Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 31, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | TTD | |
Entity Registrant Name | TRADE DESK, INC. | |
Entity Central Index Key | 1,671,933 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Class A common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 36,251,162 | |
Class B common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 6,990,958 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 166,349 | $ 155,950 |
Accounts receivable, net | 640,098 | 599,565 |
Prepaid expenses and other current assets | 18,614 | 10,298 |
TOTAL CURRENT ASSETS | 825,061 | 765,813 |
Property and equipment, net | 29,402 | 17,405 |
Deferred income taxes | 3,359 | 3,359 |
Other assets, non-current | 15,891 | 10,587 |
TOTAL ASSETS | 873,713 | 797,164 |
Current liabilities: | ||
Accounts payable | 493,284 | 490,377 |
Accrued expenses and other current liabilities | 35,927 | 28,155 |
TOTAL CURRENT LIABILITIES | 529,211 | 518,532 |
Debt, net | 27,000 | |
Other liabilities, non-current | 7,488 | 6,049 |
TOTAL LIABILITIES | 536,699 | 551,581 |
Commitments and contingencies (Note 9) | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock, par value $0.000001; 100,000 shares authorized, zero shares issued and outstanding as of September 30, 2018 and December 31, 2017 | ||
Common stock, par value $0.000001; 1,000,000 Class A shares authorized as of September 30, 2018 and December 31, 2017; 35,734 and 32,486 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively; 95,000 Class B shares authorized as of September 30, 2018 and December 31, 2017; 7,451 and 9,155 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 0 | 0 |
Additional paid-in capital | 252,329 | 209,603 |
Retained earnings | 84,685 | 35,980 |
TOTAL STOCKHOLDERS’ EQUITY | 337,014 | 245,583 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 873,713 | $ 797,164 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.000001 | $ 0.000001 |
Preferred stock, authorized shares | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.000001 | $ 0.000001 |
Class A common stock | ||
Common stock | ||
Common stock, authorized shares | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 35,734,000 | 32,486,000 |
Common stock, shares outstanding | 35,734,000 | 32,486,000 |
Class B common stock | ||
Common stock | ||
Common stock, authorized shares | 95,000,000 | 95,000,000 |
Common stock, shares issued | 7,451,000 | 9,155,000 |
Common stock, shares outstanding | 7,451,000 | 9,155,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 118,825 | $ 79,413 | $ 316,826 | $ 205,569 |
Type of Revenue [Extensible List] | us-gaap:ServiceMember | us-gaap:ServiceMember | us-gaap:ServiceMember | us-gaap:ServiceMember |
Operating expenses: | ||||
Platform operations | $ 29,344 | $ 17,397 | $ 78,842 | $ 45,097 |
Type of Cost, Good or Service [Extensible List] | us-gaap:ServiceMember | us-gaap:ServiceMember | us-gaap:ServiceMember | us-gaap:ServiceMember |
Sales and marketing | $ 23,287 | $ 16,200 | $ 60,007 | $ 42,842 |
Technology and development | 22,621 | 13,181 | 59,806 | 35,777 |
General and administrative | 21,310 | 14,227 | 59,816 | 41,815 |
Total operating expenses | 96,562 | 61,005 | 258,471 | 165,531 |
Income from operations | 22,263 | 18,408 | 58,355 | 40,038 |
Other expense (income): | ||||
Interest expense (income), net | (237) | 513 | (113) | 1,290 |
Foreign currency exchange loss, net | 395 | 1,841 | 2,035 | 3,159 |
Total other expense, net | 158 | 2,354 | 1,922 | 4,449 |
Income before income taxes | 22,105 | 16,054 | 56,433 | 35,589 |
Provision for income taxes | 1,813 | 5,825 | 7,728 | 1,602 |
Net income | $ 20,292 | $ 10,229 | $ 48,705 | $ 33,987 |
Earnings per share: | ||||
Basic | $ 0.47 | $ 0.25 | $ 1.15 | $ 0.85 |
Diluted | $ 0.44 | $ 0.23 | $ 1.07 | $ 0.77 |
Weighted average shares outstanding: | ||||
Basic | 42,721 | 40,700 | 42,178 | 39,977 |
Diluted | 46,576 | 44,245 | 45,460 | 43,919 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING ACTIVITIES: | ||
Net income | $ 48,705 | $ 33,987 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 8,107 | 5,157 |
Stock-based compensation | 27,958 | 12,406 |
Bad debt expense | 1,727 | 3,943 |
Other | 2,396 | (1,312) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (44,736) | (95,215) |
Prepaid expenses and other assets | (10,597) | (7,296) |
Accounts payable | (2,804) | 51,855 |
Accrued expenses and other liabilities | 7,789 | 3,506 |
Net cash provided by operating activities | 38,545 | 7,031 |
INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (10,383) | (8,357) |
Capitalized software development costs | (4,340) | (2,479) |
Net cash used in investing activities | (14,723) | (10,836) |
FINANCING ACTIVITIES: | ||
