On Thursday, Alliance Entertainment (NASDAQ:AENT) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Alliance Entertainment reported an 8% increase in revenue to $1.15 billion for fiscal 2026, with a 14% rise in adjusted EBITDA to $41.5 million.
The company expanded its gross margin by 80 basis points to 13.3%, driven by stronger margins in physical movies and collectibles.
Strategic initiatives include expansion into higher-margin collectibles, development of Alliance Authentic for product authentication, and enhanced fulfillment capabilities using automation and AI.
Key partnerships with Paramount and Amazon MGM Studios strengthened Alliance's position in physical media distribution.
Despite a non-cash write-off affecting GAAP operating income, adjusted net income rose by 24% to $23.4 million.
Future growth is expected in physical music, collectibles, and the development of a peer-to-peer marketplace for authenticated products.
The company is leveraging AI to improve sales and marketing efficiency, with a new AI-enabled B2B platform to launch in early 2027.
Full Transcript
OPERATOR
Greetings and welcome to Alliance Entertainment's Fiscal Year 2026 Financial Results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Paul Koontz, a member of Alliance Entertainment's IR team at Redshift.
Paul Koontz, Investor Relations
Paul, thank you. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates or other information that might be considered forward-looking. While those forward-looking statements represent the Company's current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's opinions only as of the date of this presentation.
Please keep in mind that the Company is not obligating itself to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, management will attempt to present some important factors relating to the business that may affect predictions. You should also review the Company's Form 10-K filed today, September 10, 2026, for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors.
During this conference call, management will discuss non-GAAP financial measures, including a discussion of adjusted EBITDA, adjusted net income and adjusted earnings per share. Management believes non-GAAP disclosures enable investors to better understand Alliance Entertainment's core operating performance. Please refer to the investor presentation or today's earnings press release for reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure.
Your hosts today, Jeff Walker, Chief Executive Officer, and Emmanueko, Chief Financial Officer, will present the results of operations for the fiscal year ended June 30, 2026. Bruce Ogilvie, Executive Chairman, is also on the line and will participate during the Q&A session. Before I turn the call over, I'd like to congratulate Jeff on being named Billboard's Executive of the Week last week, recognizing Alliance's role in helping drive the continued growth of physical music.
With that, Jeff, the call is yours.
Jeff Walker, Chief Executive Officer
Thank you, Paul, and good afternoon, everyone. We appreciate you joining us. Fiscal 2026 was a year of acceleration for Alliance, both financially and strategically. We grew the business, expanded margins, strengthened our position across physical entertainment and collectibles, and continued building new capabilities that can drive the next phase of growth. Revenue increased 8% to $1.15 billion. Gross margin expanded 80 basis points to 13.3% and adjusted EBITDA increased 14% to $41.5 million.
We also finished the year with strong momentum as fourth quarter revenue increased 18% year over year to $268.1 million. We saw broad-based growth across physical music, home entertainment, collectibles and fulfillment while continuing to shift the business toward premium products, exclusive content and higher-valued services. Several changes occurring across the entertainment industry are also increasing the value of the distribution and fulfillment infrastructure we have built over the past three decades.
Physical entertainment is becoming more specialized and increasingly centered around ownership, fandom and premium products. Consumers have virtually unlimited digital access to music and entertainment, yet they continue to purchase vinyl records, CDs, 4K Ultra HD titles, steelbooks and other physical products. Those purchases are increasingly about owning something connected to an artist, movie franchise or community that matters to them. The latest industry data shows how strong that demand remains.
The RIAA's 2026 Mid-Year Report showed U.S. physical music revenue increasing nearly 26% in the first half of calendar 2026, including 17.7% growth in vinyl revenue and 58.6% growth in CD revenue. In home entertainment, DEG reported that consumer spending on 4K Ultra HD increased 12% in calendar 2025 even as the broader physical video market declined. We saw those same trends in our own results for fiscal 2026: vinyl revenue increased 13% to $383 million, CD revenue increased 25% to $156 million, and physical movie revenue increased 22% to $339 million in home entertainment.
