Good morning and welcome to the Hasbro’s Third Quarter 2020 Earnings Conference Call. At this time, all parties will be in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. At this time, I’d like to turn the call over to Ms. Debbie Hancock, 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 Deb 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 these non-GAAP adjustments. A reconciliation of GAAP to non-GAAP measures is included in the press release and presentation. Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. Before we begin, I would like to remind you that during this call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives, and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. These factors include those set forth in our annual report on form 10-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 global Hasbro team did an excellent job delivering a strong third quarter, with revenues growth in toys, games and digital initiatives while live-action production begins to return. Consumer demand remained strong. Global point of sale for Hasbro brands was up mid-single digits, including double-digit gains in the U.S., UK, and Australia, among others. Overall, point-of-sale grew despite declines in Latin America and Asia and some out of stocks in the games category. Nearly all stores globally have been open and operating, with Latin America experiencing the most restrictions. Foot traffic in stores remains meaningfully lower, but ecomm continues to deliver, with 50% growth globally in the quarter. We also benefited from the reopening of Toy Specialty retailers in Europe. Production at our third-party factories is up and running, and supply is largely in-line with demand. Where demand remains above trend, we are working to catch up. The restarting of live-action entertainment is gradually occurring, with some of our larger productions beginning late in the third quarter. As a result, deliveries were low, but are set to improve in the fourth quarter and some revenue will move into 2021. MAGIC: THE GATHERING delivered strong third quarter results and revenue was up double digits for the first nine months of the year. The release of Double Masters and Zendikar Rising drove the year-over-year gains in the quarter, including growth in analog and digital play. MAGIC: THE GATHERING is providing its players connections and entertainment despite not all being able to gather to play. That connection and entertainment continues to drive gaming demand broadly. Revenues grew for our gaming portfolio, and the overall gaming category, including MAGIC and MONOPOLY was up 21%. Point-of-sale gains were limited by product availability…

Thank you, Brian and good morning everyone. Our teams delivered a very good third quarter in a difficult environment. The results reflected growing consumer demand for Hasbro brands; an improved operating environment as third-party factories, warehouses, and retail stores were mostly open; and excellent execution by our teams, including strong cash collections and cost management. My discussion today will be versus pro forma adjusted 2019 earnings. The third quarter 2020 adjusted results exclude after tax amounts of $19.6 million of purchased intangible amortization and $4.7 million of acquisition and related expenses associated with the eOne acquisition, and $13.7 million of incremental tax expense related to a change in the U.K. tax code. We ended the quarter with one of our highest ever third quarter cash balances and delivered an additional 230 basis points on adjusted operating profit margin for the quarter from both favorable product mix and cost savings. We continue to have $1.5 billion available under our revolving credit facility, should we need it, and we remain well within our financial covenants. The team drove strong cash collections and Q3 DSO decreased to 74 days from 83 days last year, and 96 days in the second quarter. As live-action production has been limited, our cash spend on content this year is now targeted to be at the lower end of our prior $450 million to $550 million range for the full-year. Due to the timing of this return to production, certain deliveries expected in the fourth quarter 2020 will move to 2021, shifting expected revenue. We currently expect next year to have a more normalized cash spend level as production and deliveries are slated to improve from the lower 2020 levels. Our capital expenditures year-to-date are in-line with 2019 and are now expected to be slightly below the $145…

Thank you, Deb. I want to take a minute and recognize John Frascotti. Earlier this month, we announced that John has decided to retire after 13 years with Hasbro when his existing contract ends in March of 2021. John has been an important part of our senior management team since 2008, and a loyal colleague, mentor and friend to so many of us over the years. In addition to the leadership roles he has held, John has always been a champion for our culture, our purpose and our values. He embodies the idea of servant leadership and his impact on our company will be felt long after he departs. John leaves big shoes to fill, but I am extremely confident in the leadership of our company and the strength of our teams to lead Hasbro into the future. Deb and I are now happy to take your questions.

Thank you. [Operator Instructions] Thank you. And our first question is coming from the line of Steph Wissink with Jefferies. Please proceed with your questions.

