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Criteo's Multi-Product Platform Is Paying Off

Steve Symington, The Motley Fool

Criteo (NASDAQ: CRTO) announced fourth-quarter results on Wednesday morning, highlighting a return to constant-currency revenue growth thanks to both new client additions and the early fruits of its multi-solution platform.

With shares of the ad-retargeting company climbing as much as 20% early today, and then settling to close up around 9%, let's dig deeper to see what's driving Criteo's relative outperformance.

Man in tie celebrating in front of wooden arrow chart indicating gains

Image source: Getty Images.

Criteo results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Growth

Revenue (ex-TAC)

$271.9 million

$276.9 million

(1.8%)

Net income available to shareholders

$38.0 million

$53.0 million

(28.3%)

Net income per diluted share

$0.57

$0.78

(26.9%)

Data source: Criteo. Ex-TAC: excluding traffic acquisition costs. 

What happened with Criteo this quarter?

  • Revenue ex-TAC increased 0.1% at constant currency and arrived well above Criteo's guidance provided in October for between $256 million and $262 million.
  • Adjusted EBITDA fell 13% (or 12% at constant currency) to $105 million, also above guidance for between $86 million and $92 million. 
  • Adjusted for items such as stock-based compensation and restructuring expenses, Criteo's non-GAAP earnings declined 31% year over year to $0.84 per share, above the $0.73 per share most investors were anticipating.
  • Criteo increased its number of clients 7% year over year to roughly 19,500, maintaining a client retention rate at close to 90%.
  • Criteo's revenue ex-TAC from its app business increased 54% year over year.
  • 13% of all live clients now use at least two of Criteo's solutions, up from 4% a year ago.
  • Criteo Direct Bidder is now connected to over 3,500 large publishers, up from 2,600 last quarter, with notable new publishers including NBC, Mediavine, and The Washington Post.
  • Criteo completed the $80 million share-repurchase program it approved last quarter, buying back just under 3.5 million shares at an average price of $22.86 per share.

What management had to say

"The recurring nature of our business reflects the great value our clients place in our performance," stated Criteo CEO JB Rudelle. "We are building on this trust to expand our client partnerships with new solutions."

"Our Q4 results mark an inflection point in our trajectory," added CFO Benoit Fouilland, CFO. "We expect to see positive momentum in 2019 driven by healthy fundamentals and our broader multi-solution platform."

Looking forward

For the first quarter of 2019, Criteo expects revenue ex-TAC of between $233 million and $235 million, above the $231 million most investors were anticipating and good for constant-currency growth of 1% to 2%. Trending toward the bottom line, adjusted EBITDA should arrive at between $59 million and $61 million. 

Finally, for the full year 2019, Criteo expects revenue ex-TAC to increase between 3% and 6% at constant currency, with adjusted EBITDA margin contracting by three percentage points from last year to roughly 30% of revenue ex-TAC.

Still, there was little not to love from this quarterly update as Criteo reaps the rewards of its transition to a multi-product company. And the market is driving up its stock price accordingly.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Criteo. The Motley Fool has a disclosure policy.