CRITEO REPORTS STRONG FIRST QUARTER 2022 RESULTS

Q1 Activated Media Spend Up 12%
Q1 Contribution ex-TAC in Line and Adjusted EBITDA Above Guidance 

NEW YORK, May 4, 2022 /PRNewswire/ — Criteo S.A. (NASDAQ: CRTO) (“Criteo” or the “Company”), the commerce media company, today announced financial results for the first quarter ended March 31, 2022.

 First Quarter 2022 Financial Highlights: 

The following table summarizes our consolidated financial results for the three months ended March 31, 2022: 


Three Months Ended


March 31,


2022

2021


YoY
Change


(in millions, except EPS data)

GAAP Results





Revenue

$            511

$           541


(6)%

Gross Profit

$            184

$           179


3%

Net Income

$              21

$             23


(9)%

Gross Profit margin

36%

33%


3ppt

Diluted EPS

$           0.32

$          0.35


(9)%

Cash from operating activities

$              75

$             77


(3)%

Cash and cash equivalents

$            589

$           520


13%






Non-GAAP Results1





Contribution ex-TAC

$            217

$           213


2%

Contribution ex-TAC margin

42%

39%


3ppt

Adjusted EBITDA

$              63

$             76


(17)%

Adjusted diluted EPS

$           0.53

$          0.67


(21)%

Free Cash Flow (FCF)

$              69

$             64


9%

FCF / Adjusted EBITDA

110%

84%


26ppt


“We are off to a solid start in 2022 and continue to move full steam ahead to scale our Commerce Media Platform and Retail Media capabilities. With our unique access to over $1 trillion of e-commerce sales, 16 years of commerce-focused AI expertise, reaching 725 million daily active users, we’re enabling our clients to capitalize on the next big evolution in advertising,” said Megan Clarken, Chief Executive Officer.

Operating Highlights 

  • Retail Media Contribution ex-TAC grew 48% year-over-year at constant currency2, and same-retailer Contribution ex-TAC3 for Retail Media increased 51% year-over-year.
  • Marketing Solutions Contribution ex-TAC grew 2% year-over-year at constant currency2.
  • We expanded our platform adoption with large marketplaces and retailers, including Flipkart and eBay.
  • We signed a global partnership with Ascential and a U.S. partnership with another large agency holding company to accelerate the demand and supply growth of our Retail Media business.
  • Criteo’s activated media spend4 by the Commerce Media Platform for marketers and media owners was over $2.7 billion in the last 12 months and $645 million in Q1, growing 12% at constant currency2.
  • We had 725 million Daily Active Users (DAUs), over 60% of which on the web are addressable through media owners we have direct access to, as we continue to build Criteo’s first-party commerce media network.
  • Brian Gleason was appointed Chief Revenue Officer to lead Criteo’s global commercial organization.

___________________________________________________

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 2021 average exchange rates for the relevant period to 2022 figures.

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 and the media spend activated on behalf of our Retail Media clients.


Financial Summary

Revenue for Q1 2022 was $511 million, gross profit was $184 million and Contribution ex-TAC was $217 million. Net income for Q1 was $21 million, or $0.32 per share on a diluted basis. Adjusted EBITDA for Q1 was $63 million, resulting in an adjusted diluted EPS of $0.53. At constant currency, Revenue for Q1 decreased by 1%, gross profit increased 8% and Contribution ex-TAC increased by 6%. Cash flow from operating activities was $75 million and Free Cash Flow was $69 million, up 9% in Q1, representing a Free Cash Flow conversion rate of 110% of Adjusted EBITDA. As of March 31, 2022, we had $621 million in cash and marketable securities on our balance sheet.

Sarah Glickman, Chief Financial Officer, said, “We delivered solid top-line performance, profitability and free cash flow in the first quarter despite a slower macro environment and the suspension of our Russia operations. During the quarter, we resumed the execution of our share repurchase program which was extended earlier this year as part of our commitment to drive shareholder value. Overall, we are confident in our growth outlook as we continue to scale and execute on our Commerce Media Platform strategy.”

