Dolphin Entertainment, Inc. Q4 FY2023 Earnings Call

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. 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 Mirta Negrini, 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; 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've 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, an increase of 8% year-over-year. I am immensely proud of the Dolphin team. We managed to achieve this 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 received from here. We define adjusted operating income as our operating income or loss after removing any non-cash or non-recurring income or expenses. Reporting positive adjusted operating income is extremely gratifying, obviously. And now that we have our Super Group 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 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. Speaking of special projects, I know we discussed the acquisition at length on our Q3 call, but the transaction did happen in Q4. As a brief refresher, Special Projects, founded by the amazing industry leaders Nicole Vecchiarelli and Andrea Oliveri, is a leading agency in talent bookings and celebrity curated event production with offices in Los Angeles and New York. Their impressive client roster includes top brands like Apple, Chanel, and the Wall Street Journal, among 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. 42West 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 42West movie promotion team. The Boy and the Heron was a tremendous achievement to win an Oscar for in the animated motion picture category. I don't know if that's the first time, but it must be one of the first times that a movie at American won that category to beat out the Spider-Man animated movie. It was a real achievement. Congratulations to the 42West team, and a separate team were promoting Godzilla Minus One, which won the Best Visual Effects Oscar at a budget of $15 million. And I think every movie they were competing against had a Visual Effects budget bigger than $15 million. Tremendous job getting the academy to see the movie and promoting the highlights of the Visual Effects, so great job 42West. Moving to Shore Fire, Shore Fire continuously does great PR work, representing clients who collectively received nine Grammy Awards in over two dozen nominations across various categories, showcasing its roster's diversity in multiple genres and major industry events that recognized both Film and Music. Each of 42West and Shore Fire 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. Additionally, they also achieved notable success at the 81st Golden Globes, contributing to clients securing multiple awards and receiving over 1,000 nominations. Love it when our agencies work together and have success at award shows like that. The Door celebrated eight consecutive years representing the Food Network New York City Wine & Food Festival presented by Capital One. Additionally, they added new client GSC from Jada to Lawrence's for an Emmy award-winning television personality and New York Times best-selling cookbook author. They added GSC and Jada to its growing roster of elite culinary clients and lifestyle brands, special shout out to Charlie, 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 focused on 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 GlowLab to introduce a specialized Talent Management division catering to skincare experts and dermatologists led by GlowLab's founder Susan Yara. Susan is an extremely successful skincare influencer herself, with her own YouTube channel and she is also the founder of NATURIUM, a skincare product line which was sold for $355 million to Healthy Beauty in September 2023. That is part of the strategy of inviting Susan and her roster to join the digital department, to help us conceive and develop partnerships to launch skincare products in which we have an ownership stake. Obviously, Susan had a very successful exit herself in just over three years. In other words, NATURIUM launched in June of 2020 and was sold in September of 2023 for $355 million. Now it's also worth mentioning that NATURIUM's marketing during those three years was almost exclusively influencer marketing and PR, both of which are obviously strengths at 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 GlowLab, the digital department also established a Young Adult Division, a 'YAD Division' as we call it, in partnership with the Osbrink Agency. This was also a highly strategic move for us. You probably saw the announcement in February. GlowLab was back in January, and 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 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 have TikTok feeds and YouTube channels of their own. Simply put, we want to represent them, and we want to introduce them to brands. By partnering with the Osbrink Agency, we just saved years of development time for that division and went from zero to sixty, maybe even to hundreds 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. They also received congratulations from Dave and the team for awards for extraordinary craft that shapes compelling narratives and leaves a lasting impact on audiences. 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 as talent booking partner and entertainment consultant for Town & Country's Annual Philanthropy Summit, which I attended by the way. Shifting gears, I'll now provide updates on some of our ventures and which Dolphin and its shareholders participate. I'm going to turn first to Blue Angels because what a week for that, right? As some may recall, Dolphin entered into a multiyear 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, which we announced a couple of years ago at the Comtel Festival, developed and co-produced by JJ Abrams and his company Bad Robot Productions, and Glenn Zipper's company, Zipper Brothers Films. We then announced that Amazon Studios had acquired worldwide rights to the Blue Angels, wherein we expect it to generate approximately $3.75 million to Dolphin from the acquisition agreement, which would result in a 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. Amazon has secured an exclusive trailer debut and promotion on The Today Show last