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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-28 · 145 added, 154 removed, 209 unchanged (59% of the section changed)

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Strategic Risks Related to Our Business

Our business will suffer if we are not successful in executing our strategy and transformation initiatives.

Our strategy focuses on fewer and bigger brands that we believe have the largest potential, while emphasizing bottom-line growth, operational discipline, enhanced focus on our fans and commitment to shareholder return.

In mid-2022, we formed the Hasbro Transformation Office ("HTO"), a team of leaders dedicated to designing and running a simple, efficient and effective business aligned with our strategy.

The HTO is supporting our Operational Excellence Program, an ongoing enterprise-wide cost savings initiative intended to improve our business through specialized organizational programs that include targeted cost-savings, supply chain transformation and certain other restructuring actions designed to drive growth and enhance shareholder value.

There are no assurances that we will achieve these cost savings in the amounts we anticipate or within the anticipated timeframes or at all.

In addition, any cost savings that we realize may be offset, in whole or in part, by reductions in net sales or through increases in other expenses.

Failure to realize the expected cost savings from these cost savings programs could have an adverse effect on our business, financial condition, and results of operations.

Failure to execute our strategic plan and transformation initiatives may harm our business.

Our ability to successfully implement and execute these plans and initiatives in a timely basis, if at all, is dependent on many factors, including, among other things:

• our ability to successfully innovate, design, develop, price, commercialize and grow a select group of brands across our Blueprint to global consumers in a wide array of markets;

• our ability to successfully grow our digital gaming business;

Our business will suffer if we are not successful in executing our business strategy.

Our business strategy has evolved to focus on extending the reach of our toy and game products globally to improve our position in the marketplace, increase revenue and increase operating profit.

Failure to execute our strategic plan may harm our business.

Our ability to successfully implement and execute our plans and initiatives in a timely basis, if at all, is dependent on many factors, including, among other things:

• our ability to successfully innovate, design, develop, price, commercialize and grow a focused group of brands to global consumers in a wide array of markets;

• our ability to successfully grow our digital gaming, licensing, and direct-to-consumers business;

• our ability to optimize our toy business, including through right-sizing our cost structure and creating efficiencies in our operations;

• our ability to implement appropriate systems and processes to obtain and analyze data and insights from consumers to enable us to make informed decisions about priorities and consumer preferences;

• our ability to successfully develop products that gain sufficient consumer interest;

• our ability to gain market share in our focus categories;

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• our ability to successfully license, divest, sell, or otherwise cease certain parts of the business that are not as profitable as other areas or are not core to the business.

Consumer interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors, making it difficult to design and develop innovative products, play patterns and entertainment offerings which are and will continue to be popular with children, families and audiences.

Central to our mission is to Create Magic Through Play.

This means we need to design innovative toys and games that create memorable, social and collectible experiences of play and entertainment.

Our ability to successfully create innovative toys and games is affected by the interests of children, families, fans and audiences evolve quickly and can change dramatically from year to year and by geography.

To be successful, we must correctly

anticipate the types of products, play patterns and entertainment which will capture consumers’ interests and imagination, and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers’ limited time, attention and spending.

Although we utilize our brand insights platform to gather data and analytics to help us make informed decisions, it is very difficult to predict consumer acceptance with certainty due to, among other things, the ever-increasing utilization of technology at younger and younger ages, social media and digital media in entertainment offerings, and the increasing breadth of products and entertainment available to consumers.

Evolving consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of products, technology and entertainment which compete for consumer interest and acceptance, create an environment in which some products, technology and entertainment offerings can fail to achieve consumer acceptance or can be popular during a certain period of time but then be rapidly replaced.

As a result, our products and entertainment offerings can have short consumer life cycles with no guarantee of success.

Consumer acceptance is even more critical for our toy business due to the recent decline in the overall toy industry.

Consumer acceptance of our or our partners’ entertainment offerings is also affected by outside factors, such as critical reviews, promotions, the quality and acceptance of films and television programs and content released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and public tastes generally, all of which could change rapidly and most of which are beyond our control.

There can be no assurance that television programs and films we or our partners develop, produce or distribute will obtain favorable reviews or ratings, that films we develop, produce or distribute will be popular with consumers and perform well at the box office or in other distribution channels, or that broadcasters will license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our library.

If we devote time and resources to developing and marketing products or entertainment that consumers do not accept, do not find interesting enough to buy in sufficient quantities to be profitable to us or do not purchase due to the pricing of a product, our revenues and profits may decline and our business performance may be harmed.

Similarly, if our product offerings and entertainment fail to correctly anticipate consumer interests, our revenues and earnings will be reduced.

Our business will suffer if we are unable to innovate, develop and invest in digital gaming.

A key component to the success of our strategy is to continue to innovate, develop and invest in digital gaming, particularly through our Wizards of the Coast and digital gaming business.

We have invested substantially in this business and as a result it has seen significant growth over the past several years.

Our business will suffer if we are unable to develop, publish and commercialize digital games.

A key component to the success of our strategy is to continue to develop, publish and commercialize digital games.

We have invested substantially in our digital gaming business and as a result it has seen significant growth over the past several years.

Continued digital game development is a key growth factor for the future, including AAA games, games as a service and licensed games.

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As a result, we face increased risk of not achieving sales sufficient to recover our costs and we may lose money on the development and sale of these products.

