Core Insights - Alliance Entertainment Holding Corporation has launched its Handmade by Robots™ division into the anime collectibles market with licensed vinyl figures from My Hero Academia, featuring popular characters Izuku Midoriya and Shoto Todoroki, marking a strategic expansion into a rapidly growing segment of the collectibles market [1][2][3] Company Overview - Alliance Entertainment is a leading distributor and fulfillment partner in the entertainment and pop culture collectibles industry, offering over 325,000 unique in-stock SKUs, including more than 57,300 exclusive titles across various media formats [7] - The company aims to grow its collectibles portfolio, with Handmade by Robots™ focusing on high-value, fan-driven collectibles, and plans to expand its offerings to include characters from various globally recognized franchises [4][6] Industry Insights - The global demand for anime merchandise has surged, with the market reaching a record $22 billion in 2023, driven by double-digit annual growth and a dedicated fanbase [2] - Anime has become a significant driver of licensing revenue across multiple categories, including apparel, gaming, streaming, and collectibles, highlighting its importance in the global entertainment landscape [2][3]

Core Insights - Alliance Entertainment has appointed Robert Oram as Executive Vice President to enhance its filmed entertainment sales and distribution efforts, reflecting the company's commitment to operational excellence and leadership in collectibles distribution [1][2][3] Company Overview - Alliance Entertainment is a leading distributor and fulfillment partner in the entertainment and pop culture collectibles industry, offering over 325,000 unique in-stock SKUs, including more than 57,300 exclusive titles across various formats [4] - The company serves over 35,000 retail locations and provides e-commerce fulfillment for major retailers, leveraging its extensive catalog and operational expertise [4] Leadership and Strategy - Robert Oram brings 30 years of experience in the home entertainment industry, previously serving as Head of Domestic Sales and Trade Marketing at Paramount Pictures Home Entertainment, where he excelled in strategic retail partnerships [2][3] - Oram's appointment is expected to drive performance and sales growth in high-value collectible formats, aligning with the company's mission to lead at the intersection of entertainment and collectibles [3] Market Position and Growth Potential - The company is positioned to capitalize on the growing demand for premium film formats and aims to enhance its retail impact while delivering value to studio partners and retail customers [3] - Alliance is focusing on building infrastructure, talent, and partnerships to support growth in a multi-billion-dollar market for physical media [3]

Financial Performance (FY2025) - Revenue for the nine months ended March 31, 2025, was $836 million, compared to $864 million for the same period in 2024 [13] - Net income for the nine months ended March 31, 2025, was $93 million, a significant increase from $21 million in the same period of 2024 [33] - Adjusted EBITDA for the nine months ended March 31, 2025, was $244 million, compared to $222 million for the same period in 2024 [35] - Q3 2025 revenue was $213 million, compared to $211 million in Q3 2024 [23] - Q3 2025 Adjusted EBITDA was $49 million, compared to $29 million in Q3 2024 [23] Balance Sheet (as of March 31, 2025) - Debt was $752 million [17] - Inventory was $932 million [17] - Total Assets were $349396 million and Total Equity was $97402 million [107] Business Segments (Nine Months Ended March 31, 2025) - Vinyl revenue was $264 million, representing 32% of total revenue [13] - Gaming revenue was $225 million, representing 27% of total revenue [13] - DVD/Blu-ray/UltraHD revenue was $196 million, representing 24% of total revenue [13] Strategic Initiatives - Exclusive distribution and licensing agreements drive annual sales exceeding $350 million [55] - The company shipped over 600000 vinyl units to over 1000 stores for Record Store Day [45]

Company Overview - Alliance Entertainment Holding Corporation (NASDAQ: AENT) is categorized as a microcap company in the physical media and collectibles distribution sector, which is relatively unknown to many investors [1]. Investment Focus - The analysis primarily targets small- to mid-cap companies, as these are often overlooked by the broader investment community. Occasionally, larger-cap companies are also reviewed to provide a comprehensive view of the equity markets [1].

