Hasbro, Inc. (HAS) Earnings Call Transcript & Summary

Good day, everyone. I'm Steph Wissink, a senior research analyst at Jefferies, and it's my pleasure today to be hosting the management team from Hasbro. You'll see on your screen, 2 members of management, CEO and Chairman, Brian Goldner, right? He's going to give us wave. I can see you. All right.

Good morning.

And CFO, Deb Thomas. Wonderful. Just as a quick intro to Brian and Deb. One of the things that I always like to point out is that this has been a management team that's been together for over 10 years. Brian held the CEO position for 12 years, and Deb's been with the company since 1998. So 2 very long-term veterans of the organization, and that's going to come into the context of our conversation today. So the way we're going to spend our time is, first, to just take about 8 to 10 minutes to look backwards. I would think it's important to look back to know where we're headed. So Brian is going to talk a little bit about some of the strategic initiatives that they have executed, some of the key themes around the strategy, and then we'll jump into a really important discussion around this year, 2020, in the context of 2 semesters with some additional time to talk about the current quarter, the second quarter, just given some important nuances in the business. And then we're going to look at the medium-term over next few years, just given a very strategic acquisition that was recently completed. And then we'll spend the last few minutes talking about the long term, really looking out for a number of years to what the future could look like for Hasbro.

So the first thing, Brian, I want to just give you a platform to talk about how you describe the business. I think one of the things that I've noticed about Hasbro is, over my coverage history, shifting from a manufacturer of toys to really a modern brand management platform. So talk a little bit about a global play and entertainment company just as an introduction.

Sure. Well, modern era for Hasbro began around year 2000. Prior to that time, the company had owned more manufacturing assets, was more asset-heavy; today, asset-light without the manufacturing. We sold that manufacturers often that we source from an array of really capable global sourcing partners and a strategic sourcing footprint. Prior to 2000, we relied a lot on other people's properties. In fact, what led us to some challenging results in 1999 and 2000 was the fact that we did rely so heavily on other people's properties. And then as we got through 2000, and Debbie come on board just recently during that time and I joined in 2000, we began to really refocus again on our brands and on the reimagination, reignition of our brands and putting them into the modern marketplace. Recognizing that one of the first decisions we had to make and that we were asked about during a time when the company was looking at all of its cost was whether we were going to continue to invest in consumer insights or whether that would be an area that we would actually cut back on, because, of course, relying on other people's properties, you don't need as much innovation, and you don't need as much drive around consumer insights. Instead, we chose to really invest in consumer insights to really look at a proprietary way to see where consumers and audiences were going. And that began what we called our core brand strategy of reigniting and reimagining our brands for the future. That began with Transformers and My Little Pony and getting those brands back and beginning to percolate. But at that time, we had no brand in the company that was more than $100 million. And in fact, the brands that we ultimately identified as our franchise brands, representing about a half dozen to 7 brands in our company, we're only about 17% of revenues and today represent more than half of the revenues of the company. That's important because those brands also enjoy high operating margins relative to the company average operating profit margin with the potentiality of getting even higher over time and more robust because of the capabilities that we've onboarded over the last 20 years and certainly have accelerated that strategy over the last 10 years. So really our strategy is all about putting the brands in the center of everything that we do and recognizing that we want to understand where the audience and the consumer for those brands are, where they're going, what the consumption patterns look like for consumers and audiences around brands and brand engagement, and then building a virtual flywheel. Effectively, we call it the brand blueprint, but it's really a virtual flywheel where innovation, storytelling, consumer insights, content to commerce, e-com and omnichannel all are inputs to an evolving strategy that enable us to get closer to the consumer and the audience to inspire them to connect with a brand. And then in inspiring them, that consumer return travels with us around the virtual brand blueprint and effectively spends more time, and frankly, more money with us in valuable experiences for them, and of course, increasingly valuable experiences for our company and for our shareholders. So what you've just put up on the screen is, clearly, that's the evolved brand blueprint, with the brands at the center of everything we do. We are constantly looking at ways to understand our consumer better than anybody else with proprietary techniques and technologies, data analytics that we use and of course, global customer relationships. Those customer relationships include global retailers that we should talk a lot about today, but also customer relationships in the form of streamers and terrestrial and linear channels that are increasingly buying content for our brands, putting that content on air, which also inspires the next generation of consumers because we know even the youngest consumers today are more media consumers or media audiences than ever before. Peppa Pig, PJ Mask -- Peppa is world's most popular preschool brand in YouTube with billions of views each year. So that opportunity to take our brands to inspire consumer engagement and resonance allows us then to work around this blueprint kind of in a circular fashion, where every one of these categories can be new inspiration, new innovation and new engagement. So it's really this virtual media and play and entertainment model that we're constructing over time to build brand value.

