Q3 2019 Earnings Call
Good morning, and welcome to that Criteo third quarter 2019 earnings call.
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Let's turn the conference over to add hard Lasalle VP of IR. Please go ahead.
Thanks, Nicole good morning, everyone and welcome to create third quarter 2019, earning school.
With us today, our co founder and CEO , JB Rudelle and see if opening more freedom.
During the call management will make forward looking statements.
These main could projected financial results for operating metrics business strategies.
You bet, a future products and services appears you better investment and expansion plans.
Did you put in market demand opportunities and all other forward looking statements.
As always such statements are subject to various risks uncertainties assumptions.
Actual results and the timing of student events may differ materially from the results what 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.
Today, we'll also discuss non-GAAP measures of our performance definition of such metrics and the reconciliation to the most directly comparable GAAP financial measures, we're providing the earnings release, but at least earlier today, which is available on our website.
Finally, unless otherwise stated all growth comparisons made into of course older coal are against the same period in the prior year.
With that I'll now turn the call over to JB.
Thank you Ed and good morning, everyone.
On today's call I was just got three main topics first Q3 operating performance second our priorities and business outlook and third I knew governance, where the arrival of Megan.
Before it starts I wouldn't say a few words about today's announcement outside of earnings.
As you may have feeney I separate release.
I have decided with the sports support about board of directors to bring in new Chief Executive Officer.
I will remain chairman of the board what day to day operations will be into has all the new CEO .
I always talk more about this transition at the add on my prepared remarks.
Starting now without Q3 results.
We continue to make progress you know parenting priorities and transformation.
We achieved the top and I'll buy guidance on revenue ex Tac and exceeded our adjusted EBITDA target.
Our performance was particularly strong in the mid market.
Well, we saw solid momentum and accelerating growth into double digits.
And one of the Q3 highlights.
Our quarterly net client additions were again positive with 214 net new client inline with expectations.
Asking there for Europe . Walter this was again driven by focusing diffusion and productivity improvements you're not midmarket sales team.
One of them with exciting results for Q3, if the momentum although new solutions.
Which as a reminder include all that solution outside of our target.
There you, 57% on originate stack babies and now accounted for 11% about total business up from 7% a year ago.
Although the POF your identity graph I also grow both inside went over 2 billion Uni, Chris you idea.
Adding density over 95% of accrete to a years not contain a long term persistent identifiers rather than just by the cookies.
Furthermore, in Q3, we announced a new partnership we live ramp on I'd hate to de link.
By combining lybrand side entity solution with ours, we offer marketers additional capabilities to originate customers in their privacy by design manner.
We believe this and hence I didn't see solution, it's quite unique in the industry and very competitive compressed to walk out in sport proprietary approach.
They have come in Asia, and also broadens our reach by providing access to additional cookie less inventory, including connected TV.
[noise] among the key benefits of odd dance identity graph it the ability to offer a new marketing scenarios to lock clients.
From this perspective, I'm, particularly pleased with the early traction of our web consideration products that we launched in two or three.
Rather than our usual cost per click model, we decided to price this upper funnel products on a cost per impression Oh CPM basis.
Right older revenue contribution was still modest we already had 400 live accounts using wiped consideration and received very encouraging time feedback on it performance.
Also we then new solutions retail media further accelerate in Q3 growing 25% on our revenue ex Tac base and performing well across all three regions.
This business, which was designed to be lalji immune against third party kooky restrictions.
It's all enjoying very good market traction.
As discussed on previous earnings calls our retail media business. It's also increasingly marketed with a transactional fast model.
This model applies to both our spread so products and I promise display products.
Enabling more control that transparency for clients turns out to be very popular amount large retailers.
As a result, it has continued to grow very quickly in our retail media revenue mix.
There's good momentum around forces that conviction that offering clients the ability to consume I said as a programmatic platform.
Allows us to build stronger and most strategic relationship with them well this topic later.
On the supply side.
We continue to expand our direct publisher network over 4200 publisher is now connect to our direct better both on the web and not being venturing.
Including the recent additions such on T. online and at least half times.
Working directly with a notch number of high quality publishers.
Allows for more reach while eliminating the middle man tax on AD exchanges.
Regarding our legacy rocket targeting business.
We saw a decline in the middle single digit range on a revenue ex Tac basis.
The softness was mainly concentrated in the largest customer segments and is driven by two main factors.
