Good afternoon, and welcome to Funko's 2025 Third Quarter Financial Results Conference Call. [Operator Instructions] 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 hand the conference 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 Third Quarter Financial Results. On the call are Josh Simon, our recently appointed 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 the 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 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. Also, we have posted supplemental financial information on the Investor Relations section of the company's website, which includes, among other things, a net sales bridge, a gross margin bridge and key IP and product drivers. I will now turn the call over to Josh Simon. Josh?

Thanks, Rob. Good afternoon, everyone, and thank you for joining us. This is my first earnings conference call at Funko, and I want to start by saying I couldn't be more thrilled to be joining the team at this exciting time. Over the course of my career, I've seen this industry from a variety of perspectives, making movies at Disney, creating products at Nike and most recently leading the global consumer products and live experiences division at Netflix. Now across all those worlds, I gained a strong understanding for fandom, the culture of entertainment and how it translates into physical products. And I can unequivocally say there is no one better at it than Funko. There's one clear trend I saw across my years in entertainment and consumer products. Almost every filmmaker, creator or celebrity with whom I've worked inevitably asked that they would get their own Funko Pop! It seems as a sign of having made it in the entertainment world among the biggest Hollywood talent from the outside that love for Funko and its brand and products was energizing. Now I want to begin with some takeaways for my first 60 days after diving deep into the business and speaking with our customers, licensors and employees. Then I'll outline some of what I think it will take to get back to growth. I have the opportunity to meet with some of our most passionate fans at our retail stores and at New York Comic-Con. I've been able to spend time with our employees in the U.S. and Europe and we've engaged in senior leadership strategy sessions with key retailers like Hot Topic, Walmart and Target, licensed stores like Disney, Warner Bros., Universal and Netflix. And I have a deep, long-standing set of relationships with most of these partners…

Thanks, Josh. Hey, everyone. Thanks for joining us today. For the third quarter, total net sales were $250.9 million, in line with our expectations. Compared with Q3 of last year, approximately $11 million of the decrease in net sales can be attributed to SKU rationalizations as well as a reduction of clearance sales. As a reminder, we posted supplemental financial information on our website, which includes a net sales as well as a gross margin bridge. Direct-to-consumer sales mix in the quarter was 18% of our gross sales down from 20% in last year's Q3 due in part to a pullback in marketing spend. Gross profit was $100.8 million equal to gross margin of 40.2%, which was better than expected. Price increases helped fully offset the impact of increased tariffs. It's worth noting that with the exception of our 2025 second quarter, which was significantly impacted by tariffs, we have maintained a gross margin in the 40% plus range since the first quarter of 2024 were in 6 of the last 7 quarters. SG&A expenses were $79.8 million compared to $92.7 million last year. Approximately half of the reduction came from a full quarter benefit of cost reduction actions taken in Q2 and the other half came from a reduction in marketing spend. Adjusted net income was $3.2 million or $0.06 per diluted share. And finally, adjusted EBITDA was $24.4 million, which was higher than our expectations. Turning to our balance sheet. At September 30, we had cash and cash equivalents of $39.2 million. Net inventory was $99.8 million and our total debt was approximately $241 million. Turning now to our outlook. We're pleased with our Q3 results and the progress made against the second half outlook, which we shared last quarter. We now expect for the 2025 fourth quarter net sales to increase modestly from Q3 2025, driven in part by the launch of Pop! Yourself in Europe and sales of our KPop Demon Hunters product lines, gross margin of approximately 40% and adjusted EBITDA margin to be in the mid- to high single digits range. A few comments on our refinancing process. Our 10-Q filing for the 2025 third quarter includes disclosures about the company's ability to continue as a going concern. As previously announced, we executed an amendment to our existing credit facilities, which mature in September of 2026. The amendment waived financial covenants for Q2 and Q3 and introduced a minimum cash requirement and a series of milestones to demonstrate progress against a refinancing transaction. We've engaged Moelis & Company LLC to advise the company on our refinancing process, and that process is ongoing. With that, I'll turn it back over to Josh.

