FNKO - Funko stock falls over 25% as losses far outpace expectations

Funko ( NASDAQ: FNKO ) shares slid sharply in Wednesday’s extended session after the company more than tripled the per share loss anticipated by analysts.

The Washington-based pop culture brand posted an adjusted loss per share of $0.35 on $333M in revenue. The Street had expected just an $0.11 per share loss on $317.9M. Gross margin in the fourth quarter of 2022 decreased 560 basis points from the year prior as inventory ballooned 48% to $246.4M.

"During the fourth quarter and in early 2023, we have made progress in addressing operational issues that impacted our results in the second half of 2022,” CEO Brian Mariotti said. “We have strengthened our executive and operational management team and have taken significant steps to improve our operating efficiency.”

Toward that end, the company announced that Steve Nave has been appointed Chief Financial Officer and Chief Operating Officer, effective immediately. He had previously been employed as a consultant working with CEO Brian Mariotti.

Moving forward into 2023, the company intends to reduce fulfillment costs by cutting inventory levels to align with the operating capacity. The right-sizing of bloated inventory is expected to result in a write down of $30M to $36M in the first half of the year.

For Q1, revenue is expected to range between $225M and $255M, below the $295.94M consensus estimate. Excluding an anticipated inventory write down, gross margin is expected to be in line to slightly below the fourth quarter of 2022. An adjusted EBITDA loss of between $50M and $45M is expected for the quarter, with a return to positive territory not expected until the second half of 2023.

For the full year, the company expects year-over-year revenue growth between 0% and 5%. Adjusted EBITDA for the year is projected to be between $50M and $75M

Shares of Funko ( FNKO ) crashed 25.23% in after hours trading on Wednesday.

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