Hasbro, Inc.: Form 10-Q for the period ended Sep 27, 2026

(Dollar and share amounts in tables presented in millions, unless otherwise noted)

The following discussion and analysis should be read together with the accompanying unaudited consolidated financial statements and the notes thereto included in this Quarterly Report and the audited consolidated financial statements and the notes thereto in the Company's 2025 Form 10-K.

Overview

Hasbro, Inc. (“Hasbro”) is a leading game, intellectual property ("IP"), and toy company whose mission is to create joy and community through the magic of play. With over 100 years of expertise, we deliver play experiences to kids, families, and fans around the world, through physical and digital games, toys, licensed consumer products, location-based entertainment, film, TV and more.

Through our franchise-first approach, we unlock value from both new and legacy IP, including Magic: The Gathering, Monopoly, Hasbro Games, Play-Doh, Transformers, Dungeons & Dragons, Nerf, and Peppa Pig, as well as premier partner brands. Powered by our portfolio of iconic brands and a diversified network of partners and subsidiary studios, we bring fans together wherever they are, from tabletop to screen.

For more than a decade, Hasbro has been consistently recognized for its corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media, a 2026 JUST Capital Industry Leader, one of the 50 Most Community-Minded Companies in the U.S. by the Civic 50, and a Brand that Matters by Fast Company.

Recent Developments

In fiscal year 2025, we launched our refreshed strategy "Playing to Win" to refocus the Company on inspiring a lifetime of play across more categories, more partners, and more ways to engage. Through play fueled brand engagement and partner scaled co-investment, we plan to expand our consumer reach as a games, IP, and toy company.

During the first nine months of 2026, we've made exciting new steps on executing the Playing to Win strategy, including:

• The introduction of Blooms by Play-Doh, the first-ever Play-Doh line designed specifically for adults.
• The release of Marvel Super Heroes, along with all past and future Marvel sets, within Magic: The Gathering Arena, allowing players to jump into the Marvel Universe through Hasbro's online adaptation of the iconic Magic: The Gathering card game.
• The announcement of a multi-year licensing partnership starting in 2027 with Warner Bros. Discovery Global Consumer Products, making Hasbro the global primary toy licensee for the world of Harry Potter and the upcoming HBO Original Harry Potter series.
• The announcement of a licensing collaboration with Amazon MGM Studios to produce action figures, toys and roleplay for the studio’s upcoming live-action Voltron movie and with Legendary Entertainment tied to the live-action Street Fighter movie.
• The launch of Sixth Wall Studio, a new AI studio dedicated to bringing iconic characters into the AI era through new channels, such as behavioral licensing.

We believe these strategic moves position us to accelerate innovation and drive long-term growth in line with our Playing to Win strategy which emphasizes play-driven engagement and collaboration with partners.

Tariffs

Significant changes in trade policy announced by the U.S. government could adversely impact our forward-looking financial results. The Company monitors the impact of tariffs to its business operations on an ongoing basis and may need to implement actions such as price adjustments or making changes in our supply chain sourcing strategies in order to mitigate the impact of tariffs in future periods. The impacts of tariffs may lead to reduced economic activity, increased costs, reduced demand and changes in purchasing behaviors for some or all of our products, actual or potential impairments, write-downs or unrealizability of some of our existing assets, or other economic outcomes that could have a material adverse impact on our sales volumes, prices, and our financial results.

During the three and nine months ended September 27, 2026, Hasbro recorded a total of $54.5 million of tariff recoveries as a reduction to Cost of sales within the Consolidated Statements of Operations. Of this amount, $41.5 million was received as cash, with the remainder recorded as a receivable within Prepaid expenses and other current assets on the Consolidated Balance Sheets. The Company expects to receive the remaining $13.0 million of Phase 2 and Phase 3 IEEPA tariff refunds within the next six months. These amounts could further impact our results in 2026 and, to a lesser extent, 2027.

Unauthorized Network Access

In late March 2026, the Company identified unauthorized access to our network. Upon discovery, the Company promptly activated its security incident response protocols, implemented containment measures, including proactively taking certain systems offline, and launched an investigation with the assistance of third-party cybersecurity professionals. Simultaneously, the Company implemented its business continuity plans, including manual ordering and processing procedures at a reduced rate of operations in order to continue servicing its customers.

The impacts of these system disruptions included order processing, shipping, and invoicing delays, resulting in a negative impact on net sales and operating profit during the second quarter, particularly within the Consumer Products segment. For the entirety of the third quarter, the Company was able to operate under pre-incident order processing, shipping, and invoicing practices.

The Company incurred incremental expenses of approximately $1.0 million and $11.8 million, respectively, during the three and nine months ended September 27, 2026 as a result of the unauthorized access, including for third-party IT recovery and forensic experts, professional services and other costs incurred to investigate and remediate the attack. The Company expects to incur a less significant amount of additional costs related to the incident in future periods. The Company did not recognize any insurance proceeds during the three and nine months ended September 27, 2026 related to the unauthorized network access. The timing of recognizing insurance recoveries, if any, may differ from the timing of recognizing the associated expenses.

Summary of Results

The Company's net revenues were $1,595.3 million and $3,735.1 million for the three and nine months ended September 27, 2026, respectively, as compared to $1,387.5 million and $3,255.4 million for the three and nine months ended September 28, 2025, respectively. The increase in net revenues for both periods was driven primarily by growth in our Wizards of the Coast and Digital Gaming segment, specifically within Tabletop Gaming attributable to Magic: The Gathering.

