Good morning, and welcome to the Hasbro second quarter 2021 earnings conference call. At this time all participants are on listen only mode. If anyone should require operator's assistance during the conference please press star zero on your telephone keypad. This conference is being recorded. If you have any objection you may disconnect at this time. At this time I'd like to turn the call over to Ms. Debbie Hancock, Senior Vice President of Investor Relations. Please go ahead. Thank you, and good morning, everyone. Joining me today are Brian Goldner, Hasbro's Chairman and Chief Executive Officer, and Deborah Thomas, Hasbro's Chief Financial Officer. Today, we will begin with Brian and Deb providing commentary on the company's performance, then we will take your questions. Our earnings release and presentation slides for today's call are posted on our investor website. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures. Our call today will discuss certain adjusted measures which exclude those 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-K, our most recent 10-Q, in today's press release, and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. I would now like to introduce Brian Goldner. Brian? Thank you, Debbie. Good morning, everyone, and thank you for joining us today. The Hasbro team delivered an excellent second quarter, highlighting the power of our portfolio and the benefits of supercharging our blueprint across consumer products, Wizards and digital gaming, and entertainment. Each segment grew revenues and profit on an adjusted basis in the second quarter. Overall revenue was up 54% from last year and 9% higher compared to pro forma second quarter 2019. Demand for Hasbro brands, products, and content remains strong. The team is executing extremely well to meet consumer, retailer, and audience demand in a dynamic environment while driving significant profit and cash generation. As communicated earlier this year, we are on track to grow revenues, adjusted earnings, and adjusted EBITDA this year. This includes revenue growth in all segments to achieve double-digit revenue growth for Hasbro. We also continue to believe we can reach an adjusted operating margin level approximately in line with last year's adjusted level of 15.1%. We delivered two quarters of excellent results so far, and given these results and favorable mix, year-to-date adjusted operating margin is 570 basis points higher versus last year's first half. We successfully established price increases that go into effect during the third quarter and provide an offset to the rising input and freight costs in the business. These supply chain pressures are meaningful, but given the strength in our business, the actions we have taken, combined with our global footprint, we continue to believe we can meet our full-year targets. The team is doing tremendous work, from manufacturing to logistics to partnering with our retailers to ensure there is product to meet demand. It is not easy, and we'll work through challenges every day. Deb will speak to this further. Each brand category grew in the quarter, as did six of our seven franchise brands. Monopoly declined slightly versus a very robust quarter last year. Franchise brands, Hasbro Games, and emerging brands were each up versus second quarter 2019. Partner brands and the TV/film entertainment categories were essentially flat with two years ago, as theatrical releases and content production is returning. Wizards generated a standout performance this quarter led by Magic: The Gathering. Demand for Magic is at all-time highs, including two record releases in the quarter, Strixhaven and Modern Horizons 2. As players begin to return to stores and play communities, we're seeing an uptick in sales on our backlist product as well. The high demand is tempered only by supply chain challenges, as the collectible trading card space has seen significant demand for production capacity and materials. The launch of Magic: The Gathering Arena on mobile exceeded our expectations and is attracting new Arena players. Hybrid players who engage in both desktop and mobile show increased engagement and spend. Digital remains an important driver for our business, and our overall digital portfolio is performing at record levels. We take a holistic approach and are pleased with the direction of our digital transformation. For Dungeons & Dragons, which grew in both analog and digital this past quarter, the launch of Dark Alliance did not meet our expectations or that of our players. We'll continue to invest in improving the gameplay and downloadable content. Dark Alliance was a modest investment for us, and we do not anticipate any material effect to Wizards results. We continue to invest robustly in digital. Wizards is on track for another record year, and while much of that growth was front-half loaded, we expect growth in the second half of the year behind a positive third quarter release slate. Turning to our consumer products business, each region grew toy and game revenues as did licensing, which is beginning to recover. The strength of our brand portfolio more than offset the difficult comparisons in games. As expected, point of sale declined in the mid-single digits versus high single-digit growth last year, which was led by the extraordinary growth in the games category. Hasbro point of sale for toys this second quarter was up while games was down. For the U.S., where we have the most comprehensive data, point of sale is up 10% when compared to 2019, with similar gains in both toy and games categories. The quarterly year-over-year comparisons are choppy, but the trajectory is positive. E-com revenue, including omni-channel retailers, continued to grow in the mid-teens, and physical shopping improved as most stores are open this year versus last. According to Profitero, Hasbro had the leading share of Prime Day toy and game sales in several countries. Channel growth was widespread, with the largest growth in mass retailers, toy specialty, and fan channels. We have significant product launches backed by robust multi-channel marketing campaigns slated for the second half, including new Nerf launches to continue driving the brand after successful DinoSquad and Hyper launches in the second quarter. Hasbro's Peppa Pig and PJ Masks line will be on shelf in the coming weeks. With 100 new products, new entertainment, and the support of Hasbro's global retail partners, these brands are poised to reach more families than ever. We're also relaunching My Little Pony in the third quarter. There's an all-new cast of ponies and product in support of the