Digital Media Solutions, Inc. Announces Record-Breaking Quarter For Q2 2021 Revenue, Gross Profit Margin And Adjusted EBITDA

• Record revenue of $105.1 million and adjusted revenue¹ of $109.3 million, up $29.9 million and $32.5 million year over year, respectively.

• Net income of $4.9 million, compared to net income of $2.1 million in the second quarter of 2020.

• Increased Variable Marketing Margin to $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.

• Adjusted EBITDA of $16.0 million, down 3.0% year over year, a reflection of the essential public company infrastructure investments made throughout the past twelve months.

• Announced third quarter 2021 revenue guidance of $108 – $110 million and adjusted revenue guidance of $113 – $115 million.

• Announced FY 2021 revenue guidance of $438 – $447 million and reiterated adjusted revenue guidance of $455 – $465 million and adjusted EBITDA of $72 – $75 million.

Digital Media Solutions, Inc. , a leading provider of technology-enabled digital performance advertising solutions connecting consumers and advertisers, announced strong quarterly results inclusive of expanded margins; substantial growth within insurance, its largest vertical; and strategic investments that boosted both revenue and efficiency in Q2 with continued and long-term benefits expected.

“Our strong second-quarter performance is thanks to a confluence of circumstances that we strategically and deliberately constructed for ourselves,” noted Joe Marinucci, Chief Executive Officer at DMS. “We continue to see a competitive advantage as a result of leveraging our first-party data asset, proprietary technology and expansive media reach, which, even in an environment of rising cost per impression, allows us to operate with greater efficiency, thus resulting in higher-quality targeted engagements, benefiting consumers and advertisers alike. Additionally, we played from strength to strength, leveraging the growing consumer and advertiser demand for auto insurance, to more than double quote request volume. And, we made strategic investments, in terms of acquisitions, technology enhancements and new hires, that boosted every part of our business. Lastly, the advancements we made during the second quarter should serve us well during the upcoming open enrollment period (“OEP”) and holiday shopping seasons.”

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“Our strong second-quarter performance is thanks to a confluence of circumstances that we strategically and deliberately constructed for ourselves,” said Joe Marinucci, CEO of Digital Media Solutions.

Second Quarter Revenues 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 year over year, respectively, from the second quarter of 2020.
2. We continued to see strong revenue growth across our segments. Higher revenues in Q2 2021 compared to Q2 2020 were driven by continued strong growth in insurance, both in the Brand-Direct and Marketplace segments, as our advertiser clients have continued the transition of ad spend to digital channels, as they follow consumer usage patterns.

Revenue by Segment:

1. Brand-Direct Solutions revenue in the second quarter 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 growth in insurance sector revenue.
3. Other Solutions revenue was $1.9 million in the second quarter, up $0.7 million year over year.

Gross Profit/Margin and Variable Marketing Margin:

1. For the second quarter, reported gross profit was $33.7 million, or a 32.1% margin, compared to 28.5% margin in Q1 2021 and 30.3% in the Q2 quarter of 2020.
2. Brand-Direct Solutions gross margin in the second quarter was 26.0%, up significantly from 23.8% in Q1 2021 and up from 24.2% the same quarter last year. The uptick in margin is driven by strong execution and strategic investments, like DMS Voice, which allowed us to create efficiencies.
3. Marketplace Solutions gross margin in the second quarter was 28.9%, up from 25.7% in Q1 2021 and down from 30.3% in the Q2 quarter of 2020.
4. 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 the leverage in our business while investing in the infrastructure needed for a successful public company with strong financial, legal and compliance controls.
2. Our total operating expenses amounted to $25.8 million in the second quarter, an increase of $5.6 million from Q1 2021 and up $9.5 million year over year, adjusted predominantly for one-time expenses related to acquisition costs of $0.4 million, stock compensation of $1.3 million, lease restructuring reserves of $0.4 million, and additional expenses of $1.8 million pertaining mostly to pre-acquisition legal fees, settlements and consulting.
3. We ended the second quarter of 2021 with a total headcount of approximately 600 FTEs, which includes the new employees in connection with the acquisition of Crisp Results assets.

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Second Quarter 2021 Profitability, Balance Sheet and Liquidity:

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 stock is based on 35.4 million weighted average shares outstanding for basic and 36.5 million for diluted. Adjusted EPS was $0.06 per share.² Adjusted EBITDA in the second quarter was $16.0 million, or an adjusted EBITDA Margin of approximately 15.2%³. Adjusted EBITDA decreased 3% year over year, a reflection of the public company infrastructure investments made throughout the past twelve months. As a reminder, second quarter 2020 was the last full quarter that did not have public company expenses.

Balance Sheet and Liquidity:

1. During the quarter, we announced the refinancing of our credit facility, a significant step in our financial transformation, providing us with increased flexibility to support our key growth initiatives.
2. The $275 million new facility, currently rated B2/B, includes a $50 million revolver.
3. We ended the quarter with $18.8 million in cash, versus $23.9 million at the end of Q1 2021, reflecting the acquisition of Crisp Results assets plus normal shifts in working capital.
4. Our total debt at quarter end was $225.0 million, and, net of discount and issuance costs, was $218.2 million.
5. As of June 30, 2021, we had an available balance on our revolving credit facility of $50 million.

M&A Update:

1. At the beginning of April, we closed our previously announced acquisition of assets from Crisp Results. The timing of the close of this transaction gives us the opportunity to integrate Crisp Results ahead of the seasonally significant fourth quarter Open Enrollment Period, leveraging our first-party data asset, our proprietary technology and our expansive media reach to enhance the strong business Crisp Results had already established.
2. Our M&A pipeline remains strong, with numerous potential opportunities. However, we are continuing to be disciplined as we evaluate such opportunities.

Third Quarter and Full-Year 2021 Guidance:

DMS currently anticipates Revenue, Adjusted Revenue, Gross Margin, Variable Marketing Margin and Adjusted EBITDA ranges as follows:

Third quarter 2021:

1. GAAP Revenue of $108 – $110 million and Adjusted Revenue of $113 – $115 million.
2. Gross Margin of 28 – 31% and Variable Marketing Margin of 32 – 36%.
3. Adjusted EBITDA in the range of $17.2 – $18.1 million.

Full year 2021:

1. GAAP Revenue guidance of $438 – $447 million and Adjusted Revenue of $455 – $465 million, unchanged from our previous guidance.
2. New GAAP Revenue guidance of $438 – $447 million and reiterated Adjusted Revenue guidance of $455 – $465 million.
3. Adjusted EBITDA in the range of $72 – $75 million, unchanged from our previous guidance.

Management continues to expect business to be solid for the rest of 2021.

Growth for our health insurance business is expected to be driven, in part, by a strong Medicare Annual Enrollment Period (AEP) and a robust Medicare Open Enrollment Period (OEP), given the number of consumers aging into Medicare.

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

Our diversified and scaling supply set (publisher partners) and demand from consumers and advertiser clients will allow us to continue pursuing opportunities in multiple verticals and 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 core operating performance of the business — refer to the “Non-GAAP Financial Measures” section below. For guidance purposes, the company is not providing a quantitative reconciliation of adjusted EBITDA in reliance on the “unreasonable efforts” exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense.

Conference Call and Webcast Information:

The U.S. toll free dial-in for the conference call is 1-833-772-0374, and the international dial-in number is 1-236-738-2220. The Conference ID is 1593396.

A replay will be available after the conclusion of the call on August 9, 2021 through August 16, 2021. The U.S. toll-free replay dial-in number is 1-800-585-8367, and the international replay dial-in number is 1-416-621-4642. The replay passcode is 1593396.

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