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spk03: Hello everyone and welcome to the Digital Media Solutions Inc fourth quarter 2021 earnings call. My name is Brika and I'll be today's event specialist. You will have the opportunity to ask a question and if you wish to do so please press star 1 on your telephone keypad. When speaking please ensure your line is unmuted locally. I would now like to hand the call over to our host Tom Bock, Executive Vice President of Investor Relations to begin So, Tom, please go ahead.
spk05: Thank you for joining us to discuss DMS's financial results for the fourth quarter and full year 2021. With me on the call are Joe Marinucci, co-founder and CEO, and Masindra Srinivas, CFO. We posted our earnings announcement this afternoon in a press release and also on our investor relations website. By now, everyone should have access. Before we begin, I would like to call your attention to our safe harbor provision for forward-looking statements in our financial results press release. The safe harbor provision identifies risk factors that may cause actual results to differ materially from the contents of our forward-looking statement. For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the coronavirus pandemic, please refer to our financial results press release and our SEC filings. Also during this call, management's commentary will include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in the tables of our financial results press release, which we have posted to our investor relations website at investors.digitalmediasolutions.com. The additional financial and other information to be discussed on this call can also be found on our investor relations website. Now, I'd like to turn the call over to Joe Marinucci, our CEO.
spk06: Thanks, Tom, and good afternoon, everyone. Welcome to our fourth quarter and full year of 2021 earnings call. We posted our press release earlier this afternoon, and I'm now happy to announce record fourth quarter gap revenue of $119 million up 17% year over year, and also record adjusted revenue of $122 million, up 17% over the prior year. In the fourth quarter, insurance revenue grew 13% versus Q4 2020. Our insurance segment contributed 58% of our total revenue in Q4, of which auto represented 49%, and health came in at 41%. We'll talk more about that split and the significance of diversification in just a bit. We also continued to maintain solid profitability with adjusted EBITDA of $15 million, which translates to a strong margin of 12%. We were also pleased with our gross margin and variable marketing margins, which came in at 30% and 36% respectively. Of course, Q4 was just the culmination of a successful 2021. In 2021, we achieved GAAP revenue of $428 million and adjusted revenue of $442 million increases of 29 and 30% respectively. Our adjusted EBITDA was 58 million, an increase of 7% despite significant headwinds that had the power to disrupt our momentum. Lysundra, our CFO, will add more details and we'll also dig deeper into the numbers and go over guidance for the first quarter and the full year 2022 in a bit. So what drove growth for us in Q4 and throughout the year? I can highlight three things. First, scaled spend. Second, data flywheel, and third, dynamic diversification. These three things combined to produce the growth momentum we experienced in Q4 and really throughout all of 2021. Let me explain by going through each one of these one by one. First, scaled spend. The digital transformation of advertising continues to accelerate with more and more ad spend moving from traditional channels to digital channels that have measurable ROI. In addition to the macro trends that are scaling spend for our sector, there's a reason advertisers are scaling budget specifically with DMS. Large advertisers have and continue to devote significant budget share to DMS. Why? Because they trust us to deliver reliable ROI on their advertising spend and to do it at scale. For our top 20 advertiser clients over the last year, our retention rate is 100%. And for those top 20 advertiser clients, revenue grew by 31% from Q4 2020 to Q4 2021. This scaled spend is directly attributable to our clients trusting us to deliver the results they need. So why do our clients trust us, and why do they scale their spend with us? Because time and time again, we are proving the effectiveness of our data-driven, tech-enabled digital performance advertising solutions that reach the right consumers with the right messages in the right place and at the right time to encourage action based on their intent. Our solutions deliver reliable ROI that is trackable, scalable, and predictable. And because of that reliable ROI, our advertiser clients trust us, and this is why they scale spend with us. So the next obvious question is, How do we deliver reliable ROI at scale to our advertiser clients? And the answer is our data flywheel. We leverage our tool set, which consists of our first party data asset, proprietary technology, and expansive media reach. We've talked about this a lot. We use the tool set to connect consumers and advertisers when they're ready to make purchases. Our scaling data asset is the biggest part of that story, and we've talked about the power of our flywheel before. The more we scale, spend, and engage, the more powerful our data asset becomes. The more powerful our data asset becomes, the more efficiently we target consumers and connect them with advertisers that meet their needs. Precise targeting means higher conversion rates. That translates into better advertising ROI, and better advertising ROI means more scaled spend with VMS. To tie it all