Direct Digital (NASDAQ:DRCT) reported lower first-quarter revenue but narrower losses as management said the advertising technology company is focusing on a streamlined operating model, new sales channels and its recently launched Ignition+ platform to return to growth.
On the company’s first quarter 2026 earnings call, Chairman and Chief Executive Officer Mark Walker said Direct Digital remains focused on organically growing its sales pipeline by improving how it reaches and supports customers across a broader set of go-to-market channels.
Revenue Declines, But Gross Margin Improves
Chief Financial Officer Diana Diaz said consolidated revenue for the first quarter of 2026 was $6.7 million, down from $8.2 million in the first quarter of 2025. The decline was driven by a $2 million decrease in spending by demand-side platform customers, partially offset by a $500,000, or 8%, increase in spending by other customers.
Gross profit was $2.3 million, or 34% of revenue, compared with $2.4 million, or 29% of revenue, in the prior-year quarter.
Operating expenses fell 13% to $5.5 million from $6.3 million a year earlier. The company reported an operating loss of $3.3 million, compared with an operating loss of $3.9 million in the first quarter of 2025.
Net loss for the quarter was $5.6 million, compared with a net loss of $5.9 million a year earlier. Adjusted EBITDA was a loss of $2.6 million, compared with an adjusted EBITDA loss of $3 million in the prior-year period.
Diaz said the company’s “efficiency and cost reduction initiatives drove operating results that were in line with our internal expectations and exceeded analyst estimates in the quarter.”
Company Shifts to One Reportable Segment
Diaz said Direct Digital has reassessed its reportable segments and determined that it now has one reportable segment: digital advertising.
The change follows a shift in focus toward “driving intentional digital marketing spend” with current and future customers historically classified as buy-side customers, as well as new enterprise customers accessing the digital advertising market through Ignition+.
Diaz said the new structure is expected to enhance the customer experience and better reflect the economics of the current business, where revenues primarily reflect contracts for managed advertising campaigns. Those campaigns may or may not access curated publisher audiences managed by the company’s sell-side platform.
Ignition+ Draws Early Interest
Walker said Direct Digital launched Ignition+ in March as a unified and transparent platform for programmatic media designed to maximize efficiency, reduce costs and combine AI-driven optimization with support from experienced specialists.
Since the launch, Walker said the company has seen “strong initial interest” from mid-market enterprise clients that value the platform’s transparency and efficiency, as well as its ability to help maximize marketing budgets without sacrificing scale.
“We believe that we’re well-positioned to benefit from this demand as we transition the interest we’re seeing into long-term partnerships,” Walker said.
Walker described Ignition+ as part of a broader strategic shift as Direct Digital works to rebuild after challenges it faced over the past several years. He said the company is executing on a new strategy to return to revenue growth by targeting digital marketing spend from existing and future customers, as well as mid-market and large enterprise customers.
Balance Sheet and Capital Discipline
Direct Digital ended the quarter with $800,000 in cash and cash equivalents, compared with $700,000 at the end of December 2025. Diaz said total cash plus accounts receivable was $3.6 million as of March 31, 2026, compared with $3.9 million at year-end 2025.
Diaz said the company continues to manage the business with an emphasis on capital discipline, liquidity and cost control as it moves into its next phase of execution.
Both Walker and Diaz said Direct Digital remains open to strategic opportunities, including partnerships or acquisitions, if they align with the company’s long-term goals and meet its financial and risk-return thresholds.
“While our primary focus remains execution and organic growth, we continually assess potential partnerships or acquisitions that align with our long-term objectives and shareholder value creation,” Walker said.
Management Discusses Travel, Vertical Expansion and AI
During the question-and-answer portion of the call, StoneX analyst Daniel Kurnos asked whether destination marketing organizations, or DMOs, were seeing budget pressure due to gas prices. Walker said Direct Digital has not seen reductions or headwinds in that market and remains optimistic about local and regional travel and tourism.
Walker said the company has recently won new business in the DMO market and is looking at expansion opportunities. He added that in prior downturns, local and regional travel has been resilient as consumers reduce airline travel and drive instead.
Asked about category expansion, Walker said Direct Digital continues to push into new verticals and is beginning to see more success. He said the company’s 2026 strategy includes both organic efforts and openness to strategic partnerships or inorganic growth.
In response to a question from Michael Kupinski of Noble Capital Markets about advertiser behavior, Walker said the company has not seen a notable change in campaign tactics, though there is increased interest in campaign performance and return on investment.
“We are seeing a significant amount more interest in campaign performance and performance marketing,” Walker said. He added that Direct Digital has historically emphasized metrics and views the increased focus on performance as favorable.
Asked about EBITDA margins, Walker said margin recovery is largely a matter of business mix and efficiency in campaign management. He said the company expects margin growth over the next few quarters as the mix changes and campaign management becomes more efficient.
On AI-driven campaign optimization, Walker said clients are still trying to better understand AI’s role in campaign management. He said Direct Digital uses internal tools that have performed well and believes AI can help drive efficiency and margin optimization over time.
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.
