Hasbro (HAS) Earnings Report: Q1 2016 Conference Call ... · building deep and relevant brand...

CompanyName:HasbroIncCompanyTicker:HASSector:ConsumerGoodsIndustry:ConsumerDurables

EventDescription:Q12016EarningsCallMarketCapasofEventDate:10.15BPriceasofEventDate:86.79

©2014TheStreet,Inc.Al l R ightsReserved Page1of21

Hasbro(HAS)EarningsReport:Q12016ConferenceCallTranscriptThefollowingHasbroconferencecalltookplaceonApril18,2016,08:30AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

DebbieHancock;Hasbro,Inc.;VPIRBrianGoldner;Hasbro,Inc.;Chairman,President,CEODebThomas;Hasbro,Inc.;EVP,CFO

OtherPart icipants

FeliciaHendrix;BarclaysCapital;AnalystDrewCrum;StifelNicolaus;AnalystArpineKocharyan;UBS;AnalystStephanieWissink;PiperJaffray&Co.;AnalystFredWightman;Citigroup;AnalystTaposhBari;GoldmanSachs;AnalystJaimeKatz;Morningstar;AnalystTimConder;WellsFargoSecurities,LLC;AnalystLeeGiordano;SterneAgeeCRT;AnalystEricHandler;MKMPartners;AnalystJimChartier;Monness,Crespi,Hardt&Co.;AnalystGerrickJohnson;BMOCapitalMarkets;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheHasbrofirst-quarter2016earningsconferencecall.

(OperatorInstructions)

Today'sconferenceisbeingrecorded.Ifyouhaveanyobjections,youmaydisconnectatthistime.

Atthistime,I'dliketoturnthecallovertoMs.DebbieHancock,VicePresidentofInvestorRelations.Pleasegoahead.

DebbieHancock(VPIR):

Thankyou.Goodmorning,everyone.JoiningmethismorningareBrianGoldnerHasbro'sChairman,PresidentandChiefExecutiveOfficer;andDebThomas,Hasbro'sChiefFinancialOfficer.

Today,wewillbeginwithBrianandDebprovidingcommentaryontheCompany'sperformance,andthenwewilltakeyourquestions.

Ourfirst-quarterearningsreleasewasissuedthismorningandisavailableonourwebsite.Additionally,presentationslidescontaininginformationcoveredintoday'searningsreleaseandcallarealsoavailableonoursite.




Thepressreleaseandpresentationincludeinformationregardingnon-GAAPfinancialmeasures.PleasenotethatwheneverwediscussearningspershareorEPSwearereferringtoearningsperdilutedshare.

Beforewebegin,Iwouldliketoremindyouthatduringthiscallandthequestion-and-answersessionthatfollows,membersofHasbromanagementmaymakeforward-lookingstatementsconcerningmanagement'sexpectations,goals,objectives,andsimilarmatters.

Therearemanyfactorsthatcouldcauseactualresultsoreventstodiffermateriallyfromtheanticipatedresultsorotherexpectationsexpressedintheseforward-lookingstatements.SomeofthosefactorsaresetforthinourannualreportonForm10-K,ourmostrecent10-Q,intoday'spressrelease,andinourotherpublicdisclosures.Weundertakenoobligationtoupdateanyforward-lookingstatementsmadetodaytoreflecteventsorcircumstancesoccurringafterthedateofthiscall.

IwouldnowliketointroduceBrianGoldner.Brian?

BrianGoldner (Chairman,President,CEO):

Thankyou,Debbie.Goodmorning,everyone.Thankyouforjoiningustoday.

Thefirstquarter'srevenue,operatingprofitandnetearningsgrowthreflectedacommitmenttoourstrategyandtheinherentbenefitsoffocusingonHasbro'sfranchisebrands,keystrategicpartnerbrandsandourabilitytoexecutearoundtheblueprint.

TheglobalHasbroteamscontinuetoperformataveryhighlevel,deliveringinnovativebrandexperiencesinformedbyglobalconsumerinsightsandsupportedbycompellingstorytelling.Wearebuildingdeepandrelevantbrandconnectionswithconsumersacrossbroaddemographicsandgeographies.

First-quarterrevenuesgrew16%,and20%absentFX,drivenbyHasbrofranchisebrands,partnerbrands,andstrengthacrossgeographies.Hasbro'sglobalteamsdeliveredanextremelystrongquarterwithdouble-digitrevenueandoperatingprofitgrowthintheUSandCanadaandinternationalsegments.

Internationallywegrewrevenuesdespitetheforeignexchangeenvironment,withstronggainsinmanydevelopedeconomies.Whenadjustedforforeignexchange,weposteddouble-digitrevenuegrowthinallmajorgeographicregions.Emergingmarketrevenuesincreased6%absentFX,andwecontinuetoexpectthesemarketstogrowrevenuesdoubledigits,absentFX,for2016.

Whileconsumerdemandremainsrobust,wearebeginningtoseeanimpactonsomeretailersfromtheongoingeconomicchallenges.

Globalpointofsaleincreased27%inthequarterbehinddouble-digitgrowthinallmajorregions--NorthAmerica,Europe,LatinAmerica,andAsia-Pacific--anddouble-digitgrowthinbothtoysandgames.

IntheUS,pointofsaleincreaseddoubledigitsinallcategories--boys,girls,games,andpreschool--withgrowthinfranchiseandpartnerbrands.Inaddition,accordingtoNPD,throughthefirsttwomonthsoftheyearwecontinuedtogainshareinnearlyeverymajormarket.

Overallfranchisebrandrevenuesgrewinthequarter.Intotal,toyandgamerevenuesforfranchisebrandsincreased9%absentFX,increasing12%intheUSandCanadasegment,and6%intheinternationalsegment.

Thefirstquarterhadseveraluniqueandexpectedcomparisonchallengeswithinthefranchisebrandswhichdon'tchangeourpositiveoutlookforthefullyear.Q1wasatoughcomparisonwithintheentertainmentandlicensingcategory.




Franchisebrandrevenuesinthesegmentdeclinedthisyearversuslastyear,whenwerecordedrevenueforamultiyeardigitalstreamingdeal.TheagreementincludesMyLittlePony,LittlestPetShop,andTransformersprogramming.Thesegmentalsohadtoughcomparisonsinconsumerproductsandfilmrevenuesrelatedtothe2014Transformersmovierecordedlastyear.Transformerstoyandgamerevenueswerealsodownversusaverystrongfirstquarteroflastyear,whenitbenefitedfromthemovie.

FranchisebrandPOSinthequarterwasuphighsingledigitsgloballyanddoubledigitsintheUS,morethanovercomingthenegativeTransformerscomparison.Withinourfranchisebrands,NerfandPlay-Dohcontinuedtodeliverstronggrowth.

NewinnovationsfromNerfincludingModulusandRivalareperformingwell,and2016markstheirfirstfullyearinthemarket.Play-Dohcontinuestodrivegrowthinplaysetsandcompounds.ThisyearwearelaunchinganentirelynewsystemofplaywithPlay-DohTownthatisnowavailableintheUSandrollingoutinternationallythroughout2016.

