Criteo S.A.

Good morning and welcome to Criteo's third quarter 2023 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 rewarded. I would now like to turn the conference over to Melanie Dumper, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Quileo's third quarter 2023 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. First person, our Chief Product Officer, will join us for the Q&A session. As usual, you will find our investor presentation on our IR website now, 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 Credo's judgment, assumptions, and analysis on the ad hoc today. Our actual results may differ materially from current expectations, based on the number of factors affecting Credo's 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, filed 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, and as 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. Thank you for joining us today. I'm pleased to report that we delivered another solid quarter with top-line and adjusted EBITDA above our expectations, driven by organic growth acceleration, market share gains in retail media, and strong cost discipline. Our performance is a testament to our team's hard work and the trust of our clients who continue to prioritize performance and rely on our solutions to drive sales and return on ad spend. We've embarked on a significant transformation journey since I joined Criteo four years ago, and we've successfully moved our business from a single solution retargeting play to a multi-solution platform offering end-to-end AI-enabled ad tech services with a focus on commerce. We've demonstrated resilience and we're now positioned at the forefront of the changes in our industry, all while navigating the impacts of signal loss, the global pandemic, geopolitical conflicts, and a volatile macroeconomic backdrop. Our unique commerce data at scale, deep integration with retailers, differentiated technology, advanced AI, world-class team, and R&D Powerhouse have been the foundation of our strategy to become the leading ad tech provider for commerce media, the fourth wave in digital advertising. Since our investor day one year ago, we've focused, continued to focus our business on areas of high growth and expanded our leadership position in commerce media. We've maintained a high say-do ratio and built the only unified AI-driven platform that directly connects advertisers with retailers and publishers to drive commerce on retailers' sites and the open internet. Over the past 12 months, we've successfully integrated our acquisition of IPONweb and brought our commerce media platform to life for our clients. We further expanded our partnerships with agencies, retailers, and supply partners, just as we said we would. We're well on our way to delivering over a billion dollars in contribution extract this year for the first time in Criteo's history, including over $200 million in retail media alone, where we have a leading market footprint. We've achieved a number of important milestones since we unveiled our commerce media platform vision last year. Let me highlight some of these achievements since then and during the third quarter. Starting with retail media in our self-service Commerce Max demand-side platform, which became generally available in September. We're the first to unify the retail media ecosystem with a multi-retailer, multi-channel, and multi-format approach. We believe our deep integrations with retailers ensure accuracy and fidelity of the data To execute against the market is exactly what the market is looking for, fully integrated capabilities to advertise to shoppers at the digital point of sale across multiple retail media networks and to leverage unique retail audiences built on real shopper data for targeting off-site with full funnel closed loop measurements. It's just the beginning, but we've already received strong feedback from our partners, including Group M, Flywheel, and Dentsu, and their brands. Agencies and brands are increasingly leaning into retail media as the most effective closed-loop marketing investment, tying an ad directly to a sale. In addition to driving incremental sales, retail media helps brands better understand who are buying their product, what type of shopper prefers their brands, and who those shoppers are that enter their category. The retail media spend going through our platform grew 39% this quarter. As we've grown our footprint to 2,500 brands, and agencies are increasingly contributing to our growth. Overall, the large agency hold codes have increased their retail media spend with Credio by 50% so far this year. in the US and doubled their spend in Europe and APAC compared to the same period last year. At our Retail Media for All event in September, we also shared more about Commerce Yield, our retailer monetization solution suite that offers flexibility for retailers and marketplaces to monetize their online, offline, and in-store assets. We now partner with 220 retailers after adding 10 new retailers in Q3, and we've more than doubled the number of countries we operate in over the past year. We're proud to have won the trust of an increasing number of retailers globally, including most recently Saks, Doc Morris, and Mercatus. In addition, we had two exciting new wins this quarter. They are two of the largest US retailers. We'll announce these when we're able to. We're pleased to now be the partner of choice for close to 60% of the top 25 US retailers that have monetization programs. We're pushing ahead to drive unification with advertising ecosystem-based solutions and standards across multi-retailer, multi-marketplace, and multi-commerce environments. We've been actively investing in key areas of measurement and insight with the aim to drive an even more impactful set of solutions for brands and their agencies to reach their full potential with retail media. This includes partnering with industry leaders such as the trusted measurement provider, Integral AdScience. With this, brands can be assured that media buys are being seen, their ads are reaching real users across any onsite ad format, and that they are measured using industry standards so that they can compare results. While measurement is important, insights and analytics are critical navigation needs for clients and a differentiator for Criteo because of both our access to such extensive data sets and our patented AI-powered digital shelf analytics. We're empowering retail media businesses with our commerce insights offering to better inform monetization strategies and drive larger brand investments. Walmart Connect Mexico is successfully leveraging these insights and almost tripled brand spending in Q3 compared to last year. It's still early days for most of our clients, but we're excited to see that retailers and brands are increasingly taking advantage of the compelling retail media opportunity. Over the past year, the average number of retailers that brands are advertising on has increased by over 60% across our client base. Next up, let me talk about how we've been accelerating growth in our supply business since the successful launch of our Commerce Grid Supply Side Platform, or