Criteo Reports Third Quarter 2013 Financial Results

Criteo logo

PARIS, Nov. 14, 2013 (GLOBE NEWSWIRE) -- Criteo S.A. (Nasdaq:CRTO), a leading global technology company that specializes in performance display advertising, today announced its financial results for the third quarter ended September 30, 2013.

  • Revenue increased 57.8% (or 71.8% at constant currencies1) to €113.8 million in the third quarter 2013, compared with €72.1 million in the third quarter 2012.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, grew 59.7% (or 73.3% at constant currencies) to €46.8 million, or 41.1% of revenue, in the third quarter 2013, compared with €29.3 million, or 40.6% of revenue, in the third quarter 2012, primarily driven by our continued rapid global expansion.
  • Net income increased 90.4% to €3.0 million compared with €1.6 million in the third quarter 2012.
  • Adjusted EBITDA for the third quarter 2013 was €11.6 million, an increase of 163.8% compared with €4.4 million in the third quarter 2012.
  • Cash flow generated by operating activities increased by €6.9 million to €3.7 million in the third quarter 2013, compared with a negative €3.1 million in the third quarter 2012.

"We had a very solid quarter which came out at the higher end of our expectations, as our value proposition continued to demonstrate strong adoption and retention momentum within our client base," said JB Rudelle, co-founder and CEO of Criteo. "Our predictive technology coupled with our large volumes of granular shopping data enabled more e-commerce companies to engage and convert their customers on all devices. Our business grew across all geographies this quarter and, as we further expand our product offering on mobile devices and execute on our growth strategies, we believe there continues to be a tremendous market potential ahead of us."

Operating Highlights

  • Our total number of clients reached 4,631 in the third quarter, representing a 62% growth over the third quarter 2012.
  • During the third quarter, our solution was live on 42 geographic markets worldwide, representing an additional 5 markets compared with the second quarter.
  • We expanded our international footprint by opening two new fully-owned subsidiaries in Beijing, China and in Singapore.
  • We further broadened our strategic relationship with Yahoo! Japan by accessing more advertising impressions on Yahoo! Japan premium properties.
  • Our solution was live on Facebook Exchange® on an increasing number of markets worldwide at the end of the third quarter 2013 compared with the second quarter.

Acquisition of Ad-X Limited

On July 12, 2013, we closed the acquisition of 100% of the share capital of Ad-X Ltd on a fully diluted basis for €5.5 million in upfront cash plus €3.7 million payable in cash over a 3-year period. Ad-X Ltd is a mobile technology company, that allows brands and agencies to track, monitor and report advertising performance on mobile applications across hundreds of advertising solutions worldwide. The contribution of Ad-X to revenue and revenue ex-TAC was not material in the third quarter 2013.

Revenue ex-TAC

Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, grew 59.7% or 73.3% at constant currencies to €46.8 million in the third quarter, compared with €29.3 million in the third quarter 2012, primarily driven by our continued rapid geographic expansion.

  • In the Americas, revenue ex-TAC grew by 59.8% to €11.9 million over the comparable quarter in 2012. The Americas region represented 25% of our global revenue ex-TAC.
  • Revenue ex-TAC in our historic region, EMEA, increased by 44.8% to €25.4 million over the same period last year. EMEA represented 54% of our global revenue ex-TAC.
  • Revenue ex-TAC in Asia-Pacific increased by 118.9% in the quarter to €9.6 million. Asia-Pacific accounted for above 20% of total revenue ex-TAC.

Revenue ex-TAC margin as a percentage of revenue was at 41.1% in the third quarter, a 0.5 point improvement compared with 40.6% in the third quarter of 2012.

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA for the third quarter 2013 was €11.6 million, an increase of 163.8% compared with €4.4 million in the third quarter 2012, despite significant investments made over the period.

Operating expenses increased by 51.4% to €36.4 million in the third quarter of 2013, compared with the third quarter 2012. Excluding the impact of share-based compensation, pension costs, depreciation and amortization and acquisition-related deferred price consideration, which we refer to as on a non-IFRS basis, our operating expenses were at €32.5 million in the third quarter of 2013, an increase of 42.6% compared with the third quarter of 2012. This increase in operating expenses over the period was in particular related to headcount growth in Research & Development, as we accelerated our investments to further develop our technology platform to support future growth. On a non-IFRS basis, our Sales & Operations and General & Administrative expenses expressed as a percentage of revenue decreased by 2.2 points and 2.0 points respectively over the period.

