Q3 2024 Funko Inc Earnings Call
Okay.
Operator: Good afternoon, and welcome to Funko's 2024 third quarter of financial results. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at the end.
Speaker Change: Good afternoon, and welcome to your phone calls 2020 full third 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.
Operator: Please be advised that reproduction of this call, in whole or in part, is not permitted without written authorization from the... As a reminder, this call is being recorded.
Speaker Change: As a reminder, this call is being recorded.
Rob Jaffe: I will now turn the call over to Funko's Director of Investor Relations, Rob Jaffe. Hello, everyone, and thank you for joining us today to discuss Funko's 2024 third quarter financial results. On the call are Cynthia Williams, our Chief Executive Officer, and Yves LePendeven, 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.
Speaker Change: I will now turn the call over to <unk> director of Investor Relations Robert Jaffe. Please proceed.
Robert Jaffe: Hello, everyone and thank you for joining us today to discuss <unk> 2024 third quarter financial results.
Speaker Change: On the call are Cynthia Williams, our Chief Executive Officer, and <unk> <unk>, the company's Chief Financial Officer.
Speaker Change: This call is being broadcast live at Investor Funko Dot com.
Speaker Change: Playback will be available for at least one year on the company's website.
Rob Jaffe: 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 report. to differ materially is contained in our most recently filed SEC report.
Speaker Change: I want to remind everyone that during the course of this call management's discussion will include forward looking information.
Speaker Change: These statements represent our best judgment as of today about the company's future results and performance.
Speaker Change: Our actual results are subject to many risks and uncertainties that may differ materially from those stated or implied.
Speaker Change: Including those discussed in our earnings release.
Speaker Change: Additional information concerning factors that could cause actual results to differ materially is contained in our most recently filed SEC reports.
Rob Jaffe: 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 maybe different from non-GAAP financial measures used by other companies. Investors are encouraged to review Funko's press release announcing its 2024 3rd quarter financial results for the company's reasons for presenting non-GAAP financial measures. for Reconciliation of the Non-Gap Financial Measures to the Most Directly Comparable Gap Financial Measures. is also attached to the earnings release, press release issued earlier.
Speaker Change: In addition, during this call we refer to non-GAAP financial measures.
Speaker Change: Not prepared in accordance with U S generally accepted accounting principles.
Speaker Change: And may be different from non-GAAP financial measures used by other companies.
Speaker Change: Investors are encouraged to review phone calls a press release announcing its 2024 third quarter financial results for the company's reasons for presenting non-GAAP financial measures.
Speaker Change: A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the earnings release press release issued earlier today.
Cynthia Williams: I will now turn the call over to Cynthia Williams. Cynthia? Thanks, Rob.
I'll now turn the call over to Cynthia Williams Cynthia.
Cynthia Williams: Thanks, Rob Good afternoon, everyone and welcome to fund the 2024 third quarter financial results Conference call.
Cynthia Williams: Good afternoon, everyone, and welcome to Funko's 2024 Third Quarter Financial Results Conference Call. We reported a solid overall financial performance for the quarter. Net sales of $293 million were, as expected, down compared with Q3 of last year. So at the high end of our guidance. Growth Margin was 41% and Adjusted EBITDA was $31 million. exceeded the top end of our guidance.
Cynthia Williams: We reported a solid overall financial performance for the quarter.
Cynthia Williams: Net sales of $293 million were as expected down compared with Q3 of last year. So at the high end of our guidance range.
Cynthia Williams: Gross margin was 41% and adjusted EBITDA was $31 million, both of which exceeded the top end of our guidance range.
Cynthia Williams: Turning briefly to our 2024 full-year outlook. We are seeing some indications that consumers are increasingly looking for value, which, among other things, has resulted in certain wholesale customers remaining cautious ahead of uncertain consumer spending during the holiday. We have therefore lowered the range for net sales to $1.037 billion to $1.05 billion, the top end of which is still within our earlier guidance.
Cynthia Williams: Turning briefly to our 2020 for full year outlook.
Cynthia Williams: We are seeing some indications that consumers are increasingly looking for value, which among other things has resulted in certain wholesale customers remaining cautious ahead of uncertain consumer spending during the holidays.
Cynthia Williams: We have therefore lowered the range for net sales to $1.037 billion to $1.0 billion to $5 billion. The top end of which is still within our earlier guidance range.
Cynthia Williams: Our profitability is a different story and a very positive. Our improved gross margins have continued to produce better-than-expected bottom-line results. Therefore, we are raising the range for adjusted EBITDA to $85 million to $90 million.
Cynthia Williams: Our profitability is a different story and a very positive one our improved gross margins have continued to produce better than expected bottom line results. Therefore, we are raising the range for adjusted EBITDA to 85 million to $90 million.
Cynthia Williams: Yves will discuss the third quarter financial results and our guidance in more detail in just a moment.
Speaker Change: He will discuss the third quarter financial results and our guidance in more detail in just a moment.
Cynthia Williams: On the last call, I told you about my initial impressions of the company and the Since then, we've realigned certain responsibilities of the senior managers. Andy Otte, our Chief Commercial Officer, is taking on global sales and business development efforts in addition to overseeing our licensing relations. Moreover, he has moved to Los Angeles to be physically closer to many of our licensing partners as well as our U.S. sales team. and Johanna Gepford, our Senior Vice President of Growth and is now fully dedicated to overseeing growth initiatives and our newer business lines, which includes managing our global direct-to-consumer channel, Pop Yourself, Mondo, and Digital Collective.
Speaker Change: On the last call I told you about my initial impressions of the company and the team.
Speaker Change: Since then we realigned certain responsibilities of the senior management team.
Speaker Change: Andy Audi our Chief commercial officer is taking on global sales and business development efforts. In addition to overseeing our licensing relationships.
Speaker Change: Moreover, he has moved to Los Angeles to be physically closer to many of our licensing partners as well as our U S sales teams.
Speaker Change: And Johan <unk>, our senior Vice President of growth initiatives is now fully dedicated to overseeing growth initiatives and our newer business lines, which includes managing our global direct to consumer channel pop yourself Mondo and digital collectibles.
Cynthia Williams: We are actively recruiting to add expertise in a few key areas, including creative product development, brand management and marketing, and business development associated with organically expanding our reach and our fans. Also, on the last call, I laid out our plan to grow Funko by taking a fan-centric approach. which revolves around delighting our core fans, attracting new fans. selling where the fans are and improving the fan experience.
Speaker Change: We are actively recruiting to add expertise and a few key areas, including creative product development.
Speaker Change: <unk> management, and marketing and business development associated with organically expanding our reach and our fandom.
Also on the last call I laid out our plan to growth bump go by taking a fan centric approach, which revolves around delighting our core fans attracting youth fans selling where the fans are and improving the fan experience.
