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


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)

Registrant's telephone number, including area code: (877) 236-8632

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 30, 2021, 36,167,765~~August 5, 2022, 39,836,114 shares of the registrant’s Class A common stock; ~~25,999,464~~25,699,464 of the registrant’s Class B common stock, par value $0.0001 per share; and 13,999,078 warrants to purchase shares of the registrant’s Class A common stock, par value $0.0001 per share, were issued and outstanding.

Digital Media Solutions, Inc.

Cautionary Note Regarding Forward-Looking Statements

References in this document to the “Registrant,” “DMS Inc.,” “DMS,” the “Company,” “we,” “management,” “us” or “our” refers to Digital Media Solutions, Inc. and its consolidated subsidiaries, except where the context otherwise requires or indicates.

This Quarterly Report, particularly Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Part II. Item 1A. Risk Factors, and the documents we incorporate into this Quarterly ~~Reprt~~Report contain certain statements that are, or may be deemed to be, forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. These forward looking statements are often identified by words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions. These forward-looking statements include, without limitation, DMS’s expectations with respect to its future performance and its ability to implement its strategy, and are based on the beliefs and expectations of our management team from the information available at the time such statements are made. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside DMS’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the COVID-19 pandemic or other public health crises; (2) changes in client demand for our services and our ability to adapt to such changes; (3) the entry of new competitors in the market; (4) the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions; (5) the ability to maintain, grow and protect the data DMS obtains from consumers and advertisers; (6) the performance of DMS’s technology infrastructure; (7) the ability to protect DMS’s intellectual property rights; (8) the ability to successfully source and complete acquisitions and to integrate the operations of companies DMS acquires, including Traverse Data, Inc., the Crisp Results assets and Aimtell, PushPros and Aramis Interactive; (9) the ability to improve and maintain adequate internal controls over financial and management systems, and remediate the identified material weakness; (10) changes in applicable laws or regulations and the ability to maintain compliance; (11) our substantial levels of indebtedness; (12) volatility in the trading price on the NYSE of our common stock and warrants; (13) fluctuations in value of

our private placement warrants; and (14) other risks and uncertainties indicated from time to time in

DMS’s filings with the ~~SEC,~~U.S. Securities and Exchange Commission (“SEC”), including those under “Risk Factors” in DMS’s Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, 2021, filed on March 16, 2022 (“2021 Form 10-K”) and its subsequent filings with the SEC.

There may be additional risks that we consider immaterial or which are unknown, and it is not possible to predict or identify all such risks.

DMS cautions that the foregoing list of factors is not exclusive. DMS cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. DMS does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

PART I - FINANCIAL INFORMATION

Item 1. Financial ~~Statements~~Statement

(in thousands, except per share data)


		June 30, 2021		December 31, 2020 As Restated			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	18,829	$	31,397	Cash and cash equivalents	$	26,370	$	26,394
Accounts receivable, net of allowances of $3,985 and $3,121, respectively		51,868		42,085
Accounts receivable, net of allowances of $5,860 and $4,930, respectively						Accounts receivable, net of allowances of $5,860 and $4,930, respectively	46,545		51,578
Prepaid and other current assets	Prepaid and other current assets	3,171		2,943		Prepaid and other current assets	1,188		3,698
Income tax receivable	Income tax receivable	2,141		474		Income tax receivable	1,537		2,078
Total current assets	Total current assets	76,009		76,899		Total current assets	75,640		83,748
Property and equipment, net	Property and equipment, net	18,484		15,016		Property and equipment, net	18,152		19,168
Goodwill	Goodwill	67,127		44,904		Goodwill	76,947		76,558
Intangible assets, net	Intangible assets, net	86,434		46,447		Intangible assets, net	58,888		66,228
Deferred tax assets	Deferred tax assets	19,687		18,948		Deferred tax assets	—		—
Other assets	Other assets	797		206		Other assets	858		889
Total assets	Total assets	$	268,538	$	202,420	Total assets	$	230,485	$	246,591
LIABILITIES AND DEFICIT	LIABILITIES AND DEFICIT					LIABILITIES AND DEFICIT
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	39,741	$	37,191	Accounts payable	$	40,684	$	42,073
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	7,569		9,886		Accrued expenses and other current liabilities	9,912		9,473
Current portion of long-term debt	Current portion of long-term debt	2,250		7,967		Current portion of long-term debt	2,250		2,250
Income tax payable		26		1,413
Short-term Tax Receivable Agreement liability		1,180		510
Income taxes payable						Income taxes payable	193		103
Tax Receivable Agreement liability						Tax Receivable Agreement liability	1,310		1,310
Contingent consideration payable - current	Contingent consideration payable - current	6,213		0		Contingent consideration payable - current	10,909		7,370
Deferred acquisitions consideration payable - current						Deferred acquisitions consideration payable - current	4,928		4,785
Total current liabilities	Total current liabilities	56,979		56,967		Total current liabilities	70,186		67,364

Long-term debt	Long-term debt	215,995		193,591		Long-term debt	215,089		215,505
Long-term Tax Receivable Agreement liability		16,179		15,760
Deferred tax liability		6,455		7,024

Deferred tax liabilities						Deferred tax liabilities	4,001		4,786
Private Placement Warrant liabilities	Private Placement Warrant liabilities	14,640		22,080		Private Placement Warrant liabilities	480		3,960
Contingent consideration payable - noncurrent		4,035		0
Deferred acquisition consideration payable		4,642		0
Contingent consideration payable - non-current						Contingent consideration payable - non-current	494		1,069

Other non-current liabilities	Other non-current liabilities	2,520		2,683		Other non-current liabilities	1,754		1,725
Total liabilities	Total liabilities	321,445		298,105		Total liabilities	292,004		294,409

Stockholders' deficit:	Stockholders' deficit:					Stockholders' deficit:
Preferred stock, $0.0001 par value, 100,000 shares authorized; NaN issued and outstanding at June 30, 2021		0		0
Class A common stock, $0.0001 par value, 500,000 shares authorized; 35,818 issued and outstanding at June 30, 2021		3		3
Class B common stock, $0.0001 par value, 60,000 shares authorized; 25,999 issued and 25,699 outstanding at June 30, 2021		3		3
Class C common stock, $0.0001 par value, 40,000 authorized; NaN issued and outstanding at June 30, 2021		0		0
Preferred stock, $0.0001 par value, 100,000 shares authorized; none issued and outstanding at June 30, 2022						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						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						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						Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at June 30, 2022	—		—
Additional paid-in capital	Additional paid-in capital	$	(27,642)	$	(48,027)	Additional paid-in capital	(22,313)		(25,239)
Retained earnings		(737)		(3,146)
Cumulative deficit						Cumulative deficit	(11,060)		(944)
Total stockholders' deficit	Total stockholders' deficit	(28,373)		(51,167)		Total stockholders' deficit	(33,367)		(26,177)
Non-controlling interest	Non-controlling interest	$	(24,534)	$	(44,518)	Non-controlling interest	(28,152)		(21,641)
Total deficit	Total deficit	(52,907)		(95,685)		Total deficit	(61,519)		(47,818)
Total liabilities and deficit	Total liabilities and deficit	$	268,538	$	202,420	Total liabilities and deficit	$	230,485	$	246,591

