Hasbro, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Introduced Playing to Win strategy with pillars Play and Partnership, aiming to guide Hasbro from turnaround to growth. Hasbro now reaches over 1 billion people annually through its brands and partnerships.
• Fourth quarter revenue grew >30%, adjusted operating profit up nearly 180%. Full-year revenue up 14%, adjusted operating profit margin a record >24%, over $1.1 billion.
• Key partnerships: Added K-Pop Demon Hunters, Harry Potter, Voltron, and Streetfighter partnerships. Wizards of the Coast's Magic had record Q4 and full-year growth, with Avatar the Last Airbender set successful. Player growth and WPN stores up.
• Digital games: Exodus and Warlock trailers viewed over 100 million times, expected to launch in 2027. AI use: Human-centric, creator-led approach, deploying AI in various areas to free up over 1 million hours of work for innovation.

Segment Performance

• Wizards Segment: In Q4 2025, revenue grew 86% to $630 million, with operating profit of $284 million and a 45% operating margin. For the full year, revenue increased 45% to $2.2 billion, operating profit was over $1 billion, and operating margin was 46%. Magic revenue grew nearly 60%, with strong performance from sets like Avatar the Last Airbender and Final Fantasy, and player growth with over 10,000 active Wizards Play Network stores worldwide.
• Consumer Products Segment: Q4 revenue was $800 million, up 7%, with adjusted operating profit of $54 million. For the full year, revenue declined 4% to $2.4 billion, but delivered an adjusted operating profit of $113 million, demonstrating resilience and an improved cost structure despite tariff impact.
• Entertainment Segment: Performed in line with expectations, with stable revenue and adjusted margins consistent with the asset-light strategy.

Guidance

• Consolidated revenue expected to grow 3%-5% in 2026 on a constant currency basis, with growth across segments.
• Operating margins expected to be 24%-25%. Adjusted EBITDA $1.4-$1.45 billion.
• Wizards: mid-single-digit revenue growth, operating margins in low 40% range. Consumer Products: low single-digit revenue growth, operating profit margins 6%-8%. Entertainment: slightly positive revenue growth, operating margins ~50%.
• Capital allocation: invest in growth, pay down debt, return cash to shareholders, restart $1 billion share repurchase program.

Risks

• Market volatility and shifting consumer environment.
• Tariff impacts on consumer products.
• Uncertainty around AI deployment and its impact on business operations and competition.

Question and Answer

Q: Good morning, Christina. Thanks for taking our questions. I wanted to start with Magic. Obviously, really impressive growth in the fourth quarter and the year, and really nice to hear the momentum has continued with Lorwyn into the start of the year...

A: Yeah. Good morning, Megan. I'll start, and then Gina can correct everything I say. I think it really comes down to several growth vectors. The first one is distribution growth. We're seeing meaningful growth in our Wizards Play Network. That was up 20% last year. We think it's going to be up double digits this year again. We're seeing incremental distribution as the brand expands and player base expands. So I think mass market and non-WPN based distribution growth exceeded last year WPN growth and will exceed it again this year. Player growth has been robust. I think the organized play metrics we're giving you are just kind of hardcore or core player growth, the people who play in stores. Our metrics for non-hardcore players are a little more loose. But we think that those are growing well in excess of that 20%. And importantly, as we're bringing on new kind of casual fans or new to Magic fans and collectors, they are sticking around. And you're seeing that evidence in robust backlist and higher organized play participation. So what we're seeing going on with Magic is a virtuous cycle of there's more places to buy. There's more people playing. They're engaging longer and sticking around. And, you know, that just leads to increased set over set performance like we're seeing with Lorwyn. And we see that continuing into 2026. Not to mention, we've got a stacked lineup of partners. You've got Teenage Mutant Ninja Turtles, The Hobbit, Marvel Superheroes, and Star Trek. Plus some real fan favorite sets like Lorwyn and Strixhaven on top for this year.

Q: Hey, good morning. Wanted to sort of follow along that path of, you know, obviously, Wizards' top line was better certainly than any of us would have expected. I wanted to unpack the margin a little bit because that also blew away expectations. Right? I think you were assuming that margins would contract this year or last year, I guess, should say. Given the mix of the business, and I think it expanded 420 basis points. Right? And so as we think about 2026, you know, clearly part of the reason we're again expecting contraction is the video games and their dilution to margin. But maybe help us unpack sort of the structural margins of Wizards versus sort of the or at least the tabletop business versus, you know, some of these other offsets that may for a period of time compress that a little bit because it feels like this isn't just sort of a temporary like, things got better in '25, and then they'll contract back to where we thought they would be. It seems like this is maybe more of a permanent benefit.

A: Yeah. Morning, James. Good question. You know, we've always said that the Wizards segment margins are going to play and dance within that high 30s. Low forties. To your point, we ended the year '25 quite a bit more favorable than that, really driven by mix and leverage that kind of flew through the P&L. As well as we had some nice pickups in cost productivity through the fourth quarter within the supply chain that benefited us. As we look into 2026 and the overall margin profile, we do expect to give back a little bit of that, mainly because royalty expense is going to continue to increase. Plus, as we move through the back half of the year, we will be stepping into some additional expenses related to the launch of the two games in 2027. So to your point, the overall margin foundation is quite solid. You know, being in that high thirties, low forties is the right range for us. Now video games, when we get to that point in '27, you know, that will be, as we've talked about in the last call, it will take a bit away from margin in that sense. But gonna still be within that high thirties, low forties business.