Quarterly Results

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

NEW YORK, Nov. 2, 2016 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the performance marketing technology company, today announced financial results for the third quarter ended September 30, 2016.

  • Revenue increased 27% (or 25% at constant currency1) to $424 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, grew 32% (or 30% at constant currency) to $177 million, or 41.7% of revenue.
  • Net Income increased 154% to $15 million.
  • Adjusted EBITDA2 grew 55% (or 51% at constant currency) to $54 million, representing 12.6% of revenue and 30.3% of Revenue ex-TAC.
  • Adjusted Net Income per diluted share2 grew 173% to $0.48.

 

 

"We continue to deliver terrific results for advertisers," said Eric Eichmann, CEO. "And with the addition of HookLogic and Criteo Predictive Search, we will cover an ever increasing part of their performance marketing and become a more strategic partner." 

 

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

 

Operating Highlights

  • We added over 1,000 net clients in Q3, a new record in Criteo's history, approaching 13,000 clients.
  • Revenue ex-TAC from existing clients, live in Q3 2015 and still live in Q3 2016, grew 15% at constant currency.
  • Close to 57% of our revenue was generated on mobile ads.
  • Users matched through our Universal Match technology generated 52% of Revenue ex-TAC, reflecting the growing adoption of our solution and the high value of matched users for advertisers.
  • Close to 7,000 advertisers are now live on dynamic ads on Facebook and Instagram.
  • On October 25, 2016, we launched Criteo Predictive Search, a groundbreaking product that brings our proven performance-based approach to the large and fast-growing Google Shopping market.

 

Acquisition of HookLogic

On October 3, 2016, Criteo signed a definitive agreement to acquire HookLogic, Inc., a New York-based company connecting many of the world's largest ecommerce retailers with consumer brand manufacturers. The acquisition of HookLogic will expand Criteo's business to brand manufacturers and will strengthen our performance marketing platform. The transaction is expected to close in the coming weeks.

 

Revenue and Revenue ex-TAC

Revenue grew 27%, or 25% at constant currency, to $424 million (Q3 2015: $333 million). Revenue ex-TAC grew 32%, or 30% at constant currency, to $177 million (Q3 2015: $134 million). This increase was primarily driven by technology innovation across all devices and platforms, the addition of a record quarterly number of clients across regions and the continued expansion of our publisher relationships.

  • In the Americas, Revenue ex-TAC grew 31%, or 31% at constant currency, to $64 million (Q3 2015: $48 million) and represented 36% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 23%, or 27% at constant currency, to $71 million (Q3 2015: $57 million) and represented 40% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 51%, or 34% at constant currency, to $42 million (Q3 2015: $28 million) and represented 24% of total Revenue ex-TAC.

Revenue ex-TAC margin as a percentage of revenue was 41.7% (Q3 2015: 40.2%), slightly above prior quarters and in line with our expectations.

 

Net Income and Adjusted Net Income

Net income increased 154% to $15 million (Q3 2015: $6 million). Net income available to shareholders of Criteo S.A. was  $14 million, or $0.21 per share on a diluted basis (Q3 2015: $5 million, or $0.08 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 175% to $31 million, or $0.48 per share on a diluted basis (Q3 2015: $11 million, or $0.17 per share on a diluted basis). Adjusted Net income is not a measure calculated in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

 

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 55%, or 51% at constant currency, to $54 million (Q3 2015: $34 million). This increase in Adjusted EBITDA is primarily the result of the strong Revenue ex-TAC performance in the quarter, as well as continued operating leverage, in particular in Sales and Operations.

Adjusted EBITDA margin as a percentage of revenue improved 230 basis points to 12.6% (Q3 2015: 10.4%) and 450 basis points as a percentage of Revenue ex-TAC to 30.3% (Q3 2015: 25.8%). While we continue to invest in R&D and innovation, this margin improvement demonstrates the scalability and operating leverage of our model.

