Second Quarter 2022 Revenue Up 90%
Year-Over-Year to $21.3
Million
Second Quarter Net Income Up 58%
Year-Over-Year to $2.6 Million, or
$0.18 per Share
Company Raises Guidance to $70 Million-$75
Million for Full-Year 2022
HOUSTON, Aug. 11,
2022 /PRNewswire/ -- Direct Digital Holdings, Inc.
(Nasdaq: DRCT) ("Direct Digital" or the "Company"), a leading
advertising and marketing technology platform through its operating
companies Colossus Media, LLC ("Colossus Media"), Huddled Masses
LLC ("Huddled Masses") and Orange142, LLC ("Orange142"), today
announced financial results for the second quarter ended
June 30, 2022.
Mark Walker, Chairman and Chief
Executive Officer of Direct Digital, commented, "We are pleased to
report record revenue for the second quarter of 2022, demonstrating
the strong growth driven by our business model. By focusing on
expanding both of our impactful buy- and sell-side business
segments, we have been able to expand our portfolio and client
reach, delivering increased topline revenue, and consequently,
overall growth in our adjusted EBITDA."
Keith Smith, President of Direct
Digital, added, "This quarter's results are a testament to Direct
Digital's diverse and open digital marketplace business model.
This, along with our supportive partner in Lafayette Square Loan
Servicing, LLC, who has recently allowed us to extend our existing
non-dilutive debt facility, has propelled the Company to
exceptional results for the quarter, which we expect will provide
us a strong remainder of the year. Consequently, Direct Digital
will be raising guidance for full-year 2022."
Second Quarter 2022 Financial Highlights:
- Revenue increased to $21.3
million in the second quarter of 2022, an increase of
$10.1 million, or up 90% over the
$11.2 million in the same period of
2021.
-
- Sell-side advertising segment, consisting of the Colossus Media
business, grew to $11.9 million and
contributed $9.8 million of the
increase, or up 477% over the $2.1
million in the same period of 2021.
- Buy-side advertising segment, consisting of the Huddled Masses
and Orange142 businesses, grew to $9.3
million and contributed $0.2
million of the increase, or up 2% over the $9.1 million in the same period of 2021.
- Operating income increased $0.6
million, up 22%, to $3.1
million for the second quarter of 2022, compared to income
of $2.5 million in the same period of
2021. Operating income was impacted by approximately $0.7 million of public company related costs for
the quarter.
- Net income was $2.6 million in
the second quarter of 2022, up 58%, compared to $1.7 million in the same period of 2021.
- Adjusted EBITDA(1) increased 18% to $3.6 million in the second quarter 2022, compared
to $3.0 million in the same period of
2021.
- Net operating cash provided by operating activities for the
six-months ended June 30, 2022 was
$0.1 million, compared to a net
operating cash of $2.6 million
generated in the same period of 2021.
Business Highlights
- For the second quarter ended June 30,
2022, Direct Digital processed approximately 98 billion
monthly impressions through its sell-side advertising segment, an
increase of 176% over the same period of 2021, with over 643
billion bid requests for the quarter.
- In addition, the Company's sell-side advertising platforms
received over six billion bid responses, an increase of over 857%
over the same period in 2021, through 88,000 buyers for the
quarter.
- The Company's buy-side advertising segment served over 152
customers, an increase of 18% compared to the same period of
2021.
Financial Outlook
Direct Digital's guidance assumes that the U.S. economy
continues to recover, and there are no major COVID-19-related
setbacks that may cause economic conditions to deteriorate or
otherwise significantly reduce advertiser demand. Direct Digital
plans to offer annual guidance and update it throughout the year.
Accordingly, the Company estimates the following:
- For fiscal year 2022, Direct Digital is raising expectations
for guidance by approximately 40% to increase from a range of
$48.0 million-$52.0 million to $70
million-$75 million, or up
113% year-over-year growth at the mid-point, while targeting an
Adjusted EBITDA Margin in the double digits.
