Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 03, 2020 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-38274 | |
Entity Registrant Name | FUNKO, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 35-2593276 | |
Entity Address, Address Line One | 2802 Wetmore Avenue | |
Entity Address, City or Town | Everett | |
Entity Address, State or Province | WA | |
Entity Address, Postal Zip Code | 98201 | |
City Area Code | 425 | |
Local Phone Number | 783-3616 | |
Title of 12(b) Security | Class A Common Stock,$0.0001 par value per share | |
Trading Symbol | FNKO | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001704711 | |
Current Fiscal Year End Date | --12-31 | |
Class A common shares outstanding | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 35,611,762 | |
Class B common shares outstanding | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 14,040,296 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 191,229 | $ 223,307 | $ 426,028 | $ 581,571 |
Cost of sales (exclusive of depreciation and amortization shown separately below) | 117,504 | 137,801 | 261,103 | 361,455 |
Selling, general, and administrative expenses | 41,167 | 52,424 | 127,590 | 136,539 |
Depreciation and amortization | 11,887 | 10,472 | 33,947 | 31,127 |
Total operating expenses | 170,558 | 200,697 | 422,640 | 529,121 |
Income from operations | 20,671 | 22,610 | 3,388 | 52,450 |
Interest expense, net | 2,875 | 3,620 | 8,221 | 11,455 |
Other expense, net | 779 | 577 | 1,450 | 423 |
Income (loss) before income taxes | 17,017 | 18,413 | (6,283) | 40,572 |
Income tax expense (benefit) | 1,420 | 2,865 | (1,139) | 6,464 |
Net income (loss) | 15,597 | 15,548 | (5,144) | 34,108 |
Less: net income (loss) attributable to non-controlling interests | 5,801 | 6,909 | (229) | 18,142 |
Net income (loss) attributable to Funko, Inc. | $ 9,796 | $ 8,639 | $ (4,915) | $ 15,966 |
Earnings (loss) per share of Class A common stock: | ||||
Basic (in dollars per share) | $ 0.28 | $ 0.27 | $ (0.14) | $ 0.54 |
Diluted (in dollars per share) | $ 0.27 | $ 0.25 | $ (0.14) | $ 0.50 |
Weighted average shares of Class A common stock outstanding: | ||||
Basic (in shares) | 35,483,266 | 32,055,116 | 35,154,617 | 29,554,572 |
Diluted (in shares) | 35,903,738 | 34,502,845 | 35,154,617 | 31,711,865 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 15,597 | $ 15,548 | $ (5,144) | $ 34,108 |
Other comprehensive income (loss): | ||||
Foreign currency translation gain (loss), net of tax effect of $(315) and $158 for the three months ended September 30, 2020 and 2019, respectively, and $153 and $208 for the nine months ended September 30, 2020 and 2019, respectively | 1,647 | (998) | (896) | (1,169) |
Comprehensive income (loss) | 17,244 | 14,550 | (6,040) | 32,939 |
Less: Comprehensive income (loss) attributable to non-controlling interests | 6,397 | 6,449 | (578) | 17,680 |
Comprehensive income (loss) attributable to Funko, Inc. | $ 10,847 | $ 8,101 | $ (5,462) | $ 15,259 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Foreign currency translation loss, tax | $ (315) | $ 158 | $ 153 | $ 208 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 31,895 | $ 25,229 |
Accounts receivable, net | 136,300 | 151,564 |
Inventory | 72,603 | 62,124 |
Prepaid expenses and other current assets | 11,944 | 20,280 |
Total current assets | 252,742 | 259,197 |
Property and equipment, net | 58,771 | 65,712 |
Operating lease right-of-use assets | 55,679 | 62,901 |
Goodwill | 124,634 | 124,835 |
Intangible assets, net | 209,335 | 221,492 |
Deferred tax asset | 56,884 | 57,547 |
Other assets | 4,738 | 4,783 |
Total assets | 762,783 | 796,467 |
Current liabilities: | ||
Line of credit | 0 | 25,822 |
Current portion of long-term debt, net of unamortized discount | 22,462 | 13,685 |
Current portion of operating lease liabilities | 12,612 | 11,314 |
Accounts payable | 40,843 | 42,531 |
Income taxes payable | 155 | 637 |
Accrued royalties | 31,574 | 34,625 |
Accrued expenses and other current liabilities | 44,918 | 28,955 |
Total current liabilities | 152,564 | 157,569 |
Long-term debt, net of unamortized discount | 185,659 | 202,816 |
Operating lease liabilities, net of current portion | 55,594 | 61,622 |
Deferred tax liability | 303 | 341 |
Liabilities under tax receivable agreement, net of current portion | 62,369 | 61,554 |
Other long-term liabilities | 3,609 | 7,421 |
Commitments and Contingencies (Note 6) | ||
Stockholders’ equity: | ||
Additional paid-in-capital | 213,365 | 204,174 |
Accumulated other comprehensive income | 244 | 791 |
Retained earnings | 15,527 | 20,442 |
Total stockholders’ equity attributable to Funko, Inc. | 229,141 | 225,411 |
Non-controlling interests | 73,544 | 79,733 |
Total stockholders’ equity | 302,685 | 305,144 |
Total liabilities and stockholders’ equity | 762,783 | 796,467 |
Class A common shares outstanding | ||
Stockholders’ equity: | ||
Common stock, value | 4 | 3 |
Class B common shares outstanding | ||
Stockholders’ equity: | ||
Common stock, value | $ 1 | $ 1 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Class A common shares outstanding | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 35,486,000 | 34,918,000 |
Common stock, shares outstanding (in shares) | 35,486,000 | 34,918,000 |
Class B common shares outstanding | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 14,040,000 | 14,515,000 |
Common stock, shares outstanding (in shares) | 14,040,000 | 14,515,000 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating Activities | ||
Net income (loss) | $ (5,144,000) | $ 34,108,000 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation, amortization and other | 35,929,000 | 32,254,000 |
Equity-based compensation | 7,494,000 | 9,830,000 |
Amortization of debt issuance costs and debt discounts | 1,006,000 | 893,000 |
Deferred tax expense (benefit) | 1,237,000 | (172,000) |
Other | 1,715,000 | (84,000) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 13,507,000 | (19,643,000) |
Inventory | (11,115,000) | (8,759,000) |
Prepaid expenses and other assets | 15,163,000 | 1,527,000 |
Accounts payable | (1,595,000) | 24,310,000 |
Income taxes payable | (465,000) | (3,522,000) |
Accrued royalties | (3,045,000) | (1,240,000) |
Accrued expenses and other liabilities | 5,658,000 | (6,516,000) |
Net cash provided by operating activities | 60,345,000 | 62,986,000 |
Investing Activities | ||
Purchases of property and equipment | (14,704,000) | (27,155,000) |
Acquisitions of businesses and related intangible assets, net of cash | 0 | (6,369,000) |
Net cash used in investing activities | (14,704,000) | (33,524,000) |
Financing Activities | ||
Borrowings on line of credit | 28,267,000 | 22,543,000 |
Payments on line of credit | (55,103,000) | (23,383,000) |
Debt issuance costs | (569,000) | (411,000) |
Payments of long-term debt | (8,814,000) | (8,813,000) |
Contributions from continuing equity owners | 177,000 | 0 |
Distributions to continuing equity owners | (3,496,000) | (22,905,000) |
Payments under tax receivable agreement | (165,000) | 0 |
Proceeds from exercise of equity-based options | 41,000 | 2,210,000 |
Net cash used in financing activities | (39,662,000) | (30,759,000) |
Effect of exchange rates on cash and cash equivalents | 687,000 | 1,303,000 |
Net increase in cash and cash equivalents | 6,666,000 | 6,000 |
Cash and cash equivalents at beginning of period | 25,229,000 | 13,486,000 |
Cash and cash equivalents at end of period | $ 31,895,000 | $ 13,492,000 |
Organization and Operations
