Criteo S.A. (CRTO) on Q2 2022 Results - Earnings Call Transcript
Operator: Good morning and welcome to Criteo's Second Quarter 2022 Earnings Call. All participants will be in listen-only mode. After the prepared remarks, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Melanie Dambre, Director Investor Relations. Please go ahead. Melanie Dambre: Good morning everyone and welcome to Criteo's second quarter 2022 earnings call. Joining us on the call today, Chief Executive Officer, Megan Clarken and Chief Financial Officer, Sarah Glickman are going to share some prepared remarks. Todd Parsons, our Chief Product Officer will join us for the Q&A session. As usual, you will see our investor presentation on our Investor Relations website now as well as our prepared remarks and transcript of the call. Before we get started, I would like to remind you that our remarks will include forward-looking statements which reflect Criteo's judgments assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting Criteo'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 measure of our performance. Definitions and reconciliation to the most directly comparable GAAP metrics are included in our earnings release published today. Finally, unless otherwise stated, all growth horizons made during the quarter against the same period in the prior year. With that let me hand it over to Megan. Megan Clarken: Thanks Melanie and good morning everyone. Thank you all for joining us. Today, marks an important milestone for our transformation journey as we continue to work towards the realization of our Commerce Media Platform vision. I am very pleased to announce that we're successfully restructured and completed our acquisition of IPONWEB, which we believe will accelerate our plans to shape the future of commerce media on the open internet. Over the last few months, we've diligently evaluated the impact of the geopolitical environment on of IPONWEB and reviewed its business continuity plans to ensure the short term and long term stability of its business. We're very encouraged that of IPONWEB has seen minimal disruption to its top line performance while actively transitioning resources outside of Russia. Our close collaboration during these challenging times shows the strong fit between our companies and reinforces our confidence in what we can accomplish together. Importantly, we successfully renegotiated the deal to reduce the acquisition price with an earn out for demonstrated performance and we restructured the transaction to exclude of IPONWEB's Russian subsidiary. This is a very exciting time for our company and we are thrilled to welcome doc Dr. Boris Mouzykantskii and the IPONWEB team to Criteo. Dr. Boris joins us as Chief Architect and will work closely with the rest of our leadership team toward a successful integration and will contribute to the product, technical and business architecture of Criteo going forward. I'd like to remind you how the strategic acquisition is expected to accelerate our performance play, putting us further into a market-leading position as the intersection of retail media and performance marketing on the open internet becomes the next wave of digital advertising. Clearly, we are no longer a point solution business like most others in AdTech. First IPONWEB brings leading capabilities on both the demand and the supply sides of AdTech, which will complement our existing technology. Specifically, its flexible self-service demand side platform or DSP BidCore expands our offering into a full funnel DSP, important to attract large enterprise marketers and agencies. Add to this, their supply side platform or SSP the media grid, which should further expand our premium direct publisher footprint and bring sophisticated capabilities to increase publisher revenue opportunities. It should also enhance our first party data activation potential, a key element of our acceleration away from third party cookies. Having both the DSP and the SSP capabilities in our commerce media platform offers clients complete transparency and neutrality, knowing that Criteo doesn't own any media or a retail business that can bias all tech alternatives. Connecting the sell side and the buy side also reduces workflows and tech tax and increases the totality of the data. Secondly, the acquisition of IPONWEB should enhance our scale and the distribution of our commerce media platform, adding to Criteo's reach a further $1 billion in annual media ad spend through Bid Switch, its media trading marketplace. The more scale and media spend that we can drive through our pipes, the better the outcomes we can deliver with the network effects of attracting more advertising demand to our platform. Lastly, IPONWEB has acted as a trusted architect of the entire ad tech ecosystem over the past two decades, and its customization capabilities will be instrumental to address the needs of our growing base of enterprise and agency clients who may require the spoke deployments as they look to in-house solutions using Criteo's tech excellence and expertise. This would effectively enable us to power the growing world gardens concentrated around retail media. As longstanding partners with IPONWEB, we anticipate the seamless integration and we're in lockstep to capitalize on the growth opportunity ahead of us. As many of you know, our industry is anticipating a huge change with the rise of commerce media, which a Mackenzie study recently indicated could create a paradigm shift in digital advertising, not seen since the rise of programmatic. There is a disproportionate amount of advertising spend going to the large utility platforms of search and social because that's where advertisers know that they can reach consumers, but the reality is 73% of consumers start their shopping journey on the open internet, including