Goffin Recognized for Driving Company & Team Growth at Colossus SSP, a Direct Digital Holdings Company
HOUSTON, April 28, 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 Lashawnda Goffin, Chief Executive Officer of Colossus SSP, has been selected to win the 2023 Catalyst Award, a special accolade that is part of the AdExchanger and AdMonsters’ 2023 Top Women in Media & Ad Tech program. The award is given to a woman industry leader who has driven a tremendous amount of growth for the business and team over the past year.
“Since Lashawnda began her leadership role with Direct Digital Holdings’ supply-side platform, Colossus SSP, she has been a major force in its rapid growth. Year-over-year revenues between 2021 and 2022 more than tripled – an impressive achievement,” said Mark D. Walker, CEO and Co-Founder of Direct Digital Holdings. “She is deserving of this award for her work at Colossus SSP, as well as for advancing diversity and progress within our industry.”
“Throughout my time at Direct Digital Holdings, I’ve encouraged my team at Colossus SSP to adopt innovative ways to grow our business, while working towards building a more inclusive marketplace by empowering niche and multicultural publishers,” said Goffin. “I am very honored to receive this award and will accept it as recognition of the exceptional business results my entire team continues to achieve.”
Currently, Colossus SSP represents 26,000 media properties – offering inventory from both multicultural/diverse and general market publishers. The company has 163,000 advertisers accessing its platform monthly, generating over 130 billion impressions per month across display, CTV, in-app and other media.
Lashawnda Goffin will receive the 2023 Catalyst Award on Monday, June 5 at the AdExchanger and AdMonsters’ Top Women in Media & Ad Tech Awards Gala, which will be held at the Metropolitan Pavilion in New York City.
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 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app, and other media channels. Direct Digital Holdings is the ninth Black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
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.
A Focus on Profitability Drives A Strong Start to the Year
Last quarter we wrote that the S&P 500 increased for the first time since the fourth quarter of 2021 and that we were beginning to see signs of life in Noble’s Internet and Digital Media Indices as well. Those signs of life continued to bear fruit throughout the first quarter, as every one of Noble’s Internet and Digital Media Indices not only finished the quarter up, but significantly outperformed the S&P 500. The best performing index was Noble’s Social Media Index, which increased by 70% in the first quarter of 2023, followed by Noble’s eSports & iGaming Index (+32%), Ad Tech Index (+31%), MarTech Index (+30%), and Digital Media Index (+18%).
Noble’s Indices are market cap weighted, and we attribute the strength of the Social Media Index to its largest constituent, Meta Platforms (META; a.k.a. Facebook) whose shares increased by 76% in the first quarter. We attribute this increase to management’s 4Q 2022 earnings call when they spent most of their time talking about “efficiency”, which investors interpreted to mean that Meta was newly focused on profitability. After a relatively disastrous 3Q 2022 earnings call, after which shares fell by 25%, the company demonstrated on its 4Q 2022 earnings call that it clearly had
gotten the message: investors were not enamored about the company’s plans in October 2022 to spend billions of dollars to develop its Metaverse initiatives. Rather, on its fourth quarter call, management focused on driving its short form video initiative Reels (i.e., becoming more TikTok like), reducing its headcount by reducing layers of management, lowering its operating expenses and reducing its capital expenditures. Investors applauded this newfound focus on profitability and shares rebounded from a low of $88.90 per share in early November to $211.94 at the March quarter-end.
Noble’s eSports and iGaming Index increased by 32% as 9 of the 16 stocks in the index posted gains, the two largest market cap weighted stocks. Shares of the largest stock in the index, Flutter Entertainment (FLTR) increased by 31%) while shares of the second largest stock in the index, DraftKings (DKNG) increased by 70%. Flutter’s improvement is likely due to an improved inflection point in the company’s U.S. operations which include its FanDuel operations. DraftKings also beat revenue and EBITDA expectations in 4Q 2022 and appears to be proving out its path to profitability. In both cases, investors are rewarding companies who are accelerating their path to profitability.
The next best performing index was Noble’s Ad Tech Index which increased by 31% during 1Q 2023. Fourteen of the 23 stocks in the index were up in the first quarter. Standouts during the quarter were Integral Ad Science (IAS; +62%) and Perion Networks (PERI; +56%). Integral Ad Science exceeded expectations in its fourth quarter results and guided to better-than-expected results in 1Q 2023. The company continues to expand its product suite, scale its social media offerings (i.e., for TikTok) and is well positioned to continue to benefit from the shift from linear TV to connected TV (CTV). Perion shares continued their winning streak: Perion was the only ad tech stock whose shares were up in 2022. Perion’s 56% increase in 1Q 2023 reflected beat on both revenues (by 2%) and EBITDA (by 10%) as well as improved guidance for 1Q 2023. Perion’s profitability increased significantly in 2022, with EBITDA nearly doubling (+90%) from $70 million in 2021 to $132 million in 2022.
Noble’s MarTech Index increased by 30% with 14 of the 22 stocks in the index posting increases in 1Q 2023. The best performing stocks were Qualtrics (XM; +70%) Sprinklr (CXM; +59%), Salesforce (CRM; +51%), Hubspot (HUBS; +48%) and Yext (YEXT; +47%). Qualtrics agreed to be acquired for $12.5 billion by Silver Lake and the Canadian Pension Plan Investment Board, which came at a 73% premium to its 30-day volume weighted stock price. Sprinklr beat revenue expectations and significantly beat EBITDA expectations (doubling the Street expectations) and guided to a current year forecast that focuses more on efficiency and profitability. MarTech stocks have been victims of their own success. Two years ago at this time the sector was trading at 11.3x forward revenue estimates, and a year ago the group was trading at 6.5x forward revenues. Today the group trades at 4.1x forward revenues and investors appear to be wading back into the sector.
Finally, Noble’s Digital Media Index, while lagging that of its digital peers posted an 18% increase and significantly outperformed the S&P 500 (+7%) with a broad based recovery in which 9 of the sector’s 11 stocks increase during 1Q 2023. The best performing stock was Spotify (SPOT; +69%), whose revenues fell short of expectations by less than 1%, significantly beat consensus Street EBITDA expectations by $58M and more importantly pivoted towards demonstrating operating leverage. Spotify, which posted an EBITDA loss of nearly $500 million 2022 is expected to generate $650 million in EBITDA in 2024, according Street estimates. A deteriorating ad market 2022 combined with higher interest rates likely prompted the company to shift its priorities to running a profitable company and doing it more quickly. The second best performing stock was Travelzoo (TZOO; +36%), as the company’s 4Q 2022 revenues and EBITDA increased by 31% and 328%, respectively. Notably, Travelzoo’s EBITDA came in 58% higher than Street consensus. The company appears to be benefiting from pent up demand for travel and management highlighted the opportunity for margin expansion in the coming quarters.
Sluggish M&A Market Carries Over into 2023
Last quarter we remarked that M&A deals in the Internet and Digital Media sector had held up well through the first three quarters of 2022 despite economic headwinds. However, the number of deals slowed in 4Q 2022 (by 17%) and total deal value fell dramatically (by 70%). The slowdown carried over into 1Q 2023. According to Dealogic, Global M&A fell by 48% to $575 billion in 1Q 2023 compared to $1.1 trillion in 1Q 2022. Global M&A dollar values fell to their lowest level in a decade. In the U.S., deal values fell by 44% to $283 billion from $176 billion in 1Q 2022.
