Exhibit 99.1
CRITEO REPORTS RESULTS FOR THE SECOND QUARTER 2019
AND ANNOUNCES A NEW $80 MILLION SHARE REPURCHASE PROGRAM
NEW YORK - July 31, 2019 - Criteo S.A. (NASDAQ: CRTO), the advertising platform for the open Internet, today announced financial results for the second quarter ended June 30, 2019.
| • | Revenue decreased 2% year-over-year, and increased 1% at constant currency1, to $528 million. |
| • | Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, decreased 3% year-over-year, and increased 0.3% at constant currency, to $224 million (or $225 million at the Q2 guidance exchange rates), or 42% of revenue. |
| • | Net income decreased 15% year-over-year to $13 million. |
| • | Adjusted EBITDA2 declined 18% year-over-year, or 16% at constant currency, to $56 million, or 25% of Revenue ex-TAC. |
| • | Cash flow from operating activities increased 31% year-over-year to $53 million. |
| • | Free Cash Flow2 reached $20 million and the cash position increased to $422 million as of June 30, 2019. |
| • | Adjusted Net Income per diluted share2 was $0.47. |
| • | We maintain our 2019 outlook for both Revenue ex-TAC growth and Adjusted EBITDA margin. |
| • | Our Board of Directors has authorized a share repurchase program of up to $80 million of outstanding American Depositary Shares. |
"In a challenging landscape, we achieved important milestones in our transformation in Q2," said JB Rudelle, CEO. "I feel good about our strategic direction and our ability to deliver on our plans."
"We maintain our 2019 outlook for both topline growth and profitability margin, and are strongly committed to delivering healthy profitability over time," said Benoit Fouilland, CFO.
Operating Highlights
| • | Revenue ex-TAC from new products, which includes all solutions outside of retargeting, represented 10% of total, growing 61% year-over-year. |
| • | We added 360 net new clients in Q2, the highest level since Q2 2018, and maintained client retention at close to 90% for all products. |
| • | Revenue ex-TAC from mobile apps grew 21% year-over-year. |
| • | Same-client revenue3 decreased 1.9% year-over-year at constant currency and same-client Revenue ex-TAC3 decreased 2.9% year-over-year at constant currency. |
| • | Our header-bidding technology now connects to over 3,800 web publishers and 200 app developers providing direct access to quality inventory. |
| • | We just launched our self-registration feature for small and medium clients starting with three key markets: the U.S., U.K. and Australia. |
| • | We took effective measures to further reduce employee attrition. |
___________________________________________________
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,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.
1
Revenue and Revenue ex-TAC
Revenue declined 2% year-over-year, and increased 1% at constant currency, to $528 million (Q2 2018: $537 million). Revenue ex-TAC decreased 3% year-over-year, and increased 0.3% at constant currency, to $224 million (Q2 2018: $230 million). The increase at constant currency was primarily driven by our business with new clients, in particular in the midmarket, offsetting a slight decline in our business with existing clients, despite continued adoption of our new solutions across our existing client base. Revenue ex-TAC margin was 42.4% of revenue (Q2 2018: 42.9%).
| • | In the Americas, Revenue grew 1% year-over-year, or 1% at constant currency, to $214 million and represented 40% of total Revenue. Revenue ex-TAC declined 3% year-over-year, or 3% at constant currency, to $84 million and represented 38% of total Revenue ex-TAC. |
| • | In EMEA, Revenue declined 3% year-over-year, and increased 3% at constant currency, to $194 million and represented 37% of total Revenue. Revenue ex-TAC declined 2% year-over-year, and grew 4% at constant currency, to $87 million and represented 39% of total Revenue ex-TAC. |
| • | In Asia-Pacific, Revenue declined 3% year-over-year, or 1% at constant currency, to $120 million and represented 23% of total Revenue. Revenue ex-TAC declined 4% year-over-year, or 2% at constant currency, to $52 million and represented 23% of total Revenue ex-TAC. |
Net Income and Adjusted Net Income
Net income decreased 15% year-over-year to $13 million (Q2 2018: $15 million). Net income margin as a percentage of revenue was 2.4% (Q2 2018: 2.7%), a 40-basis point decrease year-over-year. Net income available to shareholders of Criteo S.A. decreased 21% year-over-year to $11 million, or $0.16 per share on a diluted basis (Q2 2018: $14 million, or $0.20 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 13% year-over-year to $31 million, or $0.47 per share on a diluted basis (Q2 2018: $35 million, or $0.53 per share on a diluted basis).
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA declined 18% year-over-year, or 16% at constant currency, to $56 million (Q2 2018: $69 million), primarily driven by the decrease in Revenue ex-TAC, increased Non-GAAP expenses, in particular in other cost of revenue, as well as a $5 million exceptional charge relating to an invoicing dispute. Adjusted EBITDA as a percentage of Revenue ex-TAC, which we refer to as Adjusted EBITDA margin, was 25.2% (Q2 2018: 29.9%), a 470-basis point decrease year-over-year.
Operating expenses were at $175 million (Q2 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% year-over-year to $149 million (Q2 2018: $147 million). In connection with our company transformation, we incurred restructuring costs of $0.7 million, including $2 million related to cash payroll and facilities expenses that were added back to Adjusted EBITDA, and $1 million of facilities related depreciation and amortization expense, partially offset by non-cash forfeitures of equity awards.
2
Cash Flow and Cash Position
Cash flow from operating activities increased 31% year-over-year to $53 million (Q2 2018: $40 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 10% year-over-year to $20 million (Q2 2018: $22 million), representing 36% of Adjusted EBITDA (Q2 2018: 33%).
