Operator
and welcome to the Hasbro Third Quarter 2026 Earnings Conference Call. This time, all parties will be in listen-only mode. If anyone should require operator assistance during today's conference, please press star zero from your telephone keypad. Today's conference 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 Fred Whiteman, Vice President, Hasbro Investor Relations.
Please go ahead. Thank you, and good morning, everyone. Joining me today are Chris Cox, Hasbro's Chief Executive Officer, and Gina Getter, Hasbro's Chief Financial Officer and Chief Operating Officer. We'll begin today's call with Chris and Gina providing commentary on the company's performance before taking 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 they 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 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 , our most recent 10 , 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 would now like to introduce Chris Cox. Chris?
Thanks, Fred, and good morning, everyone. Hasbro delivered another strong quarter with record profitability. Revenue grew 15% and adjusted operating profit improved 52%, with growth across all three of our segments. Wizards of the Coast's momentum continued, driven by the magic flywheel, and our consumer products business posted another quarter of gains. We're increasing our outlook for the year, which Gina will walk through in her remarks. Despite all of the macro noise in the quarter, we stayed true to our superpower, inspiring a lifetime of play. We do that by building deep, lasting fandom around great IP. Magic is the clearest proof point. Magic revenue topped $600 million for the first time, growing 34% versus last year and beating the record we set last quarter. Strength was broad-based across tentpole releases, Backlist, and Secret Lair. The Hobbit, which launched in August, is the fourth best-selling set in Magic's history, and it did that with a leaner product lineup. Shipments of Reality Fracture, which debuted in early October, exceeded our expectations. and Backlist and Secret Lair are on track for record years. Looking to Q4, Star Trek, our final set of the year, arrives in November and early signs are encouraging. It's drawing Star Trek bands who are new to magic, which is the core thesis behind Universes Beyond. You can see that demand in engagement. Hobbit pre-release participation across our 13,000 Wizards Play Network partners was the highest we've seen for a Universes Beyond release. And Magicon Atlanta is sold out, with badge sales up nearly 30% versus last year. The clearest proof is the player base. Take the first nine months of 2026 and compare it with all of 2024, our last year without a tentpole universe is beyond release. Organized play participants are up more than 40%, with three months left in the year. Fans come in through IP they already love, and expanded distribution makes it easier to find us. They stay because deep gameplay, married with best-in-class fan experiences, distinguishes Magic from other trading card games. In 2027, we expect Magic to grow on top of a record 2026. Each of our six tentpole releases next year has a full product suite. We're scaling production capacity to meet demand, and our fan base and retail distribution keep expanding. At New York Comic Con, we announced Marvel Darkhold Destiny. Our prior Marvel sets brought existing storylines into Magic. This one tells an original Marvel story centered on a brand new character and a companion comic. All six sets next year are bangers, and we look forward to telling you more about them in the coming months. Turning to digital games, at GamesCon, we kicked off hands-on previews for Exodus and confirmed an April 7, 2027 launch date. We're excited to get Exodus in front of players with more demos and announcements in the coming months. Warlock, our D&D action-adventure game, follows in 2027 and was the number one most wishlist new game from opening night. We'll share more on both titles before year end. Starting this quarter, we're providing additional information on our licensing business, and it's a model we like. It's asset light, which lets us focus on what we do best while leaning into our partner's capital investments. Hasbro is a top five global licensor with more than $17 billion in annual retail sales, and we plan to build on that position across five priorities. First, we're building an enterprise-wide franchise system that aligns story, product, and retail around key moments. Peppa Pig's Baby Eevee initiative is the proof point. Retail sales grew nearly 30%, while we spent a third less on marketing. Second, we're scaling licensed consumer products anchored by Peppa Pig, Transformers, and My Little Pony, and extending into Magic and Dungeons & Dragons. Third, we're accelerating location-based entertainment, where we're the number one licensor in the space. Fourth, we're diversifying digital licensing with a pipeline of mobile, PC, and console titles. Monopoly Go shows the asymmetric opportunity when you partner with industry leaders. Fifth, we're using entertainment and music to create fandom that pays off across the portfolio. What connects all five strategies is the same asset-light model, and these businesses generate nearly $700 million in annual revenue across consumer products, digital, and entertainment. Turning to consumer products, revenue grew 4% to $828 million, in line with our expectations, and our toy and game business delivered its fourth consecutive quarter of growth. Marvel product was the standout, with revenues up more than 35%, supported by theatrical releases from our partners at Marvel Studios. We're pleased with the momentum across our entertainment-led brands. Transformers 40th anniversary has been a great moment for fans as we brought the 1986 film back to theaters on Transformers Day, which coincided with strong retail events. In Marvel, Spider-Man remains strong following Brand New Day, and Power Charge Spider-Man is featured in multiple holiday gift guides. Dr. Doom product is on shelf ahead of the Avengers Doomsday debut in December with several items on retailers' top toy lists. We're entering the holidays with momentum, especially in our focus gem square categories, those parts of the toy industry that are gamified, entertainment-driven, multi-purchase, and multi-generational. The third quarter showed what happens when we stay true to our superpower of inspiring a lifetime of play. Magic is deepening its player base and setting records. Licensing extends our brands through great partners who bring their own capital. and our toy and game business has grown four quarters in a row. That is a balanced portfolio, and it's the foundation for the outlook Gina will walk through. Before I turn things over, I want to thank our teams and partners around the world for delivering another great quarter. Gina?
