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Digital Media Solutions, Inc. Announces Fourth Quarter And
Press-Releases

Digital Media Solutions, Inc. Announces Fourth Quarter And


  • Fourth-quarter net revenue of $86.1 million
  • Full year 2023 revenue of $334.9 million
  • Fourth-quarter gross margin of 27.8% and Variable Marketing Margin (VMM) of 31.2%1
  • Full year gross margin of 24.7% and VMM of 28.9%
  • Receives $22 million in new financing from existing lenders
  • Initiates review of potential strategic alternatives to maximize value

CLEARWATER, Fla., April 18, 2024 (GLOBE NEWSWIRE) — Digital Media Solutions, Inc. (OTCMKTS: DMSL) (“DMS” or the “Company”), a leading provider of technology-enabled digital performance advertising solutions connecting consumers and advertisers, today announced financial results for the fourth quarter and full year ended December 31, 2023.

DMS serves approximately 350 scaled enterprise customers and over 4,400 SMBs across the P&C Insurance, Health Insurance, Ecommerce and Career and Education and Consumer Finance verticals with digital performance marketing solutions.

“Our Q4 results reflect improving conditions in the Property and Casualty vertical, which has faced macro headwinds for the past couple of years. We are cautiously optimistic that P&C has hit an inflection point in its recovery, which would help drive growth for DMS in 2024. We also leaned into our key demand- and supply-side partnerships – the bedrock of our business – and continued to execute on our operational initiatives as we work to build a more streamlined, efficient and vertically integrated company”, said Joe Marinucci, CEO of DMS.

“Throughout the quarter, we diligently focused on building a solid foundation that can support our efforts to return to growth as key segments like P&C recover. We are pleased to have exceeded our margin improvement in Q4 and our overall revenue growth over Q3. We remain steadfast in our commitment to managing operating expenses, which are a crucial financial performance lever that we can control”, added Vanessa Guzmán-Clark, CFO.

Full Year 2023 Performance:

(All comparisons are relative to the full year of 2022)

  • Net revenue of $334.9 million, down 14.4%
  • Gross profit margin of 24.7%, a decrease of 1.7 PPTS
  • Variable Marketing Margin of 28.9%, a decrease of 3.8 PPTS
  • Operating expenses totaled $176.9 million, an increase of $31.1 million
  • Net loss of $122.7 million compared to net loss of $52.5 million
  • Adjusted EBITDA of $9.9 million compared to $25.7 million
  • EPS of $(31.96) compared to $(12.38)
  • Ended the year with $19.0 million in cash and cash equivalents and restricted cash, and total debt of $289.1 million.

Full Year 2023 Segment Performance (including intercompany revenue):

(All comparisons are relative to the full year of 2022)

  • Brand Direct Solutions generated revenue of $204.5 million, up 0.1%. Gross margin was 19.5%, down from 21.0%.
  • Marketplace Solutions generated revenue of $149.8 million, down 30.8%. Gross margin was 24.4%, up from 24.1%.
  • Technology Solutions generated revenue of $8.3 million, down 14.9%. Gross margin was 77.6%, down from 85.4%.

Recent Developments

On April 17, 2024, DMS secured commitments for $22 million in new financing from certain of its existing lenders.

The Company also announced that its Board of Directors has initiated a process to evaluate potential strategic alternatives to maximize value. As part of the process, the Board will consider a full range of strategic, operational and financial alternatives, including a potential sale of the Company. DMS has retained Houlihan Lokey as its financial advisor to assist with the strategic review process.

“We’ve built a robust fundamental business with blue-chip clients across the insurance, nonprofit and ecommerce industries”, Mr. Marinucci added. “While we are well-positioned to capitalize on new opportunities as certain of our markets rebound, we have determined that now is the right time to initiate a review of strategic alternatives to maximize value and ensure the Company is best positioned for long-term success”.

Mr. Marinucci concluded, “we are pleased to have the support of our lenders who have provided us additional financing and flexibility to support our operations as we work through this process”.


