Criteo Reports Record Results For The Third Quarter 2014 And Increases Full-Year 2014 Guidance

Criteo-LogoNEW YORK, USA, November 6, 2014 – Criteo S.A., the performance marketing technology company, has announced its financial results for the third quarter ended September 30, 2014.

  • Revenue in the third quarter 2014 increased 70.9% (or 71.9% at constant currency[1]) to €194.4 million, compared with €113.8 million in the third quarter 2013.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, in the third quarter 2014 grew 65.8% (or 66.5% at constant currency) to €77.6 million, compared with €46.8 million in the third quarter 2013.
  • Net income in the third quarter 2014 increased by €8.4 million to €11.5 million, compared with €3.0 million in the third quarter 2013.
  • Adjusted EBITDA for the third quarter 2014 was €19.8 million, an increase of 71.4% (or 73.1% at constant currency), compared with €11.6 million in the third quarter 2013.
  • Cash flow from operating activities in the third quarter 2014 increased by €21.7 million to €25.5 million, compared with €3.7 million in the third quarter 2013.
  • Free Cash Flow for the third quarter 2014 was €14.4 million, an increase of €16.3 million compared with a negative €1.9 million free cash flow in the third quarter 2013.

“We delivered another record quarter exceeding our expectations,” said JB Rudelle, Criteo’s co-founder and CEO. “Performance is the cornerstone of our company and we remain focused on our single goal of generating more sales for our clients.”

Operating Highlights

  • Our newly enhanced Criteo Engine, optimised for maximising the conversion of our clients’ customers, was rolled out to over 78% of our client base at the end of the third quarter.
  • 74% of our client base used our multi-screen solution in the third quarter 2014.
  • Year-over-year growth in the Americas continued to accelerate to 97% at constant currency in the third quarter from 78% in the second quarter, driven by strong performance in the US.
  • Total number of clients grew by 450 in the third quarter to a record 6,581, representing a 42% year-over-year growth.
  • New client additions in the third quarter 2014 included:
    • In the Americas: Carrentals.com, Online Shoes, Shoeme, Thredup and Travelocity
    • In EMEA: Ford, Fotocasa, Openbank and Sephora
    • In Asia-Pacific: Airbnb, Hyundai Hmall, Lazada and MakeMyTrip 

Revenue ex-TAC

Revenue ex-TAC grew 65.8% in the third quarter 2014, or 66.5% at constant currency, to €77.6 million, compared with €46.8 million in the third quarter 2013. This year-over-year performance was primarily driven by the continued roll-out of our technology and products, the steady growth in our client base across geographies and our continued success in broadening our publisher base.

  • In the Americas, revenue ex-TAC in the third quarter 2014 grew by 94.2% over the comparable quarter in 2013, or 96.6% at constant currency, to €23.1 million. The Americas represented approximately 30% of our global revenue ex-TAC in the third quarter 2014.
  • Revenue ex-TAC in EMEA in the third quarter 2014 increased by 52.5% over the same period last year, or 50.8% at constant currency, to €38.7 million. EMEA represented approximately 50% of our global revenue ex-TAC in the third quarter 2014.
  • Revenue ex-TAC in Asia-Pacific in the third quarter 2014 increased by 65.5% over the comparable quarter in 2013, or 70.4% at constant currency, to €15.8 million. Asia-Pacific accounted for approximately 20% of our global revenue ex-TAC in the third quarter 2014. 

Revenue ex-TAC margin as a percentage of revenue in the third quarter 2014 was at 39.9%, consistent with prior quarters.

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA for the third quarter 2014 was €19.8 million, an increase of 71.4%, or 73.1% at constant currency, compared with €11.6 million in the third quarter 2013. This year-over-year increase in Adjusted EBITDA is primarily the result of the strong revenue ex-TAC performance in the quarter. In addition, a slightly slower hiring pace during the summer, combined with the postponed signature of a lease for new facilities to the fourth quarter, contributed to increasing our Adjusted EBITDA this quarter.

Operating expenses in the third quarter of 2014 increased by 62.7% to €59.2 million, compared with the third quarter 2013. Excluding the impact of share-based compensation, pension costs, depreciation and amortisation and acquisition-related deferred price consideration, which, taking all exclusions together, we reference as operating expenses on a “Non-IFRS basis,” our operating expenses in the third quarter 2014 were €52.7 million, an increase of 62.0% compared with the third quarter of 2013. This increase in operating expenses over the period was principally related to headcount growth across our three main functions – Research & Development, Sales & Operations and General & Administrative – as we continued to scale the whole Criteo organisation. In particular, our headcount in Sales & Operations increased by 67% year-over-year in an effort to capture market opportunity in our geographies, especially in our mid-market organisation. We intend to continue to invest significantly in Research & Development and Sales & Operations in the fourth quarter, to support our current and anticipated future growth.

