Funko Q3 2026 Earnings Call Transcript
Funko (NASDAQ:FNKO) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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View the webcast at https://events.q4inc.com/attendee/679782109
Summary
Funko reported a gross margin of 45%, a 5-point improvement year-over-year, and adjusted EBITDA of $32 million, representing a 12% margin. The company reduced net debt to $155 million from over $200 million a year ago, showcasing significant deleveraging progress.
Funko reiterated its full-year guidance, expecting sales to be flat to up 3% and adjusted EBITDA between $100 and $110 million.
The company highlighted its ‘Make Culture Pop’ strategy, executing successful partnerships and launches, such as with WWE and ComplexCon, driving brand engagement. New product innovations like Pop Mystery products and collaborations with cultural icons were launched and received positive market responses.
Management emphasized the potential of live selling and online auctions as new revenue streams, following successful tests with partners like eBay Live. Funko continues to focus on expanding its product lines, including Pop Plush and Biddy Pop, to diversify revenue beyond core Pop products.
Full Transcript
Yves Le Pendeven (Chief Financial Officer)
Up 5% and Europe up 12%. We also delivered gross margin of 45%. That’s a 5-point improvement over Q3 of last year. Big jump. Big jump. And then adjusted EBITDA, also above expectations at $32 million. That’s a 12% margin. So we’re approaching where we’d like to be. And then also, let me call out a few balance sheet highlights because we’ve also made great progress there. Cash of $42 million at quarter end. That’s net debt of $155 million. And that compares to just over $200 million in Q3 of last year. So a lot of progress deleveraging our balance sheet.
Josh Simon (Chief Executive Officer)
Yeah, progress across the board. In the quarter, we see the core business continues to grow, improving the quality and productivity of the portfolio overall and Make Culture Pop, becoming a more deliberate and disciplined growth engine for the company. Tell us about the full-year guidance.
Yves Le Pendeven (Chief Financial Officer)
So for the full year, we’re reiterating our guidance, which was sales flat to up 3%. And then adjusted EBITDA between $100 and $110 million.
Josh Simon (Chief Executive Officer)
Great, great. Well, I think it’s time for a new segment on the earnings call. I think we like to try and mix it up every quarter. This time I thought we’d do a fun reveal of our top 10 IPs in the quarter. We’re gonna have a special guest joining us to kind of round out the top 10. Just worth noting, top 10 represented about 34% of sales in the quarter. So still a pretty big breadth of other fandoms out there. I’ll start with the top 10 and then we’re going to bring in our special guest.
Rounding out at number 10, Avengers. A new entrant onto the list this quarter. Number nine, Star Wars. Number eight, Marvel. Also a new entrant for the quarter, number seven, Hello Kitty. And number six, Demon Slayer. And now, I think first time this has happened in any sort of earnings call history. Excited to bring in one of my favorite celebrities, a big Funko fan himself. To reveal the top five, it’s none other than the Rizzler.
The Rizzler
Yo, what’s up, everyone? It’s the Rizzler. Let’s go. Number five. No way. You’re joking. You’re joking. It’s me as a Pop. Oh, my God. We gotta get this open. Oh, my God. Oh, my God. Wow, this is nice. It’s me wearing a Knicks sweatshirt holding a basketball, bro. This is actually like very well made, bro. This is sick. I love this one. Next up, we got number four, all right, we got K-pop Demon Hunters. Oh, that’s actually kind of cool. It’s like the kitty with the…
It’s like the cat with the bird on top. This is actually kind of cool. I like it. Wow. It’s cool. Very detailed too. Wow. Number four. Cool. All right, number three. Oh, my God. We got Harry Potter, bro. Yo, that’s sick. Harry Potter and his owl. We got number two. Oh, we got the One Piece limited Glow Chase edition Gear Five Luffy. Oh, my God. Yo, it’s a glow-in-the-dark one. I don’t even know if I want to open this one. Oh, my God. This is sick.
Last but not least, number one. Oh. Oh. Pokémon Charizard, bro. I always wanted this one. This one’s sick. Wow. This one is actually cool. Wow. We got Charizard from Pokémon at number one. And that right there is your Funko top 10. Wow. There’s so many amazing Funko Pop. Thank you, Funko.
Josh Simon (Chief Executive Officer)
All right. Thank you, Rizzler. Love having you as part of the Funko family and appreciate your help with that one. And again, a new number one, Pokémon, which has displaced One Piece, pushed that into the number two spot. Pokémon number one. And that’s my Casey Kasem impression for those of you old enough to remember who that is. So turning to the Make Culture Pop strategy, I think the whole idea that we’ve talked about is how do we sense demand earlier, turn those into compelling products and experiences, and then scale them through the right retail channels all over the world. Some really great highlights of seeing that strategy turn into execution this quarter. The first one for me that is top of mind as a personal fan is WWE Monday Night Raw presence extravaganza, whatever you want to call it, totally super fun moment for the team.