Repayment on line of credit | (27,000) | |
Payment of debt financing costs | (153) | |
Payment of financing obligations | (677) | |
Proceeds from exercise of stock options | 7,165 | 1,768 |
Proceeds from employee stock purchase plan | 7,014 | 2,294 |
Taxes paid related to net settlement of restricted stock awards | (602) | (29) |
Net cash provided by (used in) financing activities | (13,423) | 3,203 |
Increase (decrease) in cash and cash equivalents | 10,399 | (602) |
Cash and cash equivalents—Beginning of period | 155,950 | 133,400 |
Cash and cash equivalents—End of period | 166,349 | 132,798 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Capitalized assets financed by accounts payable | 6,624 | 945 |
Tenant improvements paid by lessor | 1,017 | 640 |
Asset retirement obligation | 386 | |
Debt financing costs included in debt, net | 1,153 | |
Stock-based compensation included in capitalized software development costs | $ 1,192 | $ 453 |
Nature of Operations
Nature of Operations | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Nature of Operations | Note 1—Nature of Operations The Trade Desk, Inc. (the “Company”) was formed in November 2009 as a Delaware corporation. The Company is headquartered in Ventura, California and has offices in various cities in North America, Europe, Asia and Australia. The Company is a global technology company that empowers ad buyers by providing a self-service omnichannel platform that enables its clients to purchase and manage data-driven digital advertising campaigns across various advertising channels and formats. Risks The Company is subject to certain business risks, including dependence on key employees, competition, market acceptance of the Company’s platform, ability to source demand from buyers of advertising inventory, availability of equity or debt financings and dependence on growth to achieve its business plan. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Note 2—Basis of Presentation and Summary of Significant Accounting Policies The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2017 was derived from audited financial statements, but does not include all disclosures required by GAAP. On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) On July 1, 2018, the Company early adopted ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , using the prospective method. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Previously, all implementation costs for a hosting arrangement that was a service contract were expensed when incurred. The Company’s adoption of ASU 2018-15 did not have a material impact on its consolidated financial statements. Except for the adoption of ASU 2014-09 and ASU 2018-15, there have been no other changes to the Company’s accounting policies and these unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the Company’s audited annual consolidated financial statements for the year ended December 31, 2017, and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements. The operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results expected for the full year ending December 31, 2018. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates under different assumptions or circumstances. Revenue Recognition The Company determines revenue recognition through the following steps: • Identification of a contract with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when or as the performance obligations are satisfied The Company maintains agreements with each client and supplier in the form of master service agreements, which set out the terms of the relationship and access to the Company’s platform. The Company’s performance obligation is to provide the use of its platform to clients to develop ad campaigns and select the advertising inventory, data and other add-on features. The Company charges clients a platform fee, based on a percentage of a client’s purchases through the platform, and the transaction price is determined based on the consideration to which it expects to be entitled in exchange for the completion of a transaction, that is, when a bid is won. The Company reports revenue net of amounts it pays suppliers for the cost of advertising inventory, third-party data and other add-on features (collectively, “Supplier Features”). The determination of whether the Company is the principal or agent, and hence whether to report revenue on a gross basis for the amount of the Supplier Features the clients purchase using the platform plus the Company’s platform fees or on a net basis for the amount of platform fees charged to the client, requires judgment. The Company determined that it is not primarily responsible for the purchase of Supplier Features, but rather, it is primarily responsible to provide a