Q2 2025 Alliance Entertainment Holding Corp Earnings Call
Greetings and welcome to the Alliance entertainments fiscal 'twenty to 'twenty five second quarter financial results Conference call. At this time, all participants are in a listen only mode.
Speaker Change: A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded I will now pass the call over to Paul Koonce, a member of our lines Entertainment IR team at redshift Paul.
Speaker Change: 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 and other information that might be considered forward looking and 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.
Speaker Change: Our caution 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. The company is not obligating itself to revise or publicly released the results of any revision to these forward looking statements in light of new information or future events.
Speaker Change: He is discussion management well attempt to present some important factors relating to the business that may affect predictions should also review the company's Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading risk factors for this conference call management will discuss non-GAAP financial measures, including a discussion of adjusted EBITDA management believes non-GAAP disclosures enable investors.
Speaker Change: Better understand Alliance Entertainment 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.
Speaker Change: A press release detailing these results crossed the wires. This afternoon at 401 P. M. Eastern time is available in the Investor Relations section of Alliance Entertainments website at H E N T Dot com.
Speaker Change: Your host today, Jeff Walker, Chief Executive Officer, and Chief Financial Officer, and Amanda JAKO, Chief Accounting Officer will present the results of operations for the fiscal 2025 second quarter ended December 31, 2024 at this time I will turn the call over to our lives entertainments, CEO and CFO, Jeff Walker.
Speaker Change: Thank you Paul and good afternoon, everyone I'm pleased to welcome you to todays call.
Speaker Change: And that is needed to our story Alliance Entertainment is the entertainment collectible, leading direct to consumer e-commerce provider and distributor serving the gateway between entertainment brands and retailers.
Speaker Change: With over 325000 Skus in stock we offer the world's largest collection of music movies video games gaming hardware arcades collectible toys and consumer electronics.
Speaker Change: We help omni channel retailers significantly expand their entertainment collectible offering online.
Speaker Change: Through our white label direct to consumer fulfillment, we shipped the orders on behalf of major retailers reinforcing their brand, while leveraging our logistics capabilities.
Speaker Change: We are a trusted partner to leading retailers, including Walmart Amazon best buy Costco target and Kohl's as well as 2500 independent music stores and specialty retailers.
Speaker Change: Our distribution network spans major studios, such as Paramount, Sony Warner Brothers, Universal and Lionsgate as well as top gaming music and collectible brands, including Microsoft Nintendo Funko, Mattel and Hasbro.
Speaker Change: We are also the exclusive north American distributor for arcade, one up retro arcade physical.
Speaker Change: Our extensive supplier relationships and broad product portfolio make us the backbone of entertainment distribution, ensuring that retailers and consumers have access to the widest selection of physical media and collectibles available today.
Speaker Change: Alliance Entertainment as the global leader in the $10 billion physical media industry generating over one 1 billion in revenue in fiscal 'twenty four with our team of 654 dedicated employee owners.
Speaker Change: Our scale.
Speaker Change: Prior relationships and distribution expertise creates significant competitive advantages reinforcing our leadership in entertainment distribution.
Speaker Change: We hold the exclusive distribution rights for approximately 150 movie Studios and music labels with these partnerships contributing over 250 million in revenue in fiscal 2020 for.
Speaker Change: Our unique content portfolio combined with our deep catalog of 325000, plus skus in stock allows us to serve both bulk b to b orders and direct to consumer shipments efficiently strengthening long term relationships with major retailers.
Speaker Change: With a global reach spanning over 35000 storefronts across 72 countries, we serve more than 200 online retailers that rely on our inventory and fulfillment capabilities.
Speaker Change: Strategic acquisitions have played a key role in our expansion, allowing us to quickly enter new markets diversify revenue streams and solidify our industry leadership over the past two decades, we used to.
Speaker Change: That's fully integrated over a dozen companies expanding our footprint across physical media gaming and collectibles.
Speaker Change: Building alliance from the ground up both organically and through acquisition has allowed us to assemble an all star team with unparalleled industry expertise that's experienced further strengthens our market leading position.
Speaker Change: And our alignment with shareholders remains a key differentiator for us.