Organization and Operations | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Operations | Organization and Operations The unaudited condensed consolidated financial statements include Funko, Inc. and its subsidiaries (together, the “Company”) and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. The Company was formed as a Delaware corporation on April 21, 2017. The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and related transactions in order to carry on the business of Funko Acquisition Holdings, L.L.C. (“FAH, LLC”) and its subsidiaries. On November 6, 2017, the Company completed an IPO and related reorganization transactions that resulted in the Company being the sole managing member of FAH, LLC. As the sole managing member of FAH, LLC, Funko, Inc. operates and controls all of FAH, LLC’s operations and, through FAH, LLC and its subsidiaries, conducts FAH, LLC’s business. Accordingly, the Company consolidates the financial results of FAH, LLC and reports a non-controlling interest in its unaudited condensed consolidated financial statements representing the common units of FAH, LLC interests still held by other owners of FAH, LLC (collectively, the “Continuing Equity Owners”). Interim Financial Information In the opinion of management, all adjustments considered necessary for a fair presentation of the results as of the date of and for the interim periods presented have been included, and such adjustments consist of normal recurring adjustments. The unaudited condensed consolidated results of operations for the current interim period are not necessarily indicative of the results for the entire year ending December 31, 2020, due to seasonality and other factors. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 5, 2020. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Use of Estimates The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions. Significant Accounting Policies Cash equivalents. As of September 30, 2020, cash equivalents included $19.9 million of highly liquid money market funds, which are classified as Level 1 within the fair value hierarchy. Evaluation of goodwill and other long-lived assets for impairment. The Company evaluates goodwill for impairment annually on October 1 of each year and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of the net assets is below their carrying amounts. The Company has determined that it has one reporting unit for which discrete financial information is available and results are regularly reviewed by management. During the nine months ended September 30, 2020, the Company assessed a series of triggering events related to the Company’s book value in excess of the market capitalization of the Company. Such triggering events included the World Health Organization declaring on March 11, 2020 that the COVID-19 outbreak constituted a global pandemic and the Company releasing a business update on March 20, 2020 announcing the closing of its retail locations, that employees would be working from home and the withdrawal of its 2020 financial guidance that had been issued on March 5, 2020. Due to sustained lower market capitalization below book value, the Company performed a quantitative analysis at each of the 2020 quarterly reporting periods. The fair value of the reporting unit was determined using a market approach which considered the current market capitalization of the Company as well as a control premium that was estimated based upon comparable market transactions to reflect the synergies and other benefits available to a market participant. As a result of its analysis, the Company has determined that the fair value of its goodwill reporting unit exceeded its carrying value and therefore an impairment charge was not recorded for the nine months ended September 30, 2020. The Company’s long-lived asset groups, which includes intangible assets, property and equipment and operating lease right-of-use assets net of operating lease liabilities, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset (or asset group), a significant change in the extent or manner in which an asset (or asset group) is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company has determined that the carrying amount of its remaining long-lived asset group is recoverable as of September 30, 2020, based on the Company’s current financial forecasts. Further declines in the Company’s market capitalization, or more severe effects of the COVID-19 pandemic than currently estimated could result in an impairment of the Company’s goodwill or long-lived assets in the future. The carrying value of the Company’s goodwill and long-lived asset group was $124.6 million and $253.8 million as of September 30, 2020, respectively. A further description of the Company’s significant accounting policies is included in the audited consolidated financial statements within its Annual Report on Form 10–K for the year ended December 31, 2019. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value MeasurementsThe Company’s financial instruments, other than those discussed below, include cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximate fair value due to the short-term nature of these instruments. For financial instruments measured at fair value on a recurring basis, the Company prioritizes the inputs used in measuring fair value according to a three-tier fair value hierarchy defined by U.S. GAAP. For a description of the methods and assumptions that the Company uses to estimate the fair value and determine the classification according to the fair value hierarchy for each financial instrument, see the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2019. Debt. The estimated fair value of the Company’s debt instruments, which are classified as Level 3 financial instruments, at September 30, 2020 and December 31, 2019, was approximately $211.5 million and $246.1 million, respectively. The carrying values of the Company’s debt instruments at September 30, 2020 and December 31, 2019, were $208.1 million and $242.3 million, respectively. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt consists of the following (in thousands): September 30, 2020 December 31, 2019 Revolving Credit Facility $ — $ 25,822 Term Loan Facility $ 211,484 $ 220,313 Debt issuance costs (3,363) (3,812) Total term debt 208,121 216,501 Less: current portion 22,462 13,685 Long-term debt, net $ 185,659 $ 202,816 Credit Facilities On October 22, 2018 (the “Closing Date”), the Company entered into a new credit agreement (as amended, the “Credit Agreement”) providing for a term loan facility in the amount of $235.0 million (the “Term Loan Facility”) and a revolving credit facility of $50.0 million (the “Revolving Credit Facility”) (together the “Credit Facilities”). On February 11, 2019, the Company amended the Credit Agreement to increase the Revolving Credit Facility to $75.0 million. On September 23, 2019, the Company entered into a second amendment to the Credit Agreement, which extended the maturity date of the Term Loan Facility and the Revolving Credit Facility under the Credit Facilities to September 23, 2024 (the “Maturity Date”), reduced the interest margin applicable to all loans under the Credit Agreement by 0.75% and reduced certain fees incurred under the Credit Agreement. The second amendment also allows the Company to request an additional $25.0 million increase to the Term Loan Facility. On May 5, 2020 the Company entered into a third amendment to the Credit Agreement (“Third Amendment”) which amended and modified the Credit Agreement, to, among other things, (i) waive the financial covenants under the Credit Agreement for the fiscal quarters ending June 30, 2020 and September 30, 2020 (the “Waiver Period”), (ii) add a requirement to maintain a minimum liquidity of at least $30.0 million until the Leverage Ratio (as defined in the Credit Agreement) is less than 2.50 to 1.00 for a period of four consecutive fiscal quarters, (iii) hold the incurrence ratios for certain restricted payments, investments and dispositions at the levels applicable prior to the effectiveness of the Third Amendment, (iv) increase the interest and fees payable under the Credit Agreement from the date of Third Amendment through (but excluding) the first date on which the Company receives cumulative net cash proceeds of at least $50.0 million from certain issuances of permitted equity or convertible subordinated debt and (v) allow that any calculation of Consolidated EBITDA (as defined in the Credit Agreement) that includes the fiscal quarter ended December 31, 2019 may include non-cash expenses for inventory write-downs incurred by the Company during such quarter. For the four consecutive fiscal quarter period ended June 30, 2020 we were able to demonstrate a leverage ratio of less than 2.50 to 1:00 and were therefore no longer subject to the minimum liquidity requirement during the three months ended September 30, 2020. The Third Amendment adjusted the required leverage levels for the Leverage Ratio to provide the Company with additional flexibility following the Waiver Period. The Term Loan Facility matures on the Maturity Date and amortizes in quarterly installments in aggregate amounts equal to 5.00% of the original principal amount of the Term Loan Facility (the “Original Principal Amount”) in the first and second years of the Term Loan Facility, 10.00% of the Original Principal Amount in the third and fourth years of the Term Loan Facility and 12.50% of the Original Principal Amount in the fifth and sixth years of the Term Loan Facility, with any outstanding balance due and payable on the Maturity Date. The first amortization payment was on December 31, 2018. The Revolving Credit Facility also terminates on the Maturity Date and loans thereunder may be borrowed, repaid, and reborrowed up to such date. As amended, loans under the Credit Facilities bear interest, at the Company’s option, at either the Euro-Rate (as defined in the Credit Agreement), or in the case of swing loans, the Swing Rate (as defined in the Credit Agreement), plus 3.00% or the Base Rate (as defined in the Credit Agreement) plus 2.00%, with 0.25% step-downs based on the achievement of certain leverage ratios following the Closing Date. The Euro-Rate is subject to a 1.00% floor and for loans based on the Euro-Rate, interest payments are due at the end of each applicable interest period. The Credit Facilities are secured by substantially all of the assets of the Company and any of its existing or future material domestic subsidiaries, subject to customary exceptions. As of September 30, 2020 and December 31, 2019, the Company was in compliance with all of the covenants in its Credit Agreement, as amended. At September 30, 2020, the Company had $211.5 million of borrowings outstanding under the Term Loan Facility and no outstanding borrowings under the Revolving Credit Facility. At December 31, 2019, the Company had $220.3 million and $25.8 million of borrowings outstanding under the Term Loan Facility and Revolving Credit Facility, respectively. At September 30, 2020 and December 31, 2019, the Company had $75.0 million and $49.2 million available under the Revolving Credit Facility, respectively. There were no outstanding letters of credit as of September 30, 2020 and December 31, 2019. |
Liabilities under Tax Receivabl
Liabilities under Tax Receivable Agreement | 9 Months Ended |
Sep. 30, 2020 | |
Liabilities Under Tax Receivable Agreement [Abstract] | |
Liabilities under Tax Receivable Agreement | Liabilities under Tax Receivable Agreement On November 1, 2017, the Company entered into a tax receivable agreement with FAH, LLC (the “Tax Receivable Agreement”) and each of the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of tax benefits, if any, that it realizes, or in some circumstances, is deemed to realize, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of common units of FAH, LLC for Class A common stock of Funko, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. During the three months ended September 30, 2020, the Company did not acquire any common units of FAH, LLC. During the nine months ended September 30, 2020, the Company acquired 0.5 million of common units of FAH, LLC, in connection with the redemption of common units, which resulted in an increase in the tax basis of the Company’s investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement. As a result of these exchanges, during the nine months ended September 30, 2020, the Company recognized an increase to its net deferred tax assets in the amount of $0.4 million and corresponding Tax Receivable Agreement liabilities of $1.0 million. No payments were made pursuant to the Tax Receivable Agreement during the three months ended September 30, 2020. There were $0.2 million in payments made pursuant to the Tax Receivable Agreement during the nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, the Company acquired an aggregate of 4.4 million and 9.4 million common units of FAH, LLC, respectively, in connection with the redemption of common units, which resulted in an increase in the tax basis of the Company’s investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement. As a result of these exchanges, during the three and nine months ended September 30, 2019 the Company recognized an increase to its net deferred tax assets in the amount of $25.4 million and $47.7 million, respectively, and corresponding Tax Receivable Agreement liabilities of $29.5 million and $58.6 million, respectively. There were no payments made pursuant to the Tax Receivable Agreement during the nine months ended September 30, 2019. As of September 30, 2020, the Company’s total obligation under the Tax Receivable Agreement, including accrued interest, was $66.6 million, of which $4.2 million was included in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets. There were no transactions subject to the Tax Receivable Agreement for which the Company did not recognize the related liability, as the Company concluded that it was probable that the Company would have sufficient future taxable income to utilize all of the related tax benefits. At December 31, 2019, the Company’s total obligation under the Tax Receivable Agreement, including accrued interest, was $65.8 million, of which $4.3 million was included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies License Agreements The Company enters into license agreements with various licensors of copyrighted and trademarked characters and design in connection with the products that it sells. The agreements generally require royalty payments based on product sales and in some cases may require minimum royalty and other related commitments. Employment Agreements The Company has employment agreements with certain officers. The agreements include, among other things, an annual bonus based on certain performance metrics of the Company, as defined by the board of directors, and up to one year’s severance pay beyond termination date. Debt The Company has entered into a Credit Agreement which includes a Term Loan Facility and a Revolving Credit Facility. See Note 4, Debt. Tax Receivable Agreement The Company is party to the Tax Receivable Agreement with FAH, LLC and each of the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners under certain circumstances. See Note 5, Liabilities under Tax Receivable Agreement. Legal Contingencies The Company is involved in claims and litigation in the ordinary course of business, some of which seek monetary damages, including claims for punitive damages, which are not covered by insurance. For certain pending matters, accruals have not been established because such matters have not progressed sufficiently through discovery, and/or development of important factual information and legal information is insufficient to enable the Company to estimate a range of possible loss, if any. An adverse determination in one or more of these pending matters could have an adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows. The Company is, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. For example, on March 10, 2020, a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Central District of California against the Company and certain of its officers, entitled Ferreira v. Funko, Inc. et al . The complaint alleges that the Company and its officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as Rule 10b-5 promulgated thereunder, by making allegedly materially misleading statements in the Company’s October 31, 2019 announcement of third quarter 2019 financial results and third quarter 2019 Form 10-Q, as well as by omitting material facts necessary to make the statements made therein not misleading. The lawsuit seeks, among other things, compensatory damages and attorneys’ fees and costs. Two additional complaints making substantially similar allegations— Nahas v. Funko, Inc. et al. and Dachev v. Funko, Inc. et al. —were filed April 3, 2020 in the United States District Court for the Central District of California and April 9, 2020 in the United States District Court for the Western District of Washington, respectively. On June 11, 2020, the Central District of California actions were consolidated for all purposes into one action under the Ferreira caption, and a lead plaintiff and lead counsel were appointed pursuant to the Private Securities Litigation Reform Act. Lead plaintiff filed the consolidated complaint on July 31, 2020, against the Company and certain of its officers and directors, as well as entities affiliated with ACON Funko Investors, L.L.C. (“ACON”). All defendants moved to dismiss the consolidated action on October 2, 2020, and briefing on the motions to dismiss is expected to conclude on December 30, 2020. On June 25, 2020, the Dachev action was voluntarily dismissed. Five shareholder derivative actions based on the earnings announcement and Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 have been brought on behalf of the Company against certain of its directors and officers. Specifically, on April 23, June 5, and June 10, 2020, the actions captioned Cassella v. Mariotti et al. , Evans v. Mariotti et al. , and Igelido v. Mariotti et al. , respectively, were filed in the United States District Court for the Central District of California. On July 6, 2020, these three actions were consolidated for all purposes into one action under the title In re Funko, Inc. Derivative Litigation , and on August 13, 2020, the consolidated action was stayed pending final resolution of the motion to dismiss in the Ferreira action. Additionally, on July 14 and July 31, 2020, the actions captioned Rubin v. Mariotti et al. and Fletcher v. Mariotti et al., respectively, were filed in the United States District Court for the District of Delaware. These two actions were consolidated for all purposes into one action under the title In re Funko, Inc. Stockholder Derivative Litigation on September 8, 2020. Defendants have informed the court that they intend to move to transfer the consolidated action to the United States District Court for the Central District of California. The complaints filed in the shareholder derivative actions have alleged breaches of fiduciary duties, unjust enrichment, waste of corporate assets, insider trading, and violations of the Exchange Act. The actions seek, among other things, payment of damages to the Company and to disgorge the directors and officers from all profits and benefits they obtained due to their alleged wrongful conduct. Defendants intend to seek to dismiss or stay these actions. Defendants believe they have meritorious defenses to the claims in the above-referenced suits and the Company believes any liability for the alleged claims is not currently probable or reasonably estimable. Additionally, between November 16, 2017 and June 12, 2018, seven purported stockholders of the Company filed putative class action lawsuits in the Superior Court of Washington in and for King County against the Company, certain of its officers and directors, ACON, Fundamental Capital, LLC and Funko International, LLC (collectively, “Fundamental”), the underwriters of the Company’s IPO, and certain other defendants. On July 2, 2018, the suits were ordered consolidated for all purposes into one action under the title In re Funko, Inc. Securities Litigation . On August 1, 2018, plaintiffs filed a consolidated complaint against the Company, certain of its officers and directors, ACON, Fundamental, and certain other defendants. On October 1, 2018, the Company moved to dismiss the action. The motion was fully briefed as of November 30, 2018 and oral argument on the motion was held on May 3, 2019. On August 2, 2019, the Superior Court of Washington in and for King County dismissed the consolidated action, allowing plaintiffs leave to amend the complaint. The Court found, inter alia, that “Funko’s statements regarding its financial disclosures were not materially false or misleading” and that “plaintiffs have not shown that Funko’s ‘opinion statements’ were false or that such statements were not simply corporate optimism or puffery.” On October 3, 2019, plaintiffs filed a first amended consolidated complaint. The Company moved to dismiss that complaint on December 5, 2019. The motion was fully briefed as of March 17, 2020, and oral argument on the motion was held on May 15, 2020. On August 5, 2020, the Superior Court of Washington in and for King County dismissed the consolidated action with prejudice. Plaintiffs filed a notice of appeal to the Washington Court of Appeals on September 4, 2020. That appeal is pending. Additionally, on June 4, 2018, a putative class action lawsuit entitled Kanugonda v. Funko, Inc. et al . was filed in the United States District Court for the Western District of Washington against the Company, certain of its officers and directors, and certain other defendants. On January 4, 2019, a lead plaintiff was appointed in that case. On April 30, 2019, the lead plaintiff filed an amended complaint against the previously named defendants. The parties to the federal action, now captioned Berkelhammer v. Funko, Inc. et al. , have agreed to a stay of that action pending developments in the state case. The complaints in Washington state court and Berkelhammer v. Funko, Inc. et al . allege that the Company violated Sections 11, 12, and 15 of the Securities Act of 1933, as amended, by making allegedly materially misleading statements and by omitting material facts necessary to make the statements made therein not misleading. The lawsuits seek, among other things, compensatory statutory damages and rescissory damages in account of the consideration paid for the Company’s Class A common stock by the plaintiffs and members of the putative class, as well as attorneys’ fees and costs. The Company believes it has meritorious defenses to the claims of the plaintiffs and members of the class and any liability for the alleged claims is not currently probable or reasonably estimable. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Segments | Segments The Company identifies its reportable segments according to how the business activities are managed and evaluated and for which discrete financial information is available and regularly reviewed by its Chief Operating Decision Maker (the “CODM”) to allocate resources and assess performance. Because its CODM reviews financial performance and allocates resources at a consolidated level on a regular basis, the Company has one reportable segment. The following table is a summary of the Company’s main product categories as a percent of net sales: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Figures 75.9 % 79.0 % 78.3 % 81.2 % Other 24.1 % 21.0 % 21.7 % 18.8 % The following tables present summarized geographical information (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net sales: United States $ 140,935 $ 147,308 $ 317,348 $ 378,852 International 50,294 75,999 108,680 202,719 Total net sales $ 191,229 $ 223,307 $ 426,028 $ 581,571 September 30, 2020 December 31, 2019 Long-term assets: United States $ 72,478 $ 78,394 Vietnam and China 17,336 19,606 United Kingdom 29,374 35,396 Total long-lived assets $ 119,188 $ 133,396 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Funko, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FAH, LLC based upon Funko, Inc.’s economic interest held in FAH, LLC. FAH, LLC is treated as a pass-through partnership for income tax reporting purposes. FAH, LLC’s members, including the Company, are liable for federal, state and local income taxes based on their share of FAH, LLC’s pass-through taxable income. The Company recorded $1.4 million and $2.9 million of income tax expense for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million of income tax benefit and $6.5 million of income tax expense for the nine months ended September 30, 2020 and 2019, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2020 was 8.3% and 18.1%, respectively. The Company’s effective tax rate is less than the statutory rate of 21% primarily because the Company is not liable for income taxes on the portion of FAH, LLC’s earnings that are attributable to non-controlling interests. Additionally, for the three and nine months ended September 30, 2020 the Company recorded a return to provision adjustment that contributed to the difference between the effective and statutory tax rate. The Company is party to the Tax Receivable Agreement with FAH, LLC and each of the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners under certain circumstances. See Note 5, Liabilities under Tax Receivable Agreement. |
Stockholders_ Equity
Stockholders’ Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | . Stockholders’ EquityThe following is a reconciliation of changes in stockholders’ equity for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Class A common stock Beginning balance $ 4 $ 3 $ 3 $ 2 Shares issued — — 1 1 Ending balance $ 4 $ 3 $ 4 $ 3 Class B common stock Beginning balance $ 1 $ 2 $ 1 $ 2 Redemption of common units of FAH, LLC — (1) — (1) Ending balance $ 1 $ 1 $ 1 $ 1 Additional paid-in capital Beginning balance $ 210,735 $ 176,684 $ 204,174 $ 146,154 Equity-based compensation 2,456 3,715 7,494 9,830 Shares issued for equity-based compensation awards 174 784 219 2,210 Shares withheld related to net share settlement of equity-based compensation awards — — (101) — Shares issued for purchase consideration — — — 2,221 Redemption of common units of FAH, LLC — 23,261 2,115 50,912 Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets — (4,079) (536) (10,962) Ending balance $ 213,365 $ 200,365 $ 213,365 $ 200,365 Accumulated other comprehensive (loss) income Beginning balance $ (807) $ (336) $ 791 $ (167) Foreign currency translation gain (loss), net of tax 1,051 (538) (547) (707) Ending balance $ 244 $ (874) $ 244 $ (874) Retained earnings Beginning balance $ 5,731 $ 16,044 $ 20,442 $ 8,717 Net income (loss) attributable to Funko, Inc. 9,796 8,639 (4,915) 15,966 Ending balance $ 15,527 $ 24,683 $ 15,527 $ 24,683 Non-controlling interests Beginning balance $ 67,968 $ 103,968 $ 79,733 $ 138,546 Distributions to Continuing Equity Owners (821) (4,784) (3,496) (22,905) Redemption of common units of FAH, LLC — (23,223) (2,115) (50,911) Foreign currency translation gain (loss), net of tax 596 (460) (349) (462) Net income (loss) attributable to non-controlling interests 5,801 6,909 (229) 18,142 Ending balance $ 73,544 $ 82,410 $ 73,544 $ 82,410 Total stockholders’ equity $ 302,685 $ 306,588 $ 302,685 $ 306,588 The following is a reconciliation of changes in Class A and Class B common shares outstanding for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Class A common shares outstanding Beginning balance 35,465 30,214 34,918 24,960 Shares issued for equity-based compensation awards 21 76 85 207 Shares issued for purchase consideration — — — 127 Redemption of common units of FAH, LLC — 4,368 483 9,364 Ending balance 35,486 34,658 35,486 34,658 Class B common shares outstanding Beginning balance 14,040 18,740 14,515 23,584 Redemption of common units of FAH, LLC — (4,173) (475) (9,017) Ending balance 14,040 14,567 14,040 14,567 Total Class A and Class B common shares outstanding 49,526 49,225 49,526 49,225 |
Non-controlling Interests
Non-controlling Interests | 9 Months Ended |
Sep. 30, 2020 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interests | Non-controlling interests Funko, Inc. is the sole managing member of FAH, LLC and as a result consolidates the financial results of FAH, LLC and reports a non-controlling interest representing the common units of FAH, LLC held by the Continuing Equity Owners. Changes in Funko, Inc.’s ownership interest in FAH, LLC while Funko, Inc. retains its controlling interest in FAH, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of common units of FAH, LLC by the Continuing Equity Owners will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when FAH, LLC has positive or negative net assets, respectively. Net income (loss) and comprehensive income (loss) are attributed between Funko, Inc. and non-controlling interest holders based on each party’s relative economic ownership interest in FAH, LLC. As of September 30, 2020 and December 31, 2019, Funko, Inc. owned 35.5 million and 34.9 million of FAH, LLC common units, respectively, representing a 69.4% and 68.7% economic ownership interest in FAH, LLC, respectively. Net income (loss) and comprehensive income (loss) of FAH, LLC excludes certain activity attributable to Funko, Inc., including equity-based compensation expense for share-based compensation awards issued by Funko, Inc. and income tax expense (benefit) for corporate, federal, state and local taxes attributable to Funko, Inc. The following represents the amounts excluded from the computation of net income (loss) and comprehensive income (loss) of FAH, LLC for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Funko, Inc. Equity-based compensation $ 2,438 $ 3,145 $ 7,384 $ 8,121 Income tax expense (benefit) $ 911 $ 2,265 $ (2,318) $ 4,751 |
Earnings (loss) per Share
