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The Trade Desk (TTD 0.04%)
Q4 2018 Earnings Conference Call
Feb. 21, 2019 5:00 p.m. ET


Prepared Remarks:


Greetings, and welcome to The Trade Desk fourth-quarter and full-year 2018 earnings conference call. [Operator instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Chris Toth, vice president of investor relations. Thank you.

You may begin.

Chris Toth -- Vice President of Investor Relations

Thank you, operator. Hello, and good afternoon. Welcome to The Trade Desk fourth-quarter and fiscal-year 2018 earnings conference call. On the call today from our Hong Kong office is Founder and CEO Jeff Green; and from our headquarters in Ventura is Chief Financial Officer Paul Ross.

A copy of our earnings press release can be found on our website at thetradedesk.com in the Investor Relations section. Before we begin, I would like to remind you that except for historical information, the matters that we will be describing will be forward-looking statements, which are dependent upon certain risks and uncertainties. I encourage you to refer to the risk factors referenced in our press release and included in our most recent SEC filings. In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data.

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A reconciliation of the GAAP to non-GAAP measures can be found in our earnings press release. We believe that providing non-GAAP measures, combined with our GAAP results, provides a more meaningful representation regarding the company's operational performance. Lastly, I would like to highlight the following upcoming Investor Relations events. We are holding an Analyst Day on Wednesday, March 6, 2019, in New York.

This event will be webcast and available on our Investor Relations website. And then, on Tuesday, March 12, we will be attending the Susquehanna Technology Conference in New York. I will now turn the call over to founder and CEO Jeff Green. Jeff?

Jeff Green -- Founder and Chief Executive Officer

Thanks, Chris. I'm excited to be taking this call from Hong Kong. For me, it's exciting to be talking about the future of our business in Asia, which is economically the fastest growing region of the world. Back in October 2017 at our Investor Day, we stated that in the years ahead, it is highly probable that we would see accelerating growth.

It happened much sooner than we thought. I'm excited to announce that our revenue growth accelerated to 55% in 2018 from 52% in 2017. It was a huge year for The Trade Desk. Spend on our platform surpassed $2.35 billion.

Revenue was a record $477 million. This growth is more than twice the 22% growth of the entire programmatic advertising industry in 2018, according to Magna Global. We've achieved over two times the growth of the industry for over five years in a row now. Q4 was also an outstanding quarter to cap off an amazing year.

Revenue for the quarter was a record $160 million, up 56% from Q4 2017. That 56% revenue growth also represents revenue acceleration. In Q3 2018, we grew 50%, and looking a year back, in Q4 2017, we grew 42%. Based on our performance, 2018 was clearly a foundational year for The Trade Desk, but that foundation is not just in the numbers.

We also had a series of achievements and accomplishments that laid groundwork for our future growth that are worth spending time on now. First, we launched the biggest product in our history at the end of June. What we call the Next Wave, included an enhanced user experience, artificial intelligence, technology, as well as a forecasting engine that helps every planner in media. Also, 2018 was the year when Connected TV became a must-have in the media plan, as the convergence of TV and the Internet continued to speed up.

We increased CTV inventory, a substantial six times since the beginning of the year. And CTV spend increased over nine times year over year. We also started to build a solid base of trust with the largest companies in China, such as Baidu, Alibaba, Tencent and ITV. Our Unified ID initiative, which reduces inefficiencies for advertisers and provides a better experience for audiences, began gaining steam across the industry.

And data usage on our platform grew at nearly twice the rate of media spend for the year. In Q3 and Q4, after the Next Wave launch, data usage accelerated. These achievements are the foundation for our future growth, and further our vision of making advertising better for everyone. In 2019, according to IDC, global advertising will be about $725 billion, up over 4% from 2018.

At current growth rates, global advertising will be a $1 trillion industry in about seven years. Programmatic is still small, estimated at around $33 billion in 2019, according to Magna Global. But it is growing much faster than all of advertising and much faster than digital advertising. We believe that before long, the vast majority of advertising will be digital and all of it will be transacted programmatically.

Our addressable market is huge and growing. We intend for The Trade Desk to own its fair share of the $1 trillion worldwide advertising market in the coming years. We believe technology and rational economic choices will win in the long run. Programmatic is better for advertisers, publishers and consumers alike.

The Trade Desk is better positioned than anyone else to prosper as the world moves to programmatic. Our customers tell us that we provide meaningfully better technology solutions and service, and we're seeing subsequent business wins as a result. We expect to grow faster than the rest of the industry for as far as we can see into the future, and this is why these foundational pieces are so important to our future growth. In 2018, we had record revenue in all of our international offices, validating our focus on expansion outside of North America.

Mobile spend grew nearly 80%, now accounting for 45% of the spend on our platform. Data spend increased by over 80% year over year. Our two-year investment in the Next Wave product launch is already paying off. Through today, customer adoption is over 71%.

Our business strategy continues to be confirmed in the marketplace. More than ever, our objectivity matters as large brands trust us more than any other sales player in the market. It is our biggest differentiator from the walled gardens, as big as they are, the rest of the internet is much bigger than any one destination. The independent Internet has more premium content than the user-generated content sites, and this is especially true in TV and video content as more of that comes online.

And whether it's premium video content, apps or websites, we're the ones who monetize it. The Trade Desk helps advertisers find quality content and audiences, as well as mitigate the risks of advertising on user-generated content sites. In 2018, marketers allocated meaningful budgets beyond a couple of search and social sites that historically attracted most incremental advertising dollars. Our strategy of being the best platform for media buying and not owning or arbitraging media is more valuable today than it ever was.

In 2018, 55% of Ad Age's top 200 worldwide advertisers spent more than $1 million on our platform. Four of the top 10 worldwide advertisers increased their spend over 100% in 2018. 84 of them increased their spend over 50% in 2018, which is just amazing. We expect most of them to spend even more in 2019 and beyond.

The results we are producing now is a direct result of the strategic decisions we made years ago. We made smart bets early and we continue to invest in these opportunities heavily. I will briefly update you on our key initiatives today. And we plan to go into more details on these initiatives at our Investor Day in a couple of weeks.

First, early on, we identified the rise of Connected TV. The convergence of the Internet and TV continues to be a once-in-a-lifetime shift in media. According to IDC, the traditional linear TV advertising market is about $230 billion worldwide, but this number is shrinking as more dollars to get allocated to Connected TV and video. Nearly everyone agrees that all of traditional linear TV will move to CTV.

