Q1 2020 Earnings Call

Good morning. Welcome to Pio first quarter 2020 earnings car. All participants will be in listen-only mode should you need assistance, please press the star key followed by zero after the prepared remarks. They'll be an opportunity to ask questions to ask a question, please press * then 1 to withdraw your question, please press * then two months. Please note. This event is being recorded. I would now like to turn the conference over to as well as president of head of investor and analyst relations office, please go ahead good morning everyone and welcome to Kudos q1 2020 earnings called. We hope you all set for the healthy wherever you are, but that's today. I see you can talk to him and see if we've been what will you please note that because of locked on restrictions will joining this call from different locations today and as a result, they face and wanted technical changes.

Yeah, good Christians think so in terms of these things marketers have new problems. And and so you know, it's it's it's just about it sort of discretionary. Um, let's dabble in some new toys. It's more about how do I get the what what do I need? What tools do I need the platform? So I need to get the right message out to the right person the right time and particularly given this environment. How can I do that most effectively and so at least all is a perfect example of that. We're by you know, there's there's a channel for brand owners for advertisers to get to Consumers and it's on the phone right in front of people who are spending more time on the phone with ahead. And so it makes a ton of sense for them to move towards things that are going to help them with their business rather than just be something that they experiment.

And of course if I called my husband will make certain forward-looking statement these forward-looking statements reflect critical judgment and Analysis only adopted a an actual results May differ materially from current expectations based on a number of factors affecting importantly at this time, the global covid-19 pandemic is having a significant impact on the global economy on the business of our clients home as well as on previous business and they further impact previous Financial condition results of operations and cash loads, there are significant uncertainties about the duration and extent of the pandemic impact the dynamic nature of the circumstances means that what it said on this call today could materially change it in for more information. Please refer to the risk factors discussed in our earnings release as well as a most recent 10-K filed with the SEC. We do not undertake any obligation to update any forward-looking statements discussed today except as required by law in addition during this call will also discuss Not Dead.

So that's the sort of training.

Seen in terms of Athens tool and I think the same applies to retail media as well as to how do I how do I utilize a network to be able to to create a shopping environment? And that's just as a response to a need and so, you know, we're we're proud that we can service those needs and will continue to talk to clients and look at the marketplace for new opportunities with us on the news and side. Well, look, I love this one Nielsen, you know our current provider birthday party independent measurement provider.

Makers about performance. The conditions are such metrics and the reconciliations to the most directly comparable gaap. Financial measures are included in the earnings release published on our website earlier today, unless otherwise stated all growth comparisons made during this for or against the same period in the prior Europe with that. It's my pleasure to know introduced and handed over to Megan.

Thank you and good morning everybody. It's a pleasure to be with you all for our second call together. I'm joining you from the safety of my home in Upstate New York, and I hope everyone thanks-thanks-thanks as well. When I called today, I'll cover for key topics firstly how we're adapting to the circumstances of the covid-19 outbreak seconds current assumptions of the business implications of covid-19 for the rest of 20/23 our progress on our for strategic pillars, which I outlined in our last call with the latest developments on our online identification plans and particular around Chrome and fifth of strategic and operational priorities for the rest of the Year. By saying that in my first full quarter as CEO, I've been confronted with a very different set of challenges from the ones that I expected when I joined still off.

It's important for us to make sure that our clients have transparency into what it is that we provide them Beyond performance, but also that they know that they got to the right person and that's what Nielsen does is just layer on an extra piece of you know, third-party validation that they're the work that we've done has shown that they got what they paid for put it that way and both in terms of uh, add ratings add ratings is a powerful one because it's able to measure of a advertisers reach if you like across platforms, it's able to compare what we do for them and a digital environment to their campaigns as they run across TV. That's incredibly powerful thing and also and digital brand effect that shows what the uptick of the brand the brand Equity birth.

We tackle the challenges as they come under.

Re proud about teams agility. I'd like to thank each and every criteo for their outstanding contribution throughout the early stages of the crisis and to the state as I indicated during last earnings call. I'm a firm believer in transparent communication and an open dialogue with all stakeholders. It's there for my intention to be as clear and helpful as possible today and providing visibility you need on our business during these unusually fluid and challenging times.