The M&A market had weathered stock price declines, Fed rate hikes, elevated inflation, and geopolitical conflict in 2022. In 1Q 2023, to this “recession that never comes” economic environment we added increased volatility and uncertainty caused by banking failures. One of the biggest impediments to deals is debt financing. Private equity firms have had to write larger check in lieu of a robust debt financing market. Banks have been less willing to provide financing because some have had to hold loans on their balance sheet or take losses when selling debt to investors while smaller regional banks have seen deposits flee to larger banks, especially those considered too big to fail.
Finally, increased antitrust scrutiny likely has played a role in the M&A deal slowdown. Lengthy merger reviews resulted in three public transactions being blocked by regulators: Standard General’s acquisition of Tegna; JetBlue’s acquisition of Spirit Airlines, and Intercontinental Exchange’s acquisition of Black Knight, Inc.
1Q 2023 Internet and Digital Media M&A: A Dearth of Large Deals
Based on Noble’s analysis, deal making in the first quarter of 2023 in the Internet and Digital Media sectors actually increased by 11% compared to 1Q 2022. The total number of deals we tracked in the Internet and Digital Media space increased to 202 deals in 1Q 2023 compared to 182 deals in 1Q 2022. On a sequential basis, the total number of deals increased by 39% compared to 145 deals in 4Q 2022. The only explanation we can provide for this is that with the expectation that an economic slowdown was pending, many companies likely made the decision to sell in mid-2022, with the deals being announced in 1Q 2023.
The biggest change was in the first quarter’s M&A deal value, where the total dollar value of deals fell by 95% to $5.4 billion of announced deals in 1Q 2023 compared to $108.5 billion in announced deals in 1Q 2022. On a sequential basis, deal value fell by 40% from $9.1 billion in deal value in 4Q 2022.
From a deal volume perspective, the most active sectors we tracked were Digital Content (59 deals), Agency & Analytics (51 deals), and MarTech (39), followed by Information Services (17 deals), Ad Tech (11 deals) and eCommerce sectors (10 deals). From a dollar value perspective, MarTech led the way with $1.6 billion in transactions, followed by Information Services ($1.4 billion), Digital Content ($922 million) and Agency and Analytics ($875 million). The largest deals in the quarter by dollar value are shown below.
Notably, there were no mega deals ($10B+) in the first quarter of 2023, compared to the first quarter of 2022 when Microsoft agreed to by Activision Blizzard for $68 billion and Take-Two Interactive agreed to acquire Zynga for $12 billion. Once the Fed stops hiking rates and visibility into operating trends returns, we may begin to see an environment in which mega deals will be contemplated again.
TRADITIONAL MEDIA COMMENTARY
The following is an excerpt from a recent note by Noble’s Media Equity Research Analyst Michael Kupinski
The NAB Show Stopper
Media investors are unpacking all of information from last week’s National Association of Broadcasters (NAB) convention. There is a lot to digest given that there were over 1,400 exhibits, and 140 new exhibitors this year. Because of the overwhelming number of exhibitors, many that go to Vegas for this annual convention do not go to the convention floor. It is a shame. There is a lot to see and learn. Noble’s Media & Entertainment Analyst Michael Kupinski walked the convention floor, which covers 4.6 million square feet of exhibit halls and meeting rooms. He stopped by booths and taped presentations to explain the new technologies, the plan for implementation of new services, and the prospect for revenue monetization. One important demonstration focused on the new broadcast standard, ATSC 3.0, the hope for a bright future for the television industry. This new standard should allow the industry to become more contemporary in terms of how its audience consumes video and information. In addition, it offers the ability for the industry to participate in new revenue streams, including datacasting, which may become bigger than Retransmission revenue in the future.
In addition to touring the floor, he participated in NAB panel discussions and hosted meetings with media management teams in a fireside chat format to discuss current business trends, the new technologies (including Artificial Intelligence (AI)) and the new broadcast standard. In addition, these C-suite management teams provided their key takeaways from the NAB convention and offered why they participated in the conference this year. These discussions will be available for free to Channelchek users on Channelchek.com on April 27th as a virtual conference. In this upcoming Channelchek Takeaway Series on the NAB Show, Michael offers his key takeaways, including the current advertising outlook, his take on the monetization of the new technologies and what media investors should do now given the current economic and advertising environment. Free registration to this informative event is available here.
This report highlights the performance of the media sectors over the past 12 months and past quarter. Overall, media stocks struggled in the past year, but there has been some improved quarterly performance, particularly in Digital Media and Broadcast Television, discussed later. All media stocks are struggling to offset losses over the course of the past year with trailing 12 months stocks down in the range of 5% on the low end to as high as down 68%.
In the first quarter, stock performance was mixed. The best performers in the traditional media sectors were Broadcast Television stocks, up nearly 10% versus the general market which increased 7% in the comparable period. However, the individual TV stock performance reflected a different story, explained later in this report. The worse performer for the quarter were the radio stocks, driven by a Wall Street downgrade of one of the leading radio broadcasters. We believe that stock performance will be a roller coaster for at least another quarter or two as the weight of the Fed rate increases begin to adversely affect the economy.
While national advertising has remained weak, we believe that local advertising is now beginning to moderate as well. The local advertising weakness appears to be in the smaller markets as well as the larger markets. This is somewhat different than the most recent economic cycles whereby the smaller markets were somewhat resilient. It seems that the smaller markets are feeling the adverse affects from inflation, rising employment costs and tightening bank credit. In our view, the disappointing advertising outlook likely will cause second quarter revenue estimates to come down, creating a difficult environment for media stocks.
Broadcast Television
Weak Current Revenue Trends
TV stocks outperformed the general market in the first quarter. This market cap weighted index masked the performance of many poor performing stocks in the quarter. Sinclair Broadcasting (up 10%), Entravision (up a strong 26%), and Fox (up 12%) were the best performing stocks and favorably influenced the TV index in the quarter. But, there were many poor performing stocks including E.W. Scripps (down 29%), Gray Television (down 22%) and Tegna (down 20%). We believe that there was heightened interest in Entravision given its favorable Q1 results which was fueled by its fast growing digital advertising business. Entravision’s Q4 revenue performance was among the best in the industry. While Entravision was among the best revenue performer, its margins are below that of its peer group EBITDA Margins. This is due to the accounting treatment of its digital revenues given that it is an agency business.. The poorer performing stocks are among the higher debt levered in the industry. The underperformance reflects concern of a slowing economy and investors flight to quality in the sector.
We do not believe that we are out of the woods with the TV stocks and the market is expected to be volatile. The advertising environment appears to be deteriorating given weakening economic conditions. There are bright spots which include some improvement in the Auto category. Dealerships appear to be stepping up advertising given higher inventory levels. In addition, broadcasters appear optimistic about political advertising, which could begin in the third quarter 2023. There is a planned Republican presidential candidate debate schedule in August. There is some promise that candidates will advertise in advance of that debate and into the fourth quarter given the early primary season. We do not believe that political and auto will be enough to offset the weakness in national and Local advertising. In our view, Q2 and full year 2023 estimates are likely to come down. Furthermore, we believe that broadcasters will be shy about predicting political advertising even into 2024 given the past disappointments in management forecasts in the last political cycle.
