Based on the provided financial report articles, I generated the title for the article: "Quarterly Report for the Period Ended June 30, 2025" Please note that the title may not be exact, as the provided text is a financial report and may not contain a clear title. However, based on the information provided, this title seems to be a reasonable approximation.
The report presents the financial statements of the company for the quarter ended June 30, 2025. The company reported a net loss of $X million, with total revenues of $Y million and total expenses of $Z million. The company’s cash and cash equivalents decreased by $X million to $Y million, and its total assets decreased by $Z million to $W million. The company’s common stock outstanding increased by X shares to Y shares, and its redeemable warrants exercisable for shares of common stock decreased by Z shares to W shares. The company’s accumulated other comprehensive income decreased by X million to Y million, and its retained earnings decreased by Z million to W million. The company’s financial position and results of operations are presented in the accompanying financial statements.
Alliance Entertainment Holding Corporation: Navigating Challenges and Seizing Opportunities
Alliance Entertainment Holding Corporation is a leading player in the entertainment industry, excelling in the licensing, production, and distribution of a diverse range of products and content. From motion pictures and music to gaming hardware and pop culture collectibles, the company has established itself as a recognized leader in this dynamic market.
Licensing Agreements and Acquisitions
A significant milestone for Alliance Entertainment was the Home Entertainment License Agreement it entered into with Paramount Home Entertainment in January 2025. This agreement grants Alliance exclusive home entertainment rights and non-exclusive promotional rights for select Paramount Pictures in the United States and Canada. This strategic partnership strengthens the company’s home entertainment leadership and expands its content portfolio, driving long-term revenue growth.
In addition to the Paramount deal, Alliance has a proven history of successfully acquiring and integrating competitors and complementary businesses. In December 2024, the company acquired Handmade by Robots, a producer of licensed vinyl figures that mimic the look of knitted or crocheted plush toys. This acquisition is expected to diversify Alliance’s product offerings and add an exclusive line to its portfolio.
Earlier in 2022, Alliance purchased the assets and liabilities of Think3Fold, LLC, a collectibles distribution company. This acquisition resulted in increased shelf space at the company’s largest customers and expanded its product offerings.
Merger and Transition to a Public Company
In February 2023, Alliance Entertainment Holding Corporation (formerly known as AENT Corporation) completed a business combination with Adara Acquisition Corp. This transaction made Alliance the successor to an SEC-registered company, requiring the hiring of additional personnel and the implementation of procedures and processes to address public company regulatory requirements.
As a result of the merger, Alliance Entertainment expects to incur additional annual expenses as a public company, including for directors’ and officers’ liability insurance, director fees, and increased internal and external accounting, legal, and administrative resources.
Macroeconomic Uncertainties
The report acknowledges that unfavorable economic conditions in the United States and abroad, such as inflation, interest rate hikes, and the Russia-Ukraine war, have led to global economic uncertainty. These macroeconomic events may not be fully reflected in Alliance Entertainment’s results of operations until future periods, and the company warns that if economic uncertainty increases or the global economy worsens, its business, financial condition, and operating results may be harmed.
Key Performance Indicators
To evaluate its financial performance, Alliance Entertainment monitors and analyzes several key performance indicators, including:
Net Revenue: This metric reflects the company’s total gross sales, reduced by customer returns, returns reserve, and allowances, including discounts.
Cost of Revenues (excluding depreciation and amortization): This measure reflects the total costs incurred to market and distribute products to customers, which are primarily impacted by sales volume, product mix, product obsolescence, freight costs, and market development funds.
Operating Expenses: These include both Distribution and Fulfillment Expenses, as well as Selling, General, and Administrative (SG&A) Expenses. Distribution and Fulfillment Expenses are the payroll and operating expenses associated with the receipt, warehousing, and distribution of products, while SG&A Expenses cover payroll and operating costs for Information Technology, Sales & Marketing, and General & Administrative functions.
Margins: The company analyzes gross and net margins in dollars and as a percentage of revenue by line of business and product line to assess profitability.
Balance Sheet Indicators: Alliance Entertainment views cash, product inventory, accounts payable, and working capital as key indicators of its financial position.
Financial Performance: Three Months Ended December 31, 2024
For the three months ended December 31, 2024, Alliance Entertainment reported a 7.5% decrease in net revenues compared to the same period in the prior year, from $426 million to $394 million. This decline was primarily driven by a 27% decrease in gaming product revenue, which was partially offset by increases in physical movie sales (23%), vinyl record sales (12%), and music CD sales (2%).
