Funko Q2 2026 Earnings Call Transcript

Key Takeaways

  • Positive Sentiment: Sales increased 7% in Q2 and 6% in the first half, with broad-based growth across regions and products; Europe rose 19% and core collectibles grew 9%.
  • Positive Sentiment: Profitability improved substantially, with normalized gross margin reaching a record 44.4% and adjusted EBITDA of $15 million excluding the $25 million tariff-related benefit; the company also paid down $15 million of debt.
  • Positive Sentiment: Funko raised adjusted EBITDA guidance to $100 million–$110 million while maintaining full-year net sales guidance of flat to up 3%, citing improved profitability and the tariff credit.
  • Positive Sentiment: Management expects continued core-collectibles growth and is expanding new platforms such as Pop! Mystery, Bitty Pop!, Pop! Yourself, and HP-enabled additive manufacturing, which could shorten product development from months or years to weeks.
  • Negative Sentiment: Management remains cautious about the second half, citing consumer uncertainty and potential downside from tariffs, freight, raw-material costs, and possible changes in tariff policy; Loungefly sales were still down 2%, despite improved productivity after a roughly 50% SKU reduction.
AI Generated. May Contain Errors.
Earnings Conference Call
Funko Q2 2026
00:00 / 00:00

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Operator

Hi, everyone. I'm here with Josh and Yves. We're here at San Diego Comic-Con. Seems like the perfect place to have this discussion about Funko and its business, because so much of Funko is here and has been here for the past 20 years.

Josh Simon
Josh Simon
CEO at Funko

Yeah. I often think there wouldn't be the Funko that exists today without Comic-Con. It's a massive highlight of the year for us. We're excited you were able to join us.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

Excited to take a little bit of a walk around in a bit here.

Operator

Well, I've been to your booth several times over the years and now we finally come together like this. Before we get into the nitty-gritty, that's something I want to talk about, because you've been here for 20 years. The booth has grown, the product has grown, the fandom has grown. Just what is that general feeling? Does it feel like a celebration when you come to San Diego every year?

Josh Simon
Josh Simon
CEO at Funko

It does. You'll see the folks who work in our booth are largely fans from all over the world, who are taking time off of work and out of their lives to come and hang out here and help interact. It's also a great way for just these community of fans from all across the country and the world to come and celebrate Funko, experience the brand, buy some incredibly coveted limited-edition products. It's flattering and humbling and wild to see the lines at our booth for people who are here to get the exclusive product you can only get here at Comic-Con.

Operator

Absolutely. It's obviously great to see this fandom that happens here, but I've seen those exclusives get off those shelves, I know some finances happen here as well. Let's get into that. How has this quarter been for Funko?

Yves LePendeven
Yves LePendeven
CFO at Funko

Yep. Numbers have been great, it's really a reflection of our Make Culture POP! strategy gaining traction. We're really pleased to report sales were up 7% in the quarter, that's building on the growth from Q1. For the first half of the year, we were up 6%. The good news is it wasn't really one product or region or IP, it was really broad based. In the U.S., we were up 3%, in Europe we were up 19%, from a product perspective, our core collectibles were up 9%. Although Loungefly was down 2%, it was an improving trend from what we saw in Q1, we're really pleased with the better SKU productivity.

Operator

Very nice. I'm going to say that increase in the U.S., about 0.045%. That might just be me. No, that's great to hear. Josh, what are some highlights of this quarter with Funko?

Josh Simon
Josh Simon
CEO at Funko

Well, Yves mentioned the momentum that we're seeing. I think a big part of that is we talked a lot about the Make Culture POP! strategy, and I think we're really seeing that go from strategy to execution and take form. It's really about culture sensing and creating demand across the entertainment and pop culture landscape, creativity, giving it form and products, then commerce, putting it in fans' hands all over the world.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

On the culture side, it's really about how we get faster at sensing what's happening and then turning that into product. The last two quick things I'll mention is creativity on the product side. We're going to take a walk around in a little bit, and you're going to get to see our brand-new Pop! Mystery platform. That's really about taking what people love about Pop! and just turning it into a broader experience, and a new product format. So excited to show you how that's about to materialize. It's great to sort of see that Make Culture POP! strategy coming together and really moving from idea to execution in the quarter.

Operator

Yeah. It's interesting because it seems like you, obviously there's some franchises you're ready and prepared for, like Avengers: Doomsday, for example, or something like that. You've got to kind of predict the popularity, and then you have Obsession or like last year with Demon Slayer, where it's like, boom, this explosion out of nowhere. How do we jump on that as fast as possible? Is that a constant turning strategy between predicting versus following up on a trend?

