Q4 2020 Criteo SA Earnings Call

Participants will be in listen only mode should you need assistance. Please press the star key followed by zero. After the prepared remarks, there will be an opportunity to ask questions to ask a question. Please press Star then one to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Edward.

S L Senior Vice President of market Relations and capital markets. Please go ahead.

Okay.

Thanks, Jason Good morning, everyone and welcome to <unk> fourth quarter and fiscal year 2020 earnings calls, we hope, you're all keeping safe and well.

Joining me on the call today are CEO, Megan Clarken, Chief product Officer, Todd Parsons and chip so sorry.

So everyone's convenience, you'll find our investor deck on our website.

Before we get started I'd like to remind everyone that our remarks today will include forward looking statements. These statements reflect kudos judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting <unk> business.

For more information please refer to the risk factors discussed in our earnings release as well as our most recent form 10-K and form 10-Q filed with the SEC, we do not undertake any obligation to update any forward looking statements discussed today, except as required by law.

We'll also discuss non-GAAP measures of our performance on the call debt.

<unk> and our reconciliation to the most directly comparable GAAP metrics are included in our earnings release published today.

Unless otherwise stated all growth comparisons made during this call are against the same periods in the prior year with that it's my pleasure to know handed over to Megan.

Thanks, Ed and good morning, everyone and thank you for joining us today I hope everybody is thanks day.

Oh Wow.

Closing on this past year, you'll all agree that 2020 was on President said, yeah by any standard interest.

Despite an extraordinary backdrop I couldn't be prouder of how much were the cheap as a company during my first year of leading the company's transformation.

We kept on People's sites.

Inefficient went from high model, we increased our focus on E commerce across our entire business.

We have the clients cheap at marketing monetization objectives.

Riding the campaign performance strong ROI right now on for time and time again.

They accelerated pretty on its transformation plan to return the company to sustainable price executing with great income VIX.

Ken.

They live at 97% by our original top line guidance set before the pandemic.

100% about original profitability packet.

I'm hugely grateful encouraged by our amazing team for their strong performance and I want to thank all of our associates for their passion dedication and discipline.

Cloud to transform ourselves into a new credit yet that we are today.

Together with Todd and Sarah will discuss all key topics on our call today.

And multiple changes with my other Cros Caribbean.

Set us up for sustainable growth.

Second.

Now I'll comment on media platform strategy positions us for success.

Good day or product areas of focus off of 'twenty 'twenty one.

Before how about solid execution allowed us to perform in 2020.

What that means throughout 'twenty 'twenty, one growth momentum organization capital allocation as we continue to transform ourselves.

Starting with a quick look back at 2020.

Not only did we achieve a lot but he also made multiple structural changes that debt pretty well.

For profitable growth ahead.

A bright spot clients, our clients' first focus putting our customer needs from marketing and monetization at the center of the organization and.

And moving all of our teams in lockstep to support them.

We will find out product vision product strategy use of assets and transformation plan.

Expand much deeper into E commerce and return to sustainable growth.

We increased our focus and investment in E commerce through retail media, which is now positioned as a central piece of that comments made on media platform strategy.

We reshaped the entire C level leadership and created a transformation office to assume smooth execution of our plans.

We strengthened our roadmap to deliver new products and.

Quoting out focus on extending our leading first party data assets and unique identity capabilities.

The competitive moat.

We adopted a much more I can approach to partnering with the industry and signed more partnerships in 2020 and on any other year before.

And we reignited the culture of innovation performance and accountability.

Growth and execute against growth opportunities that take full advantage.

That unique assets.

All of the above we did three solid planning.

So what for decision making.

Focus on high standards of execution.

Focusing specifically on gross now let me drill down on what we see that's further validating our strategic direction and Commerce media, which we talked about on.

On our last call.

To remind you.

The commerce meatier opportunity for US is based on cardio is from road position operating at the intersection of E Commerce.

Marketing and media monetization.

This intersection means that we ship, but the buying and selling of advertising and promotions of goods and services.

With a strong focus on E commerce across a massive Nate what you think first part of your identity and commerce data.

Our focus is on being the leader in marketing and monetization for comments outside of the walled gardens.

Let me give you a few of them.

A few examples that bring this to life.

During the Q4 holiday season, according to new very well how important the shopping season would be after an incredibly challenging year.

The new dynamics of more people shopping from time introduced uncertainty into a shopping season.

They needed to get right.

And then in the case on some retailers, it's a matter of long term survival.

It's the holiday season on a large deal based retailer came to us with a double challenge for their marketing and monetization.

With the marketing.

Needed to address new shopping behavior, and the potential shopping down the funnel to close the conversion rate.

We designed a full funnel audience strategy for them to drive consideration from non biased.

And engage previous fires leveraging online and offline data to drive more conversions.

To their E commerce sites, but this we drew on our growing suite of Commerce media capabilities.

Now commerce data.

Recommendation predictive billing created suites.

And brand safety capabilities.

Other AD monetization the same client wanted to capitalize on growing E commerce traffic to support their focus on building strong ad revenues.

They used our retail media solutions for that goal.

We held on board, we helped onboard and trained immediate team through a series of education training sessions across operations.

Analytics and sales.

I have a role on patient within the cross marketing and monetization helped this quantum achieved tremendous results from Q4.

Contributed $9 million in revenue ex Tac to our results up 40% year on year.

