Dolphin Entertainment, Inc.

Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. James Carbonara of Hayden IR. Sir, you may begin.

Thank you, Operator. Good afternoon. Before we begin, I'd like to remind everyone that during the course of this conference call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events. Please refer to the cautionary text forward-looking statements contained in the earnings release published earlier today, as well as the most recent SEC filings and reports. During the call today, management will also discuss non-GAAP financial measures, including adjusted operating income or loss. The company believes that these will provide helpful information for investors. reconciliation to the most comparable gap measures are provided in the earnings release. Now, I would like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin. Bill, please go ahead.

Thanks, James, and welcome, everyone. As usual, I'll start by reviewing some of the key financial and operating highlights from our first quarter, and then Merita will provide a more detailed financial overview before we open it up for Q&A. So, starting with the financials, While total revenue came in at 12.2 million for the quarter compared to 15.2 million a year ago, it's important to remember that last year's Q1 included a significant contribution of 3.4 million from our Blue Angels documentary. If we set that aside, our core entertainment publicity and marketing revenue actually grew 2% year over year, which is a testament to the underlying strength of our platform, especially as we manage through the lingering impact of the LA wildfires and a correspondingly lighter award season. We believe that the fires impacted our 42 West and Special Project subsidiaries most significantly. Fortunately, the impact of the fires was limited to Q1 for us. And on a personal note, we are very fortunate that none of our team lost their homes to the fires as we continue to give our thoughts and prayers for many of our industry colleagues who are not so lucky. On the bottom line, our adjusted operating loss was approximately 600,000, very comparable to last year if you backed out the movie as well. Obviously, any lost revenues from the impact of the fires flows through to our bottom line, and we believe this is measured and contained. Result demonstrates that our cost discipline remains intact, even as we make strategic investments for future growth. Speaking of investments, I want to highlight two areas where we've made strategic investments in Q1. First, we're big believers in the future of women's sports. Our women's sports management firm, Always Alpha, co-founded by the incredible Allison Felix, has taken a leadership role in this multi-billion dollar and rapidly growing market. Our new partnership with Deep Blue Sports and Entertainment now positions us as the largest and most comprehensive management firm in the women's sports space. We marked this milestone in style by ringing the NASDAQ closing bell on International Women's Day alongside some of the most inspiring women in sports. That was an extremely fun moment for Dolphin and really brought the momentum we were feeling to life. We now represent more than a dozen female athletes and sportscasters, including several Olympians, in addition to Allison herself, of course. We will continue to invest in this business throughout 2025. We want to expand into women's soccer and basketball with dedicated management teams for each of these two most popular women's sports in the United States. In doing so, we would expect that our active roster of represented athletes and sportscasters will double by the end of the year. Second, Our digital department has officially launched a dedicated affiliate marketing division. As the influencer economy continues to grow and evolve, affiliate marketing is quickly becoming one of the most important revenue streams globally, now estimated at over $17 billion. By building out this vertical, we're one of the rare agencies able to offer every major influencer marketing revenue stream under one roof, making us a true one-stop shop for creators and brands alike. And just like with Always Alpha, we will continue to invest in this area. We have two dozen influencers on our affiliate roster today, and we expect to more than triple that number by the end of the year. In order to achieve this growth, we will be hiring affiliate managers at a steady pace throughout the rest of the year. As you might expect, we believe that these investments in Always Alpha and the affiliate marketing division of the digital department will pay increasing dividends for us in 2026 and beyond. both in revenues and profits. Turning to the incredible work our agencies have delivered this quarter, 42S had a fantastic showing at Toy Fair. They championed the clients at both the Sundance Film Festival and the South by Southwest Festival, as well as the Oscars, and drove major campaigns at the Super Bowl, including bringing Wayne Brady and Purdue's Winging It campaign to life and increasing media buzz for the Puppy Bowl and DC Studios. Puppy Bowl being James Carbonara's favorite aspect of Super Bowl Sunday. And he's just a longtime supporter of the Puppy Bowl. We're big supporters in general. Surefire Media saw its clients win big at the Grammys, celebrated longtime client Cindy Lauper's induction into the Rock and Roll Hall of Fame, Go Cindy, and orchestrated memorable Super Bowl moments from Trombone, Shorty, and Lauren Daigle's pregame performance, which was awesome, to Fred Minnick Live and campaigns for Dove, Uber Eats, and more. The Door continued to cement its authority in culinary and lifestyle branding, unveiling a major new chef roster, and running creative Super Bowl campaigns itself, like Not So Fast, Not So Furious with Vin Diesel and Friends. Those friends include Michelle Rodriguez and Ludacris. It was a fantastic commercial. Plus the cross-country Daz Drive activation, excuse me, for Haagen-Dazs. The team at The Door just continues to crush it. A lot of, as you can see, Super Bowl activations for our PR firms. Speaking of our PR firms, Elle, our newest addition to the Dolphin family, serviced over two dozen clients across both its lifestyle and impact divisions, and it's just doing great work. The digital department set a new record with our highest grossing brand edit influencer experience in LA this past month, and as mentioned earlier, kicked off the new affiliate marketing division, expanding our reach in the creator economy. And finally, special projects strategically brought together top celebrities and cultural influencers for Max, Warner Brothers, and Louis Vuitton events, among many others I might add, enhancing brand impact and resonance. On the content side, the Blue Angels collected another industry award for sound editing and returned to IMAX theaters with a stunning new 3D version in January. Our Youngblood feature adaptation has now completed principal photography and is tracking toward a fall festival debut. We're excited for Youngblood very much. All of this activity has not gone unnoticed. We were honored to be named Agency of the Year by Observers 2025 PR Power List, a major milestone that validates our strategy and the depth of talent across all our agencies. And on a personal note, I continue to put my money where my mouth is. I see tremendous upside in our shares, and I've started weekly purchases through a 10B51 plan, which began in the first week in April after we filed our 10K. I believe our current valuation does not reflect the strength of our team, our brands, or our long-term growth prospects. Looking ahead, we are building on a powerful foundation with clear leadership in high-growth categories. We believe that our investments in women's sports and affiliate marketing are broadening our addressable market, and will provide sustainable growth opportunities for us for years ahead. As we stay focused on execution and innovation, I'm confident that 2025 will be another year of progress for both our clients and our shareholders. With that, I'll hand it over to Mirta for a deeper dive into the financials. Then we'll open it up for your questions. Mirta?

