Direct Digital Holdings Reports Q4 & Full-Year 2024 Financial Results
Full Year Revenue of $62.3 Million In-Line with Revised Revenue Guidance
Continued to Diversify Customer Base with Leading Sell-Side Partners and Buy-Side Customers in New Verticals
Management to Host Conference Call at 5:00 PM ET Today
HOUSTON, March 27, 2025 /PRNewswire/ -- Direct Digital Holdings, Inc. (Nasdaq: DRCT) ("Direct Digital Holdings" or the "Company"), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC ("Colossus SSP") and Orange 142, LLC ("Orange 142"), today announced financial results for the fourth quarter and full year ended December 31, 2024.
Mark D. Walker, Chairman and Chief Executive Officer, commented, "We are pleased to announce that despite the challenges faced this past year, we delivered fourth quarter results in-line with our revised revenue guidance range. The combination of our revenue optimization strategies and cost-saving initiatives has positioned Direct Digital Holdings for future growth as we look to rebuild to previous levels. Starting last year, we began further expanding sources of our revenue and conducting a cost savings review, which has resulted in a more diversified and efficient business model reflecting significant operating expense reduction sequentially when compared to the first half of the year."
Walker continued, "In the third quarter of 2024, we announced the launch of Colossus Connections, an aggressive initiative to accelerate our direct integration efforts with leading demand-side platforms and that we have already signed up two of the leading partners in the marketplace. We are expecting to see revenue impacts as we move through 2025, once integration is complete in the second half of 2025. On the buy-side, since we unified our two divisions, Orange 142 and Huddled Masses, we have been keenly focused on small- and mid-sized clients, who are increasingly shifting advertising budgets to digital and require support to navigate its complexities and optimize their ad spend. We have already brought on clients in new verticals which are expected to generate additional incremental revenue of $5 million to $10 million in 2025, with full impact starting in the second quarter of this year."
"As we look ahead to 2025, we are reiterating revenue guidance of $90 million to $110 million, underscoring our confidence in our ability to scale up both our buy- and sell-side businesses," said Walker. "In particular, we expect the second half of the year to deliver strong gains as we experience the full effect of new direct sell-side partners coming online. While our first quarter tends to be slower than the fourth quarter related to seasonality in our sell-side business, we are seeing sequential improvement in the first quarter of this year over November and December of last year, and we remain confident that our recalibrated approach will continue to enable us to capture market share and strengthen our leading advertising and marketing technology offering."
Keith Smith, President, added, "In addition to our optimized business model, our $20 million Equity Reserve Facility with New Circle Principal Investments, announced in October, has also provided us with enhanced financial flexibility to execute on our various strategic initiatives while also strengthening our balance sheet. This new financing source supports both our technology investments and growth objectives as we continue to evolve our platform capabilities and position Direct Digital Holdings for sustainable, long-term growth."
On the topic of recent litigation, Smith commented, "I am thrilled to report that earlier this month, we secured a significant victory in the courts. Our defamation lawsuit against those who intentionally distributed misinformation about our business last May was validated with a court ruling that our case may continue despite attempts by the other party to have our complaint dismissed. We believe this decision speaks to the substance of our allegations regarding inaccurate and false statements targeting our technologies and we look forward to running our business while we continue to pursue a judgment in the case."
Fourth Quarter and Year-to-Date Updates
For the fourth quarter ended December 31, 2024, Direct Digital Holdings processed approximately 200 billion average monthly impressions through its sell-side advertising segment, a decrease of 49% over the same period of 2023 but an increase of 53% over the same period of 2022 and a 7% sequential increase over the third quarter ended September 30, 2024.
In addition, the Company's sell-side advertising platform processed over 500 billion average monthly bid requests and received about 6 billion average monthly bid responses in the fourth quarter of 2024, a decrease of 47% and 79%, respectively, over the same period in 2023 but consistent with the same period of 2022 and the third quarter of 2024.
Sell-side advertisers for the fourth quarter of 2024 increased 137% compared to the same period of 2023, increased 18% compared to the same period of 2022 and increased 13% sequentially compared to the third quarter of 2024.
Sell-side media properties of 28,000 average per month for the fourth quarter of 2024 were up 24% compared to the same period of 2023 and up 1% sequentially compared to the third quarter of 2024.
The Company's buy-side advertising segment served about 230 customers in the fourth quarter of 2024, consistent with the prior year.
Colossus Connections Launch: Enhanced direct integration on sell-side, optimizing supply path efficiency and securing partnerships with leading marketplace platforms.
Orange 142 Momentum: Secured major new account wins on the buy-side for 2025 with a focus on small-and mid-sized advertisers and high-growth advertising opportunities in connected TV, social media and retail media, enhancing client-agency relationships and delivering premium service to clients.
