Table of Contents ________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024 OR o TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NUMBER 001-41261 ______________________________ ...

Financial Performance - Total revenues for 2023 increased to $157.11 million, up from $89.36 million in 2022, representing a 75.8% growth[363] - Sell-side advertising revenue grew to $122.43 million in 2023, a 104% increase compared to $60.01 million in 2022[363] - Buy-side advertising revenue rose to $34.68 million in 2023, an 18.2% increase from $29.35 million in 2022[363] - Gross profit for 2023 was $37.57 million, up 28.1% from $29.32 million in 2022[363] - Net loss attributable to Direct Digital Holdings, Inc. was $2.19 million in 2023, compared to a net income of $205 thousand in 2022[363] - Basic and diluted net loss per share was $0.73 in 2023, compared to a net income per share of $0.11 in 2022[363] - Net loss for the year ended December 31, 2023 was $6.844 million, compared to a net income of $4.167 million in 2022[367] - Net income (Accumulated Deficit) for the period was $4,167 thousand, compared to $669 thousand in the previous period[423] - Net loss per share for 2023 was $0.73, compared to a net income per share of $0.11 in 2022[478] - Net loss attributable to Direct Digital Holdings, Inc. for the six months ended June 30 was $22 thousand, with basic and diluted loss per share of $0.01[513] - Net income attributable to Direct Digital Holdings, Inc. for the three months ended June 30 was $192 thousand, with basic and diluted earnings per share of $0.03[510] - Net income attributable to Direct Digital Holdings, Inc. for the three months ended September 30 was $571 thousand, with basic and diluted earnings per share of $0.09[511] - Net income attributable to Direct Digital Holdings, Inc. was $549 thousand[514] - Basic net income per share was $0.09[514] - Diluted net income per share was $0.09[514] - Net loss for Q1 2023 was $1.334 million, reducing stockholders' equity to $3.367 million[516] - Net income for the quarter ended September 30, 2023, was $3.351 million[518] - Net income for the period ending September 30, 2023, was $3.212 million, reflecting a positive financial performance[520] - Net loss for the six months ended June 30, 2023, was $139 thousand[524] - Net income for the nine months ended September 30, 2023, was $3,212 thousand[526] Assets and Liabilities - Cash and cash equivalents increased to $5.116 million in 2023 from $4.047 million in 2022[360] - Accounts receivable, net of provision for credit losses, rose to $37.207 million in 2023 from $26.354 million in 2022[360] - Total current assets grew to $43.082 million in 2023 from $31.284 million in 2022[360] - Intangible assets, net decreased to $11.684 million in 2023 from $13.638 million in 2022[360] - Total liabilities increased to $74.354 million in 2023 from $52.531 million in 2022[360] - Accumulated deficit worsened to $(2.538) million in 2023 from $(344) million in 2022[360] - Noncontrolling interest shifted to $(4.225) million in 2023 from $3.314 million in 2022[360] - Total stockholders' (deficit) equity declined to $(3.682) million in 2023 from $5.595 million in 2022[360] - Total assets increased to $70.672 million as of December 31, 2023, from $58.126 million in 2022[476] - Total long-term debt as of December 31, 2023, was $31,744 thousand, an increase from $25,834 thousand in 2022[424] - Total long-term debt, net of current portion, was $28,578 thousand as of December 31, 2023[424] - Total assets increased from $62.151 million as of June 30, 2023, to $86.748 million as of September 30, 2023[501][506] - Total current liabilities decreased from $30.478 million as of June 30, 2023, to $29.478 million after restatement adjustments[502] - Total stockholders' equity increased from $4.020 million as of June 30, 2023, to $5.020 million after restatement adjustments[503] - Long-term debt remained stable at $22.515 million as of June 30, 2023, and $22.324 million as of September 30, 2023[502][505] - Total undiscounted lease payments amount to $1,122 million, with a net operating lease liability of $773 million after discounting and current portion adjustments[485] - Future payments due under operating leases as of December 31, 2023, are $97 thousand[486] - Property, equipment, and software, net, increased to $599 thousand in 2023 from $673 thousand in 2022[487] - Intangible assets, net of accumulated amortization, decreased to $11.7 million in 2023 from $13.6 million in 2022[489] - Customer lists, trademarks, and non-compete agreements make up the majority of intangible assets, with net amounts of $8.8 million, $2.4 million, and $527 thousand, respectively[492] - Future amortization of intangible assets is projected at $11.7 million, with $1.95 million due in 2024[493] - Total adjustments in Q2 2023 amounted to $530.864 thousand, impacting the restated balance sheet[516] - Stockholders' equity as of September 30, 2023, was $6.397 million[518] - APIC (Additional Paid-In Capital) as of