Greetings and welcome to the Dolphin Entertainment First Quarter 2020 Earnings Call. As a reminder, this conference is being recorded.

Thank you, and once again, welcome to Dolphin Entertainment's First Quarter 2020 Earnings Call. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, 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 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 the meaning of 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 the company's annual report on Form 10-K, those contained in subsequent filed quarterly 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 made 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.

Thanks, James, and thanks, everyone, for joining today. As usual, I'll arrange my comments as follows: first, I'll highlight our financial results; second, I'll spend some time providing operational updates; and third, I'll turn it over to Mirta to dive deeper into our financial results before having our Q&A. So first up, the financial results. All members of our PR and marketing Super Group had a good first quarter, pushing our quarterly revenues to $6,633,800. This represents a 5% year-over-year increase in total revenue, and a 6% year-over-year increase in revenue from our core segment of entertainment publicity, respectively. Furthermore, we are very proud to share net income in the first quarter of $2,073,847, which was $0.08 and $0.01 per basic and diluted share. Additionally, with respect to our balance sheet, the lender of the Max Steel production loan notified us that the Max Steel VIE that we consolidate do not owe any money under the production loan agreement. As a result, we extinguished approximately $30.3 million of debt, and we subsequently evaluated our status as the primary beneficiary of the VIE and determined that we no longer met the criteria as the primary beneficiary. Consequently, we deconsolidated the Max Steel VIE from our condensed consolidated financial statements. Cleaning up our balance sheet is a major focus for us in 2020 and specifically our working capital deficit, so let's take a quick look at that. After 4 acquisitions, our working capital deficit at December 31, 2019, was a little over $15.5 million. With the removal of the VIE helping, we reduced our working capital deficit by almost $5 million in Q1 to less than $10.7 million. That is a reduction of more than 30% in one quarter. And we're about to do even better. Along with securing capital to make our next acquisition without incurring any additional debt, reducing our working capital deficit was the primary driver for us to take advantage of a market opportunity and to raise $8.3 million in a registered direct offering last month. When we report our Q2 earnings in a few short weeks, we believe we will show an even larger reduction to our working capital deficit. Keep an eye on this metric as we manage ourselves towards the complete elimination of our working capital deficit as quickly as possible. Furthermore, as long-time investors in our stock know, the puts we provided to the sellers of 42West upon the purchase of that company in March 2017 are almost all finished by December 31 of this year, less than 6 months from now. What started out as nearly an $11 million obligation of Dolphin will be virtually extinguished by year's end, and we expect to complete the puts on schedule in their entirety by the end of Q1 2021. Turning to operational updates, just like on our 10-K earnings call, I'm sure the questions on the top of everyone's minds are: first, what does the current environment mean for Dolphin Entertainment and its 4 marketing companies, 42West, The Door, Shore Fire Media, and Viewpoint Creative? Secondly, what does the current environment mean for Dolphin's M&A strategy? And third, what does the current environment mean for Dolphin's plans to reenter production? I'll answer those questions one by one. But before I do, I'll mention a few highlights before the business disruptions started to take place at the beginning of March, especially since the start of the first quarter every year gives our PR firms a real chance to shine; that's the best of what they do in their respective fields. In January of this year, Shore Fire Media's clients won a collective 11 GRAMMY Awards, including 7 in various Best Album categories. It was our first GRAMMY season together, and we couldn't be more proud of the team at Shore Fire. In February of this year, 42West was involved in various capacities with 13 films that earned a total of 49 Academy Award nominations and won 9 Oscars. Even though it seems like 42West has a fantastic Oscar season every year, we never want to take results like those for granted. Congratulations again this year, 42West. Also in February, The Door and Shore Fire spearheaded various culinary and music events leading up to Super Bowl 54. For example, The Door handled media relations on behalf of 2 of their clients, the seminal Hard Rock Hotel and Casino Hollywood and Yellow Tail Wine, which included performances from Pitbull, Diddy, and Tiësto. Shore Fire Media on its end handled public relations for the Bud Light Super Bowl Music Fest, which included performances from Guns N' Roses, Maroon 5, DJ Khaled, and James Carbonara's personal favorite, Snoop Dogg. Furthermore, to add icing to the cake in the run-up to the Oscars, Rachel Aberly, Executive Vice President of 42West, won the inaugural Publicist of the Year award at the 2020 Publicists Awards, which feels particularly appropriate since Rachel heads up 42West's work with the Academy Award nominations. Congratulations, Rachel. That's really awesome. The inaugural Publicist of the Year Award. Fantastic. With such a great start to the year, it's not hard to see why the Observer selected all 3 of our PR companies to be on its prestigious power 50 list this past December. There are over 12,000 PR firms in this country, and we believe we are the only company that owns more than one PR firm on the Power 50 list. And of course, all 3 of our PR firms are in the same industry, entertainment. Combining