Q3 2020 Criteo SA Earnings Call
Good morning, and welcome to Brookdale third quarter, 2021 school corporate expenses and.
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Oh could be prepared remarks, there will be an opportunity to ask question.
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Please note. This event is maybe recorded.
I would now like to turn the call control about let's talk about song SVP markets Relations and capital markets. Please go ahead.
Thank you.
Good morning, everyone.
Welcome to criticize third quarter 2020 different school, we hope you all keeping healthy.
With us today are steel Megan talking coupon of top set top boxes and cheerful struggling.
Note that we may extend a coal by a little bit today to a local question Megan will talk.
Gary told a strike and what.
I would point you to a slide presentation that is available on our website.
Also please note that all joining from different locations due to ongoing restrictions and make stake and want to technical charters.
During this call management will make forward looking statements. These.
These statements reflect creels judgment and analysis only as of today and actual results may differ materially from current expectations.
Based on a number of factors that can cause.
At this time, the global probably like keeping that im still having a meaningful impact on the global economy.
With that I'll turn to peeling the supply chain as one of them could be amazed weather impacted EPS financial condition.
Results of operations and cash flow in the future.
What's significant uncertainties about the global economy, and the duration to some extent other than that.
It makes your basic substance it means that what he said on this call today is Jim that you would change at any time.
For more information please refer to the risk factors discussed in <unk> earnings release as well as the most recent form 10-K.
You probably have to see.
We do not undertake any obligation to update any forward looking statements discussed today, except as required by law.
In addition, we will also discuss non-GAAP measures of performance.
And we shouldn't underwritten transaction, the most directly comparable GAAP metrics.
Okay, then maybe I'm actually established but sitting here today.
Finally, unless otherwise stated growth comparisons made you wouldn't get school all against the same period in the prior year with.
With that it's my pleasure to know handed over to Megan.
Hi, good wild and good morning, everyone. Thank you for joining us today, I hope, everyone is staying safe and well.
With me today is on you see it's always very glickman and new Chief product Officer Thompson I'm delighted to welcome Todd and Sarah <unk> Jude He's an industry, leading you bring exactly the right skill sets it pretty our needs today.
The <unk> joined our team over the past few months is a testament to the enormous potential.
Yeah its business if.
The joint EPS It an important time for our company since starting a pretty a year ago [laughter] I've led the company's transformation and it's probably the sub run a comprehensive evaluation that business in our markets to identify a trend around cost of sustainable growth.
On todays call. In addition to discussing out better than expected Q3 earnings.
Well provide you with an overview that evaluation and initial insight into our disciplined strategy to move that business forward we.
We have unparalleled assets, including call Ms data.
Scarring retail media business no industry, leading technology after 15 years of media buying expertise and the huge network. This has created for EPS.
Great people and a strong financial position.
But turning out assets into what we call L. Calmness media platform.
A world, leading meteor activation platform for global brands agencies, and retail was optimized sales and digital advertising returns well.
Capitalized on the white space opportunities opened up by the dynamic changes in ecommerce and digital marketing.
The best position pretty young for significant long term success.
I'll explain that said the shortly.
Together with Todd and Sarah will discuss four key topics on our call today.
Yes, the refinement of our strategy and the opportunity that we are focused on second how we execute on our roadmap extend our capabilities and respond to the identity landscape.
Third a continued execution along out four strategic pillars and sport.
How we're optimizing our organization and aligning our cost structure and capital allocation to best support strategy.
The digital marketplaces experiencing fascinating trends in ecommerce and digital marketing.
Massive opportunities in the short and long term for us.
We know that.
Well using out differentiated assets refocusing our business.
Executing with discipline and pursuing targeted reinvestment.
We have a great path to create growth for ourselves.
The clients that we said.
And generate shareholder returns.
Pretty operates at the intersection of E Commerce advertising and media.
We see an enormous opportunities to expand our business much deeper into economists and you can continue to extend advertising reach the brands and retailers with a focus outside of the walled gardens that we called the open Internet.
Well call this opportunity called mass media.
<unk> mission is to be the world's leading platform for columnist space advertising and marketing offering capabilities to our clients.
We believe nobody else can.
I want to spend a few minutes to discuss why we focused on the comments meteor opportunity how.
How will leverage our unique assets and build new capabilities.
Got to deliver against this opportunity.
This means for our total addressable market going forward.
Watch second some calmness risk.
We're seeing incredible changes across the comments landscape that.
Most challenges for our clients that pretty is uniquely positioned to solve.
We see interesting changes happening in the way consumers look for products interact with ads and ultimately shop online.
We also see shifts in the way brands use their marketing dollars to engage consumers directly where they shop online.
[laughter] consumer shopping behavior is rapidly evolving to E commerce, which is booming from 16% of global sales today.
To an estimated 23% by 2023.
During the boom brands and retailers transform the E commerce prisons gaining share.
From Giants over the past months importantly, we expect this trend to continue.
For example, during public <unk>, sorry, <unk> carbon lockdown U.S. on one product searches on retailer websites.
Oh, it's an internet has increased 21 point to close to 30% type of share.
Well Amazon share declined 23 points.
Oh, sorry, 81% of E. Com is biased to try the new retailer indicated that they expect to continue to use them in the future forgetting a shift in brand loyalty towards open internet retailers.
