Funko(US:FNKO)2025-05-08 21:30Financial Data and Key Metrics Changes - For Q1 2025, total net sales were $190.7 million, in line with guidance, with a gross margin of 40.3% and adjusted EBITDA at a negative $4.7 million, both better than expected [7][22][20] - Adjusted net loss was $17.8 million or $0.33 per share, which was also better than expectations [22] - Cash and cash equivalents stood at $25.9 million, total debt increased to approximately $202.2 million, and total company liquidity decreased to $90.9 million [23][24] Business Line Data and Key Metrics Changes - Direct to consumer sales accounted for 22% of gross sales, comparable to the previous year [21] - Shipping delays affected sales of the Pop Yourself line in Q1, indicating operational challenges [22] Market Data and Key Metrics Changes - In the U.S. market, year-to-date point of sale (POS) was down mid-single digits, but recent trends showed low single-digit growth in the past four weeks [35][37] - In Europe, POS grew by 8%, significantly outpacing the overall toy market growth of 1% [8][38] Company Strategy and Development Direction - The company aims to diversify into sports, gaming, and music while enhancing retail opportunities and experiential engagements [6] - A focus on tariff mitigation strategies has been implemented, including sourcing diversification and cost discipline measures [10][11] - The company is committed to maintaining pricing to ensure accessibility for fans, despite rising costs [13][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged intensified pressures from tariffs and selective consumer behavior, leading to the withdrawal of the 2025 outlook [9][24] - The company remains confident in its ability to offset incremental tariff costs through strategic actions [25][26] - Management emphasized the importance of partnerships and community engagement in navigating the current macro environment [28] Other Important Information - The company has reduced its global workforce by over 20% as part of cost-saving measures [12][46] - A cross-functional tariff task force has been established to address the impact of tariffs on operations [10] Q&A Session Summary Question: Can you offer extra color on mitigation efforts regarding price adjustments and retailer sentiment? - Management indicated that pricing decisions were made in January, and discussions with retail partners have been positive, supporting the decision to maintain price points [32][33] Question: Can you discuss POS trends and expectations for the upcoming months? - Management noted that while the U.S. market faced challenges, recent trends showed improvement, and Europe continued to perform well with high single-digit POS growth [35][38] Question: Clarification on pricing plans and margin drivers? - Management confirmed that planned price adjustments were not in direct response to tariffs and that gross margins exceeded expectations due to slight improvements across various metrics [42][44] Question: Regarding the headcount reduction, how should it be viewed moving forward? - Management explained that the majority of the headcount reduction has already occurred, with ongoing benefits expected throughout the year [46][48]