Funko, Inc.

Good afternoon and welcome to Funco's conference call to discuss financial results for the first quarter of 2023. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorisation from the company. As a reminder, this call is being recorded. I will now turn the call over to Ben Abinia-Tapper, Director of Investor Relations, to get started. Please proceed.

Thank you and good afternoon. With us on the call today are Brian Mariotti, Chief Executive Officer, and Steve Knave, Chief Financial Officer and Chief Operating 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.fungo.com.

I will now turn the call over to Brian. Good afternoon, and thank you for joining us today. It's been a productive quarter at Funko, and we're excited to update you on all the ongoing progress we have made. While our priority continues to be improving our operations, we haven't lost sight of all the opportunities we have to continue to grow the brand. I'm pleased to report that we are ahead of schedule with respect to cost reductions and operational improvements, as we've made remarkable strides across the business. Top line results came in at the high end of our guidance, and our strong performance on the operating initiatives drove our Q1 adjusted EBITDA outperformance by more than $30 million. Steve will provide additional details on the progress we've made on all of our operating initiatives shortly. Enthusiasm for the brand remains high despite a challenging retail climate. Between our exceptional direct-to-consumer growth, the strong performance of our recent product launches, and the early success of our newest commercial partnership with Fanatecs, we remain confident in the ongoing passion and loyalty of our fans. I'll start with D2C, which grew 61% year over year and now represents approximately 17% of net sales. Our D2C growth continues to eclipse the e-commerce industry's single-digit growth rate and highlights the power of our brand. This channel is important for several reasons. First, the strength of our D2C business represents a very strong indication of our fans' continued enthusiasm for the brand. In the channel which we control inventory levels and product newness, demand is at an all-time high. Our data suggests that among avid collectors, many purchases that may have occurred at a retail partner in the past are migrating to Funko.com. Our D2T performance also highlights the strength and effectiveness of our new website, Lost in Q1. During the quarter, we transitioned to a new e-commerce platform, Salesforce, which allowed us to upgrade the front and back end of our website, including our order management system that now provides for a more seamless customer experience. We have now improved functionality, better analytics, and a tighter integration across our sites. In turn, this has more than doubled our conversion rates from search, increased our cross-selling between Funko and LoungeFly.com more than sevenfold, and driven a double-digit increase in order values amongst other metrics. Further, our D2C channel has always been an important avenue for monetizing our convention presence, and the new site is helping us capture the strong demand we're seeing from our fans. At WonderCon, our first convention of 2023, our new site helped us more than double e-commerce revenue associated with the event compared to last year. And it's not just our e-commerce that's outperforming. In our two brick and mortar stores in Hollywood and in Everett, net sales grew 41% year over year, driven by nearly 50% increase in traffic, While we can't make up for all the lost retail opportunity, we are continuing to see extraordinary growth in the channels we do control. Beyond the strength of D2C, there are several other indications of the enduring enthusiasm of our fans. In Q1, we launched a new line of miniature collectibles called Biddy Pop, and it's been one of the most successful product launches in our history. This product not only resonates with our core collector, but taps the broader miniature collectibles trend to bring new fans into the brand. The convenient size, product quality, and diversity in licensing partners gives us the confidence in the future for this promising new form factor. The positive reception to Biddy Pop reinforces our confidence in upcoming programs this year, with one of the most exciting being the online launch of Pop Yourself. This product, which allows you to create your very own fully customized pop, is already the number one product in both of our brick-and-mortar stores, and it's easily our most anticipated launch to date. Pop Yourself not only resonates with our core fans, but also introduces a new customer to Funko through the lens of gift-giving. In addition to our Funko.com launch, we will be introducing a new broadened assortment of personalization elements and accessories, including seasonal elements, to personalize your pop throughout the year and limited edition opportunities tied to the relevant pop culture trends and events. We expect to bring Pop Yourself to a much larger audience later this year, and we're only getting started on maximizing this opportunity. Finally, I'm thrilled to be able to share our newest strategic partnership. In Q1, we went live on a key partnership with Fanatics. This is a major step for Funko as we prioritize and activate against the sports side of pop culture. We've already seen success with the launch of our limited edition Kansas City Chiefs Super Bowl Gold 4-pack and currently have Funko and LoungeSide products on Fanatics.com. We look forward to the expansion of our partnership with upcoming NFL and NBA seasons. Fanatics is the undisputed leader in the critical sports category, and we're excited to continue to deepen this relationship as they expand their collectibles footprint. As we detailed, 2023 is a year for us to focus on operations. We have made great progress on all fronts. While we have made the deliberate decision to scale back and push out some longer-term opportunities, we have continued to deliver the uniquely Funko products and experiences that have been so fundamental to our long history of success. While Funko's success, built on fanthusiasm, has shown a remarkable resilience to the volatility in the broader market, we are not immune to external factors in the short term. Based on what we're hearing from our retail partners, we are taking a more cautious approach to the second half of this year, which is reflected in our updated full-year top-line guidance. While we manage through the macro uncertainty, we believe we are off to a great start for the year. We are making excellent progress on the operations front and have multiple launches and a partnership we believe will be instrumental in driving growth well into the future. As always, we remain deeply focused on delivering long-term value creation for the company and our shareholders. Now I'll turn it over to Steve to provide more details on the financial and operating results of the quarter. Thanks, Brian.