Advertising software maker The Trade Desk (NASDAQ:TTD) missed Wall Street’s revenue expectations in Q4 CY2024, but sales rose 22.3% year on year to $741 million. Next quarter’s revenue guidance of $575 million underwhelmed, coming in 1.2% below analysts’ estimates. Its non-GAAP profit of $0.59 per share was 3.6% above analysts’ consensus estimates.
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The Trade Desk (TTD) Q4 CY2024 Highlights:
- Revenue: $741 million vs analyst estimates of $759.5 million (22.3% year-on-year growth, 2.4% miss)
- Adjusted EPS: $0.59 vs analyst estimates of $0.57 (3.6% beat)
- Adjusted EBITDA: $350 million vs analyst estimates of $365.9 million (47.2% margin, 4.4% miss)
- Revenue Guidance for Q1 CY2025 is $575 million at the midpoint, below analyst estimates of $582 million
- EBITDA guidance for Q1 CY2025 is $145 million at the midpoint, below analyst estimates of $192.7 million
- Operating Margin: 26.4%, up from 23.8% in the same quarter last year
- Free Cash Flow Margin: 23.9%, down from 35.4% in the previous quarter
- Market Capitalization: $59.33 billion
“The Trade Desk once again outpaced nearly every segment of digital advertising in 2024, delivering $2.4 billion of revenue – marking accelerated growth of 26% year over year – and a record $12 billion of spend on our platform. At the same time, we achieved significant profitability and cash flow. While we are proud of these accomplishments, we are disappointed that we fell short of our own expectations in the fourth quarter,” said Jeff Green, founder and CEO of The Trade Desk.
Company Overview
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
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Thankfully, The Trade Desk’s 26.9% annualized revenue growth over the last three years was solid. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, The Trade Desk generated an excellent 22.3% year-on-year revenue growth rate, but its $741 million of revenue fell short of Wall Street’s high expectations. Company management is currently guiding for a 17% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 21.2% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is healthy and suggests the market sees success for its products and services.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
The Trade Desk is extremely efficient at acquiring new customers, and its CAC payback period checked in at 4.2 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give The Trade Desk more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from The Trade Desk’s Q4 Results
We struggled to find many positives in these results. Its revenue missed in the quarter, which is rare for this company. Revenue guidance for next quarter slightly missed as well, and EBITDA guidance fell below expectations by an even larger amount. Overall, this was a weaker quarter, and given the premium valuation, shares are reacting strongly to the miss. The stock traded down 23.3% to $93.81 immediately after reporting.
The Trade Desk didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
