Alliance Entertainment Holding Corporation (AENT) Earnings Call Transcript & Summary

Hello. This is Craig with RedChip. Thank you for joining today's event with Alliance Entertainment, which trades on the NASDAQ under the ticker AENT. With us today, we have Bruce Ogilvie, Executive Chairman of Alliance Entertainment, and Jeff Walker, CEO, CFO and Director. We will begin with a brief presentation in a moment and then we will answer your questions. [Operator Instructions] Before we begin, please allow me to read the safe harbor statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Also statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties. I now turn the webinar over to the Alliance Entertainment team. Gentlemen, please go ahead.

Thank you, Craig. Thanks, everybody, for joining us today and certainly appreciate you taking the time to come see us. I'm going to go over our deck presentation deck that we have, and it's easily available at aent.com, www.aent.com and go to Investor Relations, and you can find this deck here. This is a picture of our main facility in Shepherdsville, Kentucky. 661,000 square feet, pretty big area. This is just part of the warehouse you're seeing. The left-hand side, you can see this big red area, which is our auto store, which we'll talk later on here. My partner, Jeff Walker is on the call with me today. He's the CEO and CFO of the company. And I'm the Chairman. I joined Jeff in 2001, and we've been pinned at the hip ever since there basically taking the company from $18 million in revenue to $1.5 billion in a 20-year period there. What we are is we're a distributor. We're a distributor of entertainment products. All these entertainment products we buy from all these brands on the left-hand side of the page. These are the tentpole entertainment product categories out there in the United States, and we're a trusted distributor for these brands. You have to add value when doing business with these brands and create value. And at the same time, we're also a stocking distributor of those brands, movies, music, video games and collectibles. We stock over 325,000 SKUs that we have in stock. It's very important to be a stocking distributor because that adds value to the marketplace, plus it keeps all the buy buttons lit up in all the marketplaces around the world, people's websites there. And plus it keeps our brick-and-mortar retailers happy too, that they can order with confidence and know it's going to get shipped in the same day, and shipped either through the retail store or directly to the consumer. Those 325,000 SKUs, we're able to dish up and feed up an EDI feed to all these omni retailers on the right-hand side there. You can see omni retailers because they have websites as well as brick-and-mortar locations. And they all want to be as good as Amazon, and that's where we come in. We help them have a much wider selection than they could ever -- they would not be able to accomplish without us. Amazon is the category leader here as far as selection goes. And we can come in by giving them this EDI file, which contains all the meta data, that's all the hard work in the images. Plus we can tell them what quantity we have in stock, we can tell them what their price will be and we'll tell them what zip code we ship it from. And if they order in by a certain time, we can meet their SLAs and ship at the same day either directly to their consumer or to the brick-and-mortar location. The -- as good as Amazon is, they still rely on us because it's easier for them, maybe just to carry the fastest-moving items in their warehouse and push the long tail, which is part of that longer selection, how to a company like us and that's where we step in. If you go on the Amazon site and you see an order now and it ships in 3 hours and 22 minutes. We're one of those companies that do that for them. And when it arrives at your door, you think it came from Amazon but it was really shipped and sent by us. And it looks like it came from Amazon sold by Amazon, but it was us. Same thing for Walmart, Target, Best Buy, all these other retailers, they all rely on us. And the main reason the other omni retailers rely on us is we can create that long selection for them and then they can just offer that to their customers that go to their website there. And same deal if you order from Walmart, it's going to get you within 2 days. It's going to look like it was shipped and sold by Walmart, but it came from Alliance. Over 40% of our business is what we call e-commerce fulfillment, where we're doing drop shipping and fulfilling directly to these retailers as well as $100 million of our $1.1 billion is our own retail brands that we own and we control. So we sell in Amazon marketplace, eBay marketplace. As well as we mail out catalogs, and we have all our other retail brands would be deep discount or pop market or import CDs. Those are all our retail brands that we sell under there. So that's our secret sauce there, our success there. So in summary, we bring