ttd-10q_20190930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-37879

 

THE TRADE DESK, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

 

 

27-1887399

(State or other jurisdiction of

incorporation or organization)

 

 

 

(I.R.S. Employer

Identification No.)

42 N. Chestnut Street

Ventura, California 93001

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (805) 585-3434

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Class A Common Stock, par value $0.000001 per share

 

TTD

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

☐  

  

Smaller reporting company

 

 

 

 

 

 

 

 

  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 31, 2019, the registrant had 39,834,865 shares of Class A common stock and 5,299,496 shares of Class B common stock outstanding.

 

 


THE TRADE DESK, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

 

 

  

 

Page

Part I.

  

FINANCIAL INFORMATION

 

3

Item 1.

  

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

  

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

 

3

 

  

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018

 

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

 

6

 

  

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4.

  

Controls and Procedures

 

22

Part II.

  

OTHER INFORMATION

 

23

Item 1.

  

Legal Proceedings

 

23

Item 1A.

  

Risk Factors

 

23

Item 6.

  

Exhibits

 

44

Signatures

 

45

 


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE TRADE DESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(Unaudited)

 

 

 

As of

 

 

As of

 

 

 

September 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

173,446

 

 

$

207,232

 

Short-term investments

 

 

123,082

 

 

 

 

Accounts receivable, net

 

 

835,958

 

 

 

834,764

 

Prepaid expenses and other current assets

 

 

26,641

 

 

 

14,527

 

TOTAL CURRENT ASSETS

 

 

1,159,127

 

 

 

1,056,523

 

Property and equipment, net

 

 

47,734

 

 

 

33,046

 

Operating lease assets

 

 

177,276

 

 

 

 

Deferred income taxes

 

 

8,460

 

 

 

8,460

 

Other assets, non-current

 

 

22,442

 

 

 

19,843

 

TOTAL ASSETS

 

$

1,415,039

 

 

$

1,117,872

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

647,547

 

 

$

669,147

 

Accrued expenses and other current liabilities

 

 

40,553

 

 

 

44,844

 

Operating lease liabilities

 

 

15,938

 

 

 

 

TOTAL CURRENT LIABILITIES

 

 

704,038

 

 

 

713,991

 

Operating lease liabilities, non-current

 

 

167,668

 

 

 

 

Other liabilities, non-current

 

 

7,941

 

 

 

9,314

 

TOTAL LIABILITIES

 

 

879,647

 

 

 

723,305

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock, par value $0.000001; 100,000 shares authorized, zero shares issued and

   outstanding as of September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, par value $0.000001

   Class A, 1,000,000 shares authorized; 39,810 and 36,822 shares issued and outstanding

      as of September 30, 2019 and December 31, 2018, respectively

   Class B, 95,000 shares authorized; 5,311 and 7,042 shares issued and outstanding

      as of September 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

353,899

 

 

 

270,447

 

Retained earnings

 

 

181,493

 

 

 

124,120

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

535,392

 

 

 

394,567

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,415,039

 

 

$

1,117,872

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

3


THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

164,203

 

 

$

118,825

 

 

$

445,114

 

 

$

316,826

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform operations

 

 

39,932

 

 

 

29,344

 

 

 

108,913

 

 

 

78,842

 

Sales and marketing

 

 

36,142

 

 

 

23,287

 

 

 

89,951

 

 

 

60,007

 

Technology and development

 

 

29,185

 

 

 

22,621

 

 

 

83,949

 

 

 

59,806

 

General and administrative

 

 

37,017

 

 

 

21,310

 

 

 

102,755

 

 

 

59,816

 

Total operating expenses

 

 

142,276

 

 

 

96,562

 

 

 

385,568

 

 

 

258,471

 

Income from operations

 

 

21,927

 

 

 

22,263

 

 

 

59,546

 

 

 

58,355

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (income), net

 

 

(1,480

)

 

 

(237

)

 

 

(3,763

)

 

 

(113

)

Foreign currency exchange (gain) loss, net

 

 

(412

)

 

 

395

 

 

 

784

 

 

 

2,035

 

Total other expense (income), net

 

 

(1,892

)

 

 

158

 