platform that enables clients to bid on advertising inventory, and use data and other add-on features in designing and executing their campaigns. The Company does not control the Supplier Features prior to the purchase by the client, and it does not have pricing latitude with respect to the cost of such features. The platform fee the Company charges clients is a percentage of their purchases through its platform, similar to a commission, and the platform fee is not contingent on the results of an advertising campaign. Based on these and other factors, the Company determined that it is not the principal in the purchase and sale of Supplier Features in all of its arrangements, and therefore, it reports revenue on a net basis for the platform fees charged to clients. The Company generally bills clients for the gross amount of Supplier Features they purchase through its platform and the platform fees, net of allowances (“Gross Billings”). Some of the Company’s clients have payment relationships directly with advertising inventory suppliers in which case the Company only bills these clients for third-party data, other add-on features and its platform fees. The Company invoices its clients on a monthly basis for the purchases occurring during the month. Invoice payment terms, negotiated on a client-by-client basis, are typically between 30 to 90 days. However, for certain agency clients with sequential liability terms, payments are not due to the Company until such agency client has received payment from its customers who are advertisers. The Company’s accounts receivable are recorded at the amount of Gross Billings for the amounts it is responsible to collect, and accounts payable are recorded at the net amount payable to suppliers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis. Gross Billings, based on the billing address of the clients or client affiliates, were as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 US $ 479,489 $ 337,134 $ 1,282,178 $ 843,557 International 89,255 59,370 242,519 146,286 Total $ 568,744 $ 396,504 $ 1,524,697 $ 989,843 Allowance for Doubtful Accounts The allowance for doubtful accounts was $2.8 million and $2.3 million as of September 30, 2018 and December 31, 2017, respectively. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases The original guidance required application on a modified retrospective basis to the earliest period presented. In August 2018, the FASB issued Leases (Topic 842): Targeted Improvements , which includes an option to not restate comparative periods in transition but rather to elect to use the effective date of , as the date of initial application of transition. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement-Disclosure Framework (Topic 820). |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 3—Earnings Per Share The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights. The computation of basic and diluted EPS is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Numerator: Net income $ 20,292 $ 10,229 $ 48,705 $ 33,987 Denominator: Weighted-average shares outstanding—basic 42,721 40,700 42,178 39,977 Effect of dilutive securities: Options to purchase common stock 3,239 3,078 2,780 3,593 Employee stock purchase plan shares 270 322 273 250 Restricted stock 346 145 229 99 Weighted-average shares outstanding—diluted 46,576 44,245 45,460 43,919 Basic EPS $ 0.47 $ 0.25 $ 1.15 $ 0.85 Diluted EPS $ 0.44 $ 0.23 $ 1.07 $ 0.77 Anti-dilutive equity awards under stock-based award plans excluded from the determination of diluted EPS 167 899 167 899 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 4—Fair Value Measurements Cash equivalents, consisting of money market funds, of $12.6 million and $5.0 million at September 30, 2018 and December 31, 2017, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets. The Company had no other material financial instruments that were measured at fair value as of September 30, 2018 and December 31, 2017. |
Accounts Payable
Accounts Payable | 9 Months Ended |
Sep. 30, 2018 | |
Payables And Accruals [Abstract] | |