entertainment to you, which I mentioned there, which consists of all those entertainment products. The industry is about $10 billion of all these categories that we sell. We're $1.1 billion of that category there. So we still feel we have a lot of growth in that area there as the industry evolves. $250 million of our $1.1 billion comes from exclusive distribution of licensing products which I'll talk more about later because we're really expanding that area. There's a lot of opportunities for more growth in that area for us. I talked about our big, huge selection at 325,000 SKUs. Ships, we shipped over 35,000 store fronts, 72 countries. So we have a lot of areas where we can distribute to and keeps us very diversified. How we got to what we got Jeff and I, as we started, like I said, $18 million, and we grew to $1.5 billion. Well, that was all done with acquisitions, and we're really good at that. We have a lot of experience in that. And we've been on a little hiatus for a couple of years now of getting -- becoming a public company and destocking, but we are going full steam ahead now trying to continue that previous track record we had there and doing some acquisitions. I can't really announce anything today. They're all under wraps, all being worked on there. But 2025 is just going to be our year where we're finally back on the acquisition wagon which you'll see. Just to highlight, Jeff and I have -- and our leadership team, we have a really experienced leadership team. We picked up all these leaders and all of these team members basically with all the acquisitions we've done in the past. We've got the best of the best working for us. and that makes our job really easy there. I talked about the $10 billion market. You can certainly look at that in the slide later on when you get a chance there, but you can see the different areas there. Vinyl is growing. Video game market and collectibles are all growth areas that we're heavily involved in leaning in variable. I talked about that $250 million, soon to be more than that. There are a couple of divisions here, Distribution Solutions and AMPED, basically both those divisions. We have licensed content -- I'm sorry, we have exclusive content that we distribute. We're the exclusive distributor of that content. So we have 60 movie studios through Distribution Solutions. It amounts to about $130 million in revenue. The AMPED division, we have 80 -- sorry, 90 music labels, and that's about another $80 million. And these are new labels and movie studios, we're the exclusive seller of that creates a very sticky relationship with the retailers we sell to as well as anybody who wants to purchase those titles. Something that feeds the Distribution Solutions division is Mill Creek. Mill Creek is our licensing division. That's where we license video content of movies. And we have studios that for whatever reason they choose not to distribute and sell those titles theirselves. They look to a third party like us, which is our Mill Creek division there. And currently, we have Disney title, Sony, Universal, Lionsgate, CBS, Paramount and independent studios. About 2 years ago, Disney was one of the very first studios that decided they wanted to license their home entertainment division to third parties. So they pretty much started outside the U.S., Australia and Europe. And then they started with the bottom 1,800 titles in the United States. We were able to get that. We were awarded that ability to do that. And we thought for sure we would down the road, get their entire roster of all their content. But the RFP that we were involved with last year, unfortunately, went to Sony Pictures. So, yes, Sony Pictures is a supplier of ours as well as a competitor in this area there. But they were able to get that, but that didn't discourage us in a way because Paramount this year also put out an RFP, and we feel really strong that we're a very leading horse to get that opportunity there. Once we close that transaction, in which we think we will, but there's no guarantees, it should add about $75 million worth of revenue next calendar year. Now we're not going to stop just with Paramount. There's always going to be other studios that come along and other opportunities. And we just really look in that as these large tentpole producers of this IP is their business. Their core competency becomes leaning into digital, whether it be the form of streaming or digital downloads and physical media, which may be a much smaller part of their business. It just makes economic sense for them to outsource that to a third party, and we feel we're really going to be the guys leading the way, the go-to company for that, being a public company, having access to deep pockets, the way to raise money. We feel we're going to be the leaders in that category there. And this actually happened in the '80s when the LP was dying out and the CD was taking over, all the music companies they decided that they would license their vinyl to third-party companies, and that happened