In the latest earnings call, Funko, Inc. (FNKO) disclosed its financial results for the third quarter of 2024. CEO Cynthia Williams announced net sales of $293 million, a decrease from the previous year but in line with company guidance. Despite the sales dip, Funko surpassed expectations with a gross margin of 41% and adjusted EBITDA of $31 million.
The company has revised its full-year net sales forecast to a range of $1.037 billion to $1.05 billion and raised its adjusted EBITDA projection to between $85 million and $90 million. Funko's direct-to-consumer (DTC) sales are on the rise, particularly in Canada, and the company is ramping up marketing efforts ahead of the holiday season.
Key Takeaways
- Net sales for Q3 2024 stood at $293 million with a gross margin of 41% and adjusted EBITDA of $31 million.
- Full-year net sales outlook adjusted to $1.037 billion to $1.05 billion, with an increased adjusted EBITDA forecast of $85 million to $90 million.
- DTC sales in Canada showed growth, with overall DTC sales expected to increase year-over-year in Q4.
- Funko is focusing on expanding the Pop! Yourself line and enhancing DTC sales channels.
- Liquidity decreased to $83.5 million, with inventory buildup in anticipation of peak shipping months.
- Management remains cautious about wholesale orders due to changing consumer spending patterns but is optimistic about DTC sales improvement in Q4.
- The company is actively recruiting for product development and marketing expertise.
Company Outlook
- Q4 2024 guidance includes net sales between $280 million and $294 million, with gross margins of 38% to 40%.
- SG&A expenses are projected to be between $93 million and $99 million for Q4, with adjusted EBITDA ranging from $17 million to $22 million.
- Management plans to increase promotional activities, potentially leading to a decline in gross margins due to higher marketing expenditures.
- The company is diversifying its supply base to mitigate tariff risks, with one-third of products currently manufactured in China.
Bearish Highlights
- Decreased liquidity from $101.6 million to $83.5 million.
- Softer order book for the wholesale channel, reflecting caution among customers about consumer spending.
- Anticipated slight erosion in gross margin for Q4 due to increased discounting and marketing expenses.
Bullish Highlights
- Overperformance in gross margin in Q3 due to lower-than-expected freight costs and duties.
- Key product launches, such as "Deadpool" and upcoming "Wicked" merchandise, expected to drive sales.
- Strong sales anticipated for the Bitty Pop! line during the holiday season.
Misses
- Net sales for Q3 2024 were down from the previous year, although within company guidance.
Q&A Highlights
- Management acknowledged consumer sensitivity to promotions, particularly for mid-range priced items.
- Funko views Fanatics as a partner, not a competitor, and is collaborating on various product offerings.
- Efforts to recruit executives to enhance capabilities and support growth are ongoing.
Funko continues to focus on strategic initiatives to drive growth and profitability. The company's emphasis on expanding its DTC sales and product lines, such as the Pop! Yourself and Bitty Pop! lines, aligns with its goal of strengthening its market position. Despite the challenges in the wholesale channel and global market uncertainties, Funko's proactive measures in cost reduction, operational efficiency, and marketing strategies demonstrate its commitment to navigating the shifting retail landscape and delivering value to its stakeholders.
InvestingPro Insights
Funko's recent financial performance and strategic initiatives align with several key metrics and insights from InvestingPro. The company's market capitalization stands at $602.51 million, reflecting its position in the collectibles and entertainment merchandise industry.
One of the InvestingPro Tips highlights that Funko has seen a significant return over the last week, with data showing an 8.14% price total return in the most recent week. This aligns with the company's positive outlook and strategic initiatives discussed in the earnings call. Additionally, the strong return over the last three months, with a 41.44% price total return, suggests growing investor confidence in Funko's turnaround efforts.
However, it's important to note that Funko is currently not profitable over the last twelve months, as indicated by another InvestingPro Tip. This is reflected in the negative operating income of $27.93 million for the last twelve months as of Q2 2023. Despite this, the company's revised EBITDA forecast and focus on expanding direct-to-consumer sales could potentially improve profitability in the coming quarters.
