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Matthew Michaud
Sorry about that. Hey, everyone. Thanks for attending today's webinar, A Peak Season Prep, A CFO's Playbook for Cash Flow, Inventory, and Smarter Financing. My name is Matt Michaud. I'm a senior account executive on our capital team here at Flexport, and shortly, I'll be joined by Matt Burkett from Fun.com, Inc.. We have a great webinar for you today. Before we begin, let's cover a few housekeeping items. On your screen, you'll see a sidebar to the right of the main stage. You'll see a tab labeled docs where we have a link to a few helpful resources. A brief legal note, please keep in mind the information provided in our upcoming conversation is for general informational purposes only and may not be suited to your particular business requirement. We always recommend reaching out to a Flexport expert to discuss your particular situation. And so joining me today is Matthew Burkett from Fun.com, Inc.. Matt, thanks so much for making the time to talk with us. When we were putting this webinar together and thinking about who we'd wanna bring on, you were the clear choice for our team. Many of the businesses we work with have some sort of degree of seasonality to them. But given the nature of Fun.com, Inc. business, it it's takes it to a whole another level. And we've always been deeply really, really, really impressed with how you and your team have managed cash flows and operations throughout the year. And we felt there's a lot of companies out there, whether, you know, they're just starting out or or mature in nature, that could, you know, really learn, you know, from the way that you guys have have ran your business. So welcome, and and, happy to kick things off.
Matthew Burkett
Great. Matthew, thanks a lot. Thanks for the opportunity, and, glad to be here. And, looking forward to a good discussion and sharing kind of our story and, what we do. But as Matthew said, I'm the cfofund.com. We are a hyper seasonal Halloween costume business, that, does 80% of our sales in a very short window of time. So, we're based out of Mankato, Minnesota. We, sell really cool stuff, licensed Halloween costumes, direct to consumer. And, we sell about 85% of our business is, direct to consumer in The United States. And then about 15%, we serve, some key international markets, Canada, The UK, Europe, and Australia. And customers can find us on Fun.com, Inc., halloweencostumes.com, or halloween.com, and then also on we're live on marketplaces like Amazon, Walmart, Target. So, really unique business, hyper seasonal, as I mentioned. We ship at two facilities, one in Minnesota and one in Kentucky. So, been with Flexport for going on four years now, and we've had a good partnership. So I'm looking forward to the conversation and and sharing and helping however I can.
Matthew Michaud
Awesome. Yeah. Us too. Maybe we could just start with kind of your global footprint, where you guys source your product, who your suppliers are, and and we can kinda start there.
Matthew Burkett
Yeah. We bring in, probably anywhere from $50,000,000 to $70,000,000 of inventory dollars every year. And most of that is sourced overseas in Asia. And, historically, you know, in the last seven years since I've been here, we've been migrating to more of a made by us strategy, which made by us is where we design and make and source and produce all of our own product. So before I got here, we were probably 30% of made by us sourcing, which means, we're making it, designing it. The other 70% we were buying kind of existing products from vendors and then reselling those. So that has transitioned to be more like 85% made by us. So, has involved a lot more growth, a lot more complexities, a lot more team growth with, how we source products, how we design product, and how we kind of get it from our partners today.
Matthew Michaud
Definitely. So when you first joined as as CFO, obviously, learning that, you know, 80% of the business is really in a a thirty to forty five day window. What was something that that surprised you the most kinda coming in? Maybe you weren't used to that and and you're you're kinda realizing, okay. I have to manage this from a cash flow standpoint now.
Matthew Burkett
Yeah. I think, it's the the thing that I think of, and there's a couple parts of this, but I think it there's there's a ton of excitement, right, when when you come in, for Halloween business. I started in June, so I got the the buildup of season and getting all of the product, kind of shipped and received. But then during season, it's a ton of excitement of, you know, all of the sales are happening. We're moving products. You see some of the popular items and the fast movers. And then that excitement is like the energy is felt by everybody within the business. And it's really, really cool. The hard part for me was when it ended, you know, because as a seasonal business for specific for Halloween, it ends, you know, on Halloween or slightly before. Nobody wants their costume on November second or third. So we wanna make sure we do a really good job of getting our product out. So one of the it was like that hangover, if you call it, it was just over. And you're you're riding that wave, which was really fun and exciting, but, it changes. But then back to the the planning side, I mean, it really you have to have really good teams and we have to work, you know, months and months in advance. Right? So we're looking at orders getting in in, you know, the first part of q one, and making sure that that production cycle is is is on pace, to be able to hit kind of the receiving window to hit the sales window. So it just you have to be ready for that and learn that. Also just the sense of urgency. If you miss things, you can't really make it up. You have to wait a whole another season. So I think just you know, learning and and respecting that and appreciating it is super important in in the role that I'm in.
