Greetings and welcome to the Dolphin Entertainment Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. Please note this call is being recorded. I will now turn the conference over to your host, Mr. James Carbonara with Hayden IR. Sir, the floor is yours.

Thank you, operator. Good afternoon and thank you for joining us today for Dolphin Entertainment’s second 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, please go ahead.

Thanks, James, and welcome everyone. I’ll start by reviewing some of the key financial and operating highlights from our record-setting second 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 Q2 was $11.4 million, bringing first-half revenue to $26.6 million. We expect the second half of the year to be even stronger than the first half, positioning Dolphin well for fiscal year 2024 revenue to exceed our goal of $50 million, as we aim for more than 20% year-over-year growth. On the bottom line, in Q2, our adjusted operating loss was $100,000. In the first half of 2024, we generated a positive adjusted operating income of approximately $900,000. As you would expect, we remain on target to report positive adjusted operating income for full year 2024 and beyond. Thus, we expect to enjoy the next phase of financial flexibility for Dolphin, as we no longer have the singular focus of the acquisition strategy that we've employed since uplisting to NASDAQ in 2017 and now expand our focus to growing margins and cash flow, while we build businesses such as sports and seize opportunities, including within our Ventures strategy. More on that in a little bit. Turning to operating updates, just last month, in what is technically our third quarter, Dolphin announced the acquisition of Elle Communications. Elle is a leading PR agency, specializing in social and environmental impact. Elle joins our publicity and marketing group as a division of 42West and will work well and share clients alongside our other preeminent PR firms, Shore Fire Media and The Door; our influencer marketing agency, The Digital Dept.; and celebrity and booking event agency, Special Projects. All of them are going to benefit from having Elle as a sister agency. Based in Los Angeles and New York, Elle works at the intersection of Impact PR and the entertainment industry with a client roster of mission-centered brands, non-profits, philanthropic foundations, including, I might add, celebrity foundations, social enterprises, CSR teams, sustainably and ethically made products, activists, and leaders. Elle Communications brings 16 years of experience and unmatched relationships to the Dolphin Entertainment family. Many of our existing clients already care about using their celebrity influence or access to pop culture to attempt to put good out in the world or to amplify the messages of those that already do. With Elle, we now have greater resources to keep this work in-house and to greatly expand it with our referrals and relationships. Thus, this acquisition further strengthens Dolphin's capabilities in the rapidly growing impact investing industry, which currently manages over $1.1 trillion in assets worldwide. Many of you on the call also know it's a passion point of mine, as I'm blessed to sit on the Board of United Way Worldwide, as well as the Leadership Council of United Way. And those positions have allowed me to witness the work that many of the non-profits, large and small, do both in the United States and globally. And we're excited to be able to bring some of the power of the celebrity and influencers and access to pop culture, as I just mentioned, to this world in a more organized way with Elle. We're excited to welcome the passionate and innovative minds of Elle Communications' entire senior leadership team and staff to Dolphin Entertainment. Shifting to subsidiary highlights in Q2, 42West led multiple award-winning campaigns at the 2024 Tribeca Film Festival, with clients winning best performance in a U.S. Narrative Feature and Best Screenplay in an International Narrative Feature. During the festival, 42West marketed the premiere of HBO's new documentary feature, Wise Guy: David Chase and The Sopranos, directed by Alex Gibney. I love that show. 42West also supported the world premiere of Megalopolis, the new feature from longtime client, Francis Ford Coppola; and GKIDS' Ghost Cat Anzu at the 77th Cannes Film Festival. We've had a real run at Cannes in the last few years. Many people will remember that two years ago, we had Top Gun premiere there. Last year was Killers of the Flower Moon. So, for three years in a row, we've had a major release at Cannes. During the 2024 Television Upfronts, 42West championed clients receiving renewals, including The Boys, Conan O'Brien Must Go, The Conners, and Lopez vs. Lopez. Additionally, 42West Fandoms & Franchises division, led by the incomparable Shawna Lynch, spearheaded highly successful campaigns for three AAA video games, namely: Funko Fusion, Alien: Rogue Incursion, and MultiVersus. Shore Fire, our music PR firm, also kept up the beat as clients celebrated several milestones, with the Dave Matthews Band being successfully nominated for induction into the Rock & Roll Hall of Fame, and Kylie Minogue making Time Magazine's esteemed TIME 100 list. Warren Zeiders won Breakthrough Male Video of the Year at the 2024 Country Music Awards, and Brittney Spencer delivered a stellar performance with Parker McCollum at the same event. Shore Fire also announced the promotion of five staff members to key leadership positions, reflecting their growth and expanding roster. The Door's tastes were also once again exquisite and charitable in Q2. Client campaigns included promoting the launch of Newman's Own Pay What You Want pizza truck, with all proceeds benefiting the Newman's Own Foundation. Four Twenty Five, a Jean-Georges Restaurant, became one of the newest additions to the Michelin Guide. The Door also supported Carbone Fine Food's launch of The Sales Rep Jacket. I know many people on the call are from New York and know Carbone and Jean-Georges Restaurants. The Sales Rep Jacket was the first piece of an exclusive capsule collection. And Staple Gin, a Dolphin partnership with the longtime Door client, Rachael Ray, also landed a spot on Vine Pair's 30 Best Gins in the World, receiving a rating of 94, the highest score received. More on Staple Gin in a minute. The Digital Department, or TDD as we call them, was once again highly influential. I love what James Carbonara does there with the wordplay, executing a comprehensive influencer strategy for Crocs' latest product line, the Getaway Sandals, garnering impressive results. TDD was also selected to join Ulta