Now as the old Chris here.

Targeting only company.

We would not have been able to offer what I just described.

This is on new direction for 'twenty and 'twenty, one we havent ambitious plans to further expand that relationship with this client.

During on growing capabilities across that Commerce media platform.

In another example, a leading E commerce player on France, primarily in on for retail.

Wanted to build brand awareness for the new travel services, expanding that portfolio and the busy ecosystem is key to them to stand out from their competitors and bring more value to their customer base, while growing it.

It's a travel audience is less receptive to more traditional media, especially during the pandemic.

We suggested a broad based video campaign.

We targeted high quality audience is showing traveling five video and across multiple premium publishers on the internet.

It helped them at cheap that brand awareness objective with top of mind uplift.

While driving strong traffic on net new travel services.

This campaign brought on awareness uplift of more than 30% from a.

The client.

Growing and expanding our assets and capabilities, leading to a continuous increase in precision reach and performance for our marketing and monetization said that's it.

For instance, we continue to build on our secured and consented privacy safe first party data.

We know the consumer is we know what they like and other dislikes and what they buy and the status it keeps growing.

Now, let me tell you what I mean by that and why it's so important.

In 2020 alone our vast client relationships and processing power allowed us to ingest a $2.5 billion of daily transactions from other 21000 comments clients across 4 billion product Skus.

And three on a half thousand product categories.

Now this first party Congress day to CIT remains.

So like the central the mapping and understanding every step of the consumer journey, especially for E Commerce.

Stay there is established through direct and privileged integrations that retailer clients enable cookies.

Okay.

Targeting and re targeting across that promise media ecosystem.

Finally, <unk> has his comments day there at scale, if you look across the independent AD Tech landscape and as I said it keeps growing.

What's more we have unparalleled tech infrastructure and AI to make sense of this massive dataset.

And make it work hard for our clients.

During the peak of the holiday season, our technology was able to support 445 billion bid request on a single day.

This was a 13% increase year over year.

We regularly evaluate other 64 million campaigns per second using our AI engine.

Every additional data point that lens from now I like it even faster and smarter.

We know that we've barely scratched the surface of what we can do here.

Commerce media strategy is only just begun to uncouple, what's possible and Todd will talk shortly to you about our progress there.

Important to note is that we believe outdated will propel us possibly identity challenges that will soon affect the rest of the bucket.

The impact of these challenges could be significant on the IPO market in particular for small businesses.

In partnership with our clients the constant and face protection of first party data is the foundation about identity strategy.

That's first party cookies go away and with Iowa's 14 changes will further lean into our price position and continue to offer our clients the citizens they need.

This would essentially have us leapfrog the competition and we believe we're in great shape.

Outside of what will be otherwise from market stone.

And that's why these assets are so important.

We've talked about our commerce data I'll take infrastructure and AI is quickly switch to the breadth of that media network across thousands of open Internet publishers on retailers and let me illustrate to you why this is so important in driving new revenue for our clients.

Our extensive media network provides market is the ability to reach their audiences and customers with scale and precision. Thanks to privileged access to highly attractive AD inventory across premium media properties and away from walled gardens.

Premium publishers like NBC flow.

On the Wall Street Channel, Forbes and IBM Watson advertising give us direct access to the inventory.

To deliver the best yield correct units combined with advertiser demand at scale and consumer friendly and brand safe ways.

As a result, we get trusted privileged and deeper integrations into the immediate properties.

This doesn't stop at traditional and digital media publishes the more and more burnt clothing retailers as well.

All E commerce retailers like target Costco Bestbuy nicely also provide us with access to the media and good trade because they know our solutions would generate high margin Edgar and the need for them.

And can see on the brands with their audience and promoting their products through our E commerce native advertising directly on their on.

Line shops.

For example, now well know on U S grocery delivery service wanted to.

Capitalize on the shift of CPG brand dollars to retail media as many consumers buy more feet on CPG.

CPG products online due to COVID-19.

Through our engagement.

Client group its E commerce site monetization through sponsored ads.

Over 150% year over year to more than eight $5 million of high margin brand spend.

These coins story showcased a range of solutions, we offer and illustrate alcohol on this media strategy coming to life.

It's very early days, but we loved the traction that we're seeing here.

Looking at our transformation momentum now we're already generating positive results our focus on the growth of the company has required us to better utilize that asset.

Remember these assets previously only focus on on a re targeting product.

We're expanding the product suite and growing the uptake of new products across existing and new clients.

We're transforming pretty good.

To return to growth, which is exactly what we're executing on.

And from a larger portfolio focused on commerce, our recycling product continues to perform.

On new products now represent revenue ex Tac of about 150 million plus.

Close to 20% of that business and grew close to 50% in 2020 with strong growth across the board.

Good day retail media already works with over 50% of the U S. Top 25 E commerce retailers and other 50% of the top 20 European Commerce retailers.

Who run on online monetization program.

Given our strong momentum on highly differentiated capabilities.

For retail media. This is just the beginning.

Our retail media is a central piece of our commerce media platform with over 50% growth.

All of that on these solutions are growing and continue to grow from.

We're investing in these new solutions and also doubling down on investments in video and C. T D.

We said that growing audience targeting to brands.

Our ambition is to continue to grow on new solutions like close to 50% in 2021.

How attractive growth rates in emerging growth areas validate our strategic direction.

