Chronicle Journal: Finance

Criteo Reports Solid Results For The First Quarter 2020 Amidst A Challenging Environment

NEW YORK, April 29, 2020 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the global technology company powering the world's marketers with trusted and impactful advertising, today announced solid financial results for the first quarter ended March 31, 2020 in a challenging global environment marked by the outbreak of COVID-19.

  • Revenue decreased 10% year-over-year, or 8% at constant currency1, to $503 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, decreased 13% year-over-year, or 11% at constant currency, to $206 million ($207 million at guidance rates), representing 41% of revenue.
  • The COVID-19 outbreak negatively impacted Revenue by approximately $24 million, or approximately 4 points of year-over-year growth at constant currency, and negatively impacted Revenue ex-TAC by approximately $10 million, or approximately 4 points of year-over-year growth at constant currency.
  • Net income decreased 23% year-over-year to $16 million, representing 3% of revenue.
  • Adjusted EBITDA2 decreased 12% at constant currency to $59 million ($60 million at guidance rates), representing 29% of Revenue ex-TAC.
  • Diluted EPS decreased 14% to $0.25 and Adjusted diluted EPS2 decreased 13% to $0.52.
  • Cash flow from operating activities was $57 million.
  • Free Cash Flow2 was solid and increased 3% to $45 million.
  • Our cash position was $437 million as of March 31, 2020, up $18 million compared to Dec. 31, 2019.
  • The Company's Board of directors authorized a new share repurchase program of up to $30 million.
  • The Company had financial liquidity in excess of $820 million as of March 31, 2020.

"Our people safety, operations, client relationships and cost control are our key priorities in this context," said Megan Clarken, CEO. "We believe our core strength in direct response marketing will help our customers best rebound from these unusual times."

"Q1 was a solid quarter amidst a challenging environment," said Benoit Fouilland, CFO. "We're hyper-focused on managing our cost base and protecting our profitability and financial liquidity."

Operating Highlights

  • New solutions, which include all solutions outside of retargeting, grew 49% year-over-year to 13% of total Revenue ex-TAC, an increase of 4 points year-over-year.
  • We added over 110 net new clients and maintained high client retention at close to 90% for all solutions.
  • Same-client revenue declined 9% year-over-year and same-client Revenue ex-TAC3 decreased 9% year-over-year at constant currency, including 5 points directly attributable to the COVID-19 disruption.
  • Our direct header-bidding technology now connects to over 4,600 publishers across Web and App, and we now reach about 40% of all our publishers via Criteo Direct Bidder.
  • We launched Criteo Partners, our global partnership program for reseller agencies.

Revenue and Revenue ex-TAC

Revenue declined 10% year-over-year, or 8% at constant currency, to $503 million (Q1 2019: $558 million), after an approximately $24 million business impact from the COVID-19 outbreak, or approximately 4 points of the year-over-over decline at constant currency. Revenue ex-TAC decreased 13% year-over-year, or 11% at constant currency, to $206 million (Q1 2019: $236 million), after an approximately $10 million business impact from the COVID-19 outbreak, or approximately 4 points of the year-over-over decline at constant currency. Growth in our midmarket business and increased adoption of new solutions were offset by the decline in our large client business. Revenue ex-TAC as a percentage of revenue, or Revenue ex-TAC margin, was 41% (Q1 2019: 42%).

  • In the Americas, Revenue declined 12% year-over-year, or 11% at constant currency, to $192 million and represented 38% of total Revenue. Revenue ex-TAC declined 17% year-over-year, or 16% at constant currency, to $72 million and represented 35% of total Revenue ex-TAC.
  • In EMEA, Revenue declined 9% year-over-year, or 7% at constant currency, to $190 million and represented 38% of total Revenue. Revenue ex-TAC declined 12% year-over-year, or 9% at constant currency, to $82 million and represented 40% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue declined 7% year-over-year, or 6% at constant currency, to $122 million and represented 24% of total Revenue. Revenue ex-TAC declined 8% year-over-year, or 7% at constant currency, to $53 million and represented 25% of total Revenue ex-TAC.

