The Trade Desk, Inc. (TTD) Q1 2019 Earnings Report, Transcript and Summary

Greetings. Welcome to The Trade Desk's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I would now like to turn the conference over to your host, Chris Toth, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Hello and good afternoon to everyone here in Europe and good morning to everyone in the North America. Welcome to The Trade Desk first quarter 2019 earnings conference call. Our call today is taking place from our London office. On the line is our Founder and CEO, Jeff Green, 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 will be describing will be forward-looking statements, which are dependent upon certain risks and uncertainties. I encourage you to refer to the risk factors referenced in our press release and included in our most recent SEC filings. In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data. The reconciliation of the GAAP to non-GAAP measures can be found in our earnings press release. We believe that providing non-GAAP measures, combined with our GAAP results, provides a more meaningful representation of the company's operational performance. I will now turn the call over to Founder and CEO, Jeff Green. Jeff?

Thanks, Chris. And thank you all for joining us. I'm excited to be speaking to you from The Trade Desk's London office, the hub of our European operations. Our growth in this region continues to be very solid. Our offices in Hamburg and Madrid both grew spend well over 100% over the last 12 months. More on that later, but let's start with the results for the quarter. I am extremely pleased to report that Q1 2019 was another outstanding quarter, because advertising budgets are often reset in Q1, numbers for the quarter have historically been the most challenging to predict. This year, we again surpassed even our own expectations. We continued to add new advertisers to our platform, and existing customers increased their spend. All major agency holding companies are now under MSA with us and spending on behalf of the largest advertisers in the world. The vast majority of companies in the S&P 500 have run advertising campaigns on our platform. We are executing well. As a result, revenue was $121 million in the first quarter of 2019, which is an increase of 41% compared to a year ago. This beat our own expectations of $116 million. When we've seen surprises in the past, they tended to be to the upside. Because we have continued to maintain our 95%-plus client retention this quarter, continued that trend. Adjusted EBITDA increased to a Q1 record of $24.7 million. We continue to be one of the fastest-growing and profitable software companies in the world today. Our GAAP net income has been in the black for the last 12 quarters in a row. Now, let's step back and look at the big picture. In 2019, according to IDC, spending on global advertising will be about $725 billion, up over 4% from 2018. At current growth rates, global advertising will be a trillion-dollar industry in about seven years. Programmatic is still a relatively small part of total global advertising pie. It is estimated at around $33 billion in 2019 and growing about 20% year-over-year, according to Magna Global. But it is growing 5 times faster than total advertising. We maintain our prediction that, before long, most advertising will be digital, and nearly all of it will be transacted programmatically. We are racing toward that outcome and transforming how media is bought and sold along the way. Data-driven micro transactions are better than bulk transactions that are fueled primarily by guessing. Programmatic offers advertisers a measurable return on their investment and a better ad experience for consumers to support the content that they love with greater transparency for all parties. Our addressable market is huge and growing. In Q1, we grew twice as fast as the programmatic industry and about 10x the pace of global advertising growth. The Trade Desk is better positioned than nearly any other company to capture significant share in the channels and regions that matter most. We expect to continue to gain market share for the foreseeable future. 45% of Q1 spend on our platform was in mobile. Our Q1 year-over-year mobile video ad spend growth was about 60%. Mobile in-app spend growth was about 60% as well. Data spend was up 80% and cross-device spend was again up around 300%. Audio spend had an amazing quarter, growing over 270% in Q1, and connected TV spend grew well over 3x from a year ago. Large brands such as a massive gaming company, a global food company, a global auto manufacturer, and many others are expanding their reach through The Trade Desk. We're also seeing many of the unicorns that have gone public or are planning to go public using The Trade Desk to power their foundational digital advertising strategy. But as the programmatic industry grows, it's also consolidating. This trend is accelerating. You see it in the headlines. In this environment, we will continue to look for selective acquisition opportunities like Adbrain. Since becoming part of The Trade Desk in late 2017, Adbrain's cross-device technology has added an incredible value for our customers. Cross-device spend has been up about 300% year-over-year for the last two quarters in a row now. This acquisition has already paid for itself many times over. As our industry evolves, advertisers are migrating from other platforms to The Trade Desk as we solidify as the premier gateway to the independent Internet. Our business model of independence, transparency, and objectivity make us the compelling alternative to the walled gardens that have become an increasing source of frustration for major advertisers worldwide. Our customers and industry pundits recognize these trends. In fact, last week at AdExchanger's Programmatic I/O Conference, The Trade Desk was recognized as the best demand-side technology from among other DSPs. This validates what we have been saying all long. From our revolutionary bid factoring architecture to the Next Wave platform we launched last June, our agile engineering team has built technology that outpaces all other DSPs in the market today. This all adds up to make us one of the fastest growing and most profitable software platforms in any sector. As I mentioned earlier, much of that growth is coming from rapidly expanding markets outside of North America. Here in London, our office broke its all-time record in the month of March, surpassing the previous record they had just set in December 2018. That is quite the accomplishment. We've seen outsized growth in all our offices in Europe. And the momentum does not end there, we continued to see major brands move their spend over to our platform in Europe. These recent wins included several CPGs, a video gaming company, a large technology company, and a multinational food and drink company. As anyone following The Trade Desk closely will know, we are investing heavily in CTV. In quarters past, we have talked about CTV growth in North America, but it is happening everywhere in the world, one of the biggest drivers for growth in Europe is Connected TV. We recently ran our first CTV campaign on the European Broadcaster Exchange, or EBX. This is really exciting. EBX is a joint venture among Europe's leading media companies to make video advertising inventories available programmatically. This enables advertisers to run pan-European campaigns in a premium, brand-safe environment. We have not seen diminished spend in Europe as a result of GDPR. From our perspective, consumer privacy and relevance are both attainable. GDPR helps to create a better Internet by establishing guiding principles for marketers. It pushed companies to be clearer about the quid pro quo of the Internet and how it works. Our proactive approach to data privacy has strengthened our relationships in the region. We have built trust with publishers and customers and we continue to win new spend and build closer relationships with content owners. We think GDPR and the success we have had in this region senses its leadership can be a blueprint for other regions that implement general data and privacy regulations. We are laying the groundwork for additional success in Europe. Coming out of my meetings here this week, I am more optimistic than ever about what is possible in the UK and in continental Europe in the months and years to come. Another key region for The Trade Desk is Asia, where the largest middle-class in history is emerging and consuming digital content at unprecedented rates. After two years of laying the foundation, we officially launched our platform in China in Q1. Our inventory partners include Baidu, Alibaba, Tencent, and iQiyi, all regional must-have content providers with premium inventory for advertisers. We've also built out the appropriate data infrastructure conforming to Chinese law. Our account teams are equipped with clear onboarding procedures. The Trade Desk is fully open for business to global brands wanting to reach Chinese consumers. One great example of the outside-in approach to China is a global luxury retail brand that wanted to showcase their latest collection. Their agency used The Trade Desk