Item 1. Condensed Consolidated Financial Statements

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(Unaudited)

			As of March 31, 2024						As of December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents			$	918,200					$	895,129
Short-term investments, net			501,360						485,159
Accounts receivable, net of allowance for credit losses of $12,852 and $12,826 as of March 31, 2024 and December 31, 2023, respectively			2,619,280						2,870,313
Prepaid expenses and other current assets			57,579						63,353
TOTAL CURRENT ASSETS			4,096,419						4,313,954
Property and equipment, net			150,551						161,422
Operating lease assets			201,859						197,732
Deferred income taxes			154,849						154,849
Other assets, non-current			60,119						60,730
TOTAL ASSETS			$	4,663,797					$	4,888,687
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable			$	2,094,855					$	2,317,318
Accrued expenses and other current liabilities			131,287						137,996
Operating lease liabilities			57,208						55,524
TOTAL CURRENT LIABILITIES			2,283,350						2,510,838
Operating lease liabilities, non-current			180,456						180,369
Other liabilities, non-current			33,436						33,261
TOTAL LIABILITIES			2,497,242						2,724,468
Commitments and contingencies (Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.000001; 100,000 shares authorized, zero shares issued and outstanding as of March 31, 2024 and December 31, 2023			—						—
Common stock, par value $0.000001 Class A, 1,000,000 shares authorized; 444,809 and 444,997 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively Class B, 95,000 shares authorized; 43,919 and 43,919 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively			—						—
Additional paid-in capital			2,063,311						1,967,265
Retained earnings			103,244						196,954
TOTAL STOCKHOLDERS’ EQUITY			2,166,555						2,164,219
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	4,663,797					$	4,888,687

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

			Three Months Ended March 31,
			2024						2023
Revenue			$	491,253					$	382,803
Operating expenses:
Platform operations			103,630						84,867
Sales and marketing			121,725						97,222
Technology and development			107,686						93,710
General and administrative			129,555						130,312
Total operating expenses			462,596						406,111
Income (loss) from operations			28,657						(23,308)
Other expense (income):
Interest income, net			(16,661)						(14,423)
Foreign currency exchange loss (gain), net			(715)						723
Total other income, net			(17,376)						(13,700)
Income (loss) before income taxes			46,033						(9,608)
Provision for (benefit from) income taxes			14,373						(18,934)
Net income			$	31,660					$	9,326
Earnings per share:
Basic			$	0.06					$	0.02
Diluted			$	0.06					$	0.02
Weighted-average shares outstanding:
Basic			488,551						489,712
Diluted			498,192						499,795

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

			Class A and B Common Stock												Additional Paid-In Capital						Retained Earnings						Total Stockholders’ Equity
			Shares						Amount
Balance as of December 31, 2022			490,468						$	—					$	1,449,825					$	665,514					$	2,115,339
Exercise of common stock options			2,451						—						10,365						—						10,365
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			414						—						(15,595)						—						(15,595)
Repurchases of Class A common stock			(5,139)						—						—						(292,863)						(292,863)
Stock-based compensation			—						—						114,235						—						114,235
Net income			—						—						—						9,326						9,326
Balance as of March 31, 2023			488,194						$	—					$	1,558,830					$	381,977					$	1,940,807
Balance as of December 31, 2023			488,916						$	—					$	1,967,265					$	196,954					$	2,164,219
Exercise of common stock options			719						—						10,804						—						10,804
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			620						—						(26,806)						—						(26,806)
Repurchases of Class A common stock			(1,527)						—						—						(125,370)						(125,370)
Stock-based compensation			—						—						112,048						—						112,048
Net income			—						—						—						31,660						31,660
Balance as of March 31, 2024			488,728						$	—					$	2,063,311					$	103,244					$	2,166,555