Net Income and Adjusted Net Income

Net income decreased 23% year-over-year to $16 million (Q1 2019: $21 million). Net income margin as a percentage of revenue was 3% (Q1 2019: 4%). Net income available to shareholders of Criteo S.A. decreased 19% year-over-year to $15 million, or $0.25 per share on a diluted basis (Q1 2019: $19 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 19% year-over-year to $32 million, or $0.52 per share on a diluted basis (Q1 2019: $40 million, or $0.60 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA decreased 14% year-over-year, or 12% at constant currency, to $59 million (Q1 2019: $69 million), driven by the Revenue ex-TAC performance over the period, including the impact of the COVID-19 outbreak, partly offset by our proactive and disciplined expense management. Adjusted EBITDA as a percentage of Revenue ex-TAC, or Adjusted EBITDA margin, was 29% (Q1 2019: 29%).

Operating expenses decreased 16% to $148 million (Q1 2019: $176 million), mostly driven by lower headcount-related expense and disciplined expense management. 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, decreased 16% to $126 million (Q1 2019: $150 million), mostly driven by lower headcount-related expense and disciplined expense management.

Since the outbreak of COVID-19, the Company has been focused on managing its expense base in a swift, agile and disciplined way to maximize profitability and preserve cash generation for 2020. We have already frozen substantially all hiring and travel expenses globally and have taken several additional cost containment measures, including reductions in marketing spend and events, third-party services, hosting costs and others, beyond the savings that were already included in our fiscal year 2020 guidance provided on February 11, 2020.

Cash Flow,  Cash and Financial Liquidity Position

Cash flow from operating activities decreased 16% year-over-year to $57 million (Q1 2019: $67 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, was solid in the current circumstances and increased 3% year-over-year to $45 million (Q1 2019: $44 million), representing 76% of Adjusted EBITDA (Q1 2019: 63%), despite $4 million cash restructuring charges.

Cash and cash equivalents increased $18 million compared to December 31, 2019 to $437 million, after spending $18 million on share repurchases in the quarter. The Company completed its second share-buyback program in February 2020, for 4.5 million shares and approximately $77 million.

The Company has immediate access to a €350 million Revolving Credit Facility, which, combined with its cash position as of March 31, 2020, provides total liquidity of approximately $820 million. Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2020, puts us in a strong position to weather the COVID-19 crisis under multiple scenarios.

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of April 29, 2020.

Based on our current forecasting framework for the impact of COVID-19 on our business, we currently assume that the second quarter 2020 will be the through quarter in our central COVID-19 scenario.

Second quarter 2020 guidance:

  • We expect Revenue ex-TAC to be between $140 million and $147 million, implying constant-currency decline of approximately 32% to 35%.
  • Due to the expected significant impact of COVID-19 on our business in the second quarter, we expect Adjusted EBITDA to be between $0 million and $7 million.

We withdrew our financial guidance for fiscal year 2020 on April 1, 2020. Given how fluid the global situation still is around the consequences of the COVID-19 outbreak and the many unknowns at this point, we believe the Company is currently not yet in a position to reliably quantify the impact of COVID-19 on its financial results beyond the second quarter 2020. We will therefore not provide guidance for Revenue ex-TAC and Adjusted EBITDA for fiscal year 2020 until further notice.

The above guidance for the second quarter ending June 30, 2020, assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.902, a U.S. dollar-Japanese Yen rate of 109.7, a U.S. dollar-British pound rate of 0.803, a U.S. dollar-Korean Won rate of 1,224.5 and a U.S. dollar-Brazilian real rate of 5.05.

The above guidance assumes no acquisitions are completed during the second quarter ending June 30, 2020.

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. The variability of the above charges could potentially have a significant impact on our future U.S. GAAP financial results.

Announcement of a Share Repurchase Program of up to $30 million

Demonstrating the Company's confidence in its business and its ability to generate cash flow, and to meet its equity obligations to employees while taking advantage of the attractive level of its share price, Criteo today announces that the Board of Directors has authorized a share repurchase program of up to $30 million of the Company's outstanding American Depositary Shares.

This program relies primarily upon the authorization provided under L. 225-208 of the French Commercial Code, and as such the Company intends to use repurchased shares under this new program to satisfy employee equity obligations in lieu of issuing new shares, which would limit future dilution for its employee equity program. If a new authorization under L. 225-209-2 of the French Commercial Code is granted by the Company's shareholders at the Company's 2020 Annual General Meeting, the program could alternatively rely on the new authorization, provided the conditions provided therein notably relating to stock price are met, and could be used either to satisfy employee equity plan vesting in lieu of issuing new shares, or in connection with M&A transactions.

