FNKO - Earnings call transcript Q1 2024

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Operator

Good afternoon, and welcome to Funko's 2024 First Quarter Financial Results Conference Call. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of the company.

As a reminder, this call is being recorded. I would now turn the call over to Funko's Director of Investor Relations, Rob Jaffe. Please proceed.

Robert Jaffe

you quarter us financial thank Funko's to and first XXXX results. everyone, for today joining discuss Hello,

On the and company's on call being be Executive newly Officer; available are CEO. website. broadcast Mike Lunsford, Le appointed least A our our live Pendeven, for at acting playback call at the CFO; This Cynthia investor.funko.com. our Yves Williams, is Interim will Chief year X

the statements course include want our of call, I that to of will These everyone management's company's and as forward-looking judgment during information. the future represent remind best discussion about performance. this today results

Our actual in results or that many earnings are those including materially implied risks our and may stated subject from uncertainties release. to discussed those differ

is Additional SEC most information concerning that cause factors materially in reports. contained recent could actual differ our to results

for call, other Investors company's In for generally with issued accordance today. I most non-GAAP financial refer to over company's will is GAAP Mike? its turn directly reasons to different to of from presenting financial measures release results addition, financial prepared release press financial non-GAAP and reconciliation be comparable financial XXXX to to U.S. measures. not the are announcing attached also first the call measures earnings the non-GAAP press measures may the the A measures companies. now earlier Mike Lunsford. this quarter financial we are by during encouraged that review in Funko's accepted principles accounting non-GAAP used

Michael Lunsford

growth her across Microsoft while Directors products, spearheaded earlier Hasbro, Funko's appointed and and as Rob, the that Thanks, Cynthia everyone. afternoon, of experience with at Amazon industries, begin for combined can a will our be presentation. eager gaming CEO. comments announcement and is you, few Cynthia good has and consumer Cynthia's to a made the I e-commerce little next is today here today to the the she I'll our Board tell choice Cynthia with our and made get make later clear us family. with I'm She next get CEO. pretty started, her in started. the eager welcome Funko to We to Williams introductory

financial the our sales quarter. lower-margin shifted to the Sales our Otherwise, at million of guidance albeit lower a been QX. overall to first Turning QX have solid some quarter were to end. the net We of close within almost range, products our of sales expectations. from Net performance. our midpoint $XXX would reported for

Gross the driver channel, the in sales XX% the above margin EBITDA on we key improve result is and put margin margins the of One higher-than-expected $XX well which management. value adjusted increased inventory million of for place both of expectations. were gross our was to in processes

fulfillment difference more new QX we've XXX years costs almost tremendous we hit units last inventory in month, day and year made milestone reducing Since by warehouse What lowering Arizona, the of XXXX, service million, was make paying lower-than-anticipated and costs. Operationally, million. XX, from $XXX at progress of inventory last down top we December our reducing QX, inventory down end inventory key freight Another This was debt. debt million our of half. opening just progress shipped. is reducing a $XXX over levels, the progress than made levels we levels And year, XXXX. continue $XX total of the down And of improving At the levels. a driver to to makes. X million was on

Turning to our outlook. now

guidance. full We are year reiterating XXXX our

to lack our due of content new impacted line. a Hollywood entertainment the expected, primarily strikes top As QX recent

half mitigate than costs to have and team costs. fluctuations look costs in logistics for into due to a year. Freight were continues the QX regard in expect we the to substantial Sea. and our ways and of second QX lower shipping Red manage increase content our strengthening schedule anticipated We stabilized. freight, then assumed remaining in original the to the in these With conflicts soft forecast Nonetheless, in

plan. couple how relate we our they a product Kelce to growth collaborations, and on spotlighted campaigns. to our to and of last on Building Jason briefly Project Pop! focusing highlights regard with unmatched figure. Coke on launched With call, several and Big brand Turning our recent our DunKings we success, recently the the limited including capabilities presale Boy, Fred, addition exciting and Sprite fans that

new our our line. Chan launched the line nostalgic we Funko features and in today, Jumbo earlier of iconic initially new collectible a And first anime This stylization. Freddy edition

these premium-priced been customers. and limited-edition of have sold exclusive out collectible drops items have with brand All core of creating our all heat

emphasizing produce we example characters Pop! great Bitty to and of sales to profitably. fewer SKU we areas products consistently that to better are in and evergreen grow replenishment and done of resonate drive on Yourselfis a over Pop! control expect investing extremely focus have with And able measure be To and well, efficiencies customers.