Thanks, Chris, and good morning, everyone. Q3 was our strongest quarter of the year, with revenue growth and margin expansion across all three segments. Revenue, profit, and cash flow each came in ahead of our expectations, and the quarter gives us the confidence to raise our outlook again. Net revenue in the third quarter was $1.6 billion, up 15% year-over-year. Adjusted operating profit was $541 million, plus 52%, with an adjusted operating margin of 33.9%, up 830 basis points on favorable business mix, cost productivity, and the benefit of tariff refunds, which I'll detail in a moment. Adjusted earnings per diluted share were $2.90, up 73%, reflecting operating leverage, higher interest income, and a lower effective tax rate. Through the first nine months, net revenue of $3.7 billion grew 15%, adjusted operating profit of $1.1 billion grew 35%, and adjusted operating margin expanded 440 basis points to 29.7%. Total Hasbro adjusted EBITDA was $605 million in the quarter, up 46%, and $1.27 billion year-to-date, up 29%. Our cost transformation program remains on track, contributing $105 million through the first nine months against our full-year commitment of $150 million. Those savings are doing exactly what we designed them to do, absorbing higher royalties and input costs while funding the investment behind MAGIC and our 2027 digital game launches. Turning to the segments, Wizards delivered another exceptional quarter. Segment revenue grew 31% to $747 million, with Magic growing 34% to $616 million, behind the release of The Hobbit, Reality Fracture, and Solid Backlist performance. Third quarter results include approximately $40 million of Magic sales that we had expected in the fourth quarter, primarily related to reality fracture. Predicting the timing of a set is difficult when a release falls right at the start of the quarter, so this is business as usual. Operating profit grew 46% to $367 million with a 49.2% operating margin of 520 basis points as volume and mix more than offset higher royalty expense and the step up in marketing behind our upcoming video game launches. Digital and licensed gaming revenue was $134 million, up 3%, with Monopoly Go continuing to perform in line with our expectations. The print operations decisions we discussed last quarter continue to pay off. Increasing initial print and distribution runs has given us the capacity to meet demand at launch, reduce costs, and plan our manufacturing network more efficiently. Across Premier Sets, Universes Beyond, Commander Dex, and Secret Lair, we are producing more products than at any point in the brand's history, and Sellthru is confirming the demand is there to support it. Through nine months, Magic Revenue of $1.6 billion is up 34%, and the ecosystem remains healthy across both new releases and backlist. Consumer products delivered the margin inflection we have been working towards. Revenue grew 4% to $828 million, with growth across almost all of our markets. Adjusted operating profit doubled to $178 million, inclusive of approximately $48 million of tariff refunds, with an adjusted operating margin of 21.5% compared to 11.2% last year. The underlying improvement is the durable part of the story, and it is broad-based. Supply chain productivity, lower distribution costs, disciplined operating expense, and favorable business mix was more than able to offset higher input costs. Through the third quarter, CP revenue of $1.7 billion has grown 3%, and adjusted operating margins of 7.7% have grown 410 basis points, including the one-time tariff refund recognized in Q3. We also enter the holiday season in good shape operationally. Owned inventory ended the quarter at $359 million, down at 10% versus last year. And both owned and retail inventory are clean and well-positioned against the seasonal build and the upcoming entertainment slate. The broader operating environment remains dynamic, and our teams continue to manage it well. The oil-related input costs we flagged earlier in the year are now flowing through the P&L, and the mitigation playbook we built is helping to offset that pressure. On tariffs, the refunds recognized this quarter relate to prior year duties, and we have updated our guidance to incorporate the lower China tariff rate of 12.5%. With greater stability in the trade environment, we are taking a more measured and flexible approach to our sourcing footprint, balancing cost, speed, and resilience across our network, and we remain focused on exiting the year with a dependable supply base and clean inventory on both sides of the shelf. Entertainment segment revenue was $20 million, up 9%, and adjusted operating profit of $18 million contributed at a 91.1% margin, driven by favorable mix and deal timing. Beginning