Which now represent about 40% of global E Commerce sales.
Second to take advantage of the stage and E commerce brands accelerate the online shift a bit trade marketing budgets.
We expect digital trade marketing Black Sea 23 billion in global spend and 2020 after growing and averaged 82% each year since 2016.
And last but not least ethnic becomes even more important we know that's a new identity will publishes the meteor onez what depends even more on EPS take partners to monetize their audiences.
Retailers and brands will continue to depend on digital marketing to drive sales and loyalty and I'm expecting a measurable way. This is our sweet spot.
As large online retailers manage as many media mogul they too need the expertise of Edtech cotton is to optimize the yield of their inventory.
Despite these changes in the E commerce landscape.
When we look at the needs of market as they remain remarkably consistent oh.
Ultimately they looking to understand the consumers on the pops to purchase.
I'll get reach the right can seem it at scale and relevant brand safe environments.
To drive customer lifetime value and impact across the entire marketing funnel.
And to measure the impact of their campaigns to optimize against real business outcomes like product sales, making sure that they have accountability for every dollar that they spend.
Solving these needs has always been easier said than done.
The erosion of the third party cookie the rise of privacy restrictions like GDPR in CTP I am.
The increasing powerful gardens make it harder for marketers to target measure and optimize campaigns with the transparency and control that they expect.
In Korea, we have the unique opportunity.
To meet the needs of market isn't a rapidly evolving calmness landscape.
In past calls I talked about becoming a full stack DSP for comments.
Having do you speak capabilities is important to us, but it's not an end state these capabilities a building blocks for a broader vision.
Well now referred to as our call Miss media platform.
We want to enable brands and retailers grow three comments, maybe up media.
This means driving more valuable outcomes for our clients by activating outcomes data previously tied only to our retail media business.
To do this across all stages, the marketing funnel true audience based targeting across the platforms that clients can seem that spend that time on like C.T. They.
This means leveraging out privacy focus network of first party data to maximize return on AD spend for our marketing and drive better monetization of AD space, where out retail isn't publish it across the open internet.
This also means providing differentiated real time insights and measurement.
Marketers.
To be clear.
Retail media will become central piece about call mass media platform contributing differentiated AD inventory first.
First party audience data and insights to the platform.
We've already started down this path without scale retail media business.
And the launch of our latest retail media release.
Enabling flexible self service.
Branding and targeted advertising.
On the E commerce properties, a top retailers across the globe.
Added to the L. investment and you focus on that or didn't audience targeting solutions, which leverage our best in class machine learning and buying together without shopper data.
The full funnel advertising needs.
Without comments media platform.
What extend and expand these capabilities to address market as needs across an even broader set of them been trained use cases.
We believe the comments meteor opportunities it out to grab strong favorable market trends support our vision and we have the EPS it execute on it.
Let's talk about these assets.
We believe pretty is unrivaled in its ability to seize the market opportunity I believe leading comments media.
We have valuable assets that differentiate us.
And uniquely position us to so marketers need by connecting brands retailers and their agencies with the right shopper the right message and the right media to drive the greatest returns well.
Well fully utilized assets to drive growth and shareholder value.
Just to go outside to remain King a data driven marketing.
Our clients need the highest quality data to reduce waste and bring optimal returns.
I promise media platform will be driven by the highest available shopping behavior and transactional data there is.
No other company in Ed Tech has access to the types of data that we have.
We have incredible technology to manage common state or at massive scale interesting are the $2 billion with a daily transactional data.
Across 4 billion product skews and thousands of product categories.
We have direct access to the data buyer integrations with our retailer clients.
These privileged relationship enable for first party cookie list audience targeting across our comments media ecosystem.
Moreover, we extend these shopper targeting capabilities across the open Internet trail, leading privacy focused I d., Greg, but I, but 2.5 billion user I.D.'s.
We're actively participating with industry bodies and regulators to enable cohort based audience targeting solutions.
Please.
Joining forces with the trade desk.
Unifying <unk>.
Identity solutions for the post Cookie World.
Exciting and promising collaboration is a great step forward for the industry to develop a longtime open source identify a grounded I'm consume a choice to say Scott advertising on the Internet.
On reach.
Privileged access to highly attracted added inventory through our retail media ecosystem, we enable access to exclusive retailer AD inventory and insights that are only growing in relevant as trade dollars move online and consumer brand media budget seek to better drive sales outcomes.
On top of that we have that access.
5000 premium publishes.
Enabling massive reach and go for advertisers importantly, all of this reach can be addressable without third party cookies.
On retail media, we provide consumer.
Friends and unique with unique opportunities to advertise and promote their products directly on retail sales media.
No one of the traditional DSP on the market can do today.
Our retail media platform enables brands to engage shoppers and relevant with relevant comments native advertising and drive product sales across many of the world's leading retailers while at the same time, helping these retailers generate high margin advertising revenue.
On measurement, we provide the ability for advertisers to measure against the outcomes that met up amongst product sales.
We measure and optimize the transactional it for both online and offline sales for consumer brands, we measure outcomes down to the product skew level.
Additionally, we are investing in insights capabilities that bring together organic shopping data and paid media metrics to help market. It's been a plan optimize and measure their investments.
On global footprint across 100, plus markets, where a partner of choice to support many of the largest and most global brands.
