Alliance Entertainment Holding Corp Q3 FY2026 Earnings Call

Greetings and welcome to Alliance Entertainment's third quarter 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 will now pass a call over to Paul Kuntz, a member of Alliance Entertainment's IR team at Redchip. Paul, please go ahead.

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 these 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 September 10, 2025 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. 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 host today, Jeff Walker, Chief Executive Officer, and Amanda Necco, Chief Financial Officer, will present the results of operations for the third quarter in nine months ended March 31, 2026. Bruce Ogilvie, Executive Chairman, is also on the line and will participate during the Q&A session. At this time, I will turn the call over to Alliance Entertainment CEO, Jeff Walker.

Thank you, Paul, and good afternoon, everyone. We appreciate you joining us today. I want to begin by framing the third quarter in very clear terms, because 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 during the third quarter alliance delivered a strong top line growth with net revenue increasing 21 percent year over year alongside continued profitability with net income increasing 25% and adjusted EBITDA reaching 5.1 million. For the year-to-date period, net income is up 78% and adjusted EBITDA has increased 47%. These results are important not just because of the growth, but because of how that growth is being generated. What we're seeing is the continued execution of a strategy we've been building over the last several years. A shift toward higher value products, stronger mix, and a more scalable operating model. The revenue growth this quarter was broad-based across our core categories, including music, video, gaming, and collectibles, and it reflects both underlying demand and our ability to align inventory content and distribution with where the collectors are going at the same time we continue to operate with discipline even as we scale the business we're maintaining a cost structure that allows us to generate operating leverage and sustain profitability that balance growth with discipline is what defines the earnings profile we're building stepping back what's important is that the performance is not being driven by short-term factors it reflects a structural shift and how collectors engage with physical products today we've been very clear in how we think about this we are not in a declining physical media business we are in the collectible business and what All we're seeing in the market continues to validate that. Collectors are buying vinyl, CDs, and premium video formats, not because they need access to content, but because they want to own something tied to the artist, franchises, and brands they care about. That shift towards ownership, scarcity, and premium formats is driving stronger demand, better pricing and more consistent sell-through across our portfolio it is also reinforcing our position as a key partner to studios labels and licensors who are increasingly looking to Alliance to manage the full lifecycle of these products at the same time we are extending that model beyond traditional distribution during the quarter we advance the next phase of our strategy with the launch of Alliance Authentic and a continued integration of N-State. These initiatives begin to layer authentication, provenance, and lifecycle engagement into the products we already distribute at scale, moving us towards a platform that supports collectibles from initial sale through resale. Taken together, the third quarter reinforces that Alliance is evolving into a more scalable, high-quality business, one that combines growth, profitability, and increasing participation across the full lifecycle of collectible products. With that context, I'd like to walk through the key drivers behind this performance, starting with how our content strategy and category focus are shaping results across the portfolio. During the third quarter, we saw a strong growth in music and video. Vinyl revenue increased 15% year-over-year to $99 million. CD revenue increased a staggering 90% to $39 million. And physical movie revenue grew 5% to $61 million. What's notable here is not just the growth itself, but the breadth of that performance. We're seeing strength across multiple formats, price points, and release types. In music, demand continues to be driven by both new releases and ongoing catalog engagement, with particularly strong performance in collectible-oriented segments, such as limited editions and international titles, including kpop at an industry level this trend continues to build with us vinyl sales surpassing 1 billion last year marking nearly two decades of consistent growth and what's important is how consumers are engaging with that product when you look at major releases whether it's Taylor Swift or other top artists millions of vinyl records and CDs are being sold alongside streaming access that is readily available those purchases are not about access they're about ownership people want something tangible connected to the artist and that's what continues to drive demand in the category we also saw incremental demand tied to event driven moments like record store day which continues to expand in both scale and participation. This year was the largest record store day ever and we shipped over 700,000 units to independent retailers reflecting both the strength of the event and or role in enabling it at scale. In video while the category has gone through a long period of decline what we're seeing Industry now is a more stable demand environment, supported by a steady cadence of new releases and continued interest in premium formats such as 4K, Ultra HD, and collectible editions such as steelbooks. Industry data shows that 4K, Ultra HD formats grew approximately 12% in 2025, reinforcing the shift towards higher-quality, collector-focused home entertainment. Over the past year, we've significantly expanded our access to high-quality content through our license agreements with Paramount, which became effective at the beginning of calendar 2025, and MGM Studios, which we added at the start of calendar 2026. Together, these partnerships give us distribution rights to some of the most valuable franchises in the industry, strengthening our position with both retailers and collectors. Just as importantly, they allow us to