The Company recorded an operating profit of $517.3 million and $1,040.1 million for the three and nine months ended September 27, 2026, respectively, as compared to an operating profit of $341.1 million and an operating loss of $286.4 million for the three and nine months ended September 28, 2025, respectively. The increase in operating profit for both periods was the result of revenue growth discussed above, as well as the recording of $54.5 million of IEEPA tariff refunds during the third quarter of 2026. The increase in Operating profit for the nine months ended September 27, 2026 was also impacted by a one-time $1,021.9 million non-cash goodwill impairment recorded in the Consumer Products segment in the second quarter of 2025 which did not recur in 2026, partially offset by a one-time $56.4 million non-cash impairment charge in the second quarter of 2026 related to the Company's decision to refocus the Digital Games portfolio.

See below for further discussion on the consolidated and segment results of operations for the three and nine months ended September 27, 2026 and September 28, 2025.

RESULTS OF OPERATIONS

The following table presents the consolidated results of operations for the three months ended September 27, 2026 and September 28, 2025:

(1) Prior period amounts have been reclassified to present licensing revenue separately from net sales in the Consolidated Statements of Operations. The reclassification had no effect on total net revenues, operating profit (loss), net earnings (loss) or shareholders’ equity. Refer to Note 1, Basis of Presentation, for additional information.

NET REVENUES

Net sales – Net sales for the third quarter of 2026 increased 17.5% to $1,451.0 million from $1,234.9 million for the third quarter of 2025 primarily driven by growth in the Wizards of the Coast and Digital Gaming segment, which experienced a $156.7 million increase in net sales related to Magic: The Gathering. This growth within the Wizards of the Coast and Digital Gaming segment was supplemented by an increase in net sales within the Consumer Products segment, driven by an increase in toy and game sales for Marvel of $46.8 million as a result of a strong content slate, along with the introduction of new toys and games for the recently acquired KPop Demon Hunters license, which drove an increase of $13.3 million.

Licensing revenue – Licensing revenue for the third quarter of 2026 was $144.3 million, or 9.0% of total net revenues, compared to $152.6 million, or 11.0% of total net revenues, for the third quarter of 2025. The change was primarily driven by lower consumer products licensing revenue, particularly related to Peppa Pig and Nerf, partially offset by growth in Transformers. Licensing revenue consists of royalties earned from the out-licensing of our trademarks, characters and other brand and intellectual property rights.

As part of our Playing to Win strategy, we have aligned our brand portfolios as follows:

• Grow Brands: Brands representing the highest margin, highest growth opportunities in categories where we see significant share and/or underlying market growth.
• Optimize Brands: Brands representing opportunities to maintain or grow share while improving operating profit returns.
• Reinvent Brands: Brands representing opportunities to reinvent or restructure to drive innovation and improved operating profit returns.

The following table presents net revenues by brand portfolio category:

(1) During the first quarter of 2026, the classification of brands within these categories was reviewed and certain brands were reclassified based on changes in growth, profitability or other characteristics. As such, the respective historical revenues associated within these brands have been reclassified into the brands' new brand category.

GROW BRANDS: Net revenues in the Grow Brands portfolio increased $222.9 million, or 23.0%, in the third quarter of 2026 compared to the third quarter of 2025. The net revenue increase primarily reflects higher net revenues from Magic: The Gathering, which grew by $156.7 million, or 34.1%, driven by strong performance of the Universes Beyond The Hobbit set released during the quarter, as well as Reality Fracture. Growth in this category was also impacted by increased demand in toys and games associated with Marvel of $46.8 million, driven by a strong content slate in 2026 with no comparable releases in the prior year.

OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio increased $10.8 million, or 4.2%, in the third quarter of 2026 compared to the third quarter of 2025, driven by higher net revenues from Transformers and Duel Masters, partially offset with a decrease in net revenues from G.I. Joe.

REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio decreased $25.9 million, or 15.8%, in the third quarter of 2026 compared to the third quarter of 2025. The net revenue decrease is primarily driven by lower product sales for Nerf, Furby, and Nanomals, partially offset by higher sales for Beyblade and other Vault brands.

OPERATING COSTS AND EXPENSES

Cost of sales – Cost of sales for the third quarter of 2026 was $384.8 million, or 24.1% of net revenues, compared to $414.3 million, or 29.9% of net revenues, for the third quarter of 2025. Cost of sales decreased overall and as a percentage of net revenues as a result of a decrease of approximately $64.6 million of cost related to the impacts of tariffs, inclusive of both the recording of $54.5 million of IEEPA tariff refunds during the quarter, as well as a decrease in recurring tariff expense of approximately $10.1 million when compared to the prior year. The Cost of sales decrease was partially offset by an increase in Cost of sales attributable to the increase in net revenues period over period.

Program cost amortization – Program cost amortization decreased to $5.4 million, or 0.3% of net revenues, for the third quarter of 2026 from $7.4 million, or 0.5% of net revenues, for the third quarter of 2025. Program costs are capitalized as incurred and amortized primarily using the individual-film-forecast method which matches costs to the related recognized revenue and is based upon the current slate of entertainment projects.

Royalties – Royalties for the third quarter of 2026 increased to $142.1 million, or 8.9% of net revenues, compared to $114.3 million, or 8.2% of net revenues, for the third quarter of 2025. The increase in Royalties during the third quarter of 2026 was directly driven by an increase in sales relating to Magic: The Gathering Universes Beyond sets, such as The Hobbit, as well as increased toy and game sales on licensed brands such as Marvel.

Product development – Product development expense for the third quarter of 2026 was $103.4 million, or 6.5% of net revenues, compared to $97.6 million, or 7.0% of net revenues, for the third quarter of 2025. The increase in Product development expense during the third quarter of 2026 was primarily due to the higher incremental investment in the development of Grow Brands under the Company's Playing to Win strategy.