Thank you. Good morning everyone. And Brian, I would echo your comments on John. John we are going to miss you. My question is really about the Hasbro properties and development with eOne, I’m wondering if you can talk a little bit more about just how broad based – what different form factors that might take? And I think Deb, your comments on more profitable growth is really intriguing. If you could just talk really quickly about what you're most excited about in that pipeline that would be great? Thank you.

Sure. Good morning, Steph. First, we saw some announcements over the last week or so. Jonathan Entwistle has come on board. He will be handling the development of both live action television around Power Rangers in addition to the kid’s oriented TV show that's in its 27th season. We'll also be working on a live action film. The team is busy working on DUNGEONS AND DRAGONS live action feature film. They're also working on a couple of different approaches, because there is so much mythology in Canon to - DUNGEONS AND DRAGONS for live action television. And there's been very strong interest. We've talked about how many global streamers and other terrestrial broadcasters have been very interested in DUNGEONS AND DRAGONS. For next year, we will have a My Little Pony theatrical feature film, it'll be the first CGI film that the team is producing. It looks beautiful, and we're very excited about next fall. It'll come to theatres in September next year. And then as we go across the different IPs, what we're seeing is incredible interest in scripted shows as we develop more game show type formats, and other fun formats, like we've seen coming onto the Food Network this fall, which is a Candy Land TV show hosted by Kristin Chenoweth. We've also seen very strong demand desire for IP around the Hasbro brands and scripted television. Let me remind you that just this past summer, we had a scripted animated show called War for Cybertron, for Transformers. It was only six episodes, and yet that show posted top performance across the entire Netflix platform during June and July and August. And in fact drove considerable growth in Transformers brands. So, we're seeing the connection between creating great IP and the response that we're getting from fans and families. In fact, Transformers POS has been quite strong, and Transformers was up in the United States. As a result, as we now take that out around the world, we expect to continue to see how the teams are able to drive our brands off of that great IP spend. Just as we've seen great streaming content work for Disney+ and the Mandalorian. So, there's many, many new initiatives that are coming. And as we've said, we've got more than 30 brands and more than 40 projects stood up, some brands will get the benefit of both film and television treatments. And we're very excited they've made – the teams have made more progress than we could have ever imagined. I guess it's the silver lining in our playbook for 2020 as we all work through this COVID environment, and we're all on screens together. Deb?

Yeah. I would add to that too Steph that, you know, we've been continuing with our integration activities, we're on track to deliver the 20 million in cost savings we talked about this year and next year with our – we expect to have more in cost savings. So, when you think about creating this wonderful entertainment around our brands, being able to leverage the blueprint, achieving the cost savings that we've talked about, and we're well on track for hitting our $130 million in synergies by the end of 2022. You know that's going to lead to greater profit for our company and based on these investments along with digital gaming, we really see the benefit of the acquisition over the long-term. 2020 has been an interesting year for all of us, But you know, we continue to think the future looks very bright for our company.

Deb, if I could just to close the loop, I think you mentioned program amortization in the fourth quarter would be flat on a pro forma to the prior year, can just give us the base number, just to square up that for our model?

Yeah, absolutely. Then the pro forma number last year was 7.1%. So, we're looking at a number similar to that for the fourth quarter. Around that level.

Thank you.

The next question comes from the line of Eric Handler with MKM Partners. Please proceed with your questions.

Yes, thank you very much. Deb, since eOne is a bit of a black box in terms of modeling, just wondered if you could maybe give us a sense of if TV film entertainment was like 166 million in the third quarter, do you expect deliveries to result in that number being higher in the fourth quarter, about the same, I think last year on a on a pro forma fourth quarter number it was 179 million, just sort of give us some directional color and how to think about that for modeling purposes?