in the '80s. And there's no reason why history won't repeat itself. We're seeing it right now, video is really leading the charge right now, and we're pretty confident down the road that music will do the same thing and follow that same category. Lastly, Arcade1UP is a retro arcade. We have a distribution and exclusive distribution agreement with them. That's a very strong category for us there of about $74 million worth of revenue in our current fiscal year. This was our acquisition history. You can just see -- I'm not going to go through all of them here. But in 2001, Jeff and I started at our opportunities out there and all the way up to 2020, COKeM was our last major acquisition there. And that's how we got to $1.5 billion with those acquisitions there. Just people say, hey, when you buy a company, what do you pay for it? Well, we're pretty conservative how we approach things. But we first kind of started off with the company we're looking at and we're thinking about acquiring is what is a stand-alone EBITDA number? And that means what is the earning add-backs or takeaways as a stand-alone. Any synergies or opportunities, we keep those on our side of the ledger but we want to look at what it is if someone is going to come and buy this a standalone, what is it worth? It has to be a debt-free equity, debt-free transaction, and all bank debt has to be paid off. And then the next thing we want to set a working capital peg. We look at what is the inventory plus the AR less the AP. And then we have a 12-month average. And then we kind of said, okay, this is the amount of working capital that's needed. It protects the buyer and the seller. The buyer doesn't get shortchanged by them taking out working capital. And if for some reason, the working capital will increase, their purchase price would increase. We're using those things that some type of multiple setting the peg. We also want to do some type of note or earn out. And we also had to get bank financing. We're able to do all our previous acquisitions, whatever out really raising outside money from private equity in any way, we were able to do with bank financing. And that's what we're used to, and that's what we've done. And we like that. We were kind of protective about stock and just dolling it out there. It is a currency that we can use. We've never had that opportunity before. There's been a lot of requests in the past, could we be a partner in your business. We see a lot of growth opportunity there. We were reluctant to do that as a private company because we didn't really want to have a lot of minority shareholders. One of our strengths of our pillars, service technology and selection is technology and automation. This is called AutoStore. And this is something that we have in our Kentucky operation. We're in our second full year of operation. In January this -- in '25, we'll make 2 full years of using it. basically, think of it as an auto storage retrieval system, kind of like stacked up like a Rubik's Cube. We have all these totes that stack on top of each other. And by having everything stacked on top of each other, you're taking advantage of the cubic space in the warehouse. And then because they're stacked next to each other, there's no aisles. So not only do you gain a storage space, you're just getting very efficient use of storage capacity. And then the next thing is instead of the person, the picker, the processor that's picking the order and walking around the warehouse, all they have to do is walk -- instead of walking to the shelf location, the shelf location comes to them. We currently use this for all our vinyl that we have in our Kentucky facility. That's a little over $300 million year business that we have contained in this 22,000 square foot area for fulfilling orders that need to be shipped out there. We went from 41 people walking around the warehouse, traveling to the shelf, now we're down to 7 because nobody has to travel to the shelf. The totes with the product come to them at the pick station. And if you have time, you just go to our website, click on this deck. You can see a couple of hyperlinks here, play it back, but it's pretty impressive how it all works. Not only do we gain the efficiency of going from 41 people down to 7, but we also gained this extra storage capacity. So in one of our acquisitions we did in 2020, which is COKeM. They had about 192,000 square feet in the marketplace over 2 buildings. The larger of the 2 buildings was 162,000 square feet. We closed that facility in May 31st because the lease ran out and we consolidated that operation in Kentucky. So we just got a whole trifecta benefits here. With the AutoStore, you'll look year-over-year that our fulfillment costs have dropped basically 1% year-over-year. And now because of the extra storage capacity, we were able to take out that 162,000 square foot facility in Minnesota, and that's going to give us about a $5 million tailwind this year, in our current fiscal year of just overhead, it's never going to