Criteo Reports Results For The Second Quarter 2018, Adjusts Fiscal 2018 Outlook And Announces Acquisition Of Pioneering Retail Media Technology Platform
NEW YORK, Aug. 1, 2018 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the advertising platform of choice for the open Internet, today announced financial results for the second quarter ended June 30, 2018.
-- Revenue decreased 1% (or 3% at constant currency(1)) to $537 million.
-- Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC(2), grew
5% (or 2% at constant currency) to $230 million, or 42.9% of revenue.
-- Adjusted EBITDA(2) grew 27% (or 20% at constant currency) to $69
million, or 30% of Revenue ex-TAC.
-- Cash flow from operating activities decreased 33% to $40 million.
-- Free Cash Flow(2) was $22 million.
-- Net income increased 96% to $15 million.
-- Adjusted net income per diluted share(2) increased 36% to $0.53.
-- We expect Revenue ex-TAC for fiscal year 2018 to grow between -1% and
+1% at constant currency.
-- We are raising our Adjusted EBITDA margin outlook for fiscal year 2018
to between 30% and 32% of Revenue ex-TAC.
-- We have entered into a definitive agreement to acquire Storetail, a
pioneering retail media technology platform enabling retailers to
monetize native placements on their ecommerce sites.
"From the conversations I have had with clients since returning as CEO, I've heard many positive comments on the value we bring" said JB Rudelle, CEO. "We are building on this trust to expand our client relationships with more products and solutions".
"Our model once again proves to be strong and resilient," commented Benoit Fouilland, CFO, "as the combination of growth, increasing profitability and strong cash flow demonstrated in Q2".
Operating Highlights
-- We ended the quarter with 19,000 commerce and brand clients, a 16%
increase year-over-year, while maintaining client retention at close to
90% for all products.
-- Revenue ex-TAC from non-retargeting products, including Criteo Customer
Acquisition, Criteo Audience Match and Criteo Sponsored Products,
increased 72% year-over-year at constant currency, to 6% of our total
business.
-- Our mobile in-app business grew 38% year-over-year on a Revenue ex-TAC
basis.
-- Criteo Direct Bidder, our header bidding technology, is now connected to
over 2,300 large publishers, compared to 2,000 in Q1.
-- Same-client Revenue ex-TAC3 decreased 3% at constant currency due to
headwinds from user coverage limitations in Safari.
Revenue and Revenue ex-TAC
Revenue decreased 1%, or 3% at constant currency, to $537 million (Q2 2017: $542 million). Revenue ex-TAC grew 5%, or 2% at constant currency, to $230 million (Q2 2017: $220 million). This increase was primarily driven by the addition of new clients across regions, sizes and products, and the improving Revenue ex-TAC margin over the period, and was achieved despite significant headwinds from external factors in our business with existing clients.
-- In the Americas, Revenue ex-TAC grew 4%, or 4% at constant currency, to
$87 million and represented 38% of total Revenue ex-TAC.
-- In EMEA, Revenue ex-TAC grew 4%, and decreased 1% at constant currency,
to $89 million and represented 38% of total Revenue ex-TAC.
-- In Asia-Pacific, Revenue ex-TAC grew 7%, or 6% at constant currency, to
$54 million and represented 24% of total Revenue ex-TAC.
Revenue ex-TAC margin as a percentage of revenue improved 230 basis points to 42.9%.
Net Income and Adjusted Net Income
Net income increased 96% to $15 million (Q2 2017: $8 million). Net income available to shareholders of Criteo S.A. was $14 million, or $0.20 per share on a diluted basis (Q2 2017: $6 million, or $0.09 per share on a diluted basis).
Adjusted net income, or net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, increased 35% to $35 million, or $0.53 per share on a diluted basis (Q2 2017: $26 million, or $0.39 per share on a diluted basis).
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA grew 27%, or 20% at constant currency, to $69 million (Q2 2017: $54 million). This increase in Adjusted EBITDA was primarily driven by the Revenue ex-TAC performance across regions and temporary savings in expenses, related to hiring delays, in particular in the midmarket.
Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 30% (Q2 2017: 25%), improving by more than 500-basis point year-over-year.
Operating expenses increased 1% to $176 million (Q2 2017: $174 million). Operating expenses, excluding the impact of equity awards compensation expense, pension costs, restructuring costs, depreciation and amortization and acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, decreased 1% to $147 million (Q2 2017: $148 million) partly driven by the fact that we did not host our Global Employee Summit in 2018.
Cash Flow and Cash Position
Cash flow from operating activities decreased 33% to $40 million (Q2 2017: $60 million).
Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment, decreased 33% to $22 million (Q2 2017: $33 million).
Total cash and cash equivalents increased $66 million compared to the end of 2017 to $480 million.
Business Outlook
The following forward-looking statements reflect Criteo's expectations as of August 1, 2018.
Third Quarter 2018 Guidance:
-- We expect Revenue ex-TAC to be between $218 million and $223 million.
This implies a constant-currency growth of -5% to -3%.
-- We expect Adjusted EBITDA to be between $61 million and $66 million.
We are adjusting our Fiscal Year 2018 Guidance:
-- We now expect Revenue ex-TAC for fiscal year 2018 to grow between -1%
and +1% at constant currency.
-- We are raising our Adjusted EBITDA margin outlook for fiscal year 2018
to between 30% and 32% of Revenue ex-TAC.