 

 

(2,979

)

 

 

1,922

 

Income before income taxes

 

 

23,819

 

 

 

22,105

 

 

 

62,525

 

 

 

56,433

 

Provision for income taxes

 

 

4,397

 

 

 

1,813

 

 

 

5,152

 

 

 

7,728

 

Net income

 

$

19,422

 

 

$

20,292

 

 

$

57,373

 

 

$

48,705

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.47

 

 

$

1.29

 

 

$

1.15

 

Diluted

 

$

0.40

 

 

$

0.44

 

 

$

1.20

 

 

$

1.07

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

44,771

 

 

 

42,721

 

 

 

44,363

 

 

 

42,178

 

Diluted

 

 

48,037

 

 

 

46,576

 

 

 

47,728

 

 

 

45,460

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4


THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Class A and B

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Equity

 

Balance as of December 31, 2017

 

 

41,641

 

 

$

 

 

$

209,603

 

 

$

35,980

 

 

$

245,583

 

Exercise of common stock options

 

 

415

 

 

 

 

 

 

1,212

 

 

 

 

 

 

1,212

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,427

 

 

 

 

 

 

7,427

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

13

 

 

 

 

 

 

(361

)

 

 

 

 

 

(361

)

Net income

 

 

 

 

 

 

 

 

 

 

 

9,070

 

 

 

9,070

 

Balance as of March 31, 2018

 

 

42,069

 

 

$

 

 

$

217,881

 

 

$

45,050

 

 

$

262,931

 

Exercise of common stock options

 

 

365

 

 

 

 

 

 

1,997

 

 

 

 

 

 

1,997

 

Stock-based compensation

 

 

 

 

 

 

 

 

9,872

 

 

 

 

 

 

9,872

 

Issuance of common stock under employee

   stock purchase plan

 

 

392

 

 

 

 

 

 

7,014

 

 

 

 

 

 

7,014

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

28

 

 

 

 

 

 

(183

)

 

 

 

 

 

(183

)

Net income

 

 

 

 

 

 

 

 

 

 

 

19,343

 

 

 

19,343

 

Balance as of June 30, 2018

 

 

42,854

 

 

$

 

 

$

236,581

 

 

$

64,393

 

 

$

300,974

 

Exercise of common stock options

 

 

330

 

 

 

 

 

 

3,956

 

 

 

 

 

 

3,956

 

Stock-based compensation

 

 

 

 

 

 

 

 

11,851

 

 

 

 

 

 

11,851

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

1

 

 

 

 

 

 

(59

)

 

 

 

 

 

(59

)

Net income

 

 

 

 

 

 

 

 

 

 

 

20,292

 

 

 

20,292

 

Balance as of September 30, 2018

 

 

43,185

 

 

$

 

 

$

252,329

 

 

$

84,685

 

 

$

337,014

 

Balance as of December 31, 2018

 

 

43,864

 

 

$

 

 

$

270,447

 

 

$

124,120

 

 

$

394,567

 

Exercise of common stock options

 

 

592

 

 

 

 

 

 

9,502

 

 

 

 

 

 

9,502

 

Stock-based compensation

 

 

 

 

 

 

 

 

16,324

 

 

 

 

 

 

16,324

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

23

 

 

 

 

 

 

(1,146

)

 

 

 

 

 

(1,146

)

Net income

 

 

 

 

 

 

 

 

 

 

 

10,151

 

 

 

10,151

 

Balance as of March 31, 2019

 

 

44,479

 

 

$

 

 

$

295,127

 

 

$

134,271

 

 

$

429,398

 

Exercise of common stock options

 

 

284

 

 

 

 

 

 

7,473

 

 

 

 

 

 

7,473

 

Stock-based compensation

 

 

 

 

 

 

 

 

21,390

 

 

 

 

 

 

21,390

 

Issuance of common stock under employee

   stock purchase plan

 

 

153

 

 

 

 

 

 

8,648

 

 

 

 

 

 

8,648

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

7

 

 

 

 

 

 

(2,488

)

 

 

 

 

 

(2,488

)

Net income

 

 

 

 

 

 

 

 

 

 

 

27,800

 

 