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

			Three Months Ended March 31,
			2024						2023
OPERATING ACTIVITIES:
Net income			$	31,660					$	9,326
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			21,742						19,293
Stock-based compensation			110,620						113,470
Noncash lease expense			12,751						11,917
Provision for expected credit losses on accounts receivable			40						316
Other			1,125						(1,310)
Changes in operating assets and liabilities:
Accounts receivable			238,147						258,165
Prepaid expenses and other current and non-current assets			3,331						(5,481)
Accounts payable			(220,196)						(200,701)
Accrued expenses and other current and non-current liabilities			(104)						(4,309)
Operating lease liabilities			(13,644)						(13,113)
Net cash provided by operating activities			185,472						187,573
INVESTING ACTIVITIES:
Purchases of investments			(159,731)						(144,721)
Maturities of investments			147,794						126,731
Purchases of property and equipment			(7,224)						(9,156)
Capitalized software development costs			(1,958)						(1,467)
Net cash used in investing activities			(21,119)						(28,613)
FINANCING ACTIVITIES:
Repurchases of Class A common stock			(125,280)						(291,534)
Proceeds from exercise of stock options			10,804						10,365
Taxes paid related to net settlement of restricted stock awards			(26,806)						(15,595)
Net cash used in financing activities			(141,282)						(296,764)
Increase (decrease) in cash and cash equivalents			23,071						(137,804)
Cash and cash equivalents—Beginning of period			895,129						1,030,506
Cash and cash equivalents—End of period			$	918,200					$	892,702
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for operating lease liabilities			$	15,716					$	15,342
Operating lease assets obtained in exchange for operating lease liabilities			$	16,875					$	3,999
Capitalized assets financed by accounts payable			$	3,135					$	5,214
Tenant improvements paid by lessor			$	—					$	1,552
Stock-based compensation included in capitalized software development costs			$	1,428					$	765

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

THE TRADE DESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Nature of Operations

The Trade Desk, Inc. (the “Company”) is a global technology company that empowers buyers of advertising. Through the Company’s self-service, cloud-based platform, ad buyers can create, manage and optimize more expressive data-driven digital advertising campaigns across ad formats and channels, including video (which includes connected television (“CTV”)), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices. The Company’s platform integrations with major inventory, publisher and data partners provide ad buyers reach and decisioning capabilities, and the Company’s enterprise application programming interfaces (“APIs”) enable its clients to customize and expand platform functionality.

The Company is a Delaware corporation formed in November 2009 and headquartered in Ventura, California with offices in various cities in North America, Europe, Asia and Australia.

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2023 was derived from audited financial statements but does not include all disclosures required by GAAP. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes to the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023, and these unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the Company’s audited annual consolidated financial statements for the year ended December 31, 2023, and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the full year ending December 31, 2024.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates.

Management regularly evaluates its estimates, primarily those related to: (1) revenue recognition criteria, including the determination of revenue reporting as net versus gross in the Company’s revenue arrangements, (2) allowances for credit losses, (3) operating lease assets and liabilities, including the Company’s incremental borrowing rate and terms and provisions of each lease, (4) the useful lives of property and equipment and capitalized software development costs, (5) income taxes, (6) assumptions used in the option pricing models to determine the fair value of stock-based compensation and (7) the recognition and disclosure of contingent liabilities. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

As of March 31, 2024, the impacts to the Company’s business due to geopolitical developments and macroeconomic factors such as rising interest rates, inflation, changes in foreign currency exchange rates and supply chain disruptions, continue to evolve. As a result, many of the Company’s estimates and assumptions, including the allowance for credit losses, consider macroeconomic factors in the market, which require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which adds requirements to report significant expenses, requirements for entities with a single reportable segment to provide all disclosures otherwise required under Topic 280 and requirements to report segment information on an interim basis, among other clarifications and requirements. This guidance will be effective on a retrospective basis for annual periods beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and interim periods beginning with the Company’s Quarterly Report Form 10-Q for the fiscal quarter ended March 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and notes.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of information and consistent categories in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective on a prospective basis, with an option to apply it retrospectively, for annual periods beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and notes.

Note 3—Earnings Per Share

The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

Basic earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding adjusted for the potentially dilutive impact of stock options, restricted stock and the Employee Stock Purchase Plan (“ESPP”), using the two-class method required for participating securities. Restricted stock awards are considered to be participating securities due to their non-forfeitable dividend rights.

