ALLIANCE ENTERTAINMENT HOLDING CORP

Previous wording

The objective for the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is to provide information the Company’s management team believes is necessary to achieve an understanding of its financial condition and the results of business operations with particular emphasis on the Company’s future and should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended June 30, 2025, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2025.

Current wording

The objective for the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is to provide information that the Company’s management team believes is necessary to achieve an understanding of its financial condition and the results of business operations with particular emphasis on the Company’s future and should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended June 30, 2025, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2025.

Previous wording

Alliance is a leading global wholesaler and distributor of collectibles, physical media, entertainment products, hardware, and accessories across various platforms. Employing an established multi-channel strategy, Alliance operates as the vital link between renowned international manufacturers of entertainment content and top-tier retail partners both domestically and internationally. With premier suppliers such as Universal Pictures, Warner Brothers Home Video, Walt Disney Studios, Sony Pictures, Lionsgate, Universal Music Group, Sony Music, Warner Music Group, Microsoft, Nintendo, Take Two, Electronic Arts, Funko, Mattel and others, Alliance maintains in-stock inventory of over 340,000 SKU products, consisting of vinyl records, video games, compact discs, DVD, Blu-Rays, and collectibles. Combined with exclusive content from AMPED Distribution and Distribution Solutions, Alliance Entertainment serves as a valued added wholesale distributor, direct-to-consumer (“DTC”) distributor and e-commerce provider to notable partners including industry leaders like Walmart, Amazon, Best Buy, Barnes & Noble, Wayfair, Costco, Dell, Verizon, Kohl’s, Target, Shopify, and others. Currently, the company sells its products, permitted for export, to more than 70 countries worldwide.

Current wording

Alliance is a leading global wholesaler and distributor of collectibles, physical media, entertainment products, hardware, and accessories across multiple platforms. Through an established multi-channel strategy, the Company serves as a key link between leading content producers and manufacturers and top-tier retail partners, both domestically and internationally. Alliance partners with premier suppliers, including Universal Pictures, Nintendo, Warner Bros. Home Entertainment, Walt Disney Studios, Sony Pictures, Lionsgate, Universal Music Group, Sony Music Entertainment (including The Orchard), Warner Music Group, Microsoft, Take-Two Interactive, Electronic Arts, Funko, and Mattel. The Company maintains an in-stock assortment of over 340,000 SKUs, including vinyl records, video games, compact discs, DVDs, Blu-ray titles, and collectibles. In addition to its wholesale operations, Alliance distributes exclusive content through AMPED Distribution and Alliance Home Entertainment, and operates as a value-added wholesale distributor, direct-to-consumer (“DTC”) distributor, and e-commerce provider. Its customer base includes leading retailers such as Walmart, Amazon, Barnes & Noble, Target, Verizon, BJ’s Wholesale Club, Costco, eBay, Best Buy, and Kohl’s, among others. The Company sells export-permitted products to customers in more than 70 countries worldwide.

Previous wording

Additionally, Alliance manages a diverse portfolio of owned e-commerce brands through its DirectToU LLC division, catering to various entertainment and collectible markets. Notable brands include DeepDiscount, PopMarket, ImportCDs, Critics’ Choice Video, Collectors’ Choice Music, Movies unlimited and WowHD.

Current wording

Additionally, Alliance manages a diverse portfolio of owned e-commerce brands through its DirectToU LLC division, catering to various entertainment and collectible markets. Notable brands include CDWow, Vinyl Unlimited, DeepDiscount, PopMarket, Collectibles Unlimited, Critics’ Choice Video, Collectors’ Choice Music, Movies Unlimited and WowHD.

Previous wording

Alliance provides state-of-the art, distribution, and technology platforms that support the efficient sale and fulfillment of physical entertainment products and collectibles across retail and e-commerce channels. These capabilities are enhanced by Handmade by Robots, which expands Alliance’s premium licensed collectibles offering, and Endstate, which contributes NFC-enabled authentication and digital product identity technology that supports product verification and authenticated resale. Together, these platforms strengthen Alliance’s position in the collectibles market by enabling secure, traceable, and scalable distribution of high-value physical products. Alliance also serves as the retailers’ back office, with EDI and logistics infrastructure fully operational to support existing and new product launches.

Current wording

Alliance provides advanced distribution and technology platforms that enable the efficient sale and fulfillment of physical entertainment products and collectibles across retail and e-commerce channels. These capabilities are further enhanced by Handmade by Robots, which expands the Company’s portfolio of premium licensed collectibles, and Alliance Authentic (formerly Endstate), which delivers NFC-enabled authentication and digital product identity technology to support product verification and authenticated resale. Together, these capabilities strengthen Alliance’s position in the collectibles market by enabling secure, traceable, and scalable distribution of high-value physical products. In addition, Alliance supports its retail partners with integrated back-office services, including fully operational EDI and logistics infrastructure, to facilitate both ongoing operations and new product launches.

Previous wording

Subsequent to December 31, 2025, in January 2026, Alliance Entertainment entered into a new exclusive home entertainment license agreement with Amazon MGM Studios Distribution covering physical media distribution in the United States and Canada. Under the agreement, Alliance will serve as the exclusive distributor of Amazon MGM Studios’ physical media titles, including new releases and select catalog content, across major wholesale, e-commerce, and brick-and-mortar retail channels. Management expects the agreement to expand the Company’s physical media portfolio and support continued growth in higher-value and collectible product offerings.

Current wording

In January 2026, Alliance Entertainment entered into an exclusive home entertainment license agreement with Amazon MGM Studios Distribution for physical media distribution in the United States and Canada. Under the agreement, the Company acts as the exclusive distributor of Amazon MGM Studios’ physical media titles, including new releases and select catalog content, across wholesale, e-commerce, and brick-and-mortar retail channels. The partnership broadens the Company’s physical media portfolio, particularly in higher-value and collectible offerings, while leveraging its scale, marketing capabilities, and omnichannel fulfillment platform to drive distribution and category growth.