 

27,800

 

Balance as of June 30, 2019

 

 

44,923

 

 

$

 

 

$

330,150

 

 

$

162,071

 

 

$

492,221

 

Exercise of common stock options

 

 

196

 

 

 

 

 

 

4,936

 

 

 

 

 

 

4,936

 

Stock-based compensation

 

 

 

 

 

 

 

 

19,923

 

 

 

 

 

 

19,923

 

Restricted stock award grants, net of

   forfeitures and shares withheld for taxes

 

 

2

 

 

 

 

 

 

(1,110

)

 

 

 

 

 

(1,110

)

Net income

 

 

 

 

 

 

 

 

 

 

 

19,422

 

 

 

19,422

 

Balance as of September 30, 2019

 

 

45,121

 

 

$

 

 

$

353,899

 

 

$

181,493

 

 

$

535,392

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5


THE TRADE DESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

57,373

 

 

$

48,705

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15,246

 

 

 

8,107

 

Stock-based compensation

 

 

56,368

 

 

 

27,958

 

Bad debt expense

 

 

1,647

 

 

 

1,727

 

Noncash lease expense

 

 

15,394

 

 

 

 

Other

 

 

(2,945

)

 

 

2,396

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,739

)

 

 

(44,736

)

Prepaid expenses and other assets

 

 

(19,024

)

 

 

(10,597

)

Accounts payable

 

 

(21,401

)

 

 

(2,804

)

Accrued expenses and other liabilities

 

 

(3,178

)

 

 

7,789

 

Operating lease liabilities

 

 

(8,468

)

 

 

 

Net cash provided by operating activities

 

 

88,273

 

 

 

38,545

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(21,659

)

 

 

(10,383

)

Capitalized software development costs

 

 

(3,849

)

 

 

(4,340

)

Purchases of investments

 

 

(178,179

)

 

 

 

Maturities of investments

 

 

55,819

 

 

 

 

Net cash used in investing activities

 

 

(147,868

)

 

 

(14,723

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repayment on line of credit

 

 

 

 

 

(27,000

)

Payment of debt financing costs

 

 

(6

)

 

 

 

Proceeds from exercise of stock options

 

 

21,911

 

 

 

7,165

 

Proceeds from employee stock purchase plan

 

 

8,648

 

 

 

7,014

 

Taxes paid related to net settlement of restricted stock awards

 

 

(4,744

)

 

 

(602

)

Net cash provided by (used in) financing activities

 

 

25,809

 

 

 

(13,423

)

(Decrease) increase in cash and cash equivalents

 

 

(33,786

)

 

 

10,399

 

Cash and cash equivalents—Beginning of period

 

 

207,232

 

 

 

155,950

 

Cash and cash equivalents—End of period

 

$

173,446

 

 

$

166,349

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Capitalized assets financed by accounts payable

 

$

1,968

 

 

$

6,624

 

Tenant improvements paid by lessor

 

$

 

 

$

1,017

 

Asset retirement obligation

 

$

3,543

 

 

$

386

 

Stock-based compensation included in capitalized software development costs

 

$

1,269

 

 

$

1,192

 

Cash paid for amounts included in the measurement of lease liabilities included in

   operating cash flows

 

$

12,268

 

 

$

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$

147,682

 

 

$

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

6


THE TRADE DESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Nature of Operations

The Trade Desk, Inc. (the “Company”) was formed in November 2009 as a Delaware corporation. The Company is headquartered in Ventura, California and has offices in various cities in North America, Europe, Asia and Australia. The Company is a technology company that empowers buyers of advertising by providing a self-service cloud-based platform on which ad buyers can create, manage, and optimize more expressive data-driven digital advertising campaigns across ad formats, including display, video, audio, native and, social, on a multitude of devices, such as computers, mobile devices, and connected TV (CTV).

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by GAAP. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2018.

On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) codified as Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”), using the modified retrospective adoption approach. The Company elected the transition option provided by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, to not restate comparative periods, but rather to initially adopt the requirements of ASC 842 on January 1, 2019. The most significant impact of adopting ASC 842 on the Company’s financial statements is that most of its operating lease commitments are recognized as operating lease assets, or right-of-use assets (“ROU Assets”), and operating lease liabilities (“Lease Liabilities”) on its consolidated balance sheet. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of ROU Assets of approximately $41 million and Lease Liabilities of approximately $47 million. The impact on the Company’s consolidated statements of income and cash flows was not material.

