Criteo S.A.

Good morning and welcome to CRETO's first quarter 2021 earnings call. All participants will be in a listener mode. Should you need assistance, please press star then zero to summons the operator. After the prepared remarks, there will be an opportunity to ask questions. To ask a question, please press star then one. To try your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Edward LaSalle, SVP, Market Relations and Capital Markets. Please go ahead.

Thank you, Chad. Good morning, everyone, and welcome to CREDA's first quarter 2021 earnings goal. We hope you're all doing well and keeping safe. Joining me on the call today, CEO Megan Plarkin and CFO Sarah Glickman are going to share some prepared remarks. After these remarks, Todd Parsons, the Chief Product Officer, and Geoffroy Martin, General Manager of our Growth Portfolio, will join us for the Q&A session. As usual, for everyone's convenience, you'll find our investor deck on our website. Before we get started, I'd like to remind you that our remarks today will include 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. For more information, please refer to the risk factors discussed in our earnings release, as well as the most recent Form 10-K and Form 10-Q filed with the SEC. We do not undertake any obligation to update any forward-looking statements discussed today, except as required by law. We'll also discuss non-gap measures of our performance on the call. Definitions and reconciliations to the most directly comparable gap metrics are included in our earnings release published today. Finally, unless otherwise stated, all growth comparisons made during this call are against the same periods in the prior year. With that, it's my pleasure to hand it over to Megan.

Thanks, Ed, and good morning, everyone. Thank you all for joining us today. I hope everyone is doing well and staying safe. On our end, I have to say we feel good today. We've had a strong start to 2021. and have already achieved a number of solid things in a year of return to growth for Criteo. In particular, we're seeing good momentum across our three priorities of growth, execution, and first-party data. In Q1, we've already returned to growth, and good trends in commerce and online shopping continue to sustain the growth of our clients' business and our own. Our leadership is firmly in place and our teams are aligned and focused on steady, thoughtful execution. To add, recent market developments highlight the need for the industry to grow its focus on first-party data, validating the strategic importance of our own first-party media network. In short, our market opportunity is big. Our strategic priorities are clear and our execution is strong. All of this supports our Commerce Media Platform vision that I've talked you through on our past two earnings calls. Today, and looking at 2021 so far, I'm feeling very good about the momentum around our vision coming to life. Together with Sarah, we'll discuss three topics on our call today. First, the value of our Commerce Media Platform, what it brings to the market. Second, how our steady and thoughtful delivery across our three priorities of growth, execution, and first-party data is driving momentum in our business. And third, what drove our overperformance against guidance in Q1 and what this means for Q2 and our 2021 growth momentum. First, our commerce media platform. Our strategy of building the world's leading commerce media platform brings together the best of Criteo to deliver smarter consumer experiences. Commerce media is a category of digital advertising that drives commerce outcomes for brands, retailers, and publishers by delivering smart experiences to in-market audiences as they browse and purchase online. As a marketing category, commerce media is real and growing fast. It's out there and it's big. As I've said before, we view the commerce media opportunity as a $60 billion plus TAM for us. Our place in commerce media is based on our front row position at the intersection of e-commerce marketing and media monetization. Our unique platform makes commerce media work for everyone, driving powerful outcomes for all those that we serve. Brands like Adidas, or P&G, generate commerce results through powerful commerce-focused targeting, measurement, and optimization capabilities deployed via both our unique retail media inventory and our huge network of media properties, providing brands with a combination of commerce capabilities and unmatched scale, even by the walled garden standards. Retailers like Target, drug commerce outcomes and create new high margin ad revenue streams for themselves through targeted promotions. Publishers access existing and new brand marketing dollars previously spent below the line. And all of us as consumers get to enjoy better shopping experiences through better content and personalized ad experiences while enjoying continued access to ad supported content online. Our commerce media platform's unique combination of commerce-focused marketing and media monetization capabilities makes us ideally suited to address the complex needs of our customers. For example, we recently helped one of the world's largest retailers execute their marketing and monetization strategy in Canada. This big client has been laser-focused on growing the ROI of its digital marketing investments at scale during the holiday season and early 2021, while at the same time monetizing its in-market audiences and media with multiple CPG brands. Our marketing services for them focused on converting the visitors on their site and app, leveraging our strong creative and product recommendation suite, trusted brand safety capabilities, and flexible budget allocation tools. to turn their site and app visitors into buyers. On the media monetization side, we helped them launch native and sponsored product ads across their site and apps, and added new ad placements on their grocery-specific inventory. Over Q4 and Q1, the value we delivered to this large retailer helped drive an increase 195% year-over-year in product sales, translating into 100% growth in revenue for us. In 2021 and beyond, we see great opportunities for this retailer to further leverage our full suite of marketing