Fourth Quarter Fiscal 2023 Net Revenues Totaled $247 Million
Fiscal 2023 Net Revenues Totaled $1.2 Billion
PLANTATION, Fla., Oct. 19, 2023 (GLOBE NEWSWIRE) -- Alliance Entertainment Holding Corporation (Nasdaq: AENT) (“Alliance Entertainment”, “Company”), a distributor and wholesaler of the world’s largest in stock selection of music, movies, video games, electronics, arcades, and collectibles, has reported its financial and operational results for the fiscal fourth quarter and year ended June 30, 2023.
Fourth Quarter and Subsequent 2023 Operational Highlights
- Concurrent with a $4.0 million public offering, the Company’s Class A common stock and warrants were approved for listing on the Nasdaq Capital Market.
- Distribution Solutions, a division of Alliance Entertainment partnered with Future Today, a leading distribution company in the digital space to expand their reach and offer viewers even more options for its licensed and owned video content.
- Partnered with Atari® and retro home arcade company, Arcade1Up, for the launch of the Arcade1Up Atari 50th Anniversary Deluxe Arcade Machine for the home through its COKeM International video game division.
- Shipped over 2.0 million units representing $32.0 million in K-POP sales during the twelve months ending July 31, 2023, a 55% increase over the previous year, with exponential sales growth expected to continue with several other major K-POP acts scheduled to be released throughout the balance of 2023.
- Company’s Mill Creek Entertainment announced exclusive digital and physical release of Believe Entertainment’s supernatural thriller Nefarious, on Blu-ray™ and DVD following successful Premium Video-on-Demand (“VOD”) rollout.
- Company’s AMPED Distribution received a remarkable 20 nominations at the 2023 International Bluegrass Music Awards, further solidifying AMPED Distribution's commitment to supporting and promoting the very best in bluegrass music.
- 2023 Record Store Day on Saturday, April 22, 2023 broke a sales record for most vinyl sold in a single day with more than 800,000 units of vinyl created and shipped to participating independent record stores and retail sales expected to surpass $32 million.
Bruce Ogilvie, Chairman of Alliance Entertainment, commented, “The fourth quarter was highlighted by our Nasdaq uplisting in conjunction with a $4.0 public offering. Uplisting to the Nasdaq was the most effective method for us to elevate the Company's public profile, expand our shareholder base, improve liquidity and enhance shareholder value. As a public company, we are now well positioned to pursue future strategic combinations that further diversify our products offerings, and to invest in our operations and proprietary technology. Throughout the year we have continued to build on our foundation as one of the largest physical media and entertainment product distributors in the world, securing new partnerships and shifting toward larger scale automation in our operations.
“During the fourth quarter we signed several partnerships of note. We expanded our existing relationship with Future Today, developer and operator of a portfolio of hundreds of owned & operated channels on advertising video on-demand platforms, which currently publishes and syndicates Distribution Solutions’ content, allowing us to increase our reach on the ad-supported streaming digital platforms. Future Today will create, launch, and manage two ad-supported Apps for Alliance: MOVIESPREE™ and NCircle TV.
“Our COKeM International video game division, the leader in U.S. distribution of video games and related products, partnered with Atari® and retro home arcade company, Arcade1Up, for the launch of the Arcade1Up Atari 50th Anniversary Deluxe Arcade Machine for the home. COKeM launched the over 5-foot-tall cabinet for pre-sale online beginning September 5th at major retailers including Best Buy, Walmart, Target, and GameStop. This is another opportunity for Alliance Entertainment to support our retailers by offering this one-of-a-kind arcade experience to engage with consumers in the marketplace,” concluded Ogilvie.
Jeff Walker, Chief Executive Officer of Alliance Entertainment, added, “Although economic conditions have stabilized, we continued to see retailers reacting relatively conservatively with their inventory positions. However, as economic conditions stabilized, our B2B revenues improved to -8% year over year in Q4. As well, the decline in demand for physical gaming products presents an opportunity as we typically benefit from industry consolidation, and while we captured an increase in the average selling price in Gaming, it was not enough to offset the negative impact of decreased volume. Consumer Products, including revenue from our acquisition of Think3Fold, increased $22 million, or 37%, from $58 million to $80 million versus the prior year, benefiting from an increase in both the average selling price and volume.
