HOUSTON, Sept. 29, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today announced that the Company’s offer to purchase (the “Offer”) all of its outstanding publicly traded warrants (the “Warrants”) to purchase shares of its Class A common stock, par value $0.001 per share, at a purchase price of $1.20 in cash, without interest, expired one minute after 11:59 p.m., Eastern Time, on September 28, 2023.
According to information provided by Equiniti Trust Company, LLC, the Depositary for the Offer, 2,229,263 Warrants, including 36,242 Warrants through guaranteed delivery, representing approximately 69.3% of the outstanding Warrants, were validly tendered and not withdrawn prior to the expiration of the Offer. The tender of 2,229,263 Warrants satisfies the Minimum Tender Condition (as defined in the Offer to Purchase) for the Offer. Pursuant to the terms of the Offer and assuming the Warrants through guaranteed delivery are properly submitted before the end of the guaranteed delivery period on October 2, 2023, the Company expects to pay an aggregate of $2.7 million in cash in exchange for such Warrants. Such payment will be made promptly. Holders of Warrants that were validly tendered and not validly withdrawn prior to the expiration of the Offer and Consent Solicitation, and upon the successful completion of any guaranteed delivery, will receive $1.20 per share for each Warrant tendered by the holder and exchanged pursuant to the Offer. The Company expects to accept all validly tendered Warrants for exchange and settlement on or before October 4, 2023 (the “Settlement”).
Direct Digital Holdings also solicited consents (the “Consent Solicitation”) to amend the Warrant Agent Agreement, dated as of February 15, 2022 (the “Warrant Agreement”), by and between Direct Digital Holdings and Equiniti Trust Company, LLC (formerly American Stock Transfer & Trust Company, LLC (the “Transfer Agent”), which governs all of the Warrants, to permit Direct Digital Holdings to redeem each outstanding Warrant for $0.35 in cash, without interest, which is approximately 71% less than the price applicable to the Offer (such amendment, the “Warrant Amendment”). Pursuant to the terms of the Warrant Agreement, the adoption of the Warrant Amendment will require the consent of holders of at least 50.1% of the outstanding Warrants. In order to tender the Warrants in the Offer and receive $1.20 in cash for each of their Warrants, holders of the Warrants are required to consent to the Warrant Amendment. The 2,193,021 Warrants that were validly tendered and not withdrawn prior to the expiration of the Offer (excluding those Warrants being delivered through guaranteed delivery) exceeds the 50.1 % required to effect the Warrant Amendment. The Company expects to execute the Warrant Amendment concurrently with the Settlement.
The Offer and Consent Solicitation are being made pursuant to a Second Amended and Restated Offer to Purchase dated September 21, 2023, and Schedule TO, originally filed on August 29, 2023, as amended and supplemented, each of which has been filed with the SEC and more fully set forth the terms and conditions of the Offer and Consent Solicitation.
The Company’s Class A common stock and Warrants are listed on The Nasdaq Stock Market LLC under the symbols “DRCT” and “DRCTW,” respectively.
Stifel, Nicolaus & Company, Incorporated has been appointed as the Dealer Manager for the Offer and Consent Solicitation, D.F. King, Co., Inc. (“D.F. King”) has been appointed as the Information Agent for the Offer and Consent Solicitation, and Equiniti Trust Company, LLC has been appointed as the Depositary for the Offer and Consent Solicitation. All questions concerning tender procedures and requests for additional copies of the offer materials, including the letter of transmittal and consent should be directed to D.F. King.
Disclaimer
This announcement is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Warrants. The Offer and Consent Solicitation are being made only through the Schedule TO and Offer to Purchase, and the complete terms and conditions of the Offer and Consent Solicitation are set forth in the Schedule TO and Offer to Purchase.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage on average over 136,000 clients monthly, generating approximately 250 billion impressions per month across display, CTV, in-app and other media channels.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to the Company. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics; 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; 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; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; our limited operating history, which could result in our past results not being indicative of future operating performance; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, on receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; the satisfaction of the conditions to the Offer, including the minimum tender condition; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the Securities and Exchange Commission that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Direct Digital Holding Group’s Supply-Side Platform Colossus SSP to Integrate with Amazon’s Transparent Ad Marketplace (TAM)
HOUSTON, Sept. 26, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today announced a new collaboration with Amazon Publisher Services, with Colossus SSP integrating with Amazon’s Transparent Ad Marketplace (TAM). The integration will allow Colossus SSP’s roster of publishers – which include both minority-owned / multicultural outlets and general market properties – to tap into the benefits of TAM, server-side header bidding solutions that offer a direct auction approach.
“This collaboration with Amazon Publisher Services will deepen Colossus SSP’s access to direct, premium, transparent and scalable advertising opportunities,” said Mark D. Walker, CEO and Co-Founder of Direct Digital Holdings. “Leveraging TAM will be a boon for demand partners affiliated with Colossus SSP’s inclusive marketplace.”
“We take pride in being able to contribute to the growth of our publisher partners,” said Lashawnda Goffin, CEO, Colossus SSP. “By incorporating Amazon’s TAM, we can offer them increased demand, reduced processing power and transparent auction dynamics through lower costs – without any development work required on the part of our publishers. This is particularly critical, since we not only work with some of the biggest names in media, but also an array of diverse, niche and multicultural properties that will now be able to benefit without any sort of heavy lift.”
With one simple APS integration, Colossus SSP can seamlessly integrate with premium and scalable supply; Ranker is the first APS-connected publisher to integrate with the Colossus SSP via Transparent Ad Marketplace.
“We are excited about the collaboration between Amazon Publisher Services and Direct Digital Holdings, the added demand that the integration will drive for APS-connected publishers, and the value that TAM will drive to Direct Digital Holding’s diverse portfolio of connected media partners,” said Bryan Everett, Global Head of Third-Party Demand, APS.
Currently, Colossus SSP represents 22,000 media properties – offering inventory from both multicultural/diverse and general market publishers. The company has 136,000 advertisers accessing its platform monthly, generating over 250 billion impressions per month across display, CTV, in-app and other media.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage on average over 136,000 clients monthly, generating approximately 250 billion impressions per month across display, CTV, in-app, and other media channels.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to Direct Digital Holdings. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics, such as the ongoing global COVID-19 pandemic; 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; 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; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, of receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the SEC that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Media Contact Laura Goldberg LBG Public Relations for Direct Digital Holdings laura@lbgpr.com +1-347-683-1859
HOUSTON, Sept. 21, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today announced that the Company has extended the expiration date of its previously commenced offer to purchase (the “Offer”) all of its outstanding publicly traded warrants (the “Warrants”) to purchase shares of its Class A common stock, par value $0.001 per share, at a purchase price of $1.20 in cash, without interest, to one minute after 11:59 p.m., Eastern Time, on September 28, 2023, unless the Company, in its discretion, extends the period of time during which the Offer will remain open.
As of September 21, 2023, approximately 95 Warrants have been validly tendered and not validly withdrawn from the Offer, representing 0.003% of the outstanding Warrants. Warrant holders who have validly tendered and not withdrawn their Warrants do not need to re-tender their Warrants or take any other action in response to the extension of the tender offer.
