FNKO 10-K & 10-Q changes, risk factors and insider trading

We regularly face challenges in managing our inventory levels. We must maintain sufficient inventory levels to operate our business successfully, but we must also avoid accumulating excess inventory, which increases working capital needs and lowers gross margin. We obtain substantially all of our inventory from third-party manufacturers located outside the United States and must typically order products well in advance of the time these products will be offered for sale to our customers. As a result, at any given time it may beis difficult to respond to changes in consumer preferences and market conditions, which, for pop culture products, can change rapidly. IfAt the times when we do not accurately anticipate the popularity of certain products, then we may not have sufficient inventory to meet demand. Alternatively,Similarly, ifwhen demand or future sales do not reach forecasted levels, weit often results and could havecontinue to result in our having excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard.

In addition, we often face and may in the future face difficulties processing inventory through our distribution centers, which could cause us to hold inventory for an extended period of time. IfWhen market conditions, demand for our products or consumer preferences shift or we face distribution challenges prior to the sales of the inventory, we have and may in the future have excess inventory that we may need to hold for a long period of time, write down, and/or sell at prices lower than expected or discard.

We are also and may alsoin the future be negatively affected by changes in retailers’ inventory policies and practices, including as a result of macroeconomic factors. As a result of the desire of retailers to more closely manage inventory levels, we are required to more closely anticipate demand, and this couldhas, requireat times required us to carry additional inventory. Policies and practices of individual retailers maycan adversely affect us as well, including those relating to access to and time on shelf space, price demands, payment terms and favoring the products of our competitors. Our retail customers make no binding long-term commitments to us regarding purchase volumes and make all purchases by delivering purchase orders. Any retailer can therefore freely reduce its overall purchase of our products, including the number and variety of our products that it carries, and reduce the shelf space allotted for our products. In recent periods, we have experienced canceled orders and if demand or future sales do not reach forecasted levels, we could have excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard. For example, during the year ended December 31, 2023, we incurred an inventory write-down of $30.3 million due to our decision to increase operational efficiency and reduce storage costs and we also wrote down $8.7 million in unfinished and finished goods held at offshore factories, which contributed to the Company's net loss for the period. If we are not successful in managing our inventory, our business, financial condition and results of operations could be adversely affected. For additional information, please see " Inventory Management" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

We have generally experienced rapid growth over the last several years, which has placed a strain on our managerial, operational, product design and development, sales and marketing, administrative and financial infrastructure. For example, we increased our total number of full-time employees from 702 as of December 31, 2018 to 1,283 as of December 31, 2024. We also lease distribution centers in the U.S. and the United Kingdom and utilize third-party distribution centers in the U.S.Mexico and the Netherlands. Our success depends in part upon our ability to manage our growth effectively. To do so, we must continue to increase the productivity of our existing employees and to hire, train and manage new employees as needed, which we may not be able to do successfully or without compromising our corporate culture. See “Our success is critically dependent on the efforts and dedication of our officers and other employees, and the loss of one or more key employees, or our inability to attract and retain qualified personnel and maintain our corporate culture, could adversely affect our business.” To manage domestic and international growth of our operations and personnel, we have invested and continue to invest in the development of a domestic enterprise resource planning system, warehouse management systems, additional platforms to support our direct-to-consumer experience, and capital build out of new leased warehouse and office spaces. We will need to continue to improve our product development, supply chain, financial and management controls and our reporting processes and procedures to support our infrastructure and new business initiatives. These additional investments will increase our operating costs, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. Moreover, if we fail to scale our operations or manage our growth successfully, our business, financial condition and operating results could be adversely affected.

Our license agreements typically provide that our licensors own the intellectual property rights in the products we design and sell under the license. As a result, upon termination of the license, we would no longer have the right to sell these products, while our licensors could engage a competitor to do so. We believe our ability to retain our license agreements depends, in large part, on the strength of our relationships with our licensors. Any events or developments adversely affecting those relationships, or changes in our management team, could adversely affect our ability to maintain and renew our license agreements on similar terms or at all. In May 2024, we announced that Cynthia Williams would succeed Michael Lunsford as the Company's Chief Executive Officer. No assurance can be made that thesethe recent and otherany future changes in our leadership or changes in our financial condition will not have a material adverse impact on our relationships with licensors, and if we fail to manage our licensor relationships successfully, our business, financial condition or results of operations could be materially adversely affected. Our top ten licensors collectively accounted for approximately 63%, 68%63% and 74%68% of our sales for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. Moreover, while we have separate licensing arrangements with Disney, LucasFilm and Marvel, these parties are all under common ownership by Disney and collectively these licensors accounted for approximately 32%,28%, 38%32% and 44%38% of our sales for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. The termination or failure to renew one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, financial condition and results of operations. While we may enter into additional license agreements in the future, the terms of such license agreements may be less favorable than the terms of our existing license agreements.

Our license agreements are complex, and typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements. Any such audit could result in a dispute over whether we have paid the proper royalties and a requirement that we pay additional royalties, the amounts of which could be material. As of December 31, 2024,2025, we had aan reserveaccrual of $23.5$29.6 million on our balance sheet related to ongoing and future royalty audits, based on estimates of the costs we expect to incur. In addition to royalty payments, these agreements as a whole impose numerous other obligations on us, including, among other things, obligations to:

For example, our former Chief Executive Officer, Brian Mariotti and anotherother former Funko executive,executives, have created a collectible products company that recently launched with certain products that compete with our offerings. Mr. Mariotti may rely on licensing, supplier, marketing and other relationships he established while at Funko to produce, market and sell his products. He may be able to sell competing products for higher margins or at lower cost, and he may divert demand for our products, particularly from our customers who are collectors, all of which may adversely affect our sales and profitability in the future.

Certain of these factors have adversely impacted our business and results of operations in the past. If any of these factors, or other factors unknown to us at this time, occur,occur in the future, then our gross margin could be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.

Consumer demand for pop culture products can and does shift rapidly and without warning. As a result, even if our product offerings are initially successful, there can be no guarantee that we will be able to maintain their popularity with consumers. Accordingly, our success will depend, in part, on our ability to continually design and introduce new products that consumers find appealing. To the extent we are unable to do so, our sales and profitability will be adversely affected. This is particularly true given the concentration of our sales under certain of our brand categories, particularly Core Collectible. Sales of our Core Collectible branded category products accounted for approximately 77%, 73% and 76% of our sales for the years ended December 31, 2024, 2023 and 2022, respectively. If consumer demand for our Core Collectible branded category products were to decrease, our business, financial condition and results of operations could be adversely affected unless we were able to develop and market additional products that generated an equivalent amount of net sales at a comparable gross margin, which there is no guarantee we would be able to do.

Our officers and employees are at the heart of all of our efforts. It is their skill, creativity and hard work that drive our success. In particular, our success depends to a significant extent on the continued service and performance of our senior management team. We are dependent on their talents and continuing employment, and believe they are integral to our relationships with our licensors, certain of our key retail customers and to our overall selling and creative design processes. In MayAugust 2024,2025, we announced that CynthiaJosh WilliamsSimon wouldwas succeedappointed Chief Executive Officer, succeeding Michael LunsfordLunsford, asa theformer Company'smember of our Board of Directors and former Interim Chief Executive Officer. The recent and any future changes in our leadership could have a material adverse impact on our business, financial condition and results of operations. The loss or temporary absence of any member of our senior management team, or of any other key employees, or the inability to successfully complete planned management transitions, could impair our ability to execute our business plan and could therefore have a material adverse effect on our business, financial condition and results of operations. We do not currently maintain key manperson life insurance policies on any member of our senior management team or on our other key employees.

We use third-party manufacturers to manufacture all of our products and have historically concentrated production with a small number of manufacturers and factories. As a result, the loss or unavailability of one of our manufacturers or one of the factories in which our products are produced, even on a temporary basis, could have a materially negative impact on our business, financial condition and results of operations. This risk is exacerbated by the fact that we do not have written contracts reserving capacity or providing loss contingencies with certain of our manufacturers. While we believe our external sources of manufacturing couldcan be shifted, if necessary, to alternative sources of supply, we would require a significant period of timeplanning to make such a shift. Because we believe our products represent a significant percentage of the total capacity of each factory in which they are produced, such a shift may require us to establish relationships with new manufacturers, which we may not be able to do on a timely basis, on similar terms, or at all. We may also be required to seek out additional manufacturers in response to increased demand for our products, as our current manufacturers may not have the capacity to increase production. If we were prevented from or delayed in obtaining a material portion of the products produced by our manufacturers, or if we were required to shift manufacturers (assuming we would be able to do so), our sales and profitability could be significantly reduced.

