NEW YORK, Nov. 1, 2017 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the leading commerce marketing technology company, today announced financial results for the third quarter ended September 30, 2017.
-- Revenue increased 33% (or 32% at constant currency(1)) to $564 million. -- Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC,(2) grew 33% (or 32% at constant currency) to $234 million, or 42% of revenue. -- Adjusted EBITDA(2) grew 48% (or 45% at constant currency) to $79 million, or 34% of Revenue ex-TAC. -- Cash flow from operating activities increased 41% to $62 million. -- Free Cash Flow(2) increased 43% to $34 million. -- Net Income increased 51% to $22 million. -- Adjusted Net Income per diluted share(2) increased 37% to $0.65.
"Criteo Commerce Marketing Ecosystem is seeing very positive acceptance from chief marketing officers worldwide," said Eric Eichmann, CEO. "Our open ecosystem approach brings large opportunities for us."
"Our solid Q3 results and increased profitability outlook for 2017 highlight the strengths of our business," said Benoit Fouilland, CFO. "We are confident in our position and growth prospects."
Operating Highlights
-- The growth in same-client Revenue ex-TAC(3) remained strong with 14% at constant currency, the result of better technology and inventory access. -- We added a total of 930 net clients, ending the quarter with over 17,000 commerce and brand clients, while maintaining a 90% client retention for the core product. -- Criteo Identity Graph continued to grow in scale and efficiency, providing as good or better CRM onboarding rates than the largest Internet players. -- Criteo Direct Bidder, our next generation header bidding technology, is now connected to 950 large publishers worldwide. -- We recently introduced two new products in beta version to the Criteo Commerce Marketing Ecosystem with very promising results: Criteo Audience Match and Criteo Customer Acquisition.
Revenue and Revenue ex-TAC
Revenue grew 33%, or 32% at constant currency, to $564 million (Q3 2016: $424 million).
Revenue ex-TAC grew 33%, or 32% at constant currency, to $234 million (Q3 2016: $177 million). This increase was primarily driven by continued innovation across existing and new products, a broader and improved access to publisher inventory and new clients of various sizes across regions and products.
-- In the Americas, Revenue ex-TAC grew 36%, or 35% at constant currency, to $86 million and represented 37% of total Revenue ex-TAC. -- In EMEA, Revenue ex-TAC grew 29%, or 24% at constant currency, to $92 million and represented 39% of total Revenue ex-TAC. -- In Asia-Pacific, Revenue ex-TAC grew 33%, or 40% at constant currency, to $56 million and represented 24% of total Revenue ex-TAC.
Revenue ex-TAC margin as a percentage of revenue was 42%, in line with expectations and the prior year.
Net Income and Adjusted Net Income
Net income increased 51% to $22 million (Q3 2016: $15 million). Net income available to shareholders of Criteo S.A. was $20 million, or $0.29 per share on a diluted basis (Q3 2016: $14 million, or $0.21 per share on a diluted basis). Net income in the period was impacted by the acquisition of HookLogic, which was completed in the fourth quarter 2016, including the one-time grant of equity awards in connection with the acquisition, the amortization of intangible assets identified as a result of the preliminary purchase price allocation, and increased financial expense related to the funding of 30% of the purchase price. Excluding non-cash accounting impacts from the HookLogic acquisition on equity awards compensation and amortization of intangible assets, net income increased 98% to $29 million.
Adjusted Net income, or net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, increased 42% to $44 million, or $0.65 per share on a diluted basis (Q3 2016: $31 million, or $0.48 per share on a diluted basis).
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA grew 48%, or 45% at constant currency, to $79 million (Q3 2016: $54 million). This increase in Adjusted EBITDA was primarily driven by the strong Revenue ex-TAC performance across all regions, as well as continued operating leverage across the organization.
Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 34% (Q3 2016: 30%).
Operating expenses increased 31% to $171 million (Q3 2016: $131 million). Operating expenses, excluding the impact of equity awards compensation expense, pension costs, restructuring costs, depreciation and amortization and acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, increased 26% to $140 million (Q3 2016: $111 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (37%), Sales and Operations (18%) and General and Administrative (21%), as we continued to grow the organization.