together, this is why revenue from our top 20 customers grew by 31% year over year. Our data signals program has grown dramatically since we first began talking about it. In 2021, we generated approximately 1.9 billion engagement events and revenue attributed to data signals more than doubled versus 2020. This ties directly to our record revenue in Q4 and increased engagement as a result. To help further quantify this, you see the rise again in our consumer engagement score or CES from 76 in Q3 2021 to 82 in Q4 2021. In addition, as ad targeting gets more cumbersome with third party data sources and targeting tools being sunsetted, we are increasingly able to rely on our first party data asset. And this helps us better understand consumer intent. And therefore, the first party data asset continues to provide us with a competitive advantage. Now let's talk about our key differentiator that was especially impactful in Q4. This is dynamic diversification. DMS solutions are vertical agnostic and channel agnostic. What does that mean? It means we're not relying on any one vertical or any one media channel for our growth. In Q4, for example, 28% of our revenues came from auto insurance, 23% came from health insurance, 20% from e-commerce, 10% from career and education, and 8% from consumer finance. Similarly, when it comes to our media channels, our brand direct marketplace campaigns run across almost every possible digital channel. This includes search, social, email, programmatic, and more, and with no individual channel or publisher representing more than a quarter of our total supply. But it's more than that. We're not just diversified. We like to say we're dynamically diversified, and the difference is very important, and it's a big part of how we continue to scale revenue and profit. Because of our dynamic diversification, we're not tied to a specific percentage of our business coming from a specific vertical. And equally as important, we're more insulated from the ups and downs of the media channels or our publishing partners. This is the competitive advantage for us that allows for our business model to pivot quickly and in parallel with the opportunity. Here's an example. E-commerce was different than expected this year. Macro supply chain issues disrupted demand from some of the advertisers hoping to capitalize on holiday spending. Meanwhile, other e-commerce advertisers, not impacted by supply chain, including those within the health and wellness subcategory of e-comm, capitalized as they were able to leverage the DMS platform to match strong consumer demand with their products and services. So again, as both advertiser and demand and consumer intent pivoted, we successfully shifted. And by doing this, we maintained our growth momentum as a result of our agility within e-commerce. Our insurance numbers also tell the story of DMS dynamic diversification very well. We all know about the loss ratio challenges restricting advertising bid prices within auto insurance. In Q4 2020, auto insurance represented approximately three-quarters of our insurance revenue. Looking at Q4 2021, auto accounted for just 49% of our insurance revenue. Even with the significant negative impact of loss ratios that lowered bid prices for major insurers, our total insurance revenue grew 13% year over year. How? Because even with our insurance vertical, we are dynamically diversified and we scaled other insurance categories during 2021. In the end, insurance as a whole maintained its spot with 58% of our overall revenue. Dynamic diversification has been a consistent go-to-market strategy for DMS as it allows us to pivot quickly to meet consumer and advertiser needs. Our dynamic diversification encompasses both the demand and supply sides, in other words, the advertising and media sides of our business, and it allows us to navigate real-time consumer behaviors, changing media prices and more while we leverage our data assets. Lastly, let's talk about how our scaled spend plus our data flywheel plus our dynamic diversification consistently deliver growth momentum. We had a record AEP and OEP period in Q4. Both our brand direct and marketplace solutions support health insurance clients, and therefore the growth was felt across DMS. Revenue for our health insurance business adjusted for the CRISP acquisition in April of 2021 was up 35% organically over Q4 2020. And though we're hesitant to make any predictions on when auto insurance bid prices will spring back fully, our current visibility on Q1 has us believing that Q4 represented the floor, so we're optimistic for what's ahead. Across the rest of our business, including e-commerce, home services, consumer finance, career and education, health and wellness, we're seeing good momentum. So as we head deeper into 2022, we're cautiously optimistic about this year during which solid growth and strong margins are expected to be driven by scaling advertiser spend, our data flywheel, and dynamic diversification. I also want to take a moment to thank our amazing team. It is their grit, their agility, and their whatever-it-takes mindset that continues to be a big part of how DMS continues to deliver growth. Before I turn it over to Visundra, I want to offer a quick update on our strategic review. As all of you know, a few months ago, we announced that we are conducting a strategic review aimed at maximizing value for our shareholders. Because this review is still ongoing, I'm unable to offer specific updates. But please know we are working diligently and hope to update you all on this process by our Q1 earnings report in early May. Now I will turn it over to DMS CFO, Lissandra Srinivas.