Matthew Michaud
Yeah. Definitely. I I remember when I when I was first introduced to you guys about three years ago and, you know, we were on our introductory call and obviously talking about when Halloween was coming up. And, you know, I I I was not thinking about this, but you had mentioned that Halloween was on a Wednesday that day and how that can really drastically change, you know, how you guys plan throughout the year. And something so, like, small like that can have such such large downstream effects. So I always I always like to tell that story when when talking about you guys. And,
Matthew Burkett
Yeah. For sure.
Matthew Michaud
you do you think do you think. all the
Matthew Burkett
think
Matthew Michaud
down to the day that that Halloween's on?
Matthew Burkett
Yeah. And this year it's a Saturday. So last year was a Friday. So we the weekend Halloweens are everyone's kind of celebrating and partying and trick or treating. And then during those midweek ones, you get kind of the bookends of different weekends. Somebody's on the front side, somebody's on the back side. So it just requires more fulfillment planning as we kind of ship product out, making sure that we're staffed appropriately for those, for those, those pockets. But yeah, weekend Halloweens are good. And so we're looking forward to a big year this year. We're excited.
Matthew Michaud
Yeah. That's great. So, you know, obviously, with the seasonality profile that you guys have, there's inevitably stretches throughout the year where where cash can get tight. Layer in some unplanned, you know, headwinds like tariffs, for example. It can. put real pressure on the business in in ways that are really hard to plan for. You guys have been, you know, really deliberate and thoughtful about how you've constructed constructed your capital stack and and financing stack throughout the years. I'd love to hear you walk us through, you know, how that's evolved throughout the time and, you know, kinda what each tool or what each relationship is kind of solving for the business.
Matthew Burkett
Yeah. I think that's that's a great question. I think that's been a, an evolving process here as as I've been here. And I think when I started, you know, we were, you know, probably half the size, and we've we've grown a lot. And so you've got this growth, trajectory that you have to continue to support the working capital needs of the business as you grow. And then as I mentioned before, that migration from vendor product majority to kind of making and sourcing your own products, that just the capital needs are very different there where you get more terms from vendors and now you're partnering with factories that require deposits or, you know, just solving that differently, right? And that change is significant. So we have a strong banking relationship with our main bank, and that bank revolver has more than tripled since I've been here. So that they've been able to grow with us. But then also, we've been able to supplement and and support that capital stack with Flexport Capital. And, it it's been a good product for us largely because, you know, it it our main bank really likes it, Matthew. So, like, one of the big wins that I think has been helpful is we looked at other different products over the years, and and as CFOs, you have to be creative on trying to solve that cash gap and working capital gap. And and as a seasonal business, I think it's even harder. So part of my job is, like, moving the pile. I have to, like, move the cash pile and defer or align as much of the outflows with when we get all of our receipts in, which is in those, call it, eight weeks. So, you know, for us, we lose money for seven months, which might sound odd to people on the call, because, obviously, nobody wants to lose money in in months and especially in our roles. But we're used to losing money in January to July because we're built. for a seasonal business. Right? So so for me, it's really about we have to be creative, look at different capital stacks, and and, the Flexport Capital team in the product has partnered really well with with our main bank, and, that's been a key thing. But also just looking at, you know, deferring or aligning the the the outflows of really all of our costs, whether it's factory payments, whether that's rent payments, whether that's, just whatever it is. Right? It's just trying to align that with our with our, our main cash flows of the business has been an important thing for us. And I think, you know, as a CFO, I think for me, I have a unique background. I'm a former ABL banker. So I've sat in credit committee meetings. I've prepared packages and stuff. So I've tried to take it upon myself to make sure that my banking partners have everything they need. I, you know, I recommend people that you gotta know your numbers. You gotta be able to tell the story. And, and also the results have to kind of follow that to provide confidence in the relationships too. So for me, it's all of that together in combination is really how we have to manage kind of the growth and also capital needs of our business. And it's really all of it. It's not just one thing, and I think that's an important takeaway.