Thank you, Bill, and good afternoon, everyone. Let me walk you through our financial results for the first quarter ended March 31st, 2025. Total revenue for the quarter was $12.2 million compared to $15.2 million for the same period in 2024. As Bill noted, the year-over-year decrease is primarily attributable to last year's Blue Angels production revenue of $3.4 million. Importantly, if we exclude last year's one-time film production revenue, our core entertainment, publicity, and marketing segment revenue grew 2% year-over-year to $12.1 million. demonstrating the underlying health and resilience of our agency businesses despite the impact of the Los Angeles fires and lighter award season winds. Operating expenses for the quarter were $13.9 million compared to $15.1 million in Q1 2024. This included depreciation and amortization of approximately $600,000 and non-recurring or non-cash expenses of $600,000. Our operating loss for Q1 2025 was $1.8 million compared to operating income of $200,000 in the prior year period. Adjusted operating loss was approximately $600,000 for the quarter as compared to adjusted operating income for the same period and prior year of $1 million. If we reduce the revenue of $3.4 million and the amortization of capitalized production costs, of $1.8 million of the Blue Angels for the first quarter of 2024, our operating loss would have been approximately $600,000, comparable to the first quarter of 2025. Net loss for Q1 2025 was $2.3 million, including $600,000 in depreciation and amortization and approximately $600,000 of non-cash or non-recurring expenses. This compares to net loss of $300,000 for Q1 2024, including $600,000 of depreciation and amortization and $300,000 of non-cash or non-recurring expenses. Net loss per share was 21 cents per share based on 11,162,026 weighted average shares outstanding for the first quarter of 2025 compared to a net loss of 4 cents per share based on 9,238,913 weighted average shares outstanding for basic loss per share and 9,302,851 weighted average shares outstanding for fully diluted loss per share for the first quarter of 2024. With that, I'll now turn it back to the operator to open the floor for questions. Operator, would you please pull for questions?