Advertising – Advertising expense for the third quarter of 2026 was $96.2 million, or 6.0% of net revenues, compared to $108.3 million, or 7.8% of net revenues, for the third quarter of 2025. The Advertising expense decrease during the third quarter of 2026 was driven by declines in both the Wizards of the Coast and Digital Gaming and Consumer Products segments based on the timing of advertising campaigns.

Amortization of intangible assets – Amortization of intangible assets decreased to $14.6 million, or 0.9% of net revenues, for the third quarter of 2026, compared to $17.2 million, or 1.2% of net revenues, for the third quarter of 2025. The amortization expense was driven by the straight-line amortization of the Company's definite-lived intangible assets.

Selling, distribution and administration – Selling, distribution and administration expenses increased to $331.5 million, or 20.8% of net revenues for the third quarter of 2026, from $287.3 million, or 20.7% of net revenues, for the third quarter of 2025. The increase in Selling, distribution and administration expenses during the third quarter of 2026 is primarily the result of increases in personnel related costs, including increased severance expense corresponding to our Operational Excellence program, partially offset by a nonrecurring $4.7 million gain on the sale of a facility.

Operating profit – Operating profit for the third quarter of 2026 was $517.3 million, or 32.4% of net revenues, compared to Operating profit of $341.1 million, or 24.6% of net revenues, for the third quarter of 2025 driven by the factors discussed above.

NON-OPERATING EXPENSE

Interest expense – Interest expense was $42.7 million for the third quarter of 2026, compared to $40.8 million in the third quarter of 2025. Higher Interest expense in 2026 is primarily the result of an increase in outstanding debt driven by issuance of the 2031 Notes, partially offset by debt repurchases of the Company's outstanding 2027, 2040, and 2044 Notes.

Interest income – Interest income was $14.6 million for the third quarter of 2026, compared to $6.3 million in the third quarter of 2025. Higher Interest income in 2026 primarily reflects the Company's cash balance and investments in treasury securities, which were substantially higher in 2026 as compared to 2025, as well as $1.9 million of Interest income earned on previously paid IEEPA tariffs.

Other expense, net – Other expense, net was $0.1 million for the third quarter of 2026, compared to $1.4 million in the third quarter of 2025. The change in Other expense, net during 2026 was driven primarily by variations in the movement of foreign currencies in the third quarter of 2026 when compared to the third quarter of 2025.

INCOME TAXES

Income tax expense totaled $94.1 million on a pre-tax income of $489.1 million in the third quarter of 2026 compared to an income tax expense of $71.3 million on pre-tax income of $305.2 million in the third quarter of 2025. Both periods were impacted by discrete tax events.

During the third quarter of 2026, the Company recorded a net discrete tax benefit of $16.8 million primarily associated with the release of uncertain tax positions resulting from a settlement of an IRS audit. During the third quarter of 2025, the Company recorded a net discrete tax benefit of $5.7 million primarily associated with a benefit related to the impairment of goodwill recorded in the second quarter of 2025.

Absent discrete items, the tax rates for the third quarter of 2026 and 2025 were 22.7% and 25.2%, respectively. The decrease in the base rate for the third quarter of 2026 relative to the third quarter of 2025 is primarily due to the mix of jurisdictions where the Company earned its profits and an increased Foreign-Derived Deduction-Eligible Income ("FDDEI") benefit.

SEGMENT RESULTS

The following table presents net external revenues and operating profit for the Company's reportable segments for the three months ended September 27, 2026 and September 28, 2025:

(1) % Change is not meaningful ("NM")

Wizards of the Coast and Digital Gaming Segment

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category:

Wizards of the Coast and Digital Gaming segment net revenues increased 30.6% in the third quarter of 2026 to $747.2 million from $572.0 million in the third quarter of 2025. The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the third quarter of 2026 was primarily attributable to growth in Tabletop Gaming revenue of $171.3 million, or 38.8%, behind demand for Magic: The Gathering, which exceeded $600 million of quarterly revenue for the first time in brand history, fueled by The Hobbit and Reality Fracture.

Wizards of the Coast and Digital Gaming segment Operating profit was $367.4 million, or 49.2% of segment net revenues for the third quarter of 2026, compared to Operating profit of $251.5 million, or 44.0% of segment net revenues, for the third quarter of 2025. Operating profit increased during the third quarter of 2026 primarily due to increased net revenues, as discussed above, as well as a decrease in advertising expense and the recording of $6.6 million of IEEPA tariff refunds during the period, partially offset by an increase in royalty expense as a result of increased sales for Magic: The Gathering Universes Beyond sets.

Consumer Products Segment

The following table presents the Consumer Products segment net revenues by major geographic region:

Consumer Products segment net revenues increased to $827.9 million for the third quarter of 2026 compared to $796.9 million for the third quarter of 2025. The net revenue increase primarily reflects higher net revenues for toys and games, particularly for certain Grow Brands such as Marvel, which was positively impacted by an uptick in demand driven by major theatrical releases, such as Spider-Man: Brand New Day, occurring throughout 2026, with no comparable releases in the prior year. Growth in Consumer Products was also driven by the sale of toys and games for KPop Demon Hunters, which were released for the first time in 2026. Consumer Products net revenues also benefitted from growth in Transformers. The increase in toy and game revenues was partially offset by a decrease in licensing revenues, primarily attributable to Peppa Pig and Nerf.

