Item 1. Condensed Consolidated Financial Statements

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(Unaudited)

			As of June 30, 2024						As of December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents			$	1,009,363					$	895,129
Short-term investments, net			497,168						485,159
Accounts receivable, net of allowance for credit losses of $10,576 and $12,826 as of June 30, 2024 and December 31, 2023, respectively			2,905,533						2,870,313
Prepaid expenses and other current assets			110,776						63,353
TOTAL CURRENT ASSETS			4,522,840						4,313,954
Property and equipment, net			191,912						161,422
Operating lease assets			229,411						197,732
Deferred income taxes			154,849						154,849
Other assets, non-current			60,910						60,730
TOTAL ASSETS			$	5,159,922					$	4,888,687
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable			$	2,336,589					$	2,317,318
Accrued expenses and other current liabilities			120,218						137,996
Operating lease liabilities			61,579						55,524
TOTAL CURRENT LIABILITIES			2,518,386						2,510,838
Operating lease liabilities, non-current			202,769						180,369
Other liabilities, non-current			33,361						33,261
TOTAL LIABILITIES			2,754,516						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 June 30, 2024 and December 31, 2023			—						—
Common stock, par value $0.000001 Class A, 1,000,000 shares authorized; 447,681 and 444,997 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively Class B, 95,000 shares authorized; 43,919 and 43,919 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively			—						—
Additional paid-in capital			2,217,043						1,967,265
Retained earnings			188,363						196,954
TOTAL STOCKHOLDERS’ EQUITY			2,405,406						2,164,219
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	5,159,922					$	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 June 30,												Six Months Ended June 30,
			2024						2023						2024						2023
Revenue			$	584,550					$	464,254					$	1,075,803					$	847,057
Operating expenses:
Platform operations			110,459						86,654						214,089						171,521
Sales and marketing			133,867						111,489						255,592						208,711
Technology and development			110,035						98,308						217,721						192,018
General and administrative			135,469						126,130						265,024						256,442
Total operating expenses			489,830						422,581						952,426						828,692
Income from operations			94,720						41,673						123,377						18,365
Other expense (income):
Interest income, net			(17,817)						(17,507)						(34,478)						(31,930)
Foreign currency exchange loss (gain), net			45						(747)						(670)						(24)
Total other income, net			(17,772)						(18,254)						(35,148)						(31,954)
Income before income taxes			112,492						59,927						158,525						50,319
Provision for income taxes			27,463						26,988						41,836						8,054
Net income			$	85,029					$	32,939					$	116,689					$	42,265
Earnings per share:
Basic			$	0.17					$	0.07					$	0.24					$	0.09
Diluted			$	0.17					$	0.07					$	0.23					$	0.08
Weighted-average shares outstanding:
Basic			489,353						488,431						488,952						489,068
Diluted			500,040						499,349						499,117						499,570

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
Exercise of common stock options			1,074						—						17,407						—						17,407
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			879						—						(15,459)						—						(15,459)
Issuance of common stock under employee stock purchase plan			497						—						21,316						—						21,316
Repurchases of Class A common stock			(595)						—						—						(44,004)						(44,004)
Stock-based compensation			—						—						118,404						—						118,404
Net income			—						—						—						32,939						32,939
Balance as of June 30, 2023			490,049						$	—					$	1,700,498					$	370,912					$	2,071,410
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
Exercise of common stock options			1,167						—						27,360						—						27,360
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			1,007						—						(31,563)						—						(31,563)
Issuance of common stock under employee stock purchase plan			698						—						30,122						—						30,122
Repurchases of Class A common stock			—						—						—						90						90
Stock-based compensation			—						—						127,813						—						127,813
Net income			—						—						—						85,029						85,029
Balance as of June 30, 2024			491,600						$	—					$	2,217,043					$	188,363					$	2,405,406

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)

