Funko Reports Fourth Quarter 2020 Sales of $227 Million, Up 6%; Provides 2021 Outlook for 25% to 30% Sales Growth
Funko, Inc. (FNKO) reported strong financial results for Q4 2020, with net sales rising 6% to $226.5 million. U.S. sales surged 18% to $171 million, marking a record quarter. Gross margin improved to 37.2%, and net income reached $14.9 million, up from a loss of $6.3 million in Q4 2019. The company expects a revenue growth of 25% to 30% for 2021, driven by its direct-to-consumer strategy and new product launches.
- Q4 2020 net sales increased 6% to $226.5 million.
- Net income jumped to $14.9 million from a loss of $6.3 million in Q4 2019.
- U.S. net sales increased 18% to $171 million, the highest ever domestically.
- Gross margin improved 800 basis points to 37.2%.
- Cash flow from operations rose 69% to $46.9 million.
- Total liquidity increased 71% year-over-year to $127.3 million.
- Expecting 25%-30% revenue growth in 2021.
- International net sales decreased: Europe down 24%, other international down 7%.
Funko, Inc. ("Funko,” or the “Company”) (Nasdaq: FNKO), a leading pop culture consumer products company, today reported its consolidated financial results for the fourth quarter and fiscal year ended December 31, 2020.
Fourth Quarter 2020 Financial Highlights
-
Net sales increased
6% to$226.5 million -
Gross margin1 increased to
37.2% -
SG&A expenses decreased
6% to$53.6 million -
Net income increased
$21.2 million to$14.9 million -
Net income margin expanded 950 basis points to
6.6% -
Adjusted EBITDA2 increased
29% to$33.2 million -
Adjusted EBITDA margin2 expanded 270 basis points to
14.7% -
Cash flow from operations increased
69% to$46.9 million -
Total liquidity3 increased
71% to$127.3 million compared to prior year
Fourth Quarter 2020 Operating Highlights
-
U.S. net sales increased
18% to$171 million , representing Funko's largest quarter ever domestically -
Net sales of non-figure products grew
30% compared to 2019, primarily driven by strength within its Loungefly branded products which increased51% in the quarter -
Pop! brand grew
1% in the quarter driven by12% growth in the U.S. - Extended Funko's direct-to-consumer reach through launching funkoeurope.com
- Funko's direct-to-consumer sales nearly doubled compared to prior year driven by continued strong demand on its e-commerce sites
- Continued to diversify Funko's product portfolio through the launch of Snapsies
-
68% of sales were attributable to evergreen content
“We are pleased to finish the year with strong fourth quarter results, including
“We believe the Company is strongly positioned to deliver solid top line growth and improved profitability in 2021. We are remaining focused on our strategies to maximize Funko's core pop culture platform, drive further category diversification, expand internationally and accelerate our direct-to-consumer business. For the full year, we expect to achieve revenue growth of
Fourth Quarter 2020 Financial Results
Net sales increased
In the fourth quarter of 2020, the number of active properties increased
On a geographical basis, net sales in the United States increased
On a product category basis, net sales of figures were flat at
On a product brand basis, Pop! branded products grew
The tables below show the breakdown of net sales on a geographical, product category and branded product basis (in thousands):
Three Months Ended December 31, |
|
Period Over Period Change |
||||||||||
2020 |
|
2019 |
|
Dollar |
|
Percentage |
||||||
| Net sales by geography: | ||||||||||||
| United States | $ |
171,475 |
$ |
144,932 |
$ |
26,543 |
|
18.3 |
% |
|||
| Europe |
|
40,320 |
|
52,759 |
|
(12,439 |
) |
(23.6 |
)% |
|||
| Other International |
|
14,714 |
|
15,860 |
|
(1,146 |
) |
(7.2 |
)% |
|||
| Total net sales | $ |
226,509 |
$ |
213,551 |
$ |
12,958 |
|
6.1 |
% |
|||
Three Months Ended December 31, |
|
Period Over Period Change |
||||||||||
2020 |
|
2019 |
|
Dollar |
|
Percentage |
||||||
| Net sales by product category: | ||||||||||||
| Figures | $ |
170,227 |
$ |
170,204 |
$ |
23 |
|
— |
|
|||
| Other |
|
56,282 |
|
43,347 |
|
12,935 |
|
29.8 |
% |
|||
| Total net sales | $ |
226,509 |
$ |
213,551 |
$ |
12,958 |
|
6.1 |
% |
|||
Three Months Ended December 31, |
|
Period Over Period Change |
||||||||||
2020 |
|
2019 |
|
Dollar |
|
Percentage |
||||||
| Net sales by product brand: | ||||||||||||
| Pop! Branded Products | $ |
169,390 |
$ |
168,266 |
$ |
1,124 |
|
0.7 |
% |
|||
| Loungefly Branded Products |
|
31,619 |
|
20,951 |
|
10,668 |
|
50.9 |
% |
|||
| Other |
|
25,500 |
|
24,334 |
|
1,166 |
|
4.8 |
% |
|||
| Total net sales | $ |
226,509 |
$ |
213,551 |
$ |
12,958 |
|
6.1 |
% |
|||
Gross margin1 in the fourth quarter of 2020 increased 800 basis points to
SG&A expenses decreased
Net income in the fourth quarter of 2020 was
Balance Sheet Highlights
Total liquidity3 as of December 31, 2020 totaled
As of December 31, 2020, total debt was
Inventories at year-end totaled
Outlook
In 2021, the Company expects the following full year results:
-
Net sales growth of
25% to30% ; -
Adjusted EBITDA margin2 of
13.5% to14.0% ; -
Adjusted Net Income2 of
$44 million to$51 million , based on a blended tax rate of25% ; and -
Adjusted Earnings per Diluted Share2 of
$0.84 per share to$0.96 per share, based on estimated adjusted average diluted shares outstanding of 52.5 million for the full year.
