Q2 2026 Alliance Entertainment Holding Corp Earnings Call

February 12, 2026

Jeff Walker: Expanded by 210 basis points to 12.8%. These results reflect continued execution against the profitability baseline we established last quarter. What's important is not just the level of earnings we delivered, but how we delivered them. The margin expansion we're seeing is not driven by short-term actions; it's the result of structural improvements in product mix, disciplined operating execution, and the leverage we built into our infrastructure. When we spoke last quarter, we described fiscal 2026 as a year where Alliance would operate from a new baseline, one defined by higher quality revenue, stronger margins, and more consistent earnings power. Q2 demonstrates that this is not a one-quarter phenomenon. Margin expansion continued, operating leverage remained intact, and our cost discipline held even as we continued to invest selectively in areas that support long-term growth.

One 8%.

These results reflect continued execution against the profitability baseline, we established last quarter.

What is important it's not just the level of earnings we delivered but how we deliver them. The margin expansion. We're seeing is not driven by short term actions as a result of structural improvements in product mix disciplined operating execution and the leverage we've built into our infrastructure.

Structure.

When we spoke last quarter. We described fiscal 2026 is a year, where alliance would operate from a new baseline.

One defined by higher quality revenue stronger margins and margin assistant earnings power.

Second quarter demonstrates that this is not a one quarter phenomenon.

Margin expansion continued operating leverage remained intact and our cost discipline and held even as we continue to invest selectively in areas that support long term growth.

Jeff Walker: The performance this quarter reflects several themes that have been consistent across the business. We continue to see a shift towards higher value products, particularly in premium physical media and collectibles. Our exclusive content partnerships are contributing to better pricing, stronger sell-through, and improved visibility with retail partners. Our distribution and fulfillment infrastructure continues to scale efficiently, allowing us to support growth while maintaining tight control over costs. Taken together, Q2 reinforces that Alliance is executing against a clear strategic plan that prioritizes earnings quality, margin durability, and disciplined growth. We're building a business that generates sustainable profitability and positions us well for long-term value creation. With that context, I'd like to walk you through the key drivers behind this performance, starting with how our content strategy and category focus are shaping results across the portfolio.

The performance this quarter reflects several themes that have been consistent across the business. We continue to see a shift towards higher value products, particularly in premium physical media and collectibles.

Our exclusive content partnerships are contributing to better pricing stronger sell through and improved visibility with retail partners.

And our distribution and fulfillment infrastructure continues to scale efficiently, allowing us to support growth, while maintaining tight control over costs.

Taken together the second quarter reinforces that alliance is executing against a clear strategic plan that prioritizes earnings quality Mara.

Margin durability and disciplined growth.

We're building a business that generates sustainable profitability and positions us well for long term value creation.

With that context, I'd like to walk you through the key drivers behind this performance starting with how our content strategy and category focus are shaping results across the portfolio.

Jeff Walker: One area I want to spend a few minutes on is physical media, because it's important to be clear about how we think about this category today. At Alliance, we do not view physical media as a legacy business. We view it as a collectible category, driven by enthusiasts, premium formats, and exclusivity. That distinction matters, because it explains both the performance we delivered this quarter and the strategic decisions we're making going forward. During Q2, physical movie revenue increased 33% year-over-year to $114 million. Growth was driven by continued strength in premium formats, including 4K Ultra HD and collectible SteelBook editions, where consumer demand remains strong and highly engaged. These products are not purchased as substitutes for streaming. They are purchased because of their quality, packaging, scarcity, and connection to the underlying franchise.

One area I want to spend a few minutes on is physical media because it's important to be clear about how we think about this category today.

At Alliance, we do not view physical media as a legacy business, we view it as a collectible category driven by enthusiasts premium formats and exclusivity.

That distinction matters.

Does it explains both the performance we delivered this quarter and the strategic decisions, we're making going forward.

During the second quarter physical movie revenue increased 33% year over year to $114 million.

Growth was driven by continued strength in premium formats, including <unk> Ultra HD and collectibles steel, but conditions, where consumer demand remains strong and highly engaged.

These products are not purchased that substitutes for streaming their purchase because of their quality packaging scarcity and connection to the underlying franchise.

Jeff Walker: The Paramount Pictures exclusive agreement, which went live on 1 January 2025, is a good example of how this strategy works in practice. That partnership significantly expanded our access to high-quality catalog and new release content, improved retail visibility, and supported both higher average selling prices and stronger sell-through on premium formats. Just as importantly, it reinforces Alliance's role as a trusted, full lifecycle partner to major studios. We're applying that same playbook with our new exclusive partnership with Amazon MGM Studios, which became effective 1 January 2026. While it's still early, we expect this agreement to further strengthen our premium physical media portfolio by adding highly recognizable franchises and curated releases that naturally lend themselves to collectible formats. Over time, this expands not only revenue opportunity, but also the quality and predictability of that revenue. What underpins all of this is studio trust.

That Paramount Pictures exclusive agreement, which went live on January one 2025 is a good example of how the strategy works in practice.

<unk> partnerships significantly expanded our access to high quality catalog and new release content.

Prove retail visibility and supportive of higher average selling prices and stronger sell through on premium formats.

Just as importantly, it reinforces alliance role as a trusted full lifecycle partner to major studios.

We're applying that same playbook with our new exclusive partnership with Amazon MGM Studios, which became effective January one 2026.

While it is still early we expect this agreement to further strengthen our premium physical media portfolio by adding highly recognizable franchises.

<unk> releases, then naturally lend themselves collectible formats.

Over time this expands not only revenue opportunity, but also the quality and predictability of that revenue.

What underpins all of this is studio trust.

Jeff Walker: Studios partner with Alliance because we can manage the entire physical life cycle, from manufacturing and distribution to retail execution and inventory discipline, while preserving brand integrity and collector value. That trust leads to exclusivity. Exclusivity leads to differentiation, and differentiation supports both margin expansion and long-term demand. Physical media continues to perform because it has evolved into a collectible-driven category. Our focus is not on chasing volume for volume's sake, but on curating the right products at the right price points for an audience that values ownership, quality, and authenticity. That approach is central to how we're building a structurally stronger and more profitable business. Building on that foundation, our collectibles business continues to be an area where we see both meaningful growth opportunity and attractive margin expansion... During Q2, collectibles revenue increased 31% year-over-year, reflecting continued momentum across our premium and licensed offerings.

<unk> partner with alliance, because we can manage the entire physical lifecycle.

Our manufacturing and distribution to retail execution and inventory discipline.

While preserving brand integrity and collector value.

That trial leads to exclusivity.

Exclusivity leads to differentiation and differentiation supports both margin expansion and long term demand.

Physical media continues to perform because it has evolved into a collectible driven category.

Our focus is not on chasing volume for volume sake, but im curating the right products at the right price points for an audience that volumes ownership quality and authenticity.

That approach is central to how we are building, a structurally stronger and more profitable business.

Building on that foundation, our collectibles business continues to be an area, where we see both meaningful growth opportunity and attractive margin expansion.

During the second quarter collectibles revenue increased 31% year over year.

I think continued momentum across our premium and licensed offerings.

Jeff Walker: Growth was supported by a combination of expanded sourcing activity, higher value product launches, and improving mix within the category. That mix shift is the result of deliberate choices we have made to emphasize licensed, differentiated collectibles over more commoditized products. Licensed collectibles benefit from stronger brand relevance, deeper collector engagement, and greater pricing power, and they align naturally with Alliance's long-standing relationships across film, music, and entertainment. As we continue to expand this portfolio, we see opportunities to grow both scale and profitability by introducing products that resonate more deeply with fans and collectors. A key contributor to that progress has been the continued integration of Handmade by Robots. Since transitioning from a distributed brand to an owned brand last year, Handmade by Robots has expanded its retail footprint, broadened its licensing pipeline, and contributed meaningfully to both revenue growth and margin improvement in the collectibles segment.

