Digital Media Solutions Announces Record Quarter

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  1. Record revenues of $ 105.1 million and adjusted revenues1 of $ 109.3 million, up $ 29.9 million and $ 32.5 million year over year, respectively.
  2. Net income of $ 4.9 million, compared to net income of $ 2.1 million in the second quarter of 2020.
  3. Increased variable marketing margin to $ 40.1 million, or 38.2%, from 32.0% in the first quarter of 2021 and 34.1% in the second quarter of 2020.
  4. Adjusted EBITDA of $ 16.0 million, down 3.0% year-over-year, reflecting critical public company infrastructure investments made over the past twelve months.
  5. Announced forecast revenue of $ 108 million to $ 110 million for the third quarter of 2021 and adjusted revenue of $ 113 to $ 115 million.
  6. Announcement of revenue forecast for fiscal 2021 of $ 438 to $ 447 million and reiteration of adjusted revenue forecast of $ 455 to $ 465 million and adjusted EBITDA of $ 72 to $ 75 million.

Digital Media Solutions, Inc. (NYSE: DMS), a leading provider of technology-based digital performance advertising solutions connecting consumers and advertisers, today reported strong quarterly results, including margins enlarged; substantial growth within insurance, its largest vertical; and strategic investments that boosted both revenue and efficiency in the second quarter with continued and long-term benefits expected.

“Our strong second quarter performance is due to a confluence of circumstances that we have deliberately and strategically built for ourselves,” noted Joe Marinucci, CEO of DMS. “We continue to see a competitive advantage through leveraging our first-party data assets, proprietary technology and broad media reach, which even in a growing cost-per-impression environment keeps us going. with greater efficiency, resulting in better quality targeted engagements, benefiting both consumers and advertisers. In addition, we played from strength to strength, leveraging growing consumer and advertiser demand for auto insurance, to more than double the volume of quote requests. And we’ve made strategic investments, in terms of acquisitions, technological improvements and new hires, that have driven every part of our business. Finally, the progress we made in Q2 should serve us well during the upcoming Open Enrollment Period (“OEP”) and the holiday shopping seasons. “

Second Quarter Income and Expenses:

  1. In the second quarter of 2021, we generated quarterly revenue of $ 105.1 million and adjusted revenue of $ 109.3 million, up $ 29.9 million and $ 32.5 million on a year, respectively, compared to the second quarter of 2020.
  2. We continued to experience strong revenue growth in all of our segments. The increase in revenue in Q2 2021 compared to Q2 2020 is due to continued strong growth in insurance, both in the Brand-Direct and Marketplace segments, as our advertiser clients continued to transition ad spend to channels. digital, as they follow consumer usage patterns.

Revenue by segment:

  1. Brand-Direct Solutions’ second quarter revenue was $ 59.9 million, up $ 14.5 million year over year.
  2. Marketplace Solutions revenue of $ 57.8 million increased $ 22.5 million year over year, primarily due to revenue growth in the insurance industry.
  3. Other Solutions revenue was $ 1.9 million in the second quarter, up $ 0.7 million year over year.

Gross Margin / Variable Margin and Marketing Margin:

  1. For the second quarter, the reported gross margin was $ 33.7 million, a margin of 32.1%, compared to 28.5% margin in the first quarter of 2021 and 30.3% in the second quarter of 2020.
  2. Brand-Direct Solutions’ gross margin in the second quarter was 26.0%, up significantly from 23.8% in the first quarter of 2021 and 24.2% in the same quarter of last year. The increase in margin is due to strong execution and strategic investments, such as DMS Voice, which have enabled us to achieve efficiencies.
  3. Marketplace Solutions’ gross margin in the second quarter was 28.9%, up from 25.7% in the first quarter of 2021 and down from 30.3% in the second quarter of 2020.
  4. The variable marketing margin in the second quarter was $ 40.1 million, or 38.2%, compared to 32.0% in the first quarter of 2021 and 34.1% in the second quarter of 2020.

Operating Expenses :

  1. We remain focused on improving leverage in our business while investing in the infrastructure necessary for a successful public company with strong financial, legal and compliance controls.
  2. Our total operating expenses were $ 25.8 million in the second quarter, an increase of $ 5.6 million from the first quarter of 2021 and up $ 9.5 million from a year ago on the other, adjusted primarily for one-time acquisition cost expenses of $ 0.4 million, stock-based compensation of $ 1.3 million, lease restructuring reserves of $ 0.4 million and additional expenses of $ 1.8 million relating primarily to legal fees, settlements and pre-acquisition consultation.
  3. We ended the second quarter of 2021 with a total workforce of approximately 600 FTEs, which includes new employees as part of the acquisition of the assets of Crisp Results.

