Q4 2020 Digital Media Solutions Inc Earnings Call
Ladies and gentlemen, the sure operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
Okay.
[music].
Ladies and gentlemen, thank you for standing by and welcome to digital media solutions fourth quarter and full year 2020 earnings call.
At this time, all participants are in election, and only mode. After the speaker's presentation. There will be a question and answer session to ask the question. During this session you will need to press star one on your telephone if you require any further assistance Please press star and Cheryl.
Please be advised of today's call is being recorded I would like to turn the conference over to Thomas Bach Executive Vice President of Investor Relations. Please go ahead.
Yeah.
Thank you for joining us to discuss <unk> financial results for the fourth quarter and full year of 'twenty and 'twenty with me on the call are Joe Mayor of New Qi co founder and CEO and Randy <unk> CFO.
We posted our earnings announcement this morning, and the press release and also on the already Investor Relations website.
By now everyone should have access.
Before we begin I would like to call your attention to our safe Harbor provision for forward looking statements and our financial results press release.
The safe Harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward looking statements.
For a more detailed description of the risk factors that may affect our results, including disclosure about the effects of the Corona virus outbreak. Please refer to our financial results press release, and our SEC filings.
Also during this call management's commentary will include non-GAAP financial measures.
Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in the tables of our financial results press release, which we have posted to our Investor relations website at investors docked digital media solutions dotcom.
The additional financial and other information to be discussed on this call can be found on our Investor Relations website.
Now I'd like to turn the call over to Joe My renew cheap our CEO.
Thank you Tom and good morning to everyone joining the call today.
We are excited to share the results of another very strong quarter for DNS, which closed out our 2020 fiscal year.
2020 was of uniquely challenging year for us all here D. M. S. We are extremely proud of our team and their execution against our strategic priorities, which resulted in record results for the quarter and the full year. We are also excited about our recent growth and for the long term outlook of digital performance advertising.
As the digital transformation of AD spend continues which is an overall secular trend that benefits Dms.
In Q4, we achieved record adjusted revenue of $104 $7 million record gross profit of $28 $4 million and record adjusted EBITDA of $15 $4 million. Our Q4 revenue growth was an impressive 56, 5% year over.
A year.
And for the full year 2020, we achieved record adjusted revenue of $341 $2 million ahead of our guidance record gross profit of $98 $8 million and record adjusted EBITDA of $54 $6 million, which is in line with our guidance.
Both our Q4 and our full year performance benefited from continued momentum and growth inside of our largest key vertical which is insurance.
As many of you know Dms is the leading provider of technology enabled digital performance advertising solutions are uniquely differentiated business model is driven by our proprietary first party data asset proprietary technology and expansive media reach we leveraged these assets across our entire business.
And to efficiently and effectively connect consumers and advertisers.
And <unk> Tms, we always talk about the power of people process and technology. During 2020 prioritizing what we call PPP was as important as ever and for that reason, we continually investing in these three areas throughout the year.
And as a result, 2020 was the year of record revenue growth for US we had strong contributions from both major segments. We report.
Brand direct revenues reported a record of 197 5 million and increase of 13% from 2019 marketplace solutions also came in at a record with $156 $5 million and revenue and increase of 113, 2% from 2000.
And in 19.
In addition, 2020 was the year of significant transformation across all vertical segments, resulting in healthy EBITDA margins and growth rates.
We're pleased with our results and believe we demonstrated agility and flexibility during a period of unprecedented uncertainty that has occurred as a result of the pandemic.
We're also confident that our agility and the investments we made in 2020 have set us up for continued improvements and growth during 2021 and beyond.
And 2020, we invested to accelerate the key drivers of revenue growth.
These investments are letting us take advantage of the long term transition from traditional to digital advertising across key verticals.
According to E marketer data digital advertising spend is expected to increase from 142 billion and 2020 to 171 billion this year and to 243 billion and 2024.
Our investments, which follow our people process and technology priorities included the following.
For people, we made key strategic hires throughout the organization, including three that I want to highlight today.
First and early January Tony sell down of joined our team as General Counsel and executive Vice President of legal and compliance joining us from Skadden and one of the world's leading international law firms, Tony add significant experience and the areas of mergers and acquisitions corporate finance corporate.
Governance, and general counsel and securities matters.
And also in January Thomas Bach joined US as our new executive Vice President of corporate strategy and Investor Relations. Tom has significant experience advising both corporate and private equity backed clients with transactions and he is knowledge spanning mergers and acquisitions debt origination and risk.
Financing and equity and corporate advisory earlier in his career Tom was the sell side research analysts covering the internet sector on ranked teams bolt and the U S and Europe.
