Funko Inc (FNKO) 2019 Q1 法說會逐字稿

Good afternoon, and welcome to Funko's conference call to discuss financial results for the first quarter 2019.

(Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company.

As a reminder, this call is being recorded.

On the call today from management are Brian Mariotti, Chief Executive Officer; Andrew Perlmutter, President; and Russell Nickel, Chief Financial Officer.

I will now turn it over to Mr. Nickel to get started.

Please go ahead, sir.

Thank you, and good afternoon.

A press release covering the company's first quarter 2019 financial results was issued this afternoon, and a copy of that press release can be found in the Investors Relations section on the company's website.

Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These may include statements regarding our business goals, plans, abilities and opportunities; industry and customer trends; growth, momentum and investment initiatives; collaboration and license relationships; consumer engagement and brand awareness; acquisitions and related expenses; and anticipated financial performance.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our Form 10-K for the fiscal year 2018 and our other filings with the SEC.

Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them.

Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income, adjusted pro forma earnings per diluted share and net debt, which we believe may be important to investors to assess our operating performance.

Reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are included on our earnings release and in the Investor Relations section on our website at funko.com.

We have also prepared a visual presentation that investors can follow along with this discussion, and it can be accessed in the Investor Relations section of our website.

I will now turn the call over to Brian.

Thanks, and good afternoon, everyone.

Funko had another fantastic quarter and got 2019 off to an even better start than we were envisioning.

Our net sales were up 22% over last year, better than we expected and better than was implied in our full year guidance.

We also saw improvements in gross margin in the quarter.

Continuing the trend of the last couple quarters, more of our sales growth flowed through to the bottom line, thus giving us greater operating leverage.

We have now exceeded our internal forecast and analyst consensus for net sales and adjusted EBITDA for all 7 quarters we have reported as a publicly traded company.

And most excitingly, our future has never looked brighter.

As you know, Funko is built and has thrived on the principle that everyone is a fan of something, and that Funko has something for every fan.

This allows Funko to act as an index fund of pop culture.

Funko's continued strong growth comes from the simple premise that we are uniquely positioned at the epicenter of pop culture, connecting licensors, retailers and fans.

Licensors rely on us to connect them to their fans and to keep their content properties top of mind through a growing range of retail channels.

Retailers rely on us to bring fans into their stores seeking a way to interact with this content and our products.

And most importantly, our fans rely on us to create and deliver a growing assortment of products they want in order to stay engaged with the content they love.

No other company brings such a fast-fashion approach to pop culture the way Funko does.

As we've been saying, content creation has been and is continuing to explode.

The consumption of that content is also continuing to rise.

Currently, we see pop culture merchandise as a wheel with 5 main spokes that represent the sources of content: television, movies, video games, sports and music.

The global business of pop culture is more than $0.5 trillion annually, and when you include consumer spending on movies and concerts, recorded music, sporting events, subscription TV services, video games, comic books, anime and licensed merchandise, the amount that consumers around the world spend annually in these areas is more than the entire GDP of most countries.

Tapping into this large global market, we are seeing rapid growth of our Loungefly brand, soft-line products and accessories as a whole, demonstrating that the strategy of diversifying our product lines across the full assortment of our pop culture licenses is paying off.

Our recent acquisition of Forrest-Pruzan Creative, now called Funko Games, in the board game space is another example of our strategy to grow and diversify our revenue.

Although we expect sales of Funko Games this year to be immaterial to our overall results, we are encouraged by the fact that the retail response to our entrance into this space has exceeded our own optimistic vision.

Our demonstrated expertise in licensed properties makes this a natural transition.

I'll remind you that the average age of our consumer is 35.

In addition to dominating this adult demographic of fandom, Funko plans to continue increasing our offerings for younger audiences.

Our success over the last few years as the master toy licensee of properties like Five Nights at Freddy has given us access to different customers and aisles at major retailers globally.

Our success with Five Nights and the positive reaction that retailers have shown to our board game initiative has fueled our commitment to creating our own proprietary products in the toy space, utilizing our 150 world-class in-house artists.

You've heard us talk about how we have been incubating our own internally developed Wetmore Forest property, which you expect to see at Barnes & Noble in late Q2.

Our plan for this offering is to include a broad line of products in the form of figures, books, plush, games and puzzles, and will be supported with short-form video content from Funko Animation Studios.

