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CRITEO REPORTS SOLID THIRD QUARTER 2022 RESULTS

Hosts Investor Day on October 31, 2022

NEW YORK, Oct. 28, 2022 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO) ("Criteo" or the "Company"), the commerce media company, today announced financial results for the three and nine months ended September 30, 2022.

Third Quarter 2022 Financial Highlights:

The following table summarizes our consolidated financial results for the three and nine months ended September 30, 2022:

 

Three Months Ended

Nine Months Ended
 

September 30,

September 30,
 

2022

  

2021

  

YoY
Change

2022

  

2021

  

YoY
Change
 

(in millions, except EPS data)

GAAP Results

                    

Revenue

$              447

  

$            509

  

(12) %

$  1,453

  

$  1,601

  

(9) %

Gross Profit

$              180

  

$            176

  

2 %

$     549

  

$     538

  

2 %

Net Income (loss)

$                  7

  

$              24

  

(73) %

$        (5)

  

$        63

  

NM

Gross Profit margin

40 %

  

35 %

  

5ppt

38 %

  

34 %

  

4ppt

Diluted EPS

$             0.10

  

$           0.37

  

(73) %

$  (0.10)

  

$    0.94

  

(111) %

Cash from operating activities

$                42

  

$              51

  

(19) %

$     131

  

$     155

  

(16) %

Cash and cash equivalents

$              307

  

$            497

  

(38) %

$     307

  

$     497

  

(38) %
                     

Non-GAAP Results1

                    

Contribution ex-TAC

$              213

  

$            211

  

1 %

$     645

  

$     645

  

— %

Contribution ex-TAC margin

48 %

  

41 %

  

7ppt

44 %

  

40 %

  

4ppt

Adjusted EBITDA

$                50

  

$              68

  

(27) %

$     163

  

$     212

  

(23) %

Adjusted diluted EPS

$             0.53

  

$           0.64

  

(17) %

$    1.92

  

$    1.94

  

(1) %

Free Cash Flow (FCF)

$                21

  

$              35

  

(39) %

$        89

  

$     112

  

(20) %

FCF / Adjusted EBITDA

42 %

  

51 %

  

(9)ppt

55 %

  

53 %

  

2ppt

"I am pleased with our solid performance in the third quarter and our progress in integrating our acquisition of Iponweb, which is already helping to accelerate our product roadmap," said Megan Clarken, Chief Executive Officer of Criteo. "By bringing the best of our technology together, we're building solutions for our clients like our new DSP, Commerce Max, that are helping marketers and media owners achieve their goals in today's competitive landscape."

Operating Highlights
  • We completed the acquisition of Iponweb, a market-leading AdTech platform company with world-class media trading capabilities, on August 1, 2022.
  • We launched Commerce Max – a self-service, all-in-one demand-side platform (DSP) for enterprise marketers built for scale and powered by our leading retail media and programmatic capabilities.
  • Retail Media Contribution ex-TAC grew 32% year-over-year at constant currency2, and same-retailer Contribution ex-TAC3 retention for Retail Media was 133%.
  • Marketing Solutions Contribution ex-TAC grew 1% year-over-year at constant currency2.
  • We expanded our platform adoption with large retailers and marketplaces, including MediaMarkt, Giant Eagle and Metro Canada.
  • Criteo's activated media spend4 by the Commerce Media Platform for marketers and media owners was over $2.8 billion in the last 12 months and $656 million in Q3, growing 7% at constant currency2.
  • In September 2022, we entered into a new, expanded five-year revolving credit facility to €407 million ($397 million).

_______________________________________

1

Contribution ex-TAC, Contribution ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted diluted EPS and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.

2

Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar.

3

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

4

Activated media spend is defined as the sum of our Marketing Solutions revenue and the media spend activated on behalf of our Retail Media clients.
Financial Summary

Revenue for Q3 2022 was $447 million, gross profit was $180 million and Contribution ex-TAC was $213 million. Net income for Q3 was $7 million, or $0.10 per share on a diluted basis. Adjusted EBITDA for Q3 was $50 million, resulting in an adjusted diluted EPS of $0.53. As reported, Revenue for Q3 decreased by 12%, gross profit increased 2% and Contribution ex-TAC increased by 1%. At constant currency, Revenue for Q3 decreased by 3% and Contribution ex-TAC increased by 14%. Cash flow from operating activities was $42 million and Free Cash Flow was $21 million in Q3. As of September 30, 2022, we had $317 million in cash and marketable securities on our balance sheet.

Sarah Glickman, Chief Financial Officer, said, "We delivered 14% growth in Contribution ex-TAC at constant currency, with solid organic growth and despite a challenging macro environment. We remain focused on executing on our growth strategy with rigorous financial discipline, while delivering value to shareholders with the acceleration of our share buyback program."

Third Quarter 2022 Results
Revenue, Gross Profit and Contribution ex-TAC

Revenue decreased by 12% year-over-year in Q3 2022, or 3% at constant currency, to $447 million (Q3 2021: $509 million). Gross profit increased by 2% year-over-year in Q3 2022 to $180 million (Q3 2021: $176 million). Gross profit as a percentage of revenue, or gross profit margin, was 40% (Q3 2021: 35%). Contribution ex-TAC in the third quarter increased 1% year-over-year, or increased 14% at constant currency, to $213 million (Q3 2021: $211 million). Contribution ex-TAC as a percentage of revenue, or Contribution ex-TAC margin, was 48% (Q3 2021: 41%), up 700 basis points year-over-year, largely driven by Retail Media and the acceleration of our client transition to the Company's platform.

