Dolphin Entertainment, Inc.
Q4 2020 Earnings Call Transcript

Published: 8 Apr 2021

[Operator:]

Greetings. And welcome to Dolphin Entertainment Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, James Carbonara of Investor Relations.

[James Carbonara:]

Thank you, and once again, welcome. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I would like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995.

[Bill O'Dowd:]

Thanks, James, and thanks everyone for joining. I know there’s an intense amount of interest out there to hear more about our NFT division. The number of incoming calls and emails since we made that announcement have been numerous, and I don’t think there’s any announcement we’ve ever made that’s gotten quite that same reaction and we’re excited for that. Obviously, we released some pretty exciting news about the NFTs today, but we thought we’d address both the news of today upfront and before I get into the NFTs, I’ll turn it over to Mirta to explain the 8-K we filed after market today. So, we can explain that and then we’ll dive into the NFTs, talk to you guys for about 10 minutes and take some questions. Okay.

[Mirta Negrini:]

Thank you, Bill, and good afternoon. While preparing our year-end financial statements, we determined that we had incorrectly evaluated our role when completing our work under certain statements of work. Specifically, we originally concluded that we were acting as principal, but subsequently concluded that our role was that of agent. When reporting revenue under the role of principal, revenues are reported gross with corresponding expenses being reported gross. When reporting as an agent, the amounts are reported net of each other.

[Bill O'Dowd:]

Perfect. Yeah. Just to put a little more color on that, we run influencer marketing campaigns for many of our PR clients. Every time you need to determine if you’re the principal of the campaign or simply acting as an agent or the client and you report revenue and expense if you’re the principal, and you report neither if you’re the agent. So that’s what we’re going to correct with our Q3 inside of our 10-K. We’ll take the time necessary to just correct then inside the 10-K and file it and then jump on an earnings call and we’re excited to share the results from Q4 and share some forward-looking insights into how we think we’re going to do in Q1 and 2021. So on to the second part of the call, the NFTs. But I will talk about Dolphin 2.0, right? So, again, I know we have a lot of people joining for the first time who are new to the Dolphin story. The quick back background is, we spent the last three years since we up listed on NASDAQ, collecting the very best of entertainment marketing firms. 42West was our first . They’re the leader in film, television, and content marketing for entertainment. Their list of awards is numerous and long. We feel blessed that we’ve got complementary PR firms that are very best at what they do in their fields such as Shore Fire and music, the Door and Culinary and live events. We added B/HI in January, gaming and eSports, and we put a little braggy statement about the first three PR firms, all three are ranked in the 50 most powerful in the United States out of 12,000 PR firms in the country. We’re the only company to own more than one, and all three of ours are in the same industry, entertainment. To that powerhouse, we’ve added influencer marketing with Be Social in August, because we do so many of those campaigns with our PR firms as we were just mentioning as well as have Viewpoint, which does creative brand studio work as well as promotional videos, which will be very helpful with NFTs as you might imagine.

[Operator:]

Thank you. Our first question is from Allen Klee of Maxim Group. Please proceed.

[Allen Klee:]

Good afternoon. So, just tell me if I’m thinking about it right, for the restatement, it seems to me like this is kind of a wash. So, it doesn’t really make a change of anything on the financial side. So, it’s just a timing issue for when you get the numbers out? And then on the NFT side, are you able to share at this point anything in terms of how you think of the timeline for adding these? And maybe just explaining a little more of how, like, an example one of, how you would maybe just the whole process of how it -- where it gets auctioned off and the economics if you’re able to share anything like that? Thank you.

[Bill O'Dowd:]

