Criteo S.A.

Good morning and welcome to Queer Tales third quarter 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a console specially, pressing the star key followed by zero. After the prepared remarks, there will be an opportunity to ask questions. To ask a question, please press star then one. To withdraw your question, please press star then two. Please note this event is being recorded. I would like to turn the conference over to Edward Lassalle, SVP, Market Relations and Capital Markets. Please go ahead.

Thank you. Good morning, everyone, and welcome to Cradle's third quarter 2020 earnings call. We hope you're all keeping healthy and safe. With us today are CEO Megan Clarkin, Chief Product Officer of Top Parsons, and CFO Sarah Glickman. Please note that we may extend our call by a little bit today to a lot of questions as Megan and Todd will provide an update on our strategy and roadmap. I will point you to our slide presentation that is available on our website. Also, please note that we're all joining from different locations due to ongoing restrictions and may face unwanted technical challenges. During this call, management will make forward-looking statements. These statements reflect Creo's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Creo's business. At this time, the global COVID-19 pandemic is still having a meaningful impact on the global economy, on the business of our clients, including the supply chain, as well as on Creo's business, and may further impact Creo's financial condition, results of operations, and cash flow in the future. There are significant uncertainties about the global economy and the duration and extent of the pandemic. The dynamic nature of these circumstances means that what is said on this call today could still materially change at any time. For more information, please refer to the risk factors discussed in our earnings release as well as our most recent Form 10-K and Form 10-Q filed with the SEC. We do not undertake any obligation to have any forward-looking statements discussed today except as required by law. In addition, we'll also discuss non-GAAP measures about performance, definitions, and the reconciliation to the most directly comparable GAAP metrics are included in the earnings release published on our website earlier today. Finally, unless otherwise stated, growth comparisons made during this call are all against the same period in the prior year. With that, it's my pleasure to now hand it over to Megan.

thank you Edward and good morning everyone thank you for joining us today I hope everyone is staying safe and well with me today is our new CSO Sarah Glickman and new chief product officer Todd Parsons I'm delighted to welcome Todd and Sarah to Critio two seasoned industry leaders you bring exactly the right skill sets that Critio needs today the fact that they've joined our team over the past few months is a testament to the enormous potential of Critio's business and They've joined us at an important time for our company. And since starting at Criteo a year ago, I've led the company's transformation. And as part of this, I've run a comprehensive evaluation of our business and our markets to identify a turnaround path for sustainable growth. On today's call, in addition to discussing our better than expected Q3 earnings, we'll provide you with an overview of that evaluation and initial insight into our discipline strategy to move our business forward. We have unparalleled assets, including commerce data, a fast-growing retail media business, our industry-leading technology, our 15 years of media buying expertise, and the huge network that this has created for us, our great people, and our strong financial position. We're turning our assets into what we call our commerce media platform. a world-leading media activation platform for global brands, agencies, and retailers to optimize their sales and digital advertising returns. We'll capitalize on the white space opportunities opened up by the dynamic changes in e-commerce and digital marketing to best position Criteo for significant long-term success. And I'll explain this further shortly. Together with Todd and Sarah, we'll discuss four key topics on our call today. First, the refinement of our strategy and the opportunity that we're focused on. Second, how we'll execute on our roadmap, expand our capabilities, and respond to the identity landscape. Third, our continued execution along our four strategic pillars. And fourth, how we're optimizing our organization and aligning our cost structure and capital allocation to best support our strategy. The digital marketplace is experiencing fast-moving trends in e-commerce and digital marketing, opening up massive opportunities in the short and long term for us. We know that by using our differentiated assets, refocusing our business, executing with discipline and pursuing targeted reinvestment, we have a great path to create growth for ourselves, for the clients that we serve, and generate shareholder returns. Critio operates at the intersection of e-commerce, advertising, and media. And we see enormous opportunities to expand our business much deeper into e-commerce and to continue to extend advertising reach for brands and retailers with a focus outside of the walled gardens that we call the open internet. We'll call this opportunity commerce media. Our ambition is to be the world's leading platform for commerce-based advertising and marketing. offering capabilities to our clients that we believe nobody else can. I want to spend a few minutes to discuss why we're focused on the commerce media opportunity and how we'll leverage our unique assets and build new capabilities to deliver against this opportunity and what this means for our total addressable market going forward. So why focus on commerce? We're seeing incredible changes across the commerce landscape that pose challenges for our clients that Criteo is uniquely positioned to solve. We see interesting changes happening in the way consumers look for products, interact with ads, and ultimately shop online. We also see shifts in the way brands use their marketing dollars to engage consumers directly