EX-99.1 2 exhibit991q12019.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
logoq1a07.jpg


CRITEO REPORTS RESULTS FOR THE FIRST QUARTER 2019,
ADJUSTS 2019 GROWTH OUTLOOK
AND MAINTAINS OUTLOOK FOR 2019 PROFITABILITY MARGIN



NEW YORK - April 30, 2019 - Criteo S.A. (NASDAQ: CRTO), the advertising platform for the open Internet, today announced financial results for the first quarter ended March 31, 2019.

•
Revenue increased 3% at constant currency1 to $558 million.
•
Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, increased 2% at constant currency to $236 million, or 42.2% of revenue.
•
Adjusted EBITDA2 decreased 6% at constant currency to $69 million, or 29.2% of Revenue ex-TAC.
•
Cash flow from operating activities decreased 20% to $67 million.
•
Free Cash Flow2 decreased 16% to $44 million.
•
Net income increased 1% to $21 million.
•
Adjusted net income per diluted share2 was $0.60, in line with the prior year period.
•
Due to identified execution issues, we are taking a more modest approach to our 2019 growth outlook.
•
We maintain our 2019 outlook for Adjusted EBITDA margin, highlighting our commitment to profitability.


"While making progress on several priorities, we recognize 2019 is another transition year," said JB Rudelle, CEO. "We are working hard to accelerate our transformation."


"We maintain our Adjusted EBITDA margin outlook for 2019", said Benoit Fouilland, CFO. "This highlights our commitment to profitability."



Operating Highlights

•
Revenue ex-TAC from new products grew 74% year over year to 9% of total.
•
Customer Acquisition, Audience Match, Retail Media's transactional-Saas offering all grew triple digits.
•
Same-client Revenue ex-TAC3 decreased less than 1% at constant currency.
•
We maintained client retention at close to 90% for all products.
•
Revenue ex-TAC from mobile apps grew 32% year-over-year.
•
Our header-bidding technology now connects to over 3,700 publishers and 135 app developers.
•
We further enriched our client platform with new self-service tools, including analytics and an audience creation feature.
•
We took effective measures to drive employee attrition down.





___________________________________________________ 
1 Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2018 average exchange rates for the relevant period to 2019 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.

1



Revenue and Revenue ex-TAC

Revenue declined 1%, and increased 3% at constant currency, to $558 million (Q1 2018: $564 million). Revenue ex-TAC decreased 2%, and increased 2% at constant currency, to $236 million (Q1 2018: $240 million). This increase at constant currency was primarily driven by the broader adoption of our new solutions by existing clients. Revenue ex-TAC margin as a percentage of revenue was 42.2% (Q1 2018: 42.6%).

•
In the Americas, Revenue ex-TAC grew 6%, or 8% at constant currency, to $86 million and represented 37% of total Revenue ex-TAC.
•
In EMEA, Revenue ex-TAC declined 10%, or 2% at constant currency, to $92 million and represented 39% of total Revenue ex-TAC.
•
In Asia-Pacific, Revenue ex-TAC grew 1%, or 3% at constant currency, to $57 million and represented 24% of total Revenue ex-TAC.



Net Income and Adjusted Net Income

Net income increased 1% to $21 million (Q1 2018: $21 million). Net income available to shareholders of Criteo S.A. was $19 million, or $0.29 per share on a diluted basis (Q1 2018: $20 million, or $0.29 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, decreased 2% to $40 million, or $0.60 per share on a diluted basis (Q1 2018: $41 million, or $0.60 per share on a diluted basis).


Adjusted EBITDA and Operating Expenses

Adjusted EBITDA declined 12%, or 6% at constant currency, to $69 million (Q1 2018: $78 million). This decrease in Adjusted EBITDA was primarily driven by a slight increase in Non-GAAP expenses, as well as proceeds from the disposal of the HookLogic Travel business in the prior-year period. Adjusted EBITDA margin as a percentage of Revenue ex-TAC was 29.2% (Q1 2018: 32.4%), a 320-basis point decrease year over year.

Operating expenses were $176 million (Q1 2018: $176 million), in line with the prior-year period. 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 2% to $150 million (Q1 2018: $148 million).


