Revenue Growth and Sales Performance - Net revenues increased from $227 million to $229 million, a 1% year-over-year growth for the three months ended September 30, 2024[116] - Vinyl record sales grew by $3.2 million (4.8%) to $70.5 million, driven by a 4.9% increase in average selling price[117] - Physical movie sales (DVDs, Blu-Ray, Ultra HD) increased by $6.1 million (13.2%) to $52.9 million, with an 18.6% rise in average selling price[117] - Gaming product revenue rose by $4.5 million (8.6%) to $57.1 million, attributed to higher sales of hardware and retro arcades[119] - Consumer products revenue declined by $3.4 million (-31.6%) to $7.3 million due to a decrease in average selling price per unit[118] - Direct-to-consumer (DTC) business contributed approximately 34% of gross revenue for Q3 2024, up from 30% in the same period last year[116] Cost and Margin Analysis - Cost of revenues increased by $2 million (1%) to $203 million, while gross margin decreased from 11.6% to 11.2%[120] - Total operating expenses decreased by $5 million (-17.9%) to $23 million, with distribution and fulfillment expenses dropping by $2.7 million (-23%)[121] - The company closed its Shakopee, MN warehouse in May 2024, reducing operating costs and improving efficiency[121] Financial Performance and Liquidity - Interest expense decreased by $0.3 million (-10%) to $2.8 million for the three months ending September 30, 2024, driven by a reduction in the average revolver balance from $124 million to $81 million (-35%)[122] - Non-GAAP Adjusted EBITDA increased to $3.4 million for the three months ending September 30, 2024, compared to $1.3 million in the same period of the prior year[123] - The company's revolver balance decreased from $126 million on September 30, 2023, to $88 million (-$38 million or -28%) on September 30, 2024, due to improved cash conversion from accounts receivable and inventory[128] - Net cash provided by financing activities was $14.7 million for the three months ending September 30, 2024, compared to $3.1 million in the same period prior year, primarily due to increased borrowing for inventory[132] - The company's liquidity ratio improved to 1.34 from 0.87 last year, reflecting a stronger ability to meet short-term obligations[129] - Inventory decreased by $41 million for the three months ending September 30, 2024, compared to a $13 million increase in the same period prior year, driven by lower inventory on-hand to support sales[131] Credit Facilities and Financial Stability - The company entered into a $120 million senior secured asset-based credit facility with White Oak Commercial Finance, LLC, replacing the prior credit facility with Bank of America[125] - The company concluded it has sufficient cash to fund operations for at least twelve months, supported by the new credit facility, strategic initiatives, and financial performance[126] Internal Controls and Remediation - Material weaknesses in internal control over financial reporting were identified, primarily related to entity-level controls, IT general controls, and financial close processes[136][137][138] - Remediation efforts for material weaknesses are ongoing, with significant actions expected to be finalized by the fiscal year ending June 30, 2025[139][140][141] Legal Proceedings and Risks - Alliance is involved in legal proceedings, claims, and government investigations, which could result in monetary damage awards, fines, penalties, or injunctive orders, potentially affecting the company's business and financial condition[145][146] - A class action lawsuit filed on March 31, 2023, alleges breaches of fiduciary duties related to the Business Combination, with potential losses currently unestimable[147] - COKeM faces a lawsuit seeking damages of at least $20,913,200 plus 9% interest for alleged contributory trademark infringement and related claims[148] - A class action complaint filed on August 8, 2024, alleges violations of the Video Privacy Protection Act (VPPA) by disclosing user data to Facebook, with financial impact currently unestimable[149] Inventory and Operations - Alliance Entertainment maintains in-stock inventory of over 325,000 SKU products and serves more than 70 countries worldwide[101]

