Hasbro, Inc.

Good morning and welcome to the Hasbro second quarter 2021 earnings conference call. At this time, all parties will be in listen-only mode. 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, Senior Vice President, 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 those 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 included 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 Hasbro team delivered an excellent second quarter, highlighting the power of our portfolio and the benefits of supercharging our blueprint across consumer products, wizards in digital gaming, and entertainment. Each segment grew revenues and profit on an adjusted basis in the second quarter. Overall revenue was up 54% from last year and 9% higher compared to pro forma second quarter 2019. Demand for Hasbro brands, products, and content remains strong. The team is executing extremely well to meet consumer, retailer, and audience demand in a dynamic environment while driving significant profit and cash generation. As communicated earlier this year, we are on track to grow revenues, adjusted earnings, and adjusted EBITDA this year. This includes revenue growth in all segments to achieve double-digit revenue growth for Hasbro. We also continue to believe we can reach an adjusted operating margin level approximately in line with last year's adjusted level of 15.1 percent. We delivered two quarters of excellent results so far, and given these results in favorable mix, Year-to-date adjusted operating margin is 570 basis points higher versus last year's first half. We successfully established price increases that go into effect during the third quarter and provide an offset to the rising input and freight costs in the business. These supply chain pressures are meaningful, but given the strength in our business, the actions we have taken combined with our global footprint, we continue to believe we can meet our full-year targets. The team is doing tremendous work from manufacturing to logistics to partnering with our retailers to ensure there is product to meet demand. It is not easy and we'll work through challenges every day. Deb will speak to this further. Each brand category grew in the quarter, as did six of our seven franchise brands. Monopoly declined slightly versus a very robust quarter last year. Franchise brands, Hasbro Gaming, and emerging brands were each up versus second quarter 2019. Partner brands and the TV, film, entertainment categories were essentially flat with two years ago, as theatrical releases and content production is returning. Wizards generated a standout performance this quarter, led by Magic the Gathering. Demand for Magic is at all-time highs, including two record releases in the quarter, Strixhaven and Modern Horizons 2. As player begins to return to stores and play communities, we're seeing an uptick in sales on our backlist product as well. The high demand is tempered only by supply chain challenges as the collectible trading guard space has seen significant demand for production capacity and materials. The launch of Magic the Gathering Arena on mobile exceeded our expectations and is attracting new arena players. Hybrid players who engage in both desktop and mobile show increased engagement and spend. Digital remains an important driver for our business, and our overall digital portfolio is performing at record levels. We take a holistic approach and are pleased with the direction of our digital transformation. For Dungeons & Dragons, which grew in both analog and digital this past quarter, the launch of Dark Alliance did not meet our expectations or that of our players. we'll continue to invest in improving the gameplay and downloadable content. Dark Alliance was a modest investment for us, and we do not anticipate any material effect to Wizards results. We continue to invest robustly in digital. Wizards is on track for another record year. And while much of that growth was front half loaded, we expect growth in the second half of the year behind a positive third quarter release slate. Turning to our consumer products business, Each reason grew toy and game revenues as did licensing, which is beginning to recover. The strength of our brand portfolio more than offset the difficult comparisons in games. As expected, point of sale declined in the mid single digits versus high single digit growth last year, which was led by the extraordinary growth in the games category. Hasbro point of sale for toys the second quarter was up while games was down. For the U.S., where we have the most comprehensive data, point of sale is up 10% when compared to 2019, with similar gains in both toy and games categories. The quarterly year-over-year comparisons are choppy, but the trajectory is positive. Ecom revenue, including omnichannel retailers, continued to grow in the mid-teens, and physical shopping improved as most stores are open this year versus last. According to Profitero, Hasbro had the leading share of Prime Day toy and game sales in several countries. Channel growth was widespread with the largest growth in mass retailers, toy specialty, and fan channels. We have significant product launches backed by robust multi-channel marketing campaigns slated for the second half, including new Nerf launches to continue driving the brand after successful Dino Squad and Hyper launches in the second quarter. Hasbro's Peppa Pig and PJ Masks line will be on shelf in the coming weeks. With 100 new products, new entertainment, and the support of Hasbro's global retail partners, these brands are poised to reach more families than ever. We're also relaunching My Little Pony in the third quarter. There's an all-new cast of ponies and product in support of the September Netflix premiere of the CGI movie My Little Pony, A New Generation. we will further support the franchise with additional series and specials in coming periods. Audiences are returning to theaters and we're supporting several feature films, including in partnership with Paramount, Snake Eyes, G.I. Joe Origins, that premiered this past weekend, Marvel Studios' Black Widow that released earlier this month, as well as Marvel Studios' Spider-Man No Way Home, and Ghostbusters, Sony's Ghostbusters Afterlife. Entertainment is the catalyst that unlocks the next level of value in our portfolio. E1 is the production. Television in both scripted and unscripted led growth this quarter along with family brands revenue from content sales and YouTube advertising. Our entertainment business grew significantly in the quarter and we continue to target a similar level of revenue for the segment this year versus 2019 absent the second half of the year music revenues. In television, Cruel Summer premiered to very high ratings on Freeform and was picked up by the network for a second season. ABC renewed The Rookie for a fourth season, and we have commenced production. Apple TV Plus brought worldwide rights to our production of Come From Away, which is in post-production for release this fall. Additional film releases to come include Kit Clifford's The Big Red Dog with Paramount, and Stillwater, directed by Tom McCarthy and starring Matt Damon. In unscripted TV, our slate remains robust, with close to 40 active productions for Canada, the U.S., and U.K. The E1 team continues to develop and move into production of Hasbro IP. Of more than 200 projects in development across TV, film, and animation, more than 30 Hasbro brands are being developed. Among the many active projects were in production on the Dungeons & Dragons live-action feature to premiere in 2023, and we began principal photography with Paramount on the live-action Transformers Rise of the Beast coming June 2022. Hasbro is well-positioned for the coming quarters and years with the industry's best brand portfolio backed by unmatched capabilities in consumer products, gaming, and entertainment. Our global team of Hasbro employees and partners continues exceeding expectations to execute and deliver outstanding results during these dynamic times. I'll now turn the call over to Deb. Deb?