Trade Desk Inc

Previous wording

Our clients are advertising agencies, advertisers and other service providers for agencies or advertisers, with whom we enter into ongoing master service agreements (“MSAs”). We generate revenue by charging our clients a platform fee based on a percentage of a client’s total spend on advertising. We also generate revenue from providing data and other value-added services and platform features.

Current wording

Our clients are advertising agencies, advertisers and other service providers for agencies or advertisers, with whom we enter into ongoing master service agreements (“MSAs”). We generate revenue by charging our clients a platform fee based on a percentage of our clients’ total advertising spend on our platform and from providing data, other value-added services and platform features.

Previous wording

Rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time until economic activity normalizes. As a result of the current uncertainty in economic activity, we are unable to predict the size and duration of the impact on our revenue and our results of operations. The extent of the impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, and the duration and extent of geopolitical and global economic disruption and their respective impacts on our clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted. See “Item 1A. Risk Factors” in Part II. Other Information for further discussion of the adverse impacts of macroeconomic uncertainty on our business.

Current wording

Changes in interest and foreign currency exchange rates, inflation and geopolitical developments have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time until economic activity normalizes. As a result of the current uncertainty in economic activity, we are unable to predict the size and duration of the impact on our revenue and our results of operations. The extent of the impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, and the duration and extent of geopolitical and global economic disruption and their respective impacts on our clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted. See “Item 1A. Risk Factors” in Part II. Other Information for further discussion of the adverse impacts of macroeconomic uncertainty on our business.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 Compared with the Three and Six Months Ended June 30, 2023

Previous wording

Revenue increased by $108 million, or 28%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to higher gross spend in the current year on our platform, which was primarily driven by more advertisers and more campaigns executed by existing clients.

Current wording

Revenue increased by $120 million, or 26%, and $229 million, or 27%, for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, respectively. The increase was primarily due to higher gross spend in the current year on our platform, which was primarily driven by new clients and more campaigns executed by existing clients.

Previous wording

Platform operations expense increased by $19 million, or 22%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to increases of $14 million in hosting costs and $4 million in personnel costs, which included a $2 million increase in stock-based compensation. The increase in hosting costs was primarily attributable to support costs related to the increased use of our platform by our clients, increased use of features by our technical teams in support of our platform and investment in new data centers to support our platform. The increase in personnel costs was primarily due to the increase in stock-based compensation driven by new equity grants, headcount growth and an increase in travel and employee engagement costs, including in-person events.

Current wording

Platform operations expense increased by $43 million, or 25%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily due to increases of $31 million in hosting costs and $10 million in personnel costs, which included a $4 million increase in stock-based compensation. The increase in hosting costs was primarily attributable to support costs related to the increased use of our platform by our clients, increased use of features by our technical teams in support of our platform and investment in new data centers to support the continued growth of our platform. The increase in personnel costs was primarily due to the increase in stock-based compensation driven by new equity awards, an increase in platform support by engineers, headcount growth, an increase in taxes on equity awards and an increase in travel and employee engagement costs, including in-person events.

Previous wording

Sales and marketing expense increased by $25 million, or 25%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to an increase of $20 million in personnel costs, which included a $6 million increase in stock-based compensation, a $3 million increase in marketing costs and a $2 million increase in allocated facilities costs. The increase in personnel costs was primarily due to headcount growth to support our sales efforts and to continue to develop and maintain relationships with our clients; an increase in incentive compensation driven by headcount growth and gross spend growth; and an increase in travel and employee engagement costs, including in-person events. The increase in stock-based compensation was primarily due to new equity grants. The increase in marketing costs was primarily due to an increase in marketing campaigns, creatives, events, sponsorships and client engagement. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.

