DIGITAL MEDIA SOLUTIONS, INC.

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(Unaudited)~~

(Consolidated Statements of Changes in ~~thousands, except per share data)~~
Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Net revenue $ 91,197 $ 105,079 $ 200,307 $ 201,882
Cost of revenue (exclusive of depreciation and amortization shown separately below) 67,784 71,359 145,624 140,541
Salaries and related costs 13,237 11,708 26,945 21,977
General and administrative expenses 12,444 10,552 23,544 17,514
Depreciation and amortization 7,173 7,044 14,233 12,463
Acquisition costs 279 466 292 1,960
Change in fair value of contingent consideration liabilities (55) — 2,536 —
(Loss) income from operations $ (9,665) $ 3,950 $ (12,867) $ 7,427
Interest expense 3,817 3,622 7,502 6,879
Change in fair value of warrant liabilities (1,640) (7,750) (3,480) (7,435)
Loss on debt extinguishment — 2,108 — 2,108
Net (loss) income before income taxes $ (11,842) $ 5,970 $ (16,889) $ 5,875
Income tax expense 45 1,031 355 1,148
Net (loss) income $ (11,887) $ 4,939 $ (17,244) $ 4,727
Net (loss) income attributable to non-controlling interest (4,905) 2,411 (7,121) 2,373
Net (loss) income attributable to Digital Media Solutions, Inc. $ (6,982) $ 2,528 $ (10,123) $ 2,354
Weighted-average shares outstanding - basic 39,553 35,377 37,969 34,315
Weighted-average shares outstanding - diluted 65,252 36,522 63,682 34,325
Earnings (loss) per share attributable to Digital Media Solutions, Inc.:
Basic - per common shares $ (0.18) $ 0.07 $ (0.27) $ 0.07
Diluted - per common shares $ (0.18) $ 0.07 $ (0.27) $ (0.06)

~~The accompanying notes are an integral part of the unaudited consolidated financial statements.~~

~~Table of Contents~~

~~DIGITAL MEDIA SOLUTIONS, INC.~~

~~CONSOLIDATED STATEMENTS OF DEFICIT~~Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)


	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital					Cumulative Deficit	Total Stockholders' Deficit		Non- controlling Interest
		Shares	Amount		Shares			Amount										Total Deficit








Balance, Balance, March 31, 2022		36,394	$	3	25,699	$	3		$	(23,754)		$	(4,078)	$	(27,826)	$	(23,980)		$	(51,806)
Net loss		—	—		—	—			—			(6,982)		(6,982)		(4,905)			(11,887)
Stock-based compensation		—	—		—	—			2,174			—		2,174		—			2,174
Shares issued under the 2020 Omnibus Incentive Plan		170	—		—	—			—			—		—		—			—
Impact of transactions affecting non-controlling interest (1)		—	—		—	—			(733)			—		(733)		733			—

Balance, June 30, 2022		36,564	$	3	25,699	$	3		$	(22,313)		$	(11,060)	$	(33,367)	$	(28,152)		$	(61,519)

____________________

(1)The carrying amount of non-controlling interest was adjusted to reflect the change in ownership interest caused by shares issued under the 2020 Omnibus Incentive Plan.

The accompanying condensed notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

Class A
Common Stock
Class B
Common Stock
Additional Paid-in Capital Cumulative Deficit Total
Stockholders' Deficit Non-
controlling
Interest
Shares Amount Shares Amount Total Deficit
Balance, March 31, 2021 33,687 $ 3 25,999 $ 3 $ (37,261) $ (3,265) $ (40,520) $ (39,016) $ (79,536)
Net income — — — — — 2,528 2,528 2,411 $ 4,939
Shares issued in connection with acquisition of Crisp Results (Note 6) 1,595 $ — — $ — $ 11,513 $ — $ 11,513 $ 8,310 $ 19,823
Prism shares redeemed and issued to Class A Common Stock 300 $ — (300) $ — $ 192 $ — $ 192 $ — $ 192
Directors and employee vested units redeemed 82 $ — — $ — $ — $ — — $ — $ —
Stock-based compensation — $ — — $ — $ 1,394 $ — $ 1,394 $ — $ 1,394
SmarterChaos DMSH units redeemed and issued to Class A Common Stock (1)
154 $ — — — $ 392 $ — $ 392 $ — $ 392
Impact of transactions affecting non-controlling interest (2)
— $ — — $ — $ (3,788) $ — $ (3,788) $ 3,788 $ —
Other (3)
— $ — — $ — $ (84) $ — $ (84) $ (27) $ (111)
Balance, June 30, 2021 35,818 $ 3 25,699 3 (27,642) (737) $ (28,373) $ (24,534) $ (52,907)
DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)


	Preferred Stock (1)			Class A Common Stock	Class B Common Stock			Additional Paid-in Capital		Treasury Stock		Cumulative Deficit			Total Stockholders' Deficit		Non- controlling Interest		Total Deficit
	Shares	Amount			Shares	Amount			Shares					Amount
Balance, December 31, 2022	—	$	—		39,957	$	4	25,699		$	3	$	(14,054)		$	(181)	$	(32,896)	$	(47,124)	$	(36,823)	$	(83,947)
Net loss	—	—			—	—		—		—		—			—		(41,555)		(41,555)		(26,639)		(68,194)



Stock-based compensation	—	—			—	—		—		—		2,500			—		—		2,500		—		2,500
Series A convertible redeemable preferred stock	80	9,244			—	—		—		—		—			—		(6,391)		(6,391)		—		(6,391)
Series B convertible redeemable preferred stock	60	6,934			—	—		—		—		—			—		(4,794)		(4,794)		—		(4,794)
Series A preferred stock dividends (2)	—	89			—	—		—		—		—			—		(89)		(89)		—		(89)
Series B preferred stock dividends (2)	—	67			—	—		—		—		—			—		(67)		(67)		—		(67)
Shares issued under the 2020 Omnibus Incentive Plan	—	—			178	—		—		—		—			—		—		—		—		—

Treasury stock purchased under the 2020 Omnibus Incentive Plan	—	—			(41)	—		—		—		—			(30)		—		(30)		—		(30)
Impact of transactions affecting non-controlling interest (3)	—	—			—	—		—		—		1,788			—		—		1,788		(1,788)		—

Balance, June 30, 2023	140	$	16,334		40,094	$	4	25,699		$	3	$	(9,766)		$	(211)	$	(85,792)	$	(95,762)	$	(65,250)	$	(161,012)

____________________

(1)See Note 8. Fair Value Measurements and Note 9. Equity.

(2)Represents Series A and Series B preferred stock dividends, which have not been paid.

(3)The carrying amount of non-controlling interest was adjusted to reflect the change in ownership interest caused by shares issued in connection with the shares issued under the 2020 Omnibus Incentive Plan.

The accompanying condensed notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)


	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital					Cumulative Deficit	Total Stockholders' Deficit		Non- controlling Interest
		Shares	Amount		Shares			Amount										Total Deficit
Balance, December 31, 2021		36,226	$	3	25,699	$	3		$	(25,239)		$	(944)	$	(26,177)	$	(21,641)		$	(47,818)
Net loss		—	—		—	—			—			(10,123)		(10,123)		(7,121)			(17,244)
SmarterChaos DMSH units redeemed and issued to Class A Common Stock (1)		153	—		—	—			—			—		—		—			—
Stock-based compensation		—	—		—	—			4,116			—		4,116		—			4,116
Shares issued under the 2020 Omnibus Incentive Plan		185	—		—	—			—			—		—		—			—
Distributions to non-controlling interest holders (2)		—	—		—	—			—			—		—		(573)			(573)
Impact of transactions affecting non-controlling interest (3)		—	—		—	—			(1,183)			—		(1,183)		1,183			—

Balance, June 30, 2022		36,564	$	3	25,699	$	3		$	(22,306)		$	(11,067)	$	(33,367)	$	(28,152)		$	(61,519)

____________________

(1)On June 30, 2021, the sellers of SmarterChaos redeemed approximately one-half of their non-controlling interest held through DMSH Units in exchange for Class A Common Stock in DMS Inc. The non-controlling interest held by the sellers of SmarterChaos did not include related Class B Common Stock to be retired upon redemption.

(2)The carrying amount of non-controlling interest was adjusted to reflect the change in ownership interest caused by additional controlling shares contributed as a result of the Crisp acquisition and non-controlling redemptions by Prism and the sellers of SmarterChaos.

(3)Includes costs associated with the issuance of equity shares.

The accompanying condensed notes are an integral part of the unaudited consolidated financial statements.

~~Table of Contents~~

Class A
Common Stock Class B
Common Stock Additional
Paid-in Capital Cumulative Deficit Total
Stockholders'
Deficit Non-
controlling
Interest
Shares Amount Shares Amount Total Deficit
Balance, December 31, 2021 36,226 $ 3 25,699 $ 3 $ (25,239) $ (944) $ (26,177) $ (21,641) $ (47,818)
Net (loss) income — — — — — (10,123) (10,123) (7,121) (17,244)
SmarterChaos DMSH units redeemed and issued to Class A Common Stock (1)
153 — — — — — — — —
Shares issued in connection with acquisition of Crisp Results (Note 6) — — — — — — — — —
Exercise of warrants to issue Class A common stock — — — — — — — — —
Stock-based compensation — — — — 4,116 — 4,116 — 4,116
Shares issued under the 2020 Omnibus Incentive Plan 185 — — — — — — — —
Distributions to non-controlling interest holders (2)
— — — — — — — (573) (573)
Impact of transactions affecting non-controlling interest (3)
— — — — (1,183) — (1,183) 1,183 —
Balance, June 30, 2022 36,564 $ 3 25,699 $ 3 $ (22,306) $ (11,067) $ (33,367) $ (28,152) $ (61,519)

(1) On January 17, 2022, the Sellers of SmarterChaos redeemed their remaining non-controlling interest held through DMSH Units in exchange for 154,000 shares of Class A Common Stock in DMS, Inc. The non-controlling interest held by the Sellers of SmarterChaos did not include related Class B Common Stock to be retired upon redemption.

~~(2) Represents tax distributions to shareholders Prism, Clairvest and the Sellers of SmarterChaos. As of June 30, 2022, $10 thousand of these distributions have not been paid.~~

(3) The carrying amount of non-controlling interest was adjusted primarily to reflect the change in ownership interest caused by additional DMSH units redeemed and issued to Class A Common Stock by the Sellers of SmarterChaos and shares issued under the 2020 Omnibus Incentive Plan.

~~The accompanying notes are an integral part of the unaudited consolidated financial statements.~~

~~Table of Contents~~

Class A
Common Stock Class B
Common Stock Additional
Paid-in Capital Cumulative Deficit Total
Stockholders'
Deficit Non-
controlling
Interest
Shares Amount Shares Amount Total Deficit
Balance, December 31, 2020 32,393 $ 3 25,999 $ 3 $ (48,027) $ (3,146) $ (51,167) $ (44,518) $ (95,685)
Net (loss) income — — — — — 2,354 2,354 2,373 4,727
Shares issued in connection with acquisition of Aramis, PushPros and Aimtell (Note 6) 1,293 — — — 9,384 — 9,384 5,616 15,000
Shares issued in connection with acquisition of Crisp Results (Note 6) 1,595 — — — 11,513 — 11,513 8,310 19,823
Exercise of warrants to issue Class A common stock 1 — — — 17 — 17 — 17
Prism shares redeemed and issued to Class A Common Stock 300 — (300) — 192 — 192 — 192
SmarterChaos DMSH units redeemed and issued to Class A Common Stock (1)
154 — — — 392 — 392 — 392
Shares issued under the 2020 Omnibus Incentive Plan 82 — — — — — — — —
Stock-based compensation — — — — 2,759 — 2,759 — 2,759
Impact of transactions affecting non-controlling interest (2)
— — — — (3,733) — (3,733) 3,733 —
Other (3)
— — — — (84) — (84) (48) (132)
Balance, June 30, 2021 35,818 $ 3 25,699 $ 3 $ (27,587) $ (792) $ (28,373) $ (24,534) $ (52,907)

(1) On June 30, 2021, the sellers of SmarterChaos redeemed approximately one-half of their non-controlling interest held through DMSH Units in exchange for Class A Common Stock in DMS Inc. The non-controlling interest held by the sellers of SmarterChaos did not include related Class B Common Stock to be retired upon redemption.

(2) The carrying amount of non-controlling interest was adjusted to reflect the change in ownership interest caused by additional controlling shares contributed as a result of the Crisp acquisition and non-controlling redemptions by Prism and the sellers of SmarterChaos.

~~(3) Includes costs associated with the issuance of equity shares.~~

~~The accompanying notes are an integral part of the unaudited consolidated financial statements.~~

Table of Contents

DIGITAL MEDIA SOLUTIONS, INC.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Six Months Ended June 30,
2022 2021
Cash flows from operating activities
Net (loss) income $ (17,244) $ 4,727
Adjustments to reconcile net income to net cash provided by operating activities
Provision for bad debt 1,339 909
Depreciation and amortization 14,233 12,463
Lease restructuring charges 2 174
Loss on debt extinguishment — 2,108
Stock-based compensation, net of amounts capitalized 3,908 2,530
Amortization of debt issuance costs 938 528
Deferred income tax provision, net (785) 364
Change in fair value of contingent consideration 2,536 560
Change in fair value of warrant liability (3,480) (7,435)
Change in income tax receivable and payable 631 (2,328)
Change in accounts receivable 4,026 (4,330)
Change in prepaid expenses and other current assets 2,585 222
Change in accounts payable and accrued expenses (1,275) (6,768)
Change in other liabilities 27 (190)
Net cash provided by operating activities $ 7,441 $ 3,534
Cash flows from investing activities
Additions to property and equipment $ (3,197) $ (4,212)
Acquisition of businesses, net of cash acquired (2,579) (24,830)
Net cash used in investing activities $ (5,776) $ (29,042)
Cash flows from financing activities
Proceeds from issuance of long-term debt $ — $ 220,840
Payments of long-term debt and notes payable (1,126) (199,851)
Proceeds from borrowings on revolving credit facilities — 11,000
Payments of borrowings on revolving credit facilities — (15,000)
Payment of debt issuance costs — (3,565)
Payment of equity issuance — (322)
Payment of early termination — (188)
Proceeds from warrants exercised — 11
Distributions to non-controlling interest holders (563) —
Other — 15
Net cash (used in) provided by financing activities $ (1,689) $ 12,940
Net change in cash $ (24) $ (12,568)
Cash, beginning of period 26,394 31,397
Cash, end of period $ 26,370 $ 18,829


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(68,194)	$	(17,244)
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for credit losses, net	1,350		1,339
Depreciation and amortization	10,955		14,233

Amortization of right-of-use assets	295		—

Gain on disposal of assets	(3)		—
Impairment of goodwill	33,795		—
Impairment of intangible assets	7,791		—
Lease restructuring charges	—		2

Stock-based compensation, net of amounts capitalized	2,168		3,908

Amortization of debt issuance costs	787		938
Deferred income tax benefit, net	(2,104)		(785)

Change in fair value of contingent consideration	(77)		2,536
Change in fair value of warrant liabilities	(6,065)		(3,480)
Loss from preferred warrants issuance	553		—


Change in income tax receivable and payable	(227)		631
Change in accounts receivable	15,952		4,026
Change in prepaid expenses and other current assets	1,457		2,585
Change in operating right-of-use assets	630		—
Change in accounts payable and accrued expenses	(8,743)		(1,275)
Change in operating lease liabilities	(1,094)		—
Change in other liabilities	—		27
Net cash (used in) provided by operating activities	(10,774)		7,441
Cash flows from investing activities
Additions to property and equipment	(2,985)		(3,197)
Acquisition of business, net of cash acquired	(31,820)		(2,579)

Net cash used in investing activities	(34,805)		(5,776)
Cash flows from financing activities

Proceeds from borrowings on revolving credit facilities	10,000		—

Payments of long-term debt and notes payable	(1,125)		(1,126)



Proceeds from preferred shares and warrants issuance, net	13,107		—

Purchase of treasury stock related to stock-based compensation	(30)		—
Distributions to non-controlling interest holders	—		(563)


Net cash provided by (used in) financing activities	21,952		(1,689)
Net change in cash and cash equivalents	(23,627)		(24)
Cash and cash equivalents, beginning of period	48,839		26,394
Cash and cash equivalents, end of period	$	25,212	$	26,370

Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period For
Interest	$	6,725	$	6,524
Income taxes	167		—
Non-Cash Transactions:
Contingent and deferred acquisition consideration	$	2,457	$	2,964
Stock-based compensation capitalized in property and equipment	332		208
Capital expenditures included in accounts payable	174		269

~~Table of Contents~~

Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period For
Interest $ 6,524 $ 6,308
Income taxes $ — $ 3,837
Non-Cash Investing and Financing Transactions:
Contingent and deferred acquisition consideration $ 2,964 $ 14,890
Stock-based compensation capitalized in property and equipment $ 208 $ 229
Capital expenditures included in accounts payable $ 269 $ 1,144
Issuance of equity for Aimtell/Aramis//PushPros, and Crisp Results $ — $ 35,000

The accompanying condensed notes are an integral part of the unaudited consolidated financial statements.

