Funko, Inc. · NASDAQ:FNKO
Funko — Investor Day (September 2022)
62 slides from Funko's investor day presentation, Sep 13, 2022
Slide 1: The Future of Funko
Add “Jennifer Fall Jung, Chief The Future of Funko Financial Officer” to agenda after Andrew Perlmutter, Chief Executive Officer Channel Expansion by Andy Brand Portfolio Brian Mariotti, Chief Creative Officer Channel Expansion Andy Oddie, Chief Revenue Officer Financial Review Jennifer Fall Jung, C
Slide 2: Cautionary Notes
CAUTIONARY NOTES ‘consumer business, and the underlying trends in our business, including supply chain constraints, inflation and other macroeconomic trends, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects
Slide 3: Future of Funko
FUTURE OF
Slide 4: 4
4
Slide 5: What is Fandom
WHAT IS. FANDOM San AND WE'RE JUST GETTING STARTED Nadim) Noun — The state of being a fan of someone or something, especially a very enthusiastic ene
Slide 6: 223M U.S. addressable consumers
TO THE IP THEY LOVE Figures / Apparel / Accessories fai Movies / TV / Streaming A tall Medd 223M U.S. Addressable Consumers” Sport s Diverse and Broad Anim oy e SL DTC / US Wholesale / International 1) Ascompared to peers 2) Addressable base is defined as those that are interested in relevant pop cu
Slide 7: Total social media following - industry
Total Social media following -Industry @originalfunko 6.5M @hasbro 4.5M @mattel @loungefly @mondonews 1.6M 1.5M @spinmaster 625k 530k 7
Slide 8: We have a track record of building brands
We have a track record of building brands DRAFT FUNKOBrands Core collectibles Softlines & Accessories Toys & games Other Digital 8
Slide 9: We have a track record of building brands
We have a track record of building brands DRAFT FUNKOBrands Core collectibles Softlines & Accessories Toys & games Other Digital 9
Slide 10: We have a track record of building brands
We have a track record of building brands DRAFT FUNKOBrands Core collectibles Softlines & Accessories Toys & games Other Digital 10
Slide 11: We have a track record of building brands
We have a track record of building brands DRAFT FUNKOBrands Core collectibles Softlines & Accessories Toys & games Other Digital 11
Slide 12: We have a track record of building brands
We have a track record of building brands DRAFT FUNKOBrands Core collectibles Softlines & Accessories Toys & games Other Digital 12
Slide 13: We are a Growth Company
We are a Growth Company 19% 2017-2021 net sales CAGR 8% Russell 2000 47% 1H 2022 Net Sales Growth 15% Russell 2000 13 13
Slide 14: TAM $161B
DRAFT Licensed Sports $31 TAM 1,2 $161B Licensed Entertainment / Character $130 14 14
Slide 15: Our 5-Year Organic Growth Plan
OUR 5-YEAR ORGANIC GROWTH PLAN DOUBLE ORGANIC NET SALES BY 2026 $1B T0 $2B OUR NET SALES DOUBLED FROM 2017-2021 $500M TO $1B 1) Organicnet salesis a non-GAAP financial measure. A reconciliation of our organic net sales targets to the corresponding GAAP measure on a forware-looking basis cannot be pr
Slide 16: How We Will Achieve Our Plan
HOW WE WILL ACHIEVE OUR PLAN 01 GROW OUR CORE 02 EXPAND INTO NEW 03 DTC 0 4 INTERNATIONAL COLLECTIBLES CATEGORIES GROWTH GROWTH = Continued product innovation = Expand on Loungefly and Toys & = Platform upgrade to drive * Utilize new and existing brand and additional focus on less Games product line
Slide 17: Grow Our Core Collectibles - Strategy overview
Grow Our Core Collectibles -Strategy overview 01 Innovation within High SD to Low DD CAGR Pop! Brand $831M CAGR~16% SINCE IPO Develop new product lines and focus on emerging brands 1 17 17
Slide 18: High teens to Low 20% CAGR
02 High teens to Low 20% CAGR 18 18
Slide 19: How did we do this?
