Alliance Entertainment (AENT) - 2025 Q2 - Quarterly Results

Executive Summary & Key Highlights Fourth Quarter & Fiscal Year 2025 Financial Highlights Alliance Entertainment reported significant financial improvements for Q4 and FY2025, with substantial increases in Adjusted EBITDA, gross margin, net income, and EPS, alongside a reduction in revolver debt and growth in Direct to Consumer Fulfilment sales Q4 and FY2025 Key Financial Highlights | Metric | Q4 FY2025 ($ million) | FY2025 ($ million) | YoY Change (Q4) | YoY Change (FY) | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $12.2 | - | +481% | - | | Gross Margin | 15.8% | - | +38.6% | - | | EPS | - | $0.30 | - | Up from $0.09 in FY24 | | Net Income | - | $15.1 | - | +229% | | Revolver Debt Reduction | - | $15.7 | - | -22% | | DTC Fulfilment Sales (% of gross revenue) | - | 37% | - | - | - Q4 Adjusted EBITDA increased to $12.2 million from $2.1 million, a 481% increase year-over-year[1] - Q4 Gross Margin increased to 15.8% from 11.4%, a 38.6% increase year-over-year[1] - FY25 EPS increased to $0.30 per share, up from $0.09 per share in FY24[1] - Delivered $15.1 million in net income for FY25, a 229% year-over-year improvement[1] - Reduced revolver debt by 22% or $15.7 million year-over-year, strengthening balance sheet and liquidity position[1] - Direct to Consumer Fulfilment sales increased to 37% of gross revenue[2] Strategic & Operational Achievements The company expanded its collectibles portfolio through acquisitions and exclusive distribution agreements, significantly increased physical movie sales due to a new Paramount Pictures license, and launched a new home entertainment division, while also improving operational efficiency and reducing expenses - Expanded retail distribution of Handmade by Robots, acquired in December 2024, launching into anime collectibles and debuting a limited-edition Hello Kitty figure at San Diego Comic-Con[4][6] - Expanded collectibles portfolio through a new exclusive agreement to serve as exclusive North American distributor for Master Replicas, adding premium collectibles from iconic sci-fi properties[4][6] - Increased physical movie sales 36% year-over-year to $279 million, fueled by the January 2025 launch of the exclusive Paramount Pictures license agreement[4][6] - Launched Alliance Home Entertainment, a new division unifying Mill Creek Entertainment, Distribution Solutions, and strategic hires, and was selected by Walmart as its video category advisor in July 2025[7] - Vinyl record sales increased 2% year-over-year to $337 million in FY25, driven by strong Record Store Day demand and collector-focused limited editions[7] - Direct to Consumer Fulfillment (DTC) channel represented 37% of FY25 gross revenue, up from 36% in FY24[7] - Reduced total operating expenses by 10.5% year-over-year in FY25, with distribution and fulfillment costs as a percentage of revenue declining by 0.6% due to automation and warehouse consolidation[7] - Interest expense declined 13.7% year-over-year[7] Management Commentary CEO Jeff Walker highlighted solid execution, increased EPS, and strengthened partnerships, emphasizing the company's role as a key distribution and fulfillment partner. CFO Amanda Gnecco noted strong financial momentum, profitability improvements from product mix and expense management, and a strategic focus on high-margin channels, exclusive content, and AI for future growth - CEO Jeff Walker commented that Fiscal 2025 marked another year of solid execution, with earnings per share rising to $0.30 from $0.09 in the prior year[5] - CEO Walker emphasized Alliance's strengthened role as the go-to distribution and fulfillment partner, delivering exclusive content with efficiency and scale in the evolving entertainment and collectibles market[5][8] - CFO Amanda Gnecco stated that the company ended fiscal 2025 with strong financial momentum, delivering $15.1 million in net income (up 229%) and adjusted EBITDA of $36.5 million (up 51%)[9] - CFO Gnecco attributed these gains to a more profitable product mix, disciplined expense management, and meaningful leverage from automation and warehouse consolidation efforts[9] - CFO