Direct Digital Holdings, Inc.

speaker's presentation, there will be a question and answer session. Please note that the statements made during the call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements. These statements are made on the basis of Direct Digital'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 risks, which could cause Direct Digital's actual results to differ from its historical results and forecasts. including those risks set forth in Direct Digital's filings at the SEC, and you should refer to those for more information. This cautionary statement applies to all forward-looking statements made during this call. During this call, Direct Digital will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that Direct Digital filed in its Form 8 today. I will now hand the call over to Mark Walker, Chief Executive Officer. Please go ahead, Mark.

Thanks, Walter, and thank you to everyone joining our call this evening. I'll start by reviewing some of the highlights of our operations and financial results during the third quarter before turning the call over to our CFO, Diana Diaz, for a more detailed look at our financial results. We'll conclude by opening the call for a brief Q&A. We saw another period of encouraging growth in our buy-side segment during the quarter. with buy-side revenue increasing 7% to $7.3 million, which represented the majority of our consolidated revenue. Subsequent to the close of the quarter, we announced a first-of-its-kind partnership between Orange 142, our buy-side subsidiary, and Reach TV, an award-winning streaming network for live sports and lifestyle content, reaching over 50 million travelers per month. This partnership combines the data-driven scale of Reach TV's travel media networks with Orange 142's media planning, buying, and performance marketing expertise, providing our buy-side business with new inventory and valuable data targeting segments. Together, we're simplifying how brands reach the connected traveler through a scalable model that unites data, content, and context to drive measurable results for travel and tourism marketers. During the third quarter, our sell-side revenue was negatively impacted by lower than anticipated impression inventory and engagement levels as we continue working to rebuild publisher relationships and onboard new customers. However, we're taking a differentiated approach to this rebuild, one that leverages our unique position as one of the few companies operating at scale on both sides of the programmatic ecosystem. We're developing integrated solutions that combine our supply-side platform technology capabilities with Orange 142's demand-side marketing expertise, creating a full-stack offering for clients. This dual approach can deliver tangible cost savings to customers by streamlining a programmatic supply chain while also allowing us to capture incremental margin that wouldn't be possible with a single-sided model. We're currently in alpha testing with select clients generating revenue, which fueled our quarter-over-quarter increase in buy-side revenue, and early feedback has been positive. We believe this strategy positions us to grow company revenue in a more sustainable and profitable way. As many of you already know, over the last year, we faced considerable external challenges related to our sell-side business, Colossus SSP, that resulted in the restructuring of teams and rethinking how we operate. A silver lining of this is that it accelerated our adoption of AI for the sell-side of our business. Today, we're leveraging AI to drive innovation and agility to better position ourselves to win new opportunities. And though we're still in the very early stages, we're already seeing some encouraging results. Our overall feature set grew by nearly 40% this year, driven by the creation of 10 plus new AI modules that support both internal operations and clients. What once took months can now happen in days. Projects that previously required eight to nine engineers and nearly a year to build now take a few weeks or less to reach testing. We've achieved hundreds of thousands in annual savings through automation and streamlined infrastructure. These efficiencies allow us to reinvest more into innovation and client value. These results are driven by our phased approach to building smarter technology. Using AI and real-time analytics, we've optimized how ad requests flow through Colossus. Now we're taking that optimization a step further, moving it to the edge of our infrastructure, where requests first enter the system. This shift allows us to eliminate non-performing traffic before it even reaches our servers, dramatically improving efficiency and reducing costs. Building on these breakthroughs, we're preparing a new suite of AI tools that will empower our existing clients in ways that weren't possible before while supporting new customers. These are just the first steps in our AI journey, and they've already reshaped what's possible for our company. AI now touches every part of how we operate from development analytics to decision making and optimization. Finally, we continue to drive improved operational efficiencies and cost savings. Year to date in 2025, we've delivered total reduced operating expenses by $5.4 million or an approximately 20% decrease in expenses compared to the first nine months of 2024. So we're seeing meaningful progress from our cost savings. Recognize that this has been a challenging period for our business. and our shareholders, and we remain steadfast in our stated goals and strategy to rebuild and grow our business back to the strong year-over-year revenue growth that we drove consistently from 2018 through 2023 prior to the short attack. I will now hand the call over to Diana Diaz, our CFO, who will walk through some of the financial highlights in further detail.

Thank you, Mark, and good evening, everyone. I'll now provide a review of our third quarter results Consolidated revenue in the third quarter of 2025 was $8 million compared to revenue of $9.1 million in the third quarter of 2024. Sell-side revenue was $600,000 in the third quarter compared with $2.2 million in the third quarter of 2024. The decrease in sell-side advertising revenue was primarily related to a decrease in impression inventory when compared to the third quarter of 2024. Buy-side revenue increased approximately 7% to $7.3 million compared to buy-side revenue of $6.8 million in the third quarter of 2024. Gross margin for the third quarter of 2025 was 28% compared with 39% in the third quarter of 2024. Operating expenses in the third quarter of 2025 were $6.1 million, a decrease of 25% or just over a million dollars compared with $7.2 million in the same period of last year. The reduction is primarily related to a decrease in general and administrative costs. Expense reduction is a key strategic initiative for Direct Digital, and we're pleased with the progress that we've made so far. Our long-term goal is to efficiently minimize our cost structure while simultaneously driving growth across our business. Total operating loss for the third quarter was $3.9 million compared to a loss of $3.7 million in the same period of last year. That loss in the third quarter improved to $5 million or $0.24 per share compared to a net loss of $6.4 million or a loss of $0.71 per share in the third quarter of 2024. Adjusted EBITDA for the third quarter was a loss of $3 million, essentially consistent with the adjusted EBITDA loss of $2.9 million in the prior year period. Now turning to the balance sheet, we ended the quarter with cash and cash equivalents of $900,000 compared to $1.4 million as of December 31st, 2024. Total cash plus accounts receivable balances as of September 30th, 2025 was $4.5 million compared to $6.4 million at the end of 2024. We remained focused on strengthening our capital structure through multiple financing pathways. During the third quarter, we successfully converted 25 million of existing debt into Series A convertible preferred stock, substantially improving our shareholders' equity position and enhancing our financial flexibility. This momentum continued after quarter end with an additional 10 million debt-to-equity conversion completed on October 14, 2025. We've also enhanced our capital access by expanding our equity line of credit facility to $100 million, a $50 million share increase in late October. Since the program's November 2024 inception, we've raised $8.9 million through this facility, and the expansion provides meaningful additional financing capacity to support our strategic objectives. Now I'd like to turn it back over to Mark for some closing comments.