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Direct Digital Holdings (DRCT)
NASDAQ:DRCT
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Direct Digital Holdings
(NASDAQ:DRCT)
42Neutral
Positive Factors
Cost-Saving Efforts
Adjusted EBITDA could return to breakeven or better due to necessary cost-saving efforts.
Incremental Wins
Some minor winds at the sails with $5-10 million of incremental buyside wins to help jumpstart the path to recovery.
Revenue Guidance
Management reiterated their prior FY25 revenue guidance, which suggests some confidence despite the pervading macro questions.
Negative Factors
Ongoing Business Challenges
DRCT faces ongoing challenges across both businesses that must be resolved to enhance visibility into returning to growth and profitability.
Profitability Pressure
Profitability is expected to remain under pressure until DRCT returns to a $25-30M quarterly run rate in revenue and improved SS gross margins.
Revenue Challenges
4Q24 revenue of $9.1 million was worse than anticipated, as macro trends caught up with Direct, creating an incredibly challenging environment.
Direct Digital Holdings (DRCT) vs. S&P 500 (SPY)
Market Cap
$12.64M
Dividend YieldN/A
Average Volume (3M)981.75K
Price to Earnings (P/E)―
Beta (1Y)2.16
Revenue Growth-60.35%
EPS Growth-1269.03%
CountryUS
Employees90
SectorCommunication Services
Sector Strength76
IndustryAdvertising Agencies
Share Statistics
EPS (TTM)-1.63
Shares Outstanding6,450,554
10 Day Avg. Volume2,684,108
30 Day Avg. Volume981,748
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.12
Price to Cash Flow (P/CF)1.00
P/FCF Ratio1.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$8.00Price Target Upside995.89% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Direct Digital Holdings Business Overview & Revenue Model
Company DescriptionDirect Digital Holdings (DRCT) is a technology company that operates within the digital advertising sector, focusing on facilitating efficient media buying and selling for small and mid-sized businesses. The company offers a suite of services through its proprietary platform, including programmatic advertising, data-driven marketing solutions, and media services, helping clients to optimize their advertising expenditure and maximize reach across various digital channels.
How the Company Makes MoneyDirect Digital Holdings generates revenue primarily through its programmatic advertising services, where it acts as an intermediary between advertisers and publishers. The company earns money by taking a percentage of the advertising spend that flows through its platform. Additionally, DRCT offers data-driven marketing solutions, providing clients with insights and analytics to enhance their advertising strategies, which also contributes to its revenue. Significant partnerships with advertisers, agencies, and media companies further bolster its earnings, as these relationships expand its network and increase the volume of transactions processed through its platform.
Direct Digital Holdings Financial Statement Overview
Summary
Direct Digital Holdings faces significant financial challenges, with declining revenues, negative profitability margins, and high leverage. Negative stockholders' equity and inconsistent cash flows highlight the need for financial restructuring.Income Statement
Direct Digital Holdings has shown a volatile revenue trajectory with a significant decline in revenue from 2023 to 2024. Gross profit margins have decreased, and both EBIT and EBITDA margins are negative, highlighting operational inefficiencies. The company has also experienced consistent net losses over the years, with a particularly large net loss in 2024.45
Neutral
Balance Sheet
The balance sheet reveals high leverage, with a negative stockholders' equity in recent years, indicating potential solvency issues. The debt-to-equity ratio is concerning, as the company has been operating with negative equity. The equity ratio has also turned negative, reflecting high financial risk.30
Negative
Cash Flow
Cash flow from operations has been inconsistent, with a negative free cash flow in 2024, reflecting cash management challenges. However, the company had a positive operating cash flow in 2023, indicating some ability to generate cash from core operations. Free cash flow to net income ratio is negative, aligning with the net losses.50
Neutral
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 94.22M | 62.29M | 157.11M | 88.04M | 38.14M | 12.48M |
| Gross Profit | |||||
| 18.41M | 17.39M | 37.57M | 28.00M | 18.43M | 5.17M |
| EBIT | |||||
| -8.49M | -13.23M | -2.19M | 6.66M | 4.38M | 526.30K |
| EBITDA | |||||
| -293.93K | -13.23M | 473.00K | 9.85M | 6.34M | 457.44K |
| Net Income Common Stockholders | |||||
| -5.28M | -19.91M | -2.19M | 2.92M | -1.51M | -908.19K |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.61M | 1.45M | 5.12M | 4.05M | 4.68M | 1.61M |
| Total Assets | |||||
| 30.70M | 26.01M | 70.67M | 56.81M | 36.00M | 30.70M |
| Total Debt | |||||
| 13.37M | 4.67M | 30.95M | 24.56M | 20.82M | 13.37M |
| Net Debt | |||||
| 11.76M | 3.23M | 25.84M | 20.51M | 16.13M | 11.76M |
| Total Liabilities | |||||
| 28.33M | 45.74M | 74.35M | 53.01M | 36.37M | 28.33M |
| Stockholders Equity | |||||
| 2.37M | -19.73M | 543.00K | 3.79M | -374.86K | 2.37M |
| Cash Flow | Free Cash Flow | ||||
| -8.96M | -8.65M | 2.38M | 1.44M | 3.75M | -574.53K |
| Operating Cash Flow | |||||
| -8.95M | -8.65M | 2.56M | 2.13M | 3.75M | -574.53K |
| Investing Cash Flow | |||||
| -58.02K | -17.00K | -178.00K | -687.96K | 0.00 | -10.99M |
| Financing Cash Flow | |||||
| 7.62M | 4.99M | -1.31M | -2.08M | -678.72K | 12.29M |
Direct Digital Holdings Technical Analysis
Negative
0.73
Price Trends
1.04
Negative
1.34
Negative
2.29
Negative
Market Momentum
-0.05
Negative
43.47
Neutral
50.97
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DRCT, the sentiment is Negative. The current price of 0.73 is below the 20-day moving average (MA) of 0.86, below the 50-day MA of 1.04, and below the 200-day MA of 2.29, indicating a bearish trend. The MACD of -0.05 indicates Negative momentum. The RSI at 43.47 is Neutral, neither overbought nor oversold. The STOCH value of 50.97 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DRCT.