Cash Flow and Cash Position

Cash flow from operating activities decreased 20% to $67 million (Q1 2018: $85 million). Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment, decreased 16% to $44 million (Q1 2018: $52 million), representing 63% of Adjusted EBITDA (Q1 2018: 67%).







2


Business Outlook

We believe that, due to delays in execution, some of the new capabilities we are building to achieve our company transformation are going to take more time to yield expected benefits. As a result, we are taking a more modest approach to our 2019 growth outlook but maintain our 2019 outlook for profitability margin, highlighting our commitment to profitability.

The following forward-looking statements reflect Criteo’s expectations as of April 30, 2019.

Second quarter 2019 guidance:
•
We expect Revenue ex-TAC to be between $221 million and $224 million. This implies a constant-currency growth of -2% to 0%.
•
We expect Adjusted EBITDA to be between $50 million and $53 million.

Fiscal year 2019 guidance:
•
We now expect Revenue ex-TAC growth for fiscal year 2019 to be between 0% and 2% at constant currency.
•
Despite the lower guidance for Revenue ex-TAC, we maintain our expectation for an Adjusted EBITDA margin of approximately 30% of Revenue ex-TAC for fiscal year 2019.

The above guidance for the quarter ending June 30, 2019 and the fiscal year ending December 31, 2019, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.88 a U.S. dollar-Japanese Yen rate of 110, a U.S. dollar-British pound rate of 0.76 and a U.S. dollar-Brazilian real rate of 3.81.

The above guidance assumes no acquisitions are completed during the quarter ending June 30, 2019, and the fiscal year ending December 31, 2019.

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.

3


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.


4


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 June 30, 2019 and the fiscal year ending December 31, 2019, 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 and the impact of efforts by other participants in our industry to comply therewith, 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, 2019, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 that will be filed with the SEC, 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, April 30, 2019, 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.



5


About Criteo

Criteo (NASDAQ: CRTO) is the advertising platform for the open Internet, an ecosystem that favors
neutrality, transparency and inclusiveness. 2,800 Criteo team members partner with over 19,000
customers and thousands of publishers around the globe to deliver effective advertising across all
channels, by applying advanced machine learning to unparalleled data sets. Criteo empowers companies
of all sizes with the technology they need to better know and serve their customers. 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
Isabelle Leung-Tack, VP, Global Communications, i.leungtack@criteo.com 



Financial information to follow





6


CRITEO S.A.
Consolidated Statement of Financial Position
(U.S. dollars in thousands) (unaudited)
 
 
December 31, 2018

 
March 31, 2019

Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
364,426

 
$
395,771

 Trade receivables, net of allowances of $25.9 million and $25.2 million at December 31, 2018 and March 31, 2019, respectively
 
473,901

 
386,792

Income taxes
 
19,370

 
8,182

Other taxes
 
53,338

 
56,828

Other current assets
 
22,816

 
24,737

Total current assets
 
933,851

 
872,310

Property, plant and equipment, net
 
184,013

 
180,377

Intangible assets, net
 
112,036

 
107,218

Goodwill
 
312,881

 
317,076

Right of Use Asset - operating lease (1)
 
—

 
200,274

Non-current financial assets
 
20,460

 
20,331

Deferred tax assets
 
33,894

 
48,330

    Total non-current assets
 
663,284

 
873,606

Total assets
 
$
1,597,135

 
$
1,745,916

 
 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Trade payables
 
$
425,376

 
$
345,923

Contingencies
 
2,640

 
3,215

Income taxes
 
7,725

 
5,794

Financial liabilities - current portion
 
1,018

 
1,599

Lease liability - operating - current portion (1)
 
—

 
49,459

Other taxes
 
55,592

 
58,192

Employee - related payables
 
65,878

 
63,459

Other current liabilities
 
47,115

 
37,256

Total current liabilities
 
605,344

 
564,897

Deferred tax liabilities
 
10,770

 
8,421

Retirement benefit obligation
 
5,537

 
6,893

Financial liabilities - non current portion
 
2,490

 
2,283

Lease liability - operating - non current portion (1)
 
—

 
166,920

Other non-current liabilities
 
5,103

 
4,706

    Total non-current liabilities
 
23,900

 
189,223

Total liabilities
 
629,244

 
754,120

Commitments and contingencies
 
 
 
 
Shareholders' equity:
 
 
 
 
Common shares, €0.025 par value, 67,708,203 and 66,142,511 shares authorized, issued and outstanding at December 31, 2018 and March 31, 2019, respectively.
 
