Greetings. Welcome to the Dolphin Entertainment Third Quarter 2024 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 with Hayden IR. You may begin.

Thank you, operator. Good afternoon, and thank you for joining us once again for Dolphin Entertainment's third 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 that 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. Bill, please go ahead.

Thanks, James, and welcome, everyone. I'll start by reviewing some of the key financial and operating highlights from our third quarter of 2024, and then Mirta will provide a more detailed financial overview before we open it up for Q&A. So starting with the financials. We are pleased to report strong financial results for the quarter with significant quarter-over-quarter and year-over-year growth in both revenue and adjusted operating income. Q3 revenue grew 24.5% year-over-year to $12.7 million, driven by strong performance across all operating segments. Adjusted operating income improved greatly reaching $492,000 compared to an $850,000 adjusted operating loss in Q3 2023. Year-to-date revenues through nine months has increased 26.6% to $39.4 million, leading to $1.4 million of adjusted operating income, a significant improvement from the $2.7 million adjusted operating loss in the same period of last year. The company remains on track to exceed $50 million in revenue and achieved positive adjusted operating income for the full-year 2024 -- 2024 marketing a key milestone. I'll now turn to updates from our subsidiaries. Starting with 42West, we've maintained our dominant position in entertainment PR. Our team delivered exceptional results in major industry events, including a substantial presence at the Toronto International Film festival and managing the Venice Film Festival Premier of Tim Burton's highly anticipated Beetlejuice, Beetlejuice. At San Diego Comic-Con, we represented an unprecedented 13 major entertainment clients, cementing our position as the go-to agency for tentpole properties. Our clients receive 60 primetime Emmy nominations and we've expanded our footprint to the anime and gaming space, representing industry leaders like Crunchyroll and TOHO and Anime Expo. As discussed on our Q2 call, completed in Q3 Dolphin acquired Elle Communications, a leading PR agency focused on social and environmental impact with offices in Los Angeles and New York. Now operating…

Thank you Bill. I'll now review our Q3 2024 financial results in more detail. Total revenue for the third quarter was $12.7 million, representing an increase of 24.5% over the third quarter of 2023. Operating expenses were $20.8 million, including approximately $600,000 of depreciation and amortization, $6.5 million of goodwill impairment, $150,000 of acquisition transaction costs related to our acquisition of Elle Communications, and a $1.3 million write off of the Midnight Theatre notes receivable. This compares to operating expenses of $12.3 million in Q3 2023 that included an impairment of intangible assets of approximately $300,000 and $500,000 of depreciation and amortization. Net loss for the three months ended September 30, 2024 of $8.7 million includes the depreciation, amortization, impairment charges, acquisition transaction costs, and the notes receivable write-off discussed in the operating loss remark plus interest expense of approximately $500,000. This compares to a net loss of $3.9 million in Q3 of 2023 that include the depreciation, amortization and impairment costs detailed in the operating loss remark plus interest expense of approximately $600,000. Adjusted operating income, a non-GAAP measure, improved to $500,000 in Q3 2024 from an adjusted operating loss of $800,000 in Q3 2023. Loss per share was $0.80 per share based on 10.9 million weighted average shares outstanding for both basic loss per share and fully diluted loss per share for the three months ended September 30, 2024. For the three months ended September 30, 2023, loss per share was $0.55 based on 7.1 million weighted average shares outstanding for both basic and fully diluted loss per share. Cash and cash equivalents were $6.6 million as of September 30, 2024, compared to $7.6 million as of December 31, 2023. I will now ask the operator to open the phone lines for questions. Operator, would you please poll for questions?

Certainly. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is from Allen Klee with Maxim.

Hello, can you hear me?

Yes. I hear you, Allen. Thank you.

Hi, sorry, I'm having phone problems. Congrats. Strong quarter. Good job.

Thank you.

The jump in revenue this quarter year-over-year, how -- could you kind of rank some of what some of the bigger factors were that you would point to?

