DRCT - Earnings call transcript Q4 2023 | Direct Digital Holdings, Inc.

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Operator

Good day, everyone, and welcome to the Direct Digital Holdings Fourth Quarter and Full Year 2023 Earnings Call. Today's call is being recorded [Operator Instructions].

I will now turn the conference over to Brett Milotte, VP of Investor Relations. Please go ahead.

Brett Milotte

welcome XXXX Digital Earnings and and Fourth everyone, Year Full Conference afternoon, to Holdings Direct Quarter Good Call. My I'm name representing and Direct Digital is Holdings from Brett Milotte, ICR.

Executive Direct Diana Officer, Chairman call, Chief Diaz. Digital today's Walker; and our and On Chief Officer, Mark Financial Holdings

Today's and today accessed today discussed website. by website. replay webcast, and Holdings may be X-K Direct the being in release, SEC's which DRCT's by the its posted Digital is Information earnings entirety has at and website will qualified that Relations Form to is also accompanying call been filed and Investor DRCT's a be

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

call. Forward-looking its statements forecasts, to can results risks, forward-looking are the at those DRCT's applies all could on DRCT's to call. SEC this refer including for statements in set filings historical risks forth and This those statement differ cautionary to and subject actual results you made information. cause this to from which And during more

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

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

Mark Walker

operational strong for revenue performance our incredibly and our joining growth. full to proud Thanks, as year we're an point report XXXX for our inflection XXXX quarter now eighth everyone and and thank you double-digit financial company, year of our and earnings reporting to call. fourth results was Brett, the I'm quarter

discussed in technology earnings XXXX. advertising structure we we to in Digital Holdings operational platform significant throughout and continue investments As stack, calls, previous make Direct

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

As advertising businesses continues a solutions. marketplace our result, our platform benefit to middle open approach thoughtful as to market differentiated seek

XX% $XX.X into full achieved review Before detail quick We XX% about I'd million fourth to year. of of we initial more our year in quarter, total like begin XXXX, our achieved the with growth our over guidance. million or at revenue get $XXX.X a XXXX above

the We $XX.X million, million also higher than period achieved for XXXX. EBITDA of the EBITDA $XX.X XX% same adjusted adjusted in

In to proud today had how able team XXXX, we're achievements, grow was to a a our wanted as I we highlight which few number overall of of the of business.

bidding Firstly, with our into publishers we Amazon's integrated The auction TAM that announced Colossus serve approach. and integration TAM. Colossus and Amazon Publisher Services header with the offer Transparent to Ad our of solutions new or collaboration division roster benefits tap allowed beside Marketplace, SSP's with SSP direct

client the the customer our announced XX% side per our an buy overall with platform growth providing the reliable, growth secure for production of and highly on with partnership wins increased also year. We and by revenue our stack. portfolio build environment to HPE edge a the to X% technology cloud scalable Throughout strategic up significant we with GreenLake, across had year,

and a to transition saw the our ID integration We cookie-less rollout alternative began of solutions. environment the

the optimization transition support. scale good increased management shared and efficiency operational continued In and and addition, allows we us yield we for services achieve launched our which DDH tool, of revenue function AI to

XX% was factors. deprecation fourth XXXX X year-over-year of QX QX million, guidance to QX due begin we In which saw same last XXXX. became were revised the cookie in would clearer down was period we strong quarter, with from the While revenue, sequentially our at change based revenue $XX which QX higher growth shy primary than changes, with year, upon it of value

In addition, for. we revised demand noted softer our guidance that called

team off such, began our As proactively cookies for transactions. transition our media of

As investments and peers. decision us strategic a the result, our our positioned for future we accelerate of believe to our ahead has well

several Dotdash XXXX. we and [ not [ QX, have strategic complete all weather.com These launched did Meredith, ], increased original ] strategic in overall testing for the Arete Group, in addition, including our beta on count. would pressure In publishers been have schedule NBCU of publishers, which QX

to continue gains were calibrations revenue the build the gain the for XXXX in internal strategic measures of prioritize company we long-term short-term made XXXX share in in to confident on and continue position successes market growth We QX successes will and and in are XXXX.