The computation of basic and diluted earnings per share is as follows (in thousands, except per share amounts):

			Three Months Ended March 31,
			2024						2023
Numerator:
Net income			$	31,660					$	9,326
Denominator:
Weighted-average shares outstanding—basic			488,551						489,712
Effect of dilutive securities			9,641						10,083
Weighted-average shares outstanding—diluted			498,192						499,795
Basic earnings per share			$	0.06					$	0.02
Diluted earnings per share			$	0.06					$	0.02
Anti-dilutive equity awards under stock-based award plans excluded from the determination of diluted earnings per share			4,799						9,832

Note 4—Cash, Cash Equivalents and Short-Term Investments, Net

Cash, cash equivalents and short-term investments in marketable securities were as follows (in thousands):

			As of March 31, 2024
			Cash and Cash Equivalents						Short-Term Investments, Net						Total
Cash			$	287,742					$	—					$	287,742
Level 1:
Money market funds			594,935						—						594,935
Level 2:
Commercial paper			35,523						188,390						223,913
Corporate debt securities			—						185,016						185,016
U.S. government and agency securities			—						127,954						127,954
Total			$	918,200					$	501,360					$	1,419,560

			As of December 31, 2023
			Cash and Cash Equivalents						Short-Term Investments, Net						Total
Cash			$	289,512					$	—					$	289,512
Level 1:
Money market funds			560,673						—						560,673
Level 2:
Commercial paper			36,013						168,224						204,237
Corporate debt securities			—						185,465						185,465
U.S. government and agency securities			8,931						131,470						140,401
Total			$	895,129					$	485,159					$	1,380,288

The Company’s gross unrealized gains or losses from its short-term investments, recorded at fair value, for the three months ended March 31, 2024 and 2023, were immaterial.

The contractual maturities of the Company’s short-term investments are as follows (in thousands):

			March 31, 2024
Due in one year			$	458,132
Due in one to two years			43,228
Total			$	501,360

Note 5—Leases

The components of lease expense recorded in the condensed consolidated statements of operations were as follows (in thousands):

			Three Months Ended March 31,
			2024						2023
Operating lease cost			$	12,711					$	11,847
Short-term lease cost			474						472
Variable lease cost			3,816						3,103
Sublease income			(42)						(546)
Total lease cost			$	16,959					$	14,876

Note 6—Debt

Credit Facility

On June 15, 2021, the Company and a syndicate of banks, led by JPMorgan Chase Bank, N.A., as agent, entered into a Loan and Security Agreement (the “Credit Facility”). The Credit Facility consists of a $450 million revolving loan facility, with a $20 million sublimit for swingline borrowings and a $15 million sublimit for the issuance of letters of credit. Under certain circumstances, the Company has the right to increase the Credit Facility by an amount not to exceed $300 million. The Credit Facility is collateralized by substantially all of the Company’s assets, including a pledge of certain of its accounts receivable, deposit accounts, intellectual property, investment property and equipment.

On December 17, 2021, the Company amended the Credit Facility to expand the process for issuing letters of credit and the related invoicing, particularly with respect to letters of credit not denominated in U.S. Dollars. On February 9, 2023, the Company further amended its Credit Facility (as amended, the “Amended Credit Facility”) to transition from a variable interest rate based on the London Interbank Offered Rate to a variable interest rate based on the secured overnight financing rate (“SOFR”).

Loans under the Amended Credit Facility bear interest at a rate equal to, at the Company’s option, an annual rate of either a Base Rate or an adjusted term SOFR rate (defined as SOFR for a specified term plus a credit spread adjustment of 10 basis points, subject to a 0% floor), plus an applicable margin (“Base Rate Borrowings” and “Term SOFR Borrowings”). The Base Rate is defined as a rate per annum for any day equal to the greatest of (1) the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the United States, (2) the New York Federal Reserve Bank Rate in effect on such day plus half of 1%, and (3) the adjusted term SOFR rate for a one-month interest period on such day plus 1%. The applicable margin is between 0.25% to 1.25% for Base Rate Borrowings and between 1.25% and 2.25% for Term SOFR Borrowings based on the Company maintaining certain leverage ratios. The fee for undrawn amounts under the Amended Credit Facility ranges, based on the applicable leverage, from 0.200% to 0.350%. The Company is also required to pay customary letter of credit fees, as necessary.

As of March 31, 2024, the Company did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $443 million as of March 31, 2024, which is net of outstanding letters of credit of $7 million. The Amended Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026.

The Amended Credit Facility contains customary conditions to borrowings, events of default and covenants, including covenants that restrict the Company’s ability to sell assets, make changes to the nature of the Company’s business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of subordinated debt. The Amended Credit Facility also requires the Company to maintain compliance with a maximum ratio of consolidated funded debt to consolidated EBITDA of 3.50 to 1.00. As of March 31, 2024, the Company was in compliance with all covenants.

