Dolphin Entertainment, Inc. (DLPN) Earnings Call Transcript

Good afternoon and welcome to the Dolphin Entertainment Third Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn over the floor to your host, James Carbonara. The floor is yours.

Thank you, operator. And once again, good afternoon, and welcome, everyone. 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 involves risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking statements contained in the earnings release published today as well as the most recent SEC filings and reports. During the call, management will also discuss non-GAAP financial measures, including adjusted EBITDA and adjusted EPS. Slide 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 proceed.

Thanks, James, and welcome, everyone. As always, I'll walk through the highlights, then Mirko will take you through the financials before we open it up for questions. Starting off, I'll highlight that we had a very, very strong quarter. Third quarter revenue was $16 million, the highest quarterly revenue in Dolphin's history. This is even higher than last year's Q4 or Q1 in 2024 when we reported $3.4 million of revenue from our Blue Angels documentary with IMAX. Excitingly, this is all organic growth and actually would have been 9.7% growth year-over-year, excluding Always Alpha, which we spun out in November of 2025. And when we spoke in August, we said to expect a real step up in profitability in the third quarter. That's exactly what happened. Net income was $200,000 or $0.02 per share. compared to a net loss of $400,000 a year ago. Adjusted EBITDA was up almost 43% year-over-year to $1.6 million or $0.12 per basic share versus $1.1 million a year ago. We believe that our large noncash amortization expenses often obscure our cash flow results which is why we prefer to measure ourselves using adjusted EBITDA versus net income. We built Dolphin to grow steadily and to grow profits faster than revenue, and this quarter shows it. Revenue grew more than 8% well ahead of growth in our core operating costs. We expect continued improved operating results in the quarters ahead, especially as we get stronger each quarter in cross-selling services between our various agencies. We expect to continue to be able to leverage our horizontal scale across the major sectors of entertainment and our vertical scale and the various disciplines of earned media. And there are the free cash flow drivers that don't require any growth. The largest of our New York and Los Angeles leases expire in the second half of next year from which we expect to save more than $1 million a year. Our primary bank term loan matures in September of 2028 which frees up roughly $2.2 million a year in principal and interest. And with approximately $127 million of NOLs, almost all of those savings should flow to the bottom line. On an operational basis, our agencies had a busy quarter. A few highlights. The digital department, our influencer marketing agency, has grown its talent roster to more than 380 creators. I think it actually may be over 400 now from about $250 a year ago, grown its team by 45% and started teams in Dallas and Boston. We expect the digital department to be a strong organic growth driver for us for years to come in both revenues and profits. 42West brought 16 titles to the Toronto International Film vessel, including the People's Choice Documentary winner, Arlene Love, I know where I've been. Also a special shout out to the movie marketing teams at 42 that had a huge weekend. Godzilla minus 0 was the #1 film at the box office, reaching $31 million, which makes it the largest opening weekend in history for a non-English language live action film, incredible and all done with the marketing budget that is a fraction of the normal size. Congrats everyone at 42 West that worked on that title as well as Ramayana this weekend, the blockbuster from India that is the highest budget movie of all time from India, a country with a deep cinematic history. Shore Fire client Angeli Kigo became the first African musician to receive a star on the Hollywood Walk fame and Shore Fire is supporting both the John Coltrain and Miles Data Centennials. The Estates business of Shore Fire is really doing well and we anticipate continued growth in that vertical next year. Also at that time of year again, when Grammy nominations come out this coming weekend and Shore Fire always gets more than their fair share. I'm sure we'll have another great announcement to make next week on that topic. Moving along, the door was named U.S. Agency for CP, the extremely popular Japanese condiment, which is a nice win to add to our expanding roster of Asian clients across all of our agencies. I'll remind us of godzilla and Ramayana from a few seconds ago. Also, the Doors disruptision ran Culture con for the fifth straight year and disrupt us on a great streak of adding influential clients to its roster. To finish a roundup of our PR agencies, was named Agency for the longest table, a really great concept to bring communities together. And last but not least, special projects was as usual, all over New York Fashion Week and Academy Museum galoweek with partners like Montclair, Chanel, Fendi and Cardi to say they are busy is definitely an understatement. Gravitor Studios, our studio for creator led films that we announced at Conlin in June, we set Kristen Bencacio to direct our first feature, crush, Kristin directed IsoRay's vertical series screen time, which now has more than 580 million views. This is the most watched English language micro drama on TikTok. Again, 580 million views. Kristin is exactly the kind of creator native filmmaker, we built Gravator to support. Casting is now underway. And once our principal cast is locked, we'll set a start date. We anticipate filming in the first half of next year and I'll be at the American film market later this week, meeting with the actual distributors and co-financing partners along with the head of Dolphin Films, Emerson Davis. We also expect 2027 to be a big year for our ventures -- we've identified our next 2 ventures and expect at least 1 to be in market in the first quarter of 2027. We also anticipate 2 more during the year for a total of 4 in 2027. We believe that the majority of our ventures going forward will utilize our strategic partnership with dealmaker -- you may recall that we announced this partnership in February and deliberately took our time, spending the first several months evaluating deals together to find the ones where their platform and our marketing fit best. That work has paid off. While the timing of announcing these ventures is frequently out of our control, as mentioned just a second ago, we expect at least 1 to be in market in the first quarter of next year. We'll keep you updated before we speak again in March. So that's the story. We believe we are building a core business that grows steadily and is getting more profitable with a clear path to significantly better free cash flow and ventures on top that give us real upside. Finally, I've continued buying our stock every week under my 10b5-1 plan. Since August of 2024, 1 month after making our last acquisition and including shares bought outside of the 10b5-1 plan, I have bought more than 520,000 shares of common stock and currently own over 5% of the common shares outstanding. With that, I'll turn the call over to Mirta Negrini, our Chief Financial Officer. Mirta?

