Good morning, and welcome to the Hasbro, Inc. First Quarter 2025 Earnings Conference Call. At this time, all parties will be in a listen-only mode. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. At this time, I'd like to turn the call over to Kristen Levy, Hasbro Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Joining me today are Chris Cocks, Hasbro, Inc.'s Chief Executive Officer, and Gina Goetter, Hasbro, Inc.'s Chief Financial Officer and Chief Operating Officer. Today's call will begin with Chris and Gina providing commentary on the company's performance, and then we'll plan to take your questions. Our earnings release and presentation slides for today's call are posted on our investor website. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures. Our call today will discuss certain adjusted measures, which exclude these non-GAAP adjustments. A reconciliation of GAAP to non-GAAP measures is included in the press release and presentation. Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. Before we begin, I would like to remind you that during this call and the question and answer session that follows, members of Hasbro, Inc. management may make forward-looking statements concerning management's expectations, goals, objectives, and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. These factors include those set forth in our annual report on Form 10-K, our most recent 10-Q, in today's press release, and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. I'd now like to introduce Chris Cocks. Chris?

Thanks, Fred, and good morning. Q1 delivered another clear proof point of our plan to win strategy at work. Focused on play, scaled on partnerships, and-performing. Revenue rose 17% led by a surging Magic business, and continued strength in licensing. Wizards was up 46%, Consumer products was down 4%, driven by quarterly phasing due to a later Easter but still ahead of plan. Both segments beat expectations. Adjusted operating profit jumped 50%, a result of favorable mix and the cost discipline embedded in our transformation program. Our games portfolio, an industry-leading licensing business, remained standout performers. High growth, high margin, and structurally resilient due to lower exposure to international sourcing. On tariffs, we acknowledge the challenge posed by the current global trade environment. While no company is insulated, Hasbro, Inc. is well positioned. Our US games business benefits from largely digital or domestic sourcing, maintaining low costs and healthy margins. We make many of our board games just up the road in East Longmeadow, Massachusetts, not far from where Milton Bradley printed his first board games in the 1860s. Wizards has low tariff exposure, with sub $10 million in expected duty for the year. Most of our domestic supply is produced in North Carolina and Texas, with the balance from Kyoto, Japan. Our licensing business is primarily digital or minimum guarantee-based, with manageable partner exposure. While our toy segment faces higher exposure, we're responding proactively. Our asset-light sourcing model means we can rapidly shift production to help mitigate tariff impacts. We're accelerating our $1 billion cost savings plan to offset tariff pressures internally. While targeted pricing actions remain likely, we are prioritizing key price points and strengthening retail partnerships. We will work to capture market share and shelf space through our growth and optimize brands at critical consumer-friendly price points, particularly $9.99 and $19.99. We want the hundreds of millions of families and fans we serve each year to keep experiencing unbeatable value at the shelf, whether it’s an all-new home play set for Peppa Pig, a play booster for Magic's Final Fantasy Universe collaboration, or a hot new action figure for Marvel's upcoming Fantastic Four movie. We're also thinking long term as we play to win, especially with partners. This week, we announced the extension of our multi-decade licensing agreement with Disney Consumer Products for Marvel and Star Wars, with enhanced category rights in preschool, Play-Doh, action, and role play. Combined with the Marvel agreement for Magic: The Gathering, our collaboration with one of the world's most valuable brand portfolios has never been stronger. Expect more announcements of new partnerships with leading brands across toys, games, and video games aimed at all demographics, further solidifying our position for long-term success. Looking ahead, while we remain hopeful for a more favorable trade environment, we must acknowledge the costs imposed by current tariffs. Even with Hasbro, Inc.'s relative strength and flexibility, logistics are becoming more complex, and changes in receivables and shipping dynamics present a challenge. Ultimately, tariffs translate into higher consumer prices, potential job losses as we adjust to absorb increased costs, and reduced profits for our shareholders. Our guidance is unchanged, supported by our robust games and licensing businesses and our strategic flexibility, but prolonged tariff conditions create structural costs and heightened market unpredictability. Hasbro, Inc. produces a substantial amount of product in the US and around the world, has served as an engine of local jobs, creativity, and innovation for over a hundred years, and licenses to hundreds of American companies employing tens of thousands of American workers across toys, games, entertainment, experiences, and more. As such, we fully endorse the toy association's advocacy for zero tariffs on toys and games globally. Either on US exports or on imports. Other toy associations around the world are quickly joining the advocacy efforts. We believe there should be free and fair trade for toys, an industry critical not only to hundreds of thousands of American jobs, but also to the joy and developmental well-being of millions of children, families, and fans across the US and worldwide. Before handing it over, let me extend my sincere thanks to our team and partners. Our strong performance amid challenging conditions can be directly attributed to your dedication, agility, and shared ambition. In an unpredictable environment, our greatest assets remain our people and our valued partners. They are what truly enable us to play to win. Now, over to Gina.