Virtually every market.
Okay, just want consistency across their digital marketing spend in a single partner who has that capacity.
Finally, our strong margins cash flow and solid balance sheet.
But the financial capacity to execute on our strategy.
We're already well advanced on our journey to execute against step Calmness media platform vision.
From a cost as a global leader in re targeting.
Begun expanding our portfolio.
Bring new stops growth areas, while evolving and adding new capabilities to our core offering.
[laughter] fitting nicely without strategy, our new solutions already represent close to 20% of that business and so it's not growing 53% and 2020.
In 2020 to date retail media has grown above 60% and audience targeting around 50%. These terrific high growth rates validate our strategy and the direction, which we're heading in.
Catching the weight of the market trend.
Well Weve long had a globally scout mobile offering we're doubling down on further areas such as video.
And see TV.
In all fairness well, we've made good progress on our journey towards a full platform vision. We have more work to do this is why we intend to execute with discipline and focus and invest now and to further strengthen our offering.
Looking ahead, we intend to complete our comments media platform by doing full thing.
Number one expanded audience targeting capabilities across both the marketing funnel and omni channel to offer the full range of targeting and re targeting strategies for comments.
Number two.
Extend brand reach across a large media network on it on the open internet leveraging the combination of retail media and core business re targeting and measurement capabilities.
I'm, a threed strengthen our deep comments analytics and insights capabilities to inform brands.
Intelligence about their position on the digital shelf and every step of the buyer journey.
And use that as a customer service for retention.
And fourth.
Further expand our privacy focus first party media network growing ability to access an exit but again, that's probably identity and increased reach for marketers.
Privacy and identity, a part of the broader ecosystem and we're actively embracing and addressing them an entry as an integral part of that strategy our comments media platform.
We rely on a privacy focused and transparent this comedy media network with brands retailers and publishes.
All contribute new first party data to EPS shopper grass comments data.
As they do today and pretty good becomes the matchmaking between the advertiser the.
The product and the consumer this creates a massive massive network that we consider no other AD tech and match for columnist specific purposes, and Tom will talk more about this shortly.
Now helping you.
Without total addressable market, we believe our strategy opens up $61 billion Tam across.
Cross brands retailers and classified.
Summarize.
I'll call mass media platform is a combination.
Oh about retail media and our marketing solution assets.
To provide a full suite of media planning and selling services.
Bringing publishing and retail is data together.
Creating a huge ecosystem kit to connect the right person.
To the right products and the right media.
And connect brands and retailers to people based on their shopping preferences.
This across the breadth of the critical network, reaching a potential 3 billion consumers globally.
Let me emphasize no.
Nobody else has this sort of reach outside of the <unk> guidance.
We're making and will continue to make investments in our growth areas, we're leveraging our cash and strong financial position to fund.
These investments and.
We've also strictly managing our cost base in the core business through various operational excellence initiatives.
Why do we believe were one.
The strategy.
It's because we have global reach with 20000 advertisers across 100 markets.
You have extensive shopper data on first party media network.
Our new growth engines already supporting our strategy and today, representing 20% about business growing at probably about 50%.
A solid product roadmap that tackles, the challenges of identity.
Massive E com as Tailwinds, and increasing Tam and superior comments marketing assets and finally, a strong balance sheet and reinvestment strategy to further transform our business.
We think that our strategy of creating the world's leading comments media platform and executing executing against our transformation plan positions cardiac for healthy Beecher.
And sustainable growth.
But that's I'm glad to turn it over to Todd to take you through our product priorities to address the proposition about comments media platform Todd.
Thank you Meghan and good morning, everyone from San Francisco I'm delighted to be here for my first call with you today and to walk you through some of the very exciting plants were working on from a product perspective [laughter] first let me go back to some of the unique critical assets. It Megan mentioned, they're a key reason that I decided to join the company and what makes me.
They are both confident and excited about our future.
I firmly believe that in an advertising world, where consumer privacy and data security are front and center winners will be mentored by their access and rights to first party data.
And we anticipate this to be true or in the post cookie world.
Very importantly, I don't believe we talk enough about the depth and breadth of the first party data co control like radio.
What makes gritty owes data incredibly unique is that it is both commerce focus and available real time.
Our network collects more screen commerce data than any other independent AD Tech company.
Every day our platform in just over $2 billion of transaction data across a catalog of 4 billion skews.
3500 product categories in 13 languages. This.
This paired with the 500 million daily active users, we see today half of which are identifiable through hashed email or other offline identity, we create commerce focused audiences to drive performance for advertising clients.
With our collection of first party data, we're very well positioned to innovate post cookie advertising solution set perform.
And through this performance to further expand our market and grow revenue.
We don't speak enough also about our technology and machine learning, we do over our data network that make predictive bidding product recommendations and dynamic creative come together to ensure the greatest impact of each AD delivered Arctic.
Our technology enables us to understand patterns and buying journeys across billions of products and consumer touch points in our network. So the AD experiences we deliver can be claimed in sequence to make them, even more potent and.
And it's important to point out that consumer identity is a feature that isn't always needed to facilitate the correct advertising decisions on behalf of brands in retail partners.
Oh, ultimately, what's making our data in tech. So valuable is the incredible reach of our network.
