Chris Toth - Head of Investor Relations Jeff Green - Founder and CEO Paul Ross - CFO Rob Perdue - COO

Brian Fitzgerald - Jefferies Aaron Kessler - Raymond James Kip Paulson - Cantor Fitzgerald Kerry Rice - Needham & Company Dylan Hattem - Artist Management & Brand Partnerships

Good day, ladies and gentlemen. It's my pleasure to turn the floor over to Chris Toth, Head of Investor Relations at The Trade Desk. Sir, the floor is yours.

Thank you, operator. Hello and good afternoon. Welcome to The Trade Desk’s First 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 earnings press release can be found on our website at www.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 results, we present supplemental non-GAAP financial data. A reconciliation of the non-GAAP to 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. I will now turn the call over to founder and CEO, Jeff Green. Jeff?

Thanks, Chris. Good afternoon and thanks to everyone joining us today. Before we get into our results, I just want to remind you of the expectations for our industry. Zenith’s Programmatic Marketing Forecast predicts that programmatic advertising will grow 31% in 2017, which is faster than all digital channels. The report also estimates that programmatic will grow faster than social media, which is expected to grow 25%. And online video is estimated to grow at 20%. The inevitable shift to programmatic advertising is providing a tailwind to the entire industry and has helped us kick off our year to an amazing start. Now, on to our financial performance for the first quarter of 2017. Q1 has always been our slowest quarter of the year. Last year, in 2016, the first six weeks of the year were incredibly weak as the global market moves caused advertisers to take a deep pause. Q1 also has historically been the most difficult to predict, but this year, we shattered our own record for the first quarter, far surpassing our expectations. This was a quarter where nearly everything went right, which doesn’t usually happen. As a result, revenue was $53.4 million, an increase of 76% compared with a year ago. This means in Q1, we grew nearly 5 times faster than Magna Global’s expectation for digital growth this year. Zenith’s forecast for 2017 expects the industry’s year-over-year video growth to be 20%. Our Q1 year-over-year mobile video growth was more than 10 times that, coming in at just over 200%. At a time we were investing heavily, we grew adjusted EBITDA by 47% to a Q1 record of $6.3 million and a GAAP net income at $4.9 million. This has been one of the strongest performances for all software platform companies in Q1. It represents a number of things. Number one, the loyalty of our customers. Number two, most of the upside surprise came from new brands or agencies joining our platform at an unprecedented rate. Number 3, the reality of a consolidation in ad tech. And 4th, the market’s appetite for objective ad buying platforms. Number 5, which is the other side of that coin, a move away from buying platforms that are conflicted. Number 6, the need for advertising in a global market where the signal to noise ratios are getting worse and the need for products to differentiate themselves from their competitors can only be done through advertising. Number 7, the reality that many international markets are growing meaningfully faster than bigger, more fragmented markets like the United States. And finally, number 8, the need for data driven decision making in everything related to media, but especially the ad engine that funds media. As is the case with other SaaS companies, we have an extremely loyal customer base. For the soon approaching decade that we’ve been operating this business, we’ve been able to accurately predict that performance of the core base of our customers, as we did this quarter. What was a real positive surprise was the incredibly strong spend from new wins both from brands and the brand’s agencies, which was much more than originally expected. Additionally, data usage was as high as it has ever been, growing 77% from a year ago. I’m not sure we’ve ever had a quarter where we had a better batting average in agency and brand pitches than this one. Also in the quarter, year-over-year, our international operations grew twice as fast as North America. Finally, mobile continued to lead all our channels in terms of growth. There were also a few macro events outside of our control that created additional upside positive surprises for us. As many of you know, several brand safety incidents surfaced as a major issue on some of the leading user generated content sites or UGC sites. This drew attention to an issue that we’ve been addressing for years in the advertising industry and with our customers. Objectivity in media buying is important, and becoming more important. If we are unsure about inventory, we don’t run on it. We don’t bias our own media, because we don’t have any. The controversy around UGC has given The Trade Desk a platform to talk about the core of our video strategy, which is premium content. We are being recognized by both agencies and brands as the only scaled platform in the market today that is objective, buys across all digital types, targets premium quality video inventory, and is brand safe. While looking at about 500 billion ad opportunities everyday still holds some risks, our laser focus on a product-driven buyside makes it possible for us to protect brands better than any of our competitors. In Q1, we won big in a lot of places and markets. Without naming brands, we won new business inside a number of the agencies. We won one of the world’s biggest banks as a new customer, one of the major shoe companies, and a couple additional auto manufacturers. New wins represented millions of incremental dollars of spend on our platform. I recently spent time with a CMO from one of the largest brands in the world that is now spending over 50% of their advertising in digital. If it were up to him, he would spend 100% of all spend in programmatic. To have a large brand state that they will spend in the near future more than 50% of their ad dollars programmatically is amazing and speaks to the fact that our industry is maturing to a place where spending a majority, or even all of a massive budget through programmatic pipes, is not only possible, it’s even expected. This was unbelievably exciting and echoes the deep desires for meaningful partnerships and industry traction that we felt through Q1. It was a great quarter. Fake news has been a big issue in media in the last few quarters. Some technology companies in media have said “they’re a marketplace” and their hands-off approach has enabled fake news. On the other hand, we have publicly stated that we are working to defund fake news. We don’t want to advertise on fake news or connect to inventory that is suspect or questionable. The idea of defunding fake news is gaining steam, as one of the best, if not the best ways to stop it. We are leading the industry as demonstrated in our interview with 60minutes and the research we provided them. Also, our interviews with BBC news and a public interview with White House correspondent Todd Zwillich. Agencies and brands alike are responding. And both want to avoid and defund fake news too and advertising on premium inventory and taking a brand safe approach is helping to make The Trade Desk platform one of their preferred platforms of choice. We are also benefiting from the reality that most DSP competitors are smaller and not profitable. Nearly all of them have fewer customers and media budgets than we do. To compete, you have to have a sustainable business model, add more value to the media ecosystem than you extract, and you have to be big to survive. Every time a