retailers and digital stores, Amazon and Walmart have tapped into this, creating their own hugely successful digital media properties to attract high margin advertising dollars. This has paved the way for the wave of retailers that we see following suit and we are right at the heart of this movement, helping them to leverage their first party data and realize this potential. With a trusted tech partner for over 150 global retailers giving us access to unique premium media inventory at scale and privileged access to retailer, catalog consented identity and commerce data that our AI can use to deliver an unprecedented array of capabilities, we're only getting started. The latest client to enter our retail media client base is not a traditional retailer. It's in fact, Deliveroo. Deliveroo recently announced the launch of its advertising platform powered by Criteo. Our strong agency relationships, media API partners, and ability to scale quickly with our technology and sales team support were amongst the deciding factors in Deliveroo's decision to partner with Criteo. Complimenting our presence in omnichannel retail and marketplaces, this entry into delivery service is an exciting milestone, reinforcing the significant opportunities that lie ahead. It also highlights how operating both demand and supply side solutions at scale creates powerful network effects and allows us to win. What we do in commerce media is not just about retailers entering the media mix. It's about all existing media companies becoming even stronger and their ability to value their commerce audiences using their own first party data. A critical part of our strategy is to deliver the best commerce audiences at scale across various channels and innovative formats, including social and video. We continue to expand our direct integrations with media owners to reach consumers where they are spending their time and we are pleased to have added about 50 new premium publishers since the beginning of the year. This includes new relationships with Disney and experimental campaigns on TikTok. As we expand our reach with new opportunities in social, we're working closely with Meta to be restored as a preferred partner. This will enable us to utilize our own buying optimization technologies and our own data to buy ad inventory on the Facebook and Instagram platforms globally. As part of our direct supply strategy, we continue to strengthen our access to first party data. The most recent example is our work with a large publisher for retargeting, which has enabled us to drive a meaningful, full yield increase for them with first party data while increasing market is spend and environments where third party signals are blocked like safari, we will continue to test another browser environments, including Chrome. This work is groundbreaking and has the potential to profoundly shape privacy, first advertising and commerce on the open internet. This is part of our acceleration away from third party cookies. Overall, we remain forefronts of any industry-wide initiative that aims to improve consumer privacy. As it relates to commerce following Google's announcement of a further delay of third party cookie deprecation to the second half of 2024 will continue to partner with Google and the wider industry to test and build privacy safe solutions that promise to support a fair and open internet. I'd also like to convey our optimism about the future of the open internet following the recent adoption of the digital market act by the European parliament, which is expected to restore a level playing field in the digital economy, turning now to our second quarter performance and current market dynamics. Despite the challenges in the macroeconomic environment, we are delivering on our plans and remain focused on the long term. In the second quarter, we delivered constant currency growth of 7%, our sixth consecutive quarter of contribution XT growth. This was primarily driven by the continued growth of retail media and audience targeting solutions as well as solid performance and retargeting. Sarah will provide additional details in a moment. In retail media, we continue to experience strong momentum with our retailer clients, expanding the scope of our partnerships to use the full breadth of our commerce media platform, capabilities like targeting and retargeting to enable retailers to acquire and retain customers among others. We launch new formats for fresh direct and car four new inventory with target and Walgreens and offsite campaigns with best buy and Sam's club, Mexico to complement existing onsite opportunities. New business momentum remains strong with the launch of Bloomingdale's and the addition of Lowe's Canada and deliver room importantly, we're expanding our scale with our agency partners, including group M and we've added nearly 200 new brands in Q2. Our API partner program continues to expand with our AMEA rollout and the addition of channel advisors as an API partner in the us in marketing solutions, we continue to benefit from the travel recovery and traction and upselling and cross-selling of existing clients. Lastly, even in a softer demand environment, retargeting is showing resilience. As clients rely on our solutions to retain customers and convert to sales. Now I'd like to take a moment to address the uncertain macroeconomic outlook and what that means for our business. We're closely monitoring commerce trends to help our clients understand how consumer demand is involved is evolving. Our universal catalog provides a unified view of four billion product skews across 3,500 product categories from our 22,000 commerce clients, allowing us to quickly identify opportunities to actively pursue advertising budgets and categories that are experiencing high consumer demand across our client base. For example, in