Table of Contents

DIGITAL MEDIA SOLUTIONS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Condensed Notes to Consolidated Financial Statements

(Unaudited)

~~NOTE~~Note 1. ~~BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Digital Media Solutions, Inc. (“DMS Inc.”) is a digital performance marketing company offering a diversified lead and software delivery platform that drives high value and high intent leads to its customers. As used in this Quarterly Report, the “Company” refers to DMS Inc. and its consolidated subsidiaries, (including its wholly-owned subsidiary, CEP V DMS US Blocker Company, a Delaware corporation (“Blocker”)). The Company is headquartered in Clearwater, Florida. The Company ~~primarily operates~~generates revenue in North America and ~~derives most~~internationally, with the majority of ~~its revenues~~the revenue in the United States.

Basis of Presentation

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments consisting of normal and recurring entries considered necessary for a fair presentation of the results for the interim periods presented have been included. All significant intercompany balances and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. These estimates are based on information available as of the date of the unaudited consolidated financial statements; therefore, actual results could differ from those estimates. Interim results are not necessarily indicative of the results for a full year.

Business Combination

On July 15, 2020, Digital Media Solutions Holding (“DMSH”) consummated the Business Combination with Leo Holdings Corp. (“Leo”) pursuant to the Business Combination Agreement (“Business Combination”). Pursuant to the Business Combination, DMS Inc. acquired, directly and through its acquisition of the equity of Blocker, approximately ~~58.7%~~60.9% of the membership interest in DMSH, while Prism Data, LLC, a Delaware limited liability company (“Prism”), CEP V-A DMS AIV Limited Partnership, a Delaware limited partnership (“Clairvest Direct Seller”) and related entities (the “Sellers”) retained approximately ~~41.3%~~39.1% of the membership interest in DMSH (“non-controlling interests”). For additional information, see Note 2. Business Combination in the Notes to Consolidated Financial Statements in our ~~2021~~2022 Form ~~10-K.~~10-K/A.

Non-controlling Interest

The non-controlling interest represents the membership interest in DMSH held by holders other than the Company. As of June 30, ~~2022,~~2023, the Prism, Clairvest Direct Sellers and SmarterChaos combined ownership percentage in DMSH was ~~41.3%~~39.1% and as of December 31, ~~2021~~2022 it was ~~41.6%~~39.1%.

Principles of Consolidation

The Company consists of DMS Inc. and its wholly-owned subsidiary, Blocker. The Company consolidates the assets, liabilities and operating results of DMSH and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations, and the non-controlling interests are reported as a separate component of equity.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported as separate financial statement line items in the consolidated financial statements. Actual results could differ from those estimates. Management regularly makes estimates and assumptions that are inherent in the preparation of the consolidated financial statements including, but not limited to, the fair value of preferred warrants, private placement warrants, the allowance for ~~doubtful accounts,~~credit losses, stock-based compensation, fair value of intangibles acquired in business combinations, loss contingencies, contingent consideration liabilities, asset impairments, and deferred taxes and amounts associated with the Tax Receivable Agreement.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies in our ~~2021~~2022 Form ~~10-K.~~

~~Table~~10-K/A except those related to the accounting and valuation of ~~Contents~~preferred stock and warrants. See

Note 8. Fair Value Measurements

and

Note 9. Equity

New Accounting Standards

Accounting Standards ~~Not Yet~~Recently Adopted

~~In February 2016, the FASB issued authoritative guidance~~ ~~ASC 842, Lease Accounting, regarding the accounting for leases, and has since issued subsequent updates to the initial guidance. The amended guidance requires the recognition~~Table of assets and liabilities for operating leases. The standard was initially effective for annual and interim reporting periods beginning after December 15, 2019. However, in November 2019, the FASB issued amended guidance, which defers for Emerging Growth Companies (“EGC”) the effective date for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The standard must be adopted using a modified retrospective transition. We plan to adopt the standard using the optional transition method whereby we would apply the new lease requirements through a cumulative-effect adjustment on the effective date of adoption. We plan to elect the package of practical expedients permitted under the transition guidance of the new standards, which allows us to not reassess whether any expired or existing contracts contain leases, allows us to carry forward the historical lease classification and permits us to exclude from our assessment initial direct costs for any existing leases. We will also make an accounting policy election to exclude leases with an initial term of twelve months or less from our transition adjustment. We are currently evaluating the impact on our consolidated balance sheets.Contents

The Company qualifies as an “emerging growth company” and has elected to adhere to the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

In June 2016, the FASB issued authoritative guidance ASC 326 Financial Instruments - Credit Losses, regarding the impairment model known as the current expected credit loss (“CECL”) model on accounting for credit losses on financial instruments, including trade receivables, and has since issued subsequent updates to the initial guidance. The amended guidance requires the application of a CECL model, which measures credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires adoption using a modified retrospective approach and is effective for emerging growth companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ~~We are currently evaluating~~The Company adopted this guidance effective January 1, 2023, which was not material to the ~~impact on our~~ consolidated financial ~~statements.~~statements for the three and six months ended June 30, 2023.

Accounting Standards Not Yet Adopted

As of June 30, 2023, there were no new accounting standards that would need to be disclosed.

~~NOTE~~Note 2. ~~REVENUE~~Revenue

Disaggregation of Revenue

The following tables ~~presents~~present the disaggregation of revenue by reportable segment and type of service (in thousands):


	Three Months Ended June 30, 2023
	Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:
Customer acquisition	$	50,425	$	32,477	$	—	$	(3,845)	$	79,057
Managed services	1,269		—		757		—		2,026
Software services	—		—		1,468		—		1,468
Total Net revenue	$	51,694	$	32,477	$	2,225	$	(3,845)	$	82,551


	Three Months Ended June 30, 2022
	Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:
Customer acquisition	$	43,124	$	54,092	$	—	$	(10,232)	$	86,984
Managed services	1,665		—		1,403		—		3,068
Software services	—		—		1,145		—		1,145
Total Net revenue	$	44,789	$	54,092	$	2,548	$	(10,232)	$	91,197


		Three Months Ended June 30, 2021											Six Months Ended June 30, 2023
		Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total			Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:	Net revenue:											Net revenue:
Customer acquisition	Customer acquisition	$	57,955	$	57,763	$	—	$	(14,476)	$	101,242	Customer acquisition	$	104,444	$	69,765	$	—	$	(8,559)	$	165,650
Managed services	Managed services	1,921		—		1,109		—		3,030		Managed services	2,652		—		1,510		—		4,162
Software services	Software services	—		—		807		—		807		Software services	—		—		3,051		—		3,051
Total Net revenue	Total Net revenue	$	59,876	$	57,763	$	1,916	$	(14,476)	$	105,079	Total Net revenue	$	107,096	$	69,765	$	4,561	$	(8,559)	$	172,863

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	Six Months Ended June 30, 2022
	Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:
Customer acquisition	$	102,743	$	112,898	$	—	$	(23,492)	$	192,149
Managed services	3,274		—		2,913		—		6,187
Software services	—		—		1,971		—		1,971
Total Net revenue	$	106,017	$	112,898	$	4,884	$	(23,492)	$	200,307

Six Months Ended June 30, 2022
Brand Direct Marketplace Technology Solutions Intercompany eliminations Total
Net revenue:
Customer acquisition $ 102,743 $ 112,898 $ — $ (23,492) $ 192,149
Managed services 3,274 — 2,913 — 6,187
Software services — — 1,971 — 1,971
Total Net revenue $ 106,017 $ 112,898 $ 4,884 $ (23,492) $ 200,307
The Company generated revenue outside the United States through its 2023 ClickDealer acquisition. For the three and six months ended June 30, 2023, revenue from Europe represented $5.1 million and revenue from Other International countries represented $3.5 million of our total revenue, respectively.

Six Months Ended June 30, 2021
Brand
Direct Marketplace Technology Solutions Intercompany eliminations Total
Net revenue:
Customer acquisition $ 111,009 $ 107,022 $ — $ (25,127) $ 192,904
Managed services 5,046 — 2,325 — 7,371
Software services — — 1,607 — 1,607
Total Net revenue $ 116,055 $ 107,022 $ 3,932 $ (25,127) $ 201,882
Accounts Receivable, net

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience, delinquency trends and current credit conditions. The Company reviews its Allowance for credit losses monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

The activity in the Allowance for credit losses is as follows (in thousands):


Balance, December 31, 2022	$	4,656
Additions charged to expense	1,309
Deductions/write-offs	(2,064)
ASU 2016-13 (Topic 326) adjustment	41
Balance, June 30, 2023	$	3,942

Contract Balances

The Company’s contract liabilities result from payments received from clients in advance of revenue recognition as they precede the Company’s satisfaction of the associated performance obligation. If a customer pays consideration before the Company’s performance obligations are satisfied, such amounts are classified as deferred revenue and recorded within Accrued expenses and other current liabilities on the consolidated balance sheets. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the balance of deferred revenue was ~~$1.3~~$0.5 million and ~~$1.8~~$1.0 million, ~~respectively, and is recorded within “Accrued expenses and other current liabilities” on the unaudited consolidated balance sheets.~~respectively. We expect the majority of the deferred revenue balance at June 30, ~~2022~~2023 to be recognized as revenue during the following quarter.

For the three and six months ended June 30, 2023, one customer accounted for approximately 12.5% and 15.3%, respectively, of our total revenue. For the three and six months ended June 30, 2022, one customer accounted for approximately 24.7% and 21.0%, respectively, of our total ~~revenues. For the three and six months ended June 30, 2021, no customer accounted for more than 10% of our total revenues.~~revenue.

~~NOTE~~Note 3. ~~REPORTABLE SEGMENTS~~Reportable Segments

The Company’s operating segments are determined based on the financial information reviewed by its chief operating decision maker (“CODM”), and the basis upon which management makes resource allocation decisions and assesses the performance of the Company’s segments. The Company evaluates the operating performance of its segments based on financial measures such as ~~net~~Net revenue, cost of revenue, and ~~gross~~Gross profit. Given the nature of the digital marketing solutions business, the amount of assets does not provide meaningful insight into the operating performance of the Company. As a result, the amount of the Company’s assets is not subject to segment allocation and total assets is not included within the disclosure of the Company’s segment financial information.

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The following tables are a reconciliation of the operations of our segments to ~~income~~loss from operations (in thousands):

~~Table of Contents~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net revenue $ 91,197 $ 105,079 $ 200,307 $ 201,882
Brand Direct 44,789 59,876 106,017 116,055
Marketplace 54,092 57,763 112,898 107,022
Technology Solutions 2,548 1,916 4,884 3,932
Intercompany eliminations (10,232) (14,476) (23,492) (25,127)
Cost of revenue 67,784 71,359 145,624 140,541
Brand Direct 36,137 44,321 84,591 87,140
Marketplace 41,463 41,056 83,843 77,654
Technology Solutions 416 458 682 874
Intercompany eliminations (10,232) (14,476) (23,492) (25,127)
Gross profit $ 23,413 $ 33,720 $ 54,683 $ 61,341
Brand Direct 8,652 15,555 21,426 28,915
Marketplace 12,629 16,707 29,055 29,368
Technology Solutions 2,132 1,458 4,202 3,058
Salaries and related costs 13,237 11,708 26,945 21,977
General and administrative expenses 12,444 10,552 23,544 17,514
Depreciation and amortization 7,173 7,044 14,233 12,463
Acquisition costs 279 466 292 1,960
Change in fair value of contingent consideration liabilities (55) — 2,536 —
Income from operations $ (9,665) $ 3,950 $ (12,867) $ 7,427


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenue	$	82,551	$	91,197	$	172,863	$	200,307
Brand Direct	51,694		44,789		107,096		106,017
Marketplace	32,477		54,092		69,765		112,898
Technology Solutions	2,225		2,548		4,561		4,884
Intercompany eliminations	(3,845)		(10,232)		(8,559)		(23,492)
Cost of revenue (exclusive of depreciation and amortization)	63,343		67,784		131,384		145,624
Brand Direct	41,231		36,137		84,046		84,591
Marketplace	25,447		41,463		54,785		83,843
Technology Solutions	510		416		1,112		682
Intercompany eliminations	(3,845)		(10,232)		(8,559)		(23,492)
Gross profit (exclusive of depreciation and amortization)	19,208		23,413		41,479		54,683
Brand Direct	10,463		8,652		23,050		21,426
Marketplace	7,030		12,629		14,980		29,055
Technology Solutions	1,715		2,132		3,449		4,202
Salaries and related costs	11,489		13,237		23,715		26,945
General and administrative expenses	12,124		12,444		24,979		23,544
Depreciation and amortization	5,872		7,173		10,955		14,233
Impairment of goodwill	33,795		—		33,795		—
Impairment of intangible assets	7,791		—		7,791		—
Acquisition costs	658		279		3,003		292
Change in fair value of contingent consideration liabilities	(90)		(55)		(77)		2,536
Loss from operations	$	(52,431)	$	(9,665)	$	(62,682)	$	(12,867)

~~NOTE~~Note 4. ~~GOODWILL AND INTANGIBLE ASSETS~~Goodwill and Intangible Assets

Goodwill

Changes in the carrying value of ~~goodwill,~~Goodwill, by reporting segment, were as follows (in thousands):

Brand Direct Marketplace Technology Solutions Total
Balance, December 31, 2021 $ 18,376 $ 54,554 $ 3,628 $ 76,558
Additions (Note 6) — — 444 444
Miscellaneous changes (55) — — (55)
Balance, June 30, 2022 $ 18,321 $ 54,554 $ 4,072 $ 76,947


	Brand Direct		Marketplace		Technology Solutions		Total
Balance, December 31, 2022	$	18,321	$	54,554	$	4,363	$	77,238
Additions (Note 5)	2,308		2,693		—		5,001
Impairment of goodwill	—		(33,795)		—		(33,795)

Balance, June 30, 2023	$	20,629	$	23,452	$	4,363	$	48,444

The carrying amount of ~~goodwill~~Goodwill for ~~all reporting units~~the Marketplace segment had no accumulated ~~impairments~~impairment of $33.8 million as of June 30, ~~2022~~2023 and no impairment as of December 31, ~~2021.~~2022.

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Intangible assets, net

Finite-lived ~~intangible~~Intangible assets, net consisted of the following (in thousands):

June 30, 2022 December 31, 2021
Amortization
Period (Years) Gross Accumulated
Amortization Net Gross Accumulated
Amortization Net
Technology 3 to 5 $ 54,346 $ (34,675) $ 19,671 $ 51,946 $ (29,929) $ 22,017
Customer relationships 2 to 9 49,423 (17,181) 32,242 49,273 (13,076) 36,197
Brand 1 to 7 12,168 (5,408) 6,760 12,109 (4,575) 7,534
Non-competition agreements 3 1,901 (1,686) 215 1,898 (1,418) 480
Total $ 117,838 $ (58,950) $ 58,888 $ 115,226 $ (48,998) $ 66,228

~~Table of Contents~~


		June 30, 2023								December 31, 2022
	Amortization Period (Years)	Gross		Impairment		Accumulated Amortization		Net		Gross		Impairment		Accumulated Amortization		Net
Technology	4 to 7	$	59,096	$	(5,951)	$	(42,489)	$	10,656	$	54,316	$	(5,933)	$	(39,411)	$	8,972
Customer relationships	4 to 15	71,323		(20,119)		(24,099)		27,105		49,423		(12,387)		(21,205)		15,831
Brand	1 to 7	14,879		(3,291)		(6,867)		4,721		12,169		(3,250)		(6,233)		2,686
Non-competition agreements	1 to 3	1,898		—		(1,882)		16		1,898		—		(1,868)		30
Total		$	147,196	$	(29,361)	$	(75,337)	$	42,498	$	117,806	$	(21,570)	$	(68,717)	$	27,519

The weighted average amortization period for intangible assets is 8 years in total, and by category is 6 years for technology, 10 years for customer relationships, 6 years for brand, 3 years for non-competition agreements.