and media monetization solutions with available audiences to drive commerce outcomes on and off its properties for the brand manufacturers it works with. As you can tell from this example, we focus on being the leader in marketing and media monetization for commerce outside of walled gardens. With our unified offering, we shepherd the buying and selling of advertising and promotions for goods and services with a strong focus on commerce across our massive network of brands, retailers, and media partners. We continue to work on making the seamless flow of our first-party data across our commerce media network, a big part of our differentiation. Moving to my second point, our steady delivery driving growth. We're making good progress on each of our priorities, growth, execution, and first party data. The positive momentum we're seeing across our business is supported by our team's solid planning and focus, thoughtful decision making, and high standard of execution. As I hope that you can see, we're executing on a well-thought-out transformation plan and overcoming unprecedented circumstances. Let's start with our first priority, growth. Our growth turned positive in Q1, earlier than planned, leveraging continued help in online commerce. I'm pleased that our better than anticipated performance was driven by solid momentum across all solutions. Since I joined Criteo, our focus on growth has required us to better utilize our assets. We're growing the business by expanding our product suite and growing the uptake of our new solutions across existing and new clients. Benefiting from our larger commerce media product portfolio, our retargeting product continues to show solid resilience and to perform better than expected. In fact, A large part of our overperformance against our guidance in Q1 came from retargeting, highlighting that our clients continued, that their continued need for superior performance in converting their customers. Whether that conversion is aided by retargeting, brand building, audience targeting, direct retail promotion, superior access to buying and selling of ad real estate. This is the power of the commerce media platform at work. Our new solutions that represents about 176 million revenue extract on the last 12 months basis and now is now 21% of our business growing. It grew 60% in Q1. accelerating from both Q3 and Q4 2020 with strong growth across the board. Retail media's growth dramatically accelerated to over 120% as we further expanded our business with new retailers, brands, and agencies, and grew our share of wallet with existing ones. We already work with over 50% of the top 25 American and top 20 European e-commerce retailers, with monetization programs, and we continue to expand our business with them. While retail media is a central piece of our commerce media platform strategy, all of our new solutions continue to grow fast. We're investing in contextual advertising and audience targeting for brands on video and CTV. We continue to expect all our new solutions combined to grow by close to 50% in 2021. And last point on growth, we're driving profitable growth too, as we significantly increased our adjusted EBITDA margin in Q1, while continuing to invest in our growth initiatives. Execution is our second priority. The team continues to deliver steady, thoughtful execution on all fronts. This spans our execution playbook across organic, build, and partner. On the organic side, we saw continued solid momentum across the business. In our new solutions business, we continue to focus our sales efforts across our new solutions. In Q1, we had growth of over 160% in our omnichannel solutions and mid-teens in our audience targeting products. This solid growth is enabled by our teams to focus on best addressing and servicing the commerce media needs of our customers, big or small. On the product side, and as discussed in our last call, we launched our next level contextual advertising solution. Our solution is a first of its kind product that connects first party commerce data, like a consumer's recent purchase of Adidas sneakers, with real-time contextual signals like a particular news site or app or a key topic of an article. This capability paves the way for marketers to continue to drive and measure incremental revenue in a post-cookie world. We're already seeing good customer adoption and good performance for marketers. In supply, we launched our direct SDK product with a top US news app. adding to the scale of our direct access on the largest news apps. We also started testing in two Asian markets with one of the largest messaging platforms in APAC with huge scale, a significant strategic win for us in the region. As a reminder of our importance to supply partners, premium publishers like NBC, Globo, The Wall Street Journal, and Forbes give us direct access to the inventory because they know we deliver high yields per ad unit combined with advertiser demand at scale in brand-safe and consumer-friendly ways. In speaking of locking in highly differentiated supply, in retail media, we executed strongly with new business wins and growth in our existing customer base. On new business, we have signs three-year global preferred partnership with CAFOR the agreement calls for the deployment of the Criteo retail media platform in nine CAFOR group countries starting with France where Criteo will be the exclusive partner for the marketing of retail media inventories to advertisers and agencies the Criteo retail media platform will power advertisers promotions on their products on all CAFOR digital assets ie on its web and app shops through innovative solutions 100% integrated into the shoppers journey CAFOR joins retailers like Costco Target Macy's and Best Buy in granting us privileged access to their media inventory because our retail media solutions generate high margin and ad revenue while protecting the shopper experience through relevant commerce native ads. Also in retail media, we signed a multi-year agreement with a very large U.S. home improvement retailer, along with agreements with five other new retailers in Q1. We expect these contracts, together with potential similar agreements in the future, to continue to sustain and strengthen retail