ALLIANCE ENTERTAINMENT HOLDING CORP Segments Disclosure
Note 10: Segment Information
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about a public entity’s reportable segments, including significant segment expense categories and expanded interim reporting requirements. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The Company adopted ASU 2023-07 for the fiscal year ended June 30, 2025.
Management performed an assessment of the Company’s operating segments in accordance with ASC 280-10-50-1 through 50-9. Based on this evaluation, the Company determined that it operates as a single operating segment, which is also its sole reportable segment. Segment revenue is derived from the sale of distribution of pre-recorded music, video movies, video games and related accessories, and merchandising. This conclusion is consistent with prior periods.
The Company’s Chief Executive Officer and Chairman are the Chief Operating Decision Makers (“CODM”) and review financial performance and make resource allocation decisions at the consolidated entity level. The CODM uses net income, prepared in accordance with U.S. GAAP to assess performance and make resource allocation decisions. The CODM utilizes net income, prepared in accordance with U.S. GAAP, to evaluate financial performance, monitor variances against budget and forecast, and guide strategic decisions. Segment assets are reported as consolidated assets on the Company’s balance sheet.
Significant expense categories regularly reviewed by the CODM include:
| ● | Cost of Revenues (excluding depreciation and Amortization) | |
| ● | Distribution and Fulfillment Expense | |
| ● | Sales and Marketing |
Other Segment Items:
Other segment items include expenses that are part of segment profit or loss but are not classified as significant segment expenses. These include:
| ● | General and Administrative Expense | |
| ● | Technology Expense | |
| ● | Interest Expense | |
| ● | Income Tax Expense |
The following table presents segment revenue, net loss, and the significant segment expenses for the Company’s single reportable segment for the fiscal years ended June 30, 2025, and 2024 (in thousands):
Reconciliation to Consolidated Net Income:
| Fiscal Year ended June 30 | ||||||||
| 2025 | 2024 | |||||||
| Net Revenues | $ | 1,063,457 | $ | 1,100,483 | ||||
| Cost of Revenues (excluding depreciation and Amortization) | 930,605 | 971,594 | ||||||
Distribution and Fulfillment Expense | 40,375 | 48,818 | ||||||
| Sales and Marketing | 26,919 | 27,220 | ||||||
| Other Segment items* | 50,480 | 23,776 | ||||||
| Net income | 15,078 | 4,581 | ||||||
| * | Other segment items include interest expense, income tax expense, general and administrative expenses, and technology expenses, which are reported separately on the consolidated statements of income. |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.