Hasbro, Inc. (NASDAQ:HAS) Q3 2023 Earnings Call Transcript

Hasbro, Inc. (NASDAQ:HAS) Q3 2023 Earnings Call Transcript October 26, 2023

Hasbro, Inc. misses on earnings expectations. Reported EPS is $1.64 EPS, expectations were $1.69.

Operator: Greetings. Welcome to Hasbro’s Third Quarter 2023 Earnings Conference Call. This time, all participants will be in listen-only mode. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. At this time, I would like to turn the call over to Ms. Debbie Hancock, Senior Vice President, Investor Relations. Please go ahead.

Debbie Hancock: Thank you, and good morning, everyone. Joining me today are Chris Cocks, Hasbro’s Chief Executive Officer; and Gina Goetter, Hasbro’s Chief Financial Officer. Today, we will begin with Chris and Gina providing commentary on the company’s performance. And 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. Today’s guidance assumes we retain the non-core entertainment Film and TV business, notwithstanding our recently announced agreement with Lionsgate to sell this business.

That transaction is subject to customary closing conditions. 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 Chris Cocks. Chris?

Chris Cocks: Thanks, Debbie, and good morning. A year ago, we outlined a strategy to grow share in key categories with our core toy and game franchises. We called it fewer, bigger, better, drive savings and investment capacity through operational excellence, and build new growth for the company across games, direct-to-consumer and licensing. We also announced our intention to refocus on what has traditionally made us great, the business of play. This required making tough choices, including some significant divestitures. The goal of this plan, Blueprint 2.0 was a more focused, profitable and higher growth Hasbro built on a portfolio of some of the most valuable brands in the toy and games industry. We’ve made progress against this framework, including impressive growth in Wizards and Digital, continued momentum in direct-to-consumer and share gains in key categories.

But as our Q3 results show, particularly in our Consumer Products segment, more needs to be done. This morning, we will talk about progress on each pillar and add a special emphasis on a key part of our plan, returning consumer products to growth. Let’s start with refocusing on Play. Play is what makes our brands great and our company healthy. The sale of one film and TV, which continues to be on track for an end of year close, will simplify our operating model and refocus Hasbro on our core mission. Moving forward, our entertainment efforts will be franchise-led and asset-light, focused on driving toy and game sales with support from world-class content partners. We have over 30 projects in development from blockbuster movies like the upcoming Transformers 1 with Paramount to an animated Magic series with Netflix to digital-first IT development like our new YouTube series odd pause.

The margin and simplification benefits of refocusing on Play will grow over time as our teams build innovative next-generation toy games reinforced by cost-effective and partner-led content. Next, operational excellence, where we are making solid progress, but need to accelerate flow through. Our cost savings initiatives have already exceeded our 2023 savings targets of $150 million. This year, we anticipate total gross savings of approximately $200 million, dollars we are using to fund short-term inventory reductions and product promotions in a toy market facing headwinds and to invest long-term in new consumer insight capabilities and our growth initiatives. Importantly, our supply chain team is reinventing itself. In a time where inflation is up over 4%, our logistics and production costs are down mid-single digits.

Supply chain alone is driving approximately $100 million of the full year’s expected savings, and we see more opportunities ahead to enhance our gross margins while improving the quality and competitiveness of our toys and games. For instance, we’ll be releasing a new version of Jenga, it will be of comparable quality but lower cost and higher margin, all based on a fresh design for cost model. We are replicating this up and down our line. Our revamped supply chain is helping us get smarter on inventory management. Through Q3, Hasbro’s total inventory is down 27% year-over-year, with a 34% reduction in our CP business. We anticipate we’ll end the year with inventories 20% to 25% below 2022 levels. This should enable us to improve cash flow and lower our allowances in the quarters to come.

Given the headwinds facing our Consumer Products segment, the flow-through to the bottom line on these initiatives has not materialized as quickly as anticipated. So we plan to accelerate our efforts heading into 2024. We expect to achieve our 2025 goal of $250 million to $300 million in gross cost savings earlier than expected, and we’ll use these incremental savings and healthier inventory position to flow more cash directly to the bottom line, particularly in CP. Next, our growth initiatives, which are broadly on track. Wizards of the Coast in digital gaming is up 11% year-to-date. MAGIC: THE GATHERING is delighting tens of millions of fans with new concepts like Universes Beyond, which combine MAGIC with fan favorite IP like Lord of the Rings and Dr. Hugh [ph].