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

DIGITAL MEDIA SOLUTIONS, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			Three Months Ended June 30,				Six Months Ended June 30,
											2022		2021		2022		2021
Net revenue	Net revenue	$	105,079	$	75,196	$	201,882	$	147,924	Net revenue	$	91,197	$	105,079	$	200,307	$	201,882
Cost of revenue		71,359		52,402		140,541		102,561

Cost of revenue (exclusive of depreciation and amortization shown separately below)										Cost of revenue (exclusive of depreciation and amortization shown separately below)	67,784		71,359		145,624		140,541
Salaries and related costs	Salaries and related costs	11,708		7,901		21,977		16,231		Salaries and related costs	13,237		11,708		26,945		21,977
General and administrative expenses	General and administrative expenses	10,552		4,652		17,514		9,950		General and administrative expenses	12,444		10,552		23,544		17,514
Depreciation and amortization										Depreciation and amortization	7,173		7,044		14,233		12,463
Acquisition costs	Acquisition costs	466		47		1,960		74		Acquisition costs	279		466		292		1,960
Depreciation and amortization		7,044		4,356		12,463		8,671
Income from operations		$	3,950	$	5,838	$	7,427	$	10,437
Change in fair value of contingent consideration liabilities										Change in fair value of contingent consideration liabilities	(55)		—		2,536		—
(Loss) income from operations										(Loss) income from operations	$	(9,665)	$	3,950	$	(12,867)	$	7,427
Interest expense	Interest expense	3,622		3,491		6,879		7,281		Interest expense	3,817		3,622		7,502		6,879
Change in fair value of warrant liabilities	Change in fair value of warrant liabilities	(7,750)		0		(7,435)		0		Change in fair value of warrant liabilities	(1,640)		(7,750)		(3,480)		(7,435)
Debt extinguishment		2,108		$	0	2,108		$	0
Net income before income taxes		$	5,970	$	2,347	$	5,875	$	3,156

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

Net (loss) income before income taxes										Net (loss) income before income taxes	$	(11,842)	$	5,970	$	(16,889)	$	5,875
Income tax expense	Income tax expense	1,031		213		1,148		265		Income tax expense	45		1,031		355		1,148
Net income		$	4,939	$	2,134	$	4,727	$	2,891
Net income attributable to non-controlling interest		2,411		0		2,373		0
Net income attributable to Digital Media Solutions, Inc.		$	2,528	$	2,134	$	2,354	$	2,891
Net (loss) income										Net (loss) income	$	(11,887)	$	4,939	$	(17,244)	$	4,727
Net (loss) income attributable to non-controlling interest										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.										Net (loss) income attributable to Digital Media Solutions, Inc.	$	(6,982)	$	2,528	$	(10,123)	$	2,354

Weighted-average shares outstanding - basic	Weighted-average shares outstanding - basic	35,377		N/A1		34,315		N/A1		Weighted-average shares outstanding - basic	39,553		35,377		37,969		34,315
Weighted-average shares outstanding - diluted	Weighted-average shares outstanding - diluted	36,522		N/A1		34,325		N/A1		Weighted-average shares outstanding - diluted	65,252		36,522		63,682		34,325
Earnings per share attributable to Digital Media Solutions, Inc.:
Basic earnings per common shares		$	0.07	N/A1		$	0.07	N/A1
Diluted earnings per common shares		$	0.07	N/A1		$	(0.06)	N/A1
Earnings (loss) per share attributable to Digital Media Solutions, Inc.:										Earnings (loss) per share attributable to Digital Media Solutions, Inc.:
Basic - per common shares										Basic - per common shares	$	(0.18)	$	0.07	$	(0.27)	$	0.07
Diluted - per common shares										Diluted - per common shares	$	(0.18)	$	0.07	$	(0.27)	$	(0.06)

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

1
Prior to the Business Combination, the membership structure of Digital Media Solutions Holdings, LLC included units which had profit interests. The Company analyzed the calculation of earnings per unit for periods prior to the Business Combination and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information has not been presented for periods prior to the Business Combination on July 15, 2020.

Table of Contents

DIGITAL MEDIA SOLUTIONS, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~EQUITY (DEFICIT)~~DEFICIT

(Unaudited)

(in thousands, except share data)

Class A
Common Stock
Class B
Common Stock
Additional Paid-in Capital Retained Earnings Total
Stockholders' Deficit Non-
controlling
Interest
Shares Amount Shares Amount Total Deficit
Balance, December 31, 2020 (As Restated) 32,393 $ 3 25,999 $ 3 $ (48,027) $ (3,146) $ (51,167) $ (44,518) $ (95,685)
Net income (loss) — $ — — $ — $ — $ (119) $ (119) $ (93) $ (212)
Shares issued in connection with acquisition of Aramis, PushPros and Aimtell (Note 6) 1,293 $ — — $ — $ 9,384 $ — $ 9,384 $ 5,616 $ 15,000
Exercise of warrants to issue Class A common stock 1 $ — — $ — $ 17 $ — $ 17 $ — $ 17
Stock-based compensation — $ — — $ — $ 1,365 $ — $ 1,365 $ — $ 1,365
Other — $ — — $ — $ — $ — $ — $ (21) $ (21)
Balance, March 31, 2021 33,687 $ 3 25,999 $ 3 $ (37,261) $ (3,265) $ (40,520) $ (39,016) $ (79,536)


	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)

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)

(1) 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~~issued under the 2020 Omnibus Incentive Plan.

The accompanying notes are an integral part of the ~~Crisp acquisition and non-controlling redemptions by Prism and the sellers~~unaudited consolidated financial statements.

Table of ~~SmarterChaos.~~Contents

~~(2)~~


	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)

(1) On June 30, 2021, the sellers of ~~Smarter Chaos~~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.

Class A
Common Stock
Class B
Common Stock
Additional Paid-in Capital Retained Earnings Total
Stockholders' Deficit Non-
controlling
Interest Members’ Deficit
Shares Amount Shares Amount Total Deficit
Balance, December 31, 2019 0 $ 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (106,258) $ (106,258)
Net income — $ 0 — $ 0 $ — $ — $ — $ — 757 $ 757
Member distributions — $ 0 — $ 0 $ — $ — $ — $ — $ (170) $ (170)
Balance, March 31, 2020 0 $ 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (105,671) $ (105,671)
Net income — $ — — $ — $ — $ — $ — $ — $ 2,134 $ 2,134
Balance, June 30, 2020 0 $ 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (103,537) $ (103,537)

The accompanying notes are an integral part of the unaudited ~~condensed~~ 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.