[ information ] quarter. Our of during affected impacts was fourth adjusted likewise quarter XXXX revenue the $X.X EBITDA by the million

continues platform increase quarter. sell-side publisher trillion segment the side In supply bid of impression same of to period approximately of in quarter, addition engagements with processed billion Our XXX impressions, over monthly to XXX% month close partner in XXXX fourth our requests for increase increases inventory. X the our advertising to the an

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

transition platform last did Our the to about compared see XX,XXX some to buyers degradation year's fourth buyers due to within decreased XX% quarter. our platform

customer increased per per revenue buyer over $XXX same our XXX% the period. to However, by

side, the with consistent of buy the buy-side customer period an with approximately served On per revenue same last compared to year. period the XXX customers, X% XXXX, businesses these increase same of

middle consolidation outlook the is XXXX, the following. remains to believe our the point fragmented industry relates that market, We ad of space it opportunities view tech digital and exist. As and

value to consolidation opportunities deprecation those We of strategic evaluate accelerate and We will accretive for cookie integration, will fit. investments. anticipate continue platform creation, market opportunistic

transition dynamics media will the accelerate will our footprint to transition expand for complex business, in gain and continue services. tech-enabled to digital and present opportunities This market our traditional buy-side the AI market share For media. introduction market of from

as the as performance of privacy on and industry In impact IDs importance reporting delivery. campaign more understanding the well addition, alternative on sandbox of will strong in take the

We the in and the will wall guards ID, to along relationships. bifurcation CPM [ marketplace SSP tension believe and ] alternative with between continue that DSP exist, open marketplaces also market between continuing

cornerstone expect and to on the strategy. be We aim the our continuing our with of to streamlining brand chain, we strategic focus of value build the agency relationships partnerships

proliferate of performance. of business across capabilities allowing and our AI will continue Finally, tools offer increasing ROI the enhancing tools and chain through these both to these value leverage to companies segments,

guidance of year's million XX% $XXX million performance $XXX XXXX or providing we're midpoint. an increase revenue for the to XXXX, of at FY For over last

walk who Diaz, in I will things over now financial highlights our through CFO, the of detail. some to hand further Diana will

Diana Diaz

Thank you, Mark.

Mark XXXX, As $XX.X in which total our the X% million of the an revenue million below an over our finished XX% was fourth of or over guidance period $XX.X stated, year XXXX. XX% of $XXX.X range, about revenue point revenue low with same or We in of quarter to the $XX.X the the of year. million of increased growth million, was million achieved in increase million increase but of $XX the $XX.X last

testing the for XXXX accelerate the by quarter publishers revenue transition towards lower-than-anticipated platform. release from lower to Tier proactive quarter beta the during anticipated the X a and mentioned, than delay of of cookie-less the was company demand, due fourth fourth efforts Mark in As a advertising to

prior million Our last with the contributed of for increase revenue Colossus year. $X.X or segment a and $XX.X to the majority of grew the increase of drove year. of in over sell-side ended the XX% $XX.X million and the the million period advertising same year over quarter strong fourth SSP sell-side the QX

sell-side $XX.X full XXXX. revenue, million million revenue million $XXX.X an XXX% in achieved sell-side segment year, or growth of our over in in the the For of $XX increase

Huddled For year-over-year the to grew OrangeXXX X% quarter, period overall quarter the businesses, the our fourth revenue million with of in and million $XXX,XXX $X.X the compared of in contributed increase, same buy-side $X.X XXXX. finishing and Masses

of million buy-side $XX.X XX% For XXXX. revenue the the grew an buy-side million to or over $XX.X increase in $X.X segment year, of full million, our

profit of the million of to to For result as for dollars revenue. last XX% dollars of fourth of quarter segment. same compared as $XXX,XXX for result in about the profit a margins are to of Gross year the line were That These the approximately $X.X for XX% growth revenue. approximately a quarter higher $X.X quarter given were increase Gross with million sell-side XXXX was Gross our for compared of margin XXXX, accelerated for an the of gross to rate XX% expectations of fourth period increase $XX.X of were approximately fourth XXXX, million compared XXXX $XX.X in in higher margin results our margin million $X.X an for advertising was XXXX. compared the million XX% year. XXXX.

cost buy-side compared revenues faster-growing Our to has higher sell-side of our segment. segment

