Dolphin Entertainment, Inc.

Greetings. Welcome to the Dolphin Entertainment fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, James Carbonara of Hayden IR. You may begin.

Thank you, operator. With me on the call are Bill O'Dowd, Chief Executive Officer, and Myrtha Negremi, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor Statement. Please note that statements made on this call are not historical facts, excuse me, that are not historical facts, may be forward-looking statements. Significant risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements are detailed in the company's annual report on Form 10-K, and supplemented by subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company has filed with the SEC. Any forward-looking statements made on this call are made only as of today's date, and the company does not undertake any obligation to update or supplement any such statements to reflect subsequent developments. Now, I would like to turn the call over to Bill O'Dowd, CEO of Dolphin Entertainment. Bill, please proceed.

Thanks, James. That was the shortest safe harbor statement you have ever read in your career. I know people are hoping you'll come back at the end of the call. Hi, everyone. Good afternoon. 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 Q4 was a record $12 million, quarterly revenue record for Dolphin Entertainment, an increase of 8% year over year. I'm immensely proud of the Dolphin team. They managed to achieve its best revenue quarter ever despite enduring two prolonged industry-wide strikes. Even more impressively, on the bottom line, the team delivered positive adjusted operating income of $300,000 in the face of such headwinds. This is very important to note, so I'm going to pause here and add that adjusted operating income is the primary metric by which we measure our business. It's what I look at first in any P&L I receive from Mirta. We define adjusted operating income as our operating income or loss after removing any non-cash or non-recurring income or expenses. In other words, if you go to our reported operating income or loss and back out all non-cash and non-recurring items, how did we do? Reporting positive adjusted operating income is extremely gratifying, obviously. And now that we have our supergroup complete with the acquisition of special projects and with our expectation of continued synergies and organic growth, combined with the launch of our ventures in earnest, we believe that we will continue to have and expand positive adjusted operating income on a continuous annual basis. Very exciting. And it's good to share with everyone how we look at our business and the metric even if it's a non-GAAP metric that we use. So speaking of special projects, I know we discussed the acquisition at length on our Q3 call, but the transaction did happen in Q4. So just a couple of more bullets on them. As a brief refresher, I'll just point out the special projects founded by the amazing industry leaders, Nicole Vecchiarelli and Andrea Oliveri. is a leading agency in talent booking and celebrity curated event production with offices in Los Angeles and New York. Their impressive client roster includes top brands like Apple, Chanel, Condé Nast, Wall Street Journal, among many, many others. With this strategic addition, Dolphin aims to launch or partner on our own live events, as well as capitalize on cross-selling opportunities and synergies across our various companies. And speaking of our other companies, I'll now turn to some operating highlights. 42S helped clients secure four wins at the 96th Academy Awards and received two dozen nominations while boosting global interest for The Boy and the Heron and Godzilla Minus One. I'm going to go off script for a second because I just got to give a public round of applause to the 42S movie promotion team. The Boy and the Heron was a tremendous success. achievement to win an Oscar in the animated motion picture category. I don't know if that's the first time or must be one of the first times that a movie that wasn't American won that category. To beat out Spider-Man animated movie was a real achievement. Congratulations to that 42S team. And a separate team was promoting Godzilla Minus One. Best Visual Effects Oscar is what they won for. That entire movie had a budget of $15 million. And I think every movie they were competing against had a visual effects budget of bigger than $15 million. Tremendous job getting the Academy to see the movie and promoting the highlights of the visual effects. Excuse me. So great job, 42 West. Moving to Shorefire. Shorefire, which also continuously does great elite PR work, represented clients who collectively received nine Grammy Awards. and over two dozen nominations across various categories, showcasing its roster's diversity in multiple genres. At major industry events that recognize both film and music, each of 42 West and Shorefire Media regularly represent their clients. This was evident in Q4 and year to date, with both agencies orchestrating over half a dozen PR campaigns for clients at the 2024 South by Southwest Film Festival a couple weeks ago, and they also achieved notable success at the 81st Golden Globes, contributing to clients securing multiple awards and receiving over a dozen nominations. Love it when our agencies work together and have success at award shows like that. The Door, switching to them, celebrated eight consecutive years representing the Food Network New York City Wine and Food Festival, presented by Capital One. Additionally, they added new client, Giadzi, from Giada de Laurentiis, an Emmy award-winning A television personality, a New York Times best-selling cookbook author. What does she do? Restauranteur, entrepreneur. They added Giazzi and Giada to its growing roster of elite culinary clients and lifestyle brands. Special shout out to Charlie and Lois who will come up on this call. Okay, now let's talk about the digital department. I pointed out in our letter to shareholders in January