Alliance Entertainment — Fiscal 2026 Earnings Summary

Financial Performance

• Net revenues increased 8% year-over-year to $1.149 billion from $1.063 billion in fiscal 2025.
• Gross profit increased 15% to $152.3 million from $132.9 million; gross margin expanded 80 basis points to 13.3% from 12.5%.
• GAAP operating income was $27.2 million, down from $30.1 million in fiscal 2025; GAAP net income was $13.1 million, down from $15.1 million.
• Fiscal 2026 included a $7.8 million non-cash write-off of a historical vendor rebate receivable.
• Adjusted EBITDA increased 14% to $41.5 million from $36.5 million in fiscal 2025.
• Adjusted net income rose 24% to $23.4 million from $18.9 million; adjusted diluted EPS increased 24% to $0.46 from $0.37.
• Interest expense decreased 28% to $7.6 million from $10.6 million, reflecting a lower average effective interest rate of 6.1% compared to 9.2% following refinancing.
• Net cash used in operating activities was $1.7 million, compared to $26.8 million provided in fiscal 2025, driven by increased inventory and receivables.
• Working capital increased to $62.4 million at June 30, 2026, from $45.4 million a year prior.
• The Company ended fiscal 2026 with $45.7 million of availability under its $120 million revolving credit facility, with $74.3 million outstanding.
• The Company repaid $10.0 million of related-party borrowings during fiscal 2026.

Guidance and Future Outlook

• Management aims to drive profitable growth, improve cash generation, and increase operating leverage in fiscal 2027.
• Objectives for fiscal 2027 include moderating working-capital growth relative to revenue, increasing inventory productivity, and strengthening receivable collections.
• The Company plans to continue investing in automation and technology to support scaling.

Business Segments and Product Lines

• Vinyl revenue increased 13% to $383 million.
• CD revenue increased 25% to $156 million.
• Physical movie revenue increased 22% to $339 million, supported by higher unit volumes and expanded studio relationships.
• Collectibles revenue increased 45% to $32 million, driven by higher average selling prices and expanded proprietary products.
• Distribution and fulfillment fee revenue increased 26% to $18.6 million.
• Alliance expanded its AutoStore system capacity to 57,000 totes by ordering 5,000 additional totes.
• The Company leverages its owned Handmade by Robots™ brand and Endstate Authentic for NFC-enabled authentication and digital product identity.

Market and Competitive Landscape

• The market for physical entertainment is evolving toward premium formats, collectible products, and specialized distribution.
• Alliance holds exclusive physical-media distribution relationships with Paramount and added Amazon MGM Studios during fiscal 2026.
• The Company serves more than 35,000 retail and e-commerce storefronts.
• Content owners and retailers are seeking scaled partners capable of managing complex physical entertainment programs across wholesale, retail, and e-commerce channels.

Risks and Challenges

• Increased selling, general, and administrative expenses to $66.0 million from $56.0 million, primarily due to higher payroll and professional-service costs.
• Operating cash flow was negatively impacted by increased working-capital investment to support revenue growth.
• The press release notes standard forward-looking risks including reliance on supplier concentration, customer concentration, inventory obsolescence, indebtedness, and potential refinancing risks.

Management Commentary and Tone

• CEO Jeff Walker stated that fiscal 2026 demonstrated the strengthening of the business quality and position across the entertainment ecosystem.
• Walker emphasized that the strategy focuses on improving the value and economics of products rather than just volume, leveraging infrastructure for higher-value collectibles and fulfillment services.
• CFO Amanda Gnecco highlighted strong execution, noting that gross profit grew faster than revenue and that adjusted EBITDA and net income increased.
• Management expressed confidence in delivering continued value for customers, partners, and shareholders due to lower borrowing costs, solid liquidity, and technology investments.

Other Key Points

• The Company acquired and integrated Endstate to develop authentication and digital product identity capabilities.
• The Company benefited from favorable product mix, returns activity, and lower wholesale freight costs as a percentage of sales.
• The Company was in compliance with applicable covenants on its revolving credit facility at year-end.
• A conference call was scheduled for September 10, 2026, at 4:30 p.m. Eastern Time to discuss results.