Hasbro, Inc.

At this time, all parties will be in listen-only mode. If anyone should require operator assistance during the conference, please press star zero from 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 Karan Kapoor, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Joining me today are Chris Cox, Hasbro's Chief Executive Officer, and Gina Getter, Hasbro's Chief Financial Officer. Today, we will begin with Chris and Gina 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'd 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 Chris Cox. Chris?

Thanks, Kern, and good morning, everyone. For more than a year now, you've heard me outline Hasbro's strategy to refocus on play behind a philosophy of fewer, bigger, better. Fewer skews that drive higher impact, bigger investment behind winning brands and more focused categories, and better innovation driven by a renewed leadership team and a focus on kids, parents, and fans, our consumers, the lifeblood of Hasbro. We laid out a blueprint for a more focused and profitable company with a number of growth initiatives built on a diverse portfolio of some of the most iconic brands in the toy and game industry. While business transformations take time, I'm pleased with how much we accomplished in 2023, setting the table for a 2024 punctuated by strong profit growth and momentum in renewing Hasbro's innovation engine. We're entering 2024 with a healthier balance sheet, a leaner cost structure, and an operational rigor that will maintain and build on these improvements in the quarters ahead. In 2023, we took substantial action to bolster our balance sheet. At the end of the year, we closed our deal with Lionsgate on E1 film and TV, allowing us to focus our investments on higher return, play-focused initiatives across toys, games, and digital. Proceeds from the deal allowed us to reduce our debt by approximately $400 million. As we shift our entertainment strategy to an asset-light and partner-led model, we took a $1 billion impairment, a non-cash item, in Q4, which reflects the sale of E1 and a change in outlook for the balance of our owned and operated production efforts. This shift frees up more capital for us to reinvest in toys, games, and particularly our digital future. Between hard work from our sales and operations teams and some of the financial actions we took at the end of the quarter, we entered 2024 with inventories down over 50% year over year, which is well below 2019 levels. We also took steps to improve our structural profitability, exiting a number of low or negative profit businesses that we have shifted to a licensed out model. Finally, we are driving better than expected cost savings through our operational excellence work, unlocking crucial investment capacity as we seek to connect with fans of all ages and across all play patterns. Previously, we communicated $350 to $400 million in annual run rate savings. We're updating our target to $750 million of gross savings by the end of 2025, with half of it dropping to the bottom line. This allows us to reinvest in our business, meaningfully improve our cash flows, and return cash to our shareholders, which we are committed to continuing through our category-leading dividend. Since I became CEO in 2022, Hasbro has returned almost a billion dollars to shareholders and paid down over half a billion dollars in debt. While 2023 was challenging and we still expect the toy industry to face near-term headwinds, we believe we're taking the necessary steps to turn around our consumer products business. Wizards in Digital Gaming is coming off a banner year, led by Magic's Universes Beyond, the success of Baldur's Gate 3 from our partners at Larian, and Monopoly Go from Scopely. 2024 is about returning consumer products to profitability, investing for long-term momentum in games, and driving significant improvements in Hasbro's bottom line, fueled by operational discipline and renewed product innovation. In short, we're putting all the right pieces together to keep investing in our growth initiatives while expanding the ways our franchises reach fans through digital games. We expect the next year we'll likely see continued headwinds in the toy category. We're exiting 2023 with our retail inventory down around 20%. While we think Hasbro's retail inventory is in a healthy position, across the industry a lot of older discounted inventory still remains in the market. The consumer remains value conscious, and we anticipate entertainment will be less of a tailwind in the year ahead, behind a reduced box office slate. Anticipating these headwinds, we made necessary choices to get our cost structure and inventory positions healthy, accelerating a number of cost savings initiatives by several quarters. Since I became CEO, we have significantly enhanced our consumer insights capabilities and upgraded our design and toy leadership. In 2024, we'll see more and more of the resulting innovation improvements as these capability upgrades come to market across our portfolio. As such, we believe we're in a good position to at least pace the industry this year with innovation and share trends accelerating to ahead of market as we head into 2025. Turning around a product pipeline is key with the right people and the right insights. At the end of the day, it's all about great product. In the back half of 2023, we started to see the first evidence of our new team and products working. Take Furby, for example. This was a product we took our time testing and iterating based on consumer insights. It paid off as Furby was one of the top new toy introductions in 2023. We continued the Furby craze in December with the launch of Furblitz, another hit introduction, and I'm excited to continue building this franchise in 2024. 