Earnings Call: Q1 2019

May 9, 2019

Welcome to The Trade Desk's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Chris Toth, Vice President, Investor Relations. Thank you. You may begin. Thank you, operator. Hello and good afternoon to everyone here in Europe and good morning to everyone in North America. Welcome to The Trade Desk First Quarter 2019 Earnings Conference Call. Our call today is taking place from our London office. On the line is our Founder and CEO, Jeff Green and Chief Financial Officer, Paul Roth. A copy of our earnings press release can be found on our website at thetradedesk.com in the Investor Relations section. Before we begin, I would like to remind you that except for historical information, the matters that we will be describing will be forward looking statements, which are dependent upon certain risks and uncertainties. I encourage you to refer to the risk factors referenced in our press release and in our most recent SEC filings. In addition to reporting our GAAP financial results, we present supplemental non GAAP financial data. A reconciliation of the GAAP to non GAAP measures can be found in our earnings press release. We believe that providing non GAAP measures combined with our GAAP results provides a more meaningful representation of the company's operational performance. I will now turn the call over to Founder and CEO, Jeff Green. Jeff? Thanks, Chris, and thank you all for joining us. I'm excited to be speaking to you from The Trade Desk's London office, the hub of our European operations. Our growth in this region continues to be very solid. Our offices in Hamburg and Madrid both grew spend well over 100% over the last 12 months. More on that later, but let's get started with the results for the quarter. I'm extremely pleased to report that Q1 2019 was another outstanding quarter. Because advertising budgets are often reset in Q1, numbers for the quarter have historically been the most challenging to predict. This year, we again surpassed even our own expectations. We continue to add new advertisers to our platform and existing customers increase their spend. All major agency holding companies are now under MSA with us and spending on behalf of the largest advertisers in the world. The vast majority of companies in the S and P 500 have run advertising campaigns on our platform. We are executing well. As a result, revenue was $121,000,000 in the Q1 of 2019, which is an increase of 41% compared to a When we When we've seen surprises in the past, they tended to be to the upside. Because we have continued to maintain our 95% plus client retention, this quarter continued that trend. Adjusted EBITDA increased to a Q1 record of $24,700,000 We continue to be one of the fastest growing and profitable software companies in the world today. Our GAAP net income has been in the black for the last 12 quarters in row. Now let's step back and look at the big picture. In 2019, according to IDC, spending on global advertising will be about 7 $25,000,000,000 up over 4% from 2018. At current growth rates, global advertising will be a $1,000,000,000,000 industry in about 7 years. Programmatic is still a relatively small part of the total global advertising pie. It is estimated at around $33,000,000,000 in 20 19 and growing about 20% year over year according to Magna Global, but it is growing 5x faster than total advertising. We maintain our prediction that before long, most advertising will be digital and nearly all of it will be transacted programmatically. We are racing towards that outcome and transforming how media is bought and sold along the way. Data driven micro transactions are better than bulk transactions that are fueled primarily by guessing. Programmatic offers advertisers a measurable return on their investment and a better ad experience for consumers to support the content that they love with greater transparency for all parties. Our addressable market is huge and growing. In Q1, we grew twice as fast as the programmatic industry and about 10x the pace of global advertising growth. The Trade Desk is better positioned than nearly any other company to capture significant share in the channels and regions that matter most. We expect to continue to gain market share for the foreseeable future. 45% of Q1 spend on our platform was in mobile. Our Q1 year over year mobile video ad spend growth was about 60%. Mobile in app spend growth was about 60% as well. Data spend was up 80% and cross device spend was again up around 300%. Audio spend had an amazing quarter, growing over 2 70% in Q1 and Connected TV spend grew well over 3x from a year ago. Large brands such as a massive gaming company, a global food company, a global auto manufacturer and many others are expanding their reach through The Trade Desk. We're also seeing many of the unicorns that have gone public or are planning to go public using The Trade Desk to power their foundational digital advertising strategy. But as the programmatic industry grows, it's also consolidating. This trend is accelerating. We see it in the headlines. In this environment, we will continue to look for selective acquisition opportunities like Adbrain. Since becoming part of The Trade Desk in late 2017, Adbrain's cross device technology has added incredible value for our customers. Cross device spend has been up about 300% year over year for the last two quarters in a row now. This acquisition has already paid for itself many times over. As our industry evolves, advertisers are migrating from other platforms to The Trade Desk as we solidify as the premier gateway to the independent Internet. Our business model of independence, transparency and objectivity makes us the compelling alternative to the walled gardens that have become an increasing source of frustration for major advertisers worldwide. Our customers and industry pundits recognize these trends. In fact, last week at AdXchanger's Programmatic IO Conference, The Trade Desk was recognized as the best demand side technology from among other DSPs. This validates what we have been saying all along, From our revolutionary bit factoring architecture to the Next Wave platform we launched last June, our agile engineering team has built technology that outpaces all other DSPs in the market today. This all adds up to make us one of the fastest growing and most profitable software platforms in any North America. Here in London, our office broke its all time record in the month of March, surpassing the previous record they had just set in December of 2018. That is quite the accomplishment. We've seen outsized growth in all of our offices in Europe. And the momentum does not end there. We continue to see major brands move their spend over to our platform in Europe. These recent wins included several CPGs, a video gaming company, a large technology company and a multinational food and drink company. As anyone following The Trade Desk closely will know, we are investing heavily in CTV. In quarters past, we have talked about CTV growth in North America, but it is happening everywhere in the world. 