Under the terms of the approved program, the stock purchases may be made from time to time on the NASDAQ Global Select Market in compliance with applicable state and federal securities laws (including the requirements of SEC Rule 10b-18) and applicable provisions of French corporate law. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability, as determined by Criteo's management team and within the limits set by the shareholders' authorization. The program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice.

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 diluted EPS, 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 diluted EPS 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 diluted EPS can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted diluted EPS 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 June 30, 2020, 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 innovate and respond to changes in technology, uncertainty regarding the scope and impact of the recent outbreak of COVID-19 on our employees, operations, revenue and cash flows, 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, the impact of consumer resistance to the collection and sharing of data, our ability to access data through third parties, 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 2, 2020, and in subsequent Quarterly Reports on Form 10-Q as well as future filings and reports by the Company. Importantly, at this time, the COVID-19 pandemic is having a significant impact on Criteo's business, financial condition, cash flow and results of operations. There are significant uncertainties about the duration and the extent of the impact of the virus. 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 29, 2020, at 8:00 AM EDT, 2:00 PM CEST. The conference call will be webcast live on the Company's website http://ir.criteo.com and will be available for replay.

•    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) is the global technology company powering the world's marketers with trusted and impactful advertising. 2,700 Criteo team members partner with over 20,000 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.

___________________________________________________

1 Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the 2019 average exchange rates for the relevant period to 2020 figures.

2 Revenue ex-TAC, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA at constant currency, Adjusted EBITDA margin, Adjusted diluted EPS, Free Cash Flow and growth at constant currency are not measures calculated in accordance with U.S. GAAP.

3 Same-client revenue or Revenue ex-TAC is the revenue or Revenue ex-TAC generated by clients that were live with us in a given quarter and still live with us the same quarter in the following year.

Contacts

Criteo Investor Relations
Edouard Lassalle, VP, Head of Investor and Analyst Relations, 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

 

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands, unaudited)




December 31, 2019


March 31, 2020

Assets





Current assets:





Cash and cash equivalents


$

418,763



$

436,506


 Trade receivables, net of allowances of $16.1 million and $23.1 million at December 31, 2019 and March 31, 2020, respectively 


481,732



364,440


Income taxes


21,817



23,101


Other taxes


60,924



65,293


Other current assets


17,225



19,832


Total current assets


1,000,461



909,172


Property, plant and equipment, net


194,161



181,848


Intangible assets, net


86,886



79,818


Goodwill


317,100



315,266


Right of Use Asset - operating lease


142,044



139,954


Non-current financial assets


21,747



20,373


Deferred tax assets


27,985



29,458


    Total non-current assets


789,923



766,717


Total assets


$

1,790,384



$

1,675,889







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

390,277



$

300,315


Contingencies


6,385



6,020


Income taxes


3,422



3,013


Financial liabilities - current portion


3,636



2,303


Lease liability - operating - current portion


45,853



47,288


Other taxes


50,099



49,159


Employee - related payables


74,781



73,251


Other current liabilities


35,886



35,709


Total current liabilities


610,339



517,058


Deferred tax liabilities


9,272



7,922


Retirement benefit obligation


8,485



7,111


Financial liabilities - non current portion


769



555


Lease liability - operating - non current portion


117,988



113,920


Other non-current liabilities


5,543



2,715


    Total non-current liabilities


142,057



132,223


Total liabilities


752,396



649,281


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 par value, 66,197,181 and 66,202,881 shares authorized, issued and outstanding at December 31, 2019 and March 31, 2020, respectively.


2,158



2,158


Treasury stock, 3,903,673 and 4,533,650 shares at cost as of December 31, 2019 and March 31, 2020, respectively.


(74,900)



(79,834)


Additional paid-in capital


668,389



676,510


Accumulated other comprehensive (loss)


(40,105)



(54,283)


Retained earnings


451,725



450,480


Equity - attributable to shareholders of Criteo S.A.


1,007,267



995,031


Non-controlling interests


30,721



31,577


Total equity


1,037,988



1,026,608


Total equity and liabilities


$

1,790,384



$

1,675,889


 

CRITEO S.A.

