FNKO - Earnings call transcript Q3 2024

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Operator

Good afternoon, and welcome to Funko's 2024 Third 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 from the company.

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

Robert Jaffe

Hello, everyone, and thank you for joining us today to discuss Funko's 2024 3rd quarter financial results.

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

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

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

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

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

Cynthia? turn over now the I will to Cynthia call Williams.

Cynthia Williams

compared of so range. at which $XX Net was and of of Quarter to reported last quarter. as Third our performance high million, with margin was end $XXX Thanks, XX% Call. We Rob. guidance Good million afternoon, the year, QX EBITDA Gross top everyone, Results guidance sales exceeded of adjusted of down the Financial end our and range. financial both expected, the welcome for Conference Funko's XXXX a overall were, solid

year Turning outlook. full XXXX briefly to our

customers which, indications the cautious increasingly that remaining holidays. during in are among ahead wholesale certain consumers value, are We things, uncertain of spending has seeing consumer resulted other for looking some

within our the top therefore, of earlier sales still range to the guidance billion, for end billion which to have, $X.XX is range. net lowered We $X.XXX

is different very and one. story a profitability a positive Our

results. Our have to are in improved Yves margins raising the in gross and continued detail $XX moment. line just financial for will $XX discuss EBITDA a quarter produce range million guidance to more our million. better-than-expected Therefore, we bottom third the results to adjusted

be he call, On team. my and to Chief we the the last our I senior overseeing is told to the impressions Andy the realigned Moreover, and relationships. of Oddie, in management about taking Since moved initial responsibilities you business addition team. of our has Commercial efforts company development global certain sales on as Officer, then, licensing growth of U.S. global Senior our closer Johanna to many our digital Pop! Vice fully dedicated newer initiatives licensing and And managing lines, physically collectibles. our and to of which Angeles overseeing our includes now business partners Initiatives, channel, to Yourself, Los our Growth sales well Mondo President direct-to-consumer is Gepford, as teams.

plan recruiting product on business We add fandoms. Also actively call, including by our and reach to laid I few associated management in expertise development a areas with expanding grow to our last marketing and development, our Funko the are fans, our XXXX then, and organically delighting our brand out experience. and fan key been senior the deep taking approach, leadership and has improving developing core around of in a which for plan attracting are the strategic selling revolves fan-centric fans the beyond. Since fans, where team our process new creative

QX expect call. on our details We share to

already of executing interim, that begun several the I'm we've the pleased plan. In elements

developments. we to expand representative revenue may these are these this the of While be highlight several of and approach fandoms not of our drivers points grow they taking distribution. year, recent significant are I'll

put logo. to Pop! Sales Football our launch Pop! Funko opener new more packs expanded customize around end kicked Yourself a the QX, point fan a Yourself interest through finer of the To of NFL and Yourself accessory our than with the than XXX of people packs off area by introduced celebrated daily the base collaboration of exceeded where more Bowl. sales Yourself Kansas the new we We League team on season and with total and include Pop! of National included million Super City, the of its NFL a to launch this, from expectations. of in NFL Pop! partnership the to option and legion The with than more playoffs accessory XX% In round we NFL any anticipate sports, increased customer sales for fans. XXX%.

Pop! is the of for limited only XX wide website, minutes on X-Pack on Los XXXX Champions a Series of live Dodgers partnered campaign. within for out, NFL CeeDee XX This holder with is has national our old, our several XX. item the X.X Next, receiver be Pop! went funko.com, sold that Bowl shelf. preorder a and through on is And available NFL it His collectible weeks Lamb will advertisement with a part flying being off Angeles records clever funko.com. years the and virtual Cowboys Dallas of at exclusively World Pro November receptions only direct-to-consumer we edition last for us

dress is show episode of herself Pop! country area the XXXX to She extremely Funko television join has Reba Voice, Country on and The the an is edition contestants people. voice, nearly music, Reba a coach music Awards. the hit a gifted launched X team. Reba also of On to huge who the of limited McEntire, recent star which she a viewership actor. chose million our a weekly a wearing wore we to In the preorder Music red of famous the

