Funko Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 16:14
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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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 Exhibit 99.1 to the Current Report on Form 8-K filed on August 7, 2025. 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, $0.0001 par value per share ("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.
Overview
Funko is a leading global pop culture lifestyle company, with a diverse collection of brands, including Funko, Loungefly, and Mondo, and an industry-leading portfolio of licenses. Funko delivers industry-defining products that span vinyl figures, micro-collectibles, fashion accessories, apparel, plush, action toys, high-end art, music and digital collectibles, many of which are at the forefront of the growing Kidult economy. Through these products, which include the iconic original Pop! line, Bitty Pop!, and Pop! Yourself, Funko inspires fans across the globe to express their passions, build community, and have fun.
We sell our products in numerous countries across North America, Europe, Latin America, Asia and Africa, with approximately 39% of our net sales in the nine months ended September 30, 2025 generated outside of the United States. We also source, procure and assemble inventory, primarily out of Vietnam, China and Mexico. As such, we are exposed to and impacted by global macroeconomic factors. Current macroeconomic factors remain very dynamic, including greater political uncertainty, new or increasing tariffs and general uncertainty over U.S. trade and tariff policies, 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, 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.
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 canceled their orders. Moreover, tariffs on imports have adversely impacted and are expected to 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, and 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. For additional information regarding our financial condition, see "Liquidity and Financial Condition" below.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||
| Net sales | $ | 250,905 | $ | 292,765 | $ | 635,113 | $ | 756,121 | |||||||||||||||
| Net income (loss) | $ | 948 | $ | 4,597 | $ | (68,115) | $ | (13,650) | |||||||||||||||
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EBITDA (1)
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$ | 22,316 | $ | 26,149 | $ | (6,894) | $ | 51,981 | |||||||||||||||
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Adjusted EBITDA (1)
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$ | 24,432 | $ | 30,985 | $ | 3,238 | $ | 68,476 | |||||||||||||||
(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 income (loss), the most closely comparable U.S. GAAP financial measure, see "Non-GAAP Financial Measures" below.
Results of Operations
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table sets forth information comparing the components of net income (loss) for the three months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Period over Period Change | ||||||||||||||||||||||
| 2025 | 2024 | Dollar | Percentage | ||||||||||||||||||||
| (amounts in thousands, except percentages) | |||||||||||||||||||||||
| Net sales | $ | 250,905 | $ | 292,765 | $ | (41,860) | (14.3) | % | |||||||||||||||
| Cost of sales (exclusive of depreciation and amortization) | 150,154 | 172,956 | (22,802) | (13.2) | % | ||||||||||||||||||
| Selling, general, and administrative expenses | 79,794 | 92,662 | (12,868) | (13.9) | % | ||||||||||||||||||
| Depreciation and amortization | 14,529 | 15,411 | (882) | (5.7) | % | ||||||||||||||||||
| Total operating expenses | 244,477 | 281,029 | (36,552) | (13.0) | % | ||||||||||||||||||
| Income from operations | 6,428 | 11,736 | (5,308) | (45.2) | % | ||||||||||||||||||
| Interest expense, net | 5,611 | 4,971 | 640 | 12.9 | % | ||||||||||||||||||
| Other (income) expense, net | (1,359) | 998 | (2,357) | nm | |||||||||||||||||||
| Income before income taxes | 2,176 | 5,767 | (3,591) | (62.3) | % | ||||||||||||||||||
| Income tax expense | 1,228 | 1,170 | 58 | 5.0 | % | ||||||||||||||||||
| Net income | 948 | 4,597 | (3,649) | (79.4) | % | ||||||||||||||||||
| Less: net income attributable to non-controlling interests | 47 | 267 | (220) | (82.4) | % | ||||||||||||||||||
| Net income attributable to Funko, Inc. | $ | 901 | $ | 4,330 | $ | (3,429) | (79.2) | % | |||||||||||||||
Net Sales
Net sales were $250.9 million for the three months ended September 30, 2025, a decrease of 14.3%, compared to $292.8 million for the three months ended September 30, 2024. The decrease in net sales was across all distribution channels as a result of tariff disruption and general macroeconomic uncertainty for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
On a geographical basis, net sales in the United States decreased 20.1% to $155.4 million in the three months ended September 30, 2025 as compared to $194.4 million in the three months ended September 30, 2024. Net sales in Europe decreased 0.4% to $74.2 million in the three months ended September 30, 2025 as compared to $74.5 million in the three months ended September 30, 2024. Net sales in other international locations decreased 10.8% to $21.3 million in the three months ended September 30, 2025 as compared to $23.9 million in the three months ended September 30, 2024.
