Alliance Entertainment Holding Corporation Class A Common Stock Noble Capital Markets Virtual Equity Investor Conference

Thank you for inviting us here today. I am the Chairman of Alliance Entertainment, and what we do is we are a distributor of entertainment products consisting of movies, music, video games, toys, and collectibles. We buy all these important products from these large suppliers. I am giving you a sample of what our top 20% suppliers are, which generate over 80% of our revenue. You can see these are the top-shelf suppliers of all media. They are in movies, music, video games, toys, and collectibles. Not easy to get on with these suppliers. You have to be fiscally responsible, pay your bills on time, add value. We are a stocking distributor, and as a stocking distributor, we have over 340,000 SKUs in stock in our distribution center in Shepherdsville, Kentucky, which is about 25 minutes south of the airport there in Kentucky.

Very close to UPS Worldport, which is fantastic for us, where we get next day air delivery service for two-day air prices. Of those 340,000 SKUs, we offer to make them available to a lot of these leading retailers, which I am sure you are all familiar of. We are a traditional wholesaler where we ship directly to their stores, their distribution center. Also, 35% of our revenue is generated from we are doing drop shipping on behalf of these retailers, where we ship directly to their consumers, and it is white label made to look like it came from Walmart or Costco or whoever. It says ship from, sold by, but behind the scenes or the backroom, we are basically the fulfiller of record there. We have to meet all their stringent SLAs in order to get that privilege of being their fulfiller of record.

Amazon, even as good as Amazon is, they need somebody else who can fill stuff in when they are out of it, and that is where we come in there. We make that countdown clock that they have where it says, "Ship within six hours," or we have to ship within six hours or less. So you will see the clock ticking away. Order now, ships in three hours and 22 minutes, and we are part of that very program there. We make it very easy for these retailers wanting to buy from us. We provide them all the hard work, the metadata, the images, the track listings, all the information they need to populate their websites. With populating their websites there, we just send them a beginning stock on-hand file of what the inventory is for the day.

Every 15 minutes, there's a delta file, and that delta file includes the current stock on hand, the current price, the cost import, and what ZIP code it ships from there. A lot of the retailers like buying from us because we have the tribal knowledge, the expertise, knowing what to buy, what not to buy, and what to bring in. And where they have a tremendous problem, we have tremendous turmoil with our buyers that come and go all the time there. We just have all that expertise that creates a higher value or perceived value for our inventory, and it's just a service that the industry really needs. I talked about doing e-commerce fulfillment for retailers. There's over 200 online retailers that makes up that 35% of our revenue, plus more than 30,000 physical store locations that we service.

Primarily wholesale, 65% wholesale, 35% drop shipping, which is wholesale to those retailers. You can see that we're very diversified and do a good job. A little breakdown of our volume here. You can see for the 12 months that just ended June 30 of 2026 compared to 2025. Vinyl grew from $340 million to $383 million. That's an increase of 13% there. Our video business, consisting of DVD, Blu-ray, and Ultra HD Disc, grew from $279 million to $339 million, an increase of 22%. We do have some gaming headwinds. Nothing we're doing wrong. It's just that the industry is changing. Microsoft and Sony want to really get out of the shiny disc business and make everything digital where you have to rent it. The CD sales you can see are growing from $125 million to $156 million. There seems to be a little bit of comeback happening.

People say, "Well, what's going on with music? Why is it suddenly doing well?" There's a lot of things going on with music there. There's a segment of the consumer base that they really believe that they want to own their physical media and not rent it. We're seeing the benefits of that. Plus, from an awareness standpoint, some of the fans are aware that the artists make more money when you purchase physical product versus renting and streaming. You're dealing with fractions of a cent that they're fighting over for there. The artists don't even get 100% of that money. It's all divided up based upon market share. The economics from the artist and the fan, it's better for them to buy a physical product versus buying digital product. There's no reason why the consumer can't do both.