so all campaign management and reporting could be consolidated on one platform. The goal of the campaign was to drive more visits to the luxury retailer's site. After just a few days of running the campaign, the agency decreased the advertiser's cost per visit by 25%. It was a huge success. There are many opportunities like this for global brands to reach consumers in China on our platform. At our China launch event in March, Benson Ho, the Chief Data Strategy Officer of Tencent Marketing Solutions, stated that we are aligned on three core principles. First is our mutual desire for transparency. Second is the combined focus on delivering premium inventory to global advertisers. And third is the ability to properly put third-party data to use. He also said The Trade Desk has built a great team of people in our Shanghai and Hong Kong offices. He pointed out on stage that our business is driven by relationships. While this is true everywhere, this is especially true in China. This is how we are laying the foundation for long-term success in China. China is a long-term investment. We are only at the beginning, but I have never been more optimistic about our prospects in China. I look forward to updating you more on our progress as we continue to grow our business over the long-term. I also want to highlight some of the key growth initiatives of our business. First, we are again seeing exponential gains in our connected TV business. Nearly every quarter, we have some breakthrough to report in this key channel. Q1 2019 is no exception. Our connected TV inventory continues to grow. More channels, more users, and more ad opportunities joined our platform this quarter. In Q1, advertising slots available through our platform increased over 3x. We invested in the infrastructure early to support CTV inventory. And by nearly all measures, we are ahead of the curve. And as this market evolves, no one is better positioned to reap the rewards than us. It's better to be early than late. Five years ago, when I was predicting the advent of Internet-fueled TV to replace linear TV at a faster pace than the trends suggested, critics would always counter that traditional TV had staying power. I heard over and over again how live events, especially sports, would make TV lovers keep their beloved cable subscriptions. Now, nearly every major live event is available on demand and accompanied by fewer and more effective ads. Live TV is perhaps better suited to the real-time nature of programmatic monetization. Unpredictable commercial breaks and unexpected overtime are better monetized in programmatic than in traditional advertising. In live events, we are accessing more inventory than ever before. The NCAA March Madness Basketball Tournament is just one example. March Madness was incredibly successful for The Trade Desk. We saw more spend on our platform than we have for any other live sporting event to date. Given the spend we've seen in the past from the NBA Playoffs, MLB's World Series, the Superbowl, the World Cup, and now March Madness, we expect this trend to continue. Even with this tremendous growth, we're still just getting started with CTV. eMarketer reports that 2.8% of all television advertising spend in 2019 will be in programmatic. While that represents a solid upward trend, we believe that, before long, virtually 100% of TV ad buying will be transacted programmatically. As an industry, we have barely started. Linear television continues to lose ground to connected TV and other channels. There are fewer viewers, more ads, and higher CPMs. According to Cord Cutters News, Comcast, Verizon, and AT&T had over 900,000 people cancel their pay TV services in Q1 alone. If the trend continues, they could collectively stand to lose over 3.5 million subscribers this year. Ultimately, this is an unsustainable model. That's why we have a focused presence at the current TV upfronts. If you're not familiar with the upfronts, it's an annual gathering where networks and other content providers present their new shows to advertisers. Advertisers commit the bulk of their annual TV spending at these upfronts. These commitments have often been based on instinct and relationships with no measurable sense of how that advertising will perform. It's an old-school, analog way of doing business. Programmatic ad buying wasn't even on the radar at the upfronts a few years ago. As more TV content is consumed on connected devices, advertisers realize they can apply a more data-driven approach to TV advertising and become much more precise in their campaigns. Changes to the upfront process represent the biggest opportunity for stair-step growth CTV may ever see. The generational convergence of the Internet and TV has started to shift the entire TV industry toward programmatic. A growing number of brands and agencies now require that a portion of the upfronts be transacted programmatically. Many have asked us to help them to actively navigate this new digital upfront environment. This is the first upfront season where we've been involved like this, but we expect the trend to continue. Because of our early investment in CTV, The Trade Desk is in the right place to meet the needs of both content providers and advertisers as they shift to programmatic TV buying. Our value proposition to advertisers in CTV is massive. We have incredible scale. We currently reach 80 million households worldwide through our CTV inventory, and that's up from zero just a few years ago. The scale of our reach is at least 3x the size of the largest MVPD. In fact, it's nothing but upside at this point. So, we expect CTV to be a key growth driver for us again in 2019. A second key initiative we're excited about is the growth in data-driven spend on our platform. It's just a fact that data-driven decisions are better than guessing. The choice for advertisers is clear, when it comes to guessing or a data-driven campaign, data wins every time. With The Trade Desk, advertisers have the tools to become data-driven in all their decision-making in a way that protects consumer data and privacy. Since the launch of our Next Wave product last year, data spend growth and usage has accelerated. Data spend increased 80% year-over-year. Media buyers using data have also significantly increased. We have still only scratched the surface on what we can do with data, but data usage will be significantly higher as the years go on. This is a good time to remind everyone that our approach to data has been the same since day one. Unlike walled gardens, The Trade Desk doesn't need directly identifiable information to create relevant advertising. We don't need names or email addresses or phone numbers on our platform to target advertising effectively. It's not part of our business model and never has been. In the current environment, that positions The Trade Desk well as a compelling alternative to the duopoly of Facebook and Google for advertisers who value data transparency and privacy. Our strategy is working, and we are winning. The final initiative I want to highlight today is our commitment to enhancing the effectiveness of programmatic advertising by providing a unified ID for the entire industry. Our Unified ID solution involves The Trade Desk giving away our cookie ID for free to SSPs, publishers, DSPs, DMPs, and data providers. Doing so helps improve the efficiency and performance of the entire ad-funded Internet. Match rates are improved, giving advertisers more effective targeting, and the number of syncs taking place in the ecosystem are massively reduced, giving consumers a better ad experience. Momentum has accelerated. Today, more than half of all header bidding auctions are completed using our Unified ID technology. The largest independent SSPs in the world are seeing match rates with us of up to 99%. As we hoped, our unified open ID is becoming a common currency for the open Internet. Finally, we are continuing to make large investments in areas critical to our future. The Trade Desk has always been about innovation. We are pushing the pedal to the metal to innovate and grow more quickly than others in our industry. We are confident we can invest in areas such as CTV, data, global expansion, and creating a safer programmatic environment. We also continue to invest in our infrastructure to support business and data processing growth worldwide. All these areas are critical to grabbing additional share over the long term. We expect the investments we are making now to yield significant results in 2020 and beyond. In conclusion, The Trade Desk had a strong first quarter in 2019, extending our strong run from 2018. Our foundational business model of independence, objectivity, and transparency continues to be validated in the marketplace. The contrast between our offering and the walled gardens continues to propel our momentum. Our investment in key regions and channels has yielded great gains, so we will continue to invest wisely as new opportunities emerge. We are executing well and the secular tailwinds for our business are strong. There is every indication we will see continued significant growth in 2019 and beyond. Now I am going to turn the call over to Paul to discuss our financials.