1 of the biggest drivers for growth in Europe is Connected TV. We recently ran our 1st CTV campaign on the European Broadcaster Exchange or GETS. This is really exciting. EBS is a joint venture among Europe's leading media companies to make video advertising inventories available programmatically. This enables advertisers to run pan European campaigns in a premium brand safe environment. We have not seen diminished spend in Europe as a result of GDPR. From our perspective, consumer privacy and relevance are both attainable. GDPR helps to create a better Internet by establishing guiding principles for marketers. It pushed companies to be clear about the quid pro quo of the Internet and how it works. Our proactive approach to data privacy has strengthened our relationships in the region. We have built trust with publishers and customers, and we continue to win new spend and build closer relationships with content owners. We think GDPR and the success we have had in this region since its leadership can be a blueprint for other regions that implement general data and privacy regulations. We are laying the groundwork for additional success in Europe. Coming out of my meetings here this week, I am more optimistic than ever about what is possible in the UK and in Continental Europe in the months and years to come. Another key region for The Trade Desk is Asia, where the largest middle class in history is emerging and consuming digital content at unprecedented rates. After 2 years of laying the foundation, we officially launched our platform in China in Q1. Our inventory partners include Baidu, Alibaba, Tencent and iQIYI, all regional must have content providers with premium inventory for advertisers. We've also built out the appropriate data infrastructure conforming to Chinese law. Our account teams are equipped with clear onboarding procedures. The Trade Desk is fully open for business to global brands wanting to reach Chinese consumers. One great example of the outside in approach to China is a global luxury retail brand that wanted to showcase their latest collection. Their agency used The Trade Desk so all campaign management and reporting could be consolidated on one platform. The goal of the campaign was to drive more visits to the luxury retailer site. After just a few days of running the campaign, the agency decreased the advertiser's cost per visit by 25%. It was a huge success. There are many opportunities like this for global brands to reach consumers in China on our platform. At our China launch event in March, Vincent Ho, the Chief Data Strategy Officer of Tencent Marketing Solutions, stated that we are aligned on 3 core principles. 1st is our mutual desire for transparency. 2nd is the combined focus on delivering premium inventory to global advertisers and third is the ability to properly put 3rd party data to use. He also said The Trade Desk has built a great team of people in our Shanghai and Hong Kong offices. He pointed out on stage that our business is driven by relationships. While this is true everywhere, this is especially true in China. This is how we are laying the foundation for long term success in China. China is a long term investment. We are only at the beginning, but I have never been more optimistic about our prospects in China. I look forward to updating you more on our progress as we continue to grow our business over the long term. I also want to highlight some of the key growth initiatives of our business. First, we are again seeing exponential gains in our Connected TV business. Nearly every quarter, we have some breakthrough to report in this key channel. Q1 2019 is no exception. Our connected TV inventory continues to grow. More channels, more users and more ad opportunities joined our platform this quarter. In Q1, advertising slots available through our platform increased over 3x. We invested in the infrastructure early to support CTV inventory, and by nearly all measures, we are ahead of the curve. And as this market evolves, no one is better positioned to reap the rewards than us. It's better to be early than late. 5 years ago, when I was predicting the advent of Internet fueled TV to replace linear TV at a faster pace than the trend suggested, critics would always counter that traditional TV has staying power. I heard over and over again how live events, especially sports, would make TV lovers keep their beloved cable subscriptions. Now, nearly every major live event is available on demand and accompanied by fewer and more effective ads. Live TV is perhaps better suited to the real time nature of programmatic monetization. Unpredictable commercial breaks and unexpected overtimes are better monetized and programmatic than in traditional advertising. In live events, we are accessing more inventory than ever before. The NCAA March Madness Basketball Tournament is just one example. March Madness was incredibly successful for The Trade Desk. We saw more spend on our platform than we have for any other live sporting event today. Given the spend we've seen in the past from the NBA playoffs, MLB's World Series, the Super Bowl, the World Cup and now March Madness, we expect this trend to continue. Even with this tremendous growth, we're still just getting started with CTV. EMarketer reports that 2.8% of all television advertising spend in 2019 will be in programmatic. While that represents a solid upward trend, we believe that before long, virtually 100% of TV ad buying will be transacted programmatically. As an industry, we have barely started. Linear television continues to lose ground to connected TV and other channels. There are fewer viewers, more ads and higher CPMs. According to Cord Cutters News, Comcast, Verizon and AT and T had over 900,000 people cancel their pay TV services in Q1 alone. If the trend continues, they could collectively stand to lose over 3,500,000 subscribers this year. Ultimately, this is an unsustainable model. That's why we have a focused presence at the current TV upfronts. If you're not familiar with the upfronts, it's an annual gathering where networks and other content providers present their new shows to advertisers. Advertisers commit the bulk of their annual TV spending at these upfronts. These commitments have often been based on instinct and relationships with no measurable sense of how the advertising will perform. It's an old school analog way of doing business. Programmatic ad buying wasn't even on the radar at the upfronts a few years ago. As more TV content is consumed on connected devices, advertisers realize they can apply a more data driven approach to TV advertising and become much more precise in their campaigns. Changes to the upfront process represent the biggest opportunity for stair step growth CTV may ever see. The generational convergence of the Internet and TV has started to shift the entire TV industry toward programmatic. A growing number of brands and agencies now require that a portion of the upfronts be transacted programmatically. Many have asked us to help them to actively navigate this new digital upfront environment. This is the 1st upfront season where we've been involved like this. But we expect the trend to continue because our early investment in TV, The Trade Desk is in the right place to meet the needs of both content providers and advertisers as they shift to programmatic TV buying. Our