Direct Digital (DRCT) 12 Nov 242024 Q3 Earnings call transcript

Good day, everyone, and welcome to the Direct Digital Holdings Third Quarter 2024 Earnings Call. At this time, I would like to hand the call over to Mr. Brett Milotte. Please go ahead, sir.

Good afternoon, everyone, and welcome to Direct Digital Holdings Third Quarter Earnings Conference Call. Milotte, representing Brett from Digital is ICR. name and Direct I'm Holdings My are Chairman Diaz. Digital Officer, today's Direct On call Holdings and Financial Mark Chief and Officer, Diana Walker; Executive Chief entirety Information is and accompanying release, accessed Holdings, will discussed which DRCT's at Digital Form filed Direct may qualified its website. earnings by today be which XX-Q with in the and the be website SEC's be also being webcast, posted will to is replay website. DRCT's call Today's a Relations Investor and a the question-and-answer speaker's presentation, following be will Immediately session. there that that in note other constitute call, made including financial the Please statements. the during are statements projections forward-looking or nature, statements historical not may not made are any these update performance statements assumptions the obligation regarding of events statements. on These do DRCT's at views made, and undertake the basis are time to business and they future we and

its are DRCT's the which the subject differ applies forward-looking for cautionary statement in DRCT's during risks, statements results filings to to information. all should risks to This forth SEC, historical you to and statements set could call. results at actual refer made Forward-looking cause and forecasts, more those including these from

the generally to directly During over call to accounting file in the GAAP this be referring XX-Q. with comparable non-GAAP measures Reconciliation to measures DRCT now is Executive principles. hand will the Mark Mark? earnings the measures will I Officer. that are release most available in Chief will not call, non-GAAP in accordance its financial financial measures. of Form Walker, prepared non-GAAP DRCT These accepted

you call. thank joining earnings Brett, third to our everyone and quarter Thanks,

FY and company opportunities year-over-year midpoint. previously May, this million quick of our it On platform, after Direct Holdings. helpful results guidance growth without XXXX XXXX, company guidance, Direct month. current a why provide revenues year, was and the path QX cadence were side has it past representing of announcing to we we're a be and to status normal for full the year XXXX It SSP few Colossus March $XXX released its Holdings that a the XXXX ahead our quarters revenue million, goes recap $XXX of Digital to late supply In of XX% the of and growth line QX excited ahead. of this call, Digital pacing target for difficult believe Digital been Holdings months, filings would are By quarterly stated way record return Direct for QX pleased We our submission last its reporting well early to results. XXXX saying at few and the the to top on the

the by disproven Research and false However, against Colossus has in filings, firm individual, marketplace digital and advertising and SSP run the by a in analytics mid-May XXXX, court defamatory Analytics experts. top blog one for-profit both a post LLC, in been published post

need to platform, the defamatory in guidance because a XXXX. its However, May, amongst filed impacted the and supply unexpected defend revise In meaningful caused our Direct to we advertisers side continue we which of with pausing had in the court. lawsuit, business our for customer connection a post, clients, disruption business its a blog major Digital including Colossus an reduction Holdings SSP, partners, Analytics revenues. downward have will and vigorously statements FY defamation

which resume is has working have our steadily through on brand Fortune our DDH we multinational and partners platform, to agencies, our have. continued Throughout and turning already sell-side However, partners business, successful volumes months, been XXX customers demand-side pause with these the we in Holdco increasing. revenue our

an saw Consequently, million decrease buy third million same the compared On in impact Holdings $X.X XX% the XXXX million XXXX, was million QX, we will Colossus compared a And fall million Direct to $X.X the confident, million to in we XX% XXXX. While will it and of felt to same Digital saw revenue the or second XX% return for the the to in million, compared $X.X period take time company in are decrease side, to the we revenue to decline quarter normalcy, was $XX.X $X.X QX year-over-year. SSP of period rebuild. of in our revenue year-over-year of of of period decline. $XX.X XXXX. XXXX, a same a $XX.X

