DRCT - Earnings call 3 2023 | Direct Digital Holdings, Inc.

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Operator

Good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Direct Digital Holdings Third Quarter 2023 Earnings Conference Call.

[Operator Instructions]

Mr. begin may you Milotte, your conference. Brett

Brett Milotte

On Direct everyone, Quarter Diaz. discussed been XXXX Today's afternoon, Milotte. Chairman Digital and representing from and and Digital Officer, today have X-K name is Chief welcome which qualified and Form to filed Investor Third website. in Holdings I'm today and which Financial ICR. release, Holdings DRCT's also the Digital Walker; the accessed Digital by its be Chief Direct Relations posted webcast, Direct call, company Earnings Holdings' has Holdings, website may Information replay Brett at we call Direct entirety earnings to is Good SEC's today's Mark Conference we a company's and Executive being My with Call. Diana the is website. Officer,

to will following nature including the a be question-and-answer presentation, session. projections during These are the we financial historical future speaker's or that the these basis regarding views assumptions performance Immediately note and business made statements. call, any and events they on the are constitute statements forward-looking not undertake obligation not the are statements. statements made, time made there that do of and Please may other in DRCT's statements update at

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

the to You forward-looking should refer to during information. statement for those call. all cautionary more statements made This applies

reconciliation measures earnings Form available prepared accepted X-K comparable its financial are be the financial DRCT These call, non-GAAP in DRCT in accounting of release non-GAAP are to GAAP measures non-GAAP not will filed directly to this accordance the During the today. most generally in that measures. principles. A to measures referring

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

Mark Walker

operational performance you earnings report strong for XXXX and thank call. joining this our to incredibly and financial Brett, to Proud results quarter. Thanks, everyone third quarter

advertising operational discussed Direct recent We investments and impact expected platform initially made calls, investments these technology earnings during the we've we significant structure. of in XXXX. in see As stack, Digital Holdings to

pleased we're to fruition these and within to associated growth XXXX. However, are report benefits coming

have and number a meet our of further overarching customers' and technology to platforms. business of the our strategy partnerships enabled demand us Our growing technology capabilities

CPM highs. seek As approach businesses our a have open our to our to recently result, partnerships strategic advertiser drive and market our our technology continues as marketplace differentiating benefit also thoughtful middle solutions. helped to new our Furthermore, announced business tech-enabled platform

and minority-owned tap to integrates and offer roster that collaboration Amazon which multicultural marketplace. auction our Services into division, of publishers, solutions include Our server-side benefits allowed the ad header Colossus and Amazon's has bidding new Amazon SSP Publisher direct market approach. general outlets SSP's between transparent integration both a This of Colossus properties

Most recently, selection and the scalable GreenLake secure platform production of a we reliable, Edge-to-Cloud announced HPE highly to environment. build

infrastructure Digital division Our Colossus incorporate platform. support Holding the on-premise now entire its sell-side SSP to marketplace GreenLake with cloud and its services platform Direct HPE across will

access to Masses Huddled our well path general and with alongside buying within programmatic as for drive expanded ad helping TV multicultural buying Colossus OrangeXXX. Beeswax, connected platform, simplify FreeWheel-owned Our as partnership SSP, inventory, has growth a the market

as to we execute growth with We will strategic our explore continue our strategy. partnerships opportunities on continue to

and DRCT initiatives, As across buy significant these of saw sell all a result growth side. both the

XXX% an quarter for of increased compared increase in same XXX% an XXXX. same to the year-over-year. $XX.X million top period to QX $X.X was in in increase $XX EBITDA $XX.X over the million, period Adjusted XXXX, million million $X.X line In the revenue our of or XXXX, of million

by driven advertising segments. buy-side by was both this revenue our and Our strong quarter performance sell-side

increased investments, as platform substantial partnership saw a operational result of technology sell-side our efficiencies growth expansion. Our and

XXX% XXX revenue third of monthly growth processed revenue In approximately growth the sell-side segment our period XX% XXX% quarter, in over of the advertising increases report and billion same XXXX. sell-side to an buy-side impressions, pleased are of year-over-year. of We increase

saw as of our wallet as share investment increasing well We also with both expansion their the partners an of segments.

