Dolphin Entertainment : 2021 Q3 Earnings Call

Transcript of

Dolphin Entertainment, Inc.

Third Quarter 2021 Earnings Call

November 22, 2021

Participants

James Carbonara - Investor Relations, Dolphin Entertainment, Inc.

Bill O'Dowd - Chief Executive Officer, Dolphin Entertainment, Inc.

Mirta Negrini - Chief Financial Officer, Dolphin Entertainment, Inc.

Analysts

Allen Klee - Maxim Group

Presentation

Operator

Good afternoon, ladies and gentlemen and welcome to the Dolphin Entertainment Third 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.

James Carbonara - Investor Relations, Dolphin Entertainment, Inc.

Thank you, and once again, welcome to Dolphin Entertainment's third quarter 2021 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer and Mirta Negrini, Chief Financial Officer.

I would 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 a 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

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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.

Bill O'Dowd - Chief Executive Officer, Dolphin Entertainment, Inc.

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, the momentum from the first half of the year carried through to the third quarter. Looking at the P&L, we have set another new record with 9.4 million in revenue, up 70% year-over-year, with an absolutely fantastic 41% year-over-year organic growth from existing subsidiaries. Please note that this follows Q2, which set a record of

8.6 million in revenues, which followed Q1, which itself had a set a record of 7.2 million in revenues.

Next, looking at our operating income, which is the metric by which we gauge ourselves, it's positive for the second consecutive quarter, even when including the non-cash expenses of depreciation and amortization. To reiterate positive operating income from a MicroCap Entertainment Company, even including the D&A expense from our acquisitions. What's also nice is that we are EBITDA positive through the first nine months of the year, even while investing in our 2.0 initiatives.

Okay, let's turn to the balance sheet. We have a record cash position of $12.7 million, which is an increase of 60% compared to December 31, 2020. Also, we now have significantly more cash then all debt combined, including long-term debt. Furthermore, let's look at our working capital. After reaching a peak working capital deficit at the end of 2019 of just under 16 million, as we borrowed to pursue our acquisition strategy to build our Super Group, we're now reporting a working capital surplus standing at 4.5 million, which is more than triple the working capital surplus as of June 30. And of course, since we're a cash positive company, we expect the surplus will only continue to grow. Thus, our balance sheet today, less than two years removed from our peak working capital deficit can only be fairly described as possibly our biggest strength when compared to our micro cap peers.

I'd like to reiterate the reason this is so important to us is because that working capital surplus gives us the muscle on our balance sheet for the next set of acquisitions and 2.0 investments. Where acquisitions on the same terms of any of the six we've already done, for example, we would be able to pay the cash component for any of them from cash currently on our balance

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sheet. Furthermore, we have not needed to borrow money or do a drawdown on our S3 to fund the development of our NFT business. In short, this perfectly illustrates the better mousetrap we feel we built with Dolphin, a growing cash positive core business and Dolphin 1.0 that is capable of self funding the majority of investments and development costs of the big potential upside opportunities of Dolphin 2.0.

Now let's move to some operational updates on our Super Group, the companies that are making those great numbers happen. Let's start with Shore Fire Media, Dolphin's industry-leading music PR firm, which is having an absolutely terrific year. Shore Fire helped the concert and event business re-launch by publicizing 40 tours year-to-date from artists in all genres, the nation's largest festival in Milwaukee Summerfest and the reopening of nationally recognized venues including New York's legendary Blue Note and the award winning Brooklyn Bowl Nashville. Shore Fire's client Angelique Kidjo was named one of Times 100 most influential people, Carole King and Todd Rundgren were inducted into the Rock & Roll Hall of Fame and athlete Chris Bosh was inducted into the NBA Naismith Hall of Fame. Shore Fire's corporate clients including North America's leading live stream shopping platform Network, tech focus digital fan engagement company Mandolin and reservations technology platform Light have won Best in Class awards recently in Fast Company, Forbes, Ad Age, Adweek and Rolling Stone, thanks to Shore Fire's efforts.

Okay, how about 42West, Dolphin's entertainment PR powerhouse? Well, speaking of September that's Emmys month and 42West's extraordinary range of work for programs and individuals put their clients in position to receive a total of 19 Emmy nominations. Just to highlight a couple, the company's work on the Amazon series The Boys led to multiple nominations, including for Outstanding Drama Series. Also as a result of 42West's campaign efforts, the acclaimed music documentary Billie Eilish, The World's a Little Blurry, earned a total of four nominations.

Turning to B/HI, a division of 42West with a particular focus on entertainment consumer products and gaming. B/HI was engaged by Fandom, the world's largest fan platform and number one source for in depth information on pop culture, entertainment and gaming to execute comprehensive publicity efforts for increased brand awareness and overall business growth. For context, Fandom is an entertainment and gaming juggernaut reaching more than 315 million unique visitors each month, across 250,000 fan powered communities with 30 million pages of content to get 30 billion page views per year.

Moving along to Be Social, Dolphin's influencer marketing group. Be Social launched its Showroom concept, hosting a two-day summer showroom in West Hollywood. Participating brands included Bondi Sands, EyeBuyDirect, MATE The Label, and Peach and Lily, among many others, with key creators in the beauty, fashion, and lifestyle spaces in attendance. Those who follow our company closely know that I'm a big fan of this initiative and I've been asked how influencer showrooms work. Well, the model of the showroom concept is pretty simple. Brands pay a fee to be included in the showroom and work with Be Social on selecting products that are carefully tailored towards the influencers attending. From there, Be Social handles all event production in addition to spearheading influencer outreach. Be Social uses their own in- house roster of talent, along with their team's long standing influencer relationships, to drive

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traffic to the event. Influencers are gifted the products from each participating brand during the event and then Be Social monitors all social coverage secured from the event for a full month, sending each brand a tailored report outlining all social placements secured for their products, as a result of the event. Hopefully that helps provide context for the showroom concept. We intend to scale in 2022.

