The Trade Desk Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Rhea-AI Summary

The Trade Desk announces $700 million share repurchase authorization and strong financial results for Q4 and fiscal year 2023. Revenue grew by 23% year over year to $1.95 billion, with significant profitability and cash flow. The company continues to innovate with Kokai and sees growing value in open internet advertising. Financial highlights include a 23% increase in revenue, net income of $97 million, and adjusted EBITDA of $284 million. Recent business highlights include $9.6 billion gross spend, over 95% customer retention, and support for UID2. The company also received industry recognition and repurchased $220 million of its stock in Q4 2023. First quarter 2024 outlook projects revenue of at least $478 million and adjusted EBITDA of approximately $130 million.

Positive

• The Trade Desk announces $700 million share repurchase authorization.
• Revenue grows by 23% year over year to $1.95 billion with significant profitability and cash flow.
• Financial highlights include net income of $97 million and adjusted EBITDA of $284 million.
• Company sees growing value in open internet advertising and continues to innovate with Kokai.
• Recent business highlights include $9.6 billion gross spend and over 95% customer retention.
• The Trade Desk receives industry recognition and repurchases $220 million of its stock in Q4 2023.
• First quarter 2024 outlook projects revenue of at least $478 million and adjusted EBITDA of approximately $130 million.

Negative

• None.

Insights

Financial Analyst

The announcement of The Trade Desk's additional share repurchase authorization to the tune of $700 million indicates a strong confidence in the company's financial health and future prospects. Share repurchases are often viewed as a signal that the company believes its stock is undervalued and that it has sufficient cash flow to return value to shareholders. This action can be expected to have a positive impact on the stock's price as it reduces the number of shares outstanding, potentially increasing earnings per share (EPS) and the intrinsic value of the remaining shares.

The reported 23% year-over-year revenue growth and a record $9.6 billion spend on the platform highlight the company's robust performance in the digital advertising space, outpacing industry growth rates. This level of growth, paired with high customer retention rates over 95%, underscores the company's competitive positioning and the stickiness of its offerings. Investors should consider the sustainability of these growth rates and customer retention levels, as they are key indicators of the company's long-term profitability and market share gains.

Market Research Analyst

The Trade Desk's strategic focus on emerging channels like Connected TV (CTV) and retail media, along with its support for Unified ID 2.0 (UID2), positions the company at the forefront of the digital advertising evolution. The decline of third-party cookies has prompted the need for new identity solutions and The Trade Desk's UID2 initiative is gaining traction with significant partnerships and integrations. This positions the company as a leader in the next phase of digital advertising, which prioritizes user privacy and control. The adoption of UID2 by major players such as NBCUniversal and Walmart Connect is a testament to the industry's recognition of UID2 as a viable alternative to third-party cookies.

Investors should note the potential for increased market share as The Trade Desk's OpenPath offers direct connections to premium publishers. This could lead to improved efficiency and transparency in ad buying, which may attract more advertisers to the platform. The company's ability to capture a larger share of the digital ad spend will be crucial as the market continues to shift towards programmatic advertising.

Legal Expert

Understanding the non-GAAP financial measures used by The Trade Desk, such as Adjusted EBITDA and Non-GAAP Net Income, is essential for stakeholders to gain a clearer picture of the company's operational performance. These measures exclude certain expenses like stock-based compensation, which can be substantial in tech companies and can distort the true economic performance of the business. While these non-GAAP measures provide valuable insights, it is important to consider them alongside GAAP results to fully appreciate the company's financial health.

Investors should be aware of the limitations of non-GAAP measures and understand that they are not standardized; different companies may calculate them differently, which can impede comparability. The reconciliation of GAAP to non-GAAP results provided by the company is a critical piece of information that should be reviewed to understand the adjustments made and the rationale behind them.

The Trade Desk also announced an additional share repurchase authorization, bringing the total amount of authorized future repurchases to $700 million of its Class A common stock.

LOS ANGELES--(BUSINESS WIRE)-- The Trade Desk, Inc. (“The Trade Desk” or the “Company”) (NASDAQ: TTD), a provider of a global technology platform for buyers of advertising, today announced financial results for its fourth quarter and fiscal year ended December 31, 2023.

