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Digital Media Solutions, Inc. Announces Q2 2022 Financial Results

August 9, 2022 4:30 PM EDT
  • Second-quarter net revenue of $91 million
  • Second-quarter net loss and Adjusted EBITDA of $12 million and $3 million, respectively
  • Second-quarter gross margin of 26% and Variable Marketing Margin (VMM) of 33%
  • Announced third quarter 2022 net revenue guidance of $87 – $90 million and Adjusted EBITDA guidance of $4 – $6 million
  • Reduced full-year 2022 net revenue guidance to $390 – $400 million and Adjusted EBITDA guidance to $30 – $35 million
  • Announces a multi-year strategic advertising partnership with internet technology and content evaluation company Seekr.

CLEARWATER, Fla.--(BUSINESS WIRE)-- Digital Media Solutions, Inc. (NYSE: DMS), a leading provider of technology-enabled digital performance advertising solutions connecting consumers and advertisers, today announced financial results for the quarter ended June 30, 2022.

“We are pleased with the results we delivered despite the challenges that resulted from macro-economic factors during the quarter. We are seeing positive momentum in key areas of our business such as growth in our independent agent base with an increase of 9% quarter over quarter bringing the total agent count to 7,026. Our data signals program also grew significantly on the back of the Traverse acquisition and is a cornerstone to our future growth. We remain optimistic that our dynamic diversification and agility continue to position DMS with the resilience needed to effectively weather industry instability successfully,'' said Joe Marinucci, CEO of DMS.

The steadfast competitive advantage of DMS is a direct result of the Company’s ability to harness the power of real-time consumer intent to drive efficiency and higher yield through the expanding DMS first-party data asset.

In the quarter, DMS continued to make a number of significant investments in the business such as expanding the Company's base of independent agents. Marinucci continued, “The growth of our agent base provides greater predictability and diversification against the volatility we are seeing in the current market with the enterprise clients. Over the coming year, we see an opportunity to grow and expand our agent base by up to 40% more agents as a result of the investments we have made.”

The company has also focused on capitalizing on staffing efficiencies that help accelerate the recovery of growth while mitigating additional operating expenses. DMS remains committed to its investment in people, process and technology, with a significant emphasis on its data and technology assets.

“We believe 2022, specifically Q2, represents trough level performance for us with momentum building back for us in Q3 and Q4. This should set up 2023 as a year when we return to growth.” said Rick Rodick, DMS CFO.

The Company’s next phases of growth will include continuing to invest in the growth of independent agent operations along with commercialized audience activation. The audience activation initiatives lead to more efficient targeting and retargeting of consumers across the DMS platforms where the Company can engage consumers and deliver stronger advertising ROI to the Company's advertiser clients, as can be seen in the newly announced partnership with Seekr. For additional information, see the Seekr partnership press release at https://investors.digitalmediasolutions.com.

In August of last year, the Company announced plans to evaluate strategic alternatives for DMS to further maximize shareholder value. The process has not yet concluded, and the Company plans to provide updates when they are available.

Second-Quarter 2022 Performance:

(All comparisons are relative to the second quarter of 2021)

  • Net revenue of $91 million, down 13%
  • Gross profit margin of 26%, a decrease of 6.4 PPTS
  • Variable Marketing Margin of 33%, a decrease of 5.5 PPTS
  • Operating expenses totaled $35 million, an increase of $7 million
  • Net loss of $12 million compared to net income of $5 million
  • Adjusted EBITDA of $3 million, compared to $16 million
  • EPS of $(0.18) compared to $0.07
  • Ended the quarter with $26 million in cash and cash equivalents, and total debt of $217 million

Second-Quarter 2022 Segment Performance (excluding intra-company revenue):

(All comparisons are relative to the second quarter of 2021)

  • Brand-Direct Solutions generated revenue of $45 million, down 25%. Gross margin was 19%, down from 26%.
  • Marketplace Solutions generated revenue of $54 million, down 6%. Gross margin was 23%, down from 29%.
  • Technology Solutions, previously named "Other Solutions" generated revenue of $3 million, up 33%. Gross margin was 84%, up from 76%.

