Trade Desk Inc (TTD)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	427,167	200,480	113,654	42,283	82,307
Interest expense	US$ in thousands	—	68,508	12,755	1,030	305
Interest coverage		—	2.93	8.91	41.05	269.86

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $427,167K ÷ $—K
= —

The interest coverage ratios for Trade Desk Inc. over the fiscal years 2020 through 2024 provide a notable perspective on the company's ability to meet its interest obligations from its earnings before interest and taxes (EBIT). As of December 31, 2020, the ratio was exceptionally high at 269.86, indicating that the company's earnings were more than sufficient to cover interest expenses multiple times over, which suggests a very strong financial position and low relative risk associated with interest commitments at that time.

However, a significant decline is observed by December 31, 2021, when the ratio dropped sharply to 41.05. Although still indicating a considerable buffer, this change suggests some deterioration in the company's ability to generate earnings relative to its interest obligations. This decline continued into subsequent years, with the ratio decreasing further to 8.91 on December 31, 2022, highlighting an increased risk associated with interest coverage, yet still maintaining a comfortably above 1 ratio, which signifies that earnings surpass interest expenses.

By December 31, 2023, the interest coverage ratio further declined to 2.93, approaching closer to the minimum threshold that generally indicates the company's earnings are only just sufficient to meet interest costs. This trend underscores a potential tightening of financial flexibility and warrants attention toward earnings quality and stability.

For the fiscal year ending December 31, 2024, the data does not specify an interest coverage ratio, implying that the information is either unavailable or the significant decline may suggest that the company’s ability to cover interest expenses could be further compromised or that the measurement is not applicable due to other factors such as debt restructuring or fiscal adjustments.

Overall, the progression of the interest coverage ratio demonstrates a significant reduction over the period, from extremely comfortable levels in 2020 to levels that are substantially lower yet still above the critical threshold of 1. This pattern indicates increasing pressure on the company's earnings capacity to service its interest obligations, which merits continued monitoring to assess whether this trend persists and how it might impact the company's financial stability going forward.