these 3 companies into one family makes us unique and represents a platform for future growth that no one else has. This is the heart of the investment thesis into Dolphin. Now back to the overarching questions outlined above. While coming as no surprise, each of our subsidiaries has faced a decline in revenues during the second quarter, some more significant than others. At 42West, we have experienced a drop in revenue from our talent division as television actors temporarily go on hiatus as productions halted for the entire quarter. Also, there were no movies in theaters to promote. However, we have offset a significant amount of that revenue loss by adding a large number of projects from the streaming platforms, almost all of which are our clients. And we expect to build back our revenue loss fairly quickly if productions resume and theaters reopen here in Q3 as expected. At The Door, April and May were particularly challenging, especially with their core restaurant and hotel clients. Their revenues started to come back in June and again even further in July, allowing us to anticipate a much stronger third quarter. It's during this time that we are most thankful for the investment we made into our consumer products division at The Door beginning in January of 2019 shortly after we purchased the company the previous summer. That division, led by Nicole Lowe, has remained strong during this trying time and is helping the company rebound faster than it otherwise would. Of course, when the restaurants and hotels do fully come back, which we anticipate either Q4 of this year or Q1 of next year, because of the heavy increase in consumer products work, The Door should come out of this period even stronger than when it started. And that is a truly remarkable thing to say for the market's leading hospitality PR agency. And as a true testament to the leadership of Lois O'Neill and Charlie Dougiello. At Shore Fire, of course, they've lost some revenue from the cancellation of the summer touring season. However, fortunately, as we discussed on our 10-K earnings call, I believe the majority of their work is done online for the promotion of singles and albums. Thus, they've had the smallest percentage of revenue drop of any of our PR firms. With that said, they may not see a full 100% revenue recovery until Q1 of next year as the fall music touring season is also very much in doubt as we stand here today. Lastly, at Viewpoint, we've been focused on eliminating unprofitable clients. And I think when we report our Q2 numbers in just a few weeks, we'll have a lot of good things to say about their work during these past few months. Demand for marketing videos that can be used for online campaigns is very strong. And we're excited for the headway that the team has made into the corporate world, which was our priority for Viewpoint going into this year. We recently announced Viewpoint completed the strategic design and full-service production of a branding campaign from a long-time client, Direxion funds, to introduce a new line-up of strategic weight ETFs. And that's a good example of a great corporate client for Viewpoint. We also recently announced a brand spot that Viewpoint did for CBS News. Those 2 announcements show the balance we'd like to strike between Viewpoint's legacy of best-in-class work for the leading media brands in the industry such as CBS News as well as CNN, HBO, Showtime, Discovery, ESPN with the expansion of that heritage and experience into the corporate world. Now on the topic that is of strong interest for many of our shareholders, M&A. Let me just say this. We remain highly focused on completing the Super Group. We have never wavered on this path. As I stated above, it is the core investment thesis into Dolphin. And with every acquisition we have made to date, we have only felt validation and enhanced resolve as we see the cross-selling synergies that have already been created. We will be opportunistic during these times and expect to complete our next 2 acquisitions on schedule this year. We also believe that one will occur here in the third quarter. Lastly, on the production side, we acquired Feature Comedy Script's Sisters Before Misters. And in Q2, acquired the rights to action thriller script's Special Delivery. We're excited about those projects. We have directors attached to each and have begun casting both of them as well. Both are female-led movies and hopefully will have lead actresses attached before the start of the film festival circuit in the next few weeks. We are looking forward to taking them out to market and try and film at least one of them before the end of the year, if possible. And then, of course, COVID hit. Like the rest of the independent production sector, we are waiting for the availability of appropriate production insurance. The studios and the streaming services can underwrite their own risks, but for a large number of independent producers, including Dolphin, starting production without insurance is a gamble that we are not willing to take. So the industry has to work through that, and we will be patient. Okay. So to conclude, we're pleased to report a strong first quarter with net income of more than $2 million. Furthermore, we're very happy to have removed the VIE from our balance sheet, and we encourage all of our shareholders to watch our balance sheet carefully for the rest of the year as we work towards completely eliminating our working capital deficit even with our acquisition strategy continuing at full throttle. As you might imagine, we feel very good about our underlying business. We are growing revenues across the board at every one of our companies after the bottom of April and May. And we remain consistent to our core strategy that we shared when we uplisted to NASDAQ at the end of 2017, and we are hyper-focused on acquiring the fifth and sixth companies of our Super Group this year. We look forward to discussing our M&A activities in much more depth on our Q2 earnings call in less than 5 weeks. There is a lot to be excited about at Dolphin.

