Direct Digital Holdings(DRCT) - 2025 Q2 - Quarterly Results

Financial Performance Overview Management Commentary Management reported a 24% sequential revenue increase in Q2 2025, driven by growth in both sell-side and buy-side businesses. The company is focused on rebuilding its sell-side operations following a significant disruption in 2024. A key achievement was a 25% year-over-year reduction in operating expenses, reflecting successful cost-saving initiatives aimed at accelerating the return to profitability - The primary focus in H1 2025 has been on rebuilding and growing the business after a substantial disruption to the sell-side business in 2024[2] - Q2 2025 revenue saw a sequential increase of 24% over Q1 2025, driven by growth in both sell-side and buy-side segments[1][2] - Operating expenses were reduced by 25% in Q2 2025 compared to Q2 2024 due to ongoing strategic cost-saving initiatives[1][2] - Net loss and Adjusted EBITDA loss improved sequentially over Q1 2025 by $1.7 million and $1.6 million, respectively[1] Second Quarter 2025 Operational Highlights In Q2 2025, the company's sell-side advertising segment processed an average of 182 billion monthly impressions and increased its advertiser base by over 30% year-over-year. The number of sell-side media properties also grew significantly. The buy-side segment served over 220 customers, successfully expanding into new verticals which contributed $1.0 million in revenue - Processed approximately 182 billion average monthly impressions through the sell-side advertising segment[5] - The number of sell-side advertisers increased by over 30% compared to Q2 2024[5] - Average sell-side media properties grew to 30,000 per month, a 5% increase YoY and a 26% increase sequentially from Q1 2025[5] - The buy-side advertising segment served over 220 customers and generated $1.0 million from new verticals, reflecting expansion efforts[5] Detailed Financial Results Second Quarter 2025 Financial Results For Q2 2025, total revenue was $10.1 million, a 54% decrease year-over-year, primarily due to an 83% decline in sell-side revenue. However, buy-side revenue saw a slight increase. Gross margin improved significantly to 35% from 27% in Q2 2024. The company reported a Net loss of $4.2 million and an Adjusted EBITDA loss of $1.5 million, with both metrics showing sequential improvement from Q1 2025 Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $10.1M | $21.9M | -54% | | Sell-side Revenue | $2.5M | $14.3M | -83% | | Buy-side Revenue | $7.7M | $7.6M | +1.4% | | Gross Profit | $3.6M | $5.9M | -39% | | Gross Margin | 35% | 27% | +8 p.p. | | Operating Expenses | $6.0M | $8.0M | -25% | | Net Loss | ($4.2M) | ($3.1M) | Increased Loss | | Adjusted EBITDA Loss | ($1.5M) | ($1.3M) | Increased Loss | - The significant year-over-year revenue decline was primarily driven by an 83% decrease in the sell-side advertising segment revenue[10] - Operating expenses decreased by $2.0 million (25%) YoY, mainly due to reduced payroll costs from internal reorganization and cost-saving measures[10] Six Months Ended June 30, 2025 Financial Results For the first half of 2025, revenue decreased 59% year-over-year to $18.3 million. This was caused by an 85% drop in sell-side revenue, which was partially offset by a 3% growth in buy-side revenue. Gross margin for the period improved to 33% from 25% in H1 2024. The company recorded a Net loss of $10.1 million and an Adjusted EBITDA loss of $4.5 million for the six-month period H1 2025 Key Financial Metrics | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $18.3M | $44.1M | -59% | | Sell-side Revenue | $4.5M | $30.8M | -85% | | Buy-side Revenue | $13.8M | $13.3M | +3% | | Gross Profit | $6.0M | $10.9M | -45% | | Gross Margin | 33% | 25% | +8 p.p. | | Operating Expenses | $12.3M | $15.8M | -22% | | Net Loss | ($10.1M) | ($7.0M) | Increased Loss | | Adjusted EBITDA Loss | ($4.5M) | ($3.0M) | Increased Loss | Financial Outlook Guidance The company anticipates a strong second half of 2025, driven by enhanced buy-side activity and the ongoing recovery of the sell-side business. However, due to market uncertainty and the variable timing of the sell-side rebuild, specific revenue guidance is not being provided at this time. Management intends to reinstate guidance once visibility improves - The company is not providing specific revenue guidance due to market uncertainty and the timing of the continued rebuild of the sell-side business[7] - Management is positioned to deliver a strong back half of the year, driven by enhanced buy-side activity and the recovery of the sell-side business[7][8] - The company intends to reinstate revenue guidance in the future once it has better visibility on the sell-side of the business[7] Consolidated Financial Statements Condensed Consolidated Balance Sheets As of June 30, 2025, Direct Digital Holdings had total assets of $23.3 million and total liabilities of $47.9 million, resulting in a total stockholders' deficit of ($24.6 million). Cash and cash equivalents stood at $1.6 million, a slight increase from $1.4 million at the end of 2024. The stockholders' deficit widened from ($19.7 million) at year-end 2024 Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,593 | $1,445 | | Total current assets | $6,727 | $8,535 | | Total assets | $23,326 | $26,006 | | Total current liabilities | $13,675 | $13,350 | | Total liabilities | $47,907 | $45,736 | | Total stockholders' deficit | ($24,581) | ($19,730) | Condensed Consolidated Statements of Operations The statement of operations for Q2 2025 shows a total revenue of $10.1 million and a Net loss of $4.2 million. This compares to a revenue of $21.9 million and a Net loss of $3.1 million in the same period last year. The net loss per share attributable to the company was ($0.23) for the quarter, compared to ($0.16) in Q2 2024 Statement of Operations Highlights (in thousands, except per-share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $10,144 | $21,855 | $18,301 | $44,130 | | Gross profit | $3,561 | $5,931 | $5,954 | $10,929 | | Loss from operations | ($2,426) | ($2,065) | ($6,350) | ($4,873) | | Net loss | ($4,196) | ($3,141) | ($10,136) | ($6,961) | | Net loss per share (Basic) | ($0.23) | ($0.16) | ($0.55) | ($0.38) | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash used in operating activities was $5.4 million, a significant improvement from the $10.1 million used in the prior-year period. Cash provided by financing activities was $5.6 million, largely from the issuance of Class A Common Stock. The company ended the period with a net increase in cash of $0.1 million, bringing the cash balance to $1.6 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,398) | ($10,111) | | Net cash used in investing activities | ($38) | ($10) | | Net cash provided by financing activities | $5,584 | $6,074 | | Net increase (decrease) in cash | $148 | ($4,047) | | Cash at end of period | $1,593 | $1,069 | Non-GAAP Financial Measures Reconciliation of Net Loss to Adjusted EBITDA The company uses Adjusted EBITDA, a non-GAAP measure, to evaluate operating performance. For Q2 2025, the Adjusted EBITDA loss was $1.5 million, compared to a loss of $1.3 million in Q2 2024. This represents a sequential improvement from the $3.0 million Adjusted EBITDA loss in Q1 2025. For the first six months of 2025, the Adjusted EBITDA loss was $4.5 million - The company uses Adjusted EBITDA, which adjusts for interest, taxes, depreciation, amortization, stock-based compensation, and other specific items, to evaluate operating performance and for period-to-period comparisons[23][25] Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Period | Net Loss | Adjusted EBITDA | | :--- | :--- | :--- | | Q2 2025 | ($4,196) | ($1,452) | | Q2 2024 | ($3,141) | ($1,343) | | H1 2025 | ($10,136) | ($4,476) | | H1 2024 | ($6,961) | ($3,005) | | Q1 2025 | ($5,940) | ($3,024) |