Alliance Entertainment Gross Margin Expands 80 Basis Points to 13.3%
The entertainment commerce platform posted fiscal 2026 net revenues of $1.149 billion, up 8% from a year earlier.
Alliance Entertainment Holding Corporation (AENT), a scaled entertainment commerce and collectibles platform, reported fiscal 2026 net revenues of $1.149 billion, up 8% from $1.063 billion in fiscal 2025. Gross profit rose 15% to $152.3 million, and gross margin expanded 80 basis points to 13.3% from 12.5%.
The margin expansion was the year’s defining operating result. The company said it reflected stronger margins in physical movies and collectibles, increased contribution from premium and exclusive content, favorable product mix and returns activity, and lower wholesale freight costs as a percentage of sales. That trajectory had already been visible in the second quarter, when gross margin expanded 210 basis points year-over-year to 12.8%.
GAAP operating income declined to $27.2 million from $30.1 million, and net income fell to $13.1 million, or $0.26 a share, from $15.1 million, or $0.30 a share. The year included a $7.8 million non-cash write-off of a historical vendor rebate receivable associated with Tastemakers after the counterparty ceased operations. The company said it does not consider the charge representative of ongoing operating performance.
Adjusted EBITDA increased 14% to $41.5 million from $36.5 million. Adjusted net income rose 24% to $23.4 million, and adjusted diluted earnings per share increased 24% to $0.46 from $0.37. Selling, general and administrative expense increased to $66.0 million from $56.0 million, primarily reflecting higher payroll and employee-related costs to support growth, as well as increased consulting and professional-service costs associated with strategic initiatives and public-company operations.
Physical music remained the largest revenue engine. Vinyl revenue increased 13% to $383 million for the full year. CD revenue increased 25% to $156 million. The company said growth across both formats reflected sustained consumer demand for physical ownership, premium editions and collectible-oriented releases. In the third quarter, vinyl sales were $99 million, up 15% year-over-year, and CD sales were $39 million, up 90%.
Physical movie revenue increased 22% to $339 million, supported by higher unit volumes and expanding studio relationships. The company said its exclusive physical-media distribution relationship with Paramount and the addition of Amazon MGM Studios during fiscal 2026 further strengthened its role as a scaled partner for content owners. In the second quarter, physical movie revenue had been $114 million, up 33% year-over-year. In the third quarter it was $61 million, up 5%.
Collectibles revenue increased 45% to $32 million, supported by higher average selling prices, expanded licensed merchandise offerings and continued development of proprietary products, including the owned Handmade by Robots brand. Distribution and fulfillment fee revenue increased 26% to $18.6 million. During the year the company ordered 5,000 additional totes for its AutoStore system, increasing capacity to 57,000 totes. Following the December 31, 2025 acquisition of Endstate, it continued to develop NFC-enabled authentication and digital product identity capabilities through Endstate Authentic and Alliance Authentic.
Interest expense decreased 28% to $7.6 million from $10.6 million, reflecting a lower average effective interest rate following the company’s refinancing. The average effective interest rate declined to 6.1% from 9.2% after an October 2025 refinancing with Bank of America. The company also repaid $10.0 million of related-party borrowings.
Net cash used in operating activities was $1.7 million, compared with $26.8 million of net cash provided in fiscal 2025, primarily reflecting increased inventory and receivables to support growth. Working capital increased to $62.4 million at June 30, 2026, from $45.4 million a year earlier. Inventory and trade receivables increased at rates above the company’s 8% revenue growth. The company ended fiscal 2026 with $45.7 million of availability under its $120 million revolving credit facility, with $74.3 million outstanding.
Chief Executive Officer Jeff Walker said the market for physical entertainment continues to evolve toward premium formats, collectible products and more specialized distribution, and that those changes are playing directly to capabilities the company has built over more than three decades. Chief Financial Officer Amanda Gnecco said that in fiscal 2027 the company’s focus remains on driving profitable growth, improving cash generation and increasing operating leverage. Management’s objective is to convert a greater share of earnings into operating cash flow by moderating working-capital growth relative to revenue, increasing inventory productivity and strengthening receivable collections.