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Criteo Reports Strong Results For The Second Quarter 2017

NEW YORK, Aug. 2, 2017 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the commerce marketing technology company, today announced financial results for the second quarter ended June 30, 2017.

  • Revenue increased 33% (or 35% at constant currency1) to $542 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC,2 grew 32% (or 34% at constant currency) to $220 million, or 41% of revenue.
  • Adjusted EBITDA2 grew 38% (or 42% at constant currency) to $54 million, or 25% of Revenue ex-TAC.
  • Cash flow from operating activities increased 214% to $60 million.
  • Free Cash Flow2 increased $37 million to $33 million.
  • Net Income decreased 44% to $8 million, driven by the accounting impact of the HookLogic, Inc. ("HookLogic") acquisition and restructuring costs in China in the second quarter.
  • Adjusted Net Income per diluted share2 increased 18% to $0.39.

"We are building the highest performing and open commerce marketing ecosystem for retailers and brands, allowing them to compete with large ecommerce companies," said Eric Eichmann, CEO. "Our unique solution opens up a large opportunity for us."

"We delivered accelerating profitable growth and increased cash flow, while investing in the business," said Benoit Fouilland, CFO. "This attractive combination continues to differentiate our business model ."

Operating Highlights

  • The year-over-year growth in same-client Revenue ex-TAC accelerated from the prior quarter to 17% at constant currency, the result of better technology and a broader supply network.
  • We added a total of 950 net clients, ending the quarter with more than 16,000 commerce and brand clients, while maintaining a 90% client retention across the business.
  • Criteo User Device Graph, continued to grow in scale and efficiency, with 76% of Revenue ex-TAC generated from users matched in the graph.
  • Criteo Direct Bidder, our next generation header bidding technology, is now connected to over 450 publishers globally, helping increase their average yield by 20% to 40%.
  • We are testing several new product initiatives with promising results, including app installs, CRM onboarding for brands and retailers, and Store-to-web retargeting campaigns.

Revenue and Revenue ex-TAC

Revenue grew 33%, or 35% at constant currency, to $542 million (Q2 2016: $407 million).

Revenue ex-TAC grew 32%, or 34% at constant currency, to $220 million (Q2 2016: $166 million). This increase was primarily driven by continued innovation, both in the core technology and in new products, a broader and improved access to publisher inventory, and the addition of new clients across regions, categories and products.

  • In the Americas, Revenue ex-TAC grew 40%, or 39% at constant currency, to $84 million and represented 38% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 27%, or 32% at constant currency, to $85 million and represented 39% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 29%, or 32% at constant currency, to $51 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 44% to $8 million (Q2 2016: $13 million). Net income available to shareholders of Criteo S.A. was $6 million, or $0.09 per share on a diluted basis (Q2 2016: $12 million, or $0.19 per share on a diluted basis). Net income in the period was impacted by restructuring costs of $3.3 million related to the refocus of our Chinese efforts on the export business. Net income in the period was also impacted by the acquisition of HookLogic, including the one-time grant of equity awards in connection with the acquisition, the amortization of intangible assets recognized following the purchase price accounting, and increased financial expense related to the funding of 30% of the purchase price. Excluding the impact of non-cash accounting effects related to HookLogic, net income increased 7% to $14 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, restructuring costs and the tax impact of these adjustments, increased 20% to $26 million, or $0.39 per share on a diluted basis (Q2 2016: $22 million, or $0.33 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 38%, or 42% at constant currency, to $54 million (Q2 2016: $39 million). This increase in Adjusted EBITDA was primarily driven by the strong Revenue ex-TAC performance across all regions, as well as continued operating leverage across the organization.

Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 25% (Q2 2016: 24%).

Operating expenses increased 36% to $174 million (Q2 2016: $128 million), including approximately $1 million of restructuring costs in China. 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, increased 28% to $148 million (Q2 2016: $116 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (38%), Sales and Operations (27%) and General and Administrative (25%), as we continued to grow the entire organization.