value proposition to advertisers in CTV is massive. We have incredible scale. We currently reach 80,000,000 households worldwide through our CTV inventory, and that's up from 0 just a few years ago. The scale of our reach is at least 3x the size of the largest MVPD. In fact, it's nothing but upside at this point. So we expect CTV to be a key growth driver for us again in 2019. A second key initiative we're excited about is the growth in data driven spend on our platform. It's just a fact that data driven decisions are better than guessing. The choice for advertisers is clear. When it comes to guessing or data driven campaigns, data wins every time. With The Trade Desk, advertisers have the tools to become data driven in all of their decision making in a way that protects consumer data and privacy. Since the launch of our Next Wave product last year, data spend growth and usage has accelerated. Data spend increased 80% year over year. Media buyers using data have also significantly increased. We have still only scratched the surface of what we can do with data, but data usage will be significantly higher as the years go on. This is a good time to remind everyone that our approach to data has been the same since day 1. Unlike walled gardens, The Trade Desk doesn't need directly identifiable information to create relevant advertising. We don't need names or e mail addresses or phone numbers on our platform to target advertising effectively. It's not part of our business model and never has been. In the current environment, that positions The Trade Desk well as a compelling alternative to the duopoly of Facebook and Google for advertisers who value data transparency and privacy. Our strategy is working, and we're winning. The final initiative I want to highlight today is our commitment to enhancing the effectiveness of programmatic advertising by providing a unified ID for the entire industry. Our unified ID solution involves The Trade Desk giving away our cookie ID for free to SSPs, publishers, DSPs, DMPs and data providers. Doing so helps improve the efficiency and performance of the entire ad funded Internet. Mass rates are improved, giving advertisers more effective targeting, and the number of syncs taking place in the ecosystem are massively reduced, giving consumers a better ad experience. Momentum has accelerated. Today, more than half of all header bidding auctions are completed using our Unified ID technology. The largest independent SSPs in the world are seeing match rates with us of up to 99%. As we hoped, our unified OpenID is becoming a common currency for the open Internet. Finally, we are continuing to make large investments in the areas critical to our future. The Trade Desk has always been about innovation. We are pushing the pedal to the metal to innovate and grow more quickly than others in our industry. We are confident we can invest in areas such as CTV, data, global expansion and creating a safer programmatic environment. We also continue to invest in our infrastructure to support business and data processing growth worldwide. All these areas are critical to grabbing additional share over the long term. We expect the investments we are making now to yield significant results in 2020 beyond. In conclusion, The Trade Desk had a strong first quarter in 2019, extending our strong run from 2018. Our foundational business model of independence, objectivity and transparency continues to be validated in the marketplace. The contrast between our offering and the walled gardens continues to propel our momentum. Our investment in key regions and channels has yielded great gains, so we will continue to invest wisely as new opportunities emerge. We are executing well and the secular tailwinds for our business are strong. There is every indication we will see continued significant growth in 2019 and beyond. Now, I'm going to turn the call over to Paul to discuss our financials. Thanks, Jeff, and good afternoon, everyone, and good morning to those investors joining us from North America. As you've seen in the numbers, we are off to a great start in 2019 with strong Q1 financial performance and execution. Revenue increased 41% year over year. Adjusted EBITDA increased to $24,700,000 and GAAP net income increased to 10,200,000 dollars We achieved this while we continue to invest aggressively in areas critical to our future growth, such as in our platform, while adding to engineering and sales talent. Revenue for the Q1 was $121,000,000 which was above our prior expectations and reflected increased spend by our existing customers plus the addition of new customers and advertisers. For the quarter, approximately 89% of our Q1 gross spend came from existing customers who've been on our platform for over a year. With the growth of our business, our operating expenses grew to $115,000,000 This increase year over year was due to sales and marketing as we scale for future growth. The year over year increase also reflected higher G and A expenses, which takes into account stock based comp and we expect G and A to moderate as a percentage of revenue in Q2 and in the back half of the year. Income tax was a benefit of $4,800,000 in the quarter, mainly due to the benefit associated with employee stock based awards, the timing of which can be variable. GAAP net income was $10,200,000 for Q1 or $0.21 per fully diluted share. Our adjusted net income was $23,100,000 or $0.49 per fully diluted share compared with adjusted net income of $15,300,000 or $0.34 per share in the comparable period. Adjusted EBITDA was $24,700,000 with a corresponding margin of 20 percent of revenue during Q1. The increase in adjusted EBITDA dollars reflects the strong growth of our top line offset by our increasing investments in product, people, global expansion and corporate expenses. Net cash provided by operating activities was about $10,000,000 for Q1 and our trailing 12 months of operating cash flow and free cash flow were $84,500,000 $55,000,000 respectively. We continue to have 0 debt on our balance sheet and our total cash, cash equivalents and short term investments exiting the quarter was 218,000,000 dollars Please note that short term investments is a new item on our balance sheet and represents an opportunity for us to earn a return on our unused cash. Our DSOs at the end of Q1 were 95 days, a decrease of one day from the same period a year ago. DPOs for Q1 were 76 days, a decrease of 2 days from the same period a year ago. For Q2 of 2019, we are expecting revenue of $154,000,000 and adjusted EBITDA of $46,000,000 dollars For the full year 2019, we now expect revenue to be at least $645,000,000 revised upward from $637,000,000 last quarter. Adjusted EBITDA is now expected to be at least 29% of revenue. I will now turn the call back over to Jeff for final comments and of course Q and A. Jeff? Thanks, Paul. 2019 is off to a great start for The Trade Desk. We exceeded our expectations for the Q1 and are raising them for the year. The fundamentals of our business are solid, and we continue to scale up well. As the worldwide advertising market moves towards $1,000,000,000,000 in a few years, we are well positioned to win a large share of the programmatic portion of that