Q1 FY2027
Filed Nov 12, 2026Alliance Entertainment Q1 FY2027: revenue up 10%, GAAP net income up 56%, adjusted EBITDA flat at about 1%
Revenue growth of 10%, gross profit up 13% and GAAP net income up 56% are offset by operating income that was nearly flat ($10.6 million versus $10.5 million), adjusted EBITDA up about 1%, adjusted diluted EPS unchanged at $0.14, and operating expenses up about 18% in dollar terms. Much of the GAAP earnings gain is tied to lower interest expense and a non-cash warrant remeasurement gain, as the filing itself explains.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net revenues, Q1 FY2027 (three months ended Sept 30, 2026)GAAP | $278.8M | – | 10% |
| Gross profit, Q1 FY2027other | $42.1M | – | approximately 13% |
| Gross margin, Q1 FY2027other | 15.1% | – | 50 basis points |
| Cost of revenues (excluding depreciation and amortization), Q1 FY2027GAAP | $236.7M | – | – |
| Distribution and fulfillment expense, Q1 FY2027GAAP | $12.0 million ($12,025 thousand) | – | – |
| Selling, general and administrative expense, Q1 FY2027GAAP | $17.9 million ($17,944 thousand) | – | – |
| Total operating expenses, Q1 FY2027GAAP | $31.5 million ($31,507 thousand) | – | – |
| Operating income, Q1 FY2027GAAP | $10.6 million ($10,624 thousand) | – | – |
| Interest expense, Q1 FY2027GAAP | $1.2 million ($1,201 thousand) | – | decreased 49% |
| Change in fair value of warrants, Q1 FY2027 (non-cash gain, approximately $0.9 million per text)GAAP | −$850K | – | – |
| Income before income tax expense, Q1 FY2027GAAP | $10.28M | – | – |
| Income tax expense, Q1 FY2027GAAP | $2.65M | – | – |
| Net income, Q1 FY2027GAAP | $7.6 million ($7,621 thousand) | – | 56% |
| Net income per share, basic and diluted, Q1 FY2027GAAP | $0.15 | – | 50% |
| Adjusted EBITDA, Q1 FY2027non-GAAP | $12.3 million ($12,311 thousand) | – | approximately 1% |
| EBITDA, Q1 FY2027non-GAAP | $12.90M | – | – |
| Adjusted net income, Q1 FY2027non-GAAP | $7.2 million ($7,245 thousand) | – | – |
| Adjusted earnings per diluted share, Q1 FY2027non-GAAP | $0.14 | – | unchanged |
| Net cash provided by operating activities, Q1 FY2027GAAP | $4.3 million ($4,287 thousand) | – | 58% |
| Capital expenditures, Q1 FY2027GAAP | −$205K | – | – |
| Physical movie revenue, Q1 FY2027GAAP | $101.1M | – | 20% |
| Vinyl revenue, Q1 FY2027GAAP | $86.7M | – | 14% |
| CD revenue, Q1 FY2027GAAP | $41.2M | – | 22% |
| Collectibles revenue, Q1 FY2027GAAP | $11.9M | – | 87% |
| Collectibles share of quarterly revenue, Q1 FY2027other | 4.3% | – | – |
| Distribution and fulfillment fee revenue, Q1 FY2027GAAP | $5.7M | – | 18% |
| Gaming revenue change, Q1 FY2027other | $18.4 million decline | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Physical moviesCompany attributes growth to higher unit volumes, new releases and expanding relationships with major studios, including exclusive physical-media distribution relationships with Paramount and Amazon MGM Studios. Revenue increased $17.1 million. | $101.1M | – | 20% |
| VinylNew releases, reissues and collectible editions, with higher unit sales and higher average selling prices per the filing. Revenue increased $10.9 million. | $86.7M | – | 14% |
| CDsSame physical music drivers as vinyl: higher unit sales and higher average selling prices per the filing. Revenue increased $7.3 million. | $41.2M | – | 22% |
| CollectiblesCompany cites expanded licensed merchandise offerings, broader sourcing initiatives, vendor relationships and the owned Handmade by Robots brand. Revenue increased $5.5 million. | $11.9M | – | 87% |
| Distribution and fulfillment feesCompany attributes the increase to higher demand for distribution, fulfillment and value-added logistics services. | $5.7M | – | 18% |
| GamingFiling attributes the $18.4 million decline primarily to lower product availability and the absence of certain prior-year sales associated with the Nintendo Switch 2 launch. | not printed in filing (decline of $18.4 million) | – | – |
| Digital downloadsFiling states revenue growth was partially offset by declines in digital downloads, with no amount or percentage given. | not printed in filing | – | – |
Capital returns
- No share repurchases or dividends are reported in the filing.
