Direct Digital Holdings Inc.
11/12/2025 | Press release | Distributed by Public on 11/12/2025 07:10
Quarterly Report for Quarter Ending SEPTEMBER 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled "Risk Factors" in our Annual Report on Form 10-K or in other parts of this Quarterly Report on Form 10-Q (including in Item 1A herein). See "- Cautionary Note Regarding Forward-Looking Statements" below. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and which are subject to certain risks, trends and uncertainties. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and elsewhere in this Quarterly Report on Form 10-Q (including in Item 1A herein).
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements. We believe these factors include, but are not limited to, the following:
•the restrictions and covenants imposed upon us by our credit facilities;
•the substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing;
•our ability to secure additional financing to meet our capital needs;
•our inability, due to the government shutdown or other factors, to have declared effective any registration statement for a public offering or a resale registration statement for a selling stockholder, which may impair our ability to raise capital;
•our failure to satisfy applicable listing standards of the Nasdaq Capital Market resulting in a potential delisting of our common stock;
•costs, risks and uncertainties related to the restatement of certain prior period financial statements;
•any significant fluctuations caused by our high customer concentration;
•risks related to non-payment by our clients;
•reputational and other harms caused by our failure to detect advertising fraud;
•operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems;
•restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness;
•unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry's technology and practices, and any perceived failure to comply with laws and industry self-regulation;
•our failure to manage our growth effectively;
•the difficulty in identifying and integrating any future acquisitions or strategic investments;
•any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing;
•challenges related to our buy-side clients that are destination marketing organizations ("DMOs") and that operate as public/private partnerships;
•any strain on our resources or diversion of our management's attention as a result of being a public company;
•the intense competition of the digital advertising industry and our ability to effectively compete against current and future competitors;
•any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers', suppliers' or other partners' computer systems;
•as a holding company, we depend on distributions from Direct Digital Holdings, LLC ("DDH LLC") to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and any amount of any dividends we may pay to the holders of our common stock;
•the fact that DDH LLC is controlled by DDM, whose interest may differ from those of our public stockholders;
•any failure by us to maintain or implement effective internal controls or to detect fraud; and
•other factors and assumptions discussed under "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Overview
Direct Digital Holdings, Inc. and its subsidiaries (collectively the "Company," "DDH," "we," "us" and "our"), headquartered in Houston, Texas, is an end-to-end, full-service advertising and marketing platform primarily focused on providing advertising technology, data-driven campaign optimization and other solutions to help brands, agencies and middle market businesses deliver successful marketing results that drive return on investment ("ROI") across both the sell- and buy-side of the digital advertising ecosystem. Direct Digital Holdings, Inc. is the holding company for DDH LLC the business formed by the Company's founders in 2018 through acquisitions of Colossus Media, LLC ("Colossus Media") and Huddled Masses, LLC ("Huddled Masses™" or "Huddled Masses"). Colossus Media operates the Company's proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP. In September 2020, DDH LLC acquired Orange142, LLC ("Orange 142") to further bolster its overall programmatic buy-side advertising platform and to enhance its offerings across multiple industry verticals. In February 2022, the Company completed an initial public offering of its securities and, together with DDH LLC, effected the Organizational Transactions whereby Direct Digital Holdings, Inc. became the sole managing member of DDH LLC, the holder of 100% of the voting interest of DDH LLC and the holder of 19.7% of the economic interests of DDH LLC, commonly referred to as an "Up-C" structure. See Note 6 - Related Party Transactions to our condensed consolidated financial statements. In October 2024, the Company announced the unification of its buy-side businesses, Orange 142 and Huddled Masses. All of the subsidiaries are incorporated in the state of Delaware, except for DDH LLC, which was formed under the laws of the State of Texas.
Direct Digital Holdings, Inc. owns 100% of the voting interest in DDH LLC and as of September 30, 2025, DDH owns 63.5% of the economic interest in DDH LLC. DDH LLC was formed on June 21, 2018 and acquired by the Company on
February 15, 2022 in connection with the Organizational Transactions. DDH LLC's wholly-owned subsidiaries are as follows:
| Subsidiary |
Business Segment |
Date of Formation |
Date of Acquisition |
|||||||||||||||||
| Colossus Media, LLC | Sell-side | September 8, 2017 | June 21, 2018 | |||||||||||||||||
| Orange142, LLC | Buy-side | March 6, 2013 | September 30, 2020 | |||||||||||||||||
| Huddled Masses, LLC | Buy-side | November 13, 2012 | June 21, 2018 | |||||||||||||||||
Our sell-side advertising business, operated through Colossus Media, provides advertisers of all sizes a programmatic advertising platform that automates the sale of ad inventory between advertisers and marketers leveraging proprietary technology. Our platform reaches across a wide array of media partners to help brands, media holding companies, independent agencies or emerging businesses reach audiences, curated creators and helps publishers find the right brands for their readers, as well as drive advertising yields across all channels: web, mobile, and connected TV ("CTV"). Our platform offers advertising inventory and creator content that aligns with brands, media holding companies and mid-market agencies focusing on key growth audiences.
Our buy-side advertising business, now operating as Orange 142, provides technology-enabled advertising solutions and consulting services to clients through multiple leading demand side platforms ("DSPs"), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets. In the digital advertising space, buyers, particularly small and mid-sized businesses, can potentially achieve significantly higher ROI on their advertising spend compared to traditional media advertising by leveraging data-driven over-the-top/connected TV ("OTT/CTV"), video and display, in-app, native including programmatic, search, social, influencer marketing and audio advertisements that are delivered both at scale and on a highly targeted basis.
Providing both the front-end, buy-side advertising operations coupled with our proprietary sell-side operations enables us to curate the first through the last mile in the ad tech ecosystem execution process to drive higher results.
