Funko Reports Third Quarter 2021 Sales of $267.7 Million, Up 40.0%

Rhea-AI Summary

Funko reported a robust third quarter for 2021, with net sales increasing 40.0% year-over-year to $267.7 million. The net income grew 17.8% to $18.4 million, but margins declined slightly due to rising freight costs. The company experienced strong performance across all geographies, particularly in Europe, where sales rose 65.7%. Direct-to-consumer sales surged 88%, marking a significant shift in sales strategy. Looking ahead, Funko forecasts net sales between $950 million and $975 million for the year.

Positive

• Net sales rose 40.0% y/y to $267.7 million.
• Net income increased 17.8% y/y to $18.4 million.
• Direct-to-consumer sales surged 88%, making up 11% of total sales.
• Total liquidity rose 80.8% y/y to $193.2 million.
• Forecasted full-year net sales between $950 million and $975 million.

Negative

• Net income margin declined 130 basis points y/y to 6.9%.
• Adjusted EBITDA margin dropped 390 basis points y/y to 15.0%.
• Gross margin decreased 260 basis points to 36.0% due to higher freight costs.
• Inventories increased 94.0% y/y, indicating supply chain challenges.

Record Quarter Results Driven by Broad-Based Strength Across Products, Channels, and Geographies

EVERETT, Wash.--(BUSINESS WIRE)-- Funko, Inc. ("Funko,” or the “Company”) (Nasdaq: FNKO), a leading pop culture consumer products company, today reported its consolidated financial results for the third quarter ended September 30, 2021.

Third Quarter 2021 Financial Highlights

• Net sales increased 40.0% y/y to $267.7 million
• Net income increased 17.8% y/y to $18.4 million
• Net income margin declined 130 basis points y/y to 6.9%
• Adjusted EBITDA² increased 11.0% y/y to $40.2 million
• Adjusted EBITDA margin² declined 390 basis points y/y to 15.0%
• Cash flow from operations of $78.8 million for the nine months ended September 30, 2021
• Total liquidity³ increased 80.8% y/y to $193.2 million

Third Quarter 2021 and Recent Operating Highlights

• Exceeded Q3 expectations and raised full year guidance despite unprecedented supply chain headwinds.
• All-time high demand levels driving broad-based strength in all geographies - U.S. net sales increased 35.7% y/y to $191.3 million, Europe net sales increased 65.7% y/y to $58.9 million, and Other International net sales rose 19.1% y/y to $17.6 million.
• Pop! branded products grew 41.3% on strong evergreen product sales (evergreen properties comprised 66% of total net sales) and a robust calendar of new content.
• Net sales of Other (non-figure) products increased 33.8%, led by Loungefly branded products which grew 36.3%.
• Direct-to-consumer sales increased 88% y/y and now comprise 11% of net sales, driven by sustained traffic growth and increased e-commerce efficiency.
• Developed three brand new events (Alice In Wonderland Black Light Event; FunKon; Batman Day), with record single-day direct-to-consumer net sales.
• Launched multiple Digital Pop! NFT Collections, all of which sold out in minutes.
• In partnership with TokenWave, Funko officially opened our new digital marketplace, Droppp.io. Droppp.io creates a more accessible, user-friendly interface as we build out our digital products business.

"We are thrilled to report another exceptionally strong quarter, with broad-based strength across our product categories, geographies and channels," said Andrew Perlmutter, President. "This performance caps off a tremendous first nine months of the year for Funko and demonstrates our ability to proactively manage through challenging supply chain dynamics and inflation while driving profitable growth. It is also a reflection of our extremely loyal fan base."

Brian Mariotti, Chief Executive Officer added, "As we look to the balance of this fiscal year, we are confident in our ability to execute effectively against our core operating strategies to drive continued growth while continuing to adapt quickly to any ongoing supply chain challenges. As a credit to our brand, we are continuing to expand our product categories and fan base, increasing fan engagement and bringing innovative new products to market."

Third Quarter 2021 Financial Results

Net sales increased 40.0% to $267.7 million in the third quarter of 2021 compared to $191.2 million in the third quarter of 2020. The year-over-year increase reflects broad-based strength across geographies, products and channels.

