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What changed in Funko, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Funko, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+473 added−465 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-07)

Top changes in Funko, Inc.'s 2024 10-K

473 paragraphs added · 465 removed · 382 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+14 added−14 removed103 unchanged
Biggest changeWe have strong licensing relationships with many established content providers and seek to establish new licensing relationships with content providers in order to capitalize on new and emerging trends in pop culture. We believe we also provide value to content providers by maximizing the lifetime value of their content by extending its relevance to consumers through ongoing fan engagement.
Biggest changeWe expect to continue to develop new product designs and lines, which may develop into proprietary brands in the future. 8 Table of Contents Our Licenses Licensors. We have strong licensing relationships with many established content providers and seek to establish new licensing relationships with content providers in order to capitalize on new and emerging trends in pop culture.
Irvine received an M.S. in Taxation and a Doctor of Humane Letters from Golden Gate University, and a B.S. in Accounting from Illinois State University. We believe Ms. Irvine’s extensive public company management experience and financial expertise make her well-qualified to serve on our board of directors.
Ms. Irvine received an M.S. in Taxation and a Doctor of Humane Letters from Golden Gate University, and a B.S. in Accounting from Illinois State University. We believe Ms. Irvine’s extensive public company management experience and financial expertise make her well-qualified to serve on our board of directors.
Daw served as Senior Vice President, General Counsel and Secretary from Funko Inc.'s formation in April 2017 to March 2022. Mr. Daw served as the General Counsel of INRIX, Inc. from April 2012 until July 2016, where he was responsible for global legal affairs, with emphasis on corporate and intellectual property matters.
Previously, Mr. Daw served as Senior Vice President, General Counsel and Secretary from Funko Inc.'s formation in April 2017 to March 2022. Mr. Daw served as the General Counsel of INRIX, Inc. from April 2012 until July 2016, where he was responsible for global legal affairs, with emphasis on corporate and intellectual property matters.
On October 30, 2015, ACON Funko Investors, L.L.C., through FAH, LLC and the ACON Acquisition, acquired a controlling interest in FHL, which is also a holding company with no operating assets or operations. FAH, LLC owns 100% of FHL and FHL owns 100% of Funko, LLC, which is the operating entity. Available Information Our Internet address is www.funko.com.
On October 30, 2015, ACON Funko Investors, L.L.C., through FAH, LLC, acquired a controlling interest in FHL, which is also a holding company with no operating assets or operations. FAH, LLC owns 100% of FHL and FHL owns 100% of Funko, LLC, which is the operating entity. Available Information Our Internet address is www.funko.com.
We have the ability to leverage evergreen or back catalog content by creating fun, whimsical and nostalgic programs to be sold at retail that resonate with fans. Our evergreen programs include new versions of well-known characters or new product form factors such as Bitty Pop!.
We have the ability to leverage evergreen or back catalog content by creating fun, whimsical and nostalgic programs to be sold at retail that resonate with fans. Our evergreen programs include new versions of well-known characters or newer product form factors such as Bitty Pop!.
Three of the top U.S. pop culture-related conventions, including New York Comic Con, Comic Con International: San Diego and Anime Expo 2023, drew sell-out crowds and reaching capacity at each event location. This represents a cultural shift supporting the acceptability of fan affinity for pop culture content across all demographic categories of fans.
Three of the top U.S. pop culture-related conventions, including New York Comic Con, Comic Con International: San Diego and Anime Expo 2024, drew sell-out crowds and reaching capacity at each event location. This represents a cultural shift supporting the acceptability of fan affinity for pop culture content across all demographic categories of fans.
Diversified Global Distribution Network We sell our products through a diverse network of retail customers across multiple retail channels, including specialty retailers, mass-market retailers, and e-commerce sites, as well as directly to consumers primarily through our owned websites and two flagship retail stores. We can provide our retail customers a customized product mix designed to appeal to their consumer bases.
Diversified Global Distribution Network We sell our products through a diverse network of retail customers across multiple retail channels, including specialty retailers, mass-market retailers, and e-commerce sites, as well as directly to consumers primarily through our owned websites and three flagship retail stores. We can provide our retail customers a customized product mix designed to appeal to their consumer bases.
We believe there are opportunities to further grow our sales in other regions, such as Latin America, Canada, Oceania and APAC, by expanding our direct sales to retailers or through distributor relationships. 7 Table of Contents Increase our Direct-to-Consumer Business We view our direct-to-consumer business, which includes our e-commerce websites, www.funko.com, www.funkoeurope.com, www.loungefly.com, and www.mondoshop.com and two flagship retail stores, as a significant growth opportunity and an important vehicle for expanding our reach and broadening our relationship with our fans.
We believe there are opportunities to further grow our sales in other regions, such as Latin America, Canada, Oceania and APAC, by expanding our direct sales to retailers or through expanded distributor relationships. 7 Table of Contents Increase our Direct-to-Consumer Business We view our direct-to-consumer business, which includes our e-commerce websites, www.funko.com, www.funkoeurope.com, www.loungefly.com, and www.mondoshop.com and three flagship retail stores, as a significant growth opportunity and an important vehicle for expanding our reach and broadening our relationship with our fans.
We strive to foster a sense of community with our employees and make the workplace fun despite the demands of our rapidly changing business. We believe our passion for pop culture of all forms is reflected in our fans around the world. We believe that fully serving those fans requires a diverse and inclusive workforce.
We strive to foster a sense of community with our employees and make the workplace fun despite the demands of our rapidly changing business. We believe our passion for pop culture of all forms is reflected in our fans around the world. We believe that fully serving those fans requires an inclusive workforce.
In addition to offering multiple properties and product categories, we create and sell a variety of unique brands that have their own look and feel. Our brand portfolio includes Core Collectibles (which include Pop! Vinyl, as well as other branded lines such as Soda, Bitty Pop!, and Pop!
In addition to offering multiple properties and product categories, we create and sell a variety of unique brands that have their own look and feel. Our brand portfolio includes Core Collectible (which include Pop! Vinyl, as well as other branded lines such as Soda, Bitty Pop!, and Pop!
Additionally, we intend to strategically focus on growing within genres that we believe we have underpenetrated, such as anime, sports and music. We expect to do this by expanding our license portfolio, creating new products or designs that resonate with fans and strategically expanding our distribution of these products.
Additionally, we intend to strategically focus on growing within genres that we believe we have underpenetrated, such as anime, sports, music and video gaming. We expect to do this by expanding our license portfolio, creating new products or designs that resonate with fans and strategically expanding our distribution of these products.
We intend to continue to increase our focus on these efforts in the future. In 2023, we relaunched our U.S. website platform that consolidated www.funko.com and www.loungefly.com under one online shopping cart. We also utilize www.funkoeurope.com to serve customers in the UK and several countries in Europe.
We intend to continue to increase our focus on these efforts in the future. In 2023, we relaunched our U.S. website platform that consolidated www.funko.com and www.loungefly.com under one online shopping cart. We also utilize www.funkoeurope.com to serve customers in the UK and Europe.
Jacobs is on the board of directors of The Chernin Group, Hodinkee, Collectors Universe and The North Road Company. He previously served on the board of directors of Barstool Sports, Goldin Auctions, Equip, Exploding Kittens, The Action Network, Otter Media, Fullscreen, Ellation, Hello Sunshine, Headspace, and Gunpowder & Sky. Mr.
Jacobs is on the board of directors of The Chernin Group, Hodinkee, Collectors Universe and The North Road Company. He previously served on the board of directors of Barstool Sports, Goldin Auctions, Equip, Scopely, Exploding Kittens, The Action Network, Otter Media, Fullscreen, Ellation (Crunchyroll), Hello Sunshine, Hodinkee, Headspace, and Gunpowder & Sky. Mr.
Our key retail partners in the United States include Target, Amazon, GameStop and Hot Topic. Internationally, we sell our products directly to similar retailers, primarily in Europe, through our subsidiary Funko UK, Ltd. Our key international retail customers include Amazon, GameStop, and Fnac.
Our key retail partners in the United States include Target, Amazon, Entertainment Earth, GameStop and Hot Topic. Internationally, we sell our products directly to similar retailers, primarily in Europe, through our subsidiary Funko UK, Ltd. Our key international retail customers include Amazon, GameStop, and Fnac.
In addition to our full-time sales staff, we also retain several independent sales representatives to sell and promote our products both domestically and internationally. We sell our products to our customers with payment terms typically varying from 30 to 90 days.
In addition to our full-time sales staff, we also retain several independent sales representatives to sell and promote our products both domestically and internationally. We sell our products to our customers with payment terms typically varying from 30 to 90 days (average 57 days).
See Item 1A, “Risk Factors.” 12 Table of Contents Government Regulation Our products sold in the United States are subject to the provisions of multiple statutes, including the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”), the Consumer Product Safety Improvement Act of 2008 (“CPSIA”) and the Flammable Fabrics Act (“FFA”), and the regulations promulgated pursuant to such statutes.
See Item 1A, “Risk Factors.” Government Regulation Our products sold in the United States are subject to the provisions of multiple statutes, including the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”), the Consumer Product Safety Improvement Act of 2008 (“CPSIA”) and the Flammable Fabrics Act (“FFA”), and the regulations promulgated pursuant to such statutes.
Daw was a member of the law firm of Sidley Austin LLP, where he was a partner. Mr. Daw received a J.D. from the University of Michigan Law School and a B.S. in Industrial and Labor Relations from Cornell University. Andy Oddie has served as Chief Commercial Officer since May 2022.
Daw was a member of the law firm of Sidley Austin LLP, where he was a partner. Mr. Daw received a J.D. from the University of Michigan Law School and a B.S. in Industrial and Labor Relations from Cornell University. 15 Table of Contents Andy Oddie has served as Chief Commercial Officer since May 2022.
Additionally, the portion of our sales related to evergreen properties for the years ended December 31, 2023, 2022 and 2021 was approximately 67%, 64% and 67%, respectively. Broad Portfolio of Brands We create products to attract a broad array of fans across consumer demographic groups.
Additionally, the portion of our sales related to evergreen properties for the years ended December 31, 2024, 2023 and 2022 was approximately 73%, 67%, and 64%, respectively. Broad Portfolio of Brands We create products to attract a broad array of fans across consumer demographic groups.
Unexpected changes in these factors could result in a lack of product availability or excess inventory of a particular product. 10 Table of Contents Although we do not conduct the day-to-day manufacturing of our products, we are responsible for designing both the product and the packaging.
Unexpected changes in these factors could result in a lack of product availability or excess inventory of a particular product. Although we do not conduct the day-to-day manufacturing of our products, we are responsible for designing both the product and the packaging.
With the help of our in-house creative team, we have also developed our own proprietary intellectual property, such as our Pop! Yourself. As a result of our creative capabilities and broad portfolio of licenses, we create a substantial number of new products each year.
With the help of our in-house creative team, we have also developed our own proprietary products, such as our Pop! Yourself personalized products. As a result of our creative capabilities and broad portfolio of licenses, we create a substantial number of new products each year.
Additionally, there has been an increase in high-quality scripted television series in recent years as content providers vie for binge worthy shows to attract consumers. Although recent strikes by the Writers Guild of America and the Screen Actors Guild have interrupted content creation, we expect content providers to continue to invest in new high-quality original content.
Additionally, there has been an increase in high-quality scripted television series in recent years as content providers vie for binge worthy shows to attract consumers. Although recent strikes by the Writers Guild of America and the Screen Actors Guild have interrupted content creation, content providers have continued to invest in new high-quality original content.
Our Strategic Differentiation Deep and Extensive Licensing Partnerships We have strong licensing relationships with many established content providers and strive to partner with content providers across multiple genres, including movies, television, video games, anime, sports, and music. In 2023, we had license agreements with over 250 content providers covering approximately 900 active licensed properties.
Our Strategic Differentiation Deep and Extensive Licensing Partnerships We have strong licensing relationships with many established content providers and strive to partner with content providers across multiple genres, including movies, television, video games, anime, sports, and music. In 2024, we had license agreements with over 250 content providers covering approximately 930 active licensed properties.
Yourself), Loungefly (softlines including bags, wallets, backpacks and apparel) and Other (which includes our emerging brands, such as Digital Pop! and Mondo). The portion of sales attributed to Core Collectible branded products in the years ended December 31, 2023, 2022 and 2021 was 73%, 76% and 80%, respectively.
Yourself), Loungefly (softlines including bags, wallets, backpacks and apparel) and Other (which includes our emerging brands, such as Digital Pop! and Mondo). The portion of sales attributed to Core Collectible branded products in the years ended December 31, 2024, 2023 and 2022 was 77%, 73% and 76%, respectively.
Currently, our principal proprietary brands include Pop!, Loungefly and Mondo. Pop!, introduced in 2010, is our most well-recognized brand. The Pop! Vinyl stylized design incorporates a rounded square head that typically consists of no mouth and a very simple nose. Our standard Pop! Vinyl figure stands about four inches tall.
Currently, our principal proprietary brands include Pop!, Loungefly and Mondo. Pop!, introduced in 2010, is our most well-recognized brand. Our standard Pop! Vinyl stylized design incorporates a rounded square head that typically consists of no mouth and a very simple nose and stand about four inches tall.
We believe we sit at the nexus of pop culture—content providers value us for our ability to connect fans to their properties with our creative products and broad distribution; retailers value us for our broad portfolio of licensed pop culture products that we can curate to resonate with their consumers; and consumers value us for our distinct, stylized products and the content they represent.
We believe we sit at the nexus of pop culture and the growing "kidult" segment of the market—content providers value us for our ability to connect fans to their properties with our creative products and broad distribution; retailers value us for our broad portfolio of licensed pop culture products that we can curate to resonate with their consumers; and consumers value us for our distinct, stylized products and the content they represent.
Our license agreements require us to make royalty payments to the licensor based on our sales of the licensed product and, in some cases, require us to incur other charges. For the years ended December 31, 2023, 2022 and 2021, the average royalty rate was 16.4%, 16.1% and 15.7%, respectively.
Our license agreements require us to make royalty payments to the licensor based on our sales of the licensed product and, in some cases, require us to incur other charges. For the years ended December 31, 2024, 2023 and 2022, the average royalty rate was 16.1%, 16.4% and 16.1%, respectively.
We infuse our distinct designs and aesthetic sensibility into our extensive portfolio of licensed content over a wide variety of product categories, including figures, bags, wallets, apparel, accessories, plush, homewares, and digital non-fungible tokens ("NFTs"), which we make available at highly accessible price points under our Funko, Loungefly and Mondo brands.
We infuse our distinct designs and aesthetic sensibility into our extensive portfolio of licensed content over a wide variety of product categories, including figures, bags, wallets, apparel, accessories, plush, homewares, digital non-fungible tokens ("NFTs"), vinyl records and limited-edition posters, which we make available at highly accessible price points under our Funko, Loungefly and Mondo brands.
Our flexible and low-fixed cost production model enables us to move from product design of a figure to shipping, with a minimal upfront investment for most figures of $5,000 to $10,000 in tooling, molds and internal design costs.
Our flexible and low-fixed cost production model enables us to move from product design of a figure to shipping, with a minimal upfront investment for most figures of $5,000 to $10,000 in tooling, molds and internal design costs as of December 31, 2024.
We believe our sales are currently underpenetrated internationally as we generate the majority of our net sales in the United States. Sales generated from customers outside of the United States accounted for approximately 31%, 27% and 28% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively.
We believe our sales are currently underpenetrated internationally as we generate the majority of our net sales in the United States. Sales generated from customers outside of the United States accounted for approximately 35%, 31% and 27% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively.
We have implemented programs to advance these principles and embrace the opportunity to work with people of diverse backgrounds and perspectives. In addition to offering market competitive salaries and wages, we offer comprehensive health and 401(k) benefits to eligible employees.
We have implemented programs to advance these principles and embrace the opportunity to work with people from a variety of backgrounds and perspectives. In addition to offering market competitive salaries and wages, we offer comprehensive health and 401(k) benefits to eligible employees.
Mike was previously on the board of directors of The Action Network, Otter Media, Ellation (Crunchyroll), and a board observer of Cameo. Mr. Kerns is a graduate of UCLA with a BA in History. We believe Mr. Kerns broad management, business and entertainment experience make him well-qualified to serve on our board of directors.
Mike was previously on the board of directors of Barstool Sports, Night Media, Epic Gardening, The Action Network, Otter Media, Ellation (Crunchyroll), and a board observer of Cameo. Mr. Kerns is a graduate of UCLA with a BA in History. We believe Mr. Kerns broad management, business and entertainment experience make him well-qualified to serve on our board of directors.