Operating segments are components of an enterprise for which separate financial information is available and evaluated regularly by our chief operating decision maker ("CODM") for purpose of assessing performance and allocating resources. Our CODM is our Chairman and Chief Executive Officer. Revenues and operating income (loss) are used by our CODM to assess performance of our operating segments and allocate resources. We operate as two reportable segments: sell-side advertising, which includes the results of Colossus Media, and buy-side advertising, which includes the results of Orange 142. All our revenues are attributable to the United States.
Recent Developments
Nasdaq Rule Noncompliance.
On October 18, 2024, we received a deficiency letter (the "Letter") from the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that it was not in compliance with the minimum stockholders' equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1). This rule requires companies listed on the Nasdaq Capital Market to maintain stockholders' equity of at least $2.5 million (the "Stockholders' Equity Requirement"). The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2024 reported a stockholders' deficit of $8.77 million.
Subsequent to the end of an extension period granted by the Staff, the Company received a letter indicating that its common stock would be delisted. The Company then requested a hearing before the Nasdaq Hearings Panel (the "Panel"). The hearing was held on May 29, 2025 and, by decision dated June 9, 2025, the Panel accepted the Company's proposed plan to regain compliance with the Stockholders' Equity Requirement, and granted the Company's request for an extension through October 14, 2025 to do so, subject to the Company's satisfaction of certain interim conditions.
Since June 30, 2025, the Company completed the following transactions:
• Under the Purchase Agreement with New Circle, the Company sold 3.7 million shares of the Company's Class A Common Stock for $1.3 million during the quarter ended September 30, 2025.
• On August 8, 2025, the Company entered into the Seventh Amendment (the "Seventh Amendment") to the Term Loan and Security Agreement dated December 3, 2021 (the "Term Loan Facility") and Lafayette
Square Loan Servicing, LLC, as administrative agent, and the other lenders (collectively "Lafayette"). Under the terms of the Seventh Amendment, the parties agreed to convert and exchange term loans with an aggregate principal amount of $25.0 million for newly authorized shares of Series A Preferred Stock, par value $0.001, of the Company (the "Series A Preferred Stock"), with an aggregate face amount of $25.0 million issued to Lafayette.
• On October 14, 2025, the Company entered into the Ninth Amendment (the "Ninth Amendment") to the Term Loan Facility with Lafayette. Under the terms of the Ninth Amendment, the parties agreed to convert and exchange term loans with an aggregate principal amount of $10.0 million for newly authorized shares of Series A Preferred Stock, with an aggregate face amount of $10.0 million issued to Lafayette.
On November 7, 2025, the Panel notified the Company that the Staff has determined that the Company has evidenced compliance with the Stockholders' Equity Requirement, but that the Panel has imposed a discretionary panel monitor for a period of one year. Should the Company fail to maintain compliance with any continued listing requirement, the Staff will issue a delist determination letter and the Company may seek a new hearing with the Panel.
Also as previously disclosed, on May 12, 2025, the Company received a second notice (the "Second Notice") from the Staff notifying the Company that because the closing bid price of the Company's Class A common stock was below $1.00 per share for the prior 30 consecutive business days, the Company was not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"). The Second Notice states that the Company has 180 calendar days from the date of the Second Notice, or until November 10, 2025, to regain compliance with the Bid Price Rule. As of November 10, 2025, the Company was not in compliance with the Bid Price Rule; however, on November 7, 2025, the Panel granted the Company an exception until January 30, 2026, to demonstrate compliance with that rule. If at any time before November 10, 2025, the bid price for the Company's Class A Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days (which number of days may be extended by Nasdaq), Nasdaq will provide written notification that the Company has achieved compliance with the Bid Price Rule, and the matter will be closed.
The Company is considering all available options to resolve the deficiency and regain compliance with the applicable Nasdaq Listing Rules within the timeframes required by Nasdaq. However, there can be no assurance that the Company will be able to complete the steps outlined in the Compliance Plan or regain compliance with the minimum bid price rule. The Company's noncompliance has no immediate effect on the listing or trading of the Company's Class A Common Stock, which will continue to trade on the Nasdaq Capital Market under the symbol "DRCT." See "Risk Factors" in Item 1A herein.
Equity Reserve Facility.
On October 18, 2024, the Company entered into a Share Purchase Agreement (as amended, the "Purchase Agreement" and together with the facility as a whole, the "Equity Reserve Facility") with New Circle Principal Investments LLC, a Delaware limited liability company ("New Circle"), and subsequently entered into an amendment with New Circle on October 24, 2025 (the "Amendment"), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $100 million (the "Total Commitment") of the Company's Class A Common Stock. The purchase price of the shares that may be sold to New Circle under the Purchase Agreement will be based on an agreed upon fixed discount to the market price of our Class A Common Stock as computed under the Purchase Agreement. The Company sold 1,580,000 shares of the Company's Class A Common Stock for $3.0 million during the year ended December 31, 2024. During the nine months ended September 30, 2025, the Company sold 9,759,351 shares of the Company's Class A Common Stock for $5.9 million.
The Purchase Agreement will automatically terminate on the earliest of (i) the 36-month anniversary of the Purchase Agreement, (ii) the date on which New Circle shall have made payment to the Company for Class A Common Stock equal to the Total Commitment or (iii) the date any statute, rule, regulation, executive order, decree, ruling or injunction that would prohibit any of the transactions contemplated by the Purchase Agreement goes into effect. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty, upon five trading days' prior written notice to New Circle so long as (a) there are no outstanding purchase notices under which our Class A Common Stock have yet to be issued and (b) the Company has paid all amounts owed to New Circle pursuant to the Purchase Agreement.