Direct Digital Holdings Risk Analysis
Direct Digital Holdings disclosed 55 risk factors in its most recent earnings report. Direct Digital Holdings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Direct Digital Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $1.90B | 18.32 | 10.43% | ― | -1.22% | 112.13% | |
67 Neutral | $367.50M | 31.32 | 1.75% | ― | -32.95% | -89.11% | |
67 Neutral | $450.33M | 40.00 | 4.36% | ― | 9.08% | 43.58% | |
66 Neutral | $27.71B | 71.56 | 15.37% | ― | 25.63% | 118.49% | |
64 Neutral | $1.66B | 83.60 | 3.10% | ― | 7.82% | ― | |
59 Neutral | $27.96B | 0.79 | -25.77% | 4.12% | 2.19% | -45.44% | |
42 Neutral | $12.64M | ― | -320.07% | ― | -60.35% | -1269.03% |
* Communication Services Sector Average
Performance Comparison
DRCT
Direct Digital Holdings
0.73
-13.58
-94.90%
PERI
Perion Network
8.16
-13.72
-62.71%
CRTO
Criteo SA
35.02
-0.10
-0.28%
MGNI
Magnite
11.60
1.02
9.64%
TTD
Trade Desk
54.72
-32.59
-37.33%
PUBM
PubMatic
9.28
-14.46
-60.91%
Direct Digital Holdings Earnings Call Summary
Earnings Call Date: Mar 27, 2025 | % Change Since: -45.11% | Next Earnings Date: May 8, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a challenging year with significant revenue declines primarily due to external attacks and customer pauses. However, the company has made strategic moves to improve margins, reduce costs, and initiate new revenue-generating activities. The outlook for 2025 indicates potential recovery with expected gains in the second half of the year.Highlights
Gross Margin Improvement
Despite a decrease in revenue, gross margin increased from 23% in the prior year to 32% in the fourth quarter of 2024 due to a higher mix of buy-side revenue.
Cost Savings Achieved
The company realized cost savings in operating expenses of $2.1 million in the fourth quarter of 2024, reflecting the flexibility in its cost structure.
New Revenue Initiatives
Launch of Colossus Connections to accelerate direct integration with leading demand-side platforms, signing up two leading partners, expected to generate $5 million to $10 million in additional revenue in 2025.
Positive Buy-Side Customer Growth
Despite overall buy-side revenue decline, there was growth from existing and new customers of 8%.
Lowlights
Significant Revenue Decline
Fourth quarter 2024 revenue was $9.1 million, a decrease of $31.9 million from $41 million in the same period of 2023.
Sell-Side Revenue Impacted
Sell-side revenue fell to $2.7 million for the fourth quarter compared to $33.4 million in the same period of 2023 due to a major customer pausing its connection following a defamatory article.
Operating Loss
Operating loss for the fourth quarter was $4.3 million compared to an operating loss of $8.8 million in the same period of 2023.
Decrease in Cash Reserves
Year-end cash and cash equivalents decreased to $1.4 million from $5.1 million at the end of 2023.
Company Guidance
During the Direct Digital Holdings Fourth Quarter and Full Year 2024 Earnings Call, the company reiterated its revenue guidance for fiscal 2025, projecting between $90 million and $110 million. The call highlighted a challenging 2024, with significant revenue disruption due to defamatory attacks on their supply-side platform, Colossus SSP, which impacted partnerships and client activity. Despite the hurdles, the fourth-quarter results aligned with revised guidance, with a noted gross margin increase from 23% to 32% year-over-year due to a higher mix of buy-side revenue. The company implemented cost-saving measures, reducing operating expenses by $2.1 million in Q4 2024, and anticipates additional annualized savings of $1.5 to $2 million in 2025. The management conveyed optimism for 2025, particularly in the latter half, as they expect strong gains driven by new direct sell-side partners and emphasized a focus on higher-margin buy-side operations, projecting incremental revenue of $5 million to $10 million from new verticals.Direct Digital Holdings Corporate Events
Private Placements and FinancingRegulatory Filings and Compliance
Direct Digital Holdings Sells Shares and Rescinds Equity
Neutral
Dec 18, 2024
Direct Digital Holdings, Inc. sold 220,000 shares of its Class A Common Stock for $182,843 to New Circle Principle Investments LLC, exceeding five percent of its total outstanding shares. Additionally, company executives Mark Walker and Keith Smith have agreed to rescind shares issued to them in 2024 related to restricted stock units, reflecting a voluntary decision that may affect their equity stakes.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.