Direct Digital Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 27, 2025
Skip to Participants
Operator

Thank you. I would now like to turn the conference over to Brett Milat, Investor Relations. You may begin.

Brett Milotte
Managing Director - Global Media, Sports & Entertainment at ICR

Good afternoon, everyone, and welcome to Direct Digital Holdings' fourth quarter and full year twenty twenty four earnings conference call. My name is Brett Millotte, and I'm representing Direct Digital Holdings from ICR. On today's call are Direct Digital Holdings' Chairman and Chief Executive Officer, Mark Walker and Chief Financial Officer, Diana Diaz. Information discussed today is qualified in its entirety with the Form eight ks and accompanying earnings release, which has been filed today by Direct Digital Holdings, which may be accessed at the SEC's website and DRCT's website. Today's call is also being webcast and a replay will be posted to DRCT's Investor Relations website.

Brett Milotte
Managing Director - Global Media, Sports & Entertainment at ICR

Immediately following the speakers' presentation, there will be a question and answer session. Please note that the statements made during the call, including any financial projections or other statements that are not historical in nature, may constitute forward looking statements. These statements are made on the basis of DRCT's views and assumptions regarding future events and business performance at the time they are made, and we do not undertake any obligation to update these statements. Forward looking statements are subject to risks, which could cause DRCT's actual results to differ from historic results and forecasts, including those risks set forth in DRCT's filings with the SEC, and you should refer to those for more information. This cautionary statement applies to all forward looking statements made during this call.

Brett Milotte
Managing Director - Global Media, Sports & Entertainment at ICR

During this call, DRCT will refer you to non GAAP financial measures. These non GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the non GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that DRCT filed in its Form eight K today. I'll now hand the call over to Mark Walker, Chief Executive Officer. Mark?

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Thanks, Brett, and thank you to everyone joining our fourth quarter and full year twenty twenty four earnings call. For the full year, I'm pleased that we delivered revenue in line with our significantly revised guidance. 2024 proved to be a challenging year for the company to say the least, but I'm incredibly proud of the team for responding quickly, initiating a clear strategy, and mobilizing to execute against that strategy. Today, Direct Digital is rescaling with a significantly strengthened business model for customers, partners and shareholders alike. Just to remind everyone, at this time last year, Direct Digital Holdings released its Q4 full year results for 2023, announcing a top line revenue guidance target of $170,000,000 to $190,000,000 representing 15% year over year growth at the midpoint.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

By early May, Direct Digital Holdings' supply side platform Colossus SSP had achieved revenues far ahead of the previously stated guidance and the company was well on its way to our record quarterly results. At that time, we were fighting what we believe was an ongoing short attack since December of twenty twenty three and believed that the worst was behind us. Unfortunately, there was a secondary attack. A second false and defamatory blog post against our supply side platform Colossus SSP in mid May twenty twenty four caused an unexpected business disruption amongst our partners, advertisers, and clients due to a major customer pausing its connection with Colossus. The connection with this major customer, who is an intermediary in the digital ecosystem, has resumed.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

However, volumes have not yet returned to pre pause levels and this caused a meaningful reduction in our FY 2024 revenues and is also expected to impact 2025. That said, despite the challenges faced this past year, we delivered fourth quarter results in line with our revised revenue guidance range. We have been working diligently with our multinational HoldCo agency partners, our Fortune 500 brand partners and demand side partners to resume business, which many already have. Starting last year, we initiated a plan to one, further expand our sources of our revenue to create a more diversified business throughout all segments and two, conduct a cost savings review, which has resulted in significant operating expense reduction sequentially when compared to the first half of the year. Concerning our diversification strategy, in the third quarter of twenty twenty four, we announced the launch of Colossus Connections, an aggressive initiative to accelerate our direct integration efforts with leading demand side platforms, and we have already signed up two of the leading partners in the marketplace.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