this quarter, we are reporting licensing revenue as a separate line on the P&L. This disclosure puts together the licensing revenue for digital gaming, including Monopoly Go, as well as our licensed consumer products business. At roughly 11% of year-to-date revenue, it is a meaningful and capital-like contributor that spans the entire portfolio, and we believe the added transparency provides better visibility into our primary revenue streams. Total licensing revenue was $144 million in the quarter and $417 million year-to-date, which is down 4%, primarily due to $26 million of non-recurring items across several licensing agreements in the prior year, as well as tough Caillou My Little Pony trading cards compares. From a balance sheet and cash flow perspective, through the first nine months, we generated $907 million in operating cash flow, up 85% versus last year on earnings growth and improved working capital. We ended the quarter with $851 million of cash and $576 million of short-term investments, which are match-dated against our November 2026 maturity. We contribute $226 million towards debt reduction and return $445 million to shareholders through dividends and share repurchases. Turning to our full-year outlook, we are raising guidance for the year. We now expect consolidated revenue to grow 7% to 9% year-over-year on a constant currency basis and adjusted EBITDA to be in the range of $1.575 to $1.625 billion. At the segment level, Wizards is now expected to grow revenue between 16% to 18%, with operating margins of approximately 44% to 45%. From a phasing standpoint, the fourth quarter carries a step-up in royalties, as well as approximately $15 million of marketing spend behind the video game launches. Also note that the approximately $40 million of reality fracture and backless revenue pre-shifts recognized in the third quarter shifts out of our fourth quarter expectations. For consumer products, we continue to expect revenue to grow 1% to 3% for the year, with an increase in adjusted operating margin to 8% to 10%, including the benefit from the tariff refunds. The fourth quarter margin will step down sequentially from Q3, as the tariff refund benefit was completely recognized in Q3, and Q4 carries a heavier promotional and shipping mix. Entertainment segment revenue is now expected to grow 3% to 5%, with operating margins of approximately 65%. On capital allocation, our priorities are unchanged, but our capacity has grown. First, we continue to invest in the business behind our highest return growth opportunities led by wizards, digital gaming, and licensing. Second, we remain focused on paying down debt and maintaining a healthy balance sheet. Third, based on the continued strength of our cash flow, we are again increasing our share repurchase target for the year from $200 million to $400 million. We have repurchased $149 million through the first nine months and expect to be active through the balance of the year. And finally, we remain firmly committed to our dividend. As part of today's release, the board has authorized the fourth quarter dividends.
A few words on how we're thinking about next year.
While we're not giving 2027 guidance today, directionally, the setup is a good one. Wizards enters the year with a deeper release pipeline and a supply chain that can support it, and we expect, over time, the segment to continue operating at a healthy margin profile in the high 30s and low 40% range. With two video games scheduled for next year, Exodus and Warlock, we expect the non-cash amortization to result in 2027 margins in the high 30s range. As a reminder, amortization will show up as a depreciation charge within our cost of goods, and it will not be added back to adjusted EBITDA. It will be broken out separately on our cash flow statement, making it easy to identify and added back in operating cash flow. In consumer products, the productivity and mixed work we completed this year carries forward, and we expect to build off a structurally cleaner cost base. And as previously noted, 2026 is the peak investment year for digital gaming, which means the spending curve begins to work in our favor from here. As we wrap up, Q3 was a quarter of execution. Wizards is scaling profitably and doing it at a size that was not possible two years ago. Consumer Products has delivered four quarters of revenue growth and has turned the corner on margin, with the underlying improvement holding up even before the tariff recovery. And our cost discipline is funding the investments that will drive 2027 and beyond. We are raising our outlook with confidence and we remain focused on closing the year from a position of strength. And with that, I'll turn it back to the operator for questions.