Operating expenses increased 33% to $131 million (Q3 2015: $99 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 23% to $111 million (Q3 2015: $91 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (32%), Sales and Operations (25%) and General and Administrative (26%), as we continued to grow the organization.

Non-GAAP Operating Expenses as a percentage of revenue decreased by 100 basis points to 26.2% (Q3 2015: 27.2%) and by 480 basis points as a percentage of Revenue ex-TAC to 62.9% (Q3 2015: 67.7%).

 

Cash Flow and Cash Position

Cash flow from operating activities increased 149% to $44 million (Q3 2015: $18 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 $24 million (Q3 2015: $(7) million), increasing by $30 million year-over-year.

Total cash and cash equivalents were $407 million as of September 30, 2016 (December 31, 2015: $354 million).

 

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of November 2, 2016. We expect the HookLogic transaction to close in the coming weeks. The contribution of HookLogic is therefore not included in the following guidance for the fourth quarter and fiscal 2016.

Fourth Quarter 2016 Guidance:

  • We expect Revenue ex-TAC to be between $207 million and $210 million excluding HookLogic.
  • We expect Adjusted EBITDA to be between $72 million and $75 million excluding HookLogic.

Fiscal Year 2016 Guidance:

  • We expect Revenue ex-TAC growth to be between 33% and 34% at constant currency excluding HookLogic.
  • We expect our Adjusted EBITDA margin as a percentage of revenue to increase between 120 basis points and 140 basis points excluding HookLogic.

The above guidance for the fourth quarter 2016 assumes the following exchange rates for the main currencies having an impact on our business: a U.S. dollar-euro rate of 0.92, a U.S. dollar-Japanese yen of 105, a U.S. dollar-British pound rate of 0.78 and a U.S. dollar-Brazilian real rate of 3.2.

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

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 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.

 

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including projected financial results for the quarter ending December 31, 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: if the HookLogic acquisition is not timely completed or not completed at all, 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, whether the projected benefits of acquisitions materialize as expected, 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 our ability to manage the integration of our acquisitions, 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, November 2, 2016, at 8:00 AM ET, 1:00 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:
  • International callers: 

+1 855 209 8212

+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 2,200 employees in 30 offices across the Americas, EMEA and Asia-Pacific, serving 13,000 advertisers worldwide and with direct relationships with 17,500 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 2015 average exchange rates for the relevant period to 2016 figures.

 

2 Revenue ex-TAC, Adjusted EBITDA and Adjusted Net Income per diluted share 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,

   

September 30,

 
     

2015

   

2016

 

Assets

         

Current assets:

         

    Cash and cash equivalents

   

$

353,537

   

$

407,158

 

    Trade receivables, net of allowances

   

261,581

   

268,097

 

    Income taxes

   

2,714

   

4,422

 

    Other taxes

   

29,552

   

45,323

 

    Other current assets

   

16,030

   

20,288

 

    Total current assets

   

663,414

   

745,288

 

Property, plant and equipment, net

   

82,482

   

98,353

 

Intangible assets, net

   

16,470

   

18,595

 

Goodwill

   

41,973

   

45,690

 

Non-current financial assets

   

17,184

   

17,453

 

Deferred tax assets

   

20,196

   

28,586

 

    Total non-current assets

   

178,305

   

208,677

 

Total assets

   

$

841,719

   

$

953,965

 

Liabilities and shareholders' equity

         

Current liabilities:

         

    Trade payables

   

$

246,382

   

$

253,938

 

    Contingencies

   

668

   

286

 

    Income taxes

   

15,365

   

7,133

 

    Financial liabilities - current portion

   

7,156

   

6,403

 

    Other taxes

   

30,463

   

35,844

 

    Employee - related payables

   

42,275

   

42,317

 

    Other current liabilities

   

15,531

   

18,383

 

    Total current liabilities

   

357,840

   

364,304

 

Deferred tax liabilities

   

139

   

752

 

Retirement benefit obligation

   

1,445

   

2,262

 

Financial liabilities - non current portion

   

3,272

   

2,933

 

    Total non-current liabilities

   

4,856

   

5,947

 

Total liabilities

   

362,696

   

370,251

 

Commitments and contingencies

         

Shareholders' equity:

         

Common shares, €0.025 per value, 62,470,881 and 63,760,491 shares authorized, issued and outstanding at December 31, 2015 and September 30, 2016, respectively.

