Funko(FNKO)2025-03-07 02:44Financial Data and Key Metrics Changes - Total net sales for Q4 2024 were 124.4 million with a gross margin of 42.4%, an improvement from 37.6% in Q4 2023 [31] - Adjusted net income was 0.08 per diluted share, significantly up from 26.3 million, exceeding expectations [33] - For the full year, net sales were 1.1 billion in 2023, while adjusted EBITDA improved to 11.8 million in 2023 [34] Business Line Data and Key Metrics Changes - Direct-to-consumer sales increased by 20% year-over-year, comprising 29% of gross sales compared to 25% in Q4 2023 [30][22] - Core collectibles business grew over 10% in Q4, with sales outside the US increasing by 23% [9] - Biddy Pop line saw an impressive 83% year-over-year growth in Q4 [21] Market Data and Key Metrics Changes - Sales in Europe were up more than 20%, driven by strong seasonal performance [30] - POS in the US grew by 1% year-over-year, while Europe experienced a 17% increase [72] Company Strategy and Development Direction - The company is focusing on expanding its sports product line, which currently represents only 4% of total revenue, with significant growth potential identified in the $35 billion sports memorabilia market [12][64] - Plans to enhance direct-to-consumer sales and expand the Pop Yourself product line into new international territories [39] - The company aims to improve brand value by avoiding sales into discount channels, which could dilute brand perception [51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged softening consumer behavior in the US market and the impact of tariffs and inflation on operations [28] - Confidence in navigating external challenges is bolstered by proactive mitigation plans and a strong leadership team [28] - Anticipated modest top-line growth in 2025, with expectations for a stronger second half of the year as strategic initiatives take effect [40] Other Important Information - The company has strengthened its leadership team with key additions to enhance brand positioning and sales operations [25][27] - The fan loyalty program, Fan Rewards, added 120,000 new members in 2024, indicating strong customer engagement [24] Q&A Session Summary Question: Guidance assumptions regarding tariffs and consumer sentiment - Management highlighted green shoots in the business, particularly in direct-to-consumer and sports segments, while acknowledging headwinds from tariffs and consumer sentiment [46][47] Question: Future of the sports strategy - Management sees significant potential in the sports category, with plans for regional capsules and activations to engage fans [59][64] Question: POS performance in the US retail channel - Management reported a 1% increase in US POS, with strong performance in Europe at 17% [72] Question: Decline in first-quarter sales guidance - Management attributed the expected decline to lower foot traffic in major retailers and cautious consumer spending [78][79] Question: Impact of tariffs and pricing adjustments - Management confirmed that guidance includes anticipated tariffs and is exploring pricing adjustments as a mitigation strategy [87]