Core Insights - Alliance Entertainment Holding Corporation reported a strong start to fiscal 2025, with improved profitability driven by operational efficiencies and higher-margin Direct-to-Consumer sales [3][4][5]. Financial Performance - Net revenue for Q1 FY 2025 increased to $229 million, with year-over-year sales growth in key categories: vinyl (up 4.8%), CDs (up 4.0%), physical movie sales (up 13.2%), and gaming products (up 8.6%) [2]. - Direct-to-Consumer sales accounted for 34% of gross revenue, up from 30% in the prior year [2][4]. - Operating income improved to $2 million, a turnaround from an operating loss of $1.6 million in the previous year [2]. - Net income was $0.4 million, a $3.9 million improvement from a net loss of $3.5 million in the prior year [2]. - Adjusted EBITDA increased to $3.4 million, up from $1.3 million in Q1 FY 2024 [2][5]. Cost Management and Efficiency - Distribution and fulfillment expenses decreased to $9 million, down 23% year-over-year, due to ongoing automation initiatives [2][4]. - Selling, General and Administrative (SG&A) expenses decreased to $13 million, down 9% from the prior year [2]. - Inventory levels were reduced to $138 million as of September 30, 2024, down from $159 million a year earlier, reflecting effective inventory management [2][7]. Debt and Liquidity - The company reduced its revolver debt by 33%, from $126 million on September 30, 2023, to $85 million as of September 30, 2024, enhancing liquidity and reducing debt service costs [2][7]. - Cash increased to $4.29 million as of September 30, 2024, compared to $1.13 million at the end of the previous quarter [15][17]. Strategic Initiatives - Alliance signed an exclusive distribution agreement with Arcade1Up, generating $12.6 million in revenue in Q1 FY 2025, up from $10.2 million in the same period last year [2][6]. - The company also formed an exclusive partnership with Magenta Light Studios for physical home entertainment releases in the US and Canada, further enhancing its market position [2]. Market Outlook - The company aims to leverage its strengths as a capital-light, low-cost provider while addressing opportunities in underpenetrated channels like digital video streaming [4][8]. - Continued focus on expanding product offerings and strengthening retail partnerships is expected to capture new opportunities across the entertainment landscape [8][9].

Core Insights - Alliance Entertainment Holding Corporation is a leading global distributor and wholesaler in the physical media market, specializing in music, movies, video games, electronics, and collectibles [1][2] - The company achieved a significant financial turnaround in fiscal 2024, reporting a net income of $4.6 million, which is a $40 million improvement from the previous year [2] - Alliance's extensive reach and scale create a strong competitive advantage, positioning it as the dominant player in the distribution of physical media [2] Company Overview - Alliance Entertainment offers over 325,000 unique in-stock SKUs, including more than 57,300 exclusive compact discs, vinyl LP records, DVDs, Blu-rays, and video games [3] - The company has over thirty-five years of distribution experience and serves a diverse range of customers, providing a comprehensive suite of services to resellers and retailers worldwide [3] - Alliance's operational efficiency helps reduce costs associated with managing multiple vendor relationships, enabling omni-channel retailers to expand their product offerings [3] Upcoming Events - Alliance Entertainment will host a webinar on October 15, 2024, featuring insights from Chairman Bruce Ogilvie and CEO Jeff Walker [1][2] - The event will include a live question and answer session, allowing investors to engage directly with company leadership [2]

