hasbro (has) earnings report: q1 2016 conference call ... · building deep and relevant brand...
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CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
©2014TheStreet,Inc.Al l R ightsReserved Page1of21
Hasbro(HAS)EarningsReport:Q12016ConferenceCallTranscriptThefollowingHasbroconferencecalltookplaceonApril18,2016,08:30AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
DebbieHancock;Hasbro,Inc.;VPIRBrianGoldner;Hasbro,Inc.;Chairman,President,CEODebThomas;Hasbro,Inc.;EVP,CFO
OtherPart icipants
FeliciaHendrix;BarclaysCapital;AnalystDrewCrum;StifelNicolaus;AnalystArpineKocharyan;UBS;AnalystStephanieWissink;PiperJaffray&Co.;AnalystFredWightman;Citigroup;AnalystTaposhBari;GoldmanSachs;AnalystJaimeKatz;Morningstar;AnalystTimConder;WellsFargoSecurities,LLC;AnalystLeeGiordano;SterneAgeeCRT;AnalystEricHandler;MKMPartners;AnalystJimChartier;Monness,Crespi,Hardt&Co.;AnalystGerrickJohnson;BMOCapitalMarkets;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheHasbrofirst-quarter2016earningsconferencecall.
(OperatorInstructions)
Today'sconferenceisbeingrecorded.Ifyouhaveanyobjections,youmaydisconnectatthistime.
Atthistime,I'dliketoturnthecallovertoMs.DebbieHancock,VicePresidentofInvestorRelations.Pleasegoahead.
DebbieHancock(VPIR):
Thankyou.Goodmorning,everyone.JoiningmethismorningareBrianGoldnerHasbro'sChairman,PresidentandChiefExecutiveOfficer;andDebThomas,Hasbro'sChiefFinancialOfficer.
Today,wewillbeginwithBrianandDebprovidingcommentaryontheCompany'sperformance,andthenwewilltakeyourquestions.
Ourfirst-quarterearningsreleasewasissuedthismorningandisavailableonourwebsite.Additionally,presentationslidescontaininginformationcoveredintoday'searningsreleaseandcallarealsoavailableonoursite.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
©2014TheStreet,Inc.Al l R ightsReserved Page2of21
Thepressreleaseandpresentationincludeinformationregardingnon-GAAPfinancialmeasures.PleasenotethatwheneverwediscussearningspershareorEPSwearereferringtoearningsperdilutedshare.
Beforewebegin,Iwouldliketoremindyouthatduringthiscallandthequestion-and-answersessionthatfollows,membersofHasbromanagementmaymakeforward-lookingstatementsconcerningmanagement'sexpectations,goals,objectives,andsimilarmatters.
Therearemanyfactorsthatcouldcauseactualresultsoreventstodiffermateriallyfromtheanticipatedresultsorotherexpectationsexpressedintheseforward-lookingstatements.SomeofthosefactorsaresetforthinourannualreportonForm10-K,ourmostrecent10-Q,intoday'spressrelease,andinourotherpublicdisclosures.Weundertakenoobligationtoupdateanyforward-lookingstatementsmadetodaytoreflecteventsorcircumstancesoccurringafterthedateofthiscall.
IwouldnowliketointroduceBrianGoldner.Brian?
BrianGoldner (Chairman,President,CEO):
Thankyou,Debbie.Goodmorning,everyone.Thankyouforjoiningustoday.
Thefirstquarter'srevenue,operatingprofitandnetearningsgrowthreflectedacommitmenttoourstrategyandtheinherentbenefitsoffocusingonHasbro'sfranchisebrands,keystrategicpartnerbrandsandourabilitytoexecutearoundtheblueprint.
TheglobalHasbroteamscontinuetoperformataveryhighlevel,deliveringinnovativebrandexperiencesinformedbyglobalconsumerinsightsandsupportedbycompellingstorytelling.Wearebuildingdeepandrelevantbrandconnectionswithconsumersacrossbroaddemographicsandgeographies.
First-quarterrevenuesgrew16%,and20%absentFX,drivenbyHasbrofranchisebrands,partnerbrands,andstrengthacrossgeographies.Hasbro'sglobalteamsdeliveredanextremelystrongquarterwithdouble-digitrevenueandoperatingprofitgrowthintheUSandCanadaandinternationalsegments.
Internationallywegrewrevenuesdespitetheforeignexchangeenvironment,withstronggainsinmanydevelopedeconomies.Whenadjustedforforeignexchange,weposteddouble-digitrevenuegrowthinallmajorgeographicregions.Emergingmarketrevenuesincreased6%absentFX,andwecontinuetoexpectthesemarketstogrowrevenuesdoubledigits,absentFX,for2016.
Whileconsumerdemandremainsrobust,wearebeginningtoseeanimpactonsomeretailersfromtheongoingeconomicchallenges.
Globalpointofsaleincreased27%inthequarterbehinddouble-digitgrowthinallmajorregions--NorthAmerica,Europe,LatinAmerica,andAsia-Pacific--anddouble-digitgrowthinbothtoysandgames.
IntheUS,pointofsaleincreaseddoubledigitsinallcategories--boys,girls,games,andpreschool--withgrowthinfranchiseandpartnerbrands.Inaddition,accordingtoNPD,throughthefirsttwomonthsoftheyearwecontinuedtogainshareinnearlyeverymajormarket.
Overallfranchisebrandrevenuesgrewinthequarter.Intotal,toyandgamerevenuesforfranchisebrandsincreased9%absentFX,increasing12%intheUSandCanadasegment,and6%intheinternationalsegment.
Thefirstquarterhadseveraluniqueandexpectedcomparisonchallengeswithinthefranchisebrandswhichdon'tchangeourpositiveoutlookforthefullyear.Q1wasatoughcomparisonwithintheentertainmentandlicensingcategory.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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Franchisebrandrevenuesinthesegmentdeclinedthisyearversuslastyear,whenwerecordedrevenueforamultiyeardigitalstreamingdeal.TheagreementincludesMyLittlePony,LittlestPetShop,andTransformersprogramming.Thesegmentalsohadtoughcomparisonsinconsumerproductsandfilmrevenuesrelatedtothe2014Transformersmovierecordedlastyear.Transformerstoyandgamerevenueswerealsodownversusaverystrongfirstquarteroflastyear,whenitbenefitedfromthemovie.
FranchisebrandPOSinthequarterwasuphighsingledigitsgloballyanddoubledigitsintheUS,morethanovercomingthenegativeTransformerscomparison.Withinourfranchisebrands,NerfandPlay-Dohcontinuedtodeliverstronggrowth.
NewinnovationsfromNerfincludingModulusandRivalareperformingwell,and2016markstheirfirstfullyearinthemarket.Play-Dohcontinuestodrivegrowthinplaysetsandcompounds.ThisyearwearelaunchinganentirelynewsystemofplaywithPlay-DohTownthatisnowavailableintheUSandrollingoutinternationallythroughout2016.
MyLittlePonygrewintheUSandCanadasegmentand,absentFX,intheinternationalsegment.Wecontinuetodeliverinnovativenewproduct,stronglicensingprograms,andcompellingentertainmentincludingthesixthseasonofMyLittlePony:FriendshipIsMAGIC,whichbeganairingMarch26.
Inaddition,thelaunchofthenewEquestriaGirlsminidollsegmentisofftoastrongstart.WeareworkingthroughsomeretailinventorywithinEquestriaGirls,butweareoptimisticabouttheinitialconsumerreactiontoournewofferingandtheoveralloutlookforMyLittlePonyglobally.
