Transcript • Apr. 7, 2026 9:00 PM • Direct Digital Holdings, Inc. Class A Common Stock (DRCT)
Transcript
Apr. 7, 2026 9:00 PM
Direct Digital Holdings, Inc. Class A Common Stock (DRCT)
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Direct Digital Holdings fourth quarter and full year 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Walter Frank of IMS Investor Relations. You may begin.
Walter Frank: Good afternoon, everyone, and welcome to the Direct Digital Holdings fourth quarter and full year 2025 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 8K and accompanying earnings release, which was filed on Wednesday, April 1st by Direct Digital Holdings and 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 Holdings investor relations website. Immediately following the speaker's 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. These statements are made on the basis of Direct Digital's views and assumptions regarding future events and business performance at the time that they are made, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to risks, which could also cause Direct Digital's actual results to differ from its historical results and forecasts, including those risks set forth in Direct Digital's filings of 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 this 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 8K last week. I will now hand the call over to Mark Walker, Chief Executive Officer. Please go ahead, Mark.
Mark Walker: Thanks, Walter. And thank you to everyone joining our call this evening. I'll start by reviewing some of the highlights of our operations and financial results during the fourth quarter and full year 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. For the full year, we reported $34.7 million in sales. While we saw a decrease in our sell-side revenue during the year, we grew full-year buy-side revenue maintained strong gross margins for the year, and importantly drove considerable efficiency and cost reduction in the business. Finally, we made significant strides in improving our balance sheet. We still have a lot of work to do, but I'm encouraged that many of our strategic initiatives position us very well as we move into 2026. We're a focused, more nimble organization with a realigned structure and a clear strategy to drive returns for shareholders. Over the past year and a half, we've noticed a shift in the overall digital advertising market that prioritizes buy-side transactions, as well as increasing demand from our customers for more accessible buy-side media. During 2025, we began to lean into this demand, resulting in increased buy-side revenue, which offered some early confirmation for what we're seeing in the market. Fast-forwarding to where we are today, buy-side revenue grew 28% in the fourth quarter of 2025 compared to the fourth quarter of 2024 and has increased 10% year-over-year, supported by a combination of new and existing customers and the demand we're seeing across our verticals, including travel and tourism, higher education and energy, to provide a few examples. As we move through 2026, we'll continue to increase our focus on driving more digital marketing spend, among our buy-side and new enterprise customers. To this end, in March of 2026, we launched Ignition Plus, our AI-enabled programmatic media solution, which provides enhanced accessibility for large enterprise clients in the buy-side network. We'll also prioritize the transparency, efficiency, and cost reduction through AI-driven optimization and site security. We believe the launch of Ignition Plus And our focus on driving digital marketing spend among buy-side and new enterprise customers will allow us to more nimbly address changing market dynamics and capitalize on the many emerging opportunities that we're seeing. Specifically, Ignition Plus takes the sell-side intelligence, data, and expertise that we've collected and built over many years within our Colossus business to inform supply-side access and combines it with Orange 142's end-to-end programmatic media technology stack. The result is centralized buying that enables brands to buy media instead of markups, significantly increasing the value of their marketing budget. Ignition Plus is supported by a team of on-demand programmatic experts and designed to focus on solutions for mid-market enterprise brands who have traditionally been forced to choose between transparency and scale when selecting an ad tech solution. This is streamlined operating structure that enables us to more efficiently go to market and drive value creation for our shareholders. As a result of these changes, we're consolidating our operations into a single reporting segment beginning in 2026. We believe the streamlined structure combined with the growth strategies we have put in place, our restructured balance sheet, targeted operational improvements, and ongoing cost discipline positions us to return to positive platform growth and achieve break-even or better quarterly performance by the second half of this year. Thanks to all the hard work, dedication, and support from our team, we enter 2026 on full stride with a refreshed and revitalized strategy that allows us to expand our market share and meet the growing demands of both current and new customers. As always, we sincerely appreciate your support of Direct Digital Holdings, and we're encouraged by the many exciting opportunities ahead of us in 2026. 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: Thank you, Mark, and good evening, everyone. I'll now provide a review of our fourth quarter results with some context on full-year trends where relevant. Consolidated revenue in the fourth quarter of 2025 was $8.4 million compared to revenue of $9.1 million in the fourth quarter of last year. Buy-side revenue increased approximately 28% to $8.2 million compared to buy-side revenue of $6.4 million in the fourth quarter of last year. Sell-side revenue was $200,000 in the fourth quarter compared to $2.7 million in the fourth quarter of last year. The decrease in sell-side advertising revenue was primarily related to a decrease in impression inventory when compared to the fourth quarter of last year. Gross margin for the fourth quarter of 2025 was 27% compared with 32% in the fourth quarter of last year. Operating expenses in the fourth quarter of 2025 were $6.7 million, a decrease of 12% compared with $7.7 million in the same period of last year. On an annual basis, operating expenses decreased 18% to $25.2 million for the full year of 2025, a decrease of $5.4 million compared with operating expenses of $30.6 million in the full year of 2024. expense reduction remains a key strategic priority and we're pleased with the progress achieved in 2025. Total operating loss for the fourth quarter was $4.5 million, consistent with the fourth quarter of 2024. Net loss for the fourth quarter was $12.6 million, compared to a net loss of $6.6 million in the fourth quarter of last year. This year's quarterly net loss included non-operational financing related costs of $7.4 million. Adjusted EBITDA for the fourth quarter of this year was a loss of $3.6 million compared with adjusted EBITDA loss of $3.4 million in the fourth quarter of last year. Turning to the balance sheet, we ended the quarter with cash and cash equivalents. of $700,000 compared to $1.4 million at the end of last year. Total cash plus our accounts receivable balance as of December 31, 2025 was $3.9 million compared to $6.4 million at the end of last year. Throughout the quarter and the year, we've taken several steps to enhance our balance
Abby: Ladies and gentlemen, please stand by while we work through our technical difficulties.
