PR Newswire
NEW YORK, Aug. 2, 2023
Q2 Activated Media Spend Up 53%
Launched First-ever Supply-side Platform Built for Commerce
NEW YORK, Aug. 2, 2023 /PRNewswire/ -- 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. |
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.
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.
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.
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.
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, [email protected]
Criteo Public Relations
Jessica Meyers, [email protected]
Financial information to follow
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 | ||
CRITEO S.A. | ||||||||||||
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) % | ||||||