That growth also reflects the expanding role Alliance is playing with major studios. Over the last two years we have added significant relationships with Paramount and Amazon MGM Studios. Paramount became an exclusive physical media distribution partner for us in the U.S. and Canada beginning in calendar 2025, and we added Amazon MGM at the beginning of calendar 2026. These relationships are important not only for the products they bring to our portfolio, but for what they say about Alliance's position in the market.
As studios and labels increasingly consolidate and outsource physical media operations, content owners need partners that can coordinate manufacturing, inventory, retail execution, distribution and e-commerce fulfillment efficiently at scale. That is exactly what Alliance has spent more than three decades building. We support more than 340,000 in-stock SKUs across more than 35,000 retail and e-commerce storefronts with capabilities spanning wholesale distribution, dropship, fulfillment, inventory management and direct-to-consumer execution.
That infrastructure is becoming increasingly valuable as more content owners look to scaled specialists to manage these functions. Fiscal 2026 also demonstrated that our growth is becoming broader across categories. In addition to the strength in music and movies, collectibles revenue increased 45% to $32 million and distribution and fulfillment fee revenue increased 26% to $18.6 million. Collectibles in particular remain an important area of opportunity and growth.
We are increasingly moving towards licensed, premium and differentiated products with higher average selling prices and better margin characteristics. And because we already have relationships with entertainment licensors, major retailers and e-commerce platforms, we can use infrastructure that already exists to expand into adjacent fan and collector categories without having to recreate the distribution platform. Handmade by Robots is one example of that strategy.
Owning the brand gives us greater participation in product development, licensing and economics. Rather than serving solely as the distributor of a third-party product, we see opportunities to apply that approach selectively as we continue developing our collectibles portfolio. Our fulfillment business is another extension of the same infrastructure. As retailers expand online assortments, they increasingly need partners that can efficiently manage large catalogs and fulfill products directly to consumers.
Our breadth of inventory and dropship capabilities allow retailers to offer substantially more selection without carrying every product in their own stores or distribution centers. We also continue investing in automation to increase the scalability of that platform. During fiscal 2026, we ordered 5,000 additional totes for our AutoStore system, bringing total capacity to 57,000 totes. These investments are helping us create higher throughput while maintaining labor efficiency, which is important as we continue growing fulfillment volumes.
We are bringing the same focus on automation to sales and marketing. We implemented HubSpot in January 2026 to give our teams better visibility, automate workflows and strengthen customer engagement. We are also rebuilding our Web Amy B2B platform with AI-enabled capabilities designed to help retail buyers discover products more efficiently, improve purchasing accuracy and make our sales organization more productive. The new Web Amy platform is scheduled to launch in the first quarter of 2027.
Across the organization, we are using AI-assisted tools to reduce manual work and cost, improve decision-making and increase productivity. We are also extending our participation beyond the initial sale of physical product. Following our acquisition of End State Authentic at the beginning of the calendar year, we continue developing NFC-enabled authentication and digital product identity capabilities through End State Authentic and Alliance Authentic.
We are already expanding Alliance Authentic beyond music. We have launched preserved and encapsulated Handmade by Robots and select Funko collectibles on the platform, and we are preparing to bring the same treatment to premium video steelbooks. By combining preservation, authentication and premium presentation, we believe we can transform products fans already value into what Alliance Authentic is designed to deliver: the ultimate collectible. And because these are products we already source, distribute and fulfill, we have an opportunity to extend that model across categories at scale.
As we enter fiscal 2027, several growth sectors are coming together. We intend to build on the exceptional momentum in physical music, capture a full year of Amazon MGM, accelerate our higher-margin collectibles business and owned brands, and expand Alliance Authentic and End State Authentic into additional product categories. We also expect continued growth in fulfillment while using automation and AI—from warehouse operations to sales and marketing to the Web Amy redevelopment—to make the business more productive.
Our objective is to pair growth in these higher-value areas with better operating leverage and stronger cash conversion. We believe the changes taking place across physical entertainment are creating attractive opportunities for scaled, specialized operators. Alliance has spent decades building the infrastructure, relationships and capabilities required to operate in that environment, and fiscal 2026 provided meaningful evidence that those assets are becoming increasingly valuable.
With that, I'll turn the call over to Amanda to discuss our fiscal 2026 financial performance in more detail.
