Greetings. Welcome to the Dolphin Entertainment Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, James Carbonara of Hayden IR. You may begin.

Thank you, operator. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor statement. Please note that statements made on this call are not historical facts -- that are not historical facts may be forward-looking statements. significant risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements are detailed in the company's annual report on Form 10-K and supplemented by subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company has filed with the SEC. Any forward-looking statements made on this call are made only as of today's date, and the company does not undertake any obligation to update or supplement any such statements to reflect subsequent developments. Now I would like to turn the call over to Bill O'Dowd, CEO of Dolphin Entertainment. Bill, please proceed.

Thanks, James. That was the shortest Safe Harbor statement you have ever read in your career. I know people are hoping you'll come back at the end of the call. Hi, everyone. Good afternoon. Thank you for joining us today. As always, we'll start with a review of some financial and operating highlights, followed by a full financial review and then open it up for Q&A. So from a financial highlights perspective, revenue for Q4 was a record $12 million quarterly revenue record for Dolphin Entertainment, an increase of 8% year-over-year. I'm immensely proud of the Dolphin team. We managed to achieve its best revenue quarter ever despite enduring two prolonged industry-wide strikes. Even more impressively on the bottom line, the team delivered positive adjusted operating income of $300,000 in the face of such headwinds. This is very important to note. So I'm going to pause here and add that adjusted operating income is the primary metric by which we measure our business. It's what I look at first in any P&L I received from here. We define adjusted operating income, as our operating income or loss after removing any non-cash, or non-recurring income or expenses. In other words, if you go to our reported operating income or loss and back out all non-cash and nonrecurring items, how did we do? Reporting positive adjusted operating income is extremely gratifying, obviously. And now that we have our Super Group complete with the acquisition of Special Projects and with our expectation of continued synergies and organic growth, combined with the launch of our ventures in earnest, we believe that we will continue to have and expand positive adjusted operating income on a continuous annual basis. Very exciting. And it's good to share with everyone how we look at our business and the…

Thank you, Bill and good afternoon, everyone. I will now discuss financial results. Total revenue for the fourth quarter ended December 31, 2023 was $12 million, an increase of 8% over the same period in prior year. Adjusted operating income as defined in our earnings release for the three months ended December 31, 2023 was approximately $300,000 as compared to adjusted operating income of approximately $100,000 for the three months ended December 31, 2022. Operating expenses for the three months ended December 31, 2023 were approximately $20 million including, approximately $8.3 million of non-cash or nonrecurring expenses compared to $14.1 million of operating expenses for the three months ended December 31, 2022 including, approximately $3.1 million of noncash nonrecurring expenses. Operating expenses for the quarter ended December 31, 2023 are composed of direct costs, payroll and benefits, selling general and administrative expenses, acquisition costs, goodwill impairment costs, depreciation and amortization, write-off of notes receivable and legal and professional fees. Direct costs for the quarter ended December 31, 2023 were approximately $300,000 compared to approximately $600,000 for the quarter ended December 31 2022. Payroll costs were approximately $8.9 million in the fourth quarter of 2023 compared to approximately $8 million in the fourth quarter of 2022. SG&A expenses were approximately $2.4 million in the fourth quarter of 2023 compared to $1.9 million in the fourth quarter of 2022. Acquisition costs were approximately $100,000 in the fourth quarter of 2023 compared to $200,000 in the fourth quarter of 2022. During the fourth quarter of 2023, we impaired goodwill by approximately $3 million as compared to $900,000 impaired in the fourth quarter of 2022. Legal and professional fees were approximately $500,000 in the fourth quarter of 2023 compared to $600,000 in the fourth quarter of 2022. Operating loss and net loss for the…

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

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

Sure and thanks Alex for the kind words. Yeah, we feel we had a great quarter too. Well, the writer strike that started in May didn't really, it wasn't as impactful to our business. The actor strike that started in July was very impactful to our business, because actors weren't allowed to promote movies. So the studios -- we had double whammy on us because some of the actors took hiatus, they had nothing to promote. They weren't allowed to promote. So they went on hiatus from our talent division. But then our movie division, many of the studio films and independent films that were going to be released in the fall were pushed till 2024, it pushed everything back. So it's -- if I'm just being honest it's a little remarkable to me that the fourth quarter finished as well as it did, almost $1 million more than any previous quarter the company, because so much of our juggernaut movie business was pushed out and obviously nobody wants to release a movie if the actors in the movie can't promote it. So even though the strikes ended in November, many of those movies are pushed out of the fall, September through December you know weren't even put into the theaters in January, or excuse me in Q1. It will probably fully normalize by the end of Q2. It's my guess, and we're doing fine. The impact is lessening every month, but it was an impact in Q4 and very proud of the team for the results against those headwinds.

