Hasbro, Inc. — Q1 2024 Form 10-Q
Reporting period: Quarter ended March 31, 2024. Dollar amounts are in millions unless stated otherwise. The quarter had 13 weeks, compared with 14 weeks in the prior-year period, which limits direct comparability.
Business context and results
Hasbro sells toys, games and licensed products and develops gaming and entertainment content. Its strategy is to focus on fewer, larger brands and improve costs through its Operational Excellence program. The comparison with Q1 2023 is also affected by the December 2023 sale of eOne Film and TV.
| Metric | Q1 2024 | Prior comparable period |
|---|---|---|
| Net revenue | $757.3 | $1,001.0 |
| Operating profit / margin | $116.2 / 15.3% | $17.9 / 1.8% |
| Net earnings (loss) attributable to Hasbro | $58.2 | $(22.1) |
| Diluted earnings (loss) per share | $0.42 | $(0.16) |
| Operating cash flow | $177.8 | $88.8 |
| Capital expenditures | $45.8 | $53.2 |
| Dividends declared per share | $0.70 | $0.70 |
Revenue declined 24%. Operating profit increased substantially, reflecting lower program amortization after the eOne sale, cost savings, lower expenses and an $18.1 million stock-compensation adjustment. The filing reports no separate gross-profit figure; cost of sales was 27.0% of revenue versus 28.5% in the prior period. Operating cash flow less capital expenditures was approximately $132 million.
Segments and material changes
- Consumer Products: Revenue fell 21% to $413.0; operating loss was $46.9 versus $46.0. Hasbro cited industry conditions, exited businesses, lower closeout sales and weaker NERF and TRANSFORMERS results, partly offset by cost savings.
- Wizards of the Coast and Digital Gaming: Revenue rose 7% to $316.3; operating profit increased 60% to $122.8. Growth included digital licensing for Baldur’s Gate 3, MONOPOLY GO! and MAGIC: THE GATHERING releases.
- Entertainment: Revenue fell 85% to $28.0, primarily because eOne Film and TV was sold. Family Brands revenue increased approximately 65%, led by PEPPA PIG content. Segment operating profit was $5.8 versus an $8.7 loss.
- Brand mix: Franchise Brands revenue was nearly flat, down 1% to $606.5; Partner Brands fell 34% to $87.7, and Portfolio Brands fell 31% to $63.1. The prior period included $162.8 of non-Hasbro-branded Film & TV revenue from the divested business.
Financial position, liquidity and debt
- At March 31, 2024, cash and cash equivalents were $570.2; total assets were $6,203.0 and shareholders’ equity was $1,029.9.
- Debt principal was approximately $3.5 billion, including $500 million of 3.00% notes due November 2024. The balance sheet classifies $500 million as current debt. Long-term debt carrying value was $2,966.9.
- Hasbro had no commercial paper or revolving-credit borrowings outstanding. Approximately $1.2 billion remained available under its $1.25 billion revolving facility; the company reported compliance with covenants.
- Financing cash outflow was $108.9, primarily reflecting $97.2 of dividends paid. Cash increased $24.8 during the quarter.
- Current assets were $1,995.4 and current liabilities $1,792.2. The company also reported $103.3 of remaining deemed-repatriation tax installments: $45.9 due in 2024 and $57.4 in 2025.
Outlook, commentary and risks
Hasbro provided no specific full-year revenue or earnings guidance in the supplied filing text. Management said available cash, expected operating cash flow, commercial paper and credit facilities should meet working-capital needs for the next 12 months. The company describes its transformation as ongoing and expects additional workforce actions to be substantially complete over 18 to 24 months; consulting support for transformation planning is expected to conclude in 2024.
- The company recorded an $18.1 million benefit in Q1 2024 to correct a prior-year stock-compensation error; management said it was not material to either full-year 2023 or 2024 financial statements.
- A $9.1 million loss on disposal of business was recorded in Q1; the supplied filing text does not clearly explain the specific transaction giving rise to this charge.
- Operational Excellence restructuring liabilities were $72.6 million at quarter-end. The company may undertake additional cost-saving initiatives and incur further restructuring charges.
- Management cited inflation as a significant operating factor, with potential effects on consumer spending and material, shipping, warehousing and overhead costs. Other disclosed risks include customer concentration, sourcing and manufacturing exposure (including China), foreign exchange, partner and licensee dependence, competition, execution of the transformation, and product or legal claims.
- The company reported no material change to previously disclosed risk factors and stated that pending legal proceedings were not believed material to its business or financial condition. Disclosure controls were assessed as effective.
Important facts for investors to verify
- How revenue and margins trend after accounting for the eOne divestiture and the prior period’s extra week.
- Whether Wizards and Digital Gaming growth and profitability can persist given product-release timing and licensing concentration.
- Hasbro’s plan and funding for the $500 million November 2024 debt maturity, and progress on debt reduction and liquidity.
- How much of Q1 operating improvement reflects recurring cost savings versus the $18.1 million one-time stock-compensation benefit and lower eOne-related costs.
- Progress, cash costs and expected savings from Operational Excellence, including the $72.6 million restructuring liability and planned workforce actions.
- Dividend capacity amid debt obligations and lower Consumer Products revenue; the filing does not provide a specific dividend outlook.