MyLittlePonygrewintheUSandCanadasegmentand,absentFX,intheinternationalsegment.Wecontinuetodeliverinnovativenewproduct,stronglicensingprograms,andcompellingentertainmentincludingthesixthseasonofMyLittlePony:FriendshipIsMAGIC,whichbeganairingMarch26.

Inaddition,thelaunchofthenewEquestriaGirlsminidollsegmentisofftoastrongstart.WeareworkingthroughsomeretailinventorywithinEquestriaGirls,butweareoptimisticabouttheinitialconsumerreactiontoournewofferingandtheoveralloutlookforMyLittlePonyglobally.

AsImentioned,Transformersrevenuerepresentedthemostsignificantdeclinewithinourfranchisebrandsforthequarter.Newentertainmentbeganlateinthefirstquarterofthisyear,withthesecondseasonofTransformers:RobotsinDisguiseonCartoonNetworkintheUSandcurrentlyrollingoutinternationally.

MachinimaandHasbroareunveilingall-newentertainmenttargetingtheolderTransformersfanlaterthisyear.WearealsoactivelydevelopingthenextchapteroftheTransformers'theatricalstories.InFebruary,ParamountPicturesdatedTransformers5forreleaseonJune23,2017,withtwoadditionalTransformersfilmsplannedforJuneof2018and2019.Wehaveglobalteamsoftalentedindividualsworkingonthismulti-yeartheatricalentertainmentandinnovationslate.

Overallgamesrevenuewasdownslightlyinthequarter,andflatabsentFX.PieFacecontinuestobeinhighdemand.Wealsosawgrowthinourdigitalgaminglicensing,includingYahtzee,whichisbeingdrivenbyourmobilegaminglicensewithScopely.

DuelMasters,aJapanesetradingcardgame,alsocontributedtogrowthinthequarter.Weareinvestingtobuildgreatgamingexperiencesinbothface-to-faceanddigitalplayenvironments.

OuroutlookforMAGIC:TheGatheringremainspositive.Thereleaseschedulefluctuates,andrevenuetimingisstory-driven,butitiseffectivelydrivingengagementwithplayers.

WeshippedthefirstsetintheShadowsoverInnistradblockonApril8versusafirst-quarterreleaselastyear.Itisofftoafabulousstart,withpre-releaseattendanceup20%.Thisvalidatesourchangetoatwo-setblock.

MAGICrecentlyachievedthemilestoneof1millionactiveplayersinourorganizedplaysystem.Wealsohave65,000playerswhoplayinpremiereeventsstreamedtoe-sportsaudiences.Thisisanareaweareinvestingintobothgrowthenumberofeventsandtheplayerbase.

TheteamatWizardsoftheCoastisdoinggreatworktofosterbothanaloganddigitalplayfortheMAGICcommunity.WeareverypleasedtohaveChrisCocksfromMicrosoftjoiningusaspresidentofWizardsof




theCoast.

Asweannouncedlastweek,GregLeedsisleavingHasbro.Wearegratefulforhiscontributionsandwishhimthebestinhisnewendeavors.

Thefirstquarteralsobenefitedfromthestrengthofourpartnerbrands.RetailandconsumerdemandforStarWarsremainedveryhigh,andatthisearlystageoftheyearwecontinuetobelieve2016revenuescouldbeinlinewithlastyear.StarWars:TheForceAwakenswasrecentlyreleasedinhomeentertainment;andRogueOne,aStarWarsstory,isscheduledforreleaseonDecember16.

Thefirstquarteralsomarkedtheon-shelfdateforHasbro'slineofDisneyPrincessandDisneyFrozenfashiondollsandsmalldolls.Initialconsumerreactionhasbeenverypositive,andourapproachofofferingtheentirerangeofDisneyPrincessisresonating.NewcontentandtheallnewcharactersoftheMoanaandElenaofAvalorwillfurthersupportourinnovativeproductsthisyear.

Inaddition,Marvel'sCaptainAmerica:CivilWarwillbeintheatersonMay6.Wehavearobustlineandstrongplannedretailpromotionalactivitysupportingthisfilm.

Thefirstquarterwasagoodstarttotheyear,butweknowthereisalotoftheyearlefttodeliver.For2016andbeyond,wehaveaninnovativelineofbothHasbrobrandsandpartnerbrands,andweareinvestingtodeliverthebestexperiencestoretailersandconsumersglobally.Thisincludescontinuedstrategicinvestmentandfurtherdevelopmentofourcapabilitiesaroundthebrandblueprintincludinginstorytelling,digitalgaming,andourconsumerproductslicensingefforts.

IwillnowturnthecallovertoDeb.Deb?

DebT homas (EVP,CFO):

Thankyou,Brian,andgoodmorning,everyone.ThefirstquarterwasaverygoodquarterforHasbro.Thestrengthofourresultsreflectedthecontinuedmomentuminourbusinessandstrongexecutionbyourglobalteam.

Wegrewrevenues,operatingprofit,andearningsdespitethecontinuednegativeimpactfromforeignexchangeandchallengingeconomicenvironmentsinsomeinternationalmarkets.Wereturned$93.2millionincashtoshareholdersandendedthequarterwithaverystrongbalancesheet,wellpositionedtosupportour2016growthoutlook.

Lookingatoursegmentsforthefirst-quarter2016,revenuesintheUSandCanadasegmentincreased28%.Theboys,girls,andpreschoolcategoriespostedrevenuegrowth,whilethegamescategorydeclinedslightly.

Hasbrofranchisebrandrevenuesincreased,andpartnerbrandsfurthercontributedtogrowth,withrevenueincreasesinStarWars,DisneyPrincess,Frozen,andDescendents,aswellasYo-kaiWatch.

USpointofsalepostedsoliddouble-digitgrowthinallcategories.Retailinventorycontinuedtobeofverygoodquality.OperatingprofitintheUSandCanadasegmentincreased89%,reflectinghigherrevenuespartiallyoffsetbyhigherexpenselevels.

Internationalsegmentrevenuesgrew13%.Excludingthenegative$26.7millionimpactfromforeignexchange,internationalsegmentrevenuesincreased22%.

Revenueinthissegmentgrewinallfourproductcategories:boys,games,girls,andpreschool.Franchisebrandrevenuesweredownslightlyasreported,butgrewabsentFX.Partnerbrandswerealsopositivecontributors,includingStarWars,DisneyPrincess,andFrozen.




Operatingprofitinthissegmentincreased50%to$2.9million.Profitimprovementonhigherrevenueswaspartiallyoffsetbyincreasedexpensesyear-over-year.

Duringthequarterwealsotooka$13.8millionbaddebtprovisionforapotentiallyuncollectiblereceivable.Thiswasthefirstsignificantprovisiontakensincewebeganourexpansionin2008intomoreinternationalterritories,notablyemergingmarkets.