September Netflix premiere of the CGI movie, "My Little Pony: A New Generation." We will further support the franchise with additional series and specials in coming periods. Audiences are returning to theaters, and we're supporting several feature films, including in partnership with Paramount, "Snake Eyes: G.I. Joe Origins" that premiered this past weekend, Marvel Studios' "Black Widow" that released earlier this month, as well as Marvel Studios' "Spider-Man: No Way Home" and Sony's "Ghostbusters: Afterlife." Entertainment is the catalyst that unlocks the next level of value in our portfolio. eOne is the production. Television, in both scripted and unscripted, led growth this quarter, along with Family Brands revenue from content sales and YouTube advertising. Our entertainment business grew significantly in the quarter, and we continue to target a similar level of revenue for the segment this year versus 2019, absent the second half of the year music revenues. In television, "Cruel Summer" premiered to very high ratings on Freeform and was picked up by the network for a second season. ABC renewed "The Rookie" for a fourth season, and we have commenced production. Apple TV+ brought worldwide rights to our production of "Come From Away," which is in post-production for release this fall. Additional film releases to come include "Clifford the Big Red Dog" with Paramount, and "Stillwater," directed by Tom McCarthy and starring Matt Damon. In unscripted TV, our slate remains robust with close to 40 active productions for Canada, the U.S., and U.K. The eOne team continues to develop and move into production of Hasbro IP. Of more than 200 projects in development across TV, film, and animation, more than 30 Hasbro brands are being developed. Among the many active projects, we're in production on the Dungeons & Dragons live-action feature to premiere in 2023. We began principal photography with Paramount on the live-action Transformers: Rise of the Beasts coming June 2022. Hasbro is well-positioned for the coming quarters and years with the industry's best brand portfolio backed by unmatched capabilities in consumer products, gaming, and entertainment. Our global team of Hasbro employees and partners continues exceeding expectations to execute and deliver outstanding results during these dynamic times. I'll now turn the call over to Deb. Deb? Thank you, Brian. Good morning, everyone. The second quarter was another very good quarter for Hasbro. The team executed at a high level to drive revenue growth, profit, and margin improvement, manage a complex supply chain while reducing debt and delivering a strong balance sheet. Revenues were up significantly versus last year, but importantly, also up compared to the second quarter of 2019, which did not have an impact from COVID. Each segment grew revenues and profits on an adjusted basis year-over-year. As Brian said, we're tracking to our full-year goals, and our outlook is in line with our prior guidance. The strength of our balance sheet and the sale of the music business, which was completed early in the third quarter, enabled us to pay off $250 million of long-term debt prior to quarter end and another $100 million in July. Through today, we've retired $650 million of debt this year and are evaluating incremental opportunities for further reductions. At quarter end, cash on hand was $1.2 billion, and we're making good progress toward our goal of returning to our target of two to 2.5 times debt to EBITDA and maintaining our investment grade rating. Receivables declined further in the quarter. DSOs were 60 days, a reduction of 37 days compared to Q2 2020, and down 24 days from pro forma Q2 2019. These are the lowest levels of DSOs in a very long time. This improvement is the result of higher sales, combined with improved collections and excellent work between the commercial and treasury teams across our business. Inventory decreased versus second quarter last year, when sell-in to retailers was limited. Inventory remains below 2019 levels and of good quality. Retail inventory increased in markets where we were under stocked last year, including the U.S. and Europe. We continue to reduce our levels in certain markets like Latin America, which is helping improve profit in that region year-over-year. My discussion will be based on adjusted results, which excludes several items outlined in our release today, including a $101.8 million charge related to the loss on eOne Music assets held for sale and related pre-tax transaction costs of $9.5 million. Within our segments, consumer products revenue grew 33%, behind gains in franchise brands, emerging brands, and partner brands. While overall Hasbro Games grew, in the segment it declined compared to the strong demand last year. Revenue grew in each geographic region. Licensed consumer products revenue increased again this quarter behind franchise and entertainment-backed brands as licensed categories in the retail environment are improving. Foreign exchange had a favorable $19.1 million impact on the segment. Operating profit for the segment increased $63.1 million. Similar to the first quarter, the higher revenue was partially offset by increases in royalties from partner brand growth, higher advertising to drive the business throughout the year, and increased freight costs. Profit was up throughout the segment, with North America, Europe, and Latin America contributing the most to profit improvements. Wizards of the Coast and digital gaming segment revenues increased 118% in the quarter. Magic: The Gathering and Dungeons & Dragons contributed to this growth. Foreign exchange had a favorable $7.2 million impact. With the higher revenues, operating profit grew, increasing $118.8 million and 780 basis points in operating margin. The increased revenue more than offset higher expenses to support new game launches, including investing in future games, advertising and marketing to support game launches, and depreciation related to capitalized game development. We've said previously that based on release schedules, we expected the second quarter to be the largest for this business, and the team outperformed our expectations. Based on the release schedule for the remainder of the year, we continue to expect a record revenue year for Wizards, with operating margins closer to 2019 levels. Entertainment segment revenues grew 47%, with growth in scripted and unscripted television, animated content, and YouTube revenues. Foreign exchange had a favorable $8.8 million impact in the quarter. These results have us on the path to reaching 2019 levels of revenue, excluding the