Alliance Entertainment Holding Corporation Q4 FY2025 earnings call

• Alliance Entertainment is a premier distributor and fulfillment partner in the collectibles ecosystem with over >340,000 SKUs and fulfillment across 35,000 retail storefronts and 200 online platforms.
• In fiscal 2025, net income was $15.1 million (229% increase from prior year), adjusted EBITDA grew 51% to $36.5 million, gross margin improved from >३1>11.7% to 隚३12.5%. -©4Q FY25 net income $5.©8 million (©130% increase from prior year), adjusted EBITDA nearly fivefold to $12.2 million. -©Exclusive distribution and licensing strategy key, e.g., Paramount Pictures partnership (exclusive U.S./Canadian distributor of Paramount's physical media catalog). -隚Automation investments and warehouse consolidation delivering cost savings; Q4 distribution/fulfillment expenses down ~1% of revenue. -隚AI initiative launched to drive sales expansion and operational efficiency. -隚Disciplined M&A strategy with recent acquisition of Handmade by Robots, which has shown growth in first two quarters under Alliance.

For the quarter ended June 30, 2025, net revenue was $227.8 million, gross profit was $36 million with a gross margin of 15.8%, net income was $5.8 million or $0.11 per diluted share. For fiscal year 2025, net revenue was $1.06 billion, gross profit was $132.9 million with a gross margin of 12.5%, net income was $15.1 million or $0.30 per diluted share, and adjusted EBITDA grew 51% to $36.5 million. Exclusive partnerships accounted for more than $350 million in revenue or more than 1/3 of total sales in fiscal 2025.

• Momentum from Q4 carrying into fiscal 2026; strong consumer demand, e.g., Taylor Swift release in Oct 'XX to boost Q2 FY26. -隚Expect margins seen in Q4 (gross margin 15.8%, adjusted EBITDA margin >३३5%) to be sustainable into fiscal 隚26 and beyond. -隚Looking ahead to significant new releases in H1 FY隚26 across various franchises.

• Tariffs impact: Collectible products manufactured in China incur current tariffs; some price increases on collectible products from manufacturers/wholesalers affecting consumer demand and sales, though not majorly impacting volume yet.

Q: How sustainable is the lift from the Paramount Pictures exclusive license?

A: License started Jan 1 'XX, ramped in Q1 2025, saw impact in Q2 'XX, will have small impact in Q1 FY26, and expects growth as Paramount's slate of products grows with Skydance acquisition.

Q: What does Walmart selecting you as its video category adviser mean?

A: Big win, designated as category adviser to help with video category planning, strategic and space planning, managed by Alliance team, honoring Alliance's capabilities and strategy with Walmart on physical movies/TV.

Q: Profile of current M&A pipeline and capital structure support?

A: Actively in many acquisition conversations, robust net of conversations, evaluating which fit at each time; cash collected daily sweeps through line of credit reducing debt and interest cost, no desire to buy back stock currently, reinvesting in strategic acquisitions and internal growth.

Q: How much margin expansion is structural vs cyclical/onetime?

A: Structural improvement, from higher-margin products and significant cost savings (e.g., exiting Minnesota warehouse facilities).

Q: How AI helps the business?

A: Using Copilot, GitHub, integrating HubSpot for sales/marketing, helps each person work more efficiently, drives sales by assisting in selling products through more retailers/consumers.

Q: Balancing legacy vs higher growth segments?

A: Still seeing growth in legacy categories like vinyl and video, investing in both legacy and new initiatives.

Q: Confidence in Handmade by Robots breaking out?

A: Love the brand, style, name; in-licensed IP opportunity, aggressive growth strategy, strong margin, ability to focus on licensing/design/sales without scaling warehousing/operations as Alliance already has that infrastructure.

Q: Why exclusivity is big advantage?

A: Exclusive partnerships make Alliance the exclusive seller, opening up big accounts like Amazon, Walmart, etc., as big retailers buy direct from exclusive distributors.