[Overview and Business Performance](index=1&type=section&id=Overview%20and%20Business%20Performance) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management focused on scaling the buy-side and rebuilding the sell-side while reducing operating expenses by 19% - The company's primary focus for 2025 is to scale its buy-side solution (Orange 142) while rebuilding its sell-side business (Colossus SSP)[2](index=2&type=chunk) - Operating expenses were reduced by **nearly $1.5 million**, a **19% decrease** compared to Q1 2024, due to strategic cost-saving initiatives[3](index=3&type=chunk) - The 'Colossus Connections' initiative is progressing with the addition of new partners, whose revenue impact is anticipated in the second half of 2025 after integration is complete[4](index=4&type=chunk) - The company maintains its full-year 2025 revenue guidance of **$90 million to $110 million**[5](index=5&type=chunk) **Q1 2025 Revenue Performance** | Metric | Q1 2025 | YoY Change | | :--- | :--- | :--- | | Consolidated Revenue | $8.2 million | -63% | | Buy-Side Revenue | $6.1 million | +6% | | Sell-Side Revenue | $2.0 million | -88% | [First Quarter 2025 Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights) Revenue fell 63% to $8.2 million and net loss widened to $5.9 million despite a 19% reduction in operating expenses **Q1 2025 Operational Metrics** | Metric | Q1 2025 | YoY Change | | :--- | :--- | :--- | | Average Monthly Impressions | ~188 billion | N/A | | Sell-side Advertisers | N/A | +13% | | Sell-side Media Properties (avg/month) | 24,000 | -8% | | Buy-side Customers | >220 | N/A | **Q1 2025 Financial Highlights vs. Q1 2024** | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $8.2M | $22.3M | -63% | | Gross Profit | $2.4M | $5.0M | -52% | | Operating Expenses | $6.3M | $7.8M | -19% | | Operating Loss | ($3.9M) | ($2.8M) | +39% | | Net Loss | ($5.9M) | ($3.8M) | +55% | | Adjusted EBITDA Loss | ($3.0M) | ($1.7M) | +82% | | Cash and Cash Equivalents | $1.8M | $3.3M | -45% | [Financial Outlook](index=2&type=section&id=Financial%20Outlook) The company reaffirms its full-year 2025 revenue guidance of $90 million to $110 million, driven by business recovery - The company maintains its full-year 2025 revenue guidance of **$90 million to $110 million**[5](index=5&type=chunk)[9](index=9&type=chunk) - This guidance anticipates growth from both enhanced buy-side activity and the ongoing recovery of the sell-side business[9](index=9&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $23.8 million while the total stockholders' deficit widened to $23.3 million **Balance Sheet Summary (in thousands)** | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,789 | $1,445 | | Total current assets | $6,881 | $8,535 | | Total assets | $23,817 | $26,006 | | Total current liabilities | $13,478 | $13,350 | | Total liabilities | $47,132 | $45,736 | | Total stockholders' deficit | ($23,315) | ($19,730) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 revenue dropped to $8.2 million, widening the operating loss to $3.9 million and net loss to $5.9 million **Statement of Operations Summary (in thousands, except per-share data)** | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sell-side advertising revenue | $2,028 | $16,500 | | Buy-side advertising revenue | $6,129 | $5,775 | | **Total revenues** | **$8,157** | **$22,275** | | Gross profit | $2,393 | $4,998 | | Total operating expenses | $6,317 | $7,805 | | Loss from operations | ($3,924) | ($2,807) | | **Net loss** | **($5,940)** | **($3,819)** | | Net loss per share, diluted | ($0.35) | ($0.22) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations improved significantly, and financing activities resulted in a net cash increase of $0.3 million **Cash Flow Summary (in thousands)** | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,708) | ($5,704) | | Net cash used in investing activities | ($15) | $0 | | Net cash provided by financing activities | $3,067 | $3,922 | | **Net increase (decrease) in cash** | **$344** | **($1,782)** | | Cash and cash equivalents, end of period | $1,789 | $3,334 | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Net Loss to Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20EBITDA) The Adjusted EBITDA loss widened to $3.0 million in Q1 2025 from a $1.7 million loss in the prior-year period - Management uses Adjusted EBITDA for planning, performance evaluation, and comparison with peer companies, as it removes the effects of financing, capital structure, and certain non-cash or one-time expenses[25](index=25&type=chunk)[26](index=26&type=chunk) **Reconciliation of Net Loss to Adjusted EBITDA (in thousands)** | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net loss** | **($5,940)** | **($3,819)** | | Interest expense | $1,846 | $1,297 | | Amortization of intangible assets | $488 | $488 | | Stock-based compensation | $316 | $504 | | Depreciation and amortization | $68 | $71 | | Expenses for Equity Reserve Facility | $198 | $0 | | Income tax benefit | $0 | ($200) | | **Adjusted EBITDA** | **($3,024)** | **($1,659)** |

