Funko (FNKO) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $292.8 million, down 6.4% year-over-year but at the high end of guidance, with net income of $4.6 million versus a net loss of $16.2 million in Q3 2023.

• Gross margin improved to 40.9% from 33.2% last year, driven by operational efficiencies and fewer non-recurring charges.

• Adjusted EBITDA was $31 million, up from $25.4 million year-over-year; adjusted net income was $8 million.

• Strategic initiatives included management realignment, expanded licensing, new product launches, direct-to-consumer shipping to Canada, and expanded NFL and Harry Potter collaborations.

• The company continues to face a challenging retail environment, with retailers reducing restocking and canceling orders, but has adjusted inventory strategies to focus on core products.

Financial highlights

• Q3 2024 net sales: $292.8 million (down 6.4% year-over-year); gross profit: $119.8 million (40.9% margin); SG&A expenses: $92.7 million.

• Q3 2024 net income: $4.6 million; adjusted net income: $8 million ($0.14 per diluted share); adjusted EBITDA: $31 million.

• Cash and cash equivalents at quarter-end were $28.5 million, with total debt reduced to $223.4 million.

• Net inventory at quarter-end was $118.6 million, reflecting preparation for peak shipping.

• Interest expense for Q3 2024 was $5.0 million, down from $7.6 million year-over-year.

Outlook and guidance

• Full-year 2024 net sales guidance lowered to $1.037–$1.05 billion due to cautious wholesale orders and consumer environment.

• Full-year adjusted EBITDA guidance raised to $85–$90 million, above prior range.

• Q4 2024 net sales expected between $280–$294 million; gross margin 38–40%; SG&A $93–$99 million; adjusted EBITDA $17–$22 million.

• Q4 adjusted net income (loss) guidance ranges from a $3 million loss to $1 million income.

• Management expects continued macroeconomic and retail headwinds, with ongoing focus on inventory management and cost controls.