  • Marketing Solutions revenue decreased 16%, or decreased 6% at constant currency, and Marketing Solutions Contribution ex-TAC decreased 13%, or increased 1% at constant currency, driven by a rebound in Travel, partially offset by a slowdown in Retail, anticipated identity and privacy changes and the suspension of the Company's operations in Russia.
  • Retail Media revenue decreased 18%, or 14% at constant currency, reflecting the impact related to the ongoing client migration to the Company's platform. Retail Media Contribution ex-TAC increased 28%, or 32% at constant currency, driven by continued strength in Retail Media onsite, new client integrations and growing network effects of the platform.
  • Iponweb revenue reflects two months of contribution following the closing of the acquisition on August 1, 2022.
Net Income and Adjusted Net Income

Net income was $7 million in Q3 2022 (Q3 2021: $24 million). Net income margin as a percentage of revenue was 1% (Q3 2021: 5%). Net income available to shareholders of Criteo was $7 million, or $0.10 per share on a diluted basis (Q3 2021: $23 million, or $0.37 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 assets, restructuring and transformation costs, certain acquisition and integration costs, a loss contingency related to a regulatory matter, and the tax impact of these adjustments, was $33 million, or $0.53 per share on a diluted basis (Q3 2021: $41 million, or $0.64 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA was $50 million, in line with the Company's guidance, representing a decrease of 27% year-over-year (Q3 2021: $68 million). This was driven by planned growth investments, including investments in our people, partially offset by higher Contribution ex-TAC over the period. Adjusted EBITDA as a percentage of Contribution ex-TAC, or Adjusted EBITDA margin, was 24% (Q3 2021: 32%).

Operating expenses increased 22% year-over-year to $175 million (Q3 2021: $144 million), mostly driven by higher headcount-related expense from planned investments, equity awards compensation expense, and inclusion of the operating costs from our acquisition of Iponweb. Operating expenses, excluding the impact of equity awards compensation expense, pension costs, acquisition-related costs, restructuring related and transformation costs, loss contingency on regulatory matters, and depreciation and amortization, which we refer to as Non-GAAP operating expenses, increased by 15% or $18 million, to $141 million (Q3 2021: $123 million).

_____________________________________________

1

Contribution ex-TAC, Contribution ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted diluted EPS and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.
Cash Flow, Cash and Financial Liquidity Position

Cash flow from operating activities decreased 19% year-over-year to $42 million in Q3 2022 (Q3 2021: $51 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 to $21 million in Q3 2022 (Q3 2021: $35 million).

Cash and cash equivalents, and marketable securities, decreased $256 million compared to December 31, 2021 to $317 million, after spending approximately $135 million for the acquisition of Iponweb (net of cash acquired), which closed on August 1, 2022, and approximately $30 million on share repurchases in the third quarter of 2022.

As of September 30, 2022, the Company had total financial liquidity of approximately $740 million, including its cash position, marketable securities, Revolving Credit Facility and treasury shares reserved for M&A.

2022 Business Outlook

The following forward-looking statements reflect Criteo's expectations as of October 28, 2022.

Fourth quarter 2022 guidance:

  • We expect Contribution ex-TAC between $275 million and $280 million, or year-over-year growth at constant-currency of +11% to +13%, including the contribution from our Iponweb acquisition.
  • We expect Adjusted EBITDA between $90 million and $95 million.

Fiscal year 2022 guidance:

  • We now expect Contribution ex-TAC to grow by 10% to 11% at constant currency, including the contribution from our IPONWEB acquisition.
  • We now expect an Adjusted EBITDA margin of approximately 28% to 29% of Contribution ex-TAC and a Free Cash Flow conversion rate of about 45% of Adjusted EBITDA.

The above guidance for the fourth quarter and fiscal year ending December 31, 2022 assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.962, a U.S. dollar-Japanese Yen rate of 132, a U.S. dollar-British pound rate of 0.817, a U.S. dollar-Korean Won rate of 1,300 and a U.S. dollar-Brazilian real rate of 5.11.

The above guidance assumes that no additional acquisitions are completed during the fourth quarter of 2022.

Reconciliations of Contribution ex-TAC, Adjusted EBITDA and Adjusted EBITDA margin guidance to the closest corresponding U.S. GAAP measures are 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. The variability of the above charges could potentially have a significant impact on our future U.S. GAAP financial results.

New Revolving Credit Facility

Criteo closed an expanded €407 million ($397 million), five-year revolving credit facility, replacing the Company's prior €294 million ($287 million) facility. The increased borrowing capacity reflects Criteo's financial strength and growth outlook.

2022 Investor Day

Criteo will host an Investor Day in New York City on October 31, 2022. During this event, Criteo will be featuring presentations from its Chief Executive Officer, Megan Clarken, and other members of Criteo's executive leadership team followed by a live Q&A session. Presentations will begin at approximately 8:30 AM ET. A live webcast and Investor Day materials will be made available on the Company's investor relations website.

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 ("SEC"): Contribution ex-TAC, Contribution ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted diluted EPS, Free Cash Flow and Non-GAAP Operating Expenses. These measures are not calculated in accordance with U.S. GAAP.

Contribution ex-TAC is a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other costs of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business.

Accordingly, we believe that Contribution ex-TAC 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.

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 and transformation costs, certain acquisition and integration costs and a loss contingency related to a regulatory matter. 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 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 assets, restructuring and transformation costs, certain acquisition and integration costs, a loss contingency related to a regulatory matter, and the tax impact of these adjustments. Adjusted Net Income and Adjusted diluted EPS 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 Adjusted Net Income and Adjusted diluted EPS can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted diluted EPS 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 Conversion is defined as free cash flow divided by Adjusted EBITDA. Free Cash Flow and Free Cash Flow Conversion are key measures used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow and Free Cash Flow Conversion permit a more complete and comprehensive analysis of our available cash flows.

Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate equity awards compensation expense, pension service costs, restructuring and transformation costs, certain acquisition and integration costs, and a loss contingency related to a regulatory matter. 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 Contribution ex-TAC to gross profit, 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  Contribution ex-TAC, Contribution ex-TAC margin, 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 December 31, 2022 and the year ending December 31, 2022, 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 innovate and respond to changes in technology, uncertainty regarding the effects of the COVID-19 pandemic on our employees, operations, revenue and cash flows, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, including without limitation uncertainty regarding the timing and scope of proposed changes to and enhancements of the Chrome browser announced by Google, investments in new business opportunities and the timing of these investments, whether the projected benefits of acquisitions materialize as expected, including the successful integration of our acquisition of Iponweb, uncertainty regarding international growth and expansion (including related to changes in a specific country's or region's political or economic conditions), the impact of the invasion of Ukraine by Russia (including resulting sanctions), 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, the impact of consumer resistance to the collection and sharing of data, our ability to access data through third parties, 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 Contribution 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 25, 2022, and in subsequent Quarterly Reports on Form 10-Q as well as future filings and reports by the Company. Importantly, at this time, the COVID-19 pandemic continues to have, and inflation and rising interest rates in the U.S. could have, an impact on Criteo's business, financial condition, cash flow and results of operations. There are uncertainties about the duration and the extent of the impact of the COVID-19 pandemic.