retail, which is our largest vertical 22% of product categories, including travel items, personal care or food and beverages saw double digit year over year growth in Q2, this offsets lower demand for categories such as home improvement goods. The macro headwinds are clearly impacting our clients and the budgets that they're able to spend with us, which Sarah will comment on shortly, despite these headwinds, we continue. They continue to look to us to deliver performance outcomes in the form of product sales for retailers, brands and marketers and advertising revenues for media owners. A survey from essential showed that 70% of marketing professionals expect brand advertising budget cuts when responding to a potential recession scenario while performance advertising is expecting to hold better with our flexible platform, marketers can also pivot to the solutions that they need to acquire and retain customers and reach the audiences that matter the most to them at any time. This sort of flexibility is critical. During uncertain times, we also expect retail media to continue to grow a brand's ultimate goal of standing out on a digital shelf is to drive more product sales and nearly 70% of advertisers report enhanced returns from their retail media ad spend compared with returns from other channels, according to McKinsey, and a challenging economic environment benefiting from a new high margin revenue stream will be a key advantage for retailers monetizing their digital ad spend on our platform. We've never been better positioned to help our clients navigate a challenging macro backdrop backdrop. We're highly energized by the progress we continue to make on our transformation journey and execution of our growth strategy. The closing of our web acquisition, our path to our restored partnership with meta the progress towards third party cookie independence and the continued expansion of our commerce media platform are important, building blocks for long-term sustainable growth. I'd like to thank all ours for their hard work innovation and unwavering commitment to our vision. Our people are our greatest assets and our diversity equity and inclusion efforts have been instrumental in our ability to attract and retain the best talent in the industry. We recently held our first global company event since I joined CRI and saw exceptional engagement from our team. I'm delighted that we continue to be widely recognized with LinkedIn ranking us fourth on their list of 2022 top companies and marketing and advertising in the US. We're also recently named as one of the top 50 inspiring workplaces in North America and earned Reagan's CSR and diversity awards for our global DE&I commitment as well as our ESG engagement and communications report. With that, I'll now turn it over to Sarah, who'll take you through our Q2 performance and financial outlook. Sarah? Sarah Glickman: Thank you, Megan and good morning, everyone. Starting with our financial highlights for Q2 2022, revenue was $495 million and contribution AdTech was $215 million. Reported contribution. AdTech reflects the weakening of the Euro and yen against the US dollar resulting in a year-over-year $21 million unfavorable forex impact. At constant currency, Q2 contribution AdTech grew 7% on top of a tough comp with 18% growth in Q2 2021. Our growth was driven by retail media up 42% and audience targeting up 33% as part of marketing solutions up 2%. We continue to shift our top line mix with retail media and audience targeting representing 33% of contribution AdTech in our second quarter, up from 29% in Q1 and up from 25% a year ago. Client retention remained high at close to 90%. Turning to our business segments, in retail media, revenue was $55 million and contribution AdTech was up 42% at constant currency to $37 million. Growth was primarily driven by our US customer base and continued traction in CPG, our largest and fastest growing vertical. Our partnerships with agencies including GroupM are pacing well, and we onboarded 200 new brands in Q2. As a reminder, we also locked the acquisition of Mabaya, which we completed in May of last year to expand our retail media solutions for online marketplaces. In Marketing Solutions, revenue was $440 million and contribution AdTech was up 2% at constant currency to $178 million with solid growth in audience targeting partially offset by lower retargeting. The 3% decline in retargeting reflects the suspension of our Russia operations and a $16 million impact from the loss of signals, including iOS. Our underlying growth and retargeting was primarily driven by growth in travel, solid performance in EMEA, notably led by Germany, emerging markets and a rebound in the UK and our growing Shopify partnership, whilst still early days. This was partially offset by softer trends in France and for certain large strategic clients in the US. Overall, our value proposition is increasingly resonating with clients with 33% of our live clients using more than one Criteo product today compared to 28% a year ago. For example, a European clothing retailer that previously only used retargeting increased their overall spend with Criteo by over 90% in the second quarter, leveraging our broader audience targeting to achieve its customer acquisition and retention objectives. We expect this trend to continue as more clients transition to always on audience strategies to acquire and retain customers. We delivered an adjusted EBITDA of $50 million in Q2 2022. As expected, non-GAAP operating expenses increased 13%, including marketing events like Cannes Lions and our long plan in person company-wide event. These investments were highly valuable for showcasing our strategy and capabilities for our clients and with our Criteos. We also invested in sales, R&D and product talent. Moving down the P&L, depreciation and