We've also been working on several new original toy lines.

As we develop these product lines, we plan to leverage our proven expertise in creative design, sourcing, distribution and original animated content from our own studio, and expect to launch some of these products in 2020.

We've also been investing in building our own brand, including our own direct-to-consumer strategy.

As we previously announced, we expect to open our second retail store, this one in Hollywood, by year-end.

Our original store in Everett, Washington, headquarters was our first foray into retailtainment and has been a fantastic proof point for how interactive retail merchandising can succeed and build awareness of our brand.

The plan for a Hollywood store is to take what we did in Everett to an entirely new level.

This design includes themed worlds and larger-than-life experiences that will allow the fans to interact with their favorite pop culture content.

Another significant brand initiative so far in 2019 has been the rollout of our Funko app, which we launched toward the end of the first quarter.

The Funko app debuted at No.

14 in the lifestyle section of the Apple App Store, and it reached nearly 1 million downloads in 155 countries in the first 3 weeks it was available.

We think the app will allow our fans to engage with our brand and discover our array of products, making collecting and purchasing our products easier and pave the way for more significant expansion in our own direct-to-consumer business.

In addition to our goal of sustaining high rates of sales and profit growth, our goal over time is to continue to expand into adjacent categories to further grow the percentage of our business that comes from international markets and to increase the portion of our revenues that come from our own IP.

If these efforts succeed, we should not only be able to sustain high rates of sales growth, but we should also meaningfully improve our margins.

Before I turn the call over to Andrew Perlmutter, our President, let me take the opportunity to thank all of our team members who have contributed to our terrific growth, as well as our retail and licensing partners.

Most of all, though, thank you to our fans, whose passion for entertainment content and for our products is the No.

1 reason why we exist and why we succeed.

Andrew?

Thank you, Brian.

Our partnerships with our retailers around the world are one of Funko's key strengths.

As Brian mentioned, we connect our fans with their favorite content through our retail partners.

Funko's unique ability to drive traffic to our retailers is one of the elements that differentiate Funko from the competition.

In addition to successful, newly launched properties like Fortnite, Avengers: Endgame, Game of Thrones and Captain Marvel, we saw continued ability to tap into our back catalog with Harry Potter, Star Wars and DC Comics.

We saw increased year-over-year sales with our core retail partners across the board.

These increases were partly driven by product diversification such as Loungefly and other soft-lines products, as well as the introduction of higher-priced items such as our 10-inch, Pop!

Vinyl, Movie Moments and Pop!

Rocks.

With the shift in the timing of Easter and the release of Avengers: Endgame, which was a month later than last year's Infinity Wars, there was a shift in retail sales from March into April.

For those accounts where we had POS sell-through data through April, our year-to-date sell-through was up nearly 20% in dollars.

We continued to increase sales in all of our major channels, including mass, mall and other specialty stores, and we continued to open new accounts and cultivate expansive programs with larger existing customers.

As an example, due to the success that we are seeing at Best Buy, we have expanded our presence and are expected to launch a branded Funko section in the second quarter.

As part of our channel segmentation strategy, we are also building out programs like the DIY Pop!

program at Michael's arts and crafts store.

The Funko brand continues to resonate and expand globally.

In addition to North America, we have seen double-digit increases in net sales year-over-year in Asia, Latin America and Australia.

Australia is one of our most mature international markets, but our net sales in Australia were up over 70% year-over-year in the first quarter, and as we've seen in the U.S., we are now seeing more interest from large mass Australian retailers such as Sanity music, EB Games, JB Hi-Fi and Big W. We continue to see strong growth in Europe and expect that to continue, particularly with our space at hypermarkets set to double this year.

We are looking for strong growth at several key strategic accounts this year, including Primark, Tesco, Carrefour, EMP and Fnac.

Our fan engagement also continues to increase.

Engagement across all social media channels was up 13% in the first quarter to 34 million interactions, which includes shares, likes, comments and clicks.

Our reach across all channels for the quarter was strong at 1 billion impressions.

Looking at some operational wins, we continue to prioritize the improvement of our systems for getting inventory from our factories to our customers with minimal delay and disruption.

We recently defined a new organizational structure to transform our product development team.

We believe this will allow us to improve our lead times and make them even faster.

Being the fastest is not fast enough for Funko.