Thanks, Chris, and good morning, everyone. We are off to a strong start in 2025, delivering growth across revenue, profit, and operating margin while continuing to execute on our strategic priorities. Our Q1 performance reflects early traction from our play to win strategy, ongoing transformation initiatives, and a continued focus on cost discipline and profitable growth. Net revenue in the first quarter was $887 million, up 17% versus the prior year driven by growth in Magic, and Monopoly Go. Adjusted operating profit increased 50% to $222 million reflecting a 25.1% adjusted margin, a 5.5 point improvement over last year due to the favorable business mix. Adjusted earnings per diluted share rose 70% to $1.04 driven by top line growth, margin expansion, and broader expense management. From a segment perspective, Wizards of the Coast in digital gaming once again led the charge. Segment revenue grew 46% to $462 million with growth across both Magic Tabletop and digital licensing. Magic delivered a strong quarter with revenue up 45% driven by healthy demand for recent releases, and ongoing engagement in backlist content. The strong performance in Q1 reinforces our confidence in the momentum and stickiness of the business across our core consumers. Our licensed digital gaming portfolio grew 56% in Q1, driven by Monopoly Go lapping the minimum guarantee for the final quarter. This game is now celebrating its second anniversary and has announced the next third-party IP collaboration with Lucasfilms and Star Wars launching in the game on May 1st. Operating margin in Wizards reached 49.8%, up 11 points year over year driven by mix and leverage from top line growth. Consumer products revenue declined 4% to $398 million finishing slightly better than our original expectations behind strength in licensing. Importantly, the segment's adjusted operating loss of $31 million improved 18% versus last year, and adjusted operating margin improved 140 basis points reflecting progress on our cost transformation and lower promotional activity. Through the first quarter, we saw minimal impact from tariffs across our cost structure or customer order patterns. The entertainment segment declined modestly with revenue down 5% to $27 million primarily due to deal timing. Segment adjusted operating profit held flat year over year at $17 million. Across total Hasbro, Inc., we continue to unlock savings from our transformation. Total adjusted EBITDA was $274 million, up 59% versus the prior year with margin expansion supported by $22 million of gross cost savings from our operational excellence initiative. On the cash side, we generated $138 million in operating cash, funded $52 million in strategic investments, and returned $98 million to shareholders via our dividend. We also paid down $50 million in long-term debt keeping us on track to meet our gross leverage target of 2.5 times by 2026. As we look at the remainder of the year, we're encouraged by the strength of our Q1 results and the early execution of our strategic priorities. That said, we're operating in a dynamic macro environment. The expanded rate on imports from China and potential reciprocal tariffs on other toy manufacturing hubs including Vietnam and India is creating volatility and introducing a range of scenarios for how the year could unfold. To stay ahead of this uncertainty, we're making targeted operational pivots. We're further rationalizing our SKU portfolio to prioritize velocity and margin, reassessing our logistics routes and manufacturing to reduce exposure, and accelerating efforts to diversify our sourcing footprints. Today, roughly 50% of our US toy and game volume originates from China, and we're accelerating plans to bring that down meaningfully starting this year. China will continue to be a major manufacturing hub for us globally, in large part due to specialized capabilities developed over decades. In parallel, we're partnering closely with our customers to manage inventory flows and work through a range of pricing strategies tailored to different trade outcomes and protect key price points. These actions ensure we remain agile and margin-focused even as the external conditions evolve. With that context, let's turn to our 2025 total company outlook. We are pulling a lot of levers and making a number of puts and takes in our assumptions. The net is we are keeping full company guidance unchanged. While we are dealing with a wide range of potential tariffs, retailer, and consumer outcomes, our games business and our strategic flexibility give us options. I'd like to spend a couple of minutes to unpack how we are modeling the cost of tariffs impacts to the toy category, both in terms of retailer ordering and consumer takeaway, and provide more color on our supply chain and pricing direction. Our forecast assumes various scenarios for China tariffs ranging from 50% to the rate holding at 145%, and 10% for the rest of the world. This translates to an estimated $100 million to $300 million gross impact across the enterprise in 2025, before any mitigation. As I mentioned, our team has moved quickly to offset activating a range of levers including sourcing optimization and diversification, coordination with retail partners on SKU assortment and promotion activity, and readying targeted pricing actions. We've also modeled multiple scenarios around how the tariffs could impact our consumer products revenue, anchoring our assumptions to prior significant events including the 2008 and 2009 Great Recession and COVID. Factoring in all the mitigating levers, we estimate that the net profit impact in 2025 to be between $60 million to $180 million. The range in outcomes is dependent on final trade policy, customer order patterns, and consumer behavior. Turning to the wizard segment, given the broad-based strength in the Q1 results, we are raising our full-year outlook and now expect revenue to grow mid to high teens with a low 40s operating margin. This increase is driven by strong demand signals we're seeing across upcoming universes beyond releases, including Final Fantasy, Spider-Man, and Avatar: The Last Airbender. These sets are generating early excitement across both core and new fan segments, reinforcing the strength of our multi-franchise strategy. As we scale these temple releases, it's important to note that we will begin to accumulate higher royalty expenses starting in Q2. This is fully contemplated in our outlook and consistent with the broader strategy to grow high-margin franchise-led revenue across our portfolio and attract new and lapsed fans. The momentum in Wizards provides a strategic buffer as we navigate broader cost pressures in consumer products. At this stage, we don't have sufficient clarity to credibly adjust our full-year consumer products guidance. The range of potential outcomes tied to the evolving tariff environment remains wide and we are continuing to assess the implications in real-time. Until we see greater certainty on the scope and timing of these trade measures and how they could influence customer order patterns and consumer behavior, we believe it is prudent to leave our outlook unchanged while actively managing the levers within our control. As part of this, we're accelerating elements of our cost savings program, now targeting $175 million to $225 million in gross savings this year. As we look for additional profit offsets, despite macro uncertainty, a combination of CP mitigation, wizards outperformance, and accelerated cost savings gives us a line of sight to delivering on our full-year financial commitments. Our capital allocation priorities for the year are unchanged. We continue to invest behind the core growth engines of the business, namely Magic and Digital Games, while maintaining discipline and flexibility in an evolving macro environment. In light of current trade uncertainty, we are placing even greater emphasis on balance sheet health and liquidity. We remain committed to our long-term leverage targets and are taking a balanced approach to returning capital and prioritizing debt reduction. We have kept our Q2 dividend unchanged. To wrap up, as we move through the rest of 2025, we're executing with focus, scaling our high-margin growth engines, actively managing volatility, and accelerating cost transformation. Our Q1 performance affirms the durability and advantage of our diverse model and gives us line of sight to delivering full-year commitments. Even in a dynamic environment, we remain disciplined in capital deployment, responsive to external risks, and confident in our ability to create value across the balance of the year. We'll now turn it back to the operator to take your questions.