We also sell our products directly to consumers through our e-commerce business, two flagship retail stores and, to a lesser extent, at specialty licensing and comic book shows, conventions and exhibitions in cities throughout the United States, including at Comic-Con events. Our direct-to-consumer sales accounted for approximately 21%, 13% and 11% of our sales for 2023, 2022, and 2021, respectively.
We also sell our products directly to consumers through our e-commerce business, three flagship retail stores and, to a lesser extent, at specialty licensing and comic book shows, conventions and exhibitions in cities throughout the United States, including at Comic-Con events. Our direct-to-consumer sales accounted for approximately 24%, 21%, and 13% of our sales for 2024, 2023, and 2022, respectively.
For the years ended December 31, 2023, 2022 and 2021 approximately 55%, 53% and 59%, respectively, of our net sales were generated in the third and fourth quarters, as our customers build up their inventories in anticipation of the holiday season.
For the years ended December 31, 2024, 2023 and 2022 approximately 56%, 55% and 53%, respectively, of our net sales were generated in the third and fourth quarters, as our customers build up their inventories in anticipation of the holiday season.
She previously served on the boards of directors of Casper Sleep Inc. from August 2019 to January 2022, XO Group Inc. from November 2014 to December 21, 2018, Rightside Group Ltd. from August 2014 until July 2017, CafePress, Inc. from July 2012 until May 2015, and Blue Nile, Inc. from May 2001 until November 2011. Ms.
She previously served on the boards of directors of Farfetch Limited from August 2020, until December 2023, Casper Sleep Inc. from August 2019 to January 2022, XO Group Inc. from November 2014 to December 21, 2018, Rightside Group Ltd. from August 2014 until July 2017, CafePress, Inc. from July 2012 until May 2015, and Blue Nile, Inc. from May 2001 until November 2011.
This allows our business to be diversified across properties, as well as evergreen and current content. 5 Table of Contents For the years ended December 31, 2023, 2022 and 2021, no single property accounted for more than 6% of our sales, and the portion of our sales for the years ended December 31, 2023, 2022 and 2021 attributable to our top five properties was 17%, 18% and 20%, respectively.
This allows our business to be diversified across properties, as well as evergreen and current content. 5 Table of Contents For the years ended December 31, 2024, 2023 and 2022, no single property accounted for more than 5% of our sales, and the portion of our sales for the years ended December 31, 2024, 2023 and 2022 attributable to our top five third-party properties was 18%, 17%, and 18%, respectively.
The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. 18 Table of Contents
Our royalty expense for any given year will vary depending on the mix of products and properties sold during that year. For the years ended December 31, 2023, 2022 and 2021, we incurred royalty expenses of $179.7 million, $213.1 million and $161.6 million, respectively. Our licenses are generally not exclusive.
Our royalty expense for any given year will vary depending on the mix of products and properties sold during that year. For the years ended December 31, 2024, 2023 and 2022, we incurred royalty expenses of $168.9 million, $179.7 million and $213.1 million, respectively. Our licenses are generally not exclusive.
Edwards currently serves on the board of directors of VF Corporation, a leading apparel, footwear and accessories company, and previously served on the board of directors of Mattel Inc. from 2012 to 2018. Mr. Edwards received a BBA and MBA from Bernard Baruch College. The board believes Mr.
Edwards currently serves on the board of directors of VF Corporation, a leading apparel, footwear and accessories company, and Fanatics Inc., a global digital sports platform, and previously served on the board of directors of Mattel Inc. from 2012 to 2018. Mr. Edwards received a BBA and MBA from Bernard Baruch College. The board believes Mr.
Due to a change in executive management during the year ended December 31, 2023, we have redefined our named CODM from our prior Chief Executive Officer to our current Chief Financial Officer and Chief Operating Officer. Because our CODM reviews financial performance and allocates resources at a consolidated level on a regular basis, we have one segment.
Due to a change in executive management during the year ended December 31, 2024, our CODM has changed from our prior Chief Financial Officer and Chief Operating Officer to our current Chief Executive Officer. Because our CODM reviews financial performance and allocates resources at a consolidated level on a regular basis, we have one segment.
The portion of sales attributed to Loungefly branded products in the years ended December 31, 2023, 2022 and 2021 was 20%, 19% and 15%, respectively. The portion of sales attributable to Other branded products in the years ended December 31, 2023, 2022 and 2021 was 7%, 5%, and 5%.
The portion of sales attributed to Loungefly branded products in the years ended December 31, 2024, 2023 and 2022 was 16%, 20% and 19%, respectively. The portion of sales attributable to Other branded products in the years ended December 31, 2024, 2023 and 2022 was 7%, 7%, and 5%.
Lunsford held various management roles with RealNetworks, Inc., including interim Chief Executive Officer and Executive Vice President and General Manager of RealNetworks’ Core Business and Chief Executive Officer of Rhapsody. Mr.
From 2008 to 2013, Mr. Lunsford held various management roles with RealNetworks, Inc., including interim Chief Executive Officer and Executive Vice President and General Manager of RealNetworks’ Core Business and Chief Executive Officer of Rhapsody. Mr.
Additionally, by utilizing our in-house creative team we have the ability to develop our own content and intellectual property. Our current products are principally figures, fashion accessories, apparel, plush products, accessories, homewares, and NFTs. Our Brands and Designs Under the Funko brand, we have multiple proprietary brands under which most of our products are marketed.
Additionally, by utilizing our in-house creative team we have the ability to develop our own content and intellectual property. Our current products are principally figures, fashion accessories, apparel, plush products, accessories, homewares, NFTs, vinyl records and limited-edition posters. Our Brands and Designs We have multiple proprietary brands under which most of our products are marketed.
Irvine served as Vice President and Chief Financial Officer of Plum Creek Timber Company, Inc., and from September 1981 until February 1994, she worked at accounting firm Coopers & Lybrand LLP in various capacities, most recently as partner. Ms.
Irvine served as Vice President and Chief Financial Officer of Plum Creek Timber Company, Inc., and from September 1981 until February 1994, she worked at accounting firm Coopers & Lybrand LLP in various capacities, most recently as partner. Ms. Irvine currently serves on the boards of directors of Yelp Inc.
For the year ended December 31, 2021, 26% of sales were related to the Company’s two largest license agreements (13% each) with no other license agreements accounting for more than 10% of sales. Licensed Properties. We strive to license every pop culture property that we believe is relevant to consumers.
For the year ended December 31, 2022, 13% of sales were related to the Company's largest license agreement, with no other license agreement accounting for more than 10% of sales. Licensed Properties. We strive to license every pop culture property that we believe is relevant to consumers.
None of our employees are represented by a labor union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages. We believe that we have good relationships with our employees.
None of our employees are represented by a labor union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages.
We plan to build a robust online platform and to enhance our digital capabilities to provide the infrastructure to scale this business over the long-term. In 2023, we launched a website platform in the U.S. that consolidated our brands under one online shopping cart.
We plan to build a robust online platform and to enhance our digital capabilities to provide the infrastructure to scale this business over the long-term. In 2023, we relaunched our U.S. website platform that consolidated www.funko.com and www.loungefly.com under one online shopping cart.
Kerns began his career as an Associate at Angel Investors, LP. and later became the Chief of Staff at Steinberg & Moorad Sports Management, a premier sports representation firm. Mr. Kerns is on the board of TCG, Food52, Barstool Sports, MeatEater, SketchyMedical, Surfline, Sofar Sounds, Night Media, Epic Gardening and PLL.
Kerns began his career as an Associate at Angel Investors, LP. and later became the Chief of Staff at Steinberg & Moorad Sports Management, a premier sports representation firm. Mr. Kerns is on the board of TCG, Food52, MeatEater, SketchyMedical, Surfline, Sofar Sounds, and Premier Lacrosse League.
Similar laws exist in some U.S. states and our products sold worldwide are subject to the provisions of similar laws and regulations in many jurisdictions, including Canada, Australia, Europe and Asia. We maintain a quality control program to help ensure compliance with applicable product safety requirements.
Similar laws exist in some U.S. states and our products sold worldwide are subject to the provisions of similar laws and regulations in many jurisdictions. 12 Table of Contents We maintain a quality control program to help ensure compliance with applicable product safety requirements.
Within anime, we continue to add new license relationships with multiple new properties. In the sports category, we are continuing to leverage our broad range of sports licenses. Additionally, within the music category, we are expanding our license base to include more artists.
Within anime and video gaming, we continue to add new license relationships with multiple new properties. In the sports category, we are continuing to leverage our broad range of sports licenses and seeking to add new distribution to reach sports fans. Additionally, within the music category, we are expanding our license base to include more artists.
Mr. Lunsford served as an Advisor and Vice President of McClatchy, Inc. from 2017 to September 2020. Mr. Lunsford previously served as the Chief Executive Officer of SK Planet, Inc. from 2013 until 2018 and as interim Chief Executive Officer of shopkick, Inc. in 2016. From 2008 to 2013, Mr.
He also served as Funko's Interim Chief Executive Officer from July 2023 to May 2024. Mr. Lunsford served as an Advisor and Vice President of McClatchy, Inc. from 2017 to September 2020. Mr. Lunsford previously served as the Chief Executive Officer of SK Planet, Inc. from 2013 until 2018 and as interim Chief Executive Officer of shopkick, Inc. in 2016.
Although we do not manufacture our products, we own most of the tools and molds used in the manufacturing process, and generally these are transferable among manufacturers if we choose to employ alternative manufacturers.
Although we do not manufacture our products, we own most of the tools and molds used in the manufacturing process, and generally these are transferable among manufacturers if we choose to employ alternative manufacturers. Sales We sell our products to a diverse network of customers throughout the world.
Examples of our classic evergreen properties include Star Wars Classic, Harry Potter, DC Comics, Marvel Comics, Pokémon and WWE. 9 Table of Contents • Current Releases. Properties in the current release category typically are tied to new movie releases, current television series or new video game titles.
Examples of our classic evergreen properties include Star Wars Classic, Harry Potter, DC Comics, Marvel Comics, Pokémon and WWE. • Current Releases. Properties in the current release category typically are tied to new movie releases, current television series or new video game titles. These properties are intended to capitalize on the excitement of fans surrounding the launch of new content.
Our core benefits packages are supplemented with specific programs centered around voluntary benefits, paid time away from work, training and employee physical and mental well-being. 13 Table of Contents As of December 31, 2023, we employed 1,269 full-time employees. We employed 1,036 people in North America, 211 people in Europe and 22 people in Asia.
Our core benefits packages are supplemented with specific programs centered around voluntary benefits, paid time away from work, training and employee physical and mental well-being. As of December 31, 2024, we employed 1,283 full-time employees. We employed 1,055 people in North America, 207 people in Europe and 21 people in Asia.
We believe we have a diverse customer base, with our top ten customers representing approximately 43%, 44% and 45%, of our 2023, 2022, and 2021 sales, respectively. No single customer accounted for over 10% of revenues during these periods.
We believe we have a diverse customer base, with our top ten wholesale customers representing approximately 31%, 32%, and 41%, of our 2024, 2023, and 2022 sales, respectively. No single customer accounted for over 10% of sales during these periods.
As of December 31, 2023, we owned approximately 118 registered U.S. trademarks, 300 registered international trademarks, 8 pending U.S. trademark applications and 68 pending international trademark applications. Most of our products are produced and sold under trademarks owned by or licensed to us.
As of December 31, 2024, we owned approximately 98 registered U.S. trademarks, 278 registered international trademarks, 12 pending U.S. trademark applications and 52 pending international trademark applications. Most of our products are produced and sold under trademarks owned by or licensed to us.
Seasonality While our customers in the retail industry, and many of our competitors, typically operate in highly seasonal businesses, we have historically experienced only moderate seasonality in our business.
We believe that we have good relationships with our employees. 13 Table of Contents Seasonality While our customers in the retail industry, and many of our competitors, typically operate in highly seasonal businesses, we have historically experienced only moderate seasonality in our business.
While we purchase finished products from our manufacturers, the cost of our products is impacted by the cost of labor, as well as the cost, timing and/or availability of the principal raw materials used in the production and sale of our products, including vinyl, fabric, ceramics and plastics.
In addition to quality control testing, safety testing of our products is done by independent third-party testing laboratories. 10 Table of Contents While we purchase finished products from our manufacturers, the cost of our products is impacted by the cost of labor, as well as the cost, timing and/or availability of the principal raw materials used in the production and sale of our products, including vinyl, fabric, ceramics and plastics.
Our ability to effectively engage with our customers has resulted in a deep affinity for Funko and our products. Funko continues to acquire new fans through high profile social media sites such as Facebook, X (formerly Twitter), Instagram, TikTok and YouTube. We continue to expand our reach globally through our compelling content, events and personal engagement with our fan base.
Our ability to effectively engage with our customers has resulted in a deep affinity for Funko and our products. 11 Table of Contents Funko continues to acquire new fans through high profile social media sites such as Facebook, X (formerly Twitter), Instagram, TikTok and YouTube.
We seek to ensure quality control by actively reviewing the product, both in-house and via image at multiple stages in development and sample finished goods to validate the quality control process. In addition to quality control testing, safety testing of our products is done by independent third-party testing laboratories.
We seek to ensure quality control by actively reviewing the product, both in-house and via image at multiple stages in development and sample finished goods to validate the quality control process.
Some of these products could directly compete with our products and could be sold to our customers or directly to consumers at lower prices than those at which our products are sold.
Certain of our licensors have reserved the rights to manufacture, distribute and sell similar or identical products. Some of these products could directly compete with our products and could be sold to our customers or directly to consumers at lower prices than those at which our products are sold.
As of December 31, 2023 and 2022, we had reserves for sales allowances of $44.1 million and $57.3 million, respectively. 11 Table of Contents Marketing We believe Funko’s trendsetting and nostalgia-based product assortment is a unique voice in the pop culture marketplace, and that our expansive retailer presence, high engagement rates across our owned channels, and devout fan base create fervor for the Funko brand.
Marketing We believe Funko’s trendsetting and nostalgia-based product assortment is a unique voice in the pop culture marketplace, and that our expansive retailer presence, high engagement rates across our owned channels, and devout fan base create fervor for the Funko brand.
The Pop! brand has also been applied across many of our other product categories, including games, plush, accessories, apparel and homewares. Core Collectible branded products, which include Pop! Vinyl, represented 73%, 76% and 80% of our sales in 2023, 2022 and 2021, respectively. Our Loungefly branded products are generally fashion accessories including stylized handbags, backpacks, wallets, clothing, and other accessories.
The Pop! brand has also been applied across many of our other product categories, including plush, accessories, apparel and homewares. Core Collectible branded products, which include Pop! Vinyl, represented 77%, 73% and 76% of our sales for the years ended 2024, 2023 and 2022, respectively.
See Item 1A, “Risk Factors.” 14 Table of Contents Information about our Executive Officers and Board of Directors The following table provides information regarding our executive officers and members of our board of directors (ages as of March 7, 2024): Name Age Position(s) Michael Lunsford 56 Interim Chief Executive Officer, Director Andrew Perlmutter 46 President, Director Steve Nave 53 Chief Financial Officer and Chief Operating Officer Tracy Daw 58 Chief Legal Officer and Secretary Andy Oddie 51 Chief Commercial Officer Charles Denson 67 Chairman of the Board of Directors Trevor Edwards 61 Director Diane Irvine 65 Director Jesse Jacobs 48 Director Michael Kerns 47 Director Sarah Kirshbaum Levy 53 Director Executive Officers Michael Lunsford has served as Funko, Inc.'s Interim Chief Executive Officer since July 2023 and on the board of directors of Funko, Inc. since October 2018.
See Item 1A, “Risk Factors.” 14 Table of Contents Information about our Executive Officers and Board of Directors The following table provides information regarding our executive officers and members of our board of directors (ages as of March 13, 2025): Name Age Position(s) Cynthia Williams 58 Chief Executive Officer and Director Yves Le Pendeven 46 Chief Financial Officer Tracy Daw 59 Chief Legal Officer and Secretary Andy Oddie 52 Chief Commercial Officer Charles Denson 68 Chairman of the Board of Directors Trevor Edwards 62 Director Jason Harinstein 49 Director Diane Irvine 66 Director Jesse Jacobs 49 Director Michael Kerns 48 Director Sarah Kirshbaum Levy 54 Director Michael Lunsford 57 Director Executive Officers Cynthia Williams has served as Funko, Inc.'s Chief Executive Officer and Director since May 2024.
Examples of new movie releases are Spider-Man Across the Spider-Verse and Guardians of the Galaxy Vol. 3. Additionally, products that we design and sell based on current television series or new video game titles are expected to have a market demand depending on the popularity and longevity of the title, which is generally expected to be multiple years.