Consolidated Statement of Income

(U.S. dollars in thousands, except share and per share data, unaudited)




Three Months Ended






March 31,






2019


2020


YoY
Change










Revenue


$

558,123



$

503,376



(10)

%










Cost of revenue








Traffic acquisition cost


(322,429)



(297,364)



(8)

%


Other cost of revenue


(26,045)



(33,806)



30

%










Gross profit


209,649



172,206



(18)

%










Operating expenses:








Research and development expenses


(46,577)



(37,515)



(19)

%


Sales and operations expenses


(95,909)



(84,974)



(11)

%


General and administrative expenses


(33,770)



(25,915)



(23)

%


Total Operating expenses


(176,256)



(148,404)



(16)

%


Income from operations


33,393



23,802



(29)

%


Financial income (expense)


(1,974)



(334)



(83)

%


Income before taxes


31,419



23,468



(25)

%


Provision for income taxes


(10,018)



(7,040)



(30)

%


Net Income


$

21,401



$

16,428



(23)

%










Net income available to shareholders of Criteo S.A.


$

19,120



$

15,459



(19)

%


Net income available to non-controlling interests


$

2,281



$

969



(58)

%










Weighted average shares outstanding used in computing per share amounts:








Basic


64,336,777



61,691,001





Diluted


66,041,296



62,125,582













Net income allocated to shareholders per share:








Basic


$

0.30



$

0.25



(17)

%


Diluted


$

0.29



$

0.25



(14)

%


 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2019


2020


YoY
Change

Net income


$

21,401



$

16,428



(23)

%

Non-cash and non-operating items


24,998



32,828



31

%

           - Amortization and provisions


19,644



27,044



38

%

           - Equity awards compensation expense (1)


13,882



8,502



(39)

%

           - Net gain or loss on disposal of non-current assets




2,266



NM


           - Change in deferred taxes


(5,916)



(2,678)



(55)

%

           - Change in income taxes


(1,934)



(2,329)



20

%

           - Other


(678)



23



NM


Changes in working capital related to operating activities


20,821



7,487



(64)

%

           - Decrease in trade receivables


86,018



99,388



16

%

           - (Decrease) in trade payables


(58,485)



(81,679)



40

%

           - (Increase) in other current assets


(5,992)



(10,398)



74

%

           - Increase/(Decrease) in other current liabilities


2,436



(945)



NM


           - Change in operating lease liabilities and right of use assets


(3,156)



1,121



NM


CASH FROM OPERATING ACTIVITIES


67,220



56,743



(16)

%

Acquisition of intangible assets, property, plant and equipment


(13,292)



(11,258)



(15)

%

Change in accounts payable related to intangible assets, property, plant and equipment


(10,392)



(479)



(95)

%

(Payment for) disposal of a business, net of cash acquired (disposed)


(5,325)





NM


Change in other non-current financial assets


(32)



889



NM


CASH USED FOR INVESTING ACTIVITIES


(29,041)



(10,848)



(63)

%

Repayment of borrowings


(172)



(170)



(1)

%

Proceeds from capital increase


11



4



(64)

%

Change in treasury stock




(18,241)



NM


Change in other financial liabilities


(30)



(354)



NM


CASH USED FOR FINANCING ACTIVITIES


(191)



(18,761)



NM


Effect of exchange rates changes on cash and cash equivalents


(6,643)



(9,391)



41

%

Net increase (decrease) in cash and cash equivalents


31,345



17,743



(43)

%

Net cash and cash equivalents at beginning of period


364,426



418,763



15

%

Net cash and cash equivalents at end of period


$

395,771



$

436,506



10

%

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION







Cash paid for taxes, net of refunds


$

(17,868)



$

(12,047)



(33)

%

Cash paid for interest, net of amounts capitalized


$

(407)



$

(349)



(14)

%


(1) Share-based compensation expense according to ASC 718 Compensation - stock compensation accounted for $13.5 million and $8.1 million of equity awards compensation expense for the quarter ended March 31, 2019 and 2020.

 

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2019


2020


YoY
Change








CASH FROM OPERATING ACTIVITIES


$

67,220



$

56,743



(16)

%

Acquisition of intangible assets, property, plant and equipment


(13,292)



(11,258)



(15)

%

Change in accounts payable related to intangible assets, property, plant and equipment


(10,392)



(479)



(95)

%

FREE CASH FLOW (1)


$

43,536



$

45,006



3

%


(1) Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment.

 

CRITEO S.A.