- Weighted-average diluted shares were 51,082,171 versus 50,996,141 in the prior-year quarter; the filing does not describe a capital return program.
What drove it
- Company states revenue growth was driven primarily by higher physical movie, vinyl, CD and collectibles sales, partially offset by gaming and digital downloads declines.
- Company states gross margin improved 50 basis points to 15.1%, reflecting stronger product margins and favorable product mix contributions.
- Company states operating expenses rose primarily from higher SG&A and distribution and fulfillment costs.
- Company states lower interest expense reflected a lower average effective interest rate following the October 2025 refinancing, which more than offset higher average borrowings.
- Company states the year-over-year GAAP net income and EPS improvement reflected lower interest expense and a favorable change in the fair value of warrant liabilities, partially offset by higher income tax expense.
- Company states the GAAP net income gain included a non-cash warrant remeasurement gain of approximately $0.9 million, compared with a non-cash loss of approximately $1.5 million in the prior-year period.
- Company states operating cash flow benefited from higher earnings and increased accounts payable, partially offset by higher inventory and receivables.
Concerns
- Operating income was $10.6 million versus $10.5 million, essentially flat, while revenue grew 10%. The filing states the gross profit increase was substantially offset by higher operating expenses.
- Adjusted EBITDA rose approximately 1% and adjusted diluted EPS was unchanged at $0.14, so the GAAP net income increase of 56% is not reflected in the adjusted measures.
- Operating expenses increased to $31.5 million from $26.6 million, faster than gross profit growth of approximately 13%.
- Inventory rose to $152.0 million from $126.6 million in the quarter, and the company describes this as investment ahead of holiday-season demand. Net cash used in financing and inventory build reduced cash to $649 thousand.
- Gaming revenue declined by $18.4 million, and the filing gives no revenue level for that line or for digital downloads.
- Availability under the revolving credit facility is reported as approximately $48.9 million in one section and approximately $49.2 million in another for the same date.
What to watch
- Whether operating expense growth slows relative to gross profit, since the filing states operating income was substantially offset by higher operating expenses.
- Inventory and accounts payable levels into the holiday season, given the company's stated inventory investment for anticipated sales activity.
- Gaming revenue trajectory, given the filing's reference to lower product availability and the absence of prior-year Nintendo Switch 2 launch sales.
- Durability of physical movie growth tied to the Paramount and Amazon MGM Studios distribution relationships.
- Use of the approximately $33.4 million of collateral-supported capacity above the current facility commitment, subject to lender approval.
- Warrant remeasurement, which the filing identifies as a non-cash item affecting GAAP net income and excluded from adjusted measures.
Balance sheet and cash flow
- Inventory, net: $152,019 thousand at Sept 30, 2026 versus $126,599 thousand at June 30, 2026. Filing says the increase reflects investment to support sales growth and anticipated customer demand.
- Trade receivables, net: $119,547 thousand versus $111,038 thousand at June 30, 2026.
- Accounts payable: $198,769 thousand versus $170,958 thousand at June 30, 2026.
- Cash: $649 thousand at Sept 30, 2026 versus $814 thousand at June 30, 2026.
- Revolving Credit Facility, net (balance sheet): $70,311 thousand versus $73,721 thousand at June 30, 2026. The text states approximately $70.8 million was outstanding under the $120 million facility at Sept 30, 2026.
- Availability under the $120 million revolving credit facility: the highlights section states approximately $48.9 million, while the financial review states approximately $49.2 million at Sept 30, 2026.
- Additional collateral-supported borrowing capacity above the facility's current commitment limit: approximately $33.4 million, which the filing says could support a future expansion of the facility, subject to conditions and lender approval.
- Total assets: $428,085 thousand versus $397,600 thousand at June 30, 2026. Total liabilities: $303,641 thousand versus $280,984 thousand. Total stockholders' equity: $124,444 thousand versus $116,616 thousand.
- Net cash used in investing activities: $(205) thousand versus $(319) thousand in the prior-year quarter.