We'll now be conducting a question and answer session. If you would like to ask a question, please press The confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask participants limit themselves to one question and one follow-up. One moment please while we pull for questions. Thank you. Our first question is from Christopher Horvers with KPMorgan. Please proceed with your question.

Hi. Good morning. It's Christian Carlino on for Chris. Appreciate the color on how you're thinking about tariffs. Just given the consumers felt so much inflation over the past couple of years, can you talk through the different scenarios you're thinking about in the event the 145% on China holds? And how toy spend is impacted relative to the broader impact on the consumer's wallet.

Sure. Good morning, Christian. Before I answer the question, in case there was any doubt, we kicked off the call with Fred Wightman, our VP of Investor Relations. It wasn't Kristen Levy with a serious goal. So Kristen is still here. Yeah. Kristen is still here. Kristen. So we've looked at a variety of scenarios and, you know, I would say we have a pretty cautious outlook in terms of what the impact of the current tariff regime would have. You know, basically, we see the impact to consumer spending on the category consistent with what happened with the 2008, 2009 recession. The toy category was down roughly mid-single digits. Hasbro, Inc. fared a bit better at that time based on entertainment roadmaps and innovation that we had, as well as Wizards of the Coast. And then in terms of what we think the inflation is, we went back to 2020 and 2021 with the early days of COVID. So we basically see a combination of inflation and some recessionary pressures on the macro. That said, you know, we think the toy category early in 2025, and we think this will extend throughout the year, will kind of reassert its traditional focus on resiliency or its traditional position of resiliency. It tends to be a category of small luxuries. It tends to be a category which is heavily gift-oriented. And so we think it's going to fare better than other discretionary categories or other experience categories. So that's kind of the puts and the takes we have. Obviously, if tariffs change, that outlook will change. But right now, that's our base. It's at 145% with China and 10% everywhere else.

Got it. That's really helpful. I think could you talk to, you know, what are your conversations with retailers like? There's media reports about some big players canceling orders from China, but it sounds like you're not seeing that. And could you maybe talk about how much of this pressure is being absorbed by maybe the third-party manufacturers versus the retailers? Are you seeing retailers go to more direct imports to negotiate directly with the manufacturers and just any color there on how the impact is being shared across.

Got it. Good morning, Christian. You know, our conversations with the retailers are pretty fluid. For as many curve balls that are being thrown at us, the same kind of curve balls are being thrown to them. And everyone is taking a slightly different approach with how they're managing their inventory and their order pattern. So we haven't seen, you know, on the big three, we're not seeing a ton of canceled orders. And different thinking of how they're going to approach the holiday. But we are having very active discussions on how we're managing inventory as we move through, say, this Q2 period and then Q3, which is when you tend to see the resets start to happen ahead of the holiday season. So nothing hugely material in terms of orders being canceled or seeing instances, as you said in your or asked in your question of them going directly to the manufacturer. But we are seeing some shifts on how we're thinking about the phasing throughout the year.

Yeah. Just to add a little bit more color, I would say our first principle in all of this is don't overreact. And I think our retail partners have appreciated that perspective. Now Hasbro, Inc. is able to come from a privileged perspective on that. You know, somewhere around 45% to 50% of our US sales are either domestically sourced or based on digital or licensing from domestic companies. So that gives us a little bit more buffer than the typical toy company which is 80% plus of their volume comes from China and most of it the rest from Southeast Asia. So, you know, in terms of our discussions with retailers, we're talking a lot about okay, how can we keep prices as consistent as possible for consumers, especially for items that we think will be fantastic gifts, that kids will be asking for and moms and dads and aunts and uncles will want to give. That said, we are having discussions around pricing more broadly. You know, at this level of tariffs, I don't think you can avoid it. But generally speaking, I think it's a set of discussions in the spirit of partnership. The one thing I'll add a little bit on what Gina said is we are seeing a change from direct import to domestic. And that will change the nature of the timing of when our orders will be fulfilled. You know, I think Q2 is pretty dynamic, but I definitely think Q2 will be impactful on imports. That said, we might be able to compensate for it domestically. We'll probably have to give you guys some updates as the quarter goes on. On future conferences.