This initiative will optimize supply path efficiency for our advertising clients through direct connections with top demand side platforms, ultimately providing advertisers with improved access to demand and cost savings. In addition, we are pursuing alternative intermediaries and pathways to send buyer spend to our publishers. We've seen sequential improvement from existing direct connections and we are expecting to see greater revenue impacts as we move through 2025 as alternative pathways are solidified and as integrations are completed in the second half of twenty twenty five. As part of our continuing sell side strategy, we have worked diligently with our partners to keep our key sell side relationships intact while building back ad spend in previous levels. This plan will continue to take shape over time through 2025 as we focus on diversifying, optimizing and future proofing our sell side platform.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

On the buy side, since we unified our two divisions, Orange one hundred and forty two and Huddle Masses, we have been keenly focused on small and mid sized clients who are increasingly shifting advertising budgets to digital and require support to navigate its complexities and optimize their ad spend. Further, we see that small and mid sized brands are looking for a more high touch and tailored client buy side relationship. These clients are a key focus for our newly combined buy side operation. We are now better equipped to deliver this level of premium service to our clients as they navigate emerging technologies and high growth channels such as AI, connected TV and retail media. We have already brought on clients in new verticals, which are expected to generate additional incremental revenue of $5,000,000 to $10,000,000 in 2025 with full impact starting in the second quarter of twenty twenty five.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

With that, I will discuss some high level points related to the fourth quarter with Diana providing further details about the quarter later in the call. Revenue for the fourth quarter was down as expected compared to the prior year due to continuing negative impact on sell side revenue resulting from business disruption in May of twenty twenty four and continued impact on the buy side from certain customer spend declines, partially offset by new buy side customer growth and non recurring political spin on the sell side. Despite the overall decline in revenue, gross margin increased from 23% in the prior year to 32% in the fourth quarter twenty twenty four due to a higher mix of buy side revenue in the current quarter. We realized cost savings and operating expenses of $2,100,000 in the fourth quarter of twenty twenty four reflecting the flexibility in our cost structure. In addition to our focus on building back our top line and as mentioned on our call last quarter, we have undertaken a series of cost savings and operational optimization strategies, which have resulted in a more diversified and efficient business model positioning us for success in the coming years.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

We were able to withstand the dramatic impact to our revenue through improved gross margin and operating cost savings, which is a testament to our robust business model and the success of our cost saving initiatives. Looking forward into 2025, we're encouraged by the growth we are seeing in segments of the ad tech arena, specifically around curation and data enrichment. We are reiterating revenue guidance of $90,000,000 to $110,000,000 for fiscal twenty twenty five, underscoring our confidence in our ability to scale up both our buy side and sell side businesses. In particular, we expect the second half of the year to deliver strong gains as we experienced the full effect of new direct sell side partners coming online, while our first quarter tends to be slower than the fourth quarter related to seasonality in our sell side business. We are seeing sequential improvement in the first quarter of twenty twenty five over November and December 2024.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

We believe our streamlined approach will continue to enable us to capture market share and strengthen our leading advertising marketing technology offering. I will now hand things over to Diana Diaz, our Chief Financial Officer, who will walk through some of the financial highlights in further detail.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Thank you, Mark. I'll start with a few more details related to the fourth quarter twenty twenty four results. Related to revenue, our fourth quarter twenty twenty four revenue was $9,100,000 a decrease of $31,900,000 over the $41,000,000 in the same period of 2023. Sell side revenue fell to $2,700,000 for the fourth quarter compared to $33,400,000 in the same period of 2023. As stated before, the key driver for this reduction was the suspension by one of our large customers following the defamatory article against the company.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

This customer, which is an intermediary in the DSP marketplace, has since restored its connection and is continuing to scale, making up about 11% of the fourth quarter sell side revenue in 2024. We were pleased to see a one time positive bump in sell side revenue in the fourth quarter of twenty twenty four of about $600,000 driven by outsized political spend in October. However, we'd like to emphasize that while this was a welcome boost, it is not representative of our repositioned business. While this was a non recurring revenue impact, it demonstrates the opportunistic and dynamic nature of our business model, which was able to move and adapt when opportunities arise. On our buy side for the fourth quarter, we saw revenue decrease to $6,400,000 compared to $7,600,000 in the same period of 2023.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

