Good day and welcome to the Criteo's Q2 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Edouard Lassalle, Head of IR. Please go ahead, sir.

Thank you very much. Good morning and good afternoon to all of you and welcome to Criteo's conference call on our financial results for the second quarter ended June 30, 2015. The speakers on our call today are JB Rudelle, Co-Founder and CEO, and Benoit Fouilland Chief Financial Officer. After our prepared remarks, Eric Eichmann, President and Chief Operating Officer will participate in the Q&A session. Please note that the earnings release issued before the opening of the US market today along with a live webcast of our call are both available on our Investor Relations website at ir.criteo.com. A replay of the webcast will also be available later today on our Investor Relations website. As usual, before we begin discussing our earnings, I'd like to remind you that some of our discussions today will contain forward-looking statements. These may include projected financial results, our operating metrics, business strategies, anticipated future products and services, anticipated investment and expansion plans, anticipated market demand or opportunities and other forward-looking statements. As always these statements are subject to risks, uncertainties and assumptions. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, in addition reported results should not be considered as an indication of future performance. Also I’d like to remind you that we will discuss non-IFRS measures of our performance during the course of this call. Definition of such metrics and the reconciliation to the most directly comparable IFRS financial measures are provided in the earnings press release and accompanying financial tables issued earlier today. Last, unless otherwise stated all gross comparisons made in the course of this call are against the same period in the prior year. With this, let me now turn the call over to JB, Criteo’s Chairman, Co-founder and Chief Executive Officer. JB, the line is yours.

Thank you Ed. I am very pleased to announce yet another strong quarter. As a matter of fact for the seventh quarter in a row, we have exceeded the high end of our guidance on both the revenue ex-TAC and adjusted EBITDA. In Q2 2015, our revenue ex-TAC increased 52% at constant currency to EUR110 million while adjusted EBITDA grew 60% at constant currency to EUR22 million. This quarter, we continue to execute consistently with our growth plans. Our performance was mainly driven by three factors. First, the continued rollout of our latest technology across screen. Second, the real-time high number of a net client addition. Third, the further expansion of our publisher [ph]. Starting with the first driver, technology. To increase the value we deliver to our clients we continue to rollout new performance improvements across all screens. One performance improvement we are particularly excited about is our new generation creative platform. As you know we have always had advanced creative technology that builds ad in real-time for each user. However, our latest release takes this to a whole new level. We are now able to optimize each individual creative components in all of our apps such as pumps, color, or size and position of pictures and adjust them in almost infinite number of combination. This new capability is particularly promising for mobile in native ads. In June already 11% of our revenue ex-TAC was generated on this upgraded creative platform. We continue - it is also with the traction of our multi-screen solutions which allows us to engage in convert users immensely across all devices, browsers and apps. In Q2 85% of our clients were using a multi-screen solution compared with 69% in the prior year guide. At the same time we further strengthened our in-app solution and…

Thank you, JB. I am equally pleased about another strong quarter. As usual I will walk you through our quarterly financial performance as well as our guidance for the third quarter and fiscal year 2015. I will then open up the call to your questions. I will start with our revenue, in Q2 our revenue grew 64% or 51% at constant currency to EUR271 million as you know we use revenue ex-TAC as a key financial metric to monitor our business performance, revenue ex-TAC grew 65% or 52% at constant currency to EUR110 million. Our revenue ex-TAC margin was 40.8% in line with prior quarters. Looking at our regional performance in the second quarter, I’ll start with Americas which continues to outperform all other region. In Q2 revenue ex-TAC grew 114% to EUR40 million. At constant currency the Americas grew 81% compared with 78% in Q2 last year. Revenue ex-TAC in Europe, Middle East and Africa grew 38% to EUR49 million, at constant currency EMEA grew 37% which represented a slight acceleration from 34% in Q1. In Asia Pacific we continue to grow rapidly with Q2 revenue ex-TAC growing 66% to EUR22 million or 53% at constant currency. Changes in foreign exchange rates continued to be a significant tailwind in the second quarter and bolstered our revenue ex-TAC reported growth over 12 percentage points. The US dollar contributed to three quarters of this tailwind. Moving to the profitability of our operations, Q2 adjusted EBITDA grew 64% or 60% at constant currency to EUR22 million. Our growth in adjusted EBITDA was primarily driven by our revenue ex-TAC performance. As indicated on our last earning calls, we anticipated a EUR10 million sequential increase expenses in the second quarter. In addition, we incurred slightly higher than expected operating expenses primarily weighted cost in…

[Operator Instructions] We will now take our first question from Debra Schwartz from Goldman Sachs. Please go ahead.

