Hasbro, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Wizards of the Coast: MAGIC: THE GATHERING had a standout quarter with 23% YoY growth, Final Fantasy set is record-breaking, community engagement at new highs (e.g., MagicCon Las Vegas with over 19,000 badges). Digital pipeline progressing with Exodus RPG and D&D game in development.
• Consumer Products: Sales down in North America due to tariff uncertainty, but expect to make up delayed ordering in Q3/Q4. EMEA and APAC performing well. New toys like PLAY-DOH Barbie and retooled board games to boost top line.
• Licensing: MONOPOLY GO! continued strong performance, new casino gaming deal with 5 companies for brand expansion.

Segment Performance

• Wizards of the Coast and Digital Gaming: Revenue grew 16% to $522 million, led by MAGIC: THE GATHERING at 23% growth. Segment operating profit was $242 million with a 46.3% margin. Final Fantasy became the biggest MAGIC set, and Secret Lair had the strongest sales quarter in its history.
• Consumer Products: Revenue declined 16% to $442 million due to retailer order timing and market softness in select geographies. Margin improved through cost actions.
• Entertainment: Generated $16 million in revenue and $10 million in adjusted operating profit, in line with plan.

Guidance

• Raised full-year guidance for revenue, margin, and adjusted EBITDA. Total Hasbro expected to grow mid-single digits with adjusted operating margin 22%-23%. Wizards of the Coast revenue to grow in high 20% range with 42%-43% margin. Consumer Products revenue expected to decline 5%-8% with 4%-6% margin. Aim for $175M-$225M gross cost savings this year.

Risks

• Tariffs: Headwind, but current rates better than previous range. Mitigating through cost reductions, rebalancing marketing, diversifying suppliers, pricing actions.
• Retailer Inventory: U.S. retailers managed inventory tightly in Q2, impacting revenue, but expect improvement in back half as holiday sales ramp up.

Question and Answer

Q: About Final Fantasy set demand and scaling production A: Final Fantasy met expectations, production increased 4x, left demand on table, expected long tail. Success due to strong IP, cross-regional appeal, and Wizards team's agility.

Q: Midterm outlook and margin expansion A: Reaffirmed midterm outlook, but tariffs and future costs are fluid. Still confident in path to margin expansion.

Q: MONOPOLY GO! performance A: Strong user metrics, Scopely's partnerships, lower user acquisition costs contributing to higher revenue contribution.

Q: CP guidance and tariffs A: CP guidance adjusted due to tariff impact and order timing, but expect improvement in back half with new products.

Q: MAGIC international growth and demographics A: Japan is growth market, Universes Beyond sets help in mass distribution. Demographic shift with younger IPs like Spider-Man and Avatar to attract new players.

Q: Tariffs and pricing impact A: Tariffs causing price creep, expected to be gradual. Mix shifts to keep prices palatable for consumers.

Q: MAGIC player base and SKU rationalization A: Unique players in organized play up 40%, new players from Universes Beyond sets. SKU rationalization to simplify, focus on profitable products.