repeat itself there. So that's a big win for us with AutoStore there. Just some quick highlights of the quarter that just ended. I think the main one to point out here is that Q1 of '24 compared to Q1 to '25, we went from a loss -- that number there and up to 4 -- an improvement of $400,000, so a big improvement there. Our adjusted EBITDA is up. Our gross margin is off just a tad. But what you're going to see is another slide there is that our earnings per share for the fiscal year that just closed out June 30, '24, we were at $0.09 a share. And in the quarter that just ended, we picked up $0.08 a share there. So we're now on a rolling 12 months, we're running $0.17 a share. And you'll see some -- you might see, I think equity deck that's out there a research report. And we have forecasting our models right around $0.36 per share for the fiscal year coming up. So all our efficiencies are kicking in. We've taken those costs out, where our borrowing is going to be coming down, our earnings per share is going to rise. So nothing but smooth sailing and that's probably why you're seeing our stock do so well. Speaking of that, I think I skipped over a very important page here. Yes. So on the right-hand side of this page there, today's closing price was $6.19. You can see our 52-week range is between $0.65, which was December of last year to a high of $6.69. Our market cap is up to $315 million. And I know some of the people on the call here have done really well with that, and we're quite excited about it. But in reality, we're just kind of getting started. We have everything working in -- we're basically growing in the right direction. Everything is looking really well. And with our acquisition opportunities, I think everybody who's joining us will be happy with the results there. I talked about -- you can see our trailing 12 months there is $0.17 per share, in the fiscal year was $0.09. So that $0.17 number should be calling up right around in the $0.36 range. I could share one little slide here quickly. This is that research report I was talking about from ThinkEquity. You could see here in 2025, in their model, they're showing about $0.36 a share. Here's the $0.09 we just talked about there. So blue skies ahead. And none of these numbers that I'm sharing with you today are even include any of our potential acquisitions we're working on that we hope to be announcing here pretty soon there are opportunities. Just some quick highlights. I just wanted to share here. Well, this is a very important slide, just you can see how diversified we are. You can just see our gaming revenue for fiscal year just ended was $338 million. It's about 24% of our total revenue. You can see we're holding that same range 25%, 23% for the 2 quarters. Quarter in '24 -- fiscal '24 [indiscernible] this year versus last year there. You can see our vinyl business is $329 million. It's really music. You got to take vinyl plus the CDs is another $130 million. So you've got 23% plus 9%, there it's about 32% here. And you can see we kind of -- we picked up a little bit, our CDs came up there a little bit for the quarter there. I would call that just the CD, the collectible set, the Taylor Swifts of the world or they're the K-pop type product just have all these packages there, and that's really driving out there. Our DVD business has been a little flat. It's not growing in there, but with what we're working on right now to do more licenses, you're going to see that change there. And we're really focused on how do we grow our collectibles business. We would like that to be our next fourth really strong category. When we first started out we were 100% music, then we got into video. So we were 50-50, 50% there. And then we brought in video games. So now we had 1/3 and 1/3 and 1/3. And so our next goal is, okay, let's get that next thing, so everything is going to be 25% across the board there. So that's our goal is just stay diversified, grow and keep looking for other products that we can carry and distribute within our operation there. This slide is from a balance sheet perspective there. We just like to show our inventory level. We're bringing it down. We have it under control. We were at a peak of $249 million and our borrowing was $136 million at that time there as you could see. That was back in '22. Inventory came down to $147 million, $133 million. And then just ending this fiscal $97 million and $79 million. If you look at the 2 quarters, you can see our inventory does go up because we're leaning into the holiday season there. So we have to have more inventory. But if you look over year-over-year, we were $159 million, we're down to $138 million. So we continue with that fiscal responsibility. And by having -- and of course, you can see our loan balance too is $125 million versus $95 million. That's just going to help in lowering our borrowing costs. That's just going to be another improvement to our earnings per share. And I think at this time, I'm ready to open up for questions. Craig?