Thank you, Bill, and good afternoon, everyone. I will now review our 2026 third quarter financial results. Total revenue for the 3 months ended September 30, 2026, was a record $16 million, an increase of 8.3% from $14.8 million in the same quarter of the prior year. If we exclude always alpha from the 2025 numbers, revenue increased by 9.7% year-over-year. For the 9 months ended September 30, 2026, total revenue was $43.3 million, an increase of 5.4% from $41.1 million for the same period of prior year, or 6.5% increase if we exclude Always alpha from the 2025 numbers. Income from operations was approximately $800,000 for the third quarter of 2026 an increase of 167% from $300,000 for the same period in 2025. Operating expenses for Q3 2026 were $15.2 million compared to $14.5 million in Q3 2025. Legal and professional fees were $1 million and included approximately $400,000 of litigation-related legal fees. Depreciation and amortization was $500,000. Net income for Q3 2026 was $200,000 compared to a net loss of $400,000 in Q3 2025. Basic and diluted earnings per share for Q3 2026 was $0.02 based on approximately $13 million and $13.1 million weighted average shares outstanding, respectively, compared to basic and diluted loss per share of $0.03 in Q3 2025 based on approximately 11.8 million weighted average shares outstanding. Turning to adjusted EBITDA after adding back noncash and other onetime items, our adjusted EBITDA for the third quarter of 2026 was approximately $1.6 million, an increase of 42.9% from approximately $1.1 million in the third quarter of 2025. For the 9 months ended September 30, 2026, adjusted EBITDA was approximately $1.4 million, an increase of 24.2% from approximately $1.1 million in the same period of prior year. Adjusted EBITDA basic earnings per share for Q3 2026 was $0.12 based on approximately 13 million weighted average shares outstanding and fully diluted earnings per share was $0.08 based on approximately 20.9 million weighted average shares outstanding. This compares to $0.09 basic earnings per share based on approximately 12.7 million weighted average shares and $0.07 fully diluted earnings per share based on approximately 19.5 million weighted average shares outstanding for Q3 of 2025. Our cash and cash equivalents as of September 30, 2026, were $8.1 million compared to $7.7 million as of June 30 2026 and PAUSE and $8.8 million as of December 31, 2025. With that, I'll turn it back to the operator to open the floor for questions. Operator, would you please poll for questions?

[Operator Instructions] Our first question is Derek Greenberg with Maxim.

Congrats on the quarter. I wanted to start off just asking about the Gravitor studios, the film you have coming out. You talked a little bit about your prepared remarks. I was wondering -- maybe if you could just provide a little more color on that upcoming release, if you expect that to be potentially released in and just how you think about potential budgeting and your expectation guide?

Sure, sure. And thanks, Derek. It's always fun to do earnings calls when you have these results, right? So with respect to Crush Party, we in terms of a release date for it, we're probably aiming more for Q1 of 2028 for it to come out because it's set around Valentine's Day as the name may or may not imply for a thriller, right? And so we'd like to fill it in the first half of next year and have it readied for a Q1 release in 2028. Budget on it should be in the $1.5 million range. It's a low-budget film as Obsession was or other comparable films in terms of scope were in the past year. And we're excited for it. We think we got the right director for sure with Kristin.

That's super exciting. And then just on that budget, could you remind us how much maybe just with the structure you have through the joint venture, how much you'd be contributing versus partners?

Yes. We will look into some of the meetings I'm taking this week, whether we there are scenarios where we would put up none of the budget and partner with certain studio distributors or put up half the budget similar to our IMAX deal that we did with Blue Angels and we'll weigh which ownership structure, their trade-offs of how much back-end profit you get to participate in depending on which deal you take, and we'll just make a decision based on that.

Okay. That's really helpful. And then on deal maker, it sounds like there's good progress there. Just in terms of thinking about that target for next year, you mentioned you already have 2 identified. The other 2, is that something like further along in the pipeline or just additional opportunities maybe that could roll into '27? And then in terms of marketing those ventures. Is there kind of a rough framework of the deal sizing you're looking to raise at launch? Or any other way you could think about the potential deals to be announced?

Yes. Well, let's see, first, on the number of ventures. I think 1 of them that we were hoping we'd be able to be in market by the end of this year is rolling into Q1 we think. So that's how we're giving visibility to when we think or how we believe we've identified 1 that will should be in market in Q1. But we know the first 2, which is exciting for us as we sit here today. The confidence in having 2 more before the end of next year is because, of course, we're constantly evaluating ventures. There are 2 more already that we like quite a bit that if our diligence comes back positive over the next several weeks, then we feel we may already know by the time we get back on the 10-K call in March, what our years already shaped up to be. We also are seeing our pipeline development accelerate as we just launched this partnership in February, spent 90 days plus just actually sharing information back and forth on deals that we each like deal maker from the fundraising capability side Dolphin and from the ability to have our marketing make a difference to the success of the company after it's funded. And the partnership is only strengthening. We're getting more clarity on what each of us are good at and the deal flow is just increasing. So we're very excited for that and dealmaker just makes a great partner.

Yes. Great. And then for the businesses you have currently, could you just talk more about the cross-selling you have between divisions and how that's been?

Absolutely. I was just laughing because it's done so well for us this year, and I'd be happy to brag a little bit about the team that's really across all the agencies. We call this community. It's led by Marilyn Laverty and the team that she's assembled Andrea Evanson out of our national office does a great job coordinating these calls. And I believe that we're talking about 7 figures of cross-selling, which it's a meaningful impact to both our top and bottom line. In previous years, we've talked about how PR and influencer marketing are really the peanut butter and jelly of earned media these days. It's very hard to imagine doing an earned media campaign without 1 or the other. And our companies are working very well together -- but it's more than just combining 1 of our PR firms with the digital department on the influencer side. Our PR firms are working together. We're sharing clients, we're co-representing clients not to get ahead of a couple of press releases, we'll have in the weeks ahead. Some very exciting clients from Japan that may actually utilize the services of a 42 West in the door or Shore Fire in the door. We're also co repping clients in the U.S., I'm thinking of some between Shore Fire and the door again and including a location in Los Angeles, where we're going to hold our L.A. office holiday party this year. So I really am grateful to the work that our senior leadership has been doing to really cross-sell services. And want to work together. That's that spirit of collaboration, that culture that I think the leaders at each company have really fostered both within their own agency, but across agency. We just had 1 of my 3 favorite weeks of the year when we get all of our senior leaders together in 1 city happen to be in Los Angeles in October to see 25 of our leaders in the same room across all the companies and the buzz and excitement that comes from that just invigorating. And so that cross-selling is what drives you to apples-to-apples 9.7% year-over-year organic growth on the marketing agency side, and we expect it to continue. And you can see just talking numbers for a second on our core business, we put a line in there that said our -- we built Dolphin to have our profits grow faster than our revenue, of course. Well, you can see it through 9 months, right? I mean we're tracking well ahead in revenue, but our adjusted EBITDA is tracking over 24% year-over-year. And last year was a big jump from the year before. So we're excited about what we're doing, and it's really a function of the cross-selling, the whole idea of putting this group together.