Good afternoon, and welcome to Funko’s 2025 First 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 that time. Please be advised that reproduction of this call in whole or in part, is not permitted without written authorization from the company. As a reminder, this call is being recorded. I will now turn the call over to Funko’s Director of Investor Relations, Rob Jaffe. Please proceed.

Hello, everyone, and thank you for joining us today to discuss Funko’s 2025 first 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 2025 first 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. I will now turn the call over to Cynthia Williams. Cynthia?

Thanks Rob. Good afternoon everyone and thank you for joining us. Let me start with some context. We came into 2025 with a clear eyed view. The first half of the year would be about setting a stronger foundation for Funko, attracting new fans with intentional diversification into sports, gaming and music and selling where the fan is through improved retail opportunities and experiential engagements, all of which are designed to delight new and core collectors. But the pace and intensity of change in the macro environment has accelerated. It’s amplified existing challenges and compressed the timeline for making tough, necessary decisions. Even so, our strategy is sound and more importantly we’re executing it. We’re staying disciplined, moving with speed and adjusting in real time to protect the business while continuing to invest in what’s working. That resilience showed up in Q1. We delivered net sales of $191 million in line with guidance. Gross margin was 40% and adjusted EBITDA came in at a negative $5 million, both ahead of expectations. Before I outline our tariff mitigation efforts, it’s important to note that international performance continues to be a strength. According to Circana market research, Funko is gaining share among consumers internationally and outpacing the broader toy market. In Europe’s G5 combined markets, where overall toy POS growth was just 1%, Funko grew by 8%. We’re also expanding our global footprint with licensed and partner stores now operating in the United Arab Emirates and China and with a newly announced location in the Philippines, marking our first physical presence in Southeast Asia. The Philippines has been one of our strongest performing markets in Asia and this licensed store represented a commitment to selling where a passionate fan base lives. These are indicators that in more stable economies outside of the…

Thanks, Cynthia. Hey, everyone. Thanks for joining us today. For the first quarter, total net sales were $190.7 million, which was within our guidance range. Direct-to-consumer sales comprised 22% of our gross sales, which is comparable to last year’s first quarter. It’s worth noting that shipping delays on products crossing the Mexico border hampered sales of Pop! Yourself in Q1. Gross profit was $76.9 million, equal to gross margin of 40.3%. SG&A expenses were $84.8 million, which was well below our guidance range. Adjusted net loss of $17.8 million or $0.33 per share was better than expected. And finally, negative adjusted EBITDA was $4.7 million, also better than expected. Turning to our balance sheet. At March 31, we had cash and cash equivalents of $25.9 million. Total debt was approximately $202.2 million, up $19.4 million from the end of the previous quarter. Net inventory was $87.7 million, down from $92.6 million at the end of Q4. And total company liquidity was $90.9 million, a decrease from $124.7 million at the end of Q4. Turning to our outlook. As Cynthia mentioned, we have decided to withdraw our formal 2025 full year outlook. The ongoing changes to global tariff policies as well as uncertainty about the macroeconomic environment make it difficult to provide reliable projections. However, I will provide a couple of high-level thoughts on our future performance. For the second quarter, we expect our results to be negatively impacted by the effect of the tariff policies, both in terms of the tariffs themselves on our cost of goods sold as well as the disruption to sales related to direct import orders out of China. Because of this, today’s 10-Q filing includes disclosures about the company’s ability to continue as a going concern. At this time, we are in compliance with our debt covenants, and we have ample liquidity to operate the business. We have begun discussions with our lenders to obtain covenant relief in Q2, and we are evaluating strategies to refinance our debt. We are highly confident we will resolve this issue. Turning to the second half of 2025. We expect our performance to improve compared with the first half based on the following. Most importantly, we expect to fully offset the impact of incremental tariffs within the year. At current rates, we estimate the incremental tariff costs to represent approximately $45 million. The offsets are driven by actions within our control, including accelerating our sourcing diversification initiatives, implementing price increases and reducing costs. Additionally, in the U.S. market, we’re working closely with our largest customers to resume shipping direct import orders out of China. Finally, we also believe our international business, which represents more than one-third of our sales, will continue to gain momentum. Cynthia, that’s it for me. Back over to you.

Thanks, Yves. Before we open it up for questions, I want to reiterate that while we’re navigating a challenging macro environment, we’re also seeing the upside of our actions. We’re strengthening partnerships, sharpening our focus and moving with greater speed and clarity about what matters most, delivering for our fans. I want to thank our teams, our partners and the fans who continue to show up for this brand. It is because of their support that we remain focused. We are moving fast and we’re building for the long-term with our community alongside us every step of the way. With that, let’s open the line for questions.

Thank you. [Operator Instructions]. Our first question today will be from the line of Antares Tobelem with Goldman Sachs. Please go ahead. Your line is open.