Overall,wefeelwehavetakentheappropriaterisksandmanageourhigher-riskaccountsveryclosely.

Currentexchangeratesincertainregionshavechangedfavorablysincethebeginningofthisyear.Althoughtheeurohasstrengthened,othercurrenciescontinuedtoweakeninthequarter.

Forthefullyearweforecastedanapproximate$100millionnegativeimpactfromforeignexchangecomparedto2015.Ifrates,inparticulartheeuro,stayfavorablethatimpactwouldbemuchlower.

Entertainmentandlicensingsectorrevenuesdeclined30%.InthefirstquarteroflastyearthesegmentbenefitedfromamultiyeardigitalstreamingdealforHasbroStudiostelevisionprogramming.

Consumerproductlicensingandentertainmentrevenuesalsodeclinedinthequarter,mostnotablyfromthedifficultcomparisonwithlastyear'sTransformersmovie-relatedmerchandiseandrevenues.Licensingrevenueisgenerallyrecordedinarrears,andlastyear'sfirstquarterreflectedtheholiday2014Transformersmovie-relatedrevenue.

Segmentoperatingprofitdeclined67%.Inadditiontolowerrevenue,wecontinuetomakeinvestmentsinourconsumerproductsteam,digitalgaming,andstorytellingtodrivefuturegrowthinthesehigherprofitmarginrevenuesources.ThesearestrategicallyimportantcapabilitieswhichtrulydifferentiateHasbro'sbrandswithbothconsumersandretailers.

Turningtooverallexpenses,higherrevenuesdroveimprovedexpenseleverageanda270basispointincreaseinoperatingprofitmarginforthequarter.

Wecontinuetoseegrowthinpartnerbrands,whichdrivelowercostofsales-to-revenueandhigherroyalty-to-salesratios.Bothmeasureswereclosetoflatwithlast-yearlevelsascostsofsalesforthequarterwere34.9%ofrevenuesandroyaltiestotaled8.4%.

Productdevelopmentdollargrowthreflectscontinuedinvestmentininnovationacrossourbrandportfolio,includingfranchise,partner,andnewbrands.Advertisingremainedapproximatelyflatasapercentageofsales,andintangibleamortizationdeclined,reflectingsomeofourdigitalgamingassetsbecomingfullyamortizedinthesecondquarteroflastyear.

Programproductioncostamortizationwasalsodowninthequarter.InthefirstquarteroflastyearthislinereflectedthehigherrevenueandassociatedamortizationwithourstreamingdealforHasbroprogramming.

SG&Ainthequarterwasdownasapercentofrevenues.SG&Adollarsincreased12%,primarilyduetoinvestmentsaroundourbrandblueprint,baddebt,andhighercompensationexpense.

Ourfirst-quarterresultssupportourabilitytosustainandgrowoperatingprofitlevelsovertime.Whileachievingthis,wecontinuetomakeincrementalinvestmentsinourbrands,includinginthedigitalecosystemforMAGIC:TheGathering,inourITsystemstodriveefficienciesandenhanceinnovation,andinourtalentandcapabilitiestoexecuteourbrandblueprint.Inthefirstquarterthestrengthofourbusinessenabledustodeliveroperatingprofitexpansionwhileinvestingforfuturegrowth.

Turningtoourresultsbelowoperatingprofitforthequarter,otherexpensewas%$2.7millionversus




incomeof$4.7millionlastyear.Increasedprofitsassociatedwithour40%shareoftheoperatingincomeintheDiscoveryFamilyChannelcombinedwithhigherinterestincomeonourinvestmentswasmorethanoffsetbylargerlossesfromforeignexchangetransactions.

Theunderlyingtaxratewas26.5%,downfrom27%lastyearandessentiallyinlinewith26.4%forthefull-year2015.Dilutedearningspersharewere$0.38comparedto$0.21lastyear.

Ourbalancesheetremainsstrong.Cashtotaled$1.1billionatquarterend.Wegenerated$294millioninoperatingcashflowduringthequarterand$531millionoverthepast12months.

Duringthefirstquarterwereturned$93.2milliontoshareholders:$57.4millionindividendsand$35.8millioninsharerepurchases.OurMay16dividendpaymentwillbethefirstquarteratthehigherdividendrateof$0.51pershare,whichtheBoardincreased11%inFebruary.

Receivablesatquarterendwereup19%versusthe16%growthinrevenues.DSOsincreasedtwodaysto73days.

Absenttheimpactofforeignexchange,receivablesincreasedapproximately23%versus20%revenuegrowthabsentFX.Overall,ouraccountsreceivableareingoodconditionandcollectionscontinuetobestrong.

Inventoriesincreased36%versuslastyear.Adjustingforanegativeforeign-exchangeimpact,inventoryincreased41%,reflectingthenewbusinesseswearesupporting,thetimingofentertainment,andouroutlookfor2016.Overall,webelievewehavetherightamountandqualityofinventoryatretailandatHasbrotomeetourgrowthexpectationsfortheyear.

Throughoutthefirstquarterwemaintainedandimproveduponthehighlevelofperformancewedeliveredlastyear.Whilewehaveagreatdealoftheyearlefttogo,wearewellpositionedtocapitalizeontheinnovationandentertainmentdrivingourbrands.

BrianandIarenowhappytotakeyourquestions.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

FeliciaHendrix,Barclays.

FeliciaHendrix(Analyst-BarclaysCapital):

Hey,Brian.Ijustwantedtotouchonacommentthatyoumadeinyourpreparedremarksaboutsomeretailersbeingaffectedfromglobaleconomicchallenges.Iwasjustwondering:canyouelaborate?

Isthatglobally,isthatUS,internationally?Canyoujusttalkaboutthatcommentalittlebitmore,please?


Sure.We'rereallyreferringtoafewofourretailersintheemergingmarkets.Debnotedabaddebtprovisionthatwetookinthequarter,andsowewerejustindicatingthatwehadacoupleofretailersintheemergingmarketsthatwerechallengedandwherewefeltthattherewassomerevenuethatwouldbeuncollectible.





Consumertakeawayinthosemarkets,though,continuestobestrong.Soaswelookattheemergingmarketswestillhavetheoutlookofdouble-digitgrowthabsentFXfortheyear.


Okay,andthenin--


Yesso,thisisn't--yes,it'sagoodpoint.Imean,thisisn'tconsumerrelated.We'renottalkingaboutthetakeaways.

Wetalkedaboutdouble-digitgrowthinPOSacrossallofourregionsinthequarter.Wehadverystrongdouble-digitgrowththroughoutourbusiness.Soagain,we'rejustreferringtoafewretailerswherewetookaprovision.


Okay;that'sveryhelpful.Thankyou.ThenyougaveussomenicecolorongamesandpuzzlesandMAGIC.ItlookslikeMAGIC,withthereleaseinAprilversusthefirstquarterreleaselastyear,hadsometoughcomp.Justwonderingacoupleofthingsingamesandpuzzles.