Amortization expense relating to intangible assets subject to amortization for each of the next five years and thereafter is estimated to be as follows (in thousands):


	2023		2024		2025		2026		2027		Thereafter
Amortization expense	$	5,005	$	9,504	$	4,990	$	4,301	$	3,687	$	15,011

Amortization expense for finite-lived intangible assets is recorded on an accelerated straight-line basis. Amortization expense related to finite-lived intangible assets was $3.7 million and $6.6 million for the three and six months ended June 30, 2023, respectively, and $5.0 million and $10.0 million for the three and six months ended June 30, 2022, ~~respectively,~~respectively.

Impairment analysis

The Company considered if an event occurred or circumstances changed that would more likely than not reduce the fair value of a reporting unit below its carrying amount and ~~$5.8~~noted none for the Brand and Technology reporting units in the three and six months ended June 30, 2023 and 2022, respectively. The Company determined that the recent economic downturn and inflation, along with the Company’s revenue reduction and decreased stock market price were indicators of impairment for the Marketplace reporting unit under ASC 350-20, Goodwill, and ASC 360-10, Impairment and Disposal of Long-Lived Assets for certain asset groups during 2023.

The Company determined the fair value of Goodwill at the reporting unit level utilizing a combination of a discounted cash flow analysis incorporating variables such as revenue projections, projected operating cash flow margins, and discount rates, as well as a market-based approach employing comparable sales analysis. The valuation assumptions used in the discounted cash flow model reflect historical performance of the Company, the prevailing values in the Company’s industry, including the extent of the economic downturn related to the recent inflation and its economic contraction and its expected timing of recovery. The result of our interim impairment test indicated that there was Goodwill impairment of $33.8 million for the period ended June 30, 2023.

Further, the Company performed a recoverability test for certain asset groups in the Marketplace reporting unit to determine whether an impairment loss should be measured. The undiscounted cash flows in the recoverability test compared to the asset group’s carrying value of invested capital was less than the carrying value indicating an impairment. As a result, the Company calculated the fair value of the finite-lived intangible assets. Intangible assets include technology, brand, and ~~$9.9~~customer relationships. The fair value of technology was determined using the Relief from Royalty Approach; fair value of the customer relationships was determined using the Multi Period Excess Earnings Method; and fair value of the brand was determined using the Relief from Royalty Method. As a result of the fair value being lower than the carrying value for certain assets, the Company recorded impairment loss of $7.8 million to Intangible assets which are in asset groups included in the Marketplace reporting unit, which is included in the consolidated statements of operations as Impairment of intangible assets for the three and six months ended June 30, 2023, respectively.

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Note 5. Acquisitions

ClickDealer

On March 30, 2023, the Company completed a transaction to acquire the HomeQuote.io home services marketplace from Customer Direct Group, along with the supporting media and technology assets of the ClickDealer international ad network, ("ClickDealer"). ClickDealer’s international performance ad network and the HomeQuote.io marketplace connects consumers with brands within the home improvement and related home services sector.

The Company paid cash consideration of $31.8 million upon closing of the transaction, with an additional $3.5 million in holdbacks, subject to certain criteria. On July 3, 2023, after the successful completion of the first tranche in criteria was met, $1.0 million of the holdback was paid to the Sellers in cash. The remaining holdback of $2.5 million is expected to be released within 24 months of the closing date, subject to certain criteria. The transaction also included up to $10.0 million in contingent consideration, subject to the achievement of certain revenue and net margin based milestones in two subsequent one-year measurement periods, payable in cash or, if mutually agreed to by the Company and the Seller, in Class A Common Stock. The Estimated Net Working Capital adjustment upon closing was $0.3 million. The Final Net Working Capital adjustment was $0.6 million.

During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. All recognized assets and liabilities are preliminary, including any foreign jurisdiction taxation, if any, and except for the contingent consideration.

Determining the fair value of assets acquired and liabilities assumed requires management's judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. As the result of the completed valuation of the assets acquired (including intangibles) and liabilities assumed, as well as the contingent consideration liabilities, as of the acquisition dates, the following adjustments were recorded related to further analysis of the forecast (for example, items that occurring in the pre-acquisition period that should have been factored into the forecast as of the acquisition date) and refinements to the significant assumptions in the valuation models used to value the intangibles and contingent consideration liabilities. As a result, we have made adjustments to the initial fair value of our intangible assets, goodwill, contingent consideration and working capital. The impact of these adjustments at March 30, 2023 are as follows (in thousands):


ClickDealer	Acquisition Date Fair Value		Fair Value Mark-to-Market Changes		Revised Acquisition Date Fair Value
Goodwill	$	6,207	$	(1,206)	$	5,001
Intangible Assets:
Technology	$	5,010	$	(230)	$	4,780
Customer relationships	$	20,400	$	1,500	$	21,900
Brand	$	2,840	$	(130)	$	2,710


Contingent consideration liability	$	2,457	$	(65)	$	2,392

Working capital accounts	$	3,320	$	245	$	3,565

The Goodwill related to this transaction reflects the workforce and synergies expected from combining the operations of ClickDealer and will be included in the Brand Direct reportable segment for ClickDealer and in the Marketplace reportable

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segment for HomeQuote.io. The Goodwill expected to be deductible for tax purposes is being evaluated. Intangible assets primarily consist of brand, technology and customer relationships with an estimated useful life of five years for brand, seven years for technology and twelve years for customer relationships.

Traverse

On May 10, 2022, the Company acquired Traverse Data, Inc. (“Traverse”). Traverse is a marketing and advertising technology company. The Company paid cash consideration of $2.5 million upon closing of the transaction. The transaction also includes up to $0.5 million in contingent consideration, subject to the achievement of certain milestones, to be paid in cash 15 months after the acquisition date. Accounting for the acquisition was completed on May 10, 2023. The contingent consideration for the Traverse acquisition was finalized on May 10, 2023, which the Company paid on July 10, 2023 in the form cash payment of $0.5 million.

Crisp Results

On April 1, 2021, ~~respectively.~~the Company completed a transaction to purchase the assets of Crisp Marketing, LLC (“Crisp Results” or “Crisp”). Crisp Results is a digital performance advertising company that connects consumers with brands within the insurance sector, with primary focus on the Medicare insurance industry. Crisp Results is known for providing predictable, reliable, flexible and scalable customer acquisition solutions, supporting large brands with a process that combines data, design, technology and innovation.

The Company paid consideration of $40.0 million upon closing of the transaction, consisting of $20.0 million cash and 1.6 million Class A Common Stock valued at $20.0 million. The transaction also included up to $10.0 million in contingent consideration, and a $5.0 million deferred payment, to be paid 18 months after the acquisition date. Accounting for the acquisition was completed on March 31, 2022. The Company paid the contingent consideration on July 1, 2022 in the form of 2.99 million unregistered shares of Class A Common Stock, priced at $3.3455, the average closing price of the Class A common stock during the twenty trading-day period ended March 31, 2022. The $5.0 million deferred consideration became due on October 1, 2022, which the Company paid on October 4, 2022.

Aimtell, Aramis and PushPros

On February 1, 2021, the Company acquired Aimtell, Inc. (“Aimtell”), PushPros, Inc. (“PushPros”) and Aramis Interactive (“Aramis”, and together with Aimtell and PushPros, “AAP”). Aimtell and PushPros are leading providers of technology-enabled digital performance advertising solutions that connect consumers and advertisers within the home, auto, health and life insurance verticals. Aramis is a network of owned-and-operated websites that leverages the Aimtell and PushPros technologies and relationships.

The Company paid consideration of $20.0 million upon closing of the transaction, consisting of $5.0 million in cash and approximately 1.29 million shares of Class A Common Stock valued at $15.0 million. The transaction also included up to $15.0 million in contingent consideration to be earned over the three years following the acquisition, subject to the achievement of certain milestones. The contingent consideration can be paid in cash or Class A Common Stock at the election of the Company. Accounting for the acquisition was completed on March 31, 2022.

The contingent consideration for the Aramis acquisition was finalized on December 31, 2022, the end of the earnout period, and became payable during the second quarter of 2023, in the form of cash or Class A Common Stock, at the election of the Company. The timing of payment of the Aramis earnout remains subject to resolution of certain outstanding indemnity issues relating to the acquisition. The contingent consideration for the Aimtell / PushPros acquisition will finalize on December 31, 2023, the end of the earnout period.

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Acquisitions’ Fair Value Measurement and Pro Forma Information

The acquisition date fair value of assets acquired and liabilities assumed from the Traverse and ClickDealer acquisitions consist of the following (in thousands):


	Expected Useful Life	Traverse		ClickDealer
		2022		2023
Cash		$	232	$	—
Goodwill		735		5,001
Technology	4 to 7	2,470		4,780
Customer relationships	4 to 12	50		21,900
Accounts receivable		276		6,959
Brand	1 to 7	60		2,710


Accounts payable		(232)		(3,561)
Other assets acquired and liabilities assumed, net (1)		7		167
Net assets and liabilities acquired		$	3,598	$	37,956

____________________

(1)Other assets acquired and liabilities assumed, net includes prepaids and other current assets, partially offset by other current liabilities (e.g., Travel and expense payables, payroll liabilities, tax liabilities, and transition services payable).

The weighted average amortization period for Traverse acquisition technology is 5 years, customer relationships is 5 years, brand is 3 years and non-compete agreements is 1 year. The weighted average amortization period for ClickDealer acquisition technology is 7 years, customer relationships is 12 years and brand is 5 years. In total, the weighted average amortization period for Traverse is 5 years and ClickDealer is 10 years.

The following schedules represent the amount of net revenue and net loss from operations related to Traverse and ClickDealer acquisitions which have been included in the consolidated statements of operations for the periods indicated subsequent to the acquisition date in the period of acquisition (in thousands):


	Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
	Traverse		ClickDealer		Traverse		ClickDealer
Net revenue	$	716	$	17,810	$	1,540	$	17,810
Net income from operations	$	14	$	703	$	234	$	703


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
	Traverse		Traverse
Net revenue	$	360	$	360
Net income from operations	$	70	$	70

Pro Forma Information

The following pro forma financial information represents the consolidated financial information as if the acquisitions had been included in our consolidated results beginning on the first day of the fiscal year prior to their respective acquisition dates. There is no pro forma financial information for three months ended June 30, 2023 as the results remain consistent. Pro forma financial information is presented in the table below (in thousands):


	Three Months Ended June 30, 2022
	(unaudited)
	DMS		Traverse		ClickDealer		Pro Forma
Net revenue	$	91,197	$	277	$	17,987	$	109,461
Net income from operations	$	(9,665)	$	(434)	$	2,023	$	(8,076)

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	Six Months Ended June 30, 2023
	(unaudited)
	DMS		ClickDealer		Pro Forma
Net revenue	$	172,863	$	19,865	$	192,728
Net income (loss) from operations	$	(62,682)	$	1,704	$	(60,978)


	Six Months Ended June 30, 2022
	(unaudited)
	DMS		Traverse		ClickDealer		Pro Forma
Net revenue	$	200,307	$	999	$	36,537	$	237,843
Net income from operations	$	(12,867)	$	(417)	$	3,603	$	(9,681)

The pro forma results do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisitions; the costs to combine the companies’ operations; or the costs necessary to achieve these costs savings, operating synergies and revenue enhancements. The pro forma results do not necessarily reflect the actual results of operations of the combined companies under our ownership and operation.

~~NOTE 5. DEBT~~Note 6. Debt

The following table presents the components of outstanding debt (in thousands):

June 30, 2022 December 31, 2021
Term loan $ 222,750 $ 223,875
Less: Unamortized debt issuance costs (1)
(5,411) (6,120)
Debt, net 217,339 217,755
Less: Current portion of long-term debt (2,250) (2,250)
Long-term debt $ 215,089 $ 215,505

~~__________~~


	June 30, 2023		December 31, 2022
Term loan	$	220,500	$	221,625
Revolving credit facility	50,000		40,000


Total debt	270,500		261,625
Less: Unamortized debt issuance costs (1)	(4,101)		(4,802)
Debt, net	266,399		256,823
Less: Current portion of long-term debt	(2,250)		(2,250)
Long-term debt	$	264,149	$	254,573

____________________

(1)Includes net debt issuance discount and other costs.

On May 25, 2021, Digital Media Solutions, LLC (“DMS LLC”), as borrower, and DMSH, each of which is a subsidiary of DMS, entered into a five-year $275 million senior secured credit facility (the “Credit Facility”), with a syndicate of lenders (“Lenders”), arranged by Truist Bank and Fifth Third Bank, as joint lead arrangers, and Truist Bank, as administrative agent. The Credit Facility is guaranteed by, and secured by substantially all of the assets of, DMS LLC, DMSH LLC and their material subsidiaries, subject to customary exceptions. Pursuant to the Credit Facility, the Lenders provided DMS LLC with senior secured term loans consisting of a senior secured term loan with an aggregate principal amount of $225 million (the “Term Loan”) and a $50 million senior secured revolving credit facility (the “Revolving Facility”).

The Term Loan, which was issued at an original issue discount of 1.80% or $4.2 million, is subject to payment of 1.0% of the original aggregate principal amount per annum paid quarterly, with a bullet payment at maturity. The Term Loan will mature, and the revolving credit commitments under the Revolving Facility will terminate, on May 25, 2026, when any outstanding balances will become due. The Term Loan bears interest at our option, at either (i) adjusted LIBOR plus 5.00% or (ii) the Base Rate plus 4.00%. Since May 25, 2021 our interest rate is based on LIBOR plus 5.00%. For the three and six months ended June 30, 2023, the effective interest rate was 10.80%.

Borrowings under the Revolving Facility bear interest, at our option, at either (i) adjusted LIBOR plus 4.25% or (ii) a base rate (which is equal to the highest of (a) the administrative agent’s prime rate, (b) the federal funds rate, as in effect from time to time, plus 0.50%, (c) one-month LIBOR plus 1.00%, and (d) 1.75% (the “Base Rate”)), plus 3.25%. ~~The Term Loan bears interest at our option, at either (i) adjusted LIBOR plus 5.00% or (ii) the Base Rate plus 4.00%.~~ Under the Revolving Facility, DMS LLC pays a 0.50% per annum commitment fee in arrears on the undrawn portion of the revolving commitments. ~~For the three and six months ended June 30, 2022, the effective interest rate was 6.29%.~~ Since May 25, 2021 our interest rate is based on LIBOR plus 5%5.00% . The Company drew $10.0 million on May 24, 2023. Together with the previously disclosed draws, $50.0 million is currently outstanding under the Revolving Facility. For the three and six months ended June 30, 2023, the effective interest rate was 8.18% and 7.80%, respectively.

The initial $4.2 million debt discount and $3.5 million debt issuance cost related to the Term Loan and Revolving Facility is being amortized over the term of the loan using the effective interest method. As of June 30, 2023, the Term Loan debt discount

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and debt issuance cost classified as debt had a remaining unamortized balance of $2.5 million and $1.6 million, respectively. As of December 31, 2022, the Term Loan debt discount and debt issuance cost classified as debt had a remaining unamortized balance of ~~$3.3~~$3.0 million and $2.1 million, respectively. As of December 31, 2021, the Term Loan debt discount and debt issuance cost included in the carrying value of the debt had a remaining unamortized balance of $3.7 million and $2.4$1.8 million, respectively. At June 30, ~~2022~~2023 and December 31, ~~2021, the~~2022, unamortized debt issuance ~~cost~~costs of ~~$0.7~~$0.5 million and ~~$0.8~~$0.6 million, respectively, associated with the ~~undrawn~~ Revolving Facility is classified ~~and amortized~~ as ~~“Other assets”~~Other assets within the consolidated balance sheets.

~~Upon the closing of the Credit Facility, the credit agreement dated as of~~On July 3, ~~2018, by~~2023, the Term Loan and ~~among DMS LLC, DMSH, each of their subsidiaries party thereto, various financial institutions party thereto~~Revolving Facility were amended to transition LIBOR to the Term Secured Overnight Financing Rate (SOFR) as the basis for establishing the interest rate applicable to borrowings under the agreements. The interest rate is based on SOFR Benckmark Replacement plus 5.00% for the Term Loan and Monroe Capital Management Advisors, LLC, as administrative agent and lead arranger, and all outstanding amounts thereunder that was previously outstanding with an aggregate principal amount of $210 million was extinguished, and the $15 million revolving credit facility was closed.SOFR Benckmark Replacement plus 4.25% for Revolving Facility.

The Credit Facility is conditioned upon the Company’s compliance with specified covenants, including certain reporting covenants and financial covenants that, in addition to other items, require the Company ~~recognized~~to maintain a ~~loss~~maximum net leverage ratio. As of December 31, 2022, the Company was in breach of the net leverage ratio, which it cured on ~~debt extinguishment~~March 30, 2023 through the funds received in connection with the issuance of ~~$2.1 million~~Series A and Series B convertible Preferred stock and Warrants. As of June 30, 2023, compliance with the net leverage ratio covenant was waived in connection with entry into the First Amendment (as defined below) to the Credit Facility.

