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Funko Reports 2023 Fourth Quarter, Full Year Financial Results; Provides Full-Year Outlook for 2024

--Q4 Net Sales, Gross Margin and Adjusted EBITDA at Upper End of Expectations, Driven by Strong DTC Growth and Continued Operational Improvement--

Funko, Inc. (Nasdaq: FNKO), a leading pop culture lifestyle brand, today reported its consolidated financial results for the fourth quarter and full year ended December 31, 2023. The company also provided financial guidance for the 2024 first quarter and full year.

Fourth-Quarter Financial Results Summary: 2023 vs 2022

  • Net sales were $291.2 million versus $333.0 million
  • Gross profit was $109.4 million, equal to gross margin of 37.6%, compared with $94.3 million, equal to gross margin of 28.3%
  • SG&A expenses were $97.4 million, which included $8.0 million of non-recurring charges primarily related to fair market value adjustments for assets held for sale. This compares with $139.2 million, which included $32.5 million of non-recurring charges related to the write down of an enterprise resource planning system, for the fourth quarter of 2022
  • Net loss was $10.8 million, or $0.21 per share, versus $42.2 million, or $0.89 per diluted share
  • Adjusted net income* was $0.5 million, or $0.01 per diluted share, versus adjusted net loss of $17.9 million, or $0.35 per share
  • Adjusted EBITDA* was $23.5 million versus negative adjusted EBITDA* of $6.3 million

Full-Year Financial Results Summary: 2023 vs 2022

  • Net sales were $1.1 billion versus $1.3 billion
  • Gross profit was $333.0 million, equal to gross margin of 30.4%, which included $39.0 million of non-recurring charges related to the disposal of excess inventory and finished and unfinished goods held at offshore factories. This compares with $434.0 million, equal to gross margin of 32.8%
  • SG&A expenses were $377.1 million, which included $20.7 million of non-recurring charges primarily related to the termination of a lease agreement, fair market value adjustments for assets held for sale and severance and related charges. This compares with $398.3 million for the 2022 full year, which included $32.5 million of non-recurring charges related to the write-down of an enterprise resource planning system
  • Net loss was $154.1 million, or $3.19 per share, compared with $8.0 million, or $0.18 per share
  • Adjusted net loss* was $45.4 million, or $0.87 per share, versus adjusted net income* of $29.6 million, or $0.57 per diluted share
  • Adjusted EBITDA* was $27.2 million compared with $97.4 million

“In 2023, we implemented a comprehensive plan to significantly reduce costs, improve operational efficiencies and focus on our core product offerings,” said Michael Lunsford, Funko’s Interim Chief Executive Officer. “The major elements of that plan, which addressed the company's inventory issues, unprofitable product lines and SKUs, workforce size, and several other factors, were successfully completed, and we believe our company is now on a significantly more solid foundation upon which we intend to build and grow.

“For the 2023 fourth quarter, net sales and adjusted EBITDA were at the upper end of our guidance range, fueled in part by growth in our direct-to-consumer (DTC) business, which accounted for 26 percent of our revenue and increased nearly 30 percent compared with the same quarter of the prior year. Gross margin of 38 percent was the highest of any quarter in 2023.

“Turning to our balance sheet, we substantially lowered our inventory levels to $119 million at December 31, 2023 from $246 million at the end of last year and $162 million at September 30, 2023. We also paid down our debt by $26 million in the fourth quarter and used the proceeds from a transaction related to our Games business to further reduce our debt in the first quarter of 2024.

“Looking ahead, we face a softer content schedule following the recent Hollywood strikes and uncertainty around shipping costs caused by the Red Sea situation. Despite these headwinds, we expect our bottom line to significantly improve in 2024 compared with 2023. Our belief is based on the actions we are taking to, among other things, further expand our DTC business and increase sales of Pop! Yourself and limited-edition products – areas we control and can grow profitably.”

Leadership Update

The company also announced today that Steve Nave, Funko’s Chief Financial Officer (CFO) and Chief Operating Officer, is resigning effective March 15, 2024. Yves LePendeven, the company’s Deputy CFO, will serve as Acting CFO as of the same date.

