Hasbro, Inc, a leading toy and game company, has reported financial results for Q4 and full year 2023.
“Guided by our strategy of ‘Fewer, Bigger, Better,’ we had important wins across both toys and games while making progress in our transformation during a challenging 2023. Despite the macroeconomic backdrop, we are entering 2024 with a healthier balance sheet, a leaner cost structure, and a diverse portfolio of industry-leading toy and game brands that support our capacity to invest in the business and maintain our commitment to returning cash to shareholders via our category-leading dividend,” said Chris Cocks, Hasbro chief executive officer. “Our refreshed leadership team is bringing innovative new products to our fans. At the same time, we are taking the necessary actions to transform Hasbro and deliver long-term profitable growth starting with driving significant profit growth across our segments in 2024 and building momentum in our innovation pipeline between now and 2025.”
“2023 was a productive year for Hasbro, although not without some challenges.” said Gina Goetter, Hasbro chief financial officer. “As we navigated the current environment, we took aggressive steps to optimize our inventory, reset the cost structure, and sharpen our portfolio focus on play with the eOne film and TV divestiture. Taken together, the actions throughout the full year have positioned the company for improved financial performance in 2024 and beyond. We are encouraged by our recent progress and remain laser focused on execution to deliver on our transformation objectives.”
Full Year 2023 Highlights
- Full year Hasbro, Inc. revenue declined 15% with growth in the Wizards of the Coast and Digital Gaming segment (+10%) more than offset by declines in the Consumer Products segment (-19%) and Entertainment segment (-31%).
- Operating loss of $1,539 million includes $1.3 billion of non-cash goodwill and intangible asset impairment charges associated with eOne film and TV, a change in outlook for the balance of our owned and operated production efforts and non-recurring inventory costs.
- Adjusted operating profit of $477 million and adjusted operating margin of 9.5%, including non-recurring inventory costs.
- Reported Net loss of $10.73 per share; adjusted net earnings of $2.51 per diluted share.
- Delivered approximately $220 million of gross savings in 2023 as part of the Operational Excellence program.
- Reduced owned inventory by 51% versus last year, including a 56% decline in Consumer Products inventory.
- Completed sale of eOne Film and TV business to Lionsgate in December 2023.
- Paid $388 million in cash dividends to shareholders for the full year 2023 and reduced debt by $506 million.
- Operating cash flow of $726 million positively impacted by working capital improvements.
Full Year 2023 Segment Details
– Consumer Products Segment
- Revenue decrease of 19% driven by business exits, category trends and inventory management.
- Full year growth in Transformers and G.I. Joe; Furby performed well in launch year.
- Operating margin of -2.2% and adjusted operating margin of -0.7% were driven by lower revenues and actions focused on inventory reduction to reset the business.
– Wizards of the Coast and Digital Gaming Segment
- Revenue increase of 10% driven by increase in Licensed Digital Gaming revenue behind Baldur’s Gate III from Larian Studios and Monopoly Go! from Scopely.
- Tabletop revenue increased 1% behind growth in Magic the Gathering with a strong performance from the Universes Beyond Lord of the Rings: Tales of Middle-earth sets.
- Operating profit declined 2% and operating profit margin of 36.1% due to higher royalty costs associated with Universes Beyond.
– Entertainment Segment
- Revenue decline of 31% driven by lower Film and TV revenue due to the writers’ and actors’ strikes; Family Brands revenue grew 6%.
- Operating loss of $1,912 million compared to operating profit of $23 million in 2022. 2023 loss includes $1,846 million (non-cash) of goodwill and intangible asset impairment associated with the eOne Film and TV business and within Family Brands to align with a change in entertainment strategy.
- Adjusted operating loss of $46 million compared to adjusted operating profit of $83 million in 2022 due to the impact of industry strikes on content deliveries.
Hasbro Q4 2023 Highlights
- Hasbro Q4 2023 revenue declined 23% with growth in the Wizards of the Coast and Digital Gaming segment (+7%) more than offset by declines in the Consumer Products segment (-25%) and Entertainment segment (-49%).
- Operating loss of $1,199 million includes the goodwill and intangible asset impairment charges and non-recurring inventory charges described above; Adjusted operating loss of $50 million.
- Net loss of $7.64 per share; adjusted net earnings of $0.38 per diluted share.
2024 Company Outlook
For the full year, the Company expects:
- Consumer Products Segment revenue down 7% to 12% with 4 points of the decline coming from businesses shifting to an out-license model; Operating margin 4% to 6%. Wizards of the Coast Segment revenue down 3% to 5% decline largely driven by second half comp in licensed digital gaming; Operating margin 38% to 40%.
- Pro-Forma Entertainment segment revenue down $15 million; Adjusted operating margin of approximately 60%.
Total Hasbro, Inc Adjusted EBITDA of $925M to $1B.
- Increased mid-term gross savings target to $750M by year end 2025 from previous target of $350M to $400M.
2024 Capital Allocation priorities:
- Invest in core business.
- Return cash to shareholders through the dividend.
- Continue to pay down debt and progress towards leverage target.
The Company is not able to reconcile its forward-looking non-GAAP adjusted operating profit margin and adjusted EBITDA measures because the Company cannot predict with certainty the timing and amounts of discrete items such as charges associated with its cost-savings program, which could impact GAAP results.
The Company’s Board of Directors has declared a quarterly cash dividend of $0.70 per common share. The dividend will be payable on May 15, 2024 to shareholders of record at the close of business on May 1, 2024. In 2024, to align with industry best practice, the Company expects future dividend declarations will be made closer to the record date.