Criteo SA (CRTO) 2014 Q3 法說會逐字稿

Good day, and welcome to the Criteo Q3 2014 earnings conference call. Today's conference is being recorded.

At this time I would like to turn the conference over to Edouard Lassalle, Head of IR. Please go ahead.

Thank you, Marcena. Good afternoon and good evening to all of you, and welcome to Criteo's financial results for the third quarter ended September 30th, 2014. Joining us on the call today are JB Rudelle, Criteo's Co-founder and CEO, and Benoit Fouilland, Chief Financial Officer.

Please note that this call is being broadcast live on our Investor Relations website at ir.criteo.com. A replay of the call, along with the earnings release issued after the close of the U.S. market today, will also be available on our Investor Relations website.

Before we begin discussing our earnings, I would like to remind you that some of our discussions today will contain 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.

As always, these statements are subject to 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, and reported results should not be considered as an indication of future performance.

Also I'd like to remind you that during this course of this call we will discuss non-IFRS measures of our performance. Reconciliation to the most directly comparable IFRS financial measures are provided in the tables in the earnings press release published earlier today. Unless otherwise stated, all comparisons made in the course of this call are against the same period in the prior year.

Now with this in mind, let me turn the call over to JB Rudelle, Criteo's Co-Founder and Chief Executive Officer. JB, the line is all yours.

Thank you, Edouard. I am very pleased to present our third quarter results to all of you today. We just closed another record quarter of profitable growth. We exceeded the high end of our guidance, both on revenue ex-TAC and adjusted EBITDA.

In the third quarter, our revenue ex-TAC increased 67% year-over-year at constant currency to EUR78 million. At the same time, we grew adjusted EBITDA by 73% at constant currency to EUR20 million.

Overall, we continue to rapidly expand acquisitions in the performance marketing space. Performance is the cornerstone of our company. We are focused on innovation with a single goal in mind, generating more sales for our clients. This rapid expansion of our results is the direct consequence of our obsession with delivering measurable performance to our clients.

One year after IPO is a good opportunity to look back and reflect on our achievements. At the time of our IPO road show, we said that we were committed to a long term vision to build a major new player in performance marketing.

After four quarters as a public company, I feel increasingly confident that we are indeed on this path. We have grown very, very fast.

At the same time, we have built extremely robust foundations to pave the way for future growth. This rapid expansion is confirming the unique characteristics of our performance model, a model which is quickly disrupting the digital advertising industry.

Looking proudly at our achievements over this first quarter -- this first year as a public company, our client base has grown very significantly from 4,000 pre IPO to over 6,500 today. At the same time, we have very significantly improved our technology and broadened our product portfolio.

Among our many developments, we successfully launched our mobile and multi-screen solution and significantly enhanced our Criteo engine. We are also excited to see a new e-mail marketing product on track to disrupt another large, established industry.

More than 75% of our business continues to be generated from uncapped budgets. This means that each time we add a new product or a new source of inventory, more revenue automatically flows to our platform. Thanks to ongoing technology improvements, we can now generate significantly more sales product lines than a year ago.

Despite the strong growth in our client base, our revenue ex-TAC per client has steadily increased year-over-year in each of the past four quarters. This increase, combined with the growth of our client base, allowed us to offer this rare pattern of very high profitable growth.

This combination of a fast expanding product portfolio with superior performance has proved very attractive to our clients. In particular, we believe this has increased the performance gap with our competition.

Indeed, despite very significant expansion in our client base and frequent head to head tests against competitors, our client retention has remained over 90%. This means that we are becoming more and more strategic to our clients.

Moving now to our Q3 results, our solid performance is explained by three core drivers; first, the continued rollout of our technology and products, in particular the latest version of our engine and our multi-screen solution; second, the steady growth in our client base across all geos; and third, our continued momentum in broadening our inventory sources.

Regarding our first driver, as we mentioned last quarter the rollout of a major breakthrough in the Criteo engine has been a great success. The latest version of the Criteo engine is optimized not only for clicks but also for conversions. It has therefore enabled our clients to significantly increase post click sales while also improving their ROI. Our enhanced engine is now live with over 78% of our clients.