Cash and cash equivalents increased $58 million in the first half of 2019 to $422 million.
Business Outlook
The following forward-looking statements reflect Criteo’s expectations as of July 31, 2019.
Third quarter 2019 guidance:
| • | We expect Revenue ex-TAC to be between $219 million and $223 million, implying constant-currency growth of approximately -2% to +0%. |
| • | We expect Adjusted EBITDA to be between $57 million and $61 million. |
Fiscal year 2019 guidance:
| • | We maintain our outlook and expect Revenue ex-TAC growth for fiscal year 2019 of between 0% and 2% at constant currency. |
| • | We maintain our outlook and expect Adjusted EBITDA margin for fiscal year 2019 of approximately 30% of Revenue ex-TAC. |
The above guidance for the quarter ending September 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 109, a U.S. dollar-British pound rate of 0.78 and a U.S. dollar-Brazilian real rate of 3.81.
The above guidance assumes no acquisitions are completed during the quarter ending September 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 potentially significant impact on our future U.S. GAAP financial results.
3
Announcement of a $80 million Share Repurchase Program
Demonstrating the Company's confidence in its business and its ability to generate Free Cash Flow, Criteo today announces that the Board of Directors has authorized a share repurchase program of up to $80 million of the Company’s outstanding American Depositary Shares.
This program relies primarily upon the authorization provided by shareholders at the Company's 2019 Annual General Meeting, and as such the Company intends to use repurchased shares to satisfy employee equity plan vesting in lieu of issuing new shares, and potentially in connection with M&A transactions. The authorization is effective immediately and remains in effect until May 15, 2020.
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 Net Income per diluted share, Free Cash Flow and Non-GAAP Operating Expenses. These measures are not calculated in accordance with U.S. GAAP.
Revenue ex-TAC is our revenue excluding Traffic Acquisition Costs ("TAC") generated over the applicable measurement period and Revenue ex-TAC by Region reflects our Revenue ex-TAC by our geographies. Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our business and across our geographies.
Accordingly, we believe that Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin provide useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors. Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA and Adjusted EBITDA margin are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short‑ and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration, Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
4
Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments. Adjusted Net Income and Adjusted Net Income per diluted share are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.
In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, Adjusted Net Income and Adjusted Net Income per diluted share can provide useful measures for period-to-period comparisons of our business.
Accordingly, we believe that Adjusted Net Income and Adjusted Net Income per diluted share provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment. Free Cash Flow is a key measure used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow permits a more complete and comprehensive analysis of our available cash flows.
Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures the Company uses to provide its quarterly and annual business outlook to the investment community.
Please refer to the supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Revenue ex-TAC by Region to revenue by region, Adjusted EBITDA to net income, Adjusted Net Income to net income, Free Cash Flow to cash flow from operating activities, and Non-GAAP Operating Expenses to operating expenses, in each case, the most comparable U.S. GAAP measure. Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider such non-GAAP measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: 1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and 2) other companies may report Revenue ex-TAC, Revenue ex-TAC by Region, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Non-GAAP Operating Expenses or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income.
5
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including projected financial results for the quarter ending September 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 in subsequent Quarterly Report on Form 10-Q 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.
6
Conference Call Information
Criteo’s earnings conference call will take place today, July 31, 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.
About Criteo
Criteo (NASDAQ: CRTO) is the advertising platform for the open Internet, an ecosystem that favors neutrality, transparency and inclusiveness. Close to 2,900 Criteo team members partner with close to 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.
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
7
CRITEO S.A.
Consolidated Statement of Financial Position
(U.S. dollars in thousands, unaudited)
| December 31, 2018 | June 30, 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 364,426 | $ | 422,053 | ||||
Trade receivables, net of allowances of $25.9 million and $19.5 million at December 31, 2018 and June 30, 2019, respectively | 473,901 | 374,949 | ||||||
| Income taxes | 19,370 | 18,185 | ||||||
| Other taxes | 53,338 | 56,090 | ||||||
| Other current assets | 22,816 | 18,751 | ||||||
| Total current assets | 933,851 | 890,028 | ||||||
| Property, plant and equipment, net | 184,013 | 192,651 | ||||||
| Intangible assets, net | 112,036 | 103,113 | ||||||
| Goodwill | 312,881 | 317,093 | ||||||
Right of Use Asset - operating lease (1) | — | 183,725 | ||||||
| Non-current financial assets | 20,460 | 21,613 | ||||||
| Deferred tax assets | 33,894 | 41,346 | ||||||
| Total non-current assets | 663,284 | 859,541 | ||||||
| Total assets | $ | 1,597,135 | $ | 1,749,569 | ||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities: | ||||||||
| Trade payables | $ | 425,376 | $ | 332,735 | ||||
| Contingencies | 2,640 | 4,156 | ||||||
| Income taxes | 7,725 | 7,065 | ||||||
| Financial liabilities - current portion | 1,018 | 2,030 | ||||||
Lease liability - operating - current portion (1) | — | 47,964 | ||||||
| Other taxes | 55,592 | 56,929 | ||||||
| Employee - related payables | 65,878 | 68,702 | ||||||
| Other current liabilities | 47,115 | 33,986 | ||||||
| Total current liabilities | 605,344 | 553,567 | ||||||
| Deferred tax liabilities | 10,770 | 8,489 | ||||||
| Retirement benefit obligation | 5,537 | 8,002 | ||||||
| Financial liabilities - non current portion | 2,490 | 2,051 | ||||||
Lease liability - operating - non current portion (1) | — | 148,170 | ||||||
| Other non-current liabilities | 5,103 | 4,327 | ||||||
| Total non-current liabilities | 23,900 | 171,039 | ||||||
| Total liabilities | 629,244 | 724,606 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Common shares, €0.025 par value, 67,708,203 and 66,161,523 shares authorized, issued and outstanding at December 31, 2018 and June 30, 2019, respectively. | 2,201 | 2,157 | ||||||
Treasury stock, 3,459,119 and 1,118,969 shares at cost as of December 31, 2018 and June 30, 2019, respectively. | (79,159 | ) | (26,564 | ) | ||||
| Additional paid-in capital | 663,281 | 652,572 | ||||||
| Accumulated other comprehensive (loss) | (30,522 | ) | (33,293 | ) | ||||
| Retained earnings | 387,869 | 401,209 | ||||||
| Equity - attributable to shareholders of Criteo S.A. | 943,670 | 996,081 | ||||||
| Non-controlling interests | 24,221 | 28,882 | ||||||
| Total equity | 967,891 | 1,024,963 | ||||||
| Total equity and liabilities | $ | 1,597,135 | $ | 1,749,569 | ||||
(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.
