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ALLIANCE ENTERTAINMENT HOLDING CORP (AENT)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered solid top-line and profit growth: revenue rose 11% to $254.0M, gross margin expanded 340 bps to 14.6%, and net income reached $4.9M ($0.10 diluted EPS). Adjusted EBITDA increased 259% to $12.2M, with non-GAAP reconciliation provided in the release .
  • Results beat consensus: revenue exceeded Wall Street by ~$16.7M and diluted EPS beat by ~$0.02; consensus coverage remains thin (EPS: 1 est., revenue: 2 est.). EBITDA also beat [Q1 2026 consensus: EPS $0.08*, revenue $237.3M*, EBITDA $9.34M*; actual: EPS $0.10, revenue $253.97M, Adj. EBITDA $12.21M] . Values retrieved from S&P Global.
  • Physical media momentum (Paramount license, SteelBook demand) and vinyl strength drove segment growth; movies +59% YoY to $84M, vinyl +8% to $75.8M, collectibles +32% to $6.4M .
  • Liquidity and cost tailwinds: post-quarter close, AENT secured a new $120M Bank of America revolver (availability $61M at closing) and expects ~$1.5M annual interest savings given lower SOFR spreads; interest expense fell 17% YoY in Q1 .
  • Management signaled a baseline adjusted EBITDA margin ~4.8% for FY26, supported by automation and early AI productivity gains; ongoing exclusive content deals and Walmart category advisor role underpin the narrative into holiday/Q2 .

What Went Well and What Went Wrong

What Went Well

  • Physical media outperformance: “Physical movie sales increased 59% year-over-year to $84 million… robust demand for premium 4K and SteelBook formats” .
  • Margin expansion and efficiency: “Gross margin… 14.6%, up 340 basis points… Distribution and fulfillment expenses remained consistent at 3.9% of net revenue” .
  • Technology-driven productivity: “We’re beginning to see tangible results from our AI initiative… HubSpot Sales Hub and Microsoft Co-Pilot… improving sales enablement, speed to market, and customer responsiveness” .

What Went Wrong

  • Collectibles still early in financial impact: Management tempered expectations for Handmade by Robots near-term contribution—“not going to make a huge impact” in FY26; more meaningful lift expected in FY27–FY28 .
  • EPS optics and non-GAAP: While adjusted EBITDA surged, GAAP EBITDA was $10.37M vs. adjusted $12.21M; warrants FV changes and transaction costs affected GAAP-to-non-GAAP reconciliation .
  • Thin sell-side coverage: Only 1 EPS and 2 revenue estimates, limiting visibility and potentially amplifying post-print volatility even on beats [GetEstimates Q1 2026].

Financial Results

Quarterly Performance

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Millions)$213.0 $227.8 $253.974
Gross Profit ($USD Millions)$29.1 $36.0 $37.2
Gross Margin %13.6% 15.8% 14.6%
Net Income ($USD Millions)$1.9 $5.8 $4.880
Diluted EPS ($USD)$0.04 $0.11 $0.10
Adjusted EBITDA ($USD Millions)$4.9 $12.2 $12.208

Segment/Category Highlights (Q1 FY26)

CategoryValue ($USD Millions)YoY Change
Physical Movies$84.0 +59%
Vinyl$75.8 +8%
Collectibles$6.4 +32%

KPIs and Cost Structure (Q1 FY26)

KPIValue
Distribution & Fulfillment Expense (% of Net Revenue)3.9%
SG&A (% of Net Revenue)5.9%
Working Capital$53.2M
Interest Expense$2.347M; down 17% YoY
DTC Contribution (% of Net Revenue)37%

Actuals vs Wall Street Consensus (Q1 FY26)

MetricConsensusActualOutcome
Revenue ($USD)$237.3M*$253.974M Beat
Diluted EPS ($USD)$0.08*$0.10 Beat
EBITDA ($USD)$9.34M*Adj. EBITDA $12.208M Beat

