Thank you for standing by. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Direct Digital Holdings First Quarter 2025 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to Jennifer Belodeau, IMS Investor Relations. Please go ahead.

Good afternoon, everyone and welcome to Direct Digital Holdings’ first quarter 2025 earnings conference call. On today’s call are Direct Digital Holdings’ Chairman and Chief Executive Officer, Mark Walker and Chief Financial Officer, Diana Diaz. Information discussed today is qualified in its entirety with the Form 8-K and accompanying earnings release, which has been filed today by Direct Digital Holdings, which maybe accessed at the SEC’s website and the company’s website. Today’s call is also being webcast, and a replay will be posted to DRCT’s Investor Relations website. Immediately following the speaker’s presentation, there will be a question-and-answer session. Please note that the statements made during the call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements. These statements are made on the basis of DRCT’s views and assumptions regarding future events and business performance at the time they are made and we do not undertake any obligation to update these statements. Forward-looking statements are subject to risks, which could cause DRCT’s actual results to differ from its historical results and forecasts, including those risks set forth in DRCT’s filings with the SEC and you should refer to those for more information. This cautionary statement applies to all forward-looking statements made during this call. During this call, DRCT will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that DRCT filed in its Form 8-K today. Now I’ll hand over the conference call to Mark Walker, Chief Executive Officer. Please go ahead, Mark.

Thanks, Jen and thank you to everyone joining our call this evening. I’ll start by reviewing some of the highlights of our operations and financial results during the first quarter before turning the call over to our Chief Financial Officer, Diana Diaz, for a more detailed look at our financial results. We’ll conclude by opening the call for a brief Q&A. As we begin to move through 2025, our focus is on scaling our buy-side solution and rebuilding our sell-side business to drive consolidated revenue growth throughout the fiscal year. In the first quarter, we recognized consolidated revenue of $8.2 million, including $6.1 million in revenue from our buy-side segment, a 6% increase compared to buy-side revenue in the first quarter of 2024. The increase included growth from customers in new verticals of $1.2 million. Sequentially, our first quarter sell-side revenue of $2 million was relatively consistent with fourth quarter sell-side revenue of $2.7 million, demonstrating an encouraging trend given that our fourth quarter is typically the strongest driven by increased activity around the holidays and our fourth quarter 2024 included $700,000 of political spend. So, we are pleased with the performance of our sell-side segment in Q1 and continue to focus our efforts on scaling this segment to drive consolidated revenue growth. In the first quarter of 2025, we continue to see the impact of the disruption of our sell-side business during the previous year resulting from multiple short attacks. As many of you are already aware, a market discredited blog post against our supply-side platform, Colossus SSP in mid-May of 2024 caused an unexpected business disruption amongst our partners, advertisers, and clients. As we continue to repair the business and reconstitute our relationships, volumes have not yet returned to pre-pause levels, and this caused a meaningful reduction in…

Thank you, Mark and good evening everyone. I will now provide a review of our first quarter 2025 results. Consolidated revenue in the first quarter of 2025 was $8.2 million, a decrease of $14.1 million compared with revenue of $22.3 million in the first quarter of 2024. Sell-side revenue was $2 million in the first quarter compared with $16.5 million in the first quarter of 2024. A decrease in sell-side advertising revenue was primarily related to a decrease in impression inventory when compared to the first quarter of 2024. As Mark said, a market discredited blog post against our supply-side platform, Colossus SSP, in mid-May 2024 caused an unexpected business disruption amongst our partners, advertisers, and clients. As we continue to repair the business and reconstitute our relationships, volumes have not yet returned to pre-pause levels, and this caused a meaningful reduction in our fiscal year 2024 revenues and also impacted the first quarter of 2025. Buy-side revenue of $6.1 million increased approximately 6% compared with the first quarter of 2024, primarily driven by a $1.2 million increase in spending from customers in new verticals. Gross profit dollars decreased to $2.4 million in the first quarter compared with $5 million in the prior year period. Due to the shift in revenue mix that includes a larger portion of higher margin buy-side revenue, gross margin for the first quarter of 2025 increased to 29% compared with 22% in the first quarter of 2024. Moving now to operating expenses, our first quarter 2025 operating expenses were $6.3 million, a decrease of 19% or $1.5 million compared with $7.8 million in the same period of 2024. This reduction in operating expenses was primarily related to lower payroll costs and staff reductions made effective July 1, 2024, as part of our internal reorganization strategy…

Thank you, Diana, and thank you to everyone for joining. As always, we appreciate your interest in Direct Digital Holdings and are looking forward to answering your questions. Operator, please open the line.

