The Trade Desk, Inc. (NASDAQ:TTD) shares plunged 21.9% on Friday, making the company the S&P 500's worst performer, after a weak second-quarter report turned a long-running agency dispute into a harder question about the durability of its business model. Revenue increased just 3% to $715 million, below Wall Street's approximately $753 million estimate and the company's prior outlook of at least $750 million. The third-quarter forecast was more damaging.
Management expects revenue of at least $650 million, compared with the roughly $807 million analysts had expected, and adjusted EBITDA of approximately $160 million. At the $650 million guidance floor, third-quarter revenue would decline approximately 12% year over year. The central question is no longer whether The Trade Desk, Inc. (NASDAQ:TTD) can repair its relationship with Publicis.
The companies have already reconciled. The question is whether weaker spending from existing clients reflects temporary execution problems or a loss of leverage with agencies and advertisers. The bull case begins with the lack of evidence of a widespread client or agency departure.
Customer retention remained above 95%; Publicis is again recommending The Trade Desk, Inc. (NASDAQ:TTD) to clients, and major agencies continue developing new offerings around the platform. In March, Publicis advised clients against using The Trade Desk following an audit dispute involving fees and the activation of additional features. The Trade Desk, Inc. (NASDAQ:TTD) disputed the agency's account and said some requested information could not be provided without compromising customer and partner confidentiality.
The companies reconciled in June, ending the public rupture before the second-quarter results were released. Other agency relationships also continued moving forward. Dentsu selected The Trade Desk as the first demand-side platform for its new retail-data offering.
The company had joint business plans with 217 clients as of the second quarter, up 38% year over year, and management said revenue associated with those plans was growing six times faster than companywide revenue. The company's access to premium inventory and valuable consumer data is also expanding. Netflix joined its scaled publisher marketplace, Samsung Ads opened premium home-screen inventory, and integrations with Booking.com, Marriott, Uber, United Airlines and other travel companies added new commerce signals.
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