Current wording

Sales and marketing expense increased by $22 million, or 20%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was primarily due to an increase of $18 million in personnel costs, which included a $6 million increase in stock-based compensation, a $2 million increase in marketing costs and a $2 million increase in allocated facilities costs. The increase in personnel costs was primarily due to headcount growth to support our sales efforts and to continue to develop and maintain relationships with our clients; an increase in incentive compensation driven by gross spend growth; and an increase in travel costs. The increase in stock-based compensation was primarily due to new equity awards. The increase in marketing costs was primarily due to an increase in marketing campaigns, events, sponsorships and client engagement. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.

Previous wording

Technology and development expense increased by $14 million, or 15%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to an increase of $13 million in personnel costs, which included a $7 million increase in stock-based compensation. The increase in personnel costs was primarily attributable to the increase in stock-based compensation driven by new equity grants, headcount growth to maintain and support further development of our platform and an increase in travel and employee engagement costs, including in-person events.

Current wording

Technology and development expense increased by $26 million, or 13%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily due to an increase of $23 million in personnel costs, which included a $13 million increase in stock-based compensation, and a $2 million increase in allocated facilities costs. The increase in personnel costs was primarily attributable to the increase in stock-based compensation driven by new equity awards, headcount growth to maintain and support further development of our platform, an increase in taxes on equity awards and an increase in travel and employee engagement costs, including in-person events. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.

Previous wording

We expect technology and development expense to increase in absolute dollars as we continue to invest in the development of our platform to support additional features and functions, increase the number of advertising and data inventory suppliers and support the anticipated increase in volume of advertising spending by our clients on our platform. We also intend to invest in technology to further automate our business processes.

Current wording

We expect technology and development expense to increase in absolute dollars as we continue to invest in the development of our platform to support additional features and functions, increase the number of advertising inventory and data suppliers and support the anticipated increase in volume of advertising spending by our clients on our platform. We also intend to invest in technology to further automate our business processes.

Previous wording

General and administrative expense decreased by $1 million, or 1%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to an $18 million decrease in stock-based compensation, partially offset by increases of $9 million in personnel costs and $8 million in administrative costs. The decrease in stock-based compensation was primarily driven by a $24 million decrease in expense related to the CEO Performance Option driven by the graded-vesting attribution method, under which more expense is recognized earlier in the option’s life, partially offset by a $6 million increase in expense related to new equity grants. The increase in personnel costs was primarily attributable to increased headcount to support our growth and an increase in travel and employee engagement costs, including in-person events. The increase in administrative costs was primarily driven by increases in local business taxes and external professional fees.

Current wording

General and administrative expense increased by $9 million, or 3%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to increases of $17 million in personnel costs and $14 million in administrative costs, partially offset by a $23 million decrease in stock-based compensation. The increase in personnel costs was primarily attributable to increased headcount to support our growth, an increase in taxes on equity awards and an increase in travel and employee engagement costs, including in-person events. The increase in administrative costs was primarily driven by increases in external professional fees and local business taxes. The decrease in stock-based compensation was primarily driven by a $37 million decrease in expense related to the CEO Performance Option driven by the graded-vesting attribution method, under which more expense is recognized earlier in the option’s life, partially offset by a $14 million increase in expense related to new equity awards.

Previous wording

Total other income, net increased by $4 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to higher interest income on our cash and cash equivalents and short-term investments driven by rising interest rates as well as gains on foreign currency forwards, partially offset by foreign currency transaction losses, driven by changes in foreign currency exchange rates against the U.S. Dollar.

Current wording

Total other income, net, increased by $3 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily due to higher interest income on our cash and cash equivalents and short-term investments driven by rising interest rates as well as gains on foreign currency forwards, partially offset by foreign currency transaction losses, driven by changes in foreign currency exchange rates against the U.S. Dollar.

Previous wording

The U.S. federal statutory tax rate was 21% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

The U.S. federal statutory tax rate was 21% for the three and six months ended June 30, 2024 and 2023, respectively.

Previous wording

The provision for income taxes increased by $33 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to higher pre-tax profitability coupled with a decrease in benefits associated with employee stock-based awards.