music business over the second half of the year, given it will no longer be in our results. Adjusted operating profit was up, margin declined with higher expenses as eOne returns to more normal levels of operation. Our cash spend on content across scripted and unscripted live action animated TV and film is planned to be in the range of $675 million to $750 million for the full year. Through the second quarter, we've spent approximately $308 million of that plan. Looking at our overall Hasbro P&L, robust revenue growth and favorable mix drove significant improvement in operating profit dollars and a 1,060 basis point increase in adjusted operating profit margin to 16% for the quarter. Adjusted EBITDA more than doubled in the quarter versus last year. Gross margin, including cost of sales and program amortization, increased 80 basis points from growth across the business, including high gross margin revenues from Wizards of the Coast. Cost of sales increased in dollars on the higher revenues, but declined as a percent of revenue, reflecting the favorable mix of Wizards revenue and improved profit in the consumer products business. While other factors positively influenced gross margin, freight and input costs are significantly higher this year than last. One example is ocean freight costs, where we're projecting, on average, that costs will be more than four times higher this year versus last. As Brian mentioned, we're implementing price increases during the third quarter that should be fully realized by the fourth quarter. We expect this to offset the rising costs of freight and commodities we continue to see across the business. We're also working to ensure product availability during the holiday season. We may experience some shifts in delivery dates and timing of revenue, but we're leveraging our global footprint and scale to meet demand. This includes sourcing more products earlier out of multiple countries, increasing the number of ocean carriers we work with, and utilizing more ports to expedite the delivery of our product from their origin to their destination points, along with many other tactics to manage through anticipated port congestion and ocean capacity constraints expected in the second half of the year. Program amortization increased in the quarter, reflecting the higher entertainment deliveries. This is expected to be in the range of 9%-10% of revenues for the full year 2021. We continue to expect gross margin to decline slightly for the full year. Product development increased $29 million, led by investments in future analog and digital games at Wizards. As a percentage of revenue, this declined 20 basis points. Advertising expense increased $33 million to support new digital game launches, along with a higher support of our toy and game business as planned for this year versus last. This line also declined as a percentage of revenue by 40 basis points. Reflecting the sale of the music business, we now expect intangible amortization related to the eOne acquisition to be approximately $86 million for the full year 2021, or approximately $20 million each of the third and fourth quarters. As a reminder, we exclude this expense in adjusted earnings and EPS. SG&A reflects higher expenses as the business returns to pre-COVID levels, with higher levels of marketing and sales expense, increased depreciation associated with capitalized digital gains, increased compensation, and higher freight costs. Despite these higher expenses, SG&A declined as a percentage of revenue by 540 basis points. The underlying tax rate in the quarter was 23.2% compared to 20.6% last year. The higher rate is due to the mix of income, but we expect the full-year underlying rate to remain at approximately 21%, excluding the amortization of the eOne acquisition intangible. The all-in GAAP effective rate in the quarter was mainly driven by two discrete events, including the impact of the music sale and the remeasurement of our U.K. net deferred tax liability. This was offset by a benefit resulting from tax planning and normal discrete items. Our second quarter showcased the benefit of our deep portfolio of brands and capabilities, backed by a tremendous team and solid execution. For the remainder of the year, we will be delivering tremendous innovation in our robust content slate while navigating the global supply environment to deliver a successful holiday season. Brian and I are now happy to take your questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your question is on the question queue. You may press star two if you would like to remove your question from the queue. For participants using speakerphones, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pause for questions. Thank you. Our first question is from the line of Steph Wissink with Jefferies. Please proceed with your question. Thank you. Good morning, everyone. Deb and Brian, I have one for each of you. Deb, the question is on operating margins. Much stronger than what we would have expected for the quarter, even with Wizards. I'm just curious if you can talk a little bit about how you expect margins to play out over the longer term. Do you expect to see some of the margin benefits continue to progress through the back half? Brian, my question for you is just bigger picture. Now that you've gotten the blueprint enhanced capabilities around the blueprint, can you give us a few examples for the back half, maybe it's Peppa or My Little Pony, how you expect to fully exploit the capabilities and what we should be looking for in the marketplace as evidence of that? Thank you. Great. Good morning, Steph. Brian, let me lead off. Thanks for the question. Yes, the team delivered tremendous revenue and operating profit margins for the quarter. Really good job all the way around. As we've said, we continue to expect that throughout the rest of the year, we'll have solid operating profit margins and that we can achieve the guidance we set out at the beginning of the year to grow revenue double-digits and operating profit margins to be in line with a year ago. Over the longer term and the medium term, we do expect that we can grow our operating margin levels greater than 16% on a full-year basis and have cash generation close to that billion-dollar level that we saw a year ago. Excited about what the teams are doing, how they're working, and how they're driving profitability and products. As you know, this year, there are some pressures that are existing out there on the cost side. We've taken pricing that we think will cover all of that, and we expect it to cover it right now. We still expect