amortization decreased 10% in Q2 2022 and share-based compensation increased 3%. Our income from operations was $9 million and our net income was $18 million in Q2 2022. Our annual effective tax rate was 32%. Our weighted average diluted share count with $62.3 million compared to $64.7 million last year, due to our share buyback program. This resulted in diluted EPS of $0.27 and adjusted diluted EPS of $0.58 in Q2 2022. We are thrilled to welcome IPONWEB to Criteo. IPONWEB delivered about a $100 million in net revenue in 2021. Year-to-date in 2022, they have had minimal disruption to their top line performance and continue to grow top line of planned. We expect the IPONWEB will contribute, analyze low-to-mid double-digit EBITDA and generate free cash flow. We have incorporated the expected contribution from IPONWEB in our Q3 and full year 2022 guidance below. We have a strong financial position with solid cash generation and no long term debt, including over $970 million in total liquidity at the end of June and still ample financial flexibility to execute on our growth and capital allocation strategy following the acquisition of IPONWEB. We're pleased to have signed a mandate letter and term sheet subject to customer conditions for an expanded â¬407 million five-year revolving credits facility, which should be informally in place by the end of September, replacing our existing â¬294 million facility. This underscores the confidence of our banking partners in our pristine balance sheet and growth outlook. We remain shareholder focused in our capital allocation with the primary goal of investing in profitable growth through both organic investments and value enhancing acquisitions, while also returning capital to shareholders via our share by back program. During the first half of 2022, we repurchased over 1.1 million shares at an average cost of $26.02 per share with $151 million left on our share buyback authorization and more flexibility following the completion of our IPONWEB acquisition, we intend to resume the execution of our buyback program now that we have announced Q2 earnings. Turning to our financial outlook, which reflects our expectations as of today, August 3rd. Like many other companies, we are cautious about our outlook for the remainder of the year, given uncertain macro backdrop and considering the recent announcements from certain large retailers and economist views on the outlook for Europe. For 2022, we have updated our guidance and now anticipate constant currency growth of 11% to 14% in contribution AdTech. This comprises organic growth of approximately 6% to 8% and inorganic growth of IPONWEB contributing approximately 5% to 6%. Organically, we now expect contribution AdTech growth of approximately 45% for retail media taking into accounts softer online traffic, despite more inventory and strong booking and contribution AdTech growth of approximately 30% to 35% for audience targeting. Our 2022 adjusted EBITDA margin with IPONWEB is expected to be approximately 30% to 31%. Our diligent growth investment show our confidence in Criteo's long term strategy. We have made progress on our investments in key growth areas so far this year, and anticipate continuing to invest in high priority areas that support our growth. Clearly given the market environment and as we integrate IPONWEB, we are moderating spend over the coming months. Given the further weakening of the Euro and yen against the US dollar, we now estimate the impact of Forex to lower contribution AdTech by $60 million or six percentage points compared to our previous forecast of $34 million. Approximately 30% of our contribution AdTech is exposed to Euro and approximately 10% of our contribution AdTech is exposed to the Japanese yen. There is no change to our cash expenditures and we continue to expect free cash flow conversion of about 45% adjusted EBITDA. For Q3 2022, we have a cautious outlook given the impact of a slower macroenvironment on our clients and the budgets they are able to spend with us. We expect Q3 contribution AdTech of $223 million to $229 million growing by 12% to 15% in constant currency. This includes inorganic growth in IPONWEB that closed on August 1, contributing approximately 8% to 9% growth. Our organic growth is expected to be approximately 4% to 6%. We assume a Forex impact of approximately $13 million and approximately $10 million for signal loss as that part of the expected Q2 impact shifted to Q3. We expected adjusted EBITDA of $48 million to $53 million. Despite a challenging macroenvironment, we have a broad and diversified client base and differentiated assets that give us confidence in our ability to deliver solid growth, healthy profitability, and solid cash con generation again this year. Looking ahead, we believe that our strategic acquisition of IPONWEB will accelerate our strategy of creating the world's leading commerce media platform to drive long term sustainable growth and shareholder value. Our IPONWEB acquisitions combined with our growth investments, new business wins and recent partnerships are setting a strong foundation for growth in 2023. Finally, please save the date for our upcoming Investor Day that will be held in New York City on September 26th. You'll get a chance to hear from our leadership team, experience our commerce media platform, and we plan on providing an update on our mid to long term financial outlook. We hope to meet with many of you in person, and we will webcast the event live. With that, I'll turn it over to the operator to begin the Q&A session. Operator: Today's first question comes from Richard Kramer at Arete Research. Please go ahead. Richard Kramer: Thank you very much. Hey folks. My first question Megan, can you give us a little taste or foresight of what you think the outcome of your discussions with Meta