This call is being broadcast live at investors.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 US Generally Accepted Accounting Principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Funko, Inc.'s press release announcing its 2024 fourth 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 direct comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today. One item to note: As disclosed in our Q4 press release, following correspondence with the SEC, we no longer adjust our non-GAAP financial measures for one-time costs related to inventory. This change in presentation increases adjusted net loss by $29.3 million and lowers adjusted EBITDA by $39.0 million for the year ended December 31, 2023. I will now turn the call over to Cynthia Williams. Cynthia?

Good afternoon, everyone. And welcome to Funko, Inc.'s 2024 fourth quarter financial results conference call. In 2024, we began laying the foundation for Funko, Inc.'s future. We stabilized net sales at over $1 billion and drove gross profit and adjusted EBITDA growth by more than $100 million. We gained momentum in Q4, delivering $294 million of net sales, which was at the top end of our guidance range and up over 1% year-over-year, thanks in part to direct-to-consumer growing to 29% of our overall sales. Gross margin reached 42% and adjusted EBITDA of $26 million exceeded expectations. Yves will provide a deeper look at our financial results shortly. I continue to be proud of our team's ability to exceed expectations and bring fandom to life, and Q4 exemplified this. We saw major wins across our key growth areas, particularly in sports, Pop Yourself, and Biddy Pop, where we continue to build momentum. In just the last quarter of 2024, we grew our core collectibles business over 10% and sales outside of the US grew by 23%. This excitement was echoed by our retail and distribution partners who we recently met with at three major global toy fairs in London, Nuremberg, and New York. Their overwhelming enthusiasm for our innovative products reaffirms the strength of our strategy and the opportunities ahead. One strong example was the feedback we received from retailers and media for Biddy City, a Biddy Pop expansion where fans can build the miniature world of their dreams, which we revealed at the New York Toy Fair this past weekend. I'm going to highlight wins in Q4 and couple them with examples of how we're driving results further in Q1. Sports product launches and new licensing agreements in the back half of 2024 opened exciting avenues to engage fans…

Thanks, Cynthia. Hey, everyone. Thanks for joining us today. For the fourth quarter, total net sales were $293.7 million, up 1% over the same quarter in 2023 and at the top end of our guidance range. Direct-to-consumer sales increased 20% year-over-year and comprised 29% of our gross sales compared with 25% in last year's Q4. Sales in Europe were up more than 20%, driven by strong seasonal performance at our key retail partners across our G5 markets. This helped offset softness in the US, where some mass retailers limited purchases to end the year with leaner inventory positions. Gross profit was $124.4 million, and gross margin was 42.4%. Last year's Q4 gross profit was $109.4 million, equal to 37.6%, meaning we delivered a 480 basis point improvement. This was driven by a more favorable sales mix, lower product costs, and reduced freight and inventory reserve charges. SG&A expenses were $102.8 million, slightly above our guidance range, largely due to higher-than-anticipated marketing expenses to help fuel DTC sales. SG&A expenses included $1.6 million of nonrecurring charges compared with $8 million in Q4 2023. Adjusted net income was $4.4 million, or $0.08 per diluted share, well above our guidance range for the quarter. This marks a $4.3 million improvement over $0.1 million in Q4 of 2023. And finally, adjusted EBITDA was $26.3 million, which also was well above our guidance range. For the full year, net sales were $1.05 billion compared to $1.1 billion for 2023. Adjusted EBITDA significantly improved to $94.7 million compared to negative adjusted EBITDA of $11.8 million for 2023. Turning to our balance sheet. At December 31, we had cash and cash equivalents of $34.7 million, which is after paying down $40.6 million of debt in the fourth quarter. Our total debt was approximately $182.8 million, down considerably…

Thanks, Yves. In summary, we ended 2024 on a positive note with a better-than-expected overall financial performance for the quarter. I'm confident in our ability to navigate the current complexities and deliver our future growth propelled by our strengthened team, our strategic roadmap, and our dedicated fans. With that, we'll open the call for questions. Operator?

Thank you. We'll now open the line for questions. Again, to ask a question, please dial star one. The first question is from the line of Stephen Laszczyk with Goldman Sachs. Stephen, your line is now open.

Hey. Great. Thanks for taking the questions. Maybe to start off here, maybe for both Cynthia and Yves, if you want to jump in as well. I'm curious if you could speak a little bit more about the assumptions you're underwriting and your guidance for the year. I know you called out tariffs and consumer sentiment. Also seems like there's some green shoots elsewhere in the business, you know, perhaps on the direct-to-consumer side and sports side. I was wondering if you could maybe isolate some of the headwinds and tailwinds you're expecting to see this year from these factors and if there were upside or downside risks to the guide for the year, where you think those upside and downside risks might lie?