Growth was supported by a combination of expanded sourcing activity higher value product launches and improving mix within the category.

That mix shift as a result of deliberate choices, we have made to emphasize licensed differentiated collectibles over more commoditized products.

Licensed collectibles benefit from stronger brand relevance deeper collector engagement and greater pricing power and they align naturally with alliances long standing relationships.

Ross film music and entertainment.

As we continue to expand this portfolio, we see opportunities to grow both scale and profitability by introducing products that resonate more deeply with fans and collectors.

A key contributor to that progress has been the continued integration of handmade by robots.

Since transitioning from a distributor brand through an own brand last year handmade by robots as expanded its retail footprint broadened its licensing pipeline and contributed meaningfully to both revenue growth and margin improvement in the collectable segment.

Jeff Walker: More importantly, it gives us direct control over product design, sourcing, and lifecycle management, all of which are critical to building a scalable premium collectibles portfolio. As we look at collectibles holistically, we view this category as margin accretive, brand enhancing, and strategically expandable. It strengthens our relationship with licensors, deepens engagement with collectors, and complements our physical media business by extending the same principles of scarcity, authenticity, and quality into adjacent product categories. That evolution sets the stage for the next phase of our collectibles strategy. With the acquisition of Endstate and the launch of Endstate Authentic, Alliance is extending beyond products and traditional distribution into a platform-driven model. Endstate Authentic adds technology-enabled layer to Alliance's existing strengths. Through NFC-enabled authentication and digital product identity, it allows physical products to be verified, tracked, and authenticated throughout their entire life cycle, from the initial sale through secondary markets.

More importantly, it gives us direct control over product design sourcing and lifecycle management.

All of which are critical to building a scalable premium collectibles portfolio.

As we look at collectibles Holistically, we view this category as margin accretive brand enhancing and strategically expandable.

<unk>, our relationship with license ores deeper engagement with collectors and complements our physical media businesses by extending the same principles of scarcity authenticity and quality into adjacent product categories.

That evolution sets the stage for the next phase of our collectibles strategy.

With the acquisition of end state and the launch of <unk> State authentic alliance is extending beyond products and traditional distribution into our platform driven model.

And state authentic adds technology enabled layer two alliance those existing strengths.

Through NFC enabled authentication and digital product identity. It allows physical products to be verified tracked and authenticated throughout their entire life cycle from the initial sale through secondary market.

Jeff Walker: This capability expands Alliance's role from simply moving products to supporting long-term value creation around those products. Endstate matters now because the collectibles market is increasingly defined by authentication, provenance, and trust. As products become more premium and more valuable, collectors, licensors, and retailers all require greater confidence around authenticity, ownership history, and resale integrity. That need is especially pronounced in categories like vinyl, limited edition collectibles, and other high-value physical goods. Importantly, this initiative is not about chasing near-term revenue. It's about building platform optionality. Endstate enables lifecycle monetization opportunities that did not previously exist in physical collectibles, including authenticated resale, brand protection, and deeper engagement between collectors and content owners, while reinforcing pricing, discipline, and margin quality. Alliance Authentic represents the first commercial application of this platform within our portfolio.

This capability expands alliances role from simply moving products to supporting long term value creation around those products.

And thing matters now because the collectibles market is increasingly defined by authentication provenance and trust.

As products, we kind of more premium and more valuable collectors, licensors and retailers all require greater confidence around authenticity ownership history and resale integrity.

That need is especially pronounced in categories like vinyl limited edition collectibles and other high value physical goods.

Importantly, this initiative is not about chasing near term revenue, it's about building platform Optionality and state enables lifecycle monetization opportunities that did not previously exist in physical collectibles.

Including authenticated retail brand protection and deeper engagement between collectors and content owners, while reinforcing pricing discipline and margin quality.

Alliance authentic represents the first commercial application of this platform within our portfolio.

Jeff Walker: By applying authentication, certification, and individually numbered releases to premium vinyl collectibles, we're demonstrating how this technology can be integrated into products we already source and distribute at scale. Over time, we believe this platform has the potential to enhance margins, strengthen relationships with licensors, and further differentiate Alliance in the market. Collectibles and authentication represent a natural extension of our strategy, building a higher quality, more defensible business by combining premium products and technology-enabled trust. With that, I'll turn it over to Amanda to walk through the financial results in more detail.

By applying authentication certification and individually numbered releases to premium vinyl collectibles or demonstrating how this technology can be integrated into products. We are already source and just drove you add scale.

Over time, we believe this platform has the potential to enhance margins strengthened relationships with light sensors and further differentiate alliance in the market.

Collectibles and authentication represent a natural extension of our strategy building, a higher quality more defensible business by combining premium products and technology enabled trust.

With that I'll turn it over to Amanda as I walk through the financial results in more detail.

Amanda Gnecco: Thanks, Jeff. I'll start by walking through our financial performance for the second quarter, beginning with the income statement. For the quarter ended December 31, 2025, net revenue was $369 million, compared with $394 million in the prior year period. The year-over-year comparison reflects continued softness in certain lower margin categories, most notably gaming hardware and a deliberate shift in mix toward higher value products across physical media and collectibles. That mix shift is a key driver of profitability this quarter. Gross profit increased to $47.1 million, up from $42.3 million a year ago, and gross margin expanded by 210 basis points to 12.8%. That margin expansion was driven by a more favorable product mix, increased contribution from premium and exclusive offerings, and continued operational discipline.

Thanks, Jeff.

I'll start by walking through our financial performance for the second quarter, beginning with the income statement.

For the quarter ended December 31, 2025, net revenue was $369 million compared with 394 million in the prior year period.

The year over year comparison reflects continued softness in certain lower margin category.

Most notably game in hardware.

A deliberate shift in mix toward higher value products across physical media and collectibles.

That mix shift is a key driver of profitability this quarter.

Gross profit increased to $47 1 million up from $42 3 million a year ago.

And gross margin expanded by 210 basis points to 12, 8%.

That margin expansion was driven by a more favorable product mix.

<unk> contribution from premium and exclusive offerings and continued operational discipline.

Amanda Gnecco: Net income for the quarter increased to $9.4 million, or $0.18 per diluted share, compared with $7.1 million, or $0.14 per share in the prior year period. This improvement reflects higher gross profit, as well as operating leverage from a cost structure that continues to scale efficiently. On the adjusted basis, Adjusted EBITDA increased to approximately $18.5 million, up $2.4 million year-over-year. Adjusted EBITDA margin improved to approximately 5%, compared with 4.1% in Q2 of last year. That expansion reflects the durability of our cost structure, including stable distribution and fulfillment costs as a percentage of revenue, and ongoing benefits from automation that allows us to manage complexity without proportionate increases in labor or overhead.

Net income for the quarter increased to $9 4 million or 18 cents per diluted share.

Compared with $7 1 million or 14 cents per share in the prior year period.

This improvement reflects higher gross profit as well as operating leverage from a cost structure that continues to scale efficiently.

On the adjusted basis.

EBITDA increased to approximately $18 5 million up $2 4 million year over year.

Adjusted EBITDA margin improved to approximately 5% compared with four 1% in the second quarter of last year.

That expansion reflects the durability of our cost structure, including stable distribution and fulfillment cost as a percentage of revenue and ongoing benefits from automation that allows us to manage complexity without proportionate increases in labor or overhead.