there'll be some fluctuation in operating profit levels for the rest of the year. Over the long term, no reason why we won't exceed that 16% level in the future. Yeah. Good morning, Steph. As we look at the business, clearly Q2 is an important inflection point for the company and for stakeholders as we return to growth in our entertainment business. We're seeing the momentum in our Wizards of the Coast business and of course, continue to see very strong consumer product sales. For the fall, we are lining up with Peppa and PJ launches. It's great to see those brands in growth mode in Q2. Consumer products returning on those businesses, and Peppa is the second most viewed preschool brand in the world, and that content consumption really goes unabated as we are in season nine on that brand and in season four on PJ Masks with lots of new content to come. The My Little Pony film is coming in September. It's on Netflix. It will be a beneficiary of the 200 million subscribers that Netflix has and a really robust array of products, great innovative products from our team, as well as an array of consumer products that come from any number of licensees. A great big, movie-sized marketing campaign and a lot of excitement with a whole new core cast with lots of content to follow. In addition to that, Dungeons & Dragons has its live action film in production. Currently, the team is doing a tremendous job in delivering that film. That will be for first quarter 2023, and I've already seen a plan along with the team for consumer products and licensing. We're out to our global retailers and their entertainment councils. It's really the shape of things to come as we activate more Hasbro IP and begin to take them into content, stand them up with great storytelling, and begin to activate them across the flywheel and the blueprint. Of course, you're seeing Wizards really in the early stages of unlocking the opportunity there as we begin to achieve that doubling of the size of the business and start to set some new objectives and targets for those brands and that business as we go forward. Overall, this is a very good and important time for us as we've said we would return to growth and it helps us to be as confident as we are in our full year goals and objectives, as well as our medium range guidance that we've provided. Thank you very much. The next question is coming from the line of Eric Handler with MKM Partners. Please proceed with your question. Good morning. Thanks for the questions. Wonder if we could dissect the Entertainment segment as we think about the back half of the year a little bit here. Film and Entertainment, since you have two movies coming globally, and then you also have My Little Pony going to Netflix, and then I assume production deliveries are ramping. I imagine the Film and TV segment should be up nicely on a year-over-year basis. When I look at the Family Brands line, first and second quarters were down year-over-year and still well below 2019 levels. Is that reflecting animated program deliverables? Is that a timing issue? Is that consumer products? Can you help me understand that? I've got a follow-up question. Sure. Well, first, let me remind you that the consumer products revenues that were prior reported inside of eOne have moved over to the consumer products group. What you're seeing now in eOne is the Family Brands revenues that comes from entertainment. If you take it in total, in fact, the Family Brands were up in the second quarter if you look at Peppa Pig and PJ Masks. That's taken in total where you have consumer products plus the entertainment coming from the two different divisions. As we look at Q3 and four, we do expect with productions returning, we're seeing a great array of deliveries. We expect growth in Q3 and four for the eOne business. We have a number of television series in production for delivery in Q3, and we also have a similar amount for Q4, including a new show for Showtime called "Yellowjackets," that Come From Away movie that will appear on Apple TV on the fall, the fourth season of "The Rookie," as well as getting the Family Brands revenues for the new seasons of Peppa, PJ, and we will get paid for the My Little Pony movie primarily in the third quarter as we deliver it to Netflix. I'd say we have a very robust slate of entertainment coming, lots of Hasbro IP in development, and we're very excited about the return to growth for eOne as we had projected. Okay, thanks. As a follow-up, you did talk about Magic: The Gathering Arena, that launch on mobile did a little bit better than expected. Wonder if you could maybe talk a little bit about some of the key performance indicators, if not just for mobile, just in general for the digital business with Arena. Sure. If you look at Arena, it's up quite considerably year-over-year. Also we're really seeing that sustained high level of hours per week played, so about nine hours per week. What I would tell you is that the KPIs, if we compare the KPIs of Magic Arena to other top mobile games, we are very competitive on the comparisons. It's really part of that virtual circle that we're seeing within the Magic business. Also, just to remind you, as we think about the cadence for the full year, we have two major releases in Q3 and just one major release in Q4 this year. A year ago, Magic's biggest quarter was Q3, followed by Q4. We have seen great growth in Magic Arena, and we continue to see that where people are playing both Magic Arena and Magic: The Gathering, that it's really adding to the engagement and players playing. As we are seeing a return to more in-store and in-person play, that's also a tailwind for the business. Great. Thank you. Our next question comes from the line of Arpine Kocharian with UBS. Please proceed with your questions. Thank you, and good morning. Very strong sets of results this morning, and it sounds as if full-year top-line guidance is unchanged. Was prior guidance including music business and now it doesn't, which means underlying guide actually went up? Could you clarify? I have my main question. Certainly. As we look at the entertainment business, we've said we believe that film and TV can get back to those 2019 levels. You look at entertainment overall, we think all of our entertainment segment can get back to about 2019 levels. The second half music, and I believe we said this last quarter, but if we didn't, we expect that music business revenue to be reduced because it's no longer our business, by about $60 million-$70 million and about $15 million-$20 million in operating profit over the course of the second half of 2021. Those are