Financial Data and Key Metrics Changes - For Q3 FY2025, net revenue was $213 million, a slight increase from $211.2 million in Q3 FY2024 [15] - Gross profit rose 3.7% year over year to $29.1 million, with gross margin improving to 13.6% from 13.2% [15] - Net income was $1.9 million or $0.04 per share, compared to a net loss of $3.4 million or $0.07 per share in Q3 of last year [16] - Adjusted EBITDA grew 66% year over year to $4.9 million, up from $2.9 million [16] - For the nine-month period ended 03/31/2025, net revenue was $835.7 million, down from $863.5 million [17] - Net income increased to $9.3 million or $0.18 per diluted share, up sharply from $2.1 million or $0.04 per share last year, representing a 349% improvement [19] Business Line Data and Key Metrics Changes - Exclusive products and licensing agreements accounted for nearly a quarter of overall revenue in the trailing twelve months [7] - Direct to consumer fulfillment accounted for an estimated 40% of gross revenue in Q3, up from 33% in the same period last year [25] Market Data and Key Metrics Changes - The company reported strong performance in key high-margin categories, despite a decline in overall revenue [17] - The gaming segment faced challenges due to limited hardware allocation from Microsoft and tough comparisons from the previous year [38] Company Strategy and Development Direction - The company focuses on expanding its licensing partnerships and acquiring emerging brands to enhance its position in the collectibles market [13] - The new exclusive license agreement with Paramount Pictures is expected to significantly contribute to revenue and earnings [22][60] - The company aims to improve its EBITDA margin, targeting a return to closer to 5% in fiscal 2026 [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of the collectibles market and the company's strategic positioning within it [11] - The company is optimistic about the impact of new product releases and licensing agreements on future performance [60] Other Important Information - The company has made significant progress in reducing debt and optimizing working capital, which enhances financial flexibility for future acquisitions [48] - Automation and warehouse optimization efforts have led to a 10.2% year-over-year reduction in distribution and fulfillment costs [29] Q&A Session Summary Question: Do you have a good relationship with Nintendo with the arrival of the upcoming Switch two? - Yes, the company has a significant relationship with Nintendo and is excited about the upcoming hardware and software releases [34][35] Question: How is Handmade by Robots going? Can you provide an update? - The company is optimistic about the Handmade by Robots brand and has plans for new character releases in the second half of 2025 [36][37] Question: What do you attribute the decline in gaming revenue to? - The decline is attributed to limited hardware allocation from Microsoft and tough comparisons from the previous year [38] Question: Do you have a long-term target margin range for the business? - The company aims to exceed a 3% EBITDA margin in fiscal 2026 and is focused on improving both EBITDA and net profit margins [41][42] Question: What type of impact are tariffs having on Alliance's business? - Music and video products are not affected by tariffs, while the company is managing the impact of tariffs on gaming products [43][44] Question: How do you see your financial flexibility evolving over the next few quarters? - The company has made improvements in working capital and debt reduction, providing flexibility for potential acquisitions [48][49] Question: Can you talk about what's driving increased adoption of direct to consumer fulfillment? - The growth is driven by the ability of retailers to offer a wide selection of products without holding inventory, benefiting both retailers and consumers [51][52] Question: Can you tell me more about the Paramount exclusive license agreement? - The agreement allows the company to be the exclusive distributor of Paramount's physical media catalog, which is expected to significantly boost revenue [55][60]

Financial Data and Key Metrics Changes - For Q3 FY2025, net revenue was $213 million, a slight increase from $211.2 million in Q3 FY2024 [14] - Gross profit rose 3.7% year over year to $29.1 million, with gross margin improving to 13.6% from 13.2% [14] - Net income was $1.9 million or $0.04 per share, compared to a net loss of $3.4 million or $0.07 per share in Q3 of last year [15] - Adjusted EBITDA grew 66% year over year to $4.9 million, up from $2.9 million [15] - For the nine-month period, net revenue was $835.7 million, down from $863.5 million last year, primarily due to timing of shipments [16] - Net income increased to $9.3 million or $0.18 per diluted share, up from $2.1 million or $0.04 per share last year, representing a 349% improvement [18] Business Line Data and Key Metrics Changes - Exclusive agreements accounted for nearly a quarter of overall revenue, with $250 million generated from these partnerships over the trailing twelve months [20] - Direct-to-consumer fulfillment accounted for an estimated 40% of gross revenue in Q3, up from 33% in the same period last year [24] Market Data and Key Metrics Changes - The company reported strong performance in high-margin categories, despite a decline in overall revenue [16] - The gaming segment faced challenges due to limited hardware allocation from Microsoft and tough comparisons from the previous year [36] Company Strategy and Development Direction - The company focuses on expanding its licensing partnerships and acquiring emerging brands to enhance its position in the collectibles market [12] - The new exclusive license agreement with Paramount Pictures is expected to significantly contribute to revenue and earnings, allowing the company to be the exclusive distributor of Paramount's physical media catalog [21][56] - The company aims to improve its EBITDA margin, targeting a return to closer to 5% by FY2026 [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential driven by new product releases and strategic partnerships, particularly with major franchises [22][56] - The company is optimistic about the impact of the new Nintendo console on sales throughout 2025 [33] - Management highlighted the importance of automation and warehouse optimization in driving cost efficiencies and improving service levels [26][28] Other Important Information - The company has reduced its revolver debt and improved liquidity while maintaining strong supplier relationships [18] - The acquisition of Handmade by Robots is expected to enhance the company's licensing pipeline and position in the collectibles market [29] Q&A Session Summary Question: Do you have a good relationship with Nintendo with the arrival of the upcoming Switch two? - Yes, the company has a significant relationship with Nintendo and is excited about the upcoming hardware and software releases, which are expected to help sales [32] Question: How is Handmade by Robots going? Can you provide an update? - The company is excited about the brand and has plans for new character releases in the second half of 2025, indicating strong progress since the acquisition [34] Question: What do you attribute the decline in gaming revenue to? - The decline is attributed to limited hardware allocation from Microsoft and tough comparisons from the previous year, with expectations for stronger sales with new Nintendo hardware [36] Question: Do you have a long-term target margin range for the business? - The company aims to exceed a 3% EBITDA margin in FY2026, with a focus on improving both gross and net profit margins [39] Question: What type of impact are tariffs having on Alliance's business? - Music and video products are not affected by tariffs, while the company is managing the impact of tariffs on gaming products and Handmade by Robots [41][42] Question: How do you see your financial flexibility evolving over the next few quarters? - The company has made significant improvements in working capital and debt reduction, with availability on its line of credit for potential acquisitions [46] Question: Can you talk about what's driving increased adoption of direct-to-consumer fulfillment? - The growth is driven by the ability of retailers to offer a wider selection of products without holding inventory, benefiting both retailers and consumers [49] Question: Can you tell me more about the Paramount exclusive license agreement? - The agreement allows the company to be the exclusive distributor of Paramount's physical media catalog, which is expected to significantly boost revenue and extend the life of physical DVDs [53][56]