Lastly, we are welcoming our new CFO the sundry surrender boss on March 13th the centers of expertise includes strategic direction, GAAP and I asked Rs accounting SEC reporting M&A and financial operations, which he gained and part from a long curve.
Of your Boeing where she held numerous positions, including the CFO of Boeing Australia, and Boeing Defense Australia.
Senior roles in corporate finance transformation and enterprise finance and from 2017 through 2020. She was the CFO of Boeing Capital Corporation of large wholly owned subsidiary of falling.
After two years on the team Randy Koubek. Our current CFO is leaving after March 12 to pursue other opportunities. Our company has grown tremendously since 2018, and we are sincerely grateful for all of Randy's hard work and contributions and we wish him well and the next stage of his career.
Continuing with our PPP investments for process, we focused on leveraging ways to better connect our people and our technology. This is especially important for our now fully remote workforce to drive results inside of our business for our advertiser clients and for our media partners the.
The process investments, we made in 2020 are allowing for more standardization and they are creating efficiencies across the business enhancing the consumer experience driving more scale and measurable ROI for our advertiser clients.
For technology, we made investments to advance the efficacy of our proprietary technology, including the upgrading of our AI and <unk> capabilities is this technology that connects our data asset to our expansive media reach which competitively differentiate our service offering and.
And lastly, we also made one strategic acquisition, which allowed us to bring and valuable people process and technology to facilitate growth and the Dms ecosystem we.
We are confident these investments will continue to provide accelerated growth and 2021 and drive our point of differentiation Dms has the people process and technology to continue to provide value for both consumers and advertisers as the digital transformation of AD spend continues to accelerate.
There are a number of key highlights from 2020% and I want to share today before passing the call the Randy to discuss our financials and March when the Covid threat first emerged we prioritized our people acting quickly and decisively to ensure the safety of our Dms family, we canceled corporate travel moved to remote working law.
<unk> a series of initiatives keep employees connected accelerated training programs and ensured consistent employee communication as a result of putting our people first our teams responded by working hard during such tumultuous times, we are grateful to everyone at the EMS and their families that support them.
Throughout the year, we saw accelerated growth and our insurance vertical which now accounts for almost half of our revenues.
In total for the year 2020 insurance revenue was $164 million up 43, 9% from 2019 and.
Inside of the insurance vertical Dms works with advertisers across the following lines on.
So health life and home.
In total we have now successfully connected 15 million consumers with auto insurance providers and more than $2 5 million consumers with health insurance providers.
And Q4 alone during the open enrollment period for OA P. Under 65 health insurance revenue was up 38%.
And annual election period, or AEP over 65% Medicare revenue was up 272% versus the prior year.
The insurance industry, which includes some of the most advertised brands and the U S dramatically shifted media dollars from offline to digital channels during 2020 and Dms benefited from this transition.
We also experienced growth across our other verticals most specifically as it relates to Q4 within ecommerce and fact of brand direct business was up 53% and Q4 2020 versus 2019.
Lastly, and 2020, our online stable of marketplace brands expanded calling out one marketplace, specifically protect dot com will become the flagship marketplace for Dms and helping consumers shop for insurance and many other verticals we support.
In December we soft launched protect dot com as an auto insurance marketplace, and we've already driven more than half of million unique visitors to protect dot com, which has generated $2 $5 million of revenue as we continue to expand protect dot com and 2021. This marketplace will enable dms and continue to.
And our media reach and to emerging channels like connected TV.
In summary, 2020 was a very strong year for us a year of continued improvement and a year of growth, resulting in record numbers, both on the top and bottom lines with strong growth and margins.
During 2020 Advertiser clients spent more of their media dollars with us and.
And as a result of that increased media spend our data asset group.
As our data asset grows the audience targeting of our AI and <unk> technology has more inputs and has continually improved.
Our sophisticated targeting capabilities allow us to sort of relevant ads, which means putting the right offer in front of the right person in the right place and at the right time. These.
Of these relevant ads reduce friction from the advertising ecosystem and as previously mentioned and create value for both consumers and our advertiser clients.
And as these targeting improvements that result, and consist the improved conversion rates and the.
Of course that leads to higher ROI for our advertiser clients, which is our point of differentiation versus traditional media agencies and many other digital advertising competitors in.
In terms of measuring our scale and efficacy.
Like the standard impression measurement used by many and the industry, we measure the targeted reach of high intent consumers and our ability to successfully engage net.
To publicly quantify our growing scale in this manner, we developed the Dms consumer engagement score or the CES.
Our CES significantly increased from Q1 to Q4 from 47% to 69% Quantifiably proving what we know is true.
