Funko Inc ((FNKO)) has held its Q4 earnings call. Read on for the main highlights of the call.
Funko Inc. recently held its earnings call, revealing a strong performance in the fourth quarter of 2024. The company experienced significant growth in direct-to-consumer sales, international markets, and collaborations in sports and music. However, challenges such as limited purchases from US retailers, tariffs, and economic uncertainty posed significant risks, particularly impacting the first half of 2025.
Stabilization and Growth in Key Areas
Funko successfully stabilized net sales at over $1 billion, with gross profit and adjusted EBITDA growth exceeding $100 million. Notably, direct-to-consumer sales grew to account for 29% of overall sales, demonstrating the company’s strategic focus on this channel.
Core Collectibles and International Expansion
The core collectibles business saw over 10% growth in Q4, with international sales increasing by 23%. The Biddy line, in particular, experienced an impressive 83% year-over-year growth in Q4, highlighting the brand’s expanding global appeal.
Sports and Music Collaborations
Funko launched successful collaborations with major sports leagues such as the NFL and NBA, tapping into the lucrative $35 billion sports memorabilia market. Additionally, music partnerships with artists like Doja Cat and Sabrina Carpenter contributed to the company’s diverse product offerings.
Improved Financial Metrics
The company reported an improved gross margin of 42.4%, up from 37.6% year-over-year. Adjusted EBITDA reached $26.3 million, surpassing guidance, while total debt decreased significantly from $273.6 million to $182.8 million.
Challenges with US Retailers
US retailers, particularly mass retailers, limited their purchases to end the year with leaner inventory positions, which impacted Funko’s sales. This cautious approach reflects broader economic uncertainties affecting the retail sector.
Tariffs and Economic Uncertainty
Funko anticipates a 20% tariff on imports from China, coupled with softening consumer behavior in the US market, as significant challenges. These factors are expected to impact the company’s performance in the near term.
First Half 2025 Guidance
Looking ahead, Funko expects a decline in net sales and adjusted EBITDA in the first half of 2025 due to tariffs and weakening consumer behaviors. However, the company remains optimistic about modest top-line growth for the year, with net sales projected between $1.05 billion and $1.102 billion. Adjusted EBITDA is anticipated to range from $80 million to $100 million. Strategic initiatives, such as expanding Pop Yourself into new territories and enhancing direct-to-consumer channels, are expected to drive growth in the second half of the year.
In summary, Funko Inc.’s earnings call highlighted a strong performance in Q4 2024, driven by growth in direct-to-consumer sales and international markets. While challenges such as tariffs and economic uncertainty pose risks, the company remains focused on strategic initiatives to drive future growth. Investors and stakeholders will be keenly watching how these factors unfold in 2025.