Matthew Michaud
Yeah. Definitely. I think that's that's super important. Right? Like, we we hear it all the time kind of from from companies that we're speaking to is, you know, maybe they're unwilling to speak with their main lender about, you know, bringing on an additional provider or, frankly, maybe the other lender is not willing to put in the work to actually learn, you know, what this other provider might be providing, whether it's Flexport Capital or whether it's someone else. Right? And so I guess what is some advice you'd give to this kind of someone navigating that conversation outside of just knowing the numbers and and being able to but, you know, kind of like working, you know, in interbank, relationships together.
Matthew Burkett
Yeah. Yeah. I think, you know, it's it's, the numbers part is very important. Obviously, that helps the story and and navigate things. I think, maybe presenting the alternatives to the banking environment and your main lenders as to why this is needed and, you know, or we have to fill this gap somehow and it's either we're filling it through X, Y, and Z, but I also need these other three spots, right? So I think it's really storytelling, with those relationships and really cultivating and investing time in those relationships that's important. I think even linking up, you know, the Flexport team with your main bank, I mean, just to make sure that there's alignment there, if there's questions, I think, all to me, it's it's people and it's it's just influence and and talking through that. And I think those are the key things that that come down to it. Otherwise, it's, you know, if you have a gap to fill, you have to come up with a different way to fill it or you can't do it. Right? So it's the alternatives are I can't grow. I can't do this. For us, we've been producing 1,300 new products a year, and we've been growing a ton and having to supplement and complement our credit stack with these programs, I think are really good. And again, what I've been thankful and appreciative is our main bank has really accepted, and they they like the terms. They like the structure. Obviously, we move a lot of product with you guys, in terms of ocean freight and and logistics too. And and also, I mean, for me, the interface is super simple as well. So, like, it's an easy, it's an easy win, for companies if they need, another partner to kind of fill that fill that gap. There's others in the space, but I've looked at those and and you tend to run into bigger issues on, hey. There's, you know, rights issues or just you know, then you get into, like, bigger conversations on, like, hey. Banks aren't comfortable and this and that. Whereas I've been really grateful that our bank has been, on board with this, and you guys have been on board with the partnership, with them as well, and it it works really well.
Matthew Michaud
Yeah. For sure. And and we're we're thankful as well. So, you know, one thing I think we've always been really impressed with you and your team on is really, like, how often and this can actually speak to to my question earlier, really, and answer for you. But, you know, one thing we've been really impressed with is is how often and how detailed your updates that you provide us are. Right? You you're always providing us with monthly updates and, you know, things when maybe we're not necessarily asking of how the business is going or how the year is tracking so far. And so, you know, I think, that certainly helps, right, when when you're when you're speaking with your your various different relationships. And even from from our standpoint, you know, sometimes the updates are, hey. We're we're performing better than planned. We may actually not need you guys as much as we thought this year. Right? Which you think for us, we you know, that's okay. Maybe we make less revenue or whatever the case may be, but we actually really appreciate it because, a, it shows that, hey. What we're doing for you as a business is is working. But I guess if you could just talk to me kind of how how do you approach that in in in providing those updates with the team and, you know, kind of making sure that you you have everything, you know, ducks in a row from from a reporting standpoint.
