Alliance Entertainment (NASDAQ:AENT) reported fiscal 2026 revenue growth, wider gross margins and higher adjusted EBITDA, as demand for physical music, premium home entertainment and collectibles increased. The company also outlined investments in automation, artificial intelligence, authentication technology and owned brands as it enters fiscal 2027.
For the fiscal year ended June 30, 2026, revenue rose 8% to $1.15 billion from $1.06 billion in the prior year. Gross profit increased 15% to $152.3 million, while gross margin expanded 80 basis points to 13.3%.
Music, Movies and Collectibles Drive Growth
Alliance reported fiscal 2026 vinyl revenue of $383 million, up 13% from the prior year. CD revenue climbed 25% to $156 million, while physical movie revenue rose 22% to $339 million. Collectibles revenue increased 45% to $32 million, and distribution and fulfillment fee revenue grew 26% to $18.6 million.
Walker said the company benefited from consumer demand for products tied to artists, movies, franchises and collector communities. He also cited industry data showing U.S. physical music revenue rose nearly 26% during the first half of calendar 2026, including vinyl revenue growth of 17.7% and CD revenue growth of 58.6%.
During the question-and-answer session, Walker said stronger CD sales have been supported by labels, retailers and wholesalers improving product availability, especially for catalog and classic albums. He said retailers have begun expanding CD selections as demand has increased.
In home entertainment, Alliance said its growth reflected expanded work with major studios. Paramount became an exclusive physical-media distribution partner in the U.S. and Canada beginning in calendar 2025, and Alliance added Amazon MGM Studios at the start of calendar 2026. Walker said the company is adding catalog titles from both studios in formats including 4K and SteelBooks.
Walker said Alliance currently supports more than 340,000 in-stock SKUs across more than 35,000 retail and e-commerce storefronts. Its capabilities include wholesale distribution, drop-ship fulfillment, inventory management and direct-to-consumer execution.
Profitability Improves Despite Write-Off
Chief Financial Officer Amanda Gnecco said gross-margin expansion reflected stronger margins in physical movies and collectibles, a greater contribution from premium and exclusive content, favorable mix, returns activity and lower wholesale freight costs as a percentage of sales.
Selling, general and administrative expenses increased to $66 million from $56 million in fiscal 2025. Gnecco said the increase was primarily driven by payroll and employee-related costs supporting the larger business, along with consulting and professional-services expenses associated with strategic initiatives and public-company operations.
Fiscal 2026 results included a $7.8 million non-cash write-off of a historical vendor rebate receivable related to Tastemakers after that counterparty ceased operations. Including the charge, GAAP operating income declined to $27.2 million from $30.1 million, while net income decreased to $13.1 million from $15.1 million.
On a non-GAAP basis, adjusted EBITDA increased 14% to $41.5 million. Adjusted net income rose 24% to $23.4 million, and adjusted diluted earnings per share increased 24% to $0.46 from $0.37.
Interest expense declined 28% to $7.6 million, compared with $10.6 million a year earlier, following the refinancing of the company’s credit facility. The average effective interest rate improved to 6.1% from 9.2%.
Cash Conversion and Automation Are Fiscal 2027 Priorities
Net cash used in operating activities was $1.7 million in fiscal 2026, compared with $26.8 million of operating cash generated in fiscal 2025. Gnecco said the change was driven by higher inventory and receivables, which both increased faster than revenue.
Working capital rose to $62.4 million at June 30 from $45.4 million a year earlier. Alliance ended the year with $74.3 million outstanding under its $120 million revolving credit facility, leaving $45.7 million available. The company also repaid $10 million of related-party borrowings during the year.
Management said it intends to improve cash conversion in fiscal 2027 through inventory discipline, receivables collections and better working-capital efficiency. The company also plans to invest selectively in automation, AI tools, the redevelopment of its Webb-AMP business-to-business platform, Endstate Authentic, Alliance Authentic and Handmade by Robots.
Alliance ordered 5,000 additional totes for its AutoStore system during fiscal 2026, bringing capacity to 57,000 totes. Walker said the company still has warehouse capacity and does not see an immediate need for a major capital investment, though it is evaluating additional automation intended to improve efficiency.
The company implemented HubSpot in January 2026 and is rebuilding its Webb-AMP B2B platform with AI-enabled search and purchasing tools. Walker said the new platform is expected to launch in January 2027, following the holiday season.
Authentication, Exclusives and Franchise Opportunities
Alliance is expanding its authentication and digital-product-identity initiatives following its acquisition of Endstate Authentic earlier in calendar 2026. The company has launched preserved and encapsulated Handmade by Robots and select Funko collectibles through Alliance Authentic and is preparing to add premium video SteelBooks.
Walker said Alliance is focused on increasing the number of collectors in its authentication ecosystem before expanding a peer-to-peer marketplace. He said NFC-enabled chips can support product authentication and provenance across collectibles and other categories.
Looking ahead, management highlighted expected opportunities around major entertainment releases, including Grand Theft Auto VI. Walker said Alliance expects to participate in the launch through the game, related products, hardware, accessories and a planned vinyl release through Atlantic Records.
Walker also pointed to longer-term opportunities tied to an Amazon MGM James Bond film and new Beatles films that Sony has said are expected in 2028. He said Alliance has formed a product council spanning music, movies, gaming and collectibles to identify franchise-related opportunities across its categories.
About Alliance Entertainment (NASDAQ:AENT)
Alliance Entertainment (NASDAQ: AENT) is a distributor of physical media and related entertainment products, serving retailers, public libraries and online merchants. The company’s core business revolves around the wholesale distribution of music and video titles on CD, DVD and Blu-ray formats, as well as vinyl records, audiobooks, video games and select gift and novelty items. By maintaining a broad catalog of new and catalog titles, Alliance Entertainment enables brick-and-mortar and e-commerce channels to access an extensive range of products from major and independent labels.
In addition to its product offerings, Alliance Entertainment provides supply-chain and logistics services designed to streamline inventory management and order fulfillment.