On a branded category basis, net sales of the Core Collectible branded category decreased 12.0% to $200.4 million in the three months ended September 30, 2025 as compared to $227.8 million in the three months ended September 30, 2024. Loungefly branded category net sales decreased 5.5% to $44.7 million in the three months ended September 30, 2025 as compared to $47.3 million in the three months ended September 30, 2024. Other branded category net sales decreased 67.0% to $5.8 million in the three months ended September 30, 2025 as compared to $17.6 million in the three months ended September 30, 2024, primarily as a result of rationalizing underperforming items and product lines.
Cost of Sales and Gross Margin (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) was $150.2 million for the three months ended September 30, 2025, a decrease of 13.2%, compared to $173.0 million for the three months ended September 30, 2024. Cost of sales (exclusive of depreciation and amortization) decreased primarily as a result of decreased sales, as discussed above, offset by increased duty costs.
Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of net sales, was 40.2% for the three months ended September 30, 2025, compared to 40.9% for the three months ended September 30, 2024. The decrease in gross margin (exclusive of depreciation and amortization) for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was driven primarily by increased shipping, freight and duty costs, offset by price increases and decreased sales to discount channel partners.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $79.8 million for the three months ended September 30, 2025, a decrease of 13.9%, compared to $92.7 million for the three months ended September 30, 2024. The decrease was driven primarily by a $5.1 million decrease in personnel and related costs (including salary and related taxes/benefits, commissions and equity-based compensation), a $4.6 million decrease in advertising and marketing fees and a $1.4 million decrease in facilities and rent related to decreased usage of third-party logistics sites. Selling, general and administrative expenses were 31.8% and 31.7% of net sales for each of the three months ended September 30, 2025 and 2024, respectively.
Depreciation and Amortization
Depreciation and amortization expense was $14.5 million for the three months ended September 30, 2025, a decrease of 5.7%, compared to $15.4 million for the three months ended September 30, 2024, primarily related to the type and timing of assets placed in service.
Interest Expense, Net
Interest expense, net was $5.6 million for the three months ended September 30, 2025, an increase of 12.9%, compared to $5.0 million for the three months ended September 30, 2024. The increase in interest expense, net was due primarily to increased interest rates on outstanding borrowings during the three months ended September 30, 2025.
Other (Income) Expense, Net
Other income, net was $1.4 million and other expense, net was $1.0 million for the three months ended September 30, 2025 and 2024, respectively. Other (income) expense, net for the three months ended September 30, 2025 and 2024 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.
Income Tax Expense
Income tax expense was $1.2 million for both the three months ended September 30, 2025 and 2024, respectively. The Company's tax expense primarily reflects foreign income taxes in jurisdictions where the Company generates taxable income under its transfer pricing arrangements. The U.S. operations continue to be in a full valuation allowance position, resulting in no material U.S. federal or state income tax expense.
