NEW YORK – August 4, 2015 – Criteo S.A. (NASDAQ: CRTO), the performance marketing technology company, today announced its financial results for the second quarter that ended June 30, 2015.
“We believe we are well positioned to capture the massive opportunity ahead of us,” said JB Rudelle, co-founder & CEO.”
“We have successfully executed on our growth plans for seven quarters in a row,” said Benoit Fouilland, Chief Financial Officer, “and we will continue to invest in 2015 to maximize our growth potential.”
Revenue ex-TAC grew 65% in the second quarter 2015, or 52% at constant currency, to €110 million, compared with €67 million in the second quarter 2014. This year-over-year performance was primarily driven by the continued roll-out of our improved technology on all screens, an all-time high number of client additions, and the expansion of our publisher relationships.
Revenue ex-TAC margin in the second quarter 2015 was 40.8%, in line with prior quarters.
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA for the second quarter 2015 was €22 million, an increase of 64%, or 60% at constant currency, compared with €13 million in the second quarter 2014. This year-over-year increase in Adjusted EBITDA is primarily the result of the strong Revenue ex-TAC performance in the quarter.
Operating expenses in the second quarter 2015 increased by 68% to €90 million compared with the second quarter 2014. Operating expenses in the second quarter 2015, excluding the impact of share-based compensation, pension costs, depreciation and amortization and acquisition-related deferred price consideration, which we refer to as Non-IFRS Operating Expenses, were €82 million, an increase of 67% compared with the second quarter 2014. This increase is primarily related to headcount growth in Research & Development (42% year-over year) and Sales & Operations (48% year-over-year), as we continued to scale the organization. We intend to continue to invest significantly into Research & Development and Sales & Operations for the remainder of the year to support current and anticipated future growth
Net Income and Adjusted Net Income
Net income in the second quarter 2015 was €4 million compared with €2 million in the second quarter 2014. Net income available to shareholders of Criteo S.A. in the second quarter 2015 was €3 million, or €0.05 per diluted share, compared with €2 million, or €0.04 per diluted share, in the second quarter 2014.
Adjusted Net Income, or net income adjusted to eliminate the impact of share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related deferred price consideration, and the tax impact of these adjustments, in the second quarter 2015 was €10 million, or €0.15 per diluted share, representing a 78% increase compared with €6 million, or €0.09 per diluted share, in the second quarter 2014.
Cash Flow and Cash Position
Cash flow from operating activities in the second quarter 2015 was €11 million, compared with €11 million in the second quarter 2014. This is primarily due to a reversal of the exceptionally positive change in working capital in the first quarter, in part due to a catch up in trade payables and a less favorable working capital seasonality in the second quarter. In the first half 2015, cash flow from operating activities increased 110% to €47 million, compared with the first half 2014.
Total cash, cash equivalents and short-term investments were €287 million as of June 30, 2015. This represented a decrease of €3 million compared with December 31, 2014, primarily resulting from €19 million in Free Cash Flow generation and €3 million positive cash flow from financing activities over the period. This cash flow was more than offset by the cash consideration paid for the acquisition of DataPop, Inc. in February 2015, a €5 million outflow of other non-current financial assets as well as €2 million negative impact of changes in foreign exchange rates over the period.
The following forward-looking statements reflect Criteo’s expectations as of August 4, 2015
Third Quarter 2015 Guidance:
Fiscal Year 2015 Guidance:
The above guidance assumes no additional acquisitions are completed during the third quarter or the fiscal year 2015.
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, Revenue ex-TAC by Region, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and Non-IFRS Operating Expenses. These measures are not calculated in accordance with the International Financial Reporting Standards, as issued by the International Accounting Standards Board (IFRS).
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 core geographies. Revenue ex-TAC and Revenue ex-TAC by region 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 core business and across our core geographies. Accordingly, we believe that Revenue ex-TAC and Revenue ex-TAC by Region 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 income (loss) from operations before interest, taxes, depreciation and amortization, adjusted to eliminate the impact of share-based compensation expense, pension service 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 by eliminating non-cash compensation expense, pension costs and acquisition-related deferred price consideration, 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, amortization of acquisition-related intangible assets, acquisition-related deferred price consideration, and the tax impact of these adjustments. Adjusted Net Income 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 by eliminating share-based compensation expense, amortization of acquisition-related intangible assets and acquisition-related deferred price consideration and the tax impact of these adjustments, 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 the market generally in understanding and evaluating our results of operations 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, Revenue ex-TAC by Region to revenue by region, Adjusted EBITDA to net income, Adjusted Net Income to net income and Free Cash Flow to cash flow from operating activities, the most comparable IFRS measurements. Our use of non-IFRS financial measures has limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under IFRS. 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 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 other IFRS-based financial performance measures, such as revenue, net income and our other financial results.
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 IFRS. 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 tables below.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including projected financial results for the quarter ending September 30, 2015 and the fiscal year ending December 31, 2015, 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: recent growth rates not being indicative of future growth, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, the investments in new business opportunities and the timing of these investments, the impact of competition, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, uncertainty regarding international growth and expansion, 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 20-F filed with the SEC on March 27, 2015, as well as future filings and reports by the Company. 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 will hold a conference call today, August 4, 2015, at 8:00am ET, 2:00pm CET, to discuss second quarter 2015 operating and financial results, as well as other forward-looking information about the business.
Conference call details are:
U.S. callers: +1 212 444 0895, Conference ID: 5519209
International callers: +33 1 76 77 22 30, Conference ID: 5519209
The conference call will also be webcast simultaneously at ir.criteo.com.
(1) Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2014 average exchange rates to 2015 figures.
Criteo Investor Relations: Edouard Lassalle, Head of IR, firstname.lastname@example.org
Friederike Edelmann, email@example.com
Criteo Public Relations: Emma Ferns, Global PR Director, firstname.lastname@example.org