DRCT - Earnings call transcript Q2 2020 | Direct Digital Holdings, Inc.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Direct Digital Holdings’ Second Quarter 2022 Earnings Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. now from turn ICR. would to conference I Milotte Brett Instructions] like the to over [Operator Please ahead. go

Brett Milotte

will that’s Good afternoon, is website. a and Investor that everyone projections ICR. Chairman second to I'm including quarter and and Direct replay constitute historical is forward-looking On the and the or time be its Echard. Please posted are assumptions filed we release and update at Immediately welcome to Chief discussed in call, earnings website representing SEC’s statements performance the information Today's Officer, Direct Direct Susan nature, call. Direct the be today's there'll by these also made DRCT's conference accessed Relations Chief being question-and-answer obligation made business any call presentation, My Holdings, regarding been Digital session. Holdings Executive website. statements name call qualified financial Digital The may entirety Brett Financial accompanying other are Form Digital X-K speakers' and are future XXXX statements. Officer, note DRCT's in Milotte from made. Digital is and this following not webcast during are and undertake of basis statements. do they Holdings’ And today Holdings’ views by they and Walker; Mark to the be events DRCT's on statements earnings not Such the today which a through

set with And statement on and to information. all forecasts, risks carefully forth for cause forward-looking more risks results DRCT's applies statements reliance historical could statements. the during undue Do not to results which consider these made any and from This Forward-looking subject those you filings call. should differ this the DRCT's in to statements are to refer place SEC. forward-looking those cautionary actual including its

GAAP filed on not its financial available directly conference measures to prepared the Mark Mark? hand most Accepted I Generally is to of Officer. These Accounting the earnings comparable DRCT to in During reconciliation in measures. Principles. Executive the measures referring measures Walker, are Form today. with this will financial now be Chief A non-GAAP will X-K non-GAAP release call accordance non-GAAP the DRCT

Mark Walker

Brett, financial company. is third performance afternoon, and good Thanks, and report our to call the for everyone. record continued second earnings the a incredibly This for as proud I'm public growth quarter year.

is specific to brief through time. into in go selling I details, first those provide joining and for of Direct Before Digital to a overview Holdings you the that buying want driving company of leverages media. a us the for ROI technology clients I assist

access platform technology publishers the Our general the and and proprietary market market, sell-side to our platform. of underserved middle meets demands provides through multicultural

remainder overview financial by providing expand grow and call offerings brief the other of to main turn education, develop buy-side it our begin the XXXX. ROI. Masses for through XXXX Colossus Eckerd, platform. to will is was platform, founded which In for Huddled business financial proprietary businesses sell the in SSP, Masses services United States revised of acquisition results will and Susan our with company's share who acquired and drive media our purchase across will travel was the then and I to is platform, end-to-end Huddled to programmatic genesis industry quarter the middle and XXXX, while buyers guidance buy-side our the our which Our technology and Colossus highlights market into further verticals. over initial to and media OrangeXXX enables the publishers that to of enables sell-side financial tourism, CFO detailed a to our we OrangeXXX business along and

Digital strategic grow will combination to of First, how due a want factors. platforms, to our Direct through continue buy- to sell-side I address of variety and

you As to our business been on growth our consequently, overall But is Digital adjusted growth driven our line top expanding strong EBITA. focusing in organic Direct deliver from increased and second by have results, segments, model. able we experiencing revenue quarter both will see our business

$XX.X For revenue, period XX% the second an in same XXXX. $X.X quarter same we we million adjusted of in XX% the over EBITDA the of generated period over of increase And up achieved XXXX. million,

advertiser bid target business to growth our our up experienced impression we continually increase expanding an year-over-year. advertisers, platform the significant of overall acceleration expansion responses, over over in expansion increasing XXX% from fed our the and over segments overall of influx an quarter advertisers impressions year-over-year. growing increase saw is for of impression of properties XX,XXX grew properties, our of sell-side year-over-year increase have With of XX billion, marketplace, ability to of The led XXX% properties through matrix same XX,XXX. is billion of advertiser now This our our XXX% combination X a we've monthly period base. which count XX% with our which the an which Our By to growth over XXXX. base, second in our count