Cynthia Williams: Our senior leadership team has been deep in the process of developing our strategic plan for 2025 and beyond. We expect to share details on our Q4 call. In the interim, I'm pleased that we've already begun executing several elements of the plan. Well, these may not be significant revenue drivers. They are representative of the approach we are taking to grow fandoms and expand our points of distinction.
Speaker Change: Since then our senior leadership team has been deep in the process of developing our strategic plan for 2025 and beyond we expect to share details on our Q4 call.
Speaker Change: In the interim I'm pleased that we've already begun executing several elements of the plan well. These may not be significant revenue drivers. This year. They are representative of the approach, we're taking to grow fandoms and expand our points of distribution.
Cynthia Williams: I'll highlight several of these recent developments. in the area of sports. We expanded our collaboration with the National Football League to include the option for its fan base of more than 200 million people to customize Pop Yourself with any NFL team logo. The partnership kicked off in Kansas City, where we celebrated the season opener and introduced Funko and Pop Yourself to a new legion of fans. Sales of Pop Yourself with NFL Accessory Packs exceeded our launch expectations. To put a finer point on this, from law... And at the end of Q3, more than 40% of Pop Yourself sales included NFL accessory packs Total daily sales increased by more than We anticipate a new round of customer interest around the NFL playoffs and the season.
Speaker Change: I'll highlight several of these recent developments.
Speaker Change: In the area of sports weeks.
Speaker Change: We expanded our collaboration with the National Football League to include the option for its fan base of more than 200 million people to customize pop yourself with any NFL team logo.
Speaker Change: The partnership kicked off in Kansas City, where we celebrated the season opener and introduced funko and pop yourself to a new Legion of fans sales.
Speaker Change: Sales of pop yourself with NFL accessory packs exceeded our launch expectations.
Speaker Change: Put a finer point on that from launch through the end of Q3 more than 40% of pop yourself sales included NFL accessory packs.
Speaker Change: And total daily sales increased by more than 150%.
Speaker Change: We anticipate a new round of customer interest around the NFL playoffs and Super Bowl.
Cynthia Williams: Next, C.D. Lam, a Pro Bowl wide receiver for the Dallas Cowboys and holder of several NFL records for receptions at only 25 years old. have partnered with us on a clever advertisement that is part of our national NFL campaign. His pop is being exclusively sold on our direct-to-consumer website, Funko.com, and it is flying off the virtual shelf.
Speaker Change: Next C D Lamb, a pro bowl wide receiver for the Dallas Cowboys and holder of several NFL records for reception at only 25 years old.
Speaker Change: Has partnered with us on a clever advertisement that is part of our national NFL campaign.
Speaker Change: His pop is being exclusively sold on our direct to consumer website, <unk> dot com and it is flying off the virtual shelf.
Cynthia Williams: and within 20 minutes of the last out we went live with a limited edition collectible pop Los Angeles Dodgers 2024 World Series champions five pack on Funko.com This pre-order item will only be available for two and a half.
Speaker Change: And within 20 minutes of the last out we went live with a limited edition collectible pop Los Angeles Dodgers 'twenty 'twenty four World series Champions five pack on Funko Dot com.
Speaker Change: Preorder item will only be available for two and a half weeks through November the 18th.
Cynthia Williams: In the area of music, we launched a pre-order for Reba McIntyre wearing the famous red dress she wore to the 1993 Country Music Awards. Reba is a huge country music star and actor. She is also a coach on the hit television show, The Voice. which has a weekly viewership of nearly 6 million. On a recent episode of The Voice, Reba gifted an extremely limited edition Funko Pop of herself to the contestants who chose to join.
Speaker Change: In the area of music, we launched our preorder Reba Mcintyre wearing the famous red dress she wore to the 1993 country Music Awards.
Speaker Change: That is a huge country music star and after she is also a coach on the hit TV shows the voice, which has a weekly viewership of nearly 6 million people.
Speaker Change: On a recent episode of the voice Riva gifted and extremely limited edition Funko pop up herself to the contestants who chose to join her team.
Cynthia Williams: I want to briefly mention some recent successes with our Outbound Licensing Program, which elevates Funko's brand equity and delivers royalty in First, Funko Fusion, our indirect foray into the video game world, provides a different way for new fans to engage with Funko. an action-adventure video game developed in collaboration with Tintin Games and NBCUniversal, Funko Fusion launched on both PlayStation 5 and Xbox Series X and S in September and it was the best-selling new video game in the U.S. within its launch It will soon be released on both PlayStation 4 and Nintendo Switch, just in time for the holidays.
Speaker Change: I want to briefly mention some recent successes with our outbound licensing program, which elevates bunkers brand equity.
And delivers royalty income first bunker fusion, our indirect foray into the videogame world provides a different way for new fans to engage with funko.
Speaker Change: And action Adventure video game developed in collaboration with Tencent games, and NBC Universal Funko fusion launched on the Playstation five.
Speaker Change: And Xbox series X and S. In September and it was the best selling new video game in the U S. Within a small tweak it will soon be released on both Playstation four and Nintendo switch just in time for the holidays.
Cynthia Williams: Second, we recently partnered with the Walt Disney Company and video game developer, Gameloft, to bring the world of Loungefly to life for the first time within interactive entertainment. The six million active fans of Disney's Dreamlike Valley video game are currently able to enjoy wearing in-game some of their favorite lounge flight backpacks and bags.
Speaker Change: Second we recently partnered with the Walt Disney Company and video game developer Gameloft to bring the world of lounge fly to life for the first time with an interactive entertainment. The 6 million active fans of Disney Dreamlike Valley Videogame are currently able to engie.
Speaker Change: Joy wearing in game some of their favorite lounge, like backpacks and bags.
Cynthia Williams: And last, I would like to take a moment to shine a light on our longstanding and incredible partnership with Ferrero, one of the world's largest manufacturers of chocolate products. As of today, Ferrero has shipped over 1 billion Funko-branded Kinder Joy This is a remarkable milestone and a testament to both companies' reach and brand success. We are excited about our future with the Ferrero team, and we're in discussions to expand and extend the partnership.
Speaker Change: And last I would like to take a moment to shine a light on our long standing and incredible partnership with Ferrero, one of the world's largest manufacturers of chocolate products as of today for railroad has shipped over 1 billion funko branded Kinder Joy eggs.
Speaker Change: This is a remarkable milestone and a testament to both companies reach and brand strength.
Speaker Change: We are excited about our future with the Ferro team and we're in discussions to expand and extend the partnership.
Cynthia Williams: In the area of selling where the fans are, we further built out our direct-to-consumer shipping capability to now include Canada. In the first weeks after launch, turning on Canada led to daily sales of Pop Yourself nearly doubling our average daily volume. We have now sold well over 1 million total units of Pop Yourself since the launch last Q3.
Speaker Change: In the area of selling more of the fans are we further built out our direct to consumer shipping capability to now include Canada in the first weeks after launch turning on Canada led to daily sales are pop yourself nearly doubling our average daily volume.
