Criteo S.A.

Good morning and welcome to CRETIO's fourth quarter and fiscal year 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please press 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'd now like to turn the conference over to Edouard Lassalle, Senior Vice President of Market Relations and Capital Markets. Please go ahead.

Thank you. Good morning, everyone, and welcome to Korea's fourth quarter and fiscal year 2020 earnings call. We hope you're all keeping safe and well. Joining me on the call today are CEO Megan Clarkin, Chief Product Officer Todd Parsons, and CFO Saar Glickman. For everyone's convenience, you'll find our investor deck on our website. Before we get started, I'd like to remind everyone that our remarks today will include forward-looking statements. These statements reflect Credo's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Credo's business. 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 questions. We do not undertake any obligation to update any forward-looking statements discussed today, except as required by law. We'll also discuss non-GAAP measures of our performance on the call. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published today. Finally, unless otherwise stated, all growth comparisons made during this call are against the same period in the prior year. With that, it's my pleasure to now hand it over to Megan.

Thanks, Ed, and good morning, everyone, and thank you for joining us today. I hope everybody is staying safe and well. Closing on this past year, you'll all agree that 2020 was an unprecedented year by any standard. Yet despite an extraordinary backdrop, I couldn't be prouder of how much we've achieved as a company through my first year of leading the company's transformation. We kept our people safe through an efficient work-from-home model. We increased our focus on e-commerce across our entire business. We helped our clients achieve their marketing and monetization objectives by providing the campaign performance and strong ROI we're known for time and time again. And we accelerated Criteo's transformation plan to return the company to sustainable growth, executing with grit and conviction We delivered 97% of our original top-line guidance set before the pandemic and 100% of our original profitability target. I'm hugely grateful and encouraged by our amazing team for their strong and focused performance, and I want to thank all of our associates for their passion, dedication, and discipline. We've applied to transform ourselves into the new Criteo that we are today. Together with Todd and Sarah, we'll discuss four key topics. on our call today. First, the multiple changes we've made across Criteo to set us up for sustainable growth. Second, how our prominent media platform strategy positions us for success. Third, what our product areas of focus are for 2021. And fourth, how our solid execution allowed us to overperform in 2020 and what that means for our 2021 growth momentum organization, and capital allocation as we continue to transform ourselves. Starting with a quick look back at 2020, not only did we achieve a lot, we also made multiple structural changes that set Criteo up for profitable growth ahead. We've embraced the client-first focus, putting our customer needs for marketing and monetization at the center of the organization. and moving all of our teams in lockstep to support them. We refined our product vision, product strategy, use of assets and transformation plan to expand much deeper into e-commerce and return to sustainable growth. We increased our focus and investment in e-commerce through retail media, which is now positioned as a central piece of our commerce media platform strategy. We reshaped the entire C-level leadership and created a transformation office to assume the smooth execution of our plans. We strengthened our roadmap to deliver new products, including our focus on extending our leading first-party data assets and unique identity capabilities into a competitive moat. We adopted a much more open approach to partnering with the industry and signed more partnerships in 2020 than in any other year before. And we reignited the culture of innovation, performance, and accountability to drive growth and execute against growth opportunities that take full advantage of our unique assets. All of the above we did through solid planning, thoughtful decision-making, focus on high standards of execution. Focusing specifically on growth now, let me drill down on what we're seeing that's further validating our strategic direction and commerce media, which we talked about in our last call. To remind you, the commerce media opportunity for us is based on Criteo's front row position operating at the intersection of e-commerce, marketing, and media monetization. This intersection means that we shepherd the buying and selling of advertising and promotions of goods and services with a strong focus on e-commerce across a massive network using first-party identity and commerce data. Our focus is on being the leader in marketing and monetization for commerce outside of the walled gardens. Let me give you a few examples that bring this to life. During the Q4 holiday season, our clients knew very well how important the shopping season would be after an incredibly challenging year. The new dynamics of more people shopping from home introduced uncertainty into a shopping season that they needed to get right. And in the case of some retailers, it's a matter of long-term survival. Ahead of the holiday season, a large New York-based retailer came to us with a double challenge for their marketing and monetization. With their marketing, they needed to address new shopping behavior and move potential shoppers down the funnel to close the conversion loop. We designed a full funnel audience strategy for them to drive consideration from non-buyers and engage previous buyers, leveraging online and offline data to drive more conversions to their e-commerce sites. For this, we drew on a growing suite of commerce media capabilities. Our commerce data, product recommendation, predictive billing, creative suite, and brand safety capabilities For their ad monetization, the same client wanted to capitalize on growing e-commerce traffic to support their focus on yielding strong ad revenues. They used our retail media solutions for that goal. We helped onboard and train their media team through a series of education training sessions across operations, analytics, and sales. Overall, our engagement with them across marketing and monetization helped this client achieve tremendous results in Q4 and contributed $9 million in revenue XTAC to our results, up 40% year on year. Now, as the old Criteo, a retargeting-only company, we would not have been able to offer what I just described. This is our new direction. For 2021, we have ambitious plans to further expand our relationship with this client, drawing on growing capabilities across our commerce media platform. In another example, our leading e-commerce player in France, primarily known for retail, wanted to build brand awareness for their new travel services. Expanding their portfolio in a busy ecosystem was key to them to stand out from their competitors and bring more value to their customer base while growing it. As the travel audience is less receptive to more traditional media, especially during the pandemic, we suggested a broad-based video campaign. We targeted high-quality audiences showing travel intent via video and across multiple premium publishers on the open internet and helped them achieve their brand awareness objective with top-of-mind uplifts, while driving strong traffic on their new travel services. This