Earnings Call Transcript - DLPN Q3 2021

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the Dolphin Entertainment Third Quarter twenty twenty one Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It's now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.

James Carbonara, Host

Thank you, and once again, welcome to Dolphin Entertainment’s third quarter twenty twenty one earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the safe harbor statement for forward-looking statements described in the Private Securities Litigation Reform Act of nineteen ninety five. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within Section 27A of the Securities Act of nineteen thirty three and Section 21E of the Securities Exchange Act of nineteen thirty four. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risk factors and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed reports on Form 10-Q as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. Now, I’d like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

Bill O'Dowd, CEO

Thanks, James and hi, everyone. Good afternoon, and thank you for joining us today. As always, we'll start with the review of some financial and operating highlights, followed by a full financial review and then open it up for Q&A. So from a financial highlights perspective, the momentum from the first half of the year carried through to the third quarter. Looking at the P&L, we have set another new record with nine point four million dollars in revenue, up seventy percent year-over-year, with an absolutely fantastic forty one percent year-over-year organic growth from existing subsidiaries. Please note that this follows Q2, which set a record of eight point six million dollars in revenues, which followed Q1 which itself had a set a record of seven point two million dollars in revenues. Next, looking at our operating income, which is the metric by which we gauge ourselves. It's positive for the second consecutive quarter even when including the non-cash expenses of depreciation and amortization. To reiterate positive operating income from a microcap entertainment company, even including the D&A expense from our acquisitions. What's also nice is that we are EBITDA positive through the first nine months of the year, even while investing in our 2.0 initiatives. Okay, let's turn to the balance sheet. We have a record cash position of twelve point seven million dollars, which is an increase of sixty percent compared to December thirty one, twenty twenty. Also, we now have significantly more cash than all debt combined, including long-term debt. Furthermore, let's look at our working capital after reaching a peak working capital deficit at the end of twenty nineteen of just under sixteen million dollars, as we borrowed to pursue our acquisition strategy to build our Super Group. We're now reporting a working capital surplus standing at four point five million dollars, which is more than triple the working capital surplus as of June thirty. And of course, since we're a cash positive company, we expect the surplus will only continue to grow. Our balance sheet today, less than two years removed from our peak working capital deficit, can only be fairly described as possibly our biggest strength when compared to our microcap peers. I'd like to reiterate the reason this is so important to us is because that working capital surplus gives us the muscle on our balance sheet for the next set of acquisitions and 2.0 investments. For acquisitions on the same terms of any of the six we've already done, for example, we will be able to pay the cash component for any of them from cash currently on our balance sheet. Furthermore, we have not needed to borrow money or do a drawdown on our S-3 to fund the development of our NFT business. In short, this perfectly illustrates the better mousetrap we feel we've built with Dolphin. A growing cash positive core business in Dolphin 1.0 that is capable of self-funding the majority of investments in the development costs of the big potential upside opportunities of Dolphin 2.0. Now let's move to some operational updates on our Super Group, the companies that are making those great numbers happen. Let's start with Shore Fire Media. Dolphin’s industry leading music PR firm, which is having an absolutely terrific year. Shore Fire helped the concert and event business to relaunch by publicizing forty tours year-to-date from artists in all genres. The Nation's largest festival, Milwaukee Summerfest and the reopening of nationally recognized venues, including New York’s legendary Blue Note and the award winning Brooklyn Bowl in Nashville. Shore Fire client, Angelique Kidjo, was named one of Times 100 most influential people; Carole King and Todd Rundgren were inducted into the Rock & Roll Hall of Fame; and athlete Chris Bosh was inducted into the NBA Naismith Hall of Fame. Shore Fire's corporate clients, including North America's leading live stream shopping platform network, tech-focused digital fan engagement company, Mandolin, and reservations technology platform, Lyte, have won best-in-class awards recently in SaaS company, Forbes, Ad Age, Adweek and Rolling Stone, thanks to Shore Fire's efforts. Okay. How about 42West, Dolphin's Entertainment PR Powerhouse? While speaking of September, that's Emmy's month and 42West's extraordinary range of work for programs and individuals put their clients in position to receive a total of 19 Emmy nominations. Just to highlight a couple, the company's work on the Amazon series, The Boys, led to multiple nominations, including for outstanding drama series. Also, as a result of 42West campaign efforts, the acclaimed music documentary, Billie Eilish: The World's a Little Blurry earned a total of four nominations. Turning to BHI, the division of 42West with a particular focus on entertainment consumer products and gaming, BHI was engaged by Fandom, the world's largest fan platform and number one source for in-depth information on pop culture, entertainment and gaming, to execute comprehensive publicity efforts for increased brand awareness and overall business growth. For context, Fandom is an entertainment and gaming juggernaut, reaching more than three hundred and fifteen million unique visitors each month across two hundred and fifty thousand fan power communities with thirty million pages of content to get thirty billion page views per year. Moving along to Be Social, Dolphin's influencer marketing group. Be Social