Trade Desk earnings just came out
I would call it an “as expected” quarter.
Revenue came in a little above guidance at $395 million, +24%, but keep in mind, that was a non-election political spend Q4 in 2021 compared to a humungous amount of political spend in the presidential election cycle year in Q4 2020, so it’s kind of amazing that they even grew 24% considering how much tougher the comp was in the prior year. Next year, with the midterm cycle, it will go the other way with Q4 '22 getting an extra boost.
Q1 2022 guidance of $303 million shows a more normal (non election impacted) growth rate of +38%, which they’ll certainly beat and probably be in the mid 40%'s
And keep in mind, TTD is a very seasonal business, so you can’t look at Q4 to Q1 sequential growth like you can with other companies since advertising peaks every year in Q4 due to Holiday advertising.
I’m a bit disappointed that they only provided Q1 guidance and not full year. Will be interesting to see if they get asked about it on the call and what can be read into how they respond (e.g. are their expectations really high but they’re afraid to over-promise, or is there a reason why they are being more cautious than they have recently, etc)
For the year, they say they generated $6.2 billion of spend on the platform, up 42% for the year, (that’s how much their customers spent and TTD collected from them. However, those of you that follow the Trade Desk know that, due to the accounting rules, TTD has to record revenue “net” meaning they can only put their commission (or “take rate”) into revenue, which was about $1.2 billion in 2021. In other words, of the $6.2 billion they charged customers for advertising, $5.0 billion of it they paid back out to the owners of the advertising space (streaming services etc) and they keep $1.2 billion, which for other companies is essentially similar to a gross margin.
So that suggests that their take rate or comission rate was about 19.4% in 2021. In the prior year, they said they had ad spend of $4.2 billion with $836m of revenue, so it was 19.9% in 2020. That decline may be impacted by how fast their CTV revenue is growing which may be slightly lower margin than some other types, I’ll need to dig in to see if I can get a better sense of what’s driving this.
G&A expenses were very high in Q4, there is a footnote on the press release that notes that this is mostly driven by a long terms CEO performance stock based comp grant in Q4. It’s a big number, but hey, I consider Jeff Green to be the one of the best CEO’s I’ve ever invested in, so if this is what it takes to keep him locked in for the next several years, I have no problem with that. I suspect he’s going to earn it several times over. and this isn’t an “every year” kind of thing, it was a long term grant, and he did comment last year that he expects to be CEO of TTD for at least several more years. If they lost Jeff, that would have a big impact on my investment thesis.
The press release refers to continued growing adoption of Unified ID 2.0, which they support to essentially replace “cookies” that are being phased out. They list Snowflake as one of the companies that is partnering and supporting UID 2.0, which is nice to see.
Most of the rest of what is in the press release is a recap of the announcements they’ve made earlier in 2021 (Walmart partnership, Samsung Ads partnership, launch of new Solimar platform, expansion of NBC/Peacock partnership, etc)
They have the rare mid-trading day earnings call, which takes place at 8:30am pacific time, or 11:30am east coast time. I’ll be listending and looking forward to hearing what else they share during the call.