over the quarter, this company's addition, in sell-side the advertising over of an In platform increase responses, monthly same billion XX received period XXXX. XXX% bid

Sell-side revenue XXX%. per also advertiser increased

On buy-side same approximately customer served the over buy and XXXX. per XX% the side, customers in our XXX businesses period revenue increased

our was outstanding shareholder dilution an for to the would warrants warrant of milestone in the all purchasing combat significant announcement stock. the that and effort company protect publicly Another we against be traded of overhang

redemption its and the that attention XXXX On well as unencumbered result, report for our Digital of performing overall to as the and to completion remainder technology initiative, considerable our pleased an for to Direct as of and strategy, topic, as believe we as we our beyond. fruit continue operational stock a make are with bear the XXXX, investments of will this server progress infrastructure turns We Holdings transitions re-platforming. remainder

multicultural to the Digital for overhang, believe quarter, we're operational through and expect similar see further Consequently, market range in of a Holdings $XXX in to walk full dynamics spend upwards pave our in million. stock, valuing revenue our CFO, an on will the who growth things reach Diana of to guidance been strongest general hand XXXX peers. a has will our we removing executing revising both to QX excellence, Historically, strategy highlights we Direct and audiences. with targeted to media increase our re-platforming over way favorable By a aforementioned some level now our our at Diaz, $XXX being to warrant detail. million year financial I will and continuing we our

Diana Diaz

Thank you.

increase increased period our or XXXX, exceptional $XX.X of XXX% in sell-side or of year. million increase last million in to segment for the stated, XXX% the same of the of the the the growth third revenue revenue an $XX.X quarter in segment revenue grew of performance the third $XX.X million over $XX.X million drove Mark advertising contributed of the to and $XX.X The the period Sell-side year. As million $XX last majority over quarter advertising increase. in our million same

in benefited structure engagements. heavily and our quarter the As sell-side partner investments operational continued this from has publisher increasing stack, Mark platform technology stated,

side income buy-side million EBITDA. XX% with current primarily our $XXX,XXX side Growth from also year-over-year was and direct last of The segment strong revenue revenue growth, million quarter about customers. business buy the in net revenue increase in $X.X on of growing resulted and opportunities positive spend and in a and finishing of same revenue upsell result contributing increased in the our sell both or a to our impact Our period compared advertising performance, saw the overall to in $X.X year.

year, increase were talk for XXXX for the XX% third of $X.X approximately compared profit million million, let's Gross third primarily third gross result same to the of XX% of quarter an to million in about a profit. compared Now year. period quarter the of gross of the was last as $X.X our quarter $XX.X revenue margins for mix, last

As results margin revenue with given in we expectations accelerated discussed in margin these the our segment resulting growth profile. of are last quarter, mix our rate our and advertising of line the sell-side

revenues, on in for last side than compared a quarter to XX% a percentage grew same Sell-side overall third margin our the sell-side and third revenue, buy mix XX% on compared on the have third and sell on of buy to gross revenue XXXX were XX% quarter over margins XX% XX% the the in advertising side the the period the was lower buy-side side of approximately sell XXXX. segment. In XXXX, the quarter year. segment XX% as which of gross the our side of The

were which associated technology incremental third $XXX,XXX Additionally, gross the with XXXX costs impacted investments our stack, of about in quarter margin. in sell-side

in range segment We We margin back expect increasing the of gross to XXXX and customer anticipate decreased of level as is impact third This focus to strategy XX% believe line until the we by historical on to margin QX and strategic resort of a our in continue lifetime our compared can the will value. margin margin the customer around XXXX. results. of to XX% buy buy-side end sustainable, March prior costs year side with for of The reflecting in that gross gross mix margins Buy-side is XX% the to the quarter these campaigns half XXXX. of were sell-side XXXX of targets XX% for customer then timing advertising retention that period. approximately

expenses expenses in $X.X in the Now million general in reflects to XXXX a operating year. million $X.X Operating expenses. The of increase expense tax increased expenses. in operating level $XXX,XXX increase in over and third an quarter of increase of I'll or the $X.X and million of $XXX,XXX and talk about the benefit an compensation, increase third administrative million expenses quarter last $X.X

shared and services The market G&A support due associated tax primarily compensation in to driven headcount public by additions, in was was ongoing company benefits increase The expense increase supporting mainly with our and in our growth cost expenses initiatives. infrastructure. to

continue for to invest including associated with controls. expect additional as transition the associated expenses increased and fees, with We to to compliance internal investment incur costs infrastructure professional company, automation public operating developing a our and and requisite in required