launched its Showroom concept, hosting a two-day Summer Showroom in West Hollywood, participating brands include Bondi Sands, EyeBuyDirect, MATE The Label, and Peach and Lily, among many others, with key creators in the beauty, fashion, and lifestyle spaces in attendance. Those who follow our company closely know that I'm a big fan of this initiative and I'm going to ask how influencer showrooms work. While, the model of the showroom concept is pretty simple. Brands pay a fee to be included in the showroom and work with Be Social on selecting products that are carefully tailored towards the influencers attending. From there, Be Social handles all event production in addition to spearheading influencer outreach. Be Social uses their own in-house roster talent, along with their team's longstanding influencer relationships to drive traffic to the event. Influencers are gifted the products from each participating brand during the event and then Be Social monitors all social coverage secured from the event for a full month, sending each brand a tailored report outlining all social placements secured for their products as a result of the event. Hopefully, that helps provide context for the showroom concept we intend to scale in twenty twenty two. Next up, Viewpoint Creative, Dolphin's respected creative relations agency and video production boutique. Viewpoint joined forces with the Leary Firefighters' Foundation to create and distribute content commemorating 9/11 and the twenty years since the attacks. More than a tribute to the heroes who fell that day, the content recognized Legacy Firefighters, who continue to struggle with the fallout, and how the FDNY has improved systems and processes based on the events of 9/11. We're always very proud and willing to highlight this type of work that Viewpoint does. And last but not least, let's talk about The Door, our leading culinary, hospitality and lifestyle PR firm. The integrated marketing division that The Door is doing great work for their consumer products clients, and the culinary and hospitality teams are fresh off promoting the New York City Wine & Food Festival last month. But truth be told, I saved The Door for last in order to allow them to service a bridge into Dolphin 2.0 since Charlie, Lois and the entire Door team are playing an essential part in both of the 2.0 initiatives we're going to talk about today. So let's go. Let's talk about Dolphin 2.0. As a reminder for anyone new on the call or to the Dolphin story, we define the work of our Super Group under Dolphin 1.0 as the very best at marketing pop culture. And we define what we call Dolphin 2.0 as using pop culture to market assets that we own. What type of assets do we want to own? Easy, ones where our expertise in marketing gives us the greatest likelihood of success. We want to own what we know we can market better than anybody else. That's why last month, we announced a major Dolphin 2.0 initiative, the acquisition of an ownership stake in Midnight Theater, a contemporary variety theater and restaurant that will anchor the four point five billion dollars development from Brookfield known as Manhattan West. It's across Ninth Avenue from Moynihan Station to the East and across Tenth Avenue from Hudson Yards to the West and only a short walk from the Javits Center, New York's preeminent convention facility. We feel the Midnight Theater is being built in the very best location in Manhattan. Okay. So, let's talk about the venue. The Midnight Theater features three distinct experiences for the guests. The theater itself, a separate pan-Asian restaurant called Hidden Leaf and a ground-level cafe. Let's take the variety theater first. It's an intimate, luxury, state-of-the-art one hundred and sixty seat theater, which as the name implies, will have a rotating schedule of a wide variety of performances across music, comedy, broadway and magic shows. The Midnight Theater also has built-in live stream capabilities, allowing for events inside the theater to expand beyond into people's homes and corporate offices. The theater will be available to host live stream podcasts, comedy specials, music events, corporate keynote events and more. Hidden Leaf is the modern pan-Asian restaurant concept on the second floor of the Midnight Theater space led by renowned restaurateur Josh Cohen. Many of you know several of Josh's Brooklyn hotspots, including the Italian mainstay, Lilia, one of the most in-demand restaurants in all of New York City. For the Midnight Theater, Hidden Leaf will feature a seventy five seat dining room, twenty seat private dining room and a forty seat lounge bar area. Hidden Leaf will be open for lunch and dinner and will incorporate world-class food with interactive elements such as table-side prep, wine consignments and memberships. And the bar is where you'll be able to find James Carbonara every Tuesday, Wednesday, Thursday and Friday nights. For Dolphin, the Midnight Theater is the most exciting live venue concept we have seen in a very long time. It will be a truly modern variety theater paired with a fantastic restaurant, which is a combination that is missing in the cultural landscape today. It is in the final stages of construction, and we expect to open by the end of the first quarter of next year. Dolphin will manage all aspects of publicity and marketing for the venue, both restaurant and theater, as well as facilitate talent and commercial relationships within both the entertainment and culinary industries. As we look to own assets wherein our specific marketing expertise will give us a greater likelihood of success, it is hard to imagine anything more in our wheelhouse than a world-class restaurant for The Door to publicize paired with a state-of-the-art variety theater that will program musical performances, Broadway cabarets, comedy acts and magic shows, all of which Short Fire and 42West currently promote. And of course, we'll be sure to have Be Social bring a steady stream of influencers as our guests and post about the great time they had afterwards. Playing Dolphin's marketing strength is what Dolphin 2.0 is all about, which is also why we launched our NFTs business in twenty twenty one. I know many of you saw our big announcement this morning. Before we talk about that specifically, I'd like to take us back through the two key milestones in the past three months that positioned us to make today possible. First, our partnership with FTX U.S., which we announced in August. For