And Brian, if we could just spend a bit more time on this blueprint. You mentioned that it's an updated. This is your 2020 blueprint. And as we look at maybe the orange squares or circles here, your history is really in that toys and games category. Talk about the strategic acquisitions you've made to bolster the digital gaming, and clearly, the media and entertainment side.

Sure. Yes. If you go back and think about it in the late '90s, we acquired a company called Wizards of the Coast. And at that time, Wizards was really known for Magic: The Gathering, but also Pokémon trading cards and some other things. And the fact was we saw a long-range opportunity to build Wizards, but we first had to focus on getting our toys and games brands percolating again, recognize that at that time, Transformers was a brand that's -- revenues were in the teens of millions as well as my Little Pony, almost out of business. And we had to start with the low-hanging fruit of our company and the brands that we thought could resonate with consumers. We could see where young people were going at that time. It's almost unbelievable to think only just 20 years ago, people were looking and only consuming linear television where we put Transformers on air, having developed a new show and putting it on air in Cartoon Network where kids were consuming DVDs, and they, for my Little Pony, consumed a lot of DVDs that we produced that sat alongside of great products that reinspired kids to get back into that brand. And so over a period of 2 or 3 years in the early 2000s, we began to see just how you could create that virtual flywheel and get kids reinspired back into our brands. And again, at that time then, we began to introduce new brands that had been in the vault like LITTLEST PET SHOP, inventing new innovations like furReal Friends, taking the NERF business that was a brand that was, again, in its teens in terms of millions of dollars, and recognizing that the blaster business and that outdoor play opportunity was so substantial through innovation and engagement and building NERF NATION, as we call it today. So that's the way we then progressed where now today we have our 7 franchise brands representing more than 50% of the revenues of the company. And clearly, the revenues of the company over this period from 2,000 until today has grown sizably. Operating margins went from negative to very positive. Obviously, in this environment of COVID, there's been a bit of a step back. We've had some other recent challenges with Toys"R"Us going out of business, but the fact is the underlying strength of the company is very clear, and our long-term prospects for us are just very exciting and sitting right in front of us.

Let's shift the conversation, Brian. It's a great lead-in to think about 2020. So I want to talk to this group about it in 2 semesters. Coming into the year, there were some planned considerations for the first half of the year, and then clearly, with COVID, some very acute considerations. So maybe talk a little bit about the first half of the year on the plan side. And Deb, maybe bring you in here to just talk a little bit about the integration, early integration, of eOne, but also then just to isolate some of those acute areas of impact that you've seen both on the supply side and the demand side from COVID?

Deb, do you want to kick it off?

Sure. So at the beginning of the year, you're right, we had a great, great first quarter, and our consumer demand was good. And as we saw things shutting down, from a demand side, we've still seen quite a bit of demand passed through in the second quarter from the consumer. However, our customers, the retailers, are taking a bit less. Many of them were closed down, so they weren't taking shipments in. However, the ones that had that e-com presence have continued to do well from first quarter into second quarter with at least passing through what they had in stock to the consumer. So from a supply side, we were shutdown a bit in several of our factories. They're all open now, so we're working to work back up to supply, to meet the supply. And we think by the second half, and I know you want to go to the second year -- second semester or second half of the year. I like how you think about it as semester because it's not just one quarter, which is great because that's how we think about the business. We'll be able to get the supply back to meet the demand for the second quarter. But from our standpoint, we've said all along -- or for the second half, rather, the second quarter is just going to be our toughest quarter. You've got retailers that are closed. You've got production that can't be done from an entertainment standpoint. You've got -- from a consumer product standpoint, people who can't shop for that either. However, the good news is we started out with excellent liquidity and we've got sufficient liquidity as we look at it now, that with a slight bump in the demand side from a shipment demand standpoint in the second quarter isn't going to impact us. The important part of the year is the holiday season.