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 senior management team will discuss the Company's earnings on a call that will take place today, October 28, 2022, at 8:00 AM ET, 2:00 PM CET. The conference call will be webcast live on the Company's website at https://criteo.investorroom.com/ and will subsequently be available for replay.

  • United States:   +1 855 209 8212
  • International:     +1 412 317 0788
  • France              080-510-2319

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

About Criteo

Criteo (NASDAQ: CRTO) is the global commerce media company that enables marketers and media owners to drive better commerce outcomes. Its industry leading Commerce Media Platform connects 22,000 marketers and thousands of media owners to deliver richer consumer experiences from product discovery to purchase. By powering trusted and impactful advertising, Criteo supports an open internet that encourages discovery, innovation, and choice. For more information, please visit www.criteo.com.

Contacts

Criteo Investor Relations
Melanie Dambre, m.dambre@criteo.com

Criteo Public Relations
Jessica Meyers, j.meyers@criteo.com

Financial information to follow

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands, unaudited)
 
   

September 30, 2022

  

December 31, 2021

Assets

        

Current assets:

        

Cash and cash equivalents

  

$                         307,323

  

$                         515,527

 Trade receivables, net of allowances of $57.6 million and $45.4 million at September 30, 2022 and
December 31, 2021, respectively  

  

576,082

  

581,988

Income taxes

  

16,474

  

8,784

Other taxes

  

75,795

  

73,388

Other current assets

  

34,347

  

34,182

Restricted cash - current

  

25,000

  

—

Marketable securities - current portion

  

10,000

  

50,299

Total current assets

  

1,045,021

  

1,264,168

Property, plant and equipment, net

  

114,493

  

139,961

Intangible assets, net

  

77,464

  

82,627

Goodwill

  

597,781

  

329,699

Right of Use Asset - operating lease

  

101,982

  

120,257

Restricted cash - non current

  

75,000

  

—

Marketable securities - non current portion

  

—

  

5,000

Non-current financial assets

  

6,864

  

6,436

Other non-current assets

  

54,478

  

—

Deferred tax assets

  

49,487

  

35,443

    Total non-current assets

  

1,077,549

  

719,423

Total assets

  

$                     2,122,570

  

$                     1,983,591
         

Liabilities and shareholders' equity

        

Current liabilities:

        

Trade payables

  

$                         576,762

  

$                         430,245

Contingencies - current portion

  

60,038

  

3,059

Income taxes

  

5,602

  

6,641

Financial liabilities - current portion

  

—

  

642

Lease liability - operating - current portion

  

30,469

  

34,066

Other taxes

  

56,894

  

60,236

Employee - related payables

  

72,897

  

98,136

Other current liabilities

  

60,810

  

39,523

Total current liabilities

  

863,472

  

672,548

Deferred tax liabilities

  

2,842

  

3,053

Defined benefit plans

  

2,836

  

5,531

Financial liabilities - non current portion

  

270

  

360

Lease liability - operating - non current portion

  

77,901

  

93,893

Contingencies - non current portion

  

32,731

  

—

Other non-current liabilities

  

65,618

  

9,886

    Total non-current liabilities

  

182,198

  

112,723

Total liabilities

  

1,045,670

  

785,271

Commitments and contingencies

        

Shareholders' equity:

        

Common shares, €0.025 par value, 64,985,388 and 65,883,347  shares authorized, issued and
outstanding at September 30, 2022 and December 31, 2021, respectively.

  

2,125

  

2,149

Treasury stock, 5,348,677 and  5,207,873 shares at cost as of September 30, 2022 and December
31, 2021, respectively.

  

(152,889)

  

(131,560)

Additional paid-in capital

  

760,666

  

731,248

Accumulated other comprehensive income (loss)

  

(131,651)

  

(40,294)

Retained earnings

  

569,218

  

601,588

Equity - attributable to shareholders of Criteo S.A.

  

1,047,469

  

1,163,131

Non-controlling interests

  

29,431

  

35,189

Total equity

  

1,076,900

  

1,198,320

Total equity and liabilities

  

$                     2,122,570

  

$                     1,983,591

 

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,

    
   

2022

  

2021

  

YoY

Change

  

2022

  

2021

  

YoY

Change
                         

Revenue

  

$    446,921

  

$    508,580

  

(12) %

  

$ 1,452,578

  

$ 1,600,968

  

(9) %
                         

Cost of revenue

                        

Traffic acquisition cost

  

(233,543)

  

(297,619)

  

(22) %

  

(807,758)

  

(956,364)

  

(16) %

Other cost of revenue

  

(33,771)

  

(34,935)

  

(3) %

  

(96,214)

  

(107,011)

  

(10) %
                         

Gross profit

  

179,607

  

176,026

  

2 %

  

548,606

  

537,593

  

2 %
                         

Operating expenses:

                        

Research and development expenses

  

(42,725)

  

(33,345)

  

28 %

  

(118,248)

  

(106,957)

  

11 %

Sales and operations expenses

  

(90,051)

  

(75,619)

  

19 %

  

(278,363)

  

(235,724)

  

18 %

General and administrative expenses

  

(42,353)

  

(34,877)

  

21 %

  

(176,361)

  

(108,779)

  

62 %

Total Operating expenses

  

(175,129)

  

(143,841)

  

22 %

  

(572,972)

  

(451,460)

  

27 %

Income from operations

  

4,478

  

32,185

  

(86) %

  

(24,366)

  

86,133

  

NM

Financial and Other income (expense)

  

3,485

  

(154)

  

NM

  

23,927

  

(1,391)

  

NM

Income before taxes

  

7,963

  

32,031

  

(75) %

  

(439)

  

84,742

  

NM

Provision for income taxes

  

(1,442)

  

(7,801)

  

(82) %

  

(4,735)

  

(22,033)

  

(79) %

Net Income (loss)

  

$         6,521

  

$       24,230

  

(73) %

  

$       (5,174)

  

$       62,709

  

NM
                         

Net income (loss) available to shareholders of
Criteo S.A.