any that need reminding, FTX is a leading cryptocurrency exchange and wallet provider with over one million active users and over ten billion dollars of average trading volume per day. With access to FTX's platform and wallet services, we can now aggressively pursue our ambition to develop and program global NFT collections targeting all of Dolphin's verticals, including the sports, film, television, music, gaming, e-sports, culinary, lifestyle and charity industries. With the technical development well underway, we then turned our attention to the creative side of the coin and brought in award-winning visual designer Anthony Francisco a few weeks ago in the newly created post of Creative Director to develop and execute numerous NFT series involving original and existing IP. Anthony came to us from Marvel Studios, where he was the Senior Visual Development artist responsible for designing iconic characters across the Marvel Cinematic Universe such as Baby Groot, a personal favorite of many of the Dolphins, Loki and Dora Milaje, the female warriors in Black Panther. In short, we feel we won the lottery for our NFT business by securing FTX as our technical partner and by bringing in Anthony Francisco as our creative lead. And together, that has enabled us this morning to announce the launch of Creature Chronicles: Exiled Aliens, Dolphin's first generative NFT collection, which will feature ten thousand unique custom crafted avatars of an ancient race of aliens designed by Anthony Francisco. Each Exiled Alien avatar will fall into a specific alien hierarchy, assigned traits, and randomly generated. The collection is available for viewing today, right now, at creaturechronicles.io and is slated for minting in December. Now, we intend Creature Chronicle to be a multi-season NFT event. After the release of Exiled Aliens, the community and fan experiences will continue to evolve and grow while the storyline develops and new NFT drops are released during upcoming seasons. Dolphin will ensure that Exiled Aliens community members will enjoy a wide range of benefits, including limited edition NFTs, master classes with Anthony Francisco and friends, creative competitions with incredible prizes, private events, and future surprises, all leveraging Dolphin's world-class relationships across the creative community. Furthermore, holders of Exiled Aliens avatars will receive priority status for the purchase of future seasons of Creature Chronicles. We are pricing each Exiled Alien at two hundred dollars, which includes both the NFT avatar and inclusion into the ongoing Creature Chronicles community with all the benefits I just mentioned. Users can purchase Exiled Aliens directly on-site through a simple registration process, which establishes a proprietary FTX U.S. wallet for each user. The user's FTX U.S. wallet allows for payments to be made via credit and debit cards as well as a wide variety of cryptocurrencies, including Sol, Ether and Bitcoin. The NFTs will be minted and stored on the Solana blockchain, a leading Proof of Stake blockchain that is recognized as faster, more efficient, lower cost and more environmentally friendly than its Proof of Work competitors, notably Ethereum. So, there it is. All of us at Dolphin are really excited that this day has come, and we can share our very first NFT collection designed to launch our first community. We are obviously playing to the strengths of Anthony, and he has delivered the graphic art within the Exiled Aliens collection is absolutely breathtaking. And no offense to the aliens, but we don't believe there is a better visual artist in our shared universe than Anthony. We think this collection will appeal to the existing NFT enthusiasts while also serving as an entry point to those who are curious about NFTs and want to dip their toe in with something really cool from a world-class designer. And quite frankly, we're excited to program for the community, which will allow us to play to our strengths and offer benefits and access to the worlds of entertainment and pop culture that are simply unique in the marketplace today. Sunday, Midnight Theater and Exiled Aliens in one conversation. We're extremely pleased with these first two Dolphin 2.0 initiatives. And hopefully, today's conversation shared some context as to why they were chosen to lead Dolphin to this new era of ownership of assets that we are marketing. Any Dolphin 2.0 opportunity is judged by its ability and success to serve as a major catalyst for our company. We feel these first two certainly have tremendous growth potential with Midnight Theater's possibility to expand into other cities and with our plan to launch NFT collections across all the industries at Dolphin companies currently market. By the time we jump on the earnings call for our 10-K, we would hope to have Midnight Theater open and everyone on this call scheduling their first visit, and one or two more NFT collections launched and community activities for all of them well underway. And we're not stopping. We have more 2.0 initiatives in the final stages of closing that we anticipate announcing before the end of the year. Our Dolphin flywheel is turning and momentum is helping us to gain speed. We feel that our marketing companies are the very best in their respective industries. Quite frankly, I think that's almost impossible to argue and there is no shortage of attractive partners and opportunities for us. The 2.0 pipeline is strong for NFT and non-NFT opportunities alike, and we will pursue those first that we believe will create the most shareholder value. In closing, I would like to remind everyone that these 2.0 investments are on top of a growing 1.0 business that has led to record revenues for three quarters in a row, including seventy percent year-over-year revenue growth here in the third quarter. Two consecutive quarters of positive operating income even after the non-cash expenses of depreciation and amortization from our acquisitions and a record level of cash on hand, over twelve million dollars, in fact, which is approximately three million dollars more than all remaining debt combined, including the long-term debt. We are profitable and growing with a beautiful balance sheet, and now we are launching Dolphin 2.0 in earnest. These are the days that we've been dreaming of since we uplisted to NASDAQ almost four years ago and began assembling the Super Group. Thank you for joining us. To that end, I'll now turn it over to Mirta.