“Looking ahead, we continue to expand and diversify by adding brands, product categories, and retail partnerships in combination with various cost-cutting and automation initiatives. To support this growth, we are investing in automating facilities and upgrading proprietary software, which began to show significant improvements in fiscal Q4. As a public company with strong cash flow and with access to capital markets, we are well positioned to grow through acquisitions, enhance Direct to consumer (“DTC”) relationships, and expand product offerings. We believe that in combination with our cost-cutting initiatives we have put in place a long-term strategy with the competitive advantages that will position us for ongoing success. We look forward to providing updates on our progress at the upcoming Think Equity Conference today and in the months ahead as we commence regular quarterly conference calls for fiscal Q1-2024,” concluded Walker.
Fourth Quarter FY2023 Financial Results
- Net revenues for the fiscal fourth quarter ended June 30, 2023 were $247.1 million, compared to $265.2 million in the same period of 2022, a decrease of 7%, due mainly to our focus on profitable sales.
- Gross profit for the fiscal fourth quarter ended June 30, 2023 was $30.2 million, compared to $28.5 million in the same period of 2022, an increase of 6%, due to the strategy of profitable sales.
- Gross profit margin for the fiscal fourth quarter ended June 30, 2023 was 12%, up from 11% in the same period of 2022.
- Net loss for the fiscal third fourth ended June 30, 2023 was $1.7 million, compared to net loss of $4.6 million for the same period of 2022.
- Adjusted EBITDA for the fiscal fourth quarter ended June 30, 2023 was $3.4 million, compared to Adjusted EBITDA loss of ($0.6) million for the same period of 2022.
Fiscal Year 2023 Financial Results
- For the year ended June 30, 2023, net revenues were $1.2 billion, compared to $1.4 billion for the year ended June 30, 2022, a decrease of 18%, due mainly to macroeconomic headwinds caused by increased inflation and interest rates causing the business to business (“B2B”) customer base, which are primarily retailers, to react relatively conservatively with their inventory positions due to economic uncertainty and those retailers having their own inventory supply chain challenges. DTC channels are facing constant competition and it’s important for merchants to keep investing while keeping a tight rein on inventories.
- For the year ended June 30, 2023, gross profit was $103.9 million, compared to $182.4 million for the year ended June 30, 2022, primarily due to the direct relation of product costs to sales volume.
- For the year ended June 30, 2023, gross profit margin was 9%, down from 13% for the year ended June 30, 2022, primarily due to an inventory adjustment to address the exorbitant landed cost experienced during supply chain disruptions related to Covid and reduced supplier marketing development funds (MDF).
- For the year ended June 30, 2023, net loss was $32.5 million, compared to net income of $28.6 million for the year ended June 30, 2022.
- For the year ended June 30, 2023, Adjusted EBITDA loss was ($17.6) million, compared to Adjusted EBITDA of $60.0 million for the year ended June 30, 2022, primarily due to excessive transportation costs of $15.3 million, arcade markdowns of $12.2 million, incremental arcade storage fees of $4.6 million and additional reserves for consumer products inventory of $3.7 million.
- Cash and cash equivalents was $0.9 million at June 30, 2023, as compared to $1.5 million at June 30, 2022. The Company announced July 5, 2023, the closing of a $4.0 million public offering.
John Kutch, Chief Financial Officer of Alliance Entertainment, added, “For the fourth quarter of fiscal year 2023, we were encouraged by a 9% sequential improvement in revenue from the third quarter as the macro issues impacting us subside. Gross profit also improved in the fourth quarter, up 6% year over year, and 11% over the third quarter of fiscal 2023 as our cost-saving initiatives begin to yield positive results. For the fiscal year ended June 30, 2023, adjusted EBITDA included excessive transportation costs, markdowns and other arcade related costs of $35.8 million, without which our Adjusted EBITDA would be $18.2 million for the full fiscal year. We believe that as transportation costs normalize, we utilize our investment in additional warehouse automation combined with staffing reductions implemented in Q4, we will continue to show ongoing improvement in the year to come.”