Direct Digital Holdings is also soliciting consents (the “Consent Solicitation”) to amend the Warrant Agent Agreement, dated as of February 15, 2022 (the “Warrant Agreement”), by and between Direct Digital Holdings and Equiniti Trust Company, LLC (formerly American Stock Transfer & Trust Company, LLC (the “Transfer Agent”), which governs all of the Warrants, to permit Direct Digital Holdings to redeem each outstanding Warrant for $0.35 in cash, without interest, which is approximately 71% less than the price applicable to the Offer (such amendment, the “Warrant Amendment”). Pursuant to the terms of the Warrant Agreement, the adoption of the Warrant Amendment will require the consent of holders of at least 50.1% of the outstanding Warrants. In order to tender the Warrants in the Offer and receive $1.20 in cash for each of their Warrants, holders of the Warrants are required to consent to the Warrant Amendment. Tendered Warrants may be withdrawn by holders at any time prior to the Expiration Date. The Company’s obligation to complete the Offer is conditioned on the tender of at least 50.1% of the outstanding Warrants.
The Offer and Consent Solicitation are being made pursuant to a Second Amended and Restated Offer to Purchase dated September 21, 2023, and Schedule TO, originally filed on August 29, 2023, as amended and supplemented, each of which has been filed with the SEC and more fully set forth the terms and conditions of the Offer and Consent Solicitation.
The Company’s Class A common stock and Warrants are listed on The Nasdaq Stock Market LLC under the symbols “DRCT” and “DRCTW,” respectively. As of August 29. 2023, a total of 3,217,800 Warrants were outstanding.
Stifel, Nicolaus & Company, Incorporated has been appointed as the Dealer Manager for the Offer and Consent Solicitation, D.F. King, Co., Inc. (“D.F. King”) has been appointed as the Information Agent for the Offer and Consent Solicitation, and Equiniti Trust Company, LLC has been appointed as the Depositary for the Offer and Consent Solicitation. All questions concerning tender procedures and requests for additional copies of the offer materials, including the letter of transmittal and consent should be directed to D.F. King.
Important Additional Information Has Been Filed with the SEC
Copies of the Schedule TO and Offer to Purchase will be available free of charge at the website of the SEC at www.sec.gov. Requests for documents may also be directed to D.F. King at (866) 796-1290 (toll-free) or drct@dfking.com.
This announcement is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Warrants. The Offer and Consent Solicitation are being made only through the Schedule TO and Offer to Purchase, and the complete terms and conditions of the Offer and Consent Solicitation are set forth in the Schedule TO and Offer to Purchase.
Holders of the Warrants are urged to read the Schedule TO and Offer to Purchase carefully before making any decision with respect to the Offer and Consent Solicitation because they contain important information, including the various terms of, and conditions to, the Offer and Consent Solicitation.
None of Direct Digital Holdings, any of its management or its board of directors, or the Dealer Manager or the Information Agent or Depositary or any other person makes any recommendation as to whether or not Warrant holders should tender Warrants for exchange in the Offer or consent to the Warrant Amendment in the Consent Solicitation. Warrant holders must make their own decision as to whether to tender their Warrants and, if so, how many Warrants to tender.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage on average over 136,000 clients monthly, generating approximately 250 billion impressions per month across display, CTV, in-app and other media channels.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to the Company. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics; 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; 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; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; our limited operating history, which could result in our past results not being indicative of future operating performance; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, on receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; the satisfaction of the conditions to the Offer, including the minimum tender condition; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the Securities and Exchange Commission that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Shares of marketing software firm Klaviyo jumped 23% in their trading debut Wednesday on the New York Stock Exchange. The successful initial public offering provides investors a rare opportunity to buy into a high-growth U.S. tech startup following a nearly two-year IPO drought.
Klaviyo priced its shares at $30 each, raising $345 million and valuing the company at over $9 billion on a fully diluted basis. The listing comes just a day after grocery delivery service Instacart went public on the Nasdaq after cutting its valuation target. Investor appetite for unprofitable technology names has waned in recent years amid rising interest rates.
But demand for Klaviyo shares was strong right out of the gate. For investors, IPOs provide a chance to gain exposure to emerging, innovative companies before they are available on public markets. Companies utilize IPOs to raise cash for growth and operating expenses.
Klaviyo reported revenue jumped 51% last quarter to $165 million, as its marketing automation software is now used by over 130,000 customers. The company swung to a $11 million profit last quarter after losing money a year earlier.
This transition to profitability is an attractive quality for investors who have soured on money-losing technology firms in the current environment. One major backer providing strong IPO demand is e-commerce platform Shopify, which owns around 11% of Klaviyo’s shares.
Klaviyo gets approximately 78% of its annual recurring revenue from customers who also use Shopify, indicating close ties between the two tech firms. Shopify invested $100 million into Klaviyo last year.
The marketing software provider enables companies to store customer data and build profiles to target marketing campaigns across email, text messaging, social media, and other channels. It initially focused on e-commerce companies but is now seeing growing traction in other sectors like restaurants, travel, and entertainment.
Tech IPOs ground to a halt in 2022, as surging inflation led the Federal Reserve to aggressively raise interest rates, sparking volatility and a flight from risk assets. Klaviyo is the first notable U.S. venture-backed software IPO since HashiCorp and Samsara debuted in December 2021.
The offering provides investors hungry for exposure to high-growth tech the chance to buy into a next-generation software vendor. U.S. tech IPOs slowed to their lowest level in over a decade last year. If strong demand for Klaviyo shares continues, it could open the door for more tech IPOs in 2023.
Companies that only recently considered going public may once again pursue IPOs after Klaviyo’s success. The IPO window for unprofitable tech names appeared shut, but Klaviyo’s ability to raise over $340 million shows investors still have appetite for rapidly growing software vendors.
Looking ahead, the pipeline for tech IPOs includes names like Reddit, Databricks and Discord. But many may delay plans or explore direct listings to avoid leaving money on the table like Instacart. If markets grow choppy again, Klaviyo’s offering window could close as quickly as it opened.
For now, its strong first day of trading is a boon for both the company and tech investors. Early buyers are already sitting on sizable gains from an asset class that struggled last year. If the tech IPO market thaws, it would provide investors access to the high-growth innovators driving the future.
NEW YORK, Sept. 13, 2023 /PRNewswire/ — Thousands of people visiting Times Square were stopped in their tracks. Splashed across the façade of NASDAQ’s headquarters yesterday were fantastical animals from the Metaverse. Travelzoo META’s Travel Companions gazed out at onlookers and announced with their presence that the future of travel is here. Travelzoo® (NASDAQ: TZOO), a global Internet media company that provides exclusive offers and experiences for members, recently announced the launch of Travelzoo META, a members-only service offering groundbreaking Metaverse travel experiences.
With its launch, Travelzoo META opened registrations for Founding Membership. Founding Members of Travelzoo META will have the opportunity to be the first to experience travel in the Metaverse. Each Founding Member will also be entitled to one of the world’s first personality-based, emotionally-driven Travel Companions (NFTs) that match their personal Metaverse travel style.
Travelzoo META’s experiences are intended to allow its members to explore hard-to-reach corners of the world, like summiting Mount Everest, or travel back in time, to Ancient Rome perhaps. They can also discover new spaces beyond imagination. All this is possible using a mobile or desktop device and a simple browser.
“The Metaverse is too big for companies to ignore,” states global management consulting firm McKinsey & Company. The firm has recently confirmed its estimate of the Metaverse becoming a $5 trillion market by 2030. One of the business segments which McKinsey & Company is particularly bullish on is travel. The Metaverse is expected to have a major impact on the travel industry and change travel experiences for consumers.
Find out how you can be part of the future of travel. Become a Travelzoo META Founding Member at http://meta.travelzoo.com.
