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The Trade Desk Reports Third 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 third quarter ended September 30, 2020.

"So far in 2020 we’ve seen several years of advertising disruption and innovation compressed into a few months. As a result, advertisers have become more deliberate and data-driven with every advertising dollar. That helped us deliver record quarterly revenue of $216 million and adjusted EBITDA of $77 million." said Co-Founder and CEO of The Trade Desk, Jeff Green. "This is the result of our long-term strategic investments to build a compelling Open Internet alternative for advertisers. As advertisers come under pressure to prove the ROI of their campaigns, to take advantage of the mass consumer shift to streaming TV, and to consider alternatives to user-generated content, our investments in these areas are paying off. Whether it’s our focus on measurement capabilities, CTV inventory or the future of identity, advertisers can count on us as the industry’s most innovative and complete demand side platform."

Third Quarter 2020 Financial Highlights:

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

GAAP Results

Revenue

$

216.1

$

164.2

$

516.1

$

445.1

Increase (decrease) in revenue year over year

32

%

38

%

16

%

40

%

Net Income

$

41.2

$

19.4

$

90.4

$

57.4

Diluted EPS

$

0.84

$

0.40

$

1.86

$

1.20

Non-GAAP Results

Adjusted EBITDA

$

77.2

$

47.8

$

130.7

$

130.4

Adjusted EBITDA Margin

36

%

29

%

25

%

29

%

Non-GAAP Net Income

$

62.7

$

36.1

$

150.8

$

104.8

Non-GAAP Diluted EPS

$

1.27

$

0.75

$

3.10

$

2.19

Third 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 Q3 include:

    • Connected TV grew over 100% from Q3 2019 to Q3 2020

    • Mobile Video spend grew about 70% from Q3 2019 to Q3 2020

    • Audio spend grew about 70% from Q3 2019 to Q3 2020

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

  • Building Industry-Wide Collaboration and Support for Unified ID 2.0: The Trade Desk is building support for Unified ID 2.0, a new industry-wide approach to identity that preserves the value of relevant advertising, while putting user control and privacy at the forefront. The ID is an upgrade and alternative to third-party cookies. Recent partnerships include:

    • Nielsen Holdings, a global measurement and data analytics company

    • Criteo S.A., a global technology company that powers world marketers

    • LiveRamp Holdings, the leading data connectivity platform

  • Industry Awards: The Trade Desk was named a 2020 Best Medium WorkplaceTM in the U.K. and a 2020 Best Workplace in Hong KongTM 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 YorkTM 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 Q4 revenue to range between $287 million and $291 million. Under this assumption, we estimate adjusted EBITDA to be at least $115 million in Q4.

Fourth Quarter 2020 outlook summary:

  • Revenue range between $287 million and $291 million

  • Adjusted EBITDA of at least $115 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 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.

Third Quarter Financial Results Webcast and Conference Call Details

  • When: November 5, 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 800-459-5346. For callers outside the United States, please dial 1-203-518-9544. Participants should reference "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: 38371). Outside the United States, please dial 1-919-882-2331 (replay code: 38371). The audio replay will be available via telephone until November 12, 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

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue

$

216,113

$

164,203

$

516,128

$

445,114

Operating expenses (1):

Platform operations

44,826

39,932

127,167

108,913

Sales and marketing

44,637

36,142

116,002

89,951

Technology and development

41,079

29,185

117,931

83,949

General and administrative

42,789

37,017

117,252

102,755

Total operating expenses

173,331

142,276

478,352

385,568

Income from operations

42,782

21,927

37,776

59,546

Total other expense (income), net

223

(1,892

)

834

(2,979

)

Income before income taxes

42,559

23,819

36,942

62,525

Provision for (benefit from) income taxes

1,312

4,397

(53,473

)

5,152

Net income

$

41,247

$

19,422

$

90,415

$

57,373

Earnings per share:

Basic

$

0.89

$

0.43

$

1.96

$

1.29

Diluted

$

0.84

$

0.40

$

1.86

$

1.20

Weighted average shares outstanding:

Basic

46,582

44,771

46,075

44,363

Diluted

49,220

48,037

48,731

47,728

_______________________

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

STOCK-BASED COMPENSATION EXPENSE

(Amounts in thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Platform operations

