Funko Reports $28.1 Million Net Loss in Q1 2025, Sales Decline 11.6%

Funko, Inc. reported a net loss of $28.1 million for the first quarter of 2025, a significant increase from the $23.7 million loss recorded in the same period last year. The company's net sales fell to $190.7 million, down 11.6% from $215.7 million in the first quarter of 2024. This decline was attributed primarily to reduced sales to specialty and mass market retailers, with U.S. sales alone dropping 16.7% to $121.9 million. Despite a decrease in cost of sales, which fell by 12% to $113.9 million, the overall loss was exacerbated by a higher operating loss of $23.2 million compared to $14.9 million in the previous year.

In terms of operational metrics, Funko's selling, general, and administrative expenses remained relatively stable, decreasing slightly to $84.8 million from $85.6 million. The company also reported a decrease in interest expenses, which fell by 39% to $3.8 million, reflecting a lower average debt balance. However, the overall financial performance was negatively impacted by a combination of decreased sales and ongoing challenges in the retail environment, including inventory management and pricing pressures due to tariffs.

Strategically, Funko has been adjusting its inventory buy-in strategy to focus on non-exclusive core products in response to the challenging retail landscape. The company has also been exploring opportunities for geographic expansion, with approximately 36% of its net sales in the first quarter coming from international markets. Funko's employee headcount increased to 54,252 shares of Class A common stock outstanding, up from 52,967 shares at the end of 2024, indicating a slight growth in its workforce.

Looking ahead, Funko's management has expressed concerns about its ability to comply with financial covenants under its credit agreement, particularly the Maximum Net Leverage Ratio and Minimum Fixed Charge Coverage Ratio, which are expected to be breached by the end of the second quarter of 2025. The company is actively pursuing strategies to enhance liquidity, including potential debt issuance and cost management initiatives. However, there remains substantial uncertainty regarding the effectiveness of these measures and the overall impact of macroeconomic factors on future performance.