Operator
We'll now be conducting a question and answer session. If we ask you, please give yourself to one question, one follow-up to allow as many as possible to participate. To ask your question today, please press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 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. One moment, please, for our first question. Thank you. And the first question today comes from the line of Stephen Nysick with Goldman Sachs. Please receive your questions.
Hey, guys. Thanks for taking the questions. And maybe first for Chris, Magic continues to see really nice momentum. I would just be curious if you could maybe speak to some of the drivers of strength that you saw, particularly in the third quarter, what might have outperformed versus your expectations across some of those sets. And then, importantly, as you look ahead, it sounds like you're excited for each of the sets to come next year. I was curious if you could speak a little bit more about what you hope each of those new sets will contribute towards growing the franchise over the longer term, or perhaps maybe more generally, what gives you confidence that Magic can continue to grow off this higher base from here?
Sure thing. Good morning, Stephen. Thanks for the question. Well, I would say what outperformed in Q3 for Magic? Everything. Reality Fracture is one of the best performing premiere sets we've ever done. The Hobbit, despite being a much smaller product release in terms of the total number of SKUs, performed like a premier set release with a lot more commander decks and supplementary SKUs associated with it. And Backlist continues to impress with its total number of sales. And I think it's a combination of three or four things. First and foremost, it's new player growth and player engagement. You know, the Hobbit pre-release was one of the biggest we've ever had. Our total number of players who are engaged in in-store play, which is probably our best kind of proxy for actual engagement, is at records. Players are happy with the sets, giving us great feedback, repurchasing and investing behind them. Our distribution is up. Our distribution is up, you know, over 40% in mass, over 30% in our WPN. It's broad-based. It's both North America as well as Europe and Southeast Asia. And just in general, you know, I think we're seeing some great kind of category tailwinds as well. Magic's performing well, but the overall category is seeing a boom. And that's just consistent with our overall thesis on what categories are going to perform, which we call Gem Squared, which is those categories that are gamified, entertainment-driven, multi-purchase, and multi-generational. And I think trading cards over the last year have emerged as the number one category in toys and games. I think they're actually bigger than building blocks now. And we see that as a generational structural shift and not just as kind of like a one-time thing.
Can I add one fun fact? I thought you'd say this fun fact. But Chris mentioned backlist. You know, through these first few weeks here in fourth quarter, our backlist contribution in 2026, year to date, through these first couple weeks of fourth quarter, has already surpassed what we saw in 2025. So to the point of like all of the engines are continuing to hum, we've got momentum across our front list. We've got momentum across the back list. And that's going to continue as we move into next year.
And I suppose I'll make it real on one practical item. So The Hobbit, much smaller release in terms of SKUs versus Lord of the Rings. The Hobbit's going to do about and maybe even more lifetime than Lord of the Rings will do. despite it being a smaller release. It's certainly done that to date. We would typically expect something like The Hobbit to do 50% to 100%, 50% less than what a comparable, more full-featured release to do. And that's a factor of player growth, player growth and the ability to be able to access product. And so we see that moving forward. You know, I think, you know, I think a second part of your question was what gives us what gives us confidence in 2027 and beyond is all those factors. So, you know, fourth quarter magic will likely be down. But a big part of that is we had some sales that happened earlier this quarter or sorry, that happened this quarter that should have happened early next quarter because our supply chain was able to deliver a bit earlier and the channel wanted it. and we have some product in next quarter that we shifted into Q1. So, you know, minus those shifts, Magic would have had another growth quarter in the high single digits, low double digits for Q4. Now it'll probably be down, you know, call it low single digits, mid single digits, but barring that, it would have been up around 8% to 10%. And so instead you're going to see a big growth like you had of 30% plus in Q3. You'll have a modest kind of decline in Q4, and then you're going to see another big spike in Q1. And we expect the momentum to carry forward in 2027 with continued growth on the back of all those factors.
That's great, Keller. I can leave it there and pass it on.
