About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Financial Data and Key Metrics Changes - Total net sales for Q1 2024 were $215.7 million, within the guidance range but at the lower end due to some lower-margin products shifting to Q2 [63] - Gross margin was 40%, significantly higher than any quarter in 2023 and well above guidance [29][63] - Adjusted net loss was $9.2 million or $0.17 per share, which was better than the guidance range for the quarter [12] - Adjusted EBITDA was $9.6 million, exceeding guidance expectations [12][63] Business Line Data and Key Metrics Changes - Direct-to-consumer sales mix in Q1 was 23%, up from 19% in the previous year's Q1, indicating a 5% growth despite a lack of new entertainment releases [28] - The Pop! Yourself line performed well, especially as a Valentine's Day gift, and is expected to continue generating revenue during upcoming holidays [11][36] Market Data and Key Metrics Changes - The U.S. market underperformed compared to Europe in Q1, with a notable delta in growth rates attributed to the Hollywood strikes affecting content availability [49] - The company anticipates a strengthening content schedule in the second half of the year, which should positively impact sales [64] Company Strategy and Development Direction - The company is focusing on fewer products done extremely well, emphasizing evergreen and replenishment sales to drive SKU efficiencies [26] - There is a renewed focus on direct-to-consumer business, which is expected to help improve gross margins [28][42] - The new CEO, Cynthia Williams, aims to explore substantial growth opportunities in on-demand music, sports, and international markets [18][20] Management's Comments on Operating Environment and Future Outlook - Management noted that the financial results are expected to be stronger in the second half of 2024 due to natural seasonality and easing impacts from the Hollywood strikes [15][64] - The company is committed to reducing SG&A as a percentage of sales as revenues ramp up in the latter half of the year [51] Other Important Information - The company has made significant progress in reducing inventory levels, which were $112 million at the end of Q1, down from $119 million at the end of 2023 [9][13] - Total debt was reduced by $27 million, bringing it to approximately $246.4 million [13] Q&A Session Summary Question: What are the main drivers behind the stronger gross margin in Q1? - Management indicated that lower than anticipated freight costs and improved inventory management were key drivers [24][45] Question: Is the gross margin of 38% to 40% a new baseline going forward? - Management expressed caution in committing to this range as a new normal but acknowledged it as a potential model for future projections [23][33] Question: What trends are observed with first-time customers ordering Pop! Yourself? - A high percentage of first-time customers are purchasing Pop! Yourself, indicating strong interest, though follow-up purchase rates are still being assessed [35][36] Question: How does the company view U.S. versus international growth dynamics? - Management noted that the U.S. market was more impacted by the Hollywood strikes compared to Europe, which had a more stable business model [39] Question: What is the outlook for SG&A expenses in Q2? - SG&A expenses are expected to remain elevated due to investments in direct-to-consumer growth and marketing costs [42]

Financial Performance - Net sales for the three months ended March 31, 2024, were $215.7 million, a decrease of 14.4% compared to $251.9 million for the same period in 2023[93] - Net loss for the three months ended March 31, 2024, was $23.7 million, a 61.3% decrease from a net loss of $61.1 million in the same period in 2023[104] - Adjusted EBITDA for the three months ended March 31, 2024, was $9.6 million, compared to an adjusted EBITDA loss of $14.0 million in the same period in 2023[90] - For the three months ended March 31, 2024, the net loss attributable to Funko, Inc. was $22.7 million, a decrease from a net loss of $55.3 million in the same period of 2023, representing a 59% improvement[111] - Adjusted EBITDA for the three months ended March 31, 2024, was $9.6 million, compared to an Adjusted EBITDA of $(14.0) million for the same period in 2023, indicating a significant turnaround[111] - Adjusted loss per diluted share improved to $(0.17) for the three months ended March 31, 2024, compared to $(0.49) in the same period of 2023[111] Sales and Revenue - Net sales in the United States decreased by 17.4% to $146.4 million for the three months ended March 31, 2024, compared to $177.2 million in the same period in 2023[94] - Net sales in Europe decreased by 7.2% to $54.2 million for the three months ended March 31, 2024, compared to $58.5 million in the same period in 2023[94] Cost and Expenses - Gross margin for the three months ended March 31, 2024, was 40.0%, up from 19.7% in the same period in 2023, primarily due to a non-recurring inventory write-down charge of $30.1 million recorded in 2023[97] - Selling, general, and administrative expenses decreased by 14.5% to $85.6 million for the three months ended March 31, 2024, compared to $100.1 million in the same period in 2023[98] - Cost of sales for the three months ended March 31, 2024, was $129.4 million, a decrease of 36.0% from $202.3 million in the same period in 2023[96] Cash Flow and