Good day, ladies and gentlemen, and welcome to the Dolphin Entertainment First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode and the floor will be open for questions and comments following the presentation. Please note, this call is being recorded. It is now my pleasure to turn the floor over to your host, Mr. James Carbonara, Investor Relations. Sir, the floor is yours.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for Dolphin Entertainment's First Quarter 2024 Earnings Call. 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 regarding 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 these will provide helpful information for investors. Reconciliations to the most comparable GAAP 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 Entertainment. Bill?

Thanks, James, and welcome, everyone. I'll start by reviewing some of the key financial and operating highlights from our record-setting first quarter of 2024, and then Mirta will provide a more detailed financial overview before we open it up for Q&A. Starting with the headlines. As you may have seen in our earnings release a few minutes ago, total revenue for Q1 was $15.2 million, increasing 54% compared to Q1 last year and which was also a significant increase of 27% over our previous quarterly revenue record of $12 million established 1 quarter earlier in Q4 of 2023. On the bottom line, we delivered positive adjusted operating income of $1 million. For those unfamiliar, adjusted operating income strips out noncash and nonrecurring items and is the primary metric we use to evaluate our performance. Reporting positive adjusted operating income is tremendously gratifying and validates the success of our strategy, especially compared to the $1.9 million adjusted operating loss in Q1 of 2023. Our positive adjusted operating income of $1 million also represents another significant sequential increase of 236% over the positive operating income of $0.3 million we reported for Q4 of 2023. By concentrating on organic expansion among our top-tier marketing entities and launching complementary ventures at a steady pace, we believe we are strategically positioned for sustained growth in both revenue generation and adjusted operating income, the crucial financial metric against which we gauge our performance. As I said earlier, we believe that this accelerating growth we've reported today highlights the powerful combination of our industry-leading marketing and publicity services firms firing on all cylinders, coupled with tangible payoff as we begin to commercialize our premium content ventures with Blue Angels, simply being the first venture to monetize and have an exponential impact on our financial results. Now that our full group of marketing companies has been assembled with the acquisition of special projects last October, we are developing venture opportunities in earnest. We expect the amplifying impact will grow significantly as the Dolphin Ventures portfolio expands. We believe this strategy will unlock compounding returns and continuous value creation by sustainably getting paid for services while accumulating equity stakes, many times without any capital required from Dolphin. But before getting into the ventures, we'll start with some subsidiary highlights. At 42West, the movie promotion teams helped secure 4 Oscar wins for clients, including Best Animated Film for The Boy and the Heron and Best Visual Effects for Godzilla Minus One. They drove massive buzz and box office returns throughout the valuable award season corridor. Meanwhile, Surefire Media continued its Grammy dominance, representing clients who won a collective 9 Grammys and over 2 dozen total nominations, spanning genres like Pop, R&B, Jazz and more. Both firms play a pivotal role supporting marquee clients at leading film festivals like South by Southwest and event shows like the Golden Globes. The digital department, our specialized influencer marketing division made 2 strategic moves to expand their capabilities. First, they entered into a deal with GlowLab and Founder, Susan Yara to create a new skin care and dermatology influencer practice. Secondly, they partnered with legendary youth talent agency Osbrink to establish a young adult division focused on Gen-Z and Gen Alpha influencers across TikTok and YouTube. Finally, special projects continued its strong momentum, collaborating with luxury brands like Chanel, Gucci and Valentino on product launches and fashion week activations. They had another extremely busy Oscar season running 5 significant events during Oscar's Week, including separate events for such blue-chip clients as Apple, Versace and W Magazine. Shifting gears, I'll provide updates on some of our ventures. As a reminder, for those new to the Dolphin story, Ventures will provide its ownership stakes and assets wherein our form of marketing can provide the greatest influence on the likelihood of success, namely content creation, consumer products and live experiences. Notably, it's worth repeating that we anticipate Dolphin securing ownership stakes in many of these endeavors without the necessity of a cash outlet. Okay. It's a big week at Dolphin on multiple ventures fronts. Let's start with our flagship Blue Angels documentary. We are incredibly excited for the film's upcoming theatrical debut in IMAX theaters this weekend. The marketing campaign is in full swing with the exclusive