Previous wording

On December 31, 2025, Alliance completed its strategic acquisition of Endstate Acquisition LLC and established Endstate Authentic LLC (“Endstate”) as a wholly owned subsidiary focused on authentication and resale technology. The acquisition supports the launch of Alliance Authentic, a new premium platform designed to create authenticated, certified vinyl collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services, forming the technological foundation of the Alliance Authentic platform. As part of the transaction, Endstate co-founders Bennett Collen and Stephanie Howard joined Alliance’s leadership team as President and Senior Vice President of Operations, respectively. The acquisition resulted in the recognition of $5.0 million of goodwill and $3.3 million of identifiable intangible assets as of December 31, 2025, primarily related to Endstate’s proprietary technology and digital identity systems. Management believes the acquisition strengthens Alliance’s strategic position in the growing authenticated collectibles market and supports the development of new technology-enabled and recurring revenue opportunities.

Current wording

On December 31, 2025, Alliance completed its strategic acquisition of Endstate Authentic LLC and established Endstate Authentic LLC (“Endstate”) as a wholly owned subsidiary focused on authentication and resale technology. The acquisition supports the launch of Alliance Authentic, a new premium platform designed to create authenticated, certified vinyl collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services, forming the technological foundation of the Alliance Authentic platform. As part of the transaction, Endstate co-founders Bennett Collen and Stephanie Howard joined Alliance’s leadership team as President and Senior Vice President of Operations, respectively. The acquisition resulted in the recognition of $5 million of goodwill and $3.3 million of identifiable intangible assets as of March 31, 2026, primarily related to Endstate’s proprietary technology and digital identity systems. Management believes the acquisition strengthens Alliance’s strategic position in the growing authenticated collectibles market and supports the development of new technology-enabled and recurring revenue opportunities.

Previous wording

The Company continued to operate amid macroeconomic uncertainty during the period ended December 31, 2025, including inflationary pressures and geopolitical instability related to ongoing global conflicts. While inflation moderated during late 2025, consumer discretionary spending remained uneven, affecting demand patterns across certain product categories. The Company also experienced cost pressures related to existing and potential tariffs on imported goods, particularly for internationally sourced physical media and collectibles. Despite these challenges, management continues to actively manage pricing, product mix, and sourcing strategies to mitigate the impact of economic and trade-related volatility. While these conditions may continue to influence future periods, the Company believes its diversified product offerings and focus on higher-value collectibles position it to navigate ongoing uncertainty. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, including the risk factor titled “Unstable market and economic conditions have had and may continue to have serious adverse consequences on our business, financial condition and share price.”

Current wording

The Company continues to operate amid macroeconomic uncertainty during the period ended March 31, 2026, including inflationary pressures, evolving trade policies, and geopolitical instability related to ongoing global conflicts. While inflation has moderated compared to prior periods, consumer discretionary spending remains uneven, impacting demand across certain product categories. The Company continues to experience cost pressures associated with existing and potential tariffs on imported goods, particularly for internationally sourced physical media and collectibles. In response, management continues to actively manage pricing, product mix, and sourcing strategies to mitigate the effects of economic and trade-related volatility. While these conditions may persist, the Company believes its diversified product portfolio and focus on higher-value and collectible offerings position it to effectively navigate the current environment. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, including the risk factor titled “Unstable market and economic conditions have had and may continue to have serious adverse consequences on our business, financial condition and share price.”

Previous wording

Year over year, vinyl record sales increased from $109 million to $112 million for the three months ended December 31, 2025, representing an increase of $3 million, or 3%, compared to the prior-year period. The increase in revenue was primarily driven by a 2.9% increase in unit sales volume, reflecting continued consumer demand for vinyl records, with a modest contribution from a 0.1% increase in average selling prices. The growth in sales volume was supported by strong new release activity, continued interest in collectible and limited-edition offerings, and sustained demand for vinyl as a preferred physical music format among both established and emerging artists. While pricing remained relatively stable during the period, increased unit demand more than offset the minimal change in average selling price, resulting in overall revenue growth.

Current wording

Year over year, vinyl record sales increased from $86 million to $99 million for the three months ended March 31, 2026, representing an increase of $13 million, or 15%, compared to the prior-year period. The increase was primarily driven by higher unit sales volume, reflecting continued consumer demand for vinyl records. Growth during the quarter benefited from several notable vinyl releases, including major pop and rock comeback albums, high-profile pop titles, and early-year metal and industrial releases, as well as continued interest in collectible and limited-edition offerings. Sales were also supported by retailer and consumer purchasing in advance of Record Store Day in April 2026. Vinyl continued to perform well as a preferred physical music format among both established and emerging audiences, and increased demand more than offset relatively stable pricing during the period, resulting in overall year-over-year revenue growth.

Previous wording

Music Compact Disc (CD) sales increased from $39 million to $41 million for the three months ended December 31, 2025, representing an increase of $2 million, or 5%, compared to the prior-year period. The increase in revenue was driven primarily by a 7% increase in unit sales volume, partially offset by a 1% decline in average selling price. The growth in unit volume reflects heightened demand for select new releases during the period, including Taylor Swift’s album released in October 2025, as well as continued demand for K-Pop titles and collectible CD editions. While the broader market continues to shift toward streaming and digital formats, strong performance from major artist releases and fan-driven purchases supported increased CD sales during the quarter.

Current wording

Music Compact Disc (CD) sales increased from $21 million to $39 million for the three months ended March 31, 2026, representing an increase of $19 million, or 90%, compared to the prior-year period. The increase in revenue was primarily driven by a 39% increase in unit sales volume, along with a 37% increase in average selling price. The growth in unit volume reflects sustained demand for physical music products tied to select high-profile releases and catalog strength, as well as continued consumer interest in collectible and value-priced CD formats. While the broader music market continues to shift toward streaming and digital consumption, CD performance during the quarter ended March 31, 2026, was supported by loyal fan purchasing behavior, particularly for major artist releases and genre-driven demand in pop and international music segments, with K-pop remaining a key driver of incremental volume, helping to offset long-term category decline pressures.

