Funko(US:FNKO)2025-11-06 22:30Financial Data and Key Metrics Changes - Total net sales for Q3 2025 were $250.9 million, in line with expectations, but down approximately $11 million year-over-year due to SKU rationalizations and reduced clearance sales [22][23] - Gross profit was $100.8 million, resulting in a gross margin of 40.2%, which was better than expected, with price increases offsetting increased tariffs [23] - Adjusted net income was $3.2 million, or 6 cents per diluted share, while adjusted EBITDA was $24.4 million, higher than expectations [23][24] - Direct-to-consumer sales mix decreased to 18% from 20% in the previous year due to reduced marketing spend [23] Business Line Data and Key Metrics Changes - The company celebrated the milestone of 1 billion units sold, with a 27% increase in membership in the fan loyalty program since the start of the year [7][8] - The anime segment represented 30% of sales in Q3, becoming the second largest fan vertical [15] - The introduction of Biddy Pop mini vinyl figures has been successful, making Walmart's 2025 top toy list and expected to be placed in 1,800 stores [16][20] Market Data and Key Metrics Changes - Global point-of-sale (POS) units were down only 3% year-over-year, with the U.S. market experiencing mid to high single-digit declines while EMEA saw low double-digit growth [32][33] - The company noted a cautious approach from U.S. buyers, while European markets showed stronger momentum [34] Company Strategy and Development Direction - The "Make Culture Pop" strategy focuses on culture, creativity, and commerce, aiming to transform pop culture into products and expand into new fandoms [9][20] - The company plans to enhance its international presence, particularly in Asia and Latin America, and improve direct-to-consumer capabilities [19][20] - Recent multi-year renewal agreements with major licensing partners, including Disney and Warner Bros., strengthen the company's competitive position [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain momentum and transform for growth, emphasizing the importance of operationalizing quick responses to trends [30][31] - The outlook for Q4 2025 includes modest net sales growth driven by new product launches and a gross margin of approximately 40% [24] Other Important Information - The company has engaged advisors for its refinancing process, which is ongoing, and has amended existing credit facilities to waive financial covenants for Q2 and Q3 [25] - The company has maintained a gross margin above 40% in six of the last seven quarters, indicating improved business quality [24][26] Q&A Session Summary Question: Opportunities for the next 12 months - Management highlighted the focus on maintaining performance momentum and expanding in areas like sports and music, with operationalizing quick strike capabilities as a priority [28][29] Question: Retail environment for Q4 - Management noted strong POS trends and a mix of cautiousness in the U.S. and momentum in Europe, with a significant content slate for Q4 [32][34] Question: Market for vending machines and kiosks - The company sees the Pop Yourself experience as unique and plans to create more experiences within retail partners' spaces [36] Question: European sales outlook - Management expects European sales to recover in Q4 following production delays and the launch of Pop Yourself [38] Question: Impact of pricing on demand - Management reported that price increases have been well-received, with unit sales holding up despite some market challenges [39]