Core Insights - Direct Digital Holdings reported a consolidated revenue of $8.2 million for Q1 2025, primarily driven by buy-side revenue of $6.1 million, which increased by 6% year-over-year [2][9] - The company reduced operating expenses by approximately $1.5 million, or 19%, compared to Q1 2024, as part of strategic cost-saving initiatives [3][9] - The company maintains its full-year revenue guidance of $90 million to $110 million for 2025, supported by growth in both buy-side and sell-side segments [5][10] Financial Performance - Total revenue decreased by 63% from $22.3 million in Q1 2024 to $8.2 million in Q1 2025 [9][22] - Sell-side advertising revenue fell by 88% from $16.5 million in Q1 2024 to $2.0 million in Q1 2025, primarily due to a decrease in impression inventory [9][22] - Buy-side advertising revenue increased from $5.8 million in Q1 2024 to $6.1 million in Q1 2025 [9][22] Operational Highlights - The company processed approximately 188 billion average monthly impressions through its sell-side advertising segment, with a 13% increase in sell-side advertisers compared to Q1 2024 [9] - The unification of buy-side divisions into Orange 142 is expected to enhance service to small to mid-sized partners, representing a significant growth opportunity [4] - The company served over 220 customers in the buy-side advertising segment during Q1 2025, with $1.2 million in revenue from new verticals [9] Strategic Initiatives - Direct Digital Holdings is focused on scaling its buy-side solution while rebuilding its sell-side business, with expectations of increased activity from agency, brand, and publisher partners in the second half of 2025 [2][5] - The company is exploring strategic opportunities to support key growth initiatives and drive long-term value for shareholders [6][9] - Cost-saving measures and revenue optimization efforts are being implemented to enhance operational efficiencies [3][11]

Core Viewpoint - Direct Digital Holdings, Inc. will report its financial results for Q1 2025 on May 6, 2025, after market close [1] Group 1: Financial Reporting - The financial results for the first quarter ended March 31, 2025, will be announced on May 6, 2025 [1] - A conference call and webcast will be held on the same day at 5:00 PM ET to discuss the results [2] Group 2: Company Overview - Direct Digital Holdings operates through its subsidiaries Colossus Media, LLC and Orange 142, LLC, providing advertising and marketing technology solutions [1][3] - The company offers data-driven digital media strategies that enhance reach and performance for brands, agencies, and publishers [3] - Colossus SSP provides access to premium media properties, while Orange 142 focuses on customized digital marketing solutions for mid-market and enterprise companies [3] Group 3: Business Strategy - The company emphasizes personal relationships and tailored digital marketing solutions, ensuring dedicated support for clients of all sizes [4] - Direct Digital Holdings generates billions of monthly impressions across various media channels through advanced targeting and comprehensive data insights [4]