Mirta Negrini, CFO

Thank you, Bill, and good afternoon, everyone. I will now discuss results for the quarter that ended on September 30, 2021. Revenue for that quarter was approximately nine point four million dollars, compared to approximately five point five million dollars for the quarter that ended on September 30, 2020. Overall operating expenses for the third quarter of 2021 were about nine point four million dollars, compared to roughly six million dollars in the third quarter of 2020. Operating expenses include direct costs, payroll and benefits, selling, general and administrative costs, depreciation and amortization, and legal and professional fees. Direct costs for the third quarter of 2021 were about nine hundred and ninety two thousand dollars, compared to approximately five hundred and seventy five thousand dollars in the same period the previous year. Payroll costs were around five point nine million dollars in the third quarter of 2021, compared to about three point six million dollars in the third quarter of 2020. Selling, general and administrative expenses for the third quarter of 2021 were approximately one point five million dollars, compared to about nine hundred and fifty thousand dollars in the third quarter of 2020. Legal and professional fees were about four hundred and ninety nine thousand dollars in the third quarter of 2021, compared to around three hundred and seventy three thousand dollars in the third quarter of 2020. Operating income for the quarter ended September 30, 2021, was around thirty eight thousand dollars, which included non-cash items from depreciation and amortization of approximately four hundred and seventy five thousand dollars, compared to an operating loss of approximately four hundred and ninety three thousand dollars, which included non-cash items from depreciation and amortization of about five hundred and fourteen thousand dollars for the same period the previous year. Net income for the quarter ended September 30, 2021, was approximately one hundred and forty two thousand dollars, compared to a net loss of about one hundred and thirty eight thousand dollars for the quarter that ended September 30, 2020. For the three months that ended on September 30, 2021, we had basic and fully diluted earnings per share of zero point zero two dollars per share based on seven million seven hundred and forty thousand eighty five weighted average shares outstanding. For the three months that ended on September 30, 2020, we had basic loss per share of zero point zero two dollars per share based on six million six hundred and seventy six thousand four hundred and five weighted average shares and fully diluted loss per share of zero point zero four dollars per share based on six million nine hundred and twelve thousand eleven weighted average shares outstanding. Cash and cash equivalents were twelve point seven million dollars as of September 30, 2021, compared to seven point nine million dollars as of December 31, 2020, not including restricted cash of approximately five hundred and forty two thousand dollars and seven hundred and fourteen thousand dollars in each period, respectively. That concludes my financial remarks. I will now ask the operator to open the phone lines for Q&A. Operator, can you please poll for questions?

