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Criteo Reports Strong Results For The First Quarter 2017

NEW YORK, May 3, 2017 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the performance marketing technology company, today announced financial results for the first quarter ended March 31, 2017.

  • Revenue increased 29% (or 30% at constant currency1) to $517 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC,2 grew 29% (or 30% at constant currency) to $210 million, or 41% of revenue.
  • Adjusted EBITDA2 grew 16% (or 18% at constant currency) to $56 million, or 27% of Revenue ex-TAC.
  • Cash flow from operating activities increased 134% to $44 million.
  • Free Cash Flow2 increased 136% to $16 million.
  • Net Income decreased 22% to $15 million, driven by the accounting impact of the HookLogic, Inc. ("HookLogic") acquisition.
  • Adjusted Net Income per diluted share2 increased 6% to $0.46.

"I'm excited about the significant 30% growth in Q1," said Eric Eichmann, CEO, "which demonstrates the broadly accepted value of our performance marketing platform for commerce companies and brands."

"We continue to deliver impressive cash flow generation, while investing in the business," said Benoit Fouilland, CFO. "This, combined with rapid profitable growth, makes our model differentiated and attractive."

Operating Highlights

  • Our user graph continues to grow in scale and efficiency, with 67% of Revenue ex-TAC generated from users matched across devices thanks to the graph.
  • Our next generation header bidding technology is now connected to over 100 publishers, delivering very promising performance.
  • We added over 950 net clients, ending the quarter with more than 15,000 commerce and brand clients, while maintaining a 90% client retention across the business.
  • The growth in same-client Revenue ex-TAC remained strong at over 15% at constant currency.
  • We launched alpha partnerships on a potential video product with several large U.S. and European clients, with positive first results and a growing pipeline of demand.

Revenue and Revenue ex-TAC

Revenue grew 29%, or 30% at constant currency, to $517 million (Q1 2016: $401 million).

Revenue ex-TAC grew 29%, or 30% at constant currency, to $210 million (Q1 2016: $162 million). This increase was primarily driven by continued innovation across devices, our broader and improved access to publisher inventory, the addition of new clients across regions and the progress we made with our new products Criteo Sponsored Products and Criteo Predictive Search.

  • In the Americas, Revenue ex-TAC grew 41%, or 38% at constant currency, to $79 million and represented 38% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 19%, or 25% at constant currency, to $82 million and represented 39% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 30%, or 28% at constant currency, to $49 million and represented 23% of total Revenue ex-TAC.

Revenue ex-TAC margin as a percentage of revenue was 41%, in line with prior quarters.

Net Income and Adjusted Net Income

Net income decreased 22% to $15 million (Q1 2016: $19 million). Net income available to shareholders of Criteo S.A. was $12 million, or $0.18 per share on a diluted basis (Q1 2016: $17 million, or $0.26 per share on a diluted basis). Net income in the period was impacted by the acquisition of HookLogic, including through the one-time grant of equity awards in connection with the acquisition, the depreciation of intangible assets related to the acquisition, as well as increased financial expense related to the funding of 30% of the acquisition. Excluding the impact of non-cash accounting effects related to HookLogic, net income increased 15% to $21 million.

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 and the tax impact of these adjustments, increased 10% to $31 million, or $0.46 per share on a diluted basis (Q1 2016: $28 million, or $0.43 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 16%, or 18% at constant currency, to $56 million (Q1 2016: $49 million). This increase in Adjusted EBITDA is primarily driven by the strong Revenue ex-TAC performance in the quarter.

Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 27% (Q1 2016: 30%).

Operating expenses increased 39% to $162 million (Q1 2016: $116 million), including $18 million related to the first full quarter impact of Criteo Sponsored Products (formerly HookLogic). Operating expenses, excluding the impact of equity awards compensation expense, pension costs, depreciation and amortization and acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, increased 33% to $137 million (Q1 2016: 104 million). This increase is primarily related to the year-over-year growth in headcount, after including over 190 employees focused on Criteo Sponsored Products, in Research and Development (36%), Sales and Operations (30%) and General and Administrative (26%), as we continued to scale the organization.

