The lead underwriters on the IPO were Goldman Sachs, JP Morgan, and BofA Merrill Lynch. Shares are set to open for trading later this morning on the Nasdaq.
FNKO describes itself as a leading pop culture consumer products company. Its business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty. It infuses distinct designs and aesthetic sensibility into one of the industry’s largest portfolios of licensed content over a wide variety of product categories, including figures, plush, accessories, apparel and homewares.
The company has licensing relationships with many established content providers, such as Disney, HBO, LucasFilm, Marvel, the National Football League and Warner Brothers. FNKO strives to license every pop culture property that it believes is relevant to consumers. FNKO currently has licensed over 1,000 properties, which it believes represents one of the largest portfolios in the industry, and from which it can create multiple products based on each character within those properties.
FNKO sells its products through a diverse network of retail customers across multiple retail channels, including specialty retailers, mass-market retailers and e-commerce sites. It can provide its retail customers a customized product mix designed to appeal to their particular customer bases. Its current retail customers include Amazon, Barnes & Noble, Entertainment Earth, GameStop, Hot Topic, Target and Walmart in the United States, and Smyths Toys and Tesco internationally.
The company uses a nimble and low-fixed cost production model. The strength of its in-house creative team and relationships with content providers, retailers and third-party manufacturers allows it to move from product concept to pre-selling a new product in as few as 24 hours. Also, it typically has a new figure on the store shelf between 110 and 200 days and can have it on the shelf in as few as 70 days.
Taking a look at the financials, revenue was up 16% to $203.8 million for the six months ended June 30, 2017. Sales increased mainly as a result of the continued expansion of products and properties in its portfolio. FNKO had an average of $0.6 million net sales per active property. This was a 19% decrease compared to its average net sales per active property for the year ago period. This decline in average net sales per active property was more than offset by an increase in total active properties.
Gross margin was 36.2% for the six months ended June 30, 2017, an increase of 7.6 percentage points, compared to 28.6% for the year ago period. Gross margin was positively impacted primarily by the absence of recording of inventory at estimated fair value in connection with the ACON Acquisition and, to a lesser extent, a decrease in the weighted average royalty rate due to property mix.
Selling, General & Administrative costs climbed by 37% year/year to $50.9 million. However, due to the revenue growth and sharp increase in gross margin, operating income spiked by 193% year/year to $5.4 million.