Third Quarter 2023 Revenue Up 129% Year-Over-Year to $59.5 Million

Company Raises Full-Year 2023 Revenue Guidance to $170 Million - $190 Million

HOUSTON, Nov. 9, 2023 /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"), Huddled Masses LLC ("Huddled Masses") and Orange142, LLC ("Orange142"), today announced financial results for the third quarter ended September 30, 2023.

Mark D. Walker, Chairman and Chief Executive Officer, commented, "In recent quarters, we have made significant investments in our technology stack, advertising platform and operational structure. We initially expected to see the impact of these investments in 2024, however, we are pleased to report that these benefits have arrived much earlier in 2023. Our strong technology partnerships and our overarching business strategy have enabled us to meet a growing number of customers' demands and further the capabilities of our sell-side technology platform. On both the sell-side and the buy-side, increased spend from our buying partners has resulted in an associated increase in our impression count and organic growth profile with a direct positive impact on net income and adjusted EBITDA(1)."  

Keith Smith, President, added, "The growth seen in this quarter, as well as the past year, has been fueled by a combination of our strategic investments and partnerships, our differentiated approach to advertising solutions, as well as a set of market dynamics which have been highly beneficial to our position in the industry. We have capitalized on the shift in ad spend towards digital media on both the sell- and buy-side and will continue to grow our presence in the space through our recent partnerships and advancements of our technology stack. We remain committed to executing on the same growth and investment initiatives that led us to the strong third quarter results we are reporting today."

Third Quarter 2023 Business Highlights 

  • For the third quarter ended September 30, 2023, Direct Digital Holdings processed over 400 billion monthly impressions through its sell-side advertising segment, an increase of 220% over the same period of 2022.
  • In addition, the Company's sell-side advertising platforms received over 34 billion monthly bid responses in the third quarter of 2023, an increase of over 210% over the same period in 2022. Sell-side revenue per advertiser for the third quarter of 2023 increased 241% compared to the same period of 2022.
  • The Company's buy-side advertising segment served approximately 228 customers in the third quarter of 2023 and buy-side revenue per customer increased 14% compared to the same period of 2022.

Third Quarter 2023 Financial Highlights:

  • Revenue was $59.5 million in the third quarter of 2023, an increase of $33.5 million, or 129% over the $26.0 million in the same period of 2022.

    • Sell-side advertising segment revenue grew to $51.6 million and contributed $32.8 million of the increase, or 174% growth over the $18.9 million of sell-side revenue in the same period of 2022.
    • Buy-side advertising segment revenue grew to $7.9 million and contributed $0.7 million of the increase, or 10% growth over the $7.1 million of buy-side revenue in the same period of 2022.
  • Consolidated operating income in the third quarter of 2023 was $4.5 million compared to consolidated operating income of $1.8 million in the same period of 2022, an increase of 144% year-over-year.
  • Net income was $3.4 million in the third quarter of 2023, compared to net income of $0.8 million in the same period of 2022, an increase of 313% year-over-year.
  • Adjusted EBITDA(1) was $5.4 million in the third quarter of 2023, compared to $2.4 million in the same period of 2022, an increase of 123% year-over-year.

Financial Outlook

Assuming the U.S. economy does not experience any major economic conditions that deteriorate or otherwise significantly reduce advertiser demand, we are increasing our previously issued estimate as disclosed in our second quarter 2023 update:

  • For fiscal year 2023, we expect revenue to be in the range of $170 million to $190 million, or 101% year-over-year growth at the mid-point.

"We are thrilled to announce the raising of our fiscal year 2023 revenue guidance to $180 million at the midpoint, a 101% increase over full-year 2022 results. This increase reflects our belief in our ability to execute on our various growth strategies, demonstrates the strength of our operating leverage and highlights the favorable market trends that we expect to continue for the remainder of this year," commented Diana Diaz, Chief Financial Officer.  

Conference Call and Webcast Details

Direct Digital will host a conference call on Thursday, November 9, 2023 at 5:00 p.m. Eastern Time to discuss the Company's third quarter 2023 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.

Footnotes

(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.

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 the Company. 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 press 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; 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; our limited operating history, which could result in our past results not being indicative of future operating performance; 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 company, on 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 Securities and Exchange Commission 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 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.

About Direct Digital Holdings

Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings' sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company's subsidiaries Huddled Masses and Orange142 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' sell- and buy-side solutions manage on average over 125,000 clients monthly, generating over 300 billion impressions per month across display, CTV, in-app and other media channels. 

