TTD

[tchalla]

The trade desk doesn’t get much love on here beyond Dreamer, but I think that results today show why it’s well worthy on consideration. Long since $45.

We broke our previous revenue record and surpassed our own expectations during the second quarter. Record revenue of $112.3 million was a 54% increase year over year which equaled the 54% year over year increase we had last year in the second quarter. Net income was a record $19.3 million. Connected TV, audio, mobile and video led our channel growth. Our momentum continued with additional large customer wins and robust international growth. During the quarter, we also launched the Next Wave, the biggest product launch in our company’s history. The Next Wave includes three game-changing components: Koa™, a powerful artificial intelligence (AI) agent; The Trade Desk Planner, a data-driven media planning tool; and Megagon™, our intuitive new user experience.”

Second Quarter and Recent Business Highlights Include:

Continued Omni-channel Growth: Omni-channel solutions remain a strategic focus for The Trade Desk as the industry continues shifting toward transparency and programmatic buying. Specific channel spend highlights include:

Mobile (in-app, video and web) grew 89% from Q2 2017 to Q2 2018.
Mobile increased to 45% of gross spend for the quarter, its highest percentage ever, highlighting the growing importance of this channel to advertisers.
Connected TV more than doubled from Q1 2018 to Q2 2018.
Audio grew 191% from Q2 2017 to Q2 2018.
Mobile video grew 156% from Q2 2017 to Q2 2018.
Mobile in-app grew 104% from Q2 2017 to Q2 2018.
Strong Customer Retention: Customer retention remained over 95% during the quarter, as it has for the previous 18 quarters.
New Products and Features: On June 26, 2018, The Trade Desk launched a range of new products that will help advertisers use data-driven insights to plan, forecast, and buy digital media more effectively than ever before. Collectively referred to as the Next Wave, this release includes three transformative products:

Koa™ is powerful AI that improves advertisers’ decisioning and accelerates campaign performance. Koa™’s robust and transparent forecasting engine is built on The Trade Desk’s valuable data set – including nearly nine million queries every second – to help buyers extend audience reach and spend more efficiently.

The Trade Desk Planner is a data-driven media planning tool that delivers audience insights and informs ad strategies across channels and devices.

Megagon™ is an intuitive new user interface that proactively surfaces tailored insights and offers Koa™ recommendations to help advertisers make real-time optimization decisions. Megagon™ helps buyers save time and advertising budget without sacrificing transparency and control.

The Trade Desk’s enhanced platform allows advertisers to:

Easily plan and immediately activate cross-channel campaigns that identify high-value opportunities before spending a single dollar in market.

Have immediate visibility into the impact on scope and spend for every optimization made or setting selected in the platform.

Make smarter, more effective optimizations with customized, data-driven Koa™ recommendations.
Third Quarter and Revised Full Year 2018 Outlook:

Mr. Green added, “Programmatic is the fastest growing segment of advertising and the Trade Desk is going faster than anyone in programmatic. We continue to see momentum as ad dollars shift to our platform, and as such, we now expect revenue to be at least $456 million for the full year. We continue to make aggressive, yet prudent investments in our business in our key growth areas, such as mobile, video, connected TV and expanding our global infrastructure, and we now expect our adjusted EBITDA for 2018 to be $140 million.”

The Trade Desk is providing its financial targets for the third quarter of 2018 and revised targets for its fiscal year 2018. The Company’s financial targets are as follows:

Third Quarter 2018:

Revenue of $116 million
Adjusted EBITDA of $33 million
Full Year 2018

Revenue at least $456 million, revised from $433 million
Adjusted EBITDA of $140 million, revised from $133 million

http://investors.thetradedesk.com/phoenix.zhtml?c=254422&…

It still has a palatable EV/Forward sales vs other cloud stocks, and they are profitable.

https://www.marketscreener.com/TRADE-DESK-INC-31370485/finan…

[LifeOfDreamer]

While TTD still appears to be the Rodney Dangerfield of growth stocks on Saul’s board, feel free to stop by NPI if you want to discuss where TTD goes from here.

