Funko Inc (NASDAQ:FNKO) reported financial results for the third quarter of 2025 that presented a mixed financial picture, yet the market responded with notable enthusiasm. The company's earnings per share significantly surpassed analyst forecasts, which appeared to outweigh concerns about a top-line revenue decline, sending shares sharply higher in after-market trading.
Earnings and Revenue Versus Expectations
The third quarter performance highlighted a clear divergence between profitability and sales growth. While revenue fell short of expectations, the company's bottom-line results delivered a positive surprise.
- Revenue: $250.9 million, a 14.3% decrease compared to the same quarter last year.
- Analyst Revenue Estimate: $263.8 million, making the result a miss of approximately $12.9 million.
- Non-GAAP Earnings Per Share (EPS): $0.06.
- Analyst EPS Estimate: -$0.085, meaning the company outperformed expectations by $0.145 per share.
This substantial earnings beat against a backdrop of declining sales suggests successful cost management and operational efficiencies during the quarter.
Market Reaction
The market's response was decisively positive, focusing on the profitability surprise. Following the earnings release, the stock experienced a significant uptick.
- The stock surged approximately 14.2% in after-market trading.
- This positive movement indicates that investors were more encouraged by the earnings beat and the company's profitability outlook than they were discouraged by the revenue shortfall.
Strategic and Operational Highlights
Beyond the headline numbers, the earnings press release detailed several key operational and strategic points. CEO Josh Simon, who is 60 days into his role, characterized the quarter as "solid," noting that gross margin and profitability were "well ahead of expectations."
- Profitability Metrics: Gross profit margin was 40.2%, down only slightly from 40.9% in the prior year, demonstrating resilience despite lower sales. The company highlighted strong performance from its Bitty Pop! line and benefits from tariff mitigation plans.
- Sales Breakdown: The revenue decline was not uniform across the business.
- Core Collectible sales decreased 12.0% to $200.4 million.
- Loungefly sales saw a more modest decline of 5.5% to $44.7 million.
- The "Other" category, which includes former game assets, saw a significant 67.0% drop.
- Geographic Performance: The sales weakness was concentrated in the United States, which saw a 20.1% decline. European sales remained nearly flat, down just 0.4%.
- Balance Sheet: The company's total debt increased to $241.0 million, up from $182.8 million at the end of 2024, while cash and cash equivalents grew to $39.2 million.
Forward-Looking Commentary and Outlook
Management provided specific guidance for the fourth quarter of 2025, which offers a point of comparison against analyst models for the full year.
- The company expects net sales to "increase modestly" from the Q3 level of $250.9 million.
- It anticipates a gross margin of approximately 40%.
- Adjusted EBITDA margin is projected to be in the mid- to high-single digits range.
- This company outlook can be contrasted with analyst consensus estimates for Q4 revenue of $285.9 million and full-year 2025 sales of $941.5 million.
Conclusion
Funko's third-quarter results tell a story of a company navigating a softer sales environment but succeeding on the profitability front. The market's vigorous positive reaction suggests that investors are rewarding the company's ability to control costs and exceed earnings expectations in a challenging quarter. The focus now shifts to whether the company's strategic initiatives, under its new CEO, can translate into a return to sales growth in the coming quarters as guided.
For a more detailed look at upcoming earnings dates and analyst estimates, you can review the FNKO earnings and estimates page.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any security. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.