Operator
Our next question is in the line of James Hardiman with Citi. Please just use your question.
Hey, good morning. Thanks for taking my call. So, Chris, you just gave us a lot to chew on there in that last little follow-up. I just want to make sure I understand sort of where we were and where we are. I believe your initial and previous expectation was that Wizards would be down in the fourth quarter. You're still saying it's going to be down in the fourth quarter. But had you not moved the timing both from 4Q into 3Q and from 4Q into 1Q of next year, we would now be talking about Wizards going from being down to being up high singles, low doubles. Just want to make sure I have all those moving pieces right because certainly one of the big questions we're getting is a fourth quarter that was worse than sort of where the street was thinking about it. Just need to double check that.
Yeah, you totally captured it, James, and good morning. I think the bottom line on Wizards is we manage the game for the fans and not for quarterly results. That should be an expectation moving forward. We're going to pace the sets based on the logical pacing, especially as we do more kind of IT collaborations. And we're working with, you know, outside companies to make sure that we make the biggest moments possible. And, you know, I think that the honest answer also is we're chasing demand. Like, you know, we're going to be opportunistic about when we supply. Our supply chain team is doing a great job. They're helping, like, you know, chase one of the hottest categories in toys and games. And, you know, those two factors, occasionally we're going to have a quarter that's down modestly. But I think you can count on the fact that that's not a demand signal. That's just a timing of when we ship and a timing of when we have product available. and a factor of when we chose to make a product available based off of the best possible time for our channel partners and for our fans.
The ad I'd have kind of quantitatively, when we were sitting in July doing earnings and looking at our Wizards back half, we had thought that it would be up collectively, call it low single digits. Now we're going to exit the year with a back half that is, you know, call it high, high single digits, low double digit rate. So the overall, you know, improvement or kind of momentum of Wizards is continuing. To Chris's point, like there are things that can shift meaningful revenue as we're seeing, like one week can make a difference, a meaningful difference in the quarter. And I think you've got that compounding factor of just when we're launching our first set in 27 and now reality fracture of how much was shipped that first week that just take Q4 down, but the overall back half is well ahead of our expectations.
That makes a ton of sense. I just think everybody is, I think, rightfully just trying to understand what's signal and what's noise here, for sure.
Yeah, we were staring at the same mass ourselves as we were prepping, and we knew that was going to be one of the top questions.
So did we answer both of your questions?
So I actually did have a second question on sort of margins, but it's the same sort of general topic of sort of signal versus noise. Margins for wizards just continue to blow away, I think, even our most optimistic expectations. We're pushing nearly 50% year to date. Obviously, you've talked about that being in the high 30s next year. I guess what I'm trying to figure out is how to think about sort of core wizard margins. Obviously, there are some, I don't want to call them one-timers because maybe that's the new normal. But is there any reason to think that relative to, you know, the really strong performance here year-to-date that core wizards margins would actually compress in 2027, or is it just some of the things that you've laid out? Obviously, video games and some of the other, you know, if you want to call them idiosyncratic factors. Maybe, you know, help us think through sort of core versus, you know, other items in the context of 2027 and beyond. Thanks.
Sure, sure. Good question. I mean, obviously, this year, the volume growth that we're seeing on the business kicks off a favorable tailwind on leverage so that you see that showing up in our 26 margins. And as we look forward to 27, as we've talked about, we expect the Wizards business to grow. We expect that to be, call it, mid to high single digits in that range. But, you know, we're not going to plan for that business to grow at the double-digit rate that we're guiding to now. So there's a little bit more leverage that kicks off in 26 that we will see some leverage next year, just not as great. But to your point, the single biggest thing that will weigh on our margins next year that will keep it in the high 30s is that amortization expense that will flow through for both games. And remember, as we've talked about Exodus, now we have the launch date of Exodus being, you know, April 7th. And the first three months, we'll see the majority of that amortization flow through. So it will be a Q2 event where we'll see most of that, or I would say 65% of that cost come through. 85% of the depreciation hits within the first 12 months. So we'll then pick up some two of Exodus as we go through the balance of the year. And then we've got Warlock that's coming kind of in the back half. So that's probably the single biggest atypical thing in 27 that will weigh on margins. Everything else, it puts and takes. We're going to, you know, royalty expense might be a little bit heavier just given our UB set releases, but that's within the realm of reason. We'll have puts and takes within operating expenses. We'll continue to expect cost productivity to offset inflation. It's really the amortization expense.
