Direct Digital Holdings(US:DRCT)2025-11-12 13:09Financial Performance - Total revenues for the three months ended September 30, 2025, were $7,984,000, a decrease of 12% compared to $9,075,000 for the same period in 2024[10] - Gross profit for the nine months ended September 30, 2025, was $8,169,000, down from $14,444,000 in 2024, reflecting a decline of 43%[10] - The net loss attributable to Direct Digital Holdings, Inc. for the three months ended September 30, 2025, was $2,680,000, compared to a net loss of $2,690,000 in the same period of 2024[10] - For the nine months ended September 30, 2025, the net loss was $15.136 million, compared to a net loss of $13.338 million for the same period in 2024, representing an increase in loss of approximately 13.5%[19] - The company reported a total operating loss of $1.091 million for the three months ended September 30, 2025, compared to an operating income of $1.1 million for the same period in 2024[124] - The net loss attributable to Class A shareholders for the three months ended September 30, 2025, was $3.043 million, compared to a loss of $2.690 million in 2024, reflecting an increase in loss of approximately 13%[128] Assets and Liabilities - Total current assets decreased to $6,603,000 as of September 30, 2025, down from $8,535,000 at the end of 2024, representing a decline of 23%[8] - Total liabilities decreased to $29,230,000 as of September 30, 2025, compared to $45,736,000 at the end of 2024, a reduction of 36%[8] - The company reported cash and cash equivalents of $871,000 as of September 30, 2025, down from $1,445,000 at the end of 2024, a decrease of 40%[8] - The accumulated deficit increased to $16,058,000 as of September 30, 2025, from $8,774,000 as of December 31, 2024, indicating a worsening financial position[8] - Total long-term debt as of September 30, 2025, was $16.3 million, down from $41.2 million as of December 31, 2024[68] Operating Expenses - Operating expenses for the nine months ended September 30, 2025, were $18,429,000, a decrease of 20% compared to $22,973,000 in 2024[10] - Operating expenses for the three months ended September 30, 2025, were $6,125,000, down from $7,172,000 in the same period of 2024, indicating a decrease of approximately 15%[10] - The company incurred corporate office expenses of $4.961 million for the three months ended September 30, 2025, significantly higher than $0.247 million in the same period of 2024[125] Stock and Equity - The company issued 25,000 shares of Series A Convertible Preferred Stock, raising $21,220,000 net of issuance costs[12] - The company raised $6.708 million from the issuance of Class A Common Stock during the nine months ended September 30, 2025[19] - The Series A Convertible Preferred Stock was established with a total amount of $25.0 million, carrying a cumulative dividend rate of 10% per annum[101][103] - The balance of Class A Common Stock increased to 3,795,199 units as of September 30, 2024, from 3,478,776 units at the end of 2023, representing a growth of 9.1%[16] Revenue Recognition - Revenue from the sell-side advertising segment is generated through the sale of digital ad units, while the buy-side segment focuses on managed advertising campaigns[28] - The Company recognized revenue on a gross basis, inclusive of all supplier costs, for both sell-side and buy-side advertising segments[30] - The Company’s revenue recognition follows a five-step process, primarily derived from sell-side and buy-side advertising[27] - The Company generated revenue from both sell-side and buy-side advertising, with the latter focusing on managed advertising campaigns and data services[28] Cash Flow and Liquidity - The company utilized $7.036 million in operating activities for the nine months ended September 30, 2025, which is slightly lower than the $7.095 million used in the same period of 2024[19] - As of September 30, 2025, cash and cash equivalents were $0.9 million, raising substantial doubt about the company's ability to continue as a going concern[63] - The company anticipates liquidity sources from cash flow from operations and potential sales of equity or debt securities[65] Debt and Financing - The Company entered into a Term Loan and Security Agreement with a principal amount of up to $32.0 million, consisting of a $22.0 million closing date term loan and a $10.0 million delayed draw term loan[69] - The Company entered into a Credit Agreement with East West Bank for a revolving credit facility of up to $10.0 million, maturing on July 7, 2025[82] - The Company made prepayments totaling $1.0 million upon execution of the Third EWB Amendment, with additional prepayments of $1.0 million by January 15, 2025, and $2.0 million by April 15, 2025[86] Customer Concentration - Two customers accounted for 30% of revenues for the three months ended September 30, 2025, while one customer accounted for 12% of revenues for the same period in 2024[47] Strategic Initiatives - The company has a plan to reduce expenses through staff reductions and cost-saving measures, executed on July 1, 2024[65] - The company completed the unification of its buy-side businesses, Orange 142 and Huddled Masses, in October 2024, aiming to enhance its advertising solutions[21]