First the much higher penetration whoever each year compared to market and second that delayed investment in mobile app marketing that doesn't fully compensate the slow erosion of Rob rather use that yet.
Moving now to outlook and probably keys, but a future.
We expect the softness we saw in large accounts in Q3 to continue in Q4 in particular in a business.
Which is highly concentrated around a large accounts.
Given the importance contribution of a large clients through the holiday season were taking a more moderate approach to our Q4 revenue outlook.
Despite this momentary topline.
We expect to see a year over year improvements in our profitability margin in Q4.
This illustrates that even if our transformation does not generate topline growth yet it is already showing early signs of positive feedback on our bottom line.
Looking beyond just Q4, one of my key priorities is to make our revenue model more resilient.
This will involve role during our value proposition beyond pure return on that span.
As discussed about retail media.
We're seeing some of my most sophisticated retailers seek more control over the AD Tech stack.
Sometimes this appetite for control become even more important that campaign performance itself.
We are seeing an opportunity to poor keeping embraced this new trend and engage most strategically we though is large clients.
This might be mold adapting our pricing although from traditional cost per click.
To a transactional SAS small though.
A fraction of a high end marketing solution clients.
Quite similar to what we already started doing successfully with retail media.
We believe that having a transactional five offering dedicated to specific client needs will allow us to capture a bigger share of the market opportunity.
It will also make us more resilience in a world where access to cookies have been made more difficult.
Looking back over the past 18 month, we have made important progress around four key dimensions.
First we have great. He broaden our product portfolio from what was almost just retargeting to set a new solutions those new solutions as steel about LTV early in the development that as we've seen already generating substantial growth.
Second.
We'll go both from what was perceived as a narrow point solution to an actual tech platform. We made huge efforts integrating our managed services into said salvage tours that can be operated direct t. by our clients large and small and agencies.
Third.
Thanks to a bigger more diversified identity graph and a growing number of products that that cookie less by design.
We have significantly reduced I dependency on third party cookies.
And fourth.
To steer our ambitious transformation, we have appointed a whole new generation of highly talented and passionate executives.
Despite the significant headwinds we faced during those 18 month. It is worth noting that if we were able to implement these key changes, while maintaining a healthy financial profile as evidenced by a strong balance sheet and cash flow.
Now with a clear direction set for critical it this time to move to the next stage about transformation.
This phase we come with more changes to their way with her right and we were quite tight execution.
I believe that adding someone who has already led teams through similar types of transformation programs.
We didn't maximize our success.
This is why we own a very excited about making joining us as our new CEO .
For my multiple conversations with her I think make out it's a fantastic leader with a REIT scales for the job.
She combines very strong industry expertise and a global profile with a proven track record in driving complex transformations.
In addition is a great opportunity for critical and all its employees.
As well as block clients and partners.
I am personally very happy to work with Megan on the next phase of outs on somebody journey as.
As chairman I remain a public face off the company, especially in Europe Your public affairs.
And so ensure that the board fully support Mega <unk> and the executive team to maximize critical success.
Make ends appointment with the effective November 25th.
To ensure a smooth transition I would support her operationally until we report our fiscal year 2019 results.
As usual, we will then provide guidance for the coming year.
In closing I'd like to say that given our plan and achievements. So far I am very confident that accrete to is on the right five to succeed at the leading advertising platform for the open Internet.
With that I'll turn the call to burn off.
Thank you JB on good morning from my side.
Usual I will walk you through our quarterly performance on share I would guidance for Q fall on fiscal year 2019.
Revenue was flat at constant currency.
500 on $23 million.
Revenue ex Tac, our key metric to money. So it's a business was also flat constant currency.
$221 million.
New client business drove our performance, especially in the mid markets.
Offsetting limited decline in our existing client business.
Despite continued adoption of our new solution across the client base.
Using currency assumptions supporting our guidance revenue ex Tac reach over 200 on $23 million before it's $2.5 million negative FX impact.
Compared to Q3 2018.
The FX negative impact was approximately $3 million all malls are one point of girls.
Revenue ex Tac margin was essentially flat at 42 persons in line with our expectations.
We grew the number of clients, 4% year over year to 20 seldom on month end client retention I'd just below 90% for all solutions combined.
From an existing clients standpoint, same clients revenue decreased just a bit less on srivastava constant currency.