“Steve joined us a year ago to help with our cost reduction and operational improvement plan,” said Lunsford. “We have made significant progress against that plan and thank Steve for his contributions. We wish Steve success in his future endeavors.

“I have worked with Yves for several years now, as both a board member and as the interim CEO. I have complete faith in Yves to lead our Finance and Accounting functions. We believe we now have in place a strong, lean, aligned senior leadership team to support the arrival of a new CEO and the growth of Funko.”

Fourth Quarter 2023 Net Sales by Category and Geography

The tables below show the breakdown of net sales on a brand category and geographical basis (in thousands):

 

 

Three Months Ended December 31,

 

Period Over Period Change

 

 

 

2023

 

 

 

2022

 

 

Dollar

 

Percentage

Net sales by product brand:

 

 

 

 

 

 

 

 

Core Collectibles

 

$

212,776

 

$

243,340

 

$

(30,564

)

 

(12.6

)%

Loungefly Branded Products

 

 

54,908

 

 

 

73,346

 

 

 

(18,438

)

 

(25.1

)%

Other

 

 

23,552

 

 

 

16,354

 

 

 

7,198

 

 

44.0

%

Total net sales

 

$

291,236

 

 

$

333,040

 

 

$

(41,804

)

 

(12.6

)%

 

 

Three Months Ended December 31,

 

Period Over Period Change

 

 

 

2023

 

 

 

2022

 

 

Dollar

 

Percentage

Net sales by geography:

 

 

 

 

 

 

 

 

United States

 

$

197,368

 

$

240,647

 

$

(43,279

)

 

(18.0

)%

Europe

 

 

78,138

 

 

 

61,869

 

 

 

16,269

 

 

26.3

%

Other International

 

 

15,730

 

 

 

30,524

 

 

 

(14,794

)

 

(48.5

)%

Total net sales

 

$

291,236

 

 

$

333,040

 

 

$

(41,804

)

 

(12.6

)%

Balance Sheet Highlights - At December 31, 2023 vs December 31, 2022

  • Total cash and cash equivalents were $36.5 million at December 31, 2023 versus $19.2 million at December 31, 2022
  • Inventories were $119.5 million at December 31, 2023 versus $246.4 million at December 31, 2022
  • Total debt was $273.6 million at December 31, 2023 versus $245.8 million at December 31, 2022. Total debt includes the amount outstanding under the company's term loan facility, net of unamortized discounts, revolving line of credit and the company's equipment finance loan

Outlook for 2024

Based on its current outlook, the company provided its 2024 full-year outlook and 2024 first-quarter guidance, as follows:

 

Current Outlook

2024 Full Year

 

Net Sales

$1.047 billion to $1.103 billion

Adjusted EBITDA*

$65 million to $85 million

 

 

2024 First Quarter

 

Net sales

$214 million to $227 million

Gross margin %

~37%

SG&A expense, in dollars

$87 million to $88 million

Adjusted net loss*

$17 million to $13 million

Adjusted net loss per share*

$0.32 to $0.24

Adjusted EBITDA*

$0 million to $5 million

*Adjusted net loss, adjusted net loss per diluted share and adjusted EBITDA are non-GAAP financial measures. For a reconciliation of historical adjusted net loss, adjusted loss per diluted share, and adjusted EBITDA, to the most directly comparable U.S. GAAP financial measures, please refer to the “Non-GAAP Financial Measures” section of this press release. A reconciliation of adjusted net loss, adjusted net loss per diluted share and adjusted EBITDA outlook to the corresponding GAAP measure on a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to certain items. However, for the first quarter of 2024 the company expects equity-based compensation of approximately $4 million, depreciation and amortization of approximately $16 million and interest expense of approximately $6 million. For the full year 2024, the company expects equity-based compensation of approximately $15 million, depreciation and amortization of approximately $64 million and interest expense of approximately $18 million, each of which is a reconciling item to net loss. See "Use of Non-GAAP Financial Measures" and the attached reconciliations for more information.

