00:06 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. 00:19 It's now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.

00:28 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. 00:40 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. 01:07 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. 01:26 For a discussion of such risks 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 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. 01:46 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. 01:58 Now, I’d like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

02:07 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. 02:23 So from a financial highlight’s 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. 02:58 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 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. 03:29 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. 3:47 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 borrow to pursue our acquisition strategy to build our Super Group. We're now reporting…

20:52 Thank you, Bill, and good afternoon, everyone. I will now discuss results for the quarter ended September thirty, twenty twenty one. Revenue for the quarter ended September thirty, twenty twenty one, was approximately nine point four million dollars compared to approximately five point five million dollars in the quarter ended September thirty, twenty twenty. Overall operating expenses for the third quarter of twenty twenty one were approximately nine point four million dollars compared to approximately six million dollars in the quarter end -- in the third quarter of twenty twenty. 21:26 Operating expenses are composed of 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 twenty twenty one were approximately nine hundred and ninety two thousand dollars compared to approximately five hundred and seventy five thousand dollars in the same period of the prior year. Payroll costs were approximately five point nine million dollars in third quarter of twenty twenty one as compared to approximately three point six million dollars in the third quarter of twenty twenty. 22:01 Selling, general and administrative expenses for the third quarter of twenty twenty one were approximately one point five million dollars compared to approximately nine hundred and fifty thousand dollars in the third quarter of twenty twenty. Legal and professional fees were approximately four hundred and ninety nine thousand dollars in the third quarter of twenty twenty one compared to approximately three hundred and seventy three thousand dollars in the third quarter of twenty twenty. 22:27 Operating income for the quarter ended September thirty, twenty twenty one of approximately thirty eight thousand dollars included non-cash items from depreciation and amortization of approximately four hundred and seventy five thousand dollars as compared to an operating loss of…

24:21 Absolutely. Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] First question is coming from Allen Klee from Maxim Group. Your line is live.

24:54 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 of that this could have an impact next year how do you think about kind of, is there a way to think about like how the opportunity is here? Thank you.

25:20 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 or two big ones for us, but we're excited for today. 26:17 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 and 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 scene. What he did for them in some of the story decisions. So imagine suite stakes 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…

28:52 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?

29:05 Sure. And if I could, as I was trying to say in our numbers, this really is illustrative of what we hope is considered a better mousetrap by the market. I mean we have the optionality and a huge catalyst in NFTs, right? I would argue that NFTs to Dolphin represent the potential upside or more of many of the highest return investments out there from biotech or wherever else if they work. Well, we feel our catalyst is as good as anybody else's, but we're profitable along the way. We've been building this technology and our ability to offer this product to market and have been EBITDA positive in both the second and third quarters. So, therefore, that should pretty much tell you what the margin can be. Obviously, people have already received numerous calls today. People see the quick math, ten thousand avatars at two hundred dollars each. It's a two million dollars product and you're starting at communities. And so that means you can engage with that community every week, daily, hourly on social media. But -- and then as we -- this product was designed to be an event, a multi-season event, so you're going to have more drops, more contests and sweepstakes and that's what allows you to build and sustain this community that will have future drops in the future. So, you might have another two million dollars product four, six months from now, et cetera, et cetera. So, it scales very quickly. And then, of course, once we have multiple verticals going, imagine a product in music, one in film, one in sports, one in charity, one in culinary, one in gaming. Right now, that's up to six and you start cross-selling with each other. So, you cross-pollinate your communities. 31:01 And of course, you can have more than one community inside each vertical. I mean, music itself, you're not going to have one music community, you'll have multiple, so four different types of music, right. So, it's an exciting world for us, and we needed the robustness, if I just coined the term, I'm not sure of FTX and their wallet to allow for both the acceptance of credit cards, the speed, the strength of being able to build on the blockchain for those that volume of offering globally. So, some of our programs, including Anthony's are going to appeal to an international audience very much. Aliens, no, no, national boundaries, right? So, it's an exciting day, and I think it opens a glimpse to those who are interested in Dolphin for our NFT capabilities to really get a sense of what we can accomplish.

32:02 And just to confirm that I understand the NFT market right, you have the potential -- is it true that you have the potential to get recurring revenue if you're the creator of an NFT because every time there's a secondary sale, can you get a piece of that?

32:21 Yeah. Thank you. I'm sorry, and going back to your previous question, I'll answer in three parts with the new question with that. Yes, it's a very...

32:28 Sorry.

32:31 My fault. It's a very high-margin business because especially Exiled Aliens because this is an internal Dolphin-developed property. We own one hundred percent of it, and it's exciting for us to launch with that and to show our creative shops and why we took the time to build an entire storyline around it. There's a saga here that fans are going to want to be a part of. And imagine receiving issue number one of one of the classic DC or Marvel Comics, right. If you're a collector, you're going to want to collect all ten episodes. And that's exciting for us. That's what I mean by future NFT drops. 33:08 But secondly, yes, we have recurring -- potential for recurring revenue in a couple of ways. One, are those future drops to the same community. We haven't decided on the number of episodes of Exiled Aliens. But whatever number it might be, as we're refining that now, those are -- that's revenue you can go to the same community and give them added value along the way. And secondly, each NFT that we sell, if it resells in the open market because new people want to be part of the community or certain of these entities are going to be very rare and valuable for moment number one. Then yes, as they resell to often keep seven point five percent of the revenue in perpetuity across all sales.