Amanda, Chief Financial Officer
Thanks, Jeff. I'll walk through our fiscal 2026 financial results beginning with revenue and gross margin, then covering operating expenses, profitability, cash flow, and our balance sheet. Net revenue for fiscal year 2026 increased 8% to $1.15 billion compared to $1.06 billion in fiscal year 2025. Gross profit increased 15% to $152.3 million from $132.9 million, and gross margin expanded 80 basis points to 13.3% from 12.5%. The improvement in gross margin reflected stronger margins in physical movies and collectibles, increased contribution from premium and exclusive content, favorable product mix, returns activity, and lower wholesale freight cost as a percentage of sales. Gross profit grew faster than revenue during the year, reflecting improvement in the economics of our business as our mix continues to evolve. Turning to operating expenses, selling, general and administrative expenses increased to $66 million from $56 million in fiscal year 2025. The increase primarily reflected higher payroll and employee-related costs to support the larger business, as well as increased consulting and professional service costs associated with strategic initiatives and public company operations.
As we enter fiscal year 2027, expense discipline and converting gross profit growth into stronger operating leverage are important priorities. Fiscal 2026 also included a $7.8 million non-cash write-off of a historical vendor rebate receivable associated with Tastemakers following the counterparty’s cessation of operations. We do not consider this charge representative of our ongoing operating performance. Including that charge, GAAP operating income was $27.2 million compared with $30.1 million in fiscal year 2025.
Net income was $13.1 million compared to $15.1 million in the prior year. On a non-GAAP basis, adjusted EBITDA increased 14% to $41.5 million, up from $36.5 million last year. Adjusted net income increased 24% to $23.4 million and adjusted diluted earnings per share increased 24% to $0.46 per share, up from $0.37 in fiscal year 2025. Turning to interest expense, we saw substantial benefit from the refinancing of our credit facility. Interest expense declined 28% to $7.6 million from $10.6 million and our average effective interest rate improved to 6.1% from 9.2%.
This improved our borrowing economics and provides a stronger financing platform as we manage the working capital requirements of our business. Moving to cash flow, net cash used in operating activities was $1.7 million in fiscal year 2026 compared with $26.8 million of cash provided by operating activities in fiscal year 2025. The year-over-year change was primarily driven by higher working capital requirements, including increased inventory and receivables.
Both balances grew faster than revenue during the year, contributing to the decline in operating cash flow. In fiscal year 2027, our objective is to convert a greater share of earnings into operating cash flow by moderating working capital growth relative to revenue, improving inventory productivity, and strengthening receivable collections. As a result, working capital increased to $62.4 million at June 30, 2026, compared with $45.4 million a year earlier.
As Jeff noted, improving cash conversion is a key priority in fiscal year 2027. Our focus is on disciplined inventory management, receivable collections, and working capital efficiency while continuing to support attractive growth opportunities across the business. At year end, $74.3 million was outstanding under our $120 million revolving credit facility, leaving $45.7 million of availability. The facility also provides, subject to certain conditions and lender consent, up to $50 million of additional borrowing capacity, providing further potential financial flexibility as the business grows.
During fiscal year 2026, we also repaid $10 million of related-party borrowings, further simplifying our financing structure. Our capital allocation priorities remain straightforward. First, we will fund working capital required to support attractive organic growth. Second, we will invest selectively in initiatives designed to increase both growth and productivity, including automation and AI, our WebAMI B2B redevelopment, Endstate and Alliance Authentic, and the continued expansion of Handmade by Robots.
Third, we are focused on improving cash conversion and balance sheet efficiency, and finally, we will continue to evaluate acquisitions selectively, where the strategic fit and expected return justify the use of capital. With that, I'll turn it back to Jeff.
Jeff Walker, Chief Executive Officer
Thank you, Amanda. Before we open the call for questions, I want to close with a few recent examples that bring our strategy to life and explain why I am so excited about where Alliance Entertainment is going. In July, I had the opportunity to spend time with Sir Richard Branson on Necker Island and present him with an Alliance Authentic preserved copy of the Sex Pistols’ Never Mind the Bollocks, Here’s the Sex Pistols because that album is so closely connected to the history of Virgin Records, it was a particularly meaningful moment for myself and Richard.