Bridging favorable market trends Congress focused capabilities from marketing and monetization.

And a deeply rooted growth culture across the company.

In short, we see pretty other combination of commerce focused marketing and monetization capabilities is truly unique in the marketplace.

Connecting brands and retailers to the consumers based on their shopping behaviors across the breadth of security and network.

Reaching $2 5 billion consumers won't richly monetizing retailers on publishers inventory at scale is highly differentiated.

We believe on acreage here has the value proposition for brands retailers and publishers on the open Internet.

And work ahead of us to continue to take full advantage other unique catch thrill Commerce media strategy.

<unk> to sustainable growth.

And drive value for our shareholders.

Looking at what this means for our priorities the team and I are laser focused on three things for 'twenty and 'twenty one.

First growth.

Focusing on the strong secular trends in E commerce accelerating the momentum with bell.

Making the right thoughtful decisions on investments in attracting and retaining the best and brightest talent out there.

Second execution and everything that we do.

We nurture a culture of high performance and accountability with a high we do what we say well to discipline.

And lastly, first party data using our unique and protected first party data assets across our network of advertisers and publishers.

To strengthen our competitive moat and leapfrog other market players challenged by the third party day to consents.

We'll of course update you regularly as we progress on our priorities and with this I'm.

I'm pleased to turn it over to Todd who will take you through some of the key product areas of focus for 'twenty 'twenty, one and I'll be back shortly with closing comments.

Al.

Thank you Meghan and Hello, everyone from San Francisco.

On our Q3 call I touched on the importance of several critical assets I'd like to reinforce our direct assets pardon me our direct access to vast amounts of first party identity and commerce data.

The AI, we apply to make predictions about consumer needs that drive commerce outcomes and the vast reach of our direct retailer and publisher network.

As Meghan said, our combination of assets makes a pretty old completely unique amongst independent AD tech companies.

They constitute the raw material, we use to continually deliver superior marketing outcomes at scale, while navigating challenges posed by changing browser features operating system policies and data privacy regulation.

Since our last call our delivery of new product has come into sharp focus and we've made tangible progress with what we're building on.

I'm going to walk you through some of our product investments in more detail, but before doing so I want to share the two objectives that drive our 2021 product plan.

First returning <unk> to sustainable growth and second future proofing, our business for the benefit of marketers publishers and the consumers they collectively serve.

Using these objectives as our compass, we built our product roadmap around six key initiatives three.

Three of these focus on returning <unk> to sustainable growth.

First we're expanding our performance audience offerings to address the full consumer journey from discovery to purchase.

During the Q3 call I shared our vision of building a completely differentiated contextual marketing solution.

We're shipping the N V P of that product in late Q1 and have secured notable brands for our testing.

What makes our approach to contextual truly different is that we're using first party data to out of commerce signature to the content consumers are reading and watching across the open internet.

This enables us to go beyond traditional contextual influences of interest and intent to indicate what combinations of content are actually driving purchases.

Since our last call. We've also graduated our investment in Google's privacy sandbox shifting focus on resources towards testing the efficacy and impact of cohort advertising on our ecosystem on.

Testing approach is designed to provide empirical evidence that cohort advertising will benefit all system ecosystem stakeholders and in partnership with Google to shape the end solution Accordingly.

And of course, we continue to be laser focused on preserving addressable advertising at scale without a third party cookie.

Whether re targeting or other outcome based use cases.

While we do this we're also making solid progress in testing cookie less advertising channels like C. T V.

Our active partnerships.

Our second growth initiative is focused on bringing new advertising dollars into career. He owes network here, we've taken a big step forward by launching our API partner program into general availability.

Critical API has paved the way for brands retailers agencies and partners to directly leverage the world's leading commerce media platform and to build customized solutions that produce more value using our core assets.

I'm pleased to report, we successfully beta tested with more than 100 global clients and tech companies Red.

Red bubble foot locker and Blue core are just a few notable clients and partners we're thrilled to serve.

Next up we'll be adding API access to our existing support for first party data integration.

Finally, our third growth initiative is to drive new stakeholder monetization unlocking value and audiences and advertising inventory in new ways.

In addition to the incredible progress, we're making with our retail media partners. We're actively working to drive more value to our network of 5000 direct publishers.

We're working directly with select publishers and have deepened our investment in pre bed to test a healthy pipeline of data and media monetization products that promised new revenue and higher yields to our publisher partners.

Our investment here is very important as it strikes a balance between publisher and advertiser needs and will ensure the entire ecosystem around our commerce media platform thrives.

Now that I've covered our new growth products and some detail I'd like to illustrate the potential of using the example of a large retailer in the home improvement sector here in the U S.

This retailer currently spends $180 million a year on digital 60 million of which goes directly to the open internet, where our most immediate opportunity lies.

Of this $60 million opportunity, we've captured 7 million in annual conversion stand just on re targeting.

Equivalent to a 12% share of wallet.

By future Proofing, our business using first party data will not only preserve this re targeting spend but be able to grow it over time.

In addition, as you can see on slides 18, and 19 of our investor deck by packaging New solutions from our Commerce media platform across both audiences and monetization. We believe we can quickly triple their spend with us to bring our share of wallet to 36%.

To be clear this is a potential run rate, we're aiming for as we go into 2022 and beyond with a client like this one.

It's an imperative for us to enable this growth by future proofing <unk> business.

