Funko, Inc. (NASDAQ:FNKO) Q1 2023 Results Conference Call May 4, 2023 4:30 PM ET
Company Participants
Ben Avenia-Tapper - Director of Investor Relations
Brian Mariotti - Chief Executive Officer
Steve Nave - Chief Operating Officer and Chief Financial Officer
Conference Call Participants
Andrew Uerkwitz - Jefferies
Linda Bolton-Weiser - D.A. Davidson
Gerrick Johnson - BMO
Operator
Good afternoon. And welcome to Funko’s Conference Call to discuss Financial Results for the First Quarter of 2023. At this time, all participants are in a listen only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, this call is being recorded.
I'll now turn the call over to Ben Avenia-Tapper, Director of Investor Relations to get started. Please proceed.
Ben Avenia-Tapper
Thank you, and good afternoon. With us on the call today are Brian Mariotti, Chief Executive Officer; and Steve Nave, Chief Operating Officer and Chief Financial Officer.
Before we begin, I’d like to remind everyone that during the course of this conference call, management will discuss forecasts, targets and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during the call, important factors that may affect our future results are described in our most recent SEC reports and today’s earnings press release. In addition, we will refer to non-GAAP financial measures during the discussion. Reconciliations to their most directly comparable US GAAP financial measures and supplemental financial information can be found in the earnings press release and 8-K that we released earlier today. All of these items plus a visual presentation that investors can consult to follow along with this discussion are available on our Investor Relations Web site, investor.funko.com.
I'll now turn the call over to Brian.
Brian Mariotti
Good afternoon. And thank you for joining us today. It's been a productive quarter at Funko and we're excited to update you on all the ongoing progress we have made. While our priority continues to be improving our operations, we haven't lost sight of all the opportunities we have to continue to grow the brand. I'm pleased to report that we are ahead of schedule with respect to cost reductions and operational improvements as we've made remarkable strides across the business. Top line results came in at the high end of our guidance and our strong performance on the operating initiatives drove our Q1 adjusted EBITDA outperformance by more than $30 million. Steve will provide additional details on the progress we have made on all of our operating initiatives shortly. Enthusiasm for the brand remains high despite a challenging retail climate. Between our exceptional direct-to-consumer growth, the strong performance of our recent product launches and the early success of our newest commercial partnership with Fanatics, we remain confident in the ongoing passion and loyalty of our fans. I'll start with D2C, which grew 61% year-over-year and now represents approximately 17% of net sales. Our D2C growth continues to eclipse the e-commerce industries single digit growth rate and highlights the power of our brand. This channel is important for several reasons. First, the strength of our D2C business represents a very strong indication of our fans’ continued enthusiasm for the brand. In the channel which we control inventory levels and product newness, demand is at an all time high. Our data suggests that among avid collectors, many purchases that may have occurred at a retail partner in the past are migrating to funko.com.