Criteo SA (CRTO) 2014 Q4 法說會逐字稿

Good day and welcome to the Criteo Q4 Full year Earnings Presentation Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Edouard Lassalle, Head of IR. Please go ahead.

Thank you, Sandra. Good morning and good afternoon to all of you and welcome to Criteo's financial results for the fourth quarter and fiscal year ended December 31, 2014. Joining us on the call today are JB Rudelle, Chairman and CEO; Benoit Fouilland, Chief Financial Officer; and Eric Eichmann, President and Chief Operating Officer. Eric will participate in the Q&A session of our call.

Please note that the earnings release issued before the opening of the US market today, along with a live broadcast of the earnings call are both available on our Investor Relations website at ir.criteo.com. A replay of the call will also be available later on our Investor Relations website.

Before we begin discussing our earnings, I'd like to remind you that some of our discussions today will contain forward-looking statements. These may include projected financial results, our 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 would like to remind you that during the course of this call we will discuss non-IFRS measures of our performance. Definition of such metrics and the reconciliations to the most directly comparable IFRS financial measures are provided in the earnings press release and accompanying financial tables issued earlier today. Unless otherwise stated, all growth comparisons made in the course of this call are against the same period in the prior-year.

With this in mind, let me now turn the call over to JB Rudelle, Criteo's Chairman and Chief Executive Officer. JB the line is all yours.

Thank you, Edouard. I'm very pleased to present our fourth quarter and full-year 2014 results to all of you today. We closed another great quarter and a record year of profitable high growth. We exceeded the high end of our guidance for both revenue ex-TAC and adjusted EBITDA. In the fourth quarter, we grew revenue ex-TAC by 73% at constant currency to EUR96 million and adjusted EBITDA by 120% to EUR32 million. For the full year 2014, our revenue ex-TAC grew by 72% at constant currency to EUR304 million, while adjusted EBITDA increased 154% to over EUR79 million.

As we'd like to say, at Criteo, performance is everything. This powerful idea is at the very core of our DNA. Our most important if not only objective is to generate more incremental sales for our clients through innovation and technology. As we provide more sales to our clients, it also makes our business more successful. In 2014, we increased the total amount of post-click sales we generate for our clients by 77%. As you can see, we have grown the revenue of our clients even faster than our own revenue.

Our key focus on performance combined with disciplined execution enabled us to grow faster in 2014 than in 2013 and further accelerate our year-over-year growth in Q4.

Overall 2014 has been a truly great year for us confirming the power of our business model. During the year, we have added over 2,000 clients to a total of more than 7,000. Despite this important client growth, we had maintained client retention rates above 90%. We also continue to generate over 75% of our business from uncapped budgets. We significantly improved our core prediction technology. We have broadened our product portfolio in particular with our complete mobile solution at full scale. Now over 80% of our clients use our multi-screen solution, the technology only introduced towards the end of 2013. We believe all of this makes our solution more strategic for our clients. Overall, I would say our focus on performance had paid off in 2014.

Moving now to our Q4 results. Our strong performance resulted from three main drivers. First, the complete roll out of our new prediction engine; second, the continued momentum of our multi-screen solution; third, our record client and publisher growth.

By the end of December 2014, we had a rolled out to a new generation of our prediction engine to 95% of our clients. As a reminder, this release came into production early last year and was a major breakthrough for our Criteo Engine. Optimizing our targeting not only on our engagement, but also on direct conversions, it has enabled our clients to significantly increase post-click sales, while at the same time also improving the return on investments. As you know, during the holiday season, we typically see our clients be more aggressively on their CPCs to win high volumes of inventories and generate more sales. This year, we saw a much steeper increase in CPC especially between Thanksgiving and Cyber Monday as our clients were taking full advantage of our enhanced Criteo Engine.

The continued momentum in our multi-screen solution was the second driver of our performance. This complete solution allows our clients to seamlessly engage and convert customers across all devices and leading operating systems. In December, 80% of our clients used our multi-screen solution. The growth in mobile commerce continues to be a huge opportunity for us. To help our clients understand this critical new sales channel, we released our first report on the state of mobile commerce which is the start of a quarterly series. Based on our own data from billions of dollars of transactions, this showed that globally mobile now accounts for approximately 30% of all ecommerce transactions.