Equity well, so do I remember the brand does it change my decision set to purchase Etc to these sorts of metrics that we don't necessarily provide but we think of fundamental are add-ons to wage four months. Did it actually sell a product. So, you know, I I love this one clearly for obvious reasons and I do hope that and feel good about a deeper and wider relationship with me or something.

Makes sense. Thanks a lot.

To Mai V points early and quickly to the circumstances of the code. Break the safety of our employees has been our immediate and number one priority took all their offices around the globe before local authorities requirements. Our policy is Safety First always at the same time. We focused on business continuity to ensure all the operations and R&D functions remained 100% up and running and our associate our Associates have all the resources. They needed we quickly put in place with a plan in place for supporting our clients securing our data centers and maintaining our internal processes and pleased to say that today we're operating very smoothly. Thanks to take Communications and seamless alignment within and across teams.

Our next question is from Andrew Boone from J & T security. Go ahead.

Hi, thanks for taking the question on mid-market a new clients or there any Trends to the client ads that you're seeing is this brick-and-mortar companies finally coming online or is it off business formation? And then how sustainable is that as you think about these Trends in a 20-second leon Publishers or does does covid-19

I'll take a unless you.

Unless you want to take the first one been where I can I can do that. Yeah, go ahead. Go ahead. Okay. So so your question I think was about the trends that we're seeing in a new clients around mid-market. The I think I think you're right. There is a real push towards e-commerce. And as I said before the the there are mid-market clients are heavy retail and they are heavier wage is what we're seeing I think is a reaction to to the environment that we find ourselves in at the moment is that you know, there is brick-and-mortar is struggling wage and and so brick-and-mortar is needs to move into e-commerce and needs to move and fast. And so when you we see clients coming from that side, not not just large clients off.

We're also supporting our clients more than ever during these times. For example, we're providing covid-19 weekly updates about shopping Trends across categories and regions resisting club. I'm trying to identify any Revenue opportunities and helping them to adjust their messages in line with the new paradigm. They're working with them to leverage the significant rise and online users to catch the audience's and build Customer Loyalty for their businesses. We launched several social contribution campaigns to help all those on the front lines or assisting people around the world example technology enables the a PHP foundation and Paris to raise funds in order to improve the working conditions of Medical Teams and fund research on covid-19 treatment rules are running pro bono campaigns for the Ad Council non-profit organization promoting The Works of various non-profit ngos and US government agencies dead.

mostly mid-market clients that I should

That you can mostly mid-market clients, but also more and more mid-market clients who realize that you know, brick-and-mortar than unhelpful to them right now and that they have to increase the eCommerce profile job and because of that we're seeing an increase in in mid-market clients coming to us for performance-based advertising. So look, I think it's I think it's not just the sign of these time and where we are right now, but it is a sign of the new bill going forward Because unless you think that will come out of this and everyone will get back to the way they were before then I got to think that e-commerce presence will will sustain pastors. And so we we feel good about the move of mid-market clients out to to to office in terms of driving targeted direct response advertising.

Internally, we also immediately applied Financial rigor and took incremental measures to control our cost base. I'll talk to that great a detail in a few minutes. We intend to continue to manage our business in this way during this time people and safety operations and clients cost control and social responsibility. Let's get me to my second topic as early as April one. We communicated our updated q1 guidance to the market and exceeded our initial adjusted ebitda Target Benoit. We'll talk more about this in a few minutes. So for now, let me talk about the potential implications of covid-19 for Q2 and the rest of 2023 most acknowledging that there are so many moving pieces and we continue to learn more everyday. I want to establish that our current forecasting framework is based on the best job.

Your second question. I apologize. Can you just it was to do with crime but what was the first part of that because I'd get it right as I think about Publishers and cpm's down broadly across advertising or are you finding that Publishers are leaning into a more direct direct relationship with criteo and that's helping on move away from kind of third-party cookies to a first-party access.

We have have us.

I'm have also have as of today April 29th. You started feeling the covid-19 impact from mid February on different phone calls have been impacted differently traditionally. Our business makes is about 70% retail 10% travel 10% classified and the remaining 10% a collection of verticals including auto finance and gaming in q1 spins and the travel vertical decreased by around 95% compared to pre covid-19 levels while spending classifieds decreased by 40% or more.