Note 7—Capitalization

Share Repurchase Program

In February 2023, the Company’s board of directors approved a share repurchase program with authorization to purchase up to $700 million of its Class A common stock. As of December 31, 2023, $53 million remained available and authorized for repurchases. In February 2024, an additional $647 million was authorized under this program, bringing the total amount available for future repurchases back to $700 million. The share repurchase program, which has no expiration date, is designed to help offset the impact of future share dilution from employee stock issuances. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. Open market repurchases are structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. This program does not obligate the Company to acquire any particular amount of Class A common stock, and may be modified, suspended or terminated at any time at the discretion of the Company’s board of directors.

During the three months ended March 31, 2024, the Company repurchased and subsequently retired 1.5 million shares of its Class A common stock for an aggregate repurchase amount of $125 million. The repurchase amount for the three months ended March 31, 2024 included an immaterial amount related to the 1% excise tax on net share repurchases as a result of the Inflation Reduction Act of 2022 (“IRA”). As of March 31, 2024, $575 million remained available and authorized for repurchases. Activity under the share repurchase program was recognized in the condensed consolidated financial statements on a trade-date basis.

Note 8—Stock-Based Compensation

Stock-Based Compensation Expense

Stock-based compensation expense recorded in the condensed consolidated statements of operations was as follows (in thousands):

			Three Months Ended March 31,
			2024						2023
Platform operations			$	5,555					$	3,946
Sales and marketing			20,292						14,123
Technology and development			27,974						20,867
General and administrative			56,799						74,534
Total			$	110,620					$	113,470

Stock Options

The following summarizes stock option activity:

			Shares Under Options (in thousands)						Weighted- Average Exercise Price
Outstanding as of December 31, 2023			12,258						$	31.05
Granted			114						77.94
Exercised			(719)						15.51
Expired/Forfeited			(109)						47.60
Outstanding as of March 31, 2024			11,544						$	32.33
Exercisable as of March 31, 2024			8,653						$	21.84

As of March 31, 2024, the Company had unrecognized stock-based compensation relating to stock options, excluding the CEO Performance Option (as defined below), of approximately $109 million, which is expected to be recognized over a weighted-average period of 2.7 years.

CEO Performance Option

In October 2021, the Company granted a market-based performance award to the Company’s Chief Executive Officer (the “CEO Performance Option”) under the Company’s 2016 Incentive Award Plan. The CEO Performance Option has an exercise price of $68.29 per share. As of December 31, 2023, the CEO Performance Option had 19.2 million options outstanding. No options were granted, exercised, forfeited or expired during the three months ended March 31, 2024. As of March 31, 2024, the CEO Performance Option had 2.4 million exercisable options and 19.2 million options outstanding. Stock-based compensation of $36 million and $60 million for the CEO Performance Option was recorded as a component of general and administrative expense during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had unrecognized stock-based compensation relating to the CEO Performance Option of $165 million that is expected to be recognized over a weighted-average period of 1.5 years, assuming no acceleration of vesting.

Restricted Stock

The following summarizes restricted stock activity:

			Shares (in thousands)						Weighted- Average Grant Date Fair Value
Unvested as of December 31, 2023			10,546						$	62.22
Granted			396						75.50
Vested			(1,040)						56.87
Forfeited			(212)						62.45
Unvested as of March 31, 2024			9,690						$	63.33

As of March 31, 2024, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $564 million, which is expected to be recognized over a weighted-average period of 2.7 years.

Employee Stock Purchase Plan (“ESPP”)

Stock-based compensation expense related to the ESPP totaled $6 million and $3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had unrecognized stock-based compensation relating to ESPP awards of approximately $7 million, which is expected to be recognized over a weighted-average period of 0.6 years.

Note 9—Income Taxes

In determining the interim provision for (benefit from) income taxes for each of the three months ended March 31, 2024 and 2023, the Company utilized the annual estimated effective tax rate applied to the actual year-to-date income and added the tax effects of any discrete items in the reporting period in which they occur.

For the three months ended March 31, 2024 and 2023, the provision for (benefit from) income taxes included benefits associated with stock-based awards of $11 million and $27 million, respectively.