Our technology improvements and ability to engage seamlessly with annual customers across all big and small screens have generated more sales for our clients. As a result, our clients have kept increasing their spend with us. In Q4, our revenue ex-TAC per clients increased 24%, mainly driven by significant growth from existing clients. Put differently, at Q4 2013 clients that were live with us in Q4 2014 generated 37% more revenue ex-TAC compared to the prior-year. Our ability to convert a very large portion of our clients to un-capped budgets is also key driver of this growth in revenue ex-TAC per clients.

With regard to our third performance driver, we added this quarter more than 600 new clients. This is the largest quarterly addition in Criteo's history. We ended 2014 with a record of 7,190 clients. We continue to add large clients in all geos. In addition, we're also very pleased with our strong momentum with mid-market clients. Our revenue ex-TAC growth in this area was close to 100% in Q4, while we believe we had only penetrated a small fraction of the addressable midmarket segment.

In parallel, we continued to make good progress in expanding our publisher relationships. During the last quarter, we added more than 900 new publishers, bringing the total of our direct relationships to over 9,000 publishers at the end of 2014. This also represents the largest quarterly addition in Criteo's history. Latest comScore data showed that Criteo ads reached more than a billion unique users worldwide in December 2014. Our publisher marketplace for mid-sized publishers continues to enjoy a very positive traction and increasingly contributes to the success of our business. In addition, we delivered significant technical improvements to our buying technologies, leading to further scale across all publishers. We also signed deals with large local RTB platforms in major emerging markets like China, Russia and Korea.

Moving now to our performance per region. We continue to be pleased with our execution across all geos. Starting with the Americas, our year-over-year growth in revenue ex-TAC continued to accelerate in this region for the fourth consecutive quarter from 62% in Q4 2013, 66% in Q1, 78% in Q2 and 97% in Q3. Our year-over-year growth reached 114% at constant currency in the fourth quarter. In the US, we continue to receive very positive traction, driven by greater scale, increasing buying power and best-in-class performance. Our client massive adoption of our new engine optimizing on sales had a particularly strong impact on volumes delivered at the peak of the holiday season. The increasing contribution of the mobile screens to the holiday shopping mix has also been particularly beneficial to us. Furthermore, the rapid ramp up of our mid-market business out of Boston continue to be a strong contributor to the region's growth.

Moving now to EMEA. Our growth continued to be strong across all markets in Q4 and accelerated to 57% at constant currency in Q4. This acceleration was driven by both new and existing clients. Our client base in EMEA further expanded across markets, segments and verticals. Our enhanced engine along with mobile and email continued to drive incremental spend from existing clients in particular during the holiday season.

In Asia-Pacific, revenue ex-TAC grew 61% at constant currency and 6% sequentially. Higher adoption of our multi-screen solution and enhanced engine continued to increase spend from existing clients. We recently implemented a new sales organization in Japan and launched our APAC mid-market organization out of Tokyo. We see near-term potential for midmarket across the whole region. We are also making good progress in Southeast Asia, out of our Singapore office as well as in China. Overall, we continue to be very excited about the opportunity to capture incremental growth across this fast-moving APAC region.

Moving now to 2015. We are focused on a clear set of priorities. Number one, help our clients to expand their marketing channels; number two, continue to innovate in products and technology; and number three, growing our presence globally.

So our first priority is to help our clients to the get full benefit of our multi-channel performance marketing solution. Converting end-customers across multiple marketing channels is critical for CMOs. Our solution already covers 4 key marketing channels: display, social, in-app and email, and more will come in the future. Leveraging the huge momentum in mobile commerce, we have started to engage in various exciting initiatives in this area.

Starting with mobile native ads on major social platforms. In Q4, we continued to work closely with Facebook on a solution that supports performance advertising on their mobile in-app inventory. We delivered our first in-app advertisements on Facebook in the fourth quarter. In 2015, we aim to access Facebook in-app inventory on a much larger scale and bring our clients the same performance in this important source of mobile traffic. This will be one of our key areas of focus for 2015.We're also working with other major players with large mobile inventory in native formats.

We also plan to deploy our cross-device solution at scale. In a world where each end customer increasingly uses multiple digital devices, it is more challenging than ever for our clients to match the performance marketing dollars they spend on one device with the sales they generate on another device or screen. With our cross-device matching solution, we are excited to empower marketers to seamlessly solve this challenge. We believe that in 2015, we will be one of the very few companies in the world capable of doing this at scale based on an exact match rather than a statistical guess. In Q4, we announced the release of our cross-device matching solution and rolled it out with a select group of clients. We will roll this out more broadly in Q1 2015.