Net Income and Adjusted Net Income

Net income was €3.0 million for the third quarter of 2013, representing a 90.4% increase compared with €1.6 million in the third quarter 2012. Net income available to shareholders of Criteo S.A. for the third quarter of 2013 was €2.8 million, or €0.05 per diluted share, compared with €1.6 million, or €0.03 per diluted share in the third quarter 2012.

Adjusted Net Income, or our net income adjusted to eliminate the impact of share-based compensation expense, was €4.9 million for the third quarter of 2013, representing a 97.2% increase compared with an Adjusted Net Income of €2.5 million for the third quarter of 2012.

Cash Flow and Cash Position

  • Our cash flow generated by operating activities increased by €6.9 million to €3.7 million in the third quarter 2013, compared with a negative €3.1 million in the third quarter 2012.
  • Total cash, cash equivalents and short-term investments were at €39.8 million as of September 30, 2013, representing a decrease of €8.1 million compared with June 30, 2013, primarily the result of our combined capital expenditures and investment in Ad-X Ltd in the quarter, which together represented a cash outflow of €11.0 million.
  • After the close of the third quarter 2013, we received net proceeds of $268.7 million from the closing of our Initial Public Offering on the NASDAQ Global Select Market.

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of November 14, 2013.

Fourth Quarter 2013 Guidance:

  • Revenue ex-TAC for the fourth quarter ending December 31, 2013 is expected to be between €50 million and €52 million.
  • Adjusted EBITDA for the fourth quarter ending December 31, 2013 is expected to be between €10 million and €12 million.

Fiscal Year 2013 Guidance:

  • Revenue ex-TAC for the fiscal year ending December 31, 2013 is expected to be between €174.2 million and €176.2 million.
  • Adjusted EBITDA for the fiscal year ending December 31, 2013 is expected to be between €26.8 million and €28.8 million.

Non-IFRS Financial Measures

This press release and its attachments include the following financial measures defined as non-IFRS financial measures by the U.S. Securities and Exchange Commission (SEC): Revenue ex-TAC, Adjusted EBITDA and Adjusted Net Income. These measures are not calculated in accordance with IFRS.

Revenue ex-TAC is our revenue excluding traffic acquisition costs (TAC) generated over the applicable measurement period. Revenue ex-TAC 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 TAC from revenue can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA is our income from operations before interests, taxes, depreciation and amortization, adjusted to eliminate the impact of share-based compensation expense, pension costs and acquisition-related deferred price consideration. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short‑ and long-term operational plans. In particular, we believe that the elimination of non-cash compensation expense, pension costs and acquisition-related deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.

Adjusted Net Income is our net income adjusted to eliminate the impact of share-based compensation expense. Adjusted Net Income is not a measure calculated in accordance with IFRS. Adjusted Net Income is a key measure 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 share-based compensation expense in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Accordingly, we believe that Revenue-ex TAC, Adjusted EBITDA and Adjusted Net Income provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Please refer to supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Adjusted EBITDA to net income and Adjusted Net Income to net income, the most comparable IFRS measurements. Our use of Revenue ex-TAC, Adjusted EBITDA and Adjusted Net Income have 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 IFRS.

With respect to our expectations under "Business Outlook" above, reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding IFRS 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-IFRS measures, in particular, the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future IFRS financial results.

These measures may be different than non-IFRS financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Explanations of the Company's non-IFRS financial measures and reconciliations of these financial measures to the IFRS financial measures the Company considers most comparable are included in the accompanying relevant tables below.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements that are inherently difficult to predict, including projected financial results for the quarter and the fiscal year ending December 31, 2013, our expectations regarding our market opportunity and other statements that are not historical facts, which 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: our recent growth rates may not be indicative of our future growth, uncertainty regarding regulatory, legislative or self-regulatory developments regarding internet privacy matters, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand our access to such inventory, the amount that Criteo invests in new business opportunities and the timing of these investments, the impact of competition, our ability to manage our growth, potential fluctuations in operating results, our ability to grow our base of advertising clients, uncertainty regarding our international growth and expansion and the financial impact of our focus on 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 Criteo S.A.'s Securities and Exchange Commission filings and reports, including in the Company's prospectus filed with the SEC on October 30, 2013 and future filings and reports by the Company. Criteo undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations.

