Good morning and welcome to the Criteo Q4 and Fiscal Year 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Edouard Lassalle, Vice President of IR. Please go ahead.

Thank you, Andrew. Good morning everyone, and welcome to Criteo's Q4 and fiscal year 2017 earnings call. With us today are CEO, Eric Eichmann, and CFO, Benoit Fouilland. During the course of this call, management will make forward-looking statements. These may include projected financial results or operating metrics, business strategies, anticipated future products and services, anticipated investment and expansion plans, anticipated market demand or opportunities, and other forward-looking statements. These statements are subject to various risks, uncertainties, and assumptions. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements. We do not undertake any obligation to update any forward-looking statements contained herein except as required by law. In addition, reported results should not be considered as an indication of future performance. Also we will discuss non-GAAP measures of our performance. Definitions of these metrics and the reconciliations to the most directly comparable GAAP financial measures were provided in our earnings release published earlier today. Lastly, unless otherwise stated, all growth comparisons made in the course of this call are against the same period in the prior year. I will now turn the call over to Eric Eichmann, CEO of Criteo.

Thank you, Edouard. Good morning everyone. I am happy to report another record quarter for Criteo. We continue to deliver high profitable growth while expanding our product portfolio. Let me start by restating our vision of building the highest performing and open Commerce Marketing Ecosystem. We deliver measurable results at scale to the retailers and brands who participate in our open and trusted data collectors. The Commerce Marketing Ecosystem represents a large opportunity for our clients and for us. Today, retailers and brands are sitting on very large amounts of data and Criteo's expertise is to successfully activate these large data sets in real time to drive sales and profits. To do this, we help marketers gather and structure granular shopper data in real time online and offline and on a large scale. And through state of the art predictive technology and the ability to reach consumers across devices and environment, we generate more sales for them. Our Commerce Marketing Ecosystem continues to be positively received by Chief Marketing Officers around the globe. As a result, we're making good stride with the adoption of our new products, Criteo Sponsored Products, Criteo Customer Acquisition and Criteo Audience Match. These products rely on our unique data collectors and our powerful predictive technology. Turning to earnings, we delivered better results than expected led by strong holiday sales momentum particularly in the US. At constant currency, we grew revenue ex-TAC 20% and adjusted EBITDA 36% in Q4. In fiscal year 2017, we increased revenue ex-TAC 29% and adjusted EBITDA 35% at constant currency. Including all products, same client revenue ex-TAC grew over 6% at constant currency in Q4. Thanks to better technology, broader inventory and more products. This additional revenue came mainly from clients who have on capped their marketing spend with us. We…

Thank you, Eric. Good morning, everyone. I'm equally pleased with our strong performance. We delivered another year of high growth increase profitability on cash flow while investing for the future. In mid-December we had indicated our confidence in the business for Q4, also a strong finish for the year for both Revenue ex-TAC on profitability. Our productivity initiatives on effective investment approach drove higher profitability which positions as well for 2018. The attractive combination of high growth increasing profitability on strong cash flow continues to be a key differentiator for our model. I will walk you through the quarterly and annual performance and share our guidance for Q1 on 2018. Revenue was $674 million in Q4, at 16% at cost constant currency and $2.3 billion in 2017 at 27%. Revenue ex-TAC, our key metric to monitor performance grew 20% at constant currency to $277 million in Q4 on 29% to $941 million in 2017. This was driven by continued growth in same client revenue ex-TAC throughout the year on the addition of over 3600 net new clients in 2017 across region sizes on product. Revenue ex-TAC margin was 41% in both Q4 and the year in line with expectation on prior year's level. Compared with our Q4 guidance, changes in Forex had a positive impact of approximately $1 million on revenue ex-TAC. Thanks to the stronger Japanese yen on euro. Compared with the prior year, Forex changes represented a tailwind of about 300 basis point to revenue ex-TAC growth in Q4 and only 40 basis points in 2017. Switching to expenses, other cost of revenue, comprised of hosting and data costs, grew 31% in Q4 and 43% in 2017. In both periods, this was driven by a higher number of service to increase our hosting on computing capacity worldwide as…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Tim Nollen of Macquarie. Please go ahead.