About Travelzoo META Travelzoo META is a paid members-only service offering groundbreaking Metaverse travel experiences. Working in partnership with cutting-edge creators, we have access to the latest immersive experiences that are intended to allow members to explore hard-to-reach corners of the world, travel back in time, or discover new spaces beyond imagination.
Travelzoo and Travelzoo META are registered trademarks of Travelzoo. All other names are trademarks and/or registered trademarks of their respective owners.
Shareholders of Digital World Acquisition (DWAC), the investment partner of former President Donald Trump’s media venture, have granted an extension to the company’s merger deadline. This extension allows the special purpose acquisition company (SPAC) more time to complete its long-pending merger with Truth Social, a social network with pro-Trump leanings.
The extension comes after a concerted effort to secure shareholder approval, arriving just three days before the liquidation deadline of Truth Social on September 8. A failure to secure shareholder approval would have compelled the SPAC to dissolve, resulting in the return of $300 million to shareholders, depriving Trump Media & Technology Group of the funds associated with the deal.
However, the merger still faces challenges, including meeting closing conditions and resolving issues raised by the Securities and Exchange Commission (SEC). In July, the SEC alleged that Digital World had misled investors in its official merger documents. Correcting these inaccuracies and resubmitting the filings is necessary before the merger process can proceed. Additionally, required quarterly financial statements covering operations in the first half of 2023 have not been filed with the SEC.
Digital World Acquisition had initially anticipated a year for the merger process when it went public in September 2021 but has encountered several hurdles necessitating deadline extensions, including a previous one in September 2022.
Following the news of the extension, Digital World’s shares experienced a rise to over $18 before settling at $16.80 per share at 11 a.m. The stock had reached its peak at approximately $175 per share in 2021.
Explore other SPAC Mergers via SPACtrac reports from Noble Capital Markets
HOUSTON, Aug. 29, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today announced that the Company has commenced an offer to purchase (the “Offer”) all of its outstanding publicly traded warrants (the “Warrants”) to purchase shares of its Class A common stock, par value $0.001 per share, at a purchase price of $1.20 in cash, without interest. The purpose of the Offer is to reduce the number of shares of Class A common stock that would become outstanding upon the exercise of Warrants, thus simplifying, and providing investors and potential investors with greater certainty as to, Direct Digital Holdings’ capital structure.
Direct Digital Holdings is also soliciting consents (the “Consent Solicitation”) to amend the Warrant Agreement, dated as of February 15, 2022 (the “Warrant Agreement”), by and between Direct Digital Holdings and Equiniti Trust Company, LLC (formerly American Stock Transfer & Trust Company, LLC (the “Transfer Agent”), which governs all of the Warrants, to permit Direct Digital Holdings to redeem each outstanding Warrant for $0.35 in cash, without interest, which is approximately 71% less than the price applicable to the Offer (such amendment, the “Warrant Amendment”). Pursuant to the terms of the Warrant Agreement, the adoption of the Warrant Amendment will require the consent of holders of at least a majority of the outstanding Warrants. In order to tender the Warrants in the Offer and receive $1.20 in cash for each of their Warrants, holders of the Warrants are required to consent to the Warrant Amendment. The Offer will be open until one minute after 11:59 p.m., Eastern Time, on September 26, 2023, unless extended or earlier terminated by Direct Digital Holdings (the “Expiration Date”). Tendered Warrants may be withdrawn by holders at any time prior to the Expiration Date. The Company’s obligation to complete the Offer is conditioned on the tender of more than 50% of the outstanding Warrants.
The Offer and Consent Solicitation are being made pursuant to an Offer to Purchase dated August 29, 2023, and Schedule TO, dated August 29, 2023, each of which will be filed with the Securities and Exchange Commission (“SEC”) and more fully set forth the terms and conditions of the Offer and Consent Solicitation.
The Company’s Class A common stock and Warrants are listed on The Nasdaq Stock Market LLC under the symbols “DRCT” and “DRCTW,” respectively. As of August 29, 2023, a total of 3,217,800 Warrants were outstanding.
Stifel, Nicolaus & Company, Incorporated has been appointed as the Dealer Manager for the Offer and Consent Solicitation, D.F. King, Co., Inc. (“D.F. King”) has been appointed as the Information Agent for the Offer and Consent Solicitation, and Equiniti Trust Company, LLC has been appointed as the Depositary for the Offer and Consent Solicitation. All questions concerning tender procedures and requests for additional copies of the offer materials, including the letter of transmittal and consent should be directed to D.F. King.
Important Additional Information Has Been Filed with the SEC
Copies of the Schedule TO and Offer to Purchase will be available free of charge at the website of the SEC at www.sec.gov. Requests for documents may also be directed to D.F. King at (866) 796-1290 (toll-free) or drct@dfking.com.
This announcement is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Warrants. The Offer and Consent Solicitation are being made only through the Schedule TO and Offer to Purchase, and the complete terms and conditions of the Offer and Consent Solicitation are set forth in the Schedule TO and Offer to Purchase.
Holders of the Warrants are urged to read the Schedule TO and Offer to Purchase carefully before making any decision with respect to the Offer and Consent Solicitation because they contain important information, including the various terms of, and conditions to, the Offer and Consent Solicitation.
None of Direct Digital Holdings, any of its management or its board of directors, or the Dealer Manager or the Information Agent or Depositary or any other person makes any recommendation as to whether or not Warrant holders should tender Warrants for exchange in the Offer or consent to the Warrant Amendment in the Consent Solicitation. Warrant holders must make their own decision as to whether to tender their Warrants and, if so, how many Warrants to tender.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage on average over 136,000 clients monthly, generating approximately 250 billion impressions per month across display, CTV, in-app and other media channels.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to the Company. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics; 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; 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; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; our limited operating history, which could result in our past results not being indicative of future operating performance; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, on receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; the satisfaction of the conditions to the Offer, including the minimum tender condition; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the Securities and Exchange Commission that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
CHELMSFORD, MA / ACCESSWIRE / August 10, 2023 / Harte Hanks, Inc. (NASDAQ:HHS), a leading global customer experience company focused on bringing companies closer to customers for 100 years, today announced financial results for the second quarter and six-month period ended June 30, 2023.
Kirk Davis, Chief Executive Officer, commented: “My favorable impressions of Harte Hanks were confirmed in my first month as CEO; Harte Hanks has great people and significant capabilities that are desired by global brands. The pandemic had a positive, multi-year impact on our business, which we’re now beyond. In addition, many of our customers have curtailed budgets for 2023 due to concerns about the economy. This necessitates our near-term focus on further aligning our cost structure, and in addition, shifting some of our current spend to bolster sales productivity.”
“The second quarter results represent a baseline for our expectations in the near term and present a solid foundation on which to build,” added Mr. Davis. “We’re focused on bolstering our sales pipeline, retooling our marketing programs, improving sales effectiveness, and leveraging a new partnership we’ve struck with a highly reputable business development company. Our acquisition of InsideOut in December of 2022 expands our end-to-end offering and specifically our lead generation capabilities. We expect to build on the consistent profitability that has been achieved and position Harte Hanks to generate more sustainable, profitable growth. We’re excited to deliver on these objectives. Additionally, the company executed on its stock repurchase plan by repurchasing almost 315,000 shares.”
Second Quarter Financial Highlights
Total revenues for Q2 2023 were $47.8 million, up 1.4% sequentially and down 1.6% year over year compared to $48.6 million in Q2 2022. Included in 2023 was $2.3 million from InsideOut acquired in fourth quarter of 2022.