The above guidance for the quarter ending September 30, 2018 and the fiscal year ending December 31, 2018, assumes the following average exchange rates over both the nine months to September 30, 2018 and the twelve months to December 31, 2018, for the main currencies impacting our business: a U.S. dollar-euro rate of 0.84, a U.S. dollar-Japanese Yen rate of 110, a U.S. dollar-British pound rate of 0.73 and a U.S. dollar-Brazilian real rate of 3.51.
The above guidance assumes no acquisitions are completed during the quarter ending September 30, 2018, and the fiscal year ending December 31, 2018.
Reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding U.S. GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of equity awards compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our share price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future U.S. GAAP financial results.
Acquisition of Storetail
Criteo has entered into a definitive agreement to acquire Storetail, a pioneering retail media technology platform that enables retailers to monetize native placements on their ecommerce sites on a CPM basis. The 2016 Hooklogic acquisition, and the subsequent Criteo Sponsored Products solution, have allowed Criteo to partner more deeply with retailers from an on-site monetization perspective to reach and engage shoppers throughout every stage of the funnel. While having no material revenue contribution at closing, the addition of Storetail's highly complementary technology is an important building block to enable Criteo to offer a full monetization platform to retailers.
We expect the deal to close in the third quarter of this year, subject to certain conditions precedent.
Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (the "SEC"): Revenue ex-TAC, Revenue ex-TAC by Region, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow and Non-GAAP Operating Expenses. These measures are not calculated in accordance with U.S. GAAP.
Revenue ex-TAC is our revenue excluding Traffic Acquisition Costs ("TAC") generated over the applicable measurement period and Revenue ex-TAC by Region reflects our Revenue ex-TAC by our geographies. Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our business and across our geographies. Accordingly, we believe that Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin provide useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA and Adjusted EBITDA margin are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short? and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration, Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments. Adjusted Net Income and Adjusted Net Income per diluted share are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, Adjusted Net Income and Adjusted Net Income per diluted share can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted Net Income per diluted share provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment. Free Cash Flow is a key measure used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow permits a more complete and comprehensive analysis of our available cash flows.
Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures the Company uses to provide its quarterly and annual business outlook to the investment community.
Please refer to the supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Revenue ex-TAC by Region to revenue by region, Adjusted EBITDA to net income, Adjusted Net Income to net income, Free Cash Flow to cash flow from operating activities, and Non-GAAP Operating Expenses to operating expenses, in each case, the most comparable U.S. GAAP measure. Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider such non-GAAP measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP.
Some of these limitations are: 1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and 2) other companies may report Revenue ex-TAC, Revenue ex-TAC by Region, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Non-GAAP Operating Expenses or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including projected financial results for the quarter ending June 30, 2018 and the fiscal year ending December 31, 2018, our expectations regarding our market opportunity and future growth prospects and other statements that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure related to our technology and our ability to respond to changes in technology, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, investments in new business opportunities and the timing of these investments, whether the projected benefits of acquisitions materialize as expected, uncertainty regarding international growth and expansion, the impact of competition, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters and the impact of efforts by other participants in our industry to comply therewith, failure to enhance our brand cost-effectively, recent growth rates not being indicative of future growth, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, and the financial impact of maximizing Revenue ex-TAC, as well as risks related to future opportunities and plans, including the uncertainty of expected future financial performance and results and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in the Company's SEC filings and reports, including the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2018, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed with the SEC on May 4, 2018, and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, that will be filed with the SEC, as well as future filings and reports by the Company. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations or otherwise.
Conference Call Information
Criteo's earnings conference call will take place today, August 1, 2018, at 8:00 AM ET, 2:00 PM CET. The conference call will be webcast live on the Company's website http://ir.criteo.com and will be available for replay.
Conference call details:
-- U.S. callers: +1 855 209 8212
-- International callers: +1 412 317 0788 or +33 1 76 74 05 02
Please ask to be joined into the "Criteo S.A." call.
About Criteo
Criteo (NASDAQ: CRTO) is the advertising platform of choice for the open Internet, an ecosystem that favors neutrality, transparency and inclusiveness. 2,700 Criteo team members partner with close to 19,000 customers and thousands of publishers around the globe to deliver effective advertising across all channels, by applying advanced machine learning to unparalleled data sets. Criteo empowers companies of all sizes with the technology they need to better know and serve their customers. For more information, please visit www.criteo.com.
(___________________________________________________
)(1 )Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2017 average exchange rates for the relevant period to 2018 figures.
(2 )Revenue ex-TAC, Adjusted EBITDA, Adjusted net Income per diluted share and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.
(3) Same-client Revenue ex-TAC is the Revenue ex-TAC generated by clients that were live with us in a given quarter and still live with us the same quarter in the following year.
Contacts
Criteo Investor Relations
Edouard Lassalle, VP, Head of IR, e.lassalle@criteo.com
Friederike Edelmann, IR Director, f.edelmann@criteo.com
Criteo Public Relations
Emma Ferns, VP Global Communications, e.ferns@criteo.com
Financial information to follow
CRITEO S.A.