Key Factors Affecting Our Performance
We believe our growth and financial performance are dependent on many factors, including those described below.
Sell-side advertising business
Increasing revenue from customers through increased advertising spend from buyers
Colossus Media operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP. Our customers (or buyers) include ad exchanges, DSPs, agencies and individual advertisers. We have broad exposure to the ecosystem of buyers, reaching on average approximately 183,000 advertisers per month in the nine months ended September 30, 2025, an increase of 25,000, or 16%, over the 158,000 advertisers per month in the nine months ended September 30, 2024. As spending on programmatic advertising increasingly becomes a larger share of the overall ad spend, advertisers and agencies are seeking greater control of their digital advertising supply chains. To take advantage of this industry shift, we have entered into Supply Path Optimization agreements directly with customers which address acceptable advertisements and data usage. As part of these agreements, we provide advertisers and agencies with benefits ranging from custom data and workflow integrations, product features, volume-based business terms, and visibility into campaign performance data and methodology. As a result of these direct relationships, our existing advertisers and agencies are incentivized to allocate an increasing percentage of their advertising budgets to our platform. However, as discussed elsewhere in this Report and our public filings, including in Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we continue to face challenges related to our return to historic levels of revenue and profitability.
We continue to strive to retain existing publishers and add new publishers. Our proprietary Colossus SSP platform was custom developed with a view towards the specific challenges facing small and mid-sized publishers with the belief that smaller publishers often offer a more engaged, highly-valued, unique following but experience technological and budgetary constraints on the path to monetization. Our business strategy on the sell-side also presents significant growth potential, as we believe we are well positioned to provide advertisers of all sizes with extensive market reach connecting partners with curated creators and audiences, optimizing the entire media chain to drive better results for clients. We believe that our technology curates unique, highly optimized audiences informed by data analytics, artificial intelligence and algorithmic machine-learning technology, resulting in increased campaign performance.
Monetizing ad impressions for publishers and buyers
We curate advertisers and increase access to publishers with valuable ad impressions. We focus on monetizing digital impressions by coordinating daily real-time auctions and bids. Each time the publisher's web page loads, an ad request is sent to multiple ad exchanges and, in some cases, to the demand side platform directly from Colossus SSP. In case of real-time bidding ("RTB") media buys, many DSPs would place bids to the impressions being offered by the publisher during the auction. The advertiser that bids a higher amount compared to other advertisers will win the bid. We continuously review our available inventory from existing publishers across every format (mobile, desktop, digital video, OTT, CTV, and rich media). The factors we consider when determining which impressions we process include transparency, viewability, and whether or not the impression is human sourced. By consistently applying these criteria, we believe the ad impressions we process will be valuable and marketable to advertisers.
Enhancing ad inventory quality
In the advertising industry, inventory quality is assessed in terms of invalid traffic ("IVT") which can be impacted by fraud such as "fake eyeballs" generated by automated technologies set up to artificially inflate impression counts. Through our platform design and proactive IVT mitigation efforts, including our accredited verification process, we address IVT on a number of fronts, including sophisticated technology, which detects and avoids IVT on the front end and back end, direct publisher and inventory relationships for supply path optimization and ongoing campaign and inventory performance reviews to ensure inventory quality and brand protection controls are in place.
Growing access to valuable ad impressions
Historically, our growth has been driven by a variety of factors including increased access to a variety of impressions. Advertisers and agencies often have a large portfolio of brands requiring a variety of campaign types and support for a wide array of inventory formats and devices, including OTT/CTV, video and display, in-app, native and audio. Our omni-channel proprietary technology platform is designed to maximize these various advertising channels, which we believe is a further driver of efficiency for our buyers. The platform is comprised of publishers across multiple channels including OTT/CTV, display, native, in-app, online video ("OLV"), audio and digital out of home ("DOOH"). In the nine months ended September 30, 2025, we processed approximately 199 billion average monthly impressions across many unique audiences including multicultural growth audiences at scale with 89 billion, or 45%, of those impressions from growing multicultural-focused audiences. The Colossus SSP continues to expand its capabilities to give our content providers more
avenues to distribute ad inventory such as OTT/CTV, digital audio, DOOH, etc. and inform our publishers to enhance their ad selling needs by distributing content in various forms to meet the rising demands of the ad buying community.
Expanding and managing investments
Each impression or transaction occurs in a fraction of a second. Given that most transactions take place in an auction/bidding format, we continue to make investments across the platform to further reduce the processing time. In addition to the robust infrastructure supporting our platform, it is also critical that we align with key industry partners in the digital supply chain. The Colossus SSP is agnostic to any specific demand side platform.
We automate workflow processes whenever feasible to drive predictable and value-added outcomes for our customers and increase productivity of our organization. In the first half of 2023, we transitioned our server platform to HPE Greenlake, which provides increased capacity, faster response time, and expansion capabilities to align with growth in our business.
Managing industry dynamics
We operate in the rapidly evolving digital advertising industry. Due to the scale and complexity of the digital advertising ecosystem, direct sales via manual, person-to-person processes are insufficient for delivering a real-time, personalized ad experience, creating the need for programmatic advertising. In turn, advances in programmatic technologies have enabled publishers to auction their ad inventory to more buyers, simultaneously, and in real time through a process referred to as header bidding. Header bidding has also provided advertisers with transparent access to ad impressions. As advertisers keep pace with ongoing changes in the way that consumers view and interact with digital media we anticipate further innovation and expect that header bidding will be extended into new areas such as OTT/CTV. We believe our focus on publishers and buyers has allowed us to understand their needs and our ongoing innovation has enabled us to quickly adapt to changes in the industry, develop new solutions and do so cost effectively. Our performance depends on our ability to keep pace with industry changes such as header bidding and the evolving needs of our publishers and buyers while continuing our cost efficiency.
