• Net Sales: $293.7 million for Q4 2024, up 1% year over year.
• Gross Margin: 42.4% in Q4 2024, a 480-basis-point improvement from the previous year.
• Adjusted EBITDA: $26.3 million for Q4 2024, exceeding expectations.
• Adjusted Net Income: $4.4 million, or $0.08 per diluted share for Q4 2024.
• Direct-to-Consumer Sales: Increased 20% year over year, comprising 29% of gross sales in Q4 2024.
• Full Year Net Sales: $1.05 billion for 2024.
• Full Year Adjusted EBITDA: $94.7 million for 2024, a significant improvement from negative $11.8 million in 2023.
• Cash and Cash Equivalents: $34.7 million as of December 31, 2024.
• Total Debt: $182.8 million, reduced from $273.6 million at the end of 2023.
• Net Inventory: $92.6 million, down more than 20% from the end of 2023.
• Total Company Liquidity: Increased to $124.7 million from $57 million at the end of 2023.
• 2025 Full Year Net Sales Outlook: Expected to be up modestly over 2024.
• 2025 Full Year Adjusted EBITDA Outlook: Expected to be slightly lower than 2024 at the midpoint of the range.

• Warning! GuruFocus has detected 5 Warning Sign with FNKO.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Funko Inc (NASDAQ:FNKO) stabilized net sales at over $1 billion and achieved gross profit and adjusted EBITDA growth by more than $100 million in 2024.
• The company delivered $294 million in net sales for Q4 2024, reaching the top end of its guidance range and marking a year-over-year increase.
• Direct-to-consumer sales grew to 29% of overall sales, contributing to higher margins and providing valuable consumer insights.
• Funko Inc (NASDAQ:FNKO) experienced significant growth in its core Collectibles business, with a 10% increase, and a 23% rise in sales outside the US.
• The company's Bitty Pop! line saw an impressive 83% year-over-year growth in Q4, reflecting strong consumer interest in miniature collectibles.

Negative Points

• Funko Inc (NASDAQ:FNKO) faces challenges from 20% tariffs on imports from China, impacting approximately one-third of its global product purchases.
• The company is experiencing softening consumer behavior in the US market, affecting sales and consumer spending patterns.
• Funko Inc (NASDAQ:FNKO) anticipates a decline in net sales and adjusted EBITDA in the first half of 2025 due to tariffs and weakening US consumer sentiment.
• There are disruptions at the Mexico-US border affecting the delivery times of Pop! Yourself products, leading to increased shipping costs.
• The company is navigating uncertainties related to tariffs and inflation, which could impact future financial performance.

Q & A Highlights

Q: Can you elaborate on the assumptions behind your guidance for the year, considering factors like tariffs and consumer sentiment? What are the potential upside and downside risks? A: Cynthia Williams, CEO, highlighted positive developments such as the strong reception of Bitty City! at the New York Toy Fair and robust POS growth in Europe. She noted that while there are challenges like tariffs and softening US consumer behavior, there are also significant opportunities, especially in sports and direct-to-consumer channels. Yves Le Pendeven, CFO, added that the guidance incorporates the impact of 20% tariffs on imports from China and the current US consumer sentiment. Upside risks include potential tariff exemptions or delays, while downside risks involve further tariff escalations.

Q: What is the potential for growth in the sports category over the next three to five years, and how does its margin profile compare to other licensed IP? A: Cynthia Williams, CEO, expressed optimism about the sports category, which currently represents only 4% of revenue. She sees significant potential for growth, driven by activations and partnerships with leagues like the NFL and NBA. The margin profile for sports items is similar to the rest of the business, with Pop! Yourself offering higher margins due to licensing fees being applied only to accessories.

Q: How did US retail performance fare in the fourth quarter, and what was the gap between sell-in and sell-through? A: Cynthia Williams, CEO, reported that POS in the fourth quarter was growing, with global POS up 4% year over year. In the US, POS was up 1%, while Europe saw a 17% increase. She noted that US retailers ended the season with healthy inventory levels, which impacted sell-in but not significantly.

Q: Why is there a larger decline in sales expected for the first quarter, despite healthy POS and lean retailer inventories? A: Cynthia Williams, CEO, attributed the expected decline to lower foot traffic and cautious consumer spending in the US, as well as disruptions at the Mexico-US border affecting Pop! Yourself deliveries. These factors, combined with macroeconomic challenges, are impacting first-quarter sales.

Q: Does the guidance include any mitigating actions for tariffs, such as price increases? A: Cynthia Williams, CEO, confirmed that the guidance includes potential mitigating actions like cost-sharing with vendors, supply chain diversification, and pricing adjustments. While no specific announcements were made, these strategies are part of the company's approach to managing tariff impacts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.