Direct Digital Holdings Reports First Quarter 2025 Financial Results
- Buy-side revenue increased 6% YoY to $6.1 million
- Operating expenses reduced by 19% ($1.5 million) compared to Q1 2024
- Sell-side advertisers increased 13% compared to Q1 2024
- New strategic partnerships expected to contribute to revenue in H2 2025
- Maintained full-year revenue guidance of $90-110 million
- Total revenue declined 63% YoY to $8.2 million
- Sell-side revenue dropped 88% YoY to $2.0 million
- Net loss increased to $5.9 million from $3.8 million in Q1 2024
- Adjusted EBITDA loss worsened to $3.0 million from $1.7 million in Q1 2024
- Low cash position of $1.8 million raises going concern issues
Insights
DRCT reports serious revenue decline and widening losses despite cost cuts and buy-side growth; recovery timeline uncertain.
Direct Digital Holdings' Q1 2025 results reveal significant financial deterioration with
The company's cost-cutting initiatives delivered some benefit, reducing operating expenses by
DRCT's buy-side segment showed modest growth of
The liquidity position remains precarious with only
Management maintained full-year 2025 guidance of
DRCT's business model disruption requires major rebuild of sell-side operations while buy-side shows modest growth.
Direct Digital Holdings is navigating a fundamental business model transition following a major disruption to their sell-side operations that began in 2024. The company processed approximately 188 billion average monthly impressions through their sell-side segment, but the revenue generated collapsed by
The company's recovery strategy centers on two parallel tracks: rebuilding sell-side operations while scaling the buy-side business. The sell-side recovery hinges on the "Colossus Connections" initiative launched in Q3 2024, which aims to accelerate direct integration with leading demand-side platforms. Management reports signing two major marketplace partners plus two additional mid-tier partners, but these integrations won't be completed until second half of 2025.
On the buy-side, DRCT has unified two divisions under Orange 142 to better serve small to mid-sized partners, which they identify as a significant growth opportunity. This reorganization appears to be yielding results with
Operational metrics show mixed signals: sell-side advertisers increased
The sequential comparison of sell-side revenue (
Enhanced Buy-Side Revenue Demonstrating Business Segment Growth as Orange 142 Scales
Entered New Strategic Partnerships to Diversify and Expand Addressable Market
Mark D. Walker, Chairman and Chief Executive Officer, commented, "As we begin to move through 2025, we are focused on continuing to scale our buy-side solution while simultaneously rebuilding our sell-side business. During the first quarter, which is historically our weakest quarter, we recognized consolidated revenue of
"Our focus in 2025 is on driving growth and value for our shareholders," Mr. Walker continued. "We've launched several initiatives to drive our progress, including revenue optimization efforts to diversify our revenue base and cost saving initiatives to drive reductions in operating expenses and enhance operational efficiencies. In the first quarter of 2025, we reduced operating expenses by nearly
"At the business unit level, the unification of our two buy side divisions into Orange 142 has allowed us to better service the small to mid-sized partners who represent a significant growth opportunity for our business. Moreover, our Colossus Connections, launched in the third quarter of 2024 to accelerate direct integration efforts with leading demand-side platforms, is progressing well, and as previously reported, we signed up two of the leading marketplace partners and we recently added two additional mid-tier partners who are near completion with integration. We expect to see the impact of these new partners on our revenues in the second half of 2025 once integration has been completed," Mr. Walker stated.
"With our current visibility, we maintain our current revenue guidance of
Keith Smith, President, commented, "We remain focused on strategically recalibrating and enhancing our business model to capitalize on new opportunities and meet the demands of our diverse partners. We faced significant challenges in 2024, and we are now emerging as a stronger, more nimble business intent on continuing to scale and expand our offerings. From a liquidity perspective, we continue to explore strategic opportunities to support key growth initiatives and drive long term value for our shareholders."
First Quarter 2025 Highlights
- Processed approximately 188 billion average monthly impressions through the sell-side advertising segment.
