There’s no time I feel more like an “official” financial writer than these four opportunities I get a year to analyze Hasbro’s official report to investors. I know this is kind of a dry subject, but I actually do get excited to write about it. At least, I do when there’s good news to report.

And, to get this out of the way up front, there is! 2014 was another year of growth for Magic: The Gathering, and Hasbro always makes note to praise Magic even when they’re hiding in overall growth.

And quickly we come to my biggest problem with Hasbro’s annual reports: there’s no itemization. They say things like “Core Brands were up 31%” which means very little to us. Yes, Magic is one of those Core Brands, and they note specifically that it was up, but numbers are rarely given, and numbers are where we like to live.

Still, there’s plenty to glean from this report, even if it’s stuff we think we already know. I think having a historical record of these in article form does us all a service in the future, so I’m going to do what I can today.

So let’s dig in.

Games category revenues declined 4% for the year to $1.26 billion.

First off, that’s a ton of money, right? Just saying, I see why they use the fancy hotels for players at Pro Tours.

But moving past that, let’s see what Hasbro CEO Brian Goldner (or, at least, his report) had to say.

“Growth in Franchise Brands MAGIC: THE GATHERING and MONOPOLY, as well as SIMON and THE GAME OF LIFE in 2014, was offset by declines in DUEL MASTERS, TWISTER and ANGRY BIRDS games.”

Bad news for Twister, I guess. But good news for Magic. Again, no numbers, but it’s clear enough that Magic is up year-to-year (this means, simply put, that in 2014 Magic grossed more than in 2013).

I could print some more blah-blah from the filing that we already know from that one sentence above, but I’d rather move quickly into the Q&A segment of the earnings call. After all, all the fun (and the good information) happens when those from fancy firms get to put our friend Brian on the hotseat.

Greg Badishkanian (Analyst - Citigroup):

Great. Thanks. Just going back to the US POS that was positive in 2015, which brands really stood out? Did anything change in terms of momentum you saw in the fourth quarter?

Brian Goldner (President, CEO):

What I had said, Greg, was just to be clear, absence either a Beyblade or a Furby you would see positive POS in the fourth quarter for our brands. So what speaks to is the underlying strength of our brands particularly our franchise brands.

Our franchise brand POS in the full-year was up 30% and revenues were up 30% as well. So we have seen strong growth in franchise brands obviously up some comparisons in comparing Furby and Beyblade obviously have some impact to overall POS.

And then of course Magic: The Gathering in the US is outside of 80% of that business is outside of the NPD data or the POS data. And we have said that Magic was up both in full year it was up quite strongly in the fourth quarter with the new Khans of Tarkir launch and release which has been very popular among players.

Takeaway:

From what I understand of fancy business lingo, POS stands for “Point of Sale.” In other words, direct Hasbro sales are up 30%. But the reason I bring this up is because Brian went out of his way to mention Magic, and to state that Khans has sold well. That’s not something I think he does if the numbers aren’t really good.

Taposh Bari (Analyst - Goldman Sachs):

Good morning. I had a question on capital allocation. It is nice to see that you are raising your dividend as well as your buyback authorization this morning. But I was hoping you can speak to your philosophy, and specifically acquisition criteria and where acquisitions fall on your list of cash priorities?

Brian Goldner (President, CEO):

Thank you for the question. If you look over the last five years, this management team has returned 143% of net earnings to its shareholders via both the dividend and the share buyback. Last year nearly $680 million returned, $217 million of which was in a dividend, $461 million of which was in buybacks. Deb will talk more about capital structure.

But you have a management team that is very committed to returning excess capital to shareholders. We still also believe strongly in investing in our business and we are also building our brands and innovation, insight and storytelling capabilities organically as we speak and certainly we think given the global growth potential of something like Magic: The Gathering and its strong profitability that it enjoys, investing in that brand for longer-term growth is certainly warranted and I think something our shareholders would support.

Takeaway:

I actually find this one of the most interesting points raised here, because one of the things I’ve personally worried about over the last few years can be distilled down to one basic question:

How long can the ride last?

We’ve seen huge year-over-year growth in Magic over and over again in the past five years. It’s been a great run, and we’ve all benefitted from it. But recently the basic question of when will it end has been forefront on my mind. After all, all of these great years can’t last forever, we know that, so when we saw Magic’s third-quarter earnings take a slight dip in 2014 it was a cause for pause, if not concern.

So to see that Hasbro’s CEO is still confident enough to go out of his way to mention the long-term growth of the game (albeit internationally, though that’s to be expected), is heartening.

The Follwing Is a response to a long-winded question about how expenses were being allocated.

Deb Thomas (SVP, CFO):

The other things that are impacting our margin and we did see an improvement in our gross margin this year and that was due to the success of our brands particularly our franchise brands. But one of the headwinds that we talked about for next year is foreign exchange. Many of our product costs are denominated in US or Hong Kong dollars which have stayed pretty stable as the US dollar has strengthened against foreign exchange.

So while over the longer term we do have the opportunity, as Brian was saying, to really adjust for the currency impact because of the rate and piece of the change, it had a more significant impact for us in the fourth quarter but will continue to have an impact to us in 2015.

So as far as hedging as you know, we hedge a substantial amount of our product purchases but not all of it. And I think on a blended basis, we have hedged about just under 70% for 2015. So we will continue to be impacted by currency from that and we will continue to invest in Magic: The Gathering online and in projects that create the longer-term cost efficiencies.

From another section:

As we discussed previously, we are making investments in our business including our digital capabilities with Magic: The Gathering, and Backflip where we have increased staff and had a full year of expense versus 2013.

Takeaways:

Magic Online is finally mentioned! Though of course there’s no reference to Hearthstone, we do get — for the second straight reportings — that Hasbro is investing in the future of Magic Online. I don’t know if this means they’re hiring additional people, spending on better developers or simply buying more server space, but it’s something besides the nothing most people assume Hasbro brings to Magic Online. They clearly are aware of what is happening in the digital market, and I wonder when these “investments” will begin to show something.

Anyway, I saved the most important part for last:

Sean McGowan (Analyst - Needham and Co.):

Okay, thanks. You may have said this in the remarks and maybe I didn't catch it clearly, what was the performance of Magic in the fourth quarter? Was that up?

Brian Goldner (President, CEO):

It was, yes.

Sean McGowan (Analyst - Needham and Co.):

Can you just remind us why the change from two sets -- I mean from four to two sets?

Brian Goldner (President, CEO):

We actually for 2015, there are a couple of things going on so there are more than two initiatives that are going on that will launch in 2015. We will have two sets but then we also have an additional, the core set, so in fact it is a transition and the team has got some pretty robust storytelling plans around that brand.

And again, we are very excited about what we are seeing in Magic. The momentum in Magic continues. The number of Friday gaming sessions has increased. We are up to nearly 7000 every Friday where fans are getting together to play.

We have additional tournaments this year around several of the releases. By summer we will have a tournament that will actually take place in three different countries around the world. So in fact, I think Magic and opportunity for Magic players to play face to face in a number of different ways increases throughout the year.

Takeaways:

That’s a lot of numbers, and there’s no stronger statement in the report regarding the current health of the game. Hasbro executives continue to be excited about the game, and that can only mean one thing:

It’s still making them (and by extension, us) a lot of money.

Thanks for reading,

Corbin Hosler

@Chosler88 on Twitter