Good day, ladies and gentlemen and welcome to The Trade Desk Second Quarter Fiscal Year 2017 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host Chris Toth, Head of Investor Relations. Chris?

Thank you, Operator. Hello and good afternoon. Welcome to The Trade Desk’s second quarter 2017 earnings conference call. On the call today are Founder and CEO, Jeff Green; Chief Financial Officer, Paul Ross; and Chief Operating Officer, Rob Perdue. A copy of our 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 that are dependent upon certain risks and uncertainties. I encourage you to refer to the risk factors included 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 providing non-GAAP measures combined with our GAAP results provides a more meaningful representation regarding the company’s operational performance. Lastly, I would like to highlight our participation in the following investor relations event. On Wednesday, September 6 we will be at the Citi Technology Conference in New York; and on Wednesday, October 4 we will be holding our first ever Investor Day in New York City. Professional investors and financial analysts interested in attending the event should contact myself in advance as registration is required. I will now turn the call over to founder and CEO, Jeff Green. Jeff?

Thanks, Chris. Good afternoon and thanks to everyone for joining us today. The first half of the year and in particular Q2, have been great for The Trade Desk. We posted record revenue in the June quarter of $72.8 million, and adjusted EBITDA margin of 35%, which exceeded our expectations. I will talk more about that in a bit, but what I get excited about most was that during the quarter we had some of the highest spend ever in multiple channels, in mobile, mobile video, native, and audio. I’m super excited about each of these channels, but more excited that they are all growing together. This is a sign that we are becoming more diversified as we add new unique supply partners. This helps brands reach consumers wherever they grow. We help them buy holistically. This well-rounded growth is as important as the growth itself. We have one of our biggest quarter’s ever in display, but I am even more excited that it was the lowest percentage of total spend ever, now below 40%. Audio is one of our most promising channels and it’s growing at an astounding pace almost 400% since December. Audio is still nascent and has so much outside as more inventory comes online and more users leave traditional radio. If you believe like I do that audio and video are more effective advertising mediums, the fact that we are moving in that direction means that we are moving towards more effective advertising, which in turn makes our business more sustainable as we provide more value. It also is evidence that we have done as good of a job as anybody in programmatic at being on the channel. Our customer base remains extremely loyal and retention continues north of 95%. Similar to the past three quarters,…

Thanks Jeff and good afternoon everyone. Our business continues to deliver outstanding results, and we delivered an all-time record in the June quarter with $72.8 million in revenue, which is really phenomenal given how well we did back in the December 2016 quarter. Every single office outside the U.S. set all-time records in Q2 led by Seoul, which grew 372% year-over-year, our Tokyo office growing 279%, and our Singapore office, which grew 220% year-over-year. From a channel perspective, our growth was driven in part by our mobile video channel, which grew 171% on a year-over-year basis, and our connected TV product, which grew by 167%. Our cross device products, which clients can purchase to attract user IDs across multiple devices including smartphones, tablets, smart TVs, and personal computers that also grew by 163% on a year-over-year basis. Our Q2 was all about continuing to build momentum and trust with our customers, training more people on our platform and on boarding new customers to get ready for the seasonally stronger second half of the year. Our execution has been really strong. A good example of that came from our Hamburg office in Germany, which in Q2 grew by 146% year-over-year. The German market has been growing steadily and we have been making inroads there, but hadn't quite hit the inflection point we knew was coming. After years of hard work investment and patience, we broke through in Q2, and started to see stronger momentum from some of the largest agencies in Germany. Now starting in Q2, they began moving their spend for several of their larger clients over to our platform and we are now helping them in the pitch process to with other business together as we move forward. Now, as I’ve described before from an operational perspective, we have…