campaign brought an awareness uplift of more than 30% for the client. Growing and expanding our assets and capabilities leads to a continuous increase in precision, reach and performance for our marketing and monetization services. We continue to build on our secured and consented privacy-safe first-party data. We know the consumers, we know what they like, we know their dislikes and what they buy, and this data set keeps growing. Now let me tell you what I mean by that and why it's so important. In 2020 alone, our vast client relationships and processing power allowed us to ingest over $2.5 billion of daily transactions from over 21,000 commerce clients across 4 billion product SKUs and 3,500 product categories. Now, this first-party commerce data set remains absolutely central for mapping and understanding every step of the consumer journey, especially for e-commerce. This data is established through direct and privileged integrations with our retailer clients, enabling cookie-less targeting and retargeting across our commerce media ecosystem. Only Criteo has this commerce data at scale if you look across the independent ad tech landscape. And as I said, it keeps growing. What's more, we have unparalleled tech infrastructure and AI to make sense of this massive data set and make it work hard for our clients. During the peak of the holiday season, our technology was able to support 445 billion bid requests on a single day. This was 13% increase year over year. We regularly evaluate over 64 million campaigns per second using our AI engine, and with every additional data point that learns from, our AI gets even faster and smarter. We know that we've barely scratched the surface of what we can do here. Our promise media strategy has only just begun to uncover what's possible And Todd will talk shortly to you about our progress there. Important to note is that we believe our data will propel us past the identity challenges that will soon affect the rest of the market. The impact of these challenges could be significant on the overall market, in particular for small businesses. In partnership with our clients, the constant and safe protection of first-party data is the foundation of our identity strategy. As first-party cookies go away and with iOS 14 changes, we'll further lean into our prized possession and continue to offer our clients the services they need. This would essentially have us leapfrog the competition, and we believe we're in great shape outside of what will be otherwise a market storm. And that's why these assets are so important. We've talked about our commerce data, our tech infrastructure and AI assets, Let's quickly switch to the breadth of our media network across thousands of open internet publishers and retailers, and let me illustrate to you why this is so important in driving new revenue for our clients. Our extensive media network provides marketers the ability to reach their audiences and customers with scale and precision, thanks to privileged access to highly attractive ad inventory across premium media properties and away from walled gardens. Premium publishers like NBC, Glovo, The Wall Street Journal, Forbes, and IBM Watson Advertising give us direct access to the inventory to deliver the best yield per ad unit, combined with advertiser demand at scale and consumer-friendly and brand-safe ways. As a result, we get trusted, privileged, and deeper integrations into their media properties. This doesn't stop at traditional and digital media publishers But more and more are including retailers as well. Large e-commerce retailers like Target, Costco, Best Buy, Macy's also provide us with access to their media inventory because they know that solutions will generate high margin ad revenue for them by connecting consumer brands with their audience and promoting their products through commerce native advertising directly on their online shops. For example, A well-known U.S. grocery delivery service wanted to capitalize on the shift of CPG brand dollars to retail media. As many consumers buy more CPG products online due to COVID. Through our engagement, our client grew its e-commerce site monetization through sponsored ads by over 150% year over year. to more than $8.5 million of high-margin brand spend. These client stories showcase the range of solutions we offer and illustrate our commerce media strategy coming to life. It's very early days, but we love the traction that we're seeing here. Looking at our transformation momentum now, we're already generating positive results. Our focus on the growth of the company has required us to better utilize our assets. Remember, these assets previously only focused on a retargeting product, but by expanding the product suite and growing the uptake of new products across existing and new clients, we're transforming Criteo to return to growth, which is exactly what we're executing on. Benefiting from our larger portfolio focused on commerce, our retargeting product continues to perform. Our new products now represent revenue ex-tech of about $150 million. close to 20% of our business, and grew close to 50% in 2020, with strong growth across the board. Today, retail media already works with over 50% of the US top 25 e-commerce retailers and over 50% of the top 20 European commerce retailers who run an online monetization program. Given our strong momentum and highly differentiated capabilities, For Retail Media, this is just the beginning. Retail Media is a central piece of our commerce media platform with over 50% growth. All of our new solutions have grown and continue to grow. We're investing in these new solutions and also doubling down on investments in video and CTV as we further grow audience targeting for brands. Our ambition is to continue to grow our new solutions at close to 50% in 2021. Our attractive growth rates and emerging growth areas validate our strategic direction, leveraging favorable market trends, commerce-focused capabilities for marketing and monetization, and a deeply rooted growth culture across the company. In short, we see Criteo's combination of commerce-focused marketing and monetization capabilities as truly unique in the marketplace. Connecting brands and retailers to their consumers based on their shopping behaviors across the breadth of the Criteo network, reaching over 2.5 billion consumers while richly monetizing retailers' and publishers' inventory at scale is highly differentiated. We believe Onycritio has the value proposition for brands, retailers and publishers on the open internet. Our work ahead is to continue to take full advantage of our unique assets through our commerce media strategy, return to sustainable growth and drive value for our shareholders. Looking at what this means for our priorities, the team and I are laser focused on three things for 2021. First, growth. focusing on strong secular trends in e-commerce, accelerating the momentum we've built, making the right thoughtful decisions on investments and attracting and retaining the best and brightest talent out there. Second, execution in everything that we do. We nurture a culture of high performance and accountability with a high, we do what we say we'll do, discipline. And lastly, first-party data. using our unique and protected first-party data assets across our network of advertisers and publishers to strengthen our competitive moat and leapfrog other market players challenged by the third-party data concerns. I will, of course, update you regularly as we progress on our priorities. And with this, I'm pleased to turn it over to Todd, who will take you through some of the key product areas of focus for 2021. And I'll be back shortly with closing comments. Todd.