Thank you. At this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question key, and you may press star 2 if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Thank you. We have a question from Alan T. with Maxim Group. Your line is live.

Yes, hi. In Always Alpha, you talked about potentially doubling the roster by the end of the year and adding soccer and basketball. A couple of things. Talk about how it works when you grow in terms of how to think about would you have to invest ahead of time versus the revenue potential, and then how to think about the opportunity in this segment. Thank you. Sure.

Yeah, similar businesses that we're expanding here with the affiliate marketing at GDD, which I may be anticipating your next question too, Alan, but on Always Alpha, you know, managers that will help you sign new talent. We've been signing at a very steady pace since we launched the company in October. Very proud of the roster that's been built by Cosette and Allison primarily, Allison Felix. And they've done a great job bringing in talent. So now to expand and keep going, you need more managers. And we're looking at managers that would be in those verticals of soccer and basketball because we've built a really nice practice of clients with the Olympics, Olympians, excuse me, and sportscasters. And typically, when you bring in an experienced manager, we can go recruit talent, athletes in this case, who want to be managed by us and have us bring brand deals. You know, there's a lag between um you saw you know you bring in a manager they'll sign talent they'll start signing talent hopefully week one right um month one certainly um and we can help them recruit that talent then they'll start making brand deals and we'll bring brand deals to that talent and then typically in these types of endorsement deals it's a little bit of a slower turn than an influencer marketing so you could sign a brand deal to say get a athlete X going to the Winter Olympics to be sponsored by Delta Airlines, and they'll run a campaign in Q4 of this year and Q1 of next year, as an example. Well, you know, so that's all well and good. And then, of course, but of course, you're recognizing that revenue and you're receiving it in Q4 and Q1 of next year. So, you know, there's usually on the athlete side, there could be you'll start seeing some revenue in the first three to six months after bringing in a manager, but it really hits a run rate or, or, you know, hitting revenue targets usually six to nine months after you make a hire, I would say. So as we, what we talk about in 2025 then is, um, you know, we're, we're hitting our benchmarks that we want it both in terms of speed at which we're signing clients, which has gone very well. And then, of course, the deals that we have in the works that we've closed. But if we've closed revenue through Q1 for always alpha, I think probably it's fair to say that 90% of that revenue will be sometime later in 2025. And then that'll be true in Q2, too. And, of course, eventually you'll hit a stable revenue rate that should be quite profitable for you. In terms of the potential of this division, well, I mean, sports could be easily as big as, you know, aspects of entertainment. How big is big? So we'll see as we go over the next year or two. It'll certainly be a profit center for us in the future. And if we can take advantage, we believe, of our first mover advantage. And the great story is always also, I mean, you know, Cosette's a seasoned executive, and Allison Felix is a legend. So with the momentum that we can bring that business through their hard work on the brand deals they bring, and then hopefully some synergies across all of our other companies that have many, many brand clients, then what is hopefully five years from now the preeminent women's sports athlete management firm worth? We'll find out together, right? But I don't want to set a ceiling that may turn out to just be a floor for them that they have great potential. So that's what we're doing in 2025 and it'll, it'll pay big dividends for us. We believe in 2026 and beyond.

Thank you. And so it's very clear and understandable what your strategy is and not that it's not understandable, but affiliate marketing, you said you could triple the influencers, but is it, Just explain this a little more about what is it targeted in particular areas or or how are you just try to find people who are very good at it or how how does it work?

