Hello and welcome to the Criteo Fourth Quarter 2015 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Edouard Lassalle. Mr. Lassalle please go ahead.

Thank you, Keith. Good morning everyone. Welcome to Criteo's fourth quarter and fiscal 2015 earnings call. Joining me today to discuss our results are Executive Chairman and Co-Founder JB Rudelle, CEO Eric Eichmann, and CFO Benoit Fouilland. Before we begin, I'd like to remind you that during the course of this call, management will make forward-looking statements. These may include projected financial results, or operating metrics, business strategies, anticipated future products and services, anticipated investment and expansion plans, anticipated market demand or opportunities and other forward-looking statements. These statements are subject to various 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. We do not undertake any obligation to update any forward-looking statements contained herein, except as required by law. In addition, reported results should not be considered as an indication of future performance. Also I'd like to remind you that during the course of this call, we will discuss non-IFRS measures of our performance. Definition of these metrics and the reconciliations 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 growth comparisons made in the course of this call are against the same period in the prior year. With this, I will now turn the call over to our Executive Chairman and Co-Founder, JB Rudelle.

Hello everyone. As announced last December, I’ve transitioned to Executive Chairman. So in my new role, I’m focusing on the long-term strategic direction of the Company. So, before Eric talks about 2015 and 2016, I’d like to share a few intro thoughts. For the billions they invest in marketing, advertisers expect to see actual sales and measureable returns. As you know, this direct link between ad dollars and revenues is what one calls performance advertising. Criteo’s big idea has always been to focus on actionable shopping intent rather than simple consumer demographics. Capturing and targeting actual shopping intent is the secret of effective performance advertising. This laser focus on performance drives the value we deliver for clients. And our clients, they love it. For 18 consecutive quarters, our client retention rates has been consistently over 90%, a very rare achievement in our industry. This trust we have built with our clients makes me super proud. So looking into the future, we have three key trends that shape our vision. First is one-to-one personalized marketing at scale, which is completely disrupting the ways marketers are interacting with consumers. We believe we are particularly well positioned to help our clients take full advantage of this opportunity. Our very large cross-device user graph is an incredible asset. Tomorrow, a single Criteo idea could become the cornerstone of multi-purpose people-centric marketing, enabling everything from ad personalization to solving the hardcore problem of cross-device sales attribution. Second trend. The traditional separation between online and offline worlds is quickly disappearing. This is particularly true when consumers are in shopping mode. In other words, digital campaigns can drive in-store purchases and vice versa. The first tests we’ve performed in attributing in-store sales to digital campaigns have shown very, very exciting results. Third, today, marketers typically manage their…

Thank you JB. I am thrilled to take on the CEO role at such an exciting time for Criteo. I’m very pleased with our success in 2015. With EUR1.2 billion in annual revenue, we reached significant scale while still growing very fast. Revenue ex-TAC increased 49% at constant currency to EUR482 million and adjusted EBITDA grew 59% at constant currency to over EUR130 million. 2015 was another phenomenal year for us on all fronts, confirming our strong position in the market and validating the unique strength of our model. Specifically; we added over 3,000 clients and crossed the 10,000-client mark. We maintained client retention at over 90%, while growing clients 42%. We deployed great new products, such as our enhanced creative platform, our Universal-Match cross-device solution and dynamic product ads on Facebook. We grew Criteo employees to over 1,800, including an increase of 60% in our innovation capacity to now 400 engineers in France and Palo Alto. Let me know turn to Q4. Q4 was another strong quarter. We grew revenue ex-TAC 43% at constant currency to EUR146 million and adjusted EBITDA 49% at constant currency to EUR49 million. Beyond the very strong Holiday season with very concentrated shopping days, our Q4 performance was driven by three main factors. First, constant technology improvements. Second, new record client additions across segments and regions. Third, the continued expansion of our direct publisher relationships. Let me talk about the first one. Technology improvements led to Q4 2014 clients generating 20% more revenue ex-TAC at constant currency in Q4 2015, in line with prior quarters. Of these in particular, we accelerated our transition to mobile. We are very pleased that in December, over 47% of revenue ex-TAC was generated on mobile ads. This is a very significant increase from prior year. In Q4, we…