How about this for the longest answer ever to this question? I'm going to add one more point to Chris' comment. The other strength or opportunity that we have with our retailers, the discussions that we're having, we're anticipating some shelf opportunities and stepping into some white space. So, again, with the health of our inventory, with the health of our kind of supply chain and how diversified we are, we're also using this opportunity that partner with all of our retailers to step into some new opportunities as well. So we're trying to play both defense and offense at the same time.

Super helpful. Thank you very much. Best of luck.

Our next question is from Megan Clapp with Morgan Stanley.

Hey, good morning. Thanks so much. My first question is just a bit more of a clarification, and then I have a follow-up on wizards. So the clarifying question is, Chris, I think you said something in your prepared remarks just about prolonged the potential for prolonged tariffs creating structural cost and uncertainty. And I wanted to just clarify, is that meant to say that the exposure or the kind of headwind that Gina talked about this year, could that get worse next year? Is that what you were meaning to imply from a cost perspective? Obviously, you'll have to lap through it as it rolls into 2026 given inventory. But I just wanted to maybe if you could expand upon what exactly that comment meant.

Yeah. Well, I think it's two things. I think the first thing, you're correct. In that, you know, right now, we're able to basically defer paying a bunch of tariffs because, you know, for the first four or five months of the year, we're not having a large number of deliveries. So there will be incremental tariff exposure that you'd have next year if the current duties continued. That would be a headwind. The second thing is by moving things around in our supply chain, we have a lot of flexibility. Like, you know, by the end of this year, hundreds of SKUs will be for the US will be moved from China-based manufacturing to alternate locations. And, you know, I think we're going to meaningfully accelerate our diversification efforts in terms of where we can source product from. Right now, we source it from eight countries. That's probably going to expand to nine to ten in the very near term. I think you're going to meaningfully see a big difference in terms of the percentage of product coming from China to the US, much faster than what we previously communicated. Some of that though comes with a cost. You know, when we manufacture board games in the US, it is significantly more expensive to manufacture here than it is in China, for instance. If we move products like sourcing for Play-Doh from China, which is where it's dominantly sourced from the US today to Turkey, which we've been using to source to Europe, there is a cost associated with that because the logistics in Turkey are just kind of different. And we were looking at that across multiple product lines. We feel like over time, we'll be able to manage the bulk of that. And we'll be able to make these changes on a cost-neutral basis. But at least in the mid-term, that increased complexity and that increased load on new logistics centers will have some costs associated with our outlook.

Yeah, Megan. As you think about the phasing of that gross impact that I had in my that is really all in the back half. So just as you think about what that is going to mean for 2026, the absolute kind of annualized number goes up. Now to Chris' point, all of the work that we have to diversify our supply chain and move kind of move product around, that will help to mitigate probably the bigger number that you would calculate. But that's why kind of as you think of this year's impact versus next year's impact, there's still a material headwind coming at us.

Okay. That's helpful. And then just a follow-up on wizard. So really strong performance and magic in particular in 1Q. It sounds like you're raising the guide both for the 1Q outperformance versus your expectations as well as some better expectations for the remainder of the year. Is there any way to kind of parse out what is being raised for one queue versus the rest of the year and related to that, you know, you're incorporating some additional it seems like conservatism just around the consumer into CP. Are you doing the same in Wizards?

Well, we'll tag team this between Gina and I. So I'd say wizards had meaningful outperformance in Q1. We also think it's going to do pretty darn well in Q2. Just to give some color on that, Final Fantasy will be the best-selling set of all time. On day one. It already is. And so then it'll have room to run in Q3 and Q4. And we feel really good about the back half releases as well, particularly the new universes beyond sets. You know, as we look at Wizards, our store count is up 20% versus what it was 18 months ago. It's very clear to us that the Universe is Beyond as a strategy has increased the total active installed base of Magic players, both in terms of reigniting lapsed fans as well as bringing in new fans. And just historically, Magic has been very economically macro resilient. You know, in 2008, 2009, it was growing double digits. It's a passion-based game. That's not really tied and the collectors aren't really tied to the S&P 500 or the performance thereof. So we feel pretty good about where Wizards is sitting and pretty confident in our guidance raise for it.

So if you think about then the Phase remember back in February, we said that Q1 and Q4 for Wizards were going to be the strongest growth quarters. And we continue to believe that. As you look at the ones those sandwiched in the middle of Q2 and Q3, they're stronger. Q2 is going to look a little bit goofy because of some of the comps. So we are expecting Q2 revenue to be down in Q2. Magic will be up. It'll be a healthy Magic growth business. But we're comping one, you know, to a lesser extent the difference in Baldur's Gate and Monopoly Go this year versus last year. But then also remember to a bigger extent, we have had a favorable licensing settlement last year that benefited revenue that we're lapping. So when we come to Q2, you'll see probably low single-digit declines in revenue. And then from a margin standpoint, still very healthy, but you'll see that big step up in royalty expense as we launch Universes Beyond. So I think the way that most models have been set with that growth Q1, Q4, that's the right way to think about it. And the middle two quarters got a little bit better, but there's a little bit of bumpiness just given comps.