Hi, Stephen. It's Cynthia. Thanks for the question. You're right. There's a lot of green shoots that we're seeing right now that we are excited about. In particular, I'll start with the most recent of the reaction we got at New York Toy Fair this weekend to the Biddy City that we revealed. I'm sorry I missed you when you came by the booth. I'd already left. But I hope you enjoyed seeing it as well. You can see that it's a mix of licensed IP and our own IP that allows you to build the miniature city of your dreams and really just display your fandom the way you'd like to. And I have to say I had the opportunity to show it to several of our major retailers and got phenomenal feedback about it during the meeting. So that's certainly one green shoot. Europe's POS is probably the strongest. Seeing every single major retailer in Europe be at double digits in POS is reason to believe about the strength of our brand and our products. A lot of what you hear us talking about that we're going to be doing in the US retail is based off what we see working there. If you've ever had a chance to go into an HMV in London, you've certainly seen the strength of the fixtures and the display. It feels like you're in a Funko, Inc. shop. It's just beautifully executed. And we've now hired a trade marketing person to help us do similar things in our meetings with the retailers. You know, I'd say right now we have a list of requests longer than what we're probably able to do in a given year. So we'll be prioritizing some of those, but we're excited to elevate that. I'd say…

Sure. Hey, Stephen. Yeah. So as I mentioned, from China, which would be the ones that, you know, we've incorporated the 20% tariffs that would impact us. As we've mentioned before, we have roughly a third of our global product purchases coming from China. We've incorporated both the actual, you know, dollar amount from the tariffs as well as the impact that we're seeing on the US consumer because, as Cynthia mentioned, in EMEA, we're doing quite well. I would say that, you know, it's obviously a very fluid situation. We're seeing new headlines and announcements even as recently as a couple of hours ago about delays in the implementation of some of the tariffs. So to the best of our ability, we've kind of given the range. Given what we know about the tariffs and what we see with the US consumer, obviously, upside and downside. You know, if there were, you know, exemptions, if there were delays, that would obviously help us if we see a rebounding of consumer sentiment as well. To the downside, obviously, further kind of, you know, tariff escalation would be to the downside. But we're comfortable kind of navigating what we know of today. As I said, we have a number of mitigation strategies in place. And we've proven really over the last couple of years that we're able to navigate complex challenges and be resilient. And that's really thanks to the power of our brand and the support of our fans.

That's great. Thanks for that. And then maybe second, you know, Cynthia, Toy Fair this year, one of the things that certainly stood out to us was the focus on sports. I think we've seen some nice momentum over the last year from you guys on that. I think you mentioned in your prepared remarks that it's only about 4% of revenue today. Just curious where you see the sports strategy going over the next, say, you know, three to five years. How big of a business could that be for you? And then maybe as a follow-up to that on the margin profile, the sports category, is there any way you can maybe size a margin profile of sports items for you and or maybe how that compares to the other licensed IP you have in the marketplace today?

Yeah. Thanks for that. I'm glad you enjoyed the booth. What I tell you is we're seeing a really positive reaction to the activations we're doing both in our mainline product as well as some products like the NFL advent calendar, which was one of our top-selling products in Q4. So we're seeing sports work across the product lines. As you saw at the Toy Fair, we've got some fun ways in Biddy City for you to create maybe your ideal soccer game or your ideal football game. And so I think that'll be a lot of fun, and we're looking forward to that. I'm very excited about some of the other sports activations that are already planned that you'll hear us talking about later this year, and that's regional capsules we mentioned. We've identified four cities. The first one will be Seattle. That we can do a lot of testing and learning in our hometown. But you'll see that be a celebration of all the professional sports in a given city so that you can have the fans be able to celebrate the legends, the current athletes, their love of the team. There'll be some unique experiences along the way. So we're really excited about that. And I really am looking forward to us doing more with other international teams and leagues. So I'd say the runway there is long. You know, the sports memorabilia market, I think I said in the prepared remarks, is like a $34 billion market segment, and we are just getting started. So I don't have a percentage to share with you today on how big I think that can be, but you'll see that really gaining momentum for us in the back half of the year and into 2026. In terms of the margin profile, it will really—it's more or less the same as the rest of the business. You know, in Pop Yourself, when we're doing this, we're paying our licensing fee just on the accessory, and so that still means that the Pop Yourself is a much higher margin than our mainline Pop products, but you should expect the margin profile on these to be really similar to the rest of our business.

Great. Thank you.

You're welcome. Thanks for the question.

Thank you. The next question is from Linda Bolton Weiser with T.A. Davidson. Linda, your line is now open.

Yes. Hi. So I was curious. You mentioned that US retailers, I guess maybe you've said even mass retailers, just really didn't order very much, I guess, in the fourth quarter. Can you give us a sense for how your POS is, you know, at mass and then more broadly, like because you serve a lot of specialty type retailers. So is your POS declining or is it flat or is it growing? And then what kind of a gap then was there between your sell-in and your sell-through in the US retail channel in the fourth quarter?