  

$         6,579

  

$       23,481

  

(72) %

  

$       (6,448)

  

$       60,691

  

NM

Net income (loss) available to non-controlling
interests

  

$             (58)

  

$            749

  

NM

  

$         1,274

  

$         2,018

  

(37) %
                         

Weighted average shares outstanding used
in computing per share amounts:

                        

Basic

  

60,318,114

  

60,873,594

      

60,431,597

  

60,759,613

    

Diluted

  

63,235,811

  

64,197,686

      

63,050,355

  

64,313,526

    
                         

Net income (loss) allocated to shareholders
per share:

                        

Basic

  

$           0.11

  

$           0.39

  

(72) %

  

$         (0.11)

  

$           1.00

  

(111) %

Diluted

  

$           0.10

  

$           0.37

  

(73) %

  

$         (0.10)

  

$           0.94

  

(111) %

 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands, unaudited)
 
   

Three Months Ended

      

Nine Months Ended

    
   

September 30,

      

September 30,

    
   

2022

  

2021

  

YoY

Change

  

2022

  

2021

  

YoY

Change

Net income (loss)

  

$           6,521

  

$         24,230

  

(73) %

  

$   (5,174)

  

$  62,709

  

NM

Non-cash and non-operating items

  

23,816

  

37,668

  

(37) %

  

122,043

  

103,573

  

18 %

           - Amortization and provisions

  

20,148

  

25,533

  

(21) %

  

134,650

  

67,919

  

98 %

           - Equity awards compensation expense (1)

  

21,084

  

13,289

  

59 %

  

42,594

  

32,174

  

32 %

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

  

335

  

735

  

(54) %

  

(361)

  

4,694

  

NM

- Interest accrued and non-cash financial income and expenses

  

(2,244)

  

—

  

NM

  

(2,244)

  

—

  

NM

           - Change in deferred taxes

  

(8,937)

  

2,263

  

NM

  

(16,051)

  

4,568

  

NM

           - Change in income taxes

  

1,779

  

(4,165)

  

NM

  

(12,899)

  

(5,820)

  

NM

           - Other

  

(8,349)

  

13

  

NM

  

(23,646)

  

38

  

NM

Changes in working capital related to operating activities

  

11,291

  

(10,719)

  

NM

  

13,661

  

(11,381)

  

NM

           - (Increase) / Decrease in trade receivables

  

9,923

  

(9,541)

  

NM

  

75,399

  

16,654

  

NM

           - Increase / (Decrease) in trade payables

  

(2,549)

  

14,213

  

NM

  

(19,526)

  

(5,693)

  

NM

           - (Increase) / Decrease in other current assets

  

(8,629)

  

(7,523)

  

15 %

  

(23,224)

  

(12,710)

  

83 %

           - Increase / (Decrease) in other current liabilities

  

11,135

  

(4,705)

  

NM

  

(20,178)

  

(5,774)

  

NM

           - Change in operating lease liabilities and right of use assets

  

1,411

  

(3,163)

  

NM

  

1,190

  

(3,858)

  

NM

CASH FROM OPERATING ACTIVITIES

  

41,628

  

51,179

  

(19) %

  

130,530

  

154,901

  

(16) %

Acquisition of intangible assets, property, plant and equipment

  

(16,161)

  

(16,767)

  

(4) %

  

(48,955)

  

(44,383)

  

10 %

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

  

(4,146)

  

810

  

NM

  

7,632

  

1,518

  

NM

Payment for businesses, net of cash acquired

  

(135,453)

  

71

  

NM

  

(135,453)

  

(9,527)

  

NM

Change in other non-current financial assets

  

(1,259)

  

6,505

  

NM

  

43,052

  

(13,803)

  

NM

CASH USED FOR (FROM) INVESTING ACTIVITIES

  

(157,019)

  

(9,381)

  

NM

  

(133,724)

  

(66,195)

  

NM

Proceeds from borrowings under line-of-credit agreement

  

—

  

—

  

NM

  

78,513

  

—

  

NM

Repayment of borrowings

 

—

  

10

  

NM

  

(78,513)

  

(1,262)

  

NM

Proceeds from exercise of stock options

  

266

  

12,113

  

(98) %

  

617

  

21,688

  

(97) %

Repurchase of treasury stocks

  

(29,828)

  

(37,682)

  

(21) %

  

(59,162)

  

(72,611)

  

(19) %

Change in other financial liabilities

  

107

  

(2,888)

  

NM

  

107

  

(3,636)

  

NM

Other

  

7,768

  

—

  

NM

  

22,242

  

—

  

NM

CASH USED FOR FINANCING ACTIVITIES

  

(21,687)

  

(28,447)

  

(24) %

  

(36,196)

  

(55,821)

  

(35) %

Effect of exchange rates changes on cash and cash equivalents

  

(18,145)

  

(5,414)

  

NM

  

(68,813)

  

(23,438)

  

NM

Net increase in cash and cash equivalents

 

(155,223)

  

7,937

  

NM

  

(108,203)

  

9,447

  

NM

Net cash and cash equivalents at beginning of period

  

562,546

  

489,521

  

15 %

  

515,526

  

488,011

  

6 %

Net cash and cash equivalents and restricted cash  at end of period

  

$      407,323

  

$      497,458

  

(18) %

  

$  407,323

  

$  497,458

  

(18) %
                         

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                        

Cash paid for taxes, net of refunds

  

$          (8,600)

  

$          (9,703)

  

(11) %

  

$ (33,685)

  

$ (23,285)

  

45 %

Cash paid for interest

  

$             (333)

  

$             (403)

  

(17) %

  

$       (959)

  

$   (1,139)

  

(16) %
   

(1)

Share-based compensation expense according to ASC 718 Compensation - stock compensation accounted for $20.5 million and $12.8 million of equity awards compensation expense for the quarters ended September 30, 2022 and 2021, respectively, and $41.1 million and $30.8 million of equity awards compensation for the nine months ended September 30, 2022 and 2021, respectively.