The only question has been how quickly. And the answer now appears to be much sooner than most people thought. CTV spend on our platform has had a material impact. It helped drive our revenue acceleration in Q4 and in 2018.

In Q4, we had record spend in CTV. Over 160 advertisers spent at least $100,000 each in CTV, with a double-digit number of them spending in the millions. We invested in CTV early, so that we would be poised to win substantial marketing budgets as the overall ecosystem matured. For content providers, for aggregators and advertisers, our value proposition is compelling.

We have access to premium inventory at scale. Advertisers don't have to worry about the risks associated with user-generated content. Throughout 2018, we saw CTV inventories increased a substantial six times. This increase is across all forms of CTV.

Probably the fastest-growing segment of CTV inventory today is coming from the large networks, such as NBC, Fox, CBS, ABC, Discovery, ESPN and A&E. It's our new channels, sites or players where these large networks and content owners are going direct to consumers. The networks want to monetize their own inventory and they want higher CPMs. Inventory is also coming from ads on the channels like Hulu and MVPDs like Sling TV, which are going great and are wonderful partners.

We are also seeing a lot of growth in live events, where we have access to more inventory than ever before. On our platform, advertisers could buy ads on live events for CTV, mobile apps and video players. Some of the events were huge. They included the Super Bowl and the entire NFL playoffs.

In 2018, they also included the World Cup, the NBA playoffs and also the World Series. That's a vision few saw when we made our initial CTV investments and is now already a reality. Our ongoing efforts to educate media buyers and provide them with the tools and data, such as reach and frequency, to target and measure audiences is converging with our increasing inventory scale. We advise our customers to include the CTV on every media plan they create.

Our second key initiative was international expansion. Two-thirds of global advertising spend is outside the U.S. We are a global company. As programmatic markets mature, we expect our international revenue, which is currently 14% of our revenue, to grow to roughly two-thirds of the total revenue.

The opportunity for us is massive. In 2018, growth in our North American offices was unexpectedly strong, but even with that, the growth of our international offices significantly outpaced that of North America again. Our offices in Hamburg, Madrid and Sydney grew well over twice that of the United States. We expect continued fast growth outside of North America again this year.

Our business in Europe remained very strong. Both Q4 and 2018 saw record revenue in all of our European offices. We've prepared for GDPR. We helped our customers prepare.

And then, throughout the transition to a post-GDPR world, we solidified our position as the trusted partner for brands and media buyers in the EU. We will continue to be proactive as the implications of GDPR evolve. Asia continued to be a key area of rapid growth for us, that's why I'm here in Hong Kong today. The fastest-growing, the largest middle class in the history of the world is emerging here in Asia.

And global brands want to reach these new consumers. This expanding middle class is consuming digital media, primarily through mobile and CTV channels. That's why global advertisers are turning to The Trade Desk to reach audiences in Asia. We're strong in the key channels and markets where they can effectively reach these consumers.

And of course, there's no bigger market in Asia than China. 2018 has been a year of developing key partnerships to succeed in the second-largest economy on the planet. We continue to build trust and partnerships with some of the biggest content providers in China. We've announced major partnerships with Baidu, Alibaba, Tencent and ITV, all must-have content providers for advertisers.

In the next few months, we'll be sharing even more about the scope of our offerings in China as we formally launch our major initiative in that market. We are laying the foundation for long-term success in China. China is a long-term investment, we're only at the beginning, but I'm super optimistic. And we're spending more time in Mainland China and Hong Kong in 2019, as we continue to grow our business in these key markets.

Our third initiative has been to enhance the effectiveness of programmatic advertising by providing a unified identity for the entire industry called the Unified ID solution. Today, as users surf the internet, hundreds of ad-tech platforms must sync their identifiers with one another to recognize the amount anonymized user. There is no standardized identifier and every ad-tech company uses their own ID. This slows down page loads, it drives up infrastructure cost, but most significantly, it lowers the audience mass rates.

These are costly issues that impact everyone from the consumer to the advertiser. But as the leading demand-side platform for the independent internet, The Trade Desk has a huge ID footprint. And we're making it available to all credible ad-tech players around the world for free. By inviting everyone to sync using the same universal ID, which we do not link to a user's actual identity, we can help advertisers reach more of their valuable target audiences.

It's a privately safe way to solve our industry's cookie mapping problem and boost our collective ability to compete against walled gardens. Those who use our Unified ID see more seamless matching. In some cases, nearly 100% of digital identities across multiple devices of content providers. We are seeing growing adoption of the Unified ID by some of the largest public publishers in the world, supply side platforms and data companies, as well as our other VSPs.

The final initiative I'll discuss today is the increased use of data on our platform. It's just a fact that data-driven decisions are better than guessing. So the choice for advertisers is clear. When it comes to guessing or driving the campaign with data, data wins every time.

Our focus has always been on providing advertisers with an easier way to make data-driven decisions. We have significantly increased the number of data elements used on each impression on our platform. We now average over 2.25 data elements per impression, and we still have only scratched the surface of what we can do with data. These numbers will be exponentially higher as the years go on.

The Next Wave product launch last June was the big step in the right direction, because it made it easier for advertisers to layer on data. The numbers speak for themselves. Q3 data spend growth accelerated to over 70%. Q4 data spend growth surpassed even that, increasing to over 90%.

Cost of ad spend in Q3 was up over 200%, but in Q4, cost of ad spend was up an astounding 300%. We expect more outsized growth in data in 2019 and beyond. And speaking of our Next Wave product launch from last June, we consider it the biggest product launch in our company's history. It's something akin to Apple launching its first iPhone.

There were 3 key components of the Next Wave: Megagon, our data-centric user experience that puts actionable insights right where media buyers need them; Planner, a tool that lets media player taps into the insights of our historical data to model and refine ad campaigns, and then import them into the platform for execution; and Koa, our AI agent that provides data-driven recommendations transparently to media buyers who can choose to act on the insights that make sense for their goals. We invested almost 40% of our engineering resources for almost two years to launch Next Wave. We overhauled the entire user experience and make decisioning even easier for the tens of thousands of people who use our platform. The Next Wave significantly increased our technological lead over our competition, and the engineering capacity we added to launch the Next Wave, widened the technology gap between us and the competition even further.

This release was the biggest improvement ever to the platform. Our adoption goal for our customers exiting the year was 50%. We surpassed that. Adoption today is over 70%.

