Dolphin Entertainment, Inc. (NASDAQ:DLPN) This fall 2023 Earnings Call Transcript March 28, 2024

Dolphin Entertainment, Inc. isn’t one of many 30 hottest shares amongst hedge funds on the finish of the third quarter (see the details here).

Operator: Greetings. Welcome to the Dolphin Entertainment Fourth Quarter 2023 Earnings Call. At this time, all contributors are in a listen-only mode. A matter-and-answer session will observe the formal presentation. [Operator Instructions]. Please be aware, this convention is being recorded. I’ll now flip the convention over to your host, James Carbonara of Hayden IR. You might start.

James Carbonara: Thank you, operator. With me on the decision are Bill O’Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I’d like to start the decision by studying the Safe Harbor assertion. Please be aware that statements made on this name are usually not historic details — that aren’t historic details could also be forward-looking statements. vital dangers and uncertainties that would trigger precise outcomes to vary from these expressed or implied within the forward-looking statements are detailed within the firm’s annual report on Form 10-Okay and supplemented by subsequently filed quarterly studies on Form 10-Q, in addition to in different studies that the corporate has filed with the SEC. Any forward-looking statements made on this name are made solely as of right this moment’s date, and the corporate doesn’t undertake any obligation to replace or complement any such statements to mirror subsequent developments.

Now I wish to flip the decision over to Bill O’Dowd, CEO of Dolphin Entertainment. Bill, please proceed.

Bill O’Dowd : Thanks, James. That was the shortest Safe Harbor assertion you’ve got ever learn in your profession. I do know persons are hoping you may come again on the finish of the decision. Hi, everybody. Good afternoon. Thank you for becoming a member of us right this moment. As at all times, we’ll begin with a evaluation of some monetary and working highlights, adopted by a full monetary evaluation after which open it up for Q&A. So from a monetary highlights perspective, income for This fall was a report $12 million quarterly income report for Dolphin Entertainment, a rise of 8% year-over-year. I’m immensely happy with the Dolphin workforce. We managed to attain its finest income quarter ever regardless of enduring two extended industry-wide strikes. Even extra impressively on the underside line, the workforce delivered constructive adjusted working revenue of $300,000 within the face of such headwinds.

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This is essential to notice. So I’m going to pause right here and add that adjusted working revenue is the first metric by which we measure our enterprise. It’s what I have a look at first in any P&L I acquired from right here. We outline adjusted working revenue, as our working revenue or loss after eradicating any non-cash, or non-recurring revenue or bills. In different phrases, when you go to our reported working revenue or loss and again out all non-cash and nonrecurring objects, how did we do? Reporting constructive adjusted working revenue is extraordinarily gratifying, clearly. And now that we’ve our Super Group full with the acquisition of Special Projects and with our expectation of continued synergies and natural development, mixed with the launch of our ventures in earnest, we imagine that we are going to proceed to have and broaden constructive adjusted working revenue on a steady annual foundation.

Very thrilling. And it is good to share with everybody how we have a look at our enterprise and the metric if it is a non-GAAP metric that we use. So, talking of particular initiatives. I do know we mentioned the acquisition at size on our Q3 name, however the transaction did occur in This fall. So, simply a few extra bullets on them. As a short refresher, I’ll simply level out the Special Projects based by the superb {industry} leaders, Nicole Vecchiarelli and Andrea Oliveri, is a number one company in expertise bookings and movie star curated occasion manufacturing with workplaces in Los Angeles and New York. Their spectacular consumer roster contains prime manufacturers like Apple, Chanel, Condé Nast, Wall Street Journal, amongst many, many others. With this strategic addition, Dolphin goals to launch or accomplice on our personal dwell occasions in addition to capitalize on cross-selling alternatives and synergies throughout our numerous corporations.