We have now sold well over 1 million total units pop yourself since the launch last Q3.
Cynthia Williams: I'm also pleased to share that earlier this morning, the Toyos announced that Pop Yourself is the finalist for the prestigious 2024 Collectible of the Year Award. We are honored that Pop Yourself has been recognized for its uniqueness and creativity.
Speaker Change: I'm also pleased to share that earlier. This morning, the toy Association announced that pop yourself as a finalist for the prestigious 2024 collectible of the year Award.
Speaker Change: We are honored that pop yourself has been recognized for its uniqueness and creativity.
Cynthia Williams: and in the area of delighting our core fans. We have expanded our collaboration with Warner Brothers to allow Pop Yourself to be customized with Harry Potter accessories. Millions of devoted Harry Potter fans can now combine personalizing pop yourself with their passion for Harry Potter.
Speaker Change: And then the area of delighting our core fans, we have expanded our collaboration with Warner brothers to allow pop yourself to be customized with Harry Potter accessories.
Speaker Change: Millions of devoted Harry Potter fans can now combine personal lines and pop yourself with their passion for Harry Potter.
Cynthia Williams: You are the first to hear this. The official launch starts tomorrow.
Speaker Change: You are the first to hear this the official launch starts tomorrow.
Cynthia Williams: The last two items, D2C shipping to Canada and the Harry Potter accessories for Pop Yourself, are both well-timed for the upcoming holiday season. We are certainly excited about the breadth of these positive developments as well as the other opportunities we are evaluating to grow and diversify our business.
Speaker Change: The last two items D to C shifting to Canada, and the Harry Potter accessories for pop yourself are both well timed for the upcoming holiday season.
Speaker Change: We are certainly excited about the breadth of these positive developments as well as the other opportunities we are evaluating to grow and diversify our business.
Cynthia Williams: We know how to serve our core fans. and we are developing the muscle to attract and serve.
Speaker Change: We know how to serve our core fans and we are developing the muscle to attract and serve new fans.
Speaker Change: With that I will now turn it over to Ive to take you through the financials.
Yves LePendeven: With that, I will now turn it over to Yves to take you through the financials. Yves? Thanks, Cynthia. Hey, everyone. Thanks for joining us today. For the third quarter, total net sales were $292.8 million. Direct to consumer sales were down 7% year over year and comprised 20% of our gross sales compared with 20% in last year. Our Pop Yourself business modestly comped up year over year, even though there were no special gifting occasions or holidays in Q3. I'll add a bit more color on direct-to-consumer sales in a moment. Gross profit was $119.8 million and gross margin was 40.9%.
Speaker Change: Yeah.
Speaker Change: Thanks, Cynthia Hello, everyone. Thanks for joining us today.
Speaker Change: For the third quarter total net sales were $292 8 million.
Speaker Change: Direct to consumer sales were down 7% year over year and comprised 20% of our gross sales compared with 20% in last year's Q3.
Speaker Change: Our pop yourself business modestly comped up year over year, even though there were no special gifting occasions or holidays in Q3.
Speaker Change: I had a bit more color on direct to consumer sales in a moment.
Speaker Change: Gross profit was $119 $8 million and gross margin was 49%.
Yves LePendeven: The higher-than-expected gross margin was driven in part by lower-than-anticipated inventory reserves. SG&A expenses were $92.7 million, which was in the middle of our guidance. Adjusted net income was $8 million, or $0.14 per diluted share, which was well above our guidance range for the quarter. And finally, adjusted EBITDA was $31 million, which also was well above our guidance.
Speaker Change: Higher than expected gross margin was driven in part by lower than anticipated inventory reserves.
Speaker Change: SG&A expenses were $92 $7 million, which was in the middle of our guidance range.
Speaker Change: Adjusted net income was $8 million or 14 cents per diluted share, which was well above our guidance range for the quarter.
Speaker Change: And finally, adjusted EBITDA was $31 million, which also was well above our guidance range.
Yves LePendeven: turning to our bell. At September 30th, we had cash and cash equivalents of $28.5 million compared with $41.6 million at the end of Q2. The primary uses of cash in the quarter included a $10 million payment on our tax receivable agreement liability, as well as a slight build in interest. Net inventory was $118.6 million, up slightly from $109 million at June 30, 2024. The buildup was driven by new inventory to service demand during our peak shipping month. Our total debt was approximately $223.4 million, marginally down from $223.9 million at the end of the second quarter.
Turning to our balance sheet at September 30, we had cash and cash equivalents of $28 5 million compared.
Speaker Change: Compared with $41 $6 million at the end of Q2.
Speaker Change: The primary uses of cash in the quarter included a $10 million payment on our tax receivable agreement liability as well as a slight build in inventory.
Speaker Change: Net inventory was $118 6 million up slightly from $109 million at June 32024.
Speaker Change: Buildup was driven by new inventory to service demand during our peak shipping months.
Speaker Change: Our total debt was approximately $223 4 million marginally down from $223 $9 million at the end of the second quarter.
Yves LePendeven: and Total Company Liquidity decreased to $83.5 million from $101.6 million at the end of last quarter.
Speaker Change: Total company liquidity decreased to $83 $5 million from $101 $6 million at the end of last quarter.
Yves LePendeven: Before I provide our outlook, a bit more detail on our direct-to-consumers In Q3, we saw signs that our direct-to-consumer customers were more responsive to promotional activities. We believe shoppers are increasingly looking for value, which we anticipate will shift a higher percentage of our sales into Q4, when we ramp up our promotional activities and marketing spend ahead of the holiday. We expect direct-to-consumer sales in Q4 to return to year-over-year growth. In our Wholesale Channel, we believe this trend of consumers seeking for value has resulted in a softer-than-expected order book for Q4, as certain wholesale customers remain cautious ahead of uncertain consumer spending during the holiday.
Before I provide our outlook a bit more detail on our direct to consumer sales.
Speaker Change: In Q3, we saw signs that our direct to consumer or customers are more responsive to promotional activities.
Speaker Change: We believe shoppers are increasingly looking for value, which we anticipate will shift a higher percentage of our sales into Q4, when we ramp up our promotional activities and marketing spend ahead of the holidays.
Speaker Change: We expect direct to consumer sales in Q4 to return to year over year growth.
Speaker Change: In our wholesale channel. We believe this trend of consumers seeking for value has resulted in a softer than expected order book for Q4 are certain wholesale customers remain cautious ahead of uncertain consumer spending during the holidays.
Yves LePendeven: Turning now to our 2024 Full Year Outlook. We are lowering the range for net sales to $1.037 billion to $1.05 billion. the high end of which is just above the low end of our previous. Again, our profitability is another story. Our improved growth margins have resulted in a better-than-anticipated bottom-line performance. So for Adjusted EBITDA, we are raising the range to $85 million to $90 million, which is above the high end of our previous guidance.