   

2,052

   

2,087

 

Additional paid-in capital

   

425,220

   

470,871

 

Accumulated other comprehensive (loss)

   

(69,023)

   

(57,902)

 

Retained earnings

   

116,076

   

158,945

 

Equity - attributable to shareholders of Criteo S.A.

   

474,325

   

574,001

 

Non-controlling interests

   

4,698

   

9,713

 

Total equity

   

479,023

   

583,714

 

Total equity and liabilities

   

$

841,719

   

$

953,965

 
 

 

CRITEO S.A.

Consolidated Statement of Income

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

(unaudited)

 
   

Three Months Ended

     

Nine Months Ended

   
   

September 30,

     

September 30,

   
   

2015

   

2016

   

YoY
Change

 

2015

   

2016

   

YoY
Change

                         

Revenue

 

$

332,674

   

$

423,867

   

27

%

 

$

926,152

   

$

1,232,321

   

33

%

                         

Cost of revenue

                       

Traffic acquisition cost

 

(198,970)

   

(247,310)

   

24

%

 

(552,097)

   

(727,034)

   

32

%

Other cost of revenue

 

(17,206)

   

(22,332)

   

30

%

 

(44,418)

   

(60,950)

   

37

%

                         

Gross profit

 

116,498

   

154,225

   

32

%

 

329,637

   

444,337

   

35

%

                         

Operating expenses:

                       

Research and development expenses

 

(22,442)

   

(30,701)

   

37

%

 

(60,141)

   

(88,097)

   

46

%

Sales and operations expenses

 

(56,310)

   

(68,164)

   

21

%

 

(169,120)

   

(201,862)

   

19

%

General and administrative expenses

 

(19,915)

   

(32,492)

   

63

%

 

(57,865)

   

(85,839)

   

48

%

Total Operating expenses

 

(98,667)

   

(131,357)

   

33

%

 

(287,126)

   

(375,798)

   

31

%

Income from operations

 

17,831

   

22,868

   

28

%

 

42,511

   

68,539

   

61

%

Financial income (expense)

 

(6,650)

   

(570)

   

(91)

%

 

(5,276)

   

(1,982)

   

(62)

%

Income before taxes

 

11,181

   

22,298

   

99

%

 

37,235

   

66,557

   

79

%

Provision for income taxes

 

(5,388)

   

(7,574)

   

41

%

 

(13,896)

   

(19,968)

   

44

%

Net Income

 

$

5,793

   

$

14,724

   

154

%

 

$

23,339

   

$

46,589

   

100

%

                         

Net income available to shareholders of Criteo S.A.

 

$

5,096

   

$

13,539

       

$

21,618

   

$

42,869

     

Net income available to non-controlling interests

 

$

697

   

$

1,185

       

$

1,721

   

$

3,720

     
                         

Weighted average shares outstanding used in computing per share amounts:

                       

Basic

 

62,082,110

   

63,628,351

       

61,662,308

   

63,163,922

     

Diluted

 

65,254,238

   

65,816,422

       

65,095,690

   

65,429,757

     
                         

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

                       

Basic

 

$

0.08

   

$

0.21

       

$

0.35

   

$

0.68

     

Diluted

 

$

0.08

   

$

0.21

       

$

0.33

   

$

0.66

     
 

 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands)

(unaudited)

 
   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

September 30,

   

2015

   

2016

   

2015

   

2016

 

Net income

 

$

5,793

   

$

14,724

   

$

23,339

   

$

46,589

 

Adjustments to reconcile to cash from operating activities

 