Funko's successes licensing and our I'd brand equity income. to royalty with outbound recent delivers program, some mention which briefly like elevates

into developed An our action Games to Fusion, week. it NBCUniversal, on and the in It PlayStation X was way soon September, both the in and video Nintendo foray and and will different for PlayStation X time launched Funko the on and be released indirect launch provides Funko. fans a S XXXX best-selling new First, within video video collaboration Xbox game Switch game holidays. just Funko in the engage its with game in new both adventure Fusion with world for Series X U.S.

Second, entertainment. Gameloft, Loungefly time partnered we favorite to developer, Valley Company some of enjoy X to the to world first of The interactive and Dreamlight of are Loungefly and within Disney bring the games Walt the video million with for bags. currently recently Disney's able wearing backpacks in-game, life video fans their game active

would manufacturers like of take world's partnership long-standing products. I to moment largest chocolate light on of shine incredible a last, the And Ferrero, one and a our to with

Funko Ferrero This and eggs. As reach companies' to of X branded a is remarkable today, milestone testament and a brand Joy has shipped Kinder billion over both strength.

after led In built extend out about We first on are include area of the where now weeks future daily capability the launch, team, our to our volume. the turning partnership. doubling are, we fans excited Canada Canada. discussions the Pop! of daily Ferrero direct-to-consumer sales Yourself in further the nearly to In shipping to with selling our expand we're and and average

the finalist morning, have to award. units I'm well for total also We that the of Pop! is XXXX a now last earlier sold Yourself that since announced over X pleased launch Toy Year prestigious the Association Collectible the this Yourself of share million QX. Pop!

for Yourself Pop! creativity. that honored and uniqueness recognized has been are We its

with allow Yourself we our our And Potter Potter now and can Pop! have of collaboration passion their personalize expanded be to Harry customized accessories. to in Warner for combine, devoted fans, Pop! Bros. fans the Yourself Harry area of with delighting core Harry Millions Potter. with

both DTC X first The accessories launch items, the shipping to timed last well upcoming starts tomorrow. The official hear Yourself the to the are Harry holiday Potter Pop! for this. are Canada and You season. for

serve certainly diversify we evaluating to our excited about as serve business. are grow and core muscle fans. new attract and breadth to are of developments these well developing We We know as other the our to fans, the opportunities the we are positive how and

it that, Yves to will to now Yves? turn take you With financials. the through I over

Yves Le Pendeven

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

sales quarter, the XX% $XXX.X gross net Direct-to-consumer year-over-year comprised were compared year's down QX. and in For with X% our XX% of total sales were last third million. sales

color comped modestly gifting there even moment. year-over-year, no I'll holidays special up a more though or direct-to-consumer in in Yourself Pop! bit were on Our QX. add a business occasions sales

range. $XXX.X million $X.XX diluted was And inventory reserves. finally, driven well in our expenses $X was or was was our million, share, lower-than-anticipated part guidance were which was guidance $XX $XX.X per margin above profit Gross was by gross also income SG&A above the was gross guidance net range. in for and our margin which million, was which higher-than-expected well adjusted Adjusted XX.X%. quarter. range EBITDA The the of million middle

included million QX. $XX.X Turning equivalents At to million, our balance in as cash and The our shipping of liability receivable inventory. service June in The the $XXX.X cash a up we Net inventory on quarter from at $XX uses XX, by compared had the of build cash peak September months. of with agreement million payment well was tax primary $XX.X million driven our $XXX sheet. XX, demand buildup end million, at to new was inventory as during XXXX, slight a slightly