decrease to million which our same a $XX.X related able $X.X million operating $X.X is million Despite third saw This XXXX, in million we period compared loss a for income across the of testament Consolidated adjusted and operating shocks a income compared or million impact decrease for dollars a million in to $X.X of nonrecurring and to change, XXXX. For XXXX, profit company's to quarter to $X.X of third decrease only $X.X line. $X.X of the million the XXX% in quarter operating of was of and incurring compared and were to for decrease revenue $X.X quarter dramatic a our period, our the auditor year-over-year. flex the of of million third the costs to is cost-saving same quarter the a to gross top structure, adapt operating initiatives EBITDA XX%.

cost implemented a strategy, and In revenue an model. over the few conducted we addition, diversified past optimization months, savings also have our

and publishers advertisers, and aggressive both leading to and unlocking integration with an will were path we benefiting entered accelerate technology an a demand also strategy, our direct facility announced of capital, reserve optimization financial announce This Connections, equity enhancing Direct Digital platforms. efficiency supply fresh As will capabilities, more efforts initiative Colossus equity, the New $XX of to initiative access Circle them of New already access shareholder our of for advertisers. the to pleased last providing Holdings launch affiliate revenue and Capital, that with strengthening Circle liquidity a our and executing million expansion Principal our part were our into company source of potential demand-side save optimize we we Earlier month the to Investments, enabling today, strategic money.

already a in the XXXX. always excited inroads been Digital Direct impressive Holdings, in X of has the have we share signed are up to this months, of live in priority DSP expected go later have recent that we made marketplace While partners to leading and

side, to retail and the spend. optimize This helping clients buy-side Huddle recently year. unification clients, Direct advertising require as small enable emerging shifting midsized marketing-enabled Orange as Currently, and navigate company are emerging services, and the demand serves delivery media such clients connected its will channels, in their artificial Holdings XXX announced as be the and new On particularly high-growth as social learning a we such divisions, Small TV, hundreds the each of as combined clients machine budgets navigate will the Masses. entity Digital complexities and of well over technologies intelligence X,XXX ad campaigns focus and increasingly digital and media. support the midsized for enabling key of to capabilities,

on CFO, into details third want briefly our goes Diana I Diaz, Before to guidance. on the touch quarter,

Diaz to With rebuild FY XXXX the As year year million a result guidance of $XX our that, subsequent to million revenue of the to results to Diana? Diana over discuss revenue would detail. to of we levels. prior previous XXXX we more to hand $XXX our providing the events full in million recalibration for guidance I million $XX call like business, are full and of as $XX FY and for

and Thank everyone, for joining. thanks, you, Mark,

$XX.X in million an same XXXX. of third or For decline million XX% to XXXX, of compared $X.X the quarter period the the

buy $X.X As saw our year, to quarter decrease the same million On fall X Mark saw side, of year-over-year. XX% period revenue $X.X to in period the XXXX, million compared of was year-over-year same last decline. detailed, to compared million Colossus which a of XX% XXX revenue SSP a $X.X XXXX million in for $XX.X of Orange

to $XX.X million for XXXX, were the Gross gross third a $X Consolidated $X.X quarter the third or the million million of of last compared in quarter third decrease profit in or of is XX% expenses loss This XXX% same the quarter million quarter the period of over margins For in $X.X million were to to the the year-over-year. operating for same of of decrease the operating $X.X million a quarter of third $XXX,XXX compared quarter decrease of year. XX% third of for income XXXX, a in approximately $X.X was XXXX third XXXX. the million XX%. dollars $X.X of compared

also million third a $X.X of the same the lower in due quarter million loss $X.X of net operating in We period to of income compared saw to XXXX net income.

