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The Trade Desk (TTD) Q4 Earnings Beat, Revenues Rise Y/Y

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The Trade Desk (TTD - Free Report) reported fourth-quarter 2019 adjusted earnings of $1.49 cents per share, which beat the Zacks Consensus Estimate by 25.2% and increased 36.7% from the year-ago quarter.

Revenues of $215.9 million beat the Zacks Consensus Estimate by 1.2% and increased 34.5% year over year, driven by continued strength in programmatic ad buying.

Moreover, the company witnessed strong growth in its audio, video, Connected TV (CTV) and mobile in-app channels, with 89% of the spend coming from existing customers.
 

The Trade Desk Inc. Price, Consensus and EPS Surprise

The Trade Desk Inc. Price, Consensus and EPS Surprise

The Trade Desk Inc. price-consensus-eps-surprise-chart | The Trade Desk Inc. Quote

Quarterly Details

The company’s video channel spend increased 54% sequentially in the fourth quarter, while CTV spend witnessed sequential growth of 100% during the quarter. Customer retention remained over 95% during the quarter, as it has for the previous 24 quarters.

Total operating costs increased 46% year over year to $163.3 million.

Platform operations expense or effectively cost of revenues increased 34% to $47.3 million, driven primarily by the increase in the company’s platform fees or QPS. Moreover, platform operations expense is decreasing year over year as a percentage of revenues.

Technology and development expenses grew 36% to $32.8 million, driven by increased investments in the company’s platform, while sales and marketing expenses grew 59% to $42.9 million, driven by increased spending on account management and business development.

Further, general and administrative (G&A) expenses increased 61% year over year to $40.3 million during the quarter. However, the company expects G&A to improve in 2020 as it further scales its business.

Adjusted EBITDA was $84.5 million in the fourth quarter, up 24.6% year over year, while adjusted EBITDA margin contracted 310 basis points (bps) year over year to 38.7%.

Balance Sheet & Cash Flow

Cash, cash equivalents and short-term investments were $255 million as of Dec 31, 2019, compared with $296.5 million as Sep 30, 2019.

Cash flow from operating activities as of Dec 31, 2019 was $60.2 million. Free cash flow during the quarter was $19 million.

Guidance

For first-quarter 2020, The Trade Desk expects revenues of $169 million. The Zacks Consensus Estimate for revenues is pegged at $159.6 million, indicating growth of 31.9% from the year-ago quarter.

Adjusted EBITDA is expected to be $35 million.

For full-year 2020, the company expects revenues of $863 million. The consensus mark for full- year revenues is pegged at $853.7 million, indicating year-over-year growth of 29.7%.

Total gross spend on the company’s platform is expected to be at least $4.24 billion due to increased focus on expanding market share and deepening engagement and strategic importance with customers.

For full-year 2020, adjusted EBITDA is expected to be $259 million or 30% of revenues.

Zacks Rank & Stocks to Consider

The Trade Desk currently carries a Zacks Rank #3 (Hold).

Dropbox, Inc. DBX, Alteryx, Inc. (AYX - Free Report) and ManTech International Corporation MANT are some better-ranked stocks in the broader computer and technology sector. Dropbox and ManTech sport a Zacks Rank #1 (Strong Buy), while Alteryx carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Dropbox, Alteryx and ManTech is currently pegged at 20.2%, 50.6% and 8% respectively.

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