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Criteo Reports Strong Financial Results In Third Quarter 2021

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  • CRTO
Cision

Raises Outlook for Fiscal 2021 Revenue ex-TAC and Adjusted EBITDA margin

Announces Extension of Share Repurchase Authorization from $100 million to $175 million

NEW YORK, Nov. 3, 2021 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO) ("Criteo" or the "Company"), the global technology company that provides the world's leading Commerce Media Platform, today announced financial results for the third quarter ended September 30, 2021 that exceeded the Company's quarterly guidance.

Third Quarter 2021 Financial Highlights:

The following table summarizes our consolidated financial results for the three and nine months ended September 30, 2021 and 2020:


Three Months Ended


Nine Months Ended


September 30,


September 30,


2021

2020


YoY
Change


2021


2020


YoY
Change


(in millions, except EPS data)

GAAP Results











Revenue

$

509


$

470



8

%


$

1,601



$

1,411



13

%

Gross Profit

$

176


$

151



16

%


$

538



$

470



14

%

Net Income

$

24


$

5



358

%


$

63



$

28



125

%

Diluted EPS

$

0.37


$

0.09



311

%


$

0.94



$

0.43



119

%

Cash from operating activities

$

51


$

51



%


$

155



$

141



10

%

Net cash position

$

497


$

627



(21)

%


$

497



$

627



(21)

%












Non-GAAP Results1











Revenue ex-TAC

$

211


$

186



13

%


$

645



$

572



13

%

Revenue ex-TAC margin

41

%

40

%


1ppt


40

%


41

%


(1)ppt

Adjusted EBITDA

$

68


$

49



38

%


$

212



$

148



43

%

Adjusted diluted EPS

$

0.64


$

0.40



60

%


$

1.94



$

1.18



64

%

Free Cash Flow (FCF)

$

35


$

38



(8)

%


$

112



$

98



14

%

FCF / Adjusted EBITDA

51

%

77

%


(26)ppt


53

%


66

%


(13)ppt

"We achieved yet another strong quarter of double-digit growth, driven by the acceleration of our new solutions and healthy performance in retargeting," said Megan Clarken, Chief Executive Officer. "As a global powerhouse in commerce media, we are focused on delivering the best performing commerce audiences at scale for our large and growing base of 22,000 marketer and brand customers across the open Internet. The sustained momentum in our company transformation and solid execution of our Commerce Media Platform strategy position us well to drive long-term sustainable growth and shareholder value."

Q3 2021 Operating Highlights

  • Criteo's media spend activated by the Commerce Media Platform for marketers and media owners was over $2.5 billion in the last 12 months and close to $615M in Q3 growing 23% at constant currency2.

  • We delivered the highest growth in our New Solutions in four quarters at 66% year-over-year at constant currency2, now representing 28% of total revenue ex-TAC.

  • Retail Media revenue ex-TAC grew 65% year-over-year at constant currency2 and same-retailer revenue ex-TAC3 for Retail Media increased 66% year-over-year.

  • We added Lowe's, Walmart Canada, BestBuy and Douglas to our Retail Media Platform.

  • We added over 400 net new clients and closed the quarter with close to 22,000 clients.

  • Same-client revenue3 increased 5% and same-client revenue ex-TAC2 increased 9% year-over-year at constant currency2.

  • About 60% of our daily active users on the web are addressable through media owners we have direct access to, as we continue to build Criteo's first-party media network.

  • Manuela Montagnana was appointed Chief People Officer to lead Criteo's People team and talent strategy.

___________________________________________________

1

Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA at constant currency, Adjusted EBITDA margin, Adjusted diluted EPS, Free Cash Flow and growth at constant currency 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 2020 average exchange rates for the relevant period to 2021 figures.

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.