SSP, in June. Commerce Grid had a great debut and is quickly gaining share. Our Commerce Grid SSP represents another path for us to capture incremental commerce media budgets from established DSPs. We're already seeing incremental demand from top agency hold codes for our proprietary commerce audiences and supply packages. And we're excited to expand this opportunity to retailer audiences as we're about to launch our first campaign leveraging retailer data for audience extension across the open internet through commerce grid. This represents a powerful digital advertising shift for advertisers looking to engage with real shoppers and a big growth opportunity for 2024. Moving on to marketing solutions, more clients are activating always-on strategies to acquire and retain customers using our commerce growth suite of services. As a reminder, always on refers to a service where advertisers commit spend with us to drive the best results, the best way we see fit. As we have evolved beyond retargeting, that spend is optimized for our clients up and down the advertising funnel. In this context, we're excited by the continued traction of commerce audiences to complement retargeting as marketers are looking for more touch points with consumers across their buyer journey. to drive performance. Our investments are paying off as our clients are leveraging a broader and richer audience set from targeting new shoppers who resemble existing high-value customers to finding relevant shoppers with contextual targeting or engaging shoppers who are actively researching the products and services that they offer. Our ability to target highly relevant and valuable in-market audiences is helping us gain ground against competitors that provide less precise targeting on the open internet. In addition, we expanded our partnership with Shopify as the first open internet platform integrated into the Shopify audience's product. Shopify Plus merchants can now instantly upload first party audiences of high, medium, and potential intent generated by Shopify. and then activate campaigns with Criteo. This opens up opportunities to attract new Shopify Plus merchants that haven't used our solutions before and may consider using Criteo alongside Meta, Google, Pinterest, TikTok, or Snap. Lastly, we're encouraged by our prospects to extend our commerce value proposition to Meta. We've demonstrated our ability to drive incremental performance to our existing open web campaigns when accessing Meta's large-scale inventory and powerful communities. Following successful testing, we have an opportunity to extend the reach of our campaigns on Facebook and Instagram for hundreds of clients in Q4 and beyond. As a testament to the power of our platform play, we've seen an acceleration in upselling and cross-selling dynamics, with 38% of our clients now using more than one Criteo solution compared to 33% a year ago. Within marketing solutions, clients that have embraced the full power of our acquisition and retention solutions spent on average 30% more than a year ago in Q3. And this momentum is continuing. These dynamics have contributed to rebalancing our top line mix with retargeting now representing less than half of our business for the first time ever A critical part of our transformation is to lay the foundation for the future. This includes AI-driven innovation to fuel future growth and our multi-pronged addressability strategy to enhance our resilience post third-party identifiers. We have privileged access to the largest commerce data set on the open internet to feed our AI models. And we continue to integrate generative AI into our platform with a focus on improving performance and user experience for our clients and optimizing our service delivery process. We're planning to offer AI-powered creative tools like intelligent image generation to clients to enhance performance. In retail media, we're focused on bringing sponsored ads into conversational environments as more consumers are utilizing chatbots on retailer websites. Internally, we're using AI to empower our sales team to drive more effective new client leads and enhance client experience through faster response to inquiries. Turning to our multi-pronged addressability strategy, we focused on three pillars to succeed in environments deprived of third-party signals, including our first-party data strategy, our participation in Google's privacy sandbox, and also our access to more closed and authenticated environments like retailer sites and social platforms. First, we continue to progress on scaling our first-party media network to retarget consumers with consented first-party data matching and cookie-less environments. Remember, we collect significantly more hashed emails or HEMs than similar alternative industry IDs, which means that we can leverage hash emails as interoperable match keys to connect demand and supply across our network. And we're pleased to see HEM bidding increase every quarter. This is a crucial advantage to effectively find and monetize commerce audiences on the open internet once the industry finally moves beyond third-party signals. Second, we remain one of the largest-scale partners in the Privacy Sandbox, to which we've dedicated significant time and resources. Early next year, we plan to assess the effectiveness of the Privacy Sandbox APIs with Google Phases out third-party cookies for 1% of Chrome users for the web. The real-world results will be critical to further assess the economics associated with the Privacy Sandbox solution its scalability, and the industry's readiness to absorb the significant changes and technical complexity. Third, our differentiation lies in our ability to help our clients reach consumers in closed and authenticated environments like retailer sites and social platforms. Our extensive partnership with our retailers enables privileged access to first-party data for hundreds of millions of monthly users. And we're potentially expanding our reach to billions of logged in users on social platforms or other environments where we expect to participate in the future. To conclude, we believe we're better positioned than we've ever been, ever been before to drive performance for our clients across the entire marketing funnel. According to a recent Forrester survey, 90% of retailers say demand from advertisers for commerce media has increased significantly during the past 12 months, as there is nothing better than advertising at the digital point of sale or accessing in-market shoppers. We're about to enter a critical year for digital advertising, and our primary focus will be to deliver performance and continuity for our clients, while continuing to invest in outgrowth areas to scale our commerce media platform. It's important to acknowledge that our path won't be linear, but we believe we've built a strong moat through a combination of unique and proprietary technology, commerce data, and retail expertise to navigate the significant changes ahead of us and capitalize on the next waves of digital advertising and indeed the future of digital advertising. I'll hand it over to Sarah to discuss our financial results in our outlook.