Q3 2024 Alliance Entertainment Holding Corp Earnings Call

Greetings.

Operator: And welcome to the Alliance Entertainment third quarter fiscal year 2024 financial results conference call. At this time, all participants are in a listen only mode.

Welcome to the Alliance Entertainment third quarter fiscal year 2024 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. 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 our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially.

Operator: As a reminder, this conference is being recorded.

Operator: You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves 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, we will attempt to present some important factors relating to our business that may affect our prediction. You should also review our most recent Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors.

Operator: 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 well.

Operator: While these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause actual results to differ materially.

Operator: Cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation.

Operator: Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events.

Operator: Throughout today's discussion we will attempt to present, some important factors relating to our business and they affect our predictions.

Operator: You should also review our most recent Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading risk factors.

Operator: During this conference call, we will discuss non-GAAP financial measures, including a discussion of adjusted EBITDA.

Operator: During this conference call, we will discuss non-GAAP financial measures, including a discussion of adjusted EBITDA. We believe non-GAAP disclosures enable investors to better understand Alliance Entertainment's core operating performance. Please refer to the investor presentation for a reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure. The press release detailing these results crossed the wire this afternoon at 4.01 p.m. Eastern Time and is available in the Investor Relations section of our company's website, aent.com.

Operator: We believe non-GAAP disclosures enable investors to better understand the alliance entertainments core operating performance.

Operator: Please refer to the Investor presentation for a reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure.

Operator: A press release detailing these results crossed the wire. This afternoon at four one P. M. Eastern time and is available in the Investor Relations section of our company's website and E N T Dot com.

Operator: Your host today, Bruce Ogilvy Executive Chairman, and Jeff Walker, Chief Executive Officer, and Chief Financial Officer will present, the results of operations for the fiscal third quarter ended March 31 2024.

Operator: Your hosts today, Bruce Ogilvie, Executive Chairman, and Jeff Walker, Chief Executive Officer and Chief Financial Officer, will present the results of operations for the fiscal third quarter ended March 31st, 2024. At this time, I will turn the call over to Alliance Entertainment Chairman Bruce Ogilvie.

Operator: At this time I will turn the call over to Alliance Entertainment Executive Chairman Bruce Ogilvie.

Bruce Ogilvie: Thank you, Operator, and good afternoon, everyone. I'm pleased to welcome you to today's fiscal third quarter-ended March 31, 2024, Financial Results Conference Call. For those of you that are new to our story, we bring entertainment to you. Alliance stocks the world's largest selection of music, movies, video games, gaming hardware, arcades, collectibles, toys, and consumer electronics. We are a trusted omni-channel supplier to the largest retailers and wholesalers across the globe and a trusted distributor to the world's most recognized entertainment content and gaming brands. As of our most recent June 30, 2023 fiscal year-end, we produced over $1.1 billion in annual revenue and employed over 700 team members.

Bruce Ogilvie: Thank you operator, and good afternoon, everyone I'm pleased to welcome you to todays fiscal third quarter ended March 31, 2024 financial results conference call for those of you that are new to our story. We bring entertainment you you align stocks the world's largest selection of music movies video games.

Bruce Ogilvie: Alliance is the gateway between brands and retailers. We are a trusted omni-channel supplier to Walmart, Amazon, Best Buy, Costco, Target, Kohl's, BJ's, Meijer, Barnes & Nobel, Dell, Verizon, over 2,000 additional independent music retailers and wholesalers worldwide, and a trusted distributor for Walt Disney, Paramount Pictures, Warner Brothers, Universal Pictures, Microsoft, Nintendo, Activision, Electronic Arts, Mattel, We have over 200 customers that sell online worldwide that rely on our supplied metadata of descriptions and images. We ship to more than 35,000 storefronts in 72 countries and our stocking distributor of over 325,000 in-stock SKUs to the largest retailers and wholesalers in the world. On this slide, you will see nine months of sales for our current fiscal year compared to the previous four years.

Bruce Ogilvie: We wanted to show you how diversified Alliance is and how consistent sales by configuration are. The diversified products offered are a big part of Alliance's winning formula and will balance out a steady flow of new releases with evergreen consistent catalog titles. Over $200 million of our $1.1 billion is product where we are the exclusive distributor or we have licensed and sell exclusively. Amped and Distribution Solutions Division distribute physical exclusive music and exclusive videos respectively, and our Mill Creek Division engages in exclusive video licensing with content from Disney, Sony, Universal, Lionsgate, CBS, and others.

Bruce Ogilvie: You mean hardware arcades collectible toys and consumer electronics.

Bruce Ogilvie: Distribution Solution, being $120 million of the $200 million, has over 62 significant exclusive video studios that rely on Distribution Solutions to manufacture, supply, and market video products, and has direct sales accounts with Amazon, Walmart, Target, thousands of retailers, and websites through Alliance Entertainment's vast distribution channels by having exclusive content that creates a sticky relationship with retailers. Distribution Solution also developed digital video distribution consisting of streaming and premium downloads with fiscal year 2023 digital revenue of $8.4 million, and year-to-date fiscal year 2024 is $17 million. Of the $17 million year-to-date fiscal year 2024, two titles, Nefarious and the Blind, totaled $7.9 million.

Bruce Ogilvie: We are a trusted omni channel supplier to the largest retailers and wholesalers across the globe and they trusted distributor to the world's most recognized entertain them content and gaming brands.

Bruce Ogilvie: As our most recent June 30 of 2023 of fiscal year end, we produced over $1 1 billion in annual revenue and employed over 700 team members.

Bruce Ogilvie: Alliances the gateway between brands and retailers, we are a trusted omni channel supplier to Walmart Amazon Best buy Costco target Kohl's, Bj's Myer Barnes and noble Yeah, I'll horizon over 2000, additional independent music retailers and wholesalers worldwide and they trust.

Bruce Ogilvie: Distributor for Walt Disney Paramount, Sony Pictures, Warner Brothers, Universal Pictures Microsoft.

Bruce Ogilvie: Do activation of electronic Arts, Mattel Hasbro Unco arcade, one up Universal music, Sony Music Warner Music group and over 600 other suppliers.

Bruce Ogilvie: We have over 200 customers that sell online worldwide that rely on our supply meta data descriptions and images, we shipped to more than 35000 storefronts in 72 countries and are stocking distributor of over 325000 in stock Skus still largest retailers and wholesalers in the world.

Bruce Ogilvie: Well. This slide you will see nine months of sales of our current fiscal year compared to the previous four years. We wanted to show you how diversified alliances and how consistent sales by configuration. Our diversified product offered are a big part of alliances.

Bruce Ogilvie: Winning formula and will balance out steady flow of new releases with evergreen consistent catalog title.

Bruce Ogilvie: Over 200 million of our $1 1 billion.

Bruce Ogilvie: Well, we are the exclusive distributor we have licensed them sell exclusively AMT and distribution solution Division distributes physical exclusive music and exclusive videos, respectively, and our Mill Creek Division to gauge isn't exclusive video licensing with content from Disney and Sony Universal Lionsgate C B S and others.

Bruce Ogilvie: Distribution solution being $120 million of the 200 million has over 62 significant exclusive video studios that rely on distribution solutions to manufacture supply market video products and has direct sales accounts with Amazon Walmart target thousands of retailers and website through alliance entertained.

Bruce Ogilvie: Its vast distribution channels by having exclusive content that creates sticky relationship with retailers distro.

Bruce Ogilvie: Distribution solution is also develop digital video distribution, consisting of streaming and premium downloads with fiscal year 2023 digital revenue of $8 4 million and year to date fiscal year 2024, and 17 night of the 17 million year to date fiscal year 'twenty for two titles consisting of nefarious in the blind.