I think last year in the fourth quarter, you know, looking at with translation and everything else, overall the eOne segment was around [213 million] [ph] in the quarter if you think about overall. However, if you think about this fourth quarter, you know, we're really excited. We believe that we could grow revenues and adjusted EPS from our pro forma Q4 results of 2019 overall as a company, because well eOne and the live action production that’s returning, we've been in production on animated overall [training] [ph] for better deliveries. Some of those will move into the first quarter just because, you know, as Brian mentioned earlier, we started our biggest live action production late in the third quarter. So, you kind of think about finishing it and delivering it, some of that's going to shift when we start getting through all of those episodes. But overall, our brands and our business, including the Hasbro business is performing very well. The only thing I would remind people of is our comps from last year, we had a big quarter for Frozen. Our Frozen business was the highest fourth quarter – had the highest fourth quarter sales ever across the G5 for the brand in all the categories that we have rates according to NPD. So, while Star Wars is performing well ahead, we do have that big comp in Frozen, but we do believe we could grow revenues and adjusted EPS from Q4 of a year ago.

Okay, and then just as a follow up, your retail inventories were down in the third quarter, or your owned inventories were down in third quarter on a year-over-year basis, how much of that is due to because you have tough comps with last year with Star Wars and Frozen? How much is just, you know getting back up to speed?

Yeah, if you look at the Star Wars business in the third quarter was up considerably. In fact, Star Wars is performing at a very high level. So, we had the inventory on Star Wars and the brand was up high double digits for the quarter. It's up high double digits year-to-date. It's really been about very strong demand across the portfolio for our products. We talked a bit about the fact that games back and as we reported second quarter had been at low fill rates, those still rates began to notch upwards throughout the quarter. So, from July – end of July to August, August to September, and exiting the third quarter as we look at October, the month of October POS, we're seeing our POS for the month of October our games up 17.9% so far, and our Toys are up 16.4% so far. So, we did have – if you recall for the year-to-date, sell through on games, you know, online game sales were up 70% year-to-date and in the U.S. business was up 39%, and in the global international or globally, Games were up 29%. So, we had sold a lot of games and we needed to catch up. And we're seeing that now as we head into fourth quarter. So, yes, retailer inventories are down, down in several different areas in the U.S., down in Mexico. As Deb mentioned, managing that business so that we can stabilize and grow again for 2021, and down in a couple other territories. Up slightly in Europe, because the European business is performing very well, was up 7% in the quarter with growth from franchise brands, gaming, and partner brands in the quarter. And so again, this is the cadence that we're executing this year as a result of high demand and then trying to catch up in certain categories.

Thank you.

Next question is from the line of Felicia Hendrix with Barclays. Please proceed with your questions.

Hi, thank you so much. And that's a – your answer is a great segue to my question. So, you had talked about just kind of catching up on the game side and I’m wondering if we could just move to the Franchise side? And maybe you could just dissect that a little bit in terms of what's in there, and how that did you know, NERF, BABY ALIVE, PLAY-DOH, and also, I guess on the family brands, Deb, you mentioned that the retailers are being cautious with inventory, and it affected this line. So, I was wondering if you could elaborate there. Thanks.

Sure. So, if you look at Franchise Brands growth, globally was up 4%. I think it's most interesting as we get some of the new products into the market, that franchise brands in the United States and Canada and North America, were up 20%. And we saw growth and five of our franchise brands with NERF just about flat to a year ago in revenues. And My Little Pony was down and we talked, we have a big movie approach for next year. If you look at NERF POS, it grew globally, by nearly 4%, it was up more than 7% in North America. You know, again, we talked about how, coming out of India as we've expanded our strategic sourcing footprint that that was benefiting us, but it also led to some delays on some new products, but we have seen really good takeaway. We have three new segments for Q4 on NERF, the Elite 2.0, which is that core of Blaster, it's off to a very strong start. Our ULTRA product is doing quite well that's the one that flies 120 feet and we're up to ULTRA 5, so five new blasters there. And then we have a new mega blaster and a holiday item for ULTRA called the [Faro], which is going to sell for about $50 U.S. And we feel really good about all of that. And then you add to that new fortnight blasters, which are again performing quite well. And a really break frame social marketing campaign called NERF House; it's got a great lineup of celebrities and athletes. So that brand is performing well. And I think we're at an inflection point now as we catch up on production. And we respond to just the strong demand that's out there. We talked about PLAY-DOH being up for the quarter and POS was up. We have a lot of new compounds launching. We talked a bit about Transformers, which was a brand that was up in North America, POS is up double digits. And again, really responding to the content on Netflix, as well as the content that we have for kids and for preschoolers and Cybertron, and for Rescue Bots Academy. The only other brand I'd cite, you know, again with challenges in supply, our shipments are down a bit on Power Rangers, but our POS on Power Rangers for Q3 was up high double-digits 77% and year-to-date that POS was up by more than 100%. So the, you know, again, the new episodes, we're very excited about the new creative stewardship that's coming. They're performing incredibly well. We have 900 episodes available on Netflix, and new products coming from the holidays. And [Steph], you may have mentioned another brand, I'm not sure which one…

