Direct Digital Holdings Reports Second Quarter 2026 Financial Results
Rhea-AI Summary
Direct Digital Holdings (Nasdaq: DRCT) reported second quarter 2026 revenue of $7.8 million, down 23% from $10.1 million in Q2 2025, primarily due to a $2.5 million decline in demand-side platform (DSP) customer spending. Excluding DSP customers, revenue rose 3% year over year. Gross margin was 34%, slightly below 35% a year ago.
Q2 2026 operating loss widened to $2.9 million, while net loss narrowed to $3.6 million from $4.2 million. Adjusted EBITDA loss increased to $2.3 million. For the first half of 2026, revenue declined 21% to $14.5 million, but non-DSP revenue grew 5%. The company ended June 30, 2026 with $0.5 million in cash and reported noncompliance with certain financial covenants under its credit facility; management is seeking a waiver and remains focused on liquidity, cost control and growth initiatives.
Positive
- Non-DSP Q2 revenue grew 3% year over year
- Non-DSP first-half 2026 revenue grew 5% year over year
- Q2 2026 operating expenses decreased 7% to $5.6 million
- First-half 2026 operating expenses decreased 10% to $11.1 million
- Q2 2026 net loss improved to $3.6 million from $4.2 million
- Net cash used in operations improved to $1.9 million from $5.4 million
Negative
- Q2 2026 revenue fell 23% to $7.8 million
- First-half 2026 revenue fell 21% to $14.5 million
- DSP customer spending decreased $2.5 million in Q2 2026
- Adjusted EBITDA loss widened to $2.3 million in Q2 2026
- Cash balance was $0.5 million against current liabilities of $32.1 million
- Company was not in compliance with certain credit facility financial covenants
- Total stockholders’ deficit increased to $13.8 million at June 30, 2026
News Explained
The completed report documents a larger Class A share base, which can reduce existing holders’ percentage ownership absent offsetting changes.
The completed results report lists Class A shares issued and outstanding at
The first-half cash-flow statement reports
Because additional shares increase the total share count, the disclosed share-count increase changes the ownership structure for existing common holders, while the financing statement identifies both noncash settlement and cash proceeds rather than one single funding mechanism.
Market reaction after 2Q26 earnings report: DRCT -4.94%
Following this news, DRCT has declined 4.94%, reflecting a moderate negative market reaction. The stock is currently trading at $2.63. Trading volume is above average at 1.9x the average, suggesting increased trading activity.
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Key Figures
Previous Earnings Reports
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| May 11 | Q1 earnings report | Negative | -7.9% | Revenue declined amid lower DSP spending despite improved gross margin and narrower operating loss. |
| Mar 31 | Q4 earnings report | Negative | -4.8% | Full-year revenue declined despite buy-side growth, expense reductions, and a strategic business pivot. |
| Nov 06 | Q3 earnings report | Negative | -34.6% | Revenue and year-to-date results declined while losses widened and capital actions were disclosed. |
| Aug 05 | Q2 earnings report | Negative | -18.6% | Revenue declined year over year despite sequential improvement, margin expansion, and lower operating expenses. |
| May 06 | Q1 earnings report | Negative | -21.6% | Revenue fell sharply as sell-side revenue declined, alongside continuing net and adjusted EBITDA losses. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Tag-matched earnings events all had negative recorded 24-hour reactions, averaging -17.5%.
Key Terms
dsp technical
generative engine optimization technical
adjusted ebitda financial
gaap financial
financial covenants financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
Mark D. Walker, Chairman and Chief Executive Officer, commented, "The progress we're seeing in our core business reinforces the effectiveness of our growth strategy. While revenue decreased
Keith Smith, President, commented, "Over the past several quarters, we have taken deliberate steps to streamline our operations and sharpen our focus on the areas where we believe we can create the greatest value. As a result, we are operating from a stronger foundation while retaining the flexibility to evaluate strategic partnerships and other opportunities that may complement our platform. Our priority remains disciplined execution, customer success, and the long-term growth of the business."
Second Quarter 2026 Financial Results
- Revenue of
$7.8 million 23% compared to$10.1 million $2.5 million $0 $2.5 million $0.2 million 3% . - Gross profit was
$2.7 million 34% of revenue, compared to$3.6 million 35% of revenue, in the second quarter of 2025. - Operating expenses of
$5.6 million 7% compared to$6.0 million - Operating loss was
$2.9 million $2.4 million - Net loss was
$3.6 million $4.2 million - Adjusted EBITDA(1) loss was
$2.3 million $1.5 million - As of June 30, 2026, the Company held cash and cash equivalents of
$0.5 million $0.7 million
Six Months Ended June 30, 2026 Financial Results
- Revenue of
$14.5 million 21% compared to$18.3 million $4.5 million $0.1 million $4.5 million $0.7 million 5% , during the first half of 2026. - Gross profit was
$4.9 million 34% of revenue, compared to$6.0 million 33% of revenue, in the first half of 2025. - Operating expenses of
$11.1 million 10% compared to$12.3 million - Operating loss was
$6.2 million $6.4 million - Net loss was
$9.2 million $10.1 million - Adjusted EBITDA loss was
$4.9 million $4.5 million
Diana Diaz, Chief Financial Officer, commented, "We continue to manage the business with financial discipline while supporting investments that drive sustainable growth. Our streamlined cost structure and focus on liquidity position us to capitalize on future opportunities while maintaining a prudent approach to capital allocation."