On August 16, 2023, DMS LLC and DMSH LLC, along with certain subsidiaries of the Company, entered into a First Amendment to the Credit Facility (the “First Amendment”) with the Lenders, which, among other things, modified the Credit Facility as follows:

a.allows for the payment-in-kind (“PIK”) of the quarterly interest payments due and payable on September 30, 2023 and each of the following three quarters, with all PIK interest required to be repaid no later than December 31, 2025;

b.provides that (a) if the borrower exercises the PIK option, the interest rate will be equal to SOFR+11%; (b) if interest is paid in cash during the ~~year ended~~PIK period, the rate will be equal to SOFR+8%; and (c) following the PIK period, the interest rate will be equal to SOFR+8%; provided that if the Company (1) achieves the credit rating of B3 by Moody’s and B- by S&P, and (2) has repaid the aggregate capitalized PIK interest, the interest rate will be SOFR + 6.0%;

c.if any loans under the Credit Facility remain outstanding on or after January 1, 2025, back-end PIK interest will accrue as follows: 5% for the period from January 1, 2025 through June 30, 2025; 7.5% for the period from July 1, 2025 through December 31, ~~2021, which primarily included accelerated amortization~~2025; and 10% in calendar year 2026 until maturity;

d.eliminates the total net leverage ratio covenant for the remainder of ~~deferred financing costs, legal fees~~2023, inclusive of the second quarter of 2023, and ~~early termination fee. The loss recognized is presented as “Loss on Debt Extinguishment”~~sets the total net leverage ratio of DMSH LLC and its restricted subsidiaries starting at 15.6x and 10.6x for the first and second quarters of 2024, respectively, and varying for every quarter there after, down to 6.9x for the fourth quarter of 2025 and until maturity;

e.eliminates the right of the Borrower to undertake an equity cure to cure any breach of the total net leverage ratio covenant;

f.establishes a minimum liquidity covenant of $9 million for the remainder of 2023 and $10 million thereafter until maturity (subject to the Company’s ability to exercise an equity cure solely with respect to the liquidity covenant); and

g.modifies in certain respects the affirmative and negative covenants and the events of default in the ~~consolidated statement~~Credit Facility, including subjecting non ordinary course investments and restricted distributions to consent of ~~operations.~~

the requisite Lenders.

~~Table~~The amendment does not contemplate the issuance of ~~Contents~~any equity or warrants to the Company’s lenders. The foregoing description of the First Amendment does not purport to be complete and is qualified in its entirety by reference to the full text thereof, which is attached hereto as Exhibit 10.1.

Debt Maturity Schedule

The scheduled maturities of our total debt are estimated as follows at June 30, ~~2022~~2023 (in thousands):


2022		$	1,125
2023	2023	2,250		2023	$	1,125
2024	2024	2,250		2024	2,250
2025	2025	2,250		2025	2,250
2026 and thereafter		214,875
2026				2026	264,875

Total debt	Total debt	$	222,750	Total debt	$	270,500

~~NOTE 6. ACQUISITIONS~~Note 7. Leases

~~Traverse~~

~~On May 10, 2022,~~The following table summarizes the ~~Company acquired Traverse Data, Inc. (“Traverse”). Traverse is a marketing and advertising technology company. The Company paid~~maturities of undiscounted cash ~~consideration~~flows of ~~$2.5 million upon closing~~operating lease liabilities reconciled to total lease liability as of the transaction. The transaction also includes up to $0.5 million in contingent consideration, subject to the achievement of certain milestones, which can be paid in cash 15 months after the acquisition date.

~~As of May 10, 2022, the acquisition date, the preliminary fair value of the intangibles, contingent consideration liability and working capital accounts are as follows~~June 30, 2023 (in thousands):


~~Traverse~~	~~Acquisition Date Fair Value~~
~~Goodwill~~	$	~~444~~
~~Intangible Assets:~~
~~Technology~~	$	~~2,500~~
~~Customer relationships~~	$	50
~~Brand~~	$	59
~~Non-competition agreements~~	$	3

~~Contingent consideration liability~~	$	~~428~~

~~Working capital accounts~~	$	~~(49)~~

The Company primarily used Income Approach methodologies, which represents Level 3 fair value measurements, to assess the components of its purchase price allocation. The acquisition was accounted for as a business combination, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The results of operations of the acquired business have been included in the Company’s results of operations since the acquisition date of May 10, 2022. Under Accounting Standards Codification 805 (“ASC 805”), an acquirer must recognize any assets acquired and liabilities assumed at the acquisition date, measured at fair value as of that date. Assets meeting the identification criteria included tangible assets, such as real and personal property, and intangible assets. Identified intangible assets included technology, brand, customer relationships and non-competition agreements. Fair value of the technology was determined using the Multi Period Excess Earnings Approach; fair value of the customer relationships was determined using the Excess Earnings Method utilizing distributor inputs; fair value of the brand was determined using the Relief from Royalty Method; and fair value of the non-competition agreements was determined using the Discounted Cash Flow Approach.

The goodwill related to this transaction reflects the synergies expected from combining the operations of Traverse and is included in the Technology Solutions reportable segment. Goodwill is expected to be deductible for tax purposes. Intangible

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	Lease Amounts
2023	$	1,130
2024	1,751
2025	546
Total	3,427
Less: Imputed interest	(103)
Present value of operating lease liabilities	$	3,324

~~assets primarily consist~~As of ~~technology, brand~~June 30, 2023, the operating lease weighted average remaining lease term is 1.7 years and ~~customer relationships with an estimated useful life of five years for technology, three years for brand and five years for customer relationships.~~

~~Crisp Results~~

~~On April 1, 2021,~~ the ~~Company completed a transaction to purchase the assets of Crisp Marketing, LLC (“Crisp Results” or “Crisp”). Crisp Results~~operating lease weighted average remaining discount rate is a digital performance advertising company that connects consumers with brands within the insurance sector, with primary focus on the Medicare insurance industry. Crisp Results is known for providing predictable, reliable, flexible and scalable customer acquisition solutions, supporting large brands with a process that combines data, design, technology and innovation.3.51%.

The discount rate for each lease represents the incremental borrowing rate that the Company ~~paid consideration of $40.0 million upon closing~~would incur at commencement of the ~~transaction, consisting of $20.0 million cash~~lease to borrow on a collateralized basis over a similar term and ~~1.6 million Class A Common Stock valued at $20.0 million. The transaction also included up~~amount equal to ~~$10.0 million~~lease payments in ~~contingent consideration, subject to the achievement of certain milestones, which can be paid in cash or Class A Common Stock at the election of the Company, and~~ a ~~$5.0 million deferred payment, to be paid 18 months after the acquisition date.~~similar economic environment.

~~Determining~~The following table represents the fair value of assets acquired and liabilities assumed requires management's judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. As the result of the completed valuation of the assets acquired (including intangibles) and liabilities assumed, as well as the contingent consideration liabilities, as of the acquisition dates, the following adjustments were recorded related to further analysis of the forecast (for example, items that occurring in the pre-acquisition period that should have been factored into the forecast as of the acquisition date) and refinements to the significant assumptions in the valuation models used to value the intangibles and contingent consideration liabilities. As a result, we made adjustment to the initial and subsequent fair value of the intangible assets, goodwill, contingent consideration and working capital. Since December 31, 2021, there were no measurement period adjustments identified and recorded. Accounting for the acquisition was completed on March 31, 2022.Company’s aggregate lease costs, by lease classification (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
Category	Statement of Operations Location	2023		2022		2023		2022
Operating lease costs	General and administrative expenses	$	297	$	130	$	582	$	389
Short-term lease costs	General and administrative expenses	38		39		191		91
Sub-lease income	General and administrative expenses	(183)		(152)		(362)		(242)
Total lease costs, net		$	152	$	17	$	411	$	238

~~As of April 1, 2021,~~

The rental expense for the ~~acquisition date,~~three and six months ended June 30, 2023 was $0.4 million and $0.8 million, respectively, and for the ~~fair value of the contingent consideration was $5.2 million. During the~~three and six months ended June 30, 2022 was $0.5 million and $1.0 million, respectively. As of June 30, 2023 the ~~fair value~~cash paid for amounts included in the measurement of operating leases was $1.1 million. As part of the ~~contingent consideration increased $2.6 million due to accretion to $10.0 million from December 31, 2021. As of April 1, 2022, the contingent consideration milestones were met, and~~Company’s restructuring costs reduction plan, the Company ~~paid it on July 1, 2022 in~~subleased a certain portion of its leased office space. Income from the ~~form of 2.99~~sublease was $0.2 million ~~unregistered shares of Class A Common Stock, priced at $3.3455,~~and $0.4 million for the ~~average closing price of~~three and six months ended June 30, 2023, respectively, and $0.2 million and $0.2 million for the ~~Class A common stock during the~~ ~~twenty~~ ~~trading-day period ended March 31, 2022.~~

~~As of April 1, 2021, the acquisition date, the fair value of the deferred consideration was $4.6 million. During the~~three and six months ended June 30, 2022, the present value of the deferred consideration increased slightly due to accretion to $4.9 million from December 31, 2021. Since December 31, 2021, there were no measurement period adjustments identified and recorded.

~~The Company primarily used Income Approach methodologies,~~respectively, which represents Level 3 fair value measurements, to assess the components of its purchase price allocation. The acquisition was accounted for as a business combination, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The results of operations of the acquired business have been included in the Company’s results of operations since the acquisition date of April 1, 2021. Under Accounting Standards Codification 805 (“ASC 805”), an acquirer must recognize any assets acquired and liabilities assumed at the acquisition date, measured at fair value as of that date. Assets meeting the identification criteria included tangible assets, such as real and personal property, and intangible assets. Identified intangible assets included the brand and customer relationships of the acquired business. Fair value of the Crisp Results brand was determined using the Relief from Royalty Method, and the fair value of customer relationships was determined using the Multi Period Excess Earnings Method.

~~The goodwill related to this transaction reflects the workforce and synergies expected from combining the operations of Crisp Results and~~ is included in the Marketplace reportable segment. Goodwill is expected to be deductible for tax purposes. Intangible assets primarily consist of brand and customer relationships with an estimated useful life of seven years for brand and six years for customer relationships.

~~Aimtell, Aramis and PushPros~~

On February 1, 2021, the Company acquired Aimtell, Inc. (“Aimtell”), PushPros, Inc. (“PushPros”) and Aramis Interactive (“Aramis”, and together with Aimtell and PushPro, “AAP”). Aimtell and PushPros are leading providers of technology-enabled digital performance advertising solutions that connect consumers and advertisers within ~~the home, auto, health and life insurance verticals. Aramis is a network of owned-and-operated websites that leverages the Aimtell and PushPros technologies and relationships.~~

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$15.0 million in contingent consideration to be earned over the three years following the acquisition, subject to the achievement of certain milestones. The contingent consideration can be paid in cash or Class A Common Stock at the election of the Company.

Determining the fair value of assets acquired and liabilities assumed requires management's judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. As the result of the completed valuation of the assets acquired (including intangibles) and liabilities assumed, as well as the contingent consideration liabilities, as of the acquisition date, we recorded adjustments during the year ended December 31, 2021 related to further analysis of the forecast (for example, items that occurring in the pre-acquisition period that should have been factored into the forecast as of the acquisition date) and refinements to the significant assumptions in the valuation models used to value the intangibles and contingent consideration liabilities. As a result, we made adjustments to the initial and subsequent fair value of the intangible assets, goodwill, contingent consideration and working capital. Since December 31, 2021, there was a $0.1 million measurement period adjustment identified and recorded in Goodwill during the period ended March 31, 2022. There were no further measurement period adjustments identified and recorded since accounting for the acquisition was completed on March 31, 2022.

As of February 1, 2021, the acquisition date, the fair value of the contingent consideration earnout was $2.1 million. As of June 30, 2022, the contingent consideration earnout fair value total of $1.0 million remained relatively unchanged since December 31, 2021. The contingent consideration can be paid in cash or DMS Class A Common Stock at the election of the Company.

The Company primarily used Income Approach methodologies, which represents Level 3 fair value measurements, to assess the components of its purchase price allocation. The acquisition was accounted for as a business combination, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The results of operations of the acquired businesses have been included in the Company’s results of operations since the acquisition date of February 1, 2021. Under Accounting Standards Codification 805 (ASC 805), an acquirer must recognize any assets acquired and liabilities assumed at the acquisition date, measured at fair value as of that date. Assets meeting the identification criteria included tangible assets, such as real and personal property, and intangible assets. Identified intangible assets included the brand, technology, customer relationships and non-competition agreements of the acquired business. Fair value of the Aimtell and PushPros technology was determined using the Multi Period Excess Earnings Method; fair value of the AAP non-compete agreements was determined using a Discounted Cash Flow Approach; fair value of the AAP brand was determined using a Relief from Royalty Method; fair value of the Aramis customer relationships was determined using the Multi Period Excess Earnings Method; and fair value of the Aimtell and PushPros customer relationships was determined using the excess earnings method with distributor inputs.

The goodwill related to this transaction reflects the workforce and synergies expected from combining the operations of AAP and is included in the Brand Direct reportable segment. Goodwill is expected to be deductible for Aramis and PushPros for tax purposes. Intangible assets primarily consist of technology and customer relationships.

~~The acquisition date fair value of assets acquired and liabilities assumed from the AAP, Crisp Results and Traverse acquisitions consist of the following (in thousands):~~

Expected Useful Life AAP Crisp Results Traverse
2021 2021 2022
Cash $ — $ — $ 232
Goodwill 9,761 21,894 444
Technology 4 to 5 3,900 — 2,500
Customer relationships 4 to 6 7,690 19,600 50
Accounts receivable, net 3,100 2,610 276
Brand 1 to 7 208 7,400 59
Non-competitive agreements 1 to 3 83 — 3
Property and equipment 3 to 5 250 220 —
Accounts payable (2,887) (1,593) (454)
Other assets acquired and liabilities assumed, net (1)
740 1 (103)
Net assets and liabilities acquired $ 22,845 $ 50,132 $ 3,007

(1) Other assets acquired and liabilities assumed, net includes prepaids and other current assets, partially offset by other current liabilities (e.g., Travel and expense payables, payroll liabilities, tax liabilities, and transition services payable).

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The weighted average amortization period for AAP acquisition technology is 4 years, customer relationships is 4.1 years, brand is 2.1 years and non-compete agreements is 3 years. The weighted average amortization period for Crisp Results acquisition customer relationships is 6 years, and brand is 7 years. The weighted average amortization period for Traverse acquisition technology is 5 years, customer relationships is 5 years, brand is 3 years and non-compete agreements is 1 year. In total, the weighted average amortization period for AAP is 4 years, Crisp Results is 5.6 years and Traverse is 5 years.

The following schedule represents the amounts of net revenue and net loss from operations related to Traverse, AAP and Crisp Results acquisitions which have been included in the unaudited consolidated statements of operations for the periods indicated subsequent to the acquisition date in the period of acquisition (in thousands):

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022
Traverse Traverse
Net revenue $ 360 $ 360
Net income from operations $ 70 $ 70

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
AAP Crisp Results AAP Crisp Results
Net revenue $ 5,774 $ 6,967 $ 10,075 $ 6,967
Net loss from operations $ (484) $ (155) $ (620) $ (155)

~~Pro Forma Information~~

The following unaudited pro forma financial information represents the consolidated financial information as if the acquisitions had been included in our consolidated results beginning on the first day of the fiscal year prior to their respective acquisition dates (in thousands):

Three Months Ended June 30, 2022
DMS Traverse Pro Forma
Net revenue $ 91,197 $ 277 $ 91,474
Net (loss) income from operations $ (9,665) $ (434) $ (10,099)

Three Months Ended June 30, 2021
DMS AAP Crisp Results Traverse Pro Forma
Net revenue $ 105,079 $ — $ — $ 583 $ 105,662
Net income (loss) from operations $ 3,950 $ — $ — $ (21) $ 3,929

Six Months Ended June 30, 2022
DMS Traverse Combined
Net revenue $ 200,307 $ 999 $ 201,306
Net loss from operations $ (12,867) $ (417) $ (13,284)

Six Months Ended June 30, 2021
DMS AAP Crisp Results Traverse Pro Forma
Net revenue $ 201,882 $ 2,465 $ 8,284 $ 1,253 $ 213,884
Net income (loss) from operations $ 7,427 $ 457 $ 2,296 $ (67) $ 10,113

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these costs savings, operating synergies and revenue enhancements. The pro forma results do not necessarily reflect the actual results of operations of the combined companies under our ownership and operation.