We continue to see opportunities to make additional investments that we believe will improve our operations both in the U.S. and internationally as we seek to reduce the complexity and cost of getting our products to market.

These investments include initiatives that were initially earmarked for 2020, but we now believe can be accelerated into the second half of 2019.

This would result in increased cost for 2019 but should also allow for more of the benefits from these initiatives to be realized earlier than initially expected.

We recognize that while we are performing and executing, there are areas that we can still continue to improve, and we are committed to doing just that, not just for what it means now but also so that we can support the business and the long-term opportunities that we see in front of us.

With that, I will turn the call over to Russell, who will review the details of our financial performance in the quarter.

Russell?

Thanks, Andrew, and good afternoon, everyone.

As Brian and Andrew have indicated, we delivered better-than-expected results for our first quarter due to broad-based strong performance across product lines and geographies.

We exceeded our own expectations on sales, gross margin and adjusted EBITDA.

Net sales in the quarter increased 22% to $166.8 million, and were primarily driven by continued expansion of products and properties in our portfolio.

In the quarter, the number of active properties increased 35% to 611 and net sales per active property were $273,000, which was down 10% year-over-year.

As a reminder, we expect net sales per active property to fluctuate from time to time.

We believe it is a good sign to see our sales spread over such a wide range of properties.

The top-performing property in the quarter was Fortnite, which accounted for just over 10% of our total sales.

Among our top 10 properties, 3 were based on evergreen content, 3 were based on new theatrical releases, 2 were based on current TV shows and the other 2 were based on current video games, not dissimilar to prior periods.

Our top 10 properties accounted for 41% of total sales, compared with 39% in the first quarter of last year.

In Q1, just under 45% of our sales came from evergreen properties or back-catalog content that is not tied to a current movie, video game or TV show.

That is a fairly typical level for us.

In the first quarter, no customer accounted for more than 8% of our total sales, which just highlights our diversification, that we are not reliant on any one retailer and that our products are channel-agnostic.

On a geographical basis, in the first quarter, net sales in the United States increased 22% to $108.7 million and net sales internationally increased 20% to $58.1 million.

As a reminder, a year ago we were implementing the new ERP system in the U.K. and we intentionally pulled forward about $5 million in sales that would have otherwise shipped in Q2 of 2018.

That pull-forward of these sales into Q1 2018 had a 14-percentage-point negative impact on our international net sales growth in Q1 2019.

On a product category basis, Q1 net sales of figures increased 18% to $136 million and net sales of other products such as bags, accessories, apparel and homewares, increased 43% to $30.8 million.

We saw continued strength in sales of Pop!

Vinyl figures, which increased 21% on a global basis over the prior year.

The fact that Pop!

Vinyl, a 9-year-old product line, is continuing to grow double digits year-over-year is a testament to the platform that we have created, the breadth of licenses and our continued expansion of shelf space, retail doors and geographic markets.

Additionally, the broader Pop brand, which includes other product lines, was up 26% over the prior year.

Gross margin, which excludes depreciation and amortization, increased 70 basis points from Q1 of last year to 38.1%.

The increase in gross margin this quarter compared to last year was driven primarily by the negative impact that the Toys "R" Us liquidation had on our gross margin last year.

In addition, this year, we had lower product costs and shipping and freight costs as a percentage of sales, offset by slightly higher royalty costs given the mix of properties sold.

Like last quarter, we experienced higher chargebacks in Q1 of 2019 than we did in the first quarter of last year.

This was a headwind on our gross margin this quarter.

In the quarter, selling, general and administrative expenses increased 17% to $40.8 million from the prior year.

This was 24.5% of this year's Q1 sales and represented a 90-basis-point improvement in SG&A expense leverage compared to last year.

Depreciation and amortization expense in Q1 increased 9% from the prior year to $10.1 million.

This was 6.1% of Q1 sales, a 70-basis-point improvement as a percentage of sales.

The combination of higher revenues, higher gross margin and lower operating costs and depreciation and amortization expense as a percentage of sales resulted in an improvement in operating income in the quarter to $12.6 million, up 77% from last year, reflecting significant operating leverage.

Net interest expense decreased 31% to $4.1 million from $5.9 million in Q1 of 2018 due to reduced debt levels and lowered rates obtained when we refinanced our debt in Q4 of last year.