September 30, 2023, was $8.782 million[518] - Noncontrolling interest as of September 30, 2023, was $0[518] Operating Expenses and Costs - Total operating expenses rose to $39.76 million in 2023, up 86.3% from $21.34 million in 2022[363] - Compensation, taxes, and benefits increased to $17.73 million in 2023, a 25.5% rise from $14.12 million in 2022[363] - General and administrative expenses grew to $13.20 million in 2023, an 82.8% increase from $7.22 million in 2022[363] - Advertising expenses increased to $2.2 million in 2023 from $0.9 million in 2022, reflecting a 144% year-over-year growth[400] - Depreciation and amortization expenses for 2023 totaled $253 thousand, up from $34 thousand in 2022[488] - Total operating expenses were $21,652 thousand[514] - Income from operations was $6,607 thousand[514] - Total other expense, net was $(3,229) thousand[514] - Total operating expenses for the three months ended March 31 were $6.574 million, with compensation, taxes, and benefits accounting for $3.634 million[508] - Gross profit for the three months ended March 31 was $6.433 million, with a total cost of revenues of $14.790 million[508] - Gross profit for the three months ended June 30 was $10.1 million, with a gross margin of 28.5%[510] - Gross profit for the three months ended September 30 was $11.8 million, with a gross margin of 19.8%[511] - Gross profit for the six months ended June 30 was $16.5 million, with a gross margin of 29.2%[513] - Gross profit for the period was $28,259 thousand[514] - Gross profit for the three months ended March 31 was $6.433 million, with a total cost of revenues of $14.790 million[508] - Gross profit for the three months ended June 30 was $10.1 million, with a gross margin of 28.5%[510] - Gross profit for the three months ended September 30 was $11.8 million, with a gross margin of 19.8%[511] - Gross profit for the six months ended June 30 was $16.5 million, with a gross margin of 29.2%[513] - Gross profit for the period was $28,259 thousand[514] Cash Flow and Liquidity - Net cash provided by operating activities increased to $2.558 million in 2023 from $2.064 million in 2022[367] - Accounts receivable decreased by $11.275 million in 2023 compared to a decrease of $18.500 million in 2022[367] - Accounts payable increased by $16.231 million in 2023 compared to an increase of $10.966 million in 2022[367] - Cash paid for interest increased to $3.736 million in 2023 from $2.568 million in 2022[367] - Cash and cash equivalents stood at $5.1 million as of December 31, 2023[417] - Cash and cash equivalents decreased slightly from $5.668 million as of June 30, 2023, to $5.482 million as of September 30, 2023[501][506] - Cash flows provided by operating activities for the three months ended March 31, 2023, were $3.1 million, indicating strong operational cash generation[522] - Cash and cash equivalents at the end of the period stood at $6.719 million, showing a net increase of $2.672 million from the beginning of the period[522] - Payments on term loan amounted to $164 thousand, reducing the company's debt obligations[522] - Net cash provided by operating activities for the six months ended June 30, 2023, was $3,054 thousand[524] - Cash and cash equivalents at the end of the period for the six months ended June 30, 2023, were $5,668 thousand[524] - Net cash provided by operating activities for the nine months ended September 30, 2023, was $4,481 thousand[526] - Cash and cash equivalents at the end of the period for the nine months ended September 30, 2023, were $5,482 thousand[527] - Cash paid for interest for the nine months ended September 30, 2023, was $2,667 thousand[527] - Accrual of warrant redemption liability for the nine months ended September 30, 2023, was $3,540 thousand[527] - Cash paid for taxes for the nine months ended September 30, 2023, was $349 thousand[527] - Net cash used in financing activities for the nine months ended September 30, 2023, was $2,909 thousand[527] Debt and Financing - Total debt under the Credit Agreement increased to $9.7 million as of the report date from $3.0 million at the end of 2023[417] - The 2021 Credit Facility has a maturity date of December 3, 2026, with quarterly installment payments of $275,000 starting from January 1, 2024[427] - The Company borrowed $3.6 million under the Delayed Draw Loan in October 2023 to fund the 2023 warrant tender offer[426] - Interest expense for the 2021 Credit Facility was $3,655 thousand in 2023, up from $2,498 thousand in 2022[430] - The Fifth Amendment to the 2021 Credit Facility defers quarterly installment payments from June 30, 2024, through December 31, 2025[432] - The Company entered into a Credit Agreement with East West Bank on July 7, 2023, providing a revolving credit facility of up to $10.0 million[434] - The Company was in compliance with all financial covenants under the 2021 Credit Facility as of December 31, 2023[429] - The Company's liquidity covenant requires maintaining minimum liquid assets of $1,000,000 at all times[437] - The