8
CRITEO S.A.
Consolidated Statement of Income
(U.S. dollars in thousands, except share and per share data, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Revenue | $ | 537,185 | $ | 528,147 | (2 | )% | $ | 1,101,349 | $ | 1,086,270 | (1 | )% | ||||||||||
| Cost of revenue | ||||||||||||||||||||||
| Traffic acquisition cost | (306,963 | ) | (304,229 | ) | (1 | )% | (630,709 | ) | (626,658 | ) | (1 | )% | ||||||||||
| Other cost of revenue | (29,957 | ) | (29,059 | ) | (3 | )% | (60,016 | ) | (55,104 | ) | (8 | )% | ||||||||||
| Gross profit | 200,265 | 194,859 | (3 | )% | 410,624 | 404,508 | (1 | )% | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development expenses | (47,544 | ) | (44,015 | ) | (7 | )% | (92,862 | ) | (90,592 | ) | (2 | )% | ||||||||||
| Sales and operations expenses | (92,726 | ) | (95,503 | ) | 3 | % | (188,375 | ) | (191,412 | ) | 2 | % | ||||||||||
| General and administrative expenses | (35,644 | ) | (35,767 | ) | 0.3 | % | (70,235 | ) | (69,537 | ) | (1 | )% | ||||||||||
| Total Operating expenses | (175,914 | ) | (175,285 | ) | (0.4 | )% | (351,472 | ) | (351,541 | ) | — | % | ||||||||||
| Income from operations | 24,351 | 19,574 | (20 | )% | 59,152 | 52,967 | (10 | )% | ||||||||||||||
| Financial income (expense) | (1,006 | ) | (1,354 | ) | 35 | % | (2,331 | ) | (3,328 | ) | 43 | % | ||||||||||
| Income before taxes | 23,345 | 18,220 | (22 | )% | 56,821 | 49,639 | (13 | )% | ||||||||||||||
| Provision for income taxes | (8,638 | ) | (5,683 | ) | (34 | )% | (21,024 | ) | (15,701 | ) | (25 | )% | ||||||||||
| Net Income | $ | 14,707 | $ | 12,537 | (15 | )% | $ | 35,797 | $ | 33,938 | (5 | )% | ||||||||||
| Net income available to shareholders of Criteo S.A. | $ | 13,726 | $ | 10,823 | (21 | )% | $ | 33,535 | $ | 29,943 | (11 | )% | ||||||||||
| Net income available to non-controlling interests | $ | 981 | $ | 1,714 | 75 | % | $ | 2,262 | $ | 3,995 | 77 | % | ||||||||||
| Weighted average shares outstanding used in computing per share amounts: | ||||||||||||||||||||||
| Basic | 66,347,599 | 64,581,476 | 66,254,476 | 64,459,867 | ||||||||||||||||||
| Diluted | 67,488,311 | 65,624,505 | 67,479,513 | 65,833,642 | ||||||||||||||||||
| Net income allocated to shareholders per share: | ||||||||||||||||||||||
| Basic | $ | 0.21 | $ | 0.17 | (19 | )% | $ | 0.51 | $ | 0.46 | (10 | )% | ||||||||||
| Diluted | $ | 0.20 | $ | 0.16 | (20 | )% | $ | 0.50 | $ | 0.45 | (10 | )% | ||||||||||
9
CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Net income | $ | 14,707 | $ | 12,537 | (15 | )% | $ | 35,797 | $ | 33,938 | (5 | )% | ||||||||||
| Non-cash and non-operating items | 35,677 | 28,961 | (19 | )% | 75,427 | 53,959 | (28 | )% | ||||||||||||||
| - Amortization and provisions | 25,099 | 18,282 | (27 | )% | 51,149 | 37,926 | (26 | )% | ||||||||||||||
- Equity awards compensation expense (1) | 20,241 | 11,713 | (42 | )% | 39,070 | 25,595 | (34 | )% | ||||||||||||||
| - Change in deferred taxes | (4,389 | ) | 7,252 | NM | (7,535 | ) | 1,336 | NM | ||||||||||||||
| - Change in income taxes | (5,316 | ) | (8,696 | ) | 64 | % | (4,000 | ) | (10,630 | ) | NM | |||||||||||
- Other (2) | 42 | 410 | NM | (3,257 | ) | (268 | ) | (92 | )% | |||||||||||||
| Changes in working capital related to operating activities | (10,043 | ) | 11,466 | NM | 13,644 | 32,287 | NM | |||||||||||||||
| - Decrease in trade receivables | 10,154 | 19,325 | 90 | % | 101,446 | 105,343 | 4 | % | ||||||||||||||
| - Decrease in trade payables | (26,745 | ) | (14,995 | ) | (44 | )% | (89,690 | ) | (73,480 | ) | (18 | )% | ||||||||||
| - Decrease in other current assets | 5,821 | 7,504 | 29 | % | 13,779 | 1,512 | (89 | )% | ||||||||||||||