And more media dollars are spent within the Dms ecosystem, our targeting capabilities are continually improved and our ability to engage consumers at scale is continually enhanced and is this.
This engagement at results and the ROI for our advertiser clients getting stronger will.
We will be releasing more details about the dms consumer engagement score and our investor deck, including of measurement of the score how it has trended over time quarter by quarter and 2020.
So one last time I will turn it over to Randy to briefly run through some of our key financials and I do encourage you to read our earnings release for additional information over to you Randy.
Thank you Joe and good morning to everyone and it's been of great pleasure to work with you and the rest of the Dms team, including Fernando Borghese, and our board of directors I look forward to staying in touch.
But just as much and I look forward to sharing of the numbers after our year of continued improvement and growth.
I'm happy to report that and Q4 2020, we generated record adjusted revenues of $104 7 million up 23% sequentially and 56, 5% year over year from Q4 2019.
2020, adjusted revenues totaled $341 2 million, representing an increase of 38, 7% from 2019. We also reported record adjusted Q4 EBITDA of $15 4 million up nine 6% from Q3, EBITDA and up 33, 1% year over.
For years from Q4 2019.
On a reported basis not adjusted for the fourth quarter revenue was $102 6 million and increase of 23, 9% from Q3 2020 and.
And approximately 57, 5% over the same quarter last year.
The sequential increase and our revenue was primarily due to growth within the insurance vertical and growth and e-commerce across both the marketplace and brand direct solutions segments. And addition to the mid Q3 2020 smarter chaos acquisition.
For full year 2020 reported revenue was $333 4 million.
Of 39, 9% year over year.
Breaking down our revenue by segment.
Brian <unk> solutions revenue in the quarter was $62 1 million.
26, 3% sequentially and 53% year over year total for the year was $197 5 million and increase of 13% year over year.
Marketplace solutions Q4 revenue of $47 6 million increased 24% from Q3 due to the growth and insurance sector revenues and increased 81, 1% year over year.
Total for the year was $156 5 billion and increase of 113, 2%.
Other solutions revenue, which primarily includes spark rooms, SaaS technology fees was $4 million and Q4 of 38, 5% from Q3.
And up 235% year over year.
Total for the year was $9 5 million and increase of 69, 3% year over year.
And regards to gross margin gross profit the.
Company has experienced rapid revenue expansion and is focused on high growth highly competitive verticals with significant digital advertising spend.
As we continue to expand and such areas, we sometimes have to do so at relatively lower margins to gain market share.
Which lower segment and consolidated margins.
Our large and is subject to quarterly variation, primarily due to changes and sales mix and <unk>.
Segments of our business carry different margin profiles.
We do believe that overwhelms the periods of time margins will remain stable and consistent with prior trends.
For the fourth quarter.
The reported gross profit was $28 4 million or a 27, 7% margin versus $25 1 million or 32% and Q3.
And compared to 31, 7% for the same quarter in 2019.
For 2020 gross profit was $98 8 million.
For a 29, 6% margin and an increase of $22 1 million or 28, 8% year over year for.
Breaking down GAAP reported gross margin by segment.
Q4 brand direct solutions gross margin was 22, 2% down slightly from 23, 1% and Q3 and down slightly from 25, 5% the same quarter last year.
The margin was influenced by substantial diversification and our distribution channels as we continue to scale growth.
Brand direct and 2020 gross profit was $46 million or a 23, 3% margin versus $44 3 million for a 25, 4% margin in 2019.
Q4 marketplace solutions gross margin was 27% down from 30% and Q3 2020.
And down from 34, 3% in the year ago period the.
The segment is heavily weighted by our rapid growth and the insurance market, which carries gross margins.
Of approximately 28, 8%.
Marketplace 2020, gross profit was $46 6 million.
For a 29, 8% margin for the.
The increase of $19 9 million or <unk> 74, 1% year over year.
A few quick words on operating expenses.
We remain focused on improving the leverage of our business, while balancing our investments for growth.
Our total operating expenses amounted to $22 $3 million and the fourth quarter and.
And increase of $1 1 million or 5% from Q3, 2020, and up 15, 8% year over year.
There is $22 3 million number excludes the lease reserve of $3 2 million.
<unk> 9 million of the stock compensation expense.
And $4 million and loss on disposal of assets.
As a percentage of revenue total operating expenses was 26% and the fourth quarter down slightly from 26, 8% and Q3 2020.
Exclusive of the lease termination costs stock compensation expenses and the loss on disposal of assets Q4 operating expenses represented 21 seven per cent of revenues down sequentially from prior quarter of 25, 6%.
For 2020 reported operating expenses totaled $83 8 million up 9% from 2019.