Despite.
Option of our new product.
Driven by the slight decline in Retargeting in particular, we stopped customers.
As a result same client revenue ex Tac decreased 4% at constant currency.
Turning to the regional performance in the Americas revenue ex Tac gross was slightly positive at constant currency.
Improving from the prior quarter.
Including not able to improvements in the U.S. growing plus 3%.
This was driven by continued traction.
Of our new solution, including retail media all the mall recovery in the Midmarket business offset by softness we lost clients.
Year to year revenue ex Tac grew 1% a constant currency.
This was also driven by double digit growth in mid market on continued strong traction of our new solution is a region, including retarded media.
Offset by a softer business was lost customer in particular in the UK.
Only in a buck revenue ex Tac declined 2% that constant currency similar to the prior quarter.
But typhoon urging our thoughts given that that's center cost us approximately zero dot 5 million in lost opportunity.
Which combined with slower business with lost clients in Japan, Australia, offset continued strong momentum with large customers in Korea on solid growth in mid market across the region.
Excluding the impact of our Japanese data center outage, our gross was close to flat in a buck.
Shifting to expensive.
All the cost of revenue decreased 6%.
Driven by the challenging our celgar amortization period.
Savings in power consumption on the not where data centers on lower expenses for self up to date.
Offset by the provision for the French digital tax on revenue.
On the no GAAP basis.
Oh, the cost of revenues increased 16%.
GAAP operation operating expenses declined 3% year over year, driven by our disciplined expense management on lower equity awards compensation expense due to the lower stock price over the period.
It goes related expenses represented 74% of GAAP opex.
A boat to won't read on 60 basis points.
We ended the quarter with 2800 employees, but an increase of 2% view over your but the treatments unsecured sequential decline.
On a non-GAAP basis Opex were flat, that's one I've read on $38 million Dol about $12 million compared to the prior quarter.
Looking at these by function.
R&D decreased 1.1%.
Partly driven by an increase in our research tax credit on despite a one person roles in Ed Cold to 680 R&D on product engineers.
Says on operation decreased 2%.
Despite the 2% increasing that comment too.
1600 on 20.
Sales on the construct digits.
Also called quota carrying employees, 1% to 700 on certainty.
Our DNA increased 9% driven by a 2% increasing headcount to 500 or probably after Intel no transfers from other functions.
As well as one time consulting fees, including for tax advisory on HR related so pharmacy providers.
As indicated last quarter, we continue to effectively manage your cost base only expects non-GAAP expenses for 2019 to grow slower across all function compared to our original plans.
On the preferred profitability site adjusted EBITDA was over $64 million all 5% of both the high end of our guidance at comparable ethics.
On three Pissarro below Q3 2018 at constant currency.
This drove our adjusted EBITDA margin to slightly over 29% or from a new xtag, though only 80 basis points at constant currency.
Depreciation and amortization expenses decreased 13% driven by the chance is a useful life of our sell those from three to five years, representing approximately 10 million in Q3.
Equity deal what compensation expense decreased 32%.
Due to the lower stock price over the period.
So to a low to a lower extend to equity forfeitures.
Financial expense decreased 11% due to higher income from Kashi quick cash equivalent on lower interest charges on that more than offsetting the impact of flooring Forex changes on our hedging positions.
On our effective tax rate.
Was 28% inline with our 30% project the tax rate for 2000 and my team.
In Q3, Q3 2018, the effective tax rate was 27%.
Translating into a 16% increasing the provision for income taxes.
Net income increased 15% to $21 million driven by a 14% increasing income from operation on lower financial expenses.
Despite the slightly higher tax expense.
On earnings per diluted share increased 14% to 28 cents.
Cash from operation decreased 14% to $43 million.
Driven by a lower adjusted EBITDA on negative changes in working capital of as a period.
Partly offset by lower tax paid income tax paid.
Our transformation of adjusted EBITDA into operating cash flow remained strong at 67% in Q3 on 86% for the first nine months of the year.
Capex decreased 19%, 19% to $24 million, representing only 4.6% off revenue.
Lets were essentially flat on a year on year basis up.
On a year to date basis at 5% off revenue.
As a result free cash flow only decreased 6% to $19 million, reaching 30% of adjusted EBITDA in Q3 on 44% for the first nine months of the year.
On cash on cash equivalents increased $45 million into first nine months to $409 million.