Thanks Rob and good afternoon everyone. As you’ve seen in the numbers, the first half of 2017 is off to a record start and we were particularly pleased with our Q2 financial performance and execution against all of our key metrics. Revenue increased 54% year-over-year, adjusted EBITDA increased 60% year-over-year, and GAAP net income was an all-time record of $18.8 million or 148% increase from a year ago, all while investing aggressively back into our business in areas critical to our future growth. Revenue for the second quarter was $72.8 million, which was above our expectations, and reflects both the expansion of our share of spend by our existing customers, plus the addition of new customers and advertisers. For the quarter, approximately 87% of our second quarter gross spend came from existing customers, whom we define as existing customers that have been with us for over a year. Our operating expenses scaled efficiently with the growth of our business to $53 million in Q2 of 2017 from $32 million during the same period in 2016. The increase in operating expenses was primarily due to our increased investments in personnel, mostly in technology and development, and increase in plans from operation expenses, which reflect hosting cost to support the increased use of our software platform, and in general and administrative expenses, which now reflects the costs of being a public company. Total other expense net was $1.3 million and income tax was a benefit of $450,000 in the quarter. Similar to last quarter, our Q2 income tax reflects a discrete tax benefit of $8.6 million, primarily related to incentive stock options. GAAP net income was $18.8 million for the second quarter of 2017 or $0.43 per fully diluted share. Our non-GAAP adjusted net income was $23 million for the second quarter…

Thanks Paul. In summary, the programmatic revolution continues to gain momentum and The Trade Desk remains the clear independent industry leader as we move forward. For all that we have accomplished in the past six months, I personally believe that we are just beginning to scratch the surface of what is to come. Our objectivity is that comes from being buy side only and not only in any media is mattering more and more as time goes on. CMO's and agencies are in need of partners that align their interest and their digital world is so much bigger than two or three websites. Programmatic is only 2% of the entire $650 billion advertising industry, which is growing. And there is a long way to go. More importantly, our inventory partners, particularly in broadcast TV and the agencies and their clients are only beginning to realize what success they can achieve from programmatic advertising on our platform. The first half of 2017 has been an important time for The Trade Desk. And I would like to give thanks to our teams and our partners and our investors for helping to make this a success. I look forward to reporting on our progress and to our upcoming Investor Day on October 4 when we plan to provide a more detailed look into The Trade Desk. So with that, we look forward to your questions. Operator, let’s begin.

Thank you. [Operator Instructions] And our first question comes from Shyam Patil from Susquehanna. Go ahead.

Hi guys it is John [ph]. Congrats on a fantastic quarter. First question, Jeff, just following up on your connected TV commentary, can you talk about how you see that progressing in terms of platform adoption and materiality to The Trade Desk? And recently we saw the CEO of GroupM North America leaves to join AT&T, just curious to get your thoughts on that as well, and how do you see that impacting the overall opportunity?

Thanks John. So, firstly I think the AT&T Time Warner deal is something of a Northstar deal that everybody in TV and advertising should be watching, but I will come back to that. Let me just talk about the connected TV opportunity first. I actually think the most important metrics that I can share to underscore the bullishness that I have for the space is the 10x increase in inventory over the last year. What that represents, I think, is in part that consumers are tapped out on the subscriptions where there are no ads and they are more and more open to the subscriptions that come after HBO and Netflix to include app. And that’s what’s creating so much additional inventory. The Time Warner AT&T deal, as I said before, I think is just so critical I think it is one of the biggest deals in recent media history. The fact that one of the most powerful people in advertising, Brad Lester, is heading to AT&T, I think in the commentary hit bullishness on the opportunity. Because I truly do think that if they execute well they will accelerate the move to connected TV. And to just elaborate just a little bit on that deal specifically, essentially what their vision is to take 5G technology using mobile and make it easier to install cable and instead of using cable they are actually going to use the internet of course. And they what they are going to try to do is gain more customers by selling it for less than what cable companies do today by making everything on demand and then making fewer commercials. So they fully recognize that network has a great stand, while most cable companies have said, hey we are going to stick with the status…

Great, thank you. That’s very helpful. And I have one follow-up. Jeff you also talked about M&A in your prepared remarks, and we’ve seen quite a few deals, particularly on the demand side with fuel, tremor and app Nexis. Can you just talk about kind of how you see this shakeout impacting The Trade Desk and is this going to be something as primarily a tailwind here in the US or is this something that you expect to kind of feel globally? Thank you.