23,155

   

36,609

   

62,685

   

96,235

 

                 - Amortization and provisions

 

13,236

   

16,030

   

32,436

   

45,555

 

                 - Equity awards compensation expense (1)

 

4,600

   

13,965

   

16,242

   

30,030

 

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

 

59

   

1

   

85

   

1

 

                 - Interest accrued

 

2

   

(972)

   

9

   

608

 

                 - Non-cash financial income and expenses

 

(130)

   

11

   

17

   

29

 

                 - Change in deferred taxes

 

(979)

   

(3,121)

   

(3,149)

   

(7,545)

 

                 - Income tax for the period

 

6,367

   

10,695

   

17,045

   

27,557

 

Changes in working capital requirement

 

(7,120)

   

4,576

   

(2,341)

   

(22,860)

 

                 - (Increase)/decrease in trade receivables

 

(14,795)

   

(2,160)

   

(27,434)

   

(4,528)

 

                 - Increase/(decrease) in trade payables

 

11,899

   

11,218

   

39,518

   

(3,931)

 

                 - (Increase)/decrease in other current assets

 

(8,781)

   

(2,856)

   

(24,664)

   

(18,633)

 

                 - Increase/(decrease) in other current liabilities

 

4,557

   

(1,626)

   

10,239

   

4,232

 

Income taxes paid

 

(4,328)

   

(12,278)

   

(13,237)

   

(38,152)

 

CASH FROM OPERATING ACTIVITIES

 

17,500

   

43,631

   

70,446

   

81,812

 

Acquisition of intangible assets, property, plant and equipment

 

(21,514)

   

(15,792)

   

(62,671)

   

(54,970)

 

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

 

(2,551)

   

(4,115)

   

7,396

   

570

 

FREE CASH FLOW

 

(6,565)

   

23,724

   

15,171

   

27,412

 

Payments for acquired business, net of cash acquired

 

(476)

   

   

(20,551)

   

(5,074)

 

Change in other non-current financial assets

 

(1,049)

   

(377)

   

(6,292)

   

197

 

CASH USED FOR INVESTING ACTIVITIES

 

(25,590)

   

(20,284)

   

(82,118)

   

(59,277)

 

Issuance of long-term borrowings

 

790

   

739

   

3,183

   

3,798

 

Repayment of borrowings

 

(1,484)

   

32

   

(6,130)

   

(5,416)

 

Proceeds from capital increase

 

3,575

   

1,600

   

10,009

   

17,182

 

Change in other financial liabilities

 

   

(25)

   

(1,000)

   

(196)

 

CASH FROM FINANCING ACTIVITIES

 

2,881

   

2,346

   

6,062

   

15,368

 
                 

CHANGE IN NET CASH AND CASH EQUIVALENTS

 

(5,209)

   

25,693

   

(5,610)

   

37,903

 

Net cash and cash equivalents at beginning of period

 

321,109

   

377,407

   

351,827

   

353,537

 

Effect of exchange rates changes on cash and cash equivalents

 

(1,256)

   

4,058

   

(31,573)

   

15,718

 

Net cash and cash equivalents at end of period

 

$

314,644

   

$

407,158

   

$

314,644

   

$

407,158

 
 
   

(1) out of which $13.1 million and $28.6 million was share-based compensation expense according to ASC 718 - Compensation - stock compensation for the quarter ended and year to date September 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

         

Nine Months Ended

       
     

September 30,

         

September 30,

       
 

Region

 

2015

   

2016

   

YoY 
Change

 

YoY 
Change at 
Constant 
Currency

 

2015

   

2016

   

YoY Change

 

YoY 
Change at 
Constant
Currency

Revenue

                               
 

Americas

 

$

124,024

   

$

160,739

   

30

%

 

29

%

 

$

335,520

   

$

464,435

   

38

%

 

40

%

 

EMEA

 

137,185

   

157,921

   

15

%

 

19

%

 