Earnings (loss) per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings (loss) per Share | Earnings (loss) per Share Basic earnings (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Funko, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Funko, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock (in thousands, except shares and per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Numerator: Net income (loss) $ 15,597 $ 15,548 $ (5,144) $ 34,108 Less: net income (loss) attributable to non-controlling interests 5,801 6,909 (229) 18,142 Net income (loss) attributable to Funko, Inc. — basic and diluted $ 9,796 $ 8,639 $ (4,915) $ 15,966 Denominator: Weighted-average shares of Class A common stock outstanding — basic 35,483,266 32,055,116 35,154,617 29,554,572 Add: Effect of dilutive equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock 420,472 2,447,729 — 2,157,293 Weighted-average shares of Class A common stock outstanding — diluted 35,903,738 34,502,845 35,154,617 31,711,865 Earnings (loss) per share of Class A common stock — basic $ 0.28 $ 0.27 $ (0.14) $ 0.54 Earnings (loss) per share of Class A common stock — diluted $ 0.27 $ 0.25 $ (0.14) $ 0.50 For the three and nine months ended September 30, 2020 and 2019, an aggregate of 19.5 million and 20.3 million, respectively, and 19.1 million and 21.3 million, respectively, of potentially dilutive securities were excluded from the weighted-average in the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive. For the three and nine months ended September 30, 2020 and 2019, anti-dilutive securities included 15.6 million and 15.8 million, respectively, and 18.1 million and 20.4 million, respectively, of common units of FAH, LLC that are convertible into Class A common stock, but were excluded from the computations of diluted earnings (loss) per share because the effect would have been anti-dilutive under the if-converted method. Shares of the Company’s Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions. |
Evaluation of goodwill impairment | The Company evaluates goodwill for impairment annually on October 1 of each year and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of the net assets is below their carrying amounts. The Company has determined that it has one reporting unit for which discrete financial information is available and results are regularly reviewed by management.During the nine months ended September 30, 2020, the Company assessed a series of triggering events related to the Company’s book value in excess of the market capitalization of the Company. Such triggering events included the World Health Organization declaring on March 11, 2020 that the COVID-19 outbreak constituted a global pandemic and the Company releasing a business update on March 20, 2020 announcing the closing of its retail locations, that employees would be working from home and the withdrawal of its 2020 financial guidance that had been issued on March 5, 2020. Due to sustained lower market capitalization below book value, the Company performed a quantitative analysis at each of the 2020 quarterly reporting periods.The fair value of the reporting unit was determined using a market approach which considered the current market capitalization of the Company as well as a control premium that was estimated based upon comparable market transactions to reflect the synergies and other benefits available to a market participant. As a result of its analysis, the Company has determined that the fair value of its goodwill reporting unit exceeded its carrying value and therefore an impairment charge was not recorded for the nine months ended September 30, 2020. |
Evaluation of other long-lived assets for impairment | The Company’s long-lived asset groups, which includes intangible assets, property and equipment and operating lease right-of-use assets net of operating lease liabilities, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset (or asset group), a significant change in the extent or manner in which an asset (or asset group) is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company has determined that the carrying amount of its remaining long-lived asset group is recoverable as of September 30, 2020, based on the Company’s current financial forecasts. Further declines in the Company’s market capitalization, or more severe effects of the COVID-19 pandemic than currently estimated could result in an impairment of the Company’s goodwill or long-lived assets in the future. The carrying value of the Company’s goodwill and long-lived asset group was $124.6 million and $253.8 million as of September 30, 2020, respectively. |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Summary of Debt | Debt consists of the following (in thousands): September 30, 2020 December 31, 2019 Revolving Credit Facility $ — $ 25,822 Term Loan Facility $ 211,484 $ 220,313 Debt issuance costs (3,363) (3,812) Total term debt 208,121 216,501 Less: current portion 22,462 13,685 Long-term debt, net $ 185,659 $ 202,816 |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Summary of Main Product Categories as Percent of Sales | The following table is a summary of the Company’s main product categories as a percent of net sales: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Figures 75.9 % 79.0 % 78.3 % 81.2 % Other 24.1 % 21.0 % 21.7 % 18.8 % |
Summary of Net Sales and Long-Lived Assets | The following tables present summarized geographical information (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net sales: United States $ 140,935 $ 147,308 $ 317,348 $ 378,852 International 50,294 75,999 108,680 202,719 Total net sales $ 191,229 $ 223,307 $ 426,028 $ 581,571 September 30, 2020 December 31, 2019 Long-term assets: United States $ 72,478 $ 78,394 Vietnam and China 17,336 19,606 United Kingdom 29,374 35,396 Total long-lived assets $ 119,188 $ 133,396 |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Reconciliation of Changes in Stockholders' Equity | The following is a reconciliation of changes in stockholders’ equity for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Class A common stock Beginning balance $ 4 $ 3 $ 3 $ 2 Shares issued — — 1 1 Ending balance $ 4 $ 3 $ 4 $ 3 Class B common stock Beginning balance $ 1 $ 2 $ 1 $ 2 Redemption of common units of FAH, LLC — (1) — (1) Ending balance $ 1 $ 1 $ 1 $ 1 Additional paid-in capital Beginning balance $ 210,735 $ 176,684 $ 204,174 $ 146,154 Equity-based compensation 2,456 3,715 7,494 9,830 Shares issued for equity-based compensation awards 174 784 219 2,210 Shares withheld related to net share settlement of equity-based compensation awards — — (101) — Shares issued for purchase consideration — — — 2,221 Redemption of common units of FAH, LLC — 23,261 2,115 50,912 Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets — (4,079) (536) (10,962) Ending balance $ 213,365 $ 200,365 $ 213,365 $ 200,365 Accumulated other comprehensive (loss) income Beginning balance $ (807) $ (336) $ 791 $ (167) Foreign currency translation gain (loss), net of tax 1,051 (538) (547) (707) Ending balance $ 244 $ (874) $ 244 $ (874) Retained earnings Beginning balance $ 5,731 $ 16,044 $ 20,442 $ 8,717 Net income (loss) attributable to Funko, Inc. 9,796 8,639 (4,915) 15,966 Ending balance $ 15,527 $ 24,683 $ 15,527 $ 24,683 Non-controlling interests Beginning balance $ 67,968 $ 103,968 $ 79,733 $ 138,546 Distributions to Continuing Equity Owners (821) (4,784) (3,496) (22,905) Redemption of common units of FAH, LLC — (23,223) (2,115) (50,911) Foreign currency translation gain (loss), net of tax 596 (460) (349) (462) Net income (loss) attributable to non-controlling interests 5,801 6,909 (229) 18,142 Ending balance $ 73,544 $ 82,410 $ 73,544 $ 82,410 Total stockholders’ equity $ 302,685 $ 306,588 $ 302,685 $ 306,588 |
