Criteo Q1 2025 Earnings Call Transcript

Skip to Participants
Operator

Please note this event is being recorded. I would now like to turn the conference over to Melanie Dombre, Vice President, Investor Relations.

Operator

Please go ahead.

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

Good morning, everyone, and welcome to Criteo's first quarter twenty twenty five earnings call. Joining us on the call today, Chief Executive Officer, Michael Komatsinski and Chief Financial Officer, Sara Glickman are going to share some prepared remarks. Todd Parsons, our Chief Product Officer, will join us for the Q and A session. As usual, you will find our investor presentation on our Investor Relations website now as well as our prepared remarks and transcript after the call. Before we get started, I would like to remind you that our remarks will include forward looking statements, which reflect Critto's judgment, assumptions and uncertainties as of today.

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

Our actual results may differ materially from current expectations based on a number of factors affecting Criteo's business. Except as required by law, we

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

do not undertake any obligation

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

to update any forward looking statements discussed today. For more information, please refer to the risk factors discussed in our earnings release, as well as our most recent Form 10 ks and 10 Q filed with the SEC. We will also discuss non GAAP measures of our performance. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published today. Finally, unless otherwise stated, all comparisons made during this call are against the same period in the prior year.

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

With that, let me now hand it over to Michael.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Thanks, Melanie, and good morning, everyone. Thank you all for joining us today. I'm proud to be here for my first earnings call as CEO of Criteo. And it's a tremendous opportunity to lead the company forward with focus and ambition. Over the past two months, I've had the chance to meet with many of our teams across regions, along with clients and partners.

Michael Komasinski
Michael Komasinski
CEO at Criteo

I want to start by sharing a few reflections on why I took the role, what I've observed in my first couple months, and how we're thinking about the road ahead. But before I do that, I want to address two important recent developments. First one is related to Google's recent decision to keep third party cookies, which has positive near term and long term implications. In addition to a modest benefit this year, we now operate from a position of strength and with greater clarity. We're bullish about the long term prospects of our performance media segment.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Our investments in addressability have led to significant AI innovation that will continue to pay off across all environments. With a future proofed approach to privacy protecting addressability, we're moving full steam ahead to execute tailored, full funnel, cross channel campaigns that drive measurable outcomes for our clients in any scenario and for the long term. The second development impacts us in the near term, and is related to our largest retail media client, who has been a longstanding partner. This client unexpectedly notified us this week that while they will continue to use our industry leading retail media technology platform under a multi year committed contract, they will discontinue our managed services and curtail the remaining brand demand sales services in November of this year. Instead of a natural and gradual evolution of the support we provide them with, this is a sudden change that will result in a significant impact on the growth rates of our retail media business for a twelve month period starting in Q4 twenty twenty five.

Michael Komasinski
Michael Komasinski
CEO at Criteo

However, this near term change does not affect our substantial opportunities to continue to grow faster than the market across the rest of our retailer base and for the long term. More broadly, it's important to highlight that Criteo, as a leading and independent ad tech player, has built something unique. A robust AI powered performance media business, combined with leading capabilities in retail media, one of the fastest growing segments of digital advertising. Criteo sits right at the center of commerce and media, and that combination is powerful. We have deep commerce data, advanced AI capabilities, a large and diversified global client base, impressive talent, and a strong position across the digital advertising ecosystem.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Criteo is increasingly viewed as a must have agency partner in the evolving advertising landscape, and I saw firsthand that our relationships with leading global agencies are growing more strategic every quarter. For my first couple of months, I can see that Criteo hasn't yet realized its fullest potential. My key priorities are to reaccelerate growth and improve its durability, fortify our leadership position in retail media, reenergize our performance media business, and amplify the power of our platform, all with a sharp focus on maximizing shareholder value. The opportunity ahead is to intensify our focus, scale our strengths, and double down on a few core strategic initiatives to deliver durable, strong, and profitable growth. First, we have early momentum behind our platform strategy.

Michael Komasinski
Michael Komasinski
CEO at Criteo

We've elevated our positioning in the market, and we have major enterprise clients like Office Depot and ODP Business Solutions now utilizing our comprehensive commerce media platform. They leverage our demand side capabilities with Commerce Growth and Commerce Max, and our supply side solutions through Commerce Grid and Commerce Yield. This demonstrates the value of our integrated approach. We're also expanding our global agency partnerships to activate more of the overall platform. These strategic partnerships will continue to be a key growth lever for us moving forward.

Michael Komasinski
Michael Komasinski
CEO at Criteo

As a multi product platform company, we have many synergies across our products. There's a real opportunity to amplify these connections and enable our flywheel. Second, we're focused on driving more demand to our platform. That's key to reaccelerating growth. After establishing a strong foothold in retail media supply, we're deepening agency and API partnerships and expect to incorporate more demand sources moving forward, including through Microsoft and other partnerships.

Michael Komasinski
Michael Komasinski
CEO at Criteo

In performance media, we're excited about the rollout of Commerce Go, our new AI powered automation and optimization tool set to launch high performing campaigns in just five clicks and onboard more advertisers faster. Third, we're leaning into brand performance, helping brands build awareness that's actionable and linked to measurable outcomes. Our reach across multiple buyer types and our unique ability to deliver performance across the buyer journey gives us optionality. No one else delivers performance everywhere like we do, and it's powered by a rock solid foundation and sustained innovation. That's a strength we plan to build on with new product extensions.