Additionally, there are increasing expectations in various jurisdictions that companies monitor the environmental and social performance of their suppliers, including compliance with a variety of labor practices, as well as consider a wider range of potential environmental and social matters, including the end-of-life considerations for products. These laws may be standalone or incorporated into other regimes, such as trade controls. Compliance can be costly, require us to establish or augment programs to diligence or monitor our suppliers, or, in the case of legislation such as the Uyghur Forced Labor Prevention Act,Act ("UFLPA"), to design supply chains to avoid certain regions altogether. Failure to comply with such regulations can result in fines, reputational damage, import ineligibility for our products, or otherwise adversely impact our business. Although laws like the UFLPA establish presumptive standards that can be overcome, those actions may require us to spend significant time and resources and may not ultimately be successful. Monitoring compliance by independent manufacturers is complicated by the fact that expectations of ethical business practices continually evolve, may be substantially more demanding than applicable legal requirements and are driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how such expectations might develop in the future and cannot be certain that our manufacturing requirements, even if complied with, would satisfy all parties who are active in monitoring and publicizing perceived shortcomings in labor and other business practices worldwide.

Additionally, the third-party manufacturers that produce or assemble most of our products are located in Vietnam, ChinaChina, Cambodia and Mexico. As a result, we are subject to various risks resulting from our international operations. See “Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations.”

There are inherent climate-related risks wherever business is conducted. Various meteorological phenomena and extreme weather events (including, but not limited to, storms, flooding, drought, wildfire, and extreme temperatures) may disrupt our operations orand those of our suppliers, requiring us or our suppliers to incur additional operating or capital expenditures, or otherwise adversely impact our business, financial condition, or results of operations, either directly or indirectly through impacting our suppliers. Climate change may impact the frequency and/or intensity of such events as well as contribute to certain chronic changes, such as changes to meteorological or hydrological patterns, which may have various adverse impacts. While we may take various actions to mitigate our business risks associated with climate change, this may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks.

Expectations surrounding climate,climate change, human capital, and other ESG matters continue to evolve rapidly. For example, we have previously been subject to media scrutiny for our management of product inventory. Unfavorable perceptions of our ESG performance may have a negative impact on our business, whether from a reputational perspective, a reduction in interest in our stock or products, issues in attracting/retaining customers, employees, or business partners, or otherwise.

Simultaneously, there are efforts by some parties to reduce companies’ efforts on certain ESG-related matters. Both advocates and opponents to certain ESG matters increasingly resort to a range of activism forms, including media campaigns and litigation, to advance their perspectives. Addressing these varying demands and expectations (including any associated regulatory obligations) may be costly, and our efforts may not be successful or have the desired effect. Any failure to successfully navigate such divergent or conflicting expectations may also result in variousincreased costs, changes in demand for certain products, reputational harm, enhanced compliance or disclosure obligations, or other adverse impacts.impacts to our business, financial condition, or results of operations. Certain of our suppliers and business partners may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.

Our corporate headquarters are currently located in Everett, Washington and our primary distribution warehouse is located in Buckeye, Arizona. We also have additional warehouse facilities and/or offices located in Coventry, England; London, England; Burbank, California; and San Diego, California. In addition, the factories that produce most of our products are located in Vietnam, Cambodia, China and Mexico. As a result, our business may be more susceptible to adverse conditions in these regions than the operations of more geographically diverse competitors. Such conditions could include, among others, adverse economic and labor conditions, as well as demographic trends. Furthermore, Buckeye is the location from which most of the products we sell are received, stored and shipped to our customers. We depend heavily on ocean container delivery to receive products from our third-party manufacturers located in Asia and contracted third-party delivery service providers to deliver our products to our distribution facilities. Any disruption to or failures in these delivery services, at our headquarters or at our warehouse facilities, whether as a result of extreme or severe weather conditions, natural disasters, labor unrest or otherwise, affecting western Washington or Arizona in particular, or the West Coast in general, or in other areas in which we operate, could significantly disrupt our operations, damage or destroy our equipment and inventory and cause us to incur additional expenses, any of which could have a material adverse effect on our business, financial condition and results of operations.

In addition, changes in law and policy relating to taxes could adversely affect us. Taxing authorities and other officials regularly propose significant changes to tax laws, some of which may affect our business. The Organization for Economic Co-operation and Development (the “OECD”) announced an accord commonly referred to as “Pillar Two” to set a minimum global corporate tax rate of 15%, which is being or may be implemented in many jurisdictions, including the United States.jurisdictions. The OECD is also issuing guidelines that are different, in some respects, than current international tax principles, and adoption of these guidelines may increase tax uncertainty and increase taxes applicable to us. In January 2026, more than 145 countries in the OECD/G20 Inclusive Framework agreed to have U.S.-headquartered companies remain subject to only U.S. global minimum taxes while exempting them from Pillar Two. This side-by-side agreement recognizes the tax sovereignty of the United States over the worldwide operations of U.S. companies and the tax sovereignty of other countries over business activity within their own borders. However, the precise contours of this side-by-side agreement as well as the details about its implementation by specific jurisdictions are uncertain. In addition, in July 2025, Public Law No: 119-21, known as the “One Big Beautiful Bill” (the “Tax Reform Bill”), was signed into law. The Tax Reform Bill made multiple changes to U.S. federal income tax laws, which could have implications for us and also for investors. The Tax Reform Bill modified federal income tax rules relating to the expensing of research and development costs, certain other capital expenditures and certain business interest expense. Moreover, various aspects of the Tax Reform Bill are unclear, and administrative guidance is anticipated regarding the application of numerous provisions in the Tax Reform Bill. There can be no assurance that the Tax Reform Bill and any resulting administrative guidance would not adversely affect us and the tax consequences to an investor. We cannot predict whether the U.S. Congress or any other governmental body may enact new tax legislation or tax regulations, or offer any assurance that new legislation or regulations, including changes to existing laws and regulations, will not have an adverse effect on our business, results of operations, financial condition or prospects.

Additionally, some jurisdictions have implemented, or may implement, laws that require remote sellers of goods and services to collect and remit taxes on sales to customers located within the jurisdiction. In particular, the Streamlined Sales Tax Project (an ongoing, multi-year effort by U.S. state and local governments to pursue federal legislation that would require collection and remittance of sales tax by out-of-state sellers) could allow states that meet certain simplification and other criteria to require out-of-state sellers to collect and remit sales taxes on goods purchased by in-state residents. Furthermore, in June 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair that a U.S. state may require an online retailer with no in-state property or personnel to collect and remit sales taxes on sales made to the state’s residents, which may permit wider enforcement of sales tax collection requirements. These collection responsibilities and the complexity associated with tax collection, remittance and audit requirements increase the costs associated with our e-commerce business.

We are currently subject to securities class action and derivative litigation and may be subject to similar or other litigation in the future, all of which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our Class A common stock.

OnWe are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. For example, on January 18, 2022, a purported stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned Shumacher v. Mariotti, et al., relating to our corporate “Up-C” structure and bringing direct claims for breach of fiduciary duties against certain current and former officers and directors, seeking declaratory, monetary, and injunctive relief. On March 31, 2022, we moved to dismiss the action. In response to defendants’ motion to dismiss, Plaintiff filed an Amended Complaint on May 25, 2022. The amendment did not materially change the claims at issue, and the Defendants again moved to dismiss on August 12, 2022. On December 15, 2022, Plaintiff opposed the Defendants’ motion to dismiss and also moved for attorneys’ fees. Briefing on the motion to dismiss was completed on February 8, 2023; briefing on Plaintiff’s fee application was completed on April 10, 2023. The Court heard oral argument on both motions on July 24, 2023. On December 18, 2023, the Court denied Defendants’ motion to dismiss and denied Plaintiffs’ application for an interim fee. We filed our answer on January 26, 2024, and discovery is currently ongoing. On March 13, 2024, the representative plaintiff moved to withdraw as a plaintiff in the action, and another purported stockholder moved to intervene as representative plaintiff. On October 28, 2024, the Court granted the plaintiff’s motion to withdraw and granted the new representative plaintiff’s motion to intervene. TheAs a result, the litigation is now captioned Lynch vs. Mariotti, et al. In October 2025, the parties participated in a mediation to resolve the litigation. On February 18, 2026, the parties executed a settlement agreement pursuant to which the Company filedagreed, through its Answerinsurers, to resolve the remaining claims for $5.4 million, and to pay plaintiff's counsel a mootness fee of $3.0 million. The parties have submitted the settlement agreement to the VerifiedCourt Classof ActionChancery Complaintfor in Intervention on December 10, 2024, and discovery is currently ongoing.approval.