33:57 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 caring 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?

34:56 Sure. Yeah. This growth has been accomplished without a full recovery. We've had some recovery, which is great. It's only going to -- it's continuing to build momentum. But the two big areas, motion pictures have started to come back in theatres, which is great. Obviously, we had James Bond earlier this month, Dear Evan Hansen, before it. We have some others coming up, but it's still not where it was. It will -- we expect the motion picture business will be and hope that it will be where it was by the second quarter of next year, and it's growing up until that point. Now, the one that's still out there that hasn't recovered yet is the restaurant business. There are signs of shoots coming up from out of the ground, trickling in, but that's going to be a nice recovery play for us in twenty twenty two. I don't know if it's first quarter, if it's going to take till the spring but that will meaningfully impact our numbers. This revenue growth has been accomplished without that business being back. 35:55 And by the way, that's really a tribute to our subs. I really included that line, yes, we're up seventy percent year-over-year. That's forty one percent organic growth from the existing subs. That's tremendous growth. And we have more to go as we get both a recovery play, but then also long-time fans of the stock know, we -- the companies are just getting stronger and stronger cross-selling with each other. They have more and more joint projects. The old joke I made when we had 42West alone in the Group three years ago was you can't cross-sell with yourself, right. But now we're up -- you are up to six companies. And this Dolphin 1.0 is only going to continue to grow because we can cross-sell and recover. So, it's exciting times. I mean, we've gone from seven point something to eight point something to nine point something in successive quarters of record revenue. So that's got to say something to somebody.

36:57 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?

37:08 Well, it's funny you say that Allen because yeah, and those who remember from the Q2 of twenty twenty, remember the joke we made then was that the holidays came early when Be Social joined the Group because every one of our market-leading PR firms wanted a sister company that was created in both the marketing. So, for Dolphin 1.0, that's -- I'm not going to underemphasize adding Be Social to the Group and what it's meant. But for Dolphin 2.0 to talk about touching everything, as I highlighted, I mean, Midnight Theater, yeah, they can use Be Social, both for the restaurant and the theater. Influencer marketing campaigns are marketing 101 today for any restaurant opening as The Door or hotel opening. 37:57 But then also, with NFTs, I mean how do you get the word out in online about a new offering. And I think the fact that a strong influencer marketing campaign as we go forward and go into twenty twenty two, we're certainly looking for engaging Be Social on a consistent basis to help with these launches because they bring a lot of the word of mouth and a lot of the cool factor to it. So Be Social is a very important and strategic part of our company, and it couldn't be nicer people and a nice cocktail event with them last Thursday in Los Angeles. And yeah, we're -- we feel very lucky that Be Social's inside the Dolphin family.

38:44 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…

38:57 Yeah, I think so. As we get to opening, we're going to have a lot of metrics for that. We're very confident in that investment. We think it's going to do very well and it has a lot of room for growth, I can get to in a second, but we'll have some metrics probably by the time we speak on the K call because we'll have -- with the theater, you have advanced ticket sales. We'll know preopening numbers, we'll probably know our post-opening numbers, we'll have a sense of how it does. And if I could, how it's doing. I think the aspect of the variety theaters is really cool. And I think it may -- the advantages of that may be missed by the casual investor, a true -- a classic, let's call it, Broadway Theater rides entirely on whichever shows in the theater. So, if you're the Richard Rodgers and you got Hamilton, you're feeling great. But if you don't, that's riskier. The -- it's an all or nothing proposition. 39:58 For a variety theater, you have a variety of acts and you have a variety of different audiences that you can bring in because of those acts and something like an intimate one hundred and sixty seat theater, that doesn't -- that's not a lot of seats to fill that theater and you don't need to fill it to be profitable. But to sell tickets there, you're not -- it's not a heavy lift. A variety theater gives you a broad, broad audience to go after, they're something literally for everyone over a short period of time. The challenge of a variety theater is you say, well, why doesn't everybody do a variety theater? There's a shortage of that. Because there's two challenges. You…

42:52 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?

43:11 I think so. We've staffed preparing for this day, right. So, we're close to full staffing needed to -- really would be able to expand the NFT business. I assume that's what most people want to talk about, passed this one collection into a series of collections. We want to add one or two more people on the -- in that division, but bulk of what we needed, we have in-house now. So that's exciting for us. And to your original question on the NFT business, it's not only a high-margin business in success, it's the highest margin business we have. So it's -- I would hope it will be a meaningful contributor in twenty twenty two, excuse me.

44:08 That's great. Thank you so much.

44:12 Sure.

44:14 I'd now like to turn the floor back to Bill O'Dowd, CEO of Dolphin Entertainment for closing remarks.

44:18 Oh, man. I was so sure I was going to get more questions this time. Well, thank you, everybody. And to that last point on Allen's question, I should also say that's also why you saw we managed ourselves to the EBITDA positive operating income positive even while we were staffing up and investing, which is really fantastic. 44:44 So thank you, everybody, for the time today. I hope everybody has a great holiday season. I know we'll speak again in twenty twenty two, hopefully, sooner than even the 10-K call, we'll look for an opportunity to do so. But in the meantime, I think you could be looking for a couple of more announcements from us before the end of the year, and we're excited for what this call represents with our first two 2.0 initiatives in market. So -- and if you're looking for something to do when springtime rolls around the New York, come to the Hidden Leaf and have a drink with James Carbonara. Thanks, everybody. Talk to you later.

45:23 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.