Dolphin Entertainment, Inc.

Greetings, ladies and gentlemen, and welcome to the Dolphin Entertainment first quarter 2022 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's first quarter 2022 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrton O'Graney, Chief Financial Officer. I'd 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'd 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. So starting with the financials, Q1 revenue of $9.2 million represented a 28% increase year over year. This increase represents pure organic growth derived from the cross-selling of services within our supergroup of entertainment marketing companies. We feel this strong start to the year positions Dolphin to exceed $40 million in annual revenue for 2022. Commensurately, we continue to expect to generate a larger EBITDA profit in 2022 versus last year. Turning back to Q1, on the operating line, though our operating loss for the quarter ended March 31st, 2022 was $963,709. That includes non-cash items from depreciation and amortization of $407,238. It also includes nearly $440,000 in one-time investments related to our NFT business, and our marketplace is now completely finished. More on our upcoming NFT collections in a little bit. Finally, that Q1 operating number also includes approximately $400,000 of one-time non-recurring professional fee expenses related primarily to our annual audit, which was ultimately filed in May and Dolphin 2.0 initiatives. Even with those non-cash and one-time charges, Q1 was an improvement of over $600,000 from the from Q1 2021, which also included non-cash items from depreciation and amortization of $482,712 and changes to fair value contingent consideration of $365,000. Now I would like to move to the balance sheet. Let's stop and pause on this for a few minutes because this is possibly the most important point to make on today's call, something we didn't get a chance to do on the call after our 10K. Our balance sheet improvement is worth extra focus. At the apex of our acquisition strategy to build the super group, our debt reached a high of over $16 million. It has now reached a record low of below $6 million, $5.7 million to be exact. That is a dramatic reduction. Furthermore, the vast majority of our debt is long-term, and even so, the $5.7 million of remaining debt is far less than our cash on hand of $9.6 million. But that only tells part of the story. It's also extremely important to point out that all puts, all puts, and all but one earn-out contingent consideration has been paid from all six of our acquisitions. And we now have shareholders' equity of just under $25 million. This complete transformation of our balance sheet has allowed us to remove our financial statement disclosure ongoing concern, and we believe serves as a differentiating factor for us in the marketplace. Simply put, financially speaking, we have moved to the next milestone for Dolphin. No going concern, more cash on the books than all remaining debt, which is at the lowest amount it's been since we listed on NASDAQ in 2017, and almost all of the debt remaining is long-term anyway. All puts have been paid, all but one earn-out paid. Basically, we finished paying for the supergroup, and we can now look to building profits and diversifying our investments. At this point in our company's history, And continuing with our financial update, in June, we announced a change of auditor to Grant Thornton, LLP. Grant Thornton is a firm with more entertainment industry experience, providing professional services to 65% of Fortune 1000 companies in the media and entertainment space, 65%, and half of the major studios. Dolphin is growing, and we believe Grant Thornton best understands where we are heading and has the systems and procedures in place to ensure timely filing of queues in case. 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 Surefire Media, Dolphin's industry-leading music PR firm, which has had a great start to 2022, kicking off Q1 by once again helming the red carpet at the Bud Light Super Bowl Music Fest with three Knights of All-Star talent, including Green Day and Miley Cyrus, Blake Shelton and Gwen Stefani with Mickey Guyton, and Halsey and Machine Gun Kelly, as well as other special guests. Also, Surefire just announced the first dates and locations for Bruce Springsteen's 2023 World Tour. Hopefully, we'll see some of those listening to this call out there with the boss next year. And only sing along if you have a voice better than James Carbonara. Moving along to be social, Dolphins Influencer Marketing Group, it has been a busy start to the year that has included brand campaigns for red-hot Australian company Canva, iBuyDirect, and Light Stim with Kylie Jenner. while the talent management team has negotiated campaigns with blue-chip brands such as Prada, Revlon, L'Oreal, Paris, and Pinterest. Turning now to Viewpoint, Dolphin's respected creative agency and video production boutique, Viewpoint completed marketing videos and brand work for a wide range of clients in Q1, including NBC Sports Peacock, AAA, PayPal, and Harvard Business School. Finally, it's not a surprise that once again, 42 West and The Door were named to the Observer's annual list of 50 most powerful firms in the country. 