buy-side advertising our In feedback, digital solutions, are our in growing efficient our count media. of we are to continuing platforms which provide service the team the grow are $XX.X and foreseeable able growth our well to able projections have multicultural increase with other insurance, through both education, open been With which their at market higher able in audio future. business to and up and viewing predictable are as time our an to in advertisers Digital, for Our profitable the with year, customer clients. the XX% comparison overall in which business strategy delivered half This buy-side buy-side on and increase of continue buy-side continued to for is for been garden ROI. line million, in our advertisers as XXX are which We last been and over to platform driving CTV, garden their middle broad focused XXXX, effective expenditures XXXX, are over platform, an sell-side XX% digital exceed platform for Clients mix continue to as OTT to technology diverse period. the deliver our advertising. up positioned top and many leverage alternatives similar is for enabled has segment will to revenue diminishing growth a able attract to QX expectations. X%. and we're therefore to client growth we a delivering Digital’s with comprehensive on side has platforms and general companies to more same XXXX and our and $X.X With platforms. DMOs, walled our growth to a returns customer display services, Consequently, organic year-over-year allowed total, Based underserved healthcare, that more for our walled is roughly benefit see platform, upon And marketing for our buy-side market X% to for our platform client believe have ROI on of count to first segment we first strategically million and currently that XX,XXX growth costs of segment. our revenue native video, business platform purchase deliver Direct advertisers business overall has We publishers, for fuel to on walled experiencing in reassessing searching garden more cost half to Direct attract clients measurement efficient by focus who accelerate monthly continuing that industries. transparent pursuit open digital financial our

As I is continuing to the overall relates would the uncertainty to trends, one volatility the macroeconomic and it market. in aspect quickly like highlight

tighten potential we the believe may multi-segmented and approach, strategy decrease, business spent mitigates While growth and that with inherent downturn. coupled a may marketing diversification our organic business spending

our continue our platforms we and business Houston top the margin. growth buy-side In positive organic be a Business sell-side to both Journal. addition, minority-owned proud to by a are We're EBITA strategy delivering adjusted also while named across committed

growth roles innovation, to attract entrepreneurship and key that and Our corporate generating strategy a fosters is revenue maintain building continue and hiring talent. to culture

of performance furthers is us bolsters Finally, going ultimate HPE business the who cost with Susan tech growth across ongoing our way, quarter through industries, to allows and I and the to guidance. our strategy. which a will over of changes walk Eckerd, to to efficient sell-side scale our of provide with annual technological you infrastructure some for now things GreenLake the in we hand transition our believe demands our the highlights our financial and the advertising platform

Susan Echard

Thank into right you, our Mark, financial moving results.

increased same XXXX. $XX.X revenue in our $XX.X ‘XX, million million of stated, or of to increase the $XX.X Mark an quarter second the period million XX% the over of in As

the or This driven million $XX.X to of Our segment and $X.X sell-side the and $X.X increase, period ‘XX publishers grew inventory. was same our drove over contributed in million this XXXX. of million increase this and increase in impression continued QX advertising for by XXX%