Bruce Ogilvie: Totaled $7 9 million.

Bruce Ogilvie: <unk> has more than 90 exclusive labels that rely on amp to supply and market music vinyl and C. D and sells in markets music through Amazon Walmart target Barnes and noble Bestbuy and over 2000 independent music stores in the U S through our lives entertainments worldwide distribution channels artists and labels.

Bruce Ogilvie: Amped has more than 90 exclusive labels that rely on Amped to supply and market music, vinyl, and CDs. It sells and markets music through Amazon, Walmart, Target, Barnes & Nobel, Best Buy, and over 2,000 independent music stores in the U.S. through Alliance Entertainment's worldwide distribution channels. Artists and labels are attracted to Amped, like Usher or Ateez, the K-pop artists, because they use Amped as their exclusive physical distributor, and the artists do their own digital and social media marketing to maximize their profitability.

Bruce Ogilvie: We're attracted to App like Usher R. A T K pop artist because they use amped as their exclusive physical distributor and the artist do their own digital and social media marketing to maximize their profitability.

Bruce Ogilvie: K-pop artists, like Ateez, are a rapidly growing genre for Amped. Mill Creek licenses video content from studios to create, manufacture, market, and sell video DVDs with content licensed from Walt Disney, Sony Pictures, Universal Pictures, Lion Gate, CBS Paramount, and other significant studios.

Bruce Ogilvie: Hop artist like a T a rapidly growing job there for amped.

Bruce Ogilvie: Mill Creek licenses video content from studios to create manufacture market and sell video D V D's with content license from Walt Disney and Sony Pictures, Universal Pictures like H C. B S. Paramount another significant studios.

Bruce Ogilvie: This is a little history about our growth and where we are today in 2013, Jeff and I had built up Super D from $18 million of sales starting in 2190 4 million. The major event that happened in 2013 with Super D acquiring Alliance Entertainment.

Bruce Ogilvie: This is a little history about our growth and where we are today. In 2013, Jeff and I had built up Super D from $18 million in sales starting in 2001 to $194 million. The major event that happened in 2013 was Super D acquiring Alliance Entertainment. Alliance was $725 million in revenue to our $194 million. We merged our operations in California into Alliance's warehouse operations in Kentucky. After the acquisition of Alliance, we became the largest distributor of music and video in the world and was the start of our major consolidation path.

Bruce Ogilvie: With $725 million of revenue.

Bruce Ogilvie: 194 million, we merged our operations in California into alliances warehouse operations in Kentucky. After the acquisition of Alliance combined we became the largest distributor of music and video in the world.

Bruce Ogilvie: The start of our major consolidation path.

Bruce Ogilvie: 2016, we acquired Anderson Merchandisers, which included the vendor managed inventory counts providing.

Bruce Ogilvie: In 2016, we acquired Anderson Merchandisers, which included the vendor-managed inventory accounts providing all music to 3,900 Walmart stores and all 900 Best Buy stores. Being solely focused on music and movies, we were looking for a third category of content to distribute. This led us, in 2018, to the acquisition of Mecca.

Bruce Ogilvie: All music to 3900, Walmart stores, and all 900 best buy stores.

Bruce Ogilvie: Being solely music and movies, we were looking for a third category of content to distribute this latest in 2018 to the acquisition of Mecca Mecca had direct relationships with Microsoft and Sony and Nintendo by acquiring then we were able to become a distributor of video game products. The Mega acquisition gave us about another 100 million worth of revenue.

Bruce Ogilvie: Mecca had direct relationships with Microsoft, Sony, and Nintendo. By acquiring them, we were able to become a distributor of video game products. The Mecca acquisition gave us about another $100 million worth of revenue.

Bruce Ogilvie: And the same year 2018, we were offered the opportunity to take over distribution solutions from Sony Pictures distribution solutions gave us another vendor number with Walmart, which allowed US now become a supplier to Walmart about 20 different movie studios that we were the exclusive two for distribution solutions.

Bruce Ogilvie: In the same year, 2018, we were offered the opportunity to take over Distribution Solutions from Sony Pictures. Distribution Solutions gave us another vendor number with Walmart, which allowed us to become a supplier to Walmart for about 20 different movie studios that we were the exclusive distributors for Distribution Solutions. In 2020, we acquired Mecca's competitor, Kokum, and eventually consolidated Mecca into Kokum.

Bruce Ogilvie: In 2020, we acquired Mec as competitor Coke them and eventually consolidated Mecca into Coca that expanded our relationship with best buy target Kohl's Dell and Verizon. We also started distributing retro arcade from arcade one out.

Bruce Ogilvie: Expanding our relationship with Best Buy, Target, Kohl's, Dell, and Verizon, we also started distributing retro arcades from Arcade1Up. We only show this slide to share that we have a proven track record of completing acquisitions and will continue with that same strategy to grow and diversify our company. We are currently working on four possible future transactions. We put ourselves on hold for acquisitions in 2022 and 2023 for our SPAC merger and getting our new three-year line of credit in place.

Bruce Ogilvie: We only show this slide to show.

Bruce Ogilvie: Sure that we have a proven track record of.

Bruce Ogilvie: Leading acquisitions and we'll continue with that same strategy to grow and diversify our company. We are currently working on them for a possible future transactions, we put ourselves on the whole for acquisitions in 2022, and 2023 for our stack merger and getting our new three year line of credit in place.

Bruce Ogilvie: Alliance provides traditional retailers are world class distribution and e-commerce capabilities by focusing on service selection and technology, providing retailers superior service talking to the world's largest physical media and entertainment selection and stated that our technology systems and facilities.

Bruce Ogilvie: Alliance provides traditional retailers with world-class distribution and e-commerce capabilities by focusing on service selection and technology, providing retailers superior service, stocking the world's largest physical media and entertainment selection in state-of-the-art technology systems and facilities. Alliance provides efficient omni-channel expansion solutions for retailers, offering a full enterprise-level infrastructure, and white-label dropships orders directly to consumers on behalf of its customers. The entire ordering, confirmation, and invoicing process is automated, allowing customers to focus on sales, while we handle all stocking, warehousing, and shipping functions. To the consumer, the shipment they receive looks like it was sent by the large retailers we service.

Bruce Ogilvie: Alliance provides efficient omnichannel expansion solutions for retailers offering a full enterprise level infrastructure and white label drop ship orders directly to consumers on behalf of its customers the entire ordering confirmation and invoicing processes automated allowing customers to focus on sales, while we're gonna find all the stars.

Bruce Ogilvie: In warehousing and shipping functions to the consumer the shipment they receive it looks like it was sent by the large retailers. We service. It's a win for retailers that Theres no inventory risk for all of the 200 online retailers that rely on a y O.

Bruce Ogilvie: It's a win for retailers as there is no inventory risk for all the 200 online retailers that rely on Alliant. Alliance is also a leader in vendor-managed inventory solutions, providing solutions tailored to customers to support their inventory needs. These value-added services provide highly technical, critical business functions for our partners. Alliance consolidates and distributes a vast portfolio of entertainment products across six major categories, while our proprietary database powers retailers' online music and gaming offerings, including vinyl, CDs, DVD, Blu-ray, gaming products, and retro arcades. Currently, we have over 325,000 unique SKUs in stock to support our customers' vast selection needs.

Bruce Ogilvie: My life is also a leader in vendor managed inventory solutions, providing solutions tailored to customers that support their inventory needs. These value add services provide highly technical critical business functions for our partners.