And talking of our different corporations, I’ll now flip to some working highlights. 42West helped purchasers safe 4 wins on the 96th Academy Awards and acquired two dozen nominations, whereas boosting international curiosity for The Boy and the Heron and Godzilla Minus One. I’m going to go off-script for a second, as a result of I simply bought to provide a public spherical of applause to the 42West film promotion workforce. The Boy and the Heron was an amazing achievement to win an Oscar for within the animated movement image class. I do not know if that is the primary time that or have to be one of many first instances {that a} film that was at American received that class to beat out Spider-Man animated film was an actual achievement. Congratulations that 42West groups and a separate workforce have been selling Godzilla Minus One, Best Visual Effects Oscars which they received for that total film at a finances of $15 million.

And I feel each film they’re competing towards had a Visual Effects finances larger than $15 million, large job, getting the academy to see the film and selling the highlights of the Visual Effects — excuse me, so, nice job 42West. Moving to Shore Fire, Shore Fire which additionally constantly does nice lead PR work, representing purchasers who collectively acquired 9 Grammy Awards, in over two dozen nominations throughout numerous classes, showcasing its rosters range in a number of genres and main {industry} occasions that acknowledged each Film and Music. Each of 42West and Shore Fire Media, often characterize their purchasers. This was evident in This fall and year-to-date with each businesses orchestrating over half a dozen PR campaigns for purchasers on the 2024 South by Southwest Film Festival, a few weeks in the past they usually additionally achieved notable success at 81st Golden Globe’s, contributing to purchasers securing a number of awards and receiving over 1,000 nominations.

Love it, when our businesses work collectively and have success at award exhibits like that. The Door, switching to them, celebrated Eight Consecutive Years Representing the Food Network New York City Wine & Food Festival introduced by Capital One. Additionally, they added new consumer GSC from Jada [ph] to Lawrence’s for an Emmy award-winning our Television Personality and New York Times best-selling cookbook writer. What does she do restaurant tour entrepreneur? They added GSC and Jada to its rising roster of elite culinary purchasers in way of life manufacturers particular shout out to Charlie most will come up on this name. Okay. Now let’s discuss in regards to the digital division. I identified in our letter to shareholders in January that this would be the subsidiary of focus for growth through the subsequent few quarters.

At least we imagine that there’s such a chance within the market to ascertain the primary absolutely scaled influencer administration firm with the flexibility to service manufacturers and creators of all age teams on all main social media platforms and in quite a lot of specialties. To that finish, we had two main bulletins in Q1. First, the digital division introduced within the influencer roster of GlowLab to introduce a specialised Talent Management division catering to skincare specialists and dermatologists led by GlowLab’s Founder Susan Yara. Susan is a particularly profitable skincare influencer herself, with our personal YouTube channel and he or she can also be founder, of NATURIUM, a skincare product line which was bought for the low, low worth of $355 million to Healthy Beauty in September 2023.

I level that out, as a result of a part of the technique of inviting Susan and her roster to hitch the digital division, to assist us conceive and develop partnerships to launch skincare merchandise by which we’ve an possession stake. Obviously Susan had a really profitable exit herself in simply over three years. In different phrases in NATURIUM launched in June of 2020 — June of 2020 and was bought in September of 2023 for $355 million. Now it is also price mentioning that NATURIUM’s advertising throughout these three years was virtually solely influencer advertising and PR, each of that are clearly strengths at Dolphin. I’ll dispel any fantasy. We didn’t enter into the settlement with Susan to place James Carbonara because the face of a brand new skincare product line, however we’re excited to launch skincare merchandise.

In addition to bringing in GlowLab, the digital division additionally established a Young Adult Division a YAD Division as we name it, in partnership with the Osbrink Agency. This was additionally a extremely strategic transfer for us. You in all probability noticed the announcement in February. GlowLab was again in January and instantly enhances our attain throughout TikTook and YouTube to enhance our present energy on Instagram. And it launches a completely new age group of influencers for us, teenagers and younger adults. We did so in partnership with the Osbrink Agency which is Hollywood’s premier expertise company for that age group. Cindy Osbrink, somebody I’m proud to name a good friend, the founding father of the Osbrink Agency is nothing wanting a legend, having launched a careers of a whole lot of younger actors over the previous 25 plus years, together with Dakota and Elle Fanning and actually dozens of lead actors throughout Nickelodeon, Disney Channel and have movie.

