Quarterly Results

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Second Quarter 2016
Criteo Reports Strong Results For The Second Quarter 2016

NEW YORK, Aug. 3, 2016 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the performance marketing technology company, today announced financial results for the second quarter ended June 30, 2016.

  • Revenue increased 36% (or 35% at constant currency1) to $407 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, grew 36% (or 35% at constant currency) to $166 million, or 40.8% of revenue.
  • Net Income increased 240% to $13 million.
  • Adjusted EBITDA grew 66% (or 61% at constant currency) to $39 million, representing 9.6% of revenue and 23.6% of Revenue ex-TAC.
  • Adjusted Net Income per diluted share grew 106% to $0.33.

"Our performance marketing platform best positions us to offer advertisers the relevant, accountable and seamless marketing across all environments they are demanding," said Eric Eichmann, CEO.

"We deliver fast growth and expanding profitability," said Benoit Fouilland, CFO. "Our ability to deliver operating leverage while investing in innovation demonstrates the scalability of our model."

Operating Highlights

  • We added over 900 net clients in the second quarter, a new record in the history of Criteo, approaching 12,000 clients.
  • Over 50% of our business was generated on mobile ads in the second quarter.
  • We went live on Instagram in June, adding a new source of social inventory for advertisers. Many advertisers are now live on Instagram.
  • Users matched through our Universal Match solution generated 47% of Revenue ex-TAC in the second quarter, reflecting the growing adoption of our solution and the high value of matched users.
  • Existing clients in Q2 2015 generated 14% more Revenue ex-TAC at constant currency in Q2 2016, in line with expectations and demonstrating our ability to expand revenues within our client base.

Revenue ex-TAC

Revenue ex-TAC grew 36%, or 35% at constant currency, to $166 million (Q2 2015: $122 million). This increase was primarily driven by new technology innovation across all devices and platforms, the addition of a new record quarterly number of clients across regions and the continued expansion of our publisher relationships.

  • In the Americas region, Revenue ex-TAC grew 36%, or 38% at constant currency, to $60 million (Q2 2015: $44 million) and represented 36% of total Revenue ex-TAC.
  • In the EMEA region, Revenue ex-TAC grew 25%, or 25% at constant currency, to $67 million (Q2 2015: $54 million) and represented 40% of total Revenue ex-TAC.
  • In the Asia-Pacific region, Revenue ex-TAC grew 61%, or 50% at constant currency, to $39 million (Q2 2015: $24 million) and represented 24% of total Revenue ex-TAC.

Revenue ex-TAC margin as a percentage of revenue was 40.8% (Q2 2015: 40.8%), in line with prior quarters.

Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2015 average exchange rates for the relevant period to 2016 figures.

 

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 66%, or 61% at constant currency, to $39 million (Q2 2015: $24 million). This increase in Adjusted EBITDA is primarily the result of the strong Revenue ex-TAC performance in the quarter.

Adjusted EBITDA margin as a percentage of revenue improved 170 basis points to 9.6% (Q2 2015: 7.9%) and 420 basis points as a percentage of Revenue ex-TAC to 23.6% (Q2 2015: 19.4%). This margin improvement, while we continue to invest in R&D and innovation, demonstrates the scalability and operating leverage of our model.

Operating expenses increased 28% to $128 million (Q2 2015: $100 million). Operating expenses, excluding the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, increased 27% to $116 million (Q2 2015: $91 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (46%), Sales and Operations (21%) and General and Administrative (28%), as we continued to scale the entire organization.

Non-GAAP Operating Expenses as a percentage of revenue decreased by 190 basis points to 28.5% (Q2 2015: 30.4%) and by 480 basis points as a percentage of Revenue ex-TAC to 69.8% (Q2 2015: 74.5%).

Net Income and Adjusted Net Income

Net income increased 240% to $13 million (Q2 2015: $4 million). Net income available to shareholders of Criteo S.A. was  $12 million, or $0.19 per share on a diluted basis (Q2 2015: $4 million, or $0.05 per share on a diluted basis).

