Hasbro, Inc. Q1 FY2026 earnings call

- Franchise Performance (Wizards of the Coast / Magic: The Gathering) * January's *Laura When Eclipsed* became the best-selling Magic premiere set of all time, with the highest organized play engagement since the pandemic. The subsequent Teenage Mutant Ninja Turtle Universes Beyond collaboration outperformed internal expectations, expanding Magic's audience. * Magic backlist set a new quarterly record, and 2026 is already on track to be the third-largest backlist year in Magic's history. MagicCon Las Vegas sold over 23,000 badges, making it the largest Magic event ever, with MagicCon Amsterdam on track to sell out. * Q2 2026's *Secrets of Strixhaven* has already surpassed *Laura When Eclipsed* as the largest Magic premiere set ever. Upcoming 2026 Universes Beyond releases include Marvel Super Heroes, The Hobbit, and Star Trek; a new partnership with Disney grants Magic Arena full digital rights for the Marvel Super Heroes launch. * D&D is on a strong growth trajectory, with the launch of the first official D&D actual play YouTube series. Two AAA video games, *Exodus from Archetype* and *Warlock from Invoke*, remain on schedule for 2027 launch.

- Consumer Products Performance * Point-of-sale (POS) momentum continued through the end of April 2026, with lean retailer inventories keeping the segment on track for full-year growth. Hasbro gained share in most of its key gem-squared (gamified, entertainment-driven, multi-purchase, multi-generational) categories in Q1. * An extensive 2026 entertainment slate is lined up, including the theatrical release of *The Mandalorian and Grogu*, *Toy Story 5*, *Spider-Man: Brand New Day*, and *Avengers Doomsday*, with early demand for ultimate Grogu merchandise already strong. Upcoming new launches include FIFA Monopoly, Play-Doh category innovation, and K-Pop Demon Hunter's product hitting shelves in July.

- Operational and Financial Highlights * Overall Q1 2026 net revenue was $1 billion, up 13% year-over-year. Adjusted operating profit hit $287 million, up 29% year-over-year, with adjusted operating margin of 28.7% (up 360 basis points). Adjusted diluted EPS was $1.47, up 41% year-over-year. * Cost transformation efforts delivered $37 million in gross savings in Q1, keeping Hasbro on track to hit its full-year target of $150 million in gross savings. Total adjusted EBITDA was $339 million, up 24% year-over-year. * Hasbro generated $338 million in operating cash flow in Q1, funded $50 million in strategic investments, returned $99 million to shareholders via dividends, initiated share repurchases under a newly authorized program, and issued $400 million in new notes to refinance existing debt. * Cross-functional teams kept operations running through the late March cybersecurity incident, with remediation work progressing on schedule.

1. Wizards of the Coast: Revenue grew 26% year-over-year to $582 million, representing 58.2% of total Hasbro Q1 net revenue. Operating profit increased 29% to $298 million, with an operating margin of 51.2% (up 140 basis points year-over-year). Digital and licensing revenue rose 3%, with Monopoly Go delivering $41 million in revenue in line with expectations. 2. Consumer Products: Revenue was essentially flat year-over-year at $398 million, representing 39.8% of total Hasbro Q1 net revenue. The segment posted an adjusted operating loss of $41 million, a $10 million worsening versus the prior year, driven by higher royalty expense, incremental tariffs, and tough prior year licensing comparisons. 3. Entertainment: Revenue was $20 million (representing 2% of total Hasbro Q1 net revenue), with adjusted operating profit of $20 million, which matched internal expectations. Profitability was boosted by timing of Peppa Pig-related entertainment-backed revenues in the Consumer Products segment.

- Hasbro maintained its full-year 2026 guidance, with no upward or downward revisions. All impacts from the late March cybersecurity incident are already incorporated into the maintained guidance. - Consolidated full-year revenue is expected to grow 3% to 5% year-over-year on a constant currency basis, with growth planned across all three segments. Adjusted operating margins are forecast to be 24% to 25%, and adjusted EBITDA is projected in the range of $1.4 billion to $1.45 billion. - Wizards of the Coast is expected to deliver mid-single-digit full-year revenue growth, with operating margins in the low 40% range. Revenue growth will be robust in the first half of 2026, then moderate in the second half due to tough Q4 2025 comparisons. Incremental royalties and pre-launch investments for 2027's two AAA video games are already factored into margin projections. - Consumer Products is expected to deliver low single-digit full-year revenue growth, with adjusted operating margins of 6% to 8%. Lower-than-expected tariff expenses offset higher oil-related input costs, and operating margins are projected to strengthen throughout the year as volume leverage and productivity gains take effect. - The Entertainment segment is expected to deliver slightly positive year-over-year revenue growth, with operating margins of approximately 50%. - Capital allocation priorities remain unchanged: 1) Invest in high-return growth opportunities led by Wizards, digital gaming, and licensing; 2) Pay down debt to maintain a healthy balance sheet; 3) Return cash to shareholders via dividends and share repurchases.

