10q10k10q10k.net
Direct Digital Holdings, Inc.

Direct Digital Holdings, Inc.DRCTEarnings & Financial Report

Nasdaq · Consumer Discretionary · Services-Advertising

Devolver Digital, Inc. is an American video game publisher based in Austin, Texas, specializing in the publishing of indie games. The company was founded in June 2009 by Nigel Lowrie, Harry Miller, Graeme Struthers, Rick Stults, and Mike Wilson, five executives who had been involved with Gathering of Developers and Gamecock Media Group, which published games on developer-friendly terms, but due to the high cost associated with releasing retail games saw themselves acquired and dissolved by la...

What changed in Direct Digital Holdings, Inc.'s 10-K — 2023 vs 2024

Top changes in Direct Digital Holdings, Inc.'s 2024 10-K

396 paragraphs added · 355 removed · 279 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

68 edited+11 added−13 removed56 unchanged
ITEM 1. Business Company Overview We are 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, 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.
ITEM 1. Business Company Overview We are 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.
We believe the local advertising market remains in the early stages of understanding and leveraging these capabilities. Potential Death of Cookies Could Destabilize Small-to-Mid-Size Business Ad Market. As the advertising industry faces a potential phase out of third-party cookies, small-to-mid-sized business are starting to face greater challenges in the adoption and transition to digital.
We believe the local advertising market remains in the early stages of understanding and leveraging these capabilities. Potential Death of Cookies Could Destabilize Small-to-Mid-Size Business Ad Market. As the advertising industry faces a potential phase out of third-party cookies, small-to-mid-sized businesses are starting to face greater challenges in the adoption and transition to digital.
Our proprietary Colossus SSP 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 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.
Colossus SSP partners with publishers to sell advertising inventory to our Colossus Media-curated clients and the open markets (collectively referred to as “buyers”) seeking to access the general market as well as unique multi-cultural audiences.
Colossus SSP partners with publishers to sell advertising inventory to our Colossus SSP-curated clients and the open markets (collectively referred to as “buyers”) seeking to access the general market as well as unique multi-cultural audiences.
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 investment 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.
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.
Our technology allows for direct, one-on-one interactions with potential customers, tailored to local markets, media devices, and footprints. Leveraging data analytics, we assess potential buyers' decision-making processes and optimize campaign strategies accordingly. We understand that small and mid-sized businesses often operate within constrained marketing budgets and localized footprints.
Our technology allows for direct, one-on-one interactions with potential customers, tailored to local and regional markets, media devices, and footprints. By leveraging data analytics, we assess potential buyers' decision-making processes and optimize campaign strategies accordingly. We understand that small and mid-sized businesses often operate within constrained marketing budgets and localized footprints.
Based on client objectives and selected advertising channels, our buy-side platform offers forecasting and in-depth market insights. These tools empower our clients to enhance their Return on Advertising Spend (“ROAS”) across channels. Our buy-side segment primarily caters to small-to-mid-sized businesses, empowering them to leverage advanced advertising technology for targeted engagement.
Based on client objectives and selected advertising channels, our buy-side business offers forecasting and in-depth market insights. These tools empower our clients to enhance their Return on Advertising Spend (“ROAS”) across channels. Our buy-side segment primarily caters to small-to-mid-sized businesses, empowering them to leverage advanced advertising technology for targeted engagement.
For 2022 and 2023, we grew our revenue steadily and have increased our gross profit, which we believe demonstrates the power of our technology platform, the strength of our client relationships and the leverage inherent to our business model. For the years ended December 31, 2023 and 2022, our revenue was $157.1 million and $89.4 million, respectively.
In 2022 and 2023, we grew our revenue steadily and increased our gross profit, which we believe demonstrates the power of our technology platform, the strength of our client relationships and the leverage inherent to our business model. For the years ended December 31, 2023 and 2022, our revenue was $157.1 million and $89.4 million , respectively.
Through our platform design and proactive IVT mitigation efforts, including our accredited verification partners, we address IVT on a number of fronts, including sophisticated technology, which detects and avoids IVT on the front end; direct publisher and inventory relationships, for supply path optimization; and ongoing campaign and inventory performance review, to ensure inventory quality and brand protection controls are in place. ● Curated Data-Driven Sell-Side Platform to Support Customers.
Through our platform design and proactive IVT mitigation efforts, including our accredited verification partners, 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. • Curated Data-Driven Sell-Side Platform to Support Customers.
The availability of user data and rich targeting capabilities makes digital advertising an effective and important tool for businesses to connect with their audiences. 6 Table of Contents We have aligned our business strategy to capitalize on significant growth opportunities due to fundamental market shifts and industry inefficiencies in serving the small and medium sized middle market companies that are the backbone of America.
The availability of user data and rich targeting capabilities makes digital advertising an effective and important tool for businesses to connect with their audiences. We have aligned our business strategy to capitalize on significant growth opportunities due to fundamental market shifts and industry inefficiencies in serving the small and medium sized middle market companies that are the backbone of America.
We have a wide variety of small and mid-sized companies representing numerous industry verticals such as travel, education, healthcare, financial services, and consumer goods and services. We are typically engaged on an “insertion order” or master services agreement, with the typical engagement driven by the campaign goals of the client.
We have a wide variety of small and mid-sized companies representing numerous industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, and consumer goods and services. We are typically engaged on an “insertion order” or master services agreement, with the typical engagement driven by the campaign goals of the client.
Buyers may include small and mid-sized buyers as well as larger, Fortune 500 industry leading brands and multinational agencies, along with intermediaries that sit between Colossus SSP and the end buyers.
Buyers may include small and mid-sized buyers as well as larger, Fortune 500 industry leading brands and multinational or regional agencies, along with intermediaries that sit between Colossus SSP and the end buyers.
We serve the needs of over 230 small and mid-sized clients, consisting of advertising 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 the needs of about 230 small and mid-sized clients, consisting of advertising 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.
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 13 Table of Contents lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
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 revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Our Chief Financial Officer, Diana Diaz, a former audit senior manager at Deloitte & 10 Table of Contents Touche LLP, has significant experience working as CFO of a high growth microcap public company for more than ten years as well as other CFO and leadership roles at public and nonpublic companies.
Our Chief Financial Officer, Diana Diaz, a former audit senior manager at Deloitte & Touche LLP, has significant experience working as CFO of a high growth microcap public company for more than ten years as well as other CFO and leadership roles at public and nonpublic companies.
We will be investing in artificial intelligence and machine learning technology to further build out our data graph from first-party and third-party data sources and will facilitate matches and relations between the disparate sets of data. ● Experienced Management Team.
We will be investing in artificial 9 Table of Contents intelligence and machine learning technology to further build out our data graph from first-party and third-party data sources and will facilitate matches and relations between the disparate sets of data. • Experienced Management Team.
We have broad exposure to the ecosystem of buyers, reaching on average approximately 115,000 advertisers per month in 2023 compared to approximately 114,000 in 2022. 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.
We have broad exposure to the ecosystem of buyers, reaching on average approximately 168,000 advertisers per month in 2024 compared to approximately 115,000 in 2023. 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.
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.
The Colossus SSP continues to expand its capabilities to give our content providers more avenues to distribute ad inventory such as through OTT/CTV, digital audio, DOOH, and other channels 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.
On the buy-side of our business, our team of savvy digital strategists, skilled software developers, experienced ad buyers or traders, expert technicians and data analysts drives the execution of advertising strategies across an array of digital channels including programmatic advertising, social, paid search, mobile, native, email, video advertising, OTT/CTV, audio, DOOH and more.
Our team of savvy digital strategists, skilled software developers, experienced ad buyers or traders, expert technicians and data analysts drives the execution of advertising strategies across an array of digital channels including programmatic advertising, social, paid search, mobile, native, email, video advertising, OTT/CTV, audio, DOOH and more.
By adopting a platform-agnostic stance, our buy-side division offers extensive market access, enabling clients to purchase advertisements seamlessly across various mediums such as desktop, mobile, connected TV, streaming audio, social media, and digital billboards. A distinctive feature of our technology is its visibility across inventory, facilitating the creation of customized audience segments at scale.
By adopting a platform-agnostic stance, our buy-side division 6 Table of Contents offers extensive market access, enabling clients to purchase advertisements seamlessly across various mediums such as desktop, mobile, connected TV, streaming audio, social media, and digital billboards. A distinctive feature of our offering is its visibility across inventory, facilitating the creation of customized audience segments at scale.
Human Capital Resources As of December 31, 2023, we had 90 employees, the majority of whom are full-time employees. None of our employees are currently covered by a collective bargaining agreement. We have not experienced any labor-related work stoppages and believe our relations with our employees are good.
Human Capital Resources As of December 31, 2024, we had 79 employees, the majority of whom are full-time employees. None of our employees are currently covered by a collective bargaining agreement. We have not experienced any labor-related work stoppages and believe our relations with our employees are good.
We rely on intellectual property laws, including trade secret, copyright and trademark laws in the U.S. and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. We own intellectual property related to our owned sites.
We rely on intellectual property laws, including trade secret, copyright and trademark laws in the U.S. and abroad, and use contracts, 12 Table of Contents confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. We own intellectual property related to our owned sites.
The team has led digital marketing efforts for companies both large and small, with unique experience leading small and mid-sized companies through the challenges of transitioning platforms into the programmatic advertising space.
The team has led digital marketing efforts for both large and small companies with unique experience leading these companies through the challenges of transitioning platforms into the programmatic advertising space.
In addition, our marketing team advertises online and in other forms of media, creates case studies, sponsors research, writes whitepapers, publishes marketing collateral, generates blog posts and undertakes client research studies.
In 11 Table of Contents addition, our marketing team advertises online and in other forms of media, creates case studies, sponsors research, writes whitepapers, publishes marketing collateral, generates blog posts and undertakes client research studies.
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 and audio advertisements that are delivered both at scale and on a highly targeted basis.
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.
We acquired the license to our proprietary Colossus SSP platform in 2022 from our third-party developer. As of December 31, 2023, we owned approximately four websites and URLs in varying stages of development to support our marketers advertising efforts. We also hold eight U.S. registered trademarks.
We acquired the license to our proprietary Colossus SSP platform in 2022 from our third-party developer. As of December 31, 2024, we owned four websites and URLs in varying stages of development to support our marketers advertising efforts. We also hold seven U.S. registered trademarks.
According to Emarketer, combined Linear TV and CTV ad spend will grow every year through to the end of 2027, when it will reach nearly $100 billion. CTV will account for all of the growth, with spend expecting to increase by $5.5 billion year over year in 2024 to $42.4 billion by end of 2027.
According to Emarketer as of October 2023, combined Linear TV and CTV ad spend will grow every year through the end of 2027, when it will reach nearly $100 billion. CTV will account for all of the growth, with spend expecting to increase by $5.5 billion year over year to $42.4 billion by end of 2027.
During 2023, we had approximately 115,000 buyers on the sell-side and approximately 234 clients on the buy-side. They understand the independent nature of our platform and relentless focus on driving ROI-based results. Our value proposition is complete alignment across our entire digital supply platform beginning with the first dollar in and last dollar out.
During 2024, we had approximately 168,000 buyers on the sell-side and about 230 clients on the buy-side. They understand the independent nature of our platform and relentless focus on driving ROI-based results. Our value proposition is complete alignment across our entire digital supply platform beginning with the first dollar in and last dollar out.
We believe being able to go into a programmatic platform and target 8 Table of Contents the same audience across all digital inventory is a major competitive advantage.
We believe being able to go into a programmatic platform and target the same audience across all digital inventory is a major competitive advantage.
Competition Sell-Side Competition On the sell-side of the digital advertising industry, competition is robust but more limited in that there were approximately 80 SSPs in operation including Pubmatic, Magnite and Acuity Ads.
Competition Sell-Side Competition On the sell-side of the digital advertising industry, competition is robust but more limited in that there were fewer than 80 SSPs in operation during 2024 including Pubmatic, Magnite and Acuity Ads.
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. As of December 31, 2023, 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”).
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 DOOH.
Our publishers, through our platform, had access to approximately 115,000 buyers of ad inventory in December 2023. We have a sales team working on behalf of our publishers to enlist more ad buyers across all media channels to generate more revenue for our publishers.
Our publishers, through our platform, had access to approximately 168,000 buyers of ad inventory over 2024. We have a sales team working on behalf of our publishers to enlist more ad buyers across all media channels to generate more revenue for our publishers.
We are technology and media agnostic, and 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 90% client retention amongst the clients that represent approximately 80% of our revenues for the fiscal years ended December 31, 2023 and 2022.
We are technology and media agnostic, and 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 80% client retention amongst the clients that represent approximately 80% of our revenues for 2024.
Both buy-side advertising businesses, Orange 142 and Huddled Masses, provide technology-enabled advertising solutions and consulting services to clients through multiple leading demand side platforms (“DSPs”), across multiple industry verticals such as travel, education, 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.
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.
The Company’s platform allows the Company to sell, in real time, ad impressions from publishers to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats. In 2023, our platform processed over 326 billion average monthly impressions, and served approximately 115,000 buyers.
The Company’s platform allows the Company to sell, in real time, ad impressions from publishers to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats. In 2024, our platform processed over 212 billion 5 Table of Contents average monthly impressions and served approximately 168,000 buyers.
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 the SSP. In the case of RTB media buys, many DSPs place bids for the impressions being offered by the publisher during the auction.