consistently bring premium, high-demand releases to the market, which supports stronger sell-through, better pricing, and improved visibility across key retail channels. What we're also seeing is that scale matters more in this environment. As the market shifts towards premium and collectible formats, retailers and licensors increasingly rely on partners who can manage complexity, whether that's broader skew assortments, shorter production runs, or more targeted release strategy. That plays directly into our strengths in distribution fulfillment and inventory management. So when you look at the physical media category today, the takeaway is that it's becoming more focused, more premium, and more execution driven. And within that environment, our role continues to expand, not just as a distributor, but as a partner that helps bring these products to market in a way that maximize value across the entire ecosystem. Turning to collectibles, this continues to be one of the most important areas of our growth and value creation in the business. During the third quarter, collectibles revenue increased 48% year over year. That growth was driven by a combination of higher average selling prices, expanded sourcing activity, and continued improvement in product mix towards more premium and differentiated offerings. What we're focused on in this category is very deliberate. We're not trying to scale collectibles through volume alone. We're focused on building a portfolio that emphasize licensed, higher value products that resonate with collectors and carry stronger margin characteristic. This aligns with what we're seeing more broadly across the industry. large retailers like target are increasing investment in pop culture and collectibles categories while specialty players such as gamestop are seeing collectibles becoming a growing share of their overall business what that tells us is that this is not isolated demand it's a broader structural shift towards higher value fan driven products and that reinforces our focus on building a more differentiated premium collectibles portfolio that approach starts with sourcing but it extends well beyond that over the past year we've expanded our vendor base and added new relationships that are bringing incremental high quality product into the portfolio at the same time we've been refining the mix within existing brands moving away from more commoditized items and towards products with stronger fan engagement better pricing power and more consistent sell-through the result is a collectible business that is not only growing but improving in quality with higher average selling prices stronger margins and better inventory efficiency and that positions us to scale the category in a way that drives both revenue and profitability over time a key contributor to that progress is handmade by robots since transitioning to an own brand handmade by robots has given us a much greater control over product design licensing and go-to market strategy we've expanded the licensing pipeline increased retail distribution and are continuing to invest a new product development what's What's important here is that this is not just a revenue contributor, it's a margin driver and it represents a scalable model that we can apply across additional own and control brands over time. More broadly, what we are seeing in collectibles is very consistent with what we are seeing across the rest of the business. Demand is being driven by fans who are looking for products that are unique, limited, and connected to the content they care about. That creates an opportunity to introduce high-quality products, manage supply more intentionally, and ultimately improve both margins and inventory efficiency. As we continue to build out this category, we see collectibles both complementary to our core distribution business and increasingly important to our overall earnings profile. It deepens our relationship with licensors, expands our presence with retailers, and allows us to participate more directly in the value creation of the products we sell. Building on that foundation, the next phase of our strategy is extending beyond the products itself and into the full life cycle of collectibles. During the quarter, we advanced that effort with the launch of Alliance Authentic and the integration of End State Authentic. Alliance Authentic represents the first commercial application of this strategy within our portfolio. We began with premium vinyl collectibles encapsulated individually numbered releases that are authenticated at the point of origin and designed specifically for collectors. These products are not just sold, but curated with scarcity, provenance, and long-term value in mind. What N-State Authentic enables is the infrastructure behind that. Through NFC-enabled authentication and digital product identity, we can verify each item, track it over time, and connect it to a digital record that supports ownership, authenticity, and resale. That allows us to extend our role beyond initial distribution into supporting the product throughout its entire life cycle. This matters because as collectibles become more valuable, the importance of trust verification and transparency increases collectors want to know what they own where it came from and that it's authentic licensors want to protect their brands and marketplaces require reliable way to validate transactions what we're building addresses all three over time this creates additional opportunities that did not previously exist in physical products including authenticated resale direct engagement with collectors and participation in secondary market activity importantly this is more than near-term revenue contribution it's about establishing the infrastructure and ecosystem that can support long-term value creation across a growing base of collectible products we are already moving forward to expand this model beyond vinyl into other categories and we're continuing to explore partnerships both within and outside of our existing portfolio this is a natural extension of the business we built we already source distribute and fulfill these products at scale what we're now adding is the ability to track authenticate and engage with those products over time that evolution moves us from a transactional model towards a platform that participates more fully and the value of products we bring the market with that I'll turn it over to Amanda to walk through the financial results in more detail.

