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Benoit Fouilland, CFO
Investor Day, September 2016
Financial Update
2 | Copyright © 2016 Criteo
Safe Harbor Statement
This presentation contains “forward-looking” statements that are based on our management’s beliefs and assumptions and on information
currently available to management. Forward-looking statements include information concerning our possible or assumed future results of
operations, business strategies, financing plans, projections, competitive position, industry environment, potential growth opportunities,
potential market opportunities and the effects of competition.
Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,”
“believes,” “could,” “seeks,” “estimates,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar
expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and
assumptions only as of the date of this presentation. You should read the Company’s most recent Annual Report as filed on Form 10-K, on
February 29, 2016, including the Risk Factors set forth therein and the exhibits thereto, completely and with the understanding that our
actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these
forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-
looking statements, even if new information becomes available in the future.
This presentation includes certain non-GAAP financial measures as defined by SEC rules. As required by Regulation G, we have provided a
reconciliation of those measures to the most directly comparable GAAP measures, which is available in the Appendix slides to today’s
“Financial Update” presentation. In addition, certain financial information contained herein with respect to years ended prior to December 31,
2013 has been derived from our audited consolidated financial statements that were prepared in accordance with IFRS and presented in
Euros. Financial information contained herein with respect to quarterly periods has been derived from our unaudited condensed
consolidated financial statements.
3 | Copyright © 2016 Criteo
We have had a solid track-record since IPO
1 We define Revenue ex-TAC as our revenue excluding traffic acquisition costs, or TAC, generated over the applicable measurement period. Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Revenue ex-TAC to Revenue, the most directly comparable GAAP measure.2 We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.
Revenue ex-TAC1 ($M) Adjusted EBITDA2 ($M)
+51%
CAGR
22
42
105
143
176
FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016
High
growthExpanding
profitability
147
238
403
534
622
FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016
Expanding
profitability
4 | Copyright © 2016 Criteo
Our model is differentiated, efficient and scalable
Direct model driving
elastic demand
Sustainable
gross margin
Profitable
with significant
operating leverage
Highly
capital efficient
& cash generating
5 | Copyright © 2016 Criteo
Our business model has unique attributes
1 On average over the last four quarters through Q2 20162 Last twelve months to Q2 20163 On average over the last 20 quarters through Q2 20164 On average over the last four quarters through Q2 2016. Represents uncapped budgets of our clients, which are either contractually uncapped or so large that the budget constraint does not restrict ad buys
75%+Direct relationships
with clients2
800+Net client additions
per quarter1
90%+Client retention rate3
77%Of Revenue ex-TAC from
uncapped budgets4
Differentiated
in Performance Marketing
Attractive Direct
Sticky Elastic Demand
6 | Copyright © 2016 Criteo
Very consistent spending pattern by client cohort…
We drive consistent increase in client spend
Revenue per client cohort (US$)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
…Driving increasing business from existing clients
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
+20%*Revenue ex-TAC from exiting live client (US$)
* +20% YoY growth at constant currency in Q2 2016
7 | Copyright © 2016 Criteo
Q30Q29Q28Q27Q26Q25Q24Q23Q22Q21Q20Q19Q18Q17Q16Q15Q14Q13Q12Q11Q10Q9Q8Q7Q6Q5Q4Q3Q2Q1
France US Japan Germany UK
Quarterly Revenue ex-TAC since launch in major markets ($M)
Our model is highly replicable across all markets
8 | Copyright © 2016 Criteo
41% 41% 40%41% 40% 41% 40% 40% 41% 41%
We optimize our margin to create sustainable value across the ecosystem
• Maximize liquidity and scale on our platform
Strategic
objective
Drive
long-term
benefits
Maximize
absolute
Revenue ex-TAC
opportunity
for Criteo
• Maximize value for advertisers and publishers
• Maximize network effects and competitive position for Criteo
• Set optimal margin
MIN MAX
8692
103
122 118 122134
160 162 166
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Very
consistent
margin
since IPO
Revenue ex-Tac as % of
RevenueRevenue ex-Tac
9 | Copyright © 2016 Criteo
We generate significant profitability while investing
Adjusted EBITDA1 margin (% of Revenue)
and Non-GAAP operating expenses2 ($M)
0%
1%
2%
3%
4%
5%
6%
7%
FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016
GAAP operating margin3
(% of Revenue)
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
4%
5%
6%
7%
8%
9%
10%
11%
12%
FY 2012 FY 2013 FY 2014 FY 2015 LTM Q2 2016
Non-GAAP operating expenses Adjusted EBITDA margin (% Rev)
1 We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see the Appendices for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.2 We define Non-GAAP Operating Expenses as our operating expenses, excluding the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration.3 GAAP Operating margin corresponds to Income from Operations as a percentage of Revenue.