where they shop online. First, consumer shopping behavior is rapidly evolving to e-commerce, which is booming from 16% of global sales today to an estimated 23% by 2023. During this boom, brands and retailers transformed their e-commerce presence, gaining share from giants over the past months. Importantly, we expect this trend to continue. For example, during COVID lockdown, US online product searches on retailer websites on the open internet has increased 21 points to close to 30% of total share, while Amazon's share declines 23 points. Also, 81% of e-commerce buyers who tried a new retailer indicate that they expect to continue to use them in the future, creating a shift in brand loyalty towards open internet retailers, which now represent about 40% of global e-commerce sales. Second, To take advantage of the surge in e-commerce, brands accelerate the online shift of their trade marketing budgets. And we expect digital trade marketing will exceed $23 billion in global spend in 2020 after growing an average 82% each year since 2016. And last but not least, ad tech becomes even more important. We know that in the new identity world, publishers and media owners will depend even more on ad tech partners to monetize their audiences. Retailers and brands will continue to depend on digital marketing to drive sales and loyalty in an effective and measurable way. This is our sweet spot. As large online retailers emerge as the new media moguls, they too need the expertise of ad tech partners to optimize the yield of their inventory. Despite these changes in the e-commerce landscape, When we look at the needs of marketers, they remain remarkably consistent. Ultimately, they're looking to understand their consumers on the path to purchase, to target and reach the right consumers at scale and relevant brand safe environments, to drive customer lifetime value and impact across the entire marketing funnel, and to measure the impact of their campaigns to optimize against real business outcomes like product sales, making sure that they have accountability for every dollar that they spend. Solving these needs has always been easier said than done. The erosion of the third party cookie, the rise of privacy restrictions like GDPR and CCPA, and the increasing power of walled gardens make it harder for marketers to target, measure, and optimize campaigns with the transparency and control that they expect. At Criteo, we have the unique opportunity to meet the needs of marketers in a rapidly evolving commerce landscape. On past calls, I talked about becoming a full stack DSP for commerce. Having DSP capabilities is important to us, but it's not an end state. These capabilities are building blocks for our broader vision that we'll now refer to as our commerce media platform. We want to enable brands and retailers growth through commerce media. This means driving more valuable outcomes for our clients by activating our commerce data previously tied only to our retail media business to do this across all stages of the marketing funnel through audience-based targeting across the platforms that clients' consumers spend their time on, like CTV. This means leveraging our privacy-focused network of first-party data to maximize return on ad spend for our marketers. and drive better monetization of ad space for our retailers and publishers across the open internet. This also means providing differentiated real-time commerce insights and measurements to marketers. To be clear, retail media will become a central piece of our commerce media platform, contributing differentiated ad inventory, first-party audience data and insights to the platform. We've already started down this path with our scaled retail media business and the launch of our latest retail media release, enabling flexible self-service branding and targeted advertising on the e-commerce properties of top retailers across the globe. Added to this, our investment and new focus on our audience targeting solutions, which leverage our best-in-class machine learning and buying together with our shopper data to deliver full funnel advertising needs. With our commerce media platform, we'll extend and expand these capabilities to address marketers' needs across an even broader set of inventory and use cases. We believe the commerce media opportunities is ours to grab. Strong, favorable market trends support our vision, and we have the assets to execute on it. Let's talk about these assets. We believe Criteo is unrivaled in its ability to seize the market opportunity of leading commerce media. We have valuable assets that differentiate us and uniquely position us to solve marketers' needs by connecting brands, retailers, and their agencies with the right shopper, the right message, and the right media to drive the greatest returns. We'll fully utilize our assets to drive growth and shareholder value. First of all, our data remains king for data-driven marketing. Our clients need the highest quality data to reduce waste and bring optimal returns. Our commerce media platform will be driven by the highest available shopper behavior and transactional data there is. No other company in ad tech has access to the types of data that we have. We have incredible technology to manage commerce data at massive scale, ingesting over $2 billion worth of daily transactional data across 4 billion product SKUs and thousands of product categories. We have direct access to this data via our integrations with our retailer clients. These privileged relationships enable for first party cookie list audience targeting across our commerce media ecosystem. Moreover, we extend these shopper targeting capabilities across the open internet through our leading privacy-focused ID graph with over 2.5 billion user IDs. We're actively participating with industry bodies and regulators to enable cohort-based audience targeting solutions. And we're pleased to have joined forces with the Trade Desk on unifying our identity solutions for the post-cookie world This exciting and promising collaboration is a great step forward for the industry to develop a long-term open source identifier grounded on consumer choice to safeguard