Investors interested in Consumer Discretionary stocks should always be looking to find the best-performing companies in the group. Funko-A (FNKO) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? 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 286 di ...

Core Insights - Funko, Inc. reported first-quarter 2024 results with net sales declining year over year and missing the Zacks Consensus Estimate, while the bottom line showed improvement compared to both the consensus estimate and the previous year [1][2] Financial Performance - The company reported net sales of $215.7 million, a decrease of 14.4% from $251.9 million in the prior-year quarter, and missed the Zacks Consensus Estimate of $218 million, attributed to Hollywood strikes affecting new entertainment content [3] - An adjusted loss of 17 cents per share was narrower than the Zacks Consensus Estimate of a loss of 29 cents and improved from an adjusted loss of 49 cents in the year-ago quarter [2][3] - Adjusted gross margin expanded by 840 basis points year over year to 40%, driven by lower freight costs, higher direct-to-consumer sales, and improved inventory management [2][3] Expense Management - SG&A expenses decreased by 14.5% to $85.6 million from $100.1 million in the prior-year quarter, which included one-time charges [4] - Adjusted EBITDA totaled $9.6 million, a significant improvement from an adjusted EBITDA loss of $14 million reported a year ago [4] Segment Performance - Core Collectible sales declined by 14.6% year over year to $157.1 million, while Loungefly net sales fell by 20.6% to $40.7 million [5] - Geographically, net sales in the U.S., Europe, and Other International decreased by 17.4%, 7.2%, and 6.9% year over year, totaling $146.4 million, $54.2 million, and $15.1 million, respectively [5] Financial Position - The company ended the quarter with cash and cash equivalents of $26.1 million, long-term debt of $117.2 million, and total stockholders' equity of $217.6 million [7] Outlook - For Q2 2024, management expects net sales between $225 million and $240 million, with gross margin anticipated in the range of 38-40% and SG&A expenses between $80 million and $85 million [8] - Adjusted EBITDA is forecasted to be between $9 million and $15 million, with an expected adjusted net loss per share between 8 cents and 15 cents [8] - For the full year, Funko forecasts net sales between $1.047 billion and $1.103 billion, with adjusted EBITDA expected in the range of $65 million to $85 million [9]

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]