Criteo S.A.(CRTO) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for 2025 was $1.9 billion, with contribution ex-TAC growing 3.5% at constant currency to $1.2 billion, benefiting from a $14 million tailwind from foreign currencies [22][23] - Adjusted EBITDA margin was 35%, supported by operational leverage and strong cash flow generation, with free cash flow of $211 million, up 16% year-over-year [23][28] - Adjusted diluted EPS increased to $4.62 in 2025, reflecting strong financial performance [23] Business Line Data and Key Metrics Changes - In performance media, revenue was $1.7 billion, with contribution ex-TAC at $915 million, up 4% at constant currency; Commerce Growth solution grew 5% while ad tech services declined 3% [22] - Retail media revenue reached $264 million, with contribution ex-TAC at $260 million, up 2% year-over-year at constant currency; excluding two clients with scope changes, retail media contribution ex-TAC grew 16% [22][24] Market Data and Key Metrics Changes - Travel was the fastest-growing vertical in performance media, with growth accelerating to 37%, while department stores and fashion saw declines of 13% and 12% respectively [24] - Media spend growth accelerated in EMEA, while trends were softer in the U.S. and Asia Pacific [24] Company Strategy and Development Direction - The company is focusing on commerce intelligence and AI decisioning to simplify operations and scale as a commerce AI platform [5][8] - Priorities include leading in Agentic Commerce, scaling the AI-powered performance engine, and reinforcing retail media leadership [8][9] - The company aims to optimize performance at scale through proprietary commerce intelligence and AI decisioning [8][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's potential beyond current low growth expectations for 2026, emphasizing the importance of Agentic Commerce [8][21] - The company anticipates a flat to 2% growth in contribution ex-TAC for 2026, with underlying growth expected to be in the high single digits excluding client scope reductions [29][30] Other Important Information - The board increased the share buyback authorization to up to $200 million, reflecting confidence in the business's value [21][29] - The company is progressing with a redomiciliation to Luxembourg and plans for a further redomiciliation to the U.S. to enhance access to capital markets [34][35] Q&A Session Questions and Answers Question: Can you discuss the prospects for the AI recommendation service? - Management highlighted the importance of high-quality product recommendations for platforms to compete for daily active users, emphasizing the need for access to commerce data [39][40] Question: Is the weakness in department stores related to the Saks Global bankruptcy? - Management noted that department stores and fashion are experiencing headwinds, with specific declines in those sectors, but did not comment on specific clients [43] Question: How do you expect retail media growth to progress throughout the year? - Management indicated that growth will be front-loaded, with Q1 and Q2 more impacted by client scope changes, but confidence remains in the overall performance of retail media [46][49] Question: What is the pricing model for the new AI initiatives? - The monetization opportunities vary, with a take rate model for retail and potential fee structures for LLM integrations as they develop [72]