Delaware | 001-38274 | 35-2593276 |
||||||||||||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Class A Common Stock,
$0.0001 par value per share
|
FNKO | The Nasdaq Stock Market LLC |
Exhibit No. | Description | |||||||
99.1 | ||||||||
99.2 | ||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Date: November 2, 2023 |
FUNKO, INC. |
By: | /s/ Steve Nave | |||||||
Steve Nave | ||||||||
Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) |
Three Months Ended September 30, | Period Over Period Change | ||||||||||||||||||||||
2023 | 2022 | Dollar | Percentage | ||||||||||||||||||||
Core Collectible Brands | $ | 233,269 | $ | 282,412 | $ | (49,143) | (17.4) | % | |||||||||||||||
Loungefly Brand | 57,439 | 59,562 | (2,123) | (3.6) | % | ||||||||||||||||||
Other Brands | 22,236 | 23,633 | (1,397) | (5.9) | % | ||||||||||||||||||
Total net sales | $ | 312,944 | $ | 365,607 | $ | (52,663) | (14.4) | % |
Three Months Ended September 30, | Period Over Period Change | ||||||||||||||||||||||
2023 | 2022 | Dollar | Percentage | ||||||||||||||||||||
Net sales by geography: | |||||||||||||||||||||||
United States | $ | 208,895 | $ | 262,316 | $ | (53,421) | (20.4) | % | |||||||||||||||
Europe | 83,398 | 78,239 | 5,159 | 6.6 | % | ||||||||||||||||||
Other International | 20,651 | 25,052 | (4,401) | (17.6) | % | ||||||||||||||||||
Total net sales | $ | 312,944 | $ | 365,607 | $ | (52,663) | (14.4) | % |
Current Outlook | Previous Outlook | ||||||||||
2023 Full Year | |||||||||||
Net Sales |
$1.065 billion to $1.105 billion | $1.05 billion to $1.12 billion | |||||||||
Adjusted EBITDA* | $20 million to $30 million | $20 million to $30 million | |||||||||
2023 Fourth Quarter | |||||||||||
Net sales | $260 million to $300 million | ||||||||||
Gross margin % | Increasing sequentially from Q3 | ||||||||||
SG&A expense, in dollars | Decreasing sequentially from Q3 | ||||||||||
Adjusted net income (loss)* | ($4.2) million to $2.8 million | ||||||||||
Adjusted net income (loss) per share* | ($0.08) to $0.05 | ||||||||||
Adjusted EBITDA* | $16 million to $26 million |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
Net sales | $ | 312,944 | $ | 365,607 | $ | 804,850 | $ | 989,666 | |||||||||||||||
Cost of sales (exclusive of depreciation and amortization shown separately below) | 208,936 | 237,728 | 581,258 | 649,974 | |||||||||||||||||||
Selling, general, and administrative expenses | 93,992 | 97,930 | 279,685 | 259,043 | |||||||||||||||||||
Depreciation and amortization | 15,465 | 12,555 | 44,334 | 34,509 | |||||||||||||||||||
Total operating expenses | 318,393 | 348,213 | 905,277 | 943,526 | |||||||||||||||||||
(Loss) income from operations | (5,449) | 17,394 | (100,427) | 46,140 | |||||||||||||||||||
Interest expense, net | 7,601 | 2,977 | 20,551 | 5,854 | |||||||||||||||||||
Loss on debt extinguishment | — | — | 494 | — | |||||||||||||||||||
Gain on tax receivable agreement liability | — | — | (99,620) | — | |||||||||||||||||||
Other expense, net | 98 | 926 | 519 | 1,758 | |||||||||||||||||||
(Loss) income before income taxes | (13,148) | 13,491 | (22,371) | 38,528 | |||||||||||||||||||
Income tax expense (benefit) | 3,076 | 2,342 | 130,859 | (2,932) | |||||||||||||||||||
Net (loss) income | (16,224) | 11,149 | (153,230) | 41,460 | |||||||||||||||||||
Less: net (loss) income attributable to non-controlling interests | (1,215) | 1,519 | (9,912) | 7,276 | |||||||||||||||||||
Net (loss) income attributable to Funko, Inc. | $ | (15,009) | $ | 9,630 | $ | (143,318) | $ | 34,184 | |||||||||||||||
(Loss) earnings per share of Class A common stock: | |||||||||||||||||||||||
Basic | $ | (0.31) | $ | 0.21 | $ | (3.01) | $ | 0.78 | |||||||||||||||
Diluted | $ | (0.31) | $ | 0.19 | $ | (3.01) | $ | 0.73 | |||||||||||||||
Weighted average shares of Class A common stock outstanding: | |||||||||||||||||||||||
Basic | 48,237 | 46,874 | 47,641 | 43,670 | |||||||||||||||||||
