FNKO earnings call transcript, November 5, 2026

Swim, Swim, Water falling off your skin Swim, Swim, I could spend a lifetime watching you Swim, Swim, This is how it all begins Swim, Swim, I just wanna dive, I just wanna dive Pop world, gun away, yes I wake up in the Name a place that I could breathe on this map world Looking like a kitty kitty in this back world Back world, don't know how to act girl I'm in your teeth, tell me where the hell you went

Falling off their skin We'll see you next time.

Swim, water falling off your skin. Swim, swim, I could spend a lifetime watching you. Swim, swim, this is how it all begins. Swim, swim.

Baby, everything can't be so sad. Swat through my face on the west. I feel scared. Swim, swim. I could spend a lifetime watching you. Swim, swim. It all begins. Swim, swim. I just wanna dive. I just wanna dive.

She's from Texas. I can.

And judging by the smile that's written, there's nothing I can.

He's choosing Texas, I can tell.

Well, I guess she forgot.

She used to say.

He used to stay in judging.

Texas, I can tell.

Well, I'm...

The Lone Star State She's from Texas, I can tell by the way He's still stepping round the room And judging by the smile that's free There's nothing I...

He's choosing Texas, I can tell. He's choosing Texas, I can tell. Come on, baby.

Then it left the drama. Play pretend, but you know it's common. You're the one that's only calling. You can blame me, but I ain't the problem.

Pushin' my butt and it's up.

Yeah, it's true.

Now I'm somebody you don't wanna lose. You're just a gay boy.

I ain't tryin' to play, boy. I ain't thinkin' about you. Not thinkin' about you, love.

My own time. I've been doin' me, but I don't mind. That's mine. That's mine. Friends in the backseat. Headed to the club in a taxi. I'm fine. Oh no.

Pushin' my butt and you do. Leveled up, yeah, it's true. Now I'm somebody. You're just a kid.

I love the drama. Time, but you know it's common. You're the one that's only calling me, but I ain't the problem. You're just a kid.

I love the drama.

Hi, everyone. Welcome to our third quarter earnings webcast coming to you from the heart of Hollywood at the Funko store. I'm Josh Simon, Funko CEO. Join with our CFO, Yves Le Pen Devene, our chief product. Professor Hasnal Shah and our head of marketing and brand, Nick Rupp. Yves, let's get right into the results. We had another quarter delivering above expectations. Exactly. Another strong quarter. So pleased to report net sales up 3% and some of the growth drivers there continue to be core collectibles up 5% and Europe up 12%. We also delivered gross margin of 45%. That's a five 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. A lot of progress deleveraging our balance sheet. 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. 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. Great, great. Well, I think it.

Thank you, Funko.

All right.

Thank you, Riz.

I love having you as part of the Funko family and appreciate your help with that one. And again, a new number one Pokemon, which has displaced one piece, push that into the number two spot, Pokemon number one. And that's my Casey Kasem impression for those. Those are 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 as a personal fan is wwe monday night raw. 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 mcdonough where he wore a funko pop head. There's a little bit of a storyline going on with fellow wrestler cody. loads 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 has he already has the proportions of a funko pop and it was fun to kind of be part of that broadcast overall. We also launched with Dan Housen and Obafemi 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 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. Totally. For those that don't know, ComplexCon is essentially an annual festival. meets a convention where sneakers, streetwear, art, and fashion and music come together. We're 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. So I think. The magic to ComplexCon is the speed at which we were able to operate. You know, we found out from the record company he was headlining it. We only had a few weeks to react and then Hasnal you and the team jumped into action. Yeah. Yeah. And you mentioned HyperStrike. 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.

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 for with our onshore production process, which is much faster than getting it from overseas. So it really shortening the window between. Creativity concept and delivery to become much tighter. Yeah. And I think the 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 moment, 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. 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 next jersey holding the ring, which also we launched. Right at the beginning of the ring night moment at Madison Square Garden. That's awesome. Well, the other big cultural moment during the quarter was America's 250th. We decided to put our own spin 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. Definitely. We picked ultimately an icon from each decade through the lens of Funko and then partnered with the king of collectibles, Ken Golden, 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. 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 think the Babe Ruth went for $26,000 which was really mind blowing to me. I thought you were the one that bought it. Not me. 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 read. Billy have started to dip our toe into the live commerce space, which we think will be definitely developing a 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 at 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.