42 West ranked number two in the nation, the highest ranking of any entertainment firm, and The Door was ranked number 22. Both have had a very successful start to 2022, with 42 West most recently helping longtime client Tom Cruise launch Top Gun Maverick to the largest domestic Memorial Day opening in history, grossing $160 million. The film has performed remarkably well this summer and has now passed $1.2 billion at the worldwide box office. For its part, The Door has also had a strong start to the year, already having landed the fast-growing plant-based quick-service restaurant Plant Burger in late 2021, a venture between longtime Door clients Spike Mendelsohn and entrepreneur Seth Goldman of Honest Tea fame. The door was brought on to launch Chef Spike and Goldman's newest venture, Eat the Change, a plant-based snack company. You might have seen the recent announcement by Goldman that he will bring Honest Tea back into the fold to Eat the Change after its discontinuation with Coca-Cola. With both of these brands, Plant Burger and Eat the Change, under the door's watch, the door is a major player in the movement of planet-friendly eating. Kudos to the door in 42 West, proving yet again why they are perennially on the Observer's most powerful PR company's list. That concludes my update on Dolphin 1.0, and it's the perfect segue into Dolphin 2.0. Because with Dolphin 2.0, we want Dolphin and its shareholders to have some equity in projects and participate in the upside that our best-in-class marketing companies routinely facilitate for our clients. That's why in December 2021, we took an equity ownership stake in a ready-to-drink beverage company called Craft House Cocktails, and why this past May we announced a multi-year agreement with IMAX. That's the thesis behind Dolphin 2.0, taking ownership stakes and assets that we know how to market. We just gave concrete examples that we know how to market ready-to-drink beverages and feature films. Now we have ownership stakes in both areas. 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. In terms of a business model, I'll remind you that 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 categories. Let's talk about that second type of Dolphin 2.0 investment first, when we take ownership stakes in other people's companies. I'll start with Craft House Cocktails, a pioneering brand of ready-to-drink, all-natural, classic cocktails. 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 have also received an ownership stake in the company in return for the added value of the services and relationships extended by the entire supergroup. With respect to these types of Dolphin 2.0 initiatives, we typically look to receive somewhere between 5 and 10 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 simply be paying it to ourselves. but correspondingly would 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 built. Let's start with Midnight Theater, a contemporary variety theater and restaurant that will be a true anchor for Manhattan West, the $4.5 billion development for Brookfield that's between 31st and 33rd and between 9th and 10th Avenues in Manhattan. Inside Midnight Theater, There is Hidden Leaf, which we just opened a couple of weeks ago, the newest restaurant concept from our partner, Brooklyn restaurateur Josh Cohen. Many of you know Josh's other restaurants, including Lilia's, one of the hardest to get into restaurants in America. And as an aside, a favorite date night spot of multiple celebrities, some of which we represent, as well as Chez Montant's. So Hidden Leaf is a drop-dead gorgeous standalone restaurant within Midnight Theater, and you would think it was straight out of The Great Gatsby. It is stunning with beautiful and timeless art deco design. The restaurant features a Pan-Asian menu created by executive chef Chai Trivedi, previously from Tamarind and Budokan for those foodies out there. I personally have too many favorites to name off the menu, but the dim sum and the small plates are out of this world. And also, Josh has recruited internationally renowned bartender Ian Griffiths, co-founder of the wildly acclaimed and influential London bars, Dandelion and White Lion, who is making his first permanent foray into the New York City drink scene with the opening of Hidden Leafs Bar and his street-level companion, a high-energy aperitivo bar, Midnight Cafe. By the way, if you're not familiar with those London bars, both of them have been ranked by many publications as one of the best bars in the world. As you can see, these are world-class talent in the food and