396,200

   

471,226

   

19

%

 

22

%

 

Asia-Pacific

 

71,465

   

105,207

   

47

%

 

30

%

 

194,432

   

296,660

   

53

%

 

42

%

 

Total

 

332,674

   

423,867

   

27

%

 

25

%

 

926,152

   

1,232,321

   

33

%

 

33

%

                                   

Traffic acquisition costs

                           
 

Americas

 

(75,684)

   

(97,239)

   

28

%

 

28

%

 

(203,781)

   

(284,728)

   

40

%

 

41

%

 

EMEA

 

(79,710)

   

(87,092)

   

9

%

 

13

%

 

(231,023)

   

(265,097)

   

15

%

 

17

%

 

Asia-Pacific

 

(43,576)

   

(62,979)

   

45

%

 

27

%

 

(117,293)

   

(177,209)

   

51

%

 

40

%

 

Total

 

(198,970)

   

(247,310)

   

24

%

 

22

%

 

(552,097)

   

(727,034)

   

32

%

 

31

%

                                   

Revenue ex-TAC

                               
 

Americas

 

48,340

   

63,500

   

31

%

 

31

%

 

131,739

   

179,707

   

36

%

 

38

%

 

EMEA

 

57,475

   

70,829

   

23

%

 

27

%

 

165,177

   

206,129

   

25

%

 

27

%

 

Asia-Pacific

 

27,889

   

42,228

   

51

%

 

34

%

 

77,139

   

119,451

   

55

%

 

45

%

 

Total

 

$

133,704

   

$

176,557

   

32

%

 

30

%

 

$

374,055

   

$

505,287

   

35

%

 

35

%

 
   

(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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2015

   

2016

   

2015

   

2016

 

Net income

$

5,793

   

$

14,724

   

$

23,339

   

$

46,589

 

Adjustments:

             

Financial (income) expense

6,650

   

570

   

5,276

   

1,982

 

Provision for income taxes

5,388

   

7,574

   

13,896

   

19,968

 

Equity awards compensation expense

4,600

   

13,965

   

16,242

   

30,030

 

Research and development

$

1,714

   

$

4,667

   

$

4,354

   

$

9,248

 

Sales and operations

1,715

   

5,143

   

8,072

   

11,021

 

General and administrative

1,171

   

4,155

   

3,816

   

9,761

 

Pension service costs

110

   

132

   

332

   

392

 

Research and development

41

   

55

   

123

   

160

 

Sales and operations

37

   

38

   

115

   

107

 

General and administrative

32

   

39

   

94

   

125

 

Depreciation and amortization expense

11,892

   

14,771

   

30,598

   

40,588

 

Cost of revenue

8,503

   

10,406

   

21,287

   

27,846

 

Research and development

1,690

   

1,640

   

4,811

   

5,105

 

Sales and operations

1,330

   

1,813

   

3,434

   

5,604

 

General and administrative

369

   

912

   

1,066

   

2,033

 

Acquisition-related costs

   

1,793

   

   

1,941

 

General and administrative

   

1,793

   

   

1,941

 

Acquisition-related deferred price consideration

54

   

3

   

278

   

88

 

Research and development

54

   

3

   

278

   

88

 

Total net adjustments

28,694

   

38,808

   

66,622

   

94,989

 

Adjusted EBITDA (1)

$

34,487

   

$

53,532

   

$

89,961

   

$

141,578

 
 
 

(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

 

Nine Months Ended

   

September 30,

 

September 30,

   

2015

   

2016

   

2015

   

2016

 

Equity awards compensation expense

               

Research and development

 

$

1,714

   

$

4,667

   

$

4,354

   

$

9,248

 

Sales and operations

 

1,715

   

5,143

   

8,072

   

11,021

 

General and administrative

 

1,171

   

4,155

   

3,816

   

9,761

 

                Total equity awards compensation expense

 

4,600

   

13,965

   

16,242

   

30,030

 
                 

