Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: ERN, ERP

/C O R R E C T I O N -- Direct Digital Holdings/


In the news release, Direct Digital Holdings Reports Second Quarter 2022 Financial Results, issued 11-Aug-2022 by Direct Digital Holdings over PR Newswire, we are advised by the company that throughout the release the company name "Colossus Media, LLC" should read "Colossus SSP" rather than "Colossus Media, LLC" as originally issued inadvertently. The complete, corrected release follows:

Direct Digital Holdings Reports Second Quarter 2022 Financial Results

Second Quarter 2022 Revenue Up 90% Year-Over-Year to $21.3 Million

Second Quarter Net Income Up 58% Year-Over-Year to $2.6 Million, or $0.18 per Share

Company Raises Guidance to $70 Million-$75 Million for Full-Year 2022

HOUSTON, Aug. 11, 2022 /PRNewswire/ -- Direct Digital Holdings, Inc. (Nasdaq: DRCT) ("Direct Digital" or the "Company"), a leading advertising and marketing technology platform through its operating companies Colossus Media LLC ("Colossus SSP"), Huddled Masses LLC ("Huddled Masses") and Orange142, LLC ("Orange142"), today announced financial results for the second quarter ended June 30, 2022.

Mark Walker, Chairman and Chief Executive Officer of Direct Digital, commented, "We are pleased to report record revenue for the second quarter of 2022, demonstrating the strong growth driven by our business model. By focusing on expanding both of our impactful buy- and sell-side business segments, we have been able to expand our portfolio and client reach, delivering increased topline revenue, and consequently, overall growth in our adjusted EBITDA."

Keith Smith, President of Direct Digital, added, "This quarter's results are a testament to Direct Digital's diverse and open digital marketplace business model. This, along with our supportive partner in Lafayette Square Loan Servicing, LLC, who has recently allowed us to extend our existing non-dilutive debt facility, has propelled the Company to exceptional results for the quarter, which we expect will provide us a strong remainder of the year. Consequently, Direct Digital will be raising guidance for full-year 2022."

Second Quarter 2022 Financial Highlights:

Business Highlights

Financial Outlook

Direct Digital's guidance assumes that the U.S. economy continues to recover, and there are no major COVID-19-related setbacks that may cause economic conditions to deteriorate or otherwise significantly reduce advertiser demand. Direct Digital plans to offer annual guidance and update it throughout the year. Accordingly, the Company estimates the following:

Conference Call and Webcast Details

Direct Digital will host a conference call on Thursday, August 11, 2022 at 5:00 p.m. Eastern Time to discuss the Company's quarterly 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 following the live webcast.

Footnote

(1) "Adjusted EBITDA" is a non-GAAP financial measure and Adjusted EBITDA Margin is an operating ratio derived from 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.  

Forward Looking Statements

This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.

As used below, "we," "us," and "our" refer to Direct Digital. 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 statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements.

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. Our forward-looking statements 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. Although we believe that these forward-looking statements are based on reasonable assumptions, 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, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics, such as the ongoing global COVID-19 pandemic; 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; 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 unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management's attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding, of receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; and other factors and assumptions discussed in the "Risk Factors," "Management's Discussion and Analysis of Financial Conditions and Results of Operations" and other sections of our filings with the SEC that we make from time to time. 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 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.

About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses and Orange 142, 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 Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings, Inc's sell- and buy-side solutions manage approximately 88,000 clients monthly, generating over 98 billion impressions per month across display, CTV, in-app and other media channels. The company has been named a top minority-owned business by The Houston Business Journal.

 

CONSOLIDATED BALANCE SHEETS



June 30, 2022


December 31, 2021








ASSETS







CURRENT ASSETS







Cash and cash equivalents


$

4,915,815


$

4,684,431

Accounts receivable, net



14,843,049



7,871,181

Prepaid expenses and other current assets



794,092



1,225,447

 Total current assets



20,552,956



13,781,059








Goodwill



6,519,636



6,519,636

Intangible assets, net



14,614,669



15,591,578

Deferred tax asset, net



3,195,034



?

Deferred financing costs, net



33,434



96,152

Operating lease right-of-use assets



885,458



?