Thank you very much. Yes. As we said before, we're only going to take your typed in questions, and we have many already. To type in your question, click on the Q&A button and then enter your question into the text box that will pop up. Do you generate higher margins from your exclusive distribution agreements? And do you expect to see growth in your exclusive content in fiscal 2025?

Yes. This is Jeff Walker. I'll take that. And thank you, Bruce, for that good presentation there. There's a couple of components to that question there. An exclusive distribution agreement for like Distribution Solutions and AMPED, they do have solid margins. But I think what's most important is that we have 100% of the market share of those products. So we sell those to Walmart, Barnes & Noble and Amazon. So and then all of the other accounts that we sell to in our business. So that's a really important distinction. When we buy product from a major supplier, we don't have 100% of the market share. And it also protects us that we have all of those sales and so forth there. When we move into licensed products, whether it's through Mill Creek or studio -- other studio licensed products, or collectible license products and things like that, those margins are much higher than distribution margins. And so we're definitely focusing in that direction of more licensed products as we continue to move into next year.

The price has appreciated significantly since this summer and even withdrawing your recent offering. What are your current thoughts on liquidity? Do you intend to raise before making an acquisition or just using stock as a part of an acquisition?

Well, I think we've exemplified that Bruce and I started this business, and we grew the business without any outside capital into the company, and we did it through asset-based lending and seller financing to complete those acquisitions. So we come from a background of being very conservative on the amount of working capital that we need to use to grow the business. So I don't think that we're anticipating really changing that strategy. I think that strategy has been a fantastic strategy. And we were -- so with that we're going to continue to look at acquisitions and do acquisitions without a huge amount of capital needs there. So we are in a position right now where we have excess availability on our line of credit and so forth. So we have ability to do some acquisitions right now without going to raise additional capital. And anytime we go raise additional capital, that dilutes shareholders and so forth. So we're trying to continue to grow the business without too much dilution. And so we're cautious on both sides of that, for sure.

You recently were mentioned on Jim Cramer's Mad Money segment. He recommended buying Live Nation LYV instead, while this is not a comparable competitor, it made me curious as to who you see as AENT's primary competitors?

Well, I didn't know that we were mentioned there. That's new for me there. I'm going to have to slap them around if I see them, but -- the -- as Bruce mentioned, we have a very diversified business. And so when we look at our competitors and we have different competitors in each one of those categories that Bruce described earlier. We don't seem to have a big competitor that's on the public side. Although there are people in different categories of stuff that we do sell. So you could look at -- some companies when you get into Funko as an example on collectible business. They're one of our big suppliers. We're a big distributor for them. Just recently public, again, is Ingram Micro that came up in the computer space, definitely from a wholesale business, but higher volume, lower margin in that. And then we start to look at some of the entertainment companies, Warner Music, Lionsgate, some of those as well. And then we're diversified in selling consumer products. So I think some people that sell consumer products even from an Amazon and so forth perspective, we're all in the business of consumer products.

The former Chief Economist at Spotify recently reported, vinyl sales growth surpassed streaming sales growth. Do you expect to capture some of this growth in fiscal 2025?

Well, I think we've been capturing vinyl sales growth for the last almost 10 years now. It's been -- it's not slowing down. We're seeing really significant strength in the vinyl sales, and we're continuing to see consumer demand there. And we're also seeing big support from artists and labels and so forth on vinyl. I think the music industry and the artists have definitely gravitated more to it. It's not just the side idea and they're being very creative with bringing out products and limited editions and different color variants and all sorts of different things like that. So I think you're going to continue to see collectibility of vinyl and people collecting it increasing going forward.

Are any analysts following your company?

Yes. We have Ashok at ThinkEquity and he had a price target at $6, which we just passed, and then we have David at Trickle Research. And I think he had a $5.25 price target, which we also just passed. So both of those 2 are following us right now.

You have previously mentioned that you were not interested in selling any stock personally below $5. Does the recent rise in the stock makes such a move more likely?

So I assume that's on personal side for me and possibly Bruce there. I'm not really looking to sell right now. We got some great stuff going. So I'm interested to let it ride as we did almost 2 years ago when we went from private company into public, we've put -- rolled all of our equity into it. And I think it's too early for me to consider selling shares at this time.

You mentioned growing Distribution Solutions from $80 million when you acquired it in 2018 to $134 million in fiscal 2024. What factors made that possible? And do you expect similar results from future acquisitions?

Yes. Well, specifically on that acquisition, I think a couple of things have happened. One part is the business model that we have where we are stocking all the inventory for a studio that's under Distribution Solutions, and we're the exclusive distributor. By us stocking it and all of our sales channels into brick-and-mortar and all of our ability to list every single one of those SKUs that, that studio has on all the websites. And we're talking to Amazon, Walmart, Target, Barnes & Noble and many others, including eBay and so forth. That ability to have the highest level of in-stock percentage on all those sites drive sales growth. And -- so then because of that and because of our sales channels overall, not just e-commerce, but to retailers and everyone else, those that gets the attention of additional studios that are looking at their current distribution opportunities. And that starts off conversations about them moving over to Distribution Solutions. And if it's music into our AMPED division, for us to be their exclusive distributors. So with what we have from an ability to sell and distribute the product to consumers, is really adding ability for us to add new studios and labels to that exclusive side. And so it's kind of a combination of the 2 as to how we've grown it. And we're continuing to be in significant conversations with other studios and labels about coming over to Alliance into those divisions. And they can't all come at one time because they're exclusive distribution deals, so they have contracts and times when those expire and stuff. So there's a lot of active conversations in that aspect. And then there was a second part of that question, what was the second part -- acquisition in there?