Josh Simon
Josh Simon
CEO at Funko

It is. I think because we can't predict those things, what we really have to do is build this repeatable offense. Having sort of upstream teams in place that are really ready very quickly to make the licensing deals, the capacity internally to design the product, to manufacture them, and get them to shelves, then those retail relationships, either with wholesale partners or our own D2C channel, to get those out to consumers quickly.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

I think the magic for us is that we've really sort of honed that engine of sensing demand, turning it into products, and getting into our fans' hands in a really repeatable way, and we're starting to see that happen more and more.

Operator

You only have to do that with movies, television, sports, anime.

Josh Simon
Josh Simon
CEO at Funko

Only. Exactly.

Operator

Video games.

Josh Simon
Josh Simon
CEO at Funko

Exactly.

Operator

Pop! culture in general.

Josh Simon
Josh Simon
CEO at Funko

Yeah. Maybe Jimothy the raccoon that's taking the world by storm right now. Well, should we go take a look at-

Operator

I think we should. I'm very excited to see what you have here on the show floor.

Josh Simon
Josh Simon
CEO at Funko

All right, great. Let's go check it out. After you.

Operator

All right, let's check out what's over here.

Josh Simon
Josh Simon
CEO at Funko

This is Husnal, our Chief Product Officer.

Operator

Hi, Husnal. Nice to meet you.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Nice to meet you.

Operator

Pleasure. All right, obviously got some great products here, there's a special one here.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Oh, yeah.

Operator

This Pop! Mystery. Can you tell us about that?

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Yes. At San Diego Comic-Con over here, we are launching our Pop! Mystery line.

Operator

Oh, yeah. Let's see if this is the Flora pack right here?

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Yes, this is the Flora pack.

Operator

Okay, tell us about Flora.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Flora is a plant line that we started off as a regular standard Pop!, and now we've made it into a Mystery collection piece.

Operator

Oh.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

It is absolutely fabulous.

Operator

I love that. It seems here that you can get one of six possible ones in common.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Yeah. Each box has six commons.

Operator

Yeah

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

With rare cards, we have the chase as well as the global one of one chase, which is what differentiates us from the market and is extremely exciting.

Operator

Did you say one of one?

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

One of one.

Operator

There's only one of these out there.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Only one of these. Imagine if you're a fan.

Operator

Oh my God.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Yes.

Operator

That's wild. Well, I got to see which one is inside, right?

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

Let's open it.

Operator

Okay. What if this is the worldwide chase? That'd be wild, wouldn't it? All right, let's open this one up.

Josh Simon
Josh Simon
CEO at Funko

Lucky guy. Let's see.

Operator

Ooh, it's pretty. I like that. Oh, it's a little wild and cute. Oh.

Josh Simon
Josh Simon
CEO at Funko

Cute. Not the one of one, but it's still cute.

Operator

It's not the one of one, but I feel like it.

Josh Simon
Josh Simon
CEO at Funko

No, but I think it's great, and we're obviously revealing this here at Comic-Con, but there's other sort of licensing partners. This, as you mentioned, is original IP.

Operator

Yeah

Josh Simon
Josh Simon
CEO at Funko

that we created.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

Of course, we're also launching with some of the biggest IP in the world as well.

Operator

Yeah. Like who, perchance?

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

With One Piece, as well as with the Warner Bros.

Operator

Yeah

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

with the horror line.

Operator

Speaking of Warner Bros. horror, One Piece, and Flora, they have a little bit of an activation going on over here.

Husnal Shah
Husnal Shah
Chief Product Officer at Funko

They are giving away the Flora line in that activation, so you might want to go check it out.

Operator

I think I do want to check it out.

Josh Simon
Josh Simon
CEO at Funko

Yeah. Let's go take a look.

Operator

Okay, let's see what this is here. Got a knock.

Josh Simon
Josh Simon
CEO at Funko

Give it a knock. Yeah, let's see.

Operator

Flora? Flora? Flora?

Josh Simon
Josh Simon
CEO at Funko

Oh, look at that.

Operator

Oh, hey.

Josh Simon
Josh Simon
CEO at Funko

Gary, this is Nik, our head-.

Operator

Hi, guys

Josh Simon
Josh Simon
CEO at Funko

of our boutique brand deal.

