The situation sounds pretty severe: the company included a "going concern" statement with its 10-Q filing, related to the fact that it is forecasting that it will fall out of compliance with the covenants with its lenders. "The forecasted non-compliance with these covenants raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date of issuance of these financial statements," the company said in its filing.
To shore up its cash situation, Funko is negotiating with its lenders for changes to its loan agreements that would prevent a default, looking for additional or different sources of debt financing, and seeking "other potential business opportunities or strategic transactions," which generally means a sale of all or part of the company.
Recent crisis management steps included pausing all outbound shipments from China, which the company is preparing to resume to some retailers soon, and accelerating the move of manufacturing from China to other Asian sources. The movement of manufacturing to other countries will have China as a source for only about 5% of U.S. shipments by the end of the year, down from about a third, CEO Cynthia Williams said in the conference call.
On the operational side, Funko warned of price increases earlier this week (see "Funko Warns of Price Increases"). It turns out the main change was increasing the price of POP! figures from $12 to $14.99, a change that it had been discussing with retailer partners since January, Williams said in the call. It is not making additional changes beyond the previously planned increases, at least for now.
The company has also implemented significant expense cuts, including a 20% reduction in workforce in two waves, one in March and one this month; and further SKU rationalization to eliminate lower-margin, lower-velocity items.
Meanwhile, Q1 was nothing to write home about. The company lost $27.6 million, worse than the $22.7 million loss in Q1 2024, on a sales decline from $215.7 million in Q1 2024 to $190.7 million in Q1 2025. The sales decline was almost entirely in the U.S., where sales declined 16.7%, from $146.4 million in Q1 2024 to $121.9 million in Q1 2025.
The company is coming off a $14.7 million loss for full year 2024 (see "Funko Shows Loss").