Oh, yeah, I was talking in the family brands, you know Deb mentioned that retailers are being cautious with inventory, which affected that line. So, just wanted some more color there.

Oh, boy. Yes. Thanks, Felicia. I – you know, it's interesting, because if you look at our largest customers, they remain Walmart, Target, and Amazon, right. And all three of them have remained largely open and operating for toys and games. And, in fact, you know, it's really a low single digit percent of our stores. Retailers are closed globally right now, but when you look at consumer products, licensing and family and brands is in that category, has a lot in that category. For consumer products, revenue and profit held up well in the quarter, but when you think about the fourth quarter is going to reflect part of the sales from the third quarter. It's a bigger quarter for the category, year-on-year when you look at comps. Those retailers are being very cautious with inventory management, given that there are still store closures and that there are lower sales and licensed categories. So when you think about things like, you know, apparel, back to school, kind of was an interesting back to school year, this year right? This is having an impact. So, that's why we say, we're still watching the fourth quarter. We think it'll have an impact on that segment, which impacts family and brands a bit as well. But overall, the health of the whole segment is good. It's just going to have some impact in the fourth quarter from those continued store closures and retailer cautiousness with inventory in those categories.

Okay, that's helpful. And just as my follow up, I mean, it sounds like, you know, you guys are kind of chasing demand in the fourth quarter like others are in the industry, you know, as we kind of assess the puts and takes there where would your biggest risks be? [Indiscernible] satisfying that demand.

Yeah. So, you know, what we said back at the end of Q2 as we spoke together at the end of July, we said that our fill rates were low, we intended to catch up by the end of third quarter, we've made a lot of progress in catching up. We're still behind on the games category, just given the substantial demand that we're seeing there, but we've talked about successfully launching NERF and several other brand initiatives, [indiscernible] partner brands, and Star Wars is having – had a great Q3, our PRINCESS business, Disney, Disney Princesses business was up in Q3, year-to-date Frozen business was up, BEYBLADE has held up very well. So, our toy business now for the month of October comes from some of the big omni-channel events, and the early launches for the holiday through the prime days. Toys are up more than 16% to 16.4%. Games are nearly 18%. So that catch up that we've talked about through the third quarter and in supply is starting to have a good impact on demand.

And the only thing I would just say is, you know, we continue to watch that the consumer products category just because some of those license categories just aren't as strong at retail right now.

Understood. And John, bittersweet, goodbye. Thank you for all your help over the years. And we'll miss you.

Thanks Felicia.

The next question comes from the line of Arpiné Kocharyan with UBS. Please proceed with your questions. Arpiné Kocharyan: Thank you so much. John it has been great working with you. We’ll definitely miss you. Best of luck with everything. It seems like retail has held up strongly into October, I'm mostly trying to understand whether it is in-line with what you have planned for in your production plans earlier this year? And whether there are any production limitation related caps as we are looking to Q4?

Well, you know, we're sitting here today with the benefit of being about a third of the way through the fourth quarter at the end of October. And so we expect the holiday season to be a good one. We've talked about the fact that we have a lot of new products launching, and Deb talked about the fact that we could grow this year on a pro forma basis, versus 2019. And there, you know, a little more than 60 days left and we – again, we feel very good about this holiday season. It's great to see the level of consumer takeaway. It's also great through our research to understand how many new fans and families are coming into the category, which really bodes well for 2021 as we continue to execute with innovation and IP and games. Remember, we also had a great benefit that MAGIC: THE GATHERING, as we described would have more releases, those releases were very well received by players in Q3, and we have a continuation of some really good releases into Q4. But we feel good about where we are right now. Again, there's enough room left in the calendar year to have a good holiday season, and to turn the page and move on to a great 2021.

