Trade Desk (TTD) 10-K risk factor changes: FY2019 vs FY2018

If any of the following risks [removed: is] [added: are] realized, our business, financial condition, results of operations and prospects could be materially and adversely affected.

[removed: Our failure] [added: If we fail] to maintain and grow our client base and spend through our [removed: platform may negatively impact] [added: platform,] our revenue and [removed: business.][added: business may be negatively impacted.]

To sustain or increase our revenue, we must regularly add new clients and encourage existing clients to maintain or increase the amount of advertising inventory purchased through our platform and adopt new features and functionalities that we [removed: add to our platform.][added: make available.]

If competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with ours, our ability to sell [removed: access to] our [removed: platform] [added: services] to new or existing clients could be impaired.

While we generally have MSAs in place [removed: for] [added: with] our clients, such agreements allow our clients to change the amount [removed: of] [added: they] spend through our platform or terminate our services with limited notice.

[removed: Our clients] [added: We do not] typically have [added: exclusive] relationships with [removed: different providers] [added: our clients] and there is limited cost to moving [removed: budgets] [added: their media spend] to our competitors.

As a result, we [removed: may] have limited visibility [removed: as] to our future advertising revenue streams.

We do not have exclusive relationships with advertising agencies and we depend on agencies to work with us [removed: as they embark on] [added: to build and maintain advertiser relationships and execute] advertising [removed: campaigns for advertisers.][added: campaigns.]

We had approximately [removed: 742] [added: 820] clients, consisting primarily of advertising agencies, as of December 31, [removed: 2018.][added: 2019.]

If all of our individual client contractual relationships were aggregated at the holding company level, Publicis Groupe and Omnicom Group Inc. would each represent more than 10% of our gross billings for [removed: 2018.][added: 2019.]

If we fail to innovate [removed: and] [added: or] make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and advertising agencies and our revenue and results of operations may decline.

If we fail to adapt to our rapidly changing industry or to evolving client needs, [added: or we provide new products and services that exacerbate technological, legal or other challenges,] demand for our platform could decrease and our business, financial condition and results of operations may be adversely affected.

[removed: You should not consider our] [added: Our] revenue growth and levels of profitability in recent periods [added: should not be considered] as indicative of future performance.

The market for programmatic ad buying is an emerging market, and our current and potential clients may not shift [removed: as quickly as we expect] to programmatic ad buying from other buying [removed: methods,] [added: methods as quickly as we expect,] reducing our growth potential.

Growth in spend may outpace growth in our revenue as the market for programmatic buying for advertising matures due to a number of factors including [added: pricing competition,] quantity discounts and [added: shifts in] product, media, client and channel [removed: mix shifts.][added: mix.]

[removed: With the introduction of new technologies and the influx of new entrants to the market, we] [added: We] expect competition to persist and intensify in the future, which could harm our ability to increase revenue and maintain profitability.

New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants [added: develop and] offer new products and services, such as analytics, automated media buying and exchanges, aimed at capturing advertising spend or disrupting the digital marketing landscape.

We may also face competition from [added: new] companies [added: entering the market, including large established companies and companies] that we do not yet know about or do not yet exist.

If existing or new companies develop, market or resell competitive high-value [removed: marketing] products or [removed: services,] [added: services that result in additional competition for advertising spend or advertising inventory or if they] acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our results of operations could be harmed.

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, [removed: allowing] [added: which may allow] them to devote greater resources to the development, promotion, sale and support of their products and services.

[removed: We] [added: We] may experience fluctuations in our [removed: operating results,] [added: results of operations,] which could make our future [removed: operating] results [added: of operations] difficult to predict or cause our [removed: operating] results [added: of operations] to fall below analysts’ and investors’ [removed: expectations.][added: expectations.]

Our quarterly and annual [removed: operating] results [added: of operations] have fluctuated in the past and we expect our future [removed: operating] results [added: of operations] to fluctuate due to a variety of factors, many of which are beyond our control.

Fluctuations in our [removed: operating] results [added: of operations] could cause our performance to fall below the expectations of analysts and investors, and adversely affect the price of our common stock.

Because our business is changing and evolving rapidly, our historical [removed: operating] results [added: of operations] may not be necessarily indicative of our future [removed: operating results.][added: results of operations.]

Factors that may cause our [removed: operating] results [added: of operations] to fluctuate include the following:

| | • | changes in demand for [added: programmatic advertising and for] our platform, including related to the seasonal nature of our clients’ spending on digital advertising campaigns; |

| | • | changes [removed: in our pricing policies,] the pricing [removed: policies of our competitors and the pricing] or availability of inventory, data or other third-party services; |

| | • | changes and uncertainty in the regulatory environment for us, advertisers or others in the advertising [removed: industry;] [added: industry, and the effects of our efforts and those of our clients and partners to address changes and uncertainty in the regulatory environment;] |

| | • | changes in the [added: pricing and] availability of advertising inventory through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising; |

| | • | costs related to acquisitions of businesses or [removed: technologies, or employee recruiting] [added: technologies] and [removed: retention.] [added: development of new products;] |

Based upon the factors above and others beyond our control, we have a limited ability to forecast our future revenue, costs and [removed: expenses, and as a result, our operating results may, from time to time, fall below our estimates or the expectations of analysts and investors.][added: expenses.]

[removed: We] [added: We] are subject to payment-related [removed: risks,] [added: risks that may adversely affect our business, working capital, financial condition and results of operations,] including from advertising agencies that do not pay us until they receive payment from [removed: the advertiser, and, if our] [added: their advertisers and from] clients [added: that dispute or] do not pay [removed: or dispute] their [removed: invoices, our ability to collect for non-payment may be limited and our business, financial condition and results of operations may be adversely affected.][added: invoices.]

We may also be involved in disputes with [removed: agencies] [added: clients,] and [added: in the case of agencies,] their [removed: advertisers] [added: advertisers,] over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform.

[removed: Generally,] [added: In addition, typically,] we are contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our clients pay us on time, or at all.

[removed: Additionally, while] [added: While] we attempt to negotiate long payment periods with our suppliers and shorter periods from our clients, we are not always successful.

This collections and payments cycle [removed: will] [added: may] increasingly consume working capital if we continue to be successful in growing our business.

We cannot assure you that [removed: as we continue to grow,] our business will generate sufficient cash flow from operations or that future borrowings will be available to us under [removed: the] [added: our existing] credit facility in an amount sufficient to fund our working capital needs.

We cannot assure you that we would be able to locate additional financing [removed: or increase amounts borrowed under our existing credit facility] on commercially reasonable terms or at all.

[removed: A] [added: Any] decrease in the use of [removed: these] [added: the] advertising channels [removed: would] [added: that we are primarily dependent upon, failure to expand the use of emerging channels, or unexpected shift in use among the channels in which we operate, could] harm our [removed: business,] growth prospects, financial condition and results of operations.

We expect that these will continue to be significant channels used by our clients for digital [removed: advertising.][added: advertising in the future.]

In addition, as we develop and introduce new products and services, including those incorporating or utilizing

artificial intelligence and machine learning, they may raise new, or heighten existing, technological, legal and other challenges, and may cause unintended consequences, may not function properly or may be misused by our clients.

Spend on our platform primarily comes through our agency clients.

Each advertising channel presents distinct and substantial risk and, in many cases, requires us to continue to develop additional functionality or features to address the particular requirements of the channel.

We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in channel development will correspond to any such changes.

Furthermore, if our channel mix changes due to a shift in client demand, such as clients shifting their spending more quickly or more extensively than expected to channels in which we have relatively less functionality, features, or inventory, demand for our platform could decrease, and our business, financial condition, and results of operations could be adversely affected.

business would be negatively impacted.

| | • | changes to availability of and pricing of competitive products and services, and their effects on our pricing; |

| | • | cost of employee recruiting and retention; and |

| | • | changes to the cost of infrastructure, including real estate and information technology. |

If we fail to meet or exceed operating results expectations of analysts and investors or if analysts and investors have estimates and forecasts of our future performance that are unrealistic or that we do not meet, the market price of our common stock could decline.

In addition, if one or more of the analysts who cover us adversely change their recommendation regarding our stock, the market price of our common stock could decline.

We may not be successful in developing and maintaining effective internal controls, and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

If we are unable to assert that our internal control over financial reporting is effective, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.

Our services and data could be exposed to unauthorized access due to activities that breach or undermine security measures, including: negligence or malfeasance by internal or external actors; attempts by outside parties to fraudulently induce employees, clients or vendors to disclose sensitive information in order to gain access to our data; or errors or vulnerabilities in our systems, products or processes or in those of our service providers, clients, and vendors.

Further,

we can expect that the deployment of techniques to circumvent our security measures may occur with more frequency and sophistication and may not be recognized until launched against a target.

Accordingly, we may be unable to anticipate or detect these techniques or to implement adequate preventative measures.

A breach of our security and/or our failure to respond sufficiently to a security incident could disrupt our services and result in theft, misuse, loss, corruption, or improper use or disclosure of data.

While we contractually prohibit clients, data providers and inventory suppliers form importing or otherwise providing information that directly identifies individuals on our platform, if a partner provided such information in violation of our policies and our systems are breached, we could be subject to contractual breach and indemnification claims from other clients and partners.

Recently, the State of California adopted a law broadly regulating businesses’ processing of personal information, the California Consumer Privacy Act of 2018, or CCPA, which went into effect January 1, 2020.

The CCPA also offers the possibility to a consumer to recover statutory damages for certain violations and could open the door more broadly to additional risks of individual and class-action lawsuits even though the statute’s private right of action is limited in scope.

The California Attorney General has proposed regulations implementing the CCPA that could impose further limitations.

Although we have attempted to mitigate certain risks posed by the CCPA through contractual and platform changes, we cannot predict the timing or outcome of the California Attorney General’s rulemaking or the effect of the CCPA and its implementing regulations on our business.

Responding to requirements under the CCPA and the proposed regulations will continue to affect our operations (and those of our industry partners).

It also provides certain rights, such as access and deletion, to the individuals about whom the personal data relates.

European regulators have questioned its viability and activists have filed complaints with regulators of alleged non-compliance by specific companies that employ the framework.

Regulatory investigations and enforcement actions could also impact us.

Other companies in the advertising technology space have been subject to government investigation by regulatory bodies, including, in Europe, a 2016 inquiry into Criteo’s compliance with French

data privacy laws.

Advocacy organizations have also filed complaints with data protection authorities against advertising technology companies, arguing that certain of these companies' practices do not comply with the GDPR.