Additionally, products that we design and sell based on current television series or new video game titles are expected to have a market demand depending on the popularity and longevity of the title, which is generally expected to be multiple years. Examples of our current TV properties include One Piece, The Mandalorian, Demon Slayer, Naruto, and Stranger Things.
The reserves are determined as a percentage of sales based upon either historical experience or upon estimates or programs agreed upon by our customers and us.
The reserves are determined as a percentage of sales based upon either historical experience or upon estimates or programs agreed upon by our customers and us. As of December 31, 2024 and 2023, we had reserves for sales allowances of $42.2 million and $44.1 million, respectively.
Internationally, we sell our products directly to similar retailers, primarily in Europe, through our subsidiary Funko UK, Ltd. Our key international retail customers include Amazon, GameStop, and Fnac.
Domestically, we sell our products to specialty retailers, mass-market retailers and e-commerce sites. Our key retail partners in the United States include Target, Amazon, Entertainment Earth, GameStop and Hot Topic. Internationally, we sell our products directly to similar retailers, primarily in Europe, through our subsidiary Funko UK, Ltd. Our key international retail customers include Amazon, GameStop, and Fnac.
These properties are intended to capitalize on the excitement of fans surrounding the launch of new content. Products that we design and sell based on new movie releases are expected to have a limited duration of market demand, depending on the popularity of the title.
Products that we design and sell based on new movie releases are expected to have a limited duration of market demand, depending on the popularity of the title. Examples of new movie releases are Deadpool & Wolverine, Inside Out 2 and Moana 2.
We expect these categories and the properties they encompass to evolve over time as current content becomes classic evergreen and as new forms of pop culture content emerge. The percent of our sales attributable to classic evergreen and current releases may fluctuate in any given year based on the number and popularity of new content releases.
The percent of our sales attributable to classic evergreen and current releases may fluctuate in any given year based on the number and popularity of new content releases.
Levy’s extensive experience in entertainment and media, in particular her familiarity with consumer products licensing, make her well-qualified to serve on our board of directors. 17 Table of Contents Segment Information We identify our segments according to how the business activities are managed and evaluated, for which discrete financial information is available and is regularly reviewed by our Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance.
Segment Information We identify our segments according to how the business activities are managed and evaluated, for which discrete financial information is available and is regularly reviewed by our Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance.
Edwards extensive marketing and brand management experience, as well as public company leadership experience, make him well-qualified to serve on the board. 16 Table of Contents Diane Irvine has served on the board of directors of Funko, Inc. and FAH, LLC since August 2017. Ms.
Harinstein is qualified to serve as a director of the Company due to his financial expertise, leadership experience and knowledge of the collectibles industry. 16 Table of Contents Diane Irvine has served on the board of directors of Funko, Inc. and FAH, LLC since August 2017. Ms.
For the year ended December 31, 2023, 31% of sales were related to the Company's five largest license agreements, with no individual license agreement accounting for more than 10% of sales.
Historically, we have a strong track record for meeting minimum guarantees under our license agreements. For the years ended December 31, 2024 and 2023, 37% and 31% of sales, respectively, were related to the Company's five largest license agreements, with no individual license agreement accounting for more than 10% of sales.
In 2022, we launched a secondary market resale channel directly through eBay. 6 Table of Contents Leading Design and Creative Capabilities Our in-house creative team layers our own whimsical, fun and distinct stylization onto content providers’ characters, creating unique products for which there is substantial consumer demand.
Our direct-to-consumer channel includes our own e-commerce websites in the U.S. and Europe as well as our three flagship retail stores located in the U.S. 6 Table of Contents Leading Design and Creative Capabilities Our in-house creative team layers our own whimsical, fun and distinct stylization onto content providers’ characters, creating unique products for which there is substantial consumer demand.
Irvine currently serves on the boards of directors of Farfetch Limited (on whose board she has served since August 2020), Yelp Inc. (on whose board she has served since November 2011), and D.A. Davidson Companies (on whose board she has served since January 2018).
(on whose board she has served since November 2011), and D.A. Davidson Companies (on whose board she has served since January 2018).
Nave received his Bachelor of Science in Accounting from Oklahoma State University. 15 Table of Contents Tracy Daw has served as Funko, Inc.’s Chief Legal Officer and Secretary since March 2022 and as the Senior Vice President and General Counsel of FAH, LLC since July 2016. Previously, Mr.
Mr. Le Pendeven earned a M.B.A from the Paul Merage School of Business at University of California - Irvine and a B.A. in Science, Technology and Society from Stanford University. Tracy Daw has served as Funko, Inc.’s Chief Legal Officer and Secretary since March 2022 and as the Senior Vice President and General Counsel of FAH, LLC since July 2016.
We compete with toy and fashion accessory companies across our product categories, some of which have substantially more resources, stronger name recognition, and longer operating histories than us, and which benefit from greater economies of scale. We also increasingly compete with large toy companies for shelf space at leading mass market and other retailers.
Competition We are a worldwide leader in the design, manufacture and marketing of licensed pop culture and other products, in a highly competitive industry. We compete with toy and fashion accessory companies across our product categories, some of which have substantially more resources, stronger name recognition, and longer operating histories than us, and which benefit from greater economies of scale.
License Agreements . Our license agreements permit us to use the intellectual property of our licensors in connection with the products we design and sell.
We believe we also provide value to content providers by maximizing the lifetime value of their content by extending its relevance to consumers through ongoing fan engagement. License Agreements . Our license agreements permit us to use the intellectual property of our licensors in connection with the products we design and sell.
We also compete with numerous smaller domestic and foreign collectible toy and fashion accessory designers and manufacturers across our product categories. Our competitive advantage is based primarily on the creativity and quality of the design of our products, our price points, our broad consumer appeal, our license portfolio and our ability to bring new products to market quickly.
Our competitive advantage is based primarily on the creativity and quality of the design of our products, our price points, our broad consumer appeal, our license portfolio and our ability to bring new products to market quickly. We produce most of our products under trademarks and copyrights that we own, utilizing the intellectual property of our licensors.
We are continuing to invest in the growth of our international business, primarily in Europe, both directly and through third party distributors. In 2020, we launched our own e-commerce website in Europe, www.funkoeurope.com which has since expanded into additional countries throughout Europe.
We are continuing to invest in the growth of our international business, both directly and through third-party distributors.
In 2022, we completed our acquisition of Mondo Collectibles, a boutique collectibles brand specializing in high-end collectibles as well as limited edition art prints and vinyl records. We expect to continue to develop new product designs and lines, which may develop into proprietary brands in the future. 8 Table of Contents Our Licenses Licensors.
In addition, we also develop product lines that we market under the broader Funko brand, such as Funko action figures, Funko Soda, and Funko Plush product lines. In 2022, we completed our acquisition of Mondo Collectibles, a boutique collectibles brand specializing in high-end collectibles as well as limited-edition art prints and vinyl records.
We create whimsical, fun and unique products that enable fans to express their affinity for their favorite “something”—whether it is a movie, TV show, video game, musician or sports team.
We achieve this through products people display, wear or carry of their favorite “something”—whether it is a movie, TV show, video game, musician or sports team.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the Stockholders Agreement provides that for as long as the TCG Related Parties beneficially own, directly or indirectly, in the aggregate, 22% or more of all issued and outstanding shares of our Class A common stock (assuming that all outstanding common units in FAH, LLC are redeemed for newly issued shares of our Class A common stock on a one-for-one basis), we will not take, and will cause our subsidiaries not to take, certain actions or enter into certain transactions (whether by merger, consolidation, or otherwise) without the prior written approval of TCG, including: • entering into any transaction or series of related transactions in which any person or group (other than the TCG Related Parties and any group that includes the TCG Related Parties), acquires, directly or indirectly, in excess of 50% of the then outstanding shares of any class of our or our subsidiaries’ capital stock, or following which any such person or group has the direct or indirect power to elect a majority of the members of our board of directors or to replace us as the sole manager of FAH, LLC (or to add another person as co-manager of FAH, LLC); • the reorganization, voluntary bankruptcy, liquidation, dissolution or winding up of us or any of our subsidiaries; • the sale, lease or exchange of all or substantially all of our and our subsidiaries’ property and assets; • the resignation, replacement or removal of us as the sole manager of FAH, LLC, or the appointment of any additional person as a manager of FAH, LLC; • the creation of a new class or series of capital stock or other equity securities of us or, in the event such creation would materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, any of our subsidiaries; 44 Table of Contents • the issuance of additional shares of Class A common stock, Class B common stock, preferred stock or other equity securities of us other than (x) under any stock option or other equity compensation plan approved by our board of directors or the compensation committee, or (y) pursuant to the exercise or conversion of any options, warrants or other securities existing as of the date of the Stockholders Agreement or, in the event such creation would materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, equity securities of any of our subsidiaries; • any amendment or modification of our certificate of incorporation or bylaws or any similar organizational documents of any of our subsidiaries that would, in either case, materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, and • except to the extent of the express restrictions applicable to TCG and its controlled affiliates in the Stockholders Agreement, any action to adopt, approve or implement any plan, agreement or provision that would, among other things, negatively affect TCG’s or its controlled affiliates’ ability to continue to hold or acquire additional shares of our capital stock or other securities.
Biggest changeAdditionally, we are required to take all commercially reasonable action to cause (1) the board of directors to be comprised of at least seven directors or such other number of directors as our board of directors may determine; (2) the individuals designated in accordance with the terms of the Stockholders Agreement to be included in the slate of nominees to be elected to the board of directors at each annual meeting of our stockholders at which a director’s term expires; and (3) the individuals designated in accordance with the terms of the Stockholders Agreement to fill the applicable vacancies on the board of directors. 43 Table of Contents In addition, the Stockholders Agreement provides that for as long as the TCG Related Parties beneficially own, directly or indirectly, in the aggregate, 22% or more of all issued and outstanding shares of our Class A common stock (assuming that all outstanding common units in FAH, LLC are redeemed for newly issued shares of our Class A common stock on a one-for-one basis), we will not take, and will cause our subsidiaries not to take, certain actions or enter into certain transactions (whether by merger, consolidation, or otherwise) without the prior written approval of TCG, including: • entering into any transaction or series of related transactions in which any person or group (other than the TCG Related Parties and any group that includes the TCG Related Parties), acquires, directly or indirectly, in excess of 50% of the then outstanding shares of any class of our or our subsidiaries’ capital stock, or following which any such person or group has the direct or indirect power to elect a majority of the members of our board of directors or to replace us as the sole manager of FAH, LLC (or to add another person as co-manager of FAH, LLC); • the reorganization, voluntary bankruptcy, liquidation, dissolution or winding up of us or any of our subsidiaries; • the sale, lease or exchange of all or substantially all of our and our subsidiaries’ property and assets; • the resignation, replacement or removal of us as the sole manager of FAH, LLC, or the appointment of any additional person as a manager of FAH, LLC; • the creation of a new class or series of capital stock or other equity securities of us or, in the event such creation would materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, any of our subsidiaries; • the issuance of additional shares of Class A common stock, Class B common stock, preferred stock or other equity securities of us other than (x) under any stock option or other equity compensation plan approved by our board of directors or the compensation committee, or (y) pursuant to the exercise or conversion of any options, warrants or other securities existing as of the date of the Stockholders Agreement or, in the event such creation would materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, equity securities of any of our subsidiaries; • any amendment or modification of our certificate of incorporation or bylaws or any similar organizational documents of any of our subsidiaries that would, in either case, materially and adversely impair the rights of the TCG Related Parties as holders of our Class A common stock, and • except to the extent of the express restrictions applicable to TCG and its controlled affiliates in the Stockholders Agreement, any action to adopt, approve or implement any plan, agreement or provision that would, among other things, negatively affect TCG’s or its controlled affiliates’ ability to continue to hold or acquire additional shares of our capital stock or other securities. 44 Table of Contents Additionally, the Continuing Equity Owners who, as of March 11, 2025, collectively hold approximately 1.2% of the combined voting power of our common stock, and certain transferees of former Continuing Equity Owners that have been joined to our TRA (the "TRA Parties") may receive payments from us under the Tax Receivable Agreement in connection with our purchase of common units of FAH, LLC directly from certain of the Continuing Equity Owners upon a redemption or exchange of their common units in FAH, LLC, including the issuance of shares of our Class A common stock upon any such redemption or exchange.
On July 5, 2022, two purported stockholders filed an additional derivative action in the Court of Chancery of the State of Delaware, captioned Fletcher, et al. v. Mariotti . In March 2023, the Company reached a non-monetary settlement in principle in In re Funko, Inc. Derivative Litigation , Smith v. Mariotti , and Fletcher, et al. v.
On July 5, 2022, two purported stockholders filed an additional derivative action in the Court of Chancery of the State of Delaware, captioned Fletcher v. Mariotti et al . In March 2023, the Company reached a non-monetary settlement in principle in In re Funko, Inc. Derivative Litigation, Smith v. Mariotti , and Fletcher v.
We may incur significant expenses to comply with the laws, regulations and other obligations that apply to us. Additionally, the privacy- and data protection-related laws, rules, and regulations applicable to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions are considering imposing additional restrictions.
We may incur significant expenses to comply with the laws, regulations and other obligations that apply to us. Additionally, the privacy- and data protection-related laws, rules, regulations, and other obligations applicable to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions are considering imposing additional restrictions.
We have entered into the Tax Receivable Agreement with FAH, LLC and the TRA Parties, and it provides for the payment by us to the TRA Parties of 85% of the amount of tax benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (1) any future redemptions funded by us or exchanges (or deemed exchanges in certain circumstances) of common units for Class A common stock or cash and (2) certain additional tax benefits attributable to payments under the Tax Receivable Agreement.
We have entered into the Tax Receivable Agreement with FAH, LLC and the TRA Parties, and it provides for the payment by us to the TRA Parties of 85% of the amount of tax benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (1) redemptions funded by us or exchanges (or deemed exchanges in certain circumstances) of common units for Class A common stock or cash and (2) certain additional tax benefits attributable to payments under the Tax Receivable Agreement.
For example, our operations are subject to the GDPR, which imposes data privacy and security requirements on companies doing business in the European Union, including: providing detailed disclosures about how personal data is collected and processed; demonstrating an appropriate legal basis; granting new rights for data subjects in regard to their personal data; and imposing limitations on retention of personal data; and maintaining a record of data processing.
For example, our operations are subject to the GDPR, which imposes data privacy and security requirements on companies doing business in the European Union, including: providing detailed disclosures about how Personal Information is collected and processed; demonstrating an appropriate legal basis; granting new rights for data subjects in regard to their Personal Information; and imposing limitations on retention of Personal Information; and maintaining a record of data processing.
In addition, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including, but not limited to, the following: • our board of directors is classified into three classes, each of which serves for a staggered three-year term; • only the chairperson of our board of directors or a majority of our board of directors may call special meetings of our stockholders; • we have authorized undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; • any action required or permitted to be taken by our stockholders at an annual meeting or special meeting of stockholders may not be taken by written consent in lieu of a meeting; • our amended and restated certificate of incorporation and our amended and restated bylaws may be amended or repealed by the affirmative vote of the holders of at least 66 2 / 3 % of the votes which all our stockholders would be entitled to cast in any annual election of directors and our amended and restated bylaws may also be amended or repealed by a majority vote of our board of directors; • we require advance notice and duration of ownership requirements for stockholder proposals; and • we have opted out of Section 203 of the Delaware General Corporation Law of the State of Delaware, or the DGCL, however, our amended and restated certificate of incorporation contains provisions that are similar to Section 203 of the DGCL (except with respect to TCG and certain other parties, including certain affiliates, associates and transferees of TCG).
In addition, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including, but not limited to, the following: • our board of directors is classified into three classes, each of which serves for a staggered three-year term; • only the chairperson of our board of directors or a majority of our board of directors may call special meetings of our stockholders; • we have authorized undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; • any action required or permitted to be taken by our stockholders at an annual meeting or special meeting of stockholders may not be taken by written consent in lieu of a meeting; • our amended and restated certificate of incorporation and our amended and restated bylaws may be amended or repealed by the affirmative vote of the holders of at least 66 2 / 3 % of the votes which all our stockholders would be entitled to cast in any annual election of directors and our amended and restated bylaws may also be amended or repealed by a majority vote of our board of directors; • we require advance notice and duration of ownership requirements for stockholder proposals; and 50 Table of Contents • we have opted out of Section 203 of the Delaware General Corporation Law of the State of Delaware, or the DGCL, however, our amended and restated certificate of incorporation contains provisions that are similar to Section 203 of the DGCL (except with respect to TCG and certain other parties, including certain affiliates, associates and transferees of TCG).
