Criteo S.A.

Good morning, everyone, and welcome to Creteo's second quarter 2021 earnings conference call. All participants will be in a 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, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Edward LaSalle, SVP, Market Relations and Capital Markets. Please go ahead.

Thank you, Damien, and good morning, everyone, and welcome to Twitter's second quarter of 2021 earnings call. We hope you're all doing well and keeping safe. Joining us on the call today, CEO Megan Clarkin and CFO Sarah Glickman are going to share prepared remarks. After that, Todd Parsons, the Chief Product Officer, will join us for the Q&A session. As usual, you'll find our investor deck on our website now, as well as a script and transcript after the call. Before we get started, I'd like to remind you that our remarks today will include forward-looking statements, which reflect Creo's judgments and analysis only as of today. Our 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 our most recent forms 10K and 10Q 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-GAAP measures of our performance. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published today. And finally, unless otherwise stated, All growth comparisons made during this call are against the same period in the prior year. With that, let me now 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, the start to 2021 has been strong in the year of growth and momentum for Criteo. The latest developments around cookies remind the industry of the criticality of first-party data and further highlight the importance of our lead in this area. Thank you for attending our Investor Day, where we showcased our new brand, our commerce media platform strategy, and our strength in commerce media. Our team is now firmly in place, and we continue to deliver steadily on our three priorities of growth, execution, and first-party data. And again, this quarter, I am increasingly pleased with the momentum we're building around our company's transformation and our commerce media platform. Together with Sarah, we'll discuss four topics today. First, what Google's decision to delay the deprecation of third-party cookies in Chrome means for the industry and for Criteo. Second, how our commerce media platform strategy is gearing us up for long-term success. Third, how our steady delivery across growth, execution, and first-party data is driving our business momentum. And fourth, what our Q2 performance means for our growth outlook in the second half. Starting with the Chrome announcement, Google's decision to delay the deprecation of third-party cookies in Chrome through 2023 is welcome news for people who rely on a vibrant and healthy open internet. That means everybody. While this creates more time for our industry to prepare, Google's decision does not in any way change our impact or impact our strategy and product roadmap. Criteo's goal is to become the strategic partner for global brands, marketers, and media owners as they navigate cookie-less advertising on the open internet. We are ahead in the race to connect first-party data across our ecosystem and in creating viable non-cookie marketing and media monetization alternatives from that base. We expect to advance our lead during this extended period of time and provide that much needed safety net for businesses in a world of first party data. While we hear collective relief from the market right now, the clock is still ticking and unprepared marketers and media owners will still wake up with a hangover when cookies finally fade. To thrive in the post-cookie world, the industry needs to accelerate making first party data fully interoperable across our complex ecosystem. Marketers and brands need an open garden of audience and media opportunities to advertise across the open internet, including on retailers' digital properties, all connected by first-party data. This requires ensuring the collection, aggregation, and interoperability of consented first-party data across all marketers and media owners to make digital marketing as seamless and performant as possible on the open internet, and to level the playing field with walled gardens. With our commerce media platform operating at the core of the ecosystem, Criteo is in a unique position to cultivate this open garden. This is our strategy, to be the centerpiece of commerce media for the open internet. Talking about commerce media platform strategy, during our Invest Today, I shared with you our views on the massive opportunity that commerce media provides. As a new approach to advertising, commerce media uses commerce data and machine learning to target consumers through their shopping journey, essentially putting targeting on steroids. We think commerce media opens up a TAM for us of about $100 billion by 2024, representing annual growth of 22% compared to our current market. Executing on this huge opportunity, Our plan is to not only expand our addressable market, but also to continue to gain share across all of our existing markets. Pretio's contribution to commerce media is to provide the platform and suite of solutions that activate the world's largest set of commerce data and capabilities to help marketers and media owners reach and monetize audiences to drive commerce outcomes. Whether these are leads, sales, or ad revenues, In short, our marketing commerce media, we're making commerce media work for everyone, meaning Adidas, P&G, and Lazada get new or repeat customers. CNN and the Weather Channel get new audiences and attract advertisers. Huff4 and Target get brands to spend on their own media properties. And all of us as consumers, we get more relevant, trustworthy, enjoyable experiences with more choices across the most diverse accessible space online, the open internet. Commerce media is the future of ad technology and our position here is both strong and unique in the open internet. We have a large $900 billion plus commerce data sets comparable only to walled gardens. We have superior AI capabilities and a unified tech platform built for first party database marketing and monetization. Next to that, we have enormous consumer reach across our media network and 15 years of experience in driving powerful marketing outcomes. With a strong first mover advantage and defensible moats, we think we're poised to win in commerce media. It's primarily a matter of delivery. Speaking of delivery, we're making steady progress on each of our priorities, starting with growth. Our growth accelerated to 18% in Q2, four points above guidance. Growth was well balanced across our portfolio with retargeting growing 10%, a nice milestone for us, and new solutions growing 50%. We grew double digits across all regions as we leveraged continued growth in retail and commerce and drove healthy trends with our enterprise and core customers. One good example of a large enterprise customer we grew with is a very well-known global American sportswear giant. This client has built a far-reaching direct-to-consumer strategy around content, community, and customization, conceived for a consumer world where