spk01: Thank you, Joe. Hello, and thank you to everyone for joining us today. I will start off with some color on our revenues. Reported gap revenue was $119 million, a record quarter, up 17% over the same quarter last year. Insurance, which accounted for approximately 58% of our total revenues in Q4, grew 13% over the fourth quarter of 2020. The breakdown of the insurance segment was as follows. Auto made up 49% of total insurance, Health came in at 41%, followed by life at 5% and home at 5%. Diversification, as Joe has mentioned, remains key for us. In the year-ago period, auto accounted for approximately three-quarters of our insurance revenues. Just touching on the other sectors, career and education, which was approximately 10% of our total revenues in Q4, grew 23% year-over-year, driven in part by the competitive nature of this year's job market and growing wallet share from our top education advertisers. E-commerce, which represented 19% of our total revenues, was up 36% compared to the year-ago quarter. Consumer finance accounted for 8% of our total revenue and grew 56% in Q4 over the prior year's quarter. When macro supply chain challenges restricted growth, we expected from holiday shopping we were able to dynamically scale health and wellness, and that resulted in solid gains in this vertical. Similarly, upon the conclusion of AEP, we transitioned traffic to support the strong consumer finance demand rolling through to the end of the year and into Q1. This is another example of how our vertical agnostic model and dynamic diversification continued growth. For the fourth quarter, reported gross profit was $35 million, equating to a 30% margin within the guidance range of 28% to 31% compared to 29% margin in Q3 2021 and the 27% margin we achieved a year ago. Variable marketing margin, or VMM, was 36% compared to 35% in Q3 2021 and 32% a year ago based on strong performance from CRISP and higher utilization of DMS voice during AEP. On a reported segment basis, excluding intercompany revenue, the Q4 brand direct solution gross margin was 24% compared to 23% in Q3 2021 and up from 22% in the year-ago quarter. And the Q4 marketplace solutions gross margin was 28% compared to 25% in Q3 2021 and 26% from a year ago. Other solutions, primarily including our SaaS software business, had a gross margin of 38%, contributing to our overall gross margin level. We improved our already strong gross margins even as auto insurance carriers squeezed their advertising spend through lower bid prices and as the health insurance market became very competitive, increasing media costs. It is because of our ability to pivot into other categories Coupled with the strategic decisions, such as bringing voice-enabled call center software in-house with the launch of TMS Voice, that we were able to mitigate the negative gross margin impact occurring within the auto insurance and health insurance protocols. For operating expenses, in 2021, we delivered approximately half of our projected annualized savings as part of the ETI initiative we launched in Q3. As previously mentioned, these efficiency and cost savings are not just a one-time initiative, but rather the fabric of how we execute our plan is to continue to identify and resolve redundancies throughout the business. Our total operating expenses amounted to $39 million in the fourth quarter, a decrease of $6 million year over year, driven by quarterly fair market valuation of warrant expenses of $17 million, offset by quarterly contingent consideration valuations of $4 million and acquisition-related expenses. We ended the quarter with a total headcount of approximately 580 full-time equivalents. Finally, on profitability, our adjusted EBITDA in the quarter was $15 million, or a margin of 12%. Flat versus the same quarter last year, driven by investments in our workforce to retain the necessary skill sets to support and drive continued growth for the company. Our net loss came in at $4 million versus a loss of $18 million in the same quarter last year. EPS came in at a loss of 11 cents compared to a loss of 32 cents in Q4 2020. Lastly, turning to the balance sheet and liquidity, we ended the quarter with $26 million in cash, cash equivalents, and marketable securities, up $8 million from the end of Q3, reflecting normal shifts and working capital. Our total debt at quarter end was $220 million, and net of issuance costs, it was $218 million. As of quarter end, we had the full $50 million balance available to us on our revolving credit facility. Our net leverage stood at 3.3 times at year end. As a reminder, our credit facility from last year puts our leverage covenant at five times currently. So we feel that