Good afternoon, and welcome to Funko's 2025 Second Quarter Financial Results Conference Call. [Operator Instructions] 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 second quarter financial results. On the call are Mike Lunsford, our Interim Chief Executive Officer; and Yves Le Pendeven, the company's Chief Financial Officer. This call is being broadcast live at investor.funko.com. A playback will be available for at least 1 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 second 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. Also, we have posted supplemental financial information on the Investor Relations section of the company's website, which includes, among other things, a gross margin bridge and key IP and product drivers. I will now turn the call over to Mike Lunsford. Mike?

Thanks, Rob. Good afternoon, everyone, and thank you for joining us. Many of you know me from my time as Funko's Interim CEO in 2023 and 2024 and as a long-time Board member. For the past month, I stepped in again at the Board's request to help Funko realize the full potential of its business by accelerating the organic growth initiatives, exploring financial and strategic options for the business and identifying Funko's next CEO. We have commenced a search for a permanent CEO. The search will focus on external candidates, and we expect to name the CEO in the near future. Now let's move on to our financial performance and outlook. As we signaled on our last call, our Q2 financial results reflect the impact of the ever-changing and uncertain U.S. trade policies. Nonetheless, we moved quickly to mitigate the financial impact of higher tariffs by cutting costs, including a workforce reduction of approximately 20%, accelerating our shift in production out of China to other sourcing countries, raising prices and making other necessary changes to minimize the ongoing impact of these trade disruptions. While additional changes to the economic and trade environment may affect our future sales and earnings, we believe we now have a relatively robust plan for the back half of the year that will result in improved financial performance compared with the first half. I'll now turn it over to Yves to provide more detail on our Q2 results and second half outlook.

Thanks, Mike. Hey, everyone. Thanks for joining us today. For the second quarter, total net sales were $193.5 million. The 22% decline compared with last year's second quarter was primarily due to the disruption of sales related to U.S. tariff policies, more specifically a pause of orders out of China by our direct import customers. Direct-to-consumer sales comprised 21% of gross sales compared with 23% in the second quarter of last year. Gross profit was $62 million, equal to gross margin of 32.1%. Last year's Q2 gross profit was $104 million, equal to gross margin of 42%. Gross margin was favorably impacted by approximately 350 basis points as a result of reduced discounting compared to Q2 of last year. However, that was more than offset by a shortfall in minimum guaranteed royalties caused by the sales disruption, the tripling of tariffs on imports and a build in inventory reserves versus inventory reserve relief in the same quarter last year. As a reminder, we posted supplemental financial information on our website, which includes a gross margin bridge. SG&A expenses were $82.3 million. SG&A expenses for the second quarter of last year were $77.9 million, which included a nonrecurring net benefit of $1.5 million. Adjusted net loss was $26.7 million or $0.48 per share compared to adjusted net income of $5.6 million or $0.10 per diluted share. And finally, negative adjusted EBITDA was $16.5 million compared to adjusted EBITDA of $27.9 million. Turning to our balance sheet. At June 30, we had cash and cash equivalents of $49.2 million. Net inventory was $101.3 million. Our total debt was approximately $256.6 million, and total company liquidity was $54.2 million, which was comprised of $49.2 million in cash and cash equivalents and $5 million available to borrow on our revolving credit facility. Turning now…

Thanks, Yves. I want to return to the 3 areas of focus of the Board. We have commenced the search for a new CEO and hope to name someone by the end of this quarter. We continue to work on accelerating organic growth initiatives and returning to the level of profitability you expect from Funko and believe we are making good progress on improving our financial performance in the back half of the year. Finally, as Yves described, we have also made good progress on financial and strategic options, including finalizing the debt amendment and filing the ATM. Funko's Board and I believe that Funko's best chapters are still ahead. We're committed to profitable growth, operational discipline and above all, delivering for our fans in ways that only Funko can. With that, we'll open the call for questions. Operator?

[Operator Instructions] Our first question today comes from Eric Wold from Texas Capital Bank.