Universe is Beyond is a long-term multiproperty strategy that is already delivering collector excitement and new player growth. Last week, we announced a new collaboration with the beloved video game series Fallout and stop tree orders climbed number one in the toy game charts over the weekend on Amazon. And on Monday, we expanded our partnership with the Walt Disney Company with the announcement of a multiset Magic and Marvel collaboration. Expect more exciting news and previews in the quarters to come. D&D is expanding into a digitally driven multimedia franchise. Baldur’s Gate 3, the new video game from Larian Studios, based on D&D first edition is one of the best-selling games of 2023 and one of the highest rated video games of all time with metacritic reviews equivalent to mega franchises like Grand Theft Auto and the Legend of Zelda.

Our success in digital is in just contains the world of core gaming. MONOPOLY GO! from our partners at Scopely is the number one mobile game launch of 2023. Combined, Hasbro expects to generate in excess of $90 million in license revenue from these two properties this year with a multiyear long tail anticipated. These were long-term thoughtful partnerships. Each game was signed pre-2018, and we have several more of these kinds of projects in the pipeline including new games from our own internal studios, which we’ll be sharing more about in the coming months. Our direct-to-consumer business is up 57% year-to-date. Hasbro Pulse is a modest-sized platform today, but is scaling rapidly, giving us a new avenue to delight bands and learn from our consumers.

We’re excited to continue to grow our direct initiatives behind brands like Star Wars, Marvel, Transformers, MAGIC, GI Joe, D&D and Power Rangers, one of the best lineups of IP in the collectible space. And we continue to scale our industry-leading licensing business across an array of brands and categories from PEPPA PIG to Transformers, education to location-based entertainment. Next, growing share in key categories. In Q3, we grew share in four of five of our key categories: preschool, action, blasters and arts and crafts. Driving this, we have several brands that are going well. In gaming, Magic and D&D are having record years. MONOPOLY is back to growth, recently reclaiming the title of the top-selling board game brand. New innovation like TWISTER AIR is driving genre expansion and board games.

Transformers point of sale is up over 30% year-over-year, and PLAY-DOH is also showing solid gains. GI Joe continues to be a fan favorite and growth driver for our Pulse business, and FURBY is off to a strong start, one of the hottest new toy interruptions of the holiday. But we have challenges and other brands that weigh on our results, particularly in our Consumer Products business. Let’s now turn to how we return this key segment back to growth. We went into 2023, expecting a toy category down low single-digits for the year. We expected Hasbro performance to be broadly in line with market, minus our exited licenses and business. Year-to-date, our point of sale is roughly in line with category. However, market performance has been more challenging than planned.

Our internal POS system shows total point of sale down negative 8% through Q3, roughly equivalent to our view of the total toy market or negative 4% when accounting for exited licenses. We saw the category soften during Q3 to negative 10%, again, roughly equivalent to our view of market or negative 5% when accounting for discontinued licenses. Our share is up in our core categories. Our work on operational efficiency means our performance versus market is the best it’s been in several years, but we are facing headwinds. In any market scenario, we think the holiday will be late breaking and heavily deal reliant. So we’re taking the necessary steps to position our portfolio for continued share growth, exiting the year with momentum for our brands and ensuring our inventory health is back to historical norms.

Our guidance is based on a cautious outlook, but we are prepared to take advantage of any opportunities presented. We are investing in Q4 to drive continued share momentum, including maintaining our advertising and promotions budgets at competitive levels and working with retail partners to excite consumers with compelling deals. We are accelerating our cost savings initiatives to reduce overhead and see near-term flow-through in operating margins. And we continue to invest in product innovation behind a new leadership team in toy that will expand this into new play patterns, price points and market opportunities in the months ahead. Our long-term capital priorities guide our decision-making for these near-term decisions, invest to grow the business pay down our debt, maintain a healthy balance sheet and return cash to shareholders via our category-leading dividend.

