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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024


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

For the transition period from _________ to __________

_______________________________________

Digital Media Solutions, Inc.

(Exact name of Registrant as specified in its charter)

_______________________________________


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:

Title of each class

TradingSymbol(s)

Name of each exchangeon which registered

Class A common stock, $0.0001 par value per share

DMSL (1)

N/A (1)

None

____________________

(1)On October 10, 2023, the New York Stock Exchange (the “NYSE”) filed a Form 25 to delist our common stock and remove it from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The delisting was effective 10 days after the Form 25 was filed. The deregistration of the common stock under Section 12(b) of the Exchange Act will be effective 90 days, or such shorter period as the Securities and Exchange Commission may determine, after filing of the Form 25. Our common stock is currently quoted on the Over-The-Counter Pink Market under the symbol “DMSL”.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 growth company” in Rule 12b-2 of the Exchange Act.

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

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. ☐

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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 ~~November~~May 1013, ~~2023~~2024, 24,~~765~~442,~~764~~103 shares of the registrant’s Class A common stock; ~~1,672,139~~no shares of the registrant’s Class B common stock, par value $0.0001 per share; and 28,443,522 warrants to purchase ~~shares~~one-fifteenth share of the registrant’s Class A ~~common~~Common ~~stock~~Stock, ~~par value $0.0001 per share,~~ were issued and outstanding.

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Digital Media Solutions, Inc.

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		Page No.
Part I. Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit	3
	Consolidated Statements of Cash Flows	75
	Condensed Notes to Consolidated Financial Statements	96
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3023
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4235
Item 4.	Evaluation of Disclosure Controls and Procedures	4336
Part II. Other Information
Item 1.	Legal Proceedings	4538
Item 1A.	Risk Factors	4538
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	4538
Item 3.	Defaults Upon Senior Securities	4538
Item 4.	Mine Safety Disclosures	4538
Item 5.	Other Information	4538
Item 6.	Exhibits	4639
Signatures		4740

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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 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 (the “Securities Act”), 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 and the Private Securities Litigation Reform Act of ~~1955~~1995. These forward-looking statements are often identified by words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “assume,” “likely,” “predicts,” “potential,” “continue,” and similar expressions. These forward-looking statements include, without limitation, ~~DMS’s~~our expectations with respect to ~~its~~our ~~and ClickDealer’s~~ future performance and ~~its~~our 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~~a number of judgments, risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside ~~DMS’s~~our control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) DMS’s ability to attain the expected financial benefits from the ClickDealer transaction; (2) any impacts to the ClickDealer business from our acquisition thereof, (3) the COVID-19 pandemic or other public health crises; (4) management of our international expansion as a result of the ClickDealer acquisition; (5) changes in client demand for our services and our ability to adapt to such changes; (6) the entry of new competitors in the market; (7) the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions; (8) the ability to maintain, grow and protect the data DMS obtains from consumers and advertisers, and to ensure compliance with data privacy regulations in newly entered markets; (9) the performance of DMS’s technology infrastructure; (10) the ability to protect DMS’s intellectual property rights; (11) the ability to successfully source, complete and integrate acquisitions; (12) the ability to improve and maintain adequate internal controls over financial and management systems, and remediate material weaknesses therein, including any integration of the ClickDealer business; (13) changes in applicable laws or regulations and the ability to maintain compliance; (14) our substantial levels of indebtedness; (15) volatility in the trading price of our common stock and warrants; (16) fluctuations in value of our private placement warrants; (17) risks arising from the delisting of our common stock from the NYSE; and (18) other risks and uncertainties indicated from time to time in DMS’s filings with the U.S. Securities and Exchange Commission (“SEC”), including those under “Risk Factors” in DMS’s Annual Report on Form 10-K/A for the year ended December 31, 2022, filed on April 5, 2023 (“2022 Form 10-K/A”) and its subsequent filings with the SEC.

•financial and business performance, including business metrics and potential liquidity;

•changes to our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, including related to our strategic review process and the potential sale of all or part of our business;

•ability to attain the expected financial benefits from the ClickDealer transaction;

•any impacts to the ClickDealer business from our acquisition thereof,

•ability to successfully recover should DMS experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, data breach, power loss, telecommunications failure or other natural or man-made event;

•ability to manage our international expansion as a result of the ClickDealer acquisition, including operations in the Ukraine;

•the Company’s exposure to potential criminal sanctions or civil penalties for noncompliance with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan, Syria and Venezuela, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions;

•changes in client demand for our services and our ability to adapt to such changes;

•the entry of new competitors in the market;

•the ability to maintain and attract consumers and advertisers in the face of changing economic or competitive conditions;

•the ability to maintain, grow and protect the data DMS obtains from consumers and advertisers, and to ensure compliance with data privacy regulations in newly entered markets;

•the performance of DMS’s technology infrastructure;

•ability to protect DMS’s intellectual property rights;

•ability to successfully source, complete and integrate acquisitions;

•ability to improve and maintain adequate internal controls over financial and management systems, and remediate material weaknesses therein, including relating to revenue and the impairment of goodwill and intangible assets;

•the continuously evolving laws and regulations applicable to our business in the United States and around the world and our ability to maintain compliance therewith;

•our substantial levels of indebtedness;

•our ability to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows, including our ability to service our debt obligations under our senior secured credit facility, entered into on May 25, 2021 (as amended from time to time, the “Credit Facility”);

•our ability to comply with the covenants in our Credit Facility and our obligations to the holders of our Series A convertible redeemable Preferred Stock (“Series A Preferred Stock”) and Series B convertible redeemable Preferred Stock (“Series B Preferred Stock,” collectively the “Preferred Stock”);

•volatility in the trading price of our common stock and our Public Warrants and fluctuations in value of our Private Placement Warrants and the Preferred Warrants (collectively, the “Warrants”); and

•other risks and uncertainties indicated from time to time in DMS’s filings with the U.S. Securities and Exchange Commission (“SEC”), including those under “Risk Factors” in DMS’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on April 18, 2024 (“2023 Form 10-K”) and its subsequent filing with the SEC.

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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.

These forward-looking statements are based on information available as of the date of this Quarterly Report, and current expectations, forecasts and assumptions. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or similar transactions.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Balance Sheets

(in thousands, except per share data)

	September 30, 2023		December 31, 2022
	March 31, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1714,~~246~~181	$	4818,~~839~~466
Accounts receivable, net of allowances of $4,404 and $4,656, respectively	38,708		48,109
Restricted cash	505		502
Prepaid and other current assets	2,701		3,296
Accounts receivable, net of allowances of $3,732 and $4,172, respectively	32,397		35,322
Income tax receivable	2,579		1,966
Contract assets - current, net	5,613		6,467
Total current assets	61,234		102,210
Prepaid and other current assets	2,980		2,908
Property and equipment, net	15,929		17,702
Income tax receivable	2,064		2,133
Operating lease right-of-use assets, net	1,007		2,187
Total current assets	57,740		65,798
Goodwill	48,444		77,238
Property and equipment, net	14,454		15,390
Intangible assets, net	39,956		27,519
Operating lease right-of-use assets, net	692		862
Deferred tax assets	968		—
Goodwill	32,849		32,849
Other assets	1,434		765
Intangible assets, net	28,071		29,441
Total assets	$	168,972	$	227,621
Contract assets - non-current, net	1,015		1,632
Other assets	1,197		1,315
Total assets	$	136,018	$	147,287
Liabilities, Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable	$	3642,~~824~~331	$	3941,~~908~~235
Accrued expenses and other current liabilities	910,~~817~~568		710,~~101~~548
Current portion of long-term debt	2,750		2,~~250~~750
Tax Receivable Agreement liability	164		164
Operating lease liabilities - current	21,~~067~~812		21,~~175~~812
Contingent consideration payable - current	1,~~779~~000		1,~~453~~000
Total current liabilities	5358,~~401~~625		5357,~~051~~509
Long-term debt	~~274~~299,~~040~~119		~~254~~286,~~573~~353
Deferred tax liabilities	—284		~~1,112~~314
Operating lease liabilities - non-current	~~733~~187		~~2,232~~532
Warrant liabilities	~~718~~1,016		~~600~~82
Contingent consideration payable - non-current	~~1,281~~495		—512
Total liabilities	~~330~~359,~~173~~726		~~311~~345,~~568~~302
Preferred stock, $0.0001 par value, 100,000 shares authorized; 80 Series A and 60 Series B convertible redeemable issued and outstanding, respectively at September 30, 2023	16,490		—
Preferred stock, $0.0001 par value, 100,000 shares authorized; 80 Series A and 60 Series B convertible redeemable issued and outstanding, respectively, at March 31, 2024	16,802		16,646
Stockholders' deficit:
Class A common stock, $0.0001 par value, 500,000 shares authorized; 2,766 issued and outstanding at September 30, 2023	4		4
Class A common stock, $0.0001 par value, 500,000 shares authorized; 4,287 issued and outstanding at March 31, 2024	4		4
Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 1,672 issued and outstanding at September 30, 2023	3		3
Class B convertible common stock, $0.0001 par value, 60,000 shares authorized; 1,672 issued and 151 outstanding, respectively, at March 31, 2024	3		3
Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at September 30, 2023	—		—
Class C convertible common stock, $0.0001 par value, 40,000 authorized; none issued and outstanding at March 31, 2024	—		—
Additional paid-in capital	(1279,~~077~~298)		(1480,~~054~~523)
Treasury stock, at cost, 10 and 0 shares, respectively	(235)		(181)
Treasury stock, at cost, 7 and 7 shares, respectively	(235)		(235)
Cumulative deficit	(96151,~~593~~773)		(32126,~~896~~230)
Total stockholders' deficit	(~~108~~231,~~898~~299)		(47206,~~124~~981)
Non-controlling interest	(689,~~793~~211)		(367,~~823~~680)
Total deficit	(~~177~~240,~~691~~510)		(83214,~~947~~661)
Total liabilities, preferred stock and stockholders' deficit	$	~~168~~136,~~972~~018	$	~~227~~147,~~621~~287

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
			Three Months Ended March 31,
	2023		2022		2023		2022
					2024		2023
Net revenue	$	~~76,033~~	$	~~90,066~~	$	~~248~~70,~~898~~709	$	~~290~~90,~~372~~313
Cost of revenue (exclusive of depreciation and amortization)	~~58,506~~		~~66,378~~		~~189~~56,~~892~~407		~~211~~68,~~997~~042
Salaries and related costs	~~10,770~~		~~11,668~~		3410,~~484~~957		3812,~~612~~226
General and administrative expenses	~~10,087~~		~~9,076~~		3511,~~072~~402		3212,~~622~~856
Depreciation and amortization	~~4,778~~		~~7,142~~		153,~~732~~726		215,~~377~~082
Impairment of goodwill	—		—		33,795		—
Acquisition costs					—		2,345
Impairment of intangible assets	—		—		7,791		—
Change in fair value of contingent consideration liabilities					(17)		13
Acquisition costs	17		14		3,020		306
Loss from operations					(11,766)		(10,251)
Change in fair value of contingent consideration liabilities	(208)		(3)		(285)		2,533
Interest expense, net					13,488		6,699
Loss from operations	(7,917)		(4,209)		(70,603)		(17,075)
Change in fair value of warrant liabilities					934		3,764
Interest expense, net	11,989		4,570		25,732		12,072
Other (1)					40		—
Change in fair value of warrant liabilities	(2,484)		1,000		(8,549)		(2,480)
Net loss before income taxes					(26,228)		(20,714)
Change in Tax Receivable Agreement liability	—		(121)		—		(121)
Income tax expense (benefit)					50		(13)
Other (1)	19		—		11		—
Net loss					(26,278)		(20,701)
Net loss before income taxes	(17,441)		(9,658)		(87,797)		(26,546)
Net loss attributable to non-controlling interest					(891)		(8,103)
Income tax (benefit) expense	(334)		463		(2,498)		819
Net loss attributable to Digital Media Solutions, Inc.					$	(25,387)	$	(12,598)
Net loss	(17,107)		(10,121)		(85,299)		(27,365)
Weighted-average Class A common shares outstanding – basic & diluted					4,287		2,695
Net loss attributable to non-controlling interest	(6,445)		(4,010)		(33,099)		(10,765)
Net loss attributable to Digital Media Solutions, Inc.	$	(10,662)	$	(6,111)	$	(52,200)	$	(16,600)
Weighted-average Class A common shares outstanding – basic	2,763		2,664		2,721		2,510
Weighted-average Class A common shares outstanding – diluted	2,763		4,377		2,721		2,510
Loss per share attributable to Digital Media Solutions, Inc.:
Basic – per Class A common shares	$	(3.92)	$	(2.29)	$	(23.41)	$	(6.61)
Basic and diluted – per Class A common shares					$	(5.96)	$	(4.67)
Diluted – per Class A common shares	$	(3.92)	$	(2.31)	$	(23.41)	$	(6.61)

____________________

(1)Represents Foreign exchange loss (gain) ~~and Gain on disposal of assets~~.

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)

	Preferred Stock (1)			Class A Common Stock	Class B Common Stock			Additional Paid-in Capital		Treasury Stock		Cumulative Deficit			Total Stockholders' Deficit		Non-controllingInterest		Total Deficit
	Shares	Amount			Shares	Amount			Shares					Amount
Balance, June 30, 2023	140	$	16,334		2,704	$	4	1,713		$	3	$	(9,783)		$	(211)	$	(85,775)	$	(95,762)	$	(65,250)	$	(161,012)
Balance, December 31, 2023	140	$	16,646		4,287	$	4	151		$	3	$	(80,523)		$	(235)	$	(126,230)	$	(206,981)	$	(7,680)	$	(214,661)
Net (loss)	—	—			—	—		—		—		—			—		(10,662)		(10,662)		(6,445)		(17,107)
Net loss	—	—			—	—		—		—		—			—		(25,387)		(25,387)		(891)		(26,278)
Shares issued in connection with the Crisp Earnout (Note 5)	—	—			—	—		—		—		—			—		—		—		—		—
Stock-based compensation	—	—			—	—		—		—		585			—		—		585		—		585
Stock-based compensation	—	—			—	—		—		—		608			—		—		608		—		608
Series A preferred stock dividends (2)	—	89			—	—		—		—		—			—		(89)		(89)		—		(89)
Series B preferred stock dividends (2)	—	67			—	—		—		—		—			—		(67)		(67)		—		(67)
Shares issued under the 2020 Omnibus Incentive Plan	—	—			26	—		—		—		—			—		—		—		—		—
Impact of transactions affecting non-controlling interest (3)	—	—			—	—		—		—		640			—		—		640		(640)		—
Treasury stock purchased under the 2020 Omnibus Incentive Plan	—	—			(5)	—		—		—		—			(24)		—		(24)		—		(24)
Balance, March 31, 2024	140	$	16,802		4,287	$	4	151		$	3	$	(79,298)		$	(235)	$	(151,773)	$	(231,299)	$	(9,211)	$	(240,510)
Impact of transactions affecting non-controlling interest (3)	—	—			41	—		(41)		—		(2,902)			—		—		(2,902)		2,902		—
Balance, September 30, 2023	140	$	16,490		2,766	$	4	1,672		$	3	$	(12,077)		$	(235)	$	(96,593)	$	(108,898)	$	(68,793)	$	(177,691)

____________________

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

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

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

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)

		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital			Treasury Stock			Cumulative Deficit		Total Stockholders' Deficit			Non-controllingInterest
	Preferred Stock (1)			Class A Common Stock			Class B Common Stock				Additional Paid-in Capital			Treasury Stock		Cumulative Deficit			Total Stockholders' Deficit		Non-controllingInterest		Total Deficit
	Shares	Amount		~~Shares~~	~~Amount~~		Shares	Amount		~~Amount~~			Shares					Amount					~~Total Deficit~~
Balance, Balance, June 30, 2022				2,437	$	3	1,713	$	3		$	(22,313)		$	—	$	(11,060)		$	(33,367)	$	(28,152)	$	(61,519)
Balance, December 31, 2022	—	$	—				2,695	$	4		1,713			$	3	$	(14,054)		$	(181)	$	(32,896)	$	(47,124)	$	(36,823)	$	(83,947)
Net (loss)				—	—		—	—			—			—		(6,111)			(6,111)		(4,010)		(10,121)
Net loss	—	—					—	—			—			—		—			—		(12,598)		(12,598)		(8,103)		(20,701)
Shares issued in connection with the Crisp Earnout (Note 8)				199	1		—	—			9,999			—		—			10,000		—		10,000
Stock-based compensation	—	—					—	—			—			—		1,379			—		—		1,379		—		1,379
Stock-based compensation				—	—		—	—			1,579			—		—			1,579		—		1,579
Series A convertible redeemable preferred stock	80	2,853					—	—			—			—		—			—		—		—		—		—
Shares issued under the 2020 Omnibus Incentive Plan				33	—		—	—			—			—		—			—		—		—
Series B convertible redeemable preferred stock	60	2,140					—	—			—			—		—			—		—		—		—		—
Treasury stock purchased under the 2020 Omnibus Incentive Plan				(8)	—		—	—			—			(156)		—			(156)		—		(156)
Impact of transactions affecting non-controlling interest (2)	—	—					—	—			—			—		(3,939)			—		—		(3,939)		3,939		—
Impact of transactions affecting non-controlling interest (1)				—	—		—	—			(6,804)			—		—			(6,804)		6,804		—
Balance, March 31, 2023	140	$	4,993				2,695	$	4		1,713			$	3	$	(16,614)		$	(181)	$	(45,494)	$	(62,282)	$	(40,987)	$	(103,269)
Balance, September 30, 2022				2,661	$	4	1,713	$	3		$	(17,539)		$	(156)	$	(17,171)		$	(34,859)	$	(25,358)	$	(60,217)

____________________

(1)~~The~~See ~~carrying~~Note ~~amount~~8. ofFair ~~non-controlling~~Value ~~interest~~Measurements ~~was adjusted to reflect the change in ownership interest caused by shares issued in connection with the Crisp Earnout~~ and ~~shares~~Note ~~issued~~9. ~~under the 2020 Omnibus Incentive Plan~~Equity.

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

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)

	Preferred Stock (1)			Class A Common Stock	Class B Common Stock			Additional Paid-in Capital		Treasury Stock		Cumulative Deficit			Total Stockholders' Deficit		Non-controllingInterest		Total Deficit
	Shares	Amount			Shares	Amount			Shares					Amount
Balance, December 31, 2022	—	$	—		2,695	$	4	1,713		$	3	$	(14,054)		$	(181)	$	(32,896)	$	(47,124)	$	(36,823)	$	(83,947)
Net loss	—	—			—	—		—		—		—			—		(52,200)		(52,200)		(33,099)		(85,299)
Stock-based compensation	—	—			—	—		—		—		3,106			—		—		3,106		—		3,106
Series A convertible redeemable preferred stock	80	2,853			—	—		—		—		—			—		—		—		—		—
Series B convertible redeemable preferred stock	60	2,140			—	—		—		—		—			—		—		—		—		—
Accretion Series A convertible redeemable preferred stock	—	6,391			—	—		—		—		—			—		(6,391)		(6,391)		—		(6,391)
Accretion Series B convertible redeemable preferred stock	—	4,794			—	—		—		—		—			—		(4,794)		(4,794)		—		(4,794)
Series A preferred stock dividends (2)	—	178			—	—		—		—		—			—		(178)		(178)		—		(178)
Series B preferred stock dividends (2)	—	134			—	—		—		—		—			—		(134)		(134)		—		(134)
Shares issued under the 2020 Omnibus Incentive Plan	—	—			38	—		—		—		—			—		—		—		—		—
Treasury stock purchased under the 2020 Omnibus Incentive Plan	—	—			(8)	—		—		—		—			(54)		—		(54)		—		(54)
Impact of transactions affecting non-controlling interest (3)	—	—			41	—		(41)		—		(1,129)			—		—		(1,129)		1,129		—
Balance, September 30, 2023	140	$	16,490		2,766	$	4	1,672		$	3	$	(12,077)		$	(235)	$	(96,593)	$	(108,898)	$	(68,793)	$	(177,691)

____________________

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

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

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Changes in Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share data)

	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital			Treasury Stock		Cumulative Deficit		Total Stockholders' Deficit		Non-controllingInterest
		Shares	Amount		Shares			Amount											Total Deficit
Balance, December 31, 2021		2,415	$	3	1,713	$	3		$	(25,239)	$	—	$	(944)	$	(26,177)	$	(21,641)	$	(47,818)
Net loss		—	—		—	—			—		—		(16,600)		(16,600)		(10,765)		(27,365)
SmarterChaos DMSH units redeemed and issued to Class A Common Stock (1)		10	—		—	—			—		—		—		—		—		—
Shares issued in connection with the Crisp Earnout (Note 8)		199	1		—	—			9,999		—		—		10,000		—		10,000
Stock-based compensation		—	—		—	—			5,695		—		—		5,695		—		5,695
Shares issued under the 2020 Omnibus Incentive Plan		45	—		—	—			—		—		—		—		—		—
Distributions to non-controlling interest holders (2)		—	—		—	—			—		—		—		—		(573)		(573)
Treasury stock purchased under the 2020 Omnibus Incentive Plan		(8)	—		—	—			—		(156)		—		(156)		—		(156)
Impact of transactions affecting non-controlling interest (3)		—	—		—	—			(7,621)		—		—		(7,621)		7,621		—
Balance, September 30, 2022		2,661	$	4	1,713	$	3		$	(17,166)	$	(156)	$	(17,544)	$	(34,859)	$	(25,358)	$	(60,217)

____________________

(1)On January 17, 2022, the Sellers of SmarterChaos redeemed their remaining non-controlling interest held through DMSH Units in exchange for 10 thousand 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 September 30, 2022, $10 thousand of these distributions had 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, shares issued in connection with the Crisp Earnout and shares issued under the 2020 Omnibus Incentive Plan.

