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Trade Desk (NASDAQ:TTD) Surprises With Strong Q2, Next Quarter Sales Guidance Is Optimistic


Adam Hejl /
2021/08/09 8:39 am EDT
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Advertising software maker The Trade Desk (NASDAQ:TTD) reported Q2 FY2021 results that beat analyst expectations, with revenue up 100% year on year to $279.9 million. Trade Desk made a GAAP profit of $47.6 million, improving on its profit of $25.1 million, in the same quarter last year.

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

Trade Desk (TTD) Q2 FY2021 Highlights:

  • Revenue: $279.9 million vs analyst estimates of $262.8 million (6.52% beat)
  • EPS (non-GAAP): $0.18 vs analyst estimates of $0.13 (42.7% beat)
  • Revenue guidance for Q3 2021 is $282 million at the midpoint, above analyst estimates of $274.7 million
  • Free cash flow of $3.37 million, down 94.4% from previous quarter
  • Gross Margin (GAAP): 81.8%, up from 77% previous quarter

“Revenue more than doubled year-over-year to $280 million in the second quarter. Our growth speaks to The Trade Desk’s position as the default DSP for the open internet. Nowhere is this more apparent than in Connected TV, as more premium streaming inventory becomes available to meet growing marketer demand for data-driven TV advertising,” said Jeff Green, founder and CEO of The Trade Desk.

Founded in 2009, 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 to automate and optimize ad placements, which Trade Desk is well positioned to benefit from.

Sales Growth

As you can see below, Trade Desk's revenue growth has been exceptional over the last year, growing from quarterly revenue of $139.3 million, to $279.9 million.

Trade Desk Total Revenue

This was a standout quarter for Trade Desk with quarterly revenue up an absolutely stunning 100% year on year. which is above average for the company. On top of that, revenue increased $60.1 million quarter on quarter, a very strong improvement on the $100.1 million decrease in Q1 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 23% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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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. Trade Desk's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 81.8% in Q2.

Trade Desk Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.81 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 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 Trade Desk's Q2 Results

Sporting a market capitalisation of $39.9 billion, more than $705 million in cash and with positive free cash flow over the last twelve months, we're confident that Trade Desk has the resources it needs to pursue a high growth business strategy.

We were impressed by the exceptional revenue growth Trade Desk delivered this quarter. And we were also glad to see the improvement in gross margin. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 1.14% on the results and currently trades at $84.95 per share.

Trade Desk may have had a good quarter, so should you invest 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 full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.