Hasbro, Inc. (HAS) Earnings

Management highlights

### Overall Company Performance - Hasbro delivered 15% total revenue growth for the first half of 2026, with profits up considerably. The company has fully recovered from the prior cyber incident ahead of schedule, with less than $25 million in Q2 lost revenue, versus prior expectations of $40 to $60 million. - The cost transformation program remains on track, delivering $70 million in savings through the first half of 2026, against a full-year target of $150 million. ### Magic: The Gathering Franchise Update - Magic grew over 32% in Q2 2026 and 34% in the first half, positioning it as a mega, decades-long compounding franchise comparable to top global gaming and entertainment brands. Since 2009, combined tabletop and digital Magic revenue has compounded at over 17% annually, growing in 15 of the last 17 years. - Marvel Super Heroes set day-one and month-one revenue records, becoming the fastest Magic set to reach $300 million in total revenue with strong reorders and retail sell-through. The 2026 strategy of larger initial print runs successfully met demand for the largest Magic premier launch in the brand's history, after leaving unmet demand on the table in 2025. ### Digital Strategy Overhaul - Hasbro recorded a $56 million non-cash write-down of capitalized costs for canceled low-conviction digital games scheduled for 2028 and beyond, to refocus investment on high-upside opportunities where Hasbro has a clear competitive advantage. - Four core pillars guide the updated digital strategy: focus on trading card games and role-playing games; cost discipline; development of ownable platforms; and expanded partnerships. - 2026 is expected to be the peak year for digital investment, with total digital spend projected to decrease by at least 25% annually by 2028, driven by more mature development processes, shifting development to lower-cost regions, and increased co-development/co-publishing. - Key existing ownable platforms include Magic: The Gathering Arena (nearly $1 billion in total revenue since 2019) and D&D Beyond (over 30 million registered accounts, reaching 75% of hobby tabletop RPG players). New platform CharacterOS, a modest B2B AI licensing platform, is in early pilot testing. - Partner-led model has been validated by *Monopoly Go*, which is on track to exceed $8 billion in lifetime revenue by summer 2026, with Hasbro holding the top global digital licensor position. - Upcoming high-conviction owned releases are Exodus (sci-fi RPG) and Warlock (D&D expansion), both scheduled for 2027. ### Consumer Products Highlights - The toy and game business delivered its third consecutive quarter of 5% revenue growth, outperforming the broader industry via focus on

Guidance

- Management raised full-year 2026 guidance: consolidated constant currency revenue growth is now expected to be 5-7% year-over-year, with growth across all segments. Adjusted operating margin is guided to 25-26%, and adjusted EBITDA is expected to be between $1.45 billion and $1.5 billion. - Wizards of the Coast is now expected to deliver full-year low double-digit revenue growth, with operating margins in the low 40% range (volume growth more than offsets digital impairments, higher royalties, and incremental operating costs). For 2027, Wizards operating margins are projected to remain in the high 30% to low 40% range, including video game amortization and launch marketing. - Consumer Products full-year revenue growth is expected to remain low single-digit, with adjusted operating margin of 6-8%. Q2 lost cyber incident revenue is expected to be recouped in the second half of 2026. - Entertainment segment full-year revenue is expected to be slightly positive year-over-year, with operating margins of approximately 50%. - 2026 peak digital investment will be followed by at least a 25% decline in total digital spending by 2028, in line with prior guidance. - Capital allocation: The full-year share repurchase target was raised from $100 million to a minimum of $200 million, and the company remains committed to its regular dividend and ongoing debt reduction.

Segment performance

Wizards of the Coast: Segment revenue grew 27% year-over-year to $664 million, driven by a 32% increase in Magic revenue from the Strixhaven and Marvel Super Heroes releases. Operating profit grew 12% to $270 million, with an operating margin of 40.7% (down 560 basis points year-over-year due to the digital impairment charge). This segment contributed 58.2% of Hasbro's total Q2 2026 net revenue. Consumer Products: Segment revenue grew 5% year-over-year to $463 million, with North America revenue up 17% after lapping the 2025 shelf-set timing impact. The segment posted an adjusted operating loss of $7.5 million due to higher input costs, royalties, and operating expense timing. This segment contributed 40.6% of total Q2 net revenue. Entertainment: Segment revenue was $12.8 million, down 20% year-over-year against a strong prior year comparison. Adjusted operating profit was $8.6 million, with a 67.2% operating margin (up over 400 basis points year-over-year due to favorable product mix across family brands and film/TV). This segment contributed 1.1% of total Q2 net revenue.

Risks & headwinds

- Macroeconomic and consumer uncertainty around the 2026 holiday shopping season creates downside risk to guidance, which management incorporated by leaving buffer in the lower end of the revenue guidance range. - Q4 2026 Magic revenue faces a difficult comparison against an extremely strong Q4 2025, and a 2027 Q1 launch timing shift will pull ~$40 million in revenue from Q4 2026 to Q1 2027, which is already embedded in guidance. - Upcoming 2027 owned digital game launches have a range of possible outcomes, even as development remains on track to meet expectations. - Input cost inflation, higher royalty costs, and ongoing oil and trade policy headwinds remain near-term pressures on operating margins.

Analyst Q&A

• Q: What gives management confidence Magic can sustain growth from its current larger base, and what are the key growth levers for 2027 and beyond? /

  A: Management cites three core drivers: a growing total player base, including both new and re-engaged lapsed players; double-digit distribution growth, with an expanding WPN network and more mass market retail access that makes Magic easier to purchase; and a strong pipeline of upcoming first-party and Universes Beyond IP releases planned for 2027 and beyond, with digital growth upside expected to materialize starting in 2028.

• Q: What is management's approach to Magic supply and long-term production capacity to meet growing demand? /

  A: After leaving unmet demand on the table in 2025, Hasbro shifted to a strategy of larger initial print runs for 2026 releases, which successfully met demand for Q2's large launches. The company has already worked with print partners to expand long-term fundamental production capacity to meet projected demand through 2027 and 2028, leaving management confident in its ability to meet future demand. While reprints do take longer to complete, larger initial runs eliminate near-term supply concerns.

• Q: Can management share performance details on the Marvel Super Heroes Magic set, and context around how it compares to prior large sets like Final Fantasy? /

  A: Marvel Super Heroes had a record-breaking launch with strong initial sell-in, consistent reorders, and brisk retail sell-through, leaving inventory at healthy levels. It is the second-largest Magic set of all time to date, behind Final Fantasy, which remains the current record holder and continues to see reorders. Management declined to directly compare third-party IP releases, but noted Marvel has performed above expectations across all channels.

• Q: How should investors model the impact of 2027's upcoming digital game launches on Wizards segment margins? /

  A: The existing long-term guidance range of high 30% to low 40% for Wizards operating margins remains unchanged, and already accounts for launch costs. Total development costs for Exodus and Warlock remain within the prior guided $100 million to $250 million range, with two-thirds of amortization hitting the P&L within the first three months of launch. An incremental $50 million to $75 million in total segment marketing spend is planned for 2027 to support both the new games and ongoing Magic growth, which accounts for the lower end of the margin range.

• Q: What is the update to Hasbro's internal digital game pipeline after recent cancellations? /

  A: The long-term plan of 1-2 significant releases per year remains in place, but the mix will shift to more co-published projects that leverage partner capital and expertise to lower Hasbro's risk exposure. There will still be occasional large internal releases, paired with more smaller, service-oriented content projects. Development will increasingly shift to lower-cost, high-talent regions, leading to a meaningful step-down in total investment requirements while maintaining upside for long-term growth.