We cannot avoid the possibility that one of these investigations or enforcement actions will involve our practices.

Further, our legal risk depends in part on our clients’ or other third parties' adherence to privacy laws and regulations and their use of our services in ways consistent with end user expectations.

We rely on representations made to us by clients that they will comply with all applicable laws, including all relevant privacy and data protection regulations.

Although we make reasonable efforts to enforce such representations and contractual requirements, we do not fully audit our clients’ compliance with our recommended disclosures or their adherence to privacy laws and regulations.

If our clients fail to adhere to our expectations or contracts in this regard, we and our clients could be subject to adverse publicity, damages, and related possible investigation or other regulatory activity.

Uncertainty caused by lack of uniformity among laws to which we are or may become subject and instability in the global legal landscape may cause us to incur additional or unexpected costs and legal risk, increase our risk of reputational harm, or cause us to change our platform or business model.

We cannot predict the future of the regulatory landscape regarding the protection of personal information.

U.S. (state and federal) and foreign governments are considering enacting additional legislation related to privacy and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area.

For example, in the U.S., a federal privacy law is the subject of active discussion and several bills have been introduced.

We have a limited operating history, which makes it difficult to evaluate our business and prospects and may increase the risks associated with your investment.

We were incorporated in 2009 and, as a result, have only a limited operating history upon which our business and prospects may be evaluated.

Although we have experienced substantial revenue growth in our limited operating history, we may not be able to sustain this rate of growth or maintain our current revenue levels.

We have encountered and will continue to encounter risks and challenges frequently experienced by growing companies in rapidly developing industries, including risks related to our ability to:

| | • | build a reputation for providing a superior platform and client service, and for creating trust and long-term relationships with clients; |

| --- | --- | --- |

| | • | distinguish ourselves from competitors; |

| | • | develop and offer a competitive platform that meets our clients’ needs as they change; |

| | • | scale our business efficiently to keep pace with demand for our platform; |

| | • | maintain and expand our relationships with suppliers of quality advertising inventory and data; |

| | • | maintain a competitive pricing structure; |

| | • | respond to evolving industry standards and government regulation that impact our business, particularly in the areas of data collection and consumer privacy; |

| | • | prevent or mitigate failures or breaches of security; |

| | • | expand our business internationally; and |

| | • | hire and retain qualified and motivated employees. |

We cannot assure you that we will be successful in addressing these and other challenges we may face in the future.

If we are unable to do so, our business may suffer, our revenue and operating results may decline and we may not be able to achieve further growth or sustain profitability.

In addition to existing competitors and intermediaries, we may also face competition from new companies entering the market, which may include large established companies, all of which currently offer, or may in the future offer, products and services that result in additional competition for advertising spend or advertising inventory, or other changes to the marketplace that may be detrimental to our business.

A substantial portion of our business is from advertising agencies that do not pay us until they receive payment from the advertiser, resulting in an increased length of time between our payment for media inventory and our receipt of payment for use of our platform, which may adversely affect our working capital.

Substantially all of the spend on our platform is from advertising agencies.

Due to this timing imbalance in collections and payments, we may rely on our credit facility to partially or completely fund our working capital requirements.

Our business is primarily dependent on advertisers buying mobile, display and video advertising.

Should our clients lose confidence in the value or effectiveness of mobile, display and video advertising, the demand for our platform could decline.

We refer to the ability to provide offerings across multiple advertising channels as omnichannel.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

We reported in our Annual Report on Form 10-K as of December 31, 2017 a material weakness resulting from an absence of certain information technology general controls (“ITGCs”) related to our platform system applications.

During 2018, we completed the remediation measures related to our previously reported material weakness in ITGCs, and concluded that our internal control over financial reporting was effective as of December 31, 2018.

However, completion of remediation does not provide assurance that our remediated controls will continue to operate properly or that our financial statements will be free from error.

incur ongoing costs in this effort.

However, we may not be successful in developing and maintaining adequate internal controls, which may undermine our ability to provide accurate, timely and reliable reports on our financial and operating results, leading to material weaknesses in internal controls and causing our financial statements to be misstated.

If one or more of the following were to occur, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected:

| | • | we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner; |

| | • | we are unable to assert that our internal control over financial reporting is effective; or |

| | • | our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting. |

information to our financial systems.

In the wake of recent high-profile data breaches, consumers, privacy advocates and legislators have expressed concerns regarding digital advertising and whether advertising technology products, services, or processes compromise the privacy of Internet users.

Concerns about industry practices or our practices with regard to the collection, use, disclosure, or security of personal information or other data privacy related matters, even if unfounded, could damage our reputation and adversely affect our results of operations or lead to enhanced regulatory oversight that may burden our management and operations.

Our privacy policies and business operations may have to change to adapt to any such changes in our business environment.

Bugs, defects, security breaches, theft, misuse or vulnerabilities in our products, services and processes may expose us to a risk of loss or corruption of such data, improper use and disclosure of such information, litigation, and other potential liability.

Our security measures may in the future be breached due to negligence or malfeasance by internal or external actors, or errors or vulnerabilities in our systems, products or processes or in those of our customers, providers and vendors, or otherwise.

Our platform’s integrations with major data, inventory, and publisher partners provides ad buyers reach and decisioning capabilities, and our enterprise APIs enable our [removed: customers] [added: clients] to develop on top of the platform.

We commercially launched our platform in [removed: 2011] [added: 2011,] targeting display advertising.

We have since extended our platform to address additional advertising formats, and in [removed: 2018,] [added: 2019,] approximately [removed: 72%] [added: 79%] of gross spend on our platform was for mobile, video, audio, native and social.

We also generate revenue from providing data and other [removed: value added] [added: value-added] services and platform features.

For the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017:][added: 2018:]

| | • | our revenue was [removed: $477.3] [added: $661.1] million and [removed: $308.2] [added: $477.3] million, respectively, representing an increase of [removed: 55%;] [added: 39%;] and |

| | • | our net income was [removed: $88.1] [added: $108.3] million and [removed: $50.8] [added: $88.1] million, respectively. |

We enable the purchase of advertising inventory in a wide variety of [removed: formats.][added: formats, such as display, mobile, video, audio, social and native.]

To capitalize on this opportunity, we intend to continue investing in our presence [removed: internationally, and we expect our growth internationally to continue outpacing our domestic growth.][added: internationally.]

[removed: Revenue][added: Revenue]

Revenue as a percentage of gross spend may fluctuate from period to period due to a number of factors, such as changes in the proportion of spend represented by our larger [removed: customers] [added: clients] with the lowest platform fees, our clients’ use of platform features and volume discounts.

We expect that our revenue as a percentage of gross spend will fluctuate in the future, especially as we introduce and as our clients select new platform features, expand our omnichannel capabilities, extend our reach to [removed: TV] [added: more CTV] inventory and add additional clients whose businesses may have different underlying business models.

Platform operations expense consists of expenses related to hosting our platform, which includes “internet traffic” associated with the viewing of available impressions or queries per second [removed: (QPS)] [added: (“QPS”)] and providing support to our clients.

[added: |] General and [removed: Administrative.][added: administrative | | | 22 | | | | 18 | |]

[added: *General and Administrative.*] Our general and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs associated with our executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, bad debt expense and allocated overhead.

Other [removed: Expense,] [added: Expense (Income),] Net

Interest income is mainly related to our [added: cash,] cash [added: equivalents] and [removed: cash equivalents,] [added: short-term investments,] which carry variable interest rates.

We have foreign currency exposure related to our accounts receivable and, to a much lesser extent, accounts payable that are denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Indonesian Rupiah, Japanese [removed: Yen] [added: Yen, Singapore Dollar] and Thai Baht.

Our effective tax rate differs from the U.S. federal statutory income tax rate due to stock-based compensation, [added: foreign tax rate differences,] research and development tax credits, [removed: federal] and [removed: foreign tax rate differences,] state [removed: taxes, fair value adjustments associated with our warrant liabilities, and adjustments to our valuation allowance.][added: taxes.]

The following tables set forth our consolidated results of operations and our consolidated results of operations as a percentage of revenue for the periods [removed: presented:][added: presented.]

| | | For the year ended December 31, | | | | | | | [removed: | | | |]

| | | (in thousands) | | | | | | | [removed: | | | |]

| Operating expenses: | | | | | | | | | [removed: | | | |]

| Platform operations | | | [removed: 114,098 | | | | 66,230] [added: 156,180] | | | | [removed: 39,876] [added: 114,098] | |

| Sales and marketing | | | [removed: 87,071 | | | | 61,379] [added: 132,882] | | | | [removed: 46,056] [added: 87,071] | |

| Technology and development | | | [removed: 83,892 | | | | 52,806] [added: 116,752] | | | | [removed: 27,313] [added: 83,892] | |

| General and administrative | | | [removed: 84,910 | | | | 58,446] [added: 143,048] | | | | [removed: 32,163] [added: 84,910] | |

| Total operating expenses | | | [removed: 369,971 | | | | 238,861] [added: 548,862] | | | | [removed: 145,408] [added: 369,971] | |

| Income from operations | | | [removed: 107,323 | | | | 69,356] [added: 112,196] | | | | [removed: 57,518] [added: 107,323] | |

| Total other [removed: expense,] [added: expense (income),] net | | | [removed: 1,586 | | | | 5,731] [added: (4,024] | [added: )] | | | [removed: 13,684] [added: 1,586] | |

| Income before income taxes | | | [removed: 105,737 | | | | 63,625] [added: 116,220] | | | | [removed: 43,834] [added: 105,737] | |

| Provision for income taxes | | | [removed: 17,597 | | | | 12,827] [added: 7,902] | | | | [removed: 23,352] [added: 17,597] | |

| Net income | | $ | [removed: 88,140 | | | $ | 50,798] [added: 108,318] | | | $ | [removed: 20,482] [added: 88,140] | |

| | (as a percentage of revenue*) | | | | | | | | [removed: | | | |]

| Revenue | | | 100 | % | | | 100 | % | [removed: | | 100 | % |]

| Platform operations | | | 24 | | | | [removed: 21 | | | | 20] [added: 24] | |

| Sales and marketing | | | [removed: 18 | | | |] 20 | | | | [removed: 23] [added: 18] | |

| Technology and development | | | 18 | | | | [removed: 17 | | | | 13] [added: 18] | |

| General and administrative | | | [removed: 18] [added: 19] | | | | [removed: 19] [added: 23] | | | | [added: 20 | | | | 28 | | | |] 16 | | [added: | | 18 | | | | 17 | | | | 22 | |]

| Total operating expenses | | | [removed: 78 | | | | 77] [added: 83] | | | | [removed: 72] [added: 78] | |

The following generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018.