Okay. Super helpful. Thank you.

Thanks, Megan.

Our next question is from James Hardiman with Citi.

Hey, good morning. Thanks for taking my question. So wanted to dig in a little bit. I think, Chris, you talked about the cautious nature of the guide. And I guess specifically, I think it's slide sixteen, the bridge slide. And I love a good bridge. So everyone loves a good bridge slide. Everybody loves a good bridge. So I wanna make sure we're all capturing all the information that's in that slide. I think what this would suggest is that you're factoring in the full brunt of the 145% and anything less than that we would ultimately have led to a higher adjusted EBITDA guide versus where you previously were. And then I think there were some also some comments about sort of the industry assumptions in prepared remarks. I guess, you know, the second part of the question would be, I mean, GFC level industry declines and COVID level inflation is that also sort of what's built into this unchanged EBITDA guide? And if we get anything better than that, would that also ultimately be upside to the number?

Good morning, James. I just want to clarify my quote because on the advice of counsel, you'll never hear me say conservative. I know, I always say cautious. So but I'm going to let Gina take this one.

Good clarification. So good question. I think your synopsis is generally right. So and when you look at the waterfall chart on page sixteen, what is embedded in that red bar is that higher tariff rate of 145%. And an assumption that the retail sales follow similar trends to what we saw in 2008 and 2009. Like the overall kind of macro was down, call it, six to eight percent. And that's what we have factored in to our outlook for that kind of worst-case scenario. Now to your point, if we weren't on the worst case and we go to the other side, would our guide be up? Yes. Probably. However, you know, one of the muscles that we're flexing is we're pulling in and accelerating a lot of the cost savings pipeline initiatives that we had in motion. So there could be, you know, if it starts to mitigate some, you might see us slow down or rethink the pacing of some of those. But by and large, I mean, the strength of Wizards and the momentum that we have there in and of itself was would have probably taken us over. If that red bar wasn't there.

Got it. That all makes a ton of sense. And then maybe help us sort of handicap the risk of the rest of the world. Seems to me that at least one of the incremental surprises coming out of liberation day was the heavy-handed nature on the rest of the world, right, outside of China. And so much of your sort of diversification strategy has been to move out of China into some of these other countries that are now being tariffed to a certain degree. Like, you know, that ten percent number. And who knows what's ultimately gonna happen in July, but maybe help us understand the CPX exposure to the rest of the world specifically those ten percent tariff countries, and how you think about, again, moving production out of China. You know, a lot of these countries seem like safe havens and I don't know. How do you even make decisions in this current environment? Thanks.

Well, I think that goes back to first principle just answering your last question, which is don't overreact. Our assumption is that we will get to a reasonable and logical trade policy ultimately once all the negotiations are done. We're not making any kind of hopeful assumptions that that happens soon. Our guidance is based off of 145 and 10% reciprocal everywhere else. And we're assuming that that holds for the balance of the year. If the reciprocal tariffs increased and China did not change, that would be a headwind, obviously. And we would have to take that into account. You know, in terms of how we're thinking about the rest of the world in terms of a market and not just as a supply source, we see it as an opportunity. You know, our business is under-indexed a bit inside of Europe. We see a lot of retailer excitement for some of the new product lines we have. You know, the new Peppa Pig products that we have, all the great Marvel stuff that we have coming out. Magic certainly is looking like it's gonna be a winner in markets like Europe and Japan. So we see some potential for upside there, especially as we kind of prioritize where our SKUs are going and where our marketing dollars are going. In terms of market upside, APAC, likewise, we see some opportunities there. And then the other thing that we're doing a lot of is starting to look at ODMs in Vietnam, India, and even China in terms of more value SKUs and getting more aggressive about real low price points and driving some breakthrough pricing opportunities for markets like LatAm in Southeast Asia via our everyone plays initiative as part of play to win. So, you know, I'd say 145 and 10 is our base outlook. If that changes, to the negative, it certainly is a headwind. What we don't necessarily have factored into our guide though is hey, is there any market upside in terms of kind of shifting SKUs and shifting our marketing priorities? And so we'll play that out over the next couple of months.

Yeah. With our team, we're really trying to avoid the analysis paralysis and the churn that that can cause on decision making. So we're staying very focused on what is known. And right now, what is known is the 145 and the ten. All of the moves that we're making both within our supply chain as well as with our customer base, we would categorize as no-regret moves. Like, it is good for us to have a more diversified footprint, so we'll just keep moving on that path.

Got it. Really helpful. Thanks, Chris. Thanks, Gina.

Thank you.

Our next question is from Arpiné Kocharyan with UBS. Please proceed with your question.

