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The Trade Desk Posts 33% Revenue Growth

By Daniel Sparks - May 8, 2020 at 8:05AM

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But Q2 could be rough.

Despite the coronavirus negatively impacting advertising spend during the last few weeks of March, The Trade Desk (TTD -1.63%) still managed to post some impressive growth during Q1. The company's top line jumped 33% year over year, nearly in line with the 35% growth that the data-driven digital-advertising specialist saw in the fourth quarter of 2020.

Despite a strong first quarter that featured better-than-expected results on both The Trade Desk's top and bottom lines, investors should brace for a potential significant slowdown in Q2. Citing uncertainty about the ongoing impact of COVID-19, the tech company refrained from providing second-quarter guidance, and even withdrew its full-year outlook.

Overall, however, there were lots of reasons to be optimistic about The Trade Desk's business. Here's a closer look at the quarter.

A chalkboard sketch showing a bar chart with an arrow highlighting a growth trend

Image source: Getty Images.

Impressive profitability

While The Trade Desk's first-quarter revenue of $160.7 million easily beat analysts' average forecast for revenue of $158.3 million, the standout metric from the quarterly update was the ad-buying platform's non-GAAP (adjusted) earnings per share (EPS). Adjusted EPS was $0.90, up from $0.49 in the year-ago period.

Highlighting how lucrative The Trade Desk's business model is, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded from 20% in the year-ago period to 24% in the first quarter of 2020. The company's profitable business model carried over to strong cash flow performance, as well.

"We generated robust cash flow in the quarter and ended March with a strong cash position and balance sheet. This financial discipline allows us to continue to invest in our platform," said The Trade Desk founder and CEO Jeff Green in the company's first-quarter update. 

The company's cash, cash equivalents, and short-term investments totaled more than $445 million at the end of the quarter.

CTV, audio, and mobile remain big catalysts

Driving the quarter was continued hypergrowth in ad spend across connected TV (CTV), audio, and mobile.

  • Connected TV ad spend soared 100% year over year
  • Audio ad spend jumped 60%
  • Mobile ad spend rose 38%, with mobile in-app and mobile video ad spend specifically increasing 55% and 74%, respectively.

Looking ahead to Q2, of course, investors should expect ad spend growth rates to slow. This is due to stay-at-home guidelines and the fact that many stores remain closed or are open with limited operations and capacity.

But Green is convinced that these uncertain times will ultimately accelerate the shift toward programmatic advertising. "While the timing is unpredictable right now," the CEO explained in The Trade Desk's Q1 update, "we can be certain that advertisers will increasingly value measurability in their campaigns, and that they'll use data-driven strategies to drive precision and value across all channels."

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool has a disclosure policy.

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