Dolphin Entertainment, Inc.

Thank you for holding, ladies and gentlemen. You're online for this Dolphin Entertainment Conference call. At this time, we are still gathering additional participants, and we'll get started momentarily. We thank you for your patience and ask that you please continue to hold. Thank you. So, Bye. So, Thank you. Thank you. Good day, ladies and gentlemen, and welcome to the Dolphin Entertainment second quarter 2021 earnings conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to Mr. James Carbonaro with Investor Relations. Sir, the floor is yours.

Thank you. And once again, welcome to Dolphin Entertainment's second quarter 2021 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrton O'Graney, Chief Financial Officer. I would like to begin the call by reading the Safe Harbor Statement. This statement is made pursuant to the Safe Harbor Statement for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21A of the Securities Exchange Act of 1934. Although the company believes the expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For discussion of such risk factors and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances. Now, I would like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

Well, thanks, James, and hi, everyone. Good afternoon, and thank you for joining us today. Now, James has asked me to follow our traditional format, where I start by discussing our financials at a high level and then speak about Dolphin 1.0 in the second quarter, and then move to our recent launch of Dolphin 2.0 and announcements regarding NFTs. But, James, hold on to your seat, brother, because I'm going to break from format. This, I realize, may be unconventional. But I would like to first pay tribute to those who have been following Dolphin since before March 23rd of this year. I think everyone knows that date, the one when we made our first Dolphin 2.0 announcement in NFTs and the trading in our stock went nuclear. No, I want to speak to those who have been with us even before January of this year when we made our last acquisition. Yep, I want to speak to the OG stakeholders and investors, some of whom have followed us since we first spoke of our dream of building an entertainment marketing supergroup at LD Micro in December 2016 when we were an OTC stock and hadn't even brought 42 us into the family yet. And I want to speak to those who I met the following year during our roadshow prior to our uplisting to NASDAQ in December 2017. Yep, those are the people I want to speak to right now. to James Carbonara of Hayden IR, who's the first addition to the team after deciding to take Dolphin public in the summer of 2016, and who arranged for that first speaking engagement at LD Micro, I should add, to John Shaw, Jason Sardo, and Keith Goodman of Maxim, who helped us achieve the uplisting to NASDAQ and have been with us every step of the way since, to Josh Sheinfeld and all of my friends at Lincoln Park, to Tim Johnson at Bard, to Marvin Schenken, go Kings, to our directors, especially the original independent directors of Mike Espenson, Nick Stanham, and Nelson Famadas, who have seen the entire journey, to Myrta Nagrini, our CFO, who has also been with us since before we were public, and to all of our CEOs and former private company owners, Amanda, Lois, Charlie, Dave, Marilyn, Allie, and Dean, who each share the belief that we are stronger together than any of us would be alone, to their senior management teams who care so much about the work they do on behalf of our clients, and to all of the over 160 Dolphins working with us today. I want to talk to them and all the others like them, those who believe and continue to believe in what we are building here at Dolphin. And so in speaking to all of you, I'm gonna be inspired by many of our musician clients and dedicate this song, this earnings call, you know who you are and this earnings call is for you. So here we go. From a financial perspective, we have reached several significant milestones this quarter. Looking at the P&L, we have set a new record with 8.6 million in revenues. Please note that this follows Q1 which set a then record of $7.2 million in revenues. That is 20 percent sequential growth from the previous record-holding quarter. And as you might expect, it is significant growth from last year's Q2 revenues of $5.2 million, 66 percent growth to be exact. Next, looking at our operating income, this is another huge milestone. Since we uplisted to NASDAQ in December of 2017, it's positive for the first time, even when including the non-cash expense of depreciation and amortization. Yep, positive operating income from a micro-cap entertainment company, even including the DNA expense from our acquisitions. From a P&L perspective, that is how we measure ourselves, and so this is a big moment for our company. Now, sure, it's fun to report those numbers in the P&L, but for my money, the real story is the balance sheet. As we took on debt to assemble the super group, many saw this as our biggest weakness, as our Achilles heel. At first, they doubted we could add other private companies into our group. When that started happening with the door only six months after we joined NASDAQ, they then switched