Our overall multi-marketing solution, we aim to become increasingly the strategic partner for our clients by delivering best-in-class performance marketing across all key channels.

Our second priority is to continue to innovate in products and technology. We have always been a business primarily driven by technology and we see multiple areas where we can further improve our solution. Our R&D team has grown significantly in 2014, which we believe sets up as very well for 2015 in several exciting areas.

In particular, we plan to make significant improvements around our prediction engine, the structuring of campaigns and creative optimization.

The major breakthrough in our prediction engine released in 2014 focused on conversion optimization. We are now also working on the next generation of our engine. This new generation is able to predict not only the likelihood of a user to buy, but also to predict the value of the basket. The first version of this new engine was released in Q4 and rolled out to approximately to 10% of our clients by the end of December. In 2015, we'll focus on further improving it and rolling this out to a larger part of our client base; with always a single goal in mind, generating more sales and revenue for our clients.

We are also excited to announce acquisition of DataPop, a Los Angeles-based technology company specializing connecting the products of our retailers catalog to actual user shopping intent. As you know, predicting user shopping intent has always been the cornerstone of our solution. DataPop technology enables an advanced structuring of large clients' product catalogs that allows easier and more optimized recommendation to potential end customers. We expect DataPop's unique technology to enable further improvements in our performance offering. We are also working on a new generation of our creative platform. Real-time creative optimization is critical in driving customer engagement and generating sales. Since our inception, we've been at the forefront in this area. In 2015, we plan to dramatically improve our creative optimization capabilities, including in-app.

Our third priority is to further expand our geo footprint. We already have a broad global presence serving clients in around 70 markets worldwide. In 2015, we intend to further increase our penetration in existing large markets such as the US. We also plan to further penetrate early stage markets like China, Russia and Latin America. We also have plans to establish a local presence in new markets such as Canada, Dubai and Turkey. And in the mean market segments, beyond the US, we will expand our APAC organization and accelerate our European expansion from our recently opened hub in Barcelona.

Overall, we are more committed than ever to our long-term vision of building a disruptive multichannel solution for performance marketing that delivers measurable incremental sales. We believe our focus on performance through a broader set of channels will make our solution even more strategic for our clients.

In summary, we are very pleased with our performance in 2014. Our technology improvements, our significant scale and increasing value we deliver to clients, all contributed to expanding our position in performance marketing. 2015 will be another very exciting year for Criteo. I look forward to updating you on all our initiatives as we progress through 2015.

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

Thank you, JB. I'm also delighted to report another very strong quarter and fiscal year today. I will walk you through our financial performance in detail as well as our guidance for the first quarter and fiscal year 2015. I will then open up the call to your questions.

We delivered record profitable growth in the quarter and the fiscal year and exceeded our expectation for both revenue ex-TAC and adjusted EBITDA. In particular, we are very pleased with our accelerating growth, which was not only faster in fiscal year 2014 than in 2013, but also further accelerated in Q4.

Let me start with our revenue. In Q4, we grew total revenue by 71% or 69% at constant currency to EUR233 million. For fiscal year 2014, we grew total revenue by 68% or 70% at constant currency to EUR745 million.

As we have repeated ever since our IPO, we consider revenue ex-TAC as a key financial measure to evaluate and monitor our business performance.

In Q4, our global revenue ex-TAC grew 76% or 73% at constant currency to EUR96 million, compared with EUR55 million in the fourth quarter 2013. Our revenue ex-TAC margin in the quarter was 41.4%, improving 1 percentage point compared with Q4 2013. For fiscal year 2014, our global revenue ex-TAC increased 70% or 72% at constant currency to EUR304 million compared with EUR179 million in fiscal 2013. As a reminder, our year-over-year growth in 2013 was 66% at constant currency. In fiscal 2014, our revenue ex-TAC margin improved 50 basis points to 40.8% and remained well within our long-term target range of 39% to 41%.

