Sign in
FI

Funko, Inc. (FNKO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $190.7M was within guidance, gross margin of 40.3% and adjusted EBITDA of -$4.7M were better than expected; management withdrew FY25 guidance due to escalating and volatile tariff policy, creating near‑term uncertainty .
  • Relative to S&P Global consensus, revenue was essentially in line ($190.7M vs $192.0M*), while adjusted/normalized EPS beat (-$0.33 vs -$0.44*) on lower SG&A and slightly better product margins and reserves .
  • U.S. tariffs are the key swing factor; Funko is accelerating supply-chain diversification (targeting ~5% of U.S.-bound product sourced from China by YE25) and implementing cost actions including a >20% workforce reduction in 2025 .
  • Liquidity stood at $90.9M with covenant compliance as of 3/31, but the Q1 10‑Q includes a “going concern” disclosure given expected Q2 tariff headwinds; management has initiated lender discussions for covenant relief and debt refinancing .
  • Stock reaction catalysts: guidance withdrawal and going‑concern language (risk), pace of tariff offsets (~$45M estimated headwind to be fully offset within the year), and continued international/EMEA momentum and sports licensing expansion (WNBA, MLB Pop! Yourself) (opportunity) .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin (40.3%) and adjusted EBITDA (-$4.7M) came in better than expectations; management cited slight upside across product margins, reserves, and discounts/allowances, with minimal tariff impact in Q1 .
    • International remained a standout: management highlighted share gains and POS outperformance in Europe’s G5 (+8% vs toy industry +1% per Circana) and continued expansion of licensed/partner stores (Philippines announced in April) .
    • Strategic growth vectors gaining traction: DTC (Fan Rewards, Pop! Yourself), and sports tie-ins (100% sell‑through at NBA All‑Star activation; WNBA Pop! figures launch) .

  • What Went Wrong

    • U.S. tariffs escalated/turned volatile post‑April 2; management paused most U.S.-bound direct‑import orders from China in April, expected to negatively impact Q2, leading to withdrawal of FY25 outlook .
    • Q1 net sales declined 11.6% YoY (to $190.7M), with pressure across categories (Core Collectible -8%, Loungefly -13%, Other -39%) and U.S. geography (-17% YoY) .
    • Pop! Yourself was hampered by Mexico border shipping delays; company flagged a “going concern” disclosure in the Q1 10‑Q given Q2 headwinds and covenant pressure, though currently in compliance and engaging lenders .

Financial Results

Headline P&L vs prior two quarters

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$292.8 $293.7 $190.7
Gross Margin %40.9% 42.4% 40.3%
GAAP EPS ($)$0.08 ($0.03) ($0.52)
Adjusted/Normalized EPS ($)$0.14 $0.08 ($0.33)
Adjusted EBITDA ($USD Millions)$31.0 $26.3 ($4.7)

Q1 2025 actual vs S&P Global consensus

MetricQ1 2025 ActualS&P Global Consensus*Surprise
Revenue ($USD Millions)$190.7 $192.0*In line/slight miss
Adjusted/Normalized EPS ($)($0.33) ($0.44)*Beat

Values marked with * are retrieved from S&P Global.

Q1 2025 results vs Company’s prior Q1 guidance (issued Mar 6, 2025)

MetricPrior GuidanceActualResult
Net Sales ($USD Millions)$188–$198 $190.7 Within
Gross Margin %~39% 40.3% Beat
SG&A ($USD Millions)~$91 $84.8 Beat
Adjusted Net Loss ($USD Millions)$22–$25 $17.8 Beat
Adjusted EPS ($)($0.40)–($0.48) ($0.33) Beat
Adjusted EBITDA ($USD Millions)($9)–($14) ($4.7) Beat

Q1 2025 segment breakdown

  • By brand category | Category | Q1 2024 ($M) | Q1 2025 ($M) | YoY % | |---|---|---|---| | Core Collectible | $157.1 | $144.5 | (8.0%) | | Loungefly | $40.7 | $35.4 | (13.0%) | | Other | $17.9 | $10.9 | (39.2%) | | Total | $215.7 | $190.7 | (11.6%) |

  • By geography | Geography | Q1 2024 ($M) | Q1 2025 ($M) | YoY % | |---|---|---|---| | United States | $146.4 | $121.9 | (16.7%) | | Europe | $54.2 | $54.2 | (0.1%) | | Other International | $15.1 | $14.6 | (3.1%) | | Total | $215.7 | $190.7 | (11.6%) |

KPIs and balance sheet highlights

KPIQ1 2025Notes
DTC as % of gross sales22% Comparable to Q1’24
Cash & Equivalents$25.9M Down from $34.7M at 12/31/24
Inventory$87.7M Down from $92.6M at 12/31/24
Total Debt$202.2M Up from $182.8M at 12/31/24
Liquidity$90.9M Decreased from $124.7M at Q4 end

Guidance Changes

MetricPeriodPrevious Guidance (3/6/25)Current (5/8/25)Change
Net SalesFY 2025$1.050B–$1.082B Withdrawn Withdrawn
Adjusted EBITDAFY 2025$80M–$100M Withdrawn Withdrawn
Q1 2025 Guidance SetQ1 2025Revenue $188–$198M; GM ~39%; SG&A ~$91M; Adj Net Loss $22–$25M; Adj EPS ($0.40)–($0.48); Adj EBITDA ($9)–($14) Delivered above/within ranges (see table above) Delivered vs guidance

Additional qualitative outlook updates:

  • Management estimates incremental tariff costs of ~$45M at current rates and expects to fully offset within 2025 via sourcing shifts, pricing, and cost reductions .
  • Company included a going‑concern disclosure in the Q1 10‑Q due to anticipated Q2 tariff impacts; currently compliant with covenants and seeking covenant relief/refinancing .