Turning now to mobile, we continue to be very excited with the strong momentum of our multi-screen solution. As we know, we live in a world where consumers' attention span is very quickly fragmenting across multiple devices. Our multi-screen solution allows our clients to engage seamlessly with their customers across desktop, laptop, tablets, and smartphones, including Android, Safari, and iOS.

We believe our ability to match and engage users at scale on large, medium, and small screens seamlessly is unique in our industry. In Q3, 74% of our clients were using our multi-screen solution.

Furthermore, last week we announced the latest addition to our multi-screen solution, our cross device matching technology. Leveraging a large set of data points that we've built over time, we are now able to match consumer historical behaviors on different devices. As a result, we can now show in real-time consistent personalized marketing messages as consumers switch from one screen to another.

Thanks to the expansion of our product set, our business from existing clients increasingly contributes to our growth. 41% of our year-over-year growth in this third quarter came from increased spending by existing clients. To put this in perspective, a year ago existing clients were contributing only 15% of our growth.

Another way to look at this is to look at the cohort of our clients that were already live in Q3 last year. In Q3 this year, this cohort generated 31% more revenues ex-TAC.

This increase in spending from existing clients was generated in all regions. In the Americas in particular, this increase was close to 50%.

As mentioned before, another key element of this very solid growth is our ability to move a very large portion of our clients to uncapped budgets.

Adding new clients was our second growth driver this quarter. In Q3, we added 450 new clients. We have ended the quarter with a record of 6,581 clients. We continue to grow our base of large clients in all deals.

In addition, we are very pleased with the strong momentum in midmarket. Our growth in this segment was close to 100% year-over-year this quarter, and we continue to see lots of potential there in the future.

Our third driver this quarter is our continued success in growing our publisher base. We made remarkable progress in this area. We signed new RTB deals in various regions, including a number of mobile only partnerships.

On Facebook, we saw a very positive impact from enhanced native formats on the newsfeed and the right hand rail.

During the quarter, we also negotiated improved terms in our direct deals with some large premium publishers. Overall, we grew our direct relationships to over 8,000 publishers at the end of the quarter.

Latest ComScore data also revealed that Criteo personalized ads reached almost 1 billion users worldwide in September 2014. To put this in perspective, we are among the only three companies in the world to have this massive reach.

Let me now present our performance by region. We are happy with execution across all geos, which resulted in growth ranging from 51% to almost 100% at constant currency in each region this quarter compared to Q3 last year.

Starting with the Americas, for the third consecutive quarter our year-over-year growth in revenue ex-TAC continued to accelerate in the region, from 62% in Q4 last year, 66% in Q1, 78% in Q3 -- in Q2. And in Q3 this quarter, our growth accelerated to 97% at constant currency.

We have gained a lot of traction in the US, the most competitive market in the world, where it's much more difficult than anywhere else to rise above the noise. And we believe it's not by chance that this three quarter acceleration coincided with our life as a public company.

We benefit from the awareness of our public company status, combined with best in class performance and disciplined execution. These elements result in a positive feedback loop that has been seeding and accelerating growth in the US.

Attraction around new product adoption is strong, particularly with the latest version of the engine. We also continue to see a significant ramp in midmarket clients across the region. We have signed new large clients in the quarter, such as Carrentals.com, Online Shoes, and Travelocity.

Moving now to EMEA, we continue to see solid growth across all markets, driven by both new and existing clients. During the quarter, we maintained very robust revenue ex-TAC growth of 51% year-over-year at constant currency. This is an acceleration compared to the 47% year-over-year growth at constant currency we had in Q3 last year.

Our client base in EMEA continues to expand across markets, segments, and verticals. In the quarter, we added new large clients, including Ford, Openbank, and Sephora.

Our enhanced Criteo engine, along with mobile and e-mail, continued to drive incremental spend from existing clients.

Moving now to Asia-Pacific, we also continue to deliver very robust growth on a much larger scale than before. As you know, part of our strong growth in APAC over the past year was driven by the addition of Yahoo Japan prime display inventory in the third quarter of last year.

