Funko Reports Second Quarter 2019 Financial Results

Sales Increased 38% to $191.2 Million
Raises 2019 Outlook
Net Income Grew to $11.4 million from $0.3 million
Adjusted EBITDA Rose 61%

EVERETT, Wash., Aug. 08, 2019 (GLOBE NEWSWIRE) -- Funko, Inc. ("Funko,” or the “Company”) (Nasdaq: FNKO), a leading pop culture consumer products company, today reported its consolidated financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights¹

• Net sales increased 38% to $191.2 million.
• Gross profit² increased 35% to $71.2 million
• Gross margin² decreased 90 basis points to 37.2%
• Income from operations increased 98% to $17.1 million
• Net income increased to $11.4 million from $0.3 million
• Earnings per diluted share increased to $0.16
• Adjusted Net Income³ was $12.9 million compared to $3.2 million in the second quarter of 2018, and Adjusted Earnings per Diluted Share³ was $0.25, compared to $0.06 in the second quarter of 2018
• Adjusted EBITDA³ increased 61% to $31.4 million

“Funko once again delivered very strong results in the second quarter,” said Brian Mariotti, Funko’s CEO. “We believe these results and our continued opportunities for growth demonstrate that the world is increasingly viewing pop culture through the lens of Funko.

“Funko has become a solid entertainment content platform, and our brand continues to grow in awareness and popularity around the world. This unique position enables us to develop new and increasingly profitable sources of revenue that we expect will propel continued growth for many years to come.

“Our strong results in the first half of 2019 have allowed us to increase our guidance for the full year. More importantly, the growing range of opportunities for revenue growth, international expansion and entry into new categories make us confident that our best days lie ahead, and that our fans, partners, employees and shareholders can look forward to the future.”

Second Quarter 2019 Financial Results

Net sales increased 38% to $191.2 million in the second quarter of 2019 from $138.7 million in the second quarter of 2018.  The growth was driven primarily by an increase in the number of active properties and strong sales demand across all of our geographic markets and product categories.

In the second quarter of 2019, the number of active properties increased 16% to 592 from 510 in the second quarter of 2018 and net sales per active property increased 19%. On a geographical basis, net sales in the United States increased 26% to $122.7 million and net sales internationally increased 65% to $68.5 million with strong growth across all regions. On a product category basis, net sales of figures increased 39% to $159.7 million and net sales of other products increased 30% to $31.5 million versus the second quarter of 2018, driven primarily by continued growth of our Loungefly and other softline products.

The tables below show the breakdown of net sales on a geographical and product category basis (in thousands):

		Three Months Ended June 30,						Period Over Period Change
		2019			2018			Dollar			Percentage
Net sales by geography:
United States		$	122,673		$	97,108		$	25,565		26.3	%
International			68,526			41,615			26,911		64.7	%
Total net sales		$	191,199		$	138,723		$	52,476		37.8	%
		Three Months Ended June 30,						Period Over Period Change
		2019			2018			Dollar			Percentage
Net sales by product:
Figures		$	159,667		$	114,499		$	45,168		39.4	%
Other			31,532			24,224			7,308		30.2	%
Total net sales		$	191,199		$	138,723		$	52,476		37.8	%

Gross margin² in the second quarter of 2019 decreased 90 basis points to 37.2% compared to 38.1% in the second quarter of 2018. The decrease in gross margin² in the second quarter of 2019 compared to the second quarter of 2018 was driven primarily by higher reserves on inventory, partially offset by improved product cost margins and lower license and royalty costs as a percentage of net sales.

SG&A expenses increased 26% to $43.6 million in the second quarter of 2019 from $34.5 million in the second quarter of 2018, primarily related to an increase of $7.1 million in personnel and related costs (including salary and related taxes/benefits, commissions and stock compensation expense), an increase of $1.1 million in professional and consulting costs and an increase of $1.0 million in rent and related facilities costs.  Both of these costs increased as a result of the continued growth of the business. SG&A expenses declined 210 basis points as a percentage of sales as the Company gained operating leverage in the second quarter of 2019 compared to the second quarter of 2018.