Conference Call and Webcast

The company will host a conference call at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today, March 7, 2024, to further discuss its fourth-quarter and full-year results and business update. A live webcast, presentation materials and a replay of the event will be available on the Investor Relations section on the Company’s website at investor.funko.com. The replay of the webcast will be available for one year.

Use of Non-GAAP Financial Measures

This release contains references to non-GAAP financial measures, including adjusted net income (loss), including per share amounts, adjusted EBITDA, and adjusted EBITDA margin, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Management uses these measures internally for evaluating its operating performance, for planning purposes, including the preparation of our annual operating budget and financials projections, and to assess incentive compensation for our employees, and to evaluate our capacity to expand our business. In addition, our senior secured credit facilities use adjusted EBITDA to measure our compliance with covenants such as senior leverage ratio. The company's management believes that the presentation of non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor's overall understanding of the financial results for the company's core business. Additionally, it provides a basis for the comparison of the financial results for the company's core business between current, past and future periods as they remove the impact of items not directly resulting from our core operations. The company also believes that including Adjusted EBITDA and the other non-GAAP financial measures presented in this release is appropriate to provide additional information to investors and help to compare against other companies in our industry. Non-GAAP financial measures have limitations as analytical tools and should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP. We caution investors that amounts presented in accordance with our definitions of adjusted net income (loss), including per share amounts, adjusted EBITDA and adjusted EBITDA margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner.

Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables following this release.

About Funko

Headquartered in Everett, Washington, Funko is a leading pop culture lifestyle brand. Funko designs, sources and distributes licensed pop culture products across multiple categories, including vinyl figures, action toys, plush, apparel, housewares and accessories for consumers who seek tangible ways to connect with their favorite pop culture brands and characters. Learn more at www.funko.com, and follow us on Twitter (@OriginalFunko) and Instagram (@OriginalFunko).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding our anticipated financial results and financial position, the underlying trends in our business and the retail industry, including ongoing impacts from the Hollywood strikes and uncertainty relating to the situation in the Red Sea, our potential for growth, expectations regarding annualized cost savings and the impact of restructuring initiatives; and our strategic growth priorities. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: our ability to execute our business strategy; our ability to manage our inventories and growth; our ability to maintain and realize the full value of our license agreements; impacts from economic downturns; changes in the retail industry and markets for our consumer products; our ability to maintain our relationships with retail customers and distributors; risks related to the impact of COVID-19 on our business, financial results and financial condition; our ability to compete effectively; fluctuations in our gross margin; our dependence on content development and creation by third parties; the ongoing level of popularity of our products with consumers; our ability to develop and introduce products in a timely and cost-effective manner; our ability to obtain, maintain and protect our intellectual property rights or those of our licensors; potential violations of the intellectual property rights of others; risks associated with counterfeit versions of our products; our ability to attract and retain qualified employees and maintain our corporate culture; our use of third-party manufacturing; risks associated with climate change; increased attention to sustainability and environmental, social and governance initiatives; geographic concentration of our operations; risks associated with our international operations; changes in effective tax rates or tax law; our dependence on vendors and outsourcers; risks relating to government regulation; risks relating to litigation, including products liability claims and securities class action litigation; any failure to successfully integrate or realize the anticipated benefits of acquisitions or investments; future development and acceptance of blockchain networks; risks associated with receiving payments in digital assets; risk resulting from our e-commerce business and social media presence; our ability to successfully operate our information systems and implement new technology; risks relating to our indebtedness, including our ability to comply with financial and negative covenants under our Credit Agreement, as amended; our ability to secure additional financing on favorable terms or at all; the potential for our or our third party providers’ electronic data or the electronic data of our customers to be compromised; the influence of our significant stockholder, TCG, and the possibility that TCG’s interests may conflict with the interests of our other stockholders; risks relating to our organizational structure; volatility in the price of our Class A common stock; and risks associated with our internal control over financial reporting. These and other important factors discussed under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2023 and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Funko, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(in thousands, except per share data)