Speaker Change: Insiders and employees collectively holding over 94% of the company's outstanding shares.
Speaker Change: Following a surge in demand during the pandemic the physical media market has largely returned to its historical growth trajectory in the high single digits, notably the C. D. Market is also seeing a revival with C. D's out selling digital albums by a three to one margin.
And the first six months of the year.
Speaker Change: According to a midyear report.
Speaker Change: The recording industry Association of America.
Speaker Change: Now consider a physical media of vinyl T D.
Speaker Change: D V D. All collectables and fans continue to build their collection of these formats physic.
Speaker Change: Physical collectibles is in high demand today.
Speaker Change: Nearly a quarter of our annual revenue comes from exclusive distribution agreements strengthening our market position and deepening relationships with both suppliers and retailers use exclusive are managed through our distribution solutions amped milk.
Speaker Change: Greig and arcade one division, providing unique content that differentiates alliance in the market.
Speaker Change: Distribution solutions partners with over 60 movie studios to manufacture supply and market home entertainment content distributing the major retailers, such as Amazon and Walmart and target as well as thousands of independent specialty retailers. This segment was further strengthened.
Speaker Change: By our new exclusive home Entertainment license agreement with Paramount, which took effect January one 2020 five.
Speaker Change: Under this partnership Alliance is now the exclusive distributor of Paramount's physical media catalog, including DVD, Blu ray and UHD formats across the U S and Canada, expanding our leadership in home Entertainment distribution.
On the music side, our Amp Division provides exclusive distribution for over 90 music labels.
Speaker Change: <unk> artists and labels that self distribute physical media, while leveraging our deep relationships with Amazon Walmart target and 2500 independent music stores.
Speaker Change: K pop has been a particularly strong growth driver with amp support a major releases and fielding increased sales.
Speaker Change: Mill Creek licenses and Australia as the exclusive video content from major studios, including Disney and Sony Pictures, and Universal, enabling us to offer high demand films and television shows and collectable physical format.
Speaker Change: Additionally, we are now the exclusive north American distributor for arcade one up.
Speaker Change: Transitioning from a nonexclusive agreement. This partnership has already driven meaningful revenue growth reinforcing our leadership in retro gaming distribution.
Speaker Change: So content and partnerships remain a core focus for alliance as we expand our offerings and drive long term value for our retail partners and shareholders.
Speaker Change: Strategic acquisitions had been central to alliance entertainments growth, allowing us to expand into new markets diversify our offerings and strengthen our leadership in entertainment distribution.
Speaker Change: Our journey began with Super D, which Bruce and I grew from $18 million in sales in 2001 to 194 million by 2013.
Speaker Change: The transformative acquisition of Alliance Entertainment, our largest competitor at the time solidified our position as a leading global distributor of music and bedding.
Speaker Change: In 2016, we acquired and connect securing vendor managed inventory capabilities and exclusive distribution rights with Walmart and best buy.
Speaker Change: In 2018, we entered the gaming sector for Mecca Electronics acquisition, followed by Coke on the acquisition in 2020.
Speaker Change: Ripening, our relationships with major gaming brands like Microsoft Sony and Nintendo.
Speaker Change: The 2018 acquisition of distribution solutions from Sony Pictures.
Speaker Change: Secondly expanded our exclusive home video distribution business growing from 18 partners at the time.
Speaker Change: Nearly triple that today.
Speaker Change: In 2022 ways.
Speaker Change: We diversified farther by acquiring a threefold, adding collectibles to our portfolio.
Speaker Change: Most recently in December of 'twenty 'twenty, four we acquired handmade by robots and innovative collectible brand known for its unique vinyl figures designed to replicate the luck of a hand net plush toy.
Speaker Change: This acquisition strengthens our presence in high growth collectibles market and expands our portfolio of licensed products.
Speaker Change: Featuring major franchises like D C Comics, Harry Potter Jurassic World Peanuts business.
Nick the Hedgehog SAR track and many more.
Speaker Change: With handmade by robots now part of our distribution network, we see significant potential to scale this brand across major retailers and online platforms worldwide.