Seasonality
In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, in our sell-side advertising segment, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. We expect our sell-side revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Buy-side advertising business
New Customer Acquisitions
On the buy-side of our business, our customers consist of purchasers of programmatic advertising inventory (ad space). We serve the needs of about 220 small and mid-sized clients, consisting of advertising space buyers, including small and mid-sized companies, large advertising holding companies (which may manage several agencies), independent advertising agencies and mid-market advertising service organizations. We serve a variety of customers across multiple industries including travel/tourism (including DMOs), education, energy, consumer packaged goods, healthcare, financial services and other industries.
We are focused on increasing the number of customers that use our buy-side advertising businesses as their advertising partner. Our long-term growth and results of operations will depend on our ability to attract more customers, including DMOs, educational institutions and energy companies across multiple geographies.
Expand Sales to Existing Customers
Our customers understand the independent nature of our platform and relentless focus on driving results based on return on investment ("ROI"). Our value proposition is complete alignment across our entire digital supply platform beginning with the first dollar in and last dollar out. We are technology and media agnostic, and we believe our clients trust us to provide the best opportunity for success of their brands and businesses. As a result, our clients have been loyal, with approximately 91% client retention amongst the clients that represent approximately 80% of our revenue during the nine months ended September 30, 2025. In addition, we cultivate client relationships through our pipeline of managed and
moderate serve clients that conduct campaigns through our platform. The managed services delivery model allows us to combine our technology with a highly personalized offering to strategically design and manage advertising campaigns.
Shift to Digital Advertising
Media has increasingly become more digital as a result of three key ongoing developments:
•Advances in technology with more sophisticated digital content delivery across multiple platforms;
•Changes in consumer behavior, including spending longer portions of the day using mobile and other devices; and
•Better audience segmentation with more efficient targeting and measurable results.
The resulting shift has enabled a variety of options for advertisers to efficiently target and measure their advertising campaigns across nearly every media channel and device. These efforts have been led by big-budgeted, large, multi-national corporations incentivized to cast a broad advertising net to support national brands.
Increased Adoption of Digital Advertising by Small-and Mid-Sized Companies
Only recently have small and mid-sized businesses begun to leverage the power of digital media in meaningful ways, as emerging technologies have enabled advertising across multiple channels in a highly localized nature. Campaign efficiencies yielding measurable results and higher advertising ROI, as well as the needs driven by global economic and supply chain challenges, have prompted these companies to begin utilizing digital advertising on an accelerated pace. We believe this market is rapidly expanding, and that small-to-mid-sized advertisers will continue to increase their digital spend.
Seasonality
In the advertising industry, companies commonly experience seasonal fluctuations in revenue. Historically, for our buy-side advertising segment, the second and third quarters of the year reflect our highest levels of advertising activity and the first quarter reflects the lowest level of such activity. We expect our buy-side revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Components of Our Results of Operations
Revenues
For the sell-side advertising segment, we generate revenue by selling advertising inventory (digital ad units) that we purchase from publishers to advertisers through a process of monetizing ad impressions on our proprietary sell-side programmatic platform operating under the trademarked banner Colossus SSP. For the buy-side advertising segment, we generate revenue from customers that enter into agreements with us to provide managed advertising campaigns, which include digital marketing and media services to purchase digital advertising space, data and other add-on features.
In connection with our analysis of principal vs agent considerations, we have evaluated the specified goods or services and we considered whether we control the goods or services before they are provided to the customer including the three indicators of control. Based upon this analysis and our specific facts and circumstances, we concluded that we are a principal for the goods or services sold through both our sell-side advertising segment and our buy-side segment because we control the specified good or service before it is transferred to the customer and we are the primary obligor in the agreement with the customer. Therefore, we report revenue on a gross basis inclusive of all supplier costs and we pay suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.
Our revenue recognition policies are discussed in more detail under "-Critical Accounting Estimates and Related Policies" set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.
Cost of revenues
For the sell-side advertising segment, we pay publishers a fee, which is typically a percentage of the value of the ad impressions monetized through our platform. Cost of revenues consists primarily of publisher media fees and data center co-location costs. Media fees include the publishing and real time bidding costs to secure advertising space. For the buy-side advertising segment, cost of revenues consists primarily of digital media fees, third-party platform access fees, and other third-party fees associated with providing services to our customers.
Operating expenses
Operating expenses consist of compensation expenses related to our executive, sales, finance and administrative personnel (including salaries, commissions, stock-based compensation, bonuses, benefits and taxes); general and administrative expenses (including rent expense, professional fees, independent contractor costs, selling and marketing fees, administrative and operating system subscription costs, insurance and amortization expense related to our intangible assets); and other expense (including transactions that are unusual in nature or which are occurring infrequently).
Other income (expense)
Other income. Other income includes income associated with recovery of receivables and other miscellaneous credit card rebates.
Interest expense. Interest expense is mainly related to our debt as further described below in "-Liquidity and Capital Resources."
Expenses for Equity Reserve Facility. Expenses are mainly related to our Equity Reserve Facility as further described below in "-Liquidity and Capital Resources."
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
The following tables set forth our condensed consolidated results of operations for the periods presented (in thousands). The period-to-period comparison of results is not necessarily indicative of results for future periods.