Bruce Ogilvie: Our lives consolidates and distributes a vast portfolio of entertainment products over six major categories, while our proprietary database towers retailers online music and gaming offerings and cleaning vinyl C. D V D. Blu ray gaming products and retro arcade.

Bruce Ogilvie: We have over 3300 25000 unique skus in stock to support our customers vast selection needs.

Bruce Ogilvie: Alliance has invested and enhancements to our automated handling equipment, which reduces shipping times streamlined order processing reduced labor costs and also improve overall warehouse management in January 2023, We announced we went live with auto store automated storage and retrieval system than a shepherd's he'll warehouse.

Bruce Ogilvie: Alliance has invested in enhancements to our automated handling equipment, which reduces shipping times, streamline order processing, reduce labor costs, and also improve overall warehouse management. In January 2023, we announced we went live with AutoStore, an automated storage and retrieval system in our Shepherdsville warehouse. The system improved warehouse operations, allowing us to achieve increased levels of speed, reliability, capability, and precision that resulted in a significant cost savings. With AutoStore, we went from 41 pickers down to seven, and receiving went down from 14 associates down to four.

Bruce Ogilvie: The system improve warehouse operations, allowing us to achieve the increased levels of speed reliability capability precision that resulted in a significant cost savings with artist or we went from 41 to take cost out of the seven and we're seeing them went down from 14 associates down to four.

Bruce Ogilvie: During the last quarter, we announced the installation of SureSort X, a cost-saving sortation technology system from the warehouse automation solutions provider, OPEX, at our Kentucky facility. Utilizing this new SureSort X technology results in annual labor savings of nearly $400,000, along with an immediate savings of $460,000 from avoiding retrofitting older sorting technology set to be retired. With the introduction of SureSort X, the larger format sorter complements the five existing CD, DVD, and vinyl record sorters at Alliance, giving our warehouse the ability to move away from manual sortation of larger products, specifically toys, electronics, and accessories.

Bruce Ogilvie: During the last quarter, we announced the installation of sure sort ex a cost savings sortation technology assistance in the warehouse automation solutions provider opec's at our Kentucky facility.

Bruce Ogilvie: And this new share sort X technology result in annual labor savings of nearly $400000 along with an immediate savings of $460000 from avoiding retrofitting older sorting technology has to be retired with the introduction of share. So it acts the larger format sort of complements the five existing G D D D and vital.

Bruce Ogilvie: Record orders that alliance, giving our warehouse the ability to move away from manual sortation of larger products, specifically toys and electronics and accessories.

Bruce Ogilvie: In the investor presentation, there are hyperlinks to see Autostart, OPEX, and other processes we do in Kentucky. This slide highlights our strategically located operations that include seven offices and four different distribution centers, including an 873,000 square foot facility in Shepherdsville, Kentucky. In 2023, warehouse shipments total over 70 million units through our highly skilled workforce and technology-enabled facilities and infrastructure that allows Alliance to achieve industry-leading speed and accuracy. I will add that in Shakopee, Mississauga, because of Auto Store in Kentucky, we were able to close the larger two buildings, removing 198,000 square feet of our 220,000 square feet we have currently leased.

Bruce Ogilvie: And the Investor presentation, there are hyperlinks to see August start OPEC and other process as we do in Kentucky.

Bruce Ogilvie: This slide highlights our strategically located operations that include seven offices in four different distribution centers that clothing 873000 square foot facility in shepherds Vale in Kentucky in 2023 warehouse shipments total over 70 million units through our highly skilled workforce.

Bruce Ogilvie: Enable facilities and infrastructure that allows alliance to achieve industry, leading speed and accuracy metrics.

Bruce Ogilvie: I will add that in shakopee, Minnesota because of auto store in Kentucky, we were able to close the larger two buildings, removing 198000 square feet of our 220000 square feet. We have currently at least that closure process started in January will be fully completed by may 31st the warehouse cost saves will be significant and are too.

Bruce Ogilvie: That closure process started in January will be fully completed by May 31st. The warehouse cost savings will be significant in our 2025 fiscal year numbers. I will now hand the call over to Alliance's CEO and CFO, Jeff Walker, my partner.

Jeff Walker: 25 fiscal year numbers.

Bruce Ogilvie: I will now hand, the call over to a life of CEO and CFO, Jeff Walker My partner.

Jeff Walker: Thank you Bruce and thank you all for joining US today I'll now turn to an overview of our financial results.

Jeff Walker: Thank you, Bruce, and thank you all for joining us today. We will now turn to an overview of our financial results for the third quarter and for March 31st, 2024. Net revenues for the fiscal third quarter ended March 31st, 2024 were $211 million, compared to $227 million in the same period of 2023, a decrease of 7.3%. Consumer direct shipments were 33% of gross sales revenue for the three months ended March 31st, 2024. Year over year for the nine months ended March 31st, revenue generated by consumer direct shipments increased from 34.4% to 39.1% of gross sales, an increase of 4.7%.

Jeff Walker: Gross profit for the fiscal third quarter ended March 31st, 2024, was $28 million, compared to $27.3 million in the same period in 2023, an increase of 2.5%. Gross profit margin for the fiscal third quarter ended March 31st, 2024 was 13.3%, up from 12% in the same period in 2023, an increase of 130 basis points. The net loss for the fiscal third quarter ended March 31st, 2024 was $3.4 million compared to a net loss of $7.8 million for the same period of 2023, an improvement of $4.4 million.

Jeff Walker: In the third quarter ended March 31 2024.

Jeff Walker: Net revenues for the fiscal third quarter ended March 31, 2024, or $211 million compared with 227 million in the same period of 2020 three a decrease of seven 3%.

Jeff Walker: Consumer direct shipments were 33% of gross sales revenue for the three months ended March 31, 'twenty to 'twenty four.

Jeff Walker: Your over year for the nine months ended March 31st revenue generated by consumer direct shipment.

Jeff Walker: Kris from 34, 4% to 39, 1% of gross sales an increase of four 7%.

Jeff Walker: Gross profit for the fiscal third quarter ended March 31, 2020 four was 28 million compared to $27 3 million in the same period in 2020 three an increase of 2.5%.

Jeff Walker: Gross profit margin for the fiscal third quarter ended March 31, 'twenty to 'twenty four was 13, 3% up.

Jeff Walker: From 12% in the same period of 2023, an increase of 130 basis points.

Jeff Walker: Net loss for the fiscal third quarter ended March 31, 2020 four plays.

Jeff Walker: $3 4 million compared to net loss of $7 8 million for the same period of 2020 three an improvement of 4.4 million.

Jeff Walker: Adjusted EBITDA for the fiscal third quarter ended March 31, 2020 four improved by $5 3 million to $2 9 million permanent adjusted EBITDA loss of 2.4 million for the same periods of 2020 three.

Jeff Walker: Adjusted EBITDA for the fiscal third quarter ended March 31st, 2024 improved by $5.3 million to $2.9 million from an adjusted EBITDA loss of $2.4 million for the same period in 2023. We have taken significant steps over the past year to strengthen our balance sheet, with additional cost savings initiatives planned. Throughout 2023 and into 2024, we are highly focused on reducing inventory and debt, with fiscal third-quarter year-over-year inventory decreasing from $163 million to $108 million, and debt down from $127 million to $87 million.

Jeff Walker: We have taken significant steps over the past year to strengthen our balance sheet with additional cost savings initiatives planned throughout 2023 and ended 2024, we are highly focused on reducing inventory and that with physical third quarter year over year inventory decrease.

Jeff Walker: Going from 163 million to 109 8 million and that's down from 127 million to 87 million.

