Quarterly Results

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First Quarter 2018
Criteo Reports Record Results For The First Quarter 2018

NEW YORK, May 2, 2018 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the leading commerce marketing technology company, today announced financial results for the first quarter ended March 31, 2018.

  • Revenue increased 9% (or 3% at constant currency1) to $564 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, grew 14% (or 8% at constant currency) to $240 million, or 42.6% of revenue.
  • Adjusted EBITDA2 grew 38% (or 22% at constant currency) to $78 million, or 32.4% of Revenue ex-TAC.
  • Cash flow from operating activities increased 91% to $85 million.
  • Free Cash Flow2 increased 224% to $52 million.
  • Net income increased 45% to $21 million.
  • Adjusted net income per diluted share2 increased 30% to $0.60.

"I am pleased with our execution and results in the first quarter, which track quite well with our upcoming priorities for the year," said JB Rudelle, CEO.

"We delivered another quarter of healthy growth, increased profitability and cash flow," said Benoit Fouilland, CFO. "These results once again highlight the strengths and scalability of our business model."

Operating Highlights

  • We ended the quarter with more than 18,500 commerce and brand clients, a 20% increase year-over-year, while maintaining client retention at close to 90% for all products.
  • With about 1.4 billion individual users in our Identity Graph worldwide, we already operate one of the largest user graphs in the industry.
  • Criteo Direct Bidder, our header bidding technology, is now connected to 2,000 large publishers.
  • We drove stable growth in same-client Revenue ex-TACdespite some user coverage limitations.

Revenue and Revenue ex-TAC

Revenue grew 9%, or 3% at constant currency, to $564 million (Q1 2017: $517 million). Revenue ex-TAC grew 14%, or 8% at constant currency, to $240 million (Q1 2017: $210 million). This increase was primarily driven by continued innovation, a broader product portfolio, improved access to publisher inventory and new clients across regions. Revenue ex-TAC margin as a percentage of revenue was 42.6%, above the prior year.

  • In the Americas, Revenue ex-TAC grew 3%, or 3% at constant currency, to $81 million and represented 34% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 26%, or 11% at constant currency, to $103 million and represented 43% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 15%, or 10% at constant currency, to $57 million and represented 24% of total Revenue ex-TAC.

Net Income and Adjusted Net Income

Net income increased 45% to $21 million (Q1 2017: $15 million). Net income available to shareholders of Criteo S.A. was $20 million, or $0.29 per share on a diluted basis (Q1 2017: $12 million, or $0.18 per share on a diluted basis). Adjusted net income, or net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, increased 31% to $41 million, or $0.60 per share on a diluted basis (Q1 2017: $31 million, or $0.46 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 38%, or 22% at constant currency, to $78 million (Q1 2017: $56 million). This increase in Adjusted EBITDA was primarily driven by sustained Revenue ex-TAC performance across all regions, as well as proceeds from a disposal and temporary savings in expenses. Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 32.4% (Q1 2017: 26.9%), a 550-basis point improvement year-over-year.

Operating expenses increased 9% to $176 million (Q1 2017: $162 million). Operating expenses, excluding the impact of equity awards compensation expense, pension costs, restructuring costs, depreciation and amortization and acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, increased 7% to $148 million (Q1 2017: $137 million).

Cash Flow and Cash Position

Cash flow from operating activities increased 91% to $85 million (Q1 2017: $44 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 224% to $52 million (Q1 2017: $16 million).

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of May 2, 2018.

Second Quarter 2018 Guidance:

  • We expect Revenue ex-TAC to be between $226 million and $230 million.
  • We expect Adjusted EBITDA to be between $53 million and $57 million.

Fiscal Year 2018 Guidance:

  • We expect Revenue ex-TAC growth for fiscal year 2018 to be between 3% and 8% at constant currency.
  • We expect Adjusted EBITDA margin for fiscal 2018 to be between 28% and 30% of Revenue ex-TAC.

The above guidance for the quarter ending June 30, 2018 and the fiscal year ending December 31, 2018, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.813, a U.S. dollar-Japanese Yen rate of 108, a U.S. dollar-British pound rate of 0.72 and a U.S. dollar-Brazilian real rate of 3.32.

