Criteo S.A.

Good morning and welcome to Criteo's fourth quarter and fiscal year 2022 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 would now like to turn the conference over to Melanie Danbury, Head of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Credo's fourth quarter and fiscal year 2022 earnings call. Joining us on the call today, Chief Executive Officer Megan Clarkin and Chief Financial Officer Sarah Glickman are going to share some prepared remarks. top persons or chief product officer will join us for the Q&A session. As usual, you will find our investor presentation on our investor relations website, as well as our prepared remarks and transcripts after the call. Before we get started, I would like to remind you that our remarks will include forward-looking statements, which reflect critical judgment, assumptions, and energies on the end of today. Our actual results may differ materially from current expectations, based on a number of factors affecting credit with business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to the risk factors discussed in our earnings release, as well as our most recent forms, 10-K and 10-Q-5 with the SEC. We will 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. Finally, unless otherwise stated, all growth comparisons made during this quarter are against the same period in a prior year. With that, let me now hand it over to Megan.

Thanks, Melanie, and good morning, everyone. It's been a few months now since we saw many of you at our Invest Today. The event gave us the opportunity to unpack our business, share more about the growth opportunity in front of us, and demonstrate how we've de-risked our business from the third-party cookie deprecation challenges facing the industry. I want to thank everyone who attended. And for those who weren't able to attend, point you towards the webcast materials available on the investor section of our website. At our Invest Today, we explain the commerce media opportunity that we're focused on. Commerce Media is the fastest-growing media channel today and an opportunity that Criteo is poised to capture. Today, we're recognized as a clear leader in commerce media, and we believe we're in a unique position to lead this next wave of digital advertising. Criteo is the commerce media platform for the open internet and the obvious choice to complement Amazon. for brands looking to advertise to consumers at the digital point of sale across multiple retail media networks. As we explained during our Investor Day event, retailers have been early adopters of commerce media, and they refer to this as retail media. They're setting the scene. With their logged in first-party data, their quality shopper audiences, along with our ability to provide real-time closed-loop measurements, Brands are moving ad budgets rapidly in their direction. And retail media is expected to capture one in five digital ad dollars by next year. The first mover advantage was built around retail media. The retail network that it creates in the scale of valuable commerce audiences we can deliver to brands and agencies form the foundation of our strategy. Meaning to reach commerce audiences across the open internet is only possible with access to shopping data at scale, which comes with deep integrations and trusted relationships with retailers. Retail media is a powerful growth engine for us, and our focus now is to accelerate. Over the past year, we've grown our client footprint to 175 retailers and close to 1,800 brands. No other player matches that footprint, and we've only just begun. We've entered new retailer verticals, including delivery services and new geographies, particularly in APAC. We're winning new clients at a rapid pace because we offer one integrated self-service platform for all ad formats and demand sources, allowing retailers to manage their entire retail media business at scale. Over the past three months alone, we've won, renewed, or expanded our partnership with half of the top 10 US retailers. We continue to build long-term relationships with our retailer clients as evidenced by our multi-year partnership with Target's Roundel Retail Media Network. And we're proud to play an increasingly important role in their overall growth strategy. We also expanded the scope of our partnership with Walmart to include multiple ad formats on-site and off-site in Mexico Importantly, several large retailers, including Lowe's, recently dropped other providers to work with Criteo exclusively, as they continue to scale their retail media networks and look to our capabilities to help them to accelerate. In Q4, we also won new contracts with leading US and European retailers in the grocery, ag retail, and health and beauty sectors. In addition, we won our fourth retailer in Japan, where we're actively capitalizing on cross-selling opportunities. This momentum has carried into 2023, and we look forward to announcing some of our most recent exciting wins more formally over the coming weeks. Our success is evidence of our superior offering. Our clients continue to inform our product roadmap as we're evolving our capabilities in lockstep with their needs. Our number one priority is to win with retailers, to bring the best retail media solutions to them and to expand our leading position in retail media enablement and the acquisition of commerce audiences, the highest quality audiences on the internet. With retailers representing the large majority of our business, we have