Amanda Gnecco: Overall, Q2 demonstrates that Alliance is generating stronger earnings and expanding margins, even as we continue to manage through category-level revenue variability. The quality of earnings this quarter reflects deliberate execution, not short-term actions, and provides a solid foundation as we move through the balance of fiscal 2026. Turning to the six-month results, which provide additional perspective on the underlying momentum in the business. For the six months ended 31 December 2025, net revenue was $623 million, essentially flat compared to the prior year period. While category performance varied within the portfolio, the overall revenue profile reflects a continued shift towards higher-value products and premium formats. That mix shift translated into a significant improvement in profitability.

Overall, the second quarter demonstrates that allowance is generating stronger earnings.

Spending margin, even as we continue to manage to category level revenue variability.

The quality of earnings this quarter reflects deliberate execution not short term actions and provides a solid foundation as we move through the balance of fiscal 2026.

Turning to the six months results, which provide additional perspective on the underlying momentum in the business.

For the six months ended December 31st 2025, net revenue was 620 feet.

Essentially flat compared to the prior year period.

While the category performance varied within the portfolio.

Overall revenue profile reflects a continued shift towards higher value products and premium format.

Is that mix shift translated into significant improvement in profitability gross profit for the six month period increased to $84 3 million compared with $67 8 million a year ago.

Amanda Gnecco: Gross profit for the six-month period increased to $84.3 million, compared with $67.8 million a year ago, and gross margin expanded by 260 basis points to 13.5%. The improvement was driven by increased contribution from premium physical media and collectibles, improved pricing and mix from exclusive content, and continued discipline across distribution and fulfillment. Net income for the six months increased to $14.3 million, or $0.28 per diluted share, compared with $7.5 million, or $0.15 per share in the prior year period. This nearly doubling of earnings reflects the operating leverage inherent in the business as margins expand and the cost structure remains controlled.

Gross margin expanded by 260 basis points to 13, 5%.

The improvement was driven by increased contribution from premium physical media uncollectable.

Pricing and mix on exclusive content and continued disciplined across distribution and fulfillment.

Net income for the six months increased to $14 3 million or 28 cents per diluted share compared with $7 5 million or <unk> 15 per share in the prior year period.

This nearly doubling of earnings reflects the operating leverage inherent in the business as margins expand on the cost structure remains controlled.

Amanda Gnecco: Adjusted EBITDA for the six-month period increased to approximately $30.7 million, up from $19.5 million last year, representing a year-over-year improvement of more than $11 million. That performance underscores the consistency we're seeing in margin expansion and earnings generation, as higher quality mix and infrastructure leverage compound across multiple quarters. Our six-month results reinforce that the improvements we're delivering are not isolated to a single quarter. They reflect a structurally stronger earnings profile, driven by better mix, exclusive content, and disciplined execution, and we provide a solid foundation as we continue to invest selectively and scale the business. Before I turn it back to Jeff, I want to touch briefly on our balance sheet and liquidity position. We ended the quarter with approximately $74 million in working capital, reflecting disciplined management of both inventory and payables.

Adjusted EBITDA for the six month period increased to approximately $13 7 million.

Up from $19 5 million last year.

Representing a year over year improvement of more than $11 million.

That performance underscores the consistency, we're seeing in margin expansion and earnings generation as higher quality mix.

So that's sort of an average compound across multiple quarters.

Okay.

Our six month results reinforce that the improvement we're delivering are not isolated to a single quarter. There reflect a structurally stronger earnings profile driven by better mix exclusive content on disciplined execution and.

And we provide a solid foundation as we continue to invest selectively and scale of the business.

Before I turn it back to Jeff I wanted to touch briefly on our balance sheet and liquidity position.

We ended the quarter with approximately 74 million and working capital, reflecting disciplined management of both inventory and payables.

Amanda Gnecco: Inventory levels increased modestly during the quarter, consistent with seasonal patterns and the timing of inbound product, but remained aligned with current demand and our focus on higher-value, faster-moving products. Our balance sheet also benefited from the refinancing of our credit facility early in the quarter. We replaced our prior asset-based lending agreement with a new $120 million senior secured revolving credit facility with Bank of America. The new facility reduces our borrowing costs by up to 250 basis points, extends the maturity to 5 years, and provides greater flexibility to support working capital needs and strategic initiatives. Importantly, this refinancing strengthens our financial position without changing our approach to capital management.

Inventory levels increased modestly during the quarter consistent with seasonal patterns and the timing of inbound product, but remain aligned with current demand and our focus on higher value faster moving products.

Our balance sheet also benefitted from the refinancing of our credit facility early in the quarter.

We replaced our prior asset based lending agreement with a new $120 million senior secured revolving credit facility with bank of America.

The new facility reduces our borrowing costs by up to 250 basis points extend the maturity to five years and provides greater flexibility to support working capital needs and strategic initiatives.

Importantly, this refinancing strengthens our financial position without changing our approach to capital management.

Amanda Gnecco: We continue to operate with a disciplined view towards leverage, and our focus remains on maintaining liquidity, funding premium inventory, and exclusive partnerships, and preserving optionality as we evaluate opportunities across the business. Overall, we believe our balance sheet is in a strong position. It provides the flexibility to invest where returns are attractive and positions Alliance to navigate both near-term operating needs and longer-term growth opportunities. I'll close with a brief comment on how we're thinking about capital allocation. Our approach remains straightforward and disciplined. We prioritize investments that directly support the strategy Jeff outlined earlier, and that enhance the quality and durability of earnings. First, we continue to allocate capital to premium inventory and exclusive content partnerships, where demand visibility is strong and returns are attractive. These investments support higher value products, improve mix, and reinforce our position with licensors and retail partners.

Continue to operate with a disciplined view towards leverage and our focus remains on maintaining liquidity.

Funding premium inventory and exclusive partnership and preserving optionality as we evaluate opportunities across the business.

Overall, we believe our balance sheet is in a strong position.

It provides the flexibility to invest where returns are attractive and positions allow us to navigate both near term operating on longer term growth opportunity.

I'll close with a brief comment on how we're thinking about capital allocation.

Our approach remains straightforward and disciplined way.

We prioritize investments that directly support the strategy, Jeff outlined earlier and that enhance the quality and durability of earnings.

First we continue to allocate capital to premium inventory and exclusive content partnerships, where demand visibility is strong and returns are attractive.

These investments support higher value products improved mix and reinforce our position with license service and retail partners.

Amanda Gnecco: Second, we invest selectively in technology and infrastructure that improves scalability and efficiency. This includes automation, systems that support exclusive partnerships, and capabilities that strengthen fulfillment and inventory management. These investments are targeted and are evaluated based on clear operational and financial returns. Throughout all of this, maintaining flexibility and discipline is central to our approach. We are not pursuing growth for growth's sake, and we remain focused on preserving liquidity, managing risk, and ensuring that capital deployment aligns with long-term value creation. That discipline has been an important contributor to the margin expansion and earnings growth we've delivered, and it will continue to guide our decision-making as we move forward. With that, I'll turn it back to Jeff for closing remarks.

Second we invest selectively in technology and infrastructure that improves scalability and efficiency.

This includes automation systems that support exclusive partnerships and capabilities that strengthened fulfillment and inventory management.

These investments are targeted and are evaluated based on clear operational and financial returns.

Throughout all of this.

Maintaining flexibility and discipline is central to our approach we are not pursuing growth for growth's sake.

And we remain focused on preserving liquidity.