Salaries and related costs for the fourth quarter for $9 7 million and increase of 30% year over year and 23, 4% from Q3, 2020, which is inclusive of approximately $1 million and stock based compensation and.
Excluding the stock compensation Q for salaries and related costs increased 12, 3% sequentially.
For the full year salaries and related costs totaled $33 8 million.
And increase of 21% from 2019 due to a full year of head count from corporate acquisitions.
We ended the year with a total head count of approximately 400 full time employees.
Finally on profitability.
Adjusted EBITDA and the fourth quarter was $15 4 million for an adjusted EBITDA margin of approximately 15%.
This represents an increase of nine 6% from Q3, and a 33, 1% increase from Q4 2019.
Net loss and the fourth quarter was $2 9 million up 33, 7% from Q3 for 2020 net loss was $2 2 million and improvement of 84% from 2019 net loss of $11 2 million.
Q4, net loss per share of <unk>.
<unk> for class a common stock is based on 32 4 million shares outstanding fully.
Full year 2020 loss per share of <unk> is based on $32 4 million shares as well.
On an adjusted basis.
Q4 earnings per share was for <unk> per share and for the full year 2020 adjusted earnings per share was <unk> 17 per share.
We define adjusted earnings per share as adjusted net income divided by the weighted average of shares of class a common stock outstanding assuming the acquisition by digital Media Solutions, Inc. Of all outstanding LLC units not held by subsidiaries of digital Media Solutions, Inc. For newly issued shares of class a common stock.
On a one to one basis.
And as a reminder, for the purposes of market capitalization and enterprise value calculation.
The total shares outstanding should be equal to the sum of class a and class B shares for a total of approximately $58 7 million shares.
Our effective tax rate was not meaningful in Q4 and varies greatly from the statutory tax rate of 21% due to a significant portion of our operations and digital media solutions holding company.
The partnership for federal and state income tax purposes, which is not allocable to Dms ink and therefore, not subject to the statutory tax rate of 21%.
For the full year, our effective tax rate was 273, 6%.
Lastly, turning to the balance sheet and liquidity.
We ended the quarter with $31 1 million of cash cash equivalents and marketable securities up by $6 6 million from the end of Q3.
Our total debt net of issuance costs was $205 million.
As of December 31, 2020, our net leverage ratio was three one for compared to $3 88 at December 31 2019.
As of December 31, 2020, we also had and available balance on our revolving credit facility of $11 million.
As is evidenced in these numbers, we continue to convert substantial free cash flow from operations.
Which has helped strengthen the balance sheet and delever the business on the net debt basis and summary, we are pleased with our record Q4 and full year of 2020 financial performance and remain optimistic about the underlying strength of our business over the long term.
As shown during a challenging 2020, dms and at the forefront of digital performance based advertising.
As a highly resilient business model setup for continued improvement and continued strong performance growth.
I will now turn it back to Joe for some closing remarks.
Thanks, Randy and closing I want to give everybody a brief peak into 2021 for Randy and I open up the call for questions. The <unk>.
Current quarter has started off strongly with insurance again being a key driver for.
<unk> dot com and our portfolio of marketplace and brand direct solutions are supporting the growth of our auto insurance business plus the by the administration has added a second the ODP period happening right now through May 15th which will help continue to scale, our health insurance business.
Consumers online shopping habits have changed and are now likely to continue providing for a strong outlook for our E Commerce business.
We closed the acquisition of aimed tells push frozen and <unk> interactive at the beginning of this month. We are very excited about the addition of the people process and technology that came with this transaction.
Plus with this acquisition, we successfully added additional AI powered capabilities and hyper targeted push technologies.
The acquisition also gave us larger audience reach and expanded first party data asset engaging with millions of additional consumers each month.
We continue to be happy with our growth prospects carrying the strong organic growth momentum into the current quarter of.
Our M&A pipeline remains robust and our team continues to see and thoroughly evaluate a number of interesting opportunities and.
And we will continue to stay disciplined with our M&A strategy as we look to augment our strong growth.
As for the rest of this quarter is concerned current Q1 2021 consensus estimates are $95 3 million for revenues and $15 4 million for EBITDA.
This compares to Q1 2020, adjusted revenues of $74 6 million and adjusted EBITDA of $12 2 million.
2021 consensus revenue is $416 7 million with and EBITDA estimate of $70 8 million.
We are happy to share with you that Dms is currently comfortable that we will meet or exceed these forecasts.
With that we thank you for your interest and Dms and we will now open the lines for questions operator.
Operator, if you could please let our friends know what they need to do if they have questions that would be great. Thank you.
Okay. Thank you.
