Funko, Inc.

Good afternoon, and welcome to Funko's 2024 Fourth Quarter Financial Results Conference Call. At this time, all participants are in 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 authorization from the company. As a reminder, this call is being recorded. I will now turn the call over to Funko's Director of Investor Relations, Rob Yaffe. Please proceed.

Hello, everyone, and thank you for joining us today to discuss Funko's 2024 fourth quarter financial results. On the call are Cynthia Williams, our chief executive officer, and Yves LePendaven, the company's chief financial officer. This call is being broadcast live at investor.funko.com. A playback will be available for at least one year on the company's website. I want to remind everyone that during the course of this call, management's discussion will include forward-looking information. These statements represent our best judgment as of today about the company's future results and performance. Our actual results are subject to many risks and uncertainties that may differ materially from those stated or implied, including those discussed in our earnings release. Additional information concerning factors that could cause actual results to differ materially is contained in our most recently filed SEC reports. In addition, during this call, we refer to non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Funko's press release announcing its 2024 fourth quarter financial results for the company's reasons for presenting non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today. One item to note. As disclosed in our Q4 press release, following correspondence with the SEC, we no longer adjust our non-GAAP financial measures for one-time costs related to inventory. This change in presentation increases adjusted net loss by $29.3 million and lowers adjusted EBITDA by $39.0 million for the year ended December 31, 2023. I will now turn the call over to Cynthia Williams. Cynthia?

Thanks, Rob. Good afternoon, everyone, and welcome to Funko's 2024 Fourth Quarter Financial Results Conference Call. In 2024, we began laying the foundation for Funko's future. We stabilized net sales at over $1 billion and drove gross profit and adjusted EBITDA growth by more than $100 million. We gained momentum in Q4, delivering $294 million of net sales, which was at the top end of our guidance range and up over 1% year over year, thanks in part to direct-to-consumer growing to 29% of our overall sales. Gross margin reached 42%, and adjusted EBITDA of $26 million exceeded expectations. Eve will provide a deeper look at our financial results shortly. I continue to be proud of our team's ability to exceed expectations and bring fandom to life, and Q4 exemplified this. We saw major wins across our key growth areas, particularly in sports, pop yourself, and biddy pop, where we continue to build momentum. In just the last quarter of 2024, we grew our core collectibles business over 10% and sales outside of the U.S. grew by 23%. This excitement was echoed by our retail and distribution partners who we recently met with at three major global toy fairs in London, Nuremberg, and New York. Their overwhelming enthusiasm for our innovative products reaffirms the strength of our strategy and the opportunities ahead. One strong example was the feedback we received from retailers and media for Bitty City, a Bitty Pop expansion where fans can build the miniature world of their dreams, which we revealed at the New York Toy Fair this past weekend. I'm going to highlight wins in Q4 and couple them with examples of how we're driving results further in Q1. Sports product launches and new licensing agreements in the back half of 2024 opened exciting avenues to engage fans across multiple leagues and teams. Our recent collaboration with the NFL and NBA have already redefined how fans express their fandom, and we are just beginning to tap into the $35 billion sports memorabilia market. Currently, sports represent only 4% of our total revenue, and we see tremendous potential for growth in this category. In Q4, Pop Yourself took center stage, with our expanded NFL partnership allowing fans to customize figures with their favorite team's logos. The energy around this launch was undeniable as we saw a sharp spike in sales for the NFL products throughout the season. Building on this momentum, in Q1 of this year, we launched NBA-themed Pop Yourself customization, leveraging the NBA All-Star Game in February to introduce this experience to a massive audience of basketball fans. This partnership and expansion mark a significant step in bringing millions of new sports enthusiasts into the Funko ecosystem. Capitalizing on fan excitement, we launched items tied to major sporting events In November, following the Los Angeles Dodgers World Series victory, our commemorative release drove strong year-over-year revenue growth. Similarly, right after the Super Bowl, we released the Philadelphia Eagles 2025 Super Bowl Champions 5-pack in partnership with Fanatics, which flew off the virtual shelves. Expanding into collegiate athletics, we launched our first ever name image likeness pop in November featuring USC basketball phenom Juju Watkins. The pre-sale, which included an exclusive Chase variant limited to just 25 signed figures, generated immediate demand and positioned us as an emerging player in the NCAA merchandise space. Looking ahead, we will continue refining our sports fan engagement strategy by selling where the fan is through regional retail capsules. expanding pop yourself into new geographies, and strengthening partnerships, particularly in the NFL and NBA, to drive deeper fan engagement across our product lines. Music remains a critical category for Funko. In 2024, the Doja Cat pop was a top-selling figure in our direct-to-consumer channel. bringing in a new wave of customers and reinforcing the power of artist collaborations. Doja's team approached us with the idea of creating a special edition pop to commemorate her headline performance at Coachella. Similarly, This year, within minutes of her Grammy wins, we launched the Sabrina Carpenter Pop Rocks figure, tapping into the massive enthusiasm surrounding her record-breaking success. Our partnerships with artists continue to grow, reflecting that music icons across genres and generations want to work with us as much as their fans want to express their passion for the artist. In the area of gaming, in November, Mondo launched a pre-sale for Blizzard's World of Warcraft 20th Anniversary soundtrack, timed in conjunction with their celebratory livestream. This $90 collector album was our first Blizzard collaboration and one of Mondo's highest revenue albums of the year. we continue to be excited about the potential of Mondo and its ability to serve the growing community of high-end collectors, gamers, and music enthusiasts alike. Turning to our core fans, we continue to delight them across best-selling pop culture genres. In Q4, anime product sales grew 7% year over year. In fact, One Piece, the world's most popular anime franchise, was the top selling property after our own IP for the full year. Within the entertainment fandom, Wicked Excitement reached fever pitch with the movie release in November. Funko and Loungefly both played a key role in bringing the magic of Oz to our fans. The excitement was further amplified by the social media buzz around Ariana Grande wearing the Loungefly Glinda bag while arriving in London for the premiere. Even without a tentpole movie release, beloved evergreen properties like Harry Potter, Star Wars, and Batman continue to delight core fans. We've seen these evergreen characters work particularly well in our Biddy Pop line, building on the growing miniature collectibles trend. In fact, our Biddy line grew an impressive 83% year over year in Q4. And as noted before, there's real excitement about the world-building extension with Biddy City. At Funko, we believe everyone is a fan of something, and we continue to delight core fans in celebration of blockbuster entertainment releases and beloved evergreen characters like while also expanding into large fandoms like sports, music, and gaming. We are well positioned to serve these fandoms through our industry-leading portfolio of licensed IP and partnerships. Our direct-to-consumer channel enables us to learn more about our fans and how to better serve them. We saw D2C increase to 29% of gross sales, up from 25% in Q4 2023. This channel continues to deliver higher margins and critical consumer insights, helping us refine product offerings and enhance personalizations. Pop Yourself, which is currently available through our direct-to-consumer channel, has been our fastest-growing product line, with year-over-year growth of 110% in Q4 and 185% in all of 2024. This has also been a terrific customer acquisition channel, bringing nearly 800,000 new fans into the Funko ecosystem in 2024 alone, proving personalization is a powerful way to connect with new fans. Our fan loyalty program, Fan Rewards, added 120,000 new members in 2024, bringing total membership to over 280,000. These fun addicts, our most valuable customers, account for 26% of US website sales and spend nearly twice as much as non-members. With over 40% of loyalty members joining in the last year, we see a huge opportunity to continue growing membership and improving their experience through further enhanced personalization and exclusive offerings. Additionally, I want to share some updates on how we've strengthened our leadership team with key additions. Jason Harenstein, CFO of Collector Holdings, joined our board in December, bringing deep expertise in collector trends and behaviors across sports memorabilia grading, trading cards, and gaming. His insights further enhance an already engaged and innovative board. We up-leveled two key positions and added one new position. Jen Reeves, our new SVP of brand, previously helped drive Stanley 1913's viral success and skyrocketing sales of the Quencher. We are excited to see her elevate Funko's brand positioning and drive deeper engagement with our fans. Glenn Abel, SVP of North America Sales, brings extensive experience from Mattel, Moose Toys, and Lego, positioning Funko for global distribution expansion and transformative sales operations. Zvi Geffen has joined as VP and head of business development, bringing extensive sports licensing expertise from his senior roles at the Major League Baseball Players Association and Topps Trading Company. His leadership will be instrumental in expanding our presence in sports fandoms. As we move into 2025, we anticipate modest top line growth with momentum accelerating in the back half of the year as our strategic initiatives begin taking effect. Similar to others in our industry, we're experiencing softening consumer behavior in the US market and we're navigating the uncertainty of tariffs and inflation. However, we remain optimistic in our ability to navigate these external challenges thanks to our proactive mitigation plans, a high-performing leadership team, and continued disciplined execution. With that, I will hand it over to Eve to share more about our financials and our outlook for the year ahead. Eve?