Gina Goetter
Chief Financial Officer at Hasbro
Thanks, Chris, and good morning, everyone. Our Q3 results demonstrated the increasing resilience in the Hasbro business model, underpinned by the strength in Gaming and Licensing. While toy revenue fell short of expectations, we still saw a significant moderation in the decline as compared to the first half, while achieving the highest operating margin for the segment in three years. Between strength in Wizards, licensing performance, and improvements in the underlying profitability of Toys, I'm encouraged by the healthier position Hasbro is in today versus the start of the year.
The out-performance in our Wizards segment has proven that our leadership positions in trading cards, role playing, and digital licensing, continue to resonate. Magic delivered an all-around solid quarter across tabletop and digital for both tentpole and backlist content. Consumer Products Licensing was a bright spot for the second straight quarter, driven by My Little Pony trading cards, and a notable driver behind the CP operating margin expansion. Our supply chain team delivered once again, finding additional productivity wins, while our inventory has remained at multi-year lows, down 40% year-over-year. Our strategic decision to keep supply tight has resulted in a significant drop in closeout volume, which continues to be a gross margin benefit at the expense of CP revenue. This is a tradeoff we are consciously making as we continue prioritizing restoration of Toy profitability, while sharpening our innovation to drive premium offerings to our retail partners. Staying disciplined with our inventory across all our businesses is the right long-term decision for the company, but it also heightens the importance of accurate demand forecasting and supply chain agility. As we continue to upgrade our processes and systems, we are focused on strengthening that muscle to ensure we have adequate supply of the products our customers want.
As part of our transformation, we continue to look for opportunities to improve operational efficiency. As an example, we recently announced that within the CP Segment, our global brand and commercial teams will be coming together as one organization under the leadership of Tim Kilpin. We are also expanding our Design team's scope, further integrating them with our supply chain and product development teams in Asia. By bringing the design process closer to the source, we can bring products to market faster and allocate resources more efficiently across our portfolio. A continuous improvement mindset is a key component of our broader transformation, and we will remain agile in adopting processes and structures to best meet the needs of all of our stakeholders. Now moving to our Q3 financial results. Total Hasbro revenue was $1.3 billion, down 15% versus Q3 of last year. If you exclude the impact of the eOne divestiture, total revenue was down 9%. The Wizards segment declined 5% in the quarter as we lapped the launch of Baldur's Gate 3. Consumer Products revenue declined 10%, driven by exited brands, reduced close-outs, and softer than anticipated volume. And the Entertainment segment declined 86% due to the eOne divestiture. Absent this impact, Entertainment revenue decreased 17%, driven by deal timing. Adjusted operating profit was $329 million, for an adjusted operating margin of 25.7%, up 2.9 points versus last year. Benefits from favorable business mix, supply chain productivity, and reduced expenses, were partially offset by volume deleverage within Consumer Products.
Q3 adjusted net earnings were $244 million, with diluted earnings per share of $1.73, up $0.09 from the year ago period, driven by factors previously noted. We returned $98 million to shareholders through the dividend and ended the period with $1.2 billion of cash and short-term investments, including the proceeds from the May debt offering, which will be used to repay our November 2024 note. Year-to-date total Hasbro revenue was approximately $3 billion, down 18% versus the same period last year. If you exclude the impact of the eOne divestiture, total revenue was down 8%, largely driven by the same drivers of Q3.
Year-to-date adjusted operating profit was $726 million, for an adjusted operating margin of 23.9%, up approximately 10 points year-over-year. We continue to deliver margin improvement despite the volume deleverage across the toy business. Year-to-date adjusted net earnings were $498 million, with diluted earnings per share of $3.56. And year-to-date operating cash flow was $588 million, a $253 million improvement year-over-year, driven by the noted profitability improvements and working capital favorability.
Now let's look at Q3 results within our two major segments, starting with Wizards. Revenue declined 5% as growth in Magic: The Gathering, and contributions from Monopoly Go! were more than offset by the anticipated decline in revenue for Baldur's Gate 3. Magic grew 3% behind the releases of Bloomburrow and Duskmourn, along with stronger results from backlist and Secret Lair. Operating margin for Wizards finished at 44.9%, down about three points versus last year, driven entirely by the decline in licensed digital gaming.
Turning to Consumer Products. Overall, Q3 revenue declined 10%. Lower volume from exited brands and reduced closeouts offset growth in licensed consumer products and volume increases in select brands, like Transformers, Beyblade, and Furby. Continued softness in Nerf and action figures, particularly Star Wars, also contributed to the decline in the quarter. As we've mentioned, we are continuing to prioritize profitable revenue. While our closeout volume was down about 70% year-over-year and contributed to about a fourth of the revenue decline for CP, it drove about 1.5 points of gross margin benefit. Adjusted operating margin for Consumer Products was 15.1%, up 3.9 points compared to last year. Benefits from a more profitable licensing mix, supply chain productivity, fewer closeouts, and reduced expenses offset the impact from volume deleverage. On a year-to-date basis, despite the top-line declining by over $300 million versus last year, we have absorbed the impact of deleverage and kept CP operating profit essentially flat. This highlights the significant progress we have already made in our turnaround, and is a testament to our supply chain transformation and discipline on inventory and cost management.
Now turning to our guidance for 2024. We now expect total Wizards Revenue to be flat to down 1%, which is up from our prior guidance of down 1% to 3%. The improved outlook is driven by year-to-date outperformance, particularly within Magic. Our outlook for licensed digital gaming largely remains the same, with Monopoly Go! contributing roughly $105 million in revenue. We expect Baldur's Gate 3 to contribute about $35 million for the full year, with most of that revenue recorded through the first three quarters. As implied in our guidance, Q4 will see a more pronounced year-over-year decline, driven by timing of set releases for Magic. We continue to expect Wizards operating margin to be approximately 42%. This guidance also implies a step down in margin for Q4 entirely due to the planned revenue deleverage.
For Consumer Products, we now expect revenue will be down 12% to 14%, compared to our prior guidance range of down 7% to 11%. This change is partly a result of the Q3 shortfall, as well as a reduced forecast for closeout volume and action figures in the upcoming quarter. As implied in our guidance, we expect Q4 to see a continued moderation in the pace of decline as we aim to stabilize the CP business. We maintain our adjusted operating margin guidance of 4% to 6%. While this implies a quarterly step-down in Q4 margin, we should see significant year-over-year margin expansion as we lap last year's inventory clean-up efforts.
For Entertainment, adjusting for the impact of the eOne divestiture, we continue to expect revenue to be down approximately $15 million versus last year, and adjusted operating margin of roughly 60%. We remain on track towards our target of $750 million of gross cost savings through 2025 and continue to expect $200 million $250 million of net cost savings in 2024. Through the first nine months of the year, we have delivered $240 million of gross cost savings and $177 million of net savings.
Our total Hasbro adjusted EBITDA guidance remains unchanged in the range of $975 million to $1.025 billion. And given the improvement in our cash flow, we now expect 2024 ending cash to be above year-end 2023 levels. From a capital allocation standpoint, our priorities remain to, first, invest behind the core business. Second is to return cash to shareholders via the dividend, and third, to continue progressing towards our long-term leverage targets and pay down debt.
And with that, we can open the line for questions.
