A vinyl figure company just turned its worst quarter into its best, and the single biggest driver was not a new line of Pop! vinyl or a hotter licensing deal. It was a refund. The Supreme Court ruled in February that the import tariffs Funko had been paying on goods from Vietnam, China and Cambodia were unauthorized, and during the June quarter the company booked a $25.4 million pre-tax benefit in cost of sales from recovering those IEEPA tariffs. A good share of that recovery arrived in cash, because the company sold most of its refund claims to a third party for a negotiated price. That one-time item did the heavy lifting: gross margin jumped to 56.6% from a year-earlier level of barely a third, and the company swung from a net loss to a net income of $15.4 million, the first profitable quarter of the year and the cleanest P&L it has printed in a long time.
Strip the tariff windfall out of the story and the operating turn is still real, just smaller. Net sales of $207.7 million rose 7.4% year over year, with the Core Collectibles segment carrying the top line. Loungefly bags slipped slightly, and even the home market grew only modestly while Europe was the standout geography on a much faster clip. Selling, general and administrative expense fell on a meaningful personnel cost cut, and EBITDA of $37.4 million compared with a loss in the prior-year quarter, a turn that the refund flatters but that the expense discipline helps to make real. The stock, which had spent months in the mid-single digits after the tariff shock of 2025, closed at $6.72, and market interest clearly revolved around whether this quarter's profit was the start of a turnaround or a one-off paper gain.
The third quick-take is about the balance sheet, and it is the part of the story that deserves the most skepticism. Funko's revolving credit facility is fully drawn, with $124.6 million outstanding and no availability left, and total debt under the credit agreement runs well above four times the cash position of $40.7 million. The February Fifth Amendment extended maturity to December 31, 2027, waived several covenants through parts of the year, and added a first-half consolidated EBITDA test that the company passed comfortably. Cash flow from operations turned positive in the first half, a sharp swing from a sizable outflow a year earlier, which is real progress but still leaves the company borrowing against every dollar of headroom its lenders have extended.