Consolidated Statement of Financial Position
(U.S. dollars in thousands, unaudited)
December 31, 2017 June 30, 2018
----------------- -------------
Assets
Current assets:
Cash and cash equivalents $414,111 $480,285
Trade receivables, net of
allowances 484,101 372,906
Income taxes 8,882 11,921
Other taxes 58,346 42,076
Other current assets 26,327 26,114
------ ------
Total current assets 991,767 933,302
------- -------
Property, plant and equipment, net 161,738 146,904
Intangible assets, net 96,223 87,031
Goodwill 236,826 235,950
Non-current financial assets 19,525 20,226
Deferred tax assets 25,221 33,129
Total non-current assets 539,533 523,240
------- -------
Total assets $1,531,300 $1,456,542
========== ==========
Liabilities and shareholders'
equity
Current liabilities:
Trade payables $417,032 $321,295
Contingencies 1,798 1,811
Income taxes 9,997 9,346
Financial liabilities -current
portion 1,499 1,055
Other taxes 58,783 46,947
Employee - related payables 66,219 65,832
Other current liabilities 65,677 30,803
------ ------
Total current liabilities 621,005 477,089
------- -------
Deferred tax liabilities 2,497 3,251
Retirement benefit obligation 5,149 5,472
Financial liabilities - non-
current portion 2,158 1,758
Other non-current liabilities 2,793 4,104
----- -----
Total non-current liabilities 12,597 14,585
------ ------
Total liabilities 633,602 491,674
------- -------
Commitments and contingencies
Shareholders' equity:
Common shares, EUR0.025 per value,
66,085,097 and 66,861,045 shares
authorized, issued and outstanding
at December 31, 2017 and June 30,
2018, respectively. 2,152 2,177
Additional paid-in capital 591,404 630,772
Accumulated other comprehensive
income (loss) (12,241) (20,722)
Retained earnings 300,210 333,725
Equity -attributable to
shareholders of Criteo S.A. 881,525 945,952
------- -------
Non-controlling interests 16,173 18,916
------
Total equity 897,698 964,868
------- -------
Total equity and liabilities $1,531,300 $1,456,542
========== ==========
CRITEO S.A.
Consolidated Statement of Income
(U.S. dollars in thousands, except share and per share data, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
2017 2018 YoY 2017 2018 YoY
Change
Change
------
Revenue $542,022 $537,185 (1)% $1,058,688 $1,101,349 4%
Cost of revenue
Traffic acquisition cost (322,200) (306,963) (5)% (628,893) (630,709) 0.3%
Other cost of revenue (32,808) (29,957) (9)% (59,963) (60,016) 0.1%
Gross profit 187,014 200,265 7% 369,832 410,624 11%
======= ======= === ======= ======= ===
Operating expenses:
Research and development expenses (43,611) (47,544) 9% (83,132) (92,862) 12%
Sales and operations expenses (97,900) (92,726) (5)% (188,631) (188,375) (0.1)%
General and administrative expenses (32,239) (35,644) 11% (63,754) (70,235) 10%
------- -------
Total Operating expenses (173,750) (175,914) 1% (335,517) (351,472) 5%
-------- -------- --- -------- -------- ---
Income from operations 13,264 24,351 84% 34,315 59,152 72%
------ ------ ------ ------
Financial income (expense), net (2,094) (1,006) (52)% (4,427) (2,331) (47)%
------ ------ ------ ------
Income before taxes 11,170 23,345 109% 29,888 56,821 90%
------ ------ --- ------ ------ ---
Provision for income taxes (3,665) (8,638) 136% (7,866) (21,024) 167%
------ ------ ------ -------
Net Income $7,505 $14,707 96% $22,022 $35,797 63%
====== ======= === ======= ======= ===
Net income available to shareholders of Criteo S.A. $5,970 $13,726 $18,411 $33,535
====== ======= ======= =======
Net income available to non-controlling interests $1,535 $981 $3,611 $2,262
====== ==== ====== ======
Weighted average shares outstanding used in computing
per share amounts:
Basic 65,027,985 66,347,599 64,611,237 66,254,476
Diluted 68,131,274 67,488,311 67,709,789 67,479,513
Net income allocated to shareholders per share:
Basic $0.09 $0.21 $0.28 $0.51
===== ===== ===== =====
Diluted $0.09 $0.20 $0.27 $0.50
===== ===== ===== =====
CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ---- ---- ----
Net income $7,505 $14,707 96% $22,022 $35,797 63%
------ ------- --- ------- ------- ---
Non-cash and non-operating items 42,974 54,021 26% 84,448 107,987 28%
------ ------ --- ------ ------- ---
- Amortization and provisions 24,376 25,099 3% 46,692 51,149 10%
-Equity awards compensation expense (1) 14,918 20,242 36% 29,858 39,071 31%
- Interest accrued and non-cash
financial income and expense 15 21 40% 32 44 38%
- Change in deferred taxes (5,536) (4,389) (21)% (12,405) (7,535) (39)%
- Income tax for the period 9,201 13,028 42% 20,271 28,560 41%
- Other (2) - 20 - - (3,302) -
--- --- --- --- ------ ---
Changes in working capital related to
operating activities 25,860 (10,043) (139)% 25,790 13,644 (47)%
------ ------- ----- ------ ------ ----
-(Increase)/decrease in trade
receivables (23,358) 10,154 (143)% 36,211 101,446 180%
-Increase/(decrease) in trade payables 48,776 (26,745) (155)% (26,254) (89,690) 242%