Consistent with these priorities, we are investing to ensure our toy business exits the year with healthy inventories, continued share momentum and a clear runway for new product introductions in 2024. Wrapping up our results in Q3 show we are making progress across many of our key initiatives, but that we also have more to do, particularly in returning consumer products to growth. Hasbro strength is the diversity of our brands across both toy and game, our Wizards and Digital business continues to demonstrate impressive growth with smart bed coming to fruition this year and lots to be excited about in the years to come. We are likewise investing in toy to strengthen this business for the long-term. A healthy toy business is a healthy Hasbro.

I’d like to now turn over the call to Gina Goetter, our Chief Financial Officer, to share more about our detailed results and an update on guidance. Gina?

Gina Goetter: Thanks, Chris, and good morning, everyone. The Hasbro team continues to make progress in transforming our company, building a world-class gaming business, streamlining and improving the profitability of our consumer products and strengthening our balance sheet. Our third quarter results demonstrate the growth potential across our diversified gaming portfolio, offset by the tough macro environment across toys and entertainment. Despite market headwinds, we are growing share in the categories where we compete and are beginning to see the benefits of our cost savings initiatives played through the P&L. Total Hasbro revenue of $1.5 billion was down 10% versus last year. Wizards of the Coast in digital gaming revenue increased 40% behind strong contribution from Baldur’s Gate 3, MONOPOLY GO! and MAGIC: THE GATHERING.

Consumer products declined 18% due to macro category trends and planned business exits. Excluding these exits, the segment finished down 12%. The entertainment segment declined 42% due to the rider and actor strike impact. Adjusted operating profit of $343 million increased 27% versus last year. The increase was the result of favorable product mix, most notably high-margin digital game revenues as well as lower royalty and operating expenses. Adjusted earnings per share of $1.64 increased 15% versus last year, reflecting the higher operating profit, partially offset by incremental interest expense and an unfavorable tax rate impact. The adjusted results exclude $512 million of cumulative pre-tax impact associated with the loss on assets held for sale and to a lesser extent, one-time charges for the operational excellence program.

Looking at our brand performance. Our Franchise Brands grew 8% in the quarter and were flat year-to-date. These brands represent our biggest and most profitable brands and are just over 60% of our revenue. Within Franchise Brands, we delivered significant Q3 revenue growth across gaming, including DUNGEONS & DRAGONS, Hasbro Gaming and MAGIC. Partner Brands declined year-over-year after strong performance from Marvel and Star Wars in 2022. Partnerships like we have with the Walt Disney Company remain a key priority for us and we expect results to improve in the quarters ahead as we expand our partner brand lines and categories like our just announced collaboration with Marvel and MAGIC. Turning to operating margin. Third quarter adjusted operating margin of 22.8% was 6.7 margin points higher than last year.

The profit impact from the volume decline and consumer products was offset by favorable mix growth in licensed digital gaming and Magic. Supply chain cost savings outpaced inflation and delivered 1.9 points of margin growth. Operating expenses also contributed 1.4 points behind labor and lower royalty expense for exited licenses. Lower advertising spend contributed 1.7 margin points of improvement as we align spend to current demand. That said, we will continue to invest in advertising and marketing to drive sales this holiday season. Finally, lower entertainment deliveries resulted in a decline in program amortization expense that contributed 1.5 points margin. Our transformation activities are delivering real savings in our P&L. Having begun these programs last year, we have a strong start on resetting the cost base for the company, and the savings are helping us navigate a softer toy market.

Year-to-date, we have accumulated $62 million of gross cost savings within supply chain and an additional $92 million of gross savings within operating expense. The combined $154 million of gross cost savings this year are more than offsetting supply chain cost inflation and allowing us to reinvest in the business and partially defray the higher cost to move through inventory. Cumulatively, since we began the savings program last year, we have reduced our cost base and delivered gross savings of $174 million. This progress puts us on track to meet our long-term gross savings goals earlier than expected, and we will be doubling down as we continue to focus on streamlining our operations and improving the profitability within toys. We continue to make progress in lowering inventory levels.