We are seeing more publishes coming on board which is which is always very healthy our network of relationships between publishes and the buy-side and sell-side is getting stronger. I I would like to think that if there is a relationship between bats and chrome it's one where publishes understand that they need to have a direct relationship or more of a direct Trust of relationship with humor. So with their audiences that they do need to also have that to be able to have that link between them and advertisers.

Retail by far our biggest vertical has held up. Well with spins reductions in our core Solutions limited to about 10% the impact also affected by client segments as mid-market client sustain their spending more resilient ways and large claims. We saw a healthy 5% increase in our mid-market client base wage. We also saw different developments and our various geographies related to factors like the time of the outbreak the restrictions on social life and the industry mix month and finally pure online clients have seen less impact than those with a more traditional brick-and-mortar model challenged by the temporary closures of their stores these indicators along with the other factors along with other factors have helped shape our modeling for the remainder of the year.

And then they see that we provide a backbone spine. If you like that sits in the center that can link those two places. I do think that you know, the advertising the the internet is about 1 to one advertising but to effectively do want to want advertising you have to have a relationship with the consumer and you have to have one that gets you the information that you can link them yourself into a network. And so I think I think you know publishes are protecting themselves by saying relevance and an open internet environment. So I just need to continue to get the right message to the right person the right time and the contextual way and to make sure that they can free themselves up from an environment where the browser dictates what about consumers can and can't do it's a it's a really healthy sign for the industry and I I would expect we'll see more of a

Looking forward in short. We see a slow recovery out of the crisis with no for return to pre coded Levels by the end of the year.

We do various scenarios based on a framework with two critical dimensions. Number one the timing of the trough by business vertical and geography and number two the pace of recovery by vertical and geography.

Well, thank you Megan. Thank you for today. We are a team is available for any additional questions you may need. So would like to thank everyone for attending the call. We should have a great day, and hope people stay safe and healthy. Thank you.

Within These scenarios with Benchmark our assumptions against our own data third party data and against what we learn from our clients about the short and mid-term effects on their business.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.

I'll Focus now on the projected assumptions that for Mid case scenario on the First Dimension the timing of the trough we assume that our retail Club spins has reached its low points in the mirror and a pack that will deepen further in the US until end-june travel. We assume that it has already reached its low point and will Plateau now until early July.

2

Classified we Model A further deepening in the US and a Peck namely Japan and then a plateau until the end of June.

on the

Second dimension the pace of recovery. We assume that retail will gradually recover in the mirror over the second half of 2028 by government should support measures that will remain weak in the US and two for for travel with model too much slower recovery leading to a still material impact for the end of the year and 4 classifieds. We see a gradual recovery over the second half.

I acknowledge these assumptions carry a lot of uncertainty. There are still many things. We don't know today and things are rapidly changing as a result will intend to update you age progress throughout the year taking all of these considerations into account. And as of today, we believe our business and Q2 were declined by 32% to 35% off the year on a revenue basis from this level may see a progressive recovery during the second part of the year. It's obviously assumed there is another significant wave of covid-19 outbreak during or after the projected recovery or any unexpected material economic disruption of any kind.

In response to the consequences of covid-19 on our business. We took immediate and meaningful incremental measures to further contain costs. We implemented a strict home fries until further notice. We stopped business travel we cut marketing spend events and third-party services and further optimized hosting costs. These reductions came and additional savings already included in our 2020 guidance provided last February.

We intend to further Implement cost control measures to right-size our business during this time while maintaining our investment in our product strategy.

Now, let's take a look at how we deliver against our strategic pillows which remain in Focus firstly our Core Business remains resilient and shows positive suck a retargeting business with large clients has been softer so far especially in the treble and classified verticals and a function of large clients temporarily reducing spell posing campaigns rather than stopping working with us. However, we see the retail vertical holding up much better than other verticals as e-commerce grows due to the crisis may have meat market remains resilient and the current circumstances particularly in retail and continues to grow and q1 driven mostly by new clients off.

Chicken we continue to expand our product portfolio.