-(Increase)/decrease in other current
assets (3,493) 5,821 (267)% 2,580 13,779 434%
-Increase/(decrease) in other current
liabilities (2) 3,935 727 (82)% 13,253 (11,891) (190)%
----- --- ---- ------ ------- -----
Income taxes paid (15,848) (18,344) 16% (27,531) (32,560) 18%
------- ------- --- ------- ------- ---
CASH FROM OPERATING ACTIVITIES 60,491 40,341 (33)% 104,729 124,868 19%
------ ------ ---- ------- ------- ---
Acquisition of intangible assets,
property, plant and equipment (30,008) (18,880) (37)% (53,275) (26,293) (51)%
Change in accounts payable related to
intangible assets, property, plant and
equipment 2,953 1,033 (65)% (1,986) (24,121) -
Payments for (Disposal of) business, net
of cash acquired (disposed) 1,089 - (100)% 1,052 (10,811) -
Change in other non-current financial
assets 1,668 154 (91)% 1,274 42 (97)%
----- --- ---- ----- --- ----
CASH USED FOR INVESTING ACTIVITIES (24,298) (17,693) (27)% (52,935) (61,183) 16%
------- ------- ---- ------- ------- ---
Issuance of long-term borrowings 1,454 - (100)% 1,454 - (100)%
Repayment of borrowings (3) (77,168) (235) (100)% (79,221) (473) (99)%
Proceeds from capital increase 11,517 396 (97)% 24,454 562 (98)%
Change in other financial liabilities (2) 145 (35) (124)% 264 16,810 -
--- --- ----- --- ------ ---
CASH (USED FOR) FROM FINANCING ACTIVITIES (64,052) 126 (100)% (53,049) 16,899 (132)%
------- --- ----- ------- ------ -----
CHANGE IN NET CASH AND CASH EQUIVALENTS (27,859) 22,774 (182)% (1,255) 80,584 -
------- ------ ----- ------ ------ ---
Net cash and cash equivalents at
beginning of period 303,813 483,874 59% 270,317 414,111 53%
Effect of exchange rates changes on cash
and cash equivalents (2) 32,231 (26,363) (182)% 39,123 (14,410) (137)%
------ ------- ----- ------ ------- -----
Net cash and cash equivalents at end of
period $308,185 $480,285 56% $308,185 $480,285 56%
-------- -------- --- -------- -------- ---
(1) Of which $14.7 million and $19.8
million of equity awards
compensation expense consisted of
share-based compensation expense
according to ASC 718 Compensation -
stock compensation for the quarter
ended June 30, 2017 and 2018,
respectively, and $29.3 million and
$38.2 million for the six month
period ended June 30, 2017 and
2018, respectively.
(2) During the quarter ended June
30, 2018 and the six months ended
June 30, 2018, respectively, the
Company reported the cash impact of
the settlement of hedging
derivatives related to financing
activities in cash from (used for)
financing activities in the
unaudited consolidated statements
of cash flows.
(3) Interest paid for the quarter
ended June 30, 2017 and 2018,
amounted to $0.8 million and $0.4
million respectively and for the
six months ended June 30, 2017 and
2018, amounted to $1.5 million and
$0.8 million respectively.
CRITEO S.A.
Reconciliation of Cash from Operating Activities to Free Cash Flow
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ----
CASH FROM OPERATING
ACTIVITIES $60,491 $40,341 (33)% $104,729 $124,868 19%
------- ------- ---- -------- -------- ---
Acquisition of intangible
assets, property, plant
and equipment (30,008) (18,880) (37)% (53,275) (26,293) (51)%
Change in accounts payable
related to intangible
assets, property, plant
and equipment 2,953 1,033 (65)% (1,986) (24,121) -
----- ----- ---- ------ ------- ---
FREE CASH FLOW (1) $33,436 $22,494 (33)% $49,468 $74,454 51%
------- ------- ---- ------- ------- ---
(1) Free Cash Flow is defined
as cash flow from operating
activities less acquisition
of intangible assets,
property, plant and
equipment and change in
accounts payable related to
intangible assets, property,
plant and equipment.
CRITEO S.A.
Reconciliation of Revenue ex-TAC by Region to Revenue by Region
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
Region 2017 2018 YoY YoY 2017 2018 YoY YoY
Change Change at Change Change at
Constant Constant
Currency Currency
--------
Revenue
Americas $229,392 $212,781 (7)% (7)% $437,405 $425,476 (3)% (2)%
EMEA 191,682 201,080 5% (1)% 380,774 423,691 11% 2%
Asia-Pacific 120,948 123,324 2% 0.2% 240,509 252,182 5% 2%
Total 542,022 537,185 (1)% (3)% 1,058,688 1,101,349 4% - %
=== === === ===
Traffic acquisition costs
Americas (145,289) (125,502) (14)% (13)% (274,156) (257,023) (6)% (6)%
EMEA (106,605) (112,577) 6% (0.1)% (214,189) (232,470) 9% (1)%
Asia-Pacific (70,306) (68,884) (2)% (4)% (140,548) (141,216) 0.5% (3)%
Total (322,200) (306,963) (5)% (7)% (628,893) (630,709) 0.3% (3)%
=== === === ===
Revenue ex-TAC (1)
Americas 84,103 87,279 4% 4% 163,249 168,453 3% 4%
EMEA 85,077 88,503 4% (1)% 166,585 191,221 15% 5%
Asia-Pacific 50,642 54,440 7% 6% 99,961 110,966 11% 8%
Total $219,822 $230,222 5% 2% $429,795 $470,640 10% 5%
=== === === ===
(1) We define Revenue ex-TAC as our
revenue excluding traffic
acquisition costs generated over
the applicable measurement period.
