Earnings call transcript Q1 2023

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Operator

Good afternoon ladies and gentlemen and welcome to the Direct Digital Holdings' First Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. [Operator Instructions] This call is being recorded on Thursday, May 11, 2023.

I would now like to turn the conference over to Brett Milotte. Please go ahead.

Brett Milotte

welcome call. Digital and XXXX first everyone, conference earnings afternoon, to Holdings Direct quarter Good is Milotte, name ICR. My Brett Holdings Direct from Digital and I'm representing

today's Echard. and Holdings' Walker; On Chief Direct Officer, and Susan Executive Mark Chairman Officer, Financial are call Chief Digital

is Digital its entirety today SEC's be through Holdings, and which Form from filed been website in which website. the release, may earnings have qualified and today discussed its X-K Information accompanying by DRCT's Direct accessed

a replay speakers' Today's be also be call webcast and website. the is DRCT's to following a Relations presentation, will Investor being posted will question-and-answer Immediately session. there

made Please other basis and views regarding during statements not made nature, are of the future or not assumptions business obligation performance do We events are they financial undertake are historical update time in projections any statements. note at to on that that statements. made. forward-looking the may DRCT's call statements constitute and including statements these These

risks DRCT's subject those statements could historical in set and forecasts, SEC. actual from differ DRCT's which its forth Forward-looking results risks with including to the results are to filings cause

You forward-looking Do refer made to This applies cautionary this to all forward-looking more consider reliance and statement for should these call. on undue not information. place during any statements carefully statements.

will in the Generally is of DRCT to Accounting measures release Accepted Principles. During today. comparable financial Form measures. of to accordance with non-GAAP on not X-K directly DRCT referring financial available this These call, earnings are GAAP non-GAAP A be in filed non-GAAP financial the prepared measures most the measures reconciliation

Chief over Mark hand the to now Walker, I Executive Officer. Mark? call will conference

Mark Walker

results first strong you earnings thank XXXX again I'm operational off to to Thanks, start financial performance proud call. quarter XXXX. to Brett, joining once everyone our report and and

businesses we increases quarter, line market in While and side share. across buy sell strong slowest top is typically our well growth as as both seasonally our saw side QX considerable

X.X look to revenue continues for restrictive, to more market solutions. a benefit Adjusted in an of accessible quarter XXXX. EBITDA less million, XX.X and the same advertising CPM over compared million X.X period as businesses in representative of the increased less XXXX. more period was of XX.X middle XXXX, increase XX% the X.X to marketplace million open the platform Our same expensive, QX, million or for In million

shortly, As Susan more as unusual will events driven year-over-year see new onetime company. as expenses explain a quarter higher in expenses did detail this some we with well being public associated by

over sell respectively, quarter side the period impressions XXXX. XX% strong advertising increase our growth processed the by We're an was revenue sell approximately pleased increase same In billion growth. Our over period our of by side quarter, to record of segments, and which performance first XXX report saw driven XXXX. of both this monthly side XXX% an XXX% and buy revenue segment advertising same of the in

over the In over side addition, for X period is of XXX% the platform in same quarter, XXX,XXX XXXX, advertisers over bid increase received XXXX. Through XX% increase in quarter the advertising the same the billion in of an company's first over which sell period XXXX. responses

testing audio notably niche other in In some along requests, overall we impression publishers saw currently. to include new billion our X.X with DSPs SSP DSP count. customer expanded within publisher has and publisher monthly new wins, also We which ads, with to additional offerings a grow gourmet the QX our

Masses March. of same ever saw revenue single businesses year-over-year Spokane launch the growth approximately side, highest record on compared to airport, campaigns growing for XXXX. increase its Tucson in our while the customers saw period an buy also in visit month XXX Orange of X% serving and As XXX mentioned XX% Huddled

