Direct Digital Holdings, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Direct Digital Holdings second quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Brett Malott from ICR. Please go ahead.

Good afternoon, everyone, and welcome to Direct Digital Holdings' second quarter 2022 earnings conference call. My name is Brett Malott, and I'm representing Direct Digital Holdings from ICR. On today's call are Direct Digital Holdings Chairman and Chief Executive Officer Mark Walker and Chief Financial Officer Susan Deckard. The information discussed today is qualified in its entirety by the Form 8K and accompanying earnings release, but have been filed today by Direct Digital Holdings, which may be accessed on the SEC's website and DRCT's website. Today's call is also being webcast, and a replay will be posted to DRCT's investor relations website. Immediately following the speaker's presentation will be a question and answer session. Please note that the statements made during this call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements. Such statements are made on the basis of DRCT's views and assumptions regarding future events, and business performance at the time they are made, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to risks which could cause DRCT's actual results to differ from its historical results and forecasts, including those risks set forth in DRCT's filings with the SEC, and you should refer to these and carefully consider those for more information. This cautionary statement applies to all forward-looking statements made during this call. Do not place undue reliance on any forward-looking statements. During this call, DRCT will be referring to non-GAAP financial measures, These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release GRCT filed on its Form 8-K today. I will now head over the conference to Mark Walker, Chief Executive Officer. Mark?

Thanks, Brett, and good afternoon, everyone. This is our third earnings call as a public company, and I'm incredibly proud to report record financial performance for the second quarter and continued growth for the year. Before I go into specific details, I want to provide a brief overview for those of you joining us for the first time. Direct Digital Holdings is a company that leverages technology to assist clients in driving ROI through the buying and selling of media. Our technology platform meets the demands of the underserved middle market and provides access to general and multicultural market publishers through our proprietary sell-side platform. Our company's business was founded in 2018 through the initial acquisition of HuddleMasses and Colossus SSP, which was the genesis of our end-to-end programmatic platform. Colossus is our sell-side proprietary technology that enables publishers to sell media to buyers, while HuddleMasses, along with Orange 142, is our buy-side platform, which enables middle market businesses across the United States to purchase media to drive ROI. In 2020, we acquired Orange 142 to further develop and grow our buy-side platform and to expand our industry offerings into education, travel and tourism, financial services, and other verticals. I will begin the call by providing a brief business overview in the main financial highlights for the quarter, and we'll then turn it over to Susan Eckert, our CFO, who will share detailed financial results and revise guidance for the remainder of 2022. First, I want to address how through our strategic combination of buy and sell side platforms, Direct Digital will continue to grow due to a variety of factors. As you will see from our second quarter results, Direct Digital is experiencing strong organic growth driven by our business model. By focusing on expanding both our business segments, we have been able to deliver increased top line revenue and consequently overall growth in our adjusted EBITDA. For the second quarter, we generated $21.3 million of revenue, an increase of 90% over the same period in 2021, and we achieved adjusted EBITDA of $3.6 million, up 18% over the same period in 2021. Our sell-side platform business segment saw significant growth through a combination of expansion of our target properties, increasing our impression count, and growing our advertiser base. By continually expanding our marketplace, we now have over 16,000 properties, which is an increase of over 574% year over year. This expansion of properties led to an overall impression count of over 98 billion, up 176% in the same period in 2021. The overall influx of impressions fed our ability to increase our matrix of advertisers, which for the second quarter grew 38% year-over-year to 88,000. With our growth of advertisers, we've experienced an acceleration from our advertiser base with over 6 billion monthly bid responses, which is an 857% increase year-over-year. We are continuing to see growth of our buy-side platform, which for Q2 2022 delivered 9.3 million, which is up 2% in comparison to the same time last year. Our customer count has continued to grow with a 19% year-over-year increase with our business segment growing to 152 clients. We believe that the growth in our overall customer count for our buy-side platform will continue to fuel our organic growth strategy on that side for the foreseeable future. In viewing our business in total, we have been able to deliver over $32.6 million in top-line revenue for the first half of 2022. which is up 93% over a similar period. This growth has allowed our team to continue to deliver on our projections and exceed expectations. Based upon client feedback, advertisers are currently experiencing diminishing returns and higher costs through walled garden platforms. Clients are therefore reassessing their expenditures with walled garden platforms and searching for more cost-efficient digital advertising solutions which are both more transparent and more open in their measurement and delivering an efficient ROI. Consequently, at Direct Digital, we are strategically positioned to benefit as an open market digital platform, continuing to attract advertisers and clients who are in pursuit of effective alternatives to walled garden platforms for driving ROI through digital media. Direct Digital's comprehensive client mix focused on underserved middle market companies is diverse and broad for our buy-side business segment. With our profitable and predictable buy-side platform, we're able to provide technology-enabled service to DMOs, education, insurance, healthcare, financial services, as well as many other industries. And for the first half of 2022, we have been able to increase our buy-side business segment overall revenue by 9%. With our focus on multicultural and general market publishers, a sell-side platform has been able to attract and accelerate our growth to roughly 90,000 advertisers monthly that leverage our platform to purchase CTV, OTT video, audio, display, and native advertising. As it relates to the overall macroeconomic trends, one aspect I would like to quickly highlight is the continuing uncertainty and volatility in the market. While business spending may tighten and marketing spend may decrease, We believe that the inherent diversification of our multi-segmented business approach, coupled with our organic growth strategy, mitigates a potential downturn. In addition, we are committed to continue our organic growth strategy across both our sell-side and buy-side platforms while delivering a positive adjusted EBITDA margin. We're also proud to be named a top minority-owned business by the Houston Business Journal. Our corporate strategy is to continue hiring key revenue-generating roles in and building a culture that fosters innovation, entrepreneurship, and growth to attract and maintain talent. Finally, with the ongoing changes across the tech and advertising industries, we believe our transition of our sell-side platform infrastructure to HPE GreenLake bolsters our technological performance and allows us to scale with the demands of the business in a cost-efficient way, which furthers our ultimate growth strategy. I will now hand things over to Susan Eckerd, who is going to walk you through some of our financial highlights for the quarter and provide our annual guidance.