platform looks at an impression, and we look at over 6 million a second today, it costs money. You have to look at everything very efficiently and you have to win a lot to be competitive, all while returning a better ROI to media buyers. Our technological advantage is making it easier for us to compete through these market forces. Shifting to our largest opportunities and biggest growth drivers which are international, mobile and video, I believe the trends remain extremely positive and all three areas helped drive our global growth. Internationally, we have been more productive than ever, registering excellent growth in both Asia and Europe. The month of March had all-time record spend for three of our biggest international offices in London, Sydney and Hamburg, and considering March isn’t even part of the biggest quarter of the year, that is remarkable. We also saw all-time near records in Singapore, Tokyo, and Hong Kong, which again is significant given it’s only a March. Our growth and momentum in these and other international media centers are more evidence that the world, not just the US, is moving toward programmatic. eMarketer estimates that China will grow programmatic over 100% from 2016 to 2018. And Magna Global estimates that countries such as Singapore and Thailand are expected to grow programmatic ad spend 3 and 4X from where it is today to 2019. As we discussed last quarter, in Q4, we opened our Jakarta, Indonesia office. Today we are pleased to report that as planned, we opened two additional offices in Q1. One in Paris, France, and one in Madrid, Spain. We are quickly moving toward integrating inventory partners and ramping up queries per second, or QPS. Take Indonesia, for example. The sheer size and opportunity in Indonesia is evident as the country has already leaped to the second largest market in all of APAC in terms of the QPS we view every single day. We recently partnered with leading news portals, such as Liputan6 and Kompas as well as Path, a leading social media app designed for mobile. There is a massive amount of opportunity for growth due to the compelling economics of programmatic and with our footprint now in Asia, we are in one of the best positions to capture the growing move to programmatic. In two of our most important channels, mobile and video, we continue to make progress. In Q1, all mobile, which includes In-App and mobile video, grew significantly and represented over a third of our business. We continue to see exceptionally strong growth in mobile video and mobile in-app which we grew 220% and 145% compared with Q1 a year ago. Mobile continues to grow and we are well positioned to win additional spend. One recent example of spend moving toward mobile was a large food and drink company that wanted to use device targeting and attribution tools to yield a more efficient cost per acquisition. The target was Social Foodies and Theater Audiences. Using the tools in our platform, we demonstrated the increase in reach and conversions. Since then, device targeting was used across the board from the customer and the percent of mobile increased to 42% of the total campaign spend on these targets, achieving a 25% better cost per acquisition. We think this is an example of what is happening more broadly, which is mobile advertising is undervalued and is going to continue to grow faster than most other channels. As connectivity and time on mobile increases, we believe mobile ads will also become higher quality and better integrated into the user experience than they are today. We also think Mobile Video is one of the most untapped opportunities in all of digital. With all these forces coming together in mobile, we enable unbiased, data-driven decisioning to more users, and return a better ROI for our customers, not just on one site or app, but across the entire internet and all of media. And perhaps the only other area that can drive more spend than mobile over the long-term is television. We are in the golden age of TV content. TV media is at the top of its game and creating amazing content that is coming on line for programmatic purchases like on CBS All Access or Hulu or Sling TV because providers like these are embracing data-driven programmatic advertising with the significantly higher CPMs and better ad experiences. For many of these companies, better ad experiences are just as important as the higher CPM. We are only at the early stages and it will take time, but we are investing heavily into TV now and our connected TV, or CTV efforts are already paying early dividends. In Q1, our CTV spend alone was about 300% higher than where it was a year ago. In a signal of how quickly sentiment is changing in traditional TV, a year ago our team met with a large broadcasting company and there was little interest in partnering on inventory and implementing a programmatic strategy. You fast forward to when we recently met again and now they are ready to partner on a number of fronts from over-the-top or OTT inventory access to utilizing data. Other early adopters are moving programmatic CTV forward and we recently launched an inventory partnership with Sling TV, which is Dish Networks virtual offering, and have reported 1 million plus users. We are in a very early massive transformation. Traditional TV is moving to on-demand connected TV. And Connected TV is expanding from primarily subscription to primarily ad-funded. The massive adoption of ad-funded connected TV takes time, but we are forming the partnerships and making the investments needed to win in the long-term. Because of the sheer size of the market, about half of the $650 billion worldwide advertising market, TV can move the needle unlike any of our other channels. But I would even go one step further, TV needs programmatic more than any other channel. While it takes big media companies years to turn the ship, they will turn as fast as they are able because understanding and adopting programmatic advertising is existentially critical to their businesses. Finally, let me just take a minute to talk about our business model. As I have stated before, we don’t believe that growth must come at the expense of profitability. In Q1, our financial performance was more than we estimated. Even with our aggressive investments in hiring, even with our aggressive investments in mobile, video and global growth, the majority of the incremental revenue we generated in the quarter that was above our guidance contributed to EBITDA. We delivered strong adjusted EBITDA dollars of $6.3 million, an increase of 47% over the prior year. Comparatively, this year, we also are investing at a more aggressive rate. We think we’re setting the bar for what software companies have to produce to compete in the advertising business. The industry is continuing to see ad dollars shift to programmatic and we continue to win big and our customers are expecting to spend significantly more with us than they did entering the year. For 2017, we are increasing our expectation for the year. We now expect revenue to be at least $291 million and we are also increasing our adjusted EBITDA estimate. We expected our adjusted EBITDA percentage to be in line with the more mature SaaS companies at 27% for the rest of 2017, which revises our adjusted EBITDA guidance to $78 million for the year. Agencies and brands are looking for a data-driven, easy-to-use, platform solution that delivers a better ROI for their ad dollars. The Trade Desk is the answer, and this is why we’re the biggest independent market share leader in the DSP space, to why our customers are sometimes our best sales people, and why we believe our market momentum will continue. Now, I am going to turn the call over to Rob to discuss our quarter in more detail.