We were taking an iconic physical record, one with real cultural and personal significance, and showing how preservation, authentication, and digital identity can help protect its condition, provenance and story over time. For someone who has spent his entire career in physical entertainment, it was a remarkable illustration of what Alliance Authentic can become. Later that month, we brought the strategy directly to collectors at San Diego Comic-Con.
Alliance Authentic joined Handmade by Robots inside the Lucasfilm Pavilion, where we presented preserved music and licensed collectibles to one of the most engaged fan communities in the world. We also secured an additional 5,000 units of the previously sold-out Project Hail Mary Amazon Exclusive Limited Edition Collector's Steelbook. These units sold out again on the same day they were made available. Our studio and label relationships give us access to some of the most important products and franchises in entertainment.
Handmade by Robots gives us an owned brand through which we can participate directly in product design, licensing, exclusivity and go-to-market execution. Alliance Authentic adds preservation, authentication and digital product identity, and our distribution and fulfillment network gives us the ability to bring those products to retailers and consumers at scale. When those capabilities come together, we are doing more than moving units through a distribution network.
We can help shape the product, create scarcity and differentiation, build a direct relationship with the collector, protect the product's identity, and participate more fully in the value created around it. We are focused on turning moments like these into repeatable commercial capabilities across licensed products, premium limited editions, direct collector engagement and authentication services, with additional opportunities across the life cycle of the product.
The response we saw this summer strengthened our conviction that collectors want products with meaning, quality, scarcity, authenticity and the story. Alliance Entertainment is increasingly positioned to help content owners and licensors create those products and bring them to market. We are also seeing extraordinary excitement around the major entertainment release heading into fiscal 2027. Grand Theft Auto 6 is a great example. Rockstar's extended look debuted on Netflix in late August and generated an enormous level of consumer engagement, highlighting just how significant this release has become as a cultural event.
We buy directly from Take-Two and expect to participate across the launch, including the game itself and release products. We also expect to participate in the excitement around GTA 6 through music. A GTA 6 vinyl release featuring major recording artists is expected through Atlantic Records and, given the level of interest around the franchise, we believe it could be among our strongest-selling album releases of the holiday season. It is a great example of how a major entertainment event can create demand across several parts of Alliance Entertainment at once: gaming, hardware, accessories and physical music.
Opportunities like these are why we are so excited about fiscal 2027. We have momentum in our core business, new growth platforms in collectibles and authentication, and new tools in AI and automation that can make Alliance Entertainment more productive as we scale. Alliance Entertainment has spent more than three decades building relationships, infrastructure and capabilities across physical entertainment. Today, that foundation is supporting a much broader opportunity: premium formats, exclusive products, owned brands, authentication, fulfillment and direct collector engagement.
We believe Alliance Entertainment is increasingly positioned not just to participate in the evolution of physical entertainment, but to help shape it. I want to thank our employees across Alliance Entertainment for their hard work and contributions. I would also like to thank our customers, content and licensing partners, collectors and shareholders for their continued support. Operator, we are ready to open the line for questions.
OPERATOR
Thank you. We'll 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'd 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 poll for questions.
Thank you. Our first question is from Thomas Forte with Maxim Group.
Thomas Forte, Analyst at Maxim Group
Great. So, Bruce, Jeff, Amanda, congratulations on a very strong fiscal year. I have three questions, Jeff. They get progressively harder. I'll go one at a time, so the easiest one first. I don't think you were very affected by tariffs, meaning that most of your music efforts and your movie efforts weren't subject to tariffs. I think you had some small tariffs on Handmade by Robots, but we've been hearing a lot about tariff refunds in the June quarter, and I'm just curious if you were able to secure any.
Jeff Walker, Chief Executive Officer
Hey Tom, good to hear from you. Yes, we definitely secured some credits back and we have received the majority of the credits that we're waiting for to come back. Yeah, I think first off, there's a big push for people that are fans to collect products of their favorite artists, I will say, in CDs in particular. I recall maybe about 18 months ago, we were at our music trade show and we were talking with the labels about CDs and what we were seeing as the growth of it.
And one of the big topics was that everybody kind of forgot about CDs a little bit. And, you know, that the in-stock percentages and the fill percentages and things like that were not that great. And there was a lot of conversation about we've got to make sure that all the classic albums, the top albums, need to be in stock and available and, you know, and so forth there. And so that's really happened over last year, which is definitely helping the sales here.
