Launched First-ever Supply-side Platform Built for Commerce
NEW YORK - August 2, 2023 - Criteo S.A. (NASDAQ: CRTO) ("Criteo" or the "Company"), the commerce media company, today announced financial results for the three and six months ended June 30, 2023.
Second Quarter 2023 Financial Highlights:
The following table summarizes our consolidated financial results for the three months and six months ended June 30, 2023:
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
(in millions, except EPS data)
GAAP Results
Revenue
$469
$495
(5)%
$914
$1,006
(9)%
Gross Profit
$200
$185
8%
$381
$369
3%
Net Income (loss)
$(2)
$(33)
94%
$(14)
$(12)
(20)%
Gross Profit margin
43%
37%
6ppt
42%
37%
5ppt
Diluted EPS
$(0.05)
$(0.56)
(91)%
$(0.26)
$(0.22)
18%
Cash from operating activities
$1
$14
(90)%
$43
$89
(51)%
Cash and cash equivalents
$223
$563
(60)%
$223
$563
(60)%
Non-GAAP Results1
Contribution ex-TAC
$240
$215
12%
$461
$431
7%
Contribution ex-TAC margin
51%
43%
8ppt
50%
43%
7ppt
Adjusted EBITDA
$56
$50
12%
$95
$113
(16)%
Adjusted diluted EPS
$0.49
$0.37
32%
$0.95
$0.90
6%
Free Cash Flow (FCF)
$(44)
$(1)
NM
$(35)
$68
NM
FCF / Adjusted EBITDA
(79)%
(3)%
(76)ppt
(37)%
60%
(97)ppt
“We delivered a strong performance in the second quarter, demonstrating our relentless focus on execution. Our transformation to a Commerce Media powerhouse continues to progress with the successful launch of our Commerce Grid SSP,” said Megan Clarken, Chief Executive Officer of Criteo. “We have built a highly scalable Commerce Media platform to drive long-term sustainable growth and shareholder value.”
Operating Highlights
•We launched Commerce Grid, a first-of-its-kind supply-side platform (SSP) purpose-built for agencies and publishers looking to efficiently connect media and commerce with programmatic.
•We announced our partnership with Integral Ad Science to bring viewability and invalid traffic (IVT) measurement advancements on any onsite ad format across our network of retailer partners.
•Criteo's activated media spend2, including Iponweb, was $3.8 billion in the last 12 months and $0.9 billion in Q2, growing 53% year-over-year at constant currency3.
•Retail Media Contribution ex-TAC grew 20% year-over-year at constant currency3 and same-retailer Contribution ex-TAC4 retention for Retail Media was 118%.
•We expanded our platform adoption to 2,400 brands and 210 retailers, including Canadian Tire’s Sport Chek and Mark's, and marketplaces like Debenhams and Sprinter.
•Marketing Solutions Contribution ex-TAC was down 5% year-over-year at constant currency3.
•One year after the acquisition of Iponweb, we have successfully completed the integration to accelerate our Commerce Media Platform strategy.
•We deployed $75 million of capital for share repurchases in the first half of 2023.
•Rik van der Kooi was appointed to the board of directors at the 2023 Annual Meeting of Shareholders.
1 Contribution ex-TAC, Contribution ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted diluted EPS and Free Cash Flow are not measures calculated in accordance with U.S. GAAP.
2 Activated media spend is defined as the sum of our Marketing Solutions revenue, the media spend activated on behalf of our Retail Media clients, and the media spend activated by Iponweb.
3 Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar.
4 Same-client profitability or Contribution ex-TAC is the profitability or Contribution ex-TAC generated by clients that were live with us in a given quarter and are still live with us the same quarter in the following year.
1
Financial Summary
Revenue for Q2 2023 was $469 million, gross profit was $200 million and Contribution ex-TAC was $240 million. Net loss for Q2 was $2 million, or $0.05 per share on a diluted basis. Adjusted EBITDA for Q2 was $56 million, resulting in an adjusted diluted EPS of $0.49. As reported, revenue for Q2 decreased by 5%, gross profit increased 8% and Contribution ex-TAC increased by 12%. At constant currency, revenue for Q2 decreased by 4% and Contribution ex-TAC increased by 13%. Cash flow from operating activities was $1 million in Q2 and Free Cash Flow was $(44) million in Q2. As of June 30, 2023, we had $261 million in cash and marketable securities on our balance sheet.