Gnecco outlined a focus for fiscal 2026 on scaling high-margin channels, expanding the exclusive content portfolio, and leveraging AI to drive sales growth and operational efficiency[11] Detailed Financial Performance Fourth Quarter FY 2025 Financial Results Alliance Entertainment reported a slight decrease in net revenues for Q4 FY2025 compared to the prior year, but achieved significant increases in gross profit, gross margin, net income, and Adjusted EBITDA, demonstrating improved profitability and operational leverage Fourth Quarter FY2025 Financial Performance | Metric | Q4 FY2025 ($ million) | Q4 FY2024 ($ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $227.8 | $236.9 | -3.8% | | Gross Profit | $36.0 | $26.9 | +33.8% | | Gross Margin | 15.8% | 11.4% | +38.6% | | Net Income | $5.8 | $2.5 | +132.0% | | Diluted EPS | $0.11 | $0.05 | +120.0% | | Adjusted EBITDA | $12.2 | $2.1 | +481.0% | - Net revenues for Q4 FY2025 were $227.8 million, compared to $236.9 million in the same period of 2024[12] - Gross profit for Q4 FY2025 was $36.0 million, up 33.8% compared to $26.9 million in Q4 FY2024[12] - Adjusted EBITDA for Q4 FY2025 was $12.2 million, up 480% compared to $2.1 million for Q4 FY2024[12] Fiscal Year 2025 Financial Results For the full fiscal year 2025, Alliance Entertainment experienced a slight decrease in net revenues but delivered substantial growth in gross profit, gross margin, net income, and Adjusted EBITDA, reflecting enhanced operational efficiency and profitability Fiscal Year 2025 Financial Performance | Metric | FY2025 ($ million) | FY2024 ($ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $1,063.457 | $1,100.483 | -3.4% | | Gross Profit | $132.9 | $128.9 | +3.1% | | Gross Margin | 12.5% | 11.7% | +6.8% | | Net Income | $15.1 | $4.6 | +229.0% | | Diluted EPS | $0.30 | $0.09 | +233.3% | | Adjusted EBITDA | $36.5 | $24.3 | +51.0% | - Net revenues for FY2025 were $1.06 billion, compared to $1.10 billion in fiscal year 2024[17] - Net income for FY2025 was $15.1 million, or $0.30 per diluted share, up 229% compared to $4.6 million, or $0.09 per diluted share, for FY2024[17] - Adjusted EBITDA for FY2025 was $36.5 million, up 51% compared to $24.3 million for FY2024[17] Non-GAAP Financial Measures Alliance Entertainment utilizes Adjusted EBITDA as a key non-GAAP financial measure to evaluate its operating performance, which saw a significant 51% year-over-year increase to $36.5 million in FY2025, reflecting enhanced profitability - Adjusted EBITDA for FY2025 was $36.5 million, an improvement of $12.2 million or 51% year-over-year compared to $24.3 million in FY2024[27][28] - Adjusted EBITDA is defined as net income or loss adjusted to exclude income tax expense, other income (loss), interest expense, depreciation and amortization expense, and other infrequent, non-recurring expenses[27] - The company uses Adjusted EBITDA to evaluate its operating performance and as an integral part of its planning process, believing it is a useful indicator for investors[27] Consolidated Financial Statements Consolidated Statements of Operations The consolidated statements of operations for FY2025 show a decrease in net revenues but a substantial increase in net income and diluted EPS, driven by improved operating income and reduced operating expenses Consolidated Statements of Operations (Year Ended June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net Revenues | $1,063,457 | $1,100,483 | | Cost of Revenues | $930,605 | $971,594 | | Total Operating Expenses | $102,716 | $114,748 | | Operating Income | $30,136 | $14,141 | | Net Income | $15,078 | $4,581 | | Net Income per Share – Diluted | $0.30 | $0.09 | - Operating Income significantly increased to $30.136 million in FY2025 from $14.141 million in FY2024[22] - Total Operating Expenses decreased to $102.716 million in FY2025 from $114.748 million in FY2024[22] Consolidated Balance Sheets The consolidated balance sheets indicate an increase in total assets and stockholders' equity for FY2025, with notable changes including higher trade receivables and inventory, and a reduction in the revolving credit facility Consolidated Balance Sheets (As of June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Total Current Assets | $218,132 | $196,213 | | Total Assets | $361,228 | $340,812 | | Total Current Liabilities | $172,729 | $147,920 | | Revolving Credit Facility, Net | $55,268 | $69,587 | | Total Liabilities | $258,006 | $253,183 | | Total Stockholders' Equity | $103,222 | $87,629 | - Trade Receivables, Net increased to $107.246 million in FY2025 from $92.357 million in FY2024[24] - Inventory, Net increased to $102.848 million in FY2025 from $97.429 million in FY2024[24] - Revolving Credit Facility, Net decreased to $55.268 million in FY2025 from $69.587 million in FY2024[24] Consolidated Statements of Cash Flows The consolidated statements of cash flows show a decrease in net cash provided by operating activities in FY2025, while net cash used in investing activities increased, and net cash used in financing activities decreased, resulting in a net increase in cash Consolidated Statements of Cash Flows (Year Ended June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $26,809 | $55,773 | | Net Cash Used in Investing Activities | $(8,134) | $(117) | | Net Cash Used in Financing Activities | $(18,571) | $(55,390) | | Net Increase in Cash | $104 | $266 | | Cash, End of the Period | $1,236 | $1,129 | - Net Cash Provided by Operating Activities decreased from $55.773 million in FY2024 to $26.809 million in FY2025[26] - Net Cash Used in Investing Activities increased significantly from $(0.117) million in FY2024 to $(8.134) million in FY2025, primarily due to cash paid for business asset purchases[26] - Net Cash Used in Financing Activities decreased from $(55.390) million in FY2024 to $(18.571) million in FY2025, largely due to changes in revolving credit facility payments and borrowings[26] Company Overview & Additional Information About Alliance Entertainment Alliance Entertainment is a premier distributor and fulfillment partner for the entertainment and pop culture collectibles industry, offering a vast selection of physical media and licensed merchandise, leveraging exclusive partnerships and a scalable infrastructure to serve over 35,000 retail locations - Alliance Entertainment (NASDAQ: AENT) is a premier distributor and fulfillment partner for the entertainment and pop culture collectibles industry[18] - The company supplies more than 340,000 unique in-stock SKUs, including over 57,300 exclusive titles across compact discs, vinyl LPs, DVDs, Blu-rays, and video games, to over 35,000 retail and e-commerce storefronts[3][18] - Its growing collectibles portfolio includes Handmade by Robots™, a stylized vinyl figure line featuring licensed characters from leading entertainment franchises[18] Forward-Looking Statements The report contains forward-looking statements regarding future financial and performance metrics, market opportunities, and business execution, which are subject to various risks and uncertainties, including market acceptance, reliance on suppliers, indebtedness, and adverse economic factors - Certain statements in the Press Release are forward-looking for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995[19] - These statements are based on current management expectations and assumptions, and are not predictions of actual performance, being provided for illustrative purposes only[19] - Forward-looking statements are subject to risks and uncertainties, including those related to anticipated growth rates, market opportunities, changes in regulations, ability to execute business model, reliance on suppliers and customers, increased inventory risk, indebtedness, litigation, economic factors, and internal controls[19] Conference Call Information Alliance Entertainment hosted a conference call on September 10, 2025, to discuss the Q4 and FY2025 results, with details provided for live access and replay options - Alliance Entertainment Chief Executive Officer Jeff Walker and Chief Financial Officer Amanda Gnecco hosted a conference call on Wednesday, September 10, 2025, at 4:30 p.m. Eastern Time[14][15] - The conference call was broadcast live and is available for replay via webcast and telephone until November 10, 2025[16]