With respect to cash due to capital allocation, we started executing our new 80 million buyback program in early August in the quarter, we purchased approximately.
900 on 15000 shares for a total cash amount of both $18 million at an average price of 19 point $24 per share.
We have not come so any repurchase shares at this point, but may consider doing so in the future.
We intend to continue executing our buyback program over the next few quarters, including in Q4.
I will now provide our guidance for the fourth quarter on fiscal Europe to sell them a 19.
As usual the following forward looking statements reflect our expectation as of today October certainties and sell them on 19.
Our next day by JV, we are taking a more moderate approach to our Q4 revenue ex Tac outlook to reflect the softer trends in our business with large customers.
As a result, we expect revenue ex Tac.
Thank you for to be between 200 on $55 million on 200 on $61 million.
Using the currency assumptions used in our Q3 guidance. This means between approximately $261 million on $267 million.
So Q4 guidance implies constant currency growth of approximately minus five to minus 3%.
We expect year over year.
Forex changes to Niggardly negatively impact reported numbers by both $3 million all 100 on 20 basis points of girls.
With these more moderate outlook for Q4, we know expects to land as the bottom end of our revenue ex Tac guidance for fiscal year 2019.
As communicated on July cities through July 32019.
This means we now expect approximately flat revenue ex Tac growth at constant currency for the full year 2019.
Using our Toronto for Rice assumption. This means revenue ex stock offer bolt 900 on $42 million.
Based on FX assumption views for the Q3 guidance. This means approximately 940.
$9 million.
Compared to 2018 following changes are expected to negatively impact reported numbers by both $24 million all 200 on 50 basis points of gross.
Now on the profitability side, we expect Q4 2019, adjusted EBITDA between $99 million on 100 on $5 million.
That's a midpoint. This means an adjusted EBITDA margin of 39.5% driving a 100 basis points improvement in our margin in Q4 compare to prior year.
This margin improvement demonstrates both the strengths of our financial model all the early positive impacts our company transformation is having on our bottom line.
On for 2019, we maintain our expectation of an adjusted EBITDA margin of approximately 30% of revenue ex Tac.
Most rating once ball our commitment to profitability.
As indicated in the past we are committed to proactively manage our cost base in order to generate FC profitability on free cash flow in 2019 on Beall.
As usual the FX assumptions supporting our guidance for the quarter on the fiscal year. All included in our earnings release.
In closing we feel good about our strategic direction on remain focused on accelerating our transformation.
In doing so we are committed to making our business more resilient on driving efficiency across the tire company.
With that we'll now take your questions.
Thank you.
You asked a question. Please press Star then Brian if you are using his speakerphone. Please pick up your handset buffer pressing the keys.
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First question comes from Matt for Ken.
Trust. Please go ahead.
Hey, good morning, and thanks for taking the question guys. A a couple of quick ones, if I could and I apologize if I missed it I know you've talked a little bit about the retail media growth just whatever we can get an update on the web upper funnel products growth as well as the app.
Install growth secondly, self serve just wondering if you can give us a little more color on just how that platform is ramping and how some of the demand generation programs are ramping there in parallel.
And then just just finally here just wondering if there's any impact that you would call out from Google transition to the to the first price auction dynamic there any color there would be helpful. Thanks, guys.
Thank you Okay I've tried to take this in older. There's lot of question here.
So first you mentioned the web upper funnel. This is what I'm, referring in my script as web consideration.
So as I mentioned this.
This is tailored to the early because we launch formally offer in Q3 and the early results are very encouraging.
Actually we don't know significantly better than our own internal targets on this we have now 400, Clive and more importance and most of them I'm very happy with where the performance and we start to CEO .
Very significant.
[noise] orders coming in and coming in and sometimes those orders are bigger than then.
The lower final the Retargeting. So it's it's really exciting because there's something order. We always monitoring closely is wet the show voice of the new products compared to.
When it gets you retargeting and we've seen a recent here for instance, midmarket clients in Retargeting.
They did worse.
Asking us.
In a inception older or that was more like a large accounts a one for reconciliation. So this is Rick overall very encouraging.
And you mentioned also app install so on this product is still of OLED TV. Early we are as you know transitioning the on demand ash platform to the critical stack and this is an ongoing process. So right now we are we're still in the into building phase.
And haven't fully scaled this liberty.