AsImentioned,Transformersrevenuerepresentedthemostsignificantdeclinewithinourfranchisebrandsforthequarter.Newentertainmentbeganlateinthefirstquarterofthisyear,withthesecondseasonofTransformers:RobotsinDisguiseonCartoonNetworkintheUSandcurrentlyrollingoutinternationally.
MachinimaandHasbroareunveilingall-newentertainmenttargetingtheolderTransformersfanlaterthisyear.WearealsoactivelydevelopingthenextchapteroftheTransformers'theatricalstories.InFebruary,ParamountPicturesdatedTransformers5forreleaseonJune23,2017,withtwoadditionalTransformersfilmsplannedforJuneof2018and2019.Wehaveglobalteamsoftalentedindividualsworkingonthismulti-yeartheatricalentertainmentandinnovationslate.
Overallgamesrevenuewasdownslightlyinthequarter,andflatabsentFX.PieFacecontinuestobeinhighdemand.Wealsosawgrowthinourdigitalgaminglicensing,includingYahtzee,whichisbeingdrivenbyourmobilegaminglicensewithScopely.
DuelMasters,aJapanesetradingcardgame,alsocontributedtogrowthinthequarter.Weareinvestingtobuildgreatgamingexperiencesinbothface-to-faceanddigitalplayenvironments.
OuroutlookforMAGIC:TheGatheringremainspositive.Thereleaseschedulefluctuates,andrevenuetimingisstory-driven,butitiseffectivelydrivingengagementwithplayers.
WeshippedthefirstsetintheShadowsoverInnistradblockonApril8versusafirst-quarterreleaselastyear.Itisofftoafabulousstart,withpre-releaseattendanceup20%.Thisvalidatesourchangetoatwo-setblock.
MAGICrecentlyachievedthemilestoneof1millionactiveplayersinourorganizedplaysystem.Wealsohave65,000playerswhoplayinpremiereeventsstreamedtoe-sportsaudiences.Thisisanareaweareinvestingintobothgrowthenumberofeventsandtheplayerbase.
TheteamatWizardsoftheCoastisdoinggreatworktofosterbothanaloganddigitalplayfortheMAGICcommunity.WeareverypleasedtohaveChrisCocksfromMicrosoftjoiningusaspresidentofWizardsof
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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theCoast.
Asweannouncedlastweek,GregLeedsisleavingHasbro.Wearegratefulforhiscontributionsandwishhimthebestinhisnewendeavors.
Thefirstquarteralsobenefitedfromthestrengthofourpartnerbrands.RetailandconsumerdemandforStarWarsremainedveryhigh,andatthisearlystageoftheyearwecontinuetobelieve2016revenuescouldbeinlinewithlastyear.StarWars:TheForceAwakenswasrecentlyreleasedinhomeentertainment;andRogueOne,aStarWarsstory,isscheduledforreleaseonDecember16.
Thefirstquarteralsomarkedtheon-shelfdateforHasbro'slineofDisneyPrincessandDisneyFrozenfashiondollsandsmalldolls.Initialconsumerreactionhasbeenverypositive,andourapproachofofferingtheentirerangeofDisneyPrincessisresonating.NewcontentandtheallnewcharactersoftheMoanaandElenaofAvalorwillfurthersupportourinnovativeproductsthisyear.
Inaddition,Marvel'sCaptainAmerica:CivilWarwillbeintheatersonMay6.Wehavearobustlineandstrongplannedretailpromotionalactivitysupportingthisfilm.
Thefirstquarterwasagoodstarttotheyear,butweknowthereisalotoftheyearlefttodeliver.For2016andbeyond,wehaveaninnovativelineofbothHasbrobrandsandpartnerbrands,andweareinvestingtodeliverthebestexperiencestoretailersandconsumersglobally.Thisincludescontinuedstrategicinvestmentandfurtherdevelopmentofourcapabilitiesaroundthebrandblueprintincludinginstorytelling,digitalgaming,andourconsumerproductslicensingefforts.
IwillnowturnthecallovertoDeb.Deb?
DebT homas (EVP,CFO):
Thankyou,Brian,andgoodmorning,everyone.ThefirstquarterwasaverygoodquarterforHasbro.Thestrengthofourresultsreflectedthecontinuedmomentuminourbusinessandstrongexecutionbyourglobalteam.
Wegrewrevenues,operatingprofit,andearningsdespitethecontinuednegativeimpactfromforeignexchangeandchallengingeconomicenvironmentsinsomeinternationalmarkets.Wereturned$93.2millionincashtoshareholdersandendedthequarterwithaverystrongbalancesheet,wellpositionedtosupportour2016growthoutlook.
Lookingatoursegmentsforthefirst-quarter2016,revenuesintheUSandCanadasegmentincreased28%.Theboys,girls,andpreschoolcategoriespostedrevenuegrowth,whilethegamescategorydeclinedslightly.
Hasbrofranchisebrandrevenuesincreased,andpartnerbrandsfurthercontributedtogrowth,withrevenueincreasesinStarWars,DisneyPrincess,Frozen,andDescendents,aswellasYo-kaiWatch.
USpointofsalepostedsoliddouble-digitgrowthinallcategories.Retailinventorycontinuedtobeofverygoodquality.OperatingprofitintheUSandCanadasegmentincreased89%,reflectinghigherrevenuespartiallyoffsetbyhigherexpenselevels.
Internationalsegmentrevenuesgrew13%.Excludingthenegative$26.7millionimpactfromforeignexchange,internationalsegmentrevenuesincreased22%.
Revenueinthissegmentgrewinallfourproductcategories:boys,games,girls,andpreschool.Franchisebrandrevenuesweredownslightlyasreported,butgrewabsentFX.Partnerbrandswerealsopositivecontributors,includingStarWars,DisneyPrincess,andFrozen.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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Operatingprofitinthissegmentincreased50%to$2.9million.Profitimprovementonhigherrevenueswaspartiallyoffsetbyincreasedexpensesyear-over-year.
Duringthequarterwealsotooka$13.8millionbaddebtprovisionforapotentiallyuncollectiblereceivable.Thiswasthefirstsignificantprovisiontakensincewebeganourexpansionin2008intomoreinternationalterritories,notablyemergingmarkets.
Overall,wefeelwehavetakentheappropriaterisksandmanageourhigher-riskaccountsveryclosely.
Currentexchangeratesincertainregionshavechangedfavorablysincethebeginningofthisyear.Althoughtheeurohasstrengthened,othercurrenciescontinuedtoweakeninthequarter.
Forthefullyearweforecastedanapproximate$100millionnegativeimpactfromforeignexchangecomparedto2015.Ifrates,inparticulartheeuro,stayfavorablethatimpactwouldbemuchlower.
Entertainmentandlicensingsectorrevenuesdeclined30%.InthefirstquarteroflastyearthesegmentbenefitedfromamultiyeardigitalstreamingdealforHasbroStudiostelevisionprogramming.
Consumerproductlicensingandentertainmentrevenuesalsodeclinedinthequarter,mostnotablyfromthedifficultcomparisonwithlastyear'sTransformersmovie-relatedmerchandiseandrevenues.Licensingrevenueisgenerallyrecordedinarrears,andlastyear'sfirstquarterreflectedtheholiday2014Transformersmovie-relatedrevenue.