And then the second part of that, consumers were coming in, buying CDs, and you have independent music stores and so forth going, hey, sales are going up. Maybe we build back up our section a little bit. So now you're seeing more selection at the store and on the store shelves, and all of that continues to enhance it. One of the things in the decline that was a big challenge is there's No product on the store shelf. As it kept declining, declining, declining, there were fewer and fewer and fewer places to buy. Also goes the other way. So you see vinyl, more stores, bigger selections, and more different retailers as well. That's been helping support the sales of vinyl. And so now you're seeing that trend happening on CDs. So I do expect it to continue with what we're seeing, because the consumer demand is there. The retailers, the wholesalers, and the labels are all producing product, making sure product is available.
And that's the whole combination that needs to work together.
Thomas Forte, Analyst at Maxim Group
All right, great. And then third and final for me, I know that you're excited with good reason for Grand Theft Auto 6. But I feel like if you looked at your performance in your fiscal fourth quarter and just your fiscal year, and you looked at your gaming versus kind of the rest of the portfolio, that the gaming didn't do as well. So when you step back, how do you look at your efforts in gaming and how do you consider from a portfolio standpoint when to emphasize or deemphasize different categories of physical media?
Jeff Walker, Chief Executive Officer
I think, I mean, we're emphasizing and de-emphasizing based on the trends that we're seeing, Tom, on that. You know, this Grand Theft one in particular is a historic game. It's going to change the gaming industry here, as well as there's a lot of other aspects revolving around this particular game. So it will be a huge fourth quarter. It's going to be, you could say, a Grand Theft Auto Christmas. That's what's coming for everybody on the retail side.
It's a big thing happening there.
Thomas Forte, Analyst at Maxim Group
Okay, thank you for taking my questions.
Jeff Walker, Chief Executive Officer
Thank you, Tom.
OPERATOR
Our next question is from Michael Kopinski with Noble Capital Markets.
Michael Kopinski, Analyst at Noble Capital Markets
Thank you for taking the questions. And I offer my congratulations on a great year. A couple of questions here. Your physical movie revenue obviously increased strongly 22% due to Paramount and Amazon MGM, as you mentioned. Now that they're on the platform, I was wondering how much incremental revenue opportunity remains from those relationships as we cycle into fiscal 27. And then I was wondering maybe you can just give us some update on maybe some discussions you might have with other major studios or content owners that would consolidate their distribution with you.
Jeff Walker, Chief Executive Officer
Hey, Michael, good. Good to hear from you. With respect to Paramount and MGM, one of the things that we're seeing: we're seeing pretty strong sales numbers on both of those, as well as we've been very much focusing on adding new catalog products to their collections. There was a lot of great content that both Paramount and MGM did not have released previously, or it was released in one format, but maybe not released in a 4K format or in a SteelBook format.
So those types of items are stuff where we're expanding the catalog, and in particular with Paramount right now in this second half-year of 2026, we've got significantly more new releases. They're not new movies; they're releases of existing movies that are really going to help bolster our catalog position there with Paramount. So we're pretty excited about that side of it. And so from that perspective, with respect to the other studios, I really can't comment too much.
We're in a lot of different conversations, obviously, on that side, as you've seen in the past. And each one of them has a different situation and different conversation. And we still do believe that Alliance is a great opportunity for a studio to license product to us, because at the end of the day we have really a huge, substantial sales channel with all of our e-commerce capabilities, our store capabilities, and fulfillment side of it to help maximize the sales of those studios.
So I think that's where we're at on that right now.
Michael Kopinski, Analyst at Noble Capital Markets
Gotcha, Joe. Thanks. And then on your proprietary products, I was just wondering if you can maybe give us a little color. The growth—how much of the growth is coming from proprietary products like Handmade by Robots versus third-party licensed merchandise?
Jeff Walker, Chief Executive Officer
Yeah, the majority of our growth is coming from our third-party products. Right now we are pretty heavily investing in Handmade by Robots, Alliance Authentic, as well as End State. Those are all opportunities for Alliance that have very significantly strong margin profiles in those three categories. And we definitely have quite a bit of investment dollars into those right now, from building our teams on that side as well as working to market and generate new business in all three of those categories.