“Once again The Trade Desk outpaced nearly all areas of digital advertising in 2023, with $1.95 billion of revenue representing 23% growth year over year and a record $9.6 billion of spend on our platform. At the same time, we continue to generate significant profitability and cash flow, which allows us to remain at the bleeding edge of our industry, with innovations such as Kokai. Our results are testament to the growing value that advertisers are placing on the open internet versus the limitations of walled gardens,” said Jeff Green, founder and CEO of The Trade Desk. “More and more of the world’s leading advertisers are gravitating to channels and partnerships that offer precision and premium value at scale, such as Connected TV (CTV) and retail media. More companies across the advertising ecosystem are leveraging new tools, such as UID2, OpenPath and OpenPass, which allow them to build the new identity and authentication fabric of the open internet. And with the launch of Kokai, we are bringing more value to advertisers with the industry’s most advanced, intuitive media buying platform.”

Fourth Quarter and Full Year 2023 Financial Highlights:

The following table summarizes the Company’s consolidated financial results for the quarters and fiscal years ended December 31, 2023 and 2022 ($ in millions, except per share amounts):

	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
GAAP Results
Revenue	$	606			$	491			$	1,946			$	1,578
Increase in revenue year over year		23	%			24	%			23	%			32	%
Net income	$	97			$	71			$	179			$	53
GAAP diluted earnings per share	$	0.19			$	0.14			$	0.36			$	0.11
Non-GAAP Results
Adjusted EBITDA	$	284			$	245			$	772			$	668
Adjusted EBITDA margin		47	%			50	%			40	%			42	%
Non-GAAP net income	$	207			$	190			$	628			$	522
Non-GAAP diluted earnings per share	$	0.41			$	0.38			$	1.26			$	1.04

Fourth Quarter and 2023 Recent Business Highlights

• Continued Share Gains: 2023 gross spend of $9.6 billion.
  
  
• Strong Customer Retention: Customer retention remained over 95% during the year, as it has in each of the last ten years.
  
  
• Continued Collaboration and Support for Unified ID 2.0: The Trade Desk is building support for Unified ID 2.0 (UID2), an industry-wide approach to identity that preserves the value of relevant advertising, while putting user control and privacy at the forefront. UID2 is an upgrade and alternative to third-party cookies. Recent partnerships and pledges of integration and support include:
  • In January, DISH Media announced adoption of UID2 across its suite of traditional TV and OTT services including DISH TV and Sling TV.
  • With its integration of UID2, device and software company HP has seen improved targeting on CTV, and as a result, the company has reduced wasted advertising spend.
  • In September, Philo adopted UID2 across its roster of premium streaming TV channels.
  • Warner Bros. Discovery announced integration with UID2 across its premium entertainment, sports, news and lifestyle brands with its digital platforms, including Max and Discovery+.
  • Walmart Connect announced it is testing the integration of UID2 to inform decisioning across the open internet within the Walmart DSP.
  • EUID, the European counterpart to UID2 specifically developed for the European market, is gaining support across Europe from brands, publishers, and retailers. Initial industry engagement includes Bacardi, Kimberly-Clark, Aller Media, Future, OneFootball, Prisma Media, Tesco and others.
  • On stage at Forward ’23: Always On, NBCUniversal announced it is implementing UID2 on Peacock across all devices and consumer touchpoints, including on CTV, the web, apps and devices.
    
    
• OpenPath: OpenPath gives our clients a simplified, direct connection to participating premium publishers across the open internet. By supporting an objective, transparent supply path, OpenPath helps to maximize value for everyone involved. OpenPath is already live with dozens of publishers representing over 11,000 destinations across connected TV, mobile, display and audio.
  
  
• Industry Recognition (2023):
  • Institutional Investor Awards - Most Honored Company, Best CEO, Best Company Board, Best IR Program, Best IR Professional, Best IR Team, Best Analyst Day
  • Digiday Video and TV Awards - Best TV/Streaming Ad Sales Product of the Year
  • DigiZ Awards Hong Kong - Best Programmatic Advertising Platform
  • Marketing Excellence Awards Singapore - Excellence in Data-Driven Marketing - Gold
  • The Forrester Wave - Omnichannel Demand-Side Platforms Leader
  • Quadrant Knowledge Solutions SPARK Matrix for Ad Tech - Technology Leader
  • Stevie Awards for Customer Service Success - Bronze, Technology Industries
  • Adweek 50 List - Ian Colley
  • Ad Age 40 under 40 Award Winner - Jaime Nash
  • Top Women in Media and AdTech Award Winners: Samantha Jacobson - Change-Maker, Catherine Patterson - Tech Trailblazer, Jaime Nash - Programmatic Storyteller
  • Business Insider Rising Stars of AdTech - Ellen Mulryan, Sr. Dir. of Retail Data Partnerships
  • Fortune - Best Workplaces for Millennials
  • Fortune - Best Workplaces in Technology
  • Institutional Investor 2023-2024 All-America Executive Team List - Jeff Green, Founder and CEO
  • US News & World Report - Best Media Companies To Work For
  • National Intern Day - Top 100 Internship Programs of 2023
    