Sarah Glickman, Chief Financial Officer, said, “Our second quarter demonstrates the performance of our platform, the resilience of our business model, and our focus on execution. We have momentum heading into the second half of the year, and we remain confident in our 2023 growth outlook.”
Second Quarter 2023 Results
Revenue, Gross Profit and Contribution ex-TAC
Revenue decreased by 5% year-over-year in Q2 2023, or 4% at constant currency, to $469 million (Q2 2022: $495 million). Gross profit increased by 8% year-over-year in Q2 2023 to $200 million (Q2 2022: $185 million). Gross profit as a percentage of revenue, or gross profit margin, was 43% (Q2 2022: 37%). Contribution ex-TAC in the second quarter increased 12% year-over-year, or increased 13% at constant currency, to $240 million (Q2 2022: $215 million). Contribution ex-TAC as a percentage of revenue, or Contribution ex-TAC margin, was 51% (Q2 2022: 43%), up 800 basis points year-over-year, largely driven by Retail Media and the acceleration of our client transition to the Company's platform.
•Marketing Solutions revenue decreased 10%, or decreased 9% at constant currency, and Marketing Solutions Contribution ex-TAC decreased 6%, or decreased 5% at constant currency, driven by anticipated signal loss impacts and ongoing softness in Retail, partially offset by strength in Travel.
•Retail Media revenue decreased 18%, or 18% at constant currency, reflecting the impact related to the client migration to the Company's platform. Retail Media Contribution ex-TAC increased 19%, or 20% at constant currency, driven by continued strength in Retail Media onsite, new client integrations and growing network effects of the platform.
•Iponweb revenue reflects three months of contribution following the closing of the acquisition on August 1, 2022.
Net Income (Loss) and Adjusted Net Income
Net loss was $2 million in Q2 2023 (Q2 2022: net loss of $33 million). In the course of the second quarter 2023, we incurred $22 million in restructuring, integration and transformation costs. Net loss allocated to shareholders of Criteo was $3 million, or $0.05 per share on a diluted basis (Q2 2022: net loss available to shareholders of $34 million, or $0.56 per share on a diluted basis).
Adjusted net income, a non-GAAP financial measure, was $30 million, or $0.49 per share on a diluted basis (Q2 2022: $23 million, or $0.37 per share on a diluted basis).
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA was $56 million, representing an increase of 12% year-over-year (Q2 2022: $50 million). This reflects higher Contribution ex-TAC over the period and planned cost reduction actions, partially offset by incremental costs following the acquisition of Iponweb. Adjusted EBITDA as a percentage of Contribution ex-TAC, or Adjusted EBITDA margin, was 23% (Q2 2022: 23%).
Operating expenses decreased 18% year-over-year to $199 million (Q2 2022: $241 million), mostly driven by cost reduction actions and the partial reversal of the previously accrued liability for loss contingency following the CNIL’s decision. This was partially offset by equity awards compensation expense, and operating costs from Iponweb. Non-GAAP operating expenses increased by 6% or $9 million, to $157 million (Q2 2022: $148 million).
Cash Flow, Cash and Financial Liquidity Position
Cash flow from operating activities decreased to $1 million in Q2 2023 (Q2 2022: $14 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 to $(44) million in Q2 2023 (Q2 2022: $(1) million). This was mainly driven by the planned five-year renewal cycle of our data centers and restructuring.
Cash and cash equivalents, and marketable securities, decreased $113 million compared to December 31, 2022 to $261 million, after spending $75 million on share repurchases in the first half of 2023.
2
As of June 30, 2023, the Company had total financial liquidity of approximately $747 million, including its cash position, marketable securities, revolving credit facility and treasury shares reserved for M&A.
2023 Business Outlook
The following forward-looking statements reflect Criteo’s expectations as of August 2, 2023, amidst an uncertain macro-economic backdrop.
Fiscal year 2023 guidance:
•High single-digit to low double-digit growth in Contribution ex-TAC at constant currency, including the contribution from our Iponweb acquisition
•Adjusted EBITDA margin of approximately 28% of Contribution ex-TAC
Third quarter 2023 guidance:
•Contribution ex-TAC between $238 million and $242 million, or year-over-year growth at constant-currency of +7% to +9%, including the contribution from our Iponweb acquisition
•Adjusted EBITDA between $58 million and $62 million
The above guidance for the third quarter and fiscal year ending December 31, 2023 assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.917, a U.S. dollar-Japanese Yen rate of 137, a U.S. dollar-British pound rate of 0.807, a U.S. dollar-Korean Won rate of 1,295 and a U.S. dollar-Brazilian real rate of 5.00.