Company will make prepayments of $1.0 million upon execution of the Third Amendment, $1.0 million by January 15, 2025, and $2.0 million by April 15, 2025[438] - The Company's minimum TTM EBITDA is projected to increase from $5.0 million as of September 30, 2024, to $7.5 million by June 30, 2025[439] - The Company's minimum liquid assets are required to increase from $1.0 million as of June 30, 2024, to $2.0 million by March 31, 2025[439] - The Company's revolving credit availability ratio is set to increase from 1.0 to 1.0 by December 31, 2024, to 2.0 to 1.0 by June 30, 2025[439] - As of December 31, 2023, the Company had $9.7 million outstanding under the Credit Agreement, up from $3.0 million at the end of 2023[441] - The Company incurred $0.3 million of deferred financing costs during the year ended December 31, 2023[441] - The Company received a $150,000 Economic Injury Disaster Loan in 2020, bearing an interest rate of 3.75% and maturing on June 15, 2050[448] - The Company's PPP-2 Loan of $0.3 million was fully forgiven on April 11, 2022[449] - Future minimum payments related to long-term debt as of December 31, 2023, total $31.744 million, with $1.478 million due in 2024[450] - The Company completed its initial public offering on February 15, 2022, raising $10.2 million in net proceeds[454] - The company tendered 2,213,652 warrants at $1.20 per warrant, totaling approximately $2.7 million, and redeemed 1,004,148 warrants at $0.35 per warrant, totaling approximately $0.4 million[456] Stock-Based Compensation and Equity - Stock-based compensation cost for options and RSUs is measured at grant date based on fair value and recognized over the vesting period[383] - The fair value of stock options was estimated using the Black-Scholes model with expected volatility of 69% and 63% for 2023 and 2022, respectively[385] - The Company's matching contributions to the 401(k) plan were $0.2 million for both 2023 and 2022[386] - Incentive plan awards recognized were $2.4 million and $2.3 million for 2023 and 2022, respectively[388] - The company recognized $2.2 million in stock-based compensation expense for 2023, including $1.4 million in bonuses paid via stock grants in March 2024[458] - As of December 31, 2023, there were 488,646 shares available for grant under the 2022 Omnibus Incentive Plan[458] - The company granted 153,665 stock options in 2023 with a weighted average exercise price of $3.78 and a weighted average fair value of $2.44[460] - The company granted 329,249 RSUs in 2023 with a weighted average grant date fair value of $3.70 per share[461] - Stock-based compensation increased by $94 thousand in Q1 2023, contributing to a total equity adjustment of $94 thousand[516] - Stock-based compensation for the quarter was $242 thousand[518] - Stock-based compensation amounted to $546 thousand, contributing to the overall equity increase[520] - Stock options exercised resulted in a $12 thousand increase in equity[520] - Issuance related to vesting of restricted stock units, net of tax withholdings, was $2.743 thousand[518] - Balance of common stock as of September 30, 2023, was $3 thousand[518] - APIC (Additional Paid-In Capital) as of September 30, 2023, was $8.782 million[518] - Noncontrolling interest as of September 30, 2023, was $0[518] Revenue Recognition and Deferred Revenue - Revenue is recognized when an ad is delivered or displayed in response to a winning bid request from ad buyers[376] - Deferred revenue (contract liabilities) recorded as $0.4 million and $0.5 million as of December 31, 2023 and 2022, respectively[379] - Revenue recognized from deferred revenue balances amounted to $0.5 million and $1.3 million in 2023 and 2022, respectively[379] - Deferred revenues increased by $403 thousand, indicating potential future revenue recognition[522] Goodwill and Intangible Assets - Goodwill remained at $6.5 million as of December 31, 2023 and 2022, with no impairment recognized during these years[380] - Intangible assets are amortized over 5 years for non-compete agreements and 10 years for other intangibles[381] - The company acquired Orange 142 for $26.2 million, resulting in $4.1 million in goodwill and $18.0 million in intangible assets[489] Legal and Contingencies - The company is involved in a consolidated securities class action lawsuit filed in the U.S. District Court for the Southern District of Texas[481] Restatements and Adjustments - Basic net income per share for 2022 was revised downward from $0.33 to $0.11 due to accounting corrections[420] - Total stockholders' equity for 2022 was revised upward from $4.595 million to $5.595 million after accounting corrections[422] - Restatement adjustments for prior period accounting errors included a $1,000 reduction in accrued liabilities and a $5,613 reduction in additional paid-in capital[498] - As of March 31, 2023, the company's restated balance showed a net loss of $1.334 million, with stockholders' equity at $4.367 million[516] - Adjustments in Q2 2023 included a net income adjustment of $1.