This last quarter, revenue ex-TAC grew more than 70% year-over-year at constant currency and 80% sequentially. Higher adoption of our multi-screen solution and our enhanced engine continues to increase spend from existing clients.

New client additions this quarter in APAC included Airbnb, Hyundai Hmall, and MakeMyTrip.

Overall in APAC, we remain very excited by the opportunity to capture strong incremental growth through this fast moving region. We are currently launching a midmarket organization in Japan and see a great near term potential in this segment.

Before turning to our near term priorities, I would like to cover some exciting updates relating to our senior leadership. Mollie Spilman joined us in August as our new Chief Revenue Officer. Based in New York, she's responsible for leading all commercial operations globally.

Prior to joining Criteo, Mollie had senior roles at Ad.com, Yahoo, and Millennial Media. With Mollie on board, we are benefitting from her exceptional experience combing digital media, performance advertising, and mobile.

More recently, we announced the appointment of Mimi Gigoux as our Executive Vice President of Human Resources. Prior to joining Criteo, Mimi worked at various leading technology companies, including Apple, Extreme Networks, and Cisco. Based in Palo Alto, Mimi has extensive experience in attracting and developing talent in fast growing global tech companies.

Moving now to near term, we plan to focus on three core priorities; first, leveraging our technology to keep on improving performance delivered to our clients. Once again, performance is at the core of everything we do.

While we continue to roll out our enhanced engine to our full client base, we are already working on the next generation. This new version of our engine will optimize not only on sales but also on each specific basket size. It's already live with a few beta clients, and the first results are very encouraging.

Second area, we want to further help our clients to reach and convert their target customers wherever they are. In this perspective, we recently announced the launch of our cross-device solution. This cross-device solution enables to match in real-time consumers' shopping behavior as they switch from one device to another, allowing to deliver relevant personalized ads at scale across different screens.

In an increasingly fragmented digital world, we are so excited to empower marketers to seamlessly engage and convert their customers during their journey across multiple devices. We believe we are one of the very few companies in the world capable to do this at scale. Rolling out this cross-device solution across our large client base is going to be a key focus over the next quarters.

Thirdly, we are still obviously very focused on our geo expansion. We plan to continue penetrating large clients and growing midmarket extensively in all regions. Overall, we are committed to our long term vision to build a major player in performance marketing.

Before closing, I'd like to reiterate the four key reasons that make our model so powerful and so unique. First, our solution captures in real-time high quality shopping intent data at a unique scale. Second, our fully automated solution offers seamless access across all screens. Third, our CPC performance model is optimized for post click conversion.

And finally, our direct relationships with clients and publishers, our very high and stable retention rate quarter after quarter, ultimately reflects the unique value of our solution.

We believe these key differentiators, combined with the strong network effect of our model, allow us to steadily improve performance quarter after quarter.

In closing, we are very pleased with our record quarter of profitable growth. We increasingly benefit from our scale to quickly expand our position. Our obsession with performance combined with our steady technology improvements is delivering more and more value to our clients.

Given the enormous market opportunity ahead of us, we remain laser focused on execution. I look forward to updating you on our progress in the closing quarter of this already amazing year.

With that, let me turn the call to Benoit, our CFO.

Thank you, JB. I'm also delighted to report another strong quarter today. I will walk you through our quarterly financial performance in detail, as well as our guidance for the fourth quarter and the full year 2014. I will then open up the call to your questions.

We delivered another record quarter of accelerated profitable growth, which exceeded our revenue ex-TAC on adjusted EBITDA expectations.

I will start with our revenue for the quarter, which increased 71%, or 72% at constant currency to EUR194.4 million, compared with EUR113.8 million in the third quarter 2013.

In the Americas, revenue grew 92% in Q3, or 94% at constant currency, to EUR58.6 million. In EMEA, Q3 revenue increased 57%, or 56% at constant currency, to EUR93.9 million. In Asia-Pacific, revenue increased 78% year-over-year, or 85% at constant currency, to EUR42 million.