compared operating public IPO of the higher February, infrastructure our our in and well XXXX. This million incurred requirements XXXX, buy-side million businesses to anticipate $X.X segment quarter was were margins XX% due the to margins are for of of our million, outpaces will million $X.X programmatic costs. income ‘XX, higher and results the our segment or period expectations to and increase expenses of of in company higher margins revenue compared added period to quarter XX% the insurance million professional of to of increased Net operating of the in in primarily of we of company. million expand of leverage addition have increased given quarter our a to the second the to approximately these million million, in as XXXX. second costs points. that increased to this segment. of sell-side in $X.X $X.X revenue, as public driven of dollars XXXX, to the an public the same of Gross contribution EBITDA as generating million second $X.X advertising compared income buy-side in estimate These This and XXXX. since or in compared of the XX% the revenue as with a of growth segment our quarter contributed around same compared In company costs business, XXXX, for in margin Since quarter quarter we $X.X by the public the due impacted consistent the to EBITDA the margin EBITDA over operating gross Operating and increase increase transaction to gross to operating over XXXX. in $XXX,XXX of quarter We at by were advertising the X% margins income by grew invest of period Our related revenue continued expense the fees. $X.X sell-side being quarter quarter increased XX.X% and basis line The margin second the or of $X.X second the XX% XX% result of or XXXX, approximately second the in was of profit second period-over-period margin a million $X.X XX.X% of segment. results headcount this same QX $X.X for $X.X The the of of expense for Operating XX% million advertising quarter the higher growth strategic addition is XXXX. XXXX. to remained million additional the The second the customers. increase in advertising $X period cost million to dollar same approximately three adjusted impact sell-side added a the $X.X margin net were XXXX. new second rate $XXX,XXX

of Turning $X.X to quarter over we liquidity. and ended equivalents in with cash available the sheet, million $X.X balance million, the cash with

action Square This our Lafayette draw As reported, ratio costs our of Servicing as to amount allowed units with capital approximately us term under Loan amend as million worked quarter remaining transaction. and of to loan to proceeds our debt approximately agreement redemption we from improve $X.X us This cover well owed the future working end, our will cash the subsequent off the recently the $X common the provided reduce debt the interest million. delayed pay costs. and of of partner

end NASDAQ to company stockholders as in deficiency being filed equity XXXX, first a respect As the quarter of our of with the indicated required amount $X.X XX the on the below letter X-K the to our million at May issued XXXX.

the second and of results compliance. completes announce the exceeds our performance, equity company's are $X.X stockholders required threshold we quarter million, to pleased the that NASDAQ With of to plan our which increased

In guidance. range midpoint. to to year our in the for year-over-year up growth second XXXX the full XXX% the $XX range approximately year, QX by the the we million or midpoint to XX% of our $XX of After million $XX at of last Now half to we revenue be for we our to touch continuing our strong on or adjusted million XX% expect in call, and visibility indicated annual be year. that a year-over-year XXXX double increased while $XX are margins million to at target growth EBITDA raising the guidance digit the to

As look growth keen shareholder plan to forward publicly on transition with a we listed continue focus we to a being our to value. executing enhancing company,

and to inorganic both Additionally, our growth we and in our rapid further anticipate business core continuing to infrastructure organic invest strategies. support growth our

disciplined positive remain We goal in line and focus cash on adjusted and flow. of our we top increasing EBITDA continue to our growth

over Now for some to I'd turn back it Mark closing like comments. to

Mark Walker

Susan, We interest we to sincerely fast Direct and and are Thank in for your continuing everyone appreciate you, Digital to the joining. growing you Holdings and exciting build. thank business

Brett Milotte

We line now going are questions. to open for some the

Operator

will Instructions] go Please Company. The ahead. question begin question-and-answer The from [Operator session. Dan from We Kurnos is Benchmark first now the

Dan Kurnos

thanks. Good Great, Hi, Mark. evening.

one kind chase I the don't else outside of marketing cut SSP think the was everybody of other good based this. PubMatic, thing struggling. from any the I performance side, heard of Let's companies on on and

meaningfully raising You're pretty guidance your here.

comp You all after mean, a the your I in beat year. revenue the what's can quarter And going on buy-side tough sell-side. see we last

in through the the is Why exposure? outperforming us category you the market? either think of difference walk what are you here Is just share you marketplace? Is it taking can So face it new are calling else differentiated inventory? what guys Is help of Just slowdown? is business your wins? think the everybody why macro a it through, it you us in crushing sort

Mark Walker

Yeah.