Estimates marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA Margin BaselineFY 2026“Margins are sustainable… adjusted EBITDA margin exceeded 5%” (Q4 FY25) “Adjusted EBITDA margin of ~4.8% is the baseline we expect to maintain” (Q1 FY26) Lowered
Interest Expense / FinancingFY 2026Prior ABL; no savings guided New $120M Bank of America revolver; ~$1.5M annual interest savings at ~$60M borrow; $61M availability at close Enhanced liquidity / New savings
Formal Revenue/Margin RangesFY 2026Not provided Not provided; management emphasizes sustaining profitability and cash generation Maintained (no formal guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 FY26)Trend
AI / Technology InitiativesQ4 FY25: AI initiative launched; 250 Copilot seats; HubSpot integration . Q3 FY25: automation investments (AutoStore, Sure Sort X) drove ~$0.5M annual savings with more expected .Scaling AI across sales/ops; 280 Copilot licenses; early productivity gains; baseline margin view tied to tech efficiencies .Increasing adoption and contribution.
Supply Chain & Fulfillment EfficiencyQ3 FY25: 10.2% YoY reduction in distribution/fulfillment costs . Q4 FY25: ~1% reduction in distribution/fulfillment expense as % of revenue .Distribution & fulfillment at 3.9% of net revenue .Sustained efficiency.
Tariffs / MacroQ3 FY25: music/video largely unaffected; collectibles managed (145% then 30% tariff); small price increases; positive export tariff news . Q4 FY25: minimal impact on music/video; manageable on collectibles .Holiday physical media demand strong; “no tariffs in music and video” noted; gift dynamics .Manageable; supportive for physical media.
Product Performance (Movies/Vinyl)Q3 FY25: Paramount license; catalog/new releases pipeline . Q4 FY25: exclusive partnerships >$350M revenue; margin sustainability .Movies +59% to $84M; Vinyl +8% to $75.8M; SteelBook demand robust .Strengthening across formats.
Financing & LiquidityQ3/Q4 FY25: reduced revolver debt; improved working capital .New $120M revolver; $61M availability; expected ~$1.5M interest savings .Enhanced flexibility / lower cost.
Retail Partnership (Walmart)Q4 FY25: designated video category advisor (Aug 11) .Advisor role described as independent; omnichannel alignment; not direct revenue but builds confidence .Strategic credibility; execution edge.
M&A PipelineQ3/Q4 FY25: disciplined, accretive targets; Handmade by Robots integration .Active pipeline; capital-light focus; pursuing exclusive/licensing opportunities .Ongoing / disciplined.

Management Commentary

  • CEO on quarter momentum: “We opened Fiscal 2026 with strong momentum… Revenue grew 11%… Adjusted EBITDA increased to $12.2 million… Gross Margin expanded 340 basis points to 14.6%” .
  • CFO on margin baseline: “Adjusted EBITDA… representing an Adjusted EBITDA Margin of 4.8%… aligns with the baseline we expect to maintain through Fiscal 2026 and beyond” .
  • CEO on physical media strength: “Physical media remains a powerful driver… exclusive Paramount Pictures agreement… sustained interest in premium 4K and SteelBook formats” .
  • Financing: “Closing a new five-year, $120 million Senior Secured Revolving Credit Facility with Bank of America… reduces borrowing costs by up to 250 basis points… $61 million of undrawn availability at closing” .
  • AI adoption: “Embedding HubSpot and Microsoft Co-Pilot into our workflows… improving sales enablement, speed to market, and customer responsiveness” .

Q&A Highlights

  • Holiday/tariffs: Management emphasized strong holiday demand in physical media and noted “no tariffs in music and video,” supporting seasonal sales mix .
  • Vinyl demand: Broad, multi-age appeal with new releases and reissues (colored variants) sustaining demand; Taylor Swift’s October street-date activity fell outside Q1 reporting .
  • Paramount licensing: Paramount became a major contributor; Alliance’s role spans manufacturing, marketing, and retail distribution; Walmart/Amazon channels amplified sales .
  • Walmart category advisor role: Independent advisory enhances confidence/strategic alignment; supports omnichannel execution but isn’t directly tied to incremental revenue .
  • Interest savings: New facility lowers SOFR spread (SOFR+1⅝ vs SOFR+4), implying ~$1.5M annual savings at ~$60M borrow; Fed cuts add incremental benefit .

Estimates Context

  • Q1 FY26 revenue beat consensus ($253.97M actual vs $237.3M estimate*) and diluted EPS beat ($0.10 vs $0.08*). EBITDA also beat ($12.21M adjusted vs $9.34M*), though consensus definitions may vary versus company’s adjusted metric . Values retrieved from S&P Global.
  • Coverage remains limited (EPS estimates: 1; revenue estimates: 2), so revisions can be more sensitive to prints and management commentary [GetEstimates Q1 2026].

Key Takeaways for Investors

  • Exclusive content (Paramount) and premium formats (SteelBook, 4K) are driving mix-led margin expansion; watch continued studio licensing wins as catalysts .
  • Technology and automation underpin a durable margin baseline (~4.8% adjusted EBITDA), with AI adoption offering incremental productivity; monitor proof points in Q2/Q3 .
  • Liquidity and rate tailwinds enhance FCF: new $120M revolver, $61M availability, and ~$1.5M annual interest savings should support inventory builds, M&A, and growth initiatives .
  • Near-term collectibles (Handmade by Robots) are strategically sound but not yet material; the larger earnings engine remains physical media and vinyl into holiday .
  • Thin sell-side coverage magnifies estimate beats/misses; after this beat, look for upward revisions and potential multiple support if margin baseline holds [GetEstimates Q1 2026].
  • Trading: positive momentum into peak season (holiday/Q2), with watch items including tariffs trajectory (collectibles), studio slate strength, and execution on Walmart advisory and DTC channels .
  • Medium term: Owning exclusive IP pipelines and scaling owned brands could structurally lift gross margin and earnings power beyond FY26 baseline if execution continues .

Values marked with * in estimates sections were retrieved from S&P Global.