We're excited by the growth and resilience of our new products. So install has performed. Well since the outbreak growing over 90% in q1, especially with non-traditional Club since this was close to 45% better than expected our install Solutions Drive customer acquisition by having new users installed our clients mobile apps on their devices as most Global consumers are locked down within the confines of their homes and look for entertainment or information or simply want to communicate on the phones. We bought a demand for install May remain high throughout the various endings of the crisis. Another positive is that apps are Cookies by Design and therefore immune to all Cookie restrictions.

Tell me the agree strongly across-the-board accelerating to 41% in q1.

It's Brands benefit from increased consumer use of e-commerce for a broad range of product categories such as webcam shaving and grooming gear loungewear and exercising in q1. We created a business partnership with Unilever, which adds tremendous value for Unilever brands from both of Data Insights and resources perspective. We also expanded our business with four with a huge increase in traffic to their sites and reaction to the Cobra. Break our teams enabled careful to effectively address their Brand New Jersey sizes requests or preserving great customer experience.

And it's time when Ecommerce has become the new normal for consumers retail media proves not only resilient but counter-cyclical in particular in groceries and the grocery space.

For this reason, we believe we offer even higher strategic strategic value to Brands and retailers on an online presence becomes critical for brick-and-mortar retailers Beyond Amazon. I'm looking forward we expect demand for retail media to continue to flourish and we're excited to launch our new unified retail media platforms expected late and Q2 this platform combined our various retail media offerings and provide retailer and brands with self-service transparency and control over their full final ad campaigns using sponge products and other Rich head formats.

We make good progress without strategic game changes as I explained in our queue for call where it's bright exploring what we call Strategic game changes to a generate the execution of our strategy.

These aimed at strengthening a whole business and expanding our portfolio with new Solutions, especially around best-in-class. D s p and Q one we add a new card game creation and brand safety such as leads bridge and Oracle data club. We accept we expect these Partnerships with strengthen our consideration Solutions. I'm excited about our strategic relationship with Nielsen announced last week that allow us to integrate with their digital ad ratings and digital brand effects measurement Solutions We Believe offering a measurement from a global leader. Like Nielsen will enable our clients to understand the brand list benefits and their performance of their performance campaigns as well as measure the demographics of consumer. They reach across platforms.

As we evolved into a full funnel add check platform and align our technology to a broader array of marketing objectives and insights including CTV. This integration will provide more transparency flexibility and performance for brand advertisers.

in April

We hired David Fox our chief development officer joining from Stellar Labs whose Focus will be on further strengthening are offering through more strategic Partnerships. I want to emphasize that in executing our strategy. We prioritize the use of our cash primarily for building and partnering and will remain extremely thoughtful about any potential new m&a going forward and last we continue to drive Tech and operations. Excellent across the board in mid coupons improve the efficiency of operations by changing the organizational structure in the current context with paused the hiring of most of our new seats way instead and during this time. Our leaders are doubling down. Yes search for a new CFO and then while I was previously announced departure at the end of June and still underway.

As I said earlier, we took immediate and meaningful measures. Excuse me to further contain costs Beyond containing are fixed and variable costs. We continue to drive Tech excellence and assigned our top employees to the areas and projects that are key to our roadmap such as online identification. And that's a good segue to merge both point the latest developments in our work to mitigate the risk Beyond. Sorry around Chrome as you've heard me say before we're strong Believers and use it. I use a personalized advertising and its benefits for all participants in the ecosystem starting with consumers Publishers and advertisers in line with our convictions with made with the progress to move Beyond browser control and redefine how consumers can liberate themselves to see personal lives meaningful ads.

Doing this we continue to leverage direct integration with advertisers and Publishers and use their first-party data as a means to create identity solutions for our clients bought this first-party day that continues to feed out. I degress increasing both its size and resilience and providing a massive source of identity data usage continues to grow to well over two billion users and now Aggregates persistent identifiers, like hash emails or logins.

For over ninety 6% of these users.

We're also interesting ways to build and support a user ID Network around.