the levels that we're talking about. Okay. I was wondering, on your gaming business, is your margin guidance of 39% for the year largely unchanged? I guess what I'm trying to understand, and to go back to an earlier question, to meet your operating profit guidance around 15% for the full year, back half doesn't need to be up more than 14.5% in terms of sort of overall operating profit margin. I guess could you talk through some of the kind of puts and takes on how to think about it? It seems like the first half has been very strong, and some of that was front-end loaded like the gaming business, but how to think about the back half. Thank you. Certainly. As we talked a little bit about this earlier, I can certainly add some more color. If you think about our consumer products business, while we see the consumer products licensing business coming back as retail starts to open, you will also see some pressures on freight costs and moving things around. We've taken price increases for that, you think about all the product that's kind of moving in the second half of the year. If you go back and look over time, there are some pressures on certain of the quarters and operating profit for that. When you think about the entertainment business, as Brian mentioned, we're very excited for My Little Pony to launch on Netflix and be able to access all those subscribers. With that comes the amortization of the cost of the film itself. When you think about that's also going to be coming through in the second half of the year, as well as some of the other entertainment initiatives that we've talked about out there. Wizards, we said earlier in our prepared remarks, they actually outperformed our expectations for the second quarter. We'll continue to have administrative costs around amortization, depreciation of the games that we have that are being launched out there and that as well. That's why last year was just such an exceptional year for Wizards from an operating standpoint. We think that it will be closer to those 2019 levels than 2020 levels this year. When you add all of that up, it's just those different puts and takes over the latter part of the year is what gets us back to our operating profit guidance around the same levels as a year ago. Thank you. The next question comes from the line of Drew Crum from Stifel. Please proceed with your question. Okay, thanks. Hey, guys. Good morning. I think entering the year, the goal for consumer products was to grow revenues by mid-single digits. That business is up more than 20% through the first half, for the math to work for the year, consumer products would need to be down low to mid-single digits. Is that how we should be thinking about the business in the second half, or has your outlook changed there? I guess, separately, Brian, you mentioned that Dark Alliance fell out of your expectations. Can you just discuss what happened there? In the past, you've indicated that launching new titles was important to doubling the size of Wizards, and it sounds like you're pacing ahead of that. Should we expect new titles to be similar in size to Dark Alliance going forward or more robust production budgets for new games? Thanks. Yeah. Starting with D&D and the titles, we are going to have an array of new development and titles. Some come from third parties like Baldur's Gate, which has performed quite well and will go wide in the next period, probably in 2022. We have a number of games that we have in development. Some will have more modest budgets and some have larger budgets as we continue to invest in digital while the underlying games in D&D have really grown that through and we're just seeing great play both in face-to-face role-playing as well as digital role-playing. It's really a new area for us as people are playing more online and really building that brand quite considerably. Again, we feel very good about the slate that we have coming up and the momentum we have in brands like Magic and Arena. As we said, the launch of Dark Alliance was really about listening to the players, giving them more of what they want, more downloadable content, more satisfactory, more immersive gameplay. Look, that's part of the process. We're fully prepared to continue to invest behind the games. As we think about consumer products, clearly for the year-to-date period, if you look at industry data, was up double digits, but in the second quarter was up single digits. Clearly, Hasbro outperformed. As we go forward we'll have some different compares for Q3 and four last year as we began to return to greater levels of sales and being able to supply product. Remember, the big eight-week wall of supply was from mid-March to about mid to end of May last year. No, we do believe we can continue to see growth in our consumer products business. Taken in total, we are happy to reiterate our guidance for the full year, recognizing that there have been so many questions about the supply chain and about our ability to supply product that we felt that we're able to supply product. We are able through an immense amount of work on behalf of the supply chain team to add ports, to add tactics and strategies, to add new ocean carriers, and to achieve the objectives we set out for the company, which was growth across our business in each of the operating groups of the business, and ultimately with the opportunity to achieve double-digit revenue growth for the full year. Thank you. Our next question comes from the line of Jaime Katz with Morningstar. Please proceed with your question. Hi, good morning. I guess I have a sort of a follow-up to some of your prior comments. While you guys have made all these steps in sourcing and availability of product for the holiday season, how have the retailers worked with you to accept that product? I'm just thinking about working capital intensity over the back half of the year and whether or not that's going to escalate if Hasbro has to hold on to the inventory rather than maybe Target or Walmart. Thanks. Yeah. Let me comment and then Deb can comment further on the cost side. From an execution side, what I will tell you is our retailers have been incredible partners, and not just in the U.S. where they're amazing partners, but around the world. We have been incredibly resourceful in finding several new ports and ways of bringing in product, working with our retailers. The great news about our business and the categories where we're competing is they're in very high demand. We are seeing that high demand with an array of new innovation with entertainment returning not only for our portfolio but also for the Marvel