- Increase/(Decrease) in other current liabilities (2) | 727 | 3,015 | NM | (11,891 | ) | 5,451 | NM | |||||||||||||||
- Change in operating lease liabilities and right of use assets (3) | — | (3,383 | ) | NM | — | (6,539 | ) | NM | ||||||||||||||
| CASH FROM OPERATING ACTIVITIES | 40,341 | 52,964 | 31 | % | 124,868 | 120,184 | (4 | )% | ||||||||||||||
| Acquisition of intangible assets, property, plant and equipment | (18,880 | ) | (28,812 | ) | 53 | % | (26,293 | ) | (42,104 | ) | 60 | % | ||||||||||
| Change in accounts payable related to intangible assets, property, plant and equipment | 1,033 | (3,980 | ) | NM | (24,121 | ) | (14,372 | ) | (40 | )% | ||||||||||||
| Payment for (disposal of) a business, net of cash acquired (disposed) | - | 637 | NM | (10,811 | ) | (4,688 | ) | (57 | )% | |||||||||||||
| Change in other non-current financial assets | 154 | (1,152 | ) | NM | 42 | (1,184 | ) | NM | ||||||||||||||
| CASH USED FOR INVESTING ACTIVITIES | (17,693 | ) | (33,307 | ) | 88 | % | (61,183 | ) | (62,348 | ) | 2 | % | ||||||||||
| Repayment of borrowings | (235 | ) | (167 | ) | (29 | )% | (473 | ) | (339 | ) | (28 | )% | ||||||||||
| Net payments related to equity award activities | 396 | (98 | ) | NM | 562 | (87 | ) | NM | ||||||||||||||
Change in other financial liabilities (2) | (35 | ) | (209 | ) | NM | 16,810 | (239 | ) | NM | |||||||||||||
| CASH FROM (USED FOR) FINANCING ACTIVITIES | 126 | (474 | ) | NM | 16,899 | (665 | ) | NM | ||||||||||||||
Effect of exchange rates changes on cash and cash equivalents (2) | (26,363 | ) | 7,099 | NM | (14,410 | ) | 456 | NM | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (3,589 | ) | 26,282 | NM | 66,174 | 57,627 | (13 | )% | ||||||||||||||
| Net cash and cash equivalents at beginning of period | 483,874 | 395,771 | (18 | )% | 414,111 | 364,426 | (12 | )% | ||||||||||||||
| Net cash and cash equivalents at end of period | $ | 480,285 | $ | 422,053 | (12 | )% | $ | 480,285 | $ | 422,053 | (12 | )% | ||||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||||||||||||
| Cash paid for taxes, net of refunds | $ | (18,343 | ) | $ | (7,127 | ) | NM | $ | (32,560 | ) | $ | (24,995 | ) | (23 | )% | |||||||
| Cash paid for interest, net of amounts capitalized | $ | (432 | ) | $ | (351 | ) | (19 | )% | $ | (840 | ) | $ | (758 | ) | (10 | )% | ||||||
(1) Share-based compensation expense according to ASC 718 Compensation - stock compensation accounted for $19.8 million and $11.4 million of equity awards compensation expense for the quarter ended June 30, 2018 and 2019, respectively, and $38.2 million and $24.9 million of equity awards compensation for the six months ended June 30, 2018 and 2019, respectively.
(2) During the quarter ended June 30, 2018, and the six months ended June 30, 2018, respectively, 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) 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.
10
CRITEO S.A.
Reconciliation of Cash from Operating Activities to Free Cash Flow
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| CASH FROM OPERATING ACTIVITIES | $ | 40,341 | $ | 52,964 | 31 | % | $ | 124,868 | $ | 120,184 | (4 | )% | ||||||||||
| Acquisition of intangible assets, property, plant and equipment | (18,880 | ) | (28,812 | ) | 53 | % | (26,293 | ) | (42,104 | ) | 60 | % | ||||||||||
| Change in accounts payable related to intangible assets, property, plant and equipment | 1,033 | (3,980 | ) | NM | (24,121 | ) | (14,372 | ) | (40 | )% | ||||||||||||
FREE CASH FLOW (1) | $ | 22,494 | $ | 20,172 | (10 | )% | $ | 74,454 | $ | 63,708 | (14 | )% | ||||||||||
(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.
11
CRITEO S.A.