Beauty's 2024 Beauty Collective. Furthermore, TDD talents Mariyah and Peter Gerber launched their new clothing collection, The Match Me Boutique on Amazon. Finally, our Special Projects team made their mark on the CHANEL Tribeca Festival Arts Dinner, supported Infatuation's EatsCon L.A., and led an incredible night at the Peabody Awards, in each case booking notable celebrities and industry leaders to attend the events. These achievements demonstrate the exceptional work being done across our subsidiaries, and I commend the whole Dolphin family for their dedication and success. It never ceases to amaze me with the consistent output of work they do for leading entertainment clients. Shifting gears, I'll now provide updates on some of our ventures. As a reminder for those new to the Dolphin story, Ventures will provide us ownership stakes in assets where our form of marketing can provide the greatest influence on the likelihood of success. Specifically, while we are open to a wide range of opportunities, the assets we are most interested in are 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 any cash outlay. First, our film Blue Angels has achieved a remarkable milestone in Q2. We released it the week before Memorial Day weekend in IMAX theaters and across the $2 million market, the box office. Very strong result for a documentary. I believe it's the best opening weekend of the year for documentaries, and it debuted at number one on Amazon Prime Video over the Memorial Day holiday frame. That's of all movies on Amazon, not just documentaries. It's always nice to start a multi-year partnership with a hit right out of the box. Both IMAX and ourselves are thrilled with the results of Blue Angels. Later this year, we expect to begin putting the film into IMAX institutional theaters around the country, generating an annuity for Dolphin for years to come. You may recall that these theaters and museums, and cultural institutions like The Smithsonian, we are delighted with Blue Angels and hope to have a follow-up project to announce on our next earnings call after the fall film festival and development season. Congratulations, though, to Emerson Davis and all the hardworking people at Dolphin Films. That project was a real hit. It's always nice to have a home run on your first at bat in a new partnership. I'm also thrilled to announce the launch of Staple Gin, the first product developed by Dolphin in partnership with one of the A-list celebrities on our talent roster. This recipe-driven spirit, created by culinary icon Rachael Ray and crafted in New York's Catskills region, won Double Gold and a 96 point rating at the 15th Annual New York International Spirits Competition, which we announced this morning, and is now available nationally via e-commerce at www.staplegin.com and in New York State at bars, restaurants, and retail destinations via Southern Glazer's Wine & Spirits, with additional markets to follow. As I'm sure everyone on the call knows, Southern Glazer's Wine & Spirits is the world's preeminent distributor of beverage alcohol. Southern is the largest wine and spirits distributor in the United States, with operations in 44 states and Washington D.C., with 24,000 employees and $26 billion in revenue as of 2023. I'd also like to point out, they're a proud Miami-based company, as is Dolphin. I'm also very pleased to announce that we selected Oak View Group, a global leader in venue development, management, premium hospitality services, and 360-degree solutions, to manage operations at Mastercard Midnight Theater. This strategic partnership with Oak View Group will ensure the highest level of service and experience for our patrons at this iconic venue. Oak View is almost finished with the renovations, and the Mastercard Midnight Theater will be fully open for lunch and dinner with a full slate of shows in the theater right after Labor Day. Looking ahead, we anticipate making an announcement later this year regarding the first of Dolphin's owned or co-owned live events set to take place either late this year or in 2025. This marks a significant step in our strategy to expand our presence in the live entertainment sector and create new revenue streams. Our entry into live events will mark the final vertical of assets to own in our Ventures strategy, along with content like Blue Angels and consumer products like Staple Gin. These developments underscore Dolphin Entertainment's commitment to delivering exceptional content, products, and experiences across multiple platforms. By leveraging our talented roster, forging strategic partnerships, and exploring new opportunities, we are well-positioned for continued growth and success. In addition to the exciting venture developments, we expect the second half of this year will witness Dolphin's strategic expansion into sports as a new vertical. This will also mark a new era for Dolphin, one in which we can build businesses, as well as buy them. We believe the sports industry is as large and dynamic as the entertainment industry and that the two go together like peanut butter and jelly. We expect that launching our services into the sports world will also provide a vast array of fresh Ventures opportunities with sports-related content, sports-related consumer products, and sports-related live events to be developed. We believe that expanding into sports and acquiring Elle to create immediate growth in Impact PR are two examples of Dolphin demonstrating its agility and adaptability in a rapidly changing market. We are excited about the opportunities that we expect both sports and impact to bring to our existing businesses and vice versa, and remain committed to delivering exceptional results for our clients and stakeholders. We look forward to providing more details on our sports initiatives, following a formal announcement prior to our Q3 earnings call. In conclusion, we believe that Dolphin Entertainment's record-breaking financial performance and impressive subsidiary achievements in Q2 2024 demonstrate our unwavering commitment to organic growth. Furthermore, we believe that our acquisition of Elle and expansion into sports demonstrate our commitment to growth through opportunity and innovation. As we continue to deliver exceptional content, services, and experiences across multiple platforms, we remain steadfast in our mission to create long-term value for our clients, partners, and shareholders. With a strong foundation, a talented team, and a clear vision for the future, we believe Dolphin Entertainment is poised for continued success in the years to come. With that said, let me turn it over to Mirta to review the quarter's financial details.