market. We invested early in key markets and channels. And while we are pleased with our initial gains, we see far more upside yet to come. All indications are that our business is poised for increased success in 2019 and beyond. The future has never been brighter. That concludes our prepared remarks. Operator, let's open it up for questions. Thank you. Our first question comes from Youssef Squali with SunTrust Robinson Humphrey. Great. Thank you very much. Jeff, you mentioned mobile as a driver really as the first driver of spend growth this past quarter. One question we often get is around the upcoming changes to Chrome, which ultimately may hamper the ability for advertisers to use cookies to track and target. So really just wondering how you guys expect that may affect the mobile online ad environment in general outside of Google and Trade Desk in particular? Thanks a lot. Awesome. Thanks Youssef for the question. So I actually feel like we're a little bit fortunate in the fact that our prepared remarks were a couple of minutes shorter than usual. So, I want to take actually a little bit of extra time to explain this change more than I would otherwise because we just have a few extra minutes. And because so many changes have happened so quickly, this has been something I've talked a lot about over the last couple of days. So first, let me give a little bit of context. As many of you know, Apple made some changes called ITP to their browser where they decided to just block the use of all third party cookies about a year ago and replace it with what they call ITP, which was essentially an algorithm that would decide what 3rd party cookies would be allowed to persist instead of both first and third party doing well no matter what or existing on the browser no matter what. Google has a different challenge because of course Apple doesn't make any of its money through advertising, at least not directly. And Google makes 95% of its money through advertising. And of course, Chrome has much more market share. So a lot of people have been watching Google and the privacy pressure and some of the things being set out of Chrome saying what changes are they going to make. And then in the last couple of days, they've made their announcement. And I'd like to just explain exactly what they did. So basically, they decided to give they tried to thread the needle between relevance and privacy. I think Google did an amazing job and did a very good thing, which is that they gave users more privacy control. So any consumer who wants to can go in and turn off third party cookies. So unlike Apple, who had kind of did it by default and then hid behind the sort of algorithm, the decisioning or the decision was hidden behind the algorithm, not the Apple hid behind it, but the decisioning was hidden behind it. In this case, they expose that to consumers. And the user will now have a user interface where they themselves can manage and remove cookies if they want to. I don't expect that a lot of users will do this when users have been given the ability to do so in other cases. They don't take advantage of it, But they will have that control. 2nd, they've asked The Trade Desk and other ad tech players to plug into an API that will allow us to basically disclose to consumers how we use their data. And honestly, we've never had a place to share this with consumers because our relationship isn't direct with consumers. So, we're delighted at the opportunity to put this in front of them and share with them essentially how benign the impact is that we have. We don't know all the things that Google or Facebook or even a consumer data company knows. And because we don't transact in personally identifiable information, we're actually excited to share the insight because we think we too can share how we've struck the balance between privacy and relevance. Google also basically got rid of this ability to fingerprint. So, there are a number of companies who were pushing the envelope in the way that they scrape data from Google and they found ways to just further restrict it. We don't expect that to have any meaningful impact on it. We understand both the objective and at least at the high level what the mechanics are going to look like. So we don't expect that to have any material change to us. And then the last thing is, if so if you're in Google's position and 95% of your revenue comes through ads and you also want to create a better Internet and you recognize that in order for the Internet to thrive, premium publishers have to get premium CPMs. So if they were to take away targeted advertising and what is an $8 CPM on The New York Times today turns into a $4 CPM, then The New York Times is going to be out of business. But it is that's what's at stake. So Google didn't want to screw that up. So they actually implemented a 4 thing, which is and they might say implemented it, they announced they haven't implemented it. But they announced this thing called SameSite, which basically gives publishers like The New York Times the ability to go in and say treat this third party vendor, whether that's my CRM or that's my payment gateway or that's my ad tech partner, treat them like a first party cookie. So this 3rd party cookie is actually essentially the same as my own site. And that makes it possible to prevent throwing the baby out with the bathwater and putting all the burden on the algorithm. I think if there's any meaningful adoption of consumers opting out, it will then bake the question or force the discussion with companies like The New York Times between them and their users to say, if you get rid of targeted advertising, you turn $8 CPMs into $4 CPMs and I can't run my business anymore. So I need to explain to you the quid pro quo of the Internet you need to opt in. Please help me find a way for me to give you the service that I've always been giving you. This same size technology becomes a safety net to that discussion so that they don't run any risk of messing up the quid pro quo of the Internet, while at the same time striking the balance between privacy and relevance. All of this is perhaps more detailed than a lot of investors want to know, but here's the punch line. Google made a significant number of minor changes, which increased privacy controls for consumer and made the Internet better. It did not have any impact on relevance. We do not expect it to have any material change on our business. And most of these changes, we welcome because they will make our business better. And any of those others that we're sort of shrugging our shoulders at don't have a negative impact on our business at all. So overall, this is a very positive change for us. It's good for the industry. When I spoke to Google yesterday, my very first question is, is there more coming or is this the bulk of it? And they said this is it. More details to come on these specific things, but in terms of like major headlines, this is it. So I'm super excited at the change Chrome has made. I actually look at Google as a partner on the issue of privacy. We've done a lot over the years on both fraud prevention and privacy. And we're very much in the same boat on being on wanting a better Internet, but also wanting