Operating income was $1.7 million compared to $4.0 million in the prior-year quarter.
Net income of $0.6 million compared to net income of $4.5 million in the prior year.
Diluted EPS was $0.08 compared to $0.52 for the prior year’s second quarter.
EBITDA was $2.7 million compared to $4.6 million in the same period in the prior year.[1] Adjusted EBITDA, which excludes stock-based compensation and severance, was $4.4 million compared to $5.2 million.
Segment Highlights
Customer Care, $17.2 million in revenue, 36% of total – Segment revenue increased $1.8 million or 11.9% versus prior year and EBITDA totaled $3.0 million for the quarter, up 18.3% year-over-year. New business wins that are expected to positively impact results during the second quarter include:
A multi-national pharmaceutical company has engaged Harte Hanks to develop the strategy for their long-term Customer Service Experience. The scope includes the analysis and validation of their Customer Service vision, benchmarking, gap analysis and a blueprint with an implementation roadmap to inform their 2024 plans to optimize their Customer Care strategy and delivery.
One of the largest consultancy firms in the world has selected Harte Hanks to support a state government’s rollout of Medicaid renewal support for its constituents. This program helps Medicaid users renew for services, as well as provides education on how to engage and leverage the online systems to improve use of these benefits.
Fulfillment & Logistics Services, $19.6 million in revenue, 41% of total – Segment revenue decreased slightly versus the prior year quarter and EBITDA for Q2 2023 totaled $1.9 million, down $1.2 million or 39%. Revenue mix drove the reduced EBITDA margins as growth in lower-margin logistics revenue was offset by reduced volumes in our financial services vertical that yielded higher margins. New business wins during the second quarter include:
Harte Hanks Fulfillment won New Logo business with a major international manufacturer, providing fulfillment support for a new program of Direct-to-Customer hearing aid sales. As a major player in the industry, the manufacturer is well-positioned for growth as the hearing aid market pivots from prescription-only into “Over the Counter” space.
A leading branding company selected Harte Hanks Fulfillment to manage the production, kitting, and distribution of 150k+ curated Food & Beverage product gift boxes for a Fortune 50 retail partner. After producing several million kits on this partner’s behalf over the past year, this represents the first instance where the relationship has fully leveraged our FDA approved, climate-controlled facility for food grade items.
Marketing Services, $10.9 million in revenue, 23% of total – Segment revenue declined $2.5 million (19%) compared to the prior year quarterand EBITDA for the quarter totaled $1.3 million vs. $1.8 million. Pressure on both revenue and EBITDA was driven by a reduction in legacy direct mail campaigns and lighter project volumes. New business wins during second quarter include:
A major insurance carrier supporting government employees has selected Harte Hanks to help facilitate their email transition to a new CRM. While this organization is an existing customer for our Customer Care and Fulfillment segments, this is the first engagement for this client with our Marketing Services team.
One of the largest online travel agencies has expanded its services with Harte Hanks to support an ‘Always On’ nurture program for their global business customers.
Consolidated Second Quarter 2023 Results
Second quarter revenues were $47.8 million, down 1.6% from $48.6 million in the second quarter of 2022. The Company’s Customer Care segment grew, largely offsetting declines in Fulfillment & Logistics Services and Marketing Services.
Second quarter operating income was $1.7 million, compared to operating income of $4.0 million in the second quarter of 2022. The decrease resulted from a less favorable revenue mix and lower consolidated revenue.
Net income for the quarter was $0.6 million, or $0.08 per diluted share, compared to net income of $4.5 million, or $0.52 per diluted share, in the second quarter last year. Results this quarter included $1.2 million of pension expense, as well as $503,000 in stock-based compensation and $1.2 million in severance, largely related to the CEO transition. The severance and other costs related to the CEO transition created a non-recurring, $0.12 per share impact, without tax impact, in the second quarter of 2023.
Consolidated Year-to-Date 2023 Results
Year-to-date revenues were $94.9 million, down 2.8% from $97.6 million in the same period of 2022. Year-to-date operating income was $2.7 million, compared to operating income of $7.9 million. Net loss for the first six months was $(0.2) million, or $(0.03) per diluted share, compared to net income of $7.8 million, or $0.91 per diluted share, in the first six months of last year.
Balance Sheet and Liquidity
Harte Hanks ended the quarter with $13.4 million in cash and cash equivalents and $24 million of capacity on its credit line. The Company has no outstanding debt as of June 30, 2023. The Company’s financial position continues to be strong, and it is well-positioned to execute on its long-term growth strategies in 2023 and beyond.
During the quarter, Harte Hanks repurchased approximately 315,000 shares at an average price of $5.97 per share for a total of $1.9 million.
Conference Call Information
The Company will host a conference call and live webcast to discuss these results on Thursday, August 10, 2023 at 4:30 p.m. EST. Interested parties may access the webcast at https://investors.hartehanks.com/events or may access the conference call by dialing (877) 545-0320 in the United States or (973) 528-0002 from outside the U.S. and using access code 183563.
A replay of the call can also be accessed via phone through August 24, 2023 by dialing (877) 481-4010 from the U.S., or (919) 882-2331 from outside the U.S. The conference call replay passcode is 48804.
About Harte Hanks:
Harte Hanks (NASDAQ:HHS) is a leading global customer experience company whose mission is to partner with clients to provide them with CX strategy, data-driven analytics and actionable insights combined with seamless program execution to better understand, attract and engage their customers.
Using its unparalleled resources and award-winning talent in the areas of Customer Care, Fulfillment and Logistics, and Marketing Services, Harte Hanks has a proven track record of driving results for some of the world’s premier brands, including Bank of America, GlaxoSmithKline, Unilever, Pfizer, HBOMax, Volvo, Ford, FedEx, Midea, Sony and IBM among others. Headquartered in Chelmsford, Massachusetts, Harte Hanks has over 2,500 employees in offices across the Americas, Europe, and Asia Pacific.
As used herein, “Harte Hanks” or “the Company” refers to Harte Hanks, Inc. and/or its applicable operating subsidiaries, as the context may require. Harte Hanks’ logo and name are trademarks of Harte Hanks.