As a result of these factors, adjusted pro forma net income increased by nearly $7 million to $8.5 million, compared to $1.7 million in Q1 2018.

Adjusted pro forma earnings per diluted share was $0.16, compared to $0.03, and adjusted EBITDA increased 46% to $25.5 million.

This represents a 15.3% adjusted EBITDA margin, which increased 260 basis points over Q1 of 2018.

Looking at the balance sheet, we ended Q1 with net debt of $224.6 million, compared to $233.8 million at the end of 2018 and $235.2 million at the end of Q1 2018.

Inventory was relatively flat compared to a year ago at $75.4 million versus $74 million at the end of Q1 2018 and was down 13% compared to year-end 2018 despite sales being up 22% over last year in Q1.

Turning to our outlook.

While our Q1 results exceeded our expectations, we are not raising our full year guidance at this time, as it is still early, and because we believe the accelerated investments in operating improvements will pull some additional costs into 2019.

Still, we are highly confident that we will be able to achieve the guidance we issued at the end of February.

As a reminder, we expect net sales of $810 million to $825 million, representing year-over-year growth of 18% to 20%; adjusted EBITDA of $133 million to $143 million, unchanged from prior guidance despite the earlier-than-expected investment spending on certain operational improvements that Andrew spoke of; and adjusted pro forma earnings per diluted share of $1.05 to $1.15, which assumes a blended corporate tax rate of 25% and a weighted average diluted share count of 53.5 million shares.

This, too, is unchanged from our prior guidance for the reasons just cited.

With that, I would now like to turn the call back over to the operator to start the Q&A session.

(Operator Instructions)

Our first question comes from the line of Drew Crum with Stifel.

So a number of puts and takes on the gross margin during the quarter.

Is that a good run rate to think of in the out-quarters, or do you expect that to move around?

And then separately, could you comment -- go ahead.

I think that -- no, sorry, I'll let you finish.

Yes, I was just going to -- separately, was curious as to what you've seen, and I know it's early, but what you've seen in terms of the Avengers performance this year versus last year.

So on the gross margin, I do think we will see, as we've said, we would expect that gross margin will have some puts and takes throughout the course of the year and overall for the entirety of the year we would expect it to be in line with where we ended 2018.

We saw some positive movement versus that in Q1, but we also saw -- why we saw higher FOB sales versus what we saw in Q1 of last year.

It was lower than where we were in Q3 and Q4 of last year.

So as that FOB mix shifts, there will be some play and some impact on gross margin, Drew.

Yes, Drew, it's Brian.

On the Avengers question, obviously, the box office numbers were staggering for the first weekend.

Our sell-through has been a little bit better than previous year's Avengers: Infinity War products.

I think the biggest thing is that it looks like it's going to have a little bit of a bigger tailwind to it on the movie end and our second wave of products are going to be much larger than the second wave of products from Avengers: Infinity War a year earlier.

So I think we're going to be able to monetize it a little further into the future because there was a lot of ammo that was left off for us getting a pre-look at, which is great.

It surprised us and it gave us a lot of stuff to work on.

I think the appetite's going to be there.

So we're obviously ecstatic at the movie performance and our performance with the products at retail.

Our next question comes from the line of Erinn Murphy with Piper Jaffray.

Lots to dig in there, or here.

I guess I want to start with, maybe, what you didn't talk about was the Walmart initiative and kind of rolling out deeper into the entertainment and DVD section or aisle.

Could you talk a little bit more about how that's performing and kind of what the consumer response has been, and maybe -- I don't know if you'd have it, but where is your average linear foot currently at Walmart versus Target?

So I can take that one.

Thank you for the question.

I can tell you that our program with Walmart is meeting or exceeding expectations.

Without going into too much detail about the performance of any one retailer, I can tell you that Walmart's happy with it.

We are in the process of rolling out a couple of really big programs right now.

For example, Avengers: Endgame; there's a program around Game of Thrones.

So we're excited about it.

We think that there's more opportunity in front of us with Walmart not only to take our existing space and continue to build ways on -- make ways to make it more productive, but also we're looking at other space around the stores, as we've mentioned, in new categories, like the games category and a couple other new ventures that we're looking at.

So we're bullish on the relationship.

We're happy with where it is.

I can get back to you on the average linear footage; it changes year-over-year.