[Operator Instructions] And your first question comes from the line of Michael Kupinski with Noble Capital Markets. Please go ahead.

Thank you and thanks for taking my questions. I was wondering in terms of the sell-side customer that cut back last year, I was just wondering if you can give us a sense of maybe in talking to that customer what they might build back in terms of the business and maybe as a percent of 2024 spending levels, if you have any insight there. And then based on the revenue guide that you are giving for the full year, can you kind of give us a sense of what percent of revenues will be derived from the buy-side versus the sell-side?

Yes. Now, I appreciate the question, Michael. In regards to the customer from last year, what we are focusing on is to all direct – is to really go for a strategy of direct connections. So, what we believe in the most cost-efficient way for us to continue to grow the sell-side of our business is through direct relationships with different DSP partners that we actually have in the marketplace. And so what we have been working diligently on is making those direct connections with those partners. What we believe the overall impact of that direct connections will be and the strategy we have with Colossus Connections is really focused in on driving additional top line revenue dollars, increasing our margin profile as it relates to the SSP business, because it’s direct instead of working through multiple intermediaries. And then we also think that our clients and customers, we could see an increase in demand in the future state as it relates to the second half of the year. So, that’s why we maintain a bullish outlook for Q3 and Q4 as we believe some of those direct relationships will be coming online. And then as it relates to your second question that you asked as it relates to the split between buy-side, sell-side, as you know, we have been working diligently on growing the buy-side of our business. We anticipate and what we have projected out is for that to be at the $40 million range and then for the sell-side of the business to be north of that number in order to close out the 90 to 110 range.

Thank you for that color. And just as a quick follow-up, in terms of your cost-cutting initiatives, you mentioned about the payroll cost, and I would assume that most of that would be variable. Do you anticipate that kind of give us a sense of maybe the extra efforts that I think you are continuing to look at cost efficiencies and so forth? Is there a dollar amount that you plan to save this year? And are those mostly coming from variable cost reductions, or can you just kind of give us some color on those efficiencies, and when do you expect that you will continue to see those realized?

Yes. I am going to turn that over to Diana and answer that question.

Sure. Michael, we actually saw those cost reductions in the current quarter. Our operating expenses were down 19%, and those costs are fixed costs. There are staff that’s on hand, working every day, and we did cut our staff 20% back on July 1st. We saw savings in the second half of last year, and we continue to see those into the first quarter, and those will be ongoing, so not variable.

Got it. I appreciate that. That’s all I have. Thank you very much, and good luck to you guys.

Thank you.

Thank you, Michael.

[Operator Instructions] And our next question comes from the line of Daniel Kurnos with Benchmark. Please go ahead.

Yes. Great. Thanks. Just real quick, Mark, just how quickly are these integrations going to ramp with DSPs? And do you have any thoughts on sort of the broader marketplace given kind of the carnage in the Google space?

Thanks. Yes, absolutely. Yes, I think with the cookie deprecation on-again, off-again relationship, I think for the foreseeable future, I don’t think cookies are going to go anywhere. I do think alternative IDs are still going to have an impact in the marketplace. And I think we are already seeing other partners actually leveraging some of those third-party cookies that are actually out there. So, I think those are going to be a permanent part of the overall infrastructure. With regards to the breaking up of Google, if you will, between their ad tech business and all the rest of their businesses, I think it’s, we are in a wait-and-see mode on that. I think there is a lot of moving pieces as it relates to the judicial process that they are going through. So, for us, we are treating it as business as usual, and we will wait until we see definitive action from the judicial on how we are going to respond and deal with that accordingly. In regards to the ramp up of the integrations, each integration partner is different. Some move faster than others. Some have a little bit of legacy code that they are working through. So, those are going to be variable in time. And so what we are anticipating is we will see the impact of that come Q3 and Q4 of this year.

There are no further questions at this time. I will now turn the call back over to management for closing remarks.

With that stated, we thank you for your continued support of Direct Digital Holdings and that concludes our Q1 2025 call. So, thank you very much and we look forward to seeing you next quarter.

Ladies and gentlemen, that concludes today’s call. Thank you all for joining and you may now disconnect.