Next up Viewpoint Creative, Dolphin's respected creative relations agency and video production boutique. Viewpoint joined forces with the Larry Firefighters Foundation to create and distribute content commemorating 911 and the 20 years since the attacks. More than attributed heroes who fell that day, the content recognized legacy firefighters who continue to struggle with the fallout and how the FDNY has improved systems and processes based on the events of 911. We're always very proud and willing to highlight this type of work that Viewpoint does.

And last but not least, let's talk about The Door, our leading culinary, hospitality and lifestyle PR firm. The integrated marketing division at The Door is doing great work for their consumer products clients and the culinary and hospitality teams are fresh off promoting the New York City Wine and Food Festival last month. But truth be told, I save The Door for last in order to allow them to serve as a bridge into Dolphin 2.0, since Charlie, Lois and the entire door team are playing an essential part in both of the 2.0 initiatives we're going to talk about today.

So let's go let's talk about Dolphin 2.0. 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. What type of assets do we want to own? Easy, ones where our expertise in marketing gives us the greatest likelihood of success, we want to own what we know we can market better than anybody else. That's why last month we announced a major Dolphin 2.0 initiative, the acquisition of an ownership stake in Midnight Theatre, a contemporary variety theater and restaurant that will anchor the $4.5 billion development from Brookfield known as Manhattan West. Across Ninth Avenue from Moynihan Station to the east and across 10th Avenue from Hudson Yards to the west and only a short walk from the Javits Center, New York's preeminent dimension facility, we feel the Midnight Theatre is being built in the very best location in Manhattan.

Okay, so let's talk about the venue. The Midnight Theatre features three distinct experiences for the guests, the theater itself, a separate pan-Asian restaurant called Hidden Leaf, and a ground level cafe. Let's take the variety theatre first. It's an intimate luxury state-of-the-art 160 seat theater, which as the name implies, will have a rotating schedule of a wide variety of performances across music, comedy, Broadway and magic shows. The Midnight Theater also has built in live stream capabilities, allowing for events inside the theater to expand beyond into people's homes and corporate offices. The theater will be available to host live stream podcasts, comedy specials, music events, corporate keynote events and more.

Hidden Leaf is the modern pan-Asian restaurant concept on the second floor of the Midnight Theatre space led by renowned restaurants Josh Cohen. Many of you know several of Josh's Brooklyn hotspots, including the Italian mainstay Lilia, one of the most in-demand restaurants in all of New York City. For the midnight theater, Hidden Leaf will feature a 75-seat dining room,

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20-seat private dining room, and a 40-seat lounge bar area. Hidden Leaf will be opened for lunch and dinner and will incorporate world-class food with interactive elements such as table side prep, wine consignments and memberships. And the bar is where you'll be able to find James Carbonara every Tuesday, Wednesday, Thursday and Friday nights.

For Dolphin, the Midnight Theatre is the most exciting live venue concept we have seen in a very long time. It will be a truly modern variety theater paired with fantastic restaurant, which is a combination that is missing in the cultural landscape today. It is in the final stages of construction and we expect to open by the end of the first quarter of next year. Dolphin will manage all aspects of publicity and marketing for the venue, both restaurant and theatre, as well as facilitate talent and commercial relationships within both the entertainment and culinary industries. As we look to own assets, wherein our specific marketing expertise will give us a greater likelihood of success, it is hard to imagine anything more in our wheelhouse than a world-class restaurant for The Door to publicize paired with a state-of-the-art variety theater that will program musical performances, Broadway cabaret, comedy acts, and magic shows, all of which Shore Fire and 42West currently promote. And of course, we'll be sure to have Be Social bring a steady stream of influencers as our guests and post about the great time they had afterwards.

Playing Dolphin's marketing strengths is what Dolphin 2.0 is all about which is also why we launched our NFTs business in 2021. I know many of you saw our big announcement this morning. Before we talk about that specifically, I'd like to take us back through the two key milestones in the past three months that positioned us to make today possible. First, our partnership with FTX US, which we announced in August. For any that need reminding, FTX is a leading cryptocurrency exchange and wallet provider with over 1 million active users and over $10 billion of average trading volume per day. With access to FTX's platform and wallet services, we can now aggressively pursue our ambition to develop and program global NFT collections targeting all of Dolphin's verticals, including the sports, film, television, music, gaming, eSports, culinary, lifestyle and charity industries.

With the technical development well underway, we then turned our attention to the creative side of the coin and brought in award-winning visual designer Anthony Francisco a few weeks ago in the newly created post of Creative Director to develop and execute numerous NFC series involving original and existing IP. Anthony came to us from Marvel Studios, where he was the senior visual development artist responsible for designing iconic characters across the Marvel Cinematic Universe, such as Baby Groot, personal favorite of many of the Dolphin's, Loki and Dora Milaje, the female warriors in Black Panther. In short, we feel we won the lottery for NFT business of securing FTX as our technical partner and by bringing in Anthony Francisco as our creatively lead.

And together, that is what enabled us this morning to announce the launch of 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 Francisco. Each Exiled Alien avatar will fall into a specific alien hierarchy, assigned traits, and randomly generated. The collection is available for viewing today, right now, at creaturechronicles.io and is slated for minting in December.

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