Speaker Change: Turning now to our 2020 for full year outlook.
Speaker Change: We are lowering the range for net sales to 1.037 billion to 1.05 billion.
Speaker Change: The high end of which is just above the low end of our previous guidance range.
Speaker Change: Again, our profitability is another story our improved gross margin have resulted in a better than anticipated bottom line performance. So for adjusted EBITDA, we are raising the range to $85 million to $90 million, which is above the high end of our previous guidance range.
Yves LePendeven: For the 2024 fourth quarter, our guidance is as follows. Net sales between $280 million and $294 million. gross margin between 38% and 40%. SG&A expense of $93 million to $99 million. Adjusted Net Income between an adjusted net loss of $3 million or $0.05 per share. and adjusted net income of $1 million or $0.02 per diluted share. Finally, we expect adjusted EBITDA between $17 million and $22 million.
Speaker Change: For the 2020 for fourth quarter, our guidance is as follows net sales between $280 million and $294 million grew.
Speaker Change: Gross margin between 38% and 40%.
Speaker Change: G&A expense of 93 million to $99 million adjusted.
Speaker Change: Adjusted net income.
Speaker Change: <unk> and adjusted net loss of $3 million or <unk> <unk> per share and adjusted net income of $1 million or <unk> <unk> per diluted share.
Speaker Change: Finally, we expect adjusted EBITDA between 17 million and $22 million.
Yves LePendeven: Cynthia, that's it for our financial results.
Cynthia Williams: Cynthia that's it for our financial results back over to you.
Cynthia Williams: Back over to you. Thanks, Yves. In summary, our overall financial performance for the quarter was better than expected.
Cynthia Williams: Thanks, <unk> in summary, our overall financial performance for the quarter was better than expected, we slightly lowered the range for net sales and raised the range for adjusted EBITDA for the full year we've.
Cynthia Williams: slightly lowered the range for net sales and raised the range for adjusted EBITDA for the full year. We've made solid progress on developing our strategic plans to grow the company with a focus on our fans. We expect to finalize our strategy by year-end and anticipate that some of the initiatives will take time to implement. We expect to discuss these plans on our next call.
Cynthia Williams: We've made solid progress on developing our strategic plan to grow the company with a focus on our fans.
Cynthia Williams: We expect to finalize our strategy by yearend and anticipate that some of the initiatives will take time to implement we expect to discuss these plans on our next call.
Operator: With that, we'll open the call for questions.
Speaker Change: With that we'll open the call for questions operator.
Operator: Operator. Thank you. If you would like to ask a question, please tell staff followed by one on your telephone keypad. If you change your mind and would like to exit the queue, please dial star followed by D. And finally, when preparing to ask your question, please ensure that your phone is unmuted.
Speaker Change: Thank you if you would like to ask a question. Please dial star followed by one on your telephone keypad now if you changed your mind I would like to exit Q P style store, followed by two and finally when comparing to ask your question. Please ensure that your phone is unmatched it locally.
Eric Wold: and our first question will be from the line of Eric Wold. Please go ahead, your line is open. Thank you. Good afternoon, everyone. Appreciate you taking the questions. A few questions.
Speaker Change: And our first question will be from the line of Eric Wold with B. Riley. Please go ahead. Your line is open.
Speaker Change: Uh huh.
Speaker Change: Thank you.
Speaker Change: Good afternoon, everyone. I appreciate you taking my questions.
Speaker Change: A few questions I guess one.
Eric Wold: I guess one, talking about the cautiousness you're seeing, I can understand you know, a whole set of remaining cautious in this environment and maybe, you know, being a little tepid on the order book. From those of you who have access to POS, are you seeing anything to POS that would help, you know, corroborate their cautiousness or is it more on the retailer side?
Speaker Change: Talking about the the.
Speaker Change: Cautiousness Youre seeing I can understand wholesalers.
Speaker Change: Remaining cautious in this environment and maybe being a little tepid on the order book or from those that you have access to.
Speaker Change: Are you seeing anything pass.
Speaker Change: Pos that would help collaborate their cautiousness or is it more on the retailer side and then.
Eric Wold: And then on DTC becoming more responsive to promotional activity, maybe dive into that a little more if you can. Was that something you were seeing slowing trends and pumped up promo to reverse that or, you know, maybe kind of what drove that? I mean, you know, guidance, GM, gross marketing guidance still in that 38 to 40 percent range. Seems like you're still able to kind of push through that even with the additional promo.
Speaker Change: On DTC, becoming more responsive to promotional activity, maybe dive into that a little more if you can or is that something that you're seeing slowing trends and pumped up promo.
Speaker Change: To reverse that or.
Speaker Change: Maybe kind of what drove that I mean.
Speaker Change: You guided GM there as far as your guidance still got 30%, 40% range. It seems like you're still able to kind of push through that.
Speaker Change: Additional promo.
Speaker Change: Okay.
Cynthia Williams: Hey, Eric. Great to speak with you again.
Speaker Change: Hey, Erika.
Speaker Change: Great Great to speak with you again, I guess I'll start by taking a few of these questions.
Cynthia Williams: I guess I'll start by taking a few of these questions. So first on the POS trend, I'll say it's a little bit of a different story depending on the region. Globally in Q3, the POS sales that we saw were down single digit year over year. However, in the U.S., we saw that that was down low double digits versus EMEA is going pretty strong and saw a double digit growth. So what we're seeing in the U.S. market, I think, to draw a comparison with what we saw with our D2C consumer is that, you know, it seemed like sales were kind of slow during full price periods.
Speaker Change: First on the Pos trends.
Speaker Change: Say, it's a little bit of a different story, depending on the region globally in Q3.
Speaker Change: The pass sales that we saw were down single digit year over year. However.
Speaker Change: However in the U S. We saw that that was down low double digits.
Speaker Change: First is EMEA is going pretty strong.
Speaker Change: Double digit growth.
Speaker Change: So what we're seeing in the U S market I think.
Speaker Change: To draw a comparison with what we saw with our D to C consumer.
Speaker Change: <unk>.
Speaker Change: It seemed like sales were kind of slow during full price period, and then when we ran some promotions we had a promotion in September that was planned in advance and we saw a good response to it.
Cynthia Williams: And then when we ran some promotions, we had a promotion in September that was planned in advance, and we saw a good response to it. So what we believe, you know, how that translates to the wholesale channel is that while POS was down in Q3, a more significant portion of consumers will be shopping during that Black Friday, Cyber Monday period. And I think that's the kind of cautiousness that we're seeing from buyers. They're kind of got this wait and see approach to see how that period of the holiday goes.
Speaker Change: So what we believe how that translates to the wholesale channel is that while Pos was down in Q3.
A significant portion of consumers will be shopping during the black Friday cyber Monday period.
Speaker Change: And I think I think that's the kind of cautiousness that we're seeing from buyers theyre kind of got this wait and see approach to see how that how that period about holiday.