that this will be the subsidiary of Focus for expansion during the next few quarters at least. We believe that there is such an opportunity in the marketplace to establish the first fully scaled influencer management company with the ability to service brands and creators of all age groups on all major social media platforms and in a variety of specialties. To that end, we had two major announcements in Q1. First, the digital department brought in the influencer roster of Glolab to introduce a specialized talent management division catering to skincare experts, and dermatologists led by Glow Labs founder Susan Yara. Susan is an extremely successful skincare influencer herself with her own YouTube channel, and she is also founder of Naturium, a skincare product line which was sold for the low, low price of $355 million to e.l.f. Beauty in September 2023. I point that out because part of the strategy of inviting Susan and her roster to join the digital department is to help us conceive and develop partnerships to launch skin care products in which we have an ownership stake. Obviously, Susan had a very successful exit herself in just over three years. In other words, Noturium launched in June of 2020, June of 2020, and was sold in September of 2023 for $355 million. It's also worth mentioning that Noturium's marketing during those three years was almost exclusively influencer marketing and PR, both of which are obviously strengths of Dolphin. I'll dispel any myth, we did not enter into the agreement with Susan to put James Carbonara as the face of a new skincare product line, but we are excited to launch skincare products. In addition to bringing in Glolab, the digital department also established a young adult division, a YA division as we call it, in partnership with the Osborne Agency. This was also a highly strategic move for us. You probably saw the announcement in February. Glolab was back in January. It immediately enhances our reach across TikTok and YouTube to complement our current strength on Instagram, and it launches an entirely new age group of influencers for us, teens and young adults. We did so in partnership with the Osbrink Agency, which is Hollywood's premier talent agency for that age group. Cindy Osbrink, someone I'm proud to call a friend, the founder of the Osbrink Agency, is nothing short of a legend. having launched the careers of hundreds of young actors over the past 25-plus years, including Dakota and Elle Fanning, and literally dozens of lead actors across Nickelodeon, Disney Channel, and feature films. Unlike 25 years ago, or even more recently when we were producing movies and series for Nickelodeon, there is now a thing called social media. I'm joking, of course. I'm sure you've heard of it. And so many of those same talented teenagers and young adults of today are have TikTok feeds and YouTube channels of their own. Simply put, we want to represent them and we want to introduce them to brands. And by partnering with the Osbrink agency, we just saved years of development time for that division and went from zero to 60, maybe even to 100 in the snap of our fingers. We announced the partnership, as I said, last month, and we already have more than three dozen of these young, talented social media stars on our roster. and we can't wait to introduce them to our existing brand partners and to new brand partners we will meet who will want to reach this important demographic. Viewpoint Creative announced an extensive partnership with the Massachusetts State Lottery, specializing in digital graphic design and animation services, and they also received, congrats Dave and the team, four Muse Awards for extraordinary craft that shapes compelling narratives and leaves a lasting impact on audiences. And finally, special projects hit the ground running at Dolphin, partnering with the Academy Museum of Motion Pictures for its third annual gala and continued collaborations with the Wall Street Journal Magazine's Innovator Awards, great job booking Travis Kelsey again, and his talent booking partner and entertainment consultant for Town & Country's annual Philanthropy Summit, which I attended, by the way, going off script again, and a special shout out to Charlize Theron and the great work she's doing in her native South Africa. It was very impressive. They also collaborated with Chanel, Gucci, and Valentino on their respective boutique openings and events during New York Fashion Week in February, as well as an entire slate of events during Oscars week, which we'll highlight on our Q1 earnings call in six weeks. We've got to save something, right? Shifting gears, I'll now provide updates on some of our ventures in which Dolphin and its shareholders participate. So I'm going to turn first to Blue Angels, because what a week for that, right? As some may recall, Dolphin entered into a multi-year agreement to jointly finance the development and production of a slate of feature-length documentaries for the global market. The first project Greenlit was the Blue Angels. We announced it a couple years ago at the Cotton Film Festival. Developed and co-produced by JJ Abrams and his company Bad Robot Productions and Glenn Zipper and his company Zipper Brothers Films. We then announced that Amazon Studios had acquired worldwide rights to the Blue Angels. wherein we expected to generate approximately 3.75 million to Dolphin from the acquisition agreement, which would result in 75% ROI before the inclusion of any revenues to Dolphin from the ticket sales from IMAX institutional theaters, providing powerful validation for our model of also taking equity in projects we market. We're very excited for this film. It has turned out great. And so are our partners. Amazon secured an exclusive trailer debut and promotion on the Today Show last Wednesday. Thank you, our partners at Amazon. Very well-reviewed clip. That type of promotion, by the way, for those curious, that is extremely rare for a documentary. I just ask any of you, when was the last time