The Trade Desk Surges 17% After Beat and Raise

Ticker Symbol: TTD

The Trade Desk shares are surging, up 17% in the after-close market to $63.75, after the company announced its second quarter results that were largely ahead of Wall Street expectations. The Trade Desk is an advertising technology company which provides a platform for companies to bid on various forms of advertising to run their global marketing campaigns. The company has been one of the best performers in the communications sector during the past 5 years, with shares rising over 900% in that period.

The company posted second quarter revenue which topped estimates, up 34.6% over the same period in 2021 to $377 million, versus the $365 million expected by analysts. Adjusted earnings before interest, taxes, depreciation, and amortization totaled $139 million, an all-time second-quarter record. EBITDA margins were 36.9% higher than the 35.4% modelled by investors. The company reported second quarter adjusted earnings that met expectations of 20¢ per share.

Additionally, the firm provided robust third quarter guidance. The company expects revenue of at least $385 million, higher than the Wall Street forecast of $382 million. The company also expects adjusted EBITDA of around $140 million, once again ahead of the expected $134 million. The guidance EBITDA and revenue figures imply a margin of 36.4% for the company, proving that it can maintain high profitability even in an inflationary environment.

Connected TV, or entertainment content that is processed through apps and streamed via smart TVs, such as through apps like Hulu and Peacock, or through devices such as Roku and Amazon Fire Stick, is the main way through which TTD generates revenue. The company has a total addressable market, or TAM, of $750 billion in global ad spending, of which roughly $230 billion is allocated through linear television.

As more people migrate to streaming, spending on connected TV platforms should grow and digital ads could start taking more of the advertising budget at large firms. TTD is unique in that it provides a user-friendly and independent demand-side platform that is generally viewed as an alternative to the Google, Facebook, and Amazon triopoly. Furthermore, Netflix’s plans to introduce an ad-supported membership plan could also boost TTD’s revenue base as more advertisers look to spend on CTV platforms.

The company reported a customer retention rate of 95% in the second quarter, while cash flows from operations increased to $238 million in the first six months of the year, versus $85.4 million in the same period last year. Chief Executive Officer and Co-Founder Jeff Green said in the earnings report that the company sees broad avenues of growth in the second half of 2022, despite the macroeconomic headwinds facing advertisers.

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