Speaker Change: Yes.
Cynthia Williams: So I kind of addressed a little bit the D to C. I'd say, you know, what we saw in Q3, we expect to translate into Q4, and we are also, like everyone else, going to be running some promotions starting, you know, a little bit before Black Friday and extend through Cyber Monday, and we expect a pretty significant portion of our Q4 sales to happen during that period, so we're looking forward to that. As far as the gross margin, that's a little bit related. I would say that during Q4, while we expect D to C sales to rebound to growth year over year, you know, a higher portion of them will fall during that promotional period, and hence a little bit lower gross margin there, and we'll also have to support those sales promotions with a higher level of marketing spend, so a higher level of SG&A in Q4 relative to Q3.
Speaker Change: So I kind of addressed a little bit the D to C I'd say.
Speaker Change: What we saw in Q3, we expect to translate into Q4.
Speaker Change: We are also like everyone else is going to be running some promotions, starting a little bit before black Friday and extend through cyber Monday, and we expect a pretty significant portion of our Q4 sales.
Speaker Change: It happened to happen during that period.
Speaker Change: So we're looking forward to that as far as the gross margin thats, a little bit related I would say that during Q4, while we expect you to see sales to rebound to growth year over year.
Speaker Change: Higher portion of them will fall during the promotional period, and hence a little bit lower gross margin there.
Speaker Change: We will also have to support those sales promotions with a higher level of marketing spend so higher level of SG&A in Q4 relative to Q3.
Cynthia Williams: So I think those would be kind of the main drivers, and hopefully I've hit all of the questions that you asked there.
Speaker Change: So I think those would be kind of the main the main drivers and hopefully you have hit all of the questions that you asked that.
Cynthia Williams: I think I'll just add a little bit of color on what we're. I think I'll just add a little bit of color on the D to C side, more from a market perspective. You know, what we're seeing is that major e-commerce sites like Amazon are actually starting their holiday sales the week ahead of Black Friday, like on November 22nd. Certainly partly in response to the shift in the calendar, but we are seeing it go from 11-22 up until Cyber Monday, and so we're essentially matching that to be in line with the market, but it is another part of the indication of the consumer searching for value.
Speaker Change: I think I'll, just add a little bit.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: I think I'll, just add a little bit of color on the <unk> side more from a market perspective.
Speaker Change: What we're seeing is that major e-commerce sites like Amazon are actually starting there.
Speaker Change: Holiday sales the week ahead of Black Friday like on November 22nd certainly partly in response to the shift in the calendar.
Speaker Change: But we are seeing it go from 11 to 22.
Speaker Change: Up until cyber Monday, and so we're essentially matching that to.
Speaker Change: To be in line with the market.
Speaker Change: Is another part of the indication of the consumer searching for value.
Eric Wold: Got it. And if you do see... strong trends during these kind of sale periods, Black Friday, Black Monday around then. And maybe retailers get a little more enthusiastic on that.
Speaker Change: Got it and if you do see.
Speaker Change: Strong trends.
Speaker Change: These kind of sale periods Black Friday Monday around then.
Speaker Change: Okay.
Speaker Change: And maybe retail will get a little more enthusiastic on that or is that something you'd be able to address with additional shipments into the year end or is there something more that we'd like to early 'twenty five to be a beneficiary.
Cynthia Williams: Is that something you'd be able to address with additional shipments into the year end or is that something more to look to early 2025 through thebaum]: We were just looking at our cutoff date, and we are able to extend the number of days that we'll be able to ship to various regions this year, so we do expect to extend it a bit.
Speaker Change: Sure.
Speaker Change: We were just looking at our cut off date, and we are expanding we are able to extend the number of days that we'll be able to ship to various regions. This year. So we do expect to extend it a bit.
Cynthia Williams: This is why eventually I want to open a 3PL on the East Coast. That would add at least another 3 days for more than 50% of the U.S., so we can extend it, but not as much as we'd like to be able to. Perfect.
Speaker Change: This is why eventually I want to open a three PM on the east coast.
Speaker Change: That would add at least another three days for more than 50% of the U S. So if we can extend it but not as much as we'd like to be able to.
Speaker Change: Perfect and then just final question if I may.
Cynthia Williams: I mean, this final question, if I may, you know, coming off the election earlier this week and Trump's victory and kind of his rhetoric on tariffs, maybe give us your thoughts on the potential impact of if there are tariffs coming in, kind of where you are, because you're mixed from China or effectively Yeah, thanks for that question. You know, as we've been working on our strategy, we've been doing some scenario planning and scenarios around the U.S. elections were actually part of that. We are fortunate that over the past several years, we have been diversifying our supply base away from China.
Speaker Change: Coming off election.
Speaker Change: Earlier this week trumps victory riders that are working on.
Speaker Change: Tariffs, maybe give us your thoughts on.
Speaker Change: The potential impact of if there are tariffs coming in kind of where you are because your mix from China are affected regions.
Speaker Change: Yeah. Thanks for that question.
Speaker Change: As we've been working on our strategy, we have been doing some scenario planning and scenarios around the U S elections were actually part of that.
Speaker Change: We are fortunate that over the past several years, we have been diversifying our supply base away from China and in fact for the at the company level. It's about a third of our products are actually manufactured in China and of that.
Cynthia Williams: And in fact, at the company level, it's about a third of our products are actually manufactured in China. And of that, a little less than 10% is part of our lounge fly business that is already tariffed. So we've got a sense of what the size of that would be. It's a bit lower than some of the others in the industry. That said, we're going to continue to work on plans for how we could further diversify away. to try and manage that situation. But we do feel like we're in a better position coming out of the gate than some others are.
Speaker Change: A little less than 10%.
Speaker Change: Part of our lounge by business that is already tear up so we've got a sense of what the size of that would be a bit lower than maybe some of the others in the industry.
Speaker Change: That said, we're going to continue to work on plans for how we could further diversify away.
Speaker Change: To try and manage that situation.
Speaker Change: But we do feel like we're in a better position coming out of the gate and.
Speaker Change: And then some others are now that said that's the tariff side of it let's talk about the secondary impact of it.
Cynthia Williams: Now, that said, that's the tariff side of it.
Cynthia Williams: Let's talk about the secondary impact of it. The thing I am worried about in the shorter term, let's call it Q4 and Q1, if those tariffs are enacted early in the administration and people have a strong signal of that, I think we will see a rush for people to ship especially higher priced items into the United States early, like ahead of when they would actually normally need it. Now, while we have 70% of our freight rates under contract and so that's not a risk for us, what is a risk is the capacity. And so if we see a real push to get more products into the United States ahead of Terrace, if they are enacted, we might have some challenges that we'll need to overcome with that.
Speaker Change: The thing I am worried about shorter term, let's call. It Q4 Q1.
Speaker Change: Got it.
Speaker Change: If those tariffs are enacted.