Hi. Thanks for taking my question and thanks for all the detail you already provided. Sorry to go back to the tariff sensitivity slide, but could you maybe clarify, is it fair to assume that those mitigating efforts will include bringing China exposure for consumer products below substantially below the 50% mark? I think you had given 40% exposure for China for 2026 before. I guess, do you have a sense of where that could be for next year as of today to the extent you can predict that? And then in terms of other mitigating factors, you know, whether it's cost saves, you know, to find ways to make things cheaper or taking pricing, is it possible for you to detail sort of assumptions there? Let's say, making things cheaper could offset X percent of impact and then pricing will offset the rest to the extent it's possible to quantify. I know it's very difficult at this point. You're probably looking at thousands of factors.

Good questions, and good morning. I'm going to start by saying first, we are a global company. China is gonna continue to remain an important manufacturing hub for us. And while our US toy and game business is roughly 55% of our revenue, 45% of it is okay with getting goods from China. So China is always gonna be a manufacturing hub for us. As we think about our moves from the fifty, you know, to your point, we said back in February, we're on a path to move to under forty by 2026. We are speeding that up. So we are accelerating our efforts there. It will, you know, we're targeting to be below that forty percent by 2026. We are still kind of nailing down final plans and final product lines and what all this is gonna mean with our supplier base etcetera. So I'm not gonna give you an exact percentage now. But I think that the path we were on to get to forty by 2026 is going to be faster than that. As you think about then the mitigating levers that we have, again, I'm not gonna give you exact dollars because they're all in the way that you've laid it out, they're all kind of muddled together. But there's really if you go from that gross impact I'll just anchor to the high end of the range of three hundred million dollars kind of gross exposure down to the one hundred and eighty, what we're seeing is the net impact. There's really three big things to focus on. And we've talked a lot about the supply chain. That's the first big thing. And just how we're both shifting product around our existing manufacturing base, how we're managing inventory levels, how we're then kind of accelerating diversification that provides a big mitigating lever for us. The second piece is on how we're managing our products in the broader portfolio. So we have done a significant amount of SKU reduction leading up to SKU kind of rationalization as we led into this year. We're continuing to evaluate what makes sense in this current environment for the US market. So some of our higher-priced items or products that we just don't think are gonna be tenable with from a profitability standpoint with a hundred forty-five percent tariff on. We're taking different choices on. So that's kind of the next lever is that we're really focused on product all of our DTV efforts and how that influences product cost, we're accelerating there. And then the third piece of mitigating actions has everything to do with customer and commercial. How we're thinking about pricing and writing the pricing actions, how we're managing our allowances with the retailers. Now all and when we talk about allowances, those are all the dollars that are sitting within gross to net. How we put those either to better use or drop them altogether. So taken together, supply chain, how we're thinking about products, how we're thinking about commercial customer pricing, that's what gets us to kind of that one hundred twenty million dollar difference between gross to net.

That's very, very helpful, Gina. Thank you. And then one quick follow-up, you know, have you done any price elasticity of demand work to basically say, you know, X percent of growth in pricing is X percent impact on demand. I know it's difficult, right, especially in this environment, but anything you could share with investors to sort of help them think through pricing as a mitigating factor.

Well, we have. There's not a lot that I can share publicly since most of it's proprietary. We definitely think $9.99 and $19.99 are important. We definitely think innovation and having a toy that has a must-have factor to it, something that the kid asks for, and you know, is based off of a passion-based purchase is also super important. And then last but not least, having great brands backed by fantastic fan bases and big entertainment moments is also super important. And so when you look at, like, what we just announced with Disney, there's no bigger brands in the toy aisle than Marvel and Star Wars. We're thrilled to be extending our multi-decade partnership with them. We've been working with Walt Disney Company since the 1950s think Snow White was and Cinderella were one of our first collaborations together. And, you know, I love their road map. What they have coming up in 2026 and what they just announced at their Star Wars event in Japan a week or so ago for 2027. I think bodes pretty favorably for what the future is for that. And that's just one partnership in a series of partnerships that you're going to be hearing from us over the next several months and quarters. That we're going to bring the best brands to our aisles that have the highest pricing power and the surest demand. And, you know, I think that's gonna position us favorably over the long term.

Thank you very much.

Thank you. Our next question is from Eric Handler with ROTH Capital.

Good morning. Thanks for the question. You had pretty significant outperformance from Magic in the quarter, at least relative to my model. I wonder if you could sort of rank, like, where all that upside came from?

So I think it's a couple things. We did have a bit of an extra set or half an extra set in terms of a remastered set. Our backlist performed very, very well. And then early ordering for Tartier Dragon Storm has been very strong. So, you know, probably the biggest thing was, like, the backlist overperformance. And then secret layer has actually been doing pretty well. I mean, the whole magic business is just it's difficult to identify just one thing. Really, I think what we're seeing on Magic is an expansion of the player base when you expand the player base, it's just a great opportunity to engage them with more products and kind of create a network effect amongst the players and the collecting community. And we see that only strengthening as the year goes.

Thanks, Chris. And then one question on sort of manufacturing. Like, how easy is it to just pick up and leave a China manufacturing plant? How much lead time do you need to sort of switch over to another country? And, you know, can you do that before peak manufacturing times for the holidays for this year, or is this more of a 2026 event?