Deep integrations across 20000 customers and 5000 publishers and exclusive access to inventory on over 100 of the world's top retail websites critical operates on much more first party data to facilitate greater monetization for marketers and supply partners alike.
As the business, we've created a flywheel that grows this data marketing outcomes and reach in turn and.
We believe that opening critical as a platform that is making our data tech and reach available to power new partners across the commerce space will produce network effects in each of these three areas to propel our growth.
Now, let me take a moment to elaborate on how we're using these assets today and into post cookie world over three areas of product focus. We believe we can create network effects to succeed almost irrespective of where the industry is heading on matters of identity and privacy.
To start our network of first party data guarantees acute amount about inventory can remain addressable in privacy compliant ways.
This allows us and our partners to build on individual users with an overlay of commerce data as Megan shared we're truly excited about our partnership with the trade desk to provide the industry with an open source unified I'd.
In addition to partnering with identity providers like life ramp we believe the trade desk partnership sets the stage for creating a scaled market standard for consumers to control their AD experiences and to replace cookies and other platform identifiers. It is long overdue for AD tech to address consumers directly and.
To provide an improved value exchange, we see our effort opening up very big opportunities for the company.
As we build an industry wide identity solution also look for us to explore experiment with private marketplaces and to provide key demand partners with bidding access to our preferred commerce audience supply.
Second we're very active with industry groups to create a new paradigm for effective commerce advertising without platform identifiers grew.
Video has been a leader in these discussions and in parallel we're testing new audience products that use cohort signals and interest groups to deliver superior performance to our clients.
Our Sparrow initiative recently influence Googles of Dove keep proposal for cohort based advertising and we see this as a testament to the value of partnering with platforms to navigate consumer privacy challenges.
A third product focus is to transform traditional contextual advertising into performance for our brand and retail partners buyer.
By applying our machine learning at the intersection of content Commerce and user signals. We believe we can create a wholly unique advertising solution, which has incredible scale and doesn't rely on third party cookies.
In summary, our goal is to provide customers with a variety of advertising solutions that operate together for scale and can stand alone in a post cookie world and while driving outcomes for marketers and yield for media owners remains job one.
Bringing trusted out experiences to every consumer is now baked into our mindset.
Again, our product road map will ensure we continue to succeed almost irrespective of where the industry changes are taking us.
Looking forward, we have an exciting product roadmap for 2021 to position pretty well as the world's leading commerce media platform and to secure our status as network operator of the buyer match, we're all commerce.
Here's a quick look in.
In 2021 will improve our base by doing two things on Commerce media.
First we'll begin to make our assets more accessible to key technology partners, but also serve marketers retails and publishers.
We want to make technology partners more successful and in turn drive third party demand enable measurement across the entire buyer journey and drive yield to our respective partners very.
Very importantly, we've just launched the critical developer portal to make this possible and have several other initiatives underway I look forward to updating you as we advance.
Second we've begun to fully cover the marketing funnel with our product solutions. In 2021. This will include investments to ensure user identity remains available a focus on performance at the midpoint of the buyer journey and to connect the dots between awareness advertising and in store experiences.
We believe in 2021, we'll continue to demonstrate superiority and delivering outcomes across the funnel, but we'll also take pride in enabling partner applications, a better impact on commerce.
An exciting example of this work is beginning with measurement partners to connect Ctb household advertising with commerce outcomes.
From a product perspective. This is the time to lock in the most important commerce use cases across the funnel for marketers and to support partner use cases enabled by our apiay offerings.
Prior to turning it over to Sarah I, just want to reiterate my excitement to be part of this team and the company and our and and have poured and our opportunity ahead.
With that I'll now turn it over to Sarah our CFO for a discussion of financial and operational performance Sarah.
Thanks.
Good morning, everyone. Now you can see why I'm, so thrilled to be proud of that pretty okay.
I'll discuss our Q3 results our continued focus on operational excellence.
Cash position outlook for Q4.
Okay with the headline nothing.
Revenue for the quarter was $417 million and revenue ex Tac with an $86 million.
Adjusted EBITDA was over $49 million, resulting in adjusted diluted EPS of 40 cents.
They all reflect year over year decline.
Largely due to the anticipated negative impact, but they are all better than we expected at the beginning of Q3.
We generated $38 million of free cash flow in Q3, which brings our year to date free cash flow to just under $100 million.
Revenue ex Tac declined 16% to coat think healthy.
We estimate the negative coverage, where they could impact was $33 million or about 15 negative point, yeah. It would be a impact with 60% of this impact can travel. So I think the sense in the classified and 10% from retail.
The favorable and to talk up in July and against Q2.
We estimate we we estimate we lost approximately $10 million due to privacy in the quarter, including explicit consent in Europe.
Yes, Okay, kinda think negatively impacted revenue ex Tac by $18 million or 12 point.
Excluding the expected impact of the Pentelic revenue ex Tac declined about 2% and revenue increased four.
[laughter] encouraging as the fundamentals of our business, we remained well grounded.
We had solid performance around labor day anyway.
We added 201, six net new clients in the quarter and ended Q3 with 20600 clients.
A three sales growth yeah yeah.
Our client retention remained strong at 88 all in.
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Yes exactly.
From Q2 as clients we started campaign.
During the quarter, we signed our first multi year I must say contracts with some large client, which we anticipate expanding to other customers.