The above guidance assumes no acquisitions are completed during the quarter ending June 30, 2018, and the fiscal year ending December 31, 2018.

Reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding U.S. GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of equity awards compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our share price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future U.S. GAAP financial results.

Non-GAAP Financial Measures

This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (the "SEC"): Revenue ex-TAC, Revenue ex-TAC by Region, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow and Non-GAAP Operating Expenses. These measures are not calculated in accordance with U.S. GAAP.

Revenue ex-TAC is our revenue excluding Traffic Acquisition Costs ("TAC") generated over the applicable measurement period and Revenue ex-TAC by Region reflects our Revenue ex-TAC by our geographies. Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our business and across our geographies. Accordingly, we believe that Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin provide useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors. Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA and Adjusted EBITDA margin are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short‑ and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration, Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments. Adjusted Net Income and Adjusted Net Income per diluted share are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, Adjusted Net Income and Adjusted Net Income per diluted share can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted Net Income per diluted share provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment. Free Cash Flow is a key measure used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow permits a more complete and comprehensive analysis of our available cash flows.

Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures the Company uses to provide its quarterly and annual business outlook to the investment community.

Please refer to the supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Revenue ex-TAC by Region to revenue by region, Adjusted EBITDA to net income, Adjusted Net Income to net income, Free Cash Flow to cash flow from operating activities, and Non-GAAP Operating Expenses to operating expenses, in each case, the most comparable U.S. GAAP measure. Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider such non-GAAP measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: 1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and 2) other companies may report Revenue ex-TAC, Revenue ex-TAC by Region, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Non-GAAP Operating Expenses or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including projected financial results for the quarter ending June 30, 2018 and the fiscal year ending December 31, 2018, our expectations regarding our market opportunity and future growth prospects and other statements that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure related to our technology and our ability to respond to changes in technology, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, investments in new business opportunities and the timing of these investments, whether the projected benefits of acquisitions materialize as expected, uncertainty regarding international growth and expansion, the impact of competition, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters and the impact of efforts by other participants in our industry to comply therewith, failure to enhance our brand cost-effectively, recent growth rates not being indicative of future growth, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, and the financial impact of maximizing Revenue ex-TAC, as well as risks related to future opportunities and plans, including the uncertainty of expected future financial performance and results and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in the Company's SEC filings and reports, including the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2018, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 that will be filed with the SEC, as well as future filings and reports by the Company. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations or otherwise.

Conference Call Information

Criteo's earnings conference call will take place today, May 2, 2018, at 8:00 AM ET, 2:00 PM CET. The conference call will be webcast live on the Company's website http://ir.criteo.com and will be available for replay.

Conference call details:

U.S. callers:

+1 855 209 8212

International callers:

+1 412 317 0788 or +33 1 76 74 05 02

Please ask to be joined into the "Criteo S.A." call.

About Criteo

Criteo (NASDAQ: CRTO) 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 over 18,000 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 $600 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 2017 average exchange rates for the relevant period to 2018 figures.

2 Revenue ex-TAC, Adjusted EBITDA, Adjusted net Income per diluted share and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.

3 Same-client Revenue ex-TAC  is the Revenue ex-TAC generated by clients that were live with us in a given quarter and still live with us the same quarter in the following year.

Contacts

Criteo Investor Relations
Edouard Lassalle, VP, Head of IR, e.lassalle@criteo.com
Friederike Edelmann, IR Director, f.edelmann@criteo.com

Criteo Public Relations
Emma Ferns, Global PR director, e.ferns@criteo.com

Financial information to follow

CRITEO S.A.

Consolidated Statement of Financial Position

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




December 31, 2017


March 31, 2018

Assets





Current assets:





