Core Viewpoint - Pomerantz LLP is investigating claims of potential securities fraud or unlawful business practices involving Funko, Inc. and its officers or directors [1] Group 1: Company Developments - Funko announced the departure of its CEO, Cynthia Williams, effective July 5, 2025, which led to a significant stock price decline of $0.51 per share, or 10.49%, closing at $4.35 per share on July 7, 2025 [2] Group 2: Legal Context - Pomerantz LLP is recognized as a leading firm in corporate, securities, and antitrust class litigation, with a history of fighting for victims of securities fraud and corporate misconduct [3]

Company Overview - Funko's net sales in 2023 reached $1.1 billion[7] - In 2023, the United States accounted for 69% of Funko's sales, while international sales contributed 31%[7] - Core Collectibles represented 73% of 2023 sales, Loungefly accounted for 20%, and other brands made up the remaining 7%[8] - Wholesale channels accounted for 79% of 2023 sales, while direct-to-consumer (DTC) channels contributed 21%[9] Strategic Initiatives - The company aims to reduce SKU counts by approximately 30% to focus on core product lines[42, 48] - Funko implemented more than $150 million of annualized cost savings in 2023 compared to peak Q4 2022 levels[45] - Workforce reductions of approximately 25% were implemented from year-end 2022 levels[45] Financial Performance & Targets - In 2017, the Adjusted EBITDA margin was 17.4%, while in 2023, it was 7.0%[38] - The company expects equity-based compensation of approximately $15 million, depreciation and amortization of approximately $64 million, and interest expense of approximately $18 million for the full year 2024[69]

Group 1 - Funko's net sales decreased by 11.6% to $190.7 million in the first quarter [1] - Despite the decline in sales, Funko's gross margin improved to 40.3% [1] Group 2 - The report suggests a resilient collector economy that continues to thrive [1]

Group 1 - Funko's shares have experienced a significant decline, down 50.3% over the last year and 64.1% year to date [1] - The decline in Funko's stock price is attributed to weak performance [1] Group 2 - Crude Value Insights provides an investing service focused on oil and natural gas, emphasizing cash flow and companies with growth potential [1] - Subscribers have access to a stock model account, cash flow analyses of exploration and production firms, and live discussions about the sector [2] - A two-week free trial is available for new subscribers to explore the oil and gas sector [3]

Financial Data and Key Metrics Changes - Total net sales for Q1 2025 were $190.7 million, in line with guidance [21] - Gross profit was $76.9 million, resulting in a gross margin of 40.3% [22] - Adjusted net loss was $17.8 million, or $0.33 per share, which was better than expected [22] - Negative adjusted EBITDA was $4.7 million, also better than expected [22] - Cash and cash equivalents stood at $25.9 million, with total debt at approximately $202.2 million, an increase of $19.4 million from the previous quarter [23] Business Line Data and Key Metrics Changes - Direct to consumer sales accounted for 22% of gross sales, comparable to the previous year [21] - Shipping delays affected sales of the Pop Yourself line in Q1 [22] Market Data and Key Metrics Changes - In the U.S. market, year-to-date point of sale (POS) was down mid-single digits, but improved to low single digits in the past four weeks [37] - In Europe, POS showed high single-digit year-over-year growth, significantly outpacing the overall toy industry [39] Company Strategy and Development Direction - The company aims to diversify into sports, gaming, and music to attract new fans [5] - Funko is focusing on improving retail opportunities and experiential engagements to delight collectors [5] - The company is withdrawing its 2025 outlook due to uncertainties related to global tariffs and macroeconomic conditions [9][24] - A cross-functional tariff task force has been established to mitigate tariff impacts and optimize operations [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the accelerated pace of change in the macro environment and its impact on business decisions [6] - The company is confident in its strategy and is taking disciplined actions to strengthen its foundation [8] - Management expects to fully offset the impact of incremental tariffs within the year through various initiatives [25] Other Important Information - The company is expanding its global footprint with new licensed stores in the UAE, China, and the Philippines [8] - Funko is committed to maintaining pricing to protect the fan experience despite rising costs [13] Q&A Session Summary Question: Can you offer extra color on mitigation efforts regarding price adjustments and retailer sentiment? - Management indicated that pricing decisions were made in January, and retail partners have been supportive of maintaining price points despite tariffs [32] Question: Can you discuss POS trends and expectations for the upcoming months? - Management noted that POS in the U.S. has shown improvement recently, while Europe continues to see strong growth [38] Question: Were the pricing changes planned prior to the tariffs? - Management confirmed that the pricing changes were planned before the tariffs were announced [43] Question: What drove the better-than-expected margins? - Management attributed the improved margins to slight improvements across product margins and inventory reserves, with no major drivers impacting Q1 [46] Question: How will the headcount reduction impact future quarters? - Management explained that the headcount reduction will provide cost savings throughout the year, with most reductions already implemented [48]

