- Second-quarter net revenue of $82.6 million
- Second-quarter gross margin of 23.3% and Variable Marketing Margin (VMM) of 27.4%
Clearwater, Fla. — August 14, 2023 — Digital Media Solutions, a leading provider of technology-enabled digital performance advertising solutions connecting consumers and advertisers, today announced financial results for the quarter ended June 30, 2023.
DMS serves 379 scaled enterprise customers and nearly 4,406 SMBs across the P&C Insurance, Health Insurance, Ecommerce, Career and Education and Consumer Finance verticals with digital performance marketing solutions.
“Our second quarter results reflect continued market challenges we are experiencing. Despite a decrease in net revenue and adjusted EBITDA due to the challenging business cycle, gross profit margin for Q2 2023 was within our guidance range,” said Joe Marinucci, CEO of DMS. “We continue to face unprecedented pressure in our insurance vertical as P&C carrier loss ratios persist, and the impact is seen across agent counts, bid prices and overall advertiser spend. However, we maintain a positive long-term outlook and are encouraged by the growth in our home services vertical stemming from our recent ClickDealer acquisition.”
“Our financial position remains modestly positive, even as we face headwinds, particularly in our insurance business. Going forward, we are focused on driving efficiency gains across our business units to produce gross margin expansion, while at the same time right-sizing our operational expenses to do more with less,” added Vanessa Guzmán-Clark, Interim CFO.
The Company has reached an agreement in principle with a substantial majority of the lenders under its senior secured credit facility to amend certain provisions of that facility, including, among other terms, the total net leverage ratio covenant and the addition of a payment-in-kind option for the next four calendar quarters. The Company and the lenders are currently in the process of finalizing the amendment and obtaining the necessary unanimous consent of the lenders to effect the amendment. If the amendment is not completed today, the Company will file a Form 12b-25 with the Securities and Exchange Commission to extend the filing deadline for its quarterly report on Form 10-Q until August 21, 2023. There can be no assurance that such amendment will be completed on a timely basis. However, the Company currently anticipates obtaining such amendment, and filing its Form 10-Q by August 21, 2023, as prescribed in Rule 12b-25 promulgated under the Securities Exchange Act of 1934.
Second Quarter 2023 Performance:
(All comparisons are relative to the second quarter of 2022)
- Net revenue of $82.6 million, down 9.5%
- Gross profit margin of 23.3%, a decrease of 2.4 PPTS
- Variable Marketing Margin of 27.4%, a decrease of 8.1 PPTS
- Operating expenses totaled $71.6 million, an increase of $38.6 million
- Net loss of $47.5 million compared to net income of $11.9 million
- Adjusted EBITDA of $0.9 million compared to $3.0 million
- EPS of $(1.00) compared to $(0.18); and adjusted EPS of $(0.80) compared to $(0.07)
- Ended the quarter with $25.2 million in cash and cash equivalents, and total debt of $266.4 million
Second Quarter 2023 Segment Performance (including intercompany revenue):
(All comparisons are relative to the second quarter of 2022)
- Brand Direct Solutions generated revenue of $51.7 million, up 15.4%. Gross margin was 20.2%, up from 19.3%.
- Marketplace Solutions generated revenue of $32.5 million, down 40.0%. Gross margin was 21.6%, down from 23.3%.
- Technology Solutions generated revenue of $2.2 million, down 12.7%. Gross margin was 77.1%, down from 83.7%.
Third Quarter 2023 Guidance:
DMS is providing updated guidance for the third quarter of 2023, and now anticipates Revenue, Gross Margin, Variable Marketing Margin and Adjusted EBITDA to be in the following ranges:
Third Quarter 2023:
- Net Revenue: $70 – $72 million
- Gross Margin: 23% – 26%
- Variable Marketing Margin: 29% – 34%
- Adjusted EBITDA: $0.5 – $1 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:
Interested persons may access a live webcast at https://edge.media-server.com/mmc/p/fsq2wefs or may participate via telephone by registering at https://register.vevent.com/register/BIb976ca324c584a859ba4165d8b23a2b7. Once registered, participants will have the option of 1) dialing into the call from their phone (via a personalized PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone. For either option, registration will be required to access the call.
A replay of the conference call webcast will be archived on the Company's website for at least 30 days.
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, and are made in reliance upon such acts and the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1955. DMS’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. These forward 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 and ClickDealer’s 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) Our ability to successfully complete the contemplated amendment to our senior secured credit facility, (2) DMS’s ability to attain the expected financial benefits from the ClickDealer transaction, (3) any impacts to the ClickDealer business from our acquisition thereof, (4) the COVID-19 pandemic or other public health crises; (5) management of our international expansion as a result of the ClickDealer acquisition; (6) changes in client demand for our services and our ability to adapt to such changes; (7) the entry of new competitors in the market; (8) the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions; (9) the ability to maintain, grow and protect the data DMS obtains from consumers and advertisers, and to ensure compliance with data privacy regulations in newly entered markets; (10) the performance of DMS’s technology infrastructure; (11) the ability to protect DMS’s intellectual property rights; (12) the ability to successfully source, complete and integrate acquisitions; (13) the ability to improve and maintain adequate internal controls over financial and management systems, and remediate material weaknesses therein, including any integration of the ClickDealer business; (14) changes in applicable laws or regulations and the ability to maintain compliance; (15) our substantial levels of indebtedness; (16) volatility in the trading price of our common stock and warrants; (17) fluctuations in value of our private placement warrants; and (18) 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 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.
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