Revenue Performance - Net revenues increased from $211 million to $213 million (+$1.8 million, +1%) for the three months ended March 31, 2025[138] - Vinyl record sales rose from $78 million to $86 million (+$8 million, +11%) for the three months ended March 31, 2025, driven by an 18.8% increase in volume[138] - Physical movie sales increased from $42 million to $58 million (+$16 million, +39%) for the three months ended March 31, 2025, with a 27.6% rise in average selling price[140] - Net revenues decreased from $864 million to $836 million (-$28 million or -3.2%) for the nine months ended March 31, 2025[151] - Vinyl record sales increased from $242 million to $266 million ($24 million or 10%) for the nine months ended March 31, 2025[152] - Physical movie sales increased from $159 million to $197 million (+$39 million or +25%) for the nine months ended March 31, 2025[154] - Gaming product revenue declined from $43 million to $29 million (-$14 million, -32%) due to limited hardware availability and broader industry slowdown[142] - Gaming product revenue decreased from $287 million to $226 million (-$61 million or -21%) for the nine months ended March 31, 2025[156] Cost and Expenses - Total cost of revenues, excluding depreciation and amortization, increased from $183 million to $184 million (+$1 million, +0.4%) year over year[143] - Total operating expenses decreased from $88.4 million to $76.4 million (-$11.9 million or -13.5%) for the nine months ended March 31, 2025[158] - Total distribution and fulfillment expense declined from $38 million to $31.4 million for the nine months ended March 31, 2025[158] - Gross margin dollars decreased from $102 million to $97 million, resulting in a slight margin decline from 11.8% to 11.6% for the nine months ended March 31, 2025[157] Profitability Metrics - Non-GAAP Adjusted EBITDA improved from approximately $2.9 million to $4.9 million, a year-over-year increase of $2.0 million for the three months ended March 31, 2025[147] - Non-GAAP Adjusted EBITDA improved to approximately $24.4 million, up $2.2 million from approximately $22.2 million for the prior year period[162] - Net income increased to $9.3 million for the nine months ended March 31, 2025, compared to $2.1 million for the same period in 2024[163] Cash Flow and Liquidity - Cash provided by operating activities was $16.1 million, a decrease from $46.1 million in the prior year[169] - Cash availability increased from $47 million to $52 million (+$5 million, +11%) as of March 31, 2025[167] - Cash used in investing activities was $7.6 million for the nine months ended March 31, 2025, primarily due to the acquisition of Handmade by Robots[170] - Net cash used in financing activities improved to $7.6 million from $45.2 million in the prior year, reflecting tighter cash management controls[170] Debt and Financing - The Company entered into a three-year $120 million senior secured asset-based credit facility on December 21, 2023[164] - The revolver balance was reduced from $73 million to $68 million (-$5 million, -6.8%) year-over-year[166] - Interest expense decreased from $3.1 million to $2.4 million (-$0.6 million or -20.2%) for the three months ended March 31, 2025[145] - Total interest expense decreased from $9.5 million to $8.1 million (-$1.4 million, -14.9%) for the nine months ended March 31, 2025[159] Strategic Initiatives - The acquisition of Handmade by Robots for $7.6 million diversifies the product offerings with licensed vinyl figures[125] - Alliance entered into an exclusive distribution agreement with Paramount Pictures, enhancing its home entertainment distribution capabilities[123] - Direct-to-consumer (DTC) solutions accounted for approximately 35% of gross revenue for the three months ended March 31, 2025[138] - The company expects strong future demand for gaming hardware and accessories as the market awaits the next generation of consoles[142] Inventory Management - Inventory decreased by $15 million (14%) from approximately $108 million at March 31, 2024, to approximately $93 million at March 31, 2025[169]