Net income for the second quarter of 2019 increased to $11.4 million from $0.3 million in the second quarter of 2018, and Adjusted Net Income³ increased $9.7 million to $12.9 million from $3.2 million in the second quarter of 2018. In addition to the reduction in SG&A as a percentage of sales, factors that led to net income and Adjusted Net Income³ growing faster than sales in the second quarter of 2019 compared to the second quarter of 2018 include lower depreciation and amortization expense as a percentage of sales, a reduction in interest expense, net and the reduced impact of foreign currency gains and losses relating to transactions denominated in currencies other than the US dollar compared to the second quarter of 2018.

Adjusted EBITDA³ in the second quarter of 2019 rose 61% to $31.4 million, or 16.4% of net sales, from $19.5 million, or 14.0% of net sales, in the second quarter of 2018. The increase in Adjusted EBITDA³ as a percentage of net sales in the second quarter of 2019 compared to the second quarter of 2018 resulted from lower SG&A as a percentage of sales.

2019 Outlook

The Company is raising its outlook for the full year 2019. The Company now expects net sales to be in a range of $840 million to $850 million. Adjusted EBITDA³ is expected to be in a range of $140 million to $145 million. Adjusted Earnings per Diluted Share³ is expected to be in a range of $1.15 per share to $1.22 per share and is based on estimated adjusted average diluted shares outstanding of 53.5 million for the full year 2019.

Adjusted EBITDA and Adjusted EPS are non-GAAP measures. A table at the end of this release reconciles Funko’s outlook for the full year 2019 Adjusted EBITDA and Adjusted Earnings per Diluted Share guidance to the most directly comparable U.S. GAAP financial measures.  Please refer to the “Non-GAAP Financial Measures” section of this press release.

^{_________________________________
1} _{The prior period amounts have been revised to reflect the correction of immaterial errors related to an underpayment of certain duties owed to US Customs as well as other previously identified immaterial errors. Please see Note 1 to our Form 10-Q for the period ended June 30, 2019 for further information.}
² _{Gross profit is calculated as net sales less cost of sales (excluding depreciation and amortization).   Gross margin is calculated as net sales less cost of sales (excluding depreciation and amortization) as a percentage of net sales.}
³ _{Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA are non-GAAP financial measures. For a reconciliation of Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA to the most directly comparable U.S. GAAP financial measures, please refer to the “Non-GAAP Financial Measures” section of this press release.}

Conference Call and Webcast

The Company will host a conference call at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today, August 8, 2019, to further discuss its second quarter results. Investors and analysts can participate on the conference call by dialing [phone] or [phone]. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the Investor Relations section on the Company’s website at https://investor.funko.com/. The replay of the webcast will be available for one year.

About Funko

Headquartered in Everett, Washington, Funko is a leading pop culture consumer products company. Funko designs, sources and distributes licensed pop culture products across multiple categories, including vinyl figures, action toys, 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).

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 our anticipated financial results, the underlying trends in our business, growing demand for our products, our potential for growth, plans for investments in our business and future opportunities, including expanding into new product categories, broadening our retailer network and increasing international sales. 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 our 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: our ability to maintain and realize the full value of our license agreements; the ongoing level of popularity of our products with consumers; changes in the retail industry and markets for our consumer products; our ability to maintain our relationships with retail customers and distributors; our ability to compete effectively; fluctuations in our gross margin; our dependence on content development and creation by third parties; our ability to develop and introduce products in a timely and cost-effective manner; our ability to obtain, maintain and protect our intellectual property rights or those of our licensors; potential violations of the intellectual property rights of others; risks associated with counterfeit versions of our products; our ability to attract and retain qualified employees and maintain our corporate culture; risks associated with our international operations; changes in U.S. tax law; foreign currency exchange rate exposure; the possibility or existence of global and regional economic downturns; our 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 our e-commerce business and social media presence; risks relating to our indebtedness and our ability to secure additional financing; the potential for our electronic data to be compromised; the influence of our significant stockholder, ACON, and the possibility that ACON’s interests may conflict with the interests of our other stockholders; risks relating to our organizational structure; volatility in the price of our Class A common stock; and the potential that we will fail to establish and maintain effective internal control over financial reporting. These and other important factors discussed under the caption “Risk Factors” in our quarterly report on Form 10-Q for the quarter ended June 30, 2019 and our 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 we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Investor Relations:
Sean McGowan, Liolios
[e-mail]
949-574-3860