QX the of in strategy, overall green share. maintaining we which the light I all our today. starting to made continuing want our HP progress we of QX, Operationally few During a replatforming XXXX highlight market into considerable in while quarter to of incremental achievements, growth number server business capturing XXXX saw with a transition and and

to appointment. [indiscernible] our joined fortify In years XX personnel and CMO the we the industry On successful more of following pioneer board [indiscernible]. years experience advertising strategic in with January side our bringing the marketing directors, of of brand as digital corporate performance continue than board XX

media to of digital spend growth Turning the believe and see reach holdings, favorable multicultural increase direct to being the are We for XXXX. an as dynamics targeted current we market audiences. remainder in

market moving away dollars traditional to middle are simultaneously companies While digital. from media spend

strong our focus year the our growth you is our the hand financial trajectory detail. in now update top to to I will end million going XXX for to over who further estimate are of a as continue things highlights million we our line Susan of walk XXXX As Echard and through primary reaffirming some years revenue. company in disclosed to in XXX

Susan Echard

you. Thank

or first million in As X.X over XX.X quarter XXXX. of XXXX, year. in being increase first Mark in stated, of results the our period typically an quarter business lowest million the our the in our same XX.X of the to increased the XX% revenue of million Seasonality quarter

contributed advertising had and increase or strong the grew X.X over million X.X the same a side first Colossus segment increase. in drove to XX,X XX. for quarter of this million of QX XXX% of period sell the Our majority million and the

impression publisher increase increasing to to monetization. partner engagements, continues our in addition SSP Our

the and Orange in X.X XXXX. revenue finishing with first the of of For XXXX increase, quarter to Masses million XXX our compared our and period contributed grew in X.X X.X million of the year-over-year quarter XX% businesses million Huddled same buyside

spending, result a customer The market new higher driving as increase primarily acquisition. was as middle of well

were in of first result XXXX X.X mix first line XXXX the advertising for side same the expectations of segment the million quarter of of with XX% an in growth million rate XXXX result These a dollars profile. gross Primarily revenue increase approximately overall of compared for quarter X.X margins in are as first our our our gross profit to million revenue given 'XX. were margin a the resulting of sell revenue. For our as X.X higher in results and to the the compared of quarter mix XX% of accelerated period margin

sell revenues whose percentage our of approximately the than as grew XX% buy segment. was buy the XX% margin our sell XX% a sell 'XX QX, has revenue Our buyside gross mix side, lower a well mid QX XX% 'XX, revenue segment In of side and was overall profile in side. side side

of gross advertising result. line expectations are 'XX This segment gross margins with side campaigns quarter side first first for buy and for advertising this range were of first in The the segment sell can mix to side XX% of for the The quarter XX% compared 'XX, the as timing 'XX. of to the margins quarter of first buy our XX% the customer quarter in XX% the were margins 'XX. in impact the compared

the to As of reduction overall continued technology our investment are the business publishers. mix due this grow, in and segment in margins slight continues to our

higher 'XX million of the Since course operations year, XXXX. the sales in X.X and contribution expenses with over of first million the the IPO the headcount respect dollar of increase With of February operating segment. by sell to of the in of expenses EBITDA our added business X.X personnel. over Operating its first increased in side leverage revenue strategic or an of the million in programmatic the headcount XXXX primarily results X.X company SSP quarter higher quarter this the has increased our to in

We added shared have also our individuals area. services to

increase these represented total, In first expense XX% approximately our of quarter. additions represented operating in the

quarterly the administrative compared the general The to quarter million additional and associated expenses. approximately X.X general X.X company one incremental expenses, million time company of increased Greenlake period onetime with transition in X.X million same our in X.X and expenses growth costs of or first XX. and $X.XX administrative XX, to per totaling ongoing servers million HPE in for the to Included the opportunities share

to the G&A an to a loss million this And X.X which in also onetime Bank XXXX, termination per measure on the million per addition better allowing and business the evaluation we evaluating operations, share on loss Valley credit. has million underlying Silicon from in of the of impact that the periods. of quarter was useful of a net provides first the period line X.X same a Net onetime performance our charges We loss in believe company's of previous costs earnings for the these compared of early of of quarter. XXXX. better share, in total In or to results $X.XX were these X.X saw approximately costs net impact loss comparability

results. our the income X.X 'XX, is sell Our operating buy for of increase business quarter same to the income side year-over-year. the XX% XXXX million an was segments of organic first of The side growth of of by income X.X operating million, operating year-over-year measured compared of our in period and segments

aforementioned impacted quarter. X.X was to quarter EBITDA in in onetime expenses adjusted For the seen million XXXX, the first the first of quarter compared X.X million, the by