More than half of the customers that have adopted the Next Wave have enabled Koa, artificial intelligence, driven by data for our entire bid stream and data provided by customers. Over 75% of those using the Next Wave have switched on Koa predictive clearing. This is an incredible feature that counters publisher's moves to first price auctions, which will cause CPMs to jump up significantly. Those using predictive clearing have seen CPMs reduced by up to 20%, which is a huge value.

The value exchange had never been better for our customers and that helps drive customer retention and growth. In fact, our customer retention rate has been 95% plus for the 20th straight quarter in a row. We expect the momentum to continue in 2019. For the year, we expect gross spend on our platform to be over $3.2 billion, resulting in revenues of at least $637 million.

In the coming year, we will continue to make investments in high-end growth areas, just as in prior years. We estimate our EBITDA margin in 2019 to be about 29%. But like prior years, when we've seen surprises, they tend to be the upside and the upside has fallen directly to the bottom line. While we generate EBITDA at levels much higher than our software peers, we are not aiming to maximize profit in the near term.

We believe investing organically in our core growth opportunities will yield the best return for shareholders over the long term. There's a multiplier effect with our investments. Our investment in the engineering to build the Next Wave, for example, has now positioned us to outpace the competition in technology for years to come. Since we started building the Next Wave over two years ago, our engineering capacity has increased by over four times.

At the same time, we have increased our R&D efficiency. The result is we now have the capacity to build eight Next Wave products this year. And we're directing that capacity to other high-growth opportunities. CTV, data products, cross-device and now China are just a few great examples of our investment strategy.

If we had not invested in CTV years ago, then we would not be where we are today. The same can be said of investments in data, cross-device, and, of course, our acquisition of Adbrain, which has paid for itself many times over already. So we will continue to invest ahead like we're doing right now in China. We want to be there early.

We want to invest for the long term, not next quarter or the quarter after that. We are going to continue to operate this way. We regularly evaluate growth opportunities in areas of technology, channels and different geographies. It enables us to grab share as we have done consistently since the first dollar was spend on our platform back in 2011.

We are excited about our prospects in 2019, the secular tailwinds remain very strong, everything is in place for continued success this year, next year and over the long term. Now I'm going to turn the call over to Paul to discuss our financials.

Paul Ross -- Chief Financial Officer

Thanks, Jeff, and good afternoon, everyone. For the full-year 2018, revenue growth accelerated to 55% year over year, compared with the 52% growth rate we saw in 2017. The revenue growth acceleration resulted from large global brands moving additional spend on to our platform, significant amounts of new business and adoption of video, which includes both mobile video and CTV. Adjusted EBITDA increased 67% year over year and net income increased 74% from a year ago to a record $88 million.

We achieved this while continuing to heavily invest in areas critical to our future growth, such as launching our Next Wave family of products, adding engineering talent and expanding our global reach. We continued to gain market share. We ended the year with over $2.35 billion in spend on our platform, up from approximately $1.55 billion a year ago. For more than 5 years in a row, we have grown more than two times the RTB programmatic industry, according to Magna Global.

Outside the U.S., spend growth was incredibly strong at nearly 70% year over year, exiting 2018 14% of total platform spend with outside of North America. From a channel perspective, in 2018, mobile spend was the primary driver of our growth, increasing 77% year over year. For the first time, total mobile spend on our platform, which includes video, in-app and web, ended the year at over $1 billion. As Jeff highlighted, CTV grew more than nine times year over year, audio grew more than 230% year over year and mobile video grew more than 130% year over year.

Turning to our financials, revenue for the fourth quarter of 2018 was $160.5 million, up 56% year over year. This growth reflects growth in spend by existing customers, as well as the addition of new customers. Approximately 90% of our fourth-quarter growth spend came from existing customers who've been on our platform for over a year. Adjusted EBITDA was $67.1 million, with the corresponding margin of 41.8% of revenue during Q4.

Margins are typically the strongest in the fourth quarter, given the seasonal strength in advertising spend. For the full-year 2018, adjusted EBITDA was $159.4 million for a 33.4% margin, reflecting our revenue over-performance even as we increased our investments in product, technology, people and global expansion. GAAP net income was $39.4 million for the fourth quarter of 2018 or $0.84 per fully diluted share. For the full-year 2018, GAAP net income was $88 million or $1.92 per diluted share.

GAAP net income increased 74% compared with a year ago, and 2018 marked our fifth consecutive year of positive GAAP net income. Our adjusted earnings per share was $1.09 for the fourth quarter, compared with $0.54 the prior year. For the full-year 2018, our adjusted earnings per share was $2.70, up 69% compared with the prior year. In Q4, net cash provided by operating activities was $48 million, and we closed the year with $207 million in cash.

In 2018, we added $51 million in cash in addition to paying off $27 million in debt back in Q1. Our DSOs ended the year at 114 days, and our DPOs were 97 days. This 17-day spread between our DSOs and DPOs exiting the year has tightened and stabilized over the past several years, as a result of internal initiatives to improve capital management. Finally, I would like to share our guidance for the first-quarter and full-year 2019.

For Q1, we expect revenue to be $116 million and adjusted EBITDA to be $18.3 million. And for 2019, we expect the full-year revenue to be at least $637 million on total gross spend of over $3.2 billion, and adjusted EBITDA to be at least $182 million or about 29% of revenue. As a percentage of revenue, our guidance for 2019 adjusted EBITDA is very similar to our guide last year, which we believe provides significant flexibility to invest opportunistically in the growth opportunities we see in front of us. This includes investments in areas such as our infrastructure and offices.

In 2019, we plan to continue to invest in our people and our technology in high-growth channels, such as CTV, and in sales and marketing as we build out our account teams worldwide. Similar to recent years, for any revenue upside that we see in 2019, relative to our investment plan, we should again expect much of that incremental revenue upside to drop down into adjusted EBITDA. For 2019, we expect total GAAP operating expenses at $545 million, total other expenses for the year to be about $1 million and we expect our full-year tax rate to be about 28%. We expect stock-based compensation expense for the year to be about 10% of revenue.

Share count is expected to be about 49 million as we exit 2019. And, finally, we expect our capital expenditures to total about $50 million and the depreciation and amortization expense to be about $24 million for the year. With that, I will hand the call back over to Jeff for any final comments and, of course, Q&A. Jeff?