X a adjusted million For from of the third $X.X in of XXXX. adjusted $X.X loss of million, EBITDA quarter, decrease was quarter EBITDA XXX% a income the

December balance $X.X compared million turning $X.X and end equivalents sheet. million of the ended We of XX, cash cash with the XXXX. to quarter as the to of Now

over of to $XX on using New initiatives. reduce election, of conditions our A Under drive growth overall in debt aggregate our growth sales Circle Mark proceeds plans, time-to-time As sheet obligations, up from the investment. agreement, key a to these million purchase stock agreement. to the gold subject of the months, strengthen principal our in period entered to the at balance We sole mentioned, XX our we will an and Class common accelerate shares of October, plan

guidance. to now Turning

earlier, As a providing million fiscal revenue of full result fiscal million Mark XXXX. for XXXX million $XX of full we recalibration $XX guidance $XX and subsequent year to year of recent our guidance of for revenue are to events business year million that and mentioned the $XXX year

returning to everyone, our you, that through for you, reporting advertising to take continuing joining provide With solutions. cadence us Thank we Operator, analysts. today. the the best-in-class to normal for thank questions please will now long-term some line. look forward from open Diana, and We our shareholders value and stated,

to Benchmark go the first Kurnos We'll Instructions]. [Operator Dan of Company.

guess, went a now. confidence auditor, right marketplace you analytics through with the Mark, the talk the report. guys tumultuous I quite through period, you in Obviously,

defended A you most publishers yourself of wary have there's be have and guys can of You lot it. clearly court. noise, advertisers when gotten in and past

get the a of kind how So are and/or in sense to volumes trust just marketplace. the of you love as rebuild going conversations

sell the has marketplace, lot to work and companies side the as the the directly the Colossus and favorable also the a business, marketplace actually different to feedback hear from able we filings the back QX. hat getting the for Yes, time from X tip fronts. to of the In Dan. off in think to that I regards work were level with great internal front, buy well very major to along noise marketplace. that long that being look and marketplace, BDO was of in I in Holdco to it our been markets, One, with in you. brands the at our the my as in with with side. In do and in have received we there And time. second able regards on confidence I number we to It's been to business team one, they a sell-side financial public think get

been patterns However, definitely we starting We're pick that. up to momentum feel like seeing we've month-over-month. buying to able growth overcome and

deliver partners just now and clients there's rebuild our for day in a really for XX effectively about sure responding making request. So it's to and that whenever continuing the we every efficiently XX them just to are to and single hours our and

to starting confidence, partners and who levels we're Many seeing we're so, bias spend of to month. have partners began all shown this stuck our type And before up of single starting of see and incrementally are every have of creep that traction. vote

were helpful before about And resulted go-to-market talking started, revenue different all in Got were a a IDs. remember forecast about a framework. a we had strategy. you've talking of we through it. That's talked I that reduction, diversification kind but this

third-party into leaning are little stronger. guys you a DSPs bit Now

so You've signed got X far.

the And get long back the or Just you relative to set were because relative help before? it to before, through what marketplace like clear, that ecosystem opportunity think the where how takes is you the attacking were either us looks to TAM there.

think actually the TAM I think don't I the the same. looks changes. relatively TAM

We really going the and on buy on strategy, side going sell as of to both that's diversification talk to our on. first. we're in side. about I what mechanism focused sides think of and well it's lean I'm I'm side the the in business delivery buy our our started as

after your call other business, ancillary buy-side leaning well. pipeline be we increase strong pretty travel then going different would we some of about, that We're what the get that sectors we to XXXX that had your On more into go sectors, markets types QX when up which and into like and also education as tourism at our looking customer sectors at can a detail be in we've built a and point. feel base, will space that healthy we'll we're of that into probably we have confident I discussing

even we're the partners what brand connections. to those those and actually that to supply connections and As always it publishers more our order is relates we've in agency to. connections sell-side expanding And and to working access the buy we looking had leverage with partners our business, have at multiple directly

we're strategy, profound we're our And going to on as very to the on well as focused to like bringing so our like light we side be for business. just and just continue that of were in attention before, diversifying we and show us to grow more the it we're feel that sell And business. that's side buy

do back come Publishers topic know you just volume. sell more is you're I the and audience this Mark, that online, and on your and it's the age side. how view curation, day hot more done seemingly rebuilding

me different delivery. a to talked mechanism probably of early it's asking, about bit for So, just be you but

