Funko: A Turnaround Small-Cap Chasing New Markets

Core Insights - Funko Inc has undergone significant changes since 2023, including a new CEO and a strategic pivot towards digital gaming and younger demographics [3][4][23] - The company reported a positive earnings performance with an EPS of $0.10, beating expectations, and revenue of $247.66 million, reflecting a 3.18% year-over-year increase [6] - Funko Fusion, a new gaming platform, is set to launch on September 13, 2024, aiming to diversify revenue streams and engage younger audiences [5][23] Management Changes - Cynthia Williams has been appointed as the new CEO, previously leading Hasbro's Wizards of the Coast division, indicating a shift towards innovative product offerings [4] - The management change is expected to drive the company into new markets and enhance revenue growth [4][23] Financial Performance - The latest earnings call highlighted a strong performance with net sales guidance for FY 2024 projected between $1.047 billion and $1.103 billion, alongside adjusted EBITDA expectations of $65-$85 million [6] - The "bitty pop" product line has seen significant sales growth, more than doubling year-over-year in Q2 [6][11] Revenue Segmentation - The core collectible segment accounted for 75.4% of sales in 2024, showing an increase from 73.1% in 2023, while Loungefly's contribution decreased to 16.8% [8] - Total net sales for the U.S. market were $309.39 million for the first half of 2024, down from $348.28 million in the same period of 2023 [9] Market Strategy - Funko is diversifying its product lineup to include more interactive and playable toys aimed at children, moving away from the collector-focused Funko Pop! line [7][23] - The company is also exploring digital gaming as a new revenue source, which is expected to enhance brand engagement [5][23] Valuation Metrics - Funko's current price-to-sales ratio stands at 0.46, indicating potential for revenue growth relative to its market cap [21] - The company is facing challenges with share dilution and high long-term debt, which may impact future investment decisions [17][22] Future Outlook - The upcoming launch of Funko Fusion is seen as a critical catalyst for revenue growth and market expansion [5][23] - Despite positive developments, the company’s high debt levels and share dilution remain concerns for potential investors [17][24]