			Six Months Ended June 30,
			2024						2023
OPERATING ACTIVITIES:
Net income			$	116,689					$	42,265
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			42,624						39,359
Stock-based compensation			236,960						230,553
Noncash lease expense			26,460						24,325
Provision for expected credit losses on accounts receivable			133						318
Other			(4,117)						(8,423)
Changes in operating assets and liabilities:
Accounts receivable			(49,321)						(35,368)
Prepaid expenses and other current and non-current assets			(52,064)						(3,659)
Accounts payable			(13,247)						50,995
Accrued expenses and other current and non-current liabilities			(9,989)						399
Operating lease liabilities			(27,397)						(25,102)
Net cash provided by operating activities			266,731						315,662
INVESTING ACTIVITIES:
Purchases of investments			(317,969)						(316,307)
Maturities of investments			314,598						274,401
Purchases of property and equipment			(29,339)						(16,556)
Capitalized software development costs			(4,424)						(3,415)
Net cash used in investing activities			(37,134)						(61,877)
FINANCING ACTIVITIES:
Repurchases of Class A common stock			(125,280)						(336,494)
Proceeds from exercise of stock options			38,164						27,772
Proceeds from employee stock purchase plan			30,122						21,316
Taxes paid related to net settlement of restricted stock awards			(58,369)						(31,054)
Net cash used in financing activities			(115,363)						(318,460)
Increase (decrease) in cash and cash equivalents			114,234						(64,675)
Cash and cash equivalents—Beginning of period			895,129						1,030,506
Cash and cash equivalents—End of period			$	1,009,363					$	965,831
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for operating lease liabilities			$	33,272					$	30,870
Operating lease assets obtained in exchange for operating lease liabilities			$	58,133					$	16,967
Capitalized assets financed by accounts payable			$	37,927					$	3,033
Stock-based compensation included in capitalized software development costs			$	2,901					$	2,086

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 and six months ended June 30, 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 June 30, 2024, the impacts to the Company’s business due to geopolitical developments and macroeconomic factors such as changes in interest and foreign currency exchange rates, inflation 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 June 30,												Six Months Ended June 30,
			2024						2023						2024						2023
Numerator:
Net income			$	85,029					$	32,939					$	116,689					$	42,265
Denominator:
Weighted-average shares outstanding—basic			489,353						488,431						488,952						489,068
Effect of dilutive securities			10,687						10,918						10,165						10,502
Weighted-average shares outstanding—diluted			500,040						499,349						499,117						499,570
Basic earnings per share			$	0.17					$	0.07					$	0.24					$	0.09
Diluted earnings per share			$	0.17					$	0.07					$	0.23					$	0.08
Anti-dilutive equity awards under stock-based award plans excluded from the determination of diluted earnings per share			2,480						7,578						2,480						7,578

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 June 30, 2024
			Cash and Cash Equivalents						Short-Term Investments, Net						Total
Cash			$	205,707					$	—					$	205,707
Level 1:
Money market funds			761,789						—						761,789
Level 2:
Commercial paper			27,903						204,389						232,292
Corporate debt securities			—						192,131						192,131
U.S. government and agency securities			13,964						100,648						114,612
Total			$	1,009,363					$	497,168					$	1,506,531

			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 and six months ended June 30, 2024 and 2023, were immaterial.

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

			June 30, 2024
Due in one year			$	458,730
Due in one to two years			38,438
Total			$	497,168

Note 5—Leases

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

			Three Months Ended June 30,												Six Months Ended June 30,
			2024						2023						2024						2023
Operating lease cost			$	13,486					$	12,209					$	26,197					$	24,056
Short-term lease cost			414						442						888						914
Variable lease cost			3,792						2,851						7,608						5,954
Sublease income			—						(604)						(42)						(1,150)
Total lease cost			$	17,692					$	14,898					$	34,651					$	29,774