But we still learning from this Monash acquisition to make sure we had the right product for the market.
That sounds lease is also progressing.
As we mentioned last time, we are testing a new set.
Set for just straight in platform a across three test markets. The U.S., Australia in the UK and are we going to get a lot of insights in during the holiday seasons and this is going to give us a lot of good knowledge and expertise for a full rollout to the next year.
Last thing is Google first price. So this is important goal was to loss large exchange to a.
Flushes his speech to move from second price to first price.
And we were very well equipped for this foundation that occurs.
We've been developing first price a bidding.
And Jane's far far long time, now and as a results there overall impact was slightly positive for us.
Because as we believe our first prize bidder is.
Oh things equals I wanted to be speaking.
Better than competition, we could take advantage.
Oh this change of Google diverse price to increase our bidding a competitiveness so even as we know it's meaningful positive change for us.
Our next question comes from avoid Walmsley Deutsche Bank. Please go ahead.
Hi, Thanks, two questions by Ken first presumably mobile App marketing is growing faster than than wherever desktop. So is it right to think you're losing share here from these large clients and can you just elaborate on why you think that is it.
Performance related is it.
Just intense competition and he can give there would be helpful. And then secondly, if you can elaborate a bit on the identifier partnership like France.
Called out getting access to video inventory so just wondering.
How do you feel about your positioning to go after that more aggressively in kind of what is the go to market and.
To take advantage of that thanks.
Sure and so mobile marketing you know if you look at the end the harder it's a it's a growing market.
But if you look most specific T onto the written SEC to the retained.
Oh segments.
It's a more mixed picture and we have a very good to view on this a retail segments, obviously, because we have.
Close to 20000 clients into sorry also this is this is a submarket, we know very well and medically you have three buckets of guides you have what I would call. The early adopters, who aggressively developing mobile app and those retailers and.
Kelly, leading the Bakken Tim of growth and momentum.
And with those ones we do.
Very good to mobile app business with them.
And they are represents I would say the lions share of our top business.
Then you have a second buckets, which.
They do have enough, but clearly the up isn't that grades and the know about that because it takes a lot of efforts in investment whether RIDEA.
A best in class App experience.
The same way than you had lab you have to Android iOS, it's a lot of.
A different tax.
And those guys are less king to span INAP and marketing budgets at the same level the spending web because they know that they actually I've experienced needs to get improved working on that but you can see that there is a.
Again have a delay between.
Where did we not been what they've been doing web and knew you episode category and that's.
Especially among mid market clients most of them. They just don't have an app first up and they know that swept they were hoping for a long time that did not need an app.
We are showing them with cutbank compelling case studies that.
It's not something they can afford to in the long run they will have to do have an up one way or another.
But that Dean clearly delaying this investment xenapp because.
It's a much bigger effort for them relatively speaking than the bigger guys. So for this room for those mid market segments.
Medicaid, we doing only work with them and it's going to take awhile before they've looked a an up so all in all our kind base is not.
Migrating at the same speed and when you see the lines investments in the Mobotap industry as a whole you have a lot of gaming messaging.
Things like food delivery.
But not as much in a in retail.
Retail travel and classified.
Which are the our core verticals.
So we're getting a partnership with a with we'd like ramp it's you know its.
One of those the exciting cases, where one plus one includes more than two.
And I think it's highly beneficial for.
So both of US they do a has the capability to expand identity in a number of cookie less.
Inventories, including connected TV, a which is.
It's still a small business connected TV batted so it's a fast growing promising one where the world gallons have.
The lower position and we've been doing a few to ask the there.
You know in partnership where it will not romp and.
These are very encouraging. So this is very early so you know I don't want to.
Yes to get overly excited about that because this is just we just us at testing phase that it's an interesting addition out opportunity for us.
In the into mid term.
So just to follow up on the mobile App. So clearly sounds like that the clients that you have to have kind of a week from mobile app themselves aren't spending to drive traffic to their own asked but if you think about your performance buying inventory within driving traffic to web is that.
Holding up well do you feel good about your performance, there and tentative growth in that side.
Yes, so they see this piece is going very well.
Actually this is.
Very aware overall, our media buying is growing the most we discuss our drill to direct better with his ability to buy inventory directly from publishers.
And for long time, this was booked use on the web inventory.
And in the past few quarters, we've been.