Thanks, Steve. Compared with where we were 2 years ago, we've made progress on improving the quality of our business. Our gross margin trend has largely improved. We have a stronger retail footprint. We've fully implemented a price increase and inventory owned and in the channel is lower and at healthier levels. Now I want to reiterate the sense of urgency and opportunity around our Make Culture POP! strategy, executing across the intersection of culture, creativity and commerce. In the short term, I'm looking to maintain the momentum Yves discussed. Over the long term, what's most exciting to me, and I hope is equally exciting to our investors are the multiple opportunities to transform the company for substantial growth. We have a strategic advantage from building this company over the last 27 years, and we intend to leverage that legacy and relationship with our community of fans to take advantage of the huge opportunity in the increasingly global world of entertainment and pop culture fandom. I'm incredibly excited about joining Funko. From my perspective, the company has lots of potential on which we've already begun acting. And with that, we'll open the call for questions. Operator?

[Operator Instructions] Your first question comes from the line of Stephen Laszczyk with Goldman Sachs.

Josh, welcome. Thank you for all those thoughtful highlights on the strategy. I'm curious as you look out ahead against some of those opportunities that you outlined, how you're thinking about what opportunities exist over the next 12 months to execute against how investors should be thinking about what you're prioritizing the sizing of some of those opportunities. Perhaps what point of the strategy do you feel like you need to get correct here over the next year or so before it unlocks the option value over the longer term to take Funko to the next level, so to speak. Anything -- any top priorities that come to mind, I think, would be helpful for us to understand. And then I have a follow-up.

Great. I appreciate the question. I mean, look, I'd say in the short term, our focus is on continuing the performance momentum that we've been talking about and then over the long term, obviously, transforming for more growth. I do really think it comes down to -- and I'll give you some specifics around the Make Culture POP! strategy. In the short term of the area of culture, I think there's really some areas of fandom where we can continue to expand. Obviously, as you know, we've been doing a lot in the areas of sports and music. But we just -- there's opportunities to move quicker in those areas. And so as an example, we just recently were able to launch the Dodgers Championship 5 pack. There's some really great details to it. It even includes them sort of wearing their alternate road uniforms. So really like how we think about operationalizing quick strike end-to-end capabilities, sensing trends, designing and manufacturing more quickly and getting it to consumers in new ways is really an important part of the cultural impact that we're looking to drive. And obviously, we share more details about that in the future. On the creativity side, I mean, we're really focusing on how we bring more dimensions to our core franchise, which is Pop! Bitty is a really great example of that. Obviously, we mentioned how it's rolling out into Walmart now. I'm spending a lot of time engaging more broadly with the creative community bringing people internally to help think about new sort of evolutions of products that we can launch, leveraging my relationships across the entertainment industry and the product space, thinking about how we can more closely collaborate with talent. Those are all sort of immediate things that we can do to continue to evolve our form factors and creative product strategy. And then on the commerce side, I mean, I've been able to engage with some really great strategic meetings with some of our biggest retailers over the last couple of months. International is a huge component of that. And so I think particularly based on pre-existing relationships I have there, we'll look to come back next quarter and talk in a little bit more specifics about some goals that we're immediately looking to get after with retail partners in Asia and Latin America. And look, I should also note on the -- because I think this is an important point to highlight on the commerce side as well. We were able to execute some really great extensions of our licensing deals with all the biggest studios in the last few months. And so I think that puts us on really firm footing to kind of take everything that we talked about as part of our Make Culture POP! strategy and drive growth through those relationships as well.

That's great. That's really helpful. And then if I could just ask a question, maybe more in the near term in the quarter and the broader retail environment, maybe for both Josh and Yves on 4Q. Just as you have conversations with retailers heading into this holiday season, anything you'd point out in terms of the cadence of stocking, how they're approaching restocking this year, how they're particularly engaging with Funko as a brand, as a partner this holiday season that differs from perhaps what you've seen in historic years or perhaps where the levers are as we get deeper into holiday on where restocking could come from upside, downside in the model, et cetera?