Unlike 25 years in the past or much more lately after we have been producing films and collection for Nickelodeon, there may be now a factor known as Social Media. I’m joking after all, I’m certain you’ve got heard of it. And so lots of those self same gifted youngsters and younger adults of right this moment have TikTook feeds and YouTube channels of their very own. Simply put, we wish to characterize them, and we wish to introduce them to manufacturers. And by partnering with the Osbrink Agency, we simply saved years of improvement time for that division and went from 0 to 60 possibly even to a whole lot within the snap of our fingers. We introduced the partnership, as I mentioned final month, and we have already got greater than three dozen of those younger gifted social media stars on our roster, and we won’t wait to introduce them to our present model companions and to new model companions we are going to meet who will wish to attain this necessary demographic.

Viewpoint Creative introduced an intensive partnership with the Massachusetts State Lottery, specializing in digital graphic design and animation companies. And additionally they acquired congrats Dave and the workforce for us awards for extraordinary craft that shapes compelling narratives and leaves an enduring impression on audiences. And lastly, particular initiatives hit the bottom working at Dolphin, partnering with the Academy Museum of Motion Pictures for its third annual Gala and continued collaborations with the Wall Street Journal Magazines. Innovator Awards, nice job reserving Travis Kelsey once more and is expertise reserving accomplice and leisure guide for Town & Country’s Annual Philanthropy Summit, which I attended by the way in which, going off script once more and a particular shout out to Charles Darren and the nice work she’s doing in her native South Africa.

It was very spectacular. They additionally collaborated with Chanel, Gucci and Valentina on their respective boutique openings in occasions throughout New York Fashion Week in February in addition to a complete slate different occasions throughout Oscar’s Week, which we’ll spotlight on our Q1 earnings name in six weeks. We bought to say one thing proper. Shifting gears, I’ll now present updates on a few of our ventures and which Dolphin and its shareholders take part. So I’m going to show first to Blue Angels as a result of what per week for that, proper? As some might recall, Dolphin entered right into a multiyear settlement to collectively finance the event and manufacturing of a slate of characteristic size documentaries for the worldwide market. The first venture greenlit was the Blue Angels we introduced it a few years in the past on the Comtel Festival, developed and coproduced by JJ Abrams and his firm dangerous robotic productions; and Glenn Zipperis firm, Zipper Brothers movies.

We then introduced that Amazon Studios had acquired worldwide rights to the Blue Angels whereby we count on it to generate roughly $3.75 million to Dolphin from the acquisition settlement, which might lead to a 75% ROI earlier than the inclusion of any revenues to dolphin from the ticket gross sales from IMAX institutional theaters, offering highly effective validation for our mannequin of additionally taking fairness in initiatives we market. We’re very excited for this movie. It has turned out nice. And so our companions, Amazon has secured an unique trailer debut and promotion on The Today Show final Wednesday. Thank you, our companions in Amazon, very properly reviewed clip that’s extraordinarily that kind of promotion, by the way in which for these curious, that’s extraordinarily uncommon for documentary.

I simply ask any of you. When was the final time you noticed a trailer drop for a documentary on a morning present. When you keep in mind, please let me know. And let me inform you the trailer has been a success. Over 1.7 million views occurred within the first 24 hours. And as of right this moment, per week later, we’re over 9 million views. I imagine this needs to be one of many highest totals if not the best complete for documentary characteristic within the 28 years I’ve been on this enterprise. And after all, it doesn’t depend the variety of instances the trailer has been considered forward of flicks in theaters. IMAX has positioned a trailer forward of dose busters in lots of areas this previous week, and it is going to be forward of the Godzilla King Kong film that premieres tonight in lots of areas throughout the nation as properly.

This precedes the start of an unique run in IMAX theaters beginning May 17. What do you do on May 17? I hope you are going to the movie show see in Blue Angels. It’s a Friday, you may like it with availability for streaming on Prime video starting May 23, proper forward of Memorial Day weekend. Our success with Blue Angels is the results of a deliberate technique to create occasion documentaries on topic issues you wish to see in IMAX theaters. Putting an IMAX digital camera in a fighter jet cockpit and actually seeing the neighboring jet solely 12 inches away, I can’t describe it. Fingers crossed, we predict we’ve one thing particular. And the significance of a theatrical launch in enhancing the movie’s worth for streaming platforms can’t be overstated, given the pre-established viewers consciousness as theatrical launch supplies.