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

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DIGITAL MEDIA SOLUTIONS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2023		2022
	2024		2023
Cash flows from operating activities
Net loss	$	(8526,~~299~~278)	$	(2720,~~365~~701)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for credit losses, net	1,716		1,305
Allowance for credit losses - Accounts receivable, net	796		563
Depreciation and amortization	153,~~732~~726		215,~~377~~082
Amortization of right-of-use assets	~~522~~183		—242
Gain on disposal of assets	(3)		—
Stock-based compensation, net of amounts capitalized	232		1,258
Impairment of goodwill	33,795		—
Interest expense paid-in-kind	12,375		—
Impairment of intangible assets	7,791		—
Amortization of debt issuance costs	1,122		390
Lease restructuring charges	—		(167)
Deferred income tax (benefit) provision, net	(30)		550
Stock-based compensation, net of amounts capitalized	2,620		5,332
Change in fair value of contingent consideration	(17)		13
Interest expense paid-in-kind	11,417		—
Change in fair value of warrant liabilities	934		3,764
Amortization of debt issuance costs	2,420		1,149
Loss from preferred warrants issuance	—		553
Deferred income tax benefit, net	(2,080)		(1,160)
Change in income tax receivable and payable	69		(570)
Change in fair value of contingent consideration	(285)		2,533
Change in accounts receivable	2,129		(1,371)
Change in fair value of warrant liabilities	(8,549)		(2,480)
Change in contract assets	1,471		—
Loss from preferred warrants issuance	553		—
Change in prepaid expenses and other current assets	3		(657)
Change in Tax Receivable Agreement liability	—		(120)
Change in operating right-of-use assets	(13)		—
Change in income tax receivable and payable	(613)		1,297
Change in accounts payable and accrued expenses	1,203		6,638
Change in accounts receivable	14,644		4,824
Change in operating lease liabilities	(345)		(537)
Change in prepaid expenses and other current assets	(36)		1,120
Net cash used in operating activities	(2,440)		(4,783)
Change in operating right-of-use assets	670		—
Change in accounts payable and accrued expenses	(6,197)		(5,341)
Change in operating lease liabilities	(1,658)		—
Change in other liabilities	—		(195)
Net cash (used in) provided by operating activities	(12,840)		2,109
Cash flows from investing activities
Additions to property and equipment	(41,~~500~~154)		(51,~~247~~215)
Acquisition of business, net of cash acquired	~~(33,565)~~—		(235,~~579~~320)
Net cash used in investing activities	(381,~~065~~154)		(736,~~826~~535)
Cash flows from financing activities
Proceeds from borrowings on revolving credit facilities	10,000		—
Payments of long-term debt and notes payable	(563)		(562)
Payments of long-term debt and notes payable	(1,688)		(1,687)
Payments of borrowings on revolving credit facilities	(125)		—
Payment of debt issuance costs	(1,928)		—
Proceeds from preferred shares and warrants issuance, net	—		13,107
Proceeds from preferred shares and warrants issuance, net	13,107		—
Net cash (used in) provided by financing activities	(688)		12,545
Purchase of treasury stock related to stock-based compensation	(54)		(156)
Net change in cash and cash equivalents and restricted cash	(4,282)		(28,773)
Distributions to non-controlling interest holders	—		(563)
Cash and cash equivalents and restricted cash, beginning of period	18,968		48,839
Net cash provided by (used in) financing activities	19,312		(2,406)
Cash and cash equivalents and restricted cash, end of period	$	14,686	$	20,066
Net change in cash and cash equivalents	(31,593)		(8,123)
Supplemental Disclosure of Cash Flow Information
Cash and cash equivalents, beginning of period	48,839		26,394
Cash Paid During the Period For
Cash and cash equivalents, end of period	$	17,246	$	18,271
Interest	$	—	$	6,349
Income taxes	—		7
Non-Cash Transactions:
Contingent and deferred acquisition consideration	$	—	$	2,457
Stock-based compensation capitalized in property and equipment	353		121
Capital expenditures included in accounts payable	87		176
Accretion and Dividends - Preferred Series A and B	156		—
Interest paid-in-kind	12,375		—

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	Nine Months Ended September 30,
	2023		2022
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period For
Interest	$	13,074	$	10,651
Income taxes	195		662
Non-Cash Transactions:
Contingent and deferred acquisition consideration	$	2,392	$	2,971
Stock-based compensation capitalized in property and equipment	486		363
Capital expenditures included in accounts payable	192		236
Issuance of equity for Crisp Results	—		10,000
Debt amendment fees paid-in-kind - long-term debt	4,410		—
Debt amendment fees paid-in-kind - revolving credit facilities	1,000		—
Interest paid-in-kind - long-term debt	9,307		—
Interest paid-in-kind - revolving credit facilities	2,110		—

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

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DIGITAL MEDIA SOLUTIONS, INC.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

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

Basis of Presentation

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

Business Combination

On July 15, 2020, Digital Media Solutions Holding (“DMSH”) consummated the Business Combination with Leo Holdings Corp. (“Leo”) pursuant to the Business Combination Agreement (“Business Combination”). Pursuant to the Business Combination, DMS Inc. has acquired, directly and through its acquisition of the equity of Blocker, approximately 6296.36% 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”) have retained approximately 373.74% of the membership interest in DMSH (“non-controlling interests”). For additional information, see Note 2. Business Combination in the Notes to Consolidated Financial Statements in our ~~2022~~2023 Form 10-K/A.

Non-controlling Interest

The non-controlling interest represents the membership interest in DMSH held by holders other than the Company. As of ~~September~~March 3031, ~~2023~~2024, the Prism, Clairvest Direct Sellers and SmarterChaos combined ownership percentage in DMSH was 373.74% and as of December 31, ~~2022~~2023 it was 393.14%. For additional information see Note 9. Equity.

Principles of Consolidation

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

Reverse Stock Split

On August 28, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) of the Company’s Class A Common Stock and Class B Common Stock at a ratio of 1-for-15. All historical share amounts disclosed in this quarterly report on Form 10-Q have been retroactively restated to reflect the Reverse Stock Split. No fractional shares were issued as a result of the Reverse Stock Split, as fractional shares of Common Stock were rounded up to the nearest whole share. See Note 9. Equity for additional information.

Use of Estimates

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

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Significant Accounting Policies

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies in our ~~2022~~2023 Form 10-K~~/A, except those related to the accounting and valuation of preferred stock and warrants~~. ~~See Note 8. Fair Value Measurements and Note 9. Equity.~~

New Accounting Standards

Accounting Standards Recently Adopted

In June 2016, the FASB issued authoritative guidance Accounting Standards Codification (“ASC”) 326 Financial Instruments - Credit Losses, regarding the impairment model known as the current expected credit loss (“CECL”) model on accounting for credit losses on financial instruments, including trade receivables, and has since issued subsequent updates to the initial guidance. The amended guidance requires the application of a CECL model, which measures credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires adoption using a modified retrospective approach and is effective for emerging growth companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2023.

Accounting Standards Not Yet Adopted

~~The~~In ~~Company~~November ~~qualifies~~2023, asthe anFASB ~~“emerging~~issued ~~growth~~ASU ~~company”~~No. ~~and~~2023-07, ~~has~~Segment ~~elected~~Reporting to(Topic ~~adhere~~280) toImprovements ~~the~~To ~~extended~~Reportable ~~transition~~Segment ~~period~~Disclosures, ~~for~~which ~~complying~~requires ~~with~~additional ~~new~~disclosures orabout ~~revised~~a ~~accounting~~public ~~standards~~entity’s ~~under~~reportable ~~Section~~segments ~~102(b)(1)~~and addresses requests from investors and other allocators of ~~the~~capital ~~JOBS~~for ~~Act.~~additional, ~~This~~more ~~election~~detailed ~~allows~~information ~~the~~about a reportable segment’s expenses. The Company towill ~~delay~~adopt this ASU for the ~~adoption~~annual ofperiod ~~new~~beginning oron ~~revised~~January ~~accounting~~1, ~~standards~~2024 ~~that~~and ~~have~~for ~~different~~interim ~~effective~~periods ~~dates~~beginning ~~for~~on ~~public~~January 1, 2025, and ~~private~~is ~~companies~~still ~~until~~evaluating ~~those~~its ~~standards~~impact ~~apply~~on tothe ~~private~~Consolidated ~~companies~~Financial Statements.

AsIn ofDecember ~~September 30~~2023, the FASB issued ASU No. 2023-09, ~~there~~Income ~~were~~Taxes no(Topic ~~new~~740) ~~accounting~~Improvements ~~standards~~To Income Tax Disclosures, which requires additional disclosures of income tax components that ~~would~~affect ~~need~~the rate reconciliation and income taxes paid, broken out by the applicable taxing jurisdictions. The Company expects to beadopt ~~disclosed~~this ASU for the annual period beginning on January 1, 2025, and does not expect a material impact on the Consolidated Financial Statements.

Note 2. Revenue

The Company derives revenue primarily through the delivery of various types of services, including: customer acquisition, managed services and software as a service (“SaaS”). The Company recognizes revenue when the promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. The Company has elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized in the amount to which the Company has the right to invoice for services performed.

The Company has organized its operations into three reportable segments: Brand Direct, Marketplace and Technology Solutions. The Brand Direct reportable segment consists of services delivered against our customer’s brand, while the Marketplace reportable segment includes services delivered directly against the DMS brand. In the Technology Solutions reportable segment, services offered by the Company include software services and digital media services that are managed on behalf of the customer. Corporate and other represents other business activities and includes eliminating entries. Management uses these segments to evaluate the performance of its businesses and to assess its financial results and forecasts.

Disaggregation of Revenue

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

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

BrandDirect

Marketplace

Technology Solutions

Intercompany Eliminations

Total

Brand Direct

Marketplace

Technology Solutions

Intercompany Eliminations

Total

Net revenue:

Customer acquisition

4341,~~446~~224

3538,~~081~~811

—

(511,~~111~~921)

7368,~~416~~114

Managed services

~~594~~805

—

~~511~~412

—

1,~~105~~217

Software services

—

1,~~512~~378

—

1,~~512~~378

Total Net revenue

4442,~~040~~029

3538,~~081~~811

21,~~023~~790

(511,~~111~~921)

7670,~~033~~709

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

BrandDirect

Marketplace

Technology Solutions

Intercompany Eliminations

Total

Net revenue:

Customer acquisition

4154,~~381~~020

5337,~~230~~288

—

(84,~~059~~714)

86,~~552~~594

Managed services

~~937~~1,383

—

~~1,076~~753

—

2,~~013~~136

Software services

—

1,~~501~~583

—

1,~~501~~583

Total Net revenue

4255,~~318~~403

5337,~~230~~288

2,~~577~~336

(84,~~059~~714)

90,~~066~~313

107

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	Nine Months Ended September 30, 2023
	BrandDirect		Marketplace		Technology Solutions		Intercompany Eliminations		Total
Net revenue:
Customer acquisition	$	147,892	$	104,846	$	—	$	(13,670)	$	239,068
Managed services	3,246		—		2,021		—		5,267
Software services	—		—		4,563		—		4,563
Total Net revenue	$	151,138	$	104,846	$	6,584	$	(13,670)	$	248,898

	Nine Months Ended September 30, 2022
	BrandDirect		Marketplace		Technology Solutions		Intercompany Eliminations		Total
Net revenue:
Customer acquisition	$	144,123	$	166,128	$	—	$	(31,551)	$	278,700
Managed services	4,211		—		3,989		—		8,200
Software services	—		—		3,472		—		3,472
Total Net revenue	$	148,334	$	166,128	$	7,461	$	(31,551)	$	290,372

The Company generated revenue outside the United States through its 2023 ClickDealer acquisition. The following table represents these revenues by region (in thousands):

	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	Three Months Ended March 31,
Europe	$	5,980	$	11,049
	2024		2023
Other International	3,108		6,649
Europe	$	5,361	$	—
Other International	1,710		—

For the three months ended March 31, 2024 and 2023, one advertising customer within the Marketplace segment accounted for approximately 15.8% and 16.6% of our total revenue, respectively.

Accounts Receivable, net

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

The activity in the Allowance for credit losses related to accounts receivable is as follows (in thousands):

Balance, December 31, 2022	$	4,656
Balance, December 31, 2023	$	4,172
Additions charged to expense	~~1,949~~796
Deductions/write-offs	(1,~~968~~236)
ASU 2016-13 (Topic 326) adjustment	(233)
Balance, March 31, 2024	$	3,732
Balance, September 30, 2023	$	4,404

~~Contract~~For ~~Balances~~the three months ended March 31, 2024 and 2023, bad debt expense was $0.8 million. and $0.6 million, respectively.

~~The~~Contract Company’s contract liabilities result from payments received from clients in advance of revenue recognition as they precede the Company’s satisfaction of the associated performance obligation. If a customer pays consideration before the Company’s performance obligations are satisfied, such amounts are classified as deferred revenue and recorded within Accrued expenses and other current liabilities on the consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the balance of deferred revenue was $0.8 million and $1.0 million, respectively. We expect the majority of the deferred revenue balance at September 30, 2023 to be recognized as revenue during the following quarter. balances

~~For~~Contract the three and nine months ended September 30, 2023, one customer accounted for approximately 14.0% and 14.9%, respectively, of our total revenue. For the three and nine months ended September 30, 2022, one customer accounted for approximately 27.9% and 23.0%, respectively, of our total revenue.Assets

11The Company’s contract assets primarily result from the estimated variable consideration for commissions to be received from insurance distributors for performance obligations that have been satisfied. In addition, other contract assets with clients where the performance obligations have been satisfied in advance of the contractual terms with the customer are also recorded as contract assets. The Company recognizes revenue when the performance obligation is met and the contract asset is recorded within the consolidated balance sheets as current assets and long term assets, where applicable. Related to commission revenue, the Company collects the consideration payments in equal installments over the lifetime-value (“LTV”) of the underlying insurance policy, beginning collections on or after 90 days after the policy becomes effective, which can be up to several months after the Company’s performance obligation is met. From time to time, the Company may also record bonuses based on certain criteria set forth by the insurance distributor.

The balances for contract assets are as follows (in thousands):


	March 31, 2024		December 31, 2023
Contract assets - current, net	$	5,613	$	6,467
Contract assets - non-current, net	1,015		1,632
Total Contract assets	$	6,628	$	8,099

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The activity in contract assets is as follows (in thousands):



Balance, December 31, 2023	$	8,099
Revenue from Contract Assets	5,624
Change in Variable Consideration - Prior Period	(4,127)
Cash Receipts	(2,968)

Balance, March 31, 2024	$	6,628

During the three months ended March 31, 2024, the Company observed a higher than estimated decline in policy retention rates for certain prior period cohorts. Management’s evaluation of the retention trends triggered a change in the estimated variable consideration for commissions and bonuses, resulting in a net adjustment to revenue of $4.1 million during the three months ended March 31, 2024. Management will continue to monitor the policy retention rates as compared to forecasts and other market factors and evaluate whether any addition or reduction adjustment to revenue shall be recorded as the Company continues to assess its LTV models in future periods.

Allowance for credit losses related to contract assets was $2.3 million as of March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, there was no bad debt expense related to contract assets, respectively.

Contract Liabilities

The Company’s contract liabilities result from payments received from clients in advance of revenue recognition as they precede the Company’s satisfaction of the associated performance obligation. If a customer pays consideration before the Company’s performance obligations are satisfied, such amounts are classified as deferred revenue and recorded within Accrued expenses and other current liabilities on the consolidated balance sheets. As of March 31, 2024 and December 31, 2023, the balance of deferred revenue was $0.8 million and $1.0 million, respectively. We expect the majority of the deferred revenue balance at March 31, 2024 to be recognized as revenue during the following quarter.

When there is a delay between the completion of our performance obligations and when a customer is invoiced, revenue is recognized and recorded as unbilled revenue (i.e. contract assets) within Accounts receivable, net on the consolidated balance sheets.

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~~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.

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

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

Three Months Ended March 31,

2023

2022

2023

2022

2024

2023

Net revenue

~~76,033~~

~~90,066~~

~~248~~70,~~898~~709

~~290~~90,~~372~~313

Brand Direct

~~44,040~~

~~42,318~~

~~151~~42,~~138~~029

~~148~~55,~~334~~403

Marketplace

~~35,081~~

~~53,230~~

~~104~~38,~~846~~811

~~166~~37,~~128~~288

Technology Solutions

~~2,023~~

~~2,577~~

61,~~584~~790

72,~~461~~336

Intercompany eliminations

~~(5,111)~~

~~(8,059)~~

(1311,~~670~~921)

(314,~~551~~714)

Cost of revenue (exclusive of depreciation and amortization)

~~58,506~~

~~66,378~~

~~189~~56,~~892~~407

~~211~~68,~~997~~042

Brand Direct

~~36,474~~

~~32,873~~

~~120~~36,~~522~~328

~~117~~42,~~459~~816

Marketplace

~~26,713~~

~~41,202~~

8131,~~498~~743

~~125~~29,~~045~~338

Technology Solutions

~~430~~

~~362~~

~~1,542~~257

~~1,044~~602

Intercompany eliminations

~~(5,111)~~

~~(8,059)~~

(1311,~~670~~921)

(314,~~551~~714)

Gross profit (exclusive of depreciation and amortization)

~~17,527~~

~~23,688~~

5914,~~006~~302

7822,~~375~~271

Brand Direct

~~7,566~~

~~9,445~~

305,~~616~~701

3012,~~875~~587

Marketplace

~~8,368~~

~~12,028~~

237,~~348~~068

417,~~083~~950

Technology Solutions

~~1,593~~

~~2,215~~

51,~~042~~533

61,~~417~~734

Salaries and related costs

~~10,770~~

~~11,668~~

3410,~~484~~957

3812,~~612~~226

General and administrative expenses

~~10,087~~

~~9,076~~

3511,~~072~~402

3212,~~622~~856

Depreciation and amortization

~~4,778~~

~~7,142~~

153,~~732~~726

215,~~377~~082

Impairment of goodwill

—

33,795

—

Acquisition costs

—

2,345

Impairment of intangible assets

—

7,791

—

Change in fair value of contingent consideration liabilities

(17)

Acquisition costs

3,020

306

Loss from operations

(11,766)

(10,251)

Change in fair value of contingent consideration liabilities

(208)

(3)

(285)

2,533

Loss from operations

(7,917)

(4,209)

(70,603)

(17,075)

Note 4. Goodwill and Intangible Assets

Goodwill

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

	Brand Direct		Marketplace		Technology Solutions		Total
Balance, December 31, 2022	$	18,321	$	54,554	$	4,363	$	77,238
Balance, January 1, 2023	$	18,321	$	54,554	$	4,363	$	77,238
Additions (Note 5)	2,308		2,693		—		5,001
Impairment of goodwill	—(15,595)		(33,795)		—		(3349,~~795~~390)
Balance, September 30, 2023	$	20,629	$	23,452	$	4,363	$	48,444
Balance, December 31, 2023	$	5,034	$	23,452	$	4,363	$	32,849
Additions	—		—		—		—
Balance, March 31, 2024	$	5,034	$	23,452	$	4,363	$	32,849

The carrying amount of Goodwill for the Marketplace segment had accumulated impairment of $33.8 million as of ~~September~~March 3031, ~~2023~~2024 and noDecember 31, 2023, respectively. The carrying amount of Goodwill for the Brand Direct segment had accumulated impairment of $15.6 million as of March 31, 2024 and December 31, ~~2022~~2023, respectively.