At this time, if anybody would like to ask a question. Please press star one on your telephone keypad again that would be star one on your telephone keypad. Your first question comes from Rick.
And rich from Canaccord Your line is open.
Good morning, and thanks for the questions.
And to ask you about your brand direct segment. So you highlighted diversification of distribution channels.
That was sort of impact on gross margins on the near term can you just talk about the way you are on that process what are the.
From channels that you have added then that youre, adding and where do you see gross margins for all the time.
And maybe related to that can you just talk about your progress in connected to the.
Hi, Marie and good morning, good to speak to you again this is Joe speaking.
Couple of questions there so.
I guess I'll take the.
The growth and the vertical slash solutions question first.
So our technology stack is industry agnostic and because of that we're able to work with advertising partners across the number of different verticals as you know and clearly as we talked about on the call insurances are the biggest vertical but we don't think about industry segmentation and the spa.
<unk> way.
Our two key segments, our brand direct and then the marketplace solutions and as we've talked about for indirect as of one to one solution of the marketplace. One of the many with regard to consumers and inside of those two solution too.
<unk> solutions, there's a mix of sectors with each within each of those so we did see really good growth and 2020 and.
And both segments as Randy talked about and then if you think about inside of that insurance is the vertical which spans both segments. We saw demonstrable growth insurances of vertical across all lines for Dms and 2020 grew 44% with total revenue of $164 4 million and then inside of <unk>.
<unk>, we look at subcategories too so we saw a substantial growth and the health insurance category, specifically and the AEP Medicare lines growth there was very substantial 272% versus the prior year, but when we look at like Q4 as an example.
And.
We look at the different segments of the business.
Q4 was a solid quarter for us and we saw really solid growth in both segments and Q4, so marketplace grew over the comparable quarter in 2019 by 20% and then brand growth brand direct outpaced that and grew by 26%.
And.
The two biggest verticals inside of that growth or youre going to have insurance and then youre going to have the E Commerce brand revenue and side of that so inside of the Q4 quarter and.
And both of these will insurance will span both categories and then the E. Commerce brand category will live mainly inside of the brand direct so we had really strong growth in Q4.
Versus the.
And the prior quarter sequentially in 2020 insurance and Q4 grew to $52 9 million. So that was 25% growth sequentially and then E. Commerce brand revenue grew to $17 3 million and that was 32% growth sequentially. So I guess again just back to the top.
The vertical agnostic channel agnostic nature of the business.
We look across the two solutions and we're very pleased with the growth that we saw.
The last year and then the categories that are growing fastest I guess I would pointed out the insurance category all lines and then E Commerce and this is something we talked about on Q3.
So I think the second question was with regard to margin.
So.
Again, I will I'll say this look we're really pleased with the strong growth we saw on Q4.
Obviously, you said that on the earnings for both over the Q3 2020 period and the Q4 period from 2019.
And obviously, we're pleased with the success that we've had and the areas that have already called out like insurance and commerce and.
There's positive trends and both verticals continuing into 2021 and beyond.
With specific regard to margin, we don't ultimately manage the business too and absolute margin profile. This is not conducive if you will to delivering value for consumers our ROI for advertisers.
That said over time as Randy spoke to on the call our margins have fluctuated, especially during the Q4 period and verticals like E Commerce, which are impacted by holiday spending trends and then last year, we had the presidential election.
We didn't see anything and our Q4 performance that concerns us with regards to our gross margin and we continue to believe margin levels will stay inside our historical quarterly ranges of 27% and 30% going forward. So.
I think there might have been a third question about connected TV and there.
So if you think about just from a economic moat concept the more consumers, we successfully connect with advertiser advertisers the smarter our.
AI and algorithms get.
And.
With that.
As we deploy more media dollars.
We interact with more consumers.
We have increased efficiency. This is that virtuous flywheel effect and when we engage across all channels on.
For the.
The spend side of the business, whether it be <unk>.
Search social native programmatic or connected TV, we're able to leverage the same set of tools the data assets the technology and obviously the expansive media reach so we continue to expand and connected TV and it is a new channel for us.
And as such the margin profiles there are moving around.
Quite a bit as opposed to channels that we've been in for quite some time and that is.
The way things go and we expect over time that we will continue to grow and to connected TV and video.
And that will be a contributor to the growth of the business. So I think I got all three of your questions.
Yes, that's very helpful. Joe. Thank you and maybe just a quick follow up and we'll look at your full year guidance. Obviously it implies a very healthy growth what are some sort of puts and takes that could accelerate the growth even further.
Well.
We had an outstanding 2020 from a growth perspective, and as the result, we feel really confident with where we're at with the business and given where the.
And the current consensus estimates are today that implies a pretty healthy growth rate over our strong 2020 performance it's 22%.