Sure, Allen. Thank you and thanks for joining today. On your first point, yes, the expenses and the revenues offset each other, and we’ll include that correction when we file the 10-K. So, it’ll all just be in the 10-K. And on your second point, yeah, the NFTs. Well, another big benefit of NFTs, if I could from an old television film producer, right, speed to market, holy cow. So we’ve identified the athletes in partnership with Mike and his team at Hall of Fame, and we’re really excited for those first three athletes. I had the chance to be on a Zoom call with Tim Brown, and he’s a really classy, very nice individual and excited for the art we’ll be doing. With that said, we’ve already identified the first. We’re excited to share in a future announcement, first of the visual artists, and I think everyone on the call will go, wow. And I don’t want to get ahead of Mike on this, but we know these types of things are pretty quick to market. Obviously, Patrick Mahomes did it in lightning speed. I think it was nine days or something. I’m not saying that in this case, but I do think you’ll see, I think, Mike’s already said, certainly in this quarter and pretty soon in this quarter, we’ll have it first out in the marketplace. With our brands, Dolphin and Hall of Fame, we’re looking for the best way to position it in which marketplace, create our own dedicated destination and really be able to drive people to it. We have a destination we can point to with our marketing and PR firms. Because we’re not a one and done, I mean, this is quite the opposite. We’re going to have -- I don’t want to be dozens and hundreds of entities over time in the market and continuously, right? So we were thinking of it more like a release calendar of a film studio, right? And we can -- and because we have the ability to cross promote, both within any given industry and across industries, we can create tentpole moments. I’m borrowing terms from think Disney and Marvel with the Avenger movies, right? And you culminate into the big moments in time and you can package certain elements it -- within real world benefits or experiences for people that have different entities across industries or across verticals or across our sets, so there’s just a lot that we’re excited about on this. And so, in terms of speed, you just don’t see that, right? You make a movie and you got it in theaters a year later, you start collecting three months after that. Here it’s much, much faster. So, we expect the first rollout certainly in this quarter, and it’s only going to -- we expect to expand and accelerate that rollout in subsequent quarters, of course, as we add more scale to the Hall of Fame partnership and we have some really neat things in the works there, and then of course across multiple partnerships. Imagine -- I guess I’ll ask another question to the group. I mean, if you had this collection of relationships and marketing companies in film and television, what would you do with it in the NFT space, right? Can you imagine those collectibles or in the gaming and eSports space that we added in January or in the music space? So you can see why we’re so excited, and it’s really a full 2.0 opportunity for us because it touches all of our companies. So, yeah, that’s without being able to be more concrete at this point, since we haven’t selected which of the gateway partners or the marketplace partners we will go with Hall of Fame yet, but we will be announcing that shortly, Allen, I can tell you that.

[Allen Klee:]

Given what you have said, it’s -- tell me if I’m thinking about this correct, it would seem like it’s likely that this business on average would be of a higher margin than Dolphin overall that it would be accretive to your margins, I mean, I know you’re not going into numbers now, but is that a reasonable way to think about it?

[Bill O'Dowd:]

Yes. Very much so. This is very much a high margin business, and also especially with the quality of the IP and the partnerships we’ll be having, right? I think we’re blessed, and we know that in the fact that we -- I feel blessed. We have -- our PR firms are very much best-in-class, right? There’s just no denying. The number of Grammy winners, the number of Emmy winners, the number of Oscar winners, more than any other PR firm. I mean, you saw the record hall at the Emmys last year as an example, right? I think on the -- on Emmy Night we ran campaigns twice as many winners as the rest of the industry combined. So, when you start with that level of IP to create from, right? It must be like whoever first saw the Marvel comic library, and said how do we make movies out of this, right? You’re just overwhelmed with possibilities. What do you start with? How do you? Well, the -- I feel we’re blessed and that we have a lot of partnerships and a lot of IP, we can ideate around and develop around and launch around, right? And so, as we think about that from our perspective, I think, that’s what we are trying to both be quick to market and also smart about how we launch different initiatives and then how we can cross promote between our companies for them. Does that answer your question, Allen.

[Allen Klee:]

That’s great. And just one on the exchanges and this is a little new to me, I guess, I’m going to have to open a crypto account. But like do you envision you’re working with multiple ones or how does -- I don’t know…

[Bill O'Dowd:]

Yeah.

[Allen Klee:]

How does it work? Yeah.

[Bill O'Dowd:]

Sure. And by the way, on your high margin question too, that’s where we’re also feel blessed, because your margins skyrocket if you’re selling certain things at certain prices. But also we think there’s just a volume too. If you have some certain NFTs, you might do ones that are one for one, like, what Patrick Mahomes did. You sell one piece to one buyer for X millions of dollars, right? That’s fantastic and obviously that’s great. You can also do things that are promotional in nature or volume game, right? Back to my example of why a movie franchise poster, animated poster is something super cool. Can you imagine getting back to that movie animated poster that we get the best of the business to design and create for us? Well, you might sell 10,000 of those, 20,000 of those, 30,000 of those at $100 each, right? So if you look at what Top Shots is doing with their moments, the dropping packs in a 1000s and 1000s per card, right? Now, there’s just a limited number, though, and that’s what creates the resale value, right? So that’s where it becomes very high margin business when you’re doing that, because you only have -- in the digital, the biggest obvious advantage is just so it doesn’t go unsaid. What makes this such a high margin business is because when you create something digitally, you only have to do it once, right? So…

[Allen Klee:]

Right.