Additionally, designing, developing and producing digital gaming and other technologically advanced or innovative products often relies on third parties and requires different competencies and follows different timelines than traditional toys and games.

There is no guaranty that a given game will be successful and it is possible we may cease development on a game after significant investment.

As a result, we face the risk of significant write-offs in the event a digital game’s development is discontinued prior to commercialization or is not as commercially successful as we planned.

Designing, developing and producing digital gaming and other technologically advanced or innovative products often relies on third parties and requires different competencies and follows different timelines than traditional toys and games.

Delays in the design, development or production of our digital gaming products could have a significant impact on our success.

In addition, the pace of change in product offerings and consumer tastes in the electronics and digital gaming areas is potentially even greater than for our other products and this pace of change is expected to accelerate as artificial intelligence is further incorporated into the development of games.

If a digital game fails to gain consumer acceptance early in its life cycle, there are limited opportunities to gain such acceptance through secondary launches or distribution through alternative platforms.

If a digital game fails to

gain consumer acceptance early in its life cycle, there are limited opportunities to gain such acceptance through secondary launches or distribution through alternative platforms.

This pace of change or lack of consumer acceptance means that the window in which a digital gaming product can achieve and maintain consumer interest may be even shorter than traditional toys and games.

If we fail to respond to or capitalize on the rapid technological development in the entertainment industry, including changes in entertainment delivery formats, our business could be harmed.

The entertainment industry continues to experience frequent change driven by technological development and audience viewing preferences, including developments with respect to the formats through which films, television programming, and other episodic content are delivered to consumers.

With rapid technological changes and expanded digital content offerings, the scale and scope of these changes have accelerated in recent years.

Consumers are continuing to increase their access to television, film and other episodic content on streaming and digital content networks.

Similarly, some film releases go direct to streaming channels as opposed to theaters or at the same time as theaters or have gone to streaming channels after only a short period of time in the theaters.

Technological as well as other trends in the industry have caused significant disruption to the retail distribution of entertainment offerings and have caused, and could in the future cause, a negative impact on sales of our products and other forms of monetization of content, especially those which are reliant on box office success.

Third party licensees and partners of our brands or intellectual property may fail to honor their obligations to us or their actions may put us at risk.

Licensing certain of our brands and intellectual property to third parties is also a significant part of our business strategy.

Under these and other partner arrangements, we lose some control over how the brand or intellectual property is used, potentially leading to misuse or misrepresentation.

The actions of third-party licensees and partners may put our business and reputation at risk if they do not maintain the quality of our products or otherwise do not operate in accordance with our standards.

These third parties may fail to pay royalties or other agreed upon fees, which could lead to financial losses.

It is also possible that these third parties could infringe on others intellectual property rights, which could result in legal issues for us.

Further, disruptions in the financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect these third-party licensees and may impact their ability to honor their obligations to us or we may cease our arrangements with them.

Alternative arrangements may not be available to us on commercially reasonable terms or we may experience business interruptions upon a transition to an alternative partner.

We may not realize the full benefit of our licenses from third parties if the licensed material has less market appeal than expected, if revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties or if licenses are not renewed.

The success of entertainment and other properties for which we have a license, such as licenses we have with The Walt Disney Company for the MARVEL and STAR WARS properties, and our ability to successfully market and sell related products, can significantly affect our revenues and profitability.

In some cases, we may only obtain a license for certain aspects of an intellectual property or for certain territories, which means that some of our competitors may also use the same intellectual property for other categories or in different territories.

If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the associated products we offer.

In addition, competition in our industry for access to entertainment properties can lessen our ability to secure, maintain, and renew popular licenses to entertainment products on beneficial terms, if at all, and to attract and retain the talented employees necessary to design, develop and market successful products based on these properties.

If we are unable to realize the full benefit of an important license, or if an important license is not renewed or is otherwise terminated, our business results may be harmed.

The license agreements we enter to obtain these rights usually require us to pay minimum royalty guarantees that may be substantial, and in some cases may be greater than what we are ultimately able to recoup from actual sales, which could result in write-offs and could harm our results of operations.

Acquiring or renewing licenses may require the payment of minimum guaranteed royalties that we consider to be too high to be profitable, which may result in losing licenses that we currently hold when they become available for renewal, or not pursuing certain new licenses.

Additionally, as a licensee of entertainment-based properties, we cannot guarantee that a particular property or brand will translate into successful toy, game or other family entertainment products, and underperformance of any such products may result in reduced revenues and operating profit for us.

Consumer interests change quickly and acceptance of toys and games and entertainment offerings are influenced by technological and outside factors, making it difficult to design and develop innovative products, play patterns and entertainment offerings which are and will continue to be popular with children, families and audiences.

Our ability to successfully create innovative toys and games is affected by the interests of children, families, fans and audiences which evolve quickly and can change dramatically from year to year and by geography.

To be successful, we must correctly anticipate the types of products, play patterns and entertainment which will capture consumers’ interests and imagination, and quickly develop and introduce innovative and value driven products and engaging entertainment which can compete successfully for consumers’ limited time, attention and spending.

It is very difficult to predict consumer acceptance with certainty due to, among other things, the increasing utilization of technology at younger and younger ages, social media and digital media in entertainment offerings, the increasing breadth of products and entertainment available to consumers, and outside factors such as critical reviews and promotions.

acceptance or can be popular during a certain period of time but then be rapidly replaced.

As a result, our products and entertainment offerings can have short consumer life cycles with no guarantee of success.

