Funko (FNKO) Q3 2026 earnings review
Funko's profit rises, but US stores sell fewer Pop! figures
Funko, the maker of Pop! vinyl figures, made more money on each sale, but fewer US shoppers bought its toys. Sales grew 3%, ahead of its plan for a flat quarter, because Europe kept buying. Lower license fees and tariffs lifted profit. Funko kept its full-year plan, so by our math fourth-quarter sales would land about 7% below last year.
| Net sales | $258.3M +3.0% from a year ago; the plan was flat |
|---|---|
| Gross margin | 45.2% 40.2% a year ago |
| Profit before interest, tax, depreciation and one-offs | $32.1M $24.4M a year ago; plan $25–30M |
| Full-year outlook | Unchanged sales flat to up 3% |
⚖️ Verdict: 🔴 Bearish
The story got worse because demand in stores turned down. Finance chief Yves Le Pendeven said retailers sold 4% fewer Funko units than a year ago, after gains in the first half. One offset: lower debt puts Funko in a better position as it seeks to extend loans due in 2027.
The question now is whether the US drop lasts into the holidays. If shoppers return, the plan proves cautious again; if not, fourth-quarter sales fall as far as the plan allows. Fourth-quarter results, due in early 2027, will tell.
🐂 Bull Case
Lower License Costs Lift Gross Margin to 45%
Gross margin is the share of sales Funko keeps after paying to make, ship and license its products. Chief executive Josh Simon cited "continued gross margin strength". The test was whether it would last once last year's price increases stopped helping the comparison.
It did. Gross margin reached 45.2%, up 5.1 percentage points from a year ago. That also tops the second quarter's 44.4% without its one-time tariff refund. Funko's filing credits "favorable impacts from adjustments to the royalty audit reserve accrual, lower minimum guaranteed royalties, and lower duty and tariff costs".
- License and royalty costs: 14.2% of sales, down 4.2 percentage points
- Product, freight and duty costs: 40.6% of sales, down 0.9 points
- Advertising: 5.5% of sales, up 1.2 points
Most of the gain came from smaller payments to the studios that own Funko's characters, because renewed licenses carry lower minimum fees. But part came from releasing money set aside for royalty audits, and Funko gave no amount.
What to watch: fourth-quarter gross margin, due in early 2027. A figure near this quarter's level would show the full-year plan is cautious, because that plan allows a much lower one.
Europe Grows 12% and Carries the Quarter
Funko earns about 41% of its sales outside the US. In Simon's words, the quarter had "international markets again a source of strength". Sales in Europe rose 11.5%, while its other international markets added 12.1%.
Shoppers, not just retailers filling shelves, drove the gain. Finance chief Yves Le Pendeven said units sold at reporting retailers were "up 16% in EMEA", the region covering Europe, the Middle East and Africa.
But European growth has slowed for two quarters, as the chart shows. So Europe alone cannot make up for a weak US holiday season, because the US still brings in most of the money.
What to watch: European sales growth in the fourth quarter, due in early 2027. Growth above 10% would mean Europe still covers for the softer US market.
Pop! Mystery Sold Three Times Faster Than Planned
Pop! Mystery is Funko's new blind-box line: sealed boxes where buyers do not know which figure is inside. Chief product officer Husnal Shah said: "We sold 3x faster than we thought we would." Funko gave no sales figure for the line, so investors cannot yet check the claim in its accounts.
Speed matters too. Shah said the Hyper Strike process, which makes some figures in the US, aims to "capture cultural moments at incredible speed". Head of marketing Nik Rupp said a Knicks championship pack, launched as the team won, became "the best-selling item of the year for us".
What to watch: whether Funko reports Pop! Mystery sales with its fourth-quarter results. That matters because the main Pop! line slowed, so a dollar figure would show whether the format adds sales.
🐻 Bear Case
Fewer Funko Toys Sold at US Stores
Simon closed the call saying Funko's "core business continues to demonstrate healthy demand". Point-of-sale data, the units retailers actually sell to shoppers, points the other way. Finance chief Yves Le Pendeven said global units fell 4% from a year ago, after gains in the first half.
The US led the drop, with units "down 10% in the U.S.", and Funko's own US sales slipped 2.4%. Its website sold 13% fewer units, which Le Pendeven tied to "less promotional activity and discounting on our site".
Le Pendeven blamed a tough US comparison, because delayed orders reached shelves a year ago. But Core Collectibles, the Pop! figures at the heart of the business, grew 4.8%, about half the second quarter's pace.
This matters because retailers reorder based on what they sell, so weaker sales in stores usually reach Funko's orders later. Simon said he is "still expecting Q4 collectibles to grow in Q4 as well", but the unchanged full-year plan already allows fourth-quarter sales to fall.
What to watch: fourth-quarter Core Collectibles sales, due in early 2027. A decline would mean the drop in US stores has reached Funko's own orders.
Loans Still Come Due in 2027 Without a Fix
Funko owes its lenders $196 million, due on December 31, 2027, and cannot borrow more under its credit line. Its filing says it plans to "amend the Credit Agreement to further extend the maturity" or find other financing before the end of 2026.