Cash and cash equivalents


$

414,111



$

483,874


Trade receivables, net of allowances


484,101



395,707


Income taxes


8,882



7,646


Other taxes


58,346



52,557


Other current assets


26,327



26,463


Total current assets


991,767



966,247


Property, plant and equipment, net


161,738



153,252


Intangible assets, net


96,223



92,384


Goodwill


236,826



237,757


Non-current financial assets


19,525



21,137


Deferred tax assets


25,221



28,583


    Total non-current assets


539,533



533,113


Total assets


$

1,531,300



$

1,499,360







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

417,032



$

359,296


Contingencies


1,798



836


Income taxes


9,997



10,403


Financial liabilities - current portion


1,499



1,747


Other taxes


58,783



52,342


Employee - related payables


66,219



65,646


Other current liabilities


65,677



29,851


Total current liabilities


621,005



520,121


Deferred tax liabilities


2,497



2,552


Retirement benefit obligation


5,149



5,748


Financial liabilities - non current portion


2,158



2,022


Other non-current liabilities


2,793



5,246


    Total non-current liabilities


12,597



15,568


Total liabilities


633,602



535,689


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 par value, 66,085,097 and 66,248,351 shares authorized, issued and outstanding at December 31, 2017 and March 31, 2018, respectively.


2,152



2,157


Additional paid-in capital


591,404



610,281


Accumulated other comprehensive income (loss)


(12,241)



12,710


Retained earnings


300,210



320,020


Equity - attributable to shareholders of Criteo S.A.


881,525



945,168


Non-controlling interests


16,173



18,503


Total equity


897,698



963,671


Total equity and liabilities


$

1,531,300



$

1,499,360


 

CRITEO S.A.

Consolidated Statement of Income

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

(unaudited)




Three Months Ended





March 31,





2017


2018


YoY
Change








Revenue


$

516,667



$

564,164



9

%








Cost of revenue







Traffic acquisition cost


(306,693)



(323,746)



6

%

Other cost of revenue


(27,155)



(30,059)



11

%








Gross profit


182,819



210,359



15

%








Operating expenses:







Research and development expenses


(39,521)



(45,318)



15

%

Sales and operations expenses


(90,730)



(95,649)



5

%

General and administrative expenses


(31,516)



(34,591)



10

%

Total Operating expenses


(161,767)



(175,558)



9

%

Income from operations


21,052



34,801



65

%

Financial income (expense)


(2,333)



(1,325)



(43)

%

Income before taxes


18,719



33,476



79

%

Provision for income taxes


(4,201)



(12,386)



195

%

Net Income


$

14,518



$

21,090



45

%








Net income available to shareholders of Criteo S.A


$

12,442



$

19,809



59

%

Net income available to non-controlling interests


$

2,076



$

1,281



(38)

%








Weighted average shares outstanding used in computing per share amounts:







Basic


64,189,194



66,160,375




Diluted


67,283,012



67,469,738











Net income allocated  to shareholders per share:







Basic


$

0.19



$

0.30



58

%

Diluted


$

0.18



$

0.29



61

%

 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands)

(unaudited)




Three Months Ended





March 31,





2017


2018


YoY
Change

Net income


$

14,518



$

21,090



45

%

Non-cash and non-operating items


41,473



53,966



30

%

           - Amortization and provisions


22,316



26,050



17

%

           - Equity awards compensation expense (1)


14,940



18,829



26

%

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






%

 - Interest accrued and non-cash financial income and expense


16



23



44

%

           - Change in deferred taxes


(6,870)



(3,146)



(54)

%

           - Income tax for the period


11,071



15,532



40

%

           - Other (2)




(3,322)



(100)

%

Changes in working capital related to operating activities


(70)



23,687



NM

           - Decrease in trade receivables


59,569



91,292



53

%

           - Decrease in trade payables


(75,030)



(62,945)



(16)

%

           - Decrease in other current assets


8,253



7,958



(4)

%

           - Increase/(decrease) in other current liabilities (2)


7,138



(12,618)



(277)

%

Income taxes paid


(11,683)



(14,216)



22

%

CASH FROM OPERATING ACTIVITIES


44,238



84,527



91

%

Acquisition of intangible assets, property, plant and equipment


(23,267)



(7,413)



(68)

%

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


(4,939)



(25,154)



409

%

Disposal of business, net of cash disposed




(10,811)



(100)

%

Change in other non-current financial assets


(431)



(112)



(74)

%

CASH USED FOR INVESTING ACTIVITIES


(28,637)



(43,490)



52

%

Issuance of long-term borrowings






%

Repayment of borrowings (3)


(2,053)



(238)



(88)

%

Proceeds from capital increase


12,937



166



(99)

%

Change in other financial liabilities (2)


119



16,845



NM

CASH FROM FINANCING ACTIVITIES


11,003



16,773



52

%








CHANGE IN NET CASH AND CASH EQUIVALENTS


26,604



57,810



117

%

Net cash and cash equivalents at beginning of period


270,317



414,111



53

%

Effect of exchange rates changes on cash and cash equivalents (2)


6,892



11,953



73

%

Net cash and cash equivalents at end of period


$

303,813



$

483,874



59

%


(1) Of which $14.6 million and $18.4 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended March 31, 2017 and 2018, respectively.