The $1,200,000 decrease in buy side revenue for the quarter was due to a $1,700,000 decrease in spending from customers no longer actively purchasing from the company, including about $600,000 from completion of certain one time campaigns in 2023, partially offset by growth from existing and new customers of 8%. Due to the decrease in revenue, gross profit dollars decreased to $2,900,000 in the fourth quarter from $9,300,000 in the prior year. However, because of the change in mix of buy side and sell side business, gross margin for the fourth quarter improved from 23% in 2023 to 32% in 2024. Related to operating expenses, our fourth quarter twenty twenty four operating expenses were $7,700,000 a decrease of 10,400,000 over the $18,100,000 in the same period of 2023. Operating expenses for the fourth quarter were negatively impacted in 2023 by an unusual charge for $8,800,000 related to payments to a few publishers and in 2024 by about $400,000 in cost to regain compliance with respect to delinquent SEC filings.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Excluding these unusual items, adjusted operating expenses were $7,200,000 in the quarter of twenty twenty four, a decrease of $2,100,000 or 23 percent over $9,300,000 in the same period of 2023. Adjusted operating expenses, which excludes the unusual compliance costs for the second half of twenty twenty four of $13,500,000 decreased by $1,900,000 or 12% from $15,400,000 for the first half of twenty twenty four. Operating loss for the fourth quarter was $4,300,000 compared to an operating loss of $8,800,000 in the same period of 2023. The unusual operating expense items contributed $400,000 of operating loss for the fourth quarter of twenty twenty four and $8,800,000 of impact to operating income in the same period of 2023. Adjusted EBITDA for the fourth quarter of twenty twenty four was a loss of $3,400,000 compared to an adjusted EBITDA loss of $6,600,000 in the same period of 2023.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Excluding the unusual operating expense items, adjusted EBITDA loss for the fourth quarter was $3,000,000 in 2024 compared to adjusted EBITDA income of $2,200,000 in the same period of 2023. Turning to the balance sheet, we ended the year with cash and cash equivalents of $1,400,000 compared to $5,100,000 as of the end of twenty twenty three. Total cash plus our accounts receivable balance as of year end was $6,400,000 compared to $42,300,000 as of the end of twenty twenty three. We are actively advancing multiple funding and equity financing path ways with the goal that these efforts will restore NASDAQ compliance, strengthen the company's financial position and support key growth initiatives. Now to touch on our guidance.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Our guidance assumes that The U. S. Economy does not have any major economic conditions to deteriorate or otherwise significantly reduce advertiser demand. We plan to offer annual guidance and update it throughout the year. With our visibility today, we are reiterating our fiscal year twenty twenty five revenue guidance in the range of $90,000,000 to $110,000,000 underscoring our confidence and our ability to scale up both the buy side and sell side businesses.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

And as Mark said, we expect the second half of the year to deliver strong gains as we experience the full effect of new direct sell side partners coming online. As we continue to refocus the company, our lower cost structure, optimized performance and focus on driving efficiencies across the business are key to our accelerated path to return to profitability. We continue to be judicious in adding any new costs and we remain confident in our business to deliver strong performance for our shareholders this year. And I'd like to turn it back over to Mark for some closing comments.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Thank you, Diana. And thank you to everyone for joining. As always, we appreciate your interest in Direct Digital Holdings and are looking forward to answering your questions. Operator, please open the line.