Thank you, Eric, and hello everyone. I am also very pleased with our continued strong profitable growth. I am particularly happy with our growing profitability and strong free cash flow generation, which both remain unique differentiators in our space. As usual, I will walk you through the financials in detail and provide our guidance for the first quarter and fiscal 2016. Afterwards we will take your questions. Q4 revenue increased 55% or 46% at constant currency to EUR362 million, growing 21% sequentially. Fiscal 2015 revenue grew 60% or 50% at constant currency to EUR1.2 billion. Revenue ex-TAC is a key metric we use to measure our business performance. Q4 revenue ex-TAC grew 51% or 43% at constant currency to EUR146 million. And revenue ex-TAC margin was at 40.3%, similar to prior quarters. Fiscal 2015 revenue ex-TAC increased 59% or 49% at constant currency to EUR482 million. And revenue ex-TAC margin was at 40.4% remaining well within our long-term range of 39% to 41%. Compared to our guidance, changes in foreign exchange rates had a EUR1.6 million positive impact on reported revenue ex-TAC in Q4, partly driven by a stronger dollar. Compared with prior year periods, Forex continued to represent a tailwind to reported revenue ex-TAC growth of 9 percentage point in Q4 and 10 percentage points in the full year. Moving to profitability, Q4 adjusted EBITDA grew 53% or 49% at constant currency to EUR49 million. This increase was primarily driven by our strong revenue ex-TAC performance. Nearly half of the over achievement in revenue ex-TAC flowed through to adjusted EBITDA. We incurred slightly higher than anticipated expenses, primarily as a result of negative Forex and variable costs. Q4 adjusted EBITDA margin was 13.5% of revenues, consistent with Q4 2014. Fiscal 2015 adjusted EBITDA grew 64% or 59% at constant…

Yes, thank you. [Operator Instructions] And the first question comes Douglas Anmuth with JPMorgan.

Great, thanks for taking the question. Two things, first just on the benefits of cross device you talked about 25% of revenues ex-TAC from users on two or more devices, can you talk about just how you’re seeing the benefits here through better targeting, whether that is showing up in click-through rate and conversion and then ultimately in user purchasers and advertiser spend? And then just secondly, you are clearly a very global company, can you just give us some sense of your view on the macro environment, how that is playing out on your business and then also what you are assuming there in terms of the ‘16 guide for macro? Thanks.

Okay, great. Thank you for that question. This is Eric. On the cost device question there, several benefit that come from having a strong device graph that we can use in our business. Very specifically one of the key benefits is getting access to more inventory for users than in the past. We can have history around and so if you, for example, are spending a lot of time in one of our advertiser websites and then appear on your phone, in the past we didn’t know that you have that history and now we have an opportunity to serve you an ad which should drive increased sales for that advertiser. So that is one key benefit. Another key benefit is being able to take the history that you might have across several devices and combine it into one history set, if you will, that allows us to be better at targeting or creating personalized ad. So those two are big benefits that are immediate to the advertiser. Our third largest benefit is that today a lot of transactions are happening across devices, over 40% of the transactions are happening or start on one device and end in another device. And so there is not an easy way to create attribution around those sales. So, let’s say, we generate in action on a phone into transaction, gets completed on a desktop, that might not be attributed to the marketing activity that we had on the phone. So that’s an important element of it. All right, so that’s on cross device. The macro environment, I think, look, we are in a sector where e-commerce numbers and the movement or the growth of e-commerce is one of the key parameters and we are still early in terms of our penetration. So our general sense is that we still have a long way to go and macro items don’t affect us hard. We are also a performance-driven solution and because there is a very clear link between the spend that our clients do with us and the sales they generate, the changes in the macro environment don’t necessarily change the spending that they have with us, because that relationship is quite clear.

Great. Thanks, Eric.

Thank you. And the next question comes from Brian Pitz with Jefferies.

Thanks for questions. Eric, you mentioned 47% of your revenue came from mobile ads during the quarter. It seems like an obviously big ramp up versus prior results. Just curious, if there is specific publishers, set of advertisers that was driving the shift? Also do you expect mobile as a majority of revenue driver over time? And finally, how does mobile CPC compare to your desktop CPC? Thanks.