Consumer acceptance is even more critical for our toy business due to the recent decline in the overall toy industry and the impact of declining birthrates globally.

Failure to correctly anticipate consumer interests, will harm our revenues and earnings.

Technological as well as other trends in the entertainment industry, such as the continuing shift to streaming platforms, have caused significant disruption to the retail distribution of entertainment offerings and have caused, and could in the future cause, a negative impact on sales of our products and other forms of monetization of content, especially those which are reliant on box office success.

Rules governing new technological developments, such as developments in artificial intelligence remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our intellectual property and how we create our products and games.

We may lose opportunities to capitalize on changing market dynamics, technological innovations or consumer tastes if we do not adapt to such changes in a timely manner.

The overall effect that technological development and new digital distribution platforms have on the revenue and profits we derive from our entertainment content, including from merchandise sales derived from such content, and the additional costs associated with changing markets, media platforms and technologies, is unpredictable.

If we fail to accurately assess and effectively respond to changes in technology and consumer behavior in the entertainment industry, our business may be harmed.

If we fail to accurately assess and effectively respond to changes in technology and consumer behavior in the markets in which we operate, our business may be harmed.

Failure to achieve of our anticipated cost-savings may impact our ability to operate efficiently and profitably.

In mid-2022, we committed to an operational excellence program focusing on designing and running a simple, efficient and effective business aligned with our strategy.

There are no assurances that we will achieve cost savings in the amounts we anticipate or within the anticipated timeframes or at all.

In addition, any cost savings that we realize may be offset, in whole or in part, by reductions in net sales or through increases in other expenses.

Failure to realize the expected cost savings from these cost savings programs could have an adverse effect on our business, financial condition, and results of operations.

The industries in which we compete are highly competitive.

If we are unable to compete effectively with existing or new competitors, our revenues, market share and profitability could decline.

The play industry is highly competitive.

We compete in the U.S.

and internationally with a wide array of large and small manufacturers, marketers, and sellers of toys and games, products which combine traditional and digital play, digital gaming products, and other consumer products, as well as with retailers who offer such products under their own private labels often at lower prices.

In addition, we compete with companies focused on building their brands across multiple product and consumer categories, including through entertainment offerings.

Across our business, we face competitors who are constantly monitoring and attempting to anticipate consumer tastes and trends, seeking ideas which will appeal to consumers, and introducing new products that compete with our products for consumer acceptance and purchase.

The play industry is highly competitive, and if we fail to compete successfully, our business may be harmed.

Our primary competition comes from toy and game companies, digital gaming companies and digital gaming developers.

We compete with several large companies in our product categories, as well as with many smaller United States and international game and toy designers, manufacturers and marketers.

In certain instances, we also compete with large retailers, who offer such products under their own private labels, often at lower prices.

Competition is based primarily on meeting consumer preferences and on the quality and play value of our products and experiences.

To a lesser extent, competition is also based on product pricing.

We expect that as the use of artificial intelligence becomes more prevalent, we will see increased competition from those using such technology to develop games, toys and content.

In addition to existing competitors, the barriers to entry for new participants in the play industry are low, and the increasing importance of digital media and the heightened connection between digital media and consumer interest, has further increased the ability for new participants to enter our markets, and has broadened the array of companies we compete with.

New participants with a popular product idea can gain access to consumers and become a significant source of competition for our products in a very short period of time.

These risks will be heightened if the use of artificial intelligence in developing products becomes safer, more accepted and otherwise more broadly adopted.

These existing and new competitors may be able to respond more rapidly than us to changes in consumer preferences or may design products that are more desirable than ours.

These existing and new competitors may respond more rapidly than us to changes in consumer preferences or may design products that are more desirable than ours.

Our competitors’ products may achieve greater market acceptance than our products and potentially reduce demand for our products, lower our revenues and lower our profitability.

Our entertainment business, which following the sale of our eOne film and television business is primarily focused on Hasbro and family-oriented content, faces global competition from major film studios and television production companies as well as other independent distributors and independent content producers.

Many of these competitors release a large number of content offerings annually and command a significant share of box office revenues, streaming revenues, and television airtime, as well as other independent film and television production or distribution companies.

Some of these competitors have substantially greater marketing and financial resources than we do and may be able to compete aggressively on pricing in order to increase box office or streaming revenues, obtain distribution rights and obtain television airtime.

The competition we face may cause us to lose market share or achieve lower prices for productions based on our intellectual property, which could harm our business.

We may not realize the full benefit of our licenses if the licensed material has less market appeal than expected, if revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties or if licenses are not renewed.

The success of entertainment properties for which we have a license, such as licenses we have with The Walt Disney Company, and the ability of us to successfully market and sell related products, can significantly affect our revenues and profitability.

In some cases, we may only obtain an exclusive license for certain aspects of an IP or for certain territories, which means that some of our competitors also have the right to use the same IP for other categories or in different territories.

If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the associated products we are offering.

If we are unable to realize the full benefit of an important license, or if an important license is not renewed or is otherwise terminated, our business results may be harmed.

sales, which could result in write-offs which, in turn, would harm our results of operations.

We may not realize the anticipated benefits of acquisitions, dispositions or investments in joint ventures, or those benefits may be delayed or reduced in their realization.

We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to more effectively market our products, develop our competencies or grow our business.

In some cases, we expect that the integration of the companies that we may acquire into our operations will create production, marketing and other operating, revenue or cost synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies and other advantages.