 

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

(U.S. dollars in thousands, unaudited)

 
 
   

Three Months Ended

      

Nine Months Ended

    
   

September 30,

      

September 30,

    
   

2022

  

2021

  

YoY

Change

  

2022

  

2021

  

YoY

Change
                         

CASH FROM OPERATING ACTIVITIES

  

$    41,628

  

$    51,179

  

(19) %

  

$   130,530

  

$   154,901

  

(16) %

Acquisition of intangible assets, property, plant and
equipment

  

(16,161)

  

(16,767)

  

(4) %

  

(48,955)

  

(44,383)

  

10 %

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

  

(4,146)

  

810

  

NM

  

7,632

  

1,518

  

NM

FREE CASH FLOW (1)

  

$    21,321

  

$    35,222

  

(39) %

  

$      89,207

  

$   112,036

  

(20) %
   

(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 Contribution ex-TAC to Gross Profit

(U.S. dollars in thousands, unaudited)
 
 

Three Months Ended

      

Nine Months Ended

    

September 30,

      

September 30,

    

2022

  

2021

  

YoY
Change

  

2022

  

2021

  

YoY
Change
                       

Gross Profit

179,607

  

176,026

  

2 %

  

548,606

  

537,593

  

2 %
                       

Other Cost of Revenue

33,771

  

34,935

  

(3) %

  

96,214

  

107,011

  

(10) %
                       

Contribution ex-TAC (1)

$   213,378

  

$   210,961

  

1 %

  

$      644,820

  

$      644,604

  

— %
   

(1)

We define Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC 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 Contribution ex-TAC 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 Contribution 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 Contribution ex-TAC alongside our other U.S. GAAP financial result measures. The above table provides a reconciliation of Contribution ex-TAC to gross profit.

 

CRITEO S.A.

Segment Information

(U.S. dollars in thousands, unaudited)
 
     

Three Months Ended

          

Nine Months Ended

        
     

September 30,

          

September 30,

        
 

Segment

  

2022

  

2021

  

YoY Change

  

YoY Change
at Constant
Currency (3)

  

2022

  

2021

  

YoY Change

  

YoY Change
at Constant
Currency (3)

Revenue

                                
 

Marketing Solutions

  

$      387,288

  

$      458,622

  

(16) %

  

(6) %

  

$   1,291,599

  

$   1,429,277

  

(10) %

  

(2.2) %
 

Retail Media (2)

  

41,170

  

49,958

  

(18) %

  

(14) %

  

142,516

  

171,691

  

(17) %

  

(15) %
 

Iponweb

  

18,463

  

—

  

N/A

  

N/A

  

18,463

  

—

  

N/A

  

N/A
 

Total

  

446,921

  

508,580

  

(12) %

  

(3) %

  

1,452,578

  

1,600,968

  

(9) %

  

(2) %
                                   

Contribution ex-TAC

                               
 

Marketing Solutions

  

158,022

  

182,124

  

(13) %

  

1 %

  

522,079

  

567,774

  

(8) %

  

2 %
 

Retail Media (2)

  

36,893

  

28,837

  

28 %

  

32 %

  

104,278

  

76,830

  

36 %

  

40 %
 

Iponweb

  

18,463

  

—

  

N/A

  

N/A

  

18,463

  

—

  

N/A

  

N/A
 

Total (1)

  

$      213,378

  

$      210,961

  

1 %

  

14 %

  

$      644,820

  

$      644,604

  

— %

  

10 %
   

(1)

We define Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC 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 Contribution ex-TAC 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 Contribution 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 Contribution ex-TAC alongside our other U.S. GAAP financial result measures. The above table provides a reconciliation of Contribution ex-TAC to gross profit.

(2)

The Retail Media Platform, introduced in June 2020, is a strategic building block of Criteo's Commerce Media Platform and is reported under the retail media segment. It is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis. We expect most clients using Criteo's legacy Retail Media solutions to transition to this platform by the second half of 2022. As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin is expected to increase. Contribution ex-TAC is not impacted by this transition.

(3)

Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar.

 

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,

    
   

2022

  

2021

  

YoY

Change

  

2022

  

2021

  

YoY

Change

Net income (loss)

  

$      6,521

  

$   24,230

  

(73) %

  

$    (5,174)

  

$   62,709

  

NM

Adjustments:

                        

Financial (Income) expense

  

(3,526)

  

154

  

NM

  

(23,480)

  

1,391

  

NM

Provision for income taxes

  

1,442

  

7,801

  

(82) %

  

4,735

  

22,033

  

(79) %

Equity awards compensation expense

  

21,084

  

13,290

  

59 %

  

42,594

  

32,841

  

30 %

Research and development

  

11,621

  

4,858

  

NM

  

21,166

  

11,572

  

83 %

Sales and operations

  

4,577

  

3,875

  

18 %

  

9,695

  

9,880

  

(2) %

General and administrative

  

4,886

  

4,557

  

7 %

  

11,733

  

11,389

  

3 %

Pension service costs

  

247

  

330

  

(25) %

  

786

  

1,005

  

(22) %

Research and development

  

130

  

170

  

(24) %

  

408

  

520

  

(22) %

Sales and operations

  

40

  

52

  

(23) %

  

119

  

158

  

(25) %

General and administrative

  

77

  

108

  

(29) %

  

259

  

327

  

(21) %

Depreciation and amortization expense

  

19,283

  

22,301

  

(14) %

  

61,568

  

66,646

  

(8) %

Cost of revenue (data center equipment)

  

11,972

  

15,520

  

(23) %

  

39,229

  

46,508

  

(16) %

Research and development

 

3,208

  

2,557

  

25 %

  

9,682

  

6,517

  

49 %

Sales and operations

  

3,540

  

3,545

  

— %

  

10,878

  

11,201

  

(3) %

General and administrative

  

563

  

679

  

(17) %

  