As of June 30, 2026, the Company was not in compliance with certain financial covenants under its credit facility. Management is working constructively with its lender to obtain a waiver of the covenant noncompliance and believes discussions are progressing appropriately. The Company remains focused on strengthening operating performance, managing liquidity, and executing its strategic growth initiatives which we expect will expand our addressable market.
____________________ |
(1) "Adjusted EBITDA" is a non-GAAP financial measure. 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. |
Conference Call and Webcast Details
Direct Digital Holdings will host a conference call today, Wednesday, August 12, 2026, at 5:00 p.m. Eastern Time to discuss the Company's second quarter 2026 financial results. The live webcast and replay can be accessed at https://ir.directdigitalholdings.com/news-events/ir-calendar. 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/.
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, 2025 (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 ability to realize the benefit of our strategic shift to focusing on driving digital marketing spend among historical buyers of managed advertising campaigns and new enterprise customers; 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 ability to maintain compliance with the listing standards of the Nasdaq Capital Market; 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 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 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; 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) is an end-to-end, AI-powered advertising technology and media solutions provider. The Company combines advanced technology with award-winning media and marketing expertise to enhance reach and drive performance for brands, agencies, and publishers of all sizes. Through Orange 142, a leading digital marketing and advertising agency, the Company delivers customized, audience-focused campaigns that enable mid-market and enterprise companies to achieve measurable results across programmatic, search, social, CTV, influencer marketing, and more. The Company also provides curated access to premium digital media inventory through its proprietary media-buying platform. With expertise across high-growth sectors—including Energy, Higher Education, Travel & Tourism, and Financial Services—Direct Digital Holdings helps brands reach and engage audiences more effectively across the evolving digital media ecosystem.
DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(in thousands, except share and par value amounts) | |||
June 30, 2026 | December 31, 2025 | ||
(Unaudited) | |||
ASSETS | |||
CURRENT ASSETS | |||
Cash and cash equivalents | $ 520 | $ 728 | |
Accounts receivable, net of provision for credit losses of | 2,684 | 3,126 | |
Prepaid expenses and other current assets | 1,419 | 890 | |
Total current assets | 4,623 | 4,744 | |
Property, equipment and software, net | 99 | 166 | |
Goodwill | 6,520 | 6,520 | |
Intangible assets, net | 7,025 | 7,852 | |
Operating lease right-of-use assets | 607 | 702 | |
Other long-term assets | 47 | 172 | |
Total assets | $ 18,921 | $ 20,156 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
CURRENT LIABILITIES | |||
Accounts payable | $ 9,587 | $ 7,820 | |
Accounts payable - related party | 538 | — | |
Accrued liabilities | 2,406 | 2,164 | |
Accrued liabilities - related party | 1,219 | 3,663 | |
Liability related to tax receivable agreement, current portion | — | 41 | |
Current maturities of long-term debt - related party | 17,335 | 12,003 | |
Deferred revenues | 795 | 513 | |
Operating lease liabilities, current portion | 232 | 221 | |
Total current liabilities | 32,112 | 26,425 | |
Long-term debt, net of current portion | 144 | 146 | |
Operating lease liabilities, net of current portion | 490 | 608 | |
Total liabilities | 32,746 | 27,179 | |
COMMITMENTS AND CONTINGENCIES (Note 9) | |||
STOCKHOLDERS' DEFICIT | |||
Series A Convertible Preferred Stock, | — | — | |
Class A Common Stock, | 1 | — | |
Class B Common Stock, | — | — | |
Additional paid-in capital | 27,899 | 25,812 | |
Accumulated deficit | (36,365) | (27,720) | |
Noncontrolling interest | (5,360) | (5,115) | |
Total stockholders' deficit | (13,825) | (7,023) | |
Total liabilities and stockholders' deficit | $ 18,921 | $ 20,156 | |
DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(in thousands, except per-share data) | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2026 | 2025 | 2026 | 2025 | ||||
Revenues | 7,832 | 10,144 | $ 14,512 | $ 18,301 | |||
Cost of revenues | 5,169 | 6,583 | 9,587 | 12,347 | |||
Gross profit | 2,663 | 3,561 | 4,925 | 5,954 | |||
Operating expenses | |||||||
Compensation, taxes and benefits | 3,215 | 3,639 | 6,236 | 7,303 | |||
General and administrative | 2,376 | 2,348 | 4,868 | 5,001 | |||
Total operating expenses | 5,591 | 5,987 | 11,104 | 12,304 | |||