We also sell-side increase related in $X.X to or of to million million fixed in server an of fourth $X.X capacity year. to the quarter of of saw support expenses the in the fourth amount increased XXXX in growth. higher of XXXX $X.X quarter expenses million for increase over Operating our costs the $X an last million

were For of to XXXX, million in the million. compared $XX.X XXXX, full million operating $X.X increase an expenses year $XX.X

throughout were the February our administrative marketing services. quarter and by to in growth of mainly XXXX, $X.X well as shared primarily in of in the our as with and the quarter associated area as compensation a support fourth XXXX. due benefits as and additions fourth $X and were in operation the increases beginning for Increases for to expense transition million continued our tax expenses our The $XXX,XXX million in to for ongoing count as for company public year well million growth an supporting and general driven initiatives costs operations head year $X.X

in automation additional continue as initiatives. well invest count as We expect sales to support to to head

compared revenue expense a our and in the in As to of the income $X.X of impacts fourth saw a million same net net we the quarter of operating consequence period loss million fourth $X.X XXXX. quarter, to of aforementioned

compared million income million XXXX the full of XXXX. in was For in net income year, $X.X net to $X

For to adjusted the last EBITDA of adjusted fourth compared quarter for $X.X of quarter, year. million was million EBITDA the fourth $X.X

full to higher million XX% year, the or adjusted million full EBITDA adjusted the grew $XX.X the XXXX. than For EBITDA for year $XX.X

the of cash $X.X of Total year We million XXXX. the our of the balance an over million was with $XX.X at to accounts $XX.X we ended of had and end turning compared as $X.X $X million, XXXX. million equivalents cash increase cash to the end million balance plus sheet. the of of year-end receivable Now as

our to we retired liquidity XXXX, of by with of of capacity uncommitted revolving and warrants fourth improved the $XX value increase million with initiative in $X IPO. incremental As quarter shareholder facilitate of up part a all capacity. and our our facility connection securing continue to And during outstanding million credit the company's growth, we issued to

to to opportunities. We support expect facilitate as to XXXX our continue inorganic in sheet take liquidity improve balance well in to growth our as steps business

Now let's touch on guidance.

it In $XXX variety guidance the demand. the million year. guidance economic that fiscal Our or At subject present, revenue of change may in materially the update is to particular, and range significantly growth We the that plan do advertiser the million midpoint. year-over-year a $XXX to not XXXX we or it expect offer of XX% not experience to annual be year. deteriorate assumes at throughout to otherwise that economy over factors does reduced conditions U.S.

we on pace preliminary XXXX, year We at over is are off Based to a through results good of XX% to XX% XXXX. grow sell-side rate on first mid-March a prior the for quarter. to believe start revenue

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

Mark Walker

joining. Thank you, thank for Diana, and to everyone you

Direct line. appreciate Operator, Holdings looking in always, your up Digital and forward your open we As the to interest questions. are please

Operator

take ROTH. Instructions] Aftahi from [Operator And first we'll Darren question our with

Darren Aftahi

handicap come as of to have of those fourth -- of of cookie-less. you of the beta things? to just a the the X not moves demand, can the the kind fourth lower for you kind the moving proactive terms coming of guess, items quarter, like X couple Mark, publishers, out on kind each moved those initial One, of Tier relative curious, I of the in of impact know said pilots kind we kind gave of I'm quarter then highlighted of did have versus have you some the when kind I of guidance, your I then publishers you how thoughts on XXXX, items those guys believe, November into But quarter? beta. changed And of how out kind X? and

Mark Walker

Thanks the Darren. Yes. question, for

and move had I what important think deprecation we we're strategic our things. QX occurring with a I for was I though that say an was even of to X to of couple years definitely One, cookie after see deprecation will it What think that have us. seeing in dealing transition cookie was started delay.

with over and a XXXX able versus in the industry, us seeing take what a in a into that like move make started anticipate the QX did we switching versus not we we got before marketplace we hearing effort, and to so platform felt manage order we started that be waiting go to was long-term that deal And Again, transition. to we transition started for of at approach that and to did prudent it making benefit looking XXXX. once the in and short-term gain. ahead lot transition in But until

roughly QX was as look about of The billion at noticed, relates second the And that amount if for delivered our and of between each we XXX to were if thing you -- is SSP we flat. QX it those. impressions we want you to

that the be we historically to into to able by that impressions marketplace. increase have really way the introduce grow the able we of been is So actually

And that so to transition making we're deprecation. our we cookie beta able of delay to actually was especially light in were critical in the grow, ensure for that with us

our growth. that to primarily alternative count which right relates decision. to XX% is XX% and a performed a SSP though comparison based of the it making sure didn't say those growth IDs XXXX, after being of to and have and for to we we year-over-year, measures seeing upon thought still factors make QX, we able level as we started are performance, our really we we of the would X that cookie of we're were that deprecation, proactive excited our I us hedge move we're QX feel impression initially So being meet even in growth, our seeing the XX% that maintain expectations really last making justification What in about it year's to

