The Trade Desk (NASDAQ:TTD) Reports Strong Q4, Stock Jumps 22.4%
Advertising software maker The Trade Desk (NASDAQ:TTD) beat analysts' expectations in Q4 FY2023, with revenue up 23.4% year on year to $605.8 million. On top of that, next quarter's revenue guidance ($478 million at the midpoint) was surprisingly good and 5.7% above what analysts were expecting. It made a non-GAAP profit of $0.41 per share, improving from its profit of $0.38 per share in the same quarter last year.
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The Trade Desk (TTD) Q4 FY2023 Highlights:
Revenue: $605.8 million vs analyst estimates of $582.2 million (4% beat)
EPS (non-GAAP): $0.41 vs analyst expectations of $0.43 (4.6% miss)
Revenue Guidance for Q1 2024 is $478 million at the midpoint, above analyst estimates of $452.3 million
Adjusted EBITDA Guidance for Q1 2024 is $130 million at the midpoint, well above analyst estimates of $113 million
Free Cash Flow of $63.79 million, down 65.3% from the previous quarter
Gross Margin (GAAP): 83.4%, in line with the same quarter last year
Market Capitalization: $36.43 billion
“Once again The Trade Desk outpaced nearly all areas of digital advertising in 2023, with $1.95 billion of revenue representing 23% growth year over year and a record $9.6 billion of spend on our platform. At the same time, we continue to generate significant profitability and cash flow, which allows us to remain at the bleeding edge of our industry, with innovations such as Kokai. Our results are testament to the growing value that advertisers are placing on the open internet versus the limitations of walled gardens,” 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.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for 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 strong over the last two years, growing from $395.6 million in Q4 FY2021 to $605.8 million this quarter.
This quarter, The Trade Desk's quarterly revenue was once again up a very solid 23.4% year on year. On top of that, its revenue increased $112.5 million quarter on quarter, a very strong improvement from the $29.01 million increase in Q3 2023. This is a sign of acceleration of growth and great to see.
Next quarter's guidance suggests that The Trade Desk is expecting revenue to grow 24.9% year on year to $478 million, improving on the 21.4% year-on-year increase it recorded in the same quarter last year.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. The Trade Desk's free cash flow came in at $63.79 million in Q4, down 48.1% year on year.
The Trade Desk has generated $543.3 million in free cash flow over the last 12 months, an eye-popping 27.9% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.
Key Takeaways from The Trade Desk's Q4 Results
We were impressed by The Trade Desk's revenue guidance and rosy outlook for next quarter, which blew past analysts' expectations for both revenue and adjusted EBITDA--a key profit measure. We were also glad its gross margin improved. Zooming out, the company is growing faster than the digital ad market, telling us that The Trade Desk is taking share. And the company is doing so profitably. We think this was a very impressive quarter that should delight shareholders. The stock is up 22.4% after reporting and currently trades at $92.68 per share.
The Trade Desk may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