Hi, thank you very much. Couple of things if I may first you gave some expectations on the impact of the ITP situation in December and it seems now like perhaps the performance in Q4 and outlook for 2018 is a little bit better than what you implied there. I wonder if you have any comment on that. And secondly on GDPR, appreciate your comments throughout the quarter and today I just wonder there's a lot of confusion about this I think amongst investors? I just wonder what you could tell us about what customers, advertisers are saying and thinking about this, is there any sort of hesitation to stand or is it business as usual?

Hi, Tim. Thank you very much for that question those questions. On the first question regarding user coverage on safari environment, back in December, we gave I think what was the worst case scenario of what the full potential impact of the limitations of the safari environment where and what we've done up to see in our guidance is provide an implicitly sort of set of assumptions around user coverage. Let me just make a couple comments about user coverage because this is not new issue for Criteo I think we have a long history of trying to maximize user coverage on all environments I mean that blocking is a great example of a user coverage issue that we could have dealt with successfully, we as a sort of we have said previously are working and will continue to work have worked on making sure that we maximize the user coverage and our expectation is that overtime will so we'll get to a place where we get good coverage of users across all environments. A couple of other things around the worst case scenario that we gave in December, and I think sort of looking at the data and all, that we've also realized that some of the sort of safer environment also have, or if you will be the IOF user coverage also includes certain apps and certain environments where there is no limitations. Such as the Chrome, Browser, Facebook, the Google Search App etcetera, and so that itself is hard afford or that sort of exposure. So, that implicit also in our guidance, but overall we feel quite good about our ability overtime to deal with these challenges we've gone into now for a while. The second question on GDPR, I think, one of these we've been quite vocal about and that is that GDPR is obviously a change for retailers and it's now requires them in particular in the area of protection of sensitive data, requires them to do quite a bit of things to make sure they limit the exposure. In regards to the relationship that we have with retailers and the browsing data, there is really no change or nothing if you can change versus what we've done in the past. And, so our conversations with retailers and our client leaders to believe that there is not a big risk here and it's going to be more business as usual. Not to say there is no conversation that need to happen in clarification about what this means, but, in general feel quite good about our ability to continue to provide services to them even as the DPL happens.

The next question comes from Lloyd Walmsley from Deutsche Bank. Please go ahead.

Thanks. Looking at the guidance I think you are calling for about a 11% growth in Rev ex-TAC in Q1and the full year guidance implied about 4% for the balance of the year. So, wondering if you can gives us a sense of how much of that is a function of just increasing uptake around the new Apple and iOS OS's versus GDPR conservatism or just general conservatism. Any color you can give us on the implied sort of growth after Q1 will be helpful. And then I guess the second one on the GDPR side, it turns that you feel like you are not going to have to really change your existing output, but wondering whether other key data sets at risk perhaps that you get form other third parties associated with this new regulation that would impact spend or anything else that we should keep in mind around GDPR as we get closer to that?

Hi, let me take the question and then I'll pass it on to Benoit to answer your first question. But, on GDPR, the answer is no, we are not concerned about other key data sets. All of the information that we collect is non-PII information so non-sensitive by nature and it really drowsy behavior, these data. So, from that perspective we don't see any impact on GDPR and other data sets.

Yes, just on the guidance to make sure that information to what growth we're talking about, our guidance for Q1 calls for 3% to 5% rev ex-TAC growth for Q1 in cons transparency of history as always. In respect to full year '18, the growth implied or the growth within the guidance is 3% to 8% for the full year. Now, with respect what is underlined in this guidance, you'll have few important factors. First, the good momentum of the business that we've seen across the regions continuing in Q4, which give us confidence for the year, particularly with the level of activities we've seen in the US. To signal that we've incorporated in our guidance, we expect it to ramp up of our new products in 2018 on the back of the promising star that we've seen in Q4. How we have all of our assumption around user coverage in all environments which includes Safari but which also includes our better understanding of the environments that do not clean it that does our tracking. So, this needs to be put into the context of all of those assumption versus obviously what we share with you in December which was the worst case scenario.