Net third rate of the a income same of in of last the income compared period year, $XXX,XXX was quarter of $X.X year-over-year. growth million XXX% in XXXX net to

$X.X by XXX% $X.X segments income Our of our buy-side The million third increase of operating in million quarter the year-over-year for results. sell-side segments business of year, measured of the organic to our of the can income period and an was our year-over-year. XXXX income operating growth last business be operating compared same of

by operating a $X.X as the quarter, growth believe offset third previously by our the undervalued third year. about we That's quarter million EBITDA. stock both on was compared Mark and currently, in XXX% of revenue in expenses substantial based gross previously. EBITDA million $X.X was significantly talked increase is the which that profit, last And the increase partially in mentioned, the driven that For increase adjusted in to I

$X the with balance ended equivalents the third sheet. an of million to the million, end increase cash December $X.X million at of the cash we We and of $X.X Turning had from XXXX. that quarter

over for some like closing I'd And it to to now Mark comments. turn

Mark Walker

in to appreciate Holdings you the Digital questions. your and Diana, Operator, line. looking you, We your for joining. please Direct are Thank and forward thank to open everyone sincerely interest

Operator

Instructions] [Operator

the Your from comes from first line question Darren Aftahi MKM. ROTH of

Dillon Heslin

This Darren. is Dillon on for

of Like the second quite year? in big different think was half up something in year platforms or be obviously on was until faster? about that happening congratulations guess get XXXX, in didn't to could those were for seeing I want and that are to you impact it -- quarter I track the investments that the supposed guidance. sort on my on publishers or on that that it generating this that but now you ability to platform sizable talk next of to would your of extend First the you're sort of now the you're technology Or happen are note, certain revenue.

Mark Walker

to a Yes. Dillon, technology good what X-pronged accelerate monthly really than I were been I'd about us going That the stack for we a mean, and capacity approach. replatforming able we've I hat to scale and we tech number that as tip first off, to streamline type billion say it's sale. CTO us talked faster to initially a gave it's little of from to hear have through. give that anticipated. my to our grow that need on -- we basis, bit technology which they our more the XXX communicated we you. team off impressions our one, gave

our go The deeper a we mean fruit that little starting with. and been we've if you partners dig I fruition. with into and the it and to groups of to numbers second able bit, of come and is agency yield some to that work is, increase buying piece

we seen is of of able from our has until we today end that the execute that Increase, of those impressions with. seen in groups anticipating been able have we've culmination amount operational And So against. been the increase of are are we've at what that all the buying that really with of year we relationships investments to we components the and some where in together level to really, team of of of capacity doubling deliver. some had a the the that execution our X the you've now benefits coming

Dillon Heslin

Great.

sort to second of where year. mix. revenue by And back given XX% a next XX% As getting QX in question, XQ came to I sell-side just know gross in, of you're terms about the in within talking margins of potentially more anything of revenue the that that would that that in the But get terms towards happening profit way publishers number? of sell-side larger could skewing is gross hit there

Mark Walker

XXXX to right that's are now, through year. going living side And we Where on hold in us, the that confident anticipating we're No. XX%, that we're pretty XX% us business, specifically the for range. sell

Dillon Heslin

it. peers of where to XQ yourself invites market much just you other like on now Last the just markets implying sort and XQ your numbers. of of bigger for Do sort Got you one me. competition, to Could more? terms see are that and of you that middle touch play in some explore think niche begin in you

Mark Walker

is we advantage think able to set lend have market. Well, what a processes the ourselves we've Yes. that up to middle towards the competitive will been

you held that by in think actual competitive firms. that look traded some employee, gives we it's and operate, in we to ones processes the our significantly of our PE held if revenue higher that able publicly out many way the advantage the than many of The privately our competitors think I structured other per are marketplace us in the at competitors. we our that organization put are place, we've the way against of are that there

and position and in as anticipating well now feel we're about marketplace, confident the we growth So QX our in pretty from good as pretty XXXX.