Our cope with IMAX is critical for 2 essential causes. Firstly, it laid the groundwork for the strong streaming sale which has been extraordinary. Secondly, there’s an annuity profit as a result of IMAX’s possession of theaters and museums and usually institutional theaters as we name it. We are eligible to showcase our movie in IMAX institutional theaters six months after it premieres on Amazon. This signifies that as of November twenty third, the movie will be introduced on the Smithsonian Aviation Museum and an extra 150 theaters throughout America. This association creates a gradual revenue stream, an annuity which is sort of outstanding. I needed to ensure everybody understands the importance of it. So by way of financials, we retain a excessive share of ticket gross sales, roughly 25%, since there isn’t any distributor concerned.

For occasion in a theater with 200 seats, of every ticket bought at $10 that is $2000 in income from which we’d earn $500. That’s simply from one displaying in a single theater and there are 150 theaters within the nation, 12 months in a 12 months. So contemplating the movie’s potential to run for a part of or all the 12 months in numerous museums, that is anticipated to proceed for the subsequent decade or two to come back, given the shortage of this kind of content material in institutional venues. Furthermore, with the model of the movie being proven in institutional theaters being solely 44 minutes lengthy, versus the conventional 90 minutes, that can have on May seventeenth and conventional theaters. We can put in additional showings per day. These particulars are essential for stakeholders to know the monetary implications.

You might — you would possibly ask what is the worth of the film institutional theaters and while difficult to specify a precise determine, we anticipate this might generate a whole lot of 1000’s of {dollars} yearly, if no more contributing on to the underside line for the reason that movie has already recouped its investments. So along with the 75% ROI from the streaming sale and our participation in ticket gross sales from the preliminary theatrical run starting May 17, we additionally acquire this annuity put up streaming round starting in November. Very excited for Blue Angels. And if you have not seen the trailer but I hope you get an opportunity to test it out on-line proper now. Switching gig excuse me to MasterCard midnight theater, for these unfamiliar, MasterCard Midnight Theater is the state-of-the-art up to date selection theater and restaurant expertise within the coronary heart of Manhattan neighborhood dubbed Manhattan West.

So usually because the managing member and the venue and is chargeable for the advertising of each the theater and the accompanying restaurant. We have a significant possession stake in MasterCard midnight theater as properly. And it has been very gratifying to see the venue attracting high-profile occasions and partnerships with main manufacturers like MasterCard. The star-studded premieres with Jessica Chastain, Pete Davidson, Kaley Cuoco and Kevin Grant showcased the theaters capacity to attract prime expertise and create thrilling synergies with our PR agency. However, since our grand opening final September and particularly within the usually slower first quarter interval, operations throughout the restaurant cafe downstairs on the theater haven’t met our expectations and is properly understood that with no worthwhile restaurant is difficult to make the venue profitable.

So we’ve prioritized our seek for a brand new operator with a brand new restaurant idea that may finest try and revitalize the area going into the important thing summer time and fall seasons. While there isn’t any assurance that any deal will shut, we’ve recognized the group that we wish to herald and we’re working exhausting to shut a deal within the subsequent few weeks. Acknowledging the challenges of previous six months and going through the uncertainty caused by this potential change or whether or not we will make a change in any respect we determined to impair the asset worth we had on our books viewing it as a chance to reset and probably keep away from future monetary overhang. Turning to our latest enterprise, we’re proud to share that Dolphin Entertainment has partnered with famend culinary character and consumer, Rachael Ray and the esteemed Do Good Spirits distillery to launch Staple Gin.

This collaboration brings collectively Rachel’s culinary experience, Do Good Spirits craftsmanship and Dolphin’s advertising prowess to create a singular and promising addition to the spirits market. Staple Gin because of Rachael Ray for creating flavorful experiences and our many years of culinary information. The botanical recipe developed by Rachael herself guarantees a balanced and intriguing taste profile that displays Rachael Signature Style. Our subsidiary the door which has represented Rachael Ray since 2008 and Charlie and Lowe’s have labored along with her since 2005 have been instrumental in bringing this venture to life, the doorways workforce has leveraged their intensive expertise in advertising wine, spirits and client packaged items, in addition to their long-standing relationships with culinary personalities and eating places to contribute to all levels of Staple Gins developed.

