Digital Media Solutions, Inc.

Q2 2023 net revenue was $82.6 million, down 9.5% year over year. Gross profit was $19.2 million, or 23.3% margin, versus 25.7% in Q2 2022. Variable marketing margin was 27.4%, compared with 35.5% in Q2 2022. Adjusted EBITDA was $902,000, down from $3 million last year. Net loss was $47.5 million versus $11.9 million in the prior-year quarter. For Q3 2023, DMS guided to net revenue of $70 million to $72 million, adjusted EBITDA of $500,000 to $1 million, gross margin of 23% to 26%, and variable marketing margin of 29% to 34%. Management said it will provide Q4 and full-year 2023 guidance in November.

Joe Marinucci framed the quarter as a period of managing through market challenges while focusing on controllable levers like customer mix, diversification, and efficiency. He said there are early positive trends in P&C insurance in Q3, but he views a broader recovery as more likely in 2024, with carrier spend eventually returning beyond prior peak levels. He was also constructive on holiday e-commerce, international contribution, and health enrollment season in Q4, and said the company is positioned to benefit from its carrier relationships and investments in core solutions.

Vanessa Guzmán-Clark emphasized that the decline in revenue and margins was mainly tied to insurance weakness, especially lower carrier demand and margin compression in auto and health. She cited $71.6 million of operating expenses, which included goodwill and intangible impairments, and said non-cash operating expenses were $24.3 million, down $1.7 million year over year due to cost reduction efforts. She also noted $25.2 million of cash and cash equivalents, $266.4 million of total debt, and said the company expects to finalize the credit amendment and file its 10-Q by August 21, 2023.

Analysts pressed management on whether Q4 would show early signs of recovery and how fast P&C could recover in 2024; Joe said Q3 is showing early agent reactivations but that the main recovery story is likely 2024. Questions on health-vertical competition drew a response that competitor exits were mainly in premium commission policy-writing businesses, not DMS’s marketing side, and management expects open-enrollment spend to be at least equal to last year, with possible upside. On auto, management said the agent base appears stable but remains dormant until state markets reopen, while questions on ClickDealer focused on synergies; Joe said the acquisition is mainly about long-term growth, not cost takeout, and integration is still early.