Criteo SA · NASDAQ:CRTO
Criteo SA — Q1 2020 Earnings Presentation
43 slides from Criteo SA's earnings presentation, Apr 29, 2020
Slide 1: Q1 2020 Financial Results
Q1 2020 Financial Results Investor Presentation April/May 2020
Slide 2: Safe harbor statement
Safe harbor statement This presentation contains “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning our possible or assumed future results of operation
Slide 3: Investment thesis
Investment thesis Compelling Large market Competitive moats Proven Attractive Mission track-record financial profile $47B market Shopper Data Power the opportunity Unmatched Close to 90% High profitability world’s across the open ID Graph client retention marketers with Internet for all solutions St
Slide 4: Mission: power the world's marketers
To power the world’s MARKETERS with trusted and impactful advertising
Slide 5: Our market opportunity is enormous $47B
Our market opportunity is enormous TOTAL $47B $6B $4B Retailers Direct & Indirect Brands 5 Advertising spend on Display and Video – Global open Internet excluding China. Source: Criteo, September 2019.
Slide 6: We have unique assets to win
We have unique assets to win Global Footprint Advertisers & Publishers Data & Reach 100+ markets 20,400+ advertisers Well over 2B users 29 offices in 19 countries Incl. 1,000+ brands in ID Graph 4,600+ direct publishers Technology Financial Model Talent 14 years of AI Tech expertise Profitable, with
Slide 7: Direct relationships with many premium commerce and brand clients
Direct relationships with many premium commerce and brand clients 7
Slide 8: We maintain high retention across our large client base
We maintain high retention across our large client base 100% Client Retention 90% Rate 20.0 20.2 20.4 19.2 19.4 19.4 19.7 80% 18.5 19.0 18.1 17.3 70% 16.4 15.4 60% 14.5 12.9 50% 11.9 40% 30% 20% 10% 0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2
Slide 9: Extensive supply partnerships ensure broad audience access
Extensive supply partnerships ensure broad audience access 4,600 Premium publishers Long-tail & emerging formats Long-tail & emerging formats Flexible buying technology: RTB/S2S, Criteo direct bidder, SDK, API Any relevant creative formats/environment: IAB, Native, In-App, Video, Google AMP 9
Slide 10: Criteo Shopper Graph: The world's largest set of shopper data
Criteo Shopper Graph: The world’s largest set of shopper data A unified understanding of a shopper’s online journey and real-time shopping intent data Identity Graph: Interest Map: Well over 2B users in ID Graph Anonymized shopper interest cross device, same device, across products and online/offlin
Slide 11: Criteo Identity Graph
Criteo Identity Graph Matching of identifiers cross device, same device, and online/offline Criteo’s Advantages Persistent ~75% of clients participate 96% of Criteo IDs contain long-term Well over 2B users in ID Graph identifiers such as hashed emails or app identifiers besides cookies Global Covera
Slide 12: Criteo Platform
Criteo Platform Solutions Advertisers Marketing Goals Retailers Brands Awareness Supply-side Buy-side Advertising Consideration Advertising Technology Web App Store Technology Conversion Campaign Creation & Self-registration & Billing Onboarding & Integration Management Center Management Insights &
Slide 13: Self-service tools
Criteo Management Center Criteo Platform User Interfaces APIs Campaigns Self-service tools Objective Audiences Lookalike Finder Supply Coupons Billing Event Collection 13
Slide 14: The new Criteo Retail Media Platform
The new Criteo Retail Media Platform – launching Q2 2020 – provides one platform for the open retail media ecosystem Retailers & Saleshouses Brands & Agencies Manage business rules Create and manage governing access to inventory campaigns via self-service UI and data 14
Slide 15: Criteo Executive Leadership Team
Criteo Executive Leadership Team Megan Clarken Benoit Fouilland David Fox Geoffroy Martin CEO CFO Chief Development EVP and GM, Officer & Acting Chief Growth Commercial Officer Portfolio Diarmuid Gill Ryan Damon Denis Collin Thomas Jeanjean Chief Technology General EVP, People Chief Transformation O
Slide 16: Our strategic pillars drive our 2020 execution roadmap