Segmentoperatingprofitdeclined67%.Inadditiontolowerrevenue,wecontinuetomakeinvestmentsinourconsumerproductsteam,digitalgaming,andstorytellingtodrivefuturegrowthinthesehigherprofitmarginrevenuesources.ThesearestrategicallyimportantcapabilitieswhichtrulydifferentiateHasbro'sbrandswithbothconsumersandretailers.
Turningtooverallexpenses,higherrevenuesdroveimprovedexpenseleverageanda270basispointincreaseinoperatingprofitmarginforthequarter.
Wecontinuetoseegrowthinpartnerbrands,whichdrivelowercostofsales-to-revenueandhigherroyalty-to-salesratios.Bothmeasureswereclosetoflatwithlast-yearlevelsascostsofsalesforthequarterwere34.9%ofrevenuesandroyaltiestotaled8.4%.
Productdevelopmentdollargrowthreflectscontinuedinvestmentininnovationacrossourbrandportfolio,includingfranchise,partner,andnewbrands.Advertisingremainedapproximatelyflatasapercentageofsales,andintangibleamortizationdeclined,reflectingsomeofourdigitalgamingassetsbecomingfullyamortizedinthesecondquarteroflastyear.
Programproductioncostamortizationwasalsodowninthequarter.InthefirstquarteroflastyearthislinereflectedthehigherrevenueandassociatedamortizationwithourstreamingdealforHasbroprogramming.
SG&Ainthequarterwasdownasapercentofrevenues.SG&Adollarsincreased12%,primarilyduetoinvestmentsaroundourbrandblueprint,baddebt,andhighercompensationexpense.
Ourfirst-quarterresultssupportourabilitytosustainandgrowoperatingprofitlevelsovertime.Whileachievingthis,wecontinuetomakeincrementalinvestmentsinourbrands,includinginthedigitalecosystemforMAGIC:TheGathering,inourITsystemstodriveefficienciesandenhanceinnovation,andinourtalentandcapabilitiestoexecuteourbrandblueprint.Inthefirstquarterthestrengthofourbusinessenabledustodeliveroperatingprofitexpansionwhileinvestingforfuturegrowth.
Turningtoourresultsbelowoperatingprofitforthequarter,otherexpensewas%$2.7millionversus
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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incomeof$4.7millionlastyear.Increasedprofitsassociatedwithour40%shareoftheoperatingincomeintheDiscoveryFamilyChannelcombinedwithhigherinterestincomeonourinvestmentswasmorethanoffsetbylargerlossesfromforeignexchangetransactions.
Theunderlyingtaxratewas26.5%,downfrom27%lastyearandessentiallyinlinewith26.4%forthefull-year2015.Dilutedearningspersharewere$0.38comparedto$0.21lastyear.
Ourbalancesheetremainsstrong.Cashtotaled$1.1billionatquarterend.Wegenerated$294millioninoperatingcashflowduringthequarterand$531millionoverthepast12months.
Duringthefirstquarterwereturned$93.2milliontoshareholders:$57.4millionindividendsand$35.8millioninsharerepurchases.OurMay16dividendpaymentwillbethefirstquarteratthehigherdividendrateof$0.51pershare,whichtheBoardincreased11%inFebruary.
Receivablesatquarterendwereup19%versusthe16%growthinrevenues.DSOsincreasedtwodaysto73days.
Absenttheimpactofforeignexchange,receivablesincreasedapproximately23%versus20%revenuegrowthabsentFX.Overall,ouraccountsreceivableareingoodconditionandcollectionscontinuetobestrong.
Inventoriesincreased36%versuslastyear.Adjustingforanegativeforeign-exchangeimpact,inventoryincreased41%,reflectingthenewbusinesseswearesupporting,thetimingofentertainment,andouroutlookfor2016.Overall,webelievewehavetherightamountandqualityofinventoryatretailandatHasbrotomeetourgrowthexpectationsfortheyear.
Throughoutthefirstquarterwemaintainedandimproveduponthehighlevelofperformancewedeliveredlastyear.Whilewehaveagreatdealoftheyearlefttogo,wearewellpositionedtocapitalizeontheinnovationandentertainmentdrivingourbrands.
BrianandIarenowhappytotakeyourquestions.
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
FeliciaHendrix,Barclays.
FeliciaHendrix(Analyst-BarclaysCapital):
Hey,Brian.Ijustwantedtotouchonacommentthatyoumadeinyourpreparedremarksaboutsomeretailersbeingaffectedfromglobaleconomicchallenges.Iwasjustwondering:canyouelaborate?
Isthatglobally,isthatUS,internationally?Canyoujusttalkaboutthatcommentalittlebitmore,please?
BrianGoldner (Chairman,President,CEO):
Sure.We'rereallyreferringtoafewofourretailersintheemergingmarkets.Debnotedabaddebtprovisionthatwetookinthequarter,andsowewerejustindicatingthatwehadacoupleofretailersintheemergingmarketsthatwerechallengedandwherewefeltthattherewassomerevenuethatwouldbeuncollectible.
DebT homas (EVP,CFO):
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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Consumertakeawayinthosemarkets,though,continuestobestrong.Soaswelookattheemergingmarketswestillhavetheoutlookofdouble-digitgrowthabsentFXfortheyear.
FeliciaHendrix(Analyst-BarclaysCapital):
Okay,andthenin--
BrianGoldner (Chairman,President,CEO):
Yesso,thisisn't--yes,it'sagoodpoint.Imean,thisisn'tconsumerrelated.We'renottalkingaboutthetakeaways.
Wetalkedaboutdouble-digitgrowthinPOSacrossallofourregionsinthequarter.Wehadverystrongdouble-digitgrowththroughoutourbusiness.Soagain,we'rejustreferringtoafewretailerswherewetookaprovision.
FeliciaHendrix(Analyst-BarclaysCapital):
Okay;that'sveryhelpful.Thankyou.ThenyougaveussomenicecolorongamesandpuzzlesandMAGIC.ItlookslikeMAGIC,withthereleaseinAprilversusthefirstquarterreleaselastyear,hadsometoughcomp.Justwonderingacoupleofthingsingamesandpuzzles.
First,Ijustwantedtoclarify:didMAGICseegrowthinthefirstquarter?Thenalsoyouhadamanagementchangeinthatdivision,soIwasjustwonderingifyoucouldtalkaboutthedriversbehindthatchangeandwhatyouexpectforgamesandpuzzlesfortherestoftheyear.
BrianGoldner (Chairman,President,CEO):
Yes,sure.Ifyoulookatourgamesbusiness,firstIthinkreallyveryencouragingwasourstrongdouble-digitgrowthinPOSinthatcategoryforthefirstquarter.SowehavereallyseenbothintheUSandaroundtheworlddouble-digittakeawayandgrowthinPOS.
Ifyoulookatgameswithinthebusiness,we'llcallitface-to-facegamingwasupabit,butMAGICwasdowninthequarter.We'vetalkedalot;hopefullypeoplenowunderstandthatMAGICreallyisreleasedriven,storydriven,andthereforewillhaveupsanddownsthatmaynotrunseasonallyasmuchasotherbrandsbutratherjustinresponsetothatstoryreleasesandthedecksthatarereleased.
ThechangeatMAGIC,atWizardsoftheCoastwasplannedsometimeago.Greghadindicatedadesiretogooffanddosomeotherthings;andwewishhimallthebest.
