Direct Digital Holdings (DRCT) 2026 年第一季 10-Q 摘要

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2026
OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 001-41261
_________________________________________________________
DIRECT DIGITAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_________________________________________________________

Delaware87-2306185
(State or other jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)

1177 West Loop South, Suite 1310

Houston, Texas
77027
(Address of principal executive offices)(Zip code)

(832) 402-1051
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:Trading symbol(s)Name of Each Exchange on Which Registered:
Class A Common Stock, par value $0.001 per shareDRCTNasdaq Capital Market

________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated FileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 13, 2026, there were 701,243 shares of the registrant’s Class A Common Stock outstanding, par value $0.001 per share, and 42,160 shares of the registrant’s Class B Common Stock outstanding, par value $0.001 per share.

Table of Contents

TABLE OF CONTENTS

PAGE
ITEM

Part I. Financial Information
3

1.
FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025
3

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025
4

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2026 and 2025
5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025
6

Notes to Condensed Consolidated Financial Statements
7

2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29

3.
Quantitative and Qualitative Disclosures About Market Risk
41

4.
Controls and Procedures
41

Part II. Other Information
42

1.
Legal Proceedings
42

1A.
Risk Factors
42

2.
Unregistered Sales of Equity Securities and Use of Proceeds
44

3.
Defaults Upon Senior Securities
44

4.
Mine Safety Disclosures
44

5.
Other Information
44

6.
Exhibits
45

Signatures
47

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value amounts)

March 31, 2026December 31, 2025
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$796 $728 
Accounts receivable, net of provision for credit losses of $944
2,782 3,126 
Prepaid expenses and other current assets826 890 
Total current assets4,404 4,744 

Property, equipment and software, net133 166 
Goodwill6,520 6,520 
Intangible assets, net7,438 7,852 
Operating lease right-of-use assets655 702 
Other long-term assets109 172 
Total assets$19,259 $20,156 

LIABILITIES AND STOCKHOLDERS’ DEFICIT  
CURRENT LIABILITIES  
Accounts payable$8,294 $7,820 
Accrued liabilities1,887 2,164 
Accrued liabilities - related party512 3,663 
Liability related to tax receivable agreement, current portion41 41 
Current maturities of long-term debt - related party16,548 12,003 
Deferred revenues776 513 
Operating lease liabilities, current portion227 221 

Total current liabilities28,285 26,425 

Long-term debt, net of current portion145 146 
Operating lease liabilities, net of current portion550 608 
Total liabilities28,980 27,179 

COMMITMENTS AND CONTINGENCIES (Note 9)  

STOCKHOLDERS’ DEFICIT  
Series A Convertible Preferred Stock, $0.001 par value per share, 10,000,000 shares authorized, 27,077 shares issued and outstanding
— — 
Class A Common Stock, $0.001 par value per share, 760,000,000 shares authorized, 700,759 and 331,076 shares issued and outstanding, respectively
1 — 
Class B Common Stock, $0.001 par value per share, 20,000,000 shares authorized, 42,160 shares issued and outstanding
— — 
Additional paid-in capital28,403 25,812 
Accumulated deficit(32,970)(27,720)
Noncontrolling interest(5,155)(5,115)
Total stockholders’ deficit(9,721)(7,023)
Total liabilities and stockholders’ deficit$19,259 $20,156 

See accompanying notes to the unaudited condensed consolidated financial statements.
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DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per-share data)

Three Months Ended
March 31,
20262025
Revenues$6,680 $8,157 
Cost of revenues4,418 5,764 
Gross profit2,262 2,393 

Operating expenses
Compensation, taxes and benefits3,021 3,664 
General and administrative2,492 2,653 
Total operating expenses5,513 6,317 
Loss from operations(3,251)(3,924)

Other income (expense)
Other income7 28 
Loss on settlement of accounts payable(1,247)— 
Loss on debt extinguishment(517)— 
Expenses for Equity Reserve Facility— (198)
Interest expense and amortization of deferred financing cost and debt discount (premium), net(563)(1,846)
Total other expense, net(2,320)(2,016)

Loss before income taxes(5,571)(5,940)
Income tax expense— — 
Net loss(5,571)(5,940)

Net loss attributable to noncontrolling interest(321)(3,585)
Net loss attributable to Direct Digital Holdings, Inc.$(5,250)$(2,355)