Operator

Oh, nice to meet you.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Come on in. Come on in.

Operator

Oh my gosh. Wow, this is beautiful.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Welcome to the Pop! Flora Greenhouse.

Operator

Tell me about what it's like to create experiences for people at San Diego Comic-Con when it comes to Funko. Obviously, they're getting the pops, but you're giving a more immersive experience of the brand, right?

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

100%. This is such a special opportunity to be at San Diego Comic-Con. We really consider this sort of our World Cup, our Super Bowl all in one.

Operator

Yeah.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

It just provides us an amazing opportunity to be on the ground with our fans. As part of the launch of Pop! Mystery, we created these mystery game rooms. This is the Pop! Flora Greenhouse, and we really wanted to bring our own IP and our fandom to life. This isn't just a banner ad. This isn't a shelf display. This is a greenhouse that you can stand in to experience this world yourself.

Operator

I really like that because it almost brings more into the fandom-

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Exactly

Operator

when you're able to do some kind of experience along with the product.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

100%.

Operator

Let's see some more stuff here.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Let's get you out of here.

Operator

All right.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Thank you for stopping by.

Operator

Yeah. This is really cool. We also have a One Piece one here, and WB and KPop Demon Hunters. Thanks again, Nik. That was really cool.

Josh Simon
Josh Simon
CEO at Funko

Good. Yeah.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

All right. Let's take a look around this way.

Operator

Okay.

Josh Simon
Josh Simon
CEO at Funko

Obviously, we talked about this earlier, selling a lot of exclusive products that you can only get here.

Operator

Yes.

Josh Simon
Josh Simon
CEO at Funko

Obviously massive lines of people, which is super humbling. Look, I think what you experienced and saw over in the mystery room is sort of our first step into doing something that's more experiential.

Operator

Yes.

Josh Simon
Josh Simon
CEO at Funko

one of the most compelling experiences that we've become known for, both online and soon rolling out into some wholesale partners, is the Pop! Yourself.

Operator

Yes

Josh Simon
Josh Simon
CEO at Funko

experience.

Operator

I've been able to do that at the Funko Hollywood Store.

Josh Simon
Josh Simon
CEO at Funko

You can do it at the Hollywood Store. There's a couple stores we'll announce soon where you'll be able to start doing it as well. You can do it at the Inter Miami Stadium.

Operator

Okay

Josh Simon
Josh Simon
CEO at Funko

with the football club there.

Operator

Okay.

Josh Simon
Josh Simon
CEO at Funko

Of course, here celebrating the upcoming launch of Spider-Man: Brand New Day.

Operator

Wow.

Josh Simon
Josh Simon
CEO at Funko

We have a great Pop! Yourself experience as well for folks.

Operator

Wait, so.

Josh Simon
Josh Simon
CEO at Funko

here at Comic-Con.

Operator

Are you telling me I can Pop! Yourself as Spider-Man right now?

Josh Simon
Josh Simon
CEO at Funko

You sure can.

Operator

Oh.

Josh Simon
Josh Simon
CEO at Funko

A limited edition. You can only get it here.

Operator

Okay.

Josh Simon
Josh Simon
CEO at Funko

Obviously sort of a version of our kiosk experience, where you can pick your body type, your skin tone, your hair.

Operator

Yeah

Josh Simon
Josh Simon
CEO at Funko

your clothes and like I said, some very specific Spidey outfits that you can only get here at Comic-Con. All right, you want to give it a try?

Operator

I have to Pop! Myself here.

Josh Simon
Josh Simon
CEO at Funko

All right. Yep.

Operator

Let me start building. You said this is an exclusive Spider-Man: Brand New Day Pop! Yourself, right?

Josh Simon
Josh Simon
CEO at Funko

Exclusive only here to the Comic-Con.

Operator

All right. Let me pick my body type here. Nice. Okay, let's go with some skin tone. Love that. All right.

Josh Simon
Josh Simon
CEO at Funko

Yeah, you get to really customize it here. Your lashes.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

Your hair.

Operator

Lots of different hairstyles. Oh, there we go. This looks like me. I like that, I like that. Very nice.

Josh Simon
Josh Simon
CEO at Funko

Okay.

Operator

Got to do the glasses.

Josh Simon
Josh Simon
CEO at Funko

Of course.

Operator

Glad you have some glasses options.

Josh Simon
Josh Simon
CEO at Funko

Iconic. It's your trademark.

Operator

Yeah, there we go. Okay.