In the third quarter of 2021, the number of active properties increased 12.7% to 806 from 715 in the third quarter of 2020 and net sales per active property increased 24.2%.

On a geographical basis, net sales in the United States increased 35.7% to $191.3 million and net sales in Europe increased 65.7% to $58.9 million. Net sales in other international regions increased 19.1% to $17.6 million, with all geographies reporting growth.

On a product category basis, net sales of Figures grew 42.0% to $206.0 million, reflecting strong recovery in the Specialty retailer channel as well as strength in DTC and third-party e-commerce. Net sales of Other (non-figure) products increased 33.8% to $61.8 million, reflecting strength in Loungefly branded products as well as games and plush.

On a brand basis, Pop! branded products grew 41.3% to $193.1 million, reflecting strong growth in the U.S. and Europe. Loungefly branded products grew 36.3% to $36.8 million. Both brands generated strong growth in the Specialty retailer channel, as well as strength in DTC and third-party e-commerce. Net sales of other branded products increased 37.3% to $37.8 million driven by board games, plush and action figures.

The tables below show the breakdown of net sales on a geographical, product category and branded product basis (in thousands):

	Three Months Ended September 30,				Period Over Period Change
		2021		2020	Dollar		Percentage
Net sales by geography:
United States	$	191,289	$	140,935	$	50,354	35.7	%
Europe		58,873		35,538		23,335	65.7	%
Other International		17,571		14,756		2,815	19.1	%
Total net sales	$	267,733	$	191,229	$	76,504	40.0	%
	Three Months Ended September 30,				Period Over Period Change
		2021		2020	Dollar		Percentage
Net sales by product:
Figures	$	205,963		145,049	$	60,914	42.0	%
Other		61,770		46,180		15,590	33.8	%
Total net sales	$	267,733		191,229	$	76,504	40.0	%
	Three Months Ended September 30,				Period Over Period Change
		2021		2020	Dollar		Percentage
Pop! Branded Products	$	193,112	$	136,694	$	56,418	41.3	%
Loungefly Branded Products		36,794		26,990		9,804	36.3	%
Other		37,827		27,545		10,282	37.3	%
Total net sales	$	267,733	$	191,229	$	76,504	40.0	%

Gross margin¹ in the third quarter of 2021 decreased 260 basis points to 36.0% compared to 38.6% in the third quarter of 2020, reflecting higher freight expenses due to ongoing supply chain disruptions.

SG&A expenses increased 45.5% to $59.9 million or 22.4% of net sales in the third quarter of 2021 compared to $41.2 million or 21.5% of net sales in the third quarter of 2020 as we continued to invest in the long-term growth of the business. SG&A expenses for the third quarter of 2021 were lower than expected, as we proactively postponed some marketing spend to Q4 to align with product availability.

Net income in the third quarter of 2021 was $18.4 million and net income margin¹ was 6.9%, compared to net income of $15.6 million and net income margin¹ of 8.2% in the third quarter of 2020. Adjusted Net Income² (non-GAAP) was $21.1 million in the third quarter of 2021 versus Adjusted Net Income² of $16.1 million in the third quarter of 2020. Adjusted EBITDA² in the third quarter of 2021 was $40.2 million and Adjusted EBITDA margin² was 15.0%, compared to $36.2 million and 18.9%, respectively, in the third quarter of 2020. A reconciliation of these non-GAAP measures to GAAP is provided below.

Balance Sheet Highlights

Total liquidity³ as of September 30, 2021 totaled $193.2 million, an increase of 80.8% compared to September 30, 2020. Total liquidity was comprised of cash and cash equivalents of $93.2 million and total revolver availability of $100.0 million.

As of September 30, 2021, total debt was $177.6 million, a decrease of 14.7% compared to a year ago. Total debt includes the amount outstanding under the Company's term loan facility, net of unamortized discounts.

Inventories at the end of the third quarter of 2021 totaled $140.8 million, up 94.0% compared to a year ago as total transit times have increased significantly compared to pre-pandemic levels, resulting in a percent of inventory in-transit at quarter end of 61%.