In Q4 revenue ex-TAC growth in the Americas continued to accelerate to 121%, or 114% at constant currency, to EUR33 million. In EMEA, revenue ex-TAC growth in the quarter accelerated to 58%, or 57% at constant currency to reach EUR46 million. Revenue ex-TAC in Asia-Pacific for the quarter grew 58%, or 61% at constant currency to EUR17 million. For fiscal 2014, revenue ex-TAC in the Americas increased by 88%, or 91% at constant currency to EUR90 million. In EMEA, full-year revenue ex-TAC grew 59%, or 58% at constant currency to EUR155 million. And in Asia-Pac, we grew revenue ex-TAC 73%, or 84% at constant currency to EUR59 million in the full year 2014.

Overall, change in foreign exchange rates in the fourth quarter, in particular the strengthening of the US dollar, represented a 2 percentage point tailwind to our reported growth in revenue ex-TAC. For fiscal year 2014, changes in foreign currency represented a 2 percentage point headwind to our reported growth in revenue ex-TAC.

Moving on to the profitability of our operations. We grew adjusted EBITDA by 120%, or 121% at constant currency to EUR32 million. As a percentage of revenue, our adjusted EBITDA margin improved 3 percentage points to 13.7% compared with Q4 2013. The strong increase in adjusted EBITDA in the quarter was primarily the result of our strong performance in revenue ex-TAC. While more than 50% of our over achievement in revenue ex-TAC [flows through] to adjusted EBITDA in the quarter, we incurred some additional variable cost related to our revenue ex-TAC over performance, as well as some exceptional costs primarily related to consulting fees.

For fiscal 2014, adjusted EBITDA grew by 154%, or 156% at constant currency to over EUR79 million. Our adjusted EBITDA margin as a percentage of revenue increased by 3.6 percentage points during the year to 10.7% despite our continued focus on investing for growth throughout the year.

On the expense side, in the quarter, hosting and data cost increased by 66% to EUR6 million excluding depreciation and amortization, driven by continued investment in our own servers and hosting equipment. For fiscal 2014, our hosting and data cost increased 42% to EUR20 million excluding depreciation and amortization. As we stated in the past, we plan to continue invest in our own server capacity to support our anticipated future growth. In 2015, we will, in particular, invest in additional redundancy hosting capacity in order to further strengthen our infrastructure as we process even larger amounts of client and publisher data.

Looking now at our operating expenses. In Q4, our total operating expenses grew 58% to EUR66 million as we continue to scale the organization to support our growing business. On a non-IFRS basis, Q4 operating expenses increased 59% to EUR58 million. On a full-year view, our total OpEx increased 55% to EUR227 million or 53% on a non-IFRS basis to EUR204 million. Both in Q4 and in the full year, headcount-related expenses represented over 75% of our total operating expenses. Our recruitment effort were very ambitious in 2014, and we are pleased with our results. We closed 2014 with the global headcount of 1,300. We added 490 employees in 2014, representing an increase of 60% compared with December 2013 and 117 heads in Q4 only; an increase of 10% compared with September 2014. In 2015, we plan to continue to grow our headcount at a similar pace as in 2014.

Looking at our operating expenses by function in the fourth quarter, research and development expenses grew 36% on a non-IFRS basis to EUR10 million, largely driven by a 30% increase in head count to a total of 250 employees at the end of the year, compared with December 2013. This was partly offset by an increase in R&D tax credit compared with the prior year.

Sales and operation expenses increased 76% on a non-IFRS basis in Q4 to EUR36 million, also largely driven by 70% increase in headcount to a total of 833 employees at the end of December. Consistent with prior quarters, we continue to grow sales and account management team in all regions, in particular across our mid-market organization.

General and administrative expenses grew 40% on a non-IFRS basis in Q4 to EUR12 million, while G&A head count increased 71% to a total of 217 employees at the end of the year. This continue to be driven by the ongoing ramp-up in our HR teams to fulfill our ambitious recruitment plan, the continued strengthening of our IT infrastructures, as well as increased fees and expenses related to our public company status.

On a full-year view, R&D expenses grew 42% on a non-IFRS basis to EUR38 million in fiscal year 2014. In 2015, we expect to continue to invest significantly in additional R&D talent. We plan to accelerate our R&D recruitments in 2015 to support our ongoing innovations. In particular, we plan to focus our investment on engine improvement on the integration of DataPop's technology into our platform. We will also continue to invest in our channel expansion effort in mobile native ads on our cross-device solution.