$XXX.X approximately Our quarter. to marginally million down of from liquidity quarter. the million $XXX.X million end the total decreased at company from of second million, debt was $XX.X total last And $XXX.X the at end

we are to anticipate provide a believe our ahead our outlook, promotional that our marketing increasingly I our QX activities of signs up responsive promotional direct-to-consumer on spend our In customers more detail will shift saw for We Before the a value percentage we ramp sales sales. looking we direct-to-consumer when holidays. more shoppers into of which QX, bit were and higher activities.

channel, ahead this QX in consumer trend order to QX book cautious wholesale seeking in softer-than-expected sales certain of customers wholesale as to has In direct-to-consumer expect value believe year-over-year for of we uncertain a during remain spending holidays. our growth. We consumers return the resulted for

full to our XXXX year now outlook. Turning

sales Again, the is end previous the our the which We is another of profitability billion story. to just of to are net above our high guidance range. $X.XX range lowering for end $X.XXX billion, low

resulted in Our improved bottom line a margins have gross performance. better-than-anticipated

$XX the previous $XX high is So we EBITDA, million, raising above range. our for to end of range the which are to adjusted million guidance

$X.XX $XXX quarter, to million per $X $XX or Adjusted of as margin net per an Xth or income sales our XXXX million. XX% and between $X share. loss is Net between income diluted XX%. share million expense between the $XXX adjusted net $X.XX For million and of net and Gross adjusted guidance million. million of SG&A follows. $XX

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

Cynthia, financial over that's Back for results. to you. our it

Cynthia Williams

Yves. Thanks,

sales was than made for expected. summary, slightly strategic the the overall financial our for We've to the In net better EBITDA year. company a progress focus our lowered range on solid performance for on developing quarter for range fans. the grow plans full with and the raised We our adjusted

year-end our some take implement. the anticipate by and We finalize strategy to that will of time expect to initiatives

We our expect plans discuss to call. these on next

Operator? questions. for call the open we'll that, With

Operator

question of first our And be will Instructions] line from B. with Wold Riley. [Operator the Eric

Eric Wold

From guess, tepid being you seeing. A the cautiousness talking few understand cautious is their on in the questions. that have POS, a one, wholesalers help and on more I to cautiousness? order corroborate retailer this the little side? book. about would those the remaining are that you're I maybe anything POS environment you it seeing Or access can

-- And into were with kind then Maybe that in Or to XX% promo. seems that able to trends drove Was more through a you little up mean even reverse guidance pumped is becoming that what It that the gross dive activity. of that? DTC, still GM, kind in still of promo on maybe I more that can. range. guidance to responsive promotional push margin you're the seeing additional slowing like you to XX% that? something if

Yves Le Pendeven

great of questions. speak with few you I again. guess taking Eric, by a start these to I'll

say different single region. POS the on the year-over-year. story the sales trends. I'll on we QX, depending first POS Globally, a were it's down bit that a of So saw in digit little

which the was strong, saw that down pretty growth. double-digit EMEA, double we low in digits U.S., and saw we However, going versus that is

promotions, slow planned what So like saw advance, we market, what kind was to U.S. And in to that, response promotion price with had seemed seeing we a it. sales a I draw of then in full during when September that with some is we're we in ran a were it the we saw periods. our comparison think consumer good DTC and

to channel during be consumers So Black what is how wholesale we believe to portion shopping see of more Cyber POS significant seeing buyers of this period that Monday kind QX, was down of from of that the -- in cautiousness that's period. got that while that I approach Friday, that And goes. that will holiday kind the we're wait-and-see a think how translates the

QX. in going DTC. So of we to And expect to I we little starting Monday. through Black portion QX, we significant say be bit a translate we before saw extend running during what bit everyone into else, kind are addressed our to of a that Cyber Friday the like I'd sales and pretty happen And QX period. expect some promotions a also, little

So to forward we're looking that.

a the lower support higher year-over-year, sales little that relative level far a also margin, those as sales in gross DTC spend, a during level margin would a will higher expect of say rebound with little And have gross bit SG&A As bit hence, I we to that's during to we'll a promotional to and of portion while period QX higher promotions marketing so of related. to QX. that them there. growth QX, follow