expectations. and New have in accessories options Since of growing Father's best was product's Yourselfline. sold our Valentine's gift, wedding Mother's We roundup consumer Pop! was and Yourself revenue to we as than Pop! upcoming holidays. more strategically singles. especially April, a time the the going What for the to gearing York continue is awareness, Yourself the a Day we for addition has wedding a the upcoming team be Pop! of to add a sign up well Day in above nice In Times In thought performed Pop! well generated as and X-pack launch, line Day QX, Yourself launched And gifts. to the featured season. our a X-packs

these we it through you turn propelling the highlights how now With Yves momentum. each combination, demonstrate the I'll that, to builds to on Yves? financials. one, take over flywheel keep take the turning, positive where In action previous we

Yves Le Pendeven

everyone. for us joining Hey, today. Thanks, Thanks Mike.

were the represents XX% in For which Hollywood the gross QX. achieved of $XXX.X to primarily net we entertainment lack last despite million. QX XX% total sales growth, sales sales, mix quarter, direct-to-consumer first was year's releases strikes. our due sales This Direct-to-consumer X% new up a from in of

above our our in margin turn previously, in nonrecurring net million business which the EBITDA of included with exiting our and element was $X.X of said well than SG&A we've helps certain guidance to $X.X for to of grow which margin. Gross significantly gross XXXX. million quarter adjusted business, $X.X was expenses and higher gross guidance to our loss well million our million, XX%, lines. Adjusted associated which and primarily $X.XX continue million, finally, share, charges severance was related our $XX.X better in than gross range. above a was guidance was charges As key noncash any range $XX.X profit direct-to-consumer was which quarter. our was And is or per margin strategy

of had we after cash million first March which equivalents in At down is cash the and quarter. $XX.X we million, sheet. balance our to Turning paid $XX.X debt XX, of

under Our $XXX.X equipment Total which discounts, liquidity the million December term total was net and finance debt of inventory down the unamortized million, million $XX.X at company amount which XXXX. line company's was (sic) includes million, ] balance was [ outstanding loan facility, $XXX.X million, $XXX.X loan. XX, credit on and our our the approximately $XXX.X from of revolving was

our to Turning outlook.

and of million We expectations, and are year $X.XXX reiterating billion; $XX $XX EBITDA of $X.XXX our sales XXXX million. which between between net full billion adjusted and are

of between per net share; loss $X.XX of gross million; or or second SG&A quarter, of XX%; million net $X $X $X.XX guidance approximately expense $XX per margin is million between million XX% sales our XXXX adjusted and the $XXX and to $XXX to follows: million as share. For million; $XX

expect we million. EBITDA million adjusted $X Finally, of $XX and between

as We financial as that's of Mike, expect impact first Hollywood an seasonality of half to be in natural the financial to the stronger strikes. well our for the than second business our Back half results to easing in the the expected our of results. over it XXXX you. due of

Michael Lunsford

in summary, a Yves. reported overall Thanks, financial we In performance solid QX.

and down reducing debt. to inventory our make We paying levels continue progress

And CEO, for we outlook greater who expected Williams, we over XXXX our reflects core we start those especially May focus business, grow areas on can announced our new on is XX. Our believe a Cynthia control to and renewed have profitably.

I'll before that, who call she'd open questions, over Cynthia, the to the to With share. call comments Cynthia? has we like turn and for up

Cynthia Williams

I a loyal leader is joining has over introduce immersing Funko. know, in company Williams, company about of to unique the CEO Funko's my history I it several role. I'd before excited space, I'll passionate the and long be and helpful and incredibly lots saying begin perspective, collectibles as and taking and myself month. From hi, a Thanks, in Cynthia has myself products am like potential. this everyone. thought customer Mike, the be start would permanent new I'm base. innovative my to by a you Funko I to and and brands, has later global

profitability Mike believe me channel the most areas Mike sports as and opportunities reducing excellent What's the solid and improving way. the especially substantial the the in a the as core for multiple the on company its and team scale anime, direct-to-consumer have company's profitable music, done of growth. discussed: can and creating international refocusing growth, job I upon foundation an well exciting assets, in a to company are which we cost,

with some strategic As growing had hit consumer am in you to licensing dealings and with e-commerce global running. experience partners, deep worked of and the brands products, and industries ready ground the key release, adjacent background as have a customers consumer probably I well a in having extensive previous gaming Funko's saw base. as I press to Having

more team our and and our get deep do the with meet at will customers. priority to strategic key management learn and In to to a locations I order, about partners Funko's short capabilities. also first My dive be to know the various employees intend

open Operator? With that brief introduction, we call questions. for the will

Operator

line [Operator from Instructions] Riley. Our is the today Eric of question first Wold of B.