Conference Call and Webcast Details
Direct Digital will host a conference call on Thursday, August 11, 2022 at 5:00 p.m. Eastern Time to discuss the Company's
quarterly 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
following the live webcast.
Footnote
(1) "Adjusted EBITDA" is a non-GAAP financial measure
and Adjusted EBITDA Margin is an operating ratio derived from 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.
Forward Looking Statements
This press release may contain forward-looking statements within
the meaning of federal securities laws, including the Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and which are subject
to certain risks, trends and uncertainties.
As used below, "we," "us," and "our" refer to Direct Digital. 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 statements
contained in this release that do not relate to matters of
historical fact should be considered forward-looking
statements.
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. Our forward-looking statements 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. Although we believe that these
forward-looking statements are based on reasonable assumptions,
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, including, but not limited to: our dependence on the
overall demand for advertising, which could be influenced by
economic downturns; any slow-down or unanticipated development in
the market for programmatic advertising campaigns; the effects of
health epidemics, such as the ongoing global COVID-19 pandemic;
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; 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; any unavailability
or non-performance of the non-proprietary technology, software,
products and services that we use; 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; restrictions on the
use of third-party "cookies," mobile device IDs or other tracking
technologies, which could diminish our platform's effectiveness;
any inability to compete in our intensely competitive market; any
significant fluctuations caused by our high customer concentration;
any violation of legal and regulatory requirements or any
misconduct by our employees, subcontractors, agents or business
partners; any strain on our resources, diversion of our
management's attention or impact on our ability to attract and
retain qualified board members as a result of being a public
company; our dependence, as a holding, of receiving distributions
from Direct Digital Holdings, LLC to pay our taxes, expenses and
dividends; and other factors and assumptions discussed in the "Risk
Factors," "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and other sections of our
filings with the SEC that we make from time to time. 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 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.
About Direct Digital Holdings
Direct Digital Holdings,
Inc. (Nasdaq: DRCT), through its operating companies Colossus
Media, LLC, Huddled Masses LLC and Orange142, LLC, brings
state-of-the-art sell- and buy-side advertising platforms together
under one umbrella company. Direct Digital Holdings' sell-side
platform, Colossus Media, LLC, offers advertisers of all sizes
extensive reach within general market and multicultural media
properties. The company's subsidiaries Huddled Masses LLC and
Orange142, LLC deliver significant ROI for middle market
advertisers by providing data-optimized programmatic solutions at
scale for businesses in sectors that range from energy to
healthcare to travel to financial services. Direct Digital
Holdings, Inc's sell- and buy-side solutions manage approximately
88,000 clients monthly, generating over 98 billion impressions per
month across display, CTV, in-app and other media channels. The
company has been named a top minority-owned business by The Houston
Business Journal.