Jeff Walker: We also expect significant cost savings with the planned closing of our Minnesota facility on or before May 31st, 2024. Additionally, to support growth, we recently secured a new three-year $120 million senior secured asset-based credit facility with White Oak Commercial Finance.

Jeff Walker: We also expect significant cost savings with the planned closing of our Minnesota facility on or before May 31st 2024.

Jeff Walker: Additionally to support growth, we recently secured a new three year $120 million senior secured asset based credit facility with White Oak commercial finance the proceeds of which were used to refinance the existing credit facility fund working capital needs and provide for general.

Jeff Walker: The proceeds of which were used to refinance the existing credit facility, fund working capital needs, and provide for general corporate purposes. These steps have also positioned us to focus on and execute on implementing our acquisition strategy going forward. On this slide, you can see fiscal year 2022. We were experiencing the benefits of COVID with peak sales of $1.42 billion; fiscal year 2023 sales normalized after COVID with sales of $1.16 billion. For fiscal year 2023, adjusted EBITDA was negatively affected by one-time supply chain costs of $35.8 million. However, we have gotten past those one-time supply issues.

Jeff Walker: Corporate purposes here.

Jeff Walker: These steps have also position us to focus and execute on implementing our acquisition strategy going forward.

Jeff Walker: On this slide you can see fiscal year 2022 we were experiencing the benefits of Covid with peak sales of 1.42 billion.

Jeff Walker: Full year, 2020 three our sales normalized after childhood with sales of 1.16 billion.

Jeff Walker: For fiscal year, 2020 three adjusted EBITDA was negatively affected with one time supply chain cost of 35.8 million, we have gotten past that was one time supply issues.

Jeff Walker: For the fiscal nine months, ending March 31, 2020 four our adjusted EBITDA was two 6% of revenue we are continuing to reduce operating costs and improve margins in 2020 four.

Jeff Walker: For the fiscal nine months ending March 31, 2024, our adjusted EBITDA was 2.6% of revenue. We are continuing to reduce operating costs and improve margins in 2024 to maintain a 4 to 5% adjusted EBITDA for sale. In addition to growth in our year-over-year quarterly gross profit, we reduced operating costs $4.5 million, or 15.2%, through warehouse efficiencies and new technology implemented going from 29.7 million down to 25.2 million. These efficiencies will have an ongoing positive impact going forward.

Jeff Walker: Paying a 4% to 5% adjusted EBITDA to sales.

Jeff Walker: In addition to growth in our year over year quarterly gross profit, we reduced operating costs $4 5 million or 15.2 per song through warehouse efficiencies.

Jeff Walker: News and new technology implemented going from $29 7 million down to $25 2 million. These efficiencies will have an ongoing positive impact going forward.

Jeff Walker: Gross profit improvements and expense reductions also led to a fourth consecutive quarter of positive adjusted EBITDA, increasing by $2 9 million in the fiscal third quarter compared to an adjusted EBITDA loss of $2 4 million in the prior year.

Jeff Walker: Gross profit improvements and expense reductions also led to a fourth consecutive quarter of positive adjusted EBITDA, increasing to $2.9 million in the fiscal third quarter, compared to an adjusted EBITDA loss of $2.4 million in the prior year. Net revenue for the first nine months of our fiscal year ending March 31st. 2024 totaling $864 million compared to $912 million in the same period of 2023, a decrease of 5.3 percent. Growth profit was $102 million compared to $74 million in the same period of 2023, an increase of 38.4%.

Jeff Walker: Net revenue for the first nine months of our fiscal year ending March 31st.

Jeff Walker: Gross profit margin was 11.8%, up from 8.1% in the same period of 2023. Net income was $2.1 million compared to a net loss of $30.8 million for the same period of 2023. Adjusted EBITDA for the nine months ended March 31st, 2024 was $22.2 million compared to an adjusted EBITDA loss of $21 million for the same period of 2023. This slide shows the quarterly results since Q1 2020 for gross profit, gap net income, and adjusted EBITDA.

Jeff Walker: 2020, four totaling 864 million compared to $912 million in the same period of 2020 three a decrease of five 3%.

Jeff Walker: Profit was 102 million compared to 74 million in the same period of 2023, an increase of 38, 4%.

Jeff Walker: Gross profit margin was 11, 8%.

Jeff Walker: From eight 1% in the same period of 2023.

Jeff Walker: Net income was $2 1 million compared to a net loss of $30 8 million for the same period of 2020 three.

Jeff Walker: Adjusted EBITDA for the nine months ended March 31, 'twenty 'twenty four was $22 2 million compared to adjusted EBITDA loss of 21 million for the same period of 2020 three.

Jeff Walker: This slide shows the quarterly result, since Q1, 'twenty 'twenty for gross profit.

Jeff Walker: GAAP net income and adjusted EBITDA.

Jeff Walker: Comparing Q3 fiscal year 2020 to Q3 fiscal year 2024, adjusted EBITDA has decreased from $4.8 million to $2.9 million, which is a decrease of 39% over the past four years. We have taken significant steps over the past year to strengthen our balance sheet, with additional cost savings initiatives planned. Throughout 2023 and 2024 to date, we have been highly focused on reducing inventory and debt, with third quarter year-over-year inventory decreasing from $163 million to $108 million, and debt down from $127 million to $87 million.

Jeff Walker: Impairing Q3 fiscal year, 2020 for Q3 fiscal year, 2020 four.

Jeff Walker: Adjusted EBITDA has decreased.

Jeff Walker: From $4 8 million to $2 9 million, which is a decrease of 39% over the past four years.

Jeff Walker: We have taken significant steps over the past year to strengthen our balance sheet with additional cost savings initiatives planned throughout 2023, and 2024 today, we've been highly focused on reducing inventory and that with third quarter a year.

Jeff Walker: Year over your inventories inventory decreasing from 163 million to 108 million and that's down from 127 million to $87 million.

Jeff Walker: We also expect significant cost savings for the fiscal year ending 2025 with the planned closing of our Minnesota facility in May of 2024. Additionally, to support growth, we recently secured a new three-year $120 million secure, FASTA-based senior credit facility with wider commercial finance. The proceeds of which were used to refinance the existing credit facility, fund working capital needs, and provide for general corporate purposes. These steps have also positioned us to focus on and execute on implementing our acquisition strategy going forward. I will now turn the call back over to Bruce.

Jeff Walker: We also expect significant cost savings for the fiscal year, ending 2025 with the planned closing of our Minnesota facility in May of 'twenty 'twenty four.

Jeff Walker: Additionally to support growth, we recently secured a new three year 120 million secure.

Bruce Ogilvie: So based senior credit facility with wider commercial finance.

Jeff Walker: Proceeds of which was used to refinance the existing credit facility and working capital needs and provide for general corporate purposes.

Bruce Ogilvie: Being stops have also positioned us to focus on actually came on implementing our acquisition strategy going forward.

Jeff Walker: I will now turn the call back over to Bruce.

Bruce Ogilvie: Thank you, Jeff. Alliance has a proven track record of successfully acquiring and integrating competitors and complementary businesses. We have acquired over a dozen companies in the last 20 years, including Alliance Entertainment, A&Connect, MEC Electronics, Distribution Solutions, Kocum, and Think Threefold. We also continue to focus on acquiring more licenses and exclusive distribution agreements in music, video gaming, collectibles, and electronics. Expanding our existing product and service offerings and executing our acquisition strategy will drive Alliance's efforts towards increasing market share.

Bruce Ogilvie: Thank you Jeff Alliance has a proven track record of successfully acquiring and integrating competitors and complementary businesses.