First,Ijustwantedtoclarify:didMAGICseegrowthinthefirstquarter?Thenalsoyouhadamanagementchangeinthatdivision,soIwasjustwonderingifyoucouldtalkaboutthedriversbehindthatchangeandwhatyouexpectforgamesandpuzzlesfortherestoftheyear.


Yes,sure.Ifyoulookatourgamesbusiness,firstIthinkreallyveryencouragingwasourstrongdouble-digitgrowthinPOSinthatcategoryforthefirstquarter.SowehavereallyseenbothintheUSandaroundtheworlddouble-digittakeawayandgrowthinPOS.

Ifyoulookatgameswithinthebusiness,we'llcallitface-to-facegamingwasupabit,butMAGICwasdowninthequarter.We'vetalkedalot;hopefullypeoplenowunderstandthatMAGICreallyisreleasedriven,storydriven,andthereforewillhaveupsanddownsthatmaynotrunseasonallyasmuchasotherbrandsbutratherjustinresponsetothatstoryreleasesandthedecksthatarereleased.

ThechangeatMAGIC,atWizardsoftheCoastwasplannedsometimeago.Greghadindicatedadesiretogooffanddosomeotherthings;andwewishhimallthebest.

Hehasdoneaterrificjobforus.HewashereinProvidenceandPawtucketbeforegoingtoWizardsandhadrunourboysbusiness,andhehasbeenherewithusforseveralyears.

WeareveryexcitedaboutChrisCockscomingonboard,andhewillbewithusstartinginJune.NotonlyisheaMAGIC:TheGatheringplayerandrole-playinggameroverall,buthehasalsogotsometremendousexperience,mostrecentlyatMicrosoft.Sohasboththeanaloganddigitalcapabilityandwillcontinuetodriveusinbothdirections.


Great;thankssomuch.Thenjustfinally,yourquarterwasobviouslyverystrongforalotofdifferentreasons.JustwonderinghowmuchofthatwasattributabletotheEastershift.


WedefinitelysawaverystrongEasterforusinPOS.ButourEasterwasactuallyupsignificantlyversus




priorEaster.Butwe'veseenthiscontinuedstrongPOS;andevenafterEasterthisyearourPOScontinuestobestronganddouble-digitPOS-esacrosseverycategoryandeverygeography.

Ithinkitgoesbacktosomethingwetalkedaboutinthepreparedremarks,andthatis--Ithinkthethingthatyouareseeinginthefirstquarterthatisobfuscatingourotherwiseverystrongfranchisebrandresultsisjustthepaymentsthatweremadeayearagoforstreamcontentinaquarterthattendstobeabitlowerinoverallrevenue;soithasabiggerimpact.

Ifyoutakethatout,ourtotalfranchisebrandsgrowthforthequarterwas9%,andyousawadouble-digitgrowthintheUSandhighsingle-digitgrowthinternationallyforfranchisebrand.Soagain,thestreamingpaymentsmadeayearagojustgetinthewayofseeingthatunderlyingstrength.It'swhyyou'realsoseeingourmarketsharesgrowallaroundtheworld.


Great,thankyousomuch.

Operator :

DrewCrum,Stifel.

DrewCrum(Analyst-StifelNicolaus):

Brian,youprovidedusyourupdatedviewonexpectationsforStarWars,whichisunchangedfortheyear.Canyourunusthroughwhattheputsandtakesare,andhowyouarriveatthatnumberorthatview?

Thencontinuingwithboys,howdoesSpidermanfitintotheCompany'splansforMarvelin2016?Thanks.


Yes.IfyoulookatthefullyearforStarWarsandthecalendar,clearlyhomeentertainmenthasjustbrokenforTheForceAwakens.Obviouslyweknowthekindofcontributionthatwillmaketoaboys-orientedbusinessforthenextseveralquarters.

ThenwetransitioninthefalltowardRogueOne.Hopefullybynowyou'veseenoneoftheearlytrailers;it'sveryexcitingandclearlyaStarWarsstorythatisveryrelevanttoglobalfans,bothnewandold.

We'lltransitiontotheRogueOneproduct,butofcoursestilltheclassicproducts--bothfromForceAwakensandclassicoriginalStarWarsproducts--willcontinuetosell.

Wealsohaveacontinuedstrongemphasisonthefaneconomyandfan-orientedproductwhichcontinuesthroughouttheyear.Youwillseethatreflected--we'reseeingitreflectedinourbusinesspresently.Thatis,Ithink,howyouwouldlookatthecalendarizationofStarWarsforthisyear.

IntermsoftheMarvelbusiness,IthinktheinterestingthinghereiswedohaveamoviecomingupinCaptainAmerica:CivilWar.Hopefullyyou'veseenthematerialsthere,butitisclearlyafullarrayofallofourfavoritecharactersfromtheMarveluniverse.

Interestingly,thetimingofthemerchandisingofthatisamonthlaterthisyearthanitwasayearago.Sothatdoeshaveanimpactonthefirstquarter'sMarvelbusinessaswetimethat.Justhappenstobethattheshelfsetdatesareamonthlaterthisyearthanayearago,althoughthemoviedateisroughlythesame.

AndwewillrollintoCaptainAmerica:CivilWar,whichasIsaid,isafullarrayofcharactersincludingsomeofourfavoriteslikethecharacteryoumentioned.Thenofcoursewegetinto2017,andwedohavethe




Spidermanmovie.


Brian,justtogobacktoyourlastcomment,areyousuggestingthatyouwerenotshippingCaptainAmericaproductsinthefirstquarter?


We--notsayingwedidn'tshipCaptainAmericaproductinthefirstquarter.We'rejustsayingthatthetimingshifted.Soitprobablydidn'thaveasbiganimpactasitdidayearago.


Okay;gotit.Okay.Then--


Justsotoframeitout,partnerbrandforpartnerbrand,theputsandtakes.


Yes,gotit;okay.Thenjustonelastquestion.Deb,onadvertisingcanyoudiscusstheyear-on-yearincrease?

Typicallywedon'tsee,whenyouhaveaheavymixtowardsentertainmentandcontributionfrompartnerbrands,theincreasedadvertising.SoIjustwanttounderstandwhatwasdrivingthat.


Really,justaswelookatourfull-yearexpectationsandlookatrollingoutouradvertising,reallyjustwhatyou'reseeingthisyearcomparedtolastyearistheimpactofourexpectationsandhowwe'relookingatfundingtheprogramsthatwillberunningallyearlongagainsttherevenuespreadoutoverthequarters.


Okay.Thankyou.

Operator :

ArpineKocharyan.

ArpineKocharyan (Analyst-UBS):

CouldyoutalkalittlebitaboutUSretailtakeawayinthequarterandhowtothinkabouttheEastershift?AndthankyoufortheEaster-on-Eastercomparison;thatwashelpful.