The company’s cost of revenues, excluding depreciation and amortization, decreased by 7% year-over-year, in line with the decline in sales volume. Gross margin dollars decreased from $47.7 million to $42.3 million, resulting in a margin decline from 11.2% to 10.7%.
Total operating expenses decreased by 13% year-over-year, from $31.7 million to $27.5 million, primarily due to reductions in distribution and fulfillment expenses, as well as selling, general, and administrative costs. The company’s efforts to improve efficiency, such as warehouse automation and the consolidation of operations, contributed to these cost savings.
Interest expense decreased by 15%, from $3.3 million to $2.8 million, due to a reduction in the average revolver balance, partially offset by an increase in the effective interest rate.
For the three months ended December 31, 2024, Alliance Entertainment reported a net income of $7.1 million, compared to $8.9 million in the same period of the prior year. The company’s non-GAAP Adjusted EBITDA for the quarter was $16.1 million, compared to $17.9 million in the same period of the prior year.
Financial Performance: Six Months Ended December 31, 2024
For the six months ended December 31, 2024, Alliance Entertainment’s net revenues decreased by 4.4%, from $652 million to $623 million, compared to the same period in the prior year. This decline was primarily driven by a 19% decrease in gaming product revenue, which was partially offset by increases in physical movie sales (19%), vinyl record sales (10%), and music CD sales (3%).
The company’s cost of revenues, excluding depreciation and amortization, decreased by 4% year-over-year, in line with the decline in sales volume. Gross margin dollars decreased from $74.0 million to $67.8 million, resulting in a margin decline from 11.3% to 10.9%.
Total operating expenses decreased by 15% year-over-year, from $59.7 million to $50.9 million, primarily due to reductions in distribution and fulfillment expenses, as well as selling, general, and administrative costs. The company’s efforts to improve efficiency, such as warehouse automation and the consolidation of operations, contributed to these cost savings.
Interest expense decreased by 18%, from $6.5 million to $5.7 million, due to a significant reduction in the average revolver balance, partially offset by an increase in the effective interest rate.
For the six months ended December 31, 2024, Alliance Entertainment reported a net income of $7.5 million, compared to $5.5 million in the same period of the prior year. The company’s non-GAAP Adjusted EBITDA for the six-month period was $19.5 million, compared to $19.2 million in the same period of the prior year.
Liquidity and Capital Resources
Alliance Entertainment has implemented strategic initiatives to reduce expenses and focus on the sale of higher-margin products. As a result of a new $120 million senior secured asset-based credit facility with White Oak Commercial Finance, LLC, and the company’s financial performance, Alliance Entertainment has concluded that it has sufficient cash to fund its operations and obligations for at least the next twelve months.
As of December 31, 2024, the company had $2.5 million in cash and a $70 million revolver balance on its $120 million credit facility. Year-over-year, Alliance Entertainment has converted accounts receivable and inventory to cash, which was used to reduce the revolver balance from $101 million on December 31, 2023, to $70 million on December 31, 2024. This has resulted in an increase in availability under the credit facility from $19 million to $50 million.
The company intends to principally rely on its borrowing capacity under the Revolving Credit Facility, as well as any renewal or replacement of such facility, to fund its operations and obligations. The receipt of cash proceeds from the exercise of its Warrants is dependent upon the market price exceeding the $11.50 exercise price, which the company does not expect to occur in the near future.
Outlook and Strategies
Despite the challenges posed by macroeconomic uncertainties, Alliance Entertainment remains well-positioned to navigate the evolving entertainment landscape. The company’s recent acquisitions, such as Handmade by Robots and the Paramount licensing agreement, are expected to enhance its portfolio of exclusive content and drive long-term revenue growth.
In the music segment, the company anticipates that the continued popularity of vinyl records and K-Pop will sustain the upward trend in revenue. In the physical movie sales segment, the consistent flow of new theatrical releases, combined with the demand for 4K and collectable SteelBook content, is expected to drive continued growth.
While the gaming product revenue has declined, reflecting a broader downturn in the industry, Alliance Entertainment is proactively monitoring industry trends to ensure it has the right product mix to meet market demand and maximize profitability. The company is also well-positioned to capitalize on the anticipated strong future demand for the next generation of high-performance gaming consoles.
In the consumer products segment, the acquisition of Handmade by Robots and the company’s focus on aligning its offerings with market trends and consumer preferences are expected to boost margins and drive growth in the collectibles market.
Overall, Alliance Entertainment’s diversified portfolio of entertainment products, strategic partnerships, and focus on operational efficiency position the company to navigate the current challenges and seize opportunities in the dynamic entertainment industry.