Revenue ex-TAC and Revenue,
Traffic Acquisition Costs and
Revenue ex-TAC by Region are not
measures calculated in accordance
with U.S. GAAP. We have included
Revenue ex-TAC and Revenue,
Traffic Acquisition Costs and
Revenue ex-TAC by Region because
they are key measures used by our
management and board of directors
to evaluate operating performance,
generate future operating plans and
make strategic decisions regarding
the allocation of capital. In
particular, we believe that the
elimination of TAC from revenue and
review of these measures by region
can provide useful measures for
period-to-period comparisons of
our business. Accordingly, we
believe that Revenue ex-TAC and
Revenue, Traffic Acquisition Costs
and Revenue ex-TAC by Region
provide useful information to
investors and others in
understanding and evaluating our
results of operations in the same
manner as our management and board
of directors. Our use of Revenue
ex-TAC and Revenue, Traffic
Acquisition Costs and Revenue ex-
TAC by Region has limitations as an
analytical tool, and you should not
consider them in isolation or as a
substitute for analysis of our
financial results as reported under
U.S. GAAP. Some of these
limitations are: (a) other
companies, including companies in
our industry which have similar
business arrangements, may address
the impact of TAC differently; (b)
other companies may report Revenue,
Traffic Acquisition Costs and
Revenue ex-TAC by Region or
similarly titled measures but
define the regions differently,
which reduces their effectiveness
as a comparative measure; and (c)
other companies may report Revenue
ex-TAC or similarly titled
measures but calculate them
differently, which reduces their
usefulness as a comparative
measure. Because of these and other
limitations, you should consider
Revenue ex-TAC and Revenue,
Traffic Acquisition Costs and
Revenue ex-TAC by Region alongside
our other U.S. GAAP financial
results, including revenue. The
above table provides a
reconciliation of Revenue ex-TAC
to revenue and Revenue ex-TAC by
Region to revenue by region.
CRITEO S.A.
Reconciliation of Adjusted EBITDA to Net Income
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ---- ---- ----
Net income $7,505 $14,707 96% $22,022 $35,797 63%
Adjustments:
Financial (income) expense,
net 2,094 1,006 (52)% 4,427 2,331 (47)%
----- ----- ---- ----- ----- ----
Provision for income taxes 3,665 8,638 136% 7,866 21,024 167%
----- ----- --- ----- ------ ---
Equity awards compensation
expense 14,918 20,245 36% 29,858 39,548 32%
------ ------ --- ------ ------ ---
Research and development 4,461 6,771 52% 8,377 11,326 35%
Sales and operations 6,401 8,668 35% 13,111 16,499 26%
General and administrative 4,056 4,806 18% 8,370 11,723 40%
----- ----- --- ----- ------ ---
Pension service costs 299 419 40% 589 853 45%
--- --- --- --- --- ---
Research and development 151 212 40% 297 432 45%
Sales and operations 60 75 25% 119 154 29%
General and administrative 88 132 50% 173 267 54%
--- --- --- --- --- ---
Depreciation and amortization
expense 22,306 23,560 6% 42,473 47,206 11%
------ ------ --- ------ ------ ---
Cost of revenue 13,003 15,050 16% 24,094 30,299 26%
Research and development 3,092 2,245 (27)% 6,036 4,466 (26)%
Sales and operations 4,925 4,518 (8)% 9,886 8,972 (9)%
General and administrative 1,286 1,747 36% 2,457 3,469 41%
----- ----- --- ----- ----- ---
Acquisition-related costs - - - 6 - (100)%
--- --- --- --- --- -----
General and administrative - - - 6 - (100)%
--- --- --- --- --- -----
Restructuring 3,299 199 (94)% 3,299 (53) (102)%
----- --- ---- ----- --- -----
Cost of revenue 2,497 - (100)% 2,497 - (100)%
Research and development - 16 - - (332) -
Sales and operations 690 183 (73)% 690 290 (58)%
General and administrative 112 - (100)% 112 (11) (110)%
Total net adjustments 46,581 54,067 16% 88,518 110,909 25%
------ ------ --- ------ ------- ---
Adjusted EBITDA(1) $54,086 $68,774 27% $110,540 $146,706 33%
------- ------- --- -------- -------- ---
(1) We define Adjusted EBITDA as our
consolidated earnings before
financial income (expense), income
taxes, depreciation and
amortization, adjusted to eliminate
the impact of equity awards
compensation expense, pension
service costs, restructuring costs,
acquisition-related costs and
deferred price consideration.
Adjusted EBITDA is not a measure
calculated in accordance with U.S.