Except for the adoption of ASC 842, there have been no changes to the Company’s accounting policies and these unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the Company’s audited annual consolidated financial statements for the year ended December 31, 2018, and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements.

The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full year ending December 31, 2019.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates.

Operating Leases

ROU Assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and Lease Liabilities represent its obligation to make lease payments arising from the aforementioned right.

The Company determines if an arrangement is, or contains, a lease at the inception date, and the Company measures and records a non-current ROU Asset and corresponding Lease Liabilities, classified as current and non-current, on its consolidated balance sheet at the lease commencement date for all leases except for short-term leases with a term of 12 months or less. ROU Assets and Lease Liabilities are initially recorded based on the present value of lease payments over the lease term, which may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate, based on the information available at the lease commencement date in determining the present value of its expected lease payments. The ROU Asset also includes any initial direct costs and any lease payments made prior to the lease commencement date and is reduced by any lease incentives received. The ROU Asset is amortized on a straight-line basis as the operating lease cost over the lease term on the consolidated statements of income. ROU Asset amortization, referred to as noncash lease expense, along with the change in the operating lease liabilities are separately presented within the cash flows from operating activities on the consolidated statements of cash flows.

7


ASC 842 provides various optional transition practical expedients. Upon transition to ASC 842, the Company elected the use of the package of practical expedients to not reassess: whether a contract is or contains a lease, lease classification and indirect costs. The Company did not elect the hindsight practical expedient in transition. The Company has elected to not separate lease and non-lease components.

Refer to Note 5—Leases for additional information.

Revision of Cash and Cash Equivalents and Accounts Payable

The Company identified an error in its classification of cash and cash equivalents and accounts payable balances at June 30, 2019 of $23.0 million related to certain bank overdrafts. This error had the effect of understating reported cash and cash equivalents and accounts payable by that amount, and accordingly, current assets, total assets, current liabilities, and total liabilities were also understated by an equivalent amount. It also resulted in an understatement of net cash provided by operating activities in the same amount. If corrected, the amounts reported in the 2019 second quarter Form 10-Q would have been as follows: cash and cash equivalents of $153.6 million, accounts payable of $639.2 million, current assets of $1,107.0 million, total assets of $1,262.4 million, current liabilities of $693.5 million, total liabilities of $770.2 million and net cash provided by operating activities of $43.8 million. The Company determined that this error was not material to the previously issued financial statements, and it will revise these amounts in its Quarterly Report on Form 10-Q for the reporting period ended June 30, 2020.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These ASUs provide supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently with the adoption of ASU 2016-13, cumulatively referred to as “Topic 326.” Topic 326 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement-Disclosure Framework (Topic 820). The updated guidance modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

Note 3—Earnings Per Share

The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

8


The computation of basic and diluted EPS is as follows (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,422

 

 

$

20,292

 

 

$

57,373

 

 

$

48,705

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding—basic

 

 

44,771

 

 

 

42,721

 

 

 

44,363

 

 

 

42,178

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options to purchase common stock

 

 

2,762

 

 

 

3,239

 

 

 

2,871

 

 

 

2,780

 

Employee stock purchase plan shares

 

 

141

 

 

 

270

 

 

 

135

 

 

 

273

 

Restricted stock

 

 

363

 

 

 

346

 

 

 

359

 

 

 

229

 

Weighted-average shares outstanding—diluted

 

 

48,037

 

 

 

46,576

 

 

 

47,728

 

 

 

45,460

 

Basic EPS

 

$

0.43

 

 

$

0.47

 

 

$

1.29

 

 

$

1.15

 

Diluted EPS

 

$

0.40

 

 

$

0.44

 

 

$

1.20

 

 

$

1.07

 

Anti-dilutive equity awards under stock-based award plans

   excluded from the determination of diluted EPS

 

 

163

 

 

 

167

 

 

 

163