Net Income
Net income was $0.9 million and $4.6 million for the three months ended September 30, 2025 and 2024, respectively. The decrease in net income was primarily due to the decrease in net sales as compared to the three months ended September 30, 2024.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table sets forth information comparing the components of net loss for the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | Period over Period Change | ||||||||||||||||||||||
| 2025 | 2024 | Dollar | Percentage | ||||||||||||||||||||
| (amounts in thousands, except percentages) | |||||||||||||||||||||||
| Net sales | $ | 635,113 | $ | 756,121 | $ | (121,008) | (16.0) | % | |||||||||||||||
| Cost of sales (exclusive of depreciation and amortization) | 395,451 | 445,992 | (50,541) | (11.3) | % | ||||||||||||||||||
| Selling, general, and administrative expenses | 246,860 | 256,154 | (9,294) | (3.6) | % | ||||||||||||||||||
| Depreciation and amortization | 44,319 | 46,409 | (2,090) | (4.5) | % | ||||||||||||||||||
| Total operating expenses | 686,630 | 748,555 | (61,925) | (8.3) | % | ||||||||||||||||||
| (Loss) income from operations | (51,517) | 7,566 | (59,083) | nm | |||||||||||||||||||
| Interest expense, net | 13,982 | 16,363 | (2,381) | (14.6) | % | ||||||||||||||||||
| Other (income) expense, net | (304) | 1,994 | (2,298) | nm | |||||||||||||||||||
| Loss before income taxes | (65,195) | (10,791) | (54,404) | nm | |||||||||||||||||||
| Income tax expense | 2,920 | 2,859 | 61 | 2.1 | % | ||||||||||||||||||
| Net loss | (68,115) | (13,650) | (54,465) | nm | |||||||||||||||||||
| Less: net loss attributable to non-controlling interests | (938) | (432) | (506) | nm | |||||||||||||||||||
| Net loss attributable to Funko, Inc. | $ | (67,177) | $ | (13,218) | $ | (53,959) | nm | ||||||||||||||||
Net Sales
Net sales were $635.1 million for the nine months ended September 30, 2025, a decrease of 16.0%, compared to $756.1 million for the nine months ended September 30, 2024. The decrease in net sales was across all distribution channels as a result of tariff disruption and general macroeconomic uncertainty for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
On a geographical basis, net sales in the United States decreased 22.7% to $389.6 million in the nine months ended September 30, 2025 as compared to $503.8 million in the nine months ended September 30, 2024. Net sales in Europe increased 1.6% to $192.1 million in the nine months ended September 30, 2025 as compared to $189.1 million in the nine months ended September 30, 2024. Net sales in other international locations decreased 15.5% to $53.4 million in the nine months ended September 30, 2025 as compared to $63.2 million in the nine months ended September 30, 2024.
On a branded category basis, net sales of the Core Collectible branded category decreased 12.1% to $502.4 million in the nine months ended September 30, 2025 as compared to $571.7 million in the nine months ended September 30, 2024. Loungefly branded category net sales decreased 13.6% to $111.9 million in the nine months ended September 30, 2025 as compared to $129.5 million in the nine months ended September 30, 2024. Other branded category net sales decreased 62.1% to $20.8 million in the nine months ended September 30, 2025 as compared to $54.9 million in the nine months ended September 30, 2024.
Cost of Sales and Gross Margin (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) was $395.5 million for the nine months ended September 30, 2025, a decrease of 11.3%, compared to $446.0 million for the nine months ended September 30, 2024. Cost of sales (exclusive of depreciation and amortization) decreased primarily as a result of decreased sales, as discussed above, offset by increased duty costs.
Gross margin (exclusive of depreciation and amortization), calculated as net sales less cost of sales as a percentage of net sales, was 37.7% for the nine months ended September 30, 2025, compared to 41.0% for the nine months ended September 30, 2024. The decrease in gross margin (exclusive of depreciation and amortization) for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was driven primarily by increased shipping, freight and duty costs and increased inventory reserves as a result of comparable nine months ended September 30, 2024 product mix sell-through and related inventory reserve benefit.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $246.9 million for the nine months ended September 30, 2025, a decrease of 3.6%, compared to $256.2 million for the nine months ended September 30, 2024. The decrease was driven primarily by a $4.7 million decrease in personnel and related costs (including salary and related taxes/benefits, commissions and equity-based compensation), a $3.4 million decrease in facilities and rent related to decreased usage of third-party logistics sites, a $3.0 million decrease in administrative fees, offset by a $3.6 million increase in software expenses to support direct-to-consumer growth initiatives. Selling, general and administrative expenses were 38.9% and 33.9% of net sales for each of the nine months ended September 30, 2025 and 2024, respectively.