Thanks, Jeff. And good afternoon, everyone. And good morning to those investors joining us from North America. As you've seen in the numbers, we are off to a great start in 2019 with strong Q1 financial performance and execution. Revenue increased 41% year-over-year. Adjusted EBITDA increased to $24.7 million and GAAP net income increased to $10.2 million. We achieved this while we continued to invest aggressively in areas critical to our future growth, such as on our platform, while adding to engineering and sales talent. Revenue for the first quarter was $121 million, which was above our prior expectations, and reflected increased spend by our existing customers, plus the addition of new customers and advertisers. For the quarter, approximately 89% of our first quarter gross spend came from existing customers who have been on our platform for over a year. With the growth of our business, our operating expenses grew to $115 million. This increase year-over-year was due to sales and marketing as we scale for future growth. The year-over-year increase also reflected higher G&A expenses, which takes into account stock-based comp, and we expect G&A to moderate as a percentage of revenue in Q2 and in the back half of the year. Income tax was a benefit of $4.8 million in the quarter, mainly due to the tax benefits associated with employee stock-based awards, the timing of which can be variable. GAAP net income was $10.2 million for Q1 or $0.21 per fully diluted share. Our adjusted net income was $23.1 million or $0.49 per fully diluted share compared with adjusted net income of $15.3 million or $0.34 per share in the comparable period. Adjusted EBITDA was $24.7 million with a corresponding margin of 20% of revenue during Q1. The increase in adjusted EBITDA dollars 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 $10 million for Q1 and our trailing 12 months of operating cash flow and free cash flow were $84.5 million and $55 million, respectively. We continue to have zero debt on our balance sheet and our total cash, cash equivalents, and short-term investments exiting the quarter was $218 million. Please note that short-term investments is a new item on our balance sheet, and represents an opportunity to earn a return on our unused cash. Our DSOs at the end of Q1 were 95 days, a decrease of 1 day from the same period a year ago. DPOs for Q1 were 76 days, a decrease of 2 days from the same period a year ago. For Q2 of 2019, we are expecting revenue of $154 million and adjusted EBITDA of $46 million. For the full-year 2019, we now expect revenue to be at least $645 million, revised upward from $637 million last quarter. Adjusted EBITDA is now expected to be at least 29% percent of revenue. I will now turn the call back to Jeff for final comments and, of course, Q&A. Jeff?

