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3 Must-See Takeaways From The Trade Desk's First-Quarter Earnings Call

By Daniel Sparks – May 16, 2019 at 8:41AM

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Management discusses the ad platform's data business, continued opportunity in connected TV, and more.

The Trade Desk (TTD 3.67%) saw wild momentum again its first quarter. Revenue jumped 41% year over year -- and that was on top of 61% revenue growth in the year-ago quarter. Non-GAAP earnings per share also soared, rising 44%. The data-driven ad platform's impressive growth is supported by broad-based growth in ad spending across key marketing channels, with exceptional strength in connected TV.

Despite The Trade Desk's rapid business growth, the stock fell after its earnings report because the company's guidance didn't bring the same "wow factor" to the table that it usually does. Given the stock's pullback from a 52-week high of $233, it's a good time to take a closer look at The Trade Desk.

One way to get a better understanding of the company's operations and the tailwinds at its back is to listen to the company's quarterly conference calls. Here are three notable takeaways from The Trade Desk's first-quarter earnings call.

An ad The Trade Desk ran in The New York Times saying, "Possibly the Worst Ad We'll Ever Run."

Image source: The Trade Desk.

Gobbling up market share

The Trade Desk may be small relative to digital advertising giants Facebook and Alphabet, but the company is benefiting from its data-driven, objective positioning and its focus on what The Trade Desk CEO Jeff Green often calls "the rest of the internet," or digital advertising beyond the "walled gardens" of Facebook and Google. The company's market leadership in this programmatic space is helping The Trade Desk consistently gain market share.

"In Q1, we grew twice as fast as the programmatic industry and about 10x the pace of global advertising growth," said Green. "The Trade Desk is better positioned than nearly any other company to capture significant share in the channels and regions that matter most."

Looking ahead, Green said he expects The Trade Desk will "continue to gain market share for the foreseeable future."

Don't forget about The Trade Desk's data business

Since The Trade Desk's revenue primarily comes from ad spending on its platform, it's easy to overlook the company's data business. But one way The Trade Desk makes money beyond charging clients a platform fee based on a percentage of advertising spending is by selling data. Though The Trade Desk doesn't break out this revenue, it is growing faster than the company's revenue from ad spending.

Green said:

Since the launch of our Next Wave product last year, data spend growth and usage has accelerated. ... Data spend increased 80% year-over-year. Media buyers using data have also significantly increased. We have still only scratched the surface on what we can do with data. The data usage will be significantly higher as the years go on.

CTV remains an important catalyst

Green has been extremely bullish on connected TV (CTV) advertising for a long time. And this channel really took off in 2018, with CTV spending on its platform up more than nine times compared to 2017. But the opportunity for further growth is still compelling, the CEO explained:

Our value proposition to advertisers in CTV is massive. We have incredible scale. We currently reach 80 million households worldwide through our CTV inventory and that's up from zero just a few years ago. The scale of our reach is at least 3x the size of the largest MVPD. In fact, it's nothing but upside at this point. So, we expect CTV to be a key growth driver for us again in 2019.

Though The Trade Desk's stock may have pulled back following the company's first-quarter earnings release, the business continues to grow rapidly -- and the upside still looks compelling.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of The Trade Desk. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and The Trade Desk. The Motley Fool has a disclosure policy.

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