Consumer Products segment Operating profit for the third quarter of 2026 was $173.8 million, or 21.0% of segment net revenues, compared to a segment Operating profit of $80.1 million, or 10.1% of segment net revenues, for the third quarter of 2025. The change in Operating profit in the third quarter of 2026 was driven by the increase in net revenues, as discussed above, as well as a decrease of approximately $59.2 million of cost related to the impacts of tariffs, inclusive of both the recording of $47.9 million of IEEPA tariff benefit during the quarter, as well as a decrease in recurring tariff expense of approximately $11.3 million when compared to the prior year. Operating profit for the third quarter of 2026 was also impacted by a nonrecurring $4.7 million gain on the sale of a facility. In addition, Operating profit also benefitted from lower managed expenses and advertising expense, reflecting productivity initiatives.

Entertainment Segment

The following table presents Entertainment segment net revenues by category:

Entertainment segment net revenues increased 8.6% to $20.2 million for the third quarter of 2026, compared to $18.6 million for the third quarter of 2025. The net revenue increase in the Entertainment segment during the third quarter of 2026 was driven primarily by growth in Family Brands, reflecting the timing of entertainment streaming renewals and other content deals.

Entertainment segment Operating profit was $17.1 million, or 84.7% of segment net revenues for the third quarter of 2026, compared to an Operating profit of $7.5 million, or 40.3% of segment net revenues for the third quarter of 2025. The increase in Operating profit in the Entertainment segment during the third quarter of 2026 was primarily driven by the increase in revenue, as discussed above, and a favorable licensing mix, as well as a decrease in program cost amortization and the amortization of intangible assets.

Corporate and other

Corporate and other expense, net was $41.0 million for the third quarter of 2026 compared to Corporate and other income, net of $2.0 million for the third quarter of 2025. The change in Corporate and other in the third quarter of 2026 as compared to the third quarter of 2025 primarily reflects the impacts of increases in personnel related costs, including increased severance expense corresponding to our Operational Excellence program.

RESULTS OF OPERATIONS

The following table presents the consolidated results of operations for the nine months ended September 27, 2026 and September 28, 2025:

(1) Prior period amounts have been reclassified to present licensing revenue separately from net sales in the Consolidated Statements of Operations. The reclassification had no effect on total net revenues, operating profit (loss), net earnings (loss) or shareholders’ equity. Refer to Note 1, Basis of Presentation, for additional information.

NET REVENUES

Net sales – Net sales for the first nine months of 2026 increased 17.6% to $3,317.9 million from $2,821.1 million for the first nine months of 2025 primarily driven by growth in the Wizards of the Coast and Digital Gaming segment, most notably an increase of $413.2 million related to Magic: The Gathering, particularly stemming from increased demand for sets such as Secrets of Strixhaven, as well as Universes Beyond sets such as Marvel Super Heroes and The Hobbit. This growth within the Wizards of the Coast and Digital Gaming segment was supplemented by an increase in net sales within the Consumer Products segment, driven by an increase in toy and game sales for Marvel of $55.3 million and Star Wars of $23.7 million as a result of a strong content slate, along with the introduction of new toys and games for the recently acquired KPop Demon Hunters license of $14.2 million. These increases were partially offset by an $8.0 million, or 13.1%, decrease in the Entertainment segment.

Licensing revenue – Licensing revenue for the first nine months of 2026 was $417.2 million, or 11.2% of net revenues, compared to $434.3 million, or 13.3% of net revenues, for the first nine months of 2025. The change was primarily driven by lower consumer products licensing revenue, including the lapping of licensing revenue related to My Little Pony of approximately $11.1 million, partially offset by growth in digital licensing revenue.

The following table presents net revenues by brand portfolio category:

(1) During the first quarter of 2026, the classification of brands within these categories was reviewed and certain brands were reclassified based on changes in growth, profitability or other characteristics. As such, the respective historical revenues associated within these brands have been reclassified into the brands' new brand category.

GROW BRANDS: Net revenues in the Grow Brands portfolio increased $513.9 million, or 21.7%, in the first nine months of 2026, compared to the first nine months of 2025. The net revenue increase primarily reflects higher net revenues from Magic: The Gathering, which grew by $413.2 million, or 33.9%, driven by strong performance of Lorwyn Eclipsed and Secrets of Strixhaven, as well as Universes Beyond sets such as Teenage Mutant Ninja Turtles, Marvel Super Heroes and The Hobbit, which released within the first nine months of 2026. Growth in this category was also impacted by increased demand in toys and games associated with the licensed Marvel and Star Wars brands, driven by a strong content slate in 2026 with no comparable releases in the prior year.

OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio were relatively flat, decreasing $1.3 million, or 0.2%, in the first nine months of 2026, compared to the first nine months of 2025. Net revenues in this category include brands such as Play-Doh, Transformers, Duel Masters and G.I. Joe.

REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio decreased $32.9 million, or 9.7%, in the first nine months of 2026 compared to the first nine months of 2025. The net revenue decrease is primarily driven by lower product sales for Furby, Nerf and Baby Alive, partially offset by higher sales relating to Beyblade.

OPERATING COSTS AND EXPENSES

Cost of sales – Cost of sales for the first nine months of 2026 was $893.3 million, or 23.9% of net revenues, compared to $844.1 million, or 25.9% of net revenues, for the first nine months of 2025. The increase in Cost of sales was primarily the result of an increase in net revenues period over period. Cost of sales decreased as a percentage of net revenues as a result of the recording of $54.5 million of IEEPA tariff refunds during the period.

Program cost amortization – Program cost amortization decreased to $12.5 million, or 0.3% of net revenues, for the first nine months of 2026 from $21.0 million, or 0.6% of net revenues, for the first nine months of 2025. Program costs are capitalized as incurred and amortized primarily using the individual-film-forecast method which matches costs to the related recognized revenue and is based upon the current slate of entertainment projects.