First Quarter 2022 Results

Revenue, Gross Profit and Contribution ex-TAC

Revenue decreased by 6% year-over-year in Q1 2022, or 1% at constant currency, to $511 million (Q1 2021: $541 million). Gross profit increased by 3% year-over-year in Q1 2022, or 8% at constant currency, to $184 million (Q1 2021: $179 million). Gross profit as a percentage of revenue, or gross profit margin, was 36% (Q1 2021: 33%). Contribution ex-TAC in the first quarter increased 2% year-over-year, or 6% at constant currency, to $217 million (Q1 2021: $213 million). Contribution ex-TAC as a percentage of revenue, or Contribution ex-TAC margin, was 42% (Q1 2021: 39%), up 280 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 4%, or increased 1% at constant currency, and Marketing Solutions Contribution ex-TAC decreased 3%, or increased 2% at constant currency, driven by healthy demand from Retail clients, partially offset by anticipated identity and privacy changes and the suspension of the Company’s operations in Russia.
  • Retail Media revenue decreased 19%, or 18% at constant currency, reflecting the impact related to the ongoing client migration to the Company’s platform. Retail Media Contribution ex-TAC increased 46%, or 48% at constant currency, driven by continued strength in Retail Media onsite, new client integrations and growing network effects of the platform.

Net Income and Adjusted Net Income

Net income was $21 million in Q1 2022 (Q1 2021: $23 million). Net income margin as a percentage of revenue was 4% (Q1 2021: 4%). Net income available to shareholders of Criteo was $21 million, or $0.32 per share on a diluted basis (Q1 2021: $22 million, or $0.35 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 $34 million, or $0.53 per share on a diluted basis (Q1 2021: $43 million, or $0.67 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA was $63 million, above the high end of the Company’s guidance, representing a decrease of 17% year-over-year, or 12% at constant currency, (Q1 2021: $76 million). This was driven by growth investments including a higher headcount, partially offset by higher Contribution ex-TAC over the period. Adjusted EBITDA as a percentage of Contribution ex-TAC, or Adjusted EBITDA margin, was 29% (Q1 2021: 36%).

Operating expenses increased 8% year-over-year to $156 million (Q1 2021: $144 million), mostly driven by higher headcount-related expense, including equity awards compensation expense, balanced with effective cost 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 15% or $18 million, to $136 million (Q1 2021: $118 million).

Cash Flow, Cash and Financial Liquidity Position

Cash flow from operating activities decreased 3% year-over-year to $75 million in Q1 2022 (Q1 2021: $77 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, increased 9% to $69 million in Q1 2022 (Q1 2021: $64 million), driving a Free Cash Flow conversion rate of 110% of Adjusted EBITDA in 2021 (Q1 2021: 84%).

Cash and cash equivalents increased $74 million compared to December 31, 2021 to $589 million, after spending approximately $8 million on share repurchases in the first quarter of 2022.

As of March 31, 2022, the Company had total financial liquidity of approximately $1 billion, including its cash position, marketable securities, Revolving Credit Facility and treasury shares reserved for M&A.

2022 Business Outlook

The following forward-looking statements reflect Criteo’s expectations as of May 4, 2022.

Second quarter 2022 guidance:

  • We expect Contribution ex-TAC between $220 million and $224 million, or year-over-year growth at constant-currency of +4% to +6%.
  • We expect Adjusted EBITDA between $49 million and $53 million.

Fiscal year 2022 guidance:

  • We now expect Contribution ex-TAC to grow by 8% to 10% at constant currency, reflecting the suspension of our Russia operations and lower Contribution ex-TAC for Europe due to higher traffic acquisition costs for global supply contracts denominated in USD.
  • We continue to expect an Adjusted EBITDA margin of approximately 32% of Contribution ex-TAC and a Free Cash Flow conversion rate of about 45% of Adjusted EBITDA.

The above guidance for the second quarter and fiscal year ending December 31, 2022 assumes the following exchange rates for the main currencies impacting our business: a U.S. dollar-euro rate of 0.885, a U.S. dollar-Japanese Yen rate of 117, a U.S. dollar-British pound rate of 0.761, a U.S. dollar-Korean Won rate of 1,190 and a U.S. dollar-Brazilian real rate of 5.30.

The above guidance does not include the acquisition of IPONWEB and assumes that no additional acquisitions are completed during the second quarter of 2022 or the fiscal year ended December 31, 2022.