Operator

comes line The question Dan Kurnos next from from Benchmark the of Your Company.

Daniel Kurnos

I color good, if questions. would mean, million That's the growth impression One, tech appreciate incremental I couple be helpful. on a revenue in A put QX. through I of of up few -- capacity. questions too, I $XX

it's of notable partner there question You've had parse its out organic? sort some between increase? just underlying way obviously just not organic, to of because any Is And Is wins. all of technically, fair a but mostly really metrics there the which a versus partner sell-side, impressions way, base. I'm inventory spend versus just way customer, partner good new of some sort wins by with increased have talking bucket expansion of on. to the between per kind existing they

Mark Walker

the XXX QX. that we of We Yes. actually mean, I combination in amount would a QX, say million all in I it's grew. impressions from XXX of went three. million

that look that I right? up benefit advertiser, our you Second revenue about XXX% actually you at think went XXX% that's to roughly if one see, per benefit, year-over-year.

can together kind growth that so our you actually put out pieces of And those both from X that coming actually think I figure and really is sides.

day level have agency implemented them with from partner going with in It's of we've just. community us that on relationships X, the our groups diligently and the honoring and buying that work building strategy decided operating increased the our and deep to and by commitments on impressions,

secret actually communities for investing in spend continue platform. our that's secret growth. growing So the -- and impressions, really come everybody That is the the through they the asks about then continue sauce your buying and sauce, the

Daniel Kurnos

a kidding. Well, let angle its a now so trying platforms it to has bring I'm tough that a spends. given have you've get sense obviously, I'll small get market -- to And that I for inventory this expand because and the to unique -- of the recipe, little figure do like is -- Mark, just add a out. really No, been me trials in bit I'm and marketplace. the you of to you just follow-on this

the that rates of been know narrative has of get tested can the I'm you per they you so off last like have get a we campaigns number to put been can of growth get the like you months your small, it was still, which, to be just with XX numbers. have to year, sense really willing by advertiser But are to But here, it more trying they've with too. results for and trying a just way, larger dollars to I'm spend sense I smaller fantastic, work now because just saw number, to

here equates run that other strategy. Or just just beneficial the dynamic in just evolved inventory way is that the video that something that at marketplace way space the digital both smaller there the in has is base. to space how was -- It and your the you a play some you given on run

platform of So the the the are marketplace dynamics you've to incrementally beneficial that developed.

Mark Walker

of a multiple would teams value I in on of say we've chain. the come I the One, actually mean sitting excellence. significant put it's with operational Yes. amount really that they actually place. points experience

are the when in interesting think bring we out with have different to that So I marketplace. communities an we buying the that we the perspective work market

number I So that's think one.

Thing really of the to we in behind get allowed us. the campaigns. even we've in order number fact X quietly we two, us make can to processes our that where business for smaller that were it And money structure operating actually and though been for years, scenes, has benefit been off a

upgrade Now starting that able been in out to you've We've our mature. seen us we're the marketplace, to platform.

go the to growth our on we've you're seeing out that of forward, start the platform continued structured the going and business. think way I

Daniel Kurnos

self-serve is we're numbers Mark, even over, up to me, peer there's falling than a way conversation else and mean the not not -- of which is everybody is putting groups. right The crazy most having part now, you're what I better

ask from on you The -- And in stabilized cautiousness it's November. evident the relative now out Trade seeing guidance I'll So October, QX, but kudos to in macro. QX. the like little that. is talking kind being just especially in a -- in momentum too, history -- QX here, just rough what for I stabilized broader just QX of right curious thank your that I'm seems some in you about to sequentially you're just you're conversations seeing if up in Desk is There's continuing,

Mark Walker

Yes.

