Hi everyone, and welcome to Funko's 2025 fourth quarter financial results conference call. I'm Katie Wilson, and I'm here at the Funko store in Hollywood. With me are Josh Simon, our Chief Executive Officer, and Yves Le Pendeven, our Chief Financial Officer. Welcome guys. Hello. Josh, I have heard this is one of your favorite places in Los Angeles. It is, yeah. I've been on the job for about six months now. I think I've spent the majority of my time in this store. They actually gave me a key to the store earlier this week, so I can come and go, you know, even after hours. But what I love about being here is it really embodies the strength and how much fun the Funko brand is. You kinda see around us here from an IP standpoint, KPop Demon Hunters, Mickey Mouse, Michael Jordan in the background. Come here over the weekends, and there's people from all over the world, all ages, all demographics, and it's really fun watching them kind of discover their favorite fandom or IP. We thought it would be a fun new way to do the earnings call from here today. How have your first six months been? Well, see, we're just getting back from the toy fair circuit, so London Toy Fair, Nuremberg, New York Toy Fair. I've been going to these toy fairs for a while in various capacities, and I can say, definitely I've felt more energy around the Funko brand than I have in, you know, in a bit. It was really fun to meet with our licensors and retailers. In Q4, we also had a great presence at New York Comic Con, so I had a great chance to meet with a lot of our fans and YouTubers. You know, the energy was great, and we're seeing that energy translate into momentum on the business side. In Q4, our net sales were better than expected, profitability at the higher end of expectations, and I know Yves will dive into that detail here in a little bit. I'm guessing some of that was driven by this guy, Derpy, right behind me? One of my favorites, near and dear to my heart, obviously. KPop Demon Hunters. Look, what's great about that one is I think it really demonstrates one of our superpowers, which is how quickly we're able to move in creating these really great collectibles. I think, you know, it's about four months from ideation and design to getting it into fans and consumers' hands in Q4. We also won the Viral Hit of the Year award from The Toy Book, which is a really coveted awards program. That was great. There were plenty of other really fun ways that we came to life in Q4 as well. It was the final season of Stranger Things, sadly. The Duffers were on The Tonight Show Starring Jimmy Fallon, and they actually reenacted the season and the series finale using only Funko Pop!s. You know, that was really fun to see. We launched Pop! Yourself in Europe, which is, you know, the experience where you can create a custom Funko Pop! of you or a loved one. We rolled out Bitty Pop! into Walmart. You know, Bitty Pop! is this great example of how we're able to continue to add dimensions to, you know, the iconic Funko Pop! Silhouette. It rolled out in all Walmart doors in Q4. It was incremental placement in the toy aisle. It was incremental placement at impulse and out of aisle, and it really helped to drive some strong sales in Q4 as well. During the last earnings call, you talked about the Make Culture POP! strategy. I believe you mentioned culture, creativity, and commerce. How's that going so far? Well, if you remembered those, the three Cs, then, so far so good. It's going great. Look, the idea is that how do we participate in all of those moments that are shaping culture? Really the goal is to become the preeminent brand for turning pop culture into collectibles and also turning those collectibles we create into culture and cultural moments. Let's start with culture. I've said it a few times here, but really that means just being at the center of the moments that fans are talking about, like while it's actually happening. KPop Demon Hunters is a great example of that, but we do it pretty broadly. We have great relationships with licensors all over the world, pretty much, you know, a portfolio of about 900 actively managed licenses at the moment. In addition to that, there's still a ton of white space that we could get after. Sports is one that's a little bit more nascent for us, but we launched a really great new partnership with Topps and Fanatics. We're part of the new MLB Super Pack with trading cards and blind Bitty Pop! products that rolled out in Walmart, Target, GameStop, sporting goods stores like Dick's. Just sort of one example in sports, but even, you know, even in these massive fandoms, I think there's plenty more opportunity for us. Speaking of sports, by the way, did I see Funko in a Super Bowl commercial? You did. It was surprising for all of us. I mean, I'd sat down with my family to watch the Super Bowl, and in one of those first commercial breaks, like on comes this really great spot from the NFL that's sort of celebrating the, you know, intergenerational love of football. And like in an opening frame in a, you know, in a young kid's bedroom, there's a shelf filled with NFL Funko Pop!s. So, you know, that was really great to see. You know, in that sports space though, I mentioned there continues to be more opportunities. In Miami, Inter Miami, the football or soccer club there, if you're here in the U.S., is opening up a brand new stadium, Miami Freedom Park, in a couple weeks on April 2nd. We have a presence in their flagship store. It's a Funko and Loungefly shop-in-shop with exclusive products and also a really great unique Pop! Yourself experience that you can only do there in the stadium. In addition to these sports moments, Q4 was also really great from an entertainment perspective. We had Zootopia 2 from Disney, which was a great movie and a massive hit. Wicked: For Good, also a great film for us. Other areas that we're expanding into as well, you know, I think I'm sure Yves is a huge fan of this, but the world of Romantasy and