Adjusted Net income, defined 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 these adjustments, increased 106% to $22 million, or $0.33 per share on a diluted basis (Q2 2015: $11 million, or $0.16 per share on a diluted basis).

Cash Flow and Cash Position

Cash flow from operating activities increased 61% to $19 million (Q2 2015: $12 million).

Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and net of proceeds from disposal, was $(3) million (Q2 2015: $(6) million), improving by 51% year-over-year.

Total cash and cash equivalents were $377 million as of June 30, 2016 (December 31, 2015: $354 million).

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of August 3, 2016.

Third Quarter 2016 Guidance:

  • We expect Revenue ex-TAC to be between $170 million and $174 million.
  • We expect Adjusted EBITDA to be between $42 million and $46 million.

Fiscal Year 2016 Guidance:

  • We expect Revenue ex-TAC growth to be between 30% and 34% at constant currency.
  • We expect our Adjusted EBITDA margin as a percentage of revenue to increase between 60 basis points and 100 basis points.

The above guidance for the third quarter 2016 assumes the following exchange rates for the main currencies having an impact on our business: a U.S. dollar-euro rate of 0.90, a U.S. dollar-Japanese Yen of 110, a U.S. dollar-British pound rate of 0.72 and a U.S. dollar-Brazilian real rate of 3.60.

The above guidance assumes no acquisitions are completed during the third quarter ending September 30, 2016 and the fiscal year ending December 31, 2016.

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 accounting principles generally accepted in the United States of America ("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 core geographies. Revenue ex-TAC and Revenue ex-TAC by Region 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 core business and across our core geographies. Accordingly, we believe that Revenue ex-TAC and Revenue ex-TAC by Region 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 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‑ 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 can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides 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 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 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 can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides 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 net of proceeds from disposal. 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.

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 and Free Cash Flow to cash flow from operating activities, 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 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.

With respect to our expectations under "Business Outlook" above, 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.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including projected financial results for the quarter ending September 30, 2016 and the fiscal year ending December 31, 2016, 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: recent growth rates not being indicative of future growth, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, the investments in new business opportunities and the timing of these investments, the impact of competition, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, uncertainty regarding international growth and expansion, 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 February 29, 2016, 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 3, 2016, 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 2,000 employees in 31 offices across the Americas, EMEA andAsia-Pacific, serving 12,000 advertisers worldwide and with direct relationships with 17,000 publishers.

For more information, please visit www.criteo.com.

Financial information to follow

 

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands)

(unaudited)

 
     

December 31,

   

June 30,

 
     

2015

   

2016

 

Assets

         

Current assets:

         

    Cash and cash equivalents

   

$

353,537

   

$

377,407

 

    Trade receivables, net of allowances

   

261,581

   

266,436

 

    Income taxes

   

2,714

   

5,277

 

    Other taxes

   

29,552

   

39,527

 

    Other current assets

   

16,030

   

23,164

 

    Total current assets

   

663,414

   

711,811

 

Property, plant and equipment, net

   

82,482

   

97,236

 

Intangible assets, net

   

16,470

   

17,170

 

Goodwill

   

41,973

   

46,859

 

Non-current financial assets

   

17,184

   

17,010

 

Deferred tax assets

   

20,196

   

25,330

 

    Total non-current assets

   

178,305

   

203,605

 

Total assets

   

$

841,719

   

$

915,416

 

Liabilities and shareholders' equity

         

Current liabilities:

         

    Trade payables

   

$

246,382

   

$

240,757

 

    Contingencies

   

668

   

283

 

    Income taxes

   

15,365

   

9,455

 

    Financial liabilities - current portion

   

7,156

   

6,011

 

     Other taxes

   

30,463

   

33,880

 

    Employee - related payables

   

42,275

   

46,372

 

    Other current liabilities

   

15,531

   