And Lloyd if I can add one quick thing is obviously we're as we mentioned in the script, are more seasonal as a company and so you have more weighing towards the end of the year and so that's what appears a bit of the high growth you will see later on.

Got it, okay, guess I needed to check my math, may be soon as that impacts, sorry for any confusion there.

The next question comes from Douglas Anmuth from JP Morgan. Please go ahead.

Thanks for taking my questions. First I wanted to talk about some of your good market approach. Can you talk about what's changing here in terms of the sales scores now that you are going to go multi product and also talk a little bit more about the sales opportunity especially on the long tale. Can you also address the same client spend growth at 6% and how you expect that to trend as you go through the year, how you can potentially accelerate it. Thanks.

Hi, thank you Doug. So, the view to market approach is something that we've been working on now for at least conceptual way of thinking and now we are moving into a implementation mode since last year. And, the idea really here is to make sure that we are set up to have one sales force that can sell multiple products to our clients. Two, we sort of align our service levels with the potential of clients and three importantly, this is one thing that we dig deeper into the mere market and still there is huge potential that we are sort of very clear on which clients we go after from sort of people perspective versus having an approach in that platform and our expectations that we will be building these platforms throughout the year and we are searching some of the benefits of that coming next year. And, we think that will sort of Q1 that will open up new opportunities. So, that's on the growth of market approach. On the same client spend growth that was 6% for Q4, and if you take under user coverage basis that is comparable to what we have done, what the user coverage we had in Q3, that's an acceleration that's going from 14% in Q3 to about 17% in Q4. So, that's very positive, there's number of factors that's going to it, as we discussed on the call. For example, our better access to inventory is one of the more improvement to the engine is another one. The underlying growth of the commerce and our clients is another one. As we have done in the past, it's hard for us to provide any guidance on how we expect this to trend, but, I think you can look at what had happened in all the quarters in Q4 and you see we've been harboring around 15% on an eco-user coverage basis and so, I think that's the good way for you guys to think about that, knowing that in Q4 obviously that was 6% an absolute terms.

The next question comes from Rocco Strauss from Arete Research. Please go ahead.

Hey good morning guys. Two questions for me please, just a follow up on ITP related issues, I guess. Google has made several changes to Chrome over time, do you see any risk of Google taking a similar approach around third party's tracking data on Chrome? Is that actually with the recent changes? And, secondly how has, attribution improved over the last years to insulate curtail solution again kind of false positives at retailers and throughout the company? So, I mean generating incremental sales rather than claiming sales that would have any output. Thanks.

Great. Thank you, great question. So, our expectation the land scalping digital to the advertising changes overtime, we had to do things like that blocking etcetera. We believe that environments like Chrome will continue to be environments where there are not going to be limitations in terms of tracking in particular, because the parent company that produces that being very much a company that's committed to targeted advertising based on data. And, so we don't expect any changes there, what we expect from Google, and that has happened overtime, is that they set standards around advertising that generally are standards around speed, quality of ads etcetera and AMP, Accelerated Mobile Pages is a good example of Google sort of going in that direction and we abide by those standards. And, so we feel very comfortable, we have very strong relationship with Google and we believe that scenario is quite very unlikely. So, in terms of attribution, great question, we haven't talked about this in a while. But, interestingly I think what we have in market I feel, it's a big part of the market that's thinking about last click attribution. Sophisticated clients now for a while, this is not a new trend. For a while have asked in generally to look at incremental sales comparing two random data sets and seeing what the incremental is. And, so, I think, this is something we've been working in many cases with clients if they have a different attribution than post quick 30 days, we end up ingesting their data and looking at what conversions are happening on the site and sort of optimizing around that. So, we feel that is going to be a continuous area of change with the cautionary note that it basically continues to be buying in large a post click, last click type of environment.