Core Insights - Alliance Entertainment Holding Corporation reported a net income of $1.9 million for the third quarter of FY 2025, marking a $5.3 million improvement year-over-year, indicating strong operational execution and margin gains [1][11] - The company reduced its revolver debt by 25% year-over-year, enhancing its balance sheet and liquidity position [1][11] - Direct to Consumer sales accounted for 35% of gross revenue, up from 33% in the same quarter of the previous year, reflecting a growing trend in consumer fulfillment [1][10] Financial Performance - Net revenues for the third quarter ended March 31, 2025, were $213.0 million, a 1% increase from $211.2 million in the same period of 2024 [15] - Gross profit for the third quarter was $29.1 million, up 3.7% from $28.0 million year-over-year, with a gross profit margin of 13.6%, compared to 13.2% in the prior year [15] - Adjusted EBITDA for the quarter was $4.9 million, reflecting a 66% increase from $2.9 million in the same period of 2024 [11][15] Operational Highlights - The company launched a distribution partnership with Paramount Pictures, becoming the exclusive licensee of Paramount's physical media in the U.S. and Canada, which strengthens its position in the home entertainment market [6][5] - Physical movie sales surged 39% year-over-year, increasing from $42 million to $58 million, driven by new exclusive content partnerships [6] - Vinyl record sales increased by 11% year-over-year, rising from $78 million to $86 million, supported by strong consumer demand [6] Inventory and Cost Management - Inventory levels improved to $93.2 million, down 13% from $108.0 million at March 31, 2024, indicating better inventory turnover and working capital efficiency [6] - Total operating expenses decreased by 11.4% year-over-year, with distribution and fulfillment costs declining by 10.2% due to automation initiatives [6] - Interest expense declined by 20.2% year-over-year, reflecting a lower revolving credit balance and improved financial efficiency [6]

Company Overview - Alliance Entertainment Holding Corporation (NASDAQ: AENT) is a leading distributor and fulfillment partner in the entertainment and pop culture collectibles industry, offering over 325,000 unique in-stock SKUs, including more than 57,300 exclusive titles across various formats [4] Upcoming Conference Call - The company will hold a conference call on May 15, 2025, at 4:30 p.m. Eastern Time to discuss its third-quarter results for the period ended March 31, 2025 [1][2] - The call will be hosted by CEO Jeff Walker and CFO Amanda Gnecco, followed by a question-and-answer session [2] - A presentation will accompany the call, available during the webcast or via the investor relations section of the company's website [2] Access Information - To access the conference call, participants can use the toll-free dial-in number 1-877-407-0784 or the international dial-in number 1-201-689-8560, with a conference ID of 13753860 [2] - A live broadcast of the call will be available, along with a replay accessible for three hours after the call concludes, lasting until July 15, 2025 [3] Industry Position - Alliance Entertainment serves over 35,000 retail locations and provides e-commerce fulfillment for leading retailers, leveraging its extensive catalog and operational expertise [4] - The company connects collectors and fans to a wide range of products, franchises, and experiences across different formats and generations [4]

Core Viewpoint - The Delaware Court of Chancery has approved a proposed settlement for stockholders of Alliance Entertainment Holding Corp., involving a cash settlement of $511,000 to resolve claims in a class action lawsuit [4][5]. Group 1: Settlement Details - The proposed settlement amount is $511,000, which will resolve all claims in the class action lawsuit [4]. - The settlement is intended for record and beneficial owners of Class A common stock who held redeemable stock but did not redeem by December 8, 2022, and those who held unredeemed stock at the time of the merger [1][8]. - A hearing to finalize the settlement will take place on June 17, 2025, to determine various aspects including class certification and the fairness of the settlement [5][6]. Group 2: Class Member Rights - Class members may be entitled to share in the Net Settlement Fund, which will be distributed on a pro rata basis according to the proposed Plan of Allocation [9]. - Eligible Class Members do not need to submit a claim form to receive a payment from the Net Settlement Fund [9]. - Any objections to the settlement must be submitted by June 2, 2025, to the appropriate parties as outlined in the notice [10].