The Trade Desk Reports Fourth Quarter and Fiscal Year 2018 Financial Results

LOS ANGELES–(BUSINESS WIRE)–Global advertising technology leader The Trade Desk (Nasdaq: TTD)
today announced financial results for its fourth quarter and fiscal year
ended December 31, 2018.

“2018 was a huge year for The Trade Desk. Revenue growth accelerated to
55% in 2018 from 52% in 2017. In 2018, we surpassed $2.35 billion in
gross spend on our platform resulting in $477 million in revenue. Our
fourth quarter revenue growth also accelerated, growing 56% to a record
$160.5 million,” said Founder and CEO Jeff Green. “2018 was a
foundational year. We launched the biggest product, called the Next
Wave, in our history; Connected TV became a must-have on the media plan;
we partnered with some of the largest internet companies in China; data
usage on our platform accelerated; and our Unified ID initiative gained
steam across the industry. Our vision is to change the way advertising
is bought by enabling programmatic, data-driven decisions and 2018
marked another year of great strides toward that goal.”

Fourth Quarter and Full Year 2018 Financial
Highlights:

The following table summarizes our consolidated financial results for
the quarters and fiscal years ended December 31, 2018 and 2017 ($ in
millions, except per share amounts):

  Three Months Ended   Year Ended
December 31, December 31,
2018   2017 2018   2017
GAAP Results
Revenue $ 160.5 $ 102.6 $ 477.3 $ 308.2
Increase in revenue year over year 56 % 42 % 55 % 52 %
Net Income $ 39.4 $ 16.8 $ 88.1 $ 50.8
Diluted EPS $ 0.84 $ 0.38 $ 1.92 $ 1.15
 
Non-GAAP Results
Adjusted EBITDA $ 67.1 $ 39.5 $ 159.4 $ 95.4
Adjusted EBITDA Margin 42 % 38 % 33 % 31 %
Non-GAAP Net Income $ 51.1 $ 24.2 $ 123.8 $ 70.4
Non-GAAP Diluted EPS $ 1.09 $ 0.54 $ 2.70 $ 1.60
 

Fourth Quarter and 2018 Business Highlights
Include:

  • Continued Share Gain: 2018 gross spend on the platform was over
    $2.35 billion, a 51% increase from a year ago. According to Magna
    Global, total real-time-bidding programmatic was estimated to increase
    22% in 2018.
  • Continued Omni-channel Growth: Omni-channel solutions remain a
    strategic focus for The Trade Desk as the industry continues shifting
    toward transparency and programmatic buying. Specific channel spend
    highlights include:

    • Mobile (in-app, video and web) grew 69% from Q4 2017 to Q4 2018.
    • Connected TV grew over 525% from Q4 2017 to Q4 2018.
    • Connected TV grew over 9X from 2017 to 2018.
    • Audio grew over 230% from 2017 to 2018.
    • Mobile video grew over 130% from 2017 to 2018.
    • Mobile in-app grew over 90% from 2017 to 2018.
  • Strong Customer Retention: Customer retention remained over 95%
    during the quarter, as it has for the previous 20 quarters.
  • New Products and Features: On June 26, 2018, The Trade
    Desk launched a range of new products that helps advertisers use
    data-driven insights to plan, forecast, and buy digital media more
    effectively than ever before. Collectively referred to as the Next
    Wave, this release included three transformative products:

    • Koa™ is powerful AI that improves advertisers’ decisioning
      and accelerates campaign performance. Koa’s robust and transparent
      forecasting engine is built on The Trade Desk’s valuable data set
      – including about nine million queries every second – to help
      buyers extend audience reach and spend more efficiently.
    • The Trade Desk Planner is a data-driven media planning tool
      that delivers audience insights and informs ad strategies across
      channels and devices.
    • Megagon™ is an intuitive new user interface that
      proactively surfaces tailored insights and offers Koa
      recommendations to help advertisers make real-time optimization
      decisions. Megagon helps buyers save time and advertising
      budget without sacrificing transparency and control.

