UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-37879

THE TRADE DESK, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-1887399
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

42 N. Chestnut Street

Ventura, California 93001

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (805) 585-3434

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, par value $0.000001 per share	TTD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of July 31, 2021, the registrant had 434,119,332 shares of Class A common stock and 44,556,450 shares of Class B common stock outstanding.

THE TRADE DESK, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

		Page
Part I.	FINANCIAL INFORMATION		3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020		3
	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020		4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020		5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21
Item 4.	Controls and Procedures		21
Part II.	OTHER INFORMATION		22
Item 1.	Legal Proceedings		22
Item 1A.	Risk Factors		22
Item 6.	Exhibits		45
Signatures			46

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(Unaudited)

	As of		As of
	June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	476,907	$	437,353
Short-term investments, net		228,150		186,685
Accounts receivable, net of allowance for credit losses    of $6,989 and $7,253 as of June 30, 2021 and December 31, 2020, respectively		1,527,651		1,584,109
Prepaid expenses and other current assets		114,558		102,170
TOTAL CURRENT ASSETS		2,347,266		2,310,317
Property and equipment, net		124,809		115,863
Operating lease assets		245,674		248,143
Deferred income taxes		45,124		50,168
Other assets, non-current		30,075		29,154
TOTAL ASSETS	$	2,792,948	$	2,753,645
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	1,222,220	$	1,348,480
Accrued expenses and other current liabilities		66,759		88,335
Operating lease liabilities		39,594		37,868
TOTAL CURRENT LIABILITIES		1,328,573		1,474,683
Operating lease liabilities, non-current		252,995		254,562
Other liabilities, non-current		9,034		11,255
TOTAL LIABILITIES		1,590,602		1,740,500
Commitments and contingencies (Note 10)
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.000001; 100,000 shares authorized, zero shares issued    and outstanding as of June 30, 2021 and December 31, 2020		—		—
Common stock, par value $0.000001    Class A, 1,000,000 shares authorized; 433,892 and 423,383 shares       issued and outstanding as of June 30, 2021 and December 31, 2020, respectively    Class B, 95,000 shares authorized; 44,557 and 50,018 shares       issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		—		—
Additional paid-in capital		657,640		538,778
Retained earnings		544,706		474,367
TOTAL STOCKHOLDERS’ EQUITY		1,202,346		1,013,145
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,792,948	$	2,753,645

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

3

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2021		2020			2021			2020
Revenue	$	279,967	$	139,355		$	499,778		$	300,015
Operating expenses:
Platform operations		50,809		42,133			101,309			82,341
Sales and marketing		61,755		37,071			117,519			71,365
Technology and development		53,536		40,058			107,454			76,852
General and administrative		51,919		35,865			103,764			74,463
Total operating expenses		218,019		155,127			430,046			305,021
Income (loss) from operations		61,948		(15,772	)		69,732			(5,006	)
Other expense (income):
Interest expense (income), net		194		(158	)		239			(975	)
Foreign currency exchange loss (gain), net		204		352			(149	)		1,586
Total other expense, net		398		194			90			611
Income (loss) before income taxes		61,550		(15,966	)		69,642			(5,617	)
Provision for (benefit from) income taxes		13,853		(41,077	)		(697	)		(54,785	)
Net income	$	47,697	$	25,111		$	70,339		$	49,168
Earnings per share:
Basic	$	0.10	$	0.05		$	0.15		$	0.11
Diluted	$	0.10	$	0.05		$	0.14		$	0.10
Weighted average shares outstanding:
Basic		475,512		461,356			474,172			458,184
Diluted		496,987		486,537			497,449			484,834

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Class A and B				Additional						Total
	Common Stock				Paid-In			Retained			Stockholders’
	Shares		Amount		Capital			Earnings			Equity
Balance as of December 31, 2019		454,755	$	—	$	380,079		$	232,438		$	612,517
Impact upon adoption of ASC 326		—		—		—			(388	)		(388	)
Exercise of common stock options		5,393		—		19,478			—			19,478
Restricted stock, net of forfeitures and shares     withheld for taxes		197		—		(4,893	)		—			(4,893	)
Stock-based compensation		—		—		23,263			—			23,263
Net income		—		—		—			24,057			24,057
Balance as of March 31, 2020		460,346	$	—	$	417,927		$	256,107		$	674,034
Exercise of common stock options		4,306		—		22,491			—			22,491
Restricted stock, net of forfeitures and shares     withheld for taxes		613		—		(2,836	)		—			(2,836	)
Stock-based compensation		—		—		24,516			—			24,516
Issuance of common stock under employee     stock purchase plan		2,026		—		15,035			—			15,035
Net income		—		—		—			25,111			25,111
Balance as of June 30, 2020		467,291	$	—	$	477,133		$	281,218		$	758,351
Balance as of December 31, 2020		473,401	$	—	$	538,778		$	474,367		$	1,013,145
Exercise of common stock options		1,794		—		12,621			—			12,621
Restricted stock, net of forfeitures and shares     withheld for taxes		110		—		(17,080	)		—			(17,080	)
Stock-based compensation		—		—		52,985			—			52,985
Net income		—		—		—			22,642			22,642
Balance as of March 31, 2021		475,305	$	—	$	587,304		$	497,009		$	1,084,313
Exercise of common stock options		1,401		—		13,718			—			13,718
Restricted stock, net of forfeitures and shares     withheld for taxes		409		—		(12,155	)		—			(12,155	)
Stock-based compensation		—		—		46,015			—			46,015
Issuance of common stock under employee     stock purchase plan		1,334		—		22,758			—			22,758
Net income		—		—		—			47,697			47,697
Balance as of June 30, 2021		478,449	$	—	$	657,640		$	544,706		$	1,202,346