Third-Quarter and Full-Year 2022 Guidance:

Due to the macroeconomic risks and uncertainty ahead, the Company is announcing guidance for its third quarter and revising guidance for revenue and adjusted EBITDA for the full year 2022, as follows:

Third-Quarter 2022:

  • Net Revenue: $87 – $90 million
  • Gross Margin: 28% – 31%
  • Variable Marketing Margin: 32% – 36%
  • Adjusted EBITDA: $4 – $6 million

Full-Year 2022:

  • Net Revenue: $390 – $400 million
  • Gross Margin: 28% – 31%
  • Variable Marketing Margin: 32% – 36%
  • Adjusted EBITDA: $30 – $35 million

Adjusted EBITDA and Variable Marketing Margin are non-GAAP financial measures. Management believes that 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 these non-GAAP measures 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 1-844-200-6205, and the international dial-in number is 1-646-904-5544. The access code is 763986. A live webcast 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 conclusion of the call on August 9, 2022 through August 16, 2022. The U.S. toll-free replay dial-in number is 1-866-813-9403, and the international replay dial-in number is 1-929-458-6194. The replay access code is 072933.

Forward-Looking Statements:

This press release includes “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the "safe harbor" protections provided by such acts for forward-looking statements. These forward looking statements are often identified by words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions. These forward-looking statements include, without limitation, DMS’s expectations with respect to its future performance and its ability to implement its strategy, and are based on the beliefs and expectations of our management team from the information available at the time such statements are made. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside DMS’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the COVID-19 pandemic or other public health crises; (2) changes in client demand for our services and our ability to adapt to such changes; (3) the entry of new competitors in the market; (4) the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions; (5) the ability to maintain, grow and protect the data DMS obtains from consumers and advertisers; (6) the performance of DMS’s technology infrastructure; (7) the ability to protect DMS’s intellectual property rights; (8) the ability to successfully source and complete acquisitions and to integrate the operations of companies DMS acquires, including Traverse Data, Inc., Aimtell, Inc., PushPros, Inc. and Aramis Interactive, and the assets of Crisp Marketing, LLC; (9) the ability to improve and maintain adequate internal controls over financial and management systems, and remediate the identified material weakness; (10) changes in applicable laws or regulations and the ability to maintain compliance; (11) our substantial levels of indebtedness; (12) volatility in the trading price on the NYSE of our common stock and warrants; (13) fluctuations in value of our private placement warrants; and (14) other risks and uncertainties indicated from time to time in DMS’s filings with the SEC, including those under “Risk Factors” in DMS’s Annual Report on Form 10-K and its subsequent filings with the SEC. There may be additional risks that we consider immaterial or which are unknown, and it is not possible to predict or identify all such risks. DMS cautions that the foregoing list of factors is not exclusive. DMS cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. DMS does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

About DMS:

Digital Media Solutions, Inc. (NYSE: DMS) is a leading provider of data-driven, technology-enabled digital performance advertising solutions connecting consumers and advertisers within the auto, home, health, and life insurance, plus a long list of top consumer verticals. The DMS first-party data asset, proprietary advertising technology, significant proprietary media distribution, and data-driven processes help digital advertising clients de-risk their advertising spend while scaling their customer bases. Learn more at https://digitalmediasolutions.com.

DIGITAL MEDIA SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share data)

 

 

June 30,
2022

 

December 31,
2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

26,370

 

 

$

26,394

 

Accounts receivable, net of allowances of $5,860 and $4,930, respectively

 

46,545

 

 

 

51,578

 

Prepaid and other current assets

 

1,188

 

 

 

3,698

 

Income tax receivable

 

1,537

 

 

 

2,078

 

Total current assets

 

75,640

 

 

 

83,748

 

Property and equipment, net

 

18,152

 

 

 

19,168

 

Goodwill

 

76,947

 

 

 

76,558

 

Intangible assets, net

 

58,888

 

 

 

66,228

 

Deferred tax assets

 

 

 

 

 

Other assets

 

858

 

 

 

889

 

Total assets

$

230,485

 

 

$

246,591

 

LIABILITIES AND DEFICIT

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

40,684

 

 

$

42,073

 

Accrued expenses and other current liabilities

 

9,912

 

 

 

9,473

 

Current portion of long-term debt

 

2,250

 

 

 

2,250

 

Income taxes payable

 

193

 

 

 

