Benoit Fouilland, CFO - Criteocriteo.investorroom.com/download/2016+Investor+Day...FY 2012 FY 2013...

Benoit Fouilland, CFO

Investor Day, September 2016

Financial Update

2 | Copyright © 2016 Criteo

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

operations, business strategies, financing plans, projections, competitive position, industry environment, potential growth opportunities,

potential market opportunities and the effects of competition.

Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,”

“believes,” “could,” “seeks,” “estimates,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar

expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other

factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or

achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and

assumptions only as of the date of this presentation. You should read the Company’s most recent Annual Report as filed on Form 10-K, on

February 29, 2016, including the Risk Factors set forth therein and the exhibits thereto, completely and with the understanding that our

actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these

forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-

looking statements, even if new information becomes available in the future.

This presentation includes certain non-GAAP financial measures as defined by SEC rules. As required by Regulation G, we have provided a

reconciliation of those measures to the most directly comparable GAAP measures, which is available in the Appendix slides to today’s

“Financial Update” presentation. In addition, certain financial information contained herein with respect to years ended prior to December 31,

2013 has been derived from our audited consolidated financial statements that were prepared in accordance with IFRS and presented in

Euros. Financial information contained herein with respect to quarterly periods has been derived from our unaudited condensed

consolidated financial statements.


We have had a solid track-record since IPO

1 We define Revenue ex-TAC as our revenue excluding traffic acquisition costs, or TAC, generated over the applicable measurement period. Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Revenue ex-TAC to Revenue, the most directly comparable GAAP measure.2 We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.

Revenue ex-TAC1 ($M) Adjusted EBITDA2 ($M)

+51%

CAGR

22

42

105

143

176

FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016

High

growthExpanding

profitability

147

238

403

534

622

FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016

Expanding

profitability


Our model is differentiated, efficient and scalable

Direct model driving

elastic demand

Sustainable

gross margin

Profitable

with significant

operating leverage

Highly

capital efficient

& cash generating


Our business model has unique attributes

1 On average over the last four quarters through Q2 20162 Last twelve months to Q2 20163 On average over the last 20 quarters through Q2 20164 On average over the last four quarters through Q2 2016. Represents uncapped budgets of our clients, which are either contractually uncapped or so large that the budget constraint does not restrict ad buys

75%+Direct relationships

with clients2

800+Net client additions

per quarter1

90%+Client retention rate3

77%Of Revenue ex-TAC from

uncapped budgets4

Differentiated

in Performance Marketing

Attractive Direct

Sticky Elastic Demand


Very consistent spending pattern by client cohort…

We drive consistent increase in client spend

Revenue per client cohort (US$)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

…Driving increasing business from existing clients

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

+20%*Revenue ex-TAC from exiting live client (US$)

* +20% YoY growth at constant currency in Q2 2016


Q30Q29Q28Q27Q26Q25Q24Q23Q22Q21Q20Q19Q18Q17Q16Q15Q14Q13Q12Q11Q10Q9Q8Q7Q6Q5Q4Q3Q2Q1

France US Japan Germany UK

Quarterly Revenue ex-TAC since launch in major markets ($M)

Our model is highly replicable across all markets


41% 41% 40%41% 40% 41% 40% 40% 41% 41%

We optimize our margin to create sustainable value across the ecosystem

• Maximize liquidity and scale on our platform

Strategic

objective

Drive

long-term

benefits

Maximize

absolute

Revenue ex-TAC

opportunity

for Criteo

• Maximize value for advertisers and publishers

• Maximize network effects and competitive position for Criteo

• Set optimal margin

MIN MAX

8692

103

122 118 122134

160 162 166

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Very

consistent

margin

since IPO

Revenue ex-Tac as % of

RevenueRevenue ex-Tac


We generate significant profitability while investing

Adjusted EBITDA1 margin (% of Revenue)

and Non-GAAP operating expenses2 ($M)

0%

1%

2%

3%

4%

5%

6%

7%

FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016

GAAP operating margin3

(% of Revenue)

$-

$50

$100

$150

$200

$250

$300

$350

$400

$450

4%

5%

6%

7%

8%

9%

10%

11%

12%

FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016

Non-GAAP operating expenses Adjusted EBITDA margin (% Rev)

1 We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.2 We define Non-GAAP Operating Expenses as our operating expenses, excluding the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration.3 GAAP Operating margin corresponds to Income from Operations as a percentage of Revenue.


We have significant drivers of operating leverage

Technology

innovation

Broader

supply

Upselling incremental

products and channels

Operating excellence

and productivity

Always-on spending Uncapped budgetsLevers driving additional spend

at limited incremental costs

Powered by a combination of


Technology Innovation

New Supply

Technology and new supply are powerful levers

Revenue ex-TAC uplift (%)

Conversion Optimization

+20% uplift

Dynamic Creative Optimization

+10% uplift

+8% upliftRevenue Optimization

+6% upliftRTB integration improvement

+36% uplift in Japan

+5% uplift globally

+10% uplift

Native

+3% uplift

Some significant examples over time…

Note: the uplift in Revenue ex-TAC from technology innovation corresponds to the increase in Revenue ex-TAC for Criteo on a representative sample of clients, where clients use the

corresponding new Engine feature on 50% of their user pool and do not use the corresponding new Engine feature on the other 50% of their user pool, pursuant to a proven 50/50 A/B

test methodology. The uplift in Revenue ex-TAC from new sources of inventory supply and new channels corresponds to the increase in Revenue ex-TAC for Criteo on a representative

sample of clients, comparing the Revenue ex-TAC generated from those clients before and after the introduction of such new source of inventory supply or new channel.