And without going into too much detail, I can tell you that that should be increasing over the next 12-month period.

Yes, Erinn, it's Brian.

I think it's a lot like we thought it was going to be.

We saw how the Target initiative 5 years ago grew and grew, and then there was the incremental opportunities in different departments, and we're seeing the same thing.

I think the power of what we can do, the people we can bring into Walmart, physically into the brick-and-mortar stores, the rather quick sell-through on special exclusives and programs has really got their appetite up.

So we're doing everything we possibly can to make this relationship great for the future to come, but it's off to a great start.

That's good to hear.

And then maybe just on Loungefly, Brian, you talked about that at the beginning of your prepared remarks in terms of the strength there.

Can you talk a little bit more about kind of where the growth is coming from?

Kind of what the distribution footprint looks like today for Loungefly?

And if you can, kind of how big that business is now?

Yes.

I mean, it's basically doubled since we bought it just pre-IPO.

The big thing for us has been just injecting the Funko DNA, making sure that they're aligning with our brand calendar; getting the information on the products that they're making out to us at the mothership so that we can help them with sales internationally, because they didn't have a footprint internationally; making sure that they make the right products at the right time and hit the timelines.

For example, I think they released all their Black Panther products 6 months after the movie came out last year.

So these are things that we've managed to course-correct and we've added some great creative people from Hybrid, which is a larger apparel company than -- probably the largest in our industry.

Two of their big people came over to our -- to Loungefly to help continue to guide that business.

So we're just seeing better alignment with all of our programs on all of our retailers, better international sales, more timely development, and really just true alignment with what Funko's initiatives are.

I think all those are really allowing the business to grow as fast as we hoped it would.

Got it.

And then -- and Russell, one for you.

Just going back to the gross margin, I just want to see if you could maybe break it out in a different way.

So up 70 basis points, if you were to -- sorry, take out the [lapping] of the Toys "R" Us impact from last year, where would gross margins have been in the quarter?

It would have been about -- I believe it was about -- would have been about 38.6.

So it was about 50 -- it would have been about 50 basis points higher.

And then the impact to take that back down to kind of what our -- where we ended the quarter was driven by the higher chargebacks that we saw, lower than what we saw as we make progress, lower than what we saw in Q4, but it was higher than Q1 of last year.

And then also the increase in FOB sales.

I think it was about 25% of our sales in the first quarter of this year were from -- direct from the factory, so.

Our next question comes from the line of Steph Wissink with Jefferies.

We have 2 questions.

The first is, maybe, Russell, for you, on the investments.

If you can just help us go about where those land in the P&L, if it's a split in gross margin or SG&A, and then maybe give us some perspective on when those investments start to feed into the model and kind of how they'll roll into 2020?

And then one, I think, Brian, for you, on the app.

Just as we've been playing around with the app over the last couple of weeks, we noticed that there's definitely a collector angle to it.

You can track value of some of the products and see some of the new releases.

If we think into the future, is there the possibility that there's a marketplace that you develop for buying, swapping and trading some of your product?

How should we think about that app as kind of a center connector for your collectors?

I guess I'll take that one first.

Yes, so we are very happy about the early response and the undertaking we have.

The first, foremost, this is for the fans.

This is to allow them in real time to understand what's being released, how to track, and more importantly, deep link to the products, whether it's from a Hot Topic or a hottopic.com or a Walmart or a Target or a Barnes & Noble, whatever, or back to Funko Shop, the ability for one bit of information to link to wherever that product is, is truly helpful.

And I think it's really going to be the basis of our direct-to-consumer as we continue to grow that avenue.

So I think we're super excited about that.

I think you see the writing ahead in terms of a marketplace, and I think that we are looking into a lot of what's going on in our industry, and sometimes outside our industry, like with retailers like Goat and StockX, and that secondary market.

And we're having conversations with eBay.

So there's a lot of conversations going on right now for us to formulate a plan on that kind of a secondary marketplace.

So -- and for trading for collector to collector.

So this is the beginning steps of a really great initiative and win for us, and our fans are loving it.

The numbers of people tracking their collections is just absolutely astronomical, but it's just the beginning, so we're pretty excited about what that's going to bring.

Yes, and Erinn (sic) [Stephanie], on the investments, they would happen if we execute on them in the second half of the year, and they would largely flow through SG&A.