Cash Flow and Cash Position
Cash flow from operating activities increased 41% to $62 million (Q3 2016: $44 million).
Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment, grew by 43% to $34 million (Q3 2016: $24 million).
Total cash and cash equivalents were $358 million as of September 30, 2017 (December 31, 2016: $270 million).
Business Outlook
Apples' Intelligent Tracking Prevention feature, or ITP, was released on mobile on September 19, 2017. We believe our solution for Safari users currently allows us to mitigate about half of the potential impact from ITP. In the third quarter, ITP had a minimal net negative impact on our Revenue ex-TAC of less than $1 million. Given our expectations of the roll out of Apple's iOS11 and our coverage of Safari users, we expect ITP to have a net negative impact on our Revenue ex-TAC in the fourth quarter of between 8% and 10% relative to our base case projections for the quarter. We will continue to improve and deploy our solution for Safari users over the coming quarters.
The following forward-looking statements reflect Criteo's expectations as of November 1, 2017.
Fourth Quarter 2017 Guidance:
-- We expect Revenue ex-TAC to be between $260 million and $263 million. -- We expect Adjusted EBITDA to be between $106 million and $109 million.
Fiscal Year 2017 Guidance:
-- We are adjusting our guidance to reflect the impact from ITP in the fourth quarter and now expect Revenue ex-TAC growth for fiscal year 2017 to be between 26% and 27% at constant currency. -- We are increasing our guidance for Adjusted EBITDA margin improvement for fiscal 2017 to between 100 basis points and 120 basis points.
The above guidance for the fourth quarter and fiscal year ending December 31, 2017, assumes the following exchange rates for the fourth quarter for the main currencies impacting our business: a U.S. dollar-euro rate of 0.855, a U.S. dollar-Japanese Yen rate of 115, a U.S. dollar-British pound rate of 0.76 and a U.S. dollar-Brazilian real rate of 3.25.
The above guidance assumes no acquisitions are completed during the fourth quarter and fiscal year ending December 31, 2017.
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 September 30, 2017 and the fiscal year ending December 31, 2017, 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, 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, 2017, as well as future filings and reports by the Company. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations or otherwise.
Conference Call Information
Criteo's earnings conference call will take place today, November 1, 2017, at 8:00 AM ET, 1:00 PM CET. The conference call will be webcast live on the Company's website http://ir.criteo.com and will be available for replay.
Conference call details: -- U.S. callers: +1 855 209 8212 -- International callers: +1 412 317 0788 or +33 1 76 74 05 02 Please ask to be joined into the "Criteo S.A." call.
About Criteo
Criteo (NASDAQ: CRTO) the leader in commerce marketing, is building the highest performing and open commerce marketing ecosystem to drive profits and sales for retailers and brands. More than 2,700 Criteo team members partner with over 17,000 customers and thousands of publishers across the globe to deliver performance at scale by connecting shoppers to the things they need and love. Designed for commerce, Criteo Commerce Marketing Ecosystem sees over $550 billion in annual commerce sales data.
For more information, please visit www.criteo.com.
(1 )Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2016 average exchange rates for the relevant period to 2017 figures.
(2 )Revenue ex-TAC, Adjusted EBITDA, Adjusted Net Income per diluted share and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.
(3) Same-client Revenue ex-TAC is the Revenue ex-TAC generated by clients that were live with us in a given quarter and still live with us the same quarter in the following year.