Thanks Jeff. I'll start with our financial performance for this third quarter. Net revenue for the quarter was $258 million, an increase of 21% compared to $213 million in the prior year period. This growth reflects broad-based strength across our core categories as just discussed and continued alignment of our product mix with areas of higher consumer demand cost of revenue increased 22% year over year to two hundred and twenty five million dollars generally in line with the revenue growth reflecting the higher volume of product flowing through the business gross profit for the quarter was thirty three million compared to $29.1 million in the prior year period. Gross margin was 12.8 percent compared to 13.6 percent last year. The year-over-year change primarily reflects category and product mix within the quarter, including the relative contribution of certain lower margin categories as we scaled revenue. Importantly, we continue to see the benefits of mix improvement and pricing discipline in across higher value categories, which support the overall earnings profile of the business over time. Net income for the quarter increased 25% to $2.3 million, or $0.05 per diluted share, compared to $1.9 million, or $0.04 per share, in the prior year period. Adjusted EBITDA was approximately 5.1 million, up from 4.9 million last year, representing a four percent increase. While EBITDA growth was more modest than revenue growth in the quarter, it reflects the continued scaling of the business alongside targeted investments in growth initiatives including technology and platform capabilities. Overall, the third quarter reflects a business that is growing generating consistent profitability and continuing to operate with discipline as we invest in areas that support long-term expansion turning now to our year-to-date results which provides a broader view of the underlying momentum in the business for the nine months ended March 31, 2026, net revenue was $881 million, an increase of 5% compared to $836 million in the prior year period. While overall revenue growth was more modest on a year-to-date thesis, it reflects continued strength in higher value categories and the impact of mixed improvements across the portfolio. That mixed shift is clearly reflected in profitability. Gross profit for the nine-month period increased to 117.3 million compared to 96.9 million in the prior year and growth margin expanded by 170 basis points to 13.3%. This improvement was driven by increased contribution from premium physical media, collectibles and exclusive content, as well as continued discipline in pricing and inventory management. Net income for the nine-month period increased 78% to $16.6 million or $0.32 per diluted share, compared to $9.3 million or $0.18 per share in the prior year period. Adjusted EBITDA increased 47 percent to 35.7 million, up from 24.4 million last year. What these results demonstrate is the operating leverage inherent in our model. As we continue to shift the business towards higher value products and more efficient execution, we are seeing a disproportionate improvement in earnings relative to revenue importantly this performance reflects consistency across multiple quarters the margin expansion and earnings growth we are delivering are not isolated to a single period but the result of deliberate changes in mix cost structure and operating discipline that are compounding over time overall our year-to-date results reinforce that we are building a structurally stronger business with improving profitability and increasing scalability as we continue to grow before I turn it back to Jeff I'll touch on our balance sheet and liquidity position we ended the quarter with approximately 60 million in working capital reflecting continued discipline in managing both inventory and payables as we support growth across the business inventory increased during the quarter consistent with higher revenue and the timing of inbound product importantly our inventory levels remain aligned with current demand and reflect our focus on higher value faster moving categories where we have strong visibility into sulfur from a liquidity standpoint we ended the quarter with approximately $56 million of availability under our evolving credit facility. This provides us with ample flexibility to support working capital needs, invest in inventory tied to exclusive partnerships, and fund strategic initiatives across the business. More broadly, our balance sheet remains well positioned to support both near-term operating requirements and longer-term growth. We continue to take a measured approach to capital management with a focus on maintaining liquidity, managing risk, and preserving flexibility as we scale the business. I'll close with a brief comment on our approach to capital allocation. Our framework remains consistent and disciplined. We prioritize investments that directly support to strategy Jeff outlined and that enhance the quality and durability of our earnings. First, we continue to allocate capital towards inventory and exclusive content partnerships where we have strong demand visibility and attractive returns. These investments support higher value products, improve overall mix, and reinforce our relationships with key licensors and retail partners. Second, we invest selectively in technology and infrastructure that improves scalability and efficiency. This includes automation, systems that support our exclusive partnerships, and capabilities tied to initiatives like Alliance Authentic and End State Authentic. These investments are targeted and are evaluated based on clear operational and financial returns. Throughout all of this, maintaining flexibility remains a priority. We are not pursuing growth for growth's sake and we remain focused on deploying capital in a way that balances near-term performance with long-term value creation.