GAAP. We have included Adjusted
EBITDA because it is a key measure
used by our management and board of
directors to understand and
evaluate our core operating
performance and trends, to prepare
and approve our annual budget and
to develop short-term and long-
term operational plans. In
particular, we believe that the
elimination of equity awards
compensation expense, pension
service costs, restructuring costs,
acquisition-related costs and
deferred price consideration in
calculating Adjusted EBITDA can
provide a useful measure for
period-to-period comparisons of
our business. Accordingly, we
believe that Adjusted EBITDA
provides useful information to
investors and others in
understanding and evaluating our
results of operations in the same
manner as our management and board
of directors. Our use of Adjusted
EBITDA has limitations as an
analytical tool, and you should not
consider it in isolation or as a
substitute for analysis of our
financial results as reported under
U.S. GAAP. Some of these
limitations are: (a) although
depreciation and amortization are
non-cash charges, the assets being
depreciated and amortized may have
to be replaced in the future, and
Adjusted EBITDA does not reflect
cash capital expenditure
requirements for such replacements
or for new capital expenditure
requirements; (b) Adjusted EBITDA
does not reflect changes in, or
cash requirements for, our working
capital needs; (c) Adjusted EBITDA
does not reflect the potentially
dilutive impact of equity-based
compensation; (d) Adjusted EBITDA
does not reflect tax payments that
may represent a reduction in cash
available to us; and (e) other
companies, including companies in
our industry, may calculate
Adjusted EBITDA or similarly titled
measures differently, which reduces
their usefulness as a comparative
measure. Because of these and other
limitations, you should consider
Adjusted EBITDA alongside our U.S.
GAAP financial results, including
net income.
CRITEO S.A.
Reconciliation from Non-GAAP Operating Expenses to Operating Expenses under GAAP
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ---- ---- ----
Research and Development
expenses $(43,611) $(47,544) 9% $(83,132) $(92,862) 12%
-------- -------- --- -------- -------- ---
Equity awards compensation
expense 4,461 6,771 52% 8,377 11,326 35%
Depreciation and Amortization
expense 3,092 2,245 (27)% 6,036 4,466 (26)%
Pension service costs 151 212 40% 297 432 45%
Restructuring - 16 - - (332) -
--- --- --- --- ---- ---
Non GAAP -Research and
Development expenses (35,907) (38,300) 7% (68,422) (76,970) 12%
------- ------- --- ------- ------- ---
Sales and Operations expenses (97,900) (92,726) (5)% (188,631) (188,375) - %
Equity awards compensation
expense 6,401 8,668 35% 13,111 16,499 26%
Depreciation and Amortization
expense 4,925 4,518 (8)% 9,886 8,972 (9)%
Pension service costs 60 75 25% 119 154 29%
Restructuring 690 183 (73)% 690 290 (58)%
--- --- ---- --- --- ----
Non GAAP -Sales and
Operations expenses (85,824) (79,282) (8)% (164,825) (162,460) (1)%
------- ------- --- -------- -------- ---
General and Administrative
expenses (32,239) (35,644) 11% (63,754) (70,235) 10%
Equity awards compensation
expense 4,056 4,806 18% 8,370 11,723 40%
Depreciation and Amortization
expense 1,286 1,747 36% 2,457 3,469 41%
Pension service costs 88 132 50% 173 267 54%
Acquisition related costs - - - 6 - (100)%
Restructuring 112 - (100)% 112 (11) (110)%
--- --- ----- --- --- -----
Non GAAP -General and
Operations expenses (26,697) (28,959) 8% (52,636) (54,787) 4%
------- ------- --- ------- ------- ---
Total Operating expenses (173,750) (175,914) 1% (335,517) (351,472) 5%
-------- -------- --- -------- -------- ---
Equity awards compensation
expense 14,918 20,245 36% 29,858 39,548 32%
Depreciation and Amortization
expense 9,303 8,510 (9)% 18,379 16,907 (8)%
Pension service costs 299 419 40% 589 853 45%
Acquisition-related costs - - - 6 - (100)%
Restructuring 802 199 (75)% 802 (53) (107)%
--- --- ---- --- --- -----
Total Non GAAP Operating
expenses (1) $(148,428) $(146,541) (1)% $(285,883) $(294,217) 3%
--------- --------- --- --------- --------- ---
(1) We define Non-GAAP Operating
Expenses as our consolidated
operating expenses adjusted to
eliminate the impact of
depreciation and amortization,
equity awards compensation
expense, pension service costs,
restructuring costs, acquisition-
related costs and deferred price
consideration. The Company uses
Non-GAAP Operating Expenses to
understand and compare operating
results across accounting periods,
for internal budgeting and
forecasting purposes, for short-
term and long-term operational
plans, and to assess and measure
our financial performance and the
ability of our operations to
generate cash. We believe Non-
GAAP Operating Expenses reflects
our ongoing operating expenses in
a manner that allows for
meaningful period-to-period
comparisons and analysis of trends
in our business. As a result, we
believe that Non-GAAP Operating
Expenses provides useful
information to investors in
understanding and evaluating our
core operating performance and
trends in the same manner as our
management and in comparing
financial results across periods.
In addition, Non-GAAP Operating
Expenses is a key component in
calculating Adjusted EBITDA, which
is one of the key measures we use
to provide our quarterly and
annual business outlook to the
investment community.
CRITEO S.A.
