Signal management

DIGITAL MEDIA SOLUTIONS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

PREVIEW

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

On August 16, 2021, we announced our decision to evaluate potential strategic
alternatives to maximize shareholder value. We intend to evaluate a full range
of strategic, operational and financial alternatives. We have retained Goldman
Sachs & Co LLC and Canaccord Genuity as our financial advisors to assist with
the strategic review process. There can be no assurance that the strategic
review process will result in any strategic alternative, or any assurance as to
its outcome or timing.

RESULTS OF OPERATIONS

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

                                                                            Three Months Ended March
                                                                                      31,
                                                                                 2022                          2021
Revenue by type:
Customer acquisition                                                                 96.4  %                       94.4  %
Managed services                                                                      2.9  %                        4.1  %
Software services                                                                     0.7  %                        1.5  %
Total net revenue                                                                   100.0  %                      100.0  %
Revenue by segment:
Brand Direct                                                                         56.1  %                       58.0  %
Marketplace                                                                          53.9  %                       50.9  %
Technology Solutions                                                                  2.1  %                        2.1  %
Intercompany eliminations                                                           (12.1) %                      (11.0) %
Net revenue                                                                         100.0  %                      100.0  %
Cost of revenue                                                                      71.3  %                       71.5  %
Gross profit                                                                         28.7  %                       28.5  %
Salaries and related costs                                                           12.5  %                       10.6  %
General and administrative                                                           10.2  %                        7.2  %
Depreciation and amortization                                                         6.5  %                        5.6  %
Acquisition costs                                                                       -  %                        1.5  %
Change in fair value of contingent consideration                                      2.4  %                          -  %
(Loss) income from operations                                                        (2.9) %                        3.6  %
Interest expense                                                                      3.4  %                        3.4  %
Change in fair value of warrant liabilities                                          (1.7) %                        0.3  %

Net loss before income taxes                                                         (4.6) %                       (0.1) %
Income tax expense                                                                    0.3  %                        0.1  %
Net loss                                                                             (4.9) %                       (0.2) %
Net loss attributable to non-controlling interest                                    (2.0) %                       (0.1) %
Net loss attributable to Digital Media Solutions, Inc.                               (2.9) %                       (0.1) %



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Results of operations for the three months ended March 31, 2022 and 2021

The following table presents the consolidated results of operations for the
three months ended March 31, 2022 and 2021 and the changes from the prior period
(in thousands):

                                                           Three Months Ended March 31,
                                                     2022                 2021             $ Change       % Change

Net revenue                                   $  109,110                $ 96,803                         $ 12,307                 12.7  %
Cost of revenue                                   77,834                  69,182                            8,652                 12.5  %
Gross profit                                  $   31,276                $ 27,621                         $  3,655                 13.2  %
Salaries and related costs                        13,705                  10,269                            3,436                 33.5  %
General and administrative                        11,107                   6,962                            4,145     -           59.5  %
Depreciation and amortization                      7,060                   5,419                            1,641                 30.3  %
Acquisition costs                                     13                   1,494                           (1,481)               (99.1) %
Change in fair value of contingent
consideration                                      2,591                       -                            2,591                100.0  %
(Loss) income from operations                 $   (3,200)               $  3,477                         $ (6,677)              (192.0) %
Interest expense                                   3,687                   3,257                              430                 13.2  %
Change in fair value of warrant liabilities       (1,840)                    315                           (2,155)    -         (684.1) %

Net loss before income taxes                  $   (5,047)               $    (95)                        $ (4,952)              5212.6  %
Income tax expense                                   310                     117                              193                165.0  %
Net loss                                      $   (5,357)               $   (212)                        $ (5,145)              2426.9  %
Net loss attributable to non-controlling
interest                                          (2,223)                    (93)                          (2,130)              2290.3  %
Net loss attributable to Digital Media
Solutions, Inc.                               $   (3,134)               $   (119)                        $ (3,015)              2533.6  %



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.

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

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                                           Three Months Ended March 31,
                                  2022            2021       $ Change      % Change
Brand Direct
Customer acquisition          $    59,619      $ 52,901      $  6,718           13  %
Managed services                    1,609         3,278        (1,669)         (51) %

Total Brand Direct                 61,228        56,179         5,049            9  %
Marketplace
Customer acquisition               58,806        49,101         9,705           20  %
Managed services                        -           158          (158)        (100) %

Total Marketplace                  58,806        49,259         9,547           19  %
Technology Solutions

Managed services                    1,510           510         1,000          196  %
Software services                     826         1,507          (681)         (45) %
Total Technology Solutions          2,336         2,017           319           16  %
Corporate and Other
Customer acquisition              (13,260)      (10,652)       (2,608)          24  %
Total Corporate and Other         (13,260)      (10,652)       (2,608)          24  %
Total Customer acquisition        105,165        91,350        13,815           15  %
Total Managed services              3,119         3,946          (827)         (21) %
Total Software services               826         1,507          (681)         (45) %
Total Net revenue             $   109,110      $ 96,803      $ 12,307           13  %



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.