Accounts Payable | Note 5—Accounts Payable Accounts payable included the following (in thousands): As of As of September 30, 2018 December 31, 2017 Accounts payable—media and data $ 471,758 $ 477,716 Accounts payable—other 21,526 12,661 Total $ 493,284 $ 490,377 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Note 6—Debt Revolving Credit Facility On May 9, 2017, the Company, a syndicate of banks, led by Citibank, N.A., and Citibank, N.A., as agent, entered into an amended and restated loan and security agreement (the “Revolving Credit Facility”). Availability under the Revolving Credit Facility was $196.6 million at September 30, 2018, based on a percentage of eligible accounts receivable and reduced by certain reserves. As of September 30, 2018, the Company was in compliance with all covenants. On October 26, 2018, the Company and a syndicate of banks, led by Citibank, N.A. as agent, entered into a second amended and restated loan and security agreement (the “Second A&R Credit Agreement”). Refer to Note 10—Subsequent Event for additional information. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-Based Compensation | Note 7—Stock-Based Compensation Stock-Based Compensation Expense Stock-based compensation expense recorded in the condensed consolidated statements of operations was as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Platform operations $ 1,234 $ 818 $ 3,137 $ 1,543 Sales and marketing 3,033 1,500 7,757 3,277 Technology and development 4,013 1,990 8,905 3,981 General and administrative 3,137 1,585 8,159 3,605 Total $ 11,417 $ 5,893 $ 27,958 $ 12,406 Stock Options The following summarizes stock option activity: Shares Under Option (in thousands) Weighted- Average Exercise Price Outstanding as of December 31, 2017 4,745 $ 17.96 Granted 1,253 59.61 Exercised (1,110 ) 6.46 Cancelled (59 ) 44.31 Outstanding as of September 30, 2018 4,829 $ 31.09 Exercisable as of September 30, 2018 2,016 $ 12.36 On January 1, 2018, the number of shares authorized for grant under the Company’s 2016 Incentive Award Plan was increased by 1.7 million shares in accordance with plan provisions. Restricted Stock and Restricted Stock Units (“Restricted Stock”) The following summarizes Restricted Stock activity: Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested as of December 31, 2017 418 $ 39.95 Granted 126 57.04 Vested (43 ) 40.92 Forfeited — — Unvested as of September 30, 2018 501 $ 44.17 Employee Stock Purchase Plan (“ESPP”) Stock-based compensation expense related to the ESPP totaled $4.4 million and $3.2 million for the three months ended September 30, 2018 and 2017, respectively. Stock-based compensation expense related to the ESPP totaled $11.0 On January 1, 2018, the number of shares available for issuance under the Company’s Employee Stock Purchase Plan was increased by 0.4 million shares in accordance with plan provisions. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8—Income Taxes In determining the interim provision for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income and adds the tax effects of any discrete items in the reporting period in which they occur. For the nine months ended September 30, 2018, the Company’s effective tax rate differed from the United States (“U.S.”) federal statutory tax rate of 21% primarily due to state and foreign taxes, nondeductible stock-based compensation and the impact of tax benefits associated with stock-based awards. For the nine months ended September 30, 2017, the Company’s effective tax rate differed from the U.S. federal statutory tax rate of 35% primarily due to the impact of tax benefits associated with stock-based awards, nondeductible stock-based compensation and state and foreign taxes. For the three months ended September 30, 2018 and 2017, the provision for income taxes included $7.7 million and $3.2 million, respectively, of benefits associated with stock-based awards. For the nine months ended September 30, 2018 and 2017, the provision for income taxes included $14.2 million and $17.1 million, respectively, of benefits associated with stock-based awards. There were no material changes to the Company’s unrecognized tax benefits during the nine months ended September 30, 2018, and the Company does not expect to have any significant changes to unrecognized tax benefits within the next 12 months. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9— Commitments and Contingencies As of September 30, 2018, the Company’s non-cancelable minimum lease commitments were as follows (in thousands): Year Amount Remainder of 2018 $ 2,540 2019 11,762 2020 13,471 2021 15,659 2022 10,511 Thereafter 35,103 $ 89,046 Guarantees and Indemnification In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to clients, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus there are no claims that the Company is aware of that could have a material effect on the Company’s balance sheet, statement of operations or statement of cash flows. Accordingly, no amounts for any obligation have been recorded at September 30, 2018. Litigation From time to time, the Company is subject to various legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. Although the outcome of the various legal proceedings and claims cannot be predicted with certainty, management does not believe that any of these proceedings or other claims will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows. Employment Contracts The Company has entered into agreements with severance terms with certain employees and officers, all of whom are employed at-will. The Company may be required to accelerate the vesting of certain stock options in the event of changes in control, as defined, and involuntary terminations. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | Note 10— Subsequent Event On October 26, 2018, the Company and a syndicate of banks, led by Citibank, N.A., as agent, entered into the Second A&R Credit Agreement. The Second A&R Credit Agreement amends and restates the Company’s existing credit facility previously entered into on May 9, 2017, and consists of a $150.0 million revolving loan facility, with a $20.0 million sublimit for swingline borrowings and a $15.0 million sublimit for the issuance of letters of credit (the “Second A&R Credit Facility”). Under certain circumstances, the Company has the right to increase the Second A&R Credit Facility by an amount not to exceed $100.0 million. The Second A&R Credit Agreement is collateralized by substantially all of the Company’s assets, including a pledge of certain of its accounts receivable, deposit accounts, intellectual property, investment property, and equipment. Loans under the Second A&R Credit Facility bear interest through maturity at a variable rate based upon, at the Company’s option, an annual rate of either a Base Rate or a LIBOR rate, plus an applicable margin (“Base Rate Borrowings” and “LIBOR Rate Borrowings”). The Base Rate is defined as a fluctuating interest rate equal to the greatest of (1) the federal funds rate plus 0.50%, (2) Citibank, N.A.’s prime rate, and (3) one month LIBOR rate plus 2.00%. The applicable margin is between 0.25% to 1.25% for Base Rate Borrowings and between 1.25% and 2.25% for LIBOR Rate Borrowings based on the Company maintaining certain leverage ratios. The fee for undrawn amounts under the Second A&R Credit Facility ranges, based on the applicable leverage, from 0.225% to 0.400%. The Company will also be required to pay customary letter of credit fees, as necessary. The Second A&R Credit Facility matures and all outstanding amounts become due and payable on May 9, 2022. The Second A&R Credit Agreement contains customary conditions to borrowings, events of default and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of subordinated debt. The Second A&R Credit Agreement also requires the Company to maintain compliance with (a) a maximum ratio of consolidated funded debt to consolidated EBITDA of 3.50 to 1.00 and (b) a minimum ratio of consolidated EBITDA to interest expense of at least 3.00 to 1.00. The Company entered into the Second A&R Credit Agreement primarily to lower its borrowing costs and to change from an asset-based structure to a cash-flow based structure. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates under different assumptions or circumstances. |
Revenue Recognition | Revenue Recognition The Company determines revenue recognition through the following steps: • Identification of a contract with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when or as the performance obligations are satisfied The Company maintains agreements with each client and supplier in the form of master service agreements, which set out the terms of the relationship and access to the Company’s platform. The Company’s performance obligation is to provide the use of its platform to clients to develop ad campaigns and select the advertising inventory, data and other add-on features. The Company charges clients a platform fee, based on a percentage of a client’s purchases through the platform, and the transaction price is determined based on the consideration to which it expects to be entitled in exchange for the completion of a transaction, that is, when a bid is won. The Company reports revenue net of amounts it pays suppliers for the cost of advertising inventory, third-party data and other add-on features (collectively, “Supplier Features”). The determination of whether the Company is the principal or agent, and hence whether to report revenue on a gross basis for the amount of the Supplier Features the clients purchase using the platform plus the Company’s platform fees or on a net basis for the amount of platform fees charged to the client, requires judgment. The Company determined that it is not primarily responsible for the purchase of Supplier Features, but rather, it is primarily responsible to provide a platform that enables clients to bid on advertising inventory, and use data and other add-on features in designing and executing their campaigns. The Company does not control the Supplier Features prior to the purchase by the client, and it does not have pricing latitude with respect to