Wednesday. Thank you to our partners at Amazon; that is extremely rare for documentary promotion. I just ask any of you: When was the last time you saw a trailer drop for a documentary on a morning show? And let me tell you, the trailer has been a hit. Over 1.7 million views occurred in the first 24 hours. As of today, a week later, we're over 9 million views. I believe this is one of the highest totals, if not the highest, 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 in theaters. IMAX has placed a trailer ahead of Ghostbusters in many locations this past week, and it will be ahead of the Godzilla and 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 17. What do you do on May 17? I hope you're going to the movie theater to see Blue Angels. It's a Friday, and you'll love it with availability for streaming on Prime Video beginning May 23, right ahead of Memorial Day weekend. Our success with Blue Angels is the result of a deliberate strategy to create event documentaries on subjects 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 in enhancing the 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 in an additional 150 theaters across America. This arrangement creates a steady income stream, an annuity which is quite remarkable. I wanted to make sure everyone understands the significance of it. 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, of 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 a year. 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 will have on May 17 in traditional theaters, we can put in more showings per day. These details are crucial for stakeholders to understand the financial implications. You might ask what's the value of the movie in institutional theaters, and while 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 investments. In addition to the 75% ROI from the streaming sale and our participation in ticket sales from the initial theatrical run beginning May 17, we also gain this annuity post-streaming around 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 to MasterCard Midnight Theater, for those unfamiliar, it is the state-of-the-art contemporary variety theater and restaurant experience in the heart of Manhattan, dubbed Manhattan West. We have a meaningful ownership stake in MasterCard Midnight Theater as well. It's been 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 Hart showcased the theater's ability to draw top talent and create exciting synergies with our PR firm. However, since our grand opening last September and especially in the typically slower first quarter period, operations across the restaurant café downstairs on the theater have not met our expectations. It is well understood that without a profitable restaurant, it is challenging to make the venue successful. 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 a group that we would like to bring in and we are working hard to close a deal in the next few weeks. Acknowledging the challenges of the 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 overhang. Turning to our newest venture, we are proud to share that Dolphin Entertainment has partnered with renowned culinary personality and client Rachael Ray and the esteemed Do Good Spirits distillery to launch Staple Gin. This collaboration brings together Rachael'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 a result of Rachael's culinary experience and our decades of culinary knowledge. The botanical recipe developed by Rachael herself promises a balanced and intriguing flavor profile that reflects Rachael's signature style. Our subsidiary, The Door, which has represented Rachael Ray since 2008, has played a crucial role in bringing this project to life. The Door's team has leveraged their extensive experience in marketing wine, spirits, and consumer packaged goods, alongside their long-standing relationships with culinary personalities and restaurants to contribute to all stages of Staple Gin's development, from branding to marketing, PR, and trade relations. 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. Rachael Ray herself was present at these events for attendees while Do Good Spirits mixed up 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 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, in home bars and a go-to choice for classic cocktails like the gin and tonic or perfect martini. As you may know, celebrity-backed spirits brands have seen tremendous success in recent years. Just look at the example of Ryan Reynolds’s Aviation Gin exit of more than $500 million and George Clooney's tequila brand, which sold for $1 billion. Moreover, it was reported last month that the potential value of Dwayne 'The Rock' Johnson’s Teremana Tequila may be significantly higher since it is moving over 170,000 cases per month, which is a staggering number. Good for him! So as you can see, big numbers are possible with celebrity-backed liquors; 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 Staple Gin the best possible chance for success. Our fantastic team at The Door, again, Charlie really spearheading this, has its own share of experience and success stories in this space, working with liquor brands from creation through successful exit, including recent examples like Jefferson's Bourbon, which was sold to Pernod Ricard in 2019 and 21Seeds tequila, which was sold to Diageo in 2022. 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 Staple Gin 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 that this will be the first of many ventures in the alcoholic beverage space 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 for Dolphin will be substantial. We look forward to sharing more details on the Staple Gin partnership and our other upcoming ventures in the spirits 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 structure. Those are some highlights about our Ventures division, and circling back then in summary, in Q4, Dolphin Entertainment achieved a 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 23, 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. 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 Staple Gin, will not require capital investment from us. 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 Mirta.