On June 2, 2023, a purported stockholder filed a putative class action lawsuit in the United States District Court for the Western District of Washington, captioned Studen v. Funko, Inc., et al. On August 17, 2023, the Court appointed two lead plaintiffs, and those plaintiffs filed an amended complaint on October 19, 2023. The Complaintamended complaint alleges that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Exchange Act, as amended, as well as Rule 10b-5 promulgated thereunder by making allegedly materially misleading statements in documents filed with the SEC, as well as in earnings calls and presentations to investors, regarding a planned upgrade to its enterprise resource planning system and the relocation of a distribution center, as well as by omitting material facts about the same subjects necessary to make the statements made therein not misleading. ThePlaintiffs lawsuits seek, among other things, compensatory damages and attorneys’ fees and costs. On August 17, 2023, the Court appointed lead plaintiff, and on August 29, 2023, the parties submitted a joint stipulated scheduling order. Plaintiff’s amended complaint was filed October 19, 2023. The amendment adds additional allegations by including accounts from purported former employees and contractors. Plaintiff seeksseek to represent a putative class of investors who purchased or acquired Funko common stock between March 3, 2022 and March 1, 2023.2023, and seek, among other things, compensatory damages and attorneys' fees and costs. On May 16, 2024, the Court granted the Company’s motion to dismiss with leave for Plaintiffs to file a second amended complaint. On July 1, 2024, Plaintiffs notified the Court of their decision to not amend their complaint, and the Court dismissed the complaint with prejudice on July 8, 2024. Plaintiffs filed a Notice of Appeal to the United States Court of Appeals for the Ninth Circuit on August 6, 2024, under the amended caption Construction Laborers Pension Trust of Greater St. Louis v. Funko, Inc., et al. Plaintiffs’ opening brief was filed on October 21, 2024, and briefing was completed on February 10, 2025. Oral argument iswas expectedheld on May 23, 2025. On February 4, 2026, the Court of Appeals affirmed in part and reversed in part the District Court's decision. Specifically, it affirmed the dismissal of all claims based on statements made on earnings calls and presentations to beinvestors, heldbut reversed the dismissal of claims based on certain risk factor disclosures made in orthe aroundCompany's MaySEC or June 2025.filings.

On April 12, 2024, a former employee of the Company filed a putative class action in San Diego Superior Court, seeking to represent all non-exempt workers of the Company in the State of California. The complaint alleges various wage and hour violations under the California Labor Code and related statutes. Plaintiff has also served a Private Attorneys General Act notice for the same alleged wage and hour violations. The claims predominantly relate to alleged unpaid wages (overtime) and missed meal and rest breaks. The lawsuit seeks, among other things, compensatory damages, statutory penalties, attorneys’ fees and costs. ThereOn May 20, 2025, the parties participated in mediation and reached an immaterial monetary settlement in exchange for a release of all claims that were or could have been no substantive rulingsasserted in the case,complaint includingfor asthe period from April 12, 2020 through July 19, 2025. In January 2026, the Court granted preliminary approval of the class action settlement. The settlement administrator mailed class notices to propriety of proceeding on athe class widemembers basis,in andFebruary a2026. dateThe final approval hearing is scheduled for trial has not yet been set. The parties have agreed to a mediation session related to this case that is expected to occur in May 2025.1, 2026.

Use of digital marketing and social media may materially and adversely affect our reputation or subject us to fines or other penalties.

We rely to a large extent on our online presence to reach consumers and use third-party social media platforms as marketing tools. ForWe example,rely on internet search engines, such as Google and we maintain Facebook, X (formerly Twitter),X, Instagram, TikTok and YouTube accounts. AsSearch e-commerceengines and social media platforms continuefrequently update and change the algorithms that determine the placement and display of results of a user's search or the content a user sees. If we are unable to rapidlyappear evolve,prominently wein mustthe continuesearch to maintain a presence on these platforms and establish presences on newresults or emerging popular social media platforms.feeds for relevant queries or if changes to these algorithms reduce the visibility of our content, traffic to our website could decline and we may not be able to replace this traffic with traffic from other channels in a timely manner or at all, which could harm our business, financial condition, and results of operations. If we are unable to cost-effectively use social media platforms as marketing tools, our ability to acquire new consumers and our financial condition may suffer. Furthermore, as laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and result of operations.

Funko is a leading pop culture consumer products company. Our business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty. We create whimsical, fun and unique products that enable fans to express their affinity for their favorite “something”—whether it is a movie, TV show, video game, musician or sports team. We infuse our distinct designs and aesthetic sensibility into one of the industry’s largest portfolios of licensed content over a wide variety of product categories, including figures, plush, accessories, apparel, homewares, digital NFTs, vinyl records and limited-edition posters.

We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 35%40% of our net sales generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, ChinaChina, Cambodia and Mexico. As such, we are exposed to and impacted by global macroeconomic factors. Current macroeconomic factors remain very dynamic, such as greater political uncertainty, unrest or instability in the United States, Central and Eastern Europe (including the ongoing Russia-Ukraine War), the Middle East (including the Israel–Hamas War), and certain Southeast Asia regions as well as financial instability, new or increasing tariffs and general uncertainty over U.S. trade and tariff policies, rising interest rates and heightened inflation that could reduce our net sales or have impacts to our gross margin (as defined below), net income and cash flows. Certain tariffs enacted in 2025 have been subject to successful legal challenge, but it remains unclear whether and to whom those tariffs may be refunded, and the federal government may attempt to impose new or similar tariffs under alternative statutory mechanisms. This has led and may lead to further continued uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our products.

In addition, we have been and continue to be operating in a challenging retail environment where retailers have slowed their restocking, prioritized lower inventory levels and, in some cases, have negotiated additional discounting for sell-through or canceled their orders. Moreover, tariffs on imports have adversely impacted and may in the future adversely impact our costs and we have raised prices for certain of our products. This has had an impact across our brands and geographies of reducing our net sales, gross margin and net income. Additionally, tariffs could impact consumer discretionary spending in future periods. We have strategically adjusted our inventory buy-in to focus on non-exclusive core products in order to help mitigate this impact.

Our operating results and prospects will beare impacted by developments in the market for pop culture consumer products. Our business has benefited from pop culture trends including (1) technological innovation that has facilitated content consumption and engagement, (2) creation of more quality content, (3) greater cultural prevalence and acceptance of pop culture fandom and (4) increased engagement by fans with pop culture content beyond mere consumption driven by social media and demonstrated by fan-centric experiences, such as Comic-Con events around the world. These trends have contributed to significant growth in the demand for pop culture products like ours in recent years; however, consumer demand for pop culture products and pop culture trends can and does shift rapidly and without warning, and content consumption trends by consumers are also rapidly evolving. To the extent we are unable to offer products that appeal to consumers, our operating results will be adversely affected. This is particularly true given the concentration of our sales of products under certain of our brands, particularly our Core Collectible branded products, which represented approximately 77% and 73% of our sales for the years ended December 31, 2024 and 2023, respectively, and which are sold across multiple product categories.

Historically, substantially all of our sales have been derived from our retail customers and distributors, upon which we rely to reach the consumers who are the ultimate purchasers of our products. Our top ten wholesale customers represented approximately 31% and 32% of our sales for both the years ended December 31, 20242025 and 2023,2024, respectively. During the years ended December 31, 20242025 and 2023,2024, we saw shifts in our client mix as a direct result of our growing direct-to-consumer business and enhanced online presence of our top customers.

Inventory consists primarily of figures, plush, apparel, homewares, accessories and other finished goods, and is accounted for using the first-in, first-out (“FIFO”) method. Inventory costs include direct product costs and freight costs. We order inventory based on assumptions of future demand and maintain reserves for excess and obsolete inventories to reflect the inventory balance at the lower of cost or net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to customers, or liquidation, and expected recoverable value of each disposition category. We also monitor our warehouse operations for maximum throughput to minimize carrying costs and aging of on-hand inventory. We may from time to time, liquidate and/or dispose of inventory to increase warehouse operating efficiency. During the year ended December 31, 2023, the Company approved an inventory reduction plan to improve U.S. warehouse operational efficiency. The Company recorded a $30.3 million inventory write-down included in cost of sales as presented in the consolidated statements of operations for the year ended December 31, 2023. The units were identified and recorded based on an estimate of product costs, associated capitalized freight, net of allocated inventory reserves of the identified units and an estimate of physical destruction costs.