Michael Komasinski
Michael Komasinski
CEO at Criteo

For the second quarter in a row, we've seen success in capturing budgets from traditional upper funnel DSPs, which reinforces our growing relevance across the full funnel. Underpinning all of this is our AI innovation. We have world class capabilities, including the right training data, and we intend to continue to accelerate the pace of our innovation. In performance media, our AI delivers greater automation and performance breakthroughs. More broadly, as AI agents become a new interface for consumers, we see a clear opportunity for Criteo to play a central role in helping brands show up where it matters, in real time, with measurable outcomes.

Michael Komasinski
Michael Komasinski
CEO at Criteo

In retail media, AI is a key enabler for our full funnel relevancy and holistic page optimization strategies. As we look to the future, here's what you can expect from us. We intend to continue to lead in commerce media and maintain our disciplined approach to growth through our build, partner, and buy framework. We'll hold ourselves accountable, aligning ambition with execution. We're shifting from transformation to scale with continuous innovation and disciplined execution.

Michael Komasinski
Michael Komasinski
CEO at Criteo

That means further expanding across multiple channels, including retail media, open web, and social to serve the full buyer journey. We're investing in new formats, such as outcome based, native display, on-site video, and CTV, all expanding our SAM. Importantly, we are evolving from a largely managed service model to a more scalable self-service platform. We're excited about this new chapter, and we have a world class team to execute. For my part, I lead with transparency, operational rigor, and a focus on measurable impact.

Michael Komasinski
Michael Komasinski
CEO at Criteo

I take a hands on approach to understanding the business dynamics, enabling smart decisions to turn high ambitions into tangible results. Now turning to our first quarter performance. We delivered solid results, reflecting continued execution and momentum. Starting with retail media. We activated $335,000,000 in media spend, up 21% year over year from over 3,800 brands globally.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Our media spend growth was primarily driven by our multi year partnerships with leading agencies, with a year over year increase of approximately 50% in U. S. Agency spend again this quarter. At the same time, our growing relationships with independent agencies are fueling the expansion of our small and mid sized brand roster. With the transition of retailers from Microsoft Advertising to our platform, we now partner with 70% of the top 30 retailers in The US, an increase from 65% previously, and our pipeline is strong.

Michael Komasinski
Michael Komasinski
CEO at Criteo

We're expanding globally with new wins across all regions, including Dick's Sporting Goods in The US, Endeavour in Australia, Dee Shopping in Japan, Cooperative U in France, and Elk Shop, our first retailer in The Nordics. We're also expanding our collaboration with E. Leclerc in France. Additionally, we're building from our success with sponsored ads to expand to newer formats, including on-site video, which we recently launched into general availability, and our outcome based native on-site display offering coming later this year. Shoppable video is a powerful addition to on-site advertising, expanding inventory, boosting engagement, and elevating the overall shopping experience.

Michael Komasinski
Michael Komasinski
CEO at Criteo

For retailers, it unlocks new revenue streams while enhancing how shoppers discover and interact with products. For brands, it raises awareness at the point of sale and drives purchases, all backed by closed loop measurement. We're excited to see early adoption of on-site video from several key retail partners, including Albertsons Companies and Costco, and we look forward to rolling this out over the next several quarters. Overall, we're confident that our comprehensive full funnel on-site advertising capabilities combining video, display, and sponsored product ad formats in one unified platform can increase our market share gains. Retail media off-site represents a complementary opportunity for retailers and brands to expand their reach across the open web.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Most recently, we launched off-site with Office Depot, ODP Business Solutions, and Costco Canada in our CommerceMax DSP. The recent campaign with HP and Costco showcased the power of our full funnel retail media strategy. Shoppers exposed to both on-site and off-site ads saw an 855% uplift in conversion rates, an over 10x increase in revenue per user, and a 58% lift in click through rates, all a clear demonstration of how our integrated approach drives measurable business impact. In addition, we now have several retailers running off-site monetization through our Commerce Grid SSP, enabling brands to access retailer audiences via third party DSPs. This demonstrates our platform synergies and further expands the scale and flexibility of our retail media offering.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Moving on to performance media. We're encouraged by the sequential increase in media spend growth, excluding ad tech services. Our growth was led by commerce audiences, our set of precision targeting tactics that leverage our large commerce data set and best in class AI to help advertisers acquire and retain customers. We've successfully capitalized on cross selling and increasingly benefit from third party demand via our Commerce Grid SSP. We're now focused on expanding beyond these initial levers to unlock even greater scale and opportunity.

Michael Komasinski
Michael Komasinski
CEO at Criteo

We believe our ability to drive performance for clients is the strongest it has ever been, and will continue to expand. We're focused on unifying the buyer journey in a single, independent platform for advertisers to drive brand performance and reach shoppers wherever they are. To this end, we further expanded our social offering in the first quarter, enabling advertisers to activate Facebook and Instagram inventory at the SKU level for their commerce audience campaigns globally. While still early days, this led to a 40% sequential increase in social campaigns this quarter. Our value proposition is resonating, and we're pleased to announce a new preferred partnership with Tinuity, one of the largest independent full funnel agencies in The US to leverage our performance media solutions.