Thank you, Bill, and good afternoon everyone. I'll now dive into Q2 2024 financial results in more detail. Total revenue for the second quarter of 2024 was $11.4 million, representing a 4% increase from the second quarter of 2023. Operating expenses for the three months ended June 30th, 2024, were $12.6 million, including approximately $600,000 of depreciation and amortization and $191,000 related to the impairment of goodwill. This compares to operating expenses of $18.5 million for the same period in 2023, which included approximately $500,000 of depreciation and amortization and $6.5 million of impairment of goodwill. Net loss for the quarter ended June 30th, 2024, was approximately $1.6 million and included approximately $600,000 of depreciation and amortization, $191,000 of impairment of goodwill, and $500,000 of interest expense. This compares to a net loss of $7.8 million for the same period in 2023, which included approximately $500,000 of depreciation and amortization, $6.5 million of impairment of goodwill, $500,000 of interest expense, and $100,000 of equity losses in unconsolidated affiliates. Loss per share of $0.08 per share based on 19.4 million weighted average shares outstanding for basic loss per share and 19.6 million weighted average shares for outstanding diluted loss per share for the three months ended June 30th, 2024. For the three months ended June 30th, 2023, loss per share was $0.60, based on 13.2 million weighted average shares outstanding for both basic and fully diluted loss per share. Cash and cash equivalents were $9.8 million as of June 30th, 2024, compared to $7.6 million as of December 31st, 2023. I will now ask the operator to open the phone lines for questions. Operator, would you please poll for questions?

Thank you. At this time, we will be conducting a question-and-answer session. Thank you. We have a question from Allen Klee with Maxim Group. Your line is live.

Yes. Hi. Good quarter. Good job. Could you remind us how to think about seasonality, if there is any, in the third quarter versus fourth quarter?

Sure. Thank you, Allen. I appreciate that. We feel positive about our second quarter. It's encouraging to see year-over-year growth. The fourth quarter is consistently our strongest quarter because our influencer marketing business, which accounts for about 20% to 25% of our revenue, tends to be more robust in the latter half of the year, particularly in Q4, as many brands prefer to launch influencer campaigns during the holiday season. As a result, we experience a dip in the first half of the year. This year, the first quarter was bolstered significantly by a portion of the Blue Angels revenue. Thus, while Q2 showed improvement compared to last year, we anticipate Q3 will be even stronger, and naturally, Q4 will remain our best quarter. There is definitely some seasonality that benefits us in Q4.

Okay, that's great. You also mentioned, in the second half, a plan to go into sports. Is the thought to do that organically? I thought I heard you say that.

Yes.

Is it like from a PR perspective or other things, too?