Our press release and related earnings conference call contain “forward-looking statements” within the meaning of U.S. federal securities laws. All such statements are qualified by this cautionary note, provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements other than historical facts are forward-looking and may be identified by words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “seeks,” “could,” “intends,” or words of similar meaning. These forward-looking statements are based on current information, expectations and estimates and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from what is expressed in or indicated by the forward-looking statements. In that event, our business, financial condition, results of operations or liquidity could be materially adversely affected and investors in our securities could lose part or all of their investments. These risks, uncertainties, assumptions and other factors include: (a) local, national and international economic and business conditions, including (i) the outbreak of diseases, such as the COVID-19 coronavirus, which has curtailed travel to and from certain countries and geographic regions, created supply chain disruption and shortages, disrupted business operations and reduced consumer spending, (ii) market conditions that may adversely impact marketing expenditures, (iii) the impact of the Russia/Ukraine conflict on the global economy and our business, including impacts from related sanctions and export controls and (iv) the impact of economic environments and competitive pressures on the financial condition, marketing expenditures and activities of our clients and prospects; (b) the demand for our products and services by clients and prospective clients, including (i) the willingness of existing clients to maintain or increase their spending on products and services that are or remain profitable for us, and (ii) our ability to predict changes in client needs and preferences; (c) economic and other business factors that impact the industry verticals we serve, including competition and consolidation of current and prospective clients, vendors and partners in these verticals; (d) our ability to manage and timely adjust our facilities, capacity, workforce and cost structure to effectively serve our clients; (e) our ability to improve our processes and to provide new products and services in a timely and cost-effective manner though development, license, partnership or acquisition; (f) our ability to protect our facilities against security breaches and other interruptions and to protect sensitive personal information of our clients and their customers; (g) our ability to respond to increasing concern, regulation and legal action over consumer privacy issues, including changing requirements for collection, processing and use of information; (h) the impact of privacy and other regulations, including restrictions on unsolicited marketing communications and other consumer protection laws; (i) fluctuations in fuel prices, paper prices, postal rates and postal delivery schedules; (j) the number of shares, if any, that we may repurchase in connection with our repurchase program; (k) unanticipated developments regarding litigation or other contingent liabilities; (l) our ability to complete anticipated divestitures and reorganizations, including cost-saving initiatives; (m) our ability to realize the expected tax refunds; and (n) other factors discussed from time to time in our filings with the Securities and Exchange Commission, including under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 which was filed on March 31, 2023. The forward-looking statements in this press release and our related earnings conference call are made only as of the date hereof, and we undertake no obligation to update publicly any forward-looking statement, even if new information becomes available or other events occur in the future.
Supplemental Non-GAAP Financial Measures:
The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). However, the Company may use certain non-GAAP measures of financial performance in order to provide investors with a better understanding of operating results and underlying trends to assess the Company’s performance and liquidity in this press release and our related earnings conference call. We have presented herein a reconciliation of these measures to the most directly comparable GAAP financial measure.
The Company presents the non-GAAP financial measure “Adjusted Operating Income (Loss)” as a measure useful to both management and investors in their analysis of the Company’s financial results because it facilitates a period-to-period comparison of Operating Revenue and Operating Income (Loss) by excluding restructuring expense, impairment expense and stock-based compensation. The most directly comparable measure for this non-GAAP financial measure is Operating Income (Loss).
The Company presents the non-GAAP financial measure “EBITDA” and “Adjusted EBITDA” as a supplemental measure of operating performance in order to provide an improved understanding of underlying performance trends. The Company defines “Adjusted EBITDA” as earnings before interest expense net, income tax expense (benefit), depreciation expense, stock compensation expense and severance expenses. The most directly comparable measure for each of EBITDA and Adjusted EBITDA is Net Income (Loss). We believe each of EBITDA and Adjusted EBITDA are important performance metrics because they facilitates the analysis of our results, exclusive of certain non-cash items, non-recurring or special charges and items we believe do not directly correlate to our business operations; however, we urge investors to review the reconciliation of each of EBITDA and Adjusted EBITDA to the comparable GAAP Net Income (Loss), which is included in this press release, and not to rely on any single financial measure to evaluate the Company’s financial performance.
The use of non-GAAP measures do not serve as a substitute and should not be construed as a substitute for GAAP performance but should provide supplemental information concerning our performance that our investors and we find useful. The Company evaluates its operating performance based on several measures, including this non-GAAP financial measures. The Company believes that the presentation of this non-GAAP financial measures in this press release and earnings conference call presentations are useful supplemental financial measures of operating performance for investors because they facilitate investors’ ability to evaluate the operational strength of the Company’s business. However, there are limitations to the use of this non-GAAP measures, including that they may not be calculated the same by other companies in our industry limiting their use as a tool to compare results. Any supplemental non-GAAP financial measures referred to herein are not calculated in accordance with GAAP and they should not be considered in isolation or as substitutes for the most comparable GAAP financial measures.
EBITDA is the Company’s measure of segment profitability.
1 EBITDA is a non-GAAP financial measure. See “Supplemental Non-GAAP Financial Measures” below. EBITDA is also the Company’s measure of segment profitability.
Investor Relations Contact:
Rob Fink or Tom Baumann 646.809.4048 / 646.349.6641 FNK IR HHS@fnkir.com
Harte Hanks, Inc.
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
In thousands, except per share data
2023
2022
2023
2022
Revenues………………………………………………………………………………..
$
47,762
$
48,553
$
94,882
$
97,615
Operating expenses
Labor…………………………………………………………………………………..
26,666
25,109
51,131
51,027
Production and distribution……………………………………………………….
13,328
13,507
27,780
26,225
Advertising, selling, general and administrative………………………………
5,065
5,340
11,149
11,273
Depreciation and amortization expense………………………………………..
Second Quarter 2023 Revenue Up 67% Year-Over-Year to $35.4 Million
Company Raises Full-Year 2023 Revenue Guidance
HOUSTON, Aug. 10, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today announced financial results for the second quarter ended June 30, 2023.
Mark D. Walker, Chairman and Chief Executive Officer, commented, “We are thrilled to report substantial growth this quarter in both our buy- and sell-side businesses. We continue to see a shift in media spend from traditional to digital as well as an increase in media spend targeted at the middle market. The results of our second quarter begin to demonstrate the fruits of our previous strategic investments across our platform and we will continue executing on our growth strategies in the back half of the year.”
Keith Smith, President, added, “We find the current market dynamics to be greatly favorable for Direct Digital Holdings as we continue to see strong demand for our advertising solutions within the numerous industries in which we operate. Our unique, differentiated approach to both the buy- and sell-side verticals within our business continue to separate Direct Digital Holdings from the rest and we greatly look forward to growing all aspects of our business through the rest of 2023 and beyond.”
Second Quarter 2023 Business Highlights
For the second quarter ended June 30, 2023, Direct Digital Holdings processed approximately 300 billion monthly impressions through its sell-side advertising segment, an increase of 205% over the same period of 2022.
In addition, the Company’s sell-side advertising platforms received over 11.2 billion bid responses in the second quarter of 2023, an increase of over 70% over the same period in 2022, through 119,000 advertisers for the quarter, which equates to a 34% increase over the same period in 2022.
The Company’s buy-side advertising segment served approximately 227 customers in the second quarter of 2023, a decrease of 7% compared to the same period of 2022. However, revenue per customer of $52,000 in the second quarter of 2023 increased 36% compared to the same period of 2022.
Second quarter 2023 Financial Highlights:
Revenue was $35.4 million in the second quarter of 2023, an increase of $14.1 million, or 67% over the $21.3 million in the same period of 2022.
Sell-side advertising segment revenue grew to $23.6 million and contributed $11.7 million of the increase, or 98% growth over the $11.9 million of sell-side revenue in the same period of 2022.
Buy-side advertising segment revenue grew to $11.8 million and contributed $2.5 million of the increase, or 27% growth over the $9.3 million of buy-side revenue in the same period of 2022.
Consolidated operating income was $2.3 million for the second quarter of 2023 compared to consolidated operating income of $3.1 million in the same period of 2022.
The operating income of our business segments for the second quarter of 2023 was $6.1 million compared to the operating income of our business segments of $4.8 million in the same period of 2022, an increase of 28% year-over-year.
Net income was $1.2 million in the second quarter of 2023, compared to net income of $2.6 million in the same period of 2022. Net income was negatively impacted by higher operating expenses associated with investments in growth as well as operating as a public company and higher interest expense.
Adjusted EBITDA(1) was $3.1 million in the second quarter 2023, compared to $3.6 million in the same period of 2022.