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Amount | % | 2025 | 2024 | Amount | % | ||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Sell-side advertising | $ | 641 | $ | 2,202 | $ | (1,561) | (71) | % | $ | 5,153 | $ | 33,001 | $ | (27,848) | (84) | % | |||||||||||||||||||||||||||||||
| Buy-side advertising | 7,343 | 6,873 | 470 | 7 | % | 21,133 | 20,204 | 929 | 5 | % | |||||||||||||||||||||||||||||||||||||
| Total revenues | 7,984 | 9,075 | (1,091) | (12) | % | 26,286 | 53,205 | (26,919) | (51) | % | |||||||||||||||||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Sell-side advertising | 1,457 | 2,654 | (1,197) | (45) | % | 6,946 | 30,670 | (23,724) | (77) | % | |||||||||||||||||||||||||||||||||||||
| Buy-side advertising | 4,313 | 2,907 | 1,406 | 48 | % | 11,171 | 8,091 | 3,080 | 38 | % | |||||||||||||||||||||||||||||||||||||
| Total cost of revenues | 5,770 | 5,561 | 209 | 4 | % | 18,117 | 38,761 | (20,644) | (53) | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 2,214 | 3,514 | (1,300) | (37) | % | 8,169 | 14,444 | (6,275) | (43) | % | |||||||||||||||||||||||||||||||||||||
| Operating expenses | 6,125 | 7,172 | (1,047) | (15) | % | 18,429 | 22,973 | (4,544) | (20) | % | |||||||||||||||||||||||||||||||||||||
| Loss from operations | (3,911) | (3,658) | (253) | 7 | % | (10,260) | (8,529) | (1,731) | 20 | % | |||||||||||||||||||||||||||||||||||||
| Other expense, net | (1,089) | 3,887 | (4,976) | (128) | % | (4,876) | 1,323 | (6,199) | (469) | % | |||||||||||||||||||||||||||||||||||||
| (Loss) income before income taxes | (5,000) | 229 | (5,229) | (2282) | % | (15,136) | (7,206) | (7,930) | 110 | % | |||||||||||||||||||||||||||||||||||||
| Income tax expense | - | 6,606 | (6,606) | (100) | % | - | 6,132 | (6,132) | (100) | % | |||||||||||||||||||||||||||||||||||||
| Net loss | $ | (5,000) | $ | (6,377) | $ | 1,377 | (22) | % | $ | (15,136) | $ | (13,338) | $ | (1,798) | 13 | % | |||||||||||||||||||||||||||||||
|
Adjusted EBITDA(1)
|
$ | (2,963) | $ | (2,855) | $ | (108) | 4 | % | $ | (7,440) | $ | (5,858) | $ | (1,582) | 27 | % | |||||||||||||||||||||||||||||||
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(1)For a definition of Adjusted EBITDA, an explanation of our management's use of this measure, and a reconciliation of Adjusted EBITDA to net income see "- Non-GAAP Financial Measures."
Revenues
Our revenues of $8.0 million for the three months ended September 30, 2025 decreased by $1.1 million, or 12%, from $9.1 million for the three months ended September 30, 2024. Sell-side advertising revenue decreased $1.6 million, or 71% while buy-side revenue increased $0.5 million, or 7%, compared to the prior year period. The decrease in sell-side advertising revenue was primarily due to a decrease in impression inventory. Management attributes the cause of this decrease to unexpected business disruption amongst our partners, advertisers and clients caused by multiple short attacks and a market-discredited blog post against our supply-side platform, Colossus SSP, in mid May 2024. Sell-side volumes have resumed but not yet at the levels experienced prior to the post in May 2024. The Company continues efforts to reconstitute its prior business, target new customers and develop new products for the sell-side segment. The Company sold approximately 154 million average monthly impressions in the third quarter of 2025, a decrease of 25% from the prior period. The increase in buy-side revenue of $0.5 million was due to growth from new customers of $2.3 million, including $2.1 million from customers in new verticals, partially offset by a $1.8 million decrease in spending from existing customers, including a $0.7 million decrease from customers no longer actively purchasing from the Company.
Our revenues of $26.3 million for the nine months ended September 30, 2025 decreased by $26.9 million, or 51%, from $53.2 million for the nine months ended September 30, 2024. Sell-side advertising revenue decreased $27.8 million, or 84%, while buy-side revenue increased $0.9 million, or 5%, compared to the prior year period. The decrease in sell-side advertising revenue was primarily due to a decrease in impression inventory and the unexpected business disruption described above. The Company sold approximately 175 million average monthly impressions in the first nine months of 2025, a decrease of 87% from the prior period. The increase in buy-side revenue of $0.9 million was due to growth from new customers of $5.0 million, including $4.3 million from customers in new verticals, partially offset by a $4.1 million decrease in spending from existing customers, including a $3.6 million decrease from customers no longer actively purchasing from the Company.
Cost of revenues
Cost of revenues of $5.8 million for the three months ended September 30, 2025 increased by $0.2 million, or 4% from $5.6 million for the three months ended September 30, 2024. Sell-side advertising cost of revenues decreased $1.2 million, to $1.5 million, or 227% of sell-side revenue, for the three months ended September 30, 2025, compared to $2.7 million, or 121% of sell-side revenue, for the same period in 2024. The decrease in costs was primarily due to the related decrease in revenue, while the 106% increase as a percentage of revenue was due to fixed costs not decreasing at the same proportionate rate as the revenue decline. Fixed cost of sell-side revenues for the three months ended September 30, 2025 of $0.8 million decreased by $0.1 million, or 4%, from fixed cost of sell-side revenues of $0.9 million for the same period in 2024. Buy-side advertising cost of revenues increased $1.4 million to $4.3 million, or 59% of buy-side revenue, for the three months ended September 30, 2025, compared to $2.9 million, or 42% of buy-side revenue, for the same period in 2024. See gross profit changes described in more detail below.
