The Trade Desk Q3 2024 Earnings Analysis
Dive into $TTD Trade Desk’s Q3 2024 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results:
↗️$628M rev (+27.4% YoY, +26.1% LQ) beat est by 1.3%
↗️Adj EBITDA Margin (40.9%, +0.4 PPs YoY)
↘️Net Margin* (26.6%, -7.3 PPs YoY)🟡
↘️FCF Margin (35.4%, -2.0 PPs YoY)🟡
↗️EPS* $0.41 beat est by 5.1%
*non-GAAP
➡️Customer Retention 95% (95% LQ)
Operating expenses
↗️Platform operations*/Revenue 18.3% (+0.5 PPs YoY)
↘️S&M*/Revenue 18.3% (-0.2 PPs YoY)
↘️R&D*/Revenue 12.9% (-2.2 PPs YoY)
↗️G&A*/Revenue 12.8% (+0.0 PPs YoY)
Dilution
↘️SBC/rev 20%, -1.1 PPs QoQ
↗️Basic shares up 0.4% YoY, +0.3 PPs QoQ🟢
↘️Diluted shares up 0.1% YoY, -0.0 PPs QoQ🟢
Guidance
↗️Q4'24 $756.0M guide (+24.8% YoY) beat est by 0.8%
Key points from The Trade Desk’s Third Quarter 2024 Earnings Call:
Financial Performance
In Q3 2024, The Trade Desk (TTD) achieved 27% year-over-year revenue growth, reaching $628 million, marking an acceleration from prior quarters and reinforcing its growing market share. Adjusted EBITDA was $257 million, or 41% of revenue, with a free cash flow of $222 million. With no debt and $1.7 billion in cash reserves, TTD’s liquidity remains strong. Projected Q4 revenue of at least $756 million represents an anticipated 25% YoY increase, driven by Connected TV (CTV), retail media, and political ad spending. CapEx for both 2024 and 2025 is expected to stay around 5% of revenue as TTD invests in infrastructure and data centers to support continued growth.
Connected TV (CTV)
CTV remains TTD’s largest and fastest-growing channel, highlighting its market-leading position. In Q3, video, which includes CTV, accounted for nearly 50% of TTD’s business. The company has strengthened relationships with key media brands like Disney, Roku, and Netflix as the industry moves from linear TV to streaming. Inventory availability has improved since the pandemic, providing advertisers access to more diverse, high-quality options. TTD’s supply path innovations enable advertisers to identify premium CTV content for maximized ad impact.
Kokai Platform
TTD has significantly advanced the Kokai platform, integrating AI and data science to offer advertisers enhanced campaign insights and measurable growth. Kokai's adoption among TTD’s sales and client service teams has been robust, positioning it as a central growth driver. Kokai uses TTD’s data resources to enhance personalization, optimize ad spend, and boost programmatic precision, with further platform enhancements expected to improve the advertiser experience in coming quarters.
UID2 and OpenPath
UID2 has become a primary identity currency on the open internet, essential in CTV where precise targeting is critical. OpenPath enhances ad spend transparency by giving publishers insight into bid values, which improves their content monetization. OpenPath has led to substantial improvements in fill rates and revenue for early adopters, including one major news publisher who saw a 7x increase in fill rate and a 25% boost in revenue.
Global Expansion
International growth outpaced North America in Q3, with CTV driving spending in EMEA and Asia Pacific. Regions such as the UK, Germany, and India showed notable progress as digital media adoption grows. International revenue now constitutes approximately 12% of TTD’s business, with further expansion expected as CTV and audio gain traction in new markets. UID2 and retail media partnerships offer advertisers consistent identity frameworks to target global audiences with precision.
Retail Media Partnerships
TTD’s retail media segment is capturing increased budgets as retail brands leverage TTD’s data-driven capabilities for shopper marketing. Partnerships with major retailers like Walmart and Target allow advertisers to align with in-store consumer behavior, optimizing ad placements. Retail media, a fast-growing area for TTD, is expected to gain momentum through 2025, driven by Kokai’s innovations in measurement and attribution, which further enhance the impact for consumer-packaged goods (CPG) advertisers.
Customer Success Stories
A client in the restaurant and quick-service segment expanded its customer base among younger demographics using TTD’s programmatic capabilities. The campaign, focused on live sports through CTV and executed with agency HappyCOG, led to a 15% increase in brand awareness and a 9% increase in mobile transactions, highlighting TTD's effectiveness in delivering measurable brand and sales outcomes.