Oh, we talk it seemed business declined 24% at constant currency in Q3.
'cause, it's representing 17 point.
Our large customer business improved 10 point, such as Q2, driven by the U.S. spent by Midmarket and direct to consumer brands remain healthy.
You certainly shipments grew 43% in Q say, Craig representing 19% of our total business on a revenue ex Tac basis.
This is largely driven by retail media.
Seats continued strong adoption with friends and we couldn't live and grew close to 60% driven.
Driven by strong demand from CPG, and reflecting its growing strategic value for buttons.
In Q3, we tell media launched over a hunk of those 15 you Brian.
Activated $200 million media spend over the first nine months of 2020.
We expect this positive momentum to continue.
Oh, the China business grew 100 them to 20% in the quarter, although from a small base.
Both so we have some exciting see TV campaigns in partnership with various industry players and we a saw scaling our capabilities.
Moving to the coal space, we have done an impressive job, reflecting focus and discipline.
Non-GAAP opex, excluding bad debt declined to $25 million or 18% in Q3.
And $92 million and 21% over the first nine months.
He was able to generate meaningful cost savings through head count and how that's going and we chase every other state footprint.
As you can see in our non-GAAP reconciliation incurred $12 million in pre tax restructuring cost in the quarter.
Primarily related to closing of Palo Alto, R&D Center and real estate actions.
Moving down the income statement, our depreciation and amortization expense Street [laughter] from lost share.
Financial expenses health and you saw that in the quarter. So at this point Ninemillion <unk>.
Oh that effective tax rate 30%.
Oh hi.
Diluted EPS [laughter].
[laughter] thing impact.
Hi.
Hello.
[laughter] acute.
And adjusted diluted EPS was 40 cents.
Okay cash flow in the quarter 38 me Oh this reflects good collections and lower Capex spend.
Our balance sheet and cash position continued to be strong and we expect to repay the 150 million go a drawdown in does that.
Well I will provide guy doesn't think perspective through the end of 2020, which reflect <unk> expectations as of today October 28.
Clearly there are many assumptions on that line. They are the situation continues to be fluid and thats. It.
As of now we continue to see an impact to our business and our customers business from the pandemic.
We expect the holiday peak could be more muted on an it first is the traditional seasonal pattern. We expect that we told media will continue to do well, it's solid bunch it spend on our platform.
Taking all of this into consideration we are guiding revenue ex Tac Q4, but the 200 between 223 million $213 million translating to a year over year decline, 15% at constant currency.
Basically its $17 million for privacy, increasing extended throughout the restrictions in diet season.
Putting the profit timidity side, we expect Q4, adjusted EBITDA to be between $81 million and $88 million or 37% adjusted EBITDA margin.
We have lower cost run rates across all spend categories, including the impact of all restructuring cost actions and we expect to leverage some of these savings to reinvest in closed opportunity.
Oh annual effective tax rate is still expected to be 30%.
I will close with my priorities to foster profitable growth and operational excellence across Chris Yes.
One key priority for me at the CFO is two inches profit resource and investment allocation to our priority growth areas.
Making then told station is obviously compello and we are all moving swiftly to execute against that.
On the commercial side, we are partnering with the sales team to advance share of wallet with agency.
<unk> operational excellence, we are focused on step changes to our fixed cost base, including I think to set it says.
Well, what can I say shouldn't efficiency will be Alexa, especially as our business model other folks.
Finally on cash and it looks like when we always typically the highest but you you save and invest in growth while maintaining flexibility.
We anticipate maintaining that shake out.
He is a busy time than I am personally excited to cost at the critical leadership Hey wait.
With that I will now hand, it back to Meghan for closing remarks.
Thank you Sarah Ah yes.
In closing I'll say, a few words about how I feel about the future of pretty.
A joint pretty approximately a year ago little under and I'm proud of some of the key milestones weve achieved together as a team.
We have we've taken a clients this focus across the company.
Weve refined our company vision and strategic road map to return to sustainable growth.
We strengthened the product Roadmaps revives gross and address identity challenges.
We've extended our exposure to E com as through retail media and position it to be.
Pace of our future strategy.
We've reshaped out C level leadership team and created a transformation office.
I just kept up people say.
For a solid work from home model, well achieving expectations despite tied to 19.
Including on top line profitability and cash flow in Q3.
And we're developing a culture of innovation performance and accountability.
Overall, our business performance shows resilience and 2020 to date, despite industry headwinds and the impact of COVID-19.
This is a testament to the talent strings and dedication about great people.
This is also a testament to our relentless focus on execution.
Staying nimble as Glenn Scape unfolds and you train some edge.
Well he please while we are pleased without positive accomplishments, we focused on the future.
To fully realize the strength of the business and the promising vision pretty.
We're planning against out comments media platform strategy, both organically and via partnerships with finding out product roadmap fully embracing identity.
Executing with discipline and focus.
We're implementing.
And organization and cost structure that supports our strategic plan.
We're investing in significant opportunities for growth to address it came up more than $60 billion.
Within this context, we have a compelling future ahead to create sustainable revenue for our shareholders Oh, sorry, just sustainable value for our shareholders, Todd Sarah and I will be speaking at multiple investor and industry analyst events over the next few weeks with that I'd like to open the floor up to your questions.
