Dolphin Entertainment, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Dolphin Entertainment third quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Carbonaro. Sir, the floor is yours.

Thank you. And once again, welcome to Dolphin Entertainment's third quarter 2021 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrtha Negreani, 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 Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Although the company believes that 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.

Thanks, James, and hi, everyone. Good afternoon, and thank you for joining us today. As always, we'll start with a review of some financial and operating highlights, followed by a full financial review, and then open it up for Q&A. So from a financial highlights perspective, the momentum from the first half of the year carried through to the third quarter. Looking at the P&L, we have set another new record with $9.4 million in revenue, up 70% year-over-year, with an absolutely fantastic 41% year-over-year organic growth from existing subsidiaries. Please note that this follows Q2, which set a record of $8.6 million in revenues, which followed Q1, which itself had set a record of $7.2 million in revenues. Looking at our operating income, which is the metric by which we gauge ourselves, it's positive for the second consecutive quarter, even when including the non-cash expenses of depreciation and amortization. To reiterate, positive operating income from a microcap entertainment company, even including the DNA expense from our acquisitions. What's also nice is that we are EBITDA positive through the first nine months of the year, even while investing in our 2.0 initiatives. Okay, let's turn to the balance sheet. We have a record cash position of $12.7 million, which is an increase of 60% compared to December 31st, 2020. Also, we now have significantly more cash than all debt combined, including long-term debt. Furthermore, let's look at our working capital. After reaching a peak working capital deficit at the end of 2019 of just under $16 million, as we borrowed to pursue our acquisition strategy to build our supergroup, We're now reporting a working capital surplus standing at 4.5 million, which is more than triple the working capital surplus as of June 30th. And of course, since we're a cash-positive company, we expect this surplus will only continue to grow. Thus, our balance sheet today, less than two years removed from our peak working capital deficit, can only be fairly described as possibly our biggest strength when compared to our micro-cap peers. I'd like to reiterate the reason this is so important to us. It's because that working capital surplus gives us the muscle 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. Furthermore, we have not needed to borrow money or do a drawdown on our S3 to fund the development of our NFT business. In short, this perfectly illustrates the better mousetrap we feel we've built with Dolphin, a growing cash-positive core business in Dolphin 1.0 that is capable of self-funding the majority of investments and development costs of the big potential upside opportunities of Dolphin 2.0. Now let's move to some operational updates on our supergroup, the companies that are making those great numbers happen. Let's start with Shorefire Media, Dolphin's industry-leading music PR firm. which is having an absolutely terrific year. Shorefire helped the concert and event business relaunch by publicizing 40 tours year-to-date from artists in all genres, the nation's largest festival, Milwaukee Summerfest, and the reopening of nationally recognized venues, including New York's legendary Blue Note and the award-winning Brooklyn Bowl Nashville. Shorefire client Angelique Kidjo was named one of Time's 100 Most Influential People. Carole King and Todd Rundgren were inducted into the Rock and Roll Hall of Fame. and athlete Chris Bosch was inducted into the NBA Naismith Hall of Fame. Shorefire's corporate clients, including North America's leading live stream shopping platform network, tech-focused digital fan engagement company Mandolin, and Reservations Technology Platform Lite have won best-in-class awards recently in Fast Company, Forbes, Ad Age, Adweek, and Rolling Stone, thanks to Shorefire's efforts. Okay, how about 42 West, Dolphins Entertainment PR powerhouse? Well, speaking of September, that's Emmys month, and 42 West's extraordinary range of work for programs and individuals put their clients in position to receive a total of 19 Emmy nominations. Just to highlight a couple, the company's work on the Amazon series The Boys led to multiple nominations, including for Outstanding Drama Series. Also, as a result of 42 West's campaign efforts, the acclaimed music documentary, Billie Eilish, The World's a Little Blurry, earned a total of four nominations. Turning to BHI, the division of 42S, with a particular focus on entertainment consumer products and gaming. BHI was engaged by Fandom, the world's largest fan platform, and number one source for in-depth information on pop culture, entertainment, and gaming, to execute comprehensive publicity efforts for increased brand awareness and overall business growth. For context, Fandom is an entertainment and gaming juggernaut, reaching more than 315 million unique visitors each month, across 250,000 fan-powered communities with 30 million pages of content to get 30 billion page views per year. Moving along to BeSocial, Dolphin's influencer marketing group, BeSocial launched its showroom concept, hosting a two-day summer showroom in West Hollywood. Participating brands included Bondi Sands, iBuyDirect, Make the Label, and Peach & Lily, among many others. with key creators in the beauty, fashion, and lifestyle spaces in attendance. Those who follow our company closely know that I'm a big fan of this initiative, and I've been asked how influencer showrooms work. Well, the model of the showroom concept is pretty simple. Brands pay a fee to be included in the showroom and work with BSocial on