- Sell-side advertisers increased
13% compared to the first quarter of 2024. - Sell-side media properties of 24,000 average per month in the first quarter of 2025 decreased
8% compared to the first quarter of 2024, increased20% over the same period in 2023, and decreased15% sequentially compared to the fourth quarter of 2024. - Buy-side advertising segment served over 220 customers in the first quarter of 2025.
- Buy-side advertising revenue for the first quarter of 2025 included
$1.2 million - Continued to consider strategic opportunities to support key growth initiatives and drive long term value for shareholders.
First Quarter 2025 Financial Results
- Revenue of
$8.2 million 63% compared to$22.3 million - Sell-side advertising segment revenue of
$2.0 million 88% compared to$16.5 million - Buy-side advertising segment revenue of
$6.1 million 6% compared to$5.8 million - Gross profit was
$2.4 million 29% of revenue, compared to$5.0 million 22% of revenue, in the first quarter of 2024. - Operating expenses of
$6.3 million $1.5 million 19% , compared with$7.8 million - Operating loss was
$3.9 million $2.8 million - Net loss was
$5.9 million $3.8 million - Adjusted EBITDA1 loss was
$3.0 million $1.7 million - As of March 31, 2025, the Company held cash and cash equivalents of
$1.8 million $1.4 million
Financial Outlook
Based on current visibility and subject to general market factors, the Company is maintaining its full year guidance of
Diana Diaz, Chief Financial Officer, stated, "Our focus continues to be on optimizing performance, reducing our cost structure, and driving efficiencies as we navigate the business back to profitability. With our visibility today, we believe that we are well positioned to achieve our financial goals for the fiscal year."
Conference Call and Webcast Details
Direct Digital will host a conference call today, May 6, 2025, at 5:00 p.m. Eastern Time to discuss the Company's first quarter 2025 financial results. The live webcast and replay can be accessed at https://ir.directdigitalholdings.com/. Please access the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. For those who cannot access the webcast, a replay will be available at https://ir.directdigitalholdings.com/ for a period of twelve months.
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1"Adjusted EBITDA" and "Adjusted Operating Expenses" are non-GAAP financial measures. The section titled "Non-GAAP Financial Measures" below describes our usage of non-GAAP financial measures and provides reconciliations between historical GAAP and non-GAAP information contained in this press release. |
Cautionary Note Regarding Forward Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws that are subject to certain risks, trends and uncertainties. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption "Risk Factors" and elsewhere in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the "Form 10-K") and subsequent periodic and or current reports filed with the Securities and Exchange Commission (the "SEC").
The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements. We believe these factors include, but are not limited to, the following: the restrictions and covenants imposed upon us by our credit facilities; the substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing; our ability to secure additional financing to meet our capital needs; our ineligibility to file short-form registration statements on Form S-3, which may impair our ability to raise capital; our failure to satisfy applicable listing standards of the Nasdaq Capital Market resulting in a potential delisting of our common stock; costs, risks and uncertainties related to restatement of certain prior period financial statements; any significant fluctuations caused by our high customer concentration; risks related to non-payment by our clients; reputational and other harms caused by our failure to detect advertising fraud; operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry's technology and practices, and any perceived failure to comply with laws and industry self-regulation; our failure to manage our growth effectively; the difficulty in identifying and integrating any future acquisitions or strategic investments; any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing; challenges related to our buy-side clients that are destination marketing organizations and that operate as public/private partnerships; any strain on our resources or diversion of our management's attention as a result of being a public company; the intense competition of the digital advertising industry and our ability to effectively compete against current and future competitors; any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers', suppliers' or other partners' computer systems; as a holding company, we depend on distributions from Direct Digital Holdings, LLC ("DDH LLC") to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and any amount of any dividends we may pay to the holders of our common stock; the fact that DDH LLC is controlled by DDM, whose interest may differ from those of our public stockholders; any failure by us to maintain or implement effective internal controls or to detect fraud; and other factors and assumptions discussed in our Form 10-K and subsequent periodic and current reports we may file with the SEC.
Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT) combines cutting-edge sell-side and buy-side advertising solutions, providing data-driven digital media strategies that enhance reach and performance for brands, agencies, and publishers of all sizes. Our sell-side platform, Colossus SSP, offers curated access to premium, growth-oriented media properties throughout the digital ecosystem. On the buy-side, Orange 142 delivers customized, audience-focused digital marketing and advertising solutions that enable mid-market and enterprise companies to achieve measurable results across a range of platforms, including programmatic, search, social, CTV, and influencer marketing. With extensive expertise in high-growth sectors such as Energy, Healthcare, Travel & Tourism, and Financial Services, our teams deliver performance strategies that connect brands with their ideal audiences.
At Direct Digital Holdings, we prioritize personal relationships by humanizing technology, ensuring each client receives dedicated support and tailored digital marketing solutions regardless of company size. This empowers everyone to thrive by generating billions of monthly impressions across display, CTV, in-app, and emerging media channels through advanced targeting, comprehensive data insights, and cross-platform activation. DDH is "Digital advertising built for everyone."
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) | |||
March 31, 2025 | December 31, 2024 | ||
(Unaudited) | |||
ASSETS | |||
CURRENT ASSETS | |||
Cash and cash equivalents | $ 1,789 | $ 1,445 | |
Accounts receivable, net of provision for credit losses of | 4,391 | 4,973 | |
Prepaid expenses and other current assets | 701 | 2,117 | |
Total current assets | 6,881 | 8,535 | |
Property, equipment and software, net | 288 | 341 | |
Goodwill | 6,520 | 6,520 | |
Intangible assets, net | 9,242 | 9,730 | |
Operating lease right-of-use assets | 838 | 832 | |
Other long-term assets | 48 | 48 | |
Total assets | $ 23,817 | $ 26,006 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
CURRENT LIABILITIES | |||
Accounts payable | $ 7,024 | $ 7,657 | |
Accrued liabilities | 1,512 | 1,257 | |
Liability related to tax receivable agreement, current portion | 41 | 41 | |
Current maturities of long-term debt | 4,122 | 3,700 | |
Deferred revenues | 558 | 507 | |
Operating lease liabilities, current portion | 202 | 188 | |
Income taxes payable | 19 | — | |
Total current liabilities | 13,478 | 13,350 | |
Long-term debt, net of current portion, deferred financing cost and debt discount | 32,878 | 31,603 | |
Operating lease liabilities, net of current portion | 776 | 783 | |
Total liabilities | 47,132 | 45,736 | |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' DEFICIT | |||
Class A Common Stock, 5,450,554 shares issued and outstanding, respectively | 7 | 6 | |
Class B Common Stock, 10,868,000 shares issued and outstanding, respectively | 11 | 11 | |
Additional paid-in capital | 3,776 | 3,769 | |
Accumulated deficit | (11,129) | (8,774) | |
Noncontrolling interest | (15,980) | (14,742) | |
Total stockholders' deficit | (23,315) | (19,730) | |
Total liabilities and stockholders' deficit | $ 23,817 | $ 26,006 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per-share data) | |||
Three Months Ended March 31, | |||
2025 | 2024 | ||
Revenues | |||
Sell-side advertising | $ 2,028 | $ 16,500 | |
Buy-side advertising | 6,129 | 5,775 | |
Total revenues | 8,157 | 22,275 | |
Cost of revenues | |||
Sell-side advertising | 2,638 | 14,807 | |
Buy-side advertising | 3,126 | 2,470 | |
Total cost of revenues | 5,764 | 17,277 | |
Gross profit | 2,393 | 4,998 | |
Operating expenses | |||
Compensation, taxes and benefits | 3,664 | 4,524 | |
General and administrative | 2,653 | 3,281 | |
Total operating expenses | 6,317 | 7,805 | |
Loss from operations | (3,924) | (2,807) | |
Other income (expense) | |||
Other income | 28 | 85 | |
Expenses for Equity Reserve Facility | (198) | — | |
Interest expense | (1,846) | (1,297) | |
Total other expense, net | (2,016) | (1,212) | |
Loss before income taxes | (5,940) | (4,019) | |
Income tax benefit | — | (200) | |
Net loss | (5,940) | (3,819) | |