Non-GAAP Financial Measures: We define Adjusted EBITDA as net gain or loss adjusted to exclude: (i) income tax expense; (ii) other income (loss); (iii) interest expense; and (iv) depreciation and amortization expense and (v) other infrequent, non- recurring expenses. Our method of calculating Adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA.
| US-GAAP NET INCOME (LOSS) TO ADJUSTED EBITDA RECONCILIATION | ||||||||
| Year Ended | Year Ended | |||||||
| ($ in thousands) | June 30, 2023 | June 30, 2022 | ||||||
| Net (Loss) Income | $ | (35,404 | ) | $ | 28,619 | |||
| Add back: | ||||||||
| Interest Expense | 11,715 | 4,056 | ||||||
| Income Tax (Benefit) Expense | (9,058 | ) | 9,423 | |||||
| Depreciation and Amortization | 6,629 | 8,259 | ||||||
| EBITDA | (26,118 | ) | 50,357 | |||||
| Adjustments | ||||||||
| IC-DISC | 2,833 | 9,907 | ||||||
| SPAC Merger Transaction Cost | 5,014 | (251 | ) | |||||
| Restructuring Cost | 306 | — | ||||||
| Stock-based Compensation Expense | 216 | — | ||||||
| Change in Fair Value of Warrants | 1 | — | ||||||
| Contingent Loss | 150 | — | ||||||
| Gain on Disposal of PPE | (3 | ) | — | |||||
| Adjusted EBITDA | $ | (17,601 | ) | $ | 60,013 | |||
| Adjusted EBITDA for the year ended June 30, 2023, includes the following expenses: | ||||||||
| Excessive International Transportation Costs (Units Sold) | $ | 8,241 | — | |||||
| Excessive International Transportation Costs (On Hand) | 7,100 | — | ||||||
| Markdown for Arcades Sold | 12,156 | — | ||||||
| Incremental Storage Fees Arcades | 4,643 | — | ||||||
| Consumer Products Inventory Reserve | 3,700 | — | ||||||
| Total | $ | 35,840 | — | |||||
About Alliance Entertainment
Alliance Entertainment (NASDAQ: AENT) is a premier distributor of music, movies, and consumer electronics. We offer over 375,000 unique in stock SKU’s, including over 57,300 exclusive compact discs, vinyl LP records, DVDs, Blu-rays, and video games. Complementing our vast media catalog, we also stock a full array of related accessories, toys and collectibles. With more than thirty-five years of distribution experience, Alliance Entertainment serves customers of every size, providing a robust suite of services to resellers and retailers worldwide. Our efficient processing and essential seller tools noticeably reduce the costs associated with administrating multiple vendor relationships, while helping omni-channel retailers expand their product selection and fulfillment goals. For more information, visit www.aent.com.
Forward Looking Statements
Certain statements included in this Press Release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether identified in this Press Release, and on the current expectations of Alliance’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as and must not be relied on by an investor as, a guarantee, an assurance, a prediction, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Alliance. These forward-looking statements are subject to a number of risks and uncertainties, including risks relating to the anticipated growth rates and market opportunities; changes in applicable laws or regulations; the ability of Alliance to execute its business model, including market acceptance of its systems and related services; Alliance’s reliance on a concentration of suppliers for its products and services; increases in Alliance’s costs, disruption of supply, or shortage of products and materials; Alliance’s dependence on a concentration of customers, and failure to add new customers or expand sales to Alliance’s existing customers; increased Alliance inventory and risk of obsolescence; Alliance’s significant amount of indebtedness; Our ability to continue as a going concern absent access to sources of liquidity; risks and failure by Alliance to meet the covenant requirements of its revolving credit facility, including a fixed charge coverage ratio; risks that a breach of the revolving credit facility, including Alliance’s recent breach of the covenant requirements, could result in the lender declaring a default and that the full outstanding amount under the revolving credit facility could be immediately due in full, which would have severe adverse consequences for the Company; known or future litigation and regulatory enforcement risks, including the diversion of time and attention and the additional costs and demands on Alliance’s resources; Alliance’s business being adversely affected by increased inflation, higher interest rates and other adverse economic, business, and/or competitive factors; geopolitical risk and changes in applicable laws or regulations; risk that the COVID-19 pandemic, and local, state, and federal responses to addressing the pandemic may have an adverse effect on our business operations, as well as our financial condition and results of operations; substantial regulations, which are evolving, and unfavorable changes or failure by Alliance to comply with these regulations; product liability claims, which could harm Alliance’s financial condition and liquidity if Alliance is not able to successfully defend or insure against such claims; availability of additional capital to support business growth; and the inability of Alliance to develop and maintain effective internal controls.
