Digital Media Solutions, Inc.

Thank you for joining us to discuss DMS’ financial results for the fourth quarter and full year of 2020. With me on the call are Joe Marinucci, Co-Founder and CEO and Randy Koubek, CFO.

We posted our earnings announcement this morning in a press release and also on our Investor Relations website. By now everyone should have access.

Before we begin, I would like to call your attention to our Safe Harbor provision for forward-looking statements in our financial results press release. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the contents of our forward-looking statements.

For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the coronavirus outbreak, please refer to our financial results press release and our SEC filings. Also, during this call, management’s commentary will include non-GAAP financial measures.

Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in the tables of our financial results press release, which we have posted to our Investor Relations website at investors.digitalmediasolutions.com. The additional financial and other information to be discussed on this call can be found on our Investor Relations website.

Now, I would like to turn the call over to Joe Marinucci, our CEO.

Thank you, Tom and good morning to everyone joining the call today. We are excited to share the results of another very strong quarter for DMS, which closed out our 2020 fiscal year.

2020 was a uniquely challenging year for us all. Here at DMS, we are extremely proud of our team and their execution against our strategic priorities, which resulted in record results for the quarter and the full year.

We are also excited about our recent growth and for the long-term outlook of digital performance advertising as the digital transformation of ad spend continues, which is an overall secular trend that benefits DMS. In Q4, we achieved record adjusted revenue of $104.7 million, record gross profit of $28.4 million and record adjusted EBITDA of $15.4 million.

Our Q4 revenue growth was an impressive 56.5% year-over-year and for the full year 2020, we achieved record adjusted revenue of $341.2 million ahead of our guidance. Record gross profit of $98.8 million and record adjusted EBITDA of $54.6 million, which is in line with our guidance.

Both our Q4 and our full year performance benefited from continued momentum in growth inside of our largest key vertical, which is insurance. As many of you know, DMS is a leading provider of technology-enabled digital performance advertising solutions.

Our uniquely differentiated business model is driven by our proprietary first-party data asset, proprietary technology and expansive media reach. We leveraged these assets across our entire business to efficiently and effectively connect consumers and advertisers.

Here at DMS, we always talk about the power of people, process and technology. During 2020 prioritizing what we call PPT was as important as ever.

And for that reason, we continually invested in these three areas throughout the year. As a result, 2020 was a year of record revenue growth for us.

We had strong contributions from both major segments we report. Brand-Direct revenues reported a record of $197.5 million, an increase of 13% from 2019.

Marketplace Solutions also came in at a record with $156.5 million in revenue, an increase of 113.2% from 2019. In addition, 2020 was a year of significant transformation across all vertical segments, resulting in healthy EBITDA margins and growth rates.

We are pleased with our results and believe we have demonstrated agility and flexibility during a period of unprecedented uncertainty that has occurred as a result of the pandemic. We are also confident that our agility and the investments we made in 2020 have set us up for continued improvements in growth during 2021 and beyond.

In 2020, we invested to accelerate the key drivers of revenue growth. These investments are letting us take advantage of the long-term transition from traditional to digital advertising across key verticals.

According to eMarketer data, digital advertising spend is expected to increase from $142 billion in 2020 to $171 billion this year and to $243 billion in 2024. Our investments, which follow our people, process and technology priorities, included the following.

For people, we made key strategic hires throughout the organization, including three that I want to highlight today. First, in early January, Tony Saldana joined our team as General Counsel and Executive Vice President of Legal and Compliance.

Joining us from Skadden, one of the world’s leading international law firms. Tony adds significant experience in the areas of mergers and acquisitions, corporate finance, corporate governance and general counsel and securities matters.

Second, also in January, Thomas Bock joined us as our new Executive Vice President of Corporate Strategy and Investor Relations. Tom has significant experience advising both corporate and private equity backed clients with transactions and he has knowledge spanning mergers and acquisitions, debt origination and refinancing and equity and corporate advisory.

Earlier in his career, Tom was a sell-side research analyst covering the internet sector on ranked teams both in the U.S. and Europe.

Lastly, we are welcoming our new CFO, Vasundara Srenivas on March 13. Vasundara’s expertise includes strategic direction, GAAP and IFRS accounting, SEC reporting, M&A and financial operations, which she gained in part from a long career following, where she held numerous positions, including the CFO of Boeing Australia and Boeing Defense Australia; senior roles in corporate finance transformation and enterprise finance and from 2017 through 2020, she was the CFO of Boeing Capital Corporation, a large wholly owned subsidiary of Boeing.