you saw a trailer drop for a documentary on a morning show? When you remember, please let me know. And let me tell you, the trailer has been a hit. Over 1.7 million views occurred in the first 24 hours. And as of today, a week later, we're over 9 million views. I believe this has to be one of the highest totals, if not the highest total, for a documentary feature in the 28 years I've been in this business. And of course, it does not count the number of times the trailer has been viewed ahead of movies and theaters. IMAX has placed the trailer ahead of Ghostbusters in many locations this past week, and it will be ahead of the Godzilla King Kong movie that premieres tonight in many locations across the country as well. This precedes the beginning of an exclusive run in IMAX theaters starting May 17th. What are you doing May 17th? I hope you're going to the movie theater, seeing Blue Angels. It's a Friday. You'll love it. With availability for streaming on Prime Video beginning May 23rd, right ahead of Memorial Day weekend. Our success with Blue Angels is the result of a deliberate strategy to create event documentaries on subject matters you want to see in IMAX theaters. Putting an IMAX camera in a fighter jet cockpit and literally seeing the neighboring jet only 12 inches away, I cannot describe it. Fingers crossed we think we have something special. And the importance of a theatrical release and enhancing a film's value for streaming platforms cannot be overstated. given the pre-established audience awareness a theatrical release provides. Our deal with IMAX is significant for two main reasons. Firstly, it laid the groundwork for the robust streaming sale, which has been extraordinary. Secondly, there's an annuity benefit due to IMAX's ownership of theaters and museums, and generally institutional theaters, as we call it. We are eligible to showcase our film in IMAX institutional theaters six months after it premieres on Amazon. This means that as of November 23, the film can be presented at the Smithsonian Aviation Museum and an additional 150 theaters across America. This arrangement creates a steady income stream and annuity, which is quite remarkable. I wanted to make sure everyone understands the significance of this. In terms of financials, we retain a high percentage of ticket sales, roughly 25%, since there's no distributor involved. For instance, in a theater with 200 seats, each ticket sold at $10, that's $2,000 in revenue, from which we would earn $500. That's just from one showing in one theater, and there are 150 theaters in the country, 365 days in a year. So considering the film's potential to run for part of or the entire year in various museums, this is expected to continue for the next decade or two to come, given the scarcity of this type of content in institutional venues. Furthermore, with the version of the film being shown in institutional theaters being only 44 minutes long versus the normal 90 minutes that we'll have on May 17th in traditional theaters, we can fit in more showings per day. These details are crucial for stakeholders to understand the financial implication. You might ask, what's the value of the movie in institutional theaters? And while it's challenging to specify an exact figure, We anticipate this could generate hundreds of thousands of dollars annually, if not more, contributing directly to the bottom line since the film has already recouped its investment. So in addition to the 75% ROI from the streaming sale and our participation in ticket sales from the initial theatrical run beginning May 17th, we also gained this annuity with the post-streaming run beginning in November. Very excited for Blue Angels, and if you haven't seen the trailer yet, I hope you get a chance to check it out online right now. Switching gears to MasterCard Midnight Theater. For those unfamiliar, MasterCard Midnight Theater is a state-of-the-art contemporary variety theater and restaurant experience in the heart of Manhattan, in a neighborhood dubbed Manhattan West. Dolphin is the managing member in the venue and is responsible for the marketing of both the theater and the accompanying restaurant. We have a meaningful ownership stake in MasterCard Midnight Theater as well. And it's been very gratifying to see the venue attracting high-profile events and partnerships with major brands like MasterCard. The star-studded premieres with Jessica Chastain, Pete Davidson, Kaley Cuoco, and Kevin Durant showcase the theater's ability to draw top talent and create exciting synergies with our PR firms. However, since our grand opening last September, and especially in the typically slower first quarter period, operations across the restaurant, the cafe, downstairs, and the theater have not met our expectations and it's well understood that without a profitable restaurant, it's challenging to make the venue successful. So we have prioritized our search for a new operator with a new restaurant concept that can best attempt to revitalize the space going into the key summer and fall seasons. While there's no assurance that any deal will close, we have identified the group that we would like to bring in and we are working hard to close the deal in the next few weeks. Acknowledging the challenges of past six months and facing the uncertainty brought about by this potential change or whether we can make a change at all, we decided to impair the asset value we had on our books viewing it as an opportunity to reset and potentially avoid future financial overhangs. Turning to our newest venture, we are proud to share that Dolphin Entertainment has partnered with renowned culinary personality and client Rachel Ray and the esteemed Do Good Spirits Distillery to launch Staple Gin. This collaboration brings together Rachel's culinary expertise, Do Good Spirits craftsmanship, and Dolphin's marketing prowess to create a unique and promising addition to the spirits market. Staple gin is the result of Rachel Ray's passion for creating flavorful experiences and