The Organization for Economic Co-operation and Development (the “OECD”) has announced an accord commonly referred to as “Pillar Two” to set a minimum global corporate tax rate of 15%, which is being or may be implemented in many jurisdictions, including the United States.
The Organization for Economic Co-operation and Development (the “OECD”) announced an accord commonly referred to as “Pillar Two” to set a minimum global corporate tax rate of 15%, which is being or may be implemented in many jurisdictions, including the United States.
We are subject to laws, rules, and regulations in the United States, the European Union, and other jurisdictions relating to the collection, use, and security of personal information. Such data privacy laws, regulations, and other obligations may require us to change our business practices and may negatively impact our ability to expand our business and pursue business opportunities.
We are therefore subject to laws, rules, and regulations in the United States, the European Union, and other jurisdictions relating to the collection, use, and security of Personal Information. Such data privacy laws, regulations, and other obligations may require us to change our business practices and may negatively impact our ability to expand our business and pursue business opportunities.
No adjustments are or will be made as a result of such cash balances to the consideration that the Continuing Equity Owners receive in connection with an election to have their common units redeemed in exchange for, at our election, a newly-issued share of our Class A common stock or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each common unit redeemed. 47 Table of Contents Our Tax Receivable Agreement requires us to make cash payments in respect of certain tax benefits to which we may become entitled, the amounts that we may be required to pay could be significant, and we may not realize such tax benefits.
No adjustments are or will be made as a result of such cash balances to the consideration that the Continuing Equity Owners receive in connection with an election to have their common units redeemed in exchange for, at our election, a newly-issued share of our Class A common stock or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each common unit redeemed. 46 Table of Contents Our Tax Receivable Agreement requires us to make cash payments in respect of certain tax benefits to which we may become entitled, the amounts that we may be required to pay could be significant, and we may not realize such tax benefits.
We entered into a Stockholders Agreement with TCG (the “Stockholders Agreement”) in connection with TCG’s acquisition of our stock from another stockholder, as well as a Joinder and Amendment to our Registration Rights Agreement, both of which became effective at the closing of the ACON Sale.
We entered into a Stockholders Agreement with TCG (the “Stockholders Agreement") in connection with TCG’s acquisition of our stock from another stockholder, as well as a Joinder and Amendment to our Registration Rights Agreement, both of which became effective at the closing of the ACON Sale.
At this time, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts. We can give no assurance that our efforts will remediate these material weaknesses in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.
At this time, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts. We can give no assurance that our efforts will remediate the material weaknesses in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.
Additionally, ineffective internal control could expose us to an increased risk of financial reporting fraud and the misappropriation of assets and subject us to potential delisting from the stock exchange on which we list or to other regulatory investigations and civil or criminal sanctions.
Additionally, ineffective internal control over financial reporting could expose us to an increased risk of financial reporting fraud and the misappropriation of assets and subject us to potential delisting from the stock exchange on which we list or to other regulatory investigations and civil or criminal sanctions.
We are also subject to European Union rules with respect to cross-border transfers of personal data out of the European Economic Area ("EEA") and the United Kingdom. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal information from the EEA and the United Kingdom to the United States.
We are also subject to European Union rules with respect to cross-border transfers of Personal Information out of the European Economic Area ("EEA") and the United Kingdom. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of Personal Information from the EEA and the United Kingdom to the United States.
We also entered into a Registration Rights Agreement pursuant to which the shares of Class A common stock issued to certain of the Continuing Equity Owners (including each of our then-current executive officers) upon such redemption and remaining shares of Class A common stock issued to the Former Equity Owners in connection with the Transactions (such shares now being held by TCG) are eligible for resale, subject to certain limitations set forth in the Registration Rights Agreement. 49 Table of Contents We cannot predict the size of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock may have on the market price of our Class A common stock.
We also entered into a Registration Rights Agreement pursuant to which the shares of Class A common stock issued to certain of the Continuing Equity Owners (including each of our then-current executive officers) upon such redemption and remaining shares of Class A common stock issued to the Former Equity Owners in connection with the Transactions (such shares now being held by TCG) are eligible for resale, subject to certain limitations set forth in the Registration Rights Agreement. 48 Table of Contents We cannot predict the size of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock may have on the market price of our Class A common stock.
As a result, the loss or unavailability of one of our manufacturers or one of the factories in which our products are produced, even on a temporary basis, could have a negative impact on our business, financial condition and results of operations.
As a result, the loss or unavailability of one of our manufacturers or one of the factories in which our products are produced, even on a temporary basis, could have a materially negative impact on our business, financial condition and results of operations.
These international sales and manufacturing operations, including operations in emerging markets, are subject to risks that may significantly harm our sales, increase our costs or otherwise damage our business, including: • currency conversion risks and currency fluctuations; • limitations on the repatriation of earnings; • potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business; • political instability, civil unrest, war and economic instability, such as the current situation with Ukraine and Russia or Israel and Hamas and any impacts on surrounding regions; • greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; • complications in complying with different laws and regulations in varying jurisdictions, including the U.S.
These international sales and manufacturing operations, including operations in emerging markets, are subject to risks that may significantly harm our sales, increase our costs or otherwise damage our business, including: • currency conversion risks and currency fluctuations; • limitations on the repatriation of earnings; • potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business; • political instability, civil unrest, war and economic instability, such as the current situation with Ukraine and Russia or Israel and Hamas and any impacts on surrounding regions; • greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; 32 Table of Contents • complications in complying with different laws and regulations in varying jurisdictions, including the U.S.
Please see “Organizational Structure Risks—TCG has significant influence over us, including over decisions that require the approval of stockholders, and its interests, along with the interests of our other Continuing Equity Owners and certain other parties, in our business may conflict with the interests of our other stockholders.” 51 Table of Contents Our amended and restated certificate of incorporation provides, subject to certain exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters and our amended and restated bylaws designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Please see “Organizational Structure Risks—TCG has significant influence over us, including over decisions that require the approval of stockholders, and its interests, along with the interests of our other Continuing Equity Owners and certain other parties, in our business may conflict with the interests of our other stockholders.” Our amended and restated certificate of incorporation provides, subject to certain exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters and our amended and restated bylaws designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
In addition, the Credit Agreement contains, and any agreements evidencing or governing other future indebtedness may contain, certain restrictive covenants that limit our ability, among other things, to engage in certain activities that are in our long-term best interests, including our ability to: • incur additional indebtedness; • incur certain liens; • consolidate, merge or sell or otherwise dispose of our assets; • make investments, loans, advances, guarantees and acquisitions; 42 Table of Contents • pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests; • enter into transactions with our affiliates; • enter into sale and leaseback transactions in respect to real property; • enter into swap agreements; • enter into agreements restricting our subsidiaries’ ability to pay dividends; • issue or sell equity interests or securities convertible into or exchangeable for equity interests; • redeem, repurchase or refinance our other indebtedness; and • amend or modify our governing documents.
In addition, the Credit Agreement contains, and any agreements evidencing or governing other future indebtedness may contain, certain restrictive covenants that limit our ability, among other things, to engage in certain activities that are in our long-term best interests, including our ability to: • incur additional indebtedness; • incur certain liens; • consolidate, merge or sell or otherwise dispose of our assets; • make investments, loans, advances, guarantees and acquisitions; • pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests; • enter into transactions with our affiliates; • enter into sale and leaseback transactions in respect to real property; • enter into swap agreements; • enter into agreements restricting our subsidiaries’ ability to pay dividends; • issue or sell equity interests or securities convertible into or exchangeable for equity interests; • redeem, repurchase or refinance our other indebtedness; and • amend or modify our governing documents.
This influence may increase the likelihood that we will consummate transactions that are not in the best interests of holders of our Class A common stock or, conversely, prevent the consummation of transactions that are in the best interests of holders of our Class A common stock.
This influence may increase the likelihood that we will consummate transactions that are not in the best interests of other holders of our Class A common stock or, conversely, prevent the consummation of transactions that are in the best interests of other holders of our Class A common stock.
One example of such self-regulatory standards to which we may be contractually bound is the Payment Card Industry Data Security Standard, or PCI DSS.
One example of such self-regulatory standards to which we may be contractually bound is the Payment Card Industry Data Security Standard ("PCI DSS").
These IT Systems are subject to damage or interruption from power outages, computer and telecommunications failures, usage errors by our employees, software bugs or misconfigurations, cybersecurity attacks, computer viruses, malware and other security breaches, as well as catastrophic events such as hurricanes, fires, floods, earthquakes, tornadoes, acts of war or terrorism and global pandemics.
These IT Systems are subject to damage or interruption from power outages, computer and telecommunications failures, usage errors by our employees, software bugs or misconfigurations, cybersecurity attacks, computer viruses, malware and other security breaches, as well as catastrophic events such as hurricanes, fires, floods, earthquakes, tornadoes, acts of war or terrorism and global pandemics or other health crises.
Accordingly, our success will depend, in part, on our ability to continually design and introduce new products that consumers find appealing. To the extent we are unable to do so, our sales and profitability will be adversely affected. This is particularly true given the concentration of our sales under certain of our brand categories, particularly Core Collectibles.
Accordingly, our success will depend, in part, on our ability to continually design and introduce new products that consumers find appealing. To the extent we are unable to do so, our sales and profitability will be adversely affected. This is particularly true given the concentration of our sales under certain of our brand categories, particularly Core Collectible.
Many factors, which are outside our control, may cause the market price of our Class A common stock to fluctuate significantly, including those described elsewhere in this “Risk Factors” section, as well as the following: • our operating and financial performance and prospects; 54 Table of Contents • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • short sales of our stock or trading phenomena such as "short squeezes"; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry, our licensors or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; • the imposition of fines or other remedial measures as a result of regulatory violations or civil liability such as due to the underpayment of customs duties at Loungefly; and • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, pandemics and responses to such events.
Many factors, which are outside our control, may cause the market price of our Class A common stock to fluctuate significantly, including those described elsewhere in this “Risk Factors” section, as well as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; 54 Table of Contents • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • short sales of our stock or trading phenomena such as "short squeezes"; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry, our licensors or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; • the imposition of fines or other remedial measures as a result of regulatory violations or civil liability; and • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, pandemics or other health crises and responses to such events.
Derivative Litigation , and on August 13, 2020, the consolidated action was stayed. On May 9, 2022, another complaint, asserting substantially similar claims, was filed in the U.S. District Court for the Central District of California, captioned Smith v. Mariotti, et al.
Derivative Litigation , and on August 13, 2020, the consolidated action was stayed. On May 9, 2022, another complaint, asserting substantially similar claims and seeking substantially similar relief, was filed in the U.S. District Court for the Central District of California, captioned Smith v. Mariotti, et al.
See also “If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks and copyrights, or if our licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted.” 21 Table of Contents Global and regional economic downturns that negatively impact the retail and credit markets, or that otherwise damage the financial health of our retail customers and consumers, can harm our business and financial performance.
See also “If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks and copyrights, or if our licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted.” Global and regional economic downturns that negatively impact the retail and credit markets, or that otherwise damage the financial health of our retail customers and consumers, can harm our business and financial performance.
There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. 48 Table of Contents We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. 47 Table of Contents We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
A decrease in gross margin can be the result of numerous factors, including, but not limited to: • changes in customer, geographic, or product mix; • introduction of new products, including our expansion into additional product categories; • increases in the royalty rates under our license agreements; 24 Table of Contents • inability to meet minimum guaranteed royalties; • increases in, or our inability to reduce, our costs, including as a result of inflation; • entry into new markets or growth in lower margin markets; • increases in raw materials, labor or other manufacturing- and inventory-related costs; • increases in transportation costs, including the cost of fuel, and increased shipping costs to meet customer demand; • increased price competition; • changes in the dynamics of our sales channels, including those affecting the retail industry and the financial health of our customers; • inability to increase prices in order to meet increased costs; • increases in sales discounts and allowances provided to our customers; • acquisitions of companies with a lower gross margin than ours; and • overall execution of our business strategy and operating plan.
A decrease in gross margin can be the result of numerous factors, including, but not limited to: • changes in customer, geographic, or product mix; • introduction of new products, including our expansion into additional product categories; • increases in the royalty rates under our license agreements; • new or increased tariffs impacting our products or raw materials for our products; • inability to meet minimum guaranteed royalties; • increases in, or our inability to reduce, our costs, including as a result of inflation; • entry into new markets or growth in lower margin markets; • increases in raw materials, labor or other manufacturing- and inventory-related costs; • increases in transportation costs, including the cost of fuel, and increased shipping costs to meet customer demand; • increased price competition; • changes in the dynamics of our sales channels, including those affecting the retail industry and the financial health of our customers; • inability to increase prices in order to meet increased costs; • increases in sales discounts and allowances provided to our customers; • acquisitions of companies with a lower gross margin than ours; and • overall execution of our business strategy and operating plan.
Bribery Act of 2010, similar anti-bribery and anti-corruption laws and local and international environmental, labor, health and safety laws, and in dealing with changes in governmental policies and the evolution of laws and regulations and related enforcement; 32 Table of Contents • difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets which may be quite different from the United States; • changes in international labor costs and other costs of doing business internationally; • the imposition of and changes in tariffs, quotas, border adjustment taxes or other protectionist measures by any major country or market in which we operate, which could make it significantly more expensive and difficult to import products into that country or market, raise the cost of such products, decrease our sales of such products or decrease our profitability; • proper payment of customs duties and/or excise taxes; • natural disasters and pandemics, including related to COVID-19, the greater difficulty and cost in recovering therefrom; • transportation delays and interruptions; • difficulties in moving materials and products from one country to another, including port congestion, strikes or other labor disruptions, trade route disruptions due to geopolitical tensions and other transportation delays and interruptions; and • increased investment and operational complexity to make our products compatible with systems in various countries and compliant with local laws.
Bribery Act of 2010, similar anti-bribery and anti-corruption laws and local and international environmental, labor, health and safety laws, and in dealing with changes in governmental policies and the evolution of laws and regulations and related enforcement; • difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets which may be quite different from the United States; • changes in international labor costs and other costs of doing business internationally; • the imposition of and changes in tariffs, quotas, taxes or other protectionist measures by any major country or market in which we operate, which could make it significantly more expensive and difficult to import products into that country or market, raise the cost of such products, decrease our sales of such products or decrease our profitability; • proper payment of customs duties and/or excise taxes; • natural disasters, pandemics and other health crises, and the greater difficulty and cost in recovering therefrom; • transportation delays and interruptions; • difficulties in moving materials and products from one country to another, including port congestion, strikes or other labor disruptions, trade route disruptions due to geopolitical tensions and other transportation delays and interruptions; and • increased investment and operational complexity to make our products compatible with systems in various countries and compliant with local laws.
While we seek to obtain assurances from those parties that they have systems and processes in place designed to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, nonetheless those partners may also be subject to cybersecurity risks or otherwise compromise the protection of such data.
While we seek to obtain assurances from those parties that they have systems and processes in place designed to protect such Confidential Information, and where applicable, that they will take steps to assure the protections of such Confidential Information by third parties, nonetheless those partners may also be subject to cybersecurity risks or otherwise compromise the protection of such Confidential Information.
Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business or prospects. 45 Table of Contents Our principal asset consists of our interest in FAH, LLC, and accordingly, we depend on distributions from FAH, LLC to pay taxes and expenses, including payments under the Tax Receivable Agreement.
Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business or prospects. Our principal asset consists of our interest in FAH, LLC, and accordingly, we depend on distributions from FAH, LLC to pay taxes and expenses, including payments under the Tax Receivable Agreement.
Any sales in connection with the Registration Rights Agreement, or the prospect of any such sales, could materially impact the market price of our Class A common stock and could impair our ability to raise capital through future sales of equity securities. 50 Table of Contents We do not intend to pay dividends on our Class A common stock for the foreseeable future.
Any sales in connection with the Registration Rights Agreement, or the prospect of any such sales, could materially impact the market price of our Class A common stock and could impair our ability to raise capital through future sales of equity securities. We do not intend to pay dividends on our Class A common stock for the foreseeable future.
To the extent our e-commerce business does not generate more net sales than costs, our business, financial condition and results of operations will be adversely affected. We could be subject to future product liability suits or product recalls which could have a significant adverse effect on our financial condition and results of operations.
To the extent our e-commerce business does not generate more net sales than costs, our business, financial condition and results of operations will be adversely affected. 36 Table of Contents We could be subject to future product liability suits or product recalls which could have a significant adverse effect on our financial condition and results of operations.
In addition, in the ordinary course of business, both we and our third-party providers collect, process and maintain significant amounts of data electronically, including proprietary and confidential business information as well as personal information.