Jeff Green -- Founder and Chief Executive Officer

In closing, let me reiterate that we are thrilled to see revenue growth acceleration in Q4 and for the full-year 2018. We're even more bullish on our future than we were a year ago. Our objectivity is more valuable to advertisers than ever, the opportunities in areas such as CTV and China are massive, our investments are paying off. And when we see surprises, it typically is to the upside.

We believe The Trade Desk is best positioned to realize continued growth for the rest of the year, next year and beyond. That concludes our prepared remarks. Operator, let's open it up for questions. 

Questions and Answers:


[Operator instructions] Our first question comes from the line of Shyam Patil with Susquehanna.

Shyam Patil -- Susquehanna Financial Group -- Analyst

I had a couple of questions. The first one, just on the 2019 guide. Jeff, can you just talk a little bit more about how you approach the outlook, just the puts and takes? And whether you followed a similar approach to previous years? And then, the second question, I think you alluded to this, Jeff, in your prepared remarks, but it looks like YouTube is facing another backlash related to brand safety. I remember, in 2017, pretty early on, you guys started to benefit as advertisers shifted spend over to The Trade Desk.

Just what are your thoughts on what's going on right now?

Jeff Green -- Founder and Chief Executive Officer

And so a couple of inputs that are unique going into 2019, and two years in the past. But the first is, the CTV surge that we saw in 2018, which as we just highlighted, success increase in inventory last year and even more impressive than NYMEX increasing spend last year. I think accelerating on a freeway, where when you start on the on-ramp, you're going to close to 0 miles per hour, but you're going to accelerate as fast as you can and that acceleration happened much faster than we expected it to. And 2018 proved to be the most foundational year for Connected TV that we'll probably ever have.

So with that foundation well in place, we feel like we are in a phenomenal position for 2018. But I don't expect it to grow at the same rate just because we've already done so much land grabbing in Connected TV. So we've established a foundation and we're going to build on top of it. So Connected TV foundation is one of the biggest, sort of, new drivers that we had to take into account into our 2019 guide and plan.

But also, the fact that 84 of Ad Age's top 200 advertisers increased their spend by over 50% in 2018, that means we're a little over 1/3 of those that increased by over 50%, so I think there's huge opportunity with the other 2/3 for us to go increase and, of course, our work's not done with that 84. We had that amazing gift in 2018 of Google removing their ID. And a little bit of change away from Facebook as well. And so we had to account for all of those as we're going into 2019.

But the last thing I'll just add on what makes 2019 a little bit different than the years passed is just that the numbers are just getting bigger. And it is a different thing to manage 1,000-person company with over 25 offices around the globe. But I've never been more bullish than we are right now because of the foundation that we laid in 2018, so I'm more confident in the accuracy of our numbers and our guide in 2019 than I've been in years passed. So we're really optimistic about 2019.

Just the second question is, it's a really interesting time for YouTube, and I do think that it has and will benefit us. I'm following it in real time the same way that many of you are here. For those who don't know, there was a content that was offensive, related to kids and inappropriate comments, especially, were made about the content, and then advertisers started pulling their ads away from YouTube. The thing that I find so telling about that is, that it is when you see brands like Disney or Hasbro or McDonald's or especially at the game which is publicly talked about the fact that they pulled budget.

Fortnight users, probably 100% of them or close to that are on YouTube, so the fact that all of their audiences is there and they're pulling budget is a commentary on what a significant event this is for advertisers and really what a significant opportunity it is for everybody else, as there's a bunch of dollars that need to find a new home. So I do think that that represents an opportunity for us, but I think it's hard for all those advertisers to move away from YouTube, which, again, why it's significant, but it also is going to be interesting to watch to see what the long-term effect is. But in the meantime, I think we'll see at least short-term benefits.


Our next question comes from the line of Aaron Kessler with Raymond James.

Aaron Kessler -- Raymond James -- Analyst

A couple of questions. One or two for Jeff and one for Paul quickly. Maybe for, Jeff, thoughts on maybe just walled gardens, when you think maybe they start to open up? And then, second, in terms of kind of the linear TV, you mentioned kind of $230 billion that could still lead to shift over. So part of it doesn't go to Connected TV, because of modern form at the Roku, etc.

What do you think the path is for that shift to be more programmatically available, obviously, AT&T acquired AppNexus along that path. But what's the latest update on, kind of, timing of when some of that inventory becomes available?

Jeff Green -- Founder and Chief Executive Officer

Aaron, do you mind repeating the second part of your question? I just lost the top of that, I was scribbling notes on...

Aaron Kessler -- Raymond James -- Analyst

Just thoughts on when, kind of, the new linear TV, the $230 billion starts to become more programmatically available for the part that doesn't shift the platforms or more of the internet platforms.

Jeff Green -- Founder and Chief Executive Officer

OK, great. In terms of the walled gardens and when budget will move over. So I personally believe that long term, there are no walled gardens, because of the fact that you want to welcome as much demand as you can. And if you are a small walled garden, then it's really hard for you to say to advertisers, you have to log into another platform and you have to ignore your recent frequency across other channels, you have to buy in my silo, and then I'll provide you with reporting.

If you're small, you don't have the leverage to say that and you're going to struggle. And I think some of the smaller social networks have lived that. If you're big, you've got a different problem, which is that you've got a surplus of inventory and you've got way more supply than you have demand. And so it's economically irrational to not welcome more demand.

So in either case, I believe long term, it's economically rational for them to open it up and welcome incremental demand, which is what we represent in all those cases. The who moves over first and when that happens, I think is mostly dictated by a pain or by, sort of, the market and that sort of need for the incremental demand. So I expect, actually, the smaller ones to go first. And so if you're a smaller social network or a smaller TV network or things like that that are trying to source demand on their own, those are the ones that will open up first.

And we see things opening up all the time. You could have argued like audio was a walled garden two years ago, three years ago and now it's nearly all programmatic. So that phenomenon a bit opening up, it's happening all the time. And the related question on linear TV moving over, to me, it's a race between linear TV, sort of, going away as people watch more and more on-demand, and especially when people who've historically benefited from the linear highs as they're transitioning.