Sure. Yes. Let's see. Yes, 24.5% year-over-year revenue growth comes from multiple to the factors, as you might anticipate. And certainly, special projects in El Would play a factor in that. El had a particularly strong quarter going into an election year. I've learned is good for the impact PR business as many people are looking to create additional awareness of the good work that they're doing. And many of the clients received some funding from whether it be city, local or state or federal government agencies. Also, though the legacy PR firms of Shore Fire and the Door and 42West had good quarters. And increases 42West has had a strong a long stretch of having strong results and Shore Fire in the door, while they also have as well that we're seeing momentum with them through Q1 to Q2 to Q3 of this year. So I would say some surge with special projects and but also organic growth and of the legacy PR businesses were probably the primary drivers. We're getting stronger each quarter at cross-selling. And I think it's just going to continue to show in the quarters ahead.

Thank you. And the digital department, what items -- I know that this is fourth quarter is going to be the seasonally strong quarter. But just in terms of you've been doing a lot there. Was there any other things you wanted to highlight of kind of new business you're doing and cross-selling?

Yes, yes. I'm very proud of the work done by the team at The Digital Department. We've done a lot of work with that company this year and growing. I think first of all, The Digital Department -- excuse me, has three main operating divisions; talent management, brand campaigns, and the events division. I try and talk about them equally, but the talent department has gone through strong growth as we've hired quite a few new talent managers in the past six months. The skincare group, the dermatology group, has been a real highlight. We're investing in additional talent managers in that group, and we see a lot of growth with professional advice, if you will, or content from professionals online. So that would definitely be something to look for in 2025. And I've mentioned before that in our Ventures group, we'd like to have a skincare product in market by the end of 2025. That's been a real source of upside for us. The brand division had a very strong start of the year. We have done work for some major recognizable brands and anticipate doing it again in 2025. That's a real strength of our overall company, quite frankly. And the events division, as we expand the showrooms, as I mentioned in my prepared remarks, we hit New York for the first time with the showroom. We expanded the showrooms outside Los Angeles for the first time, and it started with New York at Fashion Week in September. By all accounts, that was a very successful showroom for us. We just came off a showroom the last two days in Los Angeles for the holiday season, and we're about to do another one here in Miami at Art Basel in a couple of weeks, two, three weeks. So Digital Department is going into their Q4, which is why I didn't mention them as a highlight in Q3, because as you said, their explosive quarter is Q4, and we have no reason to believe it won't be again this year.

Thank you. I just wanted to understand a little with the -- you said you've received a second installment of 2.6 million of content licensing agreement. Could you just back up and explain, like, how much money you got overall? And then that 2.6 million, did that get recognized as revenue or in a different way and going forward is the way to think of it, that you'll get revenue from the institutional theaters, is that there shouldn't be any revenue from anywhere else? Thank you.

Sure. Yes. Blue Angels did very well for us. That 2.6 million was the revenue. It was the cash we received in July, in Q3, from revenue we had recognized when we delivered the film earlier in the year. So we've received over 3.4 million from Blue Angels alone, and that's against a total cash investment at 2.25. So we've recouped the full cash investment and have made a nice profit return on that even before it goes into institutional theaters, which it will start doing in January. And then the beauty of the institutional theaters is, as I mentioned in the prepared remarks, we treat it like an annuity. We get a percentage of that box office revenue of tickets sold at the Smithsonian or Museum of Natural History or the Miami Planetarium or wherever it might run. Those are all IMAX institutional theaters, and we expect they'll probably run in most, if not all of those theaters around the country. And as you know, it may run in that theater for a month at a time and a month out of every year for the next 10 years. So it's a good business and we have a good partnership with IMAX for sure. And the Blue Angels, just the success it had in traditional theaters in May, the fact that it was the number one movie over Memorial Day weekend on Amazon, it had continued viewership for three, four, five weeks, which is again, just not common with the documentary. It was just well made. So it sets us up to do more of these and gives us a unique position in the marketplace that we can put documentaries and movie theaters. So we're excited for it. And starting in January, it'll be a nice annuity for us as well.

Okay. Thank you. You've spoken in the past of some other ventures or new areas for young people, and I was wondering how that might be progressing.

