Hasbro (HAS) sees FY22 revenue flat to slightly down in constant currency
Hasbro, Inc. (NASDAQ: HAS), a global branded entertainment leader, today hosted its first investor day under the leadership of new Chief Executive Officer Chris Cocks. Senior leaders from across the business unveiled Hasbro’s new go-forward plan, the result of a nine-month strategic review that focused on creating near-term, meaningful change that is expected to deliver positive financial impact as early as the fourth quarter of this year. Through this review process, the Company sought to identify opportunities to focus and scale the business, enhance operational excellence and drive accelerated growth and profit.
Guided by a new Blueprint with the consumer as its north star, the Company will focus investment on its most valuable franchises across toys, games, entertainment and licensing. The Company is implementing an Operational Excellence program designed to deliver $250-$300 million in run rate cost savings over the next three years, with $150 million expected in run rate savings by year end 2023.
“Hasbro has many strengths: amazing brands that span generations, a gaming portfolio second to none, a history of play and entertainment innovation led by some of the best teams in the business, and unwavering corporate citizenship,” said Chris Cocks, Chief Executive Officer, Hasbro. “Building on these strengths, today we announced a new day for Hasbro with the introduction of Blueprint 2.0. This strategic approach is core to how we’ll continue to bring our strong brands to life for consumers of all ages, and how we’ll manage the business to monetize our intellectual property, drive investments, deliver profitable growth and create shareholder value.”
Investor Day Highlights
Making Strategic Investments to Fuel the Blueprint
- Direct to consumer and digital will be a major investment focus for the Company. The Company’s direct platform, anchored by Hasbro Pulse and D&D Beyond, is poised to become a $1 billion digital and ecommerce direct business with over 50 million accounts by 2027, up from 20 million today, and will host new exclusives including the recently launched Hasbro Selfie Series, Has-Lab crowdfunded products, the return of the iconic sports collectible, Starting Lineup, and the relaunch of Avalon Hill’s HeroScape gaming system.
- Licensing is set for a major expansion with new and recent partnerships announced with Basic Fun on Littlest Pet Shop and Lego on TRANSFORMERS, and an expanded portfolio of content across Hasbro’s beloved 100-year IP vault.
- Entertainment investments are set to more than double for Hasbro IP across the Company’s iconic portfolio of leading Toy and Game brands. The Company announced PEPPA PIG, DUNGEONS & DRAGONS, MAGIC: THE GATHERING, TRANSFORMERS, PLAY-DOH, NERF, and iconic gaming brands like MONOPOLY and CLUE as key focus brands.
- The Company is investing in a Brand Insights Platform to enable data-based decisions, deliver superior consumer insights and speed innovation. The platform combines all new technology capabilities, a significant upgrading of its data and analytics team and a network of digital, direct, experiential and partner-based data feeds. This is a multi-year, $100+ million investment that will serve as a major competitive differentiator and empower the Company to create the toys, games and experiences fans want.
Unlocking Brand Value to Drive Innovation and Growth
- The Company announced that MAGIC: THE GATHERING, which is on track to become its first billion-dollar brand, has exciting new collaborations with Final Fantasy and Assassin’s Creed and a new blockbuster 30th Anniversary Edition collectible series, inspired by Limited Edition Beta, that lets fans experience cards like the iconic Black Lotus for the first time since 1993, the year the brand launched.
- DUNGEONS & DRAGONS will be a major growth priority with a blockbuster feature film, D&D: Honor Among Thieves, a new AAA videogame, Baldur’s Gate III, and a host of new collectibles, toys and games paired with the movie event in 2023.
- The Company’s Action Figure portfolio is on pace for a banner year in 2023 behind six blockbuster theatrical releases including Marvel Studios’ Ant Man and the Wasp: Quantumania, Marvel Studios' Guardians of the Galaxy: Vol 3, Sony’s Spider-Man: Across the Spider-Verse and Lucasfilm’s Indiana Jones.
- The Company expanded on its major new entertainment lineup for TRANSFORMERS, including a new animated kids show, Transformers: EarthSpark, a new blockbuster film coming in June 2023, Transformers: Rise of the Beasts, and an upcoming CGI feature film in summer 2024.
- PEPPA PIG, PLAY-DOH and key collaborations including Marvel’s Spidey and His Amazing Friends and Lucasfilm’s Star Wars: Young Jedi Adventures will anchor planned preschool growth — a $1 billion plus combined growth opportunity.
- Expanding the NERF franchise into new categories, the Company also unveiled a first-of-its-kind sports league, NERFBALL, with the first NERFBALL tournament coming in summer 2023.
Capital Allocation Priorities
The Company reviewed its plans to invest in key growth areas to support profitable growth, including in gaming, direct, Hasbro IP content, global insights, talent, supply chain and strategic M&A. Hasbro also plans to continue to de-lever its balance sheet and maintain an investment grade rating. The Company remains on track to return to its 2.0 to 2.5X gross debt to EBITDA target in 2023. Finally, the Company expects to return excess cash to shareholders through its long-standing dividend and a future share repurchase program.
During today’s event, Hasbro provided an overview of its long-term outlook with the following 2027 Financial Targets:
- Mid-single digit revenue CAGR that sets the Company up to achieve $8.5B or greater in revenue
- Operating profit growth of 50% over the next three years, with plans to further expand operating profit margin to 20% by 2027
- Operating cash flow of $1B+ annually, accelerating over the period
- An operational excellence program of $250-$300M run rate cost savings by 2025
The Company updated its 2022 guidance to include:
- Revenue flat to slightly down in constant currency
- 16% adjusted operating profit margin, excluding restructuring costs and other non-GAAP items (1)
- Expect Q3 revenue decline of approximately 15% as reported, and approximately 12% at constant currency with operating profit impacted more significantly due to the mix of revenue being different than last year
(1) The Company is not able to reconcile its forward-looking non-GAAP adjusted operating profit margin measures because the Company cannot predict with certainty the timing and amounts of discrete items such as restructuring and non-cash charges associated with its cost-savings program, which could impact GAAP results.
Today Hasbro also announced an update to brand category reporting beginning in Q1 2023, which will include revenue and operating profit. Highlights include:
- Refreshed list of Franchise Brands to meet updated priorities for profitable growth: MAGIC: THE GATHERING, DUNGEONS & DRAGONS, Hasbro Gaming, NERF, PLAY-DOH, PEPPA PIG and TRANSFORMERS.
- Partner Brands remain as reported previously, reflecting the long-term and deep partnerships with amazing IP owners, including The Walt Disney Company for Marvel, Star Wars and beginning next year Indiana Jones.
- Portfolio Brands include all remaining brands.
As Hasbro continues to invest and grow its over $2 billion dollar gaming business, the Company intends to continue to disclose revenue for the full gaming portfolio and will add operating profit. The Company also intends to begin reporting revenue associated with any brand that is $1 billion or greater, beginning with MAGIC: THE GATHERING, which is on track to become its first $1 billion brand.