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're very excited because there's a little bit of newness when the chase elements and the rarity elements in each and every one of them. So we're really excited to see results coming up next. 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. Yes. Which was cool. Some of the other ones still floating around out in the world waiting to be. Waiting. Waiting. Waiting to be. Thanks, y'all. And then, you know, the last thing from the make culture pop lens is commerce and, you know, 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 and shop we launched with the iconic retailer F.A.O. Schwartz in New York City. Definitely. Obviously, it doesn't get more iconic than F.A.O. in New York, but we were able to bring a super immersive brand right and hyper local experience to life, working with some local artists to truly create a sort of New York version of.

Funko store in F.A.O. Schwartz 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. Yeah, I think we have a an incredible Swarovski encrusted, jewel encrusted statue. Liberty collab that we did. I think retail is for about $2,500 and we were 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 Eve, we'll start with you. I went with horror Art the Clown. I'm in honor of Halloween recently and my daughters are big fans of Halloween and horror films. So this was a exclusive we did with Hot Topic and an event called Scarefair. A darker side to our CFO. Nice to know. Husna, what about you? I went with Zenitsu. He's a character from Demon Slayer, the 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, coward person to this courageous and confident human being is what really captured this well in this format.

Yeah, I think it's awesome to see the sort of those dynamic moments in a sort of entire scene. captured in a singular product and anime continues to be one of our top selling genres overall. This one sold 100,000 units already since its launch in September. Amazing. I think I can guess but it's no surprise but had to go with Ken Carson. Not only for the execution and sort of utilizing the HyperStrike 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 and i'll sort of follow in your complex con footsteps because another product that we dropped there is the bugs bunny um collab with an incredible artist joshua vitus um really amazing to see both the size the scale the detail and just kind of his artistic point of view overlay on an iconic you know space jam character at this size you know for reference um he did a really amazing job uh executing with this one and i was really proud that we were able to do a collab

with him and fans loved it as well so i put this as my as my favorite for the quarter awesome well now we have some questions so our first question is from steven late check at goldman sachs uh eve i'll direct this one to you regard 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 the first half of 26. how does management think about the sustainability of those trends as you move through the back to school and holiday season all right um so let me give you some stats um first for q3 pos so globally and as a reminder roughly half of our retailers report this information to us so in units um down four percent year over year by territory that was down ten percent in the u.s up 16 percent in emea i would uh kind of remind everyone that the dynamics of shipping being disrupted last year post tariff announcement 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 u.s market um the other thing i'd point out is that d to c was down thirteen percent 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 um so that's q3 and then year to date through the end of q3 we were up three percent globally still

um 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 yeah um and still expecting q4 collectible collectibles to grow in q4 as well um okay also from steven about new formats and form factors to what extent does management expect new formats bitty pot pot mystery sports related launch is to be revenue contributors in 2026 and 27 and how should investors think about the opportunity to diversify revenue beyond core pop products i mean i'll take the first part of that question which is to say i still think there's a lot of exist thing and new dimensions of pop itself that will contribute to more growth in this year and beyond i mean i remind everyone pop has sold more than a billion units to date it's definitely this iconic you know form figure in the world of pop culture um i think certainly you mentioned it earlier hasnal but in the world of pop mystery we're just getting started we have a dozen ips that will be launching with that throughout the next year uh you mentioned hello kitty um you mentioned harry potter shrek is another one so you know you'll start to see continued ips on pop mystery uh 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 you know

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 uh 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 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 so nuremberg in february and and new york as well in february so yeah a lot 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 questions from eric wold at texas capital securities um nick this one i'll direct to you uh given the higher prices seen in the secondary market for some of your limited run and special skews what are the opportunities to increase prices to improve gross margins further um and why don't we start there yeah no it's a great question but um 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 yeah and i think on the on that 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 the entry points um and i think that was what will grow the market more than sort of looking at extracting pricing from our sort of core collector fans there um and then one more question from eric um 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 i'm glad that question came through as well certainly i think that was the opportunity that we tested with the partnership with golden 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 so yeah i think we just finished uh in the hollywood store actually earlier today our third test of live selling on tick tock uh we just met earlier this week with the head of collectibles for tick tock commerce i was in china last week two weeks ago and um 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 you know a few years longer and i think some really great learnings that um you'll start to see us continue to grow and scale with frankly in q4 and then beyond into into next year as well absolutely yeah well um thank you all for being here i'd say

another quarter uh the teams did a great job delivering above expectations i think our core business you know continues to demonstrate healthy demand um at the start of the year you know we promised everyone growing core collectibles which is happening that will continue into q4 uh improving our profit and margins and strengthening the balance sheet so uh 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 uh in a few months for our q4 earnings forecast until then thanks for joining us thank you