Great, thanks and congrats on the quarter. I have two questions, first your client growth was strong in the quarter. In terms of the net adds that you've added in Q2, can you just breakdown how many of them were from Tier I clients versus middle-market. And then secondly it sounds like Facebook dynamic product ad to then operationalize. Can you give us a sense on what you're seeing from performance and do you have access to enough supply to meet your demand or are there are constraints? Thanks.

Thank you for the two questions. We partially we don't breakdown net client additions between Tier I in the next half. What we seen are during our call is that MM, mid-markets - market has been particularly strong this quarter both in terms of contribution to our growth and in terms of in our contributions to our net client additions which is kind of intuitive in long run that with the growing scale of our mid-market organization we will see more and more new clients coming from the mid-market now. When it comes to Facebook, I'm not sure I understand your question regarding access to inventory. Could you perhaps clarify exactly what you mean?

Yeah first I'm just curious what you're seeing from a performance standpoint from that inventory. And then just wondering if there are frequency cap or if they're putting any constraints on the amount of inventory that you can access.

The frequency caps is driven by performance. So we adjust and this is not particularly to Facebook and it’s for any target share we working with. We have a frequency caps that to make it clearly adjusted to ensure we don't over expose users. As you know business model is to be paid only if user on major conveyor. So we are no intention to show too many impressions to a given user. So this is something we've been embedding into our engine and very early into the - equity awareness working with same way for any source of publisher. So now there is no specific constraints on Facebook in the direct. Eric, do you want to add anything on those two aspects.

Yeah Debra that's a great question as you guys know we've been working with Facebook to make sure our solution works well with DPA and I would say we've made great progress but we're still only in the deployment of science onto the solution I think we're at a 200 clients and we're early in doing that. So the general feedback is quite positive. But I think it's too early to have a good sense for the uplift. And just as JB said we because it is early we have yet to find constraints from a sort of Facebook perspective that limit our ability to drive performance those clients. I think we'll know more in the next two quarters we've always said that we expected by the second half of the year to have a much better view on Facebook EPA. And I think we're certainly on plan to do that.

Great, thank you.

We will now take our next question from Charles Bedouelle from Exane BNP. Please go ahead.

Good morning all and again congrats for the very strong results. Two questions if I may one which is actually related to Facebook and another one on the cost by measurement. On Facebook I mean there has been announcement by Facebook of changes in the web ad they - in their performance is more than enough. Just wanted to have your view on where does it change from you, where does it bring more advertisers closer to the performance as you describe it or does it bringing more competition to just a view on this change. And then another question more specific on the cross-device as you talked about the advertisers embracing and participating in cross-device. Can you give us an idea, similar idea of what's the publishers' involvement in cross-device in terms of participation? And also can you give us even a rough idea of how much of your addressable consumer base is to that covered by across device measurement. Thank you.

Thank you very much. The first of peak is about measurements and specifically on Facebook and measurement is always a very complex issue in the advertising industry and lot of players are trying to improve things and Facebook is investing a lot in this area. And for us this is very exciting and there is one particular thing where I think a lot of add-ons are struggling with is in a way it's a good take away from your second question is regarding cross-device matching because we see it as we explain we see a lot of transaction invoking in multiple devices and where the click and the conversion are not necessarily on the same device and our clients are internally net well equipped to track this. And Facebook among others is developing a very interesting solution to better measure those cross-device events and we see for us is this very exciting because if our clients can measure better that we learn - that will put more value into our service because today there is a number, there is a fraction of the value we deliver to them that they don't measure. So they don't value. So we believe it's mid-term an opportunity for our clients as those solutions of Facebook and others are getting more and more mature for our clients to put more value into a service. So when it comes to cross-device, the idea is to work with the whole market. That's why we call it universal match and as I share earlier in the call we are very excited. I think it's the first time we are sharing this number and for us it's a pretty key metric that we are tracking that over 60% of our advertisers are not participating in this program and our contributing to this program and this is absolutely critical because the whole idea or if you want to have a large footprint in cross-device. Of course matter if you can get a last footprint is to have the critical size in terms of partner. And as you know one of the catalyst of Criteo is that we have a very large base of clients and it's a fast growing base and knowing that already 60% of our client base. So we are talking about thousands of partners already are participating into this program. It's very exciting. They tend to have more exact match data points than on the publisher side, but obviously there are some publishers that have also exact match and we are working in parallel with publishers on the same type of program.

