Funko, Inc. (NASDAQ:FNKO) Q2 2021 Results Conference Call August 5, 2021 4:30 PM ET Company Participants Ben Avenia-Tapper - IR Brian Mariotti - CEO Andrew Perlmutter - President Jennifer Jung - CFO Conference Call Participants Tami Zakaria - JP Morgan Erinn Murphy - Piper Sandler Steph Wissink - Jefferies Linda Weiser - D.A. Davidson Operator Good afternoon. And welcome to Funko's Conference Call to discuss Financial Results for the Second Quarter of 2021. At this time, all participants are in a listen-onl ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________to _____________ Commission file number: 001-38274 FUNKO, INC. (Exact name of registrant as specified in its charter) Delaware 35-2593276 (State or other jur ...

May 6, 2021 First Quarter 2021 Earnings 2 HOLLYWOOD UPDATE Cautionary Notes This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, industry dynamics, our mission, growth opportunities, business strategy and plans and our objectives for future operations, inclu ...

Financial Data and Key Metrics Changes - First quarter net sales increased by 38% year-over-year, marking the largest Q1 in Funko's history [8][39] - Adjusted EBITDA increased to $30 million, with adjusted EBITDA margin expanding by 790 basis points to 15.7% [42] - Gross margin improved to 41.4%, an increase of 100 basis points compared to Q1 2020 [42] - Total liquidity at the end of the quarter was $150 million, representing an improvement of nearly 50% year-over-year [43] Business Line Data and Key Metrics Changes - Sales of pop-branded products grew by 33%, while Loungefly-branded products saw an increase of over 80% year-over-year [11][41] - Non-figure business grew by 52%, driven by categories such as bags, wallets, accessories, plush, and games [12] - Direct-to-consumer business grew over 160% year-over-year, now representing 10% of overall sales, up from 4% two years ago [13][35] Market Data and Key Metrics Changes - U.S. sales increased by 39% to $137 million, while European sales grew by 55% to $40 million [40] - Other international regions saw a 2% increase, reflecting ongoing pandemic challenges [40] - The number of active properties increased by 12% to 762, with net sales per active property rising by 24% to $248,000 [40] Company Strategy and Development Direction - The company is focused on expanding its total addressable market and enhancing consumer appeal through strategic initiatives [15][21] - Funko is entering the NFT market with a strategic acquisition of a majority stake in TokenWave, aiming to connect with fans through digital collectibles [16][20] - The company emphasizes product diversification and innovation, with a focus on under-penetrated genres such as sports, music, and anime [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's long-term success, citing strong consumer demand and easing restrictions in the U.S. [22][21] - The company raised its full-year sales outlook to between $865 million and $900 million, reflecting better-than-expected performance [22][46] - Management acknowledged the dynamic macroenvironment but remains optimistic about growth opportunities in various markets [22][45] Other Important Information - The company ended the quarter with total debt of $183 million, down 25% compared to the previous year [43] - Inventory at quarter-end totaled $52 million, up 16% on sales growth of 38% [44] - The company is strategically expanding its international presence, particularly in Europe and other under-penetrated markets [36][78] Q&A Session Summary Question: Long-term penetration rate of DTC and its impact on profitability - Management is optimistic about DTC growth, which has reached 10% penetration, and sees it as a long-term strategy [49] Question: Margin profile of the NFT business and its long-term impact - The NFT business is expected to have a higher profit margin than traditional products, but initial contributions to margins may be limited [50][51] Question: Original content revenue potential - Management noted significant progress in original IP revenue, with ongoing efforts to grow this segment [52][54] Question: TokenWave acquisition details - The acquisition was for a 51% stake, with no specific details on purchase price or expected revenue contributions disclosed [66] Question: Impact of rising costs on margins - Management confirmed that while shipping costs are a concern, they are taking measures to offset these headwinds [69] Question: Update on brick-and-mortar distribution expansions - Management highlighted ongoing efforts to expand retail space and product diversification, with positive developments in various channels [74][76] Question: International expansion targets - The company is focusing on expanding into Poland, Russia, and Germany, with strong interest in these markets [78]