1 Variable Marketing Margin (VMM) and Adjusted EBITDA, as well as certain other measures in this release, are non-GAAP financial measures. See “Non-GAAP Measures” for how we define these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.

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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “assume,” “likely,” “predicts,” “potential,” “continue,” and similar expressions. These forward-looking statements include, without limitation, our expectations with respect to DMS’s future performance and ability to implement our 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 a number of judgments, risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside our control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) financial and business performance, including our business metrics and potential liquidity; (2) changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, including related to the strategic review process (as mentioned above) and the potential sale of all or part of our business; (3) ability to attain the expected financial benefits from the ClickDealer transaction; (4) any impacts to the ClickDealer business from our acquisition thereof; (5) ability to successfully recover should DMS experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, data breach, power loss, telecommunications failure or other natural or man-made event; (6) ability to manage our international expansion as a result of the ClickDealer acquisition, including operations in the Ukraine; (7) the Company’s exposure to potential criminal sanctions or civil penalties for noncompliance with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan, Syria and Venezuela, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions; (8) changes in client demand for our services and our ability to adapt to such changes; (9) the entry of new competitors in the market; (10) the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions; (11) 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; (12) the performance of DMS’s technology infrastructure; (13) ability to protect DMS’s intellectual property rights; (14) ability to successfully source, complete and integrate acquisitions; (15) ability to improve and maintain adequate internal controls over financial and management systems, and remediate material weaknesses therein, including relating to revenue and the impairment of goodwill and intangible assets; (16) the continuously evolving laws and regulations applicable to our business in the United States and around the world and our ability to maintain compliance therewith; (17) our substantial levels of indebtedness; (18) our ability to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows, including our ability to service our debt obligations under our senior secured credit facility, entered into on May 25, 2021 (as amended from time to time, the “Credit Facility”); (19) our ability to comply with the covenants in our Credit Facility and our obligations to the holders of our Series A convertible redeemable Preferred Stock and Series B convertible redeemable Preferred Stock; (20) volatility in the trading price of our common stock and our public warrants and fluctuations in value of our private placement warrants and Preferred Warrants; and (21) other risks and uncertainties indicated from time to time in DMS’s filings with the U.S. Securities and Exchange Commission (“SEC”), including those under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year 2023 (as may be amended) and in DMS’s 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.

We caution that the foregoing list of factors is not exclusive. In addition, we caution readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. For the avoidance of doubt, there can be no assurance that the review process will result in any strategic alternative being consummated (including the sale of all or part of the Company), or any assurance as to the review process’s outcome, timing or ultimate potential value to our equityholders and other stakeholders. We do 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. These forward-looking statements are based on information available as of the date hereof, and current expectations, forecasts and assumptions. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or similar transactions, including related to our strategic review process.

About DMS:

Digital Media Solutions, Inc. (DMS) drives better business results by connecting high-intent consumers with advertisers across our core verticals; Insurance (auto, home, health), Education and Consumer/Ecommerce. Our innovative solutions help consumers shop and save, while helping our advertisers achieve above average return on ad spend. Learn more at https://digitalmediasolutions.com.

Investor Relations
investors@dmsgroup.com 

For inquiries related to media, contact marketing@dmsgroup.com

For the full press release, please visit https://investors.digitalmediasolutions.com/news/default.aspx 

DIGITAL MEDIA SOLUTIONS, INC.
Consolidated Balance Sheets
(in thousands, except per share data)