Thanks.

The next question comes from Matthew Thornton of Sun Trust. Please go ahead.

Hi, good morning, thanks for taking the question. Eric or Benoit I was wondering if you were able to tease apart may be how you're thinking about the different kind of product buckets growing through 2018. I know with consumer, quick responsive price you are initially given a time line of some milestones when you acquired company on what we saw tour revenue could be. Just wondering how you are thinking about, CSP in 2018, does that growth accelerate and are those in 2019 type OE's that you've put up there still reasonable. And, in similarly with some of the new products audience match, customer acquisition, I think, you talked about 3 million contribution in the quarter, is that a good kind of starting point to take care of ramp up slowly from there? Are you expecting the bucket of new products to accelerate meaningfully in 2018? Just trying to get accesses into some of the puts and takes into the 2018 guidance. Thanks so much.

Alright thank you Matt. On new products, CSP which is the product that's coming out of the hook logic position, for me integration perspective we feel quite good around what has happened in 2017. I think we met all the main milestones that we had set out to do and because that obviously was integration of the technology. From a growth perspective we mentioned that CSP grew at over twice the rate of the overall business in Q4, which was very encouraging and we maintain, I think we are very much in line with the guidance that we have given back in the day when we bought HookLogic.

I'm sure those indication we had given at the time of acquisition was an uplift of mid to single digit so along 5% at least from our core business. And, in fact if you look at what we've delivered this year, we've delivered 5% of our business, of our total business, with extracts from sponsor products. So, we are in line with the indication we made at the time of the acquisition. And with respect to where we see sponsor our products, we are confident in the momentum that we see, so, I believe that's what we share at the time of the acquisition. It's still very much brought in line with the current momentum.

And, I have to say from a quantitative perspective as we go and talk to marketing departments what CSP has allowed us to do, it's not just open brands to come and work with us but also expand our story to make the commerce marketing system story very incredible. In additionally, talk about all the products that we rely on our fro commerce marketing system or data collected, customer acquisition and audience match products that we mentioned are doing well. Customer acquisition is seeing a 10% uplift for clients where we have them installed. We are working on the fashion right now, as a vertical. We intend to extend it to all verticals within retail and also to many more markets in the fore markets that we'll focus on right now. And so, you remember you see that data products, so, we're being cautious to make sure that it is significant potential. And then, audience match is only at 6% of the sort of eligible clients and so it's more about through bringing. Our expectations are that we will see great momentum on these new products and they will start being meaningful 2019 for sure.

The next question comes from Tom Champion of Cowen. Please go ahead.

Hi, good morning, I was wondering if you could talk a little bit about customer retention. I know, you said that it is close to 90%, but, has there been any change there, not to be the dead horse here, but, just a revisit ITP. I think there was some preliminary indication of 9% to 13% headwind then you gave us a 22%. But, I'm just curious if there's a number you could give us for what you assume your headwind will be for ITP in 2018. Thank you.

So, let me may be take your second question first, regarding user coverage on Safari. We provide them guidance what we expected, that user coverage limitation impact in Q4 to be and we came to be on top of the range in Q4. We said during the call, this is not a new issue for us, user coverage has been a challenge or an opportunity depending on how you look at it. For us overtime and inclusive in our guidance are assumptions about user coverage, and we feel quite comfortable that we will sustainable solutions to reach consumers in all environments overtime. So, that's as much as I think we'd say on Safari user coverage.

Customer retention was you know, pretty much in line with prior quarters. They are very close to 90%, so I would not quote any particular trend there. Obviously, we sponsor products. We are reaching different type of customers with branch which might overtime, but slightly different pattern in term of spending. But overall if you look at the figures, very steady, very consistent with what we've seen.

