After A Fun Time, Shares Of Funko Deserve To Move Higher

Core Viewpoint - Funko has faced significant challenges in recent years, including declining revenues and increased net losses, but recent improvements in operational metrics and management's optimistic guidance suggest potential for recovery and further upside in stock performance [1][2][3][4][17] Financial Performance - In 2023, Funko's revenue was $1.10 billion, a decline of 17.1% from $1.32 billion in 2022, primarily due to slower inventory restocking and a challenging retail environment [2] - The company's net loss expanded from $8 million in 2022 to $154.1 million in 2023, influenced by rising interest expenses and costs associated with expansion and depreciation [3] - For Q1 2024, Funko reported a revenue of $215.7 million, a 14.4% drop compared to $251.9 million in Q1 2023, with a 17.4% decline in the US market and a 7.2% drop in Europe [4] Cost Management - In Q1 2024, Funko's net loss was $22.7 million, significantly improved from a $55.3 million loss in the same quarter the previous year, with cost of sales decreasing from 80.3% of revenue to 60% [4] - Operating cash flow improved from negative $30.3 million to positive $14.5 million in Q1 2024, while EBITDA shifted from negative $14 million to positive $9.6 million [4] Future Outlook - Management projects 2024 revenue between $1.05 billion and $1.10 billion, indicating a potential year-over-year decline of only 1.9% [4] - The company anticipates EBITDA of between $65 million and $85 million for the fiscal year 2024 [4] Debt and Inventory Management - Funko has successfully reduced net debt from $275.6 million in Q1 2023 to $220.3 million in Q1 2024, indicating improved financial stability [13] - Inventory levels have decreased from $265.8 million in Q3 2022 to $112.3 million in Q1 2024, suggesting a resolution of previous inventory overhang issues [14] Investment Potential - Despite past challenges, Funko's improving fundamentals, including lower net debt and inventory levels, combined with management's expectations for revenue growth, present an appealing investment opportunity [17]