In some cases, we expect that the integration of the companies that we may acquire will create production, marketing and other operating, revenue or cost synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies and other advantages.

However, we cannot be certain that these synergies, efficiencies and cost savings will be realized.

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In other cases, we may acquire or invest in companies that we believe have strong and creative management, in which case we may plan to operate them more autonomously rather than fully integrating them into our operations.

We cannot be certain that the key talented individuals at these companies would continue to work for us after the acquisition or that they would develop popular and profitable products, entertainment or services in the future.

Acquisitions of businesses and brands could also be adversely affected by changes in our business strategy or external factors.

For example, with our Blueprint strategy, we determined to sell, license or otherwise dispose of certain non-core assets, such as the recently completed sale of eOne Film and TV to Lionsgate.

We cannot guarantee that any acquisition, disposition or investment we may make will be successful or beneficial, and acquisitions, dispositions and investments can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

We cannot be certain that the key talented individuals at these companies

would continue to work for us after the acquisition or that they would develop popular and profitable products, entertainment or services in the future.

Acquisitions of businesses and brands could also be adversely affected by changes in our business strategy or external factors, such as any decision to sell, license or otherwise dispose of certain assets, such as our sale our Entertainment One film and television business ("eOne Film and TV") to Lions Gate Entertainment Corp., Lions Gate Entertainment Inc.

and Lions Gate International Motion Pictures S.à.r.l (collectively "Lionsgate") in December 2023.

We cannot guarantee that any acquisition, disposition, license or investment we may make will be successful or beneficial, and acquisitions, dispositions, licenses and investments can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

Operational Risks Related to our Business

If we are not successful in transforming our supply chain operations, our business may be harmed.

As part of our transformation efforts, we are continuing to optimize our supply chain by improving our systems and sourcing to enable efficient product deployment, enhance product quality and safety, drive efficiency in transportation and our fulfillment centers, and strengthen our direct-to-consumer operations.

This is a long-term project, with no assurance that we will achieve the anticipated efficiencies and benefits from such efforts.

If the transformation of our supply chain operations is not successful, our business may be harmed.

Further we may not achieve our anticipated cost savings, and we may face costly inefficiencies or other supply chain disruptions.

Our business may be harmed by the imposition or threat of tariffs, including reciprocal or retaliatory tariffs, in markets in which we operate which could increase our product costs and other costs of doing business, impact consumer spending, or lower our revenues and earnings.

The current global tariff environment is uncertain.

For products manufactured outside the U.S., tariffs increase the cost of our products.

Tariffs may impact our sales and reduce our profitability.

Tariffs may also impact consumer spending if products become more expensive or consumers have less discretionary income or consumer spending power.

The current tariff environment, particularly the imposition or threat of tariffs on products manufactured in China for import into the U.S.

as well the potential for retaliatory and reciprocal tariffs in other countries in which we do business, has in the past negatively impacted our business and may in the future negatively impact our business, sales and profitability.

The threat and imposition of tariffs have resulted in the past, and may in the future result, in the elimination of some direct import orders, where customers take ownership of products near the source of supply and import the product themselves into the U.S., in favor of shifting to domestic orders, which requires us to ship the products to the U.S., and import and warehouse the products prior to delivery to the customer.

This shift to domestic orders raises the cost to us, can result in delays in the time of a sale, and may result in the potential loss of some orders entirely due to the lack of timely supply or other delays.

We cannot assure you that we will be able to successfully implement actions to lessen the impact of tariffs imposed on our products, including any changes to our supply chain, logistics capabilities, sales policies or pricing of our products.

An inability to develop, introduce and ship planned products, product lines and new brands in a timely and cost-effective manner could result in excess inventory, a shortage of products or otherwise damage our business.

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This risk is heightened by our customers’ compressed shipping schedules and the seasonality of our business.

The risk is also exacerbated by the increasing sophistication of many of the brands and products we are designing and developing in terms of combining digital and traditional technologies, and providing greater innovation and product differentiation.

Unforeseen delays or difficulties in the development process, significant increases in the planned cost of development, or changes in anticipated consumer demand for our products and new brands may cause the introduction date for products to be later than anticipated, may reduce or eliminate the profitability of such

products, result in excess inventory, or, in some situations, may cause a product or new brand introduction to be discontinued.

The risk is exacerbated by the increasing sophistication of many of the brands and products we are designing and developing in terms of combining digital and traditional technologies, and providing greater innovation and product differentiation.

If we are not successful in transforming our supply chain operations, our business may be harmed.

We are continuing to optimize our supply chain by improving our systems and sourcing to enable efficient product deployment, enhance product quality and safety, drive efficiency in transportation and our fulfillment centers, and strengthen our direct-to-consumer operations.

This is a long-term project, with no assurance that we will achieve the anticipated efficiencies and benefits from such efforts.

If the transformation of our supply chain operations is not

successful, our business may be harmed.

Further we may not achieve our anticipated cost savings, and we may face costly inefficiencies or other supply chain disruptions.

If we are unable to navigate through global supply chain challenges, our business may be harmed.

In recent years, we faced global supply chain challenges with the production and delivery of some products being delayed due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

We experienced increases in material costs and shortages for some of our products, due in part to higher wages being paid due to labor shortages in China and Vietnam, as well as periodic and unpredictable manufacturing shut-downs or slow-downs due to COVID-19.