Next question is from the line of David Beckel with Berenberg Capital Markets. Please proceed with your questions.

Hey, thanks so much. My primary question relates to YouTube, which you called out, again this quarter as a minor headwind on the advertising side. Just curious if you can expand a little bit on that. Is it a function of lower ad rates, ad loads, or lower engagement sort of relatedly if you don't mind expanding just generally on digital engagement trends that you're seeing across your portfolio of brands, they'll be really helpful? And then I have a quick follow-up.

Yeah, sure. The digital engagement, the viewership of our brands has been outstanding. PEPPA continues to be the most viewed brand in those formats around the world. We're also seeing as the team is taking on more of our brands with MY LITTLE PONY, improving viewership as a team has managed that quite well and other brands from Hasbro's portfolio to their oversight and the way they manage the algorithms and deliveries of social content and YouTube content. So, it's been quite good. Engagement for PJ MASKS is quite strong. Additional productions for PJ MASKS and PEPPA are good. It’s all about the change to the algorithm that YouTube made to be more restricted to advertisers. We just limit some of the advertising revenues that we claim as the way we manage that business. And the team has always done a very good job much better than Hasbro and you want in managing that and gaining those revenues and being able to drive revenue growth. We think it will get healthier over time, but right now, of course, we're just responding to the changes in the rules making about the way advertisers can advertise in kid’s content. Deb, I don't know if you want to add?

I was going to say, it was – there were some other changes that were made last year that just impacted it for the quarter. It was a bigger impact for the quarter than as Brian said, the algorithms have changed. And we're seeing that this year, but it was just a particularly bigger impact on the quarter. So, we wanted to call it out.

Got it. Helpful, thanks. And just as a quick follow up, I don't think you mentioned it specifically, but I'm curious if you can kind of frame for us, how much of an effect the inability to meet demand because of supply chain constraints affected POS in the quarter?

Well, look, I think that if you look at the POS number, I think the biggest impact if you look at Global POS being up mid-single-digits was the fact that Latin America was down substantially as we get that business healthy and get it on track for 2021. Also, hoping that COVID, the major impact it’s having there begins to dissipate. So, we've gotten retail inventories in line with retail inventory in Mexico, for example being down nearly 20%. And that has an impact. If you look across the regions, North America had double digit POS gains in the quarter. And Asia Pacific had double-digit POS gains in the quarter; Europe had mid-single-digit POS gains. So, it's just the average that comes out to mid-single-digits, POS gains because of the Latin American decline as we work through the issues related to the substantial COVID impact, restrictions on stores, the lack of as robust ecomm business, but I say, overall as we are now entering the October period with more supply to see high teens, POS growth for both games and toys has us well-positioned for the holiday.

Great. Thank you so much.

Next question is from the line of Tami Zakaria with JP Morgan. Please proceed with your question.

Hi, thank you so much for taking my question. So, could you comment on your plans around digital gaming launches next year? Any comments on the format of those meaning, would those be mobile or PC, Free to Play, any details you can share?

Sure. So, if you look at, you know, MAGIC: THE GATHERING for the quarter, it performed quite well and as you know, our storytelling around MAGIC: THE GATHERING is synchronized between what we do in the analog business and in digital and Magic Arena performed quite well, and it was up in the quarter. As we go forward, Magic Arena, now having over 2.8 billion games play, which is up quite a lot since Q2 still shows that people are playing on average nine hours a week, will move Magic Arena to mobile and early 2021, which is of course the most popular format for gaming that ubiquity and number of players should really benefit the brand. We're continuing to work with Tencent to publish Magic Arena for China. We also have Spellslingers coming, which is a casual mobile game for MAGIC: THE GATHERING, which will come following the move to mobile. DUNGEONS AND DRAGONS, right now you can play in Early Access on Steam, I was actually playing it, it's quite a great game called Baldur's Gate 3. For those fans, it's off to a very strong start. That's available now in Early Access, and it will launch fully in 2021. We then have Dark Alliance from two games that comes in 2021, as well, and the team is making great progress there. We've seen some of the early work and that's very exciting as well. And then there's a raft of games that talks about the R&D work that's going on. [The Rafter] games that will come in the future for years 2022, 2023, 2024. It's all in development as we speak, and it will line-up with the initiatives of those brands, as well as with our entertainment approach that we're now developing, fully developing.

