Criteo Reports Record Results For The Fourth Quarter And Fiscal Year 2017

NEW YORK – February 14, 2018 – Criteo S.A. (NASDAQ: CRTO), the leading commerce marketing technology company, today announced financial results for the fourth quarter and fiscal year ended December 31, 2017.

Q4 2017

  • Revenue increased 19% (or 16% at constant currency1) to $674 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, grew 23% (or 20% at constant currency) to $277 million, or 41% of revenue.
  • Adjusted EBITDA2 grew 45% (or 36% at constant currency) to $120 million, or 43% of Revenue ex-TAC.
  • Cash flow from operating activities increased 10% to $79 million.
  • Free Cash Flow2 increased 10% to $54 million.
  • Net income increased 29% to $52 million.
  • Adjusted net income per diluted share2 increased 44% to $1.21.

Fiscal Year 2017

  • Revenue increased 28% (or 27% at constant currency) to $2,297 million.
  • Revenue ex-TAC grew 29% (or 29% at constant currency) to $941 million, or 41% of revenue. 
  • Adjusted EBITDA grew 38% (or 35% at constant currency) to $310 million, or 33% of Revenue ex-TAC.
  • Cash flow from operating activities increased 60% to $245 million.
  • Free Cash Flow increased 80% to $137 million.
  • Net income increased 11% to $97 million.
  • Net income per diluted share increased 30% to $2.70.

“Our business is seeing strong momentum, in particular in the U.S.,” said Eric Eichmann, CEO. “This good traction, combined with the growing adoption of our new products, positions us well for 2018 and beyond.”

“We delivered another year of strong growth, increasing profitability and cash flow,” said Benoit Fouilland, CFO. “Our powerful financial model and effective investment approach make me confident for the future.”

Operating Highlights

  • Same-client Revenue ex-TAC3, including all products, increased 6% at constant currency, driven by better technology and inventory access and more products.
  • Our new beta products launched in October 2017, Criteo Customer Acquisition and Criteo Audience Match, generated approximately $3 million in Revenue ex-TAC in Q4.
  • We added a total of 820 net clients in the quarter, ending the year with over 18,000 commerce and brand clients, while maintaining the client retention rate at close to 90% for all products.
  • Clients giving us permission to share their data within the Interest Map generated 43% of Revenue ex-TAC.
  • Criteo Direct Bidder, our header bidding technology, is now connected to 1,500 large publishers.
  • We launched Criteo Reseller Program, allowing marketplaces to offer Criteo Dynamic Retargeting to their own sellers.

Revenue and Revenue ex-TAC

Q4 2017
Revenue grew 19%, or 16% at constant currency, to $674 million (Q4 2016: $567 million). Revenue ex-TAC grew 23%, or 20% at constant currency, to $277 million (Q4 2016: $225 million). This increase was primarily driven by continued innovation, improved access to publisher inventory and new clients across regions and products. Revenue ex-TAC margin as a percentage of revenue was 41%, in line with expectations and the prior year.

  • In the Americas, Revenue ex-TAC grew 22%, or 22% at constant currency, to $121 million and represented 44% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 24%, or 16% at constant currency, to $100 million and represented 36% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 23%, or 25% at constant currency, to $55 million and represented 20% of total Revenue ex-TAC.

Fiscal Year 2017
Revenue grew 28%, or 27% at constant currency, to $2,297 million (2016: $1,799 million). Revenue ex-TAC grew 29%, or 29% at constant currency, to $941 million (2016: $730 million). Revenue ex-TAC margin as a percentage of revenue was 41%, in line with expectations and growing by one percentage point compared with the prior year.

  • In the Americas, Revenue ex-TAC grew 33%, or 32% at constant currency, to $371 million and represented 39% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 25%, or 24% at constant currency, to $359 million and represented 38% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 29%, or 31% at constant currency, to $211 million and represented 22% of total Revenue ex-TAC.