The revenue growth data from InvestingPro shows a 3.18% increase in quarterly revenue for Q2 2023, which is consistent with the company's reported sales performance and cautious optimism for the upcoming holiday season.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics that could provide deeper insights into Funko's financial health and market position. Currently, there are 10 additional InvestingPro Tips available for Funko, which could offer valuable perspective for those considering an investment in the company.
Full transcript - Funko Inc (NASDAQ:FNKO) Q3 2024:
Operator: Good afternoon and welcome to Funko's 2024 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 the time. Please be advised that reproduction of this call in whole or in parts is not permitted without written authorization from the company. As a reminder, this call is being recorded I will now turn over the call to Funko's Director of Investor Relations, Rob Jaffe. Please go ahead.
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. 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 release. Additional information concerning factors that could cause actual results to differ materially is contained in our most recently filed SEC reports. 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 may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Funko's press release announcing its 2024 third quarter financial results for the company's reasons for presenting non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today. With that, I will now turn the call over to Cynthia Williams. Cynthia?
Cynthia Williams: Thanks Rob. 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 range. Gross margin was 41% and adjusted EBITDA was $31 million, both of which exceeded the top end of our guidance range. 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 holidays. 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 range. 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. Yves will discuss the third quarter financial results and our guidance in more detail in just a moment. On the last call, I told you about my initial impressions of the company and the team. Since then, we realigned certain responsibilities of the senior management team. Andy Oddie, our Chief Commercial Officer is taking on Global Sales and Business Development efforts in addition to overseeing our licensing relationships. 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. And Johanna Gepford ,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. 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 fandoms. 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. 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. In the interim, I'm pleased that we've already begun executing several elements of the plan. While these may not be significant revenue drivers this year, they are representative of the approach we are taking to grow fandoms and expand our points of distribution. 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 launch through the end of Q3, more than 40% of Pop! Yourself sales included NFL accessory packs and total daily sales increased by more than 150%. We anticipate a new round of customer interest around the NFL playoffs and the Super Bowl. Next (LON:NXT), CeeDee Lamb, a Pro Bowl wide receiver for the Dallas Cowboys and holder of several NFL records for receptions at only 25 years old has 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. And within 20 minutes of the last out, we went live with a limited edition collectible Pop! Los Angeles Dodgers 2024 World Series Champions 5-Pack on funko.com. This preorder item will only be available for 2.5 weeks through November 18. In the area of music, we launched a preorder Reba McEntire 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 six million people. On a recent episode of the voice, Reba gifted an extremely limited edition Funko Pop! of herself to the contestants who chose to join our team. I'd like to briefly mention some recent successes with our outbound licensing program which elevates Funko's brand equity and delivers royalty income. 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 1010 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 US within its launch week. It will soon be released on both PlayStation 4 and Nintendo Switch (NYSE:SWCH) just in time for the holidays. Second, we recently partnered with the Walt Disney Company (NYSE:DIS) 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 Dreamlight Valley video games are currently able to enjoy wearing in-game some of their favorite Loungefly backpacks and bags. 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, Ferrero has shipped over one billion Funko branded Kinder Joy eggs. This is a remarkable milestone and a testament to both companies' reach and brand strength. We are excited about our future with the Ferrero team and we're in discussions to expand and extend the partnership. 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. I'm also pleased to share that earlier this morning the Toy Association announced that Pop! Yourself is a finalist for the prestigious 2024 Collectible of the Year award. We are honored that Pop! Yourself has been recognized for its uniqueness and creativity. And in the area of delighting our core fans we have expanded our collaboration with Warner Bros. to allow Pop! Yourself to be customized with Harry Potter accessories. Millions of devoted Harry Potter fans can now combine personalize and Pop! Yourself with their passion for Harry Potter. You are the first to hear this. The official launch starts tomorrow. The last two items DTC 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. We know how to serve our core fans and we are developing the muscle to attract and serve new fans. With that, I will now turn it over to Yves to take you through the financials. Yves?