So.
Like Youre getting out here, we feel confident with the estimates because we feel they are achievable and we have every intention of outperforming those estimates what could be and accelerator to that well.
Obviously on the call we talked about a number of different things I could say macro would be the <unk>.
<unk> acceleration of the digital transformation of AD spend and key verticals like insurance.
We look at all lines of insurance, the two biggest lines being.
Auto and help for us as accelerators.
And with the growth of protect Dot com, we look at that as a potential opportunity to exceed and obviously, we value organic growth and.
We did make one acquisition last year and we did make the one acquisition earlier. This month. So we do look at M&A as an opportunity to accelerate organic growth. So that's what I would call out is when you get into our intention to outperform the <unk>.
Estimates as the factors that could help us accelerate.
Got it. Thank you so much for the color.
Youre welcome.
And your next question will come from Marvin Fong from <unk>. Your line is open.
Good morning, and thanks for taking my questions.
Yes.
And I was hoping to get some additional color on how some of your.
Other verticals outside of insurance performed I think you did touch on of the Joe, but if you could just kind of step us through how the other larger verticals like education and CPG of doing that'd be great.
And also had a question just on how the top 20 customers are trending and how did that perform and FY 'twenty I think.
<unk> continues to be the strength of yours, but just talk about maybe.
Net cohort grew and the retention trends there and then on last question.
Just on the acquisitions.
This last one was mostly like a platform acquisition.
You've done the others like smart, Okay, I'll start kind of like geared towards the specific demographic and just kind of clue us in on on what your strategy going forward is what can we expect it.
In terms of your priorities for M&A and what areas.
Might be focused on that'd be great. Thank you.
Hey, Mark and good morning. This is Joe speaking good to have you on and thank you for the questions I wrote it sounds like three of them down so.
I'll try to run through it.
Okay. So the first question in regards to the vertical expansion or how we're doing and key verticals.
So look I mean, obviously.
We're very pleased with our Q4 performance and our full year 2000, and 'twenty performance and the business did see very strong growth in Q4 with insurance and E Commerce, leading the way as we strongly believe and I think we were pretty vocal about this on the Q3 earnings call back in November.
So when we look at the E Commerce brand segment of the business that would encompass some of the CPG and there is a lot of diversification inside of E Commerce.
And Q3, we talked about.
Some of the work that we do in the.
Charitable giving space with some of the large charitable organizations and the United States and Thats a segment that continues to grow for us, but I mean, I guess, just generally with the comments that.
I gave to Maria on the growth and just marketplace and brand direct brand direct still is the larger portion of the business. It has been historically over time the trends there remained pretty consistent in terms of the percentage of overall revenue.
Market place grew pretty demonstrably and 2020 brand direct did lag a little bit and that was mainly because of COVID-19 related.
I would say growth pullback in the first couple of quarters of the year, but then we saw as I noted really strong.
Growth in the fourth quarter, mainly on the back of.
The people aggressively coming back into get caught up on the year. So.
Generally the verticals like insurance E Commerce and brand are outperforming and the E Commerce brand vertical well with inside of the brand direct side of the business, which actually outpaced growth in marketplace solutions and Q4. So there's a lot of different segments inside of the E Commerce segment of.
Our business and we would service like I said, the charitable organizations and there.
You have a pretty good diverse set of client groups and Theres. Some home services clients you would have.
Some publishing clients and there as well so it's pretty diverse and then with regard to the top 20 customers.
Look with the business growing the way that it has been growing.
And just generally with growth and digital AD spend I mean 2021 is expected to be 171 billion growing to 243 billion and 2024.
There's really strong secular challenge there so.
Everybody seems to be keyed in on consumers doing more online and.
The digital transformation of AD spend so.
I guess I guess, what I'll say is with regard to the top 20 customers historically retention rates have been extraordinarily high 90 plus percent to the.
Extent that we have customers moving in and out of the top 20 of lot of times, its because theyre being displaced by new customers moving into the top 20 and the customer that was in the top 20 is now and the top 25 of the top 30 as a result of.
And just increasing spend as a result of macro industry trends. So we don't see any change to the very strong customer retention rates that we have historically had which is a really good trend for the business and does help support our growth and our ability to look out into the future.
And predict how the business will perform especially.
If we have that consistency with.
The top 20 customers and beyond and.
And then.
The final question was was M&A so.
Look we've always had a very disciplined approach to how we look at M&A, we have a really connected team and we do see a lot of quality deals.
Like I said to Maria we really see M&A as a driver to our organic growth initiatives. So what that means is reality more of and we're looking at curves.