On the publisher side, I think it’s generally having the infrastructure around mobile being better set up, but not one particular one. Obviously we’ve now connected 3,000 clients with Facebook DPA and that has had an impact Facebook being a large publisher as we all know, but when we talk about the 47%, I think it’s driven by a couple of things. One, better infrastructure around mobile that different players now and publishers have done and two, it’s just the general movement of consumers [indiscernible] more comfortable with mobile purchasing. On the mobile CPCs versus desktop and I think we’ve said this in a couple of calls and this hasn’t changed. I think when you click through and conversion you see a slight sort of underperformance versus desktop for mobile, but it’s slight, there is not a dramatic difference and so that’s a good proxy to think about CPCs. And going forward, my expectation and we’ve said that our mobile revenues line up pretty well with what consumers are doing. If you take countries like China and Japan, most of the purchasing in e-commerce is now being done through mobile and our expectation is that that will happen across the world as the usage of mobile continues to increase, and because we track to it, it's probably a good assumption to think that over time, mobile will become a bigger and bigger part of our revenue stream.

And just to add on this, this is JB. There is a very interesting correlation between the growth of our own clients and the share of mobile traffic. The faster they grow, the more mobile they are and vice versa. So as we - our growth is also correlated to the growth of our own clients. As outlined, our faster growing clients are the one growing on mobile, it significantly increased their share of mobile for our own business.

Great. Thanks a lot. And congratulations on your new role, Eric.

Thank you.

Thank you. And the next question comes from Ross Sandler with Deutsche Bank.

Great. A couple of questions. First, for Eric, I guess on that last point. Any differences in your approach to running the business versus what JB had done over the past few years? I guess, what new things can we expect to see under your leadership, or is this simply a kind of passing of the baton of what was already set up? And then Benoit, the 481 million in revenue ex-tax for 2015 was about 40 million above your initial high-end of the range for this time a year ago, and if we go back to the year prior, in 2014, I think it was 50 million above the high end. So should we expect that type of upside again in ‘16? Is there anything that you’re seeing that would increase or decrease your confidence in posting upside? And then the last question, I think, Eric mentioned about 20% of the growth that you’re seeing in the fourth quarter came from increases on a same client spend basis. Is that the right cadence to think about going forward as we look at the low-30s growth in 2016? How much will come from same client versus new client? Thank you.

Okay. Thank you for those questions, Ross. In terms of the change of leadership, like we said at the beginning of the call, this is something that we've been planning for a while and JB will remain actively involved. So from a direction of the company perspective, I think we see very much eye-to-eye and this should be much more of a continuation that a departure from what we have. And so I think from that perspective, you shouldn't see a dramatic difference. So I can take the last question that you have and then, I will pass it on to Benoit. As we’ve talked over the last couple of years, we’ve had significant investments in R&D, a big part of that investment goes to improving our technology and it is innovation, and as such, it’s very hard to predict, but we've seen incredible success I think over the last two years in terms of driving more revenue. We feel very good about the portfolio of ideas that we have for improving our core technology and that will be continued - will be a continued area of investment for us. Making assessments as to how much that will bring us this year is actually quite hard and that's why we've shied away from trying to do that, but we still feel quite good about the ability for us to continue to improve our core technology.

Yes. And regarding guidance, you’re absolutely right. I mean, I think the figures you mentioned with respect to how we ended up [Technical Difficulty] ‘15 and ‘14, this was, to a significant extent, driven by tailwinds that we have from a currency standpoint, and I think one of the benefit of our new guidance approach on a constant currency basis is that this is going to be bringing more stability, especially as we move now to US dollar reporting, and the range that we are providing is also slightly larger than what we have been providing in the past.

Okay, thank you. And the next question comes from Deb Schwartz with Goldman Sachs.

Great, thanks. Two questions. First, on the lines of thinking about what's happening in the macro environment, China, there is particularly uncertainty there. Can you talk about how the macro in China is impacting your plans for rollout? And then second, Eric, if you can mention that part of the Criteo Engine improvement for next year along the lines of recommendations, improving dynamic creators. Can you talk about how far along you are in rolling out those product improvements and what's embedded in your guidance for 2016 for them, given that you typically don't embed that much into your guidance for kind of new engine improvements, because you don’t really know what the impact is going to be, so if you could walk us through that, it would be helpful.