Previous wording

Physical movie sales, encompassing DVD, Blu-ray, and Ultra HD formats, increased from $86 million to $114 million for the three months ended December 31, 2025, representing an increase of $28 million, or 33%, compared with the same period in the prior year. The increase was driven by a 4% increase in average selling price, together with higher unit shipments, resulting in significant year-over-year revenue growth. Performance during the current quarter benefited from a consistent flow of theatrical releases and sustained consumer demand for premium formats, including 4K Ultra HD and collectible SteelBook editions. In addition, the launch of a new exclusive content partnership with Paramount earlier in the year expanded the Company’s film portfolio and contributed to improved pricing and increased retail visibility for select titles. A favorable mix shift toward premium, higher-margin products supported the increase in average selling price and partially offset softness in lower-priced catalog titles.

Current wording

Physical movie sales, which include DVD, Blu-ray, and Ultra HD formats, increased from $58 million to $61 million for the three months ended March 31, 2026, representing growth of $3 million, or 5%, compared with the same period in the prior year. The increase was primarily driven by higher unit shipments, along with a modest 0.5% increase in average selling price, resulting in overall revenue growth. Performance during the quarter benefited from a steady cadence of theatrical releases and continued consumer demand for premium physical formats, including 4K Ultra HD and collectible SteelBook editions. The primary driver of the increase was the Paramount partnership, which was initially launched in January 2025 but began to meaningfully ramp in April 2025, contributing to stronger title availability, improved retail placement, and increased volume during the current period. In addition, the Amazon MGM Studios Distribution partnership introduced during the year provided incremental catalog depth and further supported assortment expansion across key retail channels. A favorable product mix shift toward higher-margin premium products also contributed to the increase in average selling price and partially offset softness in lower-priced catalog titles.

Previous wording

For the quarter ended December 31, 2025, collectibles revenue rose from $6 million to $8 million (+$2 million, +31%) compared with the prior-year period. Although unit sales volume declined by 17%, a 56% increase in average selling price more than offset the decrease and drove overall revenue growth. The increase reflects a favorable shift toward higher-value collectibles, supported by expanded sourcing activity and new vendor additions during the second half of 2025, which contributed incremental revenue primarily in the quarter. Growth was further supported by the transition of Handmade by Robots from a distributed brand in 2024 to an owned brand in 2025, as well as improved profitability from certain legacy brands following inventory rationalization in the prior year.

Current wording

For the quarter ended March 31, 2026, collectibles revenue increased from $5 million to $8 million, a gain of $3 million, or 48%, compared to the same period last year. While unit volume declined by 11%, this was more than offset by a 67% rise in average selling prices, which drove the overall increase in revenue. The improvement reflects a mix shift toward higher-priced collectibles, supported by expanded sourcing efforts and the addition of new vendors in the latter half of 2025, which contributed incremental sales during the quarter. Performance also benefited from the transition of Handmade by Robots from a distributed brand in 2024 to an owned brand in 2025, along with improved margins from certain legacy brands following inventory optimization initiatives implemented in the prior year.

Previous wording

For the quarter ended December 31, 2025, electronics revenue remained flat at $6 million compared to the prior-year period. Unit sales volume declined by 9%; however, this decrease was offset by a 5.1% increase in average selling price, resulting in relatively stable revenue year-over-year. The higher average selling price reflected changes in product mix and competitive pricing dynamics, while the decline in unit volume indicates softer demand compared with the prior-year period. Electronics sales primarily consist of audio playback devices and accessories, including turntables, headphones, speakers, and related accessories, which are generally sold as complementary products alongside physical music and movie media.

Current wording

For the quarter ended March 31, 2026, electronics revenue increased from $2.6 million to $4.0 million, representing growth of $1.4 million, or 53%, compared to the prior-year period. The increase was driven by a 19% rise in unit sales volume, along with a 29% increase in average selling price, both of which contributed to the overall revenue growth. The higher average selling price reflects a shift in product mix toward higher-priced items, as well as competitive pricing dynamics. Electronics sales primarily consist of audio playback devices and accessories, including turntables, headphones, speakers, and related products, which are typically sold as complementary items alongside physical music and movie media. Growth in the category was also supported by continued strength in vinyl and physical media sales, which helped drive demand for playback devices and related accessories.

Previous wording

Operating Expenses: Total operating expenses for the quarter increased from $28 million to $30 million, or 9% year over year, rising as a percentage of net revenue from 7% to 8%. The increase was primarily driven by higher selling, general, and administrative expenses, which grew from $14 million to $16 million, reflecting strategic investments in infrastructure, technology, and personnel to support the Company’s exclusive content partnerships and future growth initiatives. Distribution and fulfillment expenses decreased slightly from $12.4 million to $12.1 million, or 2.4%, though these costs increased modestly as a percentage of net revenue to 3.3%. The Company continues to invest in warehouse automation to support a more permanent labor structure and reduce reliance on temporary staff, while maintaining flexibility to manage demand fluctuations. Fulfillment payroll remained flat at $8 million but rose as a percentage of net revenue from 2.1% to 2.2%, reflecting lower net revenue and a 4% increase in average labor costs per hour. The May 2024 consolidation of the Shakopee, Minnesota warehouse continued to deliver cost savings and operational efficiencies through increased centralization. Depreciation and amortization expense remained consistent at $1 million compared with the prior-year period.

