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Criteo Reports Results For The First Quarter 2019, Adjusts 2019 Growth Outlook And Maintains Outlook For 2019 Profitability Margin

NEW YORK, April 30, 2019 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the advertising platform for the open Internet, today announced financial results for the first quarter ended March 31, 2019.

  • Revenue increased 3% at constant currency1 to $558 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, increased 2% at constant currency to $236 million, or 42.2% of revenue.
  • Adjusted EBITDA2 decreased 6% at constant currency to $69 million, or 29.2% of Revenue ex-TAC.
  • Cash flow from operating activities decreased 20% to $67 million.
  • Free Cash Flow2 decreased 16% to $44 million.
  • Net income increased 1% to $21 million.
  • Adjusted net income per diluted share2 was $0.60, in line with the prior year period.
  • Due to identified execution issues, we are taking a more modest approach to our 2019 growth outlook.
  • We maintain our 2019 outlook for Adjusted EBITDA margin, highlighting our commitment to profitability.

"While making progress on several priorities, we recognize 2019 is another transition year," said JB Rudelle, CEO. "We are working hard to accelerate our transformation."

"We maintain our Adjusted EBITDA margin outlook for 2019," said Benoit Fouilland, CFO. "This highlights our commitment to profitability."

Operating Highlights

  • Revenue ex-TAC from new products grew 74% year over year to 9% of total.
  • Customer Acquisition, Audience Match, Retail Media's transactional-Saas offering all grew triple digits.
  • Same-client Revenue ex-TAC3 decreased less than 1% at constant currency.
  • We maintained client retention at close to 90% for all products.
  • Revenue ex-TAC from mobile apps grew 32% year-over-year.
  • Our header-bidding technology now connects to over 3,700 publishers and 135 app developers.
  • We further enriched our client platform with new self-service tools, including analytics and an audience creation feature.
  • We took effective measures to drive employee attrition down.

Revenue and Revenue ex-TAC

Revenue declined 1%, and increased 3% at constant currency, to $558 million (Q1 2018: $564 million). Revenue ex-TAC decreased 2%, and increased 2% at constant currency, to $236 million (Q1 2018: $240 million). This increase at constant currency was primarily driven by the broader adoption of our new solutions by existing clients. Revenue ex-TAC margin as a percentage of revenue was 42.2% (Q1 2018: 42.6%).

  • In the Americas, Revenue ex-TAC grew 6%, or 8% at constant currency, to $86 million and represented 37% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC declined 10%, or 2% at constant currency, to $92 million and represented 39% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 1%, or 3% at constant currency, to $57 million and represented 24% of total Revenue ex-TAC.

Net Income and Adjusted Net Income

Net income increased 1% to $21 million (Q1 2018: $21 million). Net income available to shareholders of Criteo S.A. was $19 million, or $0.29 per share on a diluted basis (Q1 2018: $20 million, or $0.29 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, decreased 2% to $40 million, or $0.60 per share on a diluted basis (Q1 2018: $41 million, or $0.60 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA declined 12%, or 6% at constant currency, to $69 million (Q1 2018: $78 million). This decrease in Adjusted EBITDA was primarily driven by a slight increase in Non-GAAP expenses, as well as proceeds from the disposal of the HookLogic Travel business in the prior-year period. Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 29.2% (Q1 2018: 32.4%), a 320-basis point decrease year over year.

Operating expenses were $176 million (Q1 2018: $176 million), in line with the prior-year period. 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 2% to $150 million (Q1 2018: $148 million).

Cash Flow and Cash Position

Cash flow from operating activities decreased 20% to $67 million (Q1 2018: $85 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, decreased 16% to $44 million (Q1 2018: $52 million), representing 63% of Adjusted EBITDA (Q1 2018: 67%).

Business Outlook

We believe that, due to delays in execution, some of the new capabilities we are building to achieve our company transformation are going to take more time to yield expected benefits. As a result, we are taking a more modest approach to our 2019 growth outlook but maintain our 2019 outlook for profitability margin, highlighting our commitment to profitability.

The following forward-looking statements reflect Criteo's expectations as of April 30, 2019.

Second quarter 2019 guidance:

  • We expect Revenue ex-TAC to be between $221 million and $224 million. This implies a constant-currency growth of -2% to 0%.
  • We expect Adjusted EBITDA to be between $50 million and $53 million.

Fiscal year 2019 guidance:

  • We now expect Revenue ex-TAC growth for fiscal year 2019 to be between 0% and 2% at constant currency.
  • Despite the lower guidance for Revenue ex-TAC, we maintain our expectation for an Adjusted EBITDA margin of approximately 30% of Revenue ex-TAC for fiscal year 2019.