Net Income and Adjusted Net Income

Q4 2017
Net income increased 29% to $52 million (Q4 2016: $41 million). Net income available to shareholders of Criteo S.A. was $53 million, or $0.78 per share on a diluted basis (Q4 2016: $39 million, or $0.60 per share on a diluted basis). Adjusted net income, or net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, increased 47% to $82 million, or $1.21 per share on a diluted basis (Q4 2016: $55 million, or $0.84 per share on a diluted basis).

Fiscal Year 2017
Net income increased 11% to $97 million (2016: $87 million). Net income available to shareholders of Criteo S.A. was $91 million, or $1.34 per share on a diluted basis (2016: $82 million, or $1.25 per share on a diluted basis). Adjusted net income increased 34% to $183 million, or $2.70 per share on a diluted basis (2016: $137 million, or $2.08 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Q4 2017
Adjusted EBITDA grew 45%, or 36% at constant currency, to $120 million (Q4 2016: $83 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 and a stronger focus on productivity across the organization. Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 43% (Q4 2016: 37%).

Operating expenses increased 18% to $175 million (Q4 2016: $148 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 10% to $141 million (Q4 2016: $128 million). This reflects a more selective investment approach and an effective management of operating expenses, with a stronger focus on productivity across the organization.

Fiscal Year 2017
Adjusted EBITDA grew 38%, or 35% at constant currency, to $310 million (2016: $225 million). Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 33% (2016: 31%).

Operating expenses increased 30% to $682 million (2016: $524 million). Non-GAAP Operating Expenses, increased 23% to $566 million (2016: $459 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (16%), Sales and Operations (7%) and General and Administrative (14%).

Cash Flow and Cash Position

Q4 2017
Cash flow from operating activities increased 10% to $79 million (Q4 2016: $72 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 10% to $54 million (Q4 2016: $49 million).

Fiscal Year 2017
Cash flow from operating activities increased 60% to $245 million (2016: $153 million). Free Cash Flow grew 80% to $137 million (2016: $76 million). Total cash and cash equivalents were $414 million as of December 31, 2017 (December 31, 2016: $270 million).

Business Outlook

The following forward-looking statements reflect Criteo’s expectations as of February 14, 2018.

First Quarter 2018 Guidance:

  • We expect Revenue ex-TAC to be between $230 million and $235 million.
  • We expect Adjusted EBITDA to be between $60 million and $65 million.

Fiscal Year 2018 Guidance:

  • We expect Revenue ex-TAC growth for fiscal year 2018 to be between 3% and 8% at constant currency.
  • We expect Adjusted EBITDA margin for fiscal 2018 to between 28% and 30% of Revenue ex-TAC.

The above guidance for the quarter ending March 31, 2018, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.813, a U.S. dollar-Japanese Yen rate of 110, a U.S. dollar-British pound rate of 0.72 and a U.S. dollar-Brazilian real rate of 3.26.

The above guidance for the fiscal year ending December 31, 2018, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.840, a U.S. dollar-Japanese Yen rate of 114, a U.S. dollar-British pound rate of 0.76 and a U.S. dollar-Brazilian real rate of 3.30.

The above guidance assumes no acquisitions are completed during the quarter ending March 31, 2018, and the fiscal year ending December 31, 2018.

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 March 31, 2018 and the fiscal year ending December 31, 2018, 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, and the Quarterly Report on Form 10-Q filed with the SEC on November 8, 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, February 14, 2018, at 8:00 AM ET, 2:00 PM CET. The conference call will be webcast live on the Company’s website http://ir.criteo.com and will be available for replay.

Conference call details:

  • U.S. callers: +1 855 209 8212
  • International callers: +1 412 317 0788 or +33 1 76 74 05 02
    Please ask to be joined into the “Criteo S.A.” call.

About Criteo

Criteo (NASDAQ: CRTO) the leader in commerce marketing, is building the highest performing and open commerce marketing ecosystem to drive profits and sales for retailers and brands. 2,800 Criteo team members partner with over 18,000 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 $600 billion in annual commerce sales data.

For more information, please visit www.criteo.com.

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

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