with X.X December XXXX. cash and Turning to as the equivalents the of increase balance of sheet, we the quarter cash million, million of million XX, X X.X from an ended

was with we issued disclosed which a terminated. provided the notice which XX, XXXX, Valley March subsequently As a agreement On we on Silicon facility. previous of security revolving entered of January loan Bank, agreement, into for X, loan credit termination we

until new the expectations a cash working to from currently new in future. our in agreement of have and Based a of are line We on facility credit flow towards finance believe expect near place cash and we operations our year to sufficient any service cash end obligations we held, at least and the the available will fiscal of XXXX. have debt operations resources

stock, to statement a effective amount was and terms the aggregate SEC. company at utilize not more time On with our any prior our or one in A of company transactions filed will of would XX, offerings. offering securities, S-X that at registration the common debt to The the engaged form up units warrants, the currently preferred the stock, time which class in flexibility time anniversary principal shelf and issue be following the by Exchange as allow XXX prices April a provides subsequently But a on in S-X or us million to statement. housekeeping our company variety end to perspective on XXXX, public Commission This corporate declared Securities year determined from the the initiatives, good of and company. and to registration strategic for considered potential is form is

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

Mark Walker

to your you Susan. digital Thank joining. everyone are appreciate questions. We looking and thank to forward for in your interest direct sincerely holdings, And you,

Brett Milotte

some now for the to line We're going questions. open

Operator

Thank you. comes first the gentlemen, ROTH from from of begin Instructions] [Operator Ladies ahead. go line Please question [indiscernible] we MKM. the now session. and and answer Our question will

Unidentified Analyst

expenses. Hey, this for for onetime Start question. some with Darren, the of thanks is Dylan my taking

expense? So paying to transition that there, be to HPE get that guess double of Bank portion Valley can that I Silicon cost so you like complete excluding cloud rid the sort of expect double, do double the the on you're transition when you

Mark Walker

much pretty winding we're expecting we we're, going down. it's is QX have converted to expectation start over The Yes. and by

into we'll So to those in seeing alignment. QX QX start come back prices

Unidentified Analyst

Got XQ moves then, impressions with sort really some making that's a it. billion, what of increase of increases? sellside alone larger QX Can when the to you, it of publishers? that let you And last you drove about mean, I year. talk big XXX Is from the grew you're

Mark Walker

correct. Yes, that's exactly

the named larger and one we're gourmet gourmet media, in we with, So increase publishers that working ads.

and publisher expanded on relationships, have QX. side, of media types us current the we which In on over current to addition delivered to actually the that some more with impressions partnership we've that different turned

repeatedly is strategy, to turning media publishers we've add continue said types. and go-forward which more on Our to

turned audio. QX we in just As on

year for also And also that growth. so look we're to XXXX current as for our doing strategy going for the at

Unidentified Analyst

higher of how on margin, Great. it's EBITDA us mix the may. margins? lower I but is through. So And one sort sell you walk flow Can know impacting just the a side, more, I there's if through

sort they've there mean, get bit anything the squeeze sort back is side been last months to you a margins more going operating to where the where EBITDA sort maybe the I So out last can XX leverage on so? OpEx of or of of

Susan Echard

on definitely to we that. this Dylan committed growing not Hey I is business increasing term EBITDA, short also but Yes, Susan. having our course, a looking at of mean, we're Yes. view and are of every opportunity

have now before, in said as I we investment mode. right we So think, are

EBITDA to headcount. going that. and goals trying business But we are the is grow maintain be well. our still that as impacted We to achieve we by OpEx will

Unidentified Analyst

it on. me. pass will I That's from it

Operator

Thank you.

go Your comes Daniel Kurnos the Benchmark. of from next Please ahead. from question line

Daniel Kurnos

in side I Mark, right, QX XXX% XX% including just year XXX% the All a period, almost know get on scaling partners, over off of you I ago, evening. it's XXX, in just Good you're ago sell comp the a know can all Thanks. or large of adding Maybe grew taking and or that. And you I year you're hearing you've stabilization little improve numbers guide up a that obviously implies obviously, ad putting things you're numbers. detail, market. that as couple conservatism it's share. we're start some some larger bit seeing, a But these about the talk the what because CPMs said to to against