Our strategic pillars drive our 2020 execution roadmap 1 2 3 4 Strengthen Expand Product Explore Strategic Drive Tech & the Core Portfolio Game Changers Operations Excellence 16
Slide 17: Product Strategy
Product Strategy API Self-service Unbundling Brand Awareness Planning and Buying CRM Shopper Graph Consideration Measurement Insights Bidder Recommendation Incrementality Conversion Viewability Brand Safety Fraud 17
Slide 18: Criteo has a clear and strong position on online identification
Criteo has a clear and strong position on online identification Since inception, we’ve had strong convictions on identification and privacy, about what’s right for the user and where we think the industry should be heading. 1 2 3 18
Slide 19: Five key assets for online identification
Criteo’s trusted and impactful advertising builds on five key assets for online identification Privacy by Unrivaled design Identity World-class approach Graph technology & R&D Large Exposure to first-party cookie-less footprint environments 19
Slide 20: Half of our business does not rely on third-party cookies
Half of our business does not rely on third-party cookies Our goal is to become 100% independent 2019 Revenue ex-TAC • Advertising in app uses app identifiers, not cookies 3PC-dependent Chrome “App” includes “Web-to-App”, which uses web ~25% demand, i.e. shopping intent captured on Business independ
Slide 21: Our online identification strategy has four complementary layers
Our online identification strategy has four complementary layers First-party Consumer data Product Industry footprint & ID Graph portfolio leadership 21
Slide 22: First-party footprint
First-party footprint As a , we are integrated into all our advertisers’ and direct publishers’ websites We have a privileged position to embed ourselves into their workflow This means that large amounts of our data are first-party and provide us the means to create identification solutions for our
Slide 23: Consumer data & Identity Graph
Consumer data & Identity Graph Criteo Shopper Graph contains more than 2 billion+ users matched across multiple identifiers 96% of identities include non-cookie identifiers We enrich the Criteo Shopper Graph to ensure it becomes even less cookie-dependent over time, through • Additional persistent i
Slide 24: Product Portfolio
Product Portfolio We have diversified our solutions over the past years We operate using multiple cookie-less solutions to personalize ads in Criteo’s App and Retail Media businesses Our full-stack DSP product strategy reduces our cookie exposure along two dimensions • Going upper-funnel • Broadenin
Slide 25: Industry leadership
Industry leadership Criteo is company in the world We are in a strong position to partner with other players, trade associations, and regulators to help define new industry standards for privacy-first, personalized advertising Criteo subscribes to W3C influence groups • Privacy Community Group • Imp
Slide 26: We plan to build internally and to partner
We plan to build internally and to partner Audiences Measurement eCommerce Platforms Feed Management DCO Tag Management Supply Quality Offline 26
Slide 27: Key Figures
Key Figures – Revenue ex-TAC $206 Million 20,400+ Clients with retention at close to 90% for all solutions combined Adj. EBITDA $59 Million Free Cash Flow $45 Million 4,600+ Direct publishers in web and apps, deployed with Criteo Direct Bidder Revenue ex-TAC from new solutions represented 13% of tot
Slide 28: Covid-19 impacted Q1 2020 Revenue ex-TAC by $10 million
Covid-19 impacted Q1 2020 Revenue ex-TAC by $10 million We started feeling the COVID-19 impact from mid-February on YoY Reported decline COVID number at CC impact Revenue ex-TAC (RexT) $ 206M -11% 4 points* Retargeting RexT -16% 5 points* Same client RexT -9% 5 points* RexT Americas $ 72M -16% $3M R
Slide 29: Regional performance
Regional performance – Q1 2020 Revenue ex-TAC Mix by Region Growth* by Region: 25% -16% Americas 35% -9% EMEA 40% -7% APAC 29 * At constant currency
Slide 30: Key Figures
Key Figures – Revenue ex-TAC* ($M) Adjusted EBITDA* ($M) Free cash flow* ($M) -11%** 29% of Revenue ex-TAC 76% of Adj. EBITDA 236 206 69 59 44 45 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 * Revenue ex-TAC, Adjusted EBITDA, and Free Cash Flow are not measures calculated in accordance with U.S.