Speaker Change: Each acquisition has followed the same disciplined strategy enhancing our product selection, improving operational scale and deepening our retail and supplier partnerships. This approach has established alliance as a premier distributor of physical entertainment product.
Speaker Change: And positioned us for continued growth.
Speaker Change: When we acquired distribution solutions in 2018, it generated approximately $80 million of revenue and worked with 18 studio Vince.
Speaker Change: Since then the business has nearly tripled its studio partnerships and has grown into a key driver of our exclusive content strategy in it.
Speaker Change: Fiscal 'twenty 'twenty four distribution solutions contributed $134 million in revenue underscoring the success of our approach to scaling acquisition.
Speaker Change: As we further evaluate future opportunities, we will remain committed to the same disciplined strategy.
Speaker Change: Finding acquisitions that expand our content portfolio enhance operational efficiencies and strengthen our relationship with retailers and suppliers.
Speaker Change: We are confident this approach will continue to drive long term value.
Speaker Change: Technology is the backbone of our operations and a critical driver of efficiency cost savings and growth strategic investments in automation and technological innovation to enhance our ability to serve our customers more effectively.
Speaker Change: Technology is the backbone of our operations driving efficiency cost savings and scalability in 'twenty to 'twenty, three we began making strategic investments in automation to enhance our ability to serve customers, while improving our financial performance.
Speaker Change: One of our highest impact initiatives. Since then the implementation of auto store and advanced automated storage and retrieval system at our Shepherd Chill, Kentucky warehouse.
Speaker Change: This system has significantly improved our efficiency, enabling us to process over 2000 lines per hour with a leaner workforce.
Speaker Change: It has also increased storage capacity, allowing us to consolidate operations and close a 162000 square foot facility in Minnesota in May of 'twenty, 'twenty, four reducing cost and optimizing our footprint.
Speaker Change: Additionally, we installed the sure sort ex pit stem from OPEC.
Speaker Change: Streamlining our fulfillment process their system is already deliver over $500000 in savings with an unexpected $400000 in additional annual cost reduction.
Speaker Change: It also improves our ability to process larger product such as collectibles and electronic expanding our capabilities in high growth categories.
Speaker Change: Yeah.
Speaker Change: These investments are critical part to our long term strategy to drive profitability and operational excellence by leveraging automation and technology, we are strengthening our competitive position and reinforcing alliance is the most efficient scalable distributor in the entertainment industry.
I will now hand over the call to alliances Chief Accounting officer, Amanda in Nashville.
Amanda JAKO: Thank you Jack and thank you all for joining us today.
Amanda JAKO: We will know kind of try and overview of the company's financial results for the second quarter and six months ended December 31st 'twenty 'twenty four.
Amanda JAKO: Turning to our financial results for Q2 fiscal year 'twenty size, we generated $393 7 million in net revenue compared to $425 6 million in the prior year period.
Amanda JAKO: Vinyls sales grew 12% year over year to $109 million was physical movie sales surged, 23% to $86 million driven by strong demand for full key U H D. I'm collectibles do you booked additions.
Amanda JAKO: Gross margin dollars for the quarter was $42.3 million with a gross margin percentage of 10, 7%.
Amanda JAKO: Reflecting product mix and promotional activities.
Amanda JAKO: Operating expenses declined 6% year over year to $27.5 million with distribution and fulfillment costs down 18% benefiting from ongoing automation and warehouse consolidation initiatives.
Amanda JAKO: Net income for Q2 fiscal year 'twenty, five was $7 1 million compared to $8 9 million in Q2 fiscal year 'twenty four.
Amanda JAKO: This includes a $2.5 million non cash charge related to the revaluation of warrant liabilities, which reduced EPS by five cents per share.
Amanda JAKO: Excluding this non cash charge net income would have been $9 6 million an increase from the prior year.
Amanda JAKO: Adjusted EBITDA for the quarter was $16 $1 million compared to $17 9 million in the prior year period.
Amanda JAKO: For the first half of fiscal year 'twenty, five net revenues totaled $622.7 million compared to $652 3 million in the first half of fiscal year 'twenty four.
Amanda JAKO: Physical movie sales increased 19% year over year to $139 million.
