The concept of programmatic advertising might be foreign to some investors as the concept has only evolved over the last few years. The concept involves computer programs facilitating ad purchases, making decisions in real time, and buying ads across a variety of channels from the available supply.

The Trade Desk (NASDAQ:TTD) has been enormously successful in the space and evidence of that was in full force when the company reported revenue and earnings for the first quarter that beat its own guidance and smashed analysts' consensus estimates. It also raised its forecast for the full year.

Dozens of television display images, emanating from a central point, and growing in size as they come closer to the viewer.

Image source: Getty Images.

The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$85.7 million

$53.4 million

61%

GAAP net income

$9.1 million

$4.9 million

85%

GAAP earnings per share

$0.20

$0.11

82%

Data source: The Trade Desk First-Quarter 2018 Financial Release. Chart by author.

For the just-completed first quarter, The Trade Desk reported revenue of $86 million, obliterating its forecast for $73 million, and analysts' expectation for $73.2 million. 

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $18.9 million more than doubled the $7.5 million the company forecast just last quarter. Adjusted income came in at $15.3 million, producing adjusted earnings per share of $0.34, more than tripling the $0.10 expected by analysts.

What drove The Trade Desk's massive performance?

The company said that much of its growth came from key channels, like mobile, video, connected TV, and audio, noting that data spend in March "spiked to an all-time record." Growth in international markets also shined. Spending on mobile ads grew 95% year over year and increased to 42% of gross spend for the quarter. Growth in mobile video was even more impressive, up 160% compared to the prior-year quarter, while mobile in-app revenue grew 110% year over year. Two of The Trade Desk's newest and most promising markets -- connected TV and audio -- surged, with audio ads up 650% over the prior-year quarter, and connected TV ads skyrocketed an astonishing 2,000% year over year. Customer retention rates were stellar, above 95% for the 18th consecutive quarter.

The company said it will continue to invest in technology infrastructure, product development, and international expansion, as it believes these key areas are critical to its ability to make additional market share gains.

"The programmatic revolution continues to gain momentum," said founder and CEO Jeff Green. "In the first-quarter we surpassed even our own expectations. A steady stream of new brands and agencies joined our platform; we won additional spend from existing customers; and we developed closer relationships with the biggest brands in the world."

Looking ahead

Before the earnings report, analysts' consensus estimates for the second quarter were calling for earnings of $0.19 per share on revenue of about $95 million. However, after The Trade Desk's standout performance, those estimates will likely increase, as each of the 12 analysts who cover the company all raised their price targets for the stock. 

The Trade Desk is forecasting revenue of $103 million and adjusted EBITDA of $30 million for the second quarter. The company also increased its full-year outlook for 2018 to revenue of at least $433 million and adjusted EBITDA of $133 million, both up 40% year over year from 2017 levels. 

Danny Vena owns shares of The Trade Desk. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool has a disclosure policy.