Direct Digital Holdings (Nasdaq: DRCT) reports Q2 2026 revenue drop and covenant issues
Rhea-AI Filing Summary
Direct Digital Holdings, Inc. reported weaker results for the quarter and six months ended June 30, 2026. Second-quarter revenue was $7.8 million, down 23% from $10.1 million, mainly due to a $2.5 million reduction in spending by demand side platform (DSP) customers. Excluding DSP revenue, second-quarter revenue grew 3%, and first-half 2026 revenue excluding DSP increased 5% versus 2025, reflecting stronger performance in the core business.
Gross margin was 34% in both the quarter and first half. Operating expenses declined 7% in the quarter and 10% year-to-date, but Adjusted EBITDA loss widened to $2.3 million in the quarter and $4.9 million for the first half. Net loss improved modestly to $3.6 million in the quarter and $9.2 million for the first half. Operating cash outflow for the first half improved to $1.9 million from $5.4 million a year earlier.
Liquidity and leverage remain key concerns. As of June 30, 2026, the company held $0.5 million in cash against current maturities of related-party long-term debt of $17.3 million and total stockholders’ deficit of $13.8 million. Management disclosed noncompliance with certain financial covenants under its credit facility and is seeking a waiver while focusing on liquidity and strategic growth initiatives, including AI-based offerings.
Positive
- Non-DSP revenue growth: Excluding DSP customers, revenue grew approximately 5% in the first half of 2026 versus 2025, and 3% in Q2, indicating underlying demand strength despite headline declines.
- Operating cost reductions: Operating expenses fell to $5.6 million in Q2 2026 from $6.0 million in Q2 2025, and to $11.1 million from $12.3 million for the first half, improving efficiency.
- Improved net loss and cash burn: First-half net loss narrowed to $9.2 million from $10.1 million, and net cash used in operating activities improved to $1.9 million from $5.4 million, easing pressure on cash flow.
Negative
- Revenue down over 20%: Q2 2026 revenue of $7.8 million declined 23% from $10.1 million, and first-half revenue of $14.5 million declined 21% from $18.3 million, driven by sharply lower DSP customer spending.
- Widening Adjusted EBITDA losses: Adjusted EBITDA loss increased to $2.3 million in Q2 2026 from $1.5 million, and to $4.9 million in the first half from $4.5 million, indicating weaker underlying profitability.
- Covenant noncompliance disclosed: As of June 30, 2026, the company was not in compliance with certain financial covenants under its credit facility and is seeking a waiver from its lender.
- Severe leverage and deficit: Current maturities of related-party long-term debt were $17.3 million versus cash of $0.5 million, and total stockholders’ deficit widened to $13.8 million, highlighting balance sheet strain.
- Going-concern risk highlighted: Risk disclosures reference “substantial doubt about our ability to continue as a going concern,” underscoring significant ongoing viability and financing risk.
Filing Explained
Common-stock issuance and settlement increased Class A shares, reducing existing holders’ percentage ownership absent offsets, while the filing flags substantial doubt about going-concern continuity.
This Form 8-K reports a specified financial event and furnishes the second-quarter results as Exhibit 99.1; the results are expressly not deemed filed for Section 18 purposes. The balance sheet reports 740,119 Class A shares issued and outstanding at
The cash-flow statement identifies
The cautionary risk list also includes “substantial doubt about our ability to continue as a going concern.” Because that wording appears in the forward-looking risk discussion, the filing identifies a going-concern concern rather than stating that it has become a completed event.
8-K Event Classification
2 items: 2.02, 9.01
2 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q2 2026 Revenue: $7.8 million
First-half 2026 Revenue: $14.5 million
Q2 2026 Net Loss: $3.6 million
+5 more
8 metrics
Q2 2026 Revenue
$7.8 million
Three months ended June 30, 2026; down from $10.1 million in Q2 2025
First-half 2026 Revenue
$14.5 million
Six months ended June 30, 2026; down from $18.3 million in 2025
Q2 2026 Net Loss
$3.6 million
Net loss for the three months ended June 30, 2026
Q2 2026 Adjusted EBITDA
($2.3 million)
Adjusted EBITDA loss for the three months ended June 30, 2026
Cash and cash equivalents
$0.5 million
Balance as of June 30, 2026
Current maturities of long-term debt - related party
$17.3 million
Current portion of related-party long-term debt as of June 30, 2026
Total stockholders’ deficit
$13.8 million
Stockholders’ deficit as of June 30, 2026
Net cash used in operating activities
$1.9 million
Six months ended June 30, 2026; improved from $5.4 million in 2025
Key Terms
Adjusted EBITDA, tax receivable agreement, Equity Reserve Facility, going concern, +1 more
5 terms
Adjusted EBITDA financial
"Adjusted EBITDA(1) loss was $2.3 million in the second quarter of 2026"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
tax receivable agreement financial
"Liability related to tax receivable agreement, current portion"
A contract in which a company agrees to pay a specified party (often former owners after a spinoff or IPO) a share of future tax savings the company realizes. Think of it like agreeing to share a future tax refund with someone who helped create the conditions for that refund. For investors it matters because those payments reduce the cash the company can use for dividends, buybacks, or reinvestment, and therefore affect valuation and returns.