Michael Komasinski
Michael Komasinski
CEO at Criteo

More broadly, our goal is to deliver an end to end self-service streamlined workflow with Commerce Go, allowing advertisers to plan, buy, and optimize across ad formats and channels, all while onboarding clients faster and reducing our cost to serve. Our advanced AI automates decisions around audiences, channels, ad formats, and creatives to maximize results. And while we're still in the early stages of the rollout, we're seeing steady adoption from small clients and lower churn. We've grown Commerce Go campaign volume by 45% quarter over quarter, predominantly coming from small clients. We are focused on our go to market efforts to build on this progress over the next several quarters.

Michael Komasinski
Michael Komasinski
CEO at Criteo

To summarize, we believe Criteo is well positioned with many growth vectors in front of us. Our diversified global business and robust financial foundation give us a strong position, and our focus on performance enables us to be resilient. By staying focused and operating with rigor, we're confident in the long term potential of our platform, and are firmly committed to driving sustained value for our shareholders. In performance media, we have gained greater clarity and have even more confidence in our long term outlook. In retail media, the fundamentals and momentum of our business remain strong despite the near term challenges.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Overall, we have momentum behind our holistic platform strategy, and we anticipate growth in our business. We will pull cost and productivity levers as needed to maintain twenty twenty five adjusted EBITDA margins in the 33 to 34% range, and generate industry leading cash flows. PRIDEOS sits at the heart of commerce media, uniquely powered by cutting edge AI and unmatched commerce data at scale. We're firmly committed to driving shareholder value, and we intend to continue our share buyback, underscoring our confidence in our strategy and financial strength and our belief in the intrinsic value of our shares. We know there is more to do, and the management team and board continue to explore all ways to enhance value for our shareholders.

Michael Komasinski
Michael Komasinski
CEO at Criteo

With that, I'll hand it over to Sarah, who will provide more details on our financial results and our outlook.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Thank you, Michael, and good morning, everyone. Our first quarter performance reflects strong execution and financial discipline. Revenue was $451,000,000 and contribution ex TAC increased to $264,000,000 This includes a year over year headwind from foreign currencies of $6,000,000 At constant currency Q1 contribution ex TAC grew by 7% year over year representing growth of 24% on a two year stack basis. We are lapping a tougher comparison with significant AI driven performance enhancements in 2024, as well as the prior year quarter including Leap Day and Easter. Client retention remains high at close to 90%.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Starting with retail media, revenue was $59,000,000 and contribution ex TAC grew 18% at constant currency to $59,000,000 Our growth was driven by continued strength in retail media on-site and continued traction for off-site campaigns. We benefited from the contribution of newly signed retailers and growth from existing clients remained strong with same retailer contribution ex tax retention at 120%. On the supply side, we continue to win new retailers globally, including former Microsoft advertising retailers. As expected, and as previously communicated, we also benefited from higher tiered fees in January for exceeding fiscal year volume thresholds. On the demand side we saw significant expansion with CPG and smaller brands and we onboarded 300 new brands this quarter.

Sarah Glickman
Sarah Glickman
CFO at Criteo

There is continued momentum with our agency partners and we expect our 3,800 global brands to continue to prioritize retail media as a key channel for their advertising investments given the proximity with the point of sale. During the first quarter, we experienced strength in grocery, while we saw lower growth in beauty. In Performance Media, revenue was $392,000,000 and contribution ex TAC was $2.00 $6,000,000 up 4% at constant currency. This was driven by our Commerce Growth Solution, which leverages our large scale commerce data and AI powered audience modeling technology to find in market shoppers. We also benefited from the growth of our Commerce Grid SSP, while AdTech services continued to be negatively impacted by lower spend by a large client in our media training marketplace.

Sarah Glickman
Sarah Glickman
CFO at Criteo

We benefit from a global, diversified client base. By region, we delivered double digit growth in media spend in Asia Pac and low single digit growth in Europe and The Middle East, while we saw lower budgets in The US. By vertical, travel remains our fastest growing vertical, up 44%, followed by classified and marketplaces performing well. Broadly, there was lower spending in retail and fashion was down 6%. We delivered adjusted EBITDA of $92,000,000 in Q1 twenty twenty five, up 30% year over year, mainly driven by operational leverage from top line growth and cost discipline, including a slower pace of hiring and lower bad debt expense.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Non GAAP operating expenses decreased 3% year over year, reflecting our rigor on resource allocation. We invest in our growth areas while optimizing our operating model to enable scale and operational efficiencies. We continue to streamline our processes to work better and faster and enable increased productivity with AI driven tools. Moving down the P and L, depreciation and amortization increased by 3% in Q1 twenty twenty five to $26,000,000 Share based compensation expense was $16,000,000 reflecting a normalized run rate compared to $27,000,000 in 2024. Our income from operations was $48,000,000 and our net income was $40,000,000 in Q1 twenty twenty five, an increase compared to $9,000,000 last year.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Our weighted average diluted share count was 57,200,000.0, which resulted in diluted earnings per share of $0.66 compared to $0.12 last year. Adjusted diluted EPS was $1.1 in Q1 twenty twenty five, up 38% year over year. Operating cash flow was CAD62 million and free cash flow was CAD45 million in Q1, reflecting improved working capital and lapping last year's calendar impact. We benefit from a strong financial position and pristine balance sheet with solid cash generation and no long term debt. We had $810,000,000 in total liquidity as of the March, which gives us significant financial flexibility to execute on our strategy and enable disciplined and balanced capital allocation.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Our priorities are to invest in high ROI organic investments and value enhancing acquisitions and to return capital to shareholders via our share buyback program. We are confident in our business strategy and we are committed to driving shareholder value. We deployed $56,000,000 for share repurchases this quarter, which included the repurchase of 1,500,000.0 shares and we will continue to actively buy shares as part of our buyback program. Turning to our financial outlook, which reflects our expectations as of today, 05/02/2025. We have taken a prudent approach given the uncertain macro environment and the reduced scope of services related to our largest retail media clients.