Focusing more and more in a enough inventory and this is where we see most of the increase of our about media buy.
Okay. Thank you.
Our next question comes from Mark Kelley of Nomura. Please go ahead.
Great. Good morning, Thank you guys.
Can you talk a little bit more about the softness what's your large customers any verticals or geography is that.
We're most impacted and I want to go back to the my second question is I want to go back to the CTV comment you made about.
The walled gardens have a diminished position there.
Thank you to TV.
Because those funds from emphasis there I'm curious your thoughts on Roku do you see them, becoming a walled garden, especially after the.
The data do acquisition. Thank you.
Okay. So the softness on larger accounts a has been across all geos because the to try and I was describing regarding the shift of.
Of investment from went to up is something which is.
Kind of global happening everywhere. So that's some nuance there in different geos, depending on the majority of of mobile.
Some countries like like Corey are we are.
Today Super have any.
Into mobile apps that some other markets is Taylor, it's still early in this transition. So we again, we believe that this is.
This is not the long term issue, but more of relatively short term one.
It's just that there was a delay in this transition in terms of of in of integrating.
The timing budget from the web two up.
Again, mostly because.
The App expanse of a large number of our clients is not on thought with their web experience. So they are reluctant to put the same amount of money in hop.
Despite the fact that users are more and more spending time in operation right. It on the web so.
And we're not.
We are trying our best to convince our clients to to go there more aggressively.
Eventually is going to happen, but this is creating some.
Short term.
Headwinds.
Regarding a you know CTV, it's an early market. So you know, it's probably a little early to stay today.
What was it's pretty obvious way one that it's a very fragmented market today and it's a bit like the web I would say 15 years ago.
So eventually one day you might it might consolidate into a you know a handful of super strong will gallons.
But again.
You should look at what where was the web landscape 15 years ago.
You had nowhere gallons a tour you had a bunch of.
Of.
Publishers that all trying to better monetizing vetri.
And you mentioned roku and others. They all looking to increase the value of their inventory and.
Maximized opportunities.
To monetize their that entry and this is high quality inventory, where you don't have the Tbtu Ela Frode that you have on on.
On the web.
So this is quite promising right now it's a small it is it's a small pockets on compared to the to the websites. So again, we are testing the waters there.
But I mentioned that has.
As a mid term area of interest costs.
Thank you very much.
Our next question comes from Tom White of D.A. Davidson. Please go ahead.
Great. Thank you one clarifying question for JV and then one for been what.
You might come in the prepared remarks about seeing some large retailers kind of increasingly favor.
Roll over performance when it came to kind of their their AD Tech stack I was hoping you could just elaborate there and then on expense growth this year.
I think you guys said that non-GAAP .
Operating expenses are gonna grow slower across all functions relative to your prior prior plan. Just curious if you can kind of help us understand how much of that is just a function of the slower revenue growth versus your decision to.
You know maybe hold back from spend or are you finding just pockets of you know investment or expense, where you can be more efficient just trying to understand.
What's happening there thanks.
Thank you so I'll take the first one item will answer the second one.
So that's very interesting. This this whole control this.
Conversation were having its it's why TV, new without clients and again, it's mostly concentrated on that most sophisticated clients know for long time.
We we are take driven company and.
We.
Our big focus was let's let's do machine or take the decision instead of human beings because.
In there a lot of cases, whether machinists monitor and capable to do things that.
Human in front of the of the screen.
It's good that so we automated a lot of things and.
So the good the good impact is that we we've been able to they've looked like Super impressive performance and this has been how we've been growing very TV in the market by having a best in class performance for advertising products.
The flip side of that is that we have been seen as a black box, where everything was happening.
You can peaky automated fashion and without any control from the clients on weather can do.
And for most clients, it's okay because.
The one thing they look at its performance and own they don't really care, how how do I agree to works.
And the scene met for the most sophisticated one they want to have more control because they want to have the ability to influence the bidding tactics depending on specifics the consensus for instance, you know.
They want to have they have an excessive inventory in a specific type of product and they want to put high bids on those ones or that the special promotion a week, so that they want to be able to influence the bidding tactics in a more granular way.
So we have scheduled to open the platform and let them and do some control. So you know the their first reaction of engineers and you. All if you do this you're going to degrade the performance because the machine in the machine is always matter than human beings.
Well and sometime I kind of thing as you know we know that met we still want we'd rather have control. Even if you know if it's to the expense of.