From branding to advertising, PR and commerce relations the door has performed an important function in positioning Stable Gin for achievement. To generate buzz and anticipation for the launch Staple Gin made its first public debut at two prestigious occasions, the New York City Wine and Food Festival and the South Beach Wine and Food Festival. Rachael Ray herself was current at these occasions 0.6 for attendees, whereas Do Good Spirits combined up a Staple Gin cocktails, the response from those that had the chance to style Staple Gin has been overwhelmingly constructive, additional validating our confidence on this new enterprise. Staple Gin has set to come back to market right here in Q2, initially in New York State, at bars, eating places and retail locations, with plans to broaden to extra markets sooner or later.

We are thrilled to be a part of this collaboration and to make the most of the complete vary of selling and PR capabilities that Dolphin Entertainment gives. We imagine that Staple Gin has the potential to turn into a Staple, no pun supposed. That was too simple, proper and in house bars and a go-to alternative for traditional cocktails just like the gin and tonic or good martini. We are extremely excited in regards to the potential of Staple Gin and our partnership with Rachael Ray, she is simply completely pretty. As chances are you’ll know, movie star again spirits manufacturers have seen large success lately. Just have a look at the instance of Ryan Reynolds’s Aviation Gin exit of greater than $0.5 billion and George Clooney tequila model which bought for $1 billion. Moreover, it was reported final month on the potential worth of touring The Rock Johnson’s Teremana Tequila possibly considerably greater, since it’s shifting over 170000 instances per thirty days which is a staggering quantity, good for him.

So as you’ll be able to see in success large numbers are attainable with celebrity-backed liquors might we be as fortunate. While we won’t promise the identical outcomes after all, we imagine we’re enjoying in the identical area and have the advertising experience to provide Staple Gin the absolute best likelihood for achievement. And I simply wish to add that our implausible workforce on the door and once more, Charlie, actually spearheading this has its personal share of expertise and success tales on this area, working with liquor manufacturers from creation by profitable exit, together with current examples of Jefferson’s Bourbon, which was bought to Pernod Ricard in 2019 and 21Seeds tequila was bought the Diageo in 2022. So we’re not precisely overseas to the journey. And as lots of you realize, our firm is at all times in search of progressive methods to leverage our advertising expertise and experience and create worth for our shareholders.

The Staple Gin partnership is an ideal instance of this technique in motion and I wish to emphasize that this enterprise like lots of our different Ventures doesn’t require any capital expenditure from Dolphin. We anticipate this would be the first of many Ventures within the alcoholic – alcoholic beverage area for Dolphin and we count on to pursue comparable deal constructions sooner or later, the place we offer – the place we offer our advertising companies in trade for a share of the upside with out capital funding. As we proceed to pursue most of these Ventures. We imagine the financial advantages of Dolphin will probably be substantial. We sit up for sharing extra particulars on the Staple Gin partnership and our different upcoming Ventures within the spirits area. We imagine that is an thrilling new space of development for Dolphin and we’re properly positioned to create vital worth for our shareholders by our advertising experience and progressive deal construction.

There will probably be way more to come back on Staple Gin on our Q1 earnings name. Okay. Those are some highlights about our Ventures division and circling again then in abstract, in This fall, Dolphin Entertainment achieved report quarterly income of $12 million and constructive adjusted working revenue of $300,000, regardless of the impression of dual {industry} strikes for the primary time in over 60 years. All of our subsidiaries secured high-profile purchasers and partnerships and we additionally acquired particular initiatives. That’s the spotlight of the quarter for me, which completes the unique imaginative and prescient of what we now name the Super Group. And lastly, with particular initiatives added to the fold, we’ve positioned the Company and our shareholders for upside from all three classes of Dolphin Ventures; content material, client merchandise and dwell occasions.