BookTok, if I'm not mistaken. You know, we dropped a little teaser video for The Cruel Prince, which is a really popular book on TikTok. It generated like 1 million views within a couple of days. That's an area you'll see us expanding into more. Obviously, anime has been huge for us. You know, there are big titles that everyone has heard of, like One Piece, which we continue to do well in, and then newer titles like Dandadan, which was a top seller for us at, you know, at Walmart in Q4, and continued growth in video games as well. A great, you know, franchise, MOUSE: P.I., that was also strong for us in Q4. How are you participating in those surprise moments that pop up? I mean, a lot of it is through speed, you know, as I mentioned earlier, related to KPop Demon Hunters. We have a new program called HyperStrike. The idea behind that is like, how can we design, manufacture, and get products and collectibles into our fans' hands in a matter of days or weeks? We'll be rolling that out in a more commercial way later this year, but we started experimenting with it in Q4. We were doing a lot of, like, one of one characters for celebrities and friends of Funko. One thing we tried to kind of experiment with is, like, the insane world of these sort of like online, you know, videos, user-generated content, meme culture that come up. There's a great guy named Jason Gyamfi, he's known as the quarter zip guy, was one of these, like, crazy viral trends in Q4. We decided, let's make a video of Jason and, you know, his matcha and send it to him as a gift. His reaction was great. I think we have a little clip of it to show. Gang, I got my own Funko Pop!. Like, really look at the resemblance is uncanny. Really look at it. Let's take time to analyze it together. Nah, peep though, like they really got it all jokes aside. Yeah, it's really exciting because this is a new type of product we're offering. It is. One example of a new type of product we're offering because that's that second C, creativity, is really about how we take these pop culture moments and then translate them into physical form in some way. Obviously, Bitty Pop!, you know, I talked a little bit about as a new example of a product that's been around for a couple of years, and we're really seeing some strong growth there. It capitalizes on, you know, what people love about Funko Pop!. We've sold 1 billion units of Pops over the years. It's this really iconic, you know, silhouette. There's more dimensions of Pop and some net new products that we're working on to drive additional growth. The thing that's great about that iconic silhouette is starting to think about how we can reach fans and tell stories in new ways. We recently announced a partnership with an incredible production company called Rideback. Really great storytellers. I think they're experts at creating worlds from products. They produce the LEGO movies, they produce the live-action Lilo & Stitch. Really, really excited to work with them. We're developing some new ideas with them from, you know, big, you know, feature and animated series ideas, in addition to a really interesting, unique, AI-based animation toolkit they have called Spuree that will allow us to create some content much faster and bring new and iconic forms of storytelling to Funko fans everywhere. You also mentioned commerce as a part of Make Culture POP!. I have a guess that this store is a part of that. Are you expanding how you think about commerce, and is that happening around the world? Yeah. We really have fans all over the world, and we wanna make sure that we're showing up wherever our fans shop. You know, as we like to say, turning shelves into stages. This store is obviously a best expression, you know, of how we're able to do that. But you know, there's a ton of other opportunity in the US from a retail standpoint and outside of the U.S.. Europe, which has been our primary driver outside of the U.S. for a number of years now, is really strong. At the end of the year, we were actually the second largest collectible brand by market share right after Pokémon, which was great. From January 2025 to January 2026, our sales were up 20% in the EU. That was basically about double the market growth there, according to Circana Retail Tracking Service. Similar to what we've been able to sort of grow in Europe, the next idea is how do we do that in Latin America and Asia. As part of that, we just created a new role for a guy named Andy Oddie, who is our longtime Chief Commercial Officer. He has 40 years of really great experience in the toy and collectible space building businesses. He's our new Chief International Officer. He's gonna be focused on growth in Asia and Latin America, and I think his dedicated focus is really gonna help us to get traction there. The opportunity is big for two reasons. I mean, you think of China, Japan, Korea. China and Japan are the second and third largest toy markets outside of the U.S.. There's a lot of incremental business growth we know we can get in those countries. The other great thing is, like, so many cultural trends now globally are being influenced by Asia. Obviously, anime has always been a really big fandom for us, you know, largely coming from Japan. We've seen a huge growth in all things K- culture, Korean beauty, K-pop, Korean food. I think, you know, our business opportunity to grow there is strong, and then the cultural influence that I think will provide a halo of growth all over the world as we develop more relationships with licensors and creators in that region, I think will also be pretty massive for us. Turning to you, Yves, could you say a little bit more about the financial results? Sure. Happy to. This is an earnings call after all, so let's get to the numbers. For the fourth quarter, our net sales were $273 million. We were pleased to finish the year on a high note. We had guided to Q4 being up modestly over Q3. We were actually up 9%, so better than we expected. By the way, there's