Cookie list identifies for advertising independent of browsers that allow users to manage their consent and preferences all of this creates a powerful idea spine to help our clients to get the right message to the right person at the right time with our commitment to supporting consumer Choice while protecting their privacy for also actively participating in the World Wide Web Consortium with respect to Chrome's initiatives around cohort-based advertising and parallel world continue to entertain a constructive dialogue with Google both about consequences of the changes being considered in Chrome as well as potential opportunities to partner and this leads V. Topic our priorities for the rest of the year.

well, things are

Changing around us. We remain proactive disciplined and engaged and our strategic and operating priorities first and foremost. We stay focused on protecting the safety of our people guaranteeing the best business continuity for our clients and partners.

It can will continue to support our clients throughout the crisis and aim to help them maximize opportunities during the recovery phrase phase.

We're hyper focused on managing our cost base and prioritizing our use of cash 4th will look to further out industry leader in shaping the future of personalized advertising not least. We remain dedicated to executing against their product strategy or staying Nimble as the landscape unfolds. This includes leveraging our course strong and direct response marketing and our best-in-class performance solutions to help our clients fast rebound from these unusual Signs by driving sales for them.

As we head into what's likely a tough recession for the global economy going forward. We believe marketers will increasingly look for valuable High return Investments that drive sales a number of Industry experts or analysts including retro vuckovic believe that top of funnel budgets like brand awareness are more likely to get to be Captain direct response and suggest marketers will prioritize the safer more measurable and more accountable channels that are typically direct response recent survey money from advertisers perceptions shows that 65% of advertisers say that focus more on Performance Marketing and the covid-19 context for this reason, we think our core strength and direct response marketing as well as our strong client relationships. They proved to be the competitive Advantage competitive advantages and helping our customers best recover from these Hard Times dead.

With that I'll now hand it over to Benoit cover-up q1 performance and cost control and liquidity and our financial Outlook in what?

Yes, thank you again and good morning everyone from Brittany in France. Let's start our let's start with our q1 performance.

Then focus on our Cost Containment program on liquidity position on close with our guidance for Q2 on provide details about how we think about the outlook for the remainder of of 2020.

Two one was a solid quarter meets a challenging environment. Revenue was 503 million dollars Revenue extra hour wage metric to monitor the business declined 11% at constant currency to 206 million dollars or two hundred and seven million dollars using the Forex assumption for our updated guidance provided on April 1st, covid-19 impacted Revenue x-tac by about ten million dollars or more than four points off of your of your gross as some client decided to temporarily pause or reduce the campaign results.

About eighty percent of the impact was with last client as spending in the mid-market remain resilient the travel vertical which was deeply affected by covid-19 nineteen contributed to 40% of the impact on the remaining 60% wear evenly spread between retail classified on Roosevelt Accords currency changes in q1 contributed to a four million Edwin compared to q1 last year on provides the 1 million Edwin compared to our guidance assumptions.

Q1 Revenue margin was 41% in line with a prior quarter on our expectations.

Looking at some of our operating highlights our new solution grew 49% to 13% of our total business increasing Four Points compared to q1 last year now represent close to 20% of our business in the Americas. The solid growth of retail media was a significant driver of this performance package launched. Our Commerce audiences on similar audiences solution for web. Globally with this solution advertisers are now able to search on cream cheese in self-service based on product categories on price ranges Brands customer gender on purchasing power.

Our only Channel business grew over 100 on 20% as more clients on-boarded offline transaction data to reach the customer online.

Our retargeting product decline 16% in particular with large customers.

So both Five Points of the decline or most of the ten million dollars impact related to covid-19. We added over 110 net new client in q1 on ended march with close to twenty thousand four hundred clients.

This is a 5% year-over-year increase why maintaining I retention at close to 90% for all solutions covid-19 off the significant impact on our same client Revenue x-tac which declined 9% at constant currency of which five points are driven by covid-19. We launched critical Partners our Global partnership program dedicated to helping our Channel Partners to get the training certification marketing support and rewards. They need to effectively sell our core product to our small mid-market addressable clients.

From the supply standpoint more than 4,600 direct Publishers are now connected to one of our critical Direct bidders on web app. That means that we now connect to about 40% of all Publishers. We work with the direct leader.

Sezer we started to benefit from deals with a large number of Publishers running on Google addicts low in select advertisers to buy at a negotiated fixed CPM increasing privileged access to critical for creative on our clients.