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Intangible assets, net

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

September 30, 2023

December 31, 2022

March 31, 2024

December 31, 2023

AmortizationPeriod (Years)

Gross

Impairment

AccumulatedAmortization

Net

Gross

Impairment

AccumulatedAmortization

Net

Technology

4 to 7

59,~~096~~095

(57,~~951~~210)

(4344,~~515~~333)

97,~~630~~552

5459,~~316~~095

(57,~~933~~210)

(3943,~~411~~752)

8,~~972~~133

Customer relationships

4 to 15

71,323

(2027,~~119~~125)

(2527,~~331~~142)

2517,~~873~~056

4971,~~423~~323

(1227,~~387~~125)

(2126,~~205~~510)

1517,~~831~~688

Brand

1 to 7

14,~~879~~880

(3,~~291~~979)

(7,~~144~~438)

43,~~444~~463

1214,~~169~~880

(3,~~250~~979)

(67,~~233~~283)

23,~~686~~618

Non-competition agreements

1 to 3

1,898

—

(1,~~889~~898)

9—

1,898

—

(1,~~868~~896)

302

Total

147,196

(2938,~~361~~314)

(7780,~~879~~811)

3928,~~956~~071

~~117~~147,~~806~~196

(2138,~~570~~314)

(6879,~~717~~441)

2729,~~519~~441

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

~~Amortization~~As of March 31, 2024, the amortization expense relating to intangible assets subject to amortization for each of the next five years and thereafter is estimated to be as follows (in thousands):

	2023		2024		2025		2026		2027		Thereafter
	2024		2025		2026		2027		2028		Thereafter
Amortization expense	$	24,~~464~~104	$	94,~~504~~040	$	43,~~990~~642	$	43,~~301~~027	$	32,~~686~~535	$	1510,~~011~~723

Amortization expense for finite-lived intangible assets is recorded on an ~~accelerated~~ straight-line basis. Amortization expense related to finite-lived intangible assets was $21.54 million and $9.2.9 million for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023,~~2024 ~~respectively,~~ and ~~$5.0 million and $15.0 million for the three and nine months ended September 30~~2023, ~~2022,~~ respectively.

Impairment analysis

Related to goodwill impairment, the Company considered if an event occurred or circumstances changed that would more likely than not reduce the fair value of a reporting unit below its carrying amount during three months ended ~~September~~March 3031, ~~2023~~2024, noting that there were no indicators of impairment under ASC 350-20, Goodwill. Related to impairment of finite-lived assets, the Company considered whether any event occurred or circumstances changed that would be indicative of impairment triggering events under ASC 360-10, Impairment and Disposal of Long-Lived Assets for certain asset groups during the three months ended March 31, 2024, noting no indicators of impairment. Accordingly, for the three months ended March 31, 2024 and 2023, respectively, there was no impairment to intangible assets.

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

For the three and nine months ended September 30, 2022, there were no triggering events related to Goodwill.

Related to impairment of finite-lived assets, the Company considered whether any event occurred or circumstances changed that would be indicative of impairment triggering events under ASC 360-10, Impairment and Disposal of Long-Lived Assets for certain asset groups during the three months ended September 30, 2023, noting no indicators of impairment.

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

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of intangible assets for the period ended June 30, 2023. For the three months ended September 30, 2023, the recoverability test resulted in no impairments to finite-lived assets.

For the three and nine months ended September 30, 2022, there were no triggering events related to finite-lived assets.

Note 5. Acquisitions

ClickDealer

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

The Company paid cash consideration of $31.8 million ~~upon closing of the transaction~~, ~~with~~including ~~an additional~~ $30.53 million inestimated ~~holdbacks,~~net ~~subject~~working tocapital ~~certain criteria. On July 3~~adjustment, ~~2023,~~upon ~~after~~closing ~~the successful completion~~ of the ~~first tranche in criteria was met~~transaction, ~~$1.0 million~~with ofan ~~the~~additional ~~holdback was paid to the Sellers in cash. The transaction also included up to~~ $103.05 million in ~~contingent consideration~~holdbacks, subject to ~~the achievement of~~ certain ~~revenue~~criteria. ~~and~~Accounting ~~net~~for ~~margin based milestones in two subsequent one-year measurement periods, payable in cash or, if mutually agreed to by~~ the ~~Company~~acquisition ~~and the Seller, in Class A Common Stock. The Estimated Net Working Capital adjustment upon closing~~ was ~~$0.3 million.~~completed ~~The~~on ~~Final~~March ~~Net Working Capital adjustment was $0.6 million. On August 22~~30, ~~2023 the Post-closing Net Working Capital adjustment amount together with $0~~2024.~~5 million~~ ofGoodwill ~~the holdback was paid to the Sellers in cash. The remaining holdback of $2.0 million~~ is expected to be ~~released~~deductible ~~within~~for 24tax ~~months of the closing date, subject to certain criteria~~purposes.

~~During~~Through ~~the~~August ~~measurement~~22, ~~period~~2023, ~~(which~~after is the ~~period~~successful ~~required~~completion toof ~~obtain~~the ~~all~~first ~~necessary~~and ~~information~~second ~~that~~tranche ~~existed~~in atcriteria ~~the~~were ~~acquisition date~~met, or$1.5 million toof ~~conclude~~the ~~that~~holdback ~~such~~was ~~information~~paid ~~is unavailable, not~~ to ~~exceed~~the ~~one~~Sellers ~~year),~~in ~~additional assets or liabilities may be recognized~~cash, orincluding ~~there~~the ~~could~~true-up ~~be changes~~ to the ~~amounts~~net ofworking ~~assets~~capital oradjustment. ~~liabilities~~The ~~previously~~final ~~recognized~~net onworking acapital ~~preliminary~~adjustment ~~basis,~~was if$0.6 million. ~~new~~On ~~information~~April is24, ~~obtained~~2024, ~~about~~after ~~facts~~the ~~and~~successful ~~circumstances~~completion ~~that existed as~~ of the ~~acquisition~~third ~~date~~tranche ~~that,~~in ifcriteria ~~known~~was met, ~~would~~the ~~have~~Company ~~resulted~~paid in$1 million ~~the recognition~~ of ~~these~~the ~~assets~~holdback orto ~~liabilities~~the asSellers ofin ~~that date~~cash. ~~All~~The ~~recognized~~remaining ~~assets~~holdback ~~and~~of ~~liabilities~~$1.0 million ~~are~~is ~~preliminary,~~expected ~~including~~to ~~any~~be ~~foreign~~released ~~jurisdiction~~within ~~taxation,~~24 ifmonths ~~any,~~of ~~and~~the ~~except~~closing ~~for~~date, ~~the~~subject ~~contingent~~to ~~consideration~~certain criteria.

~~Determining~~The ~~the~~acquisition ~~fair~~transaction ~~value~~also ofincluded ~~assets~~up ~~acquired~~to 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$10.0 million Asin ~~the result of the completed valuation of the assets acquired (including intangibles) and liabilities assumed, as well as the~~ contingent consideration ~~liabilities~~, assubject ofto the ~~acquisition~~achievement ~~dates,~~of ~~the~~certain ~~following~~revenue ~~adjustments~~and ~~were~~net ~~recorded~~margin ~~related~~based tomilestones ~~further~~in ~~analysis~~two ofsubsequent ~~the~~one-year ~~forecast~~measurement ~~(for example~~periods, ~~items~~payable ~~that occurring~~ in ~~the~~cash ~~pre-acquisition~~or, ~~period~~if ~~that~~mutually ~~should~~agreed ~~have~~to ~~been~~by ~~factored into~~ the ~~forecast~~Company ~~as of the acquisition date)~~ and ~~refinements to~~ the ~~significant~~Seller, ~~assumptions~~ in ~~the~~Class ~~valuation~~A ~~models~~Common ~~used to value the intangibles and contingent consideration liabilities~~Stock. AsThe ~~a result, we have made adjustments to the initial fair value of our intangible assets, goodwill,~~ contingent consideration ~~and~~for ~~working capital. The impact of these adjustments on~~ the ~~acquisition~~first ~~date~~year ~~fair values are as follows (in thousands):~~

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ClickDealer	Acquisition Date Fair Value		Fair Value Mark-to-Market Changes		Revised Acquisition Date Fair Value
Goodwill	$	6,207	$	(1,206)	$	5,001
Intangible Assets:
Technology	$	5,010	$	(230)	$	4,780
Customer relationships	$	20,400	$	1,500	$	21,900
Brand	$	2,840	$	(130)	$	2,710
Contingent consideration liability	$	2,457	$	(65)	$	2,392
Working capital accounts	$	3,320	$	245	$	3,565

measurement period of the ClickDealer acquisition finalized on February 29, 2024, the end of the first earnout period, resulting in none of the metrics being met, thus no contingent consideration is to be paid to the sellers for the first measurement period.

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. Under ASC 805, Business Combinations, an acquirer must recognize any assets acquired and liabilities assumed at the acquisition date, measured at fair value as of that date. Assets meeting the identification criteria included tangible assets, such as real and personal property, and intangible assets. Identified intangible assets included the brand and customer relationships of the acquired business. Fair value of the ClickDealer and HomeQuote.io brands was determined using the Income Approach and Relief from Royalty Method, fair value of the technology was determined using the Relief from Royalty Method, and fair value of customer relationships was determined using the Multi Period Excess Earnings Method.

The Goodwill related to this transaction reflects the workforce and synergies expected from combining the operations of ClickDealer and will be included in the Brand Direct reportable segment for ClickDealer and in the Marketplace reportable segment for HomeQuote.io. The Goodwill expected to be deductible for tax purposes is being evaluated. Intangible assets primarily consist of brand, technology and customer relationships with an estimated useful life of five years for brand, seven years for technology and twelve years for customer relationships.

Traverse

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

Crisp Results

On April 1, 2021, 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 106.7 thousand Class A Common Stock valued at $20.0 million. The transaction also included up to $10.0 million in contingent consideration, and a $5.0 million deferred payment, to be paid 18 months after the acquisition date. Accounting for the acquisition was completed on March 31, 2022. The Company paid the contingent consideration on July 1, 2022 in the form of 199.3 thousand unregistered shares of Class A Common Stock, priced at $50.18, the average closing price of the Class A common stock during the twenty trading-day period ended March 31, 2022. The $5.0 million deferred consideration became due on October 1, 2022, which the Company paid on October 4, 2022.

Aimtell, Aramis and PushPros

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

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The Company paid consideration of $20.0 million upon closing of the transaction, consisting of $5.0 million in cash and approximately 86.0 thousand shares of Class A Common Stock valued at $15.0 million. The transaction also included up to $15.0 million in contingent consideration to be earned over the three years following the acquisition, subject to the achievement of certain milestones. The contingent consideration can be paid in cash or Class A Common Stock at the election of the Company. Accounting for the acquisition was completed on March 31, 2022.

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

The contingent consideration for the Aimtell and PushPros acquisition finalized on December 31, 2023, the end of the earnout period, resulting in none of the metrics being met, thus no contingent consideration is to be paid to the sellers.

Acquisitions’ Fair Value Measurement and Pro Forma Information

The acquisition date fair value of assets acquired and liabilities assumed from the ~~Traverse and~~ ClickDealer ~~acquisitions~~acquisition consist of the following (in thousands, except expected useful lives):

	Expected Useful Life	Traverse		ClickDealer
	Expected Useful Life (Years)			ClickDealer
		2022		2023
				2023
Cash		$	~~232~~	$	—
Goodwill		~~735~~		5,001
Technology	4 to 7	~~2,470~~		4,780
Customer relationships	4 to 12	50		21,900
Accounts receivable		~~276~~		6,959
Brand	1 to 7	60		2,710
Accounts payable		~~(232)~~		(3,561)
Other assets acquired and liabilities assumed, net (1)		7		167
Net assets and liabilities acquired		$	~~3,598~~	$	37,956

____________________

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

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

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

	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	ClickDealer		ClickDealer
Net revenue	$	19,582	$	37,392
Net income from operations	$	(224)	$	479

	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
	Traverse		Traverse
Net revenue	$	709	$	1,069
Net income from operations	$	229	$	299

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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. ~~There is no pro forma financial information for three months ended September 30, 2023 as the results remain consistent.~~ Pro forma financial information is presented in the table below (in thousands):

	Three Months Ended September 30, 2022
	Three Months Ended March 31, 2023
	(unaudited)
	DMS		ClickDealer		Pro Forma
Net revenue	$	90,~~066~~313	$	2119,~~087~~865	$	~~111~~110,~~153~~178
Net income from operations	$	(4,209)	$	2,339	$	(1,870)
Net income (loss) from operations	$	(10,251)	$	1,704	$	(8,547)

	Nine Months Ended September 30, 2023
	(unaudited)
	DMS		ClickDealer		Pro Forma
Net revenue	$	248,898	$	19,865	$	268,763
Net income (loss) from operations	$	(70,603)	$	1,704	$	(68,899)

	Nine Months Ended September 30, 2022
	(unaudited)
	DMS		Traverse		ClickDealer		Pro Forma
Net revenue	$	290,372	$	999	$	57,624	$	348,995
Net income from operations	$	(17,075)	$	(417)	$	5,942	$	(11,550)

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

Note 6. Debt

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

	September 30, 2023		December 31, 2022
	March 31, 2024		December 31, 2023
Term loan	$	~~233~~252,~~654~~452	$	~~221~~242,~~625~~927
Revolving credit facility	5257,~~985~~253		4055,~~000~~091
Total debt	~~286~~309,~~639~~705		~~261~~298,~~625~~018
Less: Unamortized debt issuance costs (1)	(97,~~849~~836)		(48,~~802~~915)
Debt, net	~~276~~301,~~790~~869		~~256~~289,~~823~~103
Less: Current portion of long-term debt	(2,750)		(2,~~250~~750)
Long-term debt	$	~~274~~299,~~040~~119	$	~~254~~286,~~573~~353

____________________

(1)Includes net debt issuance discount, amendment’s administrative fees and other costs.

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

17material 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”).

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The Term Loan, which was issued at an original issue discount of 1.80% or $4.2 million, is subject to payment of 1.0% of the original aggregate principal amount per annum paid quarterly, with a bullet payment at maturity. The Term Loan will mature, and the revolving credit commitments under the Revolving Facility will terminate, on May 25, 2026, when any outstanding balances will become due. Under the original agreement, the Term Loan would bear interest at our option, at either (i) adjusted LIBOR plus 5.00% or (ii) the Base Rate plus 4.00%. From May 25, 2021 to July 3, 2023 our interest rate was based on LIBOR plus 5.00%.

Under the original agreement, borrowings under the Revolving Facility would bear interest, at our option, at either (i) adjusted LIBOR plus 4.25% or (ii) a base rate (which is equal to the highest of (a) the administrative agent’s prime rate, (b) the federal funds rate, as in effect from time to time, plus 0.50%, (c) one-month LIBOR plus 1.00%, and (d) 1.75% (the “Base Rate”), plus 3.25%. DMS LLC pays a 0.50% per annum commitment fee in arrears on the undrawn portion of the revolving commitments. From May 25, 2021 to July 3, 2023, our interest rate was based on LIBOR plus 5.00% . The Company drew $10.0 million on May 24, 2023.

On July 3, 2023, the Term Loan and Revolving Facility were amended to transition LIBOR to the Term Secured Overnight Financing Rate (SOFR) as the basis for establishing the interest rate applicable to borrowings under the agreements. The interest rate is based on SOFR Benckmark Replacement plus 5.00% for the Term Loan and SOFR Benckmark Replacement plus 4.25% for Revolving Facility.

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

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

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

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

d.eliminates the total net leverage ratio covenant for the remainder of 2023, inclusive of the second quarter of 2023, and sets the total net leverage ratio of DMSH LLC and its restricted subsidiaries starting at 15.6x and 10.6x for the first and second quarters of 2024, respectively, and varying for every quarter ~~there after~~thereafter, down to 6.9x for the fourth quarter of 2025 and until maturity;

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

f.establishes a minimum liquidity covenant of $9 million for the remainder of 2023 excluding December 31, 2023, and $10 million from December 31, 2023 and thereafter until maturity (subject to the Company’s ability to exercise an equity cure solely with respect to the liquidity covenant);

g.modifies in certain respects the affirmative and negative covenants and the events of default in the Credit Facility, including subjecting non ordinary course investments and restricted distributions to consent of the requisite Lenders; and

h.establishes a minimum payment for the revolver of 1.0% per annum of the original aggregate principal amount of the Revolving Facility outstanding as of the First Amendment’s effective date, paid quarterly.

The First Amendment, as it relates to the Term Loan, was accounted for as a modification for accounting purposes. As such, $6.3 million in fees due to the Lenders was paid-in-kind and capitalized as additional debt issuance costs. These costs, plus the initial $4.2 million debt discount and $3.5 million debt issuance cost related to the Term Loan are being amortized over the term of the loan using the effective interest method. As of ~~September~~March 3031, ~~2023~~2024, the Term Loan debt discount and debt issuance cost classified as debt had a remaining unamortized balance of $21.48 million and $76.51 million, respectively. As of December 31, ~~2022~~2023, the Term Loan debt discount and debt issuance cost classified as debt had a remaining unamortized balance of $32.01 million and $16.8 million, respectively.

~~Related~~In ~~to the Revolving Facility~~addition, the First Amendment added ~~an additional~~ $0.8 million in lender fees to the Revolving Facility’s debt issuance costs. At ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, unamortized debt issuance costs of $1.20 million and $01.61 million, respectively, from the Revolving Facility are classified as Other assets within the consolidated balance sheets.

For the quarter ended ~~September~~March 3031, 2024 and the year ended December 31, 2023 , the Company elected to exercise ~~the~~its ~~first~~available PIK ~~option~~elections. Accordingly, $910.1 million and $2.3 million of PIK interest expense was added to the outstanding principal balance of the Term Loan and the Revolving Facility, respectively, for the quarter ended March 31, 2024, and $219.1 million and $4.3 million of PIK interest expense was added to the outstanding principal balance of the Term Loan and the Revolving Facility, respectively, for the year ended December 31, 2023. As of ~~September~~March 3031, ~~2023~~2024, the total outstanding balance of the Term Loan and the Revolving Facility is $~~233~~252.75 million and $5357.03 million, respectively. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, the effective interest rate was 15 16.25% for ~~and~~the 12Term Loan.~~1%,~~ ~~respectively,~~The ~~for~~effective interest rate related to the ~~Term~~Revolving ~~Loan~~Facility was 16. ~~For~~4% for the three ~~and~~months ended March 31, 2024.

18As of March 31, 2024, the Company was in breach of the net leverage ratio covenant under its Credit Facility, which it cured as of April 17, 2024, when DMS, LLC, DMSH LLC and certain of the Company’s subsidiaries entered into a second amendment and waiver (the “Second Amendment”) to its existing Credit Facility with a syndicate of lenders, arranged by Truist Bank and Fifth Third Bank, as joint lead arrangers, and Truist Bank, as administrative agent and collateral agent. The Second Amendment introduced new Tranche A term loan commitments in the amount of $22 million with a maturity date of February 25, 2026, increasing our total borrowing capacity under the Credit Facility from $275 million to $297 million. The Second Amendment allows the Company to PIK the quarterly interest payments due and payable for the quarter ended March 31, 2024 and each of the following quarters up to and including the quarter ending on March 31, 2025; and waives compliance with the net leverage ratio covenant through June 30, 2025.

The Second Amendment also includes certain limited waivers related to prior defaults and events of default under the Credit Facility, amends certain negative and affirmative covenants applicable to us and adds certain additional covenants. In accordance with the Second Amendment, we are required to maintain a minimum aggregate amount of unrestricted and uncommitted cash and cash equivalents held in U.S. dollars during the period of time from and after the Second Amendment effective date of at least $5 million. Further, we have agreed to a variance test in which (i) the Company disbursements during a variance testing period shall not be more than 15% in excess of the amount reflected in the corresponding period in the Credit Facility’s loan parties’ projected cash flows prepared in consultation with a financial advisor (the “Cash Flow Forecast”) or (ii) the Company’s aggregate net cash receipts, (a) during the two week period after the Second Amendment effective date, will not be less than 80%, for the trailing two week period, of the aggregate cash receipts forecasted in the Cash Flow Forecast applicable during such testing period, (b) during the three week period after the Second Amendment effective date, will not be less than 82.5%, for the trailing three week period of the aggregate cash receipts forecasted in the Cash Flow Forecast applicable during such testing period and (c) during the four week period after the Second Amendment effective date and

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~~nine~~thereafter, ~~months~~will ~~ended~~not ~~September~~be ~~30,~~less ~~2023,~~than 85% for the ~~effective~~trailing ~~interest~~four ~~rate~~week ~~related~~period toof the ~~Revolving~~aggregate ~~Facility~~cash ~~was~~receipts ~~16.60%~~forecasted ~~and~~in ~~14.80%,~~the ~~respectively~~Cash Flow Forecast applicable during such testing period.