Financial Performance - Net revenue for fiscal year 2024 totaled $1.1 billion, a decrease of 5% from $1.16 billion in fiscal year 2023[12] - Net income for fiscal year 2024 was $4.6 million, representing a $40 million turnaround from a net loss of $35.4 million in the previous year[2] - Operating income improved to $14,141 compared to a loss of $32,746 in the prior year, indicating a significant turnaround[24] - Net income for the year ended June 30, 2024, was $4,581, compared to a net loss of $35,404 in the previous year[24] - The company reported a basic and diluted net income per share of $0.09 for the year ended June 30, 2024, compared to a loss of $0.74 per share in the previous year[24] Profitability Metrics - Gross profit increased to $128.9 million, up 24% from the prior year, with gross margin improving by 270 basis points to 11.7%[2] - Adjusted EBITDA improved by $41.9 million, rising to $24.3 million from a negative $17.6 million in fiscal year 2023[2] - Adjusted EBITDA for the year ended June 30, 2023, was $(17,601), highlighting challenges in operational performance[29] Sales and Revenue Composition - Direct-to-Consumer (DTC) sales accounted for 36% of gross revenue in fiscal year 2024, up from 31% in the prior year[2] - Physical media sales showed resilience, with vinyl sales growing by 2% and physical movie sales increasing by 8%[8] Cash Flow and Liquidity - Net cash provided by operating activities soared by 1,547%, reaching $55.8 million in fiscal year 2024[13] - Cash flows from operating activities increased significantly to $55,818 from $3,388 in the previous year, indicating stronger cash generation[27] Debt and Financial Health - Revolver debt was reduced by 45%, from $133 million to $73 million, enhancing liquidity and reducing debt service costs[3] - The company secured a new three-year $120 million senior secured credit facility to support working capital and future growth[3] - Total liabilities decreased to $253,183 from $309,996, reflecting improved financial health[26] Inventory Management - Inventory levels were reduced to $97 million as of June 30, 2024, down from $147 million the previous year[2] - Total current assets decreased to $196,213 from $260,866, primarily due to a reduction in inventory[25] - Inventory levels decreased to $97,429 from $146,763, suggesting improved inventory management[25] Shareholder Information - The weighted average common shares outstanding increased to 50,828,548 from 48,138,393, reflecting potential equity financing activities[24]

Financial Data and Key Metrics Changes - For Q4 2024, the company reported net revenue of $236.9 million, a decline from $247.1 million in the same period last year, indicating a modest decrease [23] - Gross profit for Q4 was $26.9 million, down from $30.2 million year-over-year, resulting in a gross margin of 11.4%, slightly below the 12.2% achieved in Q4 2023 [23] - The company achieved net income of $2.5 million for the quarter, a significant turnaround from a net loss of $4.6 million in the same period last year, marking a $7.1 million improvement [24] - For the fiscal year ended June 30, 2024, net revenues were $1.1 billion, compared to $1.16 billion for fiscal year 2023 [25] - Gross profit for the fiscal year was $128.9 million, a 24% increase from $103.9 million in the prior year, with gross profit margin rising to 11.7% from 9% [25] - Net income for fiscal 2024 was $4.6 million, a $40 million improvement over the $35.4 million net loss in fiscal 2023 [26] - Net cash provided by operating activities surged to $55.8 million in fiscal 2024, up from $3.4 million in the prior year, a remarkable increase of 1,547% [26] Business Line Data and Key Metrics Changes - Consumer direct shipments increased to 36% of gross revenue, up from 31% in fiscal 2023, contributing to improved margins and profitability [24] - Distribution Solutions generated $134 million in revenue in fiscal 2024, partnering with over 60 home video movie studios [13] - The AMPED division, focusing on physical distribution of exclusive music content, works with more than 90 exclusive music labels [14] Market Data and Key Metrics Changes - The physical media market is normalizing back to historical growth levels in the high single-digits after a surge during the pandemic [12] - The CD market has seen a revival, with CDs outselling digital albums at a rate of 3 to 1 in the first half of the year [12] Company Strategy and Development Direction - The company aims to expand market share, improve margins, and drive EBITDA growth through exclusive distribution opportunities and strategic acquisitions [30] - Investments in automation and restructuring are expected to enhance operational efficiency and drive cost savings [30] - The company plans to focus on underpenetrated channels, particularly in digital video streaming, where direct vendor selling remains low [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted EBITDA in the 4% to 5% range in future quarters, indicating a positive trend [34] - The company anticipates significant cost savings in fiscal 2025 from the closure of its Minnesota facility, forecasting about $5 million in operational savings [50] - Management noted that the collectible market is normalizing, with more exclusive distribution opportunities expected in the collectibles space [43] Other Important Information - The company has secured a new three-year $120 million senior secured asset-based credit facility to support working capital and refinance existing debt [27] - The company has a proven track record of growth through strategic acquisitions, with plans to continue this strategy moving forward [18] Q&A Session Summary Question: Future adjusted EBITDA expectations - Management sees EBITDA trending upwards and believes it can reach the 4% to 5% target in the coming years [34] Question: Impact of interest rate reductions on earnings - A significant decline in interest expense is expected for fiscal 2026 due to ongoing debt reduction and potential Fed interest rate cuts [37] Question: Growth initiatives for fiscal 2025 - The focus is on increasing exclusive distribution opportunities in video, music, and collectibles, with significant licensing conversations ongoing [39] Question: Future of collectible sales - The collectible market is normalizing, and while there were challenges, the overall industry remains robust with more exclusive distribution opportunities anticipated [43] Question: Revenue growth expectations - Limited revenue growth is expected, with better gross and net margins driven by acquisition strategies and operational efficiencies [45] Question: Intent to raise cash for acquisitions - An S1 filing was made earlier this year to raise capital for acquisitions, dependent on having significant opportunities lined up [48] Question: Expected expense reduction from Minnesota warehouse closure - Forecasted operational savings of about $5 million for fiscal 2025 from the closure, with additional savings from retiring legacy IT systems [50]