Thank you for that question. I want to emphasize that we are building this business part by part, and we are pleased with our current acquisitions. We are happy with the team we've assembled, and for the first time since 2016, there are no acquisitions planned. It might be time to reassess our current capabilities. Regarding sports, we intended to build this regardless. There are limited management companies for athletes, which is our unique approach. Initially, we will treat sports and athletes as influencers, as they are today, and we'll delve into this business similarly to our influencer marketing agency, representing athletes and sportscasters, typically taking about 20% of their revenue from the deals we secure for them. This will be our entry point into sports. The advantage of such a vast industry, besides its substantial growth potential, is that these athletes, as they become brand ambassadors, will want PR services, and we can host events or assist them in events we manage in the entertainment sector. There's a significant crossover in this field, reminiscent of the influence of athletes like Michael Jordan since the early days of advertising. With the Supreme Court's ruling on NIL laws three years ago, college athletes have become influencers and earn income through this. We are excited to enter this business and are mentioning it today because we plan to make an announcement before the next call detailing our launch partners and plans in this area. We are very enthusiastic about this opportunity.

Yes. It's remarkable how positive the Olympics were and how much certain athletes' brands have grown. Many of them already had brands, but it seems like they expanded in a really nice way.

Yes, the world has changed significantly. It would be fantastic if Dolphin launched with one or two Olympic athletes. When I mention the world changing, I previously referred to my experience as a tall athlete. I played college basketball at Creighton, and back then, student-athletes couldn't receive any money or even take summer jobs. Now, the landscape for college athletes regarding compensation has flipped, allowing them to earn money through influencer opportunities. The same goes for the Olympics; Paris is considered a highly successful Games. The IOC has adjusted their rules, which used to be extremely strict— they would even sue anyone for merely mentioning the Olympics. They still enforce it to some extent, as it protects their trademark and intellectual property. In the past, athletes weren't allowed to share posts or use social media during the Games, but now they can do so freely, except for live streaming from certain areas. The relaxation of these rules is seen positively for the Games, and having athletes like Simone Biles prepare for major competitions boosts excitement. This creates numerous opportunities in sports, particularly with brands eager to use social media for promotion, whether through celebrities, influencers, or athletes. It's become clear that brands likely don't differentiate between these groups, as they all have the potential to attract audiences.

Makes sense. Okay. I was curious about something theoretical that you might not be able to answer exactly. You mentioned wanting to announce another IMAX partnership. Is there a general guideline on how long it takes to produce something after an announcement and start making a profit?

Yes, that's a great question. The timeline can vary based on the subject matter's length. The Blue Angels project took longer since we followed the Squadron for an entire season, which spans a full calendar year. Documentaries typically have a quicker turnaround. If you announce a project in the latter half of the year, you might aim to have it finished by the second half of the following year and potentially in theaters within six months after that. This could mean a release in the first half of 2026, and if everything goes well, we could speed up our process thereafter. However, with documentaries, it's also possible to be in theaters by the fourth quarter of next year if you make an announcement at the end of this year. Ultimately, the timeline depends on the balance of filming new content versus using archival footage, among other factors.

Got it, okay. And then, as you mentioned, this is something that can't be precisely answered, but you handled it well previously. The live event that you don't have yet might be viewed as a potential source of recurring revenue. Is there a way to consider it in terms of how it could significantly impact the margins relative to your existing business today?

We're less than a year into our collaboration with Special Projects, which began on October 2nd of last year. I may not have kids, but I remember the start dates of all our companies as if they were birthdays. Currently, we've successfully integrated Special Projects with our PR firms and influencer marketing agency, and they're collaborating effectively, with client referrals flowing both ways. Our next focus, starting in the spring and continuing into the summer, is to design our first event, likely in collaboration with media publications, to boost awareness. Our goal is to create events that can become annual ventures, which would generate recurring revenue. If we can establish an event that repeats successfully every year, we can create a steady income stream, similar to what we expect from the Blue Angels. There’s the potential for further growth if we develop additional events. Events can vary widely in cost and expected returns; for instance, there are events with a total cost of $1 million aiming for $0.5 million in profit, while others may cost $5 million with hopes for $2 million in profit or more. Take Comic-Con as an example, which began small but now attracts over 100,000 attendees and generates significant revenue over four days in San Diego. In summary, we're considering annual events that could provide consistent revenue rather than one-off occurrences.

Okay, great. On the last call, you talked about that you could potentially also look at launching, like, another skin or beauty product and maybe another liquor-related product. Are those things you're still thinking about?