A few questions, and I apologize, I haven't had a chance to read through the entire 10-Q yet. So I know some may be in there. But I guess first question, looking at the adjusted EBITDA in the quarter, obviously, I know a lot of disruptions in the quarter around your gross margin kind of navigating the tariffs and kind of getting on the shipments in the quarter. It doesn't look like anything was added back to adjusted EBITDA around potential kind of onetime SG&A items in the quarter around the disruption. Anything that you potentially call out maybe not to be added back, but anything in that $82 million of SG&A in the quarter that you maybe kind of say was somewhat not normal as you kind of navigated around the issues in the quarter that we should kind of think about as you kind of model going forward?

Eric, this is Yves. That's a great question. It's a little bit hard to quantify in terms of the top line disruption in the quarter that was just isolated to the tariffs announcement. What I would point you to are some supplemental slides that we posted on our IR website, and I did provide a gross margin bridge there. You'll see on there that about almost 5 points of our margin decline year-over-year was directly attributed to the tariff announcement. So I think that's one thing I would point to in the quarter that was -- I don't know that I'd call it onetime, but it certainly was a big variance compared to Q2 of last year.

Got it. And then when you talked about on the first quarter call, you talked about you halted the Q2 inbound orders to avoid the tariffs and you talked about now you kind of resumed those now. As you think about Q3 and the orders that were kind of halted or paused in Q2, how would you characterize the orders that were paused? Were the majority of those kind of resumed, canceled somewhere in between? How should we think about the orders in Q3? Are those kind of the ones that were paused in Q2 kind of pushed to Q3 or new? Kind of trying to get a sense of kind of what was kind of shifted? Or was there a good percentage of those in Q2 that were paused that were kind of end up being canceled as a result of something else kind of came up between Q1, Q2 and where we are sit today?

Yes, that's a great question. So I think the interruption in terms of shipping the orders to direct import customers was primarily happening in the April and May months. The good news is we were able to kind of work out pricing arrangements with our key customers to get those orders moving again in June. There are some orders that were intended to ship in Q2 that have rolled over into early Q3. Again, it's a little bit difficult to quantify that. But the good news is that we've got those orders flowing again. We've implemented our price adjustments. And we have a pretty good visibility on our Q3 order book right now, and things are looking good in terms of normal kind of shipping patterns and seasonality of the business. I would say at this point in time, barring any kind of unforeseen new announcements about tariffs and so forth that we've resumed normal shipping patterns.

Our next question comes from Keegan Cox from D.A. Davidson & Co.

My first question, I just wanted to kind of get any idea of early customer reaction to your price increases from July 1.

Sure. It's something that we're watching very closely. We have kind of real-time e-commerce data. And the great news there is that we've adjusted pricing beginning early July. As far as our e-commerce sales have gone, we've seen no negative impact on unit volumes, continued great sell-through on the new items that we're launching at the higher prices. In terms of our wholesale data, we have about half of our customers, larger customers that report their POS sales directly to us. And again, it's a little bit too early to say. Some of those customers were still selling through items at the older prices throughout July while bringing in the new items at the higher prices. So it's a little bit of a -- there's some noise in there when we look at the July data. But I'm happy to report that similar to our e-com business, we don't see a meaningful dip in POS unit volumes that I could attribute to the pricing changes.

Got it. And then just a clarifying question on the guidance. Adjusted EBITDA margins of mid- to high single digits, is that for the full year or just for the second half?

That is for the second half of the year and then a progressive improvement from Q3 to Q4.

Got it. And just to follow up on that, do you guys think you'll have enough cash to last through the end of the year with the ATM and the S-3 filing because you're pushing up right on your revolver and it seems like you've been bleeding cash.

Well, I mean, obviously, our liquidity has been impacted by the fact that sales were disrupted for a couple of months, and that led to lower collections than we expected. But as I said in the call, we've entered into our fourth amendment to our credit agreement. We have covenant waivers, which is great news. We also announced the filing of an ATM today, which gives us additional flexibility. If we want to raise cash, we'll have the ability to do so. But we're very focused on the refinancing process, and our goal is still to refinance our debt before the end of this year.

We have no further questions. So I will now hand back over to the management team for closing remarks.

Well, thank you, everyone, for joining us on the call today. We look forward to sharing our progress on our next call. Talk to you next time.

This concludes today's call. Thank you for joining, everyone. You may now disconnect your lines.