Funko Q2 2026 Earnings: Tariff Benefit Lifted Margins as Sales Grew 7%

Funko (NASDAQ: FNKO) reported Q2 2026 net sales of $207.7 million, up 7.4% from $193.5 million, while diluted EPS improved to $0.27 from a loss of $0.74 a year earlier. Gross margin rose to 56.6%, adjusted EBITDA reached $40.9 million, and Core Collectibles and Europe led sales growth. However, the results included a $25.4 million pre-tax tariff-related benefit, so separating operating improvement from that benefit is central to interpreting the quarter.

Core Earnings Data

For the quarter ended June 30, revenue growth combined with higher gross profit and lower SG&A expenses to produce a substantial profitability swing. SG&A declined to $79.7 million from $82.3 million and fell to 38.4% of sales from 42.5%, an improvement of 413 basis points.

The tariff-related benefit was recognized in gross margin, net income, adjusted net income and adjusted EBITDA. Even with that qualification, Funko also benefited from higher sales and tighter expense control.

Adjusted diluted EPS and adjusted EBITDA are non-GAAP measures.

Business and Segment Performance

Core Collectibles generated almost all of the company’s dollar sales increase, while Loungefly remained a modest drag. Geographically, Europe was the largest growth contributor, more than offsetting a decline in other international markets.

Management attributed demand momentum to theatrical, anime, gaming and sports properties, alongside rapid-response releases tied to live cultural events and the launch of POP! Mystery. For Loungefly, the company is reducing SKU count and concentrating the assortment on products with stronger demand and return potential.

Tariff Benefit Accounted for Much of the Margin Expansion

The $25.4 million tariff-related benefit had a material effect on Funko’s reported profitability. Mechanically subtracting it from gross profit would result in approximately $92.2 million of gross profit and a gross margin of about 44.4%, rather than the reported 56.6%. That would still represent improvement from 32.1% a year earlier, but by roughly 12.3 percentage points instead of 24.5 points.

The same calculation would reduce adjusted EBITDA from $40.9 million to approximately $15.5 million, or about 7.5% of sales. This remains a clear improvement from negative adjusted EBITDA of $16.5 million in Q2 2025, indicating that sales growth and SG&A discipline also contributed to the turnaround. Funko’s Q3 gross-margin guidance of 43% to 44% points to a substantially lower reported margin than in Q2.

Profitability, Cash Flow and Balance Sheet

Cash-flow data were provided for the first six months of 2026 rather than Q2 alone. Six-month operating cash flow improved to $23.6 million from an outflow of $44.4 million a year earlier. After $19.0 million of capital expenditures, operating cash flow less capital spending was approximately $4.7 million, compared with a roughly $60.7 million deficit in the prior-year period.

At June 30, cash and equivalents were $40.7 million, down from $42.1 million at year-end. Inventory increased to $88.8 million from $83.1 million, while total debt declined to $201.1 million from $225.3 million.

During Q2, Funko sold participation rights in $22.1 million of tariff claims for $19.2 million. Half of the proceeds were used to repay the term loan. The cash-flow statement classified the proceeds as financing activity rather than operating cash flow.

Guidance

Funko kept its full-year sales outlook unchanged but raised its gross-margin and adjusted EBITDA guidance. The revised profitability ranges explicitly include the $25.4 million Q2 tariff-related benefit; that benefit represents most of the $30 million increase at both ends of the adjusted EBITDA range. The company also cited Q2 performance, expected Core Collectibles growth and Loungefly assortment rationalization.

Recent Insider Transactions

The supplied six-month insider summary reported 261,419 shares purchased across 16 transactions and 78,866 shares sold across eight transactions, for net purchases of 182,553 shares. Among the recent individual entries supplied, the following sale included an explicit date, direction and transaction value.

The supplied data did not provide the number of shares or transaction price for this sale, and the transaction alone does not establish an insider view of Funko’s prospects.

Risks Investors Need to Watch

• Tariff-related accounting benefit: The $25.4 million benefit materially increased Q2 gross margin and adjusted EBITDA. Q3’s 43%-44% gross-margin outlook highlights the risk of treating the 56.6% Q2 margin as a continuing operating level.
• Slower near-term sales growth: Q2 sales grew 7.4%, but Funko expects Q3 sales to be approximately flat and continues to forecast full-year sales between flat and up 3%.
• Uneven portfolio and geographic performance: Loungefly sales declined 1.7%, and other international revenue fell 5.1%. Loungefly SKU rationalization may improve assortment economics but also reduces the breadth of products supporting sales.
• Debt and inventory exposure: Total debt remained $201.1 million compared with $40.7 million of cash, while inventory rose from year-end. Quarterly interest expense also increased to $5.2 million from $4.5 million despite the lower debt balance.

Summary

Funko’s Q2 2026 results showed genuine operating progress through Core Collectibles growth, strong European sales and lower SG&A spending. The $25.4 million tariff-related benefit amplified the reported margin and earnings turnaround, making normalized profitability the main issue to monitor. The next indicators are whether Core Collectibles can sustain growth, Loungefly rationalization improves returns, and Funko can deliver its Q3 margin and adjusted EBITDA targets while continuing to reduce debt.