Alliance Entertainment Holding Corp 10-Q for FY2024 Q3

Alliance Entertainment Holding Corp (AENT)

10-Q 2024-05-09 For: 2024-03-31

Added on April 07, 2026

About this 10-Q

Alliance Entertainment Holding Corp filed this 10-Q on May 9, 2024, covering the quarter ended March 31, 2024 (FY2024 Q3).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $211.21M; down 7.3% from $227.73M a year earlier
Net loss: $3.38M; compared with a net loss of $7.75M a year earlier
Diluted EPS: -$0.07; compared with -$0.16 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	AENT	The Nasdaq Stock Market LLC
Redeemable warrants, exercisable for shares of Class A common stock at an exercise price of $11.50 per share	AENTW	The Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

		Page
Part I. Financial Information		1
Item 1.	Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and June 30, 2023	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended March 31, 2024, and 2023	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended March 31, 2024, and 2023	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2024, and 2023	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
Part II. Other Information		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
Part III. Signatures		38


($ in thousands)	March 31, 2024		June 30, 2023
	(Unaudited)
Assets
Current Assets
Cash	$	1,642	$	865
Trade Receivables, Net		87,517		104,939
Inventory, Net		107,893		146,763
Other Current Assets		5,634		8,299
Total Current Assets		202,686		260,866
Property and Equipment, Net		13,502		13,421
Operating Lease Right-of-Use Assets		2,204		4,855
Goodwill		89,116		89,116
Intangibles, Net		14,356		17,356
Other Long-Term Assets		275		1,017
Deferred Tax Asset, Net		1,882		2,899
Total Assets	$	324,021	$	389,530
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable	$	132,521	$	151,622
Accrued Expenses		7,337		9,340
Current Portion of Finance Lease Obligations		2,782		2,449
Current Portion of Operating Lease Obligations		2,294		3,902
Revolving Credit Facility, Net		—		133,281
Contingent Liability		511		150
Promissory Note		—		495
Total Current Liabilities		145,445		301,239
Revolving Credit Facility, Net		77,336		—
Shareholder Loan (subordinated), Non-Current		10,000		—
Warrant Liability		165		206
Finance Lease Obligation, Non- Current		5,779		7,029
Operating Lease Obligations, Non-Current		171		1,522
Total Liabilities		238,896		309,996
Commitments and Contingencies (Note 12)
Stockholders’ Equity
Preferred Stock: Par Value $0.0001 per share, Authorized 1,000,000 shares, Issued and Outstanding 0 shares as of March 31, 2024 and June 30, 2023		—		—
Common Stock: Par Value $0.0001 per share, Authorized 550,000,000 shares at March 31, 2024, and at June 30, 2023; Issued and Outstanding 50,937,370 Shares at March 31, 2024, and 49,167,170 at June 30, 2023		5		5
Paid In Capital		48,058		44,542
Accumulated Other Comprehensive Loss		(77)		(77)
Retained Earnings		37,139		35,064
Total Stockholders’ Equity		85,125		79,534
Total Liabilities and Stockholders’ Equity	$	324,021	$	389,530


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
($ in thousands except share and per share amounts)	March 31, 2024		March 31, 2023		March 31, 2024		March 31, 2023
Net Revenues	$	211,209	$	227,728	$	863,549	$	911,590
Cost of Revenues (excluding depreciation and amortization)		183,196		200,402		761,580		837,897
Operating Expenses
Distribution and Fulfillment Expense		11,125		14,923		37,983		50,153
Selling, General and Administrative Expense		14,072		14,783		43,626		44,559
Depreciation and Amortization		1,402		1,679		4,455		4,845
Transaction Costs		2,086		3,348		2,086		4,355
IC DISC Commissions		—		—		—		2,833
Restructuring Costs		179		—		226		—
(Gain) on Disposal of Fixed Assets		(51)		—		(51)		(3)
Total Operating Expenses		28,813		34,733		88,325		106,742
Operating (Loss) Income		(800)		(7,407)		13,644		(33,049)
Other Expenses
Interest Expense, Net		3,052		3,207		9,520		9,105
Total Other Expenses		3,052		3,207		9,520		9,105
(Loss) Income Before Income Tax Expense (Benefit)		(3,852)		(10,614)		4,124		(42,154)
Income Tax (Benefit) Expense		(475)		(2,864)		2,049		(11,380)
Net (Loss) Income		(3,377)		(7,750)		2,075		(30,774)
Net (Loss) Income per Share – Basic and Diluted		(0.07)		(0.16)	$	0.04	$	(0.64)
Weighted Average Common Shares Outstanding		50,933,020		48,426,206		50,788,811		47,804,228