Current wording

Operating Expenses: Total operating expenses for the quarter increased from $25.5 million to $29.7 million, an increase of 16.3% year over year, while declining as a percentage of net revenue from 12.0% to 11.5%. The increase in absolute dollars was driven primarily by higher selling, general and administrative (“SG&A”) expenses (excluding depreciation and amortization) and distribution and fulfillment costs. SG&A expenses increased from $14.2 million to $16.9 million, reflecting strategic investments in infrastructure, technology, and personnel to support the Company’s exclusive content partnerships and future growth initiatives. Despite the increase in dollars, SG&A as a percentage of net sales improved from 6.7% to 6.5% for the quarter ended March 31, 2026. Distribution and fulfillment expenses increased from $10.0 million to $11.1 million, or 11.3%, primarily due to higher shipping volumes, partially offset by improved operating leverage. However, these costs decreased as a percentage of net revenue from 4.7% to 4.3%. The Company continues to utilize a flexible labor model within its warehouse operations, with a higher proportion of temporary staffing to support seasonal and demand-driven fluctuations, while maintaining targeted investments in automation to enhance efficiency and scalability over time. Fulfillment payroll increased to $7.1 million from $6.2 million in the prior year, primarily driven by higher staffing levels to support increased demand; however, as a percentage of net revenue, it improved from 2.9% to 2.7%, reflecting improved labor productivity and operating leverage. This was further supported by a slight 0.3% decrease in average labor costs per hour. Depreciation and amortization expense remained consistent at $1.4 million compared with the prior-year period.

Previous wording

**Income Tax:**For the three months ended December 31, 2025, an income tax expense of $3.6 million was recorded compared to $2.4 million for the prior year period. Alliance reported a pretax income of $13.0 million for the three months ended December 31, 2025, versus income of $9.4 million for the three months ended December 31, 2024. The effective tax rate was 28% and 25% for the three months ended December 31, 2025, and 2024, respectively. The difference between the Company’s effective tax rate for the three months ended December 31, 2025, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, fair value adjustments related to the Company’s warrant liability, and prior taxes related to parent’s pre-acquisition period. The difference between the Company’s effective tax rate for the three months ended December 31, 2024, and the federal statutory rate primarily resulted from state income taxes, and Foreign Derived Intangible Income. The Company completed the acquisition of Endstate Authentic LLC on December 31, 2025. For U.S. federal and state income tax purposes, the transaction is treated as a taxable purchase of assets because Endstate Authentic LLC is a disregarded entity. As such, the tax basis of all acquired assets and assumed liabilities was stepped up to an amount equal to their fair values determined under ASC 805. Accordingly, the acquisition did not give rise to any temporary differences, and no deferred tax assets or liabilities were recognized on the acquisition date.

Current wording

**Income Tax:**For the three months ended March 31, 2026, an income tax expense of $0.3 million was recorded compared to $0.9 million for the prior year period. Alliance reported a pretax income of $2.6 million for the three months ended March 31, 2026, versus income of $2.8 million for the three months ended March 31, 2025. The effective tax rate was 12% and 33% for the three months ended March 31, 2026, and 2025, respectively. In accordance with ASC 740-270, the Company calculates its interim income tax provision using an estimated annual effective tax rate (“ETR”) applied to year-to-date ordinary income. This approach ensures that the interim tax expense reflects the best estimate of the annual tax rate, as required by U.S. GAAP. Items that are unusual, infrequent, or not expected to recur—such as discrete events—are recognized separately in the period in which they occur and are not included in the estimated annual ETR. The difference between the Company’s effective tax rate for the three months ended March 31, 2026, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, and fair value adjustments related to the Company’s warrant liability.

Previous wording

**Non-GAAP Financial Measures:**For the six months ended December 31, 2025, we had non-GAAP Adjusted EBITDA of approximately $30.7 million compared with Adjusted EBITDA of approximately $19.5 million in the prior year period, or a year-over-year improvement of $11.2 million. We define Adjusted EBITDA as net gain or loss adjusted to exclude: (i) income tax expense; (ii) other income (loss); (iii) interest expense; (iv) depreciation and amortization expense; and (v) other non- recurring expenses. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA.

Current wording

**Non-GAAP Financial Measures:**For the three months ended March 31, 2026, we had non-GAAP Adjusted EBITDA of approximately $5.1 million compared with Adjusted EBITDA of approximately $4.9 million in the prior year period, or a year-over-year improvement of $0.2 million. We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income tax expense; (ii) interest expense; (iii) depreciation and amortization; (iv) changes in the fair value of warrant liabilities; and (v) other non-recurring or non-cash items, including transaction costs and stock-based compensation. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA.

Previous wording

**Net Revenue:**Year over year, total net revenues remained the same at $623 million for the six months ended December 31, 2025. Alliance Entertainment is a recognized leader in the entertainment industry, excelling in the licensing, production, and distribution of a diverse range of entertainment products and content, including motion pictures, music, gaming hardware, retro arcades, and pop culture collectibles. With exclusive distribution rights for approximately 150 studios and labels in the film and music industry, our extensive portfolio of unique content, combined with our deep inventory, enables us to service bulk business-to-business and direct-to-consumer channels with a vast selection of products unavailable through other distributors. Our recent acquisition of Handmade by Robots and the Paramount licensing contract further enhance our portfolio of exclusive content. In addition, our unique DTC suite of distribution and inventory solutions for the e-commerce retail industry, including our consumer direct subsidiary DirectToU LLC, accounted for approximately 37% of gross revenue for the six months ended December 31, 2025.

Current wording

**Net Revenue:**Year over year, total net revenues increased from $836 million to $881 million for the nine months ended March 31, 2026 (+$45 million, +5%). The increase reflected broad-based growth across the Company’s core physical entertainment categories, partially offset by softness in gaming and digital downloads. Overall performance benefited from continued demand for physical media, collectibles, and related services, as well as the Company’s broad distribution platform, deep inventory positions, and exclusive content arrangements. Alliance Entertainment remains a leading distributor of entertainment products and content across music, video, gaming hardware, electronics and pop culture collectibles. With exclusive distribution rights for approximately 150 studios and labels in the film and music industry, the Company is well positioned to serve both business-to-business and direct-to-consumer channels. In addition, the acquisition of Handmade by Robots and the Paramount and newly obtained Amazon MGM Studios Distribution licensing contracts further expand the Company’s portfolio of exclusive and differentiated content. In addition, our unique DTC suite of distribution and inventory solutions for the e-commerce retail industry, including our consumer direct subsidiary DirectToU LLC, accounted for approximately 34.8% of gross revenue for the nine months ended March 31, 2026.