(2) During the three months ended March 31, 2018, the Company reported the cash impact of the settlement of hedging derivatives related to financing activities in cash from (used for) financing activities in the unaudited consolidated statements of cash flows.


(3) Interest paid for the years ended March 31, 2017 and 2018 amounted to $0.7 million and $0.4 million respectively.

 

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

(U.S. dollars in thousands)

(unaudited)




Three Months Ended





March 31,





2017


2018


YoY
Change








CASH FROM OPERATING ACTIVITIES


$

44,238



$

84,527



91

%

Acquisition of intangible assets, property, plant and equipment


(23,267)



(7,413)



(68)

%

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


(4,939)



(25,154)



409

%

FREE CASH FLOW (1)


$

16,032



$

51,960



224

%


(1) Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment.

 

CRITEO S.A.

Reconciliation of Revenue ex-TAC by Region to Revenue by Region

(U.S. dollars in thousands)

(unaudited)





Three Months Ended








March 31,






Region


2017


2018


YoY Change


YoY Change
at Constant
Currency

Revenue










Americas


$

208,013



$

212,695



2

%


2

%


EMEA


189,092



222,611



18

%


4

%


Asia-Pacific


119,562



128,858



8

%


3

%


Total


516,667



564,164



9

%


3

%











Traffic acquisition costs










Americas


(128,867)



(131,521)



2

%


2

%


EMEA


(107,583)



(119,893)



11

%


(1)

%


Asia-Pacific


(70,243)



(72,332)



3

%


(1)

%


Total


(306,693)



(323,746)



6

%


%











Revenue ex-TAC (1)










Americas


79,146



81,174



3

%


3

%


EMEA


81,509



102,718



26

%


11

%


Asia-Pacific


49,319



56,526



15

%


10

%


Total


$

209,974



$

240,418



14

%


8

%


(1) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period. Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region are not measures calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region because they are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue and review of these measures by region can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region or similarly titled measures but define the regions differently, which reduces their effectiveness as a comparative measure; and (c) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region alongside our other U.S. GAAP financial results, including revenue. The above table provides a reconciliation of Revenue ex-TAC to revenue and Revenue ex-TAC by Region to revenue by region.

 

CRITEO S.A.

Reconciliation of Adjusted EBITDA to Net Income

(U.S. dollars in thousands)

(unaudited)




Three Months Ended





March 31,





2017


2018


YoY Change

Net income


$

14,518



$

21,090



45

%

Adjustments:







Financial (income) expense


2,333



1,325



(43)

%

Provision for income taxes


4,201



12,386



195

%

Equity awards compensation expense


14,940



19,303



29

%

Research and development


3,916



4,555



16

%

Sales and operations


6,710



7,832



17

%

General and administrative


4,314



6,916



60

%

Pension service costs


290



434



50

%

Research and development


146



220



51

%

Sales and operations


59



79



34

%

General and administrative


85



135



59

%

Depreciation and amortization expense


20,167



23,646



17

%

Cost of revenue


11,091



15,249



37

%

Research and development


2,944



2,221



(25)

%

Sales and operations


4,961



4,454



(10)

%

General and administrative


1,171



1,722



47

%

Acquisition-related costs


6





(100)

%

General and administrative


6





(100)

%

Restructuring




(252)



%

Cost of revenue






%

Research and development




(348)



(100)

%

Sales and operations




107



100

%

General and administrative




(11)



(100)

%

Total net adjustments


41,936



56,842



36

%

Adjusted EBITDA(1)


$

56,454



$

77,932



38

%


(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





March 31,





2017


2018


YoY
Change








Research and Development expenses


$

(39,521)



$

(45,318)



15

%

Equity awards compensation expense


3,916



4,555



16

%

Depreciation and Amortization expense


2,944



2,221



(25)