Sure. Sure. Yeah. And it's a little bit more of a black box to some people than say, you know, female soccer players. People understand that. Right. As we have soccer, basketball. Right. We're trying to do it responsibly this summer. So when we get on Q2, by the way, we'll see what updates we have in the sports field for everyone. Affiliate marketing. Good news is that it's usually a quicker turn. You can have a team of affiliate managers. Same thing. You bring in talent managers and you recruit a roster of affiliate influencers. The good news for us is we have a backlog of affiliate influencers that would like to work with us. and we're hiring and training affiliate managers in some cases. So we're trying to do it on a measured pace throughout the year, bringing in a new team of managers, you know, let's say every couple of months, you know, every eight weeks or so. It takes a while to train. It takes a while to add the roster, upload, and et cetera. But they can have a quicker turn. You know, a team could be cash positive within, you know, a shorter period of time, a couple of months after being fully ramped up. Um, and, and, uh, obviously, um, if our main roster of brand influencers, now we have over, I believe over 300 creators on roster, you know, what's the growth potential of affiliate? Well, right now we have, you know, a couple of dozen, which is a fantastic signup rate since we just started this in Q1. Um, I'm, I'm indicating to us out there that if we have, you know, everyone on this call can do that math, right? So, Two dozen becomes six dozen by the end of the year or more. You know, we're on a path in one year to having affiliate be 25 percent or even 33 percent size of our core business. That's tremendous growth in 12 months. Right. And I don't know that we're going to stop there. So, yeah. it will be a profit center for us by the end of the year and we're in a position to have it be a solid profit center for us in q4 which is already our best quarter for influencer marketing anyway but affiliate marketing is also very appealing to us because it doesn't really have as much of a seasonality so whatever we do in q4 we can hope similarly somewhat in q1 of next year and as it rolls through into 2026 and beyond so Will affiliate be as big as our core creator representation business? Again, we need a crystal ball and let's see where we are in three to five years. But as a meaningful, it could be, and as a meaningful contributor to our bottom line at TBD, absolutely. And strategically, it allows us to offer both services to individual influencers. So I indicated on the 10K earnings call, Both of our companies, before we merged on BeSocial and Socialite, did not offer affiliate services and neither do almost all of our competitors. So to have that in-house to go along with the brand campaigns gives us a market advantage as the market is rapidly settling down into half a dozen firms or so that are in positioning to be a market leader. We certainly are one of those. We think this gives us a major competitive edge to attract very good influencers who can make money both from brand campaigns we bring them, but also from affiliate links. So we're excited for it and very appreciative of the hard work of the team that's building it out.

Just so I understand it a little better, an affiliate influencer, do they come with leads for businesses or is that... generated by kind of your managers, or how does that work?

Yeah, absolutely. So typically, you know, what separates us, and I think a misperception in the market, I'll explain what it is in first to help hopefully explain what it is, right? I think even people that understand influencer marketing well often don't realize that when, you know, the digital department brings, insert here, Crocs, to insert one of our top influencers to do a campaign, and maybe that influencer is going to get paid, let's say, $100,000 to post Crocs products or talk about Crocs products or whatever the campaign would consist of, either on Instagram, on TikTok, on YouTube, whatever it might be, for that money. We bring the deal together to the talent, and we get paid a commission on what the talent earns, typically 20%. So in that case, we get 20% of $100,000. If the influencer were to link for their followers to be able to purchase Croc Shoes, typically many brands will offer commission to that influencer. That service of managing the links and knowing where to link to, either directly to the brand or most often through influencer sites like ShopMy or LTK, that service, which takes a lot of back-end support and also coordinating where to link to because if it's not a brand direct then you want to get you want to link to the the affiliate platform that's going to pay you the highest commission you know one platform may be paying you 20 of the sale on another platform may be paying you 10 of the sale you want to link to the one that pays you more right that service is called affiliate marketing um and uh we similar to the core service we take 20 of whatever the creator makes on those links. Of course, that's only if people buy the product through those links. So some influencers are very strong at both brand campaigns and in what's called converting into affiliate sales that they do affiliate links. But the overwhelming majority of influencers do not do affiliate links. And some of our biggest influencers, our highest earners, don't do it. They will. And with us offering the service, you know, they could turn out to be high earners. But, you know, it's no joke to people that have followers that will buy what they're posting or be curious about what they're posting and click on it and go through and buy a product. They can make hundreds of thousands of dollars a month. We have one on roster currently that does that. So it's a business we can grow. But many people think that you just do both at the same time, but that's just not true. And the overwhelming majority of influencers don't do affiliate.