Net sales

$

291,236

 

 

$

333,040

 

 

$

1,096,086

 

 

$

1,322,706

 

Cost of sales (exclusive of depreciation and amortization shown separately below)

 

181,827

 

 

 

238,711

 

 

 

763,085

 

 

 

888,685

 

Selling, general, and administrative expenses

 

97,380

 

 

 

139,229

 

 

 

377,065

 

 

 

398,272

 

Depreciation and amortization

 

15,429

 

 

 

13,160

 

 

 

59,763

 

 

 

47,669

 

Total operating expenses

 

294,636

 

 

 

391,100

 

 

 

1,199,913

 

 

 

1,334,626

 

(Loss) income from operations

 

(3,400

)

 

 

(58,060

)

 

 

(103,827

)

 

 

(11,920

)

Interest expense, net

 

7,419

 

 

 

4,480

 

 

 

27,970

 

 

 

10,334

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

494

 

 

 

 

Gain on tax receivable agreement liability adjustment

 

(603

)

 

 

 

 

 

(100,223

)

 

 

 

Other (income) expense, net

 

(646

)

 

 

(971

)

 

 

(127

)

 

 

787

 

(Loss) income before income taxes

 

(9,570

)

 

 

(61,569

)

 

 

(31,941

)

 

 

(23,041

)

Income tax expense (benefit)

 

1,638

 

 

 

(14,869

)

 

 

132,497

 

 

 

(17,801

)

Net (loss) income

 

(11,208

)

 

 

(46,700

)

 

 

(164,438

)

 

 

(5,240

)

Less: net (loss) income attributable to non-controlling interests

 

(447

)

 

 

(4,481

)

 

 

(10,359

)

 

 

2,795

 

Net (loss) income attributable to Funko, Inc.

$

(10,761

)

 

$

(42,219

)

 

$

(154,079

)

 

$

(8,035

)

 

 

 

 

 

 

 

 

(Loss) earnings per share of Class A common stock:

 

 

 

 

 

 

 

Basic

$

(0.21

)

 

$

(0.89

)

 

$

(3.19

)

 

$

(0.18

)

Diluted

$

(0.21

)

 

$

(0.89

)

 

$

(3.19

)

 

$

(0.18

)

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

Basic

 

50,384

 

 

 

47,179

 

 

 

48,332

 

 

 

44,555

 

Diluted

 

50,384

 

 

 

47,179

 

 

 

48,332

 

 

 

44,555

 

Funko, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

December 31,

 

 

2023

 

 

 

2022

 

 

(in thousands, except per share data)

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

36,453

 

 

$

19,200

 

Accounts receivable, net

 

130,831

 

 

 

167,895

 

Inventory, net

 

119,458

 

 

 

246,429

 

Prepaid expenses and other current assets

 

56,134

 

 

 

39,648

 

Total current assets

 

342,876

 

 

 

473,172

 

Property and equipment, net

 

91,335

 

 

 

102,232

 

Operating lease right-of-use assets

 

61,499

 

 

 

71,072

 

Goodwill

 

133,795

 

 

 

131,380

 

Intangible assets, net

 

167,388

 

 

 

181,284

 

Deferred tax asset, net of valuation allowance

 

 

 

 

123,893

 

Other assets

 

7,752

 

 

 

8,112

 

Total assets

$

804,645

 

 

$

1,091,145

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Line of credit

$

120,500

 

 

$

70,000

 

Current portion long-term debt, net of unamortized discount

 

22,072

 

 

 

22,041

 

Current portion of operating lease liabilities

 

17,486

 

 

 

18,904

 

Accounts payable

 

52,919

 

 

 

67,651

 

Income taxes payable

 

986

 

 

 

871

 

Accrued royalties

 

54,375

 

 

 

69,098

 

Accrued expenses and other current liabilities

 

90,494

 

 

 

112,832

 

Total current liabilities

 

358,832

 

 

