Funko(US:FNKO)2024-11-07 21:37Financial 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].