Financial Outlook
Assuming the U.S. economy does not experience any major economic conditions that deteriorate or otherwise significantly reduce advertiser demand, we are increasing our previously issued estimate as disclosed in our Q1 2023 update:
For fiscal year 2023, we expect revenue to be in the range of $125 million to $130 million, or 43% year-over-year growth at the mid-point.
“Our financial results illustrate the momentum we continue to see in our overall business and specifically a strong acceleration within our sell-side segment. We have also further solidified our balance sheet and provided the company additional financial flexibility via our previously announced $5 million revolving credit facility, positioning us well to continue growing in 2023 and maximizing value for our shareholders,” commented Diana Diaz, Chief Financial Officer.
Conference Call and Webcast Details
Direct Digital Holdings will host a conference call on Thursday, August 10, 2023 at 5:00 p.m. Eastern Time to discuss the Company’s second quarter 2023 financial results. The live webcast and replay can be accessed at https://ir.directdigitalholdings.com/. Please access the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. For those who cannot access the webcast, a replay will be available at https://ir.directdigitalholdings.com/ for a period of twelve months.
Footnotes
(1) “Adjusted EBITDA” is a non-GAAP financial measure. The section titled “Non-GAAP Financial Measures” below describes our usage of non-GAAP financial measures and provides reconciliations between historical GAAP and non-GAAP information contained in this press release.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to the Company. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics; 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; 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; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; 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; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; our limited operating history, which could result in our past results not being indicative of future operating performance; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, on receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the Securities and Exchange Commission that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage approximately 136,000 clients monthly, generating over 250 billion impressions per month across display, CTV, in-app and other media channels.
CONSOLIDATED BALANCE SHEETS
June 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
5,668,479
$
4,047,453
Accounts receivable, net
29,628,797
26,354,114
Prepaid expenses and other current assets
1,051,982
883,322
Total current assets
36,349,258
31,284,889
Property, equipment and software, net of accumulated depreciation and amortization of $155,698 and $34,218, respectively
688,716
673,218
Goodwill
6,519,636
6,519,636
Intangible assets, net
12,660,850
13,637,759
Deferred tax asset, net
5,170,870
5,164,776
Operating lease right-of-use assets
714,129
798,774
Other long-term assets
46,987
46,987
Total assets
$
62,150,446
$
58,126,039
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable
$
23,357,665
$
17,695,404
Accrued liabilities
3,879,420
4,777,764
Liability related to tax receivable agreement, current portion
40,112
182,571
Notes payable, current portion
982,500
655,000
Deferred revenues
950,831
546,710
Operating lease liabilities, current portion
47,668
91,989
Income taxes payable
22,280
174,438
Related party payables
1,197,175
1,448,333
Total current liabilities
30,477,651
25,572,209
Notes payable, net of short-term portion and deferred financing cost of $1,858,720 and $2,115,161, respectively
22,515,030
22,913,589
Economic Injury Disaster Loan
150,000
150,000
Liability related to tax receivable agreement, net of current portion
4,246,263
4,149,619
Operating lease liabilities, net of current portion
741,771
745,340
Total liabilities
58,130,715
53,530,757
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY
Class A common stock, $0.001 par value per share, 160,000,000 shares authorized, 3,519,780 and 3,252,764 shares issued and outstanding, respectively
3,520
3,253
Class B common stock, $0.001 par value per share, 20,000,000 shares authorized, 11,278,000 shares issued and outstanding
11,278
11,278
Additional paid-in capital
8,539,858
8,224,012
Accumulated deficit
(4,534,925)
(3,643,261)
Total stockholders’ equity
4,019,731
4,595,282
Total liabilities and stockholders’ equity
$
62,150,446
$
58,126,039
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues
Buy-side advertising
$
11,803,092
$
9,321,267
$
19,242,758
$
15,152,308
Sell-side advertising
23,600,708
11,940,041
37,383,952
17,479,337
Total revenues
35,403,800
21,261,308
56,626,710
32,631,645
Cost of revenues
Buy-side advertising
4,587,897
3,154,471
7,537,050
5,223,817
Sell-side advertising
20,743,266
9,771,017
32,583,972
14,291,209
Total cost of revenues
25,331,163
12,925,488
40,121,022
19,515,026
Gross profit
10,072,637
8,335,820
16,505,688
13,116,619
Operating expenses
Compensation, taxes and benefits
4,553,029
3,494,692
8,187,325
6,049,728
General and administrative
3,265,160
1,776,981
6,205,254
3,417,873
Total operating expenses
7,818,189
5,271,673
14,392,579
9,467,601
Income from operations
2,254,448
3,064,147
2,113,109
3,649,018
Other income (expense)
Other income
42,313
—
92,141
47,982
Forgiveness of Paycheck Protection Program loan
—
287,143
—
287,143
Loss on redemption of non-participating preferred units
—
—
—
(590,689)
Contingent loss on early termination of line of credit
—
—
(299,770)
—
Interest expense
(1,027,493)
(650,251)
(2,044,794)
(1,364,038)
Total other expense
(985,180)
(363,108)
(2,252,423)
(1,619,602)
Income (loss) before taxes
1,269,268
2,701,039
(139,314)
2,029,416
Tax expense (benefit)
74,312
86,676
(336)
86,676
Net income (loss)
$
1,194,956
$
2,614,363
$
(138,978)
$
1,942,740
Net income (loss) per common share:
Basic
$
0.08
$
0.18
$
(0.01)
$
0.18
Diluted
$
0.08
$
0.18
$
(0.01)
$
0.18
Weighted-average number of shares of common stock outstanding:
Basic
14,772,624
14,257,827
14,676,096
10,701,715
Diluted
14,834,051
14,257,827
14,676,096
10,701,715
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
2023
2022
Cash Flows Provided By Operating Activities:
Net income (loss)
$
(138,978)
$
1,942,740
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred financing costs
272,008
301,105
Amortization of intangible assets
976,909
976,909
Amortization of right-of-use assets
84,645
50,021
Amortization of capitalized software
104,005
—
Depreciation of property and equipment
17,475
—
Stock-based compensation
304,013
15,407
Forgiveness of Paycheck Protection Program loan
—
(287,143)
Deferred income taxes
(6,094)
38,966
Payment on tax receivable agreement
(45,815)
—
Loss on redemption of non-participating preferred units
—
590,689
Contingent loss on early termination of line of credit
299,770
—
Bad debt expense
51,532
24,799
Changes in operating assets and liabilities:
Accounts receivable
(3,326,215)
(6,996,667)
Prepaid expenses and other assets
(256,496)
386,258
Accounts payable
5,662,261
3,406,355
Accrued liabilities
(769,344)
601,699
Income taxes payable
(152,158)
47,710
Deferred revenues
404,121
(905,111)
Operating lease liability
(47,890)
(49,422)
Related party payable
(251,158)
(70,801)
Net cash provided by operating activities
3,182,591
73,514
Cash Flows Used In Investing Activities:
Cash paid for capitalized software and property and equipment
(136,978)
—
Net cash used in investing activities
(136,978)
—
Cash Flows Provided by (Used In) Financing Activities:
Payments on term loan
(327,500)
(275,000)
Payments of litigation settlement
(129,000)
—
Payment of deferred financing costs
(227,501)
(185,093)
Proceeds from Issuance of Class A common stock, net of transaction costs
—
11,212,043
Redemption of common units
—
(3,237,838)
Redemption of non-participating preferred units
—
(7,046,251)
Proceeds from warrants exercised
12,100
—
Distributions to members
(752,686)
(309,991)
Net cash provided by (used in) financing activities
(1,424,587)
157,870
Net increase in cash and cash equivalents
1,621,026
231,384
Cash and cash equivalents, beginning of the period
4,047,453
4,684,431
Cash and cash equivalents, end of the period
$
5,668,479
$
4,915,815
Supplemental Disclosure of Cash Flow Information:
Cash paid for taxes
$
348,862
$
—
Cash paid for interest
$
1,769,452
$
1,058,548
Non-cash Financing Activities:
Transaction costs related to issuances of Class A shares included in accrued liabilities
$
—
$
1,045,000
Common unit redemption balance included in accrued liabilities
$
—
$
3,962,162
Outside basis difference in partnership
$
—
$
3,234,000
Tax receivable agreement payable to Direct Digital Management, LLC
$
—
$
2,748,900
Tax benefit on tax receivable agreement
$
—
$
485,100
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 (“EBITDA”), as adjusted for stock compensation expense, loss on early termination of line of credit, and loss on early extinguishment of debt, and loss on early redemption of non-participating preferred units (“Adjusted EBITDA”), a non-GAAP financial measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss).