Josh Simon
Josh Simon
CEO at Funko

Yes, then some exclusive accessories as well.

Operator

We got a VIP badge. Perfect for Spider-Man going to Comic-Con. All right. You can hold the mask in his hand.

Josh Simon
Josh Simon
CEO at Funko

Like it, yep.

Operator

We also got some web shooting here. All right, I'm going to go with that mask. I can pick another one, right? Yeah.

Josh Simon
Josh Simon
CEO at Funko

Yeah, there you go.

Operator

Let's definitely do the web. Very nice. Looks really cool.

Josh Simon
Josh Simon
CEO at Funko

Neat.

Operator

I see you have a little Hulk here. Is that also exclusive to here?

Josh Simon
Josh Simon
CEO at Funko

It comes with a Bitty Pop! Hulk.

Operator

Oh, that's awesome.

Josh Simon
Josh Simon
CEO at Funko

Yeah.

Operator

All right, I get a Bitty Pop! Hulk with my Spider-Man outfit here. All right, got to package that Pop!. Pop!.

Josh Simon
Josh Simon
CEO at Funko

Look at that.

Operator

Wow. It's me in the Spider-Man outfit. There's the web shooting, there's the mask, there's the exclusive Hulk Pop! in there. Oh, that is great. That's a really cool experience.

Josh Simon
Josh Simon
CEO at Funko

Yeah

Operator

to come here if you're excited for Spider-Man: Brand New Day, if you're excited for Pop! Yourself, you get to have this experience right here inside of your Comic-Con.

Josh Simon
Josh Simon
CEO at Funko

Obviously, the ability to create these sort of geo-specific experiences is something that we'll start to roll out and test later this year with some retail partners.

Operator

Oh.

Josh Simon
Josh Simon
CEO at Funko

You can imagine something like this starting to pop up in other parts of the world and really create something unique and specific to a location, which is really great.

Operator

Oh, that's interesting.

Josh Simon
Josh Simon
CEO at Funko

Yeah.

Operator

I was thinking you could do this at the Funko store, but now you're saying there might be other stores.

Josh Simon
Josh Simon
CEO at Funko

Some other places as well, yeah

Operator

around the world to do this in?

Josh Simon
Josh Simon
CEO at Funko

Yeah.

Operator

All right. Stay tuned for that, huh?

Josh Simon
Josh Simon
CEO at Funko

All right. Let's go. Let's check out the next part of the booth here.

Operator

All right.

Josh Simon
Josh Simon
CEO at Funko

All right, let's go by the Mondo booth.

Operator

Oh, yes.

Josh Simon
Josh Simon
CEO at Funko

As you know, Mondo is sort of our premium collector toy line.

Operator

Yes.

Josh Simon
Josh Simon
CEO at Funko

These guys are amazing artists.

Operator

I've got some pieces in my home right now.

Josh Simon
Josh Simon
CEO at Funko

Okay, great. We're going to cut through the crowds here.

Operator

Hey, how's it going?

Company Representative at Funko

How's it going, man?

Operator

Good to see you.

Company Representative at Funko

Yeah, yeah.

Operator

Okay. I am a huge Ninja Turtles fan, so I'm very excited about what's going on here.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Yeah. This is a TMNT Mondoverse, where our partnership with Paramount has given us permission and access to create our own what if scenario sequel story to the '90s films.

Operator

Nice.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

We're bringing in all the characters and whimsy and wildness of the comics, video games, and cartoons into this real world, gritty, man in a suit vibe.

Operator

Yeah

Company Representative at Funko

that the movies have. Paramount has given us a blessing to reimagine all of the character history.

Operator

Okay.

Company Representative at Funko

For example, we're introducing new versions of the Punk Frogs as kid brothers that Mikey finds in the sewers.

Operator

Nice.

Company Representative at Funko

That's the kind of story expansion that we're able to do with the Mondoverse. It's our sandbox.

Operator

I was curious about that because you have Funko and Mondo under the same roof.

Nik Rupp
Nik Rupp
SVP of Brand and Marketing at Funko

Yeah

Operator

Obviously you're doing different types of products.

Company Representative at Funko

Yes.

Operator

Have you seen this interesting transition in any kind of way from Funko to Mondo as far as getting more detailed or an upgrade?

Company Representative at Funko

Oh, well, it's like we have the artists in-house to do all the techniques, right?

Operator

Right.

Company Representative at Funko

What we get from Funko is the support, the credibility, and the doors being blasted open for us.