Managing risk and ensuring that capital deployment aligns with long term value creation.

That discipline has been an important contributor to the margin expansion and earnings growth we've delivered and.

And it will continue to guide our decision, making as we move forward.

With that I'll turn it back to Jeff for closing remarks.

Jeff Walker: Thank you, Amanda. Before we open the call for questions, I want to spend a few minutes on how we're thinking about the remainder of the year and the long-term trajectory of our business. As we look ahead, we're not providing formal guidance, but we are confident in the durability of our margin profile we are building. The progress we made over the past several quarters reflects deliberate changes in mix, stronger exclusive content relationships, and disciplined execution across the organization. We continue to see a growing pipeline of premium and exclusive content across physical media, collectibles, and own brands, and we believe that pipeline supports continued earnings quality as we move through the back half of fiscal 2026. From an execution standpoint, our priorities for the remainder of the year are clear. We're focused on scaling Alliance Authentic in a thoughtful and controlled way.

Thank you Amanda.

Before we open the call for questions I want to spend a few minutes on how we're thinking about the remainder of the year and the long term trajectory of our business.

As we look ahead, we're not providing formal guidance, but we are confident in the durability of our margin profile we are building.

The progress we've made over the past several quarters reflects deliberate changes in mix stronger exclusive content relationships and disciplined execution across the organization.

We continue to see a growing pipeline of premium and exclusive content across physical media collectibles and owned brands and we believe our pipeline supports continued earnings quality as we move through the back half of fiscal 2020.

From an execution standpoint, our priorities for the remainder of the year are clear.

We're focused on scaling alliance authentic and a thoughtful and controlled way. The initial rollout is designed to improve the operational and economic model and we will expand deliberately as we validate use cases across additional products and partners.

Jeff Walker: The initial rollout is designed to prove the operational and economic model, and we'll expand deliberately as we validate use cases across additional products and partners. We're executing against our new exclusive partnership with Amazon MGM Studios. This agreement builds on the momentum we've established with Paramount and further strengthens our position in premium physical media. Our focus is on execution, retail visibility, and ensuring these releases reinforce our strategy around collectible formats and higher value offerings. We'll continue to expand our collectibles portfolio and own brands. Handmade by Robots is a strong example of how we can grow both scale and value by controlling design, licensing, and distribution, and we see additional opportunities to apply that model across new products and partnerships. We also see significant long-term opportunity with Endstate Authentic.

We're executing against our new exclusive partnership with Amazon M. P. M Studios.

This agreement builds on the momentum we've established with Paramount and further strengthens our position in premium physical media.

Our focus is on execution retail visibility and ensuring these releases reinforce our strategy around collectible formats and higher value offerings.

We will continue to expand our collectibles portfolio and owned brands handmade by robots is a strong example of how we can grow both scale and value by controlling design licensing and distribution and we see additional opportunities to apply that model across new products.

<unk> and partnerships.

We also see significant long term opportunity with end stage authentic.

Jeff Walker: As adoption increases, we believe digitally verifiable authentication will become increasingly important across premium physical goods, not only with our own collectibles initiatives, but across third-party brands, licensors, and marketplaces. Our focus on the back half of the year is on deepening integrations, advancing external partnerships, and building the infrastructure necessary to support authenticated primary sales and secondary resale at scale. Over time, we believe this capability can enhance differentiation, strengthen relationships across the ecosystem, and contribute to margin expansion through higher value technology-enabled offerings. Across all of this, profitability discipline remains central. We're committed to maintaining the operating rigor that has driven margin expansion while investing selectively in areas that support long-term growth. Stepping back, what's most important is how Alliance is evolving. We're moving from a traditional distributor towards a platform that supports premium products across their full life cycle.

As adoption increases we believe digitally verifiable authentication will become an increasingly important across premium physical goods not only with our own collectibles initiatives, but across third party brands license ores and marketplaces.

Our focus on the back half of the year is on deepening integrations advancing external partnerships and building the infrastructure necessary to support authenticated primary sales.

And secondary resale at scale.

Over time, we believe this capability can enhance differentiation strengthen relationships across the ecosystem and contributed to margin expansion through higher value technology enabled offerings.

Across all of this profitability discipline remains central.

We're committed to maintaining the operating rigor that has driven margin expansion, while investing selectively in areas that support long term growth.

Stepping back what's most important is how alliances evolving we're moving from a traditional distributor towards a platform that supports premium products across their full lifecycle.

Jeff Walker: We're shifting emphasis from volume-driven outcomes to value-driven returns, and we're building an ecosystem that connects content owners, retailers, and collectors through trusted infrastructure, exclusive offerings, and technology-enabled capabilities. That evolution is deliberate, and it's already showing up in the quality of our earnings and the strength of our balance sheet. We believe it positions Alliance well to create durable, long-term value for our shareholders. Before we turn to questions, I want to take a moment to thank our employees across every division. Their hard work, creativity, and execution are what drive our success.... I'd also like to thank our customers, partners, and shareholders for their continued support and trust in Alliance Entertainment. We're proud of the momentum we've built and committed to delivering on the opportunities ahead. Operator, we're ready to open the line for questions.

We're shifting emphasis from volume driven outcomes to value driven returns and.

And we're building an ecosystem that connect content owners retailers and collectors through trusted infrastructure exclusive offerings and technology enabled capabilities.

That evolution is deliberate and it's already showing up in the quality of our earnings and the strength of our balance sheet.

We believe it positions alliance well to create durable long term value for our shareholders.

Before we turn to questions I wanted to take a moment to thank our employees across every division their hard work creativity and execution are what drive our success.

I'd also like to thank our customers partners and shareholders.

<unk> support and Trust and Alliance Entertainment.

We're proud of the momentum, we built and committed to delivering on the opportunities ahead.

Operator, we're ready to open the line for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions. The first question is from Thomas Forte from Maxim Group. Please go ahead.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment and maybe nest.

The theory to pick up your handset before pressing the star keys.

One moment, please pull for questions.

The first question is from Thomas Forte from Maxim Group. Please go ahead.

Thomas Forte: Great, thanks. I have three questions. I'll go one at a time. So congrats on the MGM-Amazon deal. Can you talk about your ability to sign additional exclusive deals with studios? And then, obviously, it seems like it'd be beneficial to Alliance Entertainment if Paramount won Warner Bros. But, any thoughts on Warner Bros. in general, in addition to your ability to sign additional studios beyond Paramount and MGM?

Great. Thanks, I have three questions I'll go one at a time so congrats on the MGM Amazon deal can you talk about your ability to sign additional exclusive deals with studios.

Then obviously it seems that could be beneficial.

Through Alliance Entertainment.

Paramount and Warner Brothers.

But.

Any thoughts on Warner Brothers in General in addition to your ability to sign additional studios beyond Paramount and MGM.

Jeff Walker: Yeah, thank you for the question. This is Jeff Walker. We're in active conversations with small and large studios. There's a lot of activity in it, and, you know, once we have had Paramount on board and now, you know, MGM coming on board, you know, I think the studios are definitely looking at Alliance as the premier solution, when the time comes that a studio wants to move into a licensing model on their physical DVD product. It's very difficult for me to comment on the Warner and Paramount-Netflix saga that's going on there. There's a lot of different aspects to it.

Yeah.

Thank you for the question this jump Walker.

On the.

We're in active conversations with small and large studios.

There is a lot of activity on it and.

Once we have had paramount onboard and now.

MGM coming on board.

I think the studios are definitely look.

Getting out of alliance as the Premier solution.

When the time comes that our studio once the.

Wants to move into a licensing model on their on their physical.

