Funko (FNKO) Q4 2025 Earnings Call Transcript

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DATE

Thursday, March 12, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Josh Simon
• Chief Financial Officer — Yves Le Pendeven

TAKEAWAYS

• Net Sales -- $273 million, up 9% quarter over quarter, outperforming prior company expectations.
• Gross Margin -- 41%, exceeding guidance and marking seven out of the last eight quarters above 40%, excluding the second quarter in 2025.
• SG&A Expenses -- $91 million, representing a 12% decrease year over year.
• Adjusted EBITDA -- $23 million, at the high end of internal forecasts.
• Europe Sales Growth -- Sales up 20%, double the market growth per Circana Retail Tracker, with Funko ranking as the second-largest collectible brand in the region.
• Double-Digit POS Growth in Europe -- Maintained throughout the quarter and continuing into Q1, while U.S. POS turned positive year over year in Q4, per Yves Le Pendeven.
• 2026 Guidance: Net Sales -- Expected to be flat to up 3%, with Funko core products forecasted to increase high single digits and Loungefly projected to decline double digits due to SKU rationalization.
• 2026 Guidance: Adjusted EBITDA -- Forecasted between $70 million and $80 million, driven by improved margins, cost actions, and licensing contract renewals.
• 2026 Guidance: Gross Margin -- Expected in the 41%-43% range, primarily due to lower minimum guarantees from key licensing renewals.
• Tariffs and Duties -- Totaled close to $40 million in 2025, with about half attributable to IEEPA tariffs recently struck down.
• Inventory and Retail Restocking -- Reported in a "healthy place" with standard restocking trends continuing into Q1.
• International Expansion -- Appointment of Andy Oddie as Chief International Officer to drive growth in Asia and Latin America, with China and Japan identified as key market opportunities.

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RISKS

• Yves Le Pendeven flagged potential gross margin impact from tariffs, stating, "Currently, we're paying 10% -- the newly announced 10% tariff rates that may go up to 15%," with uncertainty regarding future rates and implications for shipping costs.
• Guidance includes a double-digit decline in Loungefly, attributed to prior SKU cuts, which could pressure overall revenue growth.

SUMMARY

Funko (NASDAQ:FNKO) reported net sales and profitability above internal expectations, highlighting notable gains in European market share and year-end product launches. Management introduced 2026 guidance for adjusted EBITDA between $70 million and $80 million, a significant increase attributed to licensing renewal benefits and cost reduction initiatives, while signaling net sales growth will be flat to modestly positive reflecting segment divergence. New international leadership aims to accelerate growth outside the U.S, with a focus on Asia and Latin America, and long-term margin improvements are tied to licensing economics and pricing actions. Updated commentary indicated no expectation of new borrowing needs in 2026, continuing the company’s Q4 debt paydown trend.

• Josh Simon said, "our sales were up 20% in the EU. That was basically about double the market growth there according to Circana Retail Tracker," confirming Funko's momentum in that region.
• The company is advancing original content partnerships and product innovation, including Bitty Pop! expansion and "Hyper Strike" rapid product initiatives, but emphasized these are longer-term growth drivers not heavily capitalized in current-year forecasts.

INDUSTRY GLOSSARY

• SKU: "Stock Keeping Unit," a unique identifier for distinct product items, often referenced in discussions of inventory or product line rationalization.
• IEEPA tariffs: Tariffs imposed under the International Emergency Economic Powers Act, referenced here as a material component of Funko's import duties.
• POS: "Point of Sale," referring to sales tracked at the retail transaction level, used here to distinguish end-user demand trends in various geographies.

Full Conference Call Transcript

Josh Simon: Well, see, we're just getting back from the Toy Fair circuit. So London Toy Fair, Nuremberg, New York Toy Fair. I've been going to these toy fairs for a while in various capacities. And I can say, definitely, I felt more energy around the Funko brand than I have in a bit. It was really fun to meet with our licensors and retailers. In Q4, we also had a great presence at New York Comic Con. So I had a great chance to meet with a lot of our fans and YouTubers. And so the energy was great. And we're seeing that energy translate into momentum on the business side.

In Q4, our net sales were better than expected, profitability at the higher end expectations. And I know Yves will dive into that detail here in a little bit.

Katie Wilson: And I'm guessing some of that was driven by this guy, Derpy, right behind me.