103

 

Tax Receivable Agreement liability

 

1,310

 

 

 

1,310

 

Contingent consideration payable - current

 

10,909

 

 

 

7,370

 

Deferred acquisitions consideration payable - current

 

4,928

 

 

 

4,785

 

Total current liabilities

 

70,186

 

 

 

67,364

 

 

 

 

 

Long-term debt

 

215,089

 

 

 

215,505

 

Deferred tax liabilities

 

4,001

 

 

 

4,786

 

Private Placement Warrant liabilities

 

480

 

 

 

3,960

 

Contingent consideration payable - non-current

 

494

 

 

 

1,069

 

Other non-current liabilities

 

1,754

 

 

 

1,725

 

Total liabilities

 

292,004

 

 

 

294,409

 

Stockholders' deficit:

 

 

 

Preferred stock, $0.0001 par value, 100,000 shares authorized; none issued and outstanding at June 30, 2022

 

 

 

 

 

Class A Common Stock, $0.0001 par value, 500,000 shares authorized; 36,564 issued and outstanding at June 30, 2022

 

3

 

 

 

3

 

Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 25,699 issued and 25,699 outstanding at June 30, 2022

 

3

 

 

 

3

 

Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at June 30, 2022

 

 

 

 

 

Additional paid-in capital

 

(22,313

)

 

 

(25,239

)

Cumulative deficit

 

(11,060

)

 

 

(944

)

Total stockholders' deficit

 

(33,367

)

 

 

(26,177

)

Non-controlling interest

 

(28,152

)

 

 

(21,641

)

Total deficit

 

(61,519

)

 

 

(47,818

)

Total liabilities and deficit

$

230,485

 

 

$

246,591

 

DIGITAL MEDIA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Net revenue

$

91,197

 

 

$

105,079

 

 

$

200,307

 

 

$

201,882

 

Cost of revenue (exclusive of depreciation and amortization shown separately below)

 

67,784

 

 

 

71,359

 

 

 

145,624

 

 

 

140,541

 

Salaries and related costs

 

13,237

 

 

 

11,708

 

 

 

26,945

 

 

 

21,977

 

General and administrative expenses

 

12,444

 

 

 

10,552

 

 

 

23,544

 

 

 

17,514

 

Depreciation and amortization

 

7,173

 

 

 

7,044

 

 

 

14,233

 

 

 

12,463

 

Acquisition costs

 

279

 

 

 

466

 

 

 

292

 

 

 

1,960

 

Change in fair value of contingent consideration liabilities

 

(55

)

 

 

 

 

 

2,536

 

 

 

 

(Loss) income from operations

$

(9,665

)

 

$

3,950

 

 

$

(12,867

)

 

$

7,427

 

Interest expense

 

3,817

 

 

 

3,622

 

 

 

7,502

 

 

 

6,879

 

Change in fair value of warrant liabilities

 

(1,640

)

 

 

(7,750

)

 

 

(3,480

)

 

 

(7,435

)

Loss on debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Net (loss) income before income taxes

$

(11,842

)

 

$

5,970

 

 

$

(16,889

)

 

$

5,875

 

Income tax expense

 

45

 

 

 

1,031

 

 

 

355

 

 

 

1,148

 

Net (loss) income

$

(11,887

)

 

$

4,939

 

 

$

(17,244

)

 

$

4,727

 

Net (loss) income attributable to non-controlling interest

 

(4,905

)

 

 

2,411

 

 

 

(7,121

)

 

 

2,373

 

Net (loss) income attributable to Digital Media Solutions, Inc.

$

(6,982

)

 

$

2,528

 

 

$

(10,123

)

 

$

2,354

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding - basic

 

39,553

 

 

 

35,377

 

 

 

37,969

 

 

 

34,315

 

Weighted-average shares outstanding - diluted

 

65,252

 

 

 

36,522

 

 

 

63,682

 

 

 

34,325

 

Earnings (loss) per share attributable to Digital Media Solutions, Inc.:

 

 

 

 

 

 

 

Basic - per common shares

$

(0.18

)

 

$

0.07

 

 

$

(0.27

)

 

$

0.07

 

Diluted - per common shares

$

(0.18

)

 

$

0.07

 

 

$

(0.27

)

 