That discipline has been an important contributor to the earnings growth and operating leverage we've delivered and it will continue to guide decision-making going forward with that I'll turn it back to Jeff thanks Amanda before we open the call for questions I want to spend a few minutes on how we're thinking about the business from here as we look at the third quarter and year-to-date performance what's most important is the consistency we're seeing across the model we've now demonstrated the ability to grow revenue expand earnings and maintain discipline all at the same time that's a meaningful shift from where the business was even a few years ago looking ahead we remain confident in the trajectory we're building from an execution standpoint our priorities are clear we're focused on continuing to scale our core categories particularly in areas where we're seeing strong demand and favorable mix including premium physical media and higher value collectibles the pipeline of new releases exclusive content and licensed products remain strong and we believe that supports continued growth and earnings quality as we move forward we are also continuing to expand our own and control brands handmade by robots is good example of how we can create additional value by controlling design licensing and distribution and we see opportunities to extend that model across new categories and partnerships over time we are also expanding the platform side of the business which is becoming an increasingly important part of how we create value across the ecosystem that includes alliance authentic where we are bringing premium, authenticated collectibles directly to market through curated, limited releases designed specifically for collectors. This allows us to participate more directly in product design, scarcity, and pricing and deliver higher value offerings to our consumer base. Alongside that, N-State Authentic provides the underlying infrastructure that enables authentication providence and lifestyle tracking through NFC enabled technology our focus there is on building out that foundation deepening integrations and expanding use cases across additional products and partners and most recently we relaunched movies unlimited website as a curated destination for collectors, supporting high-value purchasing behaviors like pre-orders and limited additions, and strengthening the collector lifetime value. Taken together, these platforms extend our role beyond traditional distribution. We will continue to manage the business with a focus on profitability, operating leverage, and return on capital, while investing selectively in areas that support long-term growth stepping back what we're building is a more scalable and more differentiated business we're moving beyond a traditional distribution model and towards a platform that connects content owners retailers and collectors across the full lifecycle of the products we bring to market that evolution is already reflected in the quality of our earnings and the strength of our performance and we believe it positions alliance to create durable long-term value for our shareholders before we turn to questions i want to thank our employees across the organization for their continued execution and commitment i'd also like to thank our partners customers and shareholders for their ongoing support operator we're ready to open the line for questions thank you we will now be conducting a question and answer session if you would like to ask a question please press star 1 on your telephone keypad a confirmation tone will indicate your line is in the question queue you may press star 2 if you would like to

remove your questions 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 poll for questions. The first question comes from the line of Thomas Forte with Maxim Group. Please go ahead.

Great. So first off, Bruce, Jeff, and Amanda, thank you for taking my questions. I apologize in advance if you touched on these in your prepared remarks. I'm juggling multiple calls right now. And then I'm going to ask both questions at once, and thank you in advance for your answers. So the first question is, this past Record Store Day, you offered Handmade by Roemots, a limited release of Ozzy Osbourne, and a Hello Kitty skew? How would you characterize the success of the initiative, including to drive brand awareness for Handmade by Robots? And then my second question is, you added Amazon MGM Studios just ahead of its breakout box office hit, Project Hail Mary, which was an amazing movie. Can one title be a needle mover for your DVD business?

