Continued Momentum in Retail Media with 200 Retailers
Reiterates Full Year 2023 Outlook
NEW YORK - May 3, 2023 - Criteo S.A. (NASDAQ: CRTO) ("Criteo" or the "Company"), the commerce media company, today announced financial results for the first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights:
The following table summarizes our consolidated financial results for the three months ended March 31, 2023:
Three Months Ended
March 31,
2023
2022
YoY Change
(in millions, except EPS data)
GAAP Results
Revenue
$445
$511
(13)%
Gross Profit
$182
$184
(1)%
Net Income (loss)
$(12)
$21
NM
Gross Profit margin
41%
36%
5ppt
Diluted EPS
$(0.20)
$0.32
NM
Cash from operating activities
$42
$75
(44)%
Cash and cash equivalents
$306
$589
(48)%
Non-GAAP Results1
Contribution ex-TAC
$221
$217
2%
Contribution ex-TAC margin
50%
42%
8ppt
Adjusted EBITDA
$39
$63
(38)%
Adjusted diluted EPS
$0.46
$0.53
(13)%
Free Cash Flow (FCF)
$9
$69
(87)%
FCF / Adjusted EBITDA
23%
110%
(87)ppt
“Notwithstanding the near-term macro-economic challenges, we're firing on all cylinders to execute on our transformation and capitalize on the significant growth opportunity ahead of us,” said Megan Clarken, Chief Executive Officer of Criteo. “We have built a highly scalable Commerce Media platform, and are on track to achieve our business ambitions.”
Operating Highlights
•We acquired Brandcrush to accelerate our Retail Media solutions and provide a holistic omnichannel monetization platform globally.
•Retail Media Contribution ex-TAC grew 22% year-over-year at constant currency2 and same-retailer Contribution ex-TAC3 retention for Retail Media was 122%.
•We expanded our platform adoption with large retailers, including Rite Aid, ASOS and Sundrug.
•Marketing Solutions Contribution ex-TAC was down 10% year-over-year at constant currency2.
•Criteo's activated media spend4, including Iponweb, was over $3.5 billion in the last 12 months and $0.8 billion in Q1, growing 37% at constant currency2.
•We deployed $51 million of capital for share repurchases in Q1.
•We appointed Rik van der Kooi as an observer to the Board and nominated Rik for election to the Board 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 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.
3 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.
4 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.
1
Financial Summary
Revenue for Q1 2023 was $445 million, gross profit was $182 million and Contribution ex-TAC was $221 million. Net loss for Q1 was $12 million, or $0.20 per share on a diluted basis. Adjusted EBITDA for Q1 was $39 million, resulting in an adjusted diluted EPS of $0.46. As reported, revenue for Q1 decreased by 13%, gross profit decreased 1% and Contribution ex-TAC increased by 2%. At constant currency, revenue for Q1 decreased by 9% and Contribution ex-TAC increased by 6%. Cash flow from operating activities was $42 million in Q1 and Free Cash Flow was $9 million in Q1. As of March 31, 2023, we had $338 million in cash and marketable securities on our balance sheet.
Sarah Glickman, Chief Financial Officer, said, “Our growth investments are paying off as we continue to win new Retail Media clients. We are off to a solid start in 2023 with top-line growth and strong focus on driving organizational efficiencies, as we navigate a challenging macro-economic environment while executing on our company transformation to create long-term shareholder value.”
First Quarter 2023 Results
Revenue, Gross Profit and Contribution ex-TAC
Revenue decreased by 13% year-over-year in Q1 2023, or 9% at constant currency, to $445 million (Q1 2022: $511 million). Gross profit decreased by 1% year-over-year in Q1 2023 to $182 million (Q1 2022: $184 million). Gross profit as a percentage of revenue, or gross profit margin, was 41% (Q1 2022: 36%). Contribution ex-TAC in the first quarter increased 2% year-over-year, or increased 6% at constant currency, to $221 million (Q1 2022: $217 million). Contribution ex-TAC as a percentage of revenue, or Contribution ex-TAC margin, was 50% (Q1 2022: 42%), 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 18%, or decreased 14% at constant currency, and Marketing Solutions Contribution ex-TAC decreased 15%, or decreased 10% at constant currency, driven by a slowdown in Retail, anticipated signal loss impacts and the suspension of the Company's operations in Russia, partially offset by strength in Travel.
