Company's Full-Year 2023 Revenue Up 76% Year-Over-Year to $157.1 Million, the Eighth Consecutive Quarter of Double-Digit Growth
Full-Year 2023 Net Income of $2.0 million; Adjusted EBITDA(1) Up 11% Year-Over-Year to $11.3 Million
Company Issues Full-Year 2024 Revenue Guidance of $170 Million ? $190 Million
HOUSTON, March 26, 2024 /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"), Orange142, LLC ("Orange 142") and Huddled Masses LLC ("Huddled Masses"), today announced financial results for the fourth quarter and fiscal year ended December 31, 2023.
Mark D. Walker, Chairman and Chief Executive Officer, commented, "2023 was another transformational year for Direct Digital Holdings, achieving remarkable year-over-year revenue growth of 76% as well as dramatic operational expansion, and impressive results for our shareholders. Although performance in the fourth quarter was not as strong as we initially expected due to proactive measures we are taking in the face of changing macro industry trends, we are confident our company is in a position to build on the successes of 2023, expand on emerging channel and inorganic growth opportunities and continue our strong revenue growth and market share gains in 2024."
Keith Smith, President, added, "The growth we saw in 2023 was primarily driven by advancements in our technology stack, additions in our customer list and strategic investments throughout our business. We are confident that all of these initiatives position our company for continued growth throughout 2024 and strengthen our foundations as we prepare for a rapidly changing industry landscape."
Fourth Quarter 2023 Business Highlights:
_________________________
(1) "Adjusted EBITDA" is a non-GAAP financial measure. The section titled "Non-GAAP Financial Measures" below describes our usage of non-GAAP financial measures and provides reconciliations between historical GAAP and non-GAAP information contained in this press release.
Fourth Quarter 2023 Financial Highlights:
Fiscal Year 2023 Financial Highlights:
Financial Outlook
Assuming the U.S. and global economy does not experience any major market or economic conditions that deteriorate or otherwise significantly reduce advertiser demand, we estimate the following:
Diana Diaz, Chief Financial Officer, commented, "We are pleased to announce our fiscal year 2024 revenue guidance of $170 million to $190 million. This range demonstrates our belief that we can continue our growth and operational optimization strategies to deliver strong performance for our shareholders this year."
Conference Call and Webcast Details
Direct Digital will host a conference call on Tuesday, March 26, 2024 at 5:00 p.m. Eastern Time to discuss the Company's fourth quarter and fiscal year 2023 financial results. The live webcast and replay can be accessed at https://ir.directdigitalholdings.com/. Please access the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. For those who cannot access the webcast, a replay will be available at https://ir.directdigitalholdings.com/ for a period of twelve months.
Cautionary Note Regarding Forward Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws that are subject to certain risks, trends and uncertainties. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption "Risk Factors" and elsewhere in our most recent Annual Report on Form 10 K (the "Form 10-K") and subsequent periodic and or current reports filed with the Securities and Exchange Commission (the "SEC").
The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements. We believe these factors include, but are not limited to, the following: the restrictions and covenants imposed upon us by our credit facilities; our ability to secure additional financing to meet our capital needs; any significant fluctuations caused by our high customer concentration; risks related to non-payment by our clients; reputational and other harms caused by our failure to detect advertising fraud; operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry's technology and practices, and any perceived failure to comply with laws and industry self-regulation; our failure to manage our growth effectively; the difficulty in identifying and integrating any future acquisitions or strategic investments; any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing; challenges related to our buy-side clients that are destination marketing organizations and that operate as public/private partnerships; any strain on our resources or diversion of our management's attention as a result of being a public company; the intense competition of the digital advertising industry and our ability to effectively compete against current and future competitors; any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers', suppliers' or other partners' computer systems; any failure by us to maintain or implement effective internal controls or to detect fraud; and other factors and assumptions discussed in our Form 10-K and subsequent periodic and current reports we may file with the SEC.
Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Orange 142 and Huddled Masses, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings' sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company's subsidiaries Huddled Masses and Orange 142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from travel to education to energy to healthcare to financial services. Direct Digital Holdings' sell- and buy-side solutions manage on average over 115,000 clients monthly, generating over 326 billion impressions per month across display, CTV, in-app and other media channels.
CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except shares and par value amounts) | |||
December 31, | |||
2023 | 2022 | ||
ASSETS | |||
CURRENT ASSETS | |||
Cash and cash equivalents | $ 5,116 | $ 4,047 | |
Accounts receivable, net | 37,207 | 26,354 | |
Prepaid expenses and other current assets | 760 | 883 | |
Total current assets | 43,083 | 31,284 | |
Property, equipment and software, net | 599 | 673 | |
Goodwill | 6,520 | 6,520 | |
Intangible assets, net | 11,684 | 13,638 | |
Deferred tax asset, net | 6,206 | 5,165 | |
Operating lease right-of-use assets | 788 | 799 | |
Other long-term assets | 130 | 47 | |
Total assets | $ 69,010 | $ 58,126 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
CURRENT LIABILITIES | |||
Accounts payable | $ 25,097 | $ 17,695 | |
Accrued liabilities | 4,816 | 4,778 | |
Liability related to tax receivable agreement, current portion | 265 | 183 | |
Current maturities of long-term debt | 1,478 | 655 | |
Deferred revenues | 381 | 547 | |
Operating lease liabilities, current portion | 126 | 92 | |
Income taxes payable | 108 | 174 | |
Related party payables | 83 | 1,448 | |
Total current liabilities | 32,354 | 25,572 | |
Long-term debt, net of current portion and deferred financing cost | 28,578 | 23,064 | |
Liability related to tax receivable agreement, net of current portion | 4,977 | 4,150 | |
Operating lease liabilities, net of current portion | 773 | 745 | |
Total liabilities | 66,682 | 53,531 | |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' EQUITY | |||
Class A common stock, $0.001 par value per share, 160,000,000 shares authorized, 3,478,776 and 2,900,000 shares issued and outstanding, respectively | 3 | 3 | |
Class B common stock, $0.001 par value per share, 20,000,000 shares authorized, 10,868,000 and 11,278,000 shares issued and outstanding, respectively | 11 | 11 | |
Additional paid-in capital | 5,791 | 8,224 | |
Accumulated deficit | (3,477) | (3,643) | |
Total stockholders' equity | 2,328 | 4,595 | |
Total liabilities and stockholders' equity | $ 69,010 | $ 58,126 |
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except shares and per-share data) | |||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenues | |||||||
Sell-side advertising | $ 33,428 | $ 23,677 | $ 122,434 | $ 60,011 | |||
Buy-side advertising | 7,584 | 7,066 | 34,676 | 29,349 | |||
Total revenues | 41,012 | 30,743 | 157,110 | 89,360 | |||
Cost of revenues | |||||||
Sell-side advertising | 28,543 | 19,254 | 105,733 | 49,599 | |||
Buy-side advertising | 3,153 | 2,744 | 13,803 | 10,439 | |||
Total cost of revenues | 31,696 | 21,998 | 119,536 | 60,038 | |||
Gross profit | 9,316 | 8,745 | 37,574 | 29,322 | |||
Operating expenses | |||||||
Compensation, taxes and benefits | 4,795 | 4,229 | 17,730 | 14,124 | |||
General and administrative | 4,483 | 2,031 | 13,199 | 7,219 | |||
Total operating expenses | 9,278 | 6,260 | 30,929 | 21,343 | |||
Income from operations | 38 | 2,485 | 6,645 | 7,979 | |||
Other income (expense) | |||||||
Other income | 81 | - | 256 | 48 | |||
Revaluation of tax receivable agreement liability | 331 | - | 331 | - | |||
Contingent loss on early termination of line of credit | - | - | (300) | - | |||
Forgiveness of Paycheck Protection Program loan | - | - | - | 287 | |||
Loss on redemption of non-participating preferred units | - | - | - | (590) | |||
Interest expense | (1,273) | (961) | (4,378) | (3,231) | |||
Total other expense | (861) | (961) | (4,091) | (3,486) | |||
Income (loss) before income taxes | (823) | 1,524 | 2,554 | 4,493 | |||
Income tax expense | 403 | 111 | 568 | 326 | |||
Net income (loss) | $ (1,226) | $ 1,413 | $ 1,986 | $ 4,167 | |||
Net income (loss) per share: | |||||||
Basic | $ (0.09) | $ 0.10 | $ 0.14 | $ 0.34 | |||
Diluted | $ (0.08) | $ 0.10 | $ 0.13 | $ 0.33 | |||
Weighted-average number of shares of common stock outstanding: | |||||||
Basic | 14,296 | 14,144 | 14,236 | 12,400 | |||
Diluted | 15,019 | 14,497 | 14,891 | 12,753 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) | |||
For the Year Ended December 31, | |||
2023 | 2022 | ||
Cash Flows Provided By Operating Activities: | |||
Net income | $ 1,986 | $ 4,167 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Amortization of deferred financing costs | 615 | 598 | |
Amortization of intangible assets | 1,954 | 1,954 | |
Amortization of right-of-use assets | 164 | 137 | |
Depreciation and amortization of property, equipment and software | 253 | 34 | |
Stock-based compensation | 706 | 154 | |
Forgiveness of Paycheck Protection Program loan | - | (287) | |