Cash Flow and Cash Position

Cash flow from operating activities increased 134% to $44 million (Q1 2016: $19 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, grew 136% to $16 million (Q1 2016: $7 million).

Total cash and cash equivalents were $304 million as of March 31, 2017 (December 31, 2016: $270 million). 

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of May 3, 2017.

Second Quarter 2017 Guidance:

  • We expect Revenue ex-TAC to be between $209 million and $213 million.
  • We expect Adjusted EBITDA to be between $44 million and $48 million.

Fiscal Year 2017 Guidance:

  • We now expect Revenue ex-TAC growth to be between 28% and 31% at constant currency.
  • We expect Adjusted EBITDA margin as a percentage of Revenue ex-TAC to increase between 0 basis points and 50 basis points.

The above guidance for the second quarter ending June 30, 2017, and the fiscal year ending December 31, 2017, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.94, a U.S. dollar-Japanese Yen of 113, a U.S. dollar-British pound rate of 0.81 and a U.S. dollar-Brazilian real rate of 3.2.

The above guidance assumes no acquisitions are completed during the second quarter ending June 30, 2017 and the fiscal year ending December 31, 2017.

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.

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, 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, service costs (pension), 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, 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, 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, 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, 2017 and the fiscal year ending December 31, 2017, 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, 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, 2017, 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, May 3, 2017, 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) delivers personalized performance marketing at an extensive scale. Measuring return on post-click sales, Criteo makes ROI transparent and easy to measure. Criteo has over 2,500 employees in more than 30 offices across the Americas, EMEA and Asia-Pacific, serving over 15,000 advertisers worldwide and with direct relationships with thousands of publishers.

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 2016 average exchange rates for the relevant period to 2017 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.

Financial information to follow

 

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands) (unaudited)




December 31, 2016



March 31, 2017


Assets





Current assets:





Cash and cash equivalents


$

270,317



$

303,813


Trade receivables, net of allowances


397,244



340,837


Income taxes


2,741



3,560


Other taxes


52,942



44,834


Other current assets


19,340



22,772


Total current assets


742,584



715,816


Property, plant and equipment, net


108,581



115,415


Intangible assets, net


102,944



107,962


Goodwill


209,418



232,138


Non-current financial assets


17,029



19,857


Deferred tax assets


30,630



46,201


    Total non-current assets


468,602



521,573


Total assets


$

1,211,186



$

1,237,389







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

365,788



$

295,602


Contingencies


654



980


Income taxes


14,454



14,969


Financial liabilities - current portion


7,969



84,398


Other taxes


44,831



41,414


Employee - related payables


55,874



53,862


Other current liabilities


30,221



35,032


Total current liabilities


519,791



526,257


Deferred tax liabilities


686



28,900


Retirement benefit obligation


3,221



3,276


Financial liabilities - non current portion


77,611



2,620


Other non-current liabilities




4,697


    Total non-current liabilities


81,518



39,493


Total liabilities


601,309



565,750


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 per value, 63,978,204 and 64,665,637 shares authorized, issued and outstanding at December 31, 2016 and March 31, 2017, respectively.


2,093



2,112


Additional paid-in capital


488,277



514,649


Accumulated other comprehensive income (loss)


(88,593)



(79,742)


Retained earnings


198,355



222,239


Equity - attributable to shareholders of Criteo S.A.


600,132



659,258


Non-controlling interests


9,745



12,381


Total equity


609,877



671,639


Total equity and liabilities


$

1,211,186



$

1,237,389


 

CRITEO S.A.