AsIn ~~noted~~connection ~~above,~~with the ~~Credit~~Second ~~Facility is conditioned upon the Company’s compliance with specified covenants~~Amendment, ~~including certain reporting covenants and financial covenants that, in addition to other items, require~~ the Company tomust ~~maintain~~pay a ~~maximum~~8.0% ~~net~~commitment ~~leverage~~fee, ~~ratio.~~which Asshall ~~of September 30,~~be ~~2023,~~fully ~~compliance~~earned ~~with~~on the ~~net~~initial ~~leverage~~funding ~~ratio~~disbursement ~~covenant~~date ~~was~~and ~~waived~~payable inas ~~connection~~PIK ~~with~~interest ~~entry~~on ~~into~~ the ~~First~~Second Amendment ~~(as~~effective ~~defined above) to the Credit Facility~~date. ~~As of December 31~~Further, ~~2022,~~under the ~~Company~~terms ~~was in breach~~ of the ~~net~~Second ~~leverage ratio~~Amendment, ~~which~~the itCompany ~~cured~~has onagreed ~~March~~to ~~30,~~promptly ~~2023~~commence ~~through~~a ~~the~~strategic ~~funds~~review ~~received~~and inmarketing ~~connection~~process ~~with~~for ~~the~~a ~~issuance~~sale of ~~Series~~all Aor ~~and~~substantially ~~Series~~all ~~B convertible Preferred stock and Warrants. As~~ of ~~September 30,~~our ~~2023~~assets, ~~the~~which ~~Company~~is ~~was~~subject into ~~compliance~~certain ~~with the First Amendment’s minimum liquidity covenant~~milestones.

As noted above, the Credit Facility is conditioned upon the Company’s compliance with specified covenants, including certain reporting covenants and financial covenants that, in addition to other items, require the Company to maintain a maximum net leverage ratio. As of March 31, 2024, compliance with the net leverage ratio covenant was waived in connection with entry into the First Amendment. As of December 31, 2023, the Company was in breach of the net leverage ratio, which it cured on March 30, 2023 through the funds received in connection with the issuance of Series A and Series B convertible Preferred stock and Warrants. As of March 31, 2024, the Company was in compliance with the Credit Facility’s minimum liquidity covenant.

Debt Maturity Schedule

The remaining scheduled maturities of our total debt are estimated as follows at ~~September~~March 3031, ~~2023~~2024 (in thousands):

2023	$	688
2024			$	2,063
2024	2,750
2025			26,233
2025	14,167
2026			281,409
2026	269,034
Total debt			$	309,705
Total debt	$	286,639

Note 7. Leases

The following table summarizes the maturities of undiscounted cash flows of operating lease liabilities reconciled to total lease liability as of ~~September~~March 3031, ~~2023~~2024 (in thousands):

	Lease Amounts
2023	$	566
2024	1,561
2024	1,751
2025	469
2025	546
Total	2,030
Total	2,863
Less: Imputed interest	(31)
Less: Imputed interest	(63)
Present value of operating lease liabilities	$	1,999
Present value of operating lease liabilities	$	2,800

As of ~~September~~March 3031, ~~2023~~2024, the operating lease weighted average remaining lease term is 1.70 years and the operating lease weighted average remaining discount rate is 3.4636%.

The discount rate for each lease represents the incremental borrowing rate that the Company would incur at commencement of the lease to borrow on a collateralized basis over a similar term and amount equal to lease payments in a similar economic environment.

The following table represents the Company’s aggregate lease costs, by lease classification (in thousands):

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

Three Months Ended March 31,

Category

Statement of Operations Location

~~2023~~

~~2022~~

~~2023~~2024

~~2022~~2023

Operating lease costs

General and administrative expenses

~~282~~

~~163~~

~~864~~217

~~549~~284

Short-term lease costs

General and administrative expenses

~~277~~95

~~186~~153

Sub-lease income

General and administrative expenses

~~(183)~~

~~(145)~~

(~~545~~90)

(~~388~~179)

Total lease costs, net

~~185~~

~~110~~

~~596~~222

~~347~~258

~~For~~The ~~the nine months ended September 30, 2023 the~~ cash paid for amounts included in the measurement of operating leases was $1345.70 thousand ~~million~~and $537. As0 thousand offor ~~August 31, 2023~~ the ~~Windstream~~three ~~lease~~months ~~was~~ended ~~abandoned~~March ~~under~~31, ~~favorable~~2024 ~~terms~~ and ~~as of June 30,~~ 2023 ~~the AAP Lease located at 1245 East Main Street~~, ~~Annville, PA 17003 was terminated under favorable terms~~respectively. ~~The total lease~~

1915

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termination costs for the three and nine months ended September 30, 2023 were $0.1 million and $0.5 million, respectively, which are included within General and administrative expenses in the consolidated statements of operations.

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.

~~Series A and Series B~~ Preferred Warrants

On March 29, 2023, the Company completed a securities purchase agreement (the “SPA”) with certain investors to purchase 80,000 ~~thousand~~ shares of Series A convertible redeemable Preferred Stock (“Series A Preferred Stock”) and 60,000 ~~thousand~~ shares of Series B convertible redeemable Preferred Stock (“Series B Preferred Stock”) for an aggregate purchase price of $14.0 million (the “Preferred Offering”), including $6.0 million of related party participation. The Company also issued the purchasers in the Preferred Offering warrants to acquire 963 thousand shares of Class A Common Stock (“Preferred Warrants”).

The Preferred Warrants are exercisable for shares of the Company’s Class A Common Stock at any time at the option of the holder and expire five years from the date of issuance. The Preferred Warrants are exercisable on a cashless basis or for cash at an exercise price of $9.6795 per share of Class A Common Stock. The exercise price of the Preferred Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, subdivisions, combinations, reclassifications, or similar events affecting the Company’s Common Stock. The Preferred Warrants contain a put feature providing the right to the holder for a net cash settlement in the event of a fundamental transaction, which is defined as instances where the Company (i) effects any merger or consolidation of the Company, (ii) effects any sale, lease, license, assignment, transfer, conveyance, or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) completes any purchase offer, tender offer, or exchange offer that has been accepted by the holders of at least 50% of the outstanding Class A Common Stock, (iv) effects any reclassification, reorganization, or recapitalization of the Class A Common Stock or any compulsory share exchange pursuant to which the Class A Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) consummates a stock or share purchase agreement or other business combination in which more than 50% of the outstanding shares of Class A Common Stock is acquired. Under such a fundamental transaction, the holder can require the Company to purchase any unexercised warrant shares at the pro-rata share of the sales price or calculated value less the exercise price of the Warrant share.

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

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

The significant assumptions were as follows:

	September 30, 2023
	March 31, 2024
Preferred Warrants Fair Value Per Share	$	01.7203
Preferred Warrant valuation inputs:
Stock price - DMS Inc. Class A Common Stock	$	1.6029
Remaining contractual term in years	4.5000
Estimated volatility	~~100~~170.0		%
Dividend yield	0.0		%
Risk free interest rate	4.6026		%

Private Placement Warrants

Each Company Private Placement Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $172.50 per share, subject to adjustment. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A Common Stock. This means only a whole warrant may be exercised at a given time by a warrant holder. The warrants will expire five years after the Business Combination, or earlier upon redemption or liquidation.

The Company may call the Company Private Placement Warrants for redemption as follows: (1) in whole and not in part; (2) at a price of $0.01 per warrant; (3) upon a minimum of 30 days’ prior written notice of redemption; and (4) only if the last reported closing price of the Class A Common Stock equals or exceeds $270.00 per share for any 20 trading days within a 30-

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

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

We record the fair value of the Private Placement Warrants as a liability in our consolidated balance sheets as of ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, 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 fair value of warrant liabilities on the consolidated statements of operations. As of ~~September~~March 3031, ~~2023~~2024, the Company has approximately 4 million Private Placement Warrants outstanding (convertible into 267 thousand Class A ~~Commont~~Common Stock), the total value of which is not material to the financial statements.

Contingent consideration payable related to acquisitions

The ~~fair value of the~~ contingent ~~considerations~~consideration ~~payable~~ for the ~~Aimtell/PushPros~~Aramis ~~and~~acquisition ~~ClickDealer~~was ~~acquisitions~~finalized ~~(described~~on ~~in Note~~December 5.31, ~~Acquisitions)~~2022, ~~were~~the ~~determined~~end ~~using~~of athe ~~Monte~~earnout ~~Carlo fair value analysis~~period, ~~based~~and onbecame ~~estimated~~payable ~~performance~~during ~~and~~ the ~~probability~~fourth quarter of ~~achieving~~2023, ~~certain~~in ~~targets.~~the Asform ~~certain~~of ~~inputs~~cash ~~are~~or ~~not~~Class ~~observable~~A inCommon ~~the market~~Stock, at the ~~contingent~~election ~~consideration~~of isthe ~~classified as a Level 3 instrument~~Company. ~~Changes~~The intiming ~~fair~~of ~~value~~payment of ~~contingent~~the ~~consideration~~Aramis ~~are~~earnout ~~presented~~remains ~~under~~subject ~~Change~~to inresolution ~~fair~~of ~~value~~certain ofoutstanding ~~contingent~~indemnity ~~consideration~~issues ~~liabilities~~relating onto the ~~consolidated~~acquisition ~~statements~~(see ofNote ~~operations~~5. Acquisitions).

The fair value of the contingent consideration payable for the ~~Crisp~~ClickDealer acquisition (described in Note 5. Acquisitions) was ~~finalized~~determined onusing ~~April~~a 1Monte Carlo fair value analysis, ~~2022~~based on estimated performance and the probability of achieving certain targets. As certain inputs are not observable in the market, the ~~end~~contingent consideration is classified as a Level 3 instrument. Changes in fair value of contingent consideration are presented under Change in fair value of contingent consideration liabilities on the ~~earnout~~consolidated ~~period~~statements of operations. AsThe contingent consideration for the ~~full~~first ~~target~~year ~~was~~measurement ~~met,~~period of the ~~payment~~ClickDealer ~~was~~acquisition ~~made~~finalized on ~~July~~February 129, ~~2022~~2024, inthe end of the ~~form~~first earnout period, resulting in none of ~~Class~~the Ametrics ~~Common~~being ~~Stock.(See~~met, ~~Note~~thus 5.no ~~Acquisitions).~~contingent consideration is to be paid to the sellers for the first measurement period.

The ~~contingent~~following ~~consideration~~table ~~for~~presents the ~~Aramis~~contingent ~~acquisition~~consideration ~~was~~assumptions ~~finalized~~as onof ~~December~~ March 31, 2022, the end of the earnout period, and became payable during the second quarter of 2023, in the form of cash or Class A Common Stock, at the election of the Company. The timing of payment of the Aramis earnout remains subject to resolution of certain outstanding indemnity issues relating to the acquisition. (See Note 5. Acquisitions).2024:

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



















	ClickDealer
Revenue Volatility	50	%
Iteration (actual)	100,000
Risk Adjustment Discount Rate	25.50	%
Risk free / Credit risk	12.50	%
Days from period end to payment	90

	Aimtell / PushPros
Revenue Volatility	25	%
Iteration (actual)	100,000
Risk adjustment discount rate	11.75	%
Risk free / Credit risk	12.50	%
Days from period end to payment	90
	ClickDealer
Revenue Volatility	50	%
Iteration (actual)	100,000
Risk Adjustment Discount Rate	26.25	%
Risk free / Credit risk	12.50	%
Days from period end to payment	90

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

		September 30, 2023
		March 31, 2024
Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Liabilities:
Private placement warrants - Class B common stock	Warrant liabilities	$	—	$	—	$	24	$	24
Preferred warrants - Series A preferred stock	Warrant liabilities	—		—		397		397
Preferred warrants - Series A & B preferred stock	Warrant liabilities	—		—		992		992
Preferred warrants - Series B preferred stock	Warrant liabilities	—		—		297		297
Contingent consideration - Aramis	Contingent consideration payable - current	—		—		1,000		1,000
Contingent consideration - ClickDealer	Contingent consideration payable - non-current	—		—		~~779~~495		~~779~~495
Contingent consideration - ClickDealer	Contingent consideration payable - non-current	—		—		1,281		1,281
Total		$	—	$	—	$	2,511	$	2,511
Total		$	—	$	—	$	3,778	$	3,778

		September 30, 2022
Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Liabilities:
Private placement warrants - Class B common stock	Warrant liabilities	$	—	$	—	$	1,480	$	1,480
Contingent consideration - Aramis	Contingent consideration payable - current	—		—		933		933
Contingent consideration - Traverse	Contingent consideration payable - current	—		—		438		438
Contingent consideration - Aimtell/PushPros	Contingent consideration payable - non-current	—		—		31		31
Total		$	—	$	—	$	2,882	$	2,882

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

	Private Placement Warrants		Series A and B Preferred Warrants		Contingent Consideration
Balance, June 30, 2023	$	24	$	3,178	$	3,768
Changes in fair value	—		(2,484)		(208)
Settlements	—		—		(500)
Balance, September 30, 2023	$	24	$	694	3,060

	Private Placement Warrants		Contingent Consideration
Balance, June 30, 2022	$	480	$	11,403
Additions	—		2
Changes in fair value	1,000		(3)
Settlements	—		(10,000)
Balance, September 30, 2022	$	1,480	$	1,402

	Private Placement Warrants		Series A and B Preferred Warrants		Contingent Consideration
Balance, December 31, 2022	$	600	$	—	$	1,453
Additions	—		8,667		2,457
Changes in fair value	(576)		(7,973)		(285)
Settlements	—		—		(500)
Other (1)	—		—		(65)
Balance, September 30, 2023	$	24	$	694	$	3,060

____________________

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

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	Private Placement Warrants		Contingent Consideration
			March 31, 2023
Balance, December 31, 2021	$	3,960	$	8,439
Category	Balance Sheet Location		Level 1		Level 2		Level 3		Total
Additions	—		430
Liabilities:
Changes in fair value	(2,480)		2,533
Private placement warrants - Class B common stock	Warrant liabilities		$	—	$	—	$	320	$	320
Settlements	—		(10,000)
Preferred warrants - Series A & B preferred stock	Warrant liabilities		—		—		12,711		12,711
Balance, September 30, 2022	$	1,480	$	1,402
Contingent consideration - Aramis	Contingent consideration payable - current		—		—		1,000		1,000
Contingent consideration - Traverse	Contingent consideration payable - current		—		—		466		466
Contingent consideration - ClickDealer	Contingent consideration payable - non-current		—		—		2,457		2,457
Total			$	—	$	—	$	16,954	$	16,954

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


	Private Placement Warrants		Preferred Warrants		Contingent Consideration
Balance, January 1, 2024	$	24	$	58	$	1,512

Changes in fair value	—		934		(17)


Balance, March 31, 2024	$	24	$	992	1,495


	Private Placement Warrants		Preferred Warrants		Contingent Consideration
Balance, January 1, 2023	$	600	$	—	$	1,453
Additions	—		8,667		2,457
Changes in fair value	(280)		4,044		13

Balance, March 31, 2023	$	320	$	12,711	$	3,923

Note 9. Equity

Class B Common Stock and DMSH Units Redemptions

On April 12, 2024, Clairvest redeemed approximately 151.2 thousand Class B Common Stock, effectively converting all of its remaining non-controlling interest held in DMSH Units into Class A Common Stock in DMS Inc. Consequently, there were no shares of the Company's Class B Common Stock outstanding after this redemption.

On July 3, 2023 and November 17, 2023, Prism redeemed approximately 41.2 thousand and 1,520.9 thousand Class B Common Stock, respectively, effectively converting all of its remaining non-controlling interest held in DMSH Units into Class A Common Stock in DMS Inc.

For additional information, see Note 2. Business Combination in the Notes to Consolidated Financial Statements in our 2023 Form 10-K.

Common Stock Reverse Stock Split

On August 28, 2023, Digital Media Solutions, Inc. filed an amendment to its certificate of incorporation in the State of Delaware (the "Amendment"), which provides that, after the market close on August 28, 2023 (the "Reverse Split Effective Time"), every fifteen shares of our issued and outstanding Class A Common Stock and Class B Common Stock will automatically be combined into one issued and outstanding share of Class A Common Stock and Class B Common Stock, respectively, without any change in the par value per share (the “Reverse Stock Split”). Earlier, on April 28, 2023, a majority of our shareholders approved a reverse stock split subject to the board of directors determining the final ratio. The Company’s Class A Common Stock began trading on a split-adjusted basis onat the ~~New~~market ~~York~~open ~~Stock~~on ~~Exchange~~August ~~(NYSE)~~29, at2023. ~~the~~The ~~market~~Company’s ~~open~~common stock and warrants trade on ~~August~~the 29Over-The-Counter Market under the symbols “DMSL” and “DMSIW”, ~~2023~~respectively.

At the Reverse Stock Split Effective Time, every 15 issued and outstanding shares of the Company’s Class A Common Stock and Class B Common Stock were converted automatically into one share of the Company’s Class A Common Stock and Class B Common Stock, respectively, without any change in the par value per share. The Reverse Stock Split reduced the number of shares of Class A Common Stock issued and outstanding from approximately 41.0 million to approximately 2.7 million and Class B Common Stock issued and outstanding from approximately 25.1 million to approximately 1.7 million.

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shares of Class A Common Stock issued and outstanding from approximately 41.0 million to approximately 2.7 million and Class B Common Stock issued and outstanding from approximately 25.1 million to approximately 1.7 million.

Preferred Stock

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

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

March 2023 Offering

On March 29, 2023, the Company entered into a Securities Purchase Agreement with certain investors, pursuant to which the Company sold (i) 80,000 shares of Series A Preferred Stock accompanied with warrants to purchase 550,268 Class A Common Stock (“Series A Warrant”) and (ii) 60,000 shares of Series B Preferred Stock accompanied with warrants to purchase 412,701 shares of Class A Common Stock (“Series B Warrants”). One share of Series A Preferred Stock with the accompanying warrants (“Series A Unit”) and one share of Series B Preferred Stock with the accompanying warrants (“Series B Unit”) were sold at $100 per unit.

~~Although~~The Company measures the Preferred Stock ~~are~~at ~~mandatorily~~its ~~redeemable,~~maximum ~~the~~redemption ~~Preferred~~value ~~Stock~~plus ~~have~~dividends anot ~~substantive~~currently ~~conversion~~declared ~~feature;~~or ~~and~~paid ~~therefore,~~but ~~are~~which ~~not~~will ~~required to~~ be ~~classified~~payable asupon aredemption. ~~liability~~On ~~under~~June ~~ASC 480~~15, ~~Distinguishing~~2023 ~~Liabilities~~the ~~from~~Company ~~Equity.~~remeasured ~~However, as~~ the Preferred Stock ~~are~~following ~~mandatorily redeemable, redeemable in certain circumstances at~~ the ~~option~~accretion ~~of the holder~~method, ~~and~~which ~~redeemable~~resulted in ~~certain~~the ~~circumstances~~Preferred ~~upon~~Stock ~~the~~being ~~occurrence~~measured ofat anits ~~event~~maximum ~~that~~redemption isvalue ~~not~~of ~~solely~~$16.3 million ~~within~~and ~~the~~accretion ~~Company’s~~of ~~control~~$11.3 million, ~~the~~included ~~Company~~in ~~has~~Cumulative ~~classified~~Deficit ~~the~~on ~~Preferred Stock as mezzanine equity in~~ the consolidated balance sheets. ~~The~~as ~~Company~~of ~~measures~~March 31, ~~the Preferred Stock at its maximum redemption value plus dividends not currently declared or paid but which will be payable upon~~ 2024.

23For additional information, see Note 11. Equity in the Notes to Consolidated Financial Statements in our 2023 Form 10-K.

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redemption. On June 15, 2023 the Company remeasured the Preferred Stock following the accretion method, which resulted in the Preferred Stock being measured at its maximum redemption value of $16.3 million and accretion of $11.3 million, included in Cumulative Deficit on the consolidated balance sheets as of September 30, 2023. The fair value of the preferred stock at issuance was recognized using the discount method, which accounts for the 11% discount of the stated value and a pro-rata allocation of the proceeds between the preferred shares and the warrants, less a pro-rata amount of the transaction costs.