Yeah. Good question. Yeah. I would I'll say it's more of a 2026 event. I mean, obviously, the moves and the work is happening now. And it depends on capabilities. There's some countries that have the capabilities and the infrastructure in place, so it's just a matter of kind of the development and quality engineering work that needs to happen to shift. In others, there's a brand new build of capability. So it kind of runs the spectrum in terms of the length of time. But if you kind of anchor back to what we said in February, it was gonna take us a couple of years to move from that 50% down to under 40. And now we're saying, oh, gosh. We're gonna get there a lot sooner. So we're speeding up the time to get that diversification.

Yeah. And it depends on the category, Eric. So, like, for Play-Doh, it's, you know, send the boat to the US. Don't send the boat to Italy from Turkey. And then send the boat from China to Europe. For Nerf, where we have a very large India-based footprint, we are able to, like, change production but, you know, not necessarily where the SKUs are produced. So we are changing what the SKU mix looks like inside of the aisle for the US so that we can favor India-based SKUs, which maybe are older SKUs but are tried and true. But the benefit there is most of our competition, the white-label competition and, you know, some of our other named competitors, they're solely China-based. So we actually could come to market with a pricing advantage versus them. So it's category by category. I think where you're gonna find China-based manufacturing the stickiest is really anything with electronics anything with super high-end deco. And then, surprisingly, anything made out of foam. Except for darts. Except for darts. Yeah. But, like, foam role play, that tends to be a very specialized set of capabilities in Chinese manufacturing.

Thank you.

Our next question is from Alex Perry with Bank of America.

Hi. Thanks for taking my questions here, and congrats on a strong quarter. Alright. I guess good morning. Gina, I just wanted to bridge some of your comments on the segment guide. So the outlook for CP unchanged, but now factoring in bigger levels of industry declines, I think you were at sort of flat to down 4% last time in the CP top line guide. You raised the Wizards top line guide pretty significantly. Op margins come up, but reiterated sort of consolidated for, you know, full company guide. I guess, is the puts and takes, like, a lower CP implied op margin offset by the higher wizard op profit contribution, like, I just wanted to make sure, you know, we're sort of clear on, you know, the segment puts and takes. Thanks.

Yeah. Good question. I mean, I think we spelled out wizards, so that's and that should be pretty clear of where we're rising both. We're rising both or raising both the revenue outlook and the operating margin outlook. In terms of CP, we're leaving it unchanged just given the wide range and potential outcome here. So when you think of the net impact of, you know, $60 million to $180 million, if it's if it's on that higher end of the range of $180 million, you'll see a higher revenue loss and you'll see those operating margins to your point, they're gonna come down in the mid-single-digit range. Just as it absorb we just can't absorb the entirety of the cost impact in the margin structure. But if you go to the other end of the range, if we net out there, you know, it's if the trade policy kind of starts to calm down a bit, if we don't see as much negative reaction from consumers or our customer order patterns remain steady. If we end on that lower end of the range, we stay then within spitting distance of our original guide. So that's why right now we just don't have enough clarity to narrow that down any further. Hopefully, you know, by the time we get to July, we're able to provide a bit more precision there, but it's a pretty wide guide. But I think how you said it in terms of mid-single digits on CP, and then you've got the wizards, both the Wizards upside as well as trying to accelerate all of these cost savings in the pipeline, that's what's helping to absorb it.

Really helpful. And then just my follow-up question. I wanted to circle back on price. And, you know, what parts of the portfolio do you have the most ability to raise price? Would you ever consider, you know, price increases on parts of the portfolio that seem like they have, you know, significant momentum right now like Magic, or will it all be sort of concentrated in the toy portfolio where you're, you know, seeing the most tariff exposure?

I think we're gonna pick and choose. So, you know, pricing is ultimately gonna be a discussion with our retail partners. And, ultimately, what price ends up on shelves is up to them. We're gonna work hard to try to figure out how to hit those magic price points for the items that we think are most exciting and or minimize any price increases associated with hot items that we think have a lot of good innovation. We've got a lot of cool products coming out this fall. You know, we're refreshing the entire Peppa Pig line with the new baby on the way. We think Play-Doh Barbie is the most exciting new innovation to hit the arts and crafts category, potentially ever. We think that's a huge collaboration and happy to be partnering with Mattel on it. Likewise, we have a lot of opportunities across board games and games. Magic is really on fire. You know, I think our default is to not pass on price wherever possible and instead to drive share and drive shelf space opportunities. That said, we are going to have to raise prices inside of a 145% tariff regime with China. We're just trying to do it as selectively as possible and minimize the burden to, you know, the fans and families that we serve.

Perfect. That's incredibly helpful. Best of luck going forward.

Thanks, Alex. Have a good day.

Our next question is from Stephen Laszczyk with Goldman Sachs.

Hey, good morning. Thanks for taking the questions. I'm curious if you'd update us a little bit more on the conversations. Maybe you're having at this point with retailers going into holiday. I imagine most retailers are trying to stay as flexible as they can for as long as they possibly can ahead of any potential reprieve on the tariff side. Could you just remind us maybe of the timing of how that plays out throughout the year and maybe when is the last possible moment that retailers would need to make a decision around holiday orders as we head into late summer early fall.