Thank you, Tom. This is Jeff. that we'll start with the handmade and the record store day there it's really the first time that record store day had approved a collectible you know they're focused on vinyl records there and you know we have a huge business with with the record stores and record store day on the on those two titles one of the things that's important for Record Store Day is to make sure that there's not an oversupply of the product. So we made 2,000 units of each of those. We actually had orders come in for just over 6,000 units on each of them. So the stores were allocated down on their orders. And then on top of that, we added another little wrinkle. They all did sell out in the stores. The stores were extremely happy with them. They were a hit. We actually started a new record store series on them. So you will see on the outside of the packaging, it says Record Store Day Exclusive, and it's a 001 and a 002. So as we move forward, there will be additional ones. We do have titles presented to them for November Record Store Day and next April that we're working on with licensors right now. And then the other part that was a huge home run in that with those handmade was that we encapsulated 30 units of each of the characters. and in the encapsulation through Alliance authentic we added an NFC chip to those and it was those were the hot tickets you know a store got some of the you know the top stores got one of those and you know what you see a lot after record store day is you know there's some resellers that sell them on eBay and things. We were seeing the Ozzie and the Hello Kitty in that $75 range on eBay. The encapsulated ones, we saw ones in the $400 to $500 range. When you look at it, people really wanted those characters. There's 2,000 of them, but there's only 30 of them that are encapsulated, uncirculated with an NFC chip. The people that have those 30 are going to have a fantastic investment over time because you can imagine we continue to drive this over the next you know 10 to 20 years that's a that's going to be a very famous two pieces that we created with handmade. On Project Hail Mary yes that's going to be a home run title for us. It's a street date is in August. Um, and yeah, it's, it's one of the, I think it's the biggest theatrical release we've had, uh, last, you know, in calendar 25 and here into 26. Um, so we're doing a lot of different, uh, planning and preparation for that right now. And we expect that to be a very good release and high volume on DVD in all formats.

Thank you, Jeff. I really appreciate that.

Thank you. Next question comes from the line of Michael Kupinski with Noble. Please go ahead.

Thank you for taking my question. It's Jacob Muchler on for Michael today. So my first question is also regarding Alliance Authentic. I was just curious if you could talk about some of the products that might hit Alliance Authentic next. I understand that it could be, you know, multiple different kinds of collectibles could be put onto the platform, but just curious if there's some additional collectible categories that seem most likely to reach a platform next.

Yeah, we're, you know, we have vinyl uh in there right now those are numbered collectibles and then uh we have launched uh funko pops um encapsulated as well as our handmade by robots uh in the future we do have cases right now for dvd steelbook and we have cases for video games playstation xbox Nintendo Switch. There is the aspect within all of this that we're really looking at preserving uncirculated copies of all these types of products and put an NFC digital chip with it, encapsulate it, and those become a piece of history. And when you think about going backwards and think about, you know, products that came out years ago. You know, the idea here is that these get encapsulated at the beginning and over time, 5, 10, 20 years down the road, even 50 years down the road, it's really a substantial piece of history. And we know it's authentic and we know it's encapsulated. That's the intention with this product. And I think we're on to something really big in this category here.

Gotcha. Thank you for the color. And would you be able to talk about some of the favorable undercurrents in the music industry this year and also the video game industry? It looks like there's a number of high-profile album releases and then also Grand Theft Auto 6 in the back half of the year. I'm just curious what your expectations are this year with a big release schedule.

Yeah, we're all pretty excited on the release schedule. On the music side, we just keep getting significant great artist releases. This last quarter that we're reporting here, we had a big Bruno Mars release, big release from Harry Styles, and then we topped it off with the BTS release. Those were huge titles for us. They're continuing to come hot and heavy. And then with that, we're also seeing, you know, some crazy numbers on vinyl sales and CD sales were off the chart. There's a lot of social media conversation about, you know, building your own collection in music, having your own, you know, your own collection of CDs and vinyl. that that conversation is bleeding over into video and DVDs right now people want to own stuff and collect it and have their collections and it's a it's a big push on social media right now we're seeing with respect to Grand Theft Auto it's going to be a home run for Q4 there's huge numbers being projected in the industry for it. We will be selling the game. Uh, we do buy direct from take two. Um, so it'll be a huge release for us. We even on, on top of that, we just came back from music biz this week and we got like a home run, uh, coming out of music biz because there's there's a grand theft auto soundtrack that is coming uh same thing in november and it's got i think 20 plus songs on it uh all the a-list artists each have a song on it it's a compilation of artists some of the songs are in the game some of the songs are additional songs. It's going to be a home-run vinyl release for us also revolving around that Grand Theft Auto. So we're pretty excited about that one coming in fourth quarter.