%

Pension service costs


146



220



51

%

Acquisition-related deferred price consideration






%

Restructuring




(348)



(100)

%

Non GAAP - Research and Development expenses


(32,515)



(38,670)



19

%

Sales and Operations expenses


(90,730)



(95,649)



5

%

Equity awards compensation expense


6,710



7,832



17

%

Depreciation and Amortization expense


4,961



4,454



(10)

%

Pension service costs


59



79



34

%

Restructuring




107



100

%

Non GAAP - Sales and Operations expenses


(79,000)



(83,177)



5

%

General and Administrative expenses


(31,516)



(34,591)



10

%

Equity awards compensation expense


4,314



6,916



60

%

Depreciation and Amortization expense


1,171



1,722



47

%

Pension service costs


85



135



59

%

Acquisition related costs


6





(100)

%

Restructuring




(11)



(100)

%

Non GAAP - General and Administrative expenses


(25,940)



(25,829)



%

Total Operating expenses


(161,767)



(175,558)



9

%

Equity awards compensation expense


14,940



19,303



29

%

Depreciation and Amortization expense


9,076



8,397



(7)

%

Pension service costs


290



434



50

%

Acquisition-related costs


6





(100)

%

Restructuring




(252)



(100)

%

Total Non GAAP Operating expenses (1)


$

(137,455)



$

(147,676)



7

%


(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





March 31,





2017


2018


YoY Change

Equity awards compensation expense







Research and development


$

3,916



$

4,555



16

%

Sales and operations


6,710



7,832



17

%

General and administrative


4,314



6,916



60

%

Total equity awards compensation expense


14,940



19,303



29

%








Pension service costs







Research and development


146



220



51

%

Sales and operations


59



79



34

%

General and administrative


85



135



59

%

Total pension service costs


290



434



50

%








Depreciation and amortization expense







Cost of revenue


11,091



15,249



37

%

Research and development


2,944



2,221



(25)

%

Sales and operations


4,961



4,454



(10)

%

General and administrative


1,171



1,722



47

%

Total depreciation and amortization expense


20,167



23,646



17

%








Acquisition-related costs







General and administrative


6





(100)

%

Total acquisition-related costs


6





(100)

%








Restructuring







Cost of revenue






%

Research and development




(348)



(100)

%

Sales and operations




107



100

%

General and administrative




(11)



(100)

%

Total restructuring


$



$

(252)



(100)

%

 

CRITEO S.A.

Reconciliation of Adjusted Net Income to Net Income

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

(unaudited)




Three Months Ended





March 31,





2017


2018


YoY Change








Net income


$

14,518



$

21,090



45

%

Adjustments:







Equity awards compensation expense


14,940



19,303



29

%

Amortization of acquisition-related intangible assets


4,674



3,457



(26)

%

Acquisition-related costs


6





(100)

%

Restructuring costs




(252)



(100)

%

Tax impact of the above adjustments


(3,317)



(3,079)



(7)

%

Total net adjustments


16,303



19,429



19

%

Adjusted net income(1)


$

30,821



$

40,519



31

%








Weighted average shares outstanding







 - Basic


64,189,194



66,160,375




 - Diluted


67,283,012



67,469,738











Adjusted net income per share







 - Basic


$

0.48



$

0.61



27

%

 - Diluted


$

0.46



$

0.60



30

%


(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





March 31,





2017


2018


YoY Change








Revenue as reported


$

516,667



$

564,164



9

%

Conversion impact U.S. dollar/other currencies




(31,086)




Revenue at constant currency(1)


516,667



533,078



3

%








Traffic acquisition costs as reported


(306,693)



(323,746)



6

%

Conversion impact U.S. dollar/other currencies




16,869




Traffic Acquisition Costs at constant currency(1)


(306,693)



(306,877)



%








Revenue ex-TAC as reported(2)


209,974



240,418



14

%

Conversion impact U.S. dollar/other currencies




(14,217)




Revenue ex-TAC at constant currency(2)


209,974



226,201



8

%

Revenue ex-TAC(2)/Revenue as reported


41

%


43

%










Other cost of revenue as reported


(27,155)



(30,059)



11

%

Conversion impact U.S. dollar/other currencies




676




Other cost of revenue at constant currency(1)