Turning now to our original performance Revenue in the Americas declined 16% at constant currency. This was driven by a street median covered impact 3 million dollars could be the impact in particular with large customers on in the broader classified the article this game in addition to a soft start in January due to clients slowing down their budgets after very I spend level during the Q4 nineteen peak season.

At this stage, we expect the copy the impact to get worse in Q2 in the Americas.

Emea Revenue decline 9% driven by impact on the fact that it's a region impacted by the weakness in travel.

Under these circumstances. Our performance is a big market across the region as well as our German on Eastern European businesses remade solid rod ends.

When you business was also healthy across with new clients gains like Roman Originals on Uniqlo.

On the revenue decreased 7% after impact mostly in the travel on retail vesicles home with our sales agent South East Asian market lost it.

Our Japanese business was less impacted than other countries on Korea continue to grow double digits despite the early covered or break.

She speak to expenses. All the cost of revenues were up 30% driven primarily by the opening of the new data center in Japan by two million digital taxes in France. Italy on turkey as well as lower cells of fixed assets non-gaap also cost of Revenue age. I'm twenty-four percent operating expenses declined 16% on both a gap on a non-gaap basis. We spent about seven million dollars less than plant in q1 on a non-gaap base total expense basis. Mostly thanks to lower people costs driven by lower count Lois's Commission on Lower stock price impact on our social charges despite also higher Provisions for collection risk on clients receivables.

I would not got expense days reduced by $20 year-over-year in q1.

We've made it a high priority to effectively adapt our cost base on intent to significantly increase our focus on cost control productivity and efficiency gain, I'll go over this in more details in a few minutes.

Pet schools related expenses represented 73% of Gap or breaks down one point. We ended we ended q1 with 2,700 employees 4% or about 110 or less than a year ago, including 64 or Price related page closure of Palo Alto or in the center in the quarter as big as indicated. We do not plan to wire until further notice on ask them. All of our teams to be very strict on only backfield certain critical roles on an exception basis.

Looking at our non-gaap expense Now by function R&D Altex declined 27% driven by 11% decline in headquarter office 630 R&D on product Engineers after the closure of our Palo Alto warranty center as well as an increase in research tax credit on Lower wage expenses. Non-gaap warranty expenses decline 200 on 80 basis points to less than 14% of Revenue off.

said operation Opex decrease 8% driven by lower sales commission the 1% decrease in to about

1600 employees lower marketing costs are lower facility expenses slightly offset by an increase in bad debt.

I work in sales on the constructivist increased by a few ads compared to Q4 to just over seven hundred and ten.

Non-gaap says on operation expenses increase 170 basis points to 37% of Revenue X stack.

On G&A expenses declined 23% driven by a 5% lower at 2 about 490 employees lower facilities expenses as a result of right-sizing of our offices lower contractor fees on Lower expenses for Global Communications. Non-gaap. G&A expenses were below 11% of Revenue extract Dawn about 150 basis points adjusted a bit. 59 or 60 guidance range on stood two million dollars for both of our original guidance for q1.

Our adjusted ebitda margin to 29% of Revenue exact in line with Q one last year on alighting our increased focused on cost control in light of the turbulences.

Depreciation and amortisation Increase five billion dollars as a result of last year on the accelerated depreciation of the manage acquired technology.

They quit your what compensation expense decreased 39% driven by the lower Average stock price Financial expense was not material and our tax rate was 30% Thanks to the positive effect of the French patent box regime.

Nothing, was $16 don't 23% on that just diluted EPS was only done 13%

cash flow from operations declined 16% to $57 due to a slightly higher DSO which drove a negative change in working capital year-over-year reflecting really impact of covid-19 or client payment terms.

Topics decline 50% on where ten million below expectations thanks to optimize server usage on our free cash flow came out solid.

Increasing 3% or 1 million dollars to forty five million thanks to our resilient cash collection on reduce capex and cash taxes despite of four million cash restructuring charge our free cash flow conversion rate was strong at 76% of adjusted ebitda.

Finally cash on cash equivalents to that $437 as of March 31st after spending $18 billion dollars of shares purchased in q1.

We completed our second show bye-bye program in February. We purchased four point five million shares under this program for a total.