•Retail Media revenue decreased 19%, or 18% at constant currency, reflecting the impact related to the client migration to the Company's platform. Retail Media Contribution ex-TAC increased 21%, or 22% 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 $12 million in Q1 2023 (Q1 2022: net income of $21 million). In the course of the first quarter 2023, we incurred $9 million in restructuring related and transformation costs. Net loss allocated to shareholders of Criteo was $12 million, or $0.20 per share on a diluted basis (Q1 2022: net income available to shareholders of $21 million, or $0.32 per share on a diluted basis).
Adjusted net income, a non-GAAP financial measure, was $28 million, or $0.46 per share on a diluted basis (Q1 2022: $34 million, or $0.53 per share on a diluted basis).
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA was $39 million, above the Company's guidance, representing a decrease of 38% year-over-year (Q1 2022: $63 million). This reflects dilution from our acquisition of Iponweb and targeted growth investments, partially offset by higher Contribution ex-TAC over the period and planned cost reduction actions. Adjusted EBITDA as a percentage of Contribution ex-TAC, or Adjusted EBITDA margin, was 18% (Q1 2022: 29%).
Operating expenses increased 31% year-over-year to $205 million (Q1 2022: $156 million), mostly driven by higher headcount-related expense from planned investments, equity awards compensation expense, and operating costs from our acquisition of Iponweb, balanced with cost reduction actions. Non-GAAP operating expenses increased by 14% or $18 million, to $155 million (Q1 2022: $136 million).
Cash Flow, Cash and Financial Liquidity Position
Cash flow from operating activities decreased 44% year-over-year to $42 million in Q1 2023 (Q1 2022: $75 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 $9 million in Q1 2023 (Q1 2022: $69 million).
2
Cash and cash equivalents, and marketable securities, decreased $36 million compared to December 31, 2022 to $338 million, after spending approximately $51 million on share repurchases in Q1.
As of March 31, 2023, the Company had total financial liquidity of approximately $814 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 May 3, 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
Second quarter 2023 guidance:
•Contribution ex-TAC between $228 million and $234 million, or year-over-year growth at constant-currency of +8% to +10%, including the contribution from our Iponweb acquisition
•Adjusted EBITDA between $46 million and $50 million
The above guidance for the second 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 0.929, a U.S. dollar-Japanese Yen rate of 133, a U.S. dollar-British pound rate of 0.819, a U.S. dollar-Korean Won rate of 1,282 and a U.S. dollar-Brazilian real rate of 5.22.
The above guidance assumes that no additional acquisitions are completed during the second 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 March 31, 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 the invasion of Ukraine by Russia (including resulting sanctions), 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. could have, an impact on 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, May 3, 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)
March 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
305,662
$
348,200
Trade receivables, net of allowances of $50.5 million and $47.8 million at March 31, 2023 and December 31, 2022, respectively
545,840
708,949
Income taxes
28,008
23,609
Other taxes
91,354
78,274
Other current assets
58,116
51,866
Restricted cash - current
75,001
25,000
Marketable securities - current portion
21,168
25,098
Total current assets
1,125,149
1,260,996
Property, plant and equipment, net
146,211
131,207
Intangible assets, net
179,877
175,983
Goodwill
522,788
515,140
Right of Use Asset - operating lease
107,749
102,176
Restricted cash - non current
—
75,000
Marketable securities - non current portion
10,875
—
Non-current financial assets
4,542
5,928
Other non-current assets
50,000
50,818
Deferred tax assets
44,296
31,646
Total non-current assets
1,066,338
1,087,898
Total assets
$
2,191,487
$
2,348,894
Liabilities and shareholders' equity
Current liabilities:
Trade payables
$
602,180
$
742,918
Contingencies - current portion
67,149
65,759
Income taxes
16,815
13,037
Financial liabilities - current portion
4,208
219
Lease liability - operating - current portion
33,287
31,003
Other taxes
60,294
58,031
Employee - related payables
99,616
85,569
Other current liabilities
109,367
83,457
Total current liabilities
992,916
1,079,993
Deferred tax liabilities
3,877
3,463
Defined benefit plans
4,138
3,708
Financial liabilities - non current portion
76
74
Lease liability - operating - non current portion
80,762
77,536
Contingencies - non current portion
33,244
33,788
Other non-current liabilities
26,285
69,226
Total non-current liabilities
148,382
187,795
Total liabilities
1,141,298
1,267,788
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 63,316,696 and 63,248,728 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022, respectively.
