Advertising software maker The Trade Desk (NASDAQ:TTD) reported Q2 FY2022 results beating Wall St's expectations, with revenue up 34.6% year on year to $376.9 million. The company expects that next quarter's revenue would be around $385 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. The Trade Desk made a GAAP loss of $19 million, down on its profit of $47.6 million, in the same quarter last year.
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The Trade Desk (TTD) Q2 FY2022 Highlights:
- Revenue: $376.9 million vs analyst estimates of $365.1 million (3.22% beat)
- EPS (non-GAAP): $0.20 vs analyst estimates of $0.20 (small beat)
- Revenue guidance for Q3 2022 is $385 million at the midpoint, above analyst estimates of $382.3 million
- Free cash flow of $89.2 million, down 34.4% from previous quarter
- Gross Margin (GAAP): 82%, in line with same quarter last year
“We delivered outstanding performance in the second quarter, growing 35% versus a year ago, significantly outpacing worldwide programmatic advertising growth. More of the world’s leading brands are signing major new or expanded long-term agreements with The Trade Desk, which speaks to the innovation and value that our platform provides compared to the limitations of walled gardens,” said Jeff Green, Co-Founder and CEO of The Trade Desk.
Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ:TTD) offers cloud-based software that uses data to help advertisers better plan, place and target their online ads.
The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
As you can see below, The Trade Desk's revenue growth has been very strong over the last year, growing from quarterly revenue of $279.9 million, to $376.9 million.
And unsurprisingly, this was another great quarter for The Trade Desk with revenue up 34.6% year on year. On top of that, revenue increased $61.6 million quarter on quarter, a strong improvement on the $80.2 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates The Trade Desk is expecting revenue to grow 27.8% year on year to $385 million, slowing down from the 39.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 23.9% over the next twelve months.
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Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. The Trade Desk's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 82% in Q2.
That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great gross margin, that allows companies like The Trade Desk to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.
Key Takeaways from The Trade Desk's Q2 Results
With a market capitalization of $26.7 billion, more than $1.21 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
It was good to see The Trade Desk improve their gross margin this quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 13.8% on the results and currently trades at $62.05 per share.
Should you invest in The Trade Desk right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.