~~NOTE 7. RESTRUCTURING COSTS~~

Restructuring costs include expenses associated with the Company’s effort to continually improve operational efficiency and reposition its assets to remain competitive on a national basis. The Company leases office space in various locations within the United States and Canada. The leases entered into by the Company consist of both long-term and short-term leases.

Termination of office lease and other related costs include lease and termination of fixed assets, employee training, relocation and facility costs. These costs are recorded in General and administrative expenses in the unaudited consolidated statements of operations.

Since the year ended December 31, 2020, due to the economic environment caused by the COVID-19 pandemic, the Company entered into negotiations with landlords to terminate certain lease agreements, which reduced cash needs by approximately $1.9 million over the remaining life of the original leases through April 30, 2025. As of June 30, 2022, the Company has 4 leased properties, representing 55,798 square feet of office space located in the United States, that are currently in negotiations with landlords to be reduced or terminated.

~~Valuation adjustments related to the reserve and lease accretion are recorded in~~ General and administrative expenses in the consolidated statements of operations. ~~The change in liability for the restructuring costs reserve for the three and six months ended~~As of June 30, ~~2022~~2023 the AAP Lease located at 1245 East Main Street, Annville, PA 17003 was terminated under favorable terms, with a total lease termination credit and ~~2021, respectively, was as follows (in thousands):~~

Three Months Ended
June 30, 2022 Three Months Ended June 30, 2021
Beginning balance $ 2,244 $ 2,966
Valuation adjustments 496 432
Lease payments (290) (487)
Lease accretion 48 46
Ending balance $ 2,498 $ 2,957
Current portion - Accrued expenses and other current liabilities $ 908 $ 1,200
Long-term portion - Other non-current liabilities $ 1,590 $ 1,757

Six Months Ended
June 30, 2022 Six Months Ended June 30, 2021
Beginning balance $ 2,516 $ 3,653
Valuation adjustments 470 81
Lease payments (584) (870)
Lease accretion 96 93
Ending balance $ 2,498 $ 2,957
Current portion - Accrued expenses and other current liabilities $ 908 $ 1,200
Long-term portion - Other non-current liabilities $ 1,590 $ 1,757
right of use asset impairment of $0.4 million, which is included within General and administrative expenses in the consolidated statements of operations.

~~NOTE~~Note 8. ~~FAIR VALUE MEASUREMENTS~~Fair Value Measurements

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The carrying amounts of our cash and cash equivalents, accounts receivable, income taxes receivable, accounts payable, accrued expenses and income taxes payable, approximate fair value because of the short-term maturity of those instruments.

Series A and Series B Preferred Warrants

On March 29, 2023, the Company completed a securities purchase agreement (the “SPA”) with certain investors to purchase 80 thousand shares of Series A convertible redeemable Preferred stock (“Series A Preferred stock”) and 60 thousand shares of Series B convertible redeemable Preferred stock (“Series B Preferred stock”, and together with Series A Preferred stock, “Preferred Warrants”) for an aggregate purchase price of $14.0 million (the “Preferred Offering”), including $6.0 million of related party participation. The Company also issued the purchasers in the Preferred Offering warrants to acquire 14.4 million shares of Class A Common Stock.

The Preferred Warrants are exercisable for shares of the Company’s Class A Common Stock at any time at the option of the holder and expire five years from the date of issuance. The Preferred Warrants are exercisable on a cashless basis or for cash at an exercise price of $0.6453 per share of Class A Common Stock. The exercise price of the Preferred Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, subdivisions, combinations, reclassifications, or similar events affecting the Company’s Common Stock. The Preferred Warrants contain a put feature providing the right to the holder for a net cash settlement in the event of a fundamental transaction, which is defined as instances where the Company (i) effects any merger or consolidation of the Company, (ii) effects any sale, lease, license, assignment, transfer, conveyance, or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) completes any purchase offer,

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tender offer, or exchange offer that has been accepted by the holders of at least 50% of the outstanding Class A Common Stock, (iv) effects any reclassification, reorganization, or recapitalization of the Class A Common Stock or any compulsory share exchange pursuant to which the Class A Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) consummates a stock or share purchase agreement or other business combination in which more than 50% of the outstanding shares of Class A Common Stock is acquired. Under such a fundamental transaction, the holder can require the Company to purchase any unexercised warrant shares at the pro-rata share of the sales price or calculated value less the exercise price of the Warrant share.

Due to the tender offer provision, the Preferred Warrants are classified as a derivative liability measured at fair value, with changes in fair value reported each period in earnings. The fair value of the warrant is estimated using the Black-Scholes pricing model. The fair value of the Preferred Warrants of approximately $8.7 million was estimated at the date of issuance using the following weighted average assumptions. Transaction costs incurred attributable to the issuance of the Preferred Warrants were part of the preferred shares issuance costs that were 0.9 million.

The fair value of the derivative Preferred Warrants is considered a Level 3 valuation and is determined using the Black-Scholes-Merton valuation model. The change in the value of the derivative Preferred Warrants are included in the accompanying consolidated statements of operations as Change in fair value of warrant liabilities.

The significant assumptions were as follows:


	June 30, 2023

Preferred Warrants Fair Value Per Share	$	0.22
Preferred Warrant valuation inputs:
Stock price - DMS Inc. Class A Common Stock	$	0.33

Remaining contractual term in years	4.75
Estimated volatility	100.0		%
Dividend yield	0.0		%
Risk free interest rate	4.13		%

Private Placement Warrants

Each Company Private Placement Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A Common Stock. This means only a whole warrant may be exercised at a given time by a warrant holder. The warrants will expire five years after the Business Combination, or earlier upon redemption or liquidation.

The Company may call the Company Private Placement Warrants - for redemption as follows: (1) in whole and not in part; (2) at a price of $0.01 per warrant; (3) upon a minimum of 30 days’ prior written notice of redemption; and (4) only if the last reported closing price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the Company Private Placement Warrants for redemption, management will have the option to require all holders that wish to exercise the Company Public Warrants to do so on a “cashless basis.”

The exercise price and number of Class A Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of Class A Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrant shares.

We record the fair value of the Private Placement Warrants as a liability in our consolidated balance sheet as of June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes-Merton valuation model. Changes in fair value of the Private

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Placement Warrants are presented under Change in ~~the~~ fair value of warrant liabilities on the ~~Income Statement.~~consolidated statements of operations. As of June 30, ~~2022,~~2023, the Company has approximately 4.0 million Private Placement Warrants outstanding.

The significant assumptions were as follows:

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			June 30, ~~2022~~2023
Private Placement Warrants Fair Value Per Share	$	~~0.12~~0.01
Private Placement Warrant valuation inputs:
Stock price - DMS Inc. Class A Common Stock	$	~~1.11~~0.33

Remaining contractual term in years			~~3.04~~ 2.04
Estimated volatility		~~85.0~~100.0		%
Dividend yield			0.0		%
Risk free interest rate		~~2.97~~4.80		%

Contingent consideration payable related to acquisitions

The fair value of the contingent considerations payable for the ~~AAP~~Aimtell/PushPros and ~~Traverse~~ClickDealer acquisitions (described in Note 6.5. Acquisitions) were determined using a Monte Carlo fair value analysis, ~~and a scenario-based methodology, respectively,~~ based on estimated performance and the probability of achieving certain targets. As certain inputs are not observable in the market, the contingent consideration is classified as a Level 3 instrument. Changes in fair value of contingent consideration are presented under ~~Acquisition costs~~Change in fair value of contingent consideration liabilities on the ~~statement~~consolidated statements of operations.

The contingent consideration payable for the Crisp acquisition was finalized on April 1, 2022, the end of the earnout period. As the full target was met, the payment was made on July 1, 2022 in the form of Class A Common Stock. ~~(See~~ (SeeNote 6.5. Acquisitions).

The contingent consideration for the Traverse acquisition was finalized on May 10, 2023, which the Company paid on July 10, 2023 in the form cash payment of $0.5 million.The following table presents the contingent consideration assumptions.


			Aimtell / PushPros
~~CYE2021 Revenue - Actual~~			$	~~7,193,881~~
~~CYE2022 Revenue - 6 Months Actual~~			$	~~2,724,201~~
~~CYE2022 Revenue - 6 Months Expectations~~			$	~~8,908,838~~
~~CYE2023 Revenue - Expectations~~			$	~~14,636,891~~
~~CYE2022 Risk Adjusted Revenue - 6 Months~~			$	~~8,715,176~~
~~CYE2023 Risk Adjusted Revenue~~			$	~~13,413,226~~
Revenue Volatility			25		%
Iteration (actual)			100,000
Risk adjustment discount rate		~~9.50~~11.75		%
Risk free / Credit risk		~~12.0~~12.00		%
Days ~~gap~~ from period end to payment			90











	~~Aramis~~ClickDealer
~~CYE2022 Earnout Successful Probability~~Revenue Volatility		~~99.0~~50		%
Iteration (actual)		100,000
Risk Adjustment Discount Rate	25.75	%
Risk free / Credit risk		~~12.0~~12.00		%
Days ~~gap~~ from period end to payment			90

			~~Traverse~~
~~CYE2023 Earnout Successful Probability~~			~~95.0~~		%

~~Risk free / Credit risk~~			~~10.0~~		%
~~Days gap from period end to payment~~			90

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The following table presents assets and liabilities measured at fair value on a recurrent basis (in thousands):

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		June 30, 2023
Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Liabilities:
Private placement warrants - Class B common stock	Warrant liabilities	$	—	$	—	$	24	$	24
Preferred warrants - Series A preferred stock	Warrant liabilities	—		—		1,816		1,816
Preferred warrants - Series B preferred stock	Warrant liabilities	—		—		1,362		1,362

Contingent consideration - Aramis	Contingent consideration payable - current	—		—		1,000		1,000
Contingent consideration - Traverse	Contingent consideration payable - current	—		—		500		500
Contingent consideration - ClickDealer	Contingent consideration payable - non-current	—		—		2,268		2,268
Total		$	—	$	—	$	6,970	$	6,970


			June 30, 2022										June 30, 2022
Category	Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total		Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Liabilities:	Liabilities:										Liabilities:
Private Placement Warrant liabilities		Total liabilities	$	—	$	—	$	480	$	480
Private placement warrants - Class B common stock											Private placement warrants - Class B common stock	Warrant liabilities	$	—	$	—	$	480	$	480
Contingent consideration - Crisp Results	Contingent consideration - Crisp Results	Contingent consideration payable - current	—		—		10,000		10,000		Contingent consideration - Crisp Results	Contingent consideration payable - current	—		—		10,000		10,000
Contingent consideration - Traverse											Contingent consideration - Traverse	Contingent consideration payable - current	—		—		428		428
Contingent consideration - Aramis	Contingent consideration - Aramis	Contingent consideration payable - current	—		—		909		909		Contingent consideration - Aramis	Contingent consideration payable - non-current	—		—		909		909
Contingent consideration - Traverse		Contingent consideration payable - non-current	—		—		428		428
Contingent consideration - Aimtell/PushPro		Contingent consideration payable - non-current	—		—		66		66
Contingent consideration - Aimtell/PushPros											Contingent consideration - Aimtell/PushPros	Contingent consideration payable - non-current	—		—		66		66
Total	Total		$	—	$	—	$	11,883	$	11,883	Total		$	—	$	—	$	11,883	$	11,883

The following ~~table represents~~tables represent the change in the warrant liability and contingent consideration (in thousands):

Private Placement Warrants Contingent Consideration
Balance, April 1, 2022 $ 2,120 $ 11,030
Additions — 428
Changes in fair value (1,640) (55)
Settlements — —
Balance, June 30, 2022 $ 480 11,403


	Private Placement Warrants		Series A and B Preferred Warrants		Contingent Consideration
Balance, March 31, 2023	$	320	$	12,711	$	3,923

Changes in fair value	(296)		(9,533)		(90)

Other (1)	—		—		(65)
Balance, June 30, 2023	$	24	$	3,178	3,768

____________________

(1)Relates to the revision of the initial fair value of the ClickDealer contingent consideration. See Note 5. Acquisitions.


		Private Placement Warrants		Contingent Consideration			Private Placement Warrants		Contingent Consideration
Balance, December 31, 2021		$	3,960	$	8,439
Balance, March 31, 2022						Balance, March 31, 2022	$	2,120	$	11,030
Additions	Additions	—		428		Additions	—		428
Changes in fair value	Changes in fair value	(3,480)		2,536		Changes in fair value	(1,640)		(55)
Settlements		—		—

Balance, June 30, 2022	Balance, June 30, 2022	$	480	$	11,403	Balance, June 30, 2022	$	480	$	11,403

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	Private Placement Warrants		Series A and B Preferred Warrants		Contingent Consideration
Balance, December 31, 2022	$	600	$	—	$	1,453
Additions	—		8,667		2,457
Changes in fair value	(576)		(5,489)		(77)

Other (1)	—		—		(65)
Balance, June 30, 2023	$	24	$	3,178	$	3,768

____________________

(1)Relates to the revision of the initial fair value of the ClickDealer contingent consideration. See Note 5. Acquisitions.


	Private Placement Warrants		Contingent Consideration
Balance, December 31, 2021	$	3,960	$	8,439
Additions	—		428
Changes in fair value	(3,480)		2,536

Balance, June 30, 2022	$	480	$	11,403

Note 9. Equity

Preferred Stock

The Board has the authority to issue shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or more series, and to fix the designations, preferences, privileges, and restrictions of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms, and the number of shares constituting any series or the designation of any series to the fullest extent permitted by the DGCL. The issuance of Preferred Stock of the Company could have the effect of decreasing the trading price of Company Common Stock, restricting dividends on the capital stock of the Company, diluting the voting power of the Company Common Stock, impairing the liquidation rights of the capital stock of the Company, or delaying or preventing a change in control of the Company.

The Company is authorized to issue 100,000,000 preferred shares with such designations, voting, and other rights and preferences as may be determined from time to time by the Board (of which 140,000 preferred shares have been issued).

March 2023 Offering

On March 29, 2023, the Company entered into a Securities Purchase Agreement with certain investors, pursuant to which the Company sold (i) 80,000 shares of Series A Preferred Stock accompanied with warrants to purchase 8,253,968 Class A Common Stock (“Series A Warrant”) and (ii) 60,000 shares of Series B Preferred Stock accompanied with warrants to purchase 6,190,476 shares of Class A Common Stock (“Series B Warrants”). One share of Series A Preferred Stock with the accompanying warrants (“Series A Unit”) and one share of Series B Preferred Stock with the accompanying warrants (“Series B Unit”) were sold at $100 per unit.

Although the Preferred Stock are mandatorily redeemable, the Preferred Stock have a substantive conversion feature; and therefore, are not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. However, as the Preferred Stock are mandatorily redeemable, redeemable in certain circumstances at the option of the holder, and redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company’s control, the Company has classified the Preferred Stock as mezzanine equity in the consolidated balance sheets. The Company measures the Preferred Stock at its maximum redemption value plus dividends not currently declared or paid but which will be payable upon redemption. On June 15, 2023 the Company remeasured the Preferred Stock following the accretion method, which resulted in the Preferred Stock being measured at its maximum redemption value of $16.3 million and accretion of $11.3 million, included in Cumulative Deficit on theconsolidated balance sheets as of June 30, 2023. The fair value of the preferred stock at issuance was recognized using the discount method, which accounts for the 11% discount of the stated value and a pro-rata allocation of the proceeds between the preferred shares and the warrants, less a pro-rata amount of the transaction costs.

Dividend Rights

The holders of the Preferred Stock are entitled to cumulative dividends at a 4.0% rate, which is accrued and compounded annually whether or not declared. These dividends are payable in cash or Class A Common Stock upon conversion or redemption of the underlying preferred stock.

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Additionally, the holders are also entitled to participate in dividends declared or paid on Class A Common Stock on an as-converted basis.

Conversion Rights

Each holder has the right, at its option, to convert its Preferred Stock into Class A Common Stock at either, at the option of the holder, (1) the Conversion Price, which is equal to $0.56 per share or (2) the Alternate Conversion Price, which is equal to the lesser of (i) 90% of the arithmetic average of the three lowest daily VWAPs (as defined in the Securities Purchase Agreement) of the 20 trading days prior to the applicable conversion date or (ii) 90% of the VWAP of the trading day prior to the applicable conversion date. Both the Conversion Price and the Alternate Conversion Price are subject to a floor price of $0.484 (“Floor Price”). However, for the Series A Preferred Stock only, if redemption of the Series A Preferred Stock is accelerated by either the Company or the holder (see the Accelerated Redemption provisions defined below), (i) any cash payment required to be made is not made, and (ii) the existing investors have defaulted under their obligations to purchase the Series A pursuant to the terms of a side letter, then the Floor Price shall be $0.161.