10 | Copyright © 2016 Criteo
We have significant drivers of operating leverage
Technology
innovation
Broader
supply
Upselling incremental
products and channels
Operating excellence
and productivity
Always-on spending Uncapped budgetsLevers driving additional spend
at limited incremental costs
Powered by a combination of
11 | Copyright © 2016 Criteo
Technology Innovation
New Supply
Technology and new supply are powerful levers
Revenue ex-TAC uplift (%)
Conversion Optimization
+20% uplift
Dynamic Creative Optimization
+10% uplift
+8% upliftRevenue Optimization
+6% upliftRTB integration improvement
+36% uplift in Japan
+5% uplift globally
+10% uplift
Native
+3% uplift
Some significant examples over time…
Note: the uplift in Revenue ex-TAC from technology innovation corresponds to the increase in Revenue ex-TAC for Criteo on a representative sample of clients, where clients use the
corresponding new Engine feature on 50% of their user pool and do not use the corresponding new Engine feature on the other 50% of their user pool, pursuant to a proven 50/50 A/B
test methodology. The uplift in Revenue ex-TAC from new sources of inventory supply and new channels corresponds to the increase in Revenue ex-TAC for Criteo on a representative
sample of clients, comparing the Revenue ex-TAC generated from those clients before and after the introduction of such new source of inventory supply or new channel.
12 | Copyright © 2016 Criteo
200
350
500
Q2 2013 Q2 2014 Q2 2015 Q2 2016
Germany
Our model improves productivity across markets
0
300
600
900
Q2 2013 Q2 2014 Q2 2015 Q2 2016
US
300
600
900
1200
Q2 2013 Q2 2014 Q2 2015 Q2 2016
Japan
150
250
350
Q2 2013 Q2 2014 Q2 2015 Q2 2016
UK
Tier 1 Revenue ex-TAC/Sales + Account Strategist Headcount (in K$)
13 | Copyright © 2016 Criteo
We drive a culture of profitable growth and P&L accountability across our regions
Revenue
TAC
Revenue ex-TAC
Cost of Sales
Gross Profit
Direct Opex
(people, facilities, 3rd-party services, marketing, other)
Direct Operating Contribution
Indirect Opex (facilities, internal IT)
Allocated Regional S&O
Regional Operating Contribution
Chief Revenue Officer
Mollie Spilman
Americas EMEA APAC
Midmarket
14 | Copyright © 2016 Criteo
Unit economics per client (in US$) – Last 12 months to Q2 2016
Midmarket economics are favorable
Tier 1 Midmarket
Revenue per client 229,000 64,000
Traffic Acquisition Costs per client 135,000 38,000
Revenue ex-TAC per client 94,000 26,000
Cost of sales per client 6,200 1,400
Direct opex per client 18,800 7,400
Direct operating contribution per client* 69,000 17,200
Direct operating contribution margin per client** 30% 27%
* Non-GAAP metric
** As % of revenue
15 | Copyright © 2016 Criteo
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0 1 2 3 4 5 6 7 8 9 10
Americas MMS Americas T1 EMEA MMS EMEA T1 APAC MMS APAC T1
Direct operating contribution by region (% of Revenue) – Last 12 months to Q2 2016
Midmarket profitability is fast approaching Tier 1 levels
Direct
operating
contribution
margin
Years after
market entry
APAC
Tier-1
Americas
Tier-1
EMEA
Tier-1EMEA
midmarket
Americas
midmarket
APAC
midmarket
16 | Copyright © 2016 Criteo
We have further sources of leverage in G&A
•
•
60
•
Org & Processes
Systems