Cash Flow and Cash Position

Cash flow from operating activities increased 214% to $60 million (Q2 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 by $37 million to $33 million (Q2 2016: $(3) million).

Total cash and cash equivalents were $308 million as of June 30, 2017 (December 31, 2016: $270 million).

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of August 2, 2017.

Third Quarter 2017 Guidance:

  • We expect Revenue ex-TAC to be between $227 million and $230 million.
  • We expect Adjusted EBITDA to be between $69 million and $72 million.

Fiscal Year 2017 Guidance:

  • We 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 third quarter ending September 30, 2017, and the fiscal year ending December 31, 2017, assumes the following exchange rates for the nine months to September 30, 2017 and the fiscal year ending December 31, 2017 for the main currencies impacting our business: a U.S. dollar-euro rate of 0.91, a U.S. dollar-Japanese Yen of 113, a U.S. dollar-British pound rate of 0.79 and a U.S. dollar-Brazilian real rate of 3.22.

The above guidance assumes no acquisitions are completed during the third quarter ending September 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, 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 September 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, August 2, 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), the leader in commerce marketing, is building the highest performing and open commerce marketing ecosystem to drive profits and sales for retailers and brands. 2,700 Criteo team members partner with 16,000 customers and thousands of publishers across the globe to deliver performance at scale by connecting shoppers to the things they need and love. Designed for commerce, Criteo Commerce Marketing Ecosystem sees over $550 billion in annual commerce sales data.

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


June 30, 2017

Assets





Current assets:





Cash and cash equivalents


$

270,317



$

308,185


Trade receivables, net of allowances


397,244



370,052


Income taxes


2,741



6,872


Other taxes


52,942



46,514


Other current assets


19,340



28,270


Total current assets


742,584



759,893


Property, plant and equipment, net


108,581



131,346


Intangible assets, net


102,944



104,045


Goodwill


209,418



235,337


Non-current financial assets


17,029



18,824


Deferred tax assets


30,630



48,700


    Total non-current assets


468,602



538,252


Total assets


$

1,211,186



$

1,298,145







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

365,788



$

351,408


Contingencies


654



1,392


Income taxes


14,454



11,898


Financial liabilities - current portion


7,969



5,851


Other taxes


44,831



45,606


Employee - related payables


55,874



64,467


Other current liabilities


30,221



37,906


Total current liabilities


519,791



518,528


Deferred tax liabilities


686



28,088


Retirement benefit obligation


3,221



3,405


Financial liabilities - non current portion


77,611



2,621


Other non-current liabilities




2,824


    Total non-current liabilities


81,518



36,938


Total liabilities


601,309



555,466


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 per value, 63,978,204 and 65,291,977 shares authorized, issued and outstanding at December 31, 2016 and June 30, 2017, respectively.


2,093



2,128


Additional paid-in capital


488,277



540,998


Accumulated other comprehensive income (loss)


(88,593)



(42,615)


Retained earnings


198,355



228,141


Equity - attributable to shareholders of Criteo S.A.


600,132



728,652


Non-controlling interests


9,745



14,027


Total equity


609,877



742,679


Total equity and liabilities


$

1,211,186



$

1,298,145


 

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,





2016


2017


YoY
Change


2016


2017


YoY
Change














Revenue


$

407,201



$

542,022



33

%


$

808,454



$

1,058,688



31

%














Cost of revenue













Traffic acquisition cost


(240,969)



(322,200)



34

%


(479,724)



(628,893)



31

%

Other cost of revenue


(20,279)



(32,808)



62

%


(38,618)



(59,963)



55

%














Gross profit


145,953



187,014



28

%


290,112



369,832



27

%














Operating expenses:













Research and development expenses


(30,235)



(43,611)



44

%


(57,396)



(83,132)



45

%

Sales and operations expenses


(69,225)



(97,900)



41

%


(133,698)



(188,631)



41

%

General and administrative expenses


(28,610)



(32,239)



13

%


(53,347)