Previous wording

Year over year, vinyl record sales increased from $179 million to $188 million (+$9 million, +5%) for the six months ending December 31, 2025. The increase in revenue was driven by a 5% increase in unit sales volume, partially offset by a 0.3% decrease in average selling price. The modest decline in pricing was more than offset by higher unit demand, resulting in overall revenue growth. The increase in vinyl record revenue reflects continued consumer demand for physical music formats, particularly among collectors and enthusiasts seeking premium and limited-edition releases. Higher sales volume during the period was supported by strong new release activity, expanded retail distribution, and the ongoing popularity of vinyl as a preferred format among both established and emerging artists.

Current wording

Year over year, vinyl record sales increased from $266 million to $287 million (+$21 million, +8%) for the nine months ending March 31, 2026. The increase in revenue was driven by a 4% increase in unit sales volume and a 4% increase in average selling price. The growth in unit volume reflects continued consumer demand for physical music formats, particularly among collectors and enthusiasts seeking premium and limited-edition releases. Volume growth during the period was also supported by strong pre-orders and early purchasing activity ahead of Record Store Day in April 2026, as retailers and consumers prepared for anticipated limited-edition releases. In addition, higher average selling prices were driven by a favorable shift in product mix toward premium and specialty vinyl formats, including colored vinyl, boxed sets, and collectible editions. Overall, vinyl performance benefited from strong new release activity, expanded retail distribution, and sustained demand for vinyl as a preferred format among both established and emerging artists.

Previous wording

Music Compact Disc sales increased from $73 million to $75 million for the six months ended December 31, 2025, representing an increase of $2 million or 2% year-over-year. The increase was driven by a 5% increase in unit volume partially offset by a 3% drop in average selling price. Higher unit demand more than offset the decline in pricing, resulting in overall revenue growth for the period. Sales were supported in part by the release ofThe Life of a Showgirl, the twelfth studio album by Taylor Swift, which was released on October 3, 2025 and generated notable physical sales activity during the 6 months ended December 31, 2025. Continued consumer interest in select physical releases and collectible CD editions also contributed to the increase in CD revenue, even as broader industry trends favor streaming and digital formats.

Current wording

Music Compact Disc (CD) sales increased from $94 million to $114 million for the nine months ended March 31, 2026, representing an increase of $20 million, or 21%, year over year. The increase was driven by a 14% increase in unit volume and a 6% increase in average selling price. The growth reflects strengthening demand for physical music products, supported by continued consumer interest in tangible and collectible formats despite the broader industry shift toward streaming and digital consumption. Sales during the period were supported in part by the release ofThe Life of a Showgirl, the twelfth studio album by Taylor Swift, which was released on October 3, 2025, and generated significant physical sales activity throughout the nine-month period ended March 31, 2026. In addition, sustained demand for K-pop releases continued to be a meaningful contributor to CD performance, driven by strong fan engagement and collectible multi-version purchasing behavior. Continued consumer interest in select physical releases and collectible CD editions also contributed to revenue growth, as fans continued to prioritize special editions and packaged formats even as broader industry trends favor streaming and digital formats.

Previous wording

Physical movie sales, encompassing DVD, Blu-ray, and Ultra HD formats, increased from $139 million to $198 million for the six months ended December 31, 2025, representing an increase of $59 million, or 43%, compared with the same period in the prior year, and accounted for approximately 32% of total net sales during the period. The increase in revenue was driven by a 3% increase in average selling price, together with a 38% increase in unit shipments, resulting in significant year-over-year growth. Performance during the period benefited from a consistent flow of theatrical releases and sustained consumer demand for premium formats, including 4K Ultra HD and collectible SteelBook editions. In addition, the launch of a new exclusive content partnership with Paramount earlier in the year expanded the Company’s film portfolio and contributed to improved pricing and increased retail visibility for select titles. A favorable shift in sales mix toward premium, higher-margin content supported the increase in average selling price and partially offset softness in lower-priced catalog titles.

Current wording

Physical movie sales, encompassing DVD, Blu-ray, and Ultra HD formats, increased from $197 million to $260 million for the nine months ended March 31, 2026, representing an increase of $63 million, or 31%, compared with the same period in the prior year, and accounted for approximately 30% of total net sales during the period. The increase in revenue was driven by a 3% increase in average selling price, together with a 28% increase in unit shipments, resulting in significant year-over-year growth. Performance during the period benefited from a consistent flow of theatrical releases and sustained consumer demand for premium formats, including 4K Ultra HD and collectible SteelBook editions. Growth was supported by the continued ramp of the Paramount exclusive content partnership, which was launched in January 2025, and contributed to expanded title availability, improved retail placement, and stronger unit performance throughout the period. In addition, the newly launched Amazon MGM Studios Distribution partnership in January 2026 further expanded the Company’s film portfolio and enhanced assortment breadth across key retail channels. A favorable shift in sales mix toward premium, higher-margin content supported the increase in average selling price and partially offset softness in lower-priced catalog titles.

Previous wording

For the six months ended December 31, 2025, collectibles revenue rose from $11 million to $14 million (+$3 million, +31%) compared with the prior-year period. Although unit volume declined 23%, a 71% increase in average selling price more than offset lower volumes and drove revenue growth. Results were supported by the addition of over 20 new collectibles vendors that began contributing sales in the second half of 2025, generating more than $0.5 million in incremental revenue. Existing vendors also delivered higher sales driven by new product lines, and Handmade by Robots’ transition from a distributed brand in 2024 to an owned brand in 2025 contributed meaningfully to year-over-year performance.