Speaker Change: Early in the administration.
Speaker Change: And people have a strong signal of that.
Speaker Change: I think we will see a rush for people to ship, especially higher priced items.
Speaker Change: And to the United States early like ahead of when they would actually normally need it now while we have 70% of our freight rates under contract and so that's not a risk for us.
Speaker Change: What is the risk is the capacity.
Speaker Change: And so if we see a real push to get more products into the United States had a.
Speaker Change: Tariffs if they are enacted we might have some challenges that will need to overcome with that but the team is working on plans for that now.
Cynthia Williams: The team is working on plans for that now.
Eric Wold: Very helpful. Thank you both. Appreciate it. Thank you.
Speaker Change: Very helpful. Thank you both I appreciate it.
Speaker Change: Thank you.
Stephen Laszczyk: Our next question will be from the line of Stephen Laszczyk with Goldman Sachs. Please go ahead, your line is open. Hey, great. Thanks for taking the question. Maybe two from me.
Speaker Change: Our next question will be from the line of Stephen <unk> with Goldman Sachs. Please go ahead. Your line is open.
Speaker Change: Hey, great. Thanks for taking the question maybe two for me first on margin I was curious if you could talk perhaps a little bit more about the drivers of the higher margin.
Stephen Laszczyk: First on margin. I was curious if you could talk perhaps a little bit more about the drivers of the higher margin in 3Q and then as well as the increased outlook for margin in 4Q. It sounds like there were some lower reserves in the third quarter. I'm not sure if that's benefiting 4Q as well. It also sounds like maybe on the opposite side of that, some higher sales and marketing that you're expecting in 4Q. Just curious how that plays through.
Speaker Change: In <unk>, and then as well as the increased outlook for margin in <unk>. It sounds like there were some other reserves in the third quarter.
Speaker Change: I'm not sure if that's benefiting <unk> as well.
Speaker Change: So it sounds like maybe on the opposite side of that some some higher sales and marketing that you're expecting in.
Speaker Change: Can you just just curious how that.
Stephen Laszczyk: And then second question on just the film slate picking up in the second half of the year here. Had some bigger movies come through in 3Q and 4Q. Curious if you could just touch on those, the theatrical slate at large, and then maybe as we look into the end of the 4Q slate, if there's any movies in particular that you feel particularly levered to. Thank you.
Speaker Change: How that plays through and then second question on just the film slate picking up in the second half of the year here had some some bigger movies come through in <unk> and <unk> I'm curious if you could just touch on.
Speaker Change: The theatrical slate at large and then maybe as we look into the end of the <unk> side. If there is any movies in particular that you feel particularly levered two thank you.
Yves LePendeven: Hey, Stephen. I'll start with the margin question. And what you saw in Q3 was really driven by a favorable gross margin. I called out inventory reserves, and that's really a continuation of the trend we've seen throughout this whole year. We continue to have some products that we sell into the value channel that had been reserved. And because, you know, the inventory that we have at this moment to sell into the value channel is high-quality inventory that we're selling above cost and getting, you know, good margins for that channel. We're able to have better than expected inventory reserves in the quarter.
Speaker Change: Hey, Stephen I'll start I'll start with the margin question and what you saw in Q3 was really driven by a favorable gross margin I called out inventory reserves and Thats really a continuation of the trend we've seen throughout this whole year.
Speaker Change: We continue to have some product that we sell into the value channel.
Speaker Change: That had been reserved and because.
Speaker Change: The inventory.
Speaker Change: We have at this moment to sell into the value channel.
Speaker Change: As a as high quality inventory that we're selling above cost and getting.
Speaker Change: Good margins for that channel.
Speaker Change: We're able to have better than expected inventory reserves in the quarter.
Yves LePendeven: There were a couple other drivers in cost of goods. We also saw a little bit lower than anticipated freight costs, as well as duty. So that led to the overperformance on gross margin in Q3.
Speaker Change: There were a couple of other drivers and cost of goods. We also saw a little bit lower than anticipated freight costs as well as duties.
Speaker Change: So that led to the over performance on gross margin in Q3, what I'd say in Q4 is that we also expect to have.
Yves LePendeven: What I'd say in Q4 is that we also expect to have, you know, a little bit more discounting during that promotional period that I called out during Black Friday, Cyber Monday window. And so that would cause a little bit of gross margin erosion, quarter over quarter, as well as the ramped-up marketing spend, which is what you see factored in our SG&A guidance. But overall, I think the bottom line, we're quite pleased with how we did in Q3, and we feel like we'll be delivering a solid Q4 as well, bottom line.
Speaker Change: A little bit more discounting during the promotional period that I called out during.
Speaker Change: During black Friday, cyber Monday window, and so that would cause a little bit of gross margin.
Speaker Change: Erosion.
Speaker Change: <unk> over quarter.
Speaker Change: As well as the ramped up marketing spend which is what you see factored in in our SG&A guidance.
Speaker Change: But overall I think the bottom line.
Speaker Change: Quite pleased with how we did in Q3, and we feel like we'll be delivering a solid Q4 as well as bottom line.
Speaker Change: Yeah.
Cynthia Williams: Hi, Stephen, it's Cynthia. I'll take the film slate. Certainly the big film for us in Q3 was Deadpool. While we shipped a lot of that in Q2, we continued to see strong uptake and people really responding to it both with the cosplay version of Deadpool and Wolverine for Pop Yourself, which, by the way, continues to show up on my top 10 items for Pop Yourself, even today. So that has done very well for us.
Speaker Change: Hi, Steve.
Speaker Change: Stephen It's Cynthia I'll take the film slate.
Speaker Change: The Big film for US in Q3 was dead pool, while we shipped a lot of that in Q2, we continued to see strong uptake.
Speaker Change: And people really responding to it both with the Cogs flavors, and Deadpool and Walgreens the pop yourself, it's by the way.
Speaker Change: Continued to show up on my top 10 items for pop yourself even today.
Speaker Change: That has done very well for us.
Cynthia Williams: The film for Q4 that our fans are most excited about is Wicked, and we had a good moment this week. We've got fantastic product across the Funko Pop line as well as Loungefly, and as the cast is out touring around going to various premieres, Ariana Grande landed in London decked out in pink and sporting the Glinda crossover bag by Loungefly, which was captured quite a bit. So there's a bit of excitement around that. We have had some of the cinemas order some of the bags to make sure they have them in their shops when people are coming for the opening weeks of the film.
Speaker Change: For Q4 that our fans are most excited about is wicked.
Speaker Change: And we had a good moment this week, we've got fantastic product across the funko pop line as well as my own supply.
Speaker Change: And as we are.
Speaker Change: The test is out touring around go into various premiers Ariane in Grande landed in London, I decked out in pain, and sporting that Glenda crossover backed by lounge fly.
As captured quite a bit so there's a bit of excitement around that we have had some of the cinemas.