For the three months ended March 31, 2024 and 2023, the Company’s effective tax rate differed from the United States federal statutory tax rate of 21% primarily due to nondeductible stock-based compensation, state and foreign taxes, research and development tax credits and the impact of tax benefits associated with stock-based awards.

There were no material changes to the Company’s unrecognized tax benefits during the three months ended March 31, 2024, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year.

Effective in the calendar year 2024, the Company is subject to international anti-base erosion rules that assess a minimum tax rate of 15% in the jurisdictions in which it operates. Commonly known as “Pillar II,” these rules apply to large multinational enterprises and are designed to address the tax challenges arising from the globalization and digitalization of the economy. The Company has calculated the minimum tax on a jurisdiction-by-jurisdiction basis and has determined that the resulting tax is immaterial to its financial results. The Company continues to monitor for evolving tax legislation in the individual jurisdictions in which it operates and for changes to its operations that could be impacted by such legislation.

Note 10—Segment and Geographic Information

The Company has one primary business activity and operates in one reportable and operating segment.

The Company reports revenue net of amounts it pays suppliers for the cost of advertising inventory, third-party data and other add-on features (collectively, “Supplier Features”). The Company generally bills clients based on the gross amount of Supplier Features they purchase through its platform and the platform fees (“Gross Billings”), net of allowances. The Company’s accounts receivable are recorded at the amount of Gross Billings for the amounts it is responsible to collect, and accounts payable are recorded at the net amount payable to suppliers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.

Gross Billings, based on the address of the clients or client affiliates, set forth as a percentage of total Gross Billings, were as follows:

			Three Months Ended March 31,
			2024						2023
United States			88		%				88		%
International			12		%				12		%
Total			100		%				100		%

Note 11— Commitments and Contingencies

Guarantees, Indemnification and Other

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to clients, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s balance sheet, statement of operations or statement of cash flows. Accordingly, no amounts for any obligation have been recorded at March 31, 2024 and 2023.

The Company is under audit by various domestic and foreign tax authorities. The Company believes that the amount of losses or any estimable range of possible losses with respect to these matters will not, either individually or in the aggregate, have a material adverse effect on its business and condensed consolidated financial statements. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from the Company’s expectations.

In May 2024, the Company entered into an agreement related to the expansion of an existing office facility located in the United States, which is expected to commence in 2026 and expire in 2037. The total commitment under the lease is estimated to be approximately $214 million, net of incentives. The Company will recognize the related lease asset and lease liability at the lease commencement date

Litigation

From time to time, the Company is subject to various legal proceedings, litigation and claims, either asserted or unasserted, that arise in the ordinary course of business. Although the outcome of the various legal proceedings, litigation and claims cannot be predicted with certainty, management does not believe that any of these proceedings or other claims will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

On May 27, 2022, a stockholder filed a derivative lawsuit captioned Huizenga v. Green, et al., No. 2022-0461, asserting claims on behalf of the Company against certain members of the Company’s board of directors in the Court of Chancery of the State of Delaware. On June 27, 2022, a second derivative lawsuit captioned Pfeiffer v. Green, et al., No. 2022-0560, was filed in the Court of Chancery of the State of Delaware alleging substantially similar claims. Those lawsuits were consolidated on August 18, 2022, and a lead plaintiff was appointed on October 7, 2022. The two complaints allege generally that the defendants breached their fiduciary duties to the Company and its stockholders in connection with the negotiation and approval of the CEO Performance Option. The plaintiffs seek a court order rescinding the CEO Performance Option and monetary damages. On November 10, 2022, the plaintiffs filed a consolidated complaint, and on January 12, 2023, the defendants moved to dismiss the consolidated complaint. On March 24, 2023, plaintiffs filed an opposition to defendants’ motions to dismiss. Defendants filed their replies in support of their motions to dismiss on May 19, 2023. The court heard oral argument on the motions on April 3, 2024.

Litigation is inherently uncertain and there can be no assurance regarding the likelihood that the motions to dismiss or defense of the various actions will be successful.

Employment Contracts

The Company has entered into agreements with severance terms with certain employees and officers, all of whom are employed on an at-will basis, subject to certain severance obligations in the event of certain involuntary terminations. The Company may be required to accelerate the vesting of certain stock options and restricted stock in the event of changes in control, as defined, and involuntary terminations.