The Conversion Price is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, subdivisions, combinations, recapitalization, or similar events, and subject to price-based adjustment in the event of any issuances of Class A Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). Additionally, the Conversion Price is subject to adjustment for any increase or decrease to the exercise price or conversion price to any outstanding options or convertible securities the Company has issued.

The Company determined that the nature of the Preferred Stock was more akin to an equity instrument than a debt instrument because the Preferred Stock are subject to a substantive Conversion Option that is in-the-money and the Company has the ultimate authority to settle redemption of the Preferred Warrants upon the Mandatory Redemption or Accelerated Redemption (all defined below) by issuing shares of Class A Common Stock rather than paying cash. Further, such potential share settlement will be at the lower of the Conversion Price or based on the Company’s VWAP allowing for the holder to be exposed to the risks and returns of the underlying Class A Common Stock. Accordingly, the economic characteristics and risks of the embedded option to convert the Preferred Stock at the Conversion Price (the “Conversion Option”) was clearly and closely related to the host contract. As such, the Conversion Option was not required to be bifurcated from the host under ASC 815, Derivatives and Hedging.

Redemption Rights

In addition to the share-settled redemption feature discussed above in the Conversion Rights section (e.g., conversion of the Preferred Stock at the Alternate Conversion Price), the Preferred Warrants are subject to several redemption features.

Mandatory Redemption – On and after June 29, 2023, the Preferred Stock are required to redeem 1/10th of the number of the issued shares of Preferred Stock on a monthly basis (“Installments”). The redemption price is paid, at the option of the Company: (i) in cash at an amount that is approximately 104% of the stated value of $111.11 per share plus all accrued and unpaid dividends and any other amounts due (the “Mandatory Redemption Price”), (ii) in a variable number shares of Class A Common Stock based on a share price equal to the lesser of (1) the prevailing Conversion Price, (2) 90% of the arithmetic average of the three lowest daily VWAPs of the 20 Trading Days prior to the applicable mandatory redemption date, or (3) 90% of the VWAP of the trading day prior to the applicable mandatory redemption date, provided that such share price used will not be below the Floor Price, or (iii) in a combination thereof. Installments may be deferred or reallocated to other dates at the Preferred Stockholders’ discretion.

Accelerated Redemption – The holders of the Preferred Stock have the right to require redemption of all or any part of the Preferred Stock at any time on or after June 15, 2023. Additionally, the Company has the option to elect redemption of all Series A shares at any time on or after June 15, 2023. The redemption price, as elected by the holder, is paid in either (i) the Mandatory Redemption Price in cash, (ii) in a variable number of shares of Common Stock based on a share price equal to the lesser of (1) the prevailing Conversion Price, (2) 90% of the arithmetic average of the three lowest daily VWAPs of the 20 Trading Days prior to the applicable accelerated redemption date or (3) 90% of the VWAP of the trading day prior to the applicable accelerated redemption date, provided that such share price used will not be below the Floor Price, or (iii) a combination thereof.

Triggered Optional Redemption – If the Company closes a debt or equity financing, then each holder has the right to require the Company to use 30% of the proceeds from the financing to repurchase a pro rata portion of that holder's Preferred Stock in cash at the Mandatory Redemption Price.

Default Redemption – Upon certain default events in which the Company defaults on its covenants, promises, or obligations under the Securities Purchase Agreement or defaults on any of its other obligations, the holder has the option to redeem the Preferred Stock for a cash amount equal to 115% of the Mandatory Redemption Price.

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Bankruptcy Redemption – If the Company is subject to a bankruptcy event, then the Company is required to immediately redeem the outstanding Preferred Stock for cash. The redemption price paid shall equal 115% of the Mandatory Redemption Price.

Change of Control Redemption – Upon change of control events (as defined in the Securities Purchase Agreement), the holders have the option to require the Company to redeem the Preferred Stock for cash. The redemption price paid shall equal the greater of (i) the product of 115% multiplied by the Mandatory Redemption Price and (ii) the prevailing Conversion Price plus all accrued but unpaid dividends.

If upon an Accelerated Redemption, Triggered Optional Redemption, or Default Redemption, any cash payment required to be made is not made, then the holder can elect to retain its shares of Preferred Warrants that have not been redeemed for cash and sell the shares of Preferred Stock to a third party. Additionally, if such an election is not made by the holder, the Company has the authority to pay to the holder the unpaid cash redemption payment in duly authorized, validly issued, fully paid and non-assessable shares of Class A Common Stock.

On July 3, 2023, a non-controlling interest holder redeemed 617,400 Class B Common Stock in exchange for Class A Common Stock on a one-for-one basis.

As noted above, the Company determined that the nature of the Preferred Stock were more akin to an equity instrument than a debt instrument. The Company determined that the economic characteristics and risks of the embedded redemption features discussed above were not clearly and closely related to the host contract. However, the Company assessed these items further and determined they did not meet the definition of a derivative under ASC 815, Derivatives and Hedging.

Liquidation Rights

Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), prior and in preference to the common stock and the Series B Preferred Stock, the holders of Series A Preferred Stock are entitled to receive out of the assets available for distribution to stockholders an amount equal in cash to 115% of the stated value of $111.11 per share plus all accrued and unpaid dividends and any other amounts due. After the payment of all preferential amounts required to be paid to the Series A holders, the Series B holders shall be entitled to receive out of the assets available for distribution to stockholders an amount equal in cash to 115% of the stated value of $111.11 per share purchase price plus all accrued and unpaid dividends and any other amounts due.

Voting Rights

Holders of the Preferred Stock are entitled to vote with the holders of the ordinary shareholders on an as-converted basis. Holders of the Preferred Stock are entitled to a separate class vote with respect to (i) altering or changing the powers, preferences, or rights of the Preferred Stock so as to affect them adversely, (ii) amending the Certificate of Incorporation or other charter documents in a manner adverse to the holders, (iii) increasing the number of authorized shares of Preferred Stock, or (iv) entering into any agreement with respect to any of the foregoing.

Redemptions

On June 15, 2023, the Company received notice from the holders of all of the Company’s outstanding Series A Preferred Stock that each holder has elected to have the Company redeem for cash the Series A Preferred Stock held by such holder pursuant to Section 9(b) of the Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock of the Company (the “Series A Certificate of Designation”).

Section 9(b) of the Series A Certificate of Designation gives holders of Series A Preferred Stock the right to require the Company to redeem for cash the Series A Preferred Stock for cash at any time on or after June 15, 2023 at the “Corporation’s Mandatory Redemption Price” (as such term is defined in the Series A Certificate of Designation). As of June 15, 2023, the aggregate Corporation’s Mandatory Redemption Price for all of the outstanding Series A Preferred Stock was approximately $9.3 million.

On June 16, 2023, the Board determined that the Company was not legally permitted under applicable Delaware law to effect a redemption for cash of any Series A Preferred Stock. As a result and in accordance with the Securities Purchase Agreement, the Company accrued dividends payable of $89.0 thousand to the Series A Preferred Stockholders, included Cumulative Deficit on the consolidated balance sheets, as of June 30, 2023. Total accrued dividend to Series A and B Preferred Stockholders was $156.0 thousand, as of June 30, 2023.

Relatedly, Section 9(a) of the Series A Certificate of Designation and the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock (the “Series B Certificate of Designation” and together with the Series A Certificate of Designation, the “Certificates of Designation”) provide for the Company to redeem 1/10th of the outstanding Series A Preferred Stock and Series B Preferred Stock, respectively, for cash or shares of the Company’s Class A common stock on a monthly basis beginning on June 30, 2023 at the “Corporation’s Mandatory Redemption Price.”

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As calculated pursuant to the Certificates of Designation, the aggregate Mandatory Redemption Price for the redemptions Series A and B Preferred Stock on June 30, 2023 and July 30, 2023 was approximately $1.8 million and $1.7 million, respectively. Pursuant to the terms of the Certificates of Designation, the Company was not permitted to elect payment in common stock because the Company’s common stock has not traded above the “Floor Price” ($0.484) for 20 trading days prior to redemption, as required by the Certificates of Designation. With respect to each monthly redemption date, the Board determined that the redemption was not permitted under the Certificates of Designation or applicable Delaware law. As a result, the Company did not redeem any shares of Series A Preferred Stock in connection with either monthly redemption.

~~NOTE 9. EMPLOYEE AND DIRECTOR INCENTIVE PLANS~~Note 10. Employee and Director Incentive Plans

2020 Omnibus Incentive Plan

On July 15, 2020, Leo’s shareholders approved the 2020 Omnibus Incentive Plan (the “2020 Plan”). The 2020 Plan allows for the issuance and repurchase of stock options, stock appreciation rights, stock awards (including restricted stock awards (“RSAs”) and Restricted Stock Units (“RSUs”)) and other stock-based awards. Directors, officers and employees, as well as others performing independent consulting or advisory services for the Company or its affiliates, are eligible for grants under the 2020 Plan. The aggregate number of shares reserved under the 2020 Plan is approximately 11.6 million. The 2020 Plan terminates on June 24, 2030. The related costs were approximately ~~$3.9~~$0.9 million and ~~$2.8~~$2.2 million for the three and six months ended June 30, 2023, respectively, and $2.1 million and $3.9 million for the three and six months ended June 30, 2022, ~~and 2021,~~ respectively, and are included in ~~“Salaries~~Salaries and related ~~costs”~~costs within the ~~Consolidated Statement~~consolidated statements of ~~Operations.~~operations. Fair value of stock-based compensation is based on the closing trading price of the Company’s stock on the grant date.

Restricted Stock Units

For the three and six months ended June 30, 2023, there were no new RSU awards. During the six months ended June 30, 2023, 362,000 RSUs were forfeited.

On April 12, 2022, the Board voted to award 762,000 RSUs consisting of 381,406 performance-based vesting RSUs (“PRSUs”) and 381,406 time-based vesting RSUs (“TRSUs”) to ~~directors~~certain employees of the Company under the 2020 Plan. The ~~TRSU and~~ PRSUs vest one-fourth each year based on four years of continuous service starting with January 1, 2022 through January 1, 2026. ~~Vesting~~The TRSUs vest one-fourth each years based on four years continuous service starting April 12, 2022 and ending April 12, 2026.Vesting of the PRSUs are also subject to certain performance metrics of the Company, which the Company evaluates on a quarterly basis. The fair value of stock-based compensation is based on the closing trading price of the Company’s stock on the grant date. For PRSUs, fair value was also determined based on the assessed likelihood of meeting the performance metrics for each tranche of the awards as of the grant date. The TRSU’s related stock-based compensation expense is recognized on a straight-line basis over the vesting period. The PRSU awards’ expense is recognized on an accelerated basis over the vesting period.

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~~NOTE 10. INCOME TAXES~~Note 11. Income Taxes

As a result of the Business Combination, the Company consists of DMS Inc. and its wholly-owned subsidiary, Blocker, which owns ~~58.7%~~60.9% of equity interests in DMSH. DMSH is treated as a partnership for purposes of U.S. federal and certain state and local income tax. As a U.S. partnership, generally DMSH will not be subject to corporate income taxes (except with respect to UE and Traverse, as described below). Instead, each of the ultimate partners (including DMS Inc.) are taxed on their proportionate share of DMSH taxable income.

While the Company consolidates DMSH for financial reporting purposes, the Company will only be taxed on its allocable share of future earnings (i.e. those earnings not attributed to the non-controlling interests, which continue to be taxed on their own allocable share of future earnings of DMSH). The Company’s income tax expense is attributable to the allocable share of earnings from DMSH, ~~a portion of activities of DMSH that are subject to Canadian income tax,~~ and the activities of UE aand Traverse, wholly-owned U.S. corporate ~~subsidiary~~subsidiaries of DMSH, which is subject to U.S. federal and state and local income taxes. The income tax burden on the earnings allocated to the non-controlling interests is not reported by the Company in its consolidated financial statements under GAAP. As a result, the Company’s effective tax rate is expected to differ materially from the statutory rate.

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. The Company recorded income tax benefit of $2.15 million and $2.16 million for the three and six months ended June 30, 2023, respectively. The blended effective tax rate for the three and six months ended June 30, 2023 was 24.5% and 24.5%, respectively, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest and impact of the valuation allowance on DMS Inc. The

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Company recorded income tax expense of $0.05 million and $0.36 million for the three and six months ended June 30, 2022, respectively. The blended effective tax rate for the three and six months ended June 30, 2022 was ~~0.4%~~24.8% and 2.1%, respectively, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest and impact of the valuation allowance on DMS, Inc. The Company recorded$1.0 million and $1.1 million income tax expense for the three and six months ended June 30, 2021, respectively. The blended effective tax rate for the three and six months ended June 30, 2021 was 17.3% and 19.5%26.4%, respectively, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest.

Tax Receivable Agreement

In conjunction with the Business Combination, DMS Inc. and Blocker also entered into a Tax Receivable Agreement (“TRA”) with the Sellers. Pursuant to the Tax Receivable Agreement, DMS Inc. is required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that DMS Inc. and Blocker actually realize as a result of (A) certain existing tax attributes of Blocker acquired in the Business Combination, and (B) increases in Blocker’s allocable share of the tax basis of the assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions or exchanges of DMS Units for cash or Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMSH and Blocker received during a taxable year beginning within two (2) years after the Closing. All such payments to the Sellers are the obligation of DMS Inc., and not that of DMSH.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company recorded a full valuation allowance on our deferred tax asset (“DTA”) related to the TRA along with the entire DTA inventory at DMS, Inc. and Blocker. At June 30, 2023 and December 31, 2022, the remaining current portion of Tax Receivable Agreement liability of ~~$1.3~~$0.2 million is attributable to carryback claims. We will continue to evaluate the positive and negative evidence in determining the realizability of the Company’s DTAs.

~~NOTE 11. EARNINGS PER SHARE~~Note 12. Earnings Per Share

Basic earnings per share of Class A ~~Common Stock~~common stock is computed by dividing net income attributable to DMS Inc. by the weighted-average number of shares of Class A ~~Common Stock~~common stock outstanding during the period. Diluted earnings per share of Class A ~~Common Stock~~common stock is computed by dividing net income attributable to DMS Inc. adjusted for the income effects of dilutive instruments by the weighted-average number of shares of Class A ~~Common Stock~~common stock outstanding adjusted to give effect to potentially dilutive elements.

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The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted ~~earnings (loss)~~loss per share of Class A ~~Common Stock:~~common stock:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator:
Net (loss) income $ (11,887) $ 4,939 $ (17,244) $ 4,727
Net (loss) income attributable to non-controlling interest (4,905) $ 2,411 (7,121) 2,373
Net (loss) income attributable to Digital Media Solutions, Inc. - basic $ (6,982) $ 2,528 $ (10,123) $ 2,354
Add: Income effects of Class B convertible common stock $ (4,903) $ — $ (7,116) $ —
Less: dilutive effect of change in fair value of warrant liabilities attributable to Digital Media Solutions, Inc. — — — 4,321
Net (loss) income attributable to Digital Media Solutions, Inc. - diluted $ (11,885) $ 2,528 $ (17,239) $ (1,967)
Denominator:
  Weighted average shares - basic 39,553 35,377 $ 37,969 $ 34,315
Add: dilutive effects of Class B convertible common stock 25,699 — $ 25,713 $ —
  Add: dilutive effects of employee equity awards — 628 — —
  Add: dilutive effects of private placement warrants — — — 10
  Add: dilutive effects of deferred consideration — 517 — —
Weighted average shares - diluted 65,252 36,522 63,682 34,325
Net earnings (loss) per common share:
  Basic $ (0.18) $ 0.07 $ (0.27) $ 0.07
  Diluted $ (0.18) $ 0.07 $ (0.27) $ (0.06)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(47,493)	$	(11,887)	$	(68,194)	$	(17,244)

Net loss attributable to non-controlling interest	(18,553)		$	(4,905)	(26,639)		(7,121)
Accretion and dividend Series A and B convertible redeemable preferred stock	(11,341)		$	—	(11,341)		—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic	$	(40,281)	$	(6,982)	$	(52,896)	$	(10,123)

Add: Income effects of Class B convertible common stock	$	—	$	(4,903)	$	—	$	(7,116)

Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - diluted	$	(40,281)	$	(11,885)	$	(52,896)	$	(17,239)

Denominator:
Weighted-average Class A common shares outstanding – basic	40,094		39,553		39,805		37,969
Add: dilutive effects of Class B convertible common stock	—		25,699		—		25,713




Weighted-average Class A common shares outstanding – diluted	40,094		65,252		39,805		63,682

Net loss per common share:
Basic – per Class A common shares	$	(1.00)	$	(0.18)	$	(1.33)	$	(0.27)
Diluted – per Class A common shares	$	(1.00)	$	(0.18)	$	(1.33)	$	(0.27)

Shares of the Company’s Class B convertible common stock and Series A and B Preferred stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate basic and diluted earnings per share of Class B convertible common stock and Series A and B Preferred stock under the two-class method has not been presented.