The above guidance assumes that no additional acquisitions are completed during the third quarter of 2023 or the fiscal year ended December 31, 2023.
Reconciliations of Contribution ex-TAC, Adjusted EBITDA and Adjusted EBITDA margin guidance to the closest corresponding U.S. GAAP measures are 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.
3
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 ("SEC"): Contribution ex-TAC, Contribution 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.
Contribution ex-TAC is a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other costs of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC 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.
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, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter. 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 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 assets, certain restructuring, integration and transformation costs, certain acquisition costs, a loss contingency related to a regulatory matter, 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 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 Conversion is defined as free cash flow divided by Adjusted EBITDA. Free Cash Flow and Free Cash Flow Conversion are key measures used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow and Free Cash Flow Conversion permit a more complete and comprehensive analysis of our available cash flows.
Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition and integration costs, and a loss contingency related to a regulatory matter. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures the Company uses to provide its quarterly and annual business outlook to the investment community.
4
Please refer to the supplemental financial tables provided in the appendix of this press release for a reconciliation of Contribution ex-TAC to gross profit, 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 Contribution ex-TAC, Contribution ex-TAC margin, 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 September 30, 2023 and the year ending December 31, 2023, 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 our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, including without limitation uncertainty regarding the timing and scope of proposed changes to and enhancements of the Chrome browser announced by Google, investments in new business opportunities and the timing of these investments, whether the projected benefits of acquisitions materialize as expected, including the successful integration of our acquisitions of Iponweb and Brandcrush, uncertainty regarding international growth and expansion (including related to changes in a specific country's or region's political or economic conditions), 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 Contribution 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 February 24, 2023, and in subsequent Quarterly Reports on Form 10-Q as well as future filings and reports by the Company. Importantly, at this time, macro-economic conditions including inflation and rising interest rates in the U.S. have impacted Criteo's business, financial condition, cash flow and results of operations.
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.
5
Conference Call Information
Criteo’s senior management team will discuss the Company’s earnings on a call that will take place today, August 2, 2023, at 8:00 AM ET, 2:00 PM CET. The conference call will be webcast live on the Company's website at https://criteo.investorroom.com/ and will subsequently be available for replay.
•United States: +1 855 209 8212
•International: +1 412 317 0788
•France 080-510-2319
Please ask to be joined into the "Criteo" call.
About Criteo
Criteo (NASDAQ: CRTO) is the global commerce media company that enables marketers and media owners to drive better commerce outcomes. Its industry leading Commerce Media Platform connects thousands of marketers and media owners to deliver richer consumer experiences from product discovery to purchase. By powering trusted and impactful advertising, Criteo supports an open internet that encourages discovery, innovation, and choice. For more information, please visit www.criteo.com.
Contacts
Criteo Investor Relations
Melanie Dambre, m.dambre@criteo.com
Criteo Public Relations
Jessica Meyers, j.meyers@criteo.com
Financial information to follow
6
CRITEO S.A.
Consolidated Statement of Financial Position
(U.S. dollars in thousands, unaudited)
June 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
223,183
$
348,200
Trade receivables, net of allowances of $ 55.7 million and $ 47.8 million at June 30, 2023 and December 31, 2022, respectively
573,463
708,949
Income taxes
28,473
23,609
Other taxes
92,063
78,274
Other current assets
45,268
51,866
Restricted cash - current
75,000
25,000
Marketable securities - current portion
21,151
25,098
Total current assets
1,058,601
1,260,996
Property, plant and equipment, net
143,724
131,207
Intangible assets, net
179,185
175,983
Goodwill
522,536
515,140
Right of Use Asset - operating lease
100,971
102,176
Restricted cash - non current
—
75,000
Marketable securities - non current portion
16,299
—
Non-current financial assets
5,311
5,928
Other non-current assets
49,719
50,818
Deferred tax assets
52,021
31,646
Total non-current assets
1,069,766
1,087,898
Total assets
$
2,128,367
$
2,348,894
Liabilities and shareholders' equity
Current liabilities:
Trade payables
$
616,590
$
742,918
Contingencies - current portion
45,403
65,759
Income taxes
3,743
13,037
Financial liabilities - current portion
614
219
Lease liability - operating - current portion
32,180
31,003
Other taxes
60,574
58,031
Employee - related payables
100,465
85,569
Other current liabilities
89,447
83,457
Total current liabilities
949,016
1,079,993
Deferred tax liabilities
3,537
3,463
Defined benefit plans
4,358
3,708
Financial liabilities - non current portion
75
74
Lease liability - operating - non current portion
74,722
77,536
Contingencies - non current portion
32,625
33,788
Other non-current liabilities
21,022
69,226
Total non-current liabilities
136,339
187,795
Total liabilities
1,085,355
1,267,788
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 63,337,453 and 63,248,728 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022 , respectively.
