Funko Inc. reported its financial results for the second quarter ended June 30, 2018.
Highlights include a net sales increase of 32 percent to $138.7 million. Gross margin increased 120 basis points to 38.2 percent. Income from operations increased 125 percent to $9.1 million, and net income increased $5.4 million to $0.9 million. Adjusted pro forma net income improved $1.9 million to $3.5 million. Adjusted EBITDA increased 12 percent to $19.9 million.
Net sales increased 32 percent to $138.7 million in the second quarter of 2018, compared to $104.7 million in the same period last year. The increase was primarily driven by the continued expansion of products and properties in the company’s portfolio.
In the second quarter of 2018, the number of active properties increased 26 percent to 510 from 404, and net sales per active property increased 5 percent. On a geographical basis, net sales in the U.S. increased 33 percent to $97.1 million, and net sales in all foreign countries increased 32 percent to $41.6 million primarily due to growth in Europe. On a product category basis, net sales of figures increased 31 percent to $114.5 million, and net sales of other products increased 42 percent to $24.2 million versus the second quarter last year.
Gross margin in the second quarter this year increased 120 basis points to 38.2 percent, compared to 37 percent in the second quarter of 2017. This was primarily due to higher product margins in Europe, which includes a positive impact of $1.1 million of inventory step-up costs related to the Underground Toys acquisition in the second quarter of 2017, partially offset by higher royalty expenses from the mix of properties sold.
Expenses increased 33 percent to $34.2 million in the second quarter of 2018, compared to $25.8 million in the same period in the year prior. The majority of the increase was driven by growth in the business, including expenses associated with the company’s direct distribution model in Europe, its Loungefly operations, and Funko Animation Studios. More specifically, personnel and commission expenses increased $5.9 million, primarily driven by the buildout of the company’s sales, operating and administrative teams worldwide, and facilities.