2,081
2,079
Treasury stock, 7,323,153 and 5,985,104 shares at cost as of March 31, 2023 and December 31, 2022, respectively.
(211,400)
(174,293)
Additional paid-in capital
760,397
734,492
Accumulated other comprehensive income (loss)
(85,415)
(91,890)
Retained earnings
551,922
577,653
Equity - attributable to shareholders of Criteo S.A.
1,017,585
1,048,041
Non-controlling interests
32,604
33,065
Total equity
1,050,189
1,081,106
Total equity and liabilities
$
2,191,487
$
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
March 31,
2023
2022
YoY Change
Revenue
$
445,016
$
510,567
(13)
%
Cost of revenue
Traffic acquisition cost
(224,398)
(293,650)
(24)
%
Other cost of revenue
(39,109)
(32,893)
19
%
Gross profit
181,509
184,024
(1)
%
Operating expenses:
Research and development expenses
(63,590)
(34,027)
87
%
Sales and operations expenses
(101,242)
(88,999)
14
%
General and administrative expenses
(40,170)
(33,336)
21
%
Total Operating expenses
(205,002)
(156,362)
31
%
Income from operations
(23,493)
27,662
NM
Financial and Other income (expense)
6,827
4,030
69
%
Income (loss) before taxes
(16,666)
31,692
NM
Provision for income taxes
4,595
(10,414)
NM
Net Income (loss)
$
(12,071)
$
21,278
NM
Net income (loss) available to shareholders of Criteo S.A.
$
(11,809)
$
20,587
NM
Net income (loss) available to non-controlling interests
$
(262)
$
691
NM
Weighted average shares outstanding used in computing per share amounts:
Basic
56,256,082
60,738,299
Diluted
60,494,827
63,613,550
Net income (loss) allocated to shareholders per share:
Basic
$
(0.21)
$
0.34
NM
Diluted
$
(0.20)
$
0.32
NM
8
CRITEO S.A.
