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The Trade Desk Reports Second Quarter Financial Results

·13 min read

The Trade Desk, Inc. (NASDAQ: TTD), a global technology company that empowers buyers of advertising, today announced financial results for its second quarter ended June 30, 2020.

"While the advertising industry hit the pause button early in the second quarter due to uncertainty around the COVID-19 pandemic, we saw substantial improvement in ad spend as the quarter progressed. Indeed, the month of June ended strongly with ad spend growth turning positive on a year-over-year basis. This improvement comes as marketers recognize the role that data-driven advertising plays in driving business growth as markets start to reopen," said Jeff Green, Co-Founder and CEO, The Trade Desk. "In this environment, advertisers value the agility and flexibility that our platform provides, along with the ability to measure the ROI of every advertising dollar. Nowhere is this more apparent than television, where the accelerated consumer shift to streaming services and the greater availability of premium inventory, allows advertisers to apply data to their massive TV campaigns for the first time."

Second Quarter 2020 Financial Highlights:

The following table summarizes our consolidated financial results for the quarters ended June 30, 2020 and 2019 ($ in millions, except per share amounts):

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

GAAP Results

Revenue

$

139.4

$

159.9

$

300.0

$

280.9

Increase (decrease) in

revenue year over year

(13

)%

42

%

7

%

42

%

Net Income

$

25.1

$

27.8

$

49.2

$

38.0

Diluted EPS

$

0.52

$

0.58

$

1.01

$

0.80

Non-GAAP Results

Adjusted EBITDA

$

14.6

$

58.0

$

53.6

$

82.6

Adjusted EBITDA Margin

10

%

36

%

18

%

29

%

Non-GAAP Net Income

$

44.8

$

45.6

$

88.2

$

68.7

Non-GAAP Diluted EPS

$

0.92

$

0.95

$

1.82

$

1.44

Second Quarter and Recent Business Highlights Include:

  • Continued Omnichannel Spend Growth: Omnichannel solutions remain a strategic focus for The Trade Desk as the industry continues shifting toward transparency and programmatic buying. Channel highlights from Q2 include:

    • Connected TV spend grew about 40% from Q2 2019 to Q2 2020

    • Mobile Video spend grew 15% from Q2 2019 to Q2 2020

    • Audio spend grew about 20% from Q2 2019 to Q2 2020

  • Strong Customer Retention: Customer retention remained over 95% during the quarter, as it has for the previous 5 years.

  • Expanding Partnerships:

    • The Trade Desk and FreeWheel, a Comcast Company expanded its partnership in connected TV. The Trade Desk now can access FreeWheel’s unified decisioning capability that enables buyers and sellers to seamlessly transact across both direct sold and programmatic advertising.

  • Industry Awards: The Trade Desk was named a 2020 Best Medium Workplace™ in the U.K. and a 2020 Best Workplace in Hong Kong™ by Great Places to Work®. The Trade Desk recently won for the Best Overall Technology for Programmatic Trading at The Drum Digital Advertising Awards (US) and was a Gartner Peer Insights 2020 Customers’ Choice for Ad Tech. The Trade Desk was also named a Best Workplace in New York™ by Great Place to Work™ and Fortune for the third year in a row.

Impact of COVID-19 on our Outlook:

Our business has been impacted by the COVID-19 pandemic that has significantly impacted advertiser demand. Like many companies that are ad-funded, we are facing a period of higher uncertainty in our business outlook. We expect our business performance could be impacted by issues beyond our control, such as changing economic conditions or shelter-in-place orders that may or may not occur. Assuming that the economy continues to recover and we do not have any major COVID-19 related setbacks that may cause economic conditions to deteriorate, we estimate revenue growth in Q3 to increase 8 to 10 percent on a year-over-year basis. Under this assumption, we estimate adjusted EBITDA to be at least $30 million in Q3.

Third Quarter 2020 outlook summary:

  • Revenue range between $177 million and $181 million

  • Adjusted EBITDA of at least $30 million

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 Income 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 (income), net, credit loss expense on available-for-sale securities and provision for (benefit from) income taxes. Non-GAAP net income excludes charges and the related income tax effects for stock-based compensation. Tax rates on the tax-deductible portions of the stock-based compensation expense approximating 30% have been used in the computation of non-GAAP net income and non-GAAP diluted EPS. 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 Income. 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.

Second Quarter Financial Results Webcast and Conference Call Details

  • When: August 6, 2020 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 with passcode: To access the call via telephone in the United States, please dial 866-342-8588. For callers outside the United States, please dial 1-203-518-9865. Participants should use the passcode "44571" to access the 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: 36377). Outside the United States, please dial 1-919-882-2331 (replay code: 36377). The audio replay will be available via telephone until August 13, 2020.