Thanks, Jeff, and good afternoon everyone. We started the year off with the best first quarter in our history in terms of our revenue, and the number of customers we won, the number of people we hired and the locations we opened. We are executing well, exceeding our targets and delivering strong results highlighted by our 76% year-over-year revenue growth for the first quarter. Our growth in Q1 was driven in part by our mobile video channel, which grew by over 220% on a year-over-year basis. The first quarter is the time to invest in our customers and in our own new hires. Educating agencies and brands on the benefits of programmatic, winning new business, as well as training, onboarding and getting our new hires up to speed, is a big part of our focus in Q1. This is an important quarter from an operational perspective and we are entering the summer and back half of the year with a lot of momentum and we are excited about the opportunities in front of us. Now, from an operational perspective I will update you on the progress we made in our three core priorities. To remind, that is one, which is to remain our customers’ objective and independent trusted advisor. Two, to continue to grow our omni-channel presence, and three, continuing to grow our international footprint. An example of our success in Q1 was working with one of our newer agency customers to win the marketing spend from a very large financial institution. Our dedicated sales, account management and trading teams spent well over a year investing to win this business. It started with our team working to become the independent trusted advisor to a large digital agency, one who had never done a campaign on our platform before. Our account teams earned their trust, and trained them on the benefits of The Trade Desk platform. The agency then introduced us to the financial institution in the pitch because they believed in us, and together with the agency, we were able to win the advertisers’ multi-million-dollar programmatic business. The brand valued our independence, transparency, and alignment with their own business over all the other criteria that they were evaluating. Our account teams earn the trust of agencies everyday by continually highlighting the benefits of The Trade Desk and proving it, not only with results and insights, but also as evidenced by a 95% plus customer retention rate for now the 13th quarter in a row. One benefit that is resonating even more now is the value of working on an agnostic platform where ad buyers can purchase brand safe inventory objectively across the Internet, and buy it holistically across multiple channels. In a time when there is a lot of focus on brand safety and reports of fake news, it is important to demonstrate that The Trade Desk is providing ad buyers the control they need to buy only the premium or quality inventory they want, and avoiding riskier types of inventory such as user generated content sites. Next, I want to focus on growing our omni-channel presence. The strong growth we have seen in mobile and video have enabled our clients to have a higher level of coordination and consolidation of their marketing spend across the whole marketing funnel -- from awareness to consideration to purchase. The ability to target marketing messages throughout a complete customer journey is a key function for an omni-channel buying platform. This is enhanced by using proprietary data and technology, including both first party data, and third party data from companies like Oracle and Acxiom, across all channels and it is making a real difference for advertisers and their agencies. For example, we can deliver highly targeted ads to the roughly 12 million people in the US who are likely to purchase a vehicle by the end of the year or to the many millions of people worldwide who are likely to buy the 200 million PCs estimated to be sold for the remainder of the year. In Q1, our total mobile spend, including In-App and mobile video, represented over a third of our business and grew 113% year-over-year, while overall mobile advertising in 2017 is expected to grow by about 30%, according to Zenith. At nearly 4X the growth of the industry, we continue to gain our share of incremental ad dollars moving to programmatic and we expect this trend to continue to grow around the world. Also in the first quarter, our Native channel saw robust growth as we continued to launch several new native inventory suppliers on our platform. Our team has spent the last few quarters training media buyers at agencies on how to incorporate native ad units into their ad campaign strategies. In just Q1 of this year, we saw Native spend surpass our entire 2016 spend in Native. It has been a truly phenomenal growth story for us and we believe we are still in the early stages of growth for our Native channel. As an example, a global eyewear brand, in partnership with their agency, was striving to deliver a more efficient cost per landing page visit in some of their ad campaigns. The advertiser was intrigued by the potential of Native inventory to deliver on this goal and began testing Native for efficacy. The agency team quickly repurposed existing advertiser assets for Native on our platform. After a two-week test running similar spend on our Native channel versus a competitor, the click through rate achieved through The Trade Desk platform was 3X that of the competition while at the same time, providing a cost per acquisition that was 37% less. So as a result, the advertiser could both scale their marketing spend on Native while also driving a more efficient marketing outcome. The third priority we are focused on is widening our geographic footprint to make sure we serve our customers locally in the markets that are important to them. In every quarter of 2016, our International growth spend percentage outpaced that of the US, and in Q1, 2017, that trend continued. Our International business amounted to about 11% of our total spend. And our teams in Germany, the UK and Australia each set their all-time spend record in March and Singapore and Hong Kong continue to grow well over 100% on a year-over-year basis. The adoption of programmatic and the market growth we are seeing across Asia is accelerating and we believe the same progress will happen over time in our newest locations in France, Spain and Indonesia. Now, in Q1, I spent two weeks in Hong Kong, Shanghai and Tokyo to meet with our teams, potential customers as well as other data and inventory partners. With respect to China, it is a really interesting market for The Trade Desk. The QPS for inventory is roughly where the US was back in 2010, so it’s really early, but the China market is maturing rapidly. There are many types of data and inventory partners and they are all really unique. But everyone we met there was very globally minded. They knew about us, they knew our story and they were open to partnering with us. The main take away is that there is a lot of opportunity for us in China over time and I’d say more than I previously thought. While I do expect it to take years, I expect China to eventually join the US as one of our two biggest markets in the world. We were well received in China but we do need to invest in this market and that needs hiring the right people on the ground, building out our integrations with quality inventory sources, expanding our data partnerships and then executing our business operation just like we have in every other market we’ve entered. Overall, we feel really good about our first quarter success and our prospects for the remainder of the year. We have made tremendous strides in our customer engagement, in our hiring and training the next generation and continuing to advance our international strategy. The advertising industry is still in the early stages of its programmatic transformation and we see a huge opportunity in front of us. And so with that, now, I am going to turn the call over to Paul to discuss our financials.