Matthew Burkett
Yeah. I think, you know, back to my prior life as an ABL banker, I think that certainly I lean into that, and that's helped me. Again, it's somewhat unique. But, I also don't know I I don't know all of the answers, but I I try to, again, take the approach that I wanna make sure I'm communicating at a certain cadence that makes sense. I'm providing the updates whether they're good or bad. We're being transparent with with our partners, and I think that goes a long way. And, I think you just gotta commit that time and you have to, it's it's time invested that will be returned back to the business in in terms of those partnerships and those capital discussions. So to me, it's it's it's time that is important to to invest in and make sure that, those, that story is being told. Right? And I think, we've got financial models that we share. We've got kind of the normal updates of stuff. We kind of provide very detailed updates on, you know, kind of market and orders and just, you know, how the business is doing. And I think, we're a very transparent organization. I think that that transcends to the partnerships that we have. And we wanna make sure that, you know, you guys know as much as we do and because we're we're relying on the financial support and and, partnership to kinda grow and perform. And, so it's not to make it overly simple, but I think it's just being direct and and sharing that, and that goes a long way. And, it's just how we work. So.
Matthew Michaud
Yeah. Definitely. Over communication always always good. So kinda transitioning a little bit into your supply chain. So, you you know, you've set up the proper capital stack. You've created your forecasts. You put all the plans in place. That's that's the easy part. The hard part, you know, as you always say in your updates is is actually executing on those plans as the year kind of, you know, draws on. Right? So it's it's really exacerbated by your seasonality because if you miss your window on certain things, it can be potentially catastrophic. So, you know, one of the key components of executing throughout the year is making sure you have your suppliers set and those suppliers have the right capacity for producing products at the right time and they're able to ship it, you know, throughout the the various points that you need them to ship it. So I guess, you know, kind of starting there, what do those conversations look like with your suppliers? How far out are you planning those conversations? And and what does that kind of relationship management look like from a a cash flow standpoint?
Matthew Burkett
Yeah. So we've got, I'd say, you know, there's there's some key teams within our business that that help lead that, and I'm I'm aligned with with with them. We've got specific teams that deal with, you know, call it, the inventory buying, what SKUs to buy, what SKUs to produce, which new ones, what to reorder. And then we've got other teams that work on the development design and just kind of the factory relationships. So we've got some key experts within the business and in our teams, and we work really closely with them on what's our budget gonna be for the year. And then really, teams are again, orders gotta really be in after our seasonal window. We're trying to look at what's selling and then we deal with kind of the returns window of what's coming back as people, you know, exchange costumes and things like that. But really, the buying season really starts for reorder, you know, in November. And then really from November to January time frame right before Chinese New Year is when things really need to get in and submitted so those factories can kind of produce. Because they, you know, really we sell a lot in a short window. They gotta make a lot in a short window too. Right? So we're really we're reliant on them to to get those orders in. And then really new development of items, we're really working probably a year or even two years ahead as we're trying to, like, develop new items. So the calendaring is really, really important. But teams are aligned on those strategies and milestones and and deliverables. And, you know, for me on the cash side, I mean, I probably, you know, 40%, maybe 50% of my time is really cash treasury management. And I'm looking at every single day, like, what's our line? What's our availability? What's our what's coming in? What's going out? And, you know, you gotta know that. And I think then connecting with your partners on, where are we at with, you know, inventory shipping? It's late. It's on time. How are sales? Right? Then you weave in all the other elements of are sales up? Are they down? Are expenses up? Are they down? What's going on? So, it's it's such a key, you know, management and oversight, but but it's being seasonal. Like, you can't take your eye off the ball from a cash standpoint. If you do, you know, it you you could get hurt if you're not paying attention to to things. Right? So I try to really be deliberate on, the cash oversight, but also the partnerships with our with our inventory teams, with our factories. I do a lot of conversations with our factories. I'm involved on the import side. I'm also involved on the logistics side as well. So, like, our our structure here at Fund is, somewhat unique where the logistics and kind of compliance stuff is aligned within the finance team. So I mean, it's important that, as I'd say, as all the CFOs being aligned with those teams to make sure that, you know, your budgets are good for buying inventory, your landed cost is right because that's all part of, call it, cash planning, but also margin protection if teams are off saying, just ship it here as fast as possible. It's like, well, do you need it when do you need it here? So for us, like, I don't need the inventory in May or June. I really need it in August, September, October. Right? So it's just you you there's there's also elements of of that where, yeah, you pay for it, but then you're okay storing it in in some seasons. But others, it's like, I don't really need it until I start to get into late summer. You know? So. all of that, it's just it's just making sure those teams are in sync. You got cross functional meetings and alignment. And as those changes happen, you're you're making adjustments and and communicating as you keep going.