DuringBased on the yearCompany's endedassessment as of December 31, 2023,2025 and 2024, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it wasis not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets.assets Consequently,and the Company establishedretained a full valuation allowance of $123.2 million against its deferred tax assets, thus reducing the carrying balance to $0, and recognized a corresponding increase to tax expense in the consolidated statements of operations and comprehensive (loss) income in the year ended December 31, 2023.allowance.

As a result of the full valuation allowance on the deferred tax assets, and projected inability to fully utilize all or part of the related tax benefits, the Company determined that certain payments to the TRA Parties related to unrealized tax benefits under the TRA are no longer probable and estimable. Based on this assessment, the Company reduced its TRA Liability as of June 30, 2023, to $9.6 million, and recognized a gain of $99.6 million within the accompanying consolidated statements of operations and comprehensive (loss) income. The Company performed a true-up in the fourth quarter of 2023 based on the filed 2022 consolidated tax return and recognized a further reduction in TRA liability and corresponding $603 thousand gain within the accompanying consolidated statements of operations and comprehensive (loss) income.

We sell a broad array of licensed pop culture consumer products across a variety of categories, including figures, plush, accessories, apparel, homewares, NFTs, vinyl records and limited-edition posters, primarily to retail customers and distributors. We also sell our products directly to consumers through our e-commerce operations, our retail stores and, to a lesser extent, at specialty licensing and comic book conventions and exhibitions.

Revenue from the sale of our products is recognized when control of the goods is transferred to the customer, which is upon shipment or upon receipt of finished goods by the customer, depending on the contract terms. The majority of revenue is recognized upon shipment of products to the customer. We routinely enter into arrangements with our customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. The estimated costs of these programs reduce gross sales in the period the related sale is recognized. We evaluate the need for price increases along with other incentive arrangements and cost of product to help manage gross margins. In 2023,2025, we instituted price increases for certain of our products, and we may institute additional increases in 2025.products. Sales terms typically do not allow for a right of return except in relation to a manufacturing defect and certain products purchased through our website. Shipping costs billed to our customers are included in net sales, while shipping and handling costs, which include inbound freight costs and the cost to ship products to our customers, are included in cost of sales.

Cost of sales consists primarily of product costs, royalty expenses paid to our licensors, the cost to ship our products, including both inbound freightfreight, duties and dutiestariffs and outbound products to our customers and inventory management. Our cost of sales excludes depreciation and amortization.

Our products are produced and assembled by third-party manufacturers primarily in Vietnam, ChinaChina, Cambodia and Mexico. The use of third-party manufacturers enables us to avoid incurring fixed product costs, while maximizing flexibility, capacity and capability. As part of a continuing effort to reduce manufacturing costs and ensure speed to market, we have historically kept our production concentrated with a small number of manufacturers and factories even as we have grown and diversified. Our use of international manufacturers, particularly in China and Mexico, may increase the likelihood that our costs are adversely impacted by newadditional tariffs.

Our royalty costs and gross margins will also be impacted from period to period based on our mix of licensed products sold, as well as a variety of other factors including reserves for minimum guarantees and accruals for ongoing and future royalty audits.

We anticipate inflationary pressures throughout our supply chain in future periods, specific to freightfreight, duty and dutiestariff costs and, to a lesser extent, product costs.

Interest expense, net includes the cost of our short-termrevolving facility borrowings and long-termterm debt, including the amortization of debt issuance costs and original issue discounts, net of any interest income earned.

Net sales were $908.2 million for the year ended December 31, 2025, a decrease of 13.5% compared to $1.0 billion for the year ended December 31, 2024, a decrease of 4.2% compared to $1.1 billion for the year ended December 31, 2023.2024. The decrease in net sales was primarilyacross dueall todistribution decreased sales to our specialty retailers and e-commerce site customers, primarilychannels as a result of theadverse availableimpacts contentto slatedemand from tariff disruption and performancegeneral ofmacroeconomic certain exclusive products.uncertainty. Our top ten wholesale customers represented approximately 31% and 32% of our sales for both the years ended December 31, 20242025 and 2023, respectively.2024.

On a geographical basis, net sales in the United States decreased 9.7%19.9% to $546.3 million in the year ended December 31, 2025 as compared to $682.0 million in the year ended December 31, 20242024, asnet comparedsales in Europe increased 1.6% to $755.6$288.3 million in the year ended December 31, 2023,2025 net sales in Europe increased 5.7% tofrom $283.8 million in the year ended December 31, 2024 fromand $268.5net sales in other international locations decreased 12.5% to $73.5 million in the year ended December 31, 20232025 and net sales in other international locations increased 16.8% tofrom $84.1 million in the year ended December 31, 2024 from $72.0 million in the year ended December 31, 2023.2024.

On a product category basis, net sales of Core Collectible branded products increaseddecreased 0.2%10.1% to $723.3 million in the year ended December 31, 2025 as compared to $804.4 million in the year ended December 31, 20242024. asNet comparedsales of Loungefly branded products decreased 9.8% to $803.2$155.0 million in the year ended December 31, 2023.2025 Netas sales of Loungefly branded products decreased 19.9%compared to $171.8 million in the year ended December 31, 20242024. asNet comparedsales of other products decreased 59.4% to $214.5$29.9 million in the year ended December 31, 2023.2025 Netas sales of other products decreased 6.1%compared to $73.6 million in the year ended December 31, 20242024, asprimarily comparedrelated to $78.4 million in the yearreduction endedof Decemberproduct 31,offerings, 2023.including certain toys, games and NFTs.

Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of sales, was 38.7% for the year ended December 31, 2025, compared to 41.4% for the year ended December 31, 2024, compared to 30.4% for the year ended December 31, 2023.2024. Gross margin (exclusive of depreciation and amortization) increaseddecreased for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, due to the factors noted above.

Selling, general, and administrative expenses were $337.7 million for the year ended December 31, 2025, a decrease of 5.9%, compared to $359.0 million for the year ended December 31, 2024, a decrease of 4.8%, compared to $377.1 million for the year ended December 31, 2023.2024. The decrease was driven primarily by a $19.5$10.6 million decrease in personnel expenses, commissions and stock option expense, a $12.3$5.2 million decrease in facilities and rent, related to decreased usage of third-party logistics sites, a $4.5 million decrease in administrative fees, and a $3.1 million decrease in professional fees, primarily related to non-recurring severance payments, termination of a lease agreement and related expenses and impairment of assets held-for-sale during the year ended December 31, 2023, offset by an increase in advertisingsoftware and marketing feesexpenses of $20.3$4.4 million in 2024,million, primarily into support of our direct-to-consumer channel.growth initiatives.

Depreciation and amortization expense was $59.1 million for the year ended December 31, 2025, a decrease of 5.6%, compared to $62.6 million for the year ended December 31, 2024, compared to $59.8 million for the year ended December 31, 2023, primarily driven by the type and timing of assets placed into service.

Interest expense, net was $19.2 million for the year ended December 31, 2025, a decrease of 6.8%, compared to $20.6 million for the year ended December 31, 2024, a decrease of 26.4%, compared to $28.0 million for the year ended December 31, 2023.2024. The decrease in interest expense, net was primarily due to lower average balances of debt outstanding during the year ended December 31, 2024.2025.

Other Expense (Income), Expense, Net

Other income, net was $0.8 million and other expense, net was $2.9 million and other income, net was $0.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. Other expense (income), expense, net for the years ended December 31, 20242025 and 20232024 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.

Net loss was $68.3 million for the year ended December 31, 2025, compared to $15.1 million for the year ended December 31, 2024,2024. The increase in net loss was primarily due to the decrease in net sales outpacing the decrease in operating expenses as compared to $164.4 million for the year ended December 31, 2023. The decrease in net loss was primarily the result of lower net sales, offset by the nonrecurring events for the year ended December 31, 2023, as discussed above.2024.

