Hi, everyone. Welcome to our third quarter earnings webcast, coming to you from the heart of Hollywood at the Funko store. I am Josh Simon, Funko's CEO, joined with our CFO, Yves Le Pendeven, our Chief Product Officer, Husnal Shah, and our Head of Marketing and Brand, Nik Rupp. Yves, let's get right into the results. We had another quarter delivering above expectations.
Exactly. Another strong quarter. So pleased to report net sales up 3%, and some of the growth drivers there continue to be core collectibles up 5%, and Europe up 12%. We also delivered gross margin of 45%. That is a five-point improvement over Q3 of last year.
Yeah. Big jump.
Big jump. Adjusted EBITDA also above expectations at $32 million. That is a 12% margin, so we are approaching where we would like to be. Also, let me call out a few balance sheet highlights because we have also made great progress there. Cash of $42 million at quarter end. That is net debt of $155 million, and that compares to just over $200 million in Q3 of last year. So, a lot of progress deleveraging our balance sheet.
Yeah, progress across the board. In the quarter, we see the core business continues to grow, improving the quality and productivity of the portfolio overall, and Make Culture POP! becoming a more deliberate and disciplined growth engine for the company. Tell us about the full year guidance.
For the full year, we're reiterating our guidance, which was sales flat to up 3%, and then Adjusted EBITDA between $100 million and $110 million.
Great. Well, I think it's time for a new segment on the earnings call. I think we like to try and mix it up every quarter. This time, I thought we'd do a fun reveal of our top 10 IPs in the quarter. We're going to have a special guest joining us to kind of round out the top 10. Just worth noting, top 10 represented about 34% of sales in the quarter, so still a pretty big breadth of other fandoms out there. I'll start with the top 10, and then we're going to bring in our special guest. Rounding out at number 10, Avengers, a new entrant onto the list this quarter. Number nine, Star Wars. Number eight, Marvel, also a new entrant for the quarter. Number seven, Hello Kitty. Number six, Demon Slayer.
Now, I think first time this has happened in any sort of earnings call history.
Very true.
Excited to bring in one of my favorite celebrities, a big Funko fan himself, to reveal the top five. It is none other than The Rizzler.
Yo, what is up, everyone? It is The Rizzler. Let us go. We got number five. No way. You are joking. You are joking. It is me as a Funko Pop! Oh my God, we got to get this open. Oh my God. Oh my God. Wow, this is nice. It is me wearing a Knicks sweatshirt holding a basketball. Bro, this is actually very well-made, bro. This is sick. I love this one. Next up, we got number four. All right. We got KPop Demon Hunters. Oh, that is actually kind of cool.
It is like the kitty with the It is like the cat with the bird on top. This is actually kind of cool. I like it. Wow. It is cool. Very detailed too. Wow, number four. Cool. All right, number three. Oh my God. We got Harry Potter, bro. Yo. That is sick. Harry Potter and his owl. We got number two. Oh!
We got the One Piece Limited Glow Chase Edition. Gear five Luffy. Oh my God. Yo, it is a glow-in-the-dark one. I do not even know if I want to open this one. Oh my God, this is sick. Last but not least, number one. Oh. Oh! Pokémon Charizard. Bro, I always wanted this one. This one is sick. Wow. This one is actually cool. Wow, we got Charizard from Pokémon at number one. That right there is your Funko top 10. Wow, there are so many amazing Funko Pops. Thank you, Funko.
All right. Thank you, Rizzler. Love having you as part of the Funko family and appreciate your help with that one. Again, a new number one, Pokémon, which has displaced One Piece, pushed that into the number two spot. Pokémon number one. That is my Casey Kasem impression, for those of you old enough to remember who that is. Turning to the Make Culture POP! strategy, I think the whole idea that we have talked about is, how do we sense demand earlier, turn those into compelling products and experiences, and then scale them through the right retail channels all over the world? Some really great highlights of seeing that strategy turn into execution this quarter. The first one for me that is top of mind as a personal fan is WWE Monday Night Raw. presence, extravaganza, whatever you want to call it.