Operator

Thank you. We will now begin the question and answer session. And with that, our first question comes from the line of Dan Kurnos with The Benchmark Company. Please go ahead.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

Yes. Thanks. Good afternoon. Mark, maybe I have several. Let's just start kind of high level.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

Number one, just in Q4, we know there was a lot of noise in kind of the DBplus arena. Obviously heard from Trade Desk, Magnite, PubMatic, everybody. Political was kind of a plus. You guys are recovering from obviously the attacks which you successfully defended against, but it takes a while to scale back. So I'm just trying to understand kind of how we should think about the cadence.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

I know you've said strong growth in the back half of this year, but how much was Q4 impacted by kind of post election malaise, which we sort of heard about? And how should we think about these clients spend coming back to you in kind of Q1 and then ramping?

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yes. No, good question, Dan, and good to hear from you as well. Yes, I would say, for the first time, especially in this cycle, political represented more of a percentage than it historically has. Typically, it had been 10% to 15%. This time, it represented probably in the 50% to 60% range of spin that came through.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

And I think, as you know, based upon what you probably heard from your peers, political was very strong all the way through November. December was softer than what we would anticipate for Q4. And so we were a little bit surprised by that. But what we are seeing and we're kind of in a different cycle right now since the last four years, we've had steady growth consistently occurring. We're seeing sequential growth month over month in regards to our overall performance.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

But for us and how we rebuild it back, it's really about it's not about our buyer intent, it's not about our publisher inventory, which as you've seen by the stats, the numbers are there. It's really about us for pathways. And so, we've been working on developing new pathways to connect our buyers and sellers, and that's through the direct connection piece, which we're anticipating to see that come to fruition in the back half of the year based upon the contracts that we have signed and the other ones that we are currently negotiating. And then we're also anticipating having alternative pathways for our buyers to actually purchase the inventory that we represent, leveraging different deals and P and Ps that we already have established. So for us, we don't see it as more of an if it comes back.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

It's more about when and timing and the quarter. And so, we're seeing us getting back to a good healthy run rate, for the last half of the year.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

Got it. That's helpful. So let's talk about some of those initiatives, right? Obviously, a lot of change has happened. We're seeing Google pull back on the SSP side as they deal with all the remedy stuff.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

So the marketplace is kind of in flux. PMax is kind of a mess. You guys doing the Direct Connect thing makes a ton of sense. We're seeing a bunch of other folks do that. You talked about top DSPs.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

I wonder given your inventory, and kind of who you represent on the publisher side, if there's not some kind of niche or middle market guys, that you could kind of attack. And then so maybe kind of talk through how we should think about how aggressive you stay on the connection side. And I would also love to hear about how you're thinking about, you know, kind of curation. It's sort of it's very topical, but, you know, we're not seeing a ton of money, figured out in the marketplace yet. So maybe hit those two topics for us.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yeah, absolutely. So for us, we actually see the opportunity. One, we have excellent HoldCo partnership relationships. In those dollar dollars, we think we're always going to have access to those dollars coming through our pipes. And so we definitely will continue to nurture and manage those relationships as we see fit.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

But the opportunity that we also see is really in the middle market, the middle market dollars flowing through our pipes, if you will, or our SSP. We think that that's actually an opportunity to expand and grow. I think you've seen some DSPs and SSPs really focus on what they call the premium partnerships. We think that there is a ripe opportunity in the middle market and that's really kind of how we've managed the business for the last four years. So actually on the buyer side and also on the sell side, we see that as our sweet spot and we're planning on doubling down into that marketplace.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

We think it provides us two benefits. One, diversification, where there's lack of concentration of dollars. We think that that's a major benefit for us in focus on the middle market. But then also, we think it's ripe for additional opportunity. And from what we've seen, that middle market has been a little bit slower to actually transition over to the digital space.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

So, we see it as real greenfield for us in growing and being able to fuel our overall growth strategy and also the repeated CAGR that we've been able to perform over the last five, six years.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

And the curation piece, Mark? Sorry, because I know it was a long question.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yes. No, no, no. No, good call. Hey, as it relates to curation, we do think that there is an opportunity for curation and it's something that we're exploring with many of our partners right now. We think that there is an opportunity.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