Operator
Our next questions are from the line of Zeon's U with BMP Paribas. Please proceed with your questions.
Thanks for the question. You talked about player growth and how that's kind of driving magic, the gathering demand. But can you also maybe talk a little bit about repeat players and what you're seeing in terms of players once they come into the ecosystem, maybe it's via UB or something else, and then kind of staying and maybe spending more? Curious on that.
Yeah, for sure. I think the best proxy for that is backlist sales. And, you know, as Gina mentioned, we already have sold more backlist this year than we did all of last year. That continues to grow at a rate as impressive as our front list is growing. Backlist is actually growing faster. And I think that's a factor of we're bringing new players in, especially on things like universes beyond. So Marvel fans, Avatar fans, Turtle fans, soon Star Trek fans, and they decide that they really like this game. And then they go and buy more sets, and not just a Star Trek set. They go and buy Reality Fracture. They'll go buy Noctis, which is our first set, our first premiere set next year. And they become Magic fans, and they stick around like a Magic fan and behave like a Magic fan, which is usually a five- to seven-year period of time where they play the game actively. And, you know, occasionally they'll put the game down for maybe a year or two because they have a life stage, but then they come back. So, you know, Magic's a really special game. It's one that we don't measure retention in days and months. We really measure it in years and generations. And the new fans that we're attracting are just as engaged and just as valuable as the more traditional fans that we've had over our 35-year history.
And maybe one other fun fact, when you look at our backlist sales, sorry, for this last quarter, to Chris's point of the people coming in, playing the game, and sticking, our largest sets that sold for backlist in terms of distribution were Foundation, Final Fantasy, and believe it or not, Lord of the Rings. and that was our you know lord of the rings for those newer to the story that was our very first universes beyond set that we did was it 23 23 yeah sorry you had a question too yeah you had two questions yeah we're excited about backwards and then no no it makes sense um and then maybe
on 27 i think i heard you say you know wizards maybe can grow in the mid to high single digit range i guess that's including some of the maybe incremental video games um but maybe zooming in a little bit on magic you also mentioned kind of the full product suite for all the the tentpole sets um scaling supply you have growing distribution so i don't know it sounds like you have you have fuller set more supply higher distribution higher player count it sounds like it's still setting up quite strong for for 27th and any any kind of further thoughts on his comment And then on mid to high single digits was magic, not wizards.
So we expect magic to continue to grow at pace.
Operator
The next question is from the line of Arpina Kacharian with UBS. Please receive your questions.
Good morning. Thank you. And thanks, Chris, for that clarification. That was going to be my follow-up question, too, because as we think about Exodus, that should absolutely add to the top line. But the question really is related to Magic the Gathering distribution that went up further this quarter. Could you maybe talk a little bit about what's driving that? And should we expect to see further expansion in Wizards play network sequentially as we get into Q4 and into 2027?
Then I have a quick follow-up. Sure. I think you should expect, as long as the hobby is growing and there's vitality in the player base, I think you should expect new store growth to follow new player growth. Through the third quarter of 2026, we've seen about a 38% in growth rate in the number of WPN stores. We have over 13,000 now. On Mass, we've seen about a 28% growth rate on the number of stores. Like Magic's available now in close to 40,000 doors. And that's just a testament of more people were buying Magic and more people were buying in the category. And more retailers want to be part of that story. Whether it's, you know, a GameStop or a Walmart or a Carefor or a Smith or, you know, a Mox Boarding House style, we see a lot of upside there. And there's many more hobby shops and game cafes and board game cafes than 13,000 around the world. Those are just the ones that qualify into the Wizards Play Network today, and many, many more of them ask us to become part of that because they see the benefits of being part of our engagement loop and part of our reward cycle.
Thank you. That's very helpful. And just to switch to consumer products, just because we're in the back of the year and holiday season ahead of us, you've talked about consumer products up low single digits for Q4. Is that still the case, how you're thinking about Q4? And just for housekeeping and math purposes, what's your as-reported implied revenue guide? Is it around percentage and a half better than constant FX of 7 to 9%? Am I calculating that correctly?