Pension service costs

               

Research and development

 

41

   

55

   

123

   

160

 

Sales and operations

 

37

   

38

   

115

   

107

 

General and administrative

 

32

   

39

   

94

   

125

 

                                     Total pension service costs

 

110

   

132

   

332

   

392

 
                 

Depreciation and amortization expense

               

Cost of revenue

 

8,503

   

10,406

   

21,287

   

27,846

 

Research and development

 

1,690

   

1,640

   

4,811

   

5,105

 

Sales and operations

 

1,330

   

1,813

   

3,434

   

5,604

 

General and administrative

 

369

   

912

   

1,066

   

2,033

 

                Total depreciation and amortization expense

 

11,892

   

14,771

   

30,598

   

40,588

 
                 

Acquisition-related costs

               

General and administrative

 

   

1,793

   

   

1,941

 

                Total acquisition-related costs

 

   

1,793

   

   

1,941

 
                 

Acquisition-related deferred price consideration

               

Research and development

 

54

   

3

   

278

   

88

 

                Total acquisition-related deferred price consideration

 

$

54

   

$

3

   

$

278

   

$

88

 
 

 

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

 

Nine Months Ended

   

September 30,

 

September 30,

   

2015

   

2016

   

2015

   

2016

 
                 

Net income

 

$

5,793

   

$

14,724

   

$

23,339

   

$

46,589

 

Adjustments:

               

Equity awards compensation expense

 

4,600

   

13,965

   

16,242

   

30,030

 

Amortization of acquisition-related intangible assets

 

1,200

   

943

   

3,794

   

3,145

 

Acquisition-related costs

 

   

1,793

   

   

1,941

 

Acquisition-related deferred price consideration

 

54

   

3

   

278

   

88

 

Tax impact of the above adjustments

 

(274)

   

(129)

   

(830)

   

(516)

 

Total net adjustments

 

5,580

   

16,575

   

19,484

   

34,688

 

Adjusted net income (1)

 

$

11,373

   

$

31,299

   

$

42,823

   

$

81,277

 
                 

Weighted average shares outstanding

               

 - Basic

 

62,082,110

   

63,628,351

   

61,662,308

   

63,163,922

 

 - Diluted

 

65,254,238

   

65,816,422

   

65,095,690

   

65,429,757

 
                 

Adjusted net income per share

               

 - Basic

 

$

0.18

   

$

0.49

   

$

0.69

   

$

1.29

 

 - Diluted

 

$

0.17

   

$

0.48

   

$

0.66

   

$

1.24

 
 
   

(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

     

Nine Months Ended

   
   

September 30,

     

September 30,

   
   

2015

   

2016

   

YoY 
Change

 

2015

   

2016

   

YoY 
Change

Revenue as reported

 

$

332,674

   

$

423,867

   

27

%

 

$

926,152

   

$

1,232,321

   

33

%

Conversion impact U.S. dollar/other currencies

     

(7,986)

           

(4,186)

     

Revenue at constant currency (1)

 

$

332,674

   

$

415,881

   

25

%

 

$

926,152

   

$

1,228,135

   

33

%

                         

Traffic acquisition costs as reported

 

(198,970)

   

(247,310)

   

24

%

 

(552,097)

   

(727,034)

   

32

%

Conversion impact U.S. dollar/other currencies

     

4,997

           

3,210

     

Traffic Acquisition Costs at constant currency (1)

 

$

(198,970)

   

$

(242,313)

   

22

%

 

$

(552,097)

   

$

(723,824)

   

31

%

                         

Revenue ex-TAC (2) as reported

 

133,704

   

176,557

   

32

%

 

374,055

   

505,287

   

35

%

Conversion impact U.S. dollar/other currencies

     

(2,989)

           

(976)

     

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

 

$

133,704

   

$

173,568

   

30

%

 

$

374,055

   

$

504,311

   

35

%

Revenue ex-TAC (2)/Revenue as reported

 

40

%

 