CONSOLIDATED BALANCE
SHEETS
|
|
|
June 30, 2022
|
|
December 31, 2021
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
4,915,815
|
|
$
|
4,684,431
|
Accounts receivable,
net
|
|
|
14,843,049
|
|
|
7,871,181
|
Prepaid expenses and
other current assets
|
|
|
794,092
|
|
|
1,225,447
|
Total current
assets
|
|
|
20,552,956
|
|
|
13,781,059
|
|
|
|
|
|
|
|
Goodwill
|
|
|
6,519,636
|
|
|
6,519,636
|
Intangible assets,
net
|
|
|
14,614,669
|
|
|
15,591,578
|
Deferred tax asset,
net
|
|
|
3,195,034
|
|
|
—
|
Deferred financing
costs, net
|
|
|
33,434
|
|
|
96,152
|
Operating lease
right-of-use assets
|
|
|
885,458
|
|
|
—
|
Other long-term
assets
|
|
|
56,605
|
|
|
11,508
|
Total assets
|
|
$
|
45,857,792
|
|
$
|
35,999,933
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' / MEMBERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
10,161,370
|
|
$
|
6,710,015
|
Accrued
liabilities
|
|
|
6,656,478
|
|
|
1,044,907
|
Current portion of
liability related to tax receivable agreement
|
|
|
183,260
|
|
|
—
|
Notes payable, current
portion
|
|
|
550,000
|
|
|
550,000
|
Deferred
revenues
|
|
|
442,982
|
|
|
1,348,093
|
Operating lease
liabilities, current portion
|
|
|
96,621
|
|
|
—
|
Related party payables
(Note 7)
|
|
|
-
|
|
|
70,801
|
Total current
liabilities
|
|
|
18,090,711
|
|
|
9,723,816
|
|
|
|
|
|
|
|
Notes payable, net of
short-term portion and deferred financing cost of $2,038,438 and
$2,091,732,
respectively
|
|
|
19,136,562
|
|
|
19,358,268
|
Mandatorily redeemable
non-participating preferred units
|
|
|
—
|
|
|
6,455,562
|
Line of
credit
|
|
|
400,000
|
|
|
400,000
|
Paycheck Protection
Program loan
|
|
|
—
|
|
|
287,143
|
Economic Injury
Disaster Loan
|
|
|
150,000
|
|
|
150,000
|
Liability related to
tax receivable agreement, net of current portion
|
|
|
2,565,640
|
|
|
—
|
Operating lease
liabilities, net of current portion
|
|
|
789,436
|
|
|
—
|
Total
liabilities
|
|
|
41,132,349
|
|
|
36,374,789
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' /
MEMBERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
Units, 1,000,000 units
authorized at December 31, 2021; 34,182 units issued and
outstanding as of
December 31,
2021
|
|
|
—
|
|
|
4,294,241
|
Class A common stock,
$0.001 par value per share, 160,000,000 shares authorized,
3,163,214 shares
issued and
outstanding as of June 30, 2022
|
|
|
3,163
|
|
|
—
|
Class B common stock,
$0.001 par value per share, 20,000,000 shares authorized,
11,378,000 shares
issued and outstanding as of June 30, 2022
|
|
|
11,378
|
|
|
—
|
Additional paid-in
capital
|
|
|
7,747,250
|
|
|
—
|
Accumulated
deficit
|
|
|
(3,036,348)
|
|
|
(4,669,097)
|
Total stockholders' /
members' equity (deficit)
|
|
|
4,725,443
|
|
|
(374,856)
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' / members' equity (deficit)
|
|
$
|
45,857,792
|
|
$
|
35,999,933
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
For the Three Months
Ended
June 30,
|
|
For the Six Months
Ended June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenues
|
|
|
|
|
|
|
|
Buy-side
advertising
|
$9,321,267
|
|
$9,113,304
|
|
$15,152,308
|
|
$13,941,352
|
Sell-side
advertising
|
11,940,041
|
|
2,068,587
|
|
17,479,337
|
|
2,934,273
|
Total revenues
|
21,261,308
|
|
11,181,891
|
|
32,631,645
|
|
16,875,625
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
Buy-side
advertising
|
3,154,471
|
|
3,351,655
|
|
5,223,817
|
|
5,306,295
|
Sell-side
advertising
|
9,771,017
|
|