Hi, Linda. Thanks for the question. You know, the good news is that our POS in the fourth quarter was growing. And I'm not going to split it by channel, but clearly, you know that our mass channels are sizable. None of them have more than 10% with Amazon being the largest at about 8%. But I'll give you a sense of how the POS is going. If we use our internal measures, which is the wholesale customers who report to us, plus our direct-to-consumer, our POS in the fourth quarter was up 4% year-over-year. Now that's global, so I'm going to split it for you a little bit. In the US, it was 1%. And it was double-digit, I think the number was 17%, in Europe and, you know, the rest of the world. So we were seeing this strength in Europe even as we closed out the year. So our sell-in and sell-through in mass in the US, what I tell you is there wasn't—it wasn't that there was this massive gap so much as as they went into the end of the season, they were really working towards ending up with very healthy inventory levels, which they really have. You would, when you look at where they're at, we're not seeing the need for a lot of significant discounting from them either. Now if you were looking at Walmart's numbers, you'd see it be a little bit up because of Biddy Pops. They have to carry a higher inventory level to keep the impulse single Biddy Pops in stock across the chain. But it's, you know, it's just a matter of we're all ending with really healthy inventory. And now with the US consumer showing ability to tighten their wallet a little bit and having lower foot traffic in both Target and Walmart, you know, we're seeing the softening of US consumer sentiment.

Okay. That's very, very helpful. Thank you. And then so then when I look at your guidance, the first quarter kind of a bigger decline year-over-year in sales. So I guess that would be what exactly? Is fairly healthy and retailers have pretty lean inventory, like why is the decline getting so much bigger in the first quarter?

I'd say it's two things that I'll highlight for you. The first one, you've probably heard some of our major retailers make public comments about their foot traffic and how it's lower and been negatively impacted, and that we are seeing that impact their replenishments. So that's item one. I'd say and we are seeing the US consumer being more cautious about their spending in our direct-to-consumer channel. I think you put out a report about this yesterday. So, you know, you're seeing our credit card data. You were spot on about it. What we're seeing is people are just being more cautious. We're seeing slightly lower, you know, average order values when they are purchasing. We're just a bit softer. But then again, I look at Europe, and it's so strong with the double-digit POS sales, you know, in every major retailer. So it really makes me feel like we are dealing with the macroeconomic environment that we're going to have to navigate through, and so we'll be doing that. I'll tell you the second piece I was going to highlight for you that is also impacting that POS credit card data you spotted. As the tariffs have been announced, we've seen some disruption in the border crossings from Mexico into the United States as the Mexican government is trying to make sure that they are compliant with whatever the rules of the moment are about, you know, the tariffs. And our Pop Yourself is built in Mexico. And so we've seen delays in the trucks getting across to the extent that we have started having to turn expedited shipping on and off to protect the consumer experience on that, and it's, you know, it's a short-term thing, but it's the right thing for the customer experience long-term and a product that's as new as Pop Yourself is. So that's having a bit of an impact for us as well.

Okay. So on that topic then of Mexico and the tariffs, so, I mean, are you saying that you're not—your Pop Yourself, which is only assembled in Mexico, your guidance doesn't include the Mexico tariff on the Mexican products brought in, or is it the de minimis rule or what are you thinking there?

Well, actually, this is what we have in the guidance. And so I just want to be clear that this is about the disruption at the border more than it's the tariffs. So we bring the components for Pop Yourself over, which are made in China. So we've got within our guidance the tariff from China on the Pop Yourself components. Now when the product is compiled or made in Mexico, we don't have an additional tariff on that as it comes back across the border. But the disruption at the border with the trucks being backed up and them trying to assess what they should let through and shouldn't let through has impacted our delivery times to our customers and therefore how much we're spending, you know, on marketing and whether or not we are allowing—well, when we pulse the marketing or not, and whether or not we have on the expedited shipping. With a giftable product, you know, it's a problem when the gift is late.

Yeah. Okay. Okay. I got it. I'm in Mexico. So then again, with the tariffs and everything, does your guidance include any mitigating actions that you're taking, like any potential price increases? Like, what are you thinking along those lines in terms of taking some pricing to offset?

It does, actually. We are looking at all levers and all possibilities for that. When I was at New York Toy Fair, I was meeting with some of our vendors. We were talking about some of the cost-sharing. We were talking about some opportunities to shift more of our production. You know, we've been working on the diversity. And pricing adjustments are a lever for us, and so we don't have anything to announce on that today, Linda, but it's certainly incorporated into our guidance.

Okay. Sounds good. Okay. I'll leave it there for now. Thank you very much.

Thank you. We appreciate the questions. Thank you.

There are no further questions. I'll hand the call back over to the management team for concluding remarks.

Well, thank you everyone for joining us on the call today, and we look forward to sharing our progress with you on the next call. Thank you very much.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.