Investor Consortium Includes eBay,
Robert A. Iger and Rich Paul
Mr. Iger and Peter
Chernin to Serve as Advisors to the Funko Board of
Directors
TCG to Designate Two Directors to the Board
and Take Role in Funko's Strategy and Growth Initiatives
LOS
ANGELES, May 5, 2022 /PRNewswire/ -- The Chernin
Group ("TCG"), a multi-stage investment firm known for building and
growing emerging consumer businesses in the media, commerce and
technology industries, and Funko, Inc. (Nasdaq: FNKO), a leading
pop culture lifestyle brand, today announced that a consortium led
by TCG will make a $263 million
strategic investment in Funko in an all secondary transaction.
TCG and its investor consortium are acquiring from ACON
Investments 12,520,559 shares of Funko Class A common stock, or 80%
of ACON Investments' stake in Funko, at $21.00 per share and will own 25% of the Company
following completion of the transaction. Additional investors in
the consortium include eBay Inc. (Nasdaq: EBAY), Robert A. Iger (Former Disney Chairman and CEO)
and Rich Paul (CEO and Founder of
Klutch Sports Group and Head of Sports at United Talent Agency). In
conjunction with the investment, TCG will designate two directors
to the Board including Jesse Jacobs,
TCG Co-Founder and Partner. The additional director will be
designated at a later date. Mr. Iger and Peter Chernin, TCG Co-Founder and Partner, will
provide guidance and strategic insight as advisors to the Funko
Board.
As part of this investment, Funko and eBay are entering into a
commercial agreement under which eBay will become the preferred
secondary marketplace for Funko and the companies will also partner
on creating exclusive product releases. Additionally, Mr. Paul will
bring his expertise in the sports and music sectors to help advance
Funko's continued product expansion and growth opportunities in
sports and music.
"We believe Funko is significantly undervalued in the public
markets and at this highly attractive entry price provides a runway
of opportunity and growth potential. There are many areas of
identifiable growth across content, commerce, marketplaces,
consumer products and technology that should drive substantial
increases to Funko's performance," said Mr. Chernin.
TCG believes the investment will help reinforce Funko's
leadership position in the pop culture collectibles space and
advance the Company's strategic growth initiatives, which include
maximizing the core business by (1) expanding its premium
intellectual property (IP) and Pop! aesthetic into new content
areas, (2) expanding Funko's pop culture platform through the
addition of adjacent physical and digital categories and brands,
both organically and through acquisition as appropriate, (3)
growing its Direct-to-Consumer (DTC) business and (4) extending its
reach into international markets.
"This is a very exciting time to be a part of Funko. We are
incredibly appreciative of ACON for their 7 years of collaboration
and belief in our company's long-term potential. This investment
from TCG validates Funko as a leading lifestyle brand with a pulse
on what's trending in pop culture," said Andrew Perlmutter, Funko's Chief Executive
Officer. "TCG is an ideal partner for Funko based on its expertise,
deep understanding of the markets we serve, and track record of
working successfully with companies in the pop culture and
entertainment space to create value and drive growth. With their
support, we are even better positioned to continue developing great
products that delight our fans and broadening our base through
expanded offerings and new categories."
"Funko has tremendous brand equity, a deeply engaged consumer
base, and an innovative product offering, which makes it a very
appealing investment for TCG," said TCG Co-founder and Partner
Jesse Jacobs. "We have demonstrated our ability to drive
significant value with our investments in sectors that are core to
Funko, including collectibles, content, IP, community and
marketplaces, and we see clear opportunities to leverage this
expertise at Funko."
"Funko sits at the intersection of pop culture, passion and
collectibles, with one of the most engaged communities of
enthusiasts," said Stefanie Jay,
eBay Chief Business and Strategy Officer. "Building on the
incredible appetite for Funko products on eBay, we look forward to
what our companies can do together. The investment and partnership
with Funko will make eBay the preferred resale marketplace for
Funko fans around the world and give customers new and exclusive
products."