Let me see -- just a moment, let me bring it back. Yes, what key factors made that possible? And do you expect similar results from future acquisitions?

So that particular acquisition was solely on Distribution Solutions with those studios that we acquired there. I think every acquisition has different components to it. And -- but every time we look at an acquisition, we're looking at ways that we can grow that business through all of our sales channels and our products to their customer base as well. So we typically are looking for acquisitions that we can grow the value after completing them.

And Jeff, the only thing I would add to what you're saying is you probably won't see the deck, but I'm on Slide 9 of the deck, and we went from 18 studios to 60 studios when we acquired that in 2018 to today.

From the many individual investors in your company, thank you for your clear communication, transparency and execution on your business plan.

You're welcome.

Do you think Target and Best Buy transitioning out of physical media after this year will make for strong end of year sales for Alliance in those categories or have those sales primarily move to other channels already?

Well, their transition this year was primarily in video in both of those retailers. We are seeing pretty significant video sales for target.com and then target.com is very strong in the audio side, especially vinyl records. And so we don't -- I'd say those transitions are kind of neutral for us. We lost a little business on the store shelves, but we're picking up a little bit on e-commerce.

Could you talk more about growth opportunity and how your suppliers feel about you selling on Temu and/or Shein?

Well, in particular, on those platforms, I think our suppliers are -- they're very happy in any opportunity that we have to grow sales. And those platforms, in particular, both of them are doing things what we consider a good way. They're being very particular on the product that's being sold. And you have to realize that we sell virtually every item that we sell is a licensed product. And both of those sites are being very cautious to make sure that legitimate product is being sold on those platforms. And -- so there are also -- those platforms are leaning on a company like Alliance who's buying all the product and all the entertainment products that we're buying, we buy them exclusively through our licensed vendors and so forth there. So there's a good trust level between us and those platforms that there is good legitimate product on there. And it's a very important aspect on e-commerce and one of the other things that we're seeing, especially on Shein too, is that consumers are liking that our product is located here in the U.S. So a lot of that product is getting delivered quickly out of our Kentucky warehouse to consumers and so forth there. So -- and we all have to realize that e-commerce on an Amazon, Walmart, Target, those websites is kind of -- I kind of look at it as e-commerce 1.0. That's kind of the first way that people were buying stuff. But, in today's world right now, there's -- we have to look at kind of the other platforms. Shein and Temu are more websites, but we're also heavily looking at live commerce, whether it's through WhatNot and eBay Live and TikTok and Instagram. Those are all significant sales channels that consumers are currently buying products on that are kind of I described as the new way that consumers are buying. And so we've got a warehouse full of product that consumers want and how are we expanding our sales on those new sales platforms that people are buying on today. And so that's a particular growth area -- organic growth area for Alliance going forward is all these new sales platforms and channels. As we've described, we have the e-commerce fulfillment capability in the back end nailed down. We know how to do that. So -- and we have the product in the warehouse. So for us to be able to get listed and sold on these other types of platforms, then we get the order into the system, we get it out to the customer, everybody is happy in that. So that's a big growth area for us in that -- those other sales channels.

Are you using artificial intelligence?

I think we're always using some form of artificial intelligence. We are looking at different aspects of this and how it can help our business and streamline our business and obviously, we have a lot of data and information in the company from all the different SKUs we have to maintain and all the different customer demands and customer sales histories and all those things. So yes, we're definitely looking at new technology to help us be more efficient and be more accurate in all of our forecasting aspects there.

Can you give any color on the current quarter and how you feel about the company's position during the holidays?

Well, I think that on the current quarter, we're -- we're pretty happy with where -- what our results are looking at. Our profitability is super strong. We are seeing a little bit of a decline in Microsoft hardware kind of as it's -- we had some really significant sales and they had some significant marketing components last fourth quarter. So we're pressured in the comps for that particular one. Although on some of the other stuff, vinyl in particular, we're seeing increased sales and comps on the vinyl side. And we're also kind of evaluating how the difference of Black Friday or yes, I guess, Black Friday timing this year. So with it being much later, it shifted some of November sales into December. So as we come through for the quarter, we're pretty happy with our sales results for this quarter, and our profitability as Bruce mentioned, we've got a lot of expenses trimmed out from a year ago. So we're pretty confident on our profitability. And then we've got a couple of significant initiatives that we're working on going into the first quarter of 2025 that we're pretty excited about as well.