(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

(Unaudited)

(in thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	4,727	$	2,891
Net (loss) income						Net (loss) income	$	(17,244)	$	4,727
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Provision for bad debt						Provision for bad debt	1,339		909
Depreciation and amortization	Depreciation and amortization	12,463		8,671		Depreciation and amortization	14,233		12,463

Lease restructuring charges	Lease restructuring charges	174		0		Lease restructuring charges	2		174
Loss on debt extinguishment	Loss on debt extinguishment	2,108		0		Loss on debt extinguishment	—		2,108
Provision for bad debt		909		0
Stock-based compensation, net of amounts capitalized	Stock-based compensation, net of amounts capitalized	2,530		0		Stock-based compensation, net of amounts capitalized	3,908		2,530
Payment of contingent consideration		0		(1,000)

Amortization of debt issuance costs	Amortization of debt issuance costs	528		471		Amortization of debt issuance costs	938		528
Deferred income tax provision, net	Deferred income tax provision, net	364		(984)		Deferred income tax provision, net	(785)		364

Change in fair value of contingent consideration	Change in fair value of contingent consideration	560		0		Change in fair value of contingent consideration	2,536		560
Change in fair value of warrant liability	Change in fair value of warrant liability	(7,435)		0		Change in fair value of warrant liability	(3,480)		(7,435)

Change in income tax receivable and payable	Change in income tax receivable and payable	(2,328)		0		Change in income tax receivable and payable	631		(2,328)
Change in accounts receivable, net		(4,330)		(2,200)
Change in accounts receivable						Change in accounts receivable	4,026		(4,330)
Change in prepaid expenses and other current assets	Change in prepaid expenses and other current assets	222		(4,109)		Change in prepaid expenses and other current assets	2,585		222
Change in accounts payable and accrued expenses	Change in accounts payable and accrued expenses	(6,768)		(76)		Change in accounts payable and accrued expenses	(1,275)		(6,768)

Change in other liabilities	Change in other liabilities	(190)		29		Change in other liabilities	27		(190)
Net cash provided by operating activities	Net cash provided by operating activities	$	3,534	$	3,693	Net cash provided by operating activities	$	7,441	$	3,534
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Additions to property and equipment	Additions to property and equipment	$	(4,212)	$	(5,031)	Additions to property and equipment	$	(3,197)	$	(4,212)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(24,830)		0		Acquisition of businesses, net of cash acquired	(2,579)		(24,830)

Net cash used in investing activities	Net cash used in investing activities	$	(29,042)	$	(5,031)	Net cash used in investing activities	$	(5,776)	$	(29,042)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities

Proceeds from issuance of long-term debt						Proceeds from issuance of long-term debt	$	—	$	220,840
Payments of long-term debt and notes payable	Payments of long-term debt and notes payable	$	(199,851)	$	(2,386)	Payments of long-term debt and notes payable	(1,126)		(199,851)
Proceeds from borrowings on revolving credit facilities	Proceeds from borrowings on revolving credit facilities	11,000		10,000		Proceeds from borrowings on revolving credit facilities	—		11,000
Payments of borrowings on revolving credit facilities	Payments of borrowings on revolving credit facilities	(15,000)		(1,000)		Payments of borrowings on revolving credit facilities	—		(15,000)
Proceeds from issuance of long-term debt		220,840		0
Proceeds from warrants exercised		11		0

Payment of debt issuance costs	Payment of debt issuance costs	(3,565)		(163)		Payment of debt issuance costs	—		(3,565)

Payment of equity issuance costs		(322)		0
Payment of equity issuance						Payment of equity issuance	—		(322)
Payment of early termination	Payment of early termination	(188)		0		Payment of early termination	—		(188)
Proceeds from warrants exercised						Proceeds from warrants exercised	—		11
Distributions to non-controlling interest holders						Distributions to non-controlling interest holders	(563)		—
Other	Other	15		(170)		Other	—		15
Net cash provided by financing activities		$	12,940	$	6,281
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	$	(1,689)	$	12,940
Net change in cash	Net change in cash	$	(12,568)	$	4,943	Net change in cash	$	(24)	$	(12,568)
Cash, beginning of period	Cash, beginning of period	31,397		3,008		Cash, beginning of period	26,394		31,397
Cash, end of period	Cash, end of period	$	18,829	$	7,951	Cash, end of period	$	26,370	$	18,829

Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period For:
Interest		$	6,308	$	6,904
Income taxes, net		$	3,837	$	0
Non-Cash Investing and Financing Transactions:
Contingent and deferred acquisition consideration		$	14,890	$	0
Issuance of equity for Aimtell/PushPros/Aramis and Crisp Results		$	35,000	$	0
Capital expenditures included in accounts payable		$	1,144	$	248

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

DIGITAL MEDIA SOLUTIONS, INC.

NOTES TO ~~UNAUDITED CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 and derives most of its revenues in the United States.

~~Restatement of Previously Issued Financial Statements~~

The notes included herein should be read in conjunction with the Company’s restated audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 18, 2021 (the “2020 Form 10-K/A”).

As previously disclosed in our 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the impacted quarters within 2020 to make the necessary accounting corrections related to our warrant accounting for the Private Placement warrants. There was no impact to the quarter ended June 30, 2020 as the Private Placement warrants were not issued.

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 ~~SEC~~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 ~~condensed~~ 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

~~As discussed in more detail in our 2020 Form 10-K/A on~~On July 15, 2020, ~~DMSH~~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 ~~55.5%~~58.7% 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 ~~44.5%~~41.3% of the membership interest in DMSH (“non-controlling interests”).

For additional information, see Note ~~2: “Business Combination”~~2. Business Combination in the Notes to Consolidated Financial Statements in our ~~2020~~2021 Form ~~10-K/A.~~10-K.

Non-controlling Interest

The non-controlling interest represents the membership interest in ~~Digital Media Solutions Holding (“DMSH”)~~DMSH held by holders other than the Company. As of June 30, ~~2021,~~2022, the Prism, Clairvest Direct Sellers and SmarterChaos combined ownership percentage in DMSH was ~~41.9%~~41.3% and as of December 31, ~~2020~~2021 it was ~~44.8%~~41.6%.

Principles of Consolidation

The Company ~~has consolidated~~consists of DMS Inc. and its wholly-owned subsidiary, Blocker. The Company consolidates the ~~financial position~~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 ~~DMSH and reflected the proportionate interest held by Prism, Clairvest Direct Seller~~operations, and the ~~SmarterChaos sellers~~non-controlling interests are reported as a ~~non-controlling interest.~~separate component of equity.