Josh Simon: One of my favorites, near and dear to my heart, obviously, KPop Demon Hunters. And look, what's great about that one is I think it really demonstrates one of our superpowers, which is how quickly we're able to move in creating these really great collectibles. I think it was about 4 months from ideation and design to getting into fans and consumers' hands in Q4. We also won the Viral Hit of the Year award from Toy Book, which is a really coveted awards program. So that was great. There were plenty of other really fun ways that we came to life in Q4 as well.

It was the final season of Stranger Things sadly, but the Duffers were on the Tonight show with Jimmy Fallon, and they actually reenacted the season and the series finale using only Funko Pop. So that was really fun to see. We launched Pop! Yourself in Europe, which is the experience where you can create a custom Funko Pop of you or a loved one. And we rolled out Bitty Pop! into Walmart. Bitty Pop! is this great example of how we're able to continue to add dimensions to the iconic Funko Pop silhouette. It rolled out in all Walmart doors in Q4. It was incremental placement in the toy aisle.

It was incremental placement at impulse and out of aisle, and it really helped to drive some strong sales in Q4 as well.

Katie Wilson: So during the last earnings call, you talked about the make culture Pop strategy. I believe you mentioned culture, creativity and commerce. How is that going so far?

Josh Simon: Well, if you remembered those -- the 3 Cs, then so far, so good. It's going great. Look, our -- the idea is that how do we participate in all of those moments that are shaping culture. Really, the goal is to become the preeminent brand for turning pop culture into collectibles and also turning those collectibles we create into culture and cultural moments. So let's start with culture. I've said it a few times here. But really, that means just being at the center of the moments that fans are talking about like while it's actually happening. KPop Demon Hunters is a great example of that. But we do it pretty broadly.

We have great relationships with licensors all over the world, pretty much a portfolio of about 900 actively managed licenses at the moment. But in addition to that, there's still a ton of whitespace that we could get after. Sports is one that's a little bit more nascent for us, but we launched a really great new partnership with Topps and Fanatics. We're part of the new MLB Super Pack with trading cards and blind Bitty Pop! products. That rolled out in Walmart, Target, GameStop, sporting goods stores like DICK'S. So just sort of one example in sports. But even in these massive fandoms, I think there's plenty more opportunity for us.

Katie Wilson: And speaking of sports, by the way, did I see Funko in a Super Bowl commercial?

Josh Simon: You did. You did. It was surprising for all of us. I mean I sat down with my family to watch the Super Bowl. And in one of those first commercial breaks, like on comes this really great spot from the NFL that's sort of celebrating the intergenerational love of football and like in an opening frame, in a young kids bedroom, there's a shelf filled with NFL Funko pops. So that was really great to see.

In that sports space, though, I mentioned there continues to be more opportunities in Miami, Inter Miami, the football or soccer club there, if you're here in the U.S., is opening up a brand-new stadium, Miami Freedom Park in a couple of weeks on April 2. We have a presence in their flagship store. It's a Funko and Loungefly shop-in-shop with exclusive products and also a really great unique Pop! Yourself experience that you could only do there in the stadium. And in addition to these sports moments, Q4 was also really great from an entertainment perspective. We had Zootopia 2 from Disney, which was a great movie and a massive hit.

Wicked: For Good and Evil also a great film for us. And other areas that we're expanding into as well, I think the -- I'm sure Yves is a huge fan of this, but the world of romantasy and BookTok, if I'm not mistaken. We just -- we dropped a little teaser video for The Cruel Prince, which is a really popular book on TikTok. It generated like 1 million views within a couple of days. And so that's an area you'll see us expanding into more. Obviously, anime has been huge for us. There are big titles that everyone has heard of like One Piece, which we continue to do well in.

And then newer titles like Dandadan, which was a top seller for us at Walmart in Q4 and continued growth in video games as well, a great franchise, Mouse: P.I that was also strong for us in Q4.

Katie Wilson: And how are you participating in those surprise moments that pop up?

Josh Simon: I mean a lot of it is through speed, as I mentioned earlier, related to KPop Demon Hunters, but we have a new program called Hyper Strike. The idea behind that is like how can we design, manufacture and get products and collectibles into our fans' hands in a matter of days or weeks. So we'll be rolling that out in a more commercial way later this year, but we started experimenting with it in Q4. We were doing a lot of like one-on-one characters for celebrities and friends of Funko. One thing we tried to kind of experiment with is like the insane world of the sort of like online videos, user-generated content meme culture that come up.