HowtothinkaboutwhatEastershiftwasintermsofretailtakeawayandyourshipmentintheUSofupabout28%?


Yes.Ifyoulookat--ourPOSisverystrongacrosstheboardintheUS,upstrongdoubledigitsacrossallcategories.Fortoysupstrongdoubledigits;inboys,similarly;girls,preschool.Andgameswereupdoubledigits.

OurfranchisebrandsintheUSwereupdoubledigitsinPOS.AndwedidseeverystrongEaster,butwe




havebeenseeingstrongweek-on-weekPOSand,asIindicated,ourstrongdouble-digitPOShascontinuedbeyondEaster.


Okay,thankyou.Thenmysecondquestionis,Brian,backinFebruaryyouhadsaidthatyouexpectedpartnerrevenuestobeclosertothat25%range,higherthanhistorical,around20%.Partnerbrandscameinstrongerthanfranchise,althoughthereisabitofatoughcompinentertainmentlicensing.Butoverallroyaltyratewasalsoupatinybit.

Couldyousharewithuswhetheryourguidanceforfullyearofpartnerbrandsbeingstillatthehigherendofthat20%,25%rangeandroyaltyratescomingdownasapercentageofsalesforthefullyear,hasthatguidanceorexpectationchanged?


Yes;no,ithasn'tchanged.Ourguidanceisverymuchthesame.Infact,ifyoulookasapercentofrevenuesourroyaltiesareonlyup1/10thofapercentagepointinthequarterversusayearago,soaverysmallchange.

Theotherelement,aswesaid,thepartnerbrandseveninthefirstquarterwhereyouhavelowerabsoluterevenuesandtheimpact,wereonlyupslightlyabove25%numberthatwehavegivenatthehighendoftherange.Soagain,overthefourquarterswestillexpectittobeatthehighendofthe20%to25%range.


Thatishelpful.Soabsenttheentertainmentlicensingtoughcompofthatone-offpayment,youstillexpectfranchisebrandstogrowatahigherrateversuspartner?


Well,Ithinkit'sveryheartening--wewerelookingatthenumbers,andifyoutakethetop10brandsofourCompanyatthismomentinthequarter,sixofthetoptenbrandsofourCompanyarefranchisebrands.AndthetopbrandinourCompanystillinthefirstquarterisNerf.

SoIthinktheportfoliomanagementtheteamsareexecutingisquitestrong.It'scertainlyacomplementoffranchisebrandsandpartnerbrandsrevenues;sotheotherfourbrandswithinthetop10arepartnerbrands.

Butthatisagreatcombination.Andourstrongestbrand,topbrandofthequarterisstillNerf.Thatcombinationallowsustocontinuetoprovidethatguidancetoyouaboutroyaltiesandaboutpartnerbrandsasapercentageofrevenuefortheyear.


Veryhelpful,thankyou.

Operator :

StephanieWissink,PiperJaffray.

StephanieWissink(Analyst-PiperJaffray&Co.):

Thankyou.Goodmorning,andcongratulationstoeveryonethereonafantasticquarter.Myquestionisjustrelatedtotheprofitgrowthversusthesalesgrowth,whichisafactorofthreefoldinthisquarter.




Reallyoutstanding.

Curious,Deb,ifyoucansharewithushowweshouldthinkaboutthatoverthenextcoupleofquartersandthenextcoupleofyears?IthinkatToyFairyouindicatedyourmargintargetsfortheQareroughlyflattish.

Butacouplehundredbasispointsofexpansioninthefirstquarter:I'mjustcuriousifthat'schangedthewayyou'rethinkingabouttheforwardyearandthenextcoupleofyears.


No,Ithinkbasedonour--wetalkedalittlebitaboutthefactthatthefirstquarteris--it'salotofsmallnumbersforus.ButwhatweareseeingistheimprovementinourmarginsthatwedidsayatyearendandatToyFairthatwebelieveweresustainableandexpandableovertime,particularlyaswerampsomeofthenewbrandsandgainmoreoperatingprofitforit.

Theoneitemwedidwanttopointoutwasthatbaddebt.Thatwasabitunusualforus.Whilewewon'texcludeit,itwasthefirstonethatwehaveencounteredaswehaveexpanded,particularlyintoemergingmarkets.Wedohavesomehigh-riskaccounts,butwemanagethoseverycloselyanddohavereserveswherewedeemthemappropriate.

Butoverallourmarginshavegrowninallofoursegments,withtheexceptionofentertainmentandlicensing.Andagainthatstreamingrevenue,becauseoftheprofitabilityofit,hasabigimpact.Butwedocontinuetobelieve,basedonourcurrentestimates,thattheguidancethatwegaveinFebruarystillholds.


Thankyou.Thenjustonefollow-up,Deb,ontheinventories.Ithinkyoumentionedexcludingcurrencyup41%year-over-year.I'mwonderingifyou'dbewillingtojusteliminatethenon-comparablesforPrincess.IwouldimaginethereissomerampinventorythereforPrincess.

Isitmoreconsistentwithsalesifyoubackthatoutandjustlookatitonacomparablebasis?


Yes,Ithinkaswelookatourinventoryoverallyouhaveidentifiedabigpieceofit.Imeanwearereallyrampingupforthebusinessweseeintheyearahead.


Thankyou.Bestofluck,everyone.


Yes,ifyoulookwhereinventoryis,Steph,itisreallynicelyspreadanditdoesfollowoursalescurvesglobally.SoyougetaboutathirdoftheinventoryincreaseintheUSandtheothertwo-thirdsoutinternationallyaswe'regrowingin--regionforregion.


Thanks,Brian.

Operator :

GregBadishkanian,Citi.




FredWightman (Analyst-Citigroup):

Goodmorning;thisisactuallyFredonforGreg.IwasjustwonderingifyoucouldguysgivealittlebitmorecolorontheDisneyPrincesslaunch,howit'sgoneversusyourexpectations,andwhereyouthinkweare(technicaldifficulty)licenseposition?


Yes.Well,clearlyIthinkyousaidoneofthekeywordswhichisclearlythefirstquarterisatransitionalquarter.We'vesaidthatallalong.

Havingsaidthat,theteamshavedone,ourteamsatHasbro,havedoneafantasticjoboflaunchingthebrand.Beautifulproductsandit'sbeenwellreceivedbyconsumers,andtheearlytakeawayisquitegood.

Wearerampingthisbusinessandwecontinuetobelievethataswemoveforward,asweexpandinrevenueswe'llcontinuetoimproveouroperatingmarginovertimethere.SoIwouldsaythatourguidanceforwhatwewanttoachieveisbeingachieved,andwe'reontrackforourexpectationsforPrincess.


Great.ThenifwejustlookedatStarWars,isthereanythingthatyouguyslearnedfromlastyear'smoviethatyou'replanningtoimplementforthiscomingyear'srelease?