Contacts
Criteo Investor Relations
Edouard Lassalle, VP, Head of IR, e.lassalle@criteo.com
Friederike Edelmann, IR Director, f.edelmann@criteo.com
Criteo Public Relations
Emma Ferns, Global PR director, e.ferns@criteo.com
Financial information to follow
CRITEO S.A. Consolidated Statement of Financial Position (U.S. dollars in thousands) (unaudited) December 31, 2016 September 30, 2017 ----------------- ------------------ Assets Current assets: Cash and cash equivalents $270,317 $357,983 Trade receivables, net of allowances 397,244 373,922 Income taxes 2,741 5,295 Other taxes 52,942 46,095 Other current assets 19,340 26,945 ------ ------ Total current assets 742,584 810,240 ------- ------- Property, plant and equipment, net 108,581 134,885 Intangible assets, net 102,944 99,714 Goodwill 209,418 236,363 Non-current financial assets 17,029 19,350 Deferred tax assets 30,630 57,642 Total non-current assets 468,602 547,954 ------- ------- Total assets $1,211,186 $1,358,194 ========== ========== Liabilities and shareholders' equity Current liabilities: Trade payables $365,788 $350,690 Contingencies 654 1,553 Income taxes 14,454 16,341 Financial liabilities -current portion 7,969 7,943 Other taxes 44,831 42,713 Employee - related payables 55,874 59,661 Other current liabilities 30,221 26,802 ------ ------ Total current liabilities 519,791 505,703 ------- ------- Deferred tax liabilities 686 28,719 Retirement benefit obligation 3,221 3,690 Financial liabilities -non current portion 77,611 2,525 Other non-current liabilities - 4,290 --- ----- Total non-current liabilities 81,518 39,224 ------ ------ Total liabilities 601,309 544,927 ------- ------- Commitments and contingencies Shareholders' equity: Common shares, EUR0.025 par value, 63,978,204 and 65,551,174 shares authorized, issued and outstanding at December 31, 2016 and September 30, 2017, respectively. 2,093 2,137 Additional paid-in capital 488,277 568,171 Accumulated other comprehensive income (loss) (88,593) (21,386) Retained earnings 198,355 247,821 Equity -attributable to shareholders of Criteo S.A. 600,132 796,743 ------- ------- Non-controlling interests 9,745 16,524 ----- Total equity 609,877 813,267 ------- ------- Total equity and liabilities $1,211,186 $1,358,194 ========== ==========
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, 2016 2017 YoY Change 2016 2017 YoY Change ---- ---- ---------- ---- ---- ---------- Revenue $423,867 $563,973 33% $1,232,321 $1,622,661 32% Cost of revenue Traffic acquisition cost (247,310) (329,576) 33% (727,034) (958,469) 32% Other cost of revenue (22,332) (29,951) 34% (60,950) (89,914) 48% Gross profit 154,225 204,446 33% 444,337 574,278 29% ======= ======= === ======= ======= === Operating expenses: Research and development expenses (30,701) (43,860) 43% (88,097) (126,992) 44% Sales and operations expenses (68,164) (95,184) 40% (201,862) (283,815) 41% General and administrative expenses (32,492) (32,389) - % (85,839) (96,143) 12% ------- ------- Total Operating expenses (131,357) (171,433) 31% (375,798) (506,950) 35% -------- -------- --- -------- -------- --- Income from operations 22,868 33,013 44% 68,539 67,328 (2)% ------ ------ ------ ------ Financial income (expense) (570) (2,886) 406% (1,982) (7,313) 269% ---- ------ ------ ------ Income before taxes 22,298 30,127 35% 66,557 60,015 (10)% ------ ------ --- ------ ------ ---- Provision for income taxes (7,574) (7,858) 4% (19,968) (15,724) (21)% ------ ------ ------- ------- Net Income $14,724 $22,269 51% $46,589 $44,291 (5)% ======= ======= === ======= ======= === Net income available to shareholders of Criteo S.A $13,539 $19,774 $42,869 $38,185 ======= ======= ======= ======= Net income available to non-controlling interests $1,185 $2,495 $3,720 $6,106 ====== ====== ====== ====== Weighted average shares outstanding used in computing per share amounts: Basic 63,628,351 65,412,326 63,163,922 64,881,751 Diluted 65,816,422 68,200,343 65,429,757 67,876,791 Net income allocated to shareholders per share: Basic $0.21 $0.30 $0.68 $0.59 ===== ===== ===== ===== Diluted $0.21 $0.29 $0.66 $0.56 ===== ===== ===== =====