We're still working through figuring out what's the best way for us to apply that to our partners. And what we are seeing, at least off the onset, it's a case by case basis. So that's kind of the strategy that we're looking at curation. We'll be talking about that more so in the future. But the other opportunity that we also see as it relates to curation is really with our buy side partners.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

We work with about two fifty different two twenty five to two fifty different buy side partners. We think there's a curation opportunity with the middle market and we think what sets us unique and what also makes us have a competitive advantage in serving the middle market is the fact that our buy side employees and our sell side employees talk and have the capability of actually leveraging curation as a competitive advantage that we actually take to the marketplace to interact with our buy side clients. So, we think that gives us a unique value proposition and selling point. And so, you'll see us talking more specifically about curation in the middle market to our buy side partners as well as on the sell side as capabilities that we have.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

Super helpful. Last one, I promise. Just thoughts on attacking video. I know it's not been a huge component historically. Then we started talking about the whole CTV market is kind of very top heavy at the moment.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

The bottom side has been challenged, but still a great opportunity for programmatic execution. So just curious how you're thinking about attacking kind of that landscape if that's part of the strategy here.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yeah. It actually is. The, what we're seeing specifically on the sell side platform, people are looking for lower cost CPMs, as it relates to the CTV, OTT video space. And we think that there is a prime opportunity for us to provide that into the marketplace.

Uh-huh. Uh-huh. Uh-huh. Uh-huh.

Operator

Ladies and gentlemen, your conference will now resume. Mark, please go ahead.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Hey, Dan, I don't know if you finished, if it cut off before the curation piece or did you get everything you wanted to hear or do I need to repeat it?

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

I heard you say, you're seeing lower cost CBC on the sell side, you're seeing clients come in asking for lower cost CPMs in the CPDOT video space, but I didn't hear the rest after that.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yeah. So, what we were saying is, in regards to the partners that we are working with and from what we have seen in the marketplace, there seems to be a demand for lower cost CPMs, that are on the mid to lower end of the spectrum. And we think that there's opportunity for Colossus SSP SSP and Direct Digital to be able to fulfill that demand in the marketplace. And so, many of the things that we're working to do is really to focus in on that and provide, CTV partners and video partners and OTT partners that actually fit in that end of the space. And we think that we can have a competitive advantage there.

Daniel Kurnos
Equity Research Analyst at The Benchmark Company LLC

Got it. No, thank you for all the color. And I apologize for asking so many questions. I apparently blew up your phone, but I will get back in the queue.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

No, it's all good. Thank you.

Operator

And your next question comes from the line of Michael Kupinski with Noble Capital Markets. Please go ahead.

Michael Kupinski
Director of Research at Noble Financial Capital Markets

Good afternoon, everyone. A couple of questions. Mark, you indicated that some of the revenue initiatives appear to be at least on the buy side of your business. And I was wondering if this represents a shift or maybe a rebalancing on your focus on growing your sell side business?

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yes. No, good question. Yes, we definitely have and this has been our strategy for the last two years. We've been focused on bringing on the buy side of our business and really looking at expanding it. We made, some internal investments as it relates to our sales processes in the marketplace.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

And so what we're starting to see is some of the fruition of that come to bear. Last year, we put all of our sales teams on specific, CRM system, and made that a lot more uniformed, but then also put different sales processes in place in order to try to, increase demand into our buy side business. And so, I think part of what you're seeing right now is the work to actually go after and continue to grow that piece of the business, especially because it's at a higher margin. And we think that in the long run, especially with some of the cost saving measures we've taken in place, it will help us, get back to profitability, but also expand profitability once we get the top line higher as it relates to the buy and the sell side business. So, it's not really a recalibration, but it's been a two year focus for us and we're starting to see foods come from it.

Michael Kupinski
Director of Research at Noble Financial Capital Markets

Got you. And then on the cost side, I was wondering if you obviously said that you've taken out some costs. Can you give us a sense of how much the cost savings will be on an annualized basis? And just trying to get a sense of the amount of fixed cost that you've taken out and if you're including variable cost in your expectation for 2025?

