Direct Digital Q2 2026 Earnings Results & Report

Direct Digital EPS Results

• Actual EPS: -$5.78
• Consensus EPS: -$9.60
• Beat/Miss: Beat by +$3.82
• One Year Ago EPS: N/A
• EPS Beat Rate: 4 of last 8 quarters

Direct Digital Revenue Results

• Actual Revenue: $7.83 million
• Expected Revenue: $8.84 million
• Beat/Miss: Missed by -$1.00 million
• YoY Revenue Growth: N/A

Direct Digital (NASDAQ:DRCT) is a digital advertising technology company that provides programmatic advertising solutions for advertisers, agencies and publishers. The company’s platform is designed to help businesses plan, purchase, optimize and measure digital advertising campaigns across multiple channels and formats.

Direct Digital operates through two primary businesses. Huddled Masses is its buy-side platform, providing advertisers and agencies with access to programmatic media buying, campaign management, audience targeting and performance measurement. Colossus Media operates on the sell side, offering a supply-side platform that helps publishers and media owners monetize digital advertising inventory by connecting them with advertising demand.

The company was founded in 2018 and is headquartered in Houston, Texas. Direct Digital Holdings became a publicly traded company in 2022. Its operations are led by co-founder Mark D. Walker, who serves as chief executive officer and chairman. Through its buy-side and sell-side offerings, the company serves participants across the digital advertising ecosystem, including brands, agencies, publishers and other media partners.

Direct Digital Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: New AI search, geo, support, and web-infrastructure offerings are generating strong demand from existing and prospective clients, expanding the company’s addressable market and positioning it as a broader digital growth partner.
• Neutral Sentiment: Second-quarter revenue fell to $7.8 million from $10.1 million a year ago, primarily due to a $2.5 million decline in spending by demand-side platform customers; excluding that impact, first-half revenue increased approximately 5% year over year.
• Negative Sentiment: Profitability weakened, with a second-quarter operating loss of $2.9 million and adjusted EBITDA loss of $2.3 million, compared with losses of $2.4 million and $1.5 million, respectively, in the prior-year quarter.
• Negative Sentiment: The company ended June with just $500,000 in cash and was not in compliance with certain credit-facility covenants; management is seeking a waiver from its lender, with discussions still ongoing.
• Positive Sentiment: Management highlighted an approximately 80% client retention rate among customers representing about 80% of revenue, supporting its view that the streamlined strategy is being built on a stronger customer foundation.

Presentation

[Operator]

Well, good day everyone, and welcome to the Direct Digital Holdings second quarter 2026 conference call. As a reminder, this call is being recorded. At this time, I would like to hand things over to Walter Frank, Investor Relations. Please go ahead.

[Walter Frank, Head of Investor Relations at IMS Investor Relations]

Thank you. Good afternoon, everyone, and welcome to Direct Digital Holdings' second quarter 2026 earnings conference call. 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 8-K and accompanying earnings release, which has been filed today by Direct Digital Holdings, which may be accessed at the SEC's website and the company's website. Today's call is also being webcast, and a replay will be posted to Direct Digital's Investor Relations website. Immediately following the speakers' presentation, there will be a question and answer session. Please note that the statements made during the call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements.

[Walter Frank, Head of Investor Relations at IMS Investor Relations]

These statements are made on the basis of Direct Digital'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 Direct Digital's actual results to differ from its historical results and forecasts, including those risks set forth in Direct Digital's filings at the SEC, and you should refer to those for more information. This cautionary statement applies to all forward-looking statements made during this call. During the call, Direct Digital will be referring 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 Direct Digital filed in its Form 8-K today.

[Walter Frank, Head of Investor Relations at IMS Investor Relations]

I will now hand over the conference to Mark Walker, Chief Executive Officer. Please go ahead, Mark.

[Mark Walker, Chairman and CEO at Direct Digital Holdings]

Thanks, Walter, and thank you to everyone joining our call today. I'll start by reviewing some of the highlights of our operations and financial results during the second quarter and first half of 2026, before turning the call over to our Chief Financial Officer, Diana Diaz, for a more detailed look at our financial results. We'll conclude by opening the call for a brief Q&A. We saw encouraging progress in our core business during the second quarter. To recap, during the first quarter of 2026, we announced a comprehensive shift in our strategy that saw us aggregate our operations into a streamlined model to sharpen our focus on the areas where we believe we can create the greatest value for both our clients and our shareholders.