Hehasdoneaterrificjobforus.HewashereinProvidenceandPawtucketbeforegoingtoWizardsandhadrunourboysbusiness,andhehasbeenherewithusforseveralyears.
WeareveryexcitedaboutChrisCockscomingonboard,andhewillbewithusstartinginJune.NotonlyisheaMAGIC:TheGatheringplayerandrole-playinggameroverall,buthehasalsogotsometremendousexperience,mostrecentlyatMicrosoft.Sohasboththeanaloganddigitalcapabilityandwillcontinuetodriveusinbothdirections.
FeliciaHendrix(Analyst-BarclaysCapital):
Great;thankssomuch.Thenjustfinally,yourquarterwasobviouslyverystrongforalotofdifferentreasons.JustwonderinghowmuchofthatwasattributabletotheEastershift.
BrianGoldner (Chairman,President,CEO):
WedefinitelysawaverystrongEasterforusinPOS.ButourEasterwasactuallyupsignificantlyversus
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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priorEaster.Butwe'veseenthiscontinuedstrongPOS;andevenafterEasterthisyearourPOScontinuestobestronganddouble-digitPOS-esacrosseverycategoryandeverygeography.
Ithinkitgoesbacktosomethingwetalkedaboutinthepreparedremarks,andthatis--Ithinkthethingthatyouareseeinginthefirstquarterthatisobfuscatingourotherwiseverystrongfranchisebrandresultsisjustthepaymentsthatweremadeayearagoforstreamcontentinaquarterthattendstobeabitlowerinoverallrevenue;soithasabiggerimpact.
Ifyoutakethatout,ourtotalfranchisebrandsgrowthforthequarterwas9%,andyousawadouble-digitgrowthintheUSandhighsingle-digitgrowthinternationallyforfranchisebrand.Soagain,thestreamingpaymentsmadeayearagojustgetinthewayofseeingthatunderlyingstrength.It'swhyyou'realsoseeingourmarketsharesgrowallaroundtheworld.
FeliciaHendrix(Analyst-BarclaysCapital):
Great,thankyousomuch.
Operator :
DrewCrum,Stifel.
DrewCrum(Analyst-StifelNicolaus):
Brian,youprovidedusyourupdatedviewonexpectationsforStarWars,whichisunchangedfortheyear.Canyourunusthroughwhattheputsandtakesare,andhowyouarriveatthatnumberorthatview?
Thencontinuingwithboys,howdoesSpidermanfitintotheCompany'splansforMarvelin2016?Thanks.
BrianGoldner (Chairman,President,CEO):
Yes.IfyoulookatthefullyearforStarWarsandthecalendar,clearlyhomeentertainmenthasjustbrokenforTheForceAwakens.Obviouslyweknowthekindofcontributionthatwillmaketoaboys-orientedbusinessforthenextseveralquarters.
ThenwetransitioninthefalltowardRogueOne.Hopefullybynowyou'veseenoneoftheearlytrailers;it'sveryexcitingandclearlyaStarWarsstorythatisveryrelevanttoglobalfans,bothnewandold.
We'lltransitiontotheRogueOneproduct,butofcoursestilltheclassicproducts--bothfromForceAwakensandclassicoriginalStarWarsproducts--willcontinuetosell.
Wealsohaveacontinuedstrongemphasisonthefaneconomyandfan-orientedproductwhichcontinuesthroughouttheyear.Youwillseethatreflected--we'reseeingitreflectedinourbusinesspresently.Thatis,Ithink,howyouwouldlookatthecalendarizationofStarWarsforthisyear.
IntermsoftheMarvelbusiness,IthinktheinterestingthinghereiswedohaveamoviecomingupinCaptainAmerica:CivilWar.Hopefullyyou'veseenthematerialsthere,butitisclearlyafullarrayofallofourfavoritecharactersfromtheMarveluniverse.
Interestingly,thetimingofthemerchandisingofthatisamonthlaterthisyearthanitwasayearago.Sothatdoeshaveanimpactonthefirstquarter'sMarvelbusinessaswetimethat.Justhappenstobethattheshelfsetdatesareamonthlaterthisyearthanayearago,althoughthemoviedateisroughlythesame.
AndwewillrollintoCaptainAmerica:CivilWar,whichasIsaid,isafullarrayofcharactersincludingsomeofourfavoriteslikethecharacteryoumentioned.Thenofcoursewegetinto2017,andwedohavethe
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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Spidermanmovie.
DrewCrum(Analyst-StifelNicolaus):
Brian,justtogobacktoyourlastcomment,areyousuggestingthatyouwerenotshippingCaptainAmericaproductsinthefirstquarter?
BrianGoldner (Chairman,President,CEO):
We--notsayingwedidn'tshipCaptainAmericaproductinthefirstquarter.We'rejustsayingthatthetimingshifted.Soitprobablydidn'thaveasbiganimpactasitdidayearago.
DrewCrum(Analyst-StifelNicolaus):
Okay;gotit.Okay.Then--
BrianGoldner (Chairman,President,CEO):
Justsotoframeitout,partnerbrandforpartnerbrand,theputsandtakes.
DrewCrum(Analyst-StifelNicolaus):
Yes,gotit;okay.Thenjustonelastquestion.Deb,onadvertisingcanyoudiscusstheyear-on-yearincrease?
Typicallywedon'tsee,whenyouhaveaheavymixtowardsentertainmentandcontributionfrompartnerbrands,theincreasedadvertising.SoIjustwanttounderstandwhatwasdrivingthat.
DebT homas (EVP,CFO):
Really,justaswelookatourfull-yearexpectationsandlookatrollingoutouradvertising,reallyjustwhatyou'reseeingthisyearcomparedtolastyearistheimpactofourexpectationsandhowwe'relookingatfundingtheprogramsthatwillberunningallyearlongagainsttherevenuespreadoutoverthequarters.
DrewCrum(Analyst-StifelNicolaus):
Okay.Thankyou.
Operator :
ArpineKocharyan.
ArpineKocharyan (Analyst-UBS):
CouldyoutalkalittlebitaboutUSretailtakeawayinthequarterandhowtothinkabouttheEastershift?AndthankyoufortheEaster-on-Eastercomparison;thatwashelpful.
HowtothinkaboutwhatEastershiftwasintermsofretailtakeawayandyourshipmentintheUSofupabout28%?
BrianGoldner (Chairman,President,CEO):
Yes.Ifyoulookat--ourPOSisverystrongacrosstheboardintheUS,upstrongdoubledigitsacrossallcategories.Fortoysupstrongdoubledigits;inboys,similarly;girls,preschool.Andgameswereupdoubledigits.
OurfranchisebrandsintheUSwereupdoubledigitsinPOS.AndwedidseeverystrongEaster,butwe
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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havebeenseeingstrongweek-on-weekPOSand,asIindicated,ourstrongdouble-digitPOShascontinuedbeyondEaster.
ArpineKocharyan (Analyst-UBS):
Okay,thankyou.Thenmysecondquestionis,Brian,backinFebruaryyouhadsaidthatyouexpectedpartnerrevenuestobeclosertothat25%range,higherthanhistorical,around20%.Partnerbrandscameinstrongerthanfranchise,althoughthereisabitofatoughcompinentertainmentlicensing.Butoverallroyaltyratewasalsoupatinybit.
Couldyousharewithuswhetheryourguidanceforfullyearofpartnerbrandsbeingstillatthehigherendofthat20%,25%rangeandroyaltyratescomingdownasapercentageofsalesforthefullyear,hasthatguidanceorexpectationchanged?