Thank you, Bill and good afternoon, everyone. I will now discuss financial results. Total revenue for the fourth quarter ended December 31, 2023 was $12 million, an increase of 8% over the same period in the prior year. Adjusted operating income, as defined in our earnings release, for the three months ended December 31, 2023, was approximately $300,000 compared to adjusted operating income of approximately $100,000 for the three months ended December 31, 2022. Operating expenses for the three months ended December 31, 2023 were approximately $20 million including approximately $8.3 million of non-cash or non-recurring expenses compared to $14.1 million of operating expenses for the three months ended December 31, 2022 including approximately $3.1 million of non-cash non-recurring expenses. Operating expenses for the quarter ended December 31, 2023 are composed of direct costs, payroll and benefits, selling, general and administrative expenses, acquisition costs, goodwill impairment costs, depreciation and amortization, write-off of notes receivable, and legal and professional fees. Direct costs for the quarter ended December 31, 2023 were approximately $300,000 compared to approximately $600,000 for the quarter ended December 31, 2022. Payroll costs were approximately $8.9 million in the fourth quarter of 2023 compared to approximately $8 million in the fourth quarter of 2022. SG&A expenses were approximately $2.4 million in the fourth quarter of 2023 compared to $1.9 million in the fourth quarter of 2022. Acquisition costs were approximately $100,000 in the fourth quarter of 2023 compared to $200,000 in the fourth quarter of 2022. During the fourth quarter of 2023, we impaired goodwill by approximately $3 million as compared to $900,000 impaired in the fourth quarter of 2022. Legal and professional fees were approximately $500,000 in the fourth quarter of 2023 compared to $600,000 in the fourth quarter of 2022. Operating loss and net loss for the quarter ended December 31, 2023 of approximately $8 million and $9.6 million respectively include non-cash and or nonrecurring items of approximately $8.3 million and $9 million respectively. These include a $3 million impairment of goodwill, approximately $600,000 of depreciation and amortization, $400,000 of bad debt write-off, $100,000 of acquisition costs and write-off of our notes receivable and Midnight Theater in the amount of approximately $4.1 million. The net loss also includes losses from equity investments of approximately $700,000. This compares to an operating loss and net loss for the quarter ended December 31, 2022 of $3 million and $3.3 million respectively, which included non-cash and nonrecurring items from depreciation and amortization of $500,000, $900,000 of goodwill impairment, $200,000 of acquisition costs, and $1.4 million of changes in the fair value of contingent consideration. Net loss also included approximately $100,000 in losses from equity investments in affiliates. Loss per share was $0.54 per share based on 17,632,822 weighted average shares outstanding for both basic loss per share and fully diluted loss per share for the three months ended December 31, 2023. Loss per share was $0.29 per share based on 11,256,578 weighted average shares outstanding for basic and fully diluted loss per share for the three months ended December 31, 2022. Cash and cash equivalents totaled $6.4 million as of December 31, 2023, compared to $6.1 million as of December 31, 2022. That concludes my financial remarks. I will now ask the operator to open the phone lines for questions. Operator, would you please poll for questions?

Sure. Thank you. At this time, we will be conducting a question-and-answer session. The first question comes from Allen Klee with Maxim. Please proceed.

Good afternoon. Congratulations on the quarter. Starting off with some 42West, you mentioned that despite headwinds from the two strikes you still perform well. How do you think about how that business will normalize in 2024, and maybe how much of the headwinds there were in 2023 and how much might go away in 2024?

Thank you, Allen, for the kind words. We also believe we had a strong quarter. The writer strike that began in May did not significantly affect our business. However, the actor strike that started in July had a substantial impact since actors were unable to promote films. This created challenges for us, especially as some actors took breaks and had no projects to promote, which affected our talent division. Additionally, many films from both studios and independent productions scheduled for fall release were postponed until 2024, causing delays across the board. I find it impressive that the fourth quarter turned out as well as it did, with nearly $1 million more than any previous quarter, considering how much of our major movie business was deferred and the reluctance to release films without promotional support from the actors. Even though the strikes concluded in November, most of the films that were moved out of the fall, from September to December, did not make it to theaters in January or the first quarter. I anticipate things will mostly return to normal by the end of the second quarter. We are managing well, and the impact is diminishing month by month, but it did affect us in Q4. I’m very proud of our team for achieving these results despite the challenges.