$

(0.06

)

 

 

 

 

 

 

 

 

DIGITAL MEDIA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Six Months Ended June 30,

 

2022

 

2021

Cash flows from operating activities

 

 

 

Net (loss) income

$

(17,244

)

 

$

4,727

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Provision for bad debt

 

1,339

 

 

 

909

 

Depreciation and amortization

 

14,233

 

 

 

12,463

 

Lease restructuring charges

 

2

 

 

 

174

 

Loss on debt extinguishment

 

 

 

 

2,108

 

Stock-based compensation, net of amounts capitalized

 

3,908

 

 

 

2,530

 

Amortization of debt issuance costs

 

938

 

 

 

528

 

Deferred income tax provision, net

 

(785

)

 

 

364

 

Change in fair value of contingent consideration

 

2,536

 

 

 

560

 

Change in fair value of warrant liability

 

(3,480

)

 

 

(7,435

)

Change in income tax receivable and payable

 

631

 

 

 

(2,328

)

Change in accounts receivable

 

4,026

 

 

 

(4,330

)

Change in prepaid expenses and other current assets

 

2,585

 

 

 

222

 

Change in accounts payable and accrued expenses

 

(1,275

)

 

 

(6,768

)

Change in other liabilities

 

27

 

 

 

(190

)

Net cash provided by operating activities

$

7,441

 

 

$

3,534

 

Cash flows from investing activities

 

 

 

Additions to property and equipment

$

(3,197

)

 

$

(4,212

)

Acquisition of businesses, net of cash acquired

 

(2,579

)

 

 

(24,830

)

Net cash used in investing activities

$

(5,776

)

 

$

(29,042

)

Cash flows from financing activities

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

220,840

 

Payments of long-term debt and notes payable

$

(1,126

)

 

$

(199,851

)

Proceeds from borrowings on revolving credit facilities

 

 

 

 

11,000

 

Payments of borrowings on revolving credit facilities

 

 

 

 

(15,000

)

Payment of debt issuance costs

 

 

 

 

(3,565

)

Payment of equity issuance

 

 

 

 

(322

)

Payment of early termination

 

 

 

 

(188

)

Proceeds from warrants exercised

 

 

 

 

11

 

Distributions to non-controlling interest holders

 

(563

)

 

 

 

Other

 

 

 

 

15

 

Net cash (used in) provided by financing activities

$

(1,689

)

 

$

12,940

 

Net change in cash

$

(24

)

 

$

(12,568

)

Cash, beginning of period

 

26,394

 

 

 

31,397

 

Cash, end of period

$

26,370

 

 

$

18,829

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

Cash Paid During the Period For

 

 

 

Interest

$

6,524

 

 

$

6,308

 

Income taxes

$

 

 

$

3,837

 

Non-Cash Investing and Financing Transactions:

 

 

 

Contingent and deferred acquisition consideration

$

2,964

 

 

$

14,890

 

Stock-based compensation capitalized in property and equipment

$

208

 

 

$

229

 

Capital expenditures included in accounts payable

$

269

 

 

$

1,144

 

Issuance of equity for Aimtell/Aramis//PushPros, and Crisp Results

$

 

 

$

35,000

 

NON-GAAP FINANCIAL MEASURES

In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (“GAAP”), this earnings release includes additional financial measures that are not prepared in accordance with GAAP (“non-GAAP”), including Variable Marketing Margin, Adjusted EBITDA, Unlevered Free Cash Flow, Adjusted Net Income and Adjusted EPS. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found below.

As explained further below, we use these financial measures internally to review the performance of our business units without regard to certain accounting treatments, non-operational, extraordinary or non-recurring items. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations. Because of these limitations, management relies primarily on its GAAP results and uses non-GAAP measures only as a supplement.

Variable Marketing Margin

Variable Marketing Margin is a measure of the efficiency of the Company’s revenue generation efforts, measuring revenue after subtracting the variable marketing and direct media costs that are directly associated with revenue generation. Variable Marketing Margin and Variable Marketing Margin % of revenue are key reporting metrics by which the Company measures the efficacy of its marketing and media acquisition efforts.

