Hasbro, Inc.

Good morning and welcome to the Hasbro fourth quarter and full year 2024 earnings conference call. At this time, all parties will be in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, 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 Kern Pavore, 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 and Chief Operating 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 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 Chris Cox.

Chris? Thanks, Kern, and good morning. We closed 2024 with momentum, beating plan across the board. Our Wizards of the Coast and Digital Games segment had another record year. We saw strong growth across our licensing business, and we delivered the best operating profit margin in company history, eclipsing 20%. including a return to profitability for our consumer product segment. We began last year a healthier, stronger Hasbro with an improved balance sheet and operating structure outlining plans for greater cost savings and reinvigorating the company's innovation engine. We over-delivered, exceeding our guidance on nearly every metric, operating with renewed discipline that we believe positions Hasbro for multi-year growth and margin expansion. Wizards of the Coast in digital games was up 4% year over year, with an operating margin north of 40%, as Magic the Gathering and Monopoly Go proved a potent one-two punch, with both poised for continued growth in 2025. Wizards grew for the 14th time in the last 15 years, led by a booming digital licensing business. Monopoly Go maintained its high levels of engagement, capping the year with a star-studded TV campaign, and success with its new Tycoon Club. Baldur's Gate 3 saw solid Year 2 sales, nearly doubling our initial expectations. Magic the Gathering had another impressive year. 2024 nearly matched 2023's record year, despite fewer set releases. And the Magic ecosystem is as healthy and engaged as it's ever been. We saw year-over-year increases in active players and MagicCon attendance. and better-than-expected demand for several tentpole sets, including Q4's release, Foundations. Magic also exhibited strength beyond its tentpoles. We saw strong demand for Backlist and Secret Lair, capping off the year with a record-setting Marvel offering, which sold out instantly. D&D released the first significant update to 5th edition since 2014, and closed out the year strong with both the New Players Handbook, and Dungeon Master's Guide Breaking Records for the best-selling D&D books ever. And we also shared more about our video game future, including a new best-selling novel for Exodus by award-winning author Peter Hamilton, a top-rated episode on the new hit Amazon Prime game anthology series Secret Level, exploring more about the Exodus universe, and our first gameplay sneak peek that has sci-fi video game fans buzzing. Consumer products licensing was a standout, led by My Little Pony trading cards. And our out-licensed brands like For Real Friends and Littlest Pet Shop saw POS lifts of over 50% in 2024, showing the value of our IP vault and promise of our partnerships. The LEGO Ideas Dungeons & Dragons set delighted fans and is nominated for a Toy of the Year award. We celebrated over 140 location-based entertainment experiences open around the globe, reaching over 50 million visitors annually, making Hasbro one of the most visited brand portfolios in the world. The momentum in our licensing business has been a huge catalyst for Hasbro, with a highly diversified and high-profit revenue stream across over 1,000 partners driving over 4,000 individual collaborations. Toy and board games finished the year on much stronger footing. Our revamped innovation, marketing effectiveness, and retailer alignment drove some nice wins for the holidays. One of the biggest was Beyblade, which saw demand acceleration in Q4 following media support and streaming content ahead of the holidays. We also saw solid growth in Transformers following the animated movie Transformers 1, strength in our Marvel Collector range, and outperformance in preschool led by Marvel's Spidey and his amazing friends. Discounting was down for the quarter across the business. In fact, when factoring in a significant reduction year over year in inventory clearance, our mainline toy sales grew in the quarter, indicating momentum as we enter 2025. 2024 wasn't just a good year for Hasbro proving we can deliver. It also helped set up the foundation for our new strategic plan Playing to Win. Playing to Win focuses Hasbro on what has always made us great, play and partners. Through the power of our brands and breadth of our partnerships, we bring joy and community to over half a billion fans across the world. Whether it's 4D theme park rides for Transformers, unique collectibles for Gem and the Holograms, epic quests with D&D, all new video games with G.I. Joe, or bankrupting your little brother with a well-timed hotel on boardwalk in Monopoly. Our focus on play and partners is clarifying. It has allowed us to exit non-core businesses like E1 Film and TV, reduce our content budget by over 95% while increasing our active production pipeline for Hasbro IP by 15%, and take out over $600 million of costs from our P&L in the process. Our balance sheet is stronger, Our lineup of partnerships is the best it's ever been. And our focus has allowed us to lean into high profit, high growth areas like digital games, where our brands have proven resonance and our diversified digital revenue streams allows us to self-fund the efforts. Play is the foundation for our incredible portfolio of brands, a library of thousands of marks spanning our 164-year history. From the checkered game of life created by Milton Bradley in 1860 to To the first mass marketed toy in history, Mr. Potato Head, 1952. To cutting edge video games like Baldur's Gate 3. What distinguishes us is the breadth and depth of our portfolio. Hasbro generates nearly 70% of our revenue in categories outside traditional toys for kids. Games, digital, licensing, compounds. While we have powerhouse brands for children, over 60% of our audience is 13 or older. representing the lifetime fandom we create with consumers of all ages. Whether it's collecting your first Spidey and Friends action figure to completing your collection of super rare Mox cards from Magic the Gathering. Our audience diversity, the lifetime nature of our fandom, and the diversification of our brand portfolio gives us conviction to invest in the future of play. As strong as our brands are, our partners are the rocket fuel that helps them go supersonic. In the last three years, our licensing business has