Cost of revenues of $18.1 million for the nine months ended September 30, 2025 decreased by $20.6 million, or 53% from $38.8 million for the nine months ended September 30, 2024. Sell-side advertising cost of revenues decreased $23.7 million to $6.9 million, or 135% of sell-side revenue, for the nine months ended September 30, 2025, compared to $30.7 million, or 93% of sell-side revenue, for the same period in 2024. The decrease in costs was primarily due to the related decrease in revenue, while the 42% increase as a percentage of revenue was due to fixed costs not decreasing at the same proportionate rate as the revenue decline. Fixed cost of sell-side revenues for the nine months ended September 30, 2025 of $2.6 million decreased by $0.9 million, or 26%, from fixed cost of sell-side revenues of $3.5 million for the same period in 2024. Buy-side advertising cost of revenues increased $3.1 million, to $11.2 million, or 53% of buy-side revenue, for the nine months ended September 30, 2025, compared to $8.1 million, or 40% of buy-side revenue, for the same period in 2024. See gross profit changes described in more detail below.
Gross profit
Gross profit was $2.2 million, or 28% of revenue, for the three months ended September 30, 2025, compared to $3.5 million, or 39% of revenue, for the same period in 2024, reflecting a decrease of $1.3 million, or 37%. The change in gross profit margin percentage for the three months ended September 30, 2025 is attributable to lower gross profit margins for both the sell-side segment and the buy-side segment.
Sell-side advertising gross profit decreased $0.4 million for the three months ended September 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs. Sell-side advertising gross margin percentage was (127)% and (21)% for the three months ended September 30, 2025 and 2024, respectively. Buy-side advertising gross profit decreased $0.9 million for the three months ended September 30, 2025, as compared to the same period in the prior year. Buy-side advertising gross margin percentage was 41% and 58% for the
three months ended September 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.
Gross profit was $8.2 million, or 31% of revenue, for the nine months ended September 30, 2025, compared to $14.4 million, or 27% of revenue, for the same period in 2024, reflecting a decrease of $6.3 million, or 43%. The change in gross profit margin percentage for the nine months ended September 30, 2025 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the lower sell-side fixed costs related to server capacity, analytic, development and technology-related costs.
Sell-side advertising gross profit decreased $4.1 million for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs. Sell-side advertising gross margin percentage was (35)% and 7% for the nine months ended September 30, 2025 and 2024, respectively. Buy-side advertising gross profit decreased $2.2 million for the nine months ended September 30, 2025, as compared to the same period in the prior year. Buy-side advertising gross margin percentage was 47% and 60% for the nine months ended September 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.
Operating expenses
The following table sets forth the components of operating expenses for the periods presented (in thousands):
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Amount | % | 2025 | 2024 | Amount | % | ||||||||||||||||||||||||||||||||||||||||
| Compensation, taxes and benefits | $ | 3,624 | $ | 3,526 | $ | 98 | 3 | % | $ | 10,927 | $ | 12,216 | $ | (1,289) | (11) | % | |||||||||||||||||||||||||||||||
| General and administrative | 2,501 | 3,646 | (1,145) | (31) | % | 7,502 | 10,757 | (3,255) | (30) | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 6,125 | $ | 7,172 | $ | (1,047) | (15) | % | $ | 18,429 | $ | 22,973 | $ | (4,544) | (20) | % | |||||||||||||||||||||||||||||||
Compensation, taxes and benefits
Compensation, taxes and benefits of $3.6 million increased by $0.1 million, or 3%, for the three months ended September 30, 2025 from $3.5 million for the same period in 2024. Compensation, taxes and benefits of $10.9 million decreased by $1.3 million, or 11%, for the nine months ended September 30, 2025 from $12.2 million for the same period in 2024. The decrease in the nine months ended September 30, 2025 compared to the prior year is primarily due to lower payroll costs resulting from a staff reduction made effective July 1, 2024 when we began to execute an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which has lowered certain ongoing expenses that positively affected the current period.
General and administrative expense
General and administrative ("G&A") expenses of $2.5 million for the three months ended September 30, 2025 decreased by $1.1 million from the same period in 2024. G&A expenses as a percentage of revenue were 31% and 40% for the three months ended September 30, 2025 and 2024, respectively. The decrease in G&A expenses was primarily due to lower professional fees including $1.1 million in 2024 in costs to regain compliance with respect to delinquent SEC filings.
G&A expenses of $7.5 million for the nine months ended September 30, 2025 decreased by $3.3 million from the same period in 2024. G&A expenses as a percentage of revenue were 29% and 20% for the nine months ended September 30, 2025 and 2024, respectively. The decrease in G&A expenses was primarily due to lower professional fees including $1.3 million in 2024 in costs to regain compliance with respect to delinquent SEC filings, as well as lower sales and marketing expenses, consulting costs and travel expenses due to ongoing cost savings measures.
We expect to continue to invest in and incur additional expenses associated with our operation as a public company, including professional fees, investment in automation, and compliance costs associated with developing the requisite infrastructure required for internal controls. However, on July 1, 2024, we executed an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which have lowered certain ongoing expenses, especially as the Company ceased incurring additional one-time expenses to regain compliance with respect to delinquent SEC filings, which were filed in the fourth quarter of 2024.
Other expense (income), net
The following table sets forth the components of other expense, net for the periods presented (in thousands):
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Amount | % | 2025 | 2024 | Amount | % | ||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (1,104) | $ | (1,413) | $ | 309 | (22) | % | $ | (4,739) | j | $ | (4,068) | j | $ | (671) | 16 | % | |||||||||||||||||||||||||||||
| Expenses for Equity Reserve Facility | - | - | $ | - | nm | (198) | j | - | j | $ | (198) | nm | |||||||||||||||||||||||||||||||||||
| Derecognition of tax receivable agreement liability | - | 5,201 | $ | (5,201) | nm | - | 5,201 | $ | (5,201) | nm | |||||||||||||||||||||||||||||||||||||
| Other income | 15 | 99 | (84) | (85) | % | 61 | j | 190 | j | (129) | (68) | % | |||||||||||||||||||||||||||||||||||
| Total other expense (income), net | $ | (1,089) | $ | 3,887 | $ | (4,976) | (128) | % | $ | (4,876) | $ | 1,323 | $ | (6,199) | (469) | % | |||||||||||||||||||||||||||||||
nm - not meaningful
Total other expense (income), net for the three months ended September 30, 2025 and 2024 primarily consists of $1.1 million and $1.4 million, respectively, of interest expense. Interest expense decreased by $0.3 million compared to the prior period primarily due to reduction of outstanding debt resulting from the conversion of debt to preferred stock. Total other expense (income), net for the three months ended September 30, 2024 also includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets during the three months ended September 30, 2024.
