Funko, Inc. (FNKO)
SIC breadcrumb: Manufacturing > SIC Major Group 39 > SIC 3944 Games, Toys & Children's Vehicles (No Dolls & Bicycles)
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1704711. Latest filing source: 0001704711-26-000020.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 908,209,000 | USD | 2025 | 2026-03-12 |
| Net income | -67,360,000 | USD | 2025 | 2026-03-12 |
| Assets | 685,234,000 | USD | 2025 | 2026-03-12 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001704711.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 426,717,000 | 516,084,000 | 686,073,000 | 795,122,000 | 652,537,000 | 1,029,293,000 | 1,322,706,000 | 1,096,086,000 | 1,049,850,000 | 908,209,000 |
| Net income | 26,880,000 | 3,939,000 | 7,463,000 | 11,725,000 | 3,961,000 | 43,900,000 | -8,035,000 | -154,079,000 | -14,718,000 | -67,360,000 |
| Operating income | 44,147,000 | 42,257,000 | 60,862,000 | 46,613,000 | 23,543,000 | 95,465,000 | -11,920,000 | -103,827,000 | 12,991,000 | -45,543,000 |
| Diluted EPS | 0.04 | 0.29 | 0.36 | 0.11 | 1.08 | -0.18 | -3.19 | -0.28 | -1.24 | |
| Operating cash flow | 49,468,000 | 23,837,000 | 49,991,000 | 90,765,000 | 108,739,000 | 87,362,000 | -40,134,000 | 30,935,000 | 123,524,000 | -5,120,000 |
| Capital expenditures | 21,202,000 | 33,562,000 | 26,866,000 | 42,264,000 | 18,482,000 | 27,759,000 | 59,148,000 | 35,131,000 | 32,791,000 | 32,965,000 |
| Assets | 522,237,000 | 630,313,000 | 666,340,000 | 796,467,000 | 763,590,000 | 967,503,000 | 1,091,145,000 | 798,585,000 | 707,254,000 | 685,234,000 |
| Stockholders' equity | 131,167,000 | 154,708,000 | 225,411,000 | 242,267,000 | 321,638,000 | 368,224,000 | 231,941,000 | 233,019,000 | 185,814,000 | |
| Cash and cash equivalents | 6,161,000 | 7,728,000 | 13,486,000 | 25,229,000 | 52,255,000 | 83,557,000 | 19,200,000 | 36,453,000 | 34,655,000 | 42,148,000 |
| Free cash flow | 28,266,000 | -9,725,000 | 23,125,000 | 48,501,000 | 90,257,000 | 59,603,000 | -99,282,000 | -4,196,000 | 90,733,000 | -38,085,000 |
Ratios
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | 6.30% | 0.76% | 1.09% | 1.47% | 0.61% | 4.27% | -0.61% | -14.06% | -1.40% | -7.42% |
| Operating margin | 10.35% | 8.19% | 8.87% | 5.86% | 3.61% | 9.27% | -0.90% | -9.47% | 1.24% | -5.01% |
| Return on equity | 3.00% | 4.82% | 5.20% | 1.63% | 13.65% | -2.18% | -66.43% | -6.32% | -36.25% | |
| Return on assets | 5.15% | 0.62% | 1.12% | 1.47% | 0.52% | 4.54% | -0.74% | -19.29% | -2.08% | -9.83% |
| Current ratio | 1.56 | 1.72 | 1.82 | 1.64 | 1.87 | 1.59 | 1.31 | 0.95 | 0.94 | 1.19 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001704711.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | 0.28 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | 0.19 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -1.17 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 240,028,000 | -72,998,000 | -1.54 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 312,944,000 | -15,009,000 | -0.31 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 291,236,000 | -10,761,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 215,699,000 | -22,663,000 | -0.45 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 247,657,000 | 5,115,000 | 0.10 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 292,765,000 | 4,330,000 | 0.08 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 293,729,000 | -1,500,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 190,739,000 | -27,588,000 | -0.52 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 193,469,000 | -40,490,000 | -0.74 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 250,905,000 | 901,000 | 0.02 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 273,096,000 | -183,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 200,919,000 | -18,075,000 | -0.33 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001704711-26-000036.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) (the “2025 10-K”). This discussion and analysis contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in this Quarterly Report on Form 10-Q. As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to: •“we,” “us,” “our,” the “Company,” “Funko” and similar references refer to: Funko, Inc., and, unless otherwise stated, all of its direct and indirect subsidiaries, including FAH, LLC. •“ACON” refers to ACON Funko Investors, L.L.C., a Delaware limited liability company, and certain funds affiliated with ACON Funko Investors, L.L.C. (including each of the Former Equity Owners). •“ACON Sale” refers to the sale by ACON and certain of its affiliates to TCG of an aggregate of 12,520,559 shares of our Class A common stock pursuant to a Stock Purchase Agreement, dated as of May 3, 2022, by and among ACON, certain affiliates of ACON and TCG. •“Continuing Equity Owners” refers collectively to ACON Funko Investors, L.L.C., the Former Profits Interests Holders, certain former warrant holders and certain current and former executive officers, employees and directors and each of their permitted transferees, in each case, that owned common units in FAH, LLC after our initial public offering (“IPO”) and who may redeem at each of their options, their common units for, at our election, cash or newly-issued shares of Funko, Inc.’s Class A common stock. •“FAH, LLC” refers to Funko Acquisition Holdings, L.L.C., a Delaware limited liability company. •“FAH LLC Agreement” refers to FAH, LLC’s second amended and restated limited liability company agreement, as amended from time to time. •“Former Equity Owners” refers to those Original Equity Owners affiliated with ACON who transferred their indirect ownership interests in common units of FAH, LLC for shares of Funko, Inc.’s Class A common stock (to be held by them either directly or indirectly) in connection with our IPO. •“Former Profits Interests Holders” refers collectively to certain of our directors and certain current executive officers and employees, in each case, who held existing vested and unvested profits interests in FAH, LLC pursuant to FAH, LLC’s prior equity incentive plan and received common units of FAH, LLC in exchange for their profits interests (subject to any common units received in exchange for unvested profits interests remaining subject to their existing time-based vesting requirements) in connection with our IPO. •“Fundamental” refers collectively to Fundamental Capital, LLC and Funko International, LLC. •“Original Equity Owners” refers to the owners of ownership