might be? It strikes me that you would be able to tap into a very large pool of potential additional inventory for retargeting when the business is clearly under pressure right now. So can you talk through the stages of that and how that might progress? And then I guess equally with IPONWEB coming on board, you're going to get a lot more SSP capacity and publishers on board. Can you talk about the longer term opportunity to improve margins as you sort of build out the end to end or full stack offering? And could this over time, given IPONWEB's ability to do the contract programming, you mentioned reduce Criteo's overall R&D to sales burden. Thanks. Megan Clarken: Yeah. Hi Richard. Good to hear you. Let me take the first one. And as you know, Todd's with us in the room. So in terms of sort of a longer term product view of SSP, the SSP capability, I'll pass it across to him. And he may be able to finish my sentence or my sentences on Meta as well. On the Meta front, it's been a long time since we've been out of that platform and so it's exciting to us to now to be able to rejoin with Meta, I guess, as partners to be able to offer our services across their assets. The stages here though, are we have to reimplement the tech that we have had there in the past, which already exists, but we have to renew the relationship with the tech folk on their side. We need to dust off that tech and we need to see whether or not there's anything else that we can add to that. And that's going to take us a little bit of time. It's hard to say exactly how long that's going to be, but it's certainly not sort of heavy lifting in terms of t-shirt size. It's just being able to get in there, but its early days and so establishing the relationship and the right people and then doing the scoping work is sort of immediately ahead of us. And again, we don't -- again, it's been a while since we've been on that environment. So the size of the opportunity will unfold. It's not for us at this stage at this early stage to make predictions around that, but certainly as we get on that, and we see the uptake of their assets as a supply source to us and what that return brings to I guess them and us, we'll be able to give you a little bit more color and to the actual size of that opportunity. Do you want to talk about the SSP? Todd Parsons: Definitely. good to hear from you, Richard. So just to finish on the Facebook question, pardon me, the Meta question, it is a global partnership that we're looking to restart just to give you a sense of scale, which would ostensibly bring us community targeting across the two billion Facebook users and the 600 million Instagram users in the way that Megan described. I know that Facebook would like to do a lot more with us in terms of how we might use the relationship to reach their audiences, to bring commerce experiences into Facebook. So the upside could go from a product perspective quite beyond what we were doing before, but as Megan mentioned, we're just getting into the nitty-gritty details of restarting that relationship with a focus on what we've done successfully before while exploring those bigger opportunities. Just a little bit to add to Meta, on the SSP thing. I think you know, as well as anyone maybe on the call, but that the media grid you know, SSP was very central to our investment thesis and getting together with IPO web. And we are certainly going to take advantage of cross-selling opportunities around media grid going forward and combining the opportunities we have with our direct bidding partners into that product regime. So it's a way for us to take what we have, that's established on both sides of the company that I should say both now, one company, but both sides of the team, the teams pull them together and begin selling pretty early on here. And again, just we're right at closing here, so we'll get busy with that, so that maybe next call we'll have something material to discuss. Operator: Thank you. Our next question today comes from Sarah Simon at Berenberg. Please go ahead. Sarah Simon: I'm now trying to read my notes. So a question first of all was on similar audiences. I think you referred to it at some point in the prepared remarks when you were talking about testing in Chrome if I'm not wrong, but I wonder if we could have a bit of an update on the testing you've seen there and anything more. And then as far as the delay to cookie duplication is concerned, are you seeing marketers and other partners slow down the shift away from cookies given the delayed to the timetable? Or do you think people have now kind of hit the ground running and now it's just, we're going to do this and sort of who cares about the timeline? Thanks. Todd Parsons: Okay. All right. Hi, Sarah. Now, just to address your question specifically about testing with Google, we are able to test -- we're testing three ways right now. The attribution API, the topics API, which is running across all of our advertisers and publishers. So we're collecting a lot of topics through that and obviously fledge, which, you know, is, is most interesting to us, at least from a core business perspective because it's retargeting oriented. What I would say is while we can do testing end to end the volumes of those tests are still relatively low. As Google opens up more opportunities for us to, to get to Chrome populations, then obviously we can expand and move from there. On top of that the you mentioned similar audiences, obviously we're doing a tremendous amount of testing on similar audiences in non-Chrome environments. We talked about iOS testing and hundreds of those being complete on the last call still showing very positive results. So it's important to note that whether it's the privacy sandbox with Chrome, our existing solutions for build for building cohorts that those are just a