Funko soared past estimates in its second-quarter report.
Shares of Funko (FNKO 3.88%), the toymaker best known for its POP! figurines, were moving higher today after the company topped estimates in its second-quarter earnings report and posted a surprise profit.
As a result, the stock was up 9.6% as of 11:23 a.m. ET on Friday.
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Funko impresses in the second quarter
Revenue ticked up by 3% to $247.7 million, which topped estimates at $231 million.
More importantly, its gross margin surged from 29.2% to 42%, which management credited to higher-than-expected sales in the value channel and inventory reserve relief. The company also lowered its inventory slightly from $112.3 million at the end of the first quarter to $109 million, putting it in a cleaner position heading into the second half of the year.
The company managed to cut selling, general, and administrative expenses from $85.6 million to $77.9 million as well.
That, along with the gross margin increase, helped drive a significant improvement in the bottom line as it posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $27.9 million against a loss of $7.6 million. Adjusted earnings per share (EPS) came in at $0.10, versus a loss of $0.43 a year ago.
New CEO Cynthia Williams said, “Our performance was primarily driven by strong demand for our core collectible products in Europe and other international markets.”
What’s next for Funko
While Funko’s second-quarter results were outstanding, guidance came up short. For the third quarter, it sees revenue of $282 million to $297 million, which implies a decline of 7%, and was worse than estimates at $319.2 million. Its adjusted EPS forecast of $0.01 to $0.06 was essentially even with the $0.03 it reported in the quarter a year ago, but worse than the consensus at $0.20.
Nonetheless, investors seem to be betting that that guidance is conservative and the momentum from the second quarter will carry forward.
Funko stock remains risky, but it’s not surprising to see investors cheering the latest round of results.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.