Operator

Yes

Company Representative at Funko

To get licenses and access and relationships that we otherwise might not be able to get.

Operator

Yeah.

Company Representative at Funko

It's really an amazing pairing that creates another collectible through line. You might have been collecting Funko Pop! for a long time, and you have a beautiful collection of them, and you're just like, "I'm a Turtles guy. I got all the Turtles Pops, but I also want a realistic one-sixth scale.

Operator

Yeah.

Company Representative at Funko

You can stay in-house at Funko through Mondo and have a really diverse collection.

Operator

Oh.

Company Representative at Funko

Thank you for stopping by, man.

Operator

Dude.

Company Representative at Funko

We're so proud of it. I can't wait to show you guys more.

Operator

This is awesome, man. Oh my gosh. It's so much nostalgia here too, man. Real Ghostbusters, Masters of the Universe. Street Sharks?

Company Representative at Funko

Yes.

Operator

All right.

Josh Simon
Josh Simon
CEO at Funko

One more stop.

Operator

All right.

Josh Simon
Josh Simon
CEO at Funko

One more stop on this tour.

Operator

All right. We've seen the booths. We've seen the fans having a wonderful time buying the Pops, enjoying the experiences. This feels like a good out to go on in San Diego.

Josh Simon
Josh Simon
CEO at Funko

It does. We're in the big Pop! mystery box.

Operator

Yeah.

Josh Simon
Josh Simon
CEO at Funko

I think the mystery is going to be where we end up after this, after this box closes. For now, should we go and take some investor questions?

Operator

I think we should. Thank you so much, man.

Josh Simon
Josh Simon
CEO at Funko

Yeah, you ruined the mystery.

Operator

I just remembered. They told me that one exclusive IP is coming up soon. Well, that was fast. One minute we're dodging crowds at Comic-Con, and next we're here in the Funko office. Somehow, Josh, you made it all the way to London.

Josh Simon
Josh Simon
CEO at Funko

I am. I'm across the pond, spending some time with our EMEIA team and partners. It's a late night, but excited to be reunited with you here live.

Operator

Absolutely. The magic mystery box can do multiple locations, apparently. Multiple drop-offs. Now that we shared all the fun stuff at Comic-Con, Yves, can you tell us a little bit more about the financials?

Yves LePendeven
Yves LePendeven
CFO at Funko

Sure, I'd be happy to. Like I mentioned earlier, sales were up 7% in Q2 and 6% in the first half. In addition to that, we reported a gross margin of 56.6% compared to 32.1% last year. To be clear, our Q2 gross margin benefited from the recognition of a $25 million credit that was related to the expected tariff refunds and release of accrued tariffs. Just for sake of comparison to our guidance range of 42%-44%, our gross margin normalized for that $25 million credit was 44.4%, which was still a record high for Funko. SG&A expenses improved as a percentage of sales by over 400 basis points compared to last year. Finally, adjusted EBITDA was $40.9 million compared to negative adjusted EBITDA of $16.5 million last year.

Yves LePendeven
Yves LePendeven
CFO at Funko

Excluding that tariff-related benefit, we delivered adjusted EBITDA of $15 million, well above our guidance range. I'd also like to highlight that in the quarter, we executed a sale of our IEEPA tariff claims, a total of $22 million for proceeds of $19 million. We used that to pay down debt by a total of $15 million, making more progress on deleveraging our balance sheet.

Operator

Wow, those are great results. What about the outlook?

Yves LePendeven
Yves LePendeven
CFO at Funko

For the outlook, we're reiterating our net sales guidance of flat to up 3%, and we're raising our adjusted EBITDA guidance to $100 million-$110 million. That raise is driven by, again, that $25 million tariff credit from Q2, as well as $5 million from improved profitability.

Operator

That's great. Thank you, Yves. Josh, what can investors expect in the second half of the year from Funko?

Josh Simon
Josh Simon
CEO at Funko

Well, I think the results that Yves just talked about this quarter really highlight the model that we're building. Sensing demand earlier, creating more repeatable ways to take that demand and create products that can scale selectively through the right retail channels around the world. I think in the second half, our consolidated sales will reflect more of a normalized year-over-year shipment comparison, and I think we'll continue to be prudent, just given some of the broader consumer environment that's out there. Also, just to double back on one of the things Yves mentioned earlier about Loungefly and the SKU reductions that we had discussed. We've made some meaningful progress in that area. I definitely would not declare the work there finished. We have exciting plans, but still ways to go.