The above guidance for the quarter ending June 30, 2019 and the fiscal year ending December 31, 2019, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.88 a U.S. dollar-Japanese Yen rate of 110, a U.S. dollar-British pound rate of 0.76 and a U.S. dollar-Brazilian real rate of 3.81.

The above guidance assumes no acquisitions are completed during the quarter ending June 30, 2019, and the fiscal year ending December 31, 2019.

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, 2019 and the fiscal year ending December 31, 2019, 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, 2019, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 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, April 30, 2019, 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) is the advertising platform for the open Internet, an ecosystem that favors neutrality, transparency and inclusiveness. 2,800 Criteo team members partner with over 19,000 customers and thousands of publishers around the globe to deliver effective advertising across all channels, by applying advanced machine learning to unparalleled data sets. Criteo empowers companies of all sizes with the technology they need to better know and serve their customers. 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 2018 average exchange rates for the relevant period to 2019 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
Isabelle Leung-Tack, VP, Global Communications, i.leungtack@criteo.com

Financial information to follow

 

CRITEO S.A.

Consolidated Statement of Financial Position

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




December 31, 2018


March 31, 2019

Assets





Current assets:





Cash and cash equivalents


$

364,426



$

395,771


 Trade receivables, net of allowances of $25.9 million and $25.2 million at December 31, 2018 and March 31, 2019, respectively


473,901



386,792


Income taxes


19,370



8,182


Other taxes


53,338



56,828


Other current assets


22,816



24,737


Total current assets


933,851



872,310


Property, plant and equipment, net


184,013



180,377


Intangible assets, net


112,036



107,218


Goodwill


312,881



317,076


Right of Use Asset - operating lease (1)




200,274


Non-current financial assets


20,460



20,331


Deferred tax assets


33,894



48,330


    Total non-current assets


663,284



873,606


Total assets


$

1,597,135



$

1,745,916







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

425,376



$

345,923


Contingencies


2,640



3,215


Income taxes


7,725



5,794


Financial liabilities - current portion


1,018



1,599


Lease liability - operating - current portion (1)




49,459


Other taxes


55,592



58,192


Employee - related payables


65,878



63,459


Other current liabilities


47,115



37,256


Total current liabilities


605,344



564,897


Deferred tax liabilities


10,770



8,421


Retirement benefit obligation


5,537



6,893


Financial liabilities - non current portion


2,490



2,283


Lease liability - operating - non current portion (1)




166,920


Other non-current liabilities


5,103



4,706


    Total non-current liabilities


23,900



189,223


Total liabilities


629,244



754,120


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 par value, 67,708,203 and 66,142,511 shares authorized, issued and outstanding at December 31, 2018 and March 31, 2019, respectively.


2,201



2,157


Treasury stock, 3,459,119 and 1,672,404 shares at cost as of December 31, 2018 and  March  31, 2019, respectively.


(79,159)



(39,079)


Additional paid-in capital


663,281



641,094


Accumulated other comprehensive income (loss)


(30,522)



(41,869)


Retained earnings


387,869



403,200


Equity - attributable to shareholders of Criteo S.A.


943,670



965,503


Non-controlling interests


24,221



26,293


Total equity


967,891



991,796


Total equity and liabilities


$

1,597,135



$

1,745,916



(1)  Effective January 1, 2019 we have adopted ASC 842, Leases. We have elected the modified retrospective transition method and not restated comparative prior periods.  Upon adoption, we recognized total operating lease liabilities of $223.5 million and operating right-of-use assets of $204.3 million.

 

CRITEO S.A.

Consolidated Statement of Income

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

(unaudited)




Three Months Ended





March 31,





2018


2019


YoY
Change








Revenue


$

564,164



$

558,123



(1)

%








Cost of revenue







Traffic acquisition cost


(323,746)



(322,429)



(0.4)

%

Other cost of revenue


(30,059)



(26,045)



(13)

%








Gross profit


210,359



209,649



(0.3)

%








Operating expenses:







Research and development expenses


(45,318)



(46,577)



3

%

Sales and operations expenses


(95,649)



(95,909)



0.3

%

General and administrative expenses


(34,591)



(33,770)



(2)

%

Total Operating expenses


(175,558)



(176,256)



0.4

%

Income from operations


34,801



33,393



(4)

%

Financial income (expense)


(1,325)



(1,974)



49

%

Income before taxes


33,476



31,419



(6)

%

Provision for income taxes


(12,386)



(10,018)



(19)

%

Net Income


$

21,090



$

21,401



1

%








Net income available to shareholders of Criteo S.A.