Okay, great. Thank you, Debra. On China, as you know, it’s very early for us in the Chinese market and China e-commerce is extremely large, surpassed the US already and so from that perspective, the overall macro environment, given that we’re so small today in China, doesn't really affect us that much. What is clear in our interaction with advertisers in China is that they’re all looking for a solution to drive ROI in their advertising spend. So we're really talking their language and we’re seeing good reception. We now have a Shanghai datacenter that should allow us to see good performance for our clients in China, so we’re at the beginning of that development, but the macro environment is really not a key factor for us. It's much more about penetrating the market today. In terms of your second question, as you know, this is again a hard one for us. We don't really provide a specific number related to the improvement in the Engine again because it's quite variable and we can see very good surprises within the numbers that we have, we have obviously embedded some improvements, but it's really hard to be very specific about that.

Great, thank you.

Thank you. Our next question comes from Charles Bedouelle from Exane BNP Paribas.

Good morning and congratulations for both the roles change and the great results. I had two questions, one on China, just to rebound on what’s been said and one on Facebook. So, on China, I mean from your early - new experience, early days in your experience, can you tell us what is really different from modern markets and what you are really learning there that you didn't really see elsewhere, so just trying to understand better at China? And the other question is a question we often had from our investors on the recent long run to your model that some of your partners such as Facebook or others who have basically tried to bypass you and tried to do what you're doing directly. So can you tell us a little bit of your vision on how Criteo’s role evolves and how your relationship with the likes of Facebook for example evolves? I mean, it’s obviously very good from what you’ve really stood there, but how do you see the coming years? Thank you very much.

Great. Thank you, Charles. Those are great questions. On China, it is a different environment. We believe our technology doesn't need to change for that environment, however, if you will, the plumbing that we need to setup in China is very different, the programmatic networks are different. China is very much a mobile commerce market, the projections for 2016 is at 55%. Overall e-commerce will happen through mobile, that's very different from what you see in other advanced economies. And so from that perspective, it's just much more about setting the infrastructure connecting to the right RTBs or programmatic platforms, developing the business from the publisher relationship. We don't get the benefit of having connected with global players like Google or Facebook in China, because they are not very big or very present. But other than that, I think it’s the same thing that you’d see in other markets and one of the key elements for us was developing or having a data center in China. That will sort of very much improve our performance with clients and our expectation is that we will develop that market, just like we have done with other markets. So that is on China, with Facebook as you know, we’ve had a very long and very fruitful relationship with Facebook. We remain very, very positive on our relationship with them. We now have 3000 clients on Facebook and have worked with them very hard over the last year to improve the connection of the Criteo Engine into Facebook and today, we have dramatically improved the performance of the Criteo Engine on Facebook DPA versus what it was last year and so we’re very, very pleased with that and the fact that we have 3000 clients connecting through us with Facebook shows that it's the best way to basically buy and get performance out of Facebook and again we work very closely with Facebook on this and our expectation is, we will continue to deploy rapidly our client base onto Facebook.

Thank you very much.

Thank you. And the next question comes from Richard Kramer with Arete Research.

Thanks very much. A couple of questions if I may. The first one just to confirm Eric, it seems as if there is nothing in your 2016 guidance for search, and it looks like you’ve spent, I don’t know, an incremental 14 million or so euros on that in R&D. Is that likely to generate sales or any returns in 2016 or going back to JB’s comments, is that something you're just going to experiment with this year, just to understand the sort of scope of opportunity? Second question, I suppose, for Benoit or Eric, you're sitting on EUR325 million of cash, you’ve doubled R&D spend, what will happen to the capital structure going forward, since you seem to be continually generating profit in excess of what you need and don't seem to be minded to make any large acquisitions. What's the outlook for that for the year? And then maybe last one for JB, do you think there is any impact of EU data protection laws and the revised Safe Harbor agreement on your business? Thanks.

Great. Thank you, Richard. Let me start with search and in general, because we are in the proof of concept phase with search, our expectations for 2016 are not material in terms of revenue and so that's the way we do search for. For question number two, let me turn it over to Benoit and I’ll add any commentary.