I still don't think that people have fully appreciated how much 5G is going to change linear television because companies like AT&T and, of course, as 5G has its impact here in Asia, the same phenomenon will happen, which is more and more content will move to on-demand, and that will be ad-funded, the same way that most top traditional television has been ad-funded. But, of course, when you are doing things over the Internet, you can provide more targeting, and then, raise CPMs and given that content cost in television all over the world are at an all-time high, higher CPMs are welcome by anybody who's making premium content, which is where all the time spent is going. So I personally believe that the more important investment for us is to ride that wave of Connected TV. And I'm less interested in when the linear television will become programmatic, because will at all, just because things are moving to on-demand at such a rapid pace.

I'm just starting to keep up with that opportunity.

Aaron Kessler -- Raymond James -- Analyst

Got it, great. And just quickly for Paul. Just any more colors on the expense growth, kind of, by line item, kind of gross margins, as well as maybe expense areas that we should be think about for 2019?

Paul Ross -- Chief Financial Officer

Yes, Ryan. It's pretty much all of the usual suspects. We're growing out our account teams around the world. Obviously, you heard about how fast we're growing internationally.

Of course, that baseline domestic growth in the U.S., of course, and CTV right on top of that. Our engineers, now that Next Wave has been launched, they're working on next-generation technology as well. So you should see the increase in expenses pretty much throughout platform ops, sales and marketing, as well as tech and dev.


Our next question comes from the line of Vasily Karasyov with Cannonball Research.

Vasily Karasyov -- Cannonball Research -- Analyst

Jeff, I have a question about the announcement that Hulu made about the private market place that they set up there for the programmatic trade there AVOD inventory and I think The Trade Desk is a part of that. So can you probably tell us a little more detail? And what are the implications of this, you think, given that Hulu is such a massive source of AVOD inventory? I think they did $1.5 billion last year and it's almost all sold directly.

Jeff Green -- Founder and Chief Executive Officer

You bet. So I think Hulu represents one of the most interesting companies in all of Connected TV. I referenced them before as, what I call, a key-lead company. But if you watch them carefully, you can see which way the market is going, I think they tend to be thought leaders.

I think they were a really key piece in the tug of war that ended in their acquisition last year. So I think they're a very important company to watch if you're interested in the trends in Connected TV and things progressing. Part of the reason why it's so interesting is that, if you go to your Roku or you go to your Apple TV and you look at where the people spend all time on which channels, at least, in the United States, you'll see Netflix and Amazon near the top, and then Hulu's often No. 3.

And a few years ago, Hulu was doing what you would expect a joint venture from a number of traditional television networks to do, which is trying to sell it all directly themselves. And this continues to be our thesis, because consumers are tapped out in the sense that most of them are still paying for cable, most of them also have Netflix, most of them also have Amazon, but having another subscription to get rid of the ads is just too expensive. So the vast majority of them ask for ads. But on those where they ask for ads, Hulu actually makes more money than those who pay to get rid of the app, because of the higher CPMs that come with programmatic, in particular.

And the thing that come from programmatic for them is that -- and they have surged in growth, and their growth has been unbelievable. But their direct sales force hasn't been able to sell all of it on their own, and so they've leaned more and more on programmatic as they've grown. And it's been awesome to work with them and to buy inventory from them, and I expect to continue to be one of their most important partners, one of their biggest partners as they continue to see growth. I, too, am excited by that $1.5 billion, but I believe we've only scratched the surface there.

And I think Hulu has, sort of, best demonstrated that ad-funded model for Connected TV, I think you're going to see probably hundreds of companies follow the models that they've created, which is you can pay to get rid of the ads or can see the ads and I think, ballpark, 80% of them actually ask for the ads, given just the economics. So I think that trend will continue and I'm super excited about the marketplace that they've created because I think we'll represent a significant amount of demand for them.


Our next question comes from the line of Mark Mahaney with RBC Capital Markets.

Mark Mahaney -- RBC Capital Markets -- Analyst

OK, great. Two questions, please. Jeff, we've been particularly focused on Next Wave and the impact it could have on your client base. I know this was a major R&D initiative for you, substantial amount of your budget, etc, and then a long period of time that went into this.

And I see this one data point you have in your script about how it's -- larger clients to essentially see a 20% reduction in CPMs, so that sounds great. It sounds like, therefore, it could be improving their ROIs. Is it clear already that it's leading to greater spend for your existing clients? Your retention rate has always been super high, so it's kind of hard to see what the impact is there. But I assume that's what's happening is that people are getting better ROIs, they're getting more confidence in running programmatic campaigns and, therefore, they're allocating more of their budgets to you.

Is there any way you could quantify that? And secondly, I know you spent an enormous amount of time now in Hong Kong. My guess is that your Cantonese is pretty good, could you talk about when that market itself, the China -- the Hong Kong-China market could actually become material to The Trade Desk?

Jeff Green -- Founder and Chief Executive Officer

Awesome. You bet. Some of the team here in Hong Kong who were up very early were laughing when you asked about my Cantonese. It's horrible.

But I am working a little bit on my Mandarin, I love being here. Let me start by first talking about Next Wave. So I look at it as, yes, we have had 95%-plus client retention for over 20 quarters in a row. So you're actually right that that's not where you're going to see the strength of our Next Wave product.

To me, there's a couple of ways to quantify it. First is how quickly do people adopt it. So we went to them and said, "You have to have a new user experience and there's a whole bunch of new features. You can either keep the old one or you can use of the new one.

And the new one does have AI functionality that will save you money." And the fact that in such a short time -- I'm an Apple user who hasn't updated their operating system since the last one. So just because I don't want to spend the hour. But the fact that our customers have taken double-digit number of hours to learn the new platform, and that 71% of them have adopted the Next Wave products, to me, is a commentary on exactly what we were after, which is it's hard for us to improve client retention much, but it isn't hard for us to add to what we talk about all the time which is consumer surplus. So in other words, if we're giving them more value for the same dollar, then we create more and more retention.

This is something that I think the company, Amazon, has done such an amazing job at and something that we look to try to emulate as we give more and more to our users so that they'll continue to use our products. You asked if it amounts to more spend. Us talking about cross device being up by 300% in Q4 there is no way we would have done that without the AI product and this new user experience in Megagon. The use of data -- I mean, a huge part of the new user experience in Next Wave is to make it easier for people to layer on data to their decisions which makes the decisions better and just keep that virtuous cycle or that flywheel spinning faster and faster.