Sales and operation expenses increased 55% on non-IFRS basis to EUR121 million in fiscal year 2014. As a percentage of revenue, sales and operation expenses decreased by 1.3 percentage points in 2014, to 16.3% of revenues despite our significant investments during the year. In 2015, we will continue to grow our sales and operation teams globally in particular in our regional mid-market hubs in Boston, Barcelona and Tokyo. We will also expand into Canada, Turkey and Dubai and invest into new facilities to support our global growth.

Finally, our G&A expenses grew 57% on a non-IFRS basis to EUR45 million in fiscal year 2014. As a percentage of revenue, G&A expenses decreased by 40 basis points in 2014. In 2015 we will continue to scale our HR, IT, finance and legal functions to continue to support our strong anticipated growth and prepare to potentially become a domestic filer in the US during the year.

Moving on to our cash flow generation. In the fourth quarter, our cash flow from operating activities increased by 223% to EUR40 million. This was driven primarily by strong adjusted EBITDA generation as well as positive change in working capital in the quarter. For fiscal year 2014, cash flow from operating activities grew 255% to EUR88 million, driven primarily by the growth in adjusted EBITDA in the year.

Now with regard to our capital expenditures. In Q4, our CapEx increased 39% to EUR10 million, primarily as a result of our continued investment in hosting equipment on to a lesser extent in internal IT and facilities. For fiscal year 2014, CapEx grew 61% to EUR35 million or slightly below 5% of revenue. I will cover our CapEx expectation for 2015 later in the guidance section of our call.

Moving on to free cash flow generation. In the fourth quarter, our free cash grew by EUR25 million to EUR30 million, representing 93% of our adjusted EBITDA for the quarter. For fiscal year 2014, free cash flow increased by EUR49 million to over EUR52 million or 66% of our adjusted EBITDA for the year. We believe this strong conversion of EBITDA into free cash flow continues to illustrate very clearly the robustness and scalability of our financial model.

Our total cash and cash equivalents were at EUR290 million at the end of December, growing by EUR55 million compared with December 31, 2013. This significant increase is primarily the result of our strong free cash flow generation over the period. We also generated EUR24 million in proceeds from capital increases, including the primary portion of our follow-on offering in March, offset by EUR19 million in cash consideration paid for the acquisition of Tedemis and AdQuantic during the year.

I will now wrap up with our thoughts regarding our guidance. Remind you that the forward-looking statements reflect our expectations as of today, February 18, 2015.

2015 will be another year of continued investment for Criteo. As I outlined earlier, we expect to make significant investments in 2015 in particular in R&D and hosting, as well as in sales and operations.

For the first quarter 2015, revenue ex-TAC is expected to be between EUR96 million and EUR99 million. At the midpoint of the range, this would imply a 55% reported growth compared with Q1 2014 or 48% at constant currency. In other words, we expect changes in foreign currency rates to represent a tailwind of 7 percentage points to our reported growth in Q1 2015. Also for Q1 2015, adjusted EBITDA is expected to be between EUR18 million and EUR21 million, including the EUR2 million negative impact from the acquisition of DataPop.

For fiscal year of 2015, revenue ex-TAC is expected to be between EUR433 million and EUR440 million. At the midpoint of the range, this would imply a 44% reported growth compared with 2014, or 39% at constant currency. In other words, we expect changes in foreign currency rates, in particular the stronger US dollar to represent a tailwind of 5 percentage points to our reported growth in fiscal year 2015. Also for fiscal year 2015, adjusted EBITDA is expected to be between EUR108 million and EUR115 million, including a EUR10 million dilutive impact from DataPop in the full year.

With regard to our CapEx, we expect our program to grow from below 5% of revenue in 2014 to approximately 6% of revenue in 2015 as we plan to continue to build hosting capacity in all regions and significantly increase our redundancy capacity to strengthen our infrastructure. We will also increase our investment in internal IT and in facilities globally, including in two flagship offices in New York and London.

Underlying our Q1 and fiscal year 2015 guidance, we have assumed the following exchange rates for the main currencies impacting our business. The euro-USD of $1.15; the euro-Japanese yen of JPY145; the euro-British pound of GBP0.79; and the euro-Brazilian real of BRL3.1. This guidance also assumes no additional acquisitions are completed during the first quarter of fiscal year 2015. We are confident as we enter the first quarter of the year. In the current quarter, we continue to invest into our strategic initiatives to support our 2015 growth.