    
• Share Repurchases:
  • The Company repurchased approximately $220 million of its Class A common stock in the fourth quarter of 2023. The Company repurchased approximately $647 million of its Class A common stock in the year ended December 31, 2023, at an average repurchase price of $63.87. As of December 31, 2023, the Company had $53 million available and authorized for repurchases.

Financial Guidance:

First Quarter 2024 outlook summary:

• Revenue at least $478 million
• Adjusted EBITDA of approximately $130 million

The Company has not provided an outlook for GAAP Net Income or reconciliation of Adjusted EBITDA guidance to Net Income, the closest corresponding U.S. GAAP measure, because Net Income outlook is not available without unreasonable efforts on a forward-looking basis due to the variability and complexity with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of our stock-based compensation expense that are directly impacted by unpredictable fluctuations in our share price. The Company expects the variability of the above charges could have a significant and potentially unpredictable impact on our future U.S. GAAP financial results.

Use of Non-GAAP Financial Information

Included within this press release are the non-GAAP financial measures of Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Diluted EPS that supplement the Consolidated Statements of Operations of the Company prepared under generally accepted accounting principles (“GAAP”). Adjusted EBITDA is earnings before interest income, net; provision for income taxes; depreciation and amortization; and stock-based compensation. Non-GAAP Net Income excludes charges and the related income tax effects for stock-based compensation. Tax rates on the tax-deductible portions of the stock-based compensation expense approximating 25% to 30% have been used in the computation of non-GAAP Net Income and non-GAAP Diluted EPS. Reconciliations of GAAP to non-GAAP amounts for the periods presented herein are provided in schedules accompanying this release and should be considered together with the Consolidated Statements of Operations. These non-GAAP measures are not meant as a substitute for GAAP, but are included solely for informational and comparative purposes. The Company’s management believes that this information can assist investors in evaluating the Company's operational trends, financial performance and cash-generating capacity. Management believes these non-GAAP measures allow investors to evaluate the Company’s financial performance using some of the same measures as management. However, the non-GAAP financial measures should not be regarded as a replacement for or superior to corresponding, similarly captioned, GAAP measures and may be different from non-GAAP financial measures used by other companies.

Fourth Quarter and Fiscal Year 2023 Financial Results Webcast and Conference Call Details

• When: February 15, 2024 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time).
• Webcast: A live webcast of the call can be accessed from the Investor Relations section of The Trade Desk’s website at http://investors.thetradedesk.com/. Following the call, a replay will be available on the Company’s website.
• Dial-in: To access the call via telephone in North America, please dial 888-506-0062. For callers outside the United States, please dial 1-973-528-0011. Participants should reference the conference call ID code “982223” after dialing in.
• Audio replay: An audio replay of the call will be available beginning about two hours after the call. To listen to the replay in the United States, please dial 877-481-4010 (replay code: 49704). Outside the United States, please dial 1-919-882-2331 (replay code: 49704). The audio replay will be available via telephone until February 22, 2024.

The Trade Desk, Inc. uses its Investor Relations website (http://investors.thetradedesk.com/), its Twitter feed (@TheTradeDesk), LinkedIn page (https://www.linkedin.com/company/the-trade-desk/), Facebook page (https://www.facebook.com/TheTradeDesk/) and LinkedIn profile (https://www.linkedin.com/in/jefftgreen/) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information that is posted through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to The Trade Desk’s press releases, SEC filings, public conference calls and webcasts.

Share Repurchase Program

The Company also announced that its board of directors approved an additional $647 million under its share repurchase program pursuant to which the Company may purchase its outstanding Class A Common Stock, bringing the total amount for future repurchases back to $700 million. This program does not obligate the Company to acquire any particular amount of Class A Common Stock, and may be modified, suspended or terminated at any time at the discretion of the Company’s board of directors.