  December 31, 2023   December 31, 2022
Assets      
Current assets:      
Cash and cash equivalents $ 18,466     $ 48,839  
Restricted cash   502        
Accounts receivable, net of allowances of $4,172 and $4,656, respectively   35,322       48,109  
Contract assets – current, net   6,467        
Prepaid and other current assets   2,908       3,296  
Income tax receivable   2,133       1,966  
Total current assets   65,798       102,210  
Property and equipment, net   15,390       17,702  
Operating lease right-of-use assets, net   862       2,187  
Goodwill   32,849       77,238  
Intangible assets, net   29,441       27,519  
Contract assets – non-current, net   1,632        
Other assets   1,315       765  
Total assets $ 147,287     $ 227,621  
Liabilities, Preferred Stock and Stockholders’ Deficit      
Current liabilities:      
Accounts payable $ 41,235     $ 39,908  
Accrued expenses and other current liabilities   10,548       7,101  
Current portion of long-term debt   2,750       2,250  
Tax Receivable Agreement liability   164       164  
Operating lease liabilities – current   1,812       2,175  
Contingent consideration payable – current   1,000       1,453  
Total current liabilities   57,509       53,051  
Long-term debt   286,353       254,573  
Deferred tax liabilities   314       1,112  
Operating lease liabilities – non-current   532       2,232  
Warrant liabilities   82       600  
Contingent consideration payable – non-current   512        
Total liabilities   345,302       311,568  
Preferred stock, $0.0001 par value, 100,000 shares authorized; 80 Series A and 60 Series B convertible redeemable issued and outstanding, respectively at December 31, 2023   16,646        
Stockholders’ deficit:      
Class A common stock, $0.0001 par value, 500,000 shares authorized; 2,766 issued and outstanding at December 31, 2023   4       4  
Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 1,672 issued and outstanding at December 31, 2023   3       3  
Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at December 31, 2023          
Additional paid-in capital   (80,523 )     (14,054 )
Treasury stock, at cost, 7 and 9 shares, respectively   (235 )     (181 )
Cumulative deficit   (126,230 )     (32,896 )
Total stockholders’ deficit   (206,981 )     (47,124 )
Non-controlling interest   (7,680 )     (36,823 )
Total deficit   (214,661 )     (83,947 )
Total liabilities, preferred stock and stockholders’ deficit $ 147,287     $ 227,621  
 
 

DIGITAL MEDIA SOLUTIONS, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)

    Years Ended December 31,
     2023     2022 
   
Net revenue   $ 334,949     $ 391,148  
Cost of revenue (exclusive of depreciation and amortization)     252,050       287,820  
Salaries and related costs     43,583       49,872  
General and administrative expenses     46,578       41,878  
Depreciation and amortization     19,460       28,242  
Impairment of goodwill     49,390        
Impairment of intangible assets     16,744       21,570  
Acquisition costs     3,020       1,650  
Change in fair value of contingent consideration liabilities     (1,833 )     2,583  
Loss from operations     (94,043 )     (42,467 )
Interest expense, net     38,634       17,366  
Change in fair value of warrant liabilities     (9,185 )     (3,360 )
Change in Tax Receivable Agreement liability           125  
Other (1)     (9 )     7  
Net loss before income taxes     (123,483 )     (56,605 )
Income tax benefit     (790 )     (4,105 )
Net loss     (122,693 )     (52,500 )
Net loss attributable to non-controlling interest     (41,012 )     (20,548 )
Net loss attributable to Digital Media Solutions, Inc.   $ (81,681 )   $ (31,952 )
         
Weighted-average Class A common shares outstanding – basic     2,920       2,581  
Weighted-average Class A common shares outstanding – diluted     2,920       2,583  
         
Loss per share attributable to Digital Media Solutions, Inc.:        
Basic – per Class A common shares   $ (31.96 )   $ (12.38 )
Diluted – per Class A common shares   $         (31.96 )   $         (12.37 )

____________________

(1) Represents Foreign exchange gain and (Gain) loss of disposal of assets.

  