2,201

 
2,157

Treasury stock, 3,459,119 and 1,672,404 shares at cost as of December 31, 2018 and March 31, 2019, respectively.
 
(79,159
)
 
(39,079
)
Additional paid-in capital
 
663,281

 
641,094

Accumulated other comprehensive income (loss)
 
(30,522
)
 
(41,869
)
Retained earnings
 
387,869

 
403,200

Equity - attributable to shareholders of Criteo S.A.
 
943,670

 
965,503

Non-controlling interests
 
24,221

 
26,293

Total equity
 
967,891

 
991,796

Total equity and liabilities
 
$
1,597,135

 
$
1,745,916


(1) Effective January 1, 2019 we have adopted ASC 842, Leases. We have elected the modified retrospective transition method and not restated comparative prior periods. Upon adoption, we recognized total operating lease liabilities of $223.5 million and operating right-of-use assets of $204.3 million.

7


CRITEO S.A.
Consolidated Statement of Income
(U.S. dollars in thousands, except share and per share data)
(unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

 
 
 
 
 
 
 
Revenue
 
$
564,164

 
$
558,123

 
(1
)%
 
 
 
 
 
 
 
Cost of revenue
 
 
 
 
 
 
Traffic acquisition cost
 
(323,746
)
 
(322,429
)
 
(0.4
)%
Other cost of revenue
 
(30,059
)
 
(26,045
)
 
(13
)%
 
 
 
 
 
 
 
Gross profit
 
210,359

 
209,649

 
(0.3
)%
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Research and development expenses
 
(45,318
)
 
(46,577
)
 
3
 %
Sales and operations expenses
 
(95,649
)
 
(95,909
)
 
0.3
 %
General and administrative expenses
 
(34,591
)
 
(33,770
)
 
(2
)%
Total Operating expenses
 
(175,558
)
 
(176,256
)
 
0.4
 %
Income from operations
 
34,801

 
33,393

 
(4
)%
Financial income (expense)
 
(1,325
)
 
(1,974
)
 
49
 %
Income before taxes
 
33,476

 
31,419

 
(6
)%
Provision for income taxes
 
(12,386
)
 
(10,018
)
 
(19
)%
Net Income
 
$
21,090

 
$
21,401

 
1
 %
 
 
 
 
 
 
 
Net income available to shareholders of Criteo S.A.
 
$
19,809

 
$
19,120

 
(3
)%
Net income available to non-controlling interests
 
$
1,281

 
$
2,281

 
78
 %
 
 
 
 
 
 
 
Weighted average shares outstanding used in computing per share amounts:
 
 
 
 
 
 
Basic
 
66,160,375

 
64,336,777

 
 
Diluted
 
67,469,738

 
66,041,296

 
 
 
 
 
 
 
 
 
Net income allocated to shareholders per share:
 
 
 
 
 
 
Basic
 
$
0.30

 
$
0.30

 
—
 %
Diluted
 
$
0.29

 
$
0.29

 
—
 %





8


CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

Net income
 
$
21,090

 
$
21,401

 
1
 %
Non-cash and non-operating items
 
53,966

 
42,866

 
(21
)%
           - Amortization and provisions
 
26,050

 
19,644

 
(25
)%
           - Equity awards compensation expense (1)
 
18,829

 
13,882

 
(26
)%
           - Change in deferred taxes
 
(3,146
)
 
(5,916
)
 
88
 %
           - Income tax for the period
 
15,532

 
15,934

 
3
 %
           - Other (2)
 
(3,299
)
 
(678
)
 
(79
)%
Changes in working capital related to operating activities
 
23,687

 
20,821

 
(12
)%
           - Decrease in trade receivables
 
91,292

 
86,018

 
(6
)%
           - Decrease in trade payables
 
(62,945
)
 
(58,485
)
 
(7
)%
           - Decrease/(Increase) in other current assets
 
7,958

 
(5,992
)
 