 

361,397

 

Long-term debt, net of unamortized discount

 

130,986

 

 

 

153,778

 

Operating lease liabilities, net of current portion

 

71,309

 

 

 

82,356

 

Deferred tax liability

 

402

 

 

 

382

 

Liabilities under tax receivable agreement, net of current portion

 

 

 

 

99,620

 

Other long-term liabilities

 

5,076

 

 

 

3,923

 

Commitments and contingencies

 

 

 

Stockholders' equity:

 

 

 

Class A common stock, par value $0.0001 per share, 200,000 shares authorized; 50,549 shares and 47,192 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 

5

 

 

 

5

 

Class B common stock, par value $0.0001 per share, 50,000 shares authorized; 2,277 shares and 3,293 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 

 

 

 

 

Additional paid-in-capital

 

326,180

 

 

 

310,807

 

Accumulated other comprehensive loss

 

(180

)

 

 

(2,603

)

(Accumulated deficit) retained earnings

 

(94,064

)

 

 

60,015

 

Total stockholders' equity attributable to Funko, Inc.

 

231,941

 

 

 

368,224

 

Non-controlling interests

 

6,099

 

 

 

21,465

 

Total stockholders' equity

 

238,040

 

 

 

389,689

 

Total liabilities and stockholders' equity

$

804,645

 

 

$

1,091,145

 

Funko, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

 

Year Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2021

 

 

(in thousands)

Operating Activities

 

 

 

 

 

Net (loss) income

$

(164,438

)

 

$

(5,240

)

 

$

67,854

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

Depreciation, amortization and other

 

57,389

 

 

 

47,919

 

 

 

40,056

 

Equity-based compensation

 

10,534

 

 

 

16,591

 

 

 

12,994

 

Amortization of debt issuance costs and debt discounts

 

1,274

 

 

 

902

 

 

 

1,118

 

Loss on debt extinguishment

 

494

 

 

 

 

 

 

675

 

Gain on tax receivable agreement liability adjustment

 

(100,223

)

 

 

 

 

 

 

Deferred tax expense (benefit)

 

123,124

 

 

 

(17,414

)

 

 

(361

)

Other

 

4,090

 

 

 

5,244

 

 

 

1,403

 

Changes in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

Accounts receivable, net

 

40,513

 

 

 

19,075

 

 

 

(56,648

)

Inventory

 

122,479

 

 

 

(82,214

)

 

 

(107,166

)

Prepaid expenses and other assets

 

3,242

 

 

 

(7,263

)

 

 

3,700

 

Accounts payable

 

(17,968

)

 

 

11,043

 

 

 

26,933

 

Income taxes payable

 

75

 

 

 

(15,018

)

 

 

15,585

 

Accrued royalties

 

(14,723

)

 

 

9,082

 

 

 

17,633

 

Accrued expenses and other liabilities

 

(34,927

)

 

 

(22,841

)

 

 

63,586

 

Net cash provided by (used in) operating activities

 

30,935

 

 

 

(40,134

)

 

 

87,362

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Purchase of property and equipment

$

(35,131

)

 

$

(59,148

)

 

$

(27,759

)

Acquisitions of business and intangible assets, net of cash acquired

 

(5,364

)

 

 

(19,479

)

 

 

199

 

Other

 

699

 

 

 

562

 

 

 

179

 

Net cash used in investing activities

 

(39,796

)

 

 

(78,065

)

 

 

(27,381

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Borrowings on line of credit

$

71,000

 

 

$

120,000

 

 

$

 

Payments on line of credit

 

(20,500

)

 

 

(50,000

)

 

 

 

Debt issuance costs

 

(1,957

)

 

 

(405

)

 

 

(1,055

)

Proceeds from long-term debt, net

 

 

 

 

20,000

 

 

 

180,000

 

Payment of long-term debt

 

(22,581

)

 

 

(18,000

)

 

 

(198,375

)

Contingent consideration

 

 

 

 

 

 

 

(2,000

)

Distributions to continuing equity owners

 