Outlook

In 2021, the Company expects the following full-year results:

• Net sales of $950 million to $975 million;
• Adjusted EBITDA margin² of 14.0% to 14.5%;
• Adjusted Net Income² of $64.4 million to $70.4 million, based on a blended tax rate of 25%; and
• Adjusted Earnings per Diluted Share² of $1.20 to $1.31, based on estimated adjusted average diluted shares outstanding of 53.9 million for the full year.

¹Gross margin is calculated as net sales less cost of sales (exclusive of depreciation and amortization) as a percentage of net sales. Net Income (Loss) margin is calculated as net income as a percentage of net sales.

²Adjusted Net Income (Loss), Adjusted Earnings (Loss) per Diluted Share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. For a reconciliation of historical Adjusted Net Income (Loss), Adjusted Earnings (Loss) 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 (Loss), Adjusted Earnings (Loss) 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 $14 million, depreciation and amortization of approximately $42 million and interest expense of approximately $8 million, each of which is a reconciling item to Net Income. See "Non-GAAP Financial Measures" for more information.

³Total liquidity is calculated as cash and cash equivalents plus availability under the Company's $100 million revolving credit facility.

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, November 4, 2021, to further discuss its third quarter results and business outlook. 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, including supply chain constraints, inflation and other macroeconomic trends, marketing spend, our potential for growth, and our strategic growth priorities. 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 quarterly report on Form 10-Q for the quarter ended September 30, 2021 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 September 30,					Nine Months Ended September 30,
		2021			2020		2021		2020
	(In thousands, except per share data)
Net sales	$	267,733		$	191,229	$	693,020	$	426,028
Cost of sales (exclusive of depreciation and amortization shown separately below)		171,320			117,504		425,929		261,103
Selling, general, and administrative expenses		59,890			41,167		166,032		127,590
Depreciation and amortization		10,328			11,887		30,778		33,947
Total operating expenses		241,538			170,558		622,739		422,640
Income from operations		26,195			20,671		70,281		3,388
Interest expense, net		1,711			2,875		5,921		8,221
Loss on debt extinguishment		675			-		675		-
Other (income) expense, net		(505	)		779		466		1,450
Income (loss) before income taxes		24,314			17,017		63,219		(6,283	)
Income tax expense (benefit)		5,939			1,420		12,814		(1,139	)
Net income (loss)		18,375			15,597		50,405		(5,144	)
Less: net income (loss) attributable to non-controlling interests		6,474			5,801		18,177		(229	)
Net income (loss) attributable to Funko, Inc.	$	11,901		$	9,796	$	32,228	$	(4,915	)
Earnings (loss) per share of Class A common stock:
Basic	$	0.30		$	0.28	$	0.85	$	(0.14	)
Diluted	$	0.28		$	0.27	$	0.80	$	(0.14	)
Weighted average shares of Class A common stock outstanding:
Basic		39,448			35,483		37,856		35,155
Diluted		41,796			35,904		40,079		35,155

Funko, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
	September 30, 2021		December 31, 2020
	(In thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	93,245	$	52,255
Accounts receivable, net		153,655		131,837
Inventory		140,834		59,773
Prepaid expenses and other current assets		23,790		15,486
Total current assets		411,524		259,351
Property and equipment, net		54,831		56,141
Operating lease right-of-use assets		52,831		58,079
Goodwill		126,612		125,061
Intangible assets, net		193,666		205,541
Deferred tax asset		70,339		54,682
Other assets		5,104		4,735
Total assets	$	914,907	$	763,590
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt, net of unamortized discount	$	17,378	$	10,758
Current portion of operating lease liabilities		15,187		13,840
Accounts payable		63,936		29,199
Income taxes payable		10,544		425
Accrued royalties		47,611		40,525
Accrued expenses and other current liabilities		89,019		43,949
Total current liabilities		243,675		138,696
Long-term debt, net of unamortized discount		160,172		180,012
Operating lease liabilities, net of current portion		50,495		57,512
Deferred tax liability		769		780
Liabilities under tax receivable agreement, net of current portion		80,787		60,297
Other long-term liabilities		5,135		3,848
Commitments and Contingencies
Stockholders’ equity:
Class A common stock, par value $0.0001 per share, 200,000 shares authorized; 39,749 and 35,657 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		4		4
Class B common stock, par value $0.0001 per share, 50,000 shares authorized; 10,856 and 14,040 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1		1
Additional paid-in-capital		245,859		216,141
Accumulated other comprehensive income		1,114		1,718
Retained earnings		56,631		24,403
Total stockholders’ equity attributable to Funko, Inc.		303,609		242,267
Non-controlling interests		70,265		80,178
Total stockholders’ equity		373,874		322,445
Total liabilities and stockholders’ equity	$	914,907	$	763,590