All of that has happened. So all the numbers that show data outpacing media that show our cross-device spend up 200% in Q3 and 300% in Q4 are is a by-product of our new release. But maybe the most exciting thing about the Next Wave is that we've added enough engineering resources in 2018 that even though it took about 50% of our resources, up till June of last year or almost two years to develop that product, we now, in 2019, have the engineering resources to produce six Megagons -- or I'm sorry six Next Waves. Megagon's one of the features in there.

So the fact that we have that capacity now and that we've distanced ourselves so much from our competition already represents a huge opportunity for us to just build more features and functionality in measurement and Connected TV and, of course, in Asia, which is a good segue perhaps to the second part of your question, which is when do we expect Asia, or specifically, China to be material. So we've been public about the fact that we will go GA on our China partnerships on March 25 of this year. So we've not done anything that isn't just effectively testing pipes with Baidu, Alibaba and Tencent. The ad tech ecosystem in China is much more nascent than it is in the United States, even though digital spend is a greater percentage in China than it is in the United States.

So there's a lot of work to do. We have great dialogue with Baidu, Alibaba and Tencent. In fact, I met with Tencent yesterday. So we expect those partnerships to grow throughout this year, but we're playing the long game here.

We don't expect it to be material literally for years, even though we're going to continue to make investments because we think China represents the largest-growing middle class in the history of capitalism, as well as a greater concentration in Baidu, Alibaba and Tencent. So we have important and complex relationships with Google, Amazon and Facebook, but I think in the long term, we'll have, in some ways, even more important and more complex relationships with Baidu, Alibaba and Tencent. So we're in the business of building trust with them right now, and that's what we're going to keep doing.


Our next question comes from the line of Youssef Squali with from SunTrust Robinson Humphrey.

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Just a couple of questions. First, maybe just a follow up to Mark's question around China. I think on the Q3 call, Jeff, you talked about how China should start yielding some real spend in 2019. Just was wondering about the pace of adoption and what are the kind of gating factors there? Because you obviously have the inventory.

Just how quickly can you ramp that up? In other words, also, how much of it is already baked into 2019 guidance? Maybe none of it. And then Paul, maybe can you help us understand the margin compression that you're looking at for 2019 over '18? I think there's a 400-basis-point compression there. Is the assumption there that all of that will be coming from incremental spend on things, like China, API development, distribution, on Connected TV, etc.? Just trying to figure out if there's any reason why the core margin would deviate or, if anything, wouldn't improve considering that now the NexGen has already been developed and you're not spending as much money necessarily on the newer initiatives.

Jeff Green -- Founder and Chief Executive Officer

So thank you for the questions. So I don't know that we ever said that this year would be material in terms of the spend for China, but we did say that we start to get dollars flowing through it, so that's is exactly what we said.

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Yes. I think all you said was real spend, I think that was what you said.

Jeff Green -- Founder and Chief Executive Officer

Yes, real spend. Yes, yes, yes. That's exactly right. So I don't want this to be misinterpreted as being material in the sense that it's moving the needle on our P&L.

What I mean is we're going to go out of beta. Instead of just putting test campaigns through, we're going to have real campaigns going through it. Let me just explain a little bit about our strategy in China and why I think we're in such a strong position, and especially because we're doing something different than what I think most U.S.-headquartered companies do when they go into China. Because most of those have historically got in and said, "I want to win Chinese consumers to my brand." And that's really hard to do if you're an American Uber and there's a great Chinese alternative in Didi.

So -- but if instead you bring something new to the table, that's where the game is very different. And what we're doing is we're going to the biggest brands in the world and saying -- and of course, with their agencies, so going shoulders to shoulders with their agencies saying, "How can we help you solve the spend gap?" Because if you're a high-end fashion brand, it's not uncommon to see 60% of your purchases are done in China and 30% of your ad spend to be in China. And if you're a CPG, you also have a delta, but you just have a smaller one. So 12% and 6% or whatever.

So we're trying to help solve that gap. And the way that you solve that is we go to the brands and say, let us help you put your first-party data to work. And then we go to Baidu, Alibaba and Tencent and say, we're going to bring in incremental spend. We're not trying to tax the spend that you already have, we're trying to solve that gap.

And the only way you're going to solve that gap is if you can put to work the data that these brands have. And most of the biggest brands in the world are not headquartered in China. They're all over the rest of the world, and we have some amount of relationship with that. So we think we have the ability to go to these brands and say, "You can trust us with your first-party data." And that's a tough pitch, provide you Alibaba and Tencent's mix.

In fact, that's not what they do. They say, "We have great data and let us put that to work on your behalf." So they can continue to do that, and then we can help put their data to work as we go into that market. And then also help grow the third-party data ecosystem, which is still somewhat nascent inside of China. So because we're bringing something new and because those big brands all want to solve that gap, we think that taking at least step one, being an outside-in strategy is something that's incredibly unique and is going to pay dividends.

But it's going to take some time.

Paul Ross -- Chief Financial Officer

Hey, there. This is Paul. In regards to your margin question. So just remember that when we over-perform on the top line, the vast majority of that drops down into adjusted EBITDA.

And what we guided last year, we took a very similar approach. We guided to 29%. We came in at 33% because of we over-performed. We're guiding similarly this year.

We're guiding to 29%. We plan to invest heavily. If there's over-performance on the top line, you may see something similar happen with EBITDA, above and beyond the 29%.


Our next question comes from the line of Mark Zgutowicz with Rosenblatt Securities.

Mark Zgutowicz -- Rosenblatt Securities

Just a follow-up on a couple of questions asked on Mainland China. I guess, the question for me is just in terms of the data access there and sort of what do you need from the BATs to provide you the same level of transparency and the measurement that's required from advertisers here in the States? And obviously, importantly, do you think you'll ultimately get that from the BATs.

Jeff Green -- Founder and Chief Executive Officer

Yes. So companies like Baidu, Alibaba and Tencent have had a benefit of learning from Google and Facebook, in particular, and the way that they've monetized ads. I think they've done an amazing job of learning from them, and they think about siloing their data so that they never run the risk of it going out, with also the request for us to help advertisers bring their data to the table. So there's actually clearer lines with Baidu, Alibaba and Tencent than there is with Google, Amazon and Facebook, which actually makes it much easier to have conversations about activating data.