And organic growth can take us up those curves and side of the different verticals that we operate and then there's also the curves with regard to distribution capabilities. So we're really looking at two sides of the business. We're looking at the AD demand side of the business with regard to verticals and then we're looking.
And at the distribution side of the business.
With regards to how we source media and those are really the two critical.
Components, and the ecosystem AD demand and distribution because you need to connect the two in order to grow right. So as.
As we grow the business organically and the AD demand slash vertical side of the business grows and the distribution side of the business growth.
We're on curves and.
Bolt on both sides of the business and then on the on demand side and the different verticals and as we move up those curves and we operate we grow the business organically. So we look at M&A as being an accelerator and when the M&A is done and selectively and done right and it allows us to get access to segments of those.
Curves, which once we move up the segment of that curve. It will accelerate our organic growth further so I guess for the last part of that question as far as pipeline opportunities go.
I'm not going on specifically comment, but what I'll say is we're going to continue to be selective with our M&A approach and our philosophies, which over time have been demonstrated to work very very well for us. So.
I got all three competing for some of your question and that was great and if I didn't.
That was everything that was super helpful. Joe and thank you very much and good luck Randy on your on your next step.
Thank you very much.
And your next question will come from Nick Jones from Citi. Your line is open.
Great. Thanks for taking the questions I guess first maybe to put a finer point on organic versus M&A, driven growth and 2020 and others I think like $57 million of 2019, it looks like it was in Q4.
And so as we look at the growth of <unk> 'twenty I mean, how much of that has contributed to the acquisition that was made kind of late and plenty of 19.
Versus kind of the core business that maybe it was after the acquisitions you made in 2018 and how do we how do we think about organic.
Growth versus M&A, and 2020, and then and I know there is some.
There is some upside to outlook on.
On M&A, but is there any M&A built and to kind of kind of the guidance youre, giving today. Thanks.
Hey, Nick Good morning, good to speak to you again this is Joe speaking.
So the first part of the question with regard to organic inorganic growth.
So the way that we look at it.
We're going to be out there and we're going to do M&A as an example, which as I said, we're gonna do selectively and we're going to do it right we're going to be.
Consistent with the with our approach in terms of how we go out and acquire companies that means that any business that we acquire would have to be.
Integrated synergize and harmonized and inside of the BMS, which means that that business would very much exist inside of the one dms ecosystem, which is a very holistic symbiotic ecosystem. So when we acquire businesses, we do so with that intent and.
With that the way that the business operates.
The core <unk>.
Set of tools that we're leveraging that is effective across both solutions, which would be brand direct and marketplace, and which would power all verticals would be the data asset the technology and the expansive media reach.
And is that toolbox across both solutions across all verticals that pushes the business forward. So the way that we look at it isn't so much.
Organic and inorganic it's really leveraging the totality of our connected ecosystem.
Leveraging the technology of the AI and the aspects of it making smarter media buys which leads to increased efficiency, which then thus generates as you go around the wheel so to speak that virtuous flywheel effect, which moves the business forward. So we really look at it and it will.
It'd be very difficult to untangle this because of what I said, which would be where youre getting on is if you were to look at specific acquisitions, what growth of you're attributing to them well.
And I said, they've been integrated and harmonize and and they know they don't exist everything exists inside of BMS and that means we of brand direct and marketplace solutions and we're leveraging the.
And the same toolbox, which would be the data assets the technology and the expansive media reach so we very much look at growth and fatality across the business, which goes back to that virtuous flywheel effect that I was getting at which means as the business moves forward.
Powering its own growth. So that's how we look at it and then I guess.
The.
The final question part of that question was with regards to the accelerator on M&A and.
I think I've covered this with with the explanation I gave margin which is.
We're really looking at.
Leveraging that toolbox and I'm talking about here and seeing that result in.
Organic growth of the business, just moving itself forward growth and general and when we're looking at areas of the business, where we can gain efficiencies by getting those segments of curves whether they are in verticals like insurance or subcategories of insurance like say health insurance or whether you go into a category like home serve.
<unk>, we are looking at those curves and evaluating where we are where we want to go and based on our acquisition philosophy is there something out there that makes sense for us to acquire that gives us the segment of the curve, which once we get it we can.
Get a one plus one equals something greater than two hopefully three or four because then we can really accelerate up the curve. So that's generally how we're looking at this so I think I answered your question, but you'll tell me.
Yes.
That's great. Thank you.
Youre welcome.
And again, if you'd like to ask a question. Please press star one on your telephone Keypad. Your next question comes from Jason <unk> from Craig Hallum. Your line is open.
Alright, Thanks, guys and just wanted to start out on protect dot com. It sounds like you are leading with that product and in auto insurance had some early success. There wondering if you can give detail on how you are driving traffic.