NM

           - Increase/(decrease) in other current liabilities (2)
 
(12,618
)
 
2,436

 
NM

           - Change in operating lease liabilities and right of use assets (4)
 
—

 
(3,156
)
 
NM

Income taxes paid
 
(14,216
)
 
(17,868
)
 
26
 %
CASH FROM OPERATING ACTIVITIES
 
84,527

 
67,220

 
(20
)%
Acquisition of intangible assets, property, plant and equipment
 
(7,413
)
 
(13,292
)
 
79
 %
Change in accounts payable related to intangible assets, property, plant and equipment
 
(25,154
)
 
(10,392
)
 
(59
)%
Payment for (disposal of) a business, net of cash acquired (disposed)
 
(10,811
)
 
(5,325
)
 
(51
)%
Change in other non-current financial assets
 
(112
)
 
(32
)
 
(71
)%
CASH USED FOR INVESTING ACTIVITIES
 
(43,490
)
 
(29,041
)
 
(33
)%
Repayment of borrowings (3)
 
(238
)
 
(172
)
 
(28
)%
Proceeds from capital increase
 
166

 
11

 
(93
)%
Change in other financial liabilities (2)
 
16,845

 
(30
)
 
NM

CASH FROM (USED FOR) FINANCING ACTIVITIES
 
16,773

 
(191
)
 
NM

 
 
 
 
 
 
 
CHANGE IN NET CASH AND CASH EQUIVALENTS
 
57,810

 
37,988

 
(34
)%
Net cash and cash equivalents at beginning of period
 
414,111

 
364,426

 
(12
)%
Effect of exchange rates changes on cash and cash equivalents (2)
 
11,953

 
(6,643
)
 
NM

Net cash and cash equivalents at end of period
 
$
483,874

 
$
395,771

 
(18
)%

(1) Of which $18.4 million and $13.5 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended March 31, 2018 and 2019, respectively.

(2) During the three months ended March 31, 2018, the Company reported the cash impact of the settlement of hedging derivatives related to financing activities in cash from (used for) financing activities in the unaudited consolidated statements of cash flows

(3) Interest paid for the years ended March 31, 2018 and 2019 amounted to $0.4 million and $0.3 million respectively.

(4) Effective January 1, 2019 we have adopted ASC 842, Leases. We have elected the modified retrospective transition method and not restated prior periods. Changes in operating lease liabilities and right of use assets included rent prepayments and accrued rent amounts which were mapped to other current assets and trade payables in prior years.


9


CRITEO S.A.
Reconciliation of Cash from Operating Activities to Free Cash Flow
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

 
 
 
 
 
 
 
CASH FROM OPERATING ACTIVITIES
 
$
84,527

 
$
67,220

 
(20
)%
Acquisition of intangible assets, property, plant and equipment
 
(7,413
)
 
(13,292
)
 
79
 %
Change in accounts payable related to intangible assets, property, plant and equipment
 
(25,154
)
 
(10,392
)
 
(59
)%
FREE CASH FLOW (1)
 
$
51,960

 
$
43,536

 
(16
)%


(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.


































10


CRITEO S.A.
Reconciliation of Revenue ex-TAC by Region to Revenue by Region
(U.S. dollars in thousands) (unaudited)

 
 
 
Three Months Ended
 
 
 
 
 
 
 
March 31,
 
 
 
 
 
Region
 
2018

 
2019

 
YoY Change
 
YoY Change at Constant Currency
Revenue
 
 
 
 
 
 
 
 
 
Americas
 
$
212,695

 
$
217,993

 
2
 %
 
4
 %
 
EMEA
 
222,611

 
209,643

 
(6
)%
 
3
 %
 
Asia-Pacific
 
128,858

 
130,487

 
1
 %
 
4
 %
 
Total
 
564,164

 
558,123

 
(1
)%
 
3
 %
 
 
 
 
 
 
 
 
 
 
Traffic acquisition costs
 
 
 
 
 
 
 
 
 
Americas
 
(131,521
)
 
(131,545
)
 
—
 %
 
1
 %
 
EMEA
 
(119,893
)
 
(117,291
)
 