trailer premiering on the Today Show, generating massive buzz and building audience appetite. Blue Angels has already delivered a substantial financial contribution in Q1. During the quarter, we monetized a significant portion of the streaming distribution rights, generating $3.4 million in revenue. The film will become available for streaming on Amazon Prime starting May 23, perfectly timed to capitalize on the Memorial Day viewing period, which, by the way, is the same weekend that Top Gun: Maverick was released 2 years ago, starring our client, Tom Cruise. And there's another tie between the 2 films. Glenn Powell, who's about as hot as any actor in Hollywood right now, played Hangman in Top Gun: Maverick, and is also a producer with us on Blue Angels, which certainly helps with the promotion. Importantly, in addition to the traditional theatrical window, Blue Angels represents an annuity revenue stream from its extended run in institutional IMAX theaters at museums, science centers and other educational venues around the globe. This institutional theater distribution channel provides a lucrative multi-year box office tail. So that's coming this Friday. What's that? This Friday is too far away for some of you on this call? You can't wait 3 days for a catalyst at Dolphin? What are you, James Carbonara the week of his birthday? Well, today, like right now, fast enough for you? Because consumers can now place preorders for Staple Gin on the official website, and shipments are available starting, you guessed it, right now today to 43 states. In addition to the online launch, Staple Gin is making its way across the state of New York, being introduced in retail stores, bars and restaurants. As a matter of fact, Charlie Dougiello, who is leading the charge for Dolphin in this venture, was just spotted at Staple Gin at Union Square Wine and Spirits not even 2 hours ago. For those new to the Dolphin story, Staple Gin is a new spirit developed by the team at The Door and our client Rachel Ray, crafted in New York's Catskills region by Do Good Spirits. Dolphin has partnered with Rachel Ray and Do Good Spirits, whereby Dolphin is the official creative marketing partner. Let me just say, Rachel has really knocked this one out of the park. Staple Gin has already gained recognition, being ranked as the highest rated American Gin in VinePair's 30 Best Gins for 2024 guide with an impressive rating of 94 points. Please remember, folks, this gin was rated before going to market and has received the highest score given by an industry heavyweight publication. That is an incredible result. And that's all with its retail price point suggesting that it's only $39.99. Needless to say, this gin has caught the attention of gin enthusiasts and has been praised for its clarity of aromas and flavors. The partnership between Dolphin and Staple Gin signifies a strong alliance between the entertainment marketing industry and the world of spirits. We believe our collaboration will elevate the brand and bring Staple Gin to a wider audience through innovative and creative marketing strategies. The enthusiasm for monetization in the liquor space has been palpable, driven by the remarkable success stories of celebrity-backed spirit brands like Ryan Reynolds' Aviation Gin and George Clooney's tequila Casamigos. These high-profile exits have demonstrated the immense potential for substantial returns on investment and have fueled excitement and interest in the industry. Investors and entrepreneurs are eager to capitalize on the growing demand for unique and premium spirits, making the liquor space an enticing landscape for lucrative exits. 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. We have incredibly high hopes for Staple Gin, as you can imagine, fingers crossed that we've got a hit on our hands. Finally, in talking about our Ventures, I would like to say a few brief words about Mastercard Midnight Theater. As you heard me say on our Q4 earnings call just a few weeks ago, we have narrowed down all of our choices for a new operating partner for the restaurant theater to a preferred group. We are in the final stages of working on that deal and anticipate we can make an announcement within the month of May. That will be an equally exciting piece of news for us. So how is that for the anticipation of 3 major ventures milestones all in 1 month? To recap, Q1 2024 achieved record-setting financial results while making meaningful strides in monetizing our equity ventures. Moreover, those results are just beginning. Going forward, as we secure equity ownership and an increasing number of new ventures, we believe the growth potential becomes exponential. As we seek to enter multiple venture opportunities in the next 2 to 3 years, this unique model allows us to rapidly scale a portfolio of equity-owned opportunities with minimal cash investments required, which is to say that while we believe today's results validate our strategy, we are really just getting started. Envision the amplifying impact on our top and bottom lines as our venture's portfolio expands to include a dozen or more ownership stakes using this low-cost approach. Simply put, and in one sentence, we believe that our ability to sustainably replicate this strategy unlocks a future of compounding returns and value creation. With that said, let me turn it over to Mirta to review the quarter's financial details. Mirta?