Profitability, balance sheet and liquidity for the second quarter of 2021:

Profitability:

  1. Net income of $ 4.9 million, compared to net income of $ 2.1 million in the second quarter of 2020.
  2. Second quarter 2021 basic / diluted earnings per share of $ 0.07 for Class A common shares is based on a weighted average of 35.4 million shares outstanding for basic and 36.5 million for dilution. Adjusted EPS was $ 0.06 per share.2 Second Quarter Adjusted EBITDA was $ 16.0 million, representing an Adjusted EBITDA margin of approximately 15.2%3. Adjusted EBITDA decreased 3% year over year, reflecting public company infrastructure investments made over the past twelve months. As a reminder, the second quarter of 2020 was the last full quarter that had no public enterprise spending.

Balance sheet and liquidity:

  1. During the quarter, we announced the refinancing of our credit facility, an important step in our financial transformation, giving us increased flexibility to support our key growth initiatives.
  2. The new $ 275 million facility, currently rated B2 / B, includes a $ 50 million revolver.
  3. We ended the quarter with $ 18.8 million in cash, up from $ 23.9 million at the end of the first quarter of 2021, reflecting the acquisition of the assets of Crisp Results as well as normal changes in working capital.
  4. Our total debt at the end of the quarter was $ 225.0 million and, net of discount and issuance costs, $ 218.2 million.
  5. As at June 30, 2021, we had an available balance on our $ 50 million revolving credit facility.

Update on mergers and acquisitions:

  1. In early April, we closed our previously announced asset acquisition from Crisp Results. The timing of this transaction gives us the opportunity to integrate Crisp Results ahead of the fourth quarter seasonal open enrollment period, leveraging our proprietary data assets, proprietary technology and broad media reach. to enhance the strong business of Crisp Results. had already established.
  2. Our M&A pipeline remains strong, with many potential opportunities. However, we continue to be disciplined when evaluating such opportunities.

Forecasts for the third quarter and fiscal year 2021:

DMS is currently anticipating the revenue, adjusted revenue, gross margin, variable marketing margin and adjusted EBITDA ranges as follows:

Third quarter 2021:

  1. GAAP revenue of $ 108 million to $ 110 million and adjusted revenue of $ 113 to 115 million.
  2. Gross margin from 28 to 31% and variable marketing margin from 32 to 36%.
  3. Adjusted EBITDA between $ 17.2 and $ 18.1 million.

All year 2021:

  1. Forecast GAAP revenue of $ 438-447 million and adjusted revenue of $ 455-465 million, unchanged from our previous forecast.
  2. New GAAP revenue forecast of $ 438 million to $ 447 million and reiteration of the adjusted revenue forecast of $ 455 million to $ 465 million.
  3. Adjusted EBITDA between $ 72 million and $ 75 million, unchanged from our previous guidance.

Management continues to expect business to be strong for the remainder of 2021.

Growth in our health insurance business is expected to be driven, in part, by a strong annual Medicare (AEP) enrollment period and a strong open Medicare (OEP) enrollment period, given the number of aging consumers. in Medicare.

For our auto insurance business, the growth of our agent network is expected to drive demand and generate revenue per quote request.

Our diversified and evolving offering (publisher partners) and consumer and advertising client demand will allow us to continue to seek opportunities in several verticals and to capitalize on changing and seasonal opportunities.

Adjusted Revenue, Adjusted EBITDA and Variable Marketing Margin are non-GAAP financial measures. Management believes that Adjusted Revenue, Adjusted EBITDA, and Variable Marketing Margin provide useful information to investors and help explain and isolate the basic operating performance of the business – see section “Non-GAAP Financial Measures” below. As a guide, the company does not provide a quantitative reconciliation of Adjusted EBITDA based on the “unreasonable efforts” exception for non-GAAP forward-looking measures set out in SEC rules because certain financial information, the probable importance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense.

Conference Call and Webcast Information:

The United States toll-free number for conference calling is 1-833-772-0374 and the international calling number is 1-236-738-2220. The conference ID is 1593396. A live broadcast of the conference call will be available on the Investor Relations page of the Company’s website at https://investors.digitalmediasolutions.com.

A replay will be available after the call ends from August 9, 2021 to August 16, 2021. The toll-free replay number in the United States is 1-800-585-8367, and the international call number is replay is 1-416-621-6442. The replay access code is 1593396.


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