Loss from operations | (2,928) | (2,426) | (6,179) | (6,350) | |||
Other income (expense) | |||||||
Other income | 62 | 19 | 69 | 47 | |||
Loss on settlement of accounts payable | — | — | (1,247) | — | |||
Loss on debt extinguishment | — | — | (517) | — | |||
Derecognition of tax receivable agreement liability | 41 | — | 41 | — | |||
Expenses for Equity Reserve Facility | — | — | — | (198) | |||
Interest expense and amortization of deferred financing cost and debt | (764) | (1,789) | (1,327) | (3,635) | |||
Total other expense, net | (661) | (1,770) | (2,981) | (3,786) | |||
Loss before income taxes | (3,589) | (4,196) | (9,160) | (10,136) | |||
Income tax expense | — | — | — | — | |||
Net loss | (3,589) | (4,196) | (9,160) | (10,136) | |||
Net loss attributable to noncontrolling interest | (194) | (1,947) | (515) | (5,532) | |||
Net loss attributable to Direct Digital Holdings, Inc. | $ (3,395) | $ (2,249) | $ (8,645) | $ (4,604) | |||
Net loss per common share attributable to Direct Digital Holdings, Inc.: | |||||||
Basic and diluted | $ (5.78) | $ (49.79) | $ (15.62) | $ (121.69) | |||
Weighted-average number of shares of common stock outstanding: | |||||||
Basic and diluted | 709 | 45 | 643 | 38 | |||
DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(in thousands) | |||
Six Months Ended June 30, | |||
2026 | 2025 | ||
Cash Flows Used In Operating Activities: | |||
Net loss | $ (9,160) | $ (10,136) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Amortization of deferred financing cost and debt discount (premium), net | 216 | 2,900 | |
Amortization of intangible assets | 827 | 977 | |
Reduction in carrying amount of right-of-use assets | 95 | 90 | |
Depreciation and amortization of property, equipment and software | 67 | 145 | |
Stock-based compensation | 267 | 705 | |
Loss on settlement of accounts payable | 1,247 | — | |
Loss on debt extinguishment | 517 | — | |
Derecognition of tax receivable agreement liability | (41) | — | |
Interest paid in kind | 1,100 | — | |
Expenses for Equity Reserve Facility | — | 198 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 442 | 1,082 | |
Prepaid expenses and other assets | (404) | (842) | |
Accounts payable | 2,406 | (1,491) | |
Accrued liabilities and tax receivable agreement payable | 312 | 962 | |
Income taxes payable | — | 41 | |
Deferred revenues | 282 | 63 | |
Operating lease liability | (107) | (92) | |
Net cash used in operating activities | (1,934) | (5,398) | |
Cash Flows Used In Investing Activities: | |||
Cash paid for capitalized software and property and equipment | — | (38) | |
Net cash used in investing activities | — | (38) | |
Cash Flows Provided by Financing Activities: | |||
Payment of expenses for Equity Reserve Facility | — | (198) | |
Proceeds from issuance of Class A Common Stock | 1,226 | 5,942 | |
Payment of deferred financing cost | — | (46) | |
Payments on financed insurance premiums | (36) | (114) | |
Payments on loans | (2) | — | |
Advances from related party | 538 | — | |
Net cash provided by financing activities | 1,726 | 5,584 | |
Net (decrease) increase in cash and cash equivalents | (208) | 148 | |
Cash and cash equivalents, beginning of the period | 728 | 1,445 | |
Cash and cash equivalents, end of the period | $ 520 | $ 1,593 | |
Non-cash Financing Activities: | |||
Reclassification of Exit Fee from accrued liabilities to debt | $ 3,608 | $ — | |
Settlement of accounts payable through issuance of common stock | $ 2,028 | $ — | |
Accrued dividends | $ 1,163 | $ — | |
Financed insurance premiums | $ 367 | $ 291 | |
NON-GAAP FINANCIAL MEASURES
In addition to our results determined in accordance with
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2026 | 2025 | 2026 | 2025 | ||||
Net loss | $ (3,589) | $ (4,196) | $ (9,160) | $ (10,136) | |||
Add back (deduct): | |||||||
Interest expense and amortization of deferred financing cost and debt | 764 | 1,789 | 1,327 | 3,635 | |||
Loss on settlement of accounts payable | — | — | 1,247 | — | |||
Loss on debt extinguishment | — | — | 517 | — | |||
Derecognition of tax receivable agreement liability | (41) | — | (41) | — | |||
Amortization of intangible assets | 413 | 489 | 827 | 977 | |||
Stock-based compensation | 84 | 389 | 267 | 705 | |||
Depreciation and amortization of property, equipment and software | 34 | 77 | 67 | 145 | |||
Expenses for Equity Reserve Facility | — | — | — | 198 | |||
Adjusted EBITDA | $ (2,335) | $ (1,452) | $ (4,949) | $ (4,476) | |||
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, losses from financing activities 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 it in isolation or as a substitute for analysis of our financial results as reported under GAAP.
Contacts:
Investors:
IMS Investor Relations
Walter Frank/Jennifer Belodeau
(203) 972-9200
investors@directdigitalholdings.com
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SOURCE Direct Digital Holdings