Funko, Inc. Q3 FY2025 earnings call

Culture - Aim to be the definitive brand for transforming pop culture into products, looking to identify trends faster and supercharge speed to market. For example, quickly creating KPop Demon Hunters products and partnering with The Late Show with Stephen Colbert. Embracing the collector community with exclusive drops and expanding relationships like with Inter Miami. Anime business, which is 30% of sales, has more growth opportunity. ### Creativity - Continue innovating new form factors, expanding product offering. Bitty Pop! is rolling out in Walmart, and plans to expand the line. Planning to expand the Blind Box offering, Mystery Minis, and initiate a limited launch of a premium wine box collection. ### Commerce - Significant opportunity to expand internationally, particularly in Asia and Latin America. Simplify D2C experience on e-commerce site and app, plan to add AI-powered builder. Plan to sell Bitty Pop! products through vending machines and add Pop! Yourself kiosks in retail experiences.

Total net sales for the third quarter were $250.9 million, in line with expectations. Compared to Q3 of the previous year, approximately $11 million decrease in net sales was due to SKU rationalizations and reduction of clearance sales. Direct-to-consumer sales mix in the quarter was 18% of gross sales, down from 20% in last year's Q3. Gross profit was $100.8 million, equal to a gross margin of 40.2%. Adjusted net income was $3.2 million or $0.06 per diluted share, and adjusted EBITDA was $24.4 million. The anime business represented 30% of sales in Q3 and is the second largest vertical.

Expects 2025 fourth quarter net sales to increase modestly from Q3 2025, driven in part by launch of Pop! Yourself in Europe and sales of KPop Demon Hunters product lines. Gross margin of approximately 40% and adjusted EBITDA margin to be in the mid- to high single digits range.

Tariffs earlier this year significantly disrupted Q2 shipping of orders out of Asia, with Q3 still having a hangover effect. Retailers placed buys for Q3 and early Q4 shipments during uncertainty about tariff rates and consumer hold up through holiday period, leading to lower sell-in in Q3. Production delays impacted European sales.

Q: Stephen Laszczyk asked about opportunities over the next 12 months to execute against and top priorities.

A: Josh Simon said short term focus on continuing performance momentum, in culture expand fandom areas like sports and music with quick strike capabilities, on creativity focus on evolving core franchise like Bitty Pop! and collaborating with creative community, on commerce focus on international and retail partners.

Q: Stephen Laszczyk asked about 4Q retail environment.

A: Yves Le Pendeven said POS trend relatively strong, U.S. down mid- to high single digits in units, EMEA up in low double digits, with tariff hangover effect and mixed situation by channel and retailer.

Q: Keegan Tierney Cox asked about vending machines and kiosks market.

A: Josh Simon said Pop! Yourself experience is unique, with kiosks in existing locations and plans to expand in retail partners' real estate.

Q: Keegan Tierney Cox asked about Europe sales.

A: Josh Simon said POS trend strong in Europe, but had production delays impacting Q3 sales, expecting orders to ship in Q4 and Europe to be back to growth in 4Q.

Q: Keegan Tierney Cox asked about pricing impact on demand.

A: Josh Simon said pricing rollout in early July, unit sales held up pretty well, and it's gone pretty well for them.