Reconciliation of Revenue ex-TAC by Region to Revenue by Region
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||||||||
| Region | 2018 | 2019 | YoY Change | YoY Change at Constant Currency | 2018 | 2019 | YoY Change | YoY Change at Constant Currency | |||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||
| Americas | $ | 212,781 | $ | 213,974 | 1 | % | 1 | % | $ | 425,476 | $ | 431,967 | 2 | % | 2 | % | |||||||||||||
| EMEA | 201,080 | 194,359 | (3 | )% | 3 | % | 423,691 | 404,002 | (5 | )% | 3 | % | |||||||||||||||||
| Asia-Pacific | 123,324 | 119,814 | (3 | )% | (1 | )% | 252,182 | 250,301 | (1 | )% | 2 | % | |||||||||||||||||
| Total | 537,185 | 528,147 | (2 | )% | 1 | % | 1,101,349 | 1,086,270 | (1 | )% | 2 | % | |||||||||||||||||
| Traffic acquisition costs | |||||||||||||||||||||||||||||
| Americas | (125,502 | ) | (129,491 | ) | 3 | % | 4 | % | (257,023 | ) | (261,036 | ) | 2 | % | 2 | % | |||||||||||||
| EMEA | (112,577 | ) | (107,401 | ) | (5 | )% | 1 | % | (232,470 | ) | (224,692 | ) | (3 | )% | 4 | % | |||||||||||||
| Asia-Pacific | (68,884 | ) | (67,337 | ) | (2 | )% | (0.3 | )% | (141,216 | ) | (140,930 | ) | (0.2 | )% | 2 | % | |||||||||||||
| Total | (306,963 | ) | (304,229 | ) | (1 | )% | 2 | % | (630,709 | ) | (626,658 | ) | (1 | )% | 3 | % | |||||||||||||
Revenue ex-TAC (1) | |||||||||||||||||||||||||||||
| Americas | 87,279 | 84,483 | (3 | )% | (3 | )% | 168,453 | 170,931 | 1 | % | 2 | % | |||||||||||||||||
| EMEA | 88,503 | 86,958 | (2 | )% | 4 | % | 191,221 | 179,310 | (6 | )% | 1 | % | |||||||||||||||||
| Asia-Pacific | 54,440 | 52,477 | (4 | )% | (2 | )% | 110,966 | 109,371 | (1 | )% | 1 | % | |||||||||||||||||
| Total | $ | 230,222 | $ | 223,918 | (3 | )% | 0.3 | % | $ | 470,640 | $ | 459,612 | (2 | )% | 1 | % | |||||||||||||
(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.
12
CRITEO S.A.
Reconciliation of Adjusted EBITDA to Net Income
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Net income | $ | 14,707 | $ | 12,537 | (15 | )% | $ | 35,797 | $ | 33,938 | (5 | )% | ||||||||||
| Adjustments: | ||||||||||||||||||||||
| Financial (income) expense | 1,006 | 1,354 | 35 | % | 2,331 | 3,328 | 43 | % | ||||||||||||||
| Provision for income taxes | 8,638 | 5,683 | (34 | )% | 21,024 | 15,701 | (25 | )% | ||||||||||||||
| Equity awards compensation expense | 20,245 | 14,391 | (29 | )% | 39,548 | 28,273 | (29 | )% | ||||||||||||||
| Research and development | 6,771 | 4,203 | (38 | )% | 11,326 | 8,228 | (27 | )% | ||||||||||||||
| Sales and operations | 8,668 | 5,693 | (34 | )% | 16,499 | 11,894 | (28 | )% | ||||||||||||||
| General and administrative | 4,806 | 4,495 | (6 | )% | 11,723 | 8,151 | (30 | )% | ||||||||||||||
| Pension service costs | 419 | 391 | (7 | )% | 853 | 785 | (8 | )% | ||||||||||||||
| Research and development | 212 | 191 | (10 | )% | 432 | 384 | (11 | )% | ||||||||||||||
| Sales and operations | 75 | 71 | (5 | )% | 154 | 143 | (7 | )% | ||||||||||||||
| General and administrative | 132 | 129 | (2 | )% | 267 | 258 | (3 | )% | ||||||||||||||
| Depreciation and amortization expense | 23,560 | 21,315 | (10 | )% | 47,206 | 40,611 | (14 | )% | ||||||||||||||
| Cost of revenue | 15,050 | 10,847 | (28 | )% | 30,299 | 19,982 | (34 | )% | ||||||||||||||
| Research and development | 2,245 | 3,534 | 57 | % | 4,466 | 7,011 | 57 | % | ||||||||||||||
| Sales and operations | 4,518 | 5,109 | 13 | % | 8,972 | 9,973 | 11 | % | ||||||||||||||
| General and administrative | 1,747 | 1,825 | 4 | % | 3,469 | 3,645 | 5 | % | ||||||||||||||
Restructuring cost (1) | 199 | 728 | NM | (53 | ) | 2,618 | NM | |||||||||||||||
| Research and development | 16 | 124 | NM | (332 | ) | 124 | NM | |||||||||||||||
| Sales and operations | 183 | 175 | (4 | )% | 290 | 2,065 | NM | |||||||||||||||
| General and administrative | — | 429 | NM | (11 | ) | 429 | NM | |||||||||||||||
| Total net adjustments | 54,067 | 43,862 | (19 | )% | 110,909 | 91,316 | (18 | )% | ||||||||||||||
Adjusted EBITDA (2) | $ | 68,774 | $ | 56,399 | (18 | )% | $ | 146,706 | $ | 125,254 | (15 | )% | ||||||||||
(1) For the three months ended June 30, 2019 and the six months ended June 30, 2019, respectively, the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy as detailed below:
| Three Months Ended | Six Months Ended | |||||
| June 30, 2019 | ||||||
| (Gain) from forfeitures of share-based compensation expense | (2,678 | ) | (2,678 | ) | ||
| Depreciation and amortization expense | 1,228 | 1,228 | ||||
| Payroll and Facilities related costs | 2,178 | 4,068 | ||||
| Total restructuring costs | 728 | 2,618 | ||||
(2) 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.