Bruce Ogilvie: <unk> acquired over a dozen companies in the last 20 years, including Alliance Entertainment and connect Mec electronics distribution solutions coking and think threefold. We also continue to focus on acquiring more licenses and exclusive distribution agreements and music video gaming collectibles, and electronics, expanding our existing product and service offering.

Bruce Ogilvie: In executing our acquisition strategy will drive alliances efforts towards increasing market share alliance will further invest in automating facilities and upgrading proprietary software alliances direct to consumer or DTC services are in greater demand as consumer preferences shift and stressed retailers ecommerce and DTC capability.

Bruce Ogilvie: Alliance will further invest in automating facilities and upgrading proprietary software. Alliance's direct-to-consumer, or DTC, services are in greater demand as consumer preferences shift and challenge retailers' e-commerce and DTC capabilities. Enhancing BTC relationships will grow existing revenue lines, and improving capabilities will generate a more attractive overall service offering. Leveraging existing relationships, Alliance can expand new consumer product segments, growing its product offerings, and providing more selection and diversity to its existing customer base while attracting new customers in the process.

Bruce Ogilvie: These enhancing.

Bruce Ogilvie: Enhancing DTC relationship will grow existing revenue line and improving capabilities will generate a more attractive overall service offering leveraging existing relationships alliance can expand and new consumer products segments growing its product offerings and providing more selection of diversity to our existing customer base.

Bruce Ogilvie: Tracking new customers in the process.

Bruce Ogilvie: In closing alliance as a leading global entertainment wholesale or direct to consumer distributor and ecommerce provider for entertainment industry with over 30 years of operations and experience within the entire alliance management team, which beneficially owns more than 81% of the common shares outstanding and has extensive knowledge in <unk>.

Bruce Ogilvie: In closing, Alliance is a leading global entertainment wholesaler, direct-to-consumer distributor, and e-commerce provider for the entertainment industry with over 30 years of operations and experience within the entire Alliance management team, which beneficially owns more than 81 percent of the common shares outstanding and has extensive knowledge and tribal knowledge to lead the company towards future growth. We are a leader in fulfillment and e-commerce distribution with over 325,000 SKUs physically in stock, protected by a focused commitment to service, selection, and technology.

Bruce Ogilvie: Oh knowledge to lead the company towards future growth, we are a leader in fulfillment e-commerce distribution with over 325000 Skus physically in stock protected by focus commitment of service selection and technology suppliers in brick and mortar retailers omni retailers online retailers and consumers rely on our company's platform.

Bruce Ogilvie: Suppliers and brick-and-mortar retailers, omni-retailers, online retailers, and consumers rely on our company's platform to feel transactional volume for trusted, dependable relationships. Through the expansion of partnerships with our vendors and our customers, as well as investment in existing facilities, Alliance expects us to continue to grow revenue and expand margins. Again, we have a proven track record of M&A, having successfully acquired and integrated 12 significant businesses in 2003. There are significant future acquisition and consolidation opportunities to drive future growth through the acquisition of complementary businesses and competitors.

Bruce Ogilvie: Feel transactional volume for trusted dependable relationships through the expansion of partnerships with our vendors and our customers as well as investment in existing facilities Alliance expects to continue to grow revenue and expand margins.

Bruce Ogilvie: Again, we have a proven track record of M&A, having successfully acquire and integrate 12. So you shouldn't think of businesses. In 2003, there were a significant future acquisition and consolidation opportunities to drive future growth through the acquisition of complementary businesses and competitors finally accompanies technology platform increases the efficiency of.

Bruce Ogilvie: Finally, the company's technology platform increases the efficiency of transactions, reduces labor costs, provides great mobile accessibility, and incorporates modern marketing and FinTech tools. We look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position as the premier distributor of music, movies, video games, arcades, toys, collectibles, and consumer electronics. We also look forward to seeing some of you at our upcoming Investor and Analyst Day at our warehouse in Shepherdsville, Kentucky, next week on May 16th. I thank you all for attending now, and I'd like to hand the call back over to the operator to begin our question and answer session. Operator?

Bruce Ogilvie: Actions reduces labor cost provides great mobile accessibility and incorporates modern marketing and Fintech tools, we look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position as the Premier distributor music movies video games arcade toys collectibles and consumer electronics.

Bruce Ogilvie: Alex.

Bruce Ogilvie: We also look forward to seeing some of you at our upcoming Investor and analyst day at our warehouse in shepherds they'll Kentucky next week on May 16th.

Bruce Ogilvie: I. Thank you all for attending now like to hand, the call back over to the operator to begin our question and answer session operator.

Speaker Change: Thank you at.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star 2. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Ashok Kumar with Think Equity. Thank you very much.

Speaker Change: At this time, we will be conducting a question and answer session.

Operator: He would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: Our first question is from Ashok Kumar with Bank equity.

Ashok Kumar: Thank you very much. And I have just one three-part question. How much further room for gross margin expansion do you see as you optimize for profitable sales? And what's a realistic long-term gross margin target? Then two is you've had good success with M&A historically. So what does the pipeline look like now in terms of potential acquisitions to drive organic growth and expand it to new categories? And the third part is, what are the biggest opportunities you see to grow your D2C and e-commerce as a percentage of sales? And how are you investing to enhance your capabilities here? Thank you.

Ashok Kumar: Thank you very much.

Ashok Kumar: Question how.

Ashok Kumar: How much further room for gross margin expansion do you see as you hoped.

Ashok Kumar: Myself of profitable sales in.

Ashok Kumar: What's the realistic long term gross margin target than to us.

Ashok Kumar: <unk> had good success with our M&A historically.

Ashok Kumar: What does the pipeline look now in terms of potential acquisition acquisitions to drive inorganic growth and expanded.

Ashok Kumar: And.

Ashok Kumar: What are the biggest opportunities.

Speaker Change: Oh I see.

Ashok Kumar: E Commerce as a percentage of sales.

Ashok Kumar: How are you investing.

Ashok Kumar: So our capabilities here. Thank you.

Ashok Kumar: Thank you Liz shook this is John Walker here Oh, Okay. You got me three three a lots.

Jeff Walker: Thank you, Ashok. This is Jeff Walker here.

Speaker Change: Lots of questions here on.

Jeff Walker: Okay. You got me three lots of questions here. On the gross margin side, we're definitely seeing a lot more focus on profitable sales. You know, last fiscal year, we were definitely still working on some liquidation sales that really impacted our gross margins. So we're continuing to see our gross margins approved here for fiscal 24.

Jeff Walker: On the gross margin side, we're definitely seeing a lot more focus on our profitable sales you know last fiscal year. We were definitely still are working on some liquidation sales that really impacted our gross margins. So we're we're continuing to see our.

Jeff Walker: Our gross margins approve here for fiscal 'twenty, four and I think you're gonna see unimproved and gross margin going into fiscal 'twenty five as well.

Jeff Walker: And I think you're going to see an improvement in gross margin going into fiscal 25 as well. So, from the gross margin side, we're pretty strong there. One of the other things that we are seeing is from our gross profit, you know, with operating expenses, we are consolidating into Kentucky from Minnesota, and we are also seeing less labor pressure.

Jeff Walker: So from the gross margin side, where we're pretty strong there.

Jeff Walker: One of the other things are where are we are seeing is some our gross profit Oh you know what the operating expenses, we are consolidating into Kentucky from Minnesota, and we are also seeing less labor pressure a couple of years ago. There was definitely a lot.

Jeff Walker: A couple years ago, there was definitely a lot of pressure on labor where we were having to pay out a lot of extra bonuses and things in the warehouses. And that has definitely gone down a little bit, which is helping our margins operating costs going forward, from the acquisition side. Some very robust conversations right now.

Jeff Walker: Of pressure on labor.