we have plenty of liquidity under our facility. But of course, we are very mindful of our obligations given current volatility. Turning our attention to 2022, We expect solid organic top line growth to continue in 2022 as auto insurance recovers and demand continues across other verticals, including health insurance, consumer finance, and e-commerce. We are closely watching all the other verticals we serve, especially including the auto insurance and health insurance markets. Inflation, Continued supply chain issues and the last time of individual states approving rate hikes all continue to weigh on the auto insurance sector. Although we believe auto insurance pricing has bottomed out and is showing solid trends when compared to Q4, advertising spend is still down within auto insurance year over year. And this isn't expected to be a quick recovery. The timing and the extent of the recovery in auto is still unclear. but we are increasingly optimistic about the second half of 2022. As a reminder, in Q4, auto insurance was less than 30% of our total revenues. We expect to continue to see strong demands for the advertising solutions we provide to our Medicare clients, which is the majority of our health insurance business. Meanwhile, our Protect Medicare agency business faces challenges due to competition, rising customer churn rates, and lowered lifetime values impacting payouts. Revenue sharing agreements are being reworked across the sector, including for us. Inflation is already impacting us in 2022, as we have to remain competitive on wages in a tight labor market. And inflation also has the ability to impact other cost areas of the business, inclusive of operational expenses and even possibly spilling over into media costs. Lastly, the pandemic still represents uncertainty with regards to a number of factors, including staffing for us and our publisher partners and advertiser clients. In fact, as we all remember, Omicron spikes were significant in Q1. As discussed on a prior earnings call, we have pivoted to GAAP revenue for both reporting and guidance. We currently feel comfortable in achieving a Q1 GAAP revenue range of $102 million to $107 million and a full year 2022 range of $465 million to $475 million. As a reminder, we're not going to be reporting adjusted revenue going forward. For those of you listening and wondering what the guidance would have been had we continued with adjusted revenue, that guidance for 2022 would have been $481 million to $491 million. The macro headwinds we have been facing within auto insurance have created downward pressure on gross margins. We reacted quickly and strategically by pivoting into other categories such as Medicare, life and health insurance, mitigating the negative margin impact. Our dynamic diversification, as Joe mentioned, is foundational to how we run the business, as well as a key competitive advantage for us. Our ability to adjust and pivot dynamically also contributes to our comfort with maintaining our previously discussed gross margin guidance range of 28 to 31% and variable marketing margin range of 32 to 36% for both Q1 and full year 2022. We continue to expect strong EBITDA margins, even with headwinds from wage inflation, rising public company costs, and pricing pressure in the auto insurance segment. Our current Q1 and full year EBITDA forecast is $10 to $12 million and $55 to $60 million, respectively. In summary, the combination of scaled spend, a data flywheel, and dynamic diversification delivered a strong Q4 with growth momentum that will propel us in Q1 and beyond. With that, we thank you for your interest in DMS, and we will now open the line for questions. Operator, please let our listeners know what they have to do to ask questions.
spk03: Thank you. If you would like to ask a question, please press star one on your telephone keypad. When speaking, please ensure your line is unmuted locally. And if you change your mind at any time, please press star two to remove the question. As a reminder, that is star followed by one to ask any questions. We have our first question. on the phone lines from Maria Rips of Canaccord. So, Maria, your line is open.
spk02: Great. Thanks so much for taking my questions. Joe, I appreciate your comments on dynamic diversification, but can you maybe just talk about what you're seeing in the auto vertical and whether there is anything different in the recovery standpoint from what you sort of anticipated maybe a few months ago And that sort of understanding that there's still a lot of uncertainty around the vertical. When would you sort of anticipate the vertical to return to a more normalized sort of runway? And then I have a quick follow-up.