[Mark Walker, Chairman and CEO at Direct Digital Holdings]

We believe that by diversifying our pipeline, broadening our customer relationships, and enhancing our product capabilities, we're positioning ourselves to drive more consistent, scalable, long-term growth. We successfully unveiled AI search and geo offerings this past quarter and are seeing strong demand from current clients and prospective new clients, as well as our AI support and web infrastructure technology services, which will both expand our addressable market. These products unlock new technology budgets and the technical upgrades we provide clients serve as performance multipliers that improves conversion performance and lowers cost to acquire for our new clients. We're seeing our technical expertise position us with clients as a comprehensive digital growth partner rather than just supporting the media needs and leaning into helping companies facing conversion bottlenecks. Demand is strong, but it's important to remember that we're still in the early stages of this shift.

[Mark Walker, Chairman and CEO at Direct Digital Holdings]

Total revenue was down in the quarter related to decreased activity from our DSP customers, which is expected as we continue to shift our strategy. In fact, excluding the impact of reduced spending from DSP customers, total revenue increased approximately 5% year-to-date when compared with the first six months of 2025. While these numbers seem small compared to our historical results, they are trending in the right direction. Our value proposition is heightened by complete alignment across our digital supply platform. We're technology and media agnostic, and our clients rely on us to provide the best opportunity to their brands and businesses to achieve enhanced market reach through strategic digital advertising. The strong relationships we have built are evidenced in our client retention rate of approximately 80% among clients that represent approximately 80% of our revenue for the six months ended June 30, 2026.

[Mark Walker, Chairman and CEO at Direct Digital Holdings]

We still have a tremendous amount of work to do, but we're operating from a much stronger foundation and driving measurable results. Additionally, we have the flexibility to evaluate strategic partnerships and opportunities that complement and enhance the strength of our platform with the goal of driving shareholder value. As always, I sincerely appreciate your support of Direct Digital Holdings. I will now hand the call over to Diana Diaz, our Chief Financial Officer, who will walk through some of the financial highlights in further detail.

[Diana Diaz, CFO at Direct Digital Holdings]

Thank you, Mark, and good evening, everyone. I'll now provide a review of our second quarter results with some commentary on year-to-date results where relevant. Consolidated revenue in the second quarter of 2026 was $7.8 million, compared to revenue of $10.1 million in the second quarter of last year. As Mark mentioned, revenue declined in the quarter related to a decrease in spending by demand-side platform customers of $2.5 million. On a year-to-date basis, revenue of $14.5 million decreased compared to $18.3 million in the first half of last year. Excluding the decrease in sales to DSP customers of $4.5 million for the first half of the year, revenue grew about $700,000, or 5% year-over-year. Gross profit was $2.7 million for the second quarter of 2026, or 34% of revenue, compared with $3.6 million, or 35% of revenue in the second quarter of 2025.

[Diana Diaz, CFO at Direct Digital Holdings]

Operating expenses in the second quarter of 2026 decreased 7% to $5.6 million compared to $6 million in the second quarter of 2025. Total operating loss for the second quarter was $2.9 million, compared with an operating loss of $2.4 million in the second quarter of 2025. Net loss in the second quarter was $3.6 million, compared to a net loss of $4.2 million in the second quarter of last year. The adjusted EBITDA loss for the second quarter was $2.3 million, compared with adjusted EBITDA loss of $1.5 million in the second quarter of last year. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $500,000, compared to $700,000 at the end of December 2025. Total cash plus our accounts receivable balance as of June 30, 2026, was $3.2 million compared to $3.9 million at the end of 2025.

[Diana Diaz, CFO at Direct Digital Holdings]

Related to our current credit facility, we were not in compliance with certain financial covenants as of the end of the quarter. We are actively engaged with our lender and have requested a waiver. Discussions have been constructive and while the process remains ongoing, our current focus is on improving operating performance and working toward a mutually acceptable resolution. We will provide further updates when appropriate. Our focus continues to be on driving operational efficiencies and managing the business with financial discipline, and we're strategically investing in the business to capitalize on opportunities and drive sustainable long-term growth. Now, I'd like to turn it back over to Mark for some closing comments.

[Mark Walker, Chairman and CEO at Direct Digital Holdings]

Thank you, Diana, and thank you to everyone for joining. We appreciate your interest in Direct Digital Holdings and would like to now open the call for questions. Operator, please open the line.

[Operator]

Thank you, sir. If you would like to ask a question, please press star one on your telephone keypad. Once again, that is star one if you have a question today. Everyone, there are no questions. That does conclude our conference for today. We would like to thank you all for your participation. You may dis-

Participants

Executives

• Mark Walker, Chairman and CEO
• Diana Diaz, CFO

Analysts

• Walter Frank, Head of Investor Relations at IMS Investor Relations