As we have repeated in the past, we consider revenue ex-TAC or revenue excluding the traffic acquisition cost paid to our publishers as a key financial measure to evaluate and monitor our business performance.

Our strong results in the quarter reflect the continued rollout of our technology and products, the steady growth in our client base, as well as our success in growing our publisher base.

Our global revenue ex-TAC grew 66%, or 67% at constant currency, to EUR77.6 million in the third quarter, compared with EUR46.8 million in the third quarter 2013. Our revenue ex-TAC margin in the quarter was 39.9%, consistent with recent quarters.

Looking at our performance from a geo standpoint, in the Americas revenue ex-TAC growth accelerated from 78% at constant currency in Q2 to 97% in Q3, to EUR23.1 million. In EMEA, our revenue ex-TAC grew 52%, or 51% at constant currency, to reach EUR38.7 million. In Asia-Pacific, revenue ex-TAC increased 65%, or 70% at constant currency, to EUR15.8 million.

Overall, foreign exchange in the third quarter had less negative impact than in prior quarters, reducing year-over-year growth in earned revenue ex-TAC by only approximately 1 point.

Moving on to the profitability of our operations, we grew Q3 adjusted EBITDA by 71% year-over-year, or 73% at constant currency, to EUR19.8 million in the third quarter, compared with a net adjusted EBITDA of EUR11.6 million in Q3 last year. This strong increase in adjusted EBITDA is primarily the result of our strong revenue ex-TAC performance in the quarter.

In addition, the seasonal slowdown in the hiring pace of our aggressive recruitment plan during the summer, combined with the postponed signature of the lease for new facilities, also contributed to increasing our adjusted EBITDA this quarter. We have scaled our recruitment effort to continue supporting our ambitious hiring plans.

Looking at our expenses for the quarter, hosting and data cost increased by 87% to EUR5.1 million in Q3, excluding depreciation and amortization, driven by our increased investment in our own servers and hosting equipment over the period. As we've said in the past, we plan to continue investing in our own servers to support our current and anticipated future growth.

Our OpEx increased 63% to EUR59.1 million in Q3 as we continue to scale the whole Criteo organization to support our growing business. Excluding the impact of share-based compensation, pension costs, depreciation and amortization, and acquisition-related deferred price consideration, which we reference as operating expenses on a non-IFRS basis, our operating expenses increased 62% to EUR52.7 million in the third quarter.

Our global headcount grew by 56% year-over-year to a total of 1,183 employees at the end of September 2014.

Looking at our operating expense by function, research and development expenses increased 48% year-over-year on a non-IFRS basis to EUR10.1 million in Q3. Our higher R&D expenses were largely driven by headcount growth to 231 employees at the end of the quarter, partly offset by an increase in R&D tax credits compared with the prior year.

As we continuously enhance our technology platform and enrich our product portfolio, we plan to continue to invest in additional talent in R&D and products during the year, particularly around our engine performance and our cross-device and in-app solutions.

Non-IFRS operating expenses in sales and operations increased 64% to EUR31.4 million in Q3, also largely driven by the headcount increase to 754 employees at the end of the quarter. Despite our slower recruitment pace during the summer, this quarter we continued to grow sales and account management teams in all regions, in particular in our midmarket organization.

We intend to continue growing our sales and operations teams in all geographies, both on the midmarket and the large client side of our business. We also continue to invest in new facilities globally to accommodate our growing teams.

Finally, our non-IFRS operating expenses in general and administrative in the third quarter increased by 71% to EUR11.1 million, while our G&A headcount grew 72% year-over-year to 198 at the end of September 2014.

This continues to be driven primarily by an ongoing ramp up in our HR teams to fulfill our ambitious recruitment plan, the continued strengthening of our IT infrastructure, as well as increased operating expenses associated with our public company life.

While over 160% of our revenue ex-TAC over achievement flows through the adjusted EBITDA in the third quarter, I want to reemphasize our plan to continue investing in the fourth quarter to support our current and future growth.