To ask a question. Please press Star then one.
Using a speakerphone please pick up your handset suppresses the keys.
So do we so your question. Please press Star then.
The first question is from Lloyd Walmsley with Deutsche Bank. Please go ahead.
Hi, Thanks for taking the question I have a couple if I can first.
Can you just give us a sense for how growth has has trent trended through the quarter and maybe into October I. It seems like your your guidance implies not a lot of improvement.
Into Fourq you wondering you know how much of that might be conservative and specifically you guys had called out a more extended holiday season I.
I would think that would be good good forever tizing, but curious just to understand that a little bit better and then.
I guess more broadly with you know the pandemic driven boost to E commerce.
Oh, you or do you feel shouldn't we expect to see a healthy increase in online advertising to kind of compete with this increase in demand yeah, what would be.
At least putting aside travel travel and and classified say shouldn't we expect a really strong holiday on the core retail side of the business I mean anything you could share there would be great.
Yes, Hello Lloyd its.
Okay, and then can you hear me.
Hi, Ken Yeah, loud and clear perfect sorry, apparently I wasn't so clear only only a speaking yes, Q4, where we are relatively positive, but clearly you know we we are dealing with a pad that make that is yeah anyway. So we are a little course it how.
Well, we all things can get good traction on retail spending time really globally with a pickup in Asia Pac, but as you know you know your EPS guide back into locked down and we you know we are cautious I would say on the macro headwinds.
Headwinds a in the U.S. that being said you know we've got some real when it's only especially on the retail side, and especially I would say the kind of traditional retailers that no excessive really moved to ask any color. So terrific traction there, but we do have you know a large recovery.
So business as well and you know, depending on which business in which country. That's I would say a ebbing and flowing so.
We do have some caution, but we yeah, we feel pretty good.
Good about the trends were seeing and about the customer demand kind of pick up as well.
Other comment I'd make is that the holiday peak kids, obviously different mix shift people, yeah, no running out to the shelf so on Black Friday.
So we had a.
We have full cost there that peak will be more muted will be extended and likely will be slightly lighter than last year. So those would be the two vicki comments I would like and I don't know if I address your second question.
Yeah, I think that that that's helpful color I guess around people yeah. The peak is going to be more muted.
I guess, the I guess sort of unrelated would just be on on the call you all talked about making your technology kind of available to other players in the space curious if you figured out and an economic model around this idea and just help us understand the revenue opportunity there.
Yeah, I mean, I can quickly address that I mean, we've made obviously looking more to longer term contracting with all customers I only have a couple of nice I must say that we've just guidance and a retail media is also a you know a longer term business. So we're also seeing some.
Where do you get a good then maybe there I would say that I supposed to be the key comments I would make.
Okay. Thanks.
You're welcome thank you.
The next question is from religious crime everything I read research. Please go ahead.
Thanks very much.
Our team here is I guess has several questions. The first one I guess is were really struggling to reconcile some of the claims Megan that you made a very strong claims about your I.D. graph and first party data the half billion do you use and with the need for partnerships with library up and the trade desk and I guess the questions would be are you are you going to be getting paid by then.
Jim to access this terrific idea graph that you have or was there more of course from your advertising clients to get together with rivals.
And then maybe a a separate question for Todd on this in a different direction you know with a growing number of publisher integrations are you are you further cutting FSP had exchange fees and becoming your own FSP and how much more room is there for you to become a more efficient player in and sort of get an edge for those publisher integrations and oppose cook.
<unk>, Oh, Saudi I pay world, maybe those are two to start with thanks.
Oh, Thank you, but let me just kicked it off and then I will pass it across to Todd to give a little more depth and detail.
You know the notion of like rent has always been a partner of ours May night, a week, where we use there I need matches and its part about shop the grass.
And taught about datasets Ah so nothing nothing changes there and the same is with the trade desk mean, where.
HM.
Where we sort of helping each other or clients to each other open source to each other to ultimately.
Get to identity and so there's no material change there whatsoever. It's it's how were now starting to work more closely with them I think that that has changed over the last few months.
And the announcement of a collaboration with tried this gives a perfect example of of one and maybe one of more to come so all for a little bit more color on that one I'll pass it through to Todd.
Yeah. Thanks, Megan I mean, I think the key message here is that we're not in the identity business and we're not in the data business and we've always been in the performance advertising business and the outcomes business and we're very much going to stick to our knitting there the idea.
Of of making our audiences that have the benefit of the I.D. graph and the overlays of of of Commerce data in our machine learning that that makes sense at the intersection of those things.
Is something that we want to provide to our partners more more so than we have as an output or a result, so that's.
That's important clarity the idea of opening our a pea eyes is much more about about getting to the right audience and delivering a better experience.
Not to open up a data stores or other components of the identity graph, that's the current thinking.
And I guess, maybe one just quick follow up with that I mean on the first party cookie layer solution can you help us understand a little bit more how it works with targeting segments, especially with the new solutions and what it means for sort of one to one targeting on the retargeting side, because it's clearly going to be a lot of pressure and how that evolves.
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Yeah, I mean, I think the there as they said in the in the Oh in the prepared remarks, and there are really three different pieces of that and they're all connected to you know the incredible amount of source data that we have and stitching that together at outsourced to.