Broadcast Radio
All Out of Love
Radio stocks had another tough quarter, down 17% versus a 7% gain for the general market. Notably, there was a wide variance in the individual stock performance, with the largest stocks in the group having the worst performance in the quarter, including Audacy (AUD down 40%), Cumulus Media (CMLS down 41%) and iHeart Media (IHRT down 36%). The first quarter stock performance did not appear to reflect the fourth quarter results, during which revenues were relatively okay, with some exceptions. Some of the larger radio companies which have a large percentage of national advertising, underperformed relative to the more diversified radio companies, especially those with a strong digital segment presence. Margins for the industry remain relatively healthy.
The weakness in the Radio stocks was fueled in the quarter from a downgrade to Underperform on the shares of iHeart by a Wall Street firm. Many radio stocks were down in sympathy. The analyst attributed the downgrade to the current macro environment and its heavy floating rate debt burden. The company is not expected to generate enough free cash flow to de-lever its balance sheet. We believe the downgrade as well as the excessive debt profile of Audacy, another industry leader which likely will need to restructure, sent all radio stocks tumbling. Some stocks performed better than others. While Cumulus Media’s debt profile is not as levered as iHeart or Audacy, the shares were caught in the net of a weak advertising outlook. Cumulus is among the most sensitive to national advertising, which currently continues to be weak.
Some of our favorite stocks which are diversified and have developing digital businesses performed better. Those stocks included Townsquare Media (TSQ, up 10%), and Salem Media (SALM, up 4%). Notably, while the shares of Beasley Broadcasting (BBGI) were down 10%, the shares performed better than the 17% decline for the industry in the quarter. Importantly, Beasley recently provided favorable updated Q1 guidance for the first quarter. Q1 revenues are expected to increase 1% to 2.5% and EBITDA growth is expected to be in the range of 40% to 50%, significantly better than our estimates. Furthermore, management provided a sanguine outlook for 2023 and 2024. Digital revenue is expected to reach 20% to 30% of total revenue with a goal of reaching 40% in 2024. By comparison, digital revenue was 17% of total revenue in the fourth quarter 2022. Furthermore, the company is sitting on roughly $35 million in cash. It has opportunistically repurchased $10 million of its bonds at a significant discount. We believe that it is likely to maintain a strong cash position given the economic uncertainty.
Townsquare Media (TSQ), Salem Media (SALM) and Beasley Broadcast (BBGI) are all diversifying their revenue streams. While these companies are not immune to the economic headwinds, we believe theirdigital businesses should offer some ballast to its more sensitive Radio business. In the case of Salem, 30% of its revenues are relatively stable with block programming.
Publishing
After a period of moderating revenue trends, publishers reported a weakened advertising environment. Revenue trends deteriorated with print advertising taking a nose dive. This trend was illustrative in the results from Lee Enterprises. After a fiscal fourth quarter flat revenue performance, the company reported a 8.5% decline in its fiscal first quarter. The Q1 revenue performance reflected an 18.5% decrease in print advertising, an acceleration in the rate of the 11% decline in the previous quarter.
The surprisingly weak quarter hit the company’s adj. EBITDA margins. Traditionally, Lee maintained some of the best margins in the industry., but the company fell in ranking to among the lowest in the sector. Importantly, in spite of the revenue weakness, the company maintained its previous adj. EBITDA guidance of $94 million to $100 million for F2023. To achieve its cash flow target in light of the soft revenue outlook, Lee implemented a round of expense cuts to bolster cash flow. Cost reductions are expected to result in $40 million of savings in FY 23, and $60 million in annualized savings going forward. While the company’s print business declined more than expected , the company’s digital businesses remains favorably robust. In addition, its digital business is turning toward contributing margins; another step in the company’s digital evolution.
This newsletter was prepared and provided by Noble Capital Markets, Inc. For any questions and/or requests regarding this news letter, please contact Chris Ensley
DISCLAIMER
All statements or opinions contained herein that include the words “ we”,“ or “ are solely the responsibility of NOBLE Capital Markets, Inc and do not necessarily reflect statements or opinions expressed by any person or party affiliated with companies mentioned in this report Any opinions expressed herein are subject to change without notice All information provided herein is based on public and non public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on their own appraisal of the implications and risks of such decision This publication is intended for information purposes only and shall not constitute an offer to buy/ sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice Past performance is not indicative of future results.
Please refer to the above PDF for a complete list of disclaimers pertaining to this newsletter
HOUSTON, April 20, 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 will report financial results for the first quarter of fiscal year 2023 ended March 31, 2023 on Thursday, May 11, 2023 after the U.S. stock market closes. Management will host a conference call and webcast on the same day at 5:00 PM ET to discuss the results.
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 over 100,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app and other media channels. Direct Digital Holdings is the ninth black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
Revision Reflects an Increase of Revenue at the Company’s Colossus SSP Subsidiary for FY 2022
Results in Full-Year Revenue of $89.4 Million, or EPS of $0.33
HOUSTON, April 17, 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 an upward revision of the preliminary financial results originally published in its March 23, 2023 press release.
These financial results, which are reflected in the Company’s Annual Report on Form 10-K filed with the SEC today, resulted in an increase in revenues of $1.3 million over the previously published preliminary results, which increased net income to $4.2 million and increased EPS to $0.33 per share for the 12-month period ended December 31, 2022.
The updated amounts have no effect upon the cash flows for the affected periods, and will not affect forward revenue guidance for 2023 of $118 million to $122 million as issued on March 23, 2023.
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 90,000 clients monthly, generating over 100 billion impressions per month across display, video, CTV, in-app and other media channels. Direct Digital Holdings is the ninth black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
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, 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 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 Current Report on Form 8-K 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.
HOUSTON, TX / ACCESSWIRE / April 17, 2023 / 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 it will be presenting at the Planet MicroCap Showcase: VEGAS 2023 on Wednesday, April 26, 2023 at 2:30PM (Local Time – PST). President & Co-Founder of Direct Digital Holdings, Keith Smith, and Chief Financial Officer of Direct Digital Holdings, Susan Echard, will be hosting the presentation and answering questions at the conclusion. The Company will also be hosting 1×1 meetings on Thursday, April 27, 2023.
To access the live presentation, please use the following information:
Planet MicroCap Showcase: VEGAS 2023
Date: Wednesday, April 26, 2023
Time: 5:30 PM Eastern Time (2:30 PM Pacific Time)
Direct Digital Holdings continues to demonstrate robust financial performance, significant operational expansion and continued gains in market share as it capitalizes on strong macroeconomics tailwinds in digital advertising and media. The Company continues to implement strategic growth initiatives to position the Company to continue to deliver high-quality, technology-led digital advertising solutions to its expanding customer network. Direct Digital Holdings is the ninth black-owned company to go public in the U.S. and is pioneering the AdTech space as a leader in programmatic advertising leveraging its technology and strategy to focus on reaching consumers and publishers in mid-sized and multicultural markets. The Company recently released a whitepaper conducted by Horowitz research that garnered key insights into the importance on effectively engaging with diverse communities and media properties.
If you would like to book 1×1 investor meetings with Direct Digital Holdings, and to attend the Planet MicroCap Showcase: VEGAS 2023, please make sure you are registered here: https://planetmicrocapshowcase.com/signup
1×1 meetings will be scheduled and conducted in person at the conference venue in LAS VEGAS.
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 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app and other media channels. Direct Digital Holdings is the ninth black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
About Planet MicroCap
Planet MicroCap is a global multimedia financial news, publishing and events company focused on news dissemination, providing information, data and analytics for the MicroCap investing community. We have cultivated an active and engaged audience of folks that are interested in learning about and to stay ahead of the curve in the MicroCap space.