DVD product.

It's very difficult for me to comment on that.

The Warner and Paramount Netflix Saga, that's going on there.

Hum.

There's a lot of different aspects to it I don't I think either a different way.

Jeff Walker: I don't think either way, what will happen is when a transaction happens, everybody looks at what is happening in the businesses, and they start to make decisions. So, I think just companies making decisions instead of staying status quo is a good thing for Alliance overall within this space.

What will happen is when the transaction happens everybody looks at what what is what is happening in the businesses and they start to make decisions. So.

I think just.

The company is making decisions instead of staying status quo is a good thing for for alliance overall within the space.

Thomas Forte: And then for my second question, on the gaming hardware front, can you talk about to what extent we are seeing external forces that are driving your revenue performance versus to what extent it is an internal emphasis on other categories?

And then for my second question on the gaming hardware front can you talk about.

To what extent are we seeing external forces.

That are driving your revenue performance.

Versus to what extent is it an internal emphasis on other categories.

Yeah.

Jeff Walker: Yeah, so at gaming hardware right now, you've got, you really got some differences between Nintendo, Microsoft, and Sony. We're pretty heavy Microsoft house and Nintendo distribution. So we have a pretty good numbers here in 2025 with Nintendo and the new Switch that's out, and you know, that's really helped our physical hardware sales. On the other side, Microsoft has been very short on supply with consoles and so forth there, so that has hurt us on the hardware side. It's not necessarily a shift in the Alliance strategies. It's just a matter of availability on allocation.

Yeah. So.

Gaming hardware right now you've got.

You really got some differences between Nintendo.

Microsoft and Sony.

We were pretty heavy Microsoft and Nintendo.

Distribution.

We have a pretty good numbers here in 2025 with Nintendo and the newest flavor about.

And that's really helped our our physical hardware sales on the other side Microsoft has been.

Very short on supply.

With with <unk>.

Consoles and so forth there so that has hurt us.

On the hardware side.

Sign of some fairly a shift in the alliance.

Strategies, it's just a matter of availability on.

On allocation and then we also do consider.

Jeff Walker: And then we also do consider the arcade business that we were doing with Arcade1Up in the hardware category of gaming, and that business, just in this last quarter, was down $34 million from where we were a year ago. And right now that business is going through a transition from Arcade1Up, the ownership there got transitioned over to Basic Fun, and we're in conversations with them about how we can help distribute the arcades that are now gonna be coming through Basic Fun. So we're gonna start to see some products there as we move into the middle of 2026.

The arcade business that we were doing with arcade one up.

In the hardware category of gaming and that business. Since then this last quarter.

It was down $34 million from where we were a year ago.

And right now that business is going through a transition.

From arcade went up the ownership there.

That transition over to basic fine and we're in conversations with them about how we can help.

Distribute.

Our kids that are now going to be coming through basic fund.

So we're going to start to see some some products there as we move into the middle of 2026.

Thomas Forte: Okay, great. And then my last one, you talked about your recent strategic M&A as it relates to essentially authenticated or verified collectibles. But, stepping back, what are your thoughts on just the strategic M&A opportunities in front of you today, broadly?

Okay, Great and then my last one.

You talked about your recent strategic M&A as it relates to essentially authenticated her verified.

Collectibles.

But stepping back what are your thoughts on just the strategic M&A opportunities in front of you today broadly.

Jeff Walker: Broadly, there's a lot. As you know, we're in a lot of different categories, and there's a lot of different opportunities in M&A. We're constantly in many robust conversations, and, you know, when we look at mergers and acquisitions, it's not a shortage of opportunities. It's trying to find the right opportunities at the right time, with the right financial metrics to it and all those dynamics. We constantly stay in a lot of acquisition conversations ongoingly, and sometimes something that doesn't click, you know, this quarter or this month, might turn around in a year from now, be something that makes sense at that time.

Broadly there's a lot.

As you know there is we're in a lot of different categories and Theres, a lot of different opportunities and M&A wearing.

Many were constantly on many robust conversations and.

No.

And when we look at mergers and acquisitions its not a shortage of opportunities is trying to find the right opportunities at the right time with the right financial metrics to it and all of those dynamics. So we constantly stay on a lot of acquisition conversations on.

Ongoing Lee and sometimes something that doesn't doesn't click this quarter or this month.

My turnaround in a year from now will be something.

That makes sense at that time because.

Jeff Walker: Because our business as well as, you know, the acquired business, everybody's, you know, got a lot of different initiatives and strategies and things that people are working on, and they are all in different stages. So it's the acquisition aspect, especially when you're a strategic buyer, you're in a lot of strategic acquisition conversations on an ongoing basis. And so I'm pretty optimistic about opportunities on the acquisition side, and we just continue to evaluate them in different aspects and see what financially fits and what -- you know, it has to financially be accretive to Alliance Entertainment. That's our intention. So we're always in a lot of conversations there.

Our business as well as you know.

The acquired business everybody has got a lot of different initiatives and strategies and things that people are working on and they.

They are all in different stages. So.

It's the acquisition aspect, especially when.

You're a strategic buyer you're in a lot of strategic acquisition conversations on an ongoing basis.

<unk>.

So I'm pretty optimistic about opportunities on the acquisition side and we.

Continuing to evaluate them.

And different aspects and see what what financially fits in with.

It has the financially be accretive to alliance entertainment, that's that's our intention so.

Oh, we're always been a lot of conversations there.

Thomas Forte: Great. Thanks for taking my questions.

Great. Thanks for taking my questions.

Jeff Walker: Mm-hmm. Thank you.

Thank you.

Operator: As a reminder, to ask a question over the phone, please press star one. The next question is from Michael Kupinski, from Noble Capital Markets. Please go ahead.

As a reminder to ask a question over the phone Please press star one.

The next question is from Michal Krupinski from Noble capital markets. Please go ahead.

Michael Kupinski: Thank you for taking my questions. Good afternoon, everyone. I'm gonna go back to the gaming division again, just to kind of clarify a couple of things, Jeff. You mentioned that the arcade business had a $34 million swing in the quarter. Is that correct?

Thank you for taking my questions good afternoon, everyone.

I'm going to go back to the gaming Division again, just kind of clarify a couple of things Jeff.

You mentioned that the there.

Their key business that had a $34 million swing in the quarter is that correct.

Jeff Walker: Correct.

Correct.

Michael Kupinski: Okay. And in terms of just the cadence of how that, the gaming business looks like in terms of the second half of the fiscal second half of the year, should just based on what you were telling us in terms of the arcade business, and then I would assume, in terms of the hardware portion of the business, should start to show some moderating trends, I would think. Should we see some moderating revenue trends going into the second half of the year? I mean, is that what your expectation might be?

Okay.

In terms of just the cadence of how that.

The gaming business looks like in terms of the second half of the fiscal second half of the year.

Just based on what you are telling us in terms of their a K business and then I would assume in terms of the hardware portion of the business should start to show some moderating trends I would think.

Should we see some moderating revenue trends going into the second half of the year I mean is that with your expectation might be.

Jeff Walker: Yeah, I think if you look at our numbers for the last quarter, our overall revenue was down $25 million overall. Our gaming hardware was down $24 million, and our arcade sales were down $34 million. So those two represented a $58 million down number just for the quarter. And you know, overall, outside of that, the company and the sales were a growth year-over-year. I will say that both of these categories, the arcade business and the gaming hardware, calendar 2024, we really had some significant strong sales in both of those arcades and gaming hardware. And then really, as we rolled into calendar 2025, we've been impacted with that, really all of 2025.

