Funko, Inc.

Hello everyone and welcome to the Funco Reports second quarter 2022 financial results. My name is Emily and I will be moderating today's call. At the end of the presentation, you will have the opportunity to ask a question by pressing start followed by the number one on your telephone keypads. I will now turn the call over to our host, Ben Avenia-Tapper. Please go ahead.

Thank you and good afternoon. With us on the call today are Andrew Perlmutter, Chief Executive Officer, and Jennifer Fall-Young, Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this conference call, management will discuss forecasts, targets, and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during the call, important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release. In addition, we will refer to non-GAAP financial measures during the discussion. Reconciliations to their most directly comparable U.S. GAAP financial measures and supplemental financial information can be found in the earnings press release in 8K that we released earlier today. All of these items plus a visual presentation that investors can consult to follow along with this discussion are available on our investor relations website, investor.funco.com. I will now turn the call over to Andrew.

Good afternoon, and thank you for joining us today. I'm excited to report record second quarter net sales of $316 million, a 34% increase over the prior year, capping off the strongest first half net sales in our company's history. Robust demand for our compelling product lineups led to another quarter of broad-based strength across brand categories, geographies, and channels. The strength of Funco's pop culture platform continues to shine in our second quarter performance. Net sales for all three of our reported brand categories grew double digits, with Loungefly more than doubling for a second quarter in a row, reaching $70 million in net sales for the quarter and $120 million through the first half of the year. Our international business also had the best quarter ever, with Europe growing 22% to $63 million. In June, we announced the acquisition of Mondo, a high-end collectibles company best known for its vinyl records, posters, and other collectibles. In much the same way we've integrated and grown LoungeFly and Funko Games, you can expect us to nurture the unique elements that define the Mondo brand while leveraging Funco's best-in-class resources within the collectible space to elevate that brand to the next level of growth. Finally, demand for in-person events has seen a dramatic recovery, and we're thrilled to reconnect with our loyal, passionate fans at live events throughout the quarter. Sales exceeded expectations at all our tentpole events in Q2, culminating in San Diego Comic-Con two weeks ago, where we recorded our largest day of direct-to-consumer sales ever. Of course, these events are more than just about direct sales. We've been able to expand the fan engagement we've become known for to a level that eclipses anything we've done before. Demand is through the roof. Enthusiasm for our brand is the highest we've ever seen and fans are thrilled to get back to celebrating with us. We continue to monitor many factors impacting the global supply chain and macroeconomic climate, but we remain cautiously optimistic about the second half of the year. On the strength of our first half, we are raising our net sales outlook for the full year by 25 million at the midpoint, reaffirming our implied second half guidance. I'll now review some of the highlights from the quarter for each of our brand categories. Within the core collectible brands category, continual innovation across the category is what drives the amazing loyalty from our fans. Our flagship pop brand generated double digit growth as exciting evergreen activations like Pop Diecast and Pop Deluxe supplemented a robust content slate across multimedia formats. Complementing POP and contributing to the category's 21% year-over-year net sales increase, our emerging brands, including Soda and Popsies, all delivered strong incremental growth, each with additional expansion opportunities on the horizon. While still in its early integration, Mondo will sit within the collectible brands category. We expect Mondo's high-end, limited-release business model and diverse range of high-quality collectibles to be an excellent addition to our current portfolio of brands, tapping into a new segment of attractive market opportunity for Funko. Turning to our toys and games brands, one of our key areas of revenue diversification, Funko Games, continues to drive category growth with a growing catalog of legacy titles as well as multiple exciting launches. Chief among these new releases during the quarter was the Ted Lasso Party Games, our best-selling launch to date. Ted Lasso provides an exciting blueprint to leverage universally loved content to reach a broad target audience. On the collectible gaming side, we'll soon expand our collectible gaming portfolio with the recently announced Disney Kingdomania. Designed for ages six and up, Kingdomania introduces a collectible gaming platform built on some of the most popular Disney and Pixar characters. Further, This game targets a slightly different audience from Battleworld, which remains a top five game for Funko. Within our toy brands, Five Nights at Freddy's, again, made our top ten best-selling products across all of Funko. Loungefly had another amazing quarter as the brand continues to resonate with a large and growing community of devoted fans while serving as the flagship of our revenue diversification strategy. We've leaned into our deep connections within the collector community as the brand continues to expand its loyal fan base. This is particularly visible on loungefly.com where we've seen a significant uptick in traffic as fans go directly to the source for their favorite brand. The brand's net sales have grown tenfold in the five years since we acquired it, and we continue to see tremendous upside. Finally, Turning to our digital pop NFT business, participation and enthusiasm continue to grow as we increase drop size and frequency. Our recent DC Comics NFT drop saw nearly a half a million fans in queue, while the Scooby Doo and My Little Pony drops both sold out in under 30 minutes. We're excited to continue exploring this new world of digital collectibles with our fans and many opportunities it presents. As I mentioned earlier, Our international business delivered record net sales in the second quarter with particularly strong results from Europe. Strength was broad-based across the region, driven by improvements in operating efficiency and continued strategic targeting of pan-European retailers. Importantly, we generated double-digit growth in net sales across our brand categories in the region, and we continue to expand our brand portfolio internationally to match the breadth domestically. At Funco, we like to say we are our own largest customer, reflecting the growth we've seen in our direct-to-consumer business. Despite ongoing supply chain headwinds and the relocation of our distribution center from Everett to Buckeye, Arizona during the quarter, we maintain strong double-digit growth in net sales. We continue to drive higher average order value and conversion rates through additional payment options, improved site operations, and new merchandising tools. In summary, we maintained the first quarter momentum and delivered strong results in Q2 while reinforcing Funco's foundation for growth. While we're thrilled with the first half, we are mindful of the uncertainties that remain in the macroeconomic climate broadly. As some of these factors, including inflation, could impact consumer spending or further disrupt supply chains, we are monitoring the environment closely. While we are confident in our ability to deliver sustainable long-term growth and manage through disruption, significant deterioration in the macroeconomic climate would impact our operations. Acknowledging these factors and on the strength of the first half, we now expect fiscal 2022 revenue between $1.3 and $1.35 billion and adjusted earnings per share of $1.88 to $1.99. Moving into the second half, we will continue to execute against our key strategic growth initiatives, innovate within the core, diversify our revenue base, grow our direct-to-consumer business and expand international operations. We look forward to providing updates as the year unfolds. Before I close, I would like to announce our investor event, which we are holding on September 13th in New York. We will be sharing some additional depth on our businesses and providing details around our three-year roadmap to sustain double-digit growth and margin expansion. We look forward to seeing many of you there. I'd like to thank our incredible fans, partners, and employees for their continued support and belief in the Funko brand. With that, I'll turn the call over to Jen to take you through the financials.