Media:
Jessica Piha, Funko
[e-mail]
425-783-3616

Funko, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

		Three Months Ended June 30,							Six Months Ended June 30,
		2019				2018(1)			2019(1)				2018(1)
		(In thousands, except per share data)
Net sales		$	191,199			$	138,723		$	358,264			$	275,934
Cost of sales (exclusive of depreciation and amortization shown separately below)			119,998				85,884			223,654				172,528
Selling, general, and administrative expenses			43,647				34,537			84,115				69,039
Acquisition transaction costs			-				-			-				28
Depreciation and amortization			10,425				9,650			20,655				18,951
Total operating expenses			174,070				130,071			328,424				260,546
Income from operations			17,129				8,652			29,840				15,388
Interest expense, net			3,763				5,584			7,835				11,480
Other (income) expense, net			(219	)			2,602			(154	)			1,160
Income before income taxes			13,585				466			22,159				2,748
Income tax expense			2,170				192			3,599				755
Net income			11,415				274			18,560				1,993
Less: net income attributable to non-controlling interests			6,283				204			11,233				1,326
Net income attributable to Funko, Inc.		$	5,132			$	70		$	7,327			$	667
Earnings per share of Class A common stock:
Basic		$	0.17			$	-		$	0.26			$	0.03
Diluted		$	0.16			$	-		$	0.24			$	0.03
Weighted average shares of Class A common stock outstanding:
Basic			29,910				23,344			28,284				23,341
Diluted			32,115				24,759			30,296				24,634

^{(1)   The prior period amounts have been revised to reflect the correction of immaterial errors related to an underpayment of certain duties owed to US Customs as well as other previously identified immaterial errors. Please see Note 1 to our Form 10-Q for the period ended June 30, 2019 for further information.}

Funko, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

		June 30,				December 31,
		2019				2018(1)
		(In thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents		$	19,485			$	13,486
Accounts receivable, net			131,646				148,627
Inventory			75,298				86,622
Prepaid expenses and other current assets			17,170				11,904
Total current assets			243,599				260,639
Property and equipment, net			43,331				44,296
Operating lease right-of-use assets			41,759				—
Goodwill			124,510				116,078
Intangible assets, net			229,316				233,645
Deferred tax asset			29,673				7,407
Other assets			3,986				4,275
Total assets		$	716,174			$	666,340
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit		$	19,329			$	20,000
Current portion long-term debt, net of unamortized discount			10,619				10,593
Current portion of operating lease liability			8,602				—
Accounts payable			32,852				36,130
Income taxes payable			1,046				4,492
Accrued royalties			29,819				39,020
Accrued expenses and other current liabilities			26,931				33,015
Total current liabilities			129,198				143,250
Long-term debt, net of unamortized discount			211,383				216,704
Operating lease liabilities, net of current portion			40,401				—
Deferred tax liability			20				5
Liabilities under tax receivable agreement, net of current portion			33,019				6,504
Deferred rent and other long-term liabilities			5,788				6,623
Commitments and contingencies
Stockholders' equity:
Class A common stock, par value $0.0001 per share, 200,000 shares authorized; 30,214 shares and 24,960 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively			3				2
Class B common stock, par value $0.0001 per share, 50,000 shares authorized; 18,740 shares and 23,584 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively			2				2
Additional paid-in-capital			176,684				146,154
Accumulated other comprehensive loss			(336	)			(167	)
Retained earnings			16,044				8,717
Total stockholders' equity attributable to Funko, Inc.			192,397				154,708
Non-controlling interests			103,968				138,546
Total stockholders' equity			296,365				293,254
Total liabilities and stockholders' equity		$	716,174			$	666,340

