FNKO

Funko is in a multi-year structural decline, not a one-off stumble. Revenue has fallen from a $1.32B peak in FY2022 to $908M in FY2025 (-13.5% YoY), and the company has now posted net losses in four consecutive years (FY2022–FY2025), with FY2025's -$67.4M loss (EPS -$1.24) a sharp reversal from the prior year. Operating income turned negative (-$45.5M, -5.0% margin), ROE is -36.3%, and the accumulated deficit deepened to -$176M. Crucially, the business no longer self-funds: FY2025 operating cash flow was -$5.12M against $33M of capex, so it is burning cash while long-term debt more than doubled to $202M against just $42.1M of cash. That combination — falling sales, negative free cash flow, and rising leverage — is the classic balance-sheet-stress signature the rubric penalizes.

The filing confirms the pressure is external and ongoing, not cyclical noise the company can wait out. Management flags a 'challenging retail environment where retailers have slowed their restocking, prioritized lower inventory levels and, in some cases, have negotiated additional discounting or canceled their orders,' directly reducing net sales and gross margin. Compounding this, Funko sources primarily from Vietnam, China, Cambodia and Mexico, and states tariffs 'have adversely impacted and may in the future adversely impact our costs'; the 10-K notes 2025 tariffs were legally challenged with refund status 'unclear' and the risk of new tariffs under alternative statutes — an unresolved cost overhang on a business already at a loss.