Variable Marketing Margin is defined as revenue less variable marketing expense. Variable marketing expense is defined as the expense attributable to variable costs paid for direct marketing and media acquisition costs, and includes only the portion of cost of revenue attributable to costs paid for this direct marketing activity and advertising acquired for resale to the Company’s customers, and excludes overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and to our customers’ websites, and these variable advertising costs are included in cost of revenue on the company's consolidated statements of operations.

Below is a reconciliation of net loss to Variable Marketing Margin and net loss % of revenue to Variable Marketing Margin % of revenue.

The following table provides a reconciliation of Variable Marketing Margin to net loss, the most directly comparable GAAP measure (in thousands, except percentages):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Net (loss) income

$

(11,887

)

 

$

4,939

 

 

$

(17,244

)

 

$

4,727

 

Net (loss) income % of revenue

 

(13

)%

 

 

5

%

 

 

(9

)%

 

 

2

%

 

 

 

 

 

 

 

 

Adjustments to reconcile to variable marketing

 

 

 

 

 

 

 

Cost of revenue adjustment (1)

$

6,400

 

 

$

6,392

 

 

$

13,177

 

 

$

9,705

 

Salaries and related costs

 

13,237

 

 

 

11,708

 

 

 

26,945

 

 

 

21,977

 

General and administrative expense

 

12,444

 

 

 

10,552

 

 

 

23,544

 

 

 

17,514

 

Acquisition costs

 

(2,312

)

 

 

(94

)

 

 

292

 

 

 

1,400

 

Depreciation and amortization

 

7,173

 

 

 

7,044

 

 

 

14,233

 

 

 

12,463

 

Change in fair value of contingent

 

2,536

 

 

 

560

 

 

 

2,536

 

 

 

560

 

Change in fair value of warrant liabilities

 

(1,640

)

 

 

(7,750

)

 

 

(3,480

)

 

 

(7,435

)

Debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Interest expense, net

 

3,817

 

 

 

3,622

 

 

 

7,502

 

 

 

6,879

 

Income tax expense

 

45

 

 

 

1,031

 

 

 

355

 

 

 

1,148

 

Total adjustments

$

41,700

 

 

$

35,173

 

 

$

85,104

 

 

$

66,319

 

Variable marketing margin

$

29,813

 

 

$

40,112

 

 

$

67,860

 

 

$

71,046

 

Variable marketing margin % of revenue

 

33

%

 

 

38

%

 

 

34

%

 

 

35

%

(1) Represents amounts reported as cost of revenue that are not direct media costs associated with lead sales, which were added back for the purpose of the Variable Marketing Margin (“VMM”).

Adjusted EBITDA, Unlevered Free Cash Flow and Unlevered Free Cash Flow Conversion

Adjusted EBITDA is defined as net (loss) income, excluding (a) interest expense, (b) income tax expense, (c) depreciation and amortization, (d) change in fair value of warrant liabilities, (e) debt extinguishment, (f) stock-based compensation, (g) change in tax receivable agreement liability, (h) restructuring costs, (i) acquisition costs, and (j) other expense.

In addition, we adjust to take into account estimated cost synergies related to our acquisitions. These adjustments are estimated based on cost-savings that are expected to be realized within our acquisitions over time as these acquisitions are fully integrated into DMS. These cost-savings result from the removal of cost and or service redundancies that already exist within DMS, technology synergies as systems are consolidated and centralized, headcount reductions based on redundancies, right-sized cost structure of media and service costs utilizing the most beneficial contracts within DMS and the acquired companies with external media and service providers. We believe that these non-synergized costs tend to overstate our expenses during the periods in which such synergies are still being realized.

Furthermore, in order to review the performance of the combined business over periods that extend prior to our ownership of the acquired businesses, we include the pre-acquisition performance of the businesses acquired. Management believes that doing so helps to understand the combined operating performance and potential of the business as a whole and makes it easier to compare performance of the combined business over different periods.

Unlevered Free Cash Flow is defined as Adjusted EBITDA, less capital expenditures, and Unlevered Free Cash Flow Conversion is defined as Unlevered Free Cash Flow divided by Adjusted EBITDA.