For a total cash amount of $77 million dollars at an average price of about $17 per share.

Let me know go over our Cost Containment program our credit risk management on our financial liquidity position as Mega dedicated. We are hyper focused on managing our cause based on protecting both our profitability on our cash since the covid-19 outbreak with plant to spend approximately 677 million dollars less for non-gaap expenses in 2020 than in Prior year, which represents about $46 million dollars worth of savings compared to our 2020 guidance. We provided in February.

Why does.

Set of these incremental projected savings are probably related on largely driven by our strict hiring freeze until further notice. We've also planned significant Savings in business strategic marketing spend on events. Search Party Services on Austin costs. We ask all of our team to strictly enforce our new expense restriction with them on discipline. We've also planned significant capex reduction by more than 10% of our original envelope for 2020 after this cuts off. We anticipate our capex for 2020 to represent a boat 3% of gross revenue. We've also significantly increase our attention and focus on cash collection on credit risk management.

As of March 31st was 3 days compared to March 31st 2019 to 62 days.

What commercial on finance teams follow very strict guidelines as to how best manage our collection risk besides our focus on collecting cash only on discipline the way we've immediately tightened our credit management for example by systemizing the automatic posing for all big companies reaching a certain budget Gap.

From a financial liquidity perspective. We have a comfortable net cash position of 434 million dollars as of end of March included 637 million dollars of cash on the balance sheet on only three million dollars in financial liabilities. In addition. We have limited access 2300 on 50 million euros revolving credit facility, which combined with our cash position provide the total liquidity of about 820 million months.

Equating to close to eighteen months of expense run rate based on our project non-gaap expense base for 2020 overall. We believe our current Financial liquidity combined with our expected cash flow generation in 2020 puts us in a strong position to whether the covid-19 crisis Underwood's scenarios.

No provider with guidance for the second quarter 2020.

Just following for forward-looking statements reflect our expectation as of today, April 29th, 2020 before diving into our assumption. I want to acknowledge that white retail as weather's several storm before including the severe 2008 2009 financial crisis, when we started operating the covid-19 crisis is truly unique in nature on there for calls for a lot of humility in trying to assess its full Economic and Business practices with regard to Q2 specifically. This is traditionally our lowest quarter of the year in terms of seasonality for both top-line on profitability.

and as

Indicated earlier is low Point quarter in our meat case covid-19 scenario.

Going into Q2 we've seen our April performance declined by about 25% year-over-year on the global Revenue x-tac basis through Thursday. We've seen a pack and a bit better. Yemen was still significantly impacted by logged ons on reaching a plateau in retail on the American does continue to see a growing impact compared to q1 for May and June on as of the date of this call. We currently assume that this the business impact covid-19 will get slightly worse in particular in the US.

Overall, we estimate that the covid-19 impact on our revenues for the entire second quarter could range from $60 to $65 off on the expense side with plan to cut our non-gaap cost by in Q2 by over $27 compared with last year which means incremental saving of approximately fifteen million dollars on top of what we what was our original plan.

Taking all of this into consideration on as of April 29th. We expect Revenue to be to be between $1,000 and $147 million on the reported basis translating into a year-over-year decline of 32 to 35% at constant currency due to the significant depreciation of many currency.

Edwin to report it grows of about 230 basis points or about 5 million dollars on the profitability side. We expect the significant wage covid-19 impact on our Top Line to transfer into an address in the range of 0 to 7 million dollars as usual assumption supporting. Our guidance can be found in our earning release with respect to our business outlook for the year for the rest of the year. We withdrew our guidance for fiscal year 2020 on April 1st, given our fluid. The situation still is on the many unknown at this point. I believe we are currently not yet in a position to reliably quantify the covid-19 impact on our financial results beyond the second quarter 2020.

We will.

Well, not provide guidance for Revenue exact or not. Just for fiscal year 2020 until further notice.

However, I'm happy to share some of our current assumption for the signal Alpha twenty-twenty as of the date of this call. We are currently modeling a progressive recovery in the second half of the year with I-20 percentage decline in Q3 on the it in this percentage decline in Q4 on a regular basis.

Reflecting a slightly larger covid-19 impact for the entire signal than what we currently expect for you to load.

