Greetings. Welcome to The Trade Desk First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Chris Toth. You may begin.

Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk first quarter 2025 earnings conference call. On the call today are Co-Founder and CEO, Jeff Green; and Chief Financial Officer, Laura Schenkein. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, including the most recent economic volatility, please refer to the risk factors mentioned in our press release and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures alongside our GAAP results offers a more comprehensive view of the company's outlook. (ph) I will now turn the call over to Co-Founder and CEO, Jeff Green. Jeff?

Thanks, Chris, and thank you for joining us today. As many of you know, in Q4, we experienced a setback as we undertook the most significant company upgrade in our 16 year history. I won't revisit the details today, but as company scale and complexity increases, changes and upgrades become necessary to unlock the next wave of growth, that's exactly what we did, and now we are beginning to see encouraging signs that the changes we made were the right ones. As you've seen from the press release, despite increasing economic uncertainty, we showed incredible resilience, growing revenue 25% year-over-year, far surpassing our own expectations. We continue to grow at a rate significantly higher than the broad digital marketing industry and gain market share. As you know, we have a long history of setting goals and hitting them. We're happy to report that we did it again. We also have a long history of growing faster than all of the other scaled players in our industry, and we did that again too. Today, I want to focus on just three topics. First, the macro environment. Second, the open Internet and some of the significant changes and market shifts that have happened recently. And third, all of the upgrades we've made at TTD, including the latest updates to Kokai. First, the macro environment. As I mentioned before, Q4 was relatively stable, though signs of volatility were building beneath the surface amid a contentious election cycle, that pressure intensified in Q1 with growing concern among clients. As you know, our primary clients are the largest brands in the world and the agencies that serve them, all of whom are navigating increasing volatility so far in 2025. This makes us especially proud of our performance in Q1. Our team clearly demonstrated that we…

Thank you, Jeff, and good afternoon, everyone. We have started 2025 on a strong note. The upgrades we made at the end of 2024 are beginning to deliver results, putting us in a better position to capture expanding market opportunities. Kokai adoption accelerated exiting December, and our product and engineering teams are shipping [Technical Difficulty] growth remains strong, fueled by the continued shift away from linear TV and the expanding programmatic capabilities of the world's largest media companies. And advertisers are increasingly using retail data from our marketplace to tie ad spend to real-world sales. Our independence and objectivity continue to be key differentiators, especially in times of uncertainty, as brands seek trusted results from their partners. Turning to our results. Q1 revenue was $616 million, a 25% increase year-over-year. We generated $208 million of adjusted EBITDA during the quarter, representing a 34% margin. Our Sincera acquisition closed in Q1 and there is no revenue as a result of this acquisition. Our strong growth in Q1 was broad-based in terms of geography, channel and verticals. CTV growth was strong once again as it remains our largest and fastest growing advertising channel. In Q1, video, which includes CTV, represented a high 40s percentage share of our business and continues to grow as a percentage of our mix. Mobile represented a mid-30s percentage share of spend during the quarter, while display represented a low double-digit share, and audio represented around 5%. Geographically, North America represented about 88% of spend, and international represented about 12% spend for the first quarter. International growth again outpaced North America for the ninth quarter in a row. We continue to execute our growth playbook internationally, led by CTV. We remain optimistic that our business outside North America can continue to be a strong contributor to our overall…

At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Shyam Patil with Susquehanna. Please proceed.

Hey, guys. Jeff, congrats on a very strong quarter, very strong start to the year. I had just one question. Can you elaborate on the progress that you're seeing from the product and go-to-market changes that you implemented towards the end of last year? I mean, it sounds like those efforts are beginning to gain traction and contributed pretty meaningfully to the strong start.

Thanks, Shyam. Absolutely. So first, of course, Q1 was a very strong quarter for us and we showed our resilience. I think the team felt like they had something to prove, and I think we did it. I'm really proud of how well the team has executed. The upgrades that we made to our business did help contribute to our outperformance. And we -- of course, we are always making changes and always trying to improve, but we did so with a lot more substance and more upgrades, more changes than usual. They were not easy, but they definitely were worth it. In the current environment, we continue to be a source of vision and stability for our clients as they're trying to navigate, the uncertainty that's in front of them. But a couple of other just green shoots that we're seeing that I just wanted to highlight. Kokai adoption accelerated as we were exiting December, and now about two-thirds of our clients are now using Kokai, which is ahead of schedule. Of course, part of what we talked about in our last earnings report is a lot of effort to inject AI across the platform. And we've done that with a bigger step forward in the last quarter than we ever have at any point in our company history before. You'll remember that we started introducing Koa in 2017. But as a result of these investments in AI and upgrading our platform altogether and Kokai, campaign performance on Kokai continues to be exceptional. Kokai Is delivering on lower funnel KPIs, including 24% lower cost per conversion and 20% lower cost per acquisition. And these improvements are helping unlock performance and performance budgets from existing clients, but also from new clients that are a bit more focused on the performance…

Thanks, Shyam. Next question.