Liquidity - Net cash provided by operating activities was $14.5 million for the three months ended March 31, 2024, compared to net cash used of $30.3 million in the same period of 2023, reflecting a positive change of $44.8 million[116] - The company reported a decrease in inventory of $49.1 million, contributing to improved cash flow from operations[118] - Net cash used in financing activities was $27.4 million for the three months ended March 31, 2024, primarily due to payments on the Term Loan Facility and Equipment Finance Loan[121] - The company believes its sources of liquidity and capital will be sufficient to finance operations and growth strategy for at least the next 12 months[114] Debt and Financing - The company entered into a new credit agreement providing for a term loan facility of $180.0 million and a revolving credit facility of $100.0 million[123] - The revolving credit facility was increased to $215.0 million and later reduced to $150.0 million as of December 31, 2023[123] - As of March 31, 2024, the company had $125.2 million of indebtedness outstanding under the term loan facility and $107.0 million under the revolving credit facility, leaving $43.0 million available[130] - The maximum net leverage ratio and minimum fixed charge coverage ratio for the fiscal quarter ended March 31, 2024, are set at 2.50:1.00 and 1.25:1.00, respectively[127] - The term loan facility matures on September 17, 2026, with quarterly amortization payments of 2.50% of the original principal amount[125] Market and Operational Insights - The company strategically adjusted inventory buy-in to focus on core products to mitigate impacts from a challenging retail environment[88] - The company experienced a foreign currency transaction loss of $1.6 million in Q1 2024, compared to a loss of $0.8 million in Q1 2023[111] - The company filed a preliminary shelf registration statement allowing for the offering of up to $100.0 million of various securities[131] - The company has historically experienced moderate seasonality, with over 50% of net sales occurring in the third and fourth quarters[137] - The company is exposed to market risks from changes in interest rates, foreign currency, and inflation, with no material changes reported[141]

Financial Performance - Q1 2024 net sales were $215.7 million, a decrease of 14.4% from $251.9 million in Q1 2023[5] - Gross profit for Q1 2024 was $86.3 million, resulting in a gross margin of 40.0%, compared to $49.6 million and a gross margin of 19.7% in Q1 2023[5] - Adjusted EBITDA for Q1 2024 was $9.6 million, a significant improvement from negative adjusted EBITDA of $14.0 million in Q1 2023[5] - Core Collectible net sales decreased by 14.6% to $157.1 million in Q1 2024 compared to $184.0 million in Q1 2023[6] - U.S. net sales fell by 17.4% to $146.4 million in Q1 2024, down from $177.2 million in Q1 2023[6] - Net loss for the three months ended March 31, 2024, was $23,666,000, an improvement compared to a net loss of $61,144,000 for the same period in 2023[22] - Adjusted net loss for Q1 2024 was $9,237,000, compared to an adjusted net loss of $25,258,000 in Q1 2023, indicating a reduction of approximately 63.5%[23] Guidance and Projections - The company reiterated its full-year 2024 guidance, projecting net sales between $1.047 billion and $1.103 billion[8] - For Q2 2024, net sales are expected to be between $225 million and $240 million, with a gross margin percentage of 38% to 40%[8] Inventory and Debt Management - Total inventory decreased to $112.3 million at March 31, 2024, down from $119.5 million at December 31, 2023[4] - Total debt was reduced to $246.4 million at March 31, 2024, down from $273.6 million at December 31, 2023[4] - Total current liabilities decreased from $358,832,000 as of December 31, 2023, to $318,395,000 as of March 31, 2024, a reduction of about 11.2%[20] - Inventory write-downs were not recorded in Q1 2024, compared to $30,084,000 in Q1 2023, indicating improved inventory management[24] Cash Flow and Equity - Cash and cash equivalents decreased from $36,453,000 at the beginning of the period to $26,110,000 at the end of the period, a decline of approximately 28.5%[22] - The company reported a net cash provided by operating activities of $14,507,000 for Q1 2024, contrasting with a net cash used of $(30,270,000) in Q1 2023[22] - Total stockholders' equity attributable to Funko, Inc. decreased from $231,941,000 as of December 31, 2023, to $212,495,000 as of March 31, 2024, a decline of approximately 8.4%[20] Management Changes - The newly appointed CEO, Cynthia Williams, will officially start on May 20, 2024, bringing extensive experience from major companies[4] Asset Management - Total assets decreased from $804,645,000 as of December 31, 2023, to $725,472,000 as of March 31, 2024, representing a decline of approximately 9.8%[20] - Adjusted gross margin improved to 40.0% in Q1 2024, up from 31.6% in Q1 2023, reflecting better cost management[24] - Adjusted EBITDA for Q1 2024 was $9,574,000, compared to an adjusted EBITDA of $(14,014,000) in Q1 2023, showing a significant turnaround[23]

Funko-A (FNKO) is expected to deliver a year-over-year increase in earnings on lower revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.The earnings report, which is expected to be released on May 9, 2024, might help the stock move higher if these key numbers are better than expectation ...

