The Trade Desk reported Q2’24 after market close yesterday and it was a good, largely “steady as she goes” report.
and they also put out a Q2 investor presentation deck:
The stock had been knocked down a bit lately, especially after Google’s ad business reported a soft quarter, so the market may have been expecting some disappointment and is happy with TTD’s overall report and the stock is up about +9% this morning as I write this.
When the company reported Q1 three months ago, they guided for +23.9% revenue growth, and it came in at +26.0%.
The company continues to grow profits (TTD has been consistently profitable for several years). GAAP net income increased by more than +150%, from $33 million in Q2’23 last year, to $85 million this quarter in Q2’24.
They now guide for +25.3% revenue growth next quarter in Q3, with $618 million. Even with no beat at all, that $618 million would exceed the $606 record quarterly revenue achieved in the fourth quarter of last year, even despite Q3 not being a peak seasonal holiday period quarter.
Q3 will be boosted by extra presidential election advertising spend this year, which in recent cycles I believe has been in the mid to high single digits. This was also the first time that Olympic advertising was available to be sold by TTD. So I’m betting that the +25.3% guide could prove to be pretty conversvative and I won’t be suprised if they come in above +30% next quarter.
There were no questions at all on the guidance during the earnings call, which I found interesting. They mostly asked about the industry and market trends and progress with partnerships with Netflix and some of the other streaming services. It came across, to me, like the analysts see this business as a long term opportunity, and were not as short term focused as we’ve usually come to expect.
Looking at the YoY growth rates by quarter over the last few years:
Q1 Q2 Q3 Q4
2020 33% -13% 32% 48%
2021 37% 101% 39% 24%
2022 43% 35% 31% 24%
2023 21% 23% 24% 23%
2024 28% 26% 25%(q3 guide)
And sequential growth (note that Q1 is typically going to be negative sequential growth given the seasonally strong holiday quarter in Q4)
Q1 Q2 Q3 Q4
2020 -26% -13% 55% 48%
2021 -31% 27% 8% 31%
2022 -20% 20% 5% 24%
2023 -22% 21% 6% 23%
2024 -19% 19% 6%(q3 guide)
I believe Google only achived +11% growth in advertising this quarter, so TTD’s +26% shows that they continue to take a significant amount of market share each quarter. And I think we are still pretty early in the transition of advertising spend to CTV and streaming, which should continue to benefit The Trade Desk in an outsized way in coming years.
TTD CEO Jeff Green was his usual upbeat, enthusiastic self on the earnings call, saying this (my bolding for emphasis):
“I believe that we will continue to outpace the market in the years to come, led by areas such as Connected TV, which are only getting stronger. In fact, one of the most bullish things happening in advertising today are evident in our performance. Through the first half of this year, CTV growth has accelerated versus the first half of last year.”
In May, TTD released the inaugural “Sellers and Publishers Report” a new assessment of advertising trends on the open internet.
Jeff spoke to some of the highlights of the report during the earnings call, noting that trends have consistently moved away from the walled gardens (primarily Google/Facebook), which has, and should continue to, benefit The Trade Desk (again, my bolding):
“One of the trends that, that report showcases is the massive shift over the last four years in terms of where consumers are spending their digital time. It used to be that consumers spend about 60% of their time within walled gardens and 40% on the open Internet. That trend has completely reversed since the pandemic. Why? Well, in large part, it’s because of the mass consumer shift to emerging premium open Internet channels such as CTV and digital audio.”
In May, Netflix announced that it would be partnering with The Trade Desk (and Google and Magnite) for advertising. When asked about the timing of when the company would start to see revenue from Netflix, Jeff said it might only ramp up “a little bit” this year, and to expect a more significant ramp benefiting from them in “the next few years”
Magnite, who as a supply side platform is also partnering with Netflix but not in direct competition with TTD (demand, ad purchasing, side), was also asked about Netflix timing on their recent earnings call and said Netflix will have an expanded programatic launch this summer and a “more broad rollout in 2025”.
So TTD might be underpromising and a bit more conservative when answering the same question. Regardless, there are lots of trends that should benefit The Trade Desk in the near future and the company, and their CEO, continue to sound like they know where things are moving and will be ready to benefit as the industry grows and evolves.
Hard to complain about anything I’m seeing or hearing from them here. Although my TTD position is very large, I don’t see any reason to change much between now and when we get the next update from The Trade Desk with Q3 results in November.
-mekong