Net loss per common share attributable to Direct Digital Holdings, Inc.:
Basic and diluted$(10.32)$(77.21)

Weighted-average number of shares of common stock outstanding:
Basic and diluted57531

See accompanying notes to the unaudited condensed consolidated financial statements.
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DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
(in thousands except share data)
Three Months Ended March 31, 2026

Preferred StockCommon StockAPICAccumulated
DeficitNoncontrolling InterestStockholders’
Deficit
Series A ConvertibleClass AClass B
UnitsAmountUnitsAmountUnitsAmount
Balance, December 31, 202527,077$— 331,076$— 42,160$— $25,812 $(27,720)$(5,115)$(7,023)
Stock-based compensation—— —— —— 183 — — 183 
Issuance related to vesting of restricted stock units, net of tax withholdings—— 1,392— —— — — — — 
Issuance pursuant to the Equity Reserve Facility—— 216,2501 —— 1,118 — — 1,119 
Settlement of accounts payable through issuance of common stock—— 152,041— — — 2,028 — — 2,028 
Preferred dividends accrued—— — — — — (457)— — (457)
Net loss—— —— —— — (5,250)(321)(5,571)
Noncontrolling interest rebalancing—— —— —— (281)— 281 — 
Balance, March 31, 202627,077$— 700,759$1 42,160$— $28,403 $(32,970)$(5,155)$(9,721)

Three Months Ended March 31, 2025

Common StockAPICAccumulated
DeficitNoncontrolling InterestStockholders’
Deficit
Class AClass B
UnitsAmountUnitsAmount
Balance, December 31, 202424,775$— 49,400$— $3,786 $(8,774)$(14,742)$(19,730)
Stock-based compensation—— —— 316 — — 316 
Issuance related to vesting of restricted stock units, net of tax withholdings153— —— — — — — 
Issuance pursuant to the Equity Reserve Facility6,997 — —— 2,039 — — 2,039 
Conversion of Class B to Class A Common Stock318 — (318)— (95)— 95 — 
Net loss— — — — — (2,355)(3,585)(5,940)
Noncontrolling interest rebalancing—— —— (2,252)— 2,252 — 
Balance, March 31, 202532,243$— 49,082$— $3,794 $(11,129)$(15,980)$(23,315)

See accompanying notes to the unaudited condensed consolidated financial statements.
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DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Three Months Ended March 31,
20262025
Cash Flows Used In Operating Activities:
Net loss$(5,571)$(5,940)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred financing cost and debt discount (premium), net18 1,818 
Amortization of intangible assets414 488 
Reduction in carrying amount of right-of-use assets47 46 
Depreciation and amortization of property, equipment and software33 68 
Stock-based compensation183 316 
Loss on settlement of accounts payable1,247 — 
Loss on debt extinguishment517 — 
Interest paid in kind542 — 
Expenses for Equity Reserve Facility— 198 

Changes in operating assets and liabilities:
Accounts receivable344 582 
Prepaid expenses and other assets127 69 
Accounts payable1,114 (633)
Accrued liabilities and tax receivable agreement payable(275)254 
Income taxes payable— 19 
Deferred revenues263 51 
Operating lease liability(53)(44)
Net cash used in operating activities(1,050)(2,708)

Cash Flows Used In Investing Activities:
Cash paid for capitalized software and property and equipment— (15)
Net cash used in investing activities— (15)

Cash Flows Provided by Financing Activities: 
Payment of expenses for Equity Reserve Facility— (198)
Proceeds from issuance of Class A Common Stock1,119 3,311 
Payment of deferred financing cost— (46)
Payments on loans(1)— 
Net cash provided by financing activities1,118 3,067 

Net increase in cash and cash equivalents68 344 
Cash and cash equivalents, beginning of the period728 1,445 
Cash and cash equivalents, end of the period$796 $1,789 

Non-cash Financing Activities:
Reclassification of Exit Fee from accrued liabilities to debt$3,608 $— 
Settlement of accounts payable through issuance of common stock$2,028 $— 
Accrued dividends$457 $— 
Common stock issued for subscription receivable$— $90 