spk06: Hi, Maria. Good afternoon. Good to speak to you. So we're not really seeing anything different. We anticipate what I would call a wide U-shaped recovery because it takes time for the carriers to adjust their pricing. So the regulatory environment dictates that. About half the country is use and file, or I guess file and use, which represents faster speed to market, and the other half the country's prior approval, which is slower speed to market. So there's differences in speed to market. So rates move accordingly. Just to give you an example, we still have 19 states that are still paused with various carriers that are still based on some of these approvals. And I think this has been widely communicated and anticipated that it was going to be this type of recovery, U-shaped, not V-shaped. And we're seeing that. You know, bid prices bottomed from our perspective in November, December, and now up off the bottom. And through the end of February, we're up about 20% off the bottom. So we are starting to see that nice U-shaped recovery in auto insurance, which is really no different than what we previously expected to see.
spk02: Got it. That's very helpful. And then maybe my second question, just sort of a broader question. You've had a lot of success with your health vertical and sort of as you look at your different offerings in that vertical today, how do you sort of how do you think your position versus some of your peers? Are there any sort of assets, technology or functionality that sort of you think would be additive to that vertical?
spk06: So, yeah, we obviously saw growth in health insurance this quarter. I mean, we diversified. If you look at insurance, you know, for Q4 2020 versus insurance, Q4 2021 health insurance, you know, significantly diversified the vertical. And then just generally auto insurance, you know, was the largest vertical at 28%, but then health insurance right behind that at 23%. It comes straight down off the top, and it leads off data accompanied by technology and media reach. Our ability to leverage that toolbox and then serve the competitive marketplace has been a differentiator for us. We made an acquisition this year, so we did that in conjunction with our organic growth strategy, and that has played pretty much out as we expected it to be, which is why we saw nice growth in the fourth quarter inside of the total business, inside of insurance, and then more specifically inside of health insurance. I can't specifically speak to the factors that might be impacting some of the peers, but we see the same things that they see, which is, and Basundra mentioned this in her segment, she talked about models being adjusted for lifetime values, and I think generally that's understood to be the result of more price shopping by consumers, which has led to churn. So some of those lifetime values have been adjusted down, and that's still being worked through, but we still see a competitive marketplace for digital performance marketing. In fact, I think that leads to those writing health insurance, whether it's over 65 or under 65 health insurance, just continuing to demand accountability in their media spend. So basically looking for linear track, linear tracking to their ROI. And, you know, that ultimately will win the day from that perspective. So, you know, we're just going to go up top and continue to leverage data technology and media reach to do that on behalf of our customers. And that's why we saw the growth we saw in the Q4 period.
spk02: Got it. Thanks so much, Joe. I appreciate the call.
spk03: Of course. Thank you, Maria. We now have our next question on the line from Jason Krayer of Craig Hallam. So please go ahead when you're ready, Jason.
spk07: Hey, everybody. Good afternoon. Joe, so obviously really good KPIs from your top 20 customers, good retention and growth figures. Just wondering if you can talk more specifically about the actions that you can take over the next year or so to get the smaller customers to see those similar you know, retention and spend rates and things like that.
spk06: Hey, Jason, good to talk to you again. Yeah, so top 20 customers, which represent the vast majority of our revenue, you know, 100% retention there, obviously a really strong KPI. You know, look, there are some macro headwinds right now. So, you know, you do have, And when I say macro headwinds, you've got them inside of insurance, you've got rising interest rates, you've got inflation. You know, I think generally what this means is you have a tighter labor market that ties directly to inflation. So, you know, people are going to be managing costs more efficiently and effectively to just, you know, continue to maintain a bottom line. So at the end of the day, like marketing spend has got to be held accountable and, you know, at I mean, that's the value proposition that we bring in digital performance marketing is we're aligned with the customers. So obviously, you know, the top 20 customers being the vast majority of our revenue, you know, we're very, very focused on their needs. And for the most part, you know, they're all scheduled to grow this year. So we have to match up their plans with our ability to deliver global solutions against those plans. But at the same time, you know, we do manage the sales pipeline. The sales team is out there. you know, working active prospects, bringing them in. And once we get through what I would call testing phase, you know, our goal is always to retain the customer. And historically, we've had very high retention rates. And I don't necessarily think that that's going to change. You know, so I just, as you move into this type of environment where, you know, there's a lot of different things that are going on that concern people, we've mentioned them. For us, there's a counter cyclical balance in that. because it's going to cause a higher degree of accountability and marketing spend. And that plays to our benefit. And then, you know, once we bring customers in, not everybody starts as a top 20 customer, you know, they got to scale spend over time. The fact that we're retaining the top 20 to a hundred percent is indicative of what's going on below that. So we're just going to continue to deliver on those solutions. And we believe our retention rates will remain consistent with what they've been in the past.