21,531

 

    Total current liabilities

   

357,840

   

358,289

 

Deferred tax liabilities

   

139

   

518

 

Retirement benefit obligation

   

1,445

   

1,996

 

Financial liabilities - non current portion

   

3,272

   

2,907

 

    Total non-current liabilities

   

4,856

   

5,421

 

Total liabilities

   

362,696

   

363,710

 

Commitments and contingencies

         

Shareholders' equity:

         

Common shares, €0.025 per value, 62,470,881 and 63,562,863 shares authorized, issued and outstanding at December 31, 2015 and June 30, 2016, respectively.

   

2,052

   

2,082

 

Additional paid-in capital

   

425,220

   

456,242

 

Accumulated other comprehensive (loss)

   

(69,023)

   

(60,329)

 

Retained earnings

   

116,076

   

145,407

 

Equity - attributable to shareholders of Criteo S.A.

   

474,325

   

543,402

 

Non-controlling interests

   

4,698

   

8,304

 

Total equity

   

479,023

   

551,706

 

Total equity and liabilities

   

$

841,719

   

$

915,416

 
 

 

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,

   
   

2015

   

2016

   

YoY
Change

 

2015

   

2016

   

YoY
Change

                         

Revenue

 

$

299,306

   

$

407,201

   

36

%

 

$

593,478

   

$

808,454

   

36

%

                         

Cost of revenue

                       

Traffic acquisition cost

 

(177,239)

   

(240,969)

   

36

%

 

(353,127)

   

(479,724)

   

36

%

Other cost of revenue

 

(14,243)

   

(20,279)

   

42

%

 

(27,212)

   

(38,618)

   

42

%

                         

Gross profit

 

107,824

   

145,953

   

35

%

 

213,139

   

290,112

   

36

%

                         

Operating expenses:

                       

Research and development expenses

 

(19,853)

   

(30,235)

   

52

%

 

(37,699)

   

(57,396)

   

52

%

Sales and operations expenses

 

(59,727)

   

(69,225)

   

16

%

 

(112,810)

   

(133,698)

   

19

%

General and administrative expenses

 

(20,404)

   

(28,610)

   

40

%

 

(37,950)

   

(53,347)

   

41

%

Total Operating expenses

 

(99,984)

   

(128,070)

   

28

%

 

(188,459)

   

(244,441)

   

30

%

Income from operations

 

7,840

   

17,883

   

128

%

 

24,680

   

45,671

   

85

%

Financial income (expense)

 

(2,546)

   

(94)

   

(96)

%

 

1,374

   

(1,412)

   

(203)

%

Income before taxes

 

5,294

   

17,789

   

236

%

 

26,054

   

44,259

   

70

%

Provision for income taxes

 

(1,365)

   

(4,450)

   

226

%

 

(8,508)

   

(12,394)

   

46

%

Net Income

 

$

3,929

   

$

13,339

   

240

%

 

$

17,546

   

$

31,865

   

82

%

                         

Net income available to shareholders of Criteo S.A

 

$

3,540

   

$

12,200

       

$

16,522

   

$

29,330

     

Net income available to non-controlling interests

 

$

389

   

$

1,139

       

$

1,024

   

$

2,535

     
                         

Weighted average shares outstanding used in computing per share amounts:

                       

Basic

 

61,719,367

   

63,246,785

       

61,448,678

   

62,928,221

     

Diluted

 

65,279,611

   

65,625,097

       

65,012,687

   

65,232,938

     
                         

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

                       

Basic

 

$

0.06

   

$

0.19

       

$

0.27

   

$

0.47

     

Diluted

 

$

0.05

   

$

0.19

       

$

0.25

   

$

0.45

     
 

 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands)

(unaudited)

 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2015

   

2016

   

2015

   

2016

 

Net income

 

$

3,929

   

$

13,339

   

$

17,546

   

$

31,865

 

Adjustments to reconcile to cash from operating activities

 