Moving on to cash generation for the quarter, our cash flow from operating activities increased by 6.8 X to EUR25.5 million compared with EUR3.7 million in Q3 last year, driven primarily by strong adjusted EBITDA generation and a positive change in working capital.

Our CapEx increased 94% year-over-year to EUR11.2 million in the third quarter, primarily as a result of our continued investment in hosting equipment, internal IT, and facilities.

In line with our plans, our CapEx program continued to accelerate in Q3 compared with prior quarters, in particular in hosting. We expect our total spend on CapEx for the full year to remain in the range of 5% of our revenue.

Our free cash flow for the quarter was EUR14.4 million, growing by EUR16.3 million year-over-year. For the first nine months of 2014, free cash flow generation reached EUR22.7 million, or 48% of our adjusted EBITDA for the period, illustrating the robustness and scalability of our financial model.

Total cash, cash equivalents, and short term investments were at EUR256.7 million at the end of September, increasing by EUR22.4 million compared with December 31st, 2013. This is primarily the result of our free cash flow generation over the period as well as EUR20 million in proceeds from capital increases, offset by EUR19 million in cash consideration paid for the acquisitions of Tedemis and AdQuantic earlier this year.

I will now wrap up with our thoughts regarding our guidance. I'll remind you that the following forward-looking statements reflect our expectations as of today, November the 4th, 2014.

We believe that our unique solutions focused on performance serve as a reliable and effective marketing solution to drive sales for our clients, particularly in times of economic uncertainty when advertisers are focused on maximizing the ROI of their marketing spend.

For the fourth quarter 2014, revenue ex-TAC is expected to be between EUR89 million and EUR91 million. Also for the fourth quarter 2014, adjusted EBITDA is expected to be between EUR27 million and EUR29 million.

For the fiscal year 2014, revenue ex-TAC is expected to be between EUR296 million and EUR298 million. At the midpoint, this represents a EUR15 million increase when compared to our prior guidance. This would imply a 66% year-over-year reported growth at the midpoint of the range, showing an acceleration compared with the 57% year-over-year growth we reported in fiscal year 2013.

Also for the fiscal year 2014, adjusted EBITDA is expected to be between EUR74.6 million and EUR76.6 million. At the midpoint, this represents an EUR18 million upgrade to our prior guidance.

This guidance assumes the following estimated foreign currency exchange rates for the fourth quarter -- a euro/USD exchange rate of 1.26, a euro/Japanese yen exchange rate of 1.40, a euro/British pound exchange rate of 0.79, and a euro/Brazilian real exchange rate of 3.1.

This guidance also assumes no additional acquisitions are completed during the fourth quarter 2014.

We are confident as we enter the largest quarter of the year, and we expect the fourth quarter as well as 2015 to continue to be very exciting times for Criteo. In the current quarter, we will continue to invest across our various strategic initiatives to support our current growth and prepare for 2015, particularly in further strengthening our core technology, our multi-screen and cross-device solutions, as well as growing clients across all geographies.

In closing, I'm very satisfied with our solid results in the third quarter, driven by our focus on performance and the increasing benefit of our scale. We are enthusiastic about the progress we are making as we continue to enhance our technology and expand our product set to bring ever greater value to our clients.

We see a very large market opportunity ahead of us, and are focused on continuing to execute and deliver strong results for the remainder of the year and beyond.

I look forward to continue building long term trust with our public investors and sharing our growth story every quarter as we continue to realize our full potential.

With that, I'll turn the call back to the operator now to take your questions.

Thank you. (Operator instructions.) Ross Sandler, Deutsche Bank.

Okay, great. Thanks, guys. I just had two quick little housekeeping questions and then, JB, like a high level question. So, on the housekeeping, can you guys just give us an update on how much of the client base and how much -- what percent of the revenue is on the new Criteo engine at the end of the quarter?

And then, Benoit, the APAC number also very solid, but I think you guys had called out last quarter or two quarters ago the impact from the Japan VAT tax change. So, maybe can you talk about comparing what you're seeing in Japan versus other APAC countries?