Challenge for the board:
Name stocks growing over 50% y/y, that are profitable (TTD has been for years), are founder-led, and have annual revenues over $300m?

answer: small list. NVDA pops to mind.

The reason I put the $300m requirement in, is bc it is a bit easier to grow revenues rapidly when you are a $100-200m/yr growth company.

TTD had the “hidden growth” this board normally loves, in Intl/China, CTV, and even Mobile and Digital Audio. They were already a solid growth story off the legacy “display” ads (think: ads you saw on your desktop computer when surfing online). But the shift to true programmatic is now underway (think: ads targeted to the user vs generic banner ads that are same for anyone visiting a website). Traditional advertising is, and has been, moving from tv/newspapers and static online display type of ads to programmatic. These are early innings and their focus is not on profit (despite being profitable and having their largest Qtrly profit ever just now) but rather on market share. They are growing to a point where the moat is that the barrier to entry is too high for independent DSPs. You are seeing ATT and Adobe buy other competing DSPs…there is very little real independent competition left. They do not compete against Google or Facebook. Read this interview to that their CEO had with TMF in Dec for a full explanation if you haven’t heard it before: https://www.fool.com/investing/2017/12/31/the-motley-fool-in…

You have seen in the news ROKU has done well, and credits CTV. When you see DIS buy FOX and ATT buy TW, and CBS push Star Trek exclusively to streaming, the success Netflix has had, Hulu, SlingTV, HBO Now, Youtube TV, and the Chinese equivalents of Youku Tudou, Tencent Video, and iQiyi, along with Spotify, YouTube Music, Amazon Prime (video and music), and countless others - then you understand that streaming is mammoth and a seismic shift from buying that Superbowl ad (the most expensive equivalent of throwing stuff at the wall to see what will stick) to targeting users and leveraging big data.

I may make one more post on TTD here after I can link to the conf call transcript, but will leave it at that. Great company, and one to hold for a while.

Dreamer

[LifeOfDreamer]

I will add some more color after I grab a hold of the transcript to CC (more for the Q&A portion, which I only caught the very end of).

But there is a link to the prepared Q2 2018 CC remarks here:
http://investors.thetradedesk.com/phoenix.zhtml?p=irol-event……

some excerpts below. Anything in parenthesis is from me:

The following are Jeff Green’s comments

Let me remind you that programmatic (as an industry) is growing at 21%, while our growth was nearly two and a half times that.

In the last three months, even more of the top 200 worldwide advertisers signed up on our
platform. In the last 12 months, Ad Age’s top 50 worldwide advertisers increased their spend
nearly 100% more with us this year than last. That positions us very well for continued growth, not
only for 2018, but in 2019 and beyond.

In Q2, nearly everything went right.

(Comment on Privacy)
Google’s decision to remove this ID offering is driven by its increasing need to reduce
risk against malicious data enablement, like what we saw Cambridge Analytica do with social
data. The risk is similar for both Google and Facebook. The risk exists because Google (at the
fundamental level of its business) transacts in directly identifiable consumer data. Google knows
so much about billions of consumers because of their core product, its search engine.
Because The Trade Desk does not transact in directly identifiable consumer data and because
we don’t own a search engine, we can provide a unified open ID that enables advertisers to
compare every destination on their media plan to every other destination objectively. Agencies
and brands see this, and it is why, in part, we are winning spend. In our platform, we don’t even
house email addresses—let alone provide hundreds of millions of people with their own email
addresses. Our data – and the data of our third-party partners – cannot be directly associated
with an individual. Data in The Trade Desk platform does not include names, phone numbers, or
social security numbers, for example.