    Additionally, throughout 2018, The Trade Desk released many other
    new product features and enhancements to its platform including:

    • A new suite of offline measurement tools to measure the
      effectiveness of digital campaigns. Partners include: Factual,
      AdSquare, Oracle, and Placed.
    • Better access to Nielsen On-Target-Percentage (OTP) data in the
      Campaign and Ad Group Dashboards in the UI.
    • Updates to Audience Predictor which enhance lookalike modeling
      tools to find and target undiscovered audiences based upon
      first-party data. Recent improvements include improved sampling
      rates, faster audience creations, inclusion of CPM segments,
      percent-of-media segments, and the ability to exclude audiences.
  • Global Footprint Expansion: In 2018, The Trade Desk
    broadened its coverage with the opening of its Toronto office.
  • Best Places to Work: The Trade Desk was ranked #2 among the 100
    Best Medium Workplaces 2018 by Fortune and was ranked as one of the
    best software companies to work for in 2018 according to Glassdoor.

Full Year 2019 and First Quarter Outlook:

Mr. Green added, “We exited 2018 strong and are seeing that momentum
continue into 2019. Marketers continue to adopt channels such as Mobile,
Connected TV, and Audio as they move advertising spend to our platform.
In 2019, we expect gross spend on our platform to be at least $3.2
billion and revenue to be at least $637 million. In the coming year, we
will continue to make aggressive investments in high growth areas such
as Connected TV, data, and global expansion, including in China. Our
focus is on grabbing programmatic market share and deepening our
engagement and strategic importance with our customers. We expect our
adjusted EBITDA to be $182 million, or about 29% of revenue. We believe
investing in our core growth opportunities will maximize profitability
over the long-term.”

The Trade Desk is providing its financial targets for the fiscal year
2019 and first quarter of 2019. The Company’s financial targets are as
follows:

Full Year 2019:

  • Total Gross Spend of at least $3.2 billion
  • Revenue of at least $637 million
  • Adjusted EBITDA of $182 million or about 29% of revenue

First Quarter 2019

  • Revenue of $116 million
  • Adjusted EBITDA of $18.3 million

We have not provided outlook for GAAP Net income or reconciliation of
adjusted EBITDA guidance to net income, the closest corresponding U.S.
GAAP measure, because net income outlook is not available without
unreasonable efforts on a forward-looking basis due to the variability
and complexity with respect to the charges excluded from these non-GAAP
measures; in particular, the measures and effects of our stock-based
compensation expense that are directly impacted by unpredictable
fluctuations in our share price. We expect the variability of the above
charges could have a significant and potentially unpredictable, impact
on our future U.S. GAAP financial results.

Use of Non-GAAP Financial Information

Included within this press release are the non-GAAP financial measures
of Adjusted EBITDA, Non-GAAP net income and Non-GAAP diluted EPS that
supplement the Consolidated Statements of Operations of The Trade Desk,
Inc. (the Company) prepared under generally accepted accounting
principles (GAAP). Adjusted EBITDA is earnings before depreciation and
amortization, stock-based compensation, interest expense, interest
income, secondary offering costs and provision for income taxes.
Non-GAAP net income excludes charges and the related income tax effects
for stock-based compensation and secondary offering costs. Tax rates on
the tax-deductible portions of the stock-based compensation expense
approximating 30% and 40% have been used in the computation of non-GAAP
net income and non-GAAP diluted EPS for the 2018 and 2017 periods,
respectively. Reconciliations of GAAP to non-GAAP amounts for the
periods presented herein are provided in schedules accompanying this
release and should be considered together with the Consolidated
Statements of Operations. These non-GAAP measures are not meant as a
substitute for GAAP, but are included solely for informational and
comparative purposes. The Company’s management believes that this
information can assist investors in evaluating the Company’s operational
trends, financial performance, and cash generating capacity. Management
believes these non-GAAP measures allow investors to evaluate the
Company’s financial performance using some of the same measures as
management. However, the non-GAAP financial measures should not be
regarded as a replacement for or superior to corresponding, similarly
captioned, GAAP measures and may be different from non-GAAP financial
measures used by other companies.

Fourth Quarter and Fiscal Year 2018 Results Webcast and Conference
Call Details

  • When: February 21, 2019 at 2:00 P.M. Pacific Time (5:00 P.M.
    Eastern Time).
  • Webcast: A live webcast of the call can be accessed from the
    Investor Relations section of The Trade Desk’s website at http://investors.thetradedesk.com/.
    Following the call, a replay will be available on the company’s
    website.
  • Dial-in: To access the call via telephone in North America,
    please dial 877-407-0782. For callers outside the United States,
    please dial 1-201-689-8567. Participants should reference the
    conference call ID “The Trade Desk Call” after dialing in.
  • Audio replay: An audio replay of the call will be available
    beginning about two hours after the call. To listen to the replay in
    the United States, please dial 877-481-4010 (replay code: 43124).
    Outside the United States, please dial 1-919-882-2331 (replay code:
    43124). The audio replay will be available via telephone until
    February 28, 2019.