~~Changes~~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 private placement warrants, the allowance for doubtful accounts, 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 ~~Standards and~~ Policies

There have been no material changes into our significant accounting policies as compared to the significant accounting policies ~~from those that were disclosed~~described in Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies in our ~~2020~~2021 Form ~~10-K/A.~~

~~Accounting Standards Not Yet Adopted~~

The Company qualifies as an “emerging growth company” and thus 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.10-K.

New Accounting Standards

Accounting Standards Not Yet Adopted

In February 2016, the ~~Financial Accounting Standards Board (“FASB”)~~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 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 tofor 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, recognizing assets and related lease liabilities, which may or may not have a material impact on the Company’s Consolidated Financial Statements.~~sheets.

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 guidanceASC 326 Financial Instruments - Credit Losses, regardingthe 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 ~~current expected credit loss~~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 ~~EGC~~emerging growth companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the impact on our consolidated financial statements.

Disaggregation of Revenue

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

Three Months Ended June 30, 2021
Brand
Direct Marketplace Other Intercompany eliminations Total
Three Months Ended June 30, 2021
Net revenue:
Customer acquisition $ 57,955 $ 57,763 $ 0 $ (14,476) $ 101,242
Managed services 1,921 0 1,109 0 3,030
Software services 0 0 807 0 807
Total Net revenue $ 59,876 $ 57,763 $ 1,916 $ (14,476) $ 105,079
Three Months Ended June 30, 2020
Three Months Ended June 30, 2020 Brand
Direct Marketplace Other Intercompany eliminations Total
Net revenue:
Customer acquisition $ 40,185 $ 35,218 $ 0 $ (6,636) $ 68,767
Managed services 5,189 0 449 0 5,638
Software services 0 0 791 0 791
Total Net revenue $ 45,374 $ 35,218 $ 1,240 $ (6,636) $ 75,196


	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
	Brand Direct		Marketplace		Technology Solutions		Intercompany eliminations		Total
Net revenue:
Customer acquisition	$	57,955	$	57,763	$	—	$	(14,476)	$	101,242
Managed services	1,921		—		1,109		—		3,030
Software services	—		—		807		—		807
Total Net revenue	$	59,876	$	57,763	$	1,916	$	(14,476)	$	105,079

Six Months Ended June 30, 2021
Brand
Direct
Marketplace Other Intercompany eliminations Total
Six Months Ended June 30, 2021
Net revenue:
Customer acquisition $ 111,009 $ 107,022 $ 0 $ (25,127) $ 192,904
Managed services 5,046 0 2,325 0 7,371
Software services 0 0 1,607 0 1,607
Total Net revenue $ 116,055 $ 107,022 $ 3,932 $ (25,127) $ 201,882
Six Months Ended June 30, 2020
Six Months Ended June 30, 2020
Brand
Direct
Marketplace Other Intercompany eliminations Total
Net revenue:
Customer acquisition 78,637 69,396 0 (10,246) 137,787
Managed services 7,638 0 899 0 8,537
Software services 0 0 1,600 0 1,600
Total Net revenue $ 86,275 $ 69,396 $ 2,499 $ (10,246) $ 147,924


	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, 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

Contract ~~balances~~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 on the consolidated balance sheets. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the balance of deferred revenue was ~~$1.2~~$1.3 million and ~~$1.7~~$1.8 million, respectively, and is recorded within ~~Accrued~~“Accrued expenses and other current ~~liabilities~~liabilities” on the unaudited ~~condensed~~ consolidated balance sheets. We expect the majority of the deferred revenue balance at June 30, ~~2021~~2022 to be recognized as revenue during the following quarter.

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, ~~we recognized revenue~~no customer accounted for more than 10% of our total revenues. ~~$1.1 million and $2.8 million, respectively, that was previously recorded as a contract liability within “Accrued expenses and other current liabilities” on the unaudited condensed consolidated balance sheets.~~

As of June 30, 2021 and December 31, 2020, unbilled revenue included in accounts receivable was $2.2 million and $1.8 million, respectively. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month directly following the period of service.

NOTE 3. 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 revenue, cost of revenue, and 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.

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net revenue $ 105,079 $ 75,196 $ 201,882 $ 147,924
  Brand Direct 59,876 45,374 116,055 86,275
  Marketplace 57,763 35,218 107,022 69,396
  Other 1,916 1,240 3,932 2,499
  Intercompany eliminations (14,476) (6,636) (25,127) (10,246)
Cost of revenue 71,359 52,402 140,541 102,561
    Brand Direct 44,321 34,410 87,140 65,298
    Marketplace 41,056 24,541 77,654 47,440
    Other 458 38 874 69
Intercompany eliminations (14,476) (6,587) (25,127) (10,246)
Gross profit $ 33,720 $ 22,794 $ 61,341 $ 45,363
Salaries and related costs 11,708 7,901 21,977 16,231
General and administrative expenses 10,552 4,652 17,514 9,950
Acquisition costs 466 47 1,960 74
Depreciation and amortization 7,044 4,356 12,463 8,671
Income from operations $ 3,950 $ 5,838 $ 7,427 $ 10,437


	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

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

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

Brand
Direct Marketplace Other Total
Balance, December 31, 2020 $ 8,616 $ 32,660 $ 3,628 $ 44,904
Additions (Note 6) 4,853 17,370 0 22,223
Balance, June 30, 2021 $ 13,469 $ 50,030 $ 3,628 $ 67,127


	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

The carrying amount of goodwill for all reporting units had 0no accumulated impairments as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Intangible assets, net

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

Amortization expense for finite-lived intangible assets is recorded on aan accelerated straight-line ~~basis in the pattern in which the assets’ economic benefits are consumed over their estimated useful lives.~~basis. Amortization expense related to finite-lived intangible assets was ~~$9.9~~$5.0 million and ~~$7.1~~$10.0 million for the three and six months ended June 30, ~~2021~~2022, respectively, and ~~2020,~~$5.8 million and $9.9 million for the three and six months ended June 30, 2021, respectively.

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

Unamortized debt issuance costs (1)

Less: Unamortized debt issuance costs (1)

(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 ~~new~~ 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 Company deferred approximately $3.5 million of issuance costs primarily associated with brokerage, legal, arrangement and consulting fees. The discount and the deferred financing costs will be amortized using the effective interest method over the life of the note.

The Term Loan, which was issued at an original issue discount of ~~1.8%~~1.80% or $4.2 million, ~~will be~~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.

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) ~~Administrative Agent’s~~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 ~~Loans~~Loan bears interest ~~at,~~ 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 ~~will pay~~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%.

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, 2022 the Term Loan debt discount and debt issuance cost classified as debt had a remaining unamortized balance of $3.3 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 million, respectively. At June 30, 2022 and December 31, 2021, the unamortized debt issuance cost of $0.7 million and $0.8 million, respectively, associated with the undrawn Revolving Facility is classified and amortized as “Other assets” within consolidated balance sheets.