more details, including these slides, are posted on our IR website. For gross margin, we were at 41%, and that was again slightly higher than guidance. By the way, with the exception of the second quarter in 2025, we've now been above 40% for the last seven of the last eight quarters, so really pleased with that trend. Our SG&A expenses were $91 million, and that was down 12% from Q4 of last year. Finally, adjusted EBITDA was $23 million, which again, was at the high end of our expectations. How is the financial outlook for 2026? For 2026, we expect net sales to be up modestly year-over-year, but a substantial improvement in profitability. Specifically, we're guiding to net sales being flat to up 3% compared with 2025, and our adjusted EBITDA between $70 million and $80 million. Let me give you a little bit more color on that. For sales, we expect our Funko core product lines to be up high single digits year-over-year, but that's offset by Loungefly down double digits, and that's primarily due to the SKU cuts that we implemented last year. One thing that I'll jump in and add about Loungefly is that, we are really excited about what the growth potential for that business could be. I think there's a really unique way to own this space of wearable storytelling, as we like to call it. We know there's a really passionate fan base there for the product. As a result of that, we just put in place our first ever GM for the Loungefly business, Jessica Kong. She has a lot of really great experience across lifestyle brands and experiential. We think she'll be really great for the business. She's about a month in. We're already pretty far along in building the strategy and plans to get that brand and business back to growth, and we'll share more details about that in the next quarter. Thanks, Josh. Back to our guidance. For gross margin, we expect 41%-43% for 2026, and that increase over the recent trend is really driven by the renewal of some key licensing agreements with our major studio partners, which will result in lower minimum guaranteed royalties. As far as tariff assumptions, we're assuming that tariff rates remain around 15% for the remainder of the year. In terms of refunds, we're exploring all avenues, and we'll update our guidance when we have more information later this year. Finally, with regard to Adjusted EBITDA, we expect a substantial improvement that really is driven by actions that we've already taken. That includes all of the tariff mitigation strategies that we implemented last year, including price adjustments and cost reductions annualizing the renewal of the licensing contracts that I mentioned, and finally, just beginning to see traction on some of our growth initiatives, primarily in the Funko product lines, including Bitty Pop! and Pop! Yourself, which we launched in Europe last quarter. Josh, how do you see 2026 shaping up? We're all really excited for 2026. I think it's probably the strongest entertainment slate that I've seen in the last four or five years. From a film standpoint, we've got The Mandalorian & Grogu, Toy Story 5, Moana live action, all tons of great things from Disney, Supergirl from DC, Masters of the Universe, Minions 3, Spider-Man: Brand New Day, Avengers: Doomsday at the end of the year. This week, Netflix's live action series of One Piece just debuted, season 2 of One Piece, which is always huge for us. Obviously in the sports world, it's a World Cup year. We have the England, U.S., and French teams. I mentioned we just signed this new deal with McLaren. Some new product launches that we have coming up that I'm just gonna tease for a little bit now. Really when you take a step back and look at what's driving the toy industry right now, there's three trends. It's coming from growth in collectibles, growth in licensed IP, and growth in kidult. Those are all areas that sort of squarely are in the Funko wheelhouse, and so it's really just about us executing the share. Well, with that, we'll turn to our questions here. The first question is coming in from Stephen Laszczyk of Goldman Sachs. Please describe the shape of the flat to +3% guidance past Q1. Should it be pretty consistent throughout the year? What gets you to the top versus low end of that guide? Sure, I'll take that one. Yeah, it should actually be pretty consistent throughout the year. This is not a hockey stick plan where we depend on, you know, having a huge second half of the year. We actually expect Q2 to comp up a little bit over last year, that was pretty disrupted by the tariff impact when those were first announced, and then also pretty steady growth throughout Q3 and Q4 as well. To what extent does Funko view original content creation as a growth driver? How much does the company plan to invest in original content, and how does AI play into this strategy? I mean, look, I'd say as a growth driver, I think it can be a serious growth driver in the long term. I mean, obviously, our entire business is driven by entertainment content and IP and I think as we explore more dimensions of storytelling through the Funko universe, I think over time, assuming those things are hits and people love it and watch it, we think it can actually drive growth, but it's gonna take time to develop, produce, you know, and sort of get that content out to audiences. Look, I think we're seeing the same trends everyone is from an AI standpoint in storytelling. We really believe in the power of, you know, people to tell great stories, our design teams and creative teams internally to craft these great characters. So far, it's been a great tool for efficiency and letting our teams focus more on the creative work than the busy work. Then I think just from a capital standpoint, I mean, look, we're looking to partner with the same exact partners who we already work with on the licensor side, some of the biggest studios around the world to help us develop and create these, you know, elements of content, movies, TV, et cetera. From our