October 22, 2018
Entertainment licensing of TV shows and movies proved a fiscal lifeline for venerable toy maker Hasbro.
The company Oct. 22 reported third-quarter (ended Sept. 30) net income of nearly $264 million, about equal to net income of $265.5 million during the previous-year period. Revenue fell 12% to $1.56 billion from $1.79 billion last year.
Revenue loss was in large part due to lingering effects of the shuttering of major retailer Toys R Us, ongoing changes in consumer shopping behaviors and foreign exchange — the latter having a negative impact of $32 million, or 2% of Q3 revenue.
Hasbro managed to offset the declines in part to the entertainment and licensing segment, which saw revenue increase 45% to $84.8 million compared to $58.4 million in 2017. Operating profit increased 99% to $33.7 million, or 39.7% of net revenue, compared to $16.9 million, or 28.9% of net revenue, in 2017.
Segment revenue benefited from a multiyear digital streaming deal for Hasbro television programming and revenue from the 2017 My Little Pony: The Movie.
In addition, the adoption of new accounting rules concerning revenue from contracts favorably impacted the timing of revenue recognition in the quarter. Higher revenue and a favorable mix, coupled with cost reductions, drove higher operating profit and operating profit margin in the quarter.
Brand revenue decreased 5% to $847.7 million, due in part to My Little Pony and Transformers: The Last Knight theatrical releases occurring in 2017.
Last November, Paramount Pictures and Hasbro updated a pact to produce and distribute content based on Hasbro brands, as well as original stories. The companies have partnered on five “Transformers” movies to date, as well as two “G.I. Joe” films, and the first “Transformers” spinoff, Bumblebee, slated for theatrical release on Dec. 21.
The movie co-stars Oscar-nominee Hailee Steinfeld (True Grit) and John Cena (Blockers), and is directed by Travis Knight.
“Global retailers have ambitious programs this holiday season … including programs behind our feature film, Bumblebee,” CEO Brian Goldner said in a statement.
“Hasbro remains in a strong financial position, including good operating profit margins, $907 million in cash and quality inventory to support our business this holiday season,” added CFO Deborah Thomas. “As we manage through a very disruptive environment, the strength of our brands and our business allows us to continue to invest to drive profitable growth in future years.”