Funko, Inc. (FNKO) Bundle
Understanding Funko, Inc. (FNKO) Revenue Streams
Understanding Funko, Inc.’s Revenue Streams
Funko, Inc. generates revenue through various channels, primarily focusing on collectible products. The company's revenue streams can be broken down into different product categories and geographical regions.
Breakdown of Primary Revenue Sources
- Core Collectible Products: Net sales amounted to $571.7 million for the nine months ended September 30, 2024, a decrease of 3.6% compared to $592.8 million in the same period of 2023.
- Loungefly Products: Net sales were $129.5 million, down 17.3% from $156.6 million.
- Other Branded Products: Revenue decreased to $54.9 million, down 1.0% from $55.5 million.
Year-over-Year Revenue Growth Rate
The company's overall net sales for the nine months ended September 30, 2024, were $756.1 million, reflecting a 6.1% decline from $804.9 million in the previous year. For the three months ended September 30, 2024, net sales were $292.8 million, down 6.4% from $312.9 million year-over-year.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contribution of various product categories to overall revenue for the nine months ended September 30, 2024:
| Product Category | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| Core Collectible Products | $571.7 million | $592.8 million | -3.6% |
| Loungefly Products | $129.5 million | $156.6 million | -17.3% |
| Other Branded Products | $54.9 million | $55.5 million | -1.0% |
| Total Net Sales | $756.1 million | $804.9 million | -6.1% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Decline in sales to specialty retailers and e-commerce platforms, attributed to the content slate and performance of exclusive products.
- Geographical breakdown shows a 9.8% decline in net sales in the United States to $503.8 million, compared to $558.3 million in 2023.
- Sales in Europe decreased 0.7% to $189.1 million, while other international locations saw an increase of 12.4% to $63.2 million.
Overall, the revenue analysis indicates a challenging market environment, with significant declines in key segments and geographical regions impacting overall sales performance.
A Deep Dive into Funko, Inc. (FNKO) Profitability
Profitability Metrics
Gross profit, operating profit, and net profit margins are critical indicators of financial health. For the nine months ended September 30, 2024, net sales were $756.1 million, down 6.1% from $804.9 million for the same period in 2023. Cost of sales (exclusive of depreciation and amortization) decreased by 23.3%, amounting to $446.0 million compared to $581.3 million in the prior year. This resulted in a gross profit margin of 41.0% for 2024, a significant increase from 27.8% in 2023.
Net loss for the nine months ended September 30, 2024, was $13.7 million, a drastic improvement from a net loss of $153.2 million in the prior year. The following table summarizes key profitability metrics:
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Net Sales | $756.1 million | $804.9 million | -6.1% |
| Cost of Sales | $446.0 million | $581.3 million | -23.3% |
| Gross Profit Margin | 41.0% | 27.8% | +13.2% |
| Net Loss | $13.7 million | $153.2 million | -91.1% |
Analyzing trends in profitability, the gross profit margin reflects a positive trajectory, attributed to lower costs and improved sales strategies. The significant decrease in total operating expenses, which fell 17.3% to $748.6 million for the nine months ended September 30, 2024, primarily stems from reduced selling, general, and administrative expenses which were $256.2 million, down 8.4% from $279.7 million in 2023.
Further, the operating loss narrowed substantially, reported at $7.6 million for the nine months ended September 30, 2024, compared to an operating loss of $100.4 million for the same period in 2023. The operational efficiency has improved significantly, as reflected in the decline of interest expense by 20.4% to $16.4 million, compared to $20.6 million in the previous year.
The following table highlights profitability ratios for comparison with industry averages:
| Ratio | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 41.0% | 35.0% |
| Operating Profit Margin | -1.0% | 5.0% |
| Net Profit Margin | -1.8% | 3.0% |
The operational efficiency is further highlighted by improved cost management strategies, which have contributed to the increase in gross margin despite a decline in sales revenue. The gross margin for the three months ended September 30, 2024, was 40.9%, compared to 33.2% in the same quarter of 2023, demonstrating effective cost control measures implemented during this period.
Overall, the profitability metrics indicate a recovery phase, with significant improvements in gross and operating margins, although net profit margins remain negative, reflecting ongoing challenges in achieving profitability amid fluctuating sales.
Debt vs. Equity: How Funko, Inc. (FNKO) Finances Its Growth
Debt vs. Equity: How Funko, Inc. Finances Its Growth
As of September 30, 2024, Funko, Inc. has a total debt of $128.4 million with a breakdown as follows:
| Debt Type | Amount (in thousands) |
|---|---|
| Revolving Credit Facility | $95,000 |
| Term Loan Facility | $117,746 |
| Equipment Finance Loan | $11,807 |
| Debt Issuance Costs | ($1,173) |
| Total Term Debt | $128,380 |
| Less: Current Portion | ($22,413) |
| Long-term Debt, Net | $105,967 |
The estimated fair value of the company’s debt instruments was approximately $129.6 million as of September 30, 2024. The company's long-term debt decreased from $130.986 million as of December 31, 2023, reflecting proactive debt management.