13
CRITEO S.A.
Reconciliation from Non-GAAP Operating Expenses to Operating Expenses under GAAP
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Research and Development expenses | $ | (47,544 | ) | $ | (44,015 | ) | (7 | )% | $ | (92,862 | ) | $ | (90,592 | ) | (2 | )% | ||||||
| Equity awards compensation expense | 6,771 | 4,203 | (38 | )% | 11,326 | 8,228 | (27 | )% | ||||||||||||||
| Depreciation and Amortization expense | 2,245 | 3,534 | 57 | % | 4,466 | 7,011 | 57 | % | ||||||||||||||
| Pension service costs | 212 | 191 | (10 | )% | 432 | 384 | (11 | )% | ||||||||||||||
Restructuring costs (1) | 16 | 124 | NM | (332 | ) | 124 | NM | |||||||||||||||
| Non GAAP - Research and Development expenses | (38,300 | ) | (35,963 | ) | (6 | )% | (76,970 | ) | (74,845 | ) | (3 | )% | ||||||||||
| Sales and Operations expenses | (92,726 | ) | (95,503 | ) | 3 | % | (188,375 | ) | (191,412 | ) | 2 | % | ||||||||||
| Equity awards compensation expense | 8,668 | 5,693 | (34 | )% | 16,499 | 11,894 | (28 | )% | ||||||||||||||
| Depreciation and Amortization expense | 4,518 | 5,109 | 13 | % | 8,972 | 9,973 | 11 | % | ||||||||||||||
| Pension service costs | 75 | 71 | (5 | )% | 154 | 143 | (7 | )% | ||||||||||||||
Restructuring costs (1) | 183 | 175 | (4 | )% | 290 | 2,065 | NM | |||||||||||||||
| Non GAAP - Sales and Operations expenses | (79,282 | ) | (84,455 | ) | 7 | % | (162,460 | ) | (167,337 | ) | 3 | % | ||||||||||
| General and Administrative expenses | (35,644 | ) | (35,767 | ) | 0.3 | % | (70,235 | ) | (69,537 | ) | (1 | )% | ||||||||||
| Equity awards compensation expense | 4,806 | 4,495 | (6 | )% | 11,723 | 8,151 | (30 | )% | ||||||||||||||
| Depreciation and Amortization expense | 1,747 | 1,825 | 4 | % | 3,469 | 3,645 | 5 | % | ||||||||||||||
| Pension service costs | 132 | 129 | (2 | )% | 267 | 258 | (3 | )% | ||||||||||||||
Restructuring costs (1) | — | 429 | NM | (11 | ) | 429 | NM | |||||||||||||||
| Non GAAP - General and Administrative expenses | (28,959 | ) | (28,889 | ) | (0.2 | )% | (54,787 | ) | (57,054 | ) | 4 | % | ||||||||||
| Total Operating expenses | (175,914 | ) | (175,285 | ) | (0.4 | )% | (351,472 | ) | (351,541 | ) | — | % | ||||||||||
| Equity awards compensation expense | 20,245 | 14,391 | (29 | )% | 39,548 | 28,273 | (29 | )% | ||||||||||||||
| Depreciation and Amortization expense | 8,510 | 10,468 | 23 | % | 16,907 | 20,629 | 22 | % | ||||||||||||||
| Pension service costs | 419 | 391 | (7 | )% | 853 | 785 | (8 | )% | ||||||||||||||
Restructuring costs (1) | 199 | 728 | NM | (53 | ) | 2,618 | NM | |||||||||||||||
Total Non GAAP Operating expenses (2) | $ | (146,541 | ) | $ | (149,307 | ) | 2 | % | $ | (294,217 | ) | $ | (299,236 | ) | 2 | % | ||||||
(1) For the three months ended June 30, 2019 and the six months ended June 30, 2019, respectively, the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy as detailed below:
| Three Months Ended | Six Months Ended | |||||
| June 30, 2019 | ||||||
| (Gain) from forfeitures of share-based compensation expense | (2,678 | ) | (2,678 | ) | ||
| Depreciation and amortization expense | 1,228 | 1,228 | ||||
| Payroll and Facilities related costs | 2,178 | 4,068 | ||||
| Total restructuring costs | 728 | 2,618 | ||||
(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.
14
CRITEO S.A.