So of the the facets just of can address some sort seeing talk the maybe from that to you year. higher level, a kind balance of you're but of

Mark Walker

Yes.

goal to addition think and transition, of publishers, the is other working is between and to our of side part our as of on our our strategy with to been that, our continuing on to in the performance currently which that I add we've overall business, not our our things this optimization hardware the software. So one pipeline, actual diligently just expand more growth, continue sell is

can we to our so the some get to seeing investments that also performance continue can better that so of business. that you're grow So we has optimize

QX we slowest anticipating, said before, usually quarter. We're our is as

we're As that's forward. of now, for right exactly anticipating go what

we so the well ramping order maintain side, up DSP in marketplace. side, in current the actually at looking on new the that to really as we have on the And partnerships are publisher as momentum

In amount That benefiting marketplace significant to And marketplace, those the the and effort a with what officer. of reaching marketing have in the in with I see put is would of initiatives, also run. some the brand our addition that, addition also from chief well. say us fruits starting long in we're to our actions as growth we advertising into

Daniel Kurnos

going? sounds that little the are are and In you what like curious sequentially. the half to have I spend to they, you those ad high but adding a in knowing strategy, about terms your back ones I'm they share think, are a which publishers but bit knowledge with everybody's gotten seeing conversations out, mean, bikes either just some still conversations aside of that increased going power some worried things conversations just from little as like from is new advertisers obviously taking a ideals it level, I pointed critical, better maybe from bit how want

Mark Walker

Yes.

of buy the space because on the In which of that with we really some that are really our side in and put field investments middle forward. pretty customer type that as me grew the top the regards side I by buy the middle let off side in XXX strong you we're buy start fueled the adding do think market, being the saw heard funnel. really you So companies of increase is first, to the maybe the actually They But aggressive our fueled is of always side, are the customers lot as that the teams to of hidden range, in to playing on underneath seeing are that the year's slowdown Plus, and our into current numbers X% they our and have growth wallet, with buy in us last in total of relates in customers, Fortune initiative as if seeing. service a customer will, side. those we our some for that buy those growth, partners, the are What count is that has against performance. not a benefiting actually the go is providing. what are the paying it from in XX% matrix we share customer of grew XX% marketplace, market new the to larger

growth that that pretty business. So business we've excited we've been that buys and about side with the seen

from to more go And think more forward. you're for there's And to to going prevalent, of we CTV, seeing that as share to video I to move growth publishers us going have lot of think dollars side, just we're we see and that good a display in that marketplace. as to strong of mix As is for the is, already space. OTT because you're anticipating what and start and still video able grow as to be the well we I a room going continue you probably know, we're audio, added that it relates think sell hearing the the

Daniel Kurnos

a you funnel category, market? you a think or are understand of bit little tricky turn about optimize the executor I of a just and profit more a the bit been pipe. But guys that to been Can I over talk It's on. it's really challenge audio time. scaling a sort the

about entry So just short your how into or term? do that we scaling that of sizing the over you think category announcements or medium opportunity

Mark Walker

Yes, we're right now the on in our audio for us. business infancy

to And be give understand we where shape quarters. And more how a able up. so better me think going opportunity we'll that's one the is really to couple

we'll as going that us we'd for audio. perform. better in to us, quarters like then we couple look see a able are be to landscape to medium. how relates But investment test, at like to understand For that more And around need to we'd just further it months to things

Daniel Kurnos

it. I'm making of note Okay, a

Now, Mark, the of by quarter, I will way. the quarters. ask couple you in a Congratulations on

Brett Milotte

Hey, thanks Daniel.