This is our base view. As of today on assumed the progressive recovery phone on travel client on a much longer and slower recovery base for travel again. I want to establish that given there is still a lot. We don't know the breath in the viability of potential outcomes of our current projection is quite match on highly dependent on values assumptions in particular the recovery pays by the article.

On the expense side. We anticipate to spend approximately Thirty million less it don't Gap expenses in the signal as compared to the prior month. All an incremental 24 million dollars saving on top of what was already reflected in the guidance provided on February eleventh twenty years. Most of these savings our headcount related. We intend to close the monitor our our expense base and we will look into further thoughts prediction of opportunities to protect our adjusted ebitda on maximize our ability to generate free cash flow in twenty-twenty on Beyond.

Last with regard to Capital allocation our board as authorized a new buyback program of up to $30 to meet Our obligation to employees while taking advantage of the very low price of our stock we intend to use all of the shares to be repurchased under this new program in connection with Opera Equity Grantsburg investing in order to limit future dilution for our shareholders.

In fact that falls in our proxy that we started yesterday in connection with our Equity request to shareholders. We are committing to not incur any additional dilution with respect to our Opera Equity program between the June 2020 AGM on the date of our 20 21 AGM. Let me know close with a few personal words, but my departure from Crystal at the end of June it was a heartbreaking moment for me to decide to leave because I have so much passion.

Yep after eight years.

On the full cycle from skating the company bylaws and 10x from where it was when I joined to taking the company public now adapting the company model to a different gross profile. I think it's now about time for me to move to a new challenge together with Megan. I'll ensure that we don't desire great successor on manager transition smoothly long. It's been a wonderful ride for the past eight years retail is an amazing company with truly unique assets on incredible Talent always making a d e l l is in very good and

Thank you very much for that Benoit R. I really appreciate it before watching been where all the best in his future endeavors. I want to thank him for the extremely valuable Business Partnership provided the executive team and myself since we started working together. I also want to emphasize that we're focused on hiring the right successor and we'll proactively managed to see if I transition with Benoit and a strong leadership team in the interim in closing. We delivered a strong performance in q1 a minister and President Bush business context our retail clients. Hold up. Well, our mid-market business is healthy and resilient our retail Media Solutions proved counter-cyclical and helping brands of retailers Leverage The Rise and e-commerce. The entire company is all hands on deck to successfully navigate these uncertain times while helping marketers best rebound through

Best in Class direct response marketing and we have unique Assets in a robust financial position to come out strong healthy and strong. We continue to expand their palm and to leverage videos core strengths to best position ask for the future in with that weird now like to open up the floor for questions. Thank you boss to ask a question, please press * then 1 if you're using a speaker phone, please pick up the handset before pressing the key to withdraw your question, please press them into at this time. We will pause momentarily to assemble our roster.

Educate this is Edward speaking given the length of the prepared remarks will likely push the call to nine and ten minutes. So it's slightly retirement money. That is fine. Our first question is from Nick Jones from City. Go ahead.

Hi, thank you for taking my questions this one kind of follow up on the comments about growth in the mid-market new Solutions. I guess first. What are you hearing from? Your mid-market climbed? A lot of the headlines are indicating the small and medium-sized businesses are feeling a lot of the pressure, you know under kovats. I guess. You know, what are you saying is you go into two Q in the mid-market and then you know, what are your clients appetite for new solutions kind of going into two Q, you know, after having a pretty solid one Q on the new Solutions segment. Thanks.

let me

Start with this one and Benoit a few want to feel free certainly our mid-market clients. Uh, we're seeing you know that a healthy bank statement for us. And I think it's because that for our mid-market clients, it's slightly more geared towards retail and e-commerce Gangnam Style are actually, you know fearing better than most I guess as much as you can figure in these circumstances, but you know, what we what we see from them is opportunity. We are looking globally at the ability to expand our services to a wider range of mid-market clients today. We're sort of around what we would call the tour. So if you like, but we want to take that out to the smaller players as well. And yep.

Keep reminding that it's cycling around retail there. It's it's 70% of our business. So in this environment, um, it is actually performing, uh as pretty pretty much strong for us. We listening very closely to them looking for ways in which we can assist them and one of the