While we have taken actions to lessen the impact of these supply chain challenges, such as through the use of alternative ports and air freight, and accelerating inventory purchases in certain cases to ensure product availability for customers, such actions have resulted in higher costs and there can be no assurance that the actions taken will be effective.

We have periodically faced global supply chain challenges with the production and delivery of some products being delayed due to logistics, including labor, trucking and container shortages, strikes, port congestion and other shipping disruptions.

We attempt to take actions to lessen the impact of these supply chain challenges, such as through the use of alternative ports and air freight, and adjusting inventory purchases in certain cases to ensure product availability for customers, though these actions have resulted and may in the future result in higher costs.

We have also increased prices in some cases to help offset increased costs.

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If we are unable to adapt our business to the continued shift to direct-to-consumer, our business may be harmed.

Part of our strategy is to build lifelong relationships with our consumers through direct-to consumer relationships created through ecommerce, social media, digital games and services.

If we are unable to effectively connect with consumer through these channels, or business may be harmed.

Part of our strategy is to increase our reach with our consumers through direct-to consumer relationships created through ecommerce, social media, digital games and services.

If we are unable to effectively connect with consumers through these channels, our business may be harmed.

Similarly, if our technology and systems used to support direct-to-consumer order processing are not effective, our ability to deliver products on time on a cost-effective basis may be adversely affected.

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We depend upon a relatively small customer base to sell the majority of our products.

For the fiscal year ended December 31, 2023, Walmart, Inc.

During 2024, Wal-Mart, Inc.

and Amazon.com, Inc.

each accounted for approximately 11% of our consolidated net revenues.

accounted for approximately 12% and 11%, respectively, of our consolidated net revenues.

Similarly, sales of certain products of our Wizards business depend in part on the success of specialty hobby stores.

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Any customer could reduce its overall purchase of our products and reduce the number and variety of our products that it carries and the shelf space allotted for our products.

In addition, increased concentration among our customers could negatively impact our ability to negotiate higher sales prices for our products and could result in lower gross margins than would otherwise be obtained if there were less consolidation among our customers.

In addition, increased concentration among our customers could negatively impact our ability to negotiate higher sales prices for our products and could result in lower margins than would otherwise be obtained if there were less consolidation among our customers.

Furthermore, as we experienced with the bankruptcy of certain of our retailers in the past, the failure or lack of success of a significant retail customer could negatively impact our revenues and profitability.

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These international operations, including operations in emerging markets, have unique consumer preferences and business climates, present additional challenges and are subject to risks that may significantly harm our sales, increase our costs or otherwise damage our business, including:

• The imposition of tariffs as described in these risk factors, trade sanctions, quotas, border adjustment taxes or other protectionist measures;

• Political instability, civil unrest and economic instability;

• Currency conversion risks and currency fluctuations;

• The imposition of tariffs, trade sanctions, quotas, border adjustment taxes or other protectionist measures;

• Potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business;

• Political instability, civil unrest and economic instability, such as has recently been experienced between Russia and Ukraine, which has resulted in a suspension of our business activities in Russia;

• Greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;

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Our reliance on third-party manufacturers to produce our products, particularly in China, the U.S., Vietnam and India, presents risks to our business.

All our products are manufactured by third-party manufacturers, the majority of which are in China, with a significant amount of our product sourcing also coming from manufacturers the U.S., Vietnam and a lesser amount from India.

Most of our toy and game products are manufactured by third-party manufacturers, the majority of which are in China, with a significant amount of our product sourcing also coming from manufacturers in the U.S., Vietnam, India and Japan.

Should changes be necessary, our external sources of manufacturing can be shifted, over a significant period of time, to alternative sources of supply.

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This delay could significantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.

Given that our toy and game manufacturing is conducted by third-party manufacturers, health conditions, such as COVID-19, and other factors affecting social and economic activity where our manufacturers are located may affect the movement of people and products into and from those locations to our major markets, including North America and Europe.

Given that our toy and game manufacturing is conducted by third-party manufacturers, health conditions and other factors affecting social and economic activity where our manufacturers are located may affect the movement of people and products into and from those locations to our major markets, including North America and Europe.

Further, increases in the costs of labor and other costs of doing business in markets where we manufacture, could also have a significant negative impact on our operations, revenues and earnings.

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Natural disasters or health pandemics impacting our manufacturers had and can have a significant negative impact on our business.

Further, the imposition of tariffs, border adjustment taxes, trade sanctions or other regulations or economic penalties by the U.S.

or the European Union against products imported by us from China or other foreign countries, or the loss of “normal trade relations” status with China or other foreign countries in which we operate, could significantly

increase our cost of products imported into the U.S.

Further, as described elsewhere, the imposition or threat of tariffs, border adjustment taxes, trade sanctions or other regulations or economic penalties by the U.S.

or Europe, shift more orders from direct import to domestic sales, put additional shipping and warehousing burdens on us, delay the time of our sales to retailers, result in lost sales, and otherwise harm our business.

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We compete with many other potential employers in recruiting, hiring and retaining our management team and our many other skilled officers and employees around the world.

In the digital gaming and entertainment industries, experienced personnel and top creative talent are in high demand and competition for their talent is intense.

The continuing prevalence of remote and hybrid work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely or hybrid opens up more employment opportunities.

Additionally, as we continue to transform our business to execute on our strategic plan, we have reduced our headcount and may otherwise lose employees due to our decision to eliminate or reduce the amount of work performed relative to non-core aspects of our business and the optimization of our business.