Royalties – Royalties for the first nine months of 2026 increased to $309.7 million, or 8.3% of net revenues, compared to $255.8 million, or 7.9% of net revenues, for the first nine months of 2025. The increase in Royalties for the first nine months of 2026 was directly driven by an increase in sales relating to Magic: The Gathering Universes Beyond sets, such as Teenage Mutant Ninja Turtles, Marvel Super Heroes and The Hobbit, as well as increased toy and game sales on licensed brands such as Marvel and Star Wars.

Product development – Product development expense for the first nine months of 2026 was $275.0 million, or 7.4% of net revenues, compared to $255.6 million, or 7.9% of net revenues, for the first nine months of 2025. The increase in Product development expense during the first nine months of 2026 was primarily due to the Company's higher incremental investment in the developments of Grow Brands under the Company's Playing to Win strategy.

Advertising – Advertising expense for the first nine months of 2026 was $231.4 million, or 6.2% of net revenues, compared to $227.3 million, or 7.0% of net revenues, for the first nine months of 2025. The increase in Advertising expense during the first nine months of 2026 was primarily driven by additional spend necessary to support top line growth opportunities within the Grow Brands category, specifically within the Wizards of the Coast and Digital Gaming segment. Advertising expense decreased as a percentage of net revenues based on the timing of advertising campaigns and initiatives.

Amortization of intangible assets – Amortization of intangible assets decreased to $43.8 million, or 1.2% of net revenues, for the first nine months of 2026, as compared to $51.4 million, or 1.6% of net revenues, for the first nine months of 2025. The amortization expense was driven by the straight-line amortization of the Company's definite-lived intangible assets.

Impairment of goodwill – During the first nine months of 2025, the Company recorded a $1,021.9 million non-cash goodwill impairment charge associated with goodwill assigned to reporting units within the Company's Consumer Products segment. There was no such impairment charge recorded during the first nine months of 2026.

Loss on disposal of business – During the first nine months of 2025, the Company recorded a $25.0 million loss on disposal of business associated with the divestiture of the Company's non-core film and TV business (the "eOne Film and TV business") within the Entertainment segment. No such charges were recorded during the first nine months of 2026.

Selling, distribution and administration – Selling, distribution and administration expenses increased to $929.3 million, or 24.9% of net revenues for the first nine months of 2026, from $839.7 million, or 25.8% of net revenues, for the first nine months of 2025. The increase in Selling, distribution and administration expenses during the first nine months of 2026 was primarily the result of a one-time $56.4 million non-cash impairment charge related to the Company's decision to refocus the Digital Games portfolio, which included the cancellation of certain titles scheduled for release in 2028 and beyond, $11.8 million of incremental operating costs incurred as a result of the unauthorized network access, and an increase in personnel related costs, including increased severance expense corresponding to our Operational Excellence program, partially offset by a nonrecurring $4.7 million gain on the sale of a facility.

Operating profit (loss) – Operating profit for the first nine months of 2026 was $1,040.1 million, or 27.8% of net revenues, compared to an Operating loss of $286.4 million, or 8.8% of net revenues, for the first nine months of 2025 driven by the factors discussed above.

NON-OPERATING EXPENSE

Interest expense – Interest expense for the first nine months of 2026 totaled $131.0 million compared to $123.0 million in the first nine months of 2025. Higher Interest expense in 2026 is primarily the result of an increase in outstanding debt driven by issuance of the 2031 Notes, partially offset by debt repurchases of the Company's outstanding 2027, 2040, and 2044 Notes.

Interest income – Interest income was $37.6 million for the first nine months of 2026, compared to $20.6 million in the first nine months of 2025. Higher Interest income in 2026 primarily reflects the Company's cash balance and investments in treasury securities, which were substantially higher in 2026 as compared to 2025, as well as $1.9 million of Interest income earned on previously paid IEEPA tariffs.

Other expense (income), net – Other expense (income), net resulted in expense of $4.8 million for the first nine months of 2026, compared to income of $15.9 million in the first nine months of 2025. The change in Other expense (income), net during 2026 was driven primarily by variations in the movement of foreign currencies in the first nine months of 2026 when compared to the first nine months of 2025.

INCOME TAXES

Income tax expense totaled $186.1 million on pre-tax income of $941.9 million in the first nine months of 2026 compared to an income tax expense of $148.4 million on pre-tax loss of $372.9 million in the first nine months of 2025. Both periods were impacted by discrete tax events.

During the first nine months of 2026, the Company recorded a net discrete tax benefit of $26.6 million primarily associated with share-based compensation and the release of uncertain tax positions resulting from a settlement of an IRS audit. During the first nine months of 2025, the Company recorded a non-cash goodwill impairment within the Consumer Products segment of $1,021.9 million with a tax benefit of $5.4 million and an unfavorable adjustment to the Loss on disposal of the eOne Film and TV business of $25.0 million with no tax benefit. The Company also recorded a net discrete tax benefit of $6.5 million, primarily associated with the release of a valuation allowance.

Absent discrete items, the tax rates for the first nine months of 2026 and 2025 were 22.6% and 23.8%, respectively. The decrease in the base rate for the first nine months of 2026 relative to the first nine months of 2025 is primarily due to the mix of jurisdictions where the Company earned its profits and an increased FDDEI benefit.