Detailed Information on Selected Items
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Equity awards compensation expense | ||||||||||||||||||||||
| Research and development | $ | 6,771 | $ | 4,203 | (38 | )% | $ | 11,326 | $ | 8,228 | (27 | )% | ||||||||||
| Sales and operations | 8,668 | 5,693 | (34 | )% | 16,499 | 11,894 | (28 | )% | ||||||||||||||
| General and administrative | 4,806 | 4,495 | (6 | )% | 11,723 | 8,151 | (30 | )% | ||||||||||||||
| Total equity awards compensation expense | 20,245 | 14,391 | (29 | )% | 39,548 | 28,273 | (29 | )% | ||||||||||||||
| Pension service costs | ||||||||||||||||||||||
| Research and development | 212 | 191 | (10 | )% | 432 | 384 | (11 | )% | ||||||||||||||
| Sales and operations | 75 | 71 | (5 | )% | 154 | 143 | (7 | )% | ||||||||||||||
| General and administrative | 132 | 129 | (2 | )% | 267 | 258 | (3 | )% | ||||||||||||||
| Total pension service costs | 419 | 391 | (7 | )% | 853 | 785 | (8 | )% | ||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||||||||
| Cost of revenue | 15,050 | 10,847 | (28 | )% | 30,299 | 19,982 | (34 | )% | ||||||||||||||
| Research and development | 2,245 | 3,534 | 57 | % | 4,466 | 7,011 | 57 | % | ||||||||||||||
| Sales and operations | 4,518 | 5,109 | 13 | % | 8,972 | 9,973 | 11 | % | ||||||||||||||
| General and administrative | 1,747 | 1,825 | 4 | % | 3,469 | 3,645 | 5 | % | ||||||||||||||
| Total depreciation and amortization expense | 23,560 | 21,315 | (10 | )% | 47,206 | 40,611 | (14 | )% | ||||||||||||||
Restructuring costs (1) | ||||||||||||||||||||||
| Research and development | 16 | 124 | NM | (332 | ) | 124 | NM | |||||||||||||||
| Sales and operations | 183 | 175 | (4 | )% | 290 | 2,065 | NM | |||||||||||||||
| General and administrative | — | 429 | NM | (11 | ) | 429 | NM | |||||||||||||||
| Total restructuring costs | $ | 199 | $ | 728 | NM | $ | (53 | ) | $ | 2,618 | NM | |||||||||||
(1) For the three months ended June 30, 2019 and the six months ended June 30, 2019, respectively, the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy as detailed below:
| Three Months Ended | Six Months Ended | |||||
| June 30, 2019 | ||||||
| (Gain) from forfeitures of share-based compensation expense | (2,678 | ) | (2,678 | ) | ||
| Depreciation and amortization expense | 1,228 | 1,228 | ||||
| Payroll and Facilities related costs | 2,178 | 4,068 | ||||
| Total restructuring costs | 728 | 2,618 | ||||
15
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 | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Net income | $ | 14,707 | $ | 12,537 | (15 | )% | $ | 35,797 | $ | 33,938 | (5 | )% | ||||||||||
| Adjustments: | ||||||||||||||||||||||
| Equity awards compensation expense | 20,245 | 14,391 | (29 | )% | 39,548 | 28,273 | (29 | )% | ||||||||||||||
| Amortization of acquisition-related intangible assets | 3,448 | 5,465 | 58 | % | 6,905 | 10,937 | 58 | % | ||||||||||||||
Restructuring costs (1) | 199 | 728 | NM | (53 | ) | 2,618 | NM | |||||||||||||||
| Tax impact of the above adjustments | (3,117 | ) | (2,391 | ) | (23 | )% | (6,196 | ) | (5,331 | ) | (14 | )% | ||||||||||
| Total net adjustments | 20,775 | 18,193 | (12 | )% | 40,204 | 36,497 | (9 | )% | ||||||||||||||
Adjusted net income (2) | $ | 35,482 | $ | 30,730 | (13 | )% | $ | 76,001 | $ | 70,435 | (7 | )% | ||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||
| - Basic | 66,347,599 | 64,581,476 | 66,254,476 | 64,459,867 | ||||||||||||||||||
| - Diluted | 67,488,311 | 65,624,505 | 67,479,513 | 65,833,642 | ||||||||||||||||||
| Adjusted net income per share | ||||||||||||||||||||||
| - Basic | $ | 0.53 | $ | 0.48 | (9 | )% | $ | 1.15 | $ | 1.09 | (5 | )% | ||||||||||
| - Diluted | $ | 0.53 | $ | 0.47 | (11 | )% | $ | 1.13 | $ | 1.07 | (5 | )% | ||||||||||
(1) For the three months ended June 30, 2019 and the six months ended June 30, 2019, respectively, the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy as detailed below:
| Three Months Ended | Six Months Ended | |||||
| June 30, 2019 | ||||||
| (Gain) from forfeitures of share-based compensation expense | (2,678 | ) | (2,678 | ) | ||
| Depreciation and amortization expense | 1,228 | 1,228 | ||||
| Payroll and Facilities related costs | 2,178 | 4,068 | ||||
| Total restructuring costs | 728 | 2,618 | ||||
(2) 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.
16
CRITEO S.A.
Constant Currency Reconciliation
(U.S. dollars in thousands, unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2019 | YoY Change | 2018 | 2019 | YoY Change | |||||||||||||||||
| Revenue as reported | $ | 537,185 | $ | 528,147 | (2 | )% | $ | 1,101,349 | $ | 1,086,270 | (1 | )% | ||||||||||
| Conversion impact U.S. dollar/other currencies | 15,705 | 39,746 | ||||||||||||||||||||
Revenue at constant currency(1) | 537,185 | 543,852 | 1 | % | 1,101,349 | 1,126,016 | 2 | % | ||||||||||||||
| Traffic acquisition costs as reported | (306,963 | ) | (304,229 | ) | (1 | )% | (630,709 | ) | (626,658 | ) | (1 | )% | ||||||||||
| Conversion impact U.S. dollar/other currencies | (8,662 | ) | (22,132 | ) | ||||||||||||||||||
Traffic Acquisition Costs at constant currency(1) | (306,963 | ) | (312,891 | ) | 2 | % | (630,709 | ) | (648,790 | ) | 3 | % | ||||||||||
Revenue ex-TAC as reported(2) | 230,222 | 223,918 | (3 | )% | 470,640 | 459,612 | (2 | )% | ||||||||||||||
| Conversion impact U.S. dollar/other currencies | 7,043 | 17,614 | ||||||||||||||||||||
Revenue ex-TAC at constant currency(2) | 230,222 | 230,961 | 0.3 | % | 470,640 | 477,226 | 1 | % | ||||||||||||||
Revenue ex-TAC(2)/Revenue as reported | 43 | % | 42 | % | 43 | % | 42 | % | ||||||||||||||
| Other cost of revenue as reported | (29,957 | ) | (29,059 | ) | (3 | )% | (60,016 | ) | (55,104 | ) | (8 | )% | ||||||||||
| Conversion impact U.S. dollar/other currencies | (643 | ) | (1,393 | ) | ||||||||||||||||||
Other cost of revenue at constant currency(1) | (29,957 | ) | (29,702 | ) | (1 | )% | (60,016 | ) | (56,497 | ) | (6 | )% | ||||||||||
Adjusted EBITDA(3) | 68,774 | 56,399 | (18 | )% | 146,706 | 125,254 | (15 | )% | ||||||||||||||
| Conversion impact U.S. dollar/other currencies | 1,638 | 5,973 | ||||||||||||||||||||
Adjusted EBITDA(3) at constant currency(1) | $ | 68,774 | $ | 58,037 | (16 | )% | $ | 146,706 | $ | 131,227 | (11 | )% | ||||||||||
Adjusted EBITDA(3)/Revenue ex-TAC(2) | 30 | % | 25 | % | 31 | % | 27 | % | ||||||||||||||
(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.