Darren Aftahi

kind about and -- maybe I always the kind you dismal cadence give switch like IDs, pretty any but And since color with as of of you back softer just comments, that of starts growth? growth? working has driving in -- platform demand improved on the the your maybe since advertising, which it the talk can Like -- it put to digital a in curious, coming off you off you know January month the drive you can about of and is softer of just sorry, what's is publishers new Is unique? correlated cookies beta the And of both that going absolute growth? the I'm with kind your talked is demand. or alternative something that's

Mark Walker

And Yes. we with demand the lighter was the platform holiday combination saw transition cookies actually a change in it the we impact over because that of would the the saw say softer into had also making that QX. we I going of season. being

it relates both it So QX. a combination as of to was

publishers those the that with ones that QX, regards that What the beta were are alternative into increase transition IDs, in in we've increase delayed we moved of in that of the to transitions do -- to has we actually QX, actually level QX, based seeing we of with we've that an performance the the attribute with out made in to level getting upon the impact transactions the in and everything we're seeing. in coupled added

Diana Diaz

we changes technology year. the that the benefits the to XXXX quarter we We second of the also compare in half of see last as made first

Mark Walker

Yes, correct. is that

Operator

from Benchmark We'll our Company. take Kurnos with question next Dan The

Daniel Kurnos

to And yes, and sell-side mouth, the side the guide I words year. know, put of decided assuming the SSP QX either don't just last And there had momentum and kind in there lower is, implies feels impression for your a the we continue. year, big, can over we it's isn't want lot and growth XX%, don't second? SSP The of the because going with that revenue buy is was for is but wins XQ wrong. than that's to like a I that is growth. year It in with scaling partner Mark, course obviously, you've maybe the guidance of your some -- a stay -- or of QX that

in So if be to for just trying guide choices let's buy makes assuming fair what the out of kind up is side or as next in sort understand of we this you're just -- for back reset, move how which and towards helpful. half I'm as of you to terms parse the want cookie kind a us, might year, we picks think that back you the side, about of that sell to made to, organically much of that if how the platform that volume of you've sense? laid year then out deprecation, call comes

Mark Walker

absolutely. Yes,

side side. out then So parse go sell into I'll first, this buy and I'll

buy out XX% this we're projected third and going XX% same So of which been anticipating year-over-year, still growth public. how to the side, year performed historically has being into our we

relates it to sell that expecting much Number in guidance curve regards we're in to given. or our into the we trajectory we're actually consideration our the to as historically have think As projection we we've the factors taking maintain X side, the past. one, pretty same that

reason think no have We otherwise. to

how what highest that been lowest, being maintaining with curve still QX occurred. X the the year's it's QX we're outside being the because last of last years for implication of So that's same

platform also it transition is to they're What DSPs market and One, which are and to we is making of place XX% regards to factor attributed growth year, relates cookies the how factors. already is to to XX% the seeing our year-over-year that important sell-side how X one our this as those transition. off in moves

added we've important that a -- growth and trajectory. have we that publishers in of our increase has part the being very second been The

and in really pointed the out, to that we're actually the year The able handle increase third the capacity we transactions platform can. that the Diana made amount of that change last we being, as

the So if of curve the growth XX% year. expecting and to without we're seeing working will, towards trajectory going and recommended anticipating that same maintaining far growth level into what you XX% are to anticipating year-over-year, guidance level get we're of for future, and the too and is above we QX to in our

Daniel Kurnos

should necessarily all we've you table, video. about added you on about things guys to self-serve before sort Media, go. talked deeper into getting the these SHE And know I been other but guys we FreeWheel, want not since have Okay. how of think has where you that

do new made some kind guys the of you how of initiatives announcements we about Just that and think have recently?

Mark Walker

Yes.

really impact start those those forward think you're we that I are into stage monetization. and seeing going to new as are QX, in moving QX getting ones in

active others So getting highly working SHE QX that for and to you and at in towards those look publishers, our monetizations specifically, like also has been really said, FreeWheel new with and team had Media QX. we're

Daniel Kurnos

this on for you, up. of about How about we do do we think versus leverage One year? just to -- how growth? we fixed spend drive about think reset, variable get expansion to margin of think Diana, margins? we Do do this kind finish kind How

Diana Diaz

in we'll So same about segment. on margin by the I range be think

sales. it's will first X side. of a that XXXX. costs of just side off we -- the a tail cost some Those continue So quarters in should last buy but matter from the in after of saw hosting versus cost And of that. the had quarter, mix fixed sell And we

Daniel Kurnos

then this adjusting similar the buy actually, obviously, of historically, be as because growing guess, faster. Should sort -- year is sell representative? QX grow that was could well, And year, sell the sell full representative side I side and rates the but will margin side we for margin side at or 'XX grow looking

Diana Diaz

Right.

in be what at full a by that see I think indicator look the year segment, XXXX. that margins we'll if good of would you

Operator

take NOBLE Kupinski We'll question next Michael from Capital with our Markets.