Clearlyitwasgreatforustobeabletohaveamajorentertainmentinitiativeinthefourthquarter.It'sgreattobeabletospreadouttheentertainmentinitiativesacrossourportfolionowalmost12monthsayear,andthatwillcontinuetobethecaseaswehavemoreandmorepartnersandourownbrandslaunchingnewstory-ledinitiativesthroughouteachyear.

Theconsumercertainlyrespondedinkind,anditgivesusgreatcouragetolookatnewwindowsfornewlaunches.Wewilltracksimilartolastyear,asimilartempoandtemplatethisyear,aswehaveafallsetdateforRogueOneproductandthatwillrollintoaholiday-orientedmovie.

Butagaintheteamsareconstantlypickinguponnewinsights,andwe'reusingthosetotheadvantageofcustomersandconsumers.


Great,thanks.

Operator :

TaposhBari.

T aposhBari(Analyst-GoldmanSachs):

Congratsonanothergreatquarter.Brian,ongirls,canyouhelpusbetterunderstandhowthesegmentperformedexcludingtheDisneyPrincesspiece?Thenasafollow-uptothat,howdowethinkaboutthetransitionofthatpropertyintoyourbusiness?Shouldwethinkof1Qasadisproportionatebeneficiary,giventhefactthatitrepresentstheinitialshippingwindowforthatproperty?





Well,ifyoulookatitclearlyinaquarterwheretypicallylowerrevenuesitdoeshaveadisproportionalimpact.Asyougrowthroughouttheyearyourrevenuesgrowacrosstheboard.

Wehadanumberofourgirlsbrandsthatperformedwellandgrewinthequarter.Wesawsomegreatgrowthfromsomeofwhatwewouldcallourchallengerbrands,includingFurRealFriends,BabyAlive,andEasyBake.

ThenMyLittlePony,asIsaid,thebrandoverallwasup.TheonlyplacethathadanimpactwhereitflattenstheresultisbecauseofthestreamingrevenuesthatareassignedtothepurchaseofMyLittlePonyprogrammingandLittlestPetShopprogrammingayearago.

Wehadonebrandintherethatwe'rerestagingforthefall,whichisNerfRebelle.Clearlythebrandisdownatthismomentaswerestageandgetreorientedaroundthatbrandforthesecondhalfoftheyear.

Again,PetShophadverystrongresultsinseveralterritoriesincludingtheUSandCanada.Wearebeginningtomaketheshift,thechangeinevolutionofthatbrandoutinternationally,andovertimewewouldexpectthatbrandtoseemorepositivemomentumoverall.


Great.OngamesIjustwanttomakesureIunderstandthecommentthatyoumade.Soshipmentswereflatinconstantcurrency,butPOSwasupdoubledigits;didIhearthatcorrectly?


Itis.Strongdoubledigits,yes.


Okay.SoisthatgapentirelyattributabletotheMAGICshiftinto2Qthen?


No,Idon't--wehadlotsofputsandtakes.Wehaveoflotsofinterestinganddifferentbrandsthatwereupinthequarter.Asegment--likealotofthebrandswithinourfamily-orientedsegmentwereup,includingLifeandYahtzeeandseveralotherbrands.ObviouslyPieFacecontinuestobeastrongcontributor.DuelMasterswithintheYahtzeebusinesswasup.

AsIsaid,overallface-to-facegamingwasupabitinthequarter.AndIdothinkyouhave--arecomingoffofaverystrongfourthquarter;youstillhaveproductinthemarketandverystrongPOSbothintheUSandinternationallyforgames.


Understood.Onelastoneforyou,Brian,ifyoucancommentonthehealthofthetoycategoryasweenter2016.Againthecategoryhasbeenrelativelyflatforawhileandseemstobegoingthroughthisrevival.

Whatareyouhearingfromyourretailers,bothbrick-and-mortarandonline?Aretheybelieversinthesustainability?Aretheydedicatingmoreresourcestothecategory?Thanks.


Well,Iwouldsayyestoreallyeverythingyou'vesaid.Well,rememberthatlastyearwehadaveryrobustgrowthinUSandgloballydevelopedeconomiesaswellasemergingmarketsinthetoyindustry.SoIwouldsaythisisthesecondyearofstronggrowthyeartodate.




Weareseeinghighsingle-digitgrowthratesbothindevelopedeconomiesliketheUSandalsothroughoutEurope.Retailersareveryexcitedaboutthecategoryaswecontinuetohavemorestory-drivenbrands,moreintegratedplaybrands,andmoreinnovationinthecategory.

OverallPOSwasverystrong,asIsaid.Butaswehavenotedbefore,onlinePOSwasevenstrongerandmanyadditionalretailersthathavebeenhistoricallybrickretailersaredoingaverygoodjobinomnichannel,andsowesawgreatgrowthforseveralonlineretailersbothpureplayaswellasomnichannelretailers.

SoIwouldsayoverallthestateoftheindustryisquitestrong.Andourindicationsare,fromprojections,thatitwillremainstrongforthenextseveralyears.


Great.Thankssomuchandbestofluck.

Operator :

JaimeKatz.

JaimeKatz (Analyst-Morningstar):

CanyouguysdiscusswhethertherewereanypocketsofexcessinventoryoutsideofEquestriaGirls?Iknowyouwerefillingthechannelforalotofproducts,butthatseemedtobetheonlyproductthatwascalledoutasmaybenotperformingexactlyhowyouhadexpected.


Yes,asImentionedNerfRebelle--clearlywe'rerestagingthatpartoftheNerfbrand;hadsomeinventorycarriedover,andwe'rerestagingitforthesecondhalf.We'vehadagreatresponsefromglobalretailerstothenewlineupofNerfRebelleproductsforthesecondhalfoftheyearandourexpectationisthebrandshouldsellthroughsomeremaininginventoryinthefirsthalf.

ButIwouldsaythosearereallythetwobrands.Theonlyotherone,andIalmost--wehavetalkedaboutthisoveranumberofcalls--isFurby.WedohavesomeremainingFurby--last,hopefully,quarterofFurbyheadwinds,ifyouwill.WearesellingoutsomeremainingFurbyupagainstayearago.


Okay.ThenIknowyouguystalkedalittlebitaboutbaddebts.ButI'mcuriousonamoreregionallevelwhatyouguysareseeingoutofBrazil,whichhadhistoricallybeenadecentgrowthbusiness;andthenwhetherornotMexicoishelpingtooffsetthatatall.


Well,Brazilcontinuestobestronggrowth.Itjust--obviouslyyou'rehavingacurrencyimpact.SoabsentFXBraziltheunderlyinggrowthinBrazil,ourbrandsinBrazilareperformingquitestrongly.

ClearlyweareseeinggrowthinregionslikeMexico.ButIdon'tknow,Deb,youwanttocommentonthecurrencyenvironment?


Ourbusinesscontinuestobegood.Asoflatetherealhasdoneabitbetter,asallcurrencieshave.