Thank you. That's great.

We will now take our next question from Ross Sandler from Deutsche Bank. Please go ahead.

Great. I had two questions. First for Benoit and for JB. Benoit, can you talk about the cadence of EBITDA guidance for 3Q and for 2015 overall? Your margins of EBITDA to net revenue, I have been going up every quarter some of the IPO and I think you are guiding to like over 600 basis points there is margin compression in the third quarter. So is that just conservatism or is there something else that we should be aware of it whether it's driving out that compression and then I guess stepping back as the business mix shifts towards mid-market, should margins be going up not down? So if you can clarify that, that'd be great. And then JB just a quick follow-up on the topic of ad blockers. So from what we understand this is probably only going to be isolated to adds a shop on Safari browsers within iOS devices. So how much of curtailed inventory comes from that channel and if that were to get cut back some amount of users, can you find other ways to target those users natively, can you just explain that please? Thank you.

Okay, thanks Ross. With respect to the adjusted EBITDA, the pace for Q3 and Q4, I mean clearly the indication I gave in the script is that Q4 is expected to be consistently with last year around just over 40% of the yearly EBITDA is expected in Q4 and that is very consistent as a back end. With respect to Q3 I mean we are in a continued investment as described in terms of continuous hiring in certain operation, in mid-market as we ramp up our teams globally as well as in new geography for the SLO sales and operations headcount. And we are also continuing to invest at a rapid pace in R&D. This is what is still reflected in the Q3 guidance and Q4 guidance implied guidance. With respect to your second question, can you just clarify your second question on mid-market I'm not sure that I understood it clearly.

Just as the business shifts as mid-market grows faster than the enterprise business. Shouldn't get margins be going up is that a more profitable channel.

Now what we've said always on this channel is that it's a channel that once it reach critical mass that should be at the same level of profitability than Tier I. I think we are still in the fast investment mode as we speak if you look at the type of hiring that we are in MMS. So we expect to other MMS all the time to get to the same level if not slightly better than Tier I of profitability margin. With respect to the rest of the question.

Yes. So ad blockers just to give you a bit more color on this specifically on your question. So first thing concern is that the majority of our mobile business is derived from Android devices. That really is meaningful but it's really under eight. And Apple mobile device is probably in the low-teens in terms of contribution to our business. This said ad blocker has been supported by on this total Safari for years and so far we haven't seen any impact. So we have to take this into - and second data point important is that this ad blocking feature is not default thing about iOS of Safari, it would need but not to be download which would require Apple approval on this. So I think people have to be careful although in cap rating in some announcement that you can have read in the press.

Good. Thank you.

We will now take our next question from Brian Pitz from Jefferies. Please go ahead.

Thanks. Two questions. JB, in the prepared remarks I believe you said you're looking at new opportunities like search engine marketing. Just hoping for a little more color on this opportunity perhaps timeline. Also on cross-device, why is it so hard for your competitors? You say it's a potential major aspect for the company and the nice complement to Facebook. But just hoping for a bit more color there. And Benoit just quickly on CapEx increasing to, I think you said 6% from 4% of revenue. Just hoping for a little more background on that investment basically where you guys going to be spending that. Thanks.

Thank you. So first on SCM, so at this stage, we are doing some test with selected clients. The one thing I can say at this stage is that I would clarify the first result of those tests as encouraging. Still we are not in the guidance you have it doesn't include any significant SCM numbers. So there are still a lot of work before this can become a mainstream product that the first test are pointing we think into the right direction. In cross-device, Eric you want to add some color on this why this is so strategic for us.

Absolutely. So I think you heard JB talked a little bit about the space of mobile commerce report that we did and we're not doing every quarter and one of the significant findings is that in the U.S. alone, 40% of the transactions that are happening or happening across devices that means that a user will have been an one device and then completed the transaction in another one. And this is if you talk to marketers out there given the proliferation of devices and the time that people are spending on their mobile phones and connected online this is becoming one of the biggest issues or challenges that they have. So if you are able to match cross-device, I think it's a significant asset, not just to drive performance but also to understand the growth that consumer are taking. So from our perspective, why do we think it's an asset that is quite unique is that we do have 8500 plus clients that are willing to work with us and they have a consumer base that connects to several devices for them and there is not many companies that have that type of installed base of clients that are willing to share that information to build a cross-device database. So we think we're in a unique situation and as JB mentioned this is also something that combines very well with efforts from Google and Facebook in terms of their cross-device environments where we compliment that quite well. And in the future again this is something that's going to become more prevalent as people continue to have cross-device transactions.