Next question comes from Vasily Karasyov. Please proceed.

Thank you. Good afternoon. Jeff, thank you very much for your comments regarding the guilty verdict in the Google trial. Obviously, there is a long process ahead and we don't know how long that will be. But in the meantime, if Google does de-emphasize their open internet businesses, as you posited, what exactly do you think will be the downstream implications for DSPs like The Trade Desk, the SSPs and all other, admittedly, numerous participants in the open internet value chain?

Absolutely. Thanks so much for the question. So first, let me just set the table a little bit. As we mentioned, there have been two substantial verdicts for Google and antitrust trials were in both of them. They were found guilty on some portion of the charges. The most significant one for us was the most recent one, where they were found guilty of monopolizing the ad server and the SSP markets. As we said, they've been judge, jury, bailiff, court reporter, everything, and they will have to quit one of those jobs at least and that is going to make a more fair market. I would summarize that 2025 has been a very rough year for Google, but even for walled gardens as a whole. And I think the news yesterday about Apple's decision to focus more on AI search engines rather than Google's as a result of the remedy of that first trial is as significant as anything and it tells you what's to come. Which is Google has got to focus on its core business. And as they focus on the core business, which is largely about search, and that includes Gemini and also YouTube, that means they are going to be less focused on the open internet. And that means for us that we can go participate in the open internet with less competition, but even more significant than less competition is the fact that Google has been disrupting the competitive market that we would have thrived in even more. So I stand by what I've said again and again, including in the prepared remarks, that we were winning in an unfair market. And the market is getting fairer already and as a result, we believe that we can compete even better in a fair market. So we think that this is a major victory for the open internet. As I mentioned in the prepared remarks about Spotify and their sort of feud with Apple, if you will. I think again and again, we're seeing walled gardens and draconian tactics around auctions being put in check so that the market is more fair. And I believe that, that is very good for the open internet. And I don't believe there's any player that better represents the interest of the open internet than The Trade Desk, and I don't think there's a company that will benefit more from these changes than us as well. But thanks for the question, Vasily.

Thank you.

The next question comes from Justin Patterson with KeyBanc. Please proceed.

Great. Thanks for the question, and appreciate all the details regarding the quarter. Just on the Q2 guidance. With many large brands speaking to increased uncertainty in their reports, how did you think about that in your Q2 guidance? And how are you managing the business into the back half of the year where visibility is undoubtedly more clouded than it was at the start of the year? Thank you.

Thanks, Justin. Appreciate the question. So first, in order to talk about Q2 guide, I have to just first point to what we just reported about Q1. And I'm just so proud of our team's performance, their execution. They -- like I said, I felt like they went into this quarter feeling like they had something to prove, and they did. I'm just really proud of our team. As I mentioned before, Q4 was relatively stable, although there were some signs of volatility, starting and ending with the contentious election cycle. But some pressure has intensified in Q1 with some growing concerns about macro uncertainty from some of our clients. But of course, we have our eye on the horizon, and we believe that we will grab land in the rest of the year or accelerate growth and potentially both. So we think that for the rest of the year, our focus has to be on recognizing that large brands are facing comparatively tough times, and we need to be there to help them navigate that and be a source of strategic consulting for them as they are trying to figure out how to navigate what is certainly unprecedented. But because of our objectivity and because of the fact that we've aligned our interest with them and have been building trust for years, we're in a very strong position. And with the macro environment as it relates to the open internet being more positive than it's ever been, those together, plus what's happening in streaming, which is also another secular tailwind that we've talked about extensively, we think that puts us in a good position to either grab land or accelerate growth. Of course, we also have to talk about our focus on upgrading our products across the board. There's…

Next question comes from Matt Swanson with RBC. Please proceed.

Hey. Thank you for taking my questions. Congrats on the quarter. I'm sure it felt really good to get this press release out. Jeff, on Amazon, it's got a lot of attention recently, both in our investor meetings, but also in the press, specifically around its DSP and the push into Prime Video ads. I guess maybe broadly, how are you thinking about the competitive landscape right now? And then specific to Amazon, are you seeing any noticeable shifts in how Amazon is showing up as a competitor? And then maybe a half question off that. Does Amazon and their datasets in CTV increase the need for other publishers to find and work more closely with a partner like Trade Desk to compete effectively?