Each time the publisher’s web page loads, an ad request is sent to multiple demand sources which can include ad exchanges as well as DSPs directly from the SSP. In the case of RTB media buys, many DSPs place bids for the impressions being offered by the publisher during the auction.
Direct Digital Holdings, Inc., incorporated as a Delaware corporation on August 23, 2021, is the holding company for DDH LLC, the business formed by our founders in 2018 through the acquisitions of Colossus Media and Huddled Masses.
Direct Digital Holdings, Inc., incorporated as a Delaware corporation on August 23, 2021, is the holding company for DDH LLC, the business formed by our founders in 2018 through the acquisitions of Colossus Media and Huddled Masses. Colossus Media operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP™.
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.
Seasonality in Our Business 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.
Also, SSPs allow the publishers to connect to DSPs directly instead of connecting through ad exchanges. The SSP allows publishers’ inventory to be opened up and made available to advertisers they may not be able to directly connect with.
The SSPs have enhanced their functionalities over the years and have included ad exchange mechanisms to efficiently manage their ad inventory. Also, SSPs allow the publishers to connect to DSPs directly instead of connecting through ad exchanges. The SSP allows publishers’ inventory to be opened up and made available to advertisers they may not be able to directly connect with.
Throughout this Annual Report on Form 10-K, we use the terms "client" and "customer" interchangeably to refer to the businesses we serve. 7 Table of Contents Our Industry and Trends There are several key industry trends that continue to revolutionize the way that advertising is purchased and sold.
Coupled with our access to multiple DSPs and advertising channels, we strive to deliver superior ROI. Throughout this Annual Report on Form 10-K, we use the terms "client" and "customer" interchangeably to refer to the businesses we serve. Our Industry and Trends There are several key industry trends that continue to revolutionize the way that advertising is purchased and sold.
Our platform interfaces with prominent programmatic DSPs, social media networks, and search engines, granting us the ability to harness customer insights across multiple channels. This cross-channel approach optimizes campaign performance and ROI for our clients.
This technological foundation empowers our clients to achieve enhanced ROI across a diverse range of digital media channels. We interface with prominent programmatic DSPs, social media networks, and search engines, granting us the ability to harness customer insights across multiple channels. This cross-channel approach optimizes campaign performance and ROI for our clients.
Our platform offers extensive reach within both general market and multicultural media partners to help Fortune 500 brands and agencies scale to reach highly sought after audiences 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 extensive reach across a wide array of media partners to help Fortune 500 brands, media holding companies, independent agencies or emerging businesses reach highly sought after 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").
On the Colossus SSP, we offer a wide range of niche and general market publishers an opportunity to maximize advertising revenue driven by technology-enabled targeted advertising to multicultural and other 9 Table of Contents audiences.
On the Colossus SSP, we offer a wide range of publishers an opportunity to maximize advertising revenue driven by technology-enabled targeted advertising to reach all audiences.
In addition, we have been designated as a top minority owned business and National Minority Supplier Diversity Council (“NMSDC”) certified to work with top Fortune 500 companies, brands and agencies to help them reach their social diversity, equity and inclusion (“DEI”) objectives and budget commitments across our media and advertising platform.
We have been designated as a top minority owned business and National Minority Supplier Diversity Council (“NMSDC”) certified to work with top Fortune 500 companies, brands and agencies to help them achieve their strategic goals by working with our media and advertising platform.
We are focused on expanding our national sales presence primarily by growing our sales personnel presence in certain states and regions around the country in which we currently operate and/or are seeking to establish a presence.
We are focused on expanding our national sales presence primarily by growing our sales personnel presence in certain states and regions around the country in which we currently operate and/or are seeking to establish a presence. We typically seek to add experienced sales personnel with an established track record and/or verifiable book of business and client relationships.
Campaign efficiencies yielding measurable results and higher advertising ROI, as well as the needs necessitated by the 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.
Campaign efficiencies yielding measurable results and higher advertising ROI, as well as the needs necessitated by the global economic and supply chain challenges, have prompted these companies to begin utilizing digital advertising on an accelerated pace.
This team leverages market knowledge and expertise to demonstrate the benefits of programmatic advertising and how we can drive better performance and results for our clients.
This team leverages market knowledge and expertise to demonstrate the benefits of data driven advertising solutions across a range of platforms, including programmatic, search, social, CTV and influencer marketing and how we can drive better performance and results for our clients.
For the years ended December 31, 2023 and 2022, our gross profit was $37.6 million and $29.3 million, respectively. ● Solutions for the Potential Destabilization of Advertising.
For the years ended December 31, 2023 and 2022, our gross profit was $37.6 million and $29.3 million , respectively. For 2024, our revenue and gross profit were $62.3 million and $17.4 million , respectively.
The Sell-Side Platform: Colossus SSP Colossus Media, which has been in operation since 2017, owns and operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP™.
The advertiser that bids a higher amount compared to other advertisers will win the bid in the form of an auction. The Sell-Side Platform: Colossus SSP Colossus Media, which has been in operation since 2017, owns and operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP™.
For the buy-side platform, our sales team has three fundamental components: (1) a consulting services team that advises clients on a more enterprise level in the design and implementation of a digital media strategy; (2) a professional services team with each seller integration to assist sellers in getting the most value from our solution; and (3) our client services team that works closely with clients to manage and/or support campaigns.
For the buy-side platform, our sales team has three fundamental components: (1) a consulting services team that advises clients on a more enterprise level in the design and implementation of a digital media strategy or necessary technology marketing stack to ensure their media dollars are optimized to the fullest potential; (2) a professional sales team with each salesperson working with clients to provide customized digital media plans based on the client’s ROI goals and budgets; and (3) our client services team that works closely with clients to manage and/or support campaigns.
We typically seek to add experienced sales personnel with an established track record and/or verifiable book of business and client relationships. 12 Table of Contents For Colossus SSP, our professional services team manages each new DSP or publisher/seller integration while the buyer team focuses on the unique challenges and issues arising with our inventory buys.
For Colossus SSP, our professional services team manages each new DSP or publisher/seller integration while the buyer team focuses on the unique challenges and issues arising with our inventory buys.
Through our platform during 2023, we processed approximately 326 billion monthly impressions across many unique audiences including multicultural audiences at scale with 41 billion, or 13%, of those impressions being diverse and multicultural- focused, including African Americans, Latin Americans, Asian Americans and LGBTQIA+ customers. We provide our publishers with access to a host of media buyers on a daily basis.
In 2024, we processed approximately 212 billion average monthly impressions across many unique audiences including multicultural growth audiences at scale with 59 billion, or 28%, of those impressions from growing multicultural-focused audiences. We provide our publishers with access to a host of media buyers on a daily basis.
Our key growth strategies include our plans to: ● Continue to expand our highly productive “on the ground” sell-side and buy-side sales teams throughout the United States, with a particular focus on markets where we believe our client base is underserved. ● Utilize management’s experience to identify and close additional acquisition opportunities to accelerate expansion into new industry verticals, grow market share and enhance platform innovation capabilities. ● Leverage our end-to-end product offering as a differentiating factor to win new business and cross- sell to existing clients. 11 Table of Contents ● Aggressively grow the Colossus SSP advertising inventory, including both multicultural and general inventory.
Our key growth strategies include our plans to: • Continue to expand our highly productive “on the ground” sell-side and buy-side sales teams throughout the United States, with a particular focus on markets where we believe our client base is underserved. • Utilize management’s experience to identify and close additional acquisition opportunities to accelerate expansion into new industry verticals, grow market share and enhance platform innovation capabilities to create new sales channels. • Leverage our end-to-end product offering as a differentiating factor to win new business and cross-sell to existing clients. • Aggressively grow our curated audience offerings to ensure we are helping our Fortune 500 brands, media holding companies, independent agencies or mid-market businesses reach the consumers most important to them through the multiple channels they are engaging with, including high growth content formats such as OTT/CTV in-app and Digital Out of Home (“DOOH”). • Continue to innovate and develop our audience curation and data targeting capabilities to inform decision-making and optimize client campaigns. 10 Table of Contents • Invest in further optimization of our infrastructure and technology solutions to maximize revenue and operating efficiencies.
Colossus Media operates our proprietary sell-side programmatic platform (“SSP”) operating under the trademarked banner of Colossus SSP™, which provides advertisers of all sizes a programmatic advertising platform that automates the sale of ad inventory between advertisers and agencies leveraging proprietary technology.
In October 2024, we announced the unification of our buy-side businesses, Orange 142 and Huddled Masses. 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.
This collaboration empowers us to drive increased advertising ROI and reduce customer acquisition costs for our clients. Through effective marketing strategies tailored to local markets, we aim to level the playing field for our buy-side customers, allowing them to compete effectively with larger advertisers.
Through effective marketing strategies tailored to local markets, we aim to level the playing field for our buy-side customers, allowing them to compete effectively with larger advertisers. We believe our competitive advantage lies in our data-driven technology, enabling us to offer front-end, buy-side planning for small-to-mid-sized clients.
This business began as a trading desk supporting advertisers’ desires to reach diverse audiences and we have evolved into the preeminent ad tech platform to support this goal. We partner with publishers that range from small to large in scale across both general and multicultural markets such as Hearst, MediaVine, Gannett, Ebony Magazine, Blavity, La Nacion and many others.
This business began as a trading desk supporting advertisers’ desires to reach growth audiences and we have evolved into a preeminent ad tech platform to support reaching all audiences at scale. We partner with publishers that range from small to large in scale spanning from those with multi-million viewers daily to those who curate a small niche and loyal viewership.
The buy-side segment allows us to facilitate the procurement of digital advertising inventory (ad space) on behalf of our clients, as well as offer a comprehensive suite of end-to-end media solutions. We specialize in tailoring strategies that enhance visibility, engage target audiences, and drive quantifiable Key Performance Indicators (“KPIs”) and tangible business outcomes.
The Buy-Side Business: Orange 142 The buy-side segment is now operated through Orange 142, which has been in operation since 2013. The buy-side segment allows us to facilitate the procurement of digital advertising inventory (ad space) on behalf of our clients, as well as offer a comprehensive suite of end-to-end media solutions and technology services.
Revenues We generate revenues through a broad range of offerings throughout our technology platforms. On the sell-side of our business, through our proprietary Colossus SSP, we generate revenues by enabling programmatic media buyers to buy ad inventory from our host of publishers and content creators aggregated to provide access to buyers at scale.
The platform enables programmatic media buyers to buy ad inventory from our host of publishers and content creators aggregated to provide access to buyers at scale.
We continue to add new DSP partners especially where we believe the DSP might offer a unique advertising base seeking to target both our multicultural and general market audiences at scale. We help our advertiser clients efficiently reach multicultural and diverse communities including African Americans, Hispanic/Latin, Asian Americans and LGBTQIA+ customers in highly targeted campaigns.
Colossus SSP is agnostic to any specific DSP. We continually add new DSP partners especially where we believe the DSP might offer a unique advertising base seeking to target both our growth and general market audiences at scale.
The landscape of advertising is rapidly evolving, with digital channels gaining prominence over traditional advertising placements. Our buy-side platform is equipped with cutting-edge technology for first-party data management, media procurement, campaign execution, and analytics. This technological foundation empowers our clients to achieve enhanced ROI across a diverse range of digital media channels.
We specialize in tailoring strategies that enhance visibility, engage target audiences, and drive quantifiable Key Performance Indicators (“KPIs”) and tangible business outcomes. The landscape of advertising is rapidly evolving, with digital channels gaining prominence over traditional advertising placements. Our buy-side business utilizes cutting-edge technology for first-party data management, media procurement, campaign execution, and analytics.
The SSPs help the publishers monetize the display ads, video ads, and native ads on their websites and mobile apps. The SSPs have enhanced their functionalities over the years and have included ad exchange mechanisms to efficiently manage their ad 5 Table of Contents inventory.
Publishers utilize the SSP to sell, manage and optimize the ad inventory on their websites in an automated and effective way. The SSPs help the publishers monetize the display ads, video ads, and native ads on their websites and mobile apps.
Our objective is to deliver precise, ROI-focused advertising solutions that offer measurable campaign success. For the fiscal year ended December 31, 2023, we served approximately 234 small-to-mid-sized clients through our buy-side segment. Our buy-side leverages leading DSPs and advertising channels such as The Trade Desk, Xandr, Google DV360, Basis, Beeswax, Meta, among others.
Our objective is to deliver precise, ROI-focused advertising solutions that offer measurable campaign success. We serve the needs of about 230 small-to-mid-sized clients through our buy-side segment. Our buy-side leverages leading DSPs and advertising channels. This collaboration empowers us to drive increased advertising ROI and reduce customer acquisition costs for our clients.
Programmatic Marketplace Transaction The Sell-Side On the sell-side of the digital supply chain, the supply side platform (“SSP”), is an ad technology platform used by publishers to sell, manage and optimize the ad inventory on their websites in an automated and effective way.
Programmatic Marketplace Transaction The Sell-Side On the sell-side of the digital supply chain, the supply side platform (“SSP”) is an ad technology platform used by advertisers, agencies, DSPs and publishers. Advertisers, agencies and DSPs utilize the SSP to access publishers and markets that they might not be able to access directly or through larger DSPs and ad exchangers.