Thank you, Bill, and good afternoon, everyone. I'll start by echoing those comments; we are extremely pleased with our record first quarter financial performance. I'll now dive into Q1 2024 financial results in more detail. Total revenue of $15.2 million represents a 54% increase from $9.9 million of revenue in Q1 2023. During the first quarter of 2024, we generated $3.4 million of revenue from the Blue Angels. Operating expenses for the 3 months ended March 31, 2024, were $15.1 million, including approximately $600,000 of depreciation and amortization and $1.8 million of amortization of capitalized production costs related to the Blue Angels compared to $12.5 million of operating expenses for the 3 months ended March 31, 2023, including approximately $500,000 of depreciation and amortization. Net loss for the quarter ended March 31, 2024, was approximately $300,000 and includes approximately $600,000 of depreciation and amortization, $1.8 million of amortization of capitalized production costs related to the Blue Angels, and $500,000 of interest expense. This compares to the net loss of $3 million for the same period in 2023, which includes approximately $500,000 of depreciation and amortization, $400,000 of interest expense, and $100,000 of equity losses in unconsolidated affiliates. Loss per share was $0.02 based on 18,477,825 weighted average shares outstanding for basic loss per share and 18,605,702 weighted average shares for fully diluted loss per share for the 3 months ended March 31, 2024. For the 3 months ended March 31, 2023, loss per share was $0.23 based on 12,640,285 weighted average shares outstanding for both basic and fully diluted loss per share. Cash and cash equivalents were $7.5 million as of March 31, 2024, compared to $7.6 million as of December 31, 2023. That concludes my financial remarks. I will now ask the operator to open the phone line for questions. Operator, would you please poll for questions?

Thank you. Ladies and gentlemen, the floor is now open for questions. We have a question from Allen Klee with Maxim Group.

Congratulations on a very strong quarter that handily beat my estimates. A couple of questions. Starting with Blue Angels, you said that it added $3.4 million of revenues. I missed what you said about what the production costs were. But could you give just based on the contractual amount that you're expected to get, what's the incremental amount that you can get and the cost that you would expect in the next quarter or 2?

Sure. Thank you, Allen. Thank you for the kind words at the start of this year. We're very proud of this quarter. It feels great, right? In terms of Blue Angels, I think the next couple of quarters, we may not add revenue or much revenue and much expenses, but where we really kick in is when we can put the film in theaters in IMAX and institutional theaters, which we can contractually do 6 months after it premieres on Amazon Prime. Then we'll get more revenue and allocate more of the production cost against that revenue in a bigger way. Obviously, we still have revenue from there, and there will be revenue generated from theaters this weekend and next week. But we see the big value in the additional revenue for years to come, hopefully, 2 decades to come, from having this movie play in IMAX theaters around the globe in science museums and aviation museums and the Smithsonian and other institutional theaters like that. And we'll continue to recognize that revenue each quarter as that money comes in.

Are you able to say how many institutional theaters you're hoping or you are contracted with the IMAX for it?

Sure. Yes. We think there will be somewhere between 150 to 200 of those theaters, and hopefully in perpetuity. Of course, we're projecting, Allen, but this is a major motion picture documentary, right? It's going in big IMAX going into Memorial Day. It looks great. I've seen it, of course, a few times now. It's just a stunning documentary. So if it's already best-in-class, we feel for a theatrical experience, you can imagine how it compares to the average science documentary in a museum. It's night and day. And it's very contemporary. It's very now. So shot with IMAX cameras of today and not cameras of 20 years ago. So we think it's going to have a very, very long tail, is my point.