200

350

500

Q2 2013 Q2 2014 Q2 2015 Q2 2016

Germany

Our model improves productivity across markets

0

300

600

900

Q2 2013 Q2 2014 Q2 2015 Q2 2016

US

300

600

900

1200

Q2 2013 Q2 2014 Q2 2015 Q2 2016

Japan

150

250

350

Q2 2013 Q2 2014 Q2 2015 Q2 2016

UK

Tier 1 Revenue ex-TAC/Sales + Account Strategist Headcount (in K$)


We drive a culture of profitable growth and P&L accountability across our regions

Revenue

TAC

Revenue ex-TAC

Cost of Sales

Gross Profit

Direct Opex

(people, facilities, 3rd-party services, marketing, other)

Direct Operating Contribution

Indirect Opex (facilities, internal IT)

Allocated Regional S&O

Regional Operating Contribution

Chief Revenue Officer

Mollie Spilman

Americas EMEA APAC

Midmarket


Unit economics per client (in US$) – Last 12 months to Q2 2016

Midmarket economics are favorable

Tier 1 Midmarket

Revenue per client 229,000 64,000

Traffic Acquisition Costs per client 135,000 38,000

Revenue ex-TAC per client 94,000 26,000

Cost of sales per client 6,200 1,400

Direct opex per client 18,800 7,400

Direct operating contribution per client* 69,000 17,200

Direct operating contribution margin per client** 30% 27%

* Non-GAAP metric

** As % of revenue


0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0 1 2 3 4 5 6 7 8 9 10

Americas MMS Americas T1 EMEA MMS EMEA T1 APAC MMS APAC T1

Direct operating contribution by region (% of Revenue) – Last 12 months to Q2 2016

Midmarket profitability is fast approaching Tier 1 levels

Direct

operating

contribution

margin

Years after

market entry

APAC

Tier-1

Americas

Tier-1

EMEA

Tier-1EMEA

midmarket

Americas

midmarket

APAC

midmarket


We have further sources of leverage in G&A

•

•

60

•

Org & Processes

Systems


For Criteo’s core business

We are headed toward our long-term adjusted EBITDA margin target

* Cost of revenue and operating expenses are expressed on a Non-GAAP basis, which excludes the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration.** As a % of Revenue

As a % of Revenue ex-TAC FY 2013

Revenue ex-TAC 100%

Cost of Revenue* 7.9%

Gross margin 92.1%

R&D* 14.9%

S&O* 43.6%

G&A* 16.0%

Adj. EBITDA 17.5%

As a % of Revenue 7.1%

Revenue ex-TAC margin** 40.3%

FY 2014

100%

6.6%

93.4%

12.5%

39.9%

14.8%

26.2%

10.7%

40.8%

FY 2015

100%

6.1%

93.9%

13.4%

39.8%

13.8%

26.9%

10.8%

40.4%

Long-term

operating model

100%

6% - 8%

92% - 94%

13% - 15%

29% - 31%

8% - 10%

37.5% - 42.5%

15% - 17%

40%

LTM to

Q2 2016

100%

6.3%

93.7%

14.4%

37.3%

13.8%

28.3%

11.4%

40.5%


Our profitability and direct relationships drive sound working capital

We have robust operating cash flow generation

Days sales outstanding & days payable outstanding (in days)**Adjusted EBITDA ($M)

1519 20 18

26

41

32

24

34

5349

39

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Adj. EBITDA conversion into cash from operating activities (%)*

45

50

55

60

65

70

75

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

DSO DPO

0%

20%

40%

60%

80%

100%

120%

140%

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Average 91%

+

* On a Last Twelve Months basis ** DSO and DPO figures prior to 2016 are calculated based on Euro-denominated financials, in accordance with IFRS


-$20

$0

$20

$40

$60

$80

$100

$120

$140

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

Q1 2

013

Q2 2

013

Q3 2

013

Q4 2

013

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

Q2 2

015

Q3 2

015

Q4 2

015

Q1 2

016

Q2 2

016

Our robust operating cash flow generation enables continuous investment

INVESTDEVELOP & GROW

CASHSCALE

PROFITS

SMART

INVESTING

Cash flow from operating activities ($M)

Cumulated Free Cash Flow ($M)

+0

20

40

60

80

100

120

140

2013 2014 2015 LTM Q2 2016

$-

$10

$20

$30

$40

$50

$60

$70

$80

2013 2014 2015 LTM Q2 2016

Capital expenditures ($M)