Consolidated Statement of Cash Flows
(U.S. dollars in thousands, unaudited)
Three Months Ended
March 31,
2023
2022
YoY Change
Net income (loss)
$
(12,071)
$
21,278
NM
Non-cash and non-operating items
31,947
34,726
(8)
%
- Amortization and provisions
27,311
26,611
3
%
- Equity awards compensation expense (1)
25,168
9,489
NM
- Net (gain) or loss on disposal of non-current assets
(8,790)
9
NM
- Change in deferred taxes
(12,297)
2,868
NM
- Change in income taxes
(137)
(432)
(68)
%
- Other
692
(3,819)
NM
Changes in working capital related to operating activities
22,088
18,926
17
%
- (Increase) / Decrease in trade receivables
164,120
92,738
77
%
- Increase / (Decrease) in trade payables
(145,011)
(49,672)
NM
- (Increase) / Decrease in other current assets
(13,594)
(18,947)
(28)
%
- Increase / (Decrease) in other current liabilities
16,666
(3,182)
NM
- Change in operating lease liabilities and right of use assets
(93)
(2,011)
(95)
%
CASH FROM OPERATING ACTIVITIES
41,964
74,930
(44)
%
Acquisition of intangible assets, property, plant and equipment
(37,195)
(10,857)
NM
Change in accounts payable related to intangible assets, property, plant and equipment
3,976
5,293
(25)
%
Payment for business, net of cash acquired
(6,500)
—
NM
Proceeds from disposition of investment
9,625
—
NM
Change in other non-current financial assets
(6,008)
22,489
NM
CASH USED FOR INVESTING ACTIVITIES
(36,102)
16,925
NM
Proceeds from borrowings under line-of-credit agreement
—
78,513
NM
Repayment of borrowings
—
(78,513)
NM
Proceeds from exercise of stock options
1,266
271
NM
Repurchase of treasury stocks
(51,030)
(8,304)
NM
Change in other financial liabilities
—
6,666
NM
Cash payment for contingent consideration
(22,025)
—
NM
Other
(428)
—
NM
CASH USED FOR FINANCING ACTIVITIES
(72,217)
(1,367)
NM
Effect of exchange rates changes on cash and cash equivalents
(1,182)
(16,673)
(93)
%
Net increase (decrease) in cash and cash equivalents
(67,537)
73,815
NM
Net cash and cash equivalents at beginning of period
448,200
515,527
(13)
%
Net cash and cash equivalents and restricted cash at end of period
$
380,663
$
589,342
(35)
%
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for taxes, net of refunds
$
(7,900)
$
(7,978)
(1)
%
Cash paid for interest
$
(616)
$
(365)
69
%
(1) Share-based compensation expense according to ASC 718 Compensation - stock compensation accounted for $25.2 million and $9.0 million of equity awards
compensation expense for the quarters ended March 31, 2023 and 2022
9
CRITEO S.A.
Reconciliation of Cash from Operating Activities to Free Cash Flow
(U.S. dollars in thousands, unaudited)
Three Months Ended
March 31,
2023
2022
YoY Change
CASH FROM OPERATING ACTIVITIES
$
41,964
$
74,930
(44)
%
Acquisition of intangible assets, property, plant and equipment
(37,195)
(10,857)
NM
Change in accounts payable related to intangible assets, property, plant and equipment
3,976
5,293
(25)
%
FREE CASH FLOW (1)
$
8,745
$
69,366
(87)
%
(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
March 31,
2023
2022
YoY Change
Gross Profit
181,509
184,024
(1)
%
Other Cost of Revenue
39,109
32,893
19
%
Contribution ex-TAC (1)
$
220,618
$
216,917
2
%
(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
March 31,
Segment
2023
2022
YoY Change
YoY Change at Constant Currency (3)
Revenue
Marketing Solutions
$
381,907
$
463,888
(18)
%
(14)
%
Retail Media (2)
38,021
46,679
(19)
%
(18)
%
Iponweb
25,088
—
N/A
N/A
Total
445,016
510,567
(13)
%
(9)
%
Contribution ex-TAC
Marketing Solutions
158,178
186,088
(15)
%
(10)
%
Retail Media (2)
37,352
30,829
21
%
22
%
Iponweb
25,088
—
N/A
N/A
Total (1)
$
220,618
$
216,917
2
%
6
%
(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
March 31,
2023
2022
YoY Change
Net income (loss)
$
(12,071)
$
21,278
NM
Adjustments:
Financial (Income) expense
(6,606)
(4,030)
64
%
Provision for income taxes
(4,595)
10,414
NM
Equity awards compensation expense
26,065
9,490
NM
Pension service costs
176