Thanks, Paul. 2019 is off to a great start for The Trade Desk. We exceeded our expectations for the first quarter and are raising them for the year. The fundamentals of our business are solid and we continue to scale up well. As the worldwide advertising market moves towards a trillion dollars in a few years, we are well-positioned to win a large share of the programmatic portion of that market. We invested early in key markets and channels. And, while we are pleased with our initial gains, we see far more upside yet to come. All indications are that our business is poised for increased success in 2019 and beyond. The future has never been brighter. That concludes our prepared remarks. Operator, let's open it up for questions.

Thank you. [Operator Instructions]. Our first question comes from Youssef Squali with SunTrust Robinson Humphrey.

Great. Thank you very much. Jeff, you mentioned mobile as a driver – really, as the first driver of spend growth this past quarter. One question we often get is around the upcoming changes to Chrome which ultimately may hamper the ability for advertisers to use cookies to track and target. So, really, just wondering how you guys expect that may affect the mobile online ad environment in general outside of Google and The Trade Desk in particular? Thanks a lot.

Awesome. Thanks, Youssef, for the question. So, I actually feel like we're a little bit fortunate in the fact that our prepared remarks were a couple of minutes shorter than usual. So, I’m going to take actually a little bit of extra time to explain this change more than I would otherwise because we just have a few extra minutes to spend. Because so many changes have happened so quickly, this has been something I've talked a lot about over the last couple of days. First, let me give a little bit of context. As many of you know, Apple made some changes called ITP to their browser where they decided to just block of the use of all third-party cookies about a year ago and replace it with what they call ITP, which was essentially an algorithm that would decide what third-party cookies would be allowed to persist instead of both first and third parties doing well no matter what or existing on the browser no matter what. Google has a different challenge. Because, of course, Apple doesn't make any of this money through advertising, at least not directly. And Google makes 95% of its money through advertising, and of course, Chrome has much more market share. So, a lot of people have been watching Google and the privacy pressure and some of the things being set out of Chrome, saying what changes are they going to make. In the last couple of days, they've made their announcement. And I'd just like to explain exactly what they did. So, basically, they decided to give – they tried to thread the needle between relevance and privacy, and I think Google did an amazing job and did a very good thing, which is that they gave users more privacy control. So, any consumer who wants to can go in and turn off third-party cookies. So, unlike Apple, who kind of did it by default, and then hid behind sort of algorithm the decisioning – or the decisioning was hidden behind the algorithm. Not that Apple hid behind it, but the decisioning was hidden behind it. In this case, they exposed that to consumers. And the user will now have a user interface where they themselves can manage and remove cookies that they want to. I don't expect that a lot of users will do this when users have been given the ability to do so in other cases, they don't take advantage of it, but they will have that control. Second, they've asked The Trade Desk and other ad tech players to plug into an API that will allow us to basically disclose to consumers how we use their data. And, honestly, we've never had a place to share this with consumers because our relationship isn't direct with consumers. So, we are delighted at the opportunity to put this in front of them and share with them essentially how benign the impact is that we have. We don't know all the things that Google or Facebook or even a consumer data company knows, and because we don't transact personally identifiable information, we are actually excited to share the insights because we think we too can share how we've struck the balance between privacy and relevance. Google also basically got rid of this ability to fingerprint. So, there are a number of companies who were sort of pushing the envelope in the way that they extract data from Google and they've found ways to just further restrict it. We don't expect that to have any meaningful impact on us. We understand both the objective and, at least at the high level, what the mechanics are going to look like. So, we don't expect that to have any material change to us. And then, the last thing is – so, if you're in Google's position and 95% of your revenue comes through ads and you also want to create a better Internet and you recognize that in order for the Internet to thrive, premium publishers have to get premium CPMs. So, if they were to take away targeted advertising and what is an $8 CPM on The New York Times today turns into a $4 CPM. Then The, New York Times is going to be out of business. That's what's at stake. So, Google didn't want to screw that up. So, they actually implemented a porting, which is – they didn't implement it. They announced it, and they haven't implemented it. But they announced to think on same site, which basically gives publishers like The New York Times the ability to go in and say treat this third party vendor, whether that's my CRM or that's my payment gateway or that's my ad tech partner, treat them like a first-party cookie. So, this third-party cookie is actually essentially the same as my own site, and that makes it possible to prevent throwing the baby out with the bathwater and putting all the burden on the algorithm. I think if there's any meaningful adoption of consumers opting out, it will then beg the question or force the discussion with companies like The New York Times between them and their users to say if you get rid of targeted advertising, you turn $8 CPMs into $4 CPMs and I can't run my business anymore, so I need to explain to you the quid pro quo of the Internet, you need to opt in. Please help me find a way for me to give you the service that I've always been giving you. This same site technology has become the safety net to that discussion, so that they don't run any risk of messing up the quid pro quo of the Internet, while at the same time striking the balance between privacy and relevance. All of this is perhaps more detailed than a lot of investors want to know, but here's the punchline. Google made a significant number of minor changes, which increased privacy controls for consumer and made the Internet better. It did not have any impact on relevance. We do not expect this to have any material change on our business. And most of these changes, we welcome because they will make our business better and any of those others that were shrugging their shoulders up, don't have a negative impact on our business at all. So, overall, this is a very positive change for us. It's good for the industry. When I spoke to Google yesterday, my very first question is, is there more coming or is this the bulk of it. And they said, this is it. More details to come on these specific things, but in terms of like major headlines, this is it. So, I'm super excited at the change Chrome has made. I actually look at Google as a partner on the issue of privacy. We've done a lot over the years on both fraud prevention and privacy and we are very much in the same boat on being – on wanting a better Internet, but also wanting to preserve relevance and monetization in order for the Internet to pay for itself. So, I think in the last week, there have been huge steps forward and that The Trade Desk will benefit from it. I'm so glad you asked this question and thanks for letting me go little bit longer on this one.