Yes. So what we're really seeing is there are categories and products that are selling incredibly well in the second quarter like our games business our PLAY-DOH business, increasingly as people get outside, our NERF business and other brands of the company. Having said that, the fill rates, the ability to fill good demand through shipments, which is where our revenues are created are going to be a bit lower in the Q2 period. Because again, for a number of weeks, a facility like our Massachusetts facility that we source from, we don't own, was closed as a result of Massachusetts being closed. Well, that's where we make a lot of domestic games and PLAY-DOH. And so that's now back open, so we'll catch up there in the third quarter. For some period of time in India, certain regions of India as well as the whole country was shut down and now reopening. And so we'll have supply coming from India. China early in the year was shut down and now is up fully running. And so as we look at new initiatives coming for the second half of the year, we are seeing the opportunity to catch up to get those new initiatives into the market, albeit throughout the third quarter, and we do expect to have a very good and very solid full year with a very good holiday period. And we are seeing the rates of sale remaining very strong, but Q2 dislocation is just the result of what we were able to get into market versus where the consumer demand is, our consumer demand being quite strong and expanding into new other categories of toys as we evolve through Q2 as people get back into stores and they're buying products like BABY ALIVE and more PLAY-DOH and other product categories. Brands like STAR WARS, performing well, brands like Frozen, performing well, and yet, we won't be able to realize the full opportunity because we just won't be able to get all of the potential shipments associated with some of that demand made in the Q2 period. So focus people on the short-term that there is some retail dislocation. But in Q3, Q4 period, we see that all evolving, resolving and progressing forward. And we're very excited about our initiatives that we have lined up for Q3, and particularly, in the holidays. And we haven't even scratched the surface and talked about Wizard of the Coast.

[ Stop ] sharing that image. And we can always go back to -- Brian, if you want to call it forward, just let me know. But I want to talk about the back half because you set this up nicely. And one of the things I want you to just help myth bust is one of the biggest questions we get, which is why isn't this 2020 period, this big surge in demand around COVID and kids at home and parents trying to entertain, occupy their kids, why isn't that just a pull-forward of holiday demand? So talk a little bit about -- you've got great insights. What are you finding in terms of new household penetration? You're unlocking new households and gaming, but why you don't see this as a pull-forward from holiday?

Well, when we saw the demand driving forward, of course, our first question to our experts in our gaming business was tell us about the audience and the consumer that are buying these games because we have similar questions. So we have, as you know, incredible capabilities, and as we talked about, proprietary consumer insights. So we did a lot of work with thousands of consumer families and panels. We looked at who is purchasing product. And what we really recognized and saw was that these young millennial families, who probably were less engaged in the board games category to begin with, we're now seeing very engaged in board gaming. And we're seeing our categories from preschool gaming, to kids gaming, to family gaming all the way through adult gaming growing as people are looking for opportunities to make connections with one another to spend time together, whether it's in the home, in their expanded bubble or whether it's people playing a distance over a call like this one, where people want to have fun and will play a trivia game or other games as adults, because again, it's just something fun to do. And so our own personal experiences support this. But more importantly, the research that we've done says that these are new game homes, new game purchasers, and they are now beginning to buy even more deeply. As we get to the second half of the year, we, of course, are going to offer a new array of games. So there's a lot of new games launches coming. We're not going just to rely on what was available at the first half whether that be in MONOPOLY or other gaming categories. You're going to see an array of new games. You're also seeing an array of new PLAY-DOH products. PLAY-DOH is a brand that's performed incredibly well during this time. And what I've really seen and what we're seeing is that parents who heretofore may have had many different distractions and demands on them seriously have new demands and new stresses, but their stresses are more co-located with their children. So they are able to really see what their kids like and they see their kids play. They see how toys and games play a role in those kids' lives in a way that they probably haven't seen recently, and that's what we're seeing. Now having said that, in Q2, just to, again, reaffirm for the audience, Q2 is a challenging year -- challenging quarter within the year just because of the dislocation between about 1/3 of retail being closed at any period of time, our sourcing -- strategic sourcing footprint being interrupted over a period of time, and of course, our productions in television and film being -- stops during that time. The great part is the demand is there, the new initiatives are there, the market is already making the plans for the new television and film productions to recommence. We have sold a number of shows to any number of streamers and platforms. We just need to fulfill the demand of those episodes. And a perfect example, just to get into that, we'll talk more about it, I'm sure, on eOne, we had the Rookie renewed for next season and even a larger order of episodes. Well, that's a great opportunity. We'll get back in production on that show, and we'll begin to deliver those episodes. Not all those episodes will get delivered this year, but that demand does not go away. The demand creation does not go away because these shows are resonating with audiences, and eOne does incredible job of selling to every platform, which, for us, as we begin to populate Hasbro IP into that model, becomes increasingly important. It gives us the opportunity to be on any platform globally with Hasbro stories that engage audiences and consumer.