In addition, in the ordinary course of business, both we and our third-party providers collect, process and maintain significant amounts of data, including proprietary and confidential business information as well as personal information ( collectively "Confidential Information").
The occurrence of any of these events would have an adverse effect on our business, cash flows, financial condition and results of operations. 22 Table of Contents If we do not effectively maintain and further develop our relationships with retail customers and distributors, our growth prospects, business and results of operations could be harmed.
The occurrence of any of these events would have an adverse effect on our business, cash flows, financial condition and results of operations. If we do not effectively maintain and further develop our relationships with retail customers and distributors, our growth prospects, business and results of operations could be harmed.
See “Our success is critically dependent on the efforts and dedication of our officers and other employees, and the loss of one or more key employees, or our inability to attract and retain qualified personnel and maintain our corporate culture, could adversely affect our business.” To manage domestic and international growth of our operations and personnel, we have invested and continue to invest in the development of warehouse management systems, additional platforms to support our direct-to-consumer experience, and capital build out of new leased warehouse and office spaces.
See “Our success is critically dependent on the efforts and dedication of our officers and other employees, and the loss of one or more key employees, or our inability to attract and retain qualified personnel and maintain our corporate culture, could adversely affect our business.” To manage domestic and international growth of our operations and personnel, we have invested and continue to invest in the development of a domestic enterprise resource planning system, warehouse management systems, additional platforms to support our direct-to-consumer experience, and capital build out of new leased warehouse and office spaces.
We have generally experienced rapid growth over the last several years, which has placed a strain on our managerial, operational, product design and development, sales and marketing, administrative and financial infrastructure. For example, we increased our total number of full-time employees from 702 as of December 31, 2018 to 1,269 as of December 31, 2023.
We have generally experienced rapid growth over the last several years, which has placed a strain on our managerial, operational, product design and development, sales and marketing, administrative and financial infrastructure. For example, we increased our total number of full-time employees from 702 as of December 31, 2018 to 1,283 as of December 31, 2024.
While we may enter into additional license agreements in the future, the terms of such license agreements may be less favorable than the terms of our existing license agreements. 20 Table of Contents Our license agreements are complex, and typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements.
While we may enter into additional license agreements in the future, the terms of such license agreements may be less favorable than the terms of our existing license agreements. Our license agreements are complex, and typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements.
See “Ownership of Our Class A Common Stock Risks.” 46 Table of Contents In certain circumstances, FAH, LLC will be required to make distributions to us and the Continuing Equity Owners and certain of their transferees, and the distributions that FAH, LLC will be required to make may be substantial.
See “Ownership of Our Class A Common Stock Risks.” In certain circumstances, FAH, LLC will be required to make distributions to us and the Continuing Equity Owners and certain of their transferees, and the distributions that FAH, LLC will be required to make may be substantial.
The costs required to protect our trademarks and copyrights may be substantial. In addition, we may fail to apply for, or be unable to obtain, protection for certain aspects of the intellectual property used in or beneficial to our business.
The costs required to protect our trademarks and copyrights may be substantial. 27 Table of Contents In addition, we may fail to apply for, or be unable to obtain, protection for certain aspects of the intellectual property used in or beneficial to our business.
We have recently experienced canceled orders and if demand or future sales do not reach forecasted levels, we could have excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard.
In recent periods, we have experienced canceled orders and if demand or future sales do not reach forecasted levels, we could have excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard.
Moreover, while we have separate licensing arrangements with Disney, LucasFilm and Marvel, these parties are all under common ownership by Disney and collectively these licensors accounted for approximately 38%, 44% and 43% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively.
Moreover, while we have separate licensing arrangements with Disney, LucasFilm and Marvel, these parties are all under common ownership by Disney and collectively these licensors accounted for approximately 32%, 38% and 44% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively.
Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations. We operate facilities and sell products in numerous countries outside the United States. Sales to our international customers comprised approximately 31%, 27% and 28% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively.
Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations. We operate facilities and sell products in numerous countries outside the United States. Sales to our international customers comprised approximately 35%, 31% and 27% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively.
Any actual or perceived inability to comply with applicable privacy or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental investigations, damage our reputation, and adversely affect our business. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Any actual or perceived inability to comply with applicable privacy or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental investigations, damage our reputation, and adversely affect our business. 57 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If we are not successful in managing our inventory, our business, financial condition and results of operations could be adversely affected. 19 Table of Contents If we fail to manage our growth effectively, our financial performance may suffer.
If we are not successful in managing our inventory, our business, financial condition and results of operations could be adversely affected. If we fail to manage our growth effectively, our financial performance may suffer.
Mariotti et al ., and Igelido v. Mariotti et al. , respectively, were filed in the United States District Court for the Central District of California. On July 6, 2020, these three actions were consolidated for all purposes into one action under the title In re Funko, Inc.
Mariotti et al ., and Igelido v. Mariotti et al. , respectively, were filed in the United States District Court for the Central District of California, seeking declaratory and monetary relief. On July 6, 2020, these three actions were consolidated for all purposes into one action under the title In re Funko, Inc.
On January 18, 2022, a purported stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned Shumacher v. Mariotti, et al. , relating to our corporate “Up-C” structure and bringing direct claims for breach of fiduciary duties against certain current and former officers and directors.
On January 18, 2022, a purported stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned Shumacher v. Mariotti, et al. , relating to our corporate “Up-C” structure and bringing direct claims for breach of fiduciary duties against certain current and former officers and directors, seeking declaratory, monetary, and injunctive relief.
The FCPA, the U.K. Bribery Act of 2010 and similar anti-corruption and anti-bribery laws in other jurisdictions generally prohibit companies, their officers, directors, employees and third-party intermediaries, business partners, and agents from making improper payments or other improper things of value to government officials or other persons.
Bribery Act of 2010 and similar anti-corruption and anti-bribery laws in other jurisdictions generally prohibit companies, their officers, directors, employees and third-party intermediaries, business partners, and agents from making improper payments or other improper things of value to government officials or other persons.
As a result of the COVID-19 pandemic and recent macroeconomic trends, we have had certain of our retail customers reduce and, in some instances, cancel purchase orders as a result of store closures or a shift of purchasing to focus only on essential consumer products.
As a result of recent macroeconomic trends, we have had certain of our retail customers reduce and, in some instances, cancel purchase orders as a result of store closures or a shift of purchasing to focus only on essential consumer products.
Approximately 55%, 53% and 59%, of our net sales for the years ended December 31, 2023, 2022 and 2021, respectively, were made in the third and fourth quarters, as our customers build up their inventories in anticipation of the holiday season.
Approximately 56%, 55% and 53%, of our net sales for the years ended December 31, 2024, 2023 and 2022, respectively, were made in the third and fourth quarters, as our customers build up their inventories in anticipation of the holiday season.
On March 31, 2022, we moved to dismiss the action. In response to defendants’ motion to dismiss, Plaintiff filed an Amended Complaint on May 25, 2022. The amendment did not materially change the claims at issue, and the Defendants again moved to dismiss on July 29, 2022.
On March 31, 2022, we moved to dismiss the action. In response to defendants’ motion to dismiss, Plaintiff filed an Amended Complaint on May 25, 2022. The amendment did not materially change the claims at issue, and the Defendants again moved to dismiss on August 12, 2022.
Additionally, ineffective internal controls could expose us to an increased risk of financial reporting fraud and the misappropriation of assets and subject us to potential delisting from the stock exchange on which we list or to other regulatory investigations and civil or criminal sanctions. GENERAL RISKS Changes in foreign currency exchange rates can significantly impact our reported financial performance.
Additionally, ineffective internal control over financial reporting could expose us to an increased risk of financial reporting fraud and the misappropriation of assets and subject us to potential delisting from the stock exchange on which we list or to other regulatory investigations and civil or criminal sanctions. 52 Table of Contents GENERAL RISKS Changes in foreign currency exchange rates can significantly impact our reported financial performance.
No assurance can be made that this change in our leadership will not have a material adverse impact on our relationships with licensors, and if we fail to manage our licensor relationships successfully, our business, financial condition or results of operations could be adversely affected.
No assurance can be made that these and other changes in our leadership will not have a material adverse impact on our relationships with licensors, and if we fail to manage our licensor relationships successfully, our business, financial condition or results of operations could be adversely affected.
The businesses of our retail customers are highly seasonal, with a majority of retail sales occurring during the period from October through December in anticipation of the holiday season. As a consequence, we have experienced moderate seasonality in our business.
The businesses of our retail customers are highly seasonal, with a majority of retail sales occurring during the period from August through November in anticipation of the holiday season. As a consequence, we have experienced moderate seasonality in our business.
We are subject to income taxes in the United States and the United Kingdom, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions.
We are subject to income taxes in a number of jurisdictions, including the United States and the United Kingdom, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions.
Similarly, in the year ended December 31, 2022, we acquired Mondo Collectibles, LLC (f/k/a Mondo Tees Buyer, LLC) (“Mondo”), a high-end pop culture collectibles company that creates vinyl records, posters, soundtracks, toys, apparel, books, games and other collectibles for $14.0 million in cash.
Similarly, in the year ended December 31, 2022, we acquired Mondo Collectibles, LLC (f/k/a Mondo Tees Buyer, LLC) (“Mondo”), a high-end pop culture collectibles company that creates vinyl records, posters, soundtracks, toys, apparel, books, games and other collectibles.
These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive personal data transfers to/in the U.S. In the U.S., the CCPA, imposes similar requirements on companies handling data of California residents and creates a new and potentially severe statutory damages framework for violations of the CCPA.
These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive Personal Information transfers to/in the U.S. 56 Table of Contents In the U.S., the CCPA, imposes similar requirements on companies handling the Personal Information of California residents and creates a potentially severe statutory damages framework for violations of the CCPA.
Our top ten licensors collectively accounted for approximately 68%, 74% and 74% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively.
Our top ten licensors collectively accounted for approximately 63%, 68% and 74% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively.
This transaction represents an opportunity to expand the Company’s product offerings into vinyl records, posters and other high-end collectibles however the Company has limited experience selling these product categories and there can be no assurance that we will be able to successfully or profitably enter these product categories at scale.
Following this transaction, we have expanded the Company’s product offerings into vinyl records, posters and other high-end collectibles however the Company has limited experience selling these product categories and there can be no assurance that we will be able to successfully or profitably enter these product categories at scale.
In addition, the process of implementing any new technology systems involves inherent costs and risks, including potential delays and system failures, the potential disruption of our internal control structure, the diversion of management’s time and attention, and the need to re-train or hire new employees, any of which could disrupt our business operations and have a material adverse effect on our business, financial condition and results of operations. 41 Table of Contents Our indebtedness could adversely affect our financial health and competitive position.
In addition, the process of implementing any new technology systems involves inherent costs and risks, including potential delays and system failures, the potential disruption of our internal control structure, the diversion of management’s time and attention, and the need to re-train or hire new employees, any of which could disrupt our business operations and have a material adverse effect on our business, financial condition and results of operations.
Sales of our Core Collectible branded category products accounted for approximately 73%, 76% and 80% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively.
Sales of our Core Collectible branded category products accounted for approximately 77%, 73% and 76% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively.
As a result, we are subject to various risks resulting from our international operations. See “Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations.” We are subject to a series of risks related to climate change. There are inherent climate-related risks wherever business is conducted.
See “Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations.” We are subject to a series of risks related to climate change. There are inherent climate-related risks wherever business is conducted.
The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets could have an adverse material effect on the successful development and adoption of our non-fungible token (“NFT”) and digital collectible business.
The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets could have an adverse material effect on the successful development and adoption of our NFT and digital collectible business.
Certain of the products we purchase from manufacturers in China have been or may in the future be subject to these tariffs, which could make our products less competitive than those of our competitors whose inputs are not subject to these tariffs.
Certain of the products we purchase from manufacturers in China have been or may in the future be subject to these tariffs, which, to the extent we alter our pricing as a result of such tariffs, could make our products less competitive than those of our competitors whose inputs are not subject to these tariffs.
We compete with toy companies in many of our product categories, some of which have substantially more resources than us, stronger name recognition, longer operating histories and greater economies of scale. We also compete with numerous smaller domestic and foreign collectible product designers and manufacturers.
Our industry is, and will continue to be, highly competitive. We compete with toy companies in many of our product categories, some of which have substantially more resources than us, stronger name recognition, longer operating histories and greater economies of scale. We also compete with numerous smaller domestic and foreign collectible product designers and manufacturers.
Digital assets continue to be an emerging asset class based on emerging technologies, and our use of digital assets is subject to a number of factors relating to the capabilities and development of blockchain technologies, such as the infancy of their development, their dependence on the internet and other technologies, their dependence on the role played by miners, validators and developers and the potential for malicious activity, among other factors.
Digital assets continue to be an emerging asset class based on emerging technologies, and our use of digital assets is subject to a number of factors relating to the capabilities and development of blockchain technologies, such as the infancy of their development, their dependence on the internet and other technologies, their dependence on the role played by miners, validators and developers and the potential for malicious activity, including manipulation of the keys that access and are used to maintain underlying records, among other factors.
As of December 31, 2023, we had a reserve of $18.1 million on our balance sheet related to ongoing and future royalty audits, based on estimates of the costs we expect to incur.
As of December 31, 2024, we had a reserve of $23.5 million on our balance sheet related to ongoing and future royalty audits, based on estimates of the costs we expect to incur.
Our top ten customers represented approximately 43%, 44% and 45% of our sales for the years ended December 31, 2023, 2022 and 2021, respectively. We depend on retailers to provide adequate and attractive space for our products and point of purchase displays in their stores.
Our top ten wholesale customers represented approximately 31%, 32% and 41% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively. We depend on retailers to provide adequate and attractive space for our products and point of purchase displays in their stores.
If toy companies or other competitors produce higher margin or more popular merchandise than our products, our retail customers may reduce purchases of our products and, in turn, devote less shelf space and resources to the sale of our products, which could have a material adverse effect on our sales and profitability.
If toy companies or other competitors produce higher margin or more popular merchandise than our products, our retail customers may reduce purchases of our products and, in turn, devote less shelf space and resources to the sale of our products, which could have a material adverse effect on our sales and profitability. 24 Table of Contents Our gross margin may not be sustainable and may fluctuate over time.
We originally reserved for issuance 5,518,518 shares of Class A common stock under our 2017 Incentive Award Plan (the “2017 Plan”), including, as of December 31, 2023, 1,928,998 shares of Class A common stock underlying stock options we granted to certain of our directors, executive officers and other employees and 2,382,960 shares of Class A common stock underlying restricted stock units we granted to certain of our executive officers, consultants and other employees.
We originally reserved for issuance 5,518,518 shares of Class A common stock under our 2017 Incentive Award Plan (the “2017 Plan”), including, as of December 31, 2024, 1,468,202 shares of Class A common stock underlying stock options we granted to certain of our directors, executive officers and other employees and 2,377,793 shares of Class A common stock underlying restricted stock units we granted to certain of our executive officers, consultants and other employees.
Our officers and employees are at the heart of all of our efforts. It is their skill, creativity and hard work that drive our success. In particular, our success depends to a significant extent on the continued service and performance of our senior management team.
It is their skill, creativity and hard work that drive our success. In particular, our success depends to a significant extent on the continued service and performance of our senior management team.
The factors affecting the further development of blockchain networks and digital assets, include, without limitation: • worldwide growth in the adoption and use of digital assets and other blockchain technologies; • government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operation of blockchain networks or similar systems; • the maintenance and development of the open-source software protocol of blockchain networks; • changes in consumer demographics and public tastes and preferences; • the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using government-backed currencies or existing networks; • the extent to which current purchaser interest in cryptocurrencies represents a speculative “bubble;” • the extent to which historic price volatility in cryptocurrencies and digital assets continues into the future; • general economic conditions in the United States and the world; • the regulatory environment relating to cryptocurrencies and blockchains; and • a decline in the popularity or acceptance of cryptocurrencies or other blockchain-based tokens. 39 Table of Contents Moreover, if and to the extent we are unable to successfully expand our NFT and digital collectible business, we may incur unanticipated costs and losses, and face other adverse consequences, such as negative reputational effects.
The factors affecting the further development of blockchain networks and digital assets, include, without limitation: • worldwide growth in the adoption and use of digital assets and other blockchain technologies; • further government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operation of blockchain networks or similar systems; 39 Table of Contents • the maintenance and development of the open-source software protocol of blockchain networks; • changes in consumer demographics and public tastes and preferences; • the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using government-backed currencies or existing networks; • the extent to which current purchaser interest in cryptocurrencies represents a speculative “bubble;" • the extent to which historic price volatility in cryptocurrencies and digital assets continues into the future; • general economic conditions in the United States and the world; • the regulatory environment relating to cryptocurrencies and blockchains; and • a decline in the popularity or acceptance of cryptocurrencies or other blockchain-based tokens.