After 2 years on the team, Randy Koubek, our current CFO is leaving after March 12 to pursue other opportunities. Our company has grown tremendously since 2018 and we are sincerely grateful for all Randy’s hard work and contributions and we wish him well in the next stage of his career.

Continuing with our PPT investments, for process, we focused on leveraging ways to better connect our people and our technology. This is especially important for our now fully remote workforce to drive results inside of our business for our advertiser clients and for our media partners.

The process investments we made in 2020 are allowing for more standardization and they are creating efficiencies across the business, enhancing the consumer experience and driving more scale and measurable ROI for our advertiser clients. For technology, we made investments to advance the efficacy of our proprietary technology including the upgrading of our AI and BI capabilities is this technology that connects our data asset to our expansive media reach, which competitively differentiates our service offering.

And lastly, we also made one strategic acquisition, which allowed us to bring in valuable people, process and technology to facilitate growth in the DMS ecosystem. We are confident these investments will continue to provide accelerated growth in 2021 and drive our point of differentiation.

DMS has the people, process and technology to continue to provide value for both consumers and advertisers as the digital transformation of ad spend continues to accelerate. There are number of key highlights from 2020 that I want to share today before passing the call to Randy to discuss our financials.

In March, when the COVID threat first emerged, we prioritized our people acting quickly and decisively to ensure the safety of our DMS family. We cancelled corporate travel, moved to remote working, launched a series of initiatives, keep employees connected, accelerated training programs and ensured consistent employee communication.

As a result of putting our people first, our team has responded by working hard during such tumultuous times. We are grateful to everyone at DMS and their families that support them.

Throughout the year, we saw accelerated growth in our insurance vertical, which now accounts for almost half of our revenues. In total for the year 2020, insurance revenue was $164 million, up 43.9% from 2019.

Inside of the insurance vertical, DMS works with advertisers across the following lines: auto, health, life and home. In total, we have now successfully connected 15 million consumers with auto insurance providers and more than 2.5 million consumers with health insurance providers.

In Q4 alone, during the open enrollment period, or OEP, under 65 health insurance revenue was up 38% and annual election period, or AEP, over 65 Medicare revenue was up 272% versus the prior year. The insurance industry, which includes some of the most advertised brands in the U.S.

dramatically shifted media dollars from offline to digital channels during 2020 and DMS benefited from this transition. We also experienced growth across our other verticals, most specifically as it relates to Q4 within e-commerce.

In fact, our Brand-Direct business was up 53% in Q4 2020 versus 2019. Lastly, in 2020, our online stable of marketplace brands expanded.

Calling out one marketplace specifically, Protect.com will become the flagship marketplace for DMS, helping consumers shop for insurance and many other verticals we support. In December, we soft launch Protect.com as an auto insurance marketplace.

And we have already driven more than 0.5 million unique visitors to Protect.com, which has generated $2.5 million of revenue. As we continue to expand Protect.com in 2021, this marketplace will enable DMS to continue to expand our media reach into emerging channels like connected TV.

In summary, 2020 was a very strong year for us, a year of continued improvement and a year of growth resulting in record numbers both on the top and bottom lines with strong growth in margins. During 2020, advertiser clients spent more of their media dollars with us.

And as a result of that increased media spend, our data asset grew. As our data asset grows, the audience targeting of our AI and BI technology has more inputs and has continually improved.

Our sophisticated targeting capabilities allow us to serve relevant ads, which means putting the right offer in front of the right person in the right place and at the right time. These relevant ads reduce friction from the advertising ecosystem and as previously mentioned, create value for both consumers and our advertiser clients.

It is these targeting improvements that result in consistent improved conversion rates and of course that leads to higher ROI for our advertiser clients, which is our point of differentiation versus traditional media agencies and many other digital advertising competitors. In terms of measuring our scale and efficacy, unlike the standard impression measurement used by many in the industry, we measure the targeted reach of high intent consumers and our ability to successfully engage them.

To publicly quantify our growing scale in this manner, we developed the DMS consumer engagement score, or the CES. Our CES significantly increased from Q1 to Q4 from 47% to 69% quantifiably proving what we know is true.

As more media dollars are spent within the DMS ecosystem, our targeting capabilities are continually improved and our ability to engage consumers at scale is continually enhanced. It is this engagement that results in the ROI for our advertiser clients getting stronger.

We will be releasing more details about the DMS consumer engagement score in our investor deck, including a measurement of the score, how it has trended over time quarter by quarter in 2020. So, one last time, I will turn it over to Randy to briefly run through some of our key financials and I do encourage you to read our earnings release for additional information.