Part I [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Funko's unaudited condensed consolidated financial statements for Q1 2021 and 2020 are presented, including statements of operations, balance sheets, and cash flows with detailed notes [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income for Q1 2021 reached $11.1 million, a significant improvement from a $5.7 million net loss in Q1 2020, driven by a 38.4% increase in net sales Q1 2021 vs Q1 2020 Performance | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Net sales** | $189,177 | $136,700 | | **Income (loss) from operations** | $16,795 | $(3,019) | | **Net income (loss)** | $11,086 | $(5,732) | | **Diluted Earnings (loss) per share** | $0.17 | $(0.12) | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased slightly to $769.2 million as of March 31, 2021, with notable changes including increased cash and decreased long-term debt Balance Sheet Summary | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $266,944 | $259,351 | | **Total Assets** | $769,198 | $763,590 | | **Long-term debt, net** | $168,371 | $180,012 | | **Total Stockholders' Equity** | $333,099 | $322,445 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $37.5 million for Q1 2021, with a net increase in cash of $22.4 million after financing activities Cash Flow Summary (Three Months Ended March 31) | Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $37,465 | $36,952 | | **Net cash used in investing activities** | $(3,685) | $(4,961) | | **Net cash used in financing activities** | $(10,400) | $(2,752) | | **Net increase in cash and cash equivalents** | $22,442 | $30,184 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes to the financial statements cover a recent acquisition, debt facilities, legal contingencies, segment information, and income taxes - On March 26, 2021, the company acquired a majority interest in TokenWave LLC, developer of the TokenHead app, to expand its product offerings into digital Non-Fungible Tokens (NFTs)[28](index=28&type=chunk) - As of March 31, 2021, the company had **$185.9 million** outstanding under its Term Loan Facility and no outstanding borrowings under its **$75.0 million** Revolving Credit Facility[39](index=39&type=chunk) - The company is involved in several legal proceedings, including a putative class action lawsuit (Ferreira v. Funko, Inc. et al.) alleging misleading statements in 2019 financial reports and shareholder derivative actions[47](index=47&type=chunk)[48](index=48&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial performance, highlighting a 38.4% net sales increase and return to profitability, covering operations, non-GAAP measures, and liquidity [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Net sales for Q1 2021 increased 38.4% to $189.2 million, driven by strong geographic growth and improved gross margin, leading to operating income Q1 2021 vs Q1 2020 Results of Operations | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **Net sales** | $189,177 | $136,700 | 38.4% | | **Gross Profit** | $78,324 | $55,283 | 41.7% | | **Gross Margin** | 41.4% | 40.4% | +1.0 ppt | | **Income (loss) from operations** | $16,795 | $(3,019) | nm | - The number of active properties increased by **11.9%** to **762**, and the average net sales per active property grew by **23.7%** compared to the prior-year period[84](index=84&type=chunk) Net Sales Growth by Brand | Brand | Q1 2021 Sales (in millions) | YoY Growth | | :--- | :--- | :--- | | **Pop! Branded Products** | $150.3 | 33.0% | | **Loungefly Branded Products** | $24.5 | 82.0% | | **Other Branded Products** | $14.3 | 40.8% | [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show Adjusted EBITDA significantly increased to $29.8 million in Q1 2021, with Adjusted Net Income of $13.0 million Reconciliation of Net Income (Loss) to Adjusted EBITDA | Metric (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net income (loss)** | $11,086 | $(5,732) | | **EBITDA** | $25,878 | $7,056 | | **Adjusted EBITDA** | $29,772 | $10,596 | Adjusted Net Income (Loss) and EPS | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Adjusted net income (loss)** | $12,955 | $(2,286) | | **Adjusted earnings (loss) per diluted share** | $0.24 | $(0.04) | [Liquidity and Financial Condition](index=30&type=section&id=Liquidity%20and%20Financial%20Condition) As of March 31, 2021, the company had **$74.7 million** in cash and **$75.0 million** available under its Revolving Credit Facility, with sufficient liquidity for the next 12 months - As of March 31, 2021, the company had **$74.7 million** of cash and cash equivalents and **$128.4 million** of working capital[130](index=130&type=chunk) - The company was in compliance with all covenants in its Credit Agreement as of March 31, 2021, and had **$183.0 million** of indebtedness outstanding under its Term Loan Facility with no borrowings on its Revolving Credit Facility[125](index=125&type=chunk)[127](index=127&type=chunk) - The company has an effective Form S-3 shelf registration statement, allowing it to offer and sell up to **$100.0 million** of various securities to provide financial flexibility[128](index=128&type=chunk)[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposures primarily stem from interest rate and foreign currency fluctuations, with additional hedging contracts initiated in Q1 2021 - The company is primarily exposed to market risk from interest rate and foreign currency fluctuations[140](index=140&type=chunk) - In Q1 2021, the company entered into additional short-term foreign currency forward exchange contracts to economically hedge foreign currency risk[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[143](index=143&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[144](index=144&type=chunk) Part II [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) Material legal proceedings, including ongoing securities class action and shareholder derivative lawsuits, are discussed in Note 7 of the financial statements - For details on material legal proceedings, the report directs readers to Note 7, "Commitments and Contingencies - Legal Contingencies"[146](index=146&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include the ongoing COVID-19 impact, high dependence on third-party licenses, intense competition, retail volatility, supply chain disruptions, and debt-related concerns - The COVID-19 pandemic continues to pose a significant risk, potentially impacting demand, supply chains, and overall financial condition[148](index=148&type=chunk)[152](index=152&type=chunk) - The business is highly dependent on license agreements, with the top ten licensors accounting for **71%** of sales in Q1 2021, and Disney-owned properties alone represented approximately **42%** of sales[158](index=158&type=chunk) - ACON has significant influence over the company, holding approximately **39.6%** of the combined voting power and rights to designate directors, which may create conflicts of interest with other stockholders[255](index=255&type=chunk)[258](index=258&type=chunk) - The company's debt of **$183.0 million** as of March 31, 2021, and the associated covenants in the Credit Agreement could adversely affect financial health and restrict operations[249](index=249&type=chunk)[251](index=251&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - There were no unregistered sales of equity securities or use of proceeds to report for the quarter[313](index=313&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) No other information required for disclosure was reported for the period - There was no other information to report for the period[314](index=314&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) The exhibits filed with Form 10-Q include CEO and CFO certifications and Inline XBRL documents - The exhibits filed include certifications from the CEO and CFO pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, as well as XBRL data files[317](index=317&type=chunk)