Depreciation and Amortization
Depreciation and amortization expense was $44.3 million for the nine months ended September 30, 2025, a decrease of 4.5%, compared to $46.4 million for the nine months ended September 30, 2024, primarily related to the type and timing of assets placed in service.
Interest Expense, Net
Interest expense, net was $14.0 million for the nine months ended September 30, 2025, a decrease of 14.6%, compared to $16.4 million for the nine months ended September 30, 2024. The decrease in interest expense, net was due primarily to lower average balance of debt outstanding during the nine months ended September 30, 2025.
Other (Income) Expense, Net
Other income, net was $0.3 million and other expense, net was $2.0 million for the nine months ended September 30, 2025 and 2024, respectively. Other (income) expense, net for the nine months ended September 30, 2025 and 2024 was primarily related to foreign currency gains and losses relating to transactions denominated in currencies other than the U.S. dollar.
Income Tax Expense
Income tax expense was $2.9 million for both the nine months ended September 30, 2025 and 2024, respectively. The Company's tax expense primarily reflects foreign income taxes in jurisdictions where the Company generates taxable income under its transfer pricing arrangements. The U.S. operations continue to be in a full valuation allowance position, resulting in no material U.S. federal or state income tax expense.
Net Loss
Net loss was $68.1 million for the nine months ended September 30, 2025, compared to $13.7 million for the nine months ended September 30, 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 nine months ended September 30, 2024.
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Diluted Share (collectively the "Non-GAAP Financial Measures") are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income (loss), income (loss) per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net income (loss) before interest expense, net, income tax expense, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, acquisition costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses and other unusual or one-time items. We define Adjusted Net Income (Loss) as net income (loss) attributable to Funko, Inc. adjusted for the reallocation of income (loss) attributable to non-controlling interests from the assumed exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and further adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, non-cash charges related to equity-based compensation programs, acquisition costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses and the income tax expense (benefit) effect of these adjustments. We define Adjusted Earnings (Loss) per Diluted Share as Adjusted Net Income (Loss) divided by the weighted-average shares of Class A common stock outstanding, assuming (1) the full exchange of all outstanding common units and options in FAH, LLC for newly issued-shares of Class A common stock of Funko, Inc. and (2) the dilutive effect of stock options and unvested common units, if any. We caution investors that amounts presented in accordance with our definitions of the Non-GAAP Financial Measures may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate the Non-GAAP Financial Measures in the same manner. We present the Non-GAAP Financial Measures because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors' understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.
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.
By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report") 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 costs and other expenses, certain severance, relocation and related costs, foreign currency transaction gains and losses 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 normal recurring adjustments and other 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.
The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net income (loss), for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Net income (loss) attributable to Funko, Inc. | $ | 901 | $ | 4,330 | $ | (67,177) | $ | (13,218) | |||||||||||||||
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Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock (1)
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47 | 267 | (938) | (432) | |||||||||||||||||||
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Equity-based compensation (2)
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2,529 | 3,430 | 8,906 | 10,530 | |||||||||||||||||||
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Acquisition costs and other expenses (3)
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1,029 | 287 | 1,029 | 1,866 | |||||||||||||||||||
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Certain severance, relocation and related costs (4)
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- | 114 | - | 2,081 | |||||||||||||||||||
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Foreign currency transaction (gain) loss (5)
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(1,442) | 1,005 | 197 | 2,018 | |||||||||||||||||||
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Income tax (benefit) expense (6)
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155 | (1,481) | 16,686 | 1,433 | |||||||||||||||||||