Operator, Operator

Thank you. The floor is now open for questions. Our first question comes from Allen Klee from Maxim Group. Your line is live.

Allen Klee, Analyst

Good afternoon. Congratulations on a strong quarter. I wanted to start off with the NFTs, it really seems like you've put a business together now that could have an impact next year. How do you think about kind of, is there a way to think about how the opportunity is here? Thank you.

Bill O'Dowd, CEO

Sure. Well, thank you, Allen. Thanks for the kind words. Yes. We were thrilled with the progress, even since Q2 on the numbers to get stronger. NFT, yes, it's an exciting business. I think we really wanted this announcement before we did our earnings call to be able to talk about and let people go check out, I mean, it’s up and there today to see what we've been building on the technological side with FTX to allow us to sell directly on our own sites, each branded site if you will, and be able to take credit cards as well as every form of crypto. Not just the single form on the blockchain that we're using. We're thrilled that it's Solana. We think Solana has so many advantages and as speed and environmentally friendly are two big ones for us, but we're excited for today. In terms of scaling, you can see that this type of product is very exciting for us. The idea of a community-based NFT system sell ten thousand memberships if you will and get a whole bunch of cool stuff. We think that plays to our strength. We can program the cool stuff part. If you're interested in animation graphic design, who better than somebody like Anthony Francisco to do master classes with to program around. Imagine, if we did special screenings with any of the movies that Anthony worked on and talked to you behind the scenes, what he did for them in some of the story decisions. So imagine sweeps and prizes that result in all-expense-paid trips to come to time we have teams of people at every summer. You can imagine we go to other verticals, whether it's music, movies, television, sports, what we can do, we're already at The Grammys, The Emmys, The Oscars, the Super Bowl. I think we think of the NFT business, as community-based. And I think if you talk to people on the inside, I'm talking about the blockchain, the competitive marketplaces, etc., how long pure art for art's sake will last is an open question, but everyone agrees that the future of NFTs is in utility, but the NFT allows you to do something or receive something. And I think that's exactly why we built what we've built and where we just quite frankly feel we have tremendous advantages, an entertainment related NFT community we have access to and can program better than anybody. And so that's what we're excited to roll out to the market. And along the way, by the way, our art's going to look really, really cool because we have Anthony. And so that's what we were launching today. And the next question after this initial launch will be the frequency and the speed that we can get the other verticals up and running. But as we get into the first half of next year, all the major verticals will once have launched. So we're in it for the long haul, but we're excited to start each of the verticals that we already have expertise in.

Allen Klee, Analyst

Is it reasonable to think that the NFT product should be a high-margin product? I mean, it seems that way to me. Could you explain it?