HOW DID WE DO THIS? > 4 DROP INTO +1,100 FUNKO LICENSES DROP INTO OUR DISTRIBUTION MACHINE INCORPORATE INTO OUR DTC PLATFORM TAP INTO EXISTING FUNKO AUDIENCE
Slide 20: Expand DTC Sales Mix
03 CAGR Expand $111M DTC Sales Mix $29M 2017 2021 2026T 20 20
Slide 21: International Growth - Strategy overview
International Growth -Strategy overview 04 $285M 2021 2026T 21 21
Slide 22: Beyond $2B: upside potential
beyond $2B: upside potential 22 22
Slide 23: Beyond $2B: secondary market for Funko brands
Beyond $2B: secondary market for Funko brands • $700M-$1B per year in dollars sold for Funko • Funko currently receives $0 in revenue • eBay partnership sets us up for strong partnership with leading secondary marketplace • Funko has identified multiple ways to participate in secondary revenue • Sec
Slide 24: Beyond $2B: product & technology capabilities
Beyond $2B: product & Technology capabilities 24 24
Slide 25: Brand Portfolio
BRAND PORTFOLIO
Slide 26: YRS
DRAFT 31% 33% 36% Active Buying ENTHUSIASTS COLLECTORS Consumers 35 YRS 26
Slide 27: Core Collectibles, Softlines & Accessories, Toys & Games, Digital
CORE COLLECTIBLES SOFTLINES & accessories TOYS & GAMES DIGITAL 27 27
Slide 28: Non-standard POP! growth
POP! Slide – Mike working on this Growth rate of non- standard pop since 2017 Total % of POP! business made up by non-standard 28% 14% 28 28
Slide 29: Advent Calendars: $0 to $25M
#1 Holiday offering Hold – Advent Calendars $0 to $25M In less than 3 years Countdown anything Holiday Valentine’s day Halloween 29 29
Slide 30: POP! Yourself Brand Strategy
POP! Yourself Brand Strategy POP Yourself 30 30
Slide 31: Incredible, Easy-to-use Interface
Incredible, Easy-to-use Interface RESTART © ° ca ele) ja) -|3]2 Ed (Food fed od ae ee to ot < = 1G Dlig|=lalalalale @0M TIFFANY ) — vo aa ce Cai) 31
Slide 32: Collectible Brands Emerging
Fito ~— COLLECTIBLE BRANDS EMERGING 25) FIMO ee i 32
Slide 33: Collectible Brands Emerging
Fé ~~ COLLECTIBLE BRANDS EMERGING (Gig) FINITE SFODIAL nosy sion (14) FIGURE E
Slide 34: Collectible Greetings
30 COLLECTIBLE GREETINGS COLLECTIBLE GIFT FOR ANY OCCASION! Choose A Greeting With Your Favorite Character! YOU'RE AWE INSPIRING!
Slide 35: Collectible Brands
COLLECTIBLE BRI Vinyl Records a0) at High-end Figures (As ¢ EAPTALW ANERITA
Slide 36: Licensing industry survey
36 Source: Licensing International Annual Global Licensing Industry Survey 2019 Report 36
Slide 37: Licensing industry survey
37 37 Source: Licensing International Annual Global Licensing Industry Survey 2019 Report
Slide 38: Anime industry $9B
$9B Source: Anime Industry Report 2018 which is published by The Association of Japanese Animations 38 38
Slide 39: % of total POP! business
% of total pop! business 21% 8% 2017 2021 39
Slide 40: Loungefly
loungefhy
Slide 41: Disney Loungefly Little Mermaid
Disney Loungefly Little Mermaid Purple Ariel Sequin Ariel DEC Hug... Brand Ne\ $2,200.00 t Offer ree shipping 60 watchers NWT Loungefly Disney Villains Maleficent Dragon Mini Backpeck... Brand New $2,450.00 or Best Offer Free 4 day shipping 142 watchers
Slide 42: Triple digit revenue growth - games
TRIPLE DIGIT REVENUE GROWTH GAMES TITLE & CATEGORY GROWTH % growth since 2019 42 42
Slide 43: Digital meets physical
\F 1: DIGITAL MEETS PHYSICAL ALMOST ALL DROPS HAVE SOLD OUT IN MINUTES DIGITAL PURCHASE ==> CHANG OF PHESICAL $1.6M DROP WITH DC LAST WEEK { HIGHEST TO DATE! ) HIGH-END NFTS ON OPEN SEA AND ETHEREUM IN 2023 FUNKO FUNATICS POP CULTURE ENTHUSIASTS GAMERS SNEAKERHEADS & HYPEBEASTS 43