We’ve reduced total owned inventory 27% versus prior year, primarily driven by a 34% reduction in the Consumer Products segment inventory. From a retail inventory perspective, their inventory was down 18% year-over-year, but up sequentially versus last quarter as they set through the holiday season. As we look to the balance of the year, we remain focused on ensuring we have a clean start to 2024, both in owned and retail inventory levels and we’ll continue remaining agile in taking actions to stay in sync with broader category momentum. Looking more closely at segment performance within the quarter. Wizard segment revenue increased 40% versus last year. 23 points the growth was led by licensed digital gaming revenue from BG3 and to a lesser extent, MONOPOLY GO! The revenue for Baldur’s Gate is realized along with unit sales whereas in the near term, MONOPOLY GO! has a straight-line revenue recognition based on the total multiyear contract minimum guarantee.

Cable top revenue, which includes both MAGIC and D&D added 14 points of growth, driven by timing releases, including an incremental magic release in this quarter versus last year. The growth in high-margin license digital gaming drove a 99% increase in total segment operating profit versus last year and expanded operating profit margin by 14.3 percentage points. Turning to the Consumer Products segments. The overall toy category was down 8% in the quarter, according to Sakana versus 6% through the first part of the year. Despite the category headwinds, we gained share in four of our five key categories, including action figures, arts and crafts, preschool and blasters. Overall, Consumer Products segment rev was down 18% versus last year. Looking at the key drivers for the quarter, 6 points of the revenue decline was driven by planned license exits.

Another 12 points of decline was driven by toy and game volume given the broad category trends. 2 points of decline came from pricing and mix, driven by additional closeout costs as we’ve worked through higher inventory levels. FX had a favorable 2-point impact in the segment. The segment adjusted operating margin declined 1.4 margin points, primarily driven by unfavorable mix and higher inventory obsolescence and closeout costs. Turning to the Entertainment segment. In the quarter, revenue declined 42%, primarily as a result of the writers and actors strikes. Partially offsetting this was 53% revenue growth in Family Brands, driven by content sales primarily for PEPPA PIG and Power Rangers. Adjusted operating profit increased 37% and margin expanded 3.8 margin points to 6.6% due to the exited businesses, lower program amortization and operating expenses.

The E1 film and TV assets to be sold has delivered approximately $400 million of revenue year-to-date, which is down approximately 20% versus last year. Full year earnings are expected to be breakeven to a modest loss. We’ve received the expected regulatory approvals for the sale of E1 film and TV and remain on track to close the deal by the end of the year. Wrapping up with Hasbro Inc., we delivered $335 million of operating cash year-to-date, which is $73 million ahead of last year, driven by working capital improvements led by the reduction in inventory combined with lower production costs within the Entertainment segment. Our cash and cash equivalents of $186 million does not include approximately $70 million of cash recorded in assets held for sale, the substantial majority of which we expect to stay with Hasbro upon the close of the transaction.

Including this, it brings our cash on hand to approximately $250 million, up from $217 million in Q2 2023. Through Q3, we repaid $107 million of long-term debt and spent $160 million on capital expenditures led by investments in Wizards of the Coast for future digital gaming releases. And we’ve returned $291 million of capital to our shareholders via dividends. In the quarter, we booked a 23.2% adjusted underlying tax rate, which compares to 19.9% last year. The higher rate continues to be the result of our film and TV losses and a shift in the geographical mix of income. Turning to our 2023 guidance. The impact of the broader toy category declines has had a change in our consumer products and total Hasbro outlook. Based on this, we now expect total Hasbro Inc.

revenue to be down 13% to 15%. As we look at the three primary segments, this guidance now assumes that the consumer products business will be down mid- to high teens. Based on the category trend in Q3, we are planning for modest improvement in Q4 as we begin to lap the market declines from last year. We believe that retailers will remain cautious with their inventory positions which will have an impact on typical holiday order patterns. We continue to expect that Wizards of the Coast will deliver high single-digit revenue growth behind the strong performance within digital games and solid performance on MAGIC. The majority of the revenue from BG3 was realized in Q3. We expect a modest positive contribution to revenue from the game in Q4, as it will continue to be recorded in line with unit sales.