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Tariffs / MacroNot central; guidance and 2024 outlook focus FY25 outlook assumed 20% tariffs through Feb 27, 2025 Tariff volatility escalated in April; FY25 outlook withdrawn Deteriorated
Supply chain diversification——Accelerating shift to Vietnam/Cambodia; U.S.-bound from China targeted to ~5% by YE25 Improving resilience
DTC / Pop! YourselfDTC expansion (Canada shipping); NFL team logo customization Pop! Yourself momentum cited in Q4 DTC 22% of gross sales; Mexico border delays hurt Pop! Yourself Mixed (steady share, logistics drag)
Sports initiativesNFL customization, holiday initiatives —NBA All‑Star 100% sell‑through; WNBA agreement; MLB Pop! Yourself (June) Building
Regional trends (EMEA)—EMEA strength in Q4 Europe G5 POS +8% vs toy industry +1% (Circana) Positive
Cost actions / Workforce—Severance/charges disclosed in reconciliations >20% workforce reduction planned for 2025; majority implemented Cost-down accelerating
Liquidity / Covenants—Debt $182.8M at 12/31; stronger EBITDA Debt $202.2M; going‑concern disclosure; lender talks for covenant relief/refi Risk heightened

Management Commentary

  • “We delivered net sales within our guidance range and better than expected gross margin and adjusted EBITDA… International continues to be a strength… we’re gaining share as we outpace the broader toy industry…” — Cynthia Williams, CEO .
  • “Since the beginning of April, the extent and volatility of tariffs have intensified… actions include reducing costs, adjusting pricing, and accelerating our diversified sourcing strategy… expect ~5% of future U.S.-bound product to be sourced from China by year end.” — Cynthia Williams, CEO .
  • “Gross margin was 40.3%… SG&A $84.8M… Adjusted net loss of $17.8M… negative adjusted EBITDA was $4.7M, also better than expected… Liquidity was $90.9M… Total debt ~$202.2M…” — Yves Le Pendeven, CFO .
  • “We have decided to withdraw our formal 2025 full year outlook… changes to global tariff policies… we expect to fully offset the impact of incremental tariffs within the year (~$45M).” — Yves Le Pendeven, CFO .

Q&A Highlights

  • Pricing and retailer sentiment: Price changes (to $14.99 for Pops!) were planned in January and supported by retailers; Funko opted not to raise further in response to tariffs to preserve fan value/experience .
  • POS trends: U.S. year‑to‑date POS down mid‑single digits but improved to up low‑single digits in the last 4 weeks; Europe POS high single‑digit comps; Europe G5 +8% vs toy industry +1% (Circana) .
  • Margins: GM slightly above guidance range due to broad-based small positives across product margins, reserves, and discounts; limited tariff impact in Q1 .
  • Cost actions: >20% workforce reduction in 2025 (majority implemented); savings ramp through the year .
  • Balance sheet/going concern: In compliance with covenants; included going‑concern disclosure due to expected Q2 impacts; pursuing covenant relief and refinancing; management “highly confident” in resolution .

Estimates Context

  • Q1 2025 vs S&P Global: Revenue $190.7M vs $192.0M* (in line/slight miss); Adjusted/Normalized EPS -$0.33 vs -$0.44* (beat). Estimate counts were low (2 estimates for revenue and EPS)* .
  • Implications: With FY25 guidance withdrawn and Q2 disruption flagged, Street models likely need to incorporate tariff‑related near‑term pressure (Q2) and management’s year‑end offset plan; watch for estimate dispersion/conservatism until tariff trajectory and sourcing transition clarity improves .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Guidance withdrawal and a going‑concern disclosure are the dominant near‑term risks; management is engaging lenders for covenant relief/refinancing while remaining in compliance as of Q1 .
  • Q1 execution was better than feared: revenue in range, GM and adjusted EBITDA ahead, and SG&A materially below guide .
  • Tariff mitigation is aggressive and swift: targeted reduction of U.S.-bound sourcing from China to ~5% by YE25, plus cost actions and pricing discipline aimed at fully offsetting ~$45M of tariff costs within 2025 .
  • International strength (especially Europe) remains a bright spot and a partial hedge to U.S. volatility; POS outperformance suggests brand momentum outside the U.S. .
  • DTC and sports licensing should support margin mix and engagement (Fan Rewards, Pop! Yourself; WNBA agreement; MLB Pop! Yourself), though near‑term logistics (Mexico border) affected Q1 .
  • Balance sheet watch‑items: debt rose to $202.2M; liquidity $90.9M; Q2 is the pressure point — lender negotiations and covenant relief progress are key catalysts .
  • For trading, focus on: (i) lender/covenant headlines, (ii) Q2 update on tariff offsets and DI order resumption, (iii) EMEA momentum sustaining, and (iv) early reads from sports launches (WNBA/MLB) .