Thanks so much for the question. I especially like the last part of it because I think the premise of the question is just spot on. So let me just talk a little bit about Amazon and our competition with Amazon. So first, the -- the TAM is massive and there will be lots of players that I think have room to do well in this space. So I don't think anybody is going to own all of that TAM. So I think there's opportunity for a healthy competition. But as I mentioned in the last comment as well as in the prepared remarks, I believe the objective DSP that aligns its interest with buyers will win the lion's share of market share, and there is no way that that is Amazon. Our CTV growth is faster than Amazon's advertising growth, and we're very clear on what Amazon's playbook is. It's actually very similar to the Google playbook. Google is primarily focused on search/Gemini and YouTube. And so DV360 has largely become a tool to buy YouTube. That is their focus, that is their bias in terms of their incentives as well as what moves the needle on a P&L as big as Google's. And Amazon, you can debate whether their core business is retail or their core business is AWS. But in either case, the Prime Video supports retail, and it poses a threat to their core business to be too focused on the open internet and to spend on anything besides Prime Video. They're building this product to sell more Prime Video ads. That's not objective. And then of course, you have to add to the fact that they compete with most advertisers on something. So unlike Google, where they don't have products that compete with all of…

Next question comes from Jessica Reif Ehrlich with Bank of America. Please proceed.

Thank you. Jeff, the Upfront is next week and you work with most of these publishers, some via OpenPath. Can you talk about the progress that you're seeing in OpenPath, I noticed several new names in today's press release, the improvement that you're seeing from both sides, both you and the publishers, and maybe give us your overall expectations for how the Upfront will play out. Thank you.

You bet. So let's start with the Upfront. First, right now we're facing a degree of uncertainty that is unique to upfronts of the past. Of course, COVID in lots of ways was much, much worse. But aside from moments like that where there's uncertainty, when you go into the Upfront and there's a higher degree of uncertainty, it's harder to want to commit to put dollars to work at a certain rate for the course of an entire year. So instead, what happens at the upfronts is people go in with a commitment to try or to put dollars in a more agile setting and there is nothing more than programmatic. So we anticipate that this Upfront will be a little bit weaker for linear and a little bit stronger for programmatic and digital as a result of the uncertainty that the world is facing right now. So we think all of that is very good for us. I do believe that you're going to see more and more move towards a more forward market like way of doing things that is more sophisticated than the upfronts that were invented in the 1960s and haven't progressed that much as it relates to the specifics of the way linear deals are done. Because I believe that the digital ecosystem is so much more conducive to a healthy and sophisticated forward market, we are laying groundwork in Kokai for those types of things. And one of the big products that remains for us to ship and we're releasing very shortly is a product called Deal Desk that will lay groundwork for us to get more forward market-like deals and create a lot more sophistication and a lot more performance out of upfronts or forward market than what currently exists in the…

Kelley with Stifel. Please proceed.

Great. Thanks very much. Jeff, the first question -- I appreciated the commentary on the Amazon competition. I do want to ask you about DV360 because it does seem like they, continue to invest in that product with more retail media functionality and things like that. I guess, do you see like a byproduct of the DOJ suit being Google kind of stepping on the gas on the DSP side maybe or just would love to get your thoughts there. And then Laura, the -- in Q1, the sequential decline was a lot better than what we typically see in Q1. Would it be possible to give us political in Q1, because that's obviously healthy sequential decline given the election cycle? Thank you.

Great. Well, I'll take the first part, and then Laura, you can figure out how to answer the last portion. But as it relates to DV360, if I just look at this through a strategic lens, and especially what we learned from what was made public during the trials that they recently went through, the majority of their spend is going to buying media on YouTube. And to me that makes sense for them because their cost of goods sold in YouTube is close to zero. It's an amazing asset for them, but it's not the open internet and certainly, they're not in a position to objectively buy the rest of the open internet. So when you talk about like bringing retail data on a retail partnership, that's all about trying to monetize -- in my view, that's about trying to monetize the almost unlimited supply that they have in YouTube. And so if they're able to monetize that better by adding retail media, they will. But we're not that far away from DV360 just being a buying tool for YouTube. And if I were them, that's what I would seriously consider doing. All the antitrust headaches come from participating in the open internet and pretending to be objective about what you buy. Why don't just be like Facebook and say, our properties are awesome and the best and we're just going to focus on monetizing those. I think there's [Technical Difficulty] end up and then we'll monetize the open internet and they'll monetize YouTube. I think that's almost what it is already. To your point, Laura?

Yeah. Thanks, Mark. Really appreciate the question. I would say we're really proud of what we delivered in Q1. It was such a strong quarter for us. And I would attribute the strength to the uptake in Kokai adoption and the early momentum from the upgrades that we talked about earlier in the year related to our business that we made in Q4. I wouldn't say that the Q4 to Q1 sequential strength was driven by political simply because, we exited a presidential cycle in the U.S., entered 2025 when we're not in an off-cycle and don't have much contribution. So it's more just strengths in the changes we're making to the business.

Perfect. Thank you, both.

Thanks, Mark.

We have reached the end of the conference. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.