In addition to operating income and net income, we use Adjusted EBITDA as a measure of operational efficiency. We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:
Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, and certain one-time items such as acquisition transaction costs 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.
Our use of this non-GAAP financial measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for each of the periods presented:
NON-GAAP FINANCIAL METRICS(unaudited)
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2023
2022
2023
2022
Net income (loss)
$
1,194,956
$
2,614,363
$
(138,978)
$
1,942,740
Add back (deduct):
Interest expense
1,027,493
650,251
2,044,794
1,364,038
Stock-based compensation
209,475
15,407
304,014
15,407
Amortization of intangible assets
488,455
488,455
976,909
976,909
Depreciation and amortization of property and equipment
64,988
—
121,480
—
Contingent loss on early termination of line of credit
—
—
299,770
—
Tax expense (benefit)
74,312
86,676
(336)
86,676
Forgiveness of PPP loan
—
(287,143)
—
(287,143)
Loss on early redemption of non-participating preferred units
How the Popularity of Parlay Betting is Helping the Major Players
The business of gambling keeps growing as more types of wagers become popular and a friendlier legal environment encourages major players like DraftKings (DKNG) and FanDuel (PDYPF), as well as smaller online sites. A new online betting trend has been particularly profitable for companies who include it in their product line-up. Although specific financials remain undisclosed, parlay betting has dramatically added to the bottom line of some sportsbooks.
While not public, an analysis published in Barron’s of state gambling regulatory data shows the average amount the house keeps from the wagers is around 20% for parlay bets. This compares quite favorably to the 5% kept by conventional individual outcome wagers.
What is a Parlay Bet?
A parlay bet is a type of sports bet where you combine two or more individual bets into one single all-or-nothing bet. The payout for a parlay bet is much higher than for a single bet, but the probability of winning is much lower.
For example, let’s say you want to bet on the following three NFL games:
The Dallas Cowboys to beat the New York Giants
The Tampa Bay Buccaneers to beat the Philadelphia Eagles
The Miami Dolphins to beat the New York Jets
You could place three separate bets on these games, but you would only win a small amount of money if all three bets won. Instead, you could place a parlay bet on all three games. If you win the parlay bet, you will win a much larger amount.
The payout for a parlay bet is calculated by multiplying the odds of each individual bet together. So, if the odds of the Cowboys winning are 1.50, the odds of the Buccaneers winning are 2.00, and the odds of the Dolphins winning are 1.75, the odds of the parlay bet winning would be 1.50 x 2.00 x 1.75 = 5.25.
This means that if you bet $100 on the parlay bet, you would win $525 if all three bets won.
Gambling companies emphasize that parlays are no gimmick. The odds aren’t skewed in the company’s favor or anything shifty; rather, parlays introduce higher odds against bettors due to the cumulative impact of various outcomes. Betting on multiple events, even up to 10, compounds the odds of each event’s success. This is how the casinos’ 4% to 5% edge evolves into a substantial 20%.
Margins are Better for Companies
The increase in earnings from these bets has helped lift stock values much higher than the overall market.
The growing popularity of parlay bets has also served to increase the appetite in the U.S. for sports betting. In 2018 a Supreme Court’s ruling opened the doors for sports gambling, leaving the decision to legalize it to individual states. Since then, 38 states and Washington, D.C. have legalized sports betting, with online betting approved in 24 of them. The operators amassed a gross revenue of $7.5 billion in 2022, as per the American Gaming Association, and numerous analysts speculate that further state legalization and innovative trends such as parlays could propel the market up to $30 billion or more.
The big two, DraftKings and Flutter/FanDuel dominate the market after spending heavily for years on advertising. Their state-of-the-art technology and popular parlays have helped increase market share. The companies are now veering away from over-the-top marketing, as evidenced by the 49% dip in TV ad spending by online sports betting firms in Q2, and DraftKings’ 10% reduction in marketing expenditures in established markets during the latest quarter.
Regardless of market dominance, parlays are poised to proliferate due to their popularity and profitability. While Las Vegas has long capitalized on the attractiveness of quick riches, the advent of online companies’ represents a distinct shift in the dynamics. Unlike casinos that can’t dramatically boost their own profitability in games like blackjack, the digital platforms can reach the masses electronically and digitally.
As mentioned, this surge in parlays resonates with the penchant for sudden riches, and can be witnessed far beyond Las Vegas. The recent Mega-Millions $1.55 billion prize had players lined up in the summer heat to pay for an almost impossible chance of winning. Platforms like Robinhood appealed to the high-risk high-return nature of many and amassed more brokerage customers in a year than any other company in history.
Parlays effectively tap into and profit handsomely off the mentality of all-or-nothing large gains. A mere $10 parlay could translate into thousands in winnings, mirroring the “got to be in it to win it” feeling of the lottery. But here, the bettor can feel more in control.
Take Away
The overall stock market performance is reported each trading day in popular indexes, but there are individual sectors that rise, or fall separately and at a different pace than each index. Index funds and ETF buyers are beginning to realize that a portion of their portfolio invested in industries and companies that are showing more strength than the S&P, Dow, or Nasdaq indexes may allow for enhanced performance. Many keep the largest allocation in an indexed fund or ETF to still maintain the diversification that prompted the indexed fund investment to begin with.
This December hundreds of investors will be attending NobleCon19 in order to discover actionable ideas they can invest in. The investment conference is the place where both professional and self-directed market participants go to become familiar with less mainstream companies and management. You’re invited – go here for all the information you will need to join us in Florida later this year.
X, the Company Formerly Known as Twitter – Here’s Why It Rebranded
If you’re like me, when Elon Musk announced a rebranding of Twitter to the new name X, you waited for the punchline – or thought of it as a stunt. Although weeks later I’m still typing “Twitter” into my search bar, and still refer to posts as tweets.” I have become sure that this is no stunt, it is a business decision. A decision that begs the question, Why?
This week, X’s CEO, Linda Yaccarino shared her insights in a CNBC interview. She explained the company’s decision to rebrand from Twitter, citing alignment with owner Elon Musk’s overall strategic vision for the platform and how Musk, who has owned the URL X.com since his PayPal days, has championed the social media company as the future, all-encompassing app.
“Elon has been talking about X, the everything app, for a very long time,” Yaccarino said during the interview with CNBC’s Sara Eisen. “Even when we announced that I was joining the company, I was joining the company to partner with Elon to transform Twitter into X, the everything app,” Yaccarino said.