You know effective syndication footprint, which can come from universal ideas like the trade desk you I'd to why we're participating in that can come from a life ramp identity length why were such great partners with identity like so that there were three things I mentioned I just.
Quickly go back through them again, one is we want to do a lot more stitching at the source to up our game as an SSP I think you asked the question and I didn't address it about about our SSP capabilities, we are ready or more of a pure sites I'd SSP.
He in retail media.
And there are a lot of things to learn from that model about how we actually coalesce data aggregate data and deliver more effective advertising that we can take to the open internet indeed to our SSP partners. So the mechanically the way that those things deliver.
I would love to get into in a session a separate session, but there there are three paths. One is again doing what we can to stitch data first party data together in a purely addressable network that goes beyond sales side. The second one is to use the.
Identity graph that we do have as a true set for validating the.
Veracity of cohort based or interest based advertising.
And contextual advertising you can imagine in the case of contextual advertising because it's a it's more real as we all sit here today it's.
It's more available that the combination of semantic signals from you or else and commerce signals that is products, which are purchased skews that are purchased that can be associated with the page I'm transactions downstream that can be associated with the page.
And and user base traffic, where we have it no matter how small is a very powerful combination.
So in terms of building a targeting set.
So that's not an identity first targeting said, it's a contextual targeting set and it's something that I would very much like to brief this group on as we get into details were were in development I would leave you with one thing.
This company has.
I am very rich history of using machine learning and applied analytics.
To do better remarketing, including Retargeting.
Those skills. So skill sets those capabilities are things that work, 100% for the audience solutions that we're talking about here at a fairly admittedly high level.
So I think the the fast follow we would like is a briefing so.
Sometime in the next couple of months here and I think Megan can speak more about our plants okay.
Okay. Thanks very much.
You're welcome thank you.
The next question is from Dennis how long do we began oakdale markets. Please go ahead.
Hey, good morning, everyone first food Meghan and welcome to Todd or just some follow ups on the identity questions I guess.
We also saw trade desk tie up more tightly with lives ramp yesterday I guess the big question. Here is is this type of Federated approach necessary.
You know we're in a post cookie.
<unk> mobile I'd world.
Where the walled gardens have some obvious advantages.
And how could you see that playing out even further is that we've been fairly impressive on the level of partnerships you've already talked about today, but maybe help tease out you know where that goes further and then you know second welcome to Sarah you you mentioned that the fourth quarter guidance Embeds the impacts of the browser changes going on.
Across iOS right now your predecessor was nice enough to quantify those sort of things for us at times, if you're willing to do that and then just you know any big picture comments in particular on what you hope to bring to the position maybe in particular your your views on uses of free cash flow. Thank you.
Yeah I'll start on the [noise].
Entity question, it's a good one it's a remarkable.
I guess trying to the events that are starting to happen on the back of the crime announcement, and clearly I'd say and the need for the industry to find another way.
To to get high density which is.
Ah, which protect the privacy of the consumer enables them to have choice.
And is able to be used across the entire internet as a replacement for antiquated solution, which is the party cookies [noise].
And so we you know we came forward I think last earnings call with a <unk> and.
And then channel piece of work that we were doing which wasn't dissimilar to the trade desks or what they were doing.
And you know, Jeff and I sat around and say look like what [laughter] why aren't we doing it together as an open source with the reach that we have the ability to or else though.
To to influence the open Internet sales was just a no brainer and so its led to where we are today I mean that the amount of.
Publishes that we have yeah.
The amount of consumers that we that we touch and then you know that they have the footprint as well is that why not if this is all about trying to make sure that we get.
Ah out and it's far and wide as we can to get a global adoption. Then we have to join forces that can't just be one that's pushing to get this done now you know we we were happy to go after an EPS out that you know.
The Marissa and with the lean and from the W. Three C and the <unk> b and everybody else that much that come to the table and and play a role in that so I think it's a really exciting shift for the industry to move in this direction.
But I'm going to speak high level I'm going to pass it across to talk any any further comments on this one.
Yeah. Thanks Megan.
Great to reconnect Dan.
Yeah, I mean, the only thing I would add to that is <unk> at first to reinforce megan's point that it absolutely is a partnership world in terms of of what we need to do to you insure a thriving open internet outside of the walled gardens, but there are distinctions in par.
Nurse that I think are are going to be important to talk about so I found it interesting that you know in some ways our identity graph gets compared to what a what a life ramp might have but we look at it quite differently and we look at that at our commerce assets in first.
Hardy data much more so and identity as a way to translate those into a stronger buyer match as we're calling out and to distribute that match across the network you know using the rails of identity, some something that Scott, how might say or Jeff green might reinforce with.
The open source you I'd too. So you know those those are important partnerships and initiatives for us to get you know better syndication for a buyer match and that's where identity is important to partner around but I think each party brings something very unique to the table and just that.
You know that mention of three companies and ours of course is very grounded in direct commerce data.
And we're going to be developing our products with that in mind every day.
And Hey, Dan if he says Sarah just to react to your other question in terms of Q4, where they see me around $17 million on privacy headwind, we had about 10 million in Q3, and a I would say kind of it and Patrick.
Me around $34 million at all and current models.
And then in terms of count action, what we do with the cash.
