Funko Inc. Surges 15% on Surprising Quarterly Profit, CFO Resigns

Funko's stock jumps 15% after beating Q4 expectations, faces future challenges from Hollywood strikes and Red Sea disruptions.

By Bill Bullington

3/7, 20:10 EST

Key Takeaway

  • Funko Inc.'s stock surged over 15% after reporting a surprising quarterly profit, beating analysts' expectations with adjusted earnings of one cent per share.
  • Despite strong performance, Funko faces future challenges from Hollywood strikes and Red Sea disruptions but plans to focus on direct-to-consumer business and unique products.
  • CFO Steve Nave resigns; shares down 17% in 2024 amidst leadership changes and market challenges.

Strong Quarterly Performance

Funko Inc. witnessed a significant surge of over 15% in its shares during extended trading on Thursday following a surprising quarterly profit announcement that surpassed market expectations. The company reported adjusted earnings of one cent per share on sales of $291 million for the fourth quarter, outperforming analysts' projections of a two-cent loss per share on sales of $282 million.

Funko attributed its success to the growth of its direct-to-consumer business and the completion of a cost-reduction plan aimed at enhancing operational efficiency. Interim Chief Executive Michael Lunsford expressed confidence in the company's improved foundation for future growth.

Future Challenges and Strategies

Despite the positive quarterly results, Funko acknowledged potential challenges ahead, including a softer content schedule due to Hollywood strikes impacting new releases and uncertainties surrounding shipping costs related to the Red Sea situation. However, the company remains optimistic about profit improvement in the upcoming year by expanding its direct-to-consumer business and focusing on customizable and limited-edition figurines.

Chief Financial Officer Steve Nave's resignation, effective March 15, was also announced, with Deputy CFO Yves LePendeven set to take over as acting CFO. Funko's shares have experienced a 17% decline in 2024, contrasting with the S&P 500 index's 8% gains during the same period and a 31% drop over the past 12 months.

Market Performance and Leadership Changes

Funko's recent market performance has been challenging, with a significant decline in share value despite efforts to address falling sales. The company's former CEO, Brian Mariotti, returned in December 2023 amid concerns about declining sales. The leadership transition and market challenges have contributed to Funko's struggle to maintain investor confidence.

Management Quotes

  • Michael Lunsford, interim Chief Executive of Funko:

    "Funko is now on a significantly more solid foundation upon which we intend to build and grow." "Looking ahead, however, challenges will include a 'softer' content schedule after last year’s Hollywood strikes cut down on the number of new releases and 'uncertainty around shipping costs caused by the Red Sea situation.'" "Despite those headwinds, Funko said it expects profits to improve this year, thanks to expanding the direct-to-consumer business and focusing on customizable and limited-edition figurines, 'areas we control and can grow profitably.'"