So you're going to continue to see that investment that we're making right now on those three categories in particular, and on our current sales level—to your specific question—it's really the third-party ones that are really significantly growing.
Michael Kopinski, Analyst at Noble Capital Markets
Gotcha. And then your fulfillment fee revenue increased a strong 26%, and you said that you added 5,000 totes onto your AutoStore capacity. I was just wondering if you can just tell us how much additional revenue can the existing infrastructure and AutoStore capacity accommodate before another meaningful cap investment is required.
Jeff Walker, Chief Executive Officer
We still have capacity currently, and we're always looking at how we maximize our capacity there. I don't think we have a pressing need right now for a huge capex investment. If we go down the capex side, it will be more towards automation rather than size of the building, per se. So we are looking at new opportunities to make the warehouse more efficient through different automation—different product in the AutoStore, but same type of result where we use some technology there to really help reduce our overall costs on that aspect.
So we still do have capacity, but, you know, as different things pick up one area and move around, we definitely are maneuvering with that in our warehouse operations. I will also say that we've really run the business where we get the sales and we get the opportunity, and then we invest in the systems to make that happen. We're not really a company that likes to go build a bunch of stuff and hope that the sales and opportunities show up. So we're pretty prudent about that.
We get the capacity up there and the volume up there, then we look at, okay, how do we solve this capacity challenge? So we're pretty prudent on our capital expenditures.
Michael Kopinski, Analyst at Noble Capital Markets
Yeah. And it seemed like your SG&A expense increased a fairly strong 18%. I was just wondering, you know, it sounds like a lot of that was to support future growth. I was just wondering, how should we look at SG&A leverage as we go into fiscal 2027?
Jeff Walker, Chief Executive Officer
I think there is a lot in there to support the growth, especially in some of the new categories that I was just mentioning there. We do have some AI projects in the works. Those could help us be a little more efficient with some of our SG&A expenses as well there. So we are pretty heavy on that side right now. I'm a CEO that's very pro-AI and technology, so we've got a lot of our leadership team working on a lot of different AI solutions that can help us not only grow sales—which is number one priority—but help with operational expenses as well.
And we are going to continue to see some improvements in that, a lot directly from those AI initiatives.
Michael Kopinski, Analyst at Noble Capital Markets
And Jeff, if I could squeeze one more in about Alliance Authentic, I was just wondering, are there specific commercial milestones that we should look for on Alliance Authentic and End State?
Jeff Walker, Chief Executive Officer
We have our own commercial milestones. I think really the biggest things that we're looking at first and foremost is the number of collectors that we have in the ecosystem. So what that means is how many people have one of the collectible items we have, whether it's vinyl or Handmade by Robots or a Funko encapsulated. We're also right about ready to launch SteelBook encapsulated as well. And so the bigger that we grow that ecosystem of our collectors really helps us with the second phase of that, which is the peer-to-peer marketplace using the NFC chips there and developing that.
So when people have their collectible, if they want to sell it—or, you know, sell it basically—or buy them, we have a good marketplace and ecosystem for that. So we are investing quite a bit to develop that whole component there. It's operational today, and we're working on building more people with the collectible products. The last part is we do have Comic Con New York coming up, and we did a lot with Alliance Authentic in the San Diego Comic Con and got a lot of collectors into the ecosystem through the Comic Con there as well.
Michael Kopinski, Analyst at Noble Capital Markets
Gotcha. Thank you. That's all I have. Good luck on 2027.
Jeff Walker, Chief Executive Officer
Thank you, Mike.
OPERATOR
Thank you. Our next question is from David Heiserman with ThinkEquity.
David Heiserman, Analyst at ThinkEquity
Oh, thank you very much. Thank you, Jeff. Thank you, Amanda. One of my questions was specifically about development of secondary market, peer-to-peer marketplace so that you would control the entire distribution, delivery, and chain-of-custody provenance for all your collectibles. But my second question: as an Eagles fan, I love seeing the Eagles player up there on your super exciting brand. The End State Authentic is—could you describe what the horizon would be for that going forward?
Is that something that would be on every sports team around the world and every event, especially with an NFL game in Australia tonight?