Our industry has a monumental challenge to simplify the interoperability of first party data between partners.

By this I mean, all workflows that combine activate and monetize first party data at scale, while respecting the data rights conveyed by its owners.

Powering safe and secure multi party interaction around first party data is not only what pretty Oh does incredibly well.

It's simply the future of media on the open Internet.

Against this backdrop, our first of three product initiatives focuses on simplifying our partners use of their first party data with pretty low.

Here, our intentions to go well beyond the important table Stakes of data security anonymous Asian, and multiple paths for data on boarding.

We're adding something the industry sorely needs a rights management layer to safeguard how partners first party data is managed and utilized and two items.

We believe that this capability will encourage first party data to flow freely into our ecosystem and speed the success of our future proofing initiatives.

Our second initiative is to replace the third party cookie.

With an alternative durable identity to ensure first party data can flow freely across our network.

Since the Q3 call we've gotten into a regular development cadence with the trade desk around Universal I D. Two point O or you I need to point out.

And open source I E framework created for the benefit of our entire industry.

In addition to testing already in progress with buying media on live ramps identity line.

We will soon test buying media on the U I D too.

With these partnerships, it's important to remind everyone that our end game is to provide the broadest addressable audience reach and advertising opportunities through our commerce media platform.

Finally, our third initiative is to engage consumers directly on behalf of our stakeholders to help them understand and manage other data is being used and to enforce their advertising choices across our network.

As we laid out on the Q3 call radio was developing a single sign on service, which fronts you I D two and other identity frameworks.

As part of the OID partnership we're also co developing the privacy and transparency portal.

Where consumers will be able to manage their data and advertising preferences.

Our aim is to open source these capabilities for the entire industry to benefit.

We're in process of testing and refining the service with consumer audiences and being especially prudent about getting user design, absolutely right before going broad with publisher at market or testing.

Together these three initiatives form our first party media network.

To sum things up each of the product initiatives I've outlined whether aimed at a return to growth. We're at future proofing, our business is grounded by and Leverages. The vast amount of first party data we uniquely access today.

We believe this differentiated set of first party data solutions will create an increasingly strong competitive competitive moat for video.

And with that I'll now turn it over to Sarah for a discussion of our operational and financial performance.

Sarah.

Thanks, Todd, it's an exciting time for clarity I good morning, everyone.

I will discuss how our solid execution across our strategic pillars drove out performance in Q4 ends in 'twenty, 'twenty and I'll share our financial outlook for 'twenty 'twenty one.

Let me start with the headline numbers.

Revenue grew 1% in Q4 to $661 million and was $2 $1 billion in 2028% down for the year.

As you can see we beat guidance for revenue ex Tac and adjusted EBITDA largely due to an extended cybersecurity for all U S and European E Commerce customers.

On a non-GAAP basis revenue ex Tac was $253 million in Q4 and $825 million for 'twenty 'twenty.

$25 million above our expectation.

Revenue ex Tac was 6% down.

Scent currency versus Q4, 2019 and down 13% for the year.

Q4, adjusted EBITDA of $103 million drove a 41% margin and translated into 251 million to other city yes.

This resulted in an adjusted diluted EPS of $2 17 in 'twenty 'twenty.

Free cash flow for $120 million, representing a 48% conversion of adjusted EBITDA in 2020 day.

The highest level since 2014.

Revenue ex Tac declined represented a 10 percentage point improvement versus Q3.

We estimate the negative impact of Covid was $26 million in Q4 or about 10 points of year over year impact.

With 95% of this impact from lower spend in traveling on classifieds.

In fiscal 'twenty 'twenty, we estimate the other real COVID-19 impact on revenue ex Tac at $106 million or 11 points here right. So yes.

60% of this impact within travel, 35% in classifieds and 5% related to retail, including urology with bankruptcies and the curtailment of spend by a lot of Korea based marketplace.

Excluding the estimated COVID-19 impact from these vertical customers.

Revenue grew 10% in Q4 and 3% in the GAAP revenue ex Tac grew 3% in Q4 and only declined about 1% in 2020.

Our revenue ex Tac margin was 40% in 2020 average.

Churn of two points of revenue in.

In line with expectations to the in force.

Moving product mix of our business.

Identity and privacy, what's an estimated $16 million reduction in Rev. Ex Tac in Q4.

37 million to other 'twenty 'twenty four.

For the year. This represents an impact of $10 million from explicit consent in Europe, and 27 million to other from browser restrictions globally.

Okay.

Let me now walk you through on solid execution related to our four strategic pillars that drove our performance in Q4 and the fiscal year.

On our first pillar.

On the cool a strong performance in retail team across all regions in particular in the Americas and EMEA was the largest driver.

But in Q4.

Relative to price is and as expected with booming E commerce, the holiday season with less concentrated around the traditional cyber six peak surrounding black Friday and represented a longest cyber threats he cos.

We added about 900 net new clients from Q4, the highest level for the past 15 quarters.

Well distributed across our entire business over 70% of these client additions related to re targeting with a large pile up sold to targeting campaigns as well.

With regards to our existing client business second line revenue ex Tac price of minus 1% in Q4 improved 10 points relative to Q3 and was a positive 10% excluding the estimated COVID-19 impact this.

This clearly highlights the healthy positive momentum underlying our core business continuing into Q1 'twenty 'twenty one.

Yeah.