Jeff Walker: Where we were having to do a lot of extra bonuses and things in the warehouses and that has definitely moved up a little bit that's helping our our margins our operating costs going forward.

Jeff Walker: From the acquisition side.

Jeff Walker: Some very robust conversations right now, we we really built alliance over the years through acquisition.

Jeff Walker: We really built Alliance over the years through acquisition. And, you know, with the diversity of our business and all the different categories that we mentioned earlier on the call, there's a lot of different participants, competitors, small competitors, big competitors in each of the different categories. And there are a lot of good strategic acquisitions out there, but we also have to be cautious that we're focused on the right acquisition at the right price. We're not known to overpay on acquisitions, and we're not going to go down that path to do that today.

Jeff Walker: And.

Jeff Walker: With with the diversity of our business and all the different categories that we mentioned earlier on the call. There's a lot of different participants competitors smaller competitors big competitors in each of the different category than there was a lot of good strategic acquisitions there.

Jeff Walker: We also have to be cautious that we're focused on the right acquisition at the right price.

Jeff Walker: There were not known to overpay on acquisitions, and we're not going to go down that path to do that today. So.

Jeff Walker: So some of the acquisitions, you know, become conversations that last for, you know, a time period as everybody kind of settles into the, you know, what's the right price for a transaction to happen. And we're really looking for acquisitions that are accretive to value in the business. So, you know, we want to look at something that when we do 1 plus 1, we get 3 out of that equation.

Jeff Walker: Some of the acquisitions you now become conversations that the loss for you and all the time period as everybody kind of settles into the you know what's the right price for a for a transaction to happen and we're really looking for acquisitions that become accretive to value in the business. So.

Jeff Walker: You know we want to look at something that when we do one plus one we get three out of that equation and that's really the critical component. There is that there is either it really in our acquisitions theres kind of two.

Jeff Walker: And that's really the critical component there is that in our acquisitions, there are kind of two components. One is a straight consolidation where we're taking out a lot of overhead and expenses, and we compete with a lot of the same customers and products. That part is a very good accretive value.

Jeff Walker: Two components, one is a straight consolidation, where we're taking out a lot of overhead and expenses and we compete a lot on a lot of the same customers and products.

Jeff Walker: Part of it is a very good accretive value and then there's acquisitions, where it gets us into a new category or with some new vendors or customers like in the past when we we acquired Mecca and that got us into the gaming component. There. So there are still some other.

Jeff Walker: And then there are acquisitions where it gets us into a new category or with some new vendors or customers. Like in the past when we acquired Mecca, and that got us into the gaming component there. So there are still some other product configurations and areas that are within entertainment and also within collectibles and things that people collect.

Jeff Walker: Product configurations and areas that are within entertainment and also within collectibles on things that people collect.

Jeff Walker: On the third question, DTC, we're having some great success with our direct-to-consumer business. You have to realize that Alliance is really the leading direct-to-consumer fulfillment company in all of entertainment. And what drives that is for Internet fulfillment; it's all about having the product in stock and on the shelf. And you heard us earlier in this call specifically say that we have 325,000 SKUs. And in stock is a very important component of that. It's not, you know, 325,000 in the database.

Jeff Walker: On the third question on the D. T C. We're having some great success in our direct to consumer you have to realize that alliance is really the leading direct to consumer fulfillment company in all of entertainment on what drives that is for Internet fulfillment, it's all about having.

Jeff Walker: The product in stock and on the shelf and you heard us earlier in this call specifically say that we have 325000.

Jeff Walker: I Skus and in stock is a very important component of that it's not you know 325000 in the database those were actually in stock available for sale on major web sites here in the U S and around the world that that aspect is what our major REIT.

Jeff Walker: Those are actually in stock, and available for sale on major websites here in the U.S. and around the world. And a couple of examples of that are that in these last six months, we have picked up all of the Target.com video and music direct-to-consumer fulfillment. So all the CDs, vinyl records, and DVDs that are purchased at Target are coming from the Alliance Warehouse facility with Target's brand and name on those orders. We also have been doing, for years, all the music and videos for Walmart, as well as Barnes & Nobel.

Jeff Walker: Taylor's and our major customers on D. C are relying on a and a couple of examples of that is in this last six months, we have picked up.

Jeff Walker: All of the target Dot com.

Jeff Walker: <unk> video and music are direct to consumer fulfillment.

Jeff Walker: So all C D's vinyl records Dvds or purchase on target are coming from the alliance a warehouse facility with target's brand name on those orders.

Jeff Walker: We also have been doing for years, all the music and video for Walmart as well as Barnes and noble.

Jeff Walker: And we are also, over on the gaming side, we are doing all the Microsoft Xbox products for Costco, Costco.com, and Costco Warehouse. So, on the DTC side, that's an area where the retailers have a fantastic opportunity for the retailers. And, you know, they don't have any inventory risk in that.

Jeff Walker: We are also over in the gaming side, we were doing all the micro Microsoft Xbox.

Jeff Walker: Product for Costco, Costco, Dotcom, and Costco Costco warehouses.

Jeff Walker: So on the D. T C side, that's an area where the retailers.

Jeff Walker: It's a fantastic opportunity for the retailers.

Jeff Walker: And you know they don't have any any inventory risk and that they.

Jeff Walker: They take inventory feeds from us, what's available, they sell it, they send us the order, and we ship it directly to the customer. And the last part about DTC is that we've been very big on the arcades from Arcade OneUp. We've got significant DTC business there with Wayfair, Dell, Best Buy, Walmart, Target, Amazon, Home Shopping Network, QVC, and Home Depot. All of the arcades that are up on all those retailer sites are coming from Alliance and are getting filled from Alliance.

Jeff Walker: They take inventory feeds from us what's available they saw it they send us the order we ship it direct to the customer and the last part on the D. T C. As we've been very big on the arcades from arcade one up.

Jeff Walker: We've got significant D D T C business, there with a way fair.

Jeff Walker: Dell.

Jeff Walker: Best buy Walmart target Amazon home shopping network Q V C home depot, although they are kids that are up on all of those retailers sides.

Jeff Walker: Our coming from alliance and are getting filled from alliance.

Speaker Change: So Bruce Thank you so much and all the best.

Speaker Change: Thank you Richard.

Operator: Thank you, Rishabh. As a reminder, if you'd like to ask a question, please press star 1.

Operator: As a reminder, if you'd like to ask a question. Please press star one.

Operator: Okay.

Operator: Yeah.

Operator: Yeah.

Speaker Change: Ladies and gentlemen at this time, we will take questions from the webcast.

Operator: Ladies and gentlemen, at this time, we will take questions from the webcast.

Operator: Our first webcast question asks can you speak to why net revenues decreased for the three and nine month period, and how should we think about fiscal Q4.

Jeff Walker: Our first webcast question asks, can you speak to why net revenues decreased for the three and nine month periods and what we should think about fiscal Q4?

Jeff Walker: Yeah.

Speaker Change: Yes, we we have had a decrease in in the quarter and nine months physical.

Jeff Walker: Yes. We have had a decrease in the quarter and the nine-month fiscal year. I mentioned a little bit about that previously. We, in the previous year, definitely had a lot of liquidation products that we were selling through and moving through. That product we no longer have, and it has impacted our top-line revenue a little bit because we were doing sales on it. The good part is we're more focused on profitable sales, and we don't have that. We have fewer liquidation sales going through, and so that's part of the reason why you're seeing the margin and so forth increase as we're moving forward here.

Jeff Walker: And a little bit about that previously we and the previous year, we definitely had a lot of liquidation product that we were selling through and moving through that product. We no longer have and it has impacted our top line revenue a little bit because we were doing sales on those.

