The Trade Desk Q2 Results

The Trade Desk reported their Q2 earnings on August 8 AH and the stock soared up nearly 37% the following day. The spike was a result of two things, in my opinion. First, a very strong earnings report and Q3 guidance. And secondly, because the stock was so beaten down and expectations were very low, I believe this report caught the market off guard resulting in the stock being quickly rerated. I myself was caught off guard with these numbers as I expected more disappointing growth following the earnings and warnings regarding the advertising market from companies like Snapchat, Roku and Meta. It appears The Trade Desk is a bit more protected and insulated from these macro issues thanks to their dominate position in connected TV (CTV). CTV is quickly becoming the horse that is carrying this company. Three years ago in Q2 2019, video (including CTV) made up approximately 26% of the spend on their platform. Today, that number is just over 40%. It reminds me of Atlas and MongoDB in a way. CTV is their fastest growing segment and it is now also their largest spend by channel. I believe that as CTV continues to make up a greater percentage of their spend, there is a good chance we could see this company reaccelerate growth in 2023.

Here are some of the highlights from the report:

• Revenue was $377M, up 35%, from $280M a year ago. While 35% might not be the sexiest number around these woods, I consider it quite impressive considering the macro environment and results of other ad tech companies and, TTD’s Q2 revenue last year was up 101% YoY so this made for challenging comps.

• Adjusted EBITDA was $139M, up 18%, from $118M a year ago. Adjusted EBITDA margins dropped by roughly 5% YoY to 37% due to the cost of in person events and ramping up investments in S&M and R&D. I like this, while others are slowing down the pace of investment to conserve capital, TTD is in a position to invest and grab land because they have been GAAP profitable for years and are sitting on a pile of cash with no debt ($1.2B to be exact).

• Adjusted EPS was $0.20, increasing from $0.18 a year ago.

• Customer retention was over 95% as it has been for the past eight consecutive years.

I would be remiss if I did not mention a few of my favorite remarks from the call. Jeff Green, along with Matthew Prince, is always a must listen when it comes to earnings calls. These two CEO’s always exude confidence and charisma on their calls and don’t mince words. They call it how they see it, and here is how Green sees things today.

“We outpaced our competitors and continued to gain market share despite some macroeconomic uncertainty. In the first half of the year, marketers shifted to decision data-driven advertising on the open Internet more rapidly than ever. And as a result, The Trade Desk has become increasingly indispensable as the default DSP for the open Internet and connected TV.

"Many people looking at our results, including those in the advertising industry, are asking how we are winning and growing at this pace in the current environment. There are a few vectors and macro factors that are creating an amazing opportunity for us to grow into a much bigger company and win share regardless of the economic environment… First, there is a secular tailwind that continues to propel us forward, and that’s the worldwide shift to advertising-fueled connected television.

I don’t know that we’ve ever experienced a secular tailwind like this before. CTV is evolving faster than anyone predicted. And if we continue to execute, I believe we will benefit as much as any company in the world from this tailwind… The second macro factor that is helping us grab share is that walled gardens like Google’s ad network are being downgraded in priority."

I liked the first question asked by an analyst as well – essentially how the heck are you guys doing so well when everyone else around you in the industry is struggling?? (which was also addressed above).

Analyst Question:

“This is now the second quarter in a row where your results and outlook are significantly better than what we’re seeing from other ad-supported companies, especially in the face of a slowing macro… What is driving that outperformance?”

Jeff Green, CEO Answer:

"First, we have an amazing secular tailwind of CTV, arguably the best secular tailwind we’ve ever had. Second, we are, of course, seeing the benefits of Solimar, which we’ve gone to 100%, and it just has all these benefits to our clients. Third, we’ve got this momentum around the joint business plans where we’re just getting closer to brands, and we’re creating better partnerships with each of them…

People look at our performance and say how is this so different than everybody else’s. And what is often happening is we’re winning because of those secular tailwinds and because programmatic is growing share and because digital is growing share."

Me here: This sounds to me like a company reaching the tipping point of a massive shift. That shift of course being connected TV. The Trade Desk is perfectly positioned to capture this market and is starting to see the fruits of their labor. Green has been preaching this for many, many quarters now and things are starting to come to together just as he predicted. As a result, while other ad tech companies are missing and slashing or pulling guidance, The Trade Desk just keeps chugging along, business as usual. CTV is booming, Solimar already has 100% customer adoption and they are continuing to gain traction for UID 2. From my point of view, this company is firing on all cylinders and find themselves in an strong position in a market that is poised to grow for years to come (CTV). I would not be at all surprised to see revenue growth reaccelerate in 2023 if the macro economic environment begins to improve. As advertising budgets begin to grow, The Trade Desk will be there to reap the benefits. With the massive rise in the share price this week, TTD has now grown to my second largest holding behind DDOG at nearly 17% and I have no intentions of trimming this. I think it is one that deserves a deeper look from many on this board.



Thanks, Rex. Good recap.

TTD should also see it’s usual every-other-year bump from political ad spend during the upcoming midterms. That should at least help the floor for the next couple quarters.