The following table provides a reconciliation between Adjusted net income and Adjusted EBITDA, and Unlevered Free Cash Flow, from Net loss, the most directly comparable GAAP measure (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Net (loss) income

$

(11,887

)

 

$

4,939

 

 

$

(17,244

)

 

$

4,727

 

Adjustments

 

 

 

 

 

 

 

Interest expense

 

3,817

 

 

 

3,622

 

 

 

7,502

 

 

 

6,879

 

Income tax expense

 

45

 

 

 

1,031

 

 

 

355

 

 

 

1,148

 

Depreciation and amortization

 

7,173

 

 

 

7,044

 

 

 

14,233

 

 

 

12,463

 

Change in fair value of warrant liabilities (1)

 

(1,640

)

 

 

(7,750

)

 

 

(3,480

)

 

 

(7,435

)

Loss on debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Stock-based compensation expense

 

2,066

 

 

 

1,273

 

 

 

3,908

 

 

 

2,530

 

Restructuring costs

 

1,784

 

 

 

432

 

 

 

2,178

 

 

 

81

 

Acquisition costs (2)

 

224

 

 

 

466

 

 

 

2,828

 

 

 

1,960

 

Other expense (3)

 

1,441

 

 

 

1,756

 

 

 

3,234

 

 

 

3,242

 

Adjusted net income

$

3,023

 

 

$

14,921

 

 

$

13,514

 

 

$

27,703

 

Additional adjustments

 

 

 

 

 

 

 

Pro forma cost savings - Reorganization (4)

$

 

 

$

 

 

$

 

 

$

31

 

Pro forma cost savings - Acquisitions (5)

 

 

 

 

1,030

 

 

 

 

 

 

1,800

 

Acquisitions EBITDA (6)

 

 

 

 

 

 

 

 

 

 

2,711

 

Adjusted EBITDA

$

3,023

 

 

$

15,951

 

 

$

13,514

 

 

$

32,245

 

Less: Capital Expenditures

 

1,580

 

 

 

1,821

 

 

 

3,197

 

 

 

4,212

 

Unlevered free cash flow

$

1,443

 

 

$

14,130

 

 

$

10,317

 

 

$

28,033

 

Unlevered free cash flow conversion

 

47.7

%

 

 

88.6

%

 

 

76.3

%

 

 

86.9

%

______________

(1)

Mark-to-market warrant liability adjustments.

(2)

Balance includes business combination transaction fees, acquisition incentive payments, contingent consideration accretion, earnout payments and pre-acquisition expenses.

(3)

Balance includes legal fees associated with acquisitions and other extraordinary matters, costs related to philanthropic initiatives, and private warrant transaction related costs.

(4)

Costs savings as a result of the Company reorganization initiated in Q2 2020.

(5)

Cost synergies expected as a result of the full integration of the acquisitions.

(6)

Pre-acquisition Adjusted EBITDA results from the AAP and Crisp Results acquisitions during the three and six months ended June 30, 2021.

A reconciliation of Unlevered Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure, is presented below (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Unlevered free cash flow

$

1,443

 

 

$

14,130

 

 

$

10,317

 

 

$

28,033

 

Capital expenditures

 

1,580

 

 

 

1,821

 

 

 

3,197

 

 

 

4,212

 

Adjusted EBITDA

$

3,023

 

 

$

15,951

 

 

$

13,514

 

 

$

32,245

 

Acquisitions EBITDA (1)

 

 

 

 

 

 

 

 

 

 

2,711

 

Pro forma cost savings - Reorganization (2)

 

 

 

 

 

 

 

 

 

 

31

 

Pro forma cost savings - Acquisitions (3)

 

 

 

 

1,030

 

 

 

 

 

 

1,800

 

Adjusted net income

$

3,023

 

 

$

14,921

 

 

$

13,514

 

 

$

27,703

 

Acquisition costs (4)

 

224

 

 

 

466

 

 

 

2,828

 

 

 

1,960

 

Other expenses (5)

 

1,441

 

 

 

1,756

 

 

 

3,234

 

 

 

3,242

 

Stock-based compensation

 

2,066

 

 

 

1,273

 

 

 

3,908

 

 

 

2,530

 

Restructuring costs

 

1,784

 

 

 

432

 

 

 

2,178

 

 

 

81

 

Change in fair value of warrant liabilities (6)

 

(1,640

)

 

 

(7,750

)

 

 

(3,480

)

 

 

(7,435

)