Our financial structure offers significant flexibility

Strong

balance

sheet

Dec. 2015 June 2016

842

915

Total assets (in $M) Financial liabilities (in $M)

Very low

debt

Dec. 2015 June 2016

910

Cash & cash equivalents (in $M)

Significant

cash pile

Dec. 2015 June 2016

377354

>40%

of assets

$380Mcash

As of June 30, 2016

€250M committed financing

$750M equity raise capacity*

Share buy-back authorization**

* Based on a $3bn+ market capitalization, pursuant to the 2016 AGM authorization to issue up to 15,6m shares ** Only for M&A


•

–

–

–

•

•

CapEx

M&A

Our capital allocation is both dynamic and disciplined

Focused on CapEx and M&A


We have an active yet disciplined M&A process

* July 2013-June 2016 period - Data excludes repeat engagements with the same companies

Almost 500 distinct companies screened*

Diligence

Deeper Dive

Engaged

427

91

27

5

Acquisitions in Criteo’s history

Systematic and

focused

approach

Structured

Strategy

& M&A team

Cross-functional

integration

team


Track record of acquiring complementary assets

Our use of cash supports our strategic ambitions

Clear rationale:

Accelerate the execution of our

“World’s Performance Marketing Platform” vision


We are driving Criteo forward in the best interests of our shareholders

We manage the

company for growth

while investing in the

business

We are heading

towards our 40%

long-term Adjusted

EBITDA margin target

We allocate capital

dynamically and with

the right level of

discipline

We offer a unique

combination of

superior growth,

expanding profitability

and cash

Our financial profile

supports our “World’s

Performance

Marketing Platform”

vision

The World’s

Performance

Marketing Platform

Appendices


Revenue ex-TAC reconciliation

($ in thousands) Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 2012 2013 2014 2015LTM

Q2’16

Revenue 208,881 226,633 258,245 294,489 294,172 299,306 332,674 397,018 401,253 407,201 349,209 589,418 988,249 1,323,169 1,538,146

Less: Traffic acquisition

costs122,967 134,751 155,237 172,538 175,888 177,239 198,970 237,056 238,755 240,969 202,581 351,759 585,492 789,152 915,750

Revenue ex-TAC 85,914 91,882 103,008 121,951 118,284 122,067 133,704 159,962 162,498 166,232 146,628 237,659 402,757 534,017 622,396


Adjusted EBITDA reconciliation

($ in thousands) Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 2012 2013 2014 2015LTM

Q2’16

Net income (loss) 5,233 3,330 15,439 22,893 13,617 3,929 5,793 38,938 18,527 13,339 1,066 1,839 46,896 62,276 76,597

Adjustments:

Financial (income) expense (1,103) (1,312) (7,502) (1,473) (3,920) 2,546 6,650 (735) 1,317 94 2,002 9,117 (11,390) 4,541 7,326

Provision for income taxes 4,390 4,865 4,205 4,118 7,143 1,365 5,388 (4,378) 7,944 4,450 8,422 3,203 17,578 9,517 13,404

Equity awards share

compensation expense4,458 3,247 5,754 6,142 6,317 5,325 4,600 7,748 8,370 7,695 4,569 9,130 19,601 23,989 28,413

Pension service costs 149 100 125 129 112 110 110 109 129 131 141 384 504 441 479

Depreciation and

amortization expense6,173 7,783 8,256 9,001 8,428 10,278 11,892 13,967 12,516 13,300 6,125 14,763 31,213 44,564 51,675

Acquisition-related costs - - - - - - - - - 148 - - - - 148

Acquisition-related deferred

price consideration563 148 128 110 109 115 54 (2,172) 40 44 - 3,137 950 (1,894) (2,034)

Total net adjustments 14,630 14,831 10,966 18,027 18,189 19,739 28,694 14,539 30,316 25,862 21,259 39,734 58,456 81,158 99,411

Adjusted EBITDA 19,863 18,161 26,405 40,920 31,806 23,668 34,487 53,477 48,843 39,201 22,326 41,573 105,352 143,434 176,008


Non-GAAP operating expenses reconciliation

($ in thousands) 2012 2013 2014 2015 LTM Q2’16

GAAP operating expenses -118,873 -194,350 -301,725 -395,482 -451,461

Adjustments:

Equity awards share compensation expense 4,569 9,130 19,601 23,989 28,413

Pension service costs 141 384 504 441 479

Depreciation and amortization

expense1,439 4,346 9,758 14,698 17,153

Acquisition-related costs - - - - 148

Acquisition-related deferred price consideration - 3,137 950 (1,894) (1,755)

Total net adjustments 6,149 16,997 30,813 37,234 44,438

Non-GAAP operating expenses -112,724 -177,353 -270,912 -358,248 -407,023

Benoit Fouilland, CFO - Criteocriteo.investorroom.com/download/2016+Investor+Day...FY 2012 FY 2013...

Documents

Transcript of Benoit Fouilland, CFO - Criteocriteo.investorroom.com/download/2016+Investor+Day...FY 2012 FY 2013...