Sarah Glickman
Sarah Glickman
CFO at Criteo

It is important to emphasize that our strategic priorities remain unchanged, with a strong focus on top line growth, delivering for our clients, and ensuring strong operational rigor on cost and cash. We also have greater clarity around Google's plan for third party cookies, giving us even more confidence in the long term outlook of our Performance Media segment. For 2025, we now expect contribution ex TAC to grow low single digits year over year at constant currency, with growth in each of our segments. We now estimate Forex changes to drive a positive year over year impact of about $10,000,000 to $12,000,000 on contribution ex TAC for the full year. In Retail Media, we have a scaled $250,000,000 plus revenue base.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Our 2025 Retail Media growth is now projected to be in the low to mid single digit range at constant currency. The downward revision contemplates a more challenging macro environment driving delays of certain retailers' tech roadmaps. This revision also reflects the scope changes for our largest retailer client and for a food delivery client in The US. We expect the reduced scope for these two specific clients to result in a $25,000,000 negative impact in 2025, largely related to Q4 twenty twenty five, and approximately $75,000,000 for the first ten months of 2026 until it annualizes. We have included our most prudent view in our updated outlook and do not anticipate any further significant changes.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Excluding these two clients, our underlying growth for 2025 is expected to be in the ballpark of 20%. In Performance Media, we expect contribution ex TAC to be up low single digits in 2025. This reflects continued traction with advertisers to drive performance throughout the buyer journey and lap tough comps from the significant AI driven performance enhancements in 2024. We and our clients are excited about our platform innovation and look forward to the continued ramp up of Commerce Go. We also expect potentially lower ad budgets in a challenging macro environment, especially in discretionary categories, as all ad budgets are likely to face greater scrutiny.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Overall, we continue to anticipate an adjusted EBITDA margin of approximately 33% to 34% for 2025. Q1 adjusted EBITDA had some phasing benefits as some expenses shifted from Q1 into Q2. We intend to maintain margins and generate strong cash flow while continuing to invest in the growth of our commerce media platform. We anticipate that the investments we are making this year will position us for continued top line growth and strong cash flow generation for the coming years. We expect a normalized tax rate of 22 to 27% under current rules.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Our overall CapEx is expected to be approximately $100,000,000 and we now expect a free cash flow conversion rate of above 45% of adjusted EBITDA before any non recurring item. For Q2 twenty twenty five, we expect contribution ex TAC of $270,000,000 to $278,000,000 down minus 2% to flat at constant currency. Our range takes into account the volatility in the macro environment, its impact on consumers and our clients and soft April trends. As previously communicated, this includes sequential decrease in our retail media growth in Q2, mainly due to lapping a tough comparison and the tiered fees in January. We estimate ForEx changes to drive a positive year over year impact of about $10,000,000 to $12,000,000 on contribution ex TAC in Q2.

Sarah Glickman
Sarah Glickman
CFO at Criteo

We expect adjusted EBITDA between $60,000,000 and $66,000,000 and as previously communicated, this includes a one time planned company wide internal event. It also reflects continued high ROI growth investments in our platform, our annual employee merit increase effective in April, and foreign exchange rate headwinds on our European cost base. We anticipate a slower pace of hiring and less discretionary spend for the remainder of the year. As a reminder, in Q2 twenty twenty four, we benefited from a reduction in bad debt expense due to lower DSO for Retail Media and a one time milestone payment related to one of our large partnerships. To conclude, our strong Q1 results demonstrate the underlying strength of our commerce media platform.

Sarah Glickman
Sarah Glickman
CFO at Criteo

While we are facing near term challenges, including uncertainty in the macroeconomic environment, we expect to continue to deliver growth, healthy profitability and solid cash generation. We have a resilient business with robust performance capabilities and a broad and diversified client base. We have strong conviction in our strategy and our business model, and we have the access to commerce data that fuels our AI model to enable performance and relevance at scale across the buyer journey. And with that, I'll hand it over to the operator to begin the Q and A session.

Operator

Thank you. Your first question comes from Ygal Arounian with Citigroup. Your line is now open.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

Hey, good morning, guys, and welcome, Michael. So I guess first, not surprisingly on retail media. Over the past few quarters, we you guys have highlighted the competitive environment. Accridio has been getting stronger within that competitive environment in a pretty meaningful way. And the the combined impacts here that we're talking about are roughly a third.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

It would be roughly a third of your retail media contribution ex pack in 2025. So that's a pretty meaningful impact. And, you know, just wanna kind of expand on a, with your largest retail partner, you know, why maybe why do you think this is happening again after this happened a year and a half ago? Why they're pulling back further, you know, you

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

know,

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

given given the support you offer, maybe a little bit on Uber Eats also, that's happening and the confidence that your competitive positioning remains as this plays out? Is there further risk of in housing and just how we think about that? And then follow-up just on maybe if we could expand on the comments around April and the softer macro, a little bit more detail on what you're seeing there. Thanks.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Thanks, Yigal. I can start the first question, and I'll ask Sarah for some extra commentary. In terms of the in housing question, we see some retailers willing to own the sales and demand front end of their retail media network, continuing to use our technology. But not every retailer can take that on, and Criteo demand generation is differentiated, and as is our technology, which we don't see any risk to in housing from. So no, we don't see this as a continuing trend.