The Trade Desk, Inc. uses its Investor Relations website (http://investors.thetradedesk.com/investor-overview),
its Twitter feed (@TheTradeDesk), LinkedIn page (https://www.linkedin.com/company/the-trade-desk/),
and Facebook page (https://www.facebook.com/TheTradeDesk/),
and Jeff Green’s Twitter feed (@jefftgreen) and LinkedIn profile (https://www.linkedin.com/in/jefftgreen/)
as a means of disclosing information about the company and for complying
with its disclosure obligations under Regulation FD. The information
that is posted through these channels may be deemed material.
Accordingly, investors should monitor these channels in addition to The
Trade Desk’s press releases, SEC filings, public conference calls and
webcasts.

About The Trade Desk

The Trade Desk is a technology company that empowers buyers
of advertising. Through its self-service, cloud-based platform, ad
buyers can create, manage, and optimize digital advertising campaigns
across ad formats and devices. Integrations with major data, inventory,
and publisher partners ensure maximum reach and decisioning
capabilities, and enterprise APIs enable custom development on top of
the platform. Headquartered in Ventura, CA, The Trade Desk has offices
across North America, Europe, and Asia Pacific. To learn more, visit thetradedesk.com or
follow us on FacebookTwitterLinkedIn
and YouTube.

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements relate to expectations concerning matters that (a) are not
historical facts, (b) predict or forecast future events or results, or
(c) embody assumptions that may prove to have been inaccurate, including
statements relating to the industry and market trends, and the Company’s
financial targets such as revenue and Adjusted EBITDA. When words such
as “believe,” “expect,” “anticipate,” “will”, “outlook” or similar
expressions are used, the Company is making forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it cannot
give readers any assurance that such expectations will prove
correct. These forward-looking statements involve risks, uncertainties
and assumptions, including those related to the Company’s limited
operating history, which makes it difficult to evaluate the Company’s
business and prospects, the market for programmatic advertising
developing slower or differently than the Company’s expectations, the
demands and expectations of clients and the ability to attract and
retain clients. The actual results may differ materially from those
anticipated in the forward-looking statements as a result of numerous
factors, many of which are beyond the control of the Company. These are
disclosed in the Company’s reports filed from time to time with the
Securities and Exchange Commission, including its most recent Form 10-K
and any subsequent filings on Forms 10-Q or 8-K, available at www.sec.gov.
Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. The
Company does not intend to update any forward-looking statement
contained in this press release to reflect events or circumstances
arising after the date hereof.

 
THE TRADE DESK, INC.
           
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Revenue $ 160,468 $ 102,648 $ 477,294 $ 308,217
Operating expenses:
Platform operations 35,256 21,133 114,098 66,230
Sales and marketing 27,064 18,537 87,071 61,379
Technology and development 24,086 17,029 83,892 52,806
General and administrative   25,094   16,631   84,910   58,446
Total operating expenses   111,500   73,330   369,971   238,861
Income from operations 48,968 29,318 107,323 69,356
Total other expense (income), net   (336 )   1,282   1,586   5,731
Income before income taxes 49,304 28,036 105,737 63,625
Provision for income taxes   9,869   11,225   17,597   12,827
Net income $ 39,435 $ 16,811 $ 88,140 $ 50,798
Earnings per share:
Basic $ 0.91 $ 0.41 $ 2.08 $ 1.26
Diluted $ 0.84 $ 0.38 $ 1.92 $ 1.15
Weighted average shares outstanding:
Basic   43,223   41,108   42,442   40,262
Diluted   46,777   44,464   45,793   44,056
 

STOCK-BASED COMPENSATION EXPENSE

(Amounts in thousands)

(Unaudited)

 

Three Months Ended

Year Ended

 

December 31,

 

December 31,

 

2018

 

2017

 

2018

 

2017

Platform operations

$

1,326

$

1,131

$

4,463

$

2,674

Sales and marketing

3,549

2,984

11,306

6,261

Technology and development

4,950

2,680

13,855

6,661

General and administrative

 

4,427

 

2,116

 

12,586

 

5,721

Total

$

14,252

$

8,911

$

42,210

$

21,317

 
 
THE TRADE DESK, INC.
     