275
(36)
%
Depreciation and amortization expense
25,320
22,144
14
%
Acquisition-related costs
832
2,544
(67)
%
Restructuring, integration and transformation costs (1)
9,602
710
NM
Total net adjustments
50,794
41,547
22
%
Adjusted EBITDA (2)
$
38,723
$
62,825
(38)
%
(1) For the three and nine months ended March 31, 2023 and March 31, 2022, respectively, the Company recognized restructuring, integration and transformation costs following its new organizational structure implemented to support its Commerce Media Platform strategy:
Three Months Ended
March 31,
2023
2022
(Gain) from forfeitures of share-based compensation awards
(897)
—
Facilities related costs
618
533
Payroll related (gain) costs
9,631
—
Integration and transformation costs
250
177
Total restructuring, integration and transformation costs
$
9,602
$
710
(2) 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
March 31,
2023
2022
YoY Change
Research and Development expenses
$
(63,590)
$
(34,027)
87
%
Equity awards compensation expense
16,336
3,967
NM
Depreciation and Amortization expense
10,326
3,293
NM
Pension service costs
92
142
(35)
%
Acquisition-related costs
404
—
NM
Restructuring, integration and transformation costs
874
9
NM
Non GAAP - Research and Development expenses
(35,558)
(26,616)
34
%
Sales and Operations expenses
(101,242)
(88,999)
14
%
Equity awards compensation expense
4,740
2,568
85
%
Depreciation and Amortization expense
2,816
3,609
(22)
%
Pension service costs
28
40
(30)
%
Restructuring, integration and transformation costs
4,734
456
NM
Non GAAP - Sales and Operations expenses
(88,924)
(82,326)
8
%
General and Administrative expenses
(40,170)
(33,336)
21
%
Equity awards compensation expense
4,989
2,955
69
%
Depreciation and Amortization expense
520
610
(15)
%
Pension service costs
56
93
(40)
%
Acquisition-related costs
428
—
NM
Restructuring, integration and transformation costs
3,994
245
NM
Non GAAP - General and Administrative expenses
(30,183)
(29,433)
3
%
Total Operating expenses
(205,002)
(156,362)
31.1
%
Equity awards compensation expense
26,065
9,490
NM
Depreciation and Amortization expense
13,662
7,512
82
%
Pension service costs
176
275
(36)
%
Acquisition-related costs
832
2,544
(67)
%
Restructuring, integration and transformation costs
9,602
701
NM
Total Non GAAP Operating expenses (1)
$
(154,665)
$
(135,831)
14
%
(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
March 31,
2023
2022
YoY Change
Net income (loss)
$
(12,071)
$
21,278
NM
Adjustments:
Equity awards compensation expense
26,065
9,490
NM
Amortization of acquisition-related intangible assets
8,533
3,708
NM
Acquisition-related costs
832
2,544
(67)
%
Restructuring, integration and transformation costs
9,602
710
NM
Tax impact of the above adjustments (1)
(4,949)
(3,956)
25
%
Total net adjustments
40,083
12,496
NM
Adjusted net income(2)
$
28,012
$
33,774
(17)
%
Weighted average shares outstanding
- Basic
56,256,082
60,738,299
- Diluted
60,494,827
63,613,550
Adjusted net income per share
- Basic
$
0.50
$
0.56
(11)
%
- Diluted
$
0.46
$
0.53
(13)
%
(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
March 31,
2023
2022
YoY Change
Gross Profit as reported
$
181,509
$
184,024
(1)
%
Other cost of revenue as reported
(39,109)
(32,893)
19
%
Contribution ex-TAC as reported(2)
220,618
216,917
2
%
Conversion impact U.S. dollar/other currencies
9,939
—
Contribution ex-TAC at constant currency
230,557
216,917
6
%
Contribution ex-TAC(2)/Revenue as reported
50
%
42
%
Traffic acquisition costs as reported
(224,398)
(293,650)
(24)
%
Conversion impact U.S. dollar/other currencies
(8,518)
—
Traffic acquisition costs at constant currency
(232,916)
(293,650)
(21)
%
Revenue as reported
445,016
510,567
(13)
%
Conversion impact U.S. dollar/other currencies
18,457
—
Revenue at constant currency
$
463,473
$
510,567
(9)
%
(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) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.
16
CRITEO S.A.
