Direct Digital Holdings, Inc. Q4 FY2024 earnings call

• Full year 2024 revenue was in line with revised guidance despite challenges. The team executed a strategy, including diversification efforts.
• Diversification strategy: Launched Colossus Connections to integrate with demand-side platforms, signed two leading partners; pursuing alternative intermediaries for publisher spend.
• Buy-side focus: Unified divisions to target small- and mid-size clients, expecting $5M to $10M incremental revenue from new clients in 2025, starting Q2 2025.
• Cost savings: Achieved $2.1 million in Q4 2024 cost savings, with ongoing efforts to optimize costs.

For the fourth quarter of 2024, revenue was $9.1 million, a decrease from $41 million in the same period of 2023. Sell-side revenue fell to $2.7 million (down from $33.4 million in Q4 2023), impacted by a major customer pause in May 2024 but boosted by $600,000 from one-time political spend in October. Buy-side revenue was $6.4 million (down from $7.6 million in Q4 2023), with a $1.2 million decrease due to customer spend declines, partially offset by 8% growth from existing and new customers. Gross margin increased from 23% in Q4 2023 to 32% in Q4 2024 due to a higher mix of buy-side revenue. Operating expenses in Q4 2024 were $7.7 million, a decrease from $18.1 million in Q4 2023, with $2.1 million in cost savings realized.

• Reiterated fiscal 2025 revenue guidance of $90 million to $110 million. Expect strong growth in the second half of 2025 as new direct sell-side partners come online. Seasonality impacts first quarter, but sequential improvement seen in Q1 2025.

• Business disruption: Impact from a defamatory blog post in May 2024 caused a major customer pause, affecting revenue and expected to impact 2025.
• Economic conditions: Dependence on advertiser demand, which could be affected by major economic downturns.

Q: Dan Kurnos asked about Q4 impact, cadence, and client spends.

A: Mark Walker said political spend was higher than usual, Q4 impacted by post-election malaise, with sequential growth month-over-month and focus on developing new pathways for buyers and sellers.

Q: Michael Kupinski asked about focus shift to buy-side, cost savings, and cash flow.

A: Mark Walker mentioned focus on buy-side for 2 years with fruition, Diana Diaz expected annualized cost savings of $1.5 to $2 million, and real gains in the second half of 2025 expected to drive positive cash flow