Net Income and Adjusted Net Income

Net income for the third quarter 2014 was €11.5 million, representing a €8.4 million increase compared with €3.0 million in the third quarter 2013. Net income available to shareholders of Criteo S.A. for the third quarter 2014 was €11.4 million, or €0.18 per diluted share, compared with €2.8 million, or €0.05 per diluted share, in the third quarter 2013.

Adjusted Net Income for the third quarter 2014, or our net income adjusted to eliminate the impact of share-based compensation expense, amortisation of acquisition-related intangible assets and acquisition-related deferred price consideration and the tax impact of these adjustments, was €16.7 million, representing a €10.6 million increase compared with €6.1 million in the third quarter 2013.

Cash Flow and Cash Position

  • Our cash flow generated by operating activities in the third quarter 2014 increased by €21.7 million to €25.5 million, compared with €3.7 million in the third quarter 2013.
  • Our free cash flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment, net of proceeds from disposal, was €14.4 million in the third quarter 2014, an increase of €16.3 million, compared with a negative €1.9 million free cash flow in the third quarter 2013.
  • Total cash, cash equivalents and short-term investments were at €256.7 million as of September 30, 2014. This represented an increase of €22.4 million compared with December 31, 2013, primarily the result of €22.7 million free cash flow generation over the period and proceeds from capital increases of €20.1 million, which were offset by the €18.8 million cash consideration for the acquisitions of Tedemis S.A. and AdQuantic SAS, in February 2014 and April 2014, respectively. 

Business Outlook 

The following forward-looking statements reflect Criteo’s expectations as of November 4, 2014.

Fourth Quarter 2014 Guidance:

  • Revenue ex-TAC for the fourth quarter ending December 31, 2014 is expected to be between €89 million and €91 million.
  • Adjusted EBITDA for the fourth quarter ending December 31, 2014 is expected to be between €27 million and €29 million. 

Fiscal Year 2014 Guidance:

  • The Company is increasing its Revenue ex-TAC outlook for the fiscal year ending December 31, 2014, now expected to be between €296 million and €298 million.
  • The Company is increasing its Adjusted EBITDA outlook for the fiscal year ending December 31, 2014, now expected to be between €74.6 million and €76.6 million. 

The above guidance assumes no additional acquisitions are completed during the quarter ending December 31, 2014.

Non-IFRS Financial Measures

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

Revenue ex-TAC is our revenue excluding traffic acquisition costs (TAC) generated over the applicable measurement period. Revenue ex-TAC is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC provides useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors.

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

Adjusted Net Income is our net income adjusted to eliminate the impact of share-based compensation expense, amortisation of acquisition-related intangible assets and acquisition-related deferred price consideration, and the tax impact of these adjustments. Adjusted Net Income is not a measure calculated in accordance with IFRS. In particular, we believe that the elimination of share-based compensation expense, amortisation of acquisition-related intangible assets and acquisition-related deferred price consideration and the tax impact of these adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Please refer to supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Adjusted EBITDA to net income and Adjusted Net Income to net income, the most comparable IFRS measurements. Our use of non-IFRS financial measures has limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.

With respect to our expectations under “Business Outlook” above, reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding IFRS measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-IFRS measures; in particular, the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future IFRS financial results.

 

These measures may be different than non-IFRS financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. Explanations of the Company’s non-IFRS financial measures, and reconciliations of these financial measures to the IFRS financial measures the Company considers most comparable, are included in the accompanying tables below.

 

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including projected financial results for the quarter and the fiscal year ending December 31, 2014, our expectations regarding our market opportunity and future growth prospects and other statements that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: recent growth rates not being indicative of future growth, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, the investments in new business opportunities and the timing of these investments, the impact of competition, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, uncertainty regarding international growth and expansion, and the financial impact of maximizing revenue ex-TAC, as well as risks related to future opportunities and plans, including the uncertainty of expected future financial performance and results and those risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in the Company’s SEC filings and reports, including the Company’s Registration Statement on Form F-1 filed with the SEC on March 20, 2014, as well as future filings and reports by the Company. The Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations or otherwise.

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