Got it. That’s really helpful. And then another quick one from me, the quarter to date POS trends you mentioned in October, is that including Amazon Prime and some of the deal dates from other retailers, or are those POS numbers normalized for those events?

We just took the – we took the, effectively the month, the first month, October. So, yes, those impacts are in there, but those were over specific days. If you look at the progress we've made even over the last week, [following prime], the numbers are quite strong. So, I don't want to get down to kind of week by week POS, but just suffice it to say for the month, those are really good numbers. The peaks during the prime days were even higher, but overall, we're seeing day for day really good growth around our brands. And we're back in stock on new initiatives like NERF, PLAY-DOH, as our games in stocks have improved. And we're very excited as we come up in the next week, we'll have a big launch around the Mandalorian, new season that's coming. We have more than 20 items available for the child product [indiscernible] products around Star Wars. Star Wars is performing at a very high level this year. We expect a good holiday season, which should enable us to have good performance from our partner brand category recognizing what Deb said earlier, which is, we have very strong comps from a year ago, but it at least positions us well in partner brands and allows our business to continue to move forward.

Got it. Very helpful as always. Thank you so much. And to John, you will be missed dearly. Best of luck to you, and thanks for all the help.

Our next question is from the line of Drew Crum with Stifel. Please proceed with your questions.

Okay, thanks. Hey guys. Good morning. Brian, I wonder if you could comment on your expectations for MAGIC: THE GATHERING in 4Q, you gave us some good detail entering 3Q and your expectations there. And then I have a follow up.

Sure. So, you know, I'll give you a, kind of a little bit of progress. On Q4, you'll see at least three really robust launches coming up. We have a Zendikar Rising product that will be specifically around [fans and gifting]. We have a Commander Legends product that we’ll launch in November and Secret Lair will continue into November as well. What’s interesting is that we made a number of launches in Q3 that are continuing to have an impact into Q4 as well. More offerings that were very well released that – very well received by the players, Double Masters set was released in Q3. The Core Set 2021 was our best Core Set of all times because it contains these must have cards for tournament play. It also welcomed a lot of new players into Magic for more at home play and many new and in franchise players really like that offering. We also had added this jumpstart booster and collective boosters. They'll continue to roll out in the fourth quarter because we had some production challenges. We had talked about that before. And we're going to roll that out into the EU in Q4. Jumpstart for those of you interested allows the players to immediately get into the game with these ready to play 60 card decks. And the Commander Legends combines two of Magic’s most popular formats of Commander and Draft. So, I think you've got a lot of analog play coming into Q4. We talked about how [force entertainment] always leads engagement and we were well-positioned to finish the year out strongly from [indiscernible].

Got it. Okay, very helpful. And then, Deb, $369 million of long-term debt classified as a current liability on the balance sheet, can you talk about what the company's plans would be to address that upcoming maturity? Would you pay it down or look to refinance? Thanks.

Sure. Well, within our debt, as you know, about this year, we've only got really committed to pay 22 million, 23 million onto our term loans, and we're on track for that. And, you know, depending on how liquidity and our cash position goes, we may address some of that debt earlier, or we may wait till May of next year. It's predominantly due in the May timeframe. Right now, our plans would be to pay that debt down with our current plans.

Our next question comes from the line of Michael Ng with Goldman Sachs. Please proceed with your questions.

Great, thank you very much for the question. It was encouraging to hear about the revenue and EPS growth for the fourth quarter, given the content delivery shifts for eOne, I was just wondering if you could talk about how that might affect gross margins for the fourth quarter, and just about your expectations for gross margins more broadly? Thank you.