1,779

  

2,420

  

(26) %

Acquisition-related costs

  

6,970

  

2,091

  

NM

  

11,491

  

5,138

  

NM

Sales and operations

  

(11)

  

—

  

NM

  

167

  

—

  

NM

General and administrative

  

6,981

  

2,091

  

NM

  

11,324

  

5,138

  

NM

Loss contingency on regulatory matters

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM

General and administrative

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM

Restructuring related and transformation (gain) costs (1)

  

(81)

  

(1,767)

  

(95) %

  

6,554

  

19,865

  

(67) %

Cost of revenue

  

—

  

—

  

NM

  

—

  

—

  

NM

Research and development

  

(53)

  

(1,029)

  

(95) %

  

985

  

5,238

  

(81) %

Sales and operations

  

(624)

  

(106)

  

NM

  

3,908

  

8,812

  

(56) %

General and administrative

  

596

  

(632)

  

NM

  

1,661

  

5,815

  

(71) %

Total net adjustments

  

43,655

  

44,200

  

(1) %

  

168,168

  

148,919

  

13 %

Adjusted EBITDA (2)

  

$   50,176

  

$   68,430

  

(27) %

  

$ 162,994

  

$ 211,628

  

(23) %
   

(1)

For the three and nine months ended September 30, 2022 and September 30, 2021, respectively, the Company recognized restructuring related and transformation costs following its new organizational structure implemented to support its Commerce Media Platform strategy:

 

 

Three Months Ended

  

Nine Months Ended
 

September 30,

  

June 30,
 

2022

  

2021

  

2022

  

2021

(Gain) from forfeitures of share-based compensation awards

—

  

—

  

—

  

(666)

Facilities related (gain) costs

(284)

  

(1,645)

  

1,002

  

14,692

Payroll related (gain) costs

(306)

  

(334)

  

4,686

  

4,637

Consulting costs related to transformation

509

  

212

  

866

  

1,202

Total restructuring related and transformation (gain) costs

$                        (81)

  

$                    (1,767)

  

$                     6,554

  

$                   19,865

 

For the three and nine months ended September 30, 2022 and September 30, 2021, respectively, the cash outflows related to restructuring related and transformation costs were  $6.6 million, and $4.4 million and 9.7 million, and $20.9 million respectively, and were mainly comprised of payroll costs, broker and termination penalties related to real-estate facilities and other consulting fees.
   

(2)

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, depreciation and amortization expense and certain restructuring and transformation costs, certain acquisition and integration costs and a loss contingency related to a regulatory matter. 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. 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

      

Nine Months Ended

    
   

September 30,

      

September 30,

    
   

2022

  

2021

  

YoY
Change

  

2022

  

2021

  

YoY
Change

Research and Development expenses

  

$      (42,725)

  

$      (33,345)

  

28 %

  

$    (118,248)

  

$    (106,957)

  

11 %

Equity awards compensation expense

  

11,621

  

4,858

  

NM

  

21,166

  

11,572

  

83 %

Depreciation and Amortization expense

 

3,208

  

2,557

  

25 %

  

9,682

  

6,517

  

49 %

Pension service costs

  

130

  

170

  

(24) %

  

408

  

520

  

(22) %

Restructuring related and transformation (gain) costs

 

(53)

  

(1,029)

  

(95) %

  

985

  

5,238

  

(81) %

Non GAAP - Research and Development expenses

  

(27,819)

  

(26,789)

  

4 %

  

(86,007)

  

(83,110)

  

3 %

Sales and Operations expenses

  

(90,051)

  

(75,619)

  

19 %

  

(278,363)

  

(235,724)

  

18 %

Equity awards compensation expense

  

4,577

  

3,875

  

18 %

  

9,695

  

9,880

  

(2) %

Depreciation and Amortization expense

  

3,540

  

3,545

  

— %

  

10,878

  

11,201

  

(3) %

Pension service costs

  

40

  

52

  

(23) %

  

119

  

158

  

(25) %

Acquisition-related costs

  

(11)

  

—

  

NM

  

167

  

—

  

NM

Restructuring related and transformation (gain) costs

 

(624)

  

(106)

  

NM

  

3,908

  

8,812

  

(56) %

Non GAAP - Sales and Operations expenses

  

(82,529)

  

(68,253)

  

21 %

  

(253,596)

  

(205,673)

  

23 %

General and Administrative expenses

  

(42,353)

  

(34,877)

  

21 %

  

(176,361)

  

(108,779)

  

62 %

Equity awards compensation expense

  

4,886

  

4,557

  

7 %

  

11,733

  

11,389

  

3 %

Depreciation and Amortization expense

  

563

  

679

  

(17) %

  

1,779

  

2,420

  

(26) %

Pension service costs

  

77

  

108

  

(29) %

  

259

  

327

  

(21) %

Acquisition-related costs

  

6,981

  

2,091

  

NM

  

11,324

  

5,138

  

NM

Restructuring related and transformation (gain) costs

 

596

  

(632)

  

NM

  

1,661

  

5,815

  

(71) %

Loss contingency on regulatory matters

  

(1,764)

  

0

  

NM

  

63,920

  

0

  

NM

Non GAAP - General and Administrative expenses

  

(31,014)

  

(28,074)

  

10 %

  

(85,685)

  

(83,690)

  

2 %

Total Operating expenses

  

(175,129)

  

(143,841)

  

21.8 %

  

(572,972)

  

(451,460)

  

26.9 %

Equity awards compensation expense

  

21,084

  

13,290

  

59 %

  

42,594

  

32,841

  

30 %

Depreciation and Amortization expense

 

7,311

  

6,781

  

8 %

  

22,339

  

20,138

  

11 %

Pension service costs

  

247

  

330

  

(25) %

  

786

  

1,005

  

(22) %

Acquisition-related costs

  

6,970

  

2,091

  

NM

  

11,491

  

5,138

  

NM

Loss contingency on regulatory matters

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM

Restructuring related and transformation (gain) costs

 

(81)

  

(1,767)

  

(95) %

  

6,554

  

19,865

  

(67) %

Total Non GAAP Operating expenses (1)

  

$    (141,362)

  

$    (123,116)

  

15 %

  

$    (425,288)

  

$    (372,473)

  

14 %
   

(1)

We define Non-GAAP Operating Expenses as our consolidated operating expenses adjusted to eliminate equity awards compensation expense, pension service costs, restructuring and transformation costs, certain acquisition and integration costs, and a loss contingency related to a regulatory matter. 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.