For the three and six months ended June 30, ~~2022,~~2023, the Company ~~included 2.99~~excluded 25.7 million shares of Class B convertible common stock, 80 thousand Series A ~~Common Stock~~Preferred stock, 60 thousand Series B Preferred stock, 4.0 million private warrants, 10.0 million public warrants, 14.4 million preferred warrants, 1.6 million stock options, 0.9 million RSUs, 0.2 million PRSUs, and the contingent and deferred considerations issued toin connection with the ~~sellers of Crisp Results on July 1, 2022 (see~~ ~~Note 6. Acquisitions) in the Company’s basic~~ClickDealer and ~~diluted EPS calculations,~~Aramis acquisitions as ~~all necessary conditions were satisfied during the quarter ended June 30, 2022.~~

their effect would have been anti-dilutive. For the three and six months ended June 30, 2022, the Company excluded 4.0 million private warrants, 10.0 million public warrants, 1.9 million stock options, 1.7 million RSUs and 0.4 million PRSUs, ~~respectively, as their effect would have been anti-dilutive. For the three~~ and ~~six months ended June 30, 2022, the Company excluded~~ the contingent ~~consideration~~and deferred considerations issued in connection with the AAP ~~acquisition~~ and ~~the deferred consideration issued in connection with the~~ Crisp ~~acquisition, respectively, which are payable in DMS common stock at the Company’s option,~~Results acquisitions, as their effect would have been anti-dilutive.

~~For the three months ended June 30, 2021, the Company excluded 4.0 million private warrants, 10.0 million public warrants, 0.1 million employee equity awards~~

Note 13. Commitments and 25.9 million Class B convertible common stock, as the effect was anti-dilutive. For the six months ended June 30, 2021, the Company excluded 10.0 million public warrants, 25.9 million Class B convertible common stock and 1.6 million employee equity awards as the effect was anti-dilutive.Contingencies

For the three and six months ended June 30, 2021, the Company excluded contingent consideration issued in connection with AAP and Crisp acquisitions, which is payable in DMS common stock at the Company’s option, as the necessary conditions to pay such consideration had not been satisfied by the end of the period. For the three and six months ended June 30, 2021, the

~~Table of Contents~~Legal proceedings

In the ordinary course of business, we are involved from time to time in various claims and legal actions incident to our operations, both as a plaintiff and defendant. In the opinion of management, after consulting with legal counsel, none of these other claims are currently expected to have a material adverse effect on the results of operations, financial position or cash flows. We intend to vigorously defend ourselves in these matters.

On October 28, 2022, the Company ~~excluded deferred consideration issued~~received notice from the Office of the Ohio Attorney General (“OH OAG”) that it was reviewing certain of DMS’s business practices pursuant to its authority under the Consumer Sales Practices Act, Ohio Revised Code Section 1345.06, and the Telephone Solicitation Sales Act, Ohio Revised Code Sections 4719.11; 109.87(C). While the Company believes that its practices are in ~~connection~~compliance with ~~Crisp acquisition, which~~applicable law, the Company and the OH OAG have entered into discussions regarding the terms of a potential resolution to the OH AG's review. It is ~~payable in DMS common stock at~~uncertain whether a mutually acceptable resolution can be reached and the terms thereof, and, accordingly, the Company is unable to predict the impact of any such resolution to the Company’s ~~option, as the effect was anti-dilutive.~~

business operations or financial results.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~OVERVIEW~~Overview

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to, our Consolidated Financial Statements (Unaudited) and accompanying Notes appearing elsewhere in this Quarterly Report (the “Notes”). In addition, reference should be made to our Audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2021~~2022 Form ~~10-K.~~10-K/A. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in this MD&A under “Forward-Looking Statements and Factors that May Affect Future Results”.

Series A and Series B Preferred Stock and Warrants

On ~~August 16, 2021, we announced our decision~~June 15, 2023, Digital Media Solutions, Inc. (the “Company”) received notice from the holders of all of the Company’s outstanding Series A Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”) that each holder has elected to ~~evaluate potential strategic alternatives~~have the Company redeem for cash the Series A Preferred Stock held by such holder pursuant to ~~maximize shareholder value. We intend to evaluate a full range~~Section 9(b) of ~~strategic, operational~~the Certificate of Designation of Preferences, Rights and ~~financial alternatives. We have retained Goldman Sachs & Co LLC and Canaccord Genuity as our financial advisors to assist with~~Limitations of the ~~strategic review process. There can be no assurance that~~Series A Preferred Stock of the ~~strategic review process will result in any strategic alternative, or any assurance as to its outcome or timing.~~Company (the “Series A Certificate of Designation”).

~~Recent Business Acquisitions~~

~~Our acquisitions~~Section 9(b) of the Series A Certificate of Designation gives holders of Series A Preferred Stock the right to require the Company to redeem for cash the Series A Preferred Stock for cash at any time on or after June 15, 2023 at the “Corporation’s Mandatory Redemption Price” (as such term is defined in the ~~past few years~~Series A Certificate of Designation). As of June 15, 2023, the aggregate Corporation’s Mandatory Redemption Price for all of the outstanding Series A Preferred Stock was approximately $9.3 million.

On June 16, 2023, the board of directors of the Company (the “Board”) determined that the Company was not legally permitted under applicable Delaware law to effect a redemption for cash of any Series A Preferred Stock. As a result and in accordance with the Securities Purchase Agreement, the Company accrued dividends payable of $89.0 thousand included in Cumulative Deficit on theconsolidated balance sheets as of June 30, 2023.

See Note 8. Fair Value Measurements and Note 9. Equityfor further information on the Series A and Series B Preferred Stock and Warrants.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

On March 30, 2023, the Company received notice from the New York Stock Exchange (the "NYSE") indicating that the Company is not in compliance with Rule 802.01C of the NYSE’s Listed Company Manual (“Rule 802.01C”) because the average closing price of the Company's Class A common stock was less than $1.00 over a consecutive 30 trading-day period. Under Rule 802.01C, the Company has a period of six months from receipt of the notice to regain compliance with the NYSE minimum stock price listing requirement. The Company has notified the NYSE of its intent to cure the stock price deficiency and return to compliance with the NYSE continued listing standards. The Company intends to consider available alternatives if the Company does not otherwise regain compliance during the cure period, including but not limited to a reverse stock split.

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The Company's stockholders have ~~enabled us~~approved a reverse stock split, which the Company's board of directors may determine to ~~expand our reach into high quality proprietary targeted media solutions in a wide range of industries and include~~implement if necessary to regain compliance with the ~~following.~~NYSE's continued listing standards.

On ~~May 10, 2022,~~April 28, 2023, Digital Media Solutions, Inc. (the "Company") received notice from the New York Stock Exchange (the "NYSE") indicating that the Company ~~acquired Traverse Data, Inc. (“Traverse”~~is not in compliance with Rule 802.01B of the NYSE’s Listed Company Manual, which requires it to maintain an average global market capitalization of at least $50.0 million over a consecutive 30-day trading period and, at the same time, a total stockholders’ equity equal to or greater than $50.0 million (the "market capitalization listing standard"). ~~Traverse~~This is a ~~marketing and advertising technology company.~~separate notice from the previously announced notice from the NYSE that the Company was not in compliance with the $1.00 30-trading day average price listing standard set forth in Rule 802.01C of the NYSE's Listed Company Manual. Under NYSE rules, the Company has a period of 45 days from receipt of the notice to submit a plan advising the NYSE of definitive actions the Company has taken, or is taking, that would bring it into compliance with the market capitalization listing standard within 18 months of receipt of the notice. The Company ~~paid cash consideration~~submitted a plan to cure the global market capitalization listing standard deficiency. The NYSE has notified the Company that it accepted the Company's remediation plan.

On June 14, 2023, the Company received notice from the staff of ~~$2.5 million upon closing~~NYSE Regulation (the “Staff”) of the ~~transaction.~~New York Stock Exchange (the “NYSE”), indicating that the Staff has determined to commence proceedings to delist the Company’s warrants, each whole warrant exercisable for one share of the Company’s Class A common stock, par value $0.0001 per share at an exercise price of $11.50 per share, and listed to trade on the NYSE under the symbol “DMS WS” from the NYSE and that trading in the Warrants on the NYSE would be suspended immediately. The ~~transaction also includes up~~Staff determined that the Warrants are no longer suitable for listing on the NYSE based on “abnormally low” price levels, pursuant to ~~$0.5 million~~Section 802.01D of the NYSE Listed Company Manual. Trading in ~~contingent consideration,~~the Company’s Class A Common Stock and units on the NYSE will continue, subject to compliance with the ~~achievement~~NYSE's other listing standards and remediation of ~~certain milestones, which can be paid in cash.~~the deficiencies noted above.

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~~RESULTS OF OPERATIONS~~Results of Operations

The following table presents our consolidated results of operations as a percentage of net revenue:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue by type:
Customer acquisition 95.4 % 96.3 % 95.9 % 95.6 %
Managed services 3.4 % 2.9 % 3.1 % 3.7 %
Software services 1.2 % 0.8 % 1.0 % 0.7 %
Total net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Revenue by segment:
Brand Direct 49.1 % 57.0 % 52.9 % 57.5 %
Marketplace 59.3 % 55.0 % 56.4 % 53.0 %
Technology Solutions 2.8 % 1.8 % 2.4 % 1.9 %
Intercompany eliminations (11.2) % (13.8) % (11.7) % (12.4) %
Net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue 74.3 % 67.9 % 72.7 % 69.6 %
Gross profit 25.7 % 32.1 % 27.3 % 30.4 %
Salaries and related costs 14.5 % 11.1 % 13.5 % 10.9 %
General and administrative 13.6 % 10.0 % 11.8 % 8.7 %
Depreciation and amortization 7.9 % 6.7 % 7.1 % 6.2 %
Acquisition costs 0.3 % 0.4 % 0.1 % 1.0 %
Change in fair value of contingent consideration (0.1) % — % 1.3 % — %
(Loss) income from operations (10.5) % 3.9 % (6.5) % 3.6 %
Interest expense 4.2 % 3.4 % 3.7 % 3.4 %
Change in fair value of warrant liabilities (1.8) % (7.4) % (1.7) % (3.7) %
Loss on debt extinguishment — % 2.0 % — % 1.0 %
Net (loss) income before income taxes (12.9) % 5.9 % (8.5) % 2.9 %
Income tax expense — % 1.0 % 0.2 % 0.6 %
Net (loss) income (12.9) % 4.9 % (8.7) % 2.3 %
Net (loss) income attributable to non-controlling interest (5.4) % 2.3 % (3.6) % 1.2 %
Net (loss) income attributable to Digital Media Solutions, Inc. (7.5) % 2.6 % (5.1) % 1.2 %


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022			2023		2022
Revenue by type:
Customer acquisition	95.7	%	95.4	%		95.8	%	95.9	%
Managed services	2.5	%	3.4	%		2.4	%	3.1	%
Software services	1.8	%	1.2	%		1.8	%	1.0	%
Total net revenue	100.0	%	100.0	%		100.0	%	100.0	%
Revenue by segment:
Brand Direct	62.7	%	49.1	%		62.0	%	52.9	%
Marketplace	39.3	%	59.3	%		40.4	%	56.4	%
Technology Solutions	2.7	%	2.8	%		2.6	%	2.4	%
Intercompany eliminations	(4.7)	%	(11.2)	%		(5.0)	%	(11.7)	%
Net revenue	100.0	%	100.0	%		100.0	%	100.0	%
Cost of revenue (exclusive of depreciation and amortization)	76.7	%	74.3	%		76.0	%	72.7	%
Gross profit	23.3	%	25.7	%		24.0	%	27.3	%
Salaries and related costs	13.9	%	14.5	%		13.7	%	13.5	%
General and administrative	14.7	%	13.6	%		14.5	%	11.8	%
Depreciation and amortization	7.1	%	7.9	%		6.3	%	7.1	%
Impairment of goodwill	41.0	%	—	%		19.6	%	—	%
Impairment of intangible assets	9.4	%	—	%		4.5	%	—	%
Acquisition costs	0.8	%	0.3	%		1.7	%	0.1	%
Change in fair value of contingent consideration	(0.1)	%	*			*		1.3	%
Loss from operations	(63.5)	%	(10.5)	%		(36.3)	%	(6.5)	%
Interest expense, net	8.5	%	4.2	%		7.9	%	3.7	%
Change in fair value of warrant liabilities	(11.9)	%	(1.8)	%		(3.5)	%	(1.7)	%


Gain on disposal of assets	*		—	%		*		—	%
Net loss before income taxes	(60.1)	%	(12.9)	%		(40.7)	%	(8.5)	%
Income tax (benefit) expense	(2.6)	%	*			(1.3)	%	0.2	%
Net loss	(57.5)	%	(12.9)	%		(39.4)	%	(8.7)	%
Net loss attributable to non-controlling interest	(22.5)	%	(5.4)	%		(15.4)	%	(3.6)	%
Net loss attributable to Digital Media Solutions, Inc.	(35.1)	%	(7.5)	%		(24.0)	%	(5.1)	%

____________________

* Less than one tenth of a percent.

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Operating Results for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table presents the consolidated results of operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and the changes from the prior period (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Net revenue $ 91,197 $ 105,079 $ (13,882) (13) % $ 200,307 $ 201,882 $ (1,575) (1) %
Cost of revenue 67,784 71,359 (3,575) (5) % 145,624 140,541 5,083 4 %
Salaries and related costs 13,237 11,708 1,529 13 % 26,945 21,977 4,968 23 %
General and administrative 12,444 10,552 1,892 18 % 23,544 17,514 6,030 34 %
Depreciation and amortization 7,173 7,044 129 2 % 14,233 12,463 1,770 14 %
Acquisition costs 279 466 (187) (40) % 292 1,960 (1,668) (85) %
Change in fair value of contingent consideration (55) — (55) (100) % 2,536 — 2,536 100 %
(Loss) income from operations $ (9,665) 3,950 $ (13,615) (345) % $ (12,867) 7,427 $ (20,294) (273) %
Interest expense 3,817 3,622 195 5 % 7,502 6,879 623 9 %
Change in fair value of warrant liabilities (1,640) (7,750) 6,110 (79) % (3,480) (7,435) 3,955 (53) %
Loss on debt extinguishment — 2,108 (2,108) (100) % — 2,108 (2,108) (100) %
Net (loss) income before income taxes $ (11,842) $ 5,970 $ (17,812) (298) % $ (16,889) $ 5,875 $ (22,764) (388) %
Income tax expense 45 1,031 (986) (96) % 355 1,148 (793) (69) %
Net (loss) income $ (11,887) $ 4,939 $ (16,826) (341) % $ (17,244) $ 4,727 $ (21,971) (465) %
Net (loss) income attributable to non-controlling interest (4,905) 2,411 (7,316) (303) % (7,121) 2,373 (9,494) (400) %
Net (loss) income attributable to Digital Media Solutions, Inc. $ (6,982) $ 2,528 $ (9,510) (376) % $ (10,123) $ 2,354 $ (12,477) (530) %


	Three Months Ended June 30,								Six Months Ended June 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change










Net revenue	$	82,551	$	91,197	$	(8,646)	(10)	%	$	172,863	$	200,307	$	(27,444)	(14)	%
Cost of revenue (exclusive of depreciation and amortization)	63,343		67,784		(4,441)		(7)	%	131,384		145,624		(14,240)		(10)	%

Salaries and related costs	11,489		13,237		(1,748)		(13)	%	23,715		26,945		(3,230)		(12)	%
General and administrative	12,124		12,444		(320)		(3)	%	24,979		23,544		1,435		6	%
Depreciation and amortization	5,872		7,173		(1,301)		(18)	%	10,955		14,233		(3,278)		(23)	%
Impairment of goodwill	33,795		—		33,795		100.0	%	33,795		—		33,795		100.0	%
Impairment of intangible assets	7,791		—		7,791		100.0	%	7,791		—		7,791		100.0	%
Acquisition costs	658		279		379		136	%	3,003		292		2,711		928	%
Change in fair value of contingent consideration	(90)		(55)		(35)		64	%	(77)		2,536		(2,613)		(103)	%
Loss from operations	(52,431)		(9,665)		(42,766)		443	%	(62,682)		(12,867)		(49,815)		387	%
Interest expense, net	7,045		3,817		3,228		85	%	13,743		7,502		6,241		83	%
Change in fair value of warrant liabilities	(9,829)		(1,640)		(8,189)		499	%	(6,065)		(3,480)		(2,585)		74	%


Gain on disposal of assets	(3)		—		(3)		(100)	%	(3)		—		(3)		(100)	%
Net loss before income taxes	(49,644)		(11,842)		(37,802)		319	%	(70,357)		(16,889)		(53,468)		317	%
Income tax (benefit) expense	(2,151)		45		(2,196)		(4880)	%	(2,163)		355		(2,518)		(709)	%
Net loss	(47,493)		(11,887)		(35,606)		300	%	(68,194)		(17,244)		(50,950)		296	%
Net loss attributable to non-controlling interest	(18,553)		(4,905)		(13,648)		278	%	(26,639)		(7,121)		(19,518)		274	%
Net loss attributable to Digital Media Solutions, Inc.	$	(28,940)	$	(6,982)	$	(21,958)	315	%	$	(41,555)	$	(10,123)	$	(31,432)	311	%

Net revenue. Our business generates revenue primarily through the delivery of a variety of performance-based marketing services, including customer acquisition, managed services and software services.