Loss on debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Subtotal before additional adjustments

$

(852

)

 

$

16,636

 

 

$

4,846

 

 

$

25,217

 

Less: Interest expense

 

3,817

 

 

 

3,622

 

 

 

7,502

 

 

 

6,879

 

Less: Income tax expense

 

45

 

 

 

1,031

 

 

 

355

 

 

 

1,148

 

Provision for bad debt

 

1,339

 

 

 

909

 

 

 

1,339

 

 

 

909

 

Lease restructuring charges

 

2

 

 

 

174

 

 

 

2

 

 

 

174

 

Loss on debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Stock-based compensation, net of amounts capitalized

 

3,908

 

 

 

2,530

 

 

 

3,908

 

 

 

2,530

 

Amortization of debt issuance costs

 

938

 

 

 

528

 

 

 

938

 

 

 

528

 

Deferred income tax provision, net

 

(785

)

 

 

364

 

 

 

(785

)

 

 

364

 

Change in fair value of contingent consideration

 

2,536

 

 

 

560

 

 

 

2,536

 

 

 

560

 

Change in fair value of warrant liability

 

(3,480

)

 

 

(7,435

)

 

 

(3,480

)

 

 

(7,435

)

Change in income tax receivable and payable

 

631

 

 

 

(2,328

)

 

 

631

 

 

 

(2,328

)

Change in accounts receivable

 

4,026

 

 

 

(4,330

)

 

 

4,026

 

 

 

(4,330

)

Change in prepaid expenses and other current assets

 

2,585

 

 

 

222

 

 

 

2,585

 

 

 

222

 

Change in accounts payable and accrued expenses

 

(1,275

)

 

 

(6,768

)

 

 

(1,275

)

 

 

(6,768

)

Change in other liabilities

 

27

 

 

 

(190

)

 

 

27

 

 

 

(190

)

Net cash provided by operating activities

$

5,738

 

 

$

(1,673

)

 

$

7,441

 

 

$

3,534

 

______________

(1)

Pre-acquisition Adjusted EBITDA results from the AAP and Crisp Results, and acquisitions during the three and six months ended June 30, 2021.

(2)

Costs savings as a result of the Company reorganization initiated in Q2 2020.

(3)

Cost synergies expected as a result of the full integration of the acquisitions.

(4)

Balance includes business combination transaction fees, acquisition incentive payments, contingent consideration accretion, earnout payments and pre-acquisition expenses.

(5)

Balance includes legal fees associated with acquisitions and other extraordinary matters, costs related to philanthropic initiatives, and private warrant transaction related costs.

(6)

Mark-to-market warrant liability adjustments.

Adjusted Net Income and Adjusted EPS

We use the non-GAAP measures Adjusted Net Income and Adjusted EPS to assess operating performance. Management believes that these measures provide investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial and operating performance. Management also believes these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. We define Adjusted Net Income (Loss) as net loss attributable to Digital Media Solutions, Inc. adjusted for (x) costs associated with the change in fair value of warrant liabilities, debt extinguishment, Business Combination, acquisition-related costs, equity based compensation and lease restructuring charges and (y) the reallocation of net income (loss) attributable to non-controlling interests from the assumed acquisition by Digital Media Solutions, Inc. of all units of Digital Media Solutions Holdings, LLC (“DMSH LLC”) (other than units held by subsidiaries of Digital Media Solutions, Inc.) for newly-issued shares of Class A Common Stock of Digital Media Solutions, Inc. on a one-to-one basis. We define adjusted pro forma net loss per share as adjusted pro forma net loss divided by the weighted-average shares of Class A Common Stock outstanding, assuming the acquisition by Digital Media Solutions, Inc. of all outstanding DMSH LLC units (other than units held by subsidiaries of Digital Media Solutions, Inc.) for newly-issued shares of Class A Common Stock on a one-to-one-basis.