With respect to our second pillar expand our portfolio New solutions grew 38% in Q4 to 24% of total business.

In 2020, New solutions grew 47% and represented about 20% of other business all day.

On your solutions with strong in 2020, with omni channel grabbing 120% audience targeting that 32% and retail media up 53%.

Q4 retail media continued to grow strongly at 41% accelerating from a tough comp from Jeff with terrific results for large U S retailers and despite the continued supply chain issues in the consumer electronics supposed to cool.

Is it more brands and retailers to our retail media platform and as Meghan said, our retail Cup media customers represent the type of 50% on the top 25 equal unless we tell us in the U S and I said, 50% of the top 20 in Europe.

Recent additions include selection as the preferred provider of retail media solutions globally by one of the worlds largest retailers based in Europe.

We believe that this the other than others will enable continued momentum in retail media in 'twenty 'twenty one.

And on the third pillar explore strategic game changes, we continue to work with industry partners to strengthen I'll call mass media platform with new API capabilities offering new functionality as a measurement for customers.

In Q1 this year, we launched <unk> video and CTV campaign for brands and already see strong momentum in media spend.

Finally, with respect to our fourth pillar drive Tech and operational excellence, we acted fast and executed decisively in 2020 to reduce our cost base drive EBITDA and ensure liquidity.

At the same time, we continue to invest in our growth investments and ensure disciplined cost management.

We're investing in our transformation I will call less media platform growth initiatives in 2021, including in retail media first party data.

She'll advertising fitness C T V and commerce insights.

Growth investments are funded from the vice puffy productivity and cost savings, enabling top line leverage as we commercialize new products and capabilities.

Yeah.

In Q4, non-GAAP expenses were $150 million down 4% in 'twenty, 'twenty, non-GAAP expenses declined $74 million or 11%.

This included a $42 million or 11% reduction in employee costs.

Excluding a 21 million ton increase in bad debt provision in 'twenty 'twenty largely related to U S bankruptcy risks earlier in the year, we reduced non-GAAP opex by $103 million or 18% in 2020.

This is a significant achievement.

The steps we took in 2020 designed to right size, our cost structure maintain competitive mis and generate reinvestment capabilities, including hiring freezes and optimizing our real estate footprint and hosting costs for the future.

We closed 2020 with about 2600 employees down 6% year over year basis.

This includes an ongoing shift of R&D and commercial resources from rounding our core product to building a set of new products.

'twenty 'twenty, one and we will continue to align our global organization to our customer needs.

We will relocate some teams to global and regional hubs to enable agility and operational effectiveness.

As you can see in on non-GAAP reconciliation, we incurred $20 million in pre tax restructuring and transformation costs in 2020 income.

$4 million in Q4, largely related to real estate in San Fran its costs.

With additional cost actions in 'twenty and 'twenty, one we anticipate to income about $20 million to $25 million in pretax restructuring costs. This year split between real estate portfolio reductions and employee severance.

Yeah.

Moving down the income statement, our G&A expenses were two 6% in 2020 and I'll share based compensation expense decreased 36% in the year.

This combined with our business performance and cost management, that's a 14% increase in GAAP income from operations in Q4.

Financial expenses were <unk> $4 million in 2020, and our GAAP effective tax rate was 30% net.

Net income increased 13% in Q4 on was down 22% in 2020.

Weighted average diluted share count was 62 million in both Q4 and the year down 6% in 2020, that's when we sell a share buyback program.

Diluted EPS was <unk> 73 sets in Q4 and $1 16 in 2020 and adjusted diluted EPS was <unk> 98 cents in Q4 and $2 17 for the year.

Free cash flow generation was $22 million in Q4, and 120 million into other things twenty-twenty, reflecting better collections and other capex.

48% conversion of adjusted EBITDA into free cash flow was the highest level for the past six years in 2020. This is a great achievement in a tough yes.

Our balance sheet continues to be very strong and we closed 2020 with $530 million on cash and marketable securities. After repaying the revolver draw down of $164 million in November.

We will look to maintain flexibility in our capital allocation to placebo panic and potentially inorganic investments and while remaining very selective in our approach we have an active M&A pipeline focused on low growth areas.

So our board has authorized a new share buyback program of up to $100 million.

I'll now provide our guidance and business outlook for 'twenty, 'twenty, one which reflect our expectations as of today February 10th.

Unfortunately, our key assumptions for this guidance is that we are in a new normal with continued impact from the pandemic driving even higher E commerce, a backdrop of muted.

Global economic growth and continued challenges to the traveling on classifieds verticals.

We're also closely monitoring the impact of I O S 14 changes over the coming months.

For fiscal 'twenty 'twenty, one we talk to low to mid single digit growth in revenue ex Tac at constant currency and adjusted EBITDA line and above 30% of revenue ex Tac.

This means an improvement of approximately 16 points of year over year growth at the midpoint compared to 2020.

Now moving to I'll call mass media platform with seamless launches of new products and expect price and revenue ex Tac to progress throughout 2021 accelerating in the second half of the year.

Our ambition is to grow new solutions, including retail media by around 50%. During 2021, we expect on your solutions to represent close to 30% of revenue ex Tac in 2021, we.

We have assumed incremental identity and privacy impacts of about 60 minutes on this in 'twenty, one relative to the 2020 run rates and on the cost side, we anticipate flat expenses compared to 2020 with about 40 million to other cost savings funding new investments in our growth areas.