Josh Simon
Josh Simon
CEO at Funko

The encouraging signal in Q2 was that, as Yves said, sales were down 2% with approximately 50% fewer SKUs, really seeing that increased productivity. For the remainder of the year, importantly, I think the headline is that we definitely expect the core collectibles to continue growing in the second half. When you step back from it, the core is growing, Loungefly is becoming healthier, our underlying earnings power is improving, and Q2 is really a strong and early proof point that everything we've talked about in the Make Culture POP! strategy is underway, and our focus is now just about consistent execution.

Operator

Nice. What are you excited for the rest of the year, particularly in terms of how the way the company is evolving?

Josh Simon
Josh Simon
CEO at Funko

Well, there's a lot to choose from that I'm super excited about. I guess, a couple of things that I would highlight. First, overall is just speed. I've talked about this a lot. How do we make sure that we're part of these really great cultural or entertainment moments while they're happening? Really the key to speed is being able to sense demand earlier and respond quickly. Hopefully, in some cases, with even less inventory exposure. One thing I've mentioned a couple of times, but excited to more formally announce now. We formalized a partnership with HP on the additive manufacturing front. This is part of our Hyper Strike strategy, which means we're able to create products in a matter of weeks instead of months or sometimes years that go into the traditional manufacturing process.

Josh Simon
Josh Simon
CEO at Funko

We've already sort of launched our first product with this partnership at Fanatics Fest a couple of weeks ago. We did a really awesome mashup between WWE and the Garbage Pail Kids. The product sold out at Fanatics Fest. They're selling for multiples more than what we originally sold them for on eBay. We're really excited to work with HP on that front. By the way, our normal quick-strike offense from a speed standpoint has also continued to be off and running. We had pre-orders for Heated Rivalry, Off Campus, and Obsession. A lot of surprise entertainment hits out there that we've been able to get it out for pretty quickly, including a pre-order when the Knicks won the NBA championships. The night that they won, we went live with a championship five-pack. We're really kind of building that repeatable speed capability.

Josh Simon
Josh Simon
CEO at Funko

All right. Well, the second thing I'll mention is we actually are announcing today that we're hiring a new Chief Commercial Officer. It's a role that we've had open for a little bit now. Kristen Hamilton. She joins us most recently from Crunchyroll, where she was senior vice president, head of global e-commerce and direct to consumer. Obviously excited about her commercial experience there and her experience in the anime world, which is obviously a huge fandom for us. Before Crunchyroll, she spent about 15 years at Hasbro across a ton of different leadership roles, global e-commerce, consumer product strategy, transformation, brand management, marketing. She's done a ton there. She officially starts on August 24th, I guess that's another big exciting thing for me in the second half of the year.

Operator

All right. Well, the second half's looking promising. Nice. We're going to take some questions from some analysts right now. First one is from Eric Wold at Texas Capital. How would you characterize the level of wholesale order demand in the third quarter of 2026 into the upcoming holiday season?

Yves LePendeven
Yves LePendeven
CFO at Funko

Sure. I'll take that one. I think what we're seeing this year, we continue to have about three or four months visibility with our wholesale customers placing orders. I would say compared to last year, we're seeing a return of a little bit more normalized seasonality, like Josh mentioned. Last year, Q2 was pretty disrupted, post-Liberation Day announcement, then there was an element of kind of catching up with people's orders in Q3 and into Q4. This year, obviously we're kind of shipping orders as our customers want them. We're seeing great POS trends in our wholesale channel globally. Our POS sales were up 6% year-over-year. Again, always looking for that balance between sell-in and sell-through, which we saw in Q2. By all the metrics that we gauge, the business is healthy, inventory in the channel's healthy.

Yves LePendeven
Yves LePendeven
CFO at Funko

We see that there's a good demand from our wholesale partners and from our end customers as well.

Operator

Okay. Another question. What are you seeing from your major retail partners around shelf space allocation in recent quarters and into the holiday season? What categories are likely to see the most benefit from those gains?

Josh Simon
Josh Simon
CEO at Funko

Well, look, I think I'll start off just kind of by the fact that I'm here in Europe and have been spending some time with our European retailers. We've secured extra diorama displays in about 350 stores across Smyths, which is one of the most preeminent toy retailers in Europe, and certainly even I would say in the world. HMV, Gift Universe, a bunch of independent retailers. Look, those are sort of like fully designed, kind of built-out displays that really showcase our product out of the packaging on shelves. We're also seeing increase some end cap displays at Smyths for Bitty Pop! If you walk around the city right now, we have pretty high-profile windows at Hamleys, another iconic toy retailer that sort of is a Disney and Funko collaboration that's really giving us a lot of high visibility in prime tourist destinations.