Third Quarter Financial Summary

Revenue for Q3 2021 was $509 million and Revenue ex-TAC was $211 million. Net income was $24 million, or $0.37 per share on a diluted basis. Adjusted EBITDA was $68 million, resulting in an adjusted diluted EPS of $0.64. At constant currency, Revenue increased by 8% and Revenue ex-TAC increased by 14%. Cash flow from operating activities was $155 million and Free Cash Flow was $35 million, growing 14% in the first nine months 2021 to $112 million, representing a Free Cash Flow conversion rate of 53% of Adjusted EBITDA in the first nine months 2021. As of September 30, 2021, we had $554 million in cash and marketable securities on our balance sheet.

Sarah Glickman, Chief Financial Officer, said, "We are raising our financial guidance for the full year 2021 in light of our third quarter outperformance and continued business momentum carrying into the fourth quarter. Importantly, with solid operating margins and strong cash generation, we are well positioned to continue to transform and execute our commerce media vision."

Revenue, Revenue ex-TAC and Gross Profit

Revenue increased by 8% year-over-year in Q3 2021, or 8% at constant currency, to $509 million (Q3 2020: $470 million). Revenue ex-TAC in the third quarter increased 13% year-over-year, or 14% at constant currency, to $211 million (Q3 2020: $186 million). Revenue ex-TAC as a percentage of revenue, or Revenue ex-TAC margin, was 41% (Q3 2020: 40%), up 200 basis points year-over-year, largely driven by Retail Media and the acceleration of our client transition to the Retail Media Platform.

  • Marketing Solutions revenue grew 11% (or 12% at constant currency) and Marketing Solutions revenue ex-TAC grew 8% (or 8% at constant currency), driven by healthy demand from Retail clients, both on our retargeting and audience targeting solutions, partially offset by anticipated identity and privacy changes.

  • Retail Media revenue decreased 14% (or 15% at constant currency) reflecting the impact related to the ongoing client migration to our Retail Media Platform ("RMP"). Retail Media revenue ex-TAC increased 65% (or 65% on a constant currency basis), driven by continued strength in Retail Media onsite, new client integrations and growing network effects of the RMP.

  • In the Americas, Revenue was flat year-over-year, or flat at constant currency, to $204 million and represented 40% of total Revenue. Revenue ex-TAC increased 19% year-over-year, or 18% at constant currency, to $88 million and represented 42% of total Revenue ex-TAC.

  • In EMEA, Revenue increased 12% year-over-year, or 12% at constant currency, to $188 million and represented 37% of total Revenue. Revenue ex-TAC increased 8% year-over-year, or 8% at constant currency, to $76 million and represented 36% of total Revenue ex-TAC.

  • In Asia-Pacific, Revenue increased 18% year-over-year, or 21% at constant currency, to $116 million and represented 23% of total Revenue. Revenue ex-TAC increased 13% year-over-year, or 15% at constant currency, to $47 million and represented 22% of total Revenue ex-TAC.

Gross profit increased by 16% year-over-year in Q3 2021, or 16% at constant currency, to $176 million (Q3 2020: $151 million).

Net Income and Adjusted Net Income

Net income grew 358% to $24 million in Q3 2021 (Q3 2020: $5 million). Net income margin as a percentage of revenue was 5% (Q3 2020: 1%). Net income available to shareholders of Criteo S.A. was $23 million, or $0.37 per share on a diluted basis (Q3 2020: $5 million, or $0.09 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, restructuring related and transformation costs and the tax impact of these adjustments, was $41 million, or $0.64 per share on a diluted basis (Q3 2020: $24 million, or $0.40 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA increased 38% year-over-year, or 37% at constant currency, to $68 million (Q3 2020: $49 million), driven by the Revenue ex-TAC performance over the period and effective cost management balanced with growth investments. Adjusted EBITDA as a percentage of Revenue ex-TAC, or Adjusted EBITDA margin, was 32% (Q3 2020: 27%).