Upon the closing of the Credit Facility, the credit agreement dated as of July 3, 2018, by and among DMS LLC, DMSH, each of their subsidiaries party thereto, various financial institutions party thereto 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 (“Monroe Facility”).~~closed.

The Company recognized a loss on debt extinguishment of $2.1 million during the ~~three and six months~~year ended ~~June 30,~~December 31, 2021, which primarily included accelerated amortization of deferred financing costs, legal fees and early termination fee. The loss recognized is presented as ~~“Debt~~“Loss on Debt Extinguishment” in the ~~condensed~~ consolidated statement of operations.

Debt Maturity Schedule

The scheduled maturities of our total debt are estimated as follows at June 30, ~~2021:~~2022 (in thousands):

(in thousands)
2021 $ 1,125
2022 2,250
2023 2,250
2024 2,250
2025 and thereafter 217,125
Total debt $ 225,000



2022	$	1,125
2023	2,250
2024	2,250
2025	2,250
2026 and thereafter	214,875
Total debt	$	222,750

NOTE 6. ACQUISITIONS

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, 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 (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

assets primarily consist of technology, brand and customer relationships with an estimated useful life of five years for technology, three years for brand and five years for customer relationships.

On April 1, 2021, 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 ~~includes~~included up to $10.0 million in contingent consideration, ~~to be~~

~~earned over the 12 months following the acquisition,~~ subject to the ~~achievements~~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 of deferred payment, to be paid ~~18-months~~18 months after the acquisition date.

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 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.

As of April 1, 2021, the acquisition date, the fair value of the contingent consideration was $5.2 million. During the six months ended June 30, 2022, the fair value 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 the Company paid it 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.

As of April 1, 2021, the acquisition date, the ~~present~~fair value of ~~the contingent consideration earnout was recorded at $4.8 million, and~~ the deferred consideration was $4.6 million. ~~As of June 30, 2021,~~During the ~~contingent consideration earnout increased~~

$0.6 million during the current quarter to a total of $5.4 million, and the deferred consideration did not materially change. The contingent consideration and deferred payment can be paid in cash or DMS Class A Common Stock at the election of the Company.

In conjunction with this acquisition, we incurred approximately $0.7 million of legal and other acquisition-related expenses, which were recorded as Acquisition costs in the unaudited condensed consolidated operations 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. ~~Additionally, we incurred $0.2 million of equity issuance costs, offsetting the 1.6 million share issuance in the equity for Crisp Results.~~Since December 31, 2021, there were no measurement period adjustments identified and recorded.

The Company primarily used an Income Approach ~~specifically a Discounted Cash Flow (“DCF”) analysis,~~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~~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. ~~The fair~~Fair value of the Crisp Results brand was determined ~~by applying an Income Approach, specifically~~using the Relief from Royalty ~~Method. The~~Method, and the fair value of ~~the acquired~~ customer relationships was determined ~~by applying an Income Approach, specifically~~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 ~~one~~ to seven years for brand and ~~five~~ to six years for customer relationships. ~~Accounting remains open for working capital adjustments~~

Aimtell, Aramis and ~~final fair value calculations due to the timing and complexity of the acquisition transaction.~~PushPros

~~Aimtell, PushPros and Aramis~~

~~The Company acquired on~~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 ~~connecting~~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 atupon closing of the ~~closing~~ 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 ~~subject to a lock-up agreement,~~in contingent consideration ~~with a fair value of $4.9 million and working capital of $0.3 million. Total payouts for contingent consideration~~to be earned over the three years following the ~~closing of the transaction is $15.0 million,~~acquisition, subject to the ~~acquired companies reaching~~achievement of certain milestones. The contingent consideration can be paid in cash or ~~DMS~~ 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 ~~present~~fair value of the contingent consideration earnout was ~~recorded at $4.9~~$2.1 million. ~~The~~As of June 30, 2022, the contingent consideration ~~did not materially change during the three and six months ended June 30,~~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.

In conjunction with this acquisition, we incurred approximately $0.5 million of legal and other acquisition-related expenses, which were recorded as Acquisition costs in the unaudited condensed consolidated statements of operations during the six months ended June 30, 2021.

The Company primarily used an Income Approach ~~specifically a Discounted Cash Flow (“DCF”) analysis,~~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, ~~and~~ customer relationships and non-competition agreements of the acquired business. ~~The fair~~Fair value

of the ~~brand~~Aimtell and PushPros technology was determined ~~by applying an Income Approach, specifically the Relief from Royalty Method. The fair value of the acquired customer relationships was determined by applying an Income Approach, specifically~~using the Multi Period Excess Earnings ~~Method.~~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 ~~Aimtell/Aramis/PushPros~~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 ~~brand~~ and customer ~~relationships with an estimated useful life of seven years for technology,~~ ~~one~~ ~~to seven years for brand, and~~ ~~five~~ ~~to six years for customer~~ relationships. ~~Accounting remains open for working capital adjustments and final fair value calculations due to the timing and complexity of the acquisition transaction.~~

~~SmarterChaos and She is Media~~

On July 16, 2020, the Company acquired SmarterChaos.com, LLC, a premier digital marketing and online performance management marketer, along with She Is Media, a female-centric performance ad network, (collectively, “SmarterChaos”) for cash and equity of DMSH totaling approximately $5.8 million, net of cash, which was subject to a working capital adjustment that was finalized December 31, 2020.

DMSH issued the SmarterChaos sellers approximately 307,000 DMSH Units, which are convertible to Class A Common Stock, with an aggregate total value of $3.0 million based on the DMS Inc. stock price on July 15, 2020. The SmarterChaos sellers also became parties to the Amended Partnership Agreement.

On June 30, 2021, SmarterChaos sellers elected to redeem 154,000 DMSH units; DMS Inc. elected to exchange those for shares of Class A common stock, with an aggregate capital contribution to DMSH of approximately $3.0 million.

In conjunction with this acquisition, we incurred approximately $0.4 million of legal and other acquisition-related expenses, which were recorded as Acquisition costs in the unaudited condensed consolidated statements of operations.

The Company primarily used an Income Approach, specifically a Discounted Cash Flow (“DCF”) analysis, 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~~date 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 July 16, 2020. Under Accounting Standards Codification 805 (ASC 805), an acquirer must recognize any assets acquired and liabilities assumed atfrom the ~~acquisition date, measured at fair value as of that date. Assets meeting the identification criteria included tangible assets, such as real~~AAP, Crisp Results and ~~personal property, and intangible assets. Identified intangible assets included the brand and customer relationships~~Traverse acquisitions consist of the acquired business. The fair value of the brand was determined by applying an Income Approach, specifically the Relief from Royalty Method. The fair value of the acquired customer relationships was determined by applying an Income Approach, specifically the Multi Period Excess Earnings Method.following (in thousands):

Other assets acquired and liabilities assumed, net (1)

~~The goodwill related to this transaction reflects the workforce~~

(1) Other assets acquired and ~~synergies expected from combining the operations of SmarterChaos~~liabilities assumed, net includes prepaids and ~~is included in the Other reportable segment. Intangible~~other current assets, ~~primarily consist of brand~~partially offset by other current liabilities (e.g., Travel and ~~customer relationships with an estimated useful life of~~ ~~one~~ ~~to seven years for brand,~~expense payables, payroll liabilities, tax liabilities, and ~~five~~ ~~to six years for customer relationships.~~transition services payable).