CRITEO S.A. Consolidated Statement of Cash Flows (U.S. dollars in thousands) (unaudited) Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, 2016 2017 2016 2017 ---- ---- ---- ---- Net income $14,724 $22,269 $46,589 $44,291 ------- ------- ------- ------- Non-cash and non-operating items 36,609 61,995 96,235 146,443 ------ ------ ------ ------- - Amortization and provisions 16,030 25,990 45,555 72,681 -Equity awards compensation expense (1) 13,965 22,028 30,030 51,887 - Interest accrued and non-cash financial income and expense (960) (25) 638 7 - Change in deferred taxes (3,121) (8,164) (7,545) (20,569) - Income tax for the period 10,695 16,022 27,557 36,293 - Other - 6,144 - 6,144 ----- ----- Changes in working capital related to operating activities 4,576 (12,372) (22,860) 13,418 ----- ------- ------- ------ -(Increase)/decrease in trade receivables (2,160) (991) (4,528) 35,220 -Increase/(decrease) in trade payables 11,218 (5,031) (3,931) (31,284) -(Increase)/decrease in other current assets (2,856) 4,001 (18,633) 6,581 -Increase/(decrease) in other current liabilities (1,626) (10,351) 4,232 2,901 ------ ------- ----- ----- Income taxes paid (12,278) (10,165) (38,152) (37,696) ------- ------- ------- ------- CASH FROM OPERATING ACTIVITIES 43,631 61,727 81,812 166,456 ------ ------ ------ ------- Acquisition of intangible assets, property, plant and equipment (15,792) (20,999) (54,970) (74,275) Change in accounts payable related to intangible assets, property, plant and equipment (4,115) (6,774) 570 (8,760) Payments for acquired business, net of cash acquired - 73 (5,074) 1,125 Change in other non-current financial assets (377) (157) 197 1,117 ---- ---- --- ----- CASH USED FOR INVESTING ACTIVITIES (20,284) (27,857) (59,277) (80,793) ------- ------- ------- ------- Issuance of long-term borrowings 739 2,220 3,798 3,674 Repayment of borrowings 32 (4,672) (5,416) (83,893) Proceeds from capital increase 1,600 5,164 17,182 29,619 Change in other financial liabilities (25) 15,082 (2) (196) 15,346 --- ------ ---- ------ CASH FROM (USED FOR) FINANCING ACTIVITIES 2,346 17,794 15,368 (35,254) ----- ------ ------ ------- CHANGE IN NET CASH AND CASH EQUIVALENTS 25,693 51,664 37,903 50,409 ------ ------ ------ ------ Net cash and cash equivalents at beginning of period 377,407 308,185 353,537 270,317 Effect of exchange rates changes on cash and cash equivalents 4,058 (1,866) (2) 15,718 37,257 ----- ------ ------ ------ Net cash and cash equivalents at end of period $407,158 $357,983 $407,158 $357,983 -------- -------- -------- --------
(1) Of which $13.1 million and $21.4 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended September 30, 2016 and 2017, respectively, and $28.6 million and $50.7 million for the nine month period ended September 30, 2016 and 2017, respectively. (2) During the three months ended September 30, 2017, the Company reported the cash impact of the settlement of hedging derivatives in cash from (used for) financing activities in the unaudited consolidated statements of cash flows. This resulted in a movement of $6.0 million from the line "Effect of exchange rates changes on cash and cash equivalents" to "Change in other financial liabilities" for the quarter ended September 30, 2017.