Reconciliation of Changes in Class A and Class B Common Shares Outstanding | The following is a reconciliation of changes in Class A and Class B common shares outstanding for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Class A common shares outstanding Beginning balance 35,465 30,214 34,918 24,960 Shares issued for equity-based compensation awards 21 76 85 207 Shares issued for purchase consideration — — — 127 Redemption of common units of FAH, LLC — 4,368 483 9,364 Ending balance 35,486 34,658 35,486 34,658 Class B common shares outstanding Beginning balance 14,040 18,740 14,515 23,584 Redemption of common units of FAH, LLC — (4,173) (475) (9,017) Ending balance 14,040 14,567 14,040 14,567 Total Class A and Class B common shares outstanding 49,526 49,225 49,526 49,225 |
Noncontrolling Interest (Tables
Noncontrolling Interest (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Noncontrolling Interest [Abstract] | |
Schedule of Amounts Excluded from the Computation of Net Income (Loss) and Comprehensive Income (Loss) of FAH, LLC | The following represents the amounts excluded from the computation of net income (loss) and comprehensive income (loss) of FAH, LLC for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (In thousands) Funko, Inc. Equity-based compensation $ 2,438 $ 3,145 $ 7,384 $ 8,121 Income tax expense (benefit) $ 911 $ 2,265 $ (2,318) $ 4,751 |
Earnings (loss) per Share (Tabl
Earnings (loss) per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Reconciliations of Numerators and Denominators Used to Compute Basic and Diluted Earnings Per Share | The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock (in thousands, except shares and per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Numerator: Net income (loss) $ 15,597 $ 15,548 $ (5,144) $ 34,108 Less: net income (loss) attributable to non-controlling interests 5,801 6,909 (229) 18,142 Net income (loss) attributable to Funko, Inc. — basic and diluted $ 9,796 $ 8,639 $ (4,915) $ 15,966 Denominator: Weighted-average shares of Class A common stock outstanding — basic 35,483,266 32,055,116 35,154,617 29,554,572 Add: Effect of dilutive equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock 420,472 2,447,729 — 2,157,293 Weighted-average shares of Class A common stock outstanding — diluted 35,903,738 34,502,845 35,154,617 31,711,865 Earnings (loss) per share of Class A common stock — basic $ 0.28 $ 0.27 $ (0.14) $ 0.54 Earnings (loss) per share of Class A common stock — diluted $ 0.27 $ 0.25 $ (0.14) $ 0.50 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)number_of_reporting_units | Dec. 31, 2019USD ($) | |
Accounting Policies [Abstract] | ||
Cash equivalents | $ 19,900 | |
Number of reporting units | number_of_reporting_units | 1 | |
Goodwill | $ 124,634 | $ 124,835 |
Intangible assets and other, net | $ 253,800 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - Funko Acquisition Holdings, L.L.C. - Level 3 - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Estimated fair value of debt instruments | $ 211.5 | $ 246.1 |
Term Loan Facility | $ 208.1 | $ 242.3 |
Debt - Summary of Debt (Detail)
Debt - Summary of Debt (Detail) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Oct. 22, 2018 |
Debt Instrument [Line Items] | |||
Line of credit | $ 0 | $ 25,822,000 | |
Debt issuance costs | (3,363,000) | (3,812,000) | |
Total term debt | 208,121,000 | 216,501,000 | |
Current portion of long-term debt, net of unamortized discount | 22,462,000 | 13,685,000 | |
Long-term debt, net | 185,659,000 | 202,816,000 | |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Line of credit | 0 | 25,822,000 | |
Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Term Loan Facility | $ 211,484,000 | $ 220,313,000 | $ 235,000,000 |
Debt - New Credit Facilities -
Debt - New Credit Facilities - Additional Information (Detail) - USD ($) | May 05, 2020 | Sep. 23, 2019 | Oct. 22, 2018 | Jun. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Feb. 11, 2019 |
Debt Instrument [Line Items] | |||||||
Minimum liquidity requirement | $ 30,000,000 | ||||||
Leverage ratio | 250.00% | 250.00% | |||||
Net cash proceeds requirement | $ 50,000,000 | ||||||
Line of credit | $ 0 | $ 25,822,000 | |||||
Remaining borrowing capacity | 75,000,000 | ||||||
Term Loan Facility | |||||||
Debt Instrument [Line Items] | |||||||
Term Loan Facility | $ 235,000,000 | 211,484,000 | 220,313,000 | ||||
Increase in principal balance under second amendment | $ 25,000,000 | ||||||
Long term debt maturity percentage first and second year | 5.00% | ||||||
Long term debt maturity percentage third and fourth year | 10.00% | ||||||
Long term debt maturity percentage fifth and sixth year | 12.50% | ||||||
Term Loan Facility | Euro Rate | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate margins | 3.00% | ||||||
Interest rate of borrowings | 1.00% | ||||||
Term Loan Facility | Base Rate Loans | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate margins | 2.00% | ||||||
Supplementary leverage ratio | 0.25% | ||||||
Term Loan Facility | Swing Rate | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate margins | 2.00% | ||||||
Supplementary leverage ratio | 0.25% | ||||||
Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit | $ 50,000,000 | $ 75,000,000 | |||||
Reduction in interest margin applicable to all loans | 0.75% | ||||||
Line of credit | $ 0 | 25,822,000 | |||||
Remaining borrowing capacity | $ 49,200,000 |
Liabilities under Tax Receiva_2
Liabilities under Tax Receivable Agreement - Additional information (Detail) - USD ($) | Nov. 01, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Liabilities Under Tax Receivable Agreement [Line Items] | ||||||
Percentage of tax benefit paid to equity owner | 85.00% | |||||
Common units acquired (in shares) | 0 | 4,400,000 | 500,000 | 9,400,000 | ||
Increase in deferred tax assets | $ 25,400,000 | $ 400,000 | $ 47,700,000 | |||
Increase in tax receivable agreement liabilities | $ 29,500,000 | 1,000,000 | 58,600,000 | |||
Payments under tax receivable agreement | $ 0 | 165,000 | $ 0 | |||
Funko Acquisition Holdings, L.L.C. | ||||||
Liabilities Under Tax Receivable Agreement [Line Items] | ||||||
Obligation included in accrued expenses | 66,600,000 | 66,600,000 | $ 65,800,000 | |||
Funko Acquisition Holdings, L.L.C. | Accrued Expenses and Other Current Liabilities | ||||||
Liabilities Under Tax Receivable Agreement [Line Items] | ||||||
Obligation included in accrued expenses | $ 4,200,000 | $ 4,200,000 | $ 4,300,000 |
Commitments and Contingencies -
Commitments and Contingencies - Additional information (Detail) - Lawsuit | Jun. 10, 2020 | Apr. 09, 2020 | Jul. 02, 2018 | Sep. 30, 2020 |
Lessee, Lease, Description [Line Items] | ||||
Severance payment period | 1 year | |||
Nahas v. Funko, Inc. et al. and Dachev v. Funko, Inc. et al. | ||||
Lessee, Lease, Description [Line Items] | ||||
Number of additional putative class action lawsuits filed | 2 | |||
In re Funko, Inc. Derivative Litigation | ||||
Lessee, Lease, Description [Line Items] | ||||
Number of additional putative class action lawsuits filed | 5 | |||
Berkelhammer v. Funko, inc. et. al. | ||||
Lessee, Lease, Description [Line Items] | ||||
Number of additional putative class action lawsuits filed | 1 |
Segments - Additional Informati
Segments - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2020Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Segments - Summary of Main Prod
Segments - Summary of Main Product Categories as Percent of Sales (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Schedule of Property and Equipment Net by Country [Line Items] | ||||
Net sales | $ 191,229 | $ 223,307 | $ 426,028 | $ 581,571 |
United States | ||||
Schedule of Property and Equipment Net by Country [Line Items] | ||||
Net sales | 140,935 | 147,308 | 317,348 | 378,852 |