Thanks, Rob, and good afternoon everyone. As you have seen in the numbers, 2017 is off to a great start and we are really pleased with our Q1 financial performance against our key metrics. Revenue increased 76% year-over-year, adjusted EBITDA increased 47% year-over-year and GAAP net Income was $4.9 million, all while still investing aggressively in areas critical to our future growth. Revenue for the first quarter was $53.4 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. As Jeff mentioned earlier, intra-quarter, we continued to see customers move more dollars onto our platform helping to drive the revenue upside. For the quarter, approximately 87% of our first quarter gross spend came from existing customers, whom we define as those customers that have been with us for over one year. Our operating expenses increased in line with the growth of our business, to $51 million in Q1 versus $27 million during the same period in 2016. The increase in operating expenses was primarily due to increased investments in personnel, primarily in technology and development as we invest there for future growth and in general and administrative expenses which primarily reflects public company costs that we did not incur a year ago. Also in the quarter, we recorded $3.3 million in bad debt expense related to two specific smaller customers during the quarter. Total other expense, net was $800,000 and income tax was a $3.8 million benefit in the quarter. Our Q1 income tax reflects adoption of a new accounting standard, ASU 2016-09. And under this standard, we received a discrete tax benefit of $5.3 million primarily related to stock option exercises. GAAP net income was $4.9 million for the first quarter of 2017, or $0.11 per fully-diluted share. Our adjusted net income was $7.8 million for the first quarter or $0.18 per fully diluted share compared with adjusted net income of $3.5 million or $0.09 per share in the comparable quarter last year. We use adjusted EBITDA as a core metric for our business. We calculate our adjusted EBITDA by excluding stock compensation expense and in the case of 2016, the non-cash warrant expense. Adjusted EBITDA was $6.3 million with a corresponding margin of 12% of revenue during Q1, 2017, as compared to adjusted EBITDA of $4.3 million or 14% of revenue during the same time last year. The increase in adjusted EBITDA dollars reflects growth of our top line, offset by our increasing investments in product, people, global expansion, public company expenses compared with a year ago and bad debt expense. Net cash used in operating activities was $23 million for Q1, as expected given the seasonality of our business. Because of the seasonality, it’s best to look at our trailing 12-month of operating cash flow and free cash flow, of which we generated $36 million and $23 million respectively. Our DSOs at the end of Q1 were 82 days, an increase of 6 days from the same period a year ago. DPOs for Q1 were 60 days, an increase of 9 days from the same period a year ago. As you may have seen in our recent press release, we entered into an amended credit facility that enables us to borrow up to $200 million on our revolver, which was up from $125 million. While cash flow from operations will fluctuate from quarter-to-quarter due to seasonality and timing, our net cash position of $81 million and our new revolver is more than sufficient to manage working capital for the foreseeable future. For Q2, we are expecting revenue of $67 million, and adjusted EBITDA of $14.5 million. And updating full year 2017 expectations, we now expect revenue to be at least $291 million and adjusted EBITDA to be at least $78 million or 27% of revenue. Total other expense, net is expected to be between $2 million and $4 million and our income tax rate is expected to be in the mid-40s. So with that, I will hand it back to Jeff for any final comments and of course Q&A. Jeff?

