Alliance Entertainment, a Florida-headquartered distributor and wholesaler of physical media, has published its fiscal Q4 (calendar Q2) results for the three months ended June 30.
Net revenues for the quarter slipped 7% year over year to $247.1 million from $265.2 million, according to the company’s latest financial report.
The drop in Alliance’s revenue was “due mainly to our focus on profitable sales,” the company said.
The firm’s strategy of profitable sales led to a 6% YoY jump in its gross profit during the quarter to $30.2 million from $28.5 million. Gross profit margin expanded to 12% from 11% in the year-ago period.
The company’s net loss for the April-June period narrowed to $1.7 million from $4.6 million in the preceding year, while adjusted EBITDA reached $3.4 million, versus an adjusted EBITDA loss of $600,000 a year prior.
For the whole fiscal year ended June 30, Alliance booked $1.2 billion in net revenues, down 18% from $1.4 billion the previous year, which the company attributed to macroeconomic headwinds caused by increased inflation and interest rates causing the business-to-business customer base, which are primarily retailers, to react relatively conservatively with their inventory positions.”
“DTC channels are facing constant competition and it’s important for merchants to keep investing while keeping a tight rein on inventories,” the company added.
Gross profit for the fiscal year also tumbled to $103.9 million from $182.4 million “due to the direct relation of product costs to sales volume,” while gross profit margin shrank to 9% from 13% last year.
Alliance said this was “primarily due to an inventory adjustment to address the exorbitant landed cost experienced during supply chain disruptions related to Covid and reduced supplier marketing development funds.”
The company incurred a net loss of $32.5 million for the year ended June 30, versus a net income of $28.6 million a year ago. Adjusted EBITDA loss was $17.6 million, versus adjusted EBITDA of $60 million the preceding year, which the company blamed on “excessive transportation costs of $15.3 million, arcade markdowns of $12.2 million, incremental arcade storage fees of $4.6 million and additional reserves for consumer products inventory of $3.7 million.”
“We believe that as transportation costs normalize, we utilize our investment in additional warehouse automation combined with staffing reductions implemented in Q4, we will continue to show ongoing improvement in the year to come,” said John Kutch, Chief Financial Officer of Alliance Entertainment.
Among the highlights of the company’s fiscal year is a 55% YoY jump in K-Pop sales in the 12 months ended July 31 to $32 million. This reflected sales of 2 million units of K-Pop merch, up from 1.3 million units in the year-ago period.
Back in August, Alliance said it expects a further boost in K-Pop sales throughout the remainder of the year as the genre “is driving enormous consumer demand and sales growth in physical music media, particularly in the Compact Disc market.”
Most recently, the company said it forecasts “exponential sales growth” to continue with several other major K-Pop acts scheduled to be released by the end of the year.
The main highlight of the fiscal fourth quarter was the company’s public listing, said Chairman Bruce Ogilvie. The company listed on the Nasdaq Capital Market after completing its merger with blank check company, Adara Acquisition, in February.
“The fourth quarter was highlighted by our Nasdaq uplisting in conjunction with a $4.0 public offering. Uplisting to the Nasdaq was the most effective method for us to elevate the Company’s public profile, expand our shareholder base, improve liquidity and enhance shareholder value,” Ogilvie said.
The executive added: “As a public company, we are now well positioned to pursue future strategic combinations that further diversify our products offerings, and to invest in our operations and proprietary technology.”
“As a public company, we are now well positioned to pursue future strategic combinations that further diversify our products offerings, and to invest in our operations and proprietary technology.”
Bruce Ogilvie, Alliance Entertainment
“Throughout the year we have continued to build on our foundation as one of the largest physical media and entertainment product distributors in the world, securing new partnerships and shifting toward larger scale automation in our operations.”
Also during the year, Alliance partnered with Atari and retro home arcade company, Arcade1Up, to launch the Arcade1Up Atari 50th Anniversary Deluxe Arcade Machine through its COKeM International video game division.
Additionally, Alliance unit Mill Creek Entertainment signed an exclusive digital and physical release of Believe Entertainment’s supernatural thriller Nefarious, on Blu-ray and DVD following its successful premium video-on-demand rollout.
Another Alliance division, Distribution Solutions, partnered with distribution company Future Today to expand its reach and offer viewers more options for its licensed and owned video content.
The company also disclosed that its AMPED Distribution unit received 20 nominations at the 2023 International Bluegrass Music Awards.
Jeff Walker, Chief Executive Officer of Alliance Entertainment, said: “Although economic conditions have stabilized, we continued to see retailers reacting relatively conservatively with their inventory positions.”
Walker noted that as economic conditions stabilized, the company’s B2B revenues improved to -8% year over year in Q4.
“Looking ahead, we continue to expand and diversify by adding brands, product categories, and retail partnerships in combination with various cost-cutting and automation initiatives.”
Jeff Walker, Alliance Entertainment
“As well, the decline in demand for physical gaming products presents an opportunity as we typically benefit from industry consolidation, and while we captured an increase in the average selling price in Gaming, it was not enough to offset the negative impact of decreased volume.”
“Looking ahead, we continue to expand and diversify by adding brands, product categories, and retail partnerships in combination with various cost-cutting and automation initiatives. To support this growth, we are investing in automating facilities and upgrading proprietary software, which began to show significant improvements in fiscal Q4,” Walker added.
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