So there's a great guy named Jason Gyamfi. He's known as the quarter zip guy. It was one of these like crazy viral trends in Q4. We decided let's make a video of Jason and his Matcha and just send it to him as a gift. And his reaction was great. I think we have a little clip of it to show. [Presentation]

Katie Wilson: Yes. And it's really exciting because this is a new type of product we're offering.

Josh Simon: It is. And one example of a new type of product we're offering because that second C creativity is really about how we take these pop culture moments and then translate them into physical form in some way. So obviously, Bitty Pop!, I talked a little bit about as a new example of a product that's been around for a couple of years, and we're really seeing some strong growth there. It capitalizes on what people love about Funko Pop. We've sold 1 billion units of pops over the years. It's this really iconic silhouette. And so there's more dimensions of Pop! and some net new products that we're working on to drive additional growth.

The thing that's great about that iconic silhouette is starting to think about how we can reach fans and tell stories in new ways. And so we recently announced a partnership with an incredible production company called Rideback, really great storytellers. I think they're experts at creating worlds from products. They produce the LEGO movies. They produced the live action, Lilo & Stitch. Really, really excited to work with them. We're developing some new ideas with them from big feature and animated series ideas in addition to a really interesting unique AI-based animation toolkit they have called Spuree that will allow us to create some content much faster and bring new and iconic forms of storytelling to Funko fans everywhere.

Katie Wilson: You also mentioned commerce as a part of Make Culture POP!. I have a guess that this store is a part of that. Are you expanding how you think about commerce? And is that happening around the world?

Josh Simon: Yes. We really have fans all over the world, and we want to make sure that we're showing up wherever our fans shop. As we like to say, turning shelves into stages, this store is obviously a best expression of how we're able to do that. But there's a ton of other opportunity in the U.S. from a retail standpoint and outside of the U.S. Europe, which has been our primary driver outside of the U.S. for a number of years now is really strong. At the end of the year, we are actually the second largest collectible brand by market share right after Pok mon, which was great.

From January '25 to January '26, our sales were up 20% in the EU. That was basically about double the market growth there according to Circana Retail Tracker. And similar to what we've been able to sort of grow in Europe, the next idea is how do we do that in Latin America and Asia. So as part of that, we just created a new role for a guy named Andy Oddie, who is our long-time Chief Commercial Officer. He has 40 years of really great experience in the toy and collectible space building businesses. He's our new Chief International Officer. He's going to be focused on growth in Asia and Latin America.

And I think his dedicated focus is really going to help us to get traction there. And the opportunity is big for 2 reasons. I mean you think of China, Japan, Korea. China and Japan are the second and third largest toy markets outside of the U.S. So there's a lot of incremental business growth we know we can get in those countries. But the other great thing is like so many cultural trends now globally are being influenced by Asia. So obviously, anime has always been a really big fandom for us, largely coming from Japan. We've seen a huge growth in all things, K-Culture, Korean beauty, K-Pop, Korean food.

So I think our business opportunity to grow there is strong and then the cultural influence that I think will provide a halo of growth all over the world as we develop more relationships with licensors and creators in that region, I think, will also be pretty massive for us.

Katie Wilson: Turning to you, Yves. Could you say a little bit more about the financial results?

Yves Le Pendeven: Sure. Happy to. This is an earnings call after all. So let's get to the numbers. So for the fourth quarter, our net sales were $273 million. We were pleased to finish the year on a high note. We had guided to Q4 being up modestly over Q3. We were actually up 9%, so better than we expected. And by the way, there's more details, including these slides that are posted on our IR website. For gross margin, we were at 41%, and that was again slightly higher than guidance. And by the way, with the exception of the second quarter in 2025, we've now been above 40% for the last 7 of the last 8 quarters.

So really pleased with that trend. Our SG&A expenses were $91 million, and that was down 12% from Q4 of last year. And finally, adjusted EBITDA was $23 million, which again was at the high end of our expectations.

Katie Wilson: How is the financial outlook for 2026?

Yves Le Pendeven: So for 2026, we expect net sales to be up modestly year-over-year, but a substantial improvement in profitability. So specifically, we're guiding to net sales being flat to up 3% compared with 2025 and our adjusted EBITDA between $70 million and $80 million. So let me give you a little bit more color on that. For sales, we expect our Funko core product lines to be up high single digits year-over-year, but that's offset by Loungefly down double digits, and that's primarily due to the SKU cuts that we implemented last year.

