5 Reasons The Trade Desk Skyrocketed on Earnings

The company capped off a strong year with accelerating growth.

Danny Vena
Danny Vena
Feb 22, 2019 at 8:10PM
Technology and Telecom

Expectations were already high going into The Trade Desk's (NASDAQ:TTD) fourth-quarter earnings report. The programmatic ad-buying specialist forecast robust year-over-year revenue growth and analysts followed suit. Even in light of those enthusiastic projections, The Trade Desk smashed expectations and the stock soared, up more than 30% as of this writing.

There are a number of reasons investors were celebrating the company's results. Let's review a few of the most important items from the report that illustrate why The Trade Desk is probably just getting started.

Two hands touching digital globe showing various consumer advertising touchpoints.

Image source: Getty Images.

1. Revenue up 56%

The Trade Desk continues to put up stunning growth. The company generated record revenue of $160.5 million, up 56% year over year. This easily surpassed management's forecast and analysts' consensus estimates, which both topped out at about $147 million.

This accomplishment is even more impressive when it's put into perspective. In the first three quarters of 2018, The Trade Desk produced year-over-year revenue growth of 61%, 54%, and 50%, respectively. The company faced tough comps, having grown its ad sales by 78% in 2016 and 52% in 2017, both year over year. For 2018, revenue growth accelerated to 55%.

This is also more than twice the 22% growth of the programmatic advertising industry overall.

2. Earnings more than doubled

The Trade Desk continues to move even more of its sales to the bottom line. Net income of $39.4 million grew 134% year over year, producing diluted earnings per share of $0.84, up 121%. Even on an adjusted basis, profits were robust, as adjusted net income of $51.1 million grew 111% year over year, resulting in adjusted diluted earnings per share of $1.09, up 102% compared to the prior-year quarter.

The reason for the impressive profitability? The Trade Desk's revenue continues to outpace the company's spending. Overall, operating expenses of $111.5 million grew just 52% year over year compared to sales that jumped 56%. As long as The Trade Desk continues to grow revenue faster than costs, profits will continue to soar.


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3. Advertising on key channels soared

The Trade Desk continues to increase its market share by tapping into several key growth channels for its programmatic advertising. Connected TVs continues to be the star of the show and produced year-over-year ad growth of 525% in the fourth quarter. That tops off a year where the channel grew 900% compared to 2017.

While connected TVs produced the most eye-popping growth, this is just one of several other key areas that grew like wildfire in 2018. Audio grew 230% compared to 2017, while mobile video grew 130%. Mobile in-app advertising also had a banner year, with advertising that grew 90%.

A woman's hand pointing a remote at a television as a variety of images fly towards the viewer to illustrate the vast number of viewing options.

Image source: Getty Images.

On the conference call, Jeff Green, founder and CEO of The Trade Desk, said the early investment in connected TVs is having "a material impact" on the company's revenue acceleration, both in the fourth quarter and in 2018. This and other fast-growing channels are helping to fuel The Trade Desk's phenomenal growth.

Check out all ourĀ earnings call transcripts.

4. A $725 billion opportunity

Green illustrated the significant opportunity for future growth. In 2019, global advertising will be about $725 billion, up 4% year over year, and is expected to top $1 trillion within seven years. Digital advertising represents about half of that total, while the programmatic market is still just a small part, amounting to about $33 billion in 2019. Programmatic is growing faster than both advertising and digital -- and The Trade Desk is growing at twice the rate of the programmatic market.

"We believe that before long the vast majority of advertising will be digital and all of it will be transacted programmatically," Green said. "We expect to grow faster than the rest of the industry for as far as we can see into the future."

5. The future looks bright

The Trade Desk is forecasting first-quarter revenue of $116 million, up 35% year over year. That would mark a significant deceleration from this quarter's record results but is consistent with the company's practice of providing conservative guidance. For the full year, The Trade Desk is expecting revenue of at least $637 million, driven by gross ad spending of $3.2 billion. This forecast is higher than analysts' consensus estimates, which were expecting just $617 million for the year.

The Trade Desk continues to fire on all cylinders, reaping the rewards of the sophisticated ad-buying platform it developed and its channel agnostic approach. The stock soared more than 150% in 2018 and has started off 2019 with a bang -- all on the strength of its continued robust financial results.