Our Competitive Strengths We believe the following attributes and capabilities form our core strengths and provide us with competitive advantages: ● End-to-End, Technology-Driven Solution Focused on Providing Higher Value to Underserved Markets. Our small and mid-sized client base is seeking high ROI, low customer acquisition costs and measurable results that grow their topline.
Our small and mid-sized client base is seeking high ROI, low customer acquisition costs and measurable results that grow their topline.
Our Chief Growth Officer, Maria Lowrey, was named a top 100 Diversity Leader in Energy and has over 20 years of senior level leadership experience working across energy, home services, and steel sectors. ● ESG-Centered Strategy.
Our Chief Growth Officer, Maria Lowrey, was named a top 100 Leader in Energy and has over 20 years of senior level leadership experience working across publicly traded companies leading customer acquisition sales channels, scaling sales channels, and forging relationships that deliver material growth through business-to-business (“B2B”) or business-to-business-to-consumer (“B2B2C”) strategic partnerships. • Industry Recognition.
We serve a variety of customers across multiple industries including travel/tourism (including destination marketing organizations or “DMOs”), education, energy, consumer packaged goods (“CPG”) healthcare, financial services (including cryptocurrency technologies) and other industries. Some of the significant brands we work with on the buy-side include Visit Virginia Beach, Pigeon Forge, Emory University and City of Colorado Springs.
We serve a variety of customers across multiple industries including travel/tourism (including destination marketing organizations or “DMOs”), education, energy, consumer packaged goods, healthcare, financial services and other industries. Our Competitive Strengths We believe the following attributes and capabilities form our core strengths and provide us with competitive advantages: • Humanizing technology through personalized programmatic advertising.
In February 2022, we completed our initial public offering and certain organizational transactions which resulted in our current structure.
In September 2020, DDH LLC acquired Orange 142, 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, we completed our initial public offering and certain organizational transactions which resulted in our current structure.
Our business strategy on the sell-side also presents significant growth potential, as we believe we are well positioned to be able to bring underserved multicultural publishers into the advertising ecosystem, thereby increasing our value proposition across all clients including our large clients.
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.
Removed
The advertiser that bids a higher amount compared to other advertisers will win the bid and, in most cases, pay the second highest price plus $0.01 and in a few cases pay the highest price for the winning impression to serve the ads.
Added
Our platform offers top performing advertising inventory and creator content that aligns with Fortune 500 brands, media holding companies and mid-market agencies focusing on key growth audiences.
Removed
Colossus SSP is agnostic to any specific DSP. To that end, Colossus SSP is integrated into several leading DSPs including but not limited to The Trade Desk, Google 360, Zeta Global, Xandr, Beeswax, Basis and Stirista.
Added
We believe this market is rapidly expanding, and that small to-mid-sized advertisers will continue to increase their digital spend. 7 Table of Contents Local Ad Buying Becoming More Programmatic.
Removed
The Buy-Side Business: Huddled Masses & Orange 142 The buy-side segment is operated through Orange 142, which has been in operation since 2013, and Huddled Masses, which has been in operation since 2012.
Added
We prioritize personal relationships, ensuring each client receives dedicated support and tailored programmatic solutions regardless of company size. Combining cutting-edge technology with a people-first approach makes programmatic advertising more accessible, transparent, and results-driven. Our high-touch service model ensures clients feel valued, supported, and empowered to succeed in the evolving digital landscape.
Removed
We believe our competitive advantage lies in our data-driven technology, enabling us to offer front-end, buy-side planning for small-to-mid-sized clients. Coupled with our access to multiple DSPs and advertising channels, we strive to deliver superior ROI.
Added
Marketing may be highly automated, but people are at the heart of every transaction - from marketers expressing their brand promises, publishers safeguarding their user experience, and ultimately, the consumer, who will make decisions based on the ads seen.
Removed
Significant Increase in Multicultural Audience and Targeted Content. As digital media has grown and emerging marketing channels continue to gain adoption, audience segmentation, including on multicultural lines, has become more granular. A growing and increasing segment of those audiences is the multicultural audience, which has been traditionally underserved in the industry. According to the U.S.
Added
We take a hands-on approach, ensuring that every campaign is thoughtfully designed and supported by real and highly experienced people who care about our client’s success.
Removed
Census Bureau, racial minority and multi-racial consumers represent 41% of the U.S. population and are projected to be the numerical majority in the U.S. by 2044. When we expand the definition of multicultural to include LGBTQIA+ customers, the numbers are significantly greater. Advertisers and publishers alike face the same challenge.
Added
Our unique perspective across the buy-side and sell-side allows us to offer comprehensive, tailored solutions that address the full spectrum of programmatic needs - we know what campaign success looks like for both the advertiser and publisher. 8 Table of Contents • End-to-End, Technology-Driven Solution Focused on Providing Higher Value to Underserved Markets.

… 12 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

87 edited+44 added−15 removed267 unchanged
We rely on highly skilled personnel and if we are unable to attract, retain or motivate substantial numbers of qualified personnel or expand and train our sales force, we may not be able to grow effectively.
We rely on highly skilled personnel and if we are unable to attract, retain or motivate substantial numbers of qualified personnel or expand and train our sales force, we may not be able to grow effectively.
Factors that may cause our operating results to fluctuate include the following: ● changes in demand for our platform, including related to the seasonal nature of spending on digital advertising campaigns; ● changes in our pricing policies, the pricing policies of our competitors and the pricing or availability of inventory, data or of other third-party services; 36 Table of Contents ● changes in our customer base and platform offerings; ● the addition or loss of customers; ● changes in advertising budget allocations, agency affiliations or marketing strategies; ● changes to our product, media, customer or channel mix; ● changes and uncertainty in the regulatory environment for us, advertisers or publishers; ● changes in the economic prospects of advertisers or the economy generally, which could alter advertisers’ spending priorities, or could increase the time or costs required to complete advertising inventory sales; ● changes in the availability of advertising inventory through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising; ● disruptions or outages on our platform or by or through third party intermediaries used by our platform; ● the introduction of new technologies or offerings by our competitors; ● changes in our capital expenditures as we acquire the hardware, equipment and other assets required to support our business; ● timing differences between our payments for advertising inventory and our collection of related advertising revenue; ● the length and unpredictability of our sales cycle; and ● costs related to acquisitions of businesses or technologies, or employee recruiting.
Factors that may cause our operating results to fluctuate include the following: • changes in demand for our platform, including related to the seasonal nature of spending on digital advertising campaigns; • changes in our pricing policies, the pricing policies of our competitors and the pricing or availability of inventory, data or of other third-party services; • changes in our customer base and platform offerings; • the addition or loss of customers; 34 Table of Contents • changes in advertising budget allocations, agency affiliations or marketing strategies; • changes to our product, media, customer or channel mix; • changes and uncertainty in the regulatory environment for us, advertisers or publishers; • changes in the economic prospects of advertisers or the economy generally, which could alter advertisers’ spending priorities, or could increase the time or costs required to complete advertising inventory sales; • changes in the availability of advertising inventory through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising; • disruptions or outages on our platform or by or through third party intermediaries used by our platform; • the introduction of new technologies or offerings by our competitors; • changes in our capital expenditures as we acquire the hardware, equipment and other assets required to support our business; • timing differences between our payments for advertising inventory and our collection of related advertising revenue; • the length and unpredictability of our sales cycle; and • costs related to acquisitions of businesses or technologies, or employee recruiting.
Some of these material risks include: ● Our credit facilities subject us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities. 14 Table of Contents ● The substantial doubt raised about our ability to continue as a going concern, which may hinder our ability to obtain future financing; ● We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth. ● We are currently ineligible to file new short-form registration statements on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all. ● If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our common stock may be delisted from the Nasdaq Capital Market; ● The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties; ● High customer concentration exposes us to various risks faced by our major customers and may subject us to significant fluctuations or declines in revenues. ● We are subject to payment-related risks and, if our clients do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected. ● If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan. ● 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, may adversely affect our business, operating results and financial condition. ● If the use of third-party “cookies,” mobile device IDs or other tracking technologies is restricted without similar or better alternatives, our platform’s effectiveness could be diminished and our business, results of operations, and financial condition could be adversely affected. ● 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 perceived failure to comply with laws and industry self-regulation, could adversely affect our business and operating results. ● Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our business, operating results and financial condition. ● Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition. ● Changes in legislative, judicial, regulatory or cultural environments relating to information collection, use and processing may limit our ability to collect, use and process data.
Some of these material risks include: • Our credit facilities subject us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities. • The substantial doubt raised about our ability to continue as a going concern, which may hinder our ability to obtain future financing; • We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth. • We are currently ineligible to file new short-form registration statements on Form S-3 or use our existing registration statement on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all. • If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our Class A Common Stock may be delisted from the Nasdaq Capital Market; • The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties; • High customer concentration exposes us to various risks faced by our major customers and may subject us to significant fluctuations or declines in revenues. • We are subject to payment-related risks and, if our clients do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected. • If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan. 13 Table of Contents • 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, may adversely affect our business, operating results and financial condition. • If the use of third-party “cookies,” mobile device IDs or other tracking technologies is restricted without similar or better alternatives, our platform’s effectiveness could be diminished and our business, results of operations, and financial condition could be adversely affected. • 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 perceived failure to comply with laws and industry self-regulation, could adversely affect our business and operating results. • Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our business, operating results and financial condition. • Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition. • Changes in legislative, judicial, regulatory or cultural environments relating to information collection, use and processing may limit our ability to collect, use and process data.
Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.
Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our business and financial condition.
If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements and may be required to seek additional amendments or waivers under these financing arrangements, which could adversely impact our liquidity and financial condition.
If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements and may be required to seek additional amendments or waivers under these financing arrangements, which may not be granted and could adversely impact our liquidity and financial condition.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods.
In addition, as a result of the restatement and associated non-reliance on previously issued quarterly financial statements, investors may lose confidence in our financial reporting and the price of our common stock could decline.
In addition, as a result of the restatement and associated non-reliance on previously issued quarterly financial statements, investors may lose confidence in our financial reporting and the price of our Class A Common Stock could decline.
If our common stock is delisted by the Nasdaq, the price of our common stock may decline and our common stock may be eligible to trade on the OTC Markets or other over-the-counter quotation system, where an investor may find it more difficult to dispose of their common stock or obtain accurate quotations as to the market value of our common stock.
If our Class A Common Stock is delisted by the Nasdaq, the price of our Class A Common Stock may decline and our Class A Common Stock may be eligible to trade on the OTC Markets or other over-the-counter quotation system, where an investor may find it more difficult to dispose of their Class A Common Stock or obtain accurate quotations as to the market value of our Class A Common Stock.
Our ability to continue as a going concern will depend on our ability to successfully manage costs after executing a reorganization plan on July 1, 2024, work with partners to achieve prior volume levels of sells-side revenue and obtain additional funding, as to which no assurances can be given.
Our ability to continue as a going concern will depend on our ability to successfully manage costs after executing a reorganization plan on July 1, 2024, work with partners to achieve prior volume levels of sell-side revenue and obtain additional funding, as to which no assurances can be given.
As a result of the delayed filing of several of our periodic reports with the SEC, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regained and maintain status as a current filer.
As a result of the delayed filing of several of our periodic reports with the SEC during 2024, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regained and maintain status as a current filer.
Further, if we are delisted, we would incur additional costs under requirements of state “blue sky” laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market.
Further, if we are delisted, we would incur additional costs under requirements of state “blue sky” laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our Class A Common Stock and the ability of our stockholders to sell our Class A Common Stock in the secondary market.
As a result of our failure to timely file our Annual Report on Form 10-K for year ended December 31, 2023, and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, we are currently ineligible to file new short-form registration statements on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
As a result of our failure to timely file our Annual Report on Form 10-K for year ended December 31, 2023, and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, we are currently ineligible to file new short-form registration statements on Form S-3 or use our existing registration statement on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
These risks include, but are not limited to, the following: ● Government entities typically fund projects through appropriated monies and demand is affected by public sector budgetary cycles and funding authorizations. 23 Table of Contents ● Government contracts are subject to heightened reputational and contractual risks compared to contracts with commercial clients, including additional scrutiny and publicity. ● Government contracts can be challenged by other interested parties and such challenges, even if unsuccessful, can increase costs, cause delays and defer project implementation and revenue recognition. ● U.S. government contracting regulations impose strict contractual, compliance and disclosure obligations.
These risks include, but are not limited to, the following: • Government entities typically fund projects through appropriated monies and demand is affected by public sector budgetary cycles and funding authorizations. • Government contracts are subject to heightened reputational and contractual risks compared to contracts with commercial clients, including additional scrutiny and publicity. • Government contracts can be challenged by other interested parties and such challenges, even if unsuccessful, can increase costs, cause delays and defer project implementation and revenue recognition; and • U.S. government contracting regulations impose strict contractual, compliance and disclosure obligations.
While our platform and people-based framework operates primarily in the United States, some of our operations may subject us to data privacy laws outside the United States, such as the European Union’s General Data Protection Regulation (“GDPR”) or similar legislation in the region, which prescribe a complex data protection regime including principles, rights and obligations with extraterritorial reach of EU, UK and data protection authorities of other jurisdictions.
While our platform and people-based framework operates primarily in the United States, some of our operations may subject us to data privacy laws outside the United States, such as the European Union’s General Data Protection Regulation (“GDPR”) or similar legislation in the region, which prescribe a complex data protection regime including principles, rights 20 Table of Contents and obligations with extraterritorial reach of EU, UK and data protection authorities of other jurisdictions.