And Brian, just remind us where are we at in the reopening of production sites? Is it a bit lagged?

It depends on location. So we're already starting to identify some locations. Remember, we have a Canadian entity. And parts of Canada like Manitoba and others really never saw much impact from COVID, so the team is planning productions to commence there shortly in the July and August periods. There are new protocols being put in place by the motion picture industry as well as the television industry. Those protocols will be followed by -- industry-wide, and the team is already identifying what that will mean in terms of either days production or insurance and getting insurance for these productions, so being able to source the insurance, being able to stage the return of the crews and the cast and to be able to have the additional costs that we will mitigate through planning for a COVID production. In other words, production -- protection and protocols are all things that the team is working on. So I imagine that by mid third quarter, we'll be back up and running in many geographies internationally as well as domestically.

That's great. And before we finalize this section, I wanted to give you a chance to talk about Magic, because it's really been such a great success story. And Deb, you certainly want to join in, too, as you talk about this idea of a franchise brand, Magic: The Gathering, is really coming to life in new ways. We see it on the fan community side. But certainly, it seems like the mass market is starting to get access to this brand, too. So talk a little bit about that as illustration of success rate within the franchise brand portfolio and really how it's tapping into almost all areas of your blueprint.

Yes. Our ambition -- I'll talk about at a high level here for a second, and then I want to let Deb talk about the future development investments we're making in this area, because it's a future growth driver for us as well. But what we really saw as we launched Magic Arena, it's really accelerating in this environment. And by accelerating, it's creating a complementarity with our analog business. In fact, more new users and new players coming into Magic. Having said that, in Q2, we've said there would be some headwinds, because a year ago, Q2 was just so successful for Magic. And yet we believe Magic is on a short and long-term growth trajectory, including this year as well as future years. Magic Arena, along with Magic: The Gathering, has players playing for up to 9 hours a week on average. And the increase in Arena is coming despite the fact we haven't even launched Mobile yet. We will launch Mobile Magic this year as well. Magic Arena will launch in China with Tencent as our partner. We'll also have other formats for Magic like our casual playing, Spellslingers, which will come later because we've chosen to reorder -- to go after mobile first because it's so important and ubiquitous in terms of global gamers versus a PC-based game. We have an immense array of new card releases, lots of new innovations. And the team has done a very good job of working with our Wizards Play Network. Nearly 8,000 local hobby stores that we all worried might be challenged in this environment, because of course, they're small retailers, and yet, we helped them to pivot to online local tournaments. We've given them valuable card packs that we produced for them at no charge that they're able to then retail, so they're able to cover their rent and pay their bills with very valuable card packs like Secret Lair so -- to make sure we continue to support that Wizards Play Network. We are on a long-term trajectory to double the size of Wizards of the Coast this year. It's pretty indicative of a -- that path that we started to create last year. We saw those great returns last year. We believe over a 4-, 5-year period, we will double the size of Wizards, which is not a small additional value. That's a quite considerable value to the company. And I'll let Deb talk about our future plans.