Yaccarino, who took the helm in June, indicated the transformation and growth include extended video content, articles, and even subscriptions to content providers.
“Think about what’s happened since the acquisition,” X’s CEO elaborated, “Experiences and evolution into long-form video and articles, subscribe to your favorite creators, who are now earning a real living on the platform. You look at video, and soon you’ll be able to make video chat calls without having to give your phone number to anyone on the platform.”
Attention was brought to the once microblogging platform’s intentions to facilitate transactions between users, friends, and content creators. The past Twitter was confining, she explained, the new brand will allow evolution without a legacy mindset.
“The rebrand represented really a liberation from Twitter,” she said. “A liberation that allowed us to evolve past a legacy mindset and thinking. And to reimagine how everyone, how everyone on Spaces who’s listening, everybody who’s watching around the world. It’s going to change how we congregate, how we entertain, and how we transact all in one platform.”
The CNBC host asked about the risk in light of name recognition, Yaccarino responded likening the change Johnson & Johnson made by spinning off Band-Aids and Tylenol brands under the new name Kenvue. Her reply suggested the tech giant is almost entrepreneurial now, and can begin with a start-up mentality.
“If you stay Twitter, or you stay whatever your previous brand is, change tends to be only incremental. And you get graded by a legacy report card,” Yaccarino said. “And at X we think about what’s possible. Not the incremental change of what can’t be done.” She pointed to the new product changes and infrastructure improvements, saying it “answers the question of ‘why rebrand?’”
About Yaccarino’s Duties
She is operating independently under Musk’s leadership, Yaccarino assured.
“The roles of Elon and myself are well-defined.” She continued, “Elon is working on accelerating the rebrand and working on the future,” adding, “and I’m responsible for the rest. Running the company, from partnerships to legal to sales to finance.”
Questions regarding Yaccarino’s autonomy within Musk’s framework had arisen due to his comprehensive control over the company and his ventures like Tesla and SpaceX.
Yaccarino, formerly a senior advertising executive at NBC Universal, underscored X’s dedication to enhancing the advertiser experience. This commitment arose from brands withdrawing from the platform following Musk’s acquisition of Twitter.
A large part of the Twitter brand has in the past been questioned by advertisers related to trust and safety. Yaccarino disclosed that X’s trust and safety team is now more capable compared to its pre-acquisition state. While acknowledging that not all content may align with everyone’s views, she highlighted efforts to improve the platform’s content environment.
In November, Twitter disbanded its ethical artificial intelligence team and downsized its trust and safety department. This move halted the team’s work on “algorithmic amplification monitoring,” which mainly aimed to scrutinize content amplification during elections and political events. This stands in sharp contrast to the trust which the new brand has been building.
Rebuilding advertiser confidence stands as a large challenge for Yaccarino. Musk has claimed continuous spikes in user engagement, but concrete data supporting these claims are slim. Yaccarino pointed out the return of prominent brands like Coca-Cola and Visa to advertising under her leadership, facilitated by her direct engagement with marketing and communication executives.
Yaccarino asserted that brands are now insulated from the risk of adjacency to problematic content. She acknowledged that content that is “lawful but awful” can be challenging to manage but emphasized the company’s new content controls in reducing such risks for advertisers.
Yaccarino also addressed the threat posed by Meta’s Threads, indicating that while it hasn’t fully taken off since its high-profile launch, it’s essential to stay vigilant about competitors. Despite already commanding substantial advertiser spending through Instagram and Facebook, Meta’s Threads has yet to introduce advertising.
As for a potential octagon face-off between Musk and Meta CEO Mark Zuckerberg, Yaccarino took a playful stance saying that if the event occurred, Musk “is training” and noted the potential for a great brand sponsorship opportunity.
Entravision Communications Corporation is a diversified Spanish-language media company utilizing a combination of television and radio operations to reach Hispanic consumers across the United States, as well as the border markets of Mexico. Entravision owns and/or operates 53 primary television stations and is the largest affiliate group of both the top-ranked Univision television network and Univision’s TeleFutura network, with television stations in 20 of the nation’s top 50 Hispanic markets. The Company also operates one of the nation’s largest groups of primarily Spanish-language radio stations, consisting of 48 owned and operated radio stations.
Michael Kupinski, Director of Research, Equity Research Analyst, Digital, Media & Technology , Noble Capital Markets, Inc.
Patrick McCann, CFA, Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Mixed Q2 results. While revenues beat expectations ($273.4 million versus our $262.9 million estimate), adj. EBITDA was 13% lower than expected ($14.2 million versus our $16.4 million estimate). The revenue variance was due to its Digital revenue, $10 million above our expectations. Notably, the biggest adj. EBITDA variance was due to lower margins in its Digital Media segment.
A Facebook faceplant. The company’s Digital Media margins going forward will be adversely affected by Meta (Facebook) is reducing Entravision’s commission revenue, from 10% to 7%. We estimate that this will adversely affect the company by over $8 million in adj. EBITDA in the second half 2023. While margins will take a hit, the company’s Digital Media revenue growth appears favorable and adj. EBITDA is expected to grow strong double digits in 2024.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Plans for the Platform Formerly Known as “Twitter”
Elon Musk, who counts the old Twitter among the companies he oversees, has plans for a mega-financial component to the social media platform that has been rebranded as X. The serial entrepreneur has in the past discussed the “everything” app WeChat as a model for X’s direction. WeChat is a product available to banking clients in China, as a useful do-it-all tool chest. Musk says it has no equal in the U.S. Part of what is expected from Elon’s team is enabling users of X to trade stock and cryptocurrencies and also perform all that fintech companies like PayPal provide.
Embracing a New Direction
Molding X into the ultimate multi-functional app may be beginning to take shape and gain momentum. Musk may not have invented Twitter, but he plans on reinventing it with some very aggressive plans under the new name.
Evidence of this comes from Musk and his team’s discussions with a prominent financial data powerhouse to establish a trading hub within the X platform, including real-time market data. Leaked documents, as reported by the news source Semafor, and conversations with insiders have revealed the huge initiative. It is unclear whether X has secured partnerships for its additional direction at this point.
Fuzzy Business Benefit to Partnerships
X’s outreach to potential partners highlights the company’s promise of access to a massive social media user base numbering in the hundreds of millions. The proposal requests don’t mention compensation for the project, according to Liz Hoffman at Semafor.
Plans of incorporating a trading hub within the X platform have been brought up in the past. Not long ago eTORO, a unique social investment platform, had unveiled plans to facilitate the trading of various assets, including cryptocurrencies, directly to users, through a strategic partnership of what was then Twitter.
If the plans for an in-app trading hub materialize, given Musk’s evident familiarity with Dogecoin and other digital assets, X could potentially become a hub for cryptocurrency trading. Much of the the crypto regulatory world is still being written on a battlefield by various parties with different interests. This prospect might extend to established cryptocurrencies like bitcoin (BTC), which could be perceived as a relatively secure asset within some regulatory frameworks.
Elon Musk’s innovative drive is propelling X towards uncharted territory. As the app evolves, the prospect of a comprehensive trading hub integrated seamlessly within the platform could redefine the way users engage with their finances and investments. While details are understandably not public, knowledge that this may be unfolding and the potential power and disruption it may create are undeniable.
In a reply to a social post on X by @unusual_whales which read, “Twitter/X is planning to launch its own stock trading platform, per XNewsDaily,” Musk did not completely dismiss the existence of any plans but did not in any way confirm that there has been any real movement in this direction.
