Direct Digital Holdings, Inc. reported its financial results for the three months ended March 31, 2024, showing a revenue increase of 5% to $22.3 million, up from $21.2 million in the same period of 2023. The growth was primarily driven by a 20% rise in sell-side advertising revenue, which reached $16.5 million, compared to $13.8 million in the prior year. This increase was attributed to higher impression inventory and enhanced publisher engagement. However, the company experienced a decline in buy-side advertising revenue, which fell by 22% to $6.0 million due to reduced spending from existing customers and the completion of one-time campaigns.

Despite the revenue growth, Direct Digital Holdings reported a net loss of $3.8 million for the first quarter of 2024, a significant increase from the $1.3 million loss recorded in the same period of 2023. The net loss per share also widened to $(0.22) from $(0.07) year-over-year. The gross profit decreased to $5.0 million, representing a gross margin of 22%, down from 30% in the previous year, largely due to increased fixed costs associated with server capacity.

Total operating expenses rose to $7.8 million, up from $6.6 million in the prior year, with general and administrative expenses increasing to $3.3 million. The company also faced higher interest expenses, which grew to $1.3 million due to additional borrowings and rising interest rates.

As of March 31, 2024, Direct Digital Holdings had total assets of $52.8 million, a decrease from $70.7 million at the end of 2023. The company’s cash and cash equivalents fell to $3.3 million from $5.1 million, while total current liabilities decreased to $20.3 million from $39.8 million. The long-term debt increased to $32.4 million from $28.6 million.

Strategically, the company is addressing liquidity concerns through various measures, including staff reductions and a hiring pause effective July 1, 2024. Additionally, it is working with lenders for temporary relief from debt covenants and exploring capital-raising opportunities. The company has also faced challenges related to a defamatory article that temporarily affected customer relationships, although connections have since resumed.

The company’s auditor resigned in April 2024, impacting the timely filing of its annual and quarterly reports. Furthermore, Direct Digital Holdings is currently under scrutiny due to two consolidated class action lawsuits alleging violations of federal securities laws. The company maintains that these claims lack merit and intends to defend itself vigorously.