(63,754)



20

%

Total Operating expenses


(128,070)



(173,750)



36

%


(244,441)



(335,517)



37

%

Income from operations


17,883



13,264



(26)

%


45,671



34,315



(25)

%

Financial income (expense)


(94)



(2,094)



2,128

%


(1,412)



(4,427)



214

%

Income before taxes


17,789



11,170



(37)

%


44,259



29,888



(32)

%

Provision for income taxes


(4,450)



(3,665)



(18)

%


(12,394)



(7,866)



(37)

%

Net Income


$

13,339



$

7,505



(44)

%


$

31,865



$

22,022



(31)

%














Net income available to shareholders of Criteo S.A


$

12,200



$

5,970





$

29,330



$

18,411




Net income available to non-controlling interests


$

1,139



$

1,535





$

2,535



$

3,611

















Weighted average shares outstanding used in computing per share amounts:













Basic


63,246,785



65,027,985





62,928,221



64,611,237




Diluted


65,625,097



68,131,274





65,232,938



67,709,789

















Net income allocated  to shareholders per share:













Basic


$

0.19



$

0.09





$

0.47



$

0.28




Diluted


$

0.19



$

0.09





$

0.45



$

0.27




 

CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands)
(unaudited)




Three Months Ended


Six Months Ended



June 30,


June 30,



2016


2017


2016


2017










Net income


$

13,339



$

7,505



$

31,865



$

22,022


Non-cash and non-operating items


30,121



42,974



59,626



84,448


           - Amortization and provisions


16,345



24,376



29,525



46,692


           - Equity awards compensation expense (1)


7,695



14,918



16,065



29,858


           - Interest accrued and non-cash financial income and expense


1,586



15



1,598



32


           - Change in deferred taxes


(3,285)



(5,536)



(4,424)



(12,405)


           - Income tax for the period


7,780



9,201



16,862



20,271


Changes in working capital related to operating activities


(10,297)



25,860



(27,436)



25,790


           - (Increase)/decrease in trade receivables


(7,126)



(23,358)



(2,368)



36,211


           - Increase/(decrease) in trade payables


(1,244)



48,776



(15,149)



(26,254)


           - (Increase)/decrease in other current assets


(5,969)



(3,493)



(15,777)



2,580


           - Increase/(decrease) in other current liabilities


4,042



3,935



5,858



13,253


Income taxes paid


(13,889)



(15,848)



(25,874)



(27,531)


CASH FROM OPERATING ACTIVITIES


19,274



60,491



38,181



104,729


Acquisition of intangible assets, property, plant and equipment


(25,564)



(30,008)



(39,178)



(53,275)


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


3,178



2,953



4,685



(1,986)


Payments for acquired business, net of cash acquired


(5,074)



1,089



(5,074)



1,052


Change in other non-current financial assets


(207)



1,668



574



1,274


CASH USED FOR INVESTING ACTIVITIES


(27,667)



(24,298)



(38,993)



(52,935)


Issuance of long-term borrowings


2,295



1,454



3,059



1,454


Repayment of borrowings


(3,944)



(77,168)



(5,448)



(79,221)


Proceeds from capital increase


10,106



11,517



15,582



24,454


Change in other financial liabilities


(171)



145



(171)



264


CASH FROM (USED FOR) FINANCING ACTIVITIES


8,286



(64,052)



13,022



(53,049)











CHANGE IN NET CASH AND CASH EQUIVALENTS


(107)



(27,859)



12,210



(1,255)


Net cash and cash equivalents at beginning of period


386,110



303,813



353,537



270,317


Effect of exchange rates changes on cash and cash equivalents


(8,596)



32,231



11,660



39,123


Net cash and cash equivalents at end of period


$

377,407



$

308,185



$

377,407



$

308,185



(1) Of which $7.2 million and $14.7 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, 2016 and 2017, respectively, and $15.5 million and $29.3 million for the six month period ended June 30, 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