appreciate hear Now, Dan, from the and always you. question, it's good first foremost, to

grab in it. middle medium seeing really X, we're are it has The and business market value. have. in Clients to well we're and And to able underserved. portfolio have investments, the current we convert our current buy-side tier think Greenfield our them of pieces. changed able When customers tier our that I space clients to we X been down our boils we’re haven't as And from as we customer business, made new especially retain to grab competitors. market,

customer years. strategy actually the we what to fuel count, able In the our that, say next so is also is business addition of to - two grow specifically would I and and our that can like to revenue can to we're in our to from buy-side for we three so harvest those customers

effective. it's So X that's tier those X, tier strategy. it's markets. us. been our And been for in specifically media working And And

fueling marketplace fueled adding basis. to has to those segment marketplace our As really our that our and growth being - growth. focused SSP, what added been to in are our directly are platform, suppliers it side those new We're our has formula. fueled Colossus that business new supply monthly a impressions on comes on our And

that from In of multicultural with to IVT. from attraction have us. well. And able the has our of the been we've specifically level that's able on basis, our being managed platform, mix added more technology as addition there the deliver, monthly to low marketplace to seeing that is value have an we we our been that addition to that, as the well technology you're publishers very a a to way And perform buy

with buying have to been we the the able build in trust market So community.

Dan Kurnos

You how travel on everyone are wonder, of still growth in existing business up the maybe clear any coming XX%. on sort to probably it calling perspective know, these a Mark, there in I that not And sell-side pullback CTV increases like you're messaging the verticals. is especially just of the message that buy-side you're on in seeing guys just But sounds or out not challenges new just your XX%, greater commits you? to not but that is were any open in and wins some Internet, either publisher points, on spend notable that be from from like, those - across else's you from or category? there spend

Mark Walker

business, that actually us. new have commitments sell-side to the from on Yeah, and coming buyers buy we are making

have that I the with and work HP Colossus in are those media of through based and as talked long was about we in Ulta clients our seen Beauty buying how upon the performing there upon been value partners along comes Fortune proposition. XXX SSP, the marketplace, with - think us press one have based we to that has you that decided it as

So has fueled growth. that our

we've us also We are XXX and we're DSPs that decided to. companies us some DSPs have work happy continuing we’re guys the well. to new from as more multiple and to those And with that had see as more have Fortune on partners to buy connected through

think - I of being for as to expansion the our So at this year, continue our half added to last least is impressions fuel buyers continued growth. the in you'll what to a see platform as of well

Dan Kurnos

aside. And for me, I'll last step one

thinking the know, where Just of invest the more continuing as do And uncertain adjusted about where make flowing in given think of could time there a pull that strategic are can margin, that you and EBITDA you wide about How raised the reiterated you you to EBITDA? having are some range of growth investments guide, through fueling So dollars to back? business? those more now, others sort the versus, maybe to fall. how are through that

Mark Walker

we organic growth. Yeah, and continuing investing are our fuel no, actually to

making years more procedures infrastructure of grab to up to we've in aggressive an And really company. focused in you're I As think in market the the the last us the immediate you share. what going see the four on future been know, and building marketplace spending the is, the push processes,

is being the want that which maintain we company. came privately we to held a discipline financial from, addition, In

capital double actually something we the of to able of being be and sure for judicious make being our we're use commitment EBITDA margin have make digit that So towards that benefit we own is judicious to shareholders. our that

the strategy investments being that that's growth fueled. - planning forward to operating our are market on But making how And we've to see that's So we're grab share. we adopted. we continue

be growth, into strategy. eye it to we to and have core opportunities, always relates inorganic our and it but for will has fit - our As out organic we're opportunistic,

So of level there. discipline we maintain try to some

Dan Kurnos

it. on Thanks Mark for all All say is right. with I bearing me crushing can congrats

Mark Walker

you. thank Dan,

Operator

ROTH next The from Darren is ahead. Aftahi question from go Partners. Capital Please

Darren Aftahi

for as I may. my And questions. if Hi congratulations well. guys, taking I'll thanks Two, offer my

Mark, of your So, seems there business of got place. just of curious, road? potential the of a down at is any lot light that you've your context sell-side I'm kind night business, of in good that you kind headwind of or be a visibility buy-side the anything in is like kind area that keeps a macro, could in up

