Greetings, and welcome to the Trade Desk's Third Quarter 2018 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your hosts Chris Toth, Head of Investor Relations for The Trade Desk. Chris, please go ahead.

Thank you, operator. Hello, and good afternoon. Welcome to The Trade Desk Third Quarter 2018 Earnings Conference Call. On the call today from our headquarters in Ventura our Founder and CEO, Jeff Green; Chief Operating Officer, Rob Perdue; and Chief Financial Officer, Paul Ross. A copy of our earnings press release can be found on our website at thetradedesk.com in the Investor Relations section. Before we begin, I would like to remind you that except for historical information, the matters that we'll be describing will be forward-looking statements, which are dependent upon certain risks and uncertainties. I encourage you to refer to the risk factors included in our press release and our most recent SEC filings. In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures can be found on our earnings press release. We believe providing non-GAAP measures, combined with our GAAP results, provides a more meaningful representation regarding the Company's operational performance. Lastly, I would like to highlight the following events on Wednesday, November 14, we will be attending the RBC Technology Conference in New York City. We are also planning in an Analyst Day on Wednesday, March 6, 2019 in New York. We will provide more information on this event before the end of the year. I will now turn the call over to founder and CEO, Jeff Green. Jeff,

Thanks, Chris, and thank you all for joining us today. Before we get into our results, I want to set the context of where The Trade Desk fits into the overall programmatic advertising industry. Global advertising revenues are estimated by IDC to be $700 billion in 2018. Digital is nearly half of that. Inside of digital programmatic is one of the fastest growing segments. We think nearly all of advertising will eventually be digital and nearly all of that will be programmatic. In 2018, Magna Global estimates programmatic will grow 21%. The Trade Desk is growing over two times that. In Q3, our revenue grew 50% year-over-year. This means our growth rate for Q3, 2018 equals our growth rate for Q3 2017. Even though programmatic is one of the fastest growing corners of global advertising, we're growing more than two times as fast. There are several reasons for our growth. First, there is strong momentum by advertisers to diversify their ad spend on digital. Programmatic is benefiting from this diversification. Advertisers are taking a more data driven approach to the way they spend and the marketers are realizing the traditional advertising methods do not deliver the best ROI. Another reason for our growth in Q3 is that media is rapidly fragmenting, especially in TV. From an agency and advertiser perspective, The Trade Desk is the best way to target audiences effectively across fragmenting distribution channels. This fragmentation enhances our value proposition because we are independent and objective we nimbly move where the advertising ecosystem moves. This is driving the momentum for advertisers to spend their incremental marketing dollars beyond the traditional search and social websites. Finally, our independence, avoiding conflicts of interest by not owning any media and serving only the demand side is more valuable today than ever before.…

Thanks Jeff and good afternoon everyone. We continue to execute well on all fronts and as a result, our business continues to deliver outstanding results. Our Q3 yielded record revenue of $118.8 million for the quarter. We continue to add new agency and we continue to see strong cohort growth. Perhaps most importantly like last year in Q3 and even into Q4. We have won significant amounts of new business, large global brands are moving additional spend onto our platform, including one of the largest retailers in the U.S. just in Q3. These wins continue to come from a diverse group of verticals including brands and sectors such as food and beverage, retail, fashion, fitness, consumer technology and business services. While we see some incremental spend in Q3 and Q4 from these new client wins. We expect all of these brands to be much bigger contributor starting in 2019, as they ramp up on our platform. Now outside the U.S. the trend is similar, as we saw last quarter, nearly every office outside the U.S. set records again in Q3 led by Spain, which grew 380% year-over-year. Our Hamburg, Germany at 206% and Hong Kong, which grew by 107% on a year-over-year basis, in Europe, there were two notable wins that represent much of the success we see worldwide. One was a high-end luxury automobile manufacturer that moves spend from a large competitor due to our ability to partner with many publishers in those specific regions that provide premium inventory. The other was a large global bank and financial services company that moves spend due to our ability to do custom attribution modeling using the advertiser's own first party data. This just cannot be done on other large competing platforms. Now in Asia, I want to highlight some of the…

Thanks Rob. Good afternoon everyone. Q3 was another record quarter for The Trade Desk and we were pleased with our Q3 financial performance and overall execution. Revenue increased 50% year-over-year similar to the growth rate we saw in Q3 of last year. Adjusted EBITDA increased 49% year-over-year and net income increased 98% from a year ago to a record $20.3 million all while we continue to invest aggressively for future growth. Revenue for the third quarter was a record $118.8 million, which was above our expectations and reflected increased spend by our existing customers and the addition of new customers and advertisers, as Rob elaborated a moment ago. For the quarter, approximately 91% of our third quarter growth spend came from existing customers who've been on our platform for longer than a year. With the growth of our business, our operating expenses grew to $97 million in Q3 of 2018 from $61 million during the same period in 2017. This increase was primarily due to increased investments in technology and development and our platform operations as we invested for future growth. GAAP net income was $20.3 million for Q3 or $0.44 per fully diluted share. Our adjusted net income was $30.2 million or $0.55 per fully diluted share, compared with adjusted net income of $15.3 million or $0.35 per share in the comparable period. Adjusted EBITDA was $36.6 million, with a corresponding margin of 31% of revenue during Q3 2018. The increase in adjusted EBITDA reflects the strong growth of our top line, offset by our increasing investments in product, people, global expansion and corporate expenses. Net cash provided by operating activities was about $26 million for Q3, and our trailing 12 months of operating cash flow and free cash flow were $63 million and $46 million respectively. We continue…

Let me close by giving some commentary on the remainder of 2018. For all of 2018, we are expecting revenue of $464 million and an adjusted EBITDA of $145 million. If we just meet our goals in Q4, we will have produced year-over-year growth acceleration, beating last year's Q4 growth rate of 42%. Brands are coming to us directly at a record pace. TV content creators are coming to us directly at a record pace. Our data business has grown 70% year-over-year. Cross device has grown 3x, mobile video was up almost 100% and mobile overall is almost half of our revenue. And we saw remarkable 10x increase in Connected TV yet again. With those trends, you can see why we're so bullish for Q4 and 2019. Our investments are paying off when we see surprises. They typically are to the upside. There is more opportunity in front of us. We believe The Trade Desk is well positioned to realize continued growth for Q4 next year and beyond. That concludes our prepared remarks. Operator, please open it up for questions.

Thank you. We'll be now conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Brian Schwartz from Oppenheimer. Your line is now live.

Yes, hi. Thanks for taking my question this afternoon. Congratulations Jeff, Rob and Paul on a terrific quarter here. Jeff, you mentioned a couple times here. You're more bullish about 2019 and that's quite a divergent from the other SaaS companies that I'm talking to who really aren't willing to talk about 2019 yet. You did a good job giving us some of the company specific trends that you have are looking positive. It looks like the share games are happening faster, the metrics are supporting that. The question I want to ask you, just based on the customer conversations that you have going on. When you think about 2019 and you think about that big digital advertising pie that's out there. Do you see tailwinds or headwinds out there for next year? Thanks.

Awesome. Thanks. Really appreciate the question. It's always a really important time of the year where we're prepping for 2019 or prepping for the next year. And let me give you some of the things that I think to answer your question very specifically, which are – and I'll just – I’ll skip to the end of the book, which is we had the winds at our back. We're in a better position than we've ever been at this point in the year with more confidence than we've ever had at this position in the year. So the first thing is, just looking at our own performance, it's pretty remarkable than in Q2, we equaled our growth rate of 2017 and in Q3, quarter-over-quarter meaning Q3 2018 over Q3 2017. We once again equaled our growth rate, which given that we're making much bigger numbers at this point, that we're very proud of that and that outperformance, even our own expectations. But it goes even further when we guide today that for Q4, we expect to accelerate and do grow faster this year than we did last year. And that is in part because of some of those numbers that we talked about that are the winds at our back. And maybe the two most exciting or just the channels where all the growth are coming from so first mobile, the fact that 46% of our revenue came from mobile and that mobile video, which is one of the most exciting channels will ever see, grew by 100%. And then connect the TV once again, growing at 10x a data growth where anytime people are making data driven decisions, we think that is good for us because it means that once they compare a data-driven choice to a non-data driven choice, which I think is most of advertising still, it just makes it to the house always wins like that's always in our favor. And the fact that our data spend grew so much and data usage as a whole went up by even more than that. Suggest that the winds are even more at our backs than we thought. So with all of those things happening, we're more confident for 2019 than we ever were. And I compare that to a year ago when we're looking at the next year. It's just night and day difference in terms of our competence.

Thank you. Our next question is coming from Vasily Karasyov from Cannonball Research. Your line is now live.

Thank you. Good afternoon. Chris, I'm sorry. Jeff, I would like to ask you to sort of simplify for us the Connected TV advertising process. Can you tell us what are the top three let's say, sources of inventory for you in the U.S. And then what percentage of those are transacted, what percentage is transacted programmatically? Because I think there is still some of the OTT inventory that sold manual or the traditional way. So, that would be great. Thank you.

You Bet. So first let me just give everybody a little bit of context for Connected TV. So you may recall that in Q1, I said the most bullish thing I'm reporting in this report is that inventory for Connected TV went up by a 1000%, went up by 10x. And then the next quarter, I said the most bullish thing that we've said year-to-date, even more bullish than the thing I said last quarter is that our Connected TV spend went up by 1000%. And when I said that, I never anticipated that when we are giving our Q3 results as we just said, that I would once again say that Connected TV spend went up by 10x quarter-over-quarter Q3 2018 over Q3 2017. I’d never expected that to happen. And that once again is wind at our backs. So to give you an example of where the inventory is coming from, more and more of the channels that are not included in the skinny bundles, they have their own channels popping up on the Roku and Amazon Fire and equivalents. And, of course, most of those are ad-funded. As media continues to fragment especially in TV and channels are going direct to consumers that represents new ad opportunities and we're working very closely with those companies. But maybe even more inventory is coming in through virtual MVPDs and those companies are essentially putting together their own bundles and that creates opportunity. And in order for them to stay reasonably priced and competitive, they need to rely on programmatic to be the primary source of demand. So in virtual MVPD it's often the primary source of demand, but in some of the bigger ones like for instance, Google or some of the other bigger channels where they have a…

Thank you. Our next question today is coming from Aaron Kessler from Raymond James. Your line is now live.

Hey, guys, congrats on the quarter. A couple of questions. First on, I think, last quarter you talked about Google limiting how DoubleClick ID can be used. Additionally, just your thoughts maybe Facebook also kind of limiting advertised data if that's starting to benefit you as well. And then third maybe just any commentary around election spend, if you guys benefited from that in the quarter? Thank you.

You bet. Just so that everybody understand exactly what was happening with DoubleClick ID, just because I know following all the ID stuff, it can sometimes be hard, quite used to happen. And actually I referenced this on the prepared remarks, when I was talking about the large CPG company talking about how they would rather give essentially their left over spent to Google and Facebook because of the change. So, let me explain why. So, what DoubleClick used to do is they use to share their ID with everybody. And that was great because it basically became a common currency and it was fine for the industry, it worked well. But they decided to limit the use of that mostly because of the liability of owning the search engine and the desire to protect the data that comes in through their search engine, so that it never has the opportunities to link. That's the same thing that I believe Facebook made the decision to not ever use their ID again. But in the case where it's anonymized and we, of course, not trading and personally identifiable information or directly identifiable information because, we don't transact in that using an ID to make it possible for an advertiser to track exactly what they bought is something that's much more feasible for us because, again, we don't have a search engine. So as a result, we will share our ID with the large CPG, for instance and Google will not and it makes a really hard for that CPG company to know what they bought on Google and especially, it makes it impossible for them to compare the performance on Google to something else. So, as a result, we're getting new inquiries from advertisers and agencies saying in cases where we…

Thank you. Our next question today is coming from Shyam Patil from SIG. Your line is now live.

Hey, guys. Congrats on the great quarter and outlook. I had couple of questions or two part question. First one, Jeff, you kind of talked about a little bit just now, but can you just talk a little bit about your new audience ID solution just what it is how it helps advertisers, how it fits into the advertising ID consortium. And then second part, you mentioned Amazon a couple of times in your prepared remarks. I was just wondering if you could just talk about that relationship a little bit more? Thank you.

You bet. So, let me first explain what we're after in our unified ID and some of you that were, at our Investor Day a year ago might remember that we talked about it as one of the five most important part of our strategy. And we said then even before Google made their policy change that we would have an ID available that would ultimately have a bigger footprint than any walled garden would create and sometimes that was a fairly bold assertion, but it's happening. And what our initiative is basically as I mentioned a second ago, Google used to be the currency or one of the currencies which all data can be transacted on, so it's a anonymous ID. Mobile advertising actually built sort of their entire infrastructure on a mobile ID that works the way that the rest of devices, we wished work like that. And instead things like desktop and even mobile web, transact using cookies, which makes really fragmented IDs. So, what we've done is we've said we're willing given how many times we touch consumers, given that we've essentially look at 9 million ad opportunities every single second, which represents another touch of a consumer, that we have the ability to be one of those currency that can be much bigger than any one inventory source could ever be even Google, Facebook or anybody. So, what we did, as we then created the standard and then immediately started sharing it, because our footprint or our currency was already bigger nearly everybody else we started sharing it with the independent ad tech community. As a sense then nearly every major SSP has committed many have implemented or in the process of implementing it, actually the largest independent SSP or Ad Exchange rolled it out…

Thank you. Our next question tonight is coming from Mark Kelley from Nomura-Instinet. Your line is now live.

Hi. This is Andrew Marok on for Mark. Two questions, if I could first, can you talk a bit about what you're seeing broadly in the competitive environment for spend, especially with respect to DoubleClick Bid manager and Facebook. Second, you mentioned in your prepared remarks that you haven't seen diminished spend in Europe due to GDPR, but just wanted to get your thoughts on the potential spread of GDPR style regulation being considered or potentially past outside of the EU. Thanks.

You bet. So, first on the competitive stuff for DoubleClick, when they made that strategic choice to remove the DoubleClick ID, or Google's sort of common currency, which was the DoubleClick ID, from sharing with our clients. It created a huge opportunity for us and it also effectively said we're making the strategic priority that within Google we are de prioritizing DBM or that part that is formerly known as DBM. So that's been humongous for us and it means that in more and more head-to-head, we have advantage and as we continue to build out our offering, especially like the cross-device, our offering is getting more competitive more quickly, as we're more focused, because I would just summarize their value proposition is, hey, we have a unified stack and maybe end of buying tools, but we're not as competitive as The Trade Desk, but we have, we're more integrated to other parts of your advertising and marketing stack. As we do more integration and as we continue by continuing when we shift the biggest upgrade to our product ever, when we continue to do that, we continue to distance ourselves on the buying products, so those two things together make it, so we're winning at a faster pace than ever, and we think we're gaining ground. On the GDPR thing, there's probably not a place in the world where there was more discussion about GDPR than Germany and we just talked about how we had nearly 200% year-over-year growth rate inside of Germany. One of the fastest growing in the world and more scaled then more than half of the markets we're in. So, the growth in Europe has been fantastic, and we haven't seen any negative impacts from GDPR. I think your question though is more about, hey,…

Thank you. Our next question is coming from Mark Mahaney from RBC. Your line is now live.

Okay, great. I know there were some details in the comments earlier about China and Tencent. Could you quantify that at all, do you think that there is the ability for China to be your largest international market and then potentially your largest market within a certain period of time, do you think you're up, I mean, you've got at least three really large partnerships in that market, they are the ones you need in order to gain critical mass, or do you think you already have it there? And then if I could just go back to the product itself, the Next Wave and unless I missed it, I don't think you've talked to a ton about it on this call. What impact you've seen that product have in terms of either client retention, client spend as far as we can tell, it looks like a mature, and you've certainly talked about how being the biggest product cycle upgrade, the improvement that you had, can you, can you talk about how that's actually impacted spend the client retention? Thanks a lot.

You bet. So first on the China piece, I absolutely believe that, at some point, China will be the largest market for us in the world. While today, it's the smallest market that we're in, we think that can change really rapidly as it will be the largest advertising market in the world. So, we think at end state, our pie, if you divide it up geographically, it's going to match the pie of global advertising spend and China will be the largest advertising market in the world. Because of that opportunity, and especially because so many of the advertisers that spend a lot of money in China are not based in China and that's what makes China a little bit different as the market in terms of the way you go in as well as something that makes it very different for us in a way that we go into that market versus like a B2C company, who is just trying to win over Chinese consumers to their brand. We are not doing that, we're taking brands that they already know and love into that market. And so that creates a level of trust with both the brand and the agency that is global and most often not based in China, just to bring to them, essentially trusted inventory, where Baidu, Alibaba and Tencent have more control as a percentage of the Chinese market and for instance Google, Amazon and Facebook have in the US market. So it means that developing relationships with Baidu, Alibaba and Tencent are really important. So, we alluded to an announcement that will make more public in the next couple of days around Tencent, which is that we have signed Tencent, we've been public before about our partnership with Baidu and Alibaba. Our partnership…

Thank you. Our next question is coming from Tom White from DA Davidson. Your line is now live.

Great, thanks for taking my question. It's about your data offering and I'm just kind of curious if you could kind of characterize maybe the next areas where you guys can innovate or roll-out new offerings on the data front, just that kind of refining and improving the cross-device multi-channel or are there other things. And then I guess sort of related, I'm just curious, can the fact that a large percentage of your customers integrate with your APIs. Is that can be any sort of advantage or from the insight into what data offerings might be the most compelling or leads to the best outcomes for advertisers?

You bet. Let me start in reverse order because there are some insight I think to the first question that will come from the second. So I think you can make the argument that our most sticky customers are those that leverage our API. That means it taken the time to put dev work in connecting to us and they also are doing things in a more on automated or sophisticated way, it just represents a larger investment. I think we have massively under invested in selling and distributing our APIs even in developing our APIs, which you'll see more investment go into that in 2019 and that creates even stickier customers. So, there's definitely an opportunity for us to do more in APIs and they do represent some of the most a sticky customers as an aside, I'll say, you know in the independent ad tech world, AppNexus, is probably our biggest competitor on this. And I do believe them being acquired by AT&T massively changes their focus to just focus on building products for TV and especially for traditional television, although additionally Connected TV and that does create a big opportunity for us to own much more market share in the API world than we have in the past. So I think there's big opportunity there. As it relates to other new products in data we've done a decent job of investing in our DMP but there is so much more that we can do and especially to make it easy for brands to put their first-party data to work and to automate some of the look-alike modeling that they view today. There are so much opportunity for innovation and there are very few places that maybe the only one being Connected TV, where we will invest more than this. So in other words, this is our second biggest investment area coming into next year and there is just so much to do. We have only scratched the surface in terms of what we can do in data and data innovation and I just want to always caveat that we'll always do that in consumer safe way and be constantly thinking of how can we, how can we make certain that we strike the right balance between consumer privacy and relevance for consumers and there are so much more we can do.

Thank you. Our final question is coming from Brian Fitzgerald from Jefferies. Your line is now live.

Thanks guys. You're going to an acceleration on the top line growth in Q4 and you highlighted some strong client additions. How should we think about the scale of these new clients relative to what you've seen for past cohorts and maybe also the speed with which you're seeing these newer clients and cohorts ramp spend? Thanks.

You bet. So let me give you a couple of numbers from Q1, 2017 to Q1, 2018, the new advertisers that we've added, they added nearly $200 million in new spend to the platform and of the top 200 brands that we've added since 2017 spend has increased over 5x, so a 500% increase is a result of those that we added of course many of those came in early 2017, which is why they’ve had time to ramp up like that. So if you're thinking about the cohort, one other thing to think about and in order to give you this, insight, I have to give a little bit of a preface. Let me just reinforce, we've always been close partners with the agencies. I've always anticipate that will be the case and while we've talked about signing more MSAs with advertisers directly. That does not represent a change in strategy for us, which is, it doesn't mean that we're going around the agency to go sign with brand. Instead, what we're doing is we're signing with the brands, so that we can activate their first-party data in conjunction with all the things that I've talked about in the last question and then we're asking the agencies to do the work. But we want to give the brand reassurance, so last year we signed, I think, it was five brand directly, this year we're up to 15 and the incremental 10 are way bigger by some measures a 1000% bigger in aggregate over those original five. So there is so much opportunity that's come from those relationships and if you as you use history as any guide, there will be a meaningful growth in all of those added in next year, it's one of the many reasons to be bullish about next year.

Thank you. We reached the end of our question-and-answer session. That also does conclude our teleconference for this evening. We thank you for your participation today. Have a great night.