Conference Call Information

Criteo will hold a conference call today at 8am ET, 5am PDT, 2pm CET, to discuss Criteo's third quarter 2013 operating and financial results, as well as other forward-looking information about Criteo's business.

Conference call details are:

  • US callers: +1 212 444 0481, Conference ID: 2228510
  • International callers: +33 1 76 77 22 26, Conference ID: 2228510

The conference call will also be webcast simultaneously at http://ir.criteo.com.

About Criteo

Criteo is a leading global technology company that specializes in performance display advertising, working with over 4,000 e-commerce companies around the world. Criteo has over 700 employees in offices across the U.S., Europe and Asia serving more than 35 countries.

For more information, please visit http://www.criteo.com

1 Variations at constant currencies exclude the impact of foreign currency fluctuations and are computed by restating 2013 figures with the 2012 average exchange rates.

CRITEO S.A.
Consolidated Statement of Income
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 Year-over-
year
growth
2012 2013 Year-over-
year
growth
Revenue 72,142 113,811 57.8% 185,285 308,071 66.3%
Cost of revenue
Traffic Acquisition cost (TAC) -42,826 -66,996 56.4% -106,467 -183,918 72.7%
Other cost of revenue -3,150 -4,742 50.5% -7,815 -15,622 99.9%
Gross Profit 26,166 42,073 60.8% 71,003 108,531 52.9%
Research & development expenses -3,647 -9,008 147.0% -10,028 -22,202 121.4%
Sales & operations expenses -14,456 -20,427 41.3% -40,496 -60,510 49.4%
General & administrative expenses -5,906 -6,919 17.2% -12,938 -22,114 70.9%
Total operating expenses -24,009 -36,354 51.4% -63,462 -104,826 65.2%
Income from operations 2,156 5,719 165.3% 7,541 3,705 -50.9%
Financial income (expense) -231 -1,054 356.3% 88 -3,599 -4189.8%
Income before taxes 1,925 4,665 142.3% 7,629 106 -98.6%
Provision for incomes taxes -330 -1,627 393.0% -2,065 -1,981 -4.1%
Net income (loss) 1,596 3,038 90.4% 5,564 -1,875 -133.7%
- Net income available to Shareholders of Criteo SA 1,620 2,818 5,588 -1,981
- Net income available to non-controlling interests -24 220 -24 106
Net income allocated to shareholders per share
- Basic 0.04 € 0.06 € 0.13 € - 0.04 €
- Diluted 0.03 € 0.05 € 0.12 € - 0.04 €
Basic 44,324,379 47,163,824 44,324,379 47,163,824
Diluted 47,646,835 52,081,380 47,646,835 52,081,380
CRITEO S.A.
Consolidated Statement of Financial Position
(Euros in thousands)
(unaudited)
September 30, December 31, September 30,
2012 2012 2013
Goodwill 5,597
Intangible assets 74 721 2,151
Property, plant and equipment 11,080 14,566 22,511
Non-current financial assets 6,665 6,924 7,631
Deferred tax assets 1,260 1,026 2,179
TOTAL NON-CURRENT ASSETS 19,080 23,237 40,068
Trade receivables 50,650 60,685 73,241
Current tax assets 1,667 1,866 6,208
Other current assets 8,538 8,080 18,310
Cash and cash equivalents 40,382 43,262 39,839
TOTAL CURRENT ASSETS 101,237 113,893 137,598
TOTAL ASSETS 120,317 137,130 177,667
Share capital 1,178 1,178 1,182
Additional paid-in capital 46,600 46,542 46,989
Currency translation reserve -320 72 1,110
Consolidated reserves 10,878 11,913 17,341
Retained earnings 5,587 981 -1,982
Equity - attributable to stockholders of Criteo SA 63,922 60,686 64,641
Non-controlling interests -209 -245 -44
TOTAL STOCKHOLDERS' EQUITY 63,713 60,441 64,597
Financial liabilities - non-current portion 1,636 4,181 7,386
Retirement benefit obligation 277 582 857
Deferred tax liabilities 10 15 11
TOTAL NON-CURRENT LIABILITIES 1,923 4,778 8,254