Amanda JAKO: Vinyl sales grew 10% to 180 million.
Amanda JAKO: Gross margin percentage for the six month period was 10, 9% with operating expenses declining 10% year over year to $53.5 million.
Amanda JAKO: Net income for the first half of fiscal year 2025 was $7 5 million as mentioned a moment ago net income was impacted by a 2.5 million noncash charge during the second quarter, adding back the $2 5 million warrant liability net income for the.
Amanda JAKO: First half of fiscal year 2025 would have ended at 10 million versus $5 5 million in the first half of fiscal year 2024, an increase of 82% year over year.
Amanda JAKO: Adjusted EBITDA came in at $19 5 million, an increase from $19 2 million in the prior year.
Amanda JAKO: We also continue to strengthen our balance sheet.
Amanda JAKO: Reducing our revolver balance from $101 million to 17 million year over year.
Amanda JAKO: This 31% reduction in debt improve liquidity availability from 19 million to 50 million further enhancing our financial flexibility.
Amanda JAKO: This slide compares our trailing 12 months topline and adjusted EBITDA to our financial performance over the last several years showcasing how we've navigated a dynamic environment.
Amanda JAKO: Following an unprecedented surge in demand during the COVID-19 pandemic that drove our top line to a peak of $1 4 billion in fiscal year 2022 there.
Amanda JAKO: Demand has normalized with revenues adjusting to 1.1 billion for fiscal year, 'twenty, three and 'twenty four.
Amanda JAKO: As of the end of the second quarter of fiscal year 'twenty five.
Amanda JAKO: Our trailing 12 month revenues are just under $1.1 billion.
Amanda JAKO: And our adjusted EBITDA is trending higher at $24 5 million with our adjusted EBITDA margin now at two 3%.
Amanda JAKO: Okay.
Amanda JAKO: Turning to our balance sheet, we've continued to strengthen our financial position through disciplined working capital management and debt reduction.
As of December 31st 2024, we had $2 5 million in cash and available credit facility balance of 50 million.
Amanda JAKO: Up from 19 million a year ago.
Amanda JAKO: We reduced our revolver balance by 31 million year over year to $17 million, reflecting our ability to convert accounts receivable and inventory into cash.
Amanda JAKO: Inventory levels remained stable at $96 3 million, while trade receivables increased to 147 million.
Amanda JAKO: Aligning with our seasonal sales cycles.
Amanda JAKO: Our total liabilities stood at $306 2 million, which stockholders equity improving to $95 6 million compared to $87 6 million at the end of fiscal year 'twenty 'twenty four.
Amanda JAKO: The combination of reduced leverage.
Amanda JAKO: <unk> liquidity and disciplined expense management provides us with the flexibility to invest in strategic growth initiatives, while maintaining a solid financial foundation.
Amanda JAKO: As we look to the future Alliance Entertainment is poised for continued growth by leveraging our strengths as a capital light low cost provider with unmatched reach in the industry.
Amanda JAKO: Our strategy remains clear.
Amanda JAKO: Expand our market share.
Amanda JAKO: Improve margins and drive EBITDA growth.
First we are committed to profitability and cash flow generation.
Amanda JAKO: Ensuring we remain disciplined in managing expenses, while improving operational efficiencies.
Amanda JAKO: Second.
Amanda JAKO: We continue to expand our exclusive content and product offerings.
Amanda JAKO: As demonstrated by the Hanmi by robust acquisition and.
Amanda JAKO: The launch of our exclusive Paramount home Entertainment partnership.
Amanda JAKO: These strategic moves reinforce our position in high growth categories, like collectibles and premiums physical media.
Third we are focused on strengthening our balance sheet as evidenced by the 31 million year over year reduction in our revolver balance.
Amanda JAKO: And the 163% increase in availability.
Amanda JAKO: This financial flexibility positions us to pursue future growth opportunities, while maintaining a strong foundation.
Amanda JAKO: With these priorities in place we remain confident in our ability to execute our strategy.
Amanda JAKO: Capitalize on new opportunities and deliver long term value for our shareholders.