brand connections are everything. Over the past two years, we've consistently expanded our business with this client across several industries. solutions and we're now building a long-term partnership with them, supporting their transition from a retail first to direct to consumer business across the US, South America and Asia-Pac markets. In Q2, we helped them support historical earnings growth by working in tandem to develop audience-based scenarios and drive incremental return for their e-commerce channel. With our first party media network, we enabled this customer to activate its first-party audience and reach new customers in key markets, both online and in-store, in line with their objectives. We helped grow the retail and clearance sale portions of their sites by 75% compared to Q1 and grew their on-site conversions by 200% compared to Q2 2020. In turn, our business with them grew 130% year-over-year, and 180% compared to Q2 2019. We believe this customer values Criteo's strong performance and the diversification we help drive away from the digital ad duopoly. Helping marketers like this American sportswear giant capitalize on their own audiences through various complimentary channels positions Criteo as a strategic enterprise partner for the largest brands and retailers worldwide. Execution is our second priority. The team continues to execute steadily and thoughtfully across the build, buy, and partner layers of our execution playbook. We keep investing in talent and are thrilled with the industry heavy hitters who have recently joined Credio as we focus on bringing more world-class talent to the organization. We saw solid momentum across the board in Q2. In marketing solutions, our new solutions grew 52%. including solid bookings for our recently launched contextual product. We're excited to carry this momentum to untapped agency awareness and consideration spend. When shipped this year, our new SSP will lead the way, enabling agencies to reach commerce audiences and measure outcomes using their clients' first-party data, either through Criteo's DSP or the DSP of their choice. In retail media, We continue to strengthen our number one position and signed 10 net new retailers in Q2. We also signed or transitioned 15 existing retailers to our retail media platform. This includes the recently announced deal signed with Best Buy and the signing of our first retailer in Japan. A new multi-year and exclusive agreement with a large high-end fashion speciality retailer in the U.S. and a very large membership-only big box retailer also in the U.S. On the demand side, we added over 200 net new brands. On the product side, we continue to make good progress with our new solutions, including contextual, online video, and CTV. To expand our first-party media network on the supply side, we've started building the Criteo Supply Side Platform, or SSP, to provide many more advertisers working with third-party DSPs with privileged access to buy audiences and media across our own large network of direct media partners. After a successful proof of concept, we already work with over 450 publishers to activate third-party demand through our direct connections, driving significant momentum over the past few months. This is just the start of Criteo deepening integrations into marketers and media owners' first-party data assets to solve data transparency, persistence, and interoperability issues for both sides of the ecosystem. And in supply, we've connected directly with more publishers, for example, adding a top global soccer site to our new direct bidder partners ahead of the 2020 UEFA Europe tournament in Q2. Direct integrations allow us to reduce the tech tax and enhance supply path optimization, in addition to increasing our business on media sources that do not rely on third-party cookies. This leads to around 60% of our daily active users on the web now addressable through publishers we have a direct integration with. On the M&A front, we acquired Mvaya in May. expanding our commerce media platform into the exciting area of online marketplaces. Beyond Mabaya, we have an active M&A pipeline focused on building capabilities to strengthen or further strengthen our first-party data assets and accelerate our CMP vision. With regards to first-party data, our third priority, we continue to advance our moats and differentiation. As we said earlier, At our Investor Day, we think the holy grail of building a sustainable first-party data solution for the industry is to serve both marketers and media owners, in essence, providing a combination of a DSP and an SSP. This is what our commerce media platform is about. We know that a better first-party data solution for the supply side will be propelled by our control of the demand side, data and spend, as it allows us to reduce multi-hop data loss across the value chain. We also know that once data no longer is transmitted via cookies, connected first party supply will become the only way to provide the opportunity for both marketers and media owners to effectively advertise and monetize consumer audiences on the open internet. And this is exactly where we're going. We continue to partner actively with the demand and supply sides of the market, helping create the open garden I mentioned earlier. We're investing in a large scale infrastructure needed to drive the collection, aggregation and interoperability of consented first party data across all marketers and media owners on our open garden. The Criteo SSP I just talked about provides us with an even broader access to direct supply and data as we add third party demand to our already extensive demand base. While small, the addition of Mabaya, all first party data supply side customer business, not relying on third party cookies, further strengthens our moat around first party data. And we're making further progress with our open source interoperable single sign-on solution. Last, as I said earlier, We feel good about what Google's delay in its upcoming changes to Chrome means for us as we continue to strengthen our first party data assets. In short, our team has delivered steadily with discipline and conviction across our strategic priorities in Q2 and H1. Looking ahead, we remain laser focused on the same three priorities. First on growth, accelerating our momentum, focusing on commerce, delighting clients and bringing more to them, and attracting and retaining the best and brightest talent. Second, on execution, maintaining a high say-do ratio in everything that we do. And third, on first-party data, focusing on leapfrogging the market post-cookies, using our competitive moat of consented first-party data across our marketer and media network. In closing, I feel good about the momentum we've created around Commerce Media Platform. Our leadership team is fully committed to steady execution against our growth plan. Our solid balance sheet provides the means to invest with conviction in our transformation and our growth. And as we're uniquely positioned to win in Commerce Media, the future is wide open for Criteo. With this, I'll turn over to Sarah, and I'll be back for Q&A. Sarah.