For the first quarter of 2021, the Company anticipates net sales will increase approximately
“We feel confident about the trajectory of the business and believe we are well-positioned from a strategic, operational and financial perspective," said Jennifer Fall Jung, CFO. "We expect to continue investing for growth in 2021 while also driving strong Adjusted EBITDA margins and improvement on the bottom line.”
1Gross margin is calculated as net sales less cost of sales (exclusive of depreciation and amortization) as a percentage of net sales. |
2Adjusted Net Income, Adjusted Earnings per Diluted Share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. For a reconciliation of historical Adjusted Net Income, Adjusted Earnings per Diluted Share and Adjusted EBITDA to the most directly comparable U.S. GAAP financial measures, please refer to the “Non-GAAP Financial Measures” section of this press release. A reconciliation of Adjusted Net Income, Adjusted Earnings per Diluted Share and Adjusted EBITDA margin outlook to the corresponding GAAP measure on a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to certain items. However, in 2021 the Company expects equity-based compensation of approximately |
3Total liquidity is calculated as cash and cash equivalents plus availability under the Company's |
Conference Call and Webcast
The Company will host a conference call at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today, March 11, 2021, to further discuss its fourth quarter and fiscal year results. A live webcast and replay of the event will be available on the Investor Relations section on the Company’s website at investor.funko.com. The replay of the webcast will be available for one year.
About Funko
Headquartered in Everett, Washington, Funko is a leading pop culture consumer products company. Funko designs, sources and distributes licensed pop culture products across multiple categories, including vinyl figures, action toys, plush, apparel, housewares and accessories for consumers who seek tangible ways to connect with their favorite pop culture brands and characters. Learn more at www.funko.com, and follow us on Twitter (@OriginalFunko) and Instagram (@OriginalFunko).
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding our anticipated financial results, the underlying trends in our business, the anticipated impact of COVID-19 on our business, our potential for growth, our strategic growth priorities, our expected liquidity and our strategy. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: risks related to the impact of COVID-19 on our business, financial results and financial condition; our ability to execute our business strategy; our ability to maintain and realize the full value of our license agreements; changes in the retail industry and markets for our consumer products; our ability to maintain our relationships with retail customers and distributors; our ability to compete effectively; fluctuations in our gross margin; our dependence on content development and creation by third parties; the ongoing level of popularity of our products with consumers; our ability to manage our inventories; our ability to develop and introduce products in a timely and cost-effective manner; our ability to obtain, maintain and protect our intellectual property rights or those of our licensors; potential violations of the intellectual property rights of others; risks associated with counterfeit versions of our products; our ability to attract and retain qualified employees and maintain our corporate culture; our use of third-party manufacturing; risks associated with our international operations; changes in effective tax rates or tax law; foreign currency exchange rate exposure; the possibility or existence of global and regional economic downturns; our dependence on vendors and outsourcers; risks relating to government regulation; risks relating to litigation, including products liability claims and securities class action litigation; any failure to successfully integrate or realize the anticipated benefits of acquisitions or investments; reputational risk resulting from our e-commerce business and social media presence; risks relating to our indebtedness and our ability to secure additional financing; the potential for our electronic data or the electronic data of our customers to be compromised; the influence of our significant stockholder, ACON, and the possibility that ACON’s interests may conflict with the interests of our other stockholders; risks relating to our organizational structure; volatility in the price of our Class A common stock; and risks associated with our internal control over financial reporting. These and other important factors discussed under the caption “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2020 and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.
Funko, Inc. and Subsidiaries |
||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||
(Unaudited) |
||||||||||||||
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
| (in thousands, except per share data) | ||||||||||||||
| Net sales | $ |
226,509 |
|
$ |
213,551 |
|
$ |
652,537 |
$ |
795,122 |
|
|||
| Cost of sales (exclusive of depreciation and amortization shown separately below) |
|
142,289 |
|
|
151,125 |
|
|
403,392 |
|
512,580 |
|
|||
| Selling, general, and administrative expenses |
|
53,644 |
|
|
57,264 |
|
|
181,234 |
|
193,803 |
|
|||
| Depreciation and amortization |
|
10,421 |
|
|
10,999 |
|
|
44,368 |
|
42,126 |
|
|||
| Total operating expenses |
|
206,354 |
|
|
219,388 |
|
|
628,994 |
|
748,509 |
|
|||
| Income (loss) from operations |
|
20,155 |
|
|
(5,837 |
) |
|
23,543 |
|
46,613 |
|
|||
| Interest expense, net |
|
2,491 |
|
|
2,887 |
|
|
10,712 |
|
14,342 |
|
|||
| Other (income) expense, net |
|
(407 |
) |
|
(448 |
) |
|
1,043 |
|
(25 |
) |
|||
| Income (loss) before income taxes |
|
18,071 |
|
|
(8,276 |
) |
|
11,788 |
|
32,296 |
|
|||
| Income tax expense (benefit) |
|
3,164 |
|
|
(1,988 |
) |
|
2,025 |
|
4,476 |
|
|||
| Net income (loss) |
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