Thank you, Jeff. Next question?

Our next question is from Brent Thill with Jefferies.

Thanks. Jeff, just on the strength in OTT. Investment spend is up 3X. I was just curious if you could lay out how you the year evolve? Kind of what inning you're at and any other notable items that we should highlight? Maybe just to follow-up on TTD's unified ID and how that plays into the first question as a quick follow-up. Thank you.

You bet. So, I'm going to actually answer them in reverse order just because the unified ID question is in some ways an extension of the first question on the Chrome changes. So, because Google has created this – or announced this mechanism called the same site, which enables publishers like The New York Times in my example, to identify partners whose cookie should be treated as a first-party cookie. It makes all the work that we've done in Unified ID even more important and more strategic advantage or asset to us that it was even a week ago or a year ago. And I'm excited. Some of you investors may have known that, in this quarter, we announced that we've been fully adopted in the two major forms of header bidding as the ID that gets transacted in header bidding. So, for those of you that may not follow what that means, basically, in most auctions today, there is a technology used called header bidding. And that means that we get to participate in every ad opportunity that a publisher wants to sort of test the market before they allow their ad server to monetize it. And because most publishers, especially most premium publishers, all use some of some form of header bidding and the fact that there's only two standards for header bidding means that if you want to implement an ID or a common currency, you have to integrate with both of those. The first one we integrated with was index and we found a 99% match rate for that ID, which means that there is a common currency in that header. And then, a month ago, we announced our partnership with the open source header implementation, which actually has the lion's share. And now, our ID is transacted across all of those. So, that means that, in my view, we've now become the standard – the standard currency of the open Internet or an open ID. And that means that, if you're The New York Times, and you are trying to figure out which cookie and which partners you're going to keep in your more controlled and more protected environment, there is no question that you're going to use the ID that is the currency of the open Internet. And the fact that all the major SSPs, even many DSPs and DMPs have adopted our ID now and you can just go back and look at all the headlines and the press releases that we've made over the last six months. Our ID is quickly becoming ubiquitous. And I believe, if it wasn't checkmate, we're close to it when both of the header implementations adopted our ID. So, the trend is amazing. I mentioned The New York Times as an example just because I think journalism is very important so important and also there's a lot of pressure on it. But we've actually had several of the biggest names in journalism adopted our IV directly to just make sure that they have the best chance at 100% mask rate with all the monetizeation of the open Internet. So, with that sort of momentum, I believe if we're not at the pace of being unstoppable on this initiative, we are very close to it. The second part of your question – or I'm sorry the first part of your question on connected TV, I'll just remind everybody that we announced 3X year-over-year growth on spend and 3X year-over-year growth on inventory. We now have hundreds of advertisers spending over $100,000 a month. I think that's right. A month, that's right.

Over the last quarter.

Over the last quarter, okay. I cannot remember the time frame. And that 3x growth just continues to be indicative. You heard us measure [indiscernible] when it comes to connected TV. So, it's just indicative of all the growth that we're experiencing. More and more happening in live television. And this amount of conversation that we're having with content owners directly is perhaps the bullish – or the most bullish qualitative thing that I can share. Everything in the numbers is very bullish. But beyond just the virtual MVPDs and the aggregators and – because our conversations are so strong with content owners, and especially just having conversations at the upfront and having conversations with the biggest players at the upfront about redesigning the way upfronts work as it relates to digital and putting more and more in the programmatic. Those to me are the most exciting parts of sort of future growth potential in our business. So, the very biggest conversations that we've ever had on TTD are happening right now.

Thanks, Brent. Next question, operator. Our next question is from Shyam Patil with Susquehanna.

Hi, guys. Congrats on the great quarter. Jeff, just on Europe, you mentioned in your prepared remarks that you're more confident about what you can achieve in that market. I was just wondering if you could talk a little bit more about that, what you're seeing on the ground, what excites you the most? Thank you.