Amanda JAKO: With a stronger balance sheet key growth catalysts in place and a continued focus on operational excellence, we are well positioned for the sustained profitability and success in the second half of 'twenty 'twenty five and beyond.
Amanda JAKO: The opportunities ahead are significant family owned competitors are aging out and large movie studios and companies are looking to sell our license physical media rights.
Amanda JAKO: Our capital light model combined with our proven ability to integrate acquisitions sets us apart from the competition.
Amanda JAKO: These major movie studios will be leaning on alliance, providing us with opportunities to license their home video content and allowing these studios to focus on their core competency of making movies exhibiting in theaters doing premium downloads and focusing on.
Amanda JAKO: The streaming services, while we as a company focus on our core competency distributes in packaged physical media.
Amanda JAKO: We are excited about the road ahead, and we're confident that our strategic initiatives will drive future growth and profitability in the quarters and years ahead with that I would now like to hand, the call back over to the operator to begin our question and answer session operator.
Amanda JAKO: Thank you we will now.
Speaker Change: Ill be conducting a question and answer session. If you 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. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before.
Amanda JAKO: Pressing the star keys.
Amanda JAKO: One moment, please for all day poll for questions.
Amanda JAKO: There are no questions over the phone at this moment.
Amanda JAKO: Okay.
Amanda JAKO: I'll hand, it back over to.
Amanda JAKO: Paul.
Amanda JAKO: Yes. Thank you.
Amanda JAKO: And we do have a few webcast questions.
Amanda JAKO: So my first question can you elaborate on the expected financial and operational impact of your distribution deal with Paramount How does this partnership position alliance for future growth in the home Entertainment space.
Amanda JAKO: Okay. Thank you Paul this is Jeff Walker.
Amanda JAKO: P O L I am.
Speaker Change: Ah we're super excited about our new partnership here with Paramount Pictures.
Speaker Change: For Alliance, we are we are the leading distributor and.
Speaker Change: Sales and marketing company for physical D V D. At at this point of time, and we're really excited about this new opportunity we have with Paramount.
Speaker Change: Our licensing all of the Paramount catalog as well as Paramount and new releases.
Speaker Change: Yeah and on the DVD format, which also includes ultra high Def and steel Buck.
Speaker Change: And for US. This is a perfect partnership because we're focused on physical media and the opportunity is to get physical media in front end consumers not only on the retail store shelves, but on web sites throughout the United States, and Canada and really try to promote.
Speaker Change: The longevity of of having great collectible D V D product for for fans that want to own there.
Speaker Change: They're a favorite movies at home and.
Speaker Change: This is really going to extend the life of bvd product I have an alliance do that tender under license and be able to continue to grow the business.
Speaker Change: It's for alliance, it's going to be a.
Speaker Change: A big opportunity here one of the first new releases that we have coming up is gladiator too which are within the theaters in December.
Speaker Change: That has a street date of March 4th which is coming up shortly here and we have and initial ship a forecast here of 150000 units into the marketplace for Gladiator too, which.
Speaker Change: Significantly.
Speaker Change: Impact are our financial profitability here in Q1 of 2025.
Jeff Walker: Thank you Jeff.
Speaker Change: Webcast session with the acquisition of handmade by robots is exciting how do you see this brand fitting into your broader collectible strategy and what opportunities do you perceive for cross promotion with your existing entertaining catalog.
Speaker Change: Oh, Thank you Paul.
Speaker Change: Yeah for me I'm Super excited about him a by robots, it's I loved the brand I loved the product.
Speaker Change: I think the product.
Speaker Change: The originality of the product is brilliant having a licensed character that is a is a vinyl collectible. It is designed to look like it's knitted and then there painted with different colors and we're doing special editions that are.
Speaker Change: Lack lie.
Speaker Change: Hello in the dark and glitter, there's all sorts of different variance that we can do with AD made by robots.
Speaker Change: The other component that I find fascinating in the brand of it is the name of it and in today's world, where robots and everybody's going to have a robot in their house and.
Speaker Change: I I look at it and go this is why the robot would make and where we are all over this brand right now we did launch upon the acquisition the handmade by robots website.