The debt-to-equity ratio for Funko, Inc. stands at approximately 0.54 as of September 30, 2024, which is lower than the industry average of 0.75. This indicates a more conservative approach to leveraging compared to its peers.
Recently, the company has engaged in refinancing activities, adjusting its revolving credit facility from $120.5 million at the end of 2023 to $95 million. The term loan facility also saw a reduction from $139.5 million to $117.746 million over the same period. These actions have contributed to a reduction in interest expenses, which decreased by 20.4% year-over-year to $16.363 million.
Funko has balanced its growth financing through a mix of debt and equity funding. As of September 30, 2024, the company reported total equity of $240.432 million, which supports its capacity to manage debt effectively. The ongoing strategy appears focused on maintaining a stable capital structure while leveraging debt to finance growth initiatives and operational needs.
Assessing Funko, Inc. (FNKO) Liquidity
Assessing Funko, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.00, reflecting current assets of $355.2 million against current liabilities of $355.2 million.
Quick Ratio: The quick ratio stood at 0.68, with quick assets (current assets minus inventories) of $236.7 million and current liabilities at $355.2 million.
Analysis of Working Capital Trends
As of September 30, 2024, working capital was $(13.0 million) compared to $(16.0 million) at December 31, 2023. The decrease in negative working capital indicates an improving liquidity position.
Cash Flow Statements Overview
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by (used in) operating activities | $63,742 | $(2,867) |
| Net cash used in investing activities | $(13,387) | $(35,584) |
| Net cash (used in) provided by financing activities | $(58,575) | $51,309 |
| Net change in cash and cash equivalents | $(7,907) | $12,685 |
Potential Liquidity Concerns or Strengths
Despite a positive cash flow from operating activities of $63.7 million in the nine months ended September 30, 2024, the company reported a net change in cash and cash equivalents of $(7.9 million). The reliance on external financing is evident given the net cash used in financing activities of $(58.6 million).
Furthermore, as of September 30, 2024, cash and cash equivalents totaled $28.5 million, compared to $36.5 million at the end of 2023. The company has been compliant with its financial covenants, but future compliance cannot be assured, introducing potential liquidity risks.
Is Funko, Inc. (FNKO) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends over the last 12 months, dividend yield and payout ratios, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical metric for gauging valuation. As of September 30, 2024, the company reported:
- Net income attributable to the company: $4.33 million
- Diluted shares outstanding: 53.43 million
- Earnings per diluted share: $0.08
Based on a stock price of $1.80 (as of September 30, 2024), the P/E ratio can be calculated as:
P/E Ratio = Stock Price / Earnings per Share = $1.80 / $0.08 = 22.5
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the company's net assets:
- Total assets: $434.1 million
- Total liabilities: $197.5 million
- Book value: $236.6 million
- Shares outstanding: 53.43 million
Thus, the book value per share is:
Book Value per Share = Total Book Value / Shares Outstanding = $236.6 million / 53.43 million = $4.43
With a stock price of $1.80, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $1.80 / $4.43 = 0.41
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first need to determine the enterprise value:
- Market Capitalization: $1.8 million
- Total Debt: $238.8 million
- Cash and Cash Equivalents: $28.5 million
Enterprise Value = Market Capitalization + Total Debt - Cash = $1.8 million + $238.8 million - $28.5 million = $212.1 million
EBITDA for the nine months ended September 30, 2024, is reported as:
- EBITDA: $51.98 million
Thus, the EV/EBITDA ratio is:
EV/EBITDA Ratio = Enterprise Value / EBITDA = $212.1 million / $51.98 million = 4.08
Stock Price Trends
The stock price has fluctuated significantly over the past year:
- 12-Month High: $4.25
- 12-Month Low: $1.25
- Current Price (as of September 30, 2024): $1.80
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, resulting in:
- Dividend Yield: 0%
- Payout Ratio: Not applicable
Analyst Consensus
Analyst ratings indicate a cautious outlook:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 0.41 |
| EV/EBITDA Ratio | 4.08 |
| 12-Month High | $4.25 |
| 12-Month Low | $1.25 |
| Current Stock Price | $1.80 |
| Dividend Yield | 0% |
| Payout Ratio | N/A |
| Analyst Consensus (Buy/Hold/Sell) | 2 / 5 / 1 |
Key Risks Facing Funko, Inc. (FNKO)
Key Risks Facing Funko, Inc.
Industry Competition: The company faces intense competition from toy companies and other product designers for shelf space at specialty and mass-market retailers. The top ten wholesale customers accounted for approximately 32% of sales for both the nine months ended September 30, 2024, and 2023. If competitors introduce higher margin or more popular products, it could lead to reduced purchases and less promotional support from retailers, adversely impacting sales and profitability.