In closing, I'm very satisfied with our many great achievements in 2014. We are also enthusiastic about our 2015 initiatives. We are more focused than ever on executing on the huge opportunities ahead of us in 2015 and beyond. I look forward to continue building long-term trust with our public investors and sharing our story of profitable growth every quarter as we continue to realize our full potential.

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

(Operator Instructions) Ross Sandler, Deutsche Bank.

Great. Thanks guys. And congrats on another big quarter. I guess just three quick questions. First, Americas; second, sales productivity; and then the third, the new Facebook stuff that was announced yesterday. So the Americas growth on an ex-FX basis looks very, very strong. I guess JB, you've been walking, can you just parse out the enterprise growth compared to middle markets and where you think that share gain is coming from?

And then second on sales productivity, this looks like it's continuing to improve in the right direction as you move into some of these new international markets that you called out in 2015. How should we think about sales productivity? And then on the Facebook dynamic product ads announced yesterday, how big do you think this could be as a contributor in 2015? Thanks.

Okay. So let me take the first one with respect to the Americas. Yes, we are very pleased with the growth, and we are very pleased because the growth was across the board. I mean, both from Tier 1 on MMS. So we've been delivering growth in excess of 100% in both segments. So it's an across the board phenomenon. And we had also very strong benefits from the peak season where we've seen a very dynamic activity there.

With respect to sales productivity, yes, you're right. We've seen a nice increase in the overall sales productivity, which is a combination of, as you know, increase sales to existing clients that are directly contributing to increased sales productivity on two fronts and on the other side investment into new geographies on -- and into the growth of the market. So this is in line with our plan overall and that can be seen very clearly in the percentage of sales and operation cost. When you look at it the increase in the percentage year-over-year is in line with our expectation. And I think that for next year, we have a strong investment program in place, but we should see again some incremental gains in sales productivity overall in 2015.

So regarding Facebook. We're obviously very excited with this deal. And I will let Eric Eichmann, our COO to give a bit more color. He's been in personally involved in the deal. Eric?

Great. Thank you, JB. Thank you, Ross, for the questions. So as you know from the announcement that was made by Facebook, they are now offering dynamic product ads basically allowing customers to target folks on Facebook with ads that are built on a real-time basis with product recommendations. So this obviously talks to the core of what we do. We've been saying for a while that we've been working with Facebook very closely. We are very happy that we can now finally officially say that we are serving ads with Facebook on their mobile application, which as you know, is a big part of time spent by users.

A couple of things that we also announced on our press release is we -- among many advertisers that we tested, we tested Menlook and Promod to e-commerce, e-retailers. And what we saw were great results, where we drove 6.2% of their overall mobile sales and that corresponds to about 25% of what, all ofntheir sales on mobile. So -- and this is with an early product with Facebook. So our expectation is obviously that we will continue to improve the product and as we do that, we'll start deploying this across all advertisers on our network.

Brian Pitz, Jefferies.

Thanks for the questions. Your competitors are under pressure while you guys continue to see accelerating growth. Can you discuss at a high level, really the biggest factors that are driving this from your clients' perspective? And regarding the roll out of version 3 of the Criteo Engine, should we expect the same cadence to roll out as previous platform updates? Thanks.

Thank you, JB speaking. Regarding competition first. Our clients on a very regular basis compare us with other competitors, which is fair and pretty normal in the course of business. And as we say, as I said in the beginning on the call, performance is everything. So if you have a better performance, then the client is just going to pick you up. And so as on a pretty systematic fashion, we tend to get better results in those head-to-head tests. The clients, they choose us. And so, when we're in world of performance where it's very easy for our clients to make the difference between player A and player B and if you are the best performing company, you tend to win most of the market. That's probably whether the key reason why you're seeing a much bigger momentum for us than some other players.

Regarding the Engine, as we said, we are already rolling out the new version, the new-new version by optimizing not only on conversion, but also on the size of the basket. As we are the privileged one, it's going to take several quarters to be a roll out across a whole client base, because as you know, we have now a very large client base and we have to do this client by clients. But we believe it's going to be a significant driver for our 2015 growth. Thank you.

Debra Schwartz, Goldman Sachs.

