HAS: 10-K Risk Factor Changes

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.

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.

A key component to the success of our strategy is to continue to develop, publish and commercialize digital games, including AAA/AA games, games as a service and licensed games based on our existing IP, as well as new and licensed IP. We have invested substantially in our digital gaming business. If we are unable to successfully launch and commercialize existing and new games, our business may be harmed. The digital gaming industry is highly competitive, including for talent, and costs associated with designing, developing and producing digital games and technologically advanced or sophisticated products tend to be higher than for many of our other more traditional products, with no assurance of success. 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. There is no guarantee 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 or introduction of competitive digital game products in close proximity to our introduction could have a significant impact on our success. Further, the pace of change in product offerings and consumer tastes in electronics and digital gaming areas is potentially even greater than for our other products and this pace of change is expected to accelerate as 18 18 18 Table of Contents Table of Contents 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. 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.

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. If we are unable to continue to grow this business and ensure its integration with our other business segments, our business may be harmed. The digital gaming industry is highly competitive, including for talent, and costs associated with designing, developing and producing digital games and technologically advanced or sophisticated products tend to be higher than for many of our other more traditional products, such as board and trading card games and action figures, with no assurance of success. 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. 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 17 17 17 Table of Contents Table of Contents 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.

A significant part of our strategy for our consumer products business and our Wizards and digital gaming business is to license premium and well-recognized intellectual property for the development of products. For example, we have licenses with The Walt Disney Company for the Marvel and Star Wars properties for toys and games, and for our Universes Beyond MAGIC: THE GATHERING sets we have licenses for key brands such as Final Fantasy, Spider-Man, Avatar, and Lord Of The Rings. 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. Sales may be adversely affected if the licensed products do not resonate with new or existing consumers or if consumers reduce purchases due to the perception a brand is diluted given numerous options available. If we produce a line of products based on a movie or television series or digital game, the timing of release or overall success of the movie, series or digital game 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 premium brand properties is intense and can lessen our ability to secure, maintain, and renew popular licenses on beneficial terms. 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 premium-based properties, we cannot guarantee that a particular property or brand will translate into successful products, and underperformance of any such products may result in reduced revenues and operating profit for us.

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.

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.

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 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 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, and, in some cases, the timing of release of other products and games that attract a similar consumer. 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 continue to 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. The use 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. For example, with the use of influencers and media outlets such as Tik Tok, 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 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 20 20 20 Table of Contents Table of Contents greater market acceptance than our products and potentially reduce demand for our products, lower our revenues and lower our profitability.

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 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.

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 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, political instability in certain port regions and tariffs. We can provide no assurance that we will be able to take actions, such as increase prices, to offset the entirety of additional costs we have incurred, and may incur in the future to mitigate the supply chain disruption. Further, if we are unable to negotiate favorable carrier agreements, deliver products on time or otherwise satisfy demand for our products, our business may be harmed.

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 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, political instability in certain port regions and tariffs. 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. We can provide no assurance that we will be able to increase prices in the future and we cannot assure that price increases we have already taken, will offset the entirety of additional costs we have incurred, and may incur in the future to mitigate the supply chain disruption. Further, if we are unable to negotiate favorable carrier agreements, deliver products on time or otherwise satisfy demand for our products, our business may be harmed.

Most of our toy and game products are manufactured by third-party manufacturers, a substantial but decreasing number of which are in China, and 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. Working with vendors who have not historically manufactured products for us means these new vendors must successfully develop the capability to manufacture our products to the quality and safety standards we require and within the tight timeframe required by our customers. Newer and less experienced vendors are more susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or unfamiliarity with our product standards. In addition, our increased use of original design manufacturers ("ODMs") to support cost efficiency and speed to market may reduce our direct control over product design, quality, sourcing and manufacturing processes, and any failure by ODM partners to meet our design specifications, quality standards, delivery requirements or compliance obligations could adversely affect our products, brand reputation, margins and results of operations. If we were prevented or delayed in obtaining products or components for a material portion of our product lines due to economic, political, civil, labor or other factors beyond our control, including work stoppages, slowdowns or strikes, natural disasters, adverse health conditions or pandemics, our ability to manufacture would be adversely affected and our operations may be substantially disrupted, potentially for a significant period of time. 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 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. The suspension of the operations of a third-party manufacturer by government inspectors in China or another market in which we source products could result in delays to us in obtaining product and may harm sales. 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. Prolonged disputes or slowdowns at west coast or other ports can negatively impact both the time and cost of transporting goods into the U.S. Natural disasters or health pandemics impacting our manufacturers had and can have a significant negative impact on our business. 23 23 23 Table of Contents Table of Contents We require our third-party manufacturers to comply with our Global Business Ethics Principles, which are designed to prevent products manufactured for us from being produced under inhumane or exploitive conditions. Notwithstanding these requirements and our monitoring and testing of compliance with them, there is always a risk that one or more of our third-party manufacturers will not comply with our requirements and that we will not immediately discover such non-compliance. Any failure of our third-party manufacturers to comply with labor, consumer, product safety or other applicable requirements in manufacturing products for us could result in damage to our reputation, harm sales of our products and potentially create liability for us.

