The Trade Desk Smashes Its Own Forecast and Soars on Massive Results

Expectations were high going into The Trade Desk's (TTD -6.23%) second-quarter financial report, particularly given the blowout performance it achieved just last quarter. The company's breakout performance continued while it also outgunned its own -- and analysts' -- expectations.

For the just-completed second quarter, The Trade Desk generated record revenue of $112.3 million, up 54% year over year and exceeding analysts' consensus estimates, which called for revenue of $104 million, by nearly eight percentage points. Operating income jumped 33% to $26.2 million. Adjusted earnings per share of $0.60 increased 15% compared to the prior-year quarter, sailing past expectations for $0.44. 

Image source: Getty Images.

Just the numbers

Data source: The Trade Desk Second-Quarter 2018 Financial Report.

What makes these numbers even more impressive is that they significantly exceeded targets set by The Trade Desk's management just last quarter. Revenue of $112.3 million was well above the company's $103 million forecast, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $36.9 million was 23% higher than the company's forecast for $30 million.

While The Trade Desk's earnings per share was only break-even with the year-ago figure, the tax man was the culprit, due to a large provision for taxes (courtesy of higher income) that ate into the company's bottom line.

Multiple growth drivers

Growth at The Trade Desk was broad-based, and the company offered numerous reasons for its continued outsized growth. Key channels like mobile, video, and connected TV grew as advertisers continued the migration from traditional channels and managed their digital ad campaigns on The Trade Desk's platform.

Advertiser spending on mobile, which includes in-app, video, and web, grew 89% year over year. Spending on connected TVs, which expanded more than 2,000% year over year last quarter, more than doubled from those levels in the current quarter. Audio grew 156% compared to the prior-year quarter. Mobile in-app spending climbed 104% and mobile video jumped 156%. The company also boasted a customer retention rate of 95% for the 19th consecutive quarter.

The Trade Desk isn't resting on its laurels, as the organization introduced a range of new products that use advanced analytics and artificial intelligence (AI) to help advertisers tap into its data-driven insight when planning, forecasting, and buying digital media.

"Our strategy of being the best platform for media buying and not owning or arbitraging media is more valuable today than it ever was," said Jeff Green, founder and CEO of The Trade Desk. "We broke our previous revenue record and surpassed our own expectations during the second quarter."

Looking ahead

In light of its excellent performance, The Trade Desk raised its full-year outlook for the second time in as many quarters. Comparing the current guidance to what the company provided at the end of 2017 shows just how much progress it's making:

Data source: The Trade Desk Fourth-Quarter 2017 and Second-Quarter 2018 Financial Reports.

For the upcoming third quarter, The Trade Desk is expecting revenue of $116 million and adjusted EBITDA of $33 million, which would represent year-over-year increases of 46% and 35%, respectively. 

For their part, analysts' consensus estimates anticipate revenue of $109.14 million, up 37% year over year, and adjusted earnings per share of $0.46, an increase of 33% compared to the prior-year quarter. As you can see, The Trade Desk's revised guidance for both the quarter and the year are well above analysts' expectations, helping to juice the skyrocketing stock price, which gained 37% in the trading session following the earnings release.

This is the third quarter running that the company has exceeded both analysts' and its own lofty expectations, and with the migration to digital advertising in full swing, The Trade Desk is positioning itself -- and its investors -- for future success.