(CTV comments)
The worldwide advertising market is
currently at $700 billion and moving toward $1 trillion over the next ten years. The biggest part of that market is television, which according to IDC, is nearly $230 billion this year. When that TV number is added to web video, social video, mobile video, and CTV, video content is
approaching half of the growing global advertising pie. And TV has just started to move to
digital.

Netflix used to be the exception and now they have become the rule. Content owners are showing more commitment than ever to having a direct relationship with consumers.

We ran ads across every game in the World Cup.

As a side note: I want to remind everyone that TV market dynamics are different from other
digital channels like social. No single company dominates the market share in TV, so the industry
is unlikely to see a “walled garden” approach succeed. The Google and Facebook playbooks for
search and social do not seem applicable when no one can or will likely own as much market
share in TV as Google has in search or Facebook has in social.

But in Q2, we delivered record spend in all four of our European offices: the UK, Spain, Germany,
and France. GDPR did not diminish spend over the quarter. In fact, the trust we built with our
partners and customers was massive, and we even won additional spend because of GDPR.

We are building strategic partnerships with major players like Baidu, Alibaba’s Youku, and Hong
Kong’s TVB, which are key to scaling our business in the market.
Though we have a strong focus on China as a strategic market, Asia as a whole is crucial to our
success. The opportunities here are bigger than we originally thought.

(on continually improving/innovating vs competition)
we invested almost 40% of our engineering resources over the last two years to overhaul the entire
user experience and make decisioning even easier for our users. What we call the “Next Wave”
significantly increases our technological lead over our competition. The result is increased
sophistication and ease-of-use for the thousands of people who use our platform every day. This
release was the biggest enhancement ever to the platform and it’s already paying off.

(on AI and their KOA engine)
Just a word on Koa and our approach to AI in general. We have developed new AI to make the
data-driven parts of advertising more automated, but we’ve also made it easier for media buyers
to participate in the process, too. We’ve built the best approach – where people create
hypotheses and machines test them. And unlike “black box” implementations of AI, The Trade
Desk has always been transparent about what insights are being generated. Koa draws a clear
line between what the AI found and insights it provides to the user. The user has the option to
incorporate the recommendations or not. The choice and transparency are always there.

As great as the numbers are for the quarter, we are most excited about the growth for
the year, which gives the best indicator of the strength of our business. The pieces are all in
place for continued success for the rest of this year, for 2019, and over the long-term.

---

On side note, earlier in the day I posted that I wanted them to get $109-110m in rev, and so impressed that they beat that. Just very impressive Q all around.

Dreamer

[RedandBlack]

I’ve been a lurker on Saul’s board for a few months and very impressed with the analysis provided here. I’m a little surprised that TTD hasn’t drawn more interest. I bought in the 30’s and again in the 50’s over the last 16 months. It’s a great company with a huge TAM.

If the overnight bids hold tomorrow it will become my 2nd largest holding after NFLX. I will likely be buying more at a $5B market cap. It’s a bargain at that level all things considered.

Hodges

[sarksnz]

The reason I stopped looking at TTD is one of the worst I can remember:
I found it really confusing.

I think that should be an indication to look harder! Lesson learned (hopefully). But thanks for continuing to talk about them.

re: Challenge

According to my calcs (of ~3700 stocks), there were 76 meeting the criteria.

I took ‘growing over 50% yoy’ to be revenue_TTM > 50% more than revenue_TTM of previous twelve months, which means at least 8 quarters of data. Profitable I took to be TTM EPS > 0.

Founder-led is tricky to automate, but I imagine theres not many left after that requirement.