Revenue Performance - Net Revenues decreased from $1,159 million to $1,100 million (-$59 million, -5%) for the year ended June 30, 2024, attributed to macroeconomic headwinds [284]. - Vinyl record sales increased from $324 million to $329 million ($5 million, 2%) for the 12 months ended June 30, 2024, with an average selling price increase of 6% [285]. - Digital sales of exclusive content increased approximately 135% over the same period last year, driven by new theatrical releases and collectable content [285]. - Gaming sales decreased from $391 million to $338 million (-$53 million, -14%) for the 12 months ended June 30, 2024, despite a doubling of average selling prices [287]. - Consumer Products revenue decreased from $80 million to $43 million (-$37 million, -46%) for the same period, with an average selling price increase of approximately 28% [288]. Cost and Expense Management - Total cost of revenues decreased from $1,055 million to $972 million ($83 million or 8%) year over year, with product margins increasing from 9.0% to 11.7% (+2.7 percentage points) [289]. - Total Operating Expenses declined 16% and decreased as a percentage of revenue from 11.8% to 10.4% (1.4 percentage points) year over year [290]. - Total Distribution and Fulfillment Expense as a percentage of net revenue decreased from 5.4% to 4.4%, a reduction of 1.0 percentage point for the year ended June 30, 2024 [291]. - Fulfillment payroll was reduced by $9 million or 22% for the year ended June 30, 2024, enabling the company to absorb a 2.5% increase in average labor costs [291]. - Total Selling, Administrative, and General expenses decreased by $1.4 million or 2.3% for the year ended June 30, 2024, from $59.1 million to $57.7 million [292]. Financial Position and Cash Flow - Cash provided by operating activities was $55.8 million for the year ended June 30, 2024, a significant increase from $3.4 million in the prior year [307]. - The revolver balance was reduced from $133 million to $73 million, a decrease of $60 million or 45% year-over-year [300]. - The company has sufficient cash to fund its operations and obligations for at least twelve months from the issuance of the consolidated financial statements [299]. Acquisitions and Mergers - The acquisition of Think3Fold, LLC on July 1, 2022, expanded product offerings and shelf space for the largest customer [274]. - The merger with Adara Acquisition Corp. on February 10, 2023, resulted in Alliance Entertainment becoming a publicly registered company, incurring additional regulatory expenses [275][277]. - The company continues to evaluate acquisition opportunities to identify targets that meet strategic and economic criteria [274]. Tax and Interest Expenses - Interest Expense increased by $0.5 million or 4.3% to $12.2 million for the year ended June 30, 2024, despite a significant increase in the average effective interest rate from 6.0% to 9.5% [293]. - The company recorded an income tax benefit of $2.7 million for the year ended June 30, 2024, compared to a tax benefit of $9.1 million in the prior year, resulting in an effective tax rate of 147% [294]. Goodwill and Intangible Assets - For the year ended June 30, 2024, the Company performed a quantitative assessment of goodwill and determined that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment recognized [311]. - Intangible assets are amortized over estimated useful lives ranging from 5 to 15 years, with no impairment of goodwill or other intangible assets for the year ended June 30, 2024 [311]. Market Conditions and Future Outlook - Future impairment charges may arise due to uncertainties in the macroeconomic environment, including interest rates and economic conditions [313]. - The company expects additional declines in fulfillment expenses in fiscal year 2025 due to the elimination of a warehouse and continuous improvement efforts [291]. Valuation and Financial Metrics - The fair value of the Private Warrant was measured at $3.00 as of June 30, 2024, compared to $2.55 as of June 30, 2023 [316]. - The risk-free interest rate increased to 4.41% as of June 30, 2024, from 4.16% as of June 30, 2023 [316]. - Expected volatility for the warrants was 36.0% as of June 30, 2024, up from 34.6% as of June 30, 2023 [316]. - The expected term for the warrants decreased to 3.6 years as of June 30, 2024, from 4.6 years as of June 30, 2023 [316]. Dividend Policy - The Company has never issued dividends, maintaining an expected dividend yield of 0% [317]. Acquisition Costs - Acquisition costs are expensed as incurred and included in the consolidated statements of operations and comprehensive income [314]. - The Company allocates the purchase price for business combinations based on fair value estimates of net assets acquired and liabilities assumed [314].

