Funko Files for IPO
Licensing powerhouse Funko, with more than 1,000 properties from 112 licensors, has filed for an initial public offering.
In documents filed Friday, Funko reported net income for the fiscal year ended Dec. 31 declined 1% to $26.8 million as sales rose 96% to $426.7 million. In Q2 ended June 30, the company swung to a $4.5 million net loss from a $1 million profit a year earlier as it incurred costs tied the purchase in May of fashion accessories supplier Loungefly.
The IPO comes two years after Acon Investments purchased a majority stake in the company. The $100 million being raised in the IPO will partly be used to pay off debt. After the IPO, Funko CEO Brian Mariotti, who bought the company from founder Mike Becker in 2005, and Acon will retain a more than 50% voting stake.
Sales of products based on Warner Bros. properties accounted for 21% of fiscal 2016 net sales, up from 15% a year earlier, while Disney properties (including Marvel and Lucasfilms, Disney) accounted for 30% (down from 45%). The mobile game “Five Nights at Freddy’s” – for which Funko is master toy licensee — was the company’s top licensed property in 2016, generating $63 million in sales, or 15% of the total. In the first half of 2017, the game generated sales of $17.1 million or 8% of the overall sales in the six months ended June 30.
Funko also has a master toy license for Cartoon Network’s “Rick and Morty.”
The 2016 sales were generated by products tied to 396 properties, up from 285 a year earlier and average net sales per “active” property rose 12% to $1.1 million. In the six months ended June 30, Funko had sales of $600,000 per active property, down 19% from the same period a year earlier, a decline offset by an increase by number of “active” properties to 429 from 301.
As Funko grew its licensed products business, its royalty expenses more than doubled to $64.7 million in 2016 and its weighted average royalty rate rose to 15.2% from 14.6% a year earlier. The company had a $4 million reserve as of June 30 for future and on-going royalty payments.
In acquiring both Loungefly and Underground Toys this year, Funko lessened its reliance on the vinyl figures that have been its hallmark since 2010. The figures accounted for 82% of total revenue in 2016, down from 91% a year earlier. Sales outside the U.S. accounted for 18.8% of total sales in 2016 and 28% in the first half of this year.
GameStop was Funko’s top retailer in 2016, accounting for 12% of sales, up from 11% a year earlier, while Hot Topic generated 9%, down from 11%. Toys R Us, which filed for bankruptcy last month, accounted for 3.4% of sales in 2016 and 3.8% in the first half of 2017. Funko “curates” product based on the Dr. Seuss and Harry Potter books for Barnes & Noble and on the videogames Fall Out and League of Legends, for GameStop, the company said.
A third (32%) of Funko’s 2016 sales were through specialty dealers, with distributors accounting for 20%, mass retailers for 18%, e-commerce 11%, and direct-to-consumer (partly its subscription box service) 6%. In 2016, evergreen properties (Seinfeld, Friends, Dr. Seuss, Mickey Mouse and others) generated 43% of sales, movie properties 24%, videogame properties (20%) and TV properties 12%.
Funko, Brian Mariotti, CEO 425-783-3616, firstname.lastname@example.org