couple of approaches that we're taking to address cookie deprecation and that will continue with our strategy unchanged despite the fact that Google has given the ecosystem more time and us as a partner to work with them, to see whether the privacy sandbox solutions will work for consumer privacy. And also add to the business value of marketers and publishers that we serve so that we, we don't see any slowdowns the final part of your question I think that the exposure people have had in the ecosystem to iOS has been enough to, to have everyone add attention and and, and moving forward. So we're, I would say we're less worried about slow down than maybe we would've been in the past. Megan Clarken: Yeah, Sarah it's Megan. I think it's important to note that the use of cookies is sort of saturated through our client base. They use it for all sorts of things. And so it's very difficult for us to, to have them stop doing it, unless we can show them either a drop dead date when they can't use it anymore, or a reason to move. And while Google continues to move the date, that first part, the drop dead date is, is sort of out of our reach. But the test that we're doing is part of the strategy of the test that we're doing is to actually show them the results of using the different formats, the different tactics that we have to find audiences on environments that that today don't have signals where they are blind. And as we move them across to use these tactics for those environments, then they get some tastes, then they get some experience and exactly what we can do once Google does actually flick the switch. So it's all part of our plan to accelerate away from the any, any kind of reliance for our clients on third party cookies across Chrome. Operator: And our next question today comes from Matthew Thornton at Truist. Please go ahead. Matt Thornton: Hey, good morning, everyone. Maybe, two, if I could just coming back to Meta, can you, can you give us the puts and takes of what's changed since you were last buying on that platform? Obviously their user base has gotten a lot larger, but, I just can't recall. I think the prior agreement you were, you were, was global. I think you were buying on Facebook as well as Instagram, but I guess, are there any other puts and takes now versus maybe, what the opportunity was back in 2018 and before and then just second question maybe for Sarah on the buyback. Can you remind us, I know you, I think you said $151 million remaining in the authorization. Can that increase post the acquisition of IPONWEB? I'm trying to recall kind of what the dynamics could, could be there. Any color would be great. Thanks everyone. Todd Parsons: Let me take the -- how you doing Matt? Let me quickly address the Meta question. What has changed, outside of user numbers on, on Facebook's side or, and on Instagram side, is cardio has changed CRI was doing mostly user targeting and optimizing our bidding on you know, for, for, for user based interactions in the past chapter of our relationship. And of course, we look forward to doing that where we're joining marketer first party data with, with, with Meta first party data, as this opens back up, what's different about CRI is that we are now a full funnel solution for marketers in such a way that us being able to take acquisition capabilities in meta and utilize them as part of our partnership is an important consideration of the upside. So when you have, some three billion people to work with the idea of being able to do, much better acquisition customer acquisition, in addition to all of the retention that we've been doing in the past is very appealing. Let me give you two examples to be specific. Facebook offers collaborative audiences and also a feature I've worked with in the past called value based lookalikes. It's very similar to our own web similar audiences. Those are two places that we're looking to validate in, in our partnership as quickly as we can to add to any kind of, of retention tactics we would do in Facebook using them as a partner. So the look for the partnership to expand if we're able to do so to meet our new strategy. Megan Clarken: And just to add onto the share buyback. So yes, we have a current authorization remaining of $151 million. And given that we've now closed IPONWEB that gives us a lot more capacity to be able to, to buy back. We actually had stopped buying back just prior to the AGM in June. So we anticipate restarting and doing that in the typical, I would say balanced approach between now and towards the end of the year. And that will be our program. And then as, and when we see that, it makes sense for us to increase that authorization, that would be a board of director authorization we would be seeking. Operator: Thank you. And our next question today comes from Mark Kelley at Stifel. Please go ahead. Mark Kelley: Great. Thank you very much. Good morning, everyone. Sarah, I'm sorry to make you repeat yourself, but on the IPONWEB contribution AdTech number, it looks like based on your guidance, it's like $120 million annualized run rate. Can you remind us the growth rate again that you -- that they put up last year? I think it was in the low 20%. I just want to make sure that's right. Sarah Glickman: It was 20% in 2021. So yes, it was 20% in '21. Mark Kelley: Okay, perfect. Thank you. And then my second question is probably splitting hairs, but it looks like you're, you're potentially seeing slightly less of an impact from apple and the privacy changes. You kind of wrapped a range around the incremental headwinds now again, splitting hairs, but, maybe could you talk about, is it getting a little bit better? Is it kind of align from what you were expecting? That would be great. Thank you. Megan Clarken: Yeah. So, we had anticipated overall privacy headwinds to be around $20 million