the story and said we wouldn't make it to the point where we could pay off those debts. Actually, they didn't just say it. They proclaimed it. Everyone's entitled to their opinion, of course, and we respect that. But many of those opinions were stated as conclusions, as facts. They were absolutely certain this day would never come. Well, let's recap where we are then, shall we? In little more than three years since our uplifting, to pull – our version of LeBron James maybe, we have acquired not one, not two, not three, not four, but five additional companies to join 42S. Huh. I guess other market-leading companies did want to join and create a super group after all. Who knew? And even doing all of that, From a peak working capital deficit of just under $16 million, one and a half short years ago, and even after bringing in six companies, we are now reporting the first working capital surplus in Dolphin history at $1.25 million. And since we're a cash-positive micro-cap company, cough, cough, we expect this surplus will only continue to grow. Why is that so important to us? Why is the balance sheet so great? Because that working capital surplus will give us strength on our balance sheet for the next set of acquisitions and 2.0 investments. For acquisitions on the same terms of any of the six we've already done, for example, we would be able to pay the cash component for any of them from cash currently on our balance sheet. Obviously, we had not been in this position previously, so this is another huge milestone for us. Oh, and speaking of cash, we now have $9.3 million of unrestricted cash, which is more than all remaining debt. Yep, all debt, including long-term debt and including the remaining $2 million in PPP loans, which we expect to be fully forgiven and which, of course, will only improve our working capital surplus. And last but not least, Remember all those puts from any of the acquisitions dating back to 2017, totaling $11 million? Yeah. Those have been paid in full. Thank you very much. Completely off our balance sheet. None left. Not a dollar. Nada. Zippo. So our balance sheet, what was stated to be a weakness by those who couldn't see beyond it to what we were building, yep, our balance sheet today, one and a half years later, can only be fairly described as possibly our biggest strength when compared to our micro-cap peers. And let me tell you, that feels so good. So, so, so very good. All right, now we can stop giving James a heart attack, and I'll go back to his script instead of mine. Let me give you some updates on our super group, the companies that are making those great numbers happen. During the second quarter, 42 West was involved in various capacities with 13 films that earned a total of 32 Academy Award nominations and won six Oscars. This past Friday, as movies are slowly coming back to theaters, 42 West handled Respect, MGM's biographical drama film based on the life of Aretha Franklin, and looking ahead, upcoming promotional campaigns include some doozies, including Universal Pictures' film adaptation of six-time Tony Award-winning musical Dear Evan Hansen, coming in September, MGM's highly anticipated latest installment in the James Bond franchise, coming in October, as well as Paramount's Top Gun 2, starring our very own client, Tom Cruise, coming in November. So we've got major releases coming out one after the other through the fall. Turning to music, Shorefire Media had a terrific second quarter, really, really great. Let's spend a little extra time on Shorefire because Marilyn and the team are truly firing on all cylinders. I'll start with a special shout out to Shorefire Media clients, Carol King and Todd Rundgren, who were inducted into the Rock and Roll Hall of Fame. Awesome. And although the return of a full touring calendar is very much a moving target these days, Shorefire worked with day one client Bruce Springsteen for his return to Broadway with a summer run at the St. James Theatre. as well as longtime clients Hall & Oates and the Dave Matthews Band to promote live performances. But it's not just the artists. Shorefire represents many businesses from all facets of the music industry, including one of, the digital company from Quincy Jones, and Light, the ticket reselling platform, among many others. Finally, it should be pointed out that Shorefire's work with musicians as authors and influencers has attracted a lot of attention and allowed for the growth of a very nice roster of non-musician clients, including former athletes Sean Johnson East and Chris Bosh. Go Heat! Shifting to consumer and hospitality, the door welcomed iconic ice cream brand Haagen-Dazs and beloved European baby food brand Hala, and led campaigns for the Dominic Hotel, Jefferson's Ocean Bourbon, and Virgin Hotels in New Orleans. Also, Charlie and Lois at the door have taken a leadership position for us in these early months of the NFT business, guiding our launches and developing processes to onboard more large-scale campaigns, which we'll highlight soon. But I wanted to take a moment to thank them for all of their hard work in this space. As for video production, Viewpoint, excuse me again, also had an exceptional quarter. producing a wide range of videos