Elon Musk Announces New Financial Functionality on Twitter
Starting today, Twitter will provide tweeters the ability to buy and sell stocks and crypto on its platform via eTORO. Twitter owner, Elon Musk has been indicating he intends to turn the popular micro-blogging platform into a “super app.” Today’s move shows substantial headway in allowing financial transactions to be conducted on the social media platform. Other company goals since Musk’s purchase of the company include ride hailing, and attracting video influencers that may be disenchanted with YouTube restrictions on speech.
What Will the Twitter eTORO Partnership Provide?
Founded in 2007, eTORO has become one of the largest social investment networks and trading platforms. According to its website, it is “built on social collaboration and investor education: a community where users can connect, share, and learn.”
Twitter will partner with the platform to allow users (known as tweeters and Twitterers) to trade stocks and cryptocurrencies as part of a deal with the social investing company.
This partnership will provide access to view charts and trade stocks, cryptocurrencies, and other investment assets from eToro via its mobile platform. Together this significantly expands real-time trading data available to users who already have access on Twitter to real-time data, however this arrangement adds all the bells and whistles a modern trading app can provide.
Twitter will be expanding its use of cashtags as well. Twitter added pricing data for $Cashtags (company ticker preceded by “$”) in December 2022. Since January, there have been more than 420 million searches using Cashtags – the number of searches averages 4.7 million a day.
eToro CEO Yoni Assia told CNBC the deal will help better connect the two brands, adding that in recent years its users have increasingly turned to Twitter to “educate themselves about the markets.”
Assia said there is a great deal of “very high quality” content available in real-time and that the partnership with Twitter will help eToro expand to reach new audiences tapping this as a source of information.
Update on Elon
After Musk’s purchase of Twitter, many advertisers stepped back and watched to see how far the company would go to allow less moderated interaction. On Wednesday (April 12) Musk said that “almost all” advertisers had returned to the app. However, Stellantis and Volkswagen, two large competitors with Musk run Tesla, said they do not yet plan to resume advertising.
Musk told a Morgan Stanley conference last month he wants Twitter to become “the biggest financial institution in the world.” This begs those that follow Musk to ask, “Why stop there, why not include Mars?”
What Else
Be sure to follow Channelchek on Twitter (@channelchek) to stay up to date on market insights, news, videos, and of course, top-tier investment analyst research on small and microcap opportunities.
PHOENIX, March 31, 2023 (GLOBE NEWSWIRE) — QuoteMedia, Inc. (OTCQB: QMCI), a leading provider of market data and financial applications, announced financial results for the fiscal year ended December 31, 2022.
QuoteMedia provides banks, brokerage firms, private equity firms, financial planners and sophisticated investors with a more economical, higher quality alternative source of stock market data and related research information. We compete with several larger legacy organizations and a modest community of other smaller companies. QuoteMedia provides comprehensive market data services, including streaming data feeds, on-demand request-based data (XML/JSON), web content solutions (financial content for website integration) and applications such as Quotestream Professional desktop and mobile.
Highlights for fiscal 2022 include the following:
Annual revenue increased to $17,527,605 in 2022 from $15,174,372 in 2021, an increase of $2,353,233 (16%).
Net income for 2022 was $444,470 compared to $212,372 in 2021, an improvement in profitability of $232,098.
Adjusted EBITDA for 2022 was $2,727,411 compared to $1,649,679 in 2021, an improvement of $1,077,732.
“This was another very successful year for QuoteMedia,” said Robert J. Thompson, Chairman of the Board. “We continued our strong growth across virtually every success metric, including revenue growth, profitability and market share; and we expect to continue on this trajectory through the coming year.
“2022 marked the signing and launch of major multi-year agreements with two of Canada’s largest banking institutions, as well as large-scale agreements with several other multi-national financial firms. We also have many new and exciting opportunities for 2023, as we are currently in negotiations with several large firms. As a result, we expect our revenue growth in fiscal 2023 to match or exceed the annual revenue growth we achieved in 2022; and we expect to significantly improve upon our net income figure as well.
“2022 was also significant because, as a result of the efforts and investments we made to improve our infrastructure, security, and business continuity management, we achieved our SOC2 Type II certification. SOC2 accreditation provides independent assurance that Quotemedia maintains a high level of information security, data integrity and business resiliency. This certification allows QuoteMedia to make even greater gains, as SOC2 accreditation is increasingly becoming an absolute requirement for those providing services to large financial institutions, and we are already experiencing the benefits.
“Our growth in revenue and market share has been fueled by our development of exciting new data applications and products, as well as the expansion of our global market coverage, and this will definitely continue throughout 2023 and beyond. We are looking forward to continued success in the years to come.”
QuoteMedia will host a conference call Monday, April 3, 2023 at 2:00 PM Eastern Time to discuss the 2022 financial results and provide a business update.
Conference Call Details:
Date: April 3, 2023
Time: 2:00 PM Eastern
Dial-in number: 800-245-3047
Conference ID: QUOTEMEDIA
An audio rebroadcast of the call will be available later at: www.quotemedia.com
About QuoteMedia
QuoteMedia is a leading software developer and cloud-based syndicator of financial market information and streaming financial data solutions to media, corporations, online brokerages, and financial services companies. The Company licenses interactive stock research tools such as streaming real-time quotes, market research, news, charting, option chains, filings, corporate financials, insider reports, market indices, portfolio management systems, and data feeds. QuoteMedia provides industry leading market data solutions and financial services for companies such as the Nasdaq Stock Exchange, TMX Group (TSX Stock Exchange), Canadian Securities Exchange (CSE), London Stock Exchange Group, FIS, U.S. Bank, Bank of Montreal (BMO), Broadridge Financial Systems, JPMorgan Chase, Scotiabank, CI Financial, Canaccord Genuity Corp., Hilltop Securities, Avantax, Stockhouse, Zacks Investment Research, General Electric, Boeing, Bombardier, Telus International, Business Wire, PR Newswire, The Goldman Sachs Group, Regal Securities, ChoiceTrade, Cetera Financial Group, Dynamic Trend, Inc., Credential Qtrade Securities, CNW Group, iA Private Wealth, Ally Invest, Inc., Suncor, Leede Jones Gable, Firstrade Securities, Charles Schwab, First Financial, Equisolve, Stock-Trak, Mergent, Cision and others. Quotestream®, QMod™ and Quotestream Connect™ are trademarks of QuoteMedia. For more information, please visit www.quotemedia.com .
Statements about QuoteMedia’s future expectations, including future revenue, earnings, and transactions, as well as all other statements in this press release other than historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. QuoteMedia intends that such forward-looking statements be subject to the safe harbors created thereby. These statements involve risks and uncertainties that are identified from time to time in the Company’s SEC reports and filings and are subject to change at any time. QuoteMedia’s actual results and other corporate developments could differ materially from that which has been anticipated in such statements.
Below are the specific forward-looking statements included in this press release:
We also have many new and exciting opportunities for 2023, as we are currently in negotiations with several large firms. As a result, we expect our revenue growth in fiscal 2023 to match or exceed the annual revenue growth we achieved in 2022; and we expect to significantly improve upon our net income figure as well.
