Alliance Entertainment Holding Corporation Q4 FY2025 earnings call

• Jeff Walker highlighted Alliance's position as a premier distributor and fulfillment partner in the collectibles ecosystem, with over 340,000 SKUs and fulfillment relationships across many retail and online platforms. - Mentioned fiscal 2025 results including net income of $15.1 million, a 229% increase, adjusted EBITDA growth of 51% to $36.5 million, and gross margin improvement. - Discussed exclusive distribution and licensing strategy, including the Paramount Pictures partnership, Handmade by Robots acquisition, and new exclusive distribution agreements. - Talked about consumer direct fulfillment model, automation and warehouse optimization, and AI initiative for sales expansion and operational efficiency. - Emphasized disciplined merger and acquisition strategy with a track record of 15 acquisitions.

For the quarter ended June 30, 2025, net revenue was $227.8 million compared to $236.9 million in the prior year's fourth quarter. Gross profit increased 34% year-over-year to $36 million with gross margin at 15.8%. For fiscal year 2025, net revenue was $1.06 billion compared to $1.1 billion in the prior year. Gross profit was $132.9 million with gross margin at 12.5%. Exclusive partnerships accounted for more than $350 million in revenue or more than 1/3 of total sales in fiscal 2025. CDF accounted for 37% of gross revenue in fiscal 2025, up from 36% in fiscal 2024.

• Anticipated strong second quarter fiscal year 2026 with a highly anticipated Taylor Swift release on October 3. - Entering fiscal 2026 with a margin profile (gross margin of 15.8% and adjusted EBITDA margin above 5%) that is expected to be sustainable and carry forward, significantly growing earnings per share.

• Impact of tariffs on collectible products, with some price increases on collectible products from manufacturers and wholesalers leading to potential impact on consumer demand and sales.

Q: How should investors think about ability to sign similar deals with other studios?

A: Jeff Walker said they are diligently working on it, seeing it as a long-term opportunity in physical DVD distribution consolidation and actively working on conversations.

Q: How are you impacted by tariffs and efforts to mitigate?

A: No impact on music and video tariffs, on collectibles side, Handmade by Robots incurs China tariffs but managed within cost structures, other collectible products have price increases affecting consumer demand and sales but volume decline not huge.

Q: Capital allocation preferences?

A: Cash sweeps through line of credit reducing balance and interest cost, no desire to buy back stock, actively looking at reinvesting in business, strategic M&A, and internal investments.

Q: Sustainability of lift from Paramount deal?

A: Ramp-up in first quarter of calendar 2025, saw impact in second quarter, will see impact in current and Q1 2026, and Skydance acquisition of Paramount may lead to more content and growth.

Q: What does Walmart selection as video category adviser mean?

A: Big win, designated category adviser to help with video category planning, strategic and space planning, managed by independent team from Alliance, honor as they believe in Alliance's capabilities and strategy.

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

A: Actively in a lot of conversations, M&A is art and science, stay in ongoing conversations, current capital structure supports inorganic initiatives as cash sweeps reduce line balance.

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

A: Margin expansion is structural, from higher-margin products and significant cost savings like exiting warehouses.

Q: How AI helps the business?

A: Using Copilot internally, training on it, integrating HubSpot for sales and marketing, helping sales be more efficient and expand opportunities.

Q: Balancing legacy vs higher growth segments?

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

Q: Confidence Handmade by Robots can break out?

A: Love the brand, business model with in-licensed IP, unlimited opportunity of new characters, aggressive growth strategy, strong margin, and Alliance's scale and scope to scale the brand without having to scale back-end operations.

Q: Why exclusivity is a big advantage?

A: Allows to be the exclusive seller, opens up big accounts like Amazon, Walmart, etc., as big retailers buy direct through exclusive distributors.