And then the last question, JB, you started off in the prepared remarks talking about how you went public about a year ago almost to this week. And at today's close, shares are down $1.50 from the IPO level, yet you've raised your EBITDA numbers by about 65% in 2014. Two of your largest peers, Dotomi and Sociomantic, have been acquired for very healthy multiples. So, at a high level, what do you think investors are missing with your story, and what kind of message would you guys like to send in terms of your plans for 2015 to maybe recoup some of this investor enthusiasm around the story? Thanks.

Thank you. So, I will address the first question about our engine. Our enhanced engine is now live with over 78% of our clients.

So, with respect to APAC, yes, I mean, we have experienced very robust growth in APAC during the quarter. And this is on a much larger scale, as you can see. We have now APAC representing 20% of our global revenue ex-TAC, and Japan continues to be the lion's share of this.

Obviously there is one impact in Japan that is worth just keeping in mind for this quarter. It's that last year we had for the first time access to new premium inventory from Yahoo Japan. And that obviously was in the base of Q3 last year and has impacted the comparable.

And coming to your high level question, we indeed are very happy to see the growth we had in the last 12 months. And all key indicators are trending all in the right direction.

One of the most remarkable facts that we've seen is the growing gap we have with our competitors, that we are -- we tend to grow much faster than most of them. So, we are increasingly confident that we are on track to become the major performance marketing player that we'd been pitching at the IPO time. And we are very confident that the market's going to recognize this.

Great. Thanks, guys. Nice job.

Richard Kramer, Heritage Research.

Thanks very much, a couple of questions. First of all, there seem to be folks in the industry questioning the long term efficacy of retargeting, especially if some particular platforms seem to be trying to close off their dataset maybe for use by their own ad tech offering. Could you reflect on that as a medium term risk for the company, and whether you're seeing the same thing?

Second question is can you talk a little bit more specifically about how Criteo might be working with on-boarding to Facebook mobile, Facebook Audience Network? And maybe more broadly, can you be specific about the sort of inventory sources that you say you've added on this quarter?

And maybe the third quick question, can you talk about the big increase in financial income this quarter and whether that's going to be a feature of your adjusted EBITDA guidance going forward? Thanks very much.

Okay. So, I will address the first question -- the first two questions. This is JB. So, as you mentioned retargeting, I mean, just to clarify, this retargeting business is where we started the business a number of years ago. Today our business is much broader than that.

We are covering the full performance funnel of our clients, which include retargeting, discovery, and mid-funnel. We are also expanding in terms of number of channels. We used to be focused only on display. Now we do display, mobile, native, and e-mail. So, it's a much more diversified portfolio of products.

This said, our historical product, retargeting, is still growing very, very nicely. It's leveraging our first party data, and we have this unique technical integration that where -- with our clients where we are deeply integrated into their platform.

And this creates a very sticky relationship. And we are very confident that, as our numbers are showing in terms of client retention rates, that those relationships are expanding over time.

Regarding your second question, we are actively working with Facebook on the mobile piece of the inventory, what people refer to a WCA. And this is an area we are confident that we're going to be able to announce progresses in the coming quarters.

Regarding the financial income, yes, you are right. We had an exceptional impact this quarter, which is primarily driven by the fact that we kept a portion of the proceeds from the IPO in dollars, and we had to hedge that with a cover.

That has been -- the end of the cover coincident with the moment where the dollars transferred so we could benefit from strengthening of the dollar versus euro. And that's this impact that you can see primarily in the financial income of the quarter.

This is, I would say, exceptional. We were just lucky by the timing of this increase in dollars while we were rolling our coverage. With respect to what you see of future EBITDA, EBITDA guidance that we have expressed, I mean, that EBITDA guidance doesn't have any components from financial income included in it.

Okay, that's very clear. And could you -- maybe as a last point, could you talk at all about what sort of contribution e-mail might have provided this quarter, if it's material at all? Thanks.

We don't break down our revenue there per type of product.

We've done this massive investment to scale the e-mail platform that we acquired to be able to roll it across all our geos. And we believe it's going to be one of the strong drivers for next year.