the cost of such features. The platform fee the Company charges clients is a percentage of their purchases through its platform, similar to a commission, and the platform fee is not contingent on the results of an advertising campaign. Based on these and other factors, the Company determined that it is not the principal in the purchase and sale of Supplier Features in all of its arrangements, and therefore, it reports revenue on a net basis for the platform fees charged to clients. The Company generally bills clients for the gross amount of Supplier Features they purchase through its platform and the platform fees, net of allowances (“Gross Billings”). Some of the Company’s clients have payment relationships directly with advertising inventory suppliers in which case the Company only bills these clients for third-party data, other add-on features and its platform fees. The Company invoices its clients on a monthly basis for the purchases occurring during the month. Invoice payment terms, negotiated on a client-by-client basis, are typically between 30 to 90 days. However, for certain agency clients with sequential liability terms, payments are not due to the Company until such agency client has received payment from its customers who are advertisers. The Company’s accounts receivable are recorded at the amount of Gross Billings for the amounts it is responsible to collect, and accounts payable are recorded at the net amount payable to suppliers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis. Gross Billings, based on the billing address of the clients or client affiliates, were as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 US $ 479,489 $ 337,134 $ 1,282,178 $ 843,557 International 89,255 59,370 242,519 146,286 Total $ 568,744 $ 396,504 $ 1,524,697 $ 989,843 |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The allowance for doubtful accounts was $2.8 million and $2.3 million as of September 30, 2018 and December 31, 2017, respectively. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases The original guidance required application on a modified retrospective basis to the earliest period presented. In August 2018, the FASB issued Leases (Topic 842): Targeted Improvements , which includes an option to not restate comparative periods in transition but rather to elect to use the effective date of , as the date of initial application of transition. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement-Disclosure Framework (Topic 820). |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Gross Billings Based on Billing of Clients Affiliates | Gross Billings, based on the billing address of the clients or client affiliates, were as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 US $ 479,489 $ 337,134 $ 1,282,178 $ 843,557 International 89,255 59,370 242,519 146,286 Total $ 568,744 $ 396,504 $ 1,524,697 $ 989,843 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Earnings Per Share | The computation of basic and diluted EPS is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Numerator: Net income $ 20,292 $ 10,229 $ 48,705 $ 33,987 Denominator: Weighted-average shares outstanding—basic 42,721 40,700 42,178 39,977 Effect of dilutive securities: Options to purchase common stock 3,239 3,078 2,780 3,593 Employee stock purchase plan shares 270 322 273 250 Restricted stock 346 145 229 99 Weighted-average shares outstanding—diluted 46,576 44,245 45,460 43,919 Basic EPS $ 0.47 $ 0.25 $ 1.15 $ 0.85 Diluted EPS $ 0.44 $ 0.23 $ 1.07 $ 0.77 Anti-dilutive equity awards under stock-based award plans excluded from the determination of diluted EPS 167 899 167 899 |
Accounts Payable (Tables)
Accounts Payable (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Payables And Accruals [Abstract] | |
Schedule of Accounts Payable | Accounts payable included the following (in thousands): As of As of September 30, 2018 December 31, 2017 Accounts payable—media and data $ 471,758 $ 477,716 Accounts payable—other 21,526 12,661 Total $ 493,284 $ 490,377 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Schedule of Stock-Based Compensation Expense by Operating Expense Category | Stock-based compensation expense recorded in the condensed consolidated statements of operations was as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Platform operations $ 1,234 $ 818 $ 3,137 $ 1,543 Sales and marketing 3,033 1,500 7,757 3,277 Technology and development 4,013 1,990 8,905 3,981 General and administrative 3,137 1,585 8,159 3,605 Total $ 11,417 $ 5,893 $ 27,958 $ 12,406 |
Summary of Stock Option Activity | The following summarizes stock option activity: Shares Under Option (in thousands) Weighted- Average Exercise Price Outstanding as of December 31, 2017 4,745 $ 17.96 Granted 1,253 59.61 Exercised (1,110 ) 6.46 Cancelled (59 ) 44.31 Outstanding as of September 30, 2018 4,829 $ 31.09 Exercisable as of September 30, 2018 2,016 $ 12.36 |