Some of our larger competitors have substantially 24 Table of Contents broader product offerings and may leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that may discourage customers from using our platform, including through selling at zero or negative margins or product bundling with other services they provide at reduced prices.
Some of our larger competitors have substantially broader product offerings and may leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that may discourage customers from using our platform, including through selling at zero or negative margins or product bundling with other services they provide at reduced prices.
If our platform cannot scale to meet demand, if there are errors in our execution of any of these functions on our platform, or if we experience outages, then our business may be harmed. 19 Table of Contents Our platform is complex and multifaceted.
If our platform cannot scale to meet demand, if there are errors in our execution of any of these functions on our platform, or if we experience outages, then our business may be harmed. 17 Table of Contents Our platform is complex and multifaceted.
Ad-blocking technologies could have an adverse effect on our business, results of 20 Table of Contents operations and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some ad-blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e., data owned by the publisher).
Ad-blocking technologies could have an adverse effect on our business, results of operations and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some ad-blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e., data owned by the publisher).
Delisting from the Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock.
Delisting from the Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our Class A Common Stock.
We have a limited operating history with the current scale of our business, which makes it difficult to forecast our future results. You should not rely on our past quarterly or annual results of operations as indicators of future performance. You should consider and evaluate our prospects in light of the risks and uncertainty frequently encountered by companies like ours.
We have a limited operating history with the current scale of our business, which makes it difficult to forecast our future results. You should not rely on our past quarterly or annual results of operations as indicators of future performance. You should consider and evaluate our prospects considering the risks and uncertainty frequently encountered by companies like ours.
If one or more of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
If one or more of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States (U.S. GAAP).
Third parties may also attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information to gain access to our customers’ data or our data, including intellectual property and other confidential business information. We currently serve the majority of Colossus SSP functions from third-party data center hosting facilities.
Third parties may also attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information to gain access to our customers’ data or our data, including intellectual property and other confidential business information. 22 Table of Contents We currently serve the majority of Colossus SSP functions from third-party data center hosting facilities.
If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our common stock may be delisted from the Nasdaq Capital Market.
If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our Class A Common Stock may be delisted from the Nasdaq Capital Market.
Additionally, our rapid growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform. You should not consider our revenue growth and levels of profitability in recent periods as indicative of future performance. In future 21 Table of Contents periods, our revenue or profitability could decline or grow more slowly than we expect.
Additionally, our rapid growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform. You should not consider our revenue growth and levels of profitability in recent periods as indicative of future performance. In future periods, our revenue or profitability could decline or grow more slowly than we expect.
There can be no assurances, however, that we will be successful in regaining compliance with the continued listing requirements and maintaining the listing of our common stock on the Nasdaq Capital Market.
There can be no assurances, however, that we will be successful in regaining compliance with the continued listing requirements and maintaining the listing of our Class A Common Stock on the Nasdaq Capital Market.
Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in our 28 Table of Contents ability to provide our services, which could have a material adverse effect on our business, results of operations and financial condition. Market pressure may reduce our revenue per impression.
Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in our ability to provide our services, which could have a material adverse effect on our business, results of operations and financial condition. Market pressure may reduce our revenue per impression.
For example, DDM may have different tax positions from us, especially in light of the Tax Receivable Agreement, which could influence our decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when DDH should terminate the Tax Receivable Agreement and accelerate its obligations thereunder.
For example, DDM may have different tax positions from us, especially considering the Tax Receivable Agreement, which could influence our decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when DDH should terminate the Tax Receivable Agreement and accelerate its obligations thereunder.
Additionally, if our actual taxable income were insufficient or there were additional adverse changes in applicable law or regulations, we may be unable to realize all or a portion of the expected tax benefits and our cash flows and stockholders’ equity could be negatively affected.
Additionally, if our actual taxable income were insufficient or there were additional adverse changes in applicable law or 30 Table of Contents regulations, we may be unable to realize all or a portion of the expected tax benefits and our cash flows and stockholders’ equity could be negatively affected.
Our operating results may be adversely affected if our judgments prove to be wrong, assumptions change 39 Table of Contents or actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.
Our operating results may be adversely affected if our judgments prove to be wrong, assumptions change or actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.
Privacy concerns, whether valid or not valid, may inhibit market adoption of our platform particularly in certain industries and foreign countries. Our buy-side clients include destination marketing organizations (“DMOs”), which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. Our work for DMOs carries various risks inherent in the government contracting process.
Privacy concerns, whether valid or not valid, may inhibit market adoption of our platform particularly in certain industries and foreign countries. Our buy-side clients include DMOs, which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. Our work for DMOs carries various risks inherent in the government contracting process.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is 37 Table of Contents held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
Our sales efforts involve educating our customers about the use, technical capabilities and benefits of our platform, and working through technical connections and troubleshooting technical issues with prospective customers. Some of our customers undertake an evaluation process that frequently involves not only our platform but also the offerings of our competitors.
Our sales efforts involve educating our customers about the use, technical capabilities and benefits of our platform, and working through technical connections and troubleshooting technical issues with prospective customers. Some of our customers undertake an evaluation process that 24 Table of Contents frequently involves not only our platform but also the offerings of our competitors.
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material 32 Table of Contents misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our handling of this data is 22 Table of Contents subject to a wide variety of federal, state and foreign laws and regulations and is subject to regulation by various government authorities and consumer actions. Our data handling is also subject to contractual obligations and may be deemed to be subject to industry standards.
Our handling of this data is subject to a wide variety of federal, state and foreign laws and regulations and is subject to regulation by various government authorities and consumer actions. Our data handling is also subject to contractual obligations and may be deemed to be subject to industry standards.
Risks Related to Owning our Securities We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, result in material misstatements in our financial statements. The Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, result in material misstatements in our financial statements. The Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
See Item 13 “ Certain Relationships and Related Person Transactions, and Director Independence” for more information. 32 Table of Contents The Tax Receivable Agreement with DDM and DDH LLC requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled.
See Item 13 “ Certain Relationships and Related Person Transactions, and Director Independence ” for more information. 29 Table of Contents The Tax Receivable Agreement with DDM and DDH LLC requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled.
DDM, a holding company indirectly owned by our Chairman and Chief Executive Officer and our President, beneficially owns approximately 75.8% of the combined voting power of our Class A and Class B Common Stock. As a result, we are a “controlled company” within the meaning of the Nasdaq corporate governance standards.
DDM, a holding company indirectly owned by our Chairman and Chief Executive Officer and our President, beneficially owns approximately 66.6% of the combined voting power of our Class A and Class B Common Stock. As a result, we are a “controlled company” within the meaning of the Nasdaq corporate governance standards.
The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a Registration Statement on Form S-1.
The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and 15 Table of Contents interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a Registration Statement on Form S-1.
As discussed elsewhere in this Annual Report, our management determined that our consolidated financial statements for the quarterly periods in the years ended December 31, 2023 should be restated due to accounting errors resulting from the incorrect (1) accounting for, and presentation of, noncontrolling interests (“NCI”), (2) recognition of an organizational transaction in connection with the Company’s initial public offering, (3) presentation of earnings per share considering the effect of certain features of the Company’s warrants and the impact of correcting the accounting for, and presentation of NCI, and (4) timing of the recording of the 2023 redemption of warrants.
As previously reported, our management determined that our consolidated financial statements for the quarterly periods in the years ended December 31, 2023 should be restated due to accounting errors resulting from the incorrect (1) accounting for, and presentation of, noncontrolling interests (“NCI”), (2) recognition of an organizational transaction in connection with the Company’s initial public offering, (3) presentation of earnings per share considering the effect of certain features of the Company’s warrants and the impact of correcting the accounting for, and presentation of NCI, and (4) timing of the recording of the 2023 redemption of warrants.
Among these factors include the May 2024 pause by a 16 Table of Contents sell-side customer of its connection to the Colossus SSP resulting from allegations contained in a defamatory article / blog post, which we believe was part of coordinated misinformation campaign.
These factors include the May 2024 pause by a sell-side customer of its connection to the Colossus SSP resulting from allegations contained in a defamatory article / blog post, which we believe was part of coordinated misinformation campaign.
As disclosed in Item 9A of this Annual Report on Form 10-K, the Company identified material weaknesses in its internal control over the completeness of revenue in 2022 (the “2022 Material Weakness”) and over a combination of deficiencies related to journal entry processes, information technology general controls (“ITGC”), and the technical evaluation of accounting matters in 2023 (the “2023 Material Weaknesses”).
As disclosed in Item 9A of this Annual Report on Form 10-K, the Company identified material weaknesses in its internal control over a combination of deficiencies related to journal entry processes, information technology general controls (“ITGC”), and the technical evaluation of accounting matters in 2023 (the “2023 Material Weaknesses”).
Our failure to identify suitable candidates or close transactions with potential acquisition targets for which we have invested significant time and resources could have a material adverse effect on our financial condition and cash flows.
Our failure to identify suitable candidates or close transactions with potential 19 Table of Contents acquisition targets for which we have invested significant time and resources could have a material adverse effect on our financial condition and cash flows.
If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.
If one or more of the 36 Table of Contents analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.
It is important to buyers that their advertisements be placed on appropriate media, in proximity with appropriate content, that 27 Table of Contents the impressions for which they are charged be legitimate, and that their advertising campaigns yield their desired results.
It is important to buyers that their advertisements be placed on appropriate media, in proximity with appropriate content, that the impressions for which they are charged be legitimate, and that their advertising campaigns yield their desired results.
General Risks If securities or industry analysts do not publish research or reports about our business or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline.
General Risk Factors If securities or industry analysts do not publish research or reports about our business or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline.
DDH LLC and its subsidiaries may not generate 31 Table of Contents sufficient cash flow to distribute funds to us and applicable state law and contractual restrictions, including negative covenants in our debt instruments, may not permit such distributions.
DDH LLC and its subsidiaries may not generate sufficient cash flow to distribute funds to us and applicable state law and contractual restrictions, including negative covenants in our debt instruments, may not permit such distributions.
As a result of the restatement and the change in our registered public accounting firm, we have been delayed in filing this Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for each of the periods ended March 31, 2024 and June 30, 2024, and there can be no assurance that we will be able to timely file our required reports for future periods.
As a result of the restatement and the change in our registered public accounting firm, we were delayed in filing our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q for each of the quarterly periods ended March 31, 2024 and June 30, 2024, and there can be no assurance that we will be able to timely file our required reports for future periods.
The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing 26 Table of Contents our growth potential.
The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing our growth potential.
Such developments could cause revenue to decline, increase the cost of data, reduce the availability of data and adversely affect the demand for our products and services. ● Our buy-side clients include destination marketing organizations (“DMOs”), which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. ● The requirements of being a public company may strain our resources and divert our management’s attention. 15 Table of Contents ● The digital advertising industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be harmed. ● A 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, could be detrimental to our business, reputation and results of operations. ● We are a holding company and our principal asset is our equity interest in DDH LLC, and, accordingly, we depend on distributions from DDH LLC to pay our taxes, expenses and dividends. ● DDH is controlled by DDM, whose interests may differ from those of our public stockholders. ● If we fail to maintain or implement effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and the per share price of our Class A Common Stock.
Such developments could cause revenue to decline, increase the cost of data, reduce the availability of data and adversely affect the demand for our products and services. • Our buy-side clients include DMOs, which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. • The requirements of being a public company may strain our resources and divert our management’s attention. • The digital advertising industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be harmed. • A 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, could be detrimental to our business, reputation and results of operations. • We are a holding company and our principal asset is our equity interest in DDH LLC, and, accordingly, we depend on distributions from DDH LLC to pay our taxes, expenses and dividends. • DDH is controlled by DDM, whose interests may differ from those of our public stockholders. • The sale or issuance of our Class A Common Stock to New Circle pursuant to the Purchase Agreement may cause dilution and the sale of the shares of Class A Common Stock acquired by New Circle, or the perception that such sales may occur, could cause the price of our Class A Common Stock to be volatile. • If we fail to maintain or implement effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and the per share price of our Class A Common Stock.
Additionally, in July 2022, Alphabet Inc.’s Google subsidiary (“Alphabet”) announced that it would delay its Chrome web browser timeline for the depreciation of cookies to 2024. In March 2021, Alphabet announced that it would not build alternate identifiers to track individuals as they browse across the web, nor would Google use them in its products.
In March 2021, Alphabet Inc.’s Google subsidiary (“Alphabet”) announced that it would phase out cookies and not build alternate identifiers to track individuals as they browse across the web, nor would Google use them in its products. However, in July 2022, Alphabet announced that it would delay its Chrome web browser timeline for the deprecation of cookies to 2024.
Our audited consolidated financial statements as of December 31, 2023 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2023, we had cash and cash equivalents of $5.1 million and an accumulated deficit of $2.5 million.
Our audited consolidated financial statements as of December 31, 2024 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2024, we had cash and cash equivalents of $1.4 million and an accumulated deficit of $8.8 million.
In conjunction with the short pay, the Company recorded a charge of $8.8 million for payments made to a few publishers, primarily because of the Company’s inability to charge back the publishers for the short pay given the lack of information and related documentation supporting such transaction.
In conjunction with the short pay, the Company recorded a charge of $8.8 million during the year ended December 31, 2023 for payments made in early 2024 to a few publishers, primarily because of the Company’s inability to charge back the publishers for the short pay given the lack of information and related documentation supporting such transaction.