[Bill O'Dowd:]

… that’s fantastic versus you make a bobble head doll that you need and you want to sell 10,000 of them. You have to make 10,000 or probably make more than 10,000 to allow for breakage, right? And then you got to store them and package them and ship them and all that. You have none of those costs in this business, none. So it’s an extreme -- it simplifies the business tremendously and it creates a higher margin. The -- and to answer your question about the marketplaces. We haven’t made a determination yet, if we want to build all of our different opportunities into one marketplace, but what I or spread them out and there are some marketplaces each with a few different advantages and disadvantages that we would like to keep to ourselves for now, as we evaluate this. We’re very -- this isn’t something we announced in the fad a week ago. We’ve been developing towards this announcement for months. And I hope we get credit for being in the market early, right? This is two and a half weeks ago we announced this in the partnership with Hall of Fame and before as a concerted business effort into NFTs. This isn’t a single individual selling a single piece of art. We have a business here and we’re excited for to help that’s also coming across. So with the marketplaces, we have a volume of this, which allows us to create a perhaps a different dynamic and a different negotiation with any of these marketplaces. What I do think is, we will probably select a marketplace per partnership or I don’t think we want to direct our fans of Hall of Fame or our fans and other verticals across multiple marketplaces unless there’s a specific business reason to do so, because obviously, from a marketing and PR standpoint, you want to stay consistent and drive repetition. So I think you’ll probably see that from us and probably see some announcements around it and a specific partnership in that respect.

[Allen Klee:]

That’s great. I’m sorry. And then could you just touch on with Dolphin 2.0 where you will own content and you have the resources to market it. Touch on like other areas besides NFTs you are thinking about and if NFTs is such a big areas there? Is there -- I don’t know if risk is the right word. But could this crowd out, which you were thinking you were going to maybe do in some of the other areas or are those still kind of move, how do you think about that?

[Bill O'Dowd:]

Yeah. It’s been a wild ride. I think the Tuesday we made the announcement in the morning. I received more emails and I haven’t any other day in my life, right, and phone calls. But it’s been challenging at times to just be responsive. But with that said, I definitely had a couple people say, when, especially after I mentioned the credit card line. Why that -- why NFTs for us was with was the light bulb moment of the credit cards, waking up one morning, OMG. And their response to it is, why would you do anything else? The potential and this is so big, but the -- and we’re fortunate we hope for success. We will work very hard for that. With that said, it is also true that we have multiple other initiatives in consumer products and content. We have plans for live events of those who have been following us as they have waited for us to build scale into different verticals of entertainment that we think we can be very successful in. And you think about, this unique collection. Again, there is no other collection of the very best PR and marketing firms across entertainment that exists. And what would you do with it? I am sure, NFTs is one answer, and quite frankly, the markets exploding two months ago, I never would have thought that the month of February would have done over $330 million in sales, right? So it’s moved up the ladder quickly into what we’ve launched first and we felt the time we needed to move then. But we have some other things coming that we were equally excited about, again, in those spaces. And what the purpose of bringing all the CEOs to Miami, quite frankly, today and tomorrow, we just spent all day listing of how we’re thinking about those other initiatives and how we want to sequence them out to the market. So we’re hopefully going to be very thoughtful about that and over the next couple two months, three months, four months we’ll have some of those announcements so we can thoughtfully share with the market how we’re organizing ourselves to be successful across multiple initiatives.

[Allen Klee:]

Okay. Thank you so much.

[Bill O'Dowd:]

Thank you, Allen. I appreciate those questions very much.

[Operator:]

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Bill O'Dowd for closing remarks.

[Bill O'Dowd:]

Yeah. Okay. Well, thank you, and thank you everyone for joining today. We will work quickly -- as quickly as possible to file the 10-K and get the correction for Q3 be in there. So we can do at that time. As we mentioned earlier, we’ll do a full earnings call. We’re excited for that. Share our Q4 and 2020 numbers, as well as predict or help guide how we’re looking at 2021. And also in the short order and next few weeks we’d like to also share additional thoughts about 2.0 and how we’re thinking about it, and of course, in this rapidly changing world and probably, but the next few weeks we’ll be able to talk about first entities and market. So exciting times and we’re very excited for the continued support and look forward to the next conversation. So, thank you all for joining us today and hope to talk to you very, very soon. Thank you.

[Operator:]

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