Core Insights - Funko, Inc. (FNKO) reported third-quarter 2024 results with both revenue and earnings exceeding Zacks Consensus Estimates, despite a year-over-year revenue decline [1][4] - The company achieved a significant increase in gross margin, leading to better-than-expected profitability, prompting management to raise its full-year adjusted EBITDA guidance [1][13] Financial Performance - Adjusted earnings were 14 cents per share, surpassing the Zacks Consensus Estimate of 4 cents per share, and improved from 3 cents per share in the prior year [4] - Net sales were $292.8 million, a decrease of 6.4% from $312.9 million in the previous year, but above the Zacks Consensus Estimate of $289 million [5] - Gross margin expanded by 770 basis points year-over-year to 40.9%, aided by improved inventory reserves [5] - SG&A expenses decreased by 1.4% to $92.7 million from $94 million in the prior year [6] - Adjusted EBITDA rose to $30.9 million from $25.4 million in the year-ago period, with an adjusted EBITDA margin increase of 250 basis points to 10.6% [6] Segment Performance - Core Collectible sales declined by 2.3% year-over-year to $227.8 million, while Loungefly net sales fell by 17.6% to $47.3 million [7] - Other net sales decreased by 20.8% year-over-year to $17.6 million [7] - Geographically, U.S. net sales decreased by 7.4% to $194.4 million, and European sales fell by 9.1% to $74.5 million, while Other International sales increased by 13.5% to $23.9 million [8] Guidance and Outlook - For Q4 2024, management expects net sales between $280 million and $294 million, with a gross margin of 38-40% [10] - Adjusted EBITDA is projected to be between $17 million and $22 million, down from $23.5 million in the same quarter last year [11] - Full-year 2024 net sales outlook has been revised to $1.037-$1.050 billion, down from the previous range of $1.047 billion to $1.103 billion [12] - However, full-year adjusted EBITDA guidance has been raised to $85 million to $90 million, up from the previous forecast of $65 million to $85 million [13]

Financial Data and Key Metrics Changes - Net sales for Q3 2024 were $293 million, down compared to Q3 of the previous year but at the high end of the guidance range [8] - Gross margin was 41%, and adjusted EBITDA was $31 million, both exceeding the top end of the guidance range [8][26] - Adjusted net income was $8 million, or $0.14 per diluted share, well above the guidance range for the quarter [26] - Cash and cash equivalents decreased to $28.5 million from $41.6 million at the end of Q2 [27] - Total debt was approximately $223.4 million, slightly down from $223.9 million at the end of Q2 [28] Business Line Data and Key Metrics Changes - Direct-to-consumer sales were down 7% year-over-year, comprising 20% of gross sales [25] - The Pop! Yourself business showed modest year-over-year growth despite no special gifting occasions in Q3 [25] - Sales of Pop! Yourself with NFL accessory packs exceeded launch expectations, with over 40% of sales including NFL accessories [16] Market Data and Key Metrics Changes - POS sales globally were down single-digit year-over-year, with the US market seeing low-double-digit declines [36] - EMEA market showed double-digit growth, contrasting with the US performance [36] Company Strategy and Development Direction - The company is focusing on a fan-centric approach to grow its business, which includes delighting core fans and attracting new ones [13] - A strategic plan for 2025 and beyond is being developed, with details expected to be shared in the Q4 call [13][33] - The company is expanding its collaboration with the NFL and Warner Bros. to enhance product offerings [15][23] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are increasingly looking for value, leading to cautious behavior from wholesale customers ahead of the holiday season [9][30] - The outlook for net sales for the full year has been lowered to $1.037 billion to $1.05 billion, while adjusted EBITDA guidance has been raised to $85 million to $90 million [9][31] - Management expressed optimism about the upcoming holiday season, expecting a rebound in direct-to-consumer sales [29] Other Important Information - The Pop! Yourself product was recognized as a finalist for the 2024 Collectible of the Year award [23] - The company has diversified its supply base away from China, with about one-third of products manufactured there [43] Q&A Session Summary Question: Concerns about cautiousness from wholesalers - Management indicated that POS trends vary by region, with the US seeing declines while EMEA is performing well [36] Question: Direct-to-consumer sales responsiveness to promotions - Management noted that promotional activities have led to increased responsiveness from consumers, with expectations for a strong Q4 [39][41] Question: Impact of potential tariffs on supply chain - Management stated that about one-third of products are manufactured in China, with plans to further diversify supply chains [43][45] Question: Drivers of higher margins in Q3 - Higher margins were attributed to lower-than-expected inventory reserves and reduced freight costs [50][52] Question: Upcoming film slate and its impact - Management highlighted excitement around the film "Wicked" and its associated product offerings [54][56] Question: Consumer sensitivity to promotions - Management clarified that consumer responsiveness is more pronounced in the average price range products rather than high-end collectibles [60][62] Question: Cost structure and potential savings - Management discussed ongoing cost efficiencies and the need for additional talent to support growth initiatives [68][70]