DIGITAL MEDIA SOLUTIONS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

  Years Ended December 31,
   2023     2022 
Cash flows from operating activities      
Net loss $         (122,693 )   $         (52,500 )
Adjustments to reconcile net loss to net cash used in operating activities      
Allowance for credit losses – Accounts receivable, net   1,756       1,761  
Allowance for credit losses – Contract assets, net   2,337        
Depreciation and amortization   19,460       28,242  
Amortization of right-of-use assets   648       937  
(Gain) loss of disposal of assets   (3 )     7  
Impairment of goodwill   49,390        
Impairment of intangible assets   16,744       21,570  
Lease restructuring charges         438  
Loss on termination of operations   869        
Stock-based compensation, net of amounts capitalized   3,051       6,656  
Interest expense paid-in-kind   23,482        
Amortization of debt issuance costs   2,398       1,490  
Deferred income tax benefit, net   (798 )     (4,108 )
Change in fair value of contingent consideration   (1,905 )     2,583  
Change in fair value of warrant liabilities   (9,185 )     (3,360 )
Loss from preferred warrants issuance   553        
Change in Tax Receivable Agreement liability         (1,146 )
Change in income tax receivable and payable   (167 )     9  
Change in accounts receivable   17,942       1,984  
Change in contract assets   (10,436 )      
Change in prepaid expenses and other current assets   798       416  
Change in operating right-of-use assets   757        
Change in accounts payable and accrued expenses   (735 )     (3,055 )
Change in operating lease liabilities   (2,143 )     (2,102 )
Change in other liabilities         (137 )
Net cash used in operating activities   (7,880 )     (315 )
Cash flows from investing activities      
Additions to property and equipment   (6,624 )     (6,744 )
Acquisition of business, net of cash acquired   (33,564 )     (2,502 )
Net cash used in investing activities   (40,188 )     (9,246 )
Cash flows from financing activities      
Proceeds from borrowings on revolving credit facilities   10,000       40,000  
Payments of long-term debt and notes payable   (2,250 )     (2,250 )
Payments of borrowings on revolving credit facilities   (250 )      
Payment of debt issuance costs   (1,928 )      
Proceeds from preferred shares and warrants issuance, net   13,107        
Purchase of treasury stock related to stock-based compensation   (54 )     (181 )
Distributions to non-controlling interest holders         (563 )
Payment of deferred consideration and contingent consideration payable   (428 )     (5,000 )
Net cash provided by financing activities   18,197       32,006  
Net change in cash and cash equivalents and restricted cash   (29,871 )     22,445  
Cash and cash equivalents and restricted cash, beginning of period   48,839       26,394  
Cash and cash equivalents and restricted cash, end of period $ 18,968     $ 48,839  
Supplemental Disclosure of Cash Flow Information      
Cash Paid During the Period For      
Interest $ 13,074     $ 15,574  
Income taxes   170       1,214  
Non-Cash Transactions:      
Contingent and deferred acquisition consideration $ 2,392     $ 3,014  
Stock-based compensation capitalized in property and equipment   635       469  
Capital expenditures included in accounts payable   155       151  
Issuance of equity for Crisp Results         10,000  
Accretion and Dividends – Preferred Series A and B   11,653        
Debt amendment fees paid-in-kind   5,410        
Interest paid-in-kind   23,482        

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 December 31,   Years Ended December 31,
   2023     2022     2023     2022 
Net loss $ (37,394 )   $ (25,135 )   $ (122,693 )   $ (52,500 )
Net loss % of revenue   (43 )%     (25 )%     (37 )%     (13 )%
               
Adjustments to reconcile to variable marketing margin:              
Cost of revenue adjustment (1)   2,986       5,879       13,920       24,470  
Salaries and related costs   9,100       11,260       43,583       49,872  
General and administrative expenses   11,504       9,257       46,578       41,878  
Acquisition costs         1,344       3,020       1,650  
Depreciation and amortization   3,727       6,866       19,460       28,242  
Impairment of goodwill   15,595             49,390        
Impairment of intangible assets   8,953       21,570       16,744       21,570  
Change in fair value of contingent consideration   (1,620 )     50       (1,905 )     2,583  
Change in fair value of warrant liabilities   (636 )     (880 )     (9,185 )     (3,360 )
Change in Tax Receivable Agreement liability         245             125  
Other (2)   (20 )     7       (9 )     7  
Interest expense, net   12,903       5,292       38,634       17,366  
Income tax benefit   1,708       (4,925 )     (790 )     (4,105 )
Total adjustments   64,200       55,965       219,440       180,298  
Variable marketing margin $ 26,806     $ 30,830     $ 96,747     $ 127,798  
Variable marketing margin % of revenue           31 %             31 %             29 %             33 %

______________

(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”).

(2) Represents Foreign exchange loss (gain) and Gain on disposal of assets.