Earlier, you mentioned the interest in made in America products. Does Alliance do any business with Public Square Marketplace?

Not that I'm familiar with. Don't know. Not that -- it's not that I'm familiar with.

Regarding the licensing deal with a major studio, can you talk about why a studio would choose Alliance over SDS [ Universal/WBD JV ]. A related question. Do you envision SDS ever having Alliance do distribution of DVD/blu-ray?

We can't really speak for what SDS plans.

I don't really, I wasn't -- yes, that question is kind of a difficult question there. I don't know specifically on that answer. Do you want to -- can you repeat the question for me? Let me see if I can answer part of it.

Yes. Regarding the licensing deal with a major studio, can you talk about why a studio would choose Alliance over SDS [ Universal/WBD JV ]. A related question, do you envision SDS ever having alliance to distribution of DVD/blu-ray. Before you answer, the writer perhaps could write another question in which he elucidates a little bit on what he says here.

Well, I think there's a couple of different pieces there. I won't get too far into this. But SDS is a distribution division that was created from Universal and Warner to distribute. They're not -- SDS division is not in the business of licensing content from other studios or even licensing for themselves. So when a studio is looking for a licensing partner, they're not really necessarily a licensing partner. Somebody that could be a licensing partner, as Bruce mentioned before, Disney went through Sony to license. So it really more have to be Universal or Warner or Sony licensing and other studios content and from that perspective. So it's a little kind of a nuance within the industry. SDS was created to be a distribution division for a combination of Warner and Universal's product.

Craig, before you go to the next question, I just wanted to cover that -- on the question about any type of capital raise or anything just so that nobody is surprised we are going to be planning to file a shelf ready S-3 because we're Shelf 3 S-3 eligible. It's for the sole purpose of every company has an S-3 filed and we're not the only ones to do this. Our main concern is and we ever hear from potential investors is you don't have enough float. And so we don't want to do a raise when our stock is very low priced. If we did any type of flow, it would be some type of an ATM at the market only for the sole purpose of okay, can we increase our float. So anybody sees that, that's the main driver of the whole thing there. Yes, we did pull the S-1 earlier this year. I think you've mentioned that there. That was really that's all we could do. We couldn't do a shelf ready S-3 because we weren't eligible because of the way our fiscal year ended and all that and how we ended on June 30. But we pulled that out of the market. And then we're currently looking into doing an S-3. Nothing has been filed yet. It's just something we're looking at for planning for possible increasing the float. I think we're at time.

Yes 2 minutes over. It was a great set of questions there from our attendees. Thank you very much and if you didn't have your question answered today in just a moment, I will show you what you can do. It's very easy. In fact, I'll tell you now. Take your question and paste it into an e-mail and send it to [email protected], any questions for us, send it to that e-mail. And if you want even more information on Alliance Entertainment, you could, of course, call us at 1800 RedChip. Yet another way to get information about RedChip and I highly recommend it -- sorry, about Alliance Entertainment, and I highly recommended is to go to the page that we created for Alliance, it's aentinfo.com There, you can view and download the investor presentation for Alliance as well as its fact sheet and sign up for news alerts on Alliance. Please be sure to watch Small Stocks, Big Money, RedChip's program featuring exciting small-cap companies, including sometimes Alliance Entertainment, every Saturday night at 7:00 p.m. Eastern on Bloomberg U.S.A. Finally, join RedChip's forthcoming webinars, Nova Minerals Tomorrow, Gorilla Technology Group on Thursday and bioAffinity Technologies on Thursday, December 19, all webinars start like today's at 4:15 p.m. U.S. Eastern. Register for those events and for all RedChip webinars at redchip.com/events where you can also view an archived version of today's Alliance webinar. Thanks again to our many participants, and thank you very much, Bruce and Jeff.

Thank you, everybody.

Thanks, Craig.