About The Trade Desk

The Trade Desk^™ is a technology company that empowers buyers of advertising. Through its self-service, cloud-based platform, ad buyers can create, manage and optimize digital advertising campaigns across ad formats and devices. Integrations with major data, inventory and publisher partners ensure maximum reach and decisioning capabilities, and enterprise APIs enable custom development on top of the platform. Headquartered in Ventura, CA, The Trade Desk has offices across North America, Europe and Asia Pacific. To learn more, visit thetradedesk.com or follow us on Facebook, Twitter, LinkedIn and YouTube.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results or (c) embody assumptions that may prove to have been inaccurate, including statements relating to industry and market trends, the Company’s financial targets, such as revenue and Adjusted EBITDA and the amount, timing and sources of funding for the Company’s share repurchase program. When words such as “believe,” “expect,” “anticipate,” “will”, “outlook” or similar expressions are used, the Company is making forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give readers any assurance that such expectations will prove correct. These forward-looking statements involve risks, uncertainties and assumptions, including those related to the Company’s relatively limited operating history, which makes it difficult to evaluate the Company’s business and prospects, the market for programmatic advertising developing slower or differently than the Company’s expectations, the demands and expectations of clients and the ability to attract and retain clients. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond the control of the Company. These are disclosed in the Company’s reports filed from time to time with the Securities and Exchange Commission, including its most recent Form 10-K and any subsequent filings on Forms 10-Q or 8-K, available at www.sec.gov. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not intend to update any forward-looking statement contained in this press release to reflect events or circumstances arising after the date hereof.

THE TRADE DESK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) (Unaudited)
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenue	$	605,797			$	490,737			$	1,946,120			$	1,577,795
Operating expenses (1):
Platform operations		100,695				79,619				365,598				281,123
Sales and marketing		126,793				92,829				447,970				337,975
Technology and development		102,004				84,479				411,794				319,876
General and administrative		131,867				133,650				520,278				525,167
Total operating expenses		461,359				390,577				1,745,640				1,464,141
Income from operations		144,438				100,160				200,480				113,654
Total other income, net		(16,238	)			(11,960	)			(67,515	)			(13,716	)
Income before income taxes		160,676				112,120				267,995				127,370
Provision for income taxes		63,353				40,933				89,055				73,985
Net income	$	97,323			$	71,187			$	178,940			$	53,385
Earnings per share:
Basic	$	0.20			$	0.15			$	0.37			$	0.11
Diluted	$	0.19			$	0.14			$	0.36			$	0.11
Weighted-average shares outstanding:
Basic		489,454				489,217				489,261				486,937
Diluted		499,682				500,432				500,182				499,925
___________________________
(1) Includes stock-based compensation expense as follows:

THE TRADE DESK, INC. STOCK-BASED COMPENSATION EXPENSE (Amounts in thousands) (Unaudited)
	Three Months Ended December 31,						Year Ended December 31,
	2023			2022			2023			2022
Platform operations	$	6,406		$	4,031		$	21,048		$	18,285
Sales and marketing		21,885			15,724			75,924			64,442
Technology and development		29,540			27,564			120,823			94,822
General and administrative (1)		63,604			80,212			273,826			321,093
Total	$	121,435		$	127,531		$	491,621		$	498,642
___________________________
(1) Includes stock-based compensation expense related to a long-term CEO performance grant of $42 million and $66 million for the three months ended December 31, 2023 and 2022, respectively, as well as $198 million and $262 million for the twelve months ended December 31, 2023 and 2022, respectively.

THE TRADE DESK, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited)
	As of December 31, 2023			As of December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	895,129		$	1,030,506
Short-term investments, net		485,159			416,080
Accounts receivable, net		2,870,313			2,347,195
Prepaid expenses and other current assets		63,353			51,836
Total current assets		4,313,954			3,845,617
Property and equipment, net		161,422			173,759
Operating lease assets		197,732			220,396
Deferred income taxes		154,849			94,028
Other assets, non-current		60,730			46,879
Total assets	$	4,888,687		$	4,380,679
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,317,318		$	1,871,419
Accrued expenses and other current liabilities		137,996			105,474
Operating lease liabilities		55,524			52,430
Total current liabilities		2,510,838			2,029,323
Operating lease liabilities, non-current		180,369			208,527
Other liabilities, non-current		33,261			27,490
Total liabilities		2,724,468			2,265,340
Stockholders' equity:
Preferred stock		—			—
Common stock		—			—
Additional paid-in capital		1,967,265			1,449,825
Retained earnings		196,954			665,514
Total stockholders' equity		2,164,219			2,115,339
Total liabilities and stockholders' equity	$	4,888,687		$	4,380,679