Matthew Michaud
Yeah. Definitely. And and, you know, every every supply chain is is pretty complex, but add the global nature to it, add the size and scale of your business to it, and then add the seasonality aspect to it. You know, there's a couple of things that I think, you know, Fun.com, Inc. does really well, right? And one is, given your like, we see a lot a lot of seasonal businesses have to rely on, let's say, air freight, for example, because they need that inventory to get there when they need it and that and and it needs to be fast. You guys have been able to kind of avoid that trap, right, from a a operational dollar standpoint. As we all know, ocean freight is is much cheaper than air freight, but it takes a lot longer. Right? So. times are more, you have more money tied up on the water. Right? And so how have you guys been able to kind of accomplish that, you know, throughout the years? I'm sure there's been situations where you've had to rush deliver something, but. from. majority shipping standpoint, you guys have been able to accomplish and and be able to to do mostly ocean freight.
Matthew Burkett
Yeah. That's been, you know, not an easy task, but I think, you know, happy our team has been able to accomplish that the last, I think, maybe four years potentially. But, it really comes down to, you know, teams and and planning, and and those partnerships with the factory, making sure that those meetings are happening and our factory's on schedule or or not. And then for us, so we looked at, you know, we we've we've had the airship stuff in the past. And obviously, as you mentioned, and we see it in our numbers, it's equal to the cost of the inventory, you know, for us, right? So the cost of the air freight just took away a lot of the margin of that, product. So there was kind of a cost element, which is obvious. But then the other one we did, we did an environmental study probably three or four years ago as well and really focused in on, you know, that was a large contributor to, call it carbon emissions. And that was an important part for our business to wanna, you know, kind of, tackle and solve. So kind of in combination of the cost elements, but then the, you know, the environmental impact on not air shipping those goods, were two wins that we've been able to kind of pocket and continue to go forward with.
Matthew Michaud
Yeah. Definitely. And, you know, from a a Flexport Capital standpoint, obviously, kind of what we're providing you guys is in transit financing. Right? So we're able to provide that kind of cash flow relief while those products are on the water. And then really on the the flip side. Right? So you have once the product has landed here, things that you have to think about from from a a cost standpoint. You have, warehousing costs. You have you know, once you actually enter that product into your borrowing base, it's now a borrowing cost that that you might have to draw down on. Right? And so, striking that balance of when to bring product in at the right time so that you're not paying unnecessary warehousing fees or unnecessary borrowing fees. You know, I guess, more fun question is is I'm sure there's been some mistakes in the past. Right? And so, you know, every global supply chain is gonna have its issues throughout the years. Maybe, like, a a fun story of of, you know, something that maybe, you know, maybe you guys did that you realize, okay. We we absolutely cannot do this again next year or whatever the case may be. But, anything like that from that standpoint?
Matthew Burkett
Yeah. I think, few few things come to mind. I think, you know, we have two warehouses and, one in Minnesota, one in Kentucky. And then before the Kentucky building, we did some we experimented with some, just unique technologies and robotics to kind of help, you know, support the seasonal nature of the business, right? We staff up to 3,000 employees, and we do that all internally. And so it's a ramp. Any graph I would draw for you that you've seen just kind of ramps up and then it's over. So, but we did some different robotic initiatives, and those didn't work. And for us, it was kind of a pain point of learns and adjusting, you know, on on a future basis. So I think knowing your business and and but being okay to try things. Right? I think the intentions and the planning were good. I think, it was just one of those things that we released it a little bit too late. And, also, you know, our infrastructure systems, some of the stuff is a little too tight, and it worked in bigger systems. And so it's just been you gotta try that stuff. You gotta try and learn, and then you'll then we come back to, you know, our our fulfillment system is really good. We really like it. We can we can control the different parts, of the throughput and and make sure that we don't get big bottlenecks and and delays of orders. But I think I wouldn't say it was a fun story. It was a it was a painful one, but I think we've, you know, navigated it and and and come out on the other side of it, I think, has been good. I'd say it's the other thing I'm gonna touch on, I thought was a good point you mentioned was, you know, on the borrowing base. I think for me, you know, those bank relationships are important and, you know, you gotta maintain those. I'm always working with availability, making sure that that's, you know, compliant and and managed well. Right? So, at least how we look at the borrowing base with the advances, if there's some questions maybe that people have or or thoughts there. I always treat the advances that I make on any inventory for Flexport Capital kind of separate from my borrowing base. So I'm not kind of double dipping and saying, hey, I'm getting inventory from you guys and I'm getting inventory availability from,
Matthew Michaud
Yep.