Yes, well, in terms of -- I think you're referencing the influencer marketing agency having different divisions that we could expand. I've had this experience before with -- in my previous life with Dolphin and producing content. When you have a hit show, sometimes your other shows don't get the love. And with our skincare and dermatology group, I mean, that would be the equivalent of a hit TV show. And it can get a lot of the air time, but there are a lot of good talent managers doing a lot of good work across different verticals with Influencer Marketing. Clearly we're always going to be very strong in beauty, fashion, lifestyle. It's the bread and butter and it was the bread and butter of both Be Social and Socialyte before we merged to create the digital apartment a year ago. And we just have such strong brand relationships in those verticals, too. And it feeds into and it gets fed from the showrooms which have a heavy beauty, fashion and wellness focus. With that said, yes, we are continuing to expand the types of creators that we represent. And we can imagine building rosters of creators in specific verticals like we did with skin care and dermatology, in areas such as the young adults that you're referencing in our partnership with the offspring agency Allen, as well as in the future that may include culinary or other areas that cross over into our PR expertise as well.

Thank you.

What I don't know is if we're going to start a vertical for accounting, I'm going to talk to Mirta about that. And if we get some online influencers interested in that space, we may expand it.

Okay. Your partnership, your AI partnership, Loti, this sounds very compelling. Explain -- and you said something interesting in the release of -- well, can I understand how you get paid in this? But then also you said there's an opportunity to become a venture -- kind of make a venture investment in this. Could you tell us what you're thinking about there, potentially?

Sure. I mean, AI is still so new to everyone, right. With that said though, we do have -- we're blessed to have market leading companies and we have market leading clients. And so you just can't ignore the potential of AI and you want to be market leading in that space. So we made this partnership with Loti to coming first. Our first entry into AI is actually one to bolster our core services, right. Many of our PR firms are in the -- when you summarize what they're doing, they're managing the public persona, they're managing public relations PR at its core for either individuals or brands. And you can't manage a public persona today unless you can protect it online. I mean, it's that straightforward. And has anybody attempted to get any content removed from online, I mean, good luck. AI has the potential to transform that industry and that capability by being able to search much faster than any previous technology and attempt to take down much faster than any previous technology. And we did our research, we selected the company we feel is the strongest and to our knowledge, we're the first entertainment PR firm to partner with an AI firm. We represent them as well. They are a cash paying client, which is fantastic. And in success and in testing with many of our signature clients, then we have the potential to turn this into something that may be a venture in 2025 for us because if we could have success with Loti, and we expect to -- then we could work to greatly expand them both within entertainment and into other verticals and other brands across industries. So that's exciting for us for sure. And as we look into other forms of AI, then we'll start playing with AI to create product; not content specifically, but other forms of subscription services or ways to access information that weren't possible before. Those types of some creative solutions that weren't possible before and so we might have some -- we hope to have some interesting announcements and interesting products created from AI capabilities in 2025.

Thank you. As we getting closer to 2025, what would you say kind of your priorities are for the next year?