Current wording

For the nine months ended March 31, 2026, collectibles revenue rose from $16 million to $22 million (+$6 million, +37%) compared with the prior-year period. Although unit volume declined 20%, a 71% increase in average selling price more than offset lower volumes and drove revenue growth. Results were supported by the addition of over 20 new collectibles vendors that began contributing sales in the latter part of 2025, generating more than $1.5 million in incremental revenue. Existing vendors also delivered higher sales driven by new product lines and Handmade by Robots’ transition from a distributed brand in 2024 to an owned brand in 2025 contributed meaningfully to year-over-year performance.

Previous wording

For the six months ended December 31, 2025, electronics revenue declined from $8 million to $7 million (-$1 million, -9%) compared to the prior-year period. Unit sales volume increased 4%, but this was more than offset by a 13% decline in average selling price, resulting in an overall reduction in revenue. The decline in average selling price primarily reflected changes in product mix and competitive pricing dynamics. Electronics sales primarily consist of audio playback devices and related accessories, including turntables, headphones, speakers, and other ancillary products that complement physical music and movie media.

Current wording

For the nine months ended March 31, 2026, electronics revenue increased from $11 million to $12 million, representing growth of $1 million, or 6%, compared to the prior-year period. The increase was driven by an 8% rise in unit sales volume, partially offset by a 2% decline in average selling price. The decrease in average selling price primarily reflects changes in product mix and competitive pricing dynamics, reflecting continued demand for entry-level and mid-tier audio playback devices alongside premium accessory offerings. Electronics sales primarily consist of audio playback devices and related accessories, including turntables, headphones, speakers, and other ancillary products that complement physical music and movie media.

Previous wording

Gaming product revenue declined from $197 million to $126 million (-$71 million, -36%), for the six months ended December 31, 2025. The decline in revenue was driven by a 34% decrease in average selling price, together with a 3% decrease in unit sales volume year over year. The reduction in average selling price reflected a pause in arcade hardware purchases, which typically carry higher price points, following a reassessment of vendor partnerships, as well as limited availability of certain hardware products and delays in major game releases during the period. While unit volume declined modestly, consumer interest in physical gaming products remained evident. As a distributor of physical gaming products, the Company continues to adjust its product mix and sourcing strategies to align with evolving consumer demand and to manage profitability, while monitoring potential supply chain risks related to market volatility and ongoing trade tensions with China.

Current wording

Gaming product revenue declined from $226 million to $158 million, a decrease of $68 million, or 30%, for the nine months ended March 31, 2026. The decline was driven by a 29% decrease in average selling price, together with a slight 1% decrease in unit sales volume year-over-year. The reduction in average selling price primarily reflected a pause in higher-priced arcade hardware purchases following a reassessment of vendor partnerships, as well as limited availability of certain hardware products and delays in major game releases during the period. While unit volumes were supported in part by strong demand for the Nintendo Switch II following its release in June 2025, this was not sufficient to offset declines in other higher-value product categories, resulting in a slight overall decline in unit sales volume. As a result, overall revenue decreased during the period. As a distributor of physical gaming products, the Company continues to adjust its product mix and sourcing strategies to align with evolving consumer demand and to manage profitability.

Previous wording

**Cost of Revenues:**Total cost of revenues, excluding depreciation and amortization, decreased from $555 million to $538 million (-$17 million, -3%) year-over-year, driven by improved cost discipline, a more favorable product mix, and the impact of our exclusive content partnership, which supported higher-value physical media sales. For the six months ended December 31, 2025, gross margin increased from 10.9% to 13.5%, an expansion of 2.6 percentage points compared with the prior-year period. This improvement was primarily attributable to higher average selling prices and the successful ramp-up of the exclusive content partnership, modest improvements in distribution fees, which together strengthened overall profitability.

Current wording

**Cost of Revenues:**Total cost of revenues, excluding depreciation and amortization, increased from $739 million to $764 million (+$25 million, +3%) year-over-year, primarily reflecting higher overall sales volume. The increase was partially offset by a more favorable product mix and the impact of exclusive content partnerships, which supported higher-margin physical media sales. For the nine months ended March 31, 2026, gross margin increased from 11.6% to 13.3%, an expansion of 170 basis points compared with the prior-year period. The improvement was driven by higher average selling prices, a favorable shift toward premium and exclusive content, including the continued ramp of the Paramount partnership and the launch of Amazon MGM Studios Distribution in January 2026, as well as improvements in distribution-related economics, all of which contributed to enhanced overall profitability.

Previous wording

**Operating Expenses:**Total operating expenses for the six months ended December 31, 2025, increased from $51 million to $57 million (+$6 million, +12%), rising as a percentage of net revenue from 8% to 9% compared with the same period of the prior year. This increase was primarily driven by higher selling, general, and administrative expenses, which rose from $27 million to $32 million (+$5 million, +18%) due to strategic investments in infrastructure, technology, and personnel, including additions to support our new exclusive content partnership. These investments are intended to strengthen operational effectiveness and position the business for sustainable growth. Distribution and fulfillment expenses increased modestly from $21 million to $22 million (+$1 million, +3%), remaining largely consistent as a percentage of net revenue at 3.5% compared with 3.4% in the prior-year period. The Company continues to invest in warehouse automation initiatives to support a more permanent labor structure while maintaining flexibility to manage fluctuations in demand. As a result, fulfillment payroll decreased slightly from $14.5 million to $14.3 million (-$0.2 million, -1.3%) and remained consistent as a percentage of net revenue at 2.3%, despite an approximate 3% increase in average hourly labor costs driven by market conditions. The May 2024 consolidation of the Shakopee, Minnesota warehouse continues to generate cost savings and operational efficiencies through centralized operations. We continue to identify and implement business-process improvements to enhance operational efficiency and support long-term scalability. Depreciation and amortization remained consistent at $3 million for the six months ended December 31, 2025, compared with the prior-year period.