Yeah. I’ll just add also for search with respect to - so as Eric mentioned, I mean, we have not factored anything in our rev ex-Tac guidance for search and with respect to cost, we’re not planning an increase of the investment compared to what we’ve made in 2015. So it’s a fit investment, in our guidance. With respect to cash, I think first, it’s a good news to see that the business is generating significant operating cash flow, very significant operating cash flow on LC, free cash flow despite large investments in CapEx. Now, very clearly, the fact that we have more than 300 million of cash levers, significant flexibility and we believe that that flexibility, especially in the current market is a great asset for the company. That would enable us to look at potential acquisition as we've looked in the past always with the same discipline that we've done in the past with that financial flexibility. So we keep that cash balanced in hand in order to have flexibility for future acquisitions.

So just to build - yeah just to build, this is JB, just to build on Benoit’s comments, to give you a bit more color of what is our philosophy when it comes to M&A. As you know, we are a tech driven company, so we are looking at companies that have some unique technology and we’ve been scanning the market pretty intensively in 2015, we have a pretty larger corporate team looking in the market and we've been looking at probably several hundreds of companies as a whole. It's very rare to find a company that has true disruptive technology and with the quality and the start-up that we are looking for, for R&D. This is why you’ve seen qualitatively small number of M&A in the last two years, compared to our cash position. Now, that said, if this year, we find a company, which is amazingly strong in R&D, which is really what we like with the product, which is very complimentary to what we do today, and we see some clear leverage, we won’t hesitate to move on this. And so we want to keep the flexibility and hopefully, we will find new ways to accelerate that business in the future. Coming to your last question regarding, I think you mentioned something around data policy ruling in Europe, it's relatively early in the process, but overall, I would say we don't anticipate much impact on our service. Even more, I would say because Criteo always has been at the forefront in terms of privacy. We tend to anticipate the evolution of regulation by putting to ourselves, stricter rules that whatever exists in the market. The reason is embedded into our business model where we get paid only if the end user truly engaged with that. So we tend to be more transparent and open and upfront with users that typically the regulation requires. There is one thing very interesting in this new regulation is this concept of unambiguous user consent, which is something we've been promoting for a very long time for - so we’re seeing this as very positive. It requires some strong technology and to really enforce this into practice and we like, when there is a lot of technology involved, because we can create even more differentiation compared to the rest of the market. So this is exciting, it's further possibility for us to differentiate from competition. So we look at those evolution as very positive for us in the future.

Okay, thank you.

Thank you. And the next question comes from Justin Patterson with Raymond James.

Great, thank you very much. Two please. First on the Facebook dynamic product ad. Last quarter, you talked about that as not having quite the ROI that you had hoped for initially. Could you talk about where you are on that today? And then secondly, just kind of drilling into guidance a little bit more, it sounds like the mid-market is growing pretty significantly, up about 90% year-over-year and it looks like while you’re coming off a year of just record net adds, how should we think about kind of the growth trajectory between net ads and revenue existing spend when we get to kind of your full-year guidance number, which part is kind of the bigger driver at this point? Thanks.

Okay. Great. Justin, thank you very much for those questions. On Facebook, we are very, very pleased with the progress we’ve made with the Facebook team in terms of the research and the development that we've done with them and we can say that today, the solution performs a lot better than it did last year, and that's why we've been able to now more aggressively deploy our client base into it. Our general sense is that we’re in a very good position and we’ll continue to deploy new clients throughout the year. And on the guidance, I would let Benoit talk to it.

So on the guidance, I think, if I understood correctly, your question was regarding the driver for the growth, what's the proportion of within the driver of the MMS net ads versus the rest of the drivers. So very clearly MMS has been performing very well and we are still low in terms of penetration, so there is a significant focus that we will put on MMS in 2016. So MMS is a strong driver of client ads for ‘16. Just to remind you, in Q4, 2015, MMS represented 75% [Technical Difficulty] so you should expect to see a significant traction in 2016 coming from MMS, but this is not the only click driver for growth in clients. We are also expecting to see continued growth in tier 1 clients or in large clients in geographies where we have still a level of penetration, which is below our more mature geographies from the new geographies that we’re going to enter. And besides that, we are a tech business, so innovation is going also to continue to be a factor of a driver of growth for 2016.

Thank you, everyone. I think that was the last question for the call. So thank you for attending the call. We’ll be happy to follow up with any questions you may have. This is the IR team. Thank you very much. Have a great day.

Thank you.

Thanks, everyone.

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