Well, I would say it'll be a good blocking and tackling organic growth year would be my first answer. As I said, we feel very good about getting better and better at cross selling. We have the group of companies we like. We don't know of any marketing capabilities that we don't have in house now that we would have wanted. And so we can focus on a few things. One, we will grow Always Alpha, by the way, I know we haven't talked about that yet, but the big announcement in October and there's a lot of complementary services that we can help Cosette and Allyson grow that company, hopefully faster. All those brands we just talked about for The Digital Department and beauty, fashion and wellness are all brands that could work very, very well within women's sports. We hope to open a lot of doors and expand the type of partnerships that these athletes and these broadcasters can have. But we'll also continue to grow our impact PR division for sure. There's just a lot of cross pollination between our entertainment companies and our existing relationships in the non-profit space that l can benefit and benefit from also. So I think that'll be fantastic for us. And then Dolphin's story 2025 will probably mark a pivotal year as 2024 is starting to do, because when you've got the companies you want, then you can choose what you want to do together. And obviously what we've indicated for eight years is that when we finish building the group, what we want to do together is to own some of the assets that we're marketing. So, we've got Staple Gin in the market now. Next year should bring multiple Staple Gin level opportunities we hope. We've got Blue Angels in the market. 2025 should give us more, should see more content in the market. 2025 is going to see our first live events, special projects, being at the vanguard of that capability for our company. So yes, I really do see 2025 as being the year in which we take the foothold we established in 2024, and we blow The Door open in terms of having multiple ventures in market. 2024, though, it's going to be sad to see this year ago, Allen. I mean, it's a year in which we cross 50 million. We anticipate we're going to cross 50 million in revenue. Again, that would be very hard not to do since we're sitting on 39 already and it's a year we hit full year positive adjusted operating income. That's a nice milestone for our company. And so the years ahead, we'll look to grow that adjusted operating income, of course, we'll look to grow revenue, but we'll also look to build some of these lottery tickets that any one of which, certainly against our current market cap, would be worth more than our market cap. So that's what I think we have store for 2025.

Thank you. And I forgot to ask about Always Alpha. You have so many things, it's hard to remember everything. But do you see this as kind of -- or how do you develop? I mean, you have a strong management team, but the ability to bring on new clients. How do you think about, like, how you go to market on that?

Well, I'll tell you, we have a couple of advantages there, but thank you for highlighting the management team, I mean, because that's a real rock star. Allyson is a legend, and her brother Wes may be the nicest guy I do business with. So very, very accomplished himself. And I think I got asked recently, what are the core strengths of Dolphin? And I think probably the number one answer is look at the management teams at each of these companies. I mean, these are people that are at the top of their game. So when you've got people like Amanda Lumberg at 42West or Marilyn Laverty at Shore Fire, Lois O'Neill and Charlie at The Door and all of our companies, you're starting from a position of strength, right. So, when it comes to recruiting new talent for Always Alpha, I would love to tell you that I'm essential to the process, Allen, but I think you just put Allison Felix in front of other female athletes and say, we're blessed to work with Allyson and to manage Allyson's career, well, you've already established a whole lot of trust, I would say, in the women's sports industry, right. And then secondly, when you get a chance to educate potential clients about all the other companies Dolphin has under its umbrella and how they can assist in making those dreams come true, whatever they may be, for those female athletes, female sportscasters, I think it's just an incredibly compelling story. And many of them have aspirations, of course, off the court, off the field, off the track and field for businesses or to become brand ambassadors or to become influencers. And of course, we know a whole lot about that. To build a PR presence, we know a whole lot about that, but also to do some positive good in the world with whatever charities that they're affiliated with and now we have enormous capabilities in that world, too. So I think we have a really -- I don't know of anything that they might want to do that we don't have an opportunity to help and I think that's a -- when you pair that with the credibility that Allyson and Cosette give us, it gives us, we feel, a unique story in the market. In an industry where there just aren't management firms for female athletes, so we have a first mover advantage and then we think we've got a team behind it that could sustain it for the long run.

Thank you very much. That's it for my questions. Thank you.

Sure. What I'm also hoping that 2025 does not bring me is a challenge to a foot race from Allyson Felix. That would be embarrassing, so.

There appear to be no further questions in queue. I would like to turn the call over to Bill for closing remarks.

Well, I'm sitting here thinking, I think Allison won 11 Olympic medals, incredible, and that her signature event was the 200 meter. How big a lead would she need to give me for it to be a tie? Let's just not answer that question either. Well, thank you, everybody for listening. Obviously, we're very proud of the year we've had so far. We've accomplished many great things due to the hard work of the team, the 270 dolphins now, across the country. Our financial results are speaking for themselves. The ventures that we're doing and the companies we're bringing in, we think speak for themselves, the partnerships we've created. And we hope to have a very successful Q4 and into 2025. So more to come should be another announcement or two, certainly, before we speak again in March and we look forward to it all. So thank you all for being on this ride with us and we'll talk again in a couple of months. Happy holidays to everybody. Bye now.

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