$

1,639

$

1,507

$

5,459

$

3,894

Sales and marketing

6,916

5,036

18,549

13,094

Technology and development

7,911

7,146

24,345

18,579

General and administrative

10,386

5,753

25,398

20,801

Total

$

26,852

$

19,442

$

73,751

$

56,368

THE TRADE DESK, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

As of

As of

September 30,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

434,371

$

130,876

Short-term investments, net

122,909

124,112

Accounts receivable, net

1,139,860

1,166,376

Prepaid expenses and other current assets

58,847

27,857

Total current assets

1,755,987

1,449,221

Property and equipment, net

111,862

64,012

Operating lease assets

202,172

173,449

Deferred income taxes

39,928

18,950

Other assets, non-current

28,479

23,129

Total assets

$

2,138,428

$

1,728,761

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

919,694

$

868,618

Accrued expenses and other current liabilities

57,724

47,178

Operating lease liabilities

34,735

14,577

Total current liabilities

1,012,153

930,373

Operating lease liabilities, non-current

205,408

174,873

Debt, net

72,000

Other liabilities, non-current

16,240

10,998

Total liabilities

1,305,801

1,116,244

Stockholders' equity:

Preferred stock

Common stock

Additional paid-in capital

510,017

380,079

Accumulated other comprehensive income

145

Retained earnings

322,465

232,438

Total stockholders' equity

832,627

612,517

Total liabilities and stockholders' equity

$

2,138,428

$

1,728,761

THE TRADE DESK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Nine Months Ended September 30,

2020

2019

OPERATING ACTIVITIES:

Net income

$

90,415

$

57,373

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

Depreciation and amortization

20,777

15,246

Stock-based compensation

73,751

56,368

Allowance for credit losses on accounts receivable

2,722

1,647

Noncash lease expense

24,052

15,394

Deferred income taxes

(20,978

)

Other

1,242

(2,945

)

Changes in operating assets and liabilities:

Accounts receivable

21,063

(2,739

)

Prepaid expenses and other assets

(23,919

)

(19,024

)

Accounts payable

47,728

(21,401

)

Accrued expenses and other liabilities

11,006

(3,178

)

Operating lease liabilities

(10,388

)

(8,468

)

Net cash provided by operating activities

237,471

88,273

INVESTING ACTIVITIES:

Purchases of investments

(127,117

)

(178,179

)

Maturities of investments

128,315

55,819

Purchases of property and equipment

(57,721

)

(21,659

)

Capitalized software development costs

(4,246

)

(3,849

)

Net cash used in investing activities

(60,769

)

(147,868

)

FINANCING ACTIVITIES:

Proceeds from line of credit

143,000

Repayment on line of credit

(71,000

)

Payment of debt financing costs

(6

)

Proceeds from exercise of stock options

53,942

21,911

Proceeds from employee stock purchase plan

15,035

8,648

Taxes paid related to net settlement of restricted stock awards

(14,184

)

(4,744

)

Net cash provided by financing activities

126,793

25,809

Increase (decrease) in cash and cash equivalents

303,495

(33,786

)

Cash and cash equivalents—Beginning of period

130,876

207,232

Cash and cash equivalents—End of period

$

434,371

$

173,446

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

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net income

$

41,247

$

19,422

$

90,415

$

57,373

Add back:

Depreciation and amortization

7,517

5,969

20,777

15,246

Stock-based compensation

26,852

19,442

73,751

56,368

Interest expense (income), net

235

(1,480

)

(740

)

(3,763

)

Provision for (benefit from) income taxes

1,312

4,397

(53,473

)

5,152

Adjusted EBITDA

$

77,163

$

47,750

$

130,730

$

130,376

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

GAAP net income

$

41,247

$

19,422

$

90,415

$

57,373

Add back (deduct):

Stock-based compensation expense

26,852

19,442

73,751

56,368

Adjustment for income taxes

(5,440

)

(2,777

)

(13,341

)

(8,985

)

Non-GAAP net income

$

62,659

$

36,087

$

150,825

$

104,756

GAAP diluted EPS

$

0.84

$

0.40

$

1.86

$

1.20

Non-GAAP diluted EPS

$

1.27

$

0.75

$

3.10

$

2.19

Weighted average shares outstanding—diluted

49,220

48,037

48,731

47,728

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105006090/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