Stephen, this is Yves. I'll start by saying I think we're kind of encouraged by our POS trend, which has remained relatively strong and stable. In Q3, our global kind of POS in units was down only 3% year-over-year. Now we are continuing to see a pretty big difference in our various territories that we operate in. U.S. was more like down mid- to high single digits in units and then EMEA was up in low double digits. So we continue to see the consumer demand for our products. That being said, obviously, the tariff announcements earlier this year pretty significantly disrupted in Q2, kind of shipping of our orders out of Asia. And in Q3, I'd say we kind of continue to have a bit of a hangover effect from that. What you have to keep in mind is that retailers were placing their buys for Q3 and early Q4 shipments during, what I call, kind of peak uncertainty about what the tariff rates are going to be, how the consumer is going to hold up through the holiday period. And that was in part why our sell-in was down over last year in Q3. I would say as we head into the holiday period, it's a bit of a mix depending on the channel and the retailer, but I would say that we continue to have good momentum in Europe. In the U.S., a little bit more cautiousness, I think, from buyers. We do see a little bit more strength and momentum in the mass channel, and Josh mentioned the growth in Bitty Pop! sales there. So we're encouraged by that. It feels like for the smaller kind of specialty mom-and-pops distributors. And maybe a little bit of speculation here, but it feels like might be more kind of financially impacted by the tariffs or just generally more cautious about overcommitting to inventory.

Yes. And what I would continue with is the content slate is pretty big for us in Q4. The final season of Stranger Things will launch, and that's a big priority for some of our biggest retail partners as well as us. Obviously, the sequel or the Part 2 of Wicked will also be in the market, and we have products there. And then I think most importantly, just as a reminder, we really will have a lot of unique shelf space through our KPop Demon Hunters assortment across both Funko and Loungefly. So I think some good sort of content slate strength and shared priorities with our retail partners on that front.

Your next question comes from the line of Keegan Cox with D.A. Davidson.

Tom, I just wanted to ask a little bit as you open up this creativity in commerce. I know you talked a little bit about the vending machines and kiosks. I was just wondering how do you look at that market? It seems pretty competitive. I've seen a few of your competitors moving in there, just like my mall visits and retail visits. Just curious to how you see that market and how you plan to attack it?

Yes. Well, look, I think for us, the primary driver and excitement is around the Pop! Yourself experience, which is pretty unique to us. The ability for a fan to go and create customized Funko Pop! of themselves or a friend as a gift is something that I think we are uniquely able to offer. And so when we talk about the kiosk strategy, we have examples of those kiosks that currently exist in a couple of locations, primarily in our flagship stores. But we've already been deep into conversations with some of our bigger retail partners about how we can start to create experiences within their real estate footprint and bring that experience to more of our fans around the country and around the world. So it's -- I think we offer a pretty unique angle there.

Got it. And then as I was just looking at the results, Europe sales down slightly versus an easier comparison last year. I know you're launching Pop! Yourself in the fourth quarter, but what are you seeing outside of that in Europe?

Well, like I mentioned previously, our POS trend is pretty strong in Europe. I would say one of the factors that's not super material, but we did have a little bit of production delays that impacted our European sales in the quarter, just some orders that just couldn't make it out of the factory in time. As a reminder, we moved pretty aggressively to move production from China to Vietnam. And so that was a bit of a result of that, but we expect those orders to ship in Q4. And then along with the launch of Pop! Yourself in Europe, which happened a few weeks ago, we expect Europe to be back to growth in the fourth quarter.

Got it. And one more, if I can, just on pricing. I know you were able to essentially offset all of the tariff costs. But are you seeing that impact demand? I mean the POS for the U.S. essentially with weeks. I'm wondering how pricing played into that?

We've actually been pleasantly surprised by that. We rolled out the price increases. They were in effect on the shelf in early July. I mean we did anticipate that there would be slightly lower unit volumes. It's hard to attribute that directly to the price increase and not to the other kind of factors going on in the U.S. market. But generally, it's been in line with our expectations. I mentioned the POS trend so that the unit sales have held up pretty well. And then the price increases are fully in effect. So it's gone pretty well for us.

There are no further questions at this time. I will now turn the call back to management for closing remarks.

Thanks, everyone, for joining us on the call today. We look forward to sharing our progress on our next call.

This concludes today's call. Thank you for attending. You may now disconnect.