Josh Simon: And one thing that I'll jump in and add about Loungefly is that we are really excited about what the growth potential for that business could be. I think there's a really unique way to own this space of wearable storytelling as we like to call it. We know there's a really passionate fan base there for the product. So as a result of that, we just put in place our first-ever GM for the Loungefly business, Jessica Kong. She's a lot of really great experience across lifestyle brands and experiential. We think she'll be really great for the business. She's about a month in.

We're already pretty far along in building the strategy and plans to get that brand and business back to growth, and we'll share more details about that in the next quarter.

Yves Le Pendeven: Thanks, Josh. So back to our guidance. For gross margin, we expect 41% to 43% for 2026. And that increase over the recent trend is really driven by the renewal of some key licensing agreements with our major studio partners, which will result in lower minimum guaranteed royalties. As far as tariff assumptions, we're assuming that tariff rates remain around 15% for the remainder of the year. And in terms of refunds, we're exploring all avenues, and we'll update our guidance when we have more information later this year. So finally, with regard to adjusted EBITDA, we expect a substantial improvement. That really is driven by actions that we've already taken.

That includes all of the tariff mitigation strategies that we implemented last year, including price adjustments and cost reductions annualizing, the renewal of the licensing contracts that I mentioned. And finally, just beginning to see traction on some of our growth initiatives, primarily in the Funko product lines, including Bitty Pop! and Pop! Yourself, which we launched in Europe last quarter.

Katie Wilson: Josh, how do you see 2026 shaping up?

Josh Simon: We're all really excited for 2026. I think it's probably the strongest entertainment slate that I've seen in the last 4 or 5 years. From a film standpoint, we've got Mandalorian and Grogu, Toy Story 5, Moana Live action, all -- tons of great things for Disney. Supergirl from DC, Masters of the Universe, Minions 3, Spider-Man: Brand New Day, Avengers: Doomsday at the end of the year. This week, Netflix's live action series of One Piece just debuted, Season 2 of One Piece, which is always huge for us. Then obviously, in the sports world, it's a World Cup year. We have the England, U.S. and French teams.

I mentioned we just signed this new deal with McLaren, some new product launches that we have coming up that I'm just going to tease for a little bit now. But really, when you take a step back and look at what's driving the toy industry right now, there's 3 trends. It's coming from growth in collectibles, growth in licensed IP and growth in kidult. Those are all areas that sort of squarely are in the Funko wheelhouse. And so it's really just about us executing this year.

Katie Wilson: Well, with that, we'll turn to our questions here. And the first question is coming in from Stephen Laszczyk of Goldman Sachs. Please describe the shape of the flat to plus 3% guidance past Q1. Should it be pretty consistent throughout the year? And what gets you to the top versus low end of that guide?

Yves Le Pendeven: Sure. I'll take that one. Yes, it should actually be pretty consistent throughout the year. This is not a hockey stick plan where we depend on having a huge second half of the year. We actually expect Q2 to comp up a little bit over last year that was pretty disrupted by the tariff impact when those were first announced and then also pretty steady growth throughout Q3 and Q4 as well.

Katie Wilson: To what extent does Funko view original content creation as a growth driver? How much does the company plan to invest in original content? And how does AI play into this strategy?

Josh Simon: I mean, look, I'd say as a growth driver, I think it can be a serious growth driver in the long term. I mean obviously, our entire business is driven by entertainment content and IP. And so I think as we explore more dimensions of storytelling through the Funko universe, I think over time, assuming those things are hits and people love it and watch it, we think it can actually drive growth, but it's going to take time to develop, produce and sort of get that content out to audiences. Look, I think we're seeing the same trends everyone is from an AI standpoint in storytelling.

We really believe in the power of people to tell great stories, our design teams and creative teams internally to craft these great characters. So far, it's been a great tool for efficiency and letting our teams focus more on the creative work than the busy work. And then I think from a capital standpoint, I mean, look, we're looking to partner with the same exact partners who we already work with on the licensor side, some of the biggest studios around the world to help us develop and create these elements of content, movies, TV, et cetera.

So from our standpoint, we're looking to rely on their expertise on the storytelling side and the partnership side and shouldn't be a significant capital investment from us.

Katie Wilson: Does Funko need to use any of its extended credit agreement in 2026? Or will the company continue to pay down debt like they did in Q4?

Yves Le Pendeven: So the answer is no, we don't expect to need to do any additional borrowing. We're managing right now on our operating cash flows and expect to continue to do so. We make regular quarterly principal and interest payments on the debt, and we plan potentially later in this year and certainly early next year to make some incremental debt paydowns like we did in Q4.