$

19,809



$

19,120



(3)

%

Net income available to non-controlling interests


$

1,281



$

2,281



78

%








Weighted average shares outstanding used in computing per share amounts:







Basic


66,160,375



64,336,777




Diluted


67,469,738



66,041,296











Net income allocated  to shareholders per share:







Basic


$

0.30



$

0.30



%

Diluted


$

0.29



$

0.29



%

 

CRITEO S.A.

Consolidated Statement of Cash Flows

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




Three Months Ended





March 31,





2018


2019


YoY
Change

Net income


$

21,090



$

21,401



1

%

Non-cash and non-operating items


53,966



42,866



(21)

%

           - Amortization and provisions


26,050



19,644



(25)

%

           - Equity awards compensation expense (1)


18,829



13,882



(26)

%

           - Change in deferred taxes


(3,146)



(5,916)



88

%

           - Income tax for the period


15,532



15,934



3

%

           - Other (2)


(3,299)



(678)



(79)

%

Changes in working capital related to operating activities


23,687



20,821



(12)

%

           - Decrease in trade receivables


91,292



86,018



(6)

%

           - Decrease in trade payables


(62,945)



(58,485)



(7)

%

           - Decrease/(Increase) in other current assets


7,958



(5,992)



NM


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


(12,618)



2,436



NM


           - Change in operating lease liabilities and right of use assets (4)




(3,156)



NM


Income taxes paid


(14,216)



(17,868)



26

%

CASH FROM OPERATING ACTIVITIES


84,527



67,220



(20)

%

Acquisition of intangible assets, property, plant and equipment


(7,413)



(13,292)



79

%

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


(25,154)



(10,392)



(59)

%

Payment for (disposal of) a business, net of cash acquired (disposed)


(10,811)



(5,325)



(51)

%

Change in other non-current financial assets


(112)



(32)



(71)

%

CASH USED FOR INVESTING ACTIVITIES


(43,490)



(29,041)



(33)

%

Repayment of borrowings (3)


(238)



(172)



(28)

%

Proceeds from capital increase


166



11



(93)

%

Change in other financial liabilities (2)


16,845



(30)



NM


CASH FROM (USED FOR) FINANCING ACTIVITIES


16,773



(191)



NM









CHANGE IN NET CASH AND CASH EQUIVALENTS


57,810



37,988



(34)

%

Net cash and cash equivalents at beginning of period


414,111



364,426



(12)

%

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


11,953



(6,643)



NM


Net cash and cash equivalents at end of period


$

483,874



$

395,771



(18)

%


(1) Of which $18.4 million and $13.5 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, 2018 and 2019, 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, 2018 and 2019 amounted to $0.4 million and $0.3 million respectively.


(4)  Effective January 1, 2019 we have adopted ASC 842, Leases. We have elected the modified retrospective transition method and not restated prior periods. Changes in operating lease liabilities and right of use assets included rent prepayments and accrued rent amounts which were mapped to other current assets and trade payables in prior years.

 

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

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




Three Months Ended





March 31,





2018


2019


YoY
Change








CASH FROM OPERATING ACTIVITIES


$

84,527



$

67,220



(20)

%

Acquisition of intangible assets, property, plant and equipment


(7,413)



(13,292)



79

%

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


(25,154)



(10,392)



(59)

%

FREE CASH FLOW (1)


$

51,960



$

43,536



(16)

%


(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


2018


2019


YoY Change


YoY Change
at Constant
Currency

Revenue










Americas


$

212,695



$

217,993



2

%


4

%


EMEA


222,611



209,643



(6)

%


3

%


Asia-Pacific


128,858



130,487



1

%


4

%


Total


564,164



558,123



(1)

%


3

%











Traffic acquisition costs










Americas


(131,521)



(131,545)



%


1

%


EMEA


(119,893)



(117,291)



(2)

%


7

%


Asia-Pacific


(72,332)



(73,593)



2

%


4

%


Total


(323,746)



(322,429)



(0.4)

%


4

%











Revenue ex-TAC (1)










Americas


81,174



86,448



6

%


8

%


EMEA


102,718



92,352



(10)

%


(2)

%


Asia-Pacific


56,526



56,894



1

%


3

%


Total


$

240,418



$

235,694



(2)

%


2

%


(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,





2018


2019


YoY Change

Net income


$

21,090



$

21,401



1

%

Adjustments:







Financial (income) expense


1,325



1,974



49

%

Provision for income taxes


12,386



10,018



(19)

%

Equity awards compensation expense


19,303



13,882



(28)

%

Research and development


4,555



4,025



(12)

%

Sales and operations


7,832



6,201



(21)

%

General and administrative


6,916



3,656



(47)

%

Pension service costs


434



394



(9)

%

Research and development


220



193



(12)

%

Sales and operations


79



72



(9)

%

General and administrative


135



129



(4)

%

Depreciation and amortization expense


23,646



19,296



(18)

%

Cost of revenue


15,249



9,135



(40)

%

Research and development


2,221



3,477



57

%

Sales and operations


4,454



4,864



9

%

General and administrative


1,722



1,820



6

%

Restructuring


(252)



1,890



NM


Research and development


(348)





(100)

%

Sales and operations


107



1,890



NM


General and administrative


(11)





(100)

%

Total net adjustments


56,842



47,454



(17)

%

Adjusted EBITDA(1)


$

77,932



$

68,855



(12)

%


(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,





2018


2019


YoY
Change








Research and Development expenses


$

(45,318)



$

(46,577)



3

%

Equity awards compensation expense


4,555



4,025



(12)

%

Depreciation and Amortization expense


2,221



3,477



57

%

Pension service costs


220



193



(12)

%

Restructuring


(348)





(100)

%

Non GAAP - Research and Development expenses


(38,670)



(38,882)



1

%

Sales and Operations expenses


(95,649)



(95,909)



0.3

%

Equity awards compensation expense


7,832



6,201



(21)

%

Depreciation and Amortization expense


4,454



4,864



9

%

Pension service costs


79



72



(9)

%

Restructuring


107



1,890



NM


Non GAAP - Sales and Operations expenses


(83,177)



(82,882)



(0.4)

%

General and Administrative expenses


(34,591)



(33,770)



(2)

%

Equity awards compensation expense


6,916



3,656



(47)

%

Depreciation and Amortization expense


1,722



1,820



6

%

Pension service costs


135



129



(4)

%

Restructuring


(11)





(100)

%

Non GAAP - General and Administrative expenses


(25,829)



(28,165)



9

%

Total Operating expenses


(175,558)



(176,256)



0.4

%

Equity awards compensation expense


19,303



13,882



(28)

%

Depreciation and Amortization expense


8,397



10,161



21

%

Pension service costs


434



394



(9)

%

Restructuring


(252)



1,890



NM


Total Non GAAP Operating expenses (1)


$

(147,676)



$

(149,929)



2

%


(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,





2018


2019


YoY Change

Equity awards compensation expense







Research and development


$

4,555



$

4,025



(12)

%

Sales and operations


7,832



6,201



(21)

%

General and administrative


6,916



3,656



(47)

%

Total equity awards compensation expense


19,303



13,882



(28)

%








Pension service costs







Research and development


220



193



(12)

%

Sales and operations


79



72



(9)

%

General and administrative


135



129



(4)

%

Total pension service costs


434



394



(9)

%








Depreciation and amortization expense







Cost of revenue


15,249



9,135



(40)

%

Research and development


2,221



3,477



57

%

Sales and operations


4,454



4,864



9

%

General and administrative


1,722



1,820



6

%

Total depreciation and amortization expense


23,646



19,296



(18)

%








Restructuring







Research and development


(348)





(100)

%

Sales and operations


107



1,890



NM


General and administrative


(11)





(100)

%

Total restructuring


$

(252)



$

1,890



NM


 

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,





2018


2019


YoY Change








Net income


$

21,090



$

21,401



1

%

Adjustments:







Equity awards compensation expense


19,303



13,882



(28)

%

Amortization of acquisition-related intangible assets


3,457



5,472



58

%

Restructuring costs


(252)



1,890



NM


Tax impact of the above adjustments


(3,079)



(2,940)



(5)

%

Total net adjustments


19,429



18,304



(6)

%

Adjusted net income(1)


$

40,519



$

39,705



(2)

%








Weighted average shares outstanding







 - Basic


66,160,375



64,336,777




 - Diluted


67,469,738



66,041,296











Adjusted net income per share







 - Basic


$

0.61



$

0.62



2

%

 - Diluted


$

0.60



$

0.60



%


(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,





2018


2019


YoY Change








Revenue as reported


$

564,164



$

558,123



(1)

%

Conversion impact U.S. dollar/other currencies




24,041




Revenue at constant currency(1)