Political Ad Spending
Political ads were a significant component of Q3 revenue, particularly in the CTV channel, with political ad spending projected to represent a low to mid-single-digit percentage of TTD’s Q4 revenue. This spending cycle will taper into 2025, with the typical Q4 to Q1 revenue decline likely to be amplified by the absence of election-related ads.
Audio Advertising
The audio channel accounted for 5% of TTD’s Q3 spend, with substantial growth potential. An expanded partnership with Spotify introduced UID2 and OpenPath, enhancing addressability and insights for audio ad impressions. As U.S. consumers spend an average of three hours daily on digital audio, TTD expects audio to follow CTV’s growth trajectory, bridging the gap between time spent on audio and ad budget allocation.
Positioning Against Walled Gardens
TTD positions itself as a transparent alternative to walled gardens like Google and Amazon, offering advertisers objective metrics and identity solutions. The ongoing DOJ antitrust case against Google offers TTD an opportunity to capture market share as Google’s network business faces increased scrutiny. TTD expects regulatory changes to foster a fairer competitive landscape, benefiting its open internet model as brands seek transparency.
Future Outlook
TTD’s outlook for 2025 includes growth across CTV, retail media, and international markets, bolstered by advanced measurement capabilities and the continued adoption of UID2 and Kokai. As partnerships mature from the “crawl” phase to full-scale deployment, TTD sees further potential in innovations like OpenPath, which improve advertiser efficiency. With a strong foundation and scalable global growth opportunities, TTD anticipates sustained market share gains and durable growth into 2025 and beyond.
Management comments on the earnings call.
Product Innovations
Jeff Green, Co-Founder and CEO
"With Kokai, we've created the best platform we've ever shipped, integrating AI and data science to deliver deeper insights and drive real measured growth for our clients. This is only the beginning as we continue to enhance our platform's capabilities to maximize ad spend efficiency and provide the best precision for advertisers."
Competitors
Jeff Green, Co-Founder and CEO
"Unlike walled gardens, our approach remains fully transparent and data-driven. As regulatory scrutiny increases, particularly around Google's network business, we're positioned to help brands navigate an evolving market, offering objectivity that others cannot match."
Customers
Laura Schenkind, Chief Financial Officer
"Our clients are navigating unprecedented changes and pressures. As advertisers need more transparency and measurable outcomes, we're able to stand shoulder-to-shoulder with them to provide data-driven insights and growth."
Partnerships
Jeff Green, Co-Founder and CEO
"Our partnerships with industry leaders like Disney, Netflix, and Spotify are in early stages, but the potential here is significant. With UID2 and OpenPath, we're giving our partners powerful tools to access addressability and transparency that open up more revenue potential as our partnerships scale."
International Growth
Jeff Green, Co-Founder and CEO
"International spending now represents 12% of our business, with significant opportunities for growth in regions like the UK, Germany, and India. Our goal is to capture more share in these markets as we bring UID2 and retail media partnerships into a global framework that meets advertisers' needs everywhere."
Challenges
Jeff Green, Co-Founder and CEO
"CMOs are under more pressure than ever to drive results, particularly in a complex consumer environment. As brands face scrutiny to perform with less, we're focused on helping them achieve more value with measurable, data-driven insights and an efficient supply chain."
Future Outlook
Laura Schenkind, Chief Financial Officer
"With our strong foundation, partnerships, and a focus on scalable innovations, we believe we are better positioned than ever for continued market share gains and long-term growth. As we look toward 2025, the demand for transparency, measurable impact, and premium content on the open internet only strengthens our position in the market."
Thoughts on Trade Desk ER $TTD :
🟢 Pros:
+ Customer retention remains above 95% for nine consecutive years.
+ Revenue growth rate accelerated to 27.4% YoY. If the company beats its forecast by 1.3%, as it did this quarter, next quarter’s growth is projected to be 26.8%.
+ The company is improving margins and profitability.
+ Beat Q3 revenue guidance by 1.3%.
+ Strong Free Cash Flow (FCF) margin of 35.3%.
+ The company is actively pursuing global expansion, with international growth outpacing North American growth for the seventh consecutive quarter.
+ The Trade Desk has strengthened partnerships with major retailers like Walmart and Target.
+ TTD has made significant advancements to the Kokai platform, integrating AI.
🟡 Neutral:
+- SBC/rev is 20%.
+- Weighted-average number of common shares increased by 0.4% YoY.