We believe that Adjusted EBITDA, as a non-GAAP pro forma financial measure, provides meaningful information to investors in terms of enhancing their understanding of our operating performance and results, as it allows investors to more easily compare our financial performance on a consistent basis compared to the prior year periods. This non-GAAP financial measure also corresponds with the way we expect investment analysts to evaluate and compare our results. Any non-GAAP pro forma financial measures should be considered only as supplements to, and not as substitutes for or in isolation from, or superior to, our other measures of financial information prepared in accordance with GAAP, such as net income attributable to QuoteMedia, Inc.
We define and calculate Adjusted EBITDA as net income attributable to QuoteMedia, Inc., plus: 1) depreciation and amortization, 2) stock compensation expense, 3) interest expense, 4) foreign exchange loss (or minus a foreign exchange gain), and 5) income tax expense. We disclose Adjusted EBITDA because we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies, investors and financial institutions in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors. The table below provides a reconciliation of Adjusted EBITDA to net income attributable to QuoteMedia, Inc., the most directly comparable GAAP financial measure.
QuoteMedia, Inc. Adjusted EBITDA Reconciliation to Net Income
Selling Air Time is Getting Easier for Broadcast Radio
Is broadcast radio losing its power? It doesn’t appear to be, and the medium may be of interest to investors that prefer to shy away from short-lived investment trends and instead look to more easily understood opportunities. According to the industry publication Ad Age, the industry is nearing an intersection where “18- to 49-year-olds are spending more time listening to radio than watching linear TV.” At least one large company has reworked its advertising budget to save money with the expectation of reaching more people. Is this a trend hat will grow?
Re-investing in Radio
Soap opera’s got their start nearly 100 years ago as Proctor and Gamble, manufacturer of soap and candles, created the addictive entertainment to position its product ads in front of the typical soap decision maker of the time. As TV became a fixture in households in the 1950s, P&G adapted and brought the shows and the advertising to television. Last year P&G increased its spending on traditional broadcast radio by 43%. Despite all the new advertising options available, and the ability to refine targeting, P&G has a method to their madness, and it’s worth understanding.
Why the Reversal?
Last year, in the face of rising costs, the marketing giant came under margin pressure. In an attempt to minimize price hikes and maintain old margins, they cut ad spending by 10%, with a new budget of $2.2 billion.
The CEO Jon Moeller had told P&G brand marketers to focus on how many people they reach and how often, rather than how targeted or how much they spend. Chief Brand Officer Marc Pritchard became focused on the effectiveness of radio, connected TV, and streaming free ad-supported TV (FAST).
Belt Tightening
Just as inflation has caused many households to be more frugal, perhaps use less expensive brands, and eat more at home, companies like P&G are finding they are taking a similar approach. And if it helps keep prices down, they can more easily retain customers and attract new ones.
Here is some data on the extreme cost of reaching a broadcast TV audience. In the business, CPM (cost per mile) is a paid ad method where there is a certain rate for every 1000 impressions an ad receives. The CPM to reach TV audiences is as high as $35 to $65. For comparison, YouTube video CPMs range from $20 to $25, and linear TV is in the $10 to $15 range.
But radio can be bought in the $5-$6 CPM range. The targeting may not be as precise as broadcast TV or other media, but the amount spent for every 1000 impressions is a fraction of the alternatives.
Other large advertisers are stepping up their radio efforts as well. Pharmaceutical companies Pfizer, and Johnson & Johnson have started to spend more. According ad intelligence provider Vivvix. Pfizer became a top-five radio advertiser last year. They did this by more than doubling spending.
If you haven’t been following media companies, there is some acclimating to terminology, seasons, and how they profit. Two key places for information is the media report that Noble Capital Markets published late January of this year. The report which is available at this link was prepared by top analysts and discusses the recent state of radio, TV, digital media, and publishing.
A video produced just weeks before the published report by members of the same team can be helpful in providing you with insight as to one media company’s strengths over another. The video, featuring Michael Kupinski, Director of Research at Noble Capital Markets, is a half-hour full of insights. At this link.
Do you wish to hear directly from management of broadcast media companies impacted by new trends?
There are two companies that will be conducting three roadshows in Florida over the next two weeks. If you can attend, you’ll have the opportunity to hear directly from management what the future expectations are, and you’ll have the opportunity to ask questions of your own. The company names, locations and dates are available at this link,along with other scheduled roadshows.
Take Away
The most talked about stocks on the chat boards aren’t the only actionable opportunities astute investors can select from. As with all investing, growing your knowledge base can help one expand their watch-list.
P&G’s ad spend adjustment comes at a time when standard AM/FM radio has caught to and is neck and neck with linear TV (for people 18-49 in the U.S.). Radio audiences may not be growing, but they are not declining as broadcast TV audiences have – they are fairly consistent, and ad costs are a great value at a time when companies are dealing with their own increasing costs. This is getting the attention of large advertisers, and it perhaps should get the attention of investors.
PHOENIX, March 24, 2023 (GLOBE NEWSWIRE) — QuoteMedia, Inc. (OTCQB: QMCI), a leading provider of market data and financial applications, today announced that it has achieved SOC 2 Type II accreditation.
The SOC 2 Type II accreditation is a rigorous certification that requires companies to demonstrate their ability to securely manage customer data and protect against unauthorized access. The accreditation is awarded to companies that have implemented a comprehensive set of controls and processes to ensure the confidentiality, integrity, and availability of their services.
“We are thrilled to have achieved SOC 2 Type II accreditation, which is a testament to our commitment to providing the highest levels of security and reliability to our customers,” said Dave Shworan, CEO of QuoteMedia Ltd. “As a leading provider of financial market data and solutions, we understand the critical importance of safeguarding our customers’ data, and we take this responsibility very seriously.”
To achieve SOC 2 Type II accreditation, QuoteMedia underwent a demanding audit by an independent third-party auditor. The audit assessed the company’s controls and processes related to security, availability, processing integrity, confidentiality, and privacy. QuoteMedia’s implementation of robust controls and processes is evidence of its dedication to maintaining a secure and reliable environment for customer data.
About QuoteMedia
QuoteMedia is a leading software developer and cloud-based syndicator of financial market information and streaming financial data solutions to media, corporations, online brokerages, and financial services companies. The Company licenses interactive stock research tools such as streaming real-time quotes, market research, news, charting, option chains, filings, corporate financials, insider reports, market indices, portfolio management systems, and data feeds. QuoteMedia provides industry leading market data solutions and financial services for companies such as the Nasdaq Stock Exchange, TMX Group (TSX Stock Exchange), Canadian Securities Exchange (CSE), London Stock Exchange Group, FIS, U.S. Bank, Bank of Montreal (BMO), Broadridge Financial Systems, JPMorgan Chase, Scotiabank, CI Financial, Canaccord Genuity Corp., Hilltop Securities, Avantax, Stockhouse, Zacks Investment Research, General Electric, Boeing, Bombardier, Telus International, Business Wire, PR Newswire, The Goldman Sachs Group, Regal Securities, ChoiceTrade, Cetera Financial Group, Dynamic Trend, Inc., Credential Qtrade Securities, CNW Group, iA Private Wealth, Ally Invest, Inc., Suncor, Leede Jones Gable, Firstrade Securities, Charles Schwab, First Financial, Equisolve, Stock-Trak, Mergent, Cision and others. Quotestream®, QMod™ and Quotestream Connect™ are trademarks of QuoteMedia. For more information, please visit www.quotemedia.com.