That's great. So if I take your revenue, which was $15.2 million, and exclude the Blue Angels, it was still about $11.8 million, which was above my expectations. Would you highlight that as outperformance? And maybe following up on this, this is a quarter where... Go ahead, sorry.

No, my apologies, I don't mean to interrupt you. Yes, year-over-year, we're still up over 20%, or about 20%, I should say. So yes, everything is coming together. We have a complete team, and they are effectively cross-selling. I want to give special recognition to Amanda Lumberg and 42West; their movie division had a very strong first quarter due to the Oscar Awards and the campaigns we were running. That can be a lucrative business. We're proud to represent Martin Scorsese's film, Killers of the Flower Moon, which, while it didn't win the Oscar, received multiple nominations. The Phantom team and the movie division did an outstanding job with the film that won Best Animated Feature, which was an upset over the Spider-Man animation. Additionally, Godzilla Minus One had an incredible campaign that won Best Visual Effects, despite having a budget of only $15 million. The VFX budget for competitors was higher than our entire movie budget. They had an exceptional quarter, and significant work is being done across all these firms, which are market leaders for a reason. I also mentioned special projects; they are hosting multiple events during New York Fashion Week with blue-chip clients and doing the same during Oscar week. With clients like Apple, Versace, and W Magazine, they are bringing in some of the biggest celebrities in the world for these events. So, they had a very strong first quarter, especially during those two weeks.

Thank you. The digital department, which focuses on social influencing, is expected to have its strongest performance in the fourth quarter, although it typically sees a decline in the first quarter. However, you have introduced two new areas of focus, skincare and young adults. I'm curious about how you perceive the potential significance of these two new sectors.

Sure, we selected those two areas, and we have a third one on the way. We believe it will be impactful. I want to acknowledge Susan Yara and Olivia, who is currently managing that division, as they effectively integrated an existing business into our platform. This immediately generated revenue and profit. We have a strong presence in the female Instagram market, supported by a full roster of influencers. Skincare tends to attract a predominantly female audience among both influencers and followers, primarily on Instagram, along with some engagement on YouTube and TikTok. They were able to fit right into our platform because we already had a group of 15 influencers being managed, and we just integrated the manager along with the influencers, resulting in an immediate impact. This group is on the verge of becoming our largest vertical, yet there’s significant room for growth; we could potentially double the size of the skincare segment alone. Additionally, we can explore other beauty verticals since the overall beauty market exceeds $100 billion, encompassing cosmetics and hair care, which is possibly the largest category. Each of these verticals matches the size of skincare. Thus, this area has vast potential, and aligning ourselves with a top group establishes us as a significant player instantly. Regarding the young adult market, our partnership with Osbrink has dramatically reduced the time it would take to develop this area independently. Osbrink is a leading group in young talent, and while we foster connections with brands interested in young influencers, we already have a strong lineup of talent. GlowLab has entered the young adult market with its established brands and partnerships with dermatologists. This demographic has immense potential, as many successful influencers, like Kylie Jenner, have emerged from it. She is recognized as the youngest billionaire on Forbes due to her cosmetics line and is primarily known as an influencer, along with various college athletes and Disney Channel stars. This segment holds significant promise as we strengthen our brand collaborations.

That's great. Could you discuss Staple Gin and your partnership with The Door, along with another partner? What's happening on the marketing side and how do you feel about that?