and Star Wars portfolio. The Princess business is performing very strongly. Our retailers are making good investments in these categories where our consumers are purchasing incremental product and are certainly participating in toys and game sales across the board. Again, the fact that we have a very rich mix of new innovative product in our toy business, the Nerf business was up considerably and up in every region, for example. The Play-Doh business was up and is a major contributor to growth in the quarter. The Play-Doh business was up and we continue to see double-digit growth in our online and omni-channel business taken together. Again, the good news is we have categories of product that are in high demand with gamers and players, with families and fans engaging in our brands in an increasing manner. Deb, you want to talk cost side? Sure. We do expect, as Brian said, there's great demand for the product that we are bringing in. As we bring it in and pass it through to our retailers, we had an exceptional, I will say, an exceptional DSO from a receivable standpoint this year, and so much of that was dependent on the mix of our revenue and when we shipped items in the quarter and the great work that our teams did on collection. While I wouldn't expect our DSOs to be at the same level from an DSI standpoint, I do expect our inventory levels to still be in line with reasonable amounts. Our retail inventory is good. We've increased retail inventory in the places where we couldn't have inventory a year ago. We just couldn't get it, and we couldn't ship it. Retailers were selling out of everything. I think our inventory will be in good shape on our books. It will be in good shape on our retailers' books. I think our receivables will be in good shape. We don't anticipate any unusual draws on our working capital for the full year. In fact, we still expect our operating cash flows for the full year to be in that $600 million-$750 million level for the full year, kind of getting back to that $1 billion level over the medium term. Excellent. Thank you. Next question comes from the line of Fred Wightman with Wolfe Research. Please proceed with your questions. Hey, guys. Good morning. Just to follow up on that last question, I know that we have seen some timing changes just given FOB and domestic fulfillment a couple years ago. Do you think that given the shipping environment today, we could see a similar type of timing shift from 3Q to 4Q or relatively steady to the past few years? Yeah. Look, I think our first objective is to ensure that gamers and the people engaging in our toys and games business have the product that they're looking for and that our retailers have product to support these major initiatives that we have. I do believe that there could be some shifting between Qs three and four. We're out to source product and to bring it in via any number of new carriers. The team secured more ports, and we've got more shipping lanes than we've had in the past. I'm going to be a little less focused on exactly where the inventories come in, but rather that we have the inventories to meet the demand that we need for the second half of the year, recognizing we also have a number of new entertainment initiatives, including the My Little Pony film, several from our partners at Marvel, additional Star Wars content coming for the second half of the year. Princess is performing at a very high level. Of course, we get into the holidays, and the team has an array of new games lined up there as well. Again, you're right. There could be some shifting around, as it's a little different than past years, where direct import could play a bigger role than it has in the past. Again, working with our retailers around the world, we feel most importantly, we want to meet the high demand. Makes sense. Then just if we look at some of the language in the slides from this quarter, it looks like you guys are now saying you're tracking ahead of plan to double the Wizards business by 2023. Is that really just the mobile launch? Is it some of the pent-up demand for the legacy card sets that you're seeing? How do you sort of offset that with some of the supply constraints that you touched on in your prepared remarks? Yeah. Let me comment on the supply a little bit first. What we just wanted to make sure, again, that people understood that while we were using certain printing expertise and capabilities, we’ve had to expand our global footprint for capabilities because the brand is expanding, because gamers are increasingly discovering and rediscovering the brand, are playing at an increasing rate, and are also sharing more, bringing in new players more than ever before. I think the magic of Magic is that, in fact, it is that great flywheel where players play face-to-face in the card game that contributes to engagement, that Magic Arena, as you know, has the release cadence that marries to the card releases of the analog game. Again, they really contribute to one another, and they’re synergistic with one another. It's not as if one detracts from the other or takes time away from the other. In fact, it just gives people more opportunity to play and to play with different players, whether they're friends or acquaintances at a distance and they play in mobile and online, or whether they're playing face-to-face, increasingly returning to our global hobby shops, which have performed quite well, thanks to our support and support of others through the pandemic. Great. Thank you. Our next question is coming from the line of Tami Zakaria with JPMorgan. Please proceed with your questions. Hi. Thank you so much for taking my questions, and congrats on the very strong print. I have two questions. The first one, just to get a little more color on Wizards of the Coast expectation for the rest of the year, do you expect growth in both the third and the fourth quarter, or are you saying the back half is going to be up depending on timing of releases? Yeah. It's a very good question. Look, let me walk you through a little bit of detail on that. We have two major releases coming in Q3. One is called Adventures in the Forgotten Realms, and that's actually a very exciting set because it's a crossover with Dungeons & Dragons, and that'll come out, actually just coming out about now. Then we have a second release in Innistrad coming in Q3. We have one major release for Q4. As Deb indicated in her remarks, we expect to see that Wizards will continue to see some growth, but our big quarter for the year was Q2. Let me remind you, last year, Q3 was the largest quarter, followed by Q4. If there's a