Josh Simon
Josh Simon
CEO at Funko

Actually right now even we have another partnership across Sony, Disney, with HMV, on a big Spider-Man activation at HMV Oxford Street. Things like Bitty Pop! have continued to lead incremental shelf space for us. Things like Spider-Man have led to incremental placement with pallet trains at Walmart. I think, alongside these big entertainment releases and alongside our new and growing product lines, we're seeing it generate incremental shelf space for us at retail.

Operator

Nice. I look forward to seeing people post some photos with photo ops with all of those displays there. Now we have some questions from Keegan Cox at D.A. Davidson. In regards to the strong entertainment slate we have had this year, which franchises or categories are generating the strongest demand? Any highlights this quarter, and what properties are you most excited for in the second half of the year?

Josh Simon
Josh Simon
CEO at Funko

Thanks. Thank you, Keegan, for the question. For us, obviously, a strong content slate always helps. We knew going into this year, or at least suspected, that there would be some big hits, and I think you're really seeing that in box office attendance and box office records overall. We have a pretty, first I'll just say, broad base across fandoms. We've seen momentum for us across anime, gaming, obviously theatrical, sports, and some of our own programs. I'll remind everyone in this quarter, I think our top 10 franchises and programs represented about 32% of Q2 sales. Our business is not necessarily dependent on any one property, but they obviously help. Mando & Grogu was great for us. Toy Story 5, which was a massive hit for Disney, also doing really well for us. You saw our Spider-Man: Brand New Day activation at Comic-Con.

Josh Simon
Josh Simon
CEO at Funko

That has recently proven to be huge for us, and we're really glad that we made a bet on that film early on. Couldn't be more excited for Avengers: Doomsday and what the Russo brothers and Marvel and Disney are going to bring to screens at the end of the year. Beyond that, One Piece and Pokémon in anime and gaming space continue to be huge. Sports delivered. I mentioned, the excitement around the Knicks was somewhat unprecedented for us in the certainly in the world of NBA championships compared to past seasons. The excitement around the World Cup, I think was palpable and reflected in some strong sales for us.

Josh Simon
Josh Simon
CEO at Funko

I have to just sort of mention again on the Quickstrike front, but you have movies like Obsession, which kind of came from out of nowhere as a surprise and was a major record-setting box office. We were able to very quickly go on pre-sale for that film, along with things like Heated Rivalry and Off Campus. I'll even say a personal favorite of mine in this past quarter, a great line of products celebrating the Spice Girls. I'm not just saying that because I'm over in the U.K. right now. I would've said that if I were in America as well. Across Loungefly and Funko, a dream come true, honestly, to be able to collaborate with those folks. A pretty broad representation of franchises, Keegan.

Operator

All right. Save me a MLB Funko Pop! I need that. All right. Input and take on the guidance. What are the assumptions that you give to the high and low ends of your guidance? Have you seen any impact from higher input costs like freight?

Josh Simon
Josh Simon
CEO at Funko

Sure. I would start by to the upside, especially on sales, I mentioned our order book visibility in Q3, so we feel good about that. Obviously the holiday period in Q4, we have a bit less visibility too, but we're excited about the content slate. I think obviously any upside would depend on continued sell-through performance. We're hoping the consumer stays resilient through the holiday period. To the downside, I would call out tariffs. Obviously, we've factored in the latest announced tariffs that are in effect of 10%-12%, but for everyone who's following the news, that there can continue to be surprises on that front. Again, chose to be prudent within our gross margin guidance in particular.

Josh Simon
Josh Simon
CEO at Funko

As far as freight costs or raw materials costs, we're cautiously optimistic, but obviously any kind of higher oil prices and things like that could negatively impact us as well.

Operator

Understood. All right. Here's some questions from Stephen Laszczyk at Goldman Sachs. Funko noted that point-of-sale tailwinds in the first quarter entertainment slate carried into early second quarter. Did this positive trend continue through the remainder of the quarter, and what gives management confidence that these trends are sustainable through 2026?