Yeah, I think if you look at our numbers for for the last quarter. Our overall revenue was down $25 million overall, our gaming hardware was down $24 million and our <unk> sales were down $34 million.

So those two represented a $58 million down number just for the quarter and.

Overall outside of that but the company and the sales where we're a growth year over year.

I will say that both of these categories, the Arcadia business and the gaming hardware calendar 'twenty 'twenty four we really had some significant strong sales in both of those arcades and gaming hardware and then really as we rolled into calendar 2025, we have been.

N impacted with that.

Really all of 2025.

Jeff Walker: So as we move to 2026, our comps in gaming hardware and arcades, we don't have high comps from 2025 rolling into 2026. So we're not gonna see as much of an impact of the gaming hardware changes. We're, you know, we're still in conversations with Microsoft, trying to get more allocation, and I think ultimately, you know, next holiday season, our arcade business will be up again because we, we had virtually no arcade business this Christmas or this holiday season, and we will be getting some stock back in for next season. So that's kind of the flow on that.

And so as we move to 2020, six our comps and gaming hardware and arcades, we don't have high comps from 'twenty five rolling into 'twenty. So.

We're not going to see as much of an impact of the gaming hardware changes.

We're still in conversations with Microsoft trying to get more allocation and I think ultimately.

Next.

Holiday season.

Our <unk> business will be up again, because we we had virtually no RJ business. This Christmas holiday season, and we will be getting some stock back in for next season. So that's kind of the flow on that.

Michael Kupinski: That's great color. And then going back to your licensing deals, obviously you set the stage for with the Amazon MGM coming fairly quickly after your Paramount deal. Do you have any color in terms of the, like maybe the timing? You know, I know that you said that you're in discussions with several studios now. Do you have any sense of, like, how quickly maybe some of these licensing deals might come to fruition? I mean, I'm just kind of trying to get a sense of how long the tail is in terms of trying to structure and how these licensing deals might take to come about.

That's great color and then going back to your licensing deals. Obviously, you set the stage for with Amazon MGM coming fairly quickly after the euro Paramount deal.

Do you have any color in terms of the.

Like maybe the time timing I know that you said that you are in discussions with several studios now do you have any sense of like how quickly maybe some of these.

Licensing deals might come.

Come to fruition.

I'm, just kind of trying to get a sense of how long the payout in terms of trying to structure and how how these licensing deals might take two to come about.

Jeff Walker: Well, I think first off, you know, you have to realize they're complicated transactions, you know, to move a whole business of physical product sales, marketing, the authentication aspect of all of, you know, the creation of the product. It's a big part of the business, you know, big transaction to move one of those. And we've done a really good job with Paramount moving that over, and now we know how to do it. And, you know, we're running quickly on the Amazon MGM side. As far as timeframe, that's really not something that I can discuss, and we just really don't know. It's the timing is complicated.

Well I think.

First off you have to realize they are complicated transactions.

To move a whole a whole business of physical product sales marketing.

Awesome awesome patients.

Aspects of all of them.

The creation of the product.

It's a big part of the big.

Big transaction, then to move on in the house and we've done a really good job with Paramount moving out over and now we know how to do it in.

We're running quickly on a on the Amazon MGM side.

As far as.

Timeframe.

It's really not something that I can discuss and and we just really don't know its a timing.

It is complicated.

Jeff Walker: You know, I think at the end of the day, I don't know when the end of the day is. I think the studios see that Alliance is a great solution, you know, at the time that it makes sense for each studio to move into a licensing agreement on their physical DVD. So I think I have to leave it at that, where, you know, having the first one and the second one. We are seeing some smaller studios in conversations as well right now, so those aren't as big of a project to switch over as, you know, these major studios are. But I think we're well positioned to be the licensing partner that the studios use for physical media in the future.

And.

I think it I think at the end of the day I don't know when the end of the day is.

The studios Sea that alliance is a gray.

<unk> solution.

At the time that it makes sense for each studio too.

The move into a licensing agreement on their on their physical DVD.

I think I have to leave it at that were.

Now having.

Having the first one and the second one we are seeing some smaller studios.

In conversations as well right now so those arent as as big of a project a switchover. These major studios are but I think I think we're well positioned to be the licensing partner that the studios use for physical.

Physical media in the future.

Michael Kupinski: Good. And then, I was just wondering if you can provide a little bit more color on your launch of Authentic. I know that you indicated that you have been in talks with some studios which found this idea of great interest to them, and that you thought that there might be some other specific business opportunities that could be forged with the studios and so forth. I was just wondering if there are any more, you know, thoughts have been kind of, you know, forged with those discussions that, you know, some of, some things more, you know, have gelled with them and how, how those discussions have gone?

Good.

And then I was just wondering if you can provide a little bit more color on your launch of authentic I know that you indicated.

That you have been in talks with some studios, which found this idea of great interest to them.

That you thought that there might be some other spin.

Specific business opportunities that there could be forged with the studios and so forth I was just wondering if there any more.

Thoughts of being kind of <unk>.

With those discussions.

Some things more.

I've joked with them and how how those discussions have gone.

Jeff Walker: Well, there's a lot of opportunities right now with what the technology that we have with Endstate, with the NFC digital chips, and also authentication, and then the marketplace technology that they have as well. We're looking at conversations with music labels, with video studios, and even with our own products that we're doing with Paramount and MGM as examples. Gaming companies have special edition box sets and limited edition collectibles. We see all of those type of products as big opportunities that should have an NFC digital chip in the packaging, in the particular special edition product that is made.

Well.

There was a lot of opportunities right now with <unk>.

Technology that we have with and stay with the NFC digital chips.

And also authentication.

And then the marketplace technology that they have as well.

We're looking at conversations with.

Our music labels.

With video studios, I don't know, even with our own products and that.

We're doing with Paramount and MGM as examples.

<unk>.

Gaming companies have a special edition box sets and limited edition collectibles, we see all of those type of products.

Big opportunities that should have an NFC digital chip in the packaging and in particular special edition product that is made and when you look at that and you go. Okay. Now somebody can turn scan that.

Jeff Walker: And when you look at that and you go, "Okay, now somebody can scan that," you can. If you take it one step further, and you put a digital chip in a very nice collectible movie box set, or music box set, or gaming box set, and you put that chip in there working with the manufacturers, and they put that in, then you can also enhance additional content through the blockchain because you own that piece of a physical collectible. And so that's working with the labels and the studios and the gaming companies, you know, as creating. You know, you think of a collectible, a box set of something as the ultimate collectible. Well, then what else can you do to add content to it?

You can if you take it one step further and you put a digital chip and a very nice collectible movie box or music box set or gaming box that you can put that shape and they're working with.

With the manufacturers and they put that in then you can also enhance additional content through the blockchain because you own that that piece of our physical collectible.

And so that's working with the labels and the studios in our gaming companies.

As creating.

You think of a collectible a box set of something as the ultimate uncollectible well then what else can you do to add content to it can you add.

Jeff Walker: Can you add, you know, unreleased interview with the artist or the actor or something like that, that attaches to that collectible that you own? So we're looking at how we now can provide some really incredible solutions to the labels, to the studios, and the gaming companies, and collectible companies to really enhance, you know, what these collectibles can be.

Sure.

Uh huh.

Unreleased.

Interview with the artist or the actor or something like that that attaches to that collectible that you own. So we're looking at how we now can provide some really incredible solutions to the labels to the studios and the gaming companies and collectible companies.

So really enhance.

These collectibles can be.

Michael Kupinski: Yeah. And I know this is nascent times for this segment, but I was just wondering, do you have any timeframe when you might, you know, or milestones that you might want to provide investors when you might start to see, you know, revenues kind of kicking in for Authentic?