Securities Litigation Partner James (Josh) Wilson Encourages Investors Who Suffered Losses In Direct Digital To Contact Him Directly To Discuss Their Options If you purchased or acquired securities in Direct Digital between April 17, 2023 and March 25, 2024 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/DRCT. NEW YORK, July 19, 2024 /PRNewswire/ - ...

NEW YORK, July 18, 2024 (GLOBE NEWSWIRE) -- WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of common stock of Direct Digital Holdings, Inc. (NASDAQ: DRCT) between April 17, 2023 and March 25, 2024, both dates inclusive (the "Class Period") of the important July 22, 2024 lead plaintiff deadline. WHAT TO DO NEXT: To join the Direct Digital class action, go to https://rosenlegal.com/submit-form/? case_id=25535 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email case@rosenle ...

NEW YORK, July 18, 2024 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Direct Digital Holdings, Inc. ("Direct Digital" or the "Company") (NASDAQ: DRCT) and certain officers. The class action, filed in the United States District Court for the Southern District of Texas, Houston Division, and docketed under 24-cv-02567, is on behalf of all those who purchased, or otherwise acquired, Direct Digital common stock during the period from April 17, 2023 through March 25, ...

SAN DIEGO, July 15, 2024 (GLOBE NEWSWIRE) -- Robbins LLP reminds investors that a shareholder filed a class action on behalf of persons and entities that purchased or otherwise acquired Direct Digital Holdings, Inc. (NASDAQ: DRCT) common stock between April 17, 2023 and March 25, 2024. Direct Digital is an endto-end, full-service programmatic advertising platform that provides advertising technology, data-driven campaign optimization, and other solutions to markets on both the buy- and sell-side of the digi ...

Investors can contact the law firm at no cost to learn more about recovering their losses LOS ANGELES, July 15, 2024 (GLOBE NEWSWIRE) -- The Portnoy Law Firm advises Direct Digital Holdings (Nasdaq: DRCT) investors that a shareholder filed a class action on behalf of persons and entities that purchased or otherwise acquired shares. Investors who purchased and/or sold shares between April 17th 2023 and March 24th 2024 are advised to visit our website. The suit alleges that Defendants made false and misleadin ...

NEW YORK, July 14, 2024 (GLOBE NEWSWIRE) -- SO WHAT: If you purchased Direct Digital common stock during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement. WHAT TO DO NEXT: To join the Direct Digital class action, go to https://rosenlegal.com/submit-form/? case_id=25535 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email case@rosenlegal.com for information on the class action. A class action lawsuit has alre ...

If you are a shareholder who purchased, or otherwise acquired, Direct Digital common stock during the Class Period, you have until July 22, 2024 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Danielle Peyton at newaction@pomlaw.com or 646-581-9980 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by email are encouraged to include their mailing address, telephone number, and the number ...

LOS ANGELES, July 12, 2024 /PRNewswire/ -- The DJS Law Group reminds investors of a class action lawsuit against Direct Digital Holdings, Inc. ("Direct Digital" or "the Company") (NASDAQ:DRCT) for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission. CLASS PERIOD: April 17, 2023 to March 25, 2024 CASE DETAILS: The complaint alleges that the Company made false and misleading statements to the market. Direct ...