Great. Thanks, and congrats on the quarter. Two questions. The first one additionally on the Facebook deal. Are there any limitations on the inventory that you have access to and should we think of it similarly to other publisher deals that you have or there are things that make it different? And then similarly when you think about the access to inventory that you have are signing additional publisher deals a big part of the strategy in 2015, are you kind of comfortable at where you are? Thanks.

Deb, thank you very much. This is Eric Eichmann. So, as with FBX with Facebook when we started with them, there were several parameters that sort of were changed over time to increase performance. We expect the same with mobile ads or dynamic product ads with Facebook. Ultimately what works best obviously is something that allows full transparency and full bidding and full creative on Facebook, and our expectation is that we will continue to improve in that direction.

Absolutely. And regarding your broader question regarding inventory, so it's indeed a big part of our strategy, and we keep on pushing to get more direct publishers. What people have to be aware is that, in the grand schema there is a very large portion of the inventory, which is not on the exchanges, where if you want to have access to this inventory, you need to have direct deals with publishers, especially the premium inventory, the best stuff, which is obviously an inventory we are very excited to have access to on behalf of our clients. So we will indeed keep on pushing and investing more to expand our reach across publishers and access as many inventory as possible, when we can with preferred access.

Douglas Anmuth, J.P. Morgan.

Guys, can you quantify the financial lift that you're seeing from the enhanced Criteo Engine perhaps just in talking about the impact on the spend per advertiser and then any early feedback that you have here on the basket size enhancement?

And then also JB, you mentioned moving into other platforms as well as curious to get an update on where you guys are on email and then also what other platforms you could be looking at potentially, and then also if you have any update on your efforts in China? Thanks.

So, regarding Engine, it depends on the type of clients because as now we are capable to measure and optimize targeting based on the size of the baskets. For client that has a very broad set of baskets, a very large range you have a bigger impact that for the one where all baskets are pretty much of the same size. So it depends I would say on the type of verticals that when we have clients with very diversified catalog of products from low-end products to very high ends, this is where you see the highest impact of the new engine.

Regarding your second question, yes, we are excited that email is another very important key performance channel for our clients, and yes, we're trying to serve as many channels as possible. This was a very strategic move that we made. In 2015, we're going to keep pushing this. We are obviously looking to expand to as many channels as possible, and we are looking at several others that might make sense for us.

What we want to be sure is when we enter a new channel, we enter with something really new, disruptive and significantly better than the existing solutions. Our intention is not to build me-too products compared to existing offers. So each time we decide to go into a new channel, we do it at the time we feel ready that we have something really new and really Criteo-like for our clients. This is what our clients are expecting, that us bringing much better performance than existing solution. And we will be obviously happy to update you later in the year of any initiatives in new directions.

Regarding China, Eric, you might want to give us an update of where we are?

Yes, Douglas, that's a good question. So we established our office in China late in 2013, and we've had great progress in China. I think one of the challenges when you enter a new market where there are many new players both in the publisher and advertiser side, you need to begin to build the two sides, and we're happy. We're now connected to three RTB networks and are growing our publisher relationships, and now have made also good in-roads into our advertiser's side. So we're seeing it grow well and our expectation is that we would see acceleration of that growth in 2015.

Great, thank you.

Charles Bedouelle, Exane.

Thanks for the time. Congrats for the fantastic results. Two questions, if I may. The first one is, can you give us a bit more details on the roll-out of your cross-device measurement and how much of the 1 billion, maybe 1 billion plus customers you're reaching could be a part of that in the near or medium term? And the second question I guess is on the margin, I mean, you've made a tremendous progress on the margin side, does that change at all your long-term margin perspective? Thanks.

Thank you very much. So regarding your first question on cross-device, this is a new product that we announced at the end of last year. It's still at their early stage of the roll out and as we say, it's going to be one of the key focuses of 2015. Obviously, our intention is to have the biggest possible reach. You will never get to a 100% reach by definition when you do cross-device matching. But you try to get as close as possible to that. And when you think about it, it's really a scale issue. The more you see users, the more you identify users between different screens, different devices, the better ability we have to maximize our reach. So as you pointed out, the fact that we are already covering more than 1 billion users, unique users on a monthly basis globally, put as in a very small category, where you have only a handful of players that are capable to do this. And we believe this is going to further distinguish us from our smaller competitors, this ability to do cross-device at really a big scale, and we will be obviously delighted to update you guys during the year on our progress in this area.