Equity Reserve Facility financial
"Expenses for Equity Reserve Facility"
An equity reserve facility is a committed arrangement where a company can quickly sell newly created shares to a lender or investor up to a set amount, similar to having a pre-approved credit line but paid with stock instead of cash. It matters to investors because it provides a fast source of cash for the company—reducing bankruptcy risk—but can also increase the number of shares outstanding, which can dilute existing shareholders’ ownership and earnings per share.
going concern financial
"the substantial doubt about our ability to continue as a going concern"
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
noncontrolling interest financial
"Noncontrolling interest | (5,360)"
The portion of a business owned by investors other than the controlling owner when one company has control of another; it represents outside shareholders’ share of the subsidiary’s assets and profits. For investors, it matters because those outside claims reduce the amount of profit and net assets attributable to the parent owner — similar to saying part of a pizza belongs to someone else — and thus affects earnings, book value and valuation.
Earnings Snapshot
Revenue: $7.8 million (Q2 2026); $14.5 million (first half 2026)
Quarter and six months ended June 30, 2026
Revenue
$7.8 million (Q2 2026); $14.5 million (first half 2026)
Decreased from $10.1 million in Q2 2025 and $18.3 million in first half 2025
Net loss
$3.6 million (Q2 2026); $9.2 million (first half 2026)
Compared to $4.2 million in Q2 2025 and $10.1 million in first half 2025
Adjusted EBITDA
($2.3 million) (Q2 2026); ($4.9 million) (first half 2026)
Compared to ($1.5 million) in Q2 2025 and ($4.5 million) in first half 2025
FAQ
How did Direct Digital Holdings (DRCT) perform financially in Q2 2026?
Direct Digital Holdings reported Q2 2026 revenue of $7.8 million, down 23% from $10.1 million in Q2 2025, with a net loss of $3.6 million versus $4.2 million a year earlier. Gross margin was 34%, broadly in line with the prior year.
What drove the revenue decline for Direct Digital Holdings (DRCT) in the first half of 2026?
First-half 2026 revenue fell 21% to $14.5 million, mainly due to a $4.5 million drop in demand side platform (DSP) customer spending. Excluding DSP customers, revenue increased about 5%, reflecting stronger performance in the company’s core business.
How is Direct Digital Holdings’ (DRCT) profitability trending, including Adjusted EBITDA?
Direct Digital Holdings posted a Q2 2026 Adjusted EBITDA loss of $2.3 million, deeper than the $1.5 million loss in Q2 2025. For the first half, Adjusted EBITDA loss was $4.9 million versus $4.5 million, while net loss narrowed slightly to $9.2 million.
What is the liquidity and debt position of Direct Digital Holdings (DRCT) as of June 30, 2026?
As of June 30, 2026, the company held $0.5 million in cash and had current maturities of related-party long-term debt of $17.3 million. Total stockholders’ deficit was $13.8 million, indicating a highly leveraged balance sheet and limited liquidity.
Is Direct Digital Holdings (DRCT) in compliance with its credit facility covenants?
As of June 30, 2026, Direct Digital Holdings was not in compliance with certain financial covenants under its credit facility. Management reports working with its lender to obtain a waiver while focusing on liquidity and operational improvements.
How are Direct Digital Holdings’ (DRCT) non-DSP revenues performing?
Excluding DSP customers, Direct Digital’s revenue performance improved. Q2 2026 revenue excluding DSP rose 3% year over year, and first-half 2026 revenue excluding DSP increased about 5%, supported by strong renewal rates in the core business.
What does Direct Digital Holdings (DRCT) say about going-concern risk?
Risk disclosures reference “substantial doubt about our ability to continue as a going concern”, linked to financing constraints, credit facility covenants, and other factors. This language signals heightened uncertainty around the company’s longer-term financial sustainability.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 12, 2026
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (832 ) 402-1051
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”) (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On August 12, 2026, Direct Digital Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2026. A copy of the press release is furnished herewith as Exhibit 99.1 to this report and is incorporated herein by reference.