to preserve relevance and monetization in order for the Internet to pay for itself. So I think in the last week, there's been huge steps forward and The Trade Desk will benefit from it. I'm so glad you asked this question and thanks for letting me go a little bit longer on this one. Thanks, guys. Dave, next question? Our next question is from Brett Fill with Jefferies. Thanks. Jeff, just on the strength in OT team, I assume the spend is up 3x. I was just curious if you could lay out how you think the year evolves, kind of what ending you're at and any other notable items that we should highlight? And maybe just a follow-up on TTT's unified ID and how that plays into the first question as a quick follow-up. Thank you. You bet. So I'm going to actually answer them in reverse order, just because the Unified ID question is in some ways an extension of the first question on the Chrome changes. So, because Google has created this or announced this mechanism called SameSite, which enables publishers like The New York Times in my example, to identify partners whose cookie should be treated as a first party cookie. It makes all the work that we've done in Unified ID even more important and a more strategic advantage or asset to us than it was even a week ago or a year ago. And I'm excited, some of you investors may have known that in this quarter, we announced that we've been fully adopted in the 2 major forms of header bidding as the ID that gets transacted in header bidding. So for those of you that may not follow what that means, basically in most auctions today, there is a technology use called 1000000000. And that means that we get to participate in every ad opportunity that a publisher wants to sort of test the market before they allow their ad server to monetize it. And because most publishers, especially most premium publishers, all use some form of header bidding and the fact that there's only 2 standards for header bidding means that if you want to implement an ID or a common currency, you have to integrate with both of those. The first one we integrated with was the index and we found a 99% match rate for that ID, which means that there is a common currency in that header. And then a month ago, we announced our partnership with the open source header implementation, which actually has the lion's share. And now our idea is transacted across all of those. So that means that in my view, we've now become the standard the standard currency of the open Internet for an open ID. And that means that if you're The New York Times and you are trying to figure out which cookies and which partners you're going to keep in your more controlled and more protected environment, there is no question that you're going to use the ID that is the currency of the open Internet. And the fact that all the major SSPs, even many DSPs and DMPs have adopted our ID now and you can just go back and look at all headlines and the press releases that we've made over the last 6 months. Our ID is quickly becoming ubiquitous and I believe if it wasn't CheckMate, we're close to it when both of the header implementations adopted our ID. So, the trend is amazing. I mentioned The New York Times as an example just because I think journalism is so important and also there's a lot of pressure on it. But we've actually had several of the biggest names in journalism adopt our ID directly to just make sure that they have the best chance at 100% match rates with all the monetization of the open Internet. So with that sort of momentum, I believe that if we're not at the pace of being unstoppable on this initiative, we're very close to it. The second part of your question or I'm sorry, the first part of your question on Connected TV, I'll just remind everybody that we announced 3x year over year growth on spend and 3x year over year growth on inventory. We now have 100 of advertisers spending over $100,000 a month. I think that's right. Yes. A month. That's right. Over the last quarter. Over the last quarter. Okay. I couldn't remember the time frame. And that 3x growth just continues to be indicative. I mean, you've heard us measure everything that X does now for years when it comes to Connected TV. So it's just indicative of all the growth that we're experiencing, more and more happening in live television. And the amount of conversations that we're having with content owners directly is perhaps the bullish or the most bullish qualitative thing that I can share. I mean everything in the numbers is very bullish, but beyond just the virtual MVPDs and the aggregators because our conversations are so strong with content owners. And especially just having conversations at the upfront and having conversations with the biggest players at the upfront about redesigning the way upfronts work as it relates to digital and putting more and more into programmatic. Those to me are the most exciting parts of sort of future growth potential in our business. So the very biggest conversations that we've ever had on CTV are happening right now. Thanks, Brent. Next question, operator? Our next question is from Shyam Patil with Susquehanna. Hey, guys. Congrats on the great quarter. Jeff, just on Europe, you mentioned in your prepared remarks that you're more confident about what you can achieve in that market. I was just wondering if you could talk a little bit more about that, what you're seeing on the ground, what excites you the most? Thank you. You bet. So I'd like to start by talking about Germany. While I'm doing this call from London, I've spent the last week in Germany. So Germany for the last 2 years has grown over 100% each year. Last year it grew by over 100%. It had a record quarter again incidentally as did the U. K. But one of the things that I'm especially optimistic of in Germany is the approach that the biggest players in connected TV and even traditional television, the approach that they're taking to the market. Perhaps none is bigger than RTL, who I don't mind mentioning that we spent some time with this week. RTL made a very bold decision that I actually think many companies around the world should learn from and that's they noted that Google had very aggressive economics in YouTube would take a very healthy rev share. And while they would produce the most premium content, YouTube represented sort of a richer deal for the MVPD, if you treat YouTube like that as distribution than they had ever shared in traditional television. So they made the decision to not let any of their content go on YouTube and sacrifice 1,000,000 of dollars for the long term. So in the short term, it would cost them 1,000,000 and in the long term, they felt like that would make them create better relationships directly with the consumer as well as focus on other distribution, so that they never became too dependent on YouTube. That both paid off for them, but it's also made them lean more into our partnership. And so we spend a lot of time talking about how we can do more together, how we can redefine the upfronts. But that's also had a huge impact on our business. So part of the reason for that 100% growth is because if you want to get access to some of the most premium content in Germany and that's not just isolated