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The following table presents revenue by type for each segment and the changes from the prior period:

~~Table of Contents~~


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022		2021		$ Change		% Change		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Brand Direct	Brand Direct																	Brand Direct
Customer acquisition	Customer acquisition	$	43,124	$	57,955	$	(14,831)	(26)	%	$	102,743	$	111,009	$	(8,266)	(7)	%	Customer acquisition	$	50,425	$	43,124	$	7,301	17	%	$	104,444	$	102,743	$	1,701	2	%
Managed services	Managed services	1,665		1,921		(256)		(13)	%	3,274		5,046		(1,772)		(35)	%	Managed services	1,269		1,665		(396)		(24)	%	2,652		3,274		(622)		(19)	%

Total Brand Direct	Total Brand Direct	$	44,789	$	59,876	$	(15,087)	(25)	%	$	106,017	$	116,055	$	(10,038)	(9)	%	Total Brand Direct	51,694		44,789		6,905		15	%	107,096		106,017		1,079		1	%
Marketplace	Marketplace																	Marketplace
Customer acquisition	Customer acquisition	$	54,092	$	57,763	$	(3,671)	(6)	%	$	112,898	$	107,022	$	5,876	6	%	Customer acquisition	32,477		54,092		(21,615)		(40)	%	69,765		112,898		(43,133)		(38)	%

Total Marketplace	Total Marketplace	$	54,092	$	57,763	$	(3,671)	(6)	%	$	112,898	$	107,022	$	5,876	6	%	Total Marketplace	32,477		54,092		(21,615)		(40)	%	69,765		112,898		(43,133)		(38)	%
Technology Solutions	Technology Solutions																	Technology Solutions

Managed services	Managed services	1,403		1,109		294		27	%	2,913		2,325		588		25	%	Managed services	757		1,403		(646)		(46)	%	1,510		2,913		(1,403)		(48)	%
Software services	Software services	1,145		807		338		42	%	1,971		1,607		364		23	%	Software services	1,468		1,145		323		28	%	3,051		1,971		1,080		55	%
Total Technology Solutions	Total Technology Solutions	$	2,548	$	1,916	$	632	33	%	$	4,884	$	3,932	$	952	24	%	Total Technology Solutions	2,225		2,548		(323)		(13)	%	4,561		4,884		(323)		(7)	%
Corporate and Other	Corporate and Other																	Corporate and Other
Customer acquisition	Customer acquisition	$	(10,232)	$	(14,476)	$	4,244	(29)	%	$	(23,492)	$	(25,127)	$	1,635	(7)	%	Customer acquisition	(3,845)		(10,232)		6,387		(62)	%	(8,559)		(23,492)		14,933		(64)	%
Total Corporate and Other	Total Corporate and Other	$	(10,232)	$	(14,476)	$	4,244	(29)	%	$	(23,492)	$	(25,127)	$	1,635	(7)	%	Total Corporate and Other	(3,845)		(10,232)		6,387		(62)	%	(8,559)		(23,492)		14,933		(64)	%
Total Customer acquisition	Total Customer acquisition	$	86,984	$	101,242	$	(14,258)	(14)	%	$	192,149	$	192,904	$	(755)	—	%	Total Customer acquisition	79,057		86,984		(7,927)		(9)	%	165,650		192,149		(26,499)		(14)	%
Total Managed services	Total Managed services	3,068		3,030		38		1	%	6,187		7,371		(1,184)		(16)	%	Total Managed services	2,026		3,068		(1,042)		(34)	%	4,162		6,187		(2,025)		(33)	%
Total Software services	Total Software services	1,145		807		338		42	%	1,971		1,607		364		23	%	Total Software services	1,468		1,145		323		28	%	3,051		1,971		1,080		55	%
Total Net revenue	Total Net revenue	$	91,197	$	105,079	$	(13,882)	(13)	%	$	200,307	$	201,882	$	(1,575)	(1)	%	Total Net revenue	$	82,551	$	91,197	$	(8,646)	(10)	%	$	172,863	$	200,307	$	(27,444)	(14)	%


Delaware	001-38393	98-1399727
(State of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

4800 140th Avenue N., Suite 101, Clearwater, Florida		33762
(Address of Principal Executive Offices)		(Zip Code)


Large accelerated filer	☐	Accelerated filer	☒☐
Non-accelerated filer	☐☒	Smaller reporting company	☒
		Emerging growth company	☒


		Page No.

~~PART~~Part I. ~~FINANCIAL INFORMATION~~Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets ~~(Unaudited)~~	1
	Consolidated Statements of Operations ~~(Unaudited)~~	2
	Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit ~~(Unaudited)~~	3
	Consolidated Statements of Cash Flows ~~(Unaudited)~~	7
	Condensed Notes to Consolidated Financial Statements ~~(Unaudited)~~	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2428
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3441
Item 4.	Evaluation of Disclosure Controls and Procedures	3542
~~PART~~Part II. ~~OTHER INFORMATION~~Other Information
Item 1.	Legal Proceedings	3644
Item 1A.	Risk Factors	3644
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	3644
Item 3.	Defaults Upon Senior Securities	3644
Item 4.	Mine Safety Disclosures	3644
Item 5.	Other Information	3644
Item 6.	Exhibits	3746
~~SIGNATURES~~Signatures		3847


	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,212	$	48,839
Accounts receivable, net of allowances of $3,942 and $4,656, respectively	37,766		48,109
Prepaid and other current assets	2,005		3,296
Income tax receivable	2,193		1,966
Total current assets	67,176		102,210
Property and equipment, net	16,513		17,702
Operating lease right-of-use assets, net	1,234		2,187
Goodwill	48,444		77,238
Intangible assets, net	42,498		27,519
Deferred tax assets	1,367		—
Other assets	680		765
Total assets	$	177,912	$	227,621
Liabilities, Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable	$	36,494	$	39,908
Accrued expenses and other current liabilities	8,864		7,101
Current portion of long-term debt	2,250		2,250

Tax Receivable Agreement liability	164		164
Operating lease liabilities - current	2,113		2,175
Contingent consideration payable - current	1,500		1,453

Total current liabilities	51,385		53,051
Long-term debt	264,149		254,573
Deferred tax liabilities	375		1,112
Operating lease liabilities - non-current	1,211		2,232
Warrant liabilities	3,202		600

Contingent consideration payable - non-current	2,268		—


Total liabilities	322,590		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 June 30, 2023	16,334		—

Stockholders' deficit:
Class A common stock, $0.0001 par value, 500,000 shares authorized; 40,094 issued and outstanding at June 30, 2023	4		4
Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 25,699 issued and outstanding at June 30, 2023	3		3
Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at June 30, 2023	—		—
Additional paid-in capital	(9,766)		(14,054)
Treasury stock, at cost, 138 and 0 shares, respectively	(211)		(181)
Cumulative deficit	(85,792)		(32,896)
Total stockholders' deficit	(95,762)		(47,124)
Non-controlling interest	(65,250)		(36,823)

Total deficit	(161,012)		(83,947)
Total liabilities, preferred stock and stockholders' deficit	$	177,912	$	227,621


	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	26,370	$	26,394
Accounts receivable, net of allowances of $5,860 and $4,930, respectively	46,545		51,578
Prepaid and other current assets	1,188		3,698
Income tax receivable	1,537		2,078
Total current assets	75,640		83,748
Property and equipment, net	18,152		19,168
Goodwill	76,947		76,558
Intangible assets, net	58,888		66,228
Deferred tax assets	—		—
Other assets	858		889
Total assets	$	230,485	$	246,591
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	40,684	$	42,073
Accrued expenses and other current liabilities	9,912		9,473
Current portion of long-term debt	2,250		2,250
Income taxes payable	193		103
Tax Receivable Agreement liability	1,310		1,310
Contingent consideration payable - current	10,909		7,370
Deferred acquisitions consideration payable - current	4,928		4,785
Total current liabilities	70,186		67,364

Long-term debt	215,089		215,505

Deferred tax liabilities	4,001		4,786
Private Placement Warrant liabilities	480		3,960
Contingent consideration payable - non-current	494		1,069

Other non-current liabilities	1,754		1,725
Total liabilities	292,004		294,409

Stockholders' deficit:
Preferred stock, $0.0001 par value, 100,000 shares authorized; none issued and outstanding at June 30, 2022	—		—
Class A Common Stock, $0.0001 par value, 500,000 shares authorized; 36,564 issued and outstanding at June 30, 2022	3		3
Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 25,699 issued and 25,699 outstanding at June 30, 2022	3		3
Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at June 30, 2022	—		—
Additional paid-in capital	(22,313)		(25,239)
Cumulative deficit	(11,060)		(944)
Total stockholders' deficit	(33,367)		(26,177)
Non-controlling interest	(28,152)		(21,641)
Total deficit	(61,519)		(47,818)
Total liabilities and deficit	$	230,485	$	246,591


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net revenue	$	91,197	$	105,079	$	200,307	$	201,882
Cost of revenue (exclusive of depreciation and amortization shown separately below)	67,784		71,359		145,624		140,541
Salaries and related costs	13,237		11,708		26,945		21,977
General and administrative expenses	12,444		10,552		23,544		17,514
Depreciation and amortization	7,173		7,044		14,233		12,463
Acquisition costs	279		466		292		1,960
Change in fair value of contingent consideration liabilities	(55)		—		2,536		—
(Loss) income from operations	$	(9,665)	$	3,950	$	(12,867)	$	7,427
Interest expense	3,817		3,622		7,502		6,879
Change in fair value of warrant liabilities	(1,640)		(7,750)		(3,480)		(7,435)


Loss on debt extinguishment	—		2,108		—		2,108

Net (loss) income before income taxes	$	(11,842)	$	5,970	$	(16,889)	$	5,875
Income tax expense	45		1,031		355		1,148
Net (loss) income	$	(11,887)	$	4,939	$	(17,244)	$	4,727
Net (loss) income attributable to non-controlling interest	(4,905)		2,411		(7,121)		2,373
Net (loss) income attributable to Digital Media Solutions, Inc.	$	(6,982)	$	2,528	$	(10,123)	$	2,354

Weighted-average shares outstanding - basic	39,553		35,377		37,969		34,315
Weighted-average shares outstanding - diluted	65,252		36,522		63,682		34,325
Earnings (loss) per share attributable to Digital Media Solutions, Inc.:
Basic - per common shares	$	(0.18)	$	0.07	$	(0.27)	$	0.07
Diluted - per common shares	$	(0.18)	$	0.07	$	(0.27)	$	(0.06)


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Cumulative Deficit		Total Stockholders' Deficit		Non- controlling Interest
	Shares	Amount		Shares	Amount										Total Deficit








Balance, March 31, 2022	36,394	$	3	25,699	$	3	$	(23,754)	$	(4,078)	$	(27,826)	$	(23,980)	$	(51,806)
Net (loss) income	—	—		—	—		—		(6,982)		(6,982)		(4,905)		$	(11,887)
Stock-based compensation	—	—		—	—		2,174		—		2,174		—		2,174
Shares issued under the 2020 Omnibus Incentive Plan	170	—		—	—		—		—		—		—		—
Impact of transactions affecting non-controlling interest (1)	—	—		—	—		(733)		—		(733)		733		—

Balance, June 30, 2022	36,564	$	3	25,699	$	3	$	(22,313)	$	(11,060)	$	(33,367)	$	(28,152)	$	(61,519)


	Six Months Ended June 30, 2021
	Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:
Customer acquisition	$	111,009	$	107,022	$	—	$	(25,127)	$	192,904
Managed services	5,046		—		2,325		—		7,371
Software services	—		—		1,607		—		1,607
Total Net revenue	$	116,055	$	107,022	$	3,932	$	(25,127)	$	201,882


	Six Months Ended June 30, 2022
	DMS		Traverse		Combined
Net revenue	$	200,307	$	999	$	201,306
Net loss from operations	$	(12,867)	$	(417)	$	(13,284)


	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Beginning balance	$	2,244	$	2,966
Valuation adjustments	496		432
Lease payments	(290)		(487)
Lease accretion	48		46
Ending balance	$	2,498	$	2,957
Current portion - Accrued expenses and other current liabilities	$	908	$	1,200
Long-term portion - Other non-current liabilities	$	1,590	$	1,757


	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Beginning balance	$	2,516	$	3,653
Valuation adjustments	470		81
Lease payments	(584)		(870)
Lease accretion	96		93
Ending balance	$	2,498	$	2,957
Current portion - Accrued expenses and other current liabilities	$	908	$	1,200
Long-term portion - Other non-current liabilities	$	1,590	$	1,757


	Private Placement Warrants		Contingent Consideration
Balance, April 1, 2022	$	2,120	$	11,030
Additions	—		428
Changes in fair value	(1,640)		(55)
Settlements	—		—
Balance, June 30, 2022	$	480	11,403


	June 30, 2022		December 31, 2021		$ Change		% Change
Cash	$	26,370	$	26,394	$	(24)	—	%
Availability under revolving credit facility	$	50,000	$	50,000	$	—	—	%
Total Debt	$	217,339	$	217,755	$	(416)	—	%


	June 30, 2023		December 31, 2022		$ Change		% Change
Cash	$	25,212	$	48,839	$	(23,627)	(48)	%
Availability under revolving credit facility	$	—	$	10,000	$	(10,000)	(100)	%
Total Debt	$	270,500	$	261,625	$	8,875	3	%


Exhibit Number						Description

3.1						Certificate of Incorporation of Digital Media Solutions, Inc. (incorporated by reference to Exhibit 3.1 to Digital Media Solutions, Inc.’s Current Report on Form 8-K filed with the SEC on July 16, 2020).
3.2						Bylaws of Digital Media Solutions, Inc. (incorporated by reference to Exhibit 3.2 to Digital Media Solutions, Inc.’s Current Report on Form 8-K filed with the SEC on July 16, 2020).
4.1						Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Redeemable Preferred Stock, filed on March 30, 2023 (incorporated by reference to Exhibit 4.5 to Digital Media Solutions, Inc.’s Annual Report on Form 10-K/A for the year ended December 31, 2022 filed with the SEC on April 5, 2023).
4.2						Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Redeemable Preferred Stock, filed on March 30, 2023 (incorporated by reference to Exhibit 4.6 to Digital Media Solutions, Inc.’s Annual Report on Form 10-K/A for the year ended December 31, 2022 filed with the SEC on April 5, 2023).


10.1*						First Amendment to the Credit Agreement, dated as of August 16, 2023, by and among Digital Media Solutions, LLC, as borrower, Digital Media Solutions Holdings, LLC, the lenders and issuing banks named therein, and Truist Bank, as administrative agent and as collateral agent.
31.1*						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~10.1~~						~~Letter Agreement, by and between Digital Media Solutions, Inc. and Joseph Liner, dated as of May 26, 2022.~~
~~10.2~~						~~Offer Letter, by and between Digital Media Solutions, Inc. and Richard Rodick, dated as of June 28, 2022.~~
~~10.3~~						~~Separation Agreement, by and between Digital Media Solutions, Inc. and Vasundara Srenivas, dated as of June 28, 2022.~~
~~10.4~~						~~Digital Media Solutions, Inc. Executive Severance Plan, dated August 4, 2022.~~

101.INS*1						Inline XBRL Instance Document
101.SCH*†						Inline XBRL Taxonomy Extension Schema
101.CAL*†						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*†						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*†						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*†						Inline XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



			Digital Media Solutions, Inc.

			/s/ Joseph Marinucci
			Name:			Joseph Marinucci
			Title:			President and Chief Executive Officer (Principal Executive Officer)

			/s/ ~~Richard Rodick~~Vanessa Guzmán-Clark
			Name:			~~Richard Rodick~~Vanessa Guzmán-Clark
			Title:			Interim Chief Financial Officer (Principal Financial and Accounting Officer)