2,081
2,079
Treasury stock, 7,412,578 and 5,985,104 shares at cost as of June 30, 2023 and December 31, 2022 , respectively.
(214,046)
(174,293)
Additional paid-in capital
787,674
734,492
Accumulated other comprehensive income (loss)
(91,328)
(91,890)
Retained earnings
527,857
577,653
Equity - attributable to shareholders of Criteo S.A.
1,012,238
1,048,041
Non-controlling interests
30,774
33,065
Total equity
1,043,012
1,081,106
Total equity and liabilities
$
2,128,367
$
2,348,894
7
CRITEO S.A. Consolidated Statement of Operations (U.S. dollars in thousands, except share and per share data, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY change
2023
2022
YoY change
Revenue
$
468,934
$
495,090
(5)
%
$
913,950
$
1,005,657
(9)
%
Cost of revenue
Traffic acquisition cost
(228,717)
(280,565)
(18)
%
(453,115)
(574,215)
(21)
%
Other cost of revenue
(40,435)
(29,550)
37
%
(79,544)
(62,443)
27
%
Gross profit
199,782
184,975
8
%
381,291
368,999
3
%
Operating expenses:
Research and development expenses
(67,775)
(41,496)
63
%
(131,365)
(75,523)
74
%
Sales and operations expenses
(112,511)
(99,313)
13
%
(213,753)
(188,312)
14
%
General and administrative expenses
(18,537)
(100,672)
(82)
%
(58,707)
(134,008)
(56)
%
Total Operating expenses
(198,823)
(241,481)
(18)
%
(403,825)
(397,843)
2
%
Income (loss) from operations
959
(56,506)
(102)
%
(22,534)
(28,844)
(22)
%
Financial and Other income (expense)
(1,852)
16,412
(111)
%
4,975
20,442
(76)
%
Loss before taxes
(893)
(40,094)
(98)
%
(17,559)
(8,402)
109
%
Provision for income tax (expense) benefit
(1,078)
7,121
(115)
%
3,517
(3,293)
(207)
%
Net loss
$
(1,971)
$
(32,973)
94
%
$
(14,042)
$
(11,695)
(20)
%
Net loss available to shareholders of Criteo S.A.
$
(2,876)
$
(33,614)
91
%
$
(14,685)
$
(13,027)
(13)
%
Net income (loss) available to non-controlling interests
$
905
$
641
41
%
$
643
$
1,332
(52)
%
Weighted average shares outstanding used in computing per share amounts:
Basic
55,924,824
60,240,344
(7)
%
56,094,887
60,488,429
(7)
%
Diluted
55,924,824
60,240,344
(7)
%
56,094,887
60,488,429
(7)
%
Net loss allocated to shareholders per share:
Basic
$
(0.05)
$
(0.56)
(91)
%
$
(0.26)
$
(0.22)
18
%
Diluted
$
(0.05)
$
(0.56)
(91)
%
$
(0.26)
$
(0.22)
18
%
8
CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
Net loss
$
(1,971)
$
(32,973)
94
%
$
(14,042)
$
(11,695)
(20)
%
Non-cash and non-operating items
16,939
63,501
(73)
%
48,886
98,227
(50)
%
- Amortization and provisions
10,111
87,891
(88)
%
37,422
114,502
(67)
%
- Equity awards compensation expense (1)
27,173
12,021
126
%
52,341
21,510
NM
- Net (gain) or loss on disposal of non-current assets
(7)
(705)
(99)
%
(8,797)
(696)
NM
- Change in deferred taxes
(8,239)
(9,982)
(17)
%
(20,536)
(7,114)
NM
- Change in income taxes
(13,478)
(14,246)
(5)
%
(13,615)
(14,678)
(7)
%
- Other
1,379
(11,478)
(112)
%
2,071
(15,297)
NM
Changes in working capital related to operating activities
(13,640)
(16,556)
(18)
%
8,448
2,370
NM
- (Increase) / Decrease in trade receivables
(34,666)
(27,262)
27
%
129,454
65,476
98
%
- Increase / (Decrease) in trade payables
16,454
32,695
(50)
%
(128,557)
(16,977)
NM
- (Increase) / Decrease in other current assets
6,942
4,352
60
%
(6,652)
(14,595)
(54)
%