Discussion of historical items and year-to-year comparisons between 2018 and 2017 that are not included in this discussion can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with SEC on February 22, 2019.

Information about geographic gross billings is set forth in Note 12—Segment and Geographic Information.

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | |

| Revenue | | $ | 661,058 | | | $ | 477,294 | |

| | | For the Year Ended December 31, | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | |

| Operating expenses: | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | | | $ | | | | % | | |

| Revenue | | $ | 661,058 | | | $ | 477,294 | | | $ | 183,764 | | | | 39 | % |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | | | $ | | | | % | | |

| Platform operations | | $ | 156,180 | | | $ | 114,098 | | | $ | 42,082 | | | | 37 | % |

| | | Year Ended December 31, | | | | | | | | 2019 vs 2018 Change | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | | | $ | | | | % | | |

| | | (in thousands, except percentages) | | | | | | | | | | | | | | |

| Sales and marketing | | $ | 132,882 | | | $ | 87,071 | | | $ | 45,811 | | | | 53 | % |

| | | Year Ended December 31, | | | | | | | | 2019 vs 2018 Change | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | | | $ | | | | % | | |

| | | (in thousands, except percentages) | | | | | | | | | | | | | | |

| Technology and development | | $ | 116,752 | | | $ | 83,892 | | | $ | 32,860 | | | | 39 | % |

The increase in allocated facilities costs was primarily driven by new office leases to support our growth.

| | | Year Ended December 31, | | | | | | | | 2019 vs 2018 Change | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | | | $ | | | | % | | |

| | | (in thousands, except percentages) | | | | | | | | | | | | | | |

The increase in allocated facilities costs was primarily driven by new office leases to support our growth.

Other Expense (Income), Net

| | | Year Ended December 31, | | | | | | | | 2019 vs 2018 Change | | |

| | | 2019 | | | | 2018 | | | | $ | | |

The increase in interest income was primarily attributable to an increase in short-term investments during 2019.

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2019 | | | | 2018 | | |

| | | (in thousands, except percentages) | | | | | | |

| | | 2019 | | | | 2019 | | | | 2019 | | | | 2019 | | | | 2018 | | | | 2018 | | | | 2018 | | | | 2018 | | |

Non-display advertising such as mobile, video, audio, social and native are significant and increasing components of our gross spend.

Information about geographic gross billings is set forth in Note 11 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Change in Fair Value of Preferred Stock Warrant Liabilities.

Prior to our IPO in September 2016, we had two outstanding warrants to purchase shares of our convertible preferred stock.

These convertible preferred stock warrants were subject to remeasurement at each balance sheet date, and any change in fair value was recognized as a component of other expense, net.

In connection with the closing of our IPO, the warrants converted into warrants to purchase shares of common stock and were net exercised by the holders.

As a result, we no longer remeasure the value of warrants after our IPO.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2018 | | | | 2017 | | | | 2016 | | |

| Revenue | | $ | 477,294 | | | $ | 308,217 | | | $ | 202,926 | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2018 | | | | 2017 | | | | 2016 | | | | $ | | | | % | | | | $ | | | | % | | |

| Revenue | | $ | 477,294 | | | $ | 308,217 | | | $ | 202,926 | | | $ | 169,077 | | | | 55 | % | | $ | 105,291 | | | | 52 | % |

2018 Compared to 2017

2017 Compared to 2016

Gross spend on our platform by existing clients added prior to 2017 increased by 40% in the aggregate in 2017, and these existing clients represented approximately 91% of the total gross spend in 2017.

In 2017, 59% of existing clients added prior to 2017 increased their gross spend on our platform and their average increase in gross spend was approximately $2.0 million.

| Platform operations | | $ | 114,098 | | | $ | 66,230 | | | $ | 39,876 | | | $ | 47,868 | | | | 72 | % | | $ | 26,354 | | | | 66 | % |

The increase in hosting costs was primarily attributable to supporting the increased use of our platform by our clients.

| Sales and marketing | | $ | 87,071 | | | $ | 61,379 | | | $ | 46,056 | | | $ | 25,692 | | | | 42 | % | | $ | 15,323 | | | | 33 | % |

The increase in personnel costs was primarily due to an increase in sales and marketing headcount in order to support our sales efforts and to continue to develop and maintain relationships with our clients.

The decrease in marketing costs was mainly related to a shift in our participation in industry events, tradeshows and related public relations activities.

| Technology and development | | $ | 83,892 | | | $ | 52,806 | | | $ | 27,313 | | | $ | 31,086 | | | | 59 | % | | $ | 25,493 | | | | 93 | % |

The increase in technology and development expense was primarily due to increases of $27.0 million in personnel costs, including $7.2 million of stock-based compensation, and $4.1 million in allocated facilities costs.

The increase in technology and development expense was primarily due to increases of $21.0 million in personnel costs, including $5.1 million of stock-based compensation, $3.5 million in allocated facilities costs and $1.0 million in contractor and temporary staff costs.

The increases in personnel costs and contractor and temporary staff costs were primarily attributable to increased headcount and use of contractor and temporary staff to maintain and support our technology and development efforts.

| General and administrative | | $ | 84,910 | | | $ | 58,446 | | | $ | 32,163 | | | $ | 26,464 | | | | 45 | % | | $ | 26,283 | | | | 82 | % |

The increase in general and administrative expense was primarily due to increases of $25.2 million in personnel costs, including $6.9 million of stock-based compensation, and $2.7 million in allocated facilities costs, partially offset by a $2.2 million decrease in bad debt expense.

The increase in personnel costs was primarily related to finance, human resources and legal headcount to support our growth.

The decrease in bad debt expense was primarily attributable to specific client reserves.

The increase in general and administrative expense was primarily due to increases of $18.1 million in personnel costs, including $4.6 million of stock-based compensation, $3.9 million in professional services fees, $2.4 million in bad debt expense and $1.9 million in allocated facilities costs.

The increase in professional services fees was primarily related to finance and legal services to support our growth, including $1.5 million in legal, accounting, printing and other costs related to the secondary offerings completed in March and June 2017.

The increase in bad debt expense was primarily attributable to specific client reserves.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2018 | | | | 2017 | | | | 2016 | | | | $ | | | | $ | | |

The increase in interest income was primarily attributable to an increase in cash and cash equivalents during 2018, including an increase in higher interest-bearing money market funds.

The decrease in other expense, net was primarily due to decreases of $9.5 million in expense related to the fair value of our convertible preferred stock warrant liabilities, which were exercised as part of our IPO in September 2016, and $1.3 million in interest expense attributable to a reduction in our debt borrowings and a liquidation fee paid in 2016 at the closing of our IPO related to a prior debt facility.

These decreases were partially offset by an increase in foreign currency exchange loss, net, of $2.8 million resulting from higher foreign denominated accounts receivable and accounts payable balances in 2017 compared to 2016.

The difference between the effective tax rate in 2016 of 53% and the U.S. federal statutory income tax rate of 35% was primarily due to higher non-deductible preferred stock warrant expense and stock-based compensation expense.

| | | 2018 | | | | 2018 | | | | 2018 | | | | 2018 | | | | 2017 | | | | 2017 | | | | 2017 | | | | 2017 | | |

No amount was owed on our revolving credit facility as of December 31, [removed: 2018.][added: 2019.]

We have foreign currency risks related to our revenue and expenses denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Indonesian Rupiah, Japanese [removed: Yen] [added: Yen, Singapore Dollar] and Thai Baht.

The effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts at December 31, [removed: 2018,] [added: 2019,] would result in a foreign currency loss of approximately [removed: $14.7] [added: $18.5] million.

[removed: From time to time, we may] [added: We] enter into forward contracts or other derivative transactions in an attempt to hedge our foreign currency risk.

[removed: We are] [added: The Trade Desk, Inc. (the “Company,” “we,” “our,” or “The Trade Desk”) is] a technology company that empowers buyers of advertising.

Through our self-service, cloud-based platform, ad buyers can create, manage, and optimize more expressive data-driven digital advertising campaigns across ad [removed: formats,] [added: formats and channels,] including display, video, audio, [added: in-app,] native and social, on a multitude of devices, such as computers, mobile devices, and connected TV [removed: (CTV).][added: (“CTV”).]

Our platform’s integrations with major [removed: data,] inventory, [added: publisher,] and [removed: publisher] [added: data] partners provides ad buyers reach and decisioning capabilities, and our enterprise [removed: APIs] [added: application programming interfaces (“APIs”)] enable our [removed: customers] [added: clients] to develop on top of the platform.

We commercially launched our platform in [removed: 2011] [added: 2011,] targeting display advertising.

[removed: We have since extended our platform to address] [added: Since launching, we added support for several] additional advertising formats, and in [removed: 2018,] [added: 2019,] approximately [removed: 72%] [added: 79%] of gross spend on our platform [removed: was for] [added: came from] mobile, video (which includes CTV), audio, native and [removed: social.][added: social channels.]

Our clients are primarily the advertising agencies and other service providers for advertisers, with whom we enter into ongoing master services [removed: agreements, or MSAs.][added: agreements (“MSAs”).]

We also generate revenue from providing data and other [removed: value added] [added: value-added] services and platform features.

The Trade [removed: Desk, Inc.] [added: Desk] is a Delaware corporation established in 2009, headquartered in Ventura, California.

Audience fragmentation has substantially impacted TV content distribution, perhaps more than any other channel, which we believe is [removed: setting up a significant change in] [added: changing] how TV advertising inventory is monetized.

Through the use of these [added: types of] data sources, together with real-time feedback on consumer reactions to the ads, programmatic advertising increases the value of impressions for [removed: advertisers,] [added: advertisers and] inventory [removed: owners] [added: owners,] and viewers [removed: who] receive more relevant ads.

[added: As a result,] advertisers are able to bid [added: on] and purchase the advertising inventory they value the most, pay less for advertising inventory they do not value as much, and abstain from buying advertising inventory that does not fit their campaign parameters.