Operator

you. Thank

from next ahead. Reily the Your line question from EF Please Hutton. of comes Edward go

Edward Reily

strong from industries Hey on segments both growth the seeing guys, Wondering predominantly. business what quarter. you're congrats here

Mark Walker

buy Yes. very strong. on the has space business, side been the DMO

think I are interested vacation local in marketplaces. regional specifically and travel, in still and people

And wanting into benefit that we've people space, to so customers seen specifically, the those DMO marketplaces. of attract

talked those relates seeing want us on for Tucson, we we've airport know, Visit marketplaces. business. and last dollars DMO as side about got you investments for the buy incremental And we're which the been from call the the that's to space it into pretty As we Spokane exciting

advertisers focused side advertisers to new supply investments, the business, And as are that seeing retail specifically we more well it definitely retail happens When our business. relationships. it more in larger are some as that comes relates larger on with discovering interested of side do publisher to the and sell our more to in

we're business, on in strong seen quarters. that to two those continue segments the next for from So that sell impact and we few anticipating have side

Edward Reily

one great. a Okay, My probably question for Susan. second is more

Just mentioned that'll tech wondering was recurring impact you gross if sell to wondering in what the and side due be forward? investments on margin the that these going

Susan Echard

Yes.

technology investments Some our to of relate around IVT. the our of in our protection

the that We on the the and comes IVT. so percentage of more that technology, of mix think have those margin investments so much publishers in in few OpEx vendors the of sell are the in investments mix from gross the Overall, protect category. low impact gotten the side a from making some we are not it's we're I because more

you're think rate. a coming take seeing an I different in So publishers more larger from impact those with of

Edward Reily

right, increase. rest per revenue to And Okay, got for subsidiaries? you. seems look the hiring employee for all the continue to the like What's year of

Susan Echard

Yes, infrastructure I op-cos hire we we putting still do target and place are plan to to for revenue salespeople for mean, our in them. that support our develop continuing that have

So revenue our attention we to do pay employee. per

think right around we're XX now. employees I

So be a continue going metric us. for see to that we're good to

Edward Reily

Okay, great. Congrats. Thanks.

Susan Echard

Thank you.

Operator

you. Thank

go Please next question of Capital Michael Kupinski NOBLE Your from the Markets. ahead. comes from line

Michael Kupinski

Thank second the side guide of your bit couple revenue versus XXX little XXX you, of your in congratulations contributions sell million the And quarter? of revenue kind to your a cadence of the million? and about on A have buy talk you heading questions. to buy side terms thoughts the the into quarter. Can changed as of you look side of

Mark Walker

ahead. Go Yes.

Susan Echard

plan. the No, business. still side growth nice have same. our Michael, with last cadence margins it on still continuing year, good that of hi, on our of to seeing buy to that business, And how's similar We're kind a even around side working the going? is

that. changes around see don't I So any

Michael Kupinski

how Okay. seeing know the strengthen my certainly and the an investment What cash spend, the in you're adjusted buy if and EBITDA And little beat might stronger trying investment might you Just you to than you that side you have expected better if bit number higher giving buyside? you up manage buy would suggests node, a have understand you side quarter. a the step flow, but on spend, seeing Would business. margin that strength? I investment you're as strength your the your

Susan Echard

the where supported our be move on as coming on that to from. it's depends on sales and that mean, we the buy has that boots guess people I ground. revenue I through up, side targets Yes.

that So more up, moving in for or those people if seeing expand there. a need there targets be if we're might we're investments

are So just I that guess the are pulled needed. it that levers far as on the depends investments being as

Michael Kupinski

ability, far it? relationship as the in Okay, working and the and just in that How's the and make, has How of of servers to that T's HP dot your up that capacity as relationship to kind you cross working mentioned, terms the need stepping working been I's? forth. as about so just and you

Mark Walker

relationship. process as a It's server partner. partnership through good our or HP hardware went good a infrastructure our Yes. and comprehensive a selecting and We

so the long how that relationship like able us we for near help has optimize amount they the that so and relationship to to are operated working resources And and and term. troubleshoot us provide us of and see to term that for we the

Michael Kupinski

Great.

Thank Okay, that's I have. all you.

Operator

this Thank ask will day. Thank thank so a our be lines. Ladies presenters. much you. last We question. disconnect lovely call conference that participating for Have you That your concludes gentlemen, please you you for and for and today. your

Brett Milotte	Senior Vice President of Investor Relations
Mark Walker	Chairman and Chief Executive Officer
Susan Echard	Chief Financial Officer
Daniel Kurnos	The Benchmark Company, LLC
Dylan Dupuis	ROTH MKM
Michael Kupinski	NOBLE Capital Markets, Inc.
Edward Reily	EF Hutton

Direct Digital (DRCT) 11 May 232023 Q1 Earnings call transcript