EBITDA, Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted (Loss) and Adjusted Earnings (Loss) per Diluted Share (collectively the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net loss, loss per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net loss before interest expense, net, income tax expense, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and other unusual or one-time items. We define Adjusted Net Income (Loss) Income as net loss attributable to Funko, Inc. adjusted for the reallocation of loss attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and the income tax expense effect of these adjustments. We define Adjusted Earnings (Loss) Earnings per Diluted Share as Adjusted Net Income (Loss) Income divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any. We caution investors that amounts presented in accordance with our definitions of the Non-GAAP Financial Measures may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate the Non-GAAP Financial Measures in the same manner. We present the Non-GAAP Financial Measures because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

Due to these limitations, Non-GAAP Financial Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, the Non-GAAP Financial Measures include adjustments for non-cash charges related to equity-based compensation programs, loss on debt extinguishment, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses, tax receivable agreement liability adjustments and other unusual or one-time items. It is reasonable to expect that certain of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. Each of the adjustments described herein and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

(3)For the year ended December 31, 2025, includes charges related to fair market value adjustments for certain assets held for sale. For the year ended December 31, 2024, includes a net one-time legal settlement gain of $1.4 million related to a previously disclosed Loungefly customs-related matter and costs of $4.8 million related to contract settlement agreements and related services for assets held for sale (including fair market value adjustments of $1.3 million) related to a potential business initiative and the sale of certain assets under Funko Games. For the year ended December 31, 2023, includes a lease termination charge related to the abandonment of a potential business initiative of $5.0 million, expenses related to assets held for sale of $6.8 million (including fair market value adjustments of $6.5 million), related charges of termination of service contracts, architecture and design fees of $1.6 million related to the potential business initiative, and a purchase agreement termination charge of $1.0 million related to the abandonment of a potential business initiative, partially offset by acquisition-related benefits of $975,000 related to a working capital adjustment under the Mondo Collectibles, LLC acquisition.

(87)Represents the income tax expense (benefit) effect of the above adjustments.adjustments including adding back the valuation allowance related to the net loss. This adjustment uses an effective tax rate of 25% for theall yearsperiods ended December 31, 2024 and 2023. For the year ended December 31, 2023, this also includes $123.2 million recognized valuation allowance on the Company’s deferred tax assets.presented.

Net cash used in operating activities was $5.1 million for the year ended December 31, 2025, compared to net cash provided by operating activities wasof $123.5 million for the year ended December 31, 2024, compared to $30.9 million for the year ended December 31, 2023.2024. Changes in net cash (used in) provided by operating activities resulted primarily from cash received from net sales and cash payments for product costs and royalty expenses paid to our licensors. Other drivers of the changes in net cash provided by operating activities include shippingshipping, freight, duty and freighttariff costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our short-termrevolving facility borrowings and long-termterm debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days (average 5760 days).

The increasedecrease for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to changes in net loss of $149.4$53.2 million, offset by changes in certain non-cash items, including depreciation and amortization, equity-based compensation, tax receivable liability adjustments and deferredother, tax expensenet of $16.8$11.1 million and changes in working capital of $39.9$64.3 million, which decreased net cash provided by operating activities. Working capital changes were primarily due to increases in inventory of $96.3 million and accounts receivable of $30.9 million, offset by increases in accounts payable of $27.2 million, accrued royalties of $21.7 million and accrued expenses and other liabilities of $19.9$8.9 millionmillion, accounts payable of $8.9 million, accrued royalties of $8.5 million, and a decreasedecreases to inventory of $14.4 million, prepaid expenses and other assets of $19.0$20.5 million and accounts receivable of $3.4 million.

Investing Activities. Our net cash used in investing activities primarily relates to the purchase of property and equipment and acquisitions, net of cash acquired. For the year ended December 31, 2024,2025, net cash used in investing activities was $25.2$31.9 million, which was used for the purchase of property and equipment, primarily related to purchases of tooling and molds,molds offsetused byfor proceeds from the saleproduction of inventoryour andproduct certain intellectual property marketed under and related to Funko Games.lines.

For the year ended December 31, 2023,2024, net cash used in investing activities was $39.8$25.2 million and was primarily related to purchasesthe purchase of property and equipment, related to tooling and moldsmolds, usedoffset inby ourproceeds productionfrom productthe linessale of inventory and forcertain theintellectual acquisitionproperty ofmarketed MessageMe,under Inc.and (d/b/arelated HipDot).to Funko Games.

We operate facilities and sell products in numerous countries outside the United States. Sales to our international customers comprised approximately 42%41% and 36%39% of our sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. We expect sales to our international customers to account for an increasing portion of our sales in future fiscal years. Over time, we expect our international sales and operations to continue to grow both in dollars and as a percentage of our overall business as a result of a key business strategy to expand our presence in emerging and underserved international markets. Additionally, as discussed above, we use third-party manufacturers located in Vietnam, Cambodia,Cambodia and China to produce most of our products. These international sales and manufacturing operations, including operations in emerging markets, are subject to risks that may significantly harm our sales, increase our costs or otherwise damage our business, including:

• the imposition of and changes in tariffs, quotas, taxes or other protectionist measures by any major country or market in which we operate, which could make it significantly more expensive and difficult to import products into that country or market, raise the cost of such products, decrease our sales of such products or decrease our profitability;

• currency conversion risks and currency fluctuations;

• limitations on the repatriation of earnings;

• potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business;

• political instability, civil unrest, war and economic instability, such as the current situation with Ukraine and Russia or in the Middle East and any impacts on surrounding regions;

• greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;

• complications in complying with different laws and regulations in varying jurisdictions, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act of 2010, similar anti-bribery and anti-corruption laws and local and international environmental, labor, health and safety laws, and in dealing with changes in governmental policies and the evolution of laws and regulations and related enforcement;

• difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets which may be quite different from the United States;

• changes in international labor costs and other costs of doing business internationally;

• proper payment of customs duties and/or excise taxes;

The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, Mexico, Canada and other countries have been escalating in recent years. In 2025, the U.S. presidential administration announced tariffs on a broad range of imported goods, including on imports from China, Vietnam, and Cambodia. U.S. tariff impositions against certain exports were followed by retaliatory tariffs on U.S. exports to certain countries. Certain of the products we purchase from manufacturers in China, Vietnam, and Cambodia have been or may in the future be subject to these tariffs, which, to the extent we alter our pricing further as a result of such tariffs, could make our products less competitive than those of our competitors whose inputs are not subject to these tariffs. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive compared to similar products not subjected to such import tariffs. Certain tariffs enacted in 2025 have been subject to successful legal challenge, but it remains unclear whether and to whom those tariffs may be refunded, and the federal government may attempt to impose new or similar tariffs under alternative statutory mechanisms.

FAH, LLC and certain of its material domestic subsidiaries from time to time (collectively, the "Credit Agreement Parties") are parties to a Credit Agreement dated as of September 17, 2021 (as amended, restated, amended and restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), providing for a term loan facility in the amount of $180.0 million (the “Term Loan Facility”) and a revolving credit facility of $125.0 million (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). As of MarchJune 31,30, 2026, we had $211.8$198.3 million of indebtedness outstanding under our Credit Facilities, consisting of $86.8$73.7 million outstanding under our Term Loan Facility (net of unamortized discount of $3.9$3.3 million) and $125.0$124.6 million of outstanding borrowings under our Revolving Credit Facility.

On November 25, 2022, Funko, LLC, Funko Games, LLC, Funko Acquisition Holdings, L.L.C., Funko Holdings LLC and Loungefly, LLC (collectively, “Equipment Finance Credit Parties”) entered into a $20.0 million equipment finance agreement (“Equipment Finance Loan”) with Wells Fargo Equipment Finance, Inc. The Equipment Finance Loan is secured by certain identified assets held within our Buckeye, Arizona warehouse. As of MarchJune 31,30, 2026, the Company had $4.1$2.8 million outstanding under the Equipment Finance Loan.

There can be no assurance that we can successfully execute our business strategy in the manner or time period that we expect, particularly in light of the macroeconomic pressures impacting the global economy and consumer demand. Further, achieving these objectives will require investments that may result in short-term costs without generating any current sales or countervailing cost savings and, therefore, may be dilutive to our earnings, at least in the short term. In addition, we have in the past decided, and may in the future decide,decide to divest or discontinue certain brands or products, or to streamline operations and incur other costs or special charges in doing so. We may also decide to discontinue certain programs or sales to certain retailers based on anticipated strategic benefits. The failure to realize the anticipated benefits from our business strategy could have a material adverse effect on our prospects, business, financial condition and results of operations.