for everything from traditional network and entertainment clients, CNN, National Geographic, Viacom, and HBO Max, to the rapidly growing consumer product and brand video work done for clients including PayPal, Biogen, and AAA. And on a personal level, this is a company that cares deeply about charitable opportunities and making a positive impact in the world. So I'd like to highlight Viewpoint's work with The Door, to develop strategy and digital content for Leary Firefighters Foundation's International Firefighters Day broadcast event, which recognizes firefighters and launched the foundation's virtual training video series with the largest fire training exercise in New York City. And finally, moving to influencer marketing, BeSocial was another company that had a fantastic quarter, really executing across both the brand campaign side and the influencer talent management sides of the business. This is what can happen when you've got a young, exciting market leader in such a growing market. And I honestly think some may be sleeping on this aspect of our company. It was on this earnings call last year that I tried my best to express our great enthusiasm for adding vSocial to our supergroup, explaining that influencer marketing and PR are the twin pillars of earned media. with influencer campaigns representing tremendous growth in our industry. Well, eMarketer and Business Insider recently inaugurated their forecast for this industry with an expectation of 33.6% year-over-year growth to $3.69 billion in influencer marketing spend in the U.S. in 2021, which is $1 billion more than 2020. Furthermore, their forecast for both 2022 and 2023 also showed double-digit growth, with total influencer marketing spend nearing $5 billion in the U.S. in 2023. We very much wanted to be in this space, and we have a gem of a company with BeSocial. Their skill set is an advantage for our supergroup, and we'll be sure to leverage it to the fullest extent possible with our 2.0 initiatives. Speaking of which, let's talk about Dolphin 2.0. As a recap for anyone new on the call or to the Dolphin story, we define the work of our super group under Dolphin 1.0 as the very best at marketing pop culture, and we define what we call Dolphin 2.0 as using pop culture to market, specifically marketing assets that we own. Simply put, we are looking to own assets for which our marketing companies have a particular expertise, and therefore, which will give us the best chances for success. We want to own what we know we can market better than anybody else. So what would those categories be? There are three, entertainment content, live events, and consumer products. And we also talk about a fourth category where we're in, excuse me, we take equity stakes in other people's companies that have entertainment content, live events, or consumer products. Those then are the buckets or categories we talk about when we talk about Dolphin 2.0. We used the first three years of our public company's existence to build scale and reach across all of pop culture by assembling our super group of marketing companies that we think are the very best at what they do in marketing film, television, music, culinary, hospitality, video games, e-sports, consumer products, et cetera. I think after the one point of summary I just gave, it would be very difficult for anyone to say that we don't have the best in class subsidiaries across all of those verticals. The rest of our lifetimes will now also include developing, producing, and purchasing assets that we will own, giving us greater upside and success with these projects. We've previously announced our expectation that we will seek to have two initiatives from each of the four categories per year to guide to a cadence we feel we can achieve. The only exception to this pace will be that we will not start our live events investments until 2022. for obvious reasons. As pretty much everyone on this call knows, we have previously announced our entrance into the NFT business, which was the first of our two consumer products announcements expected for this year. I can now also say that we've identified our first 2.0 content initiative and our first 2.0 equity stake initiative. And while we had hoped to be able to speak about both of those initiatives on this earnings call, The timing of our partners dictates that we'll probably need to wait until later in this quarter to be able to do so. Those initiatives will give us the first one in each of the three buckets for this year, content, consumer products, and equity. And we are hard at work in selecting the second one in each of those three buckets for 2021. And speaking of the NFT business, many of you saw the partnership with FTX we announced two weeks ago today. FTX's platform and technical skills with the blockchain were the final pieces in the puzzle we felt we needed to have to launch large-scale collectible businesses with major partners. I don't think there's anyone on this call that hasn't heard of FTX, but just in case, they are a leading cryptocurrency exchange with over 1 million users and over $10 billion of average trading volume per day. Last month, they announced the largest raise in crypto exchange history, a $900 million Series