Funko(US:FNKO)2021-05-07 01:32Financial 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]