I've all those think and of So that the hit of main drivers asked I kind would hopefully, questions you be there. the

Cynthia Williams

sales in like Friday, a on little we seeing November shift is partly from market e-commerce like the their the sites holiday color Cyber the a add Monday. Amazon bit are more major go up response side Certainly that calendar, What DTC it are XX/XX I ahead week of think to until but actually of seeing to starting perspective. in I'll XX. we're Black the on just from

the essentially to And be searching of we're in part another of market, indication that value. but it is line the with for so the matching consumer

Eric Wold

periods more see of Cyber Got Or we additional look Monday that. and Black on in something that to something early that to with little it. trends is year-end? these enthusiastic Friday, sale the around do strong something a able into kind get more that 'XX is you you'd retailers to a be Is that maybe And if during be -- then, the address beneficiary? shipments

Cynthia Williams

we extending this at number to extend just able -- days We we'll that were to regions looking various year. our able the dates, to are ship cutoff we and be are of

another open extend XPL the than days of to is the expect bit. on U.S. eventually a Coast add least I X do why to that for we would more a East So This it want at XX%

to. it's -- can extend we'd much like it, we as able be So not but as to

Eric Wold

if impact coming Maybe potential affected election China rhetoric regions? your and if where then on Trump's kind victory are Perfect. this on in terms just mix of the And I give final of question, tariffs there week you his us or Coming may. thoughts and in earlier off your tariffs. from are

Cynthia Williams

Yes. Thanks for question. that

were strategy, been the around our doing on that. some planning actually scenario scenarios of part working been we've As we've and U.S. elections

for our it's past is several years, than are already have a company supply we -- We from part that, of over XX% X/X at of products diversifying that China. fortunate level, actually our in little the Loungefly And away been that of tariffed. base the And China. about are our in the as less fact, manufactured business

that we're others a we've that got said, to going in So situation. are. gate try further of in better sense That position for some of to and the a coming the manage It's a could than size But be. of continue out to would than feel like diversify bit we're some the what plans the of lower others work we industry. how away on in we do

side that's said, tariff that it. Now the of

for rush especially like people actually about am items early, would in that, the see when and talk the it. about thing I have the of I secondary it. Let's shorter If people worried enacted higher-priced let's United those QX. are States into normally to call will administration, a early we a of The need it, of tariffs signal impact they QX the term, think strong ship and in ahead

for contract, a we have the that's under our risk risk so and is is freight what us, of capacity. a not XX% Now while rates

the push States need the see products we challenges on have United if working overcome now. a enacted, ahead into they tariffs, more real we'll of And to that and if we get for is with to might are so some that team plans that,

Operator

next from Our Stephen of be question will with Sachs. Goldman line the Laszczyk

Stephen Laszczyk

from Maybe me. two

could the there curious like lower that's margin sounds the sure talk I XQ? the as then was third more XQ in margin higher some I'm for a margin. increased well. and were benefiting bit outlook if you as in quarter. not in XQ the of It reserves little drivers First, on if about perhaps as well

the sounds marketing you're expecting in side that like opposite sales that, on some and it maybe of So higher XQ.

plays how through? Just curious that

into particularly And feel the film at we question theatrical XQ of those picking then in second particular second up slate XQ as touch the look you the that slate then end here, Curious on of movies just maybe come slate, could movies XQ. levered just the there's if year half you through on some bigger in had And and if any to? the in large?