Katie Wilson: Eric Wold of Texas Capital asks, can you break out the POS trends and inventory restocking domestically versus Europe? And if you saw any noticeable trends positive or negative as the quarter progressed? What about so far during Q1?

Yves Le Pendeven: Yes, great question. We did see a continuation of the trend that we spoke about in Q3. We continue to see great double-digit growth in POS sales in Europe. And in the U.S., we actually saw an improving trend throughout Q4 to a positive comp year-over-year. And actually, we've seen that trend continue into Q1. From a retailer inventory point of view, we watch that obviously very closely from the larger partners that report that information to us. And I think it's in a healthy place right now and restocking is kind of going as we'd expect. Yes.

Katie Wilson: Within the 2026 guidance, what would you highlight as the key initiatives to both drive top line results and margin versus 2025?

Josh Simon: I guess I'll start, and from a top line standpoint, I mean, obviously, I just -- I talked about the content slate. That's a huge driver of top line growth this year. Bitty Pop! is another example of that. A lot of the broader initiatives that I mentioned, we'll start to seed into this year. So international growth, some of the new products, those are things that we'll see, but you'll really start to see us drive incremental growth from that sort of further into the future. There's also some fun new initiatives that we have this year, too. We talked about World Cup. We have a fun lineup that's going to launch later this year, celebrating America's 250th.

I mentioned the Pop Mystery products that are launching later this year. So all of those things will start to add up. But I think primarily like the strength we've seen in Bitty, the strength we've seen in the entertainment slate should drive a lot of the top line growth. And you want to take the margin...?

Yves Le Pendeven: Yes, sure. From a margin perspective, I spoke about some of the main drivers already. The good news is we're forecasting to have a better margin than we've ever had. And those -- that's largely driven by things that are in our control, such as the price adjustments that we made last year and the renewal of some of our major licensing contracts. Now as we kind of go through the rest of the year, there will probably be puts and takes. I'm hoping for some favorable trends within the tariff world. Currently, we're paying 10% -- the newly announced 10% tariff rates that may go up to 15%. Unsure what that might be later on in the year.

On the other hand, we're also monitoring the situation right now in terms of oil prices and potential impact to shipping costs. So there are a few unknowns. But for the most part, we feel confident about maintaining that level of gross margin.

Katie Wilson: Keegan Cox of D.A. Davidson asks, can you quantify the tariff impact you experienced in 2025? And what incremental pressure you expect in the first half of 2026?

Yves Le Pendeven: Sure. So in 2025, our total tariffs and duties were close to $40 million and about half of that was related to the IEEPA tariffs, so the ones that were recently struck down.

Katie Wilson: And for the first time, we've also invited investor questions from our investor base. So the first one is to what extent has Funko signed new or expanded IP partnerships ahead of the relatively strong film slate in 2026?

Josh Simon: Well, look, I think as it relates to the film slate itself, the good news is last year, we renewed licenses with all of the major studios around the world. Disney, which is inclusive of Lucasfilm; Pixar; Marvel; Netflix; Paramount Universal. We really value those relationships. We spend a lot of time with those partners. So from a '26 slate standpoint, I think we're in pretty great shape there. I mentioned some of the World Cup teams that we signed licensing deals with.

I think for us, like the -- kind of talking about some of the white space earlier, for me, the focus is really thinking about what are those net new kind of white space incremental areas where we don't currently operate. So I'd say the world of creators is a huge example of that. We appointed a new Board member, Reed Duchscher, who represents some of the biggest creators in the world who everyone is familiar with on Twitch and YouTube and TikTok. He's been a really invaluable adviser and looking to tap into his expertise and guidance as we embark more in that space.

Katie Wilson: Coming in from an investor in South Africa. The whole of South Africa would love it if you would make Funko pops of the Springboks Rugby team.

Josh Simon: Interesting. Well, let's see, I don't want to let South Africa down. So we will look into it. But it's funny, it's a great question. I can't expound a lot on Rugby, which I apologize to any fans out there, but I respect the sport. But it's a great question. I think it definitely, I think, showcases both the opportunity that exists in sports and also just kind of the global extent of our fandom. So fun to hear a question from an investor in South Africa. But we will look into it.

Katie Wilson: Well, that does wrap up our questions. Josh, any final words?

Josh Simon: Well, I just want to thank you for hosting and being here today. Thank everyone for watching. Excited to be back in May with our next earnings call and continue to share our progress across the business.

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