Alliance Entertainment NASDAQ: AENT reported higher fiscal third-quarter revenue and profit, with management saying the company is benefiting from a shift toward premium physical media, collectibles and authenticated products aimed at fans and collectors.
On the company’s third-quarter fiscal 2026 earnings call, Chief Executive Officer Jeff Walker said net revenue rose 21% year over year to $258 million for the quarter ended March 31, 2026. Net income increased 25% to $2.3 million, or $0.05 per diluted share, compared with $1.9 million, or $0.04 per share, in the prior-year period. Adjusted EBITDA was $5.1 million, up from $4.9 million a year earlier.
“The most important takeaway this quarter is that we are now seeing both sides of our model working together, sustained revenue growth and continued earnings expansion driven by the structural shift in our business,” Walker said.
Management Points to Collectibles and Premium Formats
Walker said the company is positioning itself less as a traditional physical media distributor and more as a collectibles platform. “We are not in a declining physical media business. We are in the collectible business,” he said, arguing that consumers are buying vinyl, CDs and premium video formats because they want ownership of items connected to artists, franchises and brands.
Revenue growth was broad-based across music, video, gaming and collectibles, according to management. Walker said vinyl revenue increased 15% year over year to $99 million, CD revenue rose 90% to $39 million, and physical movie revenue grew 5% to $61 million. He also highlighted demand tied to Record Store Day, saying Alliance shipped more than 700,000 units to independent retailers for what he described as the largest Record Store Day ever.
In video, Walker said demand has become more stable after years of category decline, supported by new releases and premium formats such as 4K Ultra HD and collectible editions such as Steelbooks. He also pointed to distribution agreements with Paramount, effective at the beginning of calendar 2025, and MGM Studios, added at the start of calendar 2026, as expanding the company’s access to major franchises.
Collectibles Revenue Rises 48%
Collectibles remained a major growth area in the quarter, with revenue increasing 48% year over year. Walker said growth was driven by higher average selling prices, expanded sourcing and a mix shift toward more premium and differentiated offerings.
He said the company is emphasizing licensed, higher-value products rather than pursuing volume alone. Handmade by Robots, which Alliance has transitioned into an owned brand, was cited as a contributor to revenue and margins because it gives the company more control over product design, licensing and distribution.
During the Q&A session, Maxim Group analyst Tom Forte asked about limited-release Handmade by Robots products tied to Ozzy Osbourne and Hello Kitty for Record Store Day. Walker said Alliance produced 2,000 units of each character, received orders for just over 6,000 units for each, and allocated shipments to stores. He said the products sold out in stores and that Alliance started a Record Store Day series for the line.
Walker also said Alliance encapsulated 30 units of each character through Alliance Authentic with NFC chips. He said standard versions were appearing on eBay in the $75 range, while encapsulated versions were seen in the $400 to $500 range.
Alliance Authentic and Endstate Remain Early-Stage Initiatives
Walker said Alliance advanced its authentication strategy during the quarter with the launch of Alliance Authentic and continued integration of Endstate Authentic. Alliance Authentic began with premium vinyl collectibles that are encapsulated, individually numbered and authenticated at the point of origin.
Endstate Authentic provides NFC-enabled authentication and digital product identity, allowing items to be verified and tracked over time. Walker said the goal is to support ownership, authenticity and resale, extending Alliance’s role beyond initial distribution.
In response to a question from Noble analyst Jacob Mutchler, Walker said Alliance Authentic currently includes vinyl, Funko Pops and Handmade by Robots products. He added that the company has cases for DVD Steelbooks and video games for PlayStation, Xbox and Nintendo Switch.
Asked about the pacing of the opportunity, Walker described both Alliance Authentic and Endstate Authentic as being in an “extreme startup phase,” but said he expects fiscal 2027 to bring more key encapsulated titles and potential deal announcements. He said some discussions are under nondisclosure agreements.
Year-to-Date Earnings Show Margin Expansion
Chief Financial Officer Amanda Gnecco, who was introduced as presenting the financial results, said year-to-date net revenue for the nine months ended March 31, 2026, was $881 million, up 5% from $836 million in the prior-year period. Gross profit increased to $117.3 million from $96.9 million, while gross margin expanded 170 basis points to 13.3%.
Net income for the nine-month period rose 78% to $16.6 million, or $0.32 per diluted share, compared with $9.3 million, or $0.18 per share, a year earlier. Adjusted EBITDA increased 47% to $35.7 million from $24.4 million.
Gnecco said the results demonstrate operating leverage from shifting toward higher-value products and more efficient execution. She said Alliance ended the quarter with about $60 million in working capital and approximately $56 million of availability under its revolving credit facility. Inventory increased during the quarter, which she said was consistent with higher revenue and inbound product timing.
Q&A Highlights Release Schedule and Acquisitions
During the question-and-answer portion of the call, Walker said upcoming releases are expected to support demand across categories. He pointed to recent music releases from Bruno Mars, Harry Styles and BTS as major titles in the reported quarter. He also said Grand Theft Auto VI is expected to be a “home run” for the fourth quarter and that Alliance buys directly from Take-Two. Walker added that a Grand Theft Auto soundtrack on vinyl is expected in November and includes more than 20 songs from A-list artists.
On the video side, Walker said the MGM title Project Hail Mary is expected to be a strong release for Alliance, with a street date in August and expected high volume across DVD formats.
Walker also said Alliance is actively evaluating acquisition opportunities, including licensed products and other collectibles categories. He said the company has “several NDAs out right now” and is looking for businesses that could be accretive and create new sales or vendor opportunities.
Looking ahead, Walker said Alliance will focus on scaling core categories, expanding owned and controlled brands, building Alliance Authentic and Endstate Authentic, and maintaining discipline around profitability and return on capital.
About Alliance Entertainment NASDAQ: AENT
Alliance Entertainment NASDAQ: AENT is a distributor of physical media and related entertainment products, serving retailers, public libraries and online merchants. The company’s core business revolves around the wholesale distribution of music and video titles on CD, DVD and Blu-ray formats, as well as vinyl records, audiobooks, video games and select gift and novelty items. By maintaining a broad catalog of new and catalog titles, Alliance Entertainment enables brick-and-mortar and e-commerce channels to access an extensive range of products from major and independent labels.
In addition to its product offerings, Alliance Entertainment provides supply-chain and logistics services designed to streamline inventory management and order fulfillment.
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