Reconciliation of Revenue ex-TAC by Region to Revenue by Region

(U.S. dollars in thousands, unaudited)





Three Months Ended








March 31,






Region


2019


2020


YoY Change


YoY Change at
Constant
Currency

Revenue










Americas


$

217,993



$

191,745



(12)

%


(11)

%


EMEA


209,643



190,114



(9)

%


(7)

%


Asia-Pacific


130,487



121,517



(7)

%


(6)

%


Total


558,123



503,376



(10)

%


(8)

%











Traffic acquisition costs










Americas


(131,545)



(120,022)



(9)

%


(8)

%


EMEA


(117,291)



(108,397)



(8)

%


(5)

%


Asia-Pacific


(73,593)



(68,945)



(6)

%


(6)

%


Total


(322,429)



(297,364)



(8)

%


(6)

%











Revenue ex-TAC (1)










Americas


86,448



71,723



(17)

%


(16)

%


EMEA


92,352



81,717



(12)

%


(9)

%


Asia-Pacific


56,894



52,572



(8)

%


(7)

%


Total


$

235,694



$

206,012



(13)

%


(11)

%


(1) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period. Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region are not measures calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region because they are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue and review of these measures by region can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region or similarly titled measures but define the regions differently, which reduces their effectiveness as a comparative measure; and (c) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region alongside our other U.S. GAAP financial results, including revenue. The above table provides a reconciliation of Revenue ex-TAC to revenue and Revenue ex-TAC by Region to revenue by region.

 

CRITEO S.A.

Reconciliation of Adjusted EBITDA to Net Income

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2019


2020


YoY
Change

Net income


$

21,401



$

16,428



(23)

%

Adjustments:







Financial (income) expense


1,974



334



(83)

%

Provision for income taxes


10,018



7,040



(30)

%

Equity awards compensation expense


13,882



8,503



(39)

%

Research and development


4,025



2,370



(41)

%

Sales and operations


6,201



3,618



(42)

%

General and administrative


3,656



2,515



(31)

%

Pension service costs


394



538



37

%

Research and development


193



269



39

%

Sales and operations


72



95



32

%

General and administrative


129



174



35

%

Depreciation and amortization expense


19,296



24,138



25

%

Cost of revenue


9,135



12,771



40

%

Research and development (1)


3,477



5,650



62

%

Sales and operations


4,864



4,340



(11)

%

General and administrative


1,820



1,377



(24)

%

Restructuring cost (2)


1,890



2,209



17

%

Cost of revenue







Research and development




995



NM

Sales and operations


1,890



1,021



(46)

%

General and administrative




193



NM

Total net adjustments


47,454



42,762



(10)

%

Adjusted EBITDA (3)


$

68,855



$

59,190



(14)

%


(1) For the Three Months Ended March 31, 2020, the Company recognized an accelerated amortization for Manage technology due to a revised useful life in 2019 ($3.3 million in Research and development).


(2) For the Three Months Ended March 31, 2020, the Company recognized restructuring charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:



Three Months Ended


March 31,


2019


2020

Depreciation and amortization expense

1,143




Facilities and impairment related costs

747



987


Payroll related costs



1,222


Total restructuring costs

1,890



2,209



(3) We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income.

 

CRITEO S.A.

Reconciliation from Non-GAAP Operating Expenses to Operating Expenses under GAAP

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2019


2020


YoY
Change

Research and Development expenses


$

(46,577)



$

(37,515)



(19)

%

Equity awards compensation expense


4,025



2,370



(41)

%

Depreciation and Amortization expense (1)


3,477



5,650



62

%

Pension service costs


193



269



39

%

Restructuring costs (2)




995



NM


Non GAAP - Research and Development expenses


(38,882)



(28,231)



(27)

%

Sales and Operations expenses


(95,909)



(84,974)



(11)

%

Equity awards compensation expense


6,201



3,618



(42)

%

Depreciation and Amortization expense


4,864



4,340



(11)

%

Pension service costs


72



95



32

%

Restructuring costs (2)


1,890



1,021



(46)

%

Non GAAP - Sales and Operations expenses


(82,882)



(75,900)



(8)

%

General and Administrative expenses


(33,770)



(25,915)



(23)

%

Equity awards compensation expense


3,656



2,515



(31)

%

Depreciation and Amortization expense


1,820



1,377



(24)

%

Pension service costs


129



174



35

%

Restructuring costs (2)




193



NM


Non GAAP - General and Administrative expenses


(28,165)



(21,656)



(23)

%

Total Operating expenses


(176,256)



(148,404)



(16)

%

Equity awards compensation expense


13,882



8,503



(39)

%

Depreciation and Amortization expense (1)


10,161



11,367



12

%

Pension service costs


394



538



37

%

Restructuring costs (2)


1,890



2,209



17

%

Total Non GAAP Operating expenses (3)


$

(149,929)



$

(125,787)



(16)

%


(1) For the  Three Months Ended March 31, 2020, the Company recognized an accelerated amortization for Manage technology due to a revised useful life in 2019 ($3.3 million in Research and development).