Diluted | 48,237 | 49,686 | 47,641 | 53,991 |
September 30, 2023 (Unaudited) |
December 31, 2022 |
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(In thousands, except per share amounts) | |||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 31,885 | $ | 19,200 | |||||||
Accounts receivable, net | 166,934 | 167,895 | |||||||||
Inventory | 162,062 | 246,429 | |||||||||
Prepaid expenses and other current assets | 44,048 | 39,648 | |||||||||
Total current assets | 404,929 | 473,172 | |||||||||
Property and equipment, net | 95,389 | 102,232 | |||||||||
Operating lease right-of-use assets | 63,533 | 71,072 | |||||||||
Goodwill | 135,722 | 131,380 | |||||||||
Intangible assets, net | 171,261 | 181,284 | |||||||||
Deferred tax asset, net of valuation allowance | — | 123,893 | |||||||||
Other assets | 9,209 | 8,112 | |||||||||
Total assets | $ | 880,043 | $ | 1,091,145 | |||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Line of credit | $ | 141,000 | $ | 70,000 | |||||||
Current portion of long-term debt, net of unamortized discount | 21,977 | 22,041 | |||||||||
Current portion of operating lease liabilities | 17,866 | 18,904 | |||||||||
Accounts payable | 70,178 | 67,651 | |||||||||
Income taxes payable | 1,136 | 871 | |||||||||
Accrued royalties | 61,857 | 69,098 | |||||||||
Accrued expenses and other current liabilities | 107,720 | 112,832 | |||||||||
Total current liabilities | 421,734 | 361,397 | |||||||||
Long-term debt, net of unamortized discount | 136,539 | 153,778 | |||||||||
Operating lease liabilities, net of current portion | 73,961 | 82,356 | |||||||||
Deferred tax liability | 385 | 382 | |||||||||
Liabilities under tax receivable agreement, net of current portion | — | 99,620 | |||||||||
Other long-term liabilities | 4,658 | 3,923 | |||||||||
Commitments and Contingencies | |||||||||||
Stockholders’ equity: | |||||||||||
Class A common stock, par value $0.0001 per share, 200,000 shares authorized; 48,727 and 47,192 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | 5 | 5 | |||||||||
Class B common stock, par value $0.0001 per share, 50,000 shares authorized; 3,293 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | — | — | |||||||||
Additional paid-in-capital | 318,782 | 310,807 | |||||||||
Accumulated other comprehensive loss | (3,030) | (2,603) | |||||||||
(Accumulated deficit) retained earnings | (83,303) | 60,015 | |||||||||
Total stockholders’ equity attributable to Funko, Inc. | 232,454 | 368,224 | |||||||||
Non-controlling interests | 10,312 | 21,465 | |||||||||
Total stockholders’ equity | 242,766 | 389,689 | |||||||||
Total liabilities and stockholders’ equity | $ | 880,043 | $ | 1,091,145 |
Nine Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
(In thousands) | |||||||||||
Operating Activities | |||||||||||
Net (loss) income | $ | (153,230) | $ | 41,460 | |||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||||||
Depreciation, amortization and other | 42,592 | 34,390 | |||||||||
Equity-based compensation | 7,521 | 11,999 | |||||||||
Amortization of debt issuance costs and debt discounts | 944 | 670 | |||||||||
Loss on debt extinguishment | 494 | — | |||||||||
Gain on tax receivable agreement liability adjustment | (99,620) | — | |||||||||
Deferred tax expense | 123,206 | — | |||||||||
Other | (69) | 7,539 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable, net | 1,314 | (10,198) | |||||||||
Inventory | 84,797 | (106,061) | |||||||||
Prepaid expenses and other assets | 8,244 | (32,310) | |||||||||
Accounts payable | 2,536 | 32,349 | |||||||||
Income taxes payable | 268 | (13,303) | |||||||||
Accrued royalties | (7,240) | 10,942 | |||||||||
Accrued expenses and other liabilities | (14,624) | (42,159) | |||||||||
Net cash used in operating activities | (2,867) | (64,682) | |||||||||
Investing Activities | |||||||||||
Purchases of property and equipment | (30,861) | (46,908) | |||||||||