Yves LePendeven: 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's Q3. 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%. 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 range. 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 range. Turning to our balance sheet. At September 30, 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 inventory. 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 months. Our total debt was approximately $223.4 million marginally down from $223.9 million at the end of the second quarter. And total company liquidity decreased to $83.5 million from $101.6 million at the end of last quarter. Before I provide our outlook a bit more detail on our direct-to-consumer sales. 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 holidays. 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 holidays. 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 guidance range. Again, our profitability is another story. Our improved gross 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 range. 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. Cynthia, that's it for our financial results. Back over to you.
Cynthia Williams: Thanks Yves. 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 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. With that, we'll open the call for questions. Operator?
Operator: Thank you. [Operator Instructions] And our first question will be from the line of Eric Wold with B. Riley. Please go ahead. Your line is open.
Eric Wold: Thank you. Good afternoon, everyone. Appreciate taking the questions. A few questions. I guess one talking about the cautiousness, you're seeing. I can understand wholesalers remaining cautious in this environment and maybe being a little tepid on the order book. From those that you have access to POS, are you seeing anything the POS that would help corroborate their cautiousness? Or is it more on the retailer side? And then on DTC, becoming more responsive to promotional activity, maybe dive into that a little more if you can. Was that something that you were seeing slowing trends in pumped up promo to reverse that? Or maybe kind of what drove that? I mean the guidance -- GM gross margin guidance is still in that 38% to 40% range. It seems like you're still able to kind of push through that even with the additional promo.
Yves LePendeven: Eric, great to speak with you again. I guess, I'll start by taking a few of these questions. So first on the POS trends, 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 US, we saw that that was down low-double-digits versus EMEA, which is going pretty strong and we saw double-digit growth. So what we're seeing in the US market, I think to draw a comparison with what we saw with our DTC consumer, is that it seemed like sales were kind of slow during full price periods. 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 -- 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 (NASDAQ:MNDY) period. And I think that's the kind of cautiousness that we're seeing from buyers that kind of got this wait-and-see approach to see how that period of the holiday goes. So I kind of addressed a little bit the DTC. I'd say 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 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 DTC sales to rebound to growth year-over-year, a higher portion of them will follow 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. So I think those would be kind of the main drivers and hopefully, I've hit all of the questions that you asked there.
Cynthia Williams: I think I'll just add a little bit of color on the DTC side more from a market perspective. What we're seeing is that major e-commerce sites like Amazon (NASDAQ:AMZN) are actually starting their holiday sales the week ahead of Black Friday, like on November 22. Certainly, partly in response to the shift in the calendar but we are seeing it go from 11/20 to 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.
Eric Wold: Got it. And if you do see strong trends during these kind of sale periods in the Black Friday, Cyber Monday around then is that something – and maybe retailers get a little more enthusiastic on that. Is that something you'd be able to address with additional shipments into the year-end? Or is that something more that we look to early 2025 to be a beneficiary?
Cynthia Williams: We were just looking at our cutoff dates and we are extending – 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. This is why eventually I want to open a 3PL on the East Coast that would add at least another three days for more than 50% of the US. So it's – we can extend it but not as much as we'd like to be able to.
Eric Wold: Perfect. And then just final question if I may. Coming off the election earlier this week and Trump's victory and his rhetoric on tariffs. Maybe give us your thoughts on potential impact if there are tariffs coming in kind of where you are in terms of your mix from China or affected regions?
Cynthia Williams: Yes. Thanks for that question. As we've been working on our strategy, we've been doing some scenario planning and scenarios around the US 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. And in fact for the – at the company level, it's about one-third of our products are actually manufactured in China. And of that a little less than 10% as part of our Loungefly 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 in 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. Now that said, that's the tariff side of it. 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 tariffs if they are enacted we might have some challenges that we'll need to overcome with that and the team is working on plans for that now.