Okay. Just, I think you had also the clarification question on CapEx. Just to be very clear this is exactly in line with what we've said all along for 2015, is that our CapEx for the full year expected to be around 6% of revenues why traditionally they had been on average closer to 5%, why is that is primarily because we have significant investments in data center equipment’s and mainly we have equipment in redundancy capacity one of investment we've made and we talked about during the call on in the added cluster is one example of this. We invested in redundancy of - cluster closed to Paris which is a redundancy from the primary cluster that we had. And we have significant investments in redundancy this year. We also add investment in China that I think we've already discussed that we're in the process in affording out equipment in data center in Shanghai. And we add also significant investment in new buildings and facilities the main reason but again this is the same outlook with respect to expect to CapEx versus total revenues and what we've expressed in prior quarter, for the full year.

Great. Thanks for the clarification.

We will now take our next question from Douglas Anmuth from J. P. Morgan. Please go ahead.

Great. Thanks for taking my question. Two things I wanted to ask. First just on APAC growth, can you just talk about the key initiatives there, in terms of driving that business faster and talk a little bit more about China as well and you just touched on the data center build out there, Benoit? And then also second I may have missed it but the bidding engine rollout how broadly now is most recent technology and basket size in particular rolled out across the advertiser base? Thanks.

Thank you very much. On APAC Eric I know you've been travelling there recently so could you give us more color on the growth engines in APAC?

So, a couple of things in APAC first starting with Japan which is still our largest contributor in APAC. It's a geography that's growing quite well for us. It's still the major contributor to the growth. And what we're seeing there is that it takes a little bit longer to implement the new enhancements to our engine and to our technology for we're seeing a rapid catch-up in that direction. So that should be a good driver of growth. And then there are new geographies that are quite exciting. We talked a little bit about South East Asia there we're seeing phenomenal growth granted from small numbers but if you include India in that we have about 1.6 billion in that area of the world. So there's lots of exciting growth opportunities not just because we haven't yet deployed and sort of gathered all the clients but the inherent growth that is happening on the internet and e-commerce is a big wave that we will be riding. And so we're very excited about that and then China as a new geography we're investing quite a bit. So we already have a team that is more than 20 folks and then one of the key things that we need to do in China to drive more growth is to have a server data center within China something that we expect to complete in the second half of the year in the Shanghai area. We've been serving today from Hong Kong that has created some performance issues, so obviously since we're all about performance once we have the China data center, we think that's going to change dramatically and in China too there is a significant potential for an export business. The Alibaba's of the world are in steady in expanding their business outside of China and obviously we have a tremendously network that's global, that's ready to go for these companies to work with us and I would say that the last thing on Asia as we have yet to fully set up or mid-market operation that something that we're now actively doing with a center in Tokyo. One in Singapore and one to start later on in China and so I think that's also going to be a significant driver today that's obviously quite small.

So to answer your second question - engine. I think by the end of Q2 we were at 25% rollout. Just to put this in prospective we don't expect this version to rollout any time soon to 100% of our clients because for some clients optimizing on gross margin sector doesn't make sense. It makes a lot of sense for some clients where we've seen very big improvements better as we explain during our last calls. It depends a lot of on the structure of the capability of products of our clients. This said something we share, I think it's for the first time this quarter is this new gen creative platform which is also an engine improvements than of a different flavor which is profuse on the look and feel of the banners that has a surprisingly positive impact on both future rate and plus the conversion rate. So this is something we are aggressively rolling out across our client base.

Thank you.

We will now take our next question from Ralph Schackart from William Blair. Please go ahead.

Good morning. I have two questions please. First on EMEA and more mature market. So I'm just curious which driving the recent year-over-year acceleration that you saw in the quarter. Any color on that? And then secondly with the announcement of the Instagram opening up to the third party partners any early reason in inventory and would you expect to be or participating in that inventory source as well? Thanks.

Thank you. On EMEA Eric do you want to explain or get some color on this Q2 acceleration?