DDM, a holding company indirectly owned by our Chairman and Chief Executive Officer and our President, controls approximately 75.8% of the combined voting power of our common stock through its ownership of Class B Common Stock.
DDM, a holding company indirectly owned by our Chairman and Chief Executive Officer and our President, controls approximately 66.6% of the combined voting power of our Class A and Class B Common Stock.
A failure to comply with these provisions could result in a default or an event of default. Upon an event of default, unless waived, the lenders could elect to terminate commitments, cease making further loans, cause its loans to become due and payable in full and force us into bankruptcy or liquidation.
Upon an event of default, unless waived, the lenders could elect to terminate commitments, cease making further loans, cause their loans to become due and payable in full and force us into bankruptcy or liquidation.
In 2024, we experienced a short-pay notice from this customer resulting in reduction of our 2023 revenue to the reported amount of $157 million. The Company has not been provided with information as to the reason for the short pay, and therefore has disputed it.
In 2024, we experienced a short-pay notice from the concentrated sell-side customer resulting in reduction of our 2023 revenue to the reported amount of $157.1 million. The Company was not provided information as to the reason for the short pay and disputed it.
If our assumptions regarding these uncertainties, which we regularly use and update to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer. 29 Table of Contents The loss, modification or delay of large or multiple contracts may negatively impact our financial performance.
If our assumptions regarding these uncertainties, which 26 Table of Contents we regularly use and update to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
Specifically, any one of the following events, among others, may cause material fluctuations or declines in our revenues and have a material and adverse effect on our business, financial condition, results of operations and prospects: ● an overall decline in the business of one or more of our significant customers; ● the decision by one or more of our significant customers to switch to our competitors; ● the reduction in the prices for our services agreed by one or more of our significant customers; or ● the failure or inability of any of our significant customers to make timely payment for our services. 18 Table of Contents We are subject to payment-related risks and, if our clients do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.
Specifically, any one of the following events, among others, may cause material fluctuations or declines in our revenues and have a material and adverse effect on our business, financial condition, results of operations and prospects: • an overall decline in the business of one or more of our significant customers; • the decision by one or more of our significant customers to switch to our competitors; 16 Table of Contents • the reduction in the prices for our services agreed by one or more of our significant customers; or • the failure or inability of any of our significant customers to make timely payment for our services.
If we issue additional securities after the closing of this offering to raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock, and our current shareholders may experience dilution.
If we issue additional securities, these securities may have rights, preferences, or privileges senior to those of our Class A Common Stock, and our current shareholders may experience dilution.
The restatement of our consolidated financial statements and the ongoing process of remediating the material weaknesses has caused us to incur substantial expenses for legal, accounting, and other professional services and has diverted our management’s attention from our business and could continue to do so.
The restatement of our consolidated financial statements and the process of remediating the material weaknesses caused us to incur substantial expenses for legal, accounting, and other professional services and diverted our management’s attention from our business. Continued remediation efforts could continue to cause us to incur increased expenses in these areas.
Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources.
Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities 21 Table of Contents more difficult, time-consuming or costly and increased demand on our systems and resources.
Any adverse determination in litigation could also subject us to significant liabilities, all of which could have a material adverse effect on our business and results of operations.
Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities, all of which could have a material adverse effect on our business and results of operations.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Capital Market. 35 Table of Contents Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012.
Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business 33 Table of Contents Startups Act of 2012.
The Company has begun the process of designing and implementing effective internal control measures to improve its internal controls over the journal entry processes, ITGC and the technical evaluation of accounting matters associated with the 2023 Material Weaknesses and remediate these material weaknesses.
The Company began the process of designing and implementing effective internal control measures to improve its internal controls over the journal entry processes and ITGC associated with the 2023 Material Weaknesses and remediated these material weaknesses. The Company believes significant progress was made in 2024 to enhance and strengthen its internal control over the technical evaluation of accounting matters.
For the years ended December 31, 2023 and 2022, one customer of the sell-side business represented 73% and 63% of revenues, respectively. As of December 31, 2023 and 2022, one customer of the sell-side business accounted for 83% and 80%, respectively, of accounts receivable.
For the years ended December 31, 2024 and 2023, one sell-side customer represented 46% and 73% of revenues, respectively. As of December 31, 2024, three customers (two buy-side and one sell-side) accounted for 34% of accounts receivable. As of December 31, 2023, one sell-side customer accounted for 83% of accounts receivable.
Upon completion of these efforts, the Company concluded that the 2022 Material Weakness had been remediated as of December 31, 2023. In 2023, the Company engaged consultants to assist with identifying and testing the design of control over business processes as well as ITGC. This project was completed in the first quarter of 2024.
As a result of these material weaknesses, the Company concluded that its internal control over financial reporting was not effective as of December 31, 2023. In 2023, the Company engaged consultants to assist with identifying and testing the design of control over business processes as well as ITGC. This project was completed in the first quarter of 2024.
If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to, or do not perform as we expect, our business, results of operations and financial condition could be harmed.
Moreover, any changes in the favorable tax treatment of advertising expenses and the deductibility thereof would likely cause a reduction in advertising demand. 25 Table of Contents If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to, or do not perform as we expect, our business, results of operations and financial condition could be harmed.
In addition, our credit facilities include, and other debt instruments we may enter into in the future may include, provisions entitling the lenders to demand immediate repayment of all borrowings upon the occurrence of certain change of control events relating to us, which also could discourage, delay or prevent a business combination transaction. 38 Table of Contents Because we do not anticipate paying any cash dividends on our Class A Common Stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains.
In addition, our credit facilities include, and other debt instruments we may enter into in the future may include, provisions entitling the lenders to demand immediate repayment of all borrowings upon the occurrence of certain change of control events relating to us, which also could discourage, delay or prevent a business combination transaction.
The market growth forecasts included in this Annual Report on Form 10-K may prove to be inaccurate and, even if the market in which we compete achieves forecasted growth, we cannot assure you our business will grow at similar rates, if at all.
We may not be able to replace customers who decrease or cease their usage of our platform with new customers that will use our platform to the same extent. 23 Table of Contents The market growth forecasts included in this Annual Report on Form 10-K may prove to be inaccurate and, even if the market in which we compete achieves forecasted growth, we cannot assure you our business will grow at similar rates, if at all.
If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to operate and expand our business could be harmed.
If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to operate and expand our business could be harmed. 28 Table of Contents Risks Related to Our Organizational Structure We are a holding company and our principal asset is our equity interest in DDH LLC, and, accordingly, we depend on distributions from DDH LLC to pay our taxes, expenses and dividends.
The requirements of being a public company may strain our resources, divert our management’s attention.
The requirements of being a public company have increased our operating expenses and may divert our management’s attention.
While we do not intend to rely on the exemptions related to being a “controlled company” within the meaning of the Nasdaq rules, we may utilize these exemptions for as long as we continue to qualify as a “controlled company.” Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of The Nasdaq Capital Market.
For example, controlled companies are not required to have: • a board that is composed of a majority of “independent directors,” as defined under the Nasdaq rules; • a compensation committee that is composed entirely of independent directors; and • director nominations be made, or recommended to the full board of directors, by its independent directors, or by a nominations/governance committee that is composed entirely of independent directors. 35 Table of Contents While we do not intend to rely on the exemptions related to being a “controlled company” within the meaning of the Nasdaq rules, we may utilize these exemptions for as long as we continue to qualify as a “controlled company.” Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Capital Market.
If these remedial measures are insufficient to address the 2023 Material Weaknesses, or if additional material weaknesses in the Company’s internal control over financial reporting are discovered or occur in the future, the Company’s consolidated financial statements may contain material misstatements, and the Company could be required to restate its financial results.
If additional material weaknesses in the Company’s internal control over financial reporting are discovered or occur in the future, the Company’s consolidated financial statements may contain material misstatements, and the Company could be required to restate its financial results. In addition, our ability to produce timely and accurate financial statements and comply with applicable laws and regulations will be impaired.
These covenants may limit the amount of our borrowing available under the credit facilities, affect our ability to operate our business and may limit our ability to have sufficient funding or otherwise to take advantage of potential business opportunities as they arise.
These covenants may limit the amount of our borrowing available under the credit facilities, affect our ability to operate our business and may limit our ability to have sufficient funding or otherwise to take advantage of potential business opportunities as they arise. 14 Table of Contents Our ability to comply with the covenants and restrictions contained in the credit facilities may be affected by events beyond our control, including prevailing economic, financial, and industry conditions.
Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place us or our publishers at a disadvantage, particularly if such technologies are controlled or influenced by our competitors. Even if ad blockers do not ultimately have an adverse effect on our business, investor concerns about ad blockers could cause our stock price to decline.
Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place us or our publishers at a disadvantage, particularly if such technologies are controlled or influenced by our competitors.
District Court for the Southern District of Texas, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings.
District Court for the Southern District of Texas, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings. On July 9, 2024, another alleged stockholder filed a similar securities class action against the Company, certain of our officers and directors, also in the Southern District of Texas.
These restrictions may have adverse effects on the Company’s employees and business, which could affect our future prospects and operations. 17 Table of Contents The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties.
The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties.
In particular, uncertainty regarding the impacts of inflation, increasing interest rates and the war in Ukraine on the economy in the United States may cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders.
Government of tariffs and other trade barriers, as well as any retaliation by trade partners, and military conflicts in Ukraine and the Middle East may cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders.
In addition, our organizational structure, including the Tax Receivable Agreement, imposes additional compliance costs and requires a significant commitment of resources that would not be required of a company with a simpler organizational structure. 33 Table of Contents We may not be able to realize all or a portion of the tax benefits that are currently expected to result from the Tax Attributes covered by the Tax Receivable Agreement and from payments made under the Tax Receivable Agreement.
We may not be able to realize all or a portion of the tax benefits that are currently expected to result from the Tax Attributes covered by the Tax Receivable Agreement and from payments made under the Tax Receivable Agreement.
We have never declared or paid any dividends on our Class A Common Stock. We currently intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors.
As a result, you may only receive a return on your investment in our Class A Common Stock if the market price of our Class A Common Stock increases.
In addition, the terms of our existing debt arrangements preclude us from paying dividends and our future debt agreements, if any, may contain similar restrictions. As a result, you may only receive a return on your investment in our Class A Common Stock if the market price of our Class A Common Stock increases.
Economic downturns or unstable market conditions, such as those potentially created by 25 Table of Contents high price inflation, increasing interest rates, health pandemics or geopolitical instability may cause advertisers to decrease their advertising budgets, which could reduce spend though our platform and adversely affect our business, results of operations, and financial condition.
Government of tariffs and other trade barriers, as well as any retaliation by trade partners, health pandemics or geopolitical instability may cause advertisers to decrease their advertising budgets, which could reduce spend though our platform and adversely affect our business, results of operations, and financial condition.

… 66 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+0 added−0 removed10 unchanged
Anu has over 20 years of experience serving companies across multiple industries in senior management roles, within information technology and as such has developed substantial experience in cybersecurity, among other areas. Team members who support our Chief Technology Officer have similar broad experience and expertise in information security, including cybersecurity.
Pillai has over 20 years of experience serving companies across multiple industries in senior management roles, within information technology and as such has developed substantial experience in cybersecurity, among other areas. Team members who support our Chief Technology Officer have similar broad experience and expertise in information security, including cybersecurity.
Our board of directors have ultimate oversight regarding our cybersecurity with our audit committee specifically assisting the board of directors in the role of risk oversight by regularly reviewing cybersecurity matters and reporting to the board of directors. The Company’s Chief Technology Officer is responsible for developing and implementing our information security program and reporting on cybersecurity matters.
Our board of directors has ultimate oversight regarding our cybersecurity with our audit committee specifically assisting the board of directors in the role of risk oversight by regularly reviewing cybersecurity matters and reporting to the board of directors. The Company’s Chief Technology Officer is responsible for developing and implementing our information security program and reporting on cybersecurity matters.
We engage third-party services to conduct evaluations of our security controls, whether through independent audits or consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls.
We engage third-party services to conduct evaluations of our security controls, 37 Table of Contents whether through independent audits or consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls.
Our board of directors also engage in ad 40 Table of Contents hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Anu Pillai, our Chief Technology Officer, leads our cybersecurity efforts. She has been serving in her current role since March 2021.
Our board of directors also engages in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Anu Pillai, our Chief Technology Officer, leads our cybersecurity efforts. She has been serving in her current role since March 2021. Ms.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
ITEM 2. Properties Our headquarters are located in Houston, Texas, where we occupy a facility with approximately 7,400 square feet under a lease that expires in February 2030. We have permanent offices and/or a co-work office presence in two other office locations across the United States: Austin and New York.
ITEM 2. Properties Our headquarters are located in Houston, Texas, where we occupy a facility with approximately 8,000 square feet under a lease that expires in February 2030. We have permanent offices and/or a co-work office presence in two other office locations across the United States: Austin and New York.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+3 added−2 removed3 unchanged
On May 23, 2024, an alleged stockholder, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between April 2023 and March 2024, filed a filed a putative class action against the Company, certain of our officers and directors, and other defendants in the U.S.
On May 23, 2024, an alleged stockholder, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between April 2023 and March 2024, filed a putative class action against the Company, certain of our officers and directors, and other defendants in the U.S.