BrianGoldner (Chairman,President,CEO):
Yes;no,ithasn'tchanged.Ourguidanceisverymuchthesame.Infact,ifyoulookasapercentofrevenuesourroyaltiesareonlyup1/10thofapercentagepointinthequarterversusayearago,soaverysmallchange.
Theotherelement,aswesaid,thepartnerbrandseveninthefirstquarterwhereyouhavelowerabsoluterevenuesandtheimpact,wereonlyupslightlyabove25%numberthatwehavegivenatthehighendoftherange.Soagain,overthefourquarterswestillexpectittobeatthehighendofthe20%to25%range.
ArpineKocharyan (Analyst-UBS):
Thatishelpful.Soabsenttheentertainmentlicensingtoughcompofthatone-offpayment,youstillexpectfranchisebrandstogrowatahigherrateversuspartner?
BrianGoldner (Chairman,President,CEO):
Well,Ithinkit'sveryheartening--wewerelookingatthenumbers,andifyoutakethetop10brandsofourCompanyatthismomentinthequarter,sixofthetoptenbrandsofourCompanyarefranchisebrands.AndthetopbrandinourCompanystillinthefirstquarterisNerf.
SoIthinktheportfoliomanagementtheteamsareexecutingisquitestrong.It'scertainlyacomplementoffranchisebrandsandpartnerbrandsrevenues;sotheotherfourbrandswithinthetop10arepartnerbrands.
Butthatisagreatcombination.Andourstrongestbrand,topbrandofthequarterisstillNerf.Thatcombinationallowsustocontinuetoprovidethatguidancetoyouaboutroyaltiesandaboutpartnerbrandsasapercentageofrevenuefortheyear.
ArpineKocharyan (Analyst-UBS):
Veryhelpful,thankyou.
Operator :
StephanieWissink,PiperJaffray.
StephanieWissink(Analyst-PiperJaffray&Co.):
Thankyou.Goodmorning,andcongratulationstoeveryonethereonafantasticquarter.Myquestionisjustrelatedtotheprofitgrowthversusthesalesgrowth,whichisafactorofthreefoldinthisquarter.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
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Reallyoutstanding.
Curious,Deb,ifyoucansharewithushowweshouldthinkaboutthatoverthenextcoupleofquartersandthenextcoupleofyears?IthinkatToyFairyouindicatedyourmargintargetsfortheQareroughlyflattish.
Butacouplehundredbasispointsofexpansioninthefirstquarter:I'mjustcuriousifthat'schangedthewayyou'rethinkingabouttheforwardyearandthenextcoupleofyears.
DebT homas (EVP,CFO):
No,Ithinkbasedonour--wetalkedalittlebitaboutthefactthatthefirstquarteris--it'salotofsmallnumbersforus.ButwhatweareseeingistheimprovementinourmarginsthatwedidsayatyearendandatToyFairthatwebelieveweresustainableandexpandableovertime,particularlyaswerampsomeofthenewbrandsandgainmoreoperatingprofitforit.
Theoneitemwedidwanttopointoutwasthatbaddebt.Thatwasabitunusualforus.Whilewewon'texcludeit,itwasthefirstonethatwehaveencounteredaswehaveexpanded,particularlyintoemergingmarkets.Wedohavesomehigh-riskaccounts,butwemanagethoseverycloselyanddohavereserveswherewedeemthemappropriate.
Butoverallourmarginshavegrowninallofoursegments,withtheexceptionofentertainmentandlicensing.Andagainthatstreamingrevenue,becauseoftheprofitabilityofit,hasabigimpact.Butwedocontinuetobelieve,basedonourcurrentestimates,thattheguidancethatwegaveinFebruarystillholds.
StephanieWissink(Analyst-PiperJaffray&Co.):
Thankyou.Thenjustonefollow-up,Deb,ontheinventories.Ithinkyoumentionedexcludingcurrencyup41%year-over-year.I'mwonderingifyou'dbewillingtojusteliminatethenon-comparablesforPrincess.IwouldimaginethereissomerampinventorythereforPrincess.
Isitmoreconsistentwithsalesifyoubackthatoutandjustlookatitonacomparablebasis?
DebT homas (EVP,CFO):
Yes,Ithinkaswelookatourinventoryoverallyouhaveidentifiedabigpieceofit.Imeanwearereallyrampingupforthebusinessweseeintheyearahead.
StephanieWissink(Analyst-PiperJaffray&Co.):
Thankyou.Bestofluck,everyone.
BrianGoldner (Chairman,President,CEO):
Yes,ifyoulookwhereinventoryis,Steph,itisreallynicelyspreadanditdoesfollowoursalescurvesglobally.SoyougetaboutathirdoftheinventoryincreaseintheUSandtheothertwo-thirdsoutinternationallyaswe'regrowingin--regionforregion.
StephanieWissink(Analyst-PiperJaffray&Co.):
Thanks,Brian.
Operator :
GregBadishkanian,Citi.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
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FredWightman (Analyst-Citigroup):
Goodmorning;thisisactuallyFredonforGreg.IwasjustwonderingifyoucouldguysgivealittlebitmorecolorontheDisneyPrincesslaunch,howit'sgoneversusyourexpectations,andwhereyouthinkweare(technicaldifficulty)licenseposition?
BrianGoldner (Chairman,President,CEO):
Yes.Well,clearlyIthinkyousaidoneofthekeywordswhichisclearlythefirstquarterisatransitionalquarter.We'vesaidthatallalong.
Havingsaidthat,theteamshavedone,ourteamsatHasbro,havedoneafantasticjoboflaunchingthebrand.Beautifulproductsandit'sbeenwellreceivedbyconsumers,andtheearlytakeawayisquitegood.
Wearerampingthisbusinessandwecontinuetobelievethataswemoveforward,asweexpandinrevenueswe'llcontinuetoimproveouroperatingmarginovertimethere.SoIwouldsaythatourguidanceforwhatwewanttoachieveisbeingachieved,andwe'reontrackforourexpectationsforPrincess.
FredWightman (Analyst-Citigroup):
Great.ThenifwejustlookedatStarWars,isthereanythingthatyouguyslearnedfromlastyear'smoviethatyou'replanningtoimplementforthiscomingyear'srelease?
BrianGoldner (Chairman,President,CEO):
Clearlyitwasgreatforustobeabletohaveamajorentertainmentinitiativeinthefourthquarter.It'sgreattobeabletospreadouttheentertainmentinitiativesacrossourportfolionowalmost12monthsayear,andthatwillcontinuetobethecaseaswehavemoreandmorepartnersandourownbrandslaunchingnewstory-ledinitiativesthroughouteachyear.
Theconsumercertainlyrespondedinkind,anditgivesusgreatcouragetolookatnewwindowsfornewlaunches.Wewilltracksimilartolastyear,asimilartempoandtemplatethisyear,aswehaveafallsetdateforRogueOneproductandthatwillrollintoaholiday-orientedmovie.
Butagaintheteamsareconstantlypickinguponnewinsights,andwe'reusingthosetotheadvantageofcustomersandconsumers.
FredWightman (Analyst-Citigroup):
Great,thanks.
Operator :
TaposhBari.