The first piece of content material the Blue Angels documentary hits theaters in six weeks, and is already worthwhile from our sale of streaming rights to Amazon Prime, the place debuts on May 23, as I discussed. For the patron product class, we’ve Staple Gin, hitting the market right here in Q2 and we could not be extra excited. And for the dwell occasions class, we’re actively ideating with particular initiatives, Nicole and Andrea and count on to have the ability to announce the concept for our first owned occasion by the top of this 12 months or in early 2025. All of those Ventures will leverage our advertising experience and we count on the vast majority of them like Staple Gin won’t require capital funding from us. So for all of those causes, Dolphin Entertainment is properly positioned for development and success we imagine, specializing in creating shareholder worth by progressive partnerships and deal constructions whereas working a sustainable working firm, targeted on producing rising adjusted working revenue.

Thank you to your continued assist, and I’ll now flip it over to Mirta.

Mirta Negrini: Thank you, Bill and good afternoon, everybody. I’ll now talk about monetary outcomes. Total income for the fourth quarter ended December 31, 2023 was $12 million, a rise of 8% over the identical interval in prior 12 months. Adjusted working revenue as outlined in our earnings launch for the three months ended December 31, 2023 was roughly $300,000 as in comparison with adjusted working revenue of roughly $100,000 for the three months ended December 31, 2022. Operating bills for the three months ended December 31, 2023 have been roughly $20 million together with, roughly $8.3 million of non-cash or nonrecurring bills in comparison with $14.1 million of working bills for the three months ended December 31, 2022 together with, roughly $3.1 million of noncash nonrecurring bills.

Operating bills for the quarter ended December 31, 2023 are composed of direct prices, payroll and advantages, promoting basic and administrative bills, acquisition prices, goodwill impairment prices, depreciation and amortization, write-off of notes receivable and authorized {and professional} charges. Direct prices for the quarter ended December 31, 2023 have been roughly $300,000 in comparison with roughly $600,000 for the quarter ended December 31 2022. Payroll prices have been roughly $8.9 million within the fourth quarter of 2023 in comparison with roughly $8 million within the fourth quarter of 2022. SG&A bills have been roughly $2.4 million within the fourth quarter of 2023 in comparison with $1.9 million within the fourth quarter of 2022. Acquisition prices have been roughly $100,000 within the fourth quarter of 2023 in comparison with $200,000 within the fourth quarter of 2022.

During the fourth quarter of 2023, we impaired goodwill by roughly $3 million as in comparison with $900,000 impaired within the fourth quarter of 2022. Legal {and professional} charges have been roughly $500,000 within the fourth quarter of 2023 in comparison with $600,000 within the fourth quarter of 2022. Operating loss and web loss for the quarter ended December 31, 2023 of roughly $8 million and $9.6 million respectively embody, non-cash and or nonrecurring objects of roughly $8.3 million and $9 million, respectively. These embody a $3 million impairment of goodwill roughly $600,000 of depreciation and amortization, $400,000 of dangerous debt write-off, $100,000 of acquisition prices and write-off of our notes receivable and Midnight Theater within the quantity of roughly — $4.1 million.

The web loss additionally contains losses from fairness investments of roughly $700,000. This compares to an working loss and web loss for the quarter ended December 31, 2022 of $3 million and $3.3 million respectively, which included noncash and nonrecurring objects from depreciation and amortization of $500,000, $900,000 of goodwill impairment, $200,000 of acquisition prices and $1.4 million of modifications within the truthful worth of contingent consideration. Net loss additionally included roughly $100,000 in losses from fairness investments in associates. Loss per share was $0.54 per share primarily based on 17,632,822 weighted common shares excellent for each primary loss per share and absolutely diluted loss per share for the three months ended December 31, 2023. Loss per share was $0.29 per share primarily based on 11,256,578 weighted common shares excellent for primary and absolutely diluted loss per share for the three months ended December 31, 2022.

Cash and money equivalents of $6.4 million as of December 31, 2023 as in comparison with $6.1 million as of December 31, 2022. That concludes my monetary remarks. I’ll now ask the operator, to open the telephone strains for questions. Operator, would you please — would you please ballot for questions?

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