Slide 44: Expansion
EXPANSION
Slide 45: Deepen relationships with existing retail partners and customers
DRAFT 1 Deepen relationships with existing retail partners and customers 2 Add new retail partners and expand into new underserved channels (i.e., value, drug, and grocery stores) 3 Expand wholesale further internationally to net sales goal of ~$700M (35% of total net sales) by 2026T 4 Leverage the
Slide 46: Mass, E-comm, Specialty, Value distributors
DRAFT Mass E-comm Specialty Value distributors 46 46
Slide 47: International overview
Internationaloverview $285M Mass E-comm Rest of world Specialty Value EMEA Other 47 47
Slide 48: DRAFT $111M 109%
DRAFT $111M 109% 11% 20% 4848
Slide 49: Direct-to-consumer strategic relevancy
DIRECT-T0-CONSUMER STRATEGIC RELEVANCY STRENGTH OF DTC CHANNEL PROVIDES PATHWAY FOR RAPID AND REPEATABLE EXPANSION TO NEW REGIONS GLOBALLY LOYALTY & PREORDER SALESFORCE MARGIN ACCRETIVE DATA COLLECTION AND CONSUMER UNDERSTANDING = FS py SOeuen "9
Slide 50: Financial Review
FINANCIAL REVIEW
Slide 51: We are a Growth Company
We are a Growth Company 19% 2017-2021 net sales CAGR 8% Russell 2000 47% 1H 2022 Net Sales Growth 15% Russell 2000 51 51
Slide 52: Ongoing diversification of revenue streams
Ongoing diversification of revenue streams 52
Slide 53: 5-year financial targets
5-year financial Targets 2021 to 2026: Double organic Net sales adj. ebitdamargin $2.0bn by 2026 Core Collectibles Loungefly Other Brands by 2026 53
Slide 54: Margin drivers
• Normalized shipping and freight costs • Streamlined logistics within the new DC • Channel shift toward our own DTC channel • Organizational leverage as we move toward a house of brands • Price realization on new product categories • Longer term efficiencies as we deliver on our ERP 54
Slide 55: Effective capital deployment to drive strong shareholder value
Effective capital deployment to drive strong shareholder value Internal Investments Strategic M&A Reduce debt levels • Innovation • Accretive to growth and margin • Use excess cash to de-lever in • Talent • New categories order to maintain balance sheet • Geographic Expansion • Geographic expansion
Slide 56: M&A criteria
M&A criteria 1 2 3 Aligned to Extending Enhancing our long-term core / further financial secular diversify portfolio growth trends 56
Slide 57: Case study of successful acquisitions
Case study of successful acquisitions Description • • STRATEGIC ASSESSMENT • • INTEGRATION & FUTURE • • OPPORTUNITY EXTENDING CORE / FURTHER DIVERSIFY ✓ ✓ M&A Criteria ALIGNED TO LONG TERM SECTOR GROWTH TRENDS ✓ ✓ ENHANCING OUR FINANCIAL PROFILE ✓ ✓ 57 57
Slide 58: Wrap Up
WRAP UP
Slide 59: Double organic revenue
DOUBLE ORGANIC REVENUE JOUBLE ORGANIC NET SALES BY 2026 1) Organicnet salesis a non-GAAP financial measure. A reconciliation of our organic net sales targets to the corresponding GAAP measure on a forware-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reco
Slide 60: How we will achieve our plan
HOW WE WILL ACHIEVE OUR PLAN >, —_ GROW OUR CORE = COLLECTIBLES = pe PTC GROWTH Ae — EXPAND INTO a: ee i a hse) NEW CATEGORIES are ‘ INTERNATIONAL “a GROWTH
Slide 61: Upside potential - areas of growth
Upside potential -Areas of Growth DRAFT • New and unique revenue • Huge secondary market for • Technology will add streams Funko products that we capabilities and accelerate • Expand customer funnel make $0 growth • Margin accretive categories • eBay partnership is a • Opportunity in music space • T
Slide 62: Thank you
THANK) |! ke oungethy AWTS