Editor's note: Seeking Alpha is proud to welcome Alejandro Sanchez-Ortiz Ampuero as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more » kipgodi Thesis Funko (NASDAQ:FNKO) is a company with a very recognizable brand that sets them apart from their competitors. The pop culture is continuously expanding, allowing the company to la ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Financial Data and Key Metrics - Q4 2023 net sales were $291.2 million, with wholesale channel sales of $216.7 million and direct-to-consumer (D2C) sales of $74.5 million [12] - Gross profit was $109.4 million, with a gross margin of 37.6%, up from 33.2% in Q3 2023 [27] - Adjusted EBITDA for Q4 was $23.5 million, at the upper end of the guidance range [29] - Inventory at year-end was $119 million, down more than 50% from $246 million at the end of 2022 [7] - Cash and cash equivalents stood at $36.5 million, after paying down $26.2 million of debt in Q4 [37] Business Line Performance - D2C sales in Q4 represented 26% of net sales, up from 17% in Q4 2022, with a nearly 30% YoY increase [6][27] - Pop! Yourself and limited edition products were key contributors to D2C growth, with Pop! Yourself driving significant sales through both online and in-store channels [20][59] - The company launched Bitty Pop! and Pop! Yourself in 2023, both of which were well-received and contributed to business growth [20] Market Performance - Inventory levels in the channel for larger retail partners were 32% lower at the end of 2023 compared to 2022, reflecting healthier levels relative to POS sales [7] - POS sales were down high-single-digit percentages YoY, but this was offset by a mix shift towards the D2C channel [80][81] Strategy and Industry Competition - The company completed a transformation plan in 2023, which included eliminating unprofitable product lines, reducing workforce, and aggressively lowering inventory levels [5][22] - The focus for 2024 is on long-term profitable growth, with an emphasis on expanding the D2C business, increasing sales of Pop! Yourself, and limited edition products [8][23] - The company plans to achieve positive comps later in 2024, despite expecting lower Q1 net sales compared to Q1 2023 [30][31] Management Commentary on Operating Environment and Future Outlook - Management expects 2024 full-year adjusted EBITDA to be considerably higher than 2023, driven by growth in higher-margin product lines and the D2C business [23][39] - The company anticipates improved financial results in the second half of 2024 due to seasonality, easing Hollywood strikes, and reduced shipping disruptions [108] - Shipping costs remain uncertain due to hostilities in the Red Sea, which could impact transit times and revenue recognition [32][89] Other Important Information - Steve Nave, CFO and COO, will resign effective March 15, 2024, with Yves LePendeven taking over as acting CFO [10][35] - The company expects to announce a permanent CEO in Q2 2024 [11] - SG&A expenses in the second half of 2023 declined to 32% of net sales from 38% in the first half, driven by cost reductions [36] Q&A Session Summary Question: How is the company managing the transition after Steve Nave's departure? - Mike Lunsford has been actively running the company since July 2023, and Yves LePendeven is well-qualified to take over the CFO role [75][76] - The company does not anticipate any operational disruptions, as the leadership team is strong and aligned [76] Question: What are the drivers of D2C growth in 2024? - D2C growth is expected to continue, driven by Pop! Yourself, limited edition drops, and expansion into new territories [74][101] - The company plans to focus on higher-margin products and direct connections with fans [95] Question: How is the Red Sea situation impacting the business? - The Red Sea disruptions primarily affect shipments from Asia to Europe, leading to longer transit times and higher costs [89][97] - While the impact is more pronounced in Q1, the company does not expect it to disrupt full-year sales projections [97] Question: What are the expectations for EBITDA margin improvement? - EBITDA margin improvement is expected through a mix shift towards D2C and higher-margin products, as well as annualizing cost reductions from 2023 [83][85] - SG&A expenses will increase due to higher marketing spend for D2C growth, but overall margins are expected to improve [85] Question: When will the new CEO be announced? - The company expects to announce the new CEO in Q2 2024, with hopes of introducing them on the next earnings call [78]