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, 2016 2017 2016 2017 ---- ---- ---- ---- CASH FROM OPERATING ACTIVITIES $43,631 $61,727 $81,812 $166,456 ------- ------- ------- -------- Acquisition of intangible assets, property, plant and equipment (15,792) (20,999) (54,970) (74,275) Change in accounts payable related to intangible assets, property, plant and equipment (4,115) (6,774) 570 (8,760) ------ ------ --- ------ FREE CASH FLOW (1) $23,724 $33,954 $27,412 $83,421 ------- ------- ------- -------
(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 Nine Months Ended ------------------ ----------------- September 30, September 30, Region 2016 2017 YoY YoY 2016 2017 YoY YoY Change Change at Change Change at Constant Constant Currency Currency -------- Revenue Americas $160,739 $228,326 42% 41% $464,435 $665,731 43% 42% EMEA 157,921 207,168 31% 26% 471,226 587,942 25% 27% Asia-Pacific 105,207 128,479 22% 29% 296,660 368,988 24% 27% Total 423,867 563,973 33% 32% 1,232,321 1,622,661 32% 32% === === === === Traffic acquisition costs Americas (97,239) (141,869) 46% 45% (284,728) (416,025) 46% 45% EMEA (87,092) (115,446) 33% 27% (265,097) (329,635) 24% 26% Asia-Pacific (62,979) (72,261) 15% 21% (177,209) (212,809) 20% 23% Total (247,310) (329,576) 33% 33% (727,034) (958,469) 32% 33% === === === === Revenue ex-TAC (1) Americas 63,500 86,457 36% 35% 179,707 249,706 39% 38% EMEA 70,829 91,722 29% 24% 206,129 258,307 25% 27% Asia-Pacific 42,228 56,218 33% 40% 119,451 156,179 31% 33% Total $176,557 $234,397 33% 32% $505,287 $664,192 31% 32% === === === ===
(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 Nine Months Ended ------------------ ----------------- September 30, September 30, ------------- 2016 2017 2016 2017 ---- ---- ---- ---- Net income $14,724 $22,269 $46,589 $44,291 Adjustments: Financial (income) expense 570 2,886 1,982 7,313 --- ----- ----- ----- Provision for income taxes 7,574 7,858 19,968 15,724 ----- ----- ------ ------ Equity awards compensation expense 13,965 22,028 30,030 51,887 ------ ------ ------ ------ Research and development 4,667 6,361 9,248 14,738 Sales and operations 5,143 9,897 11,021 23,009 General and administrative 4,155 5,770 9,761 14,140 ----- ----- ----- ------ Pension service costs 132 320 392 910 --- --- --- --- Research and development 55 161 160 459 Sales and operations 38 65 107 184 General and administrative 39 94 125 267 --- --- --- --- Depreciation and amortization expense 14,771 23,755 40,588 66,232 ------ ------ ------ ------ Cost of revenue 10,406 14,320 27,846 38,419 Research and development 1,640 2,822 5,105 8,857 Sales and operations 1,813 5,102 5,604 14,988 General and administrative 912 1,511 2,033 3,968 --- ----- ----- ----- Acquisition-related costs 1,793 - 1,941 - ----- --- ----- --- General and administrative 1,793 - 1,941 - ----- --- ----- --- Acquisition-related deferred price consideration 3 - 88 - --- --- --- --- Research and development 3 - 88 - Restructuring - - - 3,299 --- --- --- ----- Cost of revenue - - - 2,497 Sales and operations - - - 690 General and administrative - - - 112 --- --- --- --- Total net adjustments 38,808 56,847 94,989 145,365 ------ ------ ------ ------- Adjusted EBITDA(1) $53,532 $79,116 $141,578 $189,656 ------- ------- -------- --------
(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 Nine Months Ended ------------------ ----------------- September 30, September 30, 2016 2017 2016 2017 ---- ---- ---- ---- Research and Development expenses $(30,701) $(43,860) $(88,097) $(126,992) Equity awards compensation expense 4,667 6,361 9,248 14,738 Depreciation and Amortization expense 1,640 2,822 5,105 8,857 Pension service costs 55 161 160 459 Acquisition-related deferred price consideration 3 - 88 - --- --- --- --- Non GAAP -Research and Development expenses (24,336) (34,516) (73,496) (102,938) ------- ------- ------- -------- Sales and Operations expenses (68,164) (95,184) (201,862) (283,815) Equity awards compensation expense 5,143 9,897 11,021 23,009 Depreciation and Amortization expense 1,813 5,102 5,604 14,988 Pension service costs 38 65 107 184 Restructuring - - - 690 --- --- --- --- Non GAAP -Sales and Operations expenses (61,170) (80,120) (185,130) (244,944) ------- ------- -------- -------- General and Administrative expenses (32,492) (32,389) (85,839) (96,143) Equity awards compensation expense 4,155 5,770 9,761 14,140 Depreciation and Amortization expense 912 1,511 2,033 3,968 Pension service costs 39 94 125 267 Acquisition related costs 1,793 - 1,941 - Restructuring - - - 112 --- --- --- --- Non GAAP -General and Administrative expenses (25,593) (25,014) (71,979) (77,656) ------- ------- ------- ------- Total Operating expenses (131,357) (171,433) (375,798) (506,950) -------- -------- -------- -------- Equity awards compensation expense 13,965 22,028 30,030 51,887 Depreciation and Amortization expense 4,365 9,435 12,742 27,813 Pension service costs 132 320 392 910 Acquisition-related costs 1,793 - 1,941 - Acquisition-related deferred price consideration 3 - 88 - Restructuring - - - 802 --- --- --- --- Total Non GAAP Operating expenses (1) $(111,099) $(139,650) $(330,605) $(425,538) --------- --------- --------- ---------