After phones and I think it's important that we recognize that.
And sometimes.
Good this tradeoff of providing more control to our clients rather than the Maxemail maximum performance and again this doesn't concern us all other accounts. It's it's a small fraction, but it's also the most sophisticated ones and typically very large clients and I think it's a very interesting trend and opportunity for us.
To the real to the different type of relationship with them.
Where they will buy more tech then just airline.
Okay. So moving on your question regarding expenses very clear I mean, we've indicated.
Agenda, when when we reported that were first quarter results ensure that we would increase our focus on the on expense management on profitability on that's exactly what we don't so this is due to proactive management of our expense base. So the current spending trends that you see on that.
I mean I've as a result of dealing expenses as a result of proactive actions taken in our.
Our cost base, we've done some significant a reorganization of our go to market as well as.
Reorganization of the leaderships leadership level last quarter that you'd be night I talked to you, but we've also taking proactive action as reviewing our portfolio of real estate on reviewing efficiency Proto project across the company, let's start on it for that is behind US we are going to continuing that before too as I said in my prepared remarks.
Productivity continue to proactively manage to look for efficiency across the business.
On that would translate into lower single digit growth in in expense for the for the full year. We are we own. Following this trend as we speak which is much lower than what we are the initiative in mind when we started the year.
Okay. Thank you.
Our next question comes from Andy Hargrave.
Keybanc. Please go ahead.
Thanks, I just have a broad question sort of on re targeting and the slow erosion that person.
At one point.
Fairly hopeful we would get back to something close to double digit growth in the second half and it seems like that the gap is almost entirely the retargeting business.
And it doesn't seem like there's been any sort of new external impacts that we didnt know of so.
Just that people are moving away from.
Individualized targeting.
Yeah.
ROI is declining what is what's driving.
Yeah.
So.
You know overall, we had this.
As we as we said in our prepared remark we have this slogan.
Yes.
Small contraction into the Retargeting business, but you have since you're right given that the the size of this in our role makes its.
It has a big impact on our on on the overall picture, but when you look when step moved down there now it's a more.
It's a more mixed picture.
And there is there is.
The connection disconnection between.
In markets and large accounts not cats is growing very nicely.
You know.
Double digits in some in some geos.
The especially in Europe and in a Americas. So it's keep growing very nicely. The shows that there is nothing.
No.
That is overly.
Concerning about the Retargeting there is a specific softness within a large accounts.
And this is explain very simply like the fact, a once we discussed previously that most of the investments in large accounts is in.
In a well most most of the investment in mobile apps is an entre counts.
So as we didn't see the gross we were expecting in mobile mobile app.
This had.
Much bigger impact on outcome that on the market.
Okay.
Good day.
And the new product.
We're looking at them collectively the the comparison.
Getting a little bit more talk.
More difficult so should we expect the year over year growth.
To start slowing or is there enough momentum in those businesses.
The growth rates are consistent with where they happen.
Well.
Kelly today, there is there is a very high momentum.
We are talking very high double digit we mention a 57% for Q3.
So we're not providing you know as of today a guidance for the future of specifically on the on new product, but we expect this hyvido CTO to a two maintained for for quite sometime.
This is.
This is really only scratching the surface of all of those new products. They are addressing very deep in launch.
Markets that are significantly different from retargeting.
A significant number of those markets.
Immune to any.
Third party cookie restrictions and net by chance because it's also why we precisely.
Pick those new products, because they would balance the risk so those new products one face the.
Traditional headwinds we've seen in our.
Retarget in our legacy we're targeting business.
Thank you.
Our next question comes from Doug Anmuth.
JP Morgan. Please go ahead.
Great. Thanks.
You talked about moving from some the CDC do SAS based model just hoping can update us on your new progress here over what timeframe. You think this can take fleets and.
Conversations with advertisers on that front and then just secondly, just curious if you're seeing anything.
In terms of minus 13 or anything new.
So.
Thanks.
[noise] so yeah.
Again, I mean, the that Irrs, we want to.
To be able to address the.
The maximum potential scenarios, our clients and not all our clients are consuming advertising technology the same way.
And I'm.
The one fits all model that says the same for everyone is today restricting our ability to go after the full the full market though.
And so by diversifying our pricing models, we bring that each year to expand a market opportunity.
And also to deepen our relationship with some of existing clients that.
