Funko CEO on the ability to disrupt the NFT space in a different way

Funko reported a net sale growth of 6% year over year, earning $226.5 million in revenue. Brian Mariotti, Funko CEO, joins Yahoo Finance to discuss the company’s booming quarterly results and meeting consumer demands.

Video Transcript

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BRIAN SOZZI: Shares of Funko are up 5% this morning as the toymaker reported better than expected fourth quarter sales and earnings on the back of strength in the US. Funko also served up guidance for a 25% to 30% increase in sales this year as it seeks to capitalize on the popularity of "Harry Potter," Marvel comics, and "The Mandalorian." Here with us now is Funko CEO Brian Mariotti.

Brian, always good to speak with you here. So let's run down the geographic performance of your business. So US sales up 18% in the fourth quarter. European Union sales up-- down 24%. Why that disparity?

BRIAN MARIOTTI: I think Europe is primarily, Brian, a specialty. And they were much harder hit throughout the entire pandemic than we were. I think our specialty channels have found a way to adapt domestically. They have turned to buy online or pick up in store. They have shift to e-commerce. And it's just been a slow recovery and a much harder lockdown in Europe.

But better than expected results in Europe. We had an idea that it could be pretty difficult going in the fourth quarter. They managed to pull some rabbits out of their hat, and better than we expected. But domestically, our largest domestic quarter ever as a company during a pandemic. I mean, our Funko team just killed it on a global basis. I'm so proud.

BRIAN SOZZI: Are you seeing any rebound in Europe as folks get vaccinated?

BRIAN MARIOTTI: We are, yeah. We are definitely seeing a slow unwind. The demand for our products have been never higher there. And obviously we moved our own direct-to-consumer e-commerce platform two years ahead of schedule in the pandemic to start fulfilling direct-to-consumer over in Europe.

So that's certainly helped, and it's great to be ahead of the curve on an investment, sometimes we're behind. This move was great for us. And I think it's going to serve us well as we come out of the pandemic.

MYLES UDLAND: Brian, it's Myles here. Something you called out in your press release, 68% of sales attributable to evergreen content. Can you maybe sketch out for some of our viewers, including myself, how that breaks down within your brand now, how different that is than previously, and sort of what that really is versus some of the more, I guess, reacting to new releases that that happens on the other side of the portfolio?

BRIAN MARIOTTI: Hey, Myles, a great question. Hey, look, we had zero theatrical to work with in 2020 because everything was moved and delayed. And it showed how quick we can react as a company. Evergreen is things that aren't tied to current movie releases, current TV shows, current video games. So "Harry Potter," DC Comics, classic, Batman, classic, "Dragon Ball Z" that has no new content.

It's truly-- the ability to truly leverage things like "Seinfeld," "Golden Girls," "Friends," "Sopranos," that's classic evergreen. We do it better than anybody else and certainly our ability to adapt when there was almost zero new content other than "The Mandalorian" for us. It is truly an important moment that just shows everybody, hey, we're flexible as a company, and we can roll and we can influence retailers and get excitement from our fan base with just a myriad of pop culture content.

BRIAN SOZZI: So Brian, in the first half of this year alone, it's going to look quite different in terms of content versus last year. So five Marvel TV shows, five Marvel movies. Are you seeing retailers step up with inventory to support those releases?

BRIAN MARIOTTI: Absolutely. We are excited that the second half of the year is stacked. And we believe these are firm dates. We talk to our content providers all the time. The Marvel TV show, "WandaVision," just got done ending. Phenomenal sales, very close to what we did with "The Mandalorian," we're very excited about that.

But yeah, five TV shows, five movies from Marvel, some great video games coming out at the end of the year. We have a major master license toy announcement coming very, very soon. We're excited about that. And that will also be in the second half of the year. So the content slate is crazy good.

But it's not just crazy good in '21, it's phenomenal in '22 and beyond. And I think a lot of that is streaming and TV and what that has meant for our business. So we are extremely bullish on new content, but we also have proven in a very tough difficult year how to lever without new content.

JULIE HYMAN: It's Julie here. I want to ask you, if I might, about a lawsuit that was filed against the company in early February, a shareholder suing over insider trading allegations and seeking more documents from the company. This has to do with a drop that happened in the shares in February of last year and allegedly some insider selling around before that period of time. I'm just curious if you could comment on that lawsuit.

BRIAN MARIOTTI: You know, I'll be generic. We've had a couple lawsuits that have been dismissed already. One, our initial IPO, and one that just was dismissed on our fourth quarter results.

We've been a publicly traded company for a little over 3 and 1/2 years, and we've hit every single one of our orders except for one, which is Q4 2019, where a lot of other companies underperformed during the holiday season as well. We've rebounded wonderfully. And so we're a litigious society.

You know, this is a bit of ambulance chasing every single time anybody's ever brought a lawsuit against us on stock performance, it's always gone away. And we're proud of the fact that we run a very reputable business, and we've done phenomenal as a publicly traded company in terms of beating analyst expectations quarter after quarter after quarter.

MYLES UDLAND: You know, Brian, I want to finish on one, if I can, kind of about a flavor of the moment, which is what's happening with NFTs and, you know, the art world and all this kind of stuff. I'm just curious how you're thinking about that either as a business or just personally, as someone who is, you know, certainly creative and sees these trends kind of crop up from time to time. And I'm just curious, you know, kind of where your head is at with that kind of stuff.

BRIAN MARIOTTI: We're excited about it. And we have a plan in place. We have some technology in place. We are going to be out in the market fairly soon. But we're going to be out in the market in a very different way. We have the ability to disrupt this space in a way that nobody else is doing right now. We can tie digital NFTs to our fan base and link entities with physical products.

And that's not happening right now. So for example, we had a pack of NFTs-- I won't mention, licenses right now, and there's a few rare ones. If you have those rare ones, we're going to give you a free product that's tied to that rare NFT, which means you have a super rare physical product that ties to your super rare NFT. That's disruptive, that's new, it's different, it's only what Funko can do.

And we're really excited about what the future of NFTs are. We're certainly all over this, and I think you'll see something fairly soon from Funko in the market.

BRIAN SOZZI: Interesting stuff. All right, Funko CEO Brian Mariotti, always good to see you. Stay safe.