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 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, depreciation and amortization expense, acquisition-related 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 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 June 30, 2022 and the year ending December 31, 2022, 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, including the successful completion of our acquisition of IPONWEB, 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 any 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 25, 2022, 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 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, May 4, 2022, 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 technology company that provides the world’s leading Commerce Media Platform. 2,900 Criteo team members partner with 22,000 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
Melanie Dambre, Director, Investor Relations, [email protected]

Criteo Public Relations
Jessica Meyers, Director PR, Americas, [email protected]

Financial information to follow

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands, unaudited)




March 31, 2022


December 31, 2021

Assets





Current assets:





     Cash and cash equivalents


$                      589,343


$                      515,527

 Trade receivables, net of allowances of $48.7 million and $45.4 million at March 31,
2022 and December 31, 2021, respectively 


479,636


581,988

     Income taxes


10,131


8,784

     Other taxes


72,869


73,388

     Other current assets


45,460


34,182

     Marketable securities – current portion


31,387


50,299

     Total current assets


1,228,826


1,264,168

Property, plant and equipment, net


129,164


139,961

Intangible assets, net


79,441


82,627

Goodwill


328,125


329,699

Right of Use Asset – operating lease


110,784


120,257

Marketable securities – non current portion



5,000

Non-current financial assets


6,855


6,436

Deferred tax assets


32,145


35,443

    Total non-current assets


686,514


719,423

Total assets


$                   1,915,340


$                   1,983,591






Liabilities and shareholders’ equity





Current liabilities:





     Trade payables


$                      374,601


$                      430,245

     Contingencies


2,864


3,059

     Income taxes


7,450


6,641

     Financial liabilities – current portion


3,481


642

     Lease liability – operating – current portion


31,373


34,066

     Other taxes


58,780


60,236

     Employee – related payables


93,817


98,136

     Other current liabilities


40,149


39,523

     Total current liabilities


612,515


672,548

Deferred tax liabilities


2,942


3,053

Defined benefit plans


4,638


5,531

Financial liabilities – non current portion


354


360

Lease liability – operating – non current portion


84,692


93,893

Other non-current liabilities


7,676


9,886

    Total non-current liabilities


100,302


112,723

Total liabilities


712,817


785,271

Commitments and contingencies





Shareholders’ equity:





Common shares, €0.025 par value, 65,905,394 and 65,883,347 shares
authorized, issued and outstanding at March 31, 2022 and December 31, 2021,
respectively.


2,150


2,149

Treasury stock, 5,327,644 and  5,207,873 shares at cost as of March 31, 2022 and
December 31, 2021, respectively.


(137,330)


(131,560)

Additional paid-in capital


740,515


731,248

Accumulated other comprehensive income (loss)


(56,501)


(40,294)

Retained earnings


619,641


601,588

Equity – attributable to shareholders of Criteo S.A.


1,168,475


1,163,131

Non-controlling interests


34,048


35,189

Total equity


1,202,523


1,198,320

Total equity and liabilities


$                   1,915,340


$                   1,983,591

CRITEO S.A.
Consolidated Statement of Income
(U.S. dollars in thousands, except share and per share data, unaudited)




Three Months Ended





March 31,





2022


2021


YoY

Change








Revenue


$           510,567


$           541,077


(6)%








Cost of revenue







          Traffic acquisition cost


(293,650)


(327,667)


(10)%

          Other cost of revenue


(32,893)


(34,712)


(5)%








Gross profit


184,024


178,698


3%








Operating expenses:







          Research and development expenses


(34,027)


(31,697)


7%

          Sales and operations expenses


(88,999)


(79,354)


12%

          General and administrative expenses


(33,336)


(33,428)


—%

                    Total Operating expenses


(156,362)


(144,479)


8%

Income from operations


27,662


34,219


(19)%

Financial and Other income (expense)


4,030


(718)


NM

Income before taxes


31,692


33,501


(5)%

Provision for income taxes


(10,414)


(10,051)


4%

Net Income


$             21,278


$             23,450


(9)%








     Net income available to shareholders of Criteo S.A.


$             20,587


$             22,406


(8)%

     Net income available to non-controlling interests


$                  691


$               1,044


(34)%








Weighted average shares outstanding used in computing per
share amounts:







          Basic


60,738,299


60,741,674



          Diluted


63,613,550


64,077,409










Net income allocated to shareholders per share:







          Basic


$                 0.34


$                 0.37


(8)%

          Diluted


$                 0.32


$                 0.35


(9)%

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2022


2021


YoY

Change

Net income


$        21,278


$        23,450


(9)%

Non-cash and non-operating items


34,726


30,017


16%

           – Amortization and provisions


26,611


17,225


54%

           – Equity awards compensation expense (1)


9,489


7,215


32%

           – Net gain or (loss) on disposal of non-current assets


9


3,945


(100)%

           – Change in deferred taxes


2,868


4,998


(43)%

           – Change in income taxes


(432)


(3,379)


(87)%

           – Other


(3,819)