- Increase / (Decrease) in other current liabilities
(2,069)
(28,131)
(93)
%
14,597
(31,313)
NM
- Change in operating lease liabilities and right of use assets
(301)
1,790
(117)
%
(394)
(221)
78
%
CASH FROM (USED FOR) OPERATING ACTIVITIES
1,328
13,972
(90)
%
43,292
88,902
(51)
%
Acquisition of intangible assets, property, plant and equipment
(24,312)
(21,937)
11
%
(61,507)
(32,794)
88
%
Change in accounts payable related to intangible assets, property, plant and equipment
(21,207)
6,485
(427)
%
(17,231)
11,778
NM
Payment for business, net of cash acquired
(457)
—
NM
(6,957)
—
NM
Proceeds from disposition of investment
—
—
NM
9,625
—
NM
Change in other non-current financial assets
(6,259)
21,822
(129)
%
(12,267)
44,311
NM
CASH FROM (USED FOR) INVESTING ACTIVITIES
(52,235)
6,370
(920)
%
(88,337)
23,295
NM
Proceeds from borrowings under line-of-credit agreement
—
—
NM
—
78,513
NM
Repayment of borrowings
—
—
NM
—
(78,513)
NM
Change in other financial liabilities
—
7,808
(100)
%
—
—
NM
Proceeds from exercise of stock options
431
80
439
%
1,697
351
NM
Repurchase of treasury stocks
(23,836)
(21,030)
13
%
(74,866)
(29,334)
NM
Cash payment for contingent consideration
—
—
NM
(22,025)
—
NM
Other
(495)
—
NM
(923)
14,474
NM
CASH FROM (USED FOR) FINANCING ACTIVITIES
(23,900)
(13,142)
82
%
(96,117)
(14,509)
NM
Effect of exchange rates changes on cash and cash equivalents
(7,673)
(33,996)
(77)
%
(8,855)
(50,669)
(83)
%
Net increase (decrease) in cash and cash equivalents
(82,480)
(26,796)
208
%
(150,017)
47,019
NM
Net cash and cash equivalents at beginning of period
380,663
589,342
(35)
%
448,200
515,527
(13)
%
Net cash and cash equivalents and restricted cash at end of period
$
298,183
$
562,546
(47)
%
$
298,183
$
562,546
(47)
%
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for taxes, net of refunds
$
(23,201)
$
(17,107)
36
%
$
(31,101)
$
(25,085)
24
%
Cash paid for interest
$
(60)
$
(261)
(77)
%
$
(676)
$
(626)
8
%
(1) Share-based compensation expense according to ASC 718 Compensation - stock compensation accounted for $26.7 million and $11.5 million of equity awards
compensation expense for the quarters ended June 30, 2023 and 2022, respectively, and $51.4 million and $20.6 million of equity awards compensation for the six months ended June 30, 2022 and 2022, respectively.
9
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,
2023
2022
YoY Change
2023
2022
YoY Change
CASH FROM (USED FOR) OPERATING ACTIVITIES
$
1,328
$
13,972
(90)
%
$
43,292
$
88,902
(51)
%
Acquisition of intangible assets, property, plant and equipment
(24,312)
(21,937)
11
%
(61,507)
(32,794)
88
%
Change in accounts payable related to intangible assets, property, plant and equipment
(21,207)
6,485
(427)
%
(17,231)
11,778
NM
FREE CASH FLOW (1)
$
(44,191)
$
(1,480)
NM
$
(35,446)
$
67,886
NM
(1) Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment.
10
CRITEO S.A.
Reconciliation of Contribution ex-TAC to Gross Profit
(U.S. dollars in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
Gross Profit
199,782
184,975
8
%
381,291
368,999
3
%
Other Cost of Revenue
40,435
29,550
37
%
79,544
62,443
27
%
Contribution ex-TAC (1)
$
240,217
$
214,525
12
%
$
460,835
$
431,442
7
%
(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
11
CRITEO S.A.