^{(1)   The prior period amounts have been revised to reflect the correction of immaterial errors related to an underpayment of certain duties owed to US Customs as well as other previously identified immaterial errors. Please see Note 1 to our Form 10-Q for the period ended June 30, 2019 for further information.}

Funko, Inc. and Subsidiaries
Non-GAAP Financial Measures

Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income (loss), earnings per share or any other performance measure derived in accordance with U.S. GAAP. We define Adjusted Net Income as net income attributable to Funko, Inc. adjusted for the reallocation of income attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance.  These items include, among other things, reallocation of net income attributable to non-controlling interests, non-cash charges related to equity-based compensation programs, acquisition transaction costs and other expenses, foreign currency transaction gains and losses and other unusual or one-time items, and the income tax expense (benefit) effect of these adjustments.  We define Adjusted Earnings per Diluted Share as Adjusted Net Income divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any. We define EBITDA as net income (loss) before interest expense, net, income tax expense (benefit), depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, acquisition transaction costs and other expenses, foreign currency transaction gains and losses and other unusual or one-time items.  We caution investors that amounts presented in accordance with our definitions Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner. We present Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.  Management uses Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations; for planning purposes, including the preparation of our internal annual operating budget and financial projections; as a consideration to assess incentive compensation for our employees; to evaluate the performance and effectiveness of our operational strategies; and to evaluate our capacity to expand our business.

By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. In addition, our senior secured credit facilities use Adjusted EBITDA to measure our compliance with covenants such as senior leverage ratio. Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in this press release as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

• such measures do not reflect changes in, or cash requirements for, our working capital needs;

• such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and

• other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted Net Income, Adjusted Earnings per Diluted Share and Adjusted EBITDA include adjustments for non-cash charges related to equity-based compensation programs, acquisition transaction costs and other expenses, foreign currency transaction gains and losses, and other unusual or one-time items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. Each of the normal recurring adjustments and other adjustments described herein and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

In addition, this press release refers to the non-GAAP financial measure Net Debt, which consists of total debt as reported on the condensed consolidated balance sheet less cash and cash equivalents. Management believes that Net Debt provides useful information to investors because it shows the Company’s outstanding debt obligations that could not be satisfied by its cash and cash equivalents on hand.

The following tables reconcile Adjusted Net Income, Adjusted Earnings per Diluted Share, EBITDA and Adjusted EBITDA to the most directly comparable U.S. GAAP financial performance measure:

		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018(8)				2019(8)				2018(8)
		(In thousands, except per share data)
Net income attributable to Funko, Inc.		$	5,132			$	70			$	7,327			$	667
Reallocation of net income attributable to   non-controlling interests from the assumed   exchange of common units of FAH, LLC for   Class A common stock (1)			6,283				204				11,233				1,326
Equity-based compensation (2)			3,367				1,171				6,115				2,143
Acquisition transaction costs and other expenses (3)			450				—				100				28
Foreign currency transaction loss (gain) (4)			(219	)			2,602				(154	)			1,160
Income tax expense (5)			(2,126	)			(868	)			(3,456	)			(765	)
Adjusted net income			12,887				3,179				21,165				4,559
Adjusted net income margin (6)			6.7	%			2.3	%			5.9	%			1.7	%
Weighted-average shares of Class A common stock   outstanding-basic			29,910				23,344				28,284				23,341
Equity-based compensation awards and common units of    FAH, LLC that are convertible into Class A common   stock			22,248				27,392				23,612				27,384
Adjusted weighted-average shares of Class A stock   outstanding - diluted			52,158				50,736				51,896				50,725
Adjusted earnings per diluted share		$	0.25			$	0.06			$	0.41			$	0.09