[removed: Digital] [added: Digital] Advertising [removed: Eco-System][added: Eco-System]

| | • | [removed: We] [added: We] Are Exclusively Focused on the [removed: Buy-Side.] [added: Buy-Side.] We focus on buyers since they control the advertising budgets. Also, the supply of digital advertising inventory exceeds demand, and accordingly, we believe it is a buyer’s market. We also believe that by aligning our business only with buyers, we are able to avoid inherent conflicts of interest that exist when serving both the buy-side and sell-side. This focus allows us to build trust with clients, many of whom [removed: incorporate] [added: leverage] their proprietary data [removed: into] [added: on] our platform. That trust and ability to use their own data on our platform, without worrying about it being used by other participants, enables our clients and their advertisers to achieve better results. This trust provides us the benefit of long-term and stable relationships with our clients. |

| | • | [removed: We] [added: We] Are an Enabler, Not a [removed: Disruptor.] [added: Disruptor.] With our platform, we enable advertising agencies and other service providers. [removed: We generally do not compete with advertising agencies and refrain from directly serving advertisers who have a relationship with one of our advertising agency clients.] Advertisers can benefit from a comprehensive solution that combines our platform with the services provided by advertising agencies. |

| | • | [removed: We] [added: We] Are [removed: Data-Driven.] [added: Data-Driven.] Our platform was founded on the principle that data-driven decisions will be the future of advertising. We built a data management platform first, before building our ad buying technology. While data from disparate third-party data providers can improve campaign performance, our clients’ success often relies largely on our ability to ingest proprietary data directly from brands and their agencies to enable intelligent decisioning that optimizes advertising campaigns. Given our independent, buy-side focused approach, and our strict protocol of carefully earmarking all client first-party data we ingest onto our data management platform, our clients trust us with their most granular and expressive data. Our technology platform enables the effective use of this granular data, which allows our clients to run precisely targeted advertising campaigns that maximize their return on advertising investments. Additionally, we are able to better optimize campaigns by using the data streams that we capture across different devices, so that data from one channel can be used to inform another. The breadth of data that we collect from a multitude of data sources across channels gives our clients a holistic view of their target audiences, enabling more effective targeting across different channels. |

| | • | [removed: We] [added: We] Do Not Arbitrage Advertising [removed: Inventory.] [added: Inventory.] To further align our interests with those of our clients, we do not buy advertising inventory in order to resell it to our clients for a profit. Instead, we provide our clients with a platform that allows them to manage their omnichannel advertising campaigns, on a self-serve basis with [removed: full reporting transparency.] [added: robust reporting.] With our platform, our clients control their campaign spend and are able to access and choose from many inventory sources. |

| | • | [removed: We] [added: We] Have Ongoing Relationships with [removed: Clients.] [added: Clients.] We derive substantially all of our revenue from ongoing MSAs with our clients rather than episodic insertion orders. We believe that this approach helps us strengthen our relationships with our clients and grow their use of our platform over the long term, providing us with a highly scalable business model. |

| | • | [removed: We] [added: We] Are a Clear Box, Not a Black [removed: Box.] [added: Box.] Our platform is transparent and shows our clients their costs of advertising inventory, data, our platform fee and detailed performance metrics on their advertising campaigns. Our clients directly access and execute campaigns on our platform, control all facets of inventory purchasing decisions, and receive detailed, real-time reporting on all their advertising campaigns. By providing transparent information on our platform, our clients are able to continually compare results and target their budgets to the most effective advertising inventory, data providers and channels. |

| | • | [removed: We] [added: We] Are an Open [removed: Platform.] [added: Platform.] Clients can customize and build their own features on top of our platform. Clients may use our [removed: application programming interfaces, or APIs,] [added: APIs] to, for example, design their own user interface, bulk manage advertising campaigns, and link other systems including ad servers or reporting tools. Using our APIs or by working with our engineering team, clients invest their own resources to build their own proprietary tools in areas including reporting, campaign strategy, custom algorithms or proprietary data use cases. Our open platform approach enables our advertising [added: agency and service provider clients to provide differentiated offerings to their clients, which we believe leads to long-term relationships and increased use of our platform.] |

[removed: Our Platform][added: Our Platform]

| | • | [removed: Easy] [added: Easy] to Use, Open and [removed: Customizable.] [added: Customizable.] Our platform provides multiple, easy-to-use automation tools that help our users focus on managing the key factors affecting their campaigns. Our platform also enables clients to integrate custom features and interfaces for their own use through our APIs. |

| | • | [removed: Expressiveness.] [added: Expressiveness.] Our platform allows clients to easily define and manage advertising campaigns with multiple targeting parameters that may result in quadrillions of permutations, which we refer to as expressiveness. We believe that expressiveness provides clients with the ability to target audiences with an extremely high level of precision and thus obtain higher returns on their advertising spend. |

| | • | [removed: Integrated,] [added: Integrated,] Omnichannel and [removed: Cross-device.] [added: Cross-device.] Our platform provides integrated access to a wide range of omnichannel inventory and data sources, as well as third-party services such as ad servers, ad verification services and survey vendors. Our platform’s integration of these sources and services enables our clients to deploy their budgets through a wide variety of channels, media screens and formats, targeted in their desired manner, through a single platform. |

| | • | [removed: Auto-Optimization.] [added: Auto-Optimization.] We provide auto-optimization features which allow buyers to automate their campaigns and support them with computer generated modeling and decision making. In addition, by giving clients full reporting, budgeting, and bidding transparency, clients can take control of targeting variables when desired, and apply algorithmic automation when appropriate. |

| | • | [removed: Advanced] [added: Advanced] Reporting and Analytics [removed: Tools.] [added: Tools.] We provide a comprehensive view of consumers’ interactions with the ads purchased through our platform with robust reporting of performance insights across multiple variables, such as audience characteristics, ad format, site category, website, device, creative type, and geography. Better reporting results in better learning, often leading to better campaign optimization and outcomes. |

| | • | [removed: Data Management.] [added: Data Management.] Our platform enables clients to license a broad selection of data from third-party vendors in a seamless and easy manner, allowing them to further optimize their campaigns with the most relevant data. |

| | • | [removed: Koa] [added: Koa] Artificial [removed: Intelligence.] [added: Intelligence.] A predictive engine that helps platform users make data-driven decisions without sacrificing control or transparency. Koa makes recommendations for campaign optimizations based on its sophisticated analysis of rich data sets. Advertisers can then choose which optimizations make the most sense for their campaigns. |

| | • | [removed: Media Planner.] [added: Media Planner.] An omnichannel solution designed for digital media professionals to generate, analyze, and launch data-driven, programmatic media plans. This tool analyzes the actions of existing core audiences with the data we see across the open internet to deliver a fully transparent, performance-focused, and ready-to-activate campaign. |

| | • | [removed: Private] [added: Private] Marketplace [removed: Support.] [added: Support.] For clients who wish to transact directly with individual publishers, we offer a comprehensive user interface for discovering and transacting via a wide variety of private contracts. Additionally, we offer a solution for advertisers to access publisher inventory via a direct tag in a publisher’s ad server where there is no other programmatic access to such publisher’s inventory. |

[removed: Our Technology][added: Our Technology]

| | • | [removed: Scalable Architecture.] [added: Scalable Architecture.] Our platform infrastructure is hosted in data centers in [removed: 7] [added: eight] countries around the world. On average, our real-time bidding technology evaluates more than [removed: 600] [added: 790] billion ad opportunities per day, reaching over [removed: 590] [added: 819] million devices per day on a global basis. Our core bidding architecture is easily adaptable to a variety of inventory formats, allowing our platform to communicate with many different inventory sources. |

| | • | [removed: Predictive Models.] [added: Predictive Models.] We use the massive data captured by our platform to build predictive models around user characteristics, such as demographic, purchase intent or interest data. Data from our platform is continually fed back into these models, which enables them to improve over time as the use of our platform increases. |

| | • | [removed: Performance Optimization.] [added: Performance Optimization.] During campaign execution, our optimization engine continually scores a variety of attributes of each impression, such as website, industry vertical or geography, for their likelihood to achieve campaign performance goals. Our bidding engine then shifts bids and budgets in real-time to deliver optimal performance. Additionally, our platform enables clients to set multiple, simultaneous optimization goals for their advertising. |

| | • | [removed: Real-time Analytics.] [added: Real-time Analytics.] Our platform continuously collects data regarding inventory availability. Real-time campaign delivery and spend totals are used to manage campaign budgets and goal caps, as well as campaign reporting. This data is fed back into our optimization engine to improve campaign performance, and into machine-learning models for user demographic predictive modeling. |

| | • | [removed: Increase] [added: Increase] Our Share of Existing Clients’ Digital Advertising [removed: Spend.] [added: Spend.] Many advertisers are moving a greater percentage of their advertising budgets to programmatic channels. We believe that this shift will provide us with the opportunity to capture a larger share of the overall advertising spend by our existing clients. Additionally, we plan to promote additional services and data to our clients, helping us grow our business. |

| | • | [removed: Grow] [added: Grow] Our Client [removed: Base.] [added: Base.] We have extensive relationships with many advertising agencies and other service providers, and believe that, given the decentralized nature of the advertising industry, we have the opportunity to expand our relationships within these agencies and with additional agencies and service providers. We expect to continue making investments in growing our sales and client service team to support this strategy. |

| | • | [removed: Expand] [added: Expand] Our Omnichannel [removed: Capabilities.] [added: Capabilities.] We believe offering clients capabilities across all media channels and devices enables advertisers to manage omnichannel campaigns and use data from each channel to inform decisions in other channels. We believe these capabilities will continue to further strengthen our relationships with our clients. We intend to continue to invest in innovation across all channels, including the integration of new inventory sources within CTV, digital radio, [removed: social] [added: social, native,] and [removed: native.] [added: digital out of home.] |

| | • | [removed: Extend] [added: Extend] Our Reach in [removed: CTV.] [added: CTV.] Television is the largest category of advertising spend, and we believe that the future of television is in streaming media and video on demand through subscription services and connected devices. We plan to invest significant resources in technology, sales and support staff related to our CTV growth initiatives. |

| | • | [removed: Continue] [added: Continue] to Innovate in Technology and [removed: Data.] [added: Data.] We intend to continue to innovate in technology to improve our platform and enhance its features and functionalities. We view data as one of our key competitive advantages. We will continue to invest resources in growing our data offerings, both from third-party providers as well as our proprietary data. |

| | • | [removed: Expand] [added: Expand] Our International [removed: Presence.] [added: Presence.] Many of our clients serve advertisers on a global basis and we intend to expand our presence outside of the United States, or U.S., to serve the needs of those advertisers in additional geographies. As we expand relationships with our existing clients, we are investing in select regions in Europe and Asia. In particular, we believe that China and Indonesia may represent substantial growth opportunities, and we are investing in developing our business in those markets. |

We have patent applications that are pending, however, historically, we have not patented our proprietary technology in order to keep our technology architecture, trade secrets, and engineering roadmap private.