~~Net assets~~The weighted average amortization period for AAP acquisition technology is 4 years, customer relationships is 4.1 years, brand is 2.1 years and ~~liabilities acquired from~~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 ~~2020~~weighted average amortization period for AAP is 4 years, Crisp Results is 5.6 years and ~~2021 Acquisitions consist of the following;~~

Other assets acquired and liabilities assumed, net (1)

(1) Other assets acquired and liabilities assumed, net includes Prepaids, and Other Current Assets, partially offset by other current liabilities (i.e., Travel and expense payables, payroll liabilities, tax liabilities).

~~Table of Contents~~Traverse is 5 years.

The following schedule represents the amounts of net revenue and net ~~income (loss)~~loss from operations related to ~~2021~~Traverse, AAP and ~~2020~~Crisp Results acquisitions which have been included in the unaudited consolidated statements of operations for the periods indicated subsequent to the acquisition ~~date.~~
Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
(In thousands) Aimtell, PushPros and Aramis Crisp Results Aimtell, PushPros and Aramis Crisp Results
Net revenue $ 5,774 $ 6,967 $ 10,075 $ 6,967
Net income (loss) from operations $ (484) $ (155) $ (620) $ (155)
Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
(In thousands) SmarterChaos
Net revenue $ 934 $ 1,757
Net income (loss) from operations $ 7 $ (161)
date in the period of acquisition (in thousands):

~~Table of Contents~~


	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.~~ 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

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.

A proforma schedule for SmarterChaos is not included below because the Company was acquired on July 16, 2020 and net revenue and net income from operations related to this acquisition prior to July 16, 2020 was not material to the Company’s consolidated financial position or results of operations. Net revenue and net income from operations are presented in the above table subsequent to the acquisition date.

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
(In thousands) Aimtell, PushPros and Aramis Crisp Results Aimtell, PushPros and Aramis Crisp Results
Net revenue $ 5,774 $ 6,967 $ 14,860 $ 15,246
Net income (loss) from operations $ (484) $ (155) $ 635 $ 2,087
Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
Aimtell, PushPros and Aramis Crisp Results Aimtell, PushPros and Aramis Crisp Results
Net revenue $ 8,393 $ 6,650 $ 16,432 $ 13,110
Net income (loss) from operations $ 2,573 $ 1,119 $ 3,268 $ 2,105

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 ~~net~~ in the unaudited ~~condensed~~ 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, ~~for 12 different~~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, ~~for approximately 62,113~~representing 55,798 square feet of office space located in ~~Canada and~~ the United States. As of June 30, 2021, a reserve of approximately $3.0 million was recorded; and $1.2 million is accrued for within Accrued expenses and other current liabilities and $1.8 million is accrued for within Other non-current liabilities, on the unaudited condensed consolidated balance sheets.States, that are currently in negotiations with landlords to be reduced or terminated.

During the three and six months ended June 30, 2021, the Company recognized a valuation cost reduction to the restructuring lease liability of $0.4 million and $0.1 million, respectively, which primarily consisted of 2 additional locations added

Valuation adjustments related to the reserve ~~representing 7,975 sq. feet.~~

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

NOTE 8. 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.

Private Placement Warrants

~~As disclosed in~~ - We record the ~~2020 Form 10-K/A, during the first quarter~~fair value of ~~2021, we reevaluated the accounting treatment of the Company’s Warrants issued in connection with the Business Combination. As a result of our reevaluation, we restated~~ the Private Placement Warrants ~~and recorded these warrants at fair value~~ as a liability in ~~the Company’s~~our consolidated balance sheet as ~~at December 31, 2020.~~of June 30, 2022 and 2021, 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

Placement Warrants are presented under Change in the fair value of warrant liabilities on the Income Statement.

The significant assumptions were as follows:


	June 30, ~~2021~~2022
Private Placement Warrants Fair Value Per Share	$	~~3.66~~0.12
Private Placement Warrant valuation inputs:
Stock price - DMS Inc. Class A Common Stock	$	~~9.68~~1.11
~~Strike price~~	$	~~11.50~~
Remaining contractual term in years	~~4.04~~3.04
Estimated volatility ~~of Class A Common Stock~~	~~55.0~~85.0		%
Dividend yield	0.0		%
Risk free interest rate	~~0.67~~2.97		%

Contingent consideration payable related to acquisitions

The fair value of the contingent ~~consideration~~considerations payable for the ~~Aimtell/PushPros/Aramis~~AAP and ~~Crisp Results~~Traverse acquisitions (described in Note 66. 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 on the ~~unaudited condensed~~ statement of operations.

The ~~range of outcomes~~contingent consideration payable for the ~~fair value~~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 Note 6. Acquisitions).

The following table presents the contingent consideration ~~did not materially change for Aimtell/PushPros/Aramis from prior period.~~


	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		%
Risk free / Credit risk	12.0		%
Days gap from period end to payment	90

	Aramis
CYE2022 Earnout Successful Probability	99.0		%
Iteration (actual)	100,000
Risk free / Credit risk	12.0		%
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

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


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

The following table represents 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		Contingent Consideration
Balance, December 31, 2021	$	3,960	$	8,439
Additions	—		428
Changes in fair value	(3,480)		2,536
Settlements	—		—
Balance, June 30, 2022	$	480	$	11,403

NOTE 9. 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 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, ~~will be~~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. ~~For additional information see~~The related costs were approximately $3.9 million and $2.8 million for the six months ended June 30, 2022 and 2021, respectively, and are included in “Salaries and related costs” within the Consolidated Statement of Operations.

Restricted Stock Units

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 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 of the PRSUs are also subject to certain performance metrics of the Company, which the Company evaluates on a quarterly basis. ~~Note 12 “Employee and Director Incentive Plans”~~ ~~in the Notes to Consolidated Financial Statements in our 2020 Form 10-K/A.~~

The fair value of ~~non-vested shares~~stock-based compensation is ~~determined~~ based on the closing trading price of the Company’s ~~shares~~stock on the grant ~~date and are amortized over~~date. For PRSUs, fair value was also determined based on the ~~award’s service period. At June 30, 2021, total non-vested~~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 ~~related to restricted stock was $7.0 million, which will be~~is recognized on a straight-line basis over ~~a weighted-average remaining period of 2.04 years.~~the vesting period. The ~~weighted-average grant-date fair value of shares granted during~~PRSU awards’ expense is recognized on an accelerated basis over the ~~six-month period ended June 30, 2021, was $7.14 per share.~~

~~Restricted Shares~~


		Page No.