Yeah.

Due to the use of former Nols and one off items in 2020, we expect to have annual effective tax rate to increase from 30% to about 32% in 'twenty and 'twenty one.

We anticipate to maintain our share count flat throughout the year.

As we head into Q1, we see continued solid performance from retail in the U S and EMEA and good traction in all Commerce media platform with accelerating momentum in retail media and continued solid growth across all our new solutions.

With almost a year into the pandemic, we expect around $10 million of incremental COVID-19 impact compared to Q1 last year all day.

Driven by travel, we expect that all Japan classifieds business will continue to be soft given local lockdowns.

Taking all of this into consideration with guidance for revenue ex Tac in Q1 of around $200 million or a 4% decline at constant currency.

It's $6 million of incremental identity and privacy impacts relative to the 'twenty 'twenty run rate.

On the profitability side, we expect Q1, adjusted EBITDA above $60 million or 13% margin as we anticipate expenses to decline by around 10% year over year.

As the CFO my priority for 'twenty 'twenty, one is clearly to continue to foster profitable growth and operational excellence across Cray T O.

We're focused on ensuring proper resource and investment allocation 12 priority growth areas. We are partnering with the commercial team twin crisis increase our share of wallet with E commerce customers and and as agencies.

Our product marketing and sales teams are collaborating closely to replicate customer success stories showcase new products, an increase on cost of cross selling.

We are also very focused on process and organizational efficiencies as we continue to evolve our operating model and we'll make sure to allocate capital to its highest value use case across organic and inorganic investment opportunities, while maintaining flexibility for shareholder returns.

In closing 2020 has been nothing short of an important transformational year for <unk>.

We are moving fast and executing with discipline and focus on our strategic vision and product roadmap.

Cited about plans to put <unk> back on a sustainable and profitable growth trajectory in 'twenty, one and beyond with that I'll hand, it back to Megan for closing remarks.

Yeah.

Thank you Sarah.

In closing I'll say, a few words about what makes me confident.

That will succeed through our transformation to comments media platform and return to sustainable growth.

And this is because we have all the right things down there on the right direction.

Massive E commerce, Taiwan's and increased Tam.

Superior's comments meteor assets and capabilities from marketing and monetization that no one else patents on the open internet, including global reach.

21000 advertisers across 100 plus markets.

Extensive commerce day, either in a unique highly differentiated first party media network.

We have a solid product roadmap to return to growth and future proof the business.

New product offerings, and entering that already support out strategy growing at around 50% and expect that represent close to 30% of that business in 2021.

Our strong balance sheet supporting our investment plans to further transform our business.

And our commitment to thoughtful.

Execution and delivery against our strategic plan.

But transforming into a new cristiana strategy of creating the world's leading commerce media platform positions us for success and sustainable growth.

We have a compelling comments focused opportunity ahead of us to create long term value for our shareholders.

We'll be happy to provide more details on our strategy and execution roadmap.

During our Investor day coming up on the late spring.

Please stay tuned.

I'd like to open the floor up for your questions.

To ask a question. Please press Star then one for using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

On the first question is from Sarah Simon from <unk>. Please go ahead.

Yes, hi, everybody I've actually got three questions on a first on sorry, you gave an assumption about the took that COVID-19 on the impact through 'twenty. One when do you think king travel starts to come back in terms of spending on all you're seeing any sign of that yet.

Second one on kind of a general question can.

Can you talk about the difference between your retail media product and on Amazon I think a lot of people still if they really understand what it is that you're doing and maybe Amazon is a good benchmark to start with and then the third one in terms of C. T V. I'm, assuming it's very small in the mix of revenues today do you think that is a product that you'll be use.

Moving on.

For more for re targeting them off on upper funnel products. Thanks.

Sharon I'll take the first from and then I'll take the yeah I can answer that.

Yeah, Hello, Sarah Yeah for travel, where we are seeing that we're about 75% to 80% down year on year still we have I would say a more aggressive assumption throughout the year and obviously all of us I hate him to start taking some trips and so were still seeing it seem like pretty muted in the channel.

Jamie we're ready for when it comes back.

Yeah.

Right.

Let me take the second one and thank you for asking it.

It's important to I think.

Lay out the differences between the two.

Let's see we've been.

Fear of ambition about to become their Amazon advertising on the open Internet.

Let me use that as a framework to explain.

The E Commerce landscape as you know is is massive and it's predicted to grow at about.

Nearly seven trillion dollars by 2023.

So it's certainly you know got room for both of US. There is some it's a extremely healthy place for us to be sitting outside outside since specifically with the assets that we've got.

We focus on the open Internet and remember Amazon is very focused on Amazon platform, and secondly to get there advertising out to the open Internet and the open Internet takes up about 38% of debt total gross merchandise value that I talked about before so.

Inside of that $6 eight trillion on seven trillion, 38% of pets actually the title of the.

Internet and that's the area that we play.

We have huge economies of scale.

So when it comes to being able to stand up against an Amazon advertising in that space.

We process about $900 billion, a year and online sales.

Which is bigger than Amazon, it's not apples to apples comparisons comparison, but it's a big alone then what Amazon processes. So we have the scale to be able to.

To be able to stand up there.

Now the big differentiator for US I think is around the open Internet al open Internet focus and what we're doing around first of all first party network, which Todd talked through before which gives us a clear advantage.

