Dolphin Entertainment, Inc.

Good day, ladies and gentlemen, and welcome to the Dolphin Entertainment third quarter 2023 earnings call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, James Cabanara, Investor Relations. Sir, the floor is yours.

Thank you, Operator. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrtha Nagrini, 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 21 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 risks 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 statement 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 open it up for Q&A. So from a financial highlights perspective, Revenue for Q3 was $10.2 million, or an increase of 3% year over year. I'm very proud of the team at Dolphin, which achieved this increase in revenue despite enduring two prolonged industry-wide strikes and the distraction of an internal merger for essentially the entire quarter. On the bottom line, our Q3 operating loss of $2.1 million includes approximately $1.2 million in non-cash charges. Thus, the cash operating loss was approximately $900,000. We believe if it were not for the impact of the two strikes and the one-time costs associated with the internal merger of our influencer marketing subsidiaries, BeSocial and Socialite, to create the digital department, we would have achieved a cash operating profit in Q3. And that would have been without the benefit of special projects, which we acquired at the start of Q4. Thus, going forward, once the industry resumes normal operations post-strikes, and with the addition of the revenues and profits of special projects, we expect to have consistent cash operating profits. The effects of the strikes will be felt into Q1, as many movies and TV series have already been pushed out of 2023 and into the spring and summer of next year. But make no mistake, the industry is excited to get back to work, and Dolphin has not been sitting idle. Quite the contrary, as we have achieved the following highlights all since our last earnings call in the middle of August. First, as I just mentioned, we created a market-leading influencer marketing agency, the Digital Department, by merging BeSocial and Socialite. Second, we hosted the grand opening of Midnight Theater, now open seven days a week, and signed our multi-year partnership with Blue Chip Marketer MasterCard. And third, we completed our seven-year journey to build an entertainment marketing earned media supergroup with the acquisition of the best-in-class talent booking and celebrity live event firm Special Projects. We believe each of these is a catalyst for our company in its own right, and I'll spend a few words on each. And as an aside, on a personal note, I can unequivocally say that this run post-Labor Day has been the busiest period of my entire career, just one big-ticket item after another. Okay, so first, the merger of BSocial and Socialite to create the digital department. I'll be brief on this topic since we alluded to it coming in September at length during our Q2 earnings call. The short-term pain of management distractions and both cash and intangible costs are all behind us now, and we've assembled a beautiful company that is a platform for us in the fastest-growing area of marketing that we know. The launch events we hosted for our talent and brand partners in New York and Los Angeles were nothing short of electric. The New York event was at Midnight Theater, I might add. The incoming calls to work with the digital department are exactly what we hoped for, and the excitement about its expansion prospects is palpable. There's just tremendous momentum, both internally and externally, around building what we think will be the flagship influencer marketing agency in the country out of the entertainment space. Simply put, the digital department will be a strong growth catalyst amongst our core businesses as we add new verticals of expertise. Right now, we are market leaders in female-focused fashion, beauty, wellness, and lifestyle products, with Instagram as our major platform of choice. We have several well-known reality television personalities on our roster of more than 200 exclusive talent. From this base, we plan to expand to include several new verticals, such as sports, culinary, teens, and young adults, reaching broader audiences on both TikTok and YouTube to complement Instagram. Just the sports vertical alone could, in success, we believe, grow to be as big as our entire business today. Much more to come on this in the quarters ahead. Next, I'll turn to Midnight Theater. As a reminder, Dolphin manages all aspects of publicity and marketing for Midnight Theater, and its restaurant, Hidden Leaf, while also facilitating talent and commercial relationships within the entertainment and culinary industries. Dolphin also holds a meaningful ownership stake in the venture. The headline here is our new multi-year partnership with MasterCard. Obviously, this is the bluest of blue-chip partners for any performance venue. Guests will have the opportunity to partake in new immersive experiences, exclusive events, special discounts, all tailored exclusively for MasterCard cardholders. Moreover, the venue will now be known as MasterCard Midnight Theater, with the financial industry powerhouse's name prominently featured. We are confident that this long-term support from such a prominent player in the financial industry substantially elevates the intrinsic value of this cutting-edge destination. For anyone new to Dolphin, Midnight Theater is located in Manhattan West in New York, between 9th and 10th Avenues. The same streets between 31st and 33rd, like Penn Station or Madison Square Garden, just one avenue over, and it's inside Brookfield's $4.5 billion complex, the largest in Brookfield's history. We are the only entertainment venue there. We have a theater and a restaurant on the same floor, all under one roof, if you will. We went to seven days a week, four days after we merged the influencer agencies, and 11 days before we acquired Special Projects. with a full programming schedule and events throughout the fall. And we've already started