17,646

   

30,121

   

39,530

   

59,626

 

                 - Amortization and provisions

 

10,938

   

16,345

   

19,201

   

29,525

 

                 - Equity awards compensation expense (1)

 

5,325

   

7,695

   

11,642

   

16,065

 

                 - Net gain or loss on disposal of non-current assets

 

22

   

   

26

   

 

                 - Interest accrued

 

2

   

1,578

   

7

   

1,580

 

                 - Non-cash financial income and expenses

 

(6)

   

8

   

147

   

18

 

                 - Change in deferred taxes

 

(2,200)

   

(3,285)

   

(2,170)

   

(4,424)

 

                 - Income tax for the period

 

3,565

   

7,780

   

10,677

   

16,862

 

Changes in working capital requirement

 

(4,125)

   

(10,297)

   

4,779

   

(27,436)

 

                 - (Increase)/decrease in trade receivables

 

(3,218)

   

(7,126)

   

(12,639)

   

(2,368)

 

                 - Increase/(decrease) in trade payables

 

3,682

   

(1,244)

   

27,619

   

(15,149)

 

                 - (Increase)/decrease in other current assets

 

(5,243)

   

(5,969)

   

(15,883)

   

(15,777)

 

                 - Increase/(decrease) in other current liabilities

 

654

   

4,042

   

5,682

   

5,858

 

Income taxes paid

 

(5,512)

   

(13,889)

   

(8,909)

   

(25,874)

 

CASH FROM OPERATING ACTIVITIES

 

11,938

   

19,274

   

52,946

   

38,181

 

Acquisition of intangible assets, property, plant and equipment

 

(29,630)

   

(25,564)

   

(41,156)

   

(39,178)

 

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

 

11,282

   

3,178

   

9,948

   

4,685

 

FREE CASH FLOW

 

(6,410)

   

(3,112)

   

21,738

   

3,688

 

Payments for acquired business, net of cash acquired

 

(2,867)

   

(5,074)

   

(20,075)

   

(5,074)

 

Change in other non-current financial assets

 

(1,492)

   

(207)

   

(5,244)

   

574

 

CASH USED FOR INVESTING ACTIVITIES

 

(22,707)

   

(27,667)

   

(56,527)

   

(38,993)

 

Issuance of long-term borrowings

 

1,567

   

2,295

   

2,394

   

3,059

 

Repayment of borrowings

 

(1,369)

   

(3,944)

   

(4,647)

   

(5,448)

 

Proceeds from capital increase

 

3,664

   

10,106

   

6,434

   

15,582

 

Change in other financial liabilities

 

   

(171)

   

(1,000)

   

(171)

 

CASH FROM FINANCING ACTIVITIES

 

3,862

   

8,286

   

3,181

   

13,022

 
                 

CHANGE IN NET CASH AND CASH EQUIVALENTS

 

(6,907)

   

(107)

   

(400)

   

12,210

 

Net cash and cash equivalents at beginning of period

 

316,376

   

386,110

   

351,827

   

353,537

 

Effect of exchange rates changes on cash and cash equivalents

 

11,640

   

(8,596)

   

(30,318)

   

11,660

 

Net cash and cash equivalents at end of period

 

$

321,109

   

$

377,407

   

$

321,109

   

$

377,407

 
 
 

(1) out of which $7.2 million and $15.5 million was share-based compensation expense according to ASC 718 - Compensation - stock compensation for the quarter ended and year to date June 30, 2016, respectively.