Sure. Charlie Dougiello and the team at The Door developed this product in collaboration with Rachel. I've learned a lot throughout this process. For instance, gin is crafted from a specific recipe, and what better way to kick off a consumer products category than with a beloved figure like Rachel Ray, who has a massive following across America? She has been a staple on daytime talk shows and has been responsible for over 30 million meals for nearly 20 years. Recently, she also signed a significant deal with A&E networks for hundreds of hours of programming each year. Rachel is truly authentic in her approach to cooking, having written the recipe for Staple Gin and creating recipes to pair with it. It's impressive that she jumped right into the market with confidence, as reflected in the rankings from VinePair. Charlie took a bold step by submitting our gin, which wasn't available yet, and it received the highest score—though there were a few others that tied. This achievement speaks volumes about the effort Rachel put into getting the flavor just right, with unique influences from her experiences in upstate New York and Italy. When the team searched for the right distillery, they chose Do Good, a distillery in upstate New York, where Rachel spends time in America. They took her recipe and executed it excellently, making it available for purchase, including in Manhattan.

That's great. How do you feel about the ability of manufacturing and distribution? And where will it be in retail in New York?

Certainly. Many investors are particularly enthusiastic about this because it’s not speculative. This is not an industry where success might lead to an exit; these are products designed for exit. There have been numerous successful exits over the past decade, and The Door has supported their share of these products during their time as the marketing partner. Our team is experienced in this process. We will maintain a regular schedule of announcements, with the next major update likely being the announcement of our national distribution partner. Those familiar with Rachel and the liquor industry might already have a strong idea of who this partner is based on past relationships. Nonetheless, this will be a significant announcement for us, as we anticipate this partner will help us scale our gin nationally. In New York, this same partner is working on placing the product, aiming for hundreds of locations throughout the state. Charlie recently visited three stores in Union Square, and he reported that two of them are already carrying Staple Gin, which is encouraging. Typically, placements happen in cycles; for example, stores might take time to rotate their shelves after placing an order, which can lead to a gradual rollout. We will announce details about our distributor and the number of stores in New York, and as we experience success, we will look to expand into other markets across the country. When people start noticing our product in various locations, it signals that we are reaching a scale that attracts interest from potential buyers. The exits in this space can be significant; for instance, Ryan Reynolds sold his gin for approximately $610 million, and Clooney made $1 billion from Casamigos. The Rock is on track to surpass them with his tequila. There are also several other successful brands that have been sold for amounts between $100 million and $500 million. We are excited about this opportunity, as it could mark the beginning of a diverse portfolio of liquor brands for us.

That's great. If I look at your different companies that you own and the divisions, I think I heard you say that your movies and acting was strong and you were strong within Blue Angels. As we think just seasonally, is there any reason to think that any of the segments might show some seasonality in the next 2 quarters compared to this quarter? Or do you think it's kind of like a steady type of growth?

The first half of the year is generally not as strong as the second half for most of our companies, and that's something we expect to continue for the foreseeable future in our core business. However, as we pursue these new ventures, we anticipate that it will help stabilize our performance. For instance, having several successful ventures, like our recent success with Blue Angels, can yield great results; we've already made a significant profit from that film before it even hits theaters. Moving forward, as we develop consistent income from these various ventures, it's important to note that we often don't have to invest any money upfront. Instead, we receive ownership stakes for our marketing efforts and typically also get a monthly cash retainer. While these ventures should help balance our revenue over time, achieving that balance will take a couple of years. Historically, we see stronger performance in the second half of the year, specifically in influencer marketing, which is influenced by the holiday season as brands typically want to leverage influencers to boost their holiday sales. So, we expect to see some seasonal effects. However, when we assess the year overall, we feel optimistic about our performance in terms of revenue and adjusted operating income. With Q1 starting off strong, it's difficult to foresee a poor year ahead.

I have a financial question. If I look at what you did for operating expenses in 1Q, are there any areas that or overall, you think we should think about that might go up or down as we go through the year?

In the direct cost, because those correlate with the revenues of the film. So for instance, in this quarter, we've got $3.4 million of revenue for Blue Angels and we have $1.8 million of the amortization of the deferred production costs. So that number is going to vary depending on the revenues that we recognize.

That amortization of the deferred loss that happens over what time period?

Over the time period that we expect the revenues to be recorded. So it's based on a ratio of the revenue that you are reporting in this period over what you estimate the total revenues for the project are going to be. So whenever we report revenues, we apply that formula to what's left of the deferred production costs, and that's what gets expensed.