Over to you, Randy.

Thank you, Joe and good morning to everyone. It’s been a great pleasure to work with you and the rest of the DMS team, including Fernando Borghese and our Board of Directors.

I look forward to staying in touch. But just as much.

I look forward to sharing the numbers after our year of continued improvement and growth. I am happy to report that in Q4 2020 we generated record adjusted revenues of $104.7 million, up 23% sequentially and 56.5% year-over-year from Q4 2019.

2020 adjusted revenues totaled $341.2 million representing an increase of 38.7% from 2019. We also reported record adjusted Q4 EBITDA of $15.4 million, up 9.6% from Q3 EBITDA and up 33.1% year-over-year from Q4 2019.

On a reported basis, not adjusted for the fourth quarter, revenue was $102.6 million, an increase of 23.9% from Q3 2020 and approximately 57.5% over the same quarter last year. The sequential increase in our revenue was primarily due to growth within the insurance vertical and growth in e-commerce across both the Marketplace and Brand-Direct Solution segments in addition to the mid Q3 2020 SmarterChaos acquisition.

For full year 2020, reported revenue was $333.4 million, up 39.9% year-over-year. Breaking down our revenue by segment, Brand-Direct Solutions revenue in the quarter was $62.1 million, up 26.3% sequentially and 53% year-over-year.

Total for the year was $197.5 million, an increase of 13% year-over-year. Marketplace Solutions Q4 revenue of $47.6 million increased 20.4% from Q3 due to the growth in insurance sector revenues and increased 81.1% year-over-year.

Total for the year was $156.5 million, an increase of 113.2%. Other solutions revenue, which primarily includes Sparkroom SaaS technology fees, was $4 million in Q4, up 38.5% from Q3 and up 235% year-over-year.

Total for the year was $9.5 million, an increase of 69.3% year-over-year. In regards to gross margin gross profit, the company has experienced rapid revenue expansion and is focused on high growth highly competitive verticals with significant digital advertising spend.

As we continue to expand in such areas, we sometimes have to do so at relatively lower margins to gain market share, which lower segment and consolidated margins. Our margin is subject to quarterly variation, primarily due to changes in sales mix, as segments of our business carry different margin profiles.

We do believe that over longer periods of time, margins will remain stable and consistent with prior trends. For the fourth quarter, reported gross profit was $28.4 million or a 27.7% margin versus $25.1 million or 30.2% in Q3 and compared to 31.7% for the same quarter in 2019.

For 2020, gross profit was $98.8 million or a 29.6% margin and an increase of $22.1 million or 28.8% year-over-year. Breaking down GAAP reported gross margin by segment, Q4 Brand-Direct Solutions gross margin was 22.2%, down slightly from 23.1% in Q3 and down slightly from 25.5% the same quarter last year.

The margin was influenced by substantial diversification in our distribution channels as we continue to scale growth. Brand-Direct 2020 gross profit was $46 million or a 23.3% margin versus $44.3 million or a 25.4% margin in 2019.

Q4 Marketplace Solutions gross margin was 27%, down from 30% in Q3 2020 and down from 34.3% in the year ago period. The segment is heavily weighted by a rapid growth in the insurance market, which carries gross margins of approximately 28.8%.

Marketplace 2020 gross profit was $46.6 million or a 29.8% margin, an increase of $19.9 million or 74.1% year-over-year. A few quick words on operating expenses.

We remain focused on improving and leveraging our business, while balancing our investments for growth. Our total operating expenses amounted to $22.3 million in the fourth quarter, an increase of $1.1 million or 5% from Q3 2020 and up 15.8% year-over-year.

This $22.3 million number excludes lease reserves of $3.2 million, $0.9 million in stock compensation expense, and $0.4 million in loss on disposal of assets. As a percent of revenue, total operating expenses was 26% in the fourth quarter, down slightly from 26.8% in Q3 2020.

Exclusive of lease termination costs, stock compensation expenses and the loss on disposal of assets, Q4 operating expenses represented 21.7% of revenues, down sequentially from prior quarter of 25.6%. For 2020, reported operating expenses totaled $83.8 million, up 9% from 2019.

Salaries and related costs in the fourth quarter were $9.7 million, an increase of 30% year-over-year and 23.4% from Q3 2020 which is inclusive of approximately $1 million in stock-based compensation. Excluding this stock compensation, Q4 salaries and related costs increased 12.3% sequentially.