And Amazon State.

On the case.

They know who their consumer is if there a registered.

Amazon user and they locked in but once they get out of that domain and once they get to what we call off sites no longer on their platform.

They have to try and find a way to connect their own registered user to the same person off debt of nine and the way to do that.

He's just third party data.

When third party cookies go away they have to find a way to be able to connect those dots.

And that's why we think we have a massive advantages because of L. A where we sit in terms of what we do for the open internet today and the massive amount of data that we have on the first part of the strategy that were going on stuff we can.

Use of first party networks to join the dots across the uses on the open Internet and also will use the you widely in other ways to identify and joined the pieces and I think as Todd said, so eloquently before the future of.

Oh from Meteor AR on the open Internet is about first party data on oxo. So they they have a challenge in front of them.

So look I think.

I've said it a lot but in summary.

We do believe that the Golar thing and it's on advertising. The open Internet South are we do have access to 38% of that $6 eight trillion dollar pie.

In that regard we have strong purchasing power, we have a debt first party data or access so we're highly differentiated.

And hopefully that's helped with the with the question let.

Let me jump really quickly that keeps you basically see CTV as a channel.

It's just it's a.

It's a it's another channel on the same way as a desktop and mobile channel. It carries video standard motion. It doesn't carry on a lot of advertising right now and Oh focus being E. Commerce. It certainly doesn't carry a lot of E commerce advertising now or addressable advertising.

So while its out there is something that we are.

Leaning into and making sure that we're on the right price at the right time for is if this should progress.

This is on E commerce, that's where our business is going and any channel that carries a E. Commerce advertising is what we are most focused on first.

Alright thats helpful. Thanks.

Great. Thanks.

The next question is from Matt Thornton from Truest. Please go ahead.

Hey, good morning, Thanks for taking the question I also have have three and I'll try to be quick here I guess, just first maybe maybe from Megan on for Todd. If we think about the retail media business is there any way to help us.

Think about how it stands right now maybe kind of SSP revenue versus DSP revenue.

Self serve versus.

Full serve our manage serve.

And again, when we think about the self serve our unit economics of that product is there any reason that they are dissimilar to what we'd see from other publicly traded types of DSP and SSP is why don't I start with that one and then I'll come back on my second line.

Taught you.

To take that one.

Yeah, I can I can take this one.

So I mean, I think first of all the debt.

On the emergence of that business.

And kind of the change in in our.

The profile of retailers from from being you know just just a M and a place to buy things as opposed to you know a place to discover and learn about it and in fact on media outlet means that we are doing you know much more in terms of being you know an S. S. P.

<unk>, if you will to to to those partners and at the same time.

We are servicing many other than with the with our with our DSP offering with our demand doctoring and well you know what we're seeing is that Fuller basket is is being driven by is driving pardon me a lot more interest and demand.

And from those parties. So the fact that we can bring customers in and we can provide monetization at the same time.

Is is something that signals I think are a very important difference in our market place and so as you heard me talk about before and we are adding quite a bit to the native <unk>.

Media monetization products on retail media.

And we've got a very healthy pipeline there.

We're also looking at ways for our partners to monetize their data through audiences and audience.

First party audience information.

On that goes with that so I would just say you know were.

Were not traditional as an S. S P.

We're actually.

Doing things that are much deeper in a retailer stack debt, then providing an advertising on media solution.

And we're very data focused so those two are coming together you know.

In a in a powerful way in terms of access control surfaces.

We have had self service capabilities on both sides of our business. You you can expect as we go forward debt you know the debt that those things will come together that the those control surfaces will merge because.

And in many ways, that's where the market is going on and what is needed.

So you know the this this kind of somewhat artificial separation between supply and demand is harder to keep clean.

When you have the the changing forces in the market that I described them. So you know retail media is going to be 100% self service soon just to be more specific in terms of its deployment.

We are pushing hard to get many more of the the customers that are coming on you heard Sarah say that.

Just in this last period and you can't do that without being pretty.

Pretty decent itself service right. So those two are our our big investments and they're going to be emerging over time.

Hopefully that helps.

That's very helpful. And then just the two other ones. The first one is probably for other other tighter Meghan ended up but maybe the last one for from Meghan.

Obviously google's touted there.

Their flock solution for cohort advertising recently and talked about the effectiveness. There I'm curious if that in any way changes how you think.

Your core kind of re targeting business will look on the other side of those chrome changes if you could talk to how important or not important.

Perhaps that is and then just final question maybe from Mega when you think about.

The two sides of the other business the retail media business. If you look at some of the valuations out there around AD Tech that are certainly re rated recently and then kind of the core retargeting business.

When you think about valuation on where you sit right now I guess, how do you think about cardiome as a potential M&A target how do you fend off M&A.

I guess, just how are you thinking about day in the broader in the broader landscape, but any help there would be would be great.

Okay.

Let me take the block.

Yeah items.

I'm, sorry about about that Megan what so the plotting I'll just be quick on this one we've been working with our with Google since the beginning of the of what I call. The bird proposals and and you know we're now we're at a place where as I mentioned before you know we're all about about it.

<unk> been testing so the the the 95% number that came out a couple of weeks ago. As you know that's pretty that's pretty impressive, but it's not testing that we've done and it's not external to Google. So we're you know we're all very hungry to continue to invest in our partnership and see how the.