interests in FAH, LLC, collectively, prior to the IPO, which include ACON, Fundamental, the Former Profits Interests Holders and certain current and former executive officers, employees and directors. •“Tax Receivable Agreement” or “TRA” refers to a tax receivable agreement entered into between Funko, Inc., FAH, LLC and each of the Continuing Equity Owners and certain transferees. •“TCG" refers to TCG 3.0 Fuji, LP. 21 Overview 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, vinyl records and limited-edition posters. We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 42% of our net sales in the three months ended March 31, 2026 generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, 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 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. Key Performance Indicators We consider the following metrics to be key performance indicators to evaluate our business, develop financial forecasts, and make strategic decisions. Three Months Ended March 31, 2026 2025 (amounts in thousands) Net sales $ 200,919 $ 190,739 Net loss $ (18,127) $ (28,059) EBITDA (1) $ 4,684 $ (8,104) Adjusted EBITDA (1) $ 11,275 $ (4,663) (1)Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA are financial measures not calculated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), or non-GAAP financial measures. For a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most closely comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measures” below. 22 Results of Operations Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The following table sets forth information comparing the components of net loss for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, Period over Period Change 2026 2025 Dollar Percentage (amounts in thousands, except percentages) Net sales $ 200,919 $ 190,739 $ 10,180 5.3 % Cost of sales (exclusive of depreciation and amortization) 112,092 113,868 (1,776) (1.6) % Selling, general, and administrative expenses 83,687 84,807 (1,120) (1.3) % Depreciation and amortization 14,774 15,262 (488) (3.2) % Total operating expenses 210,553 213,937 (3,384) (1.6) % Loss from operations (9,634) (23,198) 13,564 (58.5) % Interest expense, net 4,884 3,849 1,035 26.9 % Other expense, net 456 168 288 171.4 % Loss before income taxes (14,974) (27,215) 12,241 (45.0) % Income tax expense 3,153 844 2,309 273.6 % Net loss (18,127) (28,059) 9,932 (35.4) % Less: net loss attributable to non-controlling interests (52) (471) 419 (89.0) % Net loss attributable to Funko, Inc. $ (18,075) $ (27,588) $ 9,513 (34.5) % Net Sales Net sales were $200.9 million for the three months ended March 31, 2026, an increase of 5.3%, compared to $190.7 million for the three months ended March 31, 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. On a geographical basis, net sales in the United States decreased 3.7% to $117.4 million in the three months ended March 31, 2026 as compared to $121.9 million in the three months ended March 31, 2025. Net sales in Europe increased 25.6% to $68.1 million in the three months ended March 31, 2026 as compared to $54.2 million in the three months ended March 31, 2025. Net sales in other international locations increased 6.1% to $15.5 million in the three months ended March 31, 2026 as compared to $14.6 million in the three months ended March 31, 2025. On a branded category basis, net sales of the Core Collectible branded category increased 16.8% to $168.8 million in the three months ended March 31, 2026 as compared to $144.5 million in the three months ended March 31, 2025. Loungefly branded category net sales decreased 23.1% to $27.2 million in the three months ended March 31, 2026 as compared to $35.4 million in the three months ended March 31, 2025. Other branded category net sales decreased 54.7% to $4.9 million in the three months ended March 31, 2026 as compared to $10.9 million in the three months ended March 31, 2025. Cost of Sales and Gross Margin (exclusive of depreciation and amortization) Cost of sales (exclusive of depreciation and amortization) was $112.1 million for the three months ended March 31, 2026, a decrease of 1.6%, compared to $113.9 million for the three months ended March 31, 2025. Cost of sales (exclusive of depreciation and amortization) decreased primarily as a result of product mix, as discussed above. 23 Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of net sales, was 44.2% for the three months ended March 31, 2026, compared to 40.3% for the three months ended March 31, 2025. The increase in gross margin (exclusive of depreciation and amortization) for the three months en [Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in this Annual Report on Form 10-K. Our results of operations for the year ended December 31, 2023, including a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
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, vinyl records and limited-edition posters.
We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 40% of our net sales generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, China, 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.
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Key Performance Indicators
We consider the following metrics to be key performance indicators to evaluate our business, develop financial forecasts, and make strategic decisions.
Year Ended December 31,
2025
2024
(in thousands)
Net sales
$
908,209
$
1,049,850
Net loss
$
(68,295)
$
(15,070)
EBITDA (1)
$
14,339
$
72,652
Adjusted EBITDA (1)
$
26,580
$
94,741
(1)Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA are financial measures not calculated in accordance with U.S. GAAP. For a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most closely comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measures” in this item.
Factors Affecting our Business
Growth in the Market for Pop Culture Consumer Products
Our operating results and prospects are 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.
Relationships with Content Providers
We generate a majority of our net sales from products based on intellectual property we license from others. We have strong relationships with many established content providers and seek to establish licensing relationships with newer content providers. Our content provider relationships are highly diversified, allowing us to license a wide array of properties and thereby reduce our exposure to any individual property or license.