We were able to partner at his expense with JD McDonough where he wore a Funko Pop head. There’s a little bit of a storyline going on with fellow wrestler Cody Rhodes and he gets made fun of a little bit. So we were able to partner with him, lean into that moment, and have sort of like an on-TV moment for the brand. He already has the proportions of a Funko. You said it. And it was fun to kind of be part of that broadcast overall. Yeah. We also launched with Danhausen and Oba Femi this last few weeks where we pre-sold the product and it was in partnership with Fanatics and of course WWE. The product is off to a great start and soon will be available for mass.
Well, I think we love WWE, love Fanatics from a cultural relevance standpoint, it’s a great, great example of how Pop has been coming to life. I’d also say from another side of the cultural relevance spectrum, ComplexCon 30th anniversary which happened in LA just a few weeks ago.
Husnal Shah (Chief Product Officer)
Totally. For those that don’t know, ComplexCon is essentially an annual festival meets convention where sneakers, streetwear, art and fashion and music come together. We were partnered with Ken Carson, the headliner of the festival, one of the leading voices in a new generation of rap music to ultimately create a hyper strike with him. So we dropped the product in his booth alongside some other of his collaboration product. But funny enough, a lot of the kids who were in line were in line for the Funko Pop.
So some great demand, great energy and great, great momentum for the brand.
Josh Simon (Chief Executive Officer)
So I think the magic to ComplexCon is the speed at which we were able to operate. We found out from the record company he was headlining it. We only had a few weeks to react. And then, Husnal, you and the team jumped into action.
Husnal Shah (Chief Product Officer)
And you mentioned hyper strike. So that’s an engine we use to bring product to life, capture cultural moments at incredible speed. It’s really about the design teams working in a nonlinear fashion and parallel pathing each and every process such that we can put product out there much sooner. Obviously using all the techniques and the, you know, obsessing over the details as a designer would while creating the sculpt or the packaging, but then also bringing it to market with our onshore production process which is much faster than getting it from overseas.
So really shortening the window between creativity, concept and delivery to come much tighter.
Josh Simon (Chief Executive Officer)
Yeah. And I think the teams, design team, sculpt teams based up in Everett, Washington, using some of the most cutting-edge technology to sort of exercise their creativity, make those sculpts and then see these products, Pops, come to life in, you know, in a couple weeks’ time. Correct. So also speaking of speed, I think sports moments are always like a fun thing to lean into and probably one of the biggest sports moments, if not the biggest sports moment of the year over the summer, the NBA World Championships depends on which team you root for.
But it was hard to miss kind of the energy that the Knicks were generating during their playoff run, had some beautiful moments and even in LA you saw people wearing Knicks jerseys, which is a little strange. But we went with it and as a marketing team we were able to lean into that moment while the playoff run was happening, working with our animation team to create some content. But then also the moment the team won the championship, we were able to launch a five-pack championship celebration pack that turned into the best-selling item of the year for us and came to life at ring night a couple weeks ago as well.
And we followed it up with another Pop to turn Statue of Liberty, the first lady of New York City, into a Pop wearing the Knicks jersey holding the ring, which also we launched right at the beginning of the ring night moment at Madison Square Garden. Awesome. Well, the other big cultural moment during the quarter was America’s 250th. We decided to put our own space on it, calling it Pop 250. And I think really from product creation all the way through to how we sold it, kind of a first-of-its-kind activation for Funko overall.
Husnal Shah (Chief Product Officer)
Definitely. We picked ultimately an icon from each decade through the lens of Funko and then partnered with the king of collectibles, Ken Goldin, to host an eBay Live auction. We had presence on the eBay website, on the social channels and created a lot of viewership to sort of match this content and commerce moment at the first time. Super interesting for us because it’s quite the roadmap for the future as we go deeper into this live auction selling space.
Josh Simon (Chief Executive Officer)
I have to say I was really curious to see how much some of these would go for, some of these one-of-ones. And I think the Babe Ruth went for $26,000 which was really mind-blowing to me.
Husnal Shah (Chief Product Officer)
I thought you were the one that bought it.
Josh Simon (Chief Executive Officer)
Yeah, but and fun to see. I mean from a more modern era top five, you know, we had Michael Jackson, Michael Jordan, Britney Spears. I think the most the modern era represented by Mr. Beast, one of the most amazing popular creators in the world today. So I think an awesome program overall. And like you said, first time we really have started to dip our toe into the live commerce space which we think will be definitely a developing retail channel for us.