As of December 31, 2023, we owned approximately 118 registered U.S. trademarks, 300 registered international trademarks, 8 pending U.S. trademark applications and 68 pending international trademark applications . The market for our products depends to a significant extent upon the value associated with our product design, our proprietary brands and the properties we license.
As of December 31, 2024, we owned approximately 98 registered U.S. trademarks, 278 registered international trademarks, 12 pending U.S. trademark applications and 52 pending international trademark applications . The market for our products depends to a significant extent upon the value associated with our product design, our proprietary brands and the properties we license.
We rely extensively on IT Systems for internal and external operations and while we operate certain of these IT Systems, we also rely on third-party providers for a host of technologies, products and services.
We rely extensively on various IT Systems for internal and external operations that are critical to our business, and while we operate certain of these IT Systems, we also rely on third-party providers for a host of technologies, products and services.
Furthermore, as laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and result of operations. 40 Table of Contents Failure to successfully operate our information systems and implement new technology effectively could disrupt our business or reduce our sales or profitability.
Furthermore, as laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and result of operations.
Additionally, we have no guarantee that any particular property we license will translate into a successful product. Products tied to a particular content release may be developed and released before demand for the underlying content is known.
Additionally, we have no guarantee that any particular property we license will translate into a successful product. Products tied to a particular content release may be developed and released before demand for the underlying content is known. The underperformance of any such product may result in reduced sales and operating profit for us.
Our gross margin may not be sustainable and may fluctuate over time. Our gross margin has historically fluctuated, primarily as a result of changes in product mix, changes in our costs, including inventory management, price competition and acquisitions.
Our gross margin has historically fluctuated, primarily as a result of changes in product mix, changes in our costs, including inventory management, price competition and acquisitions.
This could result in the then-current owners of FAH, LLC equity interests (including us) bearing the burden of income tax audit adjustments in accordance with their then-current ownership of FAH, LLC, even if their ownership percentage of FAH, LLC during the taxable period that gave rise to the audit adjustment was different.
This could result in the then-current owners of FAH, LLC equity interests (including us) bearing the burden of income tax audit adjustments in accordance with their then-current ownership of FAH, LLC, even if their ownership percentage of FAH, LLC during the taxable period that gave rise to the audit adjustment was different. 34 Table of Contents In addition, changes in law and policy relating to taxes could adversely affect us.
Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition. 33 Table of Contents Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition.
Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.
FAH, LLC’s ability to make such distributions may be subject to various limitations and restrictions. We have no material assets other than our ownership of 50,548,826 common units of FAH, LLC as of December 31, 2023, representing approximately 94.9% of the economic interest in FAH, LLC.
FAH, LLC’s ability to make such distributions may be subject to various limitations and restrictions. We have no material assets other than our ownership of 52,966,785 common units of FAH, LLC as of December 31, 2024, representing approximately 97.2% of the economic interest in FAH, LLC.
Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties. We rely to a large extent on our online presence to reach consumers and use third-party social media platforms as marketing tools. For example, we maintain Facebook, X (formerly Twitter), Instagram, TikTok and YouTube accounts.
We rely to a large extent on our online presence to reach consumers and use third-party social media platforms as marketing tools. For example, we maintain Facebook, X (formerly Twitter), Instagram, TikTok and YouTube accounts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCYBERSECURITY Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. 57 Table of Contents Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Biggest changeOur cybersecurity risk management program is integrated into our overall risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
See “Item 1A: Risk Factors” above for additional information on risks related to, for example risks related to cyber-attacks, information and system breaches, and technology disruptions and failures; our reliance on using and protecting certain intellectual property rights; keeping pace with technological developments; legal and regulatory developments; and obtaining hardware, software and operational support from third-party vendors.
See Item 1A, "Risk Factors” above for additional information on risks related to, for example risks related to cyber-attacks, information and system breaches, and technology disruptions and failures; our reliance on using and protecting certain intellectual property rights; keeping pace with technological developments; legal and regulatory developments; and obtaining hardware, software and operational support from third-party vendors.
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in our IT environment. 58 Table of Contents
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
Key elements of our cybersecurity risk management program include: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a designated team responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, including incident response personnel, and senior management and • a third-party risk management process for certain service providers, suppliers, and vendors based on our assessment of their criticality to our operations and respective risk profile.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: • risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information; • a designated team responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, including incident response personnel and senior management and • a third-party risk management process for certain service providers, suppliers, and vendors based on our assessment of their criticality to our operations and respective risk profile.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. This team's experience includes over 40 years in system engineering, risk management, data privacy and compliance monitoring. We also engage an external Data Protection Officer to monitor data collection and security in the European Union.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Global Head of Technology's experience includes over 20 years in system engineering, risk management, data privacy and compliance monitoring.
In addition, management updates the Committee, as where it deems appropriate, regarding any material cybersecurity incidents, as well as certain incidents with lesser impact potential. The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
In addition, management updates the Committee, as where it deems appropriate, regarding any material cybersecurity incidents.
Our management and senior IT team, including our Interim Chief Executive Officer, Chief Financial Officer and Operating Officer, Chief Legal Officer, Sr. Director, IT Infrastructure and Operations, and SVP, People & Culture, are responsible for assessing and managing our material risks from cybersecurity threats.
The Committee reports to the full Board regarding its activities, including those related to cybersecurity. 58 Table of Contents Our management and senior IT team, including our Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Global Head of Technology, and SVP, People & Culture, are responsible for assessing and managing our material risks from cybersecurity threats.
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ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.
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We also engage an external Data Protection Officer to monitor data collection and security in the European Union.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below sets forth certain information regarding our material properties, all of which are leased: Property Location Approximate Square Footage Lease Expiration Date Offices, Warehouse and Distribution Facility Everett, Washington 201,000 January 31, 2024 Corporate Headquarters and Retail Store Everett, Washington 99,000 January 31, 2027 Administrative Offices Everett, Washington 82,000 January 31, 2032 Office and Warehouse Facility Everett, Washington 21,000 January 31, 2025 Administrative Offices, Licensing and Apparel Sales Burbank, California 43,000 December 31, 2026 Retail Store Hollywood, California 40,000 March 31, 2030 Administrative Offices San Diego, California 14,000 November 30, 2029 Warehouse and Distribution Facility Buckeye, Arizona 862,000 October 31, 2032 Warehouse and Administrative Offices Coventry, England 349,000 July 7, 2029 Sales and Administrative Offices London, United Kingdom 11,000 June 27, 2027 For leases that are scheduled to expire during the next 12 months, we may negotiate new lease agreements, renew existing lease agreements or use alternate facilities.
Biggest changeThe table below sets forth certain information regarding our material properties, all of which are leased: Property Location Approximate Square Footage Lease Expiration Date Corporate Headquarters and Retail Store Everett, Washington 99,000 January 31, 2027 Administrative Offices Everett, Washington 82,000 January 31, 2032 Office and Warehouse Facility Everett, Washington 21,000 January 31, 2030 Administrative Offices, Licensing and Apparel Sales Burbank, California 43,000 December 31, 2026 Retail Store Hollywood, California 40,000 March 31, 2030 Administrative Offices San Diego, California 14,000 November 30, 2029 Warehouse/Distribution Facility and Retail Store Buckeye, Arizona 862,000 October 31, 2032 Warehouse and Administrative Offices Coventry, England 349,000 July 7, 2029 Sales and Administrative Offices London, United Kingdom 11,000 June 27, 2027 For leases that are scheduled to expire during the next 12 months, we may negotiate new lease agreements, renew existing lease agreements or use alternate facilities.
ITEM 2. PROPERTIES As of December 31, 2023, our leased properties primarily consist of office space, warehouses and distribution facilities.
ITEM 2. PROPERTIES As of December 31, 2024, our leased properties primarily consist of office space, warehouses and distribution facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons reflected in the graph and table are not intended to forecast the future performance of our stock and may not be indicative of our future performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Funko, Inc. 100.00 130.49 78.94 142.97 82.97 58.78 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 Russell 2000 Consumer Discretionary 100.00 86.35 109.63 140.78 97.67 122.83 61 Table of Contents ITEM 6. [RESERVED.] 62 Table of Contents
Biggest changeThe comparisons reflected in the graph and table are not intended to forecast the future performance of our stock and may not be indicative of our future performance. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Funko, Inc. 100.00 60.49 109.56 63.58 45.05 78.03 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93 Russell 2000 Consumer Discretionary 100.00 126.95 163.03 113.10 142.24 153.74 61 Table of Contents ITEM 6. [RESERVED.] 62 Table of Contents
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF SECURITIES Market Information On November 2, 2017, our Class A common stock began trading on the Nasdaq Global Market under the symbol “FNKO.” Prior to that time, there was no public market for our stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On November 2, 2017, our Class A common stock began trading on the Nasdaq Global Market under the symbol “FNKO.” Prior to that time, there was no public market for our stock.
The graph and the table assume that $100 was invested on December 31, 2018 in each of our Class A common stock, the Russell 2000 Index, and the Russell 2000 Consumer Discretionary Index, and that any dividends were reinvested.
The graph and the table assume that $100 was invested on December 31, 2019 in each of our Class A common stock, the Russell 2000 Index, and the Russell 2000 Consumer Discretionary Index, and that any dividends were reinvested.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. 60 Table of Contents Stock Performance Graph The following graph and table illustrate the total return from December 31, 2018 through December 31, 2023, for (i) our Class A common stock, (ii) the Russell 2000 Index, and (iii) the Russell 2000 Consumer Discretionary Index.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. 60 Table of Contents Stock Performance Graph The following graph and table illustrate the total return from December 31, 2019 through December 31, 2024, for (i) our Class A common stock, (ii) the Russell 2000 Index, and (iii) the Russell 2000 Consumer Discretionary Index.
Issuer Purchases of Equity Securities There were no share repurchases during the fourth quarter of the fiscal year ended December 31, 2023.
Issuer Purchases of Equity Securities There were no share repurchases during the fourth quarter of the fiscal year ended December 31, 2024.
Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors.
Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors on our Class A common stock.
There is no established public trading market for our Class B common stock. Holders of Record As of March 5, 2024, there were 36 stockholders of record of our Class A common stock. As of March 5, 2024, there were 11 stockholders of record of our Class B common stock.
There is no established public trading market for our Class B common stock. Holders of Record As of March 11, 2025, there were 36 stockholders of record of our Class A common stock. As of March 11, 2025, there were 7 stockholders of record of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP financial performance measure, which is net loss, for the periods presented: Year Ended December 31, 2023 2022 (in thousands, except per share data) Net loss attributable to Funko, Inc. $ (154,079) $ (8,035) Reallocation of net (loss) income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1) (10,359) 2,795 Equity-based compensation (2) 10,534 16,591 Acquisition transaction costs and other expenses (3) 14,241 2,850 Certain severance, relocation and related costs (4) 6,486 9,775 Loss on extinguishment of debt (5) 494 — Foreign currency transaction loss (gain) (6) 854 (3,232) Tax receivable agreement liability adjustments (7) (100,223) 3,987 One-time cloud based computing arrangement abandonment (8) — 32,492 One-time disposal costs for finished goods held at offshore factories (9) 6,283 — One-time disposal costs for unfinished goods held at offshore factories (10) 2,404 — Inventory write-down (11) 30,338 — Income tax expense (benefit) (12) 147,630 (27,657) Adjusted net (loss) income $ (45,397) $ 29,566 Weighted-average shares of Class A common stock outstanding-basic 48,332 44,555 Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock 4,021 6,967 Adjusted weighted-average shares of Class A stock outstanding-diluted 52,353 51,522 Adjusted (loss) earnings per diluted share $ (0.87) $ 0.57 Year Ended December 31, 2023 2022 (in thousands) Net loss $ (164,438) $ (5,240) Interest expense, net 27,970 10,334 Income tax expense (benefit) 132,497 (17,801) Depreciation and amortization 59,763 47,669 EBITDA $ 55,792 $ 34,962 Adjustments: Equity-based compensation (2) 10,534 16,591 Acquisition transaction costs and other expenses (3) 14,241 2,850 Certain severance, relocation and related costs (4) 6,486 9,775 Loss on extinguishment of debt (5) 494 — Foreign currency transaction loss (gain) (6) 854 (3,232) Tax receivable agreement liability adjustments (7) (100,223) 3,987 One-time cloud based computing arrangement abandonment (8) — 32,492 One-time disposal costs for finished goods held at offshore factories (9) 6,283 — One-time disposal costs for unfinished goods held at offshore factories (10) 2,404 — Inventory write-down (11) 30,338 — Adjusted EBITDA $ 27,203 $ 97,425 72 Table of Contents (1) Represents the reallocation of net (loss) income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC in periods in which income was attributable to non-controlling interests.
Biggest changeGAAP financial performance measure, which is net loss, for the periods presented: Year Ended December 31, 2024 2023 (in thousands, except per share data) Net loss attributable to Funko, Inc. $ (14,718) $ (154,079) Reallocation of net loss attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1) (352) (10,359) Equity-based compensation (2) 13,602 10,534 Acquisition transaction costs and other expenses (3) 3,449 14,241 Certain severance, relocation and related costs (4) 2,093 6,486 Loss on extinguishment of debt (5) — 494 Foreign currency transaction loss (6) 2,398 854 Tax receivable agreement liability adjustments (7) 547 (100,223) Income tax expense (8) 1,668 157,386 Adjusted net income (loss) (9) $ 8,687 $ (74,666) Weighted-average shares of Class A common stock outstanding-basic 52,043 48,332 Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock 2,049 4,021 Adjusted weighted-average shares of Class A stock outstanding-diluted 54,092 52,353 Loss per diluted share $ (0.28) $ (3.19) Adjusted earnings (loss) per diluted share $ 0.16 $ (1.43) Year Ended December 31, 2024 2023 (in thousands) Net loss $ (15,070) $ (164,438) Interest expense, net 20,575 27,970 Income tax expense 4,564 132,497 Depreciation and amortization 62,583 59,763 EBITDA $ 72,652 $ 55,792 Adjustments: Equity-based compensation (2) 13,602 10,534 Acquisition transaction costs and other expenses (3) 3,449 14,241 Certain severance, relocation and related costs (4) 2,093 6,486 Loss on extinguishment of debt (5) — 494 Foreign currency transaction loss (6) 2,398 854 Tax receivable agreement liability adjustments (7) 547 (100,223) Adjusted EBITDA (9) $ 94,741 $ (11,822) 73 Table of Contents (1) Represents the reallocation of net loss attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC in periods in which income was attributable to non-controlling interests.
We define Adjusted Net (Loss) Income as net loss attributable to Funko, Inc. adjusted for the reallocation of income attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance.
We define Adjusted Net Income (Loss) as net loss attributable to Funko, Inc. adjusted for the reallocation of loss attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance.
We define Adjusted (Loss) Earnings per Diluted Share as Adjusted Net (Loss) Income divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any.
We define Adjusted Earnings (Loss) per Diluted Share as Adjusted Net Income (Loss) divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any.
The Form S-3 allows us to offer and sell from time-to-time up to $100.0 million of Class A common stock, preferred stock, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell 17,318,008 shares of Class A common stock in one or more offerings.
The Form S-3 allows us to offer and sell from time-to-time up to $100.0 million of Class A common stock, preferred stock, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell 17,318,008 shares of Class A common stock in one or more offerings.
As a result of the full valuation allowance on the deferred tax assets, and projected inability to fully utilize all or part of the related tax benefits, the Company determined that certain payments to the TRA Parties related to unrealized tax benefits under the TRA are no longer probable and estimable.
As a result of the full valuation allowance on the deferred tax assets, and projected inability to fully utilize all or part of the related tax benefits, the Company determined that certain payments to the TRA Parties related to unrealized tax benefits under the TRA are no longer probable and estimable.
The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net (loss) income or other financial statement data presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K as indicators of financial performance.
The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net loss or other financial statement data presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K as indicators of financial performance.
Management uses the Non-GAAP Financial Measures: • as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations; • for planning purposes, including the preparation of our internal annual operating budget and financial projections; • as a consideration to assess incentive compensation for our employees; • to evaluate the performance and effectiveness of our operational strategies; and • to evaluate our capacity to expand our business. 70 Table of Contents By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.