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 June 30, 2024, the Company did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $442 million as of June 30, 2024, which is net of outstanding letters of credit of $8 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 June 30, 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 June 30, 2024, the Company did not repurchase any shares of its Class A common stock. During the six months ended June 30, 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 amounts included in the condensed consolidated statements of stockholders’ equity included immaterial amounts related to the 1% excise tax on share repurchases, net of share issuances, as a result of the Inflation Reduction Act of 2022 (“IRA”). As of June 30, 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 June 30,												Six Months Ended June 30,
			2024						2023						2024						2023
Platform operations			$	7,272					$	4,967					$	12,827					$	8,913
Sales and marketing			25,068						18,800						45,360						32,923
Technology and development			32,509						26,689						60,483						47,556
General and administrative			61,491						66,627						118,290						141,161
Total			$	126,340					$	117,083					$	236,960					$	230,553

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			2,353						81.50
Exercised			(1,886)						20.45
Expired/Forfeited			(168)						52.99
Outstanding as of June 30, 2024			12,557						$	41.80
Exercisable as of June 30, 2024			7,911						$	23.85

As of June 30, 2024, the Company had unrecognized stock-based compensation relating to stock options, excluding the CEO Performance Option (as defined below), of approximately $182 million, which is expected to be recognized over a weighted-average period of 3.1 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 and six months ended June 30, 2024. As of June 30, 2024, the CEO Performance Option had 2.4 million exercisable options and 19.2 million options outstanding. Stock-based compensation of $36 million and $48 million for the CEO Performance Option was recorded as a component of general and administrative expense during the three months ended June 30, 2024 and 2023, respectively. Stock-based compensation of $71 million and $108 million for the CEO Performance Option was recorded as a component of general and administrative expense during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had unrecognized stock-based compensation relating to the CEO Performance Option of $129 million that is expected to be recognized over a weighted-average period of 1.3 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			3,979						81.84
Vested			(2,088)						57.88
Forfeited			(426)						63.21
Unvested as of June 30, 2024			12,011						$	69.44

As of June 30, 2024, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $777 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Employee Stock Purchase Plan (“ESPP”)

Stock-based compensation expense related to the ESPP totaled $7 million and $5 million for the three months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense related to the ESPP totaled $13 million and $8 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had unrecognized stock-based compensation relating to ESPP awards of approximately $11 million, which is expected to be recognized over a weighted-average period of 0.6 years.

On May 28, 2024, the Company’s stockholders approved the 2024 Employee Stock Purchase Plan (the “2024 ESPP”), an amendment and restatement of the original 2016 Employee Stock Purchase Plan (the “2016 ESPP”). The changes from the 2016 ESPP to the 2024 ESPP include removing the ten-year plan expiration date, changing the offering period commencement dates on future offering periods from May 16th and November 16th to May 15th and November 15th, respectively, and providing other minor technical and administrative updates. Existing offering periods under the 2016 ESPP continue unchanged under the 2024 ESPP, and the “evergreen” provision for annual increases in issuable ESPP shares will still end on and include January 1, 2026. The Company does not currently expect the new or modified provisions of the 2024 ESPP to materially impact its financial statements.

Note 9—Income Taxes

In determining the interim provision for income taxes for each of the three and six months ended June 30, 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 June 30, 2024 and 2023, the provision for income taxes included benefits associated with stock-based awards of $18 million and $9 million, respectively. For the six months ended June 30, 2024 and 2023, the provision for income taxes included benefits associated with stock-based awards of $29 million and $36 million, respectively.

For the six months ended June 30, 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 and state and foreign taxes, partially offset by the impact of tax benefits associated with stock-based awards and research and development tax credits.

There were no material changes to the Company’s unrecognized tax benefits during the six months ended June 30, 2024, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year.

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 for platform fees, value-added services and platform features (“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 June 30,												Six Months Ended June 30,
			2024						2023						2024						2023
United States			87		%				88		%				87		%				88		%
International			13		%				12		%				13		%				12		%
Total			100		%				100		%				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 June 30, 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.

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.