As we as we discussed earlier wont.
Total knee performance, but also control and transparency.
And they wants and the us to be much more as a country partners than just a point solution, providing the best return on our expense.
So this is a general trend.
And that has a lot of positive.
Momentum for us it creates a more sticky relationship on the long term. It's allowed US also to open in conversation with a whole new lots of of clients.
So it's an exciting move it's what I'd.
Early.
Bet with all the experience we gain in retail media because we've been doing this in retail media now for.
Quite sometimes now and in a very successful way, we're getting this experience to expand this now to a fraction of our marketing solution business.
Regarding a a U.S. thirteena.
So far I mean, we again we.
When we provide guidance. We always include any any headwinds we can have from.
From Nike or other.
Other key restriction things.
No I think it's no secret that apparel puts some restriction on the ability to access cookies in a into safari browser.
There's been going on for two years as we might as we said, we make a big efforts to onto France wants to have identity graph relying on multiple.
[noise] data points.
Including a lot that not relating to cookies on one side and to a two a favor products that were not dependent on the on cookie into first place.
And by doing this is you know we mitigate.
In our outlook any future.
In back that we can have from third parties on.
This is something we learn from the past is we want to reduce our dependency on things, which are out of control like the pretty CEO of an apple or someone else on how they manage to access to keeping the browser.
Thank you Jamie.
Our next question comes from Dan Salmon of BMO capital markets. Please go ahead.
Okay.
Hi, Good morning, everyone. Good good afternoon, if your across the Atlantic.
I'd like to return the partnership with why ramp Rubicon project also announced an extended partnership with them recently.
And their CEO and they're really interesting op, Ed recently about talking about more of an error emerging in independent AD Tech of collaboration and open source.
Curious do you see that sort of era emerging whether that is certainly.
Everybody using identity link more whether that things like pre bid, which you're involved and I'd be curious you hear your thoughts on on collaboration amongst independent players and then second I'm sure also fairly interested in your new CEO .
You are you mentioned a little bit in your prepared remarks about Megan background.
Turning around and evolving media business at Nielsen MACI, certainly did but maybe a few other key characteristics you saw on her to have a replacing the CEO . Thanks.
I'm sure so.
Yes. There is this partnership I think you know when you look at the Big picture.
I'm one of the biggest trend happening in the market is the work out then.
Restricting the ability for advertisers to track they campaigns.
And manage their own.
They win identity behind our guidance and every.
Every quarter or you see new announcement for more gathering then tend to puts further restrictions, which is something which makes the whole ecosystem very uncomfortable because you know.
I think it's very important for order.
The Tiger to keep control on there on the Disney and be able to choose.
Whatever measurements and tracking system.
That they won't and not having this imposed by by X or y.
And so are recognizing this.
There is concern from advertisers I think independent players has a very important role to play so each of US are obviously a much smaller than the will gallons then when we act to create TV and joined forces will be coming through an Ebola.
And as you know you know.
Credo has.
Super large identity graph.
Leverage has a very good one also so combining a force there makes tons of science and make this independence.
John I Tivo.
Very unique and.
And attractive compared to the toward the work out then.
On solutions. So so we think there's going to have.
Very positive impact in a market and actually you know the tick back we got from advertisers were very encouraging and they all want this independent solution.
Two striving to market because the lasting they want is to have their hands tied to any of you know a handful of of proprietary a workout in solutions.
And which is a good segue to a the arrival of Megan.
As you know she's coming from from Nielsen and incentives to.
As an expert in a measurement very aware, we believe it's important for players like with you at work to have more partnership with measurement companies.
We feel it's very important for advertisers to have different measurements partners than the one executing the advertising deck. So there was no conflict of interest and that's also a win of the issue with will gather and is there are doing both things both measurements and the the media execution, which creates a conflict of interest. So we like the idea that's.
And and I think my guess is going to there's going to help us in this.
In building the right partnership with a measurement ecosystem and I think there's going to be a super you screwed on on top of just as you mentioned she she has a lot of experiencing transformation and we are we I know you're not transformation journey I could do so.
I think she's going to be a very valuable addition to the executive team.
Tomasz his transition.
Great. Thank you well. Thanks. Thank you JV. This now concludes our coal for today, the our team will be available for any follow up.
I'd like to thank everyone for attending and wish you all good end of your day. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.