Funko-A (FNKO) came out with quarterly earnings of $0.14 per share, beating the Zacks Consensus Estimate of $0.04 per share. This compares to earnings of $0.03 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 250%. A quarter ago, it was expected that this company would post a loss of $0.14 per share when it actually produced earnings of $0.10, delivering a surprise of 171.43%.Over the last four quarters, the company has surpass ...

Financial Performance - Net sales for Q3 2024 were $292.8 million, a decrease of 6.4% from $312.9 million in Q3 2023, primarily due to reduced sales to specialty retailers [104]. - Net income for Q3 2024 was $4.6 million, compared to a net loss of $16.2 million in Q3 2023, representing a significant improvement [107]. - EBITDA for Q3 2024 was $26.1 million, up from $9.9 million in Q3 2023, indicating a strong operational performance [102]. - Gross margin for Q3 2024 increased to 40.9%, compared to 33.2% in Q3 2023, driven by better inventory management and reduced costs [110]. - Selling, general, and administrative expenses decreased by 1.4% to $92.7 million in Q3 2024, representing 31.7% of net sales [111]. - Cost of sales decreased by 17.2% to $173.0 million in Q3 2024, reflecting lower costs as a percentage of net sales [109]. - Net income for the three months ended September 30, 2024 was $4.6 million, a significant improvement from a net loss of $16.2 million for the same period in 2023 [117]. - Net sales for the nine months ended September 30, 2024 were $756.1 million, a decrease of 6.1% compared to $804.9 million for the same period in 2023 [120]. - Net loss for the nine months ended September 30, 2024 was $13.7 million, a significant reduction from a net loss of $153.2 million for the same period in 2023 [134]. - Adjusted net income for the nine months ended September 30, 2024, was $4.28 million, while the adjusted net loss for the same period in 2023 was $45.86 million [142]. Sales and Market Trends - Active properties decreased by 1.3% to 743 in Q3 2024, with average net sales per active property down by 5.2% [105]. - Net sales in the U.S. decreased by 7.4% to $194.4 million in Q3 2024, while international sales increased by 13.5% to $23.9 million [106]. - Core Collectible branded category net sales decreased by 2.3% to $227.8 million in Q3 2024, while Loungefly branded products saw a 17.6% decline [108]. - Net sales in the United States decreased by 9.8% to $503.8 million for the nine months ended September 30, 2024, compared to $558.3 million in 2023 [122]. - Net sales of Core Collectible branded products decreased by 3.6% to $571.7 million for the nine months ended September 30, 2024, compared to $592.8 million in 2023 [124]. Cost Management - Cost of sales (exclusive of depreciation and amortization) decreased by 23.3% to $446.0 million for the nine months ended September 30, 2024, down from $581.3 million in 2023 [125]. - Gross margin (exclusive of depreciation and amortization) increased to 41.0% for the nine months ended September 30, 2024, compared to 27.8% for the same period in 2023 [126]. - Selling, general, and administrative expenses were $256.2 million for the nine months ended September 30, 2024, a decrease of 8.4% from $279.7 million in 2023 [127]. Cash Flow and Liquidity - Net cash provided by operating activities was $63.74 million for the nine months ended September 30, 2024, compared to a cash outflow of $2.87 million for the same period in 2023 [146]. - Net cash provided by operating activities increased by $139.6 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to a decrease in net loss [147]. - The company reported a net cash used in investing activities of $13.39 million for the nine months ended September 30, 2024, compared to $35.58 million for the same period in 2023 [146]. - The company experienced a net cash used in financing activities of $58.58 million for the nine months ended September 30, 2024, compared to a cash inflow of $51.31 million for the same period in 2023 [146]. - The company had $28.5 million of cash and cash equivalents and $(13.0) million of working capital as of September 30, 2024, compared to $36.5 million and $(16.0) million as of December 31, 2023 [166]. Debt and Financial Obligations - As of September 30, 2024, the company had $116.6 million of indebtedness outstanding under the Term Loan Facility and $95.0 million under the Revolving Credit Facility, leaving $55.0 million available under the Revolving Credit Facility [163]. - The maximum Net Leverage Ratio and minimum fixed charge coverage ratio for the fiscal quarter ended September 30, 2024, are 2.50:1.00 and 1.25:1.00, respectively [159]. - Income tax expense for the nine months ended September 30, 2024 was $2.9 million, a decrease of 97.8% from $130.9 million in 2023 [133]. Future Outlook and Risks - The company’s liquidity sources are expected to be sufficient to finance operations and growth strategy for at least the next 12 months [144]. - The company cannot assure that cash provided by operating activities will be sufficient to meet future needs, despite current compliance with financial covenants [145]. - Future liquidity needs may include tax distributions and payments under the Tax Receivable Agreement, which could significantly impact cash flow availability [169]. - The company is exposed to market risks from changes in interest rates, foreign currency, and inflation [174]. - There have been no material changes in market risk since the last annual report for the year ended December 31, 2023 [174]. - The company filed a preliminary shelf registration statement on Form S-3 with the SEC, allowing it to offer and sell up to $100.0 million of various securities until July 25, 2025 [164]. - Over 50% of the company's net sales historically occur in the third and fourth quarters, primarily from August through November, due to seasonal inventory buildup [170]. - The company expects to maintain compliance with its financial covenants for at least one year from the issuance of these financial statements based on current expectations and forecasts [160].