media's growth over the next multiple years in q1 we also fully integrated our preferred deals offering previously called commerce display into our read it retail media platform providing retailers brands and agencies with a single unified platform for managing all ad formats across retail sites and mobile apps on the partnership front we continue to expand our strategic API partnership program making it easier for brands and agencies to buy with Criteo. Today, our APIs and partners drive greater stickiness and long-term growth for Criteo, including acceleration of our off-site retail media offering for brands across the open internet. Moving to our third priority, first-party data. As everyone knows, this is a critical area for the industry and for us, an area where where we're actively and methodically securing our moat and differentiation. First of all, all of our retail media onsite solutions leverage first-party data and do not rely on third-party cookies. This means that our growth in retail media onsite is not only tremendous in size, but also sheltered from changes in third-party identification and therefore brings steady, durable, predictable growth. This is important in light of our fast growth in this business and the central role that retail media plays in the traction of our commerce media platform. Secondly, in their early March blog post, Google interestingly reminded everyone of the strategic importance of first-party data. to the entire online ecosystem. We found Google's rap to be music to our ears as the foundation of our commerce media platform is first party data that we operate on behalf of our partners. Our first party media network enables this data to power marketing and monetization across the open internet at scale. In partnership with our clients, the constant safe and protected flow of first party data within our broad network is the cornerstone of our data identity strategy. As changes come in iOS 14 and third-party cookies go away, we'll further lean into this asset and continue to offer our clients the ability to achieve their marketing and monetization goals via first-party data. As I mentioned earlier, a strong focus of us is to make our clients' first-party identity data fully interoperable across our first-party media networks. to ultimately power the commerce media platform in the most seamless way. This means creating durable connections between first-party identity data operated on the demand side of our business with first-party data operated on the supply side of our business. Our effort requires investment and infrastructure for seamless data rights management, privacy protection, and integration with the programmatic ecosystem to differentiate. Third, in collaboration with industry partners, we further advanced the integration of the Universal Identify UID2 solution into our commerce media platform. We worked with the Trade Desk on our new single sign-on software called Open Pass, built to support UID2 and to provide publishers and retailers the tools to use first-party data as an alternative to third-party cookies. The OpenPath software will be open sourced and available for all publishers and retailers to easily install on their site and technology stack. We started testing OpenPath with consumers, publishers and retailers in Q1 and Q2 and anticipate that it will take up to about 12 months to build scale. As we've said before, OpenPass and UID2 are built for interoperability with other consent and identity solutions. And OpenPass will operate with identifiers other than UID2, which means both will also enhance other solutions publishers and retailers' choice to use. And finally, we're excited about our customers' interest We're already seeing in our first of its kind contextual advertising product. It's built with the best of Criteo AI to merge content classification with first-party transaction data to close the loop between the cohorts of consumers buy and their affinity for specific content. In the very early going, we've seen incrementality for our clients and believe this product will thrive in a post third party cookie world. It's also important to note that our shopper graph data proves particularly relevant for cohort advertising use cases to drive higher reliance for consumers and performance for marketers. We believe this positions us well ahead of testing Google's flock and pledge proposals over the coming months and quarters. In short, our team has delivered steadily, thoughtfully, and with discipline across our strategic priorities in early 2021. And looking ahead, we remain laser focused on the same three priorities. First, on growth, accelerating the momentum we've built, focusing on strong secular trends in e-commerce, making the right thoughtful decisions on investments and continuing to attract and retain the best and brightest talent out there. Second, on execution, by sticking to a strict we do what we say we'll do discipline, we nurture a culture of high performance and accountability in everything we do. And third, on first-party data, using our competitive moat of protected first-party data across our advertiser and publisher network, and focusing on the various techniques we have available to us, we feel good about our position in the market post-cookies. In closing, I'm very proud of our team's solid delivery, achieved with grit and conviction. I feel good about the momentum we've created. in our commerce media platform and how we're tracking against our transformation plan to turn our business around. And to discuss our strategy and execution plans in more detail, we're excited to host you all at our 2021 Invest Today, which will take place virtually on June 3rd. And during this event, our extended leadership team will explain why the new Criteo we are today is best positioned to offer the world's leading commerce media platform to brands, retailers, and publishers. And all details will soon be available on our IR website. I hope that you're all able to join us with this. I'm looking forward to seeing you all attend our Investor Day. I'm pleased to turn it over to Sarah, who will take you through the Q1 performance and outlook for the rest of 2021. And I'll be back for the Q&A session. Sarah.