Hasbro, Inc.

Good morning and welcome to the Hasbro third quarter 2020 earnings conference call. At this time, all parties will be in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Today's conference is being recorded. If you have any objections, you may disconnect at this time. At this time, I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations. Please go ahead.

Thank you and good morning everyone. Joining me today are Brian Goldner, Hasbro's Chairman and Chief Executive Officer, and Deb Thomas, Hasbro's Chief Financial Officer. Today we will begin with Brian and Deb providing commentary on the company's performance, then we will take your questions. Our earnings release and presentation slides for today's call are posted on our investor website. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures. Our call today will discuss certain adjusted measures which exclude these non-GAAP adjustments. A reconciliation of GAAP to non-GAAP measures is included in the press release and presentation. Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. Before we begin, I would like to remind you that during this call and the question and answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives, and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. These factors include those set forth in our annual report on Form 10-K, our most recent 10-Q, in today's press release, and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. I would now like to introduce Brian Goldner. Brian?

Thank you, Debbie. Good morning, everyone, and thank you for joining us today. The global Hasbro team did an excellent job delivering a strong third quarter, with revenues growth in toys, games, and digital initiatives, while live action production begins to return. Consumer demand remains strong. Global point of sale for Hasbro brands was up mid-single digits, including double-digit gains in the US, UK, and Australia, among others. Overall point of sale grew despite declines in Latin America and Asia and some out-of-stocks in the games category. Nearly all stores globally have been open and operating, with Latin America experiencing the most restrictions. Foot traffic in stores remains meaningful lower, but e-com continues to deliver with 50% growth globally in the quarter. We also benefited from the reopening of toy specialty retailers in Europe. Production at our third-party factories is up and running, and supply is largely in line with demand. Where demand remains above trend, we are working to catch up. The restarting of live-action entertainment is gradually occurring, with some of our larger productions beginning late in the third quarter. As a result, deliveries were low but are set to improve in the fourth quarter, and some revenue will move into 2021. Magic the Gathering delivered strong third quarter results and revenue was up double digits for the first nine months of the year. The release of Double Masters and Zendikar Rising drove the year-over-year gains in the quarter, including growth in analog and digital play. Magic the Gathering is providing its players connection and entertainment despite not all being able to gather to play. That connection and entertainment continues to drive gaming demand broadly. revenues grew for our gaming portfolio, and the overall gaming category, including Magic and Monopoly, was up 21%. Point-of-sale games were limited by product availability as we worked to catch up on production. Hasbro has an unparalleled position in gaming. We have the broadest portfolio with the industry's best-known brands, reaching all demographics across multiple genres, Importantly, we have invested to bring new games to the market over every period and every year. Our core games remained our best sellers, including Monopoly, Jenga, Connect Four, Life in Operation, and we have new games to bring home the fun this holiday. This includes a new game for the whole family in Deer Pong, and new games like The Child, Inspired Monopoly, and Super Mario Celebration Monopoly, among many others. To further long-term growth, we are investing to drive digital gaming experiences for Wizards of the Coast brand. Magic the Gathering Arena will launch on mobile in early 2021 as we fine-tune the game this year. We also have Spellslingers, an all-new digital game for the mobile first generation, slated for next year, and Tencent continues to lead the efforts to publish in China. Dungeons & Dragons continued to benefit from a strong release schedule and the quest for at-home entertainment. Revenues for the brand were up more than 20% in the quarter and year-to-date. D&D Digital is also ramping. Baldur's Gate 3 has released into early access on Steam to a strong reception and will be more broadly available next year. Also in 2021, Dark Alliance from our own Toop Games is planned for release. D&D and Magic the Gathering were among the brands on virtual display at our first ever PulseCon. PulseCon delivered to fans one-of-a-kind access to their favorite franchises as well as interactive experiences with creative talent. It generated close to a billion social and media impressions. We unveiled new products across multiple franchises, hosted two days of panels, and successfully fully funded two HasLab campaigns. one for the Star Wars Vintage Collection Razor Crest, and one for the HeroQuest game system. If you missed it live, you can find it at the session online. While the revenue for our HasLab projects will be recognized in future periods when we build and deliver the products, Hasbro products for Star Wars delivered strong growth in the third quarter. Disney Plus continued to drive engagement among kids and fans alike. Results were fueled by August's shelf set of our wide range of items for the child, as well as continued global strength in our fan business, particularly with our 40th anniversary Empire Strikes Back product and our retro figures. This year, we also launched the Star Wars Galaxy's Edge exclusive program designed to capture the park's experience at retail. Last year, on October 4th, we executed on-shelf events for Star Wars in support of streaming and theatrical content, and for Frozen 2. We are up against those comps in 2020, but with new products and new streaming content for both properties, we have a great lineup for the holiday. As this year developed and entertainment plans shifted, our teams did a tremendous job of rebalancing our initiatives for the year. Reprioritizing factories, shifting marketing plans, and partnering with our retailers around the world, they leveraged our portfolio's innovation for the holiday and ensured we have strong representation across demographics. These efforts include items like Baby Alive Baby Grows Up, For Real Friends Mama Josie the Kangaroo, Nerf Elite 2.0, the Play-Doh Candy Delight Playset, and many more. The fourth quarter is unfolding in multiple stages, kicking off successfully earlier this month with Prime Day and major initiatives from our largest omnichannel retail partners. Hasbro lines sold very well during this period. Our teams are working in concert with our retailers to drive and fulfill demand this holiday season. They are doing an excellent job managing this dynamic environment, driving the business forward for this year and beyond. Importantly, they have positioned us for what we believe should be a good holiday season for Hasbro. In entertainment, the last few quarters have been difficult given the inability to get on set and produce much of the live action content we planned for the year. However, the integration is progressing well and we've been able to make more progress than planned in the development of future projects. We recently announced that producer and director Jonathan Entwistle has come on board to shepherd new film and television adaptations of Power Rangers. E1 will develop and produce the projects with Entwistle set to direct. We also launched a competitive cooking show based on Candyland, hosted by Christian Chenoweth. You can see that series beginning November 15th on the Food Network. Looking ahead, some revenue originally planned for 2020 will shift into 2021. both from E1 projects and from theatrical releases, which were originally slated for this year. During 2020, we continue to advance in e-comm and focus the teams on our highest priorities for the near term and for long-term growth. COVID-19 remains a reality in our markets around the world, and we're working closely monitoring developments to ensure we can execute while keeping the safety of our employees and communities a top priority. I'll now turn the call over to Deb. Deb?