Speaker Change: As well as there's a pretty robust ins.
Speaker Change: Instagram account for him made by robots and we are in the process right now of our licensing and designing a significant amount of new characters here that will start to hit the market a mid year 2025, and our it system.
Speaker Change: Great platform for us it fits exactly in what we do.
Speaker Change: You know, we sell movies and I'll give it if you've got an example here there's a new movie coming out for sponge, Bob in fourth quarter.
Speaker Change: Paramount and we're gonna have Spongebob characters with him a by robots to go along with that movie coming out in fourth quarter. So.
Speaker Change: There's a deep connection within that.
Speaker Change: Within the handmade by robots, it's not just movies video games.
Speaker Change: We have some animated products that are also coming out later this year and it's just a really great format and platform. We're very excited about the opportunity and then one last part is from the financial aspect. It changes it from where were a distributor of collectible.
Speaker Change: So we're aware of the licensee and manufacturer and that helps to go towards higher margin product and so forth there, which is a key initiative for us to get more into licensing and higher margin products as we move forward over the next few years.
Speaker Change: Thanks, Jess and we have another question from the webcast can you give us a sense of the metrics you were looking for when making an acquisition I was at multiples of EBITDA for instance.
Yeah.
Speaker Change: Well every acquisition has its own story to it its own opportunity.
Speaker Change: And people, who do acquisitions I understand that it's.
Speaker Change: There's a lot of different variables that go into place.
Speaker Change: We are.
Definitely looking at several acquisition opportunities today.
Speaker Change:
Speaker Change: And you know is a key component as to.
Speaker Change: To acquire earnings.
Speaker Change: And then also for us as a strategic acquirer, we're always looking for something where we have consolidation opportunities to take out overhead and costs and we're also looking at new products that we can bring in to sell to our existing customers.
Speaker Change: Or our product selling to the acquiring companies customers as well.
Speaker Change: We are very prudent in our use.
Speaker Change: Use of capital.
Speaker Change: We were able to do a lot of acquisitions over the years.
Without a lot of additional working capital.
Speaker Change: So it's.
Speaker Change: It's a combination of a lot of different things there that are number one thing for us today is to look for.
Speaker Change: And acquisitions, that's going to be very accretive to the overall enterprise value of of alliance and will bring good profitability and good channels going forward. So.
Speaker Change: Each one is is scrutinized individually and.
Speaker Change: I think we have a pretty good formula on that I will also say on from an acquisition standpoint.
Speaker Change: We have a fantastic team here at alliance that has participated in a lot of acquisitions and one aspect is is acquiring the company, but the most important part is the integration of that acquisition. After it's acquired.
Speaker Change: Working on the same team together and looking at all the the <unk>.
Speaker Change: Opportunities of two businesses together and what that looks like and we have a very experienced team at alliance then that knows how to do that and that's part of the biggest part of the success of an acquisition.
Jess: Thank you Jess and our.
Jess: Next question with direct to consumer sales, reaching 42% of gross revenue.
Jess: How do you plan to further optimize this channel and what efficiencies can be leveraged to drive additional margin expansion.
Speaker Change: Hey, I'm a direct to.
Jess: Consumer.
Speaker Change: That's one of our definite winning formulas here at alliance.
Speaker Change: And the reason I say that is as many of you know we stock 325000 skus.
Speaker Change: And isn't in our warehouse and we have those available on as many websites as possible, but to get those consumer eyeballs to that product and we've had great success.
Speaker Change: I'll I'll give a good example, with the arcade product from our tier one up.
Speaker Change: That stuff when we acquired the company four years ago. It was selling through best buy as alliance picked it up we were able to get our kids that are in our warehouse available for sale on a you know Walmart dot com target Amazon Bestbuy way.
Speaker Change: <unk> fair.
Speaker Change: Home Depot Dell ebay this goes through calls.
You go through all of the different major retailers and if you if you search on Google for Pac Man arcade, you'll see all the retailers that sell that that's all coming from alliance. It's all in our warehouse facility and all of those retailers love that model they have no inventory risk theyre getting.
Speaker Change: Sales, we drop ship it with their names on it and so forth.