And it would be a combination of certain one-time expenses as well as incremental expenses that would continue on into 2020.

(Operator Instructions)

Our next question comes from the line of Alex Perry with Bank of America Merrill Lynch.

I just have one here.

Can you speak to the rollout of Funko at Foot Locker?

We've noticed more sort of Pop!

fixtures within their store.

Can you just elaborate on how many doors you're in currently and what the plan is for 2019?

And then just on top of that, can you talk through sort of the crossover and the core customer that you see with the Foot Locker, if they're a core Funko customer?

It's Andrew here.

I can take that one.

So when we first started our conversation with Foot Locker, they had a specific vision in mind when it came to collectibles, and they came to Funko as a resource.

Since then, the dialogue has evolved rapidly, as you've seen.

You're seeing more Pop!

and other collectible fixtures rolling out into their stores.

There's potential that you'll start to see other soft-lines products, either from Loungefly or some of our other apparel plays, in their stores as well.

That being said, the number of stores is still relatively small.

The Pop!

Shop, which is their main collectibles play, I believe that they're trying to roll that out -- I don't -- yes, I think . . .

180.

I think it's 180 or 120.

I don't know that they've actually landed on an official number, but I think they have a goal of between 120 and 180 stores this year, so.

We are excited about it.

As far as the product mix in concerned, like I'd mentioned, we started sort of like all eyes on sporting -- sports figures, whether they be the Michael Jordan that sold out within a couple minutes and crashed our website, or LeBron James.

Oddly enough, the most successful social media interaction that Foot Locker's ever had was our Post Malone figure, which is great.

I mean, that's a musician outside of the sports world, so that's opened up a new door that they knew would be successful.

They flew product in on their own dime to get that out to market first.

Sold out very quickly, and like I said, it was their most popular re-Tweeted -- I believe it was re-Tweeted -- social media post, so.

Yes, Alex, I think we see the customers are definitely different, but the same mentality.

The sneakerheads just are absolutely obsessed with collecting sneakers, and all the information on the new releases, and so it's definitely opening up our market and enlarging our market.

But the mentality seems to be the same, so they are dropping items like a Miles Morales Spider-Man Pop!

at the same time there was a [Nike] collab.

It did very, very well.

So that mix and different demographic is running in parallel lanes with our collector base, so being able to cross into their lanes has been very, very exciting for us as we continue to broaden and enlarge our marketplace.

So we're excited about the relationship.

(Operator Instructions)

Our next question comes from the line of Tami Zakaria with JP Morgan.

I just have a really quick one.

So you saw strong growth in the number of properties but a decline in sales per property this quarter.

So can you help us think about these 2 metrics for the rest of the year?

Yes.

Look, I think that we always release that information because we think it's interesting to share the diversity of our license portfolio.

But again, one property for a musician like Amy Winehouse counts as one, and so does Avengers: Endgame, which we might have developed over a hundred and something products.

So for us, the most important thing is leveraging more properties per quarter.

So when you do that, you're obviously most of the time going to see a downward trend on dollars per property, but the healthy mix we're looking for is that we're continuing to leverage as many diverse properties as we can, which goes back to our motto, that everybody is a fan of something and we have something for everybody.

So we'll continue to put those 2 metrics in.

We have since we've been public.

But I think the key thing to key on is how diverse the license bandwidth is, and it's very atypical to traditional toy companies like Hasbro that focus on 4 or 5 unique properties, a Spin Master, a Mattel.

We support 1,100 different licenses, and that's really the key to our success.

We have no further questions at this time.

I would now like to turn the floor back over to management for closing comments.

Yes, before I close, let me address our recent announcement that Russell will be leaving Funko at the end of the year.

Russell's been with us for over 5.5 years during an amazing period of growth and transformation, and we wouldn't be there, where we're at currently today, without him, and we wish him the best in his future endeavors.

He leaves behind a phenomenal and strong financial team, and we look forward to finding a great replacement.

Since having him here -- with having Russell here through the end of the year, I think we're going to have a seamless transition and a world-class transition, so just wanted to bring that up.

And thank you again for everybody's interest and support of Funko, and we look forward to seeing some of you guys at Comic-Con in San Diego in July and speaking to you again on our second quarter earnings, if not sooner.

So thank you very much.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation, and have a wonderful day.