Totally. Super fun moment for the team. We were able to partner, at his expense, with JD McDonagh, where he wore a Funko Pop! head. There is a little bit of a storyline going on with fellow wrestler Cody Rhodes, and he gets made fun of a little bit. We were able to partner with him, lean into that moment, and have sort of like an on-TV moment for the brand.
He already has the proportions of a Funko Pop!.
You said it, I did not.
It was fun to kind of be part of that broadcast overall.
We also launched with Danhausen and Oba Femi these last few weeks. We pre-sold the product, and it was in partnership with Fanatics and, of course, WWE. The product is off to a great start and soon will be available for mass.
Well, I think we love WWE, love Fanatics from a cultural relevance standpoint. It is a great example of how Pop! has been coming to life. I would also say from another side of the cultural relevance spectrum, ComplexCon 30th anniversary, which happened in L.A. just a few weeks ago.
Totally. For those that do not know, ComplexCon is essentially an annual festival meets convention where sneakers, streetwear, art, and fashion, and music come together. We were partnered with Ken Carson, the headliner of the festival, one of the leading voices in a new generation of rap music, to ultimately create a Hyperstrike with him. So, we dropped the product in his booth alongside some other of his collaboration product. But funny enough, a lot of the kids who were in line were in line for the Funko Pop!. So, some great demand, great energy, and great momentum for the brand.
I think the magic to ComplexCon is the speed at which we were able to operate. We found out from the record company he was headlining it. We only had a few weeks to react, and then, Husnal, you and the team jumped into action.
Yeah. You mentioned Hyperstrike, so that's an engine we use to bring product to life, capture cultural moments at incredible speed. It's really about the design teams working in a non-linear fashion and parallel pathing each and every process such that we can put product out there much sooner. Obviously, using all the techniques and obsessing over the details as a designer would while creating the sculpt or the packaging, but then also bringing it to market with our onshore production process, which is much faster than getting it from overseas. It really shortening the window between creativity, concept, and delivery to come much tighter.
Yeah, I think the design teams, sculpt teams based up in Everett, Washington, using some of the most cutting-edge technology to exercise their creativity, make those sculpts, and then see these products, Pops, come to life in a couple weeks' time.
Correct.
Also, speaking of speed, I think sports moments are always like a fun thing to lean into, and probably one of the biggest sports moment, if not the biggest sports moment of the year over the summer, the NBA World Championships.
Depends on which team you root for.
Yeah.
But it was hard to miss kind of the energy that the Knicks were generating during their playoff run. Had some beautiful moments, and even in L.A., you saw people wearing Knicks jerseys, which is a little strange.
Very rare.
We went with it. As a marketing team, we were able to lean into that moment while the playoff run was happening, working with our animation team to create some content. The moment the team won the championship, we were able to launch a five-pack championship celebration pack that turned into the best-selling item of the year for us.
Came to life at Ring Night a couple weeks ago as well.
We followed it up with another Pop! to turn Statue of Liberty, the First Lady of New York City, into a Pop! wearing the Knicks jersey, holding the ring, which also we launched right at the beginning of the Ring Night moment at Madison Square Garden.
That is awesome. Well, the other big cultural moment during the quarter was America's 250th. We decided to put our own spin on it, calling it Pop! 250. I think really from product creation all the way through to how we sold it, kind of a first-of-its-kind activation for Funko overall.
Definitely. We picked ultimately an icon from each decade through the lens of Funko, then partnered with the king of collectibles, Ken Goldin, to host an eBay Live auction. We had presence on the eBay website, on the social channels, and created a lot of viewership to sort of match this content and commerce moment at the first time. Super interesting for us because it is quite the roadmap for the future as we go deeper into this live auction selling space.
I have to say, I was really curious to see how much some of these would go for, some of these one-of-ones, and I think the Babe Ruth went for $26,000, which was really mind-blowing to me.
I thought you were the one that bought it.
Not me. Yeah. But fun to see, I mean, from a more modern era top five, we had Michael Jackson, Michael Jordan, Britney Spears, and I think the modern era represented by MrBeast, one of the most amazing popular creators in the world today. I think an awesome program overall. Like you said, first time we really have started to dip our toe into the live commerce space, which we think will be definitely a developing retail channel for us. The other newness from the quarter is, I'm staring at it right here, the Pop! Mystery products. We talked about it last quarter. We kind of announced it and teased it at Comic-Con, but it's out in the market officially and off to a good start.