The following table presents a reconciliation between GAAP Earnings Per Share and Non-GAAP Adjusted Net Income and Adjusted EPS (In thousands, except per share data):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Numerator:

 

 

 

 

 

 

 

Net (loss) income

$

(11,887

)

 

$

4,939

 

$

(17,244

)

 

$

4,727

 

Net (loss) income attributable to non-controlling interest

 

(4,905

)

 

$

2,411

 

 

(7,121

)

 

 

2,373

 

Net (loss) income attributable to Digital Media Solutions, Inc. - basic

$

(6,982

)

 

$

2,528

 

$

(10,123

)

 

$

2,354

 

 

 

 

 

 

 

 

 

Add: Income effects of Class B convertible common stock

$

(4,903

)

 

$

 

$

(7,116

)

 

$

 

Less: dilutive effect of change in fair value of warrant liabilities attributable to Digital Media Solutions, Inc.

 

 

 

 

 

 

 

 

 

4,321

 

Net (loss) income attributable to Digital Media Solutions, Inc. - basic

$

(11,885

)

 

$

2,528

 

$

(17,239

)

 

$

(1,967

)

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted average shares - basic

 

39,553

 

 

 

35,377

 

$

37,969

 

 

$

34,315

 

Add: dilutive effects of Class B convertible common stock

 

25,699

 

 

 

 

$

25,713

 

 

$

 

Add: dilutive effects of employee equity awards

 

 

 

 

628

 

 

 

 

 

 

Add: dilutive effects of private placement warrants

 

 

 

 

 

 

 

 

 

10

 

Add: dilutive effects of deferred consideration

 

 

 

 

517

 

 

 

 

 

 

Weighted average shares - diluted

 

65,252

 

 

 

36,522

 

 

63,682

 

 

 

34,325

 

 

 

 

 

 

 

 

 

Net earnings (loss) per common share:

 

 

 

 

 

 

 

Basic

$

(0.18

)

 

$

0.07

 

$

(0.27

)

 

$

0.07

 

Diluted

$

(0.18

)

 

$

0.07

 

$

(0.27

)

 

$

(0.06

)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Numerator:

 

 

 

 

 

 

 

Net (loss) income attributable to Digital Media Solutions, Inc. - basic

$

(6,982

)

 

$

2,528

 

 

$

(10,123

)

 

$

2,354

 

Net (loss) income attributable to Digital Media Solutions, Inc. - diluted

$

(11,885

)

 

$

2,528

 

 

$

(17,239

)

 

$

(1,967

)

Add adjustments:

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

$

(1,640

)

 

$

(7,750

)

 

$

(3,480

)

 

$

(7,435

)

Loss on debt extinguishment

 

 

 

 

2,108

 

 

 

 

 

 

2,108

 

Acquisition and related costs

 

224

 

 

 

466

 

 

 

2,828

 

 

 

1,960

 

Restructuring costs

 

1,784

 

 

 

432

 

 

 

2,178

 

 

 

81

 

Business combination expenses

 

 

 

 

1,030

 

 

 

 

 

 

1,800

 

Stock-based compensation expense

 

2,066

 

 

 

1,273

 

 

 

3,908

 

 

 

2,530

 

 

$

2,434

 

 

$

(2,441

)

 

$

5,434

 

 

$

1,044

 

Net income tax expense based on conversion of units

 

 

 

 

(76

)

 

 

 

 

 

902

 

Adjusted net income (loss) attributable to Digital Media Solutions, Inc. - basic

$

(4,548

)

 

$

11

 

 

$

(4,689

)

 

$

4,300

 

Adjusted net income (loss) attributable to Digital Media Solutions, Inc. - diluted

$

(9,451

)

 

$

163

 

 

$

(11,805

)

 

$

(1,825

)

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted-average shares outstanding - basic

 

39,553

 

 

 

35,377

 

 

 

37,969

 

 

 

34,315

 

Weighted-average LLC Units of DMSH, LLC that are convertible into Class A common stock

 

25,728

 

 

 

36,522

 

 

 

25,699

 

 

 

34,325

 

 

 

65,281

 

 

 

71,899

 

 

 

63,668

 

 

 

68,640

 

 

 

 

 

 

 

 

 

Adjusted EPS - basic

$

(0.07

)

 

$

 

 

$

(0.07

)

 

$

0.06

 

Adjusted EPS - diluted

$

(0.14

)

 

$

 

 

$

(0.19

)

 

$

(0.03

)

 

Media Contact:

Melissa Ledesma
(201) 528-5272
[email protected]

For inquiries related to investor relations, contact [email protected]

Source: Digital Media Solutions, Inc.



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