Michael Komasinski
Michael Komasinski
CEO at Criteo

This client being one of the larger ones in the market was probably overdue to start to adopt this operating model, and in fact they had contemplated it for some time. So let Sarah talk a little bit about that.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yeah, Thanks for the question. Just in terms of this situation, first of all, this is a very long standing partner for us and obviously is our largest retail media client. What we have seen over the years is that they had changed their arrangement with us a few years back, as you know. In this situation, what has happened is that they have removed services which relate to two specific items. One relates to client services that we support bringing in new clients and demand generation services, as well as other services including billing and print collections.

Sarah Glickman
Sarah Glickman
CFO at Criteo

That will now be curtailed starting November. That being said, we have incredible long term relationship with them, they will continue to use our tech for running retail media, so there will be no other change there, but it is a significant impact, especially given that we have done, I would say, a strong job for them as well as our other clients across this year and into 2025. We do expect strong growth across the rest of the base and for the long term and we expect to continue to get leverage from our tech across this customer and all our customers for the long term. Specifically to The US food delivery client, this was a choice by them simply for The US market. We are continuing to manage all the business for them globally and that, as you know, was announced externally.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Overall, we do not expect this to be impacting us for other clients. This is a, I would say, unique situation and we manage through it and we continue to service all our clients and we continue to drive our tech roadmap as well as the value that we deliver for them.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

Okay, thanks. And then maybe just on the macro trends in April and what you're seeing there.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Oh, yeah, yeah, I mean, did see a soft macro in April. I mean, came off a fantastic Q4, strong traction into Q1. I would say in Q1, and as I said, we saw a mixed quarter, beauty being more down, fashion down, US retail department stores also down, but offset with very strong growth, travel up 44%, classifies up. And similar trends in April, but we did see I would say a flat Easter year on year, and it was softer across the board. I think just given some of the news in the macro environment we saw a softening.

Sarah Glickman
Sarah Glickman
CFO at Criteo

That being said, we always see that we have an incredibly resilient performance business and none of our categories are down more than 10%, they are all either up or they're down to the kind of mid single digit range.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

Okay, thank you so much.

Operator

Your next question comes from Mark Zutowitz with Benchmark. Your line is now open.

Mark Zgutowicz
Equity Research Analyst at The Benchmark Company LLC

Thank you and welcome Michael. I just wanted to get a sense, appreciate the color, Sarah, on the verticals that you saw weaker in April, but in terms of spending patterns across income demographics, I know you see a lot of data and just curious if you're starting to see any weakness at the upper income levels relative to the low to mid that would be interesting. And then in terms of the OpEx leverage, Sarah that you saw across all line items in the first quarter, I'm just curious how that should trend into Q2 and through the year. I think you have a better picture perhaps of the top line this year, but I would be interested in just getting a sense of how you plan to manage that. And then just initially, how we should be thinking about the twelve month revenue impact that begins in fourth quarter from your large client downtick?

Mark Zgutowicz
Equity Research Analyst at The Benchmark Company LLC

Thanks.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Okay. Yeah, I'm happy to take those. Thanks, Mark, for the questions. I mean, first of all, on the macro, we do look at this, I would say, many ways, and actually there is information on our website regarding kind of marketing trends. I don't know if we show that in demographics.

Sarah Glickman
Sarah Glickman
CFO at Criteo

What I would say is that we have seen, you know, said fashion down, right, broadly, beauty, which is you know including in the fragrance kind of categories in I would say, you know, the nicer stores down, US department stores are not doing as well, and we're clearly very focused on the retailers as they announce in the coming months. But in terms of brand spend, it really is, you know, some brands are more resilient than others, so more discretionary categories, I would say across income bands we're seeing less spend just in general, but we clearly keep a close eye on what the banks publish here as well. In terms of the operating leverage, you know, we saw terrific operational leverage in Q1. We're really keeping a close eye. This is, I would say, a well trained muscle for us at this point.

Sarah Glickman
Sarah Glickman
CFO at Criteo

So Q1, very strong EBITDA leverage coming from the top line. Q2, we actually have included within our investor materials a walk of Q1 to Q2, so you can see the dynamics there. Some of it relates to comps and some of it relates to specific one time expenses. There's also an FX headwind in there for our European cost base that we expect to continue to see this year, but it's a very, I hope, clear walk for you that we included in the materials. But overall for the year, we're focused on ensuring that we deliver on the top line as well as on the bottom line, and we're going to continue to focus on all cost levers largely related to the pace of new hires.

Sarah Glickman
Sarah Glickman
CFO at Criteo

In terms of the retail media client, we have a $250,000,000 base for our retail media client, it's a scale base, it's across over 200 clients, we added over 1,100 brands year on year, that continues to grow. This impact relates to two specific client situations, it will of course lap within a year, it is a significant headwind to us, largely because I would say we've done a good job to ensure that we deliver services to our clients, including demand generation services for the long tail of brands and that is the piece that will be curtailed, but overall for all our client base commerce, Max is going well, high spend from agencies that want to go across retailer across our ad network, and so our focus is to continue to ensure that we deliver value to all those base and of course we'll see the uptake in our new clients as well as our new capabilities coming in and we anticipate that will be more in the end of this year, but likely more to start ramping up in the beginning of next year, just given the uncertain macro.