							Accumulated
	Common						Other
	Stock Shares				Paid In		Comprehensive		Retained
($ in thousands)	Issued		Par Value		Capital		Loss		Earnings		Total
Balances at June 30, 2023		49,167,170	$	5	$	44,542	$	(77)	$	35,064	$	79,534
Issuance of Common Stock, net of transaction cost of $1.9 million		1,335,000		—		1,332		—		—		1,332
Stock-based compensation		—		—		1,328		—		—		1,328
Net loss		—		—		—		—		(3,462)		(3,462)
Balances at September 30, 2023		50,502,170	$	5	$	47,202	$	(77)	$	31,602	$	78,732
Issuance of Common Stock		—		—		798		—		—		798
Stock-based compensation		428,600		—		58		—		—		58
Net Income		—		—		—		—		8,914		8,914
Balances at December 31, 2023		50,930,770	$	5	$	48,058	$	(77)	$	40,516	$	88,502
Stock-based compensation		6,600		—		—		—		—
Net loss		—		—		—		—		(3,377)		(3,377)
Balances at March 31, 2024		50,937,370	$	5	$	48,058	$	(77)	$	37,139	$	85,125


	Common								Accumulated
	Stock						Cost of		Other
	Shares		Par		Paid In		Treasury		Comprehensive		Retained
($ in thousands)	Issued		Value		Capital		Stock		Loss		Earnings		Total
Balances at June 30, 2022		47,500,000	$	5	$	39,995	$	(2,674)	$	(66)	$	71,668	$	108,928
Net loss		—		—		—		—		—		(7,509)		(7,509)
Balances at September 30, 2022		47,500,000	$	5	$	39,995	$	(2,674)	$	(66)	$	64,159	$	101,419
Capital Contribution		—		—		6,592		—		—		—		6,592
Net loss		—		—		—		—		—		(15,515)		(15,515)
Balances at December 31, 2022		47,500,000	$	5	$	46,587	$	(2,674)	$	(66)	$	48,644	$	92,496
Conversion of Treasury Stock		—		—		(2,674)		2,674		—		—		—
Fair Value of Contingent Shares		—		—		1,200		—		—		(1,200)		—
Merger: Reverse Recapitalization		1,667,170		—		(787)		—		—		—		(787)
Net Loss		—		—		—		—		—		(7,750)		(7,750)
Balances at March 31, 2023		49,167,170	$	5	$	44,326		—	$	(66)	$	39,694	$	83,959


	3 Months Ended		3 Months Ended		9 Months Ended		9 Months Ended
($ in thousands)	March 31, 2024		March 31, 2023		March 31, 2024		March 31, 2023
Customer #1	20.8	%	21.9	%	17.9	%	13.0	%
Customer #2	10.3	%	*		11.3	%	10.9	%
Customer #3	10.8	%	10.0	%	*		*


	March 31, 2024		June 30, 2023
Supplier #1	*		12.3	%
Supplier #2	17.6	%	*
Supplier #3	15.0	%	*
Supplier #4	13.8	%	*
Supplier #5	10.2	%	*


($in thousands)	March 31, 2024		June 30, 2023
Intangibles:
Customer Relationships	$	78,000	$	78,000
Trade Name - Alliance		5,200		5,200
Covenant Not to Compete		10		10
Mecca Customer Relationships		8,023		8,023
Customer List		12,760		12,760
Total	$	103,993	$	103,993
Accumulated Amortization		(89,637)		(86,637)
Intangibles, Net	$	14,356	$	17,356


($ in thousands)	Intangible Assets
Year Ended June 30
Remaining in fiscal year 2024	$	976
2025		3,326
2026		3,014
2027		2,954
2028		1,931
Thereafter		2,155
Total Expected Amortization	$	14,356