Dividend Rights

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

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

Conversion Rights

Each holder has the right, at its option, to convert its Preferred Stock into Class A Common Stock at either, at the option of the holder, (1) the Conversion Price, which is equal to $8.40 per share or (2) the Alternate Conversion Price, which is equal to the lesser of (i) 90% of the arithmetic average of the three lowest daily VWAPs (as defined in the Securities Purchase Agreement) of the 20 trading days prior to the applicable conversion date or (ii) 90% of the VWAP of the trading day prior to the applicable conversion date. Both the Conversion Price and the Alternate Conversion Price are subject to a floor price of $7.26 (“Floor Price”). However, for the Series A Preferred Stock only, if redemption of the Series A Preferred Stock is accelerated by either the Company or the holder (see the Accelerated Redemption provisions defined below), (i) any cash payment required to be made is not made, and (ii) the existing investors have defaulted under their obligations to purchase the Series A pursuant to the terms of a side letter, then the Floor Price shall be $2.415.

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

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

Redemption Rights

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

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

Accelerated Redemption – The holders of the Preferred Stock have the right to require redemption of all or any part of the Preferred Stock at any time on or after June 15, 2023. Additionally, the Company has the option to elect redemption of all Series A shares at any time on or after June 15, 2023. The redemption price, as elected by the holder, is paid in either (i) the Mandatory Redemption Price in cash, (ii) in a variable number of shares of Common Stock based on a share price equal to the lesser of (1) the prevailing Conversion Price, (2) 90% of the arithmetic average of the three lowest daily VWAPs of the 20 Trading Days prior to the applicable accelerated redemption date or (3) 90% of the VWAP of the trading day prior to the

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applicable accelerated redemption date, provided that such share price used will not be below the Floor Price, or (iii) a combination thereof.

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

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

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

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

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

On July 3, 2023, a non-controlling interest holder redeemed 41,160 Class B Common Stock in exchange for Class A Common Stock on a one-for-one basis.

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

Liquidation Rights

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

Voting Rights

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

Redemptions

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

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

25On June 16, 2023, the Board determined that the Company was not legally permitted under applicable Delaware law to effect a redemption for cash of any Series A Preferred Stock. As a result and in accordance with the Securities Purchase Agreement, the Company accrued dividends payable of $156.0 thousand to the Series A Preferred Stockholders, for the quarter ended March 31, 2024, included in Cumulative Deficit on the consolidated balance sheets, as of March 31, 2024. Total accrued dividend to Series A and B Preferred Stockholders was $624.0 thousand, as of March 31, 2024.

~~Table~~Relatedly, Section 9(a) of ~~Contents~~the Series A Certificate of Designation and the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock (the “Series B Certificate of Designation” and together with the Series A Certificate of Designation, the “Certificates of Designation”) provide for the Company to redeem 1/10th of the outstanding Series A Preferred Stock and Series B Preferred Stock, respectively, for cash or shares of the Company’s Class A common stock on a monthly basis beginning on June 30, 2023 at the “Corporation’s Mandatory Redemption Price.” Pursuant to the terms of the Certificates of Designation, the Company was not permitted to elect payment in common stock because the Company’s common stock has not traded above the “Floor Price” ($7.26) for 20 trading days prior to redemption, as required by the Certificates of Designation. With respect to each monthly redemption date, the Board determined that the redemption was not permitted under the Certificates of Designation or applicable Delaware law. As a result, the Company did not redeem any shares of Series A or Series B Preferred Stock during the year ended December 31, 2023 and the three months ended March 31, 2024, respectively.

On June 16, 2023, the Board determined that the Company was not legally permitted under applicable Delaware law to effect a redemption for cash of any Series A Preferred Stock. As a result and in accordance with the Securities Purchase Agreement, the Company accrued dividends payable of $89 thousand to the Series A Preferred Stockholders, for both the quarters ended June 30, 2023 and September 30, 2023, included in Cumulative Deficit on the consolidated balance sheets, as of September 30, 2023. Total accrued dividend to Series A and B Preferred Stockholders was $312.0 thousand, as of September 30, 2023.

Relatedly, Section 9(a) of the Series A Certificate of Designation and the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock (the “Series B Certificate of Designation” and together with the Series A Certificate of Designation, the “Certificates of Designation”) provide for the Company to redeem 1/10th of the outstanding Series A Preferred Stock and Series B Preferred Stock, respectively, for cash or shares of the Company’s Class A common stock on a monthly basis beginning on September 30, 2023 at the “Corporation’s Mandatory Redemption Price.” Pursuant to the terms of the Certificates of Designation, the Company was not permitted to elect payment in common stock because the Company’s common stock has not traded above the “Floor Price” ($7.26) for 20 trading days prior to redemption, as required by the Certificates of Designation. With respect to each monthly redemption date, the Board determined that the redemption was not permitted under the Certificates of Designation or applicable Delaware law. As a result, the Company did not redeem any shares of Series A Preferred Stock in connection with either monthly redemption.

Note 10. Employee and Director Incentive Plans

2020 Omnibus Incentive Plan

On July 15, 2020, Leo’s shareholders approved the 2020 Omnibus Incentive Plan (the “2020 Plan”). The 2020 Plan allows for the issuance and repurchase of stock options, stock appreciation rights, stock awards (including restricted stock awards (“RSAs”) and Restricted Stock Units (“RSUs”)) and other stock-based awards. Directors, officers and employees, as well as others performing independent consulting or advisory services for the Company or its affiliates, are eligible for grants under the 2020 Plan. The aggregate number of shares reserved under the 2020 Plan is approximately 110.68 million. The 2020 Plan terminates on June 24, 2030. The related costs were approximately $0.5 million and $2.6 million for the three and nine months ended September 30, 2023, respectively, and $1.4 million and $5.3 million for the three and nine months ended September 30, 2022, respectively, and are included in Salaries and related costs within the consolidated statements of operations. Fair value of stock-based compensation is based on the closing trading price of the Company’s stock on the grant date.

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terminates on June 24, 2030. The related costs were approximately $0.2 million for the three months ended March 31, 2024, and $1.3 million for the three months ended March 31, 2023, and are included in Salaries and related costs within the consolidated statements of operations. Fair value of stock-based compensation is based on the closing trading price of the Company’s stock on the grant date.

Restricted Stock Units

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, there were no new RSU awards. During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, ~~530,000~~29.3 thousand RSUs were forfeited.

On April 12, 2022, the Board voted to award ~~762,000~~50.8 thousand RSUs consisting of ~~381,406~~25.4 thousand performance-based vesting RSUs (“PRSUs”) and ~~381,406~~25.4 thousand time-based vesting RSUs (“TRSUs”) to certain employees of the Company under the 2020 Plan. The PRSUs vest one-fourth each year based on four years of continuous service starting with January 1, 2022 through January 1, 2026. The TRSUs vest one-fourth each years based on four years continuous service starting April 12, 2022 and ending April 12, 2026.Vesting of the PRSUs ~~are~~were also subject to certain performance metrics of the Company, which the Company evaluates on a quarterly basis. ~~The~~During ~~fair~~three ~~value~~months ofended ~~stock-based~~March ~~compensation~~31, is2024, ~~based~~it onwas determined that the ~~closing~~performance ~~trading~~metric ~~price~~was ofnot met for the ~~Company~~PRSU’s, ~~stock~~and onaccordingly the ~~grant~~awards ~~date~~are no longer subject to amortization. ~~For~~The ~~PRSUs,~~resulting ~~fair~~reversal ~~value~~of ~~was~~compensation ~~also~~expense ~~determined~~was ~~based~~not onmaterial to the ~~assessed~~financial ~~likelihood~~statements. The fair value of ~~meeting~~stock-based ~~the~~compensation ~~performance~~is ~~metrics~~based ~~for~~on ~~each~~the ~~tranche~~closing trading price of the ~~awards~~Company’s asstock ofon the grant date. The TRSU’s related stock-based compensation expense is recognized on a straight-line basis over the vesting period. The PRSU awards’ expense is recognized on an accelerated basis over the vesting period.

Note 11. Income Taxes

As ~~a result~~ of ~~the~~December ~~Business~~31, ~~Combination~~2023, the Company consists of DMS Inc. and its wholly-owned subsidiary, Blocker, which owns 6296.36% of equity interests in DMSH. DMSH is treated as a partnership for purposes of U.S. federal and certain state and local income tax. As a U.S. partnership, generally DMSH will not be subject to corporate income taxes (except with respect to UE and Traverse, as described below). Instead, each of the ultimate partners (including DMS Inc.) are taxed on their proportionate share of DMSH taxable income.

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

26The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. The Company recorded income tax expense of $0.1 million for the three months ended March 31, 2024. The effective tax rate for the three months ended March 31, 2024 was 0.2%, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest and impact of the valuation allowance on DMS Inc. The Company recorded income tax benefit $13.0 thousand for the three months ended March 31, 2023. The effective tax rate for the three months ended March 31, 2023 was 0.1%, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest.

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interests is not reported by the Company in its consolidated financial statements under GAAP. As a result, the Company’s effective tax rate is expected to differ materially from the statutory rate.

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. The Company recorded income tax benefit of $0.3 million and $2.5 million for the three and nine months ended September 30, 2023, respectively. The blended effective tax rate for the three and nine months ended September 30, 2023 was 25.0% and 25.2%, respectively, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest and impact of the valuation allowance on DMS Inc. The Company recorded income tax expense $0.5 million and $0.8 million for the three and nine months ended September 30, 2022, respectively. The blended effective tax rate for the three and nine months ended September 30, 2022 was 26.2% and 25.0%, respectively, which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest.

Tax Receivable Agreement

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

AsSince ofthe ~~September 30,~~year ~~2023~~ended ~~and~~ December 31, ~~2022~~2021, the Company ~~recorded~~maintains a full valuation allowance on our ~~deferred tax asset (“~~DTA”) related to the ~~TRA~~Tax Receivable Agreement along with the entire DTA inventory at DMS, Inc. and Blocker~~. At September 30~~, ~~2023~~as ~~and~~these ~~December 31,~~assets ~~2022,~~are ~~the~~not ~~current~~more ~~portion~~likely ofthan Tax Receivable Agreement liability of $0.2 million was attributable to carryback claims, respectively. We will continue to evaluate the positive and negative evidence in determining the realizability of the Company’s DTAs.

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not to be realized based on the positive and negative evidence that we considered. The Tax Receivable Agreement liability that originated from the Business Combination is not probable under ASC 450, Contingencies since a valuation allowance has been recorded against the related DTA. The remaining short-term Tax Receivable Agreement liability of $0.2 million is attributable to carryback claims. We will continue to evaluate the positive and negative evidence in determining the realizability of the Company’s DTAs.

Note 12. Earnings Per Share

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

27The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted loss per share of Class A common stock (in thousands, except share data):

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	Three Months Ended March 31,
	2024		2023
Numerator:
Net loss	$	(26,278)	$	(20,701)

Net loss attributable to non-controlling interest	(891)		(8,103)
Accretion and dividend Series A and B convertible redeemable preferred stock	(156)		—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic & diluted	$	(25,543)	$	(12,598)





Denominator:
Weighted-average Class A common shares outstanding – basic & diluted	4,287		2,695







Net loss per common share:
Basic and diluted – per Class A common shares	$	(5.96)	$	(4.67)

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

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(17,107)	$	(10,121)	$	(85,299)	$	(27,365)
Net loss attributable to non-controlling interest	(6,445)		$	(4,010)	(33,099)		(10,765)
Accretion and dividend Series A and B convertible redeemable preferred stock	(156)		$	—	(11,497)		—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic	$	(10,818)	$	(6,111)	$	(63,697)	$	(16,600)
Add: Income effects of Class B convertible common stock	$	—	$	(4,010)	$	—	$	—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - diluted	$	(10,818)	$	(10,121)	$	(63,697)	$	(16,600)
Denominator:
Weighted-average Class A common shares outstanding – basic	2,763		2,664		2,721		2,510
Add: dilutive effects of Class B convertible common stock	—		1,713		—		—
Weighted-average Class A common shares outstanding – diluted	2,763		4,377		2,721		2,510
Net loss per common share:
Basic – per Class A common shares	$	(3.92)	$	(2.29)	$	(23.41)	$	(6.61)
Diluted – per Class A common shares	$	(3.92)	$	(2.31)	$	(23.41)	$	(6.61)

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

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, the Company excluded 1151.72 ~~million~~thousand shares of Class B convertible common stock, 80 thousand Series A Preferred stock, 60 thousand Series B Preferred stock, 4.0 million ~~private~~Private ~~warrants~~Placement Warrants, 10.0 million ~~public~~Public ~~warrants~~Warrants, 14.4 million ~~preferred~~Preferred ~~warrants~~Warrants, 084.13 ~~million~~thousand stock options, 2826.38 thousand RSUs, ~~13.3 thousand PRSUs,~~ and the contingent and deferred considerations issued in connection with the ClickDealer and Aramis acquisitions as their effect would have been anti-dilutive. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023, the Company excluded 1.7 million shares of Class B convertible common stock, 4.0 million ~~private~~Private ~~warrants~~Placement Warrants, 10.0 million ~~public~~Public ~~warrants~~Warrants, 0113.~~1 million~~3 thousand stock options, 066.~~1 million~~7 thousand RSUs and 20.0 thousand PRSUs, and the contingent and deferred considerations issued in connection with the AAP and Crisp Results acquisitions, as their effect would have been anti-dilutive. ~~For the nine months ended September 30, 2022, the Company excluded the Class B convertible stock, as their effect would have been anti-dilutive.~~

Note 13. Commitments and Contingencies

Legal proceedings

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

On October 28, 2022, the Company received notice from the Office of the Ohio Attorney General (“OH OAG”) that it was reviewing certain of DMS’s business practices pursuant to its authority under the Consumer Sales Practices Act, Ohio Revised Code Section 1345.06, and the Telephone Solicitation Sales Act, Ohio Revised Code Sections 4719.11; 109.87(C). While the Company believes that its practices are in compliance with applicable law, the Company and the OH OAG have entered into discussions regarding the terms of a potential resolution to the OH AG'’s review. It is uncertain whether a mutually acceptable

2821

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resolution can be reached and the terms thereof, and, accordingly, the Company is unable to predict the impact of any such resolution to the Company’s business operations or financial results.

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

Overview

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to, our Consolidated Financial Statements (Unaudited) and accompanying Notes appearing elsewhere in this Quarterly Report (the “Notes”). In addition, reference should be made to our Audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2022~~2023 Form 10-K/A. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in this MD&A under “Cautionary Note Regarding Forward-Looking Statements ~~and Factors that May Affect Future Results~~”.

Recent Developments

~~Common~~On ~~Stock~~April ~~Reverse~~17, ~~Split~~2024, DMS, LLC, DMSH LLC and certain of the Company’s subsidiaries entered into a second amendment and waiver (the “Second Amendment”) to its existing Credit Facility with a syndicate of lenders, arranged by Truist Bank and Fifth Third Bank, as joint lead arrangers, and Truist Bank, as administrative agent and collateral agent. The Second Amendment introduced new Tranche A term loan commitments in the amount of $22 million with a maturity date of February 25, 2026, increasing our total borrowing capacity under the Credit Facility from $275 million to $297 million. The Second Amendment allows the Company to PIK the quarterly interest payments due and payable for the quarter ended March 31, 2024 and each of the following quarters up to and including the quarter ending on March 31, 2025; and waives compliance with the net leverage ratio covenant through June 30, 2025.

OnThe ~~August 28,~~Second ~~2023,~~Amendment ~~Digital~~also ~~Media~~includes ~~Solutions,~~certain ~~Inc.~~limited ~~filed~~waivers anrelated ~~amendment~~ to ~~its~~prior ~~certificate~~defaults and events of ~~incorporation~~default inunder the ~~State~~Credit ofFacility, ~~Delaware~~amends (certain negative and affirmative covenants applicable to us and adds certain additional covenants. In accordance with the "Second Amendment"), ~~which~~we ~~provides~~are ~~that,~~required ~~after~~to maintain a minimum aggregate amount of unrestricted and uncommitted cash and cash equivalents held in U.S. dollars during the ~~market~~period ~~close~~of ontime ~~August 28,~~from ~~2023~~and (after the ~~"Reverse~~Second ~~Split~~Amendment ~~Effective~~effective ~~Time")~~date of at least $5 million. Further, ~~every~~we ~~fifteen~~have ~~shares~~agreed ofto ~~our~~a ~~issued~~variance ~~and~~test ~~outstanding~~in ~~Class~~which A(i) ~~Common~~the ~~Stock~~Company ~~and~~disbursements ~~Class~~during Ba ~~Common~~variance ~~Stock~~testing ~~will~~period ~~automatically~~shall not be ~~combined~~more ~~into~~than ~~one~~15% ~~issued~~in ~~and~~excess ~~outstanding~~of ~~share~~the ofamount ~~Class~~reflected Ain ~~Common~~the ~~Stock~~corresponding ~~and~~period ~~Class~~in Bthe ~~Common~~Credit ~~Stock,~~Facility’s ~~respectively,~~loan ~~without~~parties’ ~~any~~projected ~~change~~cash flows prepared in ~~the~~consultation ~~par~~with ~~value~~a ~~per~~financial ~~share~~advisor (the “~~Reverse~~Cash ~~Stock~~Flow ~~Split~~Forecast”). ~~Earlier~~or (ii) the Company’s aggregate net cash receipts, on(a) ~~April~~during 28the two week period after the Second Amendment effective date, ~~2023~~will not be less than 80%, afor ~~majority~~the trailing two week period, of ~~our~~the ~~shareholders~~aggregate ~~approved~~cash areceipts ~~reverse~~forecasted ~~stock~~in ~~split~~the ~~subject~~Cash toFlow Forecast applicable during such testing period, (b) during the ~~board~~three ofweek ~~directors~~period ~~determining~~after the ~~final~~Second ~~ratio~~Amendment effective date, will not be less than 82.5%, ~~The~~for ~~Company’s~~the ~~Class~~trailing Athree ~~Common~~week ~~Stock~~period ~~began~~of ~~trading~~the onaggregate acash ~~split-adjusted~~receipts ~~basis~~forecasted onin the ~~New~~Cash ~~York~~Flow ~~Stock~~Forecast ~~Exchange~~applicable during such testing period and (~~NYSE~~c) atduring the ~~market~~four ~~open~~week onperiod ~~August 29~~after the Second Amendment effective date and thereafter, ~~2023~~will not be less than 85% for the trailing four week period of the aggregate cash receipts forecasted in the Cash Flow Forecast applicable during such testing period.

AtIn ~~the~~connection ~~Reverse~~with ~~Stock~~the ~~Split~~Second ~~Effective Time~~Amendment, ~~every~~the 15Company ~~issued~~must ~~and~~pay ~~outstanding~~a ~~shares~~8.0% ofcommitment ~~the~~fee, ~~Company’s~~which ~~Class~~shall Abe ~~Common~~fully ~~Stock~~earned ~~and~~on ~~Class~~the Binitial ~~Common~~funding ~~Stock~~disbursement ~~were~~date ~~converted~~and ~~automatically~~payable ~~into~~as ~~one~~PIK ~~share~~interest ofon the ~~Company’s~~Second ~~Class~~Amendment Aeffective ~~Common~~date. ~~Stock~~Further, ~~and~~under ~~Class~~the Bterms ~~Common~~of ~~Stock,~~the ~~respectively~~Second Amendment, ~~without~~the ~~any~~Company ~~change~~has inagreed ~~the~~to ~~par~~promptly ~~value~~commence ~~per~~a ~~share.~~strategic ~~The~~review ~~Reverse~~and ~~Stock~~marketing ~~Split~~process ~~reduced~~for ~~the~~a ~~number~~sale of ~~shares~~all ofor ~~Class~~substantially Aall ~~Common~~of ~~Stock~~our ~~issued~~assets, ~~and~~which ~~outstanding~~is ~~from~~subject ~~approximately~~to 41certain milestones.~~0 million~~ Refer to ~~approximately~~Note 26.~~7 million~~ ~~and~~Debt ~~Class~~in Bthe ~~Common~~Condensed ~~Stock~~Notes ~~issued~~to ~~and~~Consolidated ~~outstanding~~Financial ~~from~~Statements ~~approximately~~(Unaudited), ~~25.1 million~~included toin ~~approximately~~Item 1.~~7 million~~ Financial Statements of this Quarterly Report, for further detail on our debt.

