DMS Announces Preliminary, Unaudited Third-Quarter Results; Updates Full-Year Guidance; Announces Cost-Reduction Initiative and Earnings Release Details

1. DMS expects third-quarter results to be $106.5 – $107.5 million for GAAP revenue; $111 – $112 million for adjusted revenue; $5 – $6 million for net income; and $10 – $11 million for adjusted EBITDA.

2. DMS adjusts 2021 full-year guidance to include the impact of macro trends; currently expects GAAP revenue of $421 – $431 million; adjusted revenue of $437 – $447 million; and adjusted EBITDA of $60 – $63 million.

3. DMS announces cost reduction initiative expected to generate $8.4 million of annual savings and to be implemented by year-end 2021.

4. The Company also announces third-quarter earnings release date of November 9, 2021, with conference call details below.

Digital Media Solutions, Inc. announced preliminary, unaudited 2021 third-quarter results, which are expected to be $106.5 – $107.5 million for GAAP revenue; $111 – $112 million for adjusted revenue; $5 – $6 million net income; and $10 – $11 million for adjusted EBITDA.

“Top-line growth continued in the quarter, up 29% – 30% on a reported basis over the year-ago quarter, especially in our largest sector of insurance, despite some challenges,” stated Joe Marinucci, CEO of DMS. “We are proud of the initiatives put in place the past few months and our continued prioritization of our people, processes and technology — especially important in today’s pandemic-focused environment with evolving macro environment trends. The auto insurance sector, for example, is experiencing an increasingly challenging environment after 70% of the top private auto insurers in America confronted deteriorating loss ratios, and we are seeing the effect on the marketing appetite of our auto insurance clients.”

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As COVID-driven lockdowns came to an end and drivers returned to the roads, accidents increased and repair costs grew due to rising automobile prices plus supply and labor shortages. Insurance companies, in turn, mitigated costs, including reducing customer acquisition and advertising budgets for the remainder of 2021.

Meanwhile, the highly contagious Delta variant resulted in the U.S. experiencing its highest COVID spike to date during the third quarter. As a result, multiple associates working in the DMS Memphis-based call center battled symptoms, and significant parts of the call center went through quarantine periods, creating a decline in productivity. This, coupled with the effects of government employment programs, drove wage increases in order to stay competitive for talent.

Separately, as announced earlier this month, DMS launched Protect Health Insurance Agency as an approved agency to sell health insurance policies, with a focus on the Medicare market, launching ahead of the 2021 Annual Enrollment Period. This is an exciting strategic initiative, which provides DMS with access to the ~$30 billion Medicare distribution market. Start-up operating expenses were largely incurred in Q3, while revenue generation began in Q4.

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“We made strategic decisions and investments in Q3,” noted Marinucci. “The strategic investments were designed to drive mid- and longer-term growth, including the recently announced launch of our Protect Health Insurance Agency, which is already generating revenue. But, as a result of these investments, plus the dramatic impact of COVID, the business experienced short-term revenue and non-recurring margin pressure in Q3.”

Additionally, during the third quarter, DMS launched an efficiency and cost-saving initiative that is expected to result in annual savings of $8.4 million once implemented prior to year-end. As of the end of September 2021, DMS had already taken action on annualized savings of $3.5 million as part of this effort. Initiatives include headcount reductions through the centralization of certain functions, efficiency improvements in technology vendor management and the elimination of redundant systems, resulting in a reduction in spend with some vendors and in-sourcing other capabilities.

DMS Updates Full-Year Guidance

DMS is also updating 2021 full-year guidance for GAAP and adjusted revenue to $421 – $431 million and $437 – $447 million, respectively, and for adjusted EBITDA to $60 – $63 million.

While anticipating continued auto insurance price compression, management remains optimistic about Q4, a seasonally significant quarter for the Company. Third-quarter investments in top-line growth initiatives and capabilities, combined with the efficiency and cost-saving initiative, position DMS well during the current quarter and beyond. DMS expects a robust health insurance enrollment period with solid performance in ecommerce and consumer finance during the fourth quarter.

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