MONOPOLY GO! Q4 revenue will be consistent with Q3, given the accounting methodology. As Chris said, in total, we expect the aggregate contribution from these two licensed games to be more than $90 million for the full year. And finally, for entertainment, we continue to expect revenue declines of 25% to 30%, which incorporates the impact of the writers and actors strikes section deliveries in the back half of the year. Minus these assets held for sale, we expect total company revenue declines of 8% to 11% for the year. Adjusted operating margin is now expected to be between 13% and 13.5%. This guidance reflects the impact of the CP revenue call down and includes additional one-time cost to clear aged inventory on Hasbro’s balance sheet, continued share momentum and reset the foundation heading into next year.

This margin guidance includes a step-up in the in-year gross cost savings from our transformation efforts to $200 million. And as we look to 2024, we expect to continue accelerating our savings efforts to improve the profitability across toys and games. Given the revenue call down, we now expect 2023 adjusted EBITDA of $900 million to $950 million. And based on this current forecast, we expect to generate $500 million to $600 million of operating cash flow. From a capital allocation standpoint, our priorities are to invest behind the business, pay down debt and return excess cash to shareholders via dividends. We remain committed to our dividend strategy and advancing our progress towards achieving an overall two and 2.5 times long-term leverage target.

As I said earlier, we are making good progress on our transformation and the work we’ve done to date has us positioned to build on our gaming leadership and strengthen our toy business. We believe the toy market will stabilize and return to growth. Our near-term focus is on executing the holiday season, resetting the cost base, moving complexity and sharpening the innovation pipeline for 2024 and 2025. Chris and I will now take your questions.

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Q&A Session

Operator: Thank you. At this time we will be conducting a question-and-answer session [Operator Instructions] Our first question comes from the line of Eric Handler from ROTH MKM. Please proceed with your question.

Eric Handler: Good morning and thanks for the question. With regards to Wizards. So third quarter exceeded expectations, at least relative to consensus, you kept the full year guidance for Wizards intact, which would mean people have to lower their fourth quarter numbers, but everything is to be going well there. Is this just a matter of maybe Baldur’s Gate 3 being more front-end loaded than expected, or is there something else that you’re being a little bit more conservative on?

Chris Cocks: Eric. Good morning. Yes, Q3 met our expectations. We had the great fortune of being able to play Baldur’s Gate for a while now and had a pretty good high expectations about its performance. I think relative to how the analyst community was modeling it, I think you all put it a little more back loaded and it’s going to be a little bit more front loaded than I think the model has indicated. That said, we see a long tail associated with Baldur’s Gate and likewise a very lucrative and long tail for MONOPOLY GO! as well. So it will be a nice annuity for us.

Gina Goetter: This is Gina. The only thing I’d add as color is when — in our prepared remarks, we talked a bit about the revenue recognition. So for BG3, it — that revenue is getting recognized as those units are being delivered. So as Chris said, heavy in Q3, just given what kind of the overall launch of the game and then as we move through Q4 and into next year, there will be a tail.

Eric Handler: Got it. And then just as a follow-up, with MONOPOLY GO! , it’s the number one revenue-generating mobile game in the world right now. I would assume it’s doing well ahead of what expectations are. So what needs to happen for minimums to be exceeded?

Chris Cocks: We can’t go into a huge amount of detail on the deal. However, the deal is structured such that Scopely is incentivized to spend on marketing for it. So typically, for the first year or two of a major mobile release, you spend a lot on marketing, you scale the game. The game gets to a steady state, and then the marketing as a percentage of total sales goes down to something more sustainable. And that’s basically what’s happening here. So effectively think about our royalties as the net of store participation and a fairly high percentage of marketing. So for the first couple of years, you’re basically dealing with minimum guarantees. And as the game starts to get to maturity and those marketing and the marketing kind of goes down to a more normalized level, your participation as a licensor goes up. And if the game performs like we all hope it’s going to perform and that it’s performing now, it could be a dramatic improvement as well.

Eric Handler: Thank you very much.

Operator: Our next question is from the line of Jaime Katz with Morningstar. Please proceed with your question.

Jaime Katz: Hey, good morning. Can you guys talk a little bit about the products that you are keeping and not pruning in the consumer products category that maybe didn’t perform up to expectations? And then maybe give us a road map of what you expect for turnaround time in that CP category as we work through some of these changes? Thanks.