(2) For the Three Months Ended March 31, 2020, the Company recognized restructuring charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:



Three Months Ended


March 31,


2019


2020

Depreciation and amortization expense

1,143




Facilities and impairment related costs

747



987


Payroll related costs



1,222


Total restructuring costs

1,890



2,209



(3) We define Non-GAAP Operating Expenses as our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures we use to provide our quarterly and annual business outlook to the investment community.

 

CRITEO S.A.

Detailed Information on Selected Items

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2019


2020


YoY
Change

Equity awards compensation expense







Research and development


$

4,025



$

2,370



(41)

%

Sales and operations


6,201



3,618



(42)

%

General and administrative


3,656



2,515



(31)

%

Total equity awards compensation expense


13,882



8,503



(39)

%








Pension service costs







Research and development


193



269



39

%

Sales and operations


72



95



32

%

General and administrative


129



174



35

%

Total pension service costs


394



538



37

%








Depreciation and amortization expense







Cost of revenue


9,135



12,771



40

%

Research and development (1)


3,477



5,650



62

%

Sales and operations


4,864



4,340



(11)

%

General and administrative


1,820



1,377



(24)

%

Total depreciation and amortization expense


19,296



24,138



25

%








Restructuring costs (2)







Research and development




995



NM


Sales and operations


1,890



1,021



(46)

%

General and administrative




193



NM


Total restructuring costs


$

1,890



$

2,209



17

%


(1) For the  Three Months Ended March 31, 2020, the Company recognized an accelerated amortization for Manage technology due to a revised useful life in 2019 ($3.3 million in Research and development).


(2) For the Three Months Ended March 31, 2020, the Company recognized restructuring charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:



Three Months Ended


March 31,


2019


2020

Depreciation and amortization expense

1,143




Facilities and impairment related costs

747



987


Payroll related costs



1,222


Total restructuring costs

1,890



2,209


 

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,





2019


2020


YoY
Change








Net income


$

21,401



$

16,428



(23)

%

Adjustments:







Equity awards compensation expense


13,882



8,503



(39)

%

Amortization of acquisition-related intangible assets (1)


5,472



6,848



25

%

Restructuring costs (2)


1,890



2,209



17

%

Tax impact of the above adjustments


(2,940)



(1,960)



(33)

%

Total net adjustments


18,304



15,600



(15)

%

Adjusted net income (3)


$

39,705



$

32,028



(19)

%








Weighted average shares outstanding







 - Basic


64,336,777



61,691,001




 - Diluted


66,041,296



62,125,582











Adjusted net income per share







 - Basic


$

0.62



$

0.52



(16)

%

 - Diluted


$

0.60



$

0.52



(13)

%


(1) For the  Three Months Ended March 31, 2020, the Company recognized an accelerated amortization for Manage technology due to a revised useful life in 2019 ($3.3 million in Research and development).


(2) For the Three Months Ended March 31, 2020, the Company recognized restructuring charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:



Three Months Ended


March 31,


2019


2020

Depreciation and amortization expense

1,143




Facilities and impairment related costs

747



987


Payroll related costs



1,222


Total restructuring costs

1,890



2,209



(3) We define Adjusted Net Income as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring costs, acquisition-related costs and deferred price consideration and the tax impact of the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our other U.S. GAAP-based financial results, including net income.

 

CRITEO S.A.

Constant Currency Reconciliation

(U.S. dollars in thousands, unaudited)









Three Months Ended





March 31,





2019


2020


YoY
Change








Revenue as reported


$

558,123



$

503,376



(10)

%

Conversion impact U.S. dollar/other currencies




8,118




Revenue at constant currency(1)


558,123



511,494



(8)

%








Traffic acquisition costs as reported


(322,429)



(297,364)



(8)

%

Conversion impact U.S. dollar/other currencies




(4,525)




Traffic Acquisition Costs at constant currency(1)


(322,429)



(301,889)



(6)

%








Revenue ex-TAC as reported(2)


235,694



206,012



(13)

%

Conversion impact U.S. dollar/other currencies




3,593




Revenue ex-TAC at constant currency(2)


235,694



209,605



(11)

%

Revenue ex-TAC(2)/Revenue as reported


42

%


41

%










Other cost of revenue as reported


(26,045)



(33,806)



30

%

Conversion impact U.S. dollar/other currencies




(424)




Other cost of revenue at constant currency(1)


(26,045)



(34,230)



31

%








Adjusted EBITDA(3)


68,855



59,190



(14)

%

Conversion impact U.S. dollar/other currencies




1,617




Adjusted EBITDA(3) at constant currency(1)


$

68,855



$

60,807



(12)

%

Adjusted EBITDA(3)/Revenue ex-TAC(2)


29

%


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.