(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 Nine Months Ended ------------------ ----------------- September 30, September 30, 2016 2017 2016 2017 ---- ---- ---- ---- Equity awards compensation expense Research and development $4,667 $6,361 $9,248 $14,738 Sales and operations 5,143 9,897 11,021 23,009 General and administrative 4,155 5,770 9,761 14,140 ----- ----- Total equity awards compensation expense 13,965 22,028 30,030 51,887 ====== ====== ====== ====== Pension service costs Research and development 55 161 160 459 Sales and operations 38 65 107 184 General and administrative 39 94 125 267 Total pension service costs 132 320 392 910 === === === === Depreciation and amortization expense Cost of revenue 10,406 14,320 27,846 38,419 Research and development 1,640 2,822 5,105 8,857 Sales and operations 1,813 5,102 5,604 14,988 General and administrative 912 1,511 2,033 3,968 Total depreciation and amortization expense 14,771 23,755 40,588 66,232 ====== ====== ====== ====== Acquisition-related costs General and administrative 1,793 - 1,941 - Total acquisition-related costs 1,793 - 1,941 - ===== === ===== === Acquisition-related deferred price consideration Research and development 3 - 88 - Total acquisition-related deferred price consideration 3 - 88 - === === === === Restructuring Cost of revenue - - - 2,497 Sales and operations - - - 690 General and administrative - - - 112 Total restructuring $ - $ - $ - $3,299 === === === === === === ======
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, 2016 2017 2016 2017 ---- ---- ---- ---- Net income $14,724 $22,269 $46,589 $44,291 Adjustments: Equity awards compensation expense 13,965 22,028 30,030 51,887 Amortization of acquisition- related intangible assets 943 4,428 3,145 13,879 Acquisition-related costs 1,793 - 1,941 - Acquisition-related deferred price consideration 3 - 88 - Restructuring costs - - - 3,299 Tax impact of the above adjustments (129) (4,309) (516) (11,880) Total net adjustments 16,575 22,147 34,688 57,185 ------ ------ ------ Adjusted net income(1) $31,299 $44,416 $81,277 $101,476 ======= ======= ======= ======== Weighted average shares outstanding - Basic 63,628,351 65,412,326 63,163,922 64,881,751 - Diluted 65,816,422 68,200,343 65,429,757 67,876,791 Adjusted net income per share - Basic $0.49 $0.68 $1.29 $1.56 ===== ===== ===== ===== - Diluted $0.48 $0.65 $1.24 $1.50 ===== ===== ===== =====
(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 Nine Months Ended ------------------ ----------------- September 30, September 30, 2016 2017 YoY 2016 2017 YoY Change Change ---- ---- ------- ---- ---- ------- Revenue as reported $423,867 $563,973 33% $1,232,321 $1,622,661 32% Conversion impact U.S. dollar/other currencies (2,509) 10,107 Revenue at constant currency(1) 423,867 561,464 32% 1,232,321 1,632,768 32% ------- ------- --- --------- --------- --- Traffic acquisition costs as reported (247,310) (329,576) 33% (727,034) (958,469) 32% Conversion impact U.S. dollar/other currencies 1,299 (6,074) Traffic Acquisition Costs at constant currency(1) (247,310) (328,277) 33% (727,034) (964,543) 33% -------- -------- --- -------- -------- --- Revenue ex-TAC as reported(2) 176,557 234,397 33% 505,287 664,192 31% Conversion impact U.S. dollar/other currencies (1,210) 4,033 Revenue ex-TAC at constant currency(2) 176,557 233,187 32% 505,287 668,225 32% ------- ------- --- ------- ------- --- Revenue ex- TAC(2)/Revenue as reported 42% 42% 41% 41% Other cost of revenue as reported (22,332) (29,951) 34% (60,950) (89,914) 48% Conversion impact U.S. dollar/other currencies (146) (973) Other cost of revenue at constant currency(1) (22,332) (30,097) 35% (60,950) (90,887) 49% ------- ------- --- ------- ------- --- Adjusted EBITDA(3) 53,532 79,116 48% 141,578 189,656 34% Conversion impact U.S. dollar/other currencies (1,414) 1,189 ------ ----- Adjusted EBITDA(3) at constant currency(1) $53,532 $77,702 45% $141,578 $190,845 35% ------- ------- --- -------- -------- ---
(1) Information herein with respect to results presented on a constant currency basis is computed by applying prior period average exchange rates to current period results. We have included results on a constant currency basis because it is a key measure used by our management and Board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. The table above reconciles the actual results presented in this section with the results presented on a constant currency basis. (2) Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Revenue ex-TAC by Region to Revenue by Region" for a reconciliation of Revenue Ex-TAC to revenue. (3) Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Adjusted EBITDA to Net Income" for a reconciliation of Adjusted EBITDA to net income.