March 11, 2021 Fourth Quarter 2020 Earnings 2 HOLLYWOOD UPDATE Cautionary Notes This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, industry dynamics, our mission, growth opportunities, business strategy and plans and our objectives for future operations, i ...

Funko, Inc. (NASDAQ:FNKO) Q4 2020 Earnings Conference Call March 11, 2021 4:30 PM ET Corporate Participants Andrew Harless - Manager, Investor Relations Brian Mariotti - Chief Executive Officer Andrew Perlmutter - President Jennifer Jung - Chief Financial Officer Conference Call Participants Erinn Murphy - Piper Sandler Alex Perry - Bank of America Garrett Johnson - BMO Capital Markets Tami Zacharia - JPMorgan Operator Good afternoon, and welcome to Funko's Conference Call to discuss financial results for t ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________________________________ FORM 10-K ___________________________________________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ...

Funko, Inc. (NASDAQ:FNKO) Q3 2020 Earnings Conference Call November 5, 2020 4:30 PM ET Company Participants Andrew Harless - Manager, Investor Relations Brian Mariotti - Chief Executive Officer Andrew Perlmutter - President Jennifer Jung - Chief Financial Officer Conference Call Participants Erinn Murphy - Piper Sandler Ashley Helgans - Jefferies Alex Perry - Bank of America Tami Zacharia - JP Morgan Operator Good afternoon, and welcome to Funko's Conference Call to discuss financial results for the third q ...

November 5, 2020 Third Quarter 2020 Earnings 2 HOLLYWOOD UPDATE Cautionary Notes This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, industry dynamics, our mission, growth opportunities, business strategy and plans and our objectives for future operations, ...