THE TRADE DESK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)
	Year Ended December 31,
		2023				2022
OPERATING ACTIVITIES:
Net income	$	178,940			$	53,385
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		80,418				54,425
Stock-based compensation		491,621				498,642
Noncash lease expense		48,955				44,115
Provision for expected credit losses on accounts receivable		2,960				3,203
Deferred income taxes		(61,597	)			(11,507	)
Other		(20,379	)			622
Changes in operating assets and liabilities:
Accounts receivable		(554,012	)			(291,747	)
Prepaid expenses and other current and non-current assets		(26,815	)			50,655
Accounts payable		475,463				187,119
Accrued expenses and other current and non-current liabilities		35,681				8,168
Operating lease liabilities		(52,913	)			(48,346	)
Net cash provided by operating activities		598,322				548,734
INVESTING ACTIVITIES:
Purchases of investments		(608,379	)			(553,295	)
Sales of investments		—				1,977
Maturities of investments		555,806				338,829
Purchases of property and equipment		(46,790	)			(84,160	)
Capitalized software development costs		(8,230	)			(7,725	)
Net cash used in investing activities		(107,593	)			(304,374	)
FINANCING ACTIVITIES:
Repurchases of Class A common stock		(646,597	)			—
Proceeds from exercise of stock options		60,525				47,525
Proceeds from employee stock purchase plan		38,482				33,062
Taxes paid related to net settlement of restricted stock awards		(78,516	)			(48,595	)
Net cash provided by (used in) financing activities		(626,106	)			31,992
Increase (decrease) in cash and cash equivalents		(135,377	)			276,352
Cash and cash equivalents—Beginning of year		1,030,506				754,154
Cash and cash equivalents—End of year	$	895,129			$	1,030,506

Non-GAAP Financial Metrics (Amounts in thousands, except per share amounts)
The following tables show the Company’s non-GAAP financial metrics reconciled to the comparable GAAP financial metrics included in this release.
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Net income	$	97,323			$	71,187			$	178,940			$	53,385
Add back (deduct):
Depreciation and amortization expense		20,529				16,844				80,418				54,425
Stock-based compensation expense		121,435				127,531				491,621				498,642
Interest income, net		(18,952	)			(11,434	)			(68,508	)			(12,755	)
Provision for income taxes		63,353				40,933				89,055				73,985
Adjusted EBITDA	$	283,688			$	245,061			$	771,526			$	667,682
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
GAAP net income	$	97,323			$	71,187			$	178,940			$	53,385
Add back (deduct):
Stock-based compensation expense		121,435				127,531				491,621				498,642
Adjustment for income taxes		(11,896	)			(8,576	)			(42,462	)			(29,995	)
Non-GAAP net income	$	206,862			$	190,142			$	628,099			$	522,032
GAAP diluted earnings per share	$	0.19			$	0.14			$	0.36			$	0.11
GAAP weighted-average shares outstanding—diluted		499,682				500,432				500,182				499,925
Non-GAAP diluted earnings per share	$	0.41			$	0.38			$	1.26			$	1.04
Non-GAAP weighted-average shares used in computing Non-GAAP earnings per share, diluted		499,682				500,432				500,182				499,925

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240215543128/en/

Investors

Jake Graves

Manager, Investor Relations

The Trade Desk

ir@thetradedesk.com

Media

Melinda Zurich

VP, Communications

The Trade Desk

melinda.zurich@thetradedesk.com

Source: The Trade Desk, Inc.

FAQ

What is the total amount of authorized future repurchases announced by The Trade Desk?

$700 million of its Class A common stock.

What was the revenue growth year over year for The Trade Desk in 2023?

23%.

What were the financial highlights for The Trade Desk in Q4 and fiscal year 2023?

Net income of $97 million and adjusted EBITDA of $284 million.

What are some recent business highlights for The Trade Desk?

$9.6 billion gross spend, over 95% customer retention, and support for UID2.

What was the amount of stock repurchased by The Trade Desk in Q4 2023?

Approximately $220 million of its Class A common stock.

What is the first quarter 2024 revenue outlook for The Trade Desk?

At least $478 million.

What is the first quarter 2024 adjusted EBITDA outlook for The Trade Desk?

Approximately $130 million.