Chris Cocks: Thanks. Good morning, Jaime. Thanks for the question. Well, our franchise brands are pretty core to the company, and they kind of are tied to each of our key categories. So in action figures, you have transformers, secondarily, Power Rangers, in outdoor and blasters, you certainly have NERF, in creativity in arts and crafts, you have PLAY-DOH. In preschool, we have PEPPA PIG and then in games, we have a pretty substantial portfolio across MONOPOLY, CLU, MAGIC: THE GATHERING and D&D. And that’s in addition to all the wonderful partner brands we have like our partnership with Walt Disney across Marvel and Star Wars and then, of course, with Cartomi [ph] on BEYBLADE, which is another important partner product for us as well.

In terms of what’s performing well, I think we covered that in the comments. We have several winners that are helping us drive category share. Transformers, I think is having a fantastic year. And I think it’s really a case study on how to do movie and product integration really, really well. That brand is up 30% year-over-year. And during the movie window, was up over 90%. PLAY-DOH continues to drive great kind of price value and product innovation and is driving share for us in creativity. I think our games portfolio is second to none and is really broad-based across genres and player demographics, I think where we need to see more improvement, frankly, is in NERF. We’re up in share in the blaster category. But we need to do a better job bringing innovation and price value into that category.

And then likewise, I think we say outdoor and blasters for a reason, we need to expand NERF beyond just thinking about a dart. We need to think about more ways that we can engage kids and families in active play across more scenarios, and I think you’ll be seeing more from that for us. And then our partner brands, I think we’re having a little bit of a retrenchment this year after a record year for Marvel last year and a really strong year for Star Wars. I think we have a lot of plans with Disney to expand categories like our just announced partnership on Marvel and MAGIC. And then likewise, we have a new version of BEYBLADE that’s coming out next year that we’re pretty bullish on, particularly based on the initial sales that they’ve seen in the launch in Japan.

Jaime Katz: And as far as sort of remedying that category and returning to growth, do you see that as a first half 2024 phenomenon, second half 2024 phenomenon, or is there some more work that really needs to be addressed before we see that?

Chris Cocks: Well, Tim Kilpin came on board about five or six months ago to lead toy for us. He’s a 40-year toy veteran, who’s helped to champion and found multiple billion-dollar categories and led some of the biggest franchises in toys. I think typically, a new leader needs 18 to 24 months to make a big impact on the product line. I think they can do more tactically in terms of what we do with our partners and how we go about going to market. So I think you’ll see the impact of Tim and his new leadership team kind of slow out through 2024 and expand as we go into 2025. And then I think the market is another factor inside of that as well. Certainly, we’ve been seeing headwinds in the toy category year-to-date. And we’re expecting a relatively unpredictable market going into Q4.

But consider us long-term bulls on toy, we see this market going back to kind of the historical growth rate of 2% to 3%. We see a very high demand for play. And we think Hasbro is well positioned as the most diversified toy and game company in the industry. And so regardless of which way the market goes, I think that diversification will play well for us.

Gina Goetter: What I build on the time line there as you think about the steps in a turnaround, what we’re doing this quarter in the call for the year is we’re really cleaning up and resetting the foundation for toy. As we head into 2024, there’s going to be a kind to be kind of a very focused view on profitability and how do we quickly reset the profitability of that business, while we’re going through and kind of reducing complexity, as Chris said, kind of clearing the decks and getting ready for new and sharper innovation as we move to the back end of next year and into 2025. So taking the market out of it and the unpredictability of the market, in our categories where we compete, we are going to do that. We’re going to remain aggressive.

We’re going to compete, and we’re going to work to grow share. That’s how you should think about just the cadence is really resets. We’re going to get after profitability in 2024 and get ready for a sharper innovation pipeline and 2025.

Operator: Next question is coming from the line of Drew Crum with Stifel. Please proceed with your questions.

Drew Crum: Thanks. Hey, guys. Good morning. Chris. Can you remind us what the content road map looks like for MAGIC in 4Q? And how you grow the franchise in 2024 as you lap appears to be some tougher comps? And then I have a follow-up.