Six Months Ended



June 30,


June 30,



2016


2017


2016


2017










CASH FROM OPERATING ACTIVITIES


$

19,274



$

60,491



$

38,181



$

104,729


Acquisition of intangible assets, property, plant and equipment


(25,564)



(30,008)



(39,178)



(53,275)


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


3,178



2,953



4,685



(1,986)


FREE CASH FLOW (1)


$

(3,112)



$

33,436



$

3,688



$

49,468



(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


2016


2017


YoY
Change


YoY
Change at
Constant
Currency


2016


2017


YoY
Change


YoY
Change at
Constant
Currency

Revenue


















Americas


$

156,522



$

229,392



47

%


46

%


$

303,695



$

437,405



44

%


42

%


EMEA


153,899



191,682



25

%


30

%


313,305



380,774



22

%


27

%


Asia-Pacific


96,780



120,948



25

%


27

%


191,454



240,509



26

%


26

%


Total


407,201



542,022



33

%


35

%


808,454



1,058,688



31

%


33

%



















Traffic acquisition costs


















Americas


(96,560)



(145,289)



50

%


50

%


(187,488)



(274,156)



46

%


45

%


EMEA


(86,820)



(106,605)



23

%


28

%


(178,006)



(214,189)



20

%


26

%


Asia-Pacific


(57,589)



(70,306)



22

%


25

%


(114,230)



(140,548)



23

%


23

%


Total


(240,969)



(322,200)



34

%


36

%


(479,724)



(628,893)



31

%


33

%



















Revenue ex-TAC (1)


















Americas


59,962



84,103



40

%


39

%


116,207



163,249



40

%


39

%


EMEA


67,079



85,077



27

%


32

%


135,299



166,585



23

%


28

%


Asia-Pacific


39,191



50,642



29

%


32

%


77,224



99,961



29

%


30

%


Total


$

166,232



$

219,822



32

%


34

%


$

328,730



$

429,795



31

%


32

%


(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


Six Months Ended



June 30,


June 30,



2016


2017


2016


2017

Net income


$

13,339



$

7,505



$

31,865



$

22,022


Adjustments:









Financial (income) expense


94



2,094



1,412



4,427


Provision for income taxes


4,450



3,665



12,394



7,866


Equity awards compensation expense


7,695



14,918



16,065



29,858


Research and development


2,179



4,461



4,581



8,377


Sales and operations


2,488



6,401



5,878



13,111


General and administrative


3,028



4,056



5,606



8,370


Pension service costs


131



299



260



589


Research and development


53



151



105



297


Sales and operations


35



60



69



119


General and administrative


43



88



86



173


Depreciation and amortization expense


13,300



22,306



25,817



42,473


Cost of revenue


9,220



13,003



17,439



24,094


Research and development


1,457



3,092



3,465



6,036


Sales and operations


2,019



4,925



3,791



9,886


General and administrative


604



1,286



1,122



2,457


Acquisition-related costs


148





148



6


General and administrative


148





148



6


Acquisition-related deferred price consideration


44





85




Research and development


44





85




Restructuring




3,299





3,299


Cost of revenue




2,497





2,497


Sales and operations




690





690


General and administrative




112





112


Total net adjustments


25,862



46,581



56,181



88,518


Adjusted EBITDA(1)


$

39,201



$

54,086



$

88,046



$

110,540



(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,


June 30,



2016


2017


2016


2017










Research and Development expenses


$

(30,235)



$

(43,611)



$

(57,396)



$

(83,132)


Equity awards compensation expense


2,179



4,461



4,581



8,377


Depreciation and Amortization expense


1,457



3,092



3,465



6,036


Pension service costs


53



151



105



297


Acquisition-related deferred price consideration


44





85




Non GAAP - Research and Development expenses


(26,502)



(35,907)



(49,160)



(68,422)


Sales and Operations expenses


(69,225)



(97,900)



(133,698)



(188,631)