Our Brand Direct segment experienced an increase in Customer acquisition revenue
of $6.7 million or 13% during the three months ended March 31, 2022. Customer
acquisition revenue for Marketplace increased by $9.7 million or 20% for the
three months ended March 31, 2022. The increases in both the Brand Direct and
Marketplace segments were primarily due to the migration of consumers to the
online shopping experience, especially in the auto and health insurance
verticals, as well as two acquisitions the Company completed in the first half
of 2021.

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 $0.8 million or 21% during the three
months ended March 31, 2022. The decrease was primarily driven by decreased
media activity resulting in lower agency fees.

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 months ended March
31, 2022.

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.

The following table shows the gross margin percentage (gross margin as a percentage of total revenue) by segment and the variations compared to the previous period:

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                                                        Three Months Ended March 31,
                                                                              2022                   2021                 PPTS Change
Brand Direct                                                                     20.9  %                26.9  %                      -6.0
Marketplace                                                                      27.9  %                25.7  %                       2.2
Technology Solutions                                                             88.6  %                79.4  %                       9.2
Total gross profit percentage                                                    28.7  %                28.5  %                       0.2



Brand Direct’s gross profit declined for the three months ended March 31, 2022primarily due to compressed pricing within motor insurance and increased telecommunications costs (dial charges) for DMS Voice, our integrated voice telephony system.

Marketplace gross profit increased for the quarter ended March 31, 2022primarily driven by strong performance from our acquisition of Crisp and optimizing the media mix to drive lead conversion by leveraging our first-party data asset.

Gross profit for Technology Solutions increased for the three months ended March
31, 2022, driven by the optimization of media purchasing activity which lead to
larger budgets and resulted in increased fees.

Total gross profit increased for the three months ended March 31, 2022primarily due to performance related to acquisitions, vertical expansion and growth of our first party data asset through signals data.

Salaries and related costs. Total compensation includes salaries, commissions,
bonuses, payroll taxes and retirement benefits.
Salaries and related costs increased by $3.4 million or 33.5% for the three
months ended March 31, 2022, which was primarily driven by stock-based
compensation and headcount as a result of required expansion of our workforce to
support the Company's growth, as well as the addition of FTEs from the Crisp
Results and Aimtell/Aramis/PushPros ("AAP") acquisitions.

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 bad debt
expense, as well as sales and marketing expenses relating to advertising and
promotion. We also include other expenses such as investment banking expenses,
fundraising costs and costs related to the advancement of our corporate social
responsibility program.

General and administrative expenses increased $4.1 million or 59.5% for the three months ended March 31, 2022. The increase was primarily due to acquisition-related spending in several categories, including software, technology and professional expenses, as well as an overall increase in insurance and compliance costs.

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

Acquisition costs decreased by $1.5 million or 99.1%, during the three months
ended March 31, 2022. The decrease was primarily due to higher prior year
acquisition costs related to Crisp Results and Aimtell/Aramis/PushPros ("AAP")
acquisitions.

Depreciation and amortization. Property, plant and equipment include computers and office equipment, furniture and fixtures, leasehold improvements and the costs of internally developed software. Intangible assets subject to amortization include technology, customer relationships, brand and non-competition agreements.

Depreciation and amortization increased $1.6 million i.e. 30.3%, during the three months ended March 31, 2022primarily through capital assets acquired with Crisp Results and AAP, as well as continued investment in internally developed software, which went live in 2021.

Interest expense. Interest expense for three months ended March 31, 2022 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 Company's financial institution since
May 25, 2021 (see Note 5. Debt).

Interest expense increased by $0.4 million or 13.2%, during the three months
ended March 31, 2022. The increase for the three months ended March 31, 2022,
was primarily due to comparatively higher outstanding debt balance.


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Income tax expense. The Company recorded income tax expense of $0.3 million for
the three months ended March 31, 2022. The blended effective tax rate for the
three months ended March 31, 2022 was (6)%, 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.

As explained further below, we use these financial measures internally to review
the performance of our business units 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 and Unlevered Free Cash Flow 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
and Unlevered Free Cash Flow only as a supplement.

