Dolphin Entertainment, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Dolphin Entertainment fourth 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 Carbonara. Sir, the floor is yours.

Thank you. And once again, welcome to Dolphin Entertainment's fourth quarter and full year 2021 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrtha Negrini, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor Statement. The 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, We 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 we'll open it up for Q&A. Overall, 2021 will be remembered as a transformative year for Dolphin, both with respect to our balance sheet and operating income. as well as in our evolution to making investments in assets for which we believe our marketing expertise will greatly influence the likelihood of success. Let's start with our financial statements. The momentum from the first nine months of the year carried through to the fourth quarter. Looking at the P&L, we have set another new quarterly revenue record with $10.5 million in revenue, up 57% year over year. Each quarter of 2021 set a Venn record for revenue. Q1 reached $7.2 million in revenues, a record broken in Q2, which reached $8.6 million in revenues, followed by Q3, which set a then record with $9.4 million in revenues. Now we have achieved $10.5 million in revenues in Q4. All of these increases have been entirely organic and a result of the supergroup's growth and cross-selling of services. And with each successive quarter setting a new record in revenue, Obviously, the full year set a new revenue record as well, reaching $35.8 million, which is an approximate 49% increase from the prior year. Next, we look at our operating income, which is the metric by which we gauge ourselves. 2021 was a milestone year in this regard as well, as we turned operating income positive after deducting non-cash items of depreciation and amortization and a change in the fair value of contingent consideration. We are very proud of this achievement, especially since our expenses included investments in our 2.0 initiatives. Finally, I'll make a comment on our balance sheet. While I know that we will be releasing the balance sheet upon the completion of the audit, which we expect to occur in the next few days, I would be remiss if I didn't point out, and believe me that this feels great to say, in 2021, we reached a working capital surplus with more cash on hand than all remaining debt, including long-term debt, which has allowed us to remove our going concern, a tremendous milestone for any microcap public company. Now let's move to some operational updates on our super group, the companies that are making those great numbers happen. We'll start with Shortfire Media, Dolphin's industry leading music PR firm, which had a great 2021 punctuated by a fourth quarter working on clients and projects who collectively earned 27 Grammy nominations, reflecting the breadth of the company's roster across R&B, electronic, global, roots, folk, jazz, blues, gospel, contemporary, Christian, comedy, and other genres. Shorefire's leadership in music PR shows no sign of slowing down. Just last month, helming the red carpet at the Bud Light Super Bowl Music Fest, three nights of all-star talent, including Green Day and Miley Cyrus, Blake Shelton and Gwen Stefani with Mickey Guyton, Halsey and Machine Gun Kelly, and other special guests. Turning to 42 West, Dolphin's entertainment PR powerhouse, they were busy in the fourth quarter as well. From the promotion of the latest James Bond movie to Steven Spielberg's adaptation of West Side Story to End Just Like That, the heart-stopping revival of Sex and the City. If you're watching it, chances are 42 West promoting it. But you don't have to take my word for it. The Observer just released its ranking of the best PR agencies in America 2022, a widely respected list of the 50 most powerful public relations firms in the nation. 42 West was ranked number two in the country. Once again, the highest ranking of any entertainment PR firm. The Observer notes that 42 West, led by CEO Amanda Lumberg, yet again is recognized for its elite PR services for film, television, and corporate PR management, with clients including nearly every studio and streaming service, several A-list talent, and impactful brands like Fandom, Bond, Turner, and Riot Games. Congratulations to everyone at 42 West for such an incredible recognition. Moving along to BeSocial, Dolphin's influencer marketing group. It was a busy quarter that included partnerships with Japanese media franchise juggernaut, the Pokemon Company. BeSocial group talent influencer campaigns also included McDonald's, Capital One, and Skim's clothing line, co-founded by Kim Kardashian. In addition, BeSocial and its influencer network worked on projects for fashionable footwear, Romewares, which made Oprah's favorite things list, as well as Ciroc, Sports Illustrated, Swimsuit Magazine, and fashion collections for Nordstrom. Moving to Viewpoint Creative. Dolphin's respected creative relations agency and video production boutique. Viewpoint brought home four Gold Muse Awards in this year's international competition. Viewpoint's work with clients HBO Max, AAA Northeast, the Leary Firefighters Foundation, and First Look Media won the categories of video TV program, video insurance, video documentary, and video public service and