Segment Information
(U.S. dollars in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Segment
2023
2022
YoY Change
YoY Change at Constant Currency (3)
2023
2022
YoY Change
YoY Change at Constant Currency (3)
Revenue
Marketing Solutions
$
395,274
$
440,423
(10)
%
(9)
%
$
777,181
$
904,311
(14)
%
(12)
%
Retail Media (2)
44,590
54,667
(18)
%
(18)
%
82,611
101,346
(18)
%
(18)
%
Iponweb
29,070
—
NM
NM
54,158
—
NM
NM
Total
468,934
495,090
(5)
%
(4)
%
913,950
1,005,657
(9)
%
(7)
%
Contribution ex-TAC
Marketing Solutions
167,629
177,969
(6)
%
(5)
%
325,807
364,057
(11)
%
(7)
%
Retail Media (2)
43,518
36,556
19
%
20
%
80,870
67,385
20
%
21
%
Iponweb
29,070
—
NM
NM
54,158
—
NM
NM
Total (1)
$
240,217
$
214,525
12
%
13
%
$
460,835
$
431,442
7
%
10
%
(1) Refer to the Non-GAAP Financial Measures section of this filing for a definition of the Non-GAAP metric.
(2) The Retail Media Platform, introduced in June 2020, is a strategic building block of Criteo’s Commerce Media Platform and is reported under the retail media segment. It is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions were accounted for on a gross basis. Most clients using Criteo’s legacy Retail Media solutions transitioned to this platform by the end of 2022. During the transition period, Revenue declined but Contribution ex-TAC margin increased. Contribution ex-TAC was not impacted by this transition.
(3) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar.
12
CRITEO S.A.
Reconciliation of Adjusted EBITDA to Net Income (Loss)
(U.S. dollars in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
Net loss
$
(1,971)
$
(32,973)
(94)
%
$
(14,042)
$
(11,695)
20
%
Adjustments:
Financial (Income) expense
1,956
(15,924)
(112)
%
(4,650)
(19,954)
(77)
%
Provision for income taxes
1,078
(7,121)
(115)
%
(3,517)
3,293
(207)
%
Equity awards compensation expense
27,831
12,020
132
%
53,896
21,510
151
%
Pension service costs
177
264
(33)
%
353
539
(35)
%
Depreciation and amortization expense
26,606
20,141
32
%
51,926
42,285
23
%
Acquisition-related costs
362
1,977
(82)
%
1,194
4,521
(74)
%
Net loss contingency on regulatory matters
(21,616)
65,684
(133)
%
(21,616)
65,684
(133)
%
Restructuring, integration and transformation costs
21,563
5,925
264
%
31,165
6,635
370
%
Total net adjustments
57,957
82,966
(30)
%
108,751
124,513
(13)
%
Adjusted EBITDA (1)
$
55,986
$
49,993
12
%
$
94,709
$
112,818
(16)
%
(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
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,
2023
2022
YoY Change
2023
2022
YoY Change
Research and Development expenses
$
(67,775)
$
(41,496)
63
%
$
(131,365)
$
(75,523)
74
%
Equity awards compensation expense
16,339
5,578
193
%
32,675
9,545
242
%
Depreciation and Amortization expense
8,518
3,181
168
%
18,844
6,474
191
%
Pension service costs
94
136
(31)
%
186
278
(33)
%
Acquisition-related costs
99
—
NM
503
—
NM
Restructuring, integration and transformation costs
4,467
1,029
334
%
5,341
1,038
415
%
Non GAAP - Research and Development expenses
(38,258)
(31,572)
21
%
(73,816)
(58,188)
27
%
Sales and Operations expenses
(112,511)
(99,313)
13
%
(213,753)
(188,312)
14
%
Equity awards compensation expense
5,687
2,550
123
%
10,427
5,118
104
%
Depreciation and Amortization expense
4,059
3,729
9
%
6,875
7,338
(6)
%
Pension service costs
27
39
(31)
%
55
79
(30)
%
Acquisition-related costs
—
178
(100)
%
—
178
(100)
%
Restructuring, integration and transformation costs
12,667
4,076
211
%
17,401
4,532
284
%
Non GAAP - Sales and Operations expenses
(90,071)
(88,741)
1
%
(178,995)
(171,067)
5
%
General and Administrative expenses
(18,537)
(100,672)
(82)
%
(58,707)
(134,008)
(56)
%
Equity awards compensation expense
5,805
3,892
49
%
10,794
6,847
58
%
Depreciation and Amortization expense