Josh Simon
Josh Simon
CEO at Funko

I'll start with the trends that we saw in Q2. Again, I mentioned in the wholesale channel, 6% growth in units year-over-year in POS sales. For the year to date, it's 9% growth. Again, for the year to date in the U.S., up mid-single digit. In Europe, slightly over 20% POS growth. It's a really strong trend. We're loving to see that momentum. I believe based on the content slate and some of the products that we have coming up in the lineup that we should see that trend continue.

Josh Simon
Josh Simon
CEO at Funko

That's kind of what we factored into our guidance.

Operator

Okay. To what extent does management expect new formats like Bitty Pop!, Pop! Mystery, and the sports-related launches to be revenue contributors in 2026? What does management view as the key growth levers for Funko in 2026 and beyond, outside of the core Pop! products?

Josh Simon
Josh Simon
CEO at Funko

Well, I'll jump in. I think first on Pop! Mystery, it's a little bit too early to sort of size that one responsibly. What I think is most important about it, and I think kind of signals a lot of what we've been talking about as part of our strategy is that it's just sort of the platform potential of it. If you think about Pop! Mystery just as another dimension and extension of the core Pop! product, it can really extend across any entertainment franchise, sports. We're doing it with our own IP that you saw down at Comic-Con with the Flora line. It can go in multiple channels, markets around the world. I would say that blind box craze is showing no signs of slowing down.

Josh Simon
Josh Simon
CEO at Funko

For us, I think it's a unique way that kind of encourages what our fans have always loved, that thrill of the chase, discovery, and then that sort of motivation for repeat participation. They want to try and seek out that one specific item that they love. We'll keep a close eye on sort of the initial launch and judge sell-through and reorders and consumer behavior and scale based on that. I'd say from a licensor standpoint, we have a pretty exciting and awesome lineup of Pop! Mystery products going all the way through next year. I am feeling encouraged about that one. You mentioned sort of, Stephen, your question, Bitty is just sort of another example that I mentioned we're seeing incremental placement now at Smyths Around Europe.

Josh Simon
Josh Simon
CEO at Funko

Another extension of what people love about Pop and what makes it iconic, but it's becoming its own platform, appealing to a slightly different consumer, getting us incremental placement. We'll continue to look at new ways to dimensionalize Pop. We have a few different ideas that are in development that we'll roll out end of this year and early next year. Look, honestly, there's about, I would say, half a dozen totally brand-new formats that we have in development that we'll start to roll out early next year and beyond.

Josh Simon
Josh Simon
CEO at Funko

The idea with all of those is trying to establish new platforms for our fans to engage, capitalizing on what we know best around culture and our licensure relationships, and being part of these iconic entertainment and cultural moments, but in new and exciting ways that I think hopefully will set the stage for hopefully the next Pop franchise to come.

Operator

All right. Well, we'll look forward to all of that, and I definitely look forward to seeing who gets a one-of-one worldwide chase Pop! there with these Mystery Pops. All right. Well, that's all the time we have for questions for today. Yves, Josh, thank you so much for all your information about the success as well as how you handle certain challenges. Josh, are there any thoughts before we let everyone go today?

Josh Simon
Josh Simon
CEO at Funko

Well, first of all, thank you for being with us down at Comic-Con and in the office there in Burbank. For me, I would just say the financial highlight that this quarter shows us is really early evidence that the Make Culture POP! strategy is beginning to take hold, and it's really becoming a more deliberate and disciplined growth engine for us. Ultimately, I think we're getting better at sensing where fan demand is coming from, moving faster to turn those signals into distinctive products and in repeatable ways, and building platforms like I was just talking about, and then scaling them through channels all over the world. This quarter, I think, was an early proof point.

Josh Simon
Josh Simon
CEO at Funko

Not the end of the work, but I think the growth and SKU productivity and certainly that record underlying gross margin gives us confidence that we're on the right track. Other than that, I just want to say thank you to our shareholders for your continued confidence. Most importantly, thank you to our fans for showing up in the way that you always do. I loved the energy and everyone who made their way down to Comic-Con this year. I loved talking with everyone and hearing their ideas. It's just an awesome reminder of why we do this. We're certainly excited for the rest of the year. I'll just say again, Andre, thanks everyone for joining us, and we will see you all next quarter.

Executives
    • Josh Simon
      Josh Simon
      CEO
    • Yves LePendeven
      Yves LePendeven
      CFO
    • Husnal Shah
      Husnal Shah
      Chief Product Officer
    • Nik Rupp
      Nik Rupp
      SVP of Brand and Marketing
    • Company Representative