The impact of reductions in workforce or failing to retain key employees can be high due to increased risk of loss of important information, key knowledge and relationships, loss of creative talent, lost productivity, hiring and training costs, all of which could result in lower profitability or otherwise harm the business.

Experienced personnel and top creative talent in the markets in which we operate are in high demand and competition for their talent is intense.

The possibility of moving our corporate headquarters may impact our ability to retain and attract key employees.

Further, the continuing debate and practice of remote and hybrid work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely or hybrid opens up more employment opportunities.

As we continue to transform our business to execute on our strategic plan, we have reduced our headcount and may otherwise lose employees due to our decision to eliminate or reduce the amount of work performed relative to non-core aspects of our business and the optimization of our business.

We cannot guarantee that we will recruit, hire or retain the key personnel we need to succeed.

We have experienced significant changes in our leadership in a relatively short period of time, with most key members of executive leadership having been appointed within the past couple of years.

Our future success will depend on the leadership of our key executives and their ability to navigate the organization through our transformation efforts.

We have also experienced significant changes in our leadership in a relatively short period of time, with most key members of executive leadership having been appointed within the past few years.

Our future success will depend on the leadership of our key executives and their ability to navigate the organization through our transformation efforts and renewed strategy.

Our loss of key management or other key employees, inability to drive success through our new leaders, or our inability to retain or hire talented people with the skill sets we need for our diverse and changing business, could significantly harm our business.

If we fail to develop diverse top talent, we may be unable to compete and our business may be harmed.

We promote a diverse and inclusive work environment.

To compete successfully, we must continuously develop a diverse group of talented people representative of our fans and customers which we believe will foster new ideas and perspectives that will benefit our business, including through enhanced product innovation.

Competition for diverse talent is intense.

The recent restructuring changes in our business may make it more difficult to attract and retain diverse talent.

We cannot guarantee we will achieve our goals or that our actions will result in expected benefits to our business.

Our business may be harmed if we are unable to protect our critical intellectual property rights.

Our intellectual property, including our trademarks and tradenames, copyrights, patents, and rights under our license agreements and other agreements that establish our intellectual property rights and maintain the confidentiality of our intellectual property, is of critical value.

confidentiality of our intellectual property, is of critical value.

We rely on a combination of trade secret, copyright, trademark, patent and other proprietary rights laws to protect our rights to valuable intellectual property in the U.S.

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and around the world.

In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights, as well as the risk of unauthorized third parties copying and distributing our entertainment content or leaking portions of planned entertainment content.

In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights, as well as the risk of unauthorized persons copying and distributing our digital or entertainment content or leaking portions of planned digital or entertainment content.

We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources.

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We rely extensively on various information technology systems and software applications to manage many aspects of our business, including product development, management of our supply chain, sale and delivery of our products, analytics, royalty and financial reporting and various other processes and transactions.

As part of our transformation efforts, we are also upgrading some of our technology and systems, and, as described elsewhere, we are relying on the systems of third-party outsourcers for certain critical functions.

As part of our transformation efforts, we are upgrading some of our technology and systems, and we are relying on the systems of third-party outsourcers for certain critical functions.

We are critically dependent on the integrity, security and consistent operations of these systems and related back-up systems.

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Cyber-attacks 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 outsourcers and business partners in certain cases where doing so is necessary 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 outsourcers and partners may also be subject to data intrusion or otherwise compromise the protection of

In addition, we provide confidential and proprietary information to our third-party outsourcers and business partners in certain cases were doing so is necessary to conduct our business.

The risk of data loss or breaches is heightened during uncertain economic times, changes in business strategy and reductions in workforce.

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Global and Economic Risks Relating to our Business

Outbreaks of communicable infections, diseases, or public health pandemics in the markets in which we and our employees, consumers, customers, partners, licensees, suppliers and manufacturers operate, could substantially harm our business.

Outbreaks of communicable infections, diseases or other adverse public health conditions, such as COVID-19, in markets in which we, our employees, consumers, customers, partners, licensees, licensors, suppliers and manufacturers operate, has had and could in the future have a significant negative impact on our business, revenues and profitability.

The occurrence of these types of events can result, and in the case of COVID-19 has resulted in, disruptions and damage to our business, due to, among other things:

• difficulties in shipping and distributing products due to ongoing port capacity, and labor, shipping container and truck transportation shortages, resulting in higher costs for both ocean and air freight and delays in the availability of products, which can result in delayed sales and in some cases result in lost sales;

• disruptions in supply of products, due to closures or reductions in operations at third-party manufacturing facilities across several geographies including, but not limited to, China, Vietnam, India, the United States and Ireland;

• adverse sales impact due to changes in consumer purchasing behavior and availability of products to consumers;

• uncertain inventory availability or difficulty in anticipating demand, which can result in too little or too much supply at a given time;

• interruptions, delays or postponements of entertainment productions and releases;

• challenges of working remotely.

Inflation and other adverse economic conditions in the markets in which we and our employees, consumers, customers, suppliers and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Various economic conditions in the markets in which we, our employees, consumers, customers, suppliers and manufacturers operate, could have a significant negative impact on our revenues, profitability and business.

Changes in U.S., global or regional economic conditions could impact discretionary consumer spending and harm our business and financial performance.

Our financial performance is impacted by the level of discretionary consumer spending in the markets in which we operate.