(2
)%
 
7
 %
 
Asia-Pacific
 
(72,332
)
 
(73,593
)
 
2
 %
 
4
 %
 
Total
 
(323,746
)
 
(322,429
)
 
(0.4
)%
 
4
 %
 
 
 
 
 
 
 
 
 
 
Revenue ex-TAC (1)
 
 
 
 
 
 
 
 
 
Americas
 
81,174

 
86,448

 
6
 %
 
8
 %
 
EMEA
 
102,718

 
92,352

 
(10
)%
 
(2
)%
 
Asia-Pacific
 
56,526

 
56,894

 
1
 %
 
3
 %
 
Total
 
$
240,418

 
$
235,694

 
(2
)%
 
2
 %


(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.










11


CRITEO S.A.
Reconciliation of Adjusted EBITDA to Net Income
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

Net income
 
$
21,090

 
$
21,401

 
1
 %
Adjustments:
 
 
 
 
 
 
Financial (income) expense
 
1,325

 
1,974

 
49
 %
Provision for income taxes
 
12,386

 
10,018

 
(19
)%
Equity awards compensation expense
 
19,303

 
13,882

 
(28
)%
Research and development
 
4,555

 
4,025

 
(12
)%
Sales and operations
 
7,832

 
6,201

 
(21
)%
General and administrative
 
6,916

 
3,656

 
(47
)%
Pension service costs
 
434

 
394

 
(9
)%
Research and development
 
220

 
193

 
(12
)%
Sales and operations
 
79

 
72

 
(9
)%
General and administrative
 
135

 
129

 
(4
)%
Depreciation and amortization expense
 
23,646

 
19,296

 
(18
)%
Cost of revenue
 
15,249

 
9,135

 
(40
)%
Research and development
 
2,221

 
3,477

 
57
 %
Sales and operations
 
4,454

 
4,864

 
9
 %
General and administrative
 
1,722

 
1,820

 
6
 %
Restructuring
 
(252
)
 
1,890

 
NM

Research and development
 
(348
)
 
—

 
(100
)%
Sales and operations
 
107

 
1,890

 
NM

General and administrative
 
(11
)
 
—

 
(100
)%
Total net adjustments
 
56,842

 
47,454

 
(17
)%
Adjusted EBITDA(1)
 
$
77,932

 
$
68,855

 
(12
)%

(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.









12


CRITEO S.A.
Reconciliation from Non-GAAP Operating Expenses to Operating Expenses under GAAP
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

 
 
 
 
 
 
 
Research and Development expenses
 
$
(45,318
)
 
$
(46,577
)
 
3
 %
Equity awards compensation expense
 
4,555

 
4,025

 
(12
)%
Depreciation and Amortization expense
 
2,221

 
3,477

 
57
 %
Pension service costs
 
220

 
193

 
(12
)%
Restructuring
 
(348
)
 
—

 
(100
)%
Non GAAP - Research and Development expenses
 
(38,670
)
 
(38,882
)
 
1
 %
Sales and Operations expenses
 
(95,649
)
 
(95,909
)
 
0.3
 %
Equity awards compensation expense
 
7,832

 
6,201

 
(21
)%
Depreciation and Amortization expense
 
4,454

 
4,864

 
9
 %
Pension service costs
 
79

 
72

 
(9
)%
Restructuring
 
107

 
1,890

 
NM

Non GAAP - Sales and Operations expenses
 
(83,177
)
 
(82,882
)
 
(0.4
)%
General and Administrative expenses
 
(34,591
)
 
(33,770
)
 
(2
)%
Equity awards compensation expense
 
6,916

 
3,656

 
(47
)%
Depreciation and Amortization expense
 
1,722

 
1,820

 
6
 %
Pension service costs
 
135

 
129

 
(4
)%
Restructuring
 
(11
)
 
—

 
(100
)%
Non GAAP - General and Administrative expenses
 
(25,829
)
 
(28,165
)
 
9
 %
Total Operating expenses
 
(175,558
)
 
(176,256
)
 
0.4
 %
Equity awards compensation expense
 
19,303

 
13,882

 
(28
)%
Depreciation and Amortization expense
 
8,397

 
10,161

 
21
 %
Pension service costs
 
434

 
394

 
(9
)%
Restructuring
 
(252
)
 
1,890

 
NM

Total Non GAAP Operating expenses (1)
 
$
(147,676
)
 
$
(149,929
)
 
2
 %

(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.









