Gina Goetter
Executive Vice President & Chief Financial Officer at Hasbro
Thanks, Chris, and good morning, everyone. In Q2, we made further progress building a healthier foundation for Hasbro as we delivered better profits, moderated the pace of our revenue decline and continue to up-level our internal processes and systems. I'm pleased with our team's execution in the first half as we continue to drive operational rigor across the company.Similar to Q1, we once again saw outperformance in digital licensing led by a material step-up in contribution from MONOPOLY GO! as the game's momentum allowed us to exceed the minimum guarantee sooner than expected. This, along with healthy growth in consumer product licensing, growth in MAGIC and another strong quarter from our supply chain team, drove significant operating margin expansion.And while we still have more than half a year left from a revenue contribution standpoint, we're doing a lot of the right things and are confident from where we sit today to take up our full year guidance.
Our turnaround in toys is well underway. Q2 declined similar to Q1 as we had anticipated. And while Q3 and the back-to-school selling season will be an important gauge, we're entering the second half with clean retail inventory and are seeing encouraging demand signals for our planned innovation.
And by putting the right underlying demand and supply planning processes and systems in place, we've been able to bring aged inventory down to historic lows, while ensuring we have suitable inventory levels to support sell-through for the holidays.
We've also improved our end-to-end planning capabilities to better align where we source inventory with customer demand. In the first half of this year, we've already had some major wins from our supply chain team. And with that, I'd like to acknowledge Stephanie Bill, who has been instrumental to this transformation and congratulate her on becoming our new Supply Chain Officer.
Integrated business planning plays an important role as we transform Hasbro into a more profitable and operationally agile company. After the first couple of quarters of implementation, we're seeing greater information flow and faster decision-making, which is starting to show up in our results.And just like we're focused on digitization across play patterns, we're also enhancing our digital operations to ensure we're running as efficiently as possible and is why I'm excited to welcome Dan Shull as our new Chief Digital Information Officer. Dan brings a wealth of Fortune 500 experience and will steer our digital and IT strategy using cutting-edge technology to enhance collaboration, accelerate data analytics and modernize our infrastructure.
Now moving on to Q2 financial results. Total Hasbro net revenue was $995 million, down 18% versus Q2 of last year. If you exclude the impact of the eOne divestiture, total revenue was down 6%.Growth of 20% in our Wizards of the Coast segment, led by MAGIC and licensed digital games, was more than offset by the 20% decline in consumer products, driven by lower closeout volume, reduced entertainment slate exited brands.
The Entertainment segment declined 90% due to the sale of the eOne film and TV business. Absent this impact, Entertainment revenue decreased 30% driven by timing.Adjusted operating profit was $249 million, for an adjusted operating margin of 25%, up nearly 14 points year-on-year. This substantial improvement was driven by favorable business mix, lower royalty expense, supply chain productivity savings, the eOne divestiture and about a 2.5 point benefit from lapping the D&D movie impairment.
Q2 adjusted net earnings were $170 million with diluted earnings per share of $1.22, up from $0.49 in the year-ago period, driven by the items noted as well as reduced net interest expense and favorable timing within tax.We returned $97 million to shareholders through the dividend and ended the period with $1.1 of cash and short-term investments following May's completion of a $500 million debt offering of notes. The proceeds from the issuance are expected to be used to repay our November 2024 bond maturity.
Year-to-date, total Hasbro revenue was $1.75 billion, down 21% versus the same period last year. If you exclude the impact of the eOne divestiture, total revenue was down 7% versus a year ago.Growth of 15% in our Wizards to the Coast segment was more than offset by the 20% decline in consumer products and the 87% decline in the Entertainment segment due to the sale of the eOne film and TV business. Absent film and TV, entertainment segment is relatively flat.
Year-to-date adjusted operating profit was $397 million for an adjusted operating margin of 22.7%, up over 14 points year-over-year, mostly driven by cost savings from our operational excellence program as well as favorable business mix and the eOne divestiture. In aggregate, we were able to deliver significant margin improvement despite the ongoing volume deleverage across our toy business.Year-to-date, adjusted net earnings were $255 million, with diluted earnings per share of $1.83, driven by the improvement in operating profit as well as favorability from a stock compensation adjustment and net interest expense reduction.