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 benefit, (c) depreciation and amortization, (d) impairment of intangible assets, (e) change in fair value of warrant liabilities, (f) debt extinguishment, (g) stock-based compensation, (h) change in Tax Receivable Agreement liability, (i) restructuring costs, (j) acquisition costs, and (k) 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 December 31,   Years Ended December 31,
   2023     2022     2023     2022 
Net loss $ (37,394 )   $ (25,135 )   $ (122,693 )   $ (52,500 )
Adjustments              
Interest expense, net   12,903       5,292       38,634       17,366  
Income tax benefit   1,708       (4,925 )     (790 )     (4,105 )
Depreciation and amortization   3,727       6,866       19,460       28,242  
Impairment of goodwill   15,595             49,390        
Impairment of intangible assets   8,953       21,570       16,744       21,570  
Change in fair value of warrant liabilities   (636 )     (880 )     (9,185 )     (3,360 )
Change in fair value of contingent consideration liabilities   (1,548 )     51       (1,833 )     2,583  
Legal and professional fees – Equity Cure & Debt Amendment   929             4,809        
Change in Tax Receivable Agreement liability         245             125  
Stock-based compensation expense   431       1,324       3,051       6,656  
Restructuring costs   648       146       6,298       2,312  
Acquisition and other related costs (1)         1,344       3,833       1,650  
(Gain) loss of disposal of assets         7       (3 )     7  
Other expense (2)   411       1,170       2,178       5,110  
Adjusted EBITDA   5,727       7,075       9,893       25,656  
Less: Capital Expenditures   2,124       1,497       6,624       6,744  
Unlevered free cash flow $ 3,603     $ 5,578     $ 3,269     $ 18,912  
Unlevered free cash flow conversion   62.9 %     78.8 %     33.0 %     73.7 %

____________________

(1) Includes transaction fees in connection with the ClickDealer acquisition, pre-acquisition expenses, preferred warrants issuance costs, and post-acquisition related costs.

(2) Includes compliance-related legal and professional fees pre-acquisition transactions, and in 2022, costs associated with the Company’s strategic alternatives.

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 December 31,   Years Ended December 31,
   2023     2022     2023     2022 
Unlevered free cash flow $ 3,603     $ 5,578     $ 3,269     $ 18,912  
Capital expenditures   2,124       1,497       6,624       6,744  
Adjusted net income   5,727       7,075       9,893       25,656  
Impairment of goodwill   15,595             49,390        
Impairment of intangible assets   8,953       21,570       16,744       21,570  
Acquisition and other related costs (1)         1,344       3,833       1,650  
Change in fair value of contingent consideration liabilities   (1,548 )     51       (1,833 )     2,583  
Other expenses (2)   411       1,170       2,178       5,110  
Stock-based compensation   431       1,324       3,051       6,656  
Restructuring costs   648       146       6,298       2,312  
Change in fair value of warrant liabilities   (636 )     (880 )     (9,185 )     (3,360 )
Legal and professional fees – Equity Cure & Debt Amendment   929             4,809        
(Gain) loss of disposal of assets         7       (3 )     7  
Subtotal before additional adjustments   (19,056 )     (17,657 )     (65,389 )     (10,872 )
Less: Interest expense, net   12,903       5,292       38,634       17,366  
Less: Income tax benefit   1,708       (4,925 )     (790 )     (4,105 )
Less: Change in Tax Receivable Agreement liability – Consolidated statements of operations         245             125  
Allowance for credit losses – Accounts receivable, net   40       456       1,756       1,761  
Allowance for credit losses – Contract assets, net   2,337             2,337        
Amortization of right-of-use assets   126       937       648       937  
(Gain) loss of disposal of assets         7       (3 )     7  
Impairment of goodwill   15,595             49,390        
Impairment of intangible assets   8,953       21,570       16,744       21,570  
Lease restructuring charges         605             438  
Loss on termination of operations   869             869        
Stock-based compensation, net of amounts capitalized   431       1,324       3,051       6,656  
Interest expense paid-in-kind   12,065             23,482        
Amortization of debt issuance costs   (65 )     341       2,398       1,490  
Deferred income tax benefit, net   1,282       (2,948 )     (798 )     (4,108 )
Change in fair value of contingent consideration   (1,620 )     50       (1,905 )     2,583  
Change in fair value of warrant liabilities   (636 )     (880 )     (9,185 )     (3,360 )
Loss from preferred warrants issuance               553        
Change in Tax Receivable Agreement liability – Consolidated statements of cash flows         (1,026 )           (1,146 )
Change in income tax receivable and payable   446       (1,288 )     (167 )     9  
Change in accounts receivable   3,298       (2,840 )     17,942       1,984  
Change in contract assets   (10,436 )           (10,436 )      
Change in prepaid expenses and other current assets   877       (704 )     798       416  
Change in operating right-of-use assets   87             757        
Change in accounts payable and accrued expenses   5,463       2,286       (735 )     (3,055 )
Change in operating lease liabilities   (485 )     (2,102 )     (2,143 )     (2,102 )
Change in other liabilities         57             (137 )
Net cash used in operating activities $ 4,960     $ (2,424 )   $ (7,880 )   $ (315 )

