Profitability improved despite lower revenue: Q2 revenue fell to $369 million, but gross profit rose to $47.1 million, net income increased to $9.4 million ($0.18/share), and adjusted EBITDA grew to about $18.5 million with margin expansion year-over-year.
Shift to premium physical media and collectibles is driving growth: Management is prioritizing higher‑value formats and exclusives (notably deals with Paramount and the new Amazon MGM Studios partnership), helping physical movie revenue jump 33% and collectibles climb 31%, supported by owned brands and the NState Authentic NFC platform.
Balance-sheet and liquidity strengthened for execution: Alliance replaced its prior facility with a $120 million senior secured revolver that cuts borrowing costs by up to 250 bps and extends maturity, ending the quarter with about $74 million in working capital while managing category headwinds like gaming hardware.
Alliance Entertainment (NASDAQ:AENT) reported higher profitability in its fiscal second quarter, as management emphasized the impact of a deliberate shift toward premium physical media and collectibles alongside continued cost discipline. The company said it is prioritizing “earnings quality” and “margin durability” even as certain lower-margin categories weigh on revenue comparisons.
For the quarter ended December 31, 2025, Alliance reported net revenue of $369 million, down from $394 million in the prior-year period. Chief Financial Officer Amanda Gnecco said the year-over-year decline reflected “continued softness in certain lower margin categories, most notably gaming hardware,” as well as a deliberate mix shift toward higher-value products across physical media and collectibles.
Despite lower revenue, gross profit rose to $47.1 million from $42.3 million, and gross margin expanded 210 basis points to 12.8%. Net income increased to $9.4 million, or $0.18 per diluted share, compared with $7.1 million, or $0.14 per share, a year earlier. Adjusted EBITDA rose to about $18.5 million, up $2.4 million year-over-year, with adjusted EBITDA margin improving to roughly 5% from 4.1%.
Chief Executive Officer Jeff Walker said the margin expansion was driven by “structural improvements in product mix,” operating discipline, and “the leverage we’ve built into our infrastructure,” rather than one-time or short-term actions.
For the six months ended December 31, 2025, Alliance reported net revenue of $623 million, which management described as essentially flat versus the prior-year period. Profitability improved markedly: gross profit increased to $84.3 million from $67.8 million, and gross margin expanded 260 basis points to 13.5%.
Net income for the six-month period rose to $14.3 million, or $0.28 per diluted share, compared with $7.5 million, or $0.15 per share, in the prior-year period. Adjusted EBITDA increased to approximately $30.7 million from $19.5 million, a year-over-year improvement of more than $11 million, according to the company.
Walker argued that Alliance does not view physical media as a “legacy business,” describing it instead as a collectible market driven by “enthusiasts, premium formats, and exclusivity.” In the quarter, physical movie revenue increased 33% year-over-year to $114 million, which he attributed to demand for premium formats such as 4K, Ultra HD, and collectible Steelbook editions.
Management highlighted its exclusive studio partnerships as central to the strategy. Walker pointed to the Paramount Pictures exclusive agreement, effective January 1, 2025, saying it expanded access to catalog and new-release content and supported higher average selling prices and stronger sell-through on premium formats. He also discussed a new exclusive partnership with Amazon MGM Studios that became effective January 1, 2026, which the company expects to add recognizable franchises and curated releases suitable for collectible formats.
In the Q&A, Walker said Alliance is in “active conversations with small and large studios” and suggested that industry change tends to be favorable for Alliance when companies reassess the status quo. He declined to comment in detail on developments involving Warner Bros., but said decision-making and transactions in the space can lead participants to re-evaluate business approaches.
Alliance reported that collectibles revenue increased 31% year-over-year, driven by expanded sourcing, higher-value launches, and a mix shift toward licensed and differentiated products. Walker said the integration of Handmade by Robots has contributed to revenue growth and margin improvement since it became an owned brand, giving Alliance more control over design, sourcing, and product lifecycle management.
The company also discussed its acquisition of NState and the introduction of NState Authentic, which uses NFC-enabled authentication and digital product identity to verify and track products across their lifecycle, including potential secondary-market activity. Walker said the initiative is intended to build “platform optionality,” including opportunities tied to authenticated resale, brand protection, and collector engagement, rather than near-term revenue.
During the webcast Q&A, Walker said the NState team is engaged in discussions across internal applications and third-party opportunities with record labels, studios, and gaming companies, as well as with grading and authentication firms interested in authenticated resale use cases.
Gnecco said Alliance ended the quarter with about $74 million in working capital and noted modest seasonal inventory increases that remained aligned with demand. She also highlighted a refinancing completed early in the quarter: Alliance replaced its prior asset-based lending agreement with a new $120 million senior secured revolving credit facility with Bank of America. Management said the new facility reduces borrowing costs by up to 250 basis points, extends maturity to five years, and increases flexibility for working capital and strategic initiatives.
On category trends, management addressed weakness in gaming hardware and arcade products. Walker said Microsoft console supply constraints have pressured hardware results and noted that arcade sales were down $34 million year-over-year in the quarter as Arcade1Up transitioned ownership to Basic Fun!. He said the company is in discussions with Basic Fun! about distribution and expects to see arcade products again “as we move into the middle of 2026,” with the holiday season next year expected to be stronger than the most recent one.
Walker also offered an update on music, calling vinyl and CD sales “extremely strong.” He cited a company statistic that in 2025 Alliance sold over 16 million vinyl records and over 13 million CDs, and he pointed to upcoming releases (including Bruno Mars, Harry Styles, and BTS) that were showing “good pre-order” activity.
Looking ahead, Walker said Alliance is not providing formal guidance, but expressed confidence in the durability of the margin profile being built. He outlined priorities including scaling Alliance Authentic in a “thoughtful and controlled way,” executing the Amazon MGM Studios exclusive partnership, expanding collectibles and owned brands, and deepening integrations and partnerships around digital authentication.
Alliance Entertainment (NASDAQ: AENT) is a distributor of physical media and related entertainment products, serving retailers, public libraries and online merchants. The company’s core business revolves around the wholesale distribution of music and video titles on CD, DVD and Blu-ray formats, as well as vinyl records, audiobooks, video games and select gift and novelty items. By maintaining a broad catalog of new and catalog titles, Alliance Entertainment enables brick-and-mortar and e-commerce channels to access an extensive range of products from major and independent labels.
In addition to its product offerings, Alliance Entertainment provides supply-chain and logistics services designed to streamline inventory management and order fulfillment.