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
 
As of As of
December 31,

2018

December 31,

2017

ASSETS
Current assets:
Cash and cash equivalents $ 207,232 $ 155,950
Accounts receivable, net 834,764 599,565
Prepaid expenses and other current assets   14,527   10,298
Total current assets 1,056,523 765,813
Property and equipment, net 33,046 17,405
Deferred income taxes 8,460 3,359
Other assets, non-current   19,843   10,587
Total assets $ 1,117,872 $ 797,164
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 669,147 $ 490,377
Accrued expenses and other current liabilities   44,844   28,155
Total current liabilities 713,991 518,532
Debt, net 27,000
Other liabilities, non-current   9,314   6,049
Total liabilities   723,305   551,581
 
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital 270,447 209,603
Retained earnings   124,120   35,980
Total stockholders’ equity   394,567   245,583
Total liabilities and stockholders’ equity $ 1,117,872 $ 797,164
 
 
THE TRADE DESK, INC.
   
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
Year Ended December 31,
2018 2017
OPERATING ACTIVITIES:
Net income $ 88,140 $ 50,798

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization 11,822 7,209
Stock-based compensation 42,210 21,317
Deferred income taxes (5,101 ) (1,581 )
Bad debt expense 2,115 4,289
Other 2,905 (1,303 )
Changes in operating assets and liabilities:
Accounts receivable (239,901 ) (224,636 )
Prepaid expenses and other assets (10,551 ) (5,033 )
Accounts payable 177,675 171,793
Accrued expenses and other liabilities   17,289   8,371
Net cash provided by operating activities   86,603   31,224
INVESTING ACTIVITIES:
Purchases of property and equipment (19,795 ) (10,110 )
Capitalized software development costs (5,396 ) (2,954 )
Business acquisition     (3,000 )
Net cash used in investing activities   (25,191 )   (16,064 )
FINANCING ACTIVITIES:
Repayment on line of credit (27,000 )
Payment of debt financing costs (279 ) (154 )
Payment of financing obligations (1,001 )
Proceeds from exercise of stock options 10,021 2,565
Proceeds from employee stock purchase plan 13,805 6,997
Taxes paid related to net settlement of restricted

stock awards

  (6,677 )   (1,017 )
Net cash provided by (used in) financing activities   (10,130 )   7,390
Increase in cash and cash equivalents 51,282 22,550
Cash and cash equivalents—Beginning of period   155,950   133,400
Cash and cash equivalents—End of period $ 207,232 $ 155,950
 

Non-GAAP Financial Metrics

(Amounts in thousands, except per share amounts)

The following tables show the Company’s GAAP financial metrics
reconciled to non-GAAP financial metrics included in this release.

  Three Months Ended   Year Ended
December 31, December 31,
2018   2017 2018   2017
 
Net income $ 39,435 $ 16,811 $ 88,140 $ 50,798
Add back:
Depreciation and amortization expense 3,715 2,052 11,822 7,209
Stock-based compensation expense 14,252 8,911 42,210 21,317
Interest expense 601 501 1,550 1,791
Interest income (821 ) (47 ) (1,883 ) (93 )
Secondary offering costs 1,523
Provision for income taxes   9,869   11,225   17,597   12,827
Adjusted EBITDA $ 67,051 $ 39,453 $ 159,436 $ 95,372
 
  Three Months Ended   Year Ended
December 31, December 31,
2018   2017 2018   2017
GAAP net income $ 39,435 $ 16,811 $ 88,140 $ 50,798
Add back (deduct):
Stock-based compensation expense 14,252 8,911 42,210 21,317
Secondary offering costs 1,523
Adjustment for income taxes   (2,585 )   (1,502 )   (6,503 )   (3,274 )
Non-GAAP net income $ 51,102 $ 24,220 $ 123,847 $ 70,364
 
GAAP diluted EPS $ 0.84 $ 0.38 $ 1.92 $ 1.15
Non-GAAP diluted EPS $ 1.09 $ 0.54 $ 2.70 $ 1.60
 
Weighted average shares outstanding—diluted   46,777   44,464   45,793   44,056
 

Contacts

Investors
Chris Toth
Vice President Investor Relations, The
Trade Desk
[email protected]
310-334-9183

Media
Austin Rotter
Associate VP, 5WPR
[email protected]
646-862-6866

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