See accompanying notes to the unaudited condensed consolidated financial statements.
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DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Organization and Description of Business
Direct Digital Holdings, Inc., incorporated as a Delaware corporation on August 23, 2021 and headquartered in Houston, Texas, together with its subsidiaries, is an end-to-end, full-service advertising and marketing platform primarily focused on providing advertising technology, data-driven campaign optimization and other solutions to help brands, agencies and middle market businesses deliver successful marketing results that drive return on investment ("ROI") across the entire digital advertising ecosystem. Direct Digital Holdings, Inc. is the holding company for Direct Digital Holdings, LLC (“DDH LLC”), the business formed by the Company's founders in 2018 through acquisitions of Colossus Media, LLC (“Colossus Media”) and Huddled Masses, LLC (“Huddled Masses®” or “Huddled Masses”). Colossus Media operates the Company’s proprietary programmatic platform under the trademarked banner of Colossus SSPTM (“Colossus SSP”). In September 2020, DDH LLC acquired Orange142, LLC to further bolster its overall programmatic advertising platform and to enhance its offerings across multiple industry verticals.

In February 2022, Direct Digital Holdings, Inc. completed an initial public offering and certain organizational transactions which resulted in the Company's current Up-C structure. (See Note 6 — Related Party Transactions). During the first quarter of 2026, the Company shifted its focus to driving intentional digital marketing spend with current and future customers historically classified by the Company as buy-side customers as well as new enterprise customers accessing the digital advertising market through its recently launched product - Ignition+. In connection with this shift in focus, the Company reassessed its reportable segments and determined that it has one reportable segment that is managed on a consolidated basis. The new focus to streamline operations is expected to enhance the customer experience and better reflects the economics of the Company's current business where revenues reflect primarily contracts for managed advertising campaigns which may or may not access curated publisher audiences managed by the Company's sell side platform. In these consolidated financial statements, the “Company,” “Direct Digital,” “Direct Digital Holdings,” “DDH,” “we,” “us” and “our” refer to Direct Digital Holdings, Inc., and, unless otherwise stated, all of its subsidiaries, including DDH LLC and, unless otherwise stated, its subsidiaries. All of the subsidiaries are incorporated in the state of Delaware, except for DDH LLC, which was formed under the laws of the State of Texas.

Direct Digital Holdings, Inc. owns 100% of the voting interest in DDH LLC and as of March 31, 2026, it owns 94.3% of the economic interest in DDH LLC. DDH LLC was formed on June 21, 2018 and acquired by DDH on February 15, 2022 in connection with its organizational transactions. DDH LLC’s wholly-owned subsidiaries are as follows:

SubsidiaryDate of FormationDate of
Acquisition
Colossus Media, LLCSeptember 8, 2017June 21, 2018
Orange142, LLCMarch 6, 2013September 30, 2020
Huddled Masses, LLCNovember 13, 2012June 21, 2018

The Company provides technology-enabled advertising solutions and consulting services to clients either through multiple demand side platforms (“DSPs”) or through its own programmatic advertising platform (Colossus SSP), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets. In the digital advertising space, buyers, particularly small and mid-sized businesses, can potentially achieve significantly higher ROI on their advertising spend compared to traditional media advertising by leveraging data-driven over-the-top/connected TV (“OTT/CTV”), video and display, in-app, native including programmatic, search, social, influencer marketing and audio advertisements that are delivered both at scale and on a highly targeted basis.

Note 2 — Basis of Presentation and Consolidation and Summary of Significant Accounting Policies
Basis of presentation and consolidation
The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Rule 8-03 of Regulation S-X. Accordingly, the condensed consolidated financial statements may not include all of the information and notes required by GAAP for audited financial statements. The condensed consolidated balance sheets as of December 31, 2025 included herein was derived from audited financial statements but does not include all disclosures 
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required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of items of a normal and recurring nature, necessary to present fairly the Company’s financial position as of March 31, 2026, the results of its operations for the three months ended March 31, 2026 and 2025, cash flows for the three months ended March 31, 2026 and 2025, and stockholders’ deficit for the three months ended March 31, 2026 and 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full year. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, and related disclosures, as of the date of the financial statements, and the amounts of revenues and expenses reported during the period. Actual results could differ from estimates. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2025. 
The condensed consolidated financial statements include the accounts of Direct Digital Holdings, Inc. and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards otherwise applicable to public companies until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) it is no longer an emerging growth company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The adoption dates discussed below reflect this election.
Reverse Stock Splits