| Adjusted net income (loss) | $ | 3,219 | $ | 7,952 | $ | (41,297) | $ | 4,278 | |||||||||||||||
| Weighted-average shares of Class A common stock outstanding - basic | 54,649 | 52,523 | 54,184 | 51,781 | |||||||||||||||||||
| Equity-based compensation awards and common units of FAH, LLC that are convertible into Class A common stock | 808 | 2,755 | 854 | 2,182 | |||||||||||||||||||
| Adjusted weighted-average shares of Class A stock outstanding - diluted | 55,457 | 55,278 | 55,038 | 53,963 | |||||||||||||||||||
| Earnings (loss) per diluted share | $ | 0.02 | $ | 0.08 | $ | (1.24) | $ | (0.26) | |||||||||||||||
| Adjusted earnings (loss) per diluted share | $ | 0.06 | $ | 0.14 | $ | (0.75) | $ | 0.08 | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | 948 | $ | 4,597 | $ | (68,115) | $ | (13,650) | |||||||||||||||
| Interest expense, net | 5,611 | 4,971 | 13,982 | 16,363 | |||||||||||||||||||
| Income tax expense | 1,228 | 1,170 | 2,920 | 2,859 | |||||||||||||||||||
| Depreciation and amortization | 14,529 | 15,411 | 44,319 | 46,409 | |||||||||||||||||||
| EBITDA | $ | 22,316 | $ | 26,149 | $ | (6,894) | $ | 51,981 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
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Equity-based compensation (2)
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2,529 | 3,430 | 8,906 | 10,530 | |||||||||||||||||||
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Acquisition costs and other expenses (3)
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1,029 | 287 | 1,029 | 1,866 | |||||||||||||||||||
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Certain severance, relocation and related costs (4)
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- | 114 | - | 2,081 | |||||||||||||||||||
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Foreign currency transaction (gain) loss (5)
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(1,442) | 1,005 | 197 | 2,018 | |||||||||||||||||||
| Adjusted EBITDA | $ | 24,432 | $ | 30,985 | $ | 3,238 | $ | 68,476 | |||||||||||||||
(1)Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of FAH, LLC for Class A common stock 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 the timing of awards.
(3)For the three and nine months ended September 30, 2025, includes charges related to fair market value adjustments for certain assets held for sale. For the three months ended September 30, 2024, includes charges related to contract settlement agreements for warehouse leased space. For the nine months ended September 30, 2024, includes a net one-time legal settlement gain of $1.4 million related to a previously disclosed Loungefly customs-related matter offset by $3.2 million related to contract settlement agreements and related services for assets held for sale (including fair market value adjustments of $135,000) related to a potential business initiative and the sale of certain assets under Funko Games.
(4)For the three and nine months ended September 30, 2024, includes charges related to severance and benefit costs related to certain management departures.
(5)Represents both unrealized and realized foreign currency gains and losses on transactions denominated other than in U.S. dollars, including derivative gains and losses on foreign currency forward exchange contracts.
(6)Represents the income tax expense (benefit) effect of the above adjustments including net income (loss). This adjustment uses an effective tax rate of 25% for all periods presented.
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 with FAH, LLC and certain of its material domestic subsidiaries from time to time (the "Credit Agreement Parties") and JPMorgan Chase Bank, N.A., PNC Bank, National Association, KeyBank National Association, Citizens Bank, N.A., Bank of the West, HSBC Bank USA, National Association, Bank of America, N.A., U.S. Bank National Association, MUFG Union Bank, N.A., and Wells Fargo Bank, National Association (collectively, the "Initial Lenders") and JPMorgan Chase Bank, N.A. as administrative agent (the "Administrative Agent"), providing for a term loan facility in the amount of $180.0 million (the "Term Loan Facility") and a revolving credit facility of $100.0 million (the "Revolving Credit Facility") (together the "Credit Facilities").
In connection with preparing the unaudited consolidated financial statements for the three months ended September 30, 2025, management evaluated our future liquidity, forecasted operating results and ability to comply with the covenants under its Credit Agreement, for the twelve months from the date of issuance of these financial statements and determined that there is substantial doubt about our ability to continue as a going concern for the next twelve months from the date of issuance of these financial statements, principally based on our forecast of the expected effects of the announced tariffs and other facts and conditions, anticipated non-compliance with the maximum Net Leverage Ratio and minimum Fixed Charge Coverage Ratio (each as defined in the Credit Agreement) covenants as of the end of the quarter ending December 31, 2025 and future quarters and our potential non-compliance with the covenants with respect to a Refinancing Transaction or a Sale Transaction (each as defined the Fourth Amendment).