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
OPERATING ACTIVITIES:
Net income	$	70,339		$	49,168
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,017			13,260
Stock-based compensation		97,551			46,899
Allowance for credit losses on accounts receivable		239			2,384
Noncash lease expense		19,553			15,825
Deferred income taxes		5,044			(11,697	)
Other		9,065			(2,372	)
Changes in operating assets and liabilities:
Accounts receivable		49,802			293,577
Prepaid expenses and other assets		(6,812	)		(31,368	)
Accounts payable		(133,510	)		(214,396	)
Accrued expenses and other liabilities		(22,852	)		(7,418	)
Operating lease liabilities		(23,995	)		(4,735	)
Net cash provided by operating activities		85,441			149,127
INVESTING ACTIVITIES:
Purchases of investments		(164,031	)		(90,080	)
Sales of investments		4,539			—
Maturities of investments		116,769			85,183
Purchases of property and equipment		(18,499	)		(37,720	)
Capitalized software development costs		(2,675	)		(2,317	)
Net cash used in investing activities		(63,897	)		(44,934	)
FINANCING ACTIVITIES:
Proceeds from line of credit		—			143,000
Repayment on line of credit		—			(1,000	)
Payment of debt financing costs		(1,852	)		—
Proceeds from exercise of stock options		26,339			41,969
Proceeds from employee stock purchase plan		22,758			15,035
Taxes paid related to net settlement of restricted stock awards		(29,235	)		(7,729	)
Net cash provided by financing activities		18,010			191,275
Increase in cash and cash equivalents		39,554			295,468
Cash and cash equivalents—Beginning of period		437,353			130,876
Cash and cash equivalents—End of period	$	476,907		$	426,344
SUPPLEMENTAL CASH FLOW INFORMATION:
Capitalized assets financed by accounts payable	$	16,611		$	11,315
Cash paid for amounts included in the measurement of lease liabilities included in    operating cash flows	$	27,175		$	10,077
Right-of-use assets obtained in exchange for operating lease liabilities	$	16,108		$	45,951
Asset retirement obligation	$	592		$	1,601
Stock-based compensation included in capitalized software development costs	$	1,449		$	880

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

6

THE TRADE DESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Nature of Operations

The Trade Desk, Inc. (the “Company”) was formed in November 2009 as a Delaware corporation. The Company is headquartered in Ventura, California and has offices in various cities in North America, Europe, Asia and Australia. The Company is a technology company that empowers buyers of advertising by providing a self-service cloud-based platform on which ad buyers can create, manage, and optimize more expressive data-driven digital advertising campaigns across ad formats, including display, video, audio, native and social, on a multitude of devices, such as computers, mobile devices, and connected TV.

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2020 was derived from audited financial statements but does not include all disclosures required by GAAP. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2020.

There have been no material changes to the Company’s accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, and these unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the Company’s audited annual consolidated financial statements for the year ended December 31, 2020, and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.

On June 16, 2021, the Company effected a ten-for-one stock split (the “Stock Split”) of the Company’s common stock in the form of a stock dividend. Each stockholder of record on June 9, 2021, received nine additional shares of common stock for each then-held share. Trading began on a stock split-adjusted basis on June 17, 2021. The number of shares subject to outstanding equity awards and the exercise prices of the outstanding stock option awards were also adjusted to reflect the effect of the Stock Split. All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the Stock Split.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates.

As of June 30, 2021, the impact of the Coronavirus pandemic (“COVID-19”) on our business continued to evolve. As a result, many of our estimates and assumptions, including the allowance for credit losses, consider macro-economic factors in the market, which require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

For the three and six months ended June 30, 2021, the Company’s assessment of credit losses considered business and market disruptions caused by COVID-19 and estimates of defaults by industry. The Company reviews the allowance for credit losses and financial implications of COVID-19 on expected credit losses on a quarterly basis. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered.

7

Recent Accounting Pronouncements 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate or by another reference rate expected to be discontinued. The amendments are effective for all entities through December 31, 2022 and can be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company is currently evaluating the impacts of the provisions of ASU 2020-04 on our financial condition, results of operations, and cash flows.

Note 3—Earnings Per Share

The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

The computation of basic and diluted EPS after giving retroactive effect to the Stock Split is as follows (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Numerator:
Net income	$	47,697	$	25,111	$	70,339	$	49,168
Denominator:
Weighted-average shares outstanding—basic		475,512		461,356		474,172		458,184
Effect of dilutive securities:
Options to purchase common stock		18,094		21,766		19,356		23,117
Employee stock purchase plan shares		538		835		663		997
Restricted stock		2,843		2,580		3,258		2,536
Weighted-average shares outstanding—diluted		496,987		486,537		497,449		484,834
Basic EPS	$	0.10	$	0.05	$	0.15	$	0.11
Diluted EPS	$	0.10	$	0.05	$	0.14	$	0.10
Anti-dilutive equity awards under stock-based award plans    excluded from the determination of diluted EPS		2,958		6,332		2,958		6,332

Note 4—Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments in marketable securities were as follows (in thousands):

	As of June 30, 2021
	Cash and
	Cash		Short-Term
	Equivalents		Investments		Total
Cash	$	93,317	$	—	$	93,317
Level 1:
Money market funds		360,143		—		360,143
Level 2:
Commercial paper		23,447		94,409		117,856
Corporate debt securities		—		86,845		86,845