For the full year, salaries and related costs totaled $33.8 million, an increase of 21% from 2019 due to a full year of headcount from corporate acquisitions. We ended the year with a total headcount of approximately 400 full-time employees.

Finally on profitability, adjusted EBITDA in the fourth quarter was $15.4 million or an adjusted EBITDA margin of approximately 15%. This represents an increase of 9.6% from Q3 and a 33.1% increase in Q4 2019.

Net loss in the fourth quarter was $2.9 million, up 33.7% from Q3. For 2020, net loss was $2.2 million, an improvement of 80.4% from 2019 net loss of $11.2 million.

Q4 net loss per share of $0.05 for Class A common stock is based on 32.4 million shares outstanding. Full year 2020 loss per share of $0.01 is based on 32.4 million shares as well.

On an adjusted basis, Q4 earnings per share, was $0.04 per share and for the full year 2020, adjusted earnings per share was $0.17 per share. We defined adjusted earnings per share as adjusted net income divided by the weighted average of shares of Class A common stock outstanding assuming the acquisition by Digital Media Solutions Inc.

of all outstanding LLC units not held by subsidiaries of Digital Media Solutions, Inc. for newly issued shares of Class A common stock on a one-to-one basis.

And as a reminder, for the purposes of market capitalization and enterprise value calculations, the total shares outstanding should be equal to the sum of Class A and Class B shares for a total of approximately 58.7 million shares. Our effective tax rate was not meaningful in Q4.

It varies greatly from the statutory tax rate of 21% due to a significant portion of our operations in Digital Media Solutions Holding Company, a partnership for federal and state income tax purposes, which is not applicable to DMS, Inc. and therefore not subject to the statutory tax rate of 21%.

For the full year, our effective tax rate was 273.6%. Lastly, turning to the balance sheet and liquidity, we ended the quarter with $31.1 million in cash, cash equivalents and marketable securities, up by $6.6 million from the end of Q3.

Our total debt, net of issuance cost, was $200.5 million. As of December 31, 2020, our net leverage ratio was 3.14x compared to 3.88x at December 31, 2019.

As of December 31, 2020, we also had an available balance on our revolving credit facility of $11 million. As is evidenced in these numbers, we continue to convert substantial free cash flow from operations, which has helped strengthen the balance sheet and de-lever the business on a net debt basis.

In summary, we are pleased with our record Q4 and full year 2020 financial performance and remain optimistic about the underlying strength of our business over the long-term. As shown during a challenging 2020, DMS at the forefront of digital performance-based advertising is a highly resilient business model, setup for continued improvement and continued strong performance growth.

I will now turn it back to Joe for some closing remarks.

Thanks, Randy. In closing, I want to give everybody a brief peek into 2021 before Randy and I open up the call for questions.

The current quarter has started off strongly with insurance again being a key driver. Protect.com and our portfolio of Marketplace and Brand-Direct Solutions are supporting the growth of our auto insurance business.

Plus the Biden administration has added a second OEP period happening right now through May 15, which will help continue to scale our health insurance business. Consumers’ online shopping habits have changed and are now likely to continue providing for a strong outlook for our e-commerce business.

We closed the acquisition of Aimtell’s PushPros and Aramis Interactive at the beginning of this month. We are very excited about the addition of the people, process and technology that came with this transaction.

Plus with this acquisition, we successfully added additional AI-powered capabilities and hyper targeted push technologies. The acquisition also gave us larger audience reach and an expanded first party data asset engaging with millions of additional consumers each month.

We continue to be happy with our growth prospects carrying the strong organic growth momentum into the current quarter. Our M&A pipeline remains robust and our team continues to see and thoroughly evaluate a number of interesting opportunities.

And we will continue to stay disciplined with our M&A strategy as we look to augment our strong growth. As for the rest of this quarter is concerned, current Q1 2021 consensus estimates are $95.3 million for revenues and $15.4 million for EBITDA.

This compares to Q1 2020 adjusted revenues of $74.6 million and adjusted EBITDA of $12.2 million. 2021 consensus revenue is $416.7 million with an EBITDA estimate of $70.8 million.

We are happy to share with you that DMS is currently comfortable that we will meet or exceed these forecasts. With that, we thank you for your interest in DMS and we will now open the lines for questions.

Operator, if you could please let our friends know what they need to do if they have questions. That would be great.

Thank you.

Good morning, and thanks for the questions. I wanted to ask you about your Brand-Direct segment.

