2024 EBITDA Guidance
Q: Bridge us to 2024 EBITDA guidance?
A: Operating cash flow is projected to be slightly down due to prior inventory benefits. Non-recurring charges are returning, benefiting next year, but offset by volume decline as revenue decreases. We expect supply chain productivity to offset 3% inflation, mainly from labor, resin, and fuel costs. Net cost savings of $200 million to $250 million are embedded, stemming from supply chain productivity and reductions in managed expenses. The big negative is the revenue decline impacting de-leverage. , ,

Dividend Safety
Q: Is the dividend safe given debt levels?
A: We remain supportive of our capital allocation strategy, including the dividend. Actions in '23 and '24 to free up cash support these priorities. We're committed to reaching our leverage targets and believe fixing the business will free up our ability to meet all capital allocation goals.

Growth Outlook for D&D
Q: Does the $500M D&D guidance still hold?
A: Yes, the guidance holds, aiming for around $500 million in revenue over a 3- to 4-year period, targeting 2027. The D&D brand is progressing as expected, with contributors including the D&D Beyond platform, new entertainment like the Paramount streaming series, and successful video games like Baldur's Gate III, which earned multiple Game of the Year awards. ,

Universes Beyond Impact
Q: Expectations for future Universes Beyond sets?
A: Last year's Magic: The Lord of the Rings set did over $200 million in under six months. Starting in 2025, two of six premier sets per year will be Universes Beyond branded, featuring major IPs like Final Fantasy and Marvel, expected to attract new players and expand the user base similarly or greater than Lord of the Rings did. ,

CapEx and Margin Outlook
Q: What's the medium-term margin and CapEx outlook?
A: We're committed to achieving a 20% midterm margin target. In Consumer Products, margins will improve with volume growth and continued cost structure refinements. CapEx is stepping up to $225 million this year, mainly driven by investment in digital games—half allocated to the Wizards business. Investments in digital gaming are foundational and expected to be a material source of value creation over the next 3 to 5 years.

Toy Industry Outlook
Q: Why expect industry down 8% in 2024?
A: We think trends from the back half of 2023 will persist into 2024 due to post-COVID corrections, especially in the U.S. We still see growth in Latin America and Southeast Asia. After 2024, we anticipate being past the correction and expect the toy market to be around flat, planning to grow at or ahead of that level.

Consumer Products Revenue Guidance
Q: Expectations for Consumer Products revenue?
A: We're guiding 7% to 12% down, with steeper declines in Q1 and Q2, stabilizing in Q3, and planning for growth in Q4. Shipments will more closely align with POS. Exiting certain licenses accounts for roughly 4 points of the decline. In a down 3% scenario, we'd be over-delivering and gaining share; down 8% would be moving in line with the market. ,

Cash Flow and Balance
Q: Will operating cash flow be negative in 2024?
A: Operating cash flow will be slightly down due to the inventory benefit captured in 2023, but we don't expect negative free cash flow. Ending cash will be relatively flat year-over-year, slightly down due to a step-up in CapEx and additional charges from December announcements.

Digital Games Cadence
Q: What is the future cadence for digital games?
A: Starting in 2026, we'll likely publish one major new digital game annually, with 1–2 games per year from 2027 to 2030, depending on schedules. Licensing revenue may dip this year due to last year's Baldur's Gate III bulge but will grow sequentially thereafter. Licensing mix tends to be more mobile and casino gambling, while publishing efforts focus on PC and console.

Flexibility Amid Industry Downturn
Q: Any levers if industry worsens in 2024?
A: We have a cautious outlook but possess ample liquidity—over $1.8 billion—and tools to manage a down quarter or two. Our new management is adept at cost and supply chain management, and we're confident in our ability to execute capital allocation priorities, including investing for growth, maintaining the dividend, and achieving leverage targets below 2.5x.