Thank you, Bill, and good afternoon. As Bill stated earlier, total Q1 revenue was $6,633,800, which represented an increase of approximately 5% as compared to the same period in the prior year, and a 6% increase in revenue from the entertainment publicity and marketing segment as compared to Q1 of 2019. 100% of the revenue for this quarter of 2020 was derived from our entertainment publicity and marketing segment. Revenues from our content production segment were 0 in the first quarter of 2020, and $78,990 in the first quarter of 2019. As we previously discussed, revenues are primarily earned right after the release of a film and the decrease in revenues is part of the normal cycle of a motion picture. Overall, operating expenses in Q1 of 2020 were $7,504,659. Direct costs were $688,977 for the 3 months ended March 31, 2020, as compared to $1,187,419 for the quarter ended March 31, 2019. The decrease in direct cost is primarily related to the decrease in Viewpoint's revenue due to one-time projects completed in the 3 months ended March 31, 2019. Payroll costs were $4,889,623 for the quarter ended March 31, 2020, as compared to $4,301,413 for the quarter ended March 31, 2019. The change is primarily due to the addition of payroll from the acquisition of Shore Fire on December 3, 2019. Operating loss for the 3 months ended March 31, 2020, of $870,859 includes non-cash items and depreciation and amortization of $521,003 as compared to an operating loss of $825,161, including non-cash items for depreciation and amortization of $481,642 for the quarter ended March 31, 2019. The net income for the quarter ended March 31, 2020, was $2,073,847, which is $0.08 of basic earnings per share on a weighted average number of shares of 20,498,564, and $0.01 of diluted loss per share on a weighted average number of shares of 28,384,982. For the quarter ended March 31, 2019, our net income was $122,608, which is $0.01 on basic earnings per share with a weighted average number of shares of 15,944,443, and a diluted loss per share of $0.08, using a weighted average number of shares of 18,690,377 shares. That concludes my financial remarks. I will now ask the operator to open the phone lines for Q&A.

Our first question comes from Jack Vander with Maxim Group.

Solid Q1 results despite a challenging environment. So similar to last quarter, you guys did a nice job reviewing your thoughts on potential impact of some of your specific businesses as it relates to COVID. I'm hoping you can provide something similar in more of a summarized sense for your near-term outlook. And then how you expect that to kind of change. I know that's a very open-ended tough question. How do you expect the near-term outlook impact from COVID to change as we go to, say, the fourth quarter of this year?

Sure. Hi, Jack. Thank you for the kind words. We're very pleased with this quarter, and our businesses are doing well as they increase their revenues at the start of the third quarter. We're beginning to see the factors that will help each of them return to full revenue. I believe 42West will reach that point when movies return to theaters in the next month or two, and production picks up again. They have remained strong, as I mentioned, largely due to their business with streaming services. It's great to have a leading position in the market, and they certainly do. Our film and TV division is the best in the industry. Shore Fire has also performed well, facing only a minor revenue decline related to touring, but most of their income comes from online singles and albums. The Door experienced the largest revenue drop because of its leading market position with hotels and restaurants. Restaurants will take longer to recover than hotels, but we are starting to see hotels bounce back already. I believe we could have most, if not all, hotel business back by the third quarter. The restaurant sector, however, will likely not return until the fourth quarter.

Got it. That's very helpful. Can you remind me of the components of your business that generate recurring revenue? Also, do you have any informal targets or insights regarding what you expect recurring revenue to represent in a normalized revenue environment?

Well, the great thing about our PR firms is that they generate a consistent amount of recurring revenue each month. While we do have project-based revenue as well, it tends to come from specific clients like year-round marketing for hotel groups, such as The Door, or from restaurants that seek our services during their opening phase and continue for several months. Our steady recurring revenue has helped us manage the second quarter effectively, likely better than many anticipated and certainly better than a lot of our competitors, thanks to our reliable recurring clients across all our PR firms. For instance, some feature film releases were delayed on the 42West side, but we are fortunate to have exciting high-profile movies lined up for later this year that were initially slated for the second quarter, like the James Bond film, which I’m personally excited about, and Top Gun. It's important to note that this revenue isn’t permanently lost; it has simply been moved from the second quarter to the fourth quarter. This trend applies to all our PR firms. As we grow The Door's client base along with our consumer products division, they are performing exceptionally well. When the hotel and restaurant sectors fully recover, The Door will be in a stronger position than before this situation began rather than just trying to return to previous levels, which is very encouraging. In addition, looking at 42West, we're seeing a rise in revenue from streaming services. The introduction of platforms like HBO Max and Peacock means there will be an increase in available content to promote in the upcoming quarters, not a decrease. Plus, when we reintroduce feature films into the market, 42West will maintain its leading position in both verticals. The number of Oscar nominations we've received is just one indicator of this success. Overall, as we navigate through the coronavirus period, we're optimistic about having stronger revenue streams across all of our PR firms.