AI Expertise: Integrating advanced artificial intelligence capabilities to meet increasing client demand and enhance solutions and insights.
Award Recognition: Recognized as the 101st fastest growing company in North America by Deloitte Technology Fast 500TM, received Silver Award for Influencer Marketing from Adrian Awards; received two Gold MARCOM Awards for display and social media ad campaigns; recognized in the Longhorn 100 as one of the fastest growing Longhorn-run businesses.
Operational Optimizations: Undertook cost-saving and operational optimization strategies resulting in a more diversified business model.
Securing Strategic Financing: Actively advancing multiple funding and equity financing pathways with the goal that these efforts will restore Nasdaq compliance, strengthen the Company's financial position and support key growth initiatives.
Fourth Quarter 2024 Financial Highlights:
For the fourth quarter of 2024, revenue was $9.1 million, a decrease of $31.9 million, or a 78% decline compared to $41.0 million in the same period of 2023.Sell-side advertising segment revenue fell to $2.7 million compared to $33.4 million in the same period of 2023, a 92% decrease year-over-year. The key driver for this reduction was the suspension by one of our large customers following the defamatory article against the Company. This customer has since restored its connection and is continuing to scale.Buy-side advertising segment revenue fell to $6.4 million compared to $7.6 million in the same period of 2023, a 15% year-over-year decline.
Gross profit was $2.9 million, or 32% of revenue, in the fourth quarter of 2024 compared to $9.3 million, or 23% of revenue, in the same period of 2023.
Operating expenses were $7.7 million in the fourth quarter of 2024, a decrease of $10.5 million, or 58%, over $18.1 million in the same period of 2023.
Operating loss was $4.7 million, compared to operating loss of $8.8 million in the same period of 2023, a $4.1 million or 46% improvement.
Net loss was $6.6 million in the fourth quarter, compared to net loss of $10.1 million in the same period of 2023.
Adjusted EBITDA(1) loss was $3.4 million in the fourth quarter of 2024, a $3.2 million or 48% improvement compared to the $6.6 million Adjusted EBITDA(1) loss in the fourth quarter of 2023.
As of December 31, 2024, the Company held cash and cash equivalents of $1.4 million compared to $5.1 million as of December 31, 2023.
Full-Year 2024 Financial Highlights
Revenue in fiscal year 2024 was $62.3 million, a decrease of $94.8 million, or a 60% decrease over $157.1 million in fiscal year 2023.Sell-side advertising segment revenue was $35.7 million compared to $122.4 million in fiscal year 2023.Buy-side advertising segment revenue was $26.6 million compared to $34.7 million in fiscal year 2023.
Operating expenses were $30.6 million in 2024, a decrease of $9.1 million, or 23%, over $39.8 million in 2023. Operating expenses were negatively impacted in 2023 by an unusual charge for $8.8 million related to payments to a few publishers and in 2024 by $1.7 million in costs to regain compliance with respect to delinquent SEC filings. Adjusted Operating Expenses(1) (which excludes these unusual items) of $28.9 million in 2024 decreased $2.0 million, or 7%, from $31.0 million in 2023. Adjusted Operating Expenses for the second half of 2024 of $13.5 million decreased by $1.9 million, or 12%, from $15.4 million for the first half of 2024.
Operating loss in fiscal year 2024 was $13.2 million compared to operating loss of $2.2 million in fiscal year 2023.
Net loss for fiscal year 2024 was $19.9 million, compared to net loss of $6.8 million in fiscal year 2023.
Adjusted EBITDA(1) loss was $9.3 million in fiscal year 2024, compared to positive Adjusted EBITDA(1) of $2.4 million in fiscal year 2023.
Financial Outlook
Assuming the U.S. economy does not experience any major economic conditions that deteriorate or otherwise significantly reduce advertiser demand, and subject to certain uncertainties related to the ramp-up of our businesses and general market conditions, Direct Digital Holdings reiterates its full-year revenue guidance of $90 million to $110 million for FY 2025 as the Company rebuilds to previous levels.
Diana Diaz, Chief Financial Officer, stated, "As we continue to refocus the company, our lower cost structure, optimized performance and focus on driving efficiencies across the business are key to our accelerated path to return to profitability. We continue to be judicious in adding any new costs and we remain confident in our business to deliver strong performance for our shareholders this year."
Conference Call and Webcast Details
Direct Digital will host a conference call on March 27, 2025 at 5:00 PM ET to discuss the Company's fourth quarter and full year 2024 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 (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: our ability to sell Class A common stock under our equity reserve facility; 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; failure to remedy any listing deficiencies noted in the deficiency letters from the Listing Qualifications Department of The Nasdaq Stock Market LLC; 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 t
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