 

CRITEO S.A.

Information on Share Count

(unaudited)




Three Months Ended



March 31,



2019


2020

Shares outstanding as at January 1,


64,249,084



62,293,508


Weighted average number of shares issued during the period


87,693



(602,507)


Basic number of shares - Basic EPS basis


64,336,777



61,691,001


Dilutive effect of share options, warrants, employee warrants - Treasury method


1,704,519



434,581


Diluted number of shares - Diluted EPS basis


66,041,296



62,125,582







Shares issued as at March 31, before Treasury stocks


66,142,511



66,202,881


Treasury stock as of March 31,


(1,672,404)



(4,533,650)


Shares outstanding as of March 31, after Treasury stocks


64,470,107



61,669,231


Total dilutive effect of share options, warrants, employee warrants


8,000,740



6,982,753


Fully diluted shares as at March 31,


72,470,847



68,651,984


 

 

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

(U.S. dollars in thousands except where stated, unaudited)



Q2
2018

Q3
2018

Q4
2018

Q1
2019

Q2
2019

Q3
2019

Q4
2019

Q1
2020

YoY
Change

QoQ
Change












Clients

18,936

19,213

19,419

19,373

19,733

19,971

20,247

20,360

5%

1%












Revenue 

537,185

528,869

670,096

558,123

528,147

522,606

652,640

503,376

(10)%

(23)%

Americas

212,781

211,247

317,350

217,993

213,974

213,937

306,250

191,745

(12)%

(37)%

EMEA

201,080

195,230

220,904

209,643

194,359

185,556

216,639

190,114

(9)%

(12)%

APAC

123,324

122,392

131,842

130,487

119,814

123,113

129,751

121,517

(7)%

(6)%












TAC

(306,963)

(305,387)

(398,238)

(322,429)

(304,229)

(301,901)

(386,388)

(297,364)

(8)%

(23)%

Americas

(125,502)

(126,406)

(196,168)

(131,545)

(129,491)

(129,047)

(189,092)

(120,022)

(9)%

(37)%

EMEA

(112,577)

(111,131)

(128,053)

(117,291)

(107,401)

(103,899)

(124,939)

(108,397)

(8)%

(13)%

APAC

(68,884)

(67,850)

(74,017)

(73,593)

(67,337)

(68,955)

(72,357)

(68,945)

(6)%

(5)%












Revenue ex-TAC (1)

230,222

223,482

271,858

235,694

223,918

220,705

266,252

206,012

(13)%

(23)%

Americas

87,279

84,841

121,182

86,448

84,483

84,890

117,158

71,723

(17)%

(39)%

EMEA

88,503

84,099

92,851

92,352

86,958

81,657

91,700

81,717

(12)%

(11)%

APAC

54,440

54,542

57,825

56,894

52,477

54,158

57,394

52,572

(8)%

(8)%












Cash flow from operating activities 

40,341

50,256

85,600

67,220

52,964

43,289

59,359

56,743

(16)%

(4)%












Capital expenditures

17,847

29,656

45,408

23,684

32,792

23,944

17,520

11,737

(50)%

(33)%












Capital expenditures/Revenue

3%

6%

7%

4%

6%

5%

3%

2%

N.A

N.A












Net cash position

480,285

458,690

364,426

395,771

422,053

409,178

418,763

436,506

10%

4%












Headcount

2,678

2,737

2,744

2,813

2,873

2,794

2,755

2,701

(4)%

(2)%












Days Sales Outstanding (days - end of month)

61

60

58

59

58

57

52

62

N.A

N.A



(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.

 

Cision View original content:http://www.prnewswire.com/news-releases/criteo-reports-solid-results-for-the-first-quarter-2020-amidst-a-challenging-environment-301048702.html

SOURCE Criteo S.A.

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