Jeff Walker, Chief Executive Officer
Yeah. So the End State Authentic is—it's great. The technology that we have is great. There is a huge amount of opportunities across all sorts of different collectible platforms. It's based on an NFC digital chip, and we have our own proprietary software with that. But it really becomes an authentication aspect. That chip has its own digital codes to it that cannot be replicated and so forth. And so when you put that chip into an encapsulated product, it could go into any items that are graded or authenticated.
So you think of cards and collectibles and things like that that people grade and authenticate—chips like that are very valuable in those particular areas. It can also go into products when products are originally manufactured and made, putting a chip in there so that you then can prove the authentication and, you know, the aspect that it's not a fake one of it or something that's been knocked off. So you're going to continue to see—not just with End State, across the board—significant movement into these NFC chips, into a lot of different products.
And you see them even in high-end fashion products. Right now they're starting to put them in some of the high-end fashion bags and different things like that as well. It's really, really valuable for the authentication of the product. And so we're in the forefront of that, and we're focused heavily on collectibles and those types of things with the NFC technology. And I, and myself and Bennett, who heads up End State, we're in a lot of different conversations right now of getting our End State technology integrated into a lot of good opportunities.
I don't really want to speak on specifics about them right now because we're working under NDAs on a lot of those, but there is some great opportunity there with that technology, no doubt.
David Heiserman, Analyst at ThinkEquity
Thank you very much.
OPERATOR
Thank you. I would now like to pass the floor over to Paul Koontz for any webcast questions.
Paul Koontz, Investor Relations
Thank you. And we actually—I covered a few of these already, but we do have some. And I just want to let our attendees know we are running past 45 minutes now, so if we don't get to any of your questions and you've left contact information, we will reach out after we wrap up. But one of the questions we have: Jeff, what are you seeing in the DVD demand going forward?
Jeff Walker, Chief Executive Officer
Yeah. So on the DVD side, my personal opinion on DVD is, you know, we've been seeing a decline on DVD for, you know, more than the last decade, a significant decline on that. And I personally have a belief that we're very close to the bottom of the decline. We're definitely seeing much slower rates of decline. And with that, I'm seeing a lot of social media conversation on DVD, similar to what we're seeing on CD and vinyl, that consumers want to have their favorite movie at home and their collection.
And, you know, on the video side, we all know how complicated it is trying to find the movie you want to watch and what platform it's on and whether it's on a platform or not. And so the DVD side is definitely ripe for a turnaround there. One of the challenges we have is not very many retailers stock DVD. And, you know, we're in the right position to try to help that right now going forward. So I'm optimistic that whether it's 2027 or 2028, we're going to see the bottom of DVD and we're going to start to see it increasing, similar to what we're seeing in vinyl and CD.
People want to collect their favorite movies. They want to have them at their house. It's the same situation there. So I'm pretty optimistic about that. And the trends that we're seeing seem to be going in that direction.
Paul Koontz, Investor Relations
Great. Thank you. And our next question, did you learn anything from the reaction at San Diego Comic-Con that could influence the products Alliance Entertainment develops or brings to market next?
Jeff Walker, Chief Executive Officer
Well, Comic-Con is a fantastic convention for people that haven't been there before. There's. We have the New York Comic-Con coming up in just about a month from now. The fan base at Comic-Con is fantastic. They're focused on all their favorite products and IP and characters, and it's a fantastic thing to watch there. As well as just like there's a shift to physical product and collectability, there's also a human shift to go to events and spend time at an event and have experiences and do all of that.
You know, people pay a lot of money to go to Comic-Con and they go there because it's part of their life and part of their experience. And, you know, you're seeing not just Comic-Cons, but anime shows, vinyl record shows, collector shows, trading card shows, all that kind of stuff being very robust right now as it's an experience for people and it feeds their fandom and what they're collecting. So when we look at our products in there, we're definitely focused on what we can do as far as providing, like, Comic-Con exclusives of Handmade by Robots.
Same thing with Alliance Authentic. We had some great Star Wars collectibles on vinyl that were encapsulated. Some Japanese pressings are the vinyl records that we sold there. At Comic-Con, we are looking at more that we can do with movies and so forth, with exclusives and those type of shows. It's really a culmination of all this different IP and fandom there. And it's where the collectors that we are trying to develop, where they're coming through.