That's great. The digital department, fourth quarter is usually the seasonally strongest. Can you talk about how you felt about the performance in the quarter and with the addition of Dubov and YA? Can those be meaningful contributors to the department and the company overall in 2024?

Yes, I’ll go in the order you asked the questions, but a resounding yes on the second one. Yeah, the digital department had a strong Q4. They hit their goal. I’m also proud of that team, Ali Grant, Sarah Boyd, Kirsten Weinberg, Belinda Sztrom, because we merged them pretty socially in September. That’s a heavy lift, and anybody that tells you differently has just never done the process; it’s a big distraction to management. We really wanted it to be done in September because going into that fourth quarter, which is the heavy selling season, you didn’t want that hanging over your head. We certainly didn’t want to do a merger in Q4 and rebrand the company. They did all of that work and then still maintained a very steady ship in Q4. I’m very happy with the results of the digital department at the end of the year there. Going forward, I really tried to make it an emphasis and signal to the market that this is an emphasis for us, obviously, the growth of the digital department because it has so much growth potential. I talked about it on many previous earnings calls. We’re starting to realize that it’s growth now because GlowLab, as an example, is when you bring in a team, Susan Yara built a nice little influencer marketing company with 15 dermatologists or so, and that just immediately establishes the skincare group. Brands pay big for credible, authentic voices in that space, and we think there’s room to grow in that space. The beauty category in general, skincare is a big component, but haircare is even bigger. Cosmetics is a separate category, just to give you a sense of how big this could get for us, and we’re excited to expand that group by itself. A smart move for us.

Thank you. One follow-up on the digital department. I don't know how you answer this or what the probability is, but our government is talking about potentially maybe banning TikTok or making it harder for them to operate here. How do you think about that? If that happens, what impact might that have?

Well, for us, I take no position on whether it will or won’t, as you gathered too. I don’t know, but it comes down to individual creators. The digital department has three divisions. We manage individual talent and take a percentage of their revenue. We have a brands division, where we represent brands and design influencer marketing campaigns for them and execute them. And we have an events division. On the events division, platforms don’t impact us. On the brand side, the brands will just adapt and then shift their ad dollars from a TikTok campaign to an Instagram campaign or a YouTube campaign, and we’d be managing it anyway; it won’t have an impact. On the talent side, there will be some talent out there in the world that are only on TikTok or primarily on TikTok that’ll be impacted, and those will have to transfer their following over most likely to either YouTube as a video platform. Unfortunately, the digital department is weighted heavily on Instagram. What we want to do with moves like this YA roster is diversify and get a little bit more balanced with TikTok and YouTube. Fortunately, it shouldn’t have much of an impact on us at all if TikTok goes away.

Thank you. I'm excited about Blue Angels coming out, as a lot of people are. I'm curious, it looks like the time that it’ll be in the IMAX theaters is shorter than what I thought. Was there a different thinking of how long it would be in IMAX versus then going to Prime?

It’s not that it leaves theaters, and I apologize – we could have made that clear, Allen. It’s not that it leaves theaters. It’s just that it’s only in theaters for that first week and then it can continue its run on. I understand Amazon at first was debating whether it was a July 4th release or a Memorial Day release, and Memorial Day weekend is the kickoff of movie-watching and movie-going. They didn’t want to lose that opportunity. So we certainly understand that. That’s the weekend we premiered Top Gun two years ago. Memorial Day is the time for fighter jets to be in vogue again. The Blue Angels, in real life, have some high-profile shows over that weekend as well. So, we know we can promote heavily around the film that weekend. The thought was to launch it exclusively in IMAX May 17. Let it run as long as it intends to run in other theaters potentially too after that first week when it’s only available on IMAX, but then have Amazon be able to have viewership numbers that capture excitement around the film.