Consolidated Statement of Income

(U.S. dollars in thousands, except share and per share data)

(unaudited)










Three Months Ended






March 31,






2016



2017



YoY Change

Revenue



$

401,253



$

516,667



29

%









Cost of revenue








Traffic acquisition costs



(238,755)



(306,693)



28

%

Other cost of revenue



(18,338)



(27,155)



48

%









Gross profit



144,160



182,819



27

%









Operating expenses:








Research and development expenses



(27,162)



(39,521)



46

%

Sales and operations expenses



(64,473)



(90,730)



41

%

General and administrative expenses



(24,737)



(31,516)



27

%

Total operating expenses



(116,372)



(161,767)



39

%

Income from operations



27,788



21,052



(24)

%

Financial income (expense)



(1,317)



(2,333)



77

%

Income before taxes



26,471



18,719



(29)

%

Provision for income taxes



(7,944)



(4,201)



(47)

%

Net income



$

18,527



$

14,518



(22)

%









Net income available to shareholders of Criteo S.A.



$

17,131



$

12,442




Net income available to non-controlling interests



$

1,396



$

2,076












Weighted average shares outstanding used in computing








per share amounts:








Basic



62,610,013



64,189,194




Diluted



64,841,134



67,283,012












Net income allocated  to shareholders of Criteo S.A. per share:








Basic



0.27



0.19




Diluted



0.26



0.18




 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands)

(unaudited)




Three Months Ended



March 31,



2016



2017


Net income


$

18,527



$

14,518


Non-cash and non-operating items


29,506



41,473


                 - Amortization and provisions


13,180



22,316


                 - Equity awards compensation expense (1)


8,370



14,940


                 - Interest accrued and non-cash financial income and expenses


12



16


                 - Change in deferred taxes


(1,138)



(6,870)


                 - Income tax for the period


9,082



11,071


Changes in working capital requirement


(17,140)



(70)


                 - Decrease in trade receivables


4,758



59,569


                 - Decrease in trade payables


(13,906)



(75,030)


                 - (Increase)/decrease in other current assets


(10,368)



8,253


                 - Increase in other current liabilities


2,376



7,138


Income taxes paid


(11,986)



(11,683)


CASH FROM OPERATING ACTIVITIES


18,907



44,238


Acquisition of intangible assets, property, plant and equipment


(13,615)



(23,267)


Change in accounts payable related to intangible assets, property, plant and equipment


1,507



(4,939)


Change in other non-current financial assets


781



(431)


CASH USED FOR INVESTING ACTIVITIES


(11,327)



(28,637)


Issuance of long-term borrowings


764




Repayment of borrowings


(1,503)



(2,053)


Proceeds from capital increase


5,476



12,937


Change in other financial liabilities




119


CASH FROM FINANCING ACTIVITIES


4,737



11,003







CHANGE IN NET CASH AND CASH EQUIVALENTS


12,317



26,604


Net cash and cash equivalents - beginning of period


353,537



270,317


Effect of exchange rates changes on cash and cash equivalents


20,256



6,892


Net cash and cash equivalents - end of period


$

386,110



$

303,813



(1) $8.4 and $14.6 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended March 31, 2016 and 2017, respectively.

 

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

(U.S. dollars in thousands)

(unaudited)




Three Months Ended



March 31,



2016



2017


CASH FROM OPERATING ACTIVITIES


18,907



44,238


Acquisition of intangible assets, property, plant and equipment


(13,615)



(23,267)


Change in accounts payable related to intangible assets, property, plant and equipment


1,507



(4,939)


FREE CASH FLOW (1)


6,799



16,032



(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








March 31,






Region


2016



2017



YoY Change


YoY Change at
Constant Currency

Revenue










Americas


$

147,174



$

208,013



41

%


39

%


EMEA


159,405



189,092



19

%


24

%


Asia-Pacific


94,674



119,562



26

%


24

%


Total


401,253



516,667



29

%


30

%











Traffic acquisition costs










Americas


(90,929)



(128,867)



42

%


40

%


EMEA


(91,185)



(107,583)



18

%


24

%


Asia-Pacific


(56,641)



(70,243)



24

%


22

%


Total


(238,755)



(306,693)



28

%


29

%











Revenue ex-TAC (1)










Americas


56,245



79,146



41

%


38

%


EMEA


68,220



81,509



19

%


25

%


Asia-Pacific


38,033



49,319



30

%


28

%


Total


$

162,498



$

209,974



29

%


30

%


(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 in this Form 8-K 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


March 31,


2016



2017


Net income

$

18,527



$

14,518


Adjustments:




Financial (income) expense

1,317



2,333


Provision for income taxes

7,944



4,201


Equity awards compensation expense

8,370



14,940


Research and development

2,402



3,916


          Sales and operations

3,390



6,710


General and administrative

2,578



4,314


Pension service costs

129



290


Research and development

52



146


          Sales and operations

34



59


General and administrative

43



85


Depreciation and amortization expense

12,516



20,167


                   Cost of revenue

8,220



11,091


Research and development

2,007



2,944


          Sales and operations

1,771



4,961


General and administrative

518



1,171


Acquisition-related costs



6


General and administrative



6


Acquisition-related deferred price consideration

40




Research and development

40




Total net adjustments

30,316



41,936


Adjusted EBITDA (1)

$

48,843



$

56,454



(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, 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 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, pension service 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


March 31,


2016



2017


Research and Development expenses

$

(27,162)



$

(39,521)


Equity awards compensation expense

$

2,402



$

3,916


Depreciation and Amortization expense

2,007



2,944


Pension service costs

52



146


Acquisition-related deferred price consideration

40




Non-GAAP - Research and Development expenses

(22,661)



(32,515)


Sales and Operations expenses

(64,473)



(90,730)


Equity awards compensation expense

3,390



6,710


Depreciation and Amortization expense

1,771



4,961


Pension service costs

34



59


Non-GAAP - Sales and Operations expenses

(59,278)



(79,000)


General and Administrative expenses

(24,737)



(31,516)


Equity awards compensation expense

2,578



4,314


Depreciation and Amortization expense

518



1,171


Pension service costs

43



85


Acquisition-related costs



6


Non-GAAP - General and Administrative expenses

(21,598)



(25,940)


Total Operating expenses

(116,372)



(161,767)


Equity awards compensation expense

8,370



14,940


Depreciation and Amortization expense

4,296



9,076


Pension service costs

129



290


Acquisition-related costs



6


Acquisition-related deferred price consideration

40




Total Non-GAAP Operating expenses (1)

(103,537)



(137,455)



(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, 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 its 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


March 31,


2016



2017


Equity awards compensation expense




Research and development

$

2,402



$

3,916


Sales and operations

3,390



6,710


General and administrative

2,578



4,314


Total equity awards compensation expense

8,370



14,940






Pension service costs




Research and development

52



146


Sales and operations

34



59


General and administrative

43



85


Total pension service costs

129



290






Depreciation and amortization expense




Cost of revenue

8,220



11,091


Research and development

2,007



2,944


Sales and operations

1,771



4,961


General and administrative

518



1,171


Total depreciation and amortization expense

12,516



20,167






Acquisition-related costs




General and administrative



6


Total acquisition-related costs



6






Acquisition-related deferred price consideration




Research and development

40




                Total acquisition-related deferred price consideration

$

40



$


 

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



March 31,



2016



2017


Net income


$

18,527



$

14,518


Adjustments:





Equity awards compensation expense


8,370



14,940


Amortization of acquisition-related intangible assets


1,377



4,674


Acquisition-related costs




6


Acquisition-related deferred price consideration


40




Tax impact of the above adjustments


(228)



(3,317)


Total net adjustments


9,559



16,303


Adjusted net income (1)


$

28,086



$

30,821







Weighted average shares outstanding





 - Basic


62,610,013



64,189,194


 - Diluted


64,841,134



67,283,012







Adjusted net income per share





 - Basic


$

0.45



$

0.48


 - Diluted


$

0.43



$

0.46



(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, 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,  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





March 31,





2016



2017



YoY Change

Revenue as reported


401,253



516,667



29

%

Conversion impact U.S. dollar/other currencies




3,732




Revenue at constant currency (1)


401,253



520,399



30

%








Traffic acquisition costs as reported


(238,755)



(306,693)



28

%

Conversion impact U.S. dollar/other currencies




(2,231)




Traffic Acquisition Costs at constant currency (1)


(238,755)



(308,924)



