Funko Reports 14.3% Decline in Q3 2025 Net Sales, Faces Financial Challenges

Funko, Inc. reported a decline in financial performance for the third quarter of 2025, with net sales of $250.9 million, a decrease of 14.3% from $292.8 million in the same period last year. The company's net income also fell significantly, reaching $0.9 million compared to $4.6 million in the prior year, reflecting a 79.4% drop. For the nine months ending September 30, 2025, Funko's net sales totaled $635.1 million, down 16% from $756.1 million in 2024, while the net loss expanded to $68.1 million from $13.7 million.

The decline in revenue was attributed to several factors, including tariff disruptions and general macroeconomic uncertainty, which affected all distribution channels. Specifically, U.S. sales decreased by 20.1% to $155.4 million, while European sales remained relatively stable, decreasing only 0.4%. The company also reported a decrease in sales across its branded categories, with the Core Collectible category down 12% and Loungefly down 5.5%. The overall gross margin for the quarter was 40.2%, slightly lower than the previous year's 40.9%, primarily due to increased shipping and duty costs.

In terms of operational changes, Funko has been actively managing its inventory and adjusting its product offerings in response to market conditions. The company has focused on non-exclusive core products to mitigate the impact of tariffs and has implemented cost-cutting measures, including a reduction in selling, general, and administrative expenses, which fell by 13.9% to $79.8 million. Additionally, Funko's employee headcount has been adjusted to align with its operational needs.

Looking ahead, Funko faces significant challenges, including substantial doubt about its ability to continue as a going concern due to anticipated non-compliance with financial covenants under its credit agreement. The company has entered into a Fourth Amendment to its Credit Agreement, which waives certain financial covenants for the second and third quarters of 2025 but requires compliance with additional milestones. Funko is exploring strategic alternatives, including potential refinancing and a review of its operational strategies, to enhance liquidity and address its financial obligations. The company has also initiated a plan to raise additional cash through equity or debt issuance, as well as to consider potential business opportunities or a sale of the company.