activism, respectively. Finally, we'll talk about The Door, our leading culinary, hospitality, and lifestyle PR firm. During the fourth quarter, the door was busy promoting the New York City Wine and Food Festival, launching Rachel Ray's book, This Must Be the Place, and Dan Richer and Kate Parler's book, The Joy of Pizza. That sounds pretty good. Both of which became New York Times category bestsellers and finding room to promote National Peppermint Bark Day for client Haagen-Dazs. If you're eating, drinking, or making a reservation for it, chances are the door is promoting it. And once again, you don't have to take my word for it. The door also made the observers widely respected ranking of 50 most powerful public relations firms in the nation. The observer notes, the door led by co founder, President Lois and Jerry and O'Neill and co founder CEO Charlie Doug yellow was credited for overseeing the launch of dolphins centered. Dolphin entertainment center T studio last year, along with providing a unique integrated marketing approach for many high profile clients. including Williams-Sonoma, Citarella, Haagen-Dazs, Sir Kensington's, Fast Casual Chain Plant Burger, the Francis Ford Coppola Winery, and the Expo to Dubai. That is tremendous recognition from the esteemed observer, and I'd also like to recognize Charlie, Lois, and the entire DOOR team for playing an essential part in the Dolphin 2.0 initiatives we're going to talk about in a few minutes. All right. 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. The whole point of assembling the super group of entertainment marketing companies and putting them within a public company is so that we can take ownership positions and assets we create wherein our form of marketing expertise will influence the likelihood of success. Simply put, we want to own some of the types of things that we know we can market better than anybody else. In terms of a business model, broadly speaking, there are two types of Dolphin 2.0 initiatives. Ones where we develop assets in the categories of content, consumer products, or live events, and ones where we receive ownership stakes in other people's companies that have assets in those three categories. Let's talk about this second type of Dolphin 2.0 investment first. I'll start with Craft House Cocktails. In December 2021, we announced a strategic partnership with Craft House Cocktails, a pioneering brand of ready-to-drink, all-natural, classic cocktails created by world-renowned mixologist Charles Jolie and esteemed restaurateur Matt Lindner. Real quality ingredients, balanced cocktails, and authenticity at every level have been hallmarks of the brand since day one. Now, Craft House Cocktails is a company that's almost 10 years old. They have an award-winning product line. and they wanted the super group led by the door to help market their product. They pay us a cash fee every month to do just that, and we also receive an ownership stake in the company in return for the added value of the services and relationships extended by the entire super group. We structured our relationship with Fanjolt, another Dolphin 2.0 initiative that we announced in the first quarter of this year in the same way. Fanjolt is a new online experiential platform creating memorable interactions between fans, and a curated list of premier talent to support their favorite causes. The platform features Rafael Nadal, Aaron Judge, Jewel, Ashanti, Kevin O'Leary, Josh Richards, Jen Seltzer, Damon John, and Patrick Mahomes is 15 in the Mahomes Foundation, and Tua Tagovailoa's, takes a Miami guy to be able to say that, Tua Foundation. And similar to Craft House Cocktails, with Fangio, we receive a monthly cash fee for our services, and we also receive an equity stake in their company in return for the added value of the services and relationships extended by the entire super group with respect to these types of dolphin 2.0 initiatives we typically look to receive somewhere between five and ten percent of the equity in the respective company in addition to the monthly cash fee with respect to the other types of dolphin 2.0 initiatives wherein we develop assets that we are excited to market We do not receive a monthly cash fee, since we would often be simply paying it to ourselves, but correspondingly, we take a larger ownership position in the product or venture. Examples of these types of Dolphin 2.0 investments would be Midnight Theater and the NFT marketplace we have been building. Let's start with Midnight Theater. On October 12, 2021, we announced the acquisition of an ownership stake in Midnight Theater. contemporary variety theater and restaurant that will anchor the four and a half billion dollar development from Brookfield known as Manhattan West as we've previously shared for dolphin the midnight theater is the most exciting live venue concept we have seen in a very very long time it will be a truly modern variety theater paired with a fantastic restaurant which is a cannot which is a combination that is missing in the cultural landscape today we expect to open the restaurant in June of this year and and be in previews this summer with the theater with a grand opening and a full seven day a week theatrical calendar in the fall. Dolphin will manage all aspects of publicity and marketing for the venue, both the restaurant and the theater, as well as facilitate talent and commercial relationships within both