that been on to able and map. we're growth platform in road pretty and able establish build the revision For we revised macro, have we our think the and upwards we I that of broader have. you've If conversations the wouldn't the but and the have that confident, it weren't the our been confident our up guidance relationships seen to we've actually did, we in way we've we that

been of be confident bullish Digital. Direct some the we're having we're still in we've at peers difficulties, other to but build though really might on model even here that So able our some our business,

Daniel Kurnos

last it's just Mark, was for few, me, but quarter. on just and in EBITDA healthy flow-through, the And a really sorry,

that You be how to both should in obviously thinking we guys you're But about investments balance. further QX are making trying versus and going profitability forward. some growth

Mark Walker

viewpoint turn to Yes, some to I'm Diana give over you QX. going to that on

Diana Diaz

about operating So our that what profit still level. margins be maybe and those the spend they down. side will we've we I way both company for continuing public than gross the the about going buy slightly to side marketing at at initiatives the right higher up talked or our think were that and sell where end we're think expenses headcount third be won't quarter. the and We're filling through sales We in and the on side, but and will

Daniel Kurnos

super I guess continues if That's Okay. at guys you trend through be Xx this helpful. will stock the prices, EBITDA.

Super Okay. helpful.

Operator

from question NOBLE. Michael the comes from line next Your Kupinski of

Michael Kupinski

to want bit is, I talk a I a what the just quarter. got you congratulations. saying, wow, way, marketplace. great offer of on bit the state a to a about my follow wondering say All can was little what little but Dan if to in was just different I

was market quarter. You couple mentioned the of of wondering, see a drivers beneficial as follow-ups. what that then in key -- dynamics quick the just have do I And you and just I

Mark Walker

Yes.

a continued general inventory. one. the market, and mix seeing it's with working the our the reach two we've publishers African-American, is actually for Hispanic-American, still of trying to with. more mix marketplace are it's multicultural that's Asian-American things. number we into strong communities publishers demand. think demand I definitely along LBGTQ I'm that added more There of in One, the that the I think the We're

in the efficiency the process pretty in X a combination into our really successfully yielded same platform that an buying been of QX. all put we're to place of community. the the us we Really people fruit expecting see Number have and the and for we've the in added actually much benefit operational and that has saw two,

Michael Kupinski

a advertisers looking out more the in to And space, you percent at general targeting What the taking -- that advertising the of advertisers multiculturals that of is what way percent? is particular kind initiatives that a there maybe terms Can is of the for you space? market. the just identify versus multicultural is --

Mark Walker

of the U.S. X number roughly those with What sit, directly population -- XX% is outlined. would say on One groups we That's geared actually our one. which leave made that those are you give Yes. of I month those I'll stat you stats. up Yes. to And XX%, stat inventories depending is XX% audiences I is authentic. second where of through -- publications, the about to the

that amount think So significant upside. community still we growth the there advertising And do opportunity overall there's to those audiences. buying the we're a that with of reach of beneficiaries

So the enjoying communities. geared in into more make spend we're those the we're marketplace ultimately the ecosystem point near yet, going adding benefits goal we're at that's towards continue point marketing But really XX% of impressions type the publishers towards. would we're in to the that actually of the in available. our for differential but to some I be future, not of versus those really that the that that's And and are point be investments working that publications and actually to all actually think

Michael Kupinski

new these to wondering, to you entrants I good And marketplace. just was kind Posting I move see in? a likely still niche types additional of for pretty to start starting see you? is open it's are numbers, it competition of Or field in you're very mean going

Mark Walker

a companies They've for as are I in publicly are I competitors, there. of think some and mean now. entities some the our traded we there out of competitors, Yes. been lot private view out time the all marketplace that

And And maintain and that's towards I a to to so benefit be us. equipped adept buyers we're that for think you're they're and through. actually actually and seeing the some to competitive work the of option gravitating

Operator

There the to at further back I call questions are Mr. this Walker, you. time. over turn no Mark

Mark Walker

we're looking you. All Thank right. you If questions, listen QX. come to back thank everyone for forward decided in there's that to further no speaking and and you to

Operator

conference This concludes call. today's

You now disconnect. may

Direct Digital (DRCT) 9 Nov 232023 Q3 Earnings call transcript