You bet. So, I'd like to start by talking about Germany. While I'm doing this call from London, I've spent the last week in Germany. So, Germany, for the last two years has grown over 100% each year. Last year, it grew by over 100%. It has a record quarter again incidentally as did the UK. But one of the things that I'm especially optimistic of in Germany, it is the approach that the biggest players in connected TV and even traditional television – the approach that they're taking to the market, perhaps none as bigger than RTL who I don't mind mentioning that we spent some time with this week. RTL made a very bold decision that I actually think many companies around the world should learn from, and that's they noted that Google have very aggressive economic in YouTube, would take a very healthy rev share. And while they would produce the most premium content, YouTube represented sort of a richer deal for the MVPD if you treat YouTube like that as distribution than they had ever shared in traditional television. So, they made the decision to not let any of their content go on YouTube and sacrifice millions of dollars for the long term. So, in the short term, it would cost them millions and, in the long term, they felt like that would make them create better relationships directly with the consumer as well as focus on other distribution, so that they never became too dependent on YouTube. That both paid off for them, but it's also made them lean more into our partnership. And so, we spent a lot of time talking about how we can do more together, how we can redefine the upfront, but that's also had a huge impact on our business. So, part of the reason for that 100% growth is because, if you want to get access to some of the most premium content in Germany, and that's not just isolated to RTL, we have similar conversations with ProSieben and others. If you want to get access to the most premium inventory, you can't get that through a DBM – sorry, DV360 or YouTube. And that's brought a lot of customers to us. We also had over 100% growth again in Spain. Both the UK and Paris, who are both slightly more mature markets, are continuing to grow faster than the US and we continue to gain ground. I continue to believe those are some of the best opportunities around the world for us to grow. I spend a lot of time talking about Asia, but that's because of the sort of secular tailwind of the entire macroeconomy and what I believe the global economic sort of tailwinds are going to provide. But the facts that, A, are that Europe or EMEA is a more mature media market, but still represents a very small minority of our total spend, it represents in the short term one of the best places for growth. By short term, I mean like half a decade or so that we will continue to see outpaced growth in EMEA. So, now, leaving the time that I've now spent in London and in Germany with more optimism than I've ever had for EMEA and especially because CTV. One last anecdote, just a conversation that I had here in Europe, when we were talking about expanding our partnership, we said, hey, we should do things in other channels too, not just in CTV – or not just in video in all forms of video, CTV being part of that. They said, oh, wow, you do more than that. I thought you guys were just a video company. Which made me so delighted that we've done so well in Europe on video and CTV that despite the fact that we started our business in display and our – while we were early to market, it's one of the youngest channels that we've been in. It's been amazing to see define ourselves as a video company, especially given – [indiscernible] I expect video in all its forms to be roughly 50% of our pie and the global pie.

Thanks, John. Operator? Next question.

Our next question is from Mark Mahaney with RBC Capital Markets.

Great, thanks. Two questions. You had a lot of questions on the last quarter earnings call about setting expectations on China and materiality on China. So, I will just repeat the question this quarter. When do you think it's realistic to expect material contributions from that market? And secondly, maybe doesn't matter, but you haven't really talked about – or you've indirectly talked about Next Wave this call, but it's been more specific last couple of calls. And maybe that's just now an integral part of your product, but can you just talk about adoption you've seen and impact on spend and maybe it's embedded in your comments about the digital, the data spend, the growth of that, but just any more color on that would be helpful. Thank you.

Awesome. Thanks, Mark. So, first, as it relates to China and expectations for when materiality will come, China is something that we think we have to play the long game. And we've, for a long time, been in the business of establishing relationships with Baidu, Alibaba, and Tencent. I think we've done a great job of setting expectations with them and we've also sort of restricted our growth, if you will, in China by saying we want to start by only bringing incremental dollars to Baidu, Alibaba, and Tencent. And to make it very clear that is incremental, so it doesn't seem like we're taking money that they are already getting and then simply taxing it, which would make it – so they would be incentivized to not keep us around. But, instead, to focus on getting them incremental spend. And we've done that by leveraging the relationships we have all over the world, especially with the global headquarters of both brands and agencies to bring incremental spend. I had a meeting about that very thing here in London today. So, it's something that we spend a lot of time talking about. But because our numbers are so big and the amount that we spend in total and we're just getting started, I don't expect it to be material for some time now. But that said, at the end of March, in Q1, we launched our product GA. I was on stage with Tencent – chief data strategy officer at Tencent as I mentioned in our prepared remarks. Our dialogue with companies like Tencent, Baidu, and Alibaba is better than it's ever been. I'm really optimistic, but I expect it to go slow and to move the needle on a P&L as big as ours, when you're just getting started, it's going to take years. So, I expect that to take time. On the Next Wave launch, it's rare when you launch a new product that you see adoption happen so fast when you support both. So, I just want to be clear, we support what we now call classic. So, people want to use our old system because it's a totally new workflow to adopt Next Wave, that's fine, they can use our old system. We just tried to make our new product so good that they would choose it. So, we didn't want to force them to. We wanted them to choose it. And I'm really excited to report that, at the end of 2018, we've just been over 50%. But, today, we're over 80% in adoption and we feel like we have very clear visibility on how to get us the remaining 20%. That has had a huge impact on us, first of all, reducing CPMs for our clients. So, the algos that have come with the product have actually made more money go to working media and lowered the cost of the same inventory that they were buying. But it is also layered on more data, which is both good for us and for them. It's sort of ultimate win-win which is the best explanation for why [indiscernible] spend is 200% in Q3, was up 300% in Q4 and was up 300% again in Q1. So, 300% two quarters in a row. That is a commentary on both how strong our offering is in Next Wave, but also how important it is to be global and omnichannel in your offering. So, I expect by the end of the year to have that 80% much closer to the 100% mark. And by early next year, actually turning off classic because we'll have full adoption. And, incidentally, by turning off classic and all the effort that goes into supporting it, it will unlock engineering resources to go build more differentiation and continue to just create more and more separation between us and our competitors.

Thank you very much. Operator, next question.

Our next question is from Vasily Karasyov with Cannonball Research.

Good morning, I have a question on Hulu. The CEO of Hulu at the investor day that Disney held actually called out that they will be investing heavily in automating this ad sales process. And I believe that refers to the private marketplace that they launched in January first and where The Trade Desk is a partner. So, I was wondering if you can tell us more about the role of The Trade Desk in that private marketplace and how to expect this private marketplace to evolve now that Disney is in control and really focused on automating the head sales process.