We believe there is a trend of content providers consolidating their relationships to do more business with fewer licensees. We believe our ability to help maximize the value and extend the relevance of our content providers’ properties has allowed us to benefit from this trend. Although we have a successful track record of renewing and extending the scope of licenses, our license agreements typically have short terms (between two and three years), are not automatically renewable and, in some cases, give the licensor the right to terminate the license agreement at will. In addition, the efforts of our current and former senior management team have been integral to our relationships with our licensors. Inability to license newer pop culture properties, the termination or lack of renewal of one or more of our license agreements, or the renewal of a license agreement on less favorable terms, including as a result of members of our senior management team departing the Company, could adversely affect our business.
Retail Industry Dynamics; Relationships with Retail Customers
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% of our sales for both the years ended December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 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.
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Notwithstanding the growth of our direct-to-consumer business, we continue to depend on retailers and, in particular, rely on retailers to provide adequate and attractive space for our products and point of purchase displays in their stores. We continue to have dedicated shelf space for our products in a variety of aisles in mass-market retailer and specialty stores, with our growing diversified product offerings. In recent years, traditional retailers have been affected by a shift in consumer preferences towards other channels, particularly e-commerce.
Our customers do not make long-term commitments to us regarding purchase volumes and can therefore easily reduce their purchases of our products. Any reduction in purchases of our products by our retail customers and distributors, or the loss of any key retailer or distributor for any reason could adversely affect our business. In addition, our future growth depends upon our ability to successfully execute our business strategy. See Item 1A, “Risk Factors.”
Content Mix
The timing and mix of products we sell in any given quarter or year will depend on various factors, including the timing and popularity of new releases by third-party content providers and our ability to license properties based on these releases. We often have visibility into the new release schedule of many our major content providers and our expansive license portfolio allows us to dynamically manage new product creation. This insight allows us to adjust the mix of products based on classic evergreen properties and new releases, depending on the media release cycle.
Our results of operations may also fluctuate significantly from quarter to quarter or year to year depending on the timing and popularity of new product releases and related content releases. Sales of a certain product or group of products tied to a particular property can dramatically increase our net sales in any given quarter or year. While we expect to see growth in the number of properties and products over time, we expect that the number of active properties and the sales per active property will fluctuate from quarter to quarter or year over year based on what is relevant in pop culture at that time and the types of properties we are producing. In addition, despite our efforts to diversify the properties on which we base our products, if the performance of one or more of these properties fail to meet expectations or are delayed in their release, our operating results could be adversely affected.
Inventory Management
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.
Taxation and Expenses
We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of FAH, LLC, and we are taxed at the prevailing corporate tax rates. In addition to tax expenses, we incur expenses related to our operations, as well as payments under the Tax Receivable Agreement. We have caused and intend to continue to cause FAH, LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement.
Based on the Company's assessment as of December 31, 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 is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets and retained a full valuation allowance.
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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.
Components of our Results of Operations
Net Sales
We sell a broad array of licensed pop culture consumer products across a variety of categories, including figures, plush, accessories, apparel, homewares, 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 2025, we instituted price increases for certain of our 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
Cost of sales consists primarily of product costs, royalty expenses paid to our licensors, the cost to ship our products, including both inbound freight, duties and tariffs 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, China, 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, may increase the likelihood that our costs are adversely impacted by additional tariffs.
Our product costs and gross margins will be impacted from period to period based on the product mix in any given period. Our Loungefly branded products tend to have a higher product cost and higher duties as a percentage of sales and therefore lower gross margins than our Core Collectible branded products.
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.
Our shipping costs, both inbound and outbound, will fluctuate from period to period based on customer mix due to varying shipping terms and other factors. We contract a portion of our freight needs and the remainder is acquired through the spot market, where there may be varying costs and transit times.
We anticipate inflationary pressures throughout our supply chain in future periods, specific to freight, duty and tariff costs and, to a lesser extent, product costs.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses are primarily driven by wages, commissions and benefits, warehouse, fulfillment (internal and external), rent and facilities costs, infrastructure and technology costs, advertising and marketing expenses, including the costs to participate at specialty licensing and comic book conventions and exhibitions, as well as costs to develop promotional video and other online content created for advertising purposes. Credit card fees, insurance, legal expenses, other professional expenses and other miscellaneous operating costs are also included in selling, general and administrative expenses. Selling costs generally correlate to revenue timing and therefore experience similar moderate seasonal trends. We expect general and administrative costs to increase as our business evolves.
We have invested considerably in general and administrative costs to support the growth and anticipated growth of our business and anticipate continuing to do so in the future.
Depreciation and Amortization
Depreciation expense is recognized on a straight-line basis over the estimated useful lives of our property and equipment. Amortization relates to definite-lived intangible assets that are expensed on a straight-line basis over the estimated useful lives. Our intangible assets, which are being amortized over a range of two to 20 years, are primarily comprised of trade names, customer relationships and intellectual property.