standpoint, you know, we're looking to rely on their expertise on the storytelling side and partnership side, and it shouldn't be a significant capital investment from us. Does Funko need to use any of its extended credit agreement in 2026, or will the company continue to pay down debt like they did in Q4? The answer is no, we don't expect to need to, you know, do any additional borrowing. We're managing right now on our operating cash flows and expect to continue to do so. We make regular quarterly principal and interest payments on the debt, and we plan potentially later in this year and certainly early next year to make some incremental debt pay downs like we did in Q4. Eric Wold of Texas Capital Securities asks, "Can you break out the POS trends and inventory restocking domestically versus Europe? If you saw any noticeable trends, positive or negative, as the quarter progressed, what about so far during Q1? Yeah, great question. We did see a continuation of the trend that we spoke about in Q3. We continue to see great double-digit growth in POS sales in Europe. In the U.S., we actually saw an improving trend throughout Q4 to a positive comp year-over-year, and actually we've seen that trend continue into Q1. From a retailer inventory point of view, we watched that obviously very closely from the larger partners that report that information to us, and I think it's in a healthy place right now, and restocking is kinda going as we'd expect. Yeah. Within the 2026 guidance, what would you highlight as the key initiatives to both drive top line results and margin versus 2025? I guess I'll start. From a top-line standpoint, I mean, obviously I talked about the content slate. That's a huge driver of top-line growth this year. Bitty Pop! is, you know, is another example of that. A lot of the broader initiatives that I mentioned will start to seed into this year. International growth, some of the new products, those are things that we'll seed, but you'll really start to see us drive incremental growth from that sort of further into the future. There's also some fun new initiatives that we have this year too. We talked about World Cup. We have a fun lineup that's gonna launch later this year, celebrating America's 250th. I mentioned the POP! Mystery products that are launching later this year. You know, all of those things will start to add up, but I think primarily, like, the strength we've seen in Bitty, the strength we've seen in the entertainment slate should drive a lot of the top-line growth. You wanna take the margin question? Yeah, sure. From a margin perspective, I spoke about some of the main drivers already. The good news is, you know, we're forecasting to have a better margin than we've ever had, and that's largely driven by things that are in our control, such as the price adjustments that we made last year and the renewal of some of our major licensing contracts. Now, as we kinda go through the rest of the year, there will probably be puts and takes. I'm hoping for some favorable trends within the tariff world. Currently we're paying 10%, the newly announced 10% tariff rates that may go up to 15%. Unsure what, you know, what that might be later on in the year. On the other hand, we're also monitoring the situation right now in terms of oil prices and potential impact to shipping costs. There are a few unknowns, but for the most part, we feel confident about maintaining that level of gross margin. Keegan Cox of D.A. Davidson asks, "Can you quantify the tariff impact you experienced in 2025, and what incremental pressure you expect in the first half of 2026? Sure. In 2025, our total tariffs and duties were close to $40 million, and about half of that was related to the IEEPA tariffs. The ones that were recently struck down. For the first time, we've also invited investor questions from our investor base. The first one is, "To what extent has Funko signed new or expanded IP partnerships ahead of the relatively strong film slate in 2026? Well, look, I think as it relates to the film slate itself, the good news is, you know, last year we renewed licenses with all of the major studios around the world. Disney, which is inclusive of Lucasfilm, Pixar, Marvel, Netflix, you know, Paramount, Universal. We really value those relationships. We spend a lot of time with those partners. From a 2026 slate standpoint, you know, I think we're in pretty great shape there. I mentioned some of the World Cup teams that we signed licensing deals with. I think for us, like as, you know, kinda talking about some of the white space earlier, for me, the focus is really thinking about what are those net new kind of white space incremental areas where we don't currently operate. I'd say, you know, the world of creators, you know, is a huge example of that. We appointed a new board member, Reed Duchscher, who represents, you know, some of the biggest creators in the world, you know, who everyone's familiar with on Twitch and YouTube and TikTok. He's been a really invaluable advisor and looking to tap into his expertise and guidance as we embark in more, in that space. Coming in from an investor in South Africa, "The whole of South Africa would love it if you would make Funko Pop!s of the Springboks rugby team. Interesting. Well, let's see. I don't wanna let South Africa down. We will look into it. It's funny. It's a great question. I can't expound a lot on rugby, which I apologize to any fans out there, but I respect the sport. It's a great question. I think you know it definitely I think showcases both the opportunity that exists in sports and also just kind of the global extent you know of our fandom. Fun to hear a question from an investor in South Africa. We will look into it. Well, that does wrap up our questions. Josh, any final words? Well, I just wanna thank you for hosting and being here today. Thank everyone for watching. Excited to be back in May with our next earnings call and continue to share our progress across the business.