Funko's growth and profitability are on a strong trajectory. For
fiscal 2021, the Company grew revenue by 58% to over $1 billion and today, reported revenue of
$308 million for the first quarter
2022, up 63% year-over-year. In addition, Funko's adjusted EBITDA
increased 87% to $150 million for the
full year 2021 and adjusted EBITDA grew 22% for the first quarter
2022.
TCG has successfully partnered with companies, including
Exploding Kittens, Crunchyroll and Goldin Auctions, that grow
brands with a zealous consumer base and foster authentic
relationships with highly engaged audiences. The firm has
significant experience investing in adjacent sectors, such as IP,
content creation, collectibles, pop culture and fandom, toys and
games, media and entertainment, and DTC. As a leader in the pop
culture and collectibles space, Funko aligns with TCG's focus on
identifying high-growth sectors and investing in the best
category-defining businesses.
Additional details regarding the investment will be included in
a Form 8-K to be filed with the SEC.
Advisors
LionTree Advisors is serving as lead financial advisor to TCG
and Stephen Davis is acting as an
advisor to TCG. Gibson, Dunn & Crutcher LLP is serving as TCG's
legal counsel. Goldman Sachs & Co. LLC is acting as lead
financial advisor to Funko and Latham & Watkins LLP is serving
as legal counsel. Winston & Strawn LLP is serving as legal
counsel to ACON Investments.
Funko First Quarter 2022
Earnings
In a separate press release, Funko announced its financial
results for the first quarter ended March
31, 2022, which is accessible on the Investor Relations
section of the Company's website at: https://investor.funko.com.
Director Biography
Jesse
Jacobs
Jesse Jacobs is a Co-Founder and
Partner at TCG. Jesse also co-founded The Chernin Group, LLC with
Peter Chernin in 2010, leading the
company's investments, operations, and team building. Prior to
founding The Chernin Group, Jesse was a senior member of the media,
entertainment, and sports advisory, investing and financing team at
Goldman Sachs. Jesse began his career in NFL, MLB, and NHL sports
television production at the inception of Fox Sports and then for
CBS Sports in the Olympics. Jesse is on the board of directors of
TCG, The Chernin Group, Barstool Sports, Hodinkee, Exploding
Kittens, Goldin Auctions, Collectors Universe, Equip, Words +
Pictures, LLC and is a board observer of Scopely.
Jesse is a graduate of the University of
Pennsylvania with a BA in English and Communications and
holds an MBA from the Wharton School at University of Pennsylvania.
About Funko
Headquartered in Everett,
Washington, Funko is a leading pop culture lifestyle brand.
Funko designs, sources and distributes licensed pop culture
products across multiple categories, including vinyl figures,
action toys, board games, plush, apparel, housewares and
accessories for consumers who seek tangible ways to connect with
their favorite pop culture brands and characters. Learn more at
https://funko.com/, and follow us on Twitter (@OriginalFunko) and
Instagram (@OriginalFunko).
About TCG
Founded by Peter Chernin,
Jesse Jacobs, and Mike Kerns, The Chernin Group (TCG) is a
multi-stage investment firm dedicated to building consumer
businesses. With a focus on majority and significant minority
investments in growing consumer businesses, the TCG team has a
track record of working with world-class consumer brands in digital
media, commerce, marketplaces, sports, gaming, consumer finance,
consumer blockchain and health and wellness brands and platforms.
The TCG portfolio includes Crunchyroll, Dapper Labs, Exploding
Kittens, Food52, Goldin Auctions, Headspace, Hodinkee, OpenSea,
Oura, The Pro's Closet, and Zed Run. Learn more at
https://tcg.co/.
About eBay
eBay Inc. (Nasdaq: EBAY) is a global commerce leader that
connects people and builds communities to create economic
opportunity for all. Our technology empowers millions of buyers and
sellers in more than 190 markets around the world, providing
everyone the opportunity to grow and thrive. Founded in 1995 in
San Jose, California, eBay is one
of the world's largest and most vibrant marketplaces for
discovering great value and unique selection. In 2021, eBay enabled
over $87 billion of gross merchandise
volume. For more information about the company and its global
portfolio of online brands, visit www.ebayinc.com.
