FNKO Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Sales Growth: Q2 sales increased by 7%, building on a 6% growth in Q1, with a total of 6% growth for the first half of the year.

Gross Margin: Reported gross margin was 6.6%, benefiting from a $25 million credit related to expected tariff refunds. Normalized gross margin, excluding this credit, was 44.4%, a record high for Funko.

Adjusted EBITDA: Reached $40.9 million compared to a negative $16.5 million in the previous year. Excluding the tariff benefit, adjusted EBITDA was $15 million, exceeding guidance.

SG&A Expenses: Improved as a percentage of sales by over 400 basis points year-over-year.

2Strategic Updates and Business Highlights

Make Culture Pop Strategy: The strategy is gaining traction, focusing on quickly sensing cultural trends and converting them into products. This quarter saw the successful launch of the new Pop! Mystery platform.

Product Development: Introduction of the Pop! Mystery line and continued expansion of the Bitty Pop! product line. The company is also enhancing its experiential offerings at events like Comic-Con.

Partnerships: A new partnership with HP for additive manufacturing aims to speed up product development significantly.

New Leadership: Kristen Hamilton was announced as the new Chief Commercial Officer, bringing extensive experience from Crunchyroll and Hasbro.

3Forward Guidance and Outlook

Sales Guidance: Reiterating net sales guidance of flat to up 3% for the year.

Adjusted EBITDA Guidance: Raised to $100 million to $110 million, driven by the tariff credit and improved profitability.

Second Half Expectations: Anticipated continued growth in core collectibles, with a focus on consistent execution of the make culture pop strategy.

4Bad News, Challenges, or Points of Concern

Gross Margin Volatility: The significant drop in gross margin from 32.1% last year to 6.6% this year raises concerns, although the normalized margin is strong.

Loungefly Performance: Loungefly sales decreased by 2%, although there were signs of improvement. The SKU reduction strategy is ongoing, indicating potential challenges in product variety and sales.

Market Conditions: The company remains cautious about broader consumer environment trends and potential impacts from tariffs and freight costs.

5Notable Q&A Insights

Wholesale Demand: There is a return to normalized seasonality in wholesale orders, with POS sales up 6% year-over-year, indicating healthy demand.

Shelf Space Allocation: Increased shelf space secured at major retailers like Smith's and HMV, driven by successful product launches and partnerships.

Entertainment Slate Impact: The strong performance of franchises like Toy Story 5 and Spider-Man: Brand New Day has contributed positively to sales, with a diverse portfolio reducing dependency on any single property.

Future Product Formats: Management is optimistic about new formats like Pop! Mystery and Bitty Pop!, with plans for additional product lines in development. Overall, FNKO's Q2 2026 results reflect a positive trajectory in sales and operational improvements, although challenges remain in gross margin and specific product lines. The company is focused on leveraging cultural trends and enhancing product offerings to drive future growth.