So you’ve highlighted diversification of distribution channels that are sort of impacting gross margins in the near-term. Can you just talk about where you are in the process?

What are some channels that you’ve added and that you’re adding? And where do you see gross margins over time?

And maybe related to that, can you just talk about your progress in connected TV?

Hi, Maria. Good morning.

Good to speak to you again. This is Joe speaking.

Couple of questions there. So I guess I will take the growth in the vertical/solutions question first.

So, our technology stack is industry agnostic. And because of that, we’re able to work with advertising partners across a number of different verticals, as you know.

And clearly, as we talked about on the call insurance is our biggest vertical, but we don’t think about industry segmentation in a specific way. Our two key segments are Brand-Direct and then Marketplace Solutions.

And as we’ve talked about Brand-Direct is a one-to-one solution and Marketplace one-to-many with regard to consumers. And inside of those two solutions, there is a mix of sectors within each of those.

So we did see really good growth in 2020. And both segments as Randy talked about, and then if you think about inside of that insurance as a vertical, which spans both segments, we saw demonstrable growth, insurance as a vertical across all lines for DMS in 2020, grew 44% with total revenue of $164.4 million.

And then inside of insurance, we look at subcategories too so we saw substantial growth in the health insurance category, specifically in the AEP, Medicare lines growth, there was very substantial 272% versus the prior year. But when we look at like Q4 as an example, and we look at the different segments of the business.

Q4 was a solid quarter for us. And we saw really solid growth in both segments in Q4.

So Marketplace grew over the comparable quarter in 2019. By 20%, and then Brand-Direct outpaced that and grew by 26%.

And the two biggest verticals inside of that growth are, you’re going to have insurance, and then you’re going to have the e-commerce brand revenue inside of that. So inside of the Q4 quarter, and both of these will insurance will span both categories.

And then the e-commerce brand category will live mainly inside of Brand-Direct. So, we had really strong growth in Q4, versus the prior quarter sequentially in 2020, insurance and Q4 grew to $52.9 million.

So that was 25% growth sequentially. And then e-commerce brand revenue grew to $17.3 million and that was 32% growth sequentially.

So, I guess again, just back to the top, with the vertical agnostic, channel agnostic nature of the business, we look across the two solutions, and we’re very pleased with the growth that we saw last year, and then the categories that are growing fastest, I guess I would point out the insurance category, all lines and then e-commerce. And this is something we talked about on Q3.

So I think the second question was with regard to margin. So, you know, again, I will, I’ll say this, look, we’re really pleased with the strong growth we saw in Q4, obviously said that on the earnings call both over the Q3 2020 period in the Q4 period from 2019.

And obviously, we’re pleased with the success that we’ve had in the areas that have already called out like insurance and e-commerce. And there is positive trends in both verticals continuing into 2021 and beyond, with specific regard to margin, we don’t ultimately manage the business to an absolute margin profile.

This is not conducive, if you will to delivering value for consumers or ROI for advertisers that said over time, as Randy spoke to on the call, our margins have fluctuated, especially during the Q4 period and verticals like -commerce, which are impacted by holiday spending trends. And then last year, we had the presidential election.

That said we didn’t see anything in our Q4 performance that concerns us with regards to our gross margin and we continue to believe margin levels will stay inside our historical quarterly ranges of 27% to 30% going forward. So, I think there might have been a third question about connected TV in there.

So, if you think about just from a economic moat concept, the more consumers we successfully connect with advertisers, the smarter our AI and BI algorithms get, and with that, as we deploy more media dollars, we interact with more consumers, we have increased efficiency, this is that virtuous flywheel effect. And when we engage across all channels, on the expense side of the business whether it be search social, native, programmatic or connected TV, we are able to leverage the same set of tools, the data asset, the technology and obviously the expansive media reach.

So, we continue to expand in connected TV. It is a new channel for us.

As such, the margin profiles there are moving around quite a bit as opposed to channels that we have been in for quite some time and that is the way things go and we expect over time that we will continue to grow into connected TV and video and that will be a contributor to the growth of the business. So I think I got all three of your questions.

Yes, that’s very helpful, Joe. Thank you.

And maybe just a quick follow-up, as we look at your full year guidance, obviously, it implies a very healthy growth, what is some sort of puts and takes there that could accelerate that growth even further?

Well, we had an outstanding 2020, from a growth perspective, and as a result, we feel really confident with where we are at with the business. And given where the current consensus estimates are today, that implies a pretty healthy growth rate over our strong 2020 performance.

It’s 22%. So, like you are getting out here, we feel confident with the estimates, because we feel they are achievable.