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	~~Unaudited Condensed~~ Consolidated Balance Sheets (Unaudited)	1
	~~Unaudited Condensed~~ Consolidated Statements of Operations (Unaudited)	2
	~~Unaudited Condensed~~ Consolidated Statements of Changes in ~~Equity~~Deficit (Unaudited)	3
	~~Unaudited Condensed~~ Consolidated Statements of Cash Flows (Unaudited)	57
	Notes to ~~Unaudited Condensed~~ Consolidated Financial Statements (Unaudited)	69
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3634
Item 4.	Evaluation of Disclosure Controls and Procedures	3635
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3736
Item 1A.	Risk Factors	3836
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	3836
Item 3.	Defaults Upon Senior Securities	3836
Item 4.	Mine Safety Disclosures	3836
Item 5.	Other Information	3836
Item 6.	Exhibits	3937
SIGNATURES		4138


			June 30, 2021						December 31, 2020								June 30, 2022						December 31, 2021
		Amortization Period (Years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net			Amortization Period (Years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Intangible assets subject to amortization:
Technology	Technology	3 to 5	$	58,631	$	(26,672)	$	31,959	$	48,008	$	(21,454)	$	26,554	Technology	3 to 5	$	54,346	$	(34,675)	$	19,671	$	51,946	$	(29,929)	$	22,017
Customer relationships	Customer relationships	2 to 9	55,713		(10,653)		45,060		21,794		(6,749)		15,045		Customer relationships	2 to 9	49,423		(17,181)		32,242		49,273		(13,076)		36,197
Brand	Brand	1 to 7	9,621		(1,547)		8,074		4,295		(961)		3,334		Brand	1 to 7	12,168		(5,408)		6,760		12,109		(4,575)		7,534
Non-competition agreements	Non-competition agreements	3	2,222		(881)		1,341		2,105		(591)		1,514		Non-competition agreements	3	1,901		(1,686)		215		1,898		(1,418)		480
Total	Total		$	126,187	$	(39,753)	$	86,434	$	76,202	$	(29,755)	$	46,447	Total		$	117,838	$	(58,950)	$	58,888	$	115,226	$	(48,998)	$	66,228


	June 30, 2021		December 31, 2020
Term loan	$	225,000	$	190,541
Revolving credit facility	0		4,000
Delayed draw term loan	0		8,236
Notes payable	0		1,074
Total debt	225,000		203,851
Unamortized debt issuance costs (1)	(6,755)		(2,293)
Debt, net	218,245		201,558
Current portion of long-term debt	(2,250)		(7,967)
Long-term debt	$	215,995	$	193,591


	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


(In thousands)	SmarterChaos		Aimtell, PushPros and Aramis (preliminary)		Crisp Results (preliminary)		Expected Useful Life
	2020		2021		2021		2021
Goodwill	$	3,078	$	4,853	$	17,370
Technology	$	0	$	10,500	$	0	3 to 5
Customer relationships	$	2,500	$	7,920	$	26,000	5 to 6
Accounts receivable	$	576	$	3,313	$	2,610
Brand	$	277	$	226	$	5,100	1 to 7
Non-competitive agreements	$	0	$	117	$	0	3
Property and equipment	$	28	$	250	$	220	3 to 5
Accounts payable	$	(1,156)	$	(2,966)	$	(1,593)
Other assets acquired and liabilities assumed, net (1)	$	496	$	1,057	$	0
Net assets and liabilities acquired	$	5,799	$	25,270	$	49,707


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


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


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


	Six Months Ended June 30, 2020
Six Months Ended June 30, 2020	Brand Direct		Marketplace		Other		Intercompany eliminations		Total

Net revenue:
Customer acquisition	78,637		69,396		0		(10,246)		137,787
Managed services	7,638		0		899		0		8,537
Software services	0		0		1,600		0		1,600
Total Net revenue	$	86,275	$	69,396	$	2,499	$	(10,246)	$	147,924


	~~Three Months Ended June 30,~~
	~~2021~~
~~Restructuring Lease Liability~~

~~Beginning balance at April 1, 2021~~	$	~~2,966~~
~~Valuation adjustments~~	~~432~~
~~Lease payments~~	~~(487)~~
~~Lease accretion~~	46
~~Ending balance at June 30, 2021~~	$	~~2,957~~

	~~Six Months Ended June 30,~~
	~~2021~~
~~Restructuring Lease Liability~~

~~Beginning balance at January 1, 2021~~	$	~~3,653~~
~~Valuation adjustments~~	81
~~Lease payments~~	~~(870)~~
~~Lease accretion~~	93
~~Ending balance at June 30, 2021~~	$	~~2,957~~


Contingent Consideration assumptions:	Aimtell/PushPros/Aramis		Crisp Results
EBITDA expectations	4,390,925		10,581,397
Risk adjustment EBITDA	3,885,625		9,680,674
EBITDA volatility	115.0	%	70.0	%
Iteration (actual)	100,000		100,000
Risk adjustment discount rate	36.0	%	21.5	%
Risk free / Credit risk	6.2	%	6.2	%
Days gap from period end to payment	90		90


	Private Warrants		Contingent Consideration
Beginning January 1, 2021	$	22,080	$	0
Additions	0		9,688
Changes in fair value	(7,435)		560
Settlements	(5)		0
Ending June 30, 2021	$	14,640	$	10,248


	Private Warrants		Contingent Consideration
Beginning April 1, 2021	$	22,390	$	5,307
Additions	0		4,763
Changes in fair value	(7,750)		178
Settlements	0		0
Ending June 30, 2021	$	14,640	$	10,248


Restricted Stock Units	Number of Restricted Stock	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021	1,197	$	7.31
Granted	56	$	12.10
Exercised	(83)	$	7.31
Forfeited/Canceled	(101)	$	11.73
Outstanding at June 30, 2021	1,069	$	7.14


Stock Options	Number of Stock Options	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in Years)	Total Intrinsic Value of Stock Options Vested
Outstanding at January 1, 2021	551	$	3.34	5.9 years	$	—
Granted	59	$	5.77	5.9 years	$	—
Forfeited/expired	(47)	$	5.33	—	$	—
Outstanding at June 30, 2021	563	$	3.43	5.9 years	$	—
Vested at June 30, 2021	(9)	$	3.34	—	$	47.36


