Funko Q3 Sales Rise 3% as Margins Expand; 2026 Outlook Maintained

Funko (FNKO) reported stronger-than-expected third-quarter 2026 sales and profitability as growth in core collectibles and Europe offset a planned contraction at Loungefly. The collectibles company maintained its full-year outlook, including an adjusted EBITDA forecast that incorporates a $25.4 million tariff-related benefit recognized in the second quarter.

Net sales for the three months ended September 30 rose 3% year over year to $258.3 million from $250.9 million, exceeding the company’s expectation for approximately flat sales. Core Collectibles revenue increased 4.8%, or $9.7 million, led by Standard Pop!, Mystery Mini and the timing of Advent Calendar launches. European sales rose 12%, contributing to the international strength cited by management.

Loungefly sales declined 9.8%, reflecting an approximately 50% reduction in the number of SKUs affecting the quarter. Funko said the business nevertheless benefited from improved assortment productivity and strong sales of exclusive products. Other sales increased 37%, adding $2.2 million, primarily because of the timing of Mondo shipments, partly offset by the discontinuation of Digital NFT sales.

Margins and earnings improve

Gross margin expanded to 45.2% from 40.2% in the year-earlier quarter, above Funko’s 43% to 44% expectation. The company attributed the improvement to lower tariffs, reduced minimum guaranteed royalties, adjustments to its royalty-audit accrual, lower-than-expected freight and shipping costs, and favorable reserve adjustments.

Net income attributable to Funko increased to $7.5 million, or $0.13 per diluted share, from $0.9 million, or $0.02 per diluted share, in the third quarter of 2025. Adjusted net income rose to $9.2 million from $3.2 million, while adjusted net income margin increased to 3.6% from 1.3%.

Adjusted EBITDA, a non-GAAP measure, reached $32.1 million, compared with $24.4 million a year earlier and the company’s guidance range of $25 million to $30 million. Adjusted EBITDA margin expanded 270 basis points to 12.4% from 9.7%. Funko said the result reflected higher-than-expected sales, gross-margin performance and continued discipline in selling, general and administrative expenses.

The balance sheet also showed lower inventory and debt. Inventory was down 8% year over year, while total debt declined by $29 million during the first nine months of 2026, including a $5 million reduction in the third quarter.

Full-year outlook maintained

Funko reiterated its 2026 net sales guidance of flat to 3% growth from the prior year. The company expects Core Collectibles sales to increase at a high-single-digit rate, partially offset by a double-digit decline at Loungefly. Management said the Loungefly outlook reflects its strategic reduction in SKU count and a product assortment focused on items with stronger consumer demand and higher return potential.

The company also maintained its full-year gross-margin forecast of 46% to 47% and adjusted EBITDA guidance of $100 million to $110 million. Both outlook measures include the $25.4 million benefit recognized in the second quarter from expected tariff refunds and the release of accrued tariffs.

For the fourth quarter, Funko expects approximately $4 million of equity-based compensation, $14 million of depreciation and amortization, and $5 million of interest expense. Full-year expectations for those items are approximately $12 million, $60 million and $20 million, respectively.

Product and channel priorities

Funko’s strategy centers on identifying cultural demand, developing repeatable product formats and expanding productive retail, direct-to-consumer, international and experiential channels. Recent initiatives included limited-edition products tied to ComplexCon, collectibles based on A Court of Thorns and Roses, and a partnership with Goldin to auction one-of-one Pop! figures. A Babe Ruth figure from the company’s POP!250 collection sold for approximately $26,000.

The company also opened an experience at FAO Schwarz combining product discovery, Pop! Yourself and New York-exclusive Funko and Loungefly merchandise. At D23 2026, the Loungefly Pier experience attracted more than 9,500 guests and generated 8.59 million in social reach, with sales above the company’s expectations.

Funko cautioned that its outlook remains subject to economic conditions, changes in retail and consumer-product markets, tariffs and trade restrictions, inventory execution, dependence on licensed intellectual property and third-party content, gross-margin fluctuations, seasonality, indebtedness and access to financing. The company also identified risks tied to vendors, information systems, regulation, litigation, e-commerce and international operations.