CRITEO S.A. Information on Share Count (unaudited) Nine Months Ended ----------------- September 30, 2016 2017 ---- ---- Shares outstanding as at January 1, 62,470,881 63,978,204 Weighted average number of shares issued during the period 693,041 903,547 Basic number of shares -Basic EPS basis 63,163,922 64,881,751 ----------------------------- ---------- ---------- Dilutive effect of share options, warrants, employee warrants -Treasury method 2,265,835 2,995,040 Diluted number of shares - Diluted EPS basis 65,429,757 67,876,791 -------------------------- ========== ========== Shares outstanding as of September 30, 63,760,491 65,551,174 ------------------------ ---------- ---------- Total dilutive effect of share options, warrants, employee warrants 8,165,801 8,194,498 Fully diluted shares as of September 30, 71,926,292 73,745,672 -------------------------- ========== ==========
CRITEO S.A. Supplemental Financial Information and Operating Metrics (U.S. dollars in thousands except where stated) (unaudited) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 YoY QoQ 2015 2016 2016 2016 2016 2017 2017 2017 Change Change ---- ---- ---- ---- ---- ---- ---- ---- ------ Clients 10,198 10,962 11,874 12,882 14,468 15,423 16,370 17,299 34% 6% Revenue 397,018 401,253 407,201 423,867 566,825 516,667 542,022 563,973 33% 4% Americas 170,133 147,174 156,522 160,739 266,438 208,013 229,392 228,326 42% -% EMEA 144,905 159,405 153,899 157,921 189,298 189,092 191,682 207,168 31% 8% APAC 81,980 94,674 96,780 105,207 111,089 119,562 120,948 128,479 22% 6% TAC (237,056) (238,755) (240,969) (247,310) (341,877) (306,693) (322,200) (329,576) 33% 2% Americas (104,646) (90,929) (96,560) (97,239) (167,046) (128,867) (145,289) (141,869) 46% (2)% EMEA (82,905) (91,185) (86,820) (87,092) (108,567) (107,583) (106,605) (115,446) 33% 8% APAC (49,505) (56,641) (57,589) (62,979) (66,264) (70,243) (70,306) (72,261) 15% 3% Revenue ex- 159,962 162,498 166,232 176,557 224,948 209,974 219,822 234,397 33% 7% TAC Americas 65,487 56,245 59,962 63,500 99,391 79,146 84,103 86,457 36% 3% EMEA 62,000 68,220 67,079 70,829 80,731 81,509 85,077 91,722 29% 8% APAC 32,475 38,033 39,191 42,228 44,826 49,319 50,642 56,218 33% 11% Cash flow 66,706 18,907 19,274 43,631 71,658 44,238 60,491 61,727 41% 2% from operating activities Capital 19,205 12,109 22,386 19,907 22,981 28,206 27,055 27,773 40% 3% expenditures Net cash 353,537 386,110 377,407 407,158 270,318 303,813 308,185 357,983 (12)% 16% position Days Sales 56 57 56 53 56 57 56 Outstanding (days - end of month)(1) -----------
(1) Due to the conversion from IFRS (euros) to U.S. GAAP (U.S. dollars), the Days Sales Outstanding for historic quarters has not been recalculated and is not available.
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SOURCE Criteo S.A.