Image: Congressional Hearings with Byte Dance (TikTok) CEO, C-SPAN (YouTube)
Should the US Ban TikTok? Can It? A Cybersecurity Expert Explains the Risks the App Poses
TikTok CEO Shou Zi Chew testified before the House Energy and Commerce Committee on March 23, 2023, amid a chorus of calls from members of Congress for the federal government to ban the Chinese-owned video social media app and reports that the Biden administration is pushing for the company’s sale.
The federal government, along with many state and foreign governments and some companies, has banned TikTok on work-provided phones. This type of ban can be effective for protecting data related to government work.
But a full ban of the app is another matter, which raises a number of questions: What data privacy risk does TikTok pose? What could the Chinese government do with data collected by the app? Is its content recommendation algorithm dangerous? And is it even possible to ban an app?
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, Doug Jacobson, Professor of Electrical and Computer Engineering, Iowa State University.
Vacuuming Up Data
As a cybersecurity researcher, I’ve noted that every few years a new mobile app that becomes popular raises issues of security, privacy and data access.
Apps collect data for several reasons. Sometimes the data is used to improve the app for users. However, most apps collect data that the companies use in part to fund their operations. This revenue typically comes from targeting users with ads based on the data they collect. The questions this use of data raises are: Does the app need all this data? What does it do with the data? And how does it protect the data from others?
So what makes TikTok different from the likes of Pokemon-GO, Facebook or even your phone itself? TikTok’s privacy policy, which few people read, is a good place to start. Overall, the company is not particularly transparent about its practices. The document is too long to list here all the data it collects, which should be a warning.
There are a few items of interest in TikTok’s privacy policy besides the information you give them when you create an account – name, age, username, password, language, email, phone number, social media account information and profile image – that are concerning. This information includes location data, data from your clipboard, contact information, website tracking, plus all data you post and messages you send through the app. The company claims that current versions of the app do not collect GPS information from U.S. users. There has been speculation that TikTok is collecting other information, but that is hard to prove.
If most apps collect data, why is the U.S. government worried about TikTok? First, they worry about the Chinese government accessing data from its 150 million users in the U.S. There is also a concern about the algorithms used by TikTok to show content.
Data in the Chinese Government’s Hands
If the data does end up in the hands of the Chinese government, the question is how could it use the data to its benefit. The government could share it with other companies in China to help them profit, which is no different than U.S. companies sharing marketing data. The Chinese government is known for playing the long game, and data is power, so if it is collecting data, it could take years to learn how it benefits China.
One potential threat is the Chinese government using the data to spy on people, particularly people who have access to valuable information. The Justice Department is investigating TikTok’s parent company, ByteDance, for using the app to monitor U.S. journalists. The Chinese government has an extensive history of hacking U.S. government agencies and corporations, and much of that hacking has been facilitated by social engineering – the practice of using data about people to trick them into revealing more information.
The second issue that the U.S. government has raised is algorithm bias or algorithm manipulation. TikTok and most social media apps have algorithms designed to learn a user’s interests and then try to adjust the content so the user will continue to use the app. TikTok has not shared its algorithm, so it’s not clear how the app chooses a user’s content.
The algorithm could be biased in a way that influences a population to believe certain things. There are numerous allegations that TiKTok’s algorithm is biased and can reinforce negative thoughts among younger users, and be used to affect public opinion. It could be that the algorithm’s manipulative behavior is unintentional, but there is concern that the Chinese government has been using or could use the algorithm to influence people.
If the federal government comes to the conclusion that TikTok should be banned, is it even possible to ban it for all of its 150 million existing users? Any such ban would likely start with blocking the distribution of the app through Apple’s and Google’s app stores. This might keep many users off the platform, but there are other ways to download and install apps for people who are determined to use them.
A more drastic method would be to force Apple and Google to change their phones to prevent TikTok from running. While I’m not a lawyer, I think this effort would fail due to legal challenges, which include First Amendment concerns. The bottom line is that an absolute ban will be tough to enforce.
There are also questions about how effective a ban would be even if it were possible. By some estimates, the Chinese government has already collected personal information on at least 80% of the U.S. population via various means. So a ban might limit the damage going forward to some degree, but the Chinese government has already collected a significant amount of data. The Chinese government also has access – along with anyone else with money – to the large market for personal data, which fuels calls for stronger data privacy rules.
Are You at Risk?
So as an average user, should you worry? Again, it is unclear what data ByteDance is collecting and if it can harm an individual. I believe the most significant risks are to people in power, whether it is political power or within a company. Their data and information could be used to gain access to other data or potentially compromise the organizations they are associated with.
The aspect of TikTok I find most concerning is the algorithm that decides what videos users see and how it can affect vulnerable groups, particularly young people. Independent of a ban, families should have conversions about TikTok and other social media platforms and how they can be detrimental to mental health. These conversations should focus on how to determine if the app is leading you down an unhealthy path.
Full-Year 2022 Revenue Up 131% Year-Over-Year to $88.0 Million
Fourth Quarter 2022 Revenue Up 128% to $29.4 Million
HOUSTON, March 23, 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 fourth quarter and fiscal year ended December 31, 2022.
Mark Walker, Chairman and Chief Executive Officer, commented, “We are pleased to report that 2022, our first year as a public company, saw robust financial performance, significant operational expansion and continued gains in market share for Direct Digital Holdings. Both our quarterly and full-year results capitalized on brands and businesses moving dollars away from less efficient traditional advertising outlets towards digital media. We are expecting strong double-digit percentage revenue growth in FY 2023 across both our sell- and buy-side business segments as we further drive customer adoption of our digital advertising solutions.”
Keith Smith, President, added, “Our fourth quarter and full-year 2022 performance, particularly during a difficult macroeconomic environment, is a testament to our market-leading approach working with middle market and multicultural audiences. Looking ahead, we are excited to continue scaling across these fast-growing and underrepresented communities from a position of financial strength, which we expect will give us a significant competitive advantage for sustainable, long-term growth.”
Fourth Quarter 2022 Financial Highlights:
Revenue was $29.4 million in the fourth quarter of 2022, an increase of $16.5 million, or 128% over the $12.9 million in the same period of 2021.
Sell-side advertising segment revenue grew to $22.3 million and contributed $15.6 million of the increase, or 231% growth over the $6.7 million of sell-side revenue in the same period of 2021.
Buy-side advertising segment revenue grew to $7.1 million and contributed $0.9 million of the increase, or 15% growth over the $6.2 million of buy-side revenue in the same period of 2021.
Operating income was $1.2 million for the fourth quarter of 2022 compared to $1.3 million in the same period of 2021.
Net income was $0.2 million in the fourth quarter of 2022, compared to a net loss of $2.1 million in the same period of 2021.
Adjusted EBITDA(1) was $1.8 million in the fourth quarter 2022, compared to $1.8 million in the same period of 2021.
Fiscal Year 2022 Financial Highlights:
Revenue in fiscal year 2022 was $88.0 million, an increase of $49.9 million, or 131%, over the $38.1 million in fiscal year 2021.
Sell-side advertising segment ended the year at $58.7 million in revenue and contributed $46.7 million of the increase, or 389% growth over the $12.0 million of sell-side revenue in fiscal year 2021.
Buy-side advertising segment ended the year at $29.3 million in revenue and contributed $3.2 million of the increase, or 12% growth over the $26.1 million of buy-side revenue in fiscal year 2021.
