Saul,
I can only say that I share your misgivings. Q3 was indeed a very bad quarter from a numerics standpoint. Trade Desk does seem to have some seasonality in Q2 to Q3 being the weakest growth quarter of the year (aside from Q4 to Q1 which is somewhat typical amongst companies). Q4 by contrast is the strongest quarter of the year.
By the numbers, sequentially, revenue grew to 164.2M from 159.9M, or 4.3M. Gross profit actually fell to 124.3M from 124.6M, a decline of 0.3M. Net income fell further to 19.4M versus 27.9M, a decline of 8.5M. The only good thing I can say about the numbers is that share count only barely increased sequentially.
I have almost never sold a company based upon a single quarterly result. However, TTD needs to have a very strong Q4 to remain amongst my largest positions. They are guiding to 213M, which would be 30% sequential growth and 33% y/o/y growth. I’d like to see them maintain the 38% y/o/y growth rate (“a round up to 40%”) as they did in Q3 and do 221. Also on my wish list is that their GAAP net margin recovers to Q2 levels.
As long as they are in the range of 215+, and no material change to the story, I will continue to hold and hope for accelerating growth next year.
I can’t explain the strong stock price performance in Q4. I can only say what makes me attracted to The Trade Desk. I like the fact that they are GAAP EPS positive, have modest dilution, and they have strong story for future growth. Very few of our companies are significantly GAAP EPS positive, indeed even mighty Alteryx has turned EPS negative for the last two reported quarters. I think that is appealing to investors relative to other opportunities.
Thanks,
Rob