Funko reported first-quarter 2025 net sales of $190.7 million, an 11.6% decrease year-over-year. The company posted a net loss of $28.1 million for the quarter, compared to a net loss of $23.7 million in Q1 2024. Adjusted EBITDA was negative $4.7 million, which came in ahead of expectations.
The company's gross margin, exclusive of depreciation and amortization, increased to 40.3% from 40.0% in the prior-year quarter, driven by savings in product cost due to a favorable product mix. Selling, general, and administrative expenses also saw a modest decrease, reflecting ongoing cost discipline efforts.
Funko forecast non-compliance with financial covenants under its Credit Agreement by the end of the second quarter of 2025, raising substantial doubt about its ability to continue as a going concern for the next twelve months. The company withdrew its formal 2025 outlook due to tariff uncertainty and related disruptions.
Management expects Q2 2025 results to be negatively impacted by tariffs, with anticipated performance improvement in the second half of 2025. Plans to offset an estimated $45 million in incremental tariff costs include accelerated sourcing diversification, aiming to reduce U.S.-bound production from China to approximately 5% by year-end, planned pricing adjustments, and ongoing cost reductions, including the majority of a planned greater than 20% global workforce reduction already implemented.
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