Summary of Nonvested Restricted Stock Activity | The following summarizes Restricted Stock activity: Shares (in thousands) Weighted- Average Grant Date Fair Value Unvested as of December 31, 2017 418 $ 39.95 Granted 126 57.04 Vested (43 ) 40.92 Forfeited — — Unvested as of September 30, 2018 501 $ 44.17 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Schedule of Minimum Lease Commitments under Non-Cancelable Operating Leases | As of September 30, 2018, the Company’s non-cancelable minimum lease commitments were as follows (in thousands): Year Amount Remainder of 2018 $ 2,540 2019 11,762 2020 13,471 2021 15,659 2022 10,511 Thereafter 35,103 $ 89,046 |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies - Revenue Recognition (Detail) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Standards Update 2014-09 | |
Disaggregation Of Revenue [Line Items] | |
Revenue, performance obligation, description of payment terms | The Company invoices its clients on a monthly basis for the purchases occurring during the month. Invoice payment terms, negotiated on a client-by-client basis, are typically between 30 to 90 days. However, for certain agency clients with sequential liability terms, payments are not due to the Company until such agency client has received payment from its customers who are advertisers. |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies - Gross Billings Based on Billing Address of Clients or Client Affiliates (Detail) - Accounting Standards Update 2014-09 - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation Of Revenue [Line Items] | ||||
Gross Billings | $ 568,744 | $ 396,504 | $ 1,524,697 | $ 989,843 |
US | ||||
Disaggregation Of Revenue [Line Items] | ||||
Gross Billings | 479,489 | 337,134 | 1,282,178 | 843,557 |
International | ||||
Disaggregation Of Revenue [Line Items] | ||||
Gross Billings | $ 89,255 | $ 59,370 | $ 242,519 | $ 146,286 |
Basis of Presentation and Sum_6
Basis of Presentation and Summary of Significant Accounting Policies - Allowance for Doubtful Accounts (Detail) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||
Allowance for doubtful accounts | $ 2.8 | $ 2.3 |
Earnings Per Share - Computatio
Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Detail) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018USD ($)Class$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2018USD ($)Class$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | |
Earnings Per Share | ||||
Number of classes of common stock | Class | 2 | 2 | ||
Numerator: | ||||
Net income | $ | $ 20,292 | $ 10,229 | $ 48,705 | $ 33,987 |
Denominator: | ||||
Weighted-average shares outstanding—basic | 42,721 | 40,700 | 42,178 | 39,977 |
Effect of dilutive securities: | ||||
Options to purchase common stock | 3,239 | 3,078 | 2,780 | 3,593 |
Employee stock purchase plan shares | 270 | 322 | 273 | 250 |
Restricted stock | 346 | 145 | 229 | 99 |
Weighted-average shares outstanding—diluted | 46,576 | 44,245 | 45,460 | 43,919 |
Basic EPS | $ / shares | $ 0.47 | $ 0.25 | $ 1.15 | $ 0.85 |
Diluted EPS | $ / shares | $ 0.44 | $ 0.23 | $ 1.07 | $ 0.77 |
Anti-dilutive equity awards under stock-based award plans excluded from the determination of diluted EPS | 167 | 899 | 167 | 899 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Money Market Funds | Level 1 | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Cash equivalents | $ 12.6 | $ 5 |
Accounts Payable (Detail)
Accounts Payable (Detail) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Accounts Payable | ||
Accounts payable—media and data | $ 471,758 | $ 477,716 |
Accounts payable—other | 21,526 | 12,661 |
Total | $ 493,284 | $ 490,377 |
Debt - Additional Information (
Debt - Additional Information (Detail) $ in Millions | Sep. 30, 2018USD ($) |
Revolving Credit Facility | |
Long-term debt: | |
Credit facility available amount | $ 196.6 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Stock-Based Compensation Expense by Operating Expense Category (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stock-based compensation expense, by operating expense category | ||||
Stock-based compensation expense | $ 11,417 | $ 5,893 | $ 27,958 | $ 12,406 |
Platform operations | ||||
Stock-based compensation expense, by operating expense category | ||||
Stock-based compensation expense | 1,234 | 818 | 3,137 | 1,543 |
Sales and marketing | ||||
Stock-based compensation expense, by operating expense category | ||||
Stock-based compensation expense | 3,033 | 1,500 | 7,757 | 3,277 |
Technology and development | ||||
Stock-based compensation expense, by operating expense category | ||||