T aposhBari(Analyst-GoldmanSachs):
Congratsonanothergreatquarter.Brian,ongirls,canyouhelpusbetterunderstandhowthesegmentperformedexcludingtheDisneyPrincesspiece?Thenasafollow-uptothat,howdowethinkaboutthetransitionofthatpropertyintoyourbusiness?Shouldwethinkof1Qasadisproportionatebeneficiary,giventhefactthatitrepresentstheinitialshippingwindowforthatproperty?
BrianGoldner (Chairman,President,CEO):
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
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Well,ifyoulookatitclearlyinaquarterwheretypicallylowerrevenuesitdoeshaveadisproportionalimpact.Asyougrowthroughouttheyearyourrevenuesgrowacrosstheboard.
Wehadanumberofourgirlsbrandsthatperformedwellandgrewinthequarter.Wesawsomegreatgrowthfromsomeofwhatwewouldcallourchallengerbrands,includingFurRealFriends,BabyAlive,andEasyBake.
ThenMyLittlePony,asIsaid,thebrandoverallwasup.TheonlyplacethathadanimpactwhereitflattenstheresultisbecauseofthestreamingrevenuesthatareassignedtothepurchaseofMyLittlePonyprogrammingandLittlestPetShopprogrammingayearago.
Wehadonebrandintherethatwe'rerestagingforthefall,whichisNerfRebelle.Clearlythebrandisdownatthismomentaswerestageandgetreorientedaroundthatbrandforthesecondhalfoftheyear.
Again,PetShophadverystrongresultsinseveralterritoriesincludingtheUSandCanada.Wearebeginningtomaketheshift,thechangeinevolutionofthatbrandoutinternationally,andovertimewewouldexpectthatbrandtoseemorepositivemomentumoverall.
T aposhBari(Analyst-GoldmanSachs):
Great.OngamesIjustwanttomakesureIunderstandthecommentthatyoumade.Soshipmentswereflatinconstantcurrency,butPOSwasupdoubledigits;didIhearthatcorrectly?
BrianGoldner (Chairman,President,CEO):
Itis.Strongdoubledigits,yes.
T aposhBari(Analyst-GoldmanSachs):
Okay.SoisthatgapentirelyattributabletotheMAGICshiftinto2Qthen?
BrianGoldner (Chairman,President,CEO):
No,Idon't--wehadlotsofputsandtakes.Wehaveoflotsofinterestinganddifferentbrandsthatwereupinthequarter.Asegment--likealotofthebrandswithinourfamily-orientedsegmentwereup,includingLifeandYahtzeeandseveralotherbrands.ObviouslyPieFacecontinuestobeastrongcontributor.DuelMasterswithintheYahtzeebusinesswasup.
AsIsaid,overallface-to-facegamingwasupabitinthequarter.AndIdothinkyouhave--arecomingoffofaverystrongfourthquarter;youstillhaveproductinthemarketandverystrongPOSbothintheUSandinternationallyforgames.
T aposhBari(Analyst-GoldmanSachs):
Understood.Onelastoneforyou,Brian,ifyoucancommentonthehealthofthetoycategoryasweenter2016.Againthecategoryhasbeenrelativelyflatforawhileandseemstobegoingthroughthisrevival.
Whatareyouhearingfromyourretailers,bothbrick-and-mortarandonline?Aretheybelieversinthesustainability?Aretheydedicatingmoreresourcestothecategory?Thanks.
BrianGoldner (Chairman,President,CEO):
Well,Iwouldsayyestoreallyeverythingyou'vesaid.Well,rememberthatlastyearwehadaveryrobustgrowthinUSandgloballydevelopedeconomiesaswellasemergingmarketsinthetoyindustry.SoIwouldsaythisisthesecondyearofstronggrowthyeartodate.
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Weareseeinghighsingle-digitgrowthratesbothindevelopedeconomiesliketheUSandalsothroughoutEurope.Retailersareveryexcitedaboutthecategoryaswecontinuetohavemorestory-drivenbrands,moreintegratedplaybrands,andmoreinnovationinthecategory.
OverallPOSwasverystrong,asIsaid.Butaswehavenotedbefore,onlinePOSwasevenstrongerandmanyadditionalretailersthathavebeenhistoricallybrickretailersaredoingaverygoodjobinomnichannel,andsowesawgreatgrowthforseveralonlineretailersbothpureplayaswellasomnichannelretailers.
SoIwouldsayoverallthestateoftheindustryisquitestrong.Andourindicationsare,fromprojections,thatitwillremainstrongforthenextseveralyears.
T aposhBari(Analyst-GoldmanSachs):
Great.Thankssomuchandbestofluck.
Operator :
JaimeKatz.
JaimeKatz (Analyst-Morningstar):
CanyouguysdiscusswhethertherewereanypocketsofexcessinventoryoutsideofEquestriaGirls?Iknowyouwerefillingthechannelforalotofproducts,butthatseemedtobetheonlyproductthatwascalledoutasmaybenotperformingexactlyhowyouhadexpected.
BrianGoldner (Chairman,President,CEO):
Yes,asImentionedNerfRebelle--clearlywe'rerestagingthatpartoftheNerfbrand;hadsomeinventorycarriedover,andwe'rerestagingitforthesecondhalf.We'vehadagreatresponsefromglobalretailerstothenewlineupofNerfRebelleproductsforthesecondhalfoftheyearandourexpectationisthebrandshouldsellthroughsomeremaininginventoryinthefirsthalf.
ButIwouldsaythosearereallythetwobrands.Theonlyotherone,andIalmost--wehavetalkedaboutthisoveranumberofcalls--isFurby.WedohavesomeremainingFurby--last,hopefully,quarterofFurbyheadwinds,ifyouwill.WearesellingoutsomeremainingFurbyupagainstayearago.
JaimeKatz (Analyst-Morningstar):
Okay.ThenIknowyouguystalkedalittlebitaboutbaddebts.ButI'mcuriousonamoreregionallevelwhatyouguysareseeingoutofBrazil,whichhadhistoricallybeenadecentgrowthbusiness;andthenwhetherornotMexicoishelpingtooffsetthatatall.
BrianGoldner (Chairman,President,CEO):
Well,Brazilcontinuestobestronggrowth.Itjust--obviouslyyou'rehavingacurrencyimpact.SoabsentFXBraziltheunderlyinggrowthinBrazil,ourbrandsinBrazilareperformingquitestrongly.
ClearlyweareseeinggrowthinregionslikeMexico.ButIdon'tknow,Deb,youwanttocommentonthecurrencyenvironment?
DebT homas (EVP,CFO):
Ourbusinesscontinuestobegood.Asoflatetherealhasdoneabitbetter,asallcurrencieshave.
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
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Wedidsayinourpreparedremarks,particularlyiftheeuroholdsupthewayit'stradingrightnow,thatwillhaveapositiveimpactonourexpectationsforforeignexchangeimpacttousforthefullyear.ButwecontinuetoseethemarketinBrazilbeinggoodandconsumertakeawaybeinggoodaswell.
JaimeKatz (Analyst-Morningstar):
Excellent,thankyou.
Operator :
TimConder,WellsFargo.
T imConder (Analyst-WellsFargoSecurities,LLC):
Congratulationsalsoagainontheongoinggreatexecution,everyone.Justacoupleofitems.Stayingonthecurrency,Deb,andjustfollowingonafewofthoserelatedquestions,alittlemorecolor.Yousaidifratesstaywheretheyare;youtalkedaboutthe$100million,referencedthat,andthatitwouldbesubstantiallybetter.Anymorecolorontherevenue,operatingprofits?Againassumingratessaywheretheyaretoday.