No fractional shares were issued in connection with the Reverse Stock Split. Shareholders who otherwise would have been entitled to receive a fractional share instead became entitled to receive one whole share of common stock in lieu of such fractional share. All historical share amounts disclosed in this quarterly report on Form 10-Q have been retroactively restated to reflect the Reverse Stock Split.23

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

On September 25, 2023, the Company announced that it will be delisted from the NYSE. The Company’s delisting follows the NYSE’s determination under Rule 802.01B of the NYSE Listed Company Manual that the Company did not meet the NYSE’s continued listing standard that requires listed companies to maintain an average global market capitalization of at least $15 million over a period of 30 consecutive trading days. The Company’s delisting does not affect the Company’s business operations and DMS continues to be focused on its core solutions in service of its advertising clients. In addition, the delisting does not cause an event of default under the senior secured credit facility to which its subsidiaries are a party, and DMS continues to be supported by its lenders as evidenced by the recent amendment to its credit facility, which has provided the Company and management with the flexibility needed to manage through the current environment. The Company will continue to be a Securities and Exchange Commission (“SEC”) reporting company. The Company's Class A common stock commenced trading on the over-the-counter markets on September 26, 2023 under the trading symbol "DMSL." The Company will consider relisting its Class A Common Stock on a national securities exchange in the future if the Board of Directors determines that doing so is in the best interest of the Company and its stakeholders.

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Results of Operations

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

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	Three Months Ended March 31,
	2023		2022			2023		2022
	2024		2023
Revenue by type:
Customer acquisition	96.53	%	9695.18	%		~~96.1~~	%	~~96.0~~	%
Managed services	1.57	%	2.24	%		~~2.1~~	%	~~2.8~~	%
Software services	21.09	%	1.78	%		~~1.8~~	%	~~1.2~~	%
Total net revenue	100.0	%	100.0	%		~~100.0~~	%	~~100.0~~	%
Revenue by segment:
Brand Direct	5759.94	%	4761.03	%		~~60.8~~	%	~~51.1~~	%
Marketplace	4654.19	%	5941.03	%		~~42.1~~	%	~~57.2~~	%
Technology Solutions	2.75	%	2.96	%		~~2.6~~	%	~~2.6~~	%
Intercompany Eliminations	(616.79)	%	(85.92)	%		~~(5.5)~~	%	~~(10.9)~~	%
Net revenue	100.0	%	100.0	%		~~100.0~~	%	~~100.0~~	%
Cost of revenue (exclusive of depreciation and amortization)	7679.98	%	7375.73	%		~~76.3~~	%	~~73.0~~	%
Gross profit	2320.12	%	2624.37	%		~~23.7~~	%	~~27.0~~	%
Salaries and related costs	1415.25	%	13.05	%		~~13.9~~	%	~~13.3~~	%
General and administrative	1316.31	%	1014.14	%		~~14.1~~	%	~~11.2~~	%
Depreciation and amortization	65.3	%	75.96	%		~~6.3~~	%	~~7.4~~	%
Impairment of goodwill	—	%	—	%		13.6	%	—	%
Acquisition costs	—	%	2.6	%
Impairment of intangible assets	—	%	—	%		3.1	%	—	%
Change in fair value of contingent consideration	*		*
Acquisition costs	*		*			1.2	%	0.1	%
Loss from operations	(16.6)	%	(11.4)	%
Change in fair value of contingent consideration	(0.3)	%	*			(0.1)	%	0.9	%
Interest expense, net	19.1	%	7.4	%
Loss from operations	(10.4)	%	(4.7)	%		(28.4)	%	(5.9)	%
Change in fair value of warrant liabilities	1.3	%	4.2	%
Interest expense, net	15.8	%	5.1	%		10.3	%	4.2	%
Other (1)	*		—	%
Change in fair value of warrant liabilities	(3.3)	%	1.1	%		(3.4)	%	(0.9)	%
Net loss before income taxes	(37.1)	%	(23.0)	%
Change in Tax Receivable Agreement liability	—	%	(0.1)	%		—	%	*
Income tax expense (benefit)	*		*
Other (1)	*		—	%		*		—	%
Net loss	(37.2)	%	(23.0)	%
Net loss before income taxes	(22.9)	%	(10.8)	%		(35.3)	%	(9.2)	%
Net loss attributable to non-controlling interest	(1.3)	%	(9.0)	%
Income tax (benefit) expense	(0.4)	%	0.5	%		(1.0)	%	0.3	%
Net loss attributable to Digital Media Solutions, Inc.	(35.9)	%	(14.0)	%
Net loss	(22.5)	%	(11.3)	%		(34.3)	%	(9.5)	%
Net loss attributable to non-controlling interest	(8.5)	%	(4.5)	%		(13.3)	%	(3.7)	%
Net loss attributable to Digital Media Solutions, Inc.	(14.0)	%	(6.8)	%		(21.0)	%	(5.8)	%

____________________

* Less than one tenth of a percent.

(1)Represents Foreign exchange loss (gain) ~~and Gain on disposal of assets~~.

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Operating Results for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023

The following table presents the consolidated results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 and the changes from the prior period (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	Three Months Ended March 31,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
	2024		2023		$ Change		% Change
Net revenue	$	7670,~~033~~709	$	90,~~066~~313	$	(1419,~~033~~604)	(1622)	%	$	~~248,898~~	$	~~290,372~~	$	~~(41,474)~~	~~(14)~~	%
Cost of revenue (exclusive of depreciation and amortization)	5856,~~506~~407		6668,~~378~~042		(711,~~872~~635)		(1217)	%	~~189,892~~		~~211,997~~		~~(22,105)~~		~~(10)~~	%
Salaries and related costs	10,~~770~~957		1112,~~668~~226		(~~898~~1,269)		(810)	%	~~34,484~~		~~38,612~~		~~(4,128)~~		~~(11)~~	%
General and administrative	1011,~~087~~402		912,~~076~~856		(1,~~011~~454)		(11)	%	~~35,072~~		~~32,622~~		~~2,450~~		8	%
Depreciation and amortization	43,~~778~~726		75,~~142~~082		(21,~~364~~356)		(3327)	%	~~15,732~~		~~21,377~~		~~(5,645)~~		~~(26)~~	%
Impairment of goodwill	—		—		—		100	%	33,795		—		33,795		100	%
Acquisition costs	—		2,345		(2,345)		(100)	%
Impairment of intangible assets	—		—		—		100	%	7,791		—		7,791		100	%
Change in fair value of contingent consideration	(17)		13		(30)		(231)	%
Acquisition costs	17		14		3		21	%	3,020		306		2,714		887	%
Loss from operations	(11,766)		(10,251)		(1,515)		15	%
Change in fair value of contingent consideration	(208)		(3)		(205)		6833	%	(285)		2,533		(2,818)		(111)	%
Interest expense, net	13,488		6,699		6,789		101	%
Loss from operations	(7,917)		(4,209)		(3,708)		88	%	(70,603)		(17,075)		(53,528)		314	%
Change in fair value of warrant liabilities	934		3,764		(2,830)		(75)	%
Interest expense, net	11,989		4,570		7,419		162	%	25,732		12,072		13,660		113	%
Other (1)	40		—		40		100	%
Change in fair value of warrant liabilities	(2,484)		1,000		(3,484)		(348)	%	(8,549)		(2,480)		(6,069)		245	%
Net loss before income taxes	(26,228)		(20,714)		(5,514)		27	%
Change in Tax Receivable Agreement liability	—		(121)		121		(100)	%	—		(121)		121		(100)	%
Income tax expense (benefit)	50		(13)		63		(485)	%
Other (1)	19		—		19		100	%	11		—		11		100	%
Net loss	(26,278)		(20,701)		(5,577)		27	%
Net loss before income taxes	(17,441)		(9,658)		(7,783)		81	%	(87,797)		(26,546)		(61,251)		231	%
Net loss attributable to non-controlling interest	(891)		(8,103)		7,212		(89)	%
Income tax (benefit) expense	(334)		463		(797)		(172)	%	(2,498)		819		(3,317)		(405)	%
Net loss attributable to Digital Media Solutions, Inc.	$	(25,387)	$	(12,598)	$	(12,789)	102	%
Net loss	(17,107)		(10,121)		(6,986)		69	%	(85,299)		(27,365)		(57,934)		212	%
Net loss attributable to non-controlling interest	(6,445)		(4,010)		(2,435)		61	%	(33,099)		(10,765)		(22,334)		208	%
Net loss attributable to Digital Media Solutions, Inc.	$	(10,662)	$	(6,111)	$	(4,551)	75	%	$	(52,200)	$	(16,600)	$	(35,600)	215	%

____________________

(1)Represents Foreign exchange loss (gain) and Gain on disposal of assets.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

2023

2022

$ Change

% Change

2023

2022

$ Change

% Change

2024

2023

$ Change

% Change

Brand Direct

Customer acquisition

4341,~~446~~224

4154,~~381~~020

2(12,~~065~~796)

5(24)

~~147,892~~

~~144,123~~

~~3,769~~

Managed services

~~594~~805

~~937~~1,383

(~~343~~578)

(3742)

~~3,246~~

~~4,211~~

~~(965)~~

~~(23)~~

Total Brand Direct

4442,~~040~~029

4255,~~318~~403

1(13,~~722~~374)

4(24)

~~151,138~~

~~148,334~~

~~2,804~~

Marketplace

Customer acquisition

3538,~~081~~811

5337,~~230~~288

~~(18~~1,~~149)~~523

~~(34)~~4

~~104,846~~

~~166,128~~

~~(61,282)~~

~~(37)~~

Total Marketplace

3538,~~081~~811

5337,~~230~~288

~~(18~~1,~~149)~~523

~~(34)~~4

~~104,846~~

~~166,128~~

~~(61,282)~~

~~(37)~~

Technology Solutions

Managed services

~~511~~412

~~1,076~~753

(~~565~~341)

(5345)

~~2,021~~

~~3,989~~

~~(1,968)~~

~~(49)~~

Software services

1,~~512~~378

1,~~501~~583

11(205)

1(13)

~~4,563~~

~~3,472~~

~~1,091~~

Total Technology Solutions

21,~~023~~790

2,~~577~~336

(~~554~~546)

(2223)

~~6,584~~

~~7,461~~

~~(877)~~

~~(12)~~

Corporate and Other

Customer acquisition

(511,~~111~~921)

(84,~~059~~714)

2(7,~~948~~207)

~~(37)~~153

~~(13,670)~~

~~(31,551)~~

~~17,881~~

~~(57)~~

Total Corporate and Other

(511,~~111~~921)

(84,~~059~~714)

2(7,~~948~~207)

~~(37)~~153

~~(13,670)~~

~~(31,551)~~

~~17,881~~

~~(57)~~

Total Customer acquisition

7368,~~416~~114

86,~~552~~594

(1318,~~136~~480)

(1521)

~~239,068~~

~~278,700~~

~~(39,632)~~

~~(14)~~

Total Managed services

1,~~105~~217

2,~~013~~136

(~~908~~919)

(4543)

~~5,267~~

~~8,200~~

~~(2,933)~~

~~(36)~~

Total Software services

1,~~512~~378

1,~~501~~583

11(205)

1(13)

~~4,563~~

~~3,472~~

~~1,091~~

Total Net revenue

7670,~~033~~709

90,~~066~~313

(1419,~~033~~604)

(1622)

~~248,898~~

~~290,372~~

~~(41,474)~~

~~(14)~~

Customer Acquisition Revenue. Customer acquisition contracts deliver potential consumers or leads (i.e. number of clicks, emails, calls and applications) to the customer in real-time based on predefined qualifying characteristics specified by our customer.25

Our Brand Direct segment experienced an increase in Customer acquisition revenue of $2.1 million or 5% and $3.8 million or 3% during the three and nine months ended September 30, 2023. As our base business continues to experience downward pressure, growth within the period was driven primarily by the acquisition of ClickDealer. Customer acquisition revenue for Marketplace decreased by $18.1 million or 34% and decreased by $61.3 million or 37% for the three and nine months ended September 30, 2023. The changes in both the Brand Direct and Marketplace segments were primarily due to continued macro challenges specifically within the Property & Casualty insurance industry which continues to apply increased pressure on revenue per lead (“RPL”) pricing. Carriers continue to navigate and adjust to unprecedented complex market conditions and we are committed to exploring innovative solutions to manage these challenges while preparing for an eventual recovery. The prolonged recovery in Property & Casualty insurance, which remains uncertain, has resulted in acute revenue declines across the business as carrier profitability remains challenged due to high loss ratios. The Company has also experienced a downturn within the Mass Tort and Debt business, and a shift in the health insurance distribution model during non-enrollment periods affecting ad spend as well as enhancements to an already highly restrictive regulatory environment, which continues to impact the Company’s performance since Q2 of prior year. During the third quarter of 2023, the Company launched its Affordable Care Act (“ACA”) downline business which is expected to expand the Company’s footprint in the health insurance marketplace.

Managed Services Revenue. Managed services contracts provide continuous service of managing the customer’s media spend for the purpose of generating leads through a third-party supplier of leads, as requested by our customer. Managed services revenue experienced a decrease of $0.9 million or 45% and a decrease of $2.9 million or 36% during the three and nine months ended September 30, 2023. The changes were primarily driven by decreased media activity, resulting in lower agency fees. The managed services environment is highly sensitive and correlative to economic drivers especially inflationary in nature. As inflationary pressures and uncertainty persist, the managed services industry will continue to experience contraction.

Software Services Revenue. Software services contracts provide the customer with continuous, daily access to the Company’s proprietary software. Software services revenue is considered insignificant during the three and nine months ended September 30, 2023.

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~~advertising~~Customer ~~exchanges,~~Acquisition ~~and~~Revenue. ~~technology~~Customer ~~costs~~acquisition ~~that~~contracts ~~enable~~deliver ~~media~~potential ~~acquisition.~~consumers ~~These~~or ~~media~~leads ~~costs~~(i.e. ~~are~~number ~~used~~of ~~primarily~~clicks, toemails, ~~drive~~calls ~~user~~and ~~traffic~~applications) to the ~~Company’s~~customer ~~and~~in ~~our~~real-time ~~customers’~~based ~~media~~on ~~properties.~~predefined ~~Cost~~qualifying ofcharacteristics ~~revenue~~specified ~~also~~by ~~includes~~our ~~indirect costs such as data verification, hosting and fulfillment costs~~customer.

Our Brand Direct segment experienced a decrease in Customer acquisition revenue of $12.8 million or 24% during the three months ended March 31, 2024. As our base business continues to experience downward pressure, growth within the period was driven primarily by the acquisition of ClickDealer. Customer acquisition revenue for Marketplace increased by $1.5 million or 4% for the three months ended March 31, 2024. The decline in Brand Direct is attributed to a pivot within our customer portfolio of marketing activities shifting in-house and the result of lower performing consumer finance campaigns. The consumer finance segment continues to experience increased competition and even more complexity.As consumers try to navigate inflationary pressures, spending will continue to be strained. The increase in Marketplace segments were primarily due to the rebound within Property & Casualty insurance as the industry positions itself for a favorable outlook in FY24. The Company also launched its Affordable Care Act (“ACA”) downline business in Q3 of FY23, which continues expand the Company’s footprint in the health insurance marketplace.

Managed Services Revenue. Managed services contracts provide continuous service of managing the customer’s media spend for the purpose of generating leads through a third-party supplier of leads, as requested by our customer. Managed services revenue experienced a decrease of $0.9 million or 43% during the three months ended March 31, 2024. The changes were primarily driven by decreased media activity, resulting in lower agency fees. As marketing organizations continue to invest in advanced tools and technologies that can enhance the effectiveness of their in-house marketing activities, the managed service model will continue to contract.

Cost of revenue and gross profit. Cost of revenue primarily includes media and other related costs, such as the cost to acquire user traffic through the purchase of impressions, clicks or actions from publishers or third-party intermediaries, including advertising exchanges, and technology costs that enable media acquisition. These media costs are used primarily to drive user traffic to the Company’s and our customers’ media properties. Cost of revenue also includes indirect costs such as data verification, hosting and fulfillment costs. Gross profit is exclusive of Depreciation and amortization.

The following table presents the gross profit percentage (gross profit as a percentage of total revenue) by segment and the changes from prior period:

	Three Months Ended September 30,					Nine Months Ended September 30,
	Three Months Ended March 31,
	2023		2022		PPTS Change	2023		2022		PPTS Change
	2024		2023		PPTS Change
Brand Direct	1713.26	%	22.37	%	(59.1)	~~20.3~~	%	~~20.8~~	%	~~(0.5)~~
Marketplace	2318.92	%	2221.63	%	1.(3.1)	~~22.3~~	%	~~24.7~~	%	~~(2.4)~~
Technology Solutions	7885.76	%	8674.02	%	(711.3)4	~~76.6~~	%	~~86.0~~	%	~~(9.4)~~
Total gross profit percentage	2320.12	%	2624.37	%	(34.25)	~~23.7~~	%	~~27.0~~	%	~~(3.3)~~

Gross profit percentage for Brand Direct decreased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, in comparison to the same periods in ~~2022~~2023, primarily driven by ~~mixed~~the ~~challenges~~aforementioned ~~within~~pivot ~~our~~towards ~~publisher~~in-sourcing ~~portfolio~~of ~~impacting~~marketing ~~campaign~~activities ~~performance~~within ~~delivery~~our ~~across~~customer ~~the~~portfolio ~~segment.~~and ~~Secondarily,~~lower ~~softness~~performing campaigns within our ~~Debt~~debt/~~Consumer~~consumer ~~Finance~~finance vertical, both of which ~~delivers~~deliver a higher margin profile. Additionally, ~~also~~channel ~~contributed~~mix tochallenges ~~the~~within ~~margin~~our ~~decline.~~publisher Asportfolio ~~inflationary~~impacted ~~effects~~campaign ~~continue~~performance todelivery ~~impact~~across the ~~economy,~~segment ~~there~~and ~~will~~we beexperienced heightened competitive activities within the lead delivery and acquisition marketplace which led to higher acquisition costs as a result of the inflationary effects that continued to disrupt the economy. Each of these factors working in concert contributed to the margin decline.

Gross profit percentage for Marketplace ~~increased~~decreased for the three months ended ~~September~~March 3031, ~~2023~~2024, in comparison to the same period in ~~2022;~~2023, ~~and~~primarily ~~decreased~~driven ~~for~~by improved performance across the ~~nine~~P&C ~~months~~vertical ~~ended~~as ~~September 30,~~macro ~~2023,~~industry inheadwinds ~~comparison~~that tohave plagued the ~~same~~industry ~~period~~for inthe ~~2022,~~last ~~primarily~~twenty-four ~~driven~~months bycontinue to subside. Additionally, media optimizations within our insurance business by focusing on a diverse product strategy that centers around Owned & Operated ~~(“O&O”)~~ websites and marketplaces as a result of hiring our new ~~EVP~~executive Vice President of Media continue to improve our profitability margin. We are ~~delivering~~expecting improved margins by centralizing our demand behind our proprietary DMS asset.

Gross profit percentage for Technology Solutions ~~decreased~~increased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, in comparison to the same periods in ~~2022~~2023, ~~primarily~~ driven by the mix of media purchasing activity skewed more heavily towards higher ~~priced~~performing media sources ~~which~~coupled ~~led~~with toour ~~compressed~~internal ~~budgets~~media ~~and~~optimization ~~resulted in decreased fees~~strategy. Additionally, as we ~~have~~continue ~~seen~~to ~~softness~~invest inbehind our ~~margin performance driven by lower utilization across our~~ technology, ~~stack~~we ~~within our existing customer base as a result of increased economic inflationary fears and uncertainty.~~

Total gross profit percentage decreased for the three and nine months ended September 30, 2023, in comparison to the same periods in 2022, primarily due to the continued downward pressures within the insurance industry, which continue to lead to declines in click pricing. Additionally, inflation and macro shifts in health insurance budgets have culminated in a monetization contraction within the DMS ecosystem.26

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expect to sustain our margin performance with minimal contraction even as marketing organizations continue to explore in-house marketing solutions.

Total gross profit percentage decreased for the three months ended March 31, 2024, in comparison to the same periods in 2023, primarily due to the external pressures of in-sourcing marketing activities within our customer portfolio coupled with the declines in the consumer finance vertical driven by continued inflationary concerns. Additionally, macro shifts within the insurance industry have culminated in a monetization expansion within the DMS ecosystem as the outlook is poised for solid growth.

Salaries and related costs. Total compensation includes salaries, commissions, bonuses, payroll taxes and retirement benefits.