1,655,713
|
|
14,291,209
|
|
2,397,406
|
Total cost of
revenues
|
12,925,488
|
|
5,007,368
|
|
19,515,026
|
|
7,703,701
|
|
|
|
|
|
|
|
|
Gross
Profit
|
8,335,820
|
|
6,174,523
|
|
13,116,619
|
|
9,171,924
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Compensation,
taxes and benefits
|
3,494,692
|
|
2,123,783
|
|
6,049,728
|
|
3,896,864
|
General and
administrative
|
1,776,981
|
|
1,530,729
|
|
3,417,873
|
|
2,781,244
|
Total operating
expenses
|
5,271,673
|
|
3,654,512
|
|
9,467,601
|
|
6,678,108
|
|
|
|
|
|
|
|
|
Income from
operations
|
3,064,147
|
|
2,520,011
|
|
3,649,018
|
|
2,493,816
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Other
income
|
-
|
|
527
|
|
47,982
|
|
19,186
|
Forgiveness of
Paycheck Protection Program loan
|
287,143
|
|
-
|
|
287,143
|
|
10,000
|
Gain from
revaluation and settlement of seller notes and earnout
liability
|
-
|
|
21,232
|
|
-
|
|
21,232
|
Loss on
redemption of non-participating preferred units
|
-
|
|
-
|
|
(590,689)
|
|
-
|
Interest
expense
|
(650,251)
|
|
(828,410)
|
|
(1,364,038)
|
|
(1,640,167)
|
Total other
expense
|
(363,108)
|
|
(806,651)
|
|
(1,619,602)
|
|
(1,589,749)
|
|
|
|
|
|
|
|
|
Income before
taxes
|
2,701,039
|
|
1,713,360
|
|
2,029,416
|
|
904,067
|
Tax expense
|
86,676
|
|
54,000
|
|
86,676
|
|
54,000
|
|
|
|
|
|
|
|
|
Net income
|
$2,614,363
|
|
$1,659,360
|
|
$ 1,942,740
|
|
$ 850,067
|
|
|
|
|
|
|
|
|
Net income per common
share/unit:
|
|
|
|
|
|
|
|
Basic
|
$
0.18
|
|
$
48.54
|
|
$
0.18
|
|
$
24.87
|
Diluted
|
$
0.18
|
|
$
48.54
|
|
$
0.18
|
|
$
24.87
|
|
|
|
|
|
|
|
|
Weighted-average number
of shares of common stock / units outstanding:
|
|
|
|
|
|
|
|
Basic
|
14,257,827
|
|
34,182
|
|
10,701,715
|
|
34,182
|
Diluted
|
14,257,827
|
|
34,182
|
|
10,701,715
|
|
34,182
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
For the Six Months
Ended
June 30,
|
|
|
2022
|
|
2021
|
|
Cash Flows (Used In)
Provided By Operating Activities:
|
|
|
|
|
|
Net income
|
$
1,942,740
|
|
$
850,067
|
|
|
|
Adjustments to
reconcile net income to net cash (used in) provided by operating
activities:
|
|
|
|
|
|
|
|
Amortization of
deferred financing costs
|
301,105
|
|
169,258
|
|
|
|
|
Amortization of
intangible assets
|
976,909
|
|
976,909
|
|
|
|
|
Amortization of
right-of-use assets
|
50,021
|
|
-
|
|
|
|
|
Stock based
compensation
|
15,407
|
|
-
|
|
|
|
|
Forgiveness of Paycheck
Protection Program loan
|
(287,143)
|
|
(10,000)
|
|
|
|
|
Paid-in-kind
interest
|
-
|
|
192,367
|
|
|
|
|
Deferred income
taxes
|
38,966
|
|
-
|
|
|
|
|
Gain from revaluation
and settlement of earnout liability
|
-
|
|
(21,232)
|
|
|
|
|
Loss on redemption of
non-participating preferred units
|
590,689
|
|
-
|
|
|
|
|
Bad debt
expense
|
24,799
|
|
31,815
|
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(6,996,667)
|
|
(175,906)
|
|
|
|
|
|
Prepaid expenses and
other assets
|
386,258
|
|
(91,541)
|
|
|
|
|
|
Accounts
payable
|
3,406,355
|
|
438,105
|
|
|
|
|
|
Accrued
liabilities
|
649,409
|
|
140,657
|
|
|
|
|
|
Deferred
revenues
|
(905,111)
|
|
146,819
|
|
|
|
|
|
Operating lease
liability
|
(49,422)
|
|
-
|
|
|
|
|
|
Related party
payable
|
(70,801)
|
|
-
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
73,514
|
|
2,647,318
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided By
(Used In) Financing Activities:
|
|
|
|
|
|
Payments on term
loan
|
(275,000)
|
|
(77,801)
|
|
|
Payment of deferred
financing costs
|
(185,093)
|
|
-
|
|
|