Eric Wold

think to see on Cynthia. of time high stronger the in QX, the guess behind within to I take for XX% of questions the And drivers QX, in gross we guess, QX variables what XX% be the you kind forward? couple first this expect and main -- to to I spoke the as me. or would Glad XX%. range? the new the guess the given margin what here you for welcome, here. XX% that of for you margin a of are gross to QX main these XXs baseline in one, the call guidance And should in that XX%, the going I

Yves Le Pendeven

this call. I could is Eric, speak guess question, the Yes, you Yves. to the that. and I for on have good to Thanks

First, margin again, was XX% was reiterating margin QX. -- XX% why gross in our our

things. past a inventory expected. And few cleaner initially were in sales. from the benefit position from Freight mix we benefit a lower we So had than Direct-to-consumer of did we we've than was year. costs XX% much did having

our good freight So gross costs, were all direct-to-consumer the feel you which we XX% when about at think kind we our to mix, The maintaining stable. XX of XX% margin. QX, about remain pretty around anticipate -- that will of sales of those then drivers. And help will

margin gross XX% that be shipments think a customers. would I main XX% difference between a wholesale our timing the of and to

a As and variety know, products we you wide have of customers.

mix sales so bit but little about And gross now. range that an feel can of impact have right pretty on a good we margin,

Eric Wold

question, if Perfect. And I may... a second

Michael Lunsford

Sorry, second gotten XX% to to is the Eric, around. normal? of I point a think to question where normal, willing models that new your but that yet, is could is the -- was Mike, XX% this you know something commit it build this was we're that don't the certainly that this seems -- new we've I perhaps your to part that

Eric Wold

and Perfect. different your the And that Yourself with share site that percentage Yourself Pop! reads and outside any a coming then events have kind at never for Obviously, order to before Yourself later purchases on dates of and customers early returning seeing ordered Pop! you're trends the to realm? variety Any a on if of question. willing Pop! the promoting website them your you're you're holidays. last expanding to

Michael Lunsford

numbers, Pop! our very say are main are now, and for will we we customers. we're to purchase into what specific to It -- to high that are getting in as us leverage but is buy I that main in might not follow-up far you that know we've get group. see the every of it and trying share, tell coming to a people first-time core is percentage, yet from Yves Without coming customers there. high would something And shared that percentage and news customers what more what can great for not product or the enough is who along chance get. We're Yourself pathway as we

the that's in months, can insight something we'll more and into next I share. have that think X

Yves Le Pendeven

Valentine's we're a right? it and just capitalizing color Day on Yes. So such add online be keep really we Father's did to in launched now would period. a Day. how really And we that and trying business, last pleased -- would other The I over we're holidays the we're as with had only to make that and Mother's holiday it year-round Yourself Pop! mind, Day August,

about customers the we're Mother's cases, that for that right, the our a it's And Father's different than as to are these lot we're -- through coming some coming in And learning Day for a Day process, gift shopper going in person gift. in a site. new coming it's

it's So lot line, but we're we learning, see product early this days still a potential. of upside and with

Operator

today Sachs. of from is Stephen Laszczyk Goldman next question Our line the of

Stephen Laszczyk

welcome, Maybe And Cynthia. on international Great. growth. versus first U.S.

I think points in Europe. there's with about of XX first quarter underperforming percentage the delta U.S.

was ramping dynamics year. as then the a be some on if trend like the is you throughout slate versus talk you the into a curious and at if talk little the more it I Just I might about play half there how you you the opportunity to expect wondering more look know little and innovation. bit could back U.S. slate product year. And could European of up, bit sounds there. about product growth film there and innovation the secondly,

you if expand curious Just could on that.

Yves Le Pendeven

of success I'll delta think mind, will innovation. I had Stephen, right, But probably and big rates keep more with stable past growth But United pretty business the in evergreen program an the market, the Mike of Europe. just had between years, the that really we I much and a European there. couple in to think to in of over you're lot first have want we building and the a speak product Sure. States question, take a part

as say bit more a difference which there much little a would content QX strikes portion related main Hollywood slate, that sales, in their in higher of we Europe, and impacted in U.S., by the were quite more the that I to a Evergreen the -- they business whereas weren't was have So is impacted. the

do the product to you take want Mike, innovation?