Slide 31: Solid financial model: nearly doubled Adj. EBITDA margin since IPO
Solid financial model: nearly doubled Adj. EBITDA margin since IPO Revenue ex-TAC 100% 100% 100% 100% 100% 100% 100% Other cost of revenue* 7.9% 6.6% 6.1% 6.4% 6.9% 6.7% 7.7% Gross margin 92.1% 93.4% 93.9% 93.6% 93.1% 93.3% 92.3% R&D* 14.9% 12.5% 13.4% 14.2% 14.7% 15.2% 14.6% S&O* 43.6% 39.9% 39.8%
Slide 32: Covid-19 Assumptions for Q2 and the second half of 2020
Covid-19 Assumptions for Q2 and the second half of 2020 We are currently modelling a slow recovery out of the crisis but no full return to pre-COVID levels by end-2020 As of April 29, 2020 Q2 2020 We expect a $60-$65M impact on a Revenue ex-TAC basis H2 2020 Slightly larger impact in the 6 months of
Slide 33: We're taking meaningful cost containment measures
We’re taking meaningful cost containment measures We’re hyper-focused on managing our cost base and protecting both our profitability and our cash As of April 29, 2020 • In 2020, we plan to spend $77 Million less non-GAAP expenses than in 2019 - This represents about $42M incremental savings compare
Slide 34: More than $820M financial liquidity offers significant flexibility
More than $820M financial liquidity offers significant flexibility Strong balance sheet Significant cash pile Very low debt Cash as of Mar 31, 2020 Total assets ($M) Cash & cash Financial liabilities ($M) equivalents ($M) €350M Committed financing 1,790 1,676 ~26% of assets $100M equity raise capaci
Slide 35: Robust free cash flow and strong conversion into Adj. EBITDA
Robust free cash flow and strong conversion into Adj. EBITDA FCF to Adjusted EBITDA conversion 60,000 100% 53,526 51,960 90% 50,000 45,006 80% 43,536 41,839 40,192 70% 40,000 60% 30,000 50% 22,494 40% 20,600 20,172 19,345 20,000 30% 20% 10,000 10% - 0% Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
Slide 36: Flexible capital allocation geared to shareholder returns
Flexible capital allocation geared to shareholder returns Organic Growth Share 2019 shareholder meeting provided us with more flexibility around share buybacks repurchase program Board authorized $30 million share buyback in April 2020 We commit to incur no future dilution from equity grant and vest
Slide 37: Investment thesis
Investment thesis Compelling Large market Competitive moats Proven Attractive Mission track-record financial profile $47B market Shopper Data Power the opportunity Unmatched Close to 90% High profitability world’s across the open ID Graph client retention marketers with Internet for all solutions St
Slide 38: Investor relations contacts
Investor relations contacts IR@criteo.com Edouard Lassalle Friederike Edelmann Clemence Vermersch VP, Market Relations Director, Investor Relations Associate, Investor Relations 32, rue Blanche 387 Park Ave S., 12th Floor 32, rue Blanche 75009 Paris New York, NY 10016 75009 Paris +33 1 7621 2166 +1
Slide 39: Appendix
Appendix
Slide 40: Foreign Exchange impact on actual results and guidance
Foreign Exchange impact on actual results and guidance Q1 2020 Actual FX @ Q1 2020 FX USD million @ Q1 2019 FX Actual Actual impact guidance FX impact Revenue ex-TAC $ 209.6 $ (3.6) $ 206.0 $ 207.3 $ (1.3) $ 206.0 Q2 2020 Guidance FX Guidance USD million @ Q2 2019 FX impact Midpoint* Revenue ex-TAC
Slide 41: Revenue ex-TAC reconciliation
Revenue ex-TAC reconciliation Revenue 564,164 537,185 528,869 670,069 558,123 528,147 522,606 652,640 503,376 Revenue 2,300,314 2,261,516 Less: Traffic Less: Traffic acquisition 323,746 306,963 305,387 398,238 322,429 304,229 301,901 386,388 297,364 acquisition 1,334,334 1,314,947 costs costs Revenu
Slide 42: Adjusted EBITDA reconciliation
Revenue ex-TAC reconciliation Net income 21,090 14,707 17,948 42,134 21,401 12,537 20,557 41,474 16,428 96,659 95,879 95,969 Adjustments: Financial (income) 1,325 1,006 1,007 1,746 1,974 1,354 900 1,521 334 9,534 5,084 5,749 expense, net Provision for income 12,386 8,638 6,821 18,299 10,018 5,683 7,
Slide 43: Free cash flow reconciliation
Free cash flow reconciliation CASH FROM OPERATING ACTIVITIES 67,220 56,743 Acquisition of intangible assets, property, plant and equipment (13,292) (11,258) Change in accounts payable related to intangible assets, property, plant (10,392) (479) and equipment FREE CASH FLOW 43,536 45,006 43