		Three Months Ended June 30,			Six Months Ended June 30						Three Months Ended June 30,		Six Months Ended June 30,
			2021		2020		2021		2020					2022		2021		2022		2021
Revenue by type:	Revenue by type:											Revenue by type:
Customer acquisition	Customer acquisition		96.3	%	91.5	%	95.6	%	93.1	%		Customer acquisition		95.4	%	96.3	%	95.9	%	95.6	%
Managed services	Managed services		2.9	%	7.5	%	3.7	%	5.8	%		Managed services		3.4	%	2.9	%	3.1	%	3.7	%
Software services	Software services		0.8	%	1.0	%	0.8	%	1.1	%		Software services		1.2	%	0.8	%	1.0	%	0.7	%
Total net revenue	Total net revenue		100.0	%	100.0	%	100.0	%	100.0	%		Total net revenue		100.0	%	100.0	%	100.0	%	100.0	%
Revenue by segment:	Revenue by segment:											Revenue by segment:
Brand Direct	Brand Direct		57.0	%	60.3	%	57.5	%	58.3	%		Brand Direct		49.1	%	57.0	%	52.9	%	57.5	%
Marketplace	Marketplace		55.0	%	46.8	%	53.0	%	46.9	%		Marketplace		59.3	%	55.0	%	56.4	%	53.0	%
Other			1.8	%	1.6	%	1.9	%	1.7	%
Corporate and other			(13.8)	%	(8.8)	%	(12.4)	%	(6.9)	%
Technology Solutions												Technology Solutions		2.8	%	1.8	%	2.4	%	1.9	%
Intercompany eliminations												Intercompany eliminations		(11.2)	%	(13.8)	%	(11.7)	%	(12.4)	%
Net revenue	Net revenue		100.0	%	100.0	%	100.0	%	100.0	%		Net revenue		100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	Cost of revenue		67.9	%	69.7	%	69.6	%	69.3	%		Cost of revenue		74.3	%	67.9	%	72.7	%	69.6	%
Gross profit	Gross profit		32.1	%	30.3	%	30.4	%	30.7	%		Gross profit		25.7	%	32.1	%	27.3	%	30.4	%

Salaries and related costs	Salaries and related costs		11.1	%	11.0	%	10.9	%	11.0	%		Salaries and related costs		14.5	%	11.1	%	13.5	%	10.9	%
General and administrative	General and administrative		10.0	%	6.7	%	8.7	%	6.7	%		General and administrative		13.6	%	10.0	%	11.8	%	8.7	%
Depreciation and amortization												Depreciation and amortization		7.9	%	6.7	%	7.1	%	6.2	%
Acquisition costs	Acquisition costs		0.4	%	0.1	%	1.0	%	0.1	%		Acquisition costs		0.3	%	0.4	%	0.1	%	1.0	%
Depreciation and amortization			6.7	%	5.8	%	6.2	%	5.9	%
Income from operations			3.8	%	7.8	%	3.7	%	7.1	%
Change in fair value of contingent consideration												Change in fair value of contingent consideration		(0.1)	%	—	%	1.3	%	—	%
(Loss) income from operations												(Loss) income from operations		(10.5)	%	3.9	%	(6.5)	%	3.6	%
Interest expense	Interest expense		3.4	%	4.6	%	3.4	%	4.9	%		Interest expense		4.2	%	3.4	%	3.7	%	3.4	%
Change in fair value of warrant liabilities	Change in fair value of warrant liabilities		(7.4)	%	—	%	(3.7)	%	—	%		Change in fair value of warrant liabilities		(1.8)	%	(7.4)	%	(1.7)	%	(3.7)	%
Net income before income taxes			5.7	%	3.1	%	2.9	%	2.1	%

Loss on debt extinguishment												Loss on debt extinguishment		—	%	2.0	%	—	%	1.0	%

Net (loss) income before income taxes												Net (loss) income before income taxes		(12.9)	%	5.9	%	(8.5)	%	2.9	%
Income tax expense	Income tax expense		1.0	%	0.3	%	0.6	%	0.2	%		Income tax expense		—	%	1.0	%	0.2	%	0.6	%
Net income			4.7	%	2.8	%	2.3	%	2.0	%
Net income attributable to non-controlling interest			2.3	%	—	%	1.2	%	—	%
Net income attributable to Digital Media Solutions, Inc.			2.4	%	2.8	%	1.2		2.0	%
Net (loss) income												Net (loss) income		(12.9)	%	4.9	%	(8.7)	%	2.3	%
Net (loss) income attributable to non-controlling interest												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.												Net (loss) income attributable to Digital Media Solutions, Inc.		(7.5)	%	2.6	%	(5.1)	%	1.2	%


	Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
	Reported (GAAP)			Adjustments (1)			Adjusted (Non-GAAP)			Reported (GAAP)			Adjustments (1)			Adjusted (Non-GAAP)
Net revenue	$	105,079		$	4,176		$	109,255		$	201,882		$	6,911		$	208,793
Cost of revenue	71,359			4,176			75,535			140,541			6,911			147,452
Gross profit	$	33,720		$	—		$	33,720		$	61,341		$	—		$	61,341
Gross profit margin	32.1		%	—		%	30.9		%	30.4		%	—		%	29.4		%


		June 30, 2021		December 31, 2020		$ Change		% Change			June 30, 2022		December 31, 2021		$ Change		% Change
Cash	Cash	$	18,829	$	31,397	$	(12,568)	(40)	%	Cash	$	26,370	$	26,394	$	(24)	—	%
Availability under revolving credit facility	Availability under revolving credit facility	$	50,000	$	15,000	$	35,000	233	%	Availability under revolving credit facility	$	50,000	$	50,000	$	—	—	%
Total Debt	Total Debt	225,000		203,851		$	21,149	10	%	Total Debt	$	217,339	$	217,755	$	(416)	—	%


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).
~~10.1~~ +^		~~Asset Purchase Agreement, dated April 1, 2021, by and among Digital Media Solutions, Inc.,~~ ~~Edge Marketing, LLC, and wholly owned subsidiary of Digital Media Solutions, LLC,~~ ~~Crisp Marketing, LLC, d/b/a Crisp Results, and Union Health, LLC, a Florida limited liability company, and Justin Ferreira, in his capacity as Sellers’ representative.~~

~~10.2~~ ^		Credit Agreement, dated as of May 25, 2021, by and among Digital Media Solutions, LLC, as borrower, Digital Media Solutions Holding, LLC, the lenders and issuing banks named therein, and Truist Bank, as administrative agent and as collateral agent (incorporated by reference to Exhibit 10.1 to Digital Media Solutions, Inc.’s Current Report on Form 8-K filed with the SEC on May 26, 2021).
~~31.1~~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~~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~~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~~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.
~~101~~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*†	~~The following financial information for the period ended June 30, 2021, formatted in~~	Inline XBRL: (i) Unaudited Condensed Consolidated Balance Sheets; (ii) Unaudited Condensed Consolidated Statements of Operations; (iii) Unaudited Condensed Consolidated Statements of Changes in Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows; and (v) Notes to Unaudited Condensed Consolidated Financial Statements.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/ ~~Vasundara Srenivas~~Richard Rodick
			Name:			~~Vasundara Srenivas~~Richard Rodick
			Title:			Chief Financial Officer (Principal Financial and Accounting Officer)