The challenging retail environment, in particular as a result of the current tariff environment, has adversely impacted and is expected to adversely impact our performance. On July 16, 2025, we entered into Amendment No. 4 (the "Fourth Amendment") to our Credit Agreement, dated September 17, 2021 with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (as amended, the "Credit Agreement"), that among other things, amends the Credit Agreement by waiving compliance with (x) the maximum Net Leverage Ratio and (y) the minimum Fixed Charge Coverage Ratio financial covenants, in each case, for the fiscal quarters ended June 30, 2025 and September 30, 2025. The Fourth Amendment also contains covenants that we shall take certain actions in furtherance of a Refinancing Transaction or a Sale Transaction (each as defined in the Fourth Amendment), and certain milestone covenants have not been satisfied as of the date of this Quarterly Report (such covenants, the "Outstanding Milestone Covenants"). The administrative agent under the Credit Agreement has the discretion to extend the compliance dates for the Outstanding Milestone Covenants. On November 5, 2025, the Administrative Agent, in its sole discretion, and the Credit Agreement Parties confirmed the first of the Outstanding Milestone Covenants has been extended until November 25, 2025. If the first of the Outstanding Milestone Covenants has not been met by November 25, 2025, the Administrative Agent has the right to secure a financial advisor on behalf of itself and other secured parties, at the Company's expense, to assist in the refinancing process. As long as the financial advisor remains engaged, the Company would receive automatic periodic extensions until the Outstanding Milestone Covenants are satisfied. If the Outstanding Milestone Covenants are not satisfied by us or extended by the Administrative Agent, the Company would be in default under the Credit Agreement and if such default is not cured within 15 days, it would mature into an event of default under the Credit Agreement.
If an event of default under the Credit Agreement occurs and is not cured or waived, the Required Lenders (as defined in the Credit Agreement) could elect to declare all amounts outstanding under the Credit Agreement immediately due and payable and exercise other remedies as set forth in the Credit Agreement. In addition, the Required Lenders would have the right to proceed against the collateral pledged to them, which includes substantially all of our assets.
In addition, based on our forecast of the expected effects of the announced tariffs and other facts and conditions, we anticipate that our cash flows may be insufficient to support working capital needs within the next twelve months and, relatedly, we may not be able to comply with our minimum Qualified Cash (as defined in the Credit Agreement) covenant in future periods.
The Credit Agreement matures in September 2026, however, we are not forecasted to have sufficient cash reserves to fully repay the loans outstanding under the Credit Agreement at that time, or an earlier date, if applicable, and as such, the Credit Agreement will need to be refinanced. See Part I, Item 1, "Financial Statements - Note 4, "Debt" for additional information.
Management has developed a plan, as summarized below, that, if executed successfully, we believe will provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time, including to meet our obligations under the Credit Agreement. The plan includes:
•Continuing to monitor our commercial pricing strategy, working with current and potential sourcing partners to mitigate the effects of increasing costs, including shifting certain manufacturing out of China, and, if necessary and consistent with our existing contractual commitments, decreasing our activity level and capital expenditures further. This plan reflects our strategy of controlling capital costs and maintaining financial flexibility.
•Gaining positive cash-inflow from operating activities through continuous overhead cost reductions and increased sales of higher margin products and working capital management, including timing of accounts receivable collections. We have a significant presence in international markets, which are not impacted by tariffs, and will continue to pursue strategies to grow those markets.
•Raising additional cash through the issuance of equity or debt or assessing potential amendments, including additional covenant relief and/or refinancing of our existing debt arrangements as considered necessary. In addition, we intend to opportunistically consider other potential business opportunities or strategic transactions, including a potential sale of the Company. We will need to raise additional cash or refinance our Credit Agreement in the near term.
While management believes that the measures described in the above plan will be adequate to satisfy our liquidity requirements, there can be no assurance that management's liquidity plan will be successfully implemented, our lenders will agree to waive, modify and/or amend the maximum Net Leverage Ratio and minimum Fixed Charge Coverage Ratio covenants for the periods of forecasted covenant noncompliance, the Administrative Agent will agree to further extend the compliance dates related to the Outstanding Milestone Covenants, if necessary, or that the Credit Agreement can be refinanced before its maturity date, which all raise substantial doubt about our ability to continue as a going concern for the next twelve months.