Information on Share Count
(unaudited)
Three Months Ended
2023
2022
Shares outstanding as at January 1,
57,263,524
60,675,474
Weighted average number of shares issued during the period
Shares outstanding as of March 31, after Treasury stocks
55,993,543
60,577,750
Total dilutive effect of share options, warrants, employee warrants
9,709,019
6,361,622
Fully diluted shares as at March 31,
65,702,562
66,939,372
17
CRITEO S.A.
Supplemental Financial Information and Operating Metrics
(U.S. dollars in thousands except where stated, unaudited)
YoY Change
QoQ Change
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Clients
(0.5)%
(1.6)%
18,679
18,990
19,008
18,911
18,764
N/A
N/A
N/A
N/A
N/A
Revenue
(13)%
(21)%
445,016
564,425
446,921
495,090
510,567
653,267
508,580
551,311
541,077
661,282
Americas
(3)%
(33)%
188,288
281,806
201,274
213,340
194,847
287,270
204,428
221,227
203,900
312,817
EMEA
(17)%
(13)%
160,214
185,125
150,915
176,867
193,954
234,559
188,354
209,303
212,096
232,137
APAC
(21)%
(1)%
96,514
97,494
94,732
104,883
121,766
131,438
115,798
120,781
125,081
116,328
Revenue
(13)%
(21)%
445,016
564,425
446,921
495,090
510,567
653,267
508,580
551,311
541,077
661,282
Marketing Solutions
(18)%
(19)%
381,907
470,918
387,288
440,423
463,888
577,962
458,622
487,465
483,190
543,262
Retail Media (2)
(19)%
(36)%
38,021
59,801
41,170
54,667
46,679
75,305
49,958
63,846
57,887
118,020
Iponweb
N/A
(26)%
25,088
33,706
18,463
—
—
—
—
—
—
—
TAC
(24)%
(20)%
(224,398)
(281,021)
(233,543)
(280,565)
(293,650)
(377,076)
(297,619)
(331,078)
(327,667)
(408,108)
Marketing Solutions
(19)%
(20)%
(223,729)
(278,302)
(229,266)
(262,454)
(277,800)
(349,584)
(276,498)
(294,132)
(290,873)
(324,017)
Retail Media (2)
(96)%
(75)%
(669)
(2,719)
(4,277)
(18,111)
(15,850)
(27,492)
(21,121)
(36,946)
(36,794)
(84,091)
Iponweb
N/A
N/A
—
—
—
—
—
—
—
—
—
—
Contribution ex-TAC (1)
2%
(22)%
220,618
283,404
213,378
214,525
216,917
276,191
210,961
220,233
213,410
253,174
Marketing Solutions
(15)%
(18)%
158,178
192,616
158,022
177,969
186,088
228,378
182,124
193,333
192,317
219,245
Retail Media (2)
21%
(35)%
37,352
57,082
36,893
36,556
30,829
47,813
28,837
26,900
21,093
33,929
Iponweb
N/A
(26)%
25,088
33,706
18,463
—
—
—
—
—
—
—
Cash flow from operating activities
(44)%
(67)%
41,964
125,455
41,628
13,972
74,930
66,012
51,179
26,360
77,362
44,080
Capital expenditures
497%
129%
33,219
14,522
20,307
15,452
5,564
10,145
15,957
13,128
13,780
22,302
Capital expenditures/Revenue
6ppt
4ppt
7%
3%
5%
3%
1%
2%
3%
2%
3%
3%
Net cash position
(35)%
(15)%
380,663
448,200
407,323
562,546
589,343
515,527
497,458
489,521
520,060
488,011
Headcount
24%
(2)%
3,636
3,716
3,537
3,146
2,939
2,781
2,658
2,572
2,532
2,594
Days Sales Outstanding (days - end of month)
—
3 days
74
71
78
76
74
65
70
66
64
56
Client Count Methodology
We streamlined our client count methodology in Q1 2023. Our new client count is based on unique billing accounts while our previous methodology included clients from whom we have received a signed contract or an insertion order.
(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.