SEGMENT RESULTS

The following table presents net external revenues and operating profit (loss) for the Company's reportable segments for the nine months ended September 27, 2026 and September 28, 2025:

(1) % Change is not meaningful ("NM")

Wizards of the Coast and Digital Gaming Segment

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category:

Wizards of the Coast and Digital Gaming segment net revenues increased 28.0% in the first nine months of 2026 to $1,993.0 million from $1,556.5 million in the first nine months of 2025. Tabletop Gaming revenue increased $410.2 million, or 34.4%, behind growth in Magic: The Gathering, primarily due to strong demand for Lorwyn Eclipsed and Secrets of Strixhaven, as well as Universes Beyond sets such as Teenage Mutant Ninja Turtles, Marvel Super Heroes, and The Hobbit. This growth was accompanied by an increase in digital and licensed gaming, particularly an increase in revenue related to Magic: The Gathering Arena.

Wizards of the Coast and Digital Gaming segment Operating profit was $935.1 million, or 46.9% of segment net revenues for the first nine months of 2026, compared to Operating profit of $723.3 million, or 46.5% of segment net revenues, for the first nine months of 2025. The Operating profit increase during the first nine months of 2026 was primarily driven by increased net revenues, as discussed above, as well as the recording of $6.6 million of IEEPA tariff refunds during the period, offset by a one-time $56.4 million non-cash impairment charge related to the Company's decision to refocus the Digital Games portfolio, which included the cancellation of certain titles scheduled for release in 2028 and beyond.

Consumer Products Segment

The following table presents the Consumer Products segment net revenues by major geographic region:

The Consumer Products segment net revenues increased 3.1% to $1,688.8 million for the first nine months of 2026 compared to $1,637.6 million for the first nine months of 2025. The net revenue increase primarily reflects higher toy and game revenues, particularly for certain Grow Brands such as Marvel and Star Wars, which were positively impacted by a rise in demand in advance of major theatrical releases throughout 2026 with no comparable releases in the prior year. Growth in Consumer Products was also driven by the sale of toys and games for KPop Demon Hunters, which were released for the first time in 2026, as well as higher sales of Beyblade. The increase in toy and game revenues was partially offset by a decrease in licensing revenues, primarily attributable to the lapping of licensing revenue related to My Little Pony, which decreased $11.1 million. Consumer Products net revenues were also negatively impacted by order processing, shipping and invoicing disruptions during the second quarter resulting from the unauthorized network access, as described in Note 2, Unauthorized Network Access.

Consumer Products segment Operating profit for the first nine months of 2026 was $111.8 million, or 6.6% of segment net revenues, compared to a segment Operating loss of $993.4 million, or 60.7% of segment net revenues, for the first nine months of 2025. The change in Operating profit in the first nine months of 2026 was primarily driven by the non-cash goodwill impairment charge of $1,021.9 million recorded during 2025, as well as the recording of $47.9 million of IEEPA tariff benefit during the period and productivity improvements.

Entertainment Segment

The following table presents Entertainment segment net revenues by category:

Entertainment segment net revenues decreased 13.1% to $53.3 million for the first nine months of 2026, compared to $61.3 million for the first nine months of 2025. The net revenue decrease in the Entertainment segment during the first nine months of 2026 was driven primarily by timing of entertainment streaming renewals and other content deals.

Entertainment segment Operating profit was $40.0 million, or 75.0% of segment net revenues, for the first nine months of 2026, compared to an Operating profit of $2.6 million, or 4.2% of segment net revenues, for the first nine months of 2025. The increase in Operating profit in the Entertainment segment during the first nine months of 2026 was driven by the non-recurring $25.0 million Loss on disposal of business that was recorded in 2025, as well as a decrease in program cost amortization and the amortization of intangible assets.

Corporate and other

Corporate and other expense was $46.8 million for the first nine months of 2026 compared to Corporate and other expense of $18.9 million for the first nine months of 2025. Corporate and other expense in the first nine months of 2026 was higher when compared to the first nine months of 2025 as a result of incremental costs incurred related to the unauthorized network access described above, as well as increases in personnel related costs, including increased severance expense corresponding to our Operational Excellence program.

OTHER INFORMATION

Commitments and Contingencies

Refer to Item 7 of our 2025 Form 10-K for additional information regarding the Company’s cash obligations and commitments as of the end of fiscal year 2025. Additionally, refer to Note 16, Commitments and Contingencies, to the consolidated financial statements for a discussion of the Company’s commitments and contingencies. Contractual obligations and commercial commitments, as detailed in the Company's 2025 Form 10-K, did not materially change outside of certain payments made in the normal course of business and as otherwise set forth in this report.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically generated a significant amount of cash from operations. The Company primarily funds its operations and liquidity needs through cash on hand and from cash flows from operations, and when needed, borrowings under its commercial paper program and available lines of credit.

The Company believes that the funds available to it, including cash expected to be generated from operations, funds available through its commercial paper program or its available lines of credit, are adequate to meet its working capital needs for the next twelve months. The Company may also issue debt or equity securities from time to time to provide additional sources of liquidity when pursuing opportunities to enhance our long-term competitive position, while maintaining a strong balance sheet.

During the three and nine months ended September 27, 2026, Hasbro recorded a total of $54.5 million of tariff recoveries as a reduction to Cost of sales within the Consolidated Statements of Operations. Of this amount, $41.5 million was received as cash, with the remainder recorded as a receivable within Prepaid expenses and other current assets on the Consolidated Balance Sheets. The Company expects to receive the remaining $13.0 million of Phase 2 and Phase 3 IEEPA tariff refunds within the next six months. Significant changes in trade policy announced by the U.S. government could adversely impact our forward-looking financial results, including the timing and extent of cash flows based upon timing in customer buying patterns and changes in our supply chain sourcing strategies. The ultimate amount and timing of these remaining recoveries remain subject to CBP's administrative processing and resolution of related CIT proceedings. These amounts could further impact our results in 2026 and, to a lesser extent, 2027.