And we have every intention of outperforming those estimates, what could be an accelerator to that? Well, obviously, on the call, we talked about a number of different things, I can say macro, would be the continued acceleration of the digital transformation of ad spend in key verticals like insurance.

We look at all lines of insurance, the two biggest lines being auto and health for us as accelerators, and with the growth of Protect.com, we look at that as a potential opportunity to exceed, obviously, we value organic growth, and we could make one acquisition last year, and we did make the one acquisition earlier this month. So, we do look at M&A as an opportunity to accelerate organic growth.

So, that that’s what I would call out is when you get into our intention to outperform the estimates as being factors that could help us accelerate.

Got it. Thank you so much for the color.

You’re welcome.

Good morning and thanks for taking my questions. Yes, I was hoping to get some additional color on how some of your other verticals outside of insurance perform, I think you did touch on a bit, Joe.

But if you could just kind of step us through how your other larger verticals like education and CPG are doing that would be great? Also had a question, just on how the top 20 customers are trending?

How did that perform in FY ‘20, I think, continues to be a strength of yours. But just talk about maybe how that cohort grew and the retention trends there.

And then last question, just on acquisitions. This last one was mostly like a platform acquisition.

You’ve done others, like smarter chaos are kind of like geared towards a specific demographic. You just kind of clue us in on what your strategy going forward is what can we expect in terms of your priorities for M&A and what areas that might be focused on?

That would be great. Thank you.

Hey, Marvin. Good morning.

This is Joe speaking. Good to have you on.

And thank you for the questions I wrote. Sounds like three of them down.

So I’ll try to run through it. Okay, so to the first question in regards to the vertical expansion, or how we’re doing in key verticals.

So look, I mean, obviously, we’re very pleased with our Q4 performance in our full year 2020 performance. And the business did see very strong growth in Q4 with insurance, and e-commerce leading the way as we strongly believed and I think we were pretty vocal about this on the Q3 earnings call back in November.

So when we look at the e-commerce brand segment of the business that would encompass some of the CPG and there is a lot of diversification inside of e-commerce. Back in Q3, we talked about some of the work that we do in the charitable giving space with some of the large charitable organizations in the United States.

And that’s a segment that continues to grow for us, but I mean, I guess just generally, like with the comments that, I gave to Maria on the growth and just Marketplace and Brand-Direct, Brand-Direct still is the larger portion of the business. It has been historically over time, the trends there remained pretty consistent in terms of the percentage of overall revenue.

Marketplace grew pretty demonstrably in 2020 Brand-Direct did lag a little bit and that was mainly because of COVID related, I would say growth pullback in the first couple of quarters of the year. But then we saw, as I noted, really strong growth in the fourth quarter, mainly on the back of people aggressively coming back in to get caught up on the year.

So, generally the verticals like insurance, e-commerce and brand are outperforming and the e-commerce brand vertical will live inside of the Brand-Direct side of the business, which actually outpaced growth in Marketplace solutions in Q4. So there is a lot of different segments inside of the e-commerce segment of our business.

And we would service like I said that the charitable organizations in there, you have a pretty good diverse set of client groups in there some home services clients, you would have some publishing clients in there as well. So it’s, it’s pretty diverse.

And then with regard to the top 20 customers, look with the business growing the way that it has been growing. And just generally with growth in digital ad spend, I mean, 2021, that’s expected to be $171 billion growing to $243 billion in 2024.

There is really strong secular talents there. So, everybody seems to be keyed in on consumers doing more online and the digital transformation of ad spends.

So, I guess what I’ll say is, with regard to the top 20 customers, historically, retention rates have been extraordinarily high, 90% plus, to the extent that we have customers moving in and out of the top 20, a lot of times, it’s because they are being displaced by new customers moving into the top 20. And the customer that was in the top 20 is now in the top 25, or the top 30, as a result of, just increasing spend as a result of macro industry trends.

So, we don’t see any change to the very strong customer retention rates that we have historically had, which is a really good trend for the business, and does help support our growth, and our ability to look out into the future, and predict how the business will perform, especially if we have that consistency with, the top 20 customers and beyond. And then the final question was, was M&A, so look, we’ve always had a very disciplined approach to how we look at M&A, we have a really connected team, and we do see a lot of quality deals.

Like I said to Maria, we really see M&A as a driver to our organic growth initiatives. So, what that means is reality.

Marvin, we’re looking at curves. And organic growth can take us up those curves inside of the different verticals that we operate.