Financial Data and Key Metrics Changes - For Q1 2025, total net sales were $190.7 million, in line with guidance, with a gross margin of 40.3% and adjusted EBITDA at a negative $4.7 million, both better than expected [7][22][20] - Adjusted net loss was $17.8 million or $0.33 per share, which was also better than expectations [22] - Cash and cash equivalents stood at $25.9 million, total debt increased to approximately $202.2 million, and total company liquidity decreased to $90.9 million [23][24] Business Line Data and Key Metrics Changes - Direct to consumer sales accounted for 22% of gross sales, comparable to the previous year [21] - Shipping delays affected sales of the Pop Yourself line in Q1, indicating operational challenges [22] Market Data and Key Metrics Changes - In the U.S. market, year-to-date point of sale (POS) was down mid-single digits, but recent trends showed low single-digit growth in the past four weeks [35][37] - In Europe, POS grew by 8%, significantly outpacing the overall toy market growth of 1% [8][38] Company Strategy and Development Direction - The company aims to diversify into sports, gaming, and music while enhancing retail opportunities and experiential engagements [6] - A focus on tariff mitigation strategies has been implemented, including sourcing diversification and cost discipline measures [10][11] - The company is committed to maintaining pricing to ensure accessibility for fans, despite rising costs [13][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged intensified pressures from tariffs and selective consumer behavior, leading to the withdrawal of the 2025 outlook [9][24] - The company remains confident in its ability to offset incremental tariff costs through strategic actions [25][26] - Management emphasized the importance of partnerships and community engagement in navigating the current macro environment [28] Other Important Information - The company has reduced its global workforce by over 20% as part of cost-saving measures [12][46] - A cross-functional tariff task force has been established to address the impact of tariffs on operations [10] Q&A Session Summary Question: Can you offer extra color on mitigation efforts regarding price adjustments and retailer sentiment? - Management indicated that pricing decisions were made in January, and discussions with retail partners have been positive, supporting the decision to maintain price points [32][33] Question: Can you discuss POS trends and expectations for the upcoming months? - Management noted that while the U.S. market faced challenges, recent trends showed improvement, and Europe continued to perform well with high single-digit POS growth [35][38] Question: Clarification on pricing plans and margin drivers? - Management confirmed that planned price adjustments were not in direct response to tariffs and that gross margins exceeded expectations due to slight improvements across various metrics [42][44] Question: Regarding the headcount reduction, how should it be viewed moving forward? - Management explained that the majority of the headcount reduction has already occurred, with ongoing benefits expected throughout the year [46][48]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FUNKO, INC. (Exact name of registrant as specified in its charter) Delaware 35-2593276 (State or other jurisdiction of incorporation or organization) 2802 Wetmore Avenue 98201 Everett Washington (Address of principal executive offices) (Zip Code) (I.R.S. Employer Identification No.) For the quarterly period ended March 31, 2025 OR ☐ TRANS ...