comparison challenge in revenues, and we don't yet know exactly where we'll end up given the level of engagement that we're seeing in the brand right now, probably the most challenging comparison will be in Q4 relative to a year ago. Again, the momentum in the business remains. We are ahead of our plan to double the size of that business, and it will come down to what really takes place in the Q4 period. Got it. That's very helpful. Very quickly, I know it's probably a bit early, but are you seeing any benefit of the advanced child tax credit payments that began in mid-July? Any benefits of that in your POS for the consumer segment in the past couple of weeks? What we're seeing is that consumers are very engaged in the products and categories that we're offering. We've also gone out, as we always do, and do a lot of proprietary insight work and research around our brands and categories. We're seeing an increased and sustained level of commitment to our gaming business and game playing. People are very engaged. I think they have found gaming again, for those who had played it more in the past, are playing it more now. Lots of families around the world who hadn't really discovered games are discovering games now. I don't know that I can comment specifically on family budgets, but what I can say is that people are spending money in the consumer product categories that we're offering, from Nerf to Play-Doh, to Playskool, to our partner brands in Marvel, Star Wars, and Princess, and of course, several other brands in the portfolio. Great. Thank you so much. The next question is coming from the line of Mike Ng with Goldman Sachs. Please share your questions. Great. Thank you for the question. I just have two. One is a follow-up on MTG Arena. Could you talk a little bit about where we are in the point of life cycle there? Is it still loss-making and spending heavily on user acquisition, or is it approaching profitability? When would you expect it to do so? Could you talk a little bit about what you expect to see as the long-term mix, as it relates to mobile versus PC? I have a quick follow-up. Magic Arena is profitable. Obviously, as Deb described, with the costs that we amortize, profitability is below the analog business. That's why if you look at the blended mix, the operating margin for the year, on average, comes down a little bit as digital enters more of the mix of offerings. Again, long term, as you pay for the initial development, as you pay for your marketing campaigns, you start to get more and more of the benefit of the underlying and consistent gameplay. That's what we're seeing in Arena. It's a profitable part of the business. Obviously has some costs associated with it that the analog card business does not bear. I don't know, Deb, if you want to comment further on that. As we go forward, I would also say digital is going to be a growing part of the business, but I also expect, and we're seeing it, that the analog businesses for both D&D and for Magic continue to grow. Perhaps the universe continues to grow, and therefore, as a percent of total digital increases, but maybe by not as much as one would expect. The other thing to note is that within D&D, there's this digital role-playing area that we're really investing in. It's kind of a partially analog, partially digital, and we think this is a great opportunity for the brand as we go forward. We're charting a course beyond the doubling the size of the business. It will include a good array and a very robust slate of new digital games coming at different price points. It will also include both first-party games as well as third-party games. We're lining up some great studios to produce games for us as well with our teams embedded with them to ensure just great gameplay and brand continuity. Deb, do you want to comment? I was going to say, Brian, which is fantastic, and you're actually seeing that in the results of the numbers as well. If you think about what we've had capitalized, from a digital gaming standpoint, we have similar levels to what we had at year-end. We've obviously depreciated some and added some to that. Within the results of the segment, we see it all lift up. We see it lift in analog and digital. You're seeing that amortization, that user acquisition, those costs within the results of the segment. Great. Thank you both. I was just wondering if you might be able to provide us with a little bit more detail around how you're thinking about the holiday. Lots of factors to think about. You talked about some of the shifting in delivery dates, the pricing. Can you talk a little bit about the magnitude of that price increase and how we should think about how it flows through, and obviously some of the input cost inflation? Any additional color there would be really helpful. Thank you. Sure. Well, I'll comment, and then Deb should also talk a bit about this. What we really are seeing, obviously, is early on, we saw a necessity to raise prices as we saw the steps the team was needing to take in supply chain and logistics in order to execute our year. That's very consistent with so many consumer product categories across the board, where we're seeing the snapback in demand and this transitory return to try to find production and capabilities. I think the holiday should be incredibly good and very solid with great new innovations coming from several of our brands. We have big launches coming in the second half of the year from the My Little Pony new lineup behind the brand new film and new cast to several of our partner brands, Peppa Pig and PJ Masks, an array of new games. Again, lots of new innovation and new game and toy play for global consumers. Deb, I don't know if you want to comment further on the cost side on the second half. Sure, absolutely. Well, we talked earlier about ocean freight in some of our prepared remarks, and we're saying those costs are over four times higher than what we had been experiencing earlier or last year even. We expect a lot of those costs to continue. However, as Brian said, the team's doing just a tremendous job actually getting the product, and that's what's important, right? We expect between that and some increased input costs that our gross margin, we continue to expect our gross margin to be slightly down from a year ago. Just as a reminder, that's cost of sales plus program amortization, because we're in the great situation that we can actually provide content now and release things theatrically. We expect that program amortization to go up as well. Between cost of sales and that, we do expect our gross margin to be slightly down from a year