 

 

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

 

2015

   

2016

   

YoY
Change

 

YoY
Change at
Constant
Currency

 

2015

   

2016

   

YoY
Change

 

YoY
Change at
Constant
Currency

Revenue

                               
 

Americas

 

$

110,872

   

$

156,522

   

41

%

 

43

%

 

$

211,496

   

$

303,695

   

44

%

 

47

%

 

EMEA

 

126,807

   

153,899

   

21

%

 

22

%

 

259,015

   

313,305

   

21

%

 

23

%

 

Asia-Pacific

 

61,627

   

96,780

   

57

%

 

46

%

 

122,967

   

191,454

   

56

%

 

49

%

 

Total

 

299,306

   

407,201

   

36

%

 

35

%

 

593,478

   

808,454

   

36

%

 

37

%

                                   

Traffic acquisition costs

                               
 

Americas

 

(66,853)

   

(96,560)

   

44

%

 

46

%

 

(128,097)

   

(187,488)

   

46

%

 

49

%

 

EMEA

 

(73,155)

   

(86,820)

   

19

%

 

19

%

 

(151,313)

   

(178,006)

   

18

%

 

20

%

 

Asia-Pacific

 

(37,231)

   

(57,589)

   

55

%

 

43

%

 

(73,717)

   

(114,230)

   

55

%

 

48

%

 

Total

 

(177,239)

   

(240,969)

   

36

%

 

34

%

 

(353,127)

   

(479,724)

   

36

%

 

36

%

                                   

Revenue ex-TAC

                               
 

Americas

 

44,019

   

59,962

   

36

%

 

38

%

 

83,399

   

116,207

   

39

%

 

43

%

 

EMEA

 

53,652

   

67,079

   

25

%

 

25

%

 

107,702

   

135,299

   

26

%

 

28

%

 

Asia-Pacific

 

24,396

   

39,191

   

61

%

 

50

%

 

49,250

   

77,224

   

57

%

 

51

%

 

Total

 

$

122,067

   

$

166,232

   

36

%

 

35

%

 

$

240,351

   

$

328,730

   

37

%

 

38

%

 
 

(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 core business. Accordingly, we believe that Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region 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 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,

 

2015

   

2016

   

2015

   

2016

 

Net income

$

3,929

   

$

13,339

   

$

17,546

   

$

31,865

 

Adjustments:

             

Financial (income) expense

2,546

   

94

   

(1,374)

   

1,412

 

Provision for income taxes

1,365

   

4,450

   

8,508

   

12,394

 

Equity awards compensation expense

5,325

   

7,695

   

11,642

   

16,065

 

Research and development

$

1,162

   

$

2,179

   

$

2,640

   

$

4,581

 

Sales and operations

2,903

   

2,488

   

6,357

   

5,878

 

General and administrative

1,260

   

3,028

   

2,645

   

5,606

 

Pension service costs

110

   

131

   

221

   

260

 

Research and development

40

   

53

   

81

   

105

 

Sales and operations

39

   

35

   

78

   

69

 

General and administrative

31

   

43

   

62

   

86

 

Depreciation and amortization expense

10,278

   

13,300

   

18,707

   

25,817

 

Cost of revenue

6,813

   

9,220

   

12,784

   

17,439

 

Research and development

1,977

   

1,457

   

3,122

   

3,465

 

Sales and operations

1,112

   

2,019

   

2,104

   

3,791

 

General and administrative

376

   

604

   

697

   

1,122

 

Acquisition-related costs

   

148

   

   

148

 

General and administrative

   

148

   

   

148

 

Acquisition-related deferred price consideration

115

   

44

   

224

   

85

 

Research and development

115

   

44

   

224

   

85

 

Total net adjustments

19,739

   

25,862

   

37,928

   

56,181

 

Adjusted EBITDA (1)

$

23,668

   

$

39,201

   

$

55,474

   

$

88,046

 
 
 

(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 core 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.

