Funko checked in this afternoon as the last of the “Big 5” publicly traded toy and collectibles companies to report third quarter earnings.
The company beat Wall St. estimates with a 6.4% decline in net sales to $292.8 million, down from $312.9 million in the third quarter of last year. These numbers were in in line with expectations as the real progress in the Funko turnaround is under the hood. The Washington-based company reported gross profit of $119.9 million, equal to a gross margin of 40.9%. This is an improvement over $104 million, equal to a 33.2% gross margin in Q3 2023. Earnings per share hit $0.14, beating expectations by 250%.
We reported solid financial results for the 2024 third quarter. As expected, net sales were down compared with the prior-year quarter, though in the top end of our guidance range. On the other hand, we delivered better than expected profitability on improved gross margins, as we did in the first two quarters of this year."
Funko, faced with the same cautious, price conscious consumer environment currently impacting nearly every company in the toy and game space, updated its full-year guidance to reflect slightly lower net sales of $1.037 billion to $1.050 billion in 2024. Conversely, the company raised its outlook for adjusted EBITDA to $85-90 million.
In Q3, sales of Core Collectibles dipped 2.3% while Loungefly slid 17.6% followed by a 20.8% decline in Other items. Funko experienced 13.5% growth in international markets outside of the U.S. and Europe in Q3.
“We are deep in the process of developing our strategic plan for 2025 and beyond, and pleased that we have already begun executing several elements of that plan,” Williams adds. “Recently, we enabled direct-to-consumer shipping capability to Canada, and we expanded our collaboration with the National Football League (NFL), and its fanbase of more than 200 million, to include the option to customize Pop! Yourself with any NFL team logo. Additionally, and just in time for the holidays, we are announcing that Harry Potter accessories will be available to customize Pop! Yourself beginning tomorrow.”
On an earnings call this evening, Williams called out the immediate success of the NFL launch with more than 40% of Pop! Yourself sales from launch until the end of Q3 including NFL-branded accessories. Additionally, daily sales of Pop! Yourself products spiked 150%. Dallas Cowboys wide receiver CeeDee Lamb partnered with Funko for an advertising campaign tied to an exclusive figure offered direct-to-consumer through Funko.com. Additional Q3 hits include exclusive offerings tied to the World Series Champion Los Angeles Dodgers and country music star Reba McEntire, and the debut of the Funko Fusion video game.
New Alignments
On the earnings call, Williams revealed that certain responsibilities have been realigned within the company’s senior management team.
- Andy Oddie, Chief Commercial Officer, will now oversee global sales and business development efforts in addition to overseeing licensing relationships. He has relocated to Los Angeles to maintain a physical presence closer to the majority of Funko’s licensing partners and its U.S. sales team.
- Johanna Gepford, Senior Vice President, Growth Initiatives is fully dedicated to overseeing growth initiatives and new business lines. This includes managing global direct-to-consumer channels, Pop! Yourself, Mondo, and Digital Collectibles.
The company is actively recruiting in key areas, including creative product development, brand management and marketing, and business development related to organically expanding Funko’s reach and fandoms.
Holiday Promotions & Political Impact
According to Funko CFO Yves LePendeven, the company plans an array of holiday retail promotions and marketing spend in the weeks ahead. Williams adds that major retailers have shown that Black Friday promotions look to kick in around Nov. 22 and run through Cyber Monday.
With Donald J. Trump set to begin his second Presidency next year, the looming threat of tariffs and other supply chain issues is back on the table. Williams notes that the company has, for many years, been diversifying its supply chain away from China to markets such as Vietnam. As it stands right now, around one third of Funko’s products come from China, and slightly less than 10% of those items are for the company’s Loungefly fashion accessories business and are already tariffed. That said, the company has an idea of how tariff impacts can be felt and will continue working to diversify its supply chain and mitigate any potential tariff threats.
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