Digital Media Solutions, Inc.

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.

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.

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.