Image source: The Motley Fool.
DATE
Thursday, February 12, 2026 at 4:30 p.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — Jeff Walker
- Chief Financial Officer — Amanda Gnecco
- Executive Chairman — Bruce Ogilvie
- Investor Relations — Paul Kuntz
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
- Net Income — $9.4 million, up from $7.1 million year over year, reflecting higher profitability for the quarter.
- Adjusted EBITDA — $18.5 million, a year-over-year increase of $2.4 million, indicating improved operational performance.
- Gross Margin — Expanded by 210 basis points to 12.8%, driven by a favorable shift to premium physical media and collectibles.
- Net Revenue — $369 million, compared with $394 million in the prior-year period, as declines in lower-margin hardware and game sales offset premium category gains.
- Physical Movie Revenue — Increased by 33% to $114 million, led by premium and collectible formats.
- Collectibles Revenue — Rose 31%, supported by growth in licensed and owned brand product launches.
- Gross Profit — $47.1 million, up from $42.3 million year over year, reflecting margin-focused strategies.
- Six-Month Net Income — $14.3 million, nearly doubling from $7.5 million over the same period last year.
- Six-Month Gross Margin — Rose 260 basis points to 13.5% due to product mix and exclusive content.
- Six-Month Adjusted EBITDA — $30.7 million, up from $19.5 million, indicating compounding margin expansion.
- Exclusive Content Partnerships — New deals with Paramount Pictures and Amazon MGM Studios expanded premium portfolio and contributed to revenue mix shift.
- Credit Facility Refinance — Secured a $120 million senior secured revolving facility with Bank of America, reducing borrowing costs by up to 250 basis points and increasing financial flexibility.
- Gaming Hardware and Arcade Revenue — Segment declined by $58 million, primarily from a $34 million decrease in Arcade1Up business and $24 million drop in gaming hardware allocations; this was offset by gains in collectibles, physical media, and owned brands.
- Vinyl and CD Units Sold — For 2025, sold over 16 million vinyl records and more than 13 million CDs, disproving assumptions of declining demand in these categories.
- Launch of Alliance Authentic and Endstate Authentic — Rolled out new authentication technology with initial integration in premium vinyl, Funko, and Handmade by Robots products, aiming to support authenticated resale, margin improvement, and brand differentiation.
SUMMARY
Management emphasized a structural shift toward premium categories and exclusive licensing as the primary drivers of earnings durability. The new exclusive agreements with Paramount Pictures and Amazon MGM Studios increased the company’s access to high-value, collectible content while improving average selling prices and sell-through rates. Alliance’s technology-enabled authentication platform, piloted through Endstate Authentic, embedded NFC chips and product tracking in physical goods, signposting a strategic extension into authenticated resale and digital content linking. Balance sheet strength was enhanced through refinancing, decreasing interest costs, and providing headroom for further investment in exclusive inventory and infrastructure. Management stated that the margin profile achieved is sustainable, with investments prioritized for premium content, technology, and scalable fulfillment.
- The company described physical media as a collectibles-driven segment, not a legacy business, tying future growth to curating scarcity and exclusivity.
- Rapid integration of acquired technologies, such as Endstate, unlocked new monetization avenues through digital authentication and secondary market enablement.
- Operating leverage continued to be demonstrated by stable distribution costs as a percentage of revenue, despite scaling complexities in premium and licensed categories.
- Management’s discipline in capital allocation focused on investments with high returns, rather than broad-based expansion, aiming to preserve liquidity amid category revenue variability.
- The pace of rollout for Alliance Authentic products is accelerating, with launches targeting multiple collector categories and broader retail distribution occurring within the current quarter.
INDUSTRY GLOSSARY
- NFC (Near Field Communication) chip: A short-range wireless technology used for product authentication and digital identity in physical collectibles.
- Sell-through: Sales measurement representing how much of a distributed or stocked product is actually purchased by end consumers.
- Exclusive content partnership: Contractual agreement that grants distribution or sales rights for certain physical media or collectibles solely to Alliance, excluding other distributors.
- Encapsulation: The process of sealing and certifying collectibles in tamper-evident packaging with digital authentication.
Full Conference Call Transcript
Paul Kuntz: Thank you. 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 09/10/2025 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 Holding Corporation’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 hosts today, Jeff Walker, Chief Executive Officer, and Amanda Gnecco, Chief Financial Officer, will present the results of operations for the 2026Q2 ended 12/31/2025. Bruce Ogilvie, Executive Chairman, is also on the line and will participate during the Q&A session. At this time, I will now turn the call over to Alliance Entertainment Holding Corporation’s CEO, Jeff Walker.
Jeff Walker: Thank you, Paul, and good afternoon, everyone. We appreciate you joining us today. I want to begin by framing the second quarter in very clear terms because the most important takeaway this quarter is the continued strength and durability of our earnings profile. During the second quarter, Alliance delivered another period of meaningful profitability. Net income increased year over year to $9.4 million, adjusted EBITDA rose to $18.5 million, and gross margin expanded by 210 basis points to 12.8%. These results reflect continued execution against the profitability baseline we established last quarter. What is important is not just the level of earnings we deliver, but how we delivered them.
The margin expansion we are seeing is not driven by short-term actions; it is the result of structural improvements in product mix, disciplined operating execution, and the leverage we built into our infrastructure. When we spoke last quarter, we described fiscal 2026 as a year where Alliance would operate from a new baseline, one defined by higher-quality revenue, stronger margins, and more consistent earnings power. The second quarter demonstrates that this is not a one-quarter phenomenon. Margin expansion continued, operating leverage remained intact, and our cost discipline held even as we continue to invest selectively in areas that support long-term growth. The performance this quarter reflects several themes that have been consistent across the business.
We continue to see a shift towards higher-value products, particularly in premium physical media and collectibles. Our exclusive content partnerships are contributing to better pricing, stronger sell-through, and improved visibility with retail partners. And our distribution and fulfillment infrastructure continues to scale efficiently, allowing us to support growth while maintaining tight control over costs. Taken together, the second quarter reinforced that Alliance is executing against a clear strategic plan that prioritizes earnings quality, margin durability, and disciplined growth. We are building a business that generates sustainable profitability and positions us well for long-term value creation.
With that context, I would like to walk you through the key drivers behind this performance, starting with how our content strategy and category focus are shaping results across the portfolio. One area I want to spend a few minutes on is physical media because it is important to be clear about how we think about this category today. At Alliance, we do not view physical media as a legacy business. We view it as a collectible category driven by enthusiasts, premium formats, and exclusivity. That distinction matters because it explains both the performance we delivered this quarter and strategic decisions we are making going forward.
See More