Mark Zgutowicz
Equity Research Analyst at The Benchmark Company LLC

Okay, thank you, Sarah. Appreciate it.

Operator

Your next question comes from Mark Kelley with Stifel. Your line is now open.

Mark Kelley
Mark Kelley
MD - Internet at Stifel Financial

Great. Thank you very much. Good morning, everyone. Hello, Michael. A couple quick ones unsurprisingly on retail media.

Mark Kelley
Mark Kelley
MD - Internet at Stifel Financial

Just starting with your largest retail media client, any way to give us a sense for what percent of the demand you were generating versus what they were doing in house, you know, before this change? And then second, just on the Uber, you know, relationship, can you just walk through what that process was like? You know, I I can see who the, you know, competitor is that was starting to work with them in The US. But was there like an RFP process where they were testing you against other solutions and the other solution won out? I'm just trying to get a sense for just the dynamics at Uber.

Mark Kelley
Mark Kelley
MD - Internet at Stifel Financial

Thank you.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yeah, I'll just address the question on the largest retailer first. We do not, I would say, generally comment on our specific clients, we and we also do not give information on what's being driven between ourselves and our clients. What we have said and what continues to be the case is that 80% of brand spend for large brands is being driven by most of our large retailers. But what we are doing is you know a very good job of increasing the number of brands globally and that tends to be the mid to long tail that we do service for this client but also for other clients and that will be shifted in kind of at the end of this year. So that would be, I would say, the dynamics for this client.

Sarah Glickman
Sarah Glickman
CFO at Criteo

In terms of concentration of clients, we do include our client concentration within our 10 ks. So you can see the specifics within that.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Yeah, thanks, Sarah. Hi, Mark. I can address the Ugrees question. While we're disappointed with the change, I think it's worth reminding why we continue our global partnership with Uber advertising and remain focused on deepening that collaboration and driving shared success. Like Sarah said, we don't, I think, comment in detail about how clients make their decisions.

Michael Komasinski
Michael Komasinski
CEO at Criteo

But I guess what I can tell you is there was not a head to head competition of some kind that we lost out on. We were driving significant demand for that client. And they made a decision that they think that there'll be some maybe stronger synergy with another provider. That's about the best I could surmise at this current state.

Mark Kelley
Mark Kelley
MD - Internet at Stifel Financial

Okay, thank you both.

Operator

Your next question comes from Richard Kramer with the REIT Research. Your line is now open.

Richard Kramer
Senior Analyst at Arete research

Thanks very much. Michael, you mentioned and Sarah as well, you mentioned the onboarding of the Microsoft clients, capturing budget from upper funnel DSPs, you talked about the growth rates in agencies, larger and mid sized agencies. But we're not really seeing this come through in numbers this year. And Sarah, it seems like you're mentioning more 20 20 6 figures. Can you talk through what you could do to speed up the ramp of these both new cohorts of clients and also these new channels?

Richard Kramer
Senior Analyst at Arete research

It does seem like you're calling out a lot of areas where you're winning share or you've got a big pipeline, but again, it's hard to see that flowing through in numbers this year.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Yeah, Richard, it's Michael. Hey, how are you? Thanks for the question. I will start that and then probably kick this to Todd for a little extra commentary. But I mean, in general, there's a solid strategy here and a strong roadmap.

Michael Komasinski
Michael Komasinski
CEO at Criteo

And it's kind of back to my overall remarks that our focus here in the near term is to focus on product delivery, scaling products in the market, and making sure that we execute commercially. In the near term for performance media, we need to ramp Commerce Go and make sure that that's positioned to have an impact on the business in 2026, continue to leverage our AI investments, and I think longer term, make sure that we can continue to move up funnel to be more of a full funnel cross channel product on performance side. In retail, near term, I think it's about driving solutions towards holistic page optimization and making sure that we scale new offerings like on-site video. That's contemplated in the plan, but we need to deliver against that. And then long term, it's really about solving the equation for efficient buying in retail media.

Michael Komasinski
Michael Komasinski
CEO at Criteo

But I'll let Todd comment on maybe a couple of the product enhancements that we could also focus on.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

Thanks, Michael. Good to hear from you, Richard. I would just add one thing, which is retail media is still maturing into trading that pulls together on-site search, display and off-site in the full funnel cross channel setup that Michael was measuring. That's why we talk about the longer term implications of partnership with Microsoft and other demand platforms, because we have to make sure that all of those things trade in the full funnel cross channel setup in an efficient manner. And that's something that just doesn't exist across retail media today.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

And we are leading the charge to design it and to put it into place for the whole ecosystem. That's why we talk about it long term and that's why you're not seeing it show up in the immediate term. But we're very confident that we're ahead of the charge there. And we have a footprint that is enviable on almost any level across the ecosystem to make that true. So that's just the one thing to add.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

But we're very bullish about the opportunity as we move into this space where retail media transacts full funnel cross channel.

Sarah Glickman
Sarah Glickman
CFO at Criteo

And, Oian, just to add to the Sorry. Go ahead.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Go ahead. Please.

Sarah Glickman
Sarah Glickman
CFO at Criteo

I was just just to

Sarah Glickman
Sarah Glickman
CFO at Criteo

add to the to the forecast. I mean, as you've seen, we've, you know, we've moved to a more prudent view on the forecast. Some of that is related to the macroeconomics. We're winning clients, the win rate is strong, but we do anticipate some of those will be later, and that is largely due to the client versus the, I would say, appetite to get going. So it's more that it's just a slower transition and a slower pace.