Funko Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not
relate to matters of historical fact should be considered
forward-looking statements, including statements regarding the
timing and closing of the anticipated sale of shares by ACON to the
TCG Consortium, Funko's future financial results, the underlying
trends in Funko's business and Funko's potential for growth and
strategic growth priorities. These forward-looking statements are
based on management's current expectations. These statements are
neither promises nor guarantees, but involve known and unknown
risks, uncertainties and other important factors that may cause
Funko's actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements, including, but not limited to, the following: risks
related to the impact of COVID-19 on our business, financial
results and financial condition; Funko's ability to execute its
business strategy; its ability to maintain and realize the full
value of its license agreements; economic downturns and changes in
the retail industry and markets for its consumer products; Funko's
ability to maintain relationships with retail customers and
distributors; Funko's ability to compete effectively and manage its
growth; fluctuations in gross margin; dependence on content
development and creation by third parties; the ongoing level of
popularity of Funko's products with consumers; Funko's ability to
manage its inventories; Funko's ability to develop and introduce
products in a timely and cost-effective manner; Funko's ability to
obtain, maintain and protect its intellectual property rights or
those of its licensors; potential violations of the intellectual
property rights of others; risks associated with counterfeit
versions of our products; Funko's ability to attract and retain
qualified employees and maintain its corporate culture; Funko's use
of third-party manufacturing; risks associated with Funko's
international operations and geographic concentration of
operations; changes in effective tax rates, tax law, trade law or
trade restrictions; foreign currency exchange rate exposure; the
possibility or existence of global and regional economic downturns;
Funko's dependence on vendors and outsourcers; risks relating to
government regulation; risks relating to litigation, including
products liability claims and securities class action litigation;
any failure to successfully integrate or realize the anticipated
benefits of acquisitions or investments; reputational risk
resulting from Funko's e-commerce business and social media
presence; risks relating to Funko's indebtedness and our ability to
secure additional financing; the potential for Funko's electronic
data or the electronic data of our customers to be compromised; the
influence of Funko's significant stockholders and the possibility
that their interests may conflict with the interests of its other
stockholders; risks relating to Funko's organizational structure;
volatility in the price of Funko's Class A common stock; and risks
associated with Funko's internal control over financial reporting.
These and other important factors discussed under the caption "Risk
Factors" in Funko's quarterly report on Form 10-Q for the quarter
ended March 31, 2022 and its other
filings with the Securities and Exchange Commission could cause
actual results to differ materially from those indicated by the
forward-looking statements made in this press release. Any such
forward-looking statements represent management's estimates as of
the date of this press release. While Funko may elect to update
such forward-looking statements at some point in the future, it
disclaims any obligation to do so, even if subsequent events cause
its views to change. These forward-looking statements should not be
relied upon as representing Funko's views as of any date subsequent
to the date of this press release.
eBay Forward-Looking
Statements
Certain statements herein are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act. Such forward-looking
statements are often identified by words such as "anticipate,"
"approximate," "believe," "commit," "continue," "could,"
"estimate," "expect," "hope," "intend," "may," "outlook," "plan,"
"project," "potential," "should," "would," "will" and other similar
words or expressions. Such forward-looking statements reflect
eBay's current expectations or beliefs concerning future events and
actual events may differ materially from historical results or
current expectations. The reader is cautioned not to place undue
reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to a number of
uncertainties, risks, assumptions and other factors, many of which
are outside the control of eBay. The forward-looking statements in
this document address a variety of subjects including, for example,
the potential benefits of the investment and partnership. Actual
results are subject to risks and uncertainties that relate to
eBay's overall business, including those more fully described in
eBay's filings with the Securities and Exchange Commission,
including its annual report on Form 10-K for the fiscal year ended
December 31, 2021 and subsequent
quarterly reports on Form 10-Q. The forward-looking statements in
this document speak only as of this date. We undertake no
obligation to revise or update publicly any forward-looking
statement, except as required by law.