Yeah, Jen, thank you for taking my questions, and congratulations on the one-sided quarter.

Thank you. Thank you. Next question comes from the line of Linda Bolton-Wieser with Water Tower Research. Please go by.

Yes, hi. With regard to your adding handmade by robots to your portfolio, do you envision looking for more similar acquisitions, and do you think you'll stick mostly in the collectible figure category, or do you see opportunity in some other product categories as well? Thanks.

Thank you, Linda. From an acquisition standpoint, we're heavily engaged in lots of potential acquisition opportunities, and we've got several NDAs out right now in conversations that we're in. We do like licensed products, and so there could be other collectible stuff. It could be in a lot of other categories. With the wide range of products that we carry and that aspect, it does widen the net for what we can look at for acquisitions that become accretive to alliance. So that's a good thing. If we're only in one really tight category, it makes it hard for acquisitions but for us we're pretty diversified in a lot of different areas and if we have an opportunity to pick up uh you know a um a company that that really can be a creative through alliance and create new sales opportunities for us maybe new vendor opportunities that's a home run and we're actively looking at those right now okay thank you very much thank you we have no questions at this point of time over to you paul thank you we do have several webcast questions we had a couple around cd so i'm just going to combine these two one was can you provide a bit more color on the strong cd sales and then a related question was the growth in vinyl and CDs this quarter related primarily to record store day or was it more of a structural shift toward collecting before I answer that one I'm gonna go back to Linda's question real quick if anybody knows of any possible acquisitions that you think would be a good fit for Alliance definitely reach out to me on that I'm always looking for new leads and new opportunities there so that's that's a request from the community out there if there's anything you think uh you have a uh an insight to or anything you think would be a good fit for us uh definitely reach out to me and and uh we'd be i'd be definitely interested in looking at that um paul on on the question with cds uh i mean i've been i've been selling cds since i started in 1990 with a music store and uh you know it was hotter than hot in 1990 when everybody was buying cds and we're honestly uh shocked right now is the the growth we're seeing on the cd side um it it definitely is a uh a trend and we've you know we we saw the trend on the vinyl side You know, if you look back in our business seven or eight years ago, we were doing, you know, $5 million a year in vinyl, and we stayed in it. You know, we never were out of it, and we've organically seen that business now. You know, we just finished the quarter at $99 million in vinyl for a quarter. So, you know, with fourth quarter sales and stuff, I mean, that's a more than $400 million run rate. on the CD where you know that's a significant growth over last year and I will go back one second to 2025 on the vinyl side we sold 16.8 million units of vinyl on the CD side it was 13.5 million it wasn't a small number and now we're looking at this type of growth here on the CD side we're continuing to see it it go here and I think the other piece on CD is kind of happened in the vinyl as vinyl was coming back and seeing a resurgence you're starting to see the record labels you know refocusing on CD as far as marketing it and also making sure that they have stock on hand, their stock available on CD. We had a little stretch a few years ago where, you know, people kind of had their eye off the ball on the CD and we were not getting, you know, our fill percentages and stuff from our vendors as good, but people are improving that right now because of the demand. And, you know, when an artist is bringing out new release we're seeing you know vinyl and cd and uh it's that that music side is extremely strong right now and last thing i want to say is we you know we've seen a lot of dvd decline over the last 10 years the rate of decline on dvd has been shrinking over the last two years and there's definitely a real possibility that we're going to be at a bottom out on the DVD and we can see DVDs start to move similar to what we're seeing on the CD side right now. Because as it bottoms out and these conversations continue with collectors and people want, you know, their fans and they want to have a DVD collection on their wall, that's what's driving this.

Thank you.

And our next question, can you comment on how you're developing the direction of End State Authentic? Will they ultimately authenticate in all sports and music, for example?

So we acquired End State Authentic. Bennett and Stephanie, who lead that division, I've been working super closely with them over the last four months here. And we're in a lot of very interesting conversations. They do work with accounts outside of Alliance Authentic, with companies that do watch authentication, and there's several other different categories that we're in. And we are in very active conversations with new customers on that end-state authentic side. And I think over this next fiscal year, you're going to see some pretty good inroads with the end-state aspect there and what we can do. I really can't disclose too much as to a lot of those conversations under NDAs right now. Thank you, Jeff.