Eric Wold: Very helpful. Thank you both. Appreciate it.
Cynthia Williams: Thank you.
Yves LePendeven: Thank you.
Operator: Our next question will be from the line of Stephen Laszczyk with Goldman Sachs. Please go ahead. Your line is open.
Stephen Laszczyk: Hey. Great, Thanks for taking my question. Maybe two from me, 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. So it 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? 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 theatrical slates 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.
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 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 good margins for that channel. We're able to have better-than-expected inventory reserves in the quarter. There were a couple of other drivers. In cost of goods we also saw a little bit lower than anticipated freight costs as well as duties. So that led to the overperformance on gross margin in Q3. What I'd say in Q4 is that, we also expect to have a little bit more discounting during the 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.
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 continue 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. 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 products across the Funko Pop! as well as Loungefly. And as we're -- 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 the in their shops when people are coming for the opening weeks of the film. So we've got a lot of excitement around Wicked.
Stephen Laszczyk: That's great. Thank you both.
Cynthia Williams: Thank you.
Operator: [Operator Instructions] Our next question will be from the line of Linda Bolton Weiser with D.A. Davidson & Co. Please go ahead. Your line is open.
Linda Bolton Weiser: Yes. Hi. So I was wondering in terms of the comments about consumers being more sensitive and responding more to promotions. 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 Bitty Pop! is a lower price point even than the regular Pop! figures. So maybe you could give a little more color? Is it -- was it mostly sensitivity around the higher-priced items that you sell like some of the collectibles that are a little more pricey? 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?
Yves LePendeven: Hi, Linda. Yes, 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. We still see excellent sell-through. Every time they drop a product it sells out very quickly. So no concerns there. I think 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 Funniversary 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 kind of the core business is 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. 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 category. And so that's just the kind of trend we've been seeing these days.
Cynthia Williams: I'll add just a little bit of color since you brought up Bitty Pop! We weren't seeing this on Bitty Pop! In fact what we're seeing right now is as people like Target (NYSE:TGT) have been preparing for the holiday season. The sales of Bitty Pop! the POS has been quite strong. They're still -- Target is still setting some of the 475 stores that they're doing a specific Bitty Pop! set in. But the stores that are set are outperforming the other stores in their chain. So we're very happy with the performance of Bitty Pop! 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 Pops!
Linda Bolton-Weiser: Okay. And then 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. In looking at like Fanatics which I'm not that familiar with quite frankly but it does strike me that they sell sports related memorabilia apparel and all these items similar to some of the stuff you do. So do you view Fanatics as a competitor or as a partner or a customer? Like can you just describe kind of how you see yourself relative to their offerings? Thanks.
Cynthia Williams: Great question, Linda. And we do see them as a partner. There are places where there is some similarities in what we sell. When we did not have preorder 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 Santos that are always a hit for gifting at this time of year. Our Loungefly bags are also one of the items that are maybe complementary to what they sell. Those clear stadium bags have been really popular with a lot of our NFL fans. So we see it as very complementary.
Linda Bolton-Weiser: Okay. And then my last question has to do on the cost side. I know you did 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 this 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? And without giving guidance for next year, just 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 structure, I guess? Thanks.
Yves LePendeven: Sure. Yes, 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 in -- 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 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. 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 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 fulfilling orders. And so we expect to continue to find efficiencies and reduce the operational costs as we head into next year as well. And I'll let Cynthia speak to the additional executives 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. I think the -- 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. 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 cost savings.
Q – Linda Bolton-Weiser: Okay. Great. Thank you.
Yves LePendeven: Thanks, Linda.
Operator: 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.
Cynthia Williams: 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.
Operator: This will conclude Funko's 2024 Third Quarter Financial Results Conference Call. Thank you to everyone, who was able to join us. You may now disconnect your lines.
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