Funko, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
	Nine Months Ended September 30,
		2021			2020
	(In thousands)
Operating Activities
Net income (loss)	$	50,405		$	(5,144	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and other		30,356			35,929
Equity-based compensation		9,869			7,494
Amortization of debt issuance costs and debt discounts		893			1,006
Loss on debt extinguishment		675			-
Deferred tax expense		994			1,237
Other		(93	)		1,715
Changes in operating assets and liabilities:
Accounts receivable, net		(22,223	)		13,507
Inventory		(81,770	)		(11,115	)
Prepaid expenses and other assets		(1,582	)		15,163
Accounts payable		33,933			(1,595	)
Income taxes payable		10,135			(465	)
Accrued royalties		7,086			(3,045	)
Accrued expenses and other liabilities		40,114			5,658
Net cash provided by operating activities		78,792			60,345
Investing Activities
Purchases of property and equipment		(17,434	)		(14,704	)
Acquisitions of businesses and related intangible assets, net of cash		199			-
Other		84			-
Net cash used in investing activities		(17,151	)		(14,704	)
Financing Activities
Borrowings on line of credit		-			28,267
Payments on line of credit		-			(55,103	)
Debt issuance costs		(1,055	)		(569	)
Issuance of long-term debt		180,000			-
Payments of long-term debt		(193,875	)		(8,814	)
Contributions from continuing equity owners		-			177
Distributions to continuing equity owners		(9,284	)		(3,496	)
Payments under tax receivable agreement		(6	)		(165	)
Proceeds from exercise of equity-based options		3,726			41
Net cash used in financing activities		(20,494	)		(39,662	)
Effect of exchange rates on cash and cash equivalents		(157	)		687
Net increase in cash and cash equivalents		40,990			6,666
Cash and cash equivalents at beginning of period		52,255			25,229
Cash and cash equivalents at end of period	$	93,245		$	31,895

Funko, Inc. and Subsidiaries
Non-GAAP Financial Measures
(Unaudited)

EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Diluted Share (collectively the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income (loss), earnings (loss) per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net income (loss) before interest expense, net, income tax expense (benefit), depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, certain severance, relocation and related costs, loss on debt extinguishment, foreign currency transaction gains and losses and other unusual or one-time items. We define Adjusted Net Income (Loss) as net income (loss) attributable to Funko, Inc. adjusted for the reallocation of income (loss) attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, non-cash charges related to equity-based compensation programs, certain severance, relocation and related costs, loss on debt extinguishment, foreign currency transaction gains and losses and other unusual or one-time items, and the income tax (expense) benefit effect of these adjustments. We define Adjusted Earnings (Loss) per Diluted Share as Adjusted Net Income (Loss) divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any. We caution investors that amounts presented in accordance with our definitions of the Non-GAAP Financial Measures may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate the Non-GAAP Financial Measures in the same manner. We present the Non-GAAP Financial Measures because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

Management uses the Non-GAAP Financial Measures:

• as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• as a consideration to assess incentive compensation for our employees;
• to evaluate the performance and effectiveness of our operational strategies; and
• to evaluate our capacity to expand our business.