the entertainment and culinary industries. We're hopeful that Midnight Theater creates a relatively straightforward or predictable range of modeling Because even though it has two components, a restaurant, by the way, the restaurant's called Hidden Leaf, and the theater, Midnight Theater, I should add it has a third component, a bar named James Carbonara's Landing Spot. It has many of the variables already defined for the model. Why? Because there's a certain number of seats in each. So you can model out an average ticket price and the number of turns in the restaurant. You can do the same in the theater with an assumption of a number of shows per week, and this will quickly get you to a revenue model. And, of course, we will look to operate the venue at a reasonable profit margin standard in the industry. In success, of course, we will look to add locations around the country and around the world. You can quickly see how this opportunity can become very exciting for a company at the stage of Dolphin in 2022. We invested $1 million into the venture for a stake of approximately 13%. We also invested in options for up to another approximately 25%. As you can tell, we're very excited for Midnight Theater. Now I'll turn to NFTs. As a reminder, last August, we announced our partnership with FTX US, the leading cryptocurrency exchange and wallet provider with over 1 million active users and over $10 billion of average trading volume per day. That was as of last August. I'm sure they're much higher now. Our goal is to create and program global NFT collections targeting all of Dolphin's verticals, including the sports, film, television, music, gaming, esports, culinary, lifestyle, and charity industries. We then brought in award-winning visual designer Anthony Francisco from Marvel Studios, where he was the senior visual development artist responsible for designing iconic characters across the Marvel Cinematic Universe. Following that, in December, we announced artwork had begun on 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 himself. In March of this year, we announced our partnership with Flower Girls. Flower Girls is a fine art female-led NFT collection of 10,000 unique Flower Girls by revered artist Barvara Allay. Talking too fast. Launched in December of 2021, the Flower Girls has surpassed over $15 million in sales to date and is donating 20% of profits from both primary and secondary NFT sales to a variety of children's charities voted on by the community. In February, more than $400,000 was donated across children's charities, including $200,000 to St. Jude Children's Research Hospital, a client that is also on Dolphin Entertainment's extensive roster. The Flower Girls also give an additional 5% of profits towards collecting children's NFT art, supporting and empowering the next generation of artists. Dolphin is activating its entire network of leading marketing and promotional agencies to amplify the Flower Girls charitable initiatives as well as expand community benefits and increase value for Flower Girls holders. Dolphin will also leverage its unique position to explore meaningful and exciting new opportunities for brand growth across all lifestyle and entertainment verticals, including but not limited to scripted and unscripted television series, digital and traditional publishing, consumer products, music, gaming, and events. And of course, we will promote the living sugar out of future Flower Girls NFT collections. as a partner in the venture. So you can see that we have worked hard over the past several months to allow us to take advantage of our efforts in the NFT space. This coming summer, we expect to have other Flower Girls announcements in Q2 and to launch Creature Chronicles Exiled Aliens for Sale in Q3. Each of these collections will have a retail value in the seven figures, which allows each NFT collection to represent significant potential upside for Dolphin once we go on sale. So I'll pause there. In summary, we're extremely pleased with these first four Dolphin 2.0 initiatives, and hopefully today's conversation provided some additional detail. Just one year ago on December 31st, 2020, we had not yet started exploring Dolphin 2.0 initiatives. We always talked about January 1st, 2021 is the starting line for Dolphin because by then we would have scale with our super group. We had six companies that had been acquired and that we would begin to explore what we wanted to make investments in. By December 31st, 2021, we had launched the first three of these Dolphin 2.0 initiatives. The NFT marketplace was being built. Midnight Theater had been, we had acquired an ownership stake. and we obviously entered into the strategic partnership with Craft House Cocktails. We added a fourth initiative subsequent to year end, which is the Fan Jolt social media app. In closing, I would like to also reiterate that these 2.0 investments are on top of a growing 1.0 business that has led to record revenues for four quarters in a row, including more than 57% year-over-year revenue growth in the fourth quarter. We are profitable and growing with a pristine balance sheet. And now we are at a point where we can see Dolphin 2.0 flourish. This was our thesis when we uplisted to NASDAQ four years ago and began assembling Supergroup. Thank you for joining us on this ride. And to that end, I'll now turn it over to Mayor Tenegrini, our Chief Financial Officer.