The two actions have been consolidated. Each of these complaints seeks unspecified damages, plus costs, fees, and attorneys’ fees. The Company cannot make any predictions about the final outcome of this matter or the timing thereof but believes that plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits.
The two actions have been consolidated. Each of these complaints seeks unspecified damages, plus costs, fees, and attorneys’ fees. The Company cannot make any predictions about the final outcome of this matter or the timing thereof but believes that plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits. ITEM 4.
Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention. 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.
This customer reconnected the Company on May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024. The Company is actively working with its partners to achieve prior volume levels.
In connection with this post, one of the Company’s sell-side customers paused its connection to the Company while the allegations were investigated. This customer reconnected the Company on 38 Table of Contents May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024.
Removed
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 while the allegations were investigated.
Added
The Company is actively working with its partners to achieve prior volume levels. In May 2024, the Company, as plaintiff, filed a lawsuit against the author of the defamatory article.
Removed
On May 14, 2024, the Company filed a lawsuit against the author of the defamatory article and is vigorously pursuing its rights. The Company cannot make any predictions about the final outcome of this litigation matter or the timing thereof. ITEM 4. Mine Safety Disclosures Not applicable. 41 Table of Contents PART II
Added
O n March 5, 2025, the United States District Court for the District of Maryland denied the defendant’s motion to dismiss in its entirety, and the Company will continue to vigorously pursue its claims and rights. The Company cannot make any predictions about the final outcome of this litigation matter or the timing thereof.
Added
Mine Safety Disclosures Not applicable. 39 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+1 added−5 removed2 unchanged
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is traded on The Nasdaq Capital Market under the symbol “DRCT.” Holders As of October 11, 2024, there were four holders of record of our outstanding Class A Common Stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is traded on The Nasdaq Capital Market under the symbol “DRCT.” Holders As of March 25, 2025, there were five holders of record of our outstanding Class A Common Stock.
Removed
Issuer Purchases of Equity Securities On August 29, 2023, the Company commenced an offer to purchase (the “Tender Offer”) all of its outstanding publicly traded warrants to purchase shares of its Class A Common Stock at a purchase price of $1.20 in cash, without interest.
Added
Issuer Purchases of Equity Securities None. ITEM 6. [Reserved.] 40 Table of Contents
Removed
The Tender Offer expired at one minute after 11:59 PM, Eastern Time on September 28, 2023. The Company accepted all validly tendered warrants for purchase and settlement on October 2, 2023.
Removed
As a result of the Tender Offer, a total of 2,213,652 warrants were tendered and not validly withdrawn prior to the expiration of the Tender Offer for a total purchase price of approximately $2.7 million.
Removed
On October 23, 2023, the Company distributed a notice of redemption to the registered holders of the remaining outstanding warrants announcing the redemption of those warrants for a cash redemption price of $0.35 per warrant.
Removed
The redemption closed on October 30, 2023, and all remaining 1,004,148 warrants were purchased for an aggregate price of approximately $0.4 million. 42 Table of Contents During the three months ended December 31, 2023, purchases of warrants were as follows: ​ ​ ​ ​ ​ Total Number of Warrants Purchased as Part of Publicly Announced Plans or Programs ​ ​ ​ ​ Approximate Dollar Value of Warrants That May Yet Be Purchased Under the Plans or Programs ​ ​ ​ ​ ​ Period ​ ​ ​ ​ Total Number of Warrants Purchased ​ ​ ​ Average Price Paid per Warrant ​ ​ October 1, 2023 through October 31, 2023 ​ ​ 3,217,800 ​ $0.93 ​ 3,217,800 ​ - November 1, 2023 through November 30, 2023 ​ ​ - ​ - ​ - ​ - December 1, 2023 through December 31, 2023 ​ - ​ - ​ - ​ - Total ​ 3,217,800 ​ $0.93 ​ 3,217,800 ​ - ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+58 added−41 removed72 unchanged
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 allocating resources and assessing performance. Our CODM is our Chairman and Chief Executive Officer.
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.
Therefore, we report revenue on a gross basis inclusive of all supplier costs. We pay suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.
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.
Each quarterly installment payment under the Delayed Draw Loan was 0.625% of the amount of the Delayed Draw Loan through December 31, 2023, and each installment payment thereafter until maturity is 1.25% of the amount of the Delayed Draw Loan.
Each quarterly installment payment under the Delayed Draw Loan was 0.625% of the amount of the Delayed Draw Loan through December 31, 2023, and each quarterly installment payment thereafter until maturity is 1.25% of the amount of the Delayed Draw Loan.
In 2023, net cash flows provided by operating activities were $2.6 million and consisted of net loss of $6.8 million, $4.7 million in adjustments for non-cash and non-operating items and $4.7 million of cash inflows from working capital.
In 2023, net cash flows provided by operating activities were $2.6 million and consisted of net loss of $6.8 million, $4.7 million in adjustments for non-cash and non-operating items and $4.8 million of cash inflows from working capital.
Financing Activities In 2023, net cash used in financing activities was $1.3 million mainly resulting from $3.2 million of distributions to holders of LLC Units, $3.5 million paid to acquire and redeem warrants, $0.7 million paid on term loan and $0.6 million deferred financing costs partially offset by $3.0 million net draws on the Credit Agreement and $3.6 million proceeds from 2021 Credit Facility utilized for the warrant redemption.
In 2023, net cash used in financing activities was $1.3 million mainly resulting from $3.2 million of distributions to holders of LLC Units, $3.5 million paid to acquire and redeem warrants, $0.7 million paid on term loan and $0.6 million deferred financing costs partially offset by $3.0 million net draws on the Credit Agreement and $3.5 million proceeds from 2021 Credit Facility utilized for the warrant redemption.
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 Annual Report on Form 10-K contains forward-looking statements within the meaning of federal securities laws that are subject to certain risks, trends and uncertainties.
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 Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws and which are subject to certain risks, trends and uncertainties.
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 publisher (sell-side) or customer (buy-side).
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.
Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $3.0 million, stock-based compensation expense of $0.7 million and $0.6 million of deferred tax expense. The $4.7 million increase in cash resulting from changes in working capital primarily consisted of $16.2 million increase in accounts payable partially offset by an $11.3 million increase in accounts receivable.
Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $2.8 million, stock-based compensation expense of $0.7 million and $0.6 million of deferred tax expense. The $4.7 million increase in cash resulting from changes in working capital primarily consisted of $16.2 million increase in accounts payable partially offset by an $11.3 million increase in accounts receivable.
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; ● ineligibility to file short-form registration statements on Form S-3, which may impair our ability to raise capital; ● 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; 44 Table of Contents ● 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 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 in this Annual Report on Form 10-K under “ Risk Factors ,” and elsewhere in this Annual Report on Form 10-K.
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; • ineligibility to file short-form registration statements on Form S-3, 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; 41 Table of Contents • 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 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 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 in this Annual Report on Form 10-K under “ Risk Factors ,” and elsewhere in this Annual Report on Form 10-K.
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, DSP and media agnostic, and we believe our clients trust us to provide the best opportunity for success of their brands and businesses.
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.
Other expense The Company received a short pay notice from a sell-side customer in 2024 resulting in reduction of our 2023 revenue to the reported amount of $157 million. In conjunction with the short pay, the Company recorded a charge of $8.8 million for payments made to a few publishers.
Other expense The Company received a short pay notice from a sell-side customer in 2024 resulting in reduction of our 2023 revenue to the reported amount of $157.1 million. In conjunction with the short pay, the Company recorded a charge of $8.8 million in 2023 for payments made to a few publishers in 2024.
The Company’s revenues are derived primarily from two sources: sell-side advertising and buy-side advertising. Thus, the Company disaggregates the revenue earned into these two segments. For additional segment disclosures, refer to Note 7 of our consolidated financial statements.
The Company’s revenues are derived primarily from two sources: sell-side advertising and buy-side advertising. Thus, the Company disaggregates the revenue earned into these two segments. For additional segment disclosures, refer to Note 7 — Segment Information of our consolidated financial statements.
Credit Facilities Lafayette Square On December 3, 2021, the Company entered into the Term Loan and Security Agreement (the “2021 Credit Facility”) with Lafayette Square Loan Services, LLC (“Lafayette Square”) as administrative agent, and the various lenders thereto.
Lafayette Square On December 3, 2021, the Company entered into the Term Loan and Security Agreement (the “2021 Credit Facility”) with Lafayette Square Loan Services, LLC (“Lafayette Square”) as administrative agent, and the various lenders thereto.
The Credit Agreement provides for a revolving credit facility in the principal amount of up to $10 million, subject to a borrowing base determined based on eligible accounts, and an up to $5 million uncommitted incremental revolving facility.
The Credit Agreement provides for a revolving credit facility in the principal amount of up to $10.0 million, subject to a borrowing base determined based on eligible accounts, and an up to $5.0 million uncommitted incremental revolving facility.
Under the 2021 Credit Facility, dividends and distributions by DDH LLC to the Company and any shareholders of the Company are permitted so long as (i) no default or event of default is continuing or would occur after giving pro forma effect to such dividends and distributions under the 2021 Credit Facility, (ii) the Company, on a pro forma basis, maintains a consolidated senior net leverage ratio of not greater than 1.5 to 1.0, and (iii) the Company, on a pro forma basis, maintains liquidity of not less than $15,000,000.
Under the 2021 Credit Facility, dividends and distributions by DDH LLC to the Company and any shareholders of the Company are permitted so long as (i) no default or event of default is continuing or would occur after giving pro forma effect to such dividends and distributions under the 2021 Credit Facility, (ii) the Company, on a pro forma basis, maintains a consolidated senior net leverage ratio of not greater than 1.5 to 1.0, and (iii) the Company, on a pro forma basis, maintains liquidity of not less than $15.0 million.
Many customers run several different campaigns throughout the year to capitalize on different seasons, special events and other 62 Table of Contents happenings at their respective regions and localities. The Company provides digital advertising and media buying capabilities with a focus on generating measurable digital and financial life for its customers.
Many customers run several different campaigns throughout the year to capitalize on different seasons, special events and other happenings at their 57 Table of Contents respective regions and localities. The Company provides digital advertising and media buying capabilities with a focus on generating measurable digital and financial life for its customers.
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. 48 Table of Contents Managing industry dynamics We operate in the rapidly evolving digital advertising industry.
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. 45 Table of Contents Managing industry dynamics We operate in the rapidly evolving digital advertising industry.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to the one-month Term SOFR rate and as determined by EWB on the first day of the applicable interest period, plus 0.10% (10 basis points), plus 3.00% per annum (the “Loan Rate”); provided, that, in no event shall the Loan Rate be less than 0.50% of the Loan Rate effective as of the date of the Credit Agreement nor more than the maximum rate of interest allowed under applicable law.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to the one-month Term SOFR rate as determined by EWB on the first day of the applicable interest period, plus 0.10%, plus 3.00% per annum (the “Loan Rate”); provided, that, in no event shall the Loan Rate be less than 0.50% of the Loan Rate effective as of the date of the Credit Agreement nor more than the maximum rate of interest allowed under applicable law.
The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayment, of $0.4 million and $0.5 million as of December 31, 2023 and 2022, respectively.
The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayment, of $0.5 million and $0.4 million as of December 31, 2024 and 2023, respectively.
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; 49 Table of Contents ● 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.
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.
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 47 Table of Contents visibility into campaign performance data and methodology.
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 44 Table of Contents into campaign performance data and methodology.
In connection with the Company’s analysis of principal vs agent considerations, the Company has evaluated the specified goods or services and considered whether the Company controls the goods or services before they are provided to the customer, including the three indicators of control.
In connection with the Company’s analysis of principal-versus-agent considerations, the Company has evaluated the specified goods or services and considered whether the Company controls the goods or services before they are provided to the customer, including the three indicators of control.
Providing both the front-end, buy-side advertising businesses 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.
Providing both the front-end, buy-side 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.
Contractual Obligations and Future Cash Requirements As of December 31, 2023, 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.
Contractual Obligations and Future Cash Requirements As of December 31, 2024, 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.
As of the date of this report, sell-side volumes related to this customer 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.
As of the date of 50 Table of Contents this report, sell-side volumes related to this customer 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.
The Company bases its estimates on past experiences, market conditions, and other 61 Table of Contents assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.
The Company bases its estimates on past experiences, market conditions, and other 56 Table of Contents assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.
No impairment loss was recognized during the years ended December 31, 2023 and 2022. 63 Table of Contents Stock-based compensation Stock-based compensation cost for options and restricted stock units (“RSU”) awarded to employees and directors is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).
No impairment loss was recognized during the years ended December 31, 2024 and 2023. 58 Table of Contents Stock-based compensation Stock-based compensation cost for options and restricted stock units (“RSU”) awarded to employees and directors is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).
All accrued but unpaid interest on outstanding advances under the Credit Agreement are payable in monthly installments on the last day of each monthly interest period until the Maturity Date when the then-outstanding principal balance of the advances and all accrued but unpaid interest thereon 57 Table of Contents becomes due and payable.
All accrued but unpaid interest on outstanding advances under the Credit Agreement are payable in monthly installments on the last day of each monthly interest period until the Maturity Date when the then-outstanding principal balance of the advances and all accrued but unpaid interest thereon becomes due and payable.