Yeah, I think this is one of the things that's incredible about the business and that is we have a very, very consistent customer retention that we've had for many quarters, I think over 30 quarters now of customer retention of over 9%, which tells you that we are really a relied front partner prior clients.

Thank you.

The next question comes from Heath Terry of Goldman Sachs. Please go ahead.

Great thanks. I was wondering if you kind of just aggregate a little on e-commerce, obviously e-commerce growth was generally very strong in the fourth quarter as we've seen from other companies report. Can you help us sort of separate how much of the out performance in Q4, came from over all street in the market versus ITP being less severe than you expected or may be some of the category like customer length, how should we weight those factors in looking at results it? And, then beyond just e-commerce can you just give us an update in terms of the acquired relative growth is in your primary verticals if there was anything worth calling out and the trouble vertical or others that you're participating in?

May be with the first part of the question with respect to the dynamics of the growth in Q4, as we said for user coverage the impact that we've seen in Q4 was on the top end of the ranks that we achieved. This is despite obviously, we are not going to implement in the middle of the quarter with respect to UIY. So, in other words, this trans in Q4 came from the younger lines trans cover business particularly in the US where we've seen a very strong holiday season in the US. And, so that's not because of better impact than what we had expecting in respect to user coverage, strengths comp is entirely from the fundamentals and momentum.

And I'm thinking to your second question in terms of relative growth to the verticals, our mix hasn't really changed. If you look at Q4 2016 versus Q4 2017, about three quarters of the business are retail, travel harbors around 10% and that hasn't changed. So, I think region-to-region you have some differences, and so for example in EMEA we have very strong growth from travel in Q4, but otherwise it's the global business is not really changing dramatically, actually not changing much.

Great, thank you very much.

The next question comes from Sarah Simon of Berenberg. Please go ahead.

Yes, hi. Just one question if I may. You've obviously given a better result to 2017 and a more specific outlook certainly than it was in December. And your cash burn at the moment is obviously a pretty significant part of your market cut. So I'm just wondering, now that you have a sort of clear outlook as to the easy coverage impacts and so how you're feeling about what the right level of cash is circulated in the business? Thanks.

Yeah, I think obviously uses of cash are always a discussion and everyone with the board and the management. We feel quite good about the results and our ability sort of to deliver results in the future and we think that ultimately that should be the one that - or the main factor in the share price of the company evaluation that the street will give us. In terms of uses of cash we still believe and we believe the stronger the opportunities are quite big to continue to look for acquisitions and reinforce our commerce marketing ecosystem story and so from that perspective we're prioritizing this over any other use of cash and so that's the current situation. I don't know if Benoit if you want to comment?

Yeah, that's pretty much the current situation. It doesn't mean that we will never look at a different use of cash. We pretty much restrict our ability to be ambitious with respect to M&A, but at the moment the focus is to making sure that we have the right fire power for seizing opportunities in the marketplace.

And kind of just follow up on that, is there anything specific either use of cash flow to a single type is there anything sort of specific out that is more likely probability in terms of M&A that will be a stuff you regularly examine?

I think one of the things that we've done over the last year is put in place a structure around corporate development that is different than what we've done in the past. The Founder and Chief Executive of HookLogic has taken on that role about six months ago and so there's a lot more activity I think that we're having, a lot more ideas also the fact that we put in place a commerce marketing ecosystem vision. It incorporates a number of companies that we might have looked in the past, so our expectation is we'll continue to be active in the area and hopefully overtime we're expecting some results.

And maybe a conclusion, I mean term of flexibility with respect to cash balances, you've to understand as well that in an environment where our share price was pretty low. I think it's very important in this environment as well and in particular to keep the right flexibility of having cash available.

Okay, thanks.

Thank you, Benoit. This now concludes the Q&A part. We'd like to thank everyone for attending. The IR team is available for any follow-up questions. We wish you all a great Valentine's Day today. Thank you.

Again, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.