Chris Cocks: Yes, sure. So for Wizards in the fourth quarter, we have another Lord of the Ring set that will be coming out. We think that will be a bit smaller than what we had in Q2, but pretty solid. We also have a new premier set called The Lost Caverns of Ixalan, and we just had another universe beyond kind of commander release for Doctor Who. As we think about 2024, yeah, I mean, MAGIC had a great year, another record year in 2023. But we’ve been having record years for 13 out of the last 14 years on MAGIC. As I would think about 2024, I certainly think we’ll have some more universes beyond releases. As we said, we were surprised on the upside in terms of the initial demand and fan reaction to fall out, which should come into Q1.
In Q2, I think we have that comp with Lord of the Rings, but we’ll have another set coming out called Modern Horizon 3. And we had key sets in the history of MAGIC that have done $200 million, Lord of the Rings which officially passed $200 million earlier this week and Modern Horizons 2, which was our previous $200 million set. So we feel pretty good about Modern Horizons 3 and I think it also should be noted, you know, given that’s not royalty bearing and tends to be more of a collector’s product. It also is a pretty nice operating profit opportunity for us as well. And then the back half of the year we have other sets that we haven’t yet announced yet, so I don’t want the Wizards team to get mad at me. But generally speaking, you know, we have about six to seven premier sets per year and we’ll be lapping that in 2024.
Drew Crum: Got it. Okay. Very helpful. And then as a follow-up, just curious if you could update us on the status of the Marvel license. It was good to hear the partnership with Disney and MAGIC. But can you address the company’s commitment to retaining this license approach as its renewal? Thanks.
Chris Cocks: Well, I can certainly talk from our side. We — Walt Disney is our most valuable partnership. It’s something that we meet with regularly. We put a lot of product innovation. We put a lot of marketing. We put some of our best people against it. And we’re expanding that relationship aggressively across more categories, across more brands, whether they are standalone brands like we do for Star Wars and the Avengers or co-brands, like we’re doing with MAGIC and Marvel. So it’s certainly something that we value and are leaning into. And I think you’ll see growth from for us over the mid and long-term.
Drew Crum: Thanks, Chris.
Operator: Our next question is from the line of Jason Haas with Bank of America. Please proceed with your question.
Jason Haas: Good morning and thanks for taking my questions. So I just want to check some of the math on MONOPOLY GO! and Baldur’s Gate 3 and what it implies for 4Q. So I think you said that for the full year, you’re expecting over $90 million from both MONOPOLY GO! and Baldur’s Gate 3. And you saw, I think it was $63 million in 3Q. So that implies maybe $30 million or so comes in 4Q, which would be — I’m getting like maybe like an 8 or 9 percentage point tailwind to Wizards revenue in 4Q. Then your guidance — you left the guidance for high single-digit growth. So that would imply that ex those two licenses, you would see Wizards revenue down like 8% or 9% in 4Q. So one, do I have those numbers right? And if that’s correct, why are we seeing that decline in 4Q? Is it a function of timing of the releases or something else? Is it just conservatism? If you could help explain that would be helpful.
Chris Cocks: I’ll start really fast and then I’ll turn it over to Gina. We see broad-based growth in Wizards for the fourth quarter. So if in kind of doing math camp on the numbers, I think you can get a general tone of cautiousness in our outlook, just given the unpredictability of the near-term market. In terms of your detailed questions, Jason, I’ll turn it over to Gina to take you through kind of how we’re thinking about it.
Gina Goetter: Yes, Jason, good question. And you’ve got the math generally right on how to think about Baldur’s Gate and MONOPOLY GO! in the fourth quarter. What isn’t right is how you’re thinking about MAGIC. So as Chris said, from overall, Wizards will be growing, MAGIC will be growing as well in the fourth quarter. I think the pieces that you’re probably not thinking through some of the other businesses that are rolling up through. So D&D, I think it’s down a tick in the fourth quarter. But overall, how you’re modeling Baldur’s Gate and MONOPOLY GO! is correct.
Jason Haas: Got it. Thank you. And then as a follow-up question, are you able to size up how much headwind you saw from destocking this year in the Consumer Products business. And my thought there is just as we think about our models for next year, is there an embedded uplift to revenue in 2024 as you lap over some of this destocking, or was the destocking that we saw just a reflection of more of a return to normalcy because there was restocking in the first half or so of last year? Any color on that would be helpful.
Gina Goetter: Yes, good question. And I think there’s a little bit of both that we will talk to from a modeling standpoint. The one-time you’re going to see a lot in fourth quarter, and that was what was embedded in our updated margin guide here. And I would put that at roughly, call it, $50-ish million of onetime cost that is — that we’re putting in either move through inventory at the retailer level, extra marketing to move through the inventory, extra obsolescence cost. So call that roughly a $50 million headwind this year that I would expect as we turn the corner into 2024 becomes a tailwind for us. And to your point, there’s always going to be some level of kind of promotion and obsolete all of that as we kind of reset into 2024, but that’s $50 million, I would call out as one-time in nature for this year.
Jason Haas: Got it. And that sounds like that’s on the cost side. Is there — was there a revenue headwind from the destocking, or should we think about it more really impacted on…
Gina Goetter: I’m putting that all — yes, I’m putting that somewhat in that $50 million number. Yes.
Jason Haas: Okay. All right. That’s helpful. Thank you.
Operator: Thank you. Our next questions are from the line of Megan Alexander with Morgan Stanley. Please proceed with your question.
Megan Alexander: Yes. I guess maybe just a follow-up on that on the top line. So given that quick math would suggest maybe from that toy and game volume piece, it’s a low double-digit decline this year. And similarly in the fourth quarter. So from a top line perspective, can you just maybe put a finer point on how the outlet of Consumer Products segment was changed as it relates to inventory destocking? And I know it’s early, but how you’re thinking about the puts and takes for that segment in terms of sales next year. Presumably, you get the planned exits back, hopefully, we’re not seeing any more inventory management into next year. And so the wildcard seems to be that toy and game volume line. So can you just help us understand maybe a little bit of how 4Q changed and what you get back next year?
Gina Goetter: Sure. What we get back next year, I’m going to go back to the previous answer, $50 million is really the number that I would put in your model of onetime costs that we’re not expecting to repeat, we’re using that to try to get as clean as we can for 2024. As we think about the revenue decline when we said mid- to high teens for the toy business for the year for the CP segment for the year, there’s probably 3 or 4 points that decline that are associated with just us accelerating some of this move through of inventory from like a pure revenue standpoint, I would say, call it, 3 to 4 points of that is this acceleration. On the bottom line, it’s $50 million.
Megan Alexander: Right. And 3 to 4 points is relative to the prior guide?
Gina Goetter: No, to our updated guide.
Megan Alexander: Right. Okay. Okay. That makes sense. And then for the cost savings, $200 million this year, I think you implied you could get to $300 million next year. How much of that from a net perspective is flowing through to the bottom line this year? And what should we expect for next year?
Gina Goetter: Well, perhaps too cheeky about it. But I think in short, none of it is flowing to the bottom line this year just given that it’s all going to move through the kind of the inventory line. So I would say there’s zero kind of margin impact from the cost saves next year. And one of our big focus areas internally is moving us from talking about gross savings to talking about net savings, as a key area of focus as we move into 2024. Next year will be the year where you’ll start to see real margin acceleration from all of those cost savings initiatives. But I mean, this year, it’s all going to inventory. And we have — so I should also elaborate to say we are making investments in our growth initiatives. So some of it didn’t go to invest buying digital games.