Hi. This is Antares on for Stephen and appreciate you guys taking the questions.. You guys talked through a lot of mitigation efforts you’re taking in response to the current tariff situation. Can you offer any extra color on what some of these actions look like in practice, and particularly when it comes to passing through price adjustments? And maybe to the extent that you’re already having those conversations, can you talk about what changes you’re seeing in retailer sentiment or purchase patterns coming out of Easter? Thanks.

Antares, thanks for the question. First, I’d say the pricing that we’re doing was a decision that we’ve made back in January. So we’ve had the benefit of talking to our retail partners about this for several months now beginning back around the time of New York Toy Fair. Positive part of that was that we were able to talk about where we were positioned versus other collectibles. And the sentiment was generally that in Pop! Culture Collectibles, we’re still a fantastic value and priced below comparable competitors. And so they have been aligned to this price point since early January. As the tariffs came in, we continued conversation with them as we discussed, should we go higher. And we really received not only a lot of support for not going up, we entered into some healthy discussions about how to hold the line on that pricing. And so if anything, it’s deepened some partnerships with those retail partners. So that’s the color there. The Pops! will be priced at $14.99, and that’s the price point that our exclusives have been – being sold at. That’s our suggested retail price. So it’s a price increase versus the $12 price that non-exclusives had, but it’s the same price of what we did with exclusives. And we’re investing some of that and improving the quality of the scopes in the packaging and in the fan experience.

Awesome. And maybe just as a quick follow-up. Can you also talk maybe more about the POS trends that you’re seeing so far in the quarter and maybe what you’re looking for over the next few months in terms of trends there to maybe gain a bit more confidence in the rest of the year?

Sure. I’ll start with the U.S. market. Obviously, that’s the focus. We’ve talked in our last couple of calls about consumers looking for value being a little bit more choosy. We’ve actually seen some encouraging trends in the U.S. market for our larger retailers. The year-to-date POS has been down mid-single-digit. Part of that, I would say was driven by certain mass partners that we’ve had. There were some softness in footfall and some boycotts earlier in the year. We’ve actually seen an improvement to that trend. For the past four weeks, we’ve actually been up low-single-digit POS in the U.S. so that’s a very encouraging trend. And in Europe, which I’ll point out again, is over a third of our business. We continue to see good POS high single-digit comps year-over-year, and that business is gaining momentum.

And I know we said it in the script, but it’s worth pointing out that POS sales in Europe’s G5 markets actually outpaced the toy industry in Q1. We were at 8% up in POS as reported by Circana, and the toy industry was up 1%.

Great. Thank you.

Thank you.

The next question will be from the line of Keegan Cox with D.A. Davidson & Co. Please go ahead. Your line is open.

Hi, this is Keegan. Thanks for taking my question. So I kind of just wanted to get some clarity on the pricing. So those prices were already planned for the year. They weren’t in response to the original 20% tariffs, right?

That’s correct. Hi Keegan, it’s nice to meet you virtually, by the way. Welcome to the call.

Yes, nice to meet you as well. Perfect. And then just a follow-up on margins. I was wondering if margins came in kind of above your expectations, and if you guys could go through the drivers of that.

Sure. Yes, nice to meet you, Keegan. Yes, our gross margin came in slightly above the high end of our guidance range. I would just point out that in Q1, there wasn’t really much of a tariff impact in the quarter. We saw across the board just slight improvements over what we had forecasted, both in terms of our product margins, our inventory reserves and our discounts and allowances. So just nothing – no major driver to call out, but everything kind of came in line or slightly better than what we were expecting for Q1.

Great. And then one more, if I can. I noticed the 20% headcount reduction. You said most of that has already taken place. That’s really only a 1Q benefit, I guess. But as we look forward, how should I think about it?

The way I think about it, Keegan, is we had a – sorry, yes, it will show up in the cost savings. We had a action that took place in March and then another that took place yesterday, which I have to say was quite challenging for the management team, and of course, most importantly, for the employees where we have friends and colleagues and fans who helped build Funko who aren’t with us anymore. And so that’s a very difficult decision. That is the majority of that 20%. The remainder of it is about things that we won’t be backfilling where we had some attrition or some hires that we had planned that we’re not doing. It will bring us down to finish out by 20%. So when you think about the benefit of it, a portion of it has already occurred in this quarter – in Q2, and you’ll see more of it throughout the remainder of the year.

Thank you.

You are welcome.

With no further questions on the line at this time, I will now turn the call back over to management for any closing remarks.

Well, thank you, everyone for joining us today on the call. We look forward to sharing our progress with you when we meet next time. Thanks so much.

This will conclude Funko’s 2025 First Quarter Financial Results Conference Call. Thank you to everyone who joined us today. You may now disconnect your lines.