By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our unaudited condensed consolidated financial statements included elsewhere in this press release as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
• such measures do not reflect changes in, or cash requirements for, our working capital needs;
• such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
• other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, Non-GAAP Financial Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, the Non-GAAP Financial Measures include adjustments for non-cash charges related to equity-based compensation programs, certain severance, relocation and related costs, loss on debt extinguishment, foreign currency transaction gains and losses and other unusual or one-time items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. Each of the normal recurring adjustments and other adjustments described herein and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net income (loss), for the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020
	(In thousands, except per share data)
Net income (loss) attributable to Funko, Inc.	$	11,901		$	9,796		$	32,228		$	(4,915	)
Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1)		6,474			5,801			18,177			(229	)
Equity-based compensation (2)		3,658			2,456			9,869			7,494
Certain severance, relocation and related costs (3)		-			1,178			81			2,184
Loss on debt extinguishment (4)		675			-			675			-
Foreign currency transaction (gain) loss (5)		(505	)		778			466			1,449
Income tax (expense) benefit (6)		(1,097	)		(3,937	)		(5,764	)		(2,350	)
Adjusted net income (loss)	$	21,106		$	16,072		$	55,732		$	3,633
Adjusted net income margin (7)		7.9	%		8.4	%		8.0	%		0.9	%
Weighted-average shares of Class A common stock outstanding-basic		39,448			35,483			37,856			35,155
Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock		14,634			16,047			15,882			15,770
Adjusted weighted-average shares of Class A stock outstanding - diluted		54,082			51,530			53,738			50,925
Adjusted earnings (loss) per diluted share	$	0.39		$	0.31		$	1.04		$	0.07

	Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020
	(amounts in thousands)
Net income (loss)	$	18,375		$	15,597		$	50,405		$	(5,144	)
Interest expense, net		1,711			2,875			5,921			8,221
Income tax expense (benefit)		5,939			1,420			12,814			(1,139	)
Depreciation and amortization		10,328			11,887			30,778			33,947
EBITDA	$	36,353		$	31,779		$	99,918		$	35,885
Adjustments:
Equity-based compensation (2)		3,658			2,456			9,869			7,494
Certain severance, relocation and related costs (3)		-			1,178			81			2,184
Loss on debt extinguishment		675			-			675			-
Foreign currency transaction (gain) loss (4)		(505	)		778			466			1,449
Adjusted EBITDA	$	40,181		$	36,191		$	111,009		$	47,012
Adjusted EBITDA margin (8)		15.0	%		18.9	%		16.0	%		11.0	%

(1)		Represents the reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock in periods in which income (loss) was attributable to non-controlling interests.
(2)		Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on the timing of awards.
(3)		For the nine months ended September 30, 2021, represents severance, relocation and related costs associated with residual payment of global workforce reduction implemented in response to the COVID-19 pandemic. For the three and nine months ended September 30, 2020, represents severance, relocation and related costs associated with the consolidation of our warehouse facilities in the United Kingdom and charges related to the global workforce reduction implemented in response to the COVID-19 pandemic.
(4)		Represents write-off of unamortized debt financing fees for the three and nine months ended September 30, 2021.
(5)		Represents both unrealized and realized foreign currency gains and losses on transactions denominated other than in U.S. dollars, including derivative gains and losses on foreign currency forward exchange contracts.
(6)		Represents the income tax expense effect of the above adjustments. This adjustment uses an effective tax rate of 25% for all periods presented.
(7)		Adjusted net income (loss) margin is calculated as Adjusted net income (loss) as a percentage of net sales.
(8)		Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006263/en/

Investor Relations:

investorrelations@funko.com

Media:

pr@funko.com

Source: Funko, Inc.

FAQ

What were Funko's Q3 2021 net sales results?

Funko's Q3 2021 net sales increased 40.0% year-over-year to $267.7 million.

How did Funko's net income perform in Q3 2021?

Funko's net income for Q3 2021 rose 17.8% year-over-year to $18.4 million.

What is Funko's outlook for full-year 2021?

Funko expects full-year net sales to range between $950 million and $975 million.

Did Funko experience any supply chain issues in Q3 2021?

Yes, Funko faced supply chain headwinds, impacting freight costs and inventory levels.

What is the status of Funko's liquidity?

As of September 30, 2021, Funko's total liquidity increased 80.8% to $193.2 million.