Equity awards compensation expense


2,488



6,401



5,878



13,111


Depreciation and Amortization expense


2,019



4,925



3,791



9,886


Pension service costs


35



60



69



119


Restructuring




690





690


Non GAAP - Sales and Operations expenses


(64,683)



(85,824)



(123,960)



(164,825)


General and Administrative expenses


(28,610)



(32,239)



(53,347)



(63,754)


Equity awards compensation expense


3,028



4,056



5,606



8,370


Depreciation and Amortization expense


604



1,286



1,122



2,457


Pension service costs


43



88



86



173


Acquisition-related costs


148





148



6


Restructuring




112





112


Non GAAP - General and Operations expenses


(24,787)



(26,697)



(46,385)



(52,636)


Total Operating expenses


(128,070)



(173,750)



(244,441)



(335,517)


Equity awards compensation expense


7,695



14,918



16,065



29,858


Depreciation and Amortization expense


4,080



9,303



8,378



18,379


Pension service costs


131



299



260



589


Acquisition-related costs


148





148



6


Acquisition-related deferred price consideration


44





85




Restructuring




802





802


Total Non GAAP Operating expenses (1)


$

(115,972)



$

(148,428)



$

(219,505)



$

(285,883)



(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,


June 30,



2016


2017


2016


2017

Equity awards compensation expense









Research and development


$

2,179



$

4,461



$

4,581



$

8,377


Sales and operations


2,488



6,401



5,878



13,111


General and administrative


3,028



4,056



5,606



8,370


Total equity awards compensation expense


7,695



14,918



16,065



29,858











Pension service costs









Research and development


53



151



105



297


Sales and operations


35



60



69



119


General and administrative


43



88



86



173


Total pension service costs


131



299



260



589











Depreciation and amortization expense









Cost of revenue


9,220



13,003



17,439



24,094


Research and development


1,457



3,092



3,465



6,036


Sales and operations


2,019



4,925



3,791



9,886


General and administrative


604



1,286



1,122



2,457


Total depreciation and amortization expense


13,300



22,306



25,817



42,473











Acquisition-related costs









General and administrative


148





148



6


Total acquisition-related costs


148





148



6











Acquisition-related deferred price consideration









Research and development


44





85




Total acquisition-related deferred price consideration


44





85













Restructuring









Cost of revenue




2,497





2,497


Sales and operations




690





690


General and administrative




112





112


Total restructuring


$



$

3,299



$



$

3,299


 

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,


June 30,



2016


2017


2016


2017










Net income


$

13,339



$

7,505



$

31,865



$

22,022


Adjustments:









Equity awards compensation expense


7,695



14,918



16,065



29,858


Amortization of acquisition-related intangible assets


825



4,777



2,202



9,451


Acquisition-related costs


148





148



6


Acquisition-related deferred price consideration


44





85




Restructuring costs




3,299





3,299


Tax impact of the above adjustments


(159)



(4,255)



(387)



(7,571)


Total net adjustments


8,553



18,739



18,113



35,043


Adjusted net income(1)


$

21,892



$

26,244



$

49,978



$

57,065











Weighted average shares outstanding









 - Basic


63,246,785



65,027,985



62,928,221



64,611,237


 - Diluted


65,625,097



68,131,274



65,232,938



67,709,789











Adjusted net income per share









 - Basic


$

0.35



$

0.40



$

0.79



$

0.88


 - Diluted


$

0.33



$

0.39



$

0.77



$

0.84



(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,





2016


2017


YoY Change


2016


2017


YoY Change














Revenue as reported


$

407,201



$

542,022



33

%


$

808,454



$

1,058,688



31

%

Conversion impact U.S. dollar/other currencies




8,882







12,614




Revenue at constant currency(1)


407,201



550,904



35

%


808,454



1,071,302



33

%














Traffic acquisition costs as reported


(240,969)



(322,200)



34

%


(479,724)



(628,893)



31

%

Conversion impact U.S. dollar/other currencies




(5,142)







(7,373)




Traffic Acquisition Costs at constant currency(1)


(240,969)



(327,342)