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yeah. What I'm going to do is I'm going to give you kind of our overall comprehensive strategy, and I'm going to turn it over to Diana to actually get more into the details. But the way that we built our business model, and I think you probably have seen it, by looking at our balance sheet and our income statement, we have very little capex as it relates. And part of the way that we built it, knowing that, the ability to scale without increasing your fixed costs was important to us. And so, part of the reason that we've been able to absorb and defend against, some of the attacks that we have been, is just because of the variability that we've been able to build, inside of our structure and our overall business.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

So we were able to take cost out, without, you know, cutting what I would say muscle and bone, but cutting a little bit of fat, as it relates to the end of last year. And we're going to see benefit of that going through 2025 as well in the way that we've operating our the way that we set up our operating structure. So, I'm going to turn it over to Diana to give you some more details around that, and she can tell you kind of what that model looks like on the go forward.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Sure. We focused in the earnings release and the script on operating expenses because we wanted you to be able to calibrate there. We had some costs that will be non recurring, dollars 1,700,000.0 of compliance costs related to getting our filings complete. And then, we had the first half versus the second half reduction in costs that we wanted to point out. So, I would expect there could be another $1,500,000 to $2,000,000 of savings that we would see on a full year basis for 2025. So, that's what we're looking at.

Michael Kupinski
Director of Research at Noble Financial Capital Markets

Thank you for the color. And then based on your revenue trajectory and your revenue guidance for 2025 and focus on higher margin buy side, can you kind of give us a sense when do you anticipate you might swing towards positive cash flow?

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

As we look at the real gains coming in, in the second half of the year, that's really where we see us getting back to our more normal cadence, third and fourth quarter.

Michael Kupinski
Director of Research at Noble Financial Capital Markets

Perfect. All right. Good luck. That sounds great. Thank you.

Diana Diaz
Diana Diaz
Chief Financial Officer at Direct Digital Holdings

Thank you.

Operator

And I'm showing no further questions at this time. I would like to turn it back to our CEO, Mark Walker, for closing remarks.

Mark Walker
Mark Walker
CEO, Co-Founder & Chairman at Direct Digital Holdings

Yes. If there is no more questions, then we will see you next quarter.

Operator

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Executives
    • Mark Walker
      Mark Walker
      CEO, Co-Founder & Chairman
    • Diana Diaz
      Diana Diaz
      Chief Financial Officer
Analysts
    • Brett Milotte
      Managing Director - Global Media, Sports & Entertainment at ICR
    • Daniel Kurnos
      Equity Research Analyst at The Benchmark Company LLC
    • Michael Kupinski
      Director of Research at Noble Financial Capital Markets
Powered by Quartr

Key Takeaways

  • Despite delivering 2024 revenue in line with revised guidance, a defamatory blog post in May caused a major sell-side partner to pause, and volumes have yet to return to pre-pause levels; management is driving a recovery through Colossus Connections direct DSP integrations and alternative pathways to diversify supply.
  • Fourth-quarter gross margin improved to 32% (from 23% a year ago) thanks to a higher buy-side revenue mix, while cost-saving initiatives delivered $2.1 million in operating expense reductions sequentially.
  • The unified buy-side division is focused on small and mid-size clients in high-growth channels (AI, CTV, retail media), adding new verticals expected to generate an incremental $5 million–$10 million in 2025 revenue.
  • For fiscal 2025, management reiterated revenue guidance of $90 million–$110 million, anticipating stronger second-half gains as direct sell-side partners come online, with first-quarter seasonality offset by sequential improvement.
  • At year-end, cash plus receivables stood at $6.4 million (down from $42.3 million in 2023); the company is pursuing funding and equity financing options to restore NASDAQ compliance and bolster its financial position.
AI Generated. May Contain Errors.
Earnings Conference Call
Direct Digital Q4 2024
00:00 / 00:00

Transcript Sections