Total other expense (income), net for the nine months ended September 30, 2025 and 2024 primarily consists of $4.7 million and $4.1 million, respectively, of interest expense. Interest expense increased by $0.7 million compared to the prior period primarily due to the debt discount amortization and higher cost on line of credit converted to long term debt partially offset by a decrease in interest expense from the reduction of outstanding debt resulting from the conversion of debt to preferred stock on August 8, 2025. Total other expense (income), net for the nine months ended September 30, 2024 also includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets.
Liquidity and Capital Resources
Going Concern
As discussed in Note 9 - Commitments and Contingencies to our condensed consolidated financial statements, on May 10, 2024, the Company was the subject of a defamatory article / blog post which the Company believes was part of a coordinated misinformation campaign. In connection with this post, one of the Company's sell-side customers paused its connection to the Company for a couple of weeks in May 2024, which reduced sell-side sales volumes. As of the date of this report, sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024 which has created significant disruption in the Company's sell-side business. The Company is actively working with its partners to achieve prior volume levels. However, there can be no assurance that the Company will be able to achieve prior volume levels with its partners or on the timing of achieving such volume levels. Additionally, the Company (1) incurred a net loss of $15.1 million for the nine months ended September 30, 2025 including the impact of the sell-side disruption described above, (2) reported an accumulated deficit of $16.1 million as of September 30, 2025, (3) reported cash and cash equivalents of $0.9 million as of September 30, 2025, and (4) was notified by Nasdaq on October 18, 2024 that it was not in compliance with Nasdaq's minimum stockholders' equity requirements although it reported, on October 14, 2025, that it believes it has satisfied the stockholders' equity requirement and awaits a formal compliance determination from Nasdaq. These factors raise substantial doubt about the Company's ability to continue as a going concern over the next twelve months.
The Company anticipates sources of liquidity to include cash on hand, cash flow from operations, cash generated from its sales under the Company's Equity Reserve Facility (subject to the federal government resuming operations and the effectiveness of the Form S-1 resale registration statement to enable such sales) and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity concerns. These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that were executed on July 1, 2024 with continuing cost saving impacts through September 30, 2025, (2) working with lenders to provide temporary various relief from debt covenants via amendments from October 2024 through October 2025 (see Note 3 - Long-Term Debt to our condensed consolidated financial statements) while rebuilding sell-side volumes, (3) putting in place a program to raise capital through an Equity Reserve Facility with stock sales continuing into 2025 (see Note 4 - Stockholders' Deficit and Stock-Based Compensation), (4) converting $25.0 million and $10.0 million of debt with Lafayette Square to convertible preferred stock on August 8, 2025 and October 14, 2025, respectively, to achieve compliance with Nasdaq's
minimum stockholders' equity requirement (see Note 3 - Long-Term Debt), (5) paying off the matured Credit Agreement with a term loan from Lafayette Square (see Note 3 - Long-Term Debt) and (6) a plan to maintain compliance with Nasdaq's minimum stockholders' equity requirement by raising additional funds in a registered or private offering. There can be no assurance that the Company's actions will be successful or that additional financing will be available when needed or on acceptable terms.
Sources of Liquidity
The following table summarizes our cash and cash equivalents, and working capital deficit on September 30, 2025 and December 31, 2024 (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Cash and cash equivalents | $ | 871 | $ | 1,445 | |||||||
|
Working capital deficit
|
$ | (11,144) | $ | (4,815) | |||||||
To fund our operations and service our debt thereafter and depending on our growth and results of operations, we may raise additional capital through the issuance of additional equity and/or debt, which could have the effect of diluting our stockholders. Any future equity or debt financings may be on terms which are not favorable to us. As our credit facilities become due, we will need to repay, extend or replace such indebtedness. Our ability to do so will be subject to future economic, financial, business and other factors, many of which are beyond our control.
Credit Facilities
The terms and conditions of the various credit facilities we entered into are further described in Note 3 - Long-Term Debt in the notes to the condensed consolidated financial statements.
Equity Reserve Facility
The terms and conditions of the Equity Reserve Facility are further described in Note 4 - Stockholders' Deficit and Stock-Based Compensation in the notes to the condensed consolidated financial statements.
Historical Cash Flows:
The following table sets forth our cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash used in operating activities | $ | (7,036) | $ | (7,095) | |||||||
| Net cash used in investing activities | (38) | (17) | |||||||||
| Net cash provided by financing activities | 6,500 | 6,083 | |||||||||
| Net decrease in cash and cash equivalents | $ | (574) | $ | (1,029) | |||||||
Our cash and cash equivalents at September 30, 2025 were held for working capital and general corporate purposes. The decrease in cash and cash equivalents compared with December 31, 2024, primarily resulted from $7.0 million in cash flows used in operating activities partially offset by $6.5 million in cash flows provided by financing activities.
Operating Activities
For the Nine Months Ended September 30, 2025 and 2024
Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating expense items such as depreciation, amortization, stock-based compensation and deferred income taxes.
