Hasbro, Inc. have reported their financial results for the Q2 2024, with overall revenue down by 18%, mostly attributed to the sale of eOne, and partner brands, which includes Marvel and Star Wars, was down by 28% year on year, from $172.9 to $124.6 million.
There was no mention of Star Wars in their report, although G.I. JOE was singled out for performing well in the quarter.
“We delivered a solid performance in games and digital licensing and substantial margin improvement this quarter,” said Chris Cocks, Hasbro Chief Executive Officer. “Hasbro is emerging as a more profitable, agile, and operationally excellent company delighting fans of all ages through the magic of play.”
“We continued to make meaningful progress in our turnaround for Consumer Products in the second quarter,” said Gina Goetter, Hasbro Chief Financial Officer. “The Hasbro team remains focused on back half execution and delivering on our updated full year commitments.”
Second Quarter 2024 Highlights
• Second quarter Hasbro, Inc. revenue declined 18% driven primarily by the eOne divestiture; excluding the divestiture, revenue declined 6%. Growth of 20% in the Wizards of the Coast and Digital Gaming segment was offset by declines in Consumer Products (-20%) and Entertainment (-90%, or -30%, excluding the eOne divestiture).
• Operating profit of $212 million and operating margin of 21.3% includes $37 million of intangible amortization associated with eOne, loss on disposal of business and costs associated with the Company’s transformation.
• Adjusted operating profit of $249 million (+$112 million vs. PY) and adjusted operating margin of 25.0% (+13.7 points vs. PY), driven by favorable business mix, supply chain productivity and reduced operating costs.
• Delivered $40 million of net cost savings and approximately $90 million year to date; on track for full-year net savings commitment.
• Hasbro owned inventory down 51% versus prior year, including a 55% decline in Consumer Products inventory versus the second quarter 2023.
• Reported net earnings of $0.99 per diluted share; adjusted net earnings of $1.22 per diluted share benefiting from favorable business mix and improved operations.
• Company raises full year guidance.
• Paid $97 million in cash dividends to shareholders in the quarter.Second Quarter 2024 Segment Details
• Consumer Products Segment
· Revenue decrease of 20% driven by shifts in entertainment timing, planned business exits and reduced closeouts; growth in Consumer Products Licensing (+11%) in the quarter.
· Operating margin of -1.8% and adjusted operating margin of -0.1% behind supply chain cost productivity and reduced operating expenses partially offsetting the volume deleverage.
· FURBY, PLAY-DOH and G.I. JOE performed well in the quarter; momentum building for 2H innovation in Beyblade and TRANSFORMERS entertainment.• Wizards of the Coast and Digital Gaming Segment
· Revenue increase of 20% driven by the launch of MAGIC’S Modern Horizons 3 set and continued strength in Licensed and Digital Gaming revenue behind Monopoly Go!, Baldur’s Gate 3 and a benefit from an international publishing deal.
· Tabletop revenue increased 3% behind growth in MAGIC: THE GATHERING.
· Operating profit increased 74% and operating profit margin of 54.7% due to higher digital licensing revenue mix of revenues and lower royalty expense.• Entertainment Segment
· Revenue decline of 90% impacted by the sale of eOne Film and TV in December 2023; absent this impact, revenue declined 30% driven by the timing of the delivery of deals.
· Operating loss of $1 million compared to operating loss of $324 million in the second quarter 2023.
· Adjusted operating profit of $18 million compared to adjusted operating loss of $21 million in the second quarter 2023.Year to Date 2024 Highlights
• Year to date Hasbro revenue declined 21% driven primarily by the eOne film and television divestiture; excluding the divestiture, revenue declined 7%. Growth of 15% in the Wizards of the Coast and Digital Gaming segment was offset by declines in Consumer Products (-20%) and Entertainment (-87%, or +2% excluding the eOne divestiture).
• Operating profit of $328 million and operating margin of 18.7% includes $69 million of intangible amortization associated with eOne, loss on disposal of business and costs associated with the Company’s transformation.
• Adjusted operating profit of $397 million (+$213 million vs. PY) and adjusted operating margin of 22.7% (+14.4 points vs. PY), driven by favorable business mix, lower royalty expense, supply chain productivity and reduced operating costs.
• Reported net earnings of $1.41 per diluted share; adjusted net earnings of $1.83 per diluted share benefiting from improved operations, favorability from a stock compensation adjustment taken in Q1 and net interest expense reduction.
• Operating cash flow of $365 million vs. $119 million in the prior year driven by improved operating results and favorable timing.Year to Date 2024 Segment Details
• Consumer Products Segment
· Revenue decrease of 20% driven by business exits, reduced closeouts and entertainment timing.
· Operating margin of -6.0% and adjusted operating margin of -4.1%; cost savings and productivity gains more than offset by volume declines.• Wizards of the Coast and Digital Gaming Segment
· Revenue increase of 15% driven by growth in MAGIC: THE GATHERING and strength in Licensed and Digital Gaming.
· Tabletop revenue increased 4% behind growth in MAGIC: THE GATHERING.
· Operating profit increased 69% and operating profit margin of 48.1% due to higher digital licensing revenue mix of revenues and lower royalty expense.• Entertainment Segment
· Revenue decline of 87% impacted by the sale of eOne Film and TV; absent this impact, revenue increased $1 million driven by the timing of the delivery of deals.
· Operating profit of $5 million compared to operating loss of $333 million year to date 2023.
· Adjusted operating profit of $36 million compared to adjusted operating loss of $23 million year to date 2023.See the financial tables accompanying the press release for a reconciliation of GAAP to non-GAAP financial measures.
2024 Company Outlook1
For the full year, the Company now expects:
• Consumer Products Segment revenue down 7% to 11%; Adjusted operating margin 4% to 6%.
• Wizards of the Coast Segment revenue down 1% to 3%; Operating margin of approximately 42%.
• Pro-Forma Entertainment segment revenue down $15 million; Adjusted operating margin of approximately 60%.
• Total Hasbro Adjusted EBITDA of $975 million to $1.025 billion.
• Gross savings target of $750 million by year end 2025.2024 Capital Allocation priorities:
• Invest in core business.
• Return cash to shareholders through the dividend.
• Continue to pay down debt and progress towards leverage target.1The Company is not able to reconcile its forward-looking non-GAAP adjusted operating margin and adjusted EBITDA measures because the Company cannot predict with certainty the timing and amounts of discrete items such as charges associated with its cost-savings program, which could impact GAAP results.