Obviously, we got to reinvest others that we have a pretty compelling roadmap here. We're excited that you know I cashed out it looks good and it's obviously a big focus to make sure that continues to look good and we're gonna be repaying. The repo bought back I mean that was more a cautionary measure in any event. So we got we pay that back.
But we are very conscious on you know the expectations on capital allocation and were going to be very small it's about that and I think when we see the right things today, we will we will of course, let you guys know.
Great. Thank you.
The next question is from Memphis, Taunton trial Securities. Please go ahead.
Hey, good morning, everybody. Thanks for taking the question maybe one around the transition to kinda self serve to to some degree I don't know if this one's for Megan first maybe on all the D.S.P. side can you give us just kind of an update on either the number of clients using it on us on a cell.
I'll serve basis or percentage of revenue. That's currently coming from self serve or whether it's you know maybe still should be talking about beta clients or whatever the right metric is there. Similarly on the retail media side, just any color you know what that is in terms of a percentage of the NAHB retargeting business sense and again what percentage of retail.
Media right now is being used on a self serve versus versus full serve basis.
And then just third and also related when we think about the cost base long term as just kind of continue to to transition how can we think about.
Your cost base as as the product model, you know kind of evolves.
Evolves here, just any high level thinking there would be would be helpful. Thanks, everyone.
Oh, Hi, sorry, I think I can look at some of those not show I. I have all the detail on self serve its fastest I saw that a retail media we feel very good about obviously a job 60 pathetic run way, we're feeling good about the continued traction that I can't say that it is a more.
Integrated model with all retailers. So that's more of a self service component to that you know however, I would say we can I stay very closely connected with those customers. So oh, yeah, that's kind of a difference between self service and managed service and obviously, we kind of move between those two depending on the on the customer and then depending on Oh no solution.
But that would be my I guess my key Oh answer on that one cammy self services you know one of the areas. We continue to invest in them. We work with our partners. So not all customers to ensure that we are doing that in a way that works for them thought we also very much appreciated for the managed.
Service that we that we give and no customers see value with that so I don't have a ticket the stats on that but I would say both are working well and we see continued investment and usage in a in self service and obviously, it's a continued focus the right math as well.
I'm looking at any other question last sorry to identify impact everything else there.
The next question [laughter] pilot with them Berger. Please go ahead.
Yeah, Hi, I've got a couple of questions first one would be whether youre seeing any sign of.
The <unk> gardens being more accommodating in the context of the anti trust investigation instead of being opened up.
And the second one in terms of classified are you seeing any distinction between.
The kind of classified sites I think I'm. The big we spoke to you is is in the job's area. He could correct me if I'm wrong.
'cause. It was you were seeing strong numbers coming out of classified sites it in kind of other areas.
Second would just be can you comment on the revenue ex Tac knowledge and it's obviously coming down sequentially is that just a function of mix in terms of retail media are becoming a bigger and bigger part of the of the total revenue. Thanks.
Okay I can only I can start let me jump in on this one Sarah Sarah I'll talk about the guidance for a second and then I'll pass it across to you Sara that's okay for the class upsides commentary and the margins.
Oh on the bowl gotten Sarah there has not been a there's not been.
A dramatic change there I mean.
You know, Google I'm, continuing to sort of work towards that timeframe for for the crime upgrade to to stop the use of third party cookies.
I haven't seen any push now I think I said last time around when we crossed about this is that we are moving away from this regardless like we're not sort of hanging anything on maybe they'll change their mind, but it's not the route that we got and we think that it's time to take another direction anyway and so our.
Product sales mapped out partnerships are all related to I'm not being dependent on third party cookies, but to your question, we haven't seen as much as shifts or a change in mindset from Google. We do know that there is a lot of there's a you know a lot of pressure on them to do to to make sure that they're not and.
He competitive and and so you know we have some insight into that but it's it's you know it's not changed the way that we cooperate and work with Google, which is a strong relationship as you saw from the Starwood, we did with with them.
Oh, sorry, do you want to grab the classified some margin piece no yeah, yeah, absolutely I'm on the classified so we're actually seeing some really good yeah, I would say get new sets and definitely traction on both the job market and real estate and Asia or even in the last couple of weeks is as it's coming around on that so.
Were pretty encouraged by EPS by classified but obviously you know massive massive change fastest last year, especially in the travel space. So, yes, definitely up ticking down there, where we have factored that into into out guidance says I tried and tried to look in a pretty pretty good that in.
Because the intended to the margin you know I would say we have a this quarter. We obviously when I see some expect more expenses and trade at the kind of cute so too low a wall smoke you know it.
We are spending a lot of time focus or knock on a call space. So yeah much in Oh, I would say, we're not seeing any major kind of concern. So we always see a very focused on that but yeah. We will we don't give out necessarily kind of we'd have to look at that business from a kind of specific area. So overall margins.
Overall, the cost base is looking you know looking healthy run rates for our head count is kind of going into right direction, obviously discretionary spend no and then all cost of no acquiring inventory I'm ready depends on the market and with the way we buy a small at least.
We feel good about that and I would say margins are where we expect it to be I mean, we're not necessarily looking to any big changes that from a modeling that's that too.
Right. Thank you so thanks, Meghan and thanks, everyone for joining there's no concludes our call for today you are teams available for any additional request.
A good rest of day impeach they said thank you.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.
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