spk07: Okay. And then one for Visandra here. So if we look at the REV guide, we're looking for, I think it's around $40 to $45 million of incremental revenue. You look at your gross profit margins, it's probably in the ballpark of $12 to $14 million incremental gross profit. But you're guiding to about a flat EBITDA number year over year. So I'm just curious if you can dissect about $12 to $14 million in incremental OPEX. What is... What is layering into the model that keeps that EBITDA flat? And then, you know, as we would go out to like a 2023, do you expect to get most of that back?
spk01: Yeah. Hi, Jason. Yeah. Thanks for that question. So, I mean, if you think about it, let me kind of decipher EBITDA as it stands today, right? If you look at it in the fourth quarter, it was $15 million flat year over year, right, for the quarter. And we were below about two percentage points from the prior year. We talked about most of the reasons. Inflationary pressures is a big-ticket item that we continue to watch. Increased technology costs was one of the reasons that drove those costs up, and incremental legal professional fees to stay compliant, and public company costs. In addition to that, we had acquisition-related costs with people and other items associated with the acquisitions. But then we saw downward pressure from a gross margin standpoint, which we talked about big prices and so on. So I think it's a combination of those items that drove our adjusted EBITDA to be flat year over year. How do we think about it going forward? I would say, I mean, there is inflationary pressures that we continue to watch. There is timing and extent of auto insurance recovery that is still unclear to us that we'll continue to watch. And we expect that to recover in the second half. We are facing some challenges with operating expenses in general. So if you look at our total expenses and the makeup of those total expenses, one of those key items is pretty much accounting and technical entries that you see there, right? Contingent consideration is one item, warrant valuations, and so on. So overall, I think just considering the pressures we're seeing on the gross margin, public company costs associated with operating expenses, acquisition-related costs, and inflationary pressures, I think we are cautiously optimistic here. So we've provided a conservative guidance of about 10 to 12% EBITDA margins going forward. There's definitely opportunities here with the cost initiatives that Joel alluded to. That is a fabric of our organization, and we'll continue to look at every opportunity there to create efficiencies both at the gross margin level as well as the operating expense level. So we are seeing some upside there. Go forward.
spk05: Perfect. Thank you very much.
spk03: Thank you. As a reminder, if you would like to ask any more questions, please press start, followed by one on your telephone keypad. We now have a question on the line from Martin Fong of BGRG. So, Marvin, please go ahead.
spk04: Great. Good evening. Thanks for taking my questions. Just the first question, you know, you guys provided both, you know, first quarter and full year guidance. So, for the full year, I'm just curious, you must have some idea, you know, from a category standpoint, you know, which end markets you, you know, you see doing, you know, well versus perhaps seeing a bit of pressure. So could you just kind of decompose your thoughts around, you know, full year growth, you know, between, you know, insurance, maybe breaking that down further between auto and health and then also, you know, career education, e-commerce and consumer finance. Thanks. And then I have another question.