 Detailed Information on Selected Items

(U.S. dollars in thousands)

(unaudited)

 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2015

   

2016

   

2015

   

2016

 

Equity awards compensation expense

               

Research and development

 

$

1,162

   

$

2,179

   

$

2,640

   

$

4,581

 

Sales and operations

 

2,903

   

2,488

   

6,357

   

5,878

 

General and administrative

 

1,260

   

3,028

   

2,645

   

5,606

 

Total equity awards compensation expense

 

5,325

   

7,695

   

11,642

   

16,065

 
                 

Pension service costs

               

Research and development

 

40

   

53

   

81

   

105

 

Sales and operations

 

39

   

35

   

78

   

69

 

General and administrative

 

31

   

43

   

62

   

86

 

Total pension service costs

 

110

   

131

   

221

   

260

 
                 

Depreciation and amortization expense

               

Cost of revenue

 

6,813

   

9,220

   

12,784

   

17,439

 

Research and development

 

1,977

   

1,457

   

3,122

   

3,465

 

Sales and operations

 

1,112

   

2,019

   

2,104

   

3,791

 

General and administrative

 

376

   

604

   

697

   

1,122

 

Total depreciation and amortization expense

 

10,278

   

13,300

   

18,707

   

25,817

 
                 

Acquisition-related costs

               

General and administrative

 

   

148

   

   

148

 

Total acquisition-related costs

 

   

148

   

   

148

 
                 

Acquisition-related deferred price consideration

               

Research and development

 

115

   

44

   

224

   

85

 

Total acquisition-related deferred price consideration

 

$

115

   

$

44

   

$

224

   

$

85

 
 

 

 

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,

   

2015

   

2016

   

2015

   

2016

 
                 

Net income

 

$

3,929

   

$

13,339

   

$

17,546

   

$

31,865

 

Adjustments:

               

Equity awards compensation expense

 

5,325

   

7,695

   

11,642

   

16,065

 

Amortization of acquisition-related intangible assets

 

1,674

   

825

   

2,594

   

2,202

 

Acquisition-related costs

 

   

148

   

   

148

 

Acquisition-related deferred price consideration

 

115

   

44

   

224

   

85

 

Tax impact of the above adjustments

 

(426)

   

(159)

   

(556)

   

(387)

 

Total net adjustments

 

6,688

   

8,553

   

13,904

   

18,113

 

Adjusted net income (1)

 

$

10,617

   

$

21,892

   

$

31,450

   

$

49,978

 
                 

Weighted average shares outstanding

               

 - Basic

 

61,719,367

   

63,246,785

   

61,448,678

   

62,928,221

 

 - Diluted

 

65,279,611

   

65,625,097

   

65,012,687

   

65,232,938

 
                 

Adjusted net income per share

               

 - Basic

 

$

0.17

   

$

0.35

   

$

0.51

   

$

0.79

 

 - Diluted

 

$

0.16

   

$

0.33

   

$

0.48

   

$

0.77

 
 
 

(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 core 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,

   
   

2015

   

2016

   

YoY
Change

 

2015

   

2016

   

YoY
Change

Revenue as reported

 

$

299,306

   

$

407,201

   

36

%

 

$

593,478

   

$

808,454

   

36

%

Conversion impact U.S. dollar/other currencies

     

(4,550)

           

3,800

     

Revenue at constant currency (1)

 

$

299,306

   

$

402,651

   

35

%

 

$

593,478

   

$

812,254

   

37

%

                         

Traffic acquisition costs as reported

 

(177,239)

   

(240,969)

   

36

%

 

(353,127)

   

(479,724)

   

36

%

Conversion impact U.S. dollar/other currencies

     

2,852

           

(1,787)

     

Traffic Acquisition Costs at constant currency (1)

 

$

(177,239)

   

$

(238,117)

   

34

%

 

$

(353,127)

   

$

(481,511)

   

36

%

                         

Revenue ex-TAC (2) as reported

 

122,067

   

166,232

   

36

%

 

240,351

   

328,730

   

37

%

Conversion impact U.S. dollar/other currencies

     

(1,699)

           

2,013

     

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

 

$

122,067

   

$

164,533

   

35

%

 

$

240,351

   

$

330,743

   

38

%

Revenue ex-TAC (2)/Revenue as reported

 

41

%

 

41

%

     

40

%

 

41

%

   
                         