significant potential for growth within our existing client base alone. We have the potential to triple our retail media footprint by extending our retail media monetization solutions to our largest retailer clients that currently only use us for performance marketing capabilities today. As those retailers extend into retail media, our platform is there for them. With our unique access to commerce data at scale, deep integration with retailers, differentiated technology, a world-class team, an R&D powerhouse, we've created a competitive differentiator in our business. And in light of our growing momentum, we've now taken actions to accelerate our plans by shifting more highly experienced engineering resources, doubling the size of our existing team, to concentrate on the rapid deployment and scale of our Commerce Max demand-side platform, or DSP, and to continue to bring more features and capabilities to market faster for our retail media clients. This includes leveraging our advanced commerce-focused AI, our secret sauce, to drive powerful performance capabilities across retail media. Our goal is to help retailers take further advantage of their media opportunity and to solidify our leadership position for years to come. We have one of the largest concentrations of R&D talent in the ad tech industry, aside from the walled garden platforms, and we're continuously focused on ensuring proper resource and investment allocation to our priority growth areas. Thanks to our efforts to pivot our business towards these high growth areas, we ended the year with non-targeting solutions, sorry, non-retargeting solutions representing now close to half of our business in Q4, compared to 32% a year ago. This is an important milestone in our transformation and in line with what we said that we'd do. We're ready to take Criteo to the next level and unlock further our massive $110 billion market opportunity. Now, let me highlight some of the 2022 achievements, which puts us in a favorable position to gain share in 2023 and well into the future. What we've called our SEBU ratio remains extremely high. It shows how resilient we are and how much we can accomplish despite the challenging macroeconomic and geopolitical backdrop. First, we're delivering on the promise of the commerce media platform. We unveiled the full suite of commerce media platform solutions and we soft-launched our Commerce Max DSP, where our retail media and programmatic capabilities converge. Commerce Max is a game-changer for brands and agencies. It gives them one entry point to access premium retail media inventory onsite and open internet supply offsite with closed-loop measurement while leveraging unique first-party audiences built on real shopping behaviors. Retailers are excited to adopt Commerce Max to increase their revenue and traffic. With Commerce Max, they can best monetize onsite inventory and their valuable first-party data for on-site and off-site targeting and bring more shoppers to their sites. This creates a powerful flywheel between brands and retailers. Our successful market tests show that integrated on-site and off-site campaigns in Commerce Max is a true full funnel strategy, more than doubled conversion rates compared to on-site campaigns alone and drove an increase of close to 60% and revenue per shop are targeted during the campaigns. Our ambition is to become the commerce media DSP of choice for agencies and brands. And the feedback we've received to date gives us confidence in our ability to gain share. Overall, our full funnel platform value proposition is increasingly resonating with the market. Today, 35% of our live clients use more than one Criteo solution compared to 32% a year ago. We expect to continue to benefit from our integrated go-to-market strategy and increasing traction and upselling and cross-selling our solutions to existing clients. This is especially true for commerce growth, our product line offering targeting and retargeting capabilities to acquire and retain consumers. With commerce growth, our business is evolving to capture incremental budgets and service an increasing number of clients in the easiest and most effective manner. Our unique ability to reach valuable commerce audiences at scale makes us an obvious choice for marketers looking to drive sales. Our AI engine leverages a combination of consumer interest, contextual data, and trillions of purchasing events to engage in-market shoppers and maximize advertising performance. Among others, Skyscanner now uses our suite of always-on acquisition and retention solutions to optimize how they engage with customers across the entire buyer journey. Full-final activation with Skyscanner has more than tripled their media spend with us year over year. with new targeting or acquisition solutions now representing 30% of their investment. This is the commerce media effect. Our strategic partnership with Shopify also exemplifies how we intend to scale our solutions. We're part of the Shopify Plus technology partner program and certified app program, which simplifies and automates Shopify merchants' ability to leverage our acquisition and retention solutions. We saw a 36% increase in the number of new Shopify merchants using Criteo in 2022 compared to the number of merchants we added in 2021. We expect to continue to onboard more merchants and scale our partnership as we further enhance our self-service capabilities over the coming quarters. Shopify is a great partner of ours, and we