Salaries and related costs decreased by $01.93 million or ~~7.7~~10% for the three months ended ~~September~~March 3031, ~~2023~~2024, in comparison to the same period in ~~2022; and decreased $4.1 million or 10.7% for the nine months ended September 30,~~ 2023, ~~in comparison to the same period in 2022,~~ primarily driven by the continued redesign of the corporate structure to optimize the operational and administrative support across the organization as well as higher attrition than expected offset by the impact of the ClickDealer acquisition. We continue to evaluate opportunities to position the business for a sustainable future with a focus on developing our top talent.

General and administrative. General and administrative consist of expenses incurred in our normal course of business relating to office supplies, computer and technology, rent and utilities, insurance, legal and professional fees, state and local taxes and licenses, penalties and settlements and allowance for credit losses, as well as sales and marketing expenses relating to advertising and promotion. We also include other expenses such as investment banking expenses, capital raising costs and costs related to the advancement of our corporate social responsibility program.

General and administrative expenses ~~increased~~decreased $1.05 million or 11.1% for the three months ended ~~September~~March 3031, ~~2023~~2024, ~~in comparison to the same period in 2022, and increased $2.5 million or 7.5%, for the nine months ended September 30, 2023, in comparison to the same period in 2022,~~ largely due to costs associated with ~~negotiating~~ the ~~amendment~~termination toof ~~our~~call ~~senior~~center ~~secured~~activities ~~credit~~supporting ~~facility~~our Voice and ~~the~~Crisp ~~termination~~operations ofwhich ~~DMS~~were ~~Voice~~discontinued ~~operations~~in Q1 last year.

Depreciation and amortization. Property, plant and equipment consists of computers and office equipment, furniture and

fixtures, leasehold improvements and internally developed software costs. Intangible assets subject to amortization include technology, customer relationships, brand, and non-competition agreements.

34Depreciation and amortization expense decreased $1.4 million or 27% for the three months ended March 31, 2024, primarily due to fewer intangibles amortized after the impairments recorded during 2023.

~~Table~~Impairment of ~~Contents~~goodwill and intangible assets. During the three months ended March 31, 2024, no impairment of goodwill or impairment of intangible assets was recorded (see Note 4. Goodwill and Intangible Assets).

Depreciation and amortization expense decreased $2.4 million or 33.1% for the three months ended September 30, 2023, in comparison to the same period in 2022, and decreased $5.6 million or 26.4%, for the nine months ended September 30, 2023, in comparison to the same period in 2022, primarily due to fewer intangibles amortized after the impairment recorded as of December 31, 2022 and June 30, 2023 (see Impairment of goodwill and intangibles section below).

Impairment of goodwill and intangible assets. During the second quarter of 2023, the Company determined that the recent economic downturn and inflation, along with the Company’s revenue reduction and decreased stock market price were indicators of impairment for the Marketplace reporting unit under ASC 350-20, Goodwill, and ASC 360-10, Impairment and Disposal of Long-Lived Assets for certain asset groups. During the three months ended September 30, 2023, no impairment of goodwill or impairment of intangible assets was recorded. Comparatively, during the nine months ended September 30, 2023, Impairment of goodwill increased $33.8 million or 100.0% and Impairment of intangible assets increased $7.8 million or 100.0%, respectively, due to the Intangible assets within Marketplace exceeding its recoverability as of June 30, 2023 (see Note 4. Goodwill and Intangible Assets).

Acquisition costs. Acquisition related costs are not considered part of the consideration for acquisitions and are expensed as incurred. This includes acquisition incentive compensation and other transaction related costs.

Acquisition costs ~~increased~~decreased ~~nil for the three months ended September 30, 2023 and increased~~ $2.73 million orfor ~~886.9% during~~ the ~~nine~~three months ended ~~September 30~~March 31, ~~2023~~2024, in comparison to the same periods in ~~2022~~2023, primarily due to the ClickDealer acquisition (see Note 5. Acquisitions).

Interest expense, net. Interest expense, net for three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 was related primarily to our debt, which carries a variable interest rate based on multiple options at either LIBOR plus 5% or an alternate base rate, plus an agreed upon margin with Truist Bank, the administrative agent under the Company’s senior secured credit facility since May 25, 2021 (see Note 6. Debt).

Interest expense, net increased by $76.48 million or ~~162~~101.3% ~~and increased by $13.7 million or 113.2%~~, during the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2023~~2024, ~~respectively,~~ in comparison to the same period in ~~2022. The increases for the three and nine months ended September 30,~~ 2023, ~~in comparison to the same periods in 2022,~~ were primarily due to the rate increase of approximately ~~8.1~~3% in our LIBOR rate as a result of the amendment of our senior secured credit facility.

Income tax expense (benefit) ~~expense~~. The Company recorded income tax ~~benefit~~expense of $(0.3)05 million ~~and $(2.5) million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023, respectively~~2024. The blended effective tax rate for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 was ~~25.0%~~approximately ~~and 25.2~~24%, ~~respectively,~~ which varies from our statutory U.S. tax rate due to taxable income or loss that is allocated to the non-controlling interest and impact of the valuation allowance on DMS Inc.

Non-GAAP Financial Measures

In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (“GAAP”), this Quarterly Report includes additional financial measures that are not prepared in accordance with GAAP (“non-GAAP”), including adjusted EBITDA, unlevered free cash flow, adjusted net income and adjusted EPS. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found below.

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GAAP (“non-GAAP”), including adjusted EBITDA, unlevered free cash flow, adjusted net income and adjusted EPS. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found below.

As explained further below, we use these financial measures internally to review the performance of our business segments without regard to certain accounting treatments, non-operational, extraordinary or non-recurring items. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations. Because of these limitations, management relies primarily on its GAAP results and uses non-GAAP measures only as a supplement.

Adjusted EBITDA, Unlevered Free Cash Flow and Unlevered Free Cash Flow Conversion

We use the non-GAAP measures of Adjusted EBITDA, Unlevered Free Cash Flow and Unlevered Free Cash Flow Conversion to assess operating performance. Management believes that these measures provide useful information to investors regarding DMS’s operating performance and its capacity to incur and service debt and fund capital expenditures. DMS believes that these measures are used by many investors, analysts and rating agencies as a measure of performance. By reporting these measures, DMS provides a basis for comparison of our business operations between current, past and future periods by excluding items that DMS does not believe are indicative of our core operating performance.

Financial measures that are non-GAAP should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, DMS relies primarily on its GAAP results and uses Adjusted EBITDA, Unlevered Free Cash Flow, and Unlevered Free Cash Flow Conversion only as a supplement.

35Adjusted EBITDA is defined as net (loss) income, as may be applicable, excluding (a) interest expense, net, (b) income tax expense (benefit), (c) depreciation and amortization, (d) change in fair value of warrant liabilities, (e) change in fair value of contingent consideration liabilities, (f) legal and professional fees - Debt Amendment, (g) termination of operations, (h) stock-based compensation expense, (i) restructuring costs, (j) acquisition and other related costs, and (k) other expense.

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primarily on its GAAP results and uses Adjusted EBITDA, Unlevered Free Cash Flow, and Unlevered Free Cash Flow Conversion only as a supplement.

Adjusted EBITDA is defined as net (loss) income, excluding (a) interest expense, net, (b) income tax (benefit) expense, (c) depreciation and amortization, (d) impairment of intangible assets, (e) change in fair value of warrant liabilities, (f) debt extinguishment, (g) stock-based compensation, (h) change in Tax Receivable Agreement liability, (i) restructuring costs, (j) acquisition costs, and (k) other expense.

Furthermore, in order to review the performance of the combined business over periods that extend prior to our ownership of the acquired businesses, we include the pre-acquisition performance of the businesses acquired. Management believes that doing so helps to understand the combined operating performance and potential of the business as a whole and makes it easier to compare performance of the combined business over different periods.

Unlevered Free Cash Flow is defined as Adjusted EBITDA, less capital expenditures, and Unlevered Free Cash Flow Conversion is defined as Unlevered Free Cash Flow divided by Adjusted EBITDA.

~~The following table provides a reconciliation between Adjusted Net Loss and Adjusted EBITDA, and Unlevered Free Cash Flow, from Net loss, the most directly comparable GAAP measure (in thousands):~~28

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2023			2022			2023			2022
Net loss	$	(17,107)		$	(10,121)		$	(85,299)		$	(27,365)
Adjustments
Interest expense, net	11,989			4,570			25,732			12,072
Income tax (benefit) expense	(334)			463			(2,498)			819
Depreciation and amortization	4,778			7,142			15,732			21,377
Impairment of goodwill	—			—			33,795			—
Impairment of intangible assets	—			—			7,791			—
Change in fair value of warrant liabilities	(2,484)			1,000			(8,549)			(2,480)
Change in fair value of contingent consideration liabilities	(208)			(3)			(285)			2,533
Legal and professional fees - Equity Cure & Debt Amendment	598			—			3,880			—
Termination of DMS Voice	1,064			—			4,571			—
Change in Tax Receivable Agreement liability	—			(121)			—			(121)
Stock-based compensation expense	453			1,424			2,620			5,332
Restructuring costs	337			(13)			1,079			2,166
Acquisition and other related costs (1)	17			14			3,833			306
Gain on disposal of assets	—			—			(3)			—
Other expense (2)	805			708			1,766			3,940
Adjusted EBITDA	(92)			5,063			4,165			18,579
Less: Capital Expenditures	1,515			2,050			4,500			5,247
Unlevered free cash flow	$	(1,607)		$	3,013		$	(335)		$	13,332
Unlevered free cash flow conversion	1746.7		%	59.5		%	(8.0)		%	71.8		%

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The following table provides a reconciliation between Net loss, the most directly comparable GAAP measure, and Adjusted EBITDA and Unlevered Free Cash Flow, (in thousands):


	Three Months Ended March 31,
	2024			2023
Net loss	$	(26,278)		$	(20,701)
Adjustments
Interest expense, net	13,488			6,699
Income tax expense (benefit)	50			(13)
Depreciation and amortization	3,726			5,082


Change in fair value of warrant liabilities	934			3,764
Change in fair value of contingent consideration liabilities	(17)			13
Legal and professional fees - Debt Amendment	2,521			—
Termination of operations	—			2,117


Stock-based compensation expense	232			1,258
Restructuring costs	746			493
Acquisition and other related costs (1)	—			3,614

Other expense (2)	279			1,034






Adjusted EBITDA	(4,319)			3,360
Less: Capital Expenditures	1,154			1,215
Unlevered free cash flow	$	(5,473)		$	2,145
Unlevered free cash flow conversion	126.7		%	63.8		%

____________________

(1)Includes transaction fees in connection with the ClickDealer acquisition, pre-acquisition expenses, preferred warrants issuance costs, and post-acquisition related costs.

(2)Includes compliance-related legal and professional fees pre-acquisition transactions~~, and in 2022, costs associated with the Company’s strategic alternatives~~.

3629

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A reconciliation of Unlevered Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure, is presented below (in thousands):

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	Three Months Ended March 31,
	2023		2022		2023		2022
	2024		2023
Unlevered free cash flow	$	(15,~~607~~473)	$	32,~~013~~145	$	~~(335)~~	$	~~13,332~~
Capital expenditures	1,~~515~~154		21,~~050~~215		~~4,500~~		~~5,247~~
Adjusted net income	(92)		5,063		4,165		18,579
Adjusted EBITDA	(4,319)		3,360
Impairment of goodwill	—		—		33,795		—
Acquisition and other related costs (1)	—		3,614
Impairment of intangible assets	—		—		7,791		—
Change in fair value of contingent consideration liabilities	(17)		13
Acquisition and other related costs (1)	17		14		3,833		306
Other expenses (2)	279		1,034
Change in fair value of contingent consideration liabilities	(208)		(3)		(285)		2,533
Stock-based compensation	232		1,258
Other expenses (2)	805		708		1,766		3,940
Restructuring costs	746		493
Stock-based compensation	453		1,424		2,620		5,332
Change in fair value of warrant liabilities	934		3,764
Restructuring costs	337		(13)		1,079		2,166
Legal and professional fees - Debt Amendment	2,521		—
Change in fair value of warrant liabilities	(2,484)		1,000		(8,549)		(2,480)
Termination of operations	—		2,117
Legal and professional fees - Equity Cure & Debt Amendment	598		—		3,880		—
Subtotal before additional adjustments	(9,014)		(8,933)
Termination of DMS Voice	1,064		—		4,571		—
Less: Interest expense, net	13,488		6,699
Subtotal before additional adjustments	(674)		1,933		(46,336)		6,782
Less: Income tax expense (benefit)	50		(13)
Less: Interest expense, net	11,989		4,570		25,732		12,072
Allowance for credit losses - Accounts receivable, net	796		563
Less: Income tax (benefit) expense	(334)		463		(2,498)		819
Amortization of right-of-use assets	183		242
Less: Change in Tax Receivable Agreement liability - Consolidated statements of operations	—		(121)		—		(121)
Stock-based compensation, net of amounts capitalized	232		1,258
Allowance for credit losses	366		(34)		1,716		1,305
Interest expense paid-in-kind	12,375		—
Amortization of right-of-use assets	227		—		522		—
Amortization of debt issuance costs	1,122		390
Gain on disposal of assets	—		—		(3)		—
Deferred income tax (benefit) provision, net	(30)		550
Impairment of goodwill	—		—		33,795		—
Change in fair value of contingent consideration	(17)		13
Impairment of intangible assets	—		—		7,791		—
Change in fair value of warrant liabilities	934		3,764
Lease restructuring charges	—		(169)		—		(167)
Loss from preferred warrants issuance	—		553
Stock-based compensation, net of amounts capitalized	452		1,424		2,620		5,332
Change in income tax receivable and payable	69		(570)
Interest expense paid-in-kind	11,417		—		11,417		—
Change in accounts receivable	2,129		(1,371)
Amortization of debt issuance costs	1,633		211		2,420		1,149
Change in contract assets	1,471		—
Deferred income tax benefit, net	24		(375)		(2,080)		(1,160)
Change in prepaid expenses and other current assets	3		(657)
Change in fair value of contingent consideration	(208)		(3)		(285)		2,533
Change in operating right-of-use assets	(13)		—
Change in fair value of warrant liabilities	(2,484)		1,000		(8,549)		(2,480)
Change in accounts payable and accrued expenses	1,203		6,638
Loss from preferred warrants issuance	—		—		553		—
Change in operating lease liabilities	(345)		(537)
Change in Tax Receivable Agreement liability - Consolidated statements of cash flows	—		(120)		—		(120)
Net cash used in operating activities	$	(2,440)	$	(4,783)
Change in income tax receivable and payable	(386)		666		(613)		1,297
Change in accounts receivable	(1,308)		798		14,644		4,824
Change in prepaid expenses and other current assets	(1,493)		(1,465)		(36)		1,120
Change in operating right-of-use assets	40		—		670		—
Change in accounts payable and accrued expenses	2,547		(4,066)		(6,194)		(5,341)
Change in operating lease liabilities	(564)		—		(1,658)		—
Change in other liabilities	—		(220)		—		(195)
Net cash (used in) provided by operating activities	$	(2,066)	$	(5,332)	$	(12,840)	$	2,109

____________________

(1)Includes transaction fees in connection with the ClickDealer acquisition, pre-acquisition expenses, preferred warrants issuance costs, and post-acquisition related costs.

37(2)Includes compliance-related legal and professional fees pre-acquisition transactions.

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(2)Includes compliance-related legal and professional fees pre-acquisition transactions, and in 2022, costs associated with the Company’s strategic alternatives.

Adjusted Net Income and Adjusted EPS

We use the non-GAAP measures Adjusted Net Income (or Adjusted Net Loss, if applicable) and Adjusted EPS to assess operating performance. Management believes that these measures provide investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial and operating performance. Management also believes these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. We define Adjusted Net ~~Income (~~Loss) as net loss attributable to Digital Media Solutions, Inc. adjusted, as may be applicable, for (x) costs associated with the change in fair value of warrant liabilities, ~~debt~~acquisition ~~extinguishment~~costs, ~~Business~~change ~~Combination~~in fair value of contingent consideration liabilities, ~~acquisition-related~~restructuring costs, ~~equity~~ stock-based compensation ~~and~~expense ~~lease restructuring charges~~ and (y) the reallocation of net income (loss) attributable to non-controlling interests from the assumed acquisition by Digital Media Solutions, Inc. of all units of Digital Media Solutions Holdings, LLC (“DMSH LLC”) (other than units held by subsidiaries of Digital Media Solutions, Inc.) for newly-issued shares of Class A Common Stock of Digital Media Solutions, Inc. on a one-to-one basis. We define ~~adjusted~~Adjusted ~~pro~~EPS ~~forma~~as adjusted net ~~loss~~income ~~per~~or ~~share~~loss asattributable ~~adjusted~~to ~~pro~~Digital ~~forma~~Media ~~net~~Solutions, ~~loss~~Inc. divided by the weighted-average shares of Class A Common Stock outstanding, assuming the acquisition by Digital Media ~~Solutions, Inc. of all outstanding DMSH LLC units (other than units held by subsidiaries of Digital Media Solutions, Inc.) for newly-issued shares of Class A Common Stock on a one-to-one-basis.~~

~~The following table presents a reconciliation between GAAP Earnings Per Share and Non-GAAP Adjusted Net Income and Adjusted EPS (In thousands, except per share data):~~30

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(17,107)	$	(10,121)	$	(85,299)	$	(27,365)
Net loss attributable to non-controlling interest	(6,445)		(4,010)		(33,099)		(10,765)
Accretion and dividend Series A and B convertible redeemable preferred stock	(156)		—		(11,497)		—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic	$	(10,818)	$	(6,111)	$	(63,697)	$	(16,600)
Add: Income effects of Class B convertible common stock	$	—	$	(4,010)	$	—	$	—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - diluted	$	(10,818)	$	(10,121)	$	(63,697)	$	(16,600)
Denominator:
Weighted-average Class A common shares outstanding – basic	2,763		2,664		2,721		2,510
Add: dilutive effects of Class B convertible common stock	—		1,713		—		—
Weighted-average Class A common shares outstanding – diluted	2,763		4,377		2,721		2,510
Net loss per common share:
Basic – per Class A common shares	$	(3.92)	$	(2.29)	$	(23.41)	$	(6.61)
Diluted – per Class A common shares	$	(3.92)	$	(2.31)	$	(23.41)	$	(6.61)

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	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2023		2022		2023		2022
Numerator:
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic	$	(10,818)	$	(6,111)	$	(63,697)	$	(16,600)
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - diluted	(10,818)		(10,121)		(63,697)		(16,600)
Add adjustments:
Change in fair value of warrant liabilities	(2,484)		1,000		(8,549)		(2,480)
Acquisition costs	17		14		3,833		306
Change in fair value of contingent consideration liabilities	(208)		(3)		(285)		2,533
Restructuring costs	337		(13)		1,079		2,166
Stock-based compensation expense	453		1,424		2,620		5,332
	(1,885)		2,422		(1,302)		7,857
Adjusted net loss attributable to Digital Media Solutions, Inc. - basic	(12,703)		(3,689)		(64,999)		(8,743)
Adjusted net loss attributable to Digital Media Solutions, Inc. - diluted	(12,703)		(7,699)		(64,999)		(8,743)
Denominator:
Weighted-average shares outstanding - basic	2,763		2,664		2,721		2,510
Weighted-average LLC Units of DMSH, LLC that are convertible into Class A common stock	1,713		2		1,713		2
Weighted-average Preferred Stock Units that are convertible into Class A common stock	2,317		—		1,553		—
	6,793		2,666		5,987		2,512
Adjusted EPS - basic	$	(1.87)	$	(1.38)	$	(10.86)	$	(3.48)
Adjusted EPS - diluted	$	(1.87)	$	(2.89)	$	(10.86)	$	(3.48)

Solutions, Inc. of all outstanding DMSH LLC units (other than units held by subsidiaries of Digital Media Solutions, Inc.) and Preferred Stock Units for newly-issued shares of Class A Common Stock on a one-to-one-basis.