Right. Because, Steph, this is what -- one of my favorite brands, I always think it's our most underappreciated brand as a company, but as Brian said, we have -- we've been investing all along, and we'll continue to invest in -- actually, are investing right now. We haven't taken our foot off the gas on investing to make sure we can double the size of that Wizards of the Coast business over the next 4 to 5 years. We've got games in development now that we won't see until 2024 -- 2023, 2024 time frame, because we do believe in the value. And Magic alone and our games that are in development are for Magic and for Dungeons & Dragons. We feel that Dungeons & Dragons also has a lot of opportunity. It's been one of the longest-running digital gaming brands out there. However, we've not controlled most of that or we've worked through third parties. So we're in our own development now as well as continuing to work with third parties. But Magic also is one of our more profitable brands as a company. So as we see the interest, and as Brian said, one of the things we found so amazing and wonderful, and we've gotten this question a lot by launching Arena, will it reduce the analog business, and it hasn't. It's driven the analog business higher. As it's gotten that exposure, more people loved that social face-to-face experience. Although, now they're doing that virtually as well. But it's really driven both sides of the business.

Yes. That's probably been one of the biggest surprises over the last year. It has been the coincident growth of both the physical and the digital, which is, I think, to your point, maybe not what people would have expected initially. And then...

Yes. We had -- yes, and I think the natural progression here, we're just really at the starting gate for what Wizards of the Coast can become. And as we thought about that virtual flywheel we were building, and as we thought about onboarding new capabilities through eOne, one of the most substantial areas for us where we didn't have the capability prior, and we do now, is online, streamed and live-action television. And if you think about brands that are for audiences of young people to adults that are older than 13 and going up through many generations of fans and gamers, it gives us the opportunity to tell stories around brands like Dungeons & Dragons and Magic: The Gathering. Over time, that will build the global awareness and ubiquity of those brands. It then builds the global game playing. It builds our global publishing business. It builds then the global digital gaming business. So it has the additional dividends that it pays all around flywheel in all those categories that we showed earlier in that evolved brand blueprint. And that's really beyond the consideration even of our goal and plan to double the size of Wizards. This is additional over-and-above opportunity. And you just think about the storytelling opportunity here that inspires the next generation. I think the 2 most underappreciated brands in the portfolio are D&D, Dungeon & Dragons, and Magic: The Gathering within our opportunity as we think about the storytelling -- future storytelling that we will execute with eOne.

Yes. I can tell you from attending Comic-Cons and Cons around the world. There's no shortage of fans for those brands.

Yes. Exactly.

Let's shift over now to the medium term. Thinking about the next 2 or 3 years, and really, eOne is critical now to this full financial and strategic story. And Brian, you mentioned something about this wheel in terms of kind of completing the wheel through eOne. And you had a great slide in your Toy Fair event. And I'm going to share it now because I just think it's so helpful for people to frame up that idea of this wheel and give you a chance to talk about it a little bit and then Deb bring you in to talk about the financials. So maybe just remind folks that may not be familiar with the transaction, some of the key financial highlights of the transaction and then synergies specifically. And I'll put this wheel up, so people can just get a visual for how this -- did complete the circle for you.

Sure. Well, I think what's so important here to recognize is that the engagement between storytelling and brands and brands' resonance has been around for time and memorial. It was really invented by companies like Walt Disney. It was further accelerated by great minds like George Lucas. And we're seeing it kind of in modern storytelling across any number of platforms today, including streamed platforms where you're seeing The Mandalorian or Stranger Things take on lives of their own, even beyond just the enjoyment of the content itself. And so we wanted to build a model where we could own the inputs, and therefore, own the output of the effort where we were not, in any manner, relying on third parties, where, over time, that has always been a challenge for us, and that by having first-party capabilities, we could enter this circle kind of almost at any point in time, always enhancing it with our capabilities. And I could literally go around this wheel and tell you how each one informs the next. But by starting at the top and thinking about the fact that, today, Hasbro probably markets around 100 brands and yet we own 1,500 with dozens of brands that are highly valuable as we see it through a brand enterprise valuation as future launches that will come back into this wheel within brand-centered product development, platform distribution, getting storytelling around that brand, let's just take 2 examples. One I mentioned, like Dungeons & Dragons, where you have, today, a business for us that is relatively small as compared to some of our other brands at the company. Clearly, brands like NERF and Magic: The Gathering and Transformers are among our largest brands. And while D&D has so much resonance, it's probably one of our small-revenues brands today. And so imagine, again, accelerating and emphasizing that brand, brand engagement across each of these areas to build consumer affinity, and again, build the value of that brand for the gamer, for the player, for the participant, but also, of course, for the shareholder. And then you take a brand that's in the vault that we are redeveloping right now for live-action television, Action Man. In the 1900s Action Man was a brand that contributed hundreds of millions of dollars. In fact, if you added it up throughout the decade of the '90s, it was probably nearly $1 billion contributor to Hasbro. And yet today, it's really off the market. And so reimagining what Action Man can look like, who were the core audiences for that brand, who are the fans today, who remember that brand and how would we launch that brand in storytelling is one of the goals of the company but already one of the initiatives that's been undertaken by the combined forces of eOne and Hasbro together. So whether it's Action Man or Micronauts, M.A.S.K., Rom, Visionaries, Dungeons & Dragons, Magic: The Gathering or even a brand like MONOPOLY or PLAY-DOH, these are all brands that we are looking at now through the lens of bespoke episodic content and/or feature films and/or unscripted game shows that can go into almost any platform, and again, build the value of this virtual flywheel. Again, every area where we can input, we built capabilities from how we sell online and engage people with content to commerce, all the way through, again, the bespoke entertainment that we can now create to get new audiences and consumers into the brand.