For the nine months ended September 30, 2025, net cash flows used in operating activities were $7.0 million and consisted of net loss of $15.1 million, offset by $6.0 million in adjustments for non-cash and non-operating items and $2.1 million of cash inflows from working capital. Adjustments for non-cash and non-operating items mainly consisted of
depreciation and amortization expense of $4.9 million and stock-based compensation expense of $1.1 million. The $2.1 million increase in cash resulting from changes in working capital primarily consisted of a $1.4 million decrease in accounts receivable, a $1.0 million increase in accrued expenses such as payroll and debt restructuring expenses, and a $0.6 million increase in accounts payable, offset by a $0.9 million increase in prepaid expense. The decrease in accounts receivable is mainly due to the continued impact from the May 2024 temporary disconnection by a significant customer as a result of the customer investigating a defamatory article / blog post against the Company.
For the nine months ended September 30, 2024, net cash flows used in operating activities were $7.1 million and consisted of net loss of $13.3 million, offset by $4.1 million in adjustments for non-cash and non-operating items and $2.1 million of cash inflows from working capital. Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $2.3 million, stock-based compensation expense of $0.8 million and deferred tax expense of $6.1 million partially offset by $5.2 million of derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets. The $2.1 million increase in cash resulting from changes in working capital primarily consisted of a $30.9 million decrease in accounts receivable, partially offset by a $27.5 million decrease in accounts payable and a $1.5 million decrease in accrued expenses such as payroll and payroll related expenses. The decrease in accounts payable and accounts receivable is mainly due to the May 2024 temporary disconnection by a significant customer as a result of a customer investigating a defamatory article / blog post against the Company, as well as a payment of $8.8 million to a few publishers associated with a charge recorded in 2023 related to a disputed short pay from as customer.
Investing Activities
For the Nine Months Ended September 30, 2025 and 2024
Our investing activities to date have consisted primarily of purchases of software, office furniture and leasehold improvements. For the nine months ended September 30, 2025 and 2024, net cash flows used in investing activities of less than $0.1 million were primarily related to office furniture and leasehold improvements.
Financing Activities
For the Nine Months Ended September 30, 2025 and 2024
For the nine months ended September 30, 2025, net cash provided by financing activities was $6.5 million mainly resulting from $6.7 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility and $3.8 million of proceeds from term loan partially offset by $3.7 million for payments on the line of credit and $0.2 million for payments of expenses for the Equity Reserve Facility and deferred financing costs.
For the nine months ended September 30, 2024, net cash provided by financing activities was $6.1 million mainly resulting from $6.7 million of proceeds from line of credit and $0.2 million proceeds from warrants exercised partially offset by $0.6 million for payments on shares withheld for taxes and $0.4 million paid on the term loan.
Contractual Obligations and Future Cash Requirements
As of September 30, 2025, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility, the Credit Agreement and non-cancelable leases for our various facilities. We anticipate that the future minimum payments related to our current indebtedness over the next five years will be $3.8 million in the remainder of 2025, $12.4 million in 2026, less than $0.1 million in each of 2027, 2028, and 2029, and $0.1 million thereafter, assuming we do not refinance our indebtedness or enter into a new credit facility. The leases will require minimum payments of $0.1 million in 2025, $0.3 million in 2026, $0.3 million in 2027, $0.2 million in 2028, $0.2 million in 2029, and less than $0.1 million thereafter. As of September 30, 2025, we had cash and cash equivalents of $0.9 million.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for stock-based compensation, expenses for the Equity Reserve Facility and derecognition of tax receivable agreement liability ("Adjusted EBITDA"), a non-GAAP measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income.
The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods presented (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss | $ | (5,000) | $ | (6,377) | $ | (15,136) | $ | (13,338) | |||||||||||||||
| Add back (deduct): | |||||||||||||||||||||||
| Interest expense | 1,104 | 1,413 | 4,739 | 4,068 | |||||||||||||||||||
| Amortization of intangible assets | 488 | 488 | 1,465 | 1,465 | |||||||||||||||||||
| Stock-based compensation | 374 | 149 | 1,079 | 811 | |||||||||||||||||||
| Depreciation and amortization of property, equipment and software | 71 | 67 | 215 | 205 | |||||||||||||||||||
| Expenses for Equity Reserve Facility | - | - | 198 | - | |||||||||||||||||||
| Income tax expense | - | 6,606 | - | 6,132 | |||||||||||||||||||
| Derecognition of tax receivable agreement liability | - | (5,201) | - | (5,201) | |||||||||||||||||||
| Adjusted EBITDA | $ | (2,963) | $ | (2,855) | $ | (7,440) | $ | (5,858) | |||||||||||||||
In addition to operating income and net income, we use Adjusted EBITDA as a measure of operational efficiency. We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:
•Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation, and certain one-time items such as acquisition transaction costs and costs for the Equity Reserve Facility that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;
•Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance; and
•Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Our use of this non-GAAP financial measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.
Critical Accounting Estimates and Related Policies
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. The Company bases its estimates on past experiences, market conditions, and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. The Company uses estimates to determine many reported amounts, including but not limited to gross vs net assessment in revenue recognition, recoverability of goodwill and long-lived assets, useful lives used in amortization of intangibles, income taxes and valuation allowances, stock-based compensation and fair values of assets and liabilities acquired in business combinations as well as preferred stock issued.
There have been no material changes to our critical accounting estimates and related policies as compared to the critical accounting estimates and related policies described in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements
See Note 2 - Basis of Presentation and Consolidation and Summary of Significant Accounting Policies to our condensed consolidated financial statements for accounting pronouncements recently adopted and accounting pronouncements not yet adopted.
Direct Digital Holdings Inc. published this content on November 12, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 12, 2025 at 13:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]