Core Insights - The article discusses the release of a new guide by Orange 142 aimed at helping businesses maximize their return on investments in Connected TV (CTV) advertising, highlighting the shift from traditional TV to streaming platforms [1][4] - CTV advertising spending is projected to reach $33.35 billion in 2025, emphasizing the importance for marketers to effectively leverage this channel for competitive advantage [2] - The guide provides foundational knowledge and tactical recommendations for creating impactful and measurable CTV campaigns, addressing the knowledge gap for marketers [3][4] Company Overview - Orange 142 is a division of Direct Digital Holdings, specializing in digital marketing solutions for destination marketing organizations, and is committed to educating brands on innovative digital advertising channels [1][5] - Direct Digital Holdings combines sell-side and buy-side advertising solutions, offering data-driven strategies that enhance performance for brands and agencies [7][10] Market Trends - Nearly all US households subscribe to streaming services, with over half subscribing to four different platforms, creating unprecedented opportunities for brands to connect with consumers through data-driven advertising [3] - The guide addresses emerging technologies and trends in CTV advertising, as well as data and privacy considerations, which are crucial for effective campaign evaluation [8]

At Direct Digital Holdings, we prioritize personal relationships by humanizing technology, ensuring each client receives dedicated support and tailored digital marketing solutions regardless of company size. This empowers everyone to thrive by generating billions of monthly impressions across display, CTV, in-app, and emerging media channels through advanced targeting, comprehensive data insights, and cross-platform activation. DDH is "Digital advertising built for everyone." New resource provides practical ...

Financial Data and Key Metrics Changes - For the full year 2024, the company delivered revenue in line with significantly revised guidance, despite a challenging year [8] - Fourth quarter revenue was $9.1 million, a decrease of 31.9% from $41 million in the same period of 2023 [21] - Gross margin increased from 23% in the prior year to 32% in Q4 2024 due to a higher mix of buy-side revenue [16] - Operating expenses for Q4 2024 were $7.7 million, down from $18.1 million in the same period of 2023 [24] - Adjusted EBITDA for Q4 2024 was a loss of $3.4 million compared to a loss of $6.6 million in the same period of 2023 [25] Business Line Data and Key Metrics Changes - Sell-side revenue fell to $2.7 million in Q4 2024 from $33.4 million in Q4 2023, primarily due to a major customer's suspension following a defamatory article [21][22] - Buy-side revenue decreased to $6.4 million in Q4 2024 from $7.6 million in the same period of 2023, impacted by reduced spending from certain customers [23] Market Data and Key Metrics Changes - The company is seeing sequential improvement in the first quarter of 2025 compared to November and December 2024, indicating a recovery trend [20] - Political advertising represented 50% to 60% of spending in Q4, significantly higher than the historical range of 10% to 15% [34] Company Strategy and Development Direction - The company is focused on diversifying revenue sources and optimizing its business model, including the launch of Colossus Connections to enhance direct integration with demand-side platforms [12][13] - The strategy includes targeting small- and mid-size clients who are shifting advertising budgets to digital, emphasizing a high-touch client relationship [15] - The company is pursuing opportunities in the middle market, which is seen as a growth area due to its slower transition to digital [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to scale both buy-side and sell-side businesses, reiterating revenue guidance of $90 million to $110 million for fiscal 2025 [19][28] - The second half of 2025 is expected to deliver strong gains as new direct sell-side partners come online [19][28] - Management noted that the company is well-positioned to capture market share and strengthen its offerings in the advertising technology space [20] Other Important Information - The company ended the year with cash and cash equivalents of $1.4 million, down from $5.1 million at the end of 2023 [26] - The company is actively pursuing funding and equity financing pathways to restore NASDAQ compliance and support growth initiatives [26] Q&A Session Summary Question: Impact of post-election malaise on Q4 and client spending recovery - Management noted that political spending was significantly higher in Q4, but December was softer than anticipated, impacting overall performance [34][35] Question: Aggressiveness on direct connections and curation strategy - The company sees opportunities in the middle market and plans to focus on expanding relationships with holdco-partners while also exploring curation opportunities [42][47] Question: Cost savings and annualized basis expectations - Management indicated potential annualized cost savings of $1.5 million to $2 million for 2025, reflecting ongoing operational optimizations [71] Question: Anticipation of positive cash flow - Management expects to return to a more normal cadence of cash flow in the third and fourth quarters of 2025 [73]

