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Hasbro CEO Chris Cocks outlined why he sees the toy giant and Entertainment One owner becoming a digital gaming powerhouse amid an ongoing proxy battle with an activist investor, Alta Fox Capital Management.
On Tuesday, after the toy giant released its first-quarter financial results, the executive told Wall Street analysts during a morning call that a key growth driver for the company would come from turning legacy tabletop games for popular franchises like Magic: The Gathering and Dungeons & Dragons into digital video games.
“We see a bright future for Dungeons & Dragons. And we only see these opportunities growing over time as we invest in an end-to-end brand blueprint for Dungeons & Dragons, including blockbuster films and streaming TV, AAA video games and a major consumer products push and significant marketing tie-ins,” Cocks argued.
The new CEO also told analysts that Hasbro secures most of its earnings from consumers over the age of 13. “Much of this is generated by gaming, but also by collectibles and the fan economy, which are one of our fastest growing and most important growth businesses. We see a big opportunity in embracing the agelessness of play as we unlock more value through play and entertainment across our portfolio,” he said.
Those remarks followed Alta Fox calling on Hasbro to spin off its gaming division to unlock shareholder value. Cocks cited growth of the Dungeons & Dragons franchise coming in part through a major theatrical release in March 2023 via Paramount Pictures and a recent strategic investment to advance digital play with the acquisition of the Dungeons & Dragons toolset D&D Beyond for $146 million.
The Hasbro CEO’s argument that producing digital versions of its popular tabletop games and developing new ones is best done under the umbrella of the traditional toy giant comes amid the proxy battle with activist investor Alta Fox, a topic which Hasbro execs steered clear of in their remarks to financial analysts on Tuesday.
“We’re here to comment on our earnings. We’re focused on that. We will not be commenting on Alta Fox today,” CFO Deb Thomas said during the morning call when asked about the intervention by Alta Fox.
Following the death of CEO Brian Goldner, Cocks became the company’s top exec after serving as president and COO of Hasbro’s Wizards of the Coast and digital gaming division, the success of which drew the attention of Alta Fox.
But Hasbro, backed by its boardroom, rejected Alta Fox’s call for a tax-free spinoff of Wizards of the Coast, preferring that Wizards be allowed to keep growing within the company’s so-called “brand blueprint” overall corporate strategy.
Alta Fox, which has a 2.5 percent stake in Hasbro worth around $325 million, has argued the toy maker’s “brand blueprint” — where the company produces movies and TV series through its Entertainment One filmed entertainment division and a long-standing pact with Paramount to drive toy sales — “is little more than a generous term for ’empire-building’ without financial discipline, and that significant change in strategic direction is needed.”
Earlier on Tuesday, Hasbro reported net earnings falling 47 percent to $61.2 million, or 44 cents per diluted share, as the company continued to face supply chain disruptions.
Adjusted net earnings came to 57 cents per share, which missed an estimate of 61 cents per share, according to Refinitiv IBES data. Overall revenue rose 4 percent to $1.16 billion during the first quarter. Hasbro also warned of a potential revenue shortfall at around $100 million from its business in Russia.
The toy giant’s entertainment division saw revenue rise 4 percent to $227.5 million. Film and TV revenues increased 14 percent on deliveries of The Rookie series for ABC, which was recently renewed for a fifth season, and Graymail for Netflix.
Family Brands revenues rose 23 percent after Netflix renewed the My Little Pony, Transformers and Power Ranger franchises.
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