Dolphin Entertainment, Inc. (DLPN) Q1 2026 Earnings Call Transcript

Good afternoon, and welcome to the Dolphin Entertainment first quarter 2026 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.

It's now my pleasure to turn the floor over to your host, James Carbonara, with Hayden Investor Relations. Thank you, operator, and once again, good afternoon, everyone.

Before we begin, I would 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 2000. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual results. 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 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 proceed.

Thanks, James, and welcome, everyone. As always, I will start by walking through the key highlights from our first quarter, and then Mirta will take you through the detailed financials before we open it up for your questions. For those who have followed Dolphin for a while, you know that our business has a very natural seasonality to it. The first quarter is historically our lightest. Our revenue tends to build as the year goes on, usually peaking in a very strong fourth quarter. With that seasonal context in mind, we are pleased with our start to 2026. On the top line, total revenue grew 5.2% to $12.8 million. To give you just a quick flavor of what that growth looks like on the ground, our agencies have been at the absolute center of pop culture this year. Our powerhouse subsidiaries led major brand activations during Super Bowl 60, and we dominated the awards circuit. 42West and Shore Fire Media clients took home honors at the Grammys.

We celebrated an Oscar win for Best Documentary Feature at the Academy Awards. We also had a massive presence at South by Southwest, with a company record 16 world premiere titles, and we are seeing fantastic cross-agency collaboration like The Door and Shore Fire teaming up to launch the new hospitality concept Pawn Shop in Los Angeles. But where I really want to focus your attention today is on our profitability and cash flow potential. For the first quarter, we reduced our adjusted EBITDA loss from last year's first quarter by 25% year-over-year. When we calculate adjusted EBITDA, we add back one-time and nonrecurring items along with our significant noncash amortization costs that come from expensing the intangible assets we acquired through the years of building our marketing supergroup. We do this because it strips out the noise and gives you a much clearer, more accurate picture of our true cash flow potential.

The takeaway there is that our core business is operating more efficiently, driving that 25% improvement. While Q1 has historically resulted in an adjusted EBITDA loss, it is also worth noting that in full-year 2025, our adjusted EBITDA was positive $2.9 million. This speaks to the seasonality in our business that I mentioned at the top of my remarks. We certainly hope to beat that adjusted EBITDA result this year. Taking a step back, the broader thesis we laid out on our last call remains entirely intact. After several years of aggressive acquisitions and growth-related investment, Dolphin has built the infrastructure. We are now in the phase where we get to reap the benefits of that work. We operate in incredibly hot sectors, and with our rising profitability and very low capital expenditure requirements, we expect to generate significant free cash flow going forward. It is also worth reminding everyone that we are sitting on approximately $127 million in federal and state net operating loss carryforwards.

Because of those NOLs, we pay very little in cash taxes. That means as our EBITDA grows, it translates almost directly into free cash flow. And since our management team and insiders hold a substantial stake in the company, you can be sure we are deeply aligned with our shareholders in driving long-term value. Looking ahead to the rest of this year, to next year and beyond, we are incredibly enthusiastic. Alongside the organic growth we expect from our agencies, we have several major catalysts lined up. First, we are making strides with our DealMaker partnership. We are having good conversations and are targeting having our first deal on the market later this year. This is a perfect example of a catalyst that leverages our existing marketing acumen and carries highly attractive margins. Second, we just announced earlier today the launch of a publishing imprint venture with Copper Books and Simon & Schuster.

This gives us the ability to offer premium book publishing services to our clients, whether that is a children's book, a cookbook, or a novel. The best part of this model is that Dolphin puts up zero capital, but we receive 15% of the revenue. It is exactly the kind of capital-light venture we love to pursue. Finally, we want to reiterate two massive contractual catalysts that will fundamentally change our free cash flow profile. First, we expect to realize about $1 million in annualized lease savings when our large legacy leases in New York and Los Angeles expire before 2027. Second, our bank debt matures in roughly 2.5 years. Paying that off will save us almost $2.2 million annually in principal and interest. Combined, that is over $3 million in annual cash flow savings that we expect will flow almost entirely to our bottom line. In short, the infrastructure is built. We expect continued revenue growth and adjusted EBITDA margin expansion throughout 2026, and we are very excited to watch our incremental revenue flow disproportionately to the bottom line. With that, I will turn the call over to Mirta A. Negrini, our Chief Financial Officer, to walk through the numbers.

Thank you, Bill, and good afternoon, everyone. I will now review our first quarter 2026 financial results. Total revenue for the three months ended March 31, 2026, was $12.8 million, an increase of 5.2% from $12.2 million in the prior-year same quarter. Our operating loss was $2.1 million for 2026 compared to an operating loss of $1.8 million for the same period in 2025. Operating expenses for Q1 2026 were $14.9 million. As Bill noted, this included unusual items, specifically $900,000 in legal and professional fees as well as a one-time direct cost of $700,000 related to a distribution guarantee for Youngblood. This compares to operating expenses of $13.9 million in Q1 2025, which included acquisition costs of approximately $400,000. Both periods included noncash depreciation and amortization expenses of roughly $500,000 and $600,000, respectively. Net loss for Q1 2026 was $2.7 million compared to a net loss of $2.3 million in 2025.

Basic and diluted loss per share for Q1 2026 was $0.22 based on 12.3 million weighted average shares outstanding, compared to a basic and diluted loss per share of $0.21 in Q1 2025 based on 11.2 million weighted average shares outstanding. Finally, turning to adjusted EBITDA, after adding back noncash items like depreciation and amortization, as well as the one-time Youngblood guarantee and the unusually high legal fees related to outstanding litigation, our adjusted EBITDA loss for Q1 2026 was approximately $467,000. This represents a 25% improvement compared to an adjusted EBITDA loss of $625,000 in Q1 2025, reflecting the underlying strength of our core operations. With that, I will now turn it back to the operator to open the floor for questions. Operator, would you please poll for questions?

Certainly. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press 1 on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press 1 on your keypad at this time if you wish to join the queue to ask a question. Please hold a moment while we poll for questions. And we have a question from Derek Greenberg from Maxim Group. Derek, your line is live. Please go ahead.

Thanks for taking my questions. I wanted to start with just the DealMaker partnership. At the beginning of the call, Bill, you had mentioned you expect to announce your first deal from that later this year. I was wondering if you could just update us. I think on the last call, you had said that deals should generate around six-figure fees per deal. I was wondering, A, if that math is still correct and if that is what you are seeing, and then B, as we move forward, what your expectations are with that partnership in terms of deals per year and how you think about how that can contribute to the business overall?

Sure. Thanks, Derek, for the question. We had a very productive vetting call with DealMaker in April, sharing the deals that we have to evaluate and talk about what we like, what they like, which ones we think are ready for market. It gives me the confidence to believe we will be able to announce our first deal maybe even before our next earnings call, and certainly have a deal in market by the end of the year. We have a couple that we are all very excited about. With that said, I do believe that each of these deals will result in six figures per year to Dolphin in marketing revenue. I also believe that we will be able to get to multiple deals per year in the market. We are going to test with the first one, go through the process together, have that deal in market alone—not trying to do two deals at once to start—get the rhythm down and go from there. So it will impact later this year in a positive way, and then it will be a real driver for us in 2027.

Okay, great. And then on one of the other catalysts you had mentioned, with today's announcement of the partnership with Copper Books, you had said you expect to get 15% of revenue with zero capital. I was wondering, is that in relation to a publishing deal between author and the publisher, or is that like book sales? How should we think about that revenue? And then overall, your expectations for that partnership and getting your pipeline of talent activated within that partnership.

Yeah. This is a nice-to-have for us. We have many clients across most of our companies that have either published books already, are established authors, or want to publish, and the ability to offer this service to guide them to a national distribution deal through Simon & Schuster is something that really separates us and gives clients extra reason to sign with us or retain us. We will see the uptake, but it is all net positive. As you can see, there is no investment from Dolphin in this relationship, so from that sense anything is additive. We will see how many take us up on it and how it grows over time. The publishing industry and the book world are something we have a couple of irons in the fire on, and we think it can be very additive to Dolphin. It is entertainment, and it is something our companies already have experience promoting and marketing. Each of our marketing companies has helped launch books or clients with books or held events for book launches, so it is a natural extension for us. Copper Books was founded by Ali Trowbridge, who is a dear friend of many of us within the company, and she has a fabulous business. Simon & Schuster is, of course, one of the big publishers. So we are excited for it and looking forward to seeing where it will go.

Okay, great. And just on that 15% revenue, could you clarify if that was a percentage of the publishing deal between the author and the publisher, or is it 15% of book sales?

How to think about that: it will be 15% of the author's keep and/or any consulting fees that are required to get the book into market. So that is what that represents.

Okay, great. And now I wanted to ask about the Youngblood movie. I have two questions there. First, was there any revenue in this quarter that was related to the premiere and box office run for Youngblood? And then my other question is any updates on a potential streaming deal or your expectations there?

Sure. We recognized $450,000 of revenue in this quarter from U.S. sales of Youngblood, which is nice. In terms of the streaming sale, after the theatrical release, we put the movie out for pay-per-view. It entered pay-per-view through a subdistribution deal with Universal. We have been told that the first month was looking good—few hundred thousand in sales. We will get a full report in the next 30 days, which I could share, of course, on the second quarter earnings call. We are going to try to use that positive result from the pay-per-view sales to help drive a favorable streaming deal for ourselves. So we are waiting on that report, and then hopefully we will have something to share about a streaming sale on the Q2 earnings call.

Okay, great. That is super helpful. Could you touch on how the revenue share for the pay-per-view works?

Typically, and in this case, we will receive somewhere in the neighborhood of 40% to 50% of that revenue when there is a subdistributor like Universal, after they take their fee for doing that. That could be offset by marketing costs from the first month or two of revenue, but as a general rule of thumb, I think you could expect something in that range.

I wanted to turn to another initiative you guys had, I think, toward the end of last year just on Dolphin Intelligence and your marketing initiative. I was wondering how that is progressing and what you are seeing.

Yeah. That is run by Mark Anderson, who has spoken on a few panels in the last couple of months on this topic and is, frankly, as big a geek on this topic as anybody I know. Our clients have expressed a strong interest in this service. We have signed our first couple of clients to do what we call the audit, where we go in and effectively audit the results when people search in the general area a client works in to show them if they are showing up on AI searches and, if not, why not. That way we can take remedial action. So it has started, and we think momentum will pick up. Mark will be with me, and we will have about eight of our team members across our companies at the Cannes Lions marketing conference in June. Not to be confused with the Cannes Film Festival. At Cannes Lions, AI and influencer marketing are the two twin topics that are driving most of the conversation in marketing today. The use of AI and the continued growth of influencer marketing. We have members of our influencer marketing team, members of our consumer products team, and Mark from our Dolphin Intelligence team attending. I will be there. It will be a good conference for us, and I would expect we will have some more momentum behind Dolphin Intelligence coming out of that—the biggest marketing conference of the year.

Great. My last question: I was curious how you think about potential M&A from here. It was a huge part of your past and history, but now that you view the platform as largely built out, do you still plan to opportunistically pursue M&A or do you have any thoughts on that front?

Sure. You never say never, right? I do not know of a single acquisition in the pipeline today. If something comes across our desk or if there is a skill set we determine we need, we could go back into the market. We certainly have not forgotten how to acquire a company, but we are more focused today on our DealMaker partnership and on building ventures that can create disproportionate upside for us, along with organic growth. That was the mousetrap we were trying to build: scale across earned media to provide a suite of marketing services that would influence the outcome of ventures we pursue and that we could take ownership stakes in. Some of these DealMaker-type ventures that we are evaluating now can be 10x or more, and that is what we want to pursue. Quite frankly, that is a better use of our opportunity cost than incremental acquisitions would be. That is our view.

Thanks for taking my questions.

Thank you. There are no further questions in queue at this time. I would now like to hand the call back to CEO Bill O'Dowd for closing remarks.

Thank you. After Q1, our closing remarks usually start with the reminder that we just spoke six weeks ago, so we have a short span here and nothing major to report since we last spoke after our phenomenal Q4 to end 2025. We will get back into our normal rhythm now, speaking again in 90 days, and I think in that time frame we may have something exciting to talk about—one or two things—and certainly an update on our DealMaker partnership. Those are the huge opportunities we see for our future and a big catalyst for us coming out of that. In the meantime, the blocking and tackling of just incrementally doing better per quarter year-over-year continues. Each quarter gets us one quarter closer to those cash savings I have talked about on our last couple of calls with the leases expiring and the term loan being paid off. It is going to free up a lot of cash flow for us, and that is always exciting. Thank you, everybody, for your time, and we look forward to talking to you in 90 days.

This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.