Following the preliminary reports that it hit an unusual snag in the fourth quarter of last year, Washington-based Funko reported a 16% full-year sales increase for 2019 despite the Q4 drop.
The company made famous by its ever-growing selection of Pop! Vinyl figures reported a net sales decline of 8.4% to $213.6 million in the fourth quarter of 2019, down from $233.2 million in the fourth quarter of 2018. Gross profit decreased by 25.7% in the fourth quarter due to the previously reported one-time write-down due to the disposal of $16.8 million in “slower-moving inventory to increase operational capacity.” For the year, net sales increased 16% to $795.1 million versus $686.1 million in 2018. Gross profit increased 11% to $282.5 million.
“Full-year top-line growth of 16% was driven by the underlying strength of Pop! Vinyl, growth in key geographic markets and the introduction of new products and categories,” says Funko CEO Brian Mariotti. “Although we closed the year with a difficult fourth quarter, we remain confident in the underlying strength of our business model and have a number of initiatives underway to drive growth in 2020. We have an exceptional line-up of games, toys, and figures coming to market in the second half, unique evergreen retail programs and new products and partnerships in underpenetrated genres, including anime, sports, and music.”
The company cites a 20% increase in active properties as contributing to the full-year sales boost. Active properties spiked to 804 last year versus 672 in 2018. Sales in the U.S. increased 12% while international sales grew 23% thanks to strong performance throughout Europe. Loungefly continues to perform well, driving a 21% increase in Funko’s “other products” category.
“Funko’s deep roots and expertise in all things pop culture provides us with a strong foundation for growth and expansion,” Mariotti says. “As the proliferation of content continues to occur across pop culture, we believe Funko will be at the forefront. We are focused on building for scale — ensuring we have the tools and talent in place to drive a high level of execution, support our growth and deliver long-term shareholder value.”
Looking ahead, Funko is diversifying its product base with new offerings and original IP that was recently shown at Toy Fair New York. Funko Animation Studios and Funko Games — created by the acquisition of Forrest-Pruzan Creative are two recently added divisions that are poised to support overall growth, and the company has seen enthusiasm surrounding its second flagship store, which opened in Hollywood, California last fall. The company expects single-digit sales growth for this year, though there is growing concern involving the spread of the novel coronavirus (COVID-19).
“Looking at 2020, we expect to achieve top-line growth in the range of 6% to 9%, and adjusted EBITDA margins of approximately 14%, which includes our current assumptions regarding the impact of the coronavirus crisis,” says Jennifer Fall Jung, Funko’s CFO. “Our adjusted EBITDA outlook reflects strong gross margin performance, offset by the investments we’re making to enhance our operations, drive efficiency and build scale in our model.”