Speaker Change: What are some of the bag to make sure they have them in their shops when people are coming for.
Speaker Change: The opening weeks of the films. So we've got a lot of excitement around with it.
Cynthia Williams: So we've got a lot of excitement around Wicked.
Speaker Change: Yeah.
Speaker Change: That's great. Thank you both.
Stephen Laszczyk: That's great, thank you both. Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Operator: As a reminder, for any further questions, please dial star 1 on your telephone keypad.
Speaker Change: As a reminder for any further questions. Please all star one on your telephone keypad now.
Linda Bolton-Weiser: And our next question will be from the line of Linda Bolton-Weiser with D.A. Please go ahead, you're live. Yes, hi. So I was wondering, in terms of the comments about consumers being more sensitive and responding more to promotion, I guess I'm a little surprised to hear that because in general your products are fairly low price point type of items and especially like your biddy pop is a lower price point even than the regular pop figures. So maybe you could give a little more color. Was it mostly sensitivity around the higher priced items that you sell, like some of the collectibles that are a little more pricey?
Speaker Change: Our next question will be from the line of Linda Bolton Weiser with D. A Davidson.
Speaker Change: Please go ahead your line is open.
Speaker Change: Yes, hi.
Speaker Change: I was wondering in terms of the comments about consumers being more sensitive they're responding more to promotions.
Speaker Change: I guess I'm, a little surprised to hear that because in general your products are fairly low price point type of items and especially like you're bidding part is is a lower price point, even though the regular pop figures. So maybe you could give a little more color is it was it mostly sensitivity around the higher.
Speaker Change: Priced items that you felt like some of the collectibles that are a little more pricing or I don't know can you just kind of maybe give some color like is it by category by type of property.
Linda Bolton-Weiser: Or, I don't know, can you just kind of maybe give some color, like is it by category, by type of property, anything like that?
Speaker Change: Like that.
Cynthia Williams: Hi, Linda. Yeah, I'll be happy to take that one. It's not quite on the price point. We still feel like we have a great product and an accessible price point in our core kind of pop offering. Like you called out, we do have a pretty nice range at this point from bitty pop, which is just a few dollars, to our standard pop, which is around $12 to $15. And then on the high end, we have our Mondo brand collectibles, which can be several hundred dollars. Really, what we saw is not so much on that kind of Mondo high end.
Speaker Change: Hi, Linda Yeah, I'll be happy to take that one.
Speaker Change: That's quite on the price point, we still feel like we have a great product at an accessible price point in our in our core offering.
Speaker Change: Like you called out we do have a pretty nice range at this point from <unk> pop, which is just a few dollars to our standard pop which is around 12 to 15 and then on the high end, we have our Mondo brand collectibles, which can be several hundred dollars.
Speaker Change: Really what we saw is not.
Speaker Change: Not so much on that kind of kind of Mondo high and we still see excellent sell through every time, they drop a product itself out.
Cynthia Williams: We still see excellent sell-through. Every time they drop a product, it sells out very quickly, so no concerns there. I think, you know, the bulk of our sales happens kind of in that average price point range, and that's where we saw consumers were just more responsive. I mentioned a sale that we ran in September called the Funko Funiversary Sale, and we saw a really great response to that, and we expect to see a continuation of that trend. And I'll just remind you, I mean, people think of our business as, you know, kind of a core business of collectibles, but over the last few years, we've really diversified our business, and we now have a wide range of products, and many of them are great for gifting.
Speaker Change: Very quickly so no no concerns there.
Speaker Change: I think the bulk of our sales happens kind of in that average price point range and Thats, where we saw consumers were just more responsive I mentioned the sale that we ran in.
Speaker Change: In September we called the Funko for anniversary sale, and we saw really great response to that.
Speaker Change: And we expect to.
Speaker Change: To see to see a continuation of that trend and I'll just remind you I mean people think of our business.
Speaker Change: Our core business as collectibles, but over over the last few years, we've really diversified our business and we now have a wide range of products and many of them are great.
Great for gifting and I think that a lot of people kind of wait for these holiday promotional periods to buy gifts and pop yourself definitely fits within that within that category and so that's that's just kind of a trend we've been seeing these days.
Cynthia Williams: And I think that, you know, a lot of people kind of wait for these holiday promotional periods to buy gifts, and Pop Yourself definitely fits within that category, and so that's just the kind of trend we've been seeing these days. I'll add just a little bit of color since you brought up Bidipop. We weren't seeing this on Bidipop. In fact, what we're seeing right now is as people like Target have been preparing for the holiday season, the sales of Bidipop, the POS has been quite strong. Target is still setting some of the 475 stores that they're doing a specific Bidipop set in, but the stores that are set are outperforming the other stores in their chain.
Speaker Change: All I'll add just a little bit of color since you brought up bidding pop we werent seeing some bidding pop.
Speaker Change: In fact, what we're seeing right now is as our.
Speaker Change: People like target.
Been preparing for the holiday season, the sales of bidding pop the Pos has been quite strong there.
Speaker Change: Target is still setting some of the 475 stores that theyre doing a specific city pop set and.
Speaker Change: But the stores that are set are outperforming the other stores in our chain. So we're very happy with the performance of duty part the price point range. There is probably helping but we certainly arent seeing the need for discounting there is it's more on the giftable parts.
Cynthia Williams: So we're very happy with the performance of Bidipop. The price point range there is probably helping, but we certainly aren't seeing the need for discounting there. It's more on these giftable POS.
Speaker Change: Yeah.
Linda Bolton-Weiser: Okay, and then I was kind of a bigger picture question just trying to gain a better understanding of your core competencies and your competitive moat in looking at like fanatics, which I'm not that. Do you view Fanatics as a competitor, or as a partner, or as a customer?
Speaker Change: Okay and then.
Speaker Change: I was this is kind of a bigger picture question, just trying to gain a better understanding of your core competencies and your competitive moat.
Speaker Change: And looking at like fanatics, which I'm not that familiar.
Speaker Change: Familiar with quite frankly, but it does strike me that they sell the sports related memorabilia and apparel in all of these items similar to some of the stuff you do so do you view fanatics as a competitor or as a partner or or or a customer like can you just describe kind of how you see yourself relative to today.
Speaker Change: Thanks.
Cynthia Williams: Great question, Linda, and we do see them as a partner. There are places where there's some similarities in what we sell. When we did not have pre-order capabilities, we would have done this Dodgers World Championship from the World Series with Fanatics, and now we're able to do it on our e-com site. But we do partner with them on various items. They sell, among other things, our NFL Santas that are always a hit for gifting at this time of year. Our lounge fly bags are also one of the items that are maybe complementary to what they sell.
Speaker Change: Great question, Linda and we do see them as a partner there.
Speaker Change: There are places where there are some similarities and what we sell.
Speaker Change: We did not have preordered gordy's, we would've done the.
Speaker Change: Dodgers' World Championship from the World series with Fanatics and now we're able to do it on our E Com site.