The term loan under the 2021 Credit Facility initially provided for a term loan in the principal amount of up to $32.0 55 Table of Contents million, consisting of a $22.0 million closing date term loan (the “Term Loan”) and an up to $10.0 million delayed draw term loan (the “Delayed Draw Loan”).
The term loan under the 2021 Credit Facility initially provided for a term loan in the principal amount of up to $32.0 million, consisting of a $22.0 million closing date term loan (the “Term Loan”) and an up to $10.0 million delayed draw term loan (the “Delayed Draw Loan”).
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, revaluation of tax receivable agreement liability, and certain one-time items such as acquisition transaction costs, losses from early termination or redemption of credit agreements or preferred units and gains from settlements or loan forgiveness 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.
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, derecognition and revaluation of tax receivable agreement liability, and certain one-time items such as acquisition transaction costs, losses from early termination of credit agreements 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.
The Company maintains agreements with its customers in the form of written service agreements, which set out the terms of the relationship, including payment terms (typically 30 to 90 days) and access to its platform.
The Company maintains agreements with its customers in the form of written service agreements, which set out the terms of the relationship, including payment terms (typically 30 to 90 days).
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 115,000 advertisers per month in 2023 compared to approximately 114,000 in 2022.
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 168,000 advertisers per month in 2024 compared to approximately 115,000 in 2023.
We serve the needs of approximately 234 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 the needs of about 230 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.
Through our platform design and proactive IVT mitigation efforts, we address and minimize IVT on a number of fronts, including sophisticated technology, which detects and avoids IVT on the front end; direct publisher and inventory relationships, for supply path optimization; and ongoing campaign and inventory performance review, to ensure inventory quality and brand protection controls are in place.
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.
We serve a variety of customers across multiple industries including travel/tourism (including destination marketing organizations (“DMOs”)), education, energy, consumer packaged goods, healthcare, financial services (including cryptocurrency technologies) and other industries. We are focused on increasing the number of customers that use our buy-side advertising businesses as their advertising partner.
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.
Sources of Liquidity The following table summarizes our cash and cash equivalents, working capital, and availability under our Credit Agreement (as defined below) on December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Cash and cash equivalents ​ $ 5,116 ​ $ 4,047 Working capital ​ $ 3,280 ​ $ 6,712 Availability under Credit Agreement ​ $ 7,000 ​ $ — ​ 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.
Sources of Liquidity The following table summarizes our cash and cash equivalents, working capital (deficit), and availability under our Credit Agreement (as defined below) on December 31, 2024 and 2023 (in thousands): December 31, 2024 2023 Cash and cash equivalents $ 1,445 $ 5,116 Working capital (deficit) $ (4,815) $ 3,280 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.
The obligations under the 2021 Credit Facility are secured by senior, first-priority liens on all or substantially all assets of the Company. As of December 31, 2023, the Company owed a balance on the 2021 Credit Facility of $28.6 million.
The obligations under the 2021 Credit Facility are secured by senior, first-priority liens on all or substantially all assets of the Company. As of December 31, 2024, the Company owed a balance on the 2021 Credit Facility of $37.4 million.
Goodwill Goodwill is assessed for impairment at least annually (as of December 31) starting with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.
The Company expects to deduct goodwill for tax purposes in future years. Goodwill is assessed for impairment at least annually (as of December 31) starting with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.
The change in margin for the year ended December 31, 2023 is attributable to the mix in revenue between our business segments as our faster-growing sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the additional fixed costs related to an increase in server capacity.
The change in margin for the year ended December 31, 2024 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 additional sell-side fixed costs related to an increase in server capacity and new analytic, development and technology-related costs.
Therefore, the Company reports revenue on a gross basis inclusive of all supplier costs and pays suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.
Therefore, the Company reports revenue on a gross basis inclusive of all supplier costs and pays suppliers for the cost of digital media, advertising inventory, data and any add-on services or features. In the advertising industry, companies commonly experience seasonal fluctuations in revenue.
Our long-term growth and results of operations will depend on our ability to attract more customers, including DMOs, 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 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 ROI.
Our revenue recognition policies are discussed in more detail under “Critical Accounting Estimates and Related Policies.” Cost of revenues For cost of revenues for our 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.
Our revenue recognition policies are discussed in more detail under “Critical Accounting Estimates and Related Policies.” 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.
Each quarterly installment payment under the closing date term loan was $137,000 from January 1, 2022 through December 31, 2023, and each installment payment thereafter until maturity is $275,000.
Each quarterly installment payment under the closing date term loan was $0.1 million from January 1, 2022 through December 31, 2023, and each quarterly installment payment thereafter until maturity is $0.3 million.
The Company generates revenue through the monetization of publisher ad impressions on its platform. The Company’s platform allows the Company to sell, in real time, ad impressions from publishers to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats.
The Company’s platform allows the Company to sell, in real time, ad impressions from publishers to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats.
Revenue recognized during 2023 and 2022 from amounts included within the deferred revenue balances at the beginning of each respective period amounted to $0.5 million and $1.3 million, respectively. ASC 606 provides various optional practical expedients.
Revenue recognized during 2024 and 2023 from amounts included within the deferred revenue balances at the beginning of each respective period amounted to $0.4 million and $0.5 million, respectively. Accounting Standards Codification ("ASC") 606 provides various optional practical expedients.
The leases will require minimum payments of $0.2 million in 2024, $0.2 million in 2025, $0.2 million in 2026, $0.2 million in 2027, $0.2 million in 2028 and $0.2 million thereafter. As of December 31, 2023, we had cash and cash equivalents of $5.1 million.
The leases will require minimum payments of $0.3 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 December 31, 2024, we had cash and cash equivalents of $1.4 million.
As a result, our clients have been loyal, with approximately 90% client retention amongst the clients that represent approximately 80% of our revenue during the year ended December 31, 2023. In addition, we cultivate client relationships through our pipeline of managed and moderate serve clients that conduct campaigns through our platform.
As a result, our clients have been loyal, with approximately 80% client retention amongst the clients that represent approximately 80% of our revenue for 2024. In addition, we cultivate client relationships through our pipeline of managed and moderate serve clients that conduct campaigns through our platform.
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) looking to place their advertisements.
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).
The negative covenants include, among others, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. 58 Table of Contents The Credit Agreement also includes customary events of default, including, among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, defaults under any of the loan documents, certain cross-defaults to other indebtedness, certain bankruptcy and insolvency events, invalidity of guarantees or grant of security interest, certain ERISA-related transactions and events, certain orders of forfeiture, change of control, certain undischarged attachments, sequestrations, or similar proceedings, and certain undischarged or non-stayed judgments, in certain cases subject to certain thresholds and grace periods.
The Credit Agreement also includes customary events of default, including, among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, defaults under any of the loan documents, certain cross-defaults to other indebtedness, certain bankruptcy and insolvency events, invalidity of guarantees or grant of security interest, certain ERISA-related transactions and events, certain orders of forfeiture, change of control, certain undischarged attachments, sequestrations, or similar proceedings, and certain undischarged or non-stayed judgments, in certain cases subject to certain thresholds and grace periods.
Revolving Credit Availability is defined as an amount such that the ratio of the value of eligible accounts to the aggregate amount of all outstanding advances under the credit agreement at such time is not less than 2.0 to 1.0. The Company was in compliance with all the financial covenants under the Credit Agreement as of December 31, 2023.
Revolving Credit Availability was defined as an amount such that the ratio of the value of eligible accounts to the aggregate amount of all outstanding advances under the credit agreement at such time is not less than 2.0 to 1.0.
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 revaluation of tax receivable agreement liability, loss on early termination of line of credit, forgiveness of PPP loan, loss on redemption of non-participating preferred units, and stock-based compensation (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.
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 derecognition and revaluation of tax receivable agreement liability, commitment shares and expenses for the Equity Reserve Facility, loss on early termination 55 Table of Contents of line of credit, and stock-based compensation (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.
Historical Cash Flows: The following table sets forth our cash flows for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Net cash provided by operating activities ​ $ 2,558 ​ $ 2,064 Net cash used in investing activities ​ ​ (178) ​ (688) Net cash used in financing activities ​ ​ (1,311) ​ (2,013) Net increase (decrease) in cash and cash equivalents ​ $ 1,069 ​ $ (637) ​ Our cash and cash equivalents at December 31, 2023 were held for working capital and general corporate purposes.
Historical Cash Flows: The following table sets forth our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash (used in) provided by operating activities $ (8,648) $ 2,558 Net cash used in investing activities (17) (178) Net cash provided by (used in) financing activities 4,994 (1,311) Net (decrease) increase in cash and cash equivalents $ (3,671) $ 1,069 Our cash and cash equivalents at December 31, 2024 were held for working capital and general corporate purposes.
We anticipate that the future minimum payments related to our current indebtedness over the next five years will be $1.5 million in 2024, $4.5 million in 2025, $25.7 million in 2026, less than $0.1 million in 2027, less than $0.1 million in 2028, and $0.1 million thereafter, assuming we do not refinance our indebtedness, enter into a new revolving credit facility or make any further draws under the revolving facility.
We anticipate that the future minimum payments related to our current indebtedness over the next five years will be $3.7 million in 2025, $37.4 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 revolving credit facility.
The increase in costs was primarily due to the related increase in revenue, while the 3% increase as a percentage of revenue was due to an increase in fixed costs of approximately $1.6 million related to an increase in server capacity to support the growth as well as the mix and concentration of publishers and the related costs.
The decrease in costs was primarily due to the related decrease in revenue, while the 10% increase as a percentage of revenue was due to an increase in fixed costs of approximately $0.6 million related to an increase in server capacity and approximately $1.2 million related to new analytic, development and technology-related costs to support the growth as well as the mix and concentration of publishers and the related costs.
On October 15, 2024, with an effective date of June 30, 2024, the Company and EWB entered into the Third Amendment to the Credit Agreement (the “Third Amendment”) which, among other things, (1) provides that the Company will make prepayments of the outstanding principal balance of the Credit Agreement of $1.0 million upon execution of the Third Amendment, $1.0 million on or before January 15, 2025 and $2.0 million on or before April 15, 2025, (2) requires the Company to file a registration statement with the SEC to establish an equity line of credit offering on or before October 31, 2024 and to use commercially reasonable efforts to cause such registration statement to become effective, (3) requires the net proceeds of a potential equity line of credit to be applied to the outstanding principal balance under the Credit Agreement in an amount that would cause the ratio of the value of eligible accounts to the aggregate amount of revolving credit advances to be not less than 1.00 to 1.00, (4) requires the consent of EWB prior to the ability of the Company to make certain restricted payments, including cash dividends, (5) requires the Company to make additional prepayments in the amount by which the outstanding loans under the Credit Agreement exceed the borrowing base between the calendar months ending November 30, 2024 and April 15, 2025, and (6) replaces the financial covenants under the Credit Agreement, effective as of June 30, 2024, with the following: As of Minimum TTM (1) EBITDA ($ in millions) Minimum Liquid Assets ($ in millions) Maximum Total Funded Debt to EBITDA Leverage Ratio Minimum Fixed Charge Coverage Ratio Revolving Credit Availability (as of each month end) June 30, 2024 n/a $1.0 n/a n/a n/a September 30, 2024 $5.0 $1.5 n/a n/a n/a December 31, 2024 $3.5 $1.5 n/a n/a 1.0 to 1.0 (2) March 31, 2025 $5.5 $2.0 n/a n/a 1.5 to 1.0 (3) June 30, 2025 $7.5 $2.0 n/a 1.25 to 1.00 2.0 to 1.0 (4) ​ (1) TTM = Trailing Twelve Months (2) Beginning November 30, 2024 (3) Beginning January 31, 2025 (4) Beginning April 15, 2025 ​ The Credit Agreement contains customary representations and warranties and includes affirmative and negative covenants applicable to the borrowers and their respective subsidiaries.
On October 15, 2024, with an effective date of June 30, 2024, the Company and EWB entered into the Third Amendment to the Credit Agreement (the “Third Amendment”) which, among other things, (1) provided that the Company make prepayments of the outstanding principal balance of the Credit Agreement of $1.0 million upon execution of the Third Amendment, $1.0 million on or before January 15, 2025 and $2.0 million on or before April 15, 2025, (2) required the Company to file a registration statement with the SEC to establish an equity line of credit offering on or before October 31, 2024 and to use commercially reasonable efforts to cause such registration statement to become effective, (3) required the net proceeds of a potential equity line of credit to be applied to the outstanding principal balance under the Credit Agreement in an amount that would cause the ratio of the value of eligible accounts to the aggregate amount of revolving credit advances to be not less than 1.00 to 1.00, (4) requires the consent of EWB prior to the ability of the Company to make certain restricted payments, including cash dividends, (5) requires the Company to make additional prepayments in the amount by which the outstanding loans under the Credit Agreement exceed the borrowing base between the calendar months ending November 30, 2024 and April 15, 2025, and (6) replaced the financial covenants under the Credit Agreement, effective as of June 30, 2024, with varying threshold levels by quarter for minimum trailing twelve months EBITDA, minimum liquid assets, maximum total funded debt to EBITDA leverage ratio, minimum fixed charge coverage 53 Table of Contents ratio and revolving credit availability.
The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement of the Company or other borrowers. During the year ended December 31, 2023, the Company incurred $0.3 million of deferred financing costs associated with the Credit Agreement. As of December 31, 2023, there was $3.0 million outstanding under the Credit Agreement.