564,164



582,164



3

%








Traffic acquisition costs as reported


(323,746)



(322,429)



(0.4)

%

Conversion impact U.S. dollar/other currencies




(13,470)




Traffic Acquisition Costs at constant currency(1)


(323,746)



(335,899)



4

%








Revenue ex-TAC as reported(2)


240,418



235,694



(2)

%

Conversion impact U.S. dollar/other currencies




10,571




Revenue ex-TAC at constant currency(2)


240,418



246,265



2

%

Revenue ex-TAC(2)/Revenue as reported


43

%


42

%










Other cost of revenue as reported


(30,059)



(26,045)



(13)

%

Conversion impact U.S. dollar/other currencies




(750)




Other cost of revenue at constant currency(1)


(30,059)



(26,795)



(11)

%








Adjusted EBITDA(3)


77,932



68,855



(12)

%

Conversion impact U.S. dollar/other currencies




4,335




Adjusted EBITDA(3) at constant currency(1)


$

77,932



$

73,190



(6)

%

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


32

%


29

%




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


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


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

 

CRITEO S.A.

Information on Share Count

(unaudited)




Three Months Ended



March 31,



2018



2019


Shares outstanding as at January 1,


66,085,097



64,249,084


Weighted average number of shares issued during the period


75,278



87,693


Basic number of shares - Basic EPS basis


66,160,375



64,336,777


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


1,309,363



1,704,519


Diluted number of shares - Diluted EPS basis


67,469,738



66,041,296







Shares issued as at March 31, before Treasure stocks


66,248,351



66,142,511


Treasury stock as of March 31,




(1,672,404)


Shares outstanding as of March 31, after Treasury stocks


66,248,351



64,470,107


Total dilutive effect of share options, warrants, employee warrants


9,370,543



8,000,740


Fully diluted shares as of March 31,


75,618,894



72,470,847


 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

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

(unaudited)



Q2
2017

Q3
2017

Q4
2017

Q1
2018

Q2
2018

Q3
2018

Q4
2018

Q1
2019

YoY
Change

QoQ
Change














Clients

16,370

17,299

18,118

18,528

18,396

19,213

19,419

19,373

5%

(0.2)%














Revenue

542,022

563,973

674,031

564,164

537,185

528,869

670,096

558,123

(1)%

(17)%


Americas

229,392

228,326

324,696

212,695

212,781

211,247

317,350

217,993

2%

(31)%


EMEA

191,682

207,168

221,019

222,611

201,080

195,230

220,904

209,643

(6)%

(5)%


APAC

120,948

128,479

128,316

128,858

123,324

122,392

131,842

130,487

1%

(1)%














TAC

(322,200)

(329,576)

(397,087)

(323,746)

(306,963)

(305,387)

(398,238)

(322,429)

(0.4)%

(19)%


Americas

(145,289)

(141,869)

(203,368)

(131,521)

(125,502)

(126,406)

(196,168)

(131,545)

—%

(33)%


EMEA

(106,605)

(115,446)

(120,662)

(119,893)

(112,577)

(111,131)

(128,053)

(117,291)

(2)%

(8)%


APAC

(70,306)

(72,261)

(73,057)

(72,332)

(68,884)

(67,850)

(74,017)

(73,593)

2%

(1)%














Revenue ex-TAC

219,822

234,397

276,944

240,418

230,222

223,482

271,858

235,694

(2)%

(13)%


Americas

84,103

86,457

121,328

81,174

87,279

84,841

121,182

86,448

6%

(29)%


EMEA

85,077

91,722

100,357

102,718

88,503

84,099

92,851

92,352

(10)%

(1)%


APAC

50,642

56,218

55,259

56,526

54,440

54,542

57,825

56,894

1%

(2)%














Adjusted EBITDA (1)

54,086

79,116

119,928

77,932

68,774

69,591

104,762

68,855

(12)%

(34)%














Cash flow from operating activities

60,491

61,727

79,002

84,527

40,341

50,256

85,600

67,220

(20)%

(21)%














Capital expenditures

27,055

27,773

25,476

32,567

17,847

29,656

45,408

23,684

(27)%

(48)%














Capital expenditures / Revenue

5%

5%

4%

6%

3%

6%

7%

4%

N.A.

N.A.














Net cash position

308,185

357,983

414,111

483,874

480,285

458,690

364,426

395,771

(18)%

9%














Headcount

2,690

2,712

2,764

2,675

2,678

2,737

2,744

2,813

5%

3%














Days Sales Outstanding (days - end of month)

57

56

57

60

61

60

58

59

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.