See Part I, Item 1, "Financial Statements - Note 1, "Organization and Operations" and Part II, Item 1A, Risk Factors - "There is substantial doubt about our ability to continue as a going concern due to pressure on our financial covenants arising from the current retail environment and potentially insufficient working capital and potential non-compliance with other covenants as defined within the Credit Agreement" for additional information.
We expect it will be necessary to obtain additional financing. 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 has initiated a formal review process to evaluate strategic alternatives for the Company, including a potential sale of the Company. The Company has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome.
Liquidity and Capital Resources
The following table shows summary cash flow information for the nine months ended September 30, 2025 and 2024 (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash (used in) provided by operating activities | $ | (33,206) | $ | 63,742 | |||||||
| Net cash used in investing activities | (23,022) | (13,387) | |||||||||
| Net cash provided by (used in) financing activities | 57,848 | (58,575) | |||||||||
| Effect of exchange rates on cash and cash equivalents | 2,902 | 313 | |||||||||
| Net change in cash and cash equivalents | $ | 4,522 | $ | (7,907) | |||||||
Operating Activities. Net cash used in operating activities was $33.2 million for the nine months ended September 30, 2025, compared to net cash provided by operating activities of $63.7 million for the nine months ended September 30, 2024. Changes in net cash used in or 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 and freight costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest payments made for our short-term borrowings and long-term debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days (average 59 days).
The increase in net cash used in operating activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to changes in working capital that increased net cash used in operating activities by $36.7 million, an increase in net loss of $54.5 million and changes in depreciation and amortization, equity-based compensation and other, net of $5.7 million. Within working capital, the primary drivers were increases in accounts payable of $24.0 million, accrued expenses and other current liabilities of $14.4 million, and accrued royalties of $10.4 million. Prepaid expenses and other assets decreased $12.8 million and inventory decreased $8.1 million. This was offset by an increase in accounts receivable of $32.9 million.
Investing Activities. Our net cash used in investing activities primarily consists of purchases of property and equipment. For the nine months ended September 30, 2025, net cash used in investing activities was $23.0 million and was primarily related to purchases of tooling and molds used for production of our product lines. For the nine months ended September 30, 2024, net cash used in investing activities was $13.4 million related to purchases of tooling and molds used for production of our product lines of $20.8 million, offset by proceeds from the sale of inventory and certain intellectual property marketed under and related to Funko Games of $6.8 million.
Financing Activities. Our financing activities primarily consist of proceeds from 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.
For the nine months ended September 30, 2025, net cash provided by financing activities was $57.8 million, primarily related to net borrowings on the Revolving Line of Credit Facility of $75.0 million, offset by payments on the Term Loan Facility and Equipment Finance Loan of $17.3 million. For the nine months ended September 30, 2024, net cash used in financing activities was $58.6 million, primarily related to payments on the Term Loan Facility and Equipment Finance Loan of $25.4 million and net repayment of borrowings on the Revolving Line of Credit Facility of $25.5 million.
Credit Facilities
As of September 30, 2025, we had $99.2 million of indebtedness outstanding under our Term Loan Facility (net of unamortized discount of $0.5 million) and $135.0 million outstanding borrowings under our Revolving Credit Facility. Pursuant to the Fourth Amendment, the commitments and outstanding borrowings under the Revolving Credit Facility have since been reduced to $135.0 million. The Term Loan Facility matures on September 17, 2026 (the "Maturity Date") and amortizes in quarterly installments in aggregate amounts equal to 2.50% of the original principal amount of the Term Loan Facility, with any outstanding balance due and payable on the Maturity Date. The first amortization payment commenced with the quarter ended on December 31, 2021. The Revolving Credit Facility also terminates on the Maturity Date.
