Funko(US:FNKO)2025-11-06 22:13Financial Performance - Net sales for the three months ended September 30, 2025, were $250.9 million, a decrease of 14.3% compared to $292.8 million for the same period in 2024[111] - Net income for the three months ended September 30, 2025, was $0.9 million, down 79.2% from $4.6 million in the same period in 2024[121] - Net sales for the nine months ended September 30, 2025, were $635.1 million, a decrease of 16.0% from $756.1 million in the same period of 2024[123] - Net loss for the nine months ended September 30, 2025, was $68.1 million, compared to a net loss of $13.7 million in the same period of 2024[133] - Net income attributable to Funko, Inc. for Q3 2025 was $901,000, a decrease from $4.33 million in Q3 2024, while the nine-month net loss was $67.18 million compared to a loss of $13.22 million in the same period last year[139] - Adjusted net income for Q3 2025 was $3.22 million, down from $7.95 million in Q3 2024, with a nine-month adjusted net loss of $41.30 million compared to a profit of $4.28 million in the prior year[139] - EBITDA for Q3 2025 was $22.32 million, down from $26.15 million in Q3 2024, while the nine-month EBITDA was a loss of $6.89 million compared to $51.98 million in the same period last year[139] Sales Breakdown - Net sales in the United States decreased by 20.1% to $155.4 million for the three months ended September 30, 2025, compared to $194.4 million in 2024[112] - Net sales in Europe decreased by 0.4% to $74.2 million for the three months ended September 30, 2025, compared to $74.5 million in 2024[112] - Net sales of the Core Collectible branded category decreased by 12.0% to $200.4 million for the three months ended September 30, 2025, compared to $227.8 million in 2024[113] - Other branded category net sales decreased by 67.0% to $5.8 million for the three months ended September 30, 2025, compared to $17.6 million in 2024, primarily due to rationalizing underperforming items[113] - Net sales in the United States decreased by 22.7% to $389.6 million, while net sales in Europe increased by 1.6% to $192.1 million[124] - The Core Collectible branded category saw a 12.1% decrease in net sales to $502.4 million, and the Loungefly category decreased by 13.6% to $111.9 million[125] Cost and Expenses - Gross margin for the three months ended September 30, 2025, was 40.2%, a decrease from 40.9% in the same period in 2024, primarily due to increased shipping, freight, and duty costs[115] - Cost of sales for the three months ended September 30, 2025, was $150.2 million, a decrease of 13.2% from $173.0 million in the same period in 2024[114] - Cost of sales (exclusive of depreciation and amortization) was $395.5 million, down 11.3% from $446.0 million in the prior year[126] - Gross margin (exclusive of depreciation and amortization) decreased to 37.7% from 41.0% due to increased shipping, freight, and duty costs[127] - Selling, general, and administrative expenses decreased by 13.9% to $79.8 million for the three months ended September 30, 2025, compared to $92.7 million in 2024[116] - Selling, general, and administrative expenses were $246.9 million, a decrease of 3.6% from $256.2 million in the previous year[128] Cash Flow and Liquidity - Net cash used in operating activities for the nine months ended September 30, 2025, was $33.21 million, a significant decline from $63.74 million provided in the same period of 2024[152] - Net cash used in investing activities was $23.0 million, primarily for tooling and molds, compared to $13.4 million in the same period of 2024[154] - Net cash provided by financing activities was $57.8 million, mainly from net borrowings of $75.0 million on the Revolving Line of Credit Facility, offset by $17.3 million in payments on loans[156] - As of September 30, 2025, total indebtedness included $99.2 million under the Term Loan Facility and $135.0 million under the Revolving Credit Facility[157] - The company had $39.2 million in cash and cash equivalents and $(157.5) million in working capital as of September 30, 2025, compared to $34.7 million and $(18.7) million respectively at the end of 2024[166] - The company expects significant future liquidity needs for tax distributions, interest payments, and capital expenditures, including a new ERP system[170] Financial Covenants and Compliance - The company anticipates potential non-compliance with financial covenants under its Credit Agreement, raising substantial doubt about its ability to continue as a going concern for the next twelve months[142] - The Credit Agreement includes a term loan facility of $180 million and a revolving credit facility of $100 million, with maturity in September 2026[141] - The company anticipates non-compliance with the maximum Net Leverage Ratio and minimum Fixed Charge Coverage Ratio covenants by December 31, 2025[161] Market Risks and Challenges - The company has experienced adverse impacts from the challenging retail environment and announced tariffs, which are expected to continue affecting performance[144] - The company is exposed to market risks from changes in interest rates, foreign currency, and inflation[177] - There have been no material changes in market risk compared to the previous disclosure in the 2024 10-K[177] Strategic Plans - Management's liquidity plan includes monitoring pricing strategies, reducing overhead costs, and potentially shifting manufacturing out of China to mitigate increasing costs[148] - The company plans to raise additional cash through equity or debt issuance and is considering strategic alternatives, including a potential sale of the company[149] - The Form S-3 registration statement allows the company to offer up to $100.0 million of various securities, effective until August 15, 2028[163] Seasonal Trends - Over 50% of net sales historically occur in the third and fourth quarters, indicating a seasonal trend in sales[171] Accounting Policies - Critical accounting policies include revenue recognition, inventory, and goodwill assessments, which could materially affect financial results[173]