Deferred income taxes | 494 | 105 | |
Payment on tax receivable agreement | (46) | (115) | |
Loss on redemption of non-participating preferred units | - | 590 | |
Revaluation of tax receivable agreement liability | (331) | - | |
Contingent loss on early termination of line of credit | 300 | - | |
Bad debt expense | 422 | 17 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (11,275) | (18,500) | |
Prepaid expenses and other assets | 201 | 307 | |
Accounts payable | 7,402 | 10,966 | |
Accrued liabilities | 295 | 2,798 | |
Income taxes payable | (66) | 174 | |
Deferred revenues | (166) | (801) | |
Operating lease liability | (92) | (98) | |
Related party payable | - | (71) | |
Net cash provided by operating activities | 2,816 | 2,129 | |
Cash Flows Used In Investing Activities: | |||
Cash paid for capitalized software and property and equipment | (178) | (688) | |
Net cash used in investing activities | (178) | (688) | |
Cash Flows Used In Financing Activities: | |||
Proceeds from note payable | 3,516 | 4,260 | |
Payments on term loan | (677) | (576) | |
Payments of litigation settlement | (258) | (65) | |
Proceeds from lines of credit | 5,000 | - | |
Payments on lines of credit | (2,000) | (400) | |
Payment of deferred financing costs | (576) | (525) | |
Proceeds from Issuance of Class A common stock, net of transaction costs | - | 11,167 | |
Acquisition and redemption of warrants, including expenses | (3,540) | - | |
Redemption of common units | - | (7,200) | |
Redemption of non-participating preferred units | - | (7,046) | |
Proceeds from options exercised | 29 | - | |
Proceeds from warrants exercised | 122 | - | |
Distributions to members | (3,185) | (1,693) | |
Net cash used in financing activities | (1,569) | (2,078) | |
Net increase (decrease) in cash and cash equivalents | 1,069 | (637) | |
Cash and cash equivalents, beginning of the period | 4,047 | 4,684 | |
Cash and cash equivalents, end of the period | $ 5,116 | $ 4,047 | |
Supplemental Disclosure of Cash Flow Information: | |||
Cash paid for taxes | $ 361 | $ 47 | |
Cash paid for interest | $ 3,736 | $ 2,568 | |
Non-cash Financing Activities: | |||
Property and equipment purchased included in accounts payable | $ - | $ 19 | |
Transaction costs related to issuances of Class A shares included in accrued liabilities | $ - | $ 1,000 | |
Distributions to members payable | $ 83 | $ 1,448 | |
Outside basis difference in partnership | $ 1,536 | $ 5,270 | |
Tax receivable agreement payable to Direct Digital Management, LLC | $ 1,286 | $ 4,332 | |
Tax benefit on tax receivable agreement | $ 250 | $ 823 |
NON-GAAP FINANCIAL MEASURES
In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization ("EBITDA"), as adjusted for stock compensation expense, contingent loss on early termination of line of credit, revaluation of tax receivable agreement liability, forgiveness of PPP loan, loss on early redemption of non-participating preferred units ("Adjusted EBITDA"), a non-GAAP financial measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss).
In addition to operating income and net income, we use Adjusted EBITDA as a measure of operational efficiency. We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:
Our use of this non-GAAP financial measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for each of the periods presented:
NON-GAAP FINANCIAL METRICS (unaudited, in thousands) | |||||||||||
Three Months December 31, | Year Ended December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Net income (loss) | $ | (1,226) | $ | 1,413 | $ | 1,986 | $ | 4,167 | |||
Add back (deduct): | |||||||||||
Interest expense | 1,273 | 961 | 4,378 | 3,231 | |||||||
Amortization of intangible assets | 489 | 489 | 1,954 | 1,954 | |||||||
Stock-based compensation | 161 | 69 | 706 | 154 | |||||||
Stock-based compensation accrued but not yet granted | 1,493 | - | 1,493 | - | |||||||
Depreciation and amortization of property, equipment and software | 68 | 34 | 253 | 34 | |||||||
Contingent loss on early termination of line of credit | - | - | 300 | - | |||||||
Income tax expense | 402 | 111 | 568 | 326 | |||||||
Revaluation of tax receivable agreement liability | (331) | - | (331) | - | |||||||
Forgiveness of Paycheck Protection Program loan | - | - | - | (287) | |||||||
Loss on redemption of non-participating preferred units | - | (1) | - | 590 | |||||||
Adjusted EBITDA | $ | 2,329 | $ | 3,076 | $ | 11,307 | $ | 10,169 |
Contacts:
Investors:
Brett Milotte, ICR
[email protected]
SOURCE Direct Digital Holdings
These press releases may also interest you
|