2023 was also a strong year for our Transformers franchise on the back of the hit movie Transformers Rise of the Beasts from our partners at Paramount, driving point of sale growth of 35%. We have some exciting activations planned as we celebrate the brand's 40th anniversary in 2024, as well as the star-studded animated movie Transformers 1 coming this summer along with fresh merchandise. This year also marks Peppa Pig's 20th birthday. We'll be celebrating with new innovative products and an entertainment special featuring A-list talent Katy Perry and Orlando Bloom. After gaining share in the arts and crafts category in 2023, with another strong year including our ultimate ice cream truck, the Play-Doh team continues to innovate. Expect more creative surprises and new cross-brand collaborations in the year ahead. In action figures, we are leaning into our category-leading collaboration with the Walt Disney Company for their Marvel Super Heroes Assemble marketing campaign, featuring new price points and products across our lines. including all new preschool fun with Spidey and his amazing friends. For Star Wars, we're excited to expand our best-selling Lightsaber Forge Kyber Core series and introduce our new $7.99 Epic Series 4-inch action figures. We saw an incredibly strong launch from Beyblade X last year in Japan from our partners at Takara Tomy and are eagerly anticipating the U.S. launch this summer, what we believe will be one of the hottest new toys of 2024. It's an exciting product that we think long-time collectors and kids fresh to the franchise will be thrilled with. The Blaster category continues to be under pressure, but we also continue to believe this is a strong and enduring play pattern for fans of all ages. This year we'll be introducing new innovation into the category, featuring a new performance dart technology, pop-off-the-shelf design, and attractive pricing up and down the range. Board games continues to be a leading category for us, and one we anticipate will grow in the year ahead. Twister Air was the number one new game across the G10 markets in 2023, according to Serkana, thanks to an innovative new augmented reality experience. You're going to see a renewed focus on expanding genres, leveraging our reach and distribution strength to introduce more cool new games than ever, and working with some of the brightest designers in the industry to to give their games a platform they deserve. Whether it's adult party games, family card games, casual strategy, or extending mega hits like Monopoly, 2024 will be a big year for gaming from Hasbro. Speaking of games, Wizards and Digital outperformed our guidance in 2023, driven by a series of blockbuster hits. Magic had another record year in 23, with a string of amazing new sets. including our best-selling set of all time, The Lord of the Rings Tales of Middle-Earth. While a product like Lord of the Rings creates a tough comp in 2024, we have some unique sets that fans are eagerly anticipating, including March's Fallout, a new Commander-focused Universes Beyond product line, this summer's Modern Horizons 3, the sequel to our prior best-selling set of all time, and this September's charming new world, Bloomboro. We continue to see the power of our franchises play out with our digital licensing partners. Monopoly Go, from our partners in Scopely, is the number one mobile game launch of all time in the US, outperforming the launches of global phenomena like Pokemon Go and Candy Crush, and the fastest mobile title to reach $1 billion in the US. And the game continues to break records. In Q4 alone, the game drove more than $800 million in revenue worldwide for Scopely. As far as our financial participation goes for revenue and profit, it's like having the equivalent of a billion-dollar movie supporting Monopoly, except every year, with the impact growing sequentially as the game works through our minimum guarantees and marketing allowances. Baldur's Gate 3 from our partners at Larian continues to win awards around the world and is one of the highest-rated video games of all time. We expect a long tail into 2024 and beyond for this mega-hit. Last but not least, we have a compelling new lineup of adventures, core rulebooks, and new digital first offerings for D&D as we celebrate this iconic brand's 50th anniversary. We'll launch the biggest update to 5th edition since its introduction in 2014, reinventing everything from the artwork of our iconic monsters, to new classes, to new mechanics, to bold new ways to bring to life the world of D&D digitally. All of this will add up to more and more impressive product as the year goes on, leading into an even brighter 2025. We look forward to sharing more about 2025, all new brands, entertainment collaborations, and a chance to really show what this team is capable of later this year. Wrapping up, 2023 was a challenging year, but not without significant wins. Wins we believe augur the Hasbro to come, A company we dedicated to play, innovation, and fun for fans of all ages. Last year, we launched a top toy with Furby. We won a Game of the Year award with Twister Air. And we wowed tens of millions with Monopoly Go, Transformers Rise of the Beast, Baldur's Gate 3, and Magic Lord of the Rings. All while cleaning up the business, selling E1, paying down debt, and clearing excess inventory. which makes for a healthier, stronger Hasbro to start 2024. I'm excited to see the results to come. I'd now like to turn over the call to Gina to share more about our detailed results and to provide guidance for the year. Gina?