Hasbro Reports Fourth Quarter and Full Year 2023 Financial Results

Issues 2024 Guidance with Improved Profit Growth and Declares Quarterly Dividend

Hasbro, Inc. (NASDAQ: HAS), a leading toy and game company, today reported financial results for the fourth quarter and full year 2023.

“Guided by our strategy of “Fewer, Bigger, Better,” we had important wins across both toys and games while making progress in our transformation during a challenging 2023. Despite the macroeconomic backdrop, we are entering 2024 with a healthier balance sheet, a leaner cost structure, and a diverse portfolio of industry-leading toy and game brands that support our capacity to invest in the business and maintain our commitment to returning cash to shareholders via our category-leading dividend,” said Chris Cocks, Hasbro chief executive officer. “Our refreshed leadership team is bringing innovative new products to our fans. At the same time, we are taking the necessary actions to transform Hasbro and deliver long-term profitable growth starting with driving significant profit growth across our segments in 2024 and building momentum in our innovation pipeline between now and 2025.”

"2023 was a productive year for Hasbro, although not without some challenges." said Gina Goetter, Hasbro chief financial officer. “As we navigated the current environment, we took aggressive steps to optimize our inventory, reset the cost structure, and sharpen our portfolio focus on play with the eOne film and TV divestiture. Taken together, the actions throughout the full year have positioned the company for improved financial performance in 2024 and beyond. We are encouraged by our recent progress and remain laser focused on execution to deliver on our transformation objectives.”

Full Year 2023 Highlights

• Full year Hasbro, Inc. revenue declined 15% with growth in the Wizards of the Coast and Digital Gaming segment (+10%) more than offset by declines in the Consumer Products segment (-19%) and Entertainment segment (-31%).
• Operating loss of $1,539 million includes $1.3 billion of non-cash goodwill and intangible asset impairment charges associated with eOne film and TV, a change in outlook for the balance of our owned and operated production efforts and non-recurring inventory costs.
• Adjusted operating profit of $477 million and adjusted operating margin of 9.5%, including non-recurring inventory costs.
• Reported Net loss of $10.73 per share; adjusted net earnings of $2.51 per diluted share.
• Delivered approximately $220 million of gross savings in 2023 as part of the Operational Excellence program.
• Reduced owned inventory by 51% versus last year, including a 56% decline in Consumer Products inventory.
• Completed sale of eOne Film and TV business to Lionsgate in December 2023.
• Paid $388 million in cash dividends to shareholders for the full year 2023 and reduced debt by $506 million.
• Operating cash flow of $726 million positively impacted by working capital improvements.

Full Year 2023 Segment Details

• Consumer Products Segment
  • Revenue decrease of 19% driven by business exits, category trends and inventory management.
  • Full year growth in TRANSFORMERS and G.I. JOE; FURBY performed well in launch year.
  • Operating margin of -2.2% and adjusted operating margin of -0.7% were driven by lower revenues and actions focused on inventory reduction to reset the business.

• Wizards of the Coast and Digital Gaming Segment
  • Revenue increase of 10% driven by increase in Licensed Digital Gaming revenue behind Baldur's Gate III from Larian Studios and Monopoly Go! from Scopely.
  • Tabletop revenue increased 1% behind growth in MAGIC: THE GATHERING with a strong performance from the Universes Beyond Lord of the Rings: Tales of Middle-earth sets.
  • Operating profit declined 2% and operating profit margin of 36.1% due to higher royalty costs associated with Universes Beyond.

• Entertainment Segment
  • Revenue decline of 31% driven by lower Film and TV revenue due to the writers' and actors' strikes; Family Brands revenue grew 6%.
  • Operating loss of $1,912 million compared to operating profit of $23 million in 2022. 2023 loss includes $1,846 million (non-cash) of goodwill and intangible asset impairment associated with the eOne Film and TV business and within Family Brands to align with a change in entertainment strategy.
  • Adjusted operating loss of $46 million compared to adjusted operating profit of $83 million in 2022 due to the impact of industry strikes on content deliveries.

Fourth Quarter 2023 Highlights

• Q4 revenue declined 23% with growth in the Wizards of the Coast and Digital Gaming segment (+7%) more than offset by declines in the Consumer Products segment (-25%) and Entertainment segment (-49%).
• Operating loss of $1,199 million includes the goodwill and intangible asset impairment charges and non-recurring inventory charges described above; Adjusted operating loss of $50 million.
• Net loss of $7.64 per share; adjusted net earnings of $0.38 per diluted share.

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 expects:

• Consumer Products Segment revenue down 7% to 12% with 4 points of the decline coming from businesses shifting to an out-license model; Operating margin 4% to 6%.
• Wizards of the Coast Segment revenue down 3% to 5% decline largely driven by second half comp in licensed digital gaming; Operating margin 38% to 40%.
• Pro-Forma Entertainment segment revenue down $15 million; Adjusted operating margin of approximately 60%.
• Total Hasbro, Inc Adjusted EBITDA of $925M to $1B.
• Increased mid-term gross savings target to $750M by year end 2025 from previous target of $350M to $400M.

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 profit 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.

Dividend Announcement

The Company’s Board of Directors has declared a quarterly cash dividend of $0.70 per common share. The dividend will be payable on May 15, 2024 to shareholders of record at the close of business on May 1, 2024. In 2024, to align with industry best practice, the Company expects future dividend declarations will be made closer to the record date.

Conference Call Webcast

Hasbro will webcast its fourth quarter and full year 2023 earnings conference call at 8:30 a.m. Eastern Time today. To listen to the live webcast and access the accompanying presentation slides, please go to https://investor.hasbro.com. The replay of the call will be available on Hasbro’s website approximately 2 hours following completion of the call.