Well, overall, for eOne, you know, we said deliveries – they're on track, we have, you know, we have a lot of items and productions in the pipeline right now, right. So, we said some of those could shift into Q1 as we look at them overall, but you know, the COVID, I would just add, you know, COVID protocols are increasing costs on some of our productions. So, they're increasing them at different rates, and different productions. So, when we think about margins; that's going to be something we need to look at over the long-term to see how that plays out. Now we see some of those costs are actually reducing since we've been back in production, but I think that's something we'll be looking at over the long-term. So, when you think it over about overall margins, you have to kind of factor in that a bit, but we did say that our expectation is just based on product mix, that, you know, we had good product mix, the more of some of our gaming brands we sell in the quarter, the more brands like MAGIC: THE GATHERING, we sell in the quarter that improves our cost of sales from a product mix standpoint. And our program production, we said we thought would be around the same levels as a year ago, as a percent of revenue, which was about in the fourth quarter 7%. So, we'll have to see over time, how our margins get impacted by those additional COVID costs, but you know, right now, we expect those program production costs to be about the same level for Q4 as they were a year ago.

Great, thank you. And just as a follow up to eOne more broadly, you know, eOne’s obviously been impacted by a lot of exogenous factors because of, you know, Live TV production, theater closures, I was just wondering, do you see eOne revenues getting back to those 2019 pro forma revenues at some point in the near future when things get back to normal or, you know, is there just something structural in this new environment that prevents us from getting back there? Thanks.

Yeah, no, Mike, the short answer is we do expect that eOne revenues can grow and grow back to being more the way they were in the recent past. Recognize a couple things that will be very beneficial to the company, increasingly those revenues will have more Hasbro IP attach, more of our production capital spend will be around Hasbro IP. Over time, we'll continue that mix shift into more Hasbro IP, which has that knock on benefits that Deb described in her prepared remarks where it enables us to get more consumer products licensing, it enables us to drive more of our high margin toys and game business, it enables us to provide profitable entertainment versus looking at entertainment as a more of a marketing expense. And then it will also support the Wizards of the Coast brands that have such deep cannon and mythology and the opportunity to take that to [families and friends] is really substantial. So, we do believe that, you know we've got to get through the phases of COVID. We have to apply the protocols to our productions and we're doing that. We have 25 productions up and running right now around the world. We're sharing some of those COVID costs with our broadcasters or others who have sponsored or paying for the shows. So there are some shared costs. That's why Deb said, we've got to look at where the shared costs are and the ultimate costs, but the big picture answer is that we see the opportunity to not only go back to where eOne was in the recent history, but to grow beyond that over time and to drive a full range of Hasbro IP, both Vault IP, as well as [in-market IP] to audiences and to consumers around the world.

Great. Thank you, Brian. Thank you, Deb. And, John, I'll echo others comments on the call that it was a pleasure working with you and learning from you. Best of luck.

Our next question is from the line of Devin Brisco with Bank of America. Please proceed with your questions.

Hi, thanks for taking my questions. I just have a couple on e-commerce; do you still expect ecomm to be about 30% or more of sales for the full-year? Is the proportion of your sales mix that came from ecomm in the quarter in-line with that expectation? And could you just walk through e-commerce POS trends by category or your major brands?

Sure. You know, we do expect ecomm to probably be about a third of our total global sales by the end of the year. We mentioned that ecomm sales in the quarter had grown by 50%. So, clearly continue to track forward. And also, we saw more store re-openings, which you know, balances that ecomm sales as a percent of total sales, but ecomm growth in the U.S., in the third quarter was 35%. Year-to-date it's been 65%, our Franchise Brands were up 34%, Partner Brands were up 54%, Emerging Brands were up 79%, Specific Brands like Monopoly were up 31%, PLAY-DOH 56%, and Europe was up 16%. So, anyway, you just see that, you know, strength to strength that we have a lot of our growth in this category, recognizing that it's on track to be about a third of our business for the full-year.

Okay, thank you. And the gap between POS trends relative to shipments meaningfully improved from the second quarter? It was still a headwind, is this delta something that we should expect to continue to improve, particularly as you catch up on some demand in the games category?

Yeah, I think that, you know, our goal overall, we said was, as the point as we ended the third quarter, we expected to be [run rate] catching up, you know, the demand in certain categories is still outstripping supply. To some extent, that's why we made some of the comments on the call. But some of our new gaming initiatives and games category are quite popular, some of our new products and therefore very popular, but overall, I would say, we should have demand much more in line with supply in Q4. And that's why we said, we expect a good holiday. Deb, I don’t know if you have a comment there.