Recessions or even fear or anticipation of recessions, inflation, rising costs due to tariffs or potential tariffs, rising or fluctuating interest rates and mortgage rates, credit crises and other economic downturns, or disruptions in credit markets, in the U.S.

and in other markets in which we operate can result in lower levels of economic activity, lower employment levels, less consumer disposable income, and lower consumer confidence.

Similarly, reductions in the value of key assets held by consumers, such as their homes or stock market investments, can lower consumer confidence and consumer spending power.

Any of these factors can reduce the amount which consumers spend on the purchase of our products and entertainment.

This in turn can reduce our revenues and harm our financial performance and profitability.

Inflation and other adverse economic conditions in the markets in which we and our consumers, customers, employees, suppliers and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Various economic conditions in the markets in which we, our consumers, customers, employees, suppliers and manufacturers operate, could have a significant negative impact on our revenues, profitability and business.

The occurrence of adverse economic conditions can result in manufacturing and other work stoppages, slowdowns and delays;

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and other factors that cause increases in costs or delay in revenues.

Inflation, such as what consumers in the U.S.

and other economies have recently experienced, can cause significant increases in the costs of other products which are required by consumers, such as gasoline, home heating fuels, or groceries, may reduce household spending on the discretionary products and entertainment we offer.

Inflation can cause significant increases in the costs of other products which are required by consumers, such as gasoline, home heating fuels, or groceries, may reduce household spending on the discretionary products and entertainment we offer.

Weakened economic conditions, lowered employment levels or recessions in any of our major markets may also significantly reduce consumer purchases of our products and spending on entertainment.

Economic conditions may also be negatively impacted by terrorist attacks, wars and other conflicts, natural disasters, increases in critical commodity prices or labor costs, or the prospect of such events.

Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could harm our revenues and profitability.

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Rising fuel and raw material prices, due to inflation or otherwise, for paperboard and other components such as resin used in plastics or electronic components, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured all may increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability and harm our business.

Changes in U.S., global or regional economic conditions could impact discretionary consumer spending and harm our business and financial performance.

Our financial performance is impacted by the level of discretionary consumer spending in the markets in which we operate.

Recessions or even fear or anticipation of recessions, inflation, rising or fluctuating interest rates and mortgage rates, credit crises and other economic downturns, or disruptions in credit markets, in the U.S.

and in other markets in which we operate can result in lower levels of economic activity, lower employment levels, less consumer disposable income, and lower consumer confidence.

Similarly, reductions in the value of key assets held by consumers, such as their homes or stock market investments, can lower consumer confidence and consumer spending power.

Any of these factors can reduce the amount which consumers spend on the purchase of our products and entertainment.

This in turn can reduce our revenues and harm our financial performance and profitability.

The occurrence of these types of events can result, and in the case of COVID-19 resulted in, disruptions and damage to our business, due to, among other things:

• disruptions in supply of products, due to closures or reductions in operations at third-party manufacturing facilities across several geographies;

• adverse sales impact due to changes in consumer purchasing behavior and availability of products to consumers;

• uncertain inventory availability or difficulty in anticipating demand, which can result in too little or too much supply at a given time;

• interruptions, delays or postponements of entertainment productions and releases;

• challenges of working remotely.

Financial Risks Relating to our Business

Our quarterly and annual operating results may fluctuate due to seasonality in our business.

Sales of our products are extremely seasonal, with a majority of retail sales occurring during the period from September through December in anticipation of the holiday season.

This seasonality for our consumer products business has increased over time, as retailers become more and more efficient in their control of inventory levels through quick response or just in time inventory management techniques, including the use of automated inventory replenishment programs.

Similarly, ecommerce retailers tend to hold less inventory and take inventory closer to the time of sale to consumers than traditional retailers.

As a result, customers are timing their orders so that they are being filled by suppliers, such as us, closer to the time of purchase by consumers.

While these techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier.

Sales of our products are seasonal, with a majority of retail sales of consumers occurring during the period from September through December in anticipation of the holiday season, and sales of our card sets, games and content releases varying based on the timing of release.

Seasonality can increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier.

This can also result in our losing significant revenues and earnings if our supply chain is unable to supply product to our customers when they want it.

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Additionally, the logistics of supplying more product within shorter time periods increases the risk that we will fail to achieve tight and compressed shipping schedules, which also may reduce our sales and harm our financial performance.

The ability to accurately predict levels of inventory remains challenging in the current economic environment, and, in 2023, resulted in write-offs of excess inventory.

Our entertainment business is also subject to variations based on the timing of television, film, streaming and digital content releases or other factors, such as labor or union strikes.

Release dates are determined by several factors, including the timing of holiday periods, geographical release dates and competition in the market.

In 2023, the development, production and delivery of content was adversely affected by the actors’ and writers’ strikes that occurred during the year, which caused content to be reduced, delayed or, in some case, not completed.

This seasonal patterns of our business requires significant use of working capital, mainly to manufacture or acquire inventory during the portion of the year prior to the holiday season, and requires accurate forecasting of demand for products during the holiday season in order to avoid losing potential sales of popular products or producing excess inventory of products that are less popular with consumers.

The ability to accurately predict levels of inventory remains challenging in the current economic environment, and, in recent years, resulted in write-offs of excess inventory.