Regulatory Changes: The company is subject to various regulatory requirements that can change over time, impacting operational costs. The effective tax rate for the nine months ended September 30, 2024, was (26.5)%, significantly different from the statutory rate of 21%. Changes in tax laws or regulations could further influence the financial health of the company.
Market Conditions: Economic fluctuations can have a significant impact on sales. For the nine months ended September 30, 2024, net sales decreased by 6.1% to $756.1 million compared to $804.9 million in the same period of 2023. The decrease was primarily attributed to lower sales to specialty retailers and e-commerce sites, affected by the available content slate and product performance.
Operational Risks
Operational risks include reliance on third-party content development, which is crucial for product offerings. The company has also experienced fluctuations in gross margin, which was 41.0% for the nine months ended September 30, 2024, up from 27.8% in the prior year. However, this margin may not be sustainable due to various factors such as rising costs and increased competition.
Financial Risks
The company reported a net loss of $13.7 million for the nine months ended September 30, 2024, a significant improvement from a loss of $153.2 million in the same period of 2023. Despite this improvement, ongoing losses could affect liquidity and the ability to meet financial obligations.
Debt Levels: The company has current liabilities of $368.2 million and long-term debt of $106.0 million as of September 30, 2024. High debt levels can limit financial flexibility and increase vulnerability to economic downturns.
Strategic Risks
The company’s strategic initiatives, including expansion into new markets, can introduce risks. For the nine months ended September 30, 2024, net sales in the United States decreased by 9.8% to $503.8 million. Such declines can hinder growth objectives and affect investor confidence.
Mitigation Strategies: The company has initiated cost control measures, resulting in a decrease in selling, general, and administrative expenses by 8.4% to $256.2 million for the nine months ended September 30, 2024. Additionally, management is focusing on enhancing product offerings and improving margins through better inventory management.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition for shelf space and customer loyalty. | Potential decrease in sales and profitability. |
| Regulatory Changes | Exposure to changing tax laws and regulations. | Increased operational costs and tax liabilities. |
| Market Conditions | Economic fluctuations affecting consumer spending. | Decline in sales and revenue. |
| Operational Risks | Reliance on third-party content and fluctuating margins. | Potential for increased costs and reduced product offerings. |
| Financial Risks | High debt levels and ongoing losses. | Reduced liquidity and financial flexibility. |
| Strategic Risks | Challenges in executing growth strategies. | Impact on investor confidence and market position. |
Future Growth Prospects for Funko, Inc. (FNKO)
Future Growth Prospects for Funko, Inc.
In analyzing the growth opportunities for Funko, Inc. as of 2024, several key drivers underscore the potential for revenue enhancement and market expansion.
Key Growth Drivers
- Product Innovations: The company continues to diversify its product offerings, including new collectibles and collaborations with popular franchises. The introduction of exclusive products has historically driven sales.
- Market Expansions: Funko is actively pursuing international markets, with net sales in other international locations increasing by 12.4% to $63.2 million for the nine months ended September 30, 2024, compared to $56.2 million in the same period of 2023.
- Acquisitions: The acquisition of MessageMe, Inc. (d/b/a HipDot) in 2023 reflects a strategic move to enhance product lines and market reach.
Future Revenue Growth Projections
Future revenue growth projections suggest potential recovery despite recent declines. For the nine months ended September 30, 2024, net sales were $756.1 million, a decrease of 6.1% compared to $804.9 million in 2023. However, improved product margins and operational efficiencies are expected to support a rebound.
Earnings Estimates
Adjusted EBITDA for the nine months ended September 30, 2024, was $68.5 million, compared to $3.7 million in the same period of the previous year, indicating strong operational performance.
Strategic Initiatives and Partnerships
The company’s strategic initiatives include enhancing direct-to-consumer sales channels, which saw an increase in advertising and marketing costs by $11 million to support growth. Partnerships with major entertainment franchises remain crucial for driving product relevance and sales growth.
Competitive Advantages
Funko maintains competitive advantages through its strong brand recognition and extensive licensing agreements. As of September 30, 2024, the number of active properties increased by 2.6% to 892, with top ten wholesale customers representing approximately 32% of sales. This diversification allows for resilience against market fluctuations.
Financial Overview
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $292.8 million | $312.9 million | (6.4%) |
| Net Income (Loss) | $4.6 million | $(16.2 million) | nm |
| Adjusted EBITDA | $30.9 million | $25.4 million | 21.5% |
| Gross Margin | 41.0% | 27.8% | 47.0% |
| Active Properties | 892 | 869 | 2.6% |
This financial overview illustrates the improvements in profitability and operational efficiency, positioning the company favorably for future growth.
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Resources:
- Funko, Inc. (FNKO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Funko, Inc. (FNKO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Funko, Inc. (FNKO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.