Funko, Inc. 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This summary covers the fiscal year ended December 31, 2025. Funko, Inc. is a leading pop culture consumer products company headquartered in Everett, Washington, operating under the brands Funko, Loungefly, and Mondo. The company designs, sources, and distributes licensed products including figures, plush, accessories, and apparel. The reporting period reflects a challenging macroeconomic environment characterized by retail headwinds, tariff disruptions, and a shift in consumer spending patterns.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Net Sales | $908.2 million | $1,049.9 million | (13.5)% |
| Gross Margin (excl. D&A) | 38.7% | 41.4% | (270) bps |
| Net Loss | $(68.3) million | $(15.1) million | Worsened |
| EBITDA | $14.3 million | $72.7 million | (80.3)% |
| Adjusted EBITDA | $26.6 million | $94.7 million | (71.9)% |
| Cash & Equivalents | $42.1 million | $34.7 million | Positive |
| Total Debt Outstanding | $219.9 million | $193.8 million | Increased |
| Working Capital | $46.5 million | $(18.7) million | Improved |
Note: Debt consists of $94.9 million in Term Loans and $125.0 million in Revolving Credit Facility borrowings. The Revolving Credit Facility is fully utilized with $0 availability.
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 13.5% year-over-year, driven by a 19.9% drop in U.S. sales and a 12.5% drop in other international sales. Europe sales increased slightly by 1.6%. The decline was attributed to tariff disruptions, macroeconomic uncertainty, and retailers reducing inventory levels.
- Margin Compression: Gross margin decreased to 38.7% from 41.4%. This was caused by increased duty and tariff costs, higher inventory reserves, and a shift in product mix, partially offset by price increases implemented in 2025.
- Profitability Deterioration: Operating loss widened significantly to $45.5 million from an operating income of $13.0 million in 2024. The net loss attributable to Funko, Inc. increased to $67.4 million from $14.7 million.
- Debt Structure: The company increased borrowings under its Revolving Credit Facility to $125.0 million (fully drawn). On February 13, 2026, the company executed a Fifth Amendment to its Credit Agreement, extending the maturity date to December 31, 2027, and waiving certain financial covenants for the near term.
Guidance, Outlook, and Risks
Management Commentary & Strategy: Management is focusing on cost-saving initiatives, shifting production to lower-tariff countries (Vietnam), and price increases to mitigate cost pressures. The company is evaluating strategic alternatives to maximize shareholder value. There is no formal forward-looking guidance provided for 2026 revenue or earnings in this filing.
Liquidity & Debt Covenants: The company expects existing resources and future cash flows to meet obligations for the next 12 months. However, the Credit Agreement includes strict covenants, including a minimum Consolidated EBITDA covenant of $15.1 million for the six-month period ending June 30, 2026. Failure to meet these covenants could trigger a default.
Key Risks:
- Internal Controls: The company identified material weaknesses in internal control over financial reporting as of December 31, 2025, specifically related to the order-to-cash process, segregation of duties, and IT general controls (change management and user access).
- Tariffs & Trade: Ongoing uncertainty regarding U.S. trade policies and tariffs on imports from China, Vietnam, Cambodia, and Mexico poses a significant risk to margins and demand.
- Licensing: The business is heavily dependent on third-party licenses. The top 10 licensors accounted for 63% of sales, with Disney-owned properties (Disney, LucasFilm, Marvel) representing 28% of sales.
- Legal Proceedings: The company is involved in several securities class actions and derivative lawsuits. A settlement of $5.4 million (plus $3.0 million in fees) was reached in February 2026 regarding the Lynch v. Mariotti case.
Investor Verification Checklist
- Covenant Compliance: Verify the company's ability to meet the new minimum Consolidated EBITDA covenant ($15.1 million) for the six-month period ending June 30, 2026, given the current loss trajectory.
- Internal Control Remediation: Monitor the progress of remediation plans for the identified material weaknesses in financial reporting controls, as these pose a risk to future financial statement accuracy.
- Debt Refinancing: Assess the feasibility of refinancing the $219.9 million debt obligation maturing in December 2027, considering the current fully utilized credit facility and market conditions.
- Inventory Levels: Review inventory turnover and reserve adequacy, as the company faces risks of excess inventory due to shifting consumer preferences and retailer order cancellations.
- Tariff Impact: Evaluate the effectiveness of the company's supply chain shifts to Vietnam and price increases in offsetting the impact of new tariffs on gross margins.