Current wording

The provision for income taxes increased by $34 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily due to higher pre-tax profitability coupled with a decrease in benefits associated with employee stock-based awards, partially offset by a lower impact attributable to nondeductible stock-based compensation.

Previous wording

As of March 31, 2024, we had working capital of $1,813 million, which included $918 million in cash and cash equivalents, $94 million of which was held by our international subsidiaries, and $501 million in short-term investments in marketable securities. Additionally, we had $443 million available under our Amended Credit Facility (refer to the “Credit Facility” section below). For the three months ended March 31, 2024, we generated $185 million in cash flows from operating activities.

Current wording

As of June 30, 2024, we had working capital of $2,004 million, which included $1,009 million in cash and cash equivalents, $64 million of which was held by our international subsidiaries, and $497 million in short-term investments in marketable securities. Additionally, we had $442 million available under our Amended Credit Facility (refer to the “Credit Facility” section below). For the six months ended June 30, 2024, we generated $267 million in cash flows from operating activities.

Previous wording

As of March 31, 2024, we did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $443 million as of March 31, 2024, which is net of outstanding letters of credit of $7 million. The Amended Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026. As of March 31, 2024, we were in compliance with all covenants.

Current wording

As of June 30, 2024, we did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $442 million as of June 30, 2024, which is net of outstanding letters of credit of $8 million. The Amended Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026. As of June 30, 2024, we were in compliance with all covenants.

Previous wording

During the three months ended March 31, 2024, we repurchased and subsequently retired 1.5 million shares of our Class A common stock for an aggregate repurchase amount of $125 million. The repurchase amount for the three months ended March 31, 2024 included an immaterial amount related to the 1% excise tax on net share repurchases as a result of the Inflation Reduction Act of 2022 (“IRA”). As of March 31, 2024, $575 million remained available and authorized for repurchases.

Current wording

During the three months ended June 30, 2024, we did not repurchase any shares of our Class A common stock. During the six months ended June 30, 2024, we repurchased and subsequently retired 1.5 million shares of our Class A common stock for an aggregate repurchase amount of $125 million. The repurchase amounts included in the condensed consolidated statements of stockholders’ equity included immaterial amounts related to the 1% excise tax on share repurchases, net of share issuances, as a result of the Inflation Reduction Act of 2022 (“IRA”). As of June 30, 2024, $575 million remained available and authorized for repurchases.

Previous wording

For the three months ended March 31, 2024, cash provided by operating activities of $185 million resulted primarily from net income adjusted for noncash items of $178 million and a net increase in our operating assets and liabilities of $8 million. The net increase in our operating assets and liabilities was primarily due to a $238 million decrease in accounts receivable, partially offset by a $220 million decrease in accounts payable and a $14 million decrease in operating lease liabilities. The decrease in accounts receivable was due to the timing and seasonality of cash receipts from clients. The decrease in accounts payable was due to the timing and seasonality of payments to suppliers for the cost of advertising inventory, data and add-on features. The decrease in operating lease liabilities was due primarily to rent payments.

Current wording

For the six months ended June 30, 2024, cash provided by operating activities of $267 million resulted primarily from net income adjusted for noncash items of $419 million and a net decrease from our operating assets and liabilities of $152 million. The net decrease from our operating assets and liabilities was due to a $52 million increase in prepaid expenses and other assets, a $49 million increase in accounts receivable, a $27 million decrease in operating lease liabilities, a $13 million decrease in accounts payable and a $10 million decrease in accrued expenses and other liabilities. The increase in prepaid expenses and other assets was primarily due to cash paid for income taxes. The increase in accounts receivable was due to the timing and seasonality of cash receipts from clients and the growth of our business. The decrease in operating lease liabilities was due primarily to rent payments. The decrease in accounts payable was due to the timing and seasonality of payments to suppliers for the cost of advertising inventory, data and add-on features. The decrease in accrued expenses and other liabilities was primarily due to incentive compensation payments and a reduction of the liability related to the ESPP due to the purchase of shares in accordance with the plan.

Previous wording

For the three months ended March 31, 2023, cash provided by operating activities of $188 million resulted primarily from net income adjusted for noncash items of $153 million, and a net increase in our operating assets and liabilities of $35 million. The net increase in our operating assets and liabilities was primarily due to a $258 million decrease in accounts receivable, partially offset by a $201 million decrease in accounts payable and a $13 million decrease in operating lease liabilities. The decrease in accounts receivable was due to seasonality and the timing of cash receipts from clients. The decrease in accounts payable was due to seasonality and the timing of payments to suppliers for the cost of advertising inventory, data and add-on features. The decrease in operating lease liabilities was due primarily to rent payments.

Current wording

For the six months ended June 30, 2023, cash provided by operating activities of $316 million resulted primarily from net income adjusted for noncash items of $328 million, and a net decrease from our operating assets and liabilities of $13 million. The net decrease from our operating assets and liabilities was primarily due to a $35 million increase in accounts receivable and a $25 million decrease in operating lease liabilities, partially offset by a $51 million increase in accounts payable. The increase in accounts receivable was due to seasonality and the timing of cash receipts from clients. The decrease in operating lease liabilities was due primarily to rent payments. The increase in accounts payable was due to seasonality and the timing of payments to suppliers for the cost of advertising inventory, data and add-on features.

Previous wording

Our primary investing activities consist of investing in short-term marketable securities, purchases of property and equipment for the expansion of our new facilities in support of our expanding headcount as a result of our growth and capital expenditures to develop our software in support of enhancing our technology platform. As our business grows, our capital expenditures and our investment activity may increase.

Current wording

Our primary investing activities consist of investing in short-term marketable securities, purchases of property and equipment for the expansion of our new facilities in support of our expanding headcount as a result of our growth and capital expenditures to develop our software and hosting capabilities in support of enhancing our technology platform. As our business grows, we expect our capital expenditures to increase, and our other investment activity may increase.

Previous wording

For the three months ended March 31, 2023, we used $29 million of cash in investing activities, consisting of $18 million of net purchases of short-term investments, $9 million to purchase property and equipment and nearly $2 million of investments in capitalized software.

Current wording

For the six months ended June 30, 2024, we used $37 million of cash in investing activities, consisting of $29 million to purchase property and equipment, $4 million of investments in capitalized software and $3 million of net purchases of short-term investments.

Previous wording

For the three months ended March 31, 2024, we used $21 million of cash in investing activities, consisting of $12 million of net purchases of short-term investments, $7 million to purchase property and equipment and $2 million of investments in capitalized software.

Current wording

For the six months ended June 30, 2023, we used $62 million of cash in investing activities, consisting of $42 million of net purchases of short-term investments, $17 million to purchase property and equipment and $3 million of investments in capitalized software.

Previous wording

For the three months ended March 31, 2024, we used $141 million of cash in financing activities, consisting of $125 million of cash paid for repurchases of our Class A common stock and $27 million of taxes paid for restricted stock award settlements, partially offset by $11 million of proceeds from stock option exercises.

Current wording

For the six months ended June 30, 2024, we used $115 million of cash in financing activities, consisting of $125 million of cash paid for repurchases of our Class A common stock and $58 million of taxes paid for restricted stock award settlements, partially offset by $38 million of proceeds from stock option exercises and $30 million of proceeds from our ESPP.

Previous wording

For the three months ended March 31, 2023, we used $297 million of cash in financing activities, consisting of $292 million of cash paid for repurchases of Class A common stock and $16 million of taxes paid for restricted stock award settlements, partially offset by $10 million of proceeds from stock option exercises.

Current wording

For the six months ended June 30, 2023, we used $318 million of cash in financing activities, consisting of $336 million of cash paid for repurchases of Class A common stock and $31 million of taxes paid for restricted stock award settlements, partially offset by $28 million of proceeds from stock option exercises and $21 million of proceeds from our ESPP.