36

%


(479,724)



(636,266)



33

%














Revenue ex-TAC as reported(2)


166,232



219,822



32

%


328,730



429,795



31

%

Conversion impact U.S. dollar/other currencies




3,740







5,241




Revenue ex-TAC at constant currency(2)


166,232



223,562



34

%


328,730



435,036



32

%

Revenue ex-TAC(2)/Revenue as reported


41

%


41

%




41

%


41

%
















Other cost of revenue as reported


(20,279)



(32,808)



62

%


(38,618)



(59,963)



55

%

Conversion impact U.S. dollar/other currencies




(610)







(827)




Other cost of revenue at constant currency(1)


(20,279)



(33,418)



65

%


(38,618)



(60,790)



57

%














Adjusted EBITDA(3)


39,201



54,086



38

%


88,046



110,540



26

%

Conversion impact U.S. dollar/other currencies




1,435







2,603




Adjusted EBITDA(3) at constant currency(1)


$

39,201



$

55,521



42

%


$

88,046



$

113,143



29

%


(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,



2016


2017

Shares outstanding as at January 1,


62,470,881



63,978,204


Weighted average number of shares issued during the period


457,340



633,033


Basic number of shares - Basic EPS basis


62,928,221



64,611,237


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


2,304,717



3,098,552


Diluted number of shares - Diluted EPS basis


65,232,938



67,709,789







Shares outstanding as of June 30,


63,562,863



65,291,977


Total dilutive effect of share options, warrants, employee warrants


8,198,113



8,487,128


Fully diluted shares as of June 30,


71,760,976



73,779,105


 

CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated)
(unaudited)





Q3
2015

Q4
2015

Q1
2016

Q2
2016

Q3
2016

Q4
 2016

Q1
 2017

Q2
 2017

YoY
Change

QoQ
Change














Clients

9,290

10,198

10,962

11,874

12,882

14,468

15,423

16,370

38%

6%














Revenue

332,674

397,018

401,253

407,201

423,867

566,825

516,667

542,022

33%

5%


Americas

124,024

170,133

147,174

156,522

160,739

266,438

208,013

229,392

47%

10%


EMEA

137,185

144,905

159,405

153,899

157,921

189,298

189,092

191,682

25%

1%


APAC

71,465

81,980

94,674

96,780

105,207

111,089

119,562

120,948

25%

1%














TAC

(198,970)

(237,056)

(238,755)

(240,969)

(247,310)

(341,877)

(306,693)

(322,200)

34%

5%


Americas

(75,684)

(104,646)

(90,929)

(96,560)

(97,239)

(167,046)

(128,867)

(145,289)

50%

13%


EMEA

(79,710)

(82,905)

(91,185)

(86,820)

(87,092)

(108,567)

(107,583)

(106,605)

23%

(1)%


APAC

(43,576)

(49,505)

(56,641)

(57,589)

(62,979)

(66,264)

(70,243)

(70,306)

22%

—%














Revenue ex-TAC

133,704

159,962

162,498

166,232

176,557

224,948

209,974

219,822

32%

5%


Americas

48,340

65,487

56,245

59,962

63,500

99,391

79,146

84,103

40%

6%


EMEA

57,475

62,000

68,220

67,079

70,829

80,731

81,509

85,077

27%

4%


APAC

27,889

32,475

38,033

39,191

42,228

44,826

49,319

50,642

29%

3%














Cash flow from operating activities

17,500

66,706

18,907

19,274

43,631

71,658

44,238

60,491

214%

37%














Capital expenditures

24,066

19,205

12,109

22,386

19,907

22,981

28,206

27,055

21%

(4)%














Net cash position

314,644

353,537

386,110

377,407

407,158

270,318

303,813

308,185

(18)%

1%














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



56

57

56

53

56

57






(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, Friederike Edelmann, IR Director, f.edelmann@criteo.com, Criteo Public Relations, Emma Ferns, Senior director, Global Communications, e.ferns@criteo.com