The information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 99.1 | Press release issued by Direct Digital Holdings, Inc., dated August 12, 2026. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRLand contained in Exhibit 101) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| August 12, 2026 (Date) | Direct Digital Holdings, Inc. (Registrant) | ||||
| /s/ Diana P. Diaz | |||||
Diana P. Diaz Chief Financial Officer | |||||
Exhibit 99.1
Direct Digital Holdings Reports Second Quarter 2026 Financial Results
Houston, TX, August 12, 2026 -- Direct Digital Holdings, Inc. (Nasdaq: DRCT) ("Direct Digital Holdings" or the "Company"), a leading advertising and marketing technology platform operating through its companies Orange 142, LLC ("Orange 142") and Colossus Media, LLC ("Colossus SSP"), today announced financial results for the second quarter ended June 30, 2026.
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 $3.8 million, or 21%, during the first six months of 2026 compared to the corresponding period in 2025, excluding the impact of business with demand side platform (“DSP”) customers, revenue increased approximately $0.7 million, or 5%, during the first six months of 2026 compared to the corresponding period in 2025, reflecting strong renewal rates. Our focus on building a diversified pipeline, broadening customer relationships, and enhancing our product capabilities positions us to pursue sustainable growth and create long-term shareholder value. In fact, we are seeing strong customer and prospect interest in our AI search and generative engine optimization (“GEO”) offerings as well as our AI support and web technology services which will expand our addressable market.”
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 decreased 23% compared to $10.1 million in the second quarter of 2025. The decrease in revenue was driven primarily by a $2.5 million decrease in spending by DSP customers during the second quarter of 2026. Excluding revenue from DSP customers of $0 and $2.5 million for the second quarters of 2026 and 2025, respectively, revenue grew $0.2 million or 3%.
•Gross profit was $2.7 million, or 34% of revenue, compared to $3.6 million, or 35% of revenue, in the second quarter of 2025.
•Operating expenses of $5.6 million decreased 7% compared to $6.0 million in the second quarter of 2025.
•Operating loss was $2.9 million, compared to $2.4 million in the second quarter of 2025.
•Net loss was $3.6 million compared to net loss of $4.2 million in the second quarter of 2025.
•Adjusted EBITDA(1) loss was $2.3 million in the second quarter of 2026 compared to Adjusted EBITDA loss of $1.5 million in the second quarter of 2025.
•As of June 30, 2026, the Company held cash and cash equivalents of $0.5 million compared to $0.7 million as of December 31, 2025.
Six Months Ended June 30, 2026 Financial Results
•Revenue of $14.5 million decreased 21% compared to $18.3 million in the six months ended June 30, 2025. The decrease in revenue was driven primarily by a $4.5 million decrease in spending by DSP customers during the six months ended June 30, 2026. Excluding revenue from DSP customers of less than $0.1 million and $4.5 million for the six months ended June 30, 2026 and 2025, respectively, revenue grew $0.7 million, or 5%, during the first half of 2026.
•Gross profit was $4.9 million, or 34% of revenue, compared to $6.0 million, or 33% of revenue, in the first half of 2025.
(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.
•Operating expenses of $11.1 million decreased 10% compared to $12.3 million in the first half of 2025.
•Operating loss was $6.2 million, compared to $6.4 million in the first half of 2025.
•Net loss was $9.2 million compared to net loss of $10.1 million in the first half of 2025.
•Adjusted EBITDA loss was $4.9 million in the first half of 2026 compared to Adjusted EBITDA loss of $4.5 million in the first half of 2025.
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.
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 $944 | 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, $0.001 par value per share, 10,000,000 shares authorized, 27,077 shares issued and outstanding | — | — | |||||||||
Class A Common Stock, $0.001 par value per share, 760,000,000 shares authorized, 740,119 and 331,076 shares issued and outstanding, respectively | 1 | — | |||||||||
| Class B Common Stock, $0.001 par value per share, 20,000,000 shares authorized, 42,160 shares issued and outstanding | — | — | |||||||||
| 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 discount (premium), net | (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 U.S. generally accepted accounting principles (“GAAP”), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for stock-based compensation, expenses for the Equity Reserve Facility, loss on settlement of accounts payable and loss on debt extinguishment (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income. The following table (in thousands) presents a reconciliation of Adjusted EBITDA to net loss for each of the periods presented (unaudited):
| 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 discount (premium), net | 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