Does this get added back to adjusted operating income?

No, we did not add that back.

But it's a noncash cost or it's a cost...

It's a cost that we.. Correct, correct. We've reported in the past that we had invested over $2 million in the project. So that's already been paid for, and it's capitalized in our balance sheet undercapitalized production costs.

Okay. So you had invested over $2 million, and you recognized $1.48 million of the amortization this quarter, and the rest of it will be over whatever the life is of the assumed life of the project.

Correct. Whenever we report revenues.

Okay, let me summarize a few other points. Do you think this year you might identify a partnership similar to the Blue Angels with IMAX? Also, how do you view the future of special projects and the potential for additional investments in 2024?

Sure. Regarding the middle question, we are enthusiastic about special projects. It's a small company with 11 people based in New York and L.A., yet they manage the largest events in our industry and excel at what they do. Nicolai Liberia and Andrea Liberia are exemplary executives who embody the qualities we seek at Dolphin. They are intelligent, strategic, and genuinely good people, and I have a lot of positive things to say about them. They will play a more significant role within Dolphin, especially in areas such as ventures, content like Blue Angels, and consumer products like Staple Gin, with live events being another important category. While all our marketing firms and the digital department have experience in live events, special projects focuses on this exclusively. The strategic acquisition of special projects last October was aimed at complementing our core offerings by cross-selling with existing clients and aiding us in creating and producing events we may own or co-own. I believe we will announce our first event before year-end or very early next year, and I feel optimistic about its timing. Moving to the next Blue Angels, I would love to announce it today. It would have been perfect to do so now, especially during Cannes Film Festival week, where we've had success in the past. One of our clients is presenting a film, and another, Studio Ghibli, is receiving a career achievement award, which is fantastic. Nevertheless, we aren't ready to make that announcement yet. We're focusing on a potential filming project with James Carbonara, which we think could work well on IMAX. We are committed to building a production pipeline to ensure we don’t just have the next project but also the one following it. Our confidence stems from the success of Blue Angels, which demonstrated the significant value of theatrical release for streaming platforms. Interest from multiple streaming services shows that this approach is unique in the market. We share your eagerness for the next project. Regarding other ventures, Charlie Dougiello is diligently working on The Door. We are assessing opportunities, particularly in the liquor sector, and we believe we can meet our goal of introducing one new venture annually, possibly two in some years. We're also striving to launch a skincare product in the market by 2025. Our aim is to maintain this pace going forward, starting next year, and I truly believe we will announce our first live event this year. Live events will be an important aspect of our strategy, and our goal is to cultivate them into annual traditions. By the time we reach the fourth or fifth event, we will have a foundation to add more in different categories. Although live events will be the last segment added to our portfolio, they are equally crucial to our strategies in content and consumer products.

Okay. Great. Well, thank you so much.

No. Thank you, Allen. You always ask the most insightful questions and allow me to expand on our strategy. So, thank you.

Thank you. As we have no further questions on the line at this time, I will hand it back to Mr. O'Dowd for any closing comments you may have.

Well, thank you, everybody that's listening. Obviously, we're very proud of this quarter. It is the first quarter of the year. It's the first quarter where we've had our whole group together. This is our first full quarter. We obviously had a blowout quarter. It's not going to happen very often where you set a revenue record by 25% over the previous record. So we know that. We will have a glass of Staple Gin in celebration and go right back to work, right? We're excited. As I said on the last couple of calls, we see ourselves at the starting line. And we're not even there yet. Honestly, we're building to get to the starting line in live events, and it's only going to get better from here in consumer products and content. So we know what we've got within our company. We're very, very proud of our company. We're excited for our company, and this quarter proved it, of what we can do when we have the whole group together and we start monetizing some of these ventures. For a company of our size, we think we're as exciting an opportunity as there is in the market. Thank you all for the time, and I appreciate it, and look forward to speaking again with Q2 in August. Thank you, everybody.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.