Yeah, I think the acceleration first of all even though. It's an acceleration which we're happy about. It's not a dramatic acceleration in the sense that it's going from 34% to 37%, there I think the main sort of accelerator for us are two-fold. One is our mid-market growth. We set an up center in Barcelona and we've been hiring frantically to get new people on board and those people get new clients on board and so we've had a record number of clients that we're signed up there and that's across all geographies. So that's a very exciting driving and the second driver that's also a growth driver in comparison to last quarter is obviously we're setting ourselves up in new geographies, like Dubai, like Turkey, like Eastern Europe then our presence is increasing there. So those will be two big ones.

So regarding I mean you mention Instagram. So just to make this and more general points. There is still lot of very large inventories that are completely untouched for us, which in a way is very exciting because it give us a lot of additional greenfield opportunity and we know that each time we plugin new inventory. It's highly incremental for our business. So obviously any large tools of inventory that today we are not tapping into. We're actively discussing with the different teams and we'll keep you updated on those. That I think it's a good illustration that they are potentially much more inventory we could grow after and we are - where we have maxed up opportunity to increase our inventory.

Okay, thank you.

We will now take our next question from Justin Patterson from Raymond James. Please go ahead.

Great, thank you very much. First JB, you mentioned measure ability within your prepared remark. There is still a perception amongst some in the advertising -that you need to provide greater granularity that your clients to sustain long-term growth. Yeah, that's 25% same client revenue growth that doesn't appear to be slowing them down at all. Can you help reconcile that? And then secondly Benoit stepping back at that it seems like a lot of this investment around both an OpEx and CapEx is ready to build out the MMS segment expand globally and increase compute capacity. After this round of investment, how should we think about investment going forward, should that keep or back down to prior levels. Thanks.

Thanks very much and this would probably be the last question which is I think we getting to the end of the session. So first on measure ability, it absolutely key for our business that is as I've explained in the first part of the call. As soon as you can measure things way we're in business because we can we can invest in technology and show our clients that through technology you can drive more performance. And I think probably the best illustration of this is mobile. For long time, people were saying mobile is very hard and its different way to measure things in ads you don't have cookies. So people were questioning ability to expand our business into mobile. And as matter of fact the first thing we've been doing two years ago when we entered into mobile was to ensure we could measure ROI the same way that we could do it in this. And we've don't have a huge investment in technology to be able to measure not doing the home mobile browser but also in that. And as today a mobile is a key driver of our growth. I think it's probably one of the best illustration that measure ability overall. That's the way to expand our market. And during our investor day we spent a lot of time to trying to side our addressable market addressable opportunity. And then more and more you can see - ROIs who have measurements are getting better and better. The more opportunity there that will be for us down the road and we'll keep you updated on this.

Yeah so on the investment let me just clarify, I mean the source, what are the main destination rather than the source of investment. Another method is a big area of growth for us in terms of operation it's true. We are ramping up our centers both in Boston in the - for the Americas and now in Europe we've opened - we are going continue through at the end of the year to continue to invest and probably we have a material view on this so that will not continue that will not stop at the end of the year in term of MMS. But I want to restate that our investment doesn't goes only into MMS we are also investing in new geographies in Tier 1. And we are continuing to strengthen our teams in existing geographies where required in the US in particular where we have significant potential from a Tier I standpoint. We've been strengthening the team and with addition of couple of senior resources there. So sales on operation is not only about MMS. And now I want to also remind that we have significant investments in R&D, so we have within the total R&D expense primarily of the Euro and you remember EUR10 million impact of Datapot to the EBITDA for the year. And that goes primarily into R&D to build our future capabilities from an R&D standpoint especially supporting some of the new segments that JB has been talking about. And we are intending to continue to invest in R&D as Irene both in France but also in the US on the West Coast. And finally I wanted also to add that we have the confirmation that we are going to become a domestic issuer and I have mentioned what would be the consequences for us in terms of increased resourcing requirements from the 1st of January 2016. So which means that we are having also investment on the second part of the year to prepare for those increased reporting requirements on transition to US GAAP for the next year. And finally, taking stepping back and taking a longer term perspective, during our Investor Day, we have also gave your perspective on our long-term operating model which remains valid and we see still the same opportunity for operating leverage down to long term in our model. Thank you very much.

Thank you very much. Yeah I think that does conclude the program and thanks everyone for attending today. Thank you.

Thank you.

Thank you.

That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.