advertising on the open internet. On Reach, we have privileged access to highly attractive ad inventory. Through our retail media ecosystem, we enable access to exclusive retailer ad inventory and insights. that are only growing in relevance as trade dollars move online and consumer brands' media budgets seek to better drive sales outcomes. On top of this, we have preferred access to over 5,000 premium publishers, enabling massive reach and scale for advertisers. Importantly, all of this reach can be addressable without third-party cookies. On retail media, we provide consumer, brands with unique opportunities to advertise and promote their products directly on retailers' media, something no traditional DSP on the market can do today. Our retail media platform enables brands to engage shoppers with relevant commerce native advertising and drive product sales across many of the world's leading retailers, while at the same time helping these retailers generate high-margin advertising revenues. measurement we provide the ability for advertisers to measure against the outcomes that matter most product sales we measure and optimize at the transaction level for both online and offline sales for consumer brands we measure outcomes down to the product SKU level additionally we're investing in insights capabilities that bring together organic shopping data and and paid media metrics to help marketers better plan, optimize, and measure their investments. On global footprint, across 100 plus markets, we're a partner of choice to support many of the largest and most global brands in virtually every market. Marketers want consistency across their digital marketing spend and a single partner who has that capacity. Finally, our strong margins, cash flow, and solid balance sheet. provide the financial capacity to execute on our strategy. We're already well advanced on our journey to execute against our commerce media platform vision. From our past as a global leader in retargeting, we've begun expanding our portfolio to bring new fast growth areas while evolving and adding new capabilities to our core offering, fitting nicely with our strategy. Our new solutions already represent close to 20% of our business, and so far growing 53% in 2020. In 2020 to date, retail media has grown above 60%, and audience targeting around 50%. These terrific high growth rates validate our strategy and the direction which we're heading in, catching the wave of the market trends. While we've long had a globally scaled mobile offering, we're doubling down on further areas such as video and CTV. In all fairness, while we've made good progress on our journey towards our full platform vision, we have more work to do. This is why we intend to execute with discipline and focus and invest now to further strengthen our offering. Looking ahead, we intend to complete our commerce media platform by doing four things. Number one, expand our audience targeting capabilities across both the marketing funnel and omnichannel to offer the full range of targeting and retargeting strategies for commerce. Number two, extend brand reach across our large media network on the open internet, leveraging the combination of retail media and core business retargeting and measurement capabilities. Number three, strengthen our deep commerce analytics and insights capabilities to inform brands' intelligence about their position on the digital shelf in every step of the buyer journey and use this as a customer service for retention. And fourth, further expand our privacy-focused first-party media network, growing our ability to access and activate against first-party identity and increase reach for marketers. Privacy and identity are part of the broader ecosystem, and we're actively embracing and addressing them as an integral part of our strategy. Our commerce media platform will rely on a privacy-focused and transparent first-party media network where brands, retailers, and publishers all contribute new first-party data to our shopper graph commerce data as they do today. And Criteo becomes the matchmaker between the advertiser the product and the consumer. This creates a massive, massive network that we consider no other ad tech can match for commerce-specific purposes, and Tom will talk more about this shortly. Now, helping you with our total addressable market, we believe our strategy opens up a $61 billion TAM across brands, retailers, and classifieds. To summarize, Our commerce media platform is a combination of our retail media and our marketing solution assets to provide a full suite of media planning and selling services, bringing publishers and retailers data together, creating a huge ecosystem to connect the right person to the right product and the right media, and connect brands and retailers to people based on their shopper preferences. This, across the breadth of the Criteo network, reaching a potential 3 billion consumers globally. Let me emphasize, nobody else has this sort of reach outside of walled gardens. We're making and will continue to make investments in our growth areas. We're leveraging our cash and strong financial position to fund for these investments. And we're also strictly managing our cost base in the core business through various operational excellence initiatives. Why do we believe we'll win with the strategy? It's because we have global reach with 20,000 advertisers across 100 markets. We have extensive shopper data and first-party media network. Our new growth engines already supporting our strategy and today representing 20% of our business growing at over 50%. a solid product roadmap that tackles the challenges of identity, massive e-commerce tailwinds, an increasing TAM and superior commerce marketing assets, and finally, a strong balance sheet and reinvestment strategy to further transform our business. We think that our strategy of creating the world's leading commerce media platform and executing against our transformation plan positions Criteo for a healthy future, and sustainable growth. With this, I'm glad to turn it over to Todd to take you through our product priorities to address the proposition of our commerce media platform. Todd.