____________________
(1) Includes transaction fees in connection with the ClickDealer acquisition, pre-acquisition expenses, preferred warrants issuance costs, and post-acquisition related costs.
(2) Includes compliance-related legal and professional fees pre-acquisition transactions, and in 2022, costs associated with the Company’s strategic alternatives.

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 December 31,   Years Ended December 31,
   2023     2022     2023     2022 
Numerator:              
Net loss $ (37,394 )   $ (25,135 )   $ (122,693 )   $ (52,500 )
Net loss attributable to non-controlling interest   (6,445 )   $ (4,010 )     (41,012 )     (20,548 )
Accretion and dividend Series A and B convertible redeemable   (156 )   $       (11,653 )      
Net loss attributable to Digital Media Solutions, Inc. – Class A $ (31,105 )   $ (21,125 )   $ (93,334 )   $ (31,952 )
               
Denominator:              
Weighted-average Class A common shares outstanding – basic   3,510       2,664       2,920       2,581  
Add: dilutive effects of Class B convertible common stock         1,713              
Add: dilutive effects of equity awards under the 2020 Omnibus                     2  
Weighted-average Class A common shares outstanding – diluted   3,510       4,377       2,920       2,583  
               
Net loss per common share:              
Basic – per Class A common shares $ (8.86 )   $ (7.93 )   $ (31.96 )   $ (12.38 )
Diluted – per Class A common shares $ (8.86 )   $ (5.74 )   $ (31.96 )   $ (12.37 )
  Three Months Ended December 31,   Years Ended December 31,
   2023     2022     2023     2022 
Numerator:              
Net loss attributable to Digital Media Solutions, Inc. – Class A common stock – basic and diluted $ (31,105 )   $ (21,125 )   $ (93,334 )   $ (31,952 )
Add adjustments:              
Change in fair value of warrant liabilities   (636 )     (880 )     (9,185 )     (3,360 )
Acquisition costs         1,344       3,833       1,650  
Change in fair value of contingent consideration liabilities   (1,548 )     51       (1,833 )     2,583  
Restructuring costs   648       146       6,298       2,312  
Stock-based compensation expense   431       1,324       3,051       6,656  
    (1,105 )     1,985       2,164       9,841  
Adjusted net loss attributable to Digital Media Solutions, Inc. – basic and diluted   (32,210 )     (19,140 )     (91,170 )     (22,111 )
               
Denominator:              
Weighted-average shares outstanding – basic   3,510       2,664       2,920       2,581  
Weighted-average LLC Units of DMSH, LLC that are convertible into Class A common stock   1,713       2       1,713       1,634  
Weighted-average Preferred Stock Units that are convertible into Class A common stock   2,317             1,738        
    7,540       2,666       6,371       4,215  
               
Adjusted EPS – basic and diluted $ (4.27 )   $ (7.18 )   $ (14.31 )   $ (5.25 )

Digital Media Solutions



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