Funko, Inc. and Subsidiaries
Non-GAAP Financial Measures
|
Twelve Months Ended
December 31,
|
|
2021
|
2020
|
|
(amounts in
thousands)
|
Net income
|
$
67,854
|
$
9,763
|
Year-over-year
growth
|
595.0%
|
|
Interest expense,
net
|
7,167
|
10,712
|
Income tax
expense
|
17,061
|
2,025
|
Depreciation and
amortization
|
41,195
|
44,368
|
EBITDA
|
$
133,277
|
$
66,868
|
Adjustments:
|
|
|
Equity-based
compensation (1)
|
12,994
|
10,116
|
Loss on extinguishment
of debt (2)
|
675
|
-
|
Certain severance,
relocation and related costs (3)
|
277
|
2,190
|
Foreign currency
transaction (gain) loss (4)
|
1,118
|
955
|
Tax receivable
agreement liability adjustments (5)
|
1,590
|
87
|
Adjusted
EBITDA
|
$
149,931
|
$
80,216
|
|
|
|
|
|
|
|
|
|
(1)
Represents non-cash charges related to equity-based
compensation programs, which vary from period to period depending
on timing of awards.
|
|
(2) Represents
write-off of unamortized debt financing fees for the year ended
December 31, 2021.
|
|
(3) Represents certain
severance, relocation and related costs. For the year ended
December 31, 2021, includes charges related to one-time relocation
costs for U.S. warehouse personnel in connection with the new
opening of a warehouse and distribution facility in Buckeye,
Arizona and residual severance payments related to the global
workforce reduction implemented in response to the COVID-19
pandemic. For the year ended December 31, 2020, includes charges
related to the global workforce reduction implemented in response
to the COVID-19 pandemic and impairment related charges to the
right-of-use leased and fixed assets related to Funko Animation
Studios.
|
|
(4) Represents both
unrealized and realized foreign currency losses (gains) on
transactions other than in U.S. dollars.
|
|
(5) Represents
recognized adjustments to the tax receivable agreement
liability.
|
|
Three Months Ended
March 31,
|
|
2022
|
2021
|
|
(amounts in
thousands)
|
Net
income
|
$
14,518
|
$
11,086
|
Interest expense,
net
|
1,210
|
2,237
|
Income tax
expense
|
3,678
|
2,293
|
Depreciation and
amortization
|
10,471
|
10,262
|
EBITDA
|
$
29,877
|
$
25,878
|
Adjustments:
|
|
|
Equity-based
compensation (1)
|
3,369
|
2,690
|
Acquisition transaction
costs and other expenses (2)
|
930
|
-
|
Certain severance,
relocation and related costs (3)
|
1,680
|
25
|
Foreign currency
transaction loss (4)
|
397
|
1,179
|
Derivative (gain)
loss
|
$
-
|
$
-
|
Adjusted
EBITDA
|
$
36,253
|
$
29,772
|
|
|
|
|
|
|
|
|
|
(1) Represents non-cash
charges related to equity-based compensation programs, which vary
from period to period depending on the timing of awards.
|
|
(2) For the three
months ended March 31, 2022 includes costs related to investment
banking and due diligence fees.
|
|
(3) For the three
months ended March 31, 2022, includes charges related to one-time
relocation costs for U.S. warehouse personnel in connection with
the new opening of a warehouse and distribution facility in
Buckeye, Arizona. For the three months ended March 31, 2021,
represents severance, relocation and related costs associated with
residual payment of global workforce reduction implemented in
response to the COVID-19 pandemic.
|
|
(4) Represents both
unrealized and realized foreign currency losses on transactions
denominated other than in U.S. dollars, including derivative gains
and losses on foreign currency forward exchange
contracts.
|
Contacts
Funko Investor inquiries:
investorrelations@funko.com
Media inquiries:
For Funko:
pr@funko.com
For TCG:
Gladstone Place
Partners
Lauren Odell /
Christina Stenson
212-230-5930
For Chernin Entertainment:
Principal Communications Group
Melissa Zukerman
melissa@pcommgroup.com
For eBay:
Trina
Somera
press@ebay.com
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SOURCE The Chernin Group