grown by 60%. Hasbro is the third largest entertainment licensor on the planet and the biggest in digital games, by far the fastest growing entertainment category of the last decade. Across digital games, location-based entertainment, and toys and merchandising partners, our brands are expected to see over $4 billion in incremental partner-led investment over the next three years. Our upcoming collaborations span blockbuster movies, themed hotels, cruise ships, quick service restaurants, category expanding toy partnerships, and of course, AAA video games. Our approach thrives on some of the most expansive inbound partnerships in the industry. Today, I'm pleased to announce two more. First off, today we are unveiling an all new licensing collaboration with Mattel, combining the creativity of Play-Doh with the empowering play of Barbie. Play-Doh Barbie allows children to unlock their inner fashion designer, creating Play-Doh fashions with amazing ruffles, bows, and realistic fabric textures, all made with every kid's favorite dough for a never-before-seen creativity experience. Second, we have many new digital collaborations in the works, but I'm especially excited to announce this one today. Being a personal fan of many of this team's games, Hasbro and Saber Interactive will be collaborating in an all-new video game partnership developed by the team behind 2024's mega-hit Warhammer 40K Space Marine 2. Combining high-octane single-player action and amazing multiplayer with Saber's Swarm Tech, this new AAA title, based on one of our tentpole IPs, is sure to be a hit. Playing to Win is grounded in five strategic building blocks. First, Hasbro's unique advantage in aging up, driving play experiences for fans of all ages, whether it's through major retail partners like Amazon, Walmart, Smiths, or Target, or via our growing direct initiatives, including Hasbro Pulse, Magic Secret Lair, and D&D Beyond. Second, leadership in digital play. We've been investing in video games for over seven years, through our portfolio of over a dozen projects in various stages of development, coupled with 100-plus licensing partnerships. I'm excited to show off our first project, Exodus, to the world when we launch it in 2026. James Olin, the creative visionary behind Exodus, has a track record of success, serving as the design leader for Baldur's Gate 1 and 2, as well as the creative director during the golden age of BioWare, who helped to helm the creation of the Dragon Age and Mass Effect franchises. Our third building block, Everyone Plays, will drive Hasbro's expansion in fashion, dolls, and girls' collectibles and leverage our much-improved supply chain efficiency to better serve emerging markets and value channels globally. You'll see some early payoff in these areas from audience-expanding play and collectible innovation later this year with some new announcements we have in store next week at New York Toy Fair. Partnership, our fourth building block, will continue to be a huge part of our story, with projects in the works spanning everything from new toy collaborations, new universes beyond partners with Magic, new video game partnerships, AI-enabled games and toys, and major new location-based entertainment investments from partners around the world. Our fifth and most important strategic building block is profitable franchises. This doesn't mean just driving our brands through innovation and partnerships. It means operating them with excellence from our supply chain to our managed cost discipline to our retail execution. As part of this pillar, I'm pleased to announce we're increasing our cost savings target from $750 million by the end of 2025, a goal we are well on our way to achieving, to $1 billion in total annual gross savings by 2027, with 50% flowing to the bottom line. Playing to win marks an important pivot for the company. a return to growth. In 2025, we are projecting modest revenue growth coupled with continued margin expansion. Through 2027, we're projecting a mid single digit revenue kegger with continued operating profit improvement, powered by a killer entertainment slate, all new toy innovation, and major launches from our multi-year digital investments. When we play to win, we play to grow. In 2025, the first elements of our multi-year strategy will start to play out. Magic is poised to have its biggest year ever as we launch three Universes Beyond sets, starting with the blockbuster Final Fantasy in June. Featuring characters, items, and moments from all 16 mainline games of the beloved series, Final Fantasy has the potential to be our biggest Magic release yet. and will continue to drive best-in-class partner IP across the Magic Play system with Spider-Man and a yet-to-be-disclosed Universes Beyond set in the back half. Stay tuned for more details at this weekend's MagicCon in Chicago. And going beyond cards, we expect Magic's reach to grow wider than ever through content like the newly announced animated Netflix series and live-action film and TV series from Legendary Entertainment. D&D is also set up to continue its recent momentum. This week, we released the widely anticipated 2025 Monster Manual with strong initial orders. We'll continue to build the D&D community, leveraging D&D Beyond as a marketplace, with many third-party publishing releases set for the first half. And the future of D&D's wider franchise ambitions is strong, with all new video games and new entertainment on the horizon, including a new streaming series in development, The Forgotten Realms, from Netflix and executive producer, Sean Levy. And in board games, the team is focused on driving growth through redesigned classics, celebrating Monopoly's 90th anniversary, including our all-new expansion packs, and bringing to market fun new family games, like Connect Four Frenzy and Rebounce, that we're unveiling at Toy Fair next week. Last but not least, we have major new innovations across our toy portfolio. Whether it's fun new fashion collectibles starting at $3.99 with Furby, amazing new action play with Mix Mashers, allowing you to mix and mash to customize your favorite Marvel, Star Wars, and Transformers heroes, or exciting new water-based outdoor play with Super Soaker. Across price points, play patterns, and age ranges, Hasbro is playing to win. Playing to win marks a new phase for Hasbro. One focused not just on cost discipline and improved profitability, but on growth and expanding our brands across new categories and new partnerships. I'll now turn over the call to Gina Getter, our CFO and COO, to share details on our 2024 results and provide guidance for 2025 and beyond. Gina?