Loans under the Credit Facilities will, at the Borrowers' option, bear interest at either (i) SOFR plus (x) 4.00% per annum and (y) 0.10% per annum or (ii) ABR plus 3.00% per annum. SOFR rate is subject to a 0% floor. For loans based on ABR, interest payments are due quarterly. For loans based on SOFR, interest payments are due at the end of each applicable 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;
•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 comply on a quarterly basis with a maximum Net Leverage Ratio of 2.50:1.00 and a minimum Fixed Charge Coverage Ratio of 1.25:1.00 (in each case, measured on a trailing four-quarter basis). The Fourth Amendment waives the maximum Net Leverage Ratio and the minimum Fixed Charge Coverage Ratio covenants under the Credit Agreement for the periods ended June 30, 2025 and September 30, 2025. The maximum Net Leverage Ratio and the minimum Fixed Charge Coverage Ratio, will reset for the fiscal quarter ended December 31, 2025 and each fiscal quarter thereafter through the Maturity Date. The Fourth Amendment also contains covenants that we shall take certain actions in furtherance of a Refinancing Transaction or a Sale Transaction. For additional information regarding the terms of the Fourth Amendment, see Note 4, "Debt."
As of December 31, 2024, we were in compliance with all covenants in our credit agreement in effect at such time. Following the entrance into the Fourth Amendment, as of September 30, 2025, the Credit Agreement Parties were in compliance with the financial and other covenants then in effect and required to be tested under the Credit Agreement.
In connection with preparing the unaudited consolidated financial statements for the three months ended September 30, 2025, management evaluated the Company's future liquidity, forecasts of the expected effects of announced tariffs and other facts and conditions, and ability to comply with the covenants under the Credit Agreement, and determined that there is substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the date of issuance of these financial statements. We anticipate non-compliance with the maximum Net Leverage Ratio and minimum Fixed Charge Coverage Ratio (each as defined in the Credit Agreement) covenants as of the end of the quarter ending December 31, 2025 and future quarters and potential non-compliance with the covenants with respect to a Refinancing Transaction or a Sale Transaction (each as defined the Fourth Amendment). Failure to satisfy the covenants under the Credit Agreement, without a timely cure, waiver or amendment, would be considered an event of default. As of the date of this Quarterly Report, we have not satisfied the Outstanding Milestone Covenants. The Administrative Agent under the Credit Agreement has the discretion to extend the compliance dates for the Outstanding Milestone Covenants. On November 5, 2025, the Administrative Agent, in its sole discretion, and the Credit Agreement Parties confirmed the first of the Outstanding Milestone Covenants have been extended until November 25, 2025. If the first of the Outstanding Milestone Covenants has not been met by November 25, 2025, the Administrative Agent has the right to secure a financial advisor on behalf of itself and other secured parties, at the Company's expense, to assist in the refinancing process. As long as the financial advisor remains engaged, the Company would receive automatic periodic extensions until the Outstanding Milestone Covenants are satisfied. If an event of default occurs and is not cured or waived, the Required Lenders (as defined in the Credit Agreement) could elect to declare all amounts outstanding under the Credit Agreement immediately due and payable and exercise other remedies as set forth in the Credit Agreement. In addition, the Required Lenders would have the right to proceed against the collateral pledged to them, which includes substantially all of our assets.
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. In the quarter ended September 30, 2025, no sales were made under the Sales Agreement.
Future Sources and Uses of Liquidity
As of September 30, 2025, we had $39.2 million of cash and cash equivalents and $(157.5) 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 the seasonal trends of our business and the timing of new product releases, as well as our current portion of long-term debt and draw downs on our Revolving Credit Facility.
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 have also created a plan, described under "Liquidity and Capital Resources-Introduction" above to generate additional liquidity. We expect these sources of liquidity to continue to be our primary sources of liquidity. For a discussion of our Credit Facilities, see "Credit Facilities" above, Note 1, "Organization and Operations" and Note 4, "Debt".
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. Except as described above, there have been no material changes to our liquidity and capital commitments as described in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC (the "2024 10-K").
Additional future liquidity needs may 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 rapid growth we 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.
Critical Accounting Policies and Estimates
Discussion and analysis of our financial condition and results of operations are based on our unaudited condensed 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 unaudited condensed 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.
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.
There have been no significant changes to our critical accounting policies to our disclosure reported in "Critical Accounting Policies and Estimates" in our 2024 10-K.
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