Financial Data and Key Metrics Changes - For the full year 2024, the company delivered revenue in line with significantly revised guidance, despite a challenging year [8] - Fourth quarter revenue was $9.1 million, a decrease of 31.9% from $41 million in the same period of 2023 [21] - Gross margin increased from 23% in the prior year to 32% in Q4 2024 due to a higher mix of buy-side revenue [16] - Operating expenses for Q4 2024 were $7.7 million, down from $18.1 million in the same period of 2023 [24] - Adjusted EBITDA for Q4 2024 was a loss of $3.4 million compared to a loss of $6.6 million in the same period of 2023 [25] Business Line Data and Key Metrics Changes - Sell-side revenue fell to $2.7 million in Q4 2024 from $33.4 million in Q4 2023, primarily due to a major customer's suspension following a defamatory article [21][22] - Buy-side revenue decreased to $6.4 million in Q4 2024 from $7.6 million in Q4 2023, impacted by reduced spending from certain customers [23] Market Data and Key Metrics Changes - The company is seeing sequential improvement in the first quarter of 2025 compared to November and December 2024, indicating a recovery trend [20] - Political advertising represented 50% to 60% of spending in Q4, significantly higher than the historical range of 10% to 15% [34] Company Strategy and Development Direction - The company is focused on diversifying revenue sources and optimizing its business model, including the launch of Colossus Connections to enhance direct integrations with demand-side platforms [12][13] - The strategy includes targeting small- and mid-size clients who are shifting advertising budgets to digital, emphasizing a high-touch client relationship [15] - The company is pursuing opportunities in the middle market, which is seen as a growth area due to its slower transition to digital [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to scale both buy-side and sell-side businesses, reiterating revenue guidance for fiscal 2025 in the range of $90 million to $110 million [19][28] - The second half of 2025 is expected to deliver strong gains as new direct sell-side partners come online [19][28] Other Important Information - The company ended the year with cash and cash equivalents of $1.4 million, down from $5.1 million at the end of 2023 [26] - The company is actively pursuing funding and equity financing pathways to restore NASDAQ compliance and support growth initiatives [26][27] Q&A Session Summary Question: Impact of post-election malaise on Q4 and client spending recovery - Management noted that political spending was significantly higher in Q4, but December was softer than expected, impacting overall performance [35][36] Question: Initiatives on direct connections and middle market opportunities - Management confirmed a focus on developing new pathways for buyers and sellers, particularly in the middle market, which is seen as a ripe opportunity for growth [42][44] Question: Cost savings and annualized impact - Management indicated that there could be an additional $1.5 million to $2 million in annualized savings for 2025 due to cost-cutting measures [71] Question: Anticipation of positive cash flow - Management expects to return to a more normal cadence of cash flow in the third and fourth quarters of 2025 as revenue initiatives take effect [73]