Current wording

**Operating Expenses:**Total operating expenses for the nine months ended March 31, 2026, increased from $76.4 million to $86.2 million (+$9.7 million, +12.7%), and rose as a percentage of net revenue from 9.1% to 9.8% compared with the same period in the prior year. The increase was primarily driven by higher selling, general, and administrative expenses, which grew from $41.1 million to $48.5 million (+$7.4 million, +18.1%) reflecting strategic investments in infrastructure, technology, and personnel to support exclusive content partnerships and ongoing growth initiatives. These increases also include costs associated with various operational and strategic projects undertaken during the period. Distribution and fulfillment expenses increased modestly from $31.4 million to $33.2 million (+$1.7 million, +5.5%) and remained consistent as a percentage of net revenue at 3.8% year over year. The Company continues to invest in warehouse automation initiatives while utilizing a flexible labor model, including a higher proportion of temporary staffing, to support demand variability and project-based activities. As a result, fulfillment payroll increased slightly from $20.7 million to $21.4 million (+$.7 million, +3.1%) however, it declined as a percentage of net revenue from 2.5% to 2.4%, reflecting improved labor productivity and operating leverage, despite an approximately 2% increase in average hourly labor costs driven by market conditions. The Company continues to identify and implement process improvements to enhance operational efficiency and support long-term scalability. Depreciation and amortization remained consistent at $3.9 million for the nine months ended March 31, 2026, compared with the prior-year period.

Previous wording

**Interest Expense:**For the six months ended December 31, 2025, total interest expense increased slightly from $5.7 million to $5.8 million (+$0.1 million, +2.4%) compared with the prior-year period, primarily due to the full expensing of remaining deferred financing costs from the Company’s former White Oak credit facility, including $1.8 million in advisory fees previously paid to B&D Capital Partners, LLC, a firm partially owned by board member W. Tom Donaldson III. This non-recurring amortization totaled $1.6 million. Excluding this item, interest expense for the six months ended December 31, 2025, declined compared with the prior-year period, primarily due to a lower effective interest rate from Bank of America , which decreased from 9.6% to 8.0%, a decline of 1.6 percentage points, or 16.9% year over year. This reduction, combined with a modest decline in the average revolver balance to $81 million from $83 million, contributed to the overall decrease in interest expense excluding the non-recurring amortization.

Current wording

**Interest Expense:**For the nine months ended March 31, 2026, total interest expense decreased from $8.1 million to $7.4 million (-$.7 million, -8.6%) compared with the prior-year period. Included in the $7.4 million for the current period is $1.6 million of non-recurring expense related to the amortization of deferred financing costs associated with the Company’s former White Oak credit facility, including advisory fees of $1.8 million previously paid to B&D Capital Partners, LLC, a firm partially owned by board member W. Tom Donaldson III. Excluding this non-recurring amortization, interest expense declined more significantly year-over-year, primarily due to a lower effective interest rate following the transition to Bank of America, which decreased from 9.4% to 7.7%, a reduction of 170 basis points. This benefit was achieved despite a modest increase in the average revolver balance to $81 million from $78 million, reflecting increased utilization of the facility to support working capital needs and improved cash flow flexibility.

Previous wording

**Income Tax:**For the six months ended December 31, 2025, an income tax expense of $5.4 million was recorded compared to $1.2 million for the prior year period. Alliance reported a pretax income of $19.7 million for the six months ended December 31, 2025, versus $8.7 million for the six months ended December 31, 2024. The effective tax rate was approximately 28% and 14.0% for the six months ended December 31, 2025, and 2024, respectively. The difference between the Company’s effective tax rate and the U.S. federal statutory rate for the six months ended December 31, 2025, primarily resulted from state income taxes, FDII, fair value adjustments related to the Company’s warrant liability, and tax items attributable to periods prior to the Company’s acquisition by its parent. The difference between the Company’s effective tax rate and the U.S. federal statutory rate for the six months ended December 31, 2024 primarily resulted from state income taxes, FDII, and a discrete item related to an out-of-measurement period adjustment to the deferred tax liability related to software costs.

Current wording

**Income Tax:**For the nine months ended March 31, 2026, an income tax expense of $5.8 million was recorded compared to $2.1 million for the prior year period. Alliance reported a pretax income of $22.3 million for the nine months ended March 31, 2026, versus $11.4 million for the nine months ended March 31, 2025. The effective tax rate was approximately 26% and 19% for the nine months ended March 31, 2026, and 2025, respectively. In accordance with ASC 740-270, the Company calculates its interim income tax provision using an estimated annual effective tax rate (“ETR”) applied to year-to-date ordinary income. This approach ensures that the interim tax expense reflects the best estimate of the annual tax rate, as required by U.S. GAAP. Items that are unusual, infrequent, or not expected to recur—such as discrete events—are recognized separately in the period in which they occur and are not included in the estimated annual ETR. The difference between the Company’s effective tax rate for the nine months ended March 31, 2026, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, and fair value adjustments related to the Company’s warrant liability.

Previous wording

**Non-GAAP Financial Measures:**For the three months ended December 31, 2025, we had non-GAAP Adjusted EBITDA of approximately $18.5 million compared with Adjusted EBITDA of approximately $16.1 million in the prior year period, or a year-over-year improvement of $2.4 million. We define Adjusted EBITDA as net gain or loss adjusted to exclude: (i) income tax expense; (ii) other income (loss); (iii) interest expense; (iv) depreciation and amortization expense; and (v) other non- recurring expenses. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA.

Current wording

**Non-GAAP Financial Measures:**For the nine months ended March 31, 2026, we had non-GAAP Adjusted EBITDA of approximately $35.7 million compared with Adjusted EBITDA of approximately $24.4 million in the prior year period, or a year-over-year improvement of $11.3 million. We define Adjusted EBITDA as net gain or loss adjusted to exclude: (i) income tax expense; (ii) other income (loss); (iii) interest expense; (iv) depreciation and amortization expense; and (v) other non- recurring expenses. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA.