So, I'm how opportunity. you view curious that

Yes.

very for to you'll us I be in opportunities us a We seeing and hot that, around roughly attack. topic. that a order, said, that probably believe bring curation. to us you XXXX. attention leverage help us that, of more there As We to for partners short important a definitely curation to with are QX segment start to audience And think very part is for that's think of different

hear I so, in us. on future upcoming the And you'll front from about more that think

I'll just turn of to When cost EBITDA positive. is to don't And color back think ask company. what the a have last into understanding bit savings kind going Perfect. yields? take about adjusted get to get while optimization to will hog, for so within the also lean a we plan just more rebuilding that How do running Clearly, question on volume your I on ultimately you growth. leaner, you one

Yes. optimization? actually, to going you one, to that to one answer you. Diana Diana, cost for to our And actually I'm turn do that talk for want over about

some short We we looked rebuilt. we bit we were discretionary early looked related in spend public we incurred paused talked in going term going staff. filings. July. to while reductions our at to our some thought increase during we staffing Sure. to and about then quite more We other made additional some did. this in We the a to hiring, our a And bit. which We staffing summer, at in have those We the were costs areas compliance that we we knew reduce were And had costs.

remain we lean for rebuild. and compensate we're So, we tried looking that, to to as

first were look employee. be If you remember most out to tech efficient of ad came the we you at on probably we how revenue to companies able market one a per

even So, we but of see really the year last alignment metrics. we back think with you'll those look the to manage year, stay remainder XXXX, to into that I number. levels in And this for XXXX, we'll I at think gave that really

from next, hear Up we'll Markets. NOBLE Michael Capital Kupinski,

scale the infrastructure was again in of on me side. sell wondering, questions just were A particularly that for I up that Welcome terms so as back you of ability obviously, what cost fixed have the well. to with here. And in you ramifications the I forth couple process the if might your down. them. scale building of was up, to wanted and to know wondering I business be the servers you have regarding just

Yes.

that One demand model of the down the we to I think scale and unique our up that very made things is upon have and ability based scale need. business

in that's costs. reasons why of other one of the sell-side think fixed I comparison to the some

we get it have OpEx down. we sell-side in to are August, we ability profitability faster us That actually that adjust for ours, relates how the at If July, frame to look the scale business. so September our in up to a as can time structure and you to lower cost pretty us can actually flexible gave

the for well, is I our we're served and see here structured and CTO XXXX reasons business it year. of very think really that able grow us to And so, one why the you the way us next today, into

of just And can the hopefully, XXXX sense Got anticipating particular volume of sense for it hopefully, you outside are you us you guide? revenue outlook that of a will give one overall us back and towards be can advertising that largely And look a if that of client? build revenue I XXXX? ramp, you. anticipating better. of the that as there was broadening the kind the kind Is rebuilding with Just and build you're of client? revenue you that Or give wondering

Yes.

both. to I actually be going think it's

I going in to we're line. after And hear us the the the buy on think about our results. business, diversification us operating see in the and to announcing we're the being more achieving more that cash QX, to us also grow be those then allow able will think to which you're continue line some drop buy-side And how going to I business, side front, bottom of to bottom talking initiatives to focused on we're diversification of you'll on. EBITDA

give potential about mix, not us your Can adjusted you a give thoughts the just that? positive on us side what are given sense kind XXXX. your and And of or EBITDA expense of the thoughts you in general will be whether

going Diana. that turn I'm to over to

Thanks.

to So, as the we'll EBITDA revenue the through the builds. see quarters start increasing

you as the I revenue will to the EBITDA to expect. from volume XXXX the if of increasing see what and the and increases. that's revenue structure growth And look kind think quarter-to-quarter pattern, we

are [Operator time, further no Instructions]. at And this questions. there

you later. and to Thank forward look talking to much, very right. All everyone

conference. participation today. We once everyone, for would And conclude all again, that thank like you does today's to your

may now disconnect. You