Alliance Entertainment Holding Corporation (AENT) FY2026 Earnings: Revenue $1.1B (+8.0%)
AENT — FY2026 Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Alliance Entertainment grew fiscal 2026 revenue 8% to $1.149 billion on vinyl, CD and exclusive studio movie sales, and gross margin rose to 13.3%, but a $7.8 million vendor write-off cut GAAP EPS to $0.26 and inventory growth pushed operating cash flow negative.
Revenue
$1.1B
+8.0% YoY
Net income
$13M
-13.4% YoY
Diluted EPS
$0.26
-13.3% YoY
Operating margin
2.4%
This period vs a year ago
Same period last year
This period
Revenue▲+8.0%
≈$1.1B
$1.1B
Net income▼-13.4%
≈$15M
$13M
Diluted EPS▼-13.3%
≈$0.30
$0.26
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Physical media sold more, margins widened, but GAAP profit fell
Alliance Entertainment, the wholesaler that stands between studios and record labels on one side and retailers such as Walmart, Amazon and Barnes & Noble on the other, grew fiscal 2026 net revenue 8% to $1.149 billion (year ended June 30, 2026). Vinyl, CDs and DVD/Blu-ray all grew by double digits, and gross margin rose from 12.5% to 13.3%. GAAP net income still fell 13% to $13.1 million ($0.26 per diluted share, from $0.30), mainly because of a one-off $7.8 million write-off of money owed by a vendor that went out of business, plus a higher tax rate. Cash flow went the other way from profit: the business used $1.7 million of cash in operations as inventory and receivables grew faster than sales.
At a glance
$1.149 billion revenue, +8%. Physical music and movies did the work: vinyl +13% to $383 million, CDs +25% to $156 million, physical movies +22% to $339 million. Gaming fell 27% to $187 million as the prior year's Nintendo Switch 2 launch rolled off.
13.3% gross margin, up 0.8 points. On sales of this size, 0.8 points is roughly $9 million of extra gross profit; gross profit grew 15% to $152.3 million, faster than revenue.
-$1.7 million operating cash flow vs +$26.8 million a year earlier. Inventory rose $23.8 million and receivables $17.5 million, so the $13.1 million profit did not turn into cash, and revolver borrowings rose to $74 million from $57 million.
The numbers
Metric
FY2026 (to Jun 30, 2026)
FY2025
YoY Change
Net revenue
$1,149.0M
$1,063.5M
+8.0%
Gross profit (excl. D&A)
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$152.3M
$132.9M
+14.7%
Gross margin
13.3%
12.5%
+0.8 pts
Operating income
$27.2M
$30.1M
-9.7%
Operating margin
2.4%
2.8%
-0.4 pts
Net income
$13.1M
$15.1M
-13.4%
Diluted EPS
$0.26
$0.30
-13.3%
Adjusted EBITDA (non-GAAP)
$41.5M
$36.5M
+13.7%
Adjusted diluted EPS (non-GAAP)
$0.46
$0.37
+24%
Vinyl revenue
$383M
$340M
+13%
Operating cash flow
-$1.7M
$26.8M
n/m
Gross margin here is revenue minus the cost of the products sold (the company excludes depreciation from that cost line), as a share of revenue. Operating margin is what is left after also paying for warehouses, staff, marketing and other running costs, before interest and tax. For a distributor, a thin operating margin (2-3 cents on the dollar) is normal; what matters is how much volume flows through and how efficiently.
What drove revenue
Almost all of the growth came from physical formats that many assume are shrinking:
Category
FY2026
FY2025
Change
What the filing says drove it
Vinyl
$383M
$340M
+13%
Units +7.4%, average price +4.8%; premium and limited editions, Record Store Day
Physical movies (DVD, Blu-ray, 4K)
$339M
$279M
+22%
Units +20.8%; exclusive Paramount deal (from Jan 2025) and new Amazon MGM Studios deal (Jan 2026)
Gaming
$187M
$255M
-27%
Average price -24.6% as the prior year's Switch 2 hardware mix rolled off
CDs
$156M
$125M
+25%
Units +17.6%, average price +6.6%; big releases, deluxe and box-set editions
Collectibles
$32M
$22M
+45%
Average price +65.7%, units -13.2%; shift to premium figures, Handmade by Robots
Electronics
$16M
$15M
+7%
Turntables, headphones and speakers sold alongside music
Distribution and fulfillment fees
$18.6M
$14.8M
+26%
More studio fulfillment volume (Paramount, Amazon MGM)
Two things stand out. First, the movie growth is mostly about who Alliance distributes for, not a revival of DVD demand in general: the exclusive Paramount and Amazon MGM agreements make Alliance the sole physical-media distributor for those studios in the US and Canada, so their titles now flow through its warehouses. Second, gaming fell by $68 million, which on its own subtracted about 6 points from growth; excluding gaming, the rest of the business grew roughly 19%. That comparison flatters the underlying trend less than it looks, because the prior year's gaming number was itself swollen by a one-time console launch.