As of September 27, 2026, the Company's cash and cash equivalents totaled $850.7 million and the Company's Short-term investments totaled $576.2 million. The majority of the Company’s cash and cash equivalents held outside of the United States as of September 27, 2026 are denominated in the U.S. dollar.

Under the Company’s commercial paper program, at the request of the Company and subject to market conditions, the Company may issue notes from time to time up to an aggregate principal amount outstanding at any given time of $1.0 billion. The Company intends to use the commercial paper program as its primary short-term borrowing facility. As of September 27, 2026, the Company had no outstanding borrowings related to the commercial paper program.

On February 20, 2026, the Company entered into a Fourth Amended and Restated Revolving Credit Agreement which amended and restated the third amended and restated revolving credit agreement to extend the maturity date through February 20, 2031 and reduce the aggregate principal amount to $1.1 billion. The revolving credit facility also provides for a potential additional incremental commitment increase of up to $550.0 million subject to agreement of the lenders. The Company's revolving credit facility contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness. The Company was in compliance with all covenants as of September 27, 2026. The Company had no borrowings outstanding under its revolving credit facility as of September 27, 2026. However, letters of credit outstanding under this facility as of September 27, 2026 were approximately $3.3 million. Amounts available and unused under the revolving credit facility at September 27, 2026 were approximately $1.1 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $7.5 million was utilized as of September 27, 2026. Of the amount utilized under, or supported by, the uncommitted lines, the full $7.5 million represented letters of credit.

As of September 27, 2026, the Company had $3.5 billion of long-term debt due at varying times from 2026 through 2044. Of the total principal amount of long-term debt, $893.9 million is current as of September 27, 2026 which represents the Company's 3.55% fixed-rate notes due November 2026 (the "2026 Notes") and the Company's 3.50% fixed-rate notes due September 2027 (the "2027 Notes").

In March 2026, the Company issued an aggregate of $400.0 million in senior unsecured debt securities that bear a fixed interest rate of 4.65% due 2031 (the "2031 Notes"). The 2031 Notes were issued with an original issuance discount of $0.6 million and the Company capitalized $3.7 million of debt issuance costs. The original issuance discount and debt issuance costs will be amortized over the term of the 2031 Notes. As of September 27, 2026, the Company has invested the proceeds from the 2031 Notes into Short-term investments that are expected to be utilized to repay the 2026 Notes, while simultaneously using any excess funds to repurchase longer-dated outstanding debt. In addition, the Company has also invested incremental cash on-hand to further pre-fund a portion of the impending maturity of the 2027 Notes.

From time to time, the Company or its affiliates may seek to retire or purchase outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. During 2026, the Company has repurchased $154.1 million of outstanding debt.

The Company has a supplier finance program which provides participating suppliers the option of receiving payment in advance of an invoice due date, to be paid by certain administering banks, on the basis of invoices that the Company has confirmed as valid and approved. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers, to the administering banks on the invoice due date. The Company’s suppliers are not required to participate in the supplier finance program. The early payment transactions between the Company’s supplier and the administering bank are subject to an agreement between those parties, and the Company does not participate in any financial aspect of the agreements between the Company’s suppliers and the administering banks. The Company has not pledged any assets to the administering bank under the supplier financing program. The Company or the administering bank may terminate the agreement upon at least 30 days’ written notice.

The amount of obligations confirmed under the supplier finance program that remain unpaid by the Company were $118.8 million, $100.1 million, and $45.7 million as of September 27, 2026, September 28, 2025 and December 28, 2025, respectively. These obligations are presented within Accounts payable in the Company's Consolidated Balance Sheets. The activity related to this program is reflected within the operating activities section of the Consolidated Statements of Cash Flows.

Cash Flow

The following table summarizes the changes in the Consolidated Statements of Cash Flows:

Net cash provided by Operating activities in the first nine months of 2026 was $907.3 million compared to $490.0 million in the first nine months of 2025. The $417.3 million increase in net cash provided by Operating activities after adjusting for non-cash items, was primarily attributable to improved operating results, $43.4 million of proceeds received in 2026 relating to IEEPA tariff refunds, and a non-recurring $57.4 million repatriation tax payment that occurred in 2025.

Net cash utilized by Investing activities was $618.4 million in the first nine months of 2026 compared to $191.8 million in the first nine months of 2025. Additions to property, plant and equipment and software were $70.7 million and $77.8 million in the first nine months of 2026, respectively, compared to $49.6 million and $98.6 million in the first nine months of 2025, respectively. Additionally, purchases of Short-term investments of $472.7 million, which represent prefunding of future debt maturities with U.S. Treasury securities, occurred in the first nine months of 2026, compared to net purchases of $55.2 million in the first nine months of 2025. The level of purchases during 2026 was impacted by the intent to utilize the investments, together with available cash, to repay indebtedness of the Company that is due in November 2026 and September 2027.

Net cash utilized by Financing activities was $214.5 million in the first nine months of 2026 compared to net cash utilized by Financing activities of $375.1 million in the first nine months of 2025. The primary source of cash inflows during first nine months of 2026 was $399.4 million of proceeds from the issuance of the 2031 Notes, offset by dividends paid of $296.1 million, repayments of long-term debt of $152.5 million, and $46.9 million of payments related to tax withholdings for share compensation coinciding with equity award vesting activity. Share repurchases during the first nine months of 2026 include $149.3 million of Common Stock under a share repurchase authorization approved by the Company's Board of Directors in February 2026. As of September 27, 2026, there is $848 million remaining on the share repurchase authorization. Based on the continued strength of its cash flow, the Company has increased its 2026 share repurchase target to $400 million and expects to continue repurchasing shares throughout the balance of the year. Financing activities in the first nine months of 2025 included dividends paid of $294.2 million, repayments of long-term debt of $63.5 million, and $21.8 million of payments related to tax withholdings for share compensation coinciding with equity award vesting activity.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

We have prepared the consolidated financial statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Information with respect to accounting estimates that are the most critical to the understanding of our financial statements as they could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 28, 2025. We believe that at September 27, 2026, there has been no material change to this information.