Acquisitions of businesses and related intangible assets, net of cash acquired | (5,274) | (13,967) | |||||||||
Other | 551 | 778 | |||||||||
Net cash used in investing activities | (35,584) | (60,097) | |||||||||
Financing Activities | |||||||||||
Borrowings on line of credit | 71,000 | 90,000 | |||||||||
Debt issuance costs | (1,957) | (405) | |||||||||
Payments of long-term debt | (16,911) | (13,500) | |||||||||
Distributions to Tax Receivable Agreement Parties | (1,110) | (10,507) | |||||||||
Proceeds from exercise of equity-based options | 287 | 1,209 | |||||||||
Net cash provided by financing activities | 51,309 | 66,797 | |||||||||
Effect of exchange rates on cash and cash equivalents | (173) | (525) | |||||||||
Net change in cash and cash equivalents | 12,685 | (58,507) | |||||||||
Cash and cash equivalents at beginning of period | 19,200 | 83,557 | |||||||||
Cash and cash equivalents at end of period | $ | 31,885 | $ | 25,050 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
Net (loss) income attributable to Funko, Inc. | $ | (15,009) | $ | 9,630 | $ | (143,318) | $ | 34,184 | |||||||||||||||
Reallocation of net (loss) income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1) |
(1,215) | 1,519 | (9,912) | 7,276 | |||||||||||||||||||
Equity-based compensation (2) |
(916) | 4,677 | 7,521 | 11,999 | |||||||||||||||||||
Loss on extinguishment of debt (3) |
— | — | 494 | — | |||||||||||||||||||
Acquisition transaction costs and other expenses (4) |
5,467 | — | 6,921 | 2,850 | |||||||||||||||||||
Certain severance, relocation and related costs (5) |
3,703 | 1,070 | 5,784 | 8,203 | |||||||||||||||||||
Foreign currency transaction loss (6) |
1,074 | 927 | 1,495 | 1,758 | |||||||||||||||||||
One-time inventory write-down (7) |
— | — | 30,084 | — | |||||||||||||||||||
Tax receivable agreement liability adjustments (8) |
— | — | (99,620) | — | |||||||||||||||||||
One-time disposal costs for unfinished goods held at offshore factories (9) |
— | — | 2,404 | — | |||||||||||||||||||
One-time disposal costs for finished goods held at offshore factories (10) |
6,148 | — | 6,148 | ||||||||||||||||||||
Income tax expense (benefit) (11) |
2,494 | (2,699) | 146,144 | (18,767) | |||||||||||||||||||
Adjusted net income (loss) | $ | 1,746 | $ | 15,124 | $ | (45,855) | $ | 47,503 | |||||||||||||||
Adjusted net income (loss) margin (12) |
0.6% | 4.1% | (5.7)% | 4.8% | |||||||||||||||||||
Weighted-average shares of Class A common stock outstanding-basic | 48,237 | 46,874 | 47,641 | 43,670 | |||||||||||||||||||
Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock | 4,443 | 7,150 | 4,430 | 10,321 | |||||||||||||||||||
Adjusted weighted-average shares of Class A stock outstanding - diluted | 52,680 | 54,024 | 52,071 | 53,991 | |||||||||||||||||||
Adjusted earnings (loss) per diluted share | $ | 0.03 | $ | 0.28 | $ | (0.88) | $ | 0.88 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(amounts in thousands) | |||||||||||||||||||||||
Net (loss) income | $ | (16,224) | $ | 11,149 | $ | (153,230) | $ | 41,460 | |||||||||||||||
Interest expense, net | 7,601 | 2,977 | 20,551 | 5,854 | |||||||||||||||||||
Income tax expense (benefit) | 3,076 | 2,342 | 130,859 | (2,932) | |||||||||||||||||||
Depreciation and amortization | 15,465 | 12,555 | 44,334 | 34,509 | |||||||||||||||||||
EBITDA | $ | 9,918 | $ | 29,023 | $ | 42,514 | $ | 78,891 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Equity-based compensation (2) |
(916) | 4,677 | 7,521 | 11,999 | |||||||||||||||||||
Loss on extinguishment of debt (3) |
— | — | 494 | — | |||||||||||||||||||
Acquisition transaction costs and other expenses (4) |
5,467 | — | 6,921 | 2,850 | |||||||||||||||||||
Certain severance, relocation and related costs (5) |
3,703 | 1,070 | 5,784 | 8,203 | |||||||||||||||||||
Foreign currency transaction loss (6) |
1,074 | 927 | 1,495 | 1,758 | |||||||||||||||||||