Other cost of revenue as reported

 

(14,243)

   

(20,279)

   

42

%

 

(27,212)

   

(38,618)

   

42

%

Conversion impact U.S. dollar/other currencies

     

265

           

15

     

Other cost of revenue at constant currency (1)

 

$

(14,243)

   

$

(20,014)

   

41

%

 

$

(27,212)

   

$

(38,603)

   

42

%

                         

Adjusted EBITDA (3)

 

23,668

   

39,201

   

66

%

 

55,474

   

88,046

   

59

%

Conversion impact U.S. dollar/other currencies

     

(1,010)

           

(113)

     

Adjusted EBITDA (3) at constant currency (1)

 

$

23,668

   

$

38,191

   

61

%

 

$

55,474

   

$

87,933

   

59

%

 
 

(1) Information in this Form 8-K with respect to results presented on a constant currency basis was calculated by translating current period results at prior period average exchange rates. 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,

   

2015

   

2016

 

Shares outstanding as at January 1,

 

60,902,695

   

62,470,881

 

Weighted average number of shares issued during the period

 

545,983

   

457,340

 

Basic number of shares - Basic EPS basis

 

61,448,678

   

62,928,221

 

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

 

3,564,009

   

2,304,717

 

Diluted number of shares - Diluted EPS basis

 

65,012,687

   

65,232,938

 
         

Shares outstanding as at June 30,

 

61,913,692

   

63,562,863

 

Total dilutive effect of share options, warrants, employee warrants

 

7,119,504

   

8,198,113

 

Fully diluted shares as at June 30,

 

69,033,196

   

71,760,976

 
 

 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

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

(unaudited)

 
 

Q3
2014

Q4
2014

Q1
2015

Q2
2015

Q3
2015

Q4
2015

Q1
2016

Q2
2016

YoY
Change

QoQ
Change

 
                       

Clients

6,581

7,190

7,832

8,564

9,290

10,198

10,962

11,874

39%

8%

 
                       

Revenue

258,245

294,489

294,172

299,306

332,674

397,018

401,253

407,201

36%

1%

 

Americas

78,008

109,543

100,624

110,872

124,024

170,133

147,174

156,522

41%

6%

 

EMEA

124,455

131,275

132,208

126,807

137,185

144,905

159,405

153,899

21%

(3)%

 

APAC

55,782

53,671

61,340

61,627

71,465

81,980

94,674

96,780

57%

2%

 
                       

TAC

(155,237)

(172,538)

(175,888)

(177,239)

(198,970)

(237,056)

(238,755)

(240,969)

36%

1%

 

Americas

(47,250)

(66,774)

(61,244)

(66,853)

(75,684)

(104,646)

(90,929)

(96,560)

44%

6%

 

EMEA

(73,218)

(73,264)

(78,158)

(73,155)

(79,710)

(82,905)

(91,185)

(86,820)

19%

(5)%

 

APAC

(34,769)

(32,500)

(36,486)

(37,231)

(43,576)

(49,505)

(56,641)

(57,589)

55%

2%

 
                       

Revenue ex-TAC

103,008

121,951

118,284

122,067

133,704

159,962

162,498

166,232

36%

2%

 

Americas

30,758

42,769

39,380

44,019

48,340

65,487

56,245

59,962

36%

7%

 

EMEA

51,237

58,011

54,050

53,652

57,475

62,000

68,220

67,079

25%

(2)%

 

APAC

21,013

21,171

24,854

24,396

27,889

32,475

38,033

39,191

61%

3%

 
                       

Cash flow from operating activities

34,151

51,170

41,007

11,938

17,500

66,706

18,907

19,274

61%

2%

 
                       

Capital expenditures

14,832

12,562

12,862

18,348

24,066

19,205

12,109

22,386

22%

85%

 
                       

Net cash position

323,029

351,827

316,376

321,109

314,644

353,537

386,110

377,407

18%

(2)%

 
                       

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

           

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.

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