Our patent applications may not result in the issuance of any patents, and any issued patents may not actually provide adequate defensive protection or competitive advantages to us.

Such data is passed to us from third parties, including original equipment manufacturers, application providers, and publishers.

We do not use this data to discover the identity of individuals, and we currently prohibit clients, data providers and inventory suppliers from importing data that directly identifies individuals.

Our ability, like those of other advertising technology companies, to collect, augment, analyze, use and share data relies upon the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads.

The processes used to identify devices and similar and associated technologies are governed by U.S. and foreign laws and regulations and dependent upon their implementation within the industry ecosystem.

For example, the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect January 1, 2020, defines “personal information” broadly enough to include online identifiers provided by individuals’ devices, applications, and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data, if there is potential that individuals can be identified by such data.

The CCPA also offers the possibility to a consumer to recover statutory damages for certain violations and could open the door more broadly to additional risks of individual and class-action lawsuits even though the statute’s private right of action is limited in scope.

The General Data Protection Regulation(“GDPR”), which applies to us, came into effect on May 25, 2018.

Like the CCPA, the GDPR defines “personal data” broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data.

It also provides certain rights, such as access and deletion, to the individuals about whom the personal data relates.

The digital advertising industry has collaborated to create a user-facing framework for establishing and managing legal bases under the GDPR and other EU privacy laws including ePrivacy (discussed below), however European regulators have questioned the framework’s viability and activists have filed complaints with regulators of alleged non-compliance by specific companies that employ the framework.

Although it remains under debate, the proposed ePrivacy Regulation may further raise the bar for the use of cookies, and the fines and penalties for breach may be significant.

The Privacy Shield Framework, however, is facing criticism from privacy advocates and legal challenges in E.U. courts, as are other EU mechanisms for adequate data transfer to the U.S. such as the standard contractual clauses.

If successful challenges leave us with no reasonable option for the lawful cross-border transfer of personal data, and if we nonetheless continue to transfer personal data from the EU to the US, that could lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation and business or cause us to need to establish systems to maintain certain data in the EU, which may involve substantial expense and cause us to need to divert resources from other aspects of our operations.

If a “Do Not Track” standard is imposed by state, federal, or foreign legislation, adopted by many Internet users, or agreed upon by standard setting groups, we may have to change our business practices.

Our efforts to comply with the self-regulatory principles of these programs include offering Internet users notice and choice when advertising is served to them based, in part, on their interests.

As a result,

| --- | --- | --- |

| | | agency and service provider clients to provide differentiated offerings to their clients, which we believe leads to long-term relationships and increased use of our platform. |

We generally do not compete with advertising agencies and refrain from directly serving advertisers who have a relationship with one of our advertising agency clients.

We do not hold any patents, because we believe our proprietary technology is best protected by keeping our technology architecture, trade secrets, and engineering roadmap private.

Privacy and data protection legislation and regulation play a significant role in our business.

We do not use this data to identify specific individuals, and we do not seek to associate this data with information that can be used to identify specific individuals.

We take steps not to collect or store personally identifiable information – information that directly identifies individuals – from any source.

The definition of what data is personal or identifiable, however, varies by jurisdiction and continues to evolve.

As a result, our platform and business practices must be assessed regularly in each jurisdiction where we do business to avoid violating applicable legislation and regulation.

For example, in 2018, the State of California adopted the California Consumer Privacy Act of 2018, or the CCPA.

As currently enacted, we and partners in our industry will be required to comply with these requirements when the CCPA becomes effective in 2020.

The General Data Protection Regulation, or GDPR, which was adopted by the EU in 2016 and became effective May 25, 2018, generally harmonizes data privacy laws across EU countries.

The GDPR created new regulations relating to the collection and use of data typically leveraged on our platform and by others in the digital advertising industry, including IP addresses, cookie identifiers, and device identifiers for advertising purposes, and enhanced data protection obligations for controllers of personal data and service providers processing personal data.

These enhancements bring about significant changes in the way the advertising technology industry operates in the EU.

Although it remains under debate, recent drafts of the new ePrivacy Regulation would extend the strict opt-in marketing rules with limited exceptions to business-to-business communications, alter rules on third-party cookies, web beacons and similar technology, and significantly increase penalties for non-compliance.

The Privacy Shield Framework, however, is facing criticism from privacy advocates in the EU and is also subject to pending legal challenges in the General Court of the Court of Justice of the European Union.

Other EU mechanisms for adequate data transfer to the U.S. such as the standard contractual clauses are also being challenged in the EU courts.

These challenges to the Privacy Shield and model clauses may lead to changes in the law, governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation and business.

We may find it necessary to establish systems to maintain personal data originating from the EU in the EU, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business.

Efforts in this direction have largely gone dormant.

However, in the EU, the Article 29 Working Party, a body made up of EU national data protection authorities, has recommended that the proposed e-Privacy Regulation require browsers to implement technical mechanisms such as the “Do Not Track” standard to give users additional control over the collection of data about their Internet activity.

We do not know whether such requirement will be included in the final e-Privacy Regulation or what effect such requirement may have on our business.

Under such programs, in addition to other compliance obligations, we provide consumers with notice about our use of cookies and similar technologies, and our collection and use of data in connection with the delivery of targeted advertising.

We also allow consumers to opt out from the use of data we collect for the delivery of targeted advertising, and we provide consumers notice regarding how to exercise such choice.

| [removed: ☒] [added: ☒] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the fiscal year ended December 31, [removed: 2018][added: 2019]

| [removed: ☐] [added: ☐] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: ][added: ]

[removed: THE] [added: THE] TRADE DESK, [removed: INC.][added: INC.]

| Title of each class | | [added: Trading Symbol | |] Name of each exchange on which registered |

| Class A Common Stock, par value $0.000001 per share | | [removed: NASDAQ] [added: TTD | | The Nasdaq] Stock Market LLC [removed: (NASDAQ Global Market)] |

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [added: a] smaller reporting company or an emerging growth company.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, [removed: 2018,] [added: 2019,] based on the closing sales price for the Registrant’s Class A common stock, as reported on the NASDAQ Global Market, was approximately [removed: $3,279,011,436.][added: $8,779,399,707.]

As of January 31, [removed: 2019,] [added: 2020,] there were [removed: 37,544,005] [added: 40,412,377] shares of the registrant’s Class A common stock outstanding and [removed: 6,529,619] [added: 5,161,323] shares of the registrant’s Class B common stock outstanding.

Portions of the registrant’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, [removed: 2018.][added: 2019.]

| Item 1B. | | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | | [removed: 32] [added: 33] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | | [removed: 51] [added: 50] |

| Item 8. | | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | | [removed: 52] [added: 51] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | | [removed: 76] [added: 75] |

| Item 9A. | | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | | [removed: 76] [added: 75] |

| Item 9B. | | [Other Information](#ITEM_9B_OR_INFORMATION) | | [removed: 77] [added: 75] |

| Item 10. | | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | | [removed: 78] [added: 76] |

| Item 11. | | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | | [removed: 78] [added: 76] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | | [removed: 78] [added: 76] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | | [removed: 78] [added: 76] |

| Item 14. | | [Principal Accounting Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTING_FEES_SERVIC) | | [removed: 78] [added: 76] |

| Item 15. | | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | [removed: 79] [added: 77] |

| Item 16. | | [Form 10-K Summary](#ITEM_16_FORM_10K_SUMMARY) | | [removed: 80] [added: 79] |

| [Signatures](#SIGNATURES) | | | | [removed: 81] [added: 80] |

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

| --- | --- | --- | --- | --- |

10-K 1 ttd-10k_20181231.htm 10-K

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

(Check one):

Item 1B.

Unresolved Staff Comments

None.

Refer to “Item 1.

Business–Overview”.

We maintain our principal offices in Ventura, California, totaling approximately 25,000 square feet, under two leases that expire in September 2020 and February 2022.

We also lease offices in various cities within the U.S., Europe, Asia and Australia.

We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we will be able to secure additional space to accommodate expansion of our operations.

As of January 31, [removed: 2019,] [added: 2020,] there were approximately [removed: 19] [added: 15] holders of record of our Class A common stock and [removed: 25] [added: 21] holders of record of our Class B common stock.

The following graph compares the cumulative total stockholder return on an initial investment of $100 in our Class A common stock between September 21, 2016 (our initial trading day) and December 31, [removed: 2018,] [added: 2019,] with the comparative cumulative total returns of the Standard & Poor’s (S&P) 500 Index, Russell [removed: 2000] [added: 3000] Index and NASDAQ 100 Index over the same period.

As previously discussed, we have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon stock price appreciation (depreciation) and not reinvestment of cash dividends, whereas the data for the S&P 500 Index, Russell [removed: 2000] [added: 3000] Index and NASDAQ 100 Index assumes reinvestments of dividends.

[removed: ][added: ]

The performance graph also includes a comparison with the Russell 2000 Index, which we are now replacing with the Russell 3000 Index because it is the relevant index in which the Company is now included.

We added the NASDAQ 100 Index because the companies which comprise the NASDAQ 100 index align with our growing business.

We have derived the selected consolidated statements of operations data for [added: 2019,] 2018, [removed: 2017,] and [removed: 2016] [added: 2017] and the selected consolidated balance sheet data as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The selected consolidated statements of operations data for [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] and the selected consolidated balance sheet data as of December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] were derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K.