Digital Advertising Performance - In 2024, the Colossus SSP platform processed over 212 billion average monthly impressions and served approximately 168,000 buyers, an increase from about 115,000 in 2023[16][36]. - The buy-side segment, operated through Orange 142, serves approximately 230 small-to-mid-sized clients, focusing on enhancing advertising ROI and reducing customer acquisition costs[27][37]. - The combined Linear TV and CTV ad spend is projected to reach nearly $100 billion by the end of 2027, with CTV accounting for all growth, increasing by $5.5 billion year over year to $42.4 billion[30]. - The company aims to capitalize on the shift to digital advertising, which is increasingly being adopted by small and mid-sized businesses, leading to higher advertising ROI[32]. - The proprietary Colossus SSP platform is designed to address the challenges faced by small and mid-sized publishers, providing automated inventory management and monetization tools[20]. - The company processed approximately 212 billion average monthly impressions in 2024, with 59 billion (28%) from multicultural-focused audiences[45]. - The digital advertising landscape is evolving, with programmatic advertising enabling precise targeting of local audiences, providing a competitive advantage for smaller advertisers[34]. Financial Performance - Revenue for the year ended December 31, 2023, was $157.1 million, up from $89.4 million in 2022, representing a growth of approximately 76%[39]. - Gross profit for the year ended December 31, 2023, was $37.6 million, compared to $29.3 million in 2022, indicating a growth of about 28%[39]. - In 2024, revenue decreased to $62.3 million and gross profit to $17.4 million, primarily due to a sell-side customer pausing its connection during Q2 2024[39]. - The client retention rate is approximately 80% among clients that represent about 80% of the company's revenues for 2024[39]. - As of December 31, 2024, the company had cash and cash equivalents of $1.4 million and an accumulated deficit of $8.8 million, raising substantial doubt about its ability to continue as a going concern[66]. Operational Challenges - The company experienced a pause in sell-side customer connections to its Colossus SSP platform in May 2024 due to allegations from a defamatory article, impacting revenue[66]. - The company is investing in artificial intelligence and machine learning to build a data graph from first-party and third-party data sources[40]. - The company plans to continue investing in technology services and equipment to avoid system disruptions and maintain service levels[80]. - The company may face operational and performance issues with its platform, which could adversely affect its business and financial condition[79]. - The company is exposed to risks related to advertising fraud, which could harm its reputation and business performance[76]. Customer Concentration Risks - High customer concentration exposes the company to risks associated with major customers, potentially leading to significant revenue fluctuations[60]. - One sell-side customer represented 46% and 73% of revenues for the years ended December 31, 2024 and 2023, respectively[72]. - Three customers accounted for 34% of accounts receivable as of December 31, 2024, compared to one customer accounting for 83% as of December 31, 2023[72]. - The company recorded a charge of $8.8 million during the year ended December 31, 2023, due to a short-pay notice from a concentrated sell-side customer[72]. - The company experienced a reduction in 2023 revenue to $157.1 million due to the short-pay notice[72]. Regulatory and Compliance Issues - Changes in legislative and regulatory environments regarding data collection and processing could lead to revenue decline and increased costs, adversely affecting demand for the company's products and services[91]. - The evolving regulatory framework for data privacy, including the GDPR, may impose additional compliance costs, limiting the company's growth potential and adversely affecting its business[94]. - Compliance with various laws and regulations has increased the company's operating expenses and may divert management's attention from core business concerns[99][101]. - The legal and regulatory environment regarding AI is rapidly evolving, potentially increasing compliance costs and risks of non-compliance[133]. Market and Economic Conditions - Macroeconomic conditions and geopolitical events, such as economic downturns and high inflation, could adversely impact advertising budgets and, consequently, the company's revenue and financial condition[109]. - Economic downturns and seasonality significantly impact advertising spending, which directly affects the company's revenue and operating results[120]. - The sales cycle for the company's services can take between six to twelve months for sell-side and three to nine months for buy-side, making revenue projections challenging[115]. Internal Control and Governance - Material weaknesses in internal control over financial reporting were identified, impacting the effectiveness of financial statements as of December 31, 2023[160]. - The Company engaged consultants to improve internal controls, with significant progress made in 2024, but some weaknesses remain unremediated as of December 31, 2024[163]. - Approximately 66.6% of the voting power of the Class A and Class B Common Stock is held by DDM, a controlled company, which may limit stockholder protections[175]. Legal and Litigation Risks - The Company was subject to a defamatory article in May 2024, leading to a temporary pause in connection with a sell-side customer, which has since resumed but not at prior volume levels[197][198]. - The Company filed a lawsuit against the author of the defamatory article, with the U.S. District Court denying the defendant's motion to dismiss on March 5, 2025[198]. - A putative class action was filed against the Company in May 2024, alleging violations of federal securities laws, which has been consolidated with a similar action filed in July 2024[199]. Future Financing and Capital Structure - The Company may require additional financing to sustain operations, which could adversely impact stockholders if not secured[157]. - The Company may need to raise additional capital through equity or debt securities, potentially diluting existing stockholders' interests[158]. - The company is currently ineligible to file new short-form registration statements on Form S-3, which may impair its ability to raise capital[68]. - The Company reported stockholders' equity of negative $19.7 million for the year ended December 31, 2024, failing to meet the Nasdaq minimum requirement of $2.5 million[169].

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 ...

Full Year Revenue of $62.3 Million In-Line with Revised Revenue GuidanceContinued to Diversify Customer Base with Leading Sell-Side Partners and Buy-Side Customers in New VerticalsManagement to Host Conference Call at 5:00 PM ET TodayHOUSTON, 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 (" ...