ALLIANCE ENTERTAINMENT HOLDING CORP Q3 FY2024 earnings call

• Acquisition history: Over a dozen acquisitions in 20 years, including Alliance Entertainment, Mecca, Distribution Solutions, etc.
• Automation and technology: Implemented AutoStore and Sure Sort X in warehouses, reducing labor costs and improving efficiency.
• DTC services: Increasing demand, with efforts to enhance relationships to grow revenue.
• Product diversification: Focus on music, video, gaming, collectibles, electronics; over 325,000 SKUs in stock.

For the fiscal third quarter ended March 31, 2024, net revenues were $211 million, a decrease of 7.3% compared to the same period in 2023. Gross profit was $28 million, an increase of 2.5% from $27.3 million in 2023. The nine months ended March 31, 2024, saw net revenues of $864 million, a decrease of 5.3% from $912 million in 2023, while gross profit was $102 million, an increase of 38.4% from $74 million in 2023. Inventory decreased from $163 million to $108 million year-over-year, and debt was reduced from $127 million to $87 million. The AMPED division has over 90 exclusive labels and sells music through various retailers. Distribution Solutions has digital video distribution with $17 million YTD 2024, including titles like Nefarious and The Blind. Mill Creek licenses video content from major studios.

• Aim to maintain 4%-5% adjusted EBITDA to sales.
• Planned closing of Minnesota facility to yield cost savings.
• Secured new $120 million credit facility to support growth and acquisitions.

• Uncertainties in forward-looking statements.
• Risks related to inventory, debt, and market changes affecting revenue.

Q: How much further room for growth margin expansion do you see as you optimize for profitable sales and what’s a realistic long-term growth margin target?

A: Jeff Walker discussed gross margin improvement, acquisition pipeline, and DTC success.

Q: Why net revenues decrease for the three and nine month period and how should we think about fiscal Q4?

A: Jeff Walker mentioned less liquidation sales impacting top line, and strong April revenue including Record Store Day and Taylor Swift's release.

Q: Congratulations on the record store day event. It seems like vinyl is continuing to grow. Can you talk about the macro thematic to what is driving this and is this sustainable going forward?

A: Bruce Ogilvie discussed vinyl as a collectible item, label focus on vinyl sales, and sustainable growth due to collectibility and sound quality.