and our experience was around $16 million and most of that was iOS. And so the privacy headwinds as a total for the year is still within the same range. There are some new privacy restrictions that have come in. So that's what we're expecting more for the Q3, Q4 timeframe. Operator: And our next question today comes from Doug Anmuth with JPMorgan. Please go ahead. Unidentified Analyst: Yeah. Hi, this is Katie on for Doug. Thanks for taking the questions. Just wanted to ask a little bit more about the retail media business. You've obviously had a presence in omnichannel and marketplaces. So could you just talk a little bit more about opportunities with other marketplaces or less traditional platforms on the back of the Deliveroo deal? And then secondly, just on the macro backdrop is there anything you can share on advertiser behavior and macro trend through the course of 2Q from April versus June and now into July? And then just as we look ahead, you previously talked about ambitions to accelerate growth next year. So how you think about that now, given the volatile macro backdrop. Thanks, Megan Clarken: Right. Hi there, I'll take the beginning piece here in terms of retail media for other types of client base. I think last time we talked about Flipkart and Flipkart is actually pretty exciting for us. We've had our first campaigns launched on Flipkart since we spoke last. We've lit up and they lit up, I guess, with us something called it's actually a product performance ads, which helps them to offer our services to they call 'em merchants or whatever they call an on flip card. So it truly is a marketplace where we're helping them with their full funnel offsite capability. And then now to add to it Deliveroo and of course we have a good relationship with Shopify and we'll continue to look for opportunities as more and more marketplace providers or other clients or opportunities for us like Deliveroo come onto the scene. Our ability on the retail media front to expand out the products that we offer there into as we go into more capabilities around sponsored ads, offsite, extending out our ability to target audiences and retarget audiences through acquisition and retention of audiences, all of the pieces that we're building on top of our retail media platform. And now bringing in the capabilities of IPO web just continued to expand what we can do with clients in retail media. We anticipate that it'll bring all sorts of clients that aren't traditional retailers to us as they look to expand their potential into media and being able to offer advertising on their platform. So it's an exciting proposition for us. And one that I know I've got the team sort of laser focused on looking for other clients or potential clients that look like clients that we have so that we can service the broader industry and bring what we do to more clients that are out there. Sarah, do you want to talk macro? Sarah Glickman: Yeah, so overall in macro, we are seeing, and I think everyone's experiencing a slight worsening month or month back, even six weeks ago, there was much less discussion of recession, less talk about large customers issuing some profit warnings. We're seeing some impact of strategic, large customers putting back on spend as well as in our growth business as well, some smaller customers you know, spending slightly less dollars than they would've done it in the past. And I would say July was slightly worse than June and June was slightly worse than May. We're not seeing, a landslide downwards, hence why we still have yeah, great view for Q3 and the rest of the year, but certainly more difficult to get to the budgets and more requests and as you would expect for performance, which is good for us as well as a focus on converting to sales. So all in all where we're focused on this, we talk to our clients all the time. We feel we're in a very good position in a great economy as well in, as in a softer economy to deliver for our customers. But bottom line, there is clearly, less dollars overall and that impacts us as well as everybody else. Operator: Our next question comes from Tim Nollen at Macquarie. Please go ahead. Tim Nollen: Hi everyone. Thanks for taking the question. I'd like to follow up on the topic of brand versus performance marketing. And if you could maybe elaborate a bit please on sort of where Criteo's position now versus the old Criteo, which may have been more performance specific with retargeting. Maybe just help fill in the blanks a bit on what you're doing now with the upper funnel work and how that brings in more brand advertisers and what sort of budgets these come from on the advertiser side. Just how does this play out if we go into a deeper down? Megan Clarken: Yeah. Nice to hear from you, Tim. Look, we're make no mistake our expertise and our legacy is the wrong word, but our heritage is in performance. I mean, we, we see 40 billion in annual commerce outcomes run through our pipes. That's a very big number and that's clearly a number that that we are very proud of and particularly during this time, because during this time it is all about performance. It is all about doing two things, customer acquisition, which is our targeting capability which can be anywhere in the funnel top of the funnel in the brand space or middle of the funnel and retention the bottom of the funnel and making sure that those customers can come back again for our clients. As we as we extend out the notion here is that we're about offering a closed loop capability measurement capability for our clients, so that if you imagine a retailer has an offline store, has a digital store has sponsored ads in a digital store, has display ads in a digital store and then wants to go outside to extend their reach out to the open internet, to both acquire new consumers or retain new consumers. So