Proceeds from Paycheck
Protection Program loan
|
-
|
|
287,143
|
|
|
Proceeds from Issuance
of Class A common shares, net of transaction costs
|
11,212,043
|
|
-
|
|
|
Redemption of common
units
|
(3,237,838)
|
|
-
|
|
|
Redemption of
non-participating preferred units
|
(7,046,251)
|
|
-
|
|
|
Payments on seller
notes and earnouts payable
|
-
|
|
(309,491)
|
|
|
Distributions to
members
|
(309,991)
|
|
(652,569)
|
|
|
|
|
|
Net cash provided by
(used in) financing activities
|
157,870
|
|
(752,718)
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
231,384
|
|
1,894,600
|
|
Cash and cash
equivalents, beginning of the period
|
4,684,431
|
|
1,611,998
|
|
Cash and cash
equivalents, end of the year
|
$
4,915,815
|
|
$
3,506,598
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
Cash paid for
taxes
|
$
-
|
|
$
54,000
|
Cash paid for
interest
|
$
1,058,548
|
|
$
1,279,603
|
Non-cash Financing
Activities:
|
|
|
|
Transaction costs related to
issuances of Class A shares included in accounts payable and
accrued liabilities
|
$
1,045,000
|
|
$
-
|
Common unit redemption
balance included in accrued liabilities
|
$
3,962,162
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ("EBITDA"), as
adjusted for acquisition transaction costs, forgiveness of Paycheck
Protection Program loans, gain from revaluation and settlement of
seller notes and earnout liability, loss on early extinguishment of
debt, and loss on early redemption of non-participating preferred
units ("Adjusted EBITDA"), a non-GAAP financial measure, as well as
Adjusted EBITDA divided by total revenue, an operating ratio
derived from non-GAAP financial measures ("Adjusted EBITDA
Margin"), are useful in evaluating our operating performance. The
most directly comparable GAAP measure to Adjusted EBITDA and
Adjusted EBITDA Margin is net income.
In addition to operating income and net income, we use these
non-GAAP financial measures as measures of operational efficiency.
We believe that these non-GAAP financial measures are 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, and certain one-time items
such as acquisition transaction costs and gains from settlements or
loan forgiveness 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 these non-GAAP financial measures 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 income for each of the periods presented
(however, we are unable to provide a reconciliation of Adjusted
EBITDA Margin, an operating ratio derived from a non-GAAP financial
measure, for a number of reasons, including due to the unknown
effect, timing and potential significance of certain income
statement items):
|
NON-GAAP FINANCIAL
MEASURES (Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net Income
|
$ 2,614,363
|
|
$ 1,659,360
|
|
$ 1,942,740
|
|
$
850,067
|
Add back
(deduct):
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
488,455
|
|
488,455
|
|
976,909
|
|
976,909
|
Interest expense
|
650,251
|
|
828,410
|
|
1,364,038
|
|
1,640,167
|
Tax
expense
|
86,676
|
|
54,000
|
|
86,676
|
|
54,000
|
Forgiveness of Paycheck Protection Program loan
|
(287,143)
|
|
-
|
|
(287,143)
|
|
(10,000)
|
Gain
on seller earnout revaluation
|
-
|
|
(21,232)
|
|
-
|
|
(21,232)
|
Loss
on early redemption of non-participating preferred units
|
-
|
|
-
|
|
590,689
|
|
-
|
Adjusted
EBITDA
|
$ 3,552,602
|
|
$ 3,008,993
|
|
$ 4,673,909
|
|
$ 3,489,911
|
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SOURCE Direct Digital Holdings