13


NM

Changes in working capital related to operating activities


18,926


23,895


(21)%

           – (Increase) / Decrease in trade receivables


92,738


47,226


96%

           – Increase / (Decrease) in trade payables


(49,672)


(10,640)


NM

           – (Increase) / Decrease in other current assets


(18,947)


(5,050)


NM

           – Increase / (Decrease) in other current liabilities


(3,182)


(4,527)


(30)%

           – Change in operating lease liabilities and right of use assets


(2,011)


(3,114)


(35)%

CASH FROM OPERATING ACTIVITIES


74,930


77,362


(3)%

Acquisition of intangible assets, property, plant and equipment


(10,857)


(11,953)


(9)%

Change in accounts payable related to intangible assets, property,
plant and equipment


5,293


(1,827)


NM

Payment for businesses, net of cash acquired




NM

Change in other non-current financial assets


22,489


(3,252)


NM

CASH USED FOR INVESTING ACTIVITIES


16,925


(17,032)


NM

Proceeds from borrowings under line-of-credit agreement


78,513



NM

Repayment of borrowings


(78,513)


(182)


NM

Proceeds from exercise of stock options


271


2,074


(87)%

Repurchase of treasury stocks


(8,304)


(4,930)


68%

Change in other financial liabilities


6,666


(378)


NM

CASH USED FOR  FINANCING ACTIVITIES


(1,367)


(3,416)


(60)%

Effect of exchange rates changes on cash and cash equivalents


(16,673)


(24,865)


(33)%

Net increase in cash and cash equivalents


73,815


32,049


NM

Net cash and cash equivalents at beginning of period


515,527


488,011


6%

Net cash and cash equivalents at end of period


$      589,342


$      520,060


13%








SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION







Cash paid for taxes, net of refunds


$         (7,978)


$         (8,432)


(5)%

Cash paid for interest


$            (365)


$            (367)


(1)%


(1) Share-based compensation expense according to ASC 718 Compensation – stock compensation accounted for $9.0 million and $6.8 million of equity awards compensation expense for the quarter ended March 31, 2022 and 2021, respectively.

CRITEO S.A.

Reconciliation of Cash from Operating Activities to Free Cash Flow

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2022


2021


YoY

Change








CASH FROM OPERATING ACTIVITIES


$   74,930


$   77,362


(3)%

Acquisition of intangible assets, property, plant and equipment


(10,857)


(11,953)


(9)%

Change in accounts payable related to intangible assets, property, plant and
equipment


5,293


(1,827)


NM

FREE CASH FLOW (1)


$   69,366


$   63,582


9%


(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.

CRITEO S.A.

Reconciliation of Contribution ex-TAC to Gross Profit

(U.S. dollars in thousands, unaudited)




Three Months Ended






March 31,






2022


2021


YoY Change


YoY Change
at Constant
Currency










Gross Profit


184,024


178,698


3%


8%










Other Cost of Revenue


32,893


34,712


(5)%


(1)%










Contribution ex-TAC (1)


$     216,917


$     213,410


2%


5%


(1) We define Contribution ex-TAC as 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 cost 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. Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Contribution ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Contribution ex-TAC alongside our other U.S. GAAP financial result measures. The above table provides a reconciliation of Contribution ex-TAC to gross profit.



CRITEO S.A.

Segment Information

(U.S. dollars in thousands, unaudited)






Three Months Ended








March 31,






Segment


2022


2021


YoY Change


YoY Change
at Constant
Currency

Revenue










Marketing Solutions


$     463,888


$     483,190


(4)%


1%


Retail Media (2)


46,679


57,887


(19)%


(18)%


Total


510,567


541,077


(6)%


(1)%











Contribution ex-TAC










Marketing Solutions


186,088


192,317


(3)%


2%


Retail Media (2)


30,829


21,093


46%


48%


Total (1)


$     216,917


$     213,410


2%


6%


(1) We define Contribution ex-TAC as 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 cost 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. Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Contribution ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Contribution ex-TAC alongside our other U.S. GAAP financial result measures. The above table provides a reconciliation of Contribution ex-TAC to gross profit.


(2) Criteo operates as two reportable segments as of December 31, 2021. The table above presents the operating results of our Marketing Solutions and Retail Media segments.  A strategic building block of Criteo’s Commerce Media Platform, the Retail Media Platform, introduced in June 2020, and reported under the retail media segment, 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 are accounted for on a gross basis. We expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform by the second half of 2022. As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin is expected to increase. Contribution ex-TAC is not impacted by this transition.