And our next question, are you seeing overlap between customers that are buying media and those that are buying collectibles or electronics, or are those all still fairly distinct customer groups?

Well, yeah, they're definitely all intermixed for sure. And there's a crossover between music and video and the collectibles. I will say, in a lot of cases, there's a lot of ways to kind of divide up the fans and what they collect. There's also collectors that are in different genres. So you have collectors that are huge fans and followers of horror. you know so they like horror movies they like horror collectibles you have fans of anime you know and they like everything related around anime and then you have your music fans that are all around everything music not only the music itself but anything they can collect of their favorite movie or music artists and then you have fans that are revolving around movies and their movie buffs and anything they can get their hands on with respect to you know all types of movies so you know we work across all those different channels and really try to to put all the pieces together and uh you know there's a lot of synergies between our different departments so So, and I just see an example there on Grand Theft Auto, you know, so we got a big video game. So our gaming team, and now we got a music vinyl record with it, you know, there's, we're probably going to be seeing some other products that are relating to that franchise and across all of our purchasing teams and sales teams, there's a lot of cohesive work happening here Alliance to cross sell those. And, you know, so somebody who has a store that's a gaming store and, you know, doesn't really sell vinyl, they might come in and say, hey, I can sell 60 units of that vinyl record because I'm going to have this huge amount of customers coming in to pick up the video game and so forth there. So that's where we're seeing a lot of this win that that we talk about uh to everybody we're seeing that cross um being very robust for us right now thanks jeff uh our next question with alliance authentic and end state authentic how should we think about the pacing of that opportunity what are the key milestones that would signal it's becoming a meaningful contributor well both of those are in extreme startup phase i i call it you know, concentration right now. We are, we have a lot of resources on it. We got a lot of people on it. We got a lot of focus for me and other leaders to really develop both of those, the Alliance Authentic and the N-State Authentic. I think here in fiscal 27, we're going to start to see some aspects where on the Alliance Authentic, we started getting some more key titles encapsulated and seeing some, you know, solid demand on those, stuff like that, you know, Ozzy and Hello Kitty started to make people think about it. You know, now all of a sudden the music stores saw those, they saw what happened to it. You know, it's a training, you know, we got to educate people on what those products are and so forth and we're making good progress with that record labels are starting to really understand what the product is and that the importance of that product in the in the history and life cycle of of vinyl records you know we're we're trying to encapsulate a limited quantity of those that become the ultimate vinyl collectible of that album and on the end state side there's There's a lot of different types of businesses that could really use an NFC chip in what they're doing. And we're in a lot of conversations on that side. So I think in this next fiscal year, you're going to see quite a few announcements of deals that we've been able to make for both of those areas. And, you know, I can't communicate any of the details until we have those deals in place and we'll have press releases and things revolving around those.

Thank you. And it looks like we have one more question at this point. You called out strength across multiple categories this quarter. Are you seeing any meaningful differences in how demand is trending across those categories, or is it fairly broad-based right now?

I would say it's fairly broad-based. I mean, even our gaming side has been pretty solid. We are cautiously optimistic even on gaming right now with the change over there at Microsoft on the Xbox side with new leadership there. So we're, you know, as I said, cautiously optimistic about maybe a little more push towards consoles and physical product compared to where, you know, Microsoft was kind of leaning over in the last couple of years. Our collectible business is super strong and that side of it. And it's a combination in collectibles of expanding sales and adding new stores and customers and adding even more collectibles into music stores and things like that. But it's also we brought on quite a few collectible suppliers into our distribution side. And I'll give you a quick example. If we bring on a supplier and their product line through our sales channels, we can generate $3 million a year on that supplier's product. That's as valuable as bringing on a customer that can buy $3 million a year. And so, you know, we're working on both sides of those, right? So when we're at a toy fair or a convention like that, we have our whole sales team there working on selling to customers that are there. But we have our whole purchasing team talking with our current vendors and working on, you know, opportunities to bring in product from vendors that we aren't currently supplying. And that's why you're seeing some really strong numbers on the collectible side right now, because it's not only adding new accounts and expanding the product that we have into more accounts, and so we're adding significant amount of vendors on the collectible side. And so we're getting that doubling of the growth in that space.

Thank you. That was the last question.

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