I expect it to continue globally. I know I talked about it in the report. I just want to reiterate this sort of industry clean-up is a very good thing for the industry and that this whole story is going to end with happy ending which is, consumers are better off advertisers are selling more products for less money, and public are getting paid more and more dollar goes to them. All of that sort of, [indiscernible] it is forcing the industry to move in the very direction we have been saying everybody has to go for the last 10 years, which is you have to choose buy side or sell side, you can't have that level of comfort [indiscernible], you have to be global and you have to be omni-channel. So the players that are being acquired most quickly and are most aggressively trying to sell, I think are those players that are either geo-specific or channel specific or complex of interest and meaning to adjust their business model and they are glad to have more capital behind them then the hands of another company. So, but that’s good for the industry.

Great, thank you.

And our next question comes from Mark Kelley from Citigroup. Mark, go ahead.

Great thanks a lot for taking my question. The first one is just on the changes to, so far that Apple is making a roll-out towards the end of the quarter, you know I’m sure you have got the beta version for a little bit now, curious to get your thoughts on where you think the impact could be to: a, the entire ecosystem, and then just for your business as well? And then second, the international side that grows, it sounds like it’s going as planned. Just can you explain a little bit more on the Germany and Japan offices hitting inflection points this quarter? I mean what’s driving them now given you have been investing in those regions for some time? Thanks.

Thanks Mark. So, on the Apple stuff, first I just want to provide a little bit perspective. So, I love this report that Forbes wrote, [indiscernible] that market share when they said that Safari has 3.5% market share in the browser world. So, you know, I think people have the tendency to think that Apple is such a dominant company, and that they think they must dominate in everything that they do, and they don't want to come to browser [indiscernible]. Google is just north of 60%, others is below 4%. At those levels, I don't think there is any moves that Apple can make that has significant impact on our business. So I don't believe any changes in their intelligent tracking will have [indiscernible]. So, I hope that they continue to understand is that the Internet is powered by a quick profile [ph], which is that publishers have to make money, so they can afford to create content and if Apple takes away from them the ability just for them to monetize that optimally then they will start providing content or they are going to share users for other browsers that are more friendly. Perhaps Apple made [indiscernible] moves so that they can sort of mess up the plans with Google, but yet Google is dominant in the browser world, if they do that, I think it will backfire and Google will benefit more from that than anybody. There is a number of things in the prototype that we’ve seen that make up the [indiscernible] very little technology, but it feels very openly and a rally a lot hinges on them, how intelligent the intelligent crafting is, and then also how well they respect that quick [indiscernible], but there is no scenario right there how to materially impact others [ph]. On the second piece of it, Rob [indiscernible] comment on Japan and Germany specifically.

Yes, absolutely happy to, and thanks for the questions. Yes, things are going great as we’ve said on our prepared remarks. Across the world, Jeff has talked about, I think earlier today and we talked about in the past that different markets have different characteristics. Germany and Japan have some similarity and that - it takes time to build trust. We’ve been on the ground in both of those markets for more than three years now, in the case of Germany four years, and we’ve done well. In every year since we opened the offices, those markets have grown faster than the US, plus of course off to a very small base. And so, as they scaled over the last couple of years we’ve done what we always do, which is to go in build relationships, get a chance to prove results, train people on our platform, and then they bring us more. And when I say more, that means both more spend into programmatic, but also incremental advertisers from our existing agencies. And so that trend has happened in both markets this year, just at a higher order of magnitude that it has in the past. And then specifically in Germany, there were a couple of agencies that we’ve been working with on a very small basis, the test basis for the last 12 months or so, that really leaned in, in Q2 and starting to do business with us in a serious way. To summarize, invested more in their own in-house talent to be able to do programmatic buying in a better way and therefore we became even more of a natural partner. In Japan, very similar story, slightly different dynamics around the agencies constructed in Japan, but it really comes down to that we’ve been there for three years that we’ve build trust [indiscernible] that we ever have with folks that we have worked with for years.