Now, the other newness from the quarter is I’m staring at it right here, the Pop Mystery products. We talked about it last quarter, we kind of announced it and teased it at Comic-Con. But it’s out in the market officially and off to a good start.
Husnal Shah (Chief Product Officer)
Yeah, it’s off to a great start in the market. As you all know, we launched with the Plants Flora line and then the WB Horror line as well as our One Piece line and results are outstanding. We sold three times faster than we thought we would, 100% sell-through. We are supplying more product into the market now. And what’s coming up is Hello Kitty as well as Harry Potter and we are very excited because there’s a little bit of newness with the chase elements and the rarity elements in each and every one of them.
So we’re really excited to see results.
Josh Simon (Chief Executive Officer)
I think, if I recall on the Flora line, because some of them have… They all have sort of a one-of-one chase, correct. That one-of-one was actually discovered in Australia, which was cool. Some of the other ones still floating around out in the world waiting to be discovered. And then the last thing from the Make Culture Pop lens is commerce and how we’re coming to life in new ways at retail channels. And I’d say one of the most creative executions and paying off from sort of a revenue and impact standpoint is a new shop-in-shop we launched with the iconic retailer FAO Schwarz in New York City.
Husnal Shah (Chief Product Officer)
Definitely. Obviously doesn’t get more iconic than FAO in New York, but we were able to bring a super immersive brand-right and hyperlocal experience to life. Working with some local artists to truly create a sort of New York version of a Funko store in FAO Schwarz. Also have some very limited product that is only available at that store there, both in the inline Pop version, but also as part of the Pop Yourself offering.
Josh Simon (Chief Executive Officer)
Yeah, I think we have an incredible Swarovski-encrusted, jewel-encrusted Statue of Liberty collab that we did, I think retails for about $2,500 and we’re about 50% sort of sold through on those, which is incredible. And then a really awesome Pop Yourself experience. Some items you can only get there, but you can get your customized Pop made right there in the store. It’s really turning out to be a fun one so far. Okay, so of course we need one more new segment for this earnings call. I figured it’d be fun to go around the table and ask everyone what your favorite Pops were from the quarter. So Yves, we’ll start with you.
Yves Le Pendeven (Chief Financial Officer)
I went with Horror Art the Clown in honor of Halloween recently. And my daughters are big fans of Halloween and horror films. So this was an exclusive we did with Hot Topic and an event called Scare Fair.
Josh Simon (Chief Executive Officer)
A darker side to our CFO. Nice to know. Husnal, what about you?
Husnal Shah (Chief Product Officer)
I went with Zenitsu. He’s a character from Demon Slayer movie Infinity Castle. And I just love the rendition of how the design team brought this character to life in the most dynamic and fluid form where the pivotal moment at which he turns from a comic, you know, cowardice person to this courageous and confident human being is what really captured this well in this format. So
Josh Simon (Chief Executive Officer)
yeah, I think it’s awesome to see the sort of those dynamic moments and a sort of entire scene captured in a singular product. And anime continues to be one of our top selling genres overall.
Husnal Shah (Chief Product Officer)
This one sold 100,000 units already since its launch in September.
Josh Simon (Chief Executive Officer)
Amazing. I think I can guess, but no
Husnal Shah (Chief Product Officer)
surprise, but had to go with Ken Carson not only for the execution and sort of utilizing the hyper strike product engine to turn that cultural relevance into demand, but also how the packaging came to life and sort of opening up our packaging template, working with the collaborator and having them put their own spin on it was super beautiful to see.
Josh Simon (Chief Executive Officer)
And I’ll sort of follow in your ComplexCon footsteps because another product that we dropped there is the Bugs Bunny collab with an incredible artist, Joshua Vitis. Really amazing to see both the size, the scale, the detail and just kind of his artistic point of view overlay on an iconic Space Jam character at this size. For reference, he did a really amazing job executing with this one and was really proud that we were able to do a collab with him and fans loved it as well.
I put this as my favorite for the quarter. Well, now we have some questions. So our first question is from Stephen Lecheck at Goldman Sachs. Yves, I’ll direct this one to you regarding POS trends. Steven says global POS trends have remained strong including mid single-digit percent growth in the US and more than 20% growth in Europe through 1H26. How does management think about the sustainability of those trends as you move through the back-to-school and holiday season?
Yves Le Pendeven (Chief Financial Officer)
All right, so let me give you some stats first for Q3 POS. So globally, and as a reminder, roughly half of our retailers report this information to us. So in units, down 4% year over year. By territory that was down 10% in the US, up 16% in EMEA. I would kind of remind everyone that the dynamics of shipping being disrupted last year post-tariff announcement in Q2. So we had a lot of inventory kind of reaching the shelves in Q3 of last year, which made it a bit more of a tougher comp in the US market.