Our license agreements typically provide that our licensors own the intellectual property rights in the products we design and sell under the license. As a result, upon termination of the license, we would no longer have the right to sell these products, while our licensors could engage a competitor to do so. We believe our ability to retain our license agreements depends, in large part, on the strength of our relationships with our licensors. Any events or developments adversely affecting those relationships, or changes in our management team, could adversely affect our ability to maintain and renew our license agreements on similar terms or at all. No assurance can be made that the recent and any future changes in our leadership or changes in our financial condition will not have a material adverse impact on our relationships with licensors, and if we fail to manage our licensor relationships successfully, our business, financial condition or results of operations could be adversely affected. Our top ten licensors collectively accounted for approximately 69%65% and 63%64% of our sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Moreover, while we have separate licensing arrangements with Disney, LucasFilm, Marvel,Marvel and Fox, these parties are all under common ownership by Disney and collectively these licensors accounted for approximately 27% and 32%29% of our sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The termination or failure to renew one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, financial condition and results of operations. While we may enter into additional license agreements in the future, the terms of such license agreements may be less favorable than the terms of our existing license agreements.

Our license agreements are complex, and typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements. Any such audit could result in a dispute over whether we have paid the proper royalties and a requirement that we pay additional royalties, the amounts of which could be material. Based on historical experience and our estimates of the costs we expect to incur, as of MarchJune 31,30, 2026, we had an accrual of $30.7$34.1 million on our balance sheet related to ongoing and future royalty audits. There can be no assurance that actual costs resulting from royalty audits will be in-line with the accruals. In addition to royalty payments, these agreements as a whole impose numerous other obligations on us, including, among other things, obligations to:

Historically, a majority of all of our net sales have been derived from our retail customers and distributors, upon which we rely to reach the consumers who are the ultimate purchasers of our products. In the United States, we primarily sell our products directly to specialty retailers, mass-market retailers and e-commerce sites. In international markets, we sell our products directly to similar retailers, primarily in Europe, through our subsidiary Funko UK, Ltd. We also sell our products to distributors for sale to retailers in the United States and in certain countries internationally, typically in those countries in which we do not currently have a direct presence. Our top ten wholesale customers represented approximately 35%33% and 30%31% of our sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Our gross margin has historically fluctuated, primarily as a result of changes in product mix, changes in our costs, including inventory management, price competition and acquisitions. For the threesix months ended MarchJune 31,30, 2026 and 2025, our gross margins (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of net sales, were 44.2%50.5% and 40.3%,36.2%, respectively.respectively, which includes the recognition of a $25.4 million credit related to future tariff refunds and the release of accrued tariffs in the six months ended June 30, 2026. Our current or historical gross margins may not be sustainable or predictive of future gross margins, and our gross margin may decrease over time. A decrease in gross margin can be the result of numerous factors, including, but not limited to:

Our license agreements often require us to pay minimum royalty guarantees, which may in some cases be greater than what we are ultimately able to recoup from actual sales. When our licensing agreements require minimum royalty guarantees, we accrue a royalty liability based on the contractually required percentage, as revenues are earned. When a minimum royalty guarantee is not expected to be met through sales, we will accrue up to the minimum amount required to be paid. As of MarchJune 31,30, 2026 and December 31, 2025, we recorded reserves of $1.0$3.2 million and $0.8 million, respectively, related to prepaid royalties we estimated would not be recovered through sales. Acquiring or renewing licenses may require the payment of minimum guaranteed royalties that we consider to be too high to be profitable, which may result in losing licenses that we currently hold when they become available for renewal, or missing business opportunities for new licenses. Additionally, we have no guarantee that any particular property we license will translate into a successful product. Products tied to a particular content release may be developed and released before demand for the underlying content is known. The underperformance of any such product may result in reduced sales and operating profit for us.

Our intellectual property is a valuable asset of our business. As of MarchJune 31,30, 2026, we owned approximately 107 registered U.S. trademarks, 349356 registered international trademarks, 54 pending U.S. trademark applications and 2013 pending international trademark applications. The market for our products depends to a significant extent upon the value associated with our product design, our proprietary brands and the properties we license. Although certain of our intellectual property is registered in the United States and in several of the foreign countries in which we operate, there can be no assurances with respect to the rights associated with such intellectual property in those countries, including our ability to register, use, maintain or defend key trademarks and copyrights. We rely on a combination of trademark, trade dress, copyright and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our intellectual property or other proprietary rights. However, these laws, procedures and restrictions provide only limited and uncertain protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated, including by counterfeiters and parallel importers. In addition, our intellectual property portfolio in many foreign countries is less extensive than our portfolio in the United States, and the laws of foreign countries, including many emerging markets in which our products are produced or sold, may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and copyrights may be substantial.

Additionally, the third-party manufacturers that produce or assemble most of our products are located in Vietnam, China,China and Cambodia. As a result, we are subject to various risks resulting from our international operations. See “Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations.”

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. For example, on January 18, 2022, a purported stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned Shumacher v. Mariotti, et al., relating to our corporate “Up-C” structure and bringing direct claims for breach of fiduciary duties against certain current and former officers and directors, seeking declaratory, monetary, and injunctive relief. On March 31, 2022, we moved to dismiss the action. In response to defendants’ motion to dismiss, Plaintiff filed an Amended Complaint on May 25, 2022. The amendment did not materially change the claims at issue, and the Defendants again moved to dismiss on August 12, 2022. On December 15, 2022, Plaintiff opposed the Defendants’ motion to dismiss and also moved for attorneys’ fees. On December 18, 2023, the Court denied Defendants’ motion to dismiss and denied Plaintiffs’ application for an interim fee. On March 13, 2024, the representative plaintiff moved to withdraw as a plaintiff in the action, and another purported stockholder moved to intervene as representative plaintiff. On October 28, 2024, the Court granted the plaintiff’s motion to withdraw and granted the new representative plaintiff’s motion to intervene. As a result, the litigation is now captioned Lynch vs. Mariotti, et al. In October 2025, the parties participated in a mediation to resolve the litigation. On February 18, 2026, the parties executed a settlement agreement pursuant to which the Company agreed, through its insurers, to resolve the remaining claims for $5.4 million, and to pay plaintiff's counsel a mootness fee of $3.0 million. The partiesCourt havepreliminarily submittedapproved the settlement agreementof $8.4 million and the settlement was paid prior to the Courtend of Chancerythe forsecond approval.quarter directly by the Company’s applicable insurers. The Court has scheduled a hearing to determine whether to approveapproved the final settlement on July 8, 2026.

On April 12, 2024, a former employee of the Company filed a putative class action in San Diego Superior Court, seeking to represent all non-exempt workers of the Company in the State of California. The complaint alleges various wage and hour violations under the California Labor Code and related statutes. Plaintiff has also served a Private Attorneys General Act notice for the same alleged wage and hour violations. The claims predominantly relate to alleged unpaid wages (overtime) and missed meal and rest breaks. The lawsuit seeks, among other things, compensatory damages, statutory penalties, attorneys’ fees and costs. On May 20, 2025, the parties participated in mediation and reached an immaterial monetary settlement in exchange for a release of all claims that were or could have been asserted in the complaint for the period from April 12, 2020 through July 19, 2025. In January 2026, the Court granted preliminary approval of the class action settlement. The settlement administrator mailed class notices to the class members in February 2026. On May 1, 2026, the Court granted final approval of the settlement and entered judgment. Payment isof duethe onsettlement was made in May 29, 2026.

On March 2, 2026, a purported stockholder filed a derivative lawsuit on behalf of the Company as a nominal defendant against certain of our current and former directors in the District Court for the Western District of Washington, captioned Marconi v. Perlmutter et al. The derivative complaint alleges breach of fiduciary duty, gross mismanagement, corporate waste, and unjust enrichment claims, as well as a violation of Section 14(a) of the Exchange Act, arising from substantially similar factual predicate as alleged in the Construction Laborers Pension Trust of Greater St. Louis v. Funko, Inc. matter discussed above and seeks monetary damages, attorneys’ fees and costs and corporate governance reforms. ThisOn July 15, 2026, the parties jointly requested that the Court stay the Marconi matter ispending currentlyfinal in the early stagesresolution of litigation.Construction Laborers Pension Trust of Greater St. Louis v. Funko, Inc., et al. The parties’ request remains pending.

Additionally, the Continuing Equity Owners who, as of MayAugust 5,4, 2026, collectively hold approximately 0.2% of the combined voting power of our common stock, and certain transferees of former Continuing Equity Owners that have been joined to our TRA (the "TRA Parties") may receive payments from us under the Tax Receivable Agreement in connection with our purchase of common units of FAH, LLC directly from certain of the Continuing Equity Owners upon a redemption or exchange of their common units in FAH, LLC, including the issuance of shares of our Class A common stock upon any such redemption or exchange. Moreover, Continuing Equity Owners own interests in our business by holding interests in FAH, LLC directly (rather than through ownership of our Class A common stock). As a result of these considerations, the interests of the Continuing Equity Owners and such transferees as well as the TRA Parties may conflict with the interests of holders of our Class A common stock. For example, the TRA Parties may have different interests in the tax positions or other actions that we take which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the Tax Receivable Agreement and accelerate our obligations thereunder. In addition, the structuring of future transactions may take into consideration tax or other considerations of the TRA Parties even in situations where no similar considerations are relevant to us.