That's great. Thanks Rob thanks Jeff.

Thanks Mark.

Thanks Mark.

And our next question comes from Kerry Rice from Needham. Go ahead Kerry.

Thanks, congrats on a great quarter that’s nice to see some positive news after this trading day. A few questions, first I heard some reports of similar pricing from SSP's and may be their ability to do some of the impressions across exchanges, can you talk a little bit may be awarded the benefits that would be or if you have seen those benefits at this point, and then the second question is, on demand trends, we saw a couple of reports earlier or maybe late Q2 or early Q3 about PNG pulling back on some programmatic spending, Unilever pulling back on some programmatic spending, maybe you can put that in context, I think PNG is probably growing with you guys and I’m not sure about Unilever, but I think it is a pretty big client through the agencies for you guys. So if there is more context on what that means that would be helpful? Thanks.

It is a real interesting time. Let me just present by saying, there is a lot of nuance and [indiscernible] details that we can go into on the pricing and especially the fact that the market pressure is on SSP's and we will talk more about that on the upcoming Investor Day. So I just want to practice with that. On the [indiscernible] that is always good for us, like we have a relatively simple P&L where something like 60% plus is in employees, 30% in machines where we operate our platform and add 10% in the rest of our expenses. And that 30% when we can reduce the number of assets we need to look at or especially reduce the duplication of the assets that we look at, we’re better off. So SSDs and exchanges are looking to reduce their cost and the market is more efficient as players get sort of weeded out, that results in lower cost for us and is more streamlined. As well as more pressures get on with those SSPs or [indiscernible] so that we can chose more deliberately where we might impress, especially when impressing to represent in multiple places. So, as we do that it cleans up the industry, which is, I think is exactly what P&G and Unilever are looking forward, such as segue in that. Second question, yes, there have been some public statements made about their real locked in to put more dollars into programmatic. I can tell you as the platform that powers, I think the vast majority in large CPG companies, there is a general anxiety in both directions. There [indiscernible] programmatic that they don't understand that there is lots of new ones that there is a bunch of speed bumps that we pave in the last…

Thank you.

And our next question comes from Kip Paulson from Cantor Fitzgerald. Go ahead Kip.

Hi. Thanks for taking my question. Just a couple from me. Jeff you had a very interesting and I think must-read piece on record yesterday, as a follow-up on that and your comments today, just curious what your thoughts are on premium digital video CPMs and where they can go relative to broadcast and cable CPMs? While digital videos ads will likely be shorter than the 32nd slots on linear TV, in a people-based marketing world they should be a lot more targeted, so appreciate any color you can add there on ad pricing as this rapid shift away from linear to digital materializes. And then second, do you think the shift can expand or accelerate the overall video ad market despite cannibalization of linear, and this really be enabled by better targeting I would think, but any color there would also be appreciated? Thanks.

You bet. So, on pricing there is no question that the CPMs in digital are going to be higher because they are exponentially more effective. As we think about, like how many commercials run in your house that you don't watch because there are so many commercial breaks that became a time to leave because you’ve got time, or else the time gets skipped on your DVR. It has been really hard for the traditional measurement companies to figure out or measure that. The thing that is so great about digital is we can measure everything. We measure how many seconds you watched it. We do that today in the digital apps that we run. In some of them there is [indiscernible] so how many seconds do they watch and how does that affect the program. We can measure everything. And so, ad breaks are closer to a 100% viewable and closer to 100% measurable, as well as targetable. So [indiscernible] that has been used on TV for the last 75 years or 100 years, we can instead be very deliberate about what ad gets in front of which customer and which device. And that is exponentially more effective. So if you look at the gap today in CPM, they’re actually not as exponentially different as I think the efficacy or performance is. So perhaps both up again. Because I think as perhaps traditional TV is over compensated because we have fully measured the impact of all the people leaving that’s going to move both up, will that - can that happen without cannibalization or during the transition, so the cannibalization and TV your second question. I absolutely think that that’s possible, but it depends on some of the moves that the players make. And those like AT&T, like are they ready by 2019 and 2020, how smooth is that transition what does the execution look like, is what’s required to answer your question.