CRITEO S.A.

Reconciliation of Adjusted EBITDA to Net Income

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2022


2021


YoY

Change

Net income


$   21,278


$   23,450


(9)%

Adjustments:







Financial and Other (Income) expense


(4,030)


718


NM

Provision for income taxes


10,414


10,051


4%

Equity awards compensation expense


9,490


7,882


20%

Research and development


3,967


2,496


59%

Sales and operations


2,568


2,369


8%

General and administrative


2,955


3,017


(2)%

Pension service costs


275


338


(19)%

Research and development


142


175


(19)%

Sales and operations


40


53


(25)%

General and administrative


93


110


(15)%

Depreciation and amortization expense


22,144


21,854


1%

Cost of revenue (data center equipment)


14,632


15,244


(4)%

Research and development


3,293


1,753


88%

Sales and operations


3,609


3,954


(9)%

General and administrative


610


903


(32)%

Acquisition-related costs


2,544



NM

General and administrative


2,544



NM

Restructuring related and transformation (gain) costs (1)


710


11,636


(94)%

Research and development


9


1,436


(99)%

Sales and operations


456


7,367


(94)%

General and administrative


245


2,833


(91)%

Total net adjustments


41,547


52,479


(21)%

Adjusted EBITDA (2)


$   62,825


$   75,929


(17)%

(1) For the Three Months ended March 2022, and March 2021, respectively, the Company recognized restructuring related and transformation costs following its new organizational structure implemented to support its Commerce Media Platform strategy:


Three Months Ended


March 31,


2022


2021

(Gain) from forfeitures of share-based compensation awards


(666)

Facilities related (gain) costs

533


6,616

Payroll related (gain) costs


5,152

Consulting costs related to transformation

177


534

Total restructuring related and transformation (gain) costs

$                                  710


$                              11,636

For the three months ended March 31, 2022 and March 31, 2021, respectively, the cash outflows related to restructuring related and transformation costs were $0.9 million and $6.1 million, and were mainly comprised of payroll costs, broker and termination penalties related to real-estate facilities and other consulting fees. 


(2) We define Adjusted EBITDA as 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, depreciation and amortization expense and restructuring related and transformation costs. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA because it is a key measure 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-term and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, and restructuring related and transformation costs in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA 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. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income. 

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,





2022


2021


YoY
Change

Research and Development expenses


$  (34,027)


$  (31,697)


7%

Equity awards compensation expense


3,967


2,496


59%

Depreciation and Amortization expense


3,293


1,753


88%

Pension service costs


142


175


(19)%

Restructuring related and transformation (gain) costs


9


1,436


(99)%

Non GAAP – Research and Development expenses


(26,616)


(25,837)


3%

Sales and Operations expenses


(88,999)


(79,354)


12%

Equity awards compensation expense


2,568


2,369


8%

Depreciation and Amortization expense


3,609


3,954


(9)%

Pension service costs


40


53


(25)%

Restructuring related and transformation (gain) costs


456


7,367


(94)%

Non GAAP – Sales and Operations expenses


(82,326)


(65,611)


25%

General and Administrative expenses


(33,336)


(33,428)


—%

Equity awards compensation expense


2,955


3,017


(2)%

Depreciation and Amortization expense


610


903


(32)%

Pension service costs


93


110


(15)%

Acquisition-related costs


2,544



NM

Restructuring related and transformation (gain) costs


245


2,833


(91)%

Non GAAP – General and Administrative expenses


(26,889)


(26,565)


1%

Total Operating expenses


(156,362)


(144,479)


8.2%

Equity awards compensation expense


9,490


7,882


20%

Depreciation and Amortization expense


7,512


6,610


14%

Pension service costs


275


338


(19)%

Acquisition-related costs


2,544



NM

Restructuring related and transformation (gain) costs


710


11,636


(94)%

Total Non GAAP Operating expenses (1)


$ (135,831)


$ (118,013)


15%

(1) We define Non-GAAP Operating Expenses as our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, acquisition-related 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 we use to provide our quarterly and annual business outlook to the investment community.

CRITEO S.A.

 Detailed Information on Selected Items

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2022


2021


YoY
Change

Equity awards compensation expense







Research and development


$     3,967


$     2,496


59%

Sales and operations


2,568


2,369


8%

General and administrative


2,955


3,017


(2)%

Total equity awards compensation expense


9,490


7,882


20%








Pension service costs







Research and development


142


175


(19)%

Sales and operations


40


53


(25)%

General and administrative


93


110