Bill O'Dowd, CEO

Sure. As I mentioned in our numbers, this reflects what we hope will be seen as a better approach by the market. We have significant opportunities with NFTs, which I believe represent the potential for high returns, comparable to top investments in sectors like biotech. We believe our potential is competitive, and we are achieving profitability in the process. We’ve been developing this technology and are already EBITDA positive in the second and third quarters. This suggests strong margins can be anticipated. Many have already recognized the basic calculations; for instance, ten thousand avatars at two hundred dollars each totals two million dollars, allowing for community engagement on social media frequently. This product is intended to be an ongoing series of events, with multiple releases, contests, and sweepstakes, which helps establish a sustainable community for future offerings. We could see another product generating two million dollars in just a few months. The scalability is rapid. Furthermore, once we have several verticals established, envision products in music, film, sports, charity, culinary, and gaming. This could lead to cross-selling between communities, and each vertical can host multiple communities. For instance, in music, there will be various sub-communities. This is an exciting opportunity for us, and we required the capability of FTX and their wallet to facilitate credit card transactions and effectively build on the blockchain on a global scale. Some of our initiatives, including Anthony's, are likely to resonate with international audiences. Today is promising, and I believe it provides a glimpse for those interested in Dolphin's NFT potential to understand what we can achieve.

Allen Klee, Analyst

And just to confirm my understanding of the NFT market, is it true that as a creator of an NFT, you have the potential to earn recurring revenue every time there is a secondary sale?

Bill O'Dowd, CEO

Thank you for your question. To address it, I'll break it down into three parts. Yes, we have a very high-margin business, especially with Exiled Aliens, which is a property developed entirely in-house by Dolphin. We fully own it, and it’s thrilling for us to kick off this project and share our creative vision, which includes a comprehensive storyline. There’s an engaging saga here that fans will want to follow. Think about it like receiving the first issue of a classic DC or Marvel comic; collectors will be eager to gather all ten episodes, and that’s a thrilling aspect for us. That’s what I mean when I talk about future NFT drops. Secondly, we have ongoing revenue opportunities in a couple of ways. One is through those future drops to the same community. We haven't finalized the number of Exiled Aliens episodes yet, but whatever the count may be, as we refine our plans, that represents revenue that can continuously add value for our community. Additionally, each NFT we sell can generate revenue when it’s resold in the open market, as new individuals may wish to join the community, and some of these items will be rare and highly sought after. We will retain a percentage of revenue—specifically seven point five percent—on all future sales.

Allen Klee, Analyst

Thank you. If I look at some of your Dolphin 1.0 businesses, that they should all be benefiting from post-pandemic recovery. And I was wondering, if you could kind of give us a sense of kind of what inning we are in the recovery for some of these. I know, for example, like Live Nation, on their third quarter call, I think they said that their tickets for major festivals were selling out and overall sales were up ten percent versus twenty nineteen, which is pretty amazing. So, I'm just curious for yourselves, how you're thinking about where you are in the recovery and the potential just in some of the areas, just getting back to kind of where you were?

Bill O'Dowd, CEO

This growth has been achieved without a complete recovery. We've seen some recovery, which is encouraging, and we believe it will continue to gain momentum. The motion picture sector has begun to bounce back in theaters, which is positive. We've had popular releases like James Bond earlier this month and Dear Evan Hansen before that, along with other upcoming titles. However, it’s still not back to previous levels. We anticipate that the motion picture business will return to its former state by the second quarter of next year, and it's expected to grow until then. On the other hand, the restaurant sector has not yet fully recovered. We are seeing some signs of improvement, which indicates a promising recovery opportunity for us in 2022. I’m unsure if this will occur in the first quarter or take until spring, but it will have a significant effect on our numbers. This revenue growth has been realized without the restaurant business being back. Importantly, this achievement is a testament to our subsidiaries. We have seen a seventy percent year-over-year increase, which translates to forty-one percent organic growth from existing subsidiaries. This is remarkable growth, and we anticipate further progress as we experience both recovery and continue to strengthen our cross-selling capabilities. Our companies are collaborating more, and with the expansion from having just 42West three years ago to now six companies, we have greater opportunities for cross-selling. This Dolphin 1.0 initiative will only grow as we recover. We are witnessing consistent record revenue increases, moving from seven point something to eight point something to nine point something in successive quarters, which is definitely noteworthy.

Allen Klee, Analyst

And Be Social, it's kind of fascinating how that can kind of touch everything. How do you think about kind of how that expands next year?