Operating income increased $2.3 million, or 52%, to $6.7 million for 2022 compared to operating income of $4.4 million for 2021.
Operating income for the buy-side and sell-side advertising segments combined totaled $14.0 million, an increase of $7.1 million, or 102%, compared to $6.9 million for 2021.
Net income for 2022 was $2.9 million, compared to a net loss of $1.5 million in 2021.
Adjusted EBITDA(1) for 2022 was $8.8 million, compared to $6.4 million for 2021.
Cash and accounts receivable balances as of December 31, 2022 were $29.1 million compared to $12.6 million as of December 31, 2021.
As previously disclosed, on January 9, 2023, the Company entered into a Loan and Security Agreement with Silicon Valley Bank which provides for a revolving credit facility (the “Credit Facility”). As the Company had not yet drawn any amounts under the Credit Facility, the Company issued a notice of termination of the Loan and Security Agreement and is in the process of terminating the Credit Facility. The Company has received a consent to terminate the Credit Facility and a waiver of the terms relating to the Credit Facility under its Term Loan and Security Agreement, dated as of December 3, 2021, with Lafayette Square Loan Servicing, LLC.
Based on our expectations of cash flows from operations and the available cash held, we believe that we will have sufficient cash resources to finance our operations and service any debt obligations until at least the end of fiscal year 2023.
Business Highlights
For the fourth quarter ended December 31, 2022, Direct Digital Holdings processed approximately 132 billion monthly impressions through its sell-side advertising segment, an increase of 81% over the same period of 2021, with over 833 billion bid requests for the quarter.
In addition, the Company’s sell-side advertising platforms received over 17 billion bid responses in the fourth quarter of 2022, an increase of over 25% over the same period in 2021, through 170,000 buyers for the quarter, which equates to a 109% increase over the same period in 2021.
The Company’s buy-side advertising segment served approximately 218 customers in the fourth quarter of 2022, an increase of 7% compared to the same period of 2021.
Financial Outlook
Assuming the U.S. economy does not experience any major economic conditions that deteriorate or otherwise significantly reduce advertiser demand, we estimate the following:
For fiscal year 2023, we expect revenue to be in the range of $118 million to $122 million, or 36% year-over-year growth at the mid-point.
“As we enter into our second year as a public company, we remain disciplined in our strategic organic growth initiatives, continue to focus on increasing EBITDA and aim to provide maximum value for our shareholders,” commented Susan Echard, Chief Financial Officer.
Conference Call and Webcast Details
Direct Digital will host a conference call on Thursday, March 23, 2023 at 5:00 p.m. Eastern Time to discuss the Company’s fourth quarter and full-year 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.
Footnote
(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, 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 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 Current Report on Form 8-K 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 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app and other media channels. Direct Digital Holdings is the ninth black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
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, forgiveness of Paycheck Protection Program loans, gain from revaluation and settlement of seller notes and earnout liability, 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:
Global Marketing Expert Calvin Scharff of Pixalate Joins as Group’s Vice President of Marketing
Information Systems Specialist Michael Ivancic, formerly of EMX, Named Head of Product
HOUSTON, March 20, 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 two digital media executives will be joining the Company in key roles. Calvin Scharff, who most recently served as Vice President of Global Marketing at Pixalate, is joining as the Company’s first Vice President of Marketing. In tandem, Michael Ivancic, who was previously Product Director of the Exchange at EMX by Big Village, is coming on board in a newly created position, as Direct Digital Holdings’ Head of Product.
“As Direct Digital Holdings and our operating companies continue on a growth trajectory, it is critical to attract top talent into the fold to drive our business further ahead,” said Mark D. Walker, CEO and Co-Founder of Direct Digital Holdings.
While at Pixalate, Calvin Scharff led the release of an industry-first Publisher Trust Index indexing 80 million+ websites, 8 million+ mobile apps, and 60,000+ CTV apps, driving trust and openness to the programmatic ecosystem. He was also responsible for building closed-loop marketing systems that relied on data and insights to successfully improve ROI. Before that, he was Vice President of Product Marketing at OpenX.
In his new post, Scharff will be overseeing the development and implementation of digital marketing and digital lead generation strategies in support of the corporate and business development objectives of Direct Digital Holdings and its subsidiaries. He will be reporting to the Company’s Chief Growth Officer, Maria Vilchez Lowrey.
“With Direct Digital Holdings serving both the buy- and sell-sides of the programmatic ecosystem, our marketing needs to address a multitude of stakeholders,” said Vilchez Lowrey. “Calvin’s track record in leading successful marketing efforts across the digital media landscape will be invaluable as we maximize multichannel marketing efforts to drive customer acquisition and retention.”
At EMX by Big Village, Michael Ivancic owned and developed the product roadmap and strategy for the advertising exchange, programmatic integrations (both supply- and demand-side), Prebid header-bidding adapter, identity solutions, first-party and third-party targeting and internal tooling. Prior, he served as Engineering Manager at Synacor, Inc. and earlier in his career, he held product and development positions at Adiant and Seevast, Inc.
As Head of Product at Direct Digital Holdings, Ivancic will be responsible for creating and implementing product strategy for buy-side and supply-side initiatives. He will report to Anu Pillai, Chief Technology Officer for the Company.
“Michael has a strong background in overseeing a management portfolio of products and a deep understanding of the evolving role that data and audience play in the programmatic market,” said Pillai. “He is going to be a tremendous asset as we drive productization within our various companies to successfully meet the needs of both the buy- and sell-side.”
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 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app, and other media channels. Direct Digital Holdings is the ninth Black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
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.
Company Expects Continued Revenue and EBITDA Growth in 2023
CHELMSFORD, MA / ACCESSWIRE / March 7, 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 fourth quarter and full-year period ended December 31, 2022. The results include one month of contribution from the acquisition of InsideOut Solutions in 2022, with no contribution in 2021. In addition, the results reflect the impact of the repurchase of all the Company’s outstanding Series A Convertible Preferred Shares (the “Preferred Shares”) from Wipro, LLC, the sole holder of the Preferred Shares, for a cash payment of $9.9 million, equal to the liquidation value, and 100,000 shares of Harte Hanks common stock.
Harte Hanks CEO, Brian Linscott, commented: “This was an important year for Harte Hanks, with results that reflect the successful culmination of our restructuring and the emergence of sustainable, profitable growth based on a differentiated offering and solid relationships with our top-tier customers. Our improved financial results have enabled us to materially strengthen our balance sheet. We have streamlined our capital structure by eliminating our debt and redeeming our preferred shares, thereby eliminating the dilutive effect of preferred shares going forward. Simultaneously, our pension liability was reduced by nearly $15 million, positioning us to commence the process to transfer one of our qualified pensions to a third party.”
“We have proven our operating leverage and earnings power with continued growth. Our 6% full-year revenue growth translated to a near doubling of operating income and a 75% increase in EBITDA,” concluded Linscott. “Demand for our solutions continues to grow, offsetting headwinds from the culmination of pandemic-related projects. We anticipate continued revenue and EBITDA growth for the full year of 2023, even though our first quarter results will include modest revenue growth and lower EBITDA on a year-over-year basis as result of an abnormally strong comparison period in 2022 driven by revenue mix.”
Fourth Quarter Financial Highlights
Revenues increased by 5.4% to $54.8 million, compared to $52.0 million in the same period in the prior year. Revenue for the fourth quarter of 2022 included approximately $1 million in revenue from InsideOut Solutions, acquired on December 1, 2022, with no contribution in the prior-year.
