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].

Core Insights - Alliance Entertainment Holding Corporation is set to ship approximately 650,000 units for Record Store Day 2025, marking an 8.3% increase from 2024 [1] - The event will take place on April 12, 2025, with shipments already initiated from the company's advanced distribution center in Shepherdsville, KY [2] - The company emphasizes its role in the growth of independent record stores and the increasing popularity of vinyl records among younger consumers [3][5] Company Performance - Alliance Entertainment is a leading distributor in the entertainment and pop culture collectibles sector, boasting over 325,000 unique in-stock SKUs, including more than 57,300 exclusive titles [9] - The company utilizes advanced technology, such as proprietary vinyl sortation machines and AutoStore technology, to ensure efficient and accurate deliveries [2] - AMPED Distribution, a subsidiary of Alliance, will release 67 unique Record Store Day titles with over 100,000 units available for the event [6] Industry Trends - Vinyl record sales in the U.S. reached 24.3 million units in the first half of 2024, reflecting a 10.7% year-over-year increase, with total sales value rising by 17% to $739.9 million [3] - The resurgence of vinyl is not only a nostalgic trend but is also becoming mainstream, appealing to a younger demographic [4] - Record Store Day continues to attract new generations of music lovers, with independent stores hosting various events to celebrate the occasion [7]

Core Viewpoint - Alliance Entertainment Holding Corporation has been selected as the winning bidder to acquire substantially all assets of Diamond Comic Distributors, Inc., which is currently undergoing a court-supervised bankruptcy process. This acquisition is expected to enhance Alliance's position in the collectibles market and unlock cross-selling synergies across various retail channels [1][2][8]. Group 1: Acquisition Details - The acquisition includes Diamond Comic Distributors (U.S.), Alliance Game Distributors, Diamond Select Toys & Collectibles, and Collectible Grading Authority, which collectively represent a 42-year-old enterprise recognized as a leader in comic books, tabletop games, and collectibles [1][2]. - The acquired assets are projected to generate over $200 million in revenue and over $10 million in EBITDA in FY2026 [1]. Group 2: Strategic Importance - The acquisition is viewed as a transformative opportunity to expand leadership in gaming and physical collectibles, deepening reach into fan-driven categories [2]. - Alliance Entertainment will gain access to a highly engaged community of retailers and fans, supporting over 5,000 retail storefronts, including independent comic and game stores, specialty retailers, and mass-market chains [2][3]. Group 3: Market Position and Product Offering - Alliance Game Distributors is a category leader in the tabletop games sector, offering over 15,000 unique SKUs to more than 3,000 independent hobby retailers across North America [3]. - Diamond Comic Distributors serves as the distribution backbone for comic books and collectibles, fulfilling orders for over 2,500 comic shops and thousands of additional retailers [4]. - Collectible Grading Authority has authenticated and graded over 500,000 collectibles for dealers and collectors in more than 50 countries, adding a high-value service layer to Alliance's offerings [5]. Group 4: Financial Strategy - Alliance Entertainment plans to finance the acquisition through an amendment to its existing $120 million Revolving Credit Facility, which is expected to increase to $160 million [8].