I’ve owned TTT for a few years now, and have built up a 6% position, especially over the last few months.

Jeff Green is one of those CEOs that I’d put in the category of the Bezos, Hastings, Schultz. Great leader, knows his industry. I am always looking for companies with great CEOs leading the charge.
TTD just keeps performing and outperforming it’s peers.

I’m not sure TTD is going to get much love here, when companies grow at 35% or under, people tend to move on with this approach. I do think that TTD can grow its revenues 30% plus over the next decade, and I love holding companies like this, and just watch them do their thing over a long runway of time. Time in this case being our friend.

TTD is in a great position to carve out a significant piece of the advertising pie for a very long time to come. They just seem to be doing all the right things.



One of my bigger takeaways from the earnings call is that Jeff Green suggested that TTD will likely get future business from the new Netflix ad-supported plans. When Netflix announced the deal with Microsoft, a lot of outlets suggested that it means that other ad-tech companies would be left out completely, although that may not be the case.

Other Sale side (SSP)'s are more likely to be left out (although Pubmatic’s CEO also seemed to indicate on their call last week that there would be a place for them in the Netflix ad world too), but it does make sense that Demand side players (DSP’s) like TTD would still have a role and be selling Netflix ads, especially if Microsoft serves primarily as an SSP.

Regardless, if you asked me a the begginning of the year when Netflix would offer an ad-supported plan, I would have guessed it was a few years away, so, as an investor with TTD being among my biggest positions, any benefits of Netflix money would all be gravy, whenever it comes.

Here are the pertinent quotes from CEO Jeff Green from last week’s call:…

We have a great relationship with Netflix.

We also have a great relationship with Microsoft. We’ve had many constructive conversations with Netflix over the last few months. I personally am very impressed with how quickly they are diving into advertising. The Netflix partnership with Microsoft is very positive news for the open Internet.

The fact that Netflix didn’t choose Google is very telling. We believe it’s another strong indication that more industry leaders recognize the opportunity of the open Internet compared to the dangers and limitations of walled gardens. By partnering with Microsoft on the supply side of the digital advertising equation, Netflix controls its own destiny. They chose a partner that can represent their interests, not one with a conflict of interest.

Xandr is a strong sell-side partner and has been a great partner of ours for years. In fact, almost 12 years ago, I initiated the partnership between Microsoft and AppNexus, the company they now own that has been renamed Xandr. Netflix and Xandr have a lot of ground to cover. Once they’ve done the work on the supply side, driving as much demand as possible toward those ad impressions will come next.

Over time, Netflix is very well positioned to open their ad inventory on the demand side to the open Internet. that would enable demand-type players to compete in an open objective and decision market, driving high CPMs and maximizing the value for both the advertiser and the publisher, in this case, Netflix. They will need to figure out how to do what Disney and their properties like Hulu are doing so well right now, which is creating a personalized TV and ad experience that respects consumer privacy. Disney is setting the pace on this today, which sets a model for what technologically savvy media companies like Netflix and NBCU and Paramount and so many others are likely to pursue very quickly as well.

and then later in response to an analyst question:

Youssef Squali – Truist Securities – Analyst

Great. Thank you for taking the questions and, obviously, congrats on a really strong performance, all things considered. Jeff, with Netflix going with Microsoft and Xandr being an SSP but also DSP itself, what does that mean for The Trade Desk opportunity with Netflix over time? And as there is going to be a great deal of inventory coming into the CTV market from Netflix and, I guess, others, just could that be a depressant factor for pricing for connected TV in the short and medium term?..

Jeff Green – Founder and Chief Executive Officer

You bet. Thanks, Youssef, for the question. I actually was hoping somebody would ask about Netflix and Microsoft because I think it’s one of the most exciting things that’s happened in our space in the quarter. So let me first just restate something that Netflix stated on their earnings call, which I think is a direct quote.

It’s still early days. So Netflix has been like learning about the advertising business or in the advertising business for only a few months as they have established a very important but early partnership. But I for one was very excited when I learned that they had selected Microsoft for a number of reasons. As many of you know, I worked at Microsoft before I sold the first ad exchange to Microsoft.

I, in fact, introduced the president of the ads division at the time the CEO of AppNexus, which later became Xandr. So it’s been a part of my personal journey, as well as the fact that I’ve just been very close to AppNexus and Xandr. Of course, then are now being owned by Microsoft. Xandr, as you point out, Youssef, has a small DSP but it is primarily an SSP.

They primarily focus on the sell side. If you look at the – if you were to stack rank the major players of demand for CTV, I think you’d find that we’re the largest, and somewhere around No. 10 near the bottom of the top 10 list would be Xandr in terms of size. I would estimate that they provide less than 10% of the demand to other independent inventory or content companies.

So as a result, what I think that is, is a clear identity strategy. I think they very clearly are going to have to have a strategy both for identity, as well as for monetization that involves the open Internet. Because this is early days, it’s less important to me about the role that Trade Desk plays with Netflix in the crawl phase than it does in the walk and the run phase. And to me, selecting Microsoft makes it so it’s nearly inevitable that Netflix will be a part of the open Internet and that they’ll welcome demand from lots of different places and that that will be the only way that they can maximize their inventory and get the highest CPM as possible.