About Hasbro

Hasbro is a leading toy and game company whose mission is to entertain and connect generations of fans through the wonder of storytelling and exhilaration of play. Hasbro delivers engaging brand experiences for global audiences through toys, consumer products, gaming and entertainment, with a portfolio of iconic brands including MAGIC: THE GATHERING, DUNGEONS & DRAGONS, Hasbro Gaming, NERF, TRANSFORMERS, PLAY-DOH and PEPPA PIG, as well as premier partner brands.

Hasbro is guided by our Purpose to create joy and community for all people around the world, one game, one toy, one story at a time. For more than a decade, Hasbro has been consistently recognized for its corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media, one of the World’s Most Ethical Companies by Ethisphere Institute and one of the 50 Most Community-Minded Companies in the U.S. by the Civic 50. For more information, visit https://corporate.hasbro.com.

© 2024 Hasbro, Inc. All Rights Reserved.

Forward Looking Statement Safe Harbor

Certain statements in this press release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by the use of forward-looking words or phrases, include statements relating to our business strategies and plans; expectations relating to products, gaming and entertainment; anticipated cost savings; financial targets; dividend declarations and anticipated financial performance for 2024. Our actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties. Factors that might cause such a difference include, but are not limited to:

• our ability to successfully execute on our business strategy and transformation initiatives, including to focus on and scale select business initiatives and brands to drive profitability and to achieve anticipated cost savings;
• our ability to successfully compete in the play industry;
• our ability to transform our business and capabilities to address the changing global consumer landscape;
• our ability to design, develop, manufacture, and ship products on a timely, cost-effective and profitable basis;
• the concentration of our customers, potentially increasing the negative impact to our business of difficulties experienced by any of our customers or changes in their purchasing or selling patterns;
• inflation and downturns in global and regional economic conditions impacting one or more of the markets in which we sell products, which can negatively impact our customers and consumers, result in lower employment levels, consumer disposable income, retailer inventories and spending, including lower spending on purchases of our products;
• risks related to economic and public health conditions or regulatory changes in the markets in which we and our customers, partners, licensees, suppliers and manufacturers operate, such as inflation, rising interest rates, higher commodity prices, labor costs or transportation costs, or outbreaks of illness or disease, the occurrence of which could create work slowdowns, delays or shortages in production or shipment of products, increases in costs or delays in revenue;
• our dependence on third party relationships, including with third party partners, manufacturers, distributors, studios, content producers, licensors, and outsourcers, which creates reliance on others and loss of control;
• risks relating to the concentration of manufacturing for many of our products in the People’s Republic of China and our ability to successfully diversify sourcing of our products to reduce reliance on sources of supply in China;
• risks associated with international operations, such as conflict in territories in which we operate, currency conversion, currency fluctuations, the imposition of tariffs, quotas, shipping delays or difficulties, border adjustment taxes or other protectionist measures, and other challenges in the territories in which we operate;
• the success of our key partner brands, including the ability to secure, maintain and extend agreements with our key partners or the risk of delays, increased costs or difficulties associated with any of our or our partners’ planned digital applications or media initiatives;
• risks related to our leadership changes;
• our ability to attract and retain talented and diverse employees, particularly following recent workforce reductions;
• our ability to realize the benefits of cost-savings and efficiency and/or revenue and operating profit enhancing initiatives;
• risks relating to the impairment and/or write-offs of businesses, products and content we acquire and/or produce;
• the risk that acquisitions, dispositions and other investments we complete may not provide us with the benefits we expect, or the realization of such benefits may be significantly delayed. We may not achieve a successful or timely sale or license of non-core assets;
• our ability to protect our assets and intellectual property, including as a result of infringement, theft, misappropriation, cyber-attacks or other acts compromising the integrity of our assets or intellectual property;
• fluctuations in our business due to seasonality;
• the risk of product recalls or product liability suits and costs associated with product safety regulations;
• changes in tax laws or regulations, or the interpretation and application of such laws and regulations, which may cause us to alter tax reserves or make other changes which significantly impact our reported financial results;
• the impact of litigation or arbitration decisions or settlement actions;
• the bankruptcy or other lack of success of one or more of our significant retailers, licensees and other partners; and
• other risks and uncertainties as may be detailed in our public announcements and U.S. Securities and Exchange Commission (“SEC”) filings.

The statements contained herein are based on our current beliefs and expectations. We undertake no obligation to make any revisions to the forward-looking statements contained in this press release or to update them to reflect events or circumstances occurring after the date of this press release.

Non-GAAP Financial Measures

The financial tables accompanying this press release include non-GAAP financial measures as defined under SEC rules, specifically Adjusted operating profit, Adjusted net earnings and Adjusted net earnings per diluted share, which exclude, where applicable, acquisition and related costs, acquired intangible amortization, Operational Excellence and Blueprint 2.0 implementation charges; and certain non-cash asset impairment charges. Also included in this press release are the non-GAAP financial measures of EBITDA and Adjusted EBITDA. EBITDA represents net earnings attributable to Hasbro, Inc. excluding interest expense, income tax expense, net earnings (loss) attributable to noncontrolling interests, depreciation and amortization of intangibles. Adjusted EBITDA also excludes Operational Excellence and Blueprint 2.0 implementation charges, certain non-cash asset impairment charges and the impact of stock compensation (including acquisition-related stock expense). As required by SEC rules, we have provided reconciliations on the attached schedules of these measures to the most directly comparable GAAP measure. Management believes that Adjusted net earnings, Adjusted net earnings per diluted share and Adjusted operating profit provide investors with an understanding of the underlying performance of our business absent unusual events. Management believes that EBITDA and Adjusted EBITDA are appropriate measures for evaluating the operating performance of our business because they reflect the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet and make strategic acquisitions. These non-GAAP measures should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in our consolidated financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America.

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