Funko's Q2 2025 Earnings Call: Unpacking Tariffs, Margins, and Shipping Contradictions

Impact of tariffs on pricing strategy, impact of tariffs on order book and shipments, 2025 EBITDA margin guidance, impact of tariffs on gross margins, and order book and shipping patterns are the key contradictions discussed in Funko's latest 2025Q2 earnings call.



Q2 Financial Performance Impacted by U.S. Trade Policies:
- Funko reported total net sales of $193.5 million in Q2, showing a 22% decline compared to the previous year.
- The decline was primarily due to disruptions in sales resulting from U.S. tariff policies, specifically a pause in orders from China by direct import customers.

Gross Margin and Cost Management:
- Gross profit in Q2 was $62 million, resulting in a gross margin of 32.1%, down from 42% in the previous year.
- Despite reduced discounting positively impacting gross margin by 350 basis points, the decline was offset by shortfalls in minimum guaranteed royalties and increased inventory reserves.

International Business and Product Growth:
- Funko's international business achieved 18% POS sales growth in the first half of 2025 and 28% in Q2, contributing significantly to overall sales.
- The growth was driven by strong performance in the Bitty Pop! line and sports products category.

Tariff Mitigation and Strategic Initiatives:
- Funko has largely implemented its tariff mitigation plan, including price increases, production shifts out of China, and reductions in SG&A run rate.
- These measures are expected to offset the financial impact of $40 million in additional tariffs and duties this year.

Liquidity and Financial Strategy:
- Funko's cash and cash equivalents as of June 30 were $49.2 million, with total debt approximately $256.6 million.
- The company has filed for an ATM equity offering and engaged Moelis & Company to advise on debt refinancing and strategic options, aiming to bolster liquidity and address debt maturities.