Other long-term assets



56,605



11,508

Total assets


$

45,857,792


$

35,999,933








LIABILITIES AND STOCKHOLDERS' / MEMBERS' EQUITY (DEFICIT)







CURRENT LIABILITIES:







Accounts payable


$

10,161,370


$

6,710,015

Accrued liabilities



6,656,478



1,044,907

Current portion of liability related to tax receivable agreement



183,260



?

Notes payable, current portion



550,000



550,000

Deferred revenues



442,982



1,348,093

Operating lease liabilities, current portion



96,621



?

Related party payables (Note 7)



-



70,801

 Total current liabilities



18,090,711



9,723,816








Notes payable, net of short-term portion and deferred financing cost of $2,038,438 and $2,091,732,
respectively



19,136,562



19,358,268

Mandatorily redeemable non-participating preferred units



?



6,455,562

Line of credit



400,000



400,000

Paycheck Protection Program loan



?



287,143

Economic Injury Disaster Loan



150,000



150,000

Liability related to tax receivable agreement, net of current portion



2,565,640



?

Operating lease liabilities, net of current portion



789,436



?

Total liabilities



41,132,349



36,374,789








COMMITMENTS AND CONTINGENCIES














STOCKHOLDERS' / MEMBERS' EQUITY (DEFICIT)







Units, 1,000,000 units authorized at December 31, 2021; 34,182 units issued and outstanding as of

  December 31, 2021



?



4,294,241

Class A common stock, $0.001 par value per share, 160,000,000 shares authorized, 3,163,214 shares

   issued and outstanding as of June 30, 2022



3,163



?

Class B common stock, $0.001 par value per share, 20,000,000 shares authorized, 11,378,000 shares

    issued and outstanding as of June 30, 2022



11,378



?

Additional paid-in capital



7,747,250



?

Accumulated deficit



(3,036,348)



(4,669,097)

Total stockholders' / members' equity (deficit)



4,725,443



(374,856)








Total liabilities and stockholders' / members' equity (deficit)


$

45,857,792


$

35,999,933

 

 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)



For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2022


2021


2022


2021

Revenues








  Buy-side advertising

$9,321,267


$9,113,304


$15,152,308


$13,941,352

  Sell-side advertising

11,940,041


2,068,587


17,479,337


2,934,273

     Total revenues

21,261,308


11,181,891


32,631,645


16,875,625









Cost of revenues








  Buy-side advertising

3,154,471


3,351,655


5,223,817


5,306,295

  Sell-side advertising

9,771,017


1,655,713


14,291,209


2,397,406

     Total cost of revenues

12,925,488


5,007,368


19,515,026


7,703,701









 Gross Profit

8,335,820


6,174,523


13,116,619


9,171,924









Operating expenses








  Compensation, taxes and benefits

3,494,692


2,123,783


6,049,728


3,896,864

  General and administrative

1,776,981


1,530,729


3,417,873


2,781,244

     Total operating expenses

5,271,673


3,654,512


9,467,601


6,678,108









 Income from operations

3,064,147


2,520,011


3,649,018


2,493,816









Other income (expense)








  Other income

-


527


47,982


19,186

  Forgiveness of Paycheck Protection Program loan

287,143


-


287,143


10,000

  Gain from revaluation and settlement of seller notes and earnout liability

-


21,232


-


21,232

  Loss on redemption of non-participating preferred units

-


-


(590,689)


-

  Interest expense

(650,251)


(828,410)


(1,364,038)


(1,640,167)

     Total other expense

(363,108)


(806,651)


(1,619,602)


(1,589,749)









Income before taxes

2,701,039


1,713,360


2,029,416


904,067

Tax expense

86,676


54,000


86,676


54,000









Net income

$2,614,363


$1,659,360


$ 1,942,740


$     850,067









Net income per common share/unit:








    Basic

$         0.18


$          48.54


$           0.18


$           24.87

    Diluted

$         0.18


$          48.54


$           0.18


$           24.87









Weighted-average number of shares of common stock / units outstanding:








    Basic

14,257,827


34,182


10,701,715


34,182

    Diluted

14,257,827


34,182


10,701,715


34,182









 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



For the Six Months Ended
June 30,



2022


2021


Cash Flows (Used In) Provided By Operating Activities:






Net income

$            1,942,740


$               850,067




Adjustments to reconcile net income to net cash (used in) provided by operating activities:








Amortization of deferred financing costs

301,105


169,258





Amortization of intangible assets

976,909


976,909





Amortization of right-of-use assets

50,021


-





Stock based compensation

15,407


-





Forgiveness of Paycheck Protection Program loan

(287,143)


(10,000)





Paid-in-kind interest

-


192,367





Deferred income taxes

38,966


-





Gain from revaluation and settlement of earnout liability

-


(21,232)





Loss on redemption of non-participating preferred units

590,689


-





Bad debt expense

24,799


31,815





Changes in operating assets and liabilities:









Accounts receivable

(6,996,667)


(175,906)






Prepaid expenses and other assets

386,258


(91,541)






Accounts payable

3,406,355


438,105






Accrued liabilities

649,409


140,657






Deferred revenues

(905,111)


146,819






Operating lease liability

(49,422)


-






Related party payable

(70,801)


-







Net cash provided by operating activities

73,514


2,647,318












Cash Flows Provided By (Used In) Financing Activities:






Payments on term loan

(275,000)


(77,801)



Payment of deferred financing costs

(185,093)


-



Proceeds from Paycheck Protection Program loan

-


287,143



Proceeds from Issuance of Class A common shares, net of transaction costs

11,212,043


-



Redemption of common units

(3,237,838)


-



Redemption of non-participating preferred units

(7,046,251)


-



Payments on seller notes and earnouts payable

-


(309,491)



Distributions to members

(309,991)


(652,569)






Net cash provided by (used in) financing activities

157,870


(752,718)






 

Net increase in cash and cash equivalents

231,384


1,894,600


Cash and cash equivalents, beginning of the period

4,684,431


1,611,998


Cash and cash equivalents, end of the year

$             4,915,815


$          3,506,598







Supplemental Disclosure of Cash Flow Information:




     Cash paid for taxes

$                           -


$                  54,000

     Cash paid for interest

$            1,058,548


$             1,279,603

Non-cash Financing Activities:




     Transaction costs related to issuances of Class A shares included in accounts payable and accrued liabilities

$            1,045,000


$                            -

     Common unit redemption balance included in accrued liabilities

$            3,962,162


$                            -














 

 

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 acquisition transaction costs, forgiveness of Paycheck Protection Program loans, gain from revaluation and settlement of seller notes and earnout liability, loss on early extinguishment of debt, and loss on early redemption of non-participating preferred units ("Adjusted EBITDA"), a non-GAAP financial measure, as well as Adjusted EBITDA divided by total revenue, an operating ratio derived from non-GAAP financial measures ("Adjusted EBITDA Margin"), are useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA and Adjusted EBITDA Margin is net income.

In addition to operating income and net income, we use these non-GAAP financial measures as measures of operational efficiency. We believe that these non-GAAP financial measures are 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 these non-GAAP financial measures has limitations as an analytical tool, and you should not consider them 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 for each of the periods presented (however, we are unable to provide a reconciliation of Adjusted EBITDA Margin, an operating ratio derived from a non-GAAP financial measure, for a number of reasons, including due to the unknown effect, timing and potential significance of certain income statement items):


NON-GAAP FINANCIAL MEASURES
(Unaudited)










For the Three Months
Ended
June 30,


For the Six Months
Ended
June 30,


2022


2021


2022


2021

Net Income

$ 2,614,363


$ 1,659,360


$ 1,942,740


$    850,067

Add back (deduct):








    Amortization of intangible assets

488,455


488,455


976,909


976,909

    Interest expense

650,251


828,410


1,364,038


1,640,167

    Tax expense

86,676


54,000


86,676


54,000

    Forgiveness of Paycheck Protection Program loan

(287,143)


-


(287,143)


(10,000)

    Gain on seller earnout revaluation

-


(21,232)


-


(21,232)

    Loss on early redemption of non-participating preferred units

-


-


590,689


-

Adjusted EBITDA

$ 3,552,602


$ 3,008,993


$ 4,673,909


$ 3,489,911

 

SOURCE Direct Digital Holdings


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