Wedidsayinourpreparedremarks,particularlyiftheeuroholdsupthewayit'stradingrightnow,thatwillhaveapositiveimpactonourexpectationsforforeignexchangeimpacttousforthefullyear.ButwecontinuetoseethemarketinBrazilbeinggoodandconsumertakeawaybeinggoodaswell.


Excellent,thankyou.

Operator :

TimConder,WellsFargo.

T imConder (Analyst-WellsFargoSecurities,LLC):

Congratulationsalsoagainontheongoinggreatexecution,everyone.Justacoupleofitems.Stayingonthecurrency,Deb,andjustfollowingonafewofthoserelatedquestions,alittlemorecolor.Yousaidifratesstaywheretheyare;youtalkedaboutthe$100million,referencedthat,andthatitwouldbesubstantiallybetter.Anymorecolorontherevenue,operatingprofits?Againassumingratessaywheretheyaretoday.

DidyouguysputitonanyadditionalhedginginQ1thatmaybebenefitingthatnowthatrateshavemoved?


Wehedgethroughouttheyear,soweprobablydidputsomehedgesoninthefirstquarter.Overallfromahedgingstandpointwehedgedabout75%ofourproductcostlastyear;andweareabouthedgedthesameamountthisyear.Wealwaystrytomakesurewestayinasimilarlevel.

It'shardtotellwhereratesaregoingtogo.Ithinkifyoulookatwhatalloftheexpertsaresaying,theyexpectthedollartostrengthen.However,we'renotseeingthat,particularlyagainsttheeurorightnow.

Soifratesstaythewaytheyare--wedidputachartinourearningspresentationsoyoucouldseethemakeupofourrevenuesbycurrencyinthefirstquarter.DependingonwhatyourexpectationsareforFXrates,wecanjustkindoflookatitthatway.ButwearehittingthepointwherewearegettingcomparableFXratestolastyearincertainregions.


Okay.Iguessfromacolorstandpoint,areyoutalking$10million,$20milliondifferenceversusthat$100millionthatyoutalkedaboutinFebruary?


Well,wehavegot$30millionalmostalreadyin.Soasyoulookattherestoftheyear,Imeaniftheeurocontinuestostaystrong--it'sactuallytradingabovelevelsitwastradingatlastyear,sothatcouldsignificantlychangeourexpectationsfortheyear.Butagain,it'sjusttooearlytotell.


Okay,okay.Thenanycolor,Brian,Deb,thatyoufeelcomfortablegiving--Iknowpartofitissensitivewithaspecificstreamingcontract--butasfarastheswingfactor,thestreamingcontractandTransformerstogether,howitimpactedentertainmentlicensing.Wasthatthemajorityoftheswingthere?Canwejusttakeitasallofit?Oranyadditionalcoloryoucouldbreakdown.





ItwasIthinkbetweenthetwo--betweenthefactthatwe'recomingoff--remember,we'vesaidbeforethatwhenwedolicenseswegetpaidthefollowingquarter.Soobviouslyinfirstquarterof2015wewerecollectingroyaltiesforfourth-quarter2014inTransformers.

Thenofcoursewehadthestreamingdeal.Ithinkbothareexacerbatedbythefactthatyou'redealinginatypicallylowerrevenuequarter,somoreofanimpactinpercentageterms.

You'reright.Ithinkthatisthebulkofthechange.


Okay,okay.Thenany--backtothebaddebt.Again,yousaidyourPOSisgoodinseveralareas.What--canyougiveusanycolorastowherethemajorityofaretailerisconcentrated,wherethatbaddebtwas,orwhereyouareseeingmaybesomeretailers,nottheconsumer,havesomeissues?


Particularlywherewe'reseeingsomeimpacttocertainretailersisinouremergingmarkets.IdidalreadycommentthatBrazilcontinuestobeastrongmarketforusrightnowanddowell.Soothermarketsnotin--notBrazil.


TheotherthingIwouldliketojustnote,becausewedohavesomebigretailers:we'renottalkingaboutthebigretailersthathaverepresentedsignificantpartnersforusandgrowthenginesforusinthoseareas.SoDetskyMirinRussia,PBKids,RiHappyinBrazil.Bothareverystrong,continuetobestrongretailers.

We'rereallytalkingaboutsomeretailersthatwerenotamongourtopretailers,butclearlyretailerswe'vebeensellingto.


Veryhelpful.Lastly,Brian,China.Itwouldappearthatthat'sbeena--continuestobeaprettygoodgrowthdriverforyou.CorrectmeifIamwrongthere.

Thenjustespeciallyyoure-commerceoutlookinChinaandhowthatistrendingoverthelast12months,18months,whateverperiodhere.Andthenhowyouseethatgrowthcurvehereoverthebalanceof2016.


Wellclearly,e-cominChinaisoneofthekeythemesforfuturegrowth.EventhoughwearegettinggrowthtodayIthinkfuturegrowthisevenstrongerasweorientourCompanyandourbusinesstoe-comgloballybutalsoparticularlyinChina.

Itisagreatdisintermediaryforthatmarket;allowsustogettothevastmajorityofconsumers;andit'sanareaoffocusforus.Chinahasshownsomegoodgrowth.

Butremember,ourAsia-Pacificbusinessoverallshowedgoodgrowth,sobeyondChina,whichisquitehearteningtosee,countryforcountry.InKoreasomegreatgrowthandSoutheastAsiaaswellasourAustraliaandNewZealandbusiness.

SoChinacontinuestobebothashortandlong-termopportunityforus.Wedohaveagreatarrayof




brandsthatarebelovedinChina,andparticularlybrandslikeTransformers,andwecontinuetobuildthebusiness.ButIthinke-comisoneofthefocusesforourCompanygloballyandalsoaspecifice-comfocusinChina.


Great.Thankyouall,asalways.

Operator :

LeeGiordano,SterneAgee.

LeeGiordano (Analyst-SterneAgeeCRT):

Deb,justtoclarifyonthetaxrate,itlookslikeitcameinaround21%.Shouldwestillcontinuetolookfor26.5%or27%fortheremainderoftheyear?


Yes,theadjustmentsthatgotusdowntothat21%,whichisdiscreteitems--andourunderlyingtaxratewestill--isintherangeof26.5%to27%thatwetalkedaboutatyear-end.


Great,thanks.Thenjustsecondly,followinguponMyLittlePony,whatdoestheentertainmentschedulelooklikethisyearandnext?Andhowdoyouviewthatbrandgoingforward?Thanks.


MyLittlePony'snextseasonisjustlaunchingnowandrollingoutaroundtheworld.It'sthesixthseasonforthebrand.ThethemethisyearisallaboutexploringEquestria,andittiestogetherwithlotsoftheinitiativesthatwehaveacrosstheCompany.

Wehaveveryrobustplansinmulti-categoriesforMyLittlePonythroughoutthisyear,brand-newtoysandgamesproducts,butalsoI'veseensomereallywonderfulproductinourconsumerproductslicensingbusinessandapparelthatisoutinternationallyintheUK.Verystrongresultsinseveralcategoriesofproductsettingallaroundtheworldintunewiththattheme.