to RTL, we had similar conversations with Perceben and others. If you want to get access to the most premium inventory, you can't get that through DBM or DV360 or YouTube. And that's brought a lot of customers to us. We also have over 100% growth again in Spain, both the UK and Paris who are both slightly more mature markets are continuing to grow faster than the U. S. And we continue to gain ground. I continue to believe those are some of the best opportunities around the world for us to grow. I spend a lot of time talking about Asia, but that's because of the sort of secular tailwinds of the entire macro economy and what I believe the global economic sort of tailwinds are going to provide. But the fact that Europe or EMEA is a more mature media market, but still represents a very small minority of our total spend. It represents in the short term one of the best places for growth. And by short term, I mean like half a decade or so that we'll continue to see outpaced growth in EMEA. So I'm now leaving the time that I've now spent in London and in Germany with more optimism than I've ever had for EMEA and especially because of CTV. One last anecdote of just a conversation that I had here in Europe. When we were talking about expanding our partnership, we said, hey, we should do things in other channels too, not just in CTV or not just in video, in all forms of video, CTV being part of that. They said, Oh, wow, you do more than that? I thought you guys were just a video company, which made me just so delighted that we've done so well in Europe on video and CTV that despite the fact that we started our business in display and our while we were early to market, it's one of the youngest channels that we've been in. It's been amazing to see us define ourselves as a video company, especially given that at end state, I expect video in all its forms to be roughly 50% of our pie and the global pie. Thanks, John. Operator, next question? Our next question is from Mark Mahaney with RBC Capital Markets. Great, thanks. Two questions. I know you had a lot of questions on the last quarter earnings call about setting expectations on China and materiality on China. So I'll just repeat the question this quarter. When do you think it's realistic to expect material contributions from that market? And secondly, maybe it doesn't matter, but you haven't really talked about or you've indirectly talked about Next Wave this call, but it's been more specific the last couple of calls. And maybe that's just now an integral part of your product, but can you just talk about adoption you've seen and impact on spend? And maybe it's embedded in your comments about the digital or the data spend, the growth of that, but just any more color on that would be helpful. Thank you. Awesome. Thanks, Mark. So first, as it relates to China and expectations for when materiality will come. China is something that we think we have to play the long game. And we've for a long time been in the business of establishing relationships with Baidu, Alibaba and Tencent. I think we've done a great job of setting expectations with them and we've also sort of restricted our growth, if you will, in China by saying we want to start by only bringing incremental dollars to Baidu, Alibaba and Tencent and to make it very clear that it's incremental. So it doesn't seem like we're taking money that they're already getting and then simply taxing it, which would make it so they would be incentivized to not keep us around, but instead to focus on giving them incremental spend. And we've done that by leveraging the relationships we have all over the world and especially with the global headquarters of both brands and agencies to bring incremental spend. I've had a meeting about that very thing here in London today. So it's something that we spend a lot of time talking about. But because our numbers are so big in the amount that we spend in total and we're just getting started, I don't expect it to be material for some time. Now that said, at the end of March in Q1, we launched our product GA. I was on stage with Benson, the Chief Data Strategy Officer at Tencent, as I mentioned in our prepared remarks. Our dialogue with companies like Tencent, Baidu and Alibaba is better than it's ever been. I'm really optimistic, but I expect it to go slow and to move the needle on a P and L that's as big as ours when you're just getting started is going to take years. So I expect that to take time. On the Next Wave launch, it's rare when you launch a new product that you see adoption happen so fast when you support both. So I just want to be clear, we support what we now call classic. So people want to use our old system because it's a totally new workflow to adopt Next Wave. That's fine. They can use our old system. We just tried to make our new product so good that they would choose it. So we didn't want to force them to, we wanted them to choose it. And I'm really excited to report that at the end of 2018, we just been over 50%, five-zero. But today, we're over 80% in adoption. And we feel like we have very clear visibility on how to get the remaining 20%. That has had a huge impact on us, 1st of all, reducing CPMs for our clients. So, the algos that have come with the product have actually made more money go to working media and lowered the cost of the same inventory that they were buying. But it's also layered on more data, which is both good for us and for them, sort of ultimate win win, which is the best explanation for why cross device spend is up 200% in Q3, was up 300% in Q4 and was up 300% again in Q1, so 300 percent 2 quarters in a row. That is a commentary on both how strong our offering is in Next Wave, but also how important it is to be global and omnichannel in your offering. So I expect by the end of the year to have that 80% much closer to the 100% mark. And by early next year, actually turning off Classic because we'll have full adoption. And incidentally, by turning off Classic and all the effort that goes into supporting it, it will unlock engineering resources to go build more differentiation and continue to just create more and more separation between us and our competitors. Thank you very much, operator. Next question? Our next question is from Vasily Karasyov with Cannonball Research. Good morning. I have a question on Hulu. The CEO of Hulu at the Investor Day that Disney held actually called out that they will be investing heavily automating this ad sales process. And I believe that refers to the private marketplace that they launched in January 1 and where The Trade Desk is a partner. So I was wondering if you can tell us more about the role of The Trade Desk in that private marketplace and how do you expect this private marketplace to evolve now that Disney is in control and really focused on automating the head sales process? Yes. It's one of the most exciting things happening in TV. And the reason why, just to give a little top line color is, if you were to go down your Amazon Fire box or your Roku box and just see which apps are most popular. Netflix would likely be 1st, Amazon would likely be 2nd and on many people's TV, Hulu would be 3rd, and therefore representing the 1st ad funded app in that