17 | Copyright © 2016 Criteo
For Criteo’s core business
We are headed toward our long-term adjusted EBITDA margin target
* Cost of revenue and operating expenses are expressed on a Non-GAAP basis, which excludes the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration.** As a % of Revenue
As a % of Revenue ex-TAC FY 2013
Revenue ex-TAC 100%
Cost of Revenue* 7.9%
Gross margin 92.1%
R&D* 14.9%
S&O* 43.6%
G&A* 16.0%
Adj. EBITDA 17.5%
As a % of Revenue 7.1%
Revenue ex-TAC margin** 40.3%
FY 2014
100%
6.6%
93.4%
12.5%
39.9%
14.8%
26.2%
10.7%
40.8%
FY 2015
100%
6.1%
93.9%
13.4%
39.8%
13.8%
26.9%
10.8%
40.4%
Long-term
operating model
100%
6% - 8%
92% - 94%
13% - 15%
29% - 31%
8% - 10%
37.5% - 42.5%
15% - 17%
40%
LTM to
Q2 2016
100%
6.3%
93.7%
14.4%
37.3%
13.8%
28.3%
11.4%
40.5%
18 | Copyright © 2016 Criteo
Our profitability and direct relationships drive sound working capital
We have robust operating cash flow generation
Days sales outstanding & days payable outstanding (in days)**Adjusted EBITDA ($M)
1519 20 18
26
41
32
24
34
5349
39
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Adj. EBITDA conversion into cash from operating activities (%)*
45
50
55
60
65
70
75
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
DSO DPO
0%
20%
40%
60%
80%
100%
120%
140%
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Average 91%
+
* On a Last Twelve Months basis ** DSO and DPO figures prior to 2016 are calculated based on Euro-denominated financials, in accordance with IFRS
19 | Copyright © 2016 Criteo
-$20
$0
$20
$40
$60
$80
$100
$120
$140
Q3 2
011
Q4 2
011
Q1 2
012
Q2 2
012
Q3 2
012
Q4 2
012
Q1 2
013
Q2 2
013
Q3 2
013
Q4 2
013
Q1 2
014
Q2 2
014
Q3 2
014
Q4 2
014
Q1 2
015
Q2 2
015
Q3 2
015
Q4 2
015
Q1 2
016
Q2 2
016
Our robust operating cash flow generation enables continuous investment
INVESTDEVELOP & GROW
CASHSCALE
PROFITS
SMART
INVESTING
Cash flow from operating activities ($M)
Cumulated Free Cash Flow ($M)
+0
20
40
60
80
100
120
140
2013 2014 2015 LTM Q2 2016
$-
$10
$20
$30
$40
$50
$60
$70
$80
2013 2014 2015 LTM Q2 2016
Capital expenditures ($M)
20 | Copyright © 2016 Criteo
Our financial structure offers significant flexibility
Strong
balance
sheet
Dec. 2015 June 2016
842
915
Total assets (in $M) Financial liabilities (in $M)
Very low
debt
Dec. 2015 June 2016
910
Cash & cash equivalents (in $M)
Significant
cash pile
Dec. 2015 June 2016
377354
>40%
of assets
$380Mcash
As of June 30, 2016
€250M committed financing
$750M equity raise capacity*
Share buy-back authorization**
* Based on a $3bn+ market capitalization, pursuant to the 2016 AGM authorization to issue up to 15,6m shares ** Only for M&A
21 | Copyright © 2016 Criteo
•
–
–
–
•
•
CapEx
M&A
Our capital allocation is both dynamic and disciplined
Focused on CapEx and M&A
22 | Copyright © 2016 Criteo
We have an active yet disciplined M&A process
* July 2013-June 2016 period - Data excludes repeat engagements with the same companies
Almost 500 distinct companies screened*
Diligence
Deeper Dive
Engaged
427
91
27
5
Acquisitions in Criteo’s history
Systematic and
focused
approach
Structured
Strategy
& M&A team
Cross-functional
integration
team
23 | Copyright © 2016 Criteo
Track record of acquiring complementary assets