Interest Expense, Net
Interest expense, net includes the cost of our revolving facility borrowings and term debt, including the amortization of debt issuance costs and original issue discounts, net of any interest income earned.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The following table sets forth information comparing the components of net loss for the years ended December 31, 2025 and 2024:
Year Ended December 31,
Period over Period Change
2025
2024
Dollar
Percentage
(in thousands, except percentages)
Net sales
$
908,209
$
1,049,850
$
(141,641)
(13.5)
%
Cost of sales (exclusive of depreciation and amortization)
556,940
615,318
(58,378)
(9.5)
%
Selling, general, and administrative expenses
337,715
358,958
(21,243)
(5.9)
%
Depreciation and amortization
59,097
62,583
(3,486)
(5.6)
%
Total operating expenses
953,752
1,036,859
(83,107)
(8.0)
%
(Loss) income from operations
(45,543)
12,991
(58,534)
(450.6)
%
Interest expense, net
19,181
20,575
(1,394)
(6.8)
%
Other (income) expense, net
(785)
2,922
(3,707)
(126.9)
%
Loss before income taxes
(63,939)
(10,506)
(53,433)
508.6
%
Income tax expense
4,356
4,564
(208)
(4.6)
%
Net loss
(68,295)
(15,070)
(53,225)
353.2
%
Less: net loss attributable to non-controlling interests
(935)
(352)
(583)
165.6
%
Net loss attributable to Funko, Inc.
$
(67,360)
$
(14,718)
$
(52,642)
357.7
%
Net Sales
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. The decrease in net sales was across all distribution channels as a result of adverse impacts to demand from tariff disruption and general macroeconomic uncertainty. Our top ten wholesale customers represented approximately 31% of our sales for both the years ended December 31, 2025 and 2024.
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On a geographical basis, net sales in the United States decreased 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, 2024, net sales in Europe increased 1.6% to $288.3 million in the year ended December 31, 2025 from $283.8 million in the year ended December 31, 2024 and net sales in other international locations decreased 12.5% to $73.5 million in the year ended December 31, 2025 from $84.1 million in the year ended December 31, 2024.
On a product category basis, net sales of Core Collectible branded products decreased 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, 2024. Net sales of Loungefly branded products decreased 9.8% to $155.0 million in the year ended December 31, 2025 as compared to $171.8 million in the year ended December 31, 2024. Net sales of other products decreased 59.4% to $29.9 million in the year ended December 31, 2025 as compared to $73.6 million in the year ended December 31, 2024, primarily related to the reduction of product offerings, including certain toys, games and NFTs.
Cost of Sales and Gross Margin (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) was $556.9 million for the year ended December 31, 2025, a decrease of 9.5%, compared to $615.3 million for the year ended December 31, 2024. Cost of sales (exclusive of depreciation and amortization) decreased primarily as a result of decreased net sales, as discussed above, offset by increased duty and tariff costs during the year ended December 31, 2025. Product costs decreased $71.6 million or 21.1% and license and royalty costs decreased $10.4 million or 6.2%. Shipping, freight, duty and tariff costs increased $9.5 million or 9.5%, primarily as a result of recent implemented tariffs and increased duties and other costs increased $14.6 million or 203.8%, primarily related to increased inventory reserves as a result of comparable year ended December 31, 2024 product mix sell-through and related inventory reserve benefit.
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. Gross margin (exclusive of depreciation and amortization) decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024, due to the factors noted above.
Selling, General, and Administrative Expenses
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. The decrease was driven primarily by a $10.6 million decrease in personnel expenses, commissions and stock option expense, a $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, offset by an increase in software expenses of $4.4 million, primarily to support our direct-to-consumer growth initiatives.
Selling, general, and administrative expenses were 37.2% of sales for the year ended December 31, 2025, compared to 34.2% of sales for the year ended December 31, 2024, due to the factors noted above.
Depreciation and Amortization
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, primarily driven by the type and timing of assets placed into service.
Interest Expense, Net
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. The decrease in interest expense, net was primarily due to lower average balances of debt outstanding during the year ended December 31, 2025.
Other (Income) Expense, Net
Other income, net was $0.8 million and other expense, net was $2.9 million for the years ended December 31, 2025 and 2024, respectively. Other (income) expense, net for the years ended December 31, 2025 and 2024 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.
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Income Tax Expense
Income tax expense was $4.4 million for the year ended December 31, 2025, compared to $4.6 million for the year ended December 31, 2024. 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
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. The increase in net loss was primarily due to the decrease in net sales outpacing the decrease in operating expenses as compared to the year ended December 31, 2024.
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Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted (Loss) Earnings 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, 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 (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, 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 (Loss) Earnings per Diluted Share as Adjusted Net (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.
Management uses the Non-GAAP Financial Measures:
•as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual operating budget and financial projections;
•as a consideration to assess incentive compensation for our employees;
•to evaluate the performance and effectiveness of our operational strategies; and
•to evaluate our capacity to expand our business.
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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 loss or other financial statement data presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K as indicators of financial performance. Some of the limitations are:
•such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•such measures do not reflect changes in, or cash requirements for, our working capital needs;
•such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
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, 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.
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The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net loss, for the periods presented:
Year Ended December 31,
2025
2024
(in thousands, except per share data)
Net loss attributable to Funko, Inc.
$
(67,360)
$
(14,718)
Reallocation of net loss attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1)
(935)
(352)
Equity-based compensation (2)
11,536
13,602
Acquisition transaction costs and other expenses (3)
727
3,449
Certain severance, relocation and related costs (4)
—
2,093
Foreign currency transaction loss (5)
405
2,398
Tax receivable agreement liability adjustments (6)
(427)
547
Income tax effect of adjustments and valuation allowance reversal (7)
17,281
1,668
Adjusted net (loss) income
$
(38,773)
$
8,687
Weighted-average shares of Class A common stock outstanding-basic
54,387
52,043
Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock
768
2,049
Adjusted weighted-average shares of Class A stock outstanding-diluted
55,155
54,092
Loss per diluted share
$
(1.24)
$
(0.28)
Adjusted (loss) earnings per diluted share
$
(0.70)
$
0.16
Year Ended December 31,
2025
2024
(in thousands)
Net loss
$
(68,295)
$
(15,070)
Interest expense, net
19,181
20,575
Income tax expense
4,356
4,564
Depreciation and amortization
59,097
62,583
EBITDA
$
14,339
$
72,652
Adjustments:
Equity-based compensation (2)
11,536
13,602
Acquisition transaction costs and other expenses (3)
727
3,449
Certain severance, relocation and related costs (4)
—
2,093
Foreign currency transaction loss (5)
405
2,398
Tax receivable agreement liability adjustments (6)
(427)
547
Adjusted EBITDA
$
26,580
$
94,741
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(1)Represents the reallocation of net loss attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC in periods in which income was attributable to non-controlling interests.