13


CRITEO S.A.
Detailed Information on Selected Items
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

Equity awards compensation expense
 
 
 
 
 
 
Research and development
 
$
4,555

 
$
4,025

 
(12
)%
Sales and operations
 
7,832

 
6,201

 
(21
)%
General and administrative
 
6,916

 
3,656

 
(47
)%
Total equity awards compensation expense
 
19,303

 
13,882

 
(28
)%
 
 
 
 
 
 
 
Pension service costs
 
 
 
 
 
 
Research and development
 
220

 
193

 
(12
)%
Sales and operations
 
79

 
72

 
(9
)%
General and administrative
 
135

 
129

 
(4
)%
Total pension service costs
 
434

 
394

 
(9
)%
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
Cost of revenue
 
15,249

 
9,135

 
(40
)%
Research and development
 
2,221

 
3,477

 
57
 %
Sales and operations
 
4,454

 
4,864

 
9
 %
General and administrative
 
1,722

 
1,820

 
6
 %
Total depreciation and amortization expense
 
23,646

 
19,296

 
(18
)%
 
 
 
 
 
 
 
Restructuring
 
 
 
 
 
 
Research and development
 
(348
)
 
—

 
(100
)%
Sales and operations
 
107

 
1,890

 
NM

General and administrative
 
(11
)
 
—

 
(100
)%
Total restructuring
 
$
(252
)
 
$
1,890

 
NM




















14


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
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change

 
 
 
 
 
 
 
Net income
 
$
21,090

 
$
21,401

 
1
 %
Adjustments:
 
 
 
 
 
 
Equity awards compensation expense
 
19,303

 
13,882

 
(28
)%
Amortization of acquisition-related intangible assets
 
3,457

 
5,472

 
58
 %
Restructuring costs
 
(252
)
 
1,890

 
NM

Tax impact of the above adjustments
 
(3,079
)
 
(2,940
)
 
(5
)%
Total net adjustments
 
19,429

 
18,304

 
(6
)%
Adjusted net income(1)
 
$
40,519

 
$
39,705

 
(2
)%
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 - Basic
 
66,160,375

 
64,336,777

 
 
 - Diluted
 
67,469,738

 
66,041,296

 
 
 
 
 
 
 
 
 
Adjusted net income per share
 
 
 
 
 
 
 - Basic
 
$
0.61

 
$
0.62

 
2
 %
 - Diluted
 
$
0.60

 
$
0.60

 
—
 %


(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.













15


CRITEO S.A.
Constant Currency Reconciliation
(U.S. dollars in thousands) (unaudited)

 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018

 
2019

 
YoY Change
 
 
 
 
 
 
 
Revenue as reported
 
$
564,164

 
$
558,123

 
(1
)%
Conversion impact U.S. dollar/other currencies
 
—

 
24,041

 
 
Revenue at constant currency(1)
 
564,164

 
582,164

 
3
 %
 
 
 
 
 
 
 
Traffic acquisition costs as reported
 
(323,746
)
 
(322,429
)
 
(0.4
)%
Conversion impact U.S. dollar/other currencies
 
—

 
(13,470
)
 
 
Traffic Acquisition Costs at constant currency(1)
 
(323,746
)
 
(335,899
)
 
4
 %
 
 
 
 
 
 
 
Revenue ex-TAC as reported(2)
 
240,418

 
235,694

 
(2
)%
Conversion impact U.S. dollar/other currencies
 
—

 
10,571

 
 
Revenue ex-TAC at constant currency(2)
 
240,418

 
246,265

 
2
 %
Revenue ex-TAC(2)/Revenue as reported
 
43
%
 
42
%
 
 
 
 
 
 
 
 
 
Other cost of revenue as reported
 
(30,059
)
 
(26,045
)
 
(13
)%
Conversion impact U.S. dollar/other currencies
 
—

 
(750
)
 
 
Other cost of revenue at constant currency(1)
 
(30,059
)
 
(26,795
)
 
(11
)%
 
 
 
 
 
 
 
Adjusted EBITDA(3)
 
77,932

 
68,855

 
(12
)%
Conversion impact U.S. dollar/other currencies
 
—

 
4,335

 
 
Adjusted EBITDA(3) at constant currency(1)
 
$
77,932

 
$
73,190

 
(6
)%
Adjusted EBITDA(3)/Revenue ex-TAC(2)
 
32
%

29
%
 
 


(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.










