OVERVIEW
We are going to make this one quick. We were wrong in our fundamental expectations for revenue growth and EBITDA. 1Q23 revenue growth of 21.4% YoY slowed from 24% YoY in 4Q22 (vs. Factset consensus +15% YoY) but was relatively stable if you adjust for a single-digit % political contribution. Adjusted EBITDA beat handily, declining 10% YoY versus expectations of down 35% YoY. The company guided 2Q23 revenue of at least $452M (above the consensus of $445.4M), representing growth of 20% YoY. Meanwhile, 2Q23 Adjusted EBITDA guidance of at least $160M represents a sequential acceleration in growth to +15% YoY.
While GAAP profitability remains elusive/non-existent, and the stock expensive at 45x/36x 2023/2024 Adjusted EBITDA, those reasons alone are not enough to stick with the short from our seat. Especially for a company that has never missed a quarter in 5 years, with a positive mean/median revenue surprise % of 5.2%/3.3%. Maybe that on its own is a red flag, and the CFO transition announced with the last EPS report will mark a turning point in this trend. But for now, we are going to take the loss and move The Trade Desk (TTD) to the bench.
Note: We had previously moved TTD lower on the active short list during our April #Wrap Call as we anticipated a pickup in advertising spend going into Q2 (Click Here).
Please call or e-mail with any questions.
Andrew Freedman, CFA
Managing Director
@HedgeyeComm