And we are very excited by ability to disrupt the e-mail market the way we've been disrupting the display market with the same type of business model and same type of value proposition.

Great. Thank you.

Ralph Schackart, William Blair & Company.

Good afternoon. Just focusing on the US market for a second, it showed significant acceleration with a 97% growth rate, which is obviously much higher than the acceleration you saw in Europe. I know the US is coming off of a small euro base, and I think you called out midmarket clients on the call. But, it was such a standout metric, just curious if there's anything else sort of unique about the US market and sort of how you're thinking about that market maybe going forward. Thank you.

Yes. I mean, you are right to mention that the US is coming from a much smaller base. I mean, if you look at the total potential of the US market, it's close to 50% of the global market, between 40% and 50%. And today the Americas is still a much lower percentage of our revenues.

So, there is a significant catch up element in this acceleration of the growth in the US. Also, the US is a very large market where it takes more time to get to the critical size. And critical size matters a lot in our industry where there is a strong winner takes all dynamic.

And once we reached this critical size, which was roughly a year ago, we saw that we were getting the benefit of this critical size to leverage this winner takes all dynamic that we've been enjoying in other regions.

So, you have this combination of these two effects, about very large potential addressable market and us getting to a stage where we have much more buying power in the US, much more liquidity in our platform, much better awareness, much more word of mouth of our successful clients to their peers. And all of these elements are helping the business to accelerate.

Okay, great. I appreciate it. Well done.

Thank you.

Brian Fitzgerald, Jefferies.

Had a couple of -- maybe a follow up to the US comments. As you look at the growth there, you've had nice additions from car rentals to Travelocity. Any color on the verticals where you're seeing particular traction and strength?

And then, when you look at the preferred inventory in US, how would you juxtapose that to the type of preferred inventory that you see in Europe? And then I have one follow up.

So, in terms of verticals, we see very good traction pretty much all across the board. So, in early days, we tended -- like in any country, we tended to be more concentrated in the US than we were in Europe.

But, now as the US is getting bigger and bigger, we see an expanding set of type of clients, which is the same pattern that we've seen happening in Europe where, from a base of a highly concentrated customer base in retail, we've been expanding into travel, into real estate, into automotive, into job boards, into telecom. And this is happening in all our geos as they're getting more and more mature and we have a bigger sales team with more expertise across the board.

And in a way, it's the same story on the inventory side where the more buying power we have, the more direct deals we can negotiate with publishers and negotiate better conditions, and same story in the US. Now we're getting to the critical size where our buying power is getting very strong, and we are in a much better position than we were 12 months ago to negotiate preferred partnerships with big publishers in the US.

Great. And then, to follow up on the same point in the Americas, in the US, you've mentioned before a majority of your revenue ex-TAC is uncapped budgets. I imagine it's the same for the US and the Americas as you grow there. Any update on dynamics you're seeing there? And is there any gating factor in terms of tapping into those budgets even deeper?

I mean, absolutely we see this pattern of uncapped budgets across the board in all our geos. And it's coming from the same drivers, because at the end of the day they are all looking at their ROI, whether they are in Europe or in the US.

And I think this is particularly important as we enter the holiday season. As you know, the holiday season is particularly important in the US compared to other countries where it's less pronounced. So, having negotiated -- pre-negotiated those uncapped budgets in the US was absolutely critical before entering the holiday season.

Great. Thanks, JB.

Charles Bedouelle, Exane.

Good evening, everyone. Congrats for your fantastic results. Two questions, if I may. The first one is investors talk a lot about mobile, the changes it brings to a company like yours. You've made a recent announcement on cross-device. Can you expand a little bit more maybe the hurdles or the constraints you are maybe facing today from inside and outside the company, and how you see that things are evolving in mobile?

And the second question, slightly more tedious, is can you just give us an idea of the contribution of acquisition to revenues this quarter, please? Thanks.

So, on mobile, I would say cross-device, which is -- the two topics are very intimately related, obviously. When it comes -- as we said, a major trend that we see in the industry in general, which is a big concern for marketers, is the fragmentation of audiences across multiple devices and screens.

