After the Everett pop-culture company made unfortunate history with the worst IPO debut in 17 years, Funko stock has edged up. Its first report as a public company Tuesday will no doubt help its cause.
Brian Mariotti had one of the worst first days imaginable for the chief executive officer of a public company last month, when Everett toymaker Funko plummeted 41 percent in its debut on the Nasdaq Stock Market.
“I’m not going to lie — it was a bit disappointing, a bit shocking,” Mariotti said in an interview. “That 24 hours didn’t go as expected, but it put a hell of a lot of fire in each one of our management team’s bellies to prove everyone wrong.”
Investors took a dim view of growth prospects for the company, which sells figurines and other collectibles based on pop-culture franchises. Funko’s IPO was the worst debut for a new stock in 17 years.
But since then, the shares have begun to rebound.
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On Tuesday, Funko posted better-than-expected earnings — helped by inroads overseas. Revenue rose 21 percent to $142.8 million, with sales outside the U.S. almost doubling. The bulk of the international growth came from Europe, where Funko is still building the infrastructure to keep up with demand, Mariotti said.
The Everett company is just scratching the surface in other major foreign markets, Mariotti said.
In China, the world’s second-largest economy, sales are tiny, but Funko is making headway. It’s in talks to get distribution at Toys “R” Us stores in the Asian country.
Funko shares rose as much as 10 percent to $10.25 in extended trading after the results were released. The stock’s initial public offering priced at $12 on Nov. 1.
Net income amounted to $8.3 million last quarter, more than double the $3.4 million projected by analysts. However, that was still less than half the $17.2 million net income in last year’s comparable quarter.
The CEO chalked up Funko’s IPO woes to investors struggling to understand its story. The bankruptcy of Toys “R” Us in September — and the struggles of major toymakers like Mattel — didn’t help either.
Mariotti bought the company with an investor group in 2005. Seeing the global growth of entertainment franchises like Marvel, he wanted to build a consumer-products focused specifically on pop culture. The idea was to move quickly to respond to trends and breakout characters.
Over the past decade, that morphed into a firm that makes low-priced licensed merchandise for properties ranging from Star Wars to the Netflix series “Stranger Things.”
Funko, which is part-owned by private-equity firm Acon Investments, will continue to have plenty of licenses to pursue.
The U.S. media industry is churning out an increasing amount of content that is viewed globally. And sales of licensed toys have grown an average of 6.6 percent a year since 2008, according to analyst Michael Ng of Goldman Sachs, the IPO’s lead underwriter. That’s double the rate of non-licensed items.
The company also is expanding into more product categories, thanks in part to the $22 million acquisition earlier this year of Loungefly, which makes handbags and other accessories. This will help Funko gain more business from entertainment brands, Ng said.
On Tuesday, Funko also announced that it completed a $4 million purchase of A Large Evil Corp., an animation studio based in Bath, England, that had already been making commercials and digital shorts for the company.
Content is a proven way to lift sales, and this will allow Funko to do more of that, Mariotti said. The company also will use the studio to build its own brands through entertainment.
“There is an absolute, tangible result of acquiring them in terms of growing sales,” he said. “Content drives eyeballs.”