stack rank. So I think Hulu is a very important case study. It's an important tea leaf. I've been saying for years, they are one of the tea leaf companies of all of media. And I'm not sure that there are any 2 companies beyond Hulu and Spotify that represent tealeaf companies more than those 2. But Hulu, as you pointed out, announced in January that they're opening up their automated biddable marketplace. This is really exciting because in the past, there's been some sort of channel conflicts between their direct sales team and programmatic. And so they've gotten rid of that. So that we actually they put it into one market, which is great for them because then you consolidate all the demand. So, it competes against each other. And it's great for us because all we've been asking for, for years is give us a chance to compete. And it means that our buyers will be able to dynamically influence pricing that will give us access to more inventory and we fully expect to become a bigger and better partner to Hulu than we've ever been. And I think we've been one of, if not the most important programmatic partner that they have. So, I expect long term to be their most important source of demand and price discoverable inventory and premium content is an amazing combination. So I think what they're doing is really innovative and I couldn't be more excited about our partnership and Great. Thanks for taking my question. Great. Thanks for taking my question. Thanks for the kind of expounding on the Google Chrome changes. Related to that, I was just hoping you could help me understand how to think about your data products, your data offerings within the context of those changes? Is there kind of unique exposure to that part of your business from these changes? And on data, does it seems like I think you pointed out in your Analyst Day that the number of data segments per campaign has been growing significantly. Does that increasing mix of data kind of raise the regulatory risk profile of your business at all? Just curious how you think about that. Thanks. Yes. So I don't believe that it creates any meaningful risk. In fact, I think it's kind of the opposite. I think everybody in the space has been afraid of what changes are going to come and how do we need to respond. And there's a fear and I've talked about it very publicly that the Mark Zuckerberg hearings in Washington, I think it scared Facebook, I think it scared Google, and scared them in part because legislators, especially in the U. S, don't really understand all the mechanics and that made it so that technology companies are more afraid of them. And so the fear on sort of both sides has raised as people are trying to figure out what to do about it. And in light of Google's changes, I think Google has also been fretting about it. What do we do? Because 95% of our revenue comes from advertising and that's not something that Apple has to deal with. And if you're in Google's shoes, you're probably looking at Facebook saying we have to do better than that. And so they're just they're sort of in uncharted territory trying to figure out what to do. And what in my view they did is they gave clarity to the industry. We will strike a balance between relevance and privacy. And consumers don't want a broken Internet and they also don't want their privacy violated. And the Internet does have to pay for itself somehow. And so to me, I leave this feeling more confident than ever that our long term position of, hey, we can make relevance coexist with privacy. And that if we just share with users the benign insights that we're using to show them relevant ads, nearly all consumers will welcome it, especially if they understand that access to the great content of the Internet is contingent upon it. So Google just made it more clear, something that I don't think Apple has done well. They've not made it more clear. Every time you type in your Apple ID, you don't know why. They have not explained the quid pro quo of the Internet. But Google has just made steps to make it more clear. There's still a lot more work to do, but I think that actually makes our data business stronger, not weaker in large part because I'm really confident that we're doing the right thing and we've taken measures from the very beginning to make certain that we're not taking unnecessary risks and not least of which is that we do not transact in directly identifiable information of consumers. So I don't have even names, let alone email addresses or social security numbers and nearly every consumer data company in the world does that. So I consider us one of the safest, most benign data companies in the world. And what I lack in specificity and what some would view scariness, I make up for in volume. So I'm more bullish on our data portion of our business than I've ever been. Thanks, Tom. Next question please. Our next question is from Brian Schwartz with Oppenheimer. Yes. Hi. Thanks for taking my question here today. Jeff, just wanted to ask you a little bit of a long term strategy thought here. Assuming that this growth opportunity continues and it almost feels like it's going to, especially given some of what you're seeing out there and what you've talked about today in your prepared comments. Does it make sense at all for you to potentially even increase your investment profile even more, especially in your go to market efforts at this point? I realize obviously that could have an effect on the margin, but if you're continuing to grow very fast like you are, you're still going to see outsized profits. So how do you think about that given the opportunity today? Thanks. I'm so glad you asked this, Brian, because on one hand, I look at the global growth and I pointed that and say, this is a secular tailwind and this is such a great place to be. On the other hand, I want to make sure that we get every dollar of it possible. And I just want to make certain that we're running faster than anybody else and we're running as fast as we possibly can. And so, at the same time, all of us can point to many, many companies who have destroyed their companies and their cultures by either spending too much by way of hiring or spending too much or too quickly by way of acquisition. And both are ways to ruin your culture and ruin your business. So I refuse to let our ambition ruin our business. But at the same time, it kills me every single quarter to report EBITDA numbers as high as we do, because I would rather reinvest the business and grow or reinvest the money and grow the business. And so, I continue to look for opportunities to do that. There's a lot of consolidation happening in the space right now. Ad servers like Seismic go out of business. And of course, we're going to look closely and say, is there an opportunity here? And of course, there is an opportunity here. But what's the better one? Is it to buy it? Is it to go after the clients? Is it to build our own? Is it to simply get better at selling? Is it to partner with somebody else? So we look at every one of those. And one of the most important things we do in our calculus is to say, how do we preserve our culture and not take unnecessary risk? And I'm constantly saying to our team on this, assume the