Thanks, Paul. The recent favorable trends along with the inevitably of programmatic are driving the wins on our platform. During the quarter, we hit records for this time of year in the US, Singapore, Japan and London. The growth we are seeing in Hong Kong, Germany, and Australia is something we’ve never seen before. Our land and expand strategy is working. Ad Exchanger recently ran an article about the top 10 brands in programmatic. We powered 7 out of the 10 of these biggest brands, which is incredible. But the most promising thing about our business is what we can do to expand the brands and agencies that we already touch. Getting a little spend is exciting, but growing it to a level that transforms their businesses is more than exciting, it’s world-changing. We have already accomplished a lot so far this year. Our efforts to go arm-and-arm with the agencies are working. We have seen strong growth and deeper engagement with agencies and brands. And one of our strongest strategic assets is the independence and objectivity that comes with not owning media and it significantly differentiates us from the competition. This could not be more evident than what occurred with the brand safety issue in Q1 and this is opening doors for us around the world. But this is a marathon and not a sprint and we continue to make big investments in our key growth areas and are focused on getting to the next level, accelerating programmatic adoption and making it easier for agencies and advertisers to spend programmatically. We are still early on in the programmatic adoption and I see nothing but blue skies ahead for both the industry and The Trade Desk. The opportunities in programmatic are enormous and we believe we are positioned better than anyone else. So with that, we look forward to your questions. Operator, let’s begin.

[Operator Instructions] And our first question comes from Shyam Patel [ph]. Please state your question.

Thank you. Hey, guys. Congrats on the phenomenal quarter and outlook. I have a couple of questions. First, it looks like you beat the top line by about 10 million, you raised the annual revenue by over 20 million. Can you just talk about that and where you're seeing incremental strength? And then I have a follow-up.

First, thank you on offering congratulations and thanks for the question. So let me just talk a little bit about the way that we have visibility into our business. So the thing to keep in mind just like all SaaS companies, we have a core group of customers that come back again and again and again. And so that 95% client retention, it is the core portion of our business where almost 90% of our revenue comes from and that's the part of our business that’s super easy to predict. Another is that news stuff, and Q1 is where a lot of news stuff comes from because media or particularly advertising is a really seasonal business. So at the beginning of the year, everybody are making decisions about the rest of the year. And this just happened to be a year where we’ve won a lot of new business. And we won that business through the agencies for the most part even though it was mostly new brands inside of the agencies. So the thing that I actually just want to highlight on that fact is that, you may say, well, okay, well there's this portion of your business that is harder to predict. It is a quarter like this where you beat by so much, is it equally likely that there will be a quarter where you missed by that much. And the answer is no, because the upside surprises come from those new wins that core business is solid and steady. So this just happened to be a case where we've added 1000 and a lot of things went right, but the visibility in our business is as good as it's ever been and we're super excited about what the foundation for those new clients and new brands represent.

Great. And then second question, a couple of parts to it. Just on the recent P&G win in North America, I know it’s like some countries internationally as well. I know you might be limited in what you can specifically say about P&G, but just generally speaking, can you help us think about just how a large customer like that is typically on boarded, the timing that you’ll roll out and how long it typically takes for revenue to reach a full run rate? And then the second part of that, it seems like in the industry, we're seeing an ongoing shakeout of competitors like turns and then others like EMS need to be seeing large customer losses. Can you just talk about competitively for new deals, how the conversations have changed versus say a year ago?

You bet. So let me take the first part of your question. So there isn't a lot that I can say about P&G, but I can say a couple of things. So number one, we did win some -- P&G business, we did strike a global deal with them, which we worked on with them as well as with their agencies, particularly their lead agency here in the United States. I can also say that their contract with AudienceScience ends on June 30. I want to highlight that we won the business by working with the agencies, if it does not represent a new trend in terms of us going to rest and cutting out the agency, in fact much the opposite. We worked very closely with our agencies to strike the deal. Now I'm not talking about P&G, I’m just talking about the comps that are ramping up, big clients. I will say, the bigger they are, the slower they are to ramp. It just takes them time to move. They are very big well-oiled machine. It's just taking a long time to get things in place. So I expect this to pay dividend in the future way more so than it does in the short term. I’ll also say that big companies, because of their very nature of being slow to ramp up, they get more sticky over time. So what's going to happen in 2017 is we're going to spend a lot of time integrating and it's our hope that that makes it more and more likely that we work together in the future, but the way that we look at this inside of The Trade Desk right now as we have a lot to prove and a lot to win and we're just starting. So we're excited about the start. The second part to your second question, as it relates to competitors. So I do think there is definitely some consolidation happening and there's also -- there's a lot of pain right now in addback where players that have older business models are smaller or just struggling to compete and more and more of those dollars are going to those of us that are big and growing and success creates virtuous cycles. So I do think the competitive set is getting smaller. That is a good thing for the industry as a whole. It does feel like there are way fewer companies competing in specific pitches, but as you would expect those that are left are better competitors. So it’s a better marketplace where people are adding more value than they're extracting and this is great news for programmatic. This is great news for our industry. It's great news for us as a company. So for any of those companies that are adding more value than they’re extracting, this is great news. But it does feel like a lot of people that were in the consideration set even a year ago aren’t any more.

Our next question comes from Mark Kelly [ph]. Please state your question.