That explains it well; thank you. With IMAX, how are you thinking about the next potential partnership or the next movie? Is that likely a 2025 event?

Yes, we think so too. As you can imagine, you’re not the first person to ask. We’re excited to hopefully share the next partner movie with IMAX as soon as we can. You can imagine with this and there’s no shortage of people looking to partner because maybe it’s worth noting too: I think I said it on these earnings calls, when we formed this partnership, I’m unaware of any other deal in the industry that guarantees a theatrical release for a documentary with IMAX. It’s a big spectacle; we’re going to need to come up with a catchy phrase for that, but like with the Super Group, we’re looking for big theatrical documentaries. If this movie delivers on that promise, it’s a great first movie. When you’ve got a hit out of the gate, it’s really just a matter of choosing what do you want the next big one to be. So, yes, we think we will have an announcement obviously this year for something that could either be filmed or released in 2025. You start getting to a regular cadence with that.

That's great; thank you. For MasterCard Midnight Theater and Hidden Leaf, your comments there of looking to change the venue of Midnight – were you saying that didn’t perform to expectations? Were you referring just to the restaurant or the restaurant and MasterCard Midnight Theater?

We really want to try and bring in an operator for the restaurant. It’s very hard to have a successful venue, including theaters, if the restaurant isn’t hitting its goals. It felt like the right time to put in a new concept if we can. That’s why we’ve prioritized the search and are talking to groups actively to see if we can find a new concept for the key summer and fall seasons. Now there’s no assurance that a deal will close, but we have identified the first group that we’d like to bring in. We’re working hard to close the deal in the next few weeks.

That's great. Just finishing up with a few finance questions. I know you haven't given guidance. Are you able to give anything qualitatively, if you think you might be able to grow revenue? If so, what would be the drivers?

Sure. I’m happy we beat our beloved analysts’ expectations for Q4; we hope to do that again here in Q1. The two drivers, which won’t come as a surprise, given our prepared remarks for the last three years, right, each year we've added a new member to our group. It exponentially increases the number of collaborations that can occur, right? I think Tim Johnson from Bart pointed out to me the mathematical formula to do it, but we only have one company. You can’t cross-sell with anybody. When you have two, it can only go in two directions. When you get to three, there’s like six different strings to the spider web. Now we’re up to effectively six marketing companies and an operating film production division. So we’re exponentially more intricate and Special Projects plugs in beautifully as an additional offering. There have been no less than half a dozen introductions to potential new clients for Special Projects in the last week or two alone. The idea is that organic growth will be strong. But now, look where we are with our ventures. Q2 is going to be pretty big; the next earnings call is on May 15. We think we are having a strong Q1 with a film coming out a couple of days after. What’s exciting is that each one of those can represent very large revenue exits in time or immediate like Blue Angels. We have a couple of those in May, and if you’re trying to keep everybody abreast, this is very exciting for us.

Right. Okay. That’s it for me. Thank you very much.

And a springboard off that one idea too, Allen, I should have said: on the digital department, we announced Susan Yara and GlowLab in January. We announced the YA in February. We don’t think we’re done. We think there may be another announcement or two this year, and there’s so much growth in new spaces for the digital department. Each of those may not be as big as our Blue Angels or hopefully Staple Gin with Rachael Ray, but they’re meaningful and they could launch new businesses for us as well. We expect to have some announcements on that front as well too. Thank you for your time and questions, Allen.

And we have no further questions in the queue. I will now turn the call over to Bill O'Dowd for closing remarks.

Thank you everyone for listening. It's nice to be here at the 10-K for 2023, reiterating the welcome to special projects, a company that in a short period of time has grown to be very special in my heart. I just think the world of Nicole and Andrea and their entire team. I hope I was given the time right. Very high-quality people, very strong workers, and they built a beautiful company. I’m excited for what will come with special projects; it should be more of a feature of these calls probably in the second half of the year. Overall, obviously, the company has a little bit of a buzz about it, a little bit of a swagger given Blue Angels and the drop of the trailer that’s in theaters in just a few weeks. Thank you all for joining today, and I look forward to the next call. Thank you all very much.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.