Jeff Walker: Good part is.

Jeff Walker: We're more focused on the profitable sales and we don't have that we have less liquidation sales going through and so that's part of the reason why you're seeing the margin and so forth increase.

Jeff Walker: Increase our houseware as we're moving forward here.

Jeff Walker: At the end of fiscal Q4, we put out a press release about our Record Store Day sales. It was a record for our Record Store Day sales, as well as our Indie sales team. They had our highest monthly sales to date, and April started off very strong. Revenue was about 10% above last year for April of 2024, and we really had a pretty big... (inaudible) And also, we've had a pretty big project we've been working on with Microsoft and Verizon.

Jeff Walker: End of fiscal Q4.

Jeff Walker: We put out a press release about.

Jeff Walker: Our record store day sales it was a record for our record store day as well as our India sales team they.

Jeff Walker: They had our highest monthly sales to date.

Jeff Walker: And April started off very strong revenue is is was about 10% above last year for April of 2024, and we really had a pretty big.

Jeff Walker: Aspect all put together within that obviously, we had record store day. We are we all know that Taylor Swift's new release came out here in April as well.

Jeff Walker: And with that with that Taylor Swift one we did all the exclusive vinyl for target dotcom, we filled all their orders on that which was very significant numbers. This year and then also we've had a pretty big project, we've been working on with <unk>.

Jeff Walker: Microsoft and Verizon I'm, sorry, not Microsoft Nintendo and Verizon and <unk>.

Jeff Walker: I'm sorry, not Microsoft, Nintendo, and Verizon. And Verizon's doing a lot of Nintendo Switch giveaways, and we're the distributor in the middle selling the Nintendo product to Verizon. So all of that's had a very positive impact on the beginning of Q4 here, and should continue for the rest of the quarter.

Jeff Walker: Verizon is doing a lot of Nintendo switch giveaways, and where our where the distributor in the middle.

Jeff Walker: Selling and Nintendo product to Verizon So all of that's been a very positive impact for the beginning of Q4 here and should continue for the rest of the quarter.

Speaker Change: Our next question asked in terms of new growth initiatives. What are you doing to improve with revenue why can you talk about any verticals that showed elevated growth during the quarter for example, vinyl gaming digital et cetera.

Jeff Walker: Our next question asks, in terms of new growth initiatives, what are you doing to improve revenue? Can you talk about any verticals that showed elevated growth during the quarter? For example, vinyl, gaming, digital, etc.

Jeff Walker: Well I I've been talking to a lot of people recently and I keep saying, it's a great time to be a music artist right now music is really on fire.

Jeff Walker: Well, I've been talking to a lot of people recently, and I keep saying it's a great time to be a music artist right now. Music is really on fire, and from an artist's perspective, CDs are still selling, vinyl is going through the roof, and it's continuing to be super strong. Obviously, music artists have digital revenue, and they also have concerts and things like that that they're doing. So the music side has been super strong. You really have to realize that vinyl is a collectible item.

Jeff Walker: And from an artist perspective C. D's are still sell in vinyl is going through the roof and it's continuing to be Super strong obviously music artists have digital revenue and they also have concerts and things like that that they're doing.

Jeff Walker: So the music side has been Super strong.

Jeff Walker: You really have to realize the vinyl is you know it's a collectible item people are collecting it and it's it's really becoming a strong there. We also have put out some press releases in the in the recent past on the K pop music coming out of Korea.

Jeff Walker: People are collecting it, and it's really becoming strong there. We also have put out some press releases in the recent past on the K-pop music coming out of Korea. I can't say anything more than that stuff's on fire right now, and the collectability of that from the fans has been very, very strong.

Jeff Walker: I can't say anything more than that stuff's on fire right now.

Jeff Walker: And but the collectability of that from the fans has been been very very strong.

Jeff Walker: One of the other parts of that is our amp division, which is exclusive distribution of music. We do have some k-pop labels in there, and One of them that has 80s is a pop k-pop artist that they are really producing some great sales there on that side. We've also moved into some new areas. We have gone down the path of live commerce, you know; there are internet sales that are obviously happening on Amazon, Walmart, Target, and websites.

Jeff Walker: One of the other parts of that is our Amp division, which has exclusive distribution of music.

Jeff Walker: We do have some J pop labels in there and one of them that has a team as a pop K pop artist.

Jeff Walker: That they are really producing some great sales there on that side.

Jeff Walker: We've also moved into some new areas, we have gone down the path of live Commerce, you know, there's internet sales that are happening, obviously on Amazon Walmart target and websites, but in today's world a lot of sales are starting to move towards live.

Jeff Walker: But in today's world, a lot of sales are starting to move towards live commerce. And that is live auctions, live commerce on YNOT. And we just did one this last week with a Star Wars product with eBay Live. And we feel that that's a very strong category of a new sales channel that wasn't in existence a few years ago. You know, when we look at the breadth of products that we have and the collectability of those products, Alliance is primed to be a leader in the live commerce sales channels there.

Jeff Walker: Commerce.

Jeff Walker: And that is live auction live commerce.

Jeff Walker: On why not and we just added one that's last week with a star wars product with ebay live and we feel that that's a very strong category of a new sales channel that wasn't in existence, a few years ago.

Jeff Walker: When we look at the breadth of products. So we have and the collectability of those products are alliance.

Jeff Walker: Alliance is primed to be a leader in the live commerce sales.

Jeff Walker: Sales channels there.

Jeff Walker: And then the additional one that has been a really big win for us here in fiscal 24 and expected to continue into 25 and forward is our digital expansion into digital video. We've had digital video for several years now. And it's really starting to pick up with the volume there. And Bruce mentioned Nefarious and Blind, two big DVD titles that came out this year that drove a lot of digital revenue and are continuing to be very strong weekly digital revenue right now.

Jeff Walker: And then the additional one that has been a really big win for US here in fiscal 'twenty, four and expected to continue into 'twenty five mm and Paul.

Jeff Walker: <unk> is our digital expansion into digital video.

Jeff Walker: We've had digital video for several years now and it's really starting to pick up with the volume there and Bruce mentioned.

Jeff Walker: Nefarious in blind to Big DVD titles that came out this year that drove a lot of digital revenue and are continuing to see very strong weekly digital revenue right now.

Jeff Walker: Next question to ask congratulations on a record store day event. It seemed like vinyl is continuing to grow can you talk about the macro demand to what is driving this and is this sustainable going forward.

Jeff Walker: Next question asks, congratulations on the Record Store Day event. It seems like vinyl is continuing to grow. Can you talk about the macro themes driving this, and is this sustainable going forward?

Jeff Walker: Well, it's it's everything vinyl today I I think I I think part of it is.

Jeff Walker: Well, it's everything vinyl today. I think I know part of it. Vinyl is obviously a collectible item. People like to have a vinyl collection, show it off to their friends, and so forth. And obviously, people like the sound of vinyl as well. So it's continuing to really drive forward.

Jeff Walker: Finally, there's obviously a collectible item and people like to have a vinyl collection.

Jeff Walker: So it off to their friends and so forth.

Jeff Walker: And you know obviously people like the sound of vinyl as well so it's continuing to really.

Jeff Walker: Drive forward and we definitely have seen a pretty big shift from the music artists and the record labels.

Jeff Walker: And we definitely have seen a pretty big shift from music artists and the record labels, where they were previously thinking of vinyl as kind of an afterthought because, in the past, the sales weren't that significant. But in today's world, the sales of vinyl on a big new release are becoming very significant numbers. And it's something that the record labels are spending much more time focusing on. And then the other component in vinyl is a lot of great collectible sets, where there are a lot of limited edition items on vinyl as well.