Management uses the Non-GAAP Financial Measures: • as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations; • for planning purposes, including the preparation of our internal annual operating budget and financial projections; • as a consideration to assess incentive compensation for our employees; • to evaluate the performance and effectiveness of our operational strategies; and • to evaluate our capacity to expand our business. 71 Table of Contents By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.
Pursuant to the Second Amended and Restated FAH, LLC Agreement, FAH, LLC will generally make pro rata tax distributions to holders of common units in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of FAH, LLC that is allocated to them. 80 Table of Contents Pursuant to the Tax Receivable Agreement, we are required to make cash payments to the TRA Parties equal to 85% of the tax benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (1) any redemptions funded by us or exchanges (or deemed exchanges in certain circumstances) of common units for Class A common stock or cash, and (2) certain additional tax benefits attributable to payments under the Tax Receivable Agreement ("Tax Receivable Agreement Payments”).
Pursuant to the Second Amended and Restated FAH, LLC Agreement, FAH, LLC will generally make pro rata tax distributions to holders of common units in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of FAH, LLC that is allocated to them. 81 Table of Contents Pursuant to the Tax Receivable Agreement, we are required to make cash payments to the TRA Parties equal to 85% of the tax benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (1) any redemptions funded by us or exchanges (or deemed exchanges in certain circumstances) of common units for Class A common stock or cash, and (2) certain additional tax benefits attributable to payments under the Tax Receivable Agreement ("Tax Receivable Agreement Payments”).
Revenue from the sale of our products is recognized when control of the goods is transferred to the customer, which is upon shipment or upon receipt of finished goods by the customer, depending on the contract terms. The majority of revenue is recognized upon shipment of products to the customer.
Revenue from the sale of our products is recognized when control of the goods is transferred to the customer, which is upon shipment or upon receipt of finished goods by the customer, depending on the contract terms.
GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net (loss) income, (loss) earnings per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net (loss) income before interest expense, net, income tax expense (benefit), depreciation and amortization.
GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net loss, loss per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net loss before interest expense, net, income tax expense, depreciation and amortization.
During the year ended December 31, 2023, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets.
During the year ended December 31, 2023, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it was not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets.
For loans based on Term SOFR, EURIBOR, HIBOR or CDOR, interest payments are due at the end of each applicable interest period.
For loans based on SOFR, EURIBOR, HIBOR or CDOR, interest payments are due at the end of each applicable interest period.
As of December 31, 2023 and 2022, we were in compliance with all covenants in our respective credit agreements in effect at such time. We expect to maintain compliance with our covenants for at least one year from the issuance of these financial statements based on our current expectations and forecasts.
As of December 31, 2024 and 2023, we were in compliance with all financial covenants in our respective credit agreements in effect at such time. We expect to maintain compliance with our covenants for at least one year from the issuance of these financial statements based on our current expectations and forecasts.
In particular, though we were in compliance with the financial and other covenants under the Credit Agreement as of December 31, 2023, we cannot assure you that we will be able to maintain compliance with our financial covenants, or that we will be able to further amend the Credit Agreement should circumstances arise in the future.
In particular, though we were in compliance with the financial and other covenants under the Credit Agreement as of December 31, 2024, we cannot assure you that we will be able to maintain compliance with our financial covenants, or that we will be able to further amend the Credit Agreement should circumstances arise in the future.
Each of Term SOFR, EURIBOR, HIBOR, CDOR and Daily Simple SONIA rates are subject to a 0.00% floor. For loans based on ABR, the Central Bank Rate or the Canadian prime rate, interest payments are due quarterly. For loans based on SONIA, interest payments are due monthly.
Each of SOFR, EURIBOR, HIBOR, CDOR and Daily Simple SONIA rates are subject to a 0% floor. For loans based on ABR, the Central Bank Rate or the Canadian prime rate, interest payments are due quarterly. For loans based on Daily Simple SONIA, interest payments are due monthly.
Our results of operations for the year ended December 31, 2021, including a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
Our results of operations for the year ended December 31, 2022, including a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.
We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 31% of our net sales generated outside of the United States. We also source and procure inventory, primarily out of Vietnam, China and Mexico. As such, we are exposed to and impacted by global macroeconomic factors.
We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 35% of our net sales generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, China and Mexico. As such, we are exposed to and impacted by global macroeconomic factors.
See Item 1A, “Risk Factors.” 64 Table of Contents Content Mix The timing and mix of products we sell in any given quarter or year will depend on various factors, including the timing and popularity of new releases by third-party content providers and our ability to license properties based on these releases.
See Item 1A, “Risk Factors.” Content Mix The timing and mix of products we sell in any given quarter or year will depend on various factors, including the timing and popularity of new releases by third-party content providers and our ability to license properties based on these releases.
In making these estimates, management considers all available information including the overall business environment, historical trends and information from customers, such as agreed upon customer contract terms as well as historical experience from the customer. The estimated costs of these programs reduce gross sales in the period the related sale is recognized.
These sales adjustments require management to make estimates. In making these estimates, management considers all available information including the overall business environment, historical trends and information from customers, such as agreed upon customer contract terms as well as historical experience from the customer. The estimated costs of these programs reduce gross sales in the period the related sale is recognized.
Our financing activities primarily consist of proceeds from stock issuances, the issuance of long-term debt, net of debt issuance costs, the repayment of long-term debt, payments and borrowings under our line of credit facility, distributions to members and the payment of contingent consideration.
Our financing activities primarily consist of proceeds from stock issuances, the issuance of long-term debt, net of debt issuance costs, the repayment of long-term debt, payments and borrowings under our line of credit facility and distributions to members.
Each of the normal recurring adjustments and other adjustments described herein and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. 71 Table of Contents The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S.
Each of the adjustments described herein and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. 72 Table of Contents The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S.
This is particularly true given the concentration of our sales of products under certain of our brands, particularly our Core Collectible branded products, which represented approximately 73% and 76% of our sales for the years ended December 31, 2023 and 2022, respectively, and which are sold across multiple product categories.
This is particularly true given the concentration of our sales of products under certain of our brands, particularly our Core Collectible branded products, which represented approximately 77% and 73% of our sales for the years ended December 31, 2024 and 2023, respectively, and which are sold across multiple product categories.
On July 15, 2022, we filed a preliminary shelf registration statement on Form S-3 with the SEC. The Form S-3 was declared effective by the SEC on July 26, 2022 and will remain effective until through July 25, 2025.
Offerings of Registered Securities . On July 15, 2022, we filed a preliminary shelf registration statement on Form S-3 with the SEC. The Form S-3 was declared effective by the SEC on July 26, 2022 and will remain effective until through July 25, 2025.
However, the rapid growth we have experienced in recent years may have masked the full effects of seasonal factors on our business to date, and as such, seasonality may have a greater effect on our results of operations in future periods. 78 Table of Contents Recent Accounting Pronouncements See discussion of recently adopted and recently issued accounting pronouncements in Note 2, Significant Accounting Policies of the notes to our consolidated financial statements.
However, the rapid growth we have experienced in recent years may have masked the full effects of seasonal factors on our business to date, and as such, seasonality may have a greater effect on our results of operations in future periods. 79 Table of Contents Recent Accounting Pronouncements See discussion of recently adopted and recently issued accounting pronouncements in Note 2, "Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in this Form 10-K.
We routinely enter into arrangements with our customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. The estimated costs of these programs reduce gross sales in the period the related sale is recognized.
The majority of revenue is recognized upon shipment of products to the customer. We routinely enter into arrangements with our customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. The estimated costs of these programs reduce gross sales in the period the related sale is recognized.
For further discussion of changes in our debt, see below, and Note 10, Debt of the notes to our consolidated financial statements. 77 Table of Contents Future Sources and Uses of Liquidity Sources As noted above, historically, our primary sources of cash flows have been cash flows from operating activities and borrowings under our Credit Facilities.
For further discussion of changes in our debt, see below, and Note 10, "Debt" of the Notes to Consolidated Financial Statements included in this Form 10-K. 78 Table of Contents Future Sources and Uses of Liquidity Sources As noted above, historically, our primary sources of cash flows have been cash flows from operating activities and borrowings under our Credit Facilities.
The increase in net loss was primarily the result of lower net sales and nonrecurring events for the year ended December 31, 2023 as compared to the year ended December 31, 2022, as discussed above. 69 Table of Contents Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted (Loss) Earnings per Diluted Share (collectively the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S.
The decrease in net loss was primarily the result of lower net sales, offset by the nonrecurring events for the year ended December 31, 2023, as discussed above. 70 Table of Contents Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Diluted Share (collectively the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S.
We infuse our distinct designs and aesthetic sensibility into one of the industry’s largest portfolios of licensed content over a wide variety of product categories, including figures, plush, accessories, apparel, homewares and digital NFTs.
We infuse our distinct designs and aesthetic sensibility into one of the industry’s largest portfolios of licensed content over a wide variety of product categories, including figures, plush, accessories, apparel, homewares, digital NFTs, vinyl records and limited-edition posters.
We have strategically adjusted our inventory buy-in to focus on core products in order to help mitigate this impact. Key Performance Indicators We consider the following metrics to be key performance indicators to evaluate our business, develop financial forecasts, and make strategic decisions.
We have strategically adjusted our inventory buy-in to focus on non-exclusive core products in order to help mitigate this impact. 63 Table of Contents Key Performance Indicators We consider the following metrics to be key performance indicators to evaluate our business, develop financial forecasts, and make strategic decisions.
We order inventory based on assumptions of future demand and maintain reserves for excess and obsolete inventories to reflect the inventory balance at the lower of cost or net realizable value.
Inventory costs include direct product costs and freight costs. We order inventory based on assumptions of future demand and maintain reserves for excess and obsolete inventories to reflect the inventory balance at the lower of cost or net realizable value.
Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of sales, was 30.4% for the year ended December 31, 2023, compared to 32.8% for the year ended December 31, 2022.
Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of sales, was 41.4% for the year ended December 31, 2024, compared to 30.4% for the year ended December 31, 2023.
If we determine that it is probable that the expected revenue will not be realized, a reserve is recorded against the prepaid asset for the non-recoverable portion. As of December 31, 2023, we recorded a prepaid asset of $25.1 million , net of a reserve of $4.5 million .
If we determine that it is probable that the expected revenue will not be realized, a reserve is recorded against the prepaid asset for the non-recoverable portion. As of December 31, 2024, we recorded a prepaid asset of $6.1 million , net of a reserve of $8.5 million .
Overview Funko is a leading pop culture lifestyle brand . Our business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty.
Overview Funko is a leading pop culture consumer products company . Our business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty.
Loss on Debt Extinguishment As a result of the debt amendment in February 2023, a $0.5 million loss on debt extinguishment was recorded for the year ended December 31, 2023 as unamortized debt financing fees were written-off.
Loss on Debt Extinguishment As a result of the amendment to our Credit Agreement entered into in February 2023, a $0.5 million loss on debt extinguishment was recorded for the year ended December 31, 2023 as unamortized debt financing fees were written-off.
Depreciation and Amortization Depreciation and amortization expense was $59.8 million for the year ended December 31, 2023, compared to $47.7 million for the year ended December 31, 2022, primarily driven by the type and timing of assets placed into service.
Depreciation and Amortization Depreciation and amortization expense was $62.6 million for the year ended December 31, 2024, compared to $59.8 million for the year ended December 31, 2023, primarily driven by the type and timing of assets placed into service.
Our net cash provided by (used in) operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, equity-based compensation, accretion of discount on long-term debt, as well as the effect of changes in working capital and other activities.
Our net cash provided by operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, equity-based compensation, as well as the effect of changes in working capital and other activities.
The long-term portion of the tax receivable agreement liability was reduced and we recorded a gain of $102.2 million during the year ended December 31, 2023. 68 Table of Contents Other (Income) Expense, Net Other income, net was $0.1 million and other expense, net was $0.8 million for the years ended December 31, 2023 and 2022, respectively.
The long-term portion of the tax receivable agreement liability was reduced and we recorded a gain of $100.2 million during the year ended December 31, 2023. 69 Table of Contents Other Expense (Income), Net Other expense, net was $2.9 million and other income, net was $0.1 million for the years ended December 31, 2024 and 2023, respectively.
Credit card fees, insurance, legal expenses, other professional expenses and other miscellaneous operating costs are also included in selling, general and administrative expenses. Selling costs generally correlate to revenue timing and therefore experience similar moderate seasonal trends.
Credit card fees, insurance, legal expenses, other professional expenses and other miscellaneous operating costs are also included in selling, general and administrative expenses. Selling costs generally correlate to revenue timing and therefore experience similar moderate seasonal trends. We expect general and administrative costs to increase as our business evolves.
Loans under the Credit Facilities will, at the Borrowers’ option, bear interest at either (i) Term SOFR, EURIBOR, HIBOR, CDOR, SONIA and/or the Central Bank Rate, as applicable, plus (x) 2.50% per annum and (y) solely in the case of Term SOFR based loans, 0.10% per annum or (ii) ABR or the Canadian prime rate, as applicable, plus 1.50% per annum, in each case of clauses (i) and (ii), subject to two 0.25% per annum step-downs based on the achievement of certain leverage ratios following July 29, 2022.
Loans under the Credit Facilities will, at the Borrowers’ option, bear interest at either (i) SOFR, EURIBOR, HIBOR, CDOR, Daily Simple SONIA and/or the Central Bank Rate, as applicable, plus (x) 4.00% per annum and (y) solely in the case of Term SOFR based loans, 0.10% per annum or (ii) ABR or the Canadian prime rate, as applicable, plus 3.00% per annum, in each case of clauses (i) and (ii), subject to two 0.25% step-downs based on the achievement of certain leverage ratios following February 28, 2023.
Other drivers of the changes in net cash provided by operating activities include shipping and freight costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our short-term borrowings and long-term debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days.
Other drivers of the changes in net cash provided by operating activities include shipping and freight costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our short-term borrowings and long-term debt.
Current macroeconomic factors remain very dynamic, such as greater political unrest or instability in Central and Eastern Europe (including the ongoing Russia-Ukraine War), the Middle East (including the Israel–Hamas War), and certain Southeast Asia regions as well as financial instability, rising interest rates and heightened inflation that could reduce our net sales or have impacts to our gross margin, net income and cash flows.
Current macroeconomic factors remain very dynamic, such as greater political uncertainty, unrest or instability in the United States, Central and Eastern Europe (including the ongoing Russia-Ukraine War), the Middle East (including the Israel–Hamas War), and certain Southeast Asia regions as well as financial instability, new or increasing tariffs and general uncertainty over U.S. trade and tariff policies, rising interest rates and heightened inflation that could reduce our net sales or have impacts to our gross margin (as defined below), net income and cash flows.
During years ended December 31, 2023 and 2022, the Company acquired an aggregate of 1.8 million and 6.5 million common units of FAH, LLC, respectively, in connection with the redemption of common units, which resulted in an increase in the tax basis of our investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement.
During years ended December 31, 2024 and 2023, the Company acquired an aggregate of 1.2 million and 1.8 million common units of FAH, LLC, respectively, in connection with the redemption and/or exchange of common units, none of which resulted in an increase in the tax basis of our investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement. 82 Table of Contents
The terms of any future offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering. 74 Table of Contents Liquidity and Capital Resources The following table shows summary cash flow information for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 30,935 $ (40,134) Net cash used in investing activities (39,796) (78,065) Net cash provided by financing activities 25,596 54,639 Effect of exchange rates on cash and cash equivalents 518 (797) Net change in cash and cash equivalents $ 17,253 $ (64,357) Operating Activities.
The terms of any future offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering. 75 Table of Contents Liquidity and Capital Resources The following table shows summary cash flow information for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 123,524 $ 30,935 Net cash used in investing activities (25,228) (39,796) Net cash (used in) provided by financing activities (99,242) 25,596 Effect of exchange rates on cash and cash equivalents (852) 518 Net change in cash and cash equivalents $ (1,798) $ 17,253 Operating Activities.
The Equipment Finance Loan is secured by certain identified assets held within our Buckeye, Arizona warehouse. We are a holding company with no material assets, and we do not conduct any business operations of our own.
On November 25, 2022, the Company entered into a $20.0 million equipment finance agreement ("Equipment Finance Loan"). The Equipment Finance Loan is secured by certain identified assets held within our Buckeye, Arizona warehouse. We are a holding company with no material assets, and we do not conduct any business operations of our own.
As noted in the table below, the Non-GAAP Financial Measures include adjustments for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, inventory write-down, tax receivable agreement liability adjustments, one-time cloud-based computing arrangement abandonment expenses, one-time disposal costs for unfinished and finished goods held at offshore factories and other unusual or one-time items.