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Revenue | | $ | [removed: 477,294] [added: 661,058] | | | $ | [removed: 308,217] [added: 477,294] | | | $ | [removed: 202,926] [added: 308,217] | | | $ | [removed: 113,836] [added: 202,926] | | | $ | [removed: 44,548] [added: 113,836] | |

| Platform operations | | | [removed: 114,098] [added: 156,180] | | | | [removed: 66,230] [added: 114,098] | | | | [removed: 39,876] [added: 66,230] | | | | [removed: 22,967] [added: 39,876] | | | | [removed: 12,559] [added: 22,967] | |

| Sales and marketing | | | [removed: 87,071] [added: 132,882] | | | | [removed: 61,379] [added: 87,071] | | | | [removed: 46,056] [added: 61,379] | | | | [removed: 26,794] [added: 46,056] | | | | [removed: 14,590] [added: 26,794] | |

| Technology and development | | | [removed: 83,892] [added: 116,752] | | | | [removed: 52,806] [added: 83,892] | | | | [removed: 27,313] [added: 52,806] | | | | [removed: 12,819] [added: 27,313] | | | | [removed: 7,250] [added: 12,819] | |

| General and administrative | | | [removed: 84,910] [added: 143,048] | | | | [removed: 58,446] [added: 84,910] | | | | [removed: 32,163] [added: 58,446] | | | | [removed: 13,276] [added: 32,163] | | | | [removed: 9,385] [added: 13,276] | |

| Total operating expenses | | | [removed: 369,971] [added: 548,862] | | | | [removed: 238,861] [added: 369,971] | | | | [removed: 145,408] [added: 238,861] | | | | [removed: 75,856] [added: 145,408] | | | | [removed: 43,784] [added: 75,856] | |

| Income from operations | | | [removed: 107,323] [added: 112,196] | | | | [removed: 69,356] [added: 107,323] | | | | [removed: 57,518] [added: 69,356] | | | | [removed: 37,980] [added: 57,518] | | | | [removed: 764] [added: 37,980] | |

| Total other [removed: expense,] [added: expense (income),] net | | | [removed: 1,586] [added: (4,024] | [added: )] | | | [removed: 5,731] [added: 1,586] | | | | [removed: 13,684] [added: 5,731] | | | | [removed: 8,125] [added: 13,684] | | | | [removed: 1,707] [added: 8,125] | |

| Income [removed: (loss)] before income taxes | | | [removed: 105,737] [added: 116,220] | | | | [removed: 63,625] [added: 105,737] | | | | [removed: 43,834] [added: 63,625] | | | | [removed: 29,855] [added: 43,834] | | | | [removed: (943] [added: 29,855] | [removed: )] |

| Provision for [removed: (benefit from)] income taxes | | | [removed: 17,597] [added: 7,902] | | | | [removed: 12,827] [added: 17,597] | | | | [removed: 23,352] [added: 12,827] | | | | [removed: 13,926] [added: 23,352] | | | | [removed: (948] [added: 13,926] | [removed: )] |

| Net income | | $ | [removed: 88,140] [added: 108,318] | | | $ | [removed: 50,798] [added: 88,140] | | | $ | [removed: 20,482] [added: 50,798] | | | $ | [removed: 15,929] [added: 20,482] | | | $ | [removed: 5] [added: 15,929] | |

| Net income (loss) attributable to common stockholders (2) | | $ | [removed: 88,140] [added: 108,318] | | | $ | [removed: 50,798] [added: 88,140] | | | $ | [removed: (26,727] [added: 50,798] | [removed: )] | | $ | [removed: 8,764] [added: (26,727] | [added: )] | | $ | [removed: —] [added: 8,764] | |

| Net income (loss) per share attributable to common stockholders–basic (2) | | $ | [removed: 2.08] [added: 2.43] | | | $ | [removed: 1.26] [added: 2.08] | | | $ | [removed: (1.46] [added: 1.26] | [removed: )] | | $ | [removed: 0.85] [added: (1.46] | [added: )] | | $ | [removed: —] [added: 0.85] | |

| Net income (loss) per share attributable to common stockholders–diluted (2) | | $ | [removed: 1.92] [added: 2.27] | | | $ | [removed: 1.15] [added: 1.92] | | | $ | [removed: (1.46] [added: 1.15] | [removed: )] | | $ | [removed: 0.39] [added: (1.46] | [added: )] | | $ | [removed: —] [added: 0.39] | |

| [removed: Non-GAAP] Financial and Operating Data: | | | | | | | | | | | | | | | | | | | | |

| Gross spend (3) | | $ | [removed: 2,350,877] [added: 3,128,872] | | | $ | [removed: 1,555,856] [added: 2,350,877] | | | $ | [removed: 1,027,984] [added: 1,555,856] | | | $ | [removed: 552,325] [added: 1,027,984] | | | $ | [removed: 211,266] [added: 552,325] | |

| Gross billings (4) | | $ | [removed: 2,285,013] [added: 3,095,687] | | | $ | [removed: 1,491,742] [added: 2,285,013] | | | $ | [removed: 990,561] [added: 1,491,742] | | | $ | [removed: 529,975] [added: 990,561] | | | $ | [removed: 201,804] [added: 529,975] | |

| [removed: Cash and] [added: Cash,] cash equivalents [added: and short-term investments] | | $ | [removed: 207,232] [added: 254,988] | | | $ | [removed: 155,950] [added: 207,232] | | | $ | [removed: 133,400] [added: 155,950] | | | $ | [removed: 4,047] [added: 133,400] | | | $ | [removed: 17,315] [added: 4,047] | |

| Accounts receivable, net | | | [removed: 834,764] [added: 1,166,376] | | | | [removed: 599,565] [added: 834,764] | | | | [removed: 377,240] [added: 599,565] | | | | [removed: 191,943] [added: 377,240] | | | | [removed: 78,364] [added: 191,943] | |

| Total assets | | | [removed: 1,117,872] [added: 1,728,761] | | | | [removed: 797,164] [added: 1,117,872] | | | | [removed: 537,596] [added: 797,164] | | | | [removed: 210,231] [added: 537,596] | | | | [removed: 102,238] [added: 210,231] | |

| Accounts payable | | | [removed: 669,147] [added: 868,618] | | | | [removed: 490,377] [added: 669,147] | | | | [removed: 321,163] [added: 490,377] | | | | [removed: 108,461] [added: 321,163] | | | | [removed: 58,293] [added: 108,461] | |

| Long-term debt, net of current portion | | | — | | | | [removed: 27,000] [added: —] | | | | [removed: 25,847] [added: 27,000] | | | | [removed: 45,918] [added: 25,847] | | | | [removed: 16,493] [added: 45,918] | |

| Total liabilities | | | [removed: 723,305] [added: 1,116,244] | | | | [removed: 551,581] [added: 723,305] | | | | [removed: 373,216] [added: 551,581] | | | | [removed: 171,885] [added: 373,216] | | | | [removed: 80,372] [added: 171,885] | |

| Convertible preferred stock | | | — | | | | — | | | | — | | | | [removed: 24,204] [added: —] | | | | [removed: 27,997] [added: 24,204] | |

| Total stockholders’ equity [removed: (deficit)] | | | [removed: 394,567] [added: 612,517] | | | | [removed: 245,583] [added: 394,567] | | | | [removed: 164,380] [added: 245,583] | | | | [removed: 14,142] [added: 164,380] | | | | [removed: (6,131] [added: 14,142] | [removed: )] |

| [added: |] (1) | Includes stock-based compensation expense as follows: |

| Platform operations | | $ | [removed: 4,463] [added: 5,350] | | | $ | [removed: 2,674] [added: 4,463] | | | $ | [removed: 756] [added: 2,674] | | | $ | [removed: 71] [added: 756] | | | $ | [removed: 14] [added: 71] | |

| Sales and marketing | | | [removed: 11,306] [added: 20,769] | | | | [removed: 6,261] [added: 11,306] | | | | [removed: 1,707] [added: 6,261] | | | | [removed: 127] [added: 1,707] | | | | [removed: 50] [added: 127] | |

| Technology and development | | | [removed: 13,855] [added: 26,553] | | | | [removed: 6,661] [added: 13,855] | | | | [removed: 1,513] [added: 6,661] | | | | [removed: 85] [added: 1,513] | | | | [removed: 909] [added: 85] | |

| General and administrative | | | [removed: 12,586] [added: 28,086] | | | | [removed: 5,721] [added: 12,586] | | | | [removed: 1,080] [added: 5,721] | | | | [removed: 91] [added: 1,080] | | | | [removed: 3,572] [added: 91] | |

| Total | | $ | [removed: 42,210] [added: 80,758] | | | $ | [removed: 21,317] [added: 42,210] | | | $ | [removed: 5,056] [added: 21,317] | | | $ | [removed: 374] [added: 5,056] | | | $ | [removed: 4,545] [added: 374] | |

Refer to Note [removed: 9] [added: 10] to our audited consolidated financial statements for more information regarding stock-based compensation expense.

| | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| --- | --- | --- |

| | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| --- | --- |

[removed: THE] [added: THE] TRADE DESK, [removed: INC.][added: INC.]

| [Report of Independent Registered Public Accounting Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC) | | | [removed: 53] [added: 52] |

| [Consolidated Balance Sheets](#CONSOLIDATED_BALANCE_SHEETS) | | | [removed: 54] [added: 55] |

| [Consolidated Statements of Operations](#CONSOLIDATED_STATEMENTS_OPERATIONS) | | | [removed: 55] [added: 56] |

[removed: | [Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)](#CONSOLIDATED_STATEMENTS_CONVERTIBLE_PREF) | | | 56 |][added: CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY]

| [Consolidated Statements of Cash Flows](#CONSOLIDATED_STATEMENTS_CASH_FLOWS) | | | [removed: 57] [added: 58] |

| [Notes to Consolidated Financial [removed: Statements](#NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMEN)] [added: Statements](#NOTES)] | | | [removed: 58] [added: 59] |

We have audited the accompanying consolidated balance sheets of The Trade Desk, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of operations, of [removed: convertible preferred stock and] stockholders’ equity [removed: (deficit)] and of cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018] [added: 2019] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the COSO.