And then there is also the curves with regard to distribution capabilities. So we’re really looking at two sides of the business, we’re looking at the ad demand side of the business with regard to verticals, and then we’re looking at the distribution side of the business with regards to how we source media, and those are really the two critical components in the ecosystem, ad demand and distribution, because you need to connect it to in order to grow, right.

So, as we grow the business organically and the ad demand/vertical side of the business grows and the distribution side of the business grows, we are on curves in both – on both sides of the business, and then on the ad demand side and the different verticals. And as we move up those curves, and we operate, we grow the business organically.

So we look at M&A as being an accelerator. And when M&A is done selectively and done, right.

It allows us to get access to segments of those curves, which once we move up the segment of that curve it will accelerate our organic growth further. So I guess to the last part of that question, as far as pipeline opportunities go, I’m not going to specifically comment but what I’ll say is we’re going to continue to be selective with our M&A approach and our philosophies, which over time had been demonstrated to work very, very well for us.

So I think I got all three components of your question. You tell me, if I didn’t.

Yes. No, that was everything.

That was super helpful, Joe. Thank you very much.

And good luck, Randy, on your next step.

Thank you very much.

Great. Thanks for taking the questions.

I guess first, maybe to put a finer point on organic versus M&A driven growth in 2020 and others, I think like $57 million in 2019. It looks like it was in Q4.

So as we’ve looked at the growth for 2020, I mean, how much of that has contributed to the acquisition that was made kind of late in 2019 versus kind of the core business that maybe it was after the acquisitions you made in 2018? How do we think about organic growth versus M&A in 2020?

And then I know there is some upside to Outlook on M&A. But is there any M&A built into kind of the, I guess, guidance you’re giving today?

Thanks.

Hey, Nick. Good morning.

Good to speak to you. Again, this is Joe speaking.

So the first part of the question with regard to organic, inorganic growth, so the way that we look at it, if we’re going to be out there, and we’re going to do M&A as an example, which, as I said, we’re going to do selectively and we’re going to do it right, we’re going to be, consistent with, with our approach in terms of how we go out and acquire companies, that means that any business that we acquire would have to be integrated synergized and harmonized inside of DMS, which means that that business would very much exist inside of the one DMS ecosystem, which is a very holistic, symbiotic ecosystem. So when we acquire businesses, we do so with that intent.

And with that, the way that the business operates, the core set of tools that we’re leveraging that is effective across both solutions, which would be Brand-Direct, and Marketplace, and which would power all verticals, would be the data assets, the technology and the expansive media reach and it is that toolbox across both solutions, across all verticals that pushes the business forward. So the way that we look at it isn’t so much organic and inorganic, it’s really leveraging the totality of our connected ecosystem, leveraging the technology, the AI and the BI aspects of it, making smarter media buys, which leads to increased efficiency, which then does generates as you go around the wheel, so to speak, that virtuous flywheel effect, which moves the business forward.

So we really look at it. And it would be very difficult to untangle this because of what I said, which would be where you’re getting at is, if you were to look at specific acquisitions, what growth are you attributing to them?

Well, as I said, they have been integrated and harmonized, and they now exist, they don’t exist, everything exists inside of DMS. And that means we have Brand-Direct and marketplace solutions.

And we’re leveraging, the same toolbox, which would be the data assets, the technology and expansive media reach. So we very much look at growth in totality across the business, which goes back to that virtuous flywheel effect that I was getting at, which means as the business moves forward, it’s powering its own growth.

So that’s how we look at it. And then I guess, the final question – part of that question was, with regards to the accelerator on M&A, and I think, I covered this with the explanation I gave Marvin, which is, we’re really looking at leveraging that toolbox that I’m talking about here and seeing that result in organic growth of the business just moving itself forward growth in general.

And when we’re looking at areas of the business where we can gain efficiencies by getting those segments of curves, whether they are in verticals like insurance, or subcategories of insurance, like say health insurance, or whether you go into a category, like home services, we are looking at those curves and evaluating where we are, where we want to go. And, based on our acquisition philosophy is there something out there that makes sense for us to acquire that gives us a segment of the curve, which once we get it, we can get a one plus one equals something greater than two, hopefully three or four, because then we can really accelerate up the curve.

So, that’s generally how we are looking at this. So I think I answered your question, but you will tell me.

No, that’s great. Thank you.

You are welcome.

Alright. Thanks guys.

Just wanted to start out on Protect.com sounds like you are leading with that product in auto insurance had some early success there. Wondering if you can give detail on how you’re driving traffic.