Funko-A (FNKO) came out with quarterly earnings of $0.01 per share, in line with the Zacks Consensus Estimate. This compares to loss of $0.35 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this company would post a loss of $0.08 per share when it actually produced earnings of $0.03, delivering a surprise of 137.50%.Over the last four quarters, the company has surpassed consensus EPS estimates two times.Funko-A, which belongs to the Zacks Consumer ...

Executive Summary [Fourth Quarter 2023 Financial Highlights](index=1&type=section&id=Fourth-Quarter%20Financial%20Results%20Summary%3A%202023%20vs%202022) In Q4 2023, Funko's net sales decreased by **12.6%** year-over-year to **$291.2 million**. Despite the sales decline, gross margin saw a significant improvement to **37.6%** from **28.3%**. The company narrowed its net loss to **$10.8 million** from **$42.2 million** in the prior-year period and achieved a positive Adjusted EBITDA of **$23.5 million**, a strong recovery from a negative **$6.3 million** in Q4 2022 Q4 2023 vs Q4 2022 Financial Results (in millions) | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $291.2 | $333.0 | -12.6% | | Gross Profit | $109.4 | $94.3 | +16.0% | | Gross Margin | 37.6% | 28.3% | +9.3pp | | Net Loss | ($10.8) | ($42.2) | Improved | | Adjusted Net Income (Loss) | $0.5 | ($17.9) | Improved | | Adjusted EBITDA | $23.5 | ($6.3) | Improved | [Full Year 2023 Financial Highlights](index=1&type=section&id=Full-Year%20Financial%20Results%20Summary%3A%202023%20vs%202022) For the full year 2023, net sales declined to **$1.1 billion** from **$1.3 billion** in 2022. The company reported a significant net loss of **$154.1 million**, a sharp increase from the **$8.0 million** loss in the previous year. Adjusted EBITDA fell substantially to **$27.2 million** from **$97.4 million** in 2022, reflecting operational challenges and restructuring costs throughout the year Full Year 2023 vs Full Year 2022 Financial Results (in billions/millions) | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.1 | $1.3 | -15.1% | | Gross Profit | $333.0 | $434.0 | -23.3% | | Gross Margin | 30.4% | 32.8% | -2.4pp | | Net Loss | ($154.1) | ($8.0) | Worsened | | Adjusted Net Loss | ($45.4) | $29.6 (Income) | Worsened | | Adjusted EBITDA | $27.2 | $97.4 | -72.1% | [Management Commentary](index=1&type=section&id=Management%20Commentary) The Interim CEO stated that the company successfully completed a comprehensive plan in 2023 to reduce costs, improve operational efficiency, and focus on core products, addressing inventory issues and workforce size. Q4 results were at the upper end of guidance, driven by strong Direct-to-Consumer (DTC) growth. Despite facing headwinds in 2024 from a softer content schedule and shipping uncertainties, management expects significant bottom-line improvement, supported by further DTC expansion - Successfully completed a comprehensive plan in 2023 to reduce costs, improve operational efficiencies, and focus on core products, addressing inventory issues and workforce size[4](index=4&type=chunk) - Q4 2023 net sales and adjusted EBITDA were at the upper end of guidance, fueled by a nearly **30%** increase in the direct-to-consumer (DTC) business, which comprised **26%** of total revenue[6](index=6&type=chunk) - The company anticipates **significant bottom-line improvement in 2024** despite headwinds from Hollywood strikes and Red Sea shipping issues, focusing on DTC expansion and limited-edition products[8](index=8&type=chunk) [Leadership Update](index=2&type=section&id=Leadership%20Update) The company announced