I’ve also filtered a few that are in industries that are beyond me (Oil and Gas, Biotech - NKTR makes the list, insurance, banks, REITs), which left 38.

cheers
Greg

ticker	 revenue_ttm 	revenue_ttm_yoy_change_pct	 eps 	industry
DWDP	 $81,175,000,000 	54%	 $0.76 	Chemicals
INTL	 $33,926,400,000 	71%	 $1.27 	Brokers & Exchanges
MU	 $28,089,000,000 	61%	 $3.30 	Semiconductors
DXC	 $23,925,000,000 	106%	 $0.91 	Application Software
AXL	 $7,217,600,000 	52%	 $1.31 	Autos
CZR	 $6,978,000,000 	79%	 $0.04 	Travel & Leisure
KNX	 $4,483,843,000 	145%	 $0.51 	Transportation & Logistics
FMC	 $4,098,800,000 	59%	 $0.96 	Agriculture
KEX	 $2,793,744,000 	52%	 $0.48 	Transportation & Logistics
CBOE	 $2,677,300,000 	97%	 $0.74 	Brokers & Exchanges
KGJI	 $2,459,898,000 	62%	 $0.21 	Retail - Apparel & Specialty
JHG	 $2,309,500,000 	107%	 $0.70 	Asset Management
VIRT	 $1,878,986,000 	199%	 $0.25 	Brokers & Exchanges
CCS	 $1,837,398,000 	72%	 $1.11 	Homebuilding & Construction
ERI	 $1,814,394,000 	80%	 $0.48 	Travel & Leisure
RYAM	 $1,622,404,000 	93%	 $0.97 	Chemicals
LABL	 $1,514,603,000 	63%	 $0.89 	Business Services
SLCA	 $1,502,335,000 	76%	 $0.23 	Metals & Mining
LGIH	 $1,469,742,000 	56%	 $2.11 	Homebuilding & Construction
ICUI	 $1,445,853,000 	87%	 $1.53 	Medical Instruments & Equipment
HCC	 $1,296,101,000 	57%	 $1.72 	Coal
SGH	 $1,137,870,000 	66%	 $1.44 	Semiconductors
LOGM	 $1,130,170,000 	83%	 $0.13 	Application Software
ETM	 $1,041,597,000 	122%	 $0.02 	Entertainment
ICHR	 $854,457,000 	57%	 $1.09 	Semiconductors
HCLP	 $850,672,000 	156%	 $0.68 	Metals & Mining
SEDG	 $792,881,000 	61%	 $0.76 	Semiconductors
GDEN	 $724,001,000 	70%	 $0.13 	Travel & Leisure
EVC	 $549,182,000 	108%	 $0.05 	Entertainment
VRTS	 $513,659,000 	53%	 $2.91 	Asset Management
QDEL	 $438,082,000 	105%	 $(0.08)	Medical Diagnostics & Research
MBUU	 $433,449,000 	58%	 $0.76 	Autos
RILY	 $423,882,000 	57%	 $0.67 	Asset Management
ESIO	 $405,824,000 	118%	 $0.90 	Semiconductors
SNHY	 $405,637,000 	53%	 $0.22 	Industrial Products
BETR	 $371,674,000 	63%	 $0.01 	Consumer Packaged Goods
TTD	 $340,533,000 	51%	 $0.22 	Application Software			

[HamsterNinja]

Just very impressive Q all around.

Dreamer

---

Thanks Dreamer for your analysis on this one. I’ll be looking to get back in on TTD. Yes, I sold all TTD (except for 1 share in my son’s Robinwood account) earlier this week. I was less certain about the this quarter.

But I had used the cash to buy TWLO and AYX! So still a really good week.

hamster

[LifeOfDreamer]

Nice work on the list!

I guess my point was more about stocks discussed here.

On that list maybe lgih and MU?

Not sure i have noticed any of the others, but havent been reading the board as long as most.

Thanks,
Dreamer

[branmin]

Interested to hear your thoughts Saul on TTD? I unfortunately have no position but reading all the information posted here and on NPI impressive performance to say the least and their future appears bright. I also note that Bear still shows some concerns but I had no idea that they were heavily involved in the World Cup and that revenue stream and future soccer streams(being the most watched sport in the world) is for me of most interest. That alone is huge.
Best. Bran.

[sarksnz]

Yeah, LGIH and MU. NVDA failed because 46% YoY.