- Net cash used in financing activities: $(4,247) thousand versus $(414) thousand in the prior-year quarter.
- Cash paid for interest: $1,105 thousand versus $2,313 thousand. Cash paid for income taxes: $245 thousand versus $342 thousand.
- Average effective interest rate on borrowings: 5.3% versus 8.4%, following the October 2025 refinancing of the revolving credit facility with Bank of America, per the filing.
- The company states it remained in compliance with applicable credit facility covenants.
Analysis
Alliance Entertainment reported first quarter fiscal 2027 (three months ended September 30, 2026) with net revenues up 10% to $278.8 million and gross profit up approximately 13% to $42.1 million. Gross margin rose 50 basis points to 15.1%, which the company attributes to stronger product margins and product mix. Demand was broad within physical entertainment: physical movie revenue rose 20% to $101.1 million, vinyl rose 14% to $86.7 million, CDs rose 22% to $41.2 million, and collectibles rose 87% to $11.9 million. Gaming declined by $18.4 million, which the filing links to lower product availability and the absence of prior-year Nintendo Switch 2 launch sales. Gaming and digital downloads declines were the only offsets the filing identifies.
Profitability is more mixed than the headline GAAP figures suggest. Total operating expenses increased to $31.5 million from $26.6 million, led by SG&A of $17.9 million and distribution and fulfillment expense of $12.0 million, so operating income was $10.6 million versus $10.5 million. Adjusted EBITDA was $12.3 million, up approximately 1%, and adjusted diluted EPS was $0.14, unchanged. GAAP net income rose 56% to $7.6 million and GAAP diluted EPS rose 50% to $0.15. The filing attributes this to lower interest expense, which fell 49% to $1.2 million after a reduction in the average effective interest rate to 5.3% from 8.4% following the October 2025 refinancing, and to a non-cash warrant remeasurement gain of approximately $0.9 million, compared with a non-cash loss of approximately $1.5 million a year earlier. Income tax expense rose to $2,655 thousand from $1,858 thousand.
Cash generation improved on a reported basis. Net cash provided by operating activities rose 58% to $4.3 million. The filing describes this as supported by higher earnings and increased accounts payable, offset by higher inventory and receivables. Inventory rose to $152.0 million from $126.6 million at June 30, 2026, which the company describes as investment for sales growth and anticipated holiday demand. Cash ended at $649 thousand. Revolver borrowings were $70.8 million per the text, with availability reported as approximately $48.9 million in the highlights and approximately $49.2 million in the financial review, plus approximately $33.4 million of collateral-supported capacity above the current commitment limit. Total assets rose to $428.1 million and equity to $124.4 million.
The filing provides no forward guidance and no prior outlook was supplied, so no guidance comparison is possible. Capital returns are not reported. The principal items for a reader to weigh are the gap between GAAP earnings growth and flat adjusted earnings, the rise in operating expenses that absorbed most of the gross profit gain, and the inventory build that ran ahead of operating cash flow growth.
Management, verbatim
Fiscal 2027 is off to a strong start, with 10% revenue growth, higher gross margins and significant improvement in GAAP net income and earnings per share.
Jeff Walker, Chief Executive Officer, Alliance Entertainment
First-quarter results reflect continued revenue growth and gross margin improvement, along with the benefits of our strengthened financing structure.
Amanda Gnecco, Chief Financial Officer, Alliance Entertainment
Not in the filing
stated, not guessed- Company financial guidance for the next period or fiscal 2027 was not provided in the filing.
- Prior-year and prior-quarter comparisons for gross profit, operating income, and cost of revenues percentage changes were not printed as percentages.
- Year-over-year percentage change for cost of revenues, distribution and fulfillment expense, SG&A, total operating expenses, operating income, income tax expense and income before tax were not printed.
- Year-over-year percentage change for adjusted net income was not printed.
- Revenue level for gaming was not printed; only the $18.4 million decline was given.
- Revenue level and change for digital downloads were not printed.
- Free cash flow was not printed.
- Consensus or analyst expectations were not provided and are not used here.
- Share price reaction was not provided.
- Availability under the revolving credit facility is stated as approximately $48.9 million in the highlights and approximately $49.2 million in the financial review; the filing does not reconcile the two.
- Prior-quarter (June 30, 2026) comparison values for income statement lines were not printed; the filing compares only to the prior-year quarter.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.