selecting products that are carefully tailored towards the influencers attending. From there, BSocial handles all event production in addition to spearheading influencer outreach. BSocial uses their own in-house roster of talent, along with their team's longstanding influencer relationships, to drive traffic to the event. Influencers are gifted the products from each participating brand during the event, and then BSocial monitors all social coverage secured from the event for a full month, sending each brand a tailored report outlining all social placements secured for their products as a result of the event. Hopefully that helps provide context for the showroom concept we intend to scale in 2022. Next up, Viewpoint Creative, Dolphin's respected creative relations agency and video production boutique. Viewpoint joined forces with the Leary Firefighters Foundation to create and distribute content commemorating 9-11 and the 20 years since the attacks. More than a tribute to the heroes who fell that day, the content recognized legacy firefighters who continue to struggle with the fallout and how the FDNY has improved systems and processes based on the events of 9-11. We're always very proud and willing to highlight this type of work that Viewpoint does. And last but not least, let's talk about The Door, our leading culinary, hospitality, and lifestyle PR firm. The integrated marketing division at The Door is doing great work for their consumer products clients, and the culinary and hospitality teams are fresh off promoting the New York City Wine and Food Festival last month. But truth be told, I saved The Door for last in order to allow them to serve as a bridge into Dolphin 2.0. Since Charlie Lois and the entire door team are playing an essential part in both of the 2.0 initiatives we're going to talk about today. So let's go, let's talk about Dolphin 2.0 as a reminder 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 assets that we own. What type of assets do we want to own? Easy. Ones where our expertise in marketing gives us the greatest likelihood of success. We want to own what we know we can market better than anybody else. That's why last month we announced a major Dolphin 2.0 initiative, the acquisition of an ownership stake in Midnight Theater, a contemporary variety theater and restaurant that will anchor the $4.5 billion development from Brookfield known as Manhattan West. It's across 9th Avenue from Moynihan Station to the east, and across 10th Avenue from Hudson Yards to the west, and only a short walk from the Javits Center, New York's preeminent convention facility. We feel the Midnight Theater is being built in the very best location in Manhattan. Okay, so let's talk about the venue. The Midnight Theater features three distinct experiences for the guests. The theater itself, a separate Pan-Asian restaurant called Hidden Leaf, and a ground-level cafe. Let's take the Variety Theater first. It's an intimate, luxury, state-of-the-art 160-seat theater, which, as the name implies, will have a rotating schedule of a wide variety of performances across music, comedy, Broadway, and magic shows. The Midnight Theater also has built-in live stream capabilities, allowing for events inside the theater to expand beyond into people's homes and corporate offices. The theater will be available to host live stream podcasts, comedy specials, music events, corporate keynote events, and more. Hidden leaf is the modern Pan-Asian restaurant concept on the second floor of the midnight theater space led by renowned restauranteur, Josh Cohen. Many of you know, several of Josh's Brooklyn hotspots, including the Italian mainstay Lilia's, one of the most in demand restaurants in all of New York city for the midnight theater. Hidden Leaf will feature a 75-seat dining room, 20-seat private dining room, and a 40-seat lounge bar area. Hidden Leaf will be open for lunch and dinner and will incorporate world-class food with interactive elements such as table-side prep, wine consignments, and memberships. And the bar is where you'll be able to find James Carbonara every Tuesday, Wednesday, Thursday, and Friday nights. For Dolphin, the Midnight Theater is the most exciting live venue concept we have seen in a very long time. It will be a truly modern variety theater paired with fantastic restaurants, which is a combination that is missing in the cultural landscape today. It is in the final stages of construction and we expect to open by the end of the first quarter of next year. Dolphin will manage all aspects of publicity and marketing for the venue, both restaurant and theater, as well as facilitate talent and commercial relationships within both the entertainment and culinary industries. As we look to own assets wherein our specific marketing expertise will give us a greater likelihood of success, it is hard to imagine anything more in our wheelhouse than a world-class restaurant for the door to publicize, paired with a state-of-the-art variety theater that will program musical performances, Broadway cabarets, comedy acts, and magic shows, All of which ShoreFire and 42S currently promote. And of course, we'll be sure to have BSocial bring a steady stream of influencers as our guests and post about the great time they had afterwards. Playing Dolphin's marketing strengths is what Dolphin 2.0 is all about, which is also why we launched our NFTs business in 2021. I know many of you saw our big announcement this morning. Before we talk about that specifically, I'd like to take us back through the two key milestones in the past three months that positioned us to make today possible. First, our partnership with FTX US, which we announced in August. For any that need reminding, FTX is a leading cryptocurrency exchange and wallet provider with over 1 million active users and over $10 billion of average trading volume per day. With access to FTX's platform and wallet services, we can now aggressively pursue our ambition to develop and program global NFT collections targeting all of Dolphin's verticals, including the