(2)Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.
(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.
(4)For the year ended December 31, 2024, includes severance and benefit costs related to certain management departures of $2.1 million.
(5)Represents both unrealized and realized foreign currency losses (gains) on transactions other than in U.S. dollars.
(6)Represents recognized adjustments to the tax receivable agreement liability.
(7)Represents the income tax expense (benefit) effect of the above adjustments including adding back the valuation allowance related to the net loss. This adjustment uses an effective tax rate of 25% for all periods presented.
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Liquidity and Financial Condition
Introduction
Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt service and general corporate needs. Our primary sources of cash flows have been cash flows from operating activities and borrowings under the Credit Agreement dated September 17, 2021 with FAH, LLC and certain of its material domestic subsidiaries from time to time (the “Credit Agreement Parties”) (as amended, restated and 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").
The challenging retail environment, in particular as a result of the tariffs imposed in 2025, and the potential imposition of modified or additional tariffs or export controls by other countries, has adversely impacted and is expected to adversely impact our performance. On February 13, 2026, the Credit Agreement Parties entered into (the "Fifth Amendment") with the lenders under the Credit Agreement in effect prior to the First Amendment (the "Prior Credit Agreement"), which among other things, amended the Prior Credit Agreement to (i) extend the maturity date of the loans under the Prior Credit Agreement from September 17, 2026 to December 31, 2027, and (ii) amend the financial covenants applicable to FAH, LLC and its subsidiaries under the Prior Credit Agreement to, among other things, (a) waive the minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement) covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026 and June 30, 2026, (b) provide FAH, LLC additional cushion with respect to the minimum Fixed Charge Coverage Ratio covenant for the fiscal quarters ending September 30, 2026, December 31, 2026 and March 31, 2027 relative to the minimum Fixed Charge Coverage Ratio covenant set forth in the Prior Credit Agreement, (c) introduce a minimum Consolidated EBITDA (as defined in the Credit Agreement) covenant for the six-month period ending June 30, 2026, (d) waive the maximum Net Leverage Ratio (as defined in the Credit Agreement) covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026, June 30, 2026 and September 30, 2026, (e) subject to certain usage restrictions, permit FAH, LLC to forego testing of the maximum Net Leverage Ratio, minimum Fixed Charge Coverage Ratio, minimum Qualified Cash (as defined in the Credit Agreement) and minimum Consolidated EBITDA covenants (collectively, the "Financial Covenants") for any test period (to the extent required to be tested in such test period) if FAH, LLC makes a voluntary prepayment of the loans under the Credit Agreement in an amount not less than $10.0 million prior to the delivery of a compliance certificate for such test period, (f) requiring amortization payments on the outstanding revolving loans, with each such amortization payment in respect of the outstanding revolving loans permanently reducing the revolving commitments and (g) requiring quarterly mandatory prepayment of the revolving loans with cash (subject to certain exceptions) and cash equivalents in excess of $50.0 million, with each such prepayment permanently reducing the revolving commitments. Consistent with the Prior Credit Agreement, the Credit Parties are subject to a covenant to hold no less than $10.0 million of Qualified Cash at any time.
As a result of the Fifth Amendment of the Credit Agreement, we expect that our existing resources and future cash flows from operations and cash and cash equivalents, will provide us with sufficient liquidity to meet our obligations for at least the next twelve months from the issuance date of these financial statements, including compliance with all covenants under the Credit Agreement. As our financial condition continues to improve as a result of the 2025 implemented price increases and cost savings initiatives, we plan to either amend the Credit Agreement to further extend the maturity, seek alternative financing arrangements prior to the maturity of the debt, or opportunistically pursue other business opportunities or strategic transactions with the assistance of financial advisors. However, there can be no assurance these plans will be completed. If we are unable to complete these plans before the end of the fiscal year December 31, 2026, the debt would reclassify from long-term liability to a current liability. If the Credit Agreement is not refinanced before its maturity date of December 31, 2027 on terms that are acceptable to us or, if we do not successfully enter into a transaction(s) to strengthen our balance sheet and increase our financial flexibility, our liquidity, results of operations, cash flows and financial condition would be materially adversely impacted.
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If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. In addition, our Board of Directors intends to continue to evaluate strategic alternatives for the Company from time to time. There can be no assurance that any review of strategic alternatives will result in the identification or consummation of any transaction or action and there is no defined timeline for completion of a review process.
Liquidity and Capital Resources
The following table shows summary cash flow information for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended December 31,
2025
2024
Net cash (used in) provided by operating activities
$
(5,120)
$
123,524
Net cash used in investing activities
(31,902)
(25,228)
Net cash provided by (used in) financing activities
42,037
(99,242)
Effect of exchange rates on cash and cash equivalents
2,478
(852)
Net change in cash and cash equivalents
$
7,493
$
(1,798)
Operating Activities. Our net cash provided by operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, equity-based compensation, as well as the effect of changes in working capital and other activities.
