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Funko CEO on COVID-19 impact to the toy industry

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Funko CEO Brian Mariotti joins Yahoo Finance Live to discuss the company’s most recent quarter and how it is responding to fan engagement in a world where events have been put on pause. Plus, with the holidays right around the corner, he talks about what he’s expecting for the season.

Video Transcript

BRIAN SOZZI: The toy industry has been on a roller coaster ride during the pandemic. But with the holidays fast approaching, the industry is hoping shoppers finally open up their wallets. Let's bring in Funko CEO Brian Mariotti to discuss. Brian, always good to speak with you here. We've talked many times in the past on how new movie releases are a key driver for Funko. But there's been no movie releases during the pandemic. How does that change your business?

BRIAN MARIOTTI: Yeah, Brian, you know, we've navigated that quite effectively. Last quarter, 70% of our revenue was from evergreen content. It's the content that's not associated with new content, Harry Potter, Pokemon, Marvel classic, Disney classic, Star Wars classic, great proof point for us that when there isn't any new content, we can thrive. And as a mattter of fact, the only new content we've had basically in the last year has been "Mandalorian" on Disney Plus.

JULIE HYMAN: Hey, Brian, it's Julie. Talk to me about Fans Panel right now. Do you guys lean more heavily on direct consumer channel, or what are you seeing with a lot of retailers still are not going to a lot of in person events?

BRIAN MARIOTTI: Yeah, absolutely, great question. Obviously, the specialty channel foot traffic has been down considerably. That's a big channel segment for us. We have grown over triple digits direct to consumer. It's been phenomenal.

And between mass market third party e-commerce and our own rising direct to consumer, e-commerce has been 44% of our business. So we've been able to navigate extraordinary times by shifting over some of the products from one channel to another to get through this.

- Brian, we had a guest on just a few minutes ago talking about the elongated holiday selling season. Are you guys seeing those kinds of dynamics? How are you ramping up as we get towards what's set to be a pretty unique holiday period?

BRIAN MARIOTTI: Yeah, you know, it's obviously pretty optimistic. The retailers have gone out a little earlier than traditional. We had a very short holiday season last year. We're seeing the orders in our order book go up much earlier with much more commitment toward the holiday season, tons of advent calendar for us, which is a new category. We're doing great on advent calendar sales. So we're obviously very optimistic about the holiday season.

We had a bit of a headwind in Europe, obviously, with the closures and some of the restrictions down there. But you know, again, we're navigating some pretty extraordinary times pretty well.

- Brian, how difficult will it be if we see lockdowns this holiday season in the US?

BRIAN MARIOTTI: You know, I think that's where it goes back to the triple digit growth in direct to consumer, that the appetite for our products has not waned at all. In a matter of fact, it's been amplified. We had two very successful Comic-Cons, where our engagement, which tripled in San Diego Comic-Con and New York Comic-Con, compared to last year.

So luckily, we've done a phenomenal job of boosting the third party e-commerce direct to consumer, the mass market business, and our own direct to consumer. We're set up very well to navigate in case restrictions become even more severe.

BRIAN SOZZI: What's the outlook for next year, if we don't get a lot of more movies going back into theaters, and we have this environment where everything moves direct to consumer. I mean, just look at Disney. Disney Plus has been a home run.

BRIAN MARIOTTI: Yeah, look, we've done extremely well historically with television content, with video game content, with evergreen content. So there's no way that '21 in our opinion is going to have less content than 2020. It's the worst content year we've ever happened to have in our 20-year history. So we know '21 and '22's content is much more robust.

Even if the theatrical doesn't come to the second half of the year, we're really well positioned to navigate new video games, new television shows, which obviously, you don't need to leave your house to consume. And we do very well in those categories.

- Brian, I want to circle back quickly to the European business. I mean, it's gotten hit significantly harder than the US business. I know a lot of investors are looking at European markets. They're excited about that opportunity. Why do you think there's been such a decline in that geographic region relative to too a fairly OK US market, all things considered.

BRIAN MARIOTTI: Yeah, for us, specifically, most of our retailers there are our specialty. And we saw the decline dramatically in specialty domestically and the increase in direct to consumer and mass market here domestically. We got hit really, really hard. 95% of our retailers closed in the first two months of COVID over in Europe. And that's why we're so proud of the way we've navigated and come out of this difficult time.

For us, tons of more specialty-like retailers over in Europe. I think that you don't have the Walmarts. You don't have the Targets. You don't have the Amazon as quite a large player in Europe across all the countries, as you see here domestically.

BRIAN SOZZI: All right, I'll leave it there. Funko's CEO Brian Mariotti, always good to speak with you, and good luck this holiday season.

BRIAN MARIOTTI: Thank you very much.