For investor inquiries, please contact:
MZ Group
Chris Tyson/Larry Holub
(949) 491-8235
AENT@mzgroup.us
| ALLIANCE ENTERTAINMENT HOLDING CORP. CONSOLIDATED BALANCE SHEETS | ||||||||
| ($ in thousands) except share information | June 30, 2023 | June 30, 2022 | ||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 865 | $ | 1,469 | ||||
| Trade Receivables, Net | 104,939 | 98,699 | ||||||
| Related Party Receivable | — | 245 | ||||||
| Inventory, Net | 146,763 | 249,439 | ||||||
| Other Current Assets | 8,299 | 9,128 | ||||||
| Total Current Assets | 260,866 | 358,980 | ||||||
| Property and Equipment, Net | 13,421 | 3,284 | ||||||
| Operating Lease Right-Of-Use Assets | 4,855 | 8,360 | ||||||
| Goodwill | 89,116 | 79,903 | ||||||
| Intangibles, Net | 17,356 | 18,764 | ||||||
| Other Long-Term Assets | 1,017 | 3,748 | ||||||
| Deferred Tax Asset, Net | 2,899 | — | ||||||
| Total Assets | $ | 389,530 | $ | 473,039 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 151,622 | $ | 198,187 | ||||
| Accrued Expenses | 9,340 | 11,573 | ||||||
| Current Portion of Operating Lease Obligations | 3,902 | 4,453 | ||||||
| Current Portion of Finance Lease Obligations | 2,449 | — | ||||||
| Promissory Note | 495 | — | ||||||
| Contingent Liability | 150 | — | ||||||
| Revolving Credit Facility, Net | 133,281 | 135,968 | ||||||
| Income Taxes Payable | — | 418 | ||||||
| Total Current Liabilities | 301,239 | 350,599 | ||||||
| Finance Lease Obligation, Non- Current | 7,029 | 3,377 | ||||||
| Operating Lease Obligations, Non-Current | 1,522 | 4,864 | ||||||
| Warrant Liability | 206 | — | ||||||
| Deferred Tax Liability | — | 5,271 | ||||||
| Total Liabilities | 309,996 | 364,111 | ||||||
| Commitments and Contingencies (Note 11) | ||||||||
| Stockholders' Equity | ||||||||
| Preferred Stock Par Value $0.0001 per share, authorized 1,000,000 shares, 0 shares Issued and Outstanding | — | — | ||||||
| Common Stock: Par Value $0.0001 per share, Authorized 550,000,000 shares at June 30, 2023, and 100,000,000 at June 30, 2022; Issued and Outstanding 49,167,170 Shares as of June 30, 2023, and 47,500,000 at June 30, 2022 | 5 | 5 | ||||||
| Paid In Capital | 44,542 | 39,995 | ||||||
| Treasury Stock | — | (2,674 | ) | |||||
| Accumulated Other Comprehensive Loss | (77 | ) | (66 | ) | ||||
| Retained Earnings | 35,064 | 71,668 | ||||||
| Total Stockholders' Equity | 79,534 | 108,928 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 389,530 | $ | 473,039 | ||||
| ALLIANCE ENTERTAINMENT HOLDING CORP. CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| Year Ended | Year Ended | |||||||
| ($ in thousands except share and per share amounts) | June 30, 2023 | June 30, 2022 | ||||||
| Net Revenues | $ | 1,158,722 | $ | 1,417,377 | ||||
| Cost of Revenues (excluding depreciation and amortization) | 1,054,788 | 1,234,995 | ||||||
| Operating Expenses | ||||||||
| Distribution and Fulfillment Expense | 62,841 | 64,260 | ||||||
| Selling, General and Administrative Expense | 59,057 | 58,110 | ||||||
| Depreciation and Amortization | 6,629 | 8,259 | ||||||
| Transaction Costs | 5,014 | (251 | ) | |||||
| IC DISC Commissions | 2,833 | 9,907 | ||||||
| Restructuring Cost | 306 | — | ||||||
| Total Operating Expenses | 136,680 | 140,285 | ||||||
| Operating (Loss) Income | (32,746 | ) | 42,098 | |||||
| Other Expenses | ||||||||
| Interest Expense, Net | 11,715 | 4,056 | ||||||
| Change in Fair Value of Warrants | 1 | — | ||||||
| Total Other Expenses | 11,716 | 4,056 | ||||||
| (Loss) Income Before Income Tax (Benefit) Expense | (44,462 | ) | 38,042 | |||||
