The following is a summary of the Funko, Inc. (FNKO) Q3 2024 Earnings Call Transcript:

Financial Performance:

• Funko reported Q3 2024 net sales of $293 million, down from Q3 of the previous year but within guidance expectations.

• Gross margin for Q3 improved to 41%, and adjusted EBITDA reached $31 million, topping the guidance range.

• Adjusted net income was reported at $8 million, at $0.14 per diluted share, surpassing the expected financial outcomes.

• Despite the slowing sales, gross margins improved due to better-than-expected bottom-line performance facilitated by enhanced gross margins.

• The forecast for FY 2024 has been adjusted, with net sales projected between $1.037 billion to $1.05 billion and adjusted EBITDA from $85 million to $90 million.

Business Progress:

• Funko realigned senior management roles to enhance focus on global sales, direct-to-consumer channels, and growth initiatives.

• Announced strategic plans for 2025 to further engage with fans, including enhancements to the direct-to-consumer platform.

• Expanded NFL partnership and launched Pop! Yourself with NFL team logos, experiencing sales above expectations with significant increases since launch.

• Collaboration with CeeDee Lamb for advertisements and quick launch of collectibles tied to current events, such as the Dodgers World Series win.

• Engaged in significant initiatives like Funko Fusion and a partnership with Disney and Gameloft in gaming.

Opportunities:

• Expanding the direct-to-consumer platform and engaging directly with fans through personalized collectibles is enhancing customer experiences and opening new revenue channels.

• Partnerships with major sports and entertainment entities are providing new markets for customized and exclusive products, fueling potential growth.

Risks:

• The weaker than expected consumer spending and the trend of wholesale customers remaining cautious due to market uncertainties pose risks to the projected sales growth, potentially impacting the financial outcomes if not countered effectively.

• Potential imposition of tariffs and possible impacts on supply chain and shipping capacities could affect operational efficiency and cost.

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