Bill O'Dowd, CEO

It's interesting you mention that, Allen, because those who remember from the second quarter of 2020 will recall the joke we made back then that the holidays came early when Be Social joined the Group. Every one of our leading PR firms wanted a sister company that encompassed both marketing aspects. For Dolphin 1.0, I cannot downplay the impact of adding Be Social to the Group. However, when discussing Dolphin 2.0 and its broader reach, Midnight Theater could definitely benefit from Be Social for both the restaurant and the theater. Influencer marketing has become essential for any restaurant or hotel opening today. Additionally, when it comes to NFTs, figuring out how to promote a new offering online is crucial. Moving into 2022, we are excited about consistently engaging Be Social to assist with these launches, as they excel in generating word of mouth and bringing a vibrant appeal. Be Social is a vital and strategic component of our company, and we are fortunate to have such wonderful people in our Dolphin family. We recently had a great cocktail event with them in Los Angeles.

Allen Klee, Analyst

That's great. In terms of Midnight Theater, will there be a point next year where we can get a sense of what the contribution could be? I know it's too early now, but…

Bill O'Dowd, CEO

Yes, I believe so. As we approach the opening, we will have plenty of metrics to assess that. We are very confident in this investment and see significant growth potential. I will provide more details shortly, but we should have some metrics to share by the time of the K call since we will have advanced ticket sales from the theater. We will be aware of pre-opening and likely post-opening numbers, giving us insight into its performance. The variety theater concept is quite intriguing. Casual investors might overlook its benefits. In contrast to a traditional Broadway theater, which relies entirely on the current show, a variety theater features a range of acts that attract diverse audiences. With an intimate 160-seat theater, filling it doesn't require a massive effort to achieve profitability. A variety theater targets a broad audience, offering something for everyone over time. The challenge facing variety theaters is their relative scarcity. This is due to two main factors: the necessity of effective programming and the ability to market multiple acts simultaneously. Fortunately, we possess marketing expertise that combines various genres. Our music PR firm, Shore Fire, represents a wide array of musical acts beyond just pop, including rock, jazz, R&B, and classical music. Many of these acts perform at the Midnight Theater, providing us with dual advantages in marketing and programming. As previously mentioned, we have promotional capabilities already in place for comedy, cabarets, and magic, among others. Our expertise in marketing mitigates common challenges and leaves us with a positive outlook. Each act also brings new audiences to the restaurant, which we can market to in the future while collecting data on what works best. We’ll learn more about audience preferences over time. Moreover, the upside is substantial given the venue's fantastic location. For those unfamiliar with Manhattan West, it’s an impressive new $4.5 billion city block. There's potential for expanding this concept to other cities successfully. The scalability of this model is promising, whether in Los Angeles, London, Nashville, or Miami. In terms of catalysts, New York alone offers significant growth opportunities for a company our size, and expanding to larger markets could yield even greater results. That’s why we found the Midnight Theater concept highly appealing.

Allen Klee, Analyst

Okay. My last question, I find it somewhat financial. How do you feel about your expense structure now staffing and whatever tech spending relative to your revenue growth? Do you think that there's operating leverage at this point in the business model?

Bill O'Dowd, CEO

I think so. We've been preparing for this day. We're nearly fully staffed to expand the NFT business, which I assume is what most people want to discuss, moving from one collection into a series of collections. We plan to add one or two more people in that division, but we have most of what we need in-house now, which is exciting for us. Regarding the NFT business, it's not just a high-margin endeavor—it's actually the highest margin business we have. I hope it will significantly contribute in 2022.

Allen Klee, Analyst

That's great. Thank you so much.

Bill O'Dowd, CEO

Sure.

Operator, Operator

I'd now like to turn the floor back to Bill O'Dowd, CEO of Dolphin Entertainment for closing remarks.

Bill O'Dowd, CEO

I was really expecting to receive more questions this time. Thank you, everyone. Regarding Allen's point, I want to emphasize that we achieved EBITDA positive and positive operating income while we were expanding and investing, which is impressive. Thank you all for your time today. I wish everyone a wonderful holiday season. I'm looking forward to our next conversation in 2022, and hopefully before the 10-K call, we'll find an opportunity for that. In the meantime, you can anticipate a few more announcements from us before the year's end, and we are thrilled about the progress with our first two 2.0 initiatives in the market. And when spring arrives in New York, consider visiting the Hidden Leaf for a drink with James Carbonara. Thanks, everyone. Talk to you soon.

Operator, Operator

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