Alliance Entertainment Holding Corporation Q1 FY2026 earnings call

• Revenue grew 11% year over year to $254 million, reflecting strong demand across physical media, collectibles, and direct-to-consumer channels. • Adjusted EBITDA increased to $12.2 million from $3.4 million a year ago, a 259% improvement, with gross margin expanding 340 basis points to 14.6%. • Handmade by Robots brand is scaling rapidly with new collectible launches, expanded retail placement, and growing fan engagement. • Strengthened corporate governance with two new independent directors bringing expertise in finance, AI technology, and governance. • Advanced AI-powered sales transformation with rollout of HubSpot Sales Hub and Microsoft Copilot improving lead prioritization and content creation. • Expanded exclusive content portfolio, including new distribution agreement with Virgin Music Group via AMPED. • Alliance operates an advanced entertainment distribution network processing over 15 million units annually, with investment in automation systems improving throughput and lowering costs. • Omnichannel distribution network serves ~175 online retailers and over 35,000 physical stores, with direct-to-consumer contributing 37% of net revenue.

For the quarter ended 09/30/2025, net revenue was $254 million, a 11% increase from $229 million in the prior year. Adjusted EBITDA increased to $12.2 million from $3.4 million the prior year, a 259% improvement. Gross margin expanded to 14.6% from 11.2% the prior year. The direct-to-consumer channel contributed 37% of total net revenue. The collectible segment, particularly Handmade by Robots, is scaling rapidly with new launches driving sell-through and retail placement.

• Fiscal 2026 is off to a strong start with adjusted EBITDA margin of 4.8% in the first quarter viewed as the new baseline for fiscal 2026 and beyond. • Closed a new five-year $120 million senior secured revolving credit facility with Bank of America, providing lower interest expense, longer duration, and greater liquidity to support seasonal inventory needs and future growth initiatives.

Q: Could physical media outperform this holiday versus prior ones due to tariff status?

A: Jeff Walker noted strong sales in entertainment categories, with collectors excited about their collections, and vinyl in particular expected to be a strong gift item.

Q: Talk about the performance of Taylor Swift's 'Life of the Showgirl' versus her last album as a proxy for consumer demand for vinyl.

A: Jeff Walker stated Taylor Swift's album fulfillment wasn't booked in the reported quarter, but consumers buy vinyl and CDs as collectibles despite digital options.

Q: Thoughts on forging exclusive deals with other studios?

A: Jeff Walker mentioned ongoing conversations with studios, highlighting Alliance's role as a great solution for maximizing physical media sales.

Q: Did Handmade by Robots have broad retail distribution in the quarter and impact on financials?

A: Jeff Walker said Handmade by Robots is growing but its financial impact on Alliance in fiscal 2026 is minimal, with more impact expected in fiscal 2027 and '28.

Q: What were the driving factors in vinyl sales in the quarter?

A: Jeff Walker cited continuous consumer demand, new releases, reissues in different colors, and strong following of top artists.

Q: Significance of the Paramount licensing agreement to the movie segment?

A: Jeff Walker noted solid releases with Paramount, strong in-stock percentages, and Alliance's role in supporting various retailers beyond Walmart and Amazon.

Q: How do AI tools help teams?

A: Jeff Walker mentioned rollout of Copilot with 280 employees using it daily, and HubSpot implementation streamlining sales management with AI strategies.

Q: What gives confidence in sustaining strong margin performance?

A: Jeff Walker highlighted ongoing initiatives, an all-star team, and employee ownership through share vesting programs driving continued growth and margin sustainability.