As noted in the table below, the Non-GAAP Financial Measures include adjustments for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and other unusual or one-time items.
The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to: • incur additional indebtedness; • incur certain liens; • consolidate, merge or sell or otherwise dispose of our assets; • make investments, loans, advances, guarantees and acquisitions; • pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests; • enter into transactions with affiliates; • enter into sale and leaseback transactions in respect to real property; • enter into swap agreements; • enter into agreements restricting our subsidiaries’ ability to pay dividends; • issue or sell equity interests or securities convertible into or exchangeable for equity interests; • redeem, repurchase or refinance other indebtedness; and • amend or modify our governing documents. 76 Table of Contents In addition, the Credit Agreement requires FAH, LLC and its subsidiaries to comply on a quarterly basis with a maximum Net Leverage Ratio and a minimum fixed charge coverage ratio (in each case, measured on a trailing four-quarter basis).
The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to: • incur additional indebtedness; • incur certain liens; • consolidate, merge or sell or otherwise dispose of our assets; • make investments, loans, advances, guarantees and acquisitions; • pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests; • enter into transactions with affiliates; • enter into sale and leaseback transactions in respect to real property; 77 Table of Contents • enter into swap agreements; • enter into agreements restricting our subsidiaries’ ability to pay dividends; • issue or sell equity interests or securities convertible into or exchangeable for equity interests; • redeem, repurchase or refinance other indebtedness; and • amend or modify our governing documents.
We expect these sources of liquidity to continue to be our primary sources of liquidity. Credit Facilities . On September 17, 2021, the Company entered into the Credit Facilities. For a discussion of our Credit Facilities, see Note 10, Debt of the notes to our consolidated financial statements. Offerings of Registered Securities .
We expect these sources of liquidity to continue to be our primary sources of liquidity. Credit Facilities . On September 17, 2021, the Company entered into the Credit Facilities, which mature in September 2026. For a discussion of our Credit Facilities, see Note 10, "Debt" of the Notes to Consolidated Financial Statements included in this Form 10-K.
During the years ended December 31, 2023 and 2022, we saw shifts in our client mix as a direct result of our growing direct-to-consumer business and enhanced online presence of our top customers.
Our top ten wholesale customers represented approximately 31% and 32% of our sales for the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, we saw shifts in our client mix as a direct result of our growing direct-to-consumer business and enhanced online presence of our top customers.
Other (income) expense, net for the years ended December 31, 2023 and 2022 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.
Other expense (income), net for the years ended December 31, 2024 and 2023 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar. Income Tax Expense Income tax expense was $4.6 million for the year ended December 31, 2024, compared to $132.5 million for the year ended December 31, 2023.
We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, inventory write-down, tax receivable agreement liability adjustments, one-time cloud-based computing arrangement abandonment expenses, one-time disposal costs for unfinished and finished goods held at offshore factories and other unusual or one-time items.
We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and other unusual or one-time items.
Gross margin (exclusive of depreciation and amortization) decreased 240 basis points for the year ended December 31, 2023 compared to the year ended December 31, 2022, due to the factors noted above.
Gross margin (exclusive of depreciation and amortization) increased for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to the factors noted above.
Cost of Sales and Gross Margin (exclusive of depreciation and amortization) Cost of sales (exclusive of depreciation and amortization) was $763.1 million for the year ended December 31, 2023, a decrease of 14.1%, compared to $888.7 million for the year ended December 31, 2022.
Cost of Sales and Gross Margin (exclusive of depreciation and amortization) Cost of sales (exclusive of depreciation and amortization) was $615.3 million for the year ended December 31, 2024, a decrease of 19.4%, compared to $763.1 million for the year ended December 31, 2023.
As of December 31, 2022, we recorded a prepaid asset of $13.0 million, net of a reserve of $0.8 million. We record a royalty liability as revenues are recognized based on the terms of the licensing agreement.
As of December 31, 2023, we recorded a prepaid asset of $25.1 million, net of a reserve of $4.5 million. We record a royalty liability as revenues are recognized based on the terms of the licensing agreement.
For the year ended December 31, 2023, net cash provided by financing activities was $25.6 million, primarily related to proceeds from net borrowings on the Revolving Line of Credit of $50.5 million, partially offset by payments under the Term Loan and Equipment Financing Loan of $22.6 million.
For the year ended December 31, 2024, net cash used in financing activities was $99.2 million, primarily related to net repayments on the Revolving Line of Credit of $60.5 million, payments under the Term Loan and Equipment Financing Loan of $31.1 million and payments to TRA parties of $9.0 million. 76 Table of Contents For the year ended December 31, 2023, net cash provided by financing activities was $25.6 million, primarily related to proceeds from net borrowings on the Revolving Line of Credit of $50.5 million, partially offset by payments under the Term Loan and Equipment Financing Loan of $22.6 million.
We enter into agreements for rights to licensed trademarks, copyrights and likenesses for use in our products. These licensing agreements require the payment of royalty fees to the licensor based on a percentage of revenue. Many licensing agreements also require minimum royalty commitments. When royalty fees are paid in advance, we record these payments as a prepaid asset.
These licensing agreements require the payment of royalty fees to the licensor based on a percentage of revenue. Many licensing agreements also require minimum royalty commitments. When royalty fees are paid in advance, we record these payments as a prepaid asset.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
On a geographical basis, net sales in the United States decreased 21.8% to $755.6 million in the year ended December 31, 2023 as compared to $966.3 million in the year ended December 31, 2022, net sales in Europe increased 3.0% to $268.5 million in the year ended December 31, 2023 from $260.6 million in the year ended December 31, 2022 and net sales in other international locations decreased 24.9% to $72.0 million in the year ended December 31, 2023 from $95.8 million in the year ended December 31, 2022. 67 Table of Contents On a product category basis, net sales of Core Collectible branded products decreased 19.6% to $803.2 million in the year ended December 31, 2023 as compared to $998.4 million in the year ended December 31, 2022.
On a geographical basis, net sales in the United States decreased 9.7% to $682.0 million in the year ended December 31, 2024 as compared to $755.6 million in the year ended December 31, 2023, net sales in Europe increased 5.7% to $283.8 million in the year ended December 31, 2024 from $268.5 million in the year ended December 31, 2023 and net sales in other international locations increased 16.8% to $84.1 million in the year ended December 31, 2024 from $72.0 million in the year ended December 31, 2023. 68 Table of Contents On a product category basis, net sales of Core Collectible branded products increased 0.2% to $804.4 million in the year ended December 31, 2024 as compared to $803.2 million in the year ended December 31, 2023.
We estimate obsolescence based on assumptions regarding future demand. Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.
Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.
Cost of Sales Cost of sales consists primarily of product costs, royalty expenses paid to our licensors, the cost to ship our products, including both inbound freight and outbound products to our customers and inventory management. Our cost of sales excludes depreciation and amortization. Our products are produced and assembled by third-party manufacturers primarily in Vietnam, China and Mexico.
Cost of Sales Cost of sales consists primarily of product costs, royalty expenses paid to our licensors, the cost to ship our products, including both inbound freight and duties and outbound products to our customers and inventory management. Our cost of sales excludes depreciation and amortization.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses were $377.1 million for the year ended December 31, 2023, a decrease of 5.3%, compared to $398.3 million for the year ended December 31, 2022.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses were $359.0 million for the year ended December 31, 2024, a decrease of 4.8%, compared to $377.1 million for the year ended December 31, 2023.
These items include, among other things, non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, inventory write-down, tax receivable agreement liability adjustments, one-time cloud-based computing arrangement abandonment expenses, one-time disposal costs for unfinished and finished goods held at offshore factories and the income tax expense effect of these adjustments.
These items include, among other things, non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and the income tax expense effect of these adjustments.
For the year ended December 31, 2023, net cash used in investing activities was $39.8 million, which was used for the purchase of property and equipment, primarily related to tooling and molds. In addition, we used $5.4 million in net cash for the acquisition of MessageMe, Inc. (d/b/a HipDot).
For the year ended December 31, 2023, net cash used in investing activities was $39.8 million and was primarily related to purchases of tooling and molds used in our production product lines and for the acquisition of MessageMe, Inc. (d/b/a HipDot). Financing Activities .
As of December 31, 2023, we had $36.5 million of cash and cash equivalents and $(16.0) million of working capital, compared with $19.2 million of cash and cash equivalents and $111.8 million of working capital as of December 31, 2022.
As of December 31, 2024, we had $34.7 million of cash and cash equivalents and $(18.7) million of working capital, compared with $36.5 million of cash and cash equivalents and $(16.0) million of working capital as of December 31, 2023.
For the year ended December 31, 2023, this also includes $123.2 million recognized valuation allowance on the Company’s deferred tax assets.
This adjustment uses an effective tax rate of 25% for the years ended December 31, 2024 and 2023. For the year ended December 31, 2023, this also includes $123.2 million recognized valuation allowance on the Company’s deferred tax assets.
For the year ended December 31, 2023, reflects a reduction of the tax receivable agreement liability as a result of recognizing a full valuation allowance of the Company's deferred tax assets and anticipated inability to realize future tax benefits. (8) Represents abandoned cloud computing arrangement charge related to the enterprise resource planning project for the year ended December 31, 2022.
For the year ended December 31, 2023, reflects a reduction of the tax receivable agreement liability as a result of recognizing a full valuation allowance of the Company's deferred tax assets and anticipated inability to realize future tax benefits. (8) Represents the income tax expense effect of the above adjustments.
As noted above, on September 17, 2021, we entered into the Credit Facilities which, as amended, are secured by substantially all assets of the Borrowers and any of their existing or future material domestic subsidiaries, subject to customary exceptions.
The Credit Facilities are secured by substantially all assets of the borrowers under the Credit Facilities and any of their existing or future material domestic subsidiaries, subject to customary exceptions.
Even in the absence of such event, if we are unable to generate sufficient cash flows from operations in the future, and if availability under our Revolving Credit Facility is not sufficient we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted.
Even in the absence of such event, if we are unable to generate sufficient cash flows from operations in the future, and if availability under our Revolving Credit Facility is not sufficient, or if our debt matures and we are unable to repay amounts owed in full, we may have to obtain additional financing or refinancing.
We may from time to time, liquidate and/or dispose of inventory to increase warehouse operating efficiency. During the year ended December 31, 2023, the Company approved an inventory reduction plan to improve U.S. warehouse operational efficiency. The Company recorded a $30.3 million inventory write-down included in cost of sales as presented in the condensed consolidated statements of operations.
We may from time to time, liquidate and/or dispose of inventory to increase warehouse operating efficiency. During the year ended December 31, 2023, the Company approved an inventory reduction plan to improve U.S. warehouse operational efficiency.
Selling, general, and administrative expenses were 34.4% of sales for the year ended December 31, 2023, compared to 30.1% of sales for the year ended December 31, 2022, primarily due to the non-recurring events described above.
Selling, general, and administrative expenses were 34.2% of sales for the year ended December 31, 2024, compared to 34.4% of sales for the year ended December 31, 2023, due to the factors noted above.
Changes in net cash provided by operating activities resulted primarily from cash received from net sales and cash payments for product costs and royalty expenses paid to our licensors.
Net cash provided by operating activities was $123.5 million for the year ended December 31, 2024, compared to $30.9 million for the year ended December 31, 2023. Changes in net cash provided by operating activities resulted primarily from cash received from net sales and cash payments for product costs and royalty expenses paid to our licensors.
These trends have contributed to significant growth in the demand for pop culture products like ours in recent years; however, consumer demand for pop culture products and pop culture trends can and does shift rapidly and without warning. To the extent we are unable to offer products that appeal to consumers, our operating results will be adversely affected.
These trends have contributed to significant growth in the demand for pop culture products like ours in recent years; however, consumer demand for pop culture products and pop culture trends can and does shift rapidly and without warning, and content consumption trends by consumers are also rapidly evolving.
Year Ended December 31, 2023 2022 (in thousands) Net sales $ 1,096,086 $ 1,322,706 Net loss $ (164,438) $ (5,240) EBITDA (1) $ 55,792 $ 34,962 Adjusted EBITDA (1) $ 27,203 $ 97,425 (1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA are financial measures not calculated in accordance with U.S. GAAP.
Year Ended December 31, 2024 2023 (in thousands) Net sales $ 1,049,850 $ 1,096,086 Net loss $ (15,070) $ (164,438) EBITDA (1) $ 72,652 $ 55,792 Adjusted EBITDA (1) (2) $ 94,741 $ (11,822) (1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA are financial measures not calculated in accordance with U.S. GAAP.
For a reconciliation of EBITDA and Adjusted EBITDA to net (loss) income, the most closely comparable U.S.
For a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most closely comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measures” in this item.
We evaluate the need for price increases along with other incentive arrangements and cost of product to help manage gross margins. In 2022 and 2023, we instituted price increases for our products. Sales terms typically do not allow for a right of return except in relation to a manufacturing defect.
We evaluate the need for price increases along with other incentive arrangements and cost of product to help manage gross margins. In 2023, we instituted price increases for our products, and we may institute additional increases in 2025.
In addition, despite our efforts to diversify the properties on which we base our products, if the performance of one or more of these properties fail to meet expectations or are delayed in their release, our operating results could be adversely affected.
In addition, despite our efforts to diversify the properties on which we base our products, if the performance of one or more of these properties fail to meet expectations or are delayed in their release, our operating results could be adversely affected. 65 Table of Contents Inventory Management Inventory consists primarily of figures, plush, apparel, homewares, accessories and other finished goods, and is accounted for using the first-in, first-out (“FIFO”) method.
For the year ended December 31, 2022, includes acquisition-related costs related to investment banking and due diligence fees. (4) Represents certain severance, relocation and related costs. For the year ended December 31, 2023, includes charges to remove leasehold improvements and return multiple Washington-based warehouses, and charges related to severance and benefit costs for reductions-in-force.
For the year ended December 31, 2023, includes charges to remove leasehold improvements and return multiple Washington-based warehouses of $382,000, and charges related to severance and benefit costs for reductions-in-force of $5.2 million. (5) Represents write-off of unamortized debt financing fees for the year ended December 31, 2023.
Uses As noted above, our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt service and general corporate needs. For a description of the Company's future maturities of debt, see Note 10, Debt, and for a description of the Company's operating lease agreements, see Note 11, Leases.
Uses As noted above, our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt service and general corporate needs.
Income Tax Expense (Benefit) Income tax expense was $132.5 million for the year ended December 31, 2023, compared to an income tax benefit of $17.8 million for the year ended December 31, 2022. The increase in income tax expense was related to recognizing a full valuation allowance on the Company’s deferred tax assets.
The decrease in income tax expense was related to recognizing a full valuation allowance on the Company’s deferred tax assets during the year ended December 31, 2023. Net Loss Net loss was $15.1 million for the year ended December 31, 2024, compared to $164.4 million for the year ended December 31, 2023.
Net sales of Loungefly branded products decreased 15.2% to $214.5 million in the year ended December 31, 2023 as compared to $253.0 million in the year ended December 31, 2022. Net sales of other products increased 10.0% to $78.4 million in the year ended December 31, 2023 as compared to $71.3 million the year ended December 31, 2022.
Net sales of Loungefly branded products decreased 19.9% to $171.8 million in the year ended December 31, 2024 as compared to $214.5 million in the year ended December 31, 2023. Net sales of other products decreased 6.1% to $73.6 million in the year ended December 31, 2024 as compared to $78.4 million in the year ended December 31, 2023.
Financial Condition We believe that our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and our planned capital expenditures for at least the next 12 months. 75 Table of Contents However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our Revolving Credit Facility will be sufficient to meet our future needs.
Financial Condition We believe that our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and our planned capital expenditures for at least the next 12 months.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2023 , we had $258.1 million of variable rate debt outstanding under our Credit Facilities, consisting of $137.6 million outstanding under the Term Loan Facility (net of unamortized discount of $1.9 million) in outstanding variable rate borrowings. We had $120.5 million outstanding variable rate borrowings under our Revolving Credit Facility.
Biggest changeAs of December 31, 2024 , we had $172.2 million of variable rate debt outstanding under our Credit Facilities, consisting of $112.2 million outstanding under the Term Loan Facility (net of unamortized discount of $1.0 million) in outstanding variable rate borrowings. We had $60.0 million outstanding variable rate borrowings under our Revolving Credit Facility.
We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation in the future. 82 Table of Contents
We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation in the future. 83 Table of Contents
Based upon a sensitivity analysis of our debt levels on December 31, 2023 , an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest expense of approximately $1.4 million over the next 12 months.
Based upon a sensitivity analysis of our debt levels on December 31, 2024 , an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest expense of approximately $1.1 million over the next 12 months.

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