| Income Tax (Benefit) Expense | (9,058 | ) | 9,423 | |||||
| Net (Loss) Income | (35,404 | ) | 28,619 | |||||
| Other Comprehensive (Loss) Income | ||||||||
| Foreign Currency Translation | (11 | ) | 7 | |||||
| Total Comprehensive (Loss) Income | (35,415 | ) | 28,626 | |||||
| Net (Loss) Income per Share – Basic and Diluted | $ | (0.74 | ) | $ | 0.60 | |||
| Weighted Average Common Shares Outstanding – Basic and Diluted | 48,138,393 | 47,500,000 | ||||||
| ALLIANCE ENTERTAINMENT HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| Year Ended | Year Ended | |||||||
| ($ in thousands) | June 30, 2023 | June 30, 2022 | ||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (Loss) Income | $ | (35,404 | ) | $ | 28,619 | |||
| Adjustments to Reconcile Net (Loss) Income to | ||||||||
| Net Cash Provided by (Used in) Operating Activities: | ||||||||
| Inventory write-down | 10,800 | — | ||||||
| Depreciation of Property and Equipment | 2,221 | 3,096 | ||||||
| Amortization of Intangible Assets | 4,408 | 5,163 | ||||||
| Amortization of Deferred Financing Costs (Included in Interest) | 167 | 165 | ||||||
| Bad Debt Expense | 598 | 496 | ||||||
| Deferred Income Taxes | (8,171 | ) | (1,177 | ) | ||||
| Stock-based Compensation Expense | 216 | — | ||||||
| Gain on Disposal of Fixed Assets | (3 | ) | — | |||||
| Changes in Assets and Liabilities, Net of Acquisitions | ||||||||
| Trade Receivables | (4,626 | ) | 12,138 | |||||
| Related Party Receivable | 245 | 1,231 | ||||||
| Inventory | 99,729 | (107,778 | ) | |||||
| Income Taxes Payable\Receivable | (1,533 | ) | (1,867 | ) | ||||
| Operating Lease Right-Of-Use Assets | 3,505 | 4,299 | ||||||
| Operating Lease Obligations | (3,893 | ) | (4,583 | ) | ||||
| Other Assets | 5,031 | (5,230 | ) | |||||
| Accounts Payable | (68,950 | ) | (16,146 | ) | ||||
| Accrued Expenses | (952 | ) | (1,980 | ) | ||||
| Net Cash Provided by (Used in) Operating Activities | 3,388 | $ | (83,554 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash Received for Business Acquisitions, Net of Cash Acquired | 1 | — | ||||||
| Capital Expenditures | (825 | ) | (50 | ) | ||||
| Net Cash Used in Investing Activities | (824 | ) | (50 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Payments on Financing Leases | (304 | ) | (811 | ) | ||||
| Payments on Seller Notes | — | (3,750 | ) | |||||
| Payments on Revolving Credit Facility | (1,092,306 | ) | (1,346,442 | ) | ||||
| Borrowings on Revolving Credit Facility | 1,089,453 | 1,428,664 | ||||||
| Payments on related party loans | (7,596 | ) | — | |||||
| Borrowings on related party loans | 7,596 | — | ||||||
| Proceeds from Financing advancements | — | 3,377 | ||||||
| Net Cash (Used in) Provided by Financing Activities | (3,157 | ) | 81,038 | |||||
| Net Decrease in Cash and Cash Equivalents | (593 | ) | (2,566 | ) | ||||
| Net Effect of Currency Translation on Cash and Cash Equivalents | (11 | ) | 7 | |||||
| Cash, Beginning of the Period | 1,469 | 4,028 | ||||||
| Cash, End of the Period | $ | 865 | $ | 1,469 | ||||
| Supplemental disclosure for Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 11,425 | $ | 2,878 | ||||
| Cash Paid for Income Taxes | $ | 648 | $ | 9,345 | ||||
| Supplemental Disclosure for Non-Cash Investing and Financing Activities | ||||||||
| Conversion of Treasury stock | $ | 2,674 | $ | — | ||||
| Fixed Asset Financed with Debt | $ | 10,080 | $ | — | ||||
| Capital Contribution | $ | 6,592 | $ | — | ||||
| Business Combination: Reverse recapitalization | $ | (787 | ) | — | ||||