Because on a given impression, either it's going to be monetized using their data on behalf of an advertiser or it's going to be monetized using the advertiser's data or third-party data through a company like us. And it's going to be either/or just because you have to work harder to silo that data. So the same way that we are providing an anonymized ID for the world to help us all have a common currency, in the world of mobile, that's way less important because of the way IDs work in mobile, where there is an anonymized device ID that gets shared. And because 70% or 80% of the monetization in those companies, and that's just because of the way consumers interact with Baidu, Alibaba and Tencent in China just also the use and prevalence or ubiquity of mobile devices in China, almost all of it's over a mobile device.

So we're going to get that ID on nearly every impression. And then we'll either use our data or get some insight from third party companies but those will be a little more siloed than they are in the other markets that we do business in. But it makes it clearer. So your question of will we get adequate levels of transparency, will we have the ability to measure it the same way that we do in the rest of the world, the short answer is yes.

And in a lot of ways, it will happen from the very beginning. I don't think we're going to have the same debate and evolution that we did in the rest of the world. There's not that much controversy or questions about it because they've learned from other markets, as well as they're very clear on the way to segment data so that they don't take unnecessary risk. And that's going to help the market grow faster.

Mark Zgutowicz -- Rosenblatt Securities

OK. That's helpful. And then just a follow-on to that. So what's the gap in terms of you seeing sort of that more material revenue from China? What gets us there? Because obviously, those three players control the vast majority of spend there.

So just if you could sort of close that gap, that will be helpful.

Jeff Green -- Founder and Chief Executive Officer

Yes. So part of the reason why I say it's going to take years for us to do that is because, one, we have to rebuild our entire infrastructure there, just because on the other -- you have to be on the other side of the Chinese firewall in order to transact in the milliseconds that we do everything on the rest of the world. So we've rebuilt our infrastructure. And the Internet is routed in just a slightly different way in China, which we've spent years already building around.

So our investments to date have mostly solved that problem, but there is still some work to do. But then, we're in the business of building trust, and as you point out, Baidu, Alibaba and Tencent have a greater percentage of the market than Amazon, Facebook and Google do in the U.S., sort of their counterparts in the U.S. So it's really important for us to win trust and to prove that it's incremental. And so we are working hard to develop crawl, walk, run situations with each of them.

They're slightly different in each pace. There are, of course, other big up-and-coming players that we're also talking to in China to develop close relationships. But we just want to be super clear about what the crawl is and do what we say, and then go to the next step. And we could easily leapfrog our outside-in strategy, for instance, and try to do something either inside or inside out, which is really what Facebook does in China.

And while I do think at some point, we'll do that in terms of inside out, which would be much easier for us than outside-in, we think a huge opportunity is to help the world's biggest brands close that gap in China. And they need somebody from the outside to take their data in, and that's where, I think, we have more trust than any company in the world. So it's really about establishing trust and activating data, and then also explaining to the brand how we take their data into China and then keep it safe. All of those things are just -- there's a lot of moving parts to that, and it's going to take time.

And we're not going to throw away our opportunity by being short-term focused. So we'll continue to do what we've done, which is essentially include no numbers from China itself until we've gotten out of that crawl phase and we have some visibility because we're happy to be patient.


Our next question comes from the line of Tom White with D.A. Davidson.

Tom White -- D.A. Davidson -- Analyst

Jeff, you made a comment earlier about high CPMs for Connected TV inventory. And we've heard some grumbling from some advertisers about that. Just curious whether you think that that's having any impact on advertiser demand. Could it actually be growing faster if CPMs came in a little bit? And also, does it impact your pricing or kind of your fee structure for this inventory type? Is there any pressure maybe on your take rate because advertisers have to pay up so much in terms of the pricing of the inventory?

Jeff Green -- Founder and Chief Executive Officer

I love this question. Thank you. So I think there are two primary reasons why there's high CPMs in Connected TV. One of them will last forever and the other one is a short-term phenomenon.

There's higher CPMs in CTV because it's better, because using data is better than sort of the spray and pray that traditional TV represented, where you buy in bulk, and you buy using really rudimentary data, and there's not really any targeting or customization for an individual households or user. So the fact that you can now layer on data and only show your ad to people that's relevant, I mean just think of how many TV commercials you've seen for products you'll never buy. That way should and will go out of television, and that does make CPMs go higher. And I'm so excited -- as a consumer, I'm so glad that that's happening because that's the only way that we can continue to get the premium content that all of us enjoy because the companies are just spending so much money to produce what I think is currently like the golden age of television content.

It's just amazing that we're all benefiting from the sort of land-grab that companies like Netflix have instigated. But the second part of that is a short-term phenomenon which will make CPMs come down a little bit, which is scarcity. So if you're -- some of those brands that we just highlighted have moved spend away from YouTube in the last week. If you're Hasbro or your Epic Games or Disney or McDonald's and you're trying to reach a more targeted audience, or especially reach the next generation, where people 25 and younger who are developing brand affinity or millennials who are trying to get in some strong buying power, spending power.

But if you're trying to win over those people, linear television is not the way to do it. And so because Netflix and Amazon have used models that are not ad-funded, there's been a scarcity of ads. And that scarcity just like we all learned in economics 101, just makes prices go up. So that short-term phenomenon, as more and more inventory comes on, and we're already seeing that this vector sort of decreasing it's effect on CPM, actually makes it more advantageous for people to move over.

So part of the reason why we saw that success, increase in inventory and the nine times increase in spend is because those CPMs have come down just a little bit. And as a result, I don't think it will have any big, long-term effect on our fee structure because we add so much value by bringing data to the table that I think there's a strong argument that our consumer surplus in the CTV is higher than anywhere else. So time will tell there, but I think we're in a really strong position. And the fact that we've been able to grow like we already are -- in China I used the term -- or I corrected that it's not material.

In CTV, I'll tell you, it's material already, and the way that we charge has not changed.


Our next question comes from the line of Mark Kelley with Nomura.

Mark Kelley -- Nomura -- Analyst

My question is a follow up to the last one, just thinking about scarcity of CTV inventory. Would love to get your thoughts on the C3 limitations in terms of the kinds of media that -- the media owners actually want to put either on addressable TV, Connected TV, the limitations whereby the end buyer, the advertiser has to show the same ad unit basically to everyone watching whatever the program is to maintain that C3 rating. I guess, would love to get your view there. Does that have to change for Connected TV to really take off? Or am I not thinking about that the right way?

Jeff Green -- Founder and Chief Executive Officer

So I'm not convinced that C3 is going to have any long-term effect. I think it's a little bit of a speed bump. And the reason why it's just -- the macro is really driven by that quid pro quo of the Internet, which is you see ads in exchange for otherwise free content. That cost of content's going up.

