Alliance Entertainment (AENT) investor relations material

Business overview and operations

• Distributes toys, collectibles, music, movies, and video games to major retailers and independent stores, with over 340,000 SKUs stocked and strong supplier relationships.

• Provides e-commerce fulfillment and drop shipping, allowing retailers to avoid holding inventory and rely on real-time stock feeds.

• Owns brands sold directly to consumers via Amazon and eBay, helping manage slow-moving inventory and reduce risk.

• Exclusive distributor and licensing agreements account for $375 million in revenue, creating sticky retailer relationships.

• 37-40% of revenue comes from direct-to-consumer fulfillment, especially as an authorized drop shipper for Amazon.

Financial performance and growth drivers

• Fiscal Q4 revenue slightly down year-over-year, but earnings per share more than doubled from $0.05 to $0.11 due to efficiency gains.

• Gross profit rose from $11.4 million to $15.8 million, with adjusted EBITDA also increasing.

• Licensing deals, such as with Paramount, and new product lines like Handmade by Robots, are boosting gross profit margins above 15%.

• Free cash flow is used to pay down debt, with loan balances dropping from $70 million to $55 million and expected to fall further.

• No large new CapEx planned; $22–$25 million invested since 2013, including $10 million for warehouse automation.

Strategic initiatives and automation

• Investment in AutoStore automation reduced warehouse staff for vinyl picking from 41 to 7, saving $3–3.5 million annually.

• AI and data analytics are used for inventory management, demand forecasting, and operational efficiency.

• Company-wide adoption of Microsoft Copilot to enhance productivity and data security.

• Capacity to flex warehouse space as needed, with about 35% available for new products or storage.