her decades of culinary knowledge. The botanical recipe, developed by Rachel herself, promises a balanced and intriguing flavor profile that reflects Rachel's signature style. Our subsidiary, The Door, which has represented Rachel Ray since 2008, and Charlie and Lois have worked with her since 2005, has been instrumental in bringing this project to life. The DOORS team has leveraged their extensive experience in marketing wine, spirits, and consumer packaged goods, as well as their longstanding relationships with culinary personalities and restaurants, to contribute to all stages of Staple Gin's development. From branding to marketing, PR, and trade relations, the DOORS played a crucial role in positioning Staple Gin for success. To generate buzz and anticipation for the launch, Staple Gin made its first public debut at two prestigious events, the New York City Wine and Food Festival, and the South Beach Wine and Food Festival. Rachel Ray herself was present at these events pouring sips for attendees while do good spirits mixed up with staple gin cocktails. The response from those who had the opportunity to taste staple gin has been overwhelmingly positive, further validating our confidence in this new venture. Staple gin is set to come to market here in Q2, initially in New York State at bars, restaurants, and retail destinations with plans to expand to additional markets in the future. We are thrilled to be part of this collaboration and to utilize the full range of marketing and PR capabilities that Dolphin Entertainment offers. We believe that staple gin has the potential to become a staple, no pun intended. That was too easy, right? In home bars and a go-to choice for classic cocktails like the gin and tonic or a perfect martini. We are incredibly excited about the potential of staple gin and our partnership with Rachel Ray. She was just absolutely lovely. As you may know, celebrity-backed spirits brands have seen tremendous success in recent years. Just look at the example of Ryan Reynolds' Aviation Gin, exit of more than half a billion dollars, and George Clooney's tequila brand, which sold for a billion. Moreover, it was reported last month that the potential value of Dwayne The Rock Johnson's Terra Mana tequila may be significantly higher, since it is moving over 170,000 cases per month, which is a staggering number. Good for him. So if you can see, in success, big numbers are possible with celebrity-backed lookers. May we be as lucky. While we can't promise the same results, of course, we believe we are playing in the same space and have the marketing expertise to give StapleGen the best possible chance for success. And I just want to add that our fantastic team at the door, and again, Charlie really spearheading this, has its own share of experience and success stories in the space. working with liquor brands from creation through successful exit, including recent examples of Jefferson's Bourbon, which sold to Pernod Ricard in 2019, and 21 Seeds Tequila, which sold to Diageo in 2022. So we're not exactly foreign to the journey. And as many of you know, our company is always looking for innovative ways to leverage our marketing experience and expertise and create value for our shareholders. The Stapleton partnership is a perfect example of this strategy in action. And I want to emphasize that this venture, like many of our other ventures, does not require any capital expenditure from Dolphin. We anticipate this will be the first of many ventures in the alcoholic beverage phase for Dolphin, and we expect to pursue similar deal structures in the future, where we provide our marketing services in exchange for a share of the upside without capital investment. As we continue to pursue these types of ventures, we believe the economic benefits of Dolphin will be substantial. We look forward to sharing more details on the StapleGen partnership and our other upcoming ventures in the spirit space. We believe this is an exciting new area of growth for Dolphin, and we are well positioned to create significant value for our shareholders through our marketing expertise and innovative deal structures. There will be much more to come on StapleGen on our Q1 earnings call. Okay. Those are some highlights about our ventures division and circling back then. In summary, in Q4, Dolphin Entertainment achieved record quarterly revenue of $12 million and positive adjusted operating income of $300,000, despite the impact of twin industry strikes for the first time in over 60 years. All of our subsidiaries secured high profile clients and partnerships, and we also acquired special projects. That's the highlight of the quarter for me. which completes the original vision of what we now call the Super Group. And lastly, with special projects added to the fold, we have positioned the company and our shareholders for upside from all three categories of Dolphin Ventures, content, consumer products, and live events. The first piece of content, the Blue Angels documentary, hits theaters in six weeks. and is already profitable from our sale of streaming rights to Amazon Prime, where it debuts on May 23rd, as I mentioned. For the consumer product category, we have Staple Gin hitting the market here in Q2, and we couldn't be more excited. And for the live events category, we are actively ideating with special projects, Nicole and Andrea, and expect to be able to announce the idea for our first owned event by the end of this year or in early 2025. All of these ventures will leverage our marketing expertise, and we expect the majority of them, like StapleGen, will not require capital investment from us. So for all of these reasons, Dolphin Entertainment is well positioned for growth and success, we believe, focusing on creating shareholder value through innovative partnerships and deal structures, while running a sustainable operating company focused on generating increasing adjusted operating income. Thank you for your continued support, and I'll now turn it over to Mirtha.