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 of $123.5 million for the year ended December 31, 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 shipping, freight, duty and tariff costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our revolving facility borrowings and term debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days (average 60 days).
The decrease for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to changes in net loss of $53.2 million, changes in certain non-cash items, including depreciation and amortization, equity-based compensation, and other, net of $11.1 million and changes in working capital of $64.3 million, which decreased net cash provided by operating activities. Working capital changes were primarily due to increases in accrued expenses and other liabilities of $8.9 million, accounts payable of $8.9 million, accrued royalties of $8.5 million, and decreases to inventory of $14.4 million, prepaid expenses and other assets of $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, 2025, net cash used in investing activities was $31.9 million, which was primarily related to purchases of tooling and molds used for production of our product lines.
For the year ended December 31, 2024, net cash used in investing activities was $25.2 million and was primarily related to the purchase of property and equipment, related to tooling and molds, offset by proceeds from the sale of inventory and certain intellectual property marketed under and related to Funko Games.
Financing Activities. Our financing activities primarily consist of proceeds from stock issuances, the issuance of long-term debt, net of debt issuance costs, the repayment of long-term debt, payments and borrowings under our line of credit facility and distributions to members.
For the year ended December 31, 2025, net cash provided by financing activities was $42.0 million, primarily related to proceeds from net borrowings on the Revolving Line of Credit of $65.0 million, offset by payments under the Term Loan and Equipment Financing Loan of $23.1 million.
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For the year ended December 31, 2024, net cash used in financing activities was $99.2 million, primarily related to net repayments on the Revolving Line of Credit of $60.5 million, payments under the Term Loan and Equipment Financing Loan of $31.1 million and payments to TRA parties of $9.0 million.
Financial Condition
We cannot assure you that our cash provided by operating activities and cash and cash equivalents will be sufficient to meet our future needs. The current no availability under our Revolving Credit Facility. As of December 31, 2025, 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.
If our operating results fail to improve or if we are otherwise unable to maintain compliance with the Financial Covenants or other covenants under the Credit Agreement, our lenders could, among other things, terminate all outstanding commitments thereunder and accelerate all outstanding borrowings and other obligations, which would require us to seek additional financing. Even in the absence of such event, if we are unable to generate sufficient cash flows from operations in the future, and if availability under our Revolving Credit Facility is not sufficient, or if our debt matures and we are unable to repay amounts owed in full, we may have to obtain additional financing or refinancing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
As of December 31, 2025, we had $94.9 million of indebtedness outstanding under our Term Loan Facility (net of unamortized discount of $0.4 million) and $125.0 million outstanding borrowings under our Revolving Credit Facility. The Credit Facilities under the Credit Agreement will mature on December 31, 2027 (the “Maturity Date”).
On March 31, 2026, an amortization payment in an amount equal to $4,500,000 is due 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.
Loans under the Credit Facilities currently bear interest at SOFR plus 4.50% per annum. On the first day of each fiscal quarter, commencing with April 1, 2027, an additional 0.25% per annum will be added to the interest rate applicable to the loans under the Credit Facilities. SOFR rate is subject to a 0% floor. For loans based on SOFR, interest payments are due at the end of each applicable interest period and in the case of loans based on SOFR with an interest period of more than three months' duration, on each day prior to the last day of such interest period that occurs at intervals of three months' duration after the first day of such interest period.
The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to:
•incur additional indebtedness;
•incur certain liens;
•consolidate, merge or sell or otherwise dispose of our assets;
•make investments, loans, advances, guarantees and acquisitions;
•pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests;
•enter into transactions with affiliates;
•enter into sale and leaseback transactions in respect to real property;
•enter into swap agreements;
•enter into agreements restricting our subsidiaries’ ability to pay dividends;
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•issue or sell equity interests or securities convertible into or exchangeable for equity interests;
•redeem, repurchase or refinance other indebtedness; and
•amend or modify our governing documents.
In addition, the Credit Agreement requires FAH, LLC and its subsidiaries to, subject to the proviso at the end of this paragraph, comply with the following Financial Covenants: (i) on a quarterly basis, commencing with the fiscal quarter ending December 31, 2026, a maximum Net Leverage Ratio of 2.50:1.00, (ii) on a quarterly basis, commencing with the fiscal quarter ending September 30, 2026, a minimum Fixed Charge Coverage Ratio of (a) 0.75:1.00 with respect to the fiscal quarter ending September 30, 2026, (b) 0.85:1.00 with respect to the fiscal quarter ending December 31, 2026, (c) 1.00:1.00 with respect to the fiscal quarter ending March 31, 2027, and (d) 1.25:1.00 with respect to the fiscal quarter ending June 30, 2027 and each fiscal quarter thereafter, (iii) at all times, a minimum Qualified Cash covenant of $10.0 million, and (iv) for the six-month period ending June 30, 2026, a minimum Consolidated EBITDA covenant of $15.1 million; provided that if, in any fiscal quarter, FAH, LLC voluntarily prepays, prior to the date on which a compliance certificate is required to be delivered in respect of such fiscal quarter, more than $10.0 million of principal of then-outstanding loans, then all of the applicable Financial Covenants (other than the minimum Qualified Cash covenant), to the extent required to be tested in such fiscal quarter, will be deemed waived for such fiscal quarter (the “Covenant Cure Right”); provided, further, that (x) the Covenant Cure Right is not permitted to be exercised in two (2) consecutive fiscal quarters, and (y) if the Cure Right is to be exercised in any fiscal quarter, FAH, LLC needs to have complied with the maximum Fixed Charge Coverage Ratio required in respect of the preceding fiscal quarter.