566
606
(7)
%
1,086
1,216
(11)
%
Pension service costs
56
89
(37)
%
112
182
(38)
%
Acquisition-related costs
263
1,799
(85)
%
691
4,343
(84)
%
Restructuring, integration and transformation costs
4,429
820
440
%
8,423
1,065
691
%
Net loss contingency on regulatory matters
(21,616)
65,684
(133)
%
(21,616)
65,684
(133)
%
Non GAAP - General and Administrative expenses
(29,034)
(27,782)
5
%
(59,217)
(54,671)
8
%
Total Operating expenses
(198,823)
(241,481)
(18)
%
(403,825)
(397,843)
2
%
Equity awards compensation expense
27,831
12,020
132
%
53,896
21,510
151
%
Depreciation and Amortization expense
13,143
7,516
75
%
26,805
15,028
78
%
Pension service costs
177
264
(33)
%
353
539
(35)
%
Acquisition-related costs
362
1,977
(82)
%
1,194
4,521
(74)
%
Restructuring, integration and transformation costs
21,563
5,925
264
%
31,165
6,635
370
%
Net loss contingency on regulatory matters
(21,616)
65,684
(133)
%
(21,616)
65,684
(133)
%
Total Non GAAP Operating expenses (1)
(157,363)
$
(148,095)
6
%
(312,028)
(283,926)
10
%
(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
14
CRITEO S.A.
Reconciliation of Adjusted Net Income to Net Income (Loss)
(U.S. dollars in thousands except share and per share data, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
Net loss
$
(1,971)
$
(32,973)
(94)
%
$
(14,042)
$
(11,695)
20
%
Adjustments:
Equity awards compensation expense
27,831
12,020
132
%
53,896
21,510
151
%
Amortization of acquisition-related intangible assets
8,812
3,614
144
%
17,345
7,322
137
%
Acquisition-related costs
362
1,977
(82)
%
1,194
4,521
(74)
%
Net loss contingency on regulatory matters
(21,616)
65,684
(133)
%
(21,616)
65,684
(133)
%
Restructuring, integration and transformation costs
21,563
5,925
264
%
31,165
6,635
370
%
Tax impact of the above adjustments (1)
(5,333)
(33,220)
(84)
%
(10,282)
(37,176)
(72)
%
Total net adjustments
31,619
56,000
(44)
%
71,702
68,496
5
%
Adjusted net income(2)
$
29,648
$
23,027
29
%
$
57,660
$
56,801
2
%
Weighted average shares outstanding
- Basic
55,924,824
60,240,344
56,094,887
60,488,429
- Diluted
60,474,688
62,303,670
60,489,192
62,957,718
Adjusted net income per share
- Basic
$
0.53
$
0.38
39
%
$
1.03
$
0.94
10
%
- Diluted
$
0.49
$
0.37
32
%
$
0.95
$
0.90
6
%
(1) We consider the nature of the adjustment to determine its tax treatment in the various tax jurisdictions we operate in. The tax impact is calculated by applying the actual tax rate for the entity and period to which the adjustment relates.
(2) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
15
CRITEO S.A.
Constant Currency Reconciliation
(U.S. dollars in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
YoY Change
2023
2022
YoY Change
Gross Profit as reported
$
199,782
$
184,975
8
%
$
381,291
$
368,999
3
%
Other cost of revenue as reported
(40,435)
(29,550)
37
%
(79,544)
(62,443)
27
%
Contribution ex-TAC as reported(1)
240,217
214,525
12
%
460,835
431,442
7
%
Conversion impact U.S. dollar/other currencies
2,205
—
12,144
—
Contribution ex-TAC at constant currency(2)
242,422
214,525
13
%
472,979
431,442
10
%
Contribution ex-TAC(2)/Revenue as reported
51
%
43
%
50
%
43
%
Traffic acquisition costs as reported
(228,717)
(280,565)
(18)
%
(453,115)
(574,215)
(21)
%
Conversion impact U.S. dollar/other currencies
(2,140)
—
(10,658)
—
Traffic acquisition costs at constant currency
(230,857)
(280,565)
(18)
%
(463,773)
(574,215)
(19)
%
Revenue as reported
468,934
495,090
(5)
%
913,950
1,005,657
(9)
%
Conversion impact U.S. dollar/other currencies
4,345
—
22,802
—
Revenue at constant currency
$
473,279
$
495,090
(4)
%
$
936,752
$
1,005,657
(7)
%
(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
(2) 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.