money doesn't matter, because to some extent, it doesn't. That isn't the thing we're trading in. We're trading in opportunity cost. We're trading in focus. We're trading in culture. And so I do believe we will get ways to invest more. I think we're getting better at it. So I'm delighted at the trend line there, but I'm still unhappy with how quickly we're able to invest and I want to look for more opportunity to do it. Thank you so much, Brian. Next question please, operator. Our next question is from Aaron Kessler with Raymond James. Great. Thanks, Jeff. A couple of quick question on you mentioned kind of the unicorns having good traction there. Can you also talk about maybe some of the DTC brands that you work with or just generally, obviously there's a lot of reports, a lot of them kind of internalize some of the advertising functions, kind of not going through agencies. What type of traction are you seeing? And is that a limiting factor at all for you guys? Thank you. Yes. So there is some of that. I would just maintain the position that we sort of have always been saying, especially over the last couple of years as it relates to the topic. There's a pretty significant delta between the headlines of in housing, if you will, and the reality. It is really hard to develop the resources of a major agency. I mean, WPP has 100000 ish employees, Omnicom the same. Publicis is not much less than that. So they have massive amounts of resources that every major brand in the world is likely going to rely on for as far as anybody can see into the future. But they are bringing more of the strategy in house. There are lots of micro in housing efforts, if you will. And oftentimes, those companies are reaching out to us. But one of the most bullish things that I can share outside of talking about specific channels or regions, and so instead of talking about TTV or instead of talking about Asia or our excitement about Europe, if I instead sorry, I just got distracted. Somebody came to ask me a question. I'm sorry, somebody just walked in. I think you're talking about some of the most exciting trends that you're seeing? I'm sorry. Yes, with the agencies. Yes, yes, yes, sorry. I'm sorry, somebody just walked in the blindsided me. But one of the most exciting trends beyond those two things, it is the number of unicorns that are leading to us to help them grow their businesses. So of the companies that are going public, of the companies that are sort of next generation companies, It's not just us sort of going to the traditional routes and going to the traditional brands who are trying to either reinvent themselves or make the transition into digital. We're doing that and we're doing an amazing job of that. You could even argue that's our bread and butter. But when you look at the emerging companies and those that are sort of the next generation of growth around the economy, The fact that all of those are coming to us as well to power their growth and we're getting those are often the places where we see surprises and new clients. That's one of the most exciting things happening in our business. Great. Thank you, Justin. Thanks, Aaron. Our next question is from Mark Kelley with Nomura. Great. Thanks a lot for taking my question. I know we're going over the time allotment and it sounds like Jeff, they're trying to take the conference room away from you. So hopefully this will be You're right. Thanks, Craig. Two quick ones. First one is, can you help us maybe level set a little bit on what impression spend growth is? So I would say everything that's less data, you guys called out that 80% growth in data, which is obviously quite a bit above the corporate level. Any color there would be helpful. And the second one, bigger picture, you guys called out audio for the first time, I think in a few quarters. Curious what you're seeing there and if you have any thoughts on the podcast opportunity, you've got guys like Spotify talking about it and it's such a primitive format now where the podcast owners are reading the advertisement midstream. I would imagine you guys are pretty well positioned to see the moving pieces and capitalize on that as it grows. Any would be helpful. Thank you. Awesome. Thank you. Yes, the first part of the question just being about impression growth. In terms of general media spend or impression growth, I don't even spend that much time following it or keeping an eye on it, if you will. And the reason why is, number 1, there's still a double digit percentage of impressions that don't have any meaningful data used against them. And so data spend just has to increase. It's just economically irrational for it not to go up. And then 2, because the type of impressions are changing, meaning at the same time that we're getting more and more impressions that are more valuable because we're getting into things like connected TV and audio. Also, ideally, the number of ads per page in things like display and native, which is still overwhelmingly bad, meaning there are way too many ads on the page. We want to see those impression counts go down and the value and cost go up. And that is exactly the trend. So if you spend too much time focused on either the dollar amount or the impression count, it's really hard to get a sense of those moving vectors. So instead, it's just important to just keep track of how many of the decisions are data driven, are those growing, are those renewing and is efficacy growth going up and all of those are positive, all of those are heading in the right direction. And I'm so glad you asked about audio. I was hoping I could find some way to talk about it today because audio after all the years of growth growing at 2 70% in Q1 is one of the most exciting things happening in media because of the fact that things have gone so well in CTV. We have not given it its due whatsoever. Of course, Spotify announced a great quarter. We're super excited about them as a partner. And it is definitely one of the fastest growing channels, probably the 2nd fastest growing channel we'll ever touch. And podcasting is just growing so fast and I know there are a number of other companies besides Spotify in the game and all of them seemingly are talking about on demand advertising because it is the best chance for all of them to monetize. So, the thing that I find so optimistic about audio is that because the economics are so tight, it is just obvious that they have to use programmatic advertising. And even though you may say the same thing with the rising cost of content in TV, the thing that's different is there's the overhead of a sales force still there in TV that creates something that you kind of have to compete with similar to the way that my Hulu comments were. But that doesn't exist in these new podcast companies. It doesn't exist really at Spotify. So it just makes it so much easier to go fast and after all the years of growth and being in audio putting up 2 70%, I think that's the only way to explain that. Thank you so much, Mark. Thanks, Jeff. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. And today's call is now concluded. The Trade Desk thanks you for your time and your participation. And you may disconnect your lines at this time.