Richard Kramer
Senior Analyst at Arete research

Okay. And maybe a quick follow-up, for Todd and Sarah since you have a history there with respect to Privacy Sandbox. Does retargeting somehow revive itself down the road? Or has this sort of third party cookie ship already sailed? And maybe Sarah, what sort of incremental testing costs were you wearing in the past year or two to make the transition to privacy sandbox that may now no longer be needed?

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

Let me take the first one, and Sarah can jump in after. It's a pretty simple equation. I think Michael mentioned earlier, you know, we have made our investment in hybrid addressability and privacy sandbox specifically well before now. We're four years into that. Google's policy change is only helping us expand retargeting and other direct response pools and making them perform at greater scale.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

So that's upside for us over time. And in terms of the investment, again, just to reinforce what Michael said earlier, we've already made our investments in Privacy Sandbox. Most of those were accretive broadly, because it took us in the world of deep learning for our audience setups, for our bidding, for our product recommendation, and for our optimization in new ways. So we're going to carry those long term, and they're definitely upside for the company. We will not have to continue to invest in privacy sandbox APIs as we were before.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

So that does lose up a very slight amount of resources for the product roadmap.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yeah, I mean, just to add to that, I would say this has been actually a great ROI investment for us across the board. We understand signal, we understand data, we're putting those teams right alongside all the, I mean, I would say Todd and the R and D team alongside all the charge to really expand on how do we use data and AI signals in the best way. So I would say not significant savings there because these team members just understand this cold and are excited about the innovation that this will drive. So from our standpoint, we see blue skies ahead to just have clarity on driving that road map forward fast.

Mark Zgutowicz
Equity Research Analyst at The Benchmark Company LLC

Okay. Thank you.

Operator

Your next question comes from Justin Patterson with KeyBanc. Your line is now open.

Justin Patterson
Justin Patterson
Managing Director at KeyBanc Capital Markets

Great. Thank you. Sarah, you mentioned managing expenses during this period while still investing for growth. Could you give us just how much a sense on how much flexibility there is around expense management this year? And maybe stepping back for Michael, we've seen a lot of interest on retail media more so from the video side as connected TV ramps up.

Justin Patterson
Justin Patterson
Managing Director at KeyBanc Capital Markets

Any views on just how you might approach a channel like that and where that could fit on the long term roadmap? Thank you.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yeah, just to address on the cost side, I mean, we clearly had a roadmap and an investment, including, I would say, selling and operational resources that was focused on maybe a different macro environment at the beginning of this year. So most of this would relate to, you know, not hiring for, I would say, more discretionary roles. Second, I would say that our focus is on a self-service platform and the commerce go would be one great area. It's a new segment for us, focused back to small clients, it's self-service capability kind of end to end, and clearly that's a more efficient operating model. So I would say those would be the two items that we're focused on.

Sarah Glickman
Sarah Glickman
CFO at Criteo

We are not stopping any investment on high ROI investments. What we have seen is that we need less people to do that given AI innovation, just given some of the discussion we just had on the AI resources and engineers that are able to do more with less. All in all, it's across the board, but ultimately it's doing what we do well, which is ensuring that the operating model and the resources are focused on just ensuring that we go full speed ahead on where our clients are going and on the efficiency that we can drive in the productivity.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Yeah, can. Justin, hi. Thanks for the question. I'll take the one on CTV. It all starts with our goal to serve the full buyer journey across multiple channels, and CTV is the second fastest growing area of digital advertising.

Michael Komasinski
Michael Komasinski
CEO at Criteo

And I think in terms of what it offers as a format, it supports brand building with the added benefit of being measurable, having closed loop attribution, and we think even can be a robust performance channel. So we're in the early stages of assessing how it would fit for us, and how we would build connections between you know kind of living room commerce and other channels so to speak. So it's early days, but it definitely could have helped us achieve more scale by capitalizing on again the second fastest growing segment of the media landscape. And Todd, you want to offer a couple thoughts about sort of what our early hypotheses might be?

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

Yeah, I'd just reinforce something Michael said, we're looking at CTV and video across the full funnel cross channel landscape, and it's not just something that we're considering, we are in the process of testing the dimensions of how it is used for both performance in the direct response context, as well as all the way up to the top of the funnel in discovery advertising. So we have two dimensions of work that we're doing there product wise to prove that we can manage performance and deliver it for our clients across that full funnel setup.

Operator

Your next question comes from Alec Brondolo with Wells Fargo. Your line is now open.

Alec Brondolo
Alec Brondolo
Director - Equity Research at Wells Fargo

Yes. Hey, thanks so much. Maybe one for Sarah and one for Michael. Sarah, could you maybe help us think about the percent of retail media contribution ex TAC after backing out the $100,000,000 from the largest customer that's generated via ad sales or, I guess, demand generation services? I'm trying to think about like how much of the business pro form a is on the supply side, which seems a little bit safer and more defensible versus on the demand side.