(27,155)



(29,383)



8

%








Adjusted EBITDA(3)


56,454



77,932



38

%

Conversion impact U.S. dollar/other currencies




(9,313)




Adjusted EBITDA(3) at constant currency(1)


$

56,454



$

68,619



22

%

Adjusted EBITDA(3)/Revenue ex-TAC(2)


27

%


32

%




(1) Information herein with respect to results presented on a constant currency basis is computed by applying prior period average exchange rates to current period results. We have included results on a constant currency basis because it is a key measure used by our management and Board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. The table above reconciles the actual results presented in this section with the results presented on a constant currency basis.


(2) Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Revenue ex-TAC by Region to Revenue by Region" for a reconciliation of Revenue Ex-TAC to revenue.


(3) Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Adjusted EBITDA to Net Income" for a reconciliation of Adjusted EBITDA to net income.

 

CRITEO S.A.

Information on Share Count

(unaudited)




Three Months Ended



March 31,



2017


2018

Shares outstanding as at January 1,


63,978,204


66,085,097

Weighted average number of shares issued during the period


210,990


75,278

Basic number of shares - Basic EPS basis


64,189,194


66,160,375

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


3,093,817


1,309,363

Diluted number of shares - Diluted EPS basis


67,283,011


67,469,738






Shares outstanding as of March 31,


64,665,637


66,248,351

Total dilutive effect of share options, warrants, employee warrants


7,825,371


9,370,543

Fully diluted shares as of March 31,


72,491,008


75,618,894

 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

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

(unaudited)



Q2
2016

Q3
2016

Q4
 2016

Q1
 2017

Q2
 2017

Q3
 2017

Q4
2017

Q1
2018

YoY
Change

QoQ
Change














Clients

11,874

12,882

14,468

15,423

16,370

17,299

18,118

18,528

20%

2%














Revenue

407,201

423,867

566,825

516,667

542,022

563,973

674,031

564,164

9%

(16)%


Americas

156,522

160,739

266,438

208,013

229,392

228,326

324,696

212,695

2%

(34)%


EMEA

153,899

157,921

189,298

189,092

191,682

207,168

221,019

222,611

18%

1%


APAC

96,780

105,207

111,089

119,562

120,948

128,479

128,316

128,858

8%

—%














TAC

(240,969)

(247,310)

(341,877)

(306,693)

(322,200)

(329,576)

(397,087)

(323,746)

6%

(18)%


Americas

(96,560)

(97,239)

(167,046)

(128,867)

(145,289)

(141,869)

(203,368)

(131,521)

2%

(35)%


EMEA

(86,820)

(87,092)

(108,567)

(107,583)

(106,605)

(115,446)

(120,662)

(119,893)

11%

(1)%


APAC

(57,589)

(62,979)

(66,264)

(70,243)

(70,306)

(72,261)

(73,057)

(72,332)

3%

(1)%














Revenue ex-TAC

166,232

176,557

224,948

209,974

219,822

234,397

276,944

240,418

14%

(13)%


Americas

59,962

63,500

99,391

79,146

84,103

86,457

121,328

81,174

3%

(33)%


EMEA

67,079

70,829

80,731

81,509

85,077

91,722

100,357

102,718

26%

2%


APAC

39,191

42,228

44,826

49,319

50,642

56,218

55,259

56,526

15%

2%














Adjusted EBITDA (1)

39,201

53,532

82,995

56,454

54,086

79,116

119,928

77,932

38%

(35)%














Cash flow from operating activities

19,274

43,631

71,658

44,238

60,491

61,727

79,002

84,527

91%

7%














Capital expenditures

22,386

19,907

22,981

28,206

27,055

27,773

25,476

32,567

15%

28%














Capital expenditures / Revenue

5%

5%

4%

5%

5%

5%

4%

6%

N.A

N.A














Net cash position

377,407

407,158

270,318

303,813

308,185

357,983

414,111

483,874

59%

17%














Headcount

2,085

2,212

2,503

2,582

2,690

2,712

2,764

2,675

4%

(3)%














Days Sales Outstanding (days - end of month)

57

56

53

56

57

56

57

60

N.A

N.A




1) 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.

 

SOURCE Criteo S.A.