booking 2024, which includes internationally renowned magician Joshua Jay, who is bringing Look Closer, a new magic show, to Midnight Theater in February. He'll be performing 16 shows, including two shows on Valentine's Day. I'm going to highlight this particular show because of the quality of the performer who is looking to call Midnight Theater home. So Joshua returns to New York City four years after his critically acclaimed show, Six Impossible Things, sold out its entire 18-month off-Broadway run. As a magician, Joshua Jay has performed his original work on The Tonight Show with Jimmy Fallon, The Late Show with James Corden, and even successfully fooled Penn & Teller on Fool Us. I can hear James Carbonara multitasking and pulling up midnighttheater.com to buy Valentine's Day tickets right now, Let's just say I'm happy for Mira and his lovely wife who doesn't have to plan it this year. Okay, so now we're up to the acquisition of special projects. This company is very special to all of us at Dolphin since it represents the culmination of that seven-year journey to build our entertainment marketing supergroup. What began with a speech at LD Micro in December of 2016 and was followed by the acquisition of 42 West on March 30, 2017, and the uplisting to NASDAQ in December of 2017, one year after the speech at LD Micro, has now finished after buying one company a year since, with two in 2018, I should add. And it would be hard-pressed to think of any company more strategic for our group than Special Projects. So first, some particulars. Special Projects was founded by Nicole Vecchiarelli and Andrea Oliveri, two former magazine editors who met working at Condé Nast. They have built the entertainment industry's go-to talent, booking, and celebrity-curated live event company, period. They have offices in both New York and Los Angeles and simply handle a wide variety of signature events, from the Wall Street Journal's Innovator Awards held at the Met every year, with this year's honorees two weeks ago including Martin Scorsese and Kylie Jenner, among others, to the Motion Picture Academy Museum Gala in Los Angeles coming up in a few weeks and set to honor Meryl Streep, Oprah Winfrey, Sofia Coppola, Michael B. Jordan, along with a few surprises. Too bad they couldn't get any big names, right? Their client list is A++, from retainer clients like Apple and Chanel, to project-based clients like A24, Amazon, the Apollo Theater, Bumble, GQ, Louis Vuitton, Max Mara, Meta, Netflix, Stella McCartney, Versace, Yves Saint Laurent, and YouTube. Anyone who has heard our story before today knows that ideating and executing world-class events is a big part of Dolphin's future. First, let's just take a look at our core business. Just with the business that our PR firms are already doing, we have so many opportunities for cross-selling. Every movie or streaming series that 42S is promoting is a potential candidate for a premiere event handled by Special Projects. Every hotel or restaurant opening that The Door is promoting is a potential candidate for a launch event handled by Special Projects. Every single or album drop that ShoreFire is promoting is an opportunity to create a release party handled by Special Projects. Any consumer product being handled by any one of our PR firms is the potential beneficiary or sponsor of an event handled by Special Projects. Oh, by the way, this is an immediately accretive acquisition for us. Special Projects is a very well-run, profitable business with a great margin and we think we can grow them very well in the next 12, 24 months with all the synergies I just mentioned. And when we look at Dolphin Ventures, we talk about receiving ownership stakes in exchange for our services and promoting three categories of assets, content, consumer products, and live events. Thus, ideating and executing world-class events is a big part of Dolphin's future, and adding special projects immediately catapults us into the industry-leading positions. And needless to say, after hearing that client roster, the reputations and relationships of Andrea and Nicole in our industry are simply unmatched. So Andrea, Nicole, and Special Projects have finished our super group. I've talked about how to sum. This may seem like it's a finish line. For us at Dolphin, we see it as the starting line. We now have our full team assembled. And by the way, eight acquisitions, from only eight offers. What's that tell you? We got our first choice of companies in every vertical of entertainment marketing we want to be in. We've assembled our dream team. Now we're excited to show what we can do together. With these accomplishments, we believe Dolphin is in its strongest position in company history with highly diversified revenue sources across seven operating subsidiaries and expectations of cash operating profits in 2024. As we look ahead to next year, a landscape of promising opportunities within Dolphin Entertainment and Dolphin Ventures awaits, beginning with the release of and the revenues from the Blue Angels, the first project in our multi-year agreement with IMAX. Also, we believe the aforementioned multi-year partnership with MasterCard and Midnight Theater validates our investment by indicating the value placed on our venue by the market. Both our IMAX partnership and our Midnight Theater venue are just getting started. And each of them are ahead of other Dolphin Ventures that we are equally excited about and are working hard to realize in 2024. In short, we believe we've weathered the unique storm of this past summer and early fall. Looking ahead, after successfully navigating these temporary headwinds and after our successful at-the-market raise, no discount, no warrants, of two weeks ago, we find ourselves on stable footing and with the full amount of our targeted cash reserves. We are very confident in our sustainable path forward. We believe that this sends a strong message to a current microcap market, which we expect will reward positive free cash flow, underlining our strategy for creating significant near-term shareholder value. With that said, I'll turn it over to Meredith.