Operational efficiencies and margin improvements drive profitability turnaround Higher-margin DTC sales increased to 36% of gross revenue in FY24 Strengthened balance sheet with 45% reduction in revolver debt and added new $120M credit facility PLANTATION, Fla., Sept. 19, 2024 (GLOBE NEWSWIRE) -- Alliance Entertainment Holding Corporation (Nasdaq: AENT), a global distributor and wholesaler specializing in music, movies, video games, electronics, arcades, toys, and collectibles, reported its financial and op ...

PLANTATION, Fla., July 30, 2024 (GLOBE NEWSWIRE) -- Alliance Entertainment Holding Corporation (NASDAQ:AENT) ("Alliance Entertainment", "Company"), a global distributor and wholesaler specializing in music, movies, video games, electronics, arcades, and collectibles, announced today an exclusive distribution agreement executed with Arcade1Up for retail and website fulfillment of the complete line of arcade and gaming products in North America. Arcade1Up licenses and manufactures home arcade consoles with ov ...

Core Viewpoint - Alliance Entertainment Holding Corporation has announced a partnership with Tsuburaya Productions for the San Diego Comic-Con, aiming to enhance the visibility of the ULTRAMAN brand and offer exclusive collectibles to fans [1][2]. Group 1: Partnership and Event Details - The partnership will involve Alliance Retail's popmarket e-commerce site managing retail operations at the ULTRAMAN booth during Comic-Con, featuring collectibles, posters, and Blu-ray™ products [1]. - Exclusive products, including a special Blu-ray™ package and limited-edition merchandise, will be available at the ULTRAMAN booth, specifically designed for loyal fans [3]. Group 2: Brand and Market Strategy - The collaboration is part of Alliance Entertainment's strategy to increase brand awareness and cater to both new and existing fans with high-quality ULTRAMAN products [2]. - ULTRAMAN has over 50 product licenses in the US, with notable releases such as "Shin Ultraman" (2022) which grossed $32 million globally, and "Ultraman Rising," released on Netflix [2]. Group 3: Company Background - Alliance Entertainment is a global distributor specializing in music, movies, toys, and collectibles, with over 325,000 unique SKUs, including more than 57,300 exclusive items [8]. - Tsuburaya Productions, established in 1963, has a rich history in creating beloved characters and is expanding its licensing program into various global markets [5][4].

$30 Million Joint Venture Funding Provided Via Non-Dilutive Production Financing Through a Subsidiary of Catalyst Venture Partners Largest Project in Company History, Based Exclusively on A.A. Milne's Classic Books That Gave Rise to $80 Billion in Retail Sales  "A Hundred Acre Christmas" Animated Holiday Movie to Premiere on Amazon Prime Video on December 24, 2025, Followed by 5 Holiday Specials and 104 Episode Animated Series Celebrating 100th Anniversary of A.A. Milne's Original Publication in London ...