They can have streaming, which is a fantastic way to listen to what they own, but they have the bragging rights of what they physically own, and they can share with everybody there. Collectibles, which is our Handmade by Robots, which I'll talk more about that later. Growth area for us. You can see we went from $22 million to $32 million. Electronics is turntables, Bluetooth speakers, electronic-related items to listening to physical media. That went up by 1%. It went up a small amount there. And then ancillary revenue, that's going to be freight income, digital distribution income, some digital income there that we have there. From a non-GAAP perspective here, you can see that our revenue is up 8% overall, and we expect that trend to continue. That should be good news to everybody on this call today.

Gross margin did go up from 80 bps, and we expect that gross margin to improve even more going forward. We just had a change in a relationship with Walmart. We used to have to sell our video movies through a third party, which added additional cost, but we convinced Walmart, and that just started September 1st, that instead of having one supplier sell to Walmart, now there can be two suppliers. We have won our opportunity back to sell direct. That is just going to have our accounts receivable will be paid quicker, and our gross margin will go up. It is going to have quite an effect over the next. You will not really see the full benefit of there till the end of 12/31 or our fiscal Q2. This all did not start till September 1st, but it is all a win.

Adjusted EBITDA is up 14%, up to $41.5 million from $36.5 million. You can see our adjusted earnings are up to $46 million from $37 million. From a GAAP perspective, same numbers, green. The one thing I just want to call out is showing from a GAAP perspective, our earnings per share were $0.26. We had a one-time charge of, we had a vendor that owed us some money for future purchases to offset some rebates they owed us. Unfortunately, that vendor went out of business and went away. We originally started out that vendor, we were owed about almost $15 million. By the time they filed business and went away, it was down to $7.8 million. It is a one-time charge, but that was like a $0.15 hit from a GAAP perspective to our earnings share.

You can really take that 26 number and add $0.15 as a one-time, and that is not going to be recurring ever again with us. Quickly over our balance sheet, you can see our AR inventory, very fast-turning assets. Having all these assets gives us a lot of availability in our ABL line. Currently in our ABL line, it is a $120 million line. We have about $70 million you can see we are borrowing, and we have $50 million with availability. There is suppressed availability of close to $40 million. We have a lot of dry powder, and our cost of money is very reasonable. We are borrowing at SOFR plus one and five-eighths. SOFR just went up by 25 bps. Overall, in previous slides, you can see that our interest costs have been going down because we have the lower cost of money.

Just a snapshot of the overall market cap of us. You can see the cap structure, 51 million shares outstanding. Float has about 3.3 million. I know it says insider shares almost 78%. It is really closer to 90% insiders. That could be perceived good or perceived bad. I think the good part of it is we are highly aligned with all our shareholders, even though it is not as much float as we would like, that we want to make sure we are doing the right thing. We do not want to cause any dilution because we do not want to hurt the stock price in any way. We did come from a SPAC on February 10th of 2023, so there are warrants that are outstanding. The strike price is $11.50. We cannot push through a sale unless the stock is trading at $18, set to expire February 10th of 2028.

Our big strength in our distribution center is AutoStore. You look at this big red box there and just think of it as a warehouse inside of a warehouse. This is a 22,000 sq ft box or warehouse, but inside of it are all these totes stacked on top of each other to a tune of 14 tall, and the totes are all stacked up in stacks next to each other, and there's no aisles. Not only do we get advantage of the cubic space, we get more floor space back, eliminating aisle space. That gives us more storage capacity, gives us more sales per square foot, which is a win for any, whether it's a retail store or a warehouse.

The big win was instead of the employee walking to the shelf to pick the product in a very efficient pick path, they don't have to do that anymore. The tote comes to them. They pull from that tote as they're processing an order, and every 10 seconds, they're doing a new tote. We went from 41 employees down to seven. Big savings. We also got the same benefit on put away. When you receive inventory and you have to put it on a shelf, you'd have to walk to an empty shelf and put it away, and that's not very efficient. You're just walking all around there. We got that same benefit, too. Savings amount to about $3 million-$3.5 million a year. We're on our fourth year of using AutoStore. We were basically paying about $250,000 a month.