Yes, I was referring to the possibility of announcing a second consumer product venture before the year ends, specifically in the second half of the year. We have committed to developing a range of these products over the next three to four years, aiming for more than six or around a dozen. We could potentially launch one liquour product annually. Skincare is set to begin in 2025. Most likely, the second product this year will be related to liquor. We're excited to introduce another consumer product before the year concludes. These products are within our marketing expertise, primarily in liquor and skincare, among other areas where we can form partnerships without investing cash upfront. Instead, we gain an ownership stake and a share in the success of these ventures while we develop them into consumer products to sell, which might take three to five years. The market for liquor brands, whether associated with celebrities or not, is very active, with numerous startups being acquired each year by major distilleries. Skincare follows a similar trend. To recall our past discussions, we collaborated with Susan Yara and her team after she exited her brand, which sold for $355 million following successful influencer marketing. We're eager to have skincare products ready by next year, starting with Staple Gin this year, and we hope to introduce two to three more products annually thereafter. Within a couple of years, we could have a well-rounded portfolio with potential exits occurring one or two years later, which would be fantastic.

So, following up on your comments on the liquor category, is there any public source that we can look at to track how Staple Gin is doing?

That's a great question, Allen. Typically, there would be sources under subscription services that could provide insights. Marvin Shanken has some excellent publications in that realm, particularly the impact newsletter. I've known Marvin for years, and he is a respected authority in that area. We can point you to additional information, but it's off to a promising start. To use an Olympic analogy, I couldn't be prouder. We're three months in, and it's already winning many awards, with distribution starting in New York and now announcing Southern. This is significant because Southern is the leading player in liquor distribution in the United States, with a strong national presence across 44 states. The Olympic analogy I’d like to use involves a talented 12-year-old gymnast winning every competition in her state; she may become an Olympian, but that won’t be known for another three years. That’s where we currently stand with Staple Gin. All signs indicate that the product is exceptional. Having quality as a cornerstone is crucial for any successful consumer product, and we have that. The number of awards it is receiving just three months after launch is remarkable. Experts, excluding me, believe it tastes fantastic for gin. With a strong product and effective marketing through The Door and Rachael Ray, along with distribution via Southern, we have an excellent formula for success. The next couple of years will be intriguing for this product as it has had a fortunate start, but we need to achieve more performance in the coming quarters.

Thank you. My last question is, how do you think about operating leverage in terms of what you're thinking about for growth in expenses relative to what's going on with revenues?

Yes, I think we're at the point now with an acquisition strategy no longer being our focus. We're going to see, and we expect to see margin expansion and growth in cash flow, which is exciting. You've got your base, so if we can increase revenues by X%, much higher margin is going to fall to the bottom line. We're focused on that as a company and really see the spider web of internal referrals and organic growth increasing year-over-year. You're seeing it now. Look again at how we measure ourselves, Q2 last year was a fine quarter, but it had an adjusted operating loss of $1.9 million for the first half of last year, while this year we have an adjusted operating profit of $900,000. That's almost a $3 million swing year-over-year for the first six months of this year, and yes, Blue Angels has impacted that, but basic operations impacted that as well. We're going to see that in the second half of the year too. Our goal has been pointing to finishing the group at the end of 2023 would lead to adjusted operating income for full year 2024 and revenue of $50 million or more. We've had over $26 million of revenue in the first half of the year, and we've almost got $1 million of adjusted operating profit in the first half of the year. We think we're going to hit both those goals this year, and each subsequent year should only grow. That's without Ventures; that's without any of these lottery tickets working. Once we get two or three years from now and we start exiting, we believe then all bets are off at that point. Yes, that's how we think about it. We're focused on margins and cash flow, and it's really nice to say that. To further answer that question, it’s just really nice to not worry about financing for the next acquisition or financing for certain aspects of operations. We feel very good about where we're at, and in this environment and microcap environment, we think we've got a great story to tell because of just that factor alone.

No, that's great. You all are putting together a nice operation, and everything is coming together now. So, that's wonderful. Congratulations. Thank you.

Thank you, Allen.

Thank you. As we have no further questions in the queue, I will hand it back to Mr. O'Dowd for any closing comments he may have.

I was verbose on a couple of those answers this time. But thank you all of those who are out there listening and following our story throughout the year. We've got a couple more pretty decent catalysts, we think, coming in the second half of the year, sports being the biggest, and looking forward to making an announcement before we speak again. We'll go into great detail on it on the Q3 earnings call. Dolphin is in the sports business and that's very exciting for us. Thank you, everybody, for listening, and we'll talk in three months.

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