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

In addition, we adjust to take into account estimated cost synergies related to
our acquisitions. These adjustments are estimated based on cost-savings that are
expected to be realized within our acquisitions over time as these acquisitions
are fully integrated into DMS. These cost-savings result from the removal of
cost and or service redundancies that already exist within DMS, technology
synergies as systems are consolidated and centralized, headcount reductions
based on redundancies, right-sized cost structure of media and service costs
utilizing the most beneficial contracts within DMS and the acquired companies
with external media and service providers. We believe that these non-synergized
costs tend to overstate our expenses during the periods in which such synergies
are still being realized.

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.

Unleveraged free cash flow is defined as Adjusted EBITDA less capital expenditures, and unleveraged free cash flow conversion is defined as unleveraged free cash flow divided by adjusted EBITDA.

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



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                                                                    Three Months Ended March 31,
                                                                     2022                   2021
Net loss                                                       $      (5,357)          $      (212)
Adjustments
Interest expense                                                       3,687                 3,257
Income tax expense                                                       310                   117
Depreciation and amortization                                          7,060                 5,419
Change in fair value of warrant liabilities (1)                       (1,840)                  315

Stock-based compensation expense                                       1,842                 1,257
Restructuring costs                                                      394                  (351)
Acquisition costs (2)                                                  2,604                 1,494
Other expense (3)                                                      1,793                 1,513
Adjusted net income                                            $      10,493           $    12,809
Additional adjustments
Pro forma cost savings - Reorganization (4)                    $           -           $        31
Pro forma cost savings - Acquisitions (5)                                  -                   769
Acquisitions EBITDA (6)                                                    -                 2,711

Adjusted EBITDA                                                $      10,493           $    16,320
Less: Capital Expenditures                                             1,617                 2,391
Unlevered free cash flow                                       $       8,876           $    13,929
Unlevered free cash flow conversion                                     84.6   %              85.3  %


______________

(1) Adjustments to warrant liability at market value.

(2) The balance includes transaction costs related to the business combination, acquisition inducement payments, contingent consideration accretion, earn-out payments and pre-acquisition expenses.

(3) The balance includes legal fees associated with acquisitions and other extraordinary matters, costs related to philanthropic initiatives and costs related to private mandate transactions.

(4)Cost savings resulting from the reorganization of the company initiated in the second quarter of 2020.

(5) Cost synergies expected following the full integration of acquisitions.

(6) Pre-acquisition adjusted EBITDA results from the acquisitions of AAP and Crisp Results during the three months ended March 31, 2021.

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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 completed March, 31st,

                                                                          2022                   2021
Unlevered free cash flow                                           $         8,876          $    13,929
Capital expenditures                                                         1,617                2,391
Adjusted EBITDA                                                    $        

10,493 $16,320

Acquisitions EBITDA (1)                                                          -                2,711
Pro forma cost savings - Reorganization (2)                                      -                   31
Pro forma cost savings - Acquisitions (3)                                        -                  769
Adjusted net income                                                $        10,493          $    12,809
Acquisition costs (4)                                                        2,604                1,494
Other expenses (5)                                                           1,793                1,513
Stock-based compensation                                                     1,842                1,257
Restructuring costs                                                            394                 (351)
Change in fair value of warrant liabilities (6)                             (1,840)                 315

Subtotal before additional adjustments                             $         5,700          $     8,581
Less: Interest expense                                                       3,687                3,257
Less: Income tax expense                                                       310                  117

Provision for bad debt                                                         532                  410

Lease restructuring charges                                                   (126)                (303)

Stock-based compensation, net of amounts capitalized                         1,842                1,257

Amortization of debt issuance costs                                            453                  233
Deferred income tax provision, net                                            (392)              (1,016)

Change in fair value of contingent consideration                             2,591                  382
Change in fair value of warrant liability                                   (1,840)                 315

Change in income tax receivable and payable                                    732                1,133
Change in accounts receivable                                               (7,368)              (1,069)
Change in prepaid expenses and other current assets                          1,150                  367
Change in accounts payable and accrued expenses                             (1,263)              (5,703)
Change in other liabilities                                                     38                  (24)
Net cash (used in) provided by operating activities                $        (1,948)         $     1,189



______________

(1) Adjusted EBITDA results before acquisition of AAP and Crisp results, and acquisitions during the three months ended March 31, 2021.

(2) Cost savings resulting from the reorganization of the company initiated in the second quarter of 2020.

(3) Expected cost synergies due to the full integration of acquisitions.

(4) The balance includes transaction costs related to the business combination, acquisition inducement payments, contingent consideration accretion, earn-out payments and pre-acquisition expenses.

(5) The balance includes legal fees associated with acquisitions and other extraordinary matters, costs related to philanthropic initiatives and costs related to private mandate transactions.

(6) Adjustments to warrant liability at market value.