| | | [added: 2019 | | | |] 2018 | | | | 2017 | | |

| Cash and cash [removed: equivalents] [added: equivalents—Beginning of year] | | [removed: $] | 207,232 | | | [removed: $] | 155,950 | | [added: | | 133,400 | |]

| Accounts receivable, net | | | [removed: 834,764] [added: 1,166,376] | | | | [removed: 599,565] [added: 834,764] | |

| Prepaid expenses and other current assets | | | [removed: 14,527] [added: 27,857] | | | | [removed: 10,298] [added: 14,527] | |

| TOTAL CURRENT ASSETS | | | [removed: 1,056,523] [added: 1,449,221] | | | | [removed: 765,813] [added: 1,056,523] | |

| Property and equipment, net | | | [removed: 33,046] [added: 64,012] | | | | [removed: 17,405] [added: 33,046] | |

| Deferred income taxes | | | [removed: 8,460] [added: 18,950] | | | | [removed: 3,359] [added: 8,460] | |

| Other assets, non-current | | | [removed: 19,843] [added: 23,129] | | | | [removed: 10,587] [added: 19,843] | |

| TOTAL ASSETS | | $ | [removed: 1,117,872] [added: 1,728,761] | | | $ | [removed: 797,164] [added: 1,117,872] | |

| Accounts payable | | $ | [removed: 669,147] [added: 868,618] | | | $ | [removed: 490,377] [added: 669,147] | |

| Accrued expenses and other current liabilities | | | [removed: 44,844] [added: 47,178] | | | | [removed: 28,155] [added: 44,844] | |

| TOTAL CURRENT LIABILITIES | | | [removed: 713,991] [added: 930,373] | | | | [removed: 518,532] [added: 713,991] | |

| Other liabilities, non-current | | | [removed: 9,314] [added: 10,998] | | | | [removed: 6,049] [added: 9,314] | |

| TOTAL LIABILITIES | | | [removed: 723,305] [added: 1,116,244] | | | | [removed: 551,581] [added: 723,305] | |

| Commitments and contingencies (Note [removed: 12)] [added: 13)] | | | | | | | | |

| Preferred stock, par value $0.000001; 100,000 shares authorized, zero shares issued and outstanding as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] | | | — | | | | — | |

| Common stock, par value [removed: $0.000001; 1,000,000] [added: $0.000001] Class [removed: A] [added: A, 1,000,000] shares [removed: authorized as of December 31, 2018] [added: authorized; 40,305] and [removed: 2017;] 36,822 [removed: and 32,486] shares issued and outstanding as of December 31, [removed: 2018] [added: 2019] and [removed: 2017, respectively; 95,000] [added: 2018, respectively] Class [removed: B] [added: B, 95,000] shares [removed: authorized as of December 31, 2018] [added: authorized; 5,171] and [removed: 2017;] 7,042 [removed: and 9,155] shares issued and outstanding as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | | | — | | | | — | |

| Additional paid-in capital | | | [removed: 270,447] [added: 380,079] | | | | [removed: 209,603] [added: 270,447] | |

| Retained earnings | | | [removed: 124,120] [added: 232,438] | | | | [removed: 35,980] [added: 124,120] | |

| TOTAL STOCKHOLDERS’ EQUITY | | | [removed: 394,567] [added: 612,517] | | | | [removed: 245,583] [added: 394,567] | |

| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | [removed: 1,117,872] [added: 1,728,761] | | | $ | [removed: 797,164] [added: 1,117,872] | |

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Revenue | | $ | [removed: 477,294] [added: 661,058] | | | $ | [removed: 308,217] [added: 477,294] | | | $ | [removed: 202,926] [added: 308,217] | |

| Platform operations | | | [removed: 114,098] [added: 156,180] | | | | [removed: 66,230] [added: 114,098] | | | | [removed: 39,876] [added: 66,230] | |

| Sales and marketing | | | [removed: 87,071] [added: 132,882] | | | | [removed: 61,379] [added: 87,071] | | | | [removed: 46,056] [added: 61,379] | |

| Technology and development | | | [removed: 83,892] [added: 116,752] | | | | [removed: 52,806] [added: 83,892] | | | | [removed: 27,313] [added: 52,806] | |

| General and administrative | | | [removed: 84,910] [added: 143,048] | | | | [removed: 58,446] [added: 84,910] | | | | [removed: 32,163] [added: 58,446] | |

| Total operating expenses | | | [removed: 369,971] [added: 548,862] | | | | [removed: 238,861] [added: 369,971] | | | | [removed: 145,408] [added: 238,861] | |

| Income from operations | | | [removed: 107,323] [added: 112,196] | | | | [removed: 69,356] [added: 107,323] | | | | [removed: 57,518] [added: 69,356] | |

| [Consolidated Statements of Stockholders’ Equity](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU) | | | 57 |

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Platform Fees

As described in Note 2 to the consolidated financial statements, 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 charges clients a platform fee, based on a percentage of a client’s purchases through the platform.

The Company recognizes revenue for its platform fee at a point in time when the purchase by a client occurs through its platform.

Management reports revenue on a net basis for the platform fees charged to clients.

For the year ended December 31, 2019, the Company’s revenue was $661 million.

The principal considerations for our determination that performing procedures relating to revenue recognition – platform fees is a critical audit matter are the significant audit effort required in performing audit procedures and in evaluating audit evidence relating to client purchases through the Company’s platform to recognize revenue.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the completeness and accuracy of the revenue recognized for platform fees charged to clients, including both manual and automated controls operating over the information generated from the Company’s platform and controls over the accuracy in calculating revenue invoices based on client purchases.

These procedures also included, among others, evaluating the completeness, accuracy, and relevance of underlying information generated from the Company’s platform by inspecting a sample of master service agreements and contracts for selected clients and evaluating the appropriateness of the revenue recognized by recalculating platform fees due and validating related cash receipts.

Intellectual Property Restructuring Transaction

As described in Note 11 to the consolidated financial statements, in April 2019, the Company initiated a transaction to transfer certain intellectual property rights among wholly owned subsidiaries, primarily to align its structure to its evolving operations.

The transaction resulted in an increase in foreign deferred tax assets in an amount of $262.4 million.

Management applied significant judgment in estimating the fair value of intangible assets, which involved the use of significant assumptions, including revenue growth rates, margins and discount rates.

The principal considerations for our determination that performing procedures relating to the intellectual property restructuring transaction is a critical audit matter are that there was a significant amount of judgment by management when developing the estimate of the fair value of intellectual property rights which in turn led to a high degree of auditor judgment and subjectivity in applying procedures to evaluate the fair value of intellectual property rights.

Significant audit effort was required in evaluating the significant assumptions related to the fair value of the intellectual property rights, including the revenue growth rates, margins and discount rates, and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls over management’s valuation of intellectual property rights, including controls over the development of the revenue growth rates, margins, and discount rate assumptions.

These procedures also included, among others, reading the intellectual property license agreement and cost sharing agreement; testing management’s process for estimating the fair value of intellectual property rights, which included evaluating the appropriateness of the methodology used and evaluating the reasonableness of management’s significant assumptions.

Procedures were also performed to test the completeness, accuracy, and relevance of underlying data provided by management.

Evaluating the reasonableness of the revenue growth rates and margin assumptions involved considering current and past performance of the business and evaluating the accuracy of management’s historical forecasting.

Evaluating the reasonableness of the revenue growth rates also involved assessing consistency with external market and industry data.

The discount rates were evaluated by considering the cost of capital of comparable businesses and other industry factors.

Professionals with specialized skill and knowledge were used to assist in the evaluation of certain significant assumptions, including the discount rates.

February 27, 2020

| | | 2019 | | | | 2018 | | |

| Cash and cash equivalents | | $ | 130,876 | | | $ | 207,232 | |

| Short-term investments | | | 124,112 | | | | — | |

| Operating lease assets | | | 173,449 | | | | — | |

| Operating lease liabilities | | | 14,577 | | | | — | |

| Operating lease liabilities, non-current | | | 174,873 | | | | — | |

| Interest expense (income), net | | | (4,719 | ) | | | (333 | ) | | | 1,698 | |

| Earnings per share: | | | | | | | | | | | | |

| | | | | | | | | | | | | |

February 22, 2019

| Debt, net | | | — | | | | 27,000 | |

| Interest expense | | | 1,550 | | | | 1,791 | | | | 3,075 | |

| Interest income | | | (1,883 | ) | | | (93 | ) | | | — | |

| Change in fair value of preferred stock warrant liabilities | | | — | | | | — | | | | 9,458 | |

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance as of December 31, 2015 | | | 66,330 | | | $ | 24,204 | | | | 10,884 | | | $ | — | | | $ | 1,039 | | | $ | 13,103 | | | $ | 14,142 | |

| Issuance of series C convertible preferred stock, net of issuance costs | | | 11,501 | | | | 59,871 | | | | — | | | | — | | | | — | | | | — | | | | — | |

| Reclassification of preferred stock warrant liability upon net exercise of warrant | | | 789 | | | | 3,789 | | | | — | | | | — | | | | — | | | | — | | | | — | |

| Repurchase of convertible preferred stock | | | (12,384 | ) | | | (4,623 | ) | | | — | | | | — | | | | (1,168 | ) | | | (46,041 | ) | | | (47,209 | ) |

| Repurchase and retirement of common stock | | | — | | | | — | | | | (189 | ) | | | — | | | | — | | | | (2,362 | ) | | | (2,362 | ) |

| Issuance of Class A common stock upon IPO, net of underwriters’ commissions and offering costs of $10,366 | | | — | | | | — | | | | 4,667 | | | | — | | | | 73,634 | | | | — | | | | 73,634 | |

| Conversion of convertible preferred stock to Class B common stock in connection with IPO | | | (66,236 | ) | | | (83,241 | ) | | | 22,079 | | | | — | | | | 83,241 | | | | — | | | | 83,241 | |

| Conversion of warrant for convertible preferred stock to a warrant for Class B common stock in connection with IPO | | | — | | | | — | | | | — | | | | — | | | | 12,596 | | | | — | | | | 12,596 | |

| Net exercise of warrant to purchase Class B common stock | | | — | | | | — | | | | 449 | | | | — | | | | — | | | | — | | | | — | |

| Grants of restricted stock | | | — | | | | — | | | | 180 | | | | — | | | | — | | | | — | | | | — | |

| --- | --- |

| Repayment of term debt | | | — | | | | — | | | | (30,000 | ) |

| Proceeds from line of credit | | | — | | | | — | | | | 75,847 | |

| Proceeds from issuance of Series C convertible preferred stock | | | — | | | | — | | | | 60,000 | |

| Repurchase of preferred stock and common stock | | | — | | | | — | | | | (54,000 | ) |

| Payment of stock repurchase costs | | | — | | | | — | | | | (155 | ) |

| Payment of Series C convertible preferred stock offering cost | | | — | | | | — | | | | (129 | ) |

| Proceeds from the issuance of Class A common stock in initial public offering, net of underwriting commissions | | | — | | | | — | | | | 78,120 | |

| Payment of offering costs—initial public offering | | | — | | | | — | | | | (4,326 | ) |

| Cash and cash equivalents—End of year | | $ | 207,232 | | | $ | 155,950 | | | $ | 133,400 | |

| Conversion of convertible preferred stock to Class B common stock | | $ | — | | | $ | — | | | $ | 83,241 | |

| Conversion of warrant for convertible preferred stock to a warrant for Class B common stock and net exercise of warrant to purchase Class B common stock | | $ | — | | | $ | — | | | $ | 12,596 | |

| Net exercise of warrants to purchase Series Seed convertible preferred stock | | $ | — | | | $ | — | | | $ | 3,789 | |

Prior to the IPO in September 2016, the Company used estimates to determine the value of common and preferred stock which required the selection of appropriate valuation methodologies and models, and significant judgment in evaluating ranges of assumptions and financial inputs.