You know, and I think – I think the only thing I would just add is, we continue to watch kind of what's happening with some of our manufacturers around the world, especially in places like India. You know, some markets, we're not worried. We have essential supply status, doubtless, you know, first and foremost, we are concerned about our employee health, and that includes our third party manufacturing employee’s health as well. So, we want to be cognizant of that, but you know, to the extent we have some shutdowns around the world. We may still be catching up, you know, come Q1.

Thank you.

The next question is from the line of Gerrick Johnson with BMO Capital Markets. Please proceed with your questions.

Thank you. Good morning. And also congratulations to John, the nicest guy in the toy business. Hey, so where you're chasing, it sounds like games, and those are factories that ramped up a little bit late, how much better could your overall sales revenues have been in a quarter if you shipped what you wanted to have shipped? And related to that also, are there any other distribution issues, which you know about other than just factories starting up late? How are your warehouses and the rest of the distribution channel supply chain?

Yeah, look, clearly, we've seen where Games has been a year to date, and in the third quarter, clearly, it grew, but less so. The POS trends that we're now seeing in Q4 are indicative of the fact that we've been catching up on supply. And the team has done a great job. Deb mentioned that, you know, Ireland is going through six-week shut down, but our Irish factory has achieved essential status and it continues to produce. And we've done that around the world to try to help protect our business, and to finish out the year, very positively. In Q4, we're shipping a lot of new initiatives, and we are continuing to watch certain areas like India, but we're seeing the products come in, and we're seeing the strong demand. I don't know that Deb, if you want to comment further on.

Yeah, I was going to say, I mean, I think our teams have worked so hard to put really good protocols in place to make sure within our warehouses and our third party manufacturing, that our employees are safe, and they can come to work. So, first and foremost, you know, I got to give a big shout out to all of our warehouse employees that have just been tremendous for all this and have been so responsible and how – how they're doing business right now. So, it's really, it's – they've been just really terrific. But, you know, we do continue watch. There's certain states that we manufacture, and particularly in India, I think that, you know, give us some level of concern, but overall, really, you know, we are catching up on demand.

Okay. And then on Magic, can you just give us what the split is right now between digital and physical? You don’t have to give us an absolute dollar number, but your percent split 50/50, 60/40, what's the split between the two that's contributing right now?

No, I think we continue to see, you know, the analog business of course has been around a lot longer than the digital business. So, as you'd expect, that's probably a larger size, but the interesting things are, we continue to say when we launch things on Arena, as well as what we're building for the future on the digital side of the business and on the mobile space, you know, it's giving a lift to the analog business as well. So, the overall, the, you know, the releases have just been so well received. And as we release more in digital, it is giving that lift to analog, but analog is the larger piece. So…

[So, larger] Okay, thank you.

Thank you. Our final question today comes from the line of Jim Chartier with Monness Crespi. Please proceed with your question.

Hi, thanks for fitting me in. Just a quick question. So, wonder if you could let us know how much of eOne revenue historically is tied to the movie box office, and live music events?

Sure. Well, the first thing is, eOne has been very facile in moving movies over time from theatrical to streamed movies where they get paid and make a margin. And so I'm not concerned in the short-term that eOne’s movies are – won't benefit from exhibition, and we can't sell them, as everyone is looking for, increasingly is looking for content. The music business has performed well, has held up well. It's a smaller piece of the total, eOne business. Deb, I don't know if you want to comment further?

Yeah. I was just looking at some, you know, it is a smaller piece of the business, but it's the piece of the business that definitely has been impacted by the inability to do touring, and you know, with some of the recording acts, as well as the [think revenues] and advertising have been impacted as well, but it is a smaller piece of the business.

Right. That's helpful. Thanks. Best of luck in fourth quarter.

Thank you.

Thank you. We've reached the end of the question-and-answer session. I'll now turn the call over to Debbie Hancock for closing comments.

Thank you for joining the call today. The replay will be available on our website in approximately two hours. Additionally, management prepared remarks will be posted on our website following this call. Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.