 

CRITEO S.A.

Detailed Information on Selected Items

(U.S. dollars in thousands, unaudited)
 
   

Three Months Ended

      

Nine Months Ended

    
   

September 30,

      

September 30,

    
   

2022

  

2021

  

YoY
Change

  

2022

  

2021

  

YoY
Change

Equity awards compensation expense

                        

Research and development

  

$    11,621

  

$      4,858

  

NM

  

$    21,166

  

$    11,572

  

83 %

Sales and operations

  

4,577

  

3,875

  

18 %

  

9,695

  

9,880

  

(2) %

General and administrative

  

4,886

  

4,557

  

7 %

  

11,733

  

11,389

  

3 %

Total equity awards compensation expense

  

21,084

  

13,290

  

59 %

  

42,594

  

32,841

  

30 %
                         

Pension service costs

                        

Research and development

  

130

  

170

  

(24) %

  

408

  

520

  

(22) %

Sales and operations

  

40

  

52

  

(23) %

  

119

  

158

  

(25) %

General and administrative

  

77

  

108

  

(29) %

  

259

  

327

  

(21) %

Total pension service costs

  

247

  

330

  

(25) %

  

786

  

1,005

  

(22) %
                         

Depreciation and amortization expense

                        

Cost of revenue (data center equipment)

  

11,972

  

15,520

  

(23) %

  

39,229

  

46,508

  

(16) %

Research and development

 

3,208

  

2,557

  

25 %

  

9,682

  

6,517

  

49 %

Sales and operations

  

3,540

  

3,545

  

— %

  

10,878

  

11,201

  

(3) %

General and administrative

  

563

  

679

  

(17) %

  

1,779

  

2,420

  

(26) %

Total depreciation and amortization expense

  

19,283

  

22,301

  

(14) %

  

61,568

  

66,646

  

(8) %
                         

Acquisition-related costs

                        

Sales and operations

  

(11)

  

—

  

NM

  

167

  

—

  

NM

General and administrative

  

6,981

  

2,091

  

NM

  

11,324

  

5,138

  

NM

Total acquisition-related costs

  

6,970

  

2,091

  

NM

  

11,491

  

5,138

  

NM
                         

Loss contingency on regulatory matters

                        

General and administrative

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM

Total loss contingency on regulatory matters

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM
                         

Restructuring related and transformation (gain) costs

                       

Cost of revenue

  

—

  

—

  

NM

  

—

  

—

  

NM

Research and development

  

(53)

  

(1,029)

  

(95) %

  

985

  

5,238

  

(81) %

Sales and operations

  

(624)

  

(106)

  

NM

  

3,908

  

8,812

  

(56) %

General and administrative

  

596

  

(632)

  

NM

  

1,661

  

5,815

  

(71) %

Total restructuring related and transformation (gain) costs

  

$          (81)

  

$    (1,767)

  

(95) %

  

$      6,554

  

$    19,865

  

(67) %

 

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,

    
   

2022

  

2021

  

YoY
Change

  

2022

  

2021

  

YoY
Change
                         

Net income

  

$          6,521

  

$        24,230

  

(73) %

  

$        (5,174)

  

$        62,709

  

NM

Adjustments:

                        

Equity awards compensation expense

  

21,084

  

13,290

  

59 %

  

42,594

  

32,841

  

30 %

Amortization of acquisition-related intangible assets

  

3,531

  

3,303

  

7 %

  

10,853

  

9,174

  

18 %

Acquisition-related costs

  

6,970

  

2,091

  

NM

  

11,491

  

5,138

  

NM

Loss contingency on regulatory matters

  

(1,764)

  

—

  

NM

  

63,920

  

—

  

NM

Restructuring related and transformation (gain) costs

 

(81)

  

(1,767)

  

(95) %

  

6,554

  

19,865

  

(67) %

Tax impact of the above adjustments (1)

  

(3,036)

  

(114)

  

NM

  

(8,978)

  

(4,686)

  

92 %

Total net adjustments

  

26,704

  

16,803

  

NM

  

126,434

  

62,332

  

NM

Adjusted net income (2)

  

$        33,225

  

$        41,033

  

57 %

  

$     121,260

  

$     125,041

  

(3) %
                         

Weighted average shares outstanding

                        

 - Basic

  

60,318,114

  

60,873,594

      

60,431,597

  

60,759,613

    

 - Diluted

  

63,235,811

  

64,197,686

      

63,050,355

  

64,313,526

    
                         

Adjusted net income per share

                       

 - Basic

  

$            0.55

  

$            0.67

  

60 %

  

$            2.01

  

$            2.06

  

(2) %

 - Diluted

  

$            0.53

  

$            0.64

  

59 %

  

$            1.92

  

$            1.94

  

(1) %
   

(1)

We consider the nature of the adjustment to determine its tax treatment in the various tax jurisdictions we operate in. The tax impact is calculated by applying the actual tax rate for the entity and period to which the adjustment relates.
   

