Direct Digital Holdings, Inc.

Greetings, and welcome to the Direct Digital Holdings fourth quarter and full year 2022 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brett Malott, Senior Vice President, Investor Relations, ICR.

Good afternoon, everyone, and welcome to Direct Digital Holdings' fourth quarter and FY 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 Eckert. Information discussed today is qualified in its entirety from the Form 8K and accompanying earnings release, which have been filed today by Direct Digital Holdings, which may be accessed at the SEC's website and DRCT's website. Today's call is also being webcast in a replay we posted to DRCT's Investor Relations website. Immediately following the speaker's presentation, there will be a question and answer session. Please note that statements made during the call, including financial projections or other statements that are not historical in nature, they constitute forward-looking statements. These statements are made on basis of DRCT's views and assumptions regarding future events and business performance at the time they are made. We do not undertake any obligation to update these statements. Forward-looking statements are subject to risk, which would cause DRCT's actual results to differ from its historical results and forecasts, including those risks set forth in DRCT's filings at the SEC. You should refer to carefully consider these 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, the DRCT will be referring to non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the non-GAAP financial measures the most directly comparable GAAP measures is available in the earnings release of GRCT filed in Form 8-K today. I will now hand over the conference call to Mark Walker, Chief Executive Officer. Mark?

Thanks, Brett, and good afternoon, everyone. This is our first Q4 full-year earnings call as a public company, and I'm incredibly proud to report strong results for both the quarter and the year. Our first year as a public company demonstrated direct digital holdings operational excellence, expansion, and market share growth, which garnered robust financial performance. Before we get into more detail about the full year, I'd like to begin with a quick summary of our fourth quarter. In Q4 2022, our revenue increased to $29.4 million, an increase of $16.5 million, or 128% over the $12.9 million in the same period of 2021. And adjusted EBITDA was flat at 1.8 million. Our supply-side platform continues to increase publisher partner engagements in addition to increasing in our impression inventory. In the fourth quarter, our sell-side advertising segment processed approximately 132 billion monthly impressions, an increase of 81% over the same period of 2021, with over 833 billion bid requests for the quarter. In addition, the company's sell-side advertising platforms received over 17 billion bid responses in the fourth quarter of 2022, an increase of over 25% over the same period of 2021, through 170,000 buyers for the quarter, which is 109% increase over the same period of 2021. On the buy side, these businesses served approximately 218 customers, an increase of 7% compared to the same period of 2021. While Q4 is historically our strongest quarter, this year we began our process to expand our overall capacity, scale, and performance to fuel growth for 2023 and 2024. We achieved these results while we began our transition to HPE GreenLake environment will allow us to continue expanding our growth for the next few years. Looking at the full year of 2022 was a volatile year in the ad tech space, primarily driven by supply chain disruptions and larger economic issues. Also had a negative impact on the industry's operating environment. Open Marketplace CPMs, our platform strategy, directly benefited as Walgarden saw difficulty as the middle market businesses moved to look for alternatives due to being less expensive, less restrictive, and more accessible with expansive reach. In spite of these macroeconomic issues and changes, our company was able to achieve total full-year revenue of $88 million in line with our previously issued guidance, an increase of $49.9 million or 131% growth over $38.1 million achieved in 2021. We also achieved adjusted EBITDA of $8.8 million or 38% higher than the $6.4 million adjusted EBITDA for the same period in 2021. On the corporate side, we had a number of achievements, a few which I wanted to highlight today. First, as mentioned before, we successfully completed our IPO and raised $15 million of capital upon completion. Second, we raised an additional $3.9 million of non-dilutive capital to retire the USD and preferred equity position. On the organizational side, we added three new independent directors for our board of directors, adding technology and industry depth as our advisors, And we successfully constructed a shared services operation to capture cost synergies across all of the direct digital holding subsidiary companies. And finally, we re-platformed and transitioned Colossus SSP via a groundbreaking partnership with HPE Greenlink. We firmly believe that our market-leading performance in 2022 was driven by three key strategic objectives, our technology efficiency, our processes, and our people. Our technology configuration has allowed us to spend both financial and resource investments effectively. Consequently, we internally call our strategy Smart Innovation, where we build, borrow, or buy technology with the end-use cases in mind, and we are directly focused on driving ROI for both our clients and partners. If we can't see a tangible outcome that is metric-driven, we do not invest. We believe that has been one of the main contributors to our profitability and outpaced results that we have experienced since we have been public. Direct Digital Holdings values the neglected and nascent publishers that have not been added to the advertising ecosystem. This has allowed us to deliver reach and performance that is historically rare. Additionally, with our approach on the buy side and sell side of the businesses, we have been hyper-focused on delivering ROI and performance to our clients and partners. Instead of clients spending money with our company and not delivering a return, we're always driving for results for them. By being positioned in these nascent markets with our buy-side platform focused on the middle market and our sell-side platform focused on both the general and multicultural publishers, our team is in a strong position to capture market share that has historically been ignored. Within the United States, the multicultural audience represents 40% of the U.S. population. However, according to the Association of National Advertisers, marketers historically are only allocating 5% of their marketing spend to reach those audiences. If companies want to grow in the United States, they will have to reach those markets through those publishers, and therefore we believe the overall trend of this spend dislocation can work in our favor. And we're looking to continue to see that growth for the foreseeable future. Regarding our team members, our employees come from corporate America, consulting and other leading ad tech firms. We hire experts who have diverse views, perspectives, and backgrounds, but who are also highly experienced in their craft. We believe that our diversity is our secret sauce, and you will not find a company in this field that is more diverse across all levels of the organization. From our board of directors to our leadership team to our staff, our company's diverse environments bring the best solutions and subsequently positive results. We plan to continue to preserve and promote a diverse culture to deliver positive results for our clients, partners, and our shareholders. Turning to strategic growth for a moment, We have a history of making strategic acquisitions, and we believe in the current marketplace with over 80 plus SSPs in the programmatic ecosystem. There is certainly an opportunity to explore and evaluate strategic growth opportunities. However, we want to make clear that any such opportunities must be strategic, opportunistic, and accretive to our company. As a company, our primary focus for 2023 is to continue our strong growth trajectory and deliver $118 to $122 million in top line revenue along with strong profitability. In addition to our organizational focus, we believe the current market dynamics are favorable for direct digital holding because of a few macro trends. With the current increase in media spend being targeted to reach growth, multicultural audiences, and middle market companies moving dollars away from traditional media spend to digital, Our proven operational model combined with our stable capitalization and liquidity structure has strategically positioned our company to continue its growth trajectory. I will now hand things over to Susan Eckert, who is going to walk you through some of the financial highlights in further detail. Susan?