And those people also, as you all can realize, are fairly heavy on social media and posting and developing that stuff. So when we're there with a strong presence, that rolls out into a lot of social media going forward there. So we are, as you can tell, we're also investing in shows like that to build our brands as well. And, you know, there is cost to do that, but we are definitely seeing a win on that side by focusing on those Comic-Cons and other collector shows.
Paul Koontz, Investor Relations
Great, thank you, Jeff. Then we have another question on the new WebAmy platform: what will a retail buyer actually be able to do differently once the AI-enabled version goes live?
Jeff Walker, Chief Executive Officer
So just for everybody's info, WebAmy is our web platform for our B2B. So we have almost 2,000 independent retailers and so forth. They use that website to place orders, to look up product, to search for products. It's a pretty robust website. A significant amount of our sales come through there. The enhancement: we're rebuilding the entire back end of it as well as new enhancements. It's all been AI-enabled coming from the back end. The core part of it is completed.
We're now working on different functionality on the front end and we're planning to launch this in January of 27 after the holiday season. It includes significant speed improvements, obviously, in the platform, as well as search capabilities. And when I talk about search capabilities, it goes not only searching for basic product, kind of a linear search, but it will also help if you are looking for something Star Wars related. It will bring up the movies, the music, the collectibles, all things revolving around that.
Or if you wanted to go into some other category, it can cross-search across all the different products. And one of the things that's important for us is being able to communicate to our buying customers all the different things that Alliance Entertainment stocks in all these different categories. And that will really help the buyers at the retail locations find stuff when something's hot and selling or, you know, they're going to have an in-store appearance or a listening party for a new release on a music title, what other products from that artist are available and so forth.
So we expect it to dramatically help our sales on that side. It will be a big improvement for Alliance Entertainment and, the way it's turning out right now, it's going to be one of the top—well, it will be the top—B2B platform within our industry, for sure.
Paul Koontz, Investor Relations
Great. Thank you, Jeff. And as we're coming close to a full hour here, this will be, I guess, the last question we do. Beyond GTA 6, are there other major releases or franchises coming up that could create opportunities across several Alliance Entertainment categories at the same time?
Jeff Walker, Chief Executive Officer
Oh yeah, there's lots on that product side. We've actually put together our own product council here with music, movies, and collectible all together because we have. And gaming. So we have teams from each of those and we get together and look at what's coming out in the future and what the combined opportunities and things are. Some of this definitely revolves around movies. And I'll give you one piece of information that's coming. The new James Bond movie is there.
It's an Amazon MGM movie. They're working on that movie right now. It's looking like we're kind of hearing maybe theaters the end of 2027. And, you know, that will go into DVD for us through Amazon MGM into 2028. And then we're looking at, okay, what other collectibles revolving around James Bond? What are the music, soundtracks, and things revolving around that. And you can imagine when they put out a big movie like that that has such a history to it, what that looks like in the late '27 and '28 revolving around kind of everything James Bond.
And so we are trying to coordinate all of our different configurations to plan ahead for something like that. One other one that is coming up that was really communicated by Sony is the new Beatles movie that's coming out in April of '28. There's multiple movies that the Beatles are putting out. And you guys can all imagine the combination that we have from music and the movie side and the collectible side, trying to revolve around the Beatles coming up in 2028 and what that does for us.
So those are kind of two examples that you can see how there's such a correlation between all these platforms and these configurations all together and what those opportunities can present for us when we put our four teams of gaming and collectibles and music and video all together to try to strategize on how we have the best combination of product offering for those big initiatives that are happening. Very exciting opportunities there.
Paul Koontz, Investor Relations
Yes, very exciting. Jeff, if you have any final comments you would like to leave before we wrap up?
Jeff Walker, Chief Executive Officer
Well, I'm super excited on where we're going. I know you guys see our collectible sales increase over the last year. They've really ramped up even more recently. And, you know, people told me to get out of the music industry a long time ago, and those people are—I'm kind of telling them, I told you so—now that we're seeing vinyl and CD resurgence like it is. So we're definitely in the right place at the right time. And we've got a fantastic team of people at Alliance Entertainment and there's a lot of great business conversations happening every day.
And that's what we're all focused on here. And we're making some stuff happen, as you can see.
OPERATOR
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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