29

%








Revenue ex-TAC (2) as reported


162,498



209,974



29

%

Conversion impact U.S. dollar/other currencies




1,501




Revenue ex-TAC (2) at constant currency (1)


162,498



211,475



30

%

Revenue ex-TAC (2)/Revenue as reported


40

%


41

%










Other cost of revenue as reported


(18,338)



(27,155)



48

%

Conversion impact U.S. dollar/other currencies




(216)




Other cost of revenue at constant currency (1)


(18,338)



(27,371)



49

%








Adjusted EBITDA (3)


48,843



56,454



16

%

Conversion impact U.S. dollar/other currencies




1,168




Adjusted EBITDA (3) at constant currency (1)


48,843



57,622



18

%


(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)




Three Months Ended



March 31,



2016



2017


Shares outstanding as at January 1,


62,470,881



63,978,204


Weighted average number of shares issued during the period


139,132



210,990


Basic number of shares - Basic EPS basis


62,610,013



64,189,194


Dilutive effect of share options, warrants, employee warrants - Treasury method


2,231,121



3,093,817


Diluted number of shares - Diluted EPS basis


64,841,134



67,283,011







Shares outstanding as at March 31,


62,896,180



64,665,637


Total dilutive effect of share options, warrants, employee warrants


7,469,069



7,825,371


Fully diluted shares as at  March 31,


70,365,249



72,491,008


 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

(U.S. dollars in thousands except where stated)

(unaudited)



Q2
2015

Q3
2015

Q4
2015

Q1
2016

Q2
2016

Q3
2016

Q4
2016

Q1
2017

YoY
Change

QoQ
Change














Clients

8,564

9,290

10,198

10,962

11,874

12,882

14,468

15,423

41%

7%














Revenue

299,306

332,674

397,018

401,253

407,201

423,867

566,825

516,667

29%

(9)%


Americas

110,872

124,024

170,133

147,174

156,522

160,739

266,438

208,013

41%

(22)%


EMEA

126,807

137,185

144,905

159,405

153,899

157,921

189,298

189,092

19%

—%


APAC

61,627

71,465

81,980

94,674

96,780

105,207

111,089

119,562

26%

8%














TAC

(177,239)

(198,970)

(237,056)

(238,755)

(240,969)

(247,310)

(341,877)

(306,693)

28%

(10)%


Americas

(66,853)

(75,684)

(104,646)

(90,929)

(96,560)

(97,239)

(167,046)

(128,867)

42%

(23)%


EMEA

(73,155)

(79,710)

(82,905)

(91,185)

(86,820)

(87,092)

(108,567)

(107,583)

18%

(1)%


APAC

(37,231)

(43,576)

(49,505)

(56,641)

(57,589)

(62,979)

(66,264)

(70,243)

24%

6%














Revenue ex-TAC

122,067

133,704

159,962

162,498

166,232

176,557

224,948

209,974

29%

(7)%


Americas

44,019

48,340

65,487

56,245

59,962

63,500

99,391

79,146

41%

(20)%


EMEA

53,652

57,475

62,000

68,220

67,079

70,829

80,731

81,509

19%

1%


APAC

24,396

27,889

32,475

38,033

39,191

42,228

44,826

49,319

30%

10%














Cash flow from operating activities

11,938

17,500

66,706

18,907

19,274

43,631

71,658

44,238

134%

(38)%



Capital expenditures

18,348

24,066

19,205

12,109

22,386

19,907

22,981

28,206

133%

23%



Net cash position

321,109

314,644

353,537

386,110

377,407

407,158

270,318

303,813

(21)%

12%



Days Sales Outstanding (days - end of month) (1)




56

57

56

53

56






(1) Due to the conversion from IFRS (euros) to U.S. GAAP (U.S. dollars), the Days Sales Outstanding for historic quarters has not been recalculated and is not available.

 

SOURCE Criteo S.A.

For further information: Criteo Investor Relations, Edouard Lassalle, VP, Head of IR, e.lassalle@criteo.com, or Friederike Edelmann, IR Director, f.edelmann@criteo.com; Criteo Public Relations, Emma Ferns, Global PR director, e.ferns@criteo.com