	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	March 31,		March 31,		March 31,		March 31,
Lease Cost ($ in thousands)	2024		2023		2024		2023
Finance Lease Cost:
Amortization of Right of Use Assets	46		51		139		153
Interest on lease liabilities	1		3		4		9
Capitalized Operating Lease Cost	915		949		2,768		3,137
Short – Term Lease Cost	18		—		55		—
Variable Lease Cost	336		14		1,927		36
Total Lease Cost	1,316		1,017		4,893		3,335

Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	1		3		4		10
Operating cash flows from Capitalized Operating leases	1,031		1,043		3,077		3,387
Financing cash flows from finance leases	50		53		149		158

Right of use assets obtained in exchange for new finance lease liabilities	—		10,457		—		10,457
Right of use assets obtained in exchange for new Capitalized Operating lease liabilities	8,561		—		8,561		—
Net ROU remeasurement	—		—		—		(9)

Weighted average remaining lease term - finance leases (in Years)	0.42		10.4		0.42		10.4
Weighted average remaining lease term - Capitalized Operating leases (in Years)	0.87		1.7		0.87		1.7
Weighted average discount rate - finance leases	3.57	%	3.70	%	3.57	%	3.70	%
Weighted average discount rate - Capitalized Operating leases	4.16	%	4.13	%	4.16	%	4.13	%


($ in thousands)	Operating Leases	Finance Leases
Remaining in fiscal 2024	956	871
2025	1,415	3,338
2026	113	3,340
2027	14	1,987
2028	4	—
Total Lease Payments	2,502	9,536
Less Imputed Interest	(37)	(975)
Total	2,465	8,561


Cash Acquired	$	1
Trade Receivables		2,212
Inventory		7,853
Intangibles		3,000
Other Assets		19
Accounts Payable		(22,298)
Total identifiable net assets (liabilities)		(9,213)
Goodwill		9,213
Total Consideration	$	—


Alliance Public Shares		167,170
Alliance Sponsor Shares		1,500,000
Pre - Merger Alliance Shares		47,500,000
Total Shares of Common Stock Outstanding after Merger		49,167,170


($ in thousands)	March 31, 2024		June 30, 2023
Inventory	$	115,551	$	156,016
Less: Reserves		(7,658)		(9,253)
Inventory, Net	$	107,893	$	146,763


($ in thousands)	March 31, 2024		June 30, 2023
Other Assets - Current
Prepaid Intellectual Property	$	2,844	$	2,890
Prepaid Insurance		69		1,365
Prepaid Manufacturing Components		—		164
Prepaid Catalogs		322		—
Prepaid Inventory		559		—
Prepaid Rent		—		1,054
Prepaid Maintenance		929		1,572
Prepaid Shipping Supplies		911		1,254
Total Other Assets - Current	$	5,634	$	8,299

Other Long-Term Assets
Income tax receivable		—		747
Deposits	$	275	$	270
Total Other Long-Term Assets	$	275	$	1,017


($ in thousands)	March 31, 2024		June 30, 2023
Property and Equipment
Leasehold Improvements	$	927	$	1,680
Machinery and Equipment		29,420		29,537
Furniture and Fixtures		1,728		1,749
Capitalized Software		10,507		10,508
Equipment Under Capital Leases		12,488		12,488
Computer Equipment		1,626		1,626
Construction in Progress		1,341		154
		58,037		57,742
Less: Accumulated Depreciation and Amortization		(44,535)		(44,321)
Total Property and Equipment, Net		13,502	$	13,421


Stock Price	$	2.14
Exercise price per share	$	11.50
Risk-free interest rate		4.27	%
Expected term (years)		4.1
Expected volatility		40.1	%
Expected dividend yield		—


	As of March 31, 2024
	Total		Level 1		Level 2		Level 3
Private Placement and Representative Warrants	$	165	$	—	$	—	$	165


	Private Warrants			Representative Warrants			Total
	Shares	Value		Shares	Value		Shares	Value
June 30, 2023	4,120,000	$	203	50,000	$	3	4,170,000	$	206
Exercised	—		—	—		—	—		—
Change in value	—	$	(122)	—	$	(2)	—	$	(124)
September 30, 2023	4,120,000	$	81	50,000	$	1	4,170,000	$	82
Exercised	—		—	—	$	—	—	$	—
Change in value	—		(41)	—	$	—	—	$	(41)
December 31, 2023	4,120,000	$	40	50,000	$	1	4,170,000	$	41
Exercised	—		—	—	$	—	—	$	—
Change in value	—		123	—	$	1	—	$	124
March 31, 2024	4,120,000	$	163	50,000	$	2	4,170,000		165