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

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

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

Well, for us, yeah, I take no position on whether it will or won't, as you gather too. I don't know, but it'll really come down to individual creators. Let me back up. The digital department has three divisions. We manage individual talent and take a percentage of their revenue. We have a brands division, where we represent brands and design influencer marketing campaigns for them and execute them. And we have an events division. On the events division, platforms don't impact us. On the brand side, the brands will just adapt and then ship their ad dollars from a TikTok campaign to an Instagram campaign or a YouTube campaign, and we'd be managing it anyway. It won't have an impact. On the talent side, there will be some talent out there in the world that are only on TikTok or primarily on TikTok that'll be impacted and those will have to transfer their following over most likely to either, well, most likely YouTube as a video platform. And that may take some time for the followers to move over with them. But in today's world, time might be a day, four days. But fortunately for the digital department, we're weighted heavily on a platform and that platform's Instagram. What we want to do with moves like this YA roster is diversify and get a little bit more balanced with TikTok and YouTube. And if there is no TikTok, then YouTube and whatever comes next. So fortunately, it shouldn't have much of an impact on us at all if TikTok goes away.

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

Well, that's not that -- and I apologize, we could have made that clear Allen. It's not that it leaves theaters. It's just that it's only in theaters for that first week and then it can continue its run on. So, I understand Amazon at first was debating. Is it a July 4th release or Memorial Day release and Memorial Day weekend as such the kickoff of movie-watching and moviegoing and will be on top of mind for everybody, is generally the kickoff of the summer season, right, now that some of the Avengers movies didn't come out earlier but and some of the big temples are again this year. So, they just didn't want to lose the Memorial Day weekend for their opportunity as well. So, we certainly understand that. That's the weekend we premiered Top Gun two years ago, may fighter jets be in vogue again this Memorial Day and the Blue Angels themselves have some high-profile shows in real life over that weekend as well. So, we know we can promote the sugar out of this film on that weekend. So, the thought was launch it exclusively in IMAX May 17th. Let it run as long as it intends to run in other theaters potentially too after that first week when it's only available on IMAX, but then have Amazon be able to have viewership numbers that capture that type of excitement around the film.

That explains it well, thank you. And then -- with IMAX, how are you thinking about you know the big events the next partnership -- the next movie is that likely a 2025 event? Or how do you think about thinking about that?

Yes, we think so too. Yes, we do think that way. Shockingly, you're -- as I'm sure for yourself big surprise, you're not the first person to ask, oh man, this is so great, what's next? And we're excited to hopefully share with the next partner movie with IMAX will be as soon as we can. You can imagine with this and there's no shortage of people looking to partner because maybe it's going -- maybe to go back a step, it's worth noting too. I think I said it on these earnings calls, when we formed this partnership, I'm unaware, there is -- to my knowledge, there's no other deal in the market -- in the industry where there's a guaranteed theatrical release for a documentary and with IMAX and often we're both thinking about how can we bring something new to the marketplace and this idea of, for lack of a better word, big spectacle documentaries we're going to have to come up with a catchy phrase for that, but like -- with supergroup, but from the idea of a Blue Angels or something like that in IMAX it's not your father's Oldsmobile. It's not your father's True Crime documentary, it's theatrical. It's big. And if this movie delivers on that promise, it's a great first movie in that fleet. So, when you've got a hit out of the gate and you've got some different like that then it's really just a matter of choosing what do you want that next big one to be that hopefully you don't suffer a sophomore slump, right? And it is eye-grabbing as seeing fighter jets 12 inches apart from my camera -- 12 inches apart, not from the ground, right? So, yes, we think that the we'll have an announcement obviously this year for what could either be filmed or released in 2025 you start getting to a regular cadence with it.

That's great. Thank you. For MasterCard Midnight Theater and hidden leaf, your comments there of looking to change the venue of Midnight of a hidden leaf, would you’re saying that didn't perform to expectations that were you referring just to the restaurant or the restaurant and MasterCard Midnight Theater?

