When Topps announced its decision to combine forces with an acquisition company on Tuesday, the company offered some interesting details on its finances and future plans.
In touting the initiatives that led to its current valuation, Topps revealed it make a $92 million profit in 2020—a strange and unexpected time in which the sports card market exploded in the midst of a worldwide pandemic. Despite a gradual return to normalcy, the company and its new partner, Mudrick Capital, remain bullish on the future. Their focus, though, isn’t strictly on the boxes you can (or can’t) buy at Target, through your hobby shop or online. Topps is a multi-level company, with a strong candy business and, if you didn’t know, a strong foothold in executing gift card transactions for companies like Netflix, DoorDash and Uber.
Topps’ sports and entertainment business is bigger than the confectionery side with sales of physical products, like sports cards, making up 55 percent of its revenue. Six percent comes from digital and four percent from the gift card side. The other 35 percent comes from selling its candy products—certainly a significant chunk of the business that most collectors don’t always think about.
That revenue has skyrocketed over the last few years, especially on the sports and entertainment side. Topps says we bought $210 million worth of cards and related products in 2019 and $314 million in 2020. They expect those figures to climb to $398 million this year and $454 million in 2022.
Overall, the company had sales of $567 million last year and estimates it will haul in $692 million in 2021 and $777 million in 2022.
In its investor presentation held in conjunction with Tuesday’s announcement, Topps highlighted its success in its ecommerce business, notably on-demand trading cards like Topps Now, Project 2020, Project 70, curated sets, its Montgomery Club platform and collaborations with athletes and influencers for special sets sold through its website. Its breakdown of sports and entertainment product sales shows 25 percent took place at retail outlets (Target, Walmart, Meijer, Dollar Tree, etc.), 45 percent through hobby channels (shops, breakers, etc.) and 30 percent via ecommerce, which it indicated was a “significantly growing piece of our distribution channel.”
Topps indicated it would be looking to expand its trading card licenses in the near future. They’ve already secured the rights for Euro Cup soccer in 2024 and 2028 through UEFA and are looking to “expand globally and invest in new channels.” One of those channels could involve college athletes. The company says it believes it “will be a big factor” when current college athletes have more leeway in their ability to make money by marketing themselves.
Look for Topps to further expand with Blockchain/NFT (Non-Fungible Token) initiatives across multiple areas and spend more money on mergers and acquisitions. That doesn’t necessarily mean other sports card licenses (although you’d have to think they’ll aggressively chasing them). Topps appears to be thinking more toward those digital asset classes and partnering with other recognizable entries across the worlds of sports and entertainment. Jason Mudrick, the founder and CIO of Mudrick Capital says they like Topps’ existing business while essentially getting the company’s high-profile position in the collectible market for free as it looks toward expanding into more blockchain and NFT initiatives. He told Institutional Investor that blockchain “will allow the company to participate in the secondary market trading of collectibles for those that want to trade digital.”
It’s a futuristic approach that will extend well beyond what traditional sports card collectors may be thinking. In short, Topps will keep a foot in its traditional past, while taking a big leap into the NFT world.
It’s quite a story when you consider the trading card business wasn’t such a hot ticket 5-10 years ago. Chairman Michael Eisner and his executives have successfully steered Topps into a new age and has done so without having NFL, NBA or NHL trading card licenses for quite a while now.
Assuming there are no roadblocks that arise, it’s pretty clear that Topps will soon have the resources to chase just about whatever types of deals it wants to in the years ahead.
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