		Number of RSAs
Outstanding and Unvested as of June 30, 2023		459,200
Vested		(449,000)
Forfeited		(10,200)
Outstanding and Unvested as of March 31 , 2024		—


	Three Months Ended		Three Months Ended
($ in thousands except shares)	March 31, 2024		March 31, 2023
Net Revenues	$	211,209	$	227,728
Cost of Revenues (excluding depreciation and amortization)		183,196		200,402
Operating Expenses
Distribution and Fulfillment Expense		11,125		14,923
Selling, General and Administrative Expense		14,072		14,783
Depreciation and Amortization		1,402		1,679
Transaction Costs		2,086		3,348
Restructuring Cost		179		—
Gain on Disposal of Property and Equipment		(51)		—
Total Operating Expenses		28,813		34,733
Operating Loss		(800)		(7,407)
Other Expenses
Interest Expense, Net		3,052		3,207
Total Other Expenses		3,052		3,207
Loss Before Income Tax Benefit		(3,852)		(10,614)
Income Tax Benefit		(475)		(2,864)
Net Loss		(3,377)		(7,750)


	Nine Months Ended		Nine Months Ended
($in thousands except shares)	March 31, 2024		March 31, 2023
Net Revenues	$	863,549	$	911,590
Cost of Revenues (excluding depreciation and amortization)		761,580		837,897
Operating Expenses
Distribution and Fulfillment Expense		37,983		50,153
Selling, General and Administrative Expense		43,626		44,559
Depreciation and Amortization		4,455		4,845
Transaction Costs		2,086		4,355
IC DISC Commissions		—		2,833
Restructuring Costs		226		—
Loss on Disposal of Fixed Assets		(51)		(3)
Total Operating Expenses		88,325		106,742
Operating Income (Loss)		13,644		(33,049)
Other Expenses
Interest Expense, Net		9,520		9,105
Total Other Expenses		9,520		9,105
Income (Loss) Before Income Tax Expense (Benefit)		4,124		(42,154)
Income Tax Expense (Benefit)		2,049		(11,380)
Net Income (Loss)	$	2,075	$	(30,774)


	Nine Months Ended		Nine Months Ended
($in thousands)	March 31, 2024		March 31, 2023
Net Income (Loss)	$	2,075	$	(30,774)
Add back:
Interest Expense		9,520		9,105
Income Tax Expense (Benefit)		2,049		(11,380)
Depreciation and Amortization		4,455		4,845
EBITDA	$	18,099	$	(28,204)
Adjustments
IC-DISC		—		2,833
Stock-based Compensation		1,386		-
Transaction Costs		2,086		4,355
Restructuring Cost		226		—
Change In Fair Value of Warrants		(41)		—
Merger-related Contingent Losses		461		—
Gain on Disposal of PPE		(51)		(3)
Adjusted EBITDA	$	22,166	$	(21,019)


	March 31,		June 30,
($in millions)	2024		2023
Credit Facility		120		175
Available Credit Facility, considering Collateral		115		135
Less: Revolver Balance		81		133
Availability	$	34	$	2


	March 31,			February 10,
	2024			2023
Stock Price	$	2.14		$	3.30
Exercise price per share	$	11.50		$	11.50
Risk-free interest rate		4.27	%		3.58	%
Expected term (years)		4.1			4.8
Expected volatility		40.1	%		28.6	%
Expected dividend yield		—			—


No.		Description of Exhibit
31.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

	ALLIANCE ENTERTAINMENT HOLDING CORPORATION

Date: May 9, 2024	By:	/s/ Jeffrey Walker
	Name:	Jeffrey Walker
	Title:	Chief Executive Officer and Chief Financial Officer
		(Principal Executive, Financial and Accounting Officer)


Dated: May 9, 2024	/s/ Jeffrey Walker
	Jeffrey Walker
	Chief Executive Officer and Chief Financial Officer
	(Principal Executive, Financial and Accounting Officer)