As of December 31, 2025, the Credit Agreement Parties were in compliance with the Financial Covenants and other covenants then in effect and required to be tested under the Credit Agreement.
The Credit Agreement also contains certain customary representations and warranties and affirmative covenants, and certain reporting obligations. In addition, the lenders under the Credit Facilities will be permitted to accelerate all outstanding borrowings and other obligations, terminate outstanding commitments and exercise other specified remedies upon the occurrence of certain events of default (subject to certain grace periods and exceptions), which include, among other things, payment defaults, breaches of representations and warranties, covenant defaults, certain cross-defaults and cross-accelerations to other indebtedness, certain events of bankruptcy and insolvency, certain material monetary judgments and changes of control. The Credit Agreement defines “change of control” to include, among other things, any person or group other than TCG and its affiliates becoming the beneficial owner of more than 35% of the voting power of the equity interests of Funko, Inc.
Form S-3 Registration Statement
Our registration statement on Form S-3 was declared effective by the SEC on August 15, 2025 and will remain effective through August 15, 2028. The Form S-3 allows us to offer and sell from time-to-time up to $100.0 million of Class A common stock, preferred stock, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell 12,626,024 shares of Class A common stock in one or more offerings. The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs. The terms of any future offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
At-the-Market Sales 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 year ended December 31, 2025.
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Future Sources and Uses of Liquidity
As of December 31, 2025, we had $42.1 million of cash and cash equivalents and $46.5 million of working capital, compared with $34.7 million of cash and cash equivalents and $(18.7) million of working capital as of December 31, 2024. Working capital is impacted by 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 current availability under our Revolving Credit Facility is $0. For further discussion of changes in our debt, see above, and Note 10, "Debt" of the Notes to Consolidated Financial Statements included in this Form 10-K.
Sources
As noted above, historically, our primary sources of cash flows have been cash flows from operating activities and borrowings under our Credit Facilities. We expect cash flows from operations to continue to be our primary sources of liquidity. For a discussion of our Credit Facilities, see Note 10, "Debt" of the Notes to Consolidated Financial Statements included in this Form 10-K.
In addition, as described above, on August 15, 2025, we filed a registration statement on Form S-3 for the sale from time-to-time of up to $100.0 million of certain of our securities and for certain selling stockholders to offer and sell shares of Class A common stock in one or more offerings. We also entered into the Sales Agreement to offer and sell shares of our Class A common stock having an aggregate gross sales price of up to $40.0 million, pursuant to the prospectus supplement.
Uses
As noted above, our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt service and general corporate needs. For a description of the Company's future maturities of debt, see Note 10, "Debt" in the Notes to Consolidated Financial Statements, and for a description of the Company's operating lease agreements, see Note 11, "Leases" in the Notes to Consolidated Financial Statements included in this Form 10-K. See Note 13 "Liabilities under Tax Receivable Agreement" in the Notes to Consolidated Financial Statements included in this Form 10-K for a discussion of our obligations under the Tax Receivable Agreement. See Note 14 "Commitments and Contingencies" in the Notes to Consolidated Financial Statements included in this Form 10-K for a discussion of other material contractual obligations.
Additional future liquidity needs will likely include tax distributions, interest payments, repayment of our debt facilities, the redemption right held by the Continuing Equity Owners that they may exercise from time to time (should we elect to exchange their common units for a cash payment), payments under the Tax Receivable Agreement and general cash requirements for operations and capital expenditures (including a future enterprise resource management system (ERP), additional platforms to support our direct-to-consumer experience, and capital build out of new leased warehouse and office space). The Continuing Equity Owners may exercise their redemption right for as long as their common units remain outstanding. Although the actual timing and amount of any payments that may be made under the Tax Receivable Agreement will vary, we expect that the payments we will be required to make to the TRA Parties will be significant, which will be contingent on future realizability of the Company’s deferred tax assets. Any payments made by us to the TRA Parties under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise have been available to us or to FAH, LLC and, to the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us; provided however, that nonpayment for a specified period may constitute a material breach under the Tax Receivable Agreement and therefore may accelerate payments due under the Tax Receivable Agreement.
Seasonality
While our customers in the retail industry typically operate in highly seasonal businesses, we have historically experienced only moderate seasonality in our business. Historically, over 50% of our net sales are made in the third and fourth quarters, primarily in the period from August through November, as our customers build up their inventories in anticipation of the holiday season. Historically, the first quarter of the year has represented the lowest volume of shipment and sales in our business and in the retail and toy industries generally and it is also the least profitable quarter due to the various fixed costs of the business. However, the volatility in net sales we have experienced in recent years may have masked the full effects of seasonal factors on our business to date, and as such, seasonality may have a greater effect on our results of operations in future periods.
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Recent Accounting Pronouncements
See discussion of recently adopted and recently issued accounting pronouncements in Note 2, "Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in this Form 10-K.
Critical Accounting Policies and Estimates
Discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities, revenue and expenses at the date of the consolidated financial statements. We base our estimates on historical experience and on various other assumptions in accordance with U.S. GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and operating results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include those related to revenue recognition and sales allowances, royalties, inventory, goodwill and intangible assets and income taxes. Changes to these policies and estimates could have a material adverse effect on our results of operations and financial condition.
Revenue Recognition and Sales Allowance. 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. When we collect cash from the customer and have not yet filled our obligation for delivery of product or service, we recognize deferred revenue. 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. These sales adjustments require management to make estimates. In making these estimates, management considers all available information including the overall business environment, historical trends and information from customers, such as agreed upon customer contract terms as well as historical experience from the customer. The estimated costs of these programs reduce gross sales in the period the related sale is recognized. We adjust our estimates at least quarterly or when facts and circumstances used in the estimate process change; historically adjustments to these estimates have not been material.