Mark Walker

Yeah.

eye For on us, we're keep always market. market. watching - really And the we're an making always the we

attract to add base. We diligently sure corporate client are to make that right know, are What we're customers our talent us working to also is generating that and able revenue our that of you the we And being growth at to help add for strategy, to and type employees. able continue also, we're growth make the entrepreneurship of up that encourages sure does can culture innovation. into night continuing our new keep part building fuel then

putting processes fuel the revenue. hiring the of continue to continue to recruiting maintain field that sales in order our that night, out us generate you we're right in hold to to it's for make them accountable and So the folks our to at sales being we growth, what and sure place able to to keeps the ask me in the up actually if teams have

Darren Aftahi

talk of of I business couple just Revenue if little driving well sell-side Can on the may, pricing, grew XXX%. were sort Xx. up what's Great, impressions about a now, bit you that?

Mark Walker

helped two impressions add sell-side our we've actually marketplace had Yeah, growth. fuel on increase business, things, our that a we've the level of into significant one, has our in that

our advertiser I is what we've say have marketplace few more a also connected would that, of to that buy-side, growth. base addition on helped our also specifically fuel that into the the In buy-side, addition DSPs through the

of growth a was sorry, year roughly of billion about That billion XXX% buyers. up in $XX the fuel last impressions, the to we XXXX QX which you as adding up Where had addition $XX it well as XX,XXX So same from see are our QX combination year-over-year, of I'm about helped period as XXX% about XXXX. can new in year-over-year, advertisers.

factors you're half are we and last coming of our increase. Now our us to for that the fueled a factors that the XX,XXX see have ecosystem, gave about into about us forward XX% year. press which Those those the to continue going really were growth

Darren Aftahi

tough then a strong seasonally more year, and last are things pretty Great. two comp the if I I And second buy-side had may. with travel, remember you in quarter.

grew. marginally still You

kind it to as on on So of kind that were there through of think about next comp. looks big grow of do that you we we through quarter, down the I'm like to curious, the that? kind a or think able is how revenue step buy-side

Mark Walker

Yeah, XX there XX is going to have - a to down about we work that with. to DMOs be we different due step

that us that. think travel having travel, with ways. think overseas of One, I bit benefited I from airline think difficulty, and I specifically little benefited we've travel, two

on as clients some DMA's actually we to have I actually customers. think willing and people of that to and are road the the get travel

the you going present. model to see we are that was that a down, that But increase. benefits of think with but one I have we the a anticipating step have we are at

X% going we're year-over-year. year. be backlog actually the rate. We standing think in our trajectory where now have run we half now to As our when of to are the you I that and at the we the maintain maintain from pretty optimistic end to and I year, the could we end year, feel able what of that for And up we're can see, look same first the between of

Darren Aftahi

of to roughly in then EBITDA Right, It more Susan. million revenue democratizes like model $XX of look think XX% about in flow of of go I’ll you grow marginal cost Or grew can million kind that [indiscernible] company one the leverage like way kind right and for year-on-year one we operating squeeze forward? public yield Is a as kind the you higher? year-on-year. that of through

Susan Echard

think the about no, it. way to Yeah, that's right

as you're need range, more from think quarter. But lower those the $XXX,XXX QX we as where less get And teams, off I and then those and the quarter, the can hopefully, had for we in $XXX,XXX first about you for little know, mentioning, the second a costs, coming and we EBITA QX bat. legal the our services from less and that away yeah, audit that's that from. professional is our right increasing takes

So bit we're those a trying manage to really costs little tighter.

Darren Aftahi

Great, thank you. again. Well done

Mark Walker

Thanks.