Financial liabilities - current portion 864 2,072 5,018
Bank overdrafts 0 2
Provisions 737 755 875
Trade payables 37,256 50,340 67,003
Current tax liabilities 1,254 3,203 1,295
Other current liabilities 14,570 15,541 30,623
TOTAL CURRENT LIABILITIES 54,682 71,911 104,816
TOTAL LIABILITIES 56,604 76,689 113,069
TOTAL EQUITY AND LIABILITIES 120,317 137,130 177,667
CRITEO S.A.
Consolidated Statement of Cash Flows
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Net income 1,596 3,038 5,563 -1,875
Non-cash and non-operating items 2,537 6,462 8,252 14,988
- Amortization and provisions 1,362 2,993 3,996 8,433
- Stock-based payment expense 873 1,829 2,184 4,544
- Net gain or loss on disposal of non-current assets -30 6 11
- Interest paid 3 7
- Non-cash financial income and expenses 2 4 6 12
- Change in deferred taxes -1,266 -1,266
- Income tax for the period 330 2,893 2,065 3,247
Changes in working capital related to operating activities -4,791 -2,458 -3,646 9,123
- (Increase) / decrease in trade receivables -13,413 -7,424 -17,793 -15,108
- Increase / (decrease) in trade payables 9,319 2,261 14,849 21,311
- (Increase) / decrease in other current assets 1,805 -919 -3,009 -10,399
- Increase / (decrease) in other current liabilities -2,501 3,624 2,307 13,319
Income taxes paid -2,487 -3,311 -5,917 -9,786
CASH FROM (USED FOR) OPERATING ACTIVITIES -3,145 3,731 4,252 12,450
Acquisition of intangible assets, property, plant and equipment -2,347 -5,737 -6,333 -14,816
Proceeds from disposal of intangible assets, property, plant and equipment 70 70
Investments -5,285 -5,285
Sale of investments 38 38 0
Change in other non-current financial assets 488 -5 -5,743 -771
CASH FROM (USED FOR) INVESTING ACTIVITIES -1,821 -10,957 -12,038 -20,802
Issuance of long-term borrowings 2,500 0 2,500 8,000
Repayment of borrowings -1,199 -2,258
Interests paid -3 -7
Proceeds from capital increase 30,164 297 30,164 450
Change in other financial liabilities 0 -180 0
CASH FROM (USED FOR) FINANCING ACTIVITIES 32,664 -905 32,484 6,185
0
CHANGE IN NET CASH & CASH EQUIVALENTS 27,698 -8,131 24,698 -2,167
Net cash & cash equivalents at beginning of period 12,784 47,891 15,685 43,262
Effect of exchange rates changes on cash and cash equivalents -100 78 -2 -1,257
Net cash & cash equivalents at end of period 40,381 39,838 40,381 39,838
CRITEO S.A.
Reconciliation of Revenue ex-TAC by Region to Revenue by Region
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Region 2012 2013 2012 2013
Revenue Americas 18,800 30,473 42,047 84,344
EMEA 43,767 59,732 123,708 167,509
Asia-Pacific 9,575 23,606 19,530 56,218
Total 72,142 113,811 185,285 308,071
Traffic acquisition costs Americas -11,358 -18,577 -24,242 -51,754
EMEA -26,260 -34,374 -71,952 -99,181
Asia-Pacific -5,208 -14,045 -10,273 -32,983
Total -42,826 -66,996 -106,467 -183,918
Revenue ex-TAC Americas 7,442 11,896 17,805 32,590
EMEA 17,507 25,358 51,756 68,328
Asia-Pacific 4,367 9,561 9,257 23,235
Total 29,316 46,815 78,818 124,153
CRITEO S.A.
Reconciliation of Adjusted EBITDA to Net Income
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Reconciliation of Adjusted EBITDA to Net income
Net income (loss) 1,596 3,038 5,564 -1,875
Adjustments:
Financial income (expense) -231 -1,054 88 -3,599
Provision for income taxes -330 -1,627 -2,065 -1,981
Share-based compensation expense -872 -1,829 -2,184 -4,544
Service cost-pension -16 -67 -106 -238
Depreciation and amortization expense -1,340 -2,851 -3,119 -7,220
Acquisition-related deferred price consideration -1,102 -1,102