Operating expenses remained flat at $144 million (Q3 2020: $143 million), reflecting investments in our growth areas, including Product, Sales and R&D, balanced with disciplined and effective expense management. Operating expenses, excluding the impact of equity awards compensation expense, pension costs, acquisition-related costs, restructuring related and transformation costs, and depreciation and amortization, which we refer to as Non-GAAP Operating Expenses, increased by 6% or $7 million, to $123 million (Q3 2020: $117 million).

Cash Flow, Cash and Financial Liquidity Position

Cash flow from operating activities was flat year-over-year to $51 million in Q3 2021 (Q3 2020: $51 million) and grew 10% to $155 million in the first nine months of 2021 (9 months 2020: $141 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 8% to $35 million in Q3 2021 (Q3 2020: $38 million), and grew 14% in the first nine months 2021 to $112 million (9 months 2020: $98 million), driving a Free Cash Flow conversion rate of 53% of Adjusted EBITDA in the first nine months 2021 (9 months 2020: 67%).

Cash and cash equivalents increased $9 million compared to December 31, 2020 to $497 million and $554 million including marketable securities, after spending $73 million on share repurchases in the first nine months 2021.

As of September 30, 2021, the Company had total financial liquidity in excess of $1 billion, including its cash position, marketable securities, Revolving Credit Facility and treasury shares reserved for M&A.

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of November 3, 2021.

Fiscal year 2021 guidance:

  • We raise our Revenue ex-TAC growth outlook to approximately +10% at constant-currency.

  • We raise our Adjusted EBITDA margin outlook to approximately 35% of Revenue ex-TAC.

Fourth quarter 2021 guidance:

  • We expect Revenue ex-TAC between $271 million and $274 million, or year-over-year growth at constant-currency of +8% to +9%.

  • We expect Adjusted EBITDA between $107 million and $110 million, or an Adjusted EBITDA margin of 39% to 40%.

The above guidance for the fourth quarter and fiscal year ending December 31, 2021 assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.839, a U.S. dollar-Japanese Yen rate of 109, a U.S. dollar-British pound rate of 0.717, a U.S. dollar-Korean Won rate of 1,144 and a U.S. dollar-Brazilian real rate of 5.34.

The above guidance assumes no acquisitions are completed during the fourth quarter and fiscal year ended December 31, 2021.

Reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding U.S. GAAP measures 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. The variability of the above charges could potentially have a significant impact on our future U.S. GAAP financial results

Extension of Share Repurchase Authorization from $100 million to $175 million

Criteo continues to execute on its strategic plan and Company transformation, investing in the growth of the business and leveraging its strong balance sheet position.

Criteo today announces that the board of directors has authorized the extension of its current share repurchase program of up to $100 million of the Company's outstanding American Depositary Shares to an increased amount of up to $175 million. The Company intends to use repurchased shares under this extended program to satisfy employee equity obligations in lieu of issuing new shares, which would limit future dilution for its shareholders, as well as to fund potential acquisitions in the future.

Under the terms of the authorization, 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 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. 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 ("SEC"): Revenue ex-TAC, Revenue ex-TAC by Region, Revenue ex-TAC by Solution, Revenue 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.

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, Revenue ex-TAC by Solution, 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, Revenue ex-TAC by Solution 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 and restructuring related and transformation costs.

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 and restructuring related and transformation costs, 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 intangible assets, restructuring related and transformation costs 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 by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs and the tax impact of these adjustments, 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 the impact of depreciation and amortization, equity awards compensation expense, pension service costs, and restructuring related and transformation costs. 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, Revenue ex-TAC by Solution to revenue by solution, 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, Revenue ex-TAC by Solution, 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, 2021 and the year ended December 31, 2021, 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 the scope and impact of the COVID-19 pandemic on our employees, operations, revenue and cash flows, 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, 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, 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 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 February 26, 2021, and in subsequent Quarterly Reports on Form 10-Q as well as future filings and reports by the Company. Importantly, at this time, the COVID-19 pandemic continues to have an impact on Criteo's business, financial condition, cash flow and results of operations. There are significant uncertainties about the duration and the extent of the impact of the COVID-19 pandemic.