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Funko's Q1 2025 net sales decreased year-over-year, but gross margin improved and Adjusted EBITDA was better than expected, despite a wider net loss Q1 2025 vs Q1 2024 Financial Summary | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $190.7M | $215.7M | -11.6% | | Gross Profit | $76.9M | $86.3M | -10.9% | | Gross Margin | 40.3% | 40.0% | +30 bps | | Net Loss | $(28.1)M | $(23.7)M | Increased Loss | | Adjusted Net Loss* | $(17.8)M | $(9.2)M | Increased Loss | | Adjusted EBITDA* | $(4.7)M | $9.6M | Negative Swing | | Diluted EPS | $(0.52) | $(0.45) | Increased Loss | | Adjusted Diluted EPS* | $(0.33) | $(0.17) | Increased Loss | - The company delivered net sales within its guidance range, while gross margin and adjusted EBITDA were better than expected despite a challenging environment[1](index=1&type=chunk)[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Cynthia Williams highlighted resilience and international strength, taking decisive action on tariffs and accelerating supply chain diversification - International business remains a key strength, with increased sell-through in the European G5 markets and an expanding global footprint[3](index=3&type=chunk) - Due to intensified and volatile tariffs on imports from China, the company has taken swift action to protect margins and liquidity[4](index=4&type=chunk) - Funko is accelerating its diversified sourcing strategy and expects only **5%** of its future US-bound products to be sourced from China by the end of the year[4](index=4&type=chunk) [Business Performance Analysis](index=1&type=section&id=Business%20Performance%20Analysis) Total net sales declined **11.6%** year-over-year, driven by a **16.7%** drop in the United States market, while European sales remained stable [Net Sales by Brand Category](index=1&type=section&id=Net%20Sales%20by%20Brand%20Category) All brand categories experienced year-over-year sales declines in Q1 2025, with the 'Other' category showing the sharpest decrease at **39.2%** Net Sales by Brand Category (in thousands) | Brand Category | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Core Collectible | $144,479 | $157,121 | (8.0)% | | Loungefly | $35,374 | $40,676 | (13.0)% | | Other | $10,886 | $17,902 | (39.2)% | | **Total Net Sales** | **$190,739** | **$215,699** | **(11.6)%** | [Net Sales by Geography](index=2&type=section&id=Net%20Sales%20by%20Geography) Sales decline was concentrated in the United States with a **16.7%** decrease, while European sales were nearly flat Net Sales by Geography (in thousands) | Geography | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | United States | $121,909 | $146,366 | (16.7)% | | Europe | $54,205 | $54,243 | (0.1)% | | Other International | $14,625 | $15,090 | (3.1)% | | **Total Net Sales** | **$190,739** | **$215,699** | **(11.6)%** | [Balance Sheet Highlights](index=2&type=section&id=Balance%20Sheet%20Highlights) Q1 2025 balance sheet showed decreased cash and inventories, with total debt increasing to **$202.2 million** from **$182.8 million** Balance Sheet Comparison (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $25.9 | $34.7 | | Inventories | $87.7 | $92.6 | | Total debt | $202.2 | $182.8 | - As of March 31, 2025, the company was in compliance with all its debt covenants[11](index=11&type=chunk) [2025 Full-Year Outlook](index=2&type=section&id=Outlook%20for%202025) Funko withdrew its 2025 full-year financial outlook due to significant uncertainty and ongoing changes in global tariff policies - The company withdrew its 2025 full-year outlook, previously provided on March 6, 2025[8](index=8&type=chunk) - The withdrawal is attributed to the current uncertainty and ongoing changes in global tariff policies[8](index=8&type=chunk) [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2025 financial results show a net loss of **$28.1 million**, decreased total assets, and negative cash flow from operations [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 net sales decreased to **$190.7 million**, with loss from operations widening to **$23.2 million**, resulting in a net loss of **$28.1 million** Q1 Statement of Operations Summary (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $190,739 | $215,699 | | Loss from operations | $(23,198) | $(14,902) | | Net loss | $(28,059) | $(23,666) | | Loss per share (Basic & Diluted) | $(0.52) | $(0.45) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were **$648.4 million**, down from year-end 2024, reflecting lower cash, receivables, and inventories Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $236,736 | $287,059 | | Total assets | $648,401 | $707,254 | | Total current liabilities | $278,220 | $305,794 | | Total liabilities | $434,246 | $470,901 | | Total stockholders' equity | $214,155 | $236,353 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw a net cash outflow from operating activities of **$22.3 million**, a reversal from the prior year, with financing activities providing **$19.3 million** Q1 Statement of Cash Flows Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(22,262) | $14,507 | | Net cash (used in) provided by investing activities | $(6,359) | $2,758 | | Net cash provided by (used in) financing activities | $19,330 | $(27,439) | | **Net change in cash and cash equivalents** | **$(8,721)** | **$(10,343)** | | **Cash and cash equivalents at end of period** | **$25,934** | **$26,110** | [Reconciliation of Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Q1 2025 Adjusted Net Loss was **$17.8 million** and Adjusted EBITDA was **negative $4.7 million**, reflecting a significant decline in adjusted profitability Reconciliation to Adjusted Net Loss (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss attributable to Funko, Inc. | $(27,588) | $(22,663) | | Adjustments (Equity comp, etc.) | $9,758 | $13,426 | | **Adjusted net loss** | **$(17,830)** | **$(9,237)** | | **Adjusted loss per diluted share** | **$(0.33)** | **$(0.17)** | Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(28,059) | $(23,666) | | EBITDA | $(8,104) | $(876) | | Adjustments | $3,441 | $8,650 | | **Adjusted EBITDA** | **$(4,663)** | **$9,574** | | **Adjusted EBITDA margin** | **(2.4)%** | **4.4%** |

Core Insights - The U.S. toy industry is facing significant challenges due to increased tariffs imposed by President Trump, with a 10% baseline tariff affecting nearly all countries and much higher tariffs on China (54%) and Vietnam (46%) [3][5][6] - The tariffs are expected to lead to substantial price increases for consumers, with estimates suggesting potential hikes of 35% to 50% on toys [8][9] - Major toy companies like Hasbro and Mattel are already experiencing stock declines, with Mattel shares dropping over 16.5% and Hasbro losing more than 12% following the tariff announcements [7] Industry Impact - Approximately 77% of toys imported into the U.S. come from China, with Vietnam being a significant secondary source [4] - The tariffs are causing toy companies to scramble for solutions, including potential production shifts to other countries, but these alternatives are also facing tariffs [5][6] - Analysts predict that companies will attempt to renegotiate contracts and alter packaging to mitigate costs, but ultimately, consumers will bear the burden of the increased tariffs [7][8] Consumer Effects - The Toy Association anticipates that price hikes will align with the back-to-school season, disproportionately affecting lower-income consumers [9] - The industry's profit margins are already thin, making it difficult for companies to absorb the tariff costs without passing them on to consumers [8]

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