Do they not do it because they don't understand it? Or can you take your current roster of influencers and then just kind of upsell this to them instead of only bringing in? Because that sounds like a lower cost of

having the info well you tell me yeah yeah it is and it's low-hanging fruit too um and you know and why it often isn't done because you know you could have influencers that would only make 30 40 50 100 200 a month um you know if they're if their follower accounts don't typically think of them as as as somebody to click on and go through to the link however The other thing about building that type of practice or that type of content, I should say, is there's some back-end work to it. And bringing in Kate Steele and that team and watching people that do this every day, all day, it can meaningfully change even influencers that do affiliate work. You could go from making $15,000 a month to making $30,000 a month. We've got case studies on just that ratio within 30 days. Why? Because the influencer often doesn't have the time to shop across different platforms, know how to link, get certified to link into all these different platforms, know when the ratio changes. You sit there and say, oh, okay, Amazon pays 20% for this pair of shoes today. That's better than LTK's 10% hypothetically, but then LTK runs a special this weekend and they're offering, you know, to clear out inventory they're offering um influencers 30 on the same pair of shoes do you switch the link are you are you savvy to know that or amazon's going to do their black friday specials not only do they lower the price to the consumer they pay many times influencers a higher percentage of the sale those are those are dream situations if you're an affiliate influencer right so doing that knowing how to handle that working the links on the back end you know there's a there's a there's a lot of science to go with this art and But if you can do it at scale, and that's where having a leading influencer marketing agency, one with 300 creators on roster, now you can build out this type of practice and offer it to influencers even if their core work, their brand work's not done with us. So it's a major competitive edge. And it can be a selling point to our brands division or work with brands that have or want to have you know, affiliate links, especially depending on the type of consumer product they sell. So you can see a flywheel there, right? And having an influencer marketing agency like the Digital Department that has, you know, all four ways to make money or traditionally make money in the influencer economy between core, you know, creator representation, affiliate marketing, brand representation, which we're very proud of. Ashley Finch and that team do a great job. And then influencer events. That's Belinda Strom. That's the brand edits. That's the one that I mentioned in our prepared remarks, just had their highest grossing brand at a showroom to date in L.A. in April. Let's see if Nashville and June breaks that record. You know, TVD, the digital department, is definitely a growth company for us. I'm very proud of the leadership of Ali Grant, Kirsten Weinberg, and Sarah Boyd for that company. So that was a long answer to a short question, Alan, but hopefully that answers why Affiliate is different than the core brand representation and how we can monetize it.

Got it. Thank you. And then for the movie Youngblood, you said you'd like to get it at a fall festival. Remind us, what does that mean in terms of your target for getting it in the theaters?

Yeah, we're hoping for a February release next year. It's a streaming platform premiere. We'll see when we take it to market. And the reason for that is it's... It will be time to the Winter Olympics. Hockey is one of the most popular sports at the Winter Olympics. It's in the middle of the NHL season. The playoffs right now are very exciting for the NHL. It's a popular sport that's growing. It's also the 40th anniversary of the original. So it's kind of a marketer's dream when you have a confluence of events like that. So we would like that in that time next year. And the film's shaping up to be prepared for that because, as I mentioned, we're editing it now. And we'll, in a perfect world, just, you know, would we have the film screening in Toronto where we shot the movie? Sure, in the Toronto Film Festival. That's one of the big fall film festivals. Whether it's in competition or not is not as important to us as much as just having a special screening there. um and uh you know that's also traditionally the time that um these fall festivals whether it's or toronto when you talk about you know kicking off the oscar season i'm not positioning young blood for an oscar but what i am saying is you know you buyers whether it be studios or streaming companies streaming platforms they they often buy movies out of one of those three festivals that they will launch even before year end and make them oscar eligible so buying something at toronto which always starts, of course, right after Labor Day every year. And having it ready for release in February is not considered, you know, rushed in any way. They do things faster in the normal course. So we feel good about that, and hopefully that's the timing that, you know, the market will allow us to exercise.