Net loss attributable to noncontrolling interest | (3,585) | (3,044) | |
Net loss attributable to Direct Digital Holdings, Inc. | $ (2,355) | $ (775) | |
Net loss per common share attributable to Direct Digital Holdings, Inc.: | |||
Basic | $ (0.35) | $ (0.22) | |
Diluted | $ (0.35) | $ (0.22) | |
Weighted-average number of shares of common stock outstanding: | |||
Basic | 6,710 | 3,509 | |
Diluted | 6,710 | 3,509 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) | |||
Three Months Ended March 31, | |||
2025 | 2024 | ||
Cash Flows Used In Operating Activities: | |||
Net loss | $ (5,940) | $ (3,819) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Amortization of deferred financing cost and debt discount | 1,818 | 186 | |
Amortization of intangible assets | 488 | 488 | |
Reduction in carrying amount of right-of-use assets | 46 | 37 | |
Depreciation and amortization of property, equipment and software | 68 | 71 | |
Stock-based compensation | 316 | 504 | |
Deferred income taxes | — | (200) | |
Expenses for Equity Reserve Facility | 198 | — | |
Provision for credit losses/bad debt expense | — | (11) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 582 | 15,783 | |
Prepaid expenses and other assets | 69 | (89) | |
Accounts payable | (633) | (18,062) | |
Accrued liabilities and tax receivable agreement payable | 254 | (748) | |
Income taxes payable | 19 | — | |
Deferred revenues | 51 | 176 | |
Operating lease liability | (44) | (20) | |
Net cash used in operating activities | (2,708) | (5,704) | |
Cash Flows Used In Investing Activities: | |||
Cash paid for capitalized software and property and equipment | (15) | — | |
Net cash used in investing activities | (15) | — | |
Cash Flows Provided by Financing Activities: | |||
Payments on term loan | — | (372) | |
Proceeds from line of credit | — | 4,000 | |
Payment of expenses for Equity Reserve Facility | (198) | — | |
Proceeds from issuance of Class A Common Stock | 3,311 | — | |
Payment of deferred financing cost | (46) | — | |
Proceeds from options exercised | — | 79 | |
Proceeds from warrants exercised | — | 215 | |
Net cash provided by financing activities | 3,067 | 3,922 | |
Net increase (decrease) in cash and cash equivalents | 344 | (1,782) | |
Cash and cash equivalents, beginning of the period | 1,445 | 5,116 | |
Cash and cash equivalents, end of the period | $ 1,789 | $ 3,334 | |
Supplemental Disclosure of Cash Flow Information: | |||
Cash paid for taxes | $ 19 | $ 28 | |
Cash paid for interest | $ 92 | $ 1,078 | |
Non-cash Financing Activities: | |||
Common stock issued for subscription receivable | $ 90 | $ — | |
NON-GAAP FINANCIAL MEASURES
In addition to our results determined in accordance with
In addition to operating income and net income, we use Adjusted EBITDA as a measure of operational efficiency. We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:
- Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation and certain one-time items such as acquisition transaction costs and costs for the Equity Reserve Facility that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;
- Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance; and
- Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Our use of this non-GAAP financial measure has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP. The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods presented:
NON-GAAP FINANCIAL METRICS (unaudited, in thousands) | |||
Three Months Ended March 31, | |||
2025 | 2024 | ||
Net loss | $ (5,940) | $ (3,819) | |
Add back (deduct): | |||
Interest expense | 1,846 | 1,297 | |
Amortization of intangible assets | 488 | 488 | |
Stock-based compensation | 316 | 504 | |
Depreciation and amortization of property, equipment and software | 68 | 71 | |
Expenses for Equity Reserve Facility | 198 | — | |
Income tax benefit | — | (200) | |
Adjusted EBITDA | $ (3,024) | $ (1,659) | |
Contacts:
Investors:
IMS Investor Relations
Walter Frank/Jennifer Belodeau
(203) 972-9200
investors@directdigitalholdings.com
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SOURCE Direct Digital Holdings
FAQ
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