ago, but we do expect the price increases that we've taken to offset our increased costs. Thank you. The next question is coming from the line of Gerrick Johnson with BMO. Please proceed with your questions. Hey, good morning. Two questions. First, I was hoping you could break down Wizards between digital and physical. That'd be really helpful if you could. On the consumer product side, what were the average price increases that you're putting in in the back half, if you could quantify what that is. With your own inventory down 11%, I guess it is sufficient to hit your goals in the back half, but how are those shifts in fulfillment between FOB and domestic affecting you as well? Thanks. Clearly both digital and analog are contributing to the growth in Magic: The Gathering and digital role playing with D&D as well. We don't really break down those categories within those brands, but suffice it to say, we're seeing very strong growth on both sides. As we look at the second half of the year, you're right. We're going to see additional shifting between FOB and domestic shipments. We're working with our global retail partners on what that will exactly look like. Because of the demand in the product categories that we are offering, we have a lot of great partnership and we do expect that we'll get our products to market, recognize that the price increases we're taking will cover the incremental costs that we're experiencing. Those cost increases are around the world, and they'll be a little different in each of the regions just depending on foreign exchange and the way that they will hit the P&L. They're just intended to cover our cost increases to maintain our gross margins and to hit the operating margin that we believe we can achieve for the full year. Would perhaps 10% be a good number there? I won't provide guidance, but I think I would just say that's a bit high. Okay. Thank you. I would say that's a bit high as well, Brian. Thank you. The next question is coming from the line of Devin Brisco with Bank of America. Please proceed with your question. Thanks for the question. In the back half of the year, as you start to bring Peppa Pig and PJ Masks product in-house, how should we think about the initial impact to operating margins as licensing revenue is replaced with revenue that represents full ownership alongside associated upfront investment and tooling? My second question related to that is what is the long-term margin potential for those brands, and how much of the product that's currently being licensed can you or do you plan to bring in in-house over time? Sure. Well, both Peppa and PJ have very strong operating margins on the consumer product side, very consistent with our consumer products licensing business. The product that we're offering, in many ways, is both the categories that had been offered, also a lot of incremental product categories, yet we're also maintaining our consumer products licensees. I would expect perhaps over time, about 80% of the product lines of Peppa and PJ to be inside, but with another 20% continuing to be licensed in those categories with additional consumer products licensing opportunities. Peppa and PJ enjoy on our P&L, the consumer products P&L, enjoy Hasbro high teens operating profit margin, so on average, higher than company average operating margins, which is very consistent with Hasbro IP on the toy and game side, and then obviously much higher on the consumer product side. I don't know, Deb, if you want to add anything else relative to the plan. No, I think we had talked about this year that just based on, as Brian said, this year we'll be ramping the lines and we expect about maybe $70 million-$85 million of impact to revenue for the full year based on what we're going to launch. Really growing that and growing up to that 80% of the in-source line by 2022. With the revenue ramping with product as we go forward and margins close to our franchise brands, we're really excited about the future of Peppa and PJ, and we'll continue to work with some of our great licensees that do a terrific job out there as well. Thank you. Our final question today is coming from the line of Shawn Collins of Citigroup. Please proceed with your question. Great, thanks. Good morning, Brian and Deb. Hope you're well. My question is on expectations for consumer products in Q3. We emerge from the pandemic, at least in the U.S. and the developed world, people are likely to travel more and get out of their houses, and more importantly, looks like this August and September, we should have a back-to-school experience. There are some toy buyers that we talk to that think this could result in industry retail sales in Q3 being flat year-over-year and then bouncing back for the usual Q4 holiday season. Can you comment on any expectations around Q3 retail performance? Thanks. Look, let me give you most notably as we've come through what we call the COVID wall, those eight weeks where there were very strong sell-through, but our inability to supply product in Q2. What we're seeing in the last four weeks, and you take our North American business, for example, our POS was up 11%, our games business was up in the high teens. We're seeing good growth in regions like Latin America. We have a lot of new initiatives coming for that period of Q3. Lots of new product associated with My Little Pony, as well as our partner brands and a whole new lineup for Nerf in the Elite and the Ultra lines. Again, we believe we can grow, and we've said in line or ahead of the industry because of our innovation in storytelling and content and commerce. I won't comment specifically on Q3 except to say we expect that we'll have a very good year in consumer products. We have the innovation and the strong product lineup to achieve our objectives. I'm, again, believing and seeing what consumers are doing, and they really are participating in the categories. If you look at kids in preschool, if you look at older kids with our Nerf business, if you look at still older kids and young adults into our games business like Magic and D&D, we're seeing great engagement, and we would expect that to continue. Great. Thank you for the time and insight. Thank you. At this time, I'll turn the call back to Debbie Hancock for closing remarks. Thank you, Rob. Thank you everyone for joining the call today. The replay will be available on our website in approximately two hours, management's prepared remarks will be posted on the website following this call. Thank you. Thank you to our participants. This concludes today's conference. You may now disconnect your lines at this time.