 

CONSOLIDATED BALANCE SHEETS
(unaudited)












September 30, 2023


December 31, 2022










ASSETS








CURRENT ASSETS








Cash and cash equivalents


$

5,481,949


$

4,047,453


Accounts receivable, net



54,637,634



26,354,114


Prepaid expenses and other current assets



1,426,925



883,322


Total current assets



61,546,508



31,284,889










Property, equipment and software, net of accumulated depreciation and amortization of $219,386
and $34,218, respectively



625,028



673,218


Goodwill



6,519,636



6,519,636


Intangible assets, net



12,172,396



13,637,759


Deferred tax asset, net



5,082,424



5,164,776


Operating lease right-of-use assets



674,846



798,774


Other long-term assets



127,492



46,987


Total assets


$

86,748,330


$

58,126,039










LIABILITIES AND STOCKHOLDERS' EQUITY








CURRENT LIABILITIES








Accounts payable


$

45,021,034


$

17,695,404


Accrued liabilities



4,071,128



4,777,764


Liability related to tax receivable agreement, current portion



41,141



182,571


Notes payable, current portion



1,146,250



655,000


Deferred revenues



1,044,069



546,710


Operating lease liabilities, current portion



49,977



91,989


Income taxes payable



113,355



174,438


Related party payables



1,428,093



1,448,333


Total current liabilities



52,915,047



25,572,209










Notes payable, net of short-term portion and deferred financing cost of $1,722,716 and
$2,115,161, respectively



22,323,534



22,913,589


Economic Injury Disaster Loan



150,000



150,000


Liability related to tax receivable agreement, net of current portion



4,245,234



4,149,619


Operating lease liabilities, net of current portion



717,632



745,340


Total liabilities



80,351,447



53,530,757










COMMITMENTS AND CONTINGENCIES (Note 9)
















STOCKHOLDERS' EQUITY








Class A common stock, $0.001 par value per share, 160,000,000 shares authorized, 2,991,792 and
2,900,000 shares issued and outstanding, respectively



2,992



2,900


Class B common stock, $0.001 par value per share, 20,000,000 shares authorized, 11,278,000
shares issued and outstanding



11,278



11,278


Additional paid-in capital



8,782,092



8,224,365


Accumulated deficit



(2,399,479)



(3,643,261)


Total stockholders' equity



6,396,883



4,595,282


Total liabilities and stockholders' equity


$

86,748,330


$

58,126,039


 

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)


















For the Three Months Ended


For the Nine Months Ended




September 30, 


September 30, 




2023


2022


2023


2022


Revenues














Buy-side advertising


$

7,850,058


$

7,130,736


$

27,092,816


$

22,283,044


Sell-side advertising



51,622,066



18,854,639



89,006,018



36,333,976


Total revenues



59,472,124



25,985,375



116,098,834



58,617,020
















Cost of revenues














Buy-side advertising



3,113,491



2,471,170



10,650,541



7,694,987


Sell-side advertising



44,605,815



16,053,461



77,189,787



30,344,670


Total cost of revenues



47,719,306



18,524,631



87,840,328



38,039,657


Gross profit



11,752,818



7,460,744



28,258,506



20,577,363
















Operating expenses














Compensation, taxes and benefits



4,747,081



3,845,918



12,934,406



9,895,646


General and administrative



2,512,330



1,770,002



8,717,584



5,187,875


Total operating expenses



7,259,411



5,615,920



21,651,990



15,083,521


Income from operations



4,493,407



1,844,824



6,606,516



5,493,842
















Other income (expense)














Other income



83,331





175,472



47,982


Forgiveness of Paycheck Protection Program loan









287,143


Loss on redemption of non-participating preferred units









(590,689)


Contingent loss on early termination of line of credit







(299,770)




Interest expense



(1,059,890)



(905,605)



(3,104,684)



(2,269,643)


Total other expense



(976,559)



(905,605)



(3,228,982)



(2,525,207)
















Income before taxes



3,516,848



939,219



3,377,534



2,968,635


Tax expense



165,994



128,436



165,658



215,112


Net income


$

3,350,854


$

810,783


$

3,211,876


$

2,753,523
















Net income per common share:














Basic


$

0.23


$

0.06


$

0.23


$

0.23


Diluted


$

0.23


$

0.06


$

0.22


$

0.23
















Weighted-average number of shares of common stock outstanding:














Basic



14,268,168



14,178,000



14,216,211



11,846,601


Diluted



14,827,165



14,545,241



14,817,770



11,996,969


 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)











For the Nine Months Ended September 30, 



2023


2022

Cash Flows Provided By Operating Activities:







Net income


$

3,211,876


$

2,753,523

Adjustments to reconcile net income to net cash provided by operating activities:







Amortization of deferred financing costs



434,847



463,008

Amortization of intangible assets



1,465,363



1,465,364

Amortization of right-of-use assets



123,928



94,974

Amortization of capitalized software



159,057



Depreciation of property and equipment



26,112



Stock-based compensation



545,504



85,437

Forgiveness of Paycheck Protection Program loan





(287,143)

Deferred income taxes



82,352



(40,591)

Payment on tax receivable agreement



(45,815)



Loss on redemption of non-participating preferred units





590,689

Contingent loss on early termination of line of credit



299,770



Bad debt expense



97,740



2,717

Changes in operating assets and liabilities:







Accounts receivable



(28,381,260)



(13,520,067)

Prepaid expenses and other assets



(524,098)



482,190

Accounts payable



27,325,629



10,008,327

Accrued liabilities



(513,138)



1,555,037

Income taxes payable



(61,083)



94,440

Deferred revenues



497,359



(201,907)

Operating lease liability



(69,720)



(75,396)

Related party payable





(70,801)

Net cash provided by operating activities



4,674,423



3,399,801








Cash Flows Used In Investing Activities:







Cash paid for capitalized software and property and equipment



(136,978)



Net cash used in investing activities



(136,978)










Cash Flows Used In Financing Activities:







Proceeds from note payable





4,260,000

Payments on term loan



(491,250)



(412,500)

Payments of litigation settlement



(193,500)



Payments on lines of credit





(400,000)

Payment of deferred financing costs



(442,181)



(525,295)

Proceeds from Issuance of Class A common stock, net of transaction costs





11,167,043

Redemption of common units





(7,200,000)

Redemption of non-participating preferred units





(7,046,251)

Proceeds from options exercised



215



Proceeds from warrants exercised



12,100



Distributions to members



(1,988,333)



(916,433)

Net cash used in financing activities



(3,102,949)



(1,073,436)








Net increase in cash and cash equivalents



1,434,496



2,326,365

Cash and cash equivalents, beginning of the period



4,047,453



4,684,431

Cash and cash equivalents, end of the period


$

5,481,949


$

7,010,796








Supplemental Disclosure of Cash Flow Information:







Cash paid for taxes


$

348,862


$

133,401

Cash paid for interest


$

2,667,283


$

1,744,365








Non-cash Financing Activities:







Transaction costs related to issuances of Class A shares included in accrued liabilities


$


$

1,000,000

Outside basis difference in partnership


$


$

3,234,000

Tax receivable agreement payable to Direct Digital Management, LLC


$


$

278,900

Tax benefit on tax receivable agreement


$


$

485,100

Issuance related to vesting of restricted stock units, net of tax withholdings


$

90


$

  

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 stock compensation expense, loss on early termination of line of credit, and loss on early extinguishment of debt, and loss on early redemption of non-participating preferred units ("Adjusted EBITDA"), a non-GAAP financial measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss).

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, 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 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. The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for each of the periods presented:

 

NON-GAAP FINANCIAL METRICS
(unaudited)




















For the Three Months Ended September 30, 


For the Nine Months Ended September 30, 




2023


2022


2023


2022


Net income


$

3,350,854


$

810,783


$

3,211,876


$

2,753,523


Add back (deduct):














Interest expense



1,059,890



905,605



3,104,684



2,269,643


Amortization of intangible
assets



488,455



488,455



1,465,364



1,465,364


Stock-based compensation



241,491



70,030



545,504



85,438


Depreciation and amortization
of capitalized software,
property and equipment



63,689





185,169




Contingent loss on early
termination of line of credit







299,770




Tax expense



165,994



128,436



165,658



215,112


Forgiveness of PPP loan









(287,163)


Loss on early redemption of
non-participating preferred
units









590,689


Adjusted EBITDA


$

5,370,373


$

2,403,309


$

8,978,025


$

7,092,606


 

Contacts: 

Investors:
Brett Milotte, ICR
Brett.Milotte@icrinc.com

Direct Digital Holdings Logo (PRNewsfoto/Direct Digital Holdings)

 

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SOURCE Direct Digital Holdings

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