Thank you. You have a lot of things on your plate. What would you say your top priorities are for 2025?

Growing always alpha. I'm trying to make a theme of it, you know, on a Q Q one earnings call, because, you know, we just spoke to the, you know, to the market six weeks ago. So trying to reiterate where we are, you know, grow always alpha because we have such an opportunity there grow the affiliate division of TDD, because we see such a big opportunity there. And then after that, as you said both films you know, have Youngblood ready, get the next one in the queue behind that, increase the frequency of our productions because they're, you know, if they all worked out like Blue Angels, you know, we'll be geniuses. But, you know, Blue Angels was very lucrative for us. We hope the same for Youngblood, obviously. And then having them behind it and then also, you know, our ventures, expanding and increasing the number of ventures because now that the super group's been built, Now, as I mentioned, we see ourselves at the starting line, right, not the finish line. And we're starting to do what? We're starting to expand, grow our services and grow our ventures. And that's what we're going to measure, whether we have a good year or a bad year, in addition to increased revenue, increased profit, of course. Are we setting ourselves up for some major successes in 26 and 27? And that's how we're going to measure ourselves this year.

My other... Sorry, I think... I mean, those are my main questions.

I mean, is there anything about the financial outlook? I know you're just qualitatively... I know you're not providing specific guidance, but anything qualitatively you might want to comment on?

You know, I... I think I probably alluded to it in the prepared remarks, too. You know, we're past it, and sometimes you forget sometimes things that occur, you know, four months earlier. I'm a kid from Miami. I remember hurricanes, right? They stick with you. You know, the people that lived through those fires, it's horrific. And our hearts and our prayers, excuse me, go out to those affected, you know, business-wise. You know, we've had to return to normal and continue to work very hard, but it did have an impact on us in Q1. It's not true if I said anything different, but it was, no pun intended, contained to within Q1 and really by early March. So, you know, we're excited to kind of return to normal in Q2 here and going forward. Um, you know, we, we expect to still have as strong a year as we thought we were going to have at the start. Um, our businesses are growing, um, and, um, no, no, uh, loss of confidence for this full year, uh, for us. So, um, nope, we feel great, honestly. And, and it really is a test. Sorry. I jumped on my own conclusion there, you know, to go up 2% in revenue, um, with that, with that in our, in our entertainment marketing segment with that type of impact. That's really a testament to the teams working very hard and recovering, and our growth in general. So very, very proud of both the business development activities of our companies, especially those that were more affected, and the cross-selling that we just continue to get stronger and stronger at each successive year. And so, yeah, I feel very good about the rest of this year.

Well, thank you. I mean, your revenue, I mean, we were, our estimate was for $10 million and a quarter. So you came in much stronger than that. So with all the headwinds that you did have. So kudos to you. Okay. Thank you.

Thank you. I appreciate the kind words at the end.

Thank you. Thank you. As we have no further questions in the queue at this time, I would like to hand it back to Mr. O'Dowd for any closing comments.

Sure. Well, thank you. And longtime listeners know the Q1 call is usually the shortest because we just had our big 10K call six weeks ago. But I always like to try and look ahead a little bit. Q2 in August, we expect to be able to provide updates on the progress we're making with AlwaysAlpha. soccer and basketball. I will provide an update on the progress we're making with the affiliate marketing. We just brought in team number two, started yesterday. So we'll see where we are even on team number three by the time we get to our Q2 earnings call. We'll have an update on Youngblood, although I don't expect, well, we would know where we would be taking it out in the fall film festivals when we do Q2, so that's exciting. provide an update for sure on our ventures work. And, you know, as I say, we're growing organically on the base businesses and we'll continue to report that. But we'll judge years going forward now, not just on that growth, but also on the optionality or the lottery tickets or whatever you want to call things like films or ventures, because that will certainly factor in in future years to the valuation of Dolphin as a whole. as we rebuild those opportunities for ourselves. So thank you everyone for listening and appreciate the time and look forward to picking it back up in the middle of August in Miami. It's a balmy time to come down here. Okay. I'll talk to everybody soon.

Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and we thank you for your participation.