All right, great, thank you and congrats.

Thank you so much.

And our next question comes from Brian Fitzgerald from Jefferies. Go ahead Brian.

Hi, yes this is John [ph] on for Brian, thanks for the question. Just wondering if you could highlight any differences that you’re seeing in cohort growth, I know you, earlier in the year you added unprecedented net new clients, is there any difference in the growth of spend there across channels versus earlier cohorts or anything interesting to call out? Thank you.

I will point this over to Rob or Paul, if you want to comment at all on cohorts.

Sure, I will give a little color on that and Paul or Jeff would chime in. So, yes as we said in the last earnings call even more wins than we expected in Q1, which was great. We talked about that being a quarter where we managed thousand and that won't happen every quarter. That said, we ended Q2 really right in the zone of where we expected to in terms of new customer ads in terms of growing spend from our existing clients, which I think Paul could help with some statistics there. So, it was a great quarter. It wasn't that Q1 knocking out of the park quarter, but it was among the best quarters we’ve ever had. And the one thing I would call out in terms of color is, the newer cohorts are just like all the other ones, in the sense that they tend to start with us in a channel with an advertiser right. So they start in display or they start in mobile video and then we proved success in that channel and then they expand across channels. So our overall cohorts tend to work on these channels. They tend to work with us in three and four and five and even six different channels, as they consolidate more spend in programmatic and the newer cohorts do just what all the other cohorts has done, which is to start in one or two. We could value they start to learn how attribution in getting full transparency works in reporting and then they tend to do spread out both in terms of channel, and then also withstand. So nothing different really, other than we have more offer than we ever have in terms of channels and we continue to help them bring more of the spend in programmatic.

And as illustrated by the statistics at 87% of our spend [ph] came from existing customers [indiscernible].

And our next question comes from Dylan Haber from RBC Capital. Go ahead Dylan.

Hi guys solid quarter, congrats. In terms of connected TV what OTT platforms are you connected to now and what platforms would you like to expand to? And then just a follow-up, for the full-year outlook unlike revenue you raised EBITDA guidance by slightly less in the Q2 be, so can you provide more color on where you are investing those incremental dollars? Thanks.

You bet. So on the OTT stuff, in terms of our partner I will just take every major as funded player were either in discussions with or partnering with, not all of them can be talked about and frankly it is [indiscernible] holistic side is up. I can’t talk about, but it sounds the results are not going though [indiscernible], but every major player in cash funded OTT were either talking to already partnered with. On the EBITDA you're absolutely right, the guidance is lower given what we [indiscernible] percentage that came in Q3, which I think is what you are asking about? So, the thing I just want to highlight is, this is land grab time. This is a time where we should be spending as much as possible. I am more amused [ph] I almost felt I need to apologize for the 35% in [indiscernible] and instead of the 27% that were implied going forward because I want to take as many of those dollars and reinvest as possible. So, we want to invest in international, we want to continue to invest in TV, we’re going to continue to invest in mobile, a bunch of those investments, especially in international just crept into Q3, so I will just remind you that two-thirds of the advertising buys I will tell are in the United States, it represents - we hope it represents 15% of our spend today. So that means a decade from now I hope that it represents almost 50%, instead of 15%. In order to do that, we just have to build up our organization. There is more that I will talk about on our Investor Day, because there is so much to talk about in the individual opportunity and some of the countries that we’ve recently got into that I’m just so bullish, but because it’s a long game, I refuse to make bad investments or to be [indiscernible] about the investments. I would rather be deliberate. So the more hazard, hiring the wrong people or investing too far ahead or investing in an office that we know we can't spend time in - in order to actually make it sort of a success in the same way that we have the other 20 offices around the world. That’s the reason, why we are doing with 35% [indiscernible]. Our EBITDA margins are close to every scale or SaaS company in the world and yet we are still investing as aggressively as we possibly can, so, I mean I am so happy with the status flow.

Great, thank you.

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Thank you.