remind them that they came to the store last week and all of this be run through a single platform with a DSP and SSP capabilities to manage it and offer closed loop measurement. That is, that is what the commerce media platform is all about. And we are so we're there, we're offering that for our clients today, and that's our extensions, that's our that's our strategy and that's whereon web continues to help us. We do all this by the way and I said it earlier on, and my remarks in a transparent way, in a non-competing way, we don't own -- we're not a media company. We don't own media. We're not a retailer. We don't own a retail store. We're not an agency. And so all of this is what exactly is exactly what we're going after. If I bring that back to this economy having clients that are trying to make it in this economy who want to pivot, who want flexibility to go to performance from brand, from brand advertising to performance or back again, the platform enables that to do that. So the acquisition or full stack DSP, the platform that we are building out enables them to quickly pivot from one to the other to offer flexibility. So you've just kind of nailed it with that question. Thank you. That's what we're here to do. Operator: And ladies and gentlemen, that concludes the question-and-answer session. I'd like to turn the conference back over to Melanie Dambre for any closing remarks. Melanie Dambre: Thank you, Megan and Sarah. This now concludes our call for today. Thanks everyone for joining. The IR team is available for any additional request. We wish you all a great day. Thank you. Operator: This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.CRTO Ratings Summary
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Criteo S.A. (NASDAQ:CRTO) Thrives in Competitive Digital Marketing Sector
- Criteo S.A. (NASDAQ:CRTO) showcases resilience with a monthly gain of approximately 9.19% despite a slight dip in the past 10 days.
- The company's target price of $48.25 reflects strong confidence from analysts and investors, supported by a growth potential of 172.89% and a perfect Piotroski score of 9.
- Criteo's success is attributed to its innovative technology-driven advertising solutions, positioning it well in the rapidly growing digital marketing industry.
Criteo S.A. (NASDAQ:CRTO) is a global technology company specializing in digital marketing and advertising. It provides a platform for companies to engage and convert online audiences more effectively. This sector is highly competitive, with major players like Google and Facebook dominating the market. However, Criteo's unique approach and technology have carved out a niche for itself, allowing it to thrive despite the stiff competition.
The company's recent performance, with a monthly gain of approximately 9.19%, showcases its resilience and potential for growth. Although there was a slight dip of about 2.89% in the past 10 days, the overall trend remains positive. This is a testament to Criteo's strong market position and its ability to navigate the challenges within the digital advertising space.
The target price of $48.25 for CRTO reflects the confidence analysts and investors have in the company's future. This optimism is backed by Criteo's ability to achieve a local minimum recently, indicating that its stock price could be at a turning point for a significant rebound. Coupled with its impressive growth potential of 172.89% and a perfect Piotroski score of 9, Criteo stands out as a financially healthy company with robust profitability, leverage, liquidity, and operating efficiency.
Criteo's focus on technology-driven advertising solutions is a key factor in its success. The digital marketing industry is growing rapidly, and companies that offer innovative and effective solutions are well-positioned to benefit. Criteo's high Piotroski score further underscores its financial stability and operational efficiency, making it an attractive investment option for those looking to capitalize on the growth of the digital advertising sector.
Tougher Times For Criteo, Estimates Reduced
Analysts at Berenberg Bank provided their views on Criteo S.A. (NASDAQ:CRTO), reducing their price target to $58.50 from $66 given current tough times for the company, while their buy rating was maintained.
The analysts reduced their revenue estimates due to the company’s withdrawal from the Russian market, which accounts for less than 2% of contribution excluding traffic acquisition costs (CexTAC), and the evidence of softer e-commerce spend, which the analysts believe will impact e-commerce advertising.
The analysts now forecast constant FX growth in fiscal 2022 of 8.8%, below the guidance of 10-12% and their previous forecast of 11.7%. The analysts mentioned that the company remains solidly profitable with robust growth potential even after those challenges.
Criteo Is Undervalued, Berenberg Bank Review
Analysts at Berenberg Bank provided their views on Criteo S.A. (NASDAQ:CRTO), mentioning that the company is well-positioned to weather the deprecation of third-party identifiers, including that which was announced by Google last week, given its evolving business mix and extensive first-party integrations.
According to the analysts, valuation completely fails to reflect this, and they reiterate their Buy rating and a price target of $66 (current stock price is $31.06).
While guidance for 2022 non-GAAP operating expense growth of 16% was higher than anticipated, this should support further top-line acceleration in 2023, according to analysts. Even with this sizeable reinvestment in the business, the analysts believe the company will deliver margins of more than 32%. Given the market will give the company far more credit for top-line expansion than for profitability, the analysts think investing for growth is the right thing to do.
