The Trade Desk Q1 2022 Results

Investment Analysis Clubs Saul’s Investing Discussions
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Non-GAAP EPS of $0.21 beats by $0.07.

Revenue of $315.32M (+43.5% Y/Y) beats by $11.04M.

For 2Q22, the company expects revenue of at least $364M vs. consensus of $364.72M and Adjusted EBITDA of approximately $121M.

Results:
https://seekingalpha.com/pr/18787328-trade-desk-reports-firs…

Transcript:
https://seekingalpha.com/article/4509838-trade-desk-inc-ttd-…

So The Trade Desk I honestly felt killed it this quarter. Ok everyone is getting their guidance completely dismissed but this is a baseline.

The profitability and leverage of this business is incredible.

CCT is coming on stream and non Ad platforms are turning to advertising and walled gardens are opening
Partnerships expansion are taking place
UID2 is becoming more and more adopted
OpenPath has been launched
Solimar conversion is virtually complete (at 80% penetration)
The data and retail businesses are taking off

Mid term election advertising and further partnerships will make for a successful outcome in 2022.

What I find very interesting about where the company stands with these results is that whilst holding a P/S of ~20 as many of our SaaS investments do, this digital SaaS business with SaaS level margins has reached such profitable levels of operations and leverage at a $1bn run rate that it is sitting at a P/E of only 48 for a company growing revenues at 44%.

Now sure if you wanted to use the total $ value of underlying advertising passing through the platform of $5-6bn/year then your P/S and margin levels look different however I would liken $ value of advertising on the platform to GMV not revenues.

If ever there was an analog demonstrating how the high P/S of our cloud based SaaS companies can potentially square with a reasonable P/E valuation, then TTD is a great role model to keep an eye on.

Ant

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I agree with the above, and would add 2 further points: the developments at Netflix are an obvious net positive and we can excuse management for giving conservative guidance in this macro environment (particularly given the after effects of overly enthusiastic guidance from UPST).

Make no mistake that TTD are killing it whilst being GAAP profitable. I will add TTD down here and let you know how it goes after a few years

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Mid term election advertising

Good call, I had forgotten about that. Which could help offset potential softness in ad budget spend due to weaker economy in 2H.

The cons, I saw:
No full year forecast. Can’t really use the covid excuse any longer, so this speaks more to economy, and remember that TTD did take a hit during covid, even though their stock price grew, as companies curbed their ad budgets for a few Q’s.

While I agree they have profitability in their favor, that multiple (both P/S and P/E) are still higher than I would like. But they aren’t too far off, and have been back on my radar since stock price breached the $40s.

The other con was the actual decrease of profitability, due to rising costs, per TMF article:
https://www.fool.com/investing/2022/05/11/is-the-trade-desk-…

“However, investors seemed to focus on the bottom line, which – on a GAAP basis – translated to a loss per share of $0.03, down from a gain of $0.05 in the prior-year quarter. The culprit was a massive increase in The Trade Desk’s general and administrative expenses, which grew to $125.8 million, an increase of 143%, and drove the entirety of the company’s net loss.”

A lot of this tied to stock comp for CEO Jeff Green, who may be worth it, although it is a mammoth comp, in relation to size of their business today (they aren’t Apple):
“CEO Jeff Green closed out last year in fine fashion, achieving certain benchmarks that triggered the award of roughly $616 million in stock-based compensation. That amount will be paid out over the coming four years, with a chunk of that coming due in 2022.”

So it is a slightly mixed bag, and I am hoping the macro environment brings it lower so I can get back in again. Sold out in Jan 2020 at what is now $26.50.

Dreamer

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