Right. And just a reminder, when we set out to do this acquisition, we talked about the fact that we expected to get $130 million of synergies from this acquisition by the end of 2022. And that $130 million didn't include all those wonderful revenue opportunities that Brian just talked about. So if we take a moment and look at the acquisition, we actually closed the acquisition at the beginning of January. It's been a very eventful almost 6 months for us. The team is great. They are all working together to drive these great fantastic revenue opportunities for the future, but we're also working on getting the cost synergies. So those cost synergies that we talked about didn't include the revenue opportunities, but they included us taking on Peppa Pig, PJ Masks, Ricky Zoom, the existing family brands where there's consumer product licenses and the agents that eOne was currently using. We have a great retail network. We have people on the ground. We don't need that duplication taking that on and driving up that revenue. So we're on track to achieve our synergies. Some of them have been put off just a little bit just because of the situation we're in right now. And -- but we still expect to achieve our synergies by the end of 2022. We are -- we are looking at paying down the debt that we had in place. And we said we -- our goal is to get back to our leverage ratios of 2x to 2.5x within the next 3 to 4 years. And we really look at it that way because that leverage ratio is a good ratio for us to continue investing in the business. We talked about investing for that long-term growth in digital gaming. We talked about doing the live-action production. And those are the types of investments that we think -- as Brian and I think back to 20 years ago when we joined the company, how different it was, I'll bring us full circle again to the beginning, how different we are today, it's making sure that, that Hasbro, which is almost a 100-year-old company, continues to look to the future and evolve and invest, so we can keep making those pivots and keep growing over time. So that's a good ratio for us. So we are looking to get back to that ratio in that time frame. And we're on track with our integration and our synergy targets.

Well, it's also so hardening, and it's great to see the inventiveness, the creativity and curiosity of our teams really knows no bounds. So while we always expected there to be new initiatives coming from different parts of the business, as we spend time together today with our preschool lifestyle fashion center of excellence to the team that brought us Peppa Pig and PJ Masks and Ricky Zoom, we're also seeing new brands being created from that group that will come to the market over the next 2, 3, 4 years that should enhance and expand the product portfolio for kids, fans and families in that space. And we know that while the revenues historically for that part of the business were about 20% of eOne's revenues, we also know the EBITDA was very valuable at nearly half of the total EBITDA for the eOne business. So our expectation over the longer term, medium and longer term, is that we will run a broader portfolio of brands and then also add the reimagination of the My Little Pony brand, LITTLEST PET SHOP, Pound Puppies and other brands that today are ripe for reinvention and all being conducted by that team alongside of our teams around the world who will create toys and games and consumer products and other points of engagement, whether it be a tour of characters at local markets or whether it's toys and innovation or the online consumer products done extensively through other categories.