Yeah, you're calculating that correctly. Overall, as we look at consumer products, again, looking at the back half of the year, we expect the back half to be up low single digits. I believe that means our Q4 will be flattish, maybe slightly positive. Another similar story, like Wizards, where we had a pretty big comp last year because of all of the goofiness on tariffs and the shelf set timing changing, replan orders were stronger in fourth quarter last year. So overall, our back half is really strong as the retailers have moved to kind of more normal shelf set timing and shipping patterns. But there is a little bit of comp noise in our Q4 for CP as well. Okay, thank you.
Operator
Thank you. The next question is in the line of Eric Handler with Roth Capital. Please receive your questions.
Good morning. Thanks for the question. First, I wonder if you could just be willing to dissect a little bit the magic revenue, Like, what percentage of the revenue is frontline versus backlist versus secret layer? And how has that changed, like, let's say, going back two years to three years?
Morning, Eric. Yeah, we – thank you for the question. We typically don't provide those levels of splits. But it's suffice to say, just given kind of how our front list is stacked, the majority of our revenue comes from the front list. The growth rates, as Chris was saying, like the growth rate on backlist has been pretty Our growth rate on secret layer, but the majority of the revenue is going to come from that front list.
Okay, that's helpful. And then, you know, there has been a lot of concern, you know, macro concerns about, you know will the consumer potentially roll over a bit just given inflationary concerns and consumer sentiment doesn't seem like there's really any concerns you know with with magic you know when you look at your consumer products business how are you thinking about that uh with your 4q product line yeah we're continuing to see a pretty resilient uh consumer uh and depend especially given how we've shifted our portfolio and our portfolio mix to those gem squared categories, we're definitely seeing momentum there.
So there's nothing that we see going into the holidays that has us concerned about the consumer.
Operator
Our next questions are from the line of Anthony Bonadio with Wells Fargo. Pleased to see with your questions.
Hey, guys. Thanks for taking our questions.
I wanted to ask about 27 sets and specifically Marvel Darkhold. I know you guys sort of talked about the alignment of Marvel sets and your fan base. This one seems like it might be a little more synergistic. I guess just thoughts on that, expectations there, and then maybe more broadly, just how you're thinking about the quality of the 27 sets you've announced so far versus what you've put out this year.
Well, I think a couple things. Darkhold Destiny should be pretty cool. It's an original storyline. There'll be an original character. I think it really represents how we want to work with partners. We want to represent their IP authentically. And ideally, we'd like to make them really a part of Magic. And I think this is a great example of it. I think fans will be excited by it. You know, it will, you know, like there's been some jokes a little bit in the fan community about how New York was one of our most frequent settings for Magic sets over the last year or two. And I think this kind of brings magic into superheroes and Marvel-style action and characters and storytelling, which should be fun. I think an important thing that you and all of the analysts should also be thinking about is the composition of the sets. So, you know, this year and for the last couple years, we've had sets that have had commander decks in them, some sets that haven't had commander decks in them, some sets that have had a full suite of collectible products, some sets that have had a more limited suite of collectible products. Next year, each of our six major sets will be full sets. They'll have all the commander decks and all the collectible products associated with them. And as I mentioned, we see upwards of a 50% or even greater difference in sales per set when you have that full product suite. And so that's something I think you need to factor in as well. We haven't shared all the details about all the sets next year. There's a couple secret ones in the back half of the year that we think our fans will be pretty excited by. I think, needless to say, we feel like all of them are going to be super high quality, really great IP, and we've had great partnerships with each.
And then maybe just one quick on Exodus, just any changes to how you're thinking about the range of outcomes there? And now that we've got the April 7th date, just key data points to watch from here as we get closer to that release.
Well, I think the biggest thing that we're looking for is kind of wishlist and preorder activity. And on wishlist so far, so good. It's approaching a million wishlists, which based on what we're benchmarking from other releases over the last couple years, that's benchmarking pretty favorably. We're going to have a big December. Actually, we're going to have a big couple months about new news associated with the game. But in particular, we're going to have some major news on the game in December. And we'll be watching those metrics very, very carefully as we kind of head into the end of the year and shape our thinking about what we expect it to do commercially when it launches in April. Thanks, guys.
Operator
Thank you. The next question is from the line of Garrick Johnson with Seaport Research. Please receive your questions.