Customer concentration also rose: the top three customers were about 45% of revenue (40% a year earlier), and the single largest about 21% (15% a year earlier). The filing names Walmart, Barnes & Noble and Amazon as the leading vinyl customers, but does not say which customer is the 21% one.
What the headline numbers hide
Profit did not become cash. Net income was $13.1 million, but operating cash flow was -$1.7 million. Inventory rose 23% to $126.6 million and trade receivables (money customers owe) rose 17% to $111.0 million, both well ahead of 8% revenue growth. Accounts payable (money Alliance owes suppliers) rose $15.7 million, which covered only part of that. For a distributor, inventory growing about three times faster than sales is the number to watch: it ties up borrowed money and raises the risk of markdowns later. One mitigating detail from the 10-K: music CDs and video movies are "100% returnable" to suppliers, which limits the write-down risk on part of the stock.
The GAAP-vs-adjusted gap is wide. Adjusted net income ($23.4 million) is 80% higher than GAAP net income ($13.1 million). The biggest add-back is the $7.8 million vendor receivable write-off: rebates owed by Tastemakers, which stopped operating, so the balance became uncollectable. That is a real economic loss even if it is a one-off, and it is non-cash only in the sense that the cash was already expected and will now never arrive. Other add-backs: $2.1 million of deferred financing cost amortization (inflated by writing off the old lender's fees at refinancing), $1.3 million of litigation costs, $1.2 million of deal costs and $0.85 million of warrant fair-value changes.
Underlying pre-tax profit improved. Pre-tax income was flat at $18.8 million vs $18.7 million. Adding back the $7.8 million write-off, it would have been about $26.6 million, up roughly 42%, helped by higher gross profit and $3.0 million lower interest expense.
The tax rate took a bite. The effective tax rate rose to 25% from 19%, costing roughly $2 million of net income compared with applying last year's rate to this year's pre-tax profit.
Costs grew faster than sales. SG&A (overhead: payroll, IT, sales, professional fees) rose 18% to $66.2 million, taking it to 5.8% of revenue from 5.3%, driven by headcount and consulting costs. That absorbed about half of the gross profit gain.
Debt is up but cheaper. In October 2025 Alliance replaced its White Oak credit line with a $120 million Bank of America revolving facility; the average interest rate fell from 9.2% to 6.1%, cutting interest expense 28% to $7.6 million. The revolver balance rose to $74 million from $57 million, partly to repay a $10.0 million subordinated loan from Executive Chairman Bruce Ogilvie. Availability was about $46 million at year-end, and the company says it was in compliance with its covenants. Cash on hand was only $0.8 million, which is normal for a company that funds itself day to day from a revolver.
No buyback effect. Diluted share count was essentially unchanged at about 51.1 million, so the EPS decline tracks net income exactly.
Takeaway: Alliance's sales mix is improving (vinyl, CDs, exclusive studio movies and collectibles up, low-margin gaming hardware down) and gross margin widened, but this was paid for with a $41 million build in inventory and receivables that turned a $13 million profit into slightly negative operating cash flow. Whether fiscal 2027 converts profit back into cash matters more than the next revenue print.
Outlook
Management gave no revenue or earnings guidance. The CFO's stated fiscal 2027 aim is to "convert a greater share of earnings into operating cash flow by moderating working-capital growth relative to revenue, increasing inventory productivity and strengthening receivable collections" — an implicit admission that fiscal 2026's working-capital build was heavier than ideal.
Our read on what to watch:
Inventory and receivables vs sales. If they keep growing faster than revenue in the September and December quarters (the December quarter carries the holiday season), the revolver will keep rising and the cash story gets harder to defend.
The full-year effect of Amazon MGM. The deal started in January 2026, so fiscal 2027 gets a full year of those titles versus about half this year; that is a likely tailwind for physical movie revenue and fulfillment fees.
Gaming comparisons get easier. The Switch 2 launch distortion is now in the base, so the category's drag should shrink.
Tariffs are a minor factor so far. The company says the IEEPA tariffs' effect on cost of sales was not material and estimates about $0.2 million of potential refunds (not yet recognized).
Endstate/Alliance Authentic. The December 2025 acquisition (vinyl authentication and resale technology; $5 million of goodwill) has no disclosed revenue yet; treat it as an option, not a driver.
Without the $7.8 million write-off repeating and with lower interest costs, GAAP earnings have a clear path to rise in fiscal 2027 if gross margin holds; the risk is that growing SG&A and working capital keep eating into what reaches shareholders.
Source: Alliance Entertainment Form 10-K for the fiscal year ended June 30, 2026, filed September 10, 2026, and the accompanying earnings release (Exhibit 99.1).