Debt fell from $241 million a year ago, and finance chief Yves Le Pendeven cited "lot of progress deleveraging our balance sheet". By our math, net debt equals about 1.9 times a year of adjusted EBITDA, profit before interest, tax, depreciation and one-offs, without the tariff refund. The loan's limit from December is 2.5 times.
What to watch: the year-end balance sheet, due in early 2027. Debt listed as due within a year would mean Funko missed its own deadline to extend the loans, and neither the release nor the call named a deal.
Loungefly Sales Fall 10% After Range Halved
Loungefly, Funko's brand of backpacks and bags, is shrinking its range to "concentrate the assortment behind products with stronger demand and return potential", the company said. Sales fell 9.8% to $40.3 million.
Funko's presentation set that decline against "an approximately 50% reduction in SKUs impacting Q3", meaning roughly half as many products on sale. So each remaining product sold more than a year ago, which suggests the cuts removed weak items. But the brand still shrinks, and the full-year plan keeps a double-digit fall, so the reset is not finished.
What to watch: Loungefly's fourth-quarter sales, due in early 2027. A decline smaller than this quarter's would show the smaller range has steadied.
Risks this quarter didn't answer
Funko's results left three standing risks without a clear answer. The filing added detail on two of them, but none moved far enough to change the case.
- Tariffs: duty costs fell, but the 10-Q warns of "new or similar tariffs under alternative statutory mechanisms"; the next US tariff decision will move it.
- Lawsuits: an appeals court refused on September 2 to rehear Funko's securities case, and an October suit says flocked Pop! figures break child-safety rules; a court ruling will move it.
- Profit measure: Funko's adjusted EBITDA still counts the $25.4 million tariff refund from the second quarter; a full-year figure without it would settle the comparison.
💲 Other KPIs
Cash generation jumped. Free cash flow, the cash left after running the business and buying moulds and equipment, reached $24.7 million against $3.4 million a year ago. It ran near zero in each of the first two quarters. Bills owed to suppliers rose 36% from a year ago, which helped.
Stock on hand fell 8.2% from a year ago while sales rose. Funko built it up from $76.8 million in March ahead of the holidays, as it usually does. Leaner stock means fewer products to clear at a discount, which protects the profit on each sale.
The share count keeps rising: diluted shares grew 6.2% from a year ago as staff stock awards vested. Funko's loan terms restrict buybacks, so nothing offsets that. It sold no new shares through its $40 million at-the-market programme, which lets it sell stock gradually.
🔮 Guidance
Unchanged. The plan still has sales between flat and 3% higher this year. By our math, the middle of the range leaves fourth-quarter sales about 7% below last year's $273 million. The third quarter beat a flat plan by $7 million, yet the range did not move. Funko has beaten every quarterly sales plan this year, but each beat was smaller than the last.
Unchanged. The range still counts the one-time tariff refund booked in the second quarter. By our math, its middle leaves fourth-quarter gross margin near 41%, well under this quarter's 45.2%. Without the refund, the full-year middle works out to about 43.7%. Funko earned 44.7% over nine months on the same basis, so the target looks cautious.
Unchanged. Adjusted EBITDA is profit before interest, tax, depreciation and one-offs. By our math, the range leaves about $21 million for the fourth quarter, under last year's $23.3 million. The third quarter came in $4.6 million above the middle of its own range, but Funko did not lift the year. Its only raise this year, by $30 million, came after the second quarter and mostly reflected the tariff refund.
Unchanged for the year. Core Collectibles are the Pop! figures and related collectibles. Nine months are up 9.6%. By our math, 8% for the year then needs only about 4% growth in the fourth quarter. After the second quarter, Funko's notes placed high-single-digit growth on the second half instead. That version would need about 11% in the fourth quarter.
Unchanged. The bag and backpack brand still plans a fall of at least 10% this year as it cuts its range. Nine months are down 11.7%. By our math, a 10% annual drop leaves room for a fourth-quarter decline of only about 6%, milder than this quarter's.
❓ Key Questions
When will Funko extend its loans due in 2027?
The filing says the debt moves into current liabilities if Funko has not extended or refinanced it by the end of 2026. Neither the release nor the call gave a timetable, a structure, or whether new shares form part of it.
Why did US stores sell fewer Funko toys?
Units sold at US retailers fell 10% while Europe rose. Funko pointed to a hard comparison, but its main Pop! business slowed for a second quarter. Holiday sell-through by region would show whether the drop is lasting.
How much margin came from royalty reserve releases?
Funko credited part of its 45.2% gross margin to adjustments to its royalty audit reserve but gave no amount. Without it, readers cannot tell how much of the gain will repeat next year.
Does the second-half Core growth goal still stand?
After the second quarter, Funko pointed to high-single-digit Core growth in the second half. Its outlook now speaks of the full year. By our math, the second-half version needs about 11% growth in the fourth quarter.
How much do Pop! Mystery and Bitty Pop! sell?
Management says Pop! Mystery sold three times faster than planned, but gave no dollars, reorder rates or margins. The same gap applies to Bitty Pop!, its small-format figures.