spk06: Hey, Marvin. Good afternoon. It's Joe speaking. Good to be on with you again. Maybe just general positioning up top. We talked a little bit about dynamic diversification in the press release and then more on the call. It's really what has helped the business continue to grow, to be honest with you, because it flows down off of how we operate, which is data-driven, proprietary technology, agnostic media. It's a vertical agnostic channel agnostic model that leverages that central toolbox. Now, obviously we do a lot of work in the insurance space, which is now split up in between the auto and the health category. And then you have home and life behind that. So we look at dynamic diversification as a differentiator that allows us to move through, you know, periods of what I would call, you know, modest uncertainty, which is what we're seeing right now. If you look at insurance, you know, on both sides between auto and health, you know, you do have some macro issues there. In auto, you have loss ratios that have been widely publicized, and we're into the early stages of that U-shaped recovery, so I think I used the term cautiously optimistic on the call, and I think that that is consistent with what most people are anticipating with auto insurance. Second half recovery, cautiously optimistic we're going to get there, so that would be part of the guidance. When we look at health insurance, there's There's certainly some pressure there on the lifetime values that the various partners that we work with are working through on their side. And ultimately, that's going to come down to us. Now, you know, we do believe that demand for digital performance marketing will remain strong there because, you know, high degree of accountability in the marketing spend and ROI is critical. So, you know, there's a give and take there. And we do believe that the trend will be more accountability, continued acceleration of the digital transformation of ad spend. So we do think that benefits us, but there's uncertainty in terms of how that plays out. And we won't get there until the Q4 period with the open enrollment periods for both AEP and OEP. So there's a bit of runway between now and then. And we, in building our guidance for this year, wanted to weigh these various factors that we're discussing and you know take the approach that you know these types of situations especially with auto u-shaped recovery will play out will bend into dynamic diversification so that the company will continue to grow and if you know we took a degree of conservatism to you know some of the factors that we're seeing it gives us an opportunity to see that growth accelerate but you know we're not just focused on 2000 and In 2022, obviously, we're focused on much longer-term growth. We're very excited about the continued acceleration of the digital transformation of ad spend. We very much look at the business as having significant growth ahead, not just in 2022 through some of the uncertainty that we're discussing, but further out into the future. And the business grew nicely last year. We do have some modest growth numbers out there this year in guidance at about 10%. But for Sundar said it, we feel that there's some upside there. But we've also talked about quite a bit of risk. So that's all baked in.
spk04: Gotcha. Thanks for that. And then I guess second part of that question, also on guidance, margins have increased. Always been something investors have been watching, and I think you guys did a good job this quarter. Just comment on your visibility there. You obviously mentioned that there is downward pressure from autos, and the anticipated recovery will be U-shaped. But just, you know, how confident do you feel that, you know, 28% will hold as a minimum and, you know, you know, just further elaborate on what you're seeing in terms of your visibility and discussions with your clients. Thanks.
spk01: I can take that, Joe, and you can come in if there's anything I missed. So, hi, Marvin. We don't manage business to a specific margin goal, as we've said before, right? We continue to focus on optimizing our services to create efficiencies. We talked about DMS voice that gives us, you know, diversification, creates efficiencies, reduces our cost of goods sold. So it's a very strategic investment for us that has created a lot of efficiency within the cost of goods sold. And we'll continue to look into that, add more to our technology stack, and increase those efficiencies with connecting the consumers and advertisers. So overall, where I'm going with this is we are comfortable with the gross margin range of 28% to 31%. We're well aware of media costs. We have seen increases, for example, in Q4 as a result of the holiday shopping and AEP, media costs rose. It's not always immediately reflected in what we can charge our clients. Therefore, it may impact gross margins and BMM. There's some seasonality in media costs, which is why we have a guidance range of 28% to 31% on gross margins and 32% to 36% on BMM. Also remember, as our advertiser clients continue to spend more with us, our first-party data asset grows and our consumer targeting and engagement improves. It helps drive gross margin and VMM, even within that environment of rising CPMs and the pressures we're seeing. Future acquisitions would change that view, too. And I'd say overall, I think we're comfortable right now with the 28%, 31%, and we have a path to get there.
spk06: The only thing, Marvin, I would like to say behind that is if you look at the Q4 2021 period, basically every vertical inside of the business grew in period, and to the center's point it's, it's because we're managing the business for growth and working in strategic partnership with our advertising clients. And we're maintaining that healthy range that she discussed. But if you look at e-commerce, consumer finance, education, insurance, even, you know, the bucket of other, that is kind of everything else that doesn't fall into that every single category grew in Q4. And that comes straight down off the top data-driven business, leveraging proprietary technology, accessing expansive media reach, and we're able to grow broadly across the business and maintain margins and range. And that's the result of not being overly focused on managing to margin, but managing the business to growth objectives that meet our client and slash advertisers objectives.
spk04: Understood. That makes total sense. Thanks so much, Joe. Appreciate it.
spk03: Thank you, Marvin. As a reminder, if you would like to ask any further questions, please press star followed by one on your telephone keypads now. There are no further questions at this time. This concludes today's conference call. You may now disconnect.
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