B round, valuing their company at $18 billion. And to expand their visibility in the U.S., FTX has sought sponsorship opportunities in the sports and esports industries, which dovetail nicely with our NFT ambitions also in those industries. Some of FTX's sponsorship highlights include their 19-year naming rights deal for FTX Arena, home of my beloved Miami Heat, their 210 million 10-year sponsorship of TSM, labeled the most valuable team in esports by Forbes, the largest sponsorship deal in esports history, and their groundbreaking deal to become the official cryptocurrency exchange brand of Major League Baseball, the first such agreement with one of the major sports leagues in the United States. So, in summary, we feel our goals and interests in the NFT space are aligned. Now, Dolphin will develop and execute the creative branding, production, and marketing of these programs alongside FTX. who will use their crypto exchange services and technical development as the backbone of the marketplaces. Together, we will develop and program global NFT marketplaces targeting all of Dolphin's verticals, including the sports, film, television, music, gaming, esports, culinary, lifestyle, and charity industries. We see the trading of NFTs as much more than just a list of digital products. We view our marketplace experiences as the future of fandom for internationally recognized brands, and franchises in sports and entertainment. To achieve this vision, we need a seamless user experience. Because buying NFTs today, it's the opposite of that. To put it nicely, to buy NFTs today on the Ethereum blockchain is clunky. We want it to be able to have the wallet and the product all in one place. We want it to be able to allow the consumer to pay with crypto, credit card, or traditional currency. We want it to have the product available on wholly owned and programmed online destinations. We wanted to have the same product available for purchase directly in-app, and we also wanted to have actual customer support when necessary, all of which are enormous differentiating factors that FTX either provides now or can provide as we build larger and larger marketplaces, which we intend to do. To put it simply, Dolphin and many, many others were waiting for the ability to sell NFTs using credit cards and for the elimination of gas fees that prohibit competitively pricing collectibles. There's simply no business rationale for selling products at $10 or $20 when it costs you $100 in gas fees to upload each product for sale. And by the way, when it would cost the consumer another $100 to download the product after buying it. Those gas fees are why the NFT markets primarily up until now have been dominated by speculative assets like ARK, because they can be priced at $1,000 or more, where even $100 in gas fees becomes just a fraction of the cost. Now with FTX and the ability to take credit cards and the elimination of gas fees, we think for ourselves and honestly for the major studios and record labels that have predominantly sat on the sidelines as well, waiting like we have been, when you can sell digital products for any price point, like $25 or less if you want to, then you can create a true market, a true cross-industry ecosystem in collectibles. We like the state of the industry. And we like our position and experience within it, given that our PR firms have marketed collectibles for virtually every major studio's consumer products division, as well as industry leaders like Funko and Mattel. We know how to market collectibles, and now we can make our own and price them competitively. Let's see what happens over the next few months. We're certainly very excited for the possibilities. And to remind everyone, NFTs only represent one of the Dolphin 2.0 initiatives we expect to announce this year. We believe each of these 2.0 initiatives, including NFTs, have the potential to be a major catalyst for our company. Dolphin 2.0, after having identified the first initiative in content and after identifying the first initiative in equity stakes, is gathering momentum, and we can't wait to share more. Oh, and Did I mention that we have reported positive operating income on record revenues? Oh, yeah, I did? Okay, that's good. And how about the fact that we have a working capital surplus with more cash on the books than all remaining debt, including both long-term and the PPP loans, which we expect to be forgiven? Oh, I already said that too? Okay, great. You see, I just want to make sure I didn't forget to mention that we are a profitable entertainment micro-cap company with a working capital surplus and more cash on our books than total debt. Before we even start Dolphin 2.0. Okay. I'm just glad I didn't forget to say that. I'd like to finish my prepared remarks at the same point I started them. By saying the most sincere thank you to everyone who had faith in us along our journey. We are far from reaching our fullest potential. And we know that. But it's also important to celebrate successfully reaching milestones along the way. And I would say that record revenues positive operating income, and a working capital surplus are each absolutely a reason to celebrate. So with that said, I'll now turn it over to Myrtle.