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.

Conference Call Information

Criteo's senior management team will discuss the Company's earnings on a call that will take place today, November 3, 2021, at 8:00 AM ET, 1:00 PM CET. The conference call will be webcast live on the Company's website http://ir.criteo.com and will subsequently be available for replay.

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" call.

About Criteo

Criteo (NASDAQ: CRTO) is the global technology company that provides the world's leading Commerce Media Platform. 2,700 Criteo team members partner with over 21,000 marketers and thousands of media owners around the globe to activate the world's largest set of commerce data to drive better commerce outcomes. By powering trusted and impactful advertising, Criteo brings richer experiences to every consumer while supporting a fair and open internet that enables discovery, innovation and choice. For more information, please visit www.criteo.com.

Contacts

Criteo Investor Relations
Edouard Lassalle, SVP, Market Relations & Capital Markets, e.lassalle@criteo.com
Melanie Dambre, Director, Investor Relations, m.dambre@criteo.com

Criteo Public Relations
Maribel Henriquez, Senior Communications Manager, m.henriquez@criteo.com

Financial information to follow

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands, unaudited)




September 30, 2021


December 31, 2020

Assets





Current assets:





Cash and cash equivalents


$

497,458



$

488,011


Trade receivables, net of allowances of $44.7 million and $39.9 million at September
30, 2021 and December 31, 2020, respectively


439,493



474,055


Income taxes


14,276



11,092


Other taxes


75,214



69,987


Other current assets


23,185



21,405


Marketable securities - current portion


46,311




Total current assets


1,095,937



1,064,550


Property, plant and equipment, net


150,112



189,505


Intangible assets, net


89,288



79,744


Goodwill


330,561



325,805


Right of Use Asset - operating lease


117,273



114,012


Marketable securities - non current portion


10,000



41,809


Non-current financial assets


7,371



18,109


Deferred tax assets


13,951



19,876


Total non-current assets


718,556



788,860


Total assets


$

1,814,493



$

1,853,410







Liabilities and shareholders' equity





Current liabilities:





Trade payables


$

349,985



$

367,025


Contingencies


2,828



2,250


Income taxes


489



2,626


Financial liabilities - current portion


489



2,889


Lease liability - operating - current portion


31,309



48,388


Other taxes


53,249



58,491


Employee - related payables


72,679



85,272


Other current liabilities


38,818



33,390


Total current liabilities


549,846



600,331


Deferred tax liabilities


4,138



5,297


Defined benefit plans


6,167



6,167


Financial liabilities - non current portion


367



386


Lease liability - operating - non current portion


92,859



83,007


Other non-current liabilities


9,864



5,535


Total non-current liabilities


113,395



100,392


Total liabilities


663,241



700,723


Commitments and contingencies





Shareholders' equity:





Common shares, €0.025 par value, 66,315,019 and 66,272,106 shares authorized,
issued and outstanding at September 30, 2021 and December 31, 2020,
respectively.


2,162



2,161


Treasury stock, 5,544,527 and 5,632,536 shares at cost as of September 30, 2021
and December 31, 2020, respectively.


(122,390)



(85,570)


Additional paid-in capital


727,613



693,164


Accumulated other comprehensive income (loss)


(25,349)



16,028


Retained earnings


534,320



491,359


Equity - attributable to shareholders of Criteo S.A.


1,116,356



1,117,142


Non-controlling interests


34,896



35,545


Total equity


1,151,252



1,152,687


Total equity and liabilities


$

1,814,493



$

1,853,410


CRITEO S.A.

Consolidated Statement of Income

(U.S. dollars in thousands, except share and per share data, unaudited)




Three Months Ended




Nine Months Ended





September 30,




September 30,





2021


2020


YoY

Change


2021


...