And I know this is Nathan times four.

Segment, but I was just wondering do you have any.

I am frame when you might.

<unk> that you might want to provide investors when you might start to see revenues kind of kicking in for authentic.

Jeff Walker: Well, we went live with the vinyl. We've got Jeffrey Smith on board; we have a couple other people joining his team next Monday, experienced people that will help us to focus on the marketing there. We've engaged a PR department to help us with the PR with respect to Alliance Authentic. So those are some of the things that are happening to get the word out of the product that we have. I think consumers really like the product that we've created with the vinyl and the ultimate vinyl collectible. And so we should start to see some traction on that pretty quickly here.

While we went live with the vinyl.

We've got Jeffrey Smith onboard where we have a couple of other people joining his team next Monday.

Our experienced people that will help us.

Focus on the marketing there.

We have engaged a PR department.

Help us with the PR with respect to alliance authentic.

So those are some of the things that are happening to get the word out of the product that we have I think consumers really like the product that we've created with the vinyl and they ultimately vinyl collectible.

And so we should start to see some traction on that pretty quickly here.

Michael Kupinski: Final question, I know that you made a nice tuck-in acquisition on the technology side. I was wondering what your current appetite might be for further M&A?

And then final question I know that you.

Made it a nice tuck in acquisition on the technology side I was wondering what your current appetite might be for further M&A.

Jeff Walker: Well, we always have a pretty big appetite on that, Michael, you know, you know that. We, as I mentioned earlier on the call, we're always in a bunch of conversations, and there's, you know, acquisitions that are accretive or consolidation stuff. Those are fairly easy and straightforward. And then there's acquisitions that get us into new opportunities and expansion of skill sets and things that we have. So I think the Alli- the Endstate Authentic was a great acquisition for us. It really opens the doors to a lot of different aspects.

While we we always have a pretty big appetite on that Michael you know that we are.

As I mentioned earlier on the call, we're always in a bunch of conversations and theirs.

There is acquisitions that are.

Accretive or consolidation staff, those or are fairly easy and straightforward and then theres acquisitions that get us into new opportunities and at.

Expansion of skill sets and things that we have so I think the Elia and stayed authentic was a great acquisition for us It really opens the doors to a lot of different aspects and you also have to realize the more that we can use that technology to do product products and and <unk>.

Jeff Walker: And you also have to realize, the more that we can use that technology to do products and offerings with our vendor partners, our music, video, and gaming partners, the more integrated Alliance gets with each of them, and that's a big win for us, you know? So, we're looking at how we're an important aspect to the music, video, and gaming industry, and we're continuing to build that strength. I think they are looking at us that way, and that's why we're seeing these strong agreements coming with all these partners we work with.

Offerings with our vendor partners are music video and gaming partners. The more integrated alliance gets with each of them and that's a big win for us.

So.

We're looking at how we're we're a important aspects of the music video and gaming industry and we're continuing to build that strength.

And I think I think they are looking at us that way and Thats why were seeing this is strong agreements coming with.

With all these partners we work with.

Michael Kupinski: Great. Thanks for taking all my questions. I appreciate it.

Great. Thanks for taking all my questions I appreciate it.

Jeff Walker: Thank you.

Thank you.

Operator: There are no further phone questions at this time. I will now turn it over to Paul Koons for any webcast questions.

There are no further phone questions at this time I will now turn it over to Paul <unk> for any webcast questions.

Paul Kuntz: Thank you. One of our first questions: You didn't speak on music sales. Can you provide an update on vinyl and CD trends, and how you're thinking about the music category within the broader premium physical strategy?

Thank you.

One of my first questions you didn't speak on music sales can you provide an update on vinyl and CD trends and how youre thinking about the music category within the broader premium physical strategy.

Jeff Walker: Oh, music's great. We're super excited right now on the music side. I know we didn't put a lot of that in our communication for this quarter, but our vinyl and CD sales are extremely strong right now. This particular quarter that we're in, it's not that typical to have major new releases in Q1. But you know, coming up at the end of February, we got the new Bruno Mars coming through, and then we've got a big Harry Styles new release and a BTS release this quarter, as well as lots of other releases. But those three tentpole ones are pretty significant releases that are already showing up with some good pre-order, online pre-order sales.

Music is great.

We're super excited right now on the.

The music side I know, we didn't put a lot of that in our in our communication for this quarter, but.

Our vinyl and <unk> sales are extremely strong right now.

This particular quarter that we're in.

It's not that typical to have major new releases in Q1.

Coming up at the end of February we got the new Bruno Mars coming through.

And then we've got a big Harry styles, new release, and a bps release this quarter.

As well as a lots of other releases, but those three tent pole ones are pretty significant releases that are already showing up with some good preorder online preorder sales.

Jeff Walker: And you're definitely seeing the labels really focused on these artists right now, and the music industry is significantly strong. I do wanna throw out a little stat that I was kind of shocked on. For 2025, Alliance sold over 16 million vinyl records, and we sold over 13 million CDs. So some people that say, you know, "CDs are dead, who buys CDs anymore?" We still sold 13 million CDs last year. We are seeing some pretty strong sales on the CD side, and there's definitely a lot of communication along social media right now on physical music, vinyl, CD, and as well, DVD right now, too, as far as people wanting to collect their favorite artist music and so forth.

And you definitely see in the labels.

Really focused on on these artists right now in the music industry is significantly strong I do want to.

Throw out a little stat that I was kind of shocked on.

For 2025 alliance sold over $16 million vinyl records, and we sold over $13 million CBS.

So some people that say you know Cds, our dad, who buy Cds anymore, we still sold 13 million <unk> last year.

We're seeing some pretty strong sales on the CD side and there is definitely a lot of.

A lot of communication, along social media right now.

On physical music vinyl C D and as well DVD right now too.

As far as people wanting to collect their favorite artists music and so forth.

Jeff Walker: And all of this is still happening while, you know, everybody can listen to the music on a digital platform and so forth, but the collectors want to have their, you know, a collection of their favorite artists at their house. And so we're looking at how we're continuing to work with the labels to create more and better product for the fans there.

All of this is still happening while.

Everybody can listen to the music on on a digital.

That farm and so forth, but that collectors want to have there.

A collection of their favorite artist at their house and.

So we're looking at how we're continuing to work with the labels to create more and better product for the fan fair.

Paul Kuntz: Thank you, Jeff. Another question we had: Could you please expand on the gross margins for this quarter? Seems like the market was expecting a number around 15%, in line with past rebasing margin profile comments.

Thank you Jess.

Another question you had could you. Please expand on the gross margins for this quarter seems like the market was expecting a number around 15% in line with past Rebased margin profile.

Jeff Walker: The margins for this—say that again? Can you repeat the question there?

Okay.

Jeff Walker: The margins for this—say that again? Can you repeat the question there?

The margins for this fan out again can you repeat the question there.

Paul Kuntz: Yeah, absolutely. Could you please expand on the gross margin for this quarter? It seems like the market was expecting a number around 15%, in line with past rebasing margin profile comments.

Absolutely, yes could you please expand on the gross margin for this quarter. It seems like the market was expecting a number around 15% in line with past Rebased margin profile com.

Jeff Walker: Yeah, I think we had some pretty good growth in our margin this quarter compared to last year. Margin ends up being somewhat product mix driven. And we, you know, we do sell more ... Even though our hardware and gaming and so forth was down, overall, we still sell quite a bit of hardware and so forth in the holiday quarter. I think overall, we're pretty happy with where our margin is trending right now, but we tend to see it a little bit lower in Q4 than the other three quarters of the year. It's typical trend for us.