16


CRITEO S.A.
Information on Share Count
(unaudited)

 
 
Three Months Ended
 
 
March 31,
 
 
2018


2019

Shares outstanding as at January 1,
 
66,085,097

 
64,249,084

Weighted average number of shares issued during the period
 
75,278

 
87,693

Basic number of shares - Basic EPS basis
 
66,160,375

 
64,336,777

Dilutive effect of share options, warrants, employee warrants - Treasury method
 
1,309,363

 
1,704,519

Diluted number of shares - Diluted EPS basis
 
67,469,738

 
66,041,296

 
 
 
 
 
Shares issued as at March 31, before Treasure stocks
 
66,248,351

 
66,142,511

Treasury stock as of March 31,
 
—

 
(1,672,404
)
Shares outstanding as of March 31, after Treasury stocks
 
66,248,351

 
64,470,107

Total dilutive effect of share options, warrants, employee warrants
 
9,370,543

 
8,000,740

Fully diluted shares as of March 31,
 
75,618,894

 
72,470,847


































17


CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated)
(unaudited)

 
 
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Q1
2019
YoY
Change
QoQ Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Clients
16,370
17,299
18,118
18,528
18,396
19,213
19,419
19,373
5%
(0.2)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
542,022
563,973
674,031
564,164
537,185
528,869
670,096
558,123
(1)%
(17)%
 
Americas
229,392
228,326
324,696
212,695
212,781
211,247
317,350
217,993
2%
(31)%
 
EMEA
191,682
207,168
221,019
222,611
201,080
195,230
220,904
209,643
(6)%
(5)%
 
APAC
120,948
128,479
128,316
128,858
123,324
122,392
131,842
130,487
1%
(1)%
 
 
 
 
 
 
 
 
 
 
 
 
 
TAC
(322,200)
(329,576)
(397,087)
(323,746)
(306,963)
(305,387)
(398,238)
(322,429)
(0.4)%
(19)%
 
Americas
(145,289)
(141,869)
(203,368)
(131,521)
(125,502)
(126,406)
(196,168)
(131,545)
—%
(33)%
 
EMEA
(106,605)
(115,446)
(120,662)
(119,893)
(112,577)
(111,131)
(128,053)
(117,291)
(2)%
(8)%
 
APAC
(70,306)
(72,261)
(73,057)
(72,332)
(68,884)
(67,850)
(74,017)
(73,593)
2%
(1)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue ex-TAC
219,822
234,397
276,944
240,418
230,222
223,482
271,858
235,694
(2)%
(13)%
 
Americas
84,103
86,457
121,328
81,174
87,279
84,841
121,182
86,448
6%
(29)%
 
EMEA
85,077
91,722
100,357
102,718
88,503
84,099
92,851
92,352
(10)%
(1)%
 
APAC
50,642
56,218
55,259
56,526
54,440
54,542
57,825
56,894
1%
(2)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
54,086
79,116
119,928
77,932
68,774
69,591
104,762
68,855
(12)%
(34)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow from operating activities
60,491
61,727
79,002
84,527
40,341
50,256
85,600
67,220
(20)%
(21)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
27,055
27,773
25,476
32,567
17,847
29,656
45,408
23,684
(27)%
(48)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures / Revenue
5%
5%
4%
6%
3%
6%
7%
4%
N.A
N.A
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash position
308,185
357,983
414,111
483,874
480,285
458,690
364,426
395,771
(18)%
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
Headcount
2,690
2,712
2,764
2,675
2,678
2,737
2,744
2,813
5%
3%
 
 
 
 
 
 
 
 
 
 
 
 
 
Days Sales Outstanding (days - end of month)
57
56
57
60
61
60
58
59
N.A
N.A
 

1) 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.

18