Adjusted net profit and adjusted EPS

We use the non-GAAP measures Adjusted Net Income 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


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overall operating performance. We define Adjusted Net Income (Loss) as net loss
attributable to Digital Media Solutions, Inc. adjusted for (x) costs associated
with the change in fair value of warrant liabilities, debt extinguishment,
Business Combination, acquisition-related costs, equity based compensation and
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 pro forma net
loss per share as adjusted pro forma net loss 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):

                                                                          Three Months Ended March
                                                                                    31,
                                                                               2022                       2021
Numerator:
Net loss                                                                  $     (5,357)               $     (212)

Net loss attributable to non-controlling interest                               (2,223)                      (93)
Net loss attributable to Digital Media Solutions, Inc. - basic and
diluted                                                                   $     (3,134)               $     (119)

Denominator:

Weighted average shares - basic and diluted                                     35,576                    33,241

Net earnings (loss) per common share:

 Basic and diluted                                                        $      (0.09)               $        -



                                                                           Three Months Ended March 31,
                                                                             2022                2021
Numerator:

Net loss attributable to Digital Media Solutions, Inc. – basic and dilute

                                                                  $  

(3,134) ($119)

Add adjustments:
Change in fair value of warrant liabilities                                  (1,840)               315
Acquisition and related costs                                                 2,604              1,494
Restructuring costs                                                             394               (351)
Business combination expenses                                                     -                769
Stock-based compensation expense                                              1,842              1,257

                                                                         $    3,000          $   3,484
Net income tax expense based on conversion of units                               -                144

Adjusted net income (loss) attributable to Digital Media Solutions, Inc. – basic and dilute

                                      $  

(134) $3,509

Denominator:

Weighted-average shares outstanding - basic and diluted                      35,576             33,241
Weighted-average LLC Units of DMSH, LLC that are convertible into
Class A common stock                                                         25,728             26,306
                                                                             61,304             59,547

Adjusted EPS - basic and diluted                                         $        -          $    0.06



CASH AND CAPITAL RESOURCES

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

                                              March 31,           December 31,
                                                 2022                 2021              $ Change             % Change
Cash                                         $  21,703          $      26,394          $ (4,691)                    (18) %
Availability under revolving credit facility $  50,000          $      50,000          $      -                       -  %
Total Debt                                   $ 217,533          $     217,755          $   (222)                      -  %



Our capital sources 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. We generate sufficient
cash flows for working capital and expect to do so for the foreseeable future.

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 and
interest expense.

Borrowings under the Revolving Facility bear interest, at our option, at either
(i) adjusted LIBOR plus 4.25% or (ii) a base rate (which is equal to the highest
of (a) the administrative agent's prime rate, (b) the federal funds rate, as in
effect from time to time, plus 0.50%, (c) one-month LIBOR plus 1.00%, and (d)
1.75% (the "Base Rate")), plus 3.25%. The Term Loan bears interest at our
option, at either (i) adjusted LIBOR plus 5.00% or (ii) the Base Rate plus
4.00%. Under the Revolving Facility, DMS LLC will pay a 0.50% per annum
commitment fee in arrears on the undrawn portion of the revolving commitments.
For the three months ended March 31, 2022, the effective interest rate was
6.29%. Since May 25, 2021 our interest rate is based on LIBOR plus 5%.

The term loan, which was issued at an initial issue discount of 1.80% or
$4.2 million, will be subject to payment of 1.0% of the initial 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, the May 25, 2026when outstanding balances become due.

Cash flows from operating activities
Net cash (used in) provided by operating activities was $(1.9) million for the
three months ended March 31, 2022 as compared to $1.2 million provided by
operating activities in the three months ended March 31, 2021. The decrease is
primarily attributable to an increase in accounts receivable due to timing of
customer payments, and a slight decrease 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 three months ended March 31, 2022
decreased by $5.2 million or 76% to $1.6 million from $6.8 million for the three
months ended March 31, 2021 primarily due to the timing of the acquisition of
AAP made during the first quarter of 2021.

Cash flows from financing activities
Net cash used in financing activities for the three months ended March 31, 2022
was $1.1 million, reflecting a decrease of $0.7 million or 40%, as compared to
$1.9 million for the three months ended March 31, 2021. This decrease was due to
higher required repayments of borrowings of long-term debt and notes payable in
the prior year under the Monroe Credit Facility and Insurance Premium Financial
Service arrangements.

For the three months ended March 31, 2022 and 2021, our Unlevered Free Cash Flow
conversion rate was 84.6% and 85.3%, respectively. The slight decrease was due
to higher 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.



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to Section 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K for more information about our critical accounting policies and other significant accounting policies.

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 1. Summary of Significant Accounting Policies in the 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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