One-time inventory write-down (7) |
— | — | 30,084 | — | |||||||||||||||||||
Tax receivable agreement liability adjustments (8) |
— | — | (99,620) | — | |||||||||||||||||||
One-time disposal costs for unfinished goods held at offshore factories (9) |
— | — | 2,404 | — | |||||||||||||||||||
One-time disposal costs for finished goods held at offshore factories (10) |
6,148 | — | 6,148 | ||||||||||||||||||||
Adjusted EBITDA | $ | 25,394 | $ | 35,697 | $ | 3,745 | $ | 103,701 | |||||||||||||||
Adjusted EBITDA margin (13) |
8.1 | % | 9.8 | % | 0.5 | % | 10.5 | % |
(1) | Represents the reallocation of net (loss) income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock in periods in which income was attributable to non-controlling interests. | ||||
(2) | Represents non-cash charges (recapture of charges) related to equity-based compensation programs, which vary from period to period depending on the timing of awards and forfeitures |
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(3) | Represents write-off of unamortized debt financing fees for the nine months ended September 30, 2023. | ||||
(4) | For the three and nine months ended September 30, 2023, includes costs related to the termination of a lease agreement and related expenses, partially offset by acquisition-related benefits. For the nine months ended September 30, 2022, includes acquisition-related costs related to investment banking and due diligence fees. |
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(5) | For the three and nine months ended September 30, 2023, includes charges to remove leasehold improvements and return multiple Washington-based warehouses, and charges related to severance and benefit costs for a reduction-in-force. For the three and nine months ended September 30, 2022, includes charges related to one-time relocation costs for U.S. warehouse personnel and inventory in connection with the opening of a new warehouse and distribution facility in Buckeye, Arizona. |
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(6) | Represents both unrealized and realized foreign currency gains and losses on transactions denominated other than in U.S. dollars, including derivative gains and losses on foreign currency forward exchange contracts. | ||||
(7) | For the nine months ended September 30, 2023, represents a one-time inventory write-down to improve U.S. warehouse operational efficiency. |
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(8) | Represents reduction of the tax receivable agreement liability as a result of recognizing a full valuation allowance of the Company’s deferred tax assets and anticipated inability to realize future tax benefits. | ||||
(9) | For the nine months ended September 30, 2023, represents one-time disposal costs related to unfinished goods held at offshore factories. |
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(10) | For the three and nine months ended September 30, 2023, represents one-time disposal costs related to finished goods held at offshore factories, primarily due to customer order cancellations. |
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(11) | Represents the income tax expense effect of the above adjustments, except for the tax liability receivable adjustment. This adjustment uses an effective tax rate of 25% for all periods presented. For the nine months ended September 30, 2023, this also includes $123.2 million recognized valuation allowance on the Company’s deferred tax assets. For the nine months ended September 30, 2022, this also includes the $11.0 million discrete benefit from the release of a valuation allowance on the outside basis deferred tax asset. |
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(12) | Adjusted net (loss) income margin is calculated as Adjusted net (loss) income as a percentage of net sales. | ||||
(13) | Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales. |