EVERETT, Wash. - Funko, Inc. (NASDAQ: NASDAQ:FNKO), a leading pop culture lifestyle brand, today reported a beat on both earnings per share (EPS) and revenue for the fourth quarter of 2023. The company recorded an adjusted EPS of $0.01, surpassing the analyst estimate which predicted a loss of $0.02. Revenue for the quarter was also higher than expected, coming in at $291.2 million against the consensus estimate of $281.97 million.
The positive earnings news sent Funko's shares up 15.68% in aftermarket trading, reflecting a robust market response to the company's financial performance. This surge was primarily driven by the reported earnings and revenue beat, indicating investor confidence in the company's direction.
Funko's fourth-quarter net sales showed a decline from $333.0 million in the previous year to $291.2 million. However, gross profit improved to $109.4 million, with a gross margin of 37.6%, compared to $94.3 million and a gross margin of 28.3% in the same quarter last year. This improvement in profitability is partly attributed to the company's direct-to-consumer (DTC) business, which saw nearly 30% growth compared to the prior year and represented 26% of total revenue.
Michael Lunsford, Funko's Interim Chief Executive Officer, attributed the strong quarter to the company's strategic focus on cost reduction, operational efficiencies, and concentrating on core product offerings. He stated, "In 2023, we implemented a comprehensive plan to significantly reduce costs, improve operational efficiencies and focus on our core product offerings. The major elements of that plan were successfully completed, and we believe our company is now on a significantly more solid foundation upon which we intend to build and grow."
Looking ahead, Funko provided guidance for the first quarter of 2024, projecting net sales to be between $214 million and $227 million, which falls below the analyst consensus of $239.8 million. For the full year of 2024, the company expects net sales to range from $1.047 billion to $1.103 billion, with the midpoint of this guidance slightly below the consensus estimate of $1.088 billion.
The company also announced the resignation of Steve Nave, Funko's Chief Financial Officer (CFO) and Chief Operating Officer, effective March 15, 2024. Yves LePendeven, the company's Deputy CFO, will assume the role of Acting CFO from that date. Lunsford expressed confidence in LePendeven's ability to lead the Finance and Accounting functions and emphasized the strength of the senior leadership team in supporting Funko's growth.
Funko's results and forward-looking guidance indicate a strategic pivot towards a leaner operation with a focus on profitable growth areas, despite facing a softer content schedule and uncertainties around shipping costs. The market's positive reaction to the fourth-quarter performance and the company's strategic direction suggests investor optimism for Funko's future.
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