Alliance Entertainment Reports Revenue Decline of 29% in Q1 2023: “We Are Not Immune to Macroeconomic Headwinds”

Alliance Entertainment reported a nearly 30 percent drop in revenue in the first quarter of 2023 due to “macroeconomic headwinds.” Credit: Sean Benesh

Alliance Entertainment (OTC: AENT), a now publicly traded company, announced that it generated $227.73 million in the first three months of 2023 — approximately 28.93 percent less than the same period in 2022 .

The Florida-based media retailer, which merged with a special purpose vehicle called Adara in February, recently released its financial results for the first quarter of 2023 (the third quarter of its fiscal year). Notwithstanding a year-over-year decrease in cost of sales (total $200.40 million, down approximately 28.50 percent year-on-year), the aforementioned revenue decline contributed to Alliance Entertainment’s net loss of $7.75 million (or about 16 cents a share) for the quarter at , according to the resource.

For perspective, the company previously reported net income of $3.71 million for the opening quarter of 2022. Returning to quarterly sales of $227.73 million, vinyl topped the list with sales of $75 million for the 13-year-old company, according to the Q1 results report — although the resurgent format’s sales volume is said to have declined.

CDs, on the other hand, experienced an average price increase of 2 percent but suffered a 17 percent drop in sales in the first quarter due to lower sales volume, according to Alliance Entertainment specified.

“Along with other retailers and distributors in the United States,” Alliance wrote shortly after CD Baby exited physical business, “we are not immune to the macroeconomic headwinds caused by increased inflation and interest rates.” … Our B2B sales -wholesale customer base declined 31% year-over-year due to relatively tight inventory management.”

Elaborating on the points, Alliance said that for the nine months ended March 31, vinyl sales were down 3 percent to a total of $242 million, with CD sales down 24 percent for the entire window.

Bruce Ogilvie, CEO of Alliance Entertainment, addressed issues such as the “incredible growth in vinyl shipments at our Kentucky warehouse” and an associated automation push in his company’s first-quarter results.

“Operationally, during the quarter we installed a cube-based automated warehousing and retrieval system that is now live and operational, supporting order fulfillment of 33 million inventories across more than 425,000 SKUs,” Ogilvie shared in part.

“With our incredible growth in vinyl shipments at our Kentucky warehouse, we needed a system that could shorten the route to product picking, store in a more compact form, and reduce the labor involved in product handling. “This system is designed to support future capacity as we move towards automation at a larger scale,” he concluded.

Elsewhere in the report, Alliance announced that it had $127.43 million in revolving credit balances with Bank of America as of March 31, with “two separate promissory notes valued at $250,000” issued in June 2022. between Adara and two of its then shareholders providing cash to pay operating expenses.”

According to the performance analysis, the interest-free debentures had an outstanding balance of $471,599 as of March 31. At the time of writing, Alliance Entertainment’s stock was trading at just $3 a share.