Yeah, it's off to a great start in the market. As you all know, we launched with the Plants Flora line and then the WB Horror line, as well as our One Piece line, and results are outstanding. We sold three times faster than we thought we would. 100% sell-through. We are supplying more product into the market now. What's coming up is Hello Kitty as well as Harry Potter, and we're very excited because there's a little bit of newness in the chase elements and the rarity elements in each and every one of them. So we're really excited to see the results come in that space.
I think if I recall, on the Flora line, because some of them have, well, they all have sort of a one-of-one chase.
Correct.
That one-of-one was actually discovered in Australia.
True.
Yes, you are right.
Which was cool. Some of the other ones still floating around out in the world.
Still floating around the world.
Waiting to be discovered.
Waiting.
The last thing from the Make Culture POP! lens is commerce and how we are coming to life in new ways at retail channels. I would say one of the most creative executions and paying off from a revenue and impact standpoint is a new shop-in-shop we launched with the iconic retailer FAO Schwarz in New York City.
Definitely. Obviously, it does not get more iconic than FAO in New York, but we were able to bring a super immersive brand and hyper-local experience to life, working with some local artists to truly create a New York version of a Funko store in FAO Schwarz. Also have some very limited product that is only available at that store there, both in the inline Pop! version, but also as part of the Pop! Yourself offering.
Yeah, I think we have an incredible Swarovski-encrusted, jewel-encrusted Statue of Liberty collab that we did. I think retails for about $2,500, and we are about 50% sort of sold through on those, which is incredible. Then a really awesome Pop! Yourself experience. Some items you can only get there, but you can get your customized Pop! made right there in the store. It is really turning out to be a fun one so far.
Totally.
Okay, so of course, we need one more new segment for this earnings call. I figure it would be fun to go around the table and ask everyone what your favorite Pops were from the quarter. So, Yves, we will start with you.
I went with horror, Art the Clown, in honor of Halloween recently, and my daughters are big fans of Halloween and horror films. So this was an exclusive we did with Hot Topic and an event called Scare Fair.
A darker side to our CFO. Nice to know. Husnal, what about you?
I went with Zenitsu. He is a character from Demon Slayer.
Demon Slayer, yeah.
The movie Infinity Castle. I just love the rendition of how the design team brought this character to life in the most dynamic and fluid form, where the pivotal moment at which he turns from a comic, coward person to this courageous and confident human being is what really captured this well in this format, so.
Yeah, I think it is awesome to see those sort of those dynamic moments and an entire scene captured in a singular product. Anime continues to be one of our top-selling genres overall.
This one sold 100,000 units already since its launch in September.
Amazing.
Beautiful.
I think I can guess, but yeah, go for it.
It is no surprise, but had to go with Ken Carson, not only for the execution and utilizing the Hyperstrike product engine to turn that cultural relevance into demand, but also how the packaging came to life and opening up our packaging template, working with the collaborator, and having them put their own spin on it was super beautiful to see.
I will follow in your ComplexCon footsteps, because another product that we dropped there is the Bugs Bunny collab with an incredible artist, Joshua Vides. Really amazing to see both the size, the scale, the detail, and just kind of his artistic point of view overlay on an iconic Space Jam character at this size, for reference. He did a really amazing job executing with this one, and I was really proud that we were able to do a collab with him, and fans loved it as well. So I put this as my favorite for the quarter.
Nice. Awesome.
Well, now we have some questions. Our first question is from Stephen Laszczyk at Goldman Sachs. Yves, I will direct this one to you regarding POS trends. Stephen says, "Global POS trends have remained strong, including mid-single digit percent growth in the U.S. and more than 20% growth in Europe through the first half of 2026. How does management think about the sustainability of those trends as you move through the back-to-school and holiday season?
All right. Let me give you some stats first for Q3 POS. Globally, and as a reminder, roughly half of our retailers report this information to us. In units, down 4% year-over-year. By territory, that was down 10% in the U.S., up 16% in EMEA. I would remind everyone that the dynamics of shipping being disrupted last year post-tariff announcement in Q2, we had a lot of inventory reaching the shelves in Q3 of last year, which made it a bit more of a tougher comp in the U.S. market. The other thing I would point out is that D2C was down 13%, again, in units, and that is largely a reflection of less promotional activity and discounting on our site. Although units are down, we have seen profitability in that channel increase.