Total net adjustments -2,789 -8,530 -7,386 -18,684
Adjusted EBITDA 4,385 11,568 12,950 16,809
CRITEO S.A.
Detailed Information on Selected Non-Cash Items
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Share-Based Compensation Expense
Research and development -110 -909 -245 -1,468
Sales and operations -449 -683 -1,151 -1,509
General and administrative -314 -237 -788 -1,567
Total Share-Based Compensation Expense -873 -1,829 -2,184 -4,544
Total Pension costs -16 -67 -106 -238
Depreciation and Amortization Expense
Cost of revenue -1,014 -2,007 -2,345 -5,150
Research and development -33 -168 -114 -397
Sales and operations -274 -516 -588 -1,269
General and administrative -19 -160 -72 -404
Total Depreciation and Amortization Expense -1,340 -2,851 -3,119 -7,220
CRITEO S.A.
Reconciliation of Adjusted Net Income to Net Income
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Net income (loss) 1,596 3,038 5,564 -1,875
Adjustments:
Share-based compensation expense -872 -1,829 -2,184 -4,544
Total net adjustments -872 -1,829 -2,184 -4,544
Adjusted net income (loss) 2,468 4,867 7,748 2,669
CRITEO S.A.
Constant Currency Reconciliation
(Euros in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 Year-
over-
year
growth
2012 2013 Year-
over-
year
growth
Revenue as reported 72,142 113,811 57.8% 185,285 308,071 66.3%
Conversion impact euro/other currencies 10,108 18,030
Revenue at constant currency 72,142 123,919 71.8% 185,285 326,101 76.0%
Traffic acquisition costs as reported -42,826 -66,996 56.4% -106,467 -183,918 72.7%
Conversion impact euro/other currencies -6,108 -10,937
Traffic acquisition costs at constant currency -42,826 -73,104 70.7% -106,467 -194,855 83.0%
Revenue ex-TAC as reported 29,316 46,815 59.7% 78,818 124,153 57.5%
Conversion impact euro/other currencies 4,000 7,093
Revenue ex-TAC at constant currency 29,316 50,815 73.3% 78,818 131,246 66.5%
Other cost of revenue as reported -3,150 -4,742 50.5% -7,815 -15,622 99.9%
Conversion impact euro/other currencies -342 -762
Other cost of revenue at constant currency -3,150 -5,084 61.4% -7,815 -16,384 109.6%
CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(unaudited)
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 YoY
Change
QoQ
Change
Clients 1,335 1,712 2,026 2,447 2,866 3,379 3,811 4,274 4,631 61.6% 8.4%
Revenue ('000 euros) 34,975 48,469 56,493 56,649 72,142 86,571 94,862 99,400 113,811 57.8% 14.5%
Americas 5,365 9,807 10,669 12,577 18,800 25,740 25,025 28,846 30,473 62.1% 5.6%
EMEA 29,434 37,214 42,079 37,863 43,766 48,791 54,434 53,348 59,732 36.5% 12.0%
APAC 176 1,448 3,745 6,209 9,575 12,040 15,403 17,206 23,606 146.5% 37.2%
Revenue ex-TAC ('000 euros) 15,492 21,809 24,646 24,856 29,316 35,331 37,306 40,032 46,815 59.7% 16.9%
Americas 1,997 3,923 4,982 5,381 7,443 9,938 9,570 11,124 11,896 59.8% 6.9%
EMEA 13,359 17,334 17,927 16,324 17,506 20,037 21,163 21,807 25,358 44.9% 16.3%
APAC 136 552 1,737 3,152 4,367 5,355 6,573 7,101 9,561 118.9% 34.6%
Cash flow from operating activities ('000 euros) 1,515 -1,151 3,956 3,441 -3,145 7,561 4,737 4,134 3,731 -218.6% -9.7%
Capital expenditures ('000 euros) 1,258 2,455 1,987 1,999 2,347 7,251 2,489 6,590 5,737 144.5% -12.9%
Net Cash Position ('000 euros) 18,736 15,685 11,571 12,784 40,381 43,262 43,876 47,893 39,839 -1.3% -16.8%
Days Sales Outstanding (days - end of month) 51.3 51.7 57.2 55.6 58.4 57.4 58.1 56.7 55.6 -4.8% -1.9%

CONTACT: Criteo Investor Relations Edouard Lassalle, Criteo, +33 1 70 56 78 03 Denise Garcia, ICR, Inc., +1 203 682 8335

Source:Criteo