Actual results may differ materially from those estimates under different assumptions or circumstances.

The Company’s use of the Black-Scholes option pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock for periods prior to the completion of the Company’s IPO in September 2016, the expected term of the option, the expected volatility of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company’s common stock.

Fair Value of Common Stock.

For stock options granted subsequent to the Company’s IPO in September 2016 and ESPP awards, the fair value of common stock is based on the closing price of its common stock as reported on the NASDAQ Global Market on the grant date.

Prior to the IPO in September 2016, the board of directors determined the fair value of the common stock at the time of the grant of options by considering a number of objective and subjective factors including the Company’s actual operating and financial performance, market conditions and performance of comparable publicly traded companies, developments and milestones in the Company, the likelihood of achieving a liquidity event and transactions involving the Company’s preferred or common stock, among other factors.

The fair value was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants, Valuation of Privately Held Company Equity Securities Issued as Compensation.

During the year ended December 31, 2016, the Company early adopted Accounting Standards Update (“ASU”) No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share—Based Payment Accounting and changed its policy from estimating forfeitures to recording forfeitures when they occur.

The change in accounting policy to record forfeitures when they occur and the requirement to record excess tax benefits when they occur in the statement of operations has resulted in a reduction in the Company’s effective tax rate and may result in volatility in earnings in the future.

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, [removed: 2018.][added: 2019.]

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, [removed: 2018.][added: 2019.]

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in [removed: Internal] [added: *Internal] Control—Integrated [removed: Framework] [added: Framework*] (2013).

Based on its assessment, our management, including our CEO and CFO, has concluded that our internal control over financial reporting was effective as of December 31, [removed: 2018.][added: 2019.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which appears in Item 8 of this Annual Report on Form 10-K.

[removed: During the quarter ended December 31, 2018, there] [added: There] have been no [added: significant] changes in our internal control over financial reporting [added: during the quarter ended December 31, 2019] that have materially affected, or [removed: is] [added: are] reasonably likely to materially affect, our internal control over financial reporting.

We transitioned to a new accounting and financial reporting system, which replaced our existing accounting and financial reporting system.

The go-live for this new system occurred during July 2019, and our system implementation was completed during the quarter ended September 30, 2019.

Management evaluated the process changes as a result of the system implementation, and where needed, modified the design of and the testing for operating effectiveness of internal control over financial reporting.

The modification to the design of and testing for operating effectiveness was specific to the new accounting and financial reporting system’s functionalities and features.

We did not identify any previously unidentified risks or design gaps as a result of the system implementation.

Testing for operating effectiveness of internal control over financial reporting has been completed for the fiscal year ended December 31, 2019, and management concluded that the internal control over financial reporting under the new accounting and financial reporting system was operating effectively.

Completion of Remediation Measures

During the quarter ended December 31, 2018, we completed the remediation measures including the validation, testing of the design and concluding on the operating effectiveness of our controls related to the previously reported material weakness.

However, completion of remediation does not provide assurance that our remediated controls will continue to operate properly or that our financial statements will be free from error.

Our platform system applications are complex and multi-faceted and include applications that are highly customized in order to serve and support our clients and our advertising inventory and data suppliers, as well as support our financial reporting obligations.

We regularly make improvements to our platform to maintain and enhance our competitive position.

In the future we may implement new offerings and engage in business transactions, such as acquisitions, reorganizations or implementation of new information systems.

These factors require us to maintain, develop and implement new controls, which, if not properly designed or operating effectively could negatively affect our internal control over financial reporting and result in material weaknesses.

There also may be undetected material weaknesses in our internal control over financial reporting, as a result of which we may not detect financial statement errors on a timely basis.

We continue to develop our internal controls, processes and reporting systems in an effort to maintain the effectiveness of our internal control over financial reporting, and we expect to incur ongoing costs in this effort.

However, we may not be successful in developing and maintaining adequate internal controls, which may undermine our ability to provide accurate, timely and reliable reports on our financial condition and results of operations.

The information required by this item will be included in our proxy statement relating to our [removed: 2019] [added: 2020] annual meeting of stockholders to be filed by us with the [removed: Securities and Exchange Commission] [added: SEC] no later than 120 days after the close of our fiscal year ended December 31, [removed: 2018] [added: 2019] (the "Proxy Statement") and is incorporated herein by reference.

| 4.1 | | Reference is made to Exhibits [3.1](http://www.sec.gov/Archives/edgar/data/0001671933/000104746916015272/a2229540zex-3_2.htm) and [removed: [](http://www.sec.gov/Archives/edgar/data/0001671933/000104746916015272/a2229540zex-3_2.htm)[3.2](http://www.sec.gov/Archives/edgar/data/0001671933/000104746916015074/a2229525zex-3_4.htm).] [added: [3.2](http://www.sec.gov/Archives/edgar/data/0001671933/000104746916015074/a2229525zex-3_4.htm).] | | | | | | | | | |

| [removed: 10.1] [added: 4.4] | | [Second Amended and Restated Investor Rights Agreement dated as of February 9, 2016, by and among The Trade Desk, Inc. and the investors listed therein.](http://www.sec.gov/Archives/edgar/data/0001671933/000104746916015272/a2229540zex-10_1.htm) | | S-1/A | | 9/6/2016 | | 10.1 | | | |

| 21.1 | | [List of Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/1671933/000156459019003906/ttd-ex211_10.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex211_8.htm)] | | | | | | | | | X |

| 23.1 | | [Consent of PricewaterhouseCoopers LLP, independent registered public accounting [removed: firm.](https://www.sec.gov/Archives/edgar/data/1671933/000156459019003906/ttd-ex231_8.htm)] [added: firm.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex231_10.htm)] | | | | | | | | | X |

| 31.1 | | [Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459019003906/ttd-ex311_9.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex311_9.htm)] | | | | | | | | | X |

| 31.2 | | [Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459019003906/ttd-ex312_6.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex312_7.htm)] | | | | | | | | | X |

| 32.1 (1) | | [Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459019003906/ttd-ex321_7.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex321_6.htm)] | | | | | | | | | X |

| 101.sch | | [added: Inline] XBRL Taxonomy Schema Linkbase Document | | | | | | | | | X |

| 101.cal | | [added: Inline] XBRL Taxonomy Calculation Linkbase Document | | | | | | | | | X |

| 101.def | | [added: Inline] XBRL Taxonomy Definition Linkbase Document | | | | | | | | | X |

| 101.lab | | [added: Inline] XBRL Taxonomy Label Linkbase Document | | | | | | | | | X |

| 101.pre | | [added: Inline] XBRL Taxonomy Presentation Linkbase Document | | | | | | | | | X |

| 4.5 | | [Description of Securities.](https://www.sec.gov/Archives/edgar/data/1671933/000156459020007498/ttd-ex45_101.htm) | | | | | | | | | X |

| 10.13+ | | [Employment Agreement, dated as of November 1, 2017, between The Trade Desk, Inc. and Susan Vobejda.](http://www.sec.gov/Archives/edgar/data/1671933/000156459019017961/ttd-ex101_350.htm) | | 10-Q | | 05/09/19 | | 10.1 | | | |

| 10.14+ | | [Employment Agreement, dated as of May 1, 2017, between The Trade Desk, Inc. and Vivian Yang.](http://www.sec.gov/Archives/edgar/data/1671933/000156459019017961/ttd-ex102_351.htm) | | 10-Q | | 05/09/19 | | 10.2 | | | |

| 10.15+ | | [Offer Letter, dated October 29, 2019, by and between the Company and Blake Grayson.](http://www.sec.gov/Archives/edgar/data/1671933/000156459019043644/ttd-ex101_55.htm) | | 8-K | | 11/15/19 | | 10.1 | | | |

| 10.16+ | | [Employment Agreement, dated as of October 29, 2019 between The Trade Desk, Inc. and Blake Grayson.](http://www.sec.gov/Archives/edgar/data/0001671933/000119312517167445/d274174dex106.htm) | | 8-K | | 11/15/19 | | 10.2 | | | |

| 101.ins | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | | X |

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| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | | X |

| 101.ins | | XBRL Instance Document | | | | | | | | | X |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this [removed: Annual Report on Form 10-K] [added: report] to be signed on its behalf by the undersigned, thereunto duly authorized, [removed: in Ventura, California,] on the [removed: 22nd] [added: 27th] day of February, [removed: 2019.][added: 2020.]

| [added: | |] THE TRADE DESK, INC. | | |

| | | [removed: Paul E. Ross] [added: | |] Chief Financial Officer |

[removed: [](#POWER_ATTORNEY)POWER] [added: POWER] OF ATTORNEY

Green and [removed: Paul E.][added: Blake J.]

[removed: Ross,] [added: Grayson,] jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this [removed: Annual Report on Form 10-K] [added: report] has been signed [added: below] by the following persons on behalf of the [removed: Registrant] [added: registrant] and in the capacities and on the dates [removed: indicated:][added: indicated.]

| Signature | | Title | | Date | [added: |]

| /s/ JEFF T. GREEN | | Chief Executive Officer, Director (principal | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Jeff T. Green | | executive officer) | | | [added: |]

| /s/ [removed: PAUL E. ROSS] [added: BLAKE J. GRAYSON] | | Chief Financial Officer (principal financial | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| [removed: Paul E. Ross] [added: Blake J. Grayson] | | officer and principal accounting officer) | | | [added: |]

| /s/ BRIAN J. STEMPECK | | Chief Strategy Officer, Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Brian J. Stempeck | | | | | [added: |]

| /s/ KATHRYN E. FALBERG | | Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Kathryn E. Falberg | | | | | [added: |]

| /s/ THOMAS FALK | | Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Thomas Falk | | | | | [added: |]

| /s/ ERIC B. PALEY | | Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Eric B. Paley | | | | | [added: |]

| /s/ GOKUL RAJARAM | | Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| Gokul Rajaram | | | | | [added: |]

| /s/ DAVID B. WELLS | | Director | | February [removed: 22, 2019] [added: 27, 2020] | [added: |]

| David B. Wells | | | | | [added: |]

| | | By: | | /s/ BLAKE J. GRAYSON |

| | | | | Blake J. Grayson |

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| /s/ LISE J. BUYER | | Director | | February 27, 2020 | |

| Lise J. Buyer | | | | | |

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| By: | | /s/ PAUL E. ROSS |

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