- A late March 2026 cybersecurity incident required Hasbro to take core systems offline for remediation, leading to three expected 2026 impacts: $20 million in one-time remediation operating expenses (which do not impact adjusted EBITDA), $40 million to $60 million in Consumer Products revenue delayed from Q2 to the second half of 2026, and a temporary shift of receivables from Q2 to Q3 that impacts near-term cash flow. - Rising oil prices are increasing freight, resin, and packaging costs, with the full impact expected to hit in the second half of 2026. Roughly $30 million in total incremental annual cost is forecast, almost entirely concentrated in the Consumer Products segment. - Tariff costs and global trade uncertainty remain an ongoing headwind for the Consumer Products segment, though lower-than-projected tariffs have partially offset recent oil-driven cost increases. - High demand across the fast-growing trading card category has stretched global supply capacity; reprints of sold-out Magic products that previously took six weeks now take three to four months, though Hasbro has offset this by extending product rotation timelines from 18-24 months to 32-36 months. - The broader macro environment requires ongoing agility, with changing consumer patterns and input cost volatility creating ongoing operational challenges.

Q: Management maintained full-year guidance despite a strong Q1 beat and recent cost/demand changes. Is this consistent with typical practice, or have underlying conditions reduced confidence in the outlook? Also, how does the cyber incident-driven revenue delay impact Q2 growth expectations for Consumer Products and Wizards? / A: Management said maintaining guidance is consistent with standard early-year practice, as it is still early in the year with many major releases and entertainment tentpoles upcoming. Prudence was also warranted as the company finishes cyber remediation. For Consumer Products, Q2 growth will now be low single-digit (previously expected to be double-digit) as $40-$60 million in delayed revenue shifts mostly to Q3, with a small amount moving to Q4. Q2 for Wizards is expected to be very robust, driven by *Secrets of Strixhaven* and the Marvel Super Heroes launch, with growth moderating in the second half due to tough Q4 2025 comparisons.\n\nQ: Is the cross-franchise Universes Beyond collaboration strategy successfully driving new user retention for first-party Magic sets? Is Wizards still expected to deliver growth in the second half of 2026? / A: Universes Beyond is the most successful new player adoption initiative in Magic's history. New players acquired via collaborations are converting to first-party set purchases, as evidenced by Magic's record backlist sales and virtuous cycle of new store growth and player retention. For the full second half of 2026, Wizards will deliver low single-digit total growth: Q3 will see strong growth, but Q4 will decline versus the very strong Q4 2025 comparison, resulting in low single-digit growth for the half.\n\nQ: What specific delays resulted from the cyber breach, and is there risk of further delays to time-sensitive product launches like Star Wars or Spider-Man merchandise? How is Magic printing capacity and card stock pricing trending this year? / A: The breach did not impact third-party co-manufacturing or product production; systems were taken offline for protection, and the company prioritized restoring financial systems for earnings reporting first. Order management, shipping, and invoicing systems are being restored and are on track to be fully operational by June, with no further risk of delays. For Magic supply, strong category demand has stretched global capacity, but Hasbro has long-term diversified supply relationships across multiple regions, so it is well-positioned to meet demand longer-term.\n\nQ: Given strong recent Magic launch performance, has management changed its target mix of Universes Beyond collaborations versus first-party owned IP sets? How is *Monopoly Go* performing entering 2026? / A: Management says the current mix of first-party and collaboration sets is reasonable, and can flex plus or minus 10% based on creative opportunity, audience feedback, and release scheduling. Upcoming first-party content like the new Netflix Magic animated series could shift the mix slightly toward first-party in a positive way, which benefits all stakeholders by growing the overall Magic audience. *Monopoly Go* continues to perform extremely well, driven by strong content and collaborations from partner Scopely, and will remain a meaningful consistent contributor to Hasbro's bottom line for years to come, equivalent to multiple blockbuster films in annual incremental revenue.