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. Working with vendors who have not historically manufactured products for us means these new vendors must successfully develop the capability to manufacture our products to the quality and safety standards we require and within the tight timeframe required by our customers. Newer and less experienced vendors are more susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or unfamiliarity with our product standards. If we were prevented or delayed in obtaining products or components for a material portion of our product lines due to economic, political, civil, labor or other factors beyond our control, including work stoppages, slowdowns or strikes, natural disasters, adverse health conditions or pandemics, our ability to manufacture would be adversely affected and our operations may be substantially disrupted, potentially for a significant period of time. 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 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. Prolonged disputes or slowdowns at west coast or other ports can negatively impact both the time and cost of transporting goods into the U.S. Natural disasters or health pandemics impacting our manufacturers had and can have a significant negative impact on our business. 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 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. 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. Additionally, the suspension of the operations of a third-party manufacturer by government inspectors in China or another market in which we source products could result in delays to us in obtaining product and may harm sales. 22 22 22 Table of Contents Table of Contents We require our third-party manufacturers to comply with our Global Business Ethics Principles, which are designed to prevent products manufactured for us from being produced under inhumane or exploitive conditions. Notwithstanding these requirements and our monitoring and testing of compliance with them, there is always a risk that one or more of our third-party manufacturers will not comply with our requirements and that we will not immediately discover such non-compliance. Any failure of our third-party manufacturers to comply with labor, consumer, product safety or other applicable requirements in manufacturing products for us could result in damage to our reputation, harm sales of our products and potentially create liability for us.

Our ability to successfully create innovative products that inspire a lifetime of play 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, the breadth of products and entertainment available to consumers, and outside factors such as influencers, critical reviews and promotions. 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. In addition, frequent product releases, cross-brand collaborations or expanded licensing initiatives may contribute to franchise fatigue or oversaturation, which could reduce long-term consumer engagement and diminish the value of our brands. Failure to correctly anticipate consumer interests, will harm our revenues and earnings. Technological developments, such as developments in artificial intelligence and shifts to streaming platforms for entertainment content, continue to evolve, 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. As we incorporate AI tools into aspects of our business, including product and game development, we may face increased costs, operational complexity, IP and data governance challenges, and evolving regulatory requirements, any of which could adversely affect timelines, quality, or expected returns on investment. 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. 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. The use of artificial intelligence in product and game development may also raise intellectual property, data sourcing, ethical or regulatory issues, and disputes or restrictions in these areas could increase costs, delay development or limit the use of certain technologies.

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. 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 18 18 18 Table of Contents Table of Contents 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. 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.

Our officers and employees are at the heart of all our efforts. It is their skill, innovation and hard work that drive our success. 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. Experienced personnel and top creative talent in the markets in which we operate are in high demand and competition for their talent is intense. 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. The relocation of our primary headquarters for our toys, board games, licensing and entertainment operations from Rhode Island to Boston, Massachusetts requires substantial investment and could disrupt operations. We may lose experienced personnel unwilling to relocate, and we may face challenges recruiting in Boston's competitive labor market. If we are unable to successfully manage this transition, including facility build-out, systems migration, and cultural integration, our operations and financial performance could suffer. Certain aspects of our business, including digital game development and franchise-driven brands such as MAGIC: THE GATHERING and DUNGEONS & DRAGONS, depend on a limited number of highly skilled creative and technical personnel, and the loss of such individuals could disrupt development pipelines or adversely affect product quality and performance. The impact of the planned move, recent 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 efficiency, profitability or otherwise harm the business. We cannot guarantee that we will recruit, hire or retain the key personnel we need to succeed. 24 24 24 Table of Contents Table of Contents

Our officers and employees are at the heart of all our efforts. It is their skill, innovation and hard work that drive our success. 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. 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. 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 efficiency, profitability or otherwise harm the business. We cannot guarantee that we will recruit, hire or retain the key personnel we need to succeed. 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.

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. Failure to continue to adapt our systems and supply chain and successfully fulfill ecommerce sales could harm our business.

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. Failure to continue to adapt our systems and supply chain and successfully fulfill ecommerce sales could 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 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; •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; and •challenges of working remotely.

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 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; •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; and •challenges of working remotely. 25 25 25 Table of Contents Table of Contents

Our Playing to Win business strategy evolves around our mission to create joy and community through the magic of play and inspiring a lifetime of play. We are focused on extending the reach of our products globally to improve our position in the marketplace, increase revenue and increase operating profit. Failure to execute this strategic plan may harm our business. Our ability to successfully implement and execute these plans and initiatives 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; •continuing to grow MAGIC: THE GATHERING and driving growth in DUNGEONS & DRAGONS as traditional trading card and role-playing games, as well as further expanding into digital offerings; •successfully growing and delivering on our digital gaming business; •successfully launching new digital studios and new digital games that gain customer acceptance; •continuing to grow our licensing business; and •returning our toy business to growth and increased profitability by optimizing the business, including through right-sizing our cost structure, creating efficiencies in our operations, and designing cost-effective products. Because our strategy emphasizes growing a focused set of franchises and expanding our higher-margin games and digital businesses, including MAGIC: THE GATHERING and DUNGEONS & DRAGONS, adverse trends affecting consumer demand for, or engagement with, any of these key brands could disproportionately impact our results of operations. In addition, the simultaneous pursuit of multiple strategic initiatives, including digital gaming development, licensing expansion, AI adoption, systems modernization and cost-saving initiatives, may strain management attention, organizational capacity and capital resources, and any failure to appropriately prioritize or allocate resources among these initiatives could adversely affect our business and result of operations.

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; •our ability to simplify our supply chain logistics; •our ability to successfully manage inventory; •the ability of our workforce to focus and execute on priority transformational projects across the business, and to sustain changes to maximize savings; •the attraction and retention of key personnel with core skills and competencies in the areas of focus; and •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.