Hasbro Posts Loss on eOne Deal Cost, Braces for Bigger Virus Impact in Second Quarter

Brian Goldner - H - 2019

The toy giant, led by CEO Brian Goldner, sees live-action film and TV production restarting early in the third quarter.

Toy giant Hasbro on Wednesday swung to a first-quarter loss due to costs from its acquisition of Entertainment One, where film and TV revenues collapsed as content production shut down amid the coronavirus pandemic.

Hasbro posted a first-quarter loss of $69.6 million, or 51 cents per-share, compared to a year-earlier profit of $26.7 million, or 21 cents per share. The first-quarter loss included $127.5 million in after tax acquisition-related expenses and $19.9 million in after tax purchased intangible amortization associated with the eOne acquisition.

Excluding those one-time items, Hasbro's adjusted earnings amounted to $77.7 million, or 57 cents per share. Overall first-quarter revenue was $1.11 billion, compared to $735.5 million in 2019.

Hasbro missed the Thomson Reuters analyst forecast for 58 cents per share in earnings and revenue of $1.14 billion.

"As a result of COVID-19, we expect the second quarter to be more challenging than the first quarter of the year with revenues and earnings down versus pro forma 2019. We are taking prudent steps to lower expenses and preserve capital while positioning to meet the seasonal peak demand periods of the business in the second half of the year, including the holiday season," the company said in a statement.

Hasbro execs on a morning analyst call addressed the business fallout impacting the firm's entertainment business after Hollywood has virtually shut down TV production during the pandemic. "The second quarter will be a more challenging quarter than any quarter this year," CEO Brian Goldner warned as the coronavirus clouds production timings and deliveries this year.

The company forecast an "early third quarter return" to live-action film and TV production, as eOne continues animation production with artists often working remotely. Goldner added the integration of eOne and Hasbro is "on schedule" and the company expects to deliver $130 million in synergies by the end of 2022.

Hasbro highlighted that it had $1.2 billion in cash and a revolving credit facility of $1.5 billion available at the end of the first quarter. The company in a statement added that eOne TV and film development continues, but "ongoing production lockdowns and theatrical closures are now in place and likely to negatively impact revenues over the short term."

eOne released 1917 during the first quarter, but the ensuing COVID-19 crisis shutting down movie theaters has pushed additional releases to later in 2020 or 2021, or shifted them to video-on-demand windows. Hasbro acquired eOne in 2019 as part of a $4 billion all-cash acquisition that expanded the company's film and TV production business and handed it top kids properties like Peppa Pig and Ricky Zoom.

Goldner also addressed the future of moviegoing post-coronavirus pandemic as consumers increasingly view streaming platforms while they shelter in their homes, but also look forward to returning to the multiplex.

"There's going to be a lot of change in the near term as people work their way through reopening theaters and how you do that safely and securely. But longer term, all of us miss the opportunity to go into a movie theater and enjoy a show together and get the broad audience reaction that you can't replicate at home," he told analysts.

Goldner added that he understood why NBCUniversal opted for an on-demand release of Trolls World Tour — in which Hasbro will participate with spinoff merchandise sales for the property — but didn't see sending the animated family film straight to PVOD having a major impact on theater-going down the road.

"There's some difference between making a shift at the last moment towards PVOD and presenting a piece of entertainment as as intended for streaming," Goldner argued.

He also told analysts he didn't see eOne having to shrink its overall TV development and production slate as a result of the pandemic. "We don't believe there's a loss of demand, we just believe it's a shift of timing and that we will deliver all these episodes," he said as the impact of the TV production shutdown continues into the second quarter.

April 29, 6 a.m. Updated with comments by Hasbro execs made during an analyst call.