Operating cash flow was $365 million year-to-date, a $246 million improvement year-over-year, driven by the profitability improvement, timing of digital licensing collections, as well as the shift in timing of a transition tax payment to Q3.Now let's look at our two major segments in more detail, starting with Wizards of the Coast in digital gaming. Q2 revenue grew 20% year-over-year, largely behind strength in digital licensing led by MONOPOLY GO! and to a lesser extent, continued contribution from Baldur's Gate 3.
Last quarter, we discussed there could be the ability to book above the minimum guarantees sooner than originally planned. Due to the game's momentum, we were able to earn approximately $35 million above the minimum guarantee of $5 million in the quarter.Segment revenue also benefited from growth in MAGIC Tabletop behind the successful release of Modern Horizons three as well as early shipments for next week's tentpole set Bloomburrow both of which more than offset last year's Q2 contribution from Lord of the Rings.
Digital gaming revenue also saw a roughly $20 million noncash benefit from a publishing contract with an international partner. Operating margin for Wizards finished at 54.7%, up nearly 17 points versus last year, mainly driven by a richer digital mix, supply chain productivity gains, and lower royalty expenses as we lapped last year's MAGIC Lord of the Ring set.
Turning to Consumer Products. Q2 revenue declined 20% year-over-year, driven by reduced closeout volume exited brands and lapping a busier entertainment slate, including last year's Transformers: Rise of the Beasts.Consumer product licensing was a bright spot driven by our partnership with My Little Pony and Kayou Trading Cards. FURBY and the continued momentum in FURBLETS, G.I. Joe and Play-Doh also performed well within toys, while NERF continued to see softness ahead of the back half innovation launch.
Adjusted operating margin for Consumer Products came in roughly breakeven, down about 3.5 points compared to last year. Cost savings and the benefit from lower unprofitable closeouts were offset by product mix and volume deleverage.As anticipated, there was also approximately $10 million of operating income attributed to the segment as we reallocated cost savings captured within the corporate segment back to CP.On a year-to-date basis, despite a revenue decline of 20%, segment operating margin declined by only three-points year-on-year as we were able to significantly mitigate the deleverage impact by reducing our cost across supply chain and within operating expenses.
Now turning to our updated guidance for 2024. Given the strong performance in first half, we are raising our guidance for the full year, and we now expect total Wizards revenue to be down 1% to 3%, and up from our prior guidance of down 3% to 5%, driven by the first half outperformance in digital licensing.
For the full year, MONOPOLY GO! will generate roughly $105 million in revenue. This outlook assumes a modest monthly gross revenue decay rate for the game and consistent marketing support. For Baldur's Gate 3, we now anticipate roughly $30 million for the full year, with the bulk of that revenue having been recorded in the first half.
With all of these puts and takes, digital licensing will be down in Q3 as we lap the launch of Baldur's Gate 3, and we anticipate Q4 to be relatively flat versus last year.For MAGIC, we expect some contraction in the second half due the timing of set releases. While Modern Horizons three successfully lapped the initial release of Lord of the Rings, it will not have a comparison launch for last year's holiday bundle.
We now forecast Wizard operating margin to be approximately 42%, up from our prior guidance of 38% to 40%, driven by the increased mix of the licensing revenue. For Consumer Products, keeping in mind that a big part of year is ahead of us, we expect revenue will be down 7% to 11%, up slightly from our prior guidance range of down 7% to 12%.This narrowing is driven by encouraging early demand signals and retailer support for our back half product innovation, specifically Beyblade, Play-Doh and TRANSFORMERS ahead of the major animated film Transformers One in September. We are forecasting a low-single-digit decline in Q3 before flipping to growth in Q4 with the impact from our divested brands continuing to be a headwind.
We maintain our adjusted operating margin guidance of 4% to 6% for consumer products. Margins in Q3 will be relatively flat versus last year followed by significant expansion in Q4 as we lap the impact of the inventory cleanup.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 by 2025 and continue to expect $200 million to $250 million of net cost savings in 2024. Through the first half of the year, we have delivered $150 million of gross cost savings and $90 million of net savings.
With the increased revenue outlook and greater profitability in Wizards, we now expect total Hasbro adjusted EBITDA in the range of $975 million to $1.025 billion, up from our prior year guidance of $925 million to $1 billion.Given the improvement in our cash flow, we now expect 2024 ending cash to be at roughly similar levels versus 2023. And 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.