And the challenge is that the tracking system that was in place in the early days of a desktop only world was cookies. And cookies are browser limited, so they are not a very good tracking system when it comes to across device.

So, to tackle this, we had to rebuild the whole cross-device Criteo idea. And this is something we're very excited about and that we could do only because we have the scale that we have now with our 6,000 advertisers, 8,000 plus publishers. And this is why we can have this unique to sell Criteo idea, solving this very problem around the cross-device matching.

Acquisition, I assume you -- the question is around e-mail?

Yes. No, I mean, as you know, we don't break down the contribution of acquisition. But, what we can confirm is that e-mail was in line with our expectations this quarter.

Absolutely.

Okay. Thanks very much. And just a quick follow up question. You've had, obviously, fantastic success in Europe. The US now is getting very strong, and Japan obviously last year. Where do you see the biggest next milestone in terms of, I would say, the new markets or call it emerging market? And where do you see that first and where do you see the most potential today? Thanks.

Well, today we have really a truly global footprint. We cover EMEA. We cover North America. We cover APAC. So, it's pretty much the whole world.

And these are big regions where, within those regions, we have also new emerging countries. Like part of EMEA we have Russia, which is a relatively new country for us where we see a lot of growth potential.

In APAC, we have a lot of new countries emerging, very interesting things coming from Southeast Asia. For a long time these were very small, and now we start to see very healthy growth in this area. So, based on our three big hubs, now we see a much more diversified contribution over a growing number of countries to our overall numbers.

Thanks very much.

Douglas Anmuth, J.P. Morgan.

Great. Thanks for taking the question. This is Kaizad Gotla in for Doug. I was wondering if you could just help us think about what kind of increase in spend you might see from clients adopting cross-device tracking. And then, can you just update us on how many clients are using your mid-funnel products?

And finally, was Travelocity live and running in 3Q? Thanks.

So, cross-device, clients don't have specific budget for cross-device. At the end of the day, what they want is to maximize their opportunity to engage and convert users. So, cross-device provides two very interesting things.

One is the ability to increase their reach, because the same user, now you can match him on different devices so you have more opportunity to reengage with this user. So, think about this as expanding our inventory in a very smooth way, and with almost no friction and no need to re-discuss with the client the budget because we are, as you know, on the uncapped budget.

It has also a second very exciting feature. It's that you can now track version on the different device than the original marketing scenario. So, you see many more conversions, and it makes the ROI calculation much more accurate also for our clients.

And at the end of the day, whatever they spend with us is based on the ROI calculation. So, the ability to have a much more precise and a holistic view of the ROI is also the opportunity for them to spend more on the platform, which really has very cool true combined values directly plugged into our system.

What was the second question again?

Update on mid-funnel clients, adoption by clients.

Mid-funnel, yes. Once more, you know our clients, they look at maximizing the opportunity to go after the user. So, we are offering this cool solution, combing mid-funnel and lower funnel. And the two of them combine very well together.

And it's the same business model, same ROI calculation. Typically our mid-funnel clients are willing to be more aggressive in terms of ROI calculation because those users are a bit more challenging to bring on the platform but it creates a lot of additional business for them. And the two products combine very well together.

And was Travelocity live in 3Q?

Travelocity, yes. It's one of our new clients.

I think we are getting to the end of the one hour, but one last question.

John Egbert, Stifel.

Thanks for the question. Just digging in a little more on the cross-device tracking solution, I know it's pretty early, but do you have a feel for how your offering stacks up with competing offerings from other players in the space? Specifically, how do you think your proprietary identifier compares to like a people-based marketing solution from a Facebook, for example? Thanks.

I think our identifier is not competing with Facebook. It's complementary. Facebook identifier is great for Facebook inventory, and we work very nicely with them into this area.

But, there is many other publishers outside of Facebook. And obviously for them you need an identifier. So, I think the two things are very complementary.

Okay, thanks.

Thank you very much, everyone.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

Thank you.

Thank you.