Thatwillrollinto2017,andthenasyouknowforfallof2017,November,wehaveourfirstanimatedfeaturefilmthatwillbedistributedbyLionsgateintheMyLittlePonymovie.Sowe'llhavetelevisionentertainment,streamingentertainment,acrossanumberofdifferentover-the-topproviders.Kidscanfindentertainmentinbothshort-formandlong-form,andthentheycanalsofindentertainmentondigitalgameswithsomenewdigitalgamesthatwilllaunch,includingonenewMyLittlePonydigitalgamelaunchingfromBackflipStudios.WecontinuetohaveagamefromGameloft(technicaldifficulty)throughouttheyear.

Sostorytellingacrossanumberofdifferentdimensionsandcontinuetofeelverygoodaboutthebrandand,asI'dmentioned,thenewEquestriaGirlslineandlaunchesgoingoffquitewellwiththenewmini-dollsegment.


Great,thankyou.

Operator :




EricHandler.

EricHandler (Analyst-MKMPartners):

Forgivemeifyou'vealreadygonethroughthis,butyourUSandCanadabusinessyouhadgreatrevenuegrowth,28%.Themarginincreasedbutnotasmuchasrevenuegrowth.I'mjustcurious:Whatexpenseitemsparticularlyofnoteweretherethatdrovethemarginbelowyourrevenuegrowth?

Thensecondly,lookingatStarWars,wasPOSconsistentthroughthequarter?Orwasthereabigshipmentthatoccurredjustpriortothehomeentertainmentrelease?


FirstofalltheoperatingprofitintheUSbusinessincreased89%.Therevenueswereup28%;operatingprofitwasup89%.AndIamnotsure--


Okay,sorry.Yes.


Yes,theoperatingprofitmargininthequarterwas17.7%upagainst12%ayearago.SoIjustwanttomakesurewe'retalkingaboutthesamenumber.


Right.Yes.No,sorry;Imisspokethere.Whatwasitthatessentiallyallowedyoutogetthatmarginup570basispoints?


Yes,well,it'sobviouslytherevenueincreasesandagreatportfoliooffranchisegrowthaswellaspartnergrowth.Again,Imentionedthatthetop10brandsofourCompanywehavesizeofoursevenfranchisebrandsandthensomepartnerbrands.

It'sthatblendthatshouldallowyoutounderstandhowweintendtoimproveoperatingmarginsovertime,howourpartnerbrandswillremainatthetopendofthe20%to25%ofrevenues,andwhyroyaltiesshouldberoughlyinlinewithourguidancefortheyear.


Okay.AndthenStarWars?


StarWars.No,wehavebeenshippingStarWarsthroughout.Wecameoffofaverystrongmovie,remember?Themoviehascontinuedtoplayintheaters,sowecontinuedtoshipproductasmoreandmorepeoplesawthemovie.

Thenofcoursethereareallkindsofinitiativesaroundthehomeentertainmentwindows.Butthosewillcontinue.SoIwouldn'tsaythattherewasanyonepulseofinventoryintothemarketbutratherverystrongsellthroughthroughout.





Great,thankyou.

Operator :

JimChartier,Monness,Crespi.

JimChart ier (Analyst-Monness,Crespi,Hardt&Co.):

FirstquestiononYo-kaiWatchnowthatyou'vehadacoupleofmonthswiththeproductinthemarket.IjustwanttogetyourupdatedthoughtsthereonboththeUSandothermarkets,howit'sbeingreceived.

ThensecondlyonStarWars,RogueOnelookslikeithasanotherfemalelead,sojustcurioushowthefemalebusinessforStarWarsisdoingversusprioryears,andifyouthinkthatisanopportunitygoingforward.Thankyou.


Yo-kaiisonlyinitsfirstcoupleofmonths,asyoucorrectlyindicate,andreallyrollingoutaroundtheworldinentertainment.Sowe'vereallyonlyseenentertainmentintheUS,anditwillbegoingintointernationalmarketsthroughouttheyear.Earlyindicationsarequitegood,butit'sstillveryearlydays.

RogueOneisexcitingforeveryone.IthinkwecontinuetoofferanarrayofproductsforallStarWarsfansofallagesandgendersandaffiliations.Youwillseeuscontinuetofocusonproductforeveryone,andproducthasbeenwellreceivedbyeveryone.

Again,Ithinkwhatyou'reseeingoverallisablendingofsuchmorehistoricaldelineationthatwearereallynotfocusingonorfostering;we'rejustmakinggreatproducts.Welovethecharactersofthesemovies,andwe'reveryexcitedaboutwhereStarWarsisgoing.

Wealsosawinthefirstquartergreatsalesoflightsabers.AndIthinklightsabersaregoingtoeveryone,becauseeverybodycanbeaJedi.

JimChart ier (Analyst-Monness,Crespi,Hardt&Co.):

Great.Thanksandbestofluck.

Operator :

GerrickJohnson.

GerrickJohnson (Analyst-BMOCapitalMarkets):

DoyouguyshaveastreetdateforRogueOne?WilltherebeaRogueFriday?


Icanonlysay,atthispoint,fall.Idon'tthinkthey'veannouncedastreetdate.


Okay.Doyouhavetheactualnumberforthebaddebtexpense?


Wetalkedabouttheoneparticularchargewetook.Itwas$13.8million.





Okay.Also,yourfranchisebrandsup1%inthequarter.ButIthoughtIheardonthecallyousay9%.Whatwasthe9%numberinrelationto?


Yes.Well,itwastryingtogetacrossthefactthatifyoulookatactualsalesofourtoysandgamesaroundtheworldourfranchisebrandswereup9%.AndabrandlikeMyLittlePonywasup12%.

Justagain,giventhetypicallysmallerrevenuequarterandtheimpactofthestreamingdeal,ifyoureallylookattheunderlyingconsumerorientationofthebrandsandhowit'sperforming,they'reperformingquitestrongly.


Okay,Igetit.Ex-thestreamingdeal.Lastly,inthepastcouplequartersyou'vetalkedaboutMyLittlePonyperformanceintermsofcore.Ididn'thearthatwordthistime,core.

YousaiditdidgrowintheUS.Wasthatcore,orwasthatintotality?


Well,it'sacombinationbecausewehadhavealsoEquestriaGirls.Soit'sthecombinationofalltheelements.


Okay,great.Thankyou.

Operator :

Thankyou.AtthistimeIwillturnthefloorbacktoDebbieHancockforclosingremarks.

DebbieHancock(VPIR):

Thankyou,Rob,andthankyou,everyone,forjoiningourcalltoday.Thereplaywillbeavailableatourwebsiteinapproximatelytwohours.Additionally,management'spreparedremarkswillbepostedonourwebsitefollowingthiscall.

Oursecond-quarter2016earningsreleaseistentativelyscheduledforMonday,July18.Thankyou.

Operator :

Thankyou.Thisconcludestoday'steleconference.

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