Direct Digital Holdings Announces Receipt of Anticipated Additional Delinquency Notice

Rhea-AI Summary

Direct Digital Holdings (DRCT) has received an additional delinquency notice from Nasdaq on August 21, 2024, due to the delayed filing of its Q2 2024 Form 10-Q. This non-compliance with Nasdaq Listing Rule 5250(c)(1) could potentially lead to delisting. The company had previously received similar notices for its 2023 Form 10-K and Q1 2024 Form 10-Q filings. Nasdaq has approved the company's compliance plan, which aims to file the delayed reports by October 14, 2024. Direct Digital Holdings must update Nasdaq on its plan to file the Q2 Form 10-Q by September 5, 2024. Despite these issues, the company's stock continues to trade on The Nasdaq Capital Market under the symbol 'DRCT'.

Positive

• Nasdaq approved the company's compliance plan for filing delayed reports
• Company's stock continues to trade on The Nasdaq Capital Market

Negative

• Received additional delinquency notice from Nasdaq for delayed Q2 2024 Form 10-Q filing
• Non-compliance with Nasdaq Listing Rule 5250(c)(1)
• Potential risk of delisting from Nasdaq
• Multiple delayed financial reports (2023 Form 10-K, Q1 and Q2 2024 Form 10-Q)

Insights

Financial Compliance Analyst

This notice from Nasdaq highlights significant compliance issues for Direct Digital Holdings. The company's failure to file its Q2 2024 10-Q on time, following previous delays with its 2023 10-K and Q1 2024 10-Q, indicates persistent financial reporting challenges. This pattern raises red flags about the company's internal controls and financial management.

While Nasdaq has granted an extension until October 14, 2024, for filing the delayed reports, the accumulating delinquencies increase the risk of delisting. Investors should be cautious as these delays often suggest underlying issues, potentially affecting the reliability of financial data and the company's overall financial health. The market may react negatively to this uncertainty, potentially impacting stock price and investor confidence in the short term.

Corporate Governance Expert

The repeated filing delays at Direct Digital Holdings point to serious governance concerns. Timely financial reporting is important for maintaining transparency and investor trust. The company's inability to meet deadlines for multiple quarters suggests potential systemic issues in financial processes or internal controls.

While management claims to be working diligently to resolve the situation, the lack of concrete progress is worrying. Investors should closely monitor the company's ability to meet the September 5 deadline for updating its compliance plan. Failure to do so could escalate the situation, potentially leading to more severe regulatory actions or loss of investor confidence. This situation underscores the importance of robust corporate governance and the potential consequences of its breakdown.

HOUSTON, Aug. 27, 2024 /PRNewswire/ -- Today, Direct Digital Holdings, Inc. (the "Company") reported that the Company received an additional delinquency notice (the "Notice") from the Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") on August 21, 2024, which indicated that, as a result of the delay in the Company's filing of its Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the "Q2 Form 10-Q") by the applicable due date, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) (the "Rule"), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission (the "SEC"). The additional delinquency could serve as an additional basis for the delisting of the Company's securities from Nasdaq.

As disclosed by press release on April 17, 2024 and May 21, 2024, the Company previously received delinquency notification letters from Nasdaq and thereafter submitted its plan to Nasdaq to regain compliance with the Rule by filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "Form 10-K") and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the Q1 Form 10-Q" and together with the Q2 Form 10-Q, the "Delayed Reports") with the SEC by October 14, 2024, which plan Nasdaq ultimately approved. Nasdaq has now requested an update to the plan, particularly with respect to the Company's plan to file the Q2 Form 10-Q with the SEC. The Company plans to timely update Nasdaq with respect to the plan by September 5, 2024.

Neither the Notice nor the Company's non-compliance with the Rule will have an immediate effect on the listing or trading of the Company's securities on Nasdaq, which will continue to trade on The Nasdaq Capital Market under the symbol "DRCT." The Company continues to work diligently to complete and file the Delayed Reports with the SEC and thereby evidence compliance with the Rule as soon as practicable.

About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings' sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company's subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings' sell- and buy-side solutions manage on average over 125,000 clients monthly, generating over 300 billion impressions per month across display, CTV, in-app and other media channels.

Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws that 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 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. Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption "Risk Factors" and elsewhere in our most recent Annual Report on Form 10-K (the "Form 10-K") and subsequent periodic and or current reports filed with the Securities and Exchange Commission.

The forward-looking statements contained in this press release 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. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that 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. We believe these factors include, but are not limited to, the following: the restrictions and covenants imposed upon us by our credit facilities; our ability to secure additional financing to meet our capital needs; any significant fluctuations caused by our high customer concentration; risks related to non-payment by our clients; reputational and other harms caused by our failure to detect advertising fraud; 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; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; 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; our failure to manage our growth effectively; the difficulty in identifying and integrating any future acquisitions or strategic investments; any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing; challenges related to our buy-side clients that are destination marketing organizations and that operate as public/private partnerships; any strain on our resources or diversion of our management's attention as a result of being a public company; the intense competition of the digital advertising industry and our ability to effectively compete against current and future competitors; 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; as a holding company, we depend on distributions from Direct Digital Holdings, LLC ("DDH LLC") to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and any amount of any dividends we may pay to the holders of our common stock; the fact that DDH LLC is controlled by DDM, whose interest may differ from those of our public stockholders; any risks associated with the material weakness that was identified in our review of internal control over financial reporting as of December 31, 2022; any failure by us to maintain or implement effective internal controls or to detect fraud; our ability to complete the audit of our financial statements for the fiscal year ended December 31, 2023; and other factors and assumptions discussed in our Form 10-K and subsequent periodic and current reports we may file with the SEC. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Contacts
Brett Milotte, ICR
investors@directdigitalholdings.com

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SOURCE Direct Digital Holdings

FAQ

Why did Direct Digital Holdings (DRCT) receive a delinquency notice from Nasdaq on August 21, 2024?

Direct Digital Holdings received a delinquency notice from Nasdaq due to the delayed filing of its Q2 2024 Form 10-Q, which violates Nasdaq Listing Rule 5250(c)(1) requiring timely filing of periodic financial reports.

What is the deadline for Direct Digital Holdings (DRCT) to file its delayed financial reports?

According to the company's compliance plan approved by Nasdaq, Direct Digital Holdings aims to file its delayed reports (2023 Form 10-K, Q1 and Q2 2024 Form 10-Q) by October 14, 2024.

Is Direct Digital Holdings (DRCT) at risk of being delisted from Nasdaq?

Yes, Direct Digital Holdings is at risk of being delisted from Nasdaq due to non-compliance with listing rules. However, the company's stock continues to trade on The Nasdaq Capital Market while it works to resolve the issue.

When does Direct Digital Holdings (DRCT) need to update Nasdaq on its plan to file the Q2 2024 Form 10-Q?

Direct Digital Holdings is required to update Nasdaq on its plan to file the Q2 2024 Form 10-Q by September 5, 2024.