Direct Digital Holdings, Inc. reported significant financial challenges in its 10-Q filing for the three and six months ended June 30, 2024. Total revenues for the second quarter were $21.9 million, a decrease of 38% from $35.4 million in the same period of 2023. For the first half of 2024, revenues totaled $44.1 million, down 22% from $56.6 million year-over-year. The decline in revenue was attributed to reduced customer spending and a temporary disruption in sell-side advertising due to a defamatory article that affected business relationships.

Gross profit for the three months ended June 30, 2024, was $5.9 million, a 41% decrease from $10.1 million in 2023. For the six-month period, gross profit fell to $10.9 million from $16.5 million, reflecting a 34% decline. The company reported a loss from operations of $2.1 million for the second quarter, compared to an operating profit of $2.3 million in the prior year. For the six months, the loss from operations was $4.9 million, a stark contrast to a profit of $2.1 million in 2023.

Net loss for the three months ended June 30, 2024, was $3.1 million, compared to a profit of $1.2 million in the same quarter of 2023. The six-month net loss was $7.0 million, significantly higher than a loss of $0.1 million in the previous year. The net loss per share for the second quarter was $(0.16), compared to $0.03 in 2023.

The company’s total assets decreased to $48.5 million as of June 30, 2024, down from $70.7 million at the end of 2023. Current liabilities also fell to $16.3 million from $39.8 million, while long-term debt increased to $34.8 million from $28.6 million. The total stockholders’ deficit widened to $(8.8 million) from $(3.7 million) at the end of 2023.

In response to these financial difficulties, Direct Digital Holdings implemented cost-saving measures, including staff reductions and a hiring freeze, effective July 1, 2024. The company is also working with lenders to seek temporary relief from debt covenants while it attempts to rebuild its sell-side advertising volumes. Additionally, the company faced legal challenges, including two consolidated class action lawsuits alleging violations of federal securities laws.

The company’s operational performance was further impacted by a significant customer that paused its connection for a few weeks in May 2024, leading to reduced sales volumes. Although volumes have resumed, they have not yet returned to previous levels. The company’s auditor resigned in April 2024, which delayed the filing of its annual and quarterly reports, further complicating its financial situation.