Detailed Information on Selected Items
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ---- ---- ----
Equity awards compensation
expense
Research and development $4,461 $6,771 52% $8,377 $11,326 35%
Sales and operations 6,401 8,668 35% 13,111 16,499 26%
General and administrative 4,056 4,806 18% 8,370 11,723 40%
Total equity awards
compensation expense 14,918 20,245 36% 29,858 39,548 32%
====== ====== === ====== ====== ===
Pension service costs
Research and development 151 212 40% 297 432 45%
Sales and operations 60 75 25% 119 154 29%
General and administrative 88 132 50% 173 267 54%
Total pension service costs 299 419 40% 589 853 45%
=== === === === === ===
Depreciation and amortization
expense
Cost of revenue 13,003 15,050 16% 24,094 30,299 26%
Research and development 3,092 2,245 (27)% 6,036 4,466 (26)%
Sales and operations 4,925 4,518 (8)% 9,886 8,972 (9)%
General and administrative 1,286 1,747 36% 2,457 3,469 41%
Total depreciation and
amortization expense 22,306 23,560 6% 42,473 47,206 11%
====== ====== === ====== ====== ===
Acquisition-related costs
General and administrative - - - 6 - (100)%
Total acquisition-related
costs - - - 6 - (100)%
=== === === === === =====
Restructuring
Cost of revenue 2,497 - (100)% 2,497 - (100)%
Research and development - 16 - - (332) -
Sales and operations 690 183 (73)% 690 290 (58)%
General and administrative 112 - (100)% 112 (11) (110)%
Total restructuring $3,299 $199 (94)% $3,299 $(53) (102)%
====== ==== ==== ====== ==== =====
CRITEO S.A.
Reconciliation of Adjusted Net Income to Net Income
(U.S. dollars in thousands except share and per share data, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, YoY June 30, YoY
Change Change
------ ------
2017 2018 2017 2018
---- ---- ---- ----
Net income $7,505 $14,707 96% $22,022 $35,797 63%
Adjustments:
Equity awards compensation
expense 14,918 20,245 36% 29,858 39,548 32%
Amortization of acquisition-
related intangible assets 4,777 3,448 (28)% 9,451 6,905 (27)%
Acquisition-related costs - - - 6 - (100)%
Restructuring costs 3,299 199 (94)% 3,299 (53) (102)%
Tax impact of the above
adjustments (4,255) (3,117) (27)% (7,571) (6,196) (18)%
Total net adjustments 18,739 20,775 11% 35,043 40,204 15%
------ --- ------ ------ ---
Adjusted net income(1) $26,244 $35,482 35% $57,065 $76,001 33%
======= ======= === ======= ======= ===
Weighted average shares
outstanding
- Basic 65,027,985 66,347,599 64,611,237 66,254,476
- Diluted 68,131,274 67,488,311 67,709,789 67,479,513
Adjusted net income per share
- Basic $0.40 $0.53 33% $0.88 $1.15 31%
===== ===== === ===== ===== ===
- Diluted $0.39 $0.53 36% $0.84 $1.13 35%
===== ===== === ===== ===== ===
(1) We define Adjusted Net Income
as our net income adjusted to
eliminate the impact of equity
awards compensation expense,
amortization of acquisition-
related intangible assets,
restructuring costs, acquisition-
related costs and deferred price
consideration and the tax impact
of the foregoing adjustments.
Adjusted Net Income is not a
measure calculated in accordance
with U.S. GAAP. We have included
Adjusted Net Income because it is
a key measure used by our
management and board of directors
to evaluate operating performance,
generate future operating plans
and make strategic decisions
regarding the allocation of
capital. In particular, we believe
that the elimination of equity
awards compensation expense,
amortization of acquisition-
related intangible assets,
acquisition-related costs and
deferred price consideration,
restructuring costs and the tax
impact of the foregoing
adjustments in calculating
Adjusted Net Income can provide a
useful measure for period-to-
period comparisons of our
business. Accordingly, we believe
that Adjusted Net Income provides
useful information to investors
and others in understanding and
evaluating our results of
operations in the same manner as
our management and board of
directors. Our use of Adjusted Net
Income has limitations as an
analytical tool, and you should
not consider it in isolation or as
a substitute for analysis of our
financial results as reported
under U.S. GAAP. Some of these
limitations are: (a) Adjusted Net
Income does not reflect the
potentially dilutive impact of
equity-based compensation or the
impact of certain acquisition
related costs; and (b) other
companies, including companies in
our industry, may calculate
Adjusted Net Income or similarly
titled measures differently, which
reduces their usefulness as a
comparative measure. Because of
these and other limitations, you
should consider Adjusted Net
Income alongside our other U.S.
GAAP-based financial results,
including net income.
CRITEO S.A.
Constant Currency Reconciliation
(U.S. dollars in thousands, unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
2017 2018 YoY 2017 2018 YoY
Change Change
------ ------
Revenue as reported $542,022 $537,185 (1)% $1,058,688 $1,101,349 4%
Conversion impact U.S.
dollar/other currencies (11,393) (42,480)
Revenue at constant
currency(1) 542,022 525,792 (3)% 1,058,688 1,058,869 - %
------- ------- --- --------- --------- --- ---
Traffic acquisition costs
as reported (322,200) (306,963) (5)% (628,893) (630,709) 0.3%
Conversion impact U.S.
dollar/other currencies 6,487 23,356
Traffic Acquisition Costs
at constant currency(1) (322,200) (300,476) (7)% (628,893) (607,353) (3)%
-------- -------- --- -------- -------- ---
Revenue ex-TAC as
reported(2) 219,822 230,222 5% 429,795 470,640 10%
Conversion impact U.S.
dollar/other currencies (4,906) (19,124)
Revenue ex-TAC at
constant currency(2) 219,822 225,316 2% 429,795 451,516 5%
------- ------- --- ------- ------- ---
Revenue ex-
TAC(2)/Revenue as
reported 41% 43% 41% 43%
Other cost of revenue as
reported (32,808) (29,957) (9)% (59,963) (60,016) 0.1%
Conversion impact U.S.
