Trade Desk Inc (TTD)

Short-term

Turnover ratios

The activity ratios of Trade Desk Inc. from December 31, 2020, through December 31, 2024, exhibit specific trends that indicate the company's operational efficiency and asset management over this period.

The inventory turnover ratio consistently reports as zero across all years, implying that inventory management is either negligible or not applicable, which aligns with the nature of the company's business model focused on digital advertising services rather than inventory-holding operations.

Receivables turnover shows a gradual increase over the observed years, rising from 0.53 in 2020 to 0.73 in 2024. This upward trend suggests improved efficiency in collecting receivables and managing customer credit, thereby reducing the average collection period. A higher receivables turnover ratio signifies more rapid collection of receivables relative to the average accounts receivable balance.

Payables turnover also demonstrates a slow but steady increase, moving from 0.13 in 2020 to 0.18 in 2024. This indicates a slight trend toward faster payment cycles to suppliers, which could reflect better supplier negotiation, improved liquidity, or strategic payment policies.

The working capital turnover ratio fluctuates slightly over the period, with a decrease from 1.00 in 2020 to 0.87 in 2022, then increasing to 1.08 in 2023 before settling near 0.99 in 2024. These variations suggest minor shifts in how effectively the company's working capital base is being used to generate revenue — with periods of increased efficiency (notably in 2023) and slight reductions.

Overall, the activity ratios suggest that Trade Desk Inc. has shown operational improvements in receivables and payables management, aligning with increased efficiency in cash flow management related to receivables and payables. The consistent stable inventory turnover aligns with the company's digital service model, which does not involve significant inventory.

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Average number of days

The activity ratios of Trade Desk Inc. reveal significant insights into the company's operational efficiency and working capital management over the period from December 31, 2020, to December 31, 2024.

Days of Inventory on Hand (DOH): The data indicates that DOH remains unspecified throughout the period, suggesting either negligible or unreported inventory holdings. This is consistent with the nature of the company's business, which is primarily digital advertising technology, where physical inventory is typically minimal or non-existent.

Days of Sales Outstanding (DSO): The DSO exhibits a consistent downward trend over the analyzed years, decreasing from approximately 691.60 days at the end of 2020 to 497.20 days at the end of 2024. This decline suggests a gradual improvement in the company's collection efficiency and customer credit management. However, even at the latest date, the extended DSO indicates that it takes nearly 500 days to collect receivables, reflecting either long-term client contracts typical of the advertising technology industry or extended payment cycles.

Number of Days of Payables: Similar to DSO, the days payable period demonstrates a decreasing trend, dropping from approximately 2,752.58 days in 2020 to 2,034.68 days in 2024. This decline indicates that the company has been accelerating its payments to suppliers, or possibly managing its payables more actively. Despite the reduction, the payables period remains exceptionally long, which may be attributed to strategic payment policies or the nature of trade agreements with vendors in the digital advertising sector.

Overall Trends and Implications: The parallel decrease in both receivables and payables periods suggests an effort by Trade Desk Inc. to streamline its working capital cycle. The consistently high and declining DSO and payables days imply that the company operates in an environment characterized by extended payment and collection cycles, which is typical for digital advertising platforms where revenue recognition and cash flows can be deferred over lengthy periods.

The absence of inventory activity aligns with the company's operational profile, emphasizing the importance of receivable and payable management. The observed trends reflect ongoing attempts to optimize cash flow timing, reduce working capital requirements, and potentially improve liquidity position, albeit within an industry context where extended periods are standard practice.

In summary, Trade Desk Inc. has demonstrated continuous improvement in the efficiency of its receivables and payables management over the period, signifying strategic initiatives aimed at better working capital utilization, while the core industry characteristics continue to influence the unusually high and declining activity ratios.

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Long-term

The analysis of Trade Desk Inc.'s long-term activity ratios reveals notable trends over the observed period. The fixed asset turnover ratio experienced considerable fluctuations, beginning at 7.22 on December 31, 2020, declining sharply to 3.23 by December 31, 2021, indicating reduced efficiency in utilizing fixed assets to generate sales during that interval. Subsequently, the ratio rebounded to 9.08 by December 31, 2022, suggesting an improved deployment of fixed assets relative to sales. The ratio data is unavailable for December 31, 2023, and 2024, which limits insights into future performance or ongoing efficiency trends for fixed assets.

Conversely, the total asset turnover ratio demonstrated a steady upward trend over the same period. Starting at 0.30 as of December 31, 2020, it increased incrementally each year—reaching 0.33 by December 31, 2021, then 0.36 in 2022, and further to 0.40 in both 2023 and 2024. This consistent growth indicates an ongoing improvement in utilizing the company's total assets to generate sales revenue, reflecting enhanced operational efficiency or effective asset management.

Overall, the significant volatility in fixed asset turnover ratios suggests variability in the utilization or deployment of fixed assets, while the consistent rise in total asset turnover ratios indicates sustained improvements in the company's overall asset efficiency over the analyzed years.