Our use of cash supports our strategic ambitions
Clear rationale:
Accelerate the execution of our
“World’s Performance Marketing Platform” vision
24 | Copyright © 2016 Criteo
We are driving Criteo forward in the best interests of our shareholders
We manage the
company for growth
while investing in the
business
We are heading
towards our 40%
long-term Adjusted
EBITDA margin target
We allocate capital
dynamically and with
the right level of
discipline
We offer a unique
combination of
superior growth,
expanding profitability
and cash
Our financial profile
supports our “World’s
Performance
Marketing Platform”
vision
The World’s
Performance
Marketing Platform
Appendices
27 | Copyright © 2016 Criteo
Revenue ex-TAC reconciliation
($ in thousands) Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 2012 2013 2014 2015LTM
Q2’16
Revenue 208,881 226,633 258,245 294,489 294,172 299,306 332,674 397,018 401,253 407,201 349,209 589,418 988,249 1,323,169 1,538,146
Less: Traffic acquisition
costs122,967 134,751 155,237 172,538 175,888 177,239 198,970 237,056 238,755 240,969 202,581 351,759 585,492 789,152 915,750
Revenue ex-TAC 85,914 91,882 103,008 121,951 118,284 122,067 133,704 159,962 162,498 166,232 146,628 237,659 402,757 534,017 622,396
28 | Copyright © 2016 Criteo
Adjusted EBITDA reconciliation
($ in thousands) Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 2012 2013 2014 2015LTM
Q2’16
Net income (loss) 5,233 3,330 15,439 22,893 13,617 3,929 5,793 38,938 18,527 13,339 1,066 1,839 46,896 62,276 76,597
Adjustments:
Financial (income) expense (1,103) (1,312) (7,502) (1,473) (3,920) 2,546 6,650 (735) 1,317 94 2,002 9,117 (11,390) 4,541 7,326
Provision for income taxes 4,390 4,865 4,205 4,118 7,143 1,365 5,388 (4,378) 7,944 4,450 8,422 3,203 17,578 9,517 13,404
Equity awards share
compensation expense4,458 3,247 5,754 6,142 6,317 5,325 4,600 7,748 8,370 7,695 4,569 9,130 19,601 23,989 28,413
Pension service costs 149 100 125 129 112 110 110 109 129 131 141 384 504 441 479
Depreciation and
amortization expense6,173 7,783 8,256 9,001 8,428 10,278 11,892 13,967 12,516 13,300 6,125 14,763 31,213 44,564 51,675
Acquisition-related costs - - - - - - - - - 148 - - - - 148
Acquisition-related deferred
price consideration563 148 128 110 109 115 54 (2,172) 40 44 - 3,137 950 (1,894) (2,034)
Total net adjustments 14,630 14,831 10,966 18,027 18,189 19,739 28,694 14,539 30,316 25,862 21,259 39,734 58,456 81,158 99,411
Adjusted EBITDA 19,863 18,161 26,405 40,920 31,806 23,668 34,487 53,477 48,843 39,201 22,326 41,573 105,352 143,434 176,008
29 | Copyright © 2016 Criteo
Non-GAAP operating expenses reconciliation
($ in thousands) 2012 2013 2014 2015 LTM Q2’16
GAAP operating expenses -118,873 -194,350 -301,725 -395,482 -451,461
Adjustments:
Equity awards share compensation expense 4,569 9,130 19,601 23,989 28,413
Pension service costs 141 384 504 441 479
Depreciation and amortization
expense1,439 4,346 9,758 14,698 17,153
Acquisition-related costs - - - - 148
Acquisition-related deferred price consideration - 3,137 950 (1,894) (1,755)
Total net adjustments 6,149 16,997 30,813 37,234 44,438
Non-GAAP operating expenses -112,724 -177,353 -270,912 -358,248 -407,023
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