FINANCIAL RISK MANAGEMENT

The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while marketing and selling those products in more than twenty currencies. Results of operations may be affected primarily by changes in the value of the U.S. dollar, Euro, British pound sterling, Canadian dollar, Brazilian real and Mexican peso and, to a lesser extent, other currencies in Latin America and Asia Pacific countries.

To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions using foreign exchange forward contracts and foreign exchange option contracts. The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that the ongoing risk on the net exposure should not be material to its financial condition. In addition, the Company's revenues and costs have been and will likely continue to be affected by changes in foreign currency rates. A significant change in foreign exchange rates can materially impact the Company's revenues and earnings due to translation of foreign-denominated revenues and expenses. The Company does not hedge against translation impacts of foreign exchange. From time to time, affiliates of the Company may make or receive intercompany loans in currencies other than their functional currency. The Company manages this exposure at the time the loan is made by using foreign exchange contracts.

The Company reflects all derivative financial instruments at their fair value as an asset or liability on the Consolidated Balance Sheets. The Company does not speculate in foreign currency exchange contracts. Refer to Note 14, Derivative Financial Instruments, to the Company’s consolidated financial statements for further details on the Company's derivative financial instruments.

As of September 27, 2026, the Company had fixed-rate debt of $3.5 billion.

Inflation

The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments to mitigate the impact of changes to the rate of inflation in future periods. However, future volatility of general price inflation could affect consumer spending. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.

The information required by this item is included in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 27, 2026. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.

Changes in internal control over financial reporting

In late March 2026, the Company identified unauthorized access to its network. Upon discovery, the Company promptly activated its security incident response protocols, implemented containment measures, including proactively taking certain systems offline, and launched an investigation with the assistance of third-party cybersecurity professionals. Simultaneously, the Company implemented its business continuity plans, including manual ordering and processing procedures at a reduced rate of operations in order to continue servicing its customers. However, the incident resulted in disruptions to the Company's standard business operations and internal control over financial reporting during the second quarter. During the disruptions caused by the unauthorized access, the Company deployed additional manual controls in response to preventatively taking certain systems offline to maintain our internal control over financial reporting. As of June 28, 2026, the Company's standard business operations and internal control over financial reporting had resumed and were operating consistent with our pre-incident internal control over financial reporting.

There were no changes in the Company's internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended September 27, 2026 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

In connection with information set forth in this Quarterly Report on Form 10-Q, the risk factors discussed under Item 1A. Risk Factors, in Part I of our 2025 Form 10-K and in our subsequent filings, including in this filing, should be considered. The risks set forth in our 2025 Form 10-K and in our subsequent filings, including in this filing, could materially and adversely affect our business, financial condition, and results of operations. Except as set forth below, there are no material changes from the risk factors as previously disclosed in our 2025 Form 10-K, in any of our subsequently filed reports or as otherwise set forth in this Quarterly Report.

Our business could be significantly harmed as a result of compromise of our electronic data.

We and our third-party manufacturers and other business partners maintain significant amounts of data electronically in locations around the world and in the cloud. This data relates to all aspects of our business, including current and future products and entertainment under development, and also contains certain customer, consumer, supplier, partner and employee data. We and our partners maintain systems and processes designed to protect this data, but notwithstanding such protective systems and processes, there have been, and in the future may be, intrusions, cyber-attacks, tampering, or other unauthorized access, whether intentional or unintentional, that have compromised, and could in the future, compromise the integrity and privacy of this data. Intrusions, cyber-attacks, tampering, and other unauthorized access continue to increase in frequency, sophistication and intensity, and are becoming increasingly difficult to detect and prevent. They are often carried out by motivated, well- resourced, skilled and persistent actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent. Intrusions, cyber-attacks, tampering, and other unauthorized access could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, artificial intelligence, the use of social engineering and other means to affect the confidentiality, integrity and availability of our or third-party technology systems and data. Intrusions, cyber-attacks, tampering, and other unauthorized access could also include supply chain attacks, which could cause a delay in the manufacturing of our products. In addition, we provide confidential and proprietary information to our third-party manufacturers and business partners to conduct our business. While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, those manufacturers and partners may also be subject to data intrusion or otherwise compromise the protection of such data. The risk of data loss or breaches is heightened during uncertain economic times, changes in business strategy and reductions in workforce. Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our information technology systems, or those of our third party manufacturers and other business partners, as well as any related security incident response, containment, remediation, or mitigation efforts, could substantially disrupt our operations, result in delays of shipping products, result in delays in making or receiving payments, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and/or result in a loss of business that could be material.

For example, in late March 2026, we identified unauthorized access to our network. Upon discovery, we promptly activated our security incident response protocols, implemented containment measures, including proactively taking certain systems offline, and launched an investigation with the assistance of third-party cybersecurity professionals. The unauthorized access has since been contained and we have fully restored our systems and returned to standard business operations. Order processing, shipping and invoicing operated under pre-incident practices for the entirety of the third quarter.

Any further incidents of unauthorized access could result in adverse effects on our business, operations, financial results, and financial reporting; and any further impacts related to the unauthorized access or other similar unauthorized activity may result in increased costs, including from any legal proceedings. For more information, refer to Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Unauthorized Network Access” and Note 2 "Unauthorized Network Access."