continue to explore growth opportunities with them. Second, our high-savvy ratio applies to our growing agency relationships. Agencies drove about two-thirds of our growth in media spend in 2022, excluding iPod Web. 34% of our media spend is now activated through agencies, compared to 29% a year ago. In addition to our global strategic partnership with GroupM, we're excited to have signed a three-year partnership with another major holding agency in the US to accelerate the demands of our retail media and commerce audiences. In addition, we're very pleased to have renewed and extended our global deal with Essential and its world-class e-commerce businesses with a multi-year commitment. As part of our partnership, Essentials advertising partners can now access advanced commerce insights and analytics in real time, greatly enhancing their ability to drive performance. These agreements with major agencies reinforced our positioning as a commerce media platform or commerce media partner of choice. And we believe by further adoption of our multiple solutions at speed and at scale, In addition, we're pleased with the traction of our independent agency programs, which is being rolled out. The program certifies and incentivizes independent agencies to offer our acquisition and retention solution to their advertiser clients. Third, we successfully completed the acquisition of Ipon Web, and we're rapidly integrating that business. On the demand side, we're fully integrated iPon Web's big core DSP into Commerce Max. On the supply side, we've quickly integrated our respective teams, centralized our product roadmap, and unified our commercial strategies. We've already merged our publisher footprint, bringing more high-quality inventory for our demand partners and more value for our publishers. Combined with iPon Web, We added 150 new publishers in 2022, and we now have direct relationships with approximately 75% of the top 100 CommScore publishers in our largest markets, which we believe is instrumental in extending our first-party data integrations. We're well on our way to realize our commerce media platform ambitions, and we've de-risked our business away from third-party signal deputation. We're proud that our efforts are being recognized as we were recently named one of the hottest ad tech companies by Insider. We're also one of the few companies partnering closely with Google as part of the Privacy Sandbox. We're not only collaborating with Google to improve the Sandbox APIs, but we'll also be working together to develop specific use cases that we can bring to our clients. This puts us in pole position to deliver superior performance in the market when Google deprecates third-party cookies. As we enter 2023, we believe we're best positioned to lead the market. At the core of our strategy, retail media remains a non-cyclical growth spot, primarily benefiting from trade marketing budgets shifting online to address consumers at the digital point of sale. In addition, we expect commerce audiences to continue to outpace the market as they remain the most valuable audiences to brands. We have an exciting path ahead of us, and we're laser-focused on execution and capitalise on our significant long-term growth opportunities. We have a highly experienced senior leadership team who are firing up all cylinders to achieve our ambitions. Our team has weathered and successfully navigated various economic cycles, and I'm confident in our ability to deliver on our plans. Now, let me provide a brief update on the latest trends we're seeing in the macroeconomic environment and our actions to adapt to this environment. As anticipated, we saw a more condensed holiday season in the fourth quarter compared to prior year. As we enter 2023, our conversations with CMOs indicate delays in ad budgeting processes due to uncertainties regarding how inflation and interest rates will impact consumers this year. But marketers are not blindly cutting budgets. Ad budgets are under more scrutiny, forcing clients to optimize their spend. According to a recent survey we conducted across the U.S. and Europe, nearly two-thirds of senior media agency professionals believe newer digital channels like retail media will deliver a greater return on investment than search or social. Our commerce media platform and our focus on performance position us to meet that need. Despite overall budget tightening, we continue to benefit from robust new business trends and high client retention, close to 90%. Importantly, we're focused on profitable growth and aligning our cost structure with our top line in a slower growth economy. We believe this will allow us to emerge even stronger once economy and economic uncertainties subside. As part of our ongoing transformation, we're highly focused on allocating our resources to our growth areas. And we have and will continue to take actions to right-size our cost base. While there is lower visibility on near-term trends, the long-term opportunity for credit remains intact. The macroeconomic environment changed significantly over the past 12 months, but our strategy has not. We've laid the foundation for the future, and we're on our path to achieve our business ambitions, which we laid out in our Invest Today. We've built incredible momentum that we expect will only continue in 2023 and beyond to drive long-term shareholder value. With that, I'll turn the call over to Sarah, who will provide more details on our financial results and our outlook.