Alec Brondolo
Alec Brondolo
Director - Equity Research at Wells Fargo

And then maybe for Michael, I guess, could you help us think about early impressions of Criteo's self-service kind of tools? How would you rate the sophistication of self-service campaign set up in management at Criteo right now relative to maybe like embedded Advantage Plus or Google Performance Max? And how do you think about maybe closing the capability gap over time? Thank you.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yeah, I mean, just to address 26, clearly we're not going to give long term guidance as I think you know our 26 guidance. What I have said is that we are building off a strong base of 200 plus plus growing customers. They are growing faster than the market and we do expect that to ramp up, especially within 2026 and I would say in a more normalized macro. In terms of the service layer, the curtailment largely relates to services, which was about 20% of our base, but this is the only significant client that has services. So I guess I would say that it's just a slower ramp up of the services layer.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Demand generation we see coming through CommerceMax. We see the agency growth 50% year on year. We see the continued focus on mid and long tail brands as well as large brands across the base. And our customers want us, I mean, I'd say our agency partners and brands in particular do want to buy across retailer. So we don't necessarily see this as being a key driver for us in terms of supply fees, which I would say are quite fixed relating to the tech, but the demand side fees and the demand side of the business is where we do see scaling up with our agency and brand partners.

Michael Komasinski
Michael Komasinski
CEO at Criteo

Hi, Alex. How are you? Thanks for the question. I'll take the one on the self-service capabilities. Look, I would say that Criteo is on a journey as it pertains to that, but we are very excited about the rollout of ConverseGo.

Michael Komasinski
Michael Komasinski
CEO at Criteo

And I think we have the benefit there of seeing what has worked in terms of what's come before us, and frankly what hasn't. I can tell you from my agency background, really what agency partners are looking for in a solution like that is the ability to manage parameters. They actually enjoy AI automation but certainly want to have hands on the key critical levers. They want to understand placement, we want to have a good understanding of the measurement component. And so Commerce Go is designed with all of those in mind, we refer to it as our gray box solution because it offers those types of parameters and transparencies that other solutions in the market don't.

Michael Komasinski
Michael Komasinski
CEO at Criteo

And so we think that we potentially will be differentiated with that as we roll it out, and we're excited about the potential that that has for the business.

Alec Brondolo
Alec Brondolo
Director - Equity Research at Wells Fargo

Perfect, thanks so much.

Operator

Your next question comes from Doug Anous with JPMorgan. Your line is now open.

Bryan Smilek
Bryan Smilek
Equity Research Associate at JP Morgan

Great, it's Brian Smilek on for Doug. Thanks for taking the questions. Just thinking about the 25 guide, can you just help parse out the trade off of contributions from new clients, specifically Microsoft, versus macro headwinds that are factored into the guide? And then separately, by vertical overall too, social continues to grow well and you obviously integrated at SKU level on Facebook and Instagram. Just curious, can you help us think about the demand there and the cross selling opportunity with the new channels such as social over time?

Bryan Smilek
Bryan Smilek
Equity Research Associate at JP Morgan

Thank you.

Sarah Glickman
Sarah Glickman
CFO at Criteo

Yes. I can address just in terms of the growth rate for '25. The way that we saw the revision downwards was I would say about fiftyfifty, so about 50% related to the macro. Some of that is general macro trends, some of that is just not starting enough,

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

I would say, And the other part relates to the the two specific clients. I can jump in on the social piece, and I'm glad that you asked about Meta specifically. Our intent the entire way has been to simplify workflows and guarantee performance is returned as our clients are looking across channels and reaching that full funnel that we talked about before. And that's working quite well with Meta so far. So obviously we look to take that further out into the social platforms, so that our clients are not only getting reach, but they're also getting workflow efficiency and performance as they choose us as their solution, their overall solution, rather than using a variety of point solutions that are available in the market.

Todd Parsons
Todd Parsons
Chief Product Officer at Criteo

So we're very excited to continue down the path that we've started, and the early returns show that we're being successful on both performance and reach for our clients.

Bryan Smilek
Bryan Smilek
Equity Research Associate at JP Morgan

Great. Thank you both.

Operator

There are no further questions at this time. I will now turn the call over to Melanie for closing remarks.

Melanie Dambre
Melanie Dambre
Vice President-Investor Relations at Criteo

Thank you, Michael, Sarah and Todd. That concludes our call for today. Thanks everyone for joining. If you have any follow-up questions, the Investor Relations team is available to assist. Bye bye.

Operator

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Executives
    • Melanie Dambre
      Melanie Dambre
      Vice President-Investor Relations
    • Michael Komasinski
      Michael Komasinski
      CEO
    • Todd Parsons
      Todd Parsons
      Chief Product Officer
Analysts

Key Takeaways

  • Criteo hailed Google’s decision to keep third-party cookies as a “positive near term and long term implication” that validates its AI-driven, privacy-protecting addressability roadmap.
  • The company’s largest retail media client will cease Criteo’s managed services and brand demand sales in November, imposing a ~$25M hit in 2025 (and ~$75M through October 2026) despite retaining Criteo’s ad tech platform.
  • In Q1, Criteo posted $451M in revenue with contribution ex-TAC up 7% year-over-year (cc), powered by 21% retail media spend growth and 4% performance media growth, while adjusted EBITDA rose 30% to $92M.
  • Criteo is scaling its commerce media platform with innovations like Commerce Go for five-click AI-powered campaign setup and on-site video ads, aiming to capture budgets across retail, open web, social and CTV channels.
  • For FY25, management guides low-single-digit contribution ex-TAC growth (33–34% EBITDA margin), expects underlying retail media growth ~20% ex-two large clients, and plans continued share buybacks backed by strong cash flow.
AI Generated. May Contain Errors.
Earnings Conference Call
Criteo Q1 2025
00:00 / 00:00

Transcript Sections