Great. Thank you. Good morning. First question. Can you just go over the retail sales, the POS in a quarter for both Magic and consumer products?
POS overall for us in the quarter was up low single digits overall. I think that includes when I'm saying that. That's just toying game. Yeah, yeah. And the trading cards would have been kind of up high single digits, low double digits numbers. Yeah, there's a little bit of a timing lag of when we're doing this call and when we'll see final September results. Those come in actually today. So maybe when we talk later on today, Derek, we'll have some more some more additional information. But, you know, overall, categories were performing. I think most notably, we should look at how our gem squared categories are performing year to date. and those are up almost 14% so again when you think about our strategy and how we're shifting our portfolio mix to have those categories growing at a kind of low double-digit pace that is that's a good thing for us
okay great and one follow-up can you just discuss the distribution of magic you know understanding use distributors for your hobby shops and then I guess you go direct to mask.
Can you just discuss how you do distribute between the two channels and what maybe the margin differential might be, but also the lag between when you recognize revenue and when perhaps a hobby shop realizes retail sale?
Hey, Eric. We use distribution quite extensively for both channels. We do do direct for some, but I would say the vast, vast, vast majority of what we do is through distribution, and the margins are pretty comparable between distribution and direct for us. We've got a lot of good partnerships, usually in a given territory, like in the U.S. I think we have somewhere in the neighborhood of six to eight major distributors. In Europe, I think we have a bit less, but it's still like three or four. We want to make sure a hobby shop has a choice and can get fulfilled real time. Usually, our typical hobby shop gets fulfilled in an order in 24 to 48 hours from when they ship it. And usually, our distributors will take product anywhere from on the low side, two weeks, on the high side, six weeks before a major release. And really, that just has to do with the composition of when the product's ready, when we can ship it out, and how complex the release looks like.
Okay, great. Thank you for the detail.
Operator
Thank you. Our next question is from the line of Andrew Dodor with Bank of America. Please receive your questions.
Hey, good morning, everyone. Thanks for taking the questions. I guess, Chris, you know, Magic gets a lot of the air time, and rightfully so, but I just wanted to turn to the consumer products piece for a second. How do you think about the medium-term growth prospects within that division? Is this a segment that can sort of eke out low single-digit top line with some modest margin improvement, or do you think about that segment differently?
I think our consumer products division inside of the midterm can do better than low single digits. If you look at just, like, the new licenses that we have for 2027 alone, we'll start shipping Harry Potter at the very tail end of this year. I think the series debuts in the Christmas time frame. Then we'll follow that up with a full line in Q1 and Q2. We'll have The Legend of Zelda, which is a brand-new license for us. will have three quarters of K-pop Demon Hunters that effectively have had no comp. And then you're going to have another stacked movie lineup next year. You're going to have a new Spider-Man movie. You're going to have another Avengers film. Star Wars 50th anniversary. The Legend of Zelda movie. The new Harry Potter series, which I was lucky enough to do a tour of the set. And it was magical. like no pun intended. I think all of those combined really sets up for a healthy 2027. And frankly, it's pretty favorable for 2028. And then from a margin perspective, you know, as we drive incremental upside in terms of the top line, you just get some favorable leverage from that. And then, you know, I think our CP team has done a good job with managing their costs and getting that to something that we think is a lot more competitive. So, you know, I feel like we can get CP margins, you know, my goal is to get it into the double digits and make it be really resilient in that midterm time frame, which is consistent with the guidance that we've given you guys.
That's great color. Thank you. Just a quick follow-up. I know, Gina, you spoke in your prepared remarks about your spending curve, you know, being to work in your favor. I think the CapEx guide this year was $225 million. You've done about $200 million or so the last several years. Just how should we think about CapEx over the next 18, 24 months? And is the savings that you have there, should we think about that going towards shareholder returns?
Got it. Yeah, the commentary specifically was on our digital CapEx coming down. And I believe we said last quarter, by 2028, those development costs will be down 20% to 25%. To your point, since we've been capitalizing that, that will come directly out of that $225 million pool of dollars that we were using. And in short, yes, as that cash flow frees up, it gives us flexibility to either reinvest back into the business, to fund more towards share repurchases, or to continue to buy back debt.
Operator
Thank you. At this time, this will conclude our question and answer session and will also conclude today's conference. We thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.