Hey, guys. Thanks for taking the question. The first one is on Snapchat, they talk a lot about the strength you're seeing in programmatic last night, I think they noted 20% of impressions were through their API last quarter, so just curious if Snapchat is a partner and just your general thoughts on that platform? And second, can you just talk a little bit more about the connected TV ecosystem. What kind of inventory you have access to? I know you mentioned Sling TV. But I think there is some unique inventory on something like a Roku home screen for example. So any color there would be super helpful. Thanks.

You bet. So first on snap. So I like many of you who are listening closely to Snap’s first earnings report, and noted the programmatic, a few shout out in the course of the call and I'm so glad that you've asked the question because it gives me an opportunity to create some distinction. So when Snapchat and the same frankly goes for YouTube and parts of Facebook, when they talk about programmatic, often, what they're talking about is buyings that are bought through an API. But in that API, what buyers have the ability to do is simply assign budgets. You hand them over to Snap or Facebook or YouTube and then they decide what inventory you get, what impressions you get and they even often determine price. And by handing over all that control, it makes it so that there's no one objectively determining which impressions you get. That decreases the value of programmatic. And so when we talk about the macro advertising tie and we talk about the $650 billion and we think that there's 12 billion that is in price discoverable programmatic. That form, we don't believe is price discoverable, because you simply hand over the dollars and you get what you get. And so the thing that I like about hearing so much about programmatic or hearing at least a reference as to programmatic on that call, I'm hoping that Snapchat is open to price discoverable programmatic where we can participate in decisioning. I'm optimistic that we can become a partner of theirs, but as it exists today, there's not an opportunity for us to layer on decisioning and data and participate in price discovery. There's not much for us to do together, so we don't do much at this point. So I'm super optimistic that things will change in the future. I believe it's inevitable that all three of those companies will change. But I do frankly think it's also the best way for Snapshot to optimize their own revenue. But they're an amazing business, they're sitting on some of the most desired video inventory because it's really hard to advertise to millennials and perhaps that's a good segue to the second part of your question which is around connected TV. So inside of connected TV there is definitely a shortage of inventory, particularly on the premium content because so much of the plays get played inside of Amazon and Netflix where there aren't many ads today. But there are great partnerships that we forge with companies like Roku and CBS All Access and Hulu. So we have very minimal inventory, but the way that I would characterize it with those partners is we have gotten a taste, they all have programmatic tests that are happening that they can prove those out. And I think it's fair to say that all those tests have gone really well over the last year and as they've gone through their new front upfront recently they seemingly all carved out just a little bit more than they have in the past to really continue or expand upon those successful tests that happen especially last year and the first part of this year. So I'm optimistic that way more of that will continue to open up and I also believe that the subscription models are sort of passed out or they’re capped in the sense that consumers can't afford to keep signing up for more prescriptions [indiscernible]. And so the desire from a marketplace from the consumers to have more ad funded options is going way up and given the desire to advertise in the new VOD world I think it represents a tremendous opportunity for all of TV but especially companies like ours.

Thank you. And our next question comes from Brian Fitzgerald. Please state your question.

Maybe a couple questions, Jeff, may be ripping a bit off your comments around competitive sets in the market. My question is around kind of how you built your engine, your model maybe versus some other guys who kind of grew into programmatic maybe from a vertical ad perspective and then just what kind of services onto it. And one of the ways I think about it is, I do the analogy that you guys are more like a continuous multivariate differential equation versus some other guys who are more like discrete linear algebra functions, just adding lines and lines of code. And one scales and gets more exacting solution and one doesn't scale and has a broader solution. Can you talk a little bit about it maybe from that lens focal point, your secret sauce versus your competitors?

So this is one of the hardest things to talk about just because anything that is super dependable and highly technical it’s really hard to reduce down to something that can be explained in a few minutes. But this is at the core of what we do better than our competitors, which is, not just that we've built the business model that is way more like that, in the sense that’s recurring and predictable. So we built technology that let us to that model, not the other way around. We didn’t start by saying, oh, we want to build a SaaS Company, let's build pack that looks like that. We said what is a way that you can consistently and constantly learn from the dollars that you spend because that seems like the only way that you can ever be competitive. And so what we have done as we’ve build the platform that is always on that people log on to, they put their own data and insight into it and then using those data and insights to extrapolate from that and go use all the third party data in the world that we can get access to legally and ethically so that we can then use that to make better decisions in everything that they do. And so it actually gets smarter over time and getting smarter over time makes it more and more defensible which is part of the reason why we talk about when we ramp up a big customer it takes time, we have to go prove ourselves that after we have all of those learning and we’ve applied the budgets and the data that we have for years and years we think we have such an advantage over a newcomer that we're going to keep doing that as long as we keep paying attention to it and building the right products and listening to our clients and maintaining our position as a product driven company. But there is nothing that can make this company fail faster than ceasing to be a product driven company that shifts product every single week and that is the core of who we are.

And then the only other question I have maybe a quicker one is just on the international side of things as you continue to see growth there. Is that growth can you define, is it coming from new customers versus existing customers, when you onboard customers do they ramp similar to what you saw on the on-boarding process took in say North America. Any color there on the international side of the growth.

You bet, I’m going to let Rob address most of this but I'll just preface as I can. Of course our international growth was more than double the growth of the United States, so some humungous wins and their color – their deserved color from both Europe and Asia and I’ll let Rob do that.