The other thing I’d point out is that D2C was down 13% again in units and that’s largely a reflection of less promotional activity and discounting on our site. So although units are down, we’ve seen profitability in that channel increase. So that’s Q3. And then year to date through the end of Q3 we were up 3% globally still. So second part of that question, how we expect to see that trend continue through the holidays. And it’s always tough to predict.
I mean we’re certainly hopeful that that kind of like, you know, positive comp continues during the holidays.
Josh Simon (Chief Executive Officer)
Yeah. And still expecting Q4 collectibles to grow in Q4 as well. Okay. Also from Steven about new formats and form factors. To what extent does management expect new formats, Biddy Pop, Mystery, sports-related launches to be revenue contributors in 2026 and 2027? And how should investors think about the opportunity to diversify revenue beyond core Pop products? I’ll take the first part of that question, which is to say I still think there’s a lot of existing and new dimensions of Pop itself that will contribute to more growth this year and beyond.
I mean, I remind everyone Pop has sold more than a billion units to date. It’s definitely this iconic form figure in the world of pop culture. I think certainly you mentioned it earlier, Husnal, but in the world of Pop Mystery, we’re just getting started. We have a dozen IPs that we’ll be launching with that throughout the next year. You mentioned Hello Kitty. You mentioned Harry Potter. Shrek is another one. So you’ll start to see continued IPs on Pop Mystery.
We will be rolling out next year a version of Pop Plush in a few different formats which I think is very much on trend and will continue to do well. And then we continue to have, I think, some exciting plans to develop Biddy. And certainly even in the sports space, we’re working on something that we think will appeal more to the sports collector and so more to come there, I guess, though related to new products because there’s a lot in the pipeline.
Husnal Shah (Chief Product Officer)
There’s a lot in the pipeline and we’re really excited. We are going to be teasing a couple new product lines at the Nuremberg and New York toy fairs. So stay tuned.
Josh Simon (Chief Executive Officer)
Nuremberg in February and New York as well in February. So yeah, a lot of new product lines that are launching next year and we’ll start to, you know, roll those out sort of with our retail partners at those toy fairs which we’re excited about. Okay, next question’s from Eric Wald at Texas Capital Securities. Nick, this one I’ll direct to you. Given the higher prices seen in the secondary market for some of your limited run and special SKUs, what are the opportunities to increase prices to improve gross margins further and why don’t we start there?
Nik Rupp (Senior Vice President of Brand and Marketing)
Yeah, no, it’s a great question, but look, our primary focus is to serve our fans and our consumers and ultimately make products that they fall in love with. What happens after the purchase and after the transaction, that’s up to the consumer. I take that more as a testament to us having a job that we did well rather than seeing that as an opportunity.
Josh Simon (Chief Executive Officer)
Yeah. And I think on those limited edition products, I think the goal is like, let’s grow the market for fans who are interested in limited edition. We’re expanding the genres, the IP, the entry points. And I think that is what will grow the market more than sort of looking at extracting pricing from our sort of core collector fans there.
Nik Rupp (Senior Vice President of Brand and Marketing)
Exactly, exactly.
Josh Simon (Chief Executive Officer)
And then one more question from Eric. Could you take advantage of those higher prices, although we just talked about that, but the continued collectible demand by leaning into live selling events or online auctions.
Husnal Shah (Chief Product Officer)
I’m glad that question came through as well. Certainly. I think that was the opportunity that we tested with the partnership with Goldin and eBay Live and it provided amazing learnings and we are gearing up to lean heavily into that as a new retail stream, but also as a new revenue stream.
Josh Simon (Chief Executive Officer)
Yeah, I think we just finished in the Hollywood store actually earlier today our third test of live selling on TikTok. We just met earlier this week with the head of collectibles for TikTok Commerce. I was in China last week, two weeks ago, and some really great lessons there where I’d say the ecosystem for live selling and live shopping is, well, more developed. As much as it’s growing here, it’s been there for a few years longer and I think some really great learnings that you’ll start to see us continue to grow and scale with, frankly, in Q4 and then beyond into next year as well.
Absolutely. Yeah. Well, first, thank you all for being here. I’d say another quarter. The teams did a great job delivering above expectations. I think our core business continues to demonstrate healthy demand. At the start of the year, we promised everyone growing core collectibles which is happening, that will continue into Q4, improving our profit and margins and strengthening the balance sheet. So great to see the progress this quarter and thank you all for joining and thanks everyone out there for joining and we will see you in a few months for our Q4 earnings forecast.
Until then, thanks for joining us.
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