Hasbro Form 10-Q: Q2 2021

Key insights

7 takeaways

01
Hasbro reported net earnings of $253.2 million for Q3 2021, an increase from $220.9 million in Q3 2020, resulting in diluted earnings per share of $1.83.
02
Total net revenue for the third quarter of 2021 reached $1.97 billion, up from $1.78 billion in the same period of 2020, driven by growth in Franchise Brands, Hasbro Gaming, and TV/Film/Entertainment.
03
The Entertainment segment saw significant revenue growth to $327.1 million in Q3 2021 compared to $185.4 million in Q3 2020, largely due to increased Film and TV performance and Family Brands.
04
On June 29, 2021, Hasbro completed the sale of its Entertainment One Music (eOne Music) business for $397 million, which included a $385 million sales price and $12 million in closing adjustments.
05
Consumer Products segment operating profit declined to $210.4 million in Q3 2021 from $226.2 million in Q3 2020, impacted by higher ocean and air freight costs and global supply chain disruptions.
06
Hasbro realigned its financial reporting segments in early 2021 to better reflect its current business structure, though this change did not impact previously reported consolidated net revenue or operating profits.
07
As of September 26, 2021, the company held $21.8 million in liabilities related to financial instruments using significant unobservable inputs (Level 3), compared to $20.6 million at the end of 2020.

Summary

Hasbro demonstrated robust financial performance through the first nine months of 2021, characterized by an 18% increase in net revenues to $4.41 billion and a significant rise in operating profit to $591.8 million. This growth was primarily fueled by the Wizards of the Coast and Digital Gaming segment, which saw a 50% revenue surge driven by the popularity of Magic: The Gathering and Dungeons & Dragons. Furthermore, the Entertainment segment experienced a 76% revenue increase in the third quarter as film and television production resumed following pandemic-related delays. These gains were partially offset by a 3% decline in the Consumer Products segment during the third quarter, largely attributed to global supply chain disruptions and inflationary pressures.

The company underwent a strategic realignment of its reporting structure into three core segments: Consumer Products, Wizards of the Coast and Digital Gaming, and Entertainment. A major component of this transition was the $397 million sale of the eOne Music business, which resulted in a $101.8 million non-cash goodwill impairment charge. Despite this charge, the divestiture and subsequent focus on deleveraging allowed the company to strengthen its balance sheet. Management prioritized debt reduction throughout the period, successfully repaying its 2021 and 2022 notes and suspending share repurchases to maintain liquidity.

As of September 2021, Hasbro maintained a stable financial position with $1.5 billion available under its revolving credit agreement and no outstanding borrowings on its primary facility. The company continues to navigate a period of transition, marked by the passing of CEO Brian D. Goldner and the appointment of Richard S. Stoddart as interim leader. Looking forward, the company remains focused on managing risks associated with third-party manufacturing, volatile global economic conditions, and the ongoing operational challenges posed by the COVID-19 pandemic.