International | ||||
Schedule of Property and Equipment Net by Country [Line Items] | ||||
Net sales | $ 50,294 | $ 75,999 | $ 108,680 | $ 202,719 |
Sales Revenue | Product Concentration Risk | Figures | ||||
Schedule of Property and Equipment Net by Country [Line Items] | ||||
Percent of sales | 75.90% | 79.00% | 78.30% | 81.20% |
Sales Revenue | Product Concentration Risk | Other | ||||
Schedule of Property and Equipment Net by Country [Line Items] | ||||
Percent of sales | 24.10% | 21.00% | 21.70% | 18.80% |
Segments - Summary of Net Sales
Segments - Summary of Net Sales and Long-Lived Assets (Detail) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Segment Reporting Information [Line Items] | ||
Total long-lived assets | $ 119,188 | $ 133,396 |
United States | ||
Segment Reporting Information [Line Items] | ||
Total long-lived assets | 72,478 | 78,394 |
Vietnam and China | ||
Segment Reporting Information [Line Items] | ||
Total long-lived assets | 17,336 | 19,606 |
United Kingdom | ||
Segment Reporting Information [Line Items] | ||
Total long-lived assets | $ 29,374 | $ 35,396 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 1,420 | $ 2,865 | $ (1,139) | $ 6,464 |
Effective income tax rate | (8.30%) | 18.10% | ||
Statutory income tax rate | 21.00% |
Stockholders' Equity - Reconcil
Stockholders' Equity - Reconciliation of Changes in Stockholders' Equity (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | $ 305,144 | |||
Foreign currency translation gain (loss), net of tax | $ 1,647 | $ (998) | (896) | $ (1,169) |
Net income (loss) | 15,597 | 15,548 | (5,144) | 34,108 |
Ending balance | 302,685 | 306,588 | 302,685 | 306,588 |
Common Stock | Class A common stock | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 4 | 3 | 3 | 2 |
Shares issued | 0 | 0 | 1 | 1 |
Ending balance | 4 | 3 | 4 | 3 |
Common Stock | Class B common stock | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 1 | 2 | 1 | 2 |
Redemption of common units of FAH, LLC | 0 | (1) | 0 | (1) |
Ending balance | 1 | 1 | 1 | 1 |
Additional paid-in capital | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 210,735 | 176,684 | 204,174 | 146,154 |
Equity-based compensation | 2,456 | 3,715 | 7,494 | 9,830 |
Shares issued for equity-based compensation awards | 174 | 784 | 219 | 2,210 |
Shares withheld related to net share settlement of equity-based compensation awards | 0 | 0 | (101) | 0 |
Shares issued for purchase consideration | 0 | 0 | 0 | 2,221 |
Redemption of common units of FAH, LLC | 0 | (23,261) | (2,115) | (50,912) |
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets | 0 | (4,079) | (536) | (10,962) |
Ending balance | 213,365 | 200,365 | 213,365 | 200,365 |
Accumulated other comprehensive (loss) income | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | (807) | (336) | 791 | (167) |
Foreign currency translation gain (loss), net of tax | 1,051 | (538) | (547) | (707) |
Ending balance | 244 | (874) | 244 | (874) |
Retained earnings | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 5,731 | 16,044 | 20,442 | 8,717 |
Net income (loss) | 9,796 | 8,639 | (4,915) | 15,966 |
Ending balance | 15,527 | 24,683 | 15,527 | 24,683 |
Non-controlling interests | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 67,968 | 103,968 | 79,733 | 138,546 |
Distributions to Continuing Equity Owners | (821) | (4,784) | (3,496) | (22,905) |
Redemption of common units of FAH, LLC | 0 | (23,223) | (2,115) | (50,911) |
Foreign currency translation gain (loss), net of tax | 596 | (460) | (349) | (462) |
Net income (loss) | 5,801 | 6,909 | (229) | 18,142 |
Ending balance | $ 73,544 | $ 82,410 | $ 73,544 | $ 82,410 |
Stockholders' Equity - Reconc_2
Stockholders' Equity - Reconciliation of Changes in Class A and Class B Common Shares Outstanding (Detail) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Class A common stock | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common shares outstanding (in shares) | 35,465,000 | 30,214,000 | 34,918,000 | 24,960,000 |
Shares issued for equity-based compensation awards (in shares) | 21,000 | 76,000 | 85,000 | 207,000 |
Shares issued for purchase consideration (in shares) | 0 | 0 | 0 | 127,000 |
Redemption of common units of FAH, LLC (in shares) | 0 | 4,368,000 | 483,000 | 9,364,000 |
Common shares outstanding (in shares) | 35,486,000 | 34,658,000 | 35,486,000 | 34,658,000 |
Class B common stock | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common shares outstanding (in shares) | 14,040,000 | 18,740,000 | 14,515,000 | 23,584,000 |
Redemption of common units of FAH, LLC (in shares) | 0 | (4,173,000) | (475,000) | (9,017,000) |
Common shares outstanding (in shares) | 14,040,000 | 14,567,000 | 14,040,000 | 14,567,000 |
Class A and Class B common shares outstanding | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common shares outstanding (in shares) | 49,526,000 | 49,225,000 | 49,526,000 | 49,225,000 |
Non-controlling Interests - Add
Non-controlling Interests - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2018 | |
Noncontrolling Interest [Line Items] | ||||||||
Income tax expense (benefit) | $ 1,420 | $ 2,865 | $ (1,139) | $ 6,464 | ||||
FAH, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Ownership percentage | 69.40% | 68.70% | ||||||
Class A common shares outstanding | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Common stock, shares outstanding (in shares) | 35,486,000 | 34,658,000 | 35,486,000 | 34,658,000 | 34,918,000 | 35,465,000 | 30,214,000 | 24,960,000 |
Class A common shares outstanding | FAH, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Common stock, shares outstanding (in shares) | 35,500,000 | 35,500,000 | 34,900,000 | |||||
Funko Acquisition Holdings, L.L.C. | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Equity-based compensation | $ 2,438 | $ 3,145 | $ 7,384 | $ 8,121 | ||||
Income tax expense (benefit) | $ (911) | $ 2,265 | $ 2,318 | $ 4,751 |
Earnings (loss) per Share - Sch
Earnings (loss) per Share - Schedule of Reconciliations of Numerators and Denominators Used to Compute Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Numerator: | ||||
Net income (loss) | $ 15,597 | $ 15,548 | $ (5,144) | $ 34,108 |
Less: net income (loss) attributable to non-controlling interests | 5,801 | 6,909 | (229) | 18,142 |
Net income (loss) attributable to Funko, Inc. | $ 9,796 | $ 8,639 | $ (4,915) | $ 15,966 |
Denominator: | ||||
Weighted-average shares of Class A common stock outstanding — basic (in shares) | 35,483,266 | 32,055,116 | 35,154,617 | 29,554,572 |
Add: Effect of dilutive equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock (in shares) | 420,472 | 2,447,729 | 0 | 2,157,293 |
Weighted-average shares of Class A common stock outstanding — diluted (in shares) | 35,903,738 | 34,502,845 | 35,154,617 | 31,711,865 |
Earnings (loss) per share of Class A common stock — basic (in dollars per share) | $ 0.28 | $ 0.27 | $ (0.14) | $ 0.54 |
Earnings (loss) per share of Class A common stock — diluted (in dollars per share) | $ 0.27 | $ 0.25 | $ (0.14) | $ 0.50 |
Earnings (loss) per Share - Add
Earnings (loss) per Share - Additional Information (Detail) - Class A common shares outstanding - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||||
Anti-dilutive shares excluded from weighted-average in computation of diluted earnings per share (in shares) | 19.5 | 19.1 | 20.3 | 21.3 |
Funko Acquisition Holdings, L.L.C. | ||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||||
Anti-dilutive shares excluded from weighted-average in computation of diluted earnings per share (in shares) | 15.6 | 18.1 | 15.8 | 20.4 |