The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement of the Company or other borrowers. During the year ended December 31, 2024, the Company incurred less than $0.1 million of deferred financing costs associated with the Credit Agreement.
On October 15, 2024, with an effective date of June 30, 2024, the Company and Lafayette Square entered into the Fifth Amendment to the Term Loan and Security Agreement (the “Fifth Amendment”) which among other things, (1) defers quarterly installment payments on the Term Loan and the Delayed Draw Loan for the periods from June 30, 2024 through December 31, 2025, (2) requires that the Company pay a commitment fee of 50 basis points or an amount of $0.1 million to Lafayette Square, (3) allows proceeds from future equity raises by the Company, if any, to cure potential financial covenant noncompliance, (4) provides for one-month and three-month interest periods, (5) replaces the calculation of the consolidated total net leverage ratio with a consolidated total leverage ratio for purposes of calculating the applicable margin and the financial covenant and (6) replaces the financial covenants under the 2021 Credit Facility (effective as of June 30, 2024) with the following: ​ As of Minimum TTM* EBITDA ($ in millions) Minimum Liquidity ($ in millions) Maximum Consolidated Total Leverage Ratio Minimum Fixed Charge Coverage Ratio June 30, 2024 n/a n/a n/a n/a September 30, 2024 $5.0 $1.5 n/a n/a December 31, 2024 $3.5 $1.5 n/a n/a March 31, 2025 $5.5 $2.0 n/a n/a June 30, 2025 $7.5 $2.0 n/a 1.50 to 1.00 September 30, 2025 n/a $2.0 4.25 to 1.0 1.50 to 1.00 December 31, 2025 n/a $2.0 4.00 to 1.0 1.50 to 1.00 March 31, 2026 n/a $2.0 3.75 to 1.0 1.50 to 1.00 June 30, 2026 n/a $2.0 3.50 to 1.0 1.50 to 1.00 September 30, 2026 n/a $2.0 3.25 to 1.0 1.50 to 1.00 ​ *TTM = Trailing Twelve Months ​ 2023 Revolving Line of Credit - East West Bank On July 7, 2023, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”), with East West Bank (“EWB”), as lender.
On October 15, 2024, with an effective date of June 30, 2024, the Company and Lafayette Square entered into the Fifth Amendment to the Term Loan and Security Agreement (the “Fifth Amendment”) which among other things, (1) deferred quarterly installment payments on the Term Loan and the Delayed Draw Loan for the periods from June 30, 2024 through December 31, 2025, (2) required that the Company pay a commitment fee of 50 basis points or an amount of $0.1 million to Lafayette Square, (3) allowed proceeds from future equity raises by the Company, if any, to cure potential financial covenant noncompliance, (4) provided for one-month and three-month interest periods, (5) replaced the calculation of the consolidated total net leverage ratio with a consolidated total leverage ratio for purposes of calculating the applicable margin and the financial covenant and (6) replaced the financial covenants under the 2021 Credit Facility (effective as of June 30, 2024) with varying threshold levels by quarter for minimum trailing twelve months EBITDA, minimum liquidity, maximum consolidated total leverage ratio and minimum fixed charge coverage ratio.
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.
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.
The Company elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts with an original expected duration of one year or less.
The Company elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts with an original expected duration of one year or less. Goodwill Goodwill is attributable to entry into new markets not previously accessible and generation of future growth opportunities.
Sell-side advertising cost of revenues increased $56.1 million, to $105.7 million, or 86% of revenue for the year ended December 31, 2023, compared to $49.6 million, or 83% of revenue, for the same period in 2022.
Sell-side advertising cost of revenues decreased $71.7 million, to $34.1 million, or 96% of sell-side revenue for the year ended December 31, 2024, compared to $105.7 million, or 86% of sell-side revenue, for the same period in 2023.
Additional deferred financing costs of less than $0.1 million and $0.5 million were incurred during the year ended December 31, 2023 and 2022, respectively. Unamortized deferred financing costs as of December 31, 2023 and 2022 were $1.7 million and $2.1 million, respectively. Accrued and unpaid interest was $0 as of December 31, 2023 and 2022.
Additional deferred financing costs of $3.3 million and less than $0.1 million were incurred during the years ended December 31, 2024 and 2023, respectively. Unamortized deferred financing costs as of December 31, 2024 and 2023 were $4.2 million and $1.7 million, respectively.
Campaign efficiencies yielding measurable results and higher advertising ROI 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.
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.
The increase in cash and cash equivalents compared with December 31, 2022, primarily resulted from $2.6 million in cash flows from operating activities partially offset by $0.2 million in cash flows used for investing activities and $1.3 million in cash flows used for financing activities.
The decrease in cash and cash equivalents compared with December 31, 2023, primarily resulted from $8.6 million in cash flows used in operating activities partially offset by $5.0 million in cash flows from investing activities.
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. 50 Table of Contents 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).
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).
Growing access to valuable ad impressions Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions.
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.
Operating Activities 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.
Operating Activities 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. 54 Table of Contents In 2024, net cash flows used in operating activities were $8.6 million and consisted of net loss of $19.9 million, $7.1 million in adjustments for non-cash and non-operating items and $4.1 million of cash inflows from working capital.
The increase in accounts receivable and accounts payable is mainly due to growth in the business as well as the $8.8 million non-recurring publisher payment recorded as accounts payable as of December 31, 2023.
The increase in accounts receivable and accounts payable is mainly due to growth in the business as well as the $8.8 million non-recurring publisher payment recorded as accounts payable as of December 31, 2023. Investing Activities Our investing activities to date have consisted primarily of purchases of software, office furniture and leasehold improvements.
Buy-side advertising gross profit increased $2.0 million for the year ended December 31, 2023, as compared to the same period in the prior year, primarily due to the increase in revenue. Buy-side advertising gross margin was 60% and 64% for the years ended December 31, 2023 and 2022, respectively.
Sell-side advertising gross margin was 4% and 14% for the years ended December 31, 2024 and 2023, respectively. Buy-side advertising gross profit decreased $5.1 million for the year ended December 31, 2024, as compared to the same period in the prior year, primarily due to the decrease in revenue.
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.
These efforts have been led by big- budgeted, large, multi-national corporations incentivized to cast a broad advertising net to support national brands. 46 Table of Contents 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.
This project contributed to $0.3 million of the increase in G&A costs during the year ended December 31, 2023. We expect to continue to invest in and incur additional expenses associated with our transition to operating as a public company, including increased professional fees, investment in automation and compliance costs associated with developing the requisite infrastructure required for internal controls.
We expect to continue to invest in and incur additional expenses associated with our operation as a public company, including increased professional fees, investment in automation, and compliance costs associated with developing the requisite infrastructure required for internal controls.
All our revenues are attributable to the United States. 46 Table of Contents The table below summarizes the financial highlights of our business (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Revenues ​ $ 157,110 ​ $ 89,360 (Loss) income from operations ​ $ (2,185) ​ $ 7,979 Net (loss) income ​ $ (6,844) ​ $ 4,167 Adjusted EBITDA (2) ​ $ 2,393 ​ $ 10,169 Net cash provided by operating activities ​ $ 2,558 ​ $ 2,064 (2) For a definition of Adjusted EBITDA, a non-GAAP financial measure, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, please see “ – Non-GAAP Financial Measures .” Recent Developments Nasdaq Rule Noncompliance.
The table below summarizes the financial highlights of our business (in thousands): Year Ended December 31, 2024 2023 Revenues $ 62,288 $ 157,110 Total operating loss $ (13,233) $ (2,185) Net loss $ (19,907) $ (6,844) Adjusted EBITDA (1) $ (9,253) $ 2,393 Net cash (used in) provided by operating activities $ (8,648) $ 2,558 _________________________________________________________ (1) For a definition of Adjusted EBITDA, a non-GAAP financial measure, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, please see “ – Non-GAAP Financial Measures .” 43 Table of Contents Recent Developments Nasdaq Rule Noncompliance.
Subsequently, on October 3, 2023, the Company entered into the Fourth Amendment to the 2021 Credit Facility (the “Fourth Amendment”) and received proceeds of $3.6 million borrowed under the Delayed Draw Loan to make payments in connection with the consummation of the 2023 warrant tender offer and fees and expenses incurred as described in Note 4 – Stockholders’ Equity and Stock-Based Compensation in the notes to the consolidated financial statements.
On July 28, 2022, the Company entered into the Second Amendment and Joinder to Term Loan and Security Agreement and received proceeds of $4.3 million borrowed under the Delayed Draw Loan to pay the balance owed on the common unit redemption as well as costs associated with the transaction. 51 Table of Contents Subsequently, on October 3, 2023, the Company entered into the Fourth Amendment to the 2021 Credit Facility (the “Fourth Amendment”) and received proceeds of $3.6 million borrowed under the Delayed Draw Loan to make payments in connection with the consummation of the 2023 warrant tender offer and fees and expenses incurred as described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation.
The collateral securing the obligations under the 2021 Credit Facility and the Credit Agreement is subject to intercreditor agreements between Lafayette Square and EWB.
As of December 31, 2024, there was $3.7 million outstanding under the Credit Agreement. The collateral securing the obligations under the 2021 Credit Facility and the Credit Agreement is subject to intercreditor agreements between Lafayette Square and EWB.
The affirmative covenants include, among others, covenants requiring the Company to maintain its legal existence and governmental compliance, deliver certain financial reports and maintain insurance coverage.
The affirmative covenants include, among others, covenants requiring the Company to maintain its legal existence and governmental compliance, deliver certain financial reports and maintain insurance coverage. The negative covenants include, among others, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.
Operating Expenses The following table sets forth the components of operating expenses for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ ​ 2023 2022 Amount Percentage ​ Compensation, taxes and benefits ​ $ 17,730 ​ $ 14,124 ​ $ 3,606 ​ 26 % General and administrative ​ ​ 13,199 ​ 7,219 ​ 5,980 83 % Other expense ​ ​ 8,830 ​ ​ — ​ ​ 8,830 ​ nm % Total operating expenses ​ $ 39,759 ​ $ 21,343 ​ $ 18,416 86 % ​ nm – not meaningful Compensation, taxes and benefits Compensation, taxes and benefits of $17.7 million, increased by $3.6 million in 2023, or 26%, from $14.1 million in 2022.
Operating expenses The following table sets forth the components of operating expenses for the periods presented (in thousands): Year Ended December 31, Change 2024 2023 Amount % Compensation, taxes and benefits $ 16,402 $ 17,730 $ (1,328) (7) % General and administrative 14,222 13,199 1,023 8 % Other expense — 8,830 (8,830) nm Total operating expenses $ 30,624 $ 39,759 $ (9,135) (23) % nm – not meaningful Compensation, taxes and benefits Compensation, taxes and benefits of $16.4 million decreased by $1.3 million in 2024, or 7%, from $17.7 million in 2023.
Intangible assets are amortized on a straight-line basis over their estimated useful lives and recorded as amortization expense within general and administrative expenses in the consolidated statements of operations. The Company’s intangible assets are being amortized over their estimated useful lives, using the straight-line method with non-compete agreements over 5 years and other intangibles over 10 years.
The Company’s intangible assets are being amortized over their estimated useful lives, using the straight-line method with non-compete agreements over 5 years and other intangibles over 10 years.
Prior to entering to the Fifth Amendment, the 2021 Credit Facility also required the Company to maintain a fixed charge coverage ratio of not less than 1.50 to 1.00 as of the last day of each fiscal quarter, as well as restrictions on the ability to incur indebtedness, create certain liens, make certain investments, make certain dividends and other types of distributions, and enter into or undertake certain mergers, 56 Table of Contents consolidations, acquisitions and sales of certain assets and subsidiaries.
Prior to entering into the Fifth Amendment, the Company was required to maintain varying threshold levels by quarter for net leverage ratio and fixed charge coverage ratio, as well as restrictions on the ability to incur indebtedness, create certain liens, make certain investments, make certain dividends and other types of distributions, and enter into or undertake certain mergers, consolidations, acquisitions and sales of certain assets and subsidiaries.
The preferred A and B units were dully redeemed as of February 2022. Loss on early termination of line of credit. In January 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”), by and among Silicon Valley Bank (“SVB”), which provided for a revolving credit facility (the “Credit Facility”).
In January 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”), by and among Silicon Valley Bank (“SVB”), which provided for a revolving credit facility (the “Credit Facility”). In March 2023, we issued a notice of termination and recognized a loss on the write-off of the deferred financing fees.
Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Recent Accounting Pronouncements See Note 2 to our consolidated financial statements for accounting pronouncements recently adopted and accounting pronouncements not yet adopted.
Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets.
On June 1, 2023, as originally contemplated under the 2021 Credit Facility, the Company entered into an agreement with Lafayette Square to convert the existing LIBOR based rate to a Term Secured Overnight Financing Rate (“SOFR”) with a credit spread of 0.15% per annum for the interest periods of three months and providing for a credit spread adjustment of 0.10%, 0.15% or 0.25% per annum for interest periods of one month, three months or six months, respectively.
The loans under the 2021 Credit Facility bear interest at the Term Secured Overnight Financing Rate (“SOFR”) with a credit spread of 0.15% per annum for the interest periods of three months and providing for a credit spread adjustment of 0.10%, 0.15% or 0.25% per annum for interest periods of one month, three months or six months, respectively.

… 133 more changes not shown on this page.

Other DRCT 10-K year-over-year comparisons