And if I could, Brian, just to help shape the building blocks of this. Over the last 3 years or so, you've had some pretty distinct changes in your distribution on a global basis. Certainly, you mentioned Toys"R"Us earlier. But just help shape up how you think that foundation is a lot more solid now. And also on the supply side, last year, with the headlines around tariffs really forced the entire industry to rethink the dependence on China, you've done a great job of starting to migrate some of that manufacturing elsewhere. So 2 foundation points or anchors, if you think about distribution of physical goods and supply of physical goods, maybe just quickly bring us all up to speed on kind of where you are now on solidifying that foundation to build on moving ahead.

Yes. So you think about, first, the strategic sourcing footprint. This year it will be around 50% out of China and then an array of other geographies around the world, including about 8 places in the United States, depending on whether you're looking at trading card games, games or PLAY-DOH, so about 20% of the revenues for the U.S. in the U.S. and an opportunity to continue to look at ways of building that capability, then India, Vietnam and other markets around the world where we built additional capability and see additional opportunity as we go forward and continuing to look at just what's the right size for the China footprint as we continue to look at global demand and global sourcing as well, an Irish factory, again, all third party, all asset-light, an Irish factory that helps us supply games and products to the European and Eastern European marketplace. As we look at the retail footprint, it's a very exciting time. We built capabilities to accelerate in e-com and omnichannel. And this year, we are seeing a giant step-up in e-com and omnichannel. Our strongest partners globally, some of our top retailers globally, historically, are some of the big success stories out of this year. They are, frankly, teaching the consumer to enjoy new services and new ways of purchasing product. Who would have thought just a few years ago that people would be buying online and driving by their local Target store, Walmart store and opening their trunk for a curbside pickup of products? Who would have thought that people would be buying online and picking up in-store, maybe topping up what was their list from in-store from online with additional in-store products that they were looking for, the things they hadn't thought about? They become more impulse purchases, but not necessarily walking the entire store. And then over time, people still love shopping and getting back to a more robust overall in-store shopping experience that will happen over time. So we've increased the number of retail doors that we go into globally by tens of thousands. That's come from a product development strategy that enabled us to make products that were right price and right margin for those other retailers. You can't just take, for example, an action figure that would have sold at $10 at a Walmart, take that and sell that at a dollar store and believe that you could make that work for you long term. You have to make a product for the dollar store as well as the emerging market that might sell at $3, $4, $5, $6, and still be able to make a fair margin with a product that would be incredibly satisfactory and enthralling to a kid or a consumer. So that's taken years to develop our product development strategy that allowed us to have that expanded footprint. And we're seeing that really benefiting us as we go forward. Clearly, in the short term, there's been some headwinds to that. Clearly, the essential stores were opened during the period. I want to remind shareholders and the audience that in Q2, about 1/3 of retail at any given time was probably closed. We do have inventories sitting at those retailers that now people are beginning to purchase again. But that's a very short-term dynamic for Q2 that does not indicate where we'll be by the holiday of 2020. And again, we expect a really good holiday, a very solid full year. And 2021 is shaping up to be outstanding.

You walked into my next question. When you guys talked about 2021 at Toy Fair, there was a palatable enthusiasm, entertainment, new product initiatives, new brand initiatives. So maybe just spend one minute or so, just giving us a little sneak peek into 2021 and where some of that enthusiasm is derived from.

Sure. I'll let Deb kick it off because she's our biggest emissary of what the teams are doing. We've -- just going through global sales and marketing meetings right now, and it's amazing to see the array of initiatives the team is putting together. I'll let her kick it off, and then I'll fill in.

Great. Thanks, Brian. Now it is amazing now. I mean, it's amazing as you think about not just the top line but the bottom line because those teams that are together right now would have all been in Rhode Island spending lots of money, but they're not. So they're doing it virtually. But it's -- all these great ideas, as Brian was saying, as we look at 2021, we've had a few entertainment properties. I'll look at some of our partner brands that have moved from 2020 to 2021. So we have this opportunity there that's there already. We talked about on our own brand side. We have some of our own entertainment that right now is scheduled for 2020 but is more likely than not going to move to 2021. All the production -- and we've talked about the orders we have on production now that we'll be able to deliver in 2021. And just from a revenue recognition standpoint, we'll be able to start to make it now. But again, that revenue comes when we deliver. So 2021 is really shaping up to be a very good year for us overall.