How flock plays out how cohort advertising plays out as we implement it and as I mentioned during the prepared remarks that you were very invested in that at the same time you asked about re targeting them. We are just incredibly focused and yeah in terms of preserving that opportunity for the company.

By bridging first party data between all of our stakeholders and we're going to continue to in parallel with what we're doing with Google on block investing very very heavily there and then finally I mentioned our non cookie.

And of course, getting contextual to market as fast as we have them in a different way something that is unique and very commerce focused is the first of a good lineup there and so we've got the non cokie solutions. We've got the preservation of Cookie re targeting solutions and then we've got the flock solutions.

I'd say you know our customers are well covered.

Yeah, Matt Let me take the last one in terms of how we feel about our M&A.

You know where as you can hopefully tell just laser laser focused on our strategy and executing against that strategy.

And sitting in my job has been to come on and and to.

On a transformation across the business to return to sustainable growth and that's what that's what I'm focused on.

Clearly, we're going on the right direction here, we feel good about where we're at and we'll continue to.

To continue to execute that across that thoughtfully and to plan and Tim look on what we say we're going to deliver.

Do you think about M&A in terms of what we look for to help us execute against that plan.

We have I think Sarah citizen and active pipeline around opportunities that drive.

Synergies for us or.

Our Tech center piece for us, but that enable us to perhaps speed things up because other things quicker.

And to do things that maybe we don't have the expertise to do.

And so as I said before we had when we run an active pipeline to look for those opportunities every day and with very thoughtful in our approach and we are we make sure that if we were to move forward with something that would be something that deliberate against that strategy and provide a channel.

That's helpful. Thanks, everyone.

The next question is from Doug Anmuth from JP Morgan. Please go ahead.

Great. Thanks for taking the questions I guess there are two I just wanted to ask on net new clients reached the highest level since I think <unk> of 17 could you just talk about some of the drivers of those client net ads and then would you characterize them as more.

On a resurrected clients or totally new to the <unk> platform.

And then second just on the $60 million privacy impact in 'twenty 'twenty, one and then the 6 million in one queue.

Is that all related to Apple and an idea Fay or can you help us break that out across other items as well. Thanks, yeah. Thanks, Brad I'm, sorry, do you want to take that out I think tried to them on and your yeah. Yeah, Yeah, absolutely. Yeah. I mean, most of these are new clients. So are you know, we see especially with the open internet.

Of new players coming in and they need our services. So most of it something new cell sites and of course, we're continuing to focus on existing customers as well and I think like I said it on my most about 70% up from a fully talc sales so a sub.

Moving up the pipeline to to talk to them as well so super excited about about that metric.

The second question you asked was on the privacy and in terms of privacy.

Actually I'm, sorry, I'm sorry.

I think he is about she says on the browsers and about one third would be on the explicit kind of shy. So that's the way I would look at it.

Yeah.

Okay. Thank you that's helpful.

Thank you.

And then just sorry, just one last thing we have we have you know we continue to hone in on that assumption. So that is lower than we were anticipating a few months back and that will.

We will continue to update on that quarter after quarter, but that's all latest view on me on the restrictions and the other items.

Entity.

Thank you.

Yes.

The next question is from Mark did you go to I think you saw that too.

Uh huh.

Well, we were just about low.

It was I'm sorry, so we can take the last question quickly okay.

Next question is from Merck as they get to us from Rus them Blood Securities. Please go ahead.

Thank you.

You mentioned that you're watching for specifics as it relates to iOS I'm just curious what those specifics are sort.

Sort of what you know as you know.

Apples played on what's not yet clear.

What is clear and sort of how that plays into our U I D. Two dot O.

You know they clearly made it clear that.

Cash emails cannot be used as in and around the idea phase. So I'm just curious what's clear not clear specific to that as well. Thanks.

Mark Thanks for the question I'm going to throw it to Todd.

You can put this on top yeah sure. So you know that there.

There's not anything I think knew that we would report that you don't already know them.

We are we still you know on on overall basis.

Yeah.

Really believes that providing consumers more control over their data is is a good thing for the ecosystem.

And what we're worried about here is how it impacts smaller businesses.

You know, our App building partners and so on and so forth. So we're and we're very focused instead of you know kind of avoidance and prediction, helping our clients get ready to adapt to the change so.

And there are a couple of things there.

One is you know, making sure that we're able to use our first party data.

You mentioned to find users in India and in other addressable areas, we see because of the vastness of our network, we see them.

Many many many users many places so you're on the unfortunate thing is it will be harder for perhaps to monetize those users that we might otherwise place an advertisement.

We were rolling out our SDK much more broadly with publishers that will help us in Indiana environment, and we have some work going to map our web properties context, which generally is richer than app context to that environment. So at least we can you know get some dollars flowing in.

The upper funnel, maybe mid funnel dollars flowing into those app environments, where we care about publishers success.

So you know I think.

That's probably a good summation, we're already on that track and obviously waiting for waiting for things to flow through and for us to observed on consumer behavior on the opt in and but we're prepared for it and we're doing the three things I just mentioned.

Yeah.

Got it thanks a lot.

You bet.

Apologies for interrupting.

Thanks, everyone for joining the call today on this.

This actually concludes Nicole thanks, everyone and your argument that was worth 20 pull ups. We wish you a good end of day.

Thanks, so much on them.

Thank you.

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

Okay.

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