DidyouguysputitonanyadditionalhedginginQ1thatmaybebenefitingthatnowthatrateshavemoved?
DebT homas (EVP,CFO):
Wehedgethroughouttheyear,soweprobablydidputsomehedgesoninthefirstquarter.Overallfromahedgingstandpointwehedgedabout75%ofourproductcostlastyear;andweareabouthedgedthesameamountthisyear.Wealwaystrytomakesurewestayinasimilarlevel.
It'shardtotellwhereratesaregoingtogo.Ithinkifyoulookatwhatalloftheexpertsaresaying,theyexpectthedollartostrengthen.However,we'renotseeingthat,particularlyagainsttheeurorightnow.
Soifratesstaythewaytheyare--wedidputachartinourearningspresentationsoyoucouldseethemakeupofourrevenuesbycurrencyinthefirstquarter.DependingonwhatyourexpectationsareforFXrates,wecanjustkindoflookatitthatway.ButwearehittingthepointwherewearegettingcomparableFXratestolastyearincertainregions.
T imConder (Analyst-WellsFargoSecurities,LLC):
Okay.Iguessfromacolorstandpoint,areyoutalking$10million,$20milliondifferenceversusthat$100millionthatyoutalkedaboutinFebruary?
DebT homas (EVP,CFO):
Well,wehavegot$30millionalmostalreadyin.Soasyoulookattherestoftheyear,Imeaniftheeurocontinuestostaystrong--it'sactuallytradingabovelevelsitwastradingatlastyear,sothatcouldsignificantlychangeourexpectationsfortheyear.Butagain,it'sjusttooearlytotell.
T imConder (Analyst-WellsFargoSecurities,LLC):
Okay,okay.Thenanycolor,Brian,Deb,thatyoufeelcomfortablegiving--Iknowpartofitissensitivewithaspecificstreamingcontract--butasfarastheswingfactor,thestreamingcontractandTransformerstogether,howitimpactedentertainmentlicensing.Wasthatthemajorityoftheswingthere?Canwejusttakeitasallofit?Oranyadditionalcoloryoucouldbreakdown.
BrianGoldner (Chairman,President,CEO):
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ItwasIthinkbetweenthetwo--betweenthefactthatwe'recomingoff--remember,we'vesaidbeforethatwhenwedolicenseswegetpaidthefollowingquarter.Soobviouslyinfirstquarterof2015wewerecollectingroyaltiesforfourth-quarter2014inTransformers.
Thenofcoursewehadthestreamingdeal.Ithinkbothareexacerbatedbythefactthatyou'redealinginatypicallylowerrevenuequarter,somoreofanimpactinpercentageterms.
You'reright.Ithinkthatisthebulkofthechange.
T imConder (Analyst-WellsFargoSecurities,LLC):
Okay,okay.Thenany--backtothebaddebt.Again,yousaidyourPOSisgoodinseveralareas.What--canyougiveusanycolorastowherethemajorityofaretailerisconcentrated,wherethatbaddebtwas,orwhereyouareseeingmaybesomeretailers,nottheconsumer,havesomeissues?
DebT homas (EVP,CFO):
Particularlywherewe'reseeingsomeimpacttocertainretailersisinouremergingmarkets.IdidalreadycommentthatBrazilcontinuestobeastrongmarketforusrightnowanddowell.Soothermarketsnotin--notBrazil.
BrianGoldner (Chairman,President,CEO):
TheotherthingIwouldliketojustnote,becausewedohavesomebigretailers:we'renottalkingaboutthebigretailersthathaverepresentedsignificantpartnersforusandgrowthenginesforusinthoseareas.SoDetskyMirinRussia,PBKids,RiHappyinBrazil.Bothareverystrong,continuetobestrongretailers.
We'rereallytalkingaboutsomeretailersthatwerenotamongourtopretailers,butclearlyretailerswe'vebeensellingto.
T imConder (Analyst-WellsFargoSecurities,LLC):
Veryhelpful.Lastly,Brian,China.Itwouldappearthatthat'sbeena--continuestobeaprettygoodgrowthdriverforyou.CorrectmeifIamwrongthere.
Thenjustespeciallyyoure-commerceoutlookinChinaandhowthatistrendingoverthelast12months,18months,whateverperiodhere.Andthenhowyouseethatgrowthcurvehereoverthebalanceof2016.
BrianGoldner (Chairman,President,CEO):
Wellclearly,e-cominChinaisoneofthekeythemesforfuturegrowth.EventhoughwearegettinggrowthtodayIthinkfuturegrowthisevenstrongerasweorientourCompanyandourbusinesstoe-comgloballybutalsoparticularlyinChina.
Itisagreatdisintermediaryforthatmarket;allowsustogettothevastmajorityofconsumers;andit'sanareaoffocusforus.Chinahasshownsomegoodgrowth.
Butremember,ourAsia-Pacificbusinessoverallshowedgoodgrowth,sobeyondChina,whichisquitehearteningtosee,countryforcountry.InKoreasomegreatgrowthandSoutheastAsiaaswellasourAustraliaandNewZealandbusiness.
SoChinacontinuestobebothashortandlong-termopportunityforus.Wedohaveagreatarrayof
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brandsthatarebelovedinChina,andparticularlybrandslikeTransformers,andwecontinuetobuildthebusiness.ButIthinke-comisoneofthefocusesforourCompanygloballyandalsoaspecifice-comfocusinChina.
T imConder (Analyst-WellsFargoSecurities,LLC):
Great.Thankyouall,asalways.
Operator :
LeeGiordano,SterneAgee.
LeeGiordano (Analyst-SterneAgeeCRT):
Deb,justtoclarifyonthetaxrate,itlookslikeitcameinaround21%.Shouldwestillcontinuetolookfor26.5%or27%fortheremainderoftheyear?
DebT homas (EVP,CFO):
Yes,theadjustmentsthatgotusdowntothat21%,whichisdiscreteitems--andourunderlyingtaxratewestill--isintherangeof26.5%to27%thatwetalkedaboutatyear-end.
LeeGiordano (Analyst-SterneAgeeCRT):
Great,thanks.Thenjustsecondly,followinguponMyLittlePony,whatdoestheentertainmentschedulelooklikethisyearandnext?Andhowdoyouviewthatbrandgoingforward?Thanks.
BrianGoldner (Chairman,President,CEO):
MyLittlePony'snextseasonisjustlaunchingnowandrollingoutaroundtheworld.It'sthesixthseasonforthebrand.ThethemethisyearisallaboutexploringEquestria,andittiestogetherwithlotsoftheinitiativesthatwehaveacrosstheCompany.
Wehaveveryrobustplansinmulti-categoriesforMyLittlePonythroughoutthisyear,brand-newtoysandgamesproducts,butalsoI'veseensomereallywonderfulproductinourconsumerproductslicensingbusinessandapparelthatisoutinternationallyintheUK.Verystrongresultsinseveralcategoriesofproductsettingallaroundtheworldintunewiththattheme.
Thatwillrollinto2017,andthenasyouknowforfallof2017,November,wehaveourfirstanimatedfeaturefilmthatwillbedistributedbyLionsgateintheMyLittlePonymovie.Sowe'llhavetelevisionentertainment,streamingentertainment,acrossanumberofdifferentover-the-topproviders.Kidscanfindentertainmentinbothshort-formandlong-form,andthentheycanalsofindentertainmentondigitalgameswithsomenewdigitalgamesthatwilllaunch,includingonenewMyLittlePonydigitalgamelaunchingfromBackflipStudios.WecontinuetohaveagamefromGameloft(technicaldifficulty)throughouttheyear.