Yeah. Good morning, Susan. Yeah. The very fluid is how I would describe discussions with our retailers. And to your point right now, in this moment where we're sitting in April, the holidays are a long ways away. So when you think about order patterns what we are planning for and you I think Chris said it in Q&A here already this morning. We're planning for Q2 to have a pretty material shift in both kind of DI versus Dom. As the retailers themselves are managing their inventories. So some of that order pattern that enters. As we think about the back half of the year, when we can model out our revenue, there's not a material change in terms of the back half of the year really represents about still call it 60%, 65% of our revenue base. We expect our inventory to then gonna be more moving up from us to our retailers to be more back half loaded into Q3 and Q4. We don't see any material change in how retailers are thinking about the holidays. But to your point, they are making the do I here in May and June, or do I wait until we're closer to the holiday resets, which are gonna happen in, call it, September October. So that's how we've contemplated our phasing. That's what is all embedded in our guide in the range of outcomes. But if you think about what's CP is gonna look like in Q2, it's going to be a down quarter for us. Just given the change in the order patterns there. And then we kind of build back as we move through Q3, Q4.

Thanks. That's really helpful. And then maybe one on Monopoly Go. It looks like revenues accelerated here in the first quarter. Curious if you could just speak a little bit more to the momentum you're seeing there, what's been working so well to keep that IP going, and then any updates to your outlook in terms of the decay you're factoring into the guidance?

Well, I think first and foremost, Scalise made a fantastic game based on a fantastic brand. So it's very sticky. They're having excellent player engagement. They're doing good events with major partners. They just announced a new one with Star Wars, which I think kicks off in a month or so. So they've just been doing a really good job. And I think they're getting to a more mature place in terms of, you know, how much they have to spend in terms of driving new player engagement, new player adoption. Which was a favorable aspect of the quarter for us. I think our previous guidance of about $10 million a month in terms of what we'll make is fair for the balance of the year and what we're currently modeling in our outlook.

Great. Thank you both.

Our next question is from Jaime Katz with Morningstar.

Hey, good morning. I just want to ask a quick question on POS, which was in the back of the doc strong revenue performance with sort of a weaker market share performance. And I'm wondering if maybe that's a function of just decreasing inventories or working down inventories at retailers. Is there something else maybe that I'm missing?

We entered the year with pretty lean inventories with our retail partners, and so there is an opportunity there. Would be kind of what I would say on that.

Yeah. Our CP performance in the first quarter was the toy part of it was pretty on our planned expectation. As Chris said, we didn't have anything crazy in terms of having a clear inventory and promotions like that because we came into the year pretty healthy. Licensing was what drove the upside on revenue in the quarter.

Okay. And then can you talk a little bit about what you guys are seeing at value price points? I think from other consumer discretionary firms, we're just hearing incremental weakness across that consumer base. Thanks.

I don't think we have any real thunderous insights to share with you right now in terms of what the consumer behavior is. Generally speaking, toys as a category did pretty well in the first quarter, and, you know, Easter kind of went off as expected. So I think people are continuing to buy toys. You know, personally, I don't think we're seeing any indication that people are pulling forward like holiday buys or summer buys. Toys tend to be an occasion-based purchase or, you know, a purchase of passion. And consumers are behaving normally.

Thanks so much.

Our next question is from Kylie Cohu with Jefferies.

Hey, good morning, you guys, and thanks for taking my question. All of the color around the CT exposure is super helpful, but I was wanting to dig into the wizard exposure a little more. I know it's small, but I do believe you do source some from Japan. I was curious if there were any other countries to call out or details to add for rest of the world for that segment specifically.

Yeah. The exposure for wizard and flash magic is pretty minimal. I mean and it's embedded in the wizard's bar in the in the bar chart embedded in the wizard's guide. So on a kind of twelve-month basis, call it five to ten-ish million dollars of exposure. To your point, we do have manufacture in Japan. We do also manufacture over in Europe a bit. The bulk of the manufacturing is coming from the US.

Yeah. The only thing in Wizards that we import from China is, like, D and D box sets. So that's actually where that's actually a bigger input on the tariff duties I mentioned for wizards than like the Japanese duties for magic.

Perfect. No. That is super helpful. And then just kind of following back up on the POS trends, I think, you know, you mentioned that life we think is better than expected, but I'm curious, like, what were those bright spots specifically? That would just be helpful. And kind of what did you see, you know, anything around Easter. Obviously, there's a timing shift this year. Anything that performs particularly well.

Well, on licensing, certainly, My Little Pony continued to perform well and had a favorable year-over-year comp. Monopoly Go is doing quite well. And then in terms of POS for our brands, you know, we had Transformers was up. Duel Masters, I'm sorry, Beyblade was up. We had a good quarter in terms of Marvel. Those are probably the big bright spots for us on POS.

Awesome. Super helpful. Thank you.

Alright. Thanks.

Thank you. There are no further questions at this time. This does conclude today's conference. We thank you for your participation. You may now disconnect your lines.