For sure. Thanks Jeff. Real quick Brian, it is coming from both Europe and Asia, so it is across the board. So anywhere outside of the U.S. we're growing more than twice the pace we are in the US even though the US is growing is very fast. To your question where is it coming from, largely it looks like our overall business in that 80% of its coming from existing agencies or existing partners. But within those agencies or partners, we're getting more and more of their advertisers and the advertisers that we do work with theirs they're becoming more and more programmatic in terms of how they spend. And so in the first quarter, we mentioned we have the best month the best quarter we've ever had in UK and in Germany and in Australia. Singapore just missed their all time record, so it's coming right at their Q4 spending, growing faster than - as fast any market on a year over year basis. So we're really seeing it everywhere. It's largely coming from our existing clients spending more or putting more of their agencies, or excuse me, up more of their advertisers on to our platform.

And our next question comes from Aaron Kessler. Please state your question.

First maybe just on header bidding, I think the notion was that header bidding would kind of open up amount of inventory open to that DSP, so thoughts there. Then I’ll need a little bit of feedback on the wins that you’ve had in Q1, kind of what was the feedback with the technology reason for the win, and was the primary decision being made by the agency versus the brands? Thank you.

Let me start by just talking about header biddings. So, as it relates to header bidding, it definitely feels like it’s becoming more and more sort of mainstream or more common for publishers to be using header bidding. It’s also more and more common for them to add more tags. So it feels like the premium publishers for the most part have all adopted some form of header bidding. It also feels like for the most part they have more tags on their pages then they need or then is sustainable. So it's putting more pressure on SSDs and exchanges. And it feels like from the sell side there is pressure being put on the publishers to narrow that down instead of simultaneously running 6, 7, 8, 10 options, you instead simply run three or four and that is much more sustainable. To us it doesn't matter, it ensures that we get the opportunity to look at everything and then we also get to choose those that provide either better visibility or they fake a lower fee so it enables us to be more competitive. So whatever additional cost is incurred by us looking at more of the impression, we make that up by making good choices. So we're fine with however it ticks out, header bidding has one of the best things that ever happened to our business. But it feels like header bidding is maturing which is perhaps why you're hearing a little bit less about in 2017 than you did in 2016. As it relates to those wins and whether they're coming from brands or whether it's coming from the agencies themselves, I will say that brands are participating in the process of deciding to buy and test more than they ever have before. I'm delighted at the way that many of the biggest are thinking about it while is, while they want to more involved, they recognize the value that the agencies are adding and they want to keep them involved at providing the managed service. They recognize that their skill set is especially good at rolling out products into 150 plus markets, that is where global agencies do really well, but they also recognize that they have to have some amount of insight and some amount of data relationship with the technology, so that is becoming more common as well. So I love it when things like the P&G partnership happen, which is, we work closely with the agency and the brand to establish a partnership going forward.

And just a question for Paul, I know the technology expense was up about 5 million sequentially, is there anything one-time within that and should we think about as a good baseline going forward for the rest of year?

In the [indiscernible].

Yeah, correct.

You should look back at the baseline going forward. We're investing really aggressively in technology right now.

And our next question comes from Kip Paulson. Please state your question.

Just a couple from me, in the year ago second quarter 2016 both gross spend and revenue accelerated from the first quarter of 2016. Could you remind us what drove that, do you view this as a tougher comp for the current quarter and is there anything else driving the deceleration in revenue growth implied by your second quarter guidance, I think it’s down to 42% growth versus 76% in the first quarter? Thanks.

I’ll sort of answer in reverse order. There's nothing inherently flawed in the business or in our future, there is no [indiscernible] in front of us that’s making us say there's got to be deceleration. There is a little bit of a difference in the cost. So in Q1 last year, you just remember that the beginning of the year the global market meaning the financial markets took a pretty substantial trip downward and that caused everybody in advertising, I say everybody, I mean especially big companies which is where we focus and that’s the core of the clients that we service. That caused them to pause, so I think it's fair to say that our Q1 was weaker last year and our Q2 accelerated as a result of just having a weaker Q1. So when you’re comparing year-over- you have to remember like the comparison to last year's is a little bit different than this year. But reinforced the modeling on that core that we talked about and we're as bullish as we've never been on our business. So there's no other reason than just a little bit of differences in the denominators.

And then just one other one if I could. I might have missed it, but is there any update to your gross spend guidance for the year?

No, we provide growth spend on an annual basis and we haven’t given that on a quarterly basis and don't plan to.

And our next question comes from Kerry Rice. Please state your question.

Two questions primarily, the first one is, my understanding on many times how brands spend particularly if they're new brands, maybe they come in and they run some tests budgets and then they build their spending on the platform from there. Is that a fair way to think about this as you're - these new wins that came on Q1, maybe their Q1 spend was still relatively small compared to their overall budget. And so maybe through the year we'll see that grow and probably hit a pretty high peak in Q4. Is that fair to think about it that way Jeff? And then the second question is, you talked a little bit about data driven decisioning. Can you talk a little bit about the data tools that you can offer your advertising clients and to help them spend more on your platform? And then maybe one quick one for Paul. Thanks.

The way that brands ramp up, I'll answer briefly and then I'll ask Rob to just add some color to it. So, they go both way, sometimes what they do is, they take – they know that they’re committed to programmatic. They spend on another platform and for whatever reason they decide to move it over and they can move it over all at once. And then there are other cases, which is frankly more common, which is, they run a test and they sort of take the crawl, walk, run approach. And I would say that represents the majority of the time that they're testing and then they ramp up, I'm not sure what else you would add to that.