Yves Le Pendeven

Stephen, was year. a margin. a favorable we've And question. continuation what really margin that's gross the seen of this and really called driven I out throughout the QX with in reserves, I'll you start trend saw whole inventory by

getting continue good into sell bit that In sell duties. margins channel. a been value able saw have the and inventory reserves We're a because drivers. the this than reserved that we channel inventory quarter. to that we we're and the better-than-expected There cost goods, in couple We lower into well is at cost anticipated to to have some moment also channel inventory the that had above of that products value we as selling as other costs freight have little of for were high-quality

spend, say on Black in period like more feel So little called in promotional we the bit that margin see bottom QX, as and quite bottom which marketing as But overall, led during is quarter-over-quarter little we're of factored would window, a as we with in gross is and that to we so QX delivering the the cause a expect line, SG&A have Monday in guidance. QX we'll erosion also during bit QX. What I think did Friday, be up Cyber pleased a solid how our that line. that well the what ramped I'd overperformance to discounting I margin well out, gross you

Cynthia Williams

Stephen, in it's big us Cynthia. take Deadpool. slate. QX I'll the was film for Certainly, the film

to a we Deadpool which, continue Pop! XX version shipped continues really for cosplay in items strong today. up we to way, Yourself, with both even the on While Wolverine of the for and and show it top see lot of QX, that Yourself my uptake by to people Pop! responding

Loungefly. film a for well the We've And Wicked. are going as in we that touring products as topline Ariana us. The the premieres. to week. about moment Grande pink this good London and Glinda has for bit. decked had we're quite got fans around our Loungefly, fantastic out which So -- done the QX that sporting cast crossover bag by is most And captured is well very as a out Funko excited was across landed various in

So that. there's bit a of excitement around

they sure have We order to some of in their bags the of of had make the coming when shops have for opening the some people the are film. weeks cinemas the

got we've a lot excitement So around of Wicked.

Operator

[Operator Bolton-Weiser Davidson Linda be from next Co. of Instructions] the A. with will line & question Our D.

Linda Bolton-Weiser

the type Bitty So of about especially that figures. terms fairly responding point in your point is and being more products even Pop! a to I hear of little I your the items. Pop! because regular sensitive lower price more And price comments a guess like in surprised than consumers low general, was wondering, are I'm promotions. to

some -- maybe type Is around know, collectibles that? pricey? higher-priced sensitivity is of give could mostly a that just don't sell category, you it like color? you was you anything Like, of more of kind color. I maybe some little by that more the can like Or by property, give the are it little So a it items

Yves Le Pendeven

like dollars. Really, few product is in quite We you point I'll on have the which this point Mondo take yes, feel happy called we on sell-through. we what it then price an can our several product, Pop!, of do saw high on core have that not range one. nice we collectibles, Bitty that kind be still very hundred to just from excellent $XX. end, a to out quickly. we kind great not our a end. see offering. high to standard and they price time be still brand sells Pop!, Mondo our out, at pretty which of around much Pop! dollars is is Linda, a Every so $XX have drop point. And accessible the Like We It's which a

there. concerns no So

diversified ran I think a happens our price where bulk we a core just business, of range. few business that kind we more just of we've mentioned and of the people many of see in within range of Funko collectibles. remind the trend. for as and of a I'll them saw for kind wait gifting. sale, now fits wide And we average periods Pop! September our response responsive. I you, kind great last saw that think over that of people and in think to point And to that's are continuation Yourself products, our consumers the business sales mean But were have of great is sale Funniversary lot we definitely And and the really a I called I we that, a to holiday expect gifts and that buy of really category. promotional that these years,

days. the And these been of we've so that's trend just kind seeing

Cynthia Williams

Bitty We Pop!. on Bitty Pop!. bit of I'll brought seeing since you a color this weren't up add just little

In they're Target The holiday for still specific of the sales Bitty a been is doing setting are in. the been set we're outperforming Bitty that the chain. other fact, what of that in Target their -- They're are have some people seeing POS stores like right the Pop! preparing set Pop!, strong. quite XXX But as has still season. stores the is stores now

is there we aren't need helping, of with happy there, it's price more seeing certainly these Pop!. very Pops!. for discounting but on the The range giftable performance we're So probably the Bitty point