Royalties. We enter into agreements for rights to licensed trademarks, copyrights and likenesses for use in our products. These licensing agreements require the payment of royalty fees to the licensor based on a percentage of revenue. Many licensing agreements also require minimum royalty commitments. When royalty fees are paid in advance, we record these payments as a prepaid asset. If we determine that it is probable that the expected revenue will not be realized, a reserve is recorded against the prepaid asset for the non-recoverable portion. As of December 31, 2025, we recorded a prepaid asset of $18.6 million, net of a reserve of $0.8 million. As of December 31, 2024, we recorded a prepaid asset of $6.1 million, net of a reserve of $8.5 million.
We record a royalty liability as revenues are recognized based on the terms of the licensing agreement. In situations where a minimum commitment is not expected to be met based on expected revenues, we will accrue up to the minimum amount when it is reasonably certain that revenues generated will not meet the minimum commitment. Royalty and license expense is recorded within cost of sales on the consolidated statements of operations. Royalty expenses for the years ended December 31, 2025, 2024 and 2023 were $158.5 million, $168.9 million and $179.7 million, respectively.
Our license agreements 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. We record an audit reserve based on historical audit findings and revenues subject to audit. We adjust our estimates at least quarterly or when facts and circumstances used in the estimate process change; historically adjustments to these estimates have not been material. As of December 31, 2025 and 2024, we had an accrual of $29.6 million and $23.5 million, respectively, related to ongoing and future royalty audits, based on estimates of the costs we expect to incur.
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Inventory. Inventory consists primarily of figures, plush, accessories and other finished goods, and is accounted for using the first-in, first-out, or FIFO, method. Inventory costs include direct product costs and freight costs. We 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, through sales to customers, or liquidation, and expected recoverable value of each disposition category. We estimate obsolescence based on assumptions regarding future demand.
Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. We evaluate goodwill for impairment annually on October 1 of each year and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of the net assets is below their carrying amounts.
Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date. Intangible assets acquired include intellectual property (product design), customer relationships, and trade names. These are definite-lived assets and are amortized on a straight-line basis over their estimated useful lives. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable.
During the year ended December 31, 2025, the Company observed a significant decline in the market valuation of the Company’s Class A common stock along with a volatile macroeconomic environment. As a result, the Company has evaluated potential goodwill impairment triggering events as of December 31, 2025, and determined it was more likely than not that the fair value of the reporting unit was above carrying value of the net assets. However, the Company will continue to evaluate for impairment triggering events due to the substantive changes in circumstances, such as market capitalization, which could indicate a potential impairment and the need to record a material, non-cash charge in a future period. The Company also expects to assess the recoverability of the carrying value of the identified intangible and other long-lived assets, to the extent conditions necessitate an impairment assessment.
Income Taxes. We apply the provisions of Accounting Standards Codification (“ASC”) Topic No. 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We record a valuation allowance against our deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. If we determine we will not be able to fully utilize all or part of these deferred tax assets, we would record a valuation allowance through earnings in the period the determination was made. In accordance with ASC 740, we recognize, in our consolidated financial statements, the impact of our tax positions that are more likely than not to be sustained upon examination based on the technical merits of the positions. We recognize interest and penalties for uncertain tax positions in selling, general and administrative expenses.
We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of FAH, LLC and are taxed at the prevailing corporate tax rates. FAH, LLC is treated as a partnership for U.S. federal income tax purposes and, as such, generally is not subject to any entity‑level U.S. federal income tax. Instead, taxable income is allocated to holders of its common units, including us. As a result, we incur income taxes on our allocable share of any net taxable income of FAH, LLC. Pursuant to the Second Amended and Restated FAH, LLC Agreement, FAH, LLC will generally make pro rata tax distributions to holders of common units in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of FAH, LLC that is allocated to them.
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Pursuant to the Tax Receivable Agreement, we are required to make cash payments to the TRA Parties equal to 85% of the tax benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (1) any redemptions funded by us or exchanges (or deemed exchanges in certain circumstances) of common units for Class A common stock or cash, and (2) certain additional tax benefits attributable to payments under the Tax Receivable Agreement ("Tax Receivable Agreement Payments”). Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of taxable income over the term of the Tax Receivable Agreement and (ii) changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related Tax Receivable Agreement Payments. Therefore, we only recognize a liability for Tax Receivable Agreement Payments if we determine that it is probable that we will generate sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits. 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. A gain was recorded during the year ended December 31, 2023 in the consolidated statement of operations as a result of the derecognition of the TRA liability.
Upon redemption or exchange of common units in FAH, LLC, we record a liability relating to the obligation if we believe that it is probable that we would have sufficient future taxable income to utilize the related tax benefits. If we determine in the future that we will not be able to fully utilize all or part of the related tax benefits, we would derecognize any portion of the liability related to the benefits not expected to be utilized.
Additionally, we estimate the amount of Tax Receivable Agreement Payments expected to be paid within the next 12 months and classify this amount as current on our consolidated balance sheets. This determination is based on our estimate of taxable income for the next fiscal year. To the extent our estimate differs from actual results, we may be required to reclassify portions of our liabilities under the Tax Receivable Agreement between current and non-current.
During years ended December 31, 2025 and 2024, the Company acquired an aggregate of 1.3 million and 1.2 million common units of FAH, LLC, respectively, in connection with the redemption and/or exchange of common units, none of which resulted in an increase in the tax basis of our investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement.
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