How do monetization trends compare there versus the other properties that you've utilized in the past again, recognizing that it's pretty early on that side, but just wondering if there's anything you can give us in terms of what youre seeing to start out.
Okay. So hey, Jason Good morning, It's Joe speaking again, good to speak to you and thank you for the question.
So.
But generally we're really pleased and excited about the growth and momentum in our insurance business across all lines specifically inside of this segment.
Auto insurance, which is the featured insurance set on protect dot com now, but ultimately protect will move into auto health life and home and then it will move into adjacent categories as well, but with regard to auto we continue to benefit from secular tailwind as major insurers across.
All lines.
Move dollars digital and we did see really solid growth and Q4 and inside of Q4, we were able to.
<unk> launched the protect dot com.
The marketplace solution and.
I mean generally like we're looking at quote requests continually increasing with the growth of business and that's off the back of.
Generally how we spend our media dollars, which is.
Leveraging the data asset leveraging our technology, and then going out and deploying them.
Channel agnostic via our expansive media reach as we see best to help us connect.
And the consumers and the advertisers and the ecosystem, because we need to create value for consumers and we also have to drive ROI for the advertisers. So we you know we're.
We're balancing this and.
As you continue to leverage the data asset and you get smarter media buys you get increases and increased efficiencies and that leads to the whole virtuous flywheel effect and with the site like protect dot com.
We see Halo effect, and having a premier dotcom won where demand for this benefits our media buying strategy and when you couple of that up with where we're starting out which is inside of the auto insurance vertical where.
Generally you continue to see more premiums written online in 2020.
87, 5 billion and auto insurance premiums were written online and that's going to grow it's almost going to double by 2024 to $174 5 billion. So clearly that's.
Demonstrate of of the.
And the trend that we've been talking about which is digital AD spend growing and consumers value Optionality. They go online and they shop the shop for auto insurance the shop for other lines of insurance.
Our value proposition is to put relevant ads in front of them leveraging our core group of assets data technology and expansive media reach so they can make smarter more efficient decisions by getting matched up with advertisers and protect that com is doing that so.
Of the Premier domain because of the expansive.
The media reach that we have and the data asset that we leverage when we go out there and deploy our media dollars I think we've been very effective with that site, which is why we've seen such substantial growth on such a short period of time and we believe that that will continue throughout 2021.
And maybe dovetailing on on your thoughts there with your data assets.
And I'm curious, how the conversations with customers evolve over time, obviously, youre getting youre getting some media dollars youre executing that seemingly continuing to approve on improve on and ROI basis I'm just curious to what degree are these data assets becoming.
And the focal point of these conversations and driving you to get more more media spend over time.
It's a good question and thanks for asking it.
The way that I'm going to go about answering that is by talking a little bit about consumer engagement score and this will help you get your arms around this so if you think about the totality of.
The the digital ecosystem on a daily basis Theres approximately.
25 billion impressions across the various media exchanges and when you multiply that by 90 days in the quarter. You just had an enormous number of enormous number.
The Dms and consumer engagement scores measuring our Dms is that his target engagement, which is only 7 billion impressions for the entire quarter and when you think about that you see that we have very narrow targeted reach and I.
The flip on that is as you can also see the enormous amount of room that we have to grow which gets us excited but.
Just going back to the Cvs for <unk>, and which measures targeted reach what we're really referring to there is our ability to put the right offer in front of the right person in the right place at the right time and that is what is going to create value for the consumer and drive ROI for the advertiser. So it gets back to my earlier.
The point when you look at how early we are and the curve here and how our targeted reach right. Now is 7 billion, which is really small compared to that enormous number as we continue to leverage the data asset and spend our dollars putting.
The right offer in front of the right person and the right place at the right time, this creates efficient and value processes like match and like mentioned and in reality, what the CES is the success metrics showing our efficacy to consume the right impressions to create optimal consumer engaged.
Engagement, which is directly attributed to result, and that ties back to data technology and expansive media reach so.
I think I answered your question and a roundabout way by going through consumer engagement score, but Youll tell me if I could.
Got it that's helpful. I appreciate it thanks Joe.
Youre welcome.
At this time I have no further questions on queue I will turn the call backhaul for the Joan Merrill Lynch for closing remarks.
Thank you. We appreciate everyone. Joining today as you can tell we're very excited about how 2020 finished up and even more excited about our first quarter and our prospects for the rest of 2021.
And I'd like to say Goodbye bye, thank and everybody for the time today and look forward to speaking and May on our Q1 earnings call. Thank you.
Thank you everyone and this will conclude today's conference call you may now disconnect.
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