beverage space to pair with what we believe will be a world-class venue in Midnight Theater, which we expect to be open for preview shows in August and with a grand opening in September. Dolphin is the largest single owner within Midnight Theater, and we 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 the entertainment and culinary industries. As we've mentioned before, We're hopeful that Midnight Theater creates a relatively straightforward or predictable range of modeling because even though it has two components, a restaurant and a theater, it has many of the variables already defined for the model. There are 100 seats in the restaurant and there will be 160 seats in the theater. So anyone can model out an average ticket price and the number of turns in the restaurant and do the same in the theater within an assumption of a number of shows per week. 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. You can quickly see how this opportunity can become very exciting for a company at this stage of Dolphin in 2022. We invested $1 million into the venture for a stake of approximately 12.5%. We also invested in options for up to another 20, approximately 25%. As you can tell, we're very excited for Midnight Theater. In success, of course, we will look to add locations around the country and around the world. Now I'll turn to NFTs. In the first quarter of 2022, Dolphin Entertainment launched our Web3 marketing, consulting, and communications agency, We Come in Peace, after attracting over two dozen NFT and metaverse clients within the past year. We didn't need to acquire an agency in the space. We already had the clients to launch the leading agency. In the first quarter, We Come in Peace partnered with celebrity chefs and restaurateurs Tom Colicchio and Spike Mendelsohn to develop Chefty, a collection of NFTs that provide owners with access to a culinary community led by the founders with virtual and in-person cooking events. The collection went on sale in March and quickly sold out. We Come in Pieces' partnership with Chefty will continue with the creation of a larger Web3 culinary ecosystem aimed at helping chefs, foodies, and brands integrate into Web3. We Come in Pieces quickly developed a full slate of metaverse-related clients and NFT projects, including ones with supermodel Bella Hadid and music industry mogul Troy Carter. Our summer slate includes drops of more than half a dozen NFT collections, and we look forward to updating you on our progress when we speak again in a few weeks for our Q2 earnings call. Lastly, our most recent Dolphin 2.0 initiative is the announcement I referenced earlier. Dolphin Entertainment has struck a multi-year co-production and distribution agreement with IMAX for a slate of documentary features. The first project we have greenlit is Blue Angels, developed and co-produced with renowned producer J.J. Abrams, and it's Bad Robot Productions, along with Zipper Brothers Films. Blue Angels follows the newest class of the storied Navy and Marine Corps Flight Squadron through intense training into their first season of heart-stopping aerial artistry, while also sharing the emotional stories of the veterans on the team who this year will take their final flights. It will mark the first time the iconic blue and yellow FAA Team Super Hornets will be featured in IMAX. The film is being shot with state-of-the-art IMAX cameras and will provide a truly unique view of these incredible pilots, as for the first time ever, audiences will be able to go inside the formation, inside the cockpit, and inside the helmet for a visceral adrenaline rush ride of a lifetime. Blue Angels is currently in production. and is expected to hit IMAX theaters in the second half of 2023. IMAX is simply best in class when it comes to the movie-going experience, and certain stories, like the Blue Angels, can only be enjoyed to their fullest potential if seen in the IMAX experience. We are tremendously excited by this partnership with the IMAX team as we work together to build a slate of unforgettable documentaries that need to be seen on the big screen. So there we are, for now, in the summer of 2022. In summary, we're extremely pleased with these first five Dolphin 2.0 initiatives, and hopefully today's conversation provided some additional detail. I would also like to reiterate that these 2.0 investments are on top of a growing 1.0 business. And most importantly for today, we are very proud of our balance sheet and expect it to be a differentiating factor for us in the quarters and years to come. All this was our thesis when we uplisted to NASDAQ in December of 2017 and began assembling the super group. It's fun to be where we are now, but as we've said before, we're only getting started. The best is still way, way, way ahead of us. Thank you for joining us on this ride and to walk through the financials. I'll now turn it over to Myrta Negrini, our Chief Financial Officer.