That is Q3, and then year-to-date through the end of Q3, we were up 3% globally still. Second part of that question, how we expect to see that trend continue through the holidays, and it is always tough to predict. We are certainly hopeful that that kind of positive comp continues during the holidays.
Yeah. Still expecting Q4 collectibles to grow in Q4.
Absolutely
Okay, also from Stephen about new formats and form factors. "To what extent does management expect new formats, Bitty Pop!, Pop! Mystery, sports-related launches to be revenue contributors in 2026 and 2027, and how should investors think about the opportunity to diversify revenue beyond core Pop! products?" I mean, I will take the first part of that question, which is to say, I still think there is a lot of existing and new dimensions of Pop! itself that will contribute to more growth in this year and beyond. I remind everyone, Pop! has sold more than 1 billion units to date. It is definitely this iconic form figure in the world of pop culture.
I think certainly you mentioned it earlier, Husnal, but in the world of Pop! Mystery, we are just getting started. We have a dozen IPs that we will be launching with that throughout the next year.
You mentioned Hello Kitty. You mentioned Harry Potter. Shrek is another one. So, you will start to see continued IPs on Pop! Mystery. We will be rolling out next year a version of Pop! Plush in a few different formats, which I think is very much on trend and will continue to do well. Then we continue to have, I think, some exciting plans to develop Bitty. Certainly, even in the sports space, we are working on something that we think will appeal more to the sports collector, so more to come there. I guess, though, related to new products, because there is a lot in the pipeline too.
There is a lot in the pipeline, and we are really excited. We are going to be teasing a couple new product lines at the Nuremberg and New York Toy Fairs, so stay tuned.
Nuremberg in February and New York as well in February.
New York as well.
A lot new product lines that are launching next year, and we'll start to roll those out with our retail partners
Correct
At those toy fairs.
Yep.
Which we are excited about. Okay, next question is from Eric Wold at Texas Capital Securities. Nik, this one I will direct to you. Given the higher prices seen in the secondary market for some of your limited run and special SKUs, what are the opportunities to increase prices to improve gross margins further? Why do not we start there?
Yeah. No, it is a great question, but look, our primary focus is to serve our fans and our consumers and ultimately make products that they fall in love with. What happens after the purchase and after the transaction, that is up to the consumer. I take that more as a testament to us having a job that we did well, rather than seeing that as an opportunity.
Yeah, and I think on those limited edition products, I think the goal is like, let us grow the market for fans who are interested in limited edition. We are expanding the genres, the IP, the entry points, and I think that is what will grow the market more than sort of looking at extracting pricing from our sort of core collector fans there.
Exactly.
Then one more question from Eric. Could you take advantage of those higher prices, although we just talked about that, but the continued collectible demand by leaning into live selling events or online auctions?
I'm glad that question came through as well. Certainly, I think that was the opportunity that we tested with the partnership with Goldin and eBay Live, and it provided amazing learnings, and we are gearing up to lean heavily into that as a new retail stream, but also as a new revenue stream.
Yeah, I think we just finished in the Hollywood store, actually, earlier today.
Saturday, August.
Our third test of live selling on TikTok.
Correct.
We just met earlier this week with the head of collectibles for TikTok Commerce. I was in China last week, two weeks ago, and some really great lessons there where I'd say the ecosystem for live selling and live shopping is well more developed. As much as it's growing here, it's been there for a few years longer, and I think some really great learnings that you'll start to see us continue to grow and scale with, frankly, in Q4 and then beyond into next year as well.
Absolutely.
Yeah. Well, thank you all for being here. I'd say another quarter, the team did a great job delivering above expectations. I think our core business continues to demonstrate healthy demand. At the start of the year, we promised everyone growing core collectibles, which is happening. That will continue into Q4, improving our profit and margins and strengthening the balance sheet. So, great to see the progress this quarter. Thank you all for joining, and thanks everyone out there for joining, and we will see you in a few months for our Q4 earnings broadcast. Until then, thanks for joining us.
Thanks.
Thank you.