Funko, Inc. 10-Q Summary: Q2 2026
Business Context and Reporting Period
This summary covers Funko, Inc.'s (FNKO) unaudited financial results for the quarterly period ended June 30, 2026. Funko is a leading pop culture consumer products company selling figures, plush, and accessories globally. The company operates as a single reportable segment and is currently navigating a challenging retail environment characterized by tariff uncertainties, supply chain volatility, and retailer inventory management shifts.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $207.7 million | $193.5 million | $408.6 million | $384.2 million |
| Gross Margin (excl. D&A) | 56.6% | 32.1% | 50.5% | 36.2% |
| Operating Income (Loss) | $22.1 million | ($34.7 million) | $12.5 million | ($57.9 million) |
| Net Income (Loss) | $15.4 million | ($41.0 million) | ($2.7 million) | ($69.1 million) |
| Net Income (Loss) Attributable to Funko | $15.4 million | ($40.5 million) | ($2.7 million) | ($68.1 million) |
| EBITDA | $37.4 million | ($21.1 million) | $42.1 million | ($29.2 million) |
| Adjusted EBITDA | $40.9 million | ($16.5 million) | $52.2 million | ($21.2 million) |
| Cash and Cash Equivalents | $40.7 million (as of June 30, 2026) | |||
| Total Debt | $198.3 million (as of June 30, 2026) | |||
| Working Capital | $38.7 million (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 7.4% in Q2 and 6.4% YTD, driven by price increases implemented in late 2025 and growth in Core Collectible products. Europe sales grew 19.4% in Q2, while Loungefly sales declined 1.7%.
- Margin Expansion: Gross margin improved significantly (56.6% in Q2 vs. 32.1% prior year). This was primarily due to a $25.4 million pre-tax benefit recognized in Cost of Sales related to the recovery of International Emergency Economic Powers Act (IEEPA) tariffs following a U.S. Supreme Court ruling. Excluding this one-time item, margins were supported by product mix and lower royalty impairment.
- Profitability Turnaround: The company returned to net income in Q2 ($15.4 million) from a net loss of $41.0 million in the prior year, largely attributable to the tariff recovery benefit and reduced operating expenses.
- Debt Restructuring: In February 2026, Funko executed the "Fifth Amendment" to its Credit Agreement, extending the maturity date to December 31, 2027, and waiving certain financial covenants for the current period.
Guidance, Outlook, and Risks
- Liquidity and Debt: The company expects sufficient liquidity for the next 12 months based on operating cash flows and existing resources. However, there is no remaining availability under the Revolving Credit Facility. The company plans to seek alternative financing or amend the Credit Agreement prior to the 2027 maturity.
- Tariff Uncertainty: While the IEEPA tariffs were ruled unauthorized, the company faces ongoing risks from potential new tariffs or trade restrictions. Management is shifting production to lower-tariff countries to mitigate costs.
- Legal Contingencies:
- Shumacher/Lynch Litigation: Settled for $8.4 million (paid by insurers) in Q2 2026.
- Securities Class Action (Construction Laborers): The Ninth Circuit reversed the dismissal of claims regarding risk factor disclosures in February 2026; a rehearing petition is pending.
- Privacy Class Action: A new suit filed in May 2026 alleges privacy violations; motions to dismiss are pending.
- Internal Controls: The company continues to remediate material weaknesses in internal control over financial reporting. Disclosure controls were deemed ineffective as of June 30, 2026.
- Strategic Alternatives: The Board continues to evaluate strategic alternatives to maximize shareholder value, though no timeline or assurance of completion is provided.
Investor Verification Checklist
- Tariff Benefit Sustainability: Verify the extent to which the Q2 gross margin expansion is driven by the one-time $25.4 million IEEPA tariff recovery versus organic operational improvements.
- Debt Covenant Compliance: Monitor the company's ability to meet the new minimum Consolidated EBITDA covenant ($15.1 million for the six months ended June 30, 2026) and future Fixed Charge Coverage Ratios starting in Q3 2026.
- Refinancing Risk: Assess the feasibility of refinancing the $198.3 million debt maturing in December 2027, given the current lack of revolver availability and market conditions.
- Inventory Levels: Review inventory turnover and reserves ($11.9 million as of June 30, 2026) to ensure alignment with retailer demand and potential obsolescence risks.
- Legal Exposure: Track the status of the pending securities class action appeal and the new privacy litigation, as outcomes could result in material costs or reputational damage.