(1,118

)

 

 

(10,710

)

 

 

(9,277

)

Payments under tax receivable agreement

 

(4

)

 

 

(7,718

)

 

 

(1,715

)

Proceeds from exercise of equity-based options

 

756

 

 

 

1,472

 

 

 

3,794

 

Net cash provided by (used in) financing activities

 

25,596

 

 

 

54,639

 

 

 

(28,628

)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

518

 

 

 

(797

)

 

 

(51

)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

17,253

 

 

 

(64,357

)

 

 

31,302

 

Cash and cash equivalents at beginning of period

 

19,200

 

 

 

83,557

 

 

 

52,255

 

Cash and cash equivalents at end of period

$

36,453

 

 

$

19,200

 

 

$

83,557

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for interest

$

24,635

 

 

$

8,856

 

 

$

5,679

 

Income tax payments

 

1,059

 

 

 

22,363

 

 

 

1,462

 

Establishment of liabilities under tax receivable agreement

 

 

 

 

30,034

 

 

 

20,691

 

Issuance of equity instruments for acquisitions

 

 

 

 

1,487

 

 

 

 

Tenant allowance

 

 

 

 

17,236

 

 

 

 

The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net income (loss), for the periods presented:

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(in thousands, except per share data)

Net (loss) income attributable to Funko, Inc.

$

(10,761

)

 

$

(42,219

)

 

$

(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)

 

(447

)

 

 

(4,481

)

 

 

(10,359

)

 

 

2,795

 

Equity-based compensation (2)

 

3,013

 

 

 

4,592

 

 

 

10,534

 

 

 

16,591

 

Acquisition transaction costs and other expenses (3)

 

7,320

 

 

 

 

 

 

14,241

 

 

 

2,850

 

Certain severance, relocation and related costs (4)

 

702

 

 

 

1,572

 

 

 

6,486

 

 

 

9,775

 

Loss on extinguishment of debt (5)

 

 

 

 

 

 

 

494

 

 

 

 

Foreign currency transaction (gain) loss (6)

 

(641

)

 

 

(4,990

)

 

 

854

 

 

 

(3,232

)

Tax receivable agreement liability adjustments (7)

 

(603

)

 

 

3,987

 

 

 

(100,223

)

 

 

3,987

 

One-time cloud based computing arrangement abandonment (8)

 

 

 

 

32,492

 

 

 

 

 

 

32,492

 

One-time disposal costs for finished inventory held at offshore factories (9)

 

135

 

 

 

 

 

 

6,283

 

 

 

 

One-time disposal costs for unfinished inventory held at offshore factories (10)

 

 

 

 

 

 

 

2,404

 

 

 

 

Inventory write-down (11)

 

254

 

 

 

 

 

 

30,338

 

 

 

 

Income tax expense (9)

 

1,486

 

 

 

(8,890

)

 

 

147,630

 

 

 

(27,657

)

Adjusted net income (loss)

$

458

 

 

$

(17,937

)

 

$

(45,397

)

 

$

29,566

 

Adjusted net income (loss) margin (13)

 

0.2

%

 

 

(5.4

)%

 

 

(4.1

)%

 

 

2.2

%

Weighted-average shares of Class A common stock outstanding-basic

 

50,384

 

 

 

47,179

 

 

 

48,332

 

 

 

44,555

 

Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock

 

2,808

 

 

 

4,335

 

 

 

4,021

 

 

 

6,967

 

Adjusted weighted-average shares of Class A stock outstanding - diluted

 

53,192

 

 

 

51,514

 

 

 

52,353

 

 

 

51,522

 

Adjusted earnings (loss) per diluted share

$

0.01

 

 

$

(0.35

)

 

$

(0.87

)

 

$

0.57

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(in thousands)

Net (loss) income

$

(11,208

)

 

$

(46,700

)

 

$

(164,438

)

 

$

(5,240

)

Interest expense, net

 

7,419

 

 

 

4,480

 

 

 

27,970

 

 

 

10,334

 

Income tax expense

 