Yes. And I think as you look at the new initiatives for 2021, recognize we'll begin to in-source Peppa, PJ and Ricky in certain key categories that Hasbro has -- where Hasbro has specific expertise. We will still license out major parts of those brands because we do have great licenses and great consumer product categories that we want to continue to leverage and exploit. And then as we go forward, you're going to see whether it's unscripted television or scripted television coming for Hasbro brands. So whether engaging an audience in a giant-sized game show or whether we begin to engage an audience in bespoke episodic content, all those elements are being built now. The teams are very engaged. We have dozens of initiatives being worked on between the teams. And while one might have said, wouldn't it be great to have everybody in one room together as we integrate eOne and Hasbro, the fact is, everybody's virtually integrated all the time. And I don't have to tell this audience that we all feel like we're more available and more engaged with one another on a Zoom call than we are on a literal call or a conference together. And so again, just a real opportunity where the teams have embraced the fact that we can get to one another all the time and they are building substantial plans for the future.

A final thought. So I want to just connect strategy to financials, and Deb, maybe bring you in on this, too. But over the last several years, you've had good solid mid-single-digit top line growth. The returns have expanded. The cash flow has expanded. Now you've put together this incredible capabilities wheel. As you look out over the next few years, are there any inhibitors or structural risks to achieving that or more? Brian, you've mentioned a couple times just a level of vision to really extrapolate more value out of this portfolio or these bolts of brands that you own. Maybe talk a little bit about as you think about the financial footsteps forward. What should we be looking for as key milestones along that improved return on invested capital trajectory?

Sure. Well, look, I'll let -- I'll have Deb comment on the potential for the company over time, too. But just think about the average operating profit margin for a Hasbro brand versus our underlying corporate average operating profit margin. So as we drive more of our franchise brands, as we add new franchise brands to our owned and operated brands that will be in the marketplace, as we continue to put new brands out there that are owned by Hasbro revenues, consumer products, digital gaming from Hasbro, so double the size of Wizards of the Coast that adds to the operating margin of the company over time and of course, sizable revenues. As we add new IP that's Hasbro vault IP to the marketplace, that's new brands that will be in the marketplace for the live-action television that leads to fans and families, but also on the preschool side as the eOne preschool center of excellence adds new brands as we grow the current brands. Those new brands also have that enhanced operating margin profile and strong EBITDA margins that we had seen historically from eOne. And then you look at our consumer products business. Every time you tell a story around a brand, every time you engage a consumer and audience, that consumer products business grows because you've created that resonance or salience. And consumer products enjoys high operating profit margins relative to company average. So the profile of where we intend to grow will only continue to enhance the operating margin leverage for the company. Deb?

Yes. I agree. As we get our synergies, you see the operating profit leverage coming from there as well on the cost side. But also as we meet our debt targets, we pay down the debt and we take the interest burden of the company as well. And while we have amortization, that acquisition is going to last us for a long time to come, right? And the benefits we'll get from being able to drive these new brands forward, we really see the opportunity to grow our margins and our earnings per share profile over time.

That's great. I had just a few questions that came in over e-mail during the session, but I think we were able to tackle them in the context of our prepared topics. Brian, I'm just going to let you close it out. Any final thoughts that you'd like to leave with the audience. I know we talked a lot about Q2, so just some good things for us to remember going into the Q2 cycle. But anything else as you step back and think about what lies in front of you and the opportunities.

Yes. Look, I think that you started this session kind of where I'd like to end it, which is we have a management team that has been together for more than a decade. And that understanding of one another, understanding of the global marketplace, understanding of consumer insights and the new capabilities and tools that we've brought on portends incredibly good things for our company in the areas of both top line and bottom line growth over time. We built the capabilities. We wanted to make sure that our company could reliably and relentlessly drive new brand creation, new brand salience and new brand resonance. And so you'll see that from us. And we feel like, again, because we've been together and we've been through many different challenges together, we're also the team that understands how to work in this environment and to come out the other side very successfully. So that's what I would say.

Fantastic closing thoughts. I'm showing that we're almost right at the top of our session. So I am going to leave it there. Thank you, everyone. Brian and Deb, really appreciate the time today. Everyone, please stay safe and well, and we'll talk again soon.

Thank you.

Thank you.