Hasbro Inc "Diving into Unit Economics of Video Game Launches" (Buy) Kocharyan

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Hasbro Inc "Diving into Unit Economics of Video Game Launches" (Buy) Kocharyan

Hasbro has reiterated guidance for Magic up in the mid single digit range %, with

margins in low 40%s as volume growth absorbs incremental royalty expense and

H2 investments in digital games, including marketing for Exodus and Warlock. We

continue to see upside for Magic margins for the year, driven primarily by volume.

For the full year, Street has +9% growth (UBSe +8%) for Wizard and Digital. It

sounds as if Hasbro has some strategic initiatives planned for Magic The Gathering

Arena outside of the Disney licensing deal to align analogue game with digital

gaming. Hasbro says Arena which today is less than 10% of MTG (and used to be

20%+ of the business when it was rolled out) was designed for only standard

format of play, but growth in broader Magic has come from other formats of play

including commander format that is not the most popular format. So Hasbro will

be investing in digital iterations of Arena, leaning on what's been driving the game

in its analogue form, but also tapping into multi-player formats.

Hasbro is also reiterating consumer product guidance of up low single digits %,

with margin in the 6-8% range, unchanged from prior guidance, as lower tariffs

are being offset by higher oil related input costs, though we calculate lower tariff

expense more than offsetting higher raw material costs such as resin (and also

higher freight/logistics costs) for this year. Street is at +3.7% for consumer

products segment (UBSe +3.8%). Hasbro expects to see roughly $40-60M of

consumer product revenue shift from Q2 to H2, and management says they have

good visibility into Q2 disruption being absorbed in H2 given 1) continued strong

POS and 2) stronger movie slate.