The following table presents a reconciliation between GAAP Earnings Per Share and Non-GAAP Adjusted Net Income and Adjusted EPS (in thousands, except per share data):


	Three Months Ended March 31,
	2024		2023
Numerator:
Net loss	$	(26,278)	$	(20,701)

Net loss attributable to non-controlling interest	(891)		(8,103)
Accretion and dividend Series A and B convertible redeemable preferred stock	(156)		—
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic & diluted	$	(25,543)	$	(12,598)





Denominator:
Weighted-average Class A common shares outstanding – basic & diluted	4,287		2,695







Net loss per common share:
Basic and diluted – per Class A common shares	$	(5.96)	$	(4.67)


	Three Months Ended March 31,
	2024		2023
Numerator:
Net loss attributable to Digital Media Solutions, Inc. - Class A common stock - basic & diluted	$	(25,543)	$	(12,598)

Add adjustments:
Change in fair value of warrant liabilities	934		3,764

Acquisition costs	—		3,614
Change in fair value of contingent consideration liabilities	(17)		13
Restructuring costs	746		493

Stock-based compensation expense	232		1,258

	1,895		9,142

Adjusted net loss attributable to Digital Media Solutions, Inc. - basic and diluted	(23,648)		(3,456)


Denominator:
Weighted-average shares outstanding - basic & diluted	4,287		2,695
Weighted-average LLC Units of DMSH, LLC that are convertible into Class A common stock	151		1,713
Weighted-average Preferred Stock Units that are convertible into Class A common stock	2,317		—
	6,755		4,408

Adjusted EPS - basic and diluted	$	(3.50)	$	(0.78)

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Liquidity and Capital Resources

The following table summarizes certain key measures of our liquidity and capital resources (in thousands):

	September 30,2023		December 31,2022		$ Change		% Change
	March 31,2024		December 31,2023		$ Change		% Change
Cash	$	17,246	$	48,839	$	(31,593)	(65)	%
Cash and cash equivalents and Restricted cash	$	14,686	$	18,968	$	(4,282)	(23)	%
Availability under revolving credit facility	$	—	$	~~10,000~~—	$	~~(10,000)~~—	~~(100)~~—	%
Total Debt	$	~~286~~309,~~639~~705	$	~~261~~298,~~625~~018	$	2511,~~014~~687	104	%

Our capital ~~sources~~resources are focused on investments in our technology solutions, corporate infrastructure and strategic acquisitions to further expand into new business sectors and/or expand sales in existing sectors. Our principal sources of liquidity on a short-term basis are cash and cash equivalents, and cash flows provided by operations. Our primary use of cash is compensation to our employees and payments for general operating expenses. From time to time, we may access debt or equity capital markets to meet our working capital and/or capital expenditure needs. Our ability to obtain additional working capital and/or financing for capital expenditures or general corporate purposes will be subject to various factors, including general market conditions, our operating performance, the market's perception of our growth potential, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions, such as financial covenants under our debt agreements.

During the ~~second~~first quarter of ~~2023~~2024, the Company ~~experienced~~continued anto ~~unexpected~~experience ~~decline~~challenges in revenues and liquidity conversions due to the continued weakness in the insurance sector. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The decline in revenue adversely affected the Company's liquidity. In response, ~~during~~on ~~the~~April ~~second~~17, ~~quarter~~2024, ~~the~~DMS ~~Company~~LLC ~~drew~~and ~~the~~DMSH ~~remaining~~LLC, ~~$10.0 million~~along ~~available~~with ~~under~~certain ~~its~~subsidiaries ~~Revolving~~of ~~Facility~~the ~~and~~Company, ~~subsequently~~entered ~~has~~into ~~undertaken~~a ~~efforts~~second amendment to ~~improve~~the ~~its~~Credit ~~liquidity~~Facility, bywhich, ~~undertaking~~among ~~further~~other ~~cost-savings~~things ~~initiatives~~modified ~~and~~the ~~negotiating~~Credit anFacility ~~amendment~~as tofurther ~~its~~described ~~senior~~under ~~secured~~“—Credit ~~credit~~Facility” ~~facility as further discussed~~ below.

39For the quarter ended March 31, 2024, the Company elected to exercise its available PIK elections. Accordingly, $10.1 million and $2.3 million of PIK interest expense was added to the outstanding principal balance of the Term Loan and the Revolving Facility, respectively. As of March 31, 2024, the total outstanding balance of the Term Loan and the Revolving Facility is $252.5 million and $57.3 million, respectively. For the three months ended March 31, 2024, the effective interest rate was 16.5% for the Term Loan. The effective interest rate related to the Revolving Facility was 16.4% for the three months ended March 31, 2024.

~~Table~~For the year ended December 31, 2023, the Company elected to exercise its available PIK elections. Accordingly, $19.1 million and $4.3 million of ~~Contents~~PIK interest expense were added to the outstanding principal balance of the Term Loan and the Revolving Facility, respectively. As of December 31, 2023, the total outstanding balance of the Term Loan and the Revolving Facility was $242.9 million and $55.1 million, respectively. For the year ended December 31, 2023, the effective interest rate was 13.4%, for the Term Loan. The effective interest rate related to the Revolving Facility was 13.1% for the year ended December 31, 2023.

Management believes that the expected impact on our liquidity and cash flows resulting from the debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these unaudited consolidated financial statements. See “Item 1A. Risk Factors - Risks Related to Our Financial Condition” in our 2023 Form 10-K.

Credit Facility

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On July 3, 2023, the borrowings under the Term Loan and Revolving Facility were amended to transition LIBOR to the Term SOFR as the basis for establishing the interest rate applicable to borrowings under the agreements.

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

d.eliminates the total net leverage ratio covenant for the remainder of 2023, inclusive of the second quarter of 2023, and sets the total net leverage ratio of DMSH LLC and its restricted subsidiaries starting at 15.6 and 10.6x for the first and second quarters of 2024, respectively, and varying for every quarter ~~there after~~thereafter, down to 6.9x for the fourth quarter of 2025 and until maturity;

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

For the quarter ended ~~September~~March 3031, ~~2023~~2024, the Company elected to exercise ~~the~~its ~~first~~available PIK ~~option~~elections. Accordingly, $910.1 million and $2.3 million of PIK interest expense was added to the outstanding principal balance of the Term Loan, and ~~$2.1 million~~ ~~of interest expense was added to~~ the ~~outstanding principal balance of the~~ Revolving Facility, respectively. As of ~~September~~March 3031, ~~2023~~2024, the total outstanding balance of the Term Loan and the Revolving Facility ~~are~~is $~~233~~252.75 million, and $5357.03 million, respectively. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024, the effective interest rate was 15 16.25% ~~and 12.1%, respectively,~~ for the Term Loan. ~~For~~ ~~the~~The ~~three and nine months ended September 30, 2023, the~~ effective interest rate related to the Revolving Facility was 16.604% ~~and~~for ~~14.80%~~the three months ended March 31, ~~respectively~~2024.

The Credit Facility is conditioned upon the Company’s compliance with specified covenants, including certain reporting covenants and financial covenants that, in addition to other items, require the Company to maintain a maximum net leverage ratio. As of ~~September~~March 3031, ~~2023~~2024, compliance with the net leverage ratio covenant was waived in connection with entry into the First Amendment ~~(as defined above) to the Credit Facility~~. As of December 31, ~~2022~~2023, the Company was in breach of the net leverage ratio, which it cured on March 30, 2023 through the funds received in connection with the issuance of Series A and Series B convertible Preferred stock and Warrants. As of ~~September~~March 3031, ~~2023~~2024, the Company was in compliance with the ~~First~~Credit ~~Amendment~~Facility’s minimum liquidity covenant.

~~Management~~As isof ~~monitoring~~March 31, 2024, the Company was in breach of the net leverage ratio covenant under its Credit Facility, which it cured as of April 17, 2024, when DMS, LLC, DMSH LLC and certain of the Company’s ~~compliance~~subsidiaries entered into a second amendment and ~~future~~waiver ~~ability~~(the “Second Amendment”) to ~~comply~~its existing Credit Facility with ~~all~~a ~~financial~~syndicate ~~covenants~~of ~~within~~lenders, ~~one~~arranged ~~year~~by Truist Bank and Fifth Third Bank, as joint lead arrangers, and Truist Bank, as administrative agent and collateral agent. The Second Amendment introduced new Tranche A term loan commitments in the amount of ~~issuance~~$22 million with a maturity date of ~~these~~February ~~consolidated~~25, ~~financial~~2026, ~~statements~~increasing our total borrowing capacity under the Credit Facility from $275 million to $297 million. The Second Amendment allows the Company to PIK the quarterly interest payments due and ~~currently~~payable ~~expects~~for the quarter ended March 31, 2024 and each of the following quarters up to ~~remain~~and inincluding ~~compliance.~~the Asquarter ~~noted~~ending ~~above~~on March 31, 2025; and waives compliance with the net leverage ratio covenant through June 30, 2025.

40The Second Amendment also includes certain limited waivers related to prior defaults and events of default under the Credit Facility, amends certain negative and affirmative covenants applicable to us and adds certain additional covenants. In accordance with the Second Amendment, we are required to maintain a minimum aggregate amount of unrestricted and uncommitted cash and cash equivalents held in U.S. dollars during the period of time from and after the Second Amendment effective date of at least $5 million. Further, we have agreed to a variance test in which (i) the Company disbursements during a variance testing period shall not be more than 15% in excess of the amount reflected in the corresponding period in the Credit

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~~Company~~Facility’s ~~leverage~~loan ~~ratio~~parties’ projected cash flows prepared in consultation with a financial ~~covenant~~advisor is(the ~~reinstated~~“Cash asFlow ofForecast”) or (ii) the ~~quarter~~Company’s ~~ending~~aggregate ~~March~~net 31cash receipts, ~~2024~~(a) ~~and~~during the ~~ratio~~two ~~lowers~~week ~~over~~period ~~time.~~after ~~Our~~the ~~forecasts~~Second ~~for~~Amendment ~~future~~effective ~~covenant~~date, ~~compliance~~will ~~are~~not ~~based~~be onless ~~expected~~than ~~customer~~80%, ~~demand~~for ~~however~~the trailing two week period, ifof ~~advertisers~~the ~~stop~~aggregate ~~purchasing~~cash ~~consumer~~receipts ~~engagement~~forecasted orin ~~referrals~~the ~~from~~Cash usFlow Forecast applicable during such testing period, ~~decrease~~(b) during the ~~amount~~three ~~they~~week ~~are~~period ~~willing~~after tothe ~~spend~~Second ~~per~~Amendment ~~engagement~~effective ordate, ~~referral~~will not be less than 82.5%, orfor ifthe wetrailing ~~are~~three ~~unable~~week toperiod ~~establish~~of the aggregate cash receipts forecasted in the Cash Flow Forecast applicable during such testing period and ~~maintain~~(c) ~~new~~during ~~relationships~~the ~~with~~four ~~advertisers,~~week ~~our~~period ~~business~~after the Second Amendment effective date and thereafter, ~~results~~will not be less than 85% for the trailing four week period of ~~operations,~~the ~~and~~aggregate ~~compliance~~cash ~~with~~receipts ~~covenants~~forecasted ~~could~~in bethe ~~materially~~Cash ~~adversely~~Flow ~~affected~~Forecast applicable during such testing period.

In connection with the Second Amendment, the Company must pay a 8.0% commitment fee, which shall be fully earned on the initial funding disbursement date and payable as PIK interest on the Second Amendment effective date. Further, under the terms of the Second Amendment, the Company has agreed to promptly commence a strategic review and marketing process for a sale of all or substantially all of our assets, which is subject to certain milestones.

See Note 6. Debt for additional information.

Cash flows from operating activities

Net cash (used in) ~~provided by~~ operating activities was $~~(12~~2.8)4 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 as compared to $24.18 million ~~provided~~used byin operating activities in the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023. The ~~increase~~decrease in cash used in operating activities is primarily attributable to lower business performance, and increase in accounts payable and current accrued expenses due to timing of vendor payments.

Cash flows from investing activities

Net cash used in investing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 ~~increased~~decreased by $3035.24 million or ~~386~~97% to $~~38.~~1.2 million from $736.85 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, primarily due to the acquisition of ClickDealer during the first quarter of 2023.

Cash flows from financing activities

Net cash ~~provided by~~ (used in) provided by financing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 was $190.37 million, reflecting an ~~increase~~decrease of $2113.72 million or ~~903~~105%, as compared to $(212.4)5 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023. This ~~increase~~decrease was substantially due to the issuance of preferred shares and warrants, ~~and~~during the ~~draw~~first quarter of ~~the revolving credit facility~~2023.

For the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, our Unlevered Free Cash Flow conversion rate ~~decreased~~increased 8063% compared to the three months ended March 31, 2023 due to lower business performance.

Off-Balance Sheet Arrangements

We do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. In addition, we do not engage in trading activities involving non-exchange traded contracts. In our ongoing business, we do not enter into transactions involving, or otherwise form relationships with, unconsolidated entities or financial partnerships that are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Summary of Contractual Obligations

None.

Critical Accounting Policies and Estimates

Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operation in our ~~2022~~2023 Form 10-K/A, for further information on our critical and other significant accounting policies.

Recently Issued Accounting Standards

Refer to Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies in the Condensed Notes to Consolidated Financial Statements (Unaudited), included in Item 1. Financial Statements of this Quarterly Report, for a more detailed discussion on recent accounting pronouncements and the related impact on our consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

For our disclosures about market risk, please see Part II, Item 7A: Quantitative and Qualitative Disclosures about Market Risk in our ~~2022~~2023 Form 10-K/A.

Interest Rate Risk

As of ~~September~~March 3031, ~~2023~~2024, we had total debt outstanding of $~~276~~301.89 million (net of $97.8 million of unamortized discount and debt issuance costs), which was comprised of amounts outstanding under our Term Loan of $~~233~~252.75 million and our Revolver Facility of $5357.03 million combined. Substantially all this debt bears interest at floating rates. Changes in interest rates affect the interest expense we pay on our floating rate debt. A hypothetical 1% (100 basis points) increase in interest rates would increase our interest expense by approximately $2.67 million annually, based on the debt outstanding at ~~September~~March 3031, ~~2023~~2024.

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Item 4. Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of ~~September~~March 3031, ~~2023~~2024, the principal executive officer and principal financial officer of the Company have concluded that during the period covered by this Quarterly Report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective because of the material weakness in our internal control over financial reporting described in our ~~2022~~2023 Form 10-K/A. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our quarterly interim consolidated financial statements will not be prevented or detected on a timely basis.

Starting in the fourth quarter of fiscal year 2022 and continuing through September 30, 2023, the Company has taken steps to remediate the material weakness by adding reconciliation controls for the revenue process. We intend to continue assessing our process and adding internal controls as necessary that will help mitigate the risk related to the material weakness.

Management’s Report on Internal Control Over Financial Reporting

~~September~~March 3031, ~~2023~~2024 Assessment

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”).

The Company’s internal control over financial reporting includes those policies and procedures that:

i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and Board of Directors; and

iii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our evaluation under the framework in Internal Control - Integrated Framework, management concluded that the Company’s internal control over financial reporting was not effective as of ~~September~~March 3031, ~~2023~~2024, as a material weakness exists. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements could occur but will not be prevented or detected on a timely basis.

As previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, ~~2022~~2023, we identified a material weakness in internal control over financial reporting related to ~~revenue~~goodwill. ~~Management assessed our internal control over financial reporting as of September 30~~Specifically, ~~2023~~management ~~and concluded that a material weakness exists related to revenue. We~~ did not design and maintain sufficient procedures and controls related to ~~revenue~~impairment, ~~recognition~~ including ~~those~~calculating ~~related~~carrying tovalues ~~ensuring~~by ~~accuracy~~segment ofto ~~revenue~~accurately ~~recognized.~~reflect ~~Also,~~the ~~during~~intangible ~~management’s~~assets ~~assessment~~from ofthe ~~internal~~ClickDealer ~~control~~acquisition, ~~over~~which ~~financial~~impacted ~~reporting~~our ascalculation of ~~September 30,~~goodwill ~~2023, we concluded that we did not design and maintain effective information technology general controls for~~ impairment.

43As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, we identified a material weakness in internal control over financial reporting related to revenue. Management assessed our internal control over financial reporting as of December 31, 2023 and concluded that a material weakness continues to exist related to revenue. We did not design and maintain sufficient procedures and controls related to revenue recognition including those related to ensuring

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accuracy of revenue recognized. Also, during management’s assessment of internal control over financial reporting as of December 31, 2023, we concluded that we did not design and maintain effective information technology general controls for certain information systems that are relevant to the preparation of the financial statements. In light of the material weakness, management performed additional procedures to validate the accuracy and completeness of the financial results impacted by the control deficiencies. Such procedures included validation using revenue reconciliations, ~~and~~ fluctuation analyses and additional information technology controls related to changes in the system that could influence revenue.

Remediation Plans

We intend to continue to take steps to remediate the material weaknesses described above and further evolving our accounting processes, controls, and reviews. WeRelated ~~plan~~ to ~~continue~~the tomaterial ~~assess~~weakness ~~our~~identified ~~internal~~in ~~controls and procedures~~2023, ~~and~~management ~~intend~~intends to ~~take~~implement ~~further~~additional ~~action~~controls assurrounding ~~necessary~~formalization orof ~~appropriate~~the toreview ~~address~~process ~~any~~for ~~other~~supporting ~~matters~~documentation weused ~~identify~~in orthe ~~that~~impairment ~~are~~calculations ~~brought~~in tocases ~~our~~where ~~attention.~~external Wevaluations ~~will~~have ~~not~~been beperformed. ~~able~~The tomaterial ~~fully~~weakness ~~remediate~~will ~~these~~not ~~material~~be ~~weaknesses~~considered remediated until ~~all~~ the ~~significant~~newly ~~steps~~implemented ~~have~~internal ~~been~~controls ~~completed,~~operate ~~and have been operating effectively~~ for a sufficient period of time. Weand ~~believe~~management ~~our~~has ~~ongoing~~concluded, ~~efforts~~through ~~will~~testing, bethat ~~sufficient~~these internal controls are operating effectively. Management intends to remediate ~~the~~this ~~identified~~weakness ~~material~~in ~~weakness~~2024.

Related to the material weakness identified in 2021, during the course of 2023, the Company took steps to remediate the 2021 material weakness, including enhancement of recurring detective controls, and will continue to execute remediation steps as they relate to contract review and effective technology general controls until the material weakness is remediated. The material weakness will not be considered remediated until the existing and newly implemented internal controls operate for a sufficient period of time and management has concluded, through testing, that these internal controls are operating effectively. Management intends to remediate this weakness in 2024.

Changes in Internal Control Over Financial Reporting

Except as described above in Management’s Report on Internal Control over Financial Reporting, there have been no changes in our internal control over financial reporting during the ~~third~~first quarter of the fiscal year ending December 31, ~~2023~~2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various disputes and litigation that arise in the ordinary course of business. However, separate from such matters, to the best of our knowledge, outside of those described below, there are no material pending or threatened legal proceedings to which we are a party, either individually or in the aggregate.

Item 1A. Risk Factors

The Company’s business, results of operations, and financial condition are subject to various risks and uncertainties, including those described in Part I, Item 1A: Risk Factors in our ~~2022~~2023 Form 10-K/A.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are filed as part of this report:

ExhibitNumber						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).
3.3						Certificate of Amendment to 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 August 30, 2023).
4.1						Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Redeemable Preferred Stock, filed on March 30, 2023 (incorporated by reference to Exhibit 4.5 to Digital Media Solutions, Inc.’s Annual Report on Form 10-K/A for the year ended December 31, 2022 filed with the SEC on April 5, 2023).
4.2						Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Redeemable Preferred Stock, filed on March 30, 2023 (incorporated by reference to Exhibit 4.6 to Digital Media Solutions, Inc.’s Annual Report on Form 10-K/A for the year ended December 31, 2022 filed with the SEC on April 5, 2023).
10.1*						Offer Letter, by and between Digital Media Solutions, Inc. and Vanessa Guzmán-Clark, dated as of November 7, 2023 (incorporated by reference to Exhibit 10.1 to Digital Media Solutions, Inc.’s Current Report on Form 8-K filed with the SEC on November 13, 2023).
10.1						Second Amendment to the Credit Agreement, dated as of April 17, 2024, by and among Digital Media Solutions, LLC, as borrower, Digital Media Solutions Holdings, LLC, the lenders and issuing banks named therein, and Truist Bank, as administrative agent and as collateral agent (incorporated by reference to Exhibit 10.1 to Digital Media Solutions, Inc.’s Current Report on Form 8-K filed with the SEC on April 19, 2024).
31.1*						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document
101.SCH*†						Inline XBRL Taxonomy Extension Schema
101.CAL*†						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*†						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*†						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*†						Inline XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

____________________

* Filed herewith

† Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement for purposes of Section 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these section

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: ~~November~~May 1415, ~~2023~~2024

Digital Media Solutions, Inc. /s/ Joseph Marinucci Name: Joseph Marinucci Title: Chief Executive Officer and Director(Principal Executive Officer) /s/ Vanessa Guzmán-Clark Name: Vanessa Guzmán-Clark Title: Chief Financial Officer(Principal Financial and Accounting Officer)

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