On January 8, 2026 and April 24, 2026, the Company filed certificates of amendment to the amended and restated certificate of incorporation, as amended, with the Secretary of State of the State of Delaware, to effect a 55-to-1 reverse stock split and a 4-to-1 reverse stock split, respectively, of all classes of our issued and outstanding common stock, without any change to par value. The 55-to-1 reverse stock split (the "January Reverse Stock Split") became effective January 12, 2026 and the 4-to-1 reverse stock split (the "April Reverse Stock Split") became effective April 27, 2026. Together, the January Reverse Stock Split and the April Reverse Stock Split are referred to as the Reverse Stock Splits. No fractional shares were issued in connection with the Reverse Stock Splits as all fractional shares were rounded down to the next whole share, and a cash payment was made in lieu of such fractional shares. The Reverse Stock Splits were intended to bring the Company into compliance with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"). All share and per share amounts of our common stock listed in the condensed consolidated financial statements and footnotes have been adjusted to give effect to the Reverse Stock Splits.

Revenue recognition 
The Company recognizes revenue using the following five steps: 1) identification of a contract with a customer; 2) identification of the performance obligation(s) in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligation(s) in the contract; and 5) recognition of revenue when, or as, the performance obligation(s) are satisfied. The Company’s revenues are derived primarily from digital advertising and the Company does not disaggregate the revenue earned. The Company maintains agreements with its customers in the form of written service agreements, which set out the terms of the relationship, including payment terms (typically 30 to 90 days).
The Company generates revenue primarily from customers that enter into agreements with the Company to provide managed advertising campaigns, which include digital marketing and media services to purchase digital advertising space, data and other add-on features either through its own programmatic platform operating under the trademarked banner Colossus SSP or through third-parties such as DSPs.
In connection with the Company’s analysis of principal-versus-agent considerations, the Company has evaluated the specified goods or services and considered whether the Company controls the goods or services before they are provided to the customer, including the three indicators of control. Based upon this analysis and the Company’s specific facts and circumstances, the Company concluded that it is a principal for the goods or services sold. The Company controls the specified goods or services before it is transferred to the end customer. Additionally, the Company is the primary obligor in its agreements with customers. Therefore, the Company reports revenue on a gross basis inclusive of all supplier costs and pays suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.
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In the advertising industry, companies commonly experience seasonal fluctuations in revenue. Historically, the second and third quarters of the year have reflected our highest levels of advertising activity and the first quarter reflects the lowest level of such activity.
The Company purchases media based on the budget established by its customers with a focus on leveraging data services, customer branding, real-time market analysis and micro-location advertising. The Company offers its services on a fully managed basis, which is recognized over time using the output method when the performance obligation is fulfilled. An “impression” is delivered when an advertisement appears on pages viewed by users. The performance obligation, consisting of a series of distinct services, is satisfied over time as the volume of impressions are delivered up to the contractual maximum. Many customers run several different campaigns throughout the year to capitalize on different seasons, special events and other happenings at their respective regions and localities. The Company provides digital advertising and media buying capabilities with a focus on generating measurable digital and financial life for its customers.
Revenue arrangements are evidenced by a fully executed insertion order (“IO”), a master service agreement (“MSA”) and/or a statement of work ("SOW") covering the scope of work to be accomplished and could be a combination of marketing execution tactics. Generally, IOs specify the number and type of advertising metrics to be delivered over a specified time at an agreed upon price under payment models commonly referred to as CPM (cost per impression) or CPC (cost per click). The majority of the Company’s contracts are flat-rate, fee-based contracts and may include provisions for management, agency or other professional fees.
Cash payments received prior to the Company’s delivery of its services are recorded to deferred revenue until the performance obligation is satisfied. The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayment, of $0.8 million and $0.5 million as of March 31, 2026 and December 31, 2025, respectively. Revenue recognized during the three months ended March 31, 2026 and 2025 from amounts included within the deferred revenue balances at the beginning of each respective period amounted to $0.3 million and $0.2 million, respectively.
Cash payments made to customers to support integration efforts and long-term contracts are recorded to prepaid expenses or other long-term assets and amortized to revenue over the term of the contract. The Company recorded these cash payments in prepaid expenses and other current assets for $0.3 million and in other long-term assets for $0.1 million as of March 31, 2026 and December 31, 2025. During the three months ended March 31, 2026 and 2025, other assets amortized were less than $0.1 million and $0, respectively.
Accounting Standards Codification ("ASC") 606 provides various optional practical expedients. The Company elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts with an original expected duration of one year or less.