Yeah, I think we had some pretty good growth in our margin.

This quarter compared to last year.

We are.

Margin ends up being somewhat product product mix driven.

And we you know we do sell more even though our hardware and gaming and so forth was down.

Overall, we still sell quite a bit of hardware and so forth and of course in the holiday quarter.

I think overall, we're pretty happy with where our margin is trending right now, but we tend to see it a little bit lower in Q4 than the other three quarters of the year.

Typical trend for us.

Paul Kuntz: Thank you. And our next question: As you look at Endstate Authentic longer term, where do you see the greatest strategic opportunity? Internal applications within your own portfolio, third-party adoption, or authenticated resale? And how should investors think about its role in the broader platform strategy?

Thank you.

And our next question as you look at end state authentic longer term, where do you see the greatest strategic opportunity internal applications within your own portfolio third party adoption or authenticated resale and how should investors think about its role in the broader platform strategy.

Jeff Walker: Well, I'll tell you that Bennett and Stephanie on the Endstate team are extremely busy right now with all the opportunity conversations that just opened up with them joining with us here at Alliance. So obviously, there's some really big opportunities within our own portfolio. You know, obviously, we're doing Alliance Authentic, and then also, they're working with our home entertainment team to see what we can do on some video product as well. So there's a lot going on internally.

Well I'll tell you that.

Ben and Stephanie on end stage team are extremely busy right now with all the.

Opportunities conversations Antroscope end up with them joining with US here at alliance so.

Obviously, there's some really big opportunities within our own portfolio.

They're in Congo, Obviously, we're doing alliance authentic.

And then also.

They are working with our home entertainment team to see what we can do on some video product as well.

So there's a lot going on internally and then the second into the third party aspect.

Jeff Walker: And then the second into the third-party aspect, you know, we communicate with all the top record labels, the top studios, the top gaming companies, and so, you know, the question is, you know, how their application of NFC chips into products and so forth, you know, there's just a lot of opportunities, a lot of conversations happening, where our technology can now help with things that artists and studios are looking to do going forward. So we're pretty bullish on their opportunities right now. There also is grading companies, authentication companies, and so forth, that are interested in the authenticated resale as well as NFC chips there. So they've got a very packed new account conversations right now for Endstate.

We.

Communicate with all the top record labels that top studios, the top gaming company and so that.

The question is you know.

How their application of NFC chips, and the products and so forth.

There's just a lot of opportunities a lot of conversations happening where.

Our technology can now help with.

Things that artists and studios are looking to do going forward. So we're pretty pretty bullish on their opportunities right now.

There also is.

Grading companies augmentation companies and so forth that.

Are interested in the authenticated retail as well as the NFC chips there so.

They've got a very very poor.

Pat.

New account new account.

Conversations right now for instance.

Paul Kuntz: Thank you, Jeff. We have one more question. Can you provide, I think you already touched on this a little bit with Michael, but can you provide an update on Alliance Authentic and what you've learned from the initial rollout? How should we think about the pace of expansion from here?

Thank you Jess and we have one more question.

Can you provide I think you already touched on this a little bit with that with Michael but can you provide an update on alliance authentic and what you've learned from the initial rollout how should we think about the pace of expansion from here.

Jeff Walker: Yeah, I think the pace of expansion is going to ramp up pretty quickly here. You know, we've got, as I mentioned earlier, we got Jeffrey on board. We got two other great people to come in next week to assist him that are joining the Alliance team, and the PR that we're launching. We are also launching. So we are at Toy Fair this weekend. On the authentic side, we are also launching Funko Authentic and also Handmade by Robots Alliance Authentic product. And what those are are Funko Pop or Handmade by Robots character, encapsulated in a case similar to what we're doing on the vinyl. They have the NFC digital chip in it.

Yeah.

The pace of expansion is going to ramp up pretty quickly here.

As I mentioned earlier, we got Jeffrey onboard we got two.

Two other great people to come in next week to assist him that are joining the alliance team.

And the PR that we're launching.

We are also launching so we are at twice over this weekend.

On the authentic side, we are also launching <unk>.

<unk> authentic.

And also handmade by robot alliance authentic product and what those are.

Funko pop or handmade by robots character encapsulated N a.

In our case similar to what we're doing on the vinyl they have the NFC digital chip in it.

Jeff Walker: They are 100% authentic because we know we bought it direct from Funko or on Handmade, we are the manufacturers, and then they're uncirculated, and they're encapsulated as a collectible. Those are getting launched this weekend at Toy Fair, and we'll be able to start shipping on those with orders towards the end of February here. We've already got them into production and into the facility. You know, this business is not an easy one to start up. You know, there's a lot of work in perfecting the encapsulation cases and all the aspects that go to create that. But you also have the opportunity there, where now we will have an encapsulated Funko Pop into the marketplace, and I think there's gonna be a lot of great opportunity for sales.

Our 100% authentic because we know we bought a direct from Fargo or on the handmade.

We are the manufacturers and then they're on circulated and Theyre encapsulated as a.

Collectible.

Those are getting launched this weekend at toy fair and we will be able to.

Started shipping on those with orders towards the end of February here.

We've already got them into production and to enter the facility.

And this business is not an easy one the startup.

There's a lot of work in perfecting the encapsulation cases.

And all of the aspects that that go to create that.

But you also have the opportunity there where now we will have an encapsulated funko pop into the marketplace.

I think theres going to be a lot of great opportunity for sales. So all of those three categories R. R.

Jeff Walker: So all of those three categories are in place. We do have cases on the way right now for encapsulating video SteelBooks as well as video games, so Xbox, PlayStation, and Switch. So there's people that wanna have and collect those and wanna have one encapsulated as a piece of history for those games as well there. So that's our—that's all gonna roll out. Those other ones will roll out this quarter as well and start to get into the marketplace.

Our in place we do have cases on the way right now for Encapsulating video steel book as well as video games, So Xbox Playstation and switch.

So there is those people that want to have a collect those and want to have one encapsulated as a piece of history.

For those.

As games as well there so that's where that's all going to roll out those other ones will rollout.

This quarter as well and start to get into the marketplace.

Paul Kuntz: Excellent. That was actually our last question.

Excellent.

Actually our last question.

Operator: Great, thank you. I would like to turn the floor back over to Jeff Walker for any closing comments.

Okay. Thank you and I would like to turn the floor back over to Jeff Walker for any closing comments.

Jeff Walker: I just wanna say to everybody, we're super excited with all the new opportunities we have here for 2026, and, you know, we're as an entire company, we're having a great time working with Bennett on the Endstate side and Jeffrey on the Alliance Authentic. Those big initiatives for Alliance are gonna make a big difference here, here in 2026. And I think if you look at it a year from now, where is Alliance Authentic and Endstate Authentic gonna be? It's gonna be significantly better and different a year from now. And that's what we're very, very heavily focused on right now. Thank you, everybody, for joining the call.

I just wanted to say to everybody. We're super excited with all the new opportunities we have here for 2020 six and.

You know where we're at.

The entire company and we're having a great time working with banner on the end state side and Jeffrey on the alliance authentic does does big initiatives for alliance.

Are going to make a big difference here here in 2026 and.

I think if you look at it a year from now, whereas alliance authentic and stayed authentic gonna be it's gonna be significantly.

Better and different a year from now and that's that's where we are.

Very very heavily focused on right now.

Thank you everybody for joining the call.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Q2 2026 Alliance Entertainment Holding Corp Earnings Call

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