And in general, I think the big networks, the traditional TV companies, so whether that's a Disney or a Comcast and the NBCs and Foxs and CBSs and ABCs of the world, I think they look at Netflix and say, "We're three, four, five, seven years behind, and we've got to get a direct relationship with consumers and go as fast as we can and get much demand as we possibly can." And they're racing to do that. I don't think C3 is the long haul or the bottleneck. And that's why maybe it's not even a speed bump just because we'll solve that in the same -- at the same pace that we move over the content and make that on-demand. But I think that that problem is going to solve itself as more and more content comes online and they find ways to get advertisers -- I'm sorry, to get consumers to adopt their direct -- whatever direct methodology they use to get content to their consumers directly.

Mark Kelley -- Nomura -- Analyst

So the currency basically just needs to change, just kind of the bottom line?

Jeff Green -- Founder and Chief Executive Officer

Yes. And the thing about the currency that is -- most of measurement in traditional TV is not very good when compared to digital just because we have so much more data. Like, most of TV has been bought and sold based on channel data, where you just put a foot forward and make phone calls and say, "What did you watch last week?" And then you extrapolate. That methodology isn't what powers the Internet.

And even the companies who do that have created better methodologies for online. So I actually think that the measurement companies are the ones that have to change here just because the Internet provides something that is so much better that relates to data and measurement for television that they're the ones that are going to have to change.


Our final question comes from the line of Brian Schwartz from Oppenheimer.

Brian Schwartz -- Oppenheimer -- Analyst

One question for Paul and one for Jeff. Paul, I was just wondering how material of an uplift do you think the Connected TV segment can be for the business this year? Is there any way to pencil out some math or percentages on that? And then Jeff, wanted to ask you on the international front. You talked about the acceleration and any changes behind that international acceleration. Is it just the maturation of the market? Or is it competitor challenges? Or is it more in your go-to-market efforts? And with international, I do understand that it's still subscale and it's growing very fast right now.

But looking longer term, is there any reason that the international business won't have the same margin profile as the domestic business?

Jeff Green -- Founder and Chief Executive Officer

Paul, you want to go first?

Paul Ross -- Chief Financial Officer

Sure. So on the CTV market side of the question, I'd probably defer that to Jeff because he's going to talk about that in just a second. But in terms of investments in CTV, we're continuing to invest materially for that market. Jeff, do you want to handle the rest?

Jeff Green -- Founder and Chief Executive Officer

Yes. So on the question about the materiality of CTV, so we don't break it out yet, and it's all because of -- we have never broken out a channel. And we think that the core of our value prop is to offer everything. So in other words, we want people to come buy their display, their -- we want them to buy their Connected TV, we want them to buy their audio, we want them to buy their native ads.

And most of our clients use all of those, and a huge part of our value prop is to talk about reach and frequency across all of them. So while CTV is the most exciting channel that we've ever seen, probably ever will see, I don't know that it would help any of us to break that out in terms of showing the trends of our overall business. And it also becomes very difficult for us to count in the sense of like premium content on mobile video. We also have this challenge of like, is mobile video mobile, is it video, do we count it in both.

We're constantly trying to explain the way that we measure. So anyway, short term, not any plans to break that out. As it relates to international and all of our spend outside the United States, as you point out, it's growing much faster than the U.S. Is that a by-product of us having different go-to-markets, and do we expect that to continue? So first, I think there's a gap, which is -- so if you look at our revenue, 86% of it comes from the U.S.

But if you look at the global advertising pie, only about one-third of global advertising spend is done in the United States, two-thirds or more, it happens outside of that. And then you also look at where all the GDP growth is, because, in general, advertising growth is a little bit crude in terms of accuracy but it's roughly two times the pace of GDP. And so if that's the case, all the GDP growth -- or most of the GDP growth in the world is happening in Asia. So we should go to where there is GDP growth.

That said, programmatic, I said on stage five or six years ago in Germany, the German market will be nearly 100% programmatic before the U.S. market, even though right now you're behind. I said that onstage last year in Taiwan. I said that on stage in Shanghai a year ago.

And the reason why is because those are all markets where -- employing people to pound the pavement. And maybe this is slightly less true in China, but it's true in all of those other markets. Employing people to pound the pavement in Germany or in Spain or in France or in Indonesia to go sell content directly, it's too expensive. It's not worth it for them to have -- meaning, the content owners, to have a strategy where they are trying to sell on their own.

You can argue that that's worth it in the U.S. at times, but even there, we've already adopted programmatic in many cases. So it's because of the fact that it's a smaller market that often has a language that makes it so -- it's really hard to develop the scale to have a direct sales force. They're opening up for programmatic at a faster pace.

So if you look at our case study, for instance, here in Hong Kong, with TVB, they went from no programmatic to essentially being all programmatic and all digital in two years with myTV Super. That is 100%, in my view, the by-product of what is way more economically obvious for them to go all-in on programmatic is have somebody else help them source the demand instead of then finding to do everything on their own. And because of that, I think basically every market outside of the U.S. and China has sort of macro trends or secular tailwinds that is making programmatic grow faster than everywhere else in the world.

So it's actually really exciting if you're in my position saying, well, the real benefit of powering brands like CPG to advertise in 150 countries, and most of the biggest advertisers are all multinational corporations. And so they're trying to solve a global problem, and that's also where the most obvious programmatic benefits are. It just underlines an unbelievable opportunity for us.


Ladies and gentlemen, we have reached the end of our question-and-answer session, as well as today's conference call. We thank you for your participation, and you may now disconnect your lines at this time. Thank you for your participation.

Jeff Green -- Founder and Chief Executive Officer

Thank you.

Duration: 78 minutes

Call Participants:

Chris Toth -- Vice President of Investor Relations

Jeff Green -- Founder and Chief Executive Officer

Paul Ross -- Chief Financial Officer

Shyam Patil -- Susquehanna Financial Group -- Analyst

Aaron Kessler -- Raymond James -- Analyst

Vasily Karasyov -- Cannonball Research -- Analyst

Mark Mahaney -- RBC Capital Markets -- Analyst

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Mark Zgutowicz -- Rosenblatt Securities

Tom White -- D.A. Davidson -- Analyst

Mark Kelley -- Nomura -- Analyst

Brian Schwartz -- Oppenheimer -- Analyst

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