Direct Digital (NASDAQ:DRCT) executives highlighted a continued pivot toward the company’s buy-side advertising business, cost reductions, and balance sheet actions during the company’s fourth-quarter and full-year 2025 earnings call. Chairman and CEO Mark Walker said the company is “a focused, more nimble organization with a realigned structure,” while CFO Diana Diaz detailed a year marked by buy-side growth and steep declines in sell-side revenue.
2025 results show buy-side growth, sell-side decline
For the full year, Walker said Direct Digital reported $34.7 million in sales. He noted that while sell-side revenue declined during the year, the company grew buy-side revenue, maintained “strong gross margins,” and focused on efficiency and cost reduction. Walker also said the company made “significant strides in improving our balance sheet,” while acknowledging there is still work to do as the company enters 2026.
Sell-side revenue fell sharply to $200,000 in the quarter from $2.7 million in the prior-year period. Diaz attributed the decrease primarily to a decline in impression inventory compared with the fourth quarter of 2024.
Margins, losses, and expense reductions
Diaz said gross margin for the fourth quarter was 27%, down from 32% in the fourth quarter of 2024. Operating expenses in the quarter were $6.7 million, down 12% from $7.7 million a year earlier.
On a full-year basis, Diaz said operating expenses declined 18% to $25.2 million in 2025 from $30.6 million in 2024, a reduction of $5.4 million. “Expense reduction remains a key strategic priority,” Diaz said.
Total operating loss in the fourth quarter was $4.5 million, which Diaz said was consistent with the fourth quarter of 2024. Net loss widened to $12.6 million from $6.6 million a year earlier, driven in part by $7.4 million of “non-operational financing related costs.” Adjusted EBITDA was a loss of $3.6 million, compared with an adjusted EBITDA loss of $3.4 million in the prior-year quarter.
In response to an analyst question about additional cost cuts, Diaz said the company expects further reductions tied to the sell-side business, where certain contracts are winding down. She estimated the impact at “about half a million a quarter” beginning in the second quarter.
Shift in strategy and launch of Ignition+
Walker said the company has observed a shift in the broader digital advertising market that “prioritizes buy-side transactions” and a customer push for more accessible buy-side media. He said buy-side revenue grew 10% year-over-year and was supported by demand across verticals including travel and tourism, higher education, and energy.
As part of the company’s buy-side focus, Walker said Direct Digital launched Ignition+ in March 2026, describing it as an “AI-enabled programmatic media solution” aimed at improving accessibility for large enterprise clients in the buy-side network. He said the platform is intended to prioritize transparency, efficiency, and cost reduction through AI-driven optimization and site curation.
Walker said Ignition+ combines sell-side intelligence and data from the company’s Colossus business with Orange 142’s programmatic media technology stack, with the goal of “centralized buying that enables brands to buy media instead of markups.” He added that Ignition+ is designed for mid-market enterprise brands that have “traditionally been forced to choose between transparency and scale.”
Walker also said Direct Digital is consolidating its operations into a single reporting segment beginning in 2026, calling the change part of a streamlined operating structure to more efficiently go to market.
How management described sell-side operations
Asked how investors should view the sell-side business going forward, Walker said the company sees it primarily as a “margin capture opportunity.” He said Direct Digital is increasingly running buy-side demand dollars through its sell-side platform “to the benefit of our customers,” and described it as a strategy that can help capture “an extra 20% to our bottom line” when more volume flows through that channel.
Balance sheet actions, reverse split, and NASDAQ notice
Diaz said the company ended the quarter with $700,000 in cash and cash equivalents, down from $1.4 million at the end of the prior year. Total cash plus accounts receivable at Dec. 31, 2025 was $3.9 million, compared with $6.4 million at the end of last year.
She outlined several financing and capital structure actions taken during 2025:
- Third quarter of 2025: issuance of $25 million of a new series of convertible preferred stock through conversion of a portion of existing debt into “perpetual convertible preferred stock.”
- Fourth quarter: issuance of an additional $10 million of Series A preferred stock and expansion of the company’s equity reserve facility by 50 million shares or $100 million.
- 2025: the company raised $7.3 million through the equity reserve facility.
Diaz also noted that the board and shareholders approved a 55-to-1 reverse stock split of all classes of common stock on Dec. 30, 2025, implemented on Jan. 8, 2026.
In addition, Diaz said the company filed an 8-K disclosing receipt of a NASDAQ listing deficiency notice related to stockholders’ equity as of Dec. 31, 2025, as reported in the company’s Form 10-K. She said management is working with advisors on next steps “intended to bring us back into compliance.” Diaz called the NASDAQ listing “a key asset” for visibility among institutional investors and said the company will “prioritize our listing on NASDAQ and evaluate and take the necessary steps to preserve our status.”
Looking ahead, Walker said the company’s streamlined structure, balance sheet restructuring, operational improvements, and cost discipline are intended to position Direct Digital “to return to positive platform growth and achieve break even or better quarterly performance by the second half of this year.”
About Direct Digital (NASDAQ:DRCT)
Direct Digital Holdings, Inc (NASDAQ: DRCT) is a provider of cloud-based marketing software and services tailored to mortgage lenders and real estate professionals. The company’s integrated platform is designed to help its clients generate, nurture and convert leads through customer relationship management (CRM), automated marketing campaigns, customizable websites and digital content delivery. By combining proprietary tools with expert support, Direct Digital enables users to streamline workflows, improve customer engagement and drive growth in competitive markets.
The company’s flagship offerings include a CRM system that centralizes prospect and client data, marketing automation that triggers timely email and digital campaigns, and website solutions that are optimized for lead capture and search-engine visibility.