42

%

     

40

%

 

41

%

   
                         

Other cost of revenue as reported

 

(17,206)

   

(22,332)

   

30

%

 

(44,418)

   

(60,950)

   

37

%

Conversion impact U.S. dollar/other currencies

     

251

           

266

     

Other cost of revenue at constant currency (1)

 

$

(17,206)

   

$

(22,081)

   

28

%

 

$

(44,418)

   

$

(60,684)

   

37

%

                         

Adjusted EBITDA (3)

 

34,487

   

53,532

   

55

%

 

89,961

   

141,578

   

57

%

Conversion impact U.S. dollar/other currencies

     

(1,296)

           

(1,409)

     

Adjusted EBITDA (3) at constant currency (1)

 

$

34,487

   

$

52,236

   

51

%

 

$

89,961

   

$

140,169

   

56

%

 
   

(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)

 
   

Nine Months Ended

   

September 30,

   

2015

   

2016

 

Shares outstanding as at January 1,

 

60,902,695

   

62,470,881

 

Weighted average number of shares issued during the period

 

759,613

   

693,041

 

Basic number of shares - Basic EPS basis

 

61,662,308

   

63,163,922

 

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

 

3,433,382

   

2,265,835

 

Diluted number of shares - Diluted EPS basis

 

65,095,690

   

65,429,757

 
         

Shares outstanding as at September 30,

 

62,249,428

   

63,760,491

 

Total dilutive effect of share options, warrants, employee warrants

 

6,582,870

   

8,165,801

 

Fully diluted shares as at September 30,

 

68,832,298

   

71,926,292

 
 

 

CRITEO S.A.

 

Supplemental Financial Information and Operating Metrics

 

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

 

(unaudited)

 
   
 

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

 2016

Q2

 2016

Q3

 2016

YoY

Change

QoQ 
Change

 
                       

Clients

7,190

7,832

8,564

9,290

10,198

10,962

11,874

12,882

39%

8%

 
                       

Revenue

294,489

294,172

299,306

332,674

397,018

401,253

407,201

423,867

27%

4%

 

Americas

109,543

100,624

110,872

124,024

170,133

147,174

156,522

160,739

30%

3%

 

EMEA

131,275

132,208

126,807

137,185

144,905

159,405

153,899

157,921

15%

3%

 

APAC

53,671

61,340

61,627

71,465

81,980

94,674

96,780

105,207

47%

9%

 
                       

TAC

(172,538)

(175,888)

(177,239)

(198,970)

(237,056)

(238,755)

(240,969)

(247,310)

24%

3%

 

Americas

(66,774)

(61,244)

(66,853)

(75,684)

(104,646)

(90,929)

(96,560)

(97,239)

28%

1%

 

EMEA

(73,264)

(78,158)

(73,155)

(79,710)

(82,905)

(91,185)

(86,820)

(87,092)

9%

—%

 

APAC

(32,500)

(36,486)

(37,231)

(43,576)

(49,505)

(56,641)

(57,589)

(62,979)

45%

9%

 
                       

Revenue ex-TAC

121,951

118,284

122,067

133,704

159,962

162,498

166,232

176,557

32%

6%

 

Americas

42,769

39,380

44,019

48,340

65,487

56,245

59,962

63,500

31%

6%

 

EMEA

58,011

54,050

53,652

57,475

62,000

68,220

67,079

70,829

23%

6%

 

APAC

21,171

24,854

24,396

27,889

32,475

38,033

39,191

42,228

51%

8%

 
                       

Cash flow from operating activities

51,170

41,007

11,938

17,500

66,706

18,907

19,274

43,631

149%

126%

 
 

Capital expenditures

12,562

12,862

18,348

24,066

19,205

12,109

22,386

19,907

(17)%

(11)%

 
 

Net cash position

351,827

316,376

321,109

314,644

353,537

386,110

377,407

407,158

29%

8%

 
 

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

         

56

57

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.

 
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