		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018(8)				2019(8)				2018(8)
		(amounts in thousands)
Net income		$	11,415			$	274			$	18,560			$	1,993
Interest expense, net			3,763				5,584				7,835				11,480
Income tax expense			2,170				192				3,599				755
Depreciation and amortization			10,425				9,650				20,655				18,951
EBITDA		$	27,773			$	15,700			$	50,649			$	33,179
Adjustments:
Equity-based compensation (2)			3,367				1,171				6,115				2,143
Acquisition transaction costs and other   expenses (3)			450				—				100				28
Foreign currency transaction loss (gain) (4)			(219	)			2,602				(154	)			1,160
Adjusted EBITDA		$	31,371			$	19,473			$	56,710			$	36,510
Adjusted EBITDA margin (7)			16.4	%			14.0	%			15.8	%			13.2	%

(1	)	Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock in periods in which income was attributable to non-controlling interests.
(2	)	Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.
(3	)	Represents legal, accounting, and other related costs incurred in connection with acquisitions and other transactions. For the three and six months ended June 30, 2019, includes the accrual of a contingent liability of $0.5 million related to potential penalties that may be assessed by U.S. Customs in connection with the underpayment of customs duties at Loungefly.  This was partially offset by a $0.4 million reversal of a pre-acquisition contingent loss related to our Loungefly acquisition in the six months ended June 30, 2019.
(4	)	Represents both unrealized and realized foreign currency gains and losses on transactions other than in U.S. dollars.
(5	)	Represents the income tax expense effect of the above adjustments. This adjustment uses an effective tax rate of 25% for both the three and six months ended June 30, 2019 and 2018.
(6	)	Adjusted net income margin is calculated as Adjusted net income as a percentage of net sales.
(7	)	Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales.
(8	)	The prior period amounts have been revised to reflect the correction of immaterial errors related to an underpayment of certain duties owed to US Customs as well as other previously identified immaterial errors. Please see Note 1 to our Form 10-Q for the period ended June 30, 2019 for further information.

Guidance Reconciliation of Net Income to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Diluted Share

		Estimated Range for the Year Ending December 31, 2019
		(In millions, except per share amounts)
Net income		$	52.4			$	57.6
Interest expense, net			15.8				15.6
Income tax expense			17.9				17.9
Depreciation and amortization			42.5				42.5
EBITDA		$	128.6			$	133.6
Adjustments:
Equity-based compensation (1)			11.5				11.5
Acquisition transaction costs and other expenses (2)			0.1				0.1
Foreign currency transaction gain (3)			(0.2	)			(0.2	)
Adjusted EBITDA		$	140.0			$	145.0
Net income		$	52.4			$	57.6
Equity-based compensation (1)			11.5				11.5
Acquisition transaction costs and other expenses (2)			0.1				0.1
Foreign currency transaction gain (3)			(0.2	)			(0.2	)
Income tax expense (4)			(2.5	)			(3.8	)
Adjusted net income		$	61.3			$	65.2
Weighted-average shares of Class A common stock outstanding			25.5				25.5
Equity-based compensation awards and common units of FAH,   LLC that are convertible into Class A common stock			28.0				28.0
Adjusted weighted-average shares of Class A stock outstanding - diluted			53.5				53.5
Adjusted earnings per diluted share		$	1.15			$	1.22

(1	)	Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.
(2	)	Represents legal, accounting, and other related costs incurred in connection with potential and completed acquisitions and other transactions.
(3	)	Represents both unrealized and realized foreign currency gains and losses on transactions other than in U.S. dollars.
(4	)	Represents the income tax expense effect of the above adjustments. This adjustment uses an effective tax rate of 25% for the year ending December 31, 2019.

Note:  The Company is not able to provide the expected impact of unrealized and realized foreign currency gains and losses on transactions without unreasonable efforts because the calculation for that change is primarily driven by changes in foreign currency exchange rates, principally British pounds and euros.  Additionally, the impacts are also driven by fluctuations in product sales and operating expenses in each of those local currencies, which can fluctuate month to month.  Therefore, the Company’s Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Diluted Share for the year ending December 31, 2019, including the above adjustments, may differ materially from that forecasted in the table above.