Group 1 - Funko-A (FNKO) has gained approximately 58% year-to-date, significantly outperforming the average gain of 5.3% in the Consumer Discretionary sector [2] - Funko-A currently holds a Zacks Rank of 2 (Buy), indicating a positive earnings outlook [1] - The Zacks Consensus Estimate for FNKO's full-year earnings has increased by 21.3% over the past 90 days, reflecting stronger analyst sentiment [2] Group 2 - Funko-A is part of the Consumer Products - Discretionary industry, which has seen an average gain of 16.9% this year, indicating better performance compared to the industry average [3] - Howden Joinery (HWDJY), another stock in the Consumer Discretionary sector, has a year-to-date return of 29.8% and a Zacks Rank of 1 (Strong Buy) [2][3] - The Household Appliances industry, to which Howden Joinery belongs, has experienced a decline of 9.8% this year, contrasting with the performance of Funko-A [3]

Core Insights - The article emphasizes the importance of value investing and highlights the use of fundamental analysis and valuation metrics to identify undervalued stocks [1] Company Overview - Funko (FNKO) is currently rated with a Zacks Rank of 2 (Buy) and has a Value grade of A, indicating strong potential for value investors [2] - FNKO's price-to-book (P/B) ratio is 2.86, which is significantly lower than the industry average of 7.24, suggesting it may be undervalued [2] - The stock's P/B ratio has fluctuated between 1.32 and 2.97 over the past 12 months, with a median of 1.67 [2] Valuation Metrics - The price-to-sales (P/S) ratio for FNKO is 0.61, compared to the industry average of 0.72, further indicating its potential undervaluation [2] - FNKO's price-to-cash flow (P/CF) ratio stands at 26.17, which is attractive relative to the industry's average of 40.71 [3] - Over the past year, FNKO's P/CF has ranged from -8.67 to 27.21, with a median of -2.97, highlighting its cash flow performance [3] Investment Outlook - The combination of FNKO's strong valuation metrics and positive earnings outlook positions it as an impressive value stock at the moment [3]

Group 1 - The bank earnings season suggests a "soft landing" for the U.S. economy, contributing to the rise of the S&P 500 to new heights [1] - Despite the overall positive economic outlook, certain sectors are still facing challenges due to weaker consumer spending [1] - Funko, a pop-culture toy manufacturer, is highlighted as a company operating within this economic context [1]

Is Funko, Inc. (FNKO) back? This Zacks Rank #1 (Strong Buy) has new leadership and has reduced its inventory and debt. Funko is a pop culture lifestyle brand. Its products includes vinyl figures, action toys, plush, apparel, housewares and accessories which allow fans to connect with their favorite pop culture brands and characters. In addition to its popular Pop! brand, it also owns Loungefly. It is a small cap company with a market cap of $658 million. New Leadership Takes the Helm Funko has gone through ...

The Consumer Discretionary group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Is Funko-A (FNKO) one of those stocks right now? By taking a look at the stock's year-to-date performance in comparison to its Consumer Discretionary peers, we might be able to answer that question. Funko-A is a member of our Consumer Discretionary group, which includes 274 different companies and currently sits at #9 in the Zacks Sector Rank. The Zacks Sector ...

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks. Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation met ...