Goodwill
As of March 31, 2026 and December 31, 2025, goodwill was $6.5 million, including amounts related to acquisitions in 2018 and in 2020. The goodwill is deductible for tax purposes and is assessed for impairment at least annually (December 31) starting with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, entity-specific financial performance and other events, such as changes in our management, strategy and primary user base. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative goodwill impairment analysis is performed. Depending upon the results of the quantitative measurement, the recorded goodwill may be written down and an impairment expense is recorded in the condensed consolidated statements of operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit. Goodwill is reviewed annually and tested for impairment upon the occurrence of a triggering event. The Company determined that there was no impairment of goodwill during the three months ended March 31, 2026 and 2025.

Intangible assets, net
Intangible assets consist of customer relationships, trademarks and non-compete agreements. Intangible assets are recorded at fair value at the time of their acquisition and are stated within the condensed consolidated balance sheets net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives and recorded as amortization expense within general and administrative expenses in the condensed consolidated statements of operations. The Company’s intangible assets are being amortized over their estimated useful lives using the straight-line method with other intangibles over 10 years.
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Impairment of long-lived assets
The Company evaluates the recoverability of long-lived assets, including property, equipment and software costs and intangible assets if facts or circumstances indicate that any of those assets might be impaired. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows to determine if a write-down to fair value is necessary. No impairment loss was recognized during the three months ended March 31, 2026 and 2025.

Stock-based compensation
Stock-based compensation cost for options and restricted stock units (“RSU”) awarded to employees and directors is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). Contingently issued awards with a requisite service period that precedes the grant date are measured and recognized at the start of the requisite service period and remeasured each reporting period until the grant date. 
The Company estimates the fair value of RSUs based on the closing price of the Company’s common stock on the date of the grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the Company’s stock price, as well as assumptions regarding the expected common stock price volatility over the term of the stock options, the expected term of the stock options, risk-free interest rates and the expected dividend yield. The risk-free interest rate is derived using the U.S. Treasury yield curve in effect at date of grant. Other assumptions are based on historical experience and activity. The Company considers an estimated forfeiture rate for stock options based on historical experience and the anticipated forfeiture rates during the future contract life.

Income taxes
In February 2022, concurrent with its organizational transactions, the Company entered into a tax receivable agreement (“Tax Receivable Agreement” or “TRA”) with DDH LLC and Direct Digital Management, LLC (“DDM”). The TRA provides for certain income (loss) allocations between the Company and DDH LLC under the agreement. DDH LLC is a limited liability company, is treated as a partnership for federal income tax purposes and generally is not subject to any entity-level U.S. federal income tax and certain state and local income taxes. Any taxable income or loss generated by the Company is allocated to holders of LLC units (“LLC Units”) in accordance with the Second Amended and Restated Limited Liability Company Agreement (“LLC Agreement”), and distributions to the owners of LLC Units in an amount sufficient to fund their tax obligations. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss under the LLC Agreement. Pursuant to the Company’s election under Section 754 of the Internal Revenue Code (the “Code”), the Company expects to obtain an increase in its share of the tax basis in the net assets of DDH LLC when LLC Units are exchanged by the members of DDH LLC. The Company made an election under Section 754 of the Code for each taxable year in which an exchange of LLC interest occurred. No shares were exchanged during the three months ended March 31, 2026. During the three months ended March 31, 2025, members of DDM exchanged 318 shares of Class B Common Stock into shares of Class A Common Stock.
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets.

Accounts receivable, net
Accounts receivable primarily consists of billed amounts for products and services rendered to customers under normal trade terms. The Company performs credit evaluations of its customers’ financial condition and generally does not require collateral. Accounts receivable are stated at net realizable value. The Company insures a significant portion of its accounts receivable with unrelated third-party insurance companies in an effort to mitigate any future write-offs. Management periodically reviews outstanding accounts receivable for reasonableness. If warranted, the Company processes a claim with the third-party insurance company to recover uncollected balances, rather than writing the balances off to bad debt expense. The guaranteed recovery for the claim is approximately 90% of the original balance, and if the full amount is collected by 
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the insurance company, the remaining 10% is remitted to the Company. If the insurance company is unable to collect the full amount, the Company records the remaining 10% to bad debt expense. The Company’s provision for credit losses reflects the current expected credit loss inherent in the accounts receivable considering the Company’s aging analysis, historical collection experience, custome