We have no material assets other than our ownership of 55,829,93755,989,443 common units of FAH, LLC as of MarchJune 31,30, 2026, representing approximately 99.7% of the economic interest in FAH, LLC. We have no independent means of generating revenue or cash flow, and our ability to pay dividends in the future, if any, is dependent upon the financial results and cash flows of FAH, LLC and its subsidiaries and distributions we receive from FAH, LLC. There can be no assurance that our subsidiaries will generate sufficient cash flow to dividend or distribute funds to us or that applicable local law and contractual restrictions, including negative covenants in our debt instruments, will permit such dividends or distributions.

As of MayAugust 5,4, 2026, we had an aggregate of 144,160,416144,004,234 shares of Class A common stock authorized but unissued, as well as approximately 186,797 shares of Class A common stock issuable, at our election, upon redemption of FAH, LLC common units held by the Continuing Equity Owners. FAH, LLC has entered into the FAH LLC Agreement, and subject to certain restrictions set forth in such agreement, the Continuing Equity Owners are entitled to have their common units redeemed from time to time at each of their options (subject in certain circumstances to time-based vesting requirements) for, at our election, newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each common unit redeemed, in each case, in accordance with the terms of the FAH LLC Agreement; provided that, at our election, we may effect a direct exchange by us of such Class A common stock or such cash, as applicable, for such common units. The Continuing Equity Owners may exercise such redemption right for as long as their common units remain outstanding. We also entered into a Registration Rights Agreement pursuant to which the shares of Class A common stock issued to certain of the Continuing Equity Owners (including each of our then-current executive officers) upon such redemption and remaining shares of Class A common stock issued to the Former Equity Owners in connection with the Transactions (such shares now being held by TCG) are eligible for resale, subject to certain limitations set forth in the Registration Rights Agreement.

We originally reserved for issuance 5,518,518 shares of Class A common stock under our 2017 Incentive Award Plan (the “2017 Plan”), including, as of MarchJune 31,30, 2026, 1,310,1991,301,174 shares of Class A common stock underlying stock options we granted to certain of our directors, executive officers and other employees and 2,374,386 shares of Class A common stock underlying restricted stock units we granted to certain of our executive officers, consultants and other employees and 750,000 shares of Class A common stock underlying performance stock units we granted to certain of our executive officers. We have also reserved for issuance an aggregate number of shares under the Company’s 2019 Incentive Award Plan (the “2019 Plan”) equal to the sum of (i) 3,000,000 shares of our Class A common stock and (ii) an annual increase on the first day of each calendar year beginning on January 1, 2020 and ending on and including January 1, 2029, equal to the lesser of (A) 2% of the shares of Class A common stock outstanding as of the last day of the immediately preceding fiscal year on a fully-diluted basis and (B) such lesser number of shares of Class A common stock as determined by our board of directors. As of MarchJune 31,30, 2026, we had granted 2,416,1042,545,309 shares of Class A common stock underlying stock options,options 6,394,417and 6,364,585 shares of Class A common stock underlying restricted stock units and 18,057 shares of Class A common stock underlying performance stock units under the 2019 Plan to certain of our executive officers, consultants and other employees. In May 2024, we reserved for issuance 1,500,000 shares of Class A common stock under our 2024 Inducement Award Plan and in March 2026, we amended the 2024 Inducement Award Plan to provide for an additional 1,000,000 shares of Class A common stock issuable under the plan. As of MarchJune 31,30, 2026, we had granted 1,256,8051,366,528 shares of Class A common stock underlying restricted stock units to certain executive officers under the 2024 Inducement Award Plan. Any shares of Class A common stock that we issue, including under our 2017 Plan, our 2019 Plan, our 2024 Inducement Award Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the holders of our Class A common stock.

We rely extensively on various IT Systems for internal and external operations that are critical to our business, and while we operate certain of these IT Systems, we also rely on third-party providers for a host of technologies, products and services. In addition, in the ordinary course of business, both we and our third-party providers collect, process and maintain significant amounts of data, including proprietary and confidential business information as well as personal information ( collectively "Confidential Information"). This Confidential Information relates to all aspects of our business, including but not limited to current and future products and entertainment under development, and also contains certain customer, consumer, supplier, partner and employee data.

We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 42%41% of our net sales in the threesix months ended MarchJune 31,30, 2026 generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, China,China and Cambodia. As such, we are exposed to and impacted by global macroeconomic factors. Current macroeconomic factors remain very dynamic, such as greater political uncertainty, unrest or instability in the United States, Central and Eastern Europe (including the ongoing Russia-Ukraine War), the Middle East, and certain Southeast Asia regions as well as financial instability, new or increasing tariffs and general uncertainty over U.S. trade and tariff policies, rising interest rates and heightened inflation that could reduce our net sales or have impacts to our gross margin (as defined below), net income and cash flows.

On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S. were unauthorized. The Company’s total IEEPA tariffs paid as of the date of this report is approximately $20 million. The ruling did not address potential refunds, and therefore the ultimate availability, timing and amount of any potential refunds of these tariffs is highly uncertain. The federal government may attempt to impose new or similar tariffs under alternative statutory mechanisms. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. This has led and may lead to further continued uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our products. We will continue to monitor changes to the import and export policies of the U.S. and other countries that could impact our financial position, results of operations and cash flows.

In addition, we have been and continue to be operating in a challenging retail environment where retailers have slowed their restocking, prioritized lower inventory levels and, in some cases, have negotiated additional discounting for sell-through or canceled their orders. Moreover, tariffs on imports have adversely impacted and may in the future adversely impact our costscosts, and we have raised prices for certain of our products. This has had an impact across our brands and geographies of reducing our net sales, gross margin and net income. Additionally, tariffs could impact consumer discretionary spending in future periods. We have strategically adjusted our inventory buy-in to focus on non-exclusive core products in order to help mitigate this impact.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

The following table sets forth information comparing the components of net income (loss) for the three months ended MarchJune 31,30, 2026 and 2025:

Net sales were $200.9$207.7 million for the three months ended MarchJune 31,30, 2026, an increase of 5.3%,7.4%, compared to $190.7$193.5 million for the three months ended MarchJune 31,30, 2025. The increase in net sales was due primarily to increased sales of core Pop! products and the impact of price increases that went into effect during the third-quarter of 2025, offset by a decline in sales of Loungefly products.2025.

On a geographical basis, net sales in the United States decreasedincreased 3.7%3.4% to $117.4$121.8 million in the three months ended MarchJune 31,30, 2026 as compared to $121.9$117.9 million in the three months ended MarchJune 31,30, 2025. Net sales in Europe increased 25.6%19.4% to $68.1$69.0 million in the three months ended MarchJune 31,30, 2026 as compared to $54.2$57.8 million in the three months ended MarchJune 31,30, 2025. Net sales in other international locations increaseddecreased 6.1%5.1% to $15.5$16.9 million in the three months ended MarchJune 31,30, 2026 as compared to $14.6$17.8 million in the three months ended MarchJune 31,30, 2025.

On a branded category basis, net sales of the Core Collectible branded category increased 16.8%9.0% to $168.8$171.6 million in the three months ended MarchJune 31,30, 2026 as compared to $144.5$157.5 million in the three months ended MarchJune 31,30, 2025. Loungefly branded category net sales decreased 23.1%1.7% to $27.2$31.3 million in the three months ended MarchJune 31,30, 2026 as compared to $35.4$31.8 million in the three months ended MarchJune 31,30, 2025. Other branded category net sales decreasedincreased 54.7%15.2% to $4.9$4.8 million in the three months ended MarchJune 31,30, 2026 as compared to $10.9$4.1 million in the three months ended MarchJune 31,30, 2025.

Cost of sales (exclusive of depreciation and amortization) was $112.1$90.1 million for the three months ended MarchJune 31,30, 2026, a decrease of 1.6%,31.5%, compared to $113.9$131.4 million for the three months ended MarchJune 31,30, 2025. Cost of sales (exclusive of depreciation and amortization) decreased primarily as a result of product mix, as discussed above. In addition, cost of sales for the three months ended June 30, 2026 benefited from one-time items, including the recognition of a receivable for previously paid tariffs and the release of related tariff accruals.

Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of net sales, was 44.2%56.6% for the three months ended MarchJune 31,30, 2026, compared to 40.3%32.1% for the three months ended MarchJune 31,30, 2025. The increase in gross margin (exclusive of depreciation and amortization) for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was driven primarily by savings in product costs as a result of the product mix sold, price increases, and lower royalty impairment expense. In addition, gross margin for the three months ended June 30, 2026 benefited from one-time items, including the recognition of a receivable for previously paid tariffs and the release of related tariff accruals.

Selling, general, and administrative expenses were $83.7$79.7 million for the three months ended MarchJune 31,30, 2026, a decrease of 1.3%,3.1%, compared to $84.8$82.3 million for the three months ended MarchJune 31,30, 2025. The decrease was driven primarily by a $2.1$4.0 million decrease in personnel and related costs (including salary and related taxes/benefits, commissions and equity-based compensation), a $1.1 million decrease in facilities and rent, related to decreased usage of third-party logistics sites, partially offset by an increase of $1.6 million in professionaladvertising fees,and primarily related to the third-party debtmarketing fees associatedof with$1.8 the Fifth Amendment to our Credit Agreement.million. Selling, general and administrative expenses were 41.7%38.4% and 44.5%42.5% of net sales for each of the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Depreciation and amortization expense was $14.8$15.8 million for the three months ended MarchJune 31,30, 2026, aan decreaseincrease of 3.2%,8.5%, compared to $15.3$14.5 million for the three months ended MarchJune 31,30, 2025, primarily related to the type and timing of assets placed in service.

Interest expense, net was $4.9$5.2 million for the three months ended MarchJune 31,30, 2026, an increase of 26.9%,14.9%, compared to $3.8$4.5 million for the three months ended MarchJune 31,30, 2025. The increase in interest expense, net was due primarily to higher interest rates under our Credit Agreement and higher average balance of debt outstanding during the three months ended MarchJune 31,30, 2026.

Other expense, net was $0.5 million and $0.2$0.9 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Other expense, net for the three months ended MarchJune 31,30, 2026 and 2025 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.

Income tax expense was $3.2$1.0 million and $0.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The Company’s tax expense primarily reflects foreign income taxes in jurisdictions where the Company generates taxable income under its transfer pricing arrangements. The U.S. operations continue to be in a full valuation allowance position, resulting in no material U.S. federal or state income tax expense.

Net loss was $18.1$2.7 million for the threesix months ended MarchJune 31,30, 2026, compared to net loss of $28.1$69.1 million for the threesix months ended MarchJune 31,30, 2025. The 35.4% decrease in net loss was primarily due to the increase in net sales, in addition to the decrease in operating expenses as compared to the threesix months ended MarchJune 31,30, 2025. In addition, net income for the six months ended June 30, 2026 benefited from one-time items, including the recognition of a receivable for previously paid tariffs and the release of related tariff accruals.

EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Diluted Share (collectively the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net loss,income (loss), income (loss) per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net income (loss) before interest expense, net, income tax expense, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses and other unusual or one-time items. We define Adjusted Net Income (Loss) as net income (loss) attributable to Funko, Inc. adjusted for the reallocation of income (loss) attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, non-cash charges related to equity-based compensation programs, acquisition transaction costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses and the income tax expense (benefit) effect of these adjustments. We define Adjusted Earnings (Loss) per Diluted Share as Adjusted Net Income (Loss) divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any. We caution investors that amounts presented in accordance with our definitions of the Non-GAAP Financial Measures may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate the Non-GAAP Financial Measures in the same manner. We present the Non-GAAP Financial Measures because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q as indicators of financial performance. Some of the limitations are:

The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net loss,income (loss), for the periods presented:

The following table shows summary cash flow information for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Operating Activities. Net cash provided by operating activities was $10.2$23.6 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash used in operating activities of $22.3$44.4 million for the threesix months ended MarchJune 31,30, 2025. Changes in net cash provided by or used in by operating activities resulted primarily from cash received from net sales and cash payments for product costs and royalty expenses paid to our licensors. Other drivers of the changes in net cash provided by operating activities include cash outlays for shipping and freight costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our short-term borrowings and long-term debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days (average 6150 days).

The increase in net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was primarily due to a decrease in net loss of $66.4 million and changes in working capital that increased net cash usedprovided inby operating activities by $24.5 million and a decrease in net loss of $9.9 million and changes in depreciation and amortization, equity-based compensation and other, net of $2.1$2.3 million. Within working capital, the primary drivers were lowerincreases cash outflows fromin accrued expenses and other current liabilities of $21.4$6.3 million,million and accrued royalties of $9.1$9.9 million, lowerpartially cashoffset inflowsby fromdecreases accountsin receivableprepaid expenses and other assets of $3.6$3.0 million and higher cash outflows from accounts payable of $4.2$9.2 million.

Investing Activities. Our net cash used in investing activities primarily consists of purchases of property and equipment. For the threesix months ended MarchJune 31,30, 2026 and 2025,2025 net cash used in investing activities was $8.2$19.0 million and $6.4$15.2 million, respectively,million and was primarily related to purchases of tooling and molds used for production of our product lines.

For the threesix months ended MarchJune 31,30, 2026, net cash used in financing activities was $9.5$5.8 million, primarily related to payments on the Term Loan Facility, Revolving Credit Facility and Equipment Finance Loan of $5.8$21.3 million and payment for debt issuanceamendment costs of $3.6 million.million, partially offset by $19.2 million in proceeds from the one-time sale of a tariff receivable. For the threesix months ended MarchJune 31,30, 2025, net cash provided by financing activities was $19.3$73.7 million, primarily related to borrowings on the revolvingRevolving credit facilityLine of $25.0Credit Facility of $85.0 million, partially offset by payments on the Term Loan Facility and Equipment Finance Loan of $5.8$11.5 million.

We cannot assure you that our cash provided by operating activities and cash and cash equivalents will be sufficient to meet our future needs. There is currently no availability under our Revolving Credit Facility. As of MarchJune 31,30, 2026, the Credit Agreement Parties were in compliance with all of the covenants then in effect and required to be tested under the Credit Agreement, however, we cannot assure you that we will be able to maintain compliance with the Financial Covenants, or that we will be able to further amend the Credit Agreement should circumstances arise in the future.

As of MarchJune 31,30, 2026, we had $86.8$73.7 million of indebtedness outstanding under our Term Loan Facility (net of unamortized discount of $3.9$3.3 million) and $125.0$124.6 million outstanding borrowings under our Revolving Credit Facility, leaving $0.0no millionremaining offunds availabilityavailable under ourthe Revolving Credit Facility.

On March 31, 2026, an amortization payment in an amount equal to $4,500,000 was paid with respect to the Term Loan Facility. At the end of each fiscal quarter thereafter, commencing with the fiscal quarter ending June 30, 2026, (i) the Term Loan Facility, will amortize in quarterly installments equal to $4,125,000, with any outstanding balance due and payable on the Maturity Date and (ii) the revolving credit facility will amortize in quarterly installments equal to $375,000 (accompanied by permanent commitment reductions), with any outstanding balance due and payable on the Maturity Date. On June 30, 2026, we paid the required quarterly installment of $4,500,000, allocated between the debt facilities in accordance with the Credit Agreement.

As of MarchJune 31,30, 2026, we were in compliance with all covenants under the Credit Agreement.

On August 15, 2025, we entered into an At-the-Market Sales Agreement (the “Sales Agreement”) with BTIG, LLC (the “Agent”) relating to shares of our Class A common stock. In accordance with the terms of the Sales Agreement, from time to time we may offer and sell shares of our Class A common stock having an aggregate gross sales price of up to $40.0 million through or to the Agent, acting as sales agent or principal, pursuant to the prospectus supplement. No sales were made under the Sales Agreement during the threesix months ended MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, we had $34.3$40.7 million of cash and cash equivalents and $30.8$38.7 million of working capital, compared with $42.1 million of cash and cash equivalents and $46.5 million of working capital as of December 31, 2025. Working capital is impacted by the seasonal trends of our business and the timing of new product releases, as well as our current portion of long-term debt and any availability under our Revolving Credit Facility, which is currently $0.

We have evaluated potential goodwill impairment triggering events as of MarchJune 31,30, 2026, and determined it was more likely than not that the fair value of the reporting unit was above carrying value of the net assets. We will continue to evaluate for other-than-temporary impairment triggering events due to the substantive changes in circumstances, such as market capitalization, which could indicate a potential impairment. We reassess the recoverability of the carrying value our identified intangible and other long-lived assets, to the extent conditions necessitate an impairment assessment.