Regarding margin, Benoit, you want to --

Yes. So, I assume that you were referring to the very nice increase in EBITDA margin for the year.

Absolutely.

And then clearly this is a result of our very strong performance in revenue ex-TAC and a very large portion of that, that's flowing through the EBITDA margin. Yes, we are still on the same, I would say, on the same path from a mid-term perspective. As you've seen in 2015, we have a large investment program and we see a massive opportunity in front of us. So we will continue to manage the company on an investment mode, of course, with the objective of continuing to deliver incremental gains but you shouldn't not assume that what you've seen in 2014 is going to repeat itself in 2015 given the very sizable investment plan that we have in front of us.

Rocco Strauss, Arete Research.

Two questions I think. One on take rates, one on CapEx. And on take rates, I think we take rates being up 150 basis points sequentially or 100 basis point year-over-year. And I guess the question I have is, how sustainable you think is that? And secondly, what's the cause actually of the increase? Is that clients paying more so you see like higher CPCs or is it like you trending more to lower quality inventory? And also you've given the outlook of like EUR437 million at midpoint for ex-TAC sales, is that base on the take rate we have seen in the fourth quarter? And yes, I will let you answer that first and then ask my second question on CapEx.

So from an rev ex-TAC margin, in fact, yes, it's true that we've seen a slight increase in rev ex-TAC margin, but that doesn't change at all our philosophy and our view on the mid-term range of 39% to 41%. I mean we are referring the upper part of the range. So what you've seen in Q4, it is a result of the strong activity, particularly during the peak season where what we've observed that people have been increasing their CPCs even more during the peak season than what we had observed in prior years, but we should not draw conclusion with respect to a change in the overall dynamic of the margin over time.

Okay. Thank you. And the second one on CapEx, I mean, it looks like that CapEx as percentage of sales is coming down year-over-year. How should we think about that forward? And, what actually what have to do is like EUR290 million in cash that you have kind of collected now?

On the CapEx side, I mean, thanks for asking the question because I think there is an important point to make on CapEx. Yes, it's true. We are just below the 5%, which has been the traditional mark. 5% of revenue is what we've been spending in CapEx. Now in 2015, we have significant investment to be made. First in our data centers, we are going to invest in significant redundancy capacity in the data center. We are going also to invest in China with respect to our data center, and that is going to push this percentage above the 5% that we've traditionally shown. On top of that, we have also investments, significant investment to be made in facilities. We have two flagship offices in London and in New York that we have just signed. So all of that combined primarily driven by data center, we expect to be at 6% of revenues in CapEx in 2015. That is going to be probably a slightly exceptional year. So 5% to 6% long-term is still something that is reasonable to keep in your models.

I think we have time perhaps for a last question, and then we're going to wrap up the call.

John Egbert, Stifel.

Thanks for taking the question. So you described mobile as being at full scale of 80% of clients testing on the cross-device solution in December. I'm just wondering for clients that have tried this solution and that 80%, is there anything you can share on the proportion of their budget spend going toward mobile? And with your native mobile Facebook campaigns in the fourth quarter, is there anything you can share about performance of those campaigns relative to similar desktop campaigns? Thank you.

Thank you for the question. So the way we market our solution, our clients don't have a specific budget for each screen. And it would be very hard to manage this way because more and more, when you have a continuum of screens, small, medium, big ones, smartphones, phablets, tablets, laptop, desktop. What they want is to maximize engagement and conversion of their own end customers across all channels. So the way we work with them is with one global budget, and with a mutually agreed ROI target. This is why we don't report specifically spending per type of screen. What really matters is, are clients ready for this multi-screen solution? The good news is 80% of them are, and are really investing heavily in this. We still have a fraction of our clients, because we have now a very large client base, which are not fully mobile ready. Either, they don't have an app, or they don't even sometime mobile-specific websites. And we are strongly encouraging them to invest in this direction as mobile is absolutely key in their strategy.

Regarding performance, we've been addressing this point several times in previous quarters. What we've seen is very consistent performance across all our screens. And typically as we said, as we shared previously, the smaller screens you have typically slightly higher click-through rates and slightly lower post-click conversion rates. And the two metrics tend to nicely balance each other. So overall, we have a very consistent economics across all screens and all devices.

Thanks.

Thank you very much. I think with this, we're going to close this session. And thanks again for everyone for joining today.

Thank you.

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