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The Trade Desk (NASDAQ:TTD) Q4: Beats On Revenue, Provides Optimistic Guidance For Next Quarter


Jabin Bastian /
2022/02/16 8:00 am EST
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Advertising software maker The Trade Desk (NASDAQ:TTD) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 23.6% year on year to $395.5 million. Guidance for next quarter's revenue was $303 million at the midpoint, 5.57% above the average of analyst estimates. The Trade Desk made a GAAP profit of $8.03 million, down on its profit of $151.9 million, in the same quarter last year.

Is now the time to buy The Trade Desk? Access our full analysis of the earnings results here, it's free.

The Trade Desk (TTD) Q4 FY2021 Highlights:

  • Revenue: $395.5 million vs analyst estimates of $389.6 million (1.52% beat)
  • EPS (non-GAAP): $0.42 vs analyst estimates of $0.28 ($0.14 beat)
  • Revenue guidance for Q1 2022 is $303 million at the midpoint, above analyst estimates of $286.9 million
  • Free cash flow of $151 million, up 44.8% from previous quarter
  • Gross Margin (GAAP): 83.1%, in line with same quarter last year

“2021 was a remarkable year for The Trade Desk capped off by record performance in the fourth quarter. The launch of Solimar, our most important new platform to date, along with major progress in areas such as CTV, identity and retail data, enabled us to gain more share of the data-driven advertising market. We exceeded our objectives for 2021 and I could not be more excited about the momentum we’re carrying into the first quarter and the year ahead,” said Jeff Green, 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 exceptional over the last year, growing from quarterly revenue of $319.9 million, to $395.5 million.

The Trade Desk Total Revenue

This quarter, The Trade Desk's quarterly revenue was once again up a very solid 23.6% year on year. On top of that, revenue increased $94.5 million quarter on quarter, a very strong improvement on the $21.1 million increase in Q3 2021, which shows acceleration of growth, and is great to see.

Guidance for the next quarter indicates The Trade Desk is expecting revenue to grow 37.8% year on year to $303 million, in line with the 36.8% year-over-year increase in revenue the company had recorded in the same quarter last year.

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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 83.1% in Q4.

The Trade Desk Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.83 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 Q4 Results

Sporting a market capitalization of $38.7 billion, more than $958.7 million in cash and with positive free cash flow over the last twelve months, we're confident that The Trade Desk has the resources it needs to pursue a high growth business strategy.

We were impressed by the very optimistic revenue guidance The Trade Desk provided for the next quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 4.1% on the results and currently trades at $83.73 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.