1,638

 

 

 

(14,869

)

 

 

132,497

 

 

 

(17,801

)

Depreciation and amortization

 

15,429

 

 

 

13,160

 

 

 

59,763

 

 

 

47,669

 

EBITDA

$

13,278

 

 

$

(43,929

)

 

$

55,792

 

 

$

34,962

 

Adjustments:

 

 

 

 

 

 

 

Equity-based compensation (2)

 

3,013

 

 

 

4,592

 

 

 

10,534

 

 

 

16,591

 

Acquisition transaction costs and other expenses (3)

 

7,320

 

 

 

 

 

 

14,241

 

 

 

2,850

 

Certain severance, relocation and related costs (4)

 

702

 

 

 

1,572

 

 

 

6,486

 

 

 

9,775

 

Loss on extinguishment of debt (5)

 

 

 

 

 

 

 

494

 

 

 

 

Foreign currency transaction (gain) loss (6)

 

(641

)

 

 

(4,990

)

 

 

854

 

 

 

(3,232

)

Tax receivable agreement liability adjustments (7)

 

(603

)

 

 

3,987

 

 

 

(100,223

)

 

 

3,987

 

One-time cloud based computing arrangement abandonment (8)

 

 

 

 

32,492

 

 

 

 

 

 

32,492

 

One-time disposal costs for finished inventory held at offshore factories (9)

 

135

 

 

 

 

 

 

6,283

 

 

 

 

One-time disposal costs for unfinished inventory held at offshore factories (10)

 

 

 

 

 

 

 

2,404

 

 

 

 

Inventory write-down (11)

 

254

 

 

 

 

 

 

30,338

 

 

 

 

Adjusted EBITDA

$

23,458

 

 

$

(6,276

)

 

$

27,203

 

 

$

97,425

 

Adjusted EBITDA margin (14)

 

8.1

%

 

 

(1.9

)%

 

 

2.5

%

 

 

7.4

%

(1)

Represents the reallocation of net 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.

(2)

Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.

(3)

For the three months ended December 31, 2023, includes fair market value adjustments for assets held for sale. For the year ended December 31, 2023, includes costs related to the termination of a lease agreement and related expenses, fair market value adjustments for assets held for sale, partially offset by acquisition-related benefits. 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 three months ended December 31, 2023, includes residual charges for 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, and charges related to severance and benefit costs for reductions-in-force. For the three months ended December 31, 2022, includes charges related to severance for the transition of management personnel. For the year ended December 31, 2022, includes charges related to residual one-time relocation and severance costs for U.S. warehouse personnel in connection with the opening of a warehouse and distribution facility in Buckeye, Arizona.

(5)

Represents write-off of unamortized debt financing fees for the year ended December 31, 2023.

(6)

Represents both unrealized and realized foreign currency losses (gains) on transactions other than in U.S. dollars.

(7)

Represents recognized adjustments to the tax receivable agreement liability. For the year ended December 31, 2023, 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 three months and year ended December 31, 2022.

(9)

Represents one-time disposal costs related to unfinished goods held at offshore factories for the year ended December 31, 2023.

(10)

Represents one-time disposal costs related to finished goods held at offshore factories primarily due to customer order cancellations for the year ended December 31, 2023. Incremental charge during the three months ended December 31, 2023 were related to a true-up of original estimate of third-party destruction costs.

(11)

Represents an inventory write-down, outside of normal business operations, to improve U.S. warehouse operational efficiency for the year ended December 31, 2023. Incremental charge during the three months ended December 31, 2023 were related to a true-up of original estimate of third-party destruction costs.

(12)

Represents the income tax expense effect of the above adjustments. This adjustment uses an effective tax rate of 25% for the years ended December 31, 2023 and 2022. 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, 2022, this also includes the $11.0 million discrete benefit from the release of a valuation allowance on the outside basis deferred tax asset.

(13)

Adjusted net income (loss) margin is calculated as Adjusted net income (loss) as a percentage of net sales.

(14)

Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales.

 

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