Stock-based compensation expense | 4,013 | 1,990 | 8,905 | 3,981 |
General and administrative | ||||
Stock-based compensation expense, by operating expense category | ||||
Stock-based compensation expense | $ 3,137 | $ 1,585 | $ 8,159 | $ 3,605 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Detail) - Stock Options shares in Thousands | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Shares Under Option | |
Outstanding at the beginning of the period (in shares) | shares | 4,745 |
Granted (in shares) | shares | 1,253 |
Exercised (in shares) | shares | (1,110) |
Cancelled (in shares) | shares | (59) |
Outstanding at the end of the period (in shares) | shares | 4,829 |
Exercisable as of September 30, 2018 | shares | 2,016 |
Weighted-Average Exercise Price | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 17.96 |
Granted (in dollars per share) | $ / shares | 59.61 |
Exercised (in dollars per share) | $ / shares | 6.46 |
Cancelled (in dollars per share) | $ / shares | 44.31 |
Outstanding at the end of the period (in dollars per share) | $ / shares | 31.09 |
Exercisable as of September 30, 2018 | $ / shares | $ 12.36 |
Stock-Based Compensation - St_2
Stock-Based Compensation - Stock Options - Additional Information (Detail) shares in Millions | Jan. 01, 2018shares |
2016 Incentive Award Plan | |
Stock-Based Compensation | |
Number of additional shares authorized for grant | 1.7 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Nonvested Restricted Stock Activity (Detail) shares in Thousands | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Unvested, Shares, beginning balance | shares | 418 |
Granted, Shares | shares | 126 |
Vested, Shares | shares | (43) |
Unvested, Shares, ending balance | shares | 501 |
Unvested, Weighted-Average Grant Date Fair Value Per Share, beginning balance | $ / shares | $ 39.95 |
Granted, Weighted-Average Grant Date Fair Value Per Share | $ / shares | 57.04 |
Vested, Weighted-Average Grant Date Fair Value Per Share | $ / shares | 40.92 |
Unvested, Weighted-Average Grant Date Fair Value Per Share, ending balance | $ / shares | $ / shares | $ 44.17 |
Stock-Based Compensation - ESPP
Stock-Based Compensation - ESPP - Additional Information (Detail) - USD ($) $ in Thousands, shares in Millions | Jan. 01, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Stock-Based Compensation | |||||
Stock-based compensation expense | $ 11,417 | $ 5,893 | $ 27,958 | $ 12,406 | |
ESPP | |||||
Stock-Based Compensation | |||||
Stock-based compensation expense | $ 4,400 | $ 3,200 | $ 11,000 | $ 6,100 | |
Number of additional shares authorized for grant | 0.4 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Federal tax at statutory rate (as a percent) | 21.00% | 35.00% | ||
Benefits associated with stock-based awards | $ 7.7 | $ 3.2 | $ 14.2 | $ 17.1 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Minimum Lease Commitments under Non-Cancelable Operating Leases (Detail) $ in Thousands | Sep. 30, 2018USD ($) |
Non-cancelable minimum lease commitments | |
Remainder of 2018 | $ 2,540 |
2,019 | 11,762 |
2,020 | 13,471 |
2,021 | 15,659 |
2,022 | 10,511 |
Thereafter | 35,103 |
Total | $ 89,046 |
Commitments and Contingencies_2
Commitments and Contingencies - Additional Information (Detail) | Sep. 30, 2018USD ($) |
Indemnifications | |
Guarantees and Indemnifications | |
Recorded obligation | $ 0 |
Subsequent Event - Additional I
Subsequent Event - Additional Information (Detail) - Second A&R Credit Facility - Subsequent Event | Oct. 26, 2018USD ($) |
Subsequent Event [Line Items] | |
Credit facility, borrowing capacity | $ 150,000,000 |
Credit Facility additional borrowing amount | $ 100,000,000 |
Credit facility, maturity | May 9, 2022 |
Swingline Borrowings | |
Subsequent Event [Line Items] | |
Credit facility, borrowing capacity | $ 20,000,000 |
Letter of Credit | |
Subsequent Event [Line Items] | |
Credit facility, borrowing capacity | $ 15,000,000 |
Federal Funds Rate | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 0.50% |
LIBOR | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 2.00% |
Minimum | |
Subsequent Event [Line Items] | |
Credit Facility, fee for undrawn amounts | 0.225% |
Consolidated fixed charge coverage ratio | 300.00% |
Minimum | LIBOR | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 1.25% |
Minimum | Base Rate | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 0.25% |
Maximum | |
Subsequent Event [Line Items] | |
Credit Facility, fee for undrawn amounts | 0.40% |
Consolidated fixed charge coverage ratio | 350.00% |
Maximum | LIBOR | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 2.25% |
Maximum | Base Rate | |
Subsequent Event [Line Items] | |
Credit Facility, interest rate above base rate | 1.25% |