Yes, that's helpful. And I'm happy to hear James Bond movie and Top Gun, both of my 2 former favorites as a kid are going to be back around, and hopefully, by the holiday season. If I could just sneak one more in there, and I'll jump back in the queue, is you dropped an exciting kind of Easter eggs here about your expectations for your completion of your Super Groups. And you noted one will be closing sooner than the other. Is there any more color you could provide as to which environment or which vertical that acquisition in the near term will be representing? Or is that going to be a secret until the announcement?

We have always expressed our enthusiasm for integrating online marketing with our PR firms. This will significantly enhance our business in that sector. We anticipate that this type of company will be among the next two to complete the Super Group. We look forward to discussing this area and the cross-selling opportunities for online marketing that will complement our PR campaigns. As I mentioned earlier, our Q2 earnings call is just 4.5 weeks away, and we plan to provide more details about our M&A activities during that call.

Our next question comes from Allen Klee with National Securities.

Bill, when you talk to your customers, is there kind of a consensus view of when a movie and TV production will kind of start-up again?

Sure. It depends on which of our two types of customers you consider. For Netflix, HBO Max, Apple, and the studios, they're wrapping up their protocols, and I believe they all anticipate being back in production within the next two weeks, possibly by the end of the month. There have been announcements regarding specific productions and their resumption or the initiation of new projects. I think everyone expects this to happen before Labor Day, which is encouraging for us. Many independent producers, especially those behind the independent films we work with, face a challenge—they need production insurance to move forward since they can't underwrite the risk. Productions in the $8 million to $15 million range require this insurance to support foreign sales necessary for funding. The industry is actively addressing this issue, and I believe there is a general consensus that we will have a resolution before the fall film festival season, as these projects need to commence production. Whether significant independent production will kick off in September, October, or early next year remains uncertain, but that's the prevailing thought among many right now.

How do you think about cross-selling synergies across the Super Groups today as business picks up? Is there a way to think of like how much that could add to your typical organic growth rate?

The best way I can explain it, Allen, is that we are already witnessing the impact of Shore Fire. Two years ago, our first company was 42West, and we realized that cross-selling was limited when it was just one company. Then we added The Door, and later Shore Fire and Viewpoint. Now, with four companies, every company can cross-sell with three others, increasing our opportunities from just one between 42West and The Door to nine. When we eventually bring in our online marketing expertise, we’ll have five companies, creating 16 cross-selling opportunities compared to just one two years ago. As an example, Shore Fire serves the music sector, while 42West focuses on TV and film, and we've seen a steady rise in ratings for music-related programs over the last two decades. We anticipate being able to announce a significant cross-sale opportunity between 42West and Shore Fire during our Q2 earnings call. This was a strategic decision to acquire Shore Fire for their music PR capabilities due to the numerous cross-selling possibilities. In total, once we add our next two companies, we'll have six from Phase 1 of our Super Group, leading to 25 potential cross-selling opportunities. Currently, we have nine, up from one two years ago, indicating potential for exponential growth, which is what excites us about this progress.

I have 2 financial questions. One is, if you look at the costs above operating income, all the main cost lines, is there anything unusual in this quarter? Or is this a reasonable run rate, looking at those numbers? And then second, I kind of missed it. I think you said what your diluted share count was for calculating the diluted EPS. I thought I heard something like $50 million, but could you repeat what that was? And then maybe what got added to that. And maybe what the share count was at the end of the quarter?

Sure. At the end of the quarter, I can address your first question while I find the information for the second. Regarding operating expenses, there was nothing unusual this quarter. The share count used for the fully diluted calculation was 28,384,982 shares, primarily because we had to employ the treasury stock method to determine the number of shares needed to sell in order to cover the puts that are due. This is largely influenced by the accounting guidelines on fully diluted EPS.

So that's another benefit; as we eliminate the puts and pay them down, the fully diluted earnings per share will increase, which is great. This addresses the misconception that we would have to use all of our shares to settle the puts, which isn't accurate.

My last question, it's kind of vague, but if you're looking long term, I don't know if you've said this before, but is there a way to think of kind of a long-term organic growth rate in margin that you look at as a goal?

We expect to achieve healthy double-digit revenue growth, and we believe this is attainable. Similarly, we anticipate growth in our net income. As we navigate through the various financial instruments and move toward a true operating income by the end of this year, we are optimistic about our trajectory. We are particularly excited for our long-term investors who supported us before our uplisting, as our initial three-year plan involved acquiring six companies to form the Super Group. We're now over the 2.5-year mark, which fuels our enthusiasm for achieving double-digit growth in both revenue and net income.

There are no further questions at this time. I'd like to turn the floor back over to management for any closing remarks.

Well, thank you. I appreciate everyone's time, as always. And I know we'll be talking again in a very short number of weeks here. And look forward to elaborate on both the improvements to our balance sheet as well as to our M&A strategy. So talk to everyone then. Thank you all very much.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.