Linda Bolton-Weiser

similar that moat. this In quite they strike kind of picture some -- at and a just these understanding better bigger sports I your competitive of do. memorabilia, of to trying then me gain items like And which all sell apparel is looking question, frankly, a Okay. I'm to stuff your that you and not core with, related was but it does the familiar Fanatics, competencies

you do or offerings? competitor So a as partner yourself how of kind relative you view describe their a Fanatics customer? you can Like see a or to just as

Cynthia Williams

And with we able things, we a Santos always partner similarities in partner. not some Linda. now When it preorder Fanatics, question, what World where we're with we Dodgers do see Series a sell. would we But we hit There Championship have Great items. do this e-com NFL did and are to time is as have site. on for our the various them places them capabilities, from are at World there do on other this They sell, of our gifting among year. that done

one items NFL have of Our Loungefly with complementary what to popular also fans. clear are been they bags lot really a stadium bags maybe sell. that our Those of are the

we So complementary. as it see very

Linda Bolton-Weiser

to for I people more were build terms And infrastructure important in know, in roles. generally, are is savings to savings. if I'm some bulking along on the savings with XXXX? other sort you you be it room and carryover in you last that Or of see these for don't executives know or us question there my you savings about guess? other mentioned to of And or going how to did cost out there XXXX? And incremental Okay. in of still there kind remind And those you giving then wanting headcount up? just that, like need we'll I types guidance planned has the some improve expected cost of, some to wondering or Can this bring side? the then side. do are think reductions need something? does do what cost And skills year, without I next structure, cost just

Yves Le Pendeven

I'll of Sure. last that. reductions Yes, if did cost several we mean, year. I take Linda, recall, you rounds

towards of year. Some -- of happened then end ones and QX of bigger the QX in the in last

there. We some on, see of covers, brand point, been going we've about up cost this So not raising next the do were you you promoting is kind past focus several that when the QX into just think of dollars within something are year, and of that year, of under our reallocating annualized That's awareness been SG&A, of marketing and the this trying Funko the saved Loungefly savings we've a ramping to over lot we've the at kind years, and forward then but look Mondo. we to effort. and if really

those we're so reinvesting into marketing. dollars And

to coming in think out have efficiently this cost our I much it we we're like than more continued more was our warehouse a improvement is efficiencies now every we operations. orders. operating year. some almost And continuous see of see it quarter labor And last specifically, year how fulfilling

to And so well. And year we speak additional let efficiencies costs executives find I'll expect we're the to next recruiting head and we reduce operational Cynthia the as continue to that into as currently for.

Cynthia Williams

I of be what's came there that's were happened that time needed to we're Linda, backfilled. in part around one with folks these of that this happening that some the ways in. about bringing mentioning the is exits to think I'm And

in need using capabilities in different we going a personalization. investments be customer we're see right we And a the a lot about XXXX, us I'll type direct-to-consumer building things that hear are foundation business, when continued like we past. do that think in talking the in piece marketing going -- to continuing a have to of been a of savings. what we've our our brand that commitment hint allow doing of Hence investments includes is QX look a platform you ERP. includes us And to talent is I of to growth need to making talking Part for fandoms the with should cost making and and there capabilities going able background. But a for the do we're up And that is grow. Part like grow that data I of that's that sure the you to what got to -- than to be we're someone the marketing grow. and think about to to bring with capability. like be will to right you more about the the sports, profitable to includes to

Operator

the further line now no will on time, with remarks. at call to back I closing And this for over any management the questions turn

Cynthia Williams

everyone, on you, the forward you much. our with for next Thank Thank very sharing look to call your our call today. us on joining you. Thank questions, progress you and for we

Operator

conclude able Quarter join XXXX Call. Conference everyone you to will This Funko's Financial Thank was Results who us. Third to

You may your lines. disconnect now

Funko (FNKO) 7 Nov 242024 Q3 Earnings call transcript