Operator

next Michael Noble is from Kupinski from The Capital Markets. go ahead. question Please

Michael Kupinski

And to as congratulations you. Thank well. want my I add

talk So diversification not a little or your just some And in your couple of we're starting see the about of added on some little questions, business. I if can about whether you were the that addition categories bit was and to talked wondering you customers there? buy-side your of buy-side a business a of

Mark Walker

healthcare, mix have energy, Yeah, education, is a paying a almost universities have in actually for school. their new put strong to lot And about and that and and going to I retain the year colleges students that foothold other added as attract added actually dividends that do focus seen the network a a would now as we secondary as as talk don't healthcare to we say, with as we them new We've some have categories base One customer health, well well. half it's also And security. of ago. providers, a about we us. helping a

actually specifically with business. the weather customers process we on our due we that buy-side able how diversification the So to for we and we business, service economic and our about of clients any have, think mix that planning feel storm, just the we're to like

Michael Kupinski

some businesses, anything benefiting was you're international there is starting that to that terms just wondering, travel the related like airfare, you're airlines. other there in on headwinds? And inflation impact from you. Got seems I then mentioned your economic the any and that and your also You but see of seeing? of travel impacts it's

Mark Walker

seeing, what any has DMA's clear, haven't us travel the we I'm I to we're degradation benefited we think I and work want that with that make specifically just think sure tourism the airlines with, seen of well and - business. the No, because I side actually the

has that travel that the that actually from get alternative travel we've seen, growth doing any So other haven't think what that helped we efficient vacation we're than we to actually outside cost on that think the that a seen inflationary And a more - I to business. of airline diversified our think because able manage that we the buy-side, service. Well impacts less for clients you it. in we're we way our might we're actually specifically

Michael Kupinski

And give of of visibility lot so curious that sell-side. you us you give I'm the that by level terrific. you - more have a for of maybe visibility normally, you the on what a not they traditionally, little then I'm second And just mean that? do half color elaborate That's commitments they Can or the on what on I'm not curious, aware that have by what you kind you mentioned mean commitments? you Because actually that traditionally, sell-side.

Mark Walker

business, SSP. of we way through business the so have that our Yeah, we think that our actually flows two of types

sure pretty on with. familiar we calling set P&P are set market, and then you're have We with up buying teams also buyers I'm have actually up, that get to programmatic those which guarantees But clients. open different

that So we with communities, a actually buying SSP, with of publishers. continue from a behalf on positive buyers doing with response going on our with that also actually to some And of sets have those we've And strategy. through then line media certain work agencies growth and certain work we that with of brands. revenue our impact behalf to and directly client outreach We've seen seen favorable buy and business with us. partners and media buyers we're

Michael Kupinski

late. Great, I started a little

And comments. with? if and of you can you that to I addressed bit about are half the revenue first half So XXXX? apologize quarter support want do to in hire to anticipating talk a into sales But the growth what a little year plans of your second the the people the you number this of the you're in

Mark Walker

want headcount you take do the conversation? Susan, to

Susan Echard

I'm boots the increase But additional are the about, going the in place to preparation And growth. and don't we Yeah. the trying feels Yeah, we goals to I I mean, say I for people next on right that number. ground. for salespeople have have year's to hire on think in have that we precise XX, that still

it's So we things have But remote here. pretty we feel tight like a our as our know, hiring lot culture business our market. environment, with attractive you of working model, a

and that salespeople that hire want come - we business. we are So to trained book

the picky fold. are about into we bring who pretty So we

we So are intentional fill those very in trying positions. to

Michael Kupinski

Yeah.

any right? you and far I to look at mean, And trying you problems added. haven't so had those,

Mark Walker

We added.

Michael Kupinski

You added quarter the people. second few in a

that's Thank okay, so much. have. I all you So,

Mark Walker

Yeah.

Operator

as concludes well This call. session question-and-answer today's conference as the

You may you at have for disconnect time. participating this and a lines day. your pleasant Thank

Mark Walker	Chairman and Chief Executive Officer
Susan Echard	Chief Financial Officer
Brett Milotte	Investor Relations, ICR, Inc
Daniel Kurnos	The Benchmark Company
Darren Aftahi	ROTH Capital Partners
Michael Kupinski	Noble Capital Markets

Direct Digital (DRCT) 14 Aug 222020 Q2 Earnings call transcript