Yeah. It's one of the most exciting things happening in the TV. And the reason why, just to give a little top line color, is if you were to go down your Amazon Fire box or your Roku box and just see which aps are most popular, Netflix would likely be first, Amazon would likely be second and on many people's TV Hulu would be third, and therefore representing the first ad-funded app in that stack rank. So I think Hulu is a very important case study. It's an important tea leaf. I've been saying for years. They are one of the tea leaf companies of all of media. And I'm not sure that there are any two companies beyond Hulu and Spotify that represent tea leaf companies more than those two. But Hulu, as you pointed out, announced in January that they are opening up their automated biddable marketplace. This is really exciting because, in the past, there's been some channel conflict between their direct sales team and programmatic, and so they've gotten rid of that, so that we actually – they put it into one market which is great for them because then you consolidate all the demand, so compete against each other. And it's great for us because all we've been asking for years is give us a chance to compete. And it means that our buyers will be able to dynamically influence pricing and will give us access to more inventory, then we fully expect to become a bigger and better partner to Hulu than we've ever been. And I think we've been, one of, if not the, most important programmatic partner that they have. So, I expect long term to be the most important source of demand and price discoverable inventory and premium content is an amazing combination. So, I think what they're doing is really innovative and I couldn't be more excited about our partnership and the opportunity.

Thank you.

Thanks, Vasily.

Our next question is from Tom White with D.A. Davidson.

Great, thanks for taking my question. Thanks for the kind of expounding on the Google Chrome changes. Related to that, I was just hoping you could help me understand how to think about your data products, your data offerings within the context of those changes? Is there kind of unique exposure to that part of your business from these changes? And on data, it seems like – I think you pointed out in your analyst say that the number of data segments per campaign has been growing significantly. Does that increasing mix of data kind of raise the regulatory risk profile of your business at all? I'm just curious how you think about that. Thanks.

Yeah. So, I don't believe that it creates any meaningful risk. In fact, I think it's kind of the opposite. I think everybody in that space has been afraid of what changes are going to come and how do we need to respond and there's a fear. And I talk about it very publicly, the Mark Zuckerberg hearings in Washington. I think it scared Facebook. I think it scared Google. And it scared them in part because legislators, especially in the US, don't really understand all the mechanics [indiscernible] so the technology companies are more afraid of them. And so, the fear on sort of both sides has raised that people are trying to figure out what to do about it. And in light of Google's changes, I think Google has also been fretting about it. What do we do? Because 95% of our revenue comes from advertising and that's not something that Apple have to deal with. And if you are in Google's shoes, you are probably looking at Facebook, saying we have to do better than that. And so, they are sort of unchartered territory trying to figure out what to do. And what, in my view, they did, they did clarity to the industry. We will try to balance between relevance and privacy and consumers don't want a broken Internet. And they also don't want their privacy violated. And the Internet does have to pay for itself somehow. And so, to me, I leave this feeling more confident than ever that our long-term position of, hey, we can make relevant, coexist with privacy and that, if we just share with users, the benign insights that we are using to show them relevant ads, nearly all consumers will welcome it, especially if they understand that access to the great content of the Internet is contingent upon it. So, Google just made it more clear, something that I don't think Apple has done well. They've not made it more clear. Every time you type in your Apple ID, you don't know why. They have not explained the quid pro quo of the Internet. But Google has just made steps to make it more clear. There is still a lot more work to do, but I think that actually makes our data business stronger, not weaker, in large part because I'm really confident that we are doing the right thing and we've taken measures from the very beginning to make certain that we're not taking unnecessary risks, and not least of which is that we do not transact in directly identifiable information of consumers. So, I don't have even name, let alone email addresses or social security numbers and nearly every consumer data company in the world does that. So, I consider us one of the safest, most benign data companies in the world. And what I lack in specificity and in what some of your scariness, I make up for in volume. So, I'm more bullish on our data portion of your business than I've ever been.

Thanks, Tom. Next question please.

Our next question is from Brian Schwartz with Oppenheimer.

Yeah. Hi, thanks for taking my question here today. Jeff, just wanted to ask you a little bit of a long-term strategy thought here. Assuming that this growth opportunity continues and it almost feels like it's going to, especially given some of what you're seeing out there and what you've talked about today in your prepared comments, does it make sense at all for you to potentially even increase your investment profile even more, especially in your go-to-market efforts at this point. I realize, obviously, that could have an effect on the margin. But if you're continuing to grow very fast like you are, you're still going to see outsized profits. So, how do you think about that given the opportunity today? Thanks.

I'm so glad you asked this, Brian, because on one hand, I look at the global growth and I point at that and say, this is a secular tailwind and this is such a great place to be. On the other hand, I want to make sure that we get every dollar of it possible. And I just want to make certain that we are running faster than anybody else and we're running as fast as we possibly can. And so, at the same time, all of us can point to many, many companies who have destroyed their companies and their cultures by either spending too much by way of hiring or spending too much or too quickly by way of acquisition, and both are ways to ruin your culture and ruin your business. And so, I refuse to let our ambition ruin our business. But at the same time it kills me every single quarter to report EBITDA numbers as high as we do because I would rather reinvest the business and grow – or reinvest the money and grow the business. And so, I continue to look for opportunities to do that. There's a lot of consolidation happening in this space right now. Ad servers like [indiscernible] that go out of business and, of course, we're going to look closely and say, is there an opportunity here. And of course, there is an opportunity here. But what's the better one? Is it to buy it? Is it to go after the clients? Is it to build our own? Is it to simply get better at selling? Is it to partner with somebody else? So, we look at every one of those and one of the most important things we do in our calculus, to say how do we preserve our culture and not take unnecessary risks. And I'm constantly saying to our team on this, assume the money doesn't matter because, to some extent, it doesn't. That isn't the theme we're trading in. We're trading in the opportunity cost. We're trading in focus. We're trading in culture. And so, I do believe we will get ways to invest more. I think we're getting better at it. So, I'm delighted at the trend line there. But I'm still unhappy with how quickly we are able to invest and I want to look for more opportunity to do it.