Matthew Burkett
from the bank. Right? I I draw a clean line there and then, we make that separation. But then once items are received, it's usually kind of aligned, with kind of payments and stuff like that. So then once we get it, it kind of comes in, to the borrowing base that way. But just more of just things that you can just be aware of if people are looking at, well, how does it work if I've got an existing relationship in terms of is the inventory mine or not? I think, there's some unique not unique, but just how we've I've been really intentional on how we try to manage that, and our banks have been supportive of that process too.
Matthew Michaud
Yeah. That's great. So, you know, we're we're coming up on time here, but, you know, I think our our last question is really, and you touched on this earlier, but I think you have been really great over the years about being really heavily involved on the logistics side. And last year was a catalyst, I think, for a lot of companies to really start to look at logistics as a, you know, one of the biggest margin drivers of the business, right, with tariffs being implemented.
Matthew Burkett
sure.
Matthew Michaud
Tariffs, we couldn't change, but there are certainly other elements of the business that you can maybe look at more closely. And, in the past, you know, there's companies that maybe their finance team didn't daily talk with the operations team or or vice versa. Right? And so, you guys have always been really intentional about that. And so I guess, like, let's say you're a company, you know, just starting out and you know there's gonna be some seasonal aspect to the business. You know, what would you suggest or, you know, what has really kind of worked internally for you guys outside of just kind of reporting structure that, you know, you found is is really beneficial for for kind of future success?
Matthew Burkett
Yeah. That's great great point, Matthew. I think for us, you know, we've formally made those line changes the last couple of years, but informally, we've worked together since I've been here. So I think in my view as a CFO, we I I have to know the entire business and that might seem like impossible for for some, but I just feel like for me to be effective, like, I gotta have to know the numbers and you have to commit time and you have to get involved in the business, but you have to also know what are the big you gotta prioritize your time on like, what are the big the big buckets, right? So for us, inventory is huge. And then with that, it's getting inventory here is huge, whether that's tariffs and ocean import cost. So having those good relationships, knowing that, having good teams to be able to understand the full, you know, cash impact and also margin impact of the business. So and then I was just excited it's on the outbound too. So I'm very involved on the outbound side. I think as CFOs wanting to make an impact, being a part and influencing those big areas of your business, whether that's inventory, labor, marketing, shipping, or whatever your bucket is. Right? I think you gotta really know those are the the impact areas, and you you have to insert yourself or be involved, but and and do it in a way that is, you know, what, diplomatic, nonthreatening. Right? Trying to learn and discover and help them. So but for us, it's been a good a good alignment, just to bring value to the business and understanding the complexities with, like you said, the tariff environment and, but also then even the ocean freight environment has evolved over time, right, with it was super expensive containers. They've jumped around all over the place, but, you know, you need to be be a part of those meetings and conversations to drive drive value and understand, those parts of your business. So
Matthew Michaud
Definitely. Well, great. Well, thanks so much, Matt. We re we really appreciate you joining. You know, we're we're we're wrapping up on time here, but I'd like to thank everybody for joining. Hopefully you've been able to take something valuable out of this conversation. You know, if you're a seasonal business and, you know, you're looking to, set yourself up for success, you know, I think we're certainly open to chatting and seeing how Flexport or Flexport Capital can can help with that. Hopefully you've learned from from Matt here and and he's been able to successfully do that for a few years. So if you wanna connect with him and and hear about a little bit more, you know, in-depth on his experiences, you can find him on LinkedIn at matthew Burkett, underfund.com. And and if you wanna connect with us, we're at at capital@flexport.com. So wishing luck to everybody as we head into the second half of the year here, and and hope you have a great rest of your day.