I think the requirement for 8 quarters of 10Q data took out a bunch of others too, so you’re right, TTD is in pretty rare company. NKTR made it, but … biotech

And I think the founder-led requirement would kill almost all of the others.

cheers
Greg

[tchalla]

One advantage from my perspective is right place, right timing with TTD.

I can’t help but feel they have huge tailwinds in

1. The rapid progress in programmatic advertising
2. the underdeveloped ad market in China and massive population coming online
3. the fallout from FB privacy scandal

It’s the highest conviction growth stock I own, and at a valuation much easier to swallow than AYX or SHOP

[anthonyms]

Excellent results - they will need to manage expectations on tough compares next Q and in a years time without the World Cup boost (note to self).
A

[SaulR80683]

Interested to hear your thoughts Saul, on TTD?

Hi Bran,
I took a small position in TTD in May 2017 when the Fool recommended them twice over the course of a few months. I read the two recommendations and the recent earnings reports, and an interview with the CEO, etc… I, however, have had bad experiences with advertising companies (also recommended by the Fool) and decided I couldn’t get comfortable with TTD, so I sold out of my little position a month later at a tiny loss. I don’t follow it any more and don’t even know how it’s doing, although from the enthusiastic posts on these threads it must be doing very well. I’m happy for you people who have done well with it. It sounds like a company with rapid growth that ought to be discussed on this board. I have no regrets about having gotten out, as I can’t hold all the companies in the market that are going up, and my own have been doing adequately well.
Best,
Saul

[Darthtaco]

they will need to manage expectations on tough compares next Q and in a years time without the World Cup boost

Depends on where you think digital advertising and drivers like connected TV will be next year. My family and I just watched all of shark week (and all of the CTV ads) on The Discocery Channel App on our FireTV. What a superior watching experience than Cable. Not that that has the viewership of the World Cup though.

I found it really confusing.

https://seekingalpha.com/article/4195859-trade-trade-desk-ju…

I found this article to be the best description of TTD’s business I have ever read and also why they have been performing the way they have.

TTD TAM = Total Current Global Digital Ad Spend + Future Digital Ad Spend - Google and Facebook(60% of previous total).

TTD
Q2 2018 Rev $112M
Growth +54%
Q2 2018 EPS $.60
Q2 2017 EPS $.52

Vs

AYX
Q2 2018 Rev $46.8M
Growth +54%
Q2 2018 EPS -$.09
Q2 2017 EPS -$.09

While these stats don’t tell the whole story of either company, it’s hard to find fault in those number from TTD. A monster of a SaaS company.

Darth
Long TTD and AYX

[anthonyms]

FWIW - the earnings slides this quarter have a summary explanation of the business for anyone wanting help understanding the investment thesis…

https://seekingalpha.com/article/4197429-trade-desk-2018-q2-…

and it looks impressive and is simple to get.
Ant

[NajdorfSicilian]

Dreamer, nice call, I wish I had bought at $50 14 weeks ago, having missed the current rally and looking at the valuation at $125/75x PE is too much for me.

I do see that GAAP EPS was flat YoY.

Thanks for keeping us updated!

[arconi]

I can’t help but feel they have huge tailwinds in
1) The rapid progress in programmatic advertising
2) the underdeveloped ad market in China and massive population coming online
3) the fallout from FB privacy scandal

I roger that! I just watched the Jeff Green video from the June Megamon announce in Singapore. I like him as a leader - and I love the approach of the company. The 4 AI functions in KOA alone make the TradeDesk a unique stand-out.
I’m busy making a plan to build my moderate TTD holdings into my largest position - or at least in the top 3. Not sure how I’ll do it - maybe sell some Puts and hope to have shares put to me. Or maybe just wait for dips. Or maybe do what I really should do which is buy at the market on Monday morning.

Any strategies on how to wisely grow a TTD position? I think I’ll issue a poll to get input :-).

…Marc