Previous wording

Our primary sources of liquidity are cash on-hand, cash provided by operating activities, and borrowings under our new credit facility. As of December 31, 2025, in addition to the $1.4 million cash, we carried an $85 million revolver balance on the Revolving Credit Facility. Year over year, working capital levels increased, resulting in higher borrowings under the Company’s revolving credit facility. As of December 31, 2025, the Company carried an $85 million revolver balance, compared with a $70 million balance under the prior credit facility as of December 31, 2024, representing an increase of $15 million, or 22%. As a result, our availability under the Prior Credit Facility decreased from $50 million on December 31, 2024, to $35 million on December 31, 2025 ($15 million, 30%).

Current wording

Our primary sources of liquidity are cash on hand, cash provided by operating activities, and borrowings under our revolving credit facility. As of March 31, 2026, the Company had $1.2 million of cash on hand and $64 million outstanding under the Revolving Credit Facility. While working capital requirements increased during the period, reflecting higher inventory levels to support sales growth, period-end borrowings under the revolving credit facility decreased from $68 million under the Prior Credit Facility as of March 31, 2025, to $64 million as of March 31, 2026, primarily due to the timing of repayments and improved availability under the new facility. As a result, availability increased from $52 million to $56 million over the same period (+$4 million, +8%).

Previous wording

As of December 31, 2025, the Company intends to continue relying primarily on its borrowing capacity under the Revolving Credit Facility, as well as any renewal or replacement of such facility, to fund working capital and other operational requirements. The availability of additional cash proceeds from the potential exercise of outstanding Warrants is contingent upon the market price of the Company’s Class A common stock exceeding the Warrant exercise price of $11.50 per share. Given that the market price of the Class A common stock was $7.58 as of January 23, 2026, the Company does not currently expect Warrants to be exercised unless and until the market price exceeds the exercise price. Although the Company does not currently have any definitive plans to do so, it may seek to raise additional capital through the issuance of equity securities in the future, depending on market conditions, strategic opportunities, and liquidity needs.

Current wording

As of March 31, 2026, the Company intends to continue relying primarily on its borrowing capacity under the Revolving Credit Facility, as well as any renewal or replacement of such facility, to fund working capital and other operational requirements. The availability of additional cash proceeds from the potential exercise of outstanding Warrants is contingent upon the market price of the Company’s Class A common stock exceeding the Warrant exercise price of $11.50 per share. Given that the market price of the Class A common stock was $7.34 as of April 24, 2026, the Company does not currently expect Warrants to be exercised unless and until the market price exceeds the exercise price. Although the Company does not currently have any definitive plans to do so, it may seek to raise additional capital through the issuance of equity securities in the future, depending on market conditions, strategic opportunities, and liquidity needs.

Previous wording

**Cash Flow:**The following table summarizes our net cash provided by or used on operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our condensed consolidated financial statements for the six months ended December 31, 2025, and 2024.

Current wording

**Cash Flow:**The following table summarizes our net cash provided by or used on operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our condensed consolidated financial statements for the nine months ended March 31, 2026, and 2025.

Previous wording

Cash used in investing activities was $1.8 million for the six months ended December 31, 2025, compared to $7.5 million used during the same period in the prior year. Cash used during the current period primarily reflects capital expenditures related to facility improvements and warehouse automation, partially offset by minor cash inflows from asset disposals, as well as cash paid in connection with the Endstate acquisition completed on December 31, 2025. Cash used in the prior-year period primarily related to the Handmade by Robots acquisition, which contributed to the higher investing cash outflows in that period.

Current wording

Cash used in investing activities was $2.1 million for the nine months ended March 31, 2026, compared to $7.6 million used during the same period in the prior year. Cash used during the current period primarily reflects $1.0 million of capital expenditures related to facility improvements and warehouse automation, as well as $1.2 million of cash paid in connection with the Endstate acquisition completed on December 31, 2025, partially offset by minor proceeds from asset disposals. Cash used in the prior-year period was significantly higher and was primarily driven by $7.6 million of cash paid for the business acquisition relating to Handmade by Robots, with minimal capital expenditures in that period. The year-over-year decrease in investing cash outflows reflects lower acquisition-related spending in the current period compared to the prior year.

Previous wording

Net cash provided by financing activities was $15.8 million for the six months ended December 31, 2025, compared with net cash used of $4.7 million in the prior-year period. Financing activity during the current period primarily reflected borrowings under the Company’s revolving credit facility to support working capital requirements, resulting in net borrowings of approximately $27.9 million, compared with net repayments of $3.3 million in the prior-year period offset by repayment of the $10 million outstanding under loans from Bruce Ogilvie, Executive Chairman of the Board and a principal stockholder of the Company. The increase in net borrowings reflects higher working capital needs during the current period, partially offset by improved liquidity following the Company’s transition to its new revolving credit facility with Bank of America.

Current wording

Net cash used in financing activities was $5.3 million for the nine months ended March 31, 2026, compared with net cash used of $7.6 million in the prior-year period. Financing activities during the current period primarily reflected net repayments under the Company’s revolving credit facility and the repayment of $10.0 million of loans from Bruce Ogilvie, Executive Chairman of the Board and a principal stockholder of the Company, as well as $0.7 million of deferred financing costs associated with the transition to the Bank of America credit facility. This compared to the prior-year period, which primarily reflected net repayments under the revolving credit facility and higher acquisition-related financing activity. The lower level of net cash used in the current period reflects improved liquidity management and more efficient utilization of the Company’s revolving credit facility following its transition to Bank of America, which provides enhanced borrowing capacity and more favorable financing terms.

Previous wording

No changes were made to the critical accounting estimates discussed in the 2025 Annual Report during the six months ended December 31, 2025.

Current wording

No changes were made to the critical accounting estimates discussed in the 2025 Annual Report during the nine months ended March 31, 2026.