sports, film, television, music, gaming, esports, culinary, lifestyle, and charity industries. With the technical development well underway, we then turned our attention to the creative side of the coin and brought in award-winning visual designer Anthony Francisco a few weeks ago and the newly created post of creative director to develop and execute numerous NFT series involving original and existing IP. Anthony came to us from Marvel Studios, where he was the senior visual development artist responsible for designing iconic characters across the Marvel Cinematic Universe, such as Baby Groot, personal favorite of many of the Dolphins, Loki, and Adora Milaje, the female warriors in Black Panther. In short, we feel we won the lottery for our NFT business by securing FTX as our technical partner and by bringing in Anthony Francisco as our creative lead. And together, that is what enabled us this morning to announce the launch of Creature Chronicles Exiled Aliens, Dolphin's first generative NFT collection, which will feature 10,000 unique custom-crafted avatars of an ancient race of aliens designed by Anthony Francisco. Each exiled alien avatar will fall into a specific alien hierarchy, assign traits, and randomly generated. The collection is available for viewing today, right now, at creaturechronicles.io and is slated for minting in December. Now, we intend Creature Chronicles to be a multi-season NFT event. After the release of Exiled Aliens, the community and fan experiences will continue to evolve and grow while the storyline develops and new NFT drops are released during upcoming seasons. Dolphin will ensure that Exiled Aliens community members will enjoy a wide range of benefits, including limited edition NFTs, master classes with Anthony, Francisco, and friends, creative competitions with incredible prizes, private events, and future surprises, all leveraging Dolphin's world-class relationships across the creative community. Furthermore, holders of Exiled Aliens avatars will receive priority status for the purchase of future seasons of Creature Chronicles. We are pricing each exiled alien at $200, which includes both the NFT avatar and inclusion into the ongoing Creature Chronicles community with all the benefits I just mentioned. Users can purchase exiled aliens directly on site through a simple registration process, which establishes a proprietary FTX US wallet for each user. The user's FTX US wallet allows for payments to be made via credit and debit cards as well as a wide variety of cryptocurrencies, including Sol, Ether, and Bitcoin. The NFTs will be minted and stored on the Solana blockchain, a leading proof-of-stake blockchain that is recognized as faster, more efficient, lower cost, and more environmentally friendly than its proof-of-work competitors, notably Ethereum. So there it is. All of us at Dolphin are really excited that this day has come when we can share our very first NFT collection designed to launch our first community. We are obviously playing to the strengths of Anthony, and he has delivered. The graphic art within the Exiled Aliens collection is absolutely breathtaking. And no offense to the aliens, but we don't believe there's a better visual artist in our shared universe than Anthony. We think this collection will appeal to the existing NFT enthusiasts, while also serving as an entry point to those who are curious about NFTs and want to dip their toe in with something really cool from a world-class designer. And quite frankly, we're excited to program for the community which will allow us to play to our strengths and offer benefits and access to the worlds of entertainment and pop culture that are simply unique in the marketplace today. It's a fun day. Midnight Theater and Exiled Aliens in one conversation. We're extremely pleased with these first two Dolphin 2.0 initiatives, and hopefully today's conversation shared some context as to why they were chosen to lead Dolphin to this new era of ownership of assets that we are marketing. Any Dolphin 2.0 opportunity is judged by its ability in success to serve as a major catalyst for our company. We feel these first two certainly have tremendous growth potential with Midnight Theater's possibility to expand into other cities and with our plan to launch NFT collections across all the industries that Dolphin companies currently market. By the time we jump on the earnings call for our 10K, we would hope to have Midnight Theater open and everyone on this call scheduling their first visit. and one or two more NFT collections launched, and community activities for all of them well underway. And we're not stopping. We have more 2.0 initiatives in the final stages of closing that we anticipate announcing before the end of the year. Our dolphin flywheel is turning, and momentum is helping us to gain speed. We feel that our marketing companies are the very best in their respective industries. Quite frankly, I think that's almost impossible to argue. And there's no shortage of attractive partners and opportunities for us. The 2.0 pipeline is strong for NFT and non-NFT opportunities alike, and we will pursue those first that we believe will create the most shareholder value. In closing, I would like to remind everyone that these 2.0 investments are on top of a growing 1.0 business that has led to record revenues for three quarters in a row, including 70% year-over-year revenue growth here in the third quarter, two consecutive quarters of positive operating income, even after the non-cash expenses of depreciation and amortization from our acquisitions, and a record level of cash on hand, over $12 million in fact, which is approximately $3 million more than all remaining debt combined, including the long-term debt. We are profitable and growing with a beautiful balance sheet, and now we are launching Dolphin 2.0 in earnest. These are the days that we've been dreaming of since we uplifted to NASDAQ almost four years ago and began assembling the super group. Thank you for joining us. To that end, I'll now turn it over to Myrta.