Well, we really do want to try and bring in an operator for the restaurant. It's very hard to have a successful venue, including theaters, if the restaurants not hitting its goals. And so, it's an opportunity to kind of re-conceptualize and maybe bring in a bigger operator, especially because you're coming out of the historically slow Q1, right, restaurants in Manhattan and anywhere in the northern city don't do as well in the winter as they would in the summer or fall, right. So -- and people just don't go out as much. So, it felt like the right time to put in a new concept if we can. So that's why we've prioritized the search to -- and we are talking to groups and actively now to see if we can come up with a new concept for the key summer and fall seasons. Now there's no assurance that a deal will close but we have identified the first group that we'd like to bring in. We're working hard to close the deal in the next few weeks.

That's great. And okay. Just -- I'll just finish up quick one of a few finance questions. I know you haven't given guidance. Are you able to give anything qualitatively, if you think you might be able to grow revenue? And if so, what would be the drivers to that?

Sure. Well, I am happy we beat our beloved analysts' expectations for Q4. We hope to be able to do that again here in Q1. And the two drivers, which won't come as a surprise, given our prepared remarks for the last three years, right, each year we've added a new member of our group. It exponentially increases the amount of collaborations that can occur, right? I think Tim Johnson from Bart pointed out to me the mathematical formula to do it, but we only have one company. You can't cross-sell with anybody. And when you have two, it can only go in two directions. But by the time you get to three, there's like six different strings to the spider web. Now we're up to effectively six marketing companies and an operating Film Production division. So, we're exponentially more intricate and Special Projects plugs in beautifully as an additional offering. There's been, oh goodness, I think no less than half a dozen introductions to potential new clients for Special Projects in the last week or two alone. I attended one of them and it was extremely well received. So, the idea to organically grow our subsidiaries through cross-selling and through new introductions is just very, very real. And that's why we wanted to live event company that comes out of Hollywood instead of, let's say, a non-entertainment live event company, because Special Projects, when they're doing the Motion Picture Academy, the Oscars people, right, they’re Gala, and that's a direct hit to somebody of calling card for any number of people that 40 to us can introduce into. So, organic growth will be strong, we feel. But then now, look where we are with our ventures. We've talked about it for a couple of years, but now we have all the pieces in place to have a really strong pipeline of ventures. Q2 is going to be pretty big, next earnings call on May 15. We think we are having a strong Q1. We have a film coming out two days later. From May 15, we'll have a liquor in market probably by the time we're on the call in which case unless you have a sample to everybody on the call right. So, it is happening. Now, where we're moving to the point where these earnings calls are giving updates on those types opportunities for Dolphin, each one of those can represent very large revenue, exits in time or immediate like Blue Angels. And that will certainly be jolts of growth that we just didn't have in past years as we were building this group, right? And we have a couple of them in May. We made out of those two in a couple of more later in the year and soon if you're trying to keep everybody abreast of hopefully six, eight, 10, 12 ventures in a couple of years and that's very exciting for us.

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

And a springboard off that one idea to Allen, I'm sorry I should have said too. On the digital department, we announced Susan Yara and go-live in January. We announced the YA in February. We don't think we're done. So let's see if there's another announcement or two this year and there's just so much growth in new spaces for the digital department. And in each of those they're not as big as our Blue Angels or heaven forbid a successful Staple Gin with Rachael Ray, but they're meaningful and they could launch new businesses for us as well. So, there'll be some announcements on that front as well too we think. Thank you for your time and questions Allen.

Thank you.

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

Thank you. Thank you everyone for listening. It's nice to be here at the 10-K for 2023, reiterate welcome to special projects, it’s a company that as in a short period of time grown to be very special in my heart. I just I just think the world of Nicole and Andrea and their entire team at Chubb mall down by name. I hope I was given the time right, very high-quality people, very strong workers and they built a beautiful company. So excited for what will come with special projects should be more of a feature of these calls probably in the second half of the year. Overall, obviously the company's got a little bit of a buzz about it, a little bit of a swagger given Blue Angels and the drop of the trailer and the fact that it's in theaters and just a few weeks on and the Q1 earnings call duking out between what we lead with wither Blue Angels or for Rachel's Jin and some updates on both of those fronts. Thank you everybody for joining today and thank you for the journey. I know it's a Thursday night before holiday weekend, but we couldn't be more excited for the Company and look forward to the next call. Thank you all very much.

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