Speaker Change: We do partner with them on various items they they sell among other things our NFL Santos that are always a hit for gifting at this time of year.
Speaker Change: Our lounge supply bags are also one of the items that are.
Speaker Change: Maybe complementary to what they sell those clear stadium bags have been a really popular with a lot of our NFL fans. So I.
Cynthia Williams: Those clear stadium bags have been really popular with a lot of our NFL fans. So we see it as very complementary.
Speaker Change: We see it as very complementary.
Speaker Change: Okay.
Linda Bolton-Weiser: Okay, and then my last question has to do on the cost side. I know you did some, you know, some headcount reductions, and there were some cost savings. Can you remind us like What those savings are sort of planned to be expected in 2024? And then are there incremental savings or just carryover savings that we'll see in 2025? And going along with that, you mentioned wanting to bring in some other executives for these important roles. I'm just wondering if you need to build out more in terms of people skills or other types of, I don't know, infrastructure or something.
Speaker Change: Okay.
Speaker Change: And then my last question has to do on the cloud side.
Speaker Change: I know you did some you know some head count reductions and there was some cost savings can you remind us like.
Speaker Change: What those savings are sort of plan to be expected in 2024, and then are there incremental savings or just carryover savings that we'll see in 2025 and going along with that you mentioned wanting to bring in some other executives for these important roles.
Speaker Change: I'm just wondering if you need to build out more in terms of people skills or other types of I, dunno infrastructure or something and without giving guidance for next year, just kind of generally how do you think about the cost side and doesn't need bulking up or is there still room to improve the cost structure I guess.
Yves LePendeven: And without giving guidance for next year, kind of generally, how do you think about the cost side? And does it need bulking up? Or is there still room to improve the cost?
Speaker Change: Yeah.
Yves LePendeven: Sure, yeah, Linda, I'll take that. I mean, if you recall, we did several rounds of cost reductions last year. Some of the bigger ones happened towards the end of Q1 and then in Q3 of last year. So at this point, when you think about Q4 and then going forward into next year, we've kind of annualized a lot of the cost savings there. We do see within our SG&A, if you were to kind of look under the covers, we are reallocating some of the dollars that we've saved and ramping up marketing effort. That's been something that we've been, you know, really, really trying to focus on, not just this year, but over the past several years is promoting the Funko brand and raising awareness of Loungefly and Mondo.
Speaker Change: Sure Yeah, Linda I'll take that I mean, if you recall, we did several rounds of cost reductions last year some of the bigger ones happened.
Speaker Change: Towards the end of Q1 and then.
Speaker Change: In Q3 of last year. So at this point when you think about Q4, and then going forward into next year, we've kind of annualized.
Speaker Change: Lot of the cost savings there, we do see within our SG&A. If you were to kind of look under the covers we are reallocating some of the dollars that we saved.
Speaker Change: And ramping up marketing effort, that's been something that we've been.
Speaker Change: It really really trying to focus on not just this year, but over the past several years is promoting the funko brand and raising awareness of lounge fly in Mondo.
Yves LePendeven: And so we're reinvesting those dollars into marketing. I think, you know, we have continued to see some cost efficiencies coming out of our operations. More specifically, our warehouse labor is operating much more efficiently this year than it was last year. And we almost like every quarter see it now a continuous improvement in how we're, you know, fulfilling orders. And so we expect to continue to find efficiencies and reduce the operational costs as we head into next year as well.
Speaker Change: And so we're reinvesting those dollars into marketing I think we have continued to see some cost.
Efficiencies coming out of our operations and more specifically our warehouse on labor is operating much more efficiently. This year than it was last year and we almost like every quarter see it now of continuous improvement and how we are.
Speaker Change: Fulfilling orders and so we expect to continue to.
Speaker Change: Find efficiencies and reduce the operational cost as we as we head into next year as well.
Cynthia Williams: And I'll let Cynthia speak to the additional executives that we're currently recruiting for.
Speaker Change: And I'll, let Cynthia speak to the additional executives and that we're that we're currently recruiting for.
Cynthia Williams: Linda, one of the ways to think about this is there were some exits that happened around the time I came in that needed to be backfilled, and that's part of what's happening with these folks that I'm mentioning we're bringing in.
Speaker Change: But and that's one of the ways to think about this is there were some.
Speaker Change: Exits that happened around the time I came in.
Speaker Change: That.
Speaker Change: Needed to be back filled and thats part of whats happening with these folks that I'm mentioning we're bringing in I think that.
Cynthia Williams: I think that there is a piece of like us building up the capability, and I'll hint to you that what we're going to be talking about is a foundation to grow. And when we're talking to you in Q4 about our investments for 2025, that's going to be a lot about making sure we've got the right capabilities and the right talent to be able to grow. Part of that includes the ERP, part of that includes a customer data platform that will allow us to grow our direct-to-consumer business using things, capabilities like personalization.
Speaker Change: There is a piece of like US building up the capability and I'll I'll hand to you that what we're going to be talking about is a foundation to grow and when we're talking to you in Q4 about our investments for 2025, that's going to be a lot about making sure we've got the right capabilities and the right talent.
Speaker Change: To be able to grow.
Speaker Change:
Speaker Change: Part of that include the ERP part of that includes a customer data platform that will allow us to grow our direct to consumer business using things capabilities like personalization.
Linda Bolton-Weiser: And we do see with the investments we're making in fandoms like sports that we are going to need to do a different type of marketing than we have been doing in the past, hence the need to bring in someone with more of a brand and marketing background. But I think what you should hear is a commitment to continued profitable growth, and that includes continuing to look for call sites. Okay, great. Thank you. Thanks, Linda.
Speaker Change: And we do see with the investments, we're making in fandom like sports that we're going to need to do a different type of marketing than we have been doing in the past, hence the need to bring in someone with more of our brand and marketing.
Speaker Change: Background, but I think what you should hear is a commitment to continued profitable growth.
Speaker Change: And that includes continuing to look for cost savings.
Speaker Change: Okay.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thanks Rhonda.
Cynthia Williams: Thank you and with no further questions on the line at this time, I will now turn the call back over to management for any closing Thank you everyone for joining us on the call today. Thank you for your questions and we look forward to sharing our progress on our next call with you. Thank you very much.
Speaker Change: Thank you and with no further questions on the line at this time I will now turn the call back over to management for any closing remarks.
Speaker Change: Thank you everyone for joining us on the call today. Thank you for your questions and we look forward to sharing our progress on our next call with you.
Speaker Change: You very much.
Speaker Change: Yeah.
Operator: This will conclude Funko's 2024 third quarter financial results.
Speaker Change: This will conclude from 'twenty to 'twenty four third quarter financial results Conference call. Thank you to everyone, who is able to join US you may now disconnect your lines.
Operator: Thank you to everyone who was able to join us, you may now disconnect.
Speaker Change: [music].