16
CRITEO S.A.
Information on Share Count
(unaudited)
Six Months Ended
2023
2022
Shares outstanding as at January 1,
57,263,624
60,675,474
Weighted average number of shares issued during the period
Shares issued as at June 30, before Treasury stocks
63,337,453
65,794,032
Treasury stocks as of June 30,
(7,412,578)
(5,265,393)
Fully diluted shares as at June 30,
55,924,875
60,528,639
Total dilutive effect of share options, warrants, employee warrants
9,340,335
6,874,991
Fully diluted shares as at June 30,
65,265,210
67,403,630
17
CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated, unaudited)
YoY Change
QoQ Change
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Clients
(1.6)%
(0.4)%
18,646
18,679
18,990
19,008
18,911
18,764
NA
NA
NA
NA
Revenue
(5)%
5%
468,934
445,016
564,425
446,921
495,090
510,567
653,267
508,580
551,311
541,077
Americas
(4)%
9%
204,755
188,288
281,806
201,274
213,340
194,847
287,270
204,428
221,227
203,900
EMEA
(11)%
(1)%
158,215
160,214
185,125
150,915
176,867
193,954
234,559
188,354
209,303
212,096
APAC
1%
10%
105,964
96,514
97,494
94,732
104,883
121,766
131,438
115,798
120,781
125,081
Revenue
(5)%
5%
468,934
445,016
564,425
446,921
495,090
510,567
653,267
508,580
551,311
541,077
Marketing Solutions
(10)%
4%
395,274
381,907
470,918
387,288
440,423
463,888
577,962
458,622
487,465
483,190
Retail Media (2)
(18)%
17%
44,590
38,021
59,801
41,170
54,667
46,679
75,305
49,958
63,846
57,887
Iponweb
NM
16%
29,070
25,088
33,706
18,463
—
—
—
—
—
—
TAC
(18)%
2%
(228,717)
(224,398)
(281,021)
(233,543)
(280,565)
(293,650)
(377,076)
(297,619)
(331,078)
(327,667)
Marketing Solutions
(13)%
2%
(227,645)
(223,729)
(278,302)
(229,266)
(262,454)
(277,800)
(349,584)
(276,498)
(294,132)
(290,873)
Retail Media (2)
(94)%
60%
(1,072)
(669)
(2,719)
(4,277)
(18,111)
(15,850)
(27,492)
(21,121)
(36,946)
(36,794)
Iponweb
NM
NM
—
—
—
—
—
—
—
—
—
—
Contribution ex-TAC (1)
12%
9%
240,217
220,618
283,404
213,378
214,525
216,917
276,191
210,961
220,233
213,410
Marketing Solutions
(6)%
6%
167,629
158,178
192,616
158,022
177,969
186,088
228,378
182,124
193,333
192,317
Retail Media (2)
19%
17%
43,518
37,352
57,082
36,893
36,556
30,829
47,813
28,837
26,900
21,093
Iponweb
NM
16%
29,070
25,088
33,706
18,463
—
—
—
—
—
—
Cash flow from operating activities
(90)%
(97)%
1,328
41,964
125,455
41,628
13,972
74,930
66,012
51,179
26,360
77,362
Capital expenditures
195%
37%
45,519
33,219
14,522
20,307
15,452
5,564
10,145
15,957
13,128
13,780
Capital expenditures/Revenue
211%
30%
10%
7%
3%
5%
3%
1%
2%
3%
2%
3%
Net cash position
(47)%
(22)%
298,183
380,663
448,200
407,323
562,546
589,343
515,527
497,458
489,521
520,060
Headcount
12%
(3)%
3,514
3,636
3,716
3,537
3,146
2,939
2,781
2,658
2,572
2,532
Days Sales Outstanding (days - end of month)
(7) days
(5) days
69
74
71
78
76
74
65
70
66
64
(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
(2) The Retail Media Platform, introduced in June 2020, is a strategic building block of Criteo’s Commerce Media Platform and is reported under the retail media segment. It is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions were accounted for on a gross basis. Most clients using Criteo’s legacy Retail Media solutions transitioned to this platform by the end of 2022. During the transition period, Revenue declined but Contribution ex-TAC margin increased. Contribution ex-TAC was not impacted by this transition.