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CRITEO S.A.
Information on Share Count
(unaudited)
| Six Months Ended | ||||||
| June 30, | ||||||
| 2018 | 2019 | |||||
| Shares outstanding as at January 1, | 66,085,097 | 64,249,084 | ||||
| Weighted average number of shares issued during the period | 169,379 | 210,783 | ||||
| Basic number of shares - Basic EPS basis | 66,254,476 | 64,459,867 | ||||
| Dilutive effect of share options, warrants, employee warrants - Treasury method | 1,225,037 | 1,373,775 | ||||
| Diluted number of shares - Diluted EPS basis | 67,479,513 | 65,833,642 | ||||
| Shares issued as at June 30, before Treasure stocks | 66,861,045 | 66,161,523 | ||||
| Treasury stock as of June 30, | — | (1,118,969 | ) | |||
| Shares outstanding as of June 30, after Treasury stocks | 66,861,045 | 65,042,554 | ||||
| Total dilutive effect of share options, warrants, employee warrants | 8,477,469 | 7,458,330 | ||||
| Fully diluted shares as of June 30, | 75,338,514 | 72,500,884 | ||||
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CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated, unaudited)
| Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | Q1 2019 | Q2 2019 | YoY Change | QoQ Change | ||
| Clients | 17,299 | 18,118 | 18,528 | 18,936 | 19,213 | 19,419 | 19,373 | 19,733 | 4% | 2% | |
| Revenue | 563,973 | 674,031 | 564,164 | 537,185 | 528,869 | 670,096 | 558,123 | 528,147 | (2)% | (5)% | |
| Americas | 228,326 | 324,696 | 212,695 | 212,781 | 211,247 | 317,350 | 217,993 | 213,974 | 1% | (2)% | |
| EMEA | 207,168 | 221,019 | 222,611 | 201,080 | 195,230 | 220,904 | 209,643 | 194,359 | (3)% | (7)% | |
| APAC | 128,479 | 128,316 | 128,858 | 123,324 | 122,392 | 131,842 | 130,487 | 119,814 | (3)% | (8)% | |
| TAC | (329,576) | (397,087) | (323,746) | (306,963) | (305,387) | (398,238) | (322,429) | (304,229) | (1)% | (6)% | |
| Americas | (141,869) | (203,368) | (131,521) | (125,502) | (126,406) | (196,168) | (131,545) | (129,491) | 3% | (2)% | |
| EMEA | (115,446) | (120,662) | (119,893) | (112,577) | (111,131) | (128,053) | (117,291) | (107,401) | (5)% | (8)% | |
| APAC | (72,261) | (73,057) | (72,332) | (68,884) | (67,850) | (74,017) | (73,593) | (67,337) | (2)% | (9)% | |
Revenue ex-TAC (1) | 234,397 | 276,944 | 240,418 | 230,222 | 223,482 | 271,858 | 235,694 | 223,918 | (3)% | (5)% | |
| Americas | 86,457 | 121,328 | 81,174 | 87,279 | 84,841 | 121,182 | 86,448 | 84,483 | (3)% | (2)% | |
| EMEA | 91,722 | 100,357 | 102,718 | 88,503 | 84,099 | 92,851 | 92,352 | 86,958 | (2)% | (6)% | |
| APAC | 56,218 | 55,259 | 56,526 | 54,440 | 54,542 | 57,825 | 56,894 | 52,477 | (4)% | (8)% | |
| Cash flow from operating activities | 61,727 | 79,002 | 84,527 | 40,341 | 50,256 | 85,600 | 67,220 | 52,964 | 31% | (21)% | |
| Capital expenditures | 27,773 | 25,476 | 32,567 | 17,847 | 29,656 | 45,408 | 23,684 | 32,792 | 84% | 38% | |
| Capital expenditures/Revenue | 5% | 4% | 6% | 3% | 6% | 7% | 4% | 6% | N.A | N.A | |
| Net cash position | 357,983 | 414,111 | 483,874 | 480,285 | 458,690 | 364,426 | 395,771 | 422,053 | (12)% | 7% | |
| Headcount | 2,712 | 2,764 | 2,675 | 2,678 | 2,737 | 2,744 | 2,813 | 2,873 | 7% | 2% | |
| Days Sales Outstanding (days - end of month) | 56 | 57 | 60 | 61 | 60 | 58 | 59 | 58 | 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.
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