the resignation of Steve Nave, Chief Financial Officer (CFO) and Chief Operating Officer, effective March 15, 2024. Deputy CFO Yves LePendeven will assume the role of Acting CFO - **Steve Nave**, Funko's **CFO and COO**, is resigning effective **March 15, 2024**[9](index=9&type=chunk) - **Yves LePendeven**, the company's **Deputy CFO**, will serve as **Acting CFO** upon Mr. Nave's departure[9](index=9&type=chunk) Detailed Financial Performance [Fourth Quarter 2023 Net Sales Analysis](index=2&type=section&id=Fourth%20Quarter%202023%20Net%20Sales%20by%20Category%20and%20Geography) In Q4 2023, total net sales fell **12.6%** YoY. By product category, Core Collectibles and Loungefly branded products saw declines of **12.6%** and **25.1%** respectively, while the 'Other' category grew by **44.0%**. Geographically, a strong **26.3%** sales growth in Europe was offset by an **18.0%** decline in the United States and a **48.5%** drop in Other International markets Q4 Net Sales by Product Brand (in thousands) | Brand Category | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | Core Collectibles | $212,776 | $243,340 | -12.6% | | Loungefly Branded Products | $54,908 | $73,346 | -25.1% | | Other | $23,552 | $16,354 | +44.0% | | **Total Net Sales** | **$291,236** | **$333,040** | **-12.6%** | Q4 Net Sales by Geography (in thousands) | Geography | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | United States | $197,368 | $240,647 | -18.0% | | Europe | $78,138 | $61,869 | +26.3% | | Other International | $15,730 | $30,524 | -48.5% | | **Total Net Sales** | **$291,236** | **$333,040** | **-12.6%** | [Balance Sheet Highlights](index=3&type=section&id=Balance%20Sheet%20Highlights) As of December 31, 2023, Funko significantly improved its balance sheet health by more than halving its inventory to **$119.5 million** from **$246.4 million** at the end of 2022. Cash and cash equivalents nearly doubled to **$36.5 million**, while total debt saw a moderate increase to **$273.6 million** Balance Sheet Highlights (Year-End, in millions) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $36.5 | $19.2 | | Inventories | $119.5 | $246.4 | | Total debt | $273.6 | $245.8 | - Inventory levels were substantially lowered to **$119 million** at year-end 2023, down from **$246 million** at the end of 2022 and **$162 million** at the end of Q3 2023[7](index=7&type=chunk) 2024 Outlook and Guidance [Full Year 2024 Outlook](index=3&type=section&id=2024%20Full%20Year%20Outlook) For the full year 2024, Funko anticipates net sales to be in the range of **$1.047 billion to $1.103 billion**. The company projects a significant recovery in profitability, with Adjusted EBITDA expected to be between **$65 million and $85 million** Full Year 2024 Guidance (in billions/millions) | Metric | Outlook | | :--- | :--- | | Net Sales | $1.047 to $1.103 | | Adjusted EBITDA | $65 to $85 | [First Quarter 2024 Guidance](index=3&type=section&id=2024%20First%20Quarter%20Guidance) For the first quarter of 2024, the company guides for net sales between **$214 million and $227 million**. It expects an adjusted net loss per share in the range of **$0.32 to $0.24** and Adjusted EBITDA between **$0 million and $5 million** Q1 2024 Guidance (in millions, except per share) | Metric | Outlook | | :--- | :--- | | Net Sales | $214 to $227 | | Gross Margin % | ~37% | | SG&A Expense | $87 to $88 | | Adjusted Net Loss | ($17) to ($13) | | Adjusted Net Loss per Share | ($0.32) to ($0.24) | | Adjusted EBITDA | $0 to $5 | Financial Statements [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the full year 2023, Funko reported net sales of **$1.1 billion** and a net loss attributable to the company of **$154.1 million**, or (**$3.19**) per share. This compares to net sales of **$1.3 billion** and a net loss of **$8.0 million**, or (**$0.18**) per share, in 2022. The increased loss was driven by lower sales, non-recurring charges, and higher interest expense Annual Income Statement Highlights (in thousands) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net sales | $1,096,086 | $1,322,706 | | (Loss) income from operations | ($103,827) | ($11,920) | | Net (loss) attributable to Funko, Inc. | ($154,079) | ($8,035) | | Diluted (Loss) per share | ($3.19) | ($0.18) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's balance sheet at year-end 2023 showed total assets of **$804.6 million**, down from **$1.09 billion** in 2022, largely due to a significant reduction in inventory from **$246.4 million** to **$119.5 million**. Total liabilities stood at **$566.6 million**, while total stockholders' equity decreased to **$238.0 million** from **$389.7 million** Year-End Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,453 | $19,200 | | Inventory, net | $119,458 | $246,429 | | Total assets | $804,645 | $1,091,145 | | Total current liabilities | $358,832 | $361,397 | | Total stockholders' equity | $238,040 | $389,689 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In 2023, Funko generated **$30.9 million** in cash from operating activities, a significant improvement from the **$40.1 million** used in 2022, primarily driven by a **$122.5 million** positive change from inventory reduction. Cash used in investing was **$39.8 million**, and cash provided by financing was **$25.6 million**. The company ended the year with a cash balance of **$36.5 million** Annual Cash Flow Summary (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $30,935 | ($40,134) | | Net cash used in investing activities | ($39,796) | ($78,065) | | Net cash provided by financing activities | $25,596 | $54,639 | | Net change in cash and cash equivalents | $17,253 | ($64,357) | | Cash and cash equivalents at end of period | $36,453 | $19,200 | Non-GAAP Reconciliations [Reconciliation to Adjusted Net Income (Loss)](index=9&type=section&id=Reconciliation%20of%20Net%20%28loss%29%20income%20to%20Adjusted%20net%20income%20%28loss%29) For the full year 2023, Funko's GAAP net loss of **$154.1 million** was adjusted to a non-GAAP adjusted net loss of **$45.4 million**. Significant adjustments included a **$100.2 million** gain from a tax receivable agreement liability adjustment, a **$30.3 million** inventory write-down, and a **$147.6 million** income tax expense adjustment which includes a large valuation allowance on deferred tax assets FY 2023 Reconciliation to Adjusted Net Loss (in thousands) | Description | Amount | | :--- | :--- | | Net loss attributable to Funko, Inc. (GAAP) | ($154,079) | | Tax receivable agreement liability adjustment | ($100,223) | | Inventory write-down | $30,338 | | One-time disposal costs (inventory) | $8,687 | | Acquisition costs and other expenses | $14,241 | | Severance, relocation and related costs | $6,486 | | Income tax expense adjustment | $147,630 | | **Adjusted net loss (Non-GAAP)** | **($45,397)** | [Reconciliation to Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20Net%20%28loss%29%20income%20to%20Adjusted%20EBITDA) The company's full-year 2023 Adjusted EBITDA was **$27.2 million**, a sharp decline from **$97.4 million** in 2022. The calculation starts with a GAAP net loss of **$164.4 million** and adds back interest, taxes, D&A, and other non-recurring or non-cash items. Key add-backs for 2023 included D&A (**$59.8 million**), inventory write-downs and disposal costs (totaling **$39.0 million**), and equity-based compensation (**$10.5 million**), while a large gain on the tax receivable agreement liability (**$100.2 million**) was subtracted FY 2023 Reconciliation to Adjusted EBITDA (in thousands) | Description | Amount | | :--- | :--- | | Net loss (GAAP) | ($164,438) | | Interest expense, net | $27,970 | | Income tax expense | $132,497 | | Depreciation and amortization | $59,763 | | **EBITDA** | **$55,792** | | Adjustments (net) | ($28,589) | | **Adjusted EBITDA (Non-GAAP)** | **$27,203** | - Major adjustments to derive Adjusted EBITDA included adding back **inventory write-downs ($30.3 million)** and **one-time disposal costs ($8.7 million)**, and subtracting a **gain on the tax receivable agreement liability adjustment ($100.2 million)**[27](index=27&type=chunk)[28](index=28&type=chunk)