How do monetization trends compare there versus the other properties that you’ve utilized in the past? Again, recognizing that it’s pretty early on that side, but just wondering if there is anything you can give us in terms of what you’re seeing to start out?

Okay, so hey, Jason. Good morning, this is Joe, speaking again, good to speak to you.

And thank you for the question. So look, generally, we’re really pleased and excited about the growth and momentum in our insurance business across all lines, specifically inside of this segment.

Auto Insurance, we – which is the featured insurance set on Protect.com now, but ultimately, Protect will move into auto health, life and home and then it’ll move into adjacent categories as well. But with regard to auto, we continue to benefit from secular tailwinds as major insurers across all lines, move dollars digital, and we did see really solid growth in Q4.

And inside of Q4, we were able to launch the Protect.com, Marketplace solution. And, I mean, generally like we’re looking at, core requests continually increasing with the growth of business.

And that’s off the back of generally how we spend our media dollars, which is leveraging the data asset, leveraging our technology, and then going out and deploying them, channel agnostic via our expansive media reach, as we see best to help us connect the consumers and the advertisers and the ecosystem because we need to create value for consumers. And we also have to drive ROI to the advertisers.

So we’re balancing this and as you continue to leverage the data asset, and you get smarter media buys, you get increases –increased efficiencies, and that leads to the whole virtuous flywheel effect. And with a site like Protect.com, we see halo effect and having a Premier.com one word domain.

So this benefits, our media buying strategy. And when you couple that up with, where we’re starting out, which is inside of the auto insurance vertical, where, generally you continue to see more premiums written online in 2020, $87.5 billion in auto insurance premiums were written online, and that’s going to grow, it’s almost going to double by 2024 to $174.5 billion.

So, clearly that’s demonstrated of the trend that we’ve been talking about, which is digital ad spend, growing and consumers value optionality, they go online, they shop, they shop for auto insurance to shop for other lines of insurance, our value proposition is to put relevant ads in front of them leveraging, our core group of assets, data technology, and expansive media reach. So they can make smarter, more efficient decisions by getting matched up with advertisers and Protect.com doing that.

So, because of the premier domain, because of the expansive media reach that we have, and the data assets that we leverage, when we go out there and deploy our media dollars, like, we’ve been very effective with that site, which is why, we’ve seen such substantial growth in such a short period of time, and we believe that that will continue throughout 2021.

Maybe dovetailing on your thoughts there with your data assets, curious how the conversations with customers evolve over time. Obviously, you are getting some media dollars you are executing that seemingly, continuing to improve on an ROI basis.

I’m just curious like, to what degree are these data assets becoming, the focal point of these conversations in driving you to get more media spend over time?

It’s a good question. Thanks for asking it.

I think the way that I’m going to go about answering that is by talking a little bit about consumer engagement score. And this will help you get your arms around this.

So if you think about the totality of the digital ecosystem on a daily basis, there is approximately 25 billion impressions across the various media exchanges. And when you multiply that by 90 days in a quarter, you just have an enormous number, enormous number.

So the DMS consumer engagement score is measuring our DMS is that is target engagement, which is only 7 billion impressions for the entire quarter. And when you think about that, you see that we have very narrow, targeted reach.

But I guess the flip on that is as you can also see the enormous amount of room that we have to grow which gets us excited. But just going back to the CES for a second which measures targeted reach, what we’re really referring to there is our ability to put the right offer in front of the right person in the right place at the right time.

And that is what is going to create value for the consumer and drive ROI for the advertiser. So, I just go back to my earlier point, when you look at how early we are in the curve here and how in our targeted reach right now is 7 billion, which is really small compared to that enormous number.

As we continue to leverage the data asset and spend our dollars putting the right offer in front of the right person in the right place at the right time. This creates efficient and valued processes like matches – like mentioned, and in reality, what the CES is, is a success metric showing our efficacy to consume the right impressions to create optimal consumer engaged – engagement, which is directly attributed to results.

And that ties back to data technology and expansive media reach. So I think I answered your question in a roundabout way by going through consumer engagement score, but you’ll tell me if I didn’t.

No, no. Got it.

That’s helpful. I appreciate it.

Thanks, Joe.

You’re welcome.

Thank you. We appreciate everyone joining today.

As you can tell, we are very excited about how 2020 finished up and even more excited about our first quarter and our prospects for the rest of 2021. I’d like to say goodbye by thanking everybody for their time today and look forward to speaking in May on our Q1 earnings call.

Thank you.