Criteo S.A. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strategy and Vision: Focus on full-funnel, cross-channel, self-service advertising. Advancing intuitive self-service solutions, extending full-funnel capabilities with Commerce Audiences, and moving towards self-service to drive scale and efficiencies.
• Platform and Partnerships: Expanded global partnerships with dentsu and another major holding company. Announced new partnerships like with WPP Media for CTV. Commerce Grid SSP growing due to traction of Commerce Audiences packaged with publisher inventory.
• AI and Innovation: Embracing Agentic AI, developing model context protocol (MCP) for real-time product and shopper info to AI agents. Advancing audience creation and media activation in new environments like agent interfaces.
• Organizational Realignment: Streamlined organization with Todd Parsons as Chief Product Officer and President, Performance Media, and Sherry Smith as President, Retail Media to operate with greater agility.

Segment Performance

• Performance Media: Revenue was $422 million, contribution ex-TAC was $232 million, up 6% at constant currency or 17% on a 2-year stack basis. Commerce GO! saw 200% quarter-over-quarter campaign volume growth, driven by SMB adoption. Social spend grew nearly 30% sequentially. CTV show strong potential, e.g., Jewelry Television campaign drove 93% new users, 20% AOV increase, and more than doubled qualified site visits.
• Retail Media: Revenue was $61 million, contribution ex-TAC grew 11% at constant currency to $60 million, a 35% increase on a 2-year stack. Drove close to $400 million in media spend this quarter, up 20% year-over-year with over 4,000 brands globally. New product launches like shoppable video ads and auction-based display are ramping up, with 16 retailers live and expected to double in coming weeks.

Guidance

• Raised 2025 contribution ex-TAC growth guidance to 3%-4% at constant currency, with Performance Media expecting mid-single-digit growth and Retail Media low to mid-single-digit growth. ForEx changes to drive positive impact of $1M-$3M on 2025 contribution ex-TAC.
• Q3 2025 contribution ex-TAC expected $277M-$283M, up 5%-7% at constant currency. Adjusted EBITDA between $81M-$87M. Anticipate positive free cash flow in second half and free cash flow conversion rate above 45% of adjusted EBITDA.

Risks

• Macro environment uncertainties affecting ad budgets in discretionary categories.
• Dependence on key clients and potential churn in Retail Media, though same retailer contribution ex-TAC retention remains strong.
• Competition in AI and ad tech spaces impacting market share and growth.

Q: What's the right way to think about monetization for Agentic AI product and impact on Retail Media budgets?

A: Monetization options for Agentic AI vary, from affiliate programs to sponsored citations. AI assistance for discovery is increasing, but conversion remains key, and Criteo is set up to monetize through MCP while protecting retailer and brand positions in the shopper journey.

Q: Update on retailer count and confidence in retaining retailer base?

A: Partner with over 230 retailers. Rolled off less profitable players representing <2% of CXT. Confident in complementary position to Amazon, with 70% of top 30 U.S. retailers and 50% of top 30 European retailers as partners.

Q: Color on macro budgets and Microsoft partnership progress?

A: Challenges in retail, fashion, and some U.S. ad budgets. Travel and classifieds are strong verticals. Microsoft partnership progressing well, with Retail Media supply and demand solutions being developed, aiming for real-time setup by end of year.