Michael Kupinski

deprecation full wondering, that the cookies, searches and of just quarter. of to I marketplace to -- how Google X% see making cookies. do it's just the second of to I'm deprecation the Chrome later the indicated implementation is deprecation moves already how in that this how of cookies trying we market I was especially of as deprecated might -- go, last cookies year on the do only and as back you towards you the of half of when evolving its year, from implementation But you impact of my you I And that in see cookies the cycle Google? guess what we understanding the we start the Going of the the -- the understand full deprecation and kind understand you that the has because also

Mark Walker

an think excellent No, I that's question.

think open on I X going deprecation an things. host to -- impact is had of I it's actually up think cookie actually a

really ad I the think, a amount innovation tech significant one, it introduced it into as has of space. relates

at QX looking people I media for this moment XX one. trade the of has to of really become year last for transact the in they a last and the for really probably think dollars has how innovation the of number haven't been for year industry seen starting That's years.

of cookie, I think some that number types the deprecated of are though two, only X% Google level have other seen already has even there deprecation. media

As some of have relates Apple, what I other some see in and been they it already to how as is relates you're transact experiencing now cookies. videos, to future started we've think DSPs the to what changing off going CTV, it

different and the treat data DSPs, roughly work we all And about to same. DSPs so not XX XX with

the And are today. And DSP that think we treat of how we marketplace that, is so the of a adjusting new the seeing innovation paradigm really that we that's each is that fueling in what's we're part lot differently. actually

us conversation the them, competitive really I is specifically looking that work a actually to in year, already what in customize DSPs, So with different tests POCs think with the running the for that's future, and we're able certain of going to we and to and the advantage you're half last capture. that give more and and are

Michael Kupinski

that? result of of wondering, cookies advertising. advertisers was of ROI in getting, the like the on deprecation these and as just a say, performance let's And the the terms changes metric things the are I that that down Has in gone

Mark Walker

every think different. saying marketplace is I something

continue conversations work performance degradation as experienced that not clients campaign to have We of with had the us. we've clients with from our the

there team workarounds so relates And And go that be anticipation we've working our cookies away, one things completely is of sure that's that quality reporting actually been doesn't campaign well different with make our as of to degradation when capabilities reporting. and that intact. to will occur different and tech the towards stays it as actually campaigns partners the the as the with the

that's proof So that been clients with an on. important we've working been point our

Michael Kupinski

we And in cookie-less Or was But wondering, of for implementing the where terms adjusted that the talked about you valued you it at work of because past. are already most think and how are for they the you do I -- do this point? with, planning most kind in I publishers thoughts? this it just in terms like have environment your know feel of what and publishers this of

Mark Walker

to partners What think would that I publishers work with transition and have we comes are the they the seeing say, that or publishers a what the through with. we as behind I more have seen bit behind. larger started the smaller we're -- are Yes. midsized the what little making is

the small are more out do have publishers of some in mid-size sophisticated the of comparison lot think a so And publishers I your larger, there to catch-up in to that to marketplace. that

IDs. those have of they with that to And fill can't. of privacy we type there to really the the going have means And sandbox. the of to that's ones what that work have QX think going think future IDs the gap provide adjustments publishers and as and bifurcation them. the to alternative you're the and who relates privacy publishers or the that to marketplace sandbox see that QX I to we can -- are those publishers the a there make is is marketplace helping capability we're not might for with working means alternative really it the opportunity or and in And capability come mid-tier

Operator

to would or the conclude call does question-and-answer for any Walker today's Mark That session. closing turn like to back over remarks. I additional

Mark Walker

us year we QX. to and you thank right. full much forward joining of for you end XXXX QX for the and very at results, All the talking Well, look to

Operator

today's Thank your may presentation. Thank you. That conclude disconnect. participation today, you now for and you does

Direct Digital (DRCT) 26 Mar 242023 Q4 Earnings call transcript