(2)

We define Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related assets, restructuring and transformation costs, certain acquisition and integration costs, a loss contingency related to a regulatory matter, and the tax impact of these adjustments.  Adjusted Net Income and Adjusted diluted EPS 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 Adjusted Net Income and Adjusted diluted EPS can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted diluted EPS 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. 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,

    
   

2022

  

2021

  

YoY

Change

  

2022

  

2021

  

YoY

Change
                         

Gross Profit as reported

  

$    179,607

  

$    176,026

  

2 %

  

$    548,606

  

$    537,593

  

2 %
                         

Other cost of revenue as reported

  

(33,771)

  

(34,935)

  

(3) %

  

(96,214)

  

(107,011)

  

(10) %
                         

Contribution ex-TAC as reported(2)

  

213,378

  

210,961

  

1 %

  

644,820

  

644,604

  

— %

Conversion impact U.S. dollar/other currencies

  

27,832

  

—

      

62,740

  

—

    

Contribution ex-TAC at constant currency(2)

  

241,210

  

210,961

  

14 %

  

707,560

  

644,604

  

10 %

Contribution ex-TAC(2)/Revenue as reported

  

48 %

  

41 %

      

44 %

  

40 %

    
                         

Traffic acquisition costs as reported(2)

  

(233,543)

  

(297,619)

  

(22) %

  

(807,758)

  

(956,364)

  

(16) %

Conversion impact U.S. dollar/other currencies

  

(18,558)

  

—

      

(47,369)

  

—

    

Traffic acquisition costs at constant currency(2)

  

(252,101)

  

(297,619)

  

(15) %

  

(855,127)

  

(956,364)

  

(11) %
                         

Revenue as reported(2)

  

446,921

  

508,580

  

(12) %

  

1,452,578

  

1,600,968

  

(9) %

Conversion impact U.S. dollar/other currencies

  

46,390

  

—

      

110,109

  

—

    

Revenue at constant currency(2)

  

$    493,311

  

$    508,580

  

(3) %

  

$ 1,562,687

  

$ 1,600,968

  

(2) %
   

(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)

Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Contribution ex-TAC to Gross Profit" for a reconciliation of Contribution ex-TAC to gross profit.

 

CRITEO S.A.

Information on Share Count

(unaudited)
 
   

Nine Months Ended
   

2022

  

2021

Shares outstanding as at January 1,

  

60,675,474

  

60,639,570

Weighted average number of shares issued during the period

  

(243,877)

  

120,043

Basic number of shares - Basic EPS basis

  

60,431,597

  

60,759,613

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

  

2,618,758

  

3,553,913

Diluted number of shares - Diluted EPS basis

  

63,050,355

  

64,313,526
         

Shares issued as September 30, before Treasury stocks

  

64,985,388

  

66,315,019

Treasury stock as of September 30,

  

(5,049,409)

  

(5,544,527)

Shares outstanding as of September  30, after Treasury stocks

  

59,935,979

  

60,770,492

Total dilutive effect of share options, warrants, employee warrants

  

9,403,211

  

6,861,312

Fully diluted shares as at September 30,

  

69,339,190

  

67,631,804

 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

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

YoY

Change

QoQ
Change

Q3

2022

Q2

2022

Q1

2022

Q4

2021

Q3

2021

Q2

2021

Q1

2021

Q4

2020

Q3

2020
                       

Clients

(0.3) %

(0.2) %

21,673

21,711

21,597

21,745

21,747

21,332

20,626

21,460

20,565
                       

Revenue 

(12) %

(10) %

446,921

495,090

510,567

653,267

508,580

551,311

541,077

661,282

470,345

Americas

(2) %

(6) %

201,274

213,340

194,847

287,270

204,428

221,227

203,900

312,817

204,618

EMEA

(20) %

(15) %

150,915

176,867

193,954

234,559

188,354

209,303

212,096

232,137

167,800

APAC

(18) %

(10) %

94,732

104,883

121,766

131,438

115,798

120,781

125,081

116,328

97,927
                       

Revenue

(12) %

(10) %

446,921

495,090

510,567

653,267

508,580

551,311

541,077

661,282

470,345

Marketing Solutions

(16) %

(12) %

387,288

440,423

463,888

577,962

458,622

487,465

483,190

543,262

412,126

Retail Media (2)

(18) %

(25) %

41,170

54,667

46,679

75,305

49,958

63,846

57,887

118,020

58,219

Iponweb

N/A

N/A

18,463

—

—

—

—

—

—

—

—
                       

TAC

(22) %

(17) %

(233,543)

(280,565)

(293,650)

(377,076)

(297,619)

(331,078)

(327,667)

(408,108)

(284,401)

Marketing Solutions

(17) %

(13) %

(229,266)

(262,454)

(277,800)

(349,584)

(276,498)

(294,132)

(290,873)

(324,017)

(243,616)

Retail Media (2)

(80) %

(76) %

(4,277)

(18,111)

(15,850)

(27,492)

(21,121)

(36,946)

(36,794)

(84,091)

(40,785)

Iponweb

N/A

N/A

—

—

—

—

—

—

—

—

—
                       

Contribution ex-TAC (1)

1 %

(1) %

213,378

214,525

216,917

276,191

210,961

220,233

213,410

253,174

185,944

Marketing Solutions

(13) %

(11) %

158,022

177,969

186,088

228,378

182,124

193,333

192,317

219,245

168,510

Retail Media (2)

28 %

1 %

36,893

36,556

30,829

47,813

28,837

26,900

21,093

33,929

17,434

Iponweb

N/A

N/A

18,463

—

—

—

—

—

—

—

—
                       

Cash flow from operating activities 

(19) %

198 %

41,628

13,972

74,930

66,012

51,179

26,360

77,362

44,080

51,156
                       

Capital expenditures

27 %

31 %

20,307

15,452

5,564

10,145

15,957

13,128

13,780

22,302

12,898
                       

Capital expenditures/Revenue

2ppt

2ppt

5 %

3 %

1 %

2 %

3 %

2 %

3 %

3 %

3 %
                       

Net cash position

(18) %

(28) %

407,323

562,546

589,343

515,527

497,458

489,521

520,060

488,011

626,744
                       

Headcount

33 %

12 %

3,537

3,146

2,939

2,781

2,658

2,572

2,532

2,594

2,636
                       

Days Sales Outstanding
(days - end of month)

8 days

2 days

78

76

74

65

70

66

64

56

62
   

(1)

We define Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC 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 Contribution ex-TAC 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 Contribution 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 Contribution ex-TAC alongside our other U.S. GAAP financial result measures.
   

(2)

The Retail Media Platform, introduced in June 2020, is a strategic building block of Criteo's Commerce Media Platform and is reported under the retail media segment. It is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis. We expect most clients using Criteo's legacy Retail Media solutions to transition to this platform by the second half of 2022. As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin is expected to increase. Contribution ex-TAC is not impacted by this transition.

 

SOURCE Criteo S.A.