Jeff Walker: Where they were previously thinking of vinyl as kind of an afterthought because in the past the sales werent that significant but in today's world. The sales of vinyl on a on a big new release are becoming very significant numbers and.

Jeff Walker: It's something that the record labels or are spending much more time focusing on.

Jeff Walker: And then the other component in the vinyl is a lot of great collectible fats.

Jeff Walker: Where are a lot of limited edition items and vinyl as well like a good example, right now we we do all the music, including vinyl and C. D for Walmart and over the last 12 months, we've secured over 100 different exclusive vinyl titles for wall.

Jeff Walker: As a good example right now, we do all the music, including vinyl and CD, for Walmart. And over the last 12 months, we've secured over 100 different exclusive vinyl titles for Walmart. And one of the big ones that I'm a big fan of is the Bob Marley Legend vinyl. That's an evergreen seller, a top 10 or top 20 seller for years and years. Well, the limited edition one was a rainbow vinyl version, so the disc is rainbow colored and not just black vinyl.

Jeff Walker: Tomorrow, and one of the big ones that I I'm, a big fan of as Bob Marley legend.

Jeff Walker: You know vinyl that's the evergreen seller, a top 10 or top 20 seller now for years and years, while the limited edition. One was a was a rainbow rainbow vinyl version, so that their desk as rainbow color and not just a black vinyl so that's something.

Jeff Walker: So that's something new and collectible that people want to have. And people want to not only collect it; they want to watch it turn on their turntable. So that's what's driving vinyl. And we have to also realize that vinyl is a collectible item. Cars, everything is very popular right now with people, and people are collecting a lot of stuff, and Alliance is really selling a lot of product that is collectible, and that's the majority of the product that's in our warehouse is stuff that people are collecting and adding to their collection.

Jeff Walker: New and collectible that people want to have and you know people want to know like liked it they want to watch it turn on their turn table. So that's that's what's drive in vinyl and.

Jeff Walker: We have to also realize that it's vinyl is a collectable item, but collectible products.

Jeff Walker: And all across all entertainment across sports across.

Jeff Walker: Sure.

Jeff Walker: Hi.

Jeff Walker: Cars. The everything is very popular right now with people and people are collecting a lot of stuff and alliances really selling a lot of product that is collectable.

Jeff Walker: The majority of the product that's in our warehouse and stuff that people are collecting and adding to their collections.

Jeff Walker: Our next question asks can you talk more about DTC and the progress there.

Jeff Walker: Our next question asks, can you talk more about DTC and the progress there?

Speaker Change: Yeah, I I hit on that quite a bit there with a with a short question we're really.

Jeff Walker: Yeah, I hit on that quite a bit there with Ashok's question. We're really continuing to fine-tune our direct-to-consumer business. We definitely have added some people to our direct-to-consumer team that's really focusing a lot on a lot of our major retailers, making sure listings and product selection pages and everything are dialed in and are looking great to really support the e-commerce initiatives that all the retailers have. That's a big initiative for every brick-and-mortar retailer and e-commerce retailers, you know, to continue to expand their selection, It's really driving a lot of sales for Alliance and for the retailers.

Jeff Walker: Continuing to fine tune our direct.

Jeff Walker: To consumer.

Jeff Walker: We definitely have added some people into our direct.

Jeff Walker: Direct to consumer team, that's really focusing a lot with a lot of our major retailers are making sure their listings in product selection and product pages and everything are are dialed in and are are looking great.

Jeff Walker: Really support.

Jeff Walker: You know the e-commerce initiatives that.

Jeff Walker: All the retailers have.

Jeff Walker: That's.

Jeff Walker: And that's a big initiative for every brick and mortar retailer and E. Commerce retailer as you know are continuing to expand their selection have that stuff.

Jeff Walker: Available for sale, it's really driving a lot of sales for alliance and for the retailers.

Jeff Walker: And our last.

Jeff Walker: And our last Webcast question asked: Can you provide additional color on your views of the consumer's posture around your product? Also, are the restructuring costs all behind you?

Jeff Walker: Webcast questions. He asks.

Jeff Walker: Can you provide additional color on your views of the consumers' posture around your products are also are the restructuring costs all behind you now.

Jeff Walker: Yeah.

Jeff Walker: Well, on the consumer front, I mean consumers are definitely still rabid fans of entertainment products. So we're still seeing strong demand for our product categories there. I think the restructuring costs, you know, we didn't have a whole lot of overall restructuring costs. We are definitely... winding down the warehouse there in Minnesota. There was a small amount of cost to wind that down, but it's really the cost savings of that consolidation. And the other big part to think about is that we acquired Kokum in September of 2020, so it's been three and a half years at this point.

Jeff Walker: Well on that on the consumer I mean consumers are definitely still.

Jeff Walker: Still a rabid fans of of entertainment products. So we're still seeing strong demand on our product categories. There.

Jeff Walker: I think the restructuring costs.

Jeff Walker: We didn't have a whole lot of our overall restructuring costs.

Jeff Walker: We are definitely.

Jeff Walker: Oh winding down the warehouse there in Minnesota are there.

Jeff Walker: A small amount of cost to wind that down it's really the cost savings of that consolidation and the other big part to think about is we acquired cocoa them in September of 'twenty 'twenty. So it's been three and a half years at this point.

Jeff Walker: This consolidation came about because the lease on the main facility was expiring here in May. And the other component, though, is that we have been operating on two legacy computer systems. And so the Kokum legacy computer system is being retired as well here, which isn't just the rent of the building and things like that, but retiring a whole separate computer system definitely helps us with IT costs as well as accounting costs as well as audit costs and compliance costs and all those things to not have to have two legacy operating systems. So there is pretty substantial savings that we're seeing some of that savings here, and the majority of that savings is going to hit fiscal 25 starting really in the next couple months.

Jeff Walker: The there's consolidation came about because of the leaves on the main facility was expiring here in may and the other component, though is we have been operating on two legacy.

Jeff Walker: The computer systems and so the the Coke legacy computer system is being retired as well here, which.

Jeff Walker: As you know, it's not just the rent of the building and things like that but retiring a whole separate computer system definitely helps us from a you know I T cost as well as accounting costs as well as audit cost and compliance costs and all of those things.

Jeff Walker: To to not have to have two legacy operating system. So there is a pretty substantial savings that where we're.

Jeff Walker: Seeing some of that savings here and the majority of that savings is going to hit a physical twenty-five starting really in the next couple of months here.

Speaker Change: Thank you ladies and gentlemen.

Jeff Walker: Thank you very much. Thank you.

Speaker Change: That concludes our webcast questions.

Operator: That concludes our webcast question. Ladies and gentlemen, we are

Speaker Change: Ladies and gentlemen, we have reached the end of the question and answer session.

Operator: Ladies and gentlemen, we have reached the end of the question and answer session, and I would now like to turn the call back to Mr. Ogilvie for a closing remark.

Ogilvie: I would now like to turn the call back to Mr. Ogilvy for closing remarks.

Ogilvie: Thank you operator, I'd like to thank each of you for joining our financial results conference call today, and look forward to continuing to update you on our ongoing progress and growth.

Bruce Ogilvie: Thank you, operator. I'd like to thank each of you for joining our financial results conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer your questions, please reach out to our IR firm, MG, who would be happy, more than happy, to assist with you. Thanks, everybody, and thank you for your time.

Operator: This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.

Operator: Yeah, we were unable to answer your questions. Please reach out to our IR firm M. D would be happy more than happy to assist with you. Thanks, everybody and thank you for your time. Thank you operator.

Operator: This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.

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