There’s no sugarcoating it: Funko had a rough first quarter.
The Everett, Washington-based maker of Pop! Vinyl figures and a big selection of toys, collectibles, and life-style merchandise beneath its Funko, Loungefly, and Mondo manufacturers kicked off 2025 on a excessive notice. In January, Funko inventory hit a 52-week excessive of $14.65, bolstered by sturdy showings at worldwide commerce reveals, together with Spielwarenmesse in Nuremberg and Toy Truthful New York.
Momentum was constructing. The turnaround was taking form with improved gross revenue and margin, diminished bills, and decrease debt in 2024. Like many within the trade, Funko entered 2025 with cautious optimism, looking forward to progress, however issuing conservative steering that factored in a 20% tariff in step with then-current alerts from the White Home.
What nobody noticed coming was a sudden tariff spike to 46% on U.S. imports from Vietnam, and to 145% on U.S. imports from China, paired with inflation and shaky shopper confidence. Whereas reciprocal tariffs on Vietnam slid again to a baseline of 10% amid a 90-day pause that expires July 31, the harm was finished.
First-quarter internet gross sales dropped 11%, and adjusted EBITDA fell into the purple. Wall Avenue took discover. Discuss of potential mortgage covenant defaults surfaced, prompting an SEC submitting that raised the dreaded query of whether or not Funko may stay a going concern over the subsequent 12 months. The corporate’s inventory sank beneath $4 per share — a brand new 52-week low. With its Q1 earnings launch, Funko withdrew its steering for the yr, citing the volatility of tariffs and their affect on the enterprise.
Now, Funko is doubling down: backing The Toy Association’s push for a “Zero for Zero” tariff coverage, specializing in mitigation methods, and leaning into what’s working.
To go deeper than the numbers, The Toy Guide sat down with Funko CEO Cynthia Williams and CFO Yves Le Pendeven to speak about resilience, international progress, and the street forward.
The Toy Guide: Tariffs are the subject of the yr, with China on the prime of the listing. In your earnings name, you stated that a couple of third of Funko’s product for the U.S. is presently sourced from China, with a objective to get that beneath 5% by the top of the yr. How will that work?
Cynthia Williams: As we speak, Pop! figures are made in China and Vietnam, the place we have now a bunch of distributors. We even have a extremely automated manufacturing in Indonesia, and we’re excited to do extra there by leveraging our long-term relationships with manufacturing unit operators.
Our Loungefly merchandise are largely made in Cambodia, with some in China, however we’ve discovered ourselves in the same scenario as a lot of the larger toy trade relating to manufacturing in China. Some Pop! Your self parts are made in China as a result of some manufacturing skillsets that merely aren’t out there exterior of China. To an extent, Pop! Figures being unarticulated helped us.
TB: There was a time period known as out on the earnings name that tends to lift quite a lot of purple flags on this trade: “Going concern.” We’ve seen quite a lot of corporations hit snags and are available via simply high-quality, and we’ve seen a lot that haven’t. How are these negotiations going?
Yves Le Pendeven: We’ve gotten covenant reduction twice up to now, and it’s the identical financial institution group. Within the quick time period, the product isn’t shifting. In the long run, issues will choose up in Q3 and This autumn, similar to what occurred through the COVID-19 pandemic.
The problem right here is from exterior elements, and Funko did nothing fallacious. Banks don’t need to personal this firm, and I’m very optimistic that it will likely be like COVID, and we’ll agree on issues and transfer on.
TB: Amid all of this, Funko had one other spherical of layoffs, with some of us let go and different open positions left unfilled…
CW: Having to do a discount at the moment was actually, actually robust. It was a tough week. We’ve stayed laser-focused on what our followers care about and minimize SKUs that don’t resonate with them. Nearly all of affected positions had been associated to these initiatives.
TB: On the similar time, there was some dialogue of upping the worth proposition and creating Pop! figures with elevated sculpts and packaging. How will Funko do extra with a smaller crew?
CW: We’ve got an extremely hardworking crew that may’t tackle extra work. We’re eliminating issues like repeat stances [repaints], which our followers have made clear they don’t like. We’re on fireplace with anime, and should you take a look at a number of the latest releases there, you’ll be able to see newer sculpts that followers love.
With packaging, core collectors needed actual shortage. We simply did our first Restricted Version Legendary drop — Pop! Genya Shinazugawa from Demon Slayer. It’s restricted to 1,200 items and was bought out in half-hour.
TB: The brand new Restricted Version tiers — Grail, Legendary, Royalty, and Elite — are a direct-to-consumer play, so how can conventional retailers profit from this?
CW: At retail, we’ll do restricted runs of 9,000 items on the excessive finish. A number of the greater specialty shops like Scorching Matter and Field Lunch, and mass companions like Goal, will take runs of greater than 3,500 items.
TB: When tariffs on Vietnam dropped again to 10%, what was Funko’s first transfer?
CW: We labored carefully with all of our companions to get stuff on the water rapidly and to plan appropriately.
TB: On the eve of Licensing Expo, I think about this setting has created challenges on that aspect of the enterprise, maybe with renegotiated offers.
CW: Navigating licensing has created new questions, lots of which come from the licensor, who asks, “Will we have now merchandise?” We’re lucky that our product popping out of Vietnam might help hold retailers stocked, and we are able to do this rapidly. If another person’s licensed product isn’t going to make it, we’d be capable to fill the hole.
TB: That could be a silver lining that few producers have proper now. Regardless of all of the challenges, Funko has seen some wins to this point this yr, so let’s discuss what’s working, like sports activities and music.
CW: Sure! We deliberate and ready for [Washington Capitals Captain] Alexander Ovechkin to interrupt Wayne Gretzky’s report together with his 895th profession objective. We bought greater than 15,000 models throughout all channels.
We’re trying to join with followers in culturally related moments, and we did that once more with Sabrina Carpenter on the Grammys and Shaboozey’s look at Coachella.
Gaming is one other space of progress — not shocking, nevertheless it’s rising. Dungeons & Dragons, Astrobot — we love these moments. And we’re very excited for our new collaboration with the WNBA.
TB: You’ve been working towards “a extra international Funko” — how sizzling is the worldwide market proper now?
CW: Our worldwide gross sales within the G5 markets are outpacing the remainder of the toy trade, so it’s a really wholesome enterprise. We’re gaining share in Europe, the UAW, and China. And the Philippines is our strongest market in Asia. Our new licensed store will open there subsequent month.
Regardless of the headwinds, Williams stays energized by her crew’s focus and dedication to the Funko fandom. With operations tightening and tariffs temporarily eased — 30% (10% baseline + 20% fentanyl tax) for imports into the U.S. from China, down from the staggering 145% earlier this month — the corporate is embracing the second, not simply to get well however to innovate.
The street forward winds via some main milestones: Funko Fundays lights up Hollywood subsequent month with three days of unforgettable experiences and unique drops, adopted by a return to Comedian-Con Worldwide: San Diego (SDCC) in July. However first, it’s all eyes on Las Vegas, the place the crew is able to make large strikes at Licensing Expo this week — sealing the offers that can form the subsequent technology of popular culture merchandise.
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