dollar/other currencies (73) 603
Other cost of revenue at
constant currency(1) (32,808) (30,030) (8)% (59,963) (59,413) (1)%
------- ------- --- ------- ------- ---
Adjusted EBITDA(3) 54,086 68,774 27% 110,540 146,706 33%
Conversion impact U.S.
dollar/other currencies (3,786) (13,099)
Adjusted EBITDA(3) at
constant currency(1) $54,086 $64,988 20% $110,540 $133,607 21%
------- ------- --- -------- -------- ---
Adjusted
EBITDA(3)/Revenue ex-
TAC(2) 25% 30% 26% 31%
Adjusted EBITDA(3) at
constant
currency(1)/Revenue ex-
TAC(2) at constant
currency(1) 25% 29% 26% 30%
(1) Information herein with respect
to results presented on a constant
currency basis is computed by
applying prior period average
exchange rates to current period
results. We have included results
on a constant currency basis
because it is a key measure used by
our management and Board of
directors to evaluate operating
performance. Management reviews and
analyzes business results excluding
the effect of foreign currency
translation because they believe
this better represents our
underlying business trends. The
table above reconciles the actual
results presented in this section
with the results presented on a
constant currency basis.
(2) Revenue ex-TAC is not a measure
calculated in accordance with U.S.
GAAP. See the table entitled
"Reconciliation of Revenue ex-TAC
by Region to Revenue by Region" for
a reconciliation of Revenue ex-TAC
to revenue.
(3) Adjusted EBITDA is not a measure
calculated in accordance with U.S.
GAAP. See the table entitled
"Reconciliation of Adjusted EBITDA
to Net Income" for a reconciliation
of Adjusted EBITDA to net income.
CRITEO S.A.
Information on Share Count
(unaudited)
Six Months Ended
----------------
June 30,
2017 2018
---- ----
Shares outstanding as at
January 1, 63,978,204 66,085,097
Weighted average number of
shares issued during the
period 633,033 169,379
Basic number of shares -Basic
EPS basis 64,611,237 66,254,476
----------------------------- ---------- ----------
Dilutive effect of share
options, warrants, employee
warrants -Treasury method 3,098,552 1,225,037
Diluted number of shares -
Diluted EPS basis 67,709,789 67,479,513
-------------------------- ========== ==========
Shares outstanding as of June
30, 65,291,977 66,861,045
----------------------------- ---------- ----------
Total dilutive effect of share
options, warrants, employee
warrants 8,487,128 8,477,469
Fully diluted shares as of
June 30, 73,779,105 75,338,514
-------------------------- ========== ==========
CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated, unaudited)
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 YoY QoQ
2016 2016 2017 2017 2017 2017 2018 2018 Change Change
---- ---- ---- ---- ---- ---- ---- ---- ------
Clients 12,882 14,468 15,423 16,370 17,299 18,118 18,528 18,936 16% 2%
Revenue 423,867 566,825 516,667 542,022 563,973 674,031 564,164 537,185 (1)% (5)%
Americas 160,739 266,438 208,013 229,392 228,326 324,696 212,695 212,781 (7)% -%
EMEA 157,921 189,298 189,092 191,682 207,168 221,019 222,611 201,080 5% (10)%
APAC 105,207 111,089 119,562 120,948 128,479 128,316 128,858 123,324 2% (4)%
TAC (247,310) (341,877) (306,693) (322,200) (329,576) (397,087) (323,746) (306,963) (5)% (5)%
Americas (97,239) (167,046) (128,867) (145,289) (141,869) (203,368) (131,521) (125,502) (14)% (5)%
EMEA (87,092) (108,567) (107,583) (106,605) (115,446) (120,662) (119,893) (112,577) 6% (6)%
APAC (62,979) (66,264) (70,243) (70,306) (72,261) (73,057) (72,332) (68,884) (2)% (5)%
Revenue ex-TAC 176,557 224,948 209,974 219,822 234,397 276,944 240,418 230,222 5% (4)%
Americas 63,500 99,391 79,146 84,103 86,457 121,328 81,174 87,279 4% 8%
EMEA 70,829 80,731 81,509 85,077 91,722 100,357 102,718 88,503 4% (14)%
APAC 42,228 44,826 49,319 50,642 56,218 55,259 56,526 54,440 7% (4)%
Adjusted EBITDA 53,532 82,995 56,454 54,086 79,116 119,928 77,932 68,774 27% (12)%
Cash flow from
operating activities 43,631 71,658 44,238 60,491 61,727 79,002 84,527 40,341 (33)% (52)%
Capital expenditures 19,907 22,981 28,206 27,055 27,773 25,476 32,567 17,847 (34)% (45)%
Capital expenditures /
Revenue 5% 4% 5% 5% 5% 4% 6% 3% (40)% (50)%
Net cash position 407,158 270,318 303,813 308,185 357,983 414,111 483,874 480,285 56% (1)%
Headcount 2,212 2,503 2,582 2,690 2,712 2,764 2,675 2,678 (0.4)% 0.1%
Days Sales Outstanding
(days -end of month) 56 53 56 57 56 57 60 61 N.A N.A
---------------------- --- --- --- --- --- --- --- --- --- ---
SOURCE Criteo S.A.