Yeah that's just - that's exactly right, the perfect example, a large global agency we started working with them in the Midwest. We wanted in Q3 last year they started working with us one advertiser, just a portion of that advertiser’s programmatic spend, we crushed their goals, we gave them great insights and so they gave us more of that advertiser’s budget throughout Q3 and Q4. They added another advertiser as we headed into Q4 and the same cycle carries you describe where they give us a little bit, they see how we do, they continue to earn trust to give us more. So we entered 2017 with that large agency with two advertisers. And three or four weeks into the quarterly, they called us and said, hey guys, we have 12 brand new advertisers that we're going to put on your platform. Now that wasn't 100% of their spend, it was the same cycle. 12 new advertisers, a little bit of their spend and then we got to go prove it as Jeff just mentioned a couple times. That is the sort of way it generally works and we were happily surprised to the upside to get 12 new advertisers. Frankly coming into the year we thought it would be four to six, so getting 12 right off the bat was a great start. And that’s been happening along.

Kerry, just to answer the second part of your question about what tell us about the data driven tools that we provide. So let me just talk a little bit about the evolution and the way we thought about it historically and where we sort of sit today. So we started by saying we want to be the most transparent and give the most amount of power and control to the users of our platform. So I would argue that what we have done for most of the last ten years that we've been in business is we overwhelmed them with data. And while other especially the big digital outlets where you go buy most of digital, they get really crappy reports, and press and click conversations; that’s it. And so we said we're going to go so far beyond that we're going to have so much grain, so much insight and we're also going to make it possible for them to use as much third-party data as they want and we'll let them slice and dice any way they want. We still have all those tools, but what we've gotten way better at it is what affectively AI, which is audience predictor that enables them to just turn it on and immediately we go shopping for other data and other insights that we can target against. We have price in mind, so in other words, we go shopping for them for value and this is where the objectivity matters. We talk a lot about objectivity in media, it matters just as much in data. So for instance, I always use this example, Democrats are way more likely to drink grapefruit juice than Republicans, I have no idea why, but there is a difference. And so, no one would ever think to type in, I Democratic candidate X wants to target grapefruit juice drinkers, but it can be a data segment that is worth buying because there is correlation there. So using AIs that can be surfaced, used, transacted on, while doing the very best thing for the client is the very best price without the need for complexity that I think we've often done in the past. So the tools that we create are they get to upload data and insights since we protect at all costs because we're aligned with them by being buy side only and don't own any media. And then we extrapolate on that to go use third party data around the world and those tools are at the core of our product offering. By doing that and then looking for the needle in the haystack of those millions of ads available every second. It feels like our objectivity plus our technology make it so that we're just going to keep winning.

And then, one for Paul, on the tax rate, Paul, I think you mentioned the mid-40% for the year. That seems lower than what maybe we had previously had in our models, is there something that’s changed there and that's just kind of the outlook going forward.

Yeah. The best that I can tell you is, is model in the low to mid 40s and then each quarter there's going to be some lows around benefits and stock options and then variances from national taxes. And of course, we'll explain those as they happen but our core rate is about 40% so that’s where you should start.

And our next question comes from Dylan Hattem. Please state your questions.

Two questions, first for Paul, which international markets are currently your largest contributors to overall spend? And do you still expect international to be roughly 15% of revenue by year end. And then for Jeff, what is your perspective on how independent DSPs can grow in conjunction with or will be impacted by the walled garden such as Facebook, Google et cetera long term, especially in relation to inventory assets. Thank you.

So first, international markets are concerned, UK is our largest international market, but Singapore is a very close second. And those are followed by Germany, and then Australia. For the first quarter, growth spend outside the US was over 10%, it was a little bit over 11%. And yes, because it is growing faster, we still are marching towards that 15% number we laid out as outcome.

In response to your question about walled garden. So long term, I believe it's in the best interest of the walled gardens to open up to the scale and brand [indiscernible] independent DSPs. I can speak from having recent conversations with people like YouTube that that's something they also think about and perhaps at some point in the not too distant future things will open up. While I don't think that's part of their immediate plans because they don't have to and they do use that as a way to get advertisers to come to them in the short term. I think long term and in the next few years you'll see most of the walled gardens turn to opening things up. I believe it’s the best way to monetize YouTube, it’s the best way to Snapchat, it’s the best way to monetize anything that has scale because there will always be incremental demand with data insights that can't possibly be stored inside of those walled gardens. And so it makes it impossible for them to optimally monetize their own content without enabling other people to buy on top of it. And so if you take the biggest brands in the world and say you have to choose either you use Facebook or you use YouTube’s data or you use your own, they will always choose their own. And then if they can use test to help them make better decision especially given that we add more value than we charge them, it makes it a no brainer for both them and for the publisher to monetize that way. So some people have said, hey, I think long term you have trouble getting access to walled garden inventory, I think it's exactly the opposite. In the short term, I think I have a problem and in the long term I think I don't.

And there appear to be no further questions at this time this. This will conclude today's call. We thank you all for your participation. You may disconnect your lines at this time and have a great day.

Thanks everyone.

Thank you.