This seasonal pattern of our business requires significant use of working capital, mainly to manufacture or acquire inventory during the portion of the year prior to the holiday season and requires accurate forecasting of demand for products during the holiday season in order to avoid losing potential sales of popular products or producing excess inventory of products that are less popular with consumers.

Our failure to accurately predict and respond to consumer demand, resulting in under-producing popular items and/or overproducing less popular items, would reduce our total sales and harm our results of operations.

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We have had and may in the future have significant impairment charges that adversely affect our net earnings.

businesses, such as certain non-core entertainment assets of the business, has in the past impacted and may in the future impact our ability to recover the carrying value of the related assets and could result in an impairment charge.

Changes in strategy, shifting focus to certain lines of business, lower projections in an area of the business, declines in the profitability of acquired brands or businesses or our decision to reduce our focus or exit these brands or businesses, such as certain non-core entertainment assets of the business, has in the past impacted and may in the future impact our ability to recover the carrying value of the related assets and could result in an impairment charge.

Similarly, declines in our profitability may impact the fair value of our reporting units, which could result in a write-down of our goodwill and consequently harm our net earnings.

In 2023, we recorded non-cash goodwill and asset impairment charges of $1,307.2 million for the year ended December 31, 2023.

See note 6 to our Consolidated Financial Statements, included in Part II, Item 8.

Financial Statements, of this Form 10-K.

We have incurred, and may in the future incur, significant costs in connection with the development of video games.

If we determine that capitalized costs of the game are unlikely to be recovered by product sales due to the termination of development, lack of success of the game or otherwise, we will incur an impairment, which will be charged to costs of sales in the period in which such determination is made.

Changes in foreign currency exchange rates can significantly impact our reported financial performance.

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Our indebtedness may limit our availability of cash, cause us to divert cash to fund debt service payments or make it more difficult to take certain other actions .

We incurred significant indebtedness to finance our acquisition of eOne in 2019.

While we continue to pay down this indebtedness, including through the use of proceeds from the sale of certain parts of eOne, the increase in our debt service obligations resulting from additional indebtedness could have a material adverse effect on our results of operations and financial condition.

In particular, our increased indebtedness could:

We have approximately $3,401.8 million in long-term indebtedness.

The amount of our long-term indebtedness could:

• make it more difficult and/or costly for us to pay or refinance our debts as they become due, particularly during adverse economic and industry conditions, because a decrease in revenues or increase in costs could cause cash flow from operations to be insufficient to make scheduled debt service payments;

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We currently have a commercial paper program which, subject to market conditions, and availability under our committed revolving credit facility, allows us to issue up to $1,000.0 million in aggregate amount of commercial paper outstanding from time to time as a source of working capital funding and liquidity.

cannot guarantee that we will be able to issue commercial paper on favorable terms, or at all, at any given point in time.

We cannot guarantee that we will be able to issue commercial paper on favorable terms, or at all, at any given point in time.

We also have a revolving credit agreement which provides for a $1,250.0 million committed revolving credit facility.

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The condition of the credit markets and prevailing interest rates have fluctuated significantly in the past and are likely to fluctuate in the future.

Variations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt securities.

Variations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt

The failure to receive financing on desirable terms, or at all, could damage our ability to support our future operations or capital needs or engage in other business activities.

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In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international authorities.

Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission and a host of other agencies globally, and the collection of information from children under the age of 13 is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world.

The collection of personally identifiable information from anyone, including adults, is under increasing regulation in many markets, such as the General Data Protection Regulation adopted by the European Union, and data protection laws in the United States

and in a number of other counties.

Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission and a host of other agencies globally, and the collection of information from children is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world.

While we take all the steps we believe are necessary to comply with these acts and regulations, we cannot assure you that we will be in compliance and, if we fail to comply with these requirements or other regulations enacted in the future, we could be subject to fines, liabilities or sanctions which could have a significant negative impact on our business, financial condition and results of operations.

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In addition, any product recall, regardless of direct costs of the recall, may harm the reputation of our products and have a negative impact on our future revenues and results of operations.

As a large multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, employment, customs and tax requirements, anti-boycott regulations, environmental regulations and the Foreign Corrupt Practices Act.

As a large multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, employment, pay transparency, customs and tax requirements, anti-boycott regulations, environmental regulations and the Foreign Corrupt Practices Act.

There are also many new laws and proposed laws, rules and regulations governing the use of artificial intelligence that may become applicable to our business.

Complying with these regulations imposes costs on us which can reduce our profitability and our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could further harm our business and financial condition.

Failure to achieve our sustainability goals could result in reputational damage.

We view sustainability challenges as opportunities to innovate and continuously improve our product design and operational efficiencies.

We have set key goals and objectives in this area as described in our business section of this Form 10-K.

Our reputation could be damaged if we fail to achieve our sustainability goals, or if we or others in our industry do not act, or are perceived not to act, responsibly with respect to the production and packaging of our products.

We are involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense.

As a large multinational corporation, we are subject to regulatory investigations, litigation and arbitration disputes, including potential liability from personal injury or property damage claims by the users of products that have been or may be developed by us, claims by third parties that our products infringe upon or misuse such third parties’ property or rights, claims by former employees for employment related matters or claims relating to media content.

property or rights, securities claims, royalties claims, claims by former employees for employment related matters and claims relating to media content.

Because the outcome of litigation, arbitration and regulatory investigations is inherently difficult to predict, it is possible that the outcome of any of these matters could entail significant cost for us and harm our business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors