Dolphin Entertainment, Inc. (DLPN) Earnings

Management highlights

### Core Agency Business Performance & Key Events - Core agency operations had a busy active quarter, with prominent presences at major industry events including the Cannes Film Festival, Cannes Lions Festival of Creativity, 25th Tribeca Film Festival, VidCon Anaheim, Nexus Global Summit, and San Diego Comic-Con. 42 West secured multiple Emmy nominations for its client roster, and core agency revenue held up well despite one-time non-recurring expenses in the quarter. ### New Strategic Initiatives Launched - **Gravitor Studios**: A new joint venture production studio co-founded with Kinetic Media Ventures, focused on producing, distributing, and marketing creator-led content across streaming, television, and theatrical platforms. The studio targets top influencers and digital creators who have demonstrated proven audience pull across platforms, as evidenced by the recent box office success of low-budget creator-directed feature films. Management expects the venture to become a meaningful contributor to long-term growth. - **DealMaker Strategic Partnership**: Launched in February 2026, the partnership evaluates and brings emerging venture and consumer deals to market, leveraging Dolphin's marketing capabilities alongside DealMaker's capital access. No capital is required from Dolphin's balance sheet, and Dolphin earns marketing fees plus upside equity optionality from successful ventures. - **Copper Books Partnership**: A publishing partnership with Copper Books (distributed via Simon & Schuster) that allows Dolphin to support clients who want to write and publish books, adding a differentiated capability no competitor offers. - **Dolphin Intelligence AI Marketing**: A new AI-powered marketing service that is currently folded into existing client contracts; management is working to position it as a standalone offering with high incremental margin, as most required investment has already been completed. ### Profitability & Capital Alignment - Q2 2026 profitability was impacted by two one-time items: approximately $360,000 in one-time employee retention bonuses and $360,000 in elevated litigation-related legal fees. Management expects these costs to return to normal levels in Q3 2026. - The company holds approximately $127 million in net operating losses (NOLs), so nearly all future cost savings will flow directly to the bottom line. CEO Bill O'Dowd is purchasing additional shares under a 10b5-1 plan, and will own over 5% of outstanding common stock, aligning management with shareholder interests.

Guidance

- Management expects a meaningful step-up in profitability in Q3 2026 as one-time retention bonuses and elevated litigation costs roll off the income statement. - Management reaffirms that the first DealMaker-backed venture is still expected to launch before the end of 2026, with a second venture potentially announced by year-end, after building a pipeline of two highly attractive candidate deals. - Management expects Dolphin Intelligence AI marketing to secure its first major standalone client before the end of 2026, unlocking high incremental upside with no additional capital investment required. - International distribution deals for the *Youngblood* film are expected to be finalized after the Toronto Film Festival (September 2026) and American Film Market (November 2026), with management targeting a U.S. streaming deal for *Youngblood* in Q3 2026. - Management expects second half 2026 core revenue and profitability to exceed first half 2026 results, matching the strong second half performance of 2025, with early August indicators already showing encouraging trends for the key seasonal Q4 holiday campaign period. - No changes were made to prior long-term base profitability guidance; the core business is already on track to deliver meaningfully higher free cash flow once existing debt principal and interest obligations ($2.2 million annual savings) and office leases ($1 million annual savings) roll off over the next 18 months, with no new growth required to hit these targets.

Segment performance

Segment-level revenue breakdowns were not provided in the call transcript. Aggregate company results are as follows: Q2 2026 total revenue was $14.4 million, a 2.5% year-over-year increase from $14.1 million in Q2 2025. First half 2026 total revenue was $27.2 million, a 3.8% year-over-year increase from $26.3 million in the first half of 2025. Q2 2026 operating loss was $1 million, compared to a $100,000 operating loss in Q2 2025. Adjusted EBITDA for Q2 2026 was approximately $243,000, down from $628,000 in Q2 2025. Net loss for Q2 2026 was $1.6 million, compared to a $1.4 million net loss in Q2 2025. Basic and diluted loss per share was 13 cents for both Q2 2026 and Q2 2025. As of June 30, 2026, cash and cash equivalents totaled $7.7 million, down from $8.8 million as of December 31, 2025. The company's two largest revenue-generating segments are 42 West (public relations) and the digital department, both of which are highly seasonal with the majority of annual revenue generated in the second half of the year.

Risks & headwinds

- The *Youngblood* U.S. streaming distribution deal has taken longer to finalize than management initially expected, with no deal closed as of the Q2 2026 earnings call, creating delayed revenue recognition for the title. - New strategic initiatives (Gravitor Studios, DealMaker partnership, Copper Books, Dolphin Intelligence) are all in early stages, and there is no guarantee they will deliver projected growth, profitability, or successful exits. - A large portion of annual revenue is concentrated in the second half of the year (especially Q4 holiday marketing campaigns), so weaker-than-expected brand spending during this key period would materially impact full-year results. - Ongoing litigation has resulted in elevated legal fees in Q2 2026, though management expects these costs to decline to normal levels going forward. - The success of Gravitor Studios is dependent on the continued popularity of digital creators and their ability to draw audiences to long-form content, which may not meet management's expectations.

Analyst Q&A

• Q: What is the ownership structure, financing model, and economics of the new Gravitor Studios joint venture? /

  A: Gravitor Studios was co-developed with Kinetic Media Ventures, founded by a long-time industry partner with deep experience in digital creator representation. The venture produces low-budget creator-led content, with typical project budgets of around $1 million or less, which keeps capital requirements modest. Dolphin follows its traditional film financing approach by laying off most risk on most projects, limiting downside exposure while retaining meaningful upside from successful projects.

• Q: Are there updates on international and streaming distribution for the Youngblood film? /

  A: A U.S. streaming deal has not yet closed, which is later than management initially expected, and the distributor is making an increased push to close a deal in the second half of 2026, targeting a Q3 close. International distribution agreements will likely not be finalized until the Toronto Film Festival in September 2026 and the American Film Market in November 2026, the key industry events for international sales.

• Q: What is the current progress of the Dolphin Intelligence AI marketing service? /

  A: Multiple clients have expressed interest in the service, which is currently folded into existing PR contracts as an add-on. Management's second half 2026 goal is to position the service as a standalone offering and secure its first major standalone client. No additional capital investment is required, so all revenue from the service would flow almost directly to incremental profit.

• Q: What is the expected deal cadence and capital requirements for the DealMaker partnership? /

  A: Two promising candidate deals have been identified after the initial 3-month evaluation period, and the partnership targets a first deal launch by the end of 2026, with a potential second deal to follow shortly after. All ventures require zero capital from Dolphin's balance sheet, and Dolphin earns marketing fees plus equity upside for each deal. Over 3-4 years, management targets 6-12 active ventures with the potential for 8-figure+ exit values.