As somebody who wants to see Netflix do well and has a strong relationship with Netflix leadership, I think this is a solid plan. It’s a great start. There’s a lot of work ahead of them. But I think that we’re extremely likely to have a great partnership with them over the long term, but there’s a lot of stuff that has to be done in order for Netflix to be the leader in AVOD that they’ve been in SVOD. But I’m looking forward to it.



They primarily focus on the sell side. If you look at the – if you were to stack rank the major players of demand for CTV, I think you’d find that we’re the largest, and somewhere around No. 10 near the bottom of the top 10 list would be Xandr in terms of size. I would estimate that they provide less than 10% of the demand to other independent inventory or content companies. – Jeff Green

If you look at the math there… it doesn’t work out for Xandr to be #10 with anything close to 10%.

ASSUMING Xandr is indeed #10, they would have considerably less than 10% as a “major player”, especially if/as Trade Desk is dominate.

From that, I would conclude that Xandr might be too small to take on the entire NFLX job, leaving more for others (read: TTD, given the relationships in place).

Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.


What does everyone think of the news that apple is looking to build their own demand side platform ?
They have a large user base with massive first party data that can be more powerful that the UID2 method used by TTD.
Also because UID2 is not first party data is there risk that TTD is eventually legally barred from using this data.
I may be way off base but I see some existential risk potential

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Three years ago in Q2 2019, video (including CTV) made up approximately 26% of the spend on their platform. Today, that number is just over 40%. It reminds me of Atlas and MongoDB in a way. CTV is their fastest growing segment and it is now also their largest spend by channel. I believe that as CTV continues to make up a greater percentage of their spend, there is a good chance we could see this company reaccelerate growth in 2023.

The Trade Desk is set up for accelerated growth in Q4 (Q3 would need a 9% beat on revenues to show almost 40% YoY revenue growth). As was already mentioned on this thread, the contribution made by CTV will influence this significantly as well as TTD taking market share, the election cycle, increased large partnerships and pretty good comps coming in Q4. It’s not impossible that revenues accelerate in Q3, but it may be difficult given the historical beat numbers. Given the fact that TTD’s historical growth numbers have been inconsistent albeit primarily in the right direction, they could blow out Q3 and get to 40% growth. If the economy doesn’t significantly slow down, this could happen. I think that they’ll get pretty close to doing so. This would be nice. But not necessary for us to get great returns going forward.

Here are the historical revenues, guidance, growth and beat numbers:

QGuide	Mar	Jun	Sep	Dec	Tot		AGuide	Mar	Jun	Sep	Dec	
2017		67	76	101	244		2017	291	303	306	403	
2018	73	103	116	147	439		2018	433	456	464	637	
2019	116	154	163	213	646		2019	645	653	658	863	
2020	169	NG	179	289	637		2020	NG	NG	NG	NG	
2021	216	261	282	388	1,146		2021	NG	NG	NG	NG	
2022	303	364	385				2022	NG	NG			
Rev	Mar	Jun	Sep	Dec	Tot		Grth	Mar	Jun	Sep	Dec	Tot
2015	18	24	29	43	114		2015					
2016	30	47	53	72	203		2016	69.2%	94.5%	84.1%	69.7%	78.6%
2017	53	73	79	103	308		2017	75.6%	54.3%	50.0%	41.7%	51.9%
2018	86	112	119	160	477		2018	60.6%	54.3%	49.6%	56.4%	54.9%
2019	121	160	164	216	661		2019	41.2%	42.4%	38.2%	34.6%	38.5%
2020	161	139	216	320	836		2020	32.8%	-12.9%	31.6%	48.1%	26.5%
2021	220	280	301	396	1,196		2021	36.8%	100.9%	39.3%	**23.7%**	43.1%
2022	315	**377**					2022	43.5%	34.6%			
QBeat	Mar	Jun	Sep	Dec								
2017		9%	4%	2%								
2018	17%	9%	2%	9%								
2019	4%	4%	1%	1%								
2020	-5%	NA	21%	11%								
2021	2%	7%	7%	2%								
2022	4%	4%													

I listened to the earnings call twice, and I am most encouraged by the company’s consistent strategic message that has carried over from prior earnings calls and the validation of the messaging with consistently good numbers. I’m reminded of the 1997 book Innovator’s Dilemma by Clayton Christensen, which shows how great companies get disrupted by new companies by focusing too much on protecting existing business and leaving low end gaps for upstarts to come in and eventually dominate. TTD’s agnostic platform is such a disruptive technology that the walled gardens of Google & Facebook were forced to ignore in order to protect their power and existing revenue streams.

Although TTD is not a hyper-growth company like the others we analyze on this board, it’s a company that could grow 25%-30% for years. And with the increasing importance of CTV, we could see really nice stock appreciation with just a bit less volatility than we’re used to.