Speaker Change: And that's a big a big winning formula for how we operate on direct to consumer.
Speaker Change: I will also say one thing that we did with handmade by robots is as soon as we acquire that we went.
Speaker Change: Straight down the same path we have.
Speaker Change: Our our product that's in stock right now and we're focusing on making sure every SKU that's in the warehouses available on as many websites.
Speaker Change: Out there in the world and.
And then when you do that you'll also want to kind of do a store within a store and featured products and so forth and so we're going to drive sales on an handmade by robots through e-commerce as well as putting it in brick and mortar stores.
Speaker Change: Great. Thank you, Jeff and another question you successfully reduced operating expenses by 13% and distribution costs by 18% how sustainable are these cost reductions and are there further automation initiatives in the pipeline.
Speaker Change: Okay.
Speaker Change: Well first off we have a fantastic.
Speaker Change: Warehouse operation.
Speaker Change: Primarily the bed facility, there and in shepherds Bill Kentucky.
Speaker Change: Led by war wake as our CLO and and the team there is just fantastic so.
Speaker Change: That team is is instrumental in driving cost and efficiencies and they're constantly working on different ways to improve how we do things our more efficient.
Speaker Change: All sorts of aspects on that so we we never see an end to that we have a project list that we continue to add new things to and continue to focus on efficiencies and so forth. There. So we did have a pretty big savings as we moved out of our.
Speaker Change: Our Minnesota warehouse, so that was the significant savings, but we're going to continue to see operational benefits and things as we go forward in the warehouse just because of the way our team is focused on looking on that at that all the time.
Speaker Change: Thank you Johnson, we have one more question in the queue.
Speaker Change: Vinyl and physical movie sales have both posted strong year over year gains.
Speaker Change: Trends are you seeing in consumer demand for physical media and how do you plan to capitalize on the momentum.
Speaker Change: Well I I.
Speaker Change: It's a good question were very happy that we're seeing you know vinyl and movies.
Speaker Change: And even C D doing well here I think what it what it looks points towards us.
Speaker Change: We are in the collectible business and you know people have vinyl collection than people have D V D or movie collections and people have made by robot collections people collect things and everyone. On this call probably has something that they can collect whatever that that is and we're seeing.
Speaker Change: A really really robust.
Speaker Change: Consumer are buying things that they enjoy it and they collect and we're leaning into all of that and we really do.
Speaker Change: Don't see an end to that side of it. So when you talk you look at vinyl in particular, there is a lot of.
Speaker Change: Buyers collecting a vinyl from you know even all of the new artist and everything there vinyl is it's super Hot as a collectible item and then in the video that we mentioned are Amanda mentioned steel book and what that is is a it's.
Speaker Change: Its a steel cage still a box case that the D V D. As in so it's a more collectible version that people want and when you look at I'll take Paramount as an example, you look at top gun or you look at.
Speaker Change: Forrest Gump or you look at it by panic those are People's favorite movies, and they want to have those at their house in our steel book format.
Speaker Change: Farm so they they've got their D V D collection of their favorite.
Speaker Change: But movies and that aspect is where we're we're heading full steam and then obviously, we added in and made by robots that.
Speaker Change: Square in the middle of of collectibles, and and physical product.
Speaker Change: We're all about the collectibles side right now and I think that that's what it's going to continue to drive us going forward over the next few years.
Speaker Change: Excellent. Thank you, Jeff and that was the last question in the queue are there any final comments you want to leave the audience with.
Speaker Change: Yeah.
Speaker Change: I guess the final thing is I'm Super excited about 2025, we've been working on some of these things are working on an agreement like this with Paramount doesn't happen overnight, we've been working on that for a long time.
Speaker Change: Made by robots initiative is a huge one for us and we have some active acquisition conversations we're in today too that that could come to fruition. In this first half of this year. So we're we're pretty bullish on where we're going and what we've what we're gonna be able to accomplish here in 2025 and SAP.
That's up really nicely for end of 2026 as well so.
Speaker Change: Pretty happy with where we're at today and we've we've we've come a long way and we've we've done a great job over the over the year of 2024.
Speaker Change: Yeah.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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