Sostorytellingacrossanumberofdifferentdimensionsandcontinuetofeelverygoodaboutthebrandand,asI'dmentioned,thenewEquestriaGirlslineandlaunchesgoingoffquitewellwiththenewmini-dollsegment.
LeeGiordano (Analyst-SterneAgeeCRT):
Great,thankyou.
Operator :
CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
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EricHandler.
EricHandler (Analyst-MKMPartners):
Forgivemeifyou'vealreadygonethroughthis,butyourUSandCanadabusinessyouhadgreatrevenuegrowth,28%.Themarginincreasedbutnotasmuchasrevenuegrowth.I'mjustcurious:Whatexpenseitemsparticularlyofnoteweretherethatdrovethemarginbelowyourrevenuegrowth?
Thensecondly,lookingatStarWars,wasPOSconsistentthroughthequarter?Orwasthereabigshipmentthatoccurredjustpriortothehomeentertainmentrelease?
BrianGoldner (Chairman,President,CEO):
FirstofalltheoperatingprofitintheUSbusinessincreased89%.Therevenueswereup28%;operatingprofitwasup89%.AndIamnotsure--
EricHandler (Analyst-MKMPartners):
Okay,sorry.Yes.
BrianGoldner (Chairman,President,CEO):
Yes,theoperatingprofitmargininthequarterwas17.7%upagainst12%ayearago.SoIjustwanttomakesurewe'retalkingaboutthesamenumber.
EricHandler (Analyst-MKMPartners):
Right.Yes.No,sorry;Imisspokethere.Whatwasitthatessentiallyallowedyoutogetthatmarginup570basispoints?
BrianGoldner (Chairman,President,CEO):
Yes,well,it'sobviouslytherevenueincreasesandagreatportfoliooffranchisegrowthaswellaspartnergrowth.Again,Imentionedthatthetop10brandsofourCompanywehavesizeofoursevenfranchisebrandsandthensomepartnerbrands.
It'sthatblendthatshouldallowyoutounderstandhowweintendtoimproveoperatingmarginsovertime,howourpartnerbrandswillremainatthetopendofthe20%to25%ofrevenues,andwhyroyaltiesshouldberoughlyinlinewithourguidancefortheyear.
EricHandler (Analyst-MKMPartners):
Okay.AndthenStarWars?
BrianGoldner (Chairman,President,CEO):
StarWars.No,wehavebeenshippingStarWarsthroughout.Wecameoffofaverystrongmovie,remember?Themoviehascontinuedtoplayintheaters,sowecontinuedtoshipproductasmoreandmorepeoplesawthemovie.
Thenofcoursethereareallkindsofinitiativesaroundthehomeentertainmentwindows.Butthosewillcontinue.SoIwouldn'tsaythattherewasanyonepulseofinventoryintothemarketbutratherverystrongsellthroughthroughout.
EricHandler (Analyst-MKMPartners):
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Great,thankyou.
Operator :
JimChartier,Monness,Crespi.
JimChart ier (Analyst-Monness,Crespi,Hardt&Co.):
FirstquestiononYo-kaiWatchnowthatyou'vehadacoupleofmonthswiththeproductinthemarket.IjustwanttogetyourupdatedthoughtsthereonboththeUSandothermarkets,howit'sbeingreceived.
ThensecondlyonStarWars,RogueOnelookslikeithasanotherfemalelead,sojustcurioushowthefemalebusinessforStarWarsisdoingversusprioryears,andifyouthinkthatisanopportunitygoingforward.Thankyou.
BrianGoldner (Chairman,President,CEO):
Yo-kaiisonlyinitsfirstcoupleofmonths,asyoucorrectlyindicate,andreallyrollingoutaroundtheworldinentertainment.Sowe'vereallyonlyseenentertainmentintheUS,anditwillbegoingintointernationalmarketsthroughouttheyear.Earlyindicationsarequitegood,butit'sstillveryearlydays.
RogueOneisexcitingforeveryone.IthinkwecontinuetoofferanarrayofproductsforallStarWarsfansofallagesandgendersandaffiliations.Youwillseeuscontinuetofocusonproductforeveryone,andproducthasbeenwellreceivedbyeveryone.
Again,Ithinkwhatyou'reseeingoverallisablendingofsuchmorehistoricaldelineationthatwearereallynotfocusingonorfostering;we'rejustmakinggreatproducts.Welovethecharactersofthesemovies,andwe'reveryexcitedaboutwhereStarWarsisgoing.
Wealsosawinthefirstquartergreatsalesoflightsabers.AndIthinklightsabersaregoingtoeveryone,becauseeverybodycanbeaJedi.
JimChart ier (Analyst-Monness,Crespi,Hardt&Co.):
Great.Thanksandbestofluck.
Operator :
GerrickJohnson.
GerrickJohnson (Analyst-BMOCapitalMarkets):
DoyouguyshaveastreetdateforRogueOne?WilltherebeaRogueFriday?
BrianGoldner (Chairman,President,CEO):
Icanonlysay,atthispoint,fall.Idon'tthinkthey'veannouncedastreetdate.
GerrickJohnson (Analyst-BMOCapitalMarkets):
Okay.Doyouhavetheactualnumberforthebaddebtexpense?
DebT homas (EVP,CFO):
Wetalkedabouttheoneparticularchargewetook.Itwas$13.8million.
GerrickJohnson (Analyst-BMOCapitalMarkets):
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Okay.Also,yourfranchisebrandsup1%inthequarter.ButIthoughtIheardonthecallyousay9%.Whatwasthe9%numberinrelationto?
BrianGoldner (Chairman,President,CEO):
Yes.Well,itwastryingtogetacrossthefactthatifyoulookatactualsalesofourtoysandgamesaroundtheworldourfranchisebrandswereup9%.AndabrandlikeMyLittlePonywasup12%.
Justagain,giventhetypicallysmallerrevenuequarterandtheimpactofthestreamingdeal,ifyoureallylookattheunderlyingconsumerorientationofthebrandsandhowit'sperforming,they'reperformingquitestrongly.
GerrickJohnson (Analyst-BMOCapitalMarkets):
Okay,Igetit.Ex-thestreamingdeal.Lastly,inthepastcouplequartersyou'vetalkedaboutMyLittlePonyperformanceintermsofcore.Ididn'thearthatwordthistime,core.
YousaiditdidgrowintheUS.Wasthatcore,orwasthatintotality?
BrianGoldner (Chairman,President,CEO):
Well,it'sacombinationbecausewehadhavealsoEquestriaGirls.Soit'sthecombinationofalltheelements.
GerrickJohnson (Analyst-BMOCapitalMarkets):
Okay,great.Thankyou.
Operator :
Thankyou.AtthistimeIwillturnthefloorbacktoDebbieHancockforclosingremarks.
DebbieHancock(VPIR):
Thankyou,Rob,andthankyou,everyone,forjoiningourcalltoday.Thereplaywillbeavailableatourwebsiteinapproximatelytwohours.Additionally,management'spreparedremarkswillbepostedonourwebsitefollowingthiscall.
Oursecond-quarter2016earningsreleaseistentativelyscheduledforMonday,July18.Thankyou.
Operator :
Thankyou.Thisconcludestoday'steleconference.
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CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables
EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79
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