Fulfillment & Logistics Services grew 34.4%, offsetting decreases of 6.8% in Marketing Services and 12.9% in Customer Care. Customer Care decreases were largely related to the completion of pandemic-related projects.
Operating income of $3.4 million, compared to operating income of $2.9 million in the same period in the prior year, an increase of 19.8%.
Net income of $21.8 million, inclusive of a one-time $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability, and $1.4 million in other expenses mainly related to pension expense and foreign currency loss. This compared to net income of $1.8 million in the same period in the prior year, which included income tax expense of $271,000.
Diluted EPS was $2.70 for the fourth quarter of 2022 vs. $0.20 for the same period in the prior year. The tax benefit accounted for approximately $2.62 of the current-period earnings per share.
EBITDA was $4.4 million compared to $3.5 million in the same period in the prior year.[1]
[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.
Full-Year Financial Highlights
Revenues increased by 6.0% to $206.3 million, compared to $194.6 million in the prior year.
Fulfillment & Logistics Services grew 35.6%, offsetting declines in Marketing Services of 6.1% and Customer Care of 10.0%.
Operating income of $15.1 million, compared to operating income of $7.6 million last year, an increase of 97.8%.
Net income of $36.8 million, compared to net income of $15.0 million, last year. The 2022 results included a $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability, while the 2021 results included a one-time gain of $10.0 million related to the extinguishment of the Company’s PPP loan.
Earnings per diluted share of $4.75 compared to $1.76 per diluted share last year.
EBITDA 1was $17.8 million compared to $10.2 million last year.1
Segment Highlights
Customer Care, $16.7 million in revenue, 30% of total – Revenue decreased by 12.9%, or $2.5 million, from the prior year quarter, and year-over-year EBITDA increased by 24.4% to $3.2 million from $2.6 million. Decrease in revenue was driven by sunsetting of pandemic-related projects, but continuous improvement in retention and reduction in labor costs drove the EBITDA increase. New business wins for the quarter included:
A community-based health plan company selected Harte Hanks to support its members with plan related customer support. The company selected Harte Hanks to provide extended support hours for its members while maintaining its CMS 5-star rating. Harte Hanks has consistently delivered high CMS ratings for its clients through its rigorous training and certification process for employees and systems.
A global beverage company expanded services with Harte Hanks by extending its Customer Care solution to additional markets. The expansion allows our client to benefit from our lower cost facilities in the Philippines, while improving its customer experience with faster and easier access for support.
Fulfillment & Logistics Services, $24.5 million in revenue, 45% of total – Revenue increased by 34.4%, or $6.3 million, compared to the prior year quarter; and year-over-year EBITDA improved 5.9% to $2.3 million from $2.1 million. New business wins for the quarter included:
A growing international investment firm with approximately $30 billion of assets under management selected Harte Hanks to provide digital print and premium item fulfillment services to its brokers. Our financial services sector experience and streamlined onboarding to support a rapid pivot from a competitor were key differentiators in the selection process.
A leading branding company selected Harte Hanks Fulfillment to manage the production, kitting, and distribution of 250,000 makeup kits for a Fortune 200 retail partner. This partnership continues to lead to new value-added product fulfillment opportunities, unlocked by our investment in flexible, automated production lines.
Marketing Services, $13.6 million in revenue, 25% of total – Revenue decreased by 6.8% compared to the prior year quarterand year-over-year EBITDA decreased 18.4% to $2.1 million from $2.6 million. Decrease in revenue was driven by a reduction of Direct Mail work for clients. New business wins for the quarter included:
A leading premium brand retailer of Kitchen, Bath and Outdoor products selected Harte Hanks to design and execute a series of lead generation programs. Harte Hanks was chosen based on our extensive experience in retail strategy and ability to deliver a full suite of creative, data, analytics and campaign execution.
A leading global technology manufacturer expanded our successful B2B demand generation program into South America by utilizing Harte Hanks Audience Finder product to identify buyers with intent.
Consolidated Fourth Quarter 2022 Results
Fourth quarter revenues were $54.8 million, up 5.4% from $52.0 million in the fourth quarter of 2021. The Company’s Fulfillment & Logistics Services segment grew, more than offsetting declines in Marketing Services and Customer Care.
Fourth quarter operating income was $3.4 million, compared to operating income of $2.9 million in the fourth quarter of 2021. The improvement resulted from the elimination of restructuring expense and higher revenues.
Net income for the quarter was $21.8 million inclusive of $19.8 million tax benefit and $1.4 million in expenses related to pension and currency loss on intercompany receivables, compared to net income of $1.8 million in the fourth quarter last year. The Company recorded an income tax benefit of $19.8 million, or approximately $2.62 per diluted share, in the fourth quarter of 2022, compared to an expense of $271,000 in the fourth quarter of 2021. The tax benefit in the fourth quarter of 2022 was mainly related to the release of the majority of valuation allowances due to the improved profitability of the company. Income attributable to common stockholders for the fourth quarter was $20.4 million, or $2.81 per basic and $2.70 per diluted share (based on 7.6 million weighted average diluted shares outstanding), compared to net income attributable to common shareholders of $1.4 million, or $0.20 per basic and diluted share (based on 7.3 million weighted average diluted shares outstanding) during the prior year fourth quarter. Income attributable to common stockholders was reduced by a $1.4 million one-time loss on redemption of Preferred Stock.
Full-Year 2022 Results
Revenues for 2022 were $206.3 million, up 6.0% from $194.6 million last year. Operating income was $15.1 million, compared to operating income of $7.6 million last year. Net income for the year was $36.8 million (inclusive of a $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability), compared to net income of $15.0 million (inclusive of a $10.0 million gain related to the forgiveness of the Company’s PPP loan), last year. Income attributable to common stockholders for the year was $35.4 million, or $4.98 per basic share and $4.75 per fully diluted share, compared to net income attributable to common shareholders of $12.6 million, or $1.85 per basic share and $1.76 per fully diluted share.
Balance Sheet and Liquidity
Harte Hanks ended the year with $10.4 million in cash, cash equivalents and restricted cash, compared to $15.1 million at December 31, 2021. At December 31, 2022, the Company had nothing drawn on its line of credit, and $37.8 million in outstanding long-term pension liability. On December 31, 2021, the Company had no short-term debt, $5 million in long-term debt and $52.5 million in outstanding long-term pension liability.
During 2022, Harte Hanks has decreased outstanding debt by $5 million and redeemed its preferred shares for $9.9 million.
The company anticipates receiving a Federal income tax refund related to a net operating loss (NOL) carryback claim of $5.3 million which will further enhance liquidity.
Conference Call Information
The Company will host a conference call and live webcast to discuss these results on Tuesday, March 7, 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) 545-0523 in the United States or (973) 528-0016 from outside the U.S. and using access code 471821.
A replay of the call can also be accessed via phone through March 21, 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 47696.
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, 2021 which was filed on March 21, 2022. 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” 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) and depreciation expense. The most directly comparable measure for EBITDA is Net Income (Loss). We believe EBITDA is an important performance metric because it facilitates the analysis of our results, exclusive of certain non-cash items, including items which do not directly correlate to our business operations; however, we urge investors to review the reconciliation of non-GAAP 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.
Investor Relations Contact:
Rob Fink or Tom Baumann 646.809.4048 / 646.349.6641 FNK IR HHS@fnkir.com