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 Facebook, Twitter, LinkedIn 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 relatively limited operating history and the impact of COVID-19 on the Company and its customers and partners, 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 INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Revenue

$

139,355

$

159,924

$

300,015

$

280,911

Operating expenses (1):

Platform operations

42,133

35,330

82,341

68,981

Sales and marketing

37,071

31,072

71,365

53,809

Technology and development

40,058

29,452

76,852

54,764

General and administrative

35,865

32,121

74,463

65,738

Total operating expenses

155,127

127,975

305,021

243,292

(Loss) income from operations

(15,772

)

31,949

(5,006

)

37,619

Total other expense (income), net

194

(1,420

)

611

(1,087

)

(Loss) income before income taxes

(15,966

)

33,369

(5,617

)

38,706

Provision for (benefit from) income taxes

(41,077

)

5,569

(54,785

)

755

Net income

$

25,111

$

27,800

$

49,168

$

37,951

Earnings per share:

Basic

$

0.54

$

0.63

$

1.07

$

0.86

Diluted

$

0.52

$

0.58

$

1.01

$

0.80

Weighted average shares outstanding:

Basic

46,136

44,404

45,818

44,157

Diluted

48,654

47,828

48,484

47,573

_______________________

(1) Includes stock-based compensation expense as follows:

STOCK-BASED COMPENSATION EXPENSE

(Amounts in thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Platform operations

$

2,358

$

1,331

$

3,820

$

2,387

Sales and marketing

6,319

4,831

11,633

8,058

Technology and development

7,844

6,497

16,434

11,433

General and administrative

7,413

8,398

15,012

15,048

Total

$

23,934

$

21,057

$

46,899

$

36,926

THE TRADE DESK, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

As of

As of

June 30,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

426,344

$

130,876

Short-term investments, net

128,974

124,112

Accounts receivable, net

869,064

1,166,376

Prepaid expenses and other current assets

67,437

27,857

Total current assets

1,491,819

1,449,221

Property and equipment, net

96,075

64,012

Operating lease assets

203,914

173,449

Deferred income taxes

30,648

18,950

Other assets, non-current

26,515

23,129

Total assets

$

1,848,971

$

1,728,761

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

656,168

$

868,618

Accrued expenses and other current liabilities

43,147

47,178

Operating lease liabilities

31,385

14,577

Total current liabilities

730,700

930,373

Operating lease liabilities, non-current

205,556

174,873

Debt, net

142,000

Other liabilities, non-current

12,364

10,998

Total liabilities

1,090,620

1,116,244

Stockholders' equity:

Preferred stock

Common stock

Additional paid-in capital

476,859

380,079

Accumulated other comprehensive income

274

Retained earnings

281,218

232,438

Total stockholders' equity

758,351

612,517

Total liabilities and stockholders' equity

$

1,848,971

$

1,728,761

THE TRADE DESK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Six Months Ended June 30,

2020

2019

OPERATING ACTIVITIES:

Net income

$

49,168

$

37,951

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

13,260

9,277

Stock-based compensation

46,899

36,926

Allowance for credit losses on accounts receivable

2,384

843

Investment credit loss

13

Noncash lease expense

15,825

8,935

Deferred income taxes

(11,697

)

Other

(2,385

)

(2,056

)

Changes in operating assets and liabilities:

Accounts receivable

293,577

4,987

Prepaid expenses and other assets

(31,368

)

(11,960

)

Accounts payable

(214,396

)

(28,952

)

Accrued expenses and other liabilities

(7,535

)

(6,312

)

Operating lease liabilities

(4,735

)

(5,848

)

Net cash provided by operating activities

149,010

43,791

INVESTING ACTIVITIES:

Purchases of investments

(89,689

)

(122,432

)

Maturities of investments

85,183

22,424

Purchases of property and equipment

(37,720

)

(17,002

)

Capitalized software development costs

(2,317

)

(2,420

)

Net cash used in investing activities

(44,543

)

(119,430

)

FINANCING ACTIVITIES:

Proceeds from line of credit

143,000

Repayment on line of credit

(1,000

)

Payment of debt financing costs

(7

)

Proceeds from exercise of stock options

41,695

16,975

Proceeds from employee stock purchase plan

15,035

8,648

Taxes paid related to net settlement of restricted

stock awards

(7,729

)

(3,634

)

Net cash provided by financing activities

191,001

21,982

Increase (decrease) in cash and cash equivalents

295,468

(53,657

)

Cash and cash equivalents—Beginning of period

130,876

207,232

Cash and cash equivalents—End of period

$

426,344

$

153,575

Non-GAAP Financial Metrics
(Amounts in thousands, except per share amounts)

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Net income

$

25,111

$

27,800

$

49,168

$

37,951

Add back:

Depreciation and amortization

6,783

4,821

13,260

9,277

Stock-based compensation

23,934

21,057

46,899

36,926

Interest expense (income), net

104

(1,286

)

(988

)

(2,283

)

Credit loss expense on available-for-sale securities

(262

)

13

Provision for (benefit from) income taxes

(41,077

)

5,569

(54,785

)

755

Adjusted EBITDA

$

14,593

$

57,961

$

53,567

$

82,626

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

GAAP net income

$

25,111

$

27,800

$

49,168

$

37,951

Add back (deduct):

Stock-based compensation expense

23,934

21,057

46,899

36,926

Adjustment for income taxes

(4,248

)

(3,291

)

(7,901

)

(6,208

)

Non-GAAP net income

$

44,797

$

45,566

$

88,166

$

68,669

GAAP diluted EPS

$

0.52

$

0.58

$

1.01

$

0.80

Non-GAAP diluted EPS

$

0.92

$

0.95

$

1.82

$

1.44

Weighted average shares

outstanding—diluted

48,654

47,828

48,484

47,573

View source version on businesswire.com: https://www.businesswire.com/news/home/20200806005865/en/

Contacts

Investors
Chris Toth
Vice President Investor Relations, The Trade Desk
ir@thetradedesk.com
310-334-9183

Media
Ian Colley
Vice President Public Relations, The Trade Desk
ian.colley@thetradedesk.com
914-434-3043