Michael Lunsford

we've innovation, point. you. for would to year on stuff say and I there. last about the will. talking constantly second been Stephen, surprises this won't It's pretty I there that nice any -- half at you aren't talked have working

Cynthia as we comes plan, in think there a to and opportunities I innovate are new longer-term in areas. look at

good launching now, making call, will the and see is of slate editions, more a innovate Bitty. on half But Pop! those continue on We're what progress us and Yourself, started year. whole And talked Mondo. in limited the and more for you'll for of second which the with core have about form factors to from Loungefly I We've we content. the then

just, anything god, there But won't my oh be in new not et that months, something up is going to with next factor, a really come cetera. X the form they've new

excited we interesting few are around. we'll some including a Deadpool, which movies very stuff this have for We think summer,

Operator

from And of Davidson line our next of the question Linda Company. & is Bolton-Weiser D.A. today

Linda Bolton-Weiser

Cynthia. to welcome And Yes.

SG&A I million level So a $XX about figure had the quarter, guidance second question for $XX that million. of to

the versus still difficulties. SG&A had think you run of when elevated operational rate to the seems prior level it I kind

made headcount is you've level that cetera. of elevating still SG&A? you've wondering, What reductions, et I'm So done streamlining,

Yves Le Pendeven

the Linda, question. Well, for thanks I'd say,

differences that customers SG&A, big higher So in past a having website. the especially compared mind of keep margin, Pop! Yourself and product attracting business, including on brand-new we're those one really direct-to-consumer growing have few also you first more lines new we're but it -- benefit has variable that to marketing and years which to has grow the as to from gross trying of is build like SG&A, to costs, our the

key So difference. that's one

long at like about look then in that's not that, year we of QX. run had in of lower think percentage The kind a say the so a want where down to sales half course, and guidance a to I'd you sales as be SG&A slate back our bring are going for of where that bit. a other SG&A absolutely quite the we'll And ramp sales of of a the as obviously we quarter thing forth, QX, sequentially, content is as as percent up

Linda Bolton-Weiser

are I'm right just you're curious just about the to quo of mass going be with Are retailers. there to now kind that Or big what you in you And of are now? channel? things of where how terms try Or gain some Okay. stand shelf then kind space? whole to thinking at kind of about initiatives status

Michael Lunsford

usual good there is we think. think not that's That's of right making mass any retailers with value be place in space. news there, front and our pickup in shelf by than our Pop! Well, significant to where and more the I And will mass store, products. Bitty other we're with impulse, large the now two see the that inroads we'll that's toy, of We're brick-and-mortar that. that seeing continue eventually is

that's in the long us for a pickup big term. So

Linda Bolton-Weiser

the of first Okay. know And -- I just in what personnel. feeling answering about there can that and impressions terms then needs I'd to If her to a Chief anything is if those Like she of about Cynthia -- kind are say topics? I is Or so, be curious company, she be guess, don't questions? there know Officer? initial the Operating culture is she

Cynthia Williams

nice is most social an -- my the team. had with interaction at had have Linda, my has point This meet been conversation of this executive Board Cynthia. leadership you. have initial Directors, I to of with

focused strategy are I'll to do And people incredibly the on impressions the of spending XX my and going business. impacts to days But sort deep, getting positive. then plan. the the So any next to the know we be and really over XX first the days, need first

Linda Bolton-Weiser

Northwest? are the And to Pacific you relocating

Cynthia Williams

about in XXXX. I've at XX started Pacific in for Amazon the been Northwest I Actually, years since

to I fortunately, in need headquarters. Everett relocate. even I'll so be the don't And

Operator

this And you. further no questions have queue we Thank the in at time.

to the back team management closing hand remarks. to I'd So any like for

Michael Lunsford

on joining operator. you, Thank for everyone, the us today. you, call Thank

last Cynthia employees support. analysts own. will fans, our I've am I over my and earnings my you and in our you, sharing progress and call. Goodbye, than our for assure on be leaving to better call. will working This and partners thanks our next taking always, be everybody. enjoyed with their As you, investors, hands

Operator

This concludes Thank for joining. today's all you call.

your now may You disconnect lines.

Funko (FNKO) 9 May 242024 Q1 Earnings call transcript