Thank you so much, Brian. Next question please, operator.

Our next question is from Aaron Kessler with Raymond James.

Great. Thanks, Jeff. A couple of quick question. You mentioned kind of unicorns having good traction there. Can you also talk about maybe some of the DTC brands that you work with just generally? Obviously, there's a lot of reports a lot of them kind of internalize some of their advertising functions, kind of not going through agencies. What kind of traction are you seeing and is that a limiting factor at all for you guys? Thank you.

Yeah. So, there is some of that. I would just maintain the position that we sort of have always been saying, especially over the last couple of years as it relates to the topic, that there's a pretty significant delta between the headlines of in-housing, if you will, and the reality. It is really hard to develop the resources of a major agency. WBC has 100,000-ish employees. Omnicom, the same. Publicis, not much less than that. So, they have massive amounts of resources that every major brand in the world is likely going to rely on for as far as anybody can see into the future. But they are bringing more of the strategy in-house. There are lots of micro-enhancing efforts, if you will. And oftentimes, those companies are reaching out to us. But one of the most bullish things that I can share outside of talking about specific channels or regions, so instead of talking about CTV here, instead of talking about Asia or our excitement about Europe, if I instead – sorry, I just got struck, somebody came to ask me a question. Sorry, somebody just walked in.

I think you were talking about some of the most exciting trends that you're seeing.

Oh, yeah. With the agencies and…

Yeah, yeah, yeah. Somebody just walked in and completely blindsided me. But one of the most exciting trends beyond those two things is the number of unicorns that are leaning to us to help them grow their businesses. So, of the companies that are going public, of the companies that are sort of next generation companies, it's not just us sort of going through the traditional routes and going through the traditional brands who are trying to either reinvent themselves or make the transition into digital. We're doing that and we're doing an amazing job of that. You could even argue that's our bread and butter. But when you look at the emerging companies and those that are sort of the next generation of growth around the economy, the fact that all of those are coming to us as well to power their growth and we're getting -- those are often the places where we see surprises and new clients. That's one of the most exciting things happening in our business.

Our next question is from Mark Kelley with Nomura.

Great, thanks a lot for taking my question. I know we are going over the time allotment and sounds like, Jeff, they're trying to take the conference room away from you. So, hopefully, this will be… Two quick ones. First one is, can you help us maybe level set a little bit on what impression spend growth is. So, I would say everything that's less data – you guys called out that 80% growth in data, which is obviously quite a bit above the corporate level. Any color there would be helpful. And the second one, bigger picture, you guys called out audio for the first time, I think, in a few quarters. Curious what you're seeing there and if you have any thoughts on the podcast opportunity. You've got guys like Spotify talking about it and it's such a primitive format now where the podcast owners are reading the advertisement midstream. I would imagine you guys are pretty well positioned to see the moving pieces and capitalize on that as it grows. Any thought would be helpful. Thank you.

Awesome, thank you. The first part of the question, just being about impression growth, in terms of general media spend or impression growth, I don't even spend that much time following it or keeping an eye on it, if you will. And the reason why is, number one, there's still a double-digit percentage of impressions that don't have any meaningful data used against them. So, they just then just have to increase it. It's just economically irrational for it not to go up. And then, two, because the type of impressions are changing, meaning at the same time that we're getting more and more impressions that are more valuable because we're getting into things like connected TV and audio, also ideally, the number of ads per page in things like display and native, which is still overwhelmingly bad, meaning there are way too many ads on the page, we want to see those impression counts go down and the value and cost go up, and that is exactly the trend. So, if you spend too much time focused on either the dollar amount or the impression count, it's really hard to get a sense of those moving vectors. So, instead, it's just important to just keep track of how many of the decisions are data driven. Are those growing, are those renewing? And is efficacy going up? And all of those are positive. All of those are heading in the right direction. And it sounds like you asked about audio. I was hoping I could find some way to talk about it today because, audio, after all the years of growth, growing at 270% in Q1 is one of the most exciting things happening in media because of the fact that things have gone so well in TCD [ph], we have not given it its due whatsoever. Of course, Spotify announced a great quarter. We're super excited about them as a partner and it is definitely one of the fastest growing channels, probably the second fastest growing channel we'll ever touch. And podcasts being – it's just growing so fast in there, I know there are a number of other companies besides Spotify in the game and all of them seemingly are talking about on-demand advertising because it is the best chance for all of them to monetize. So, the thing that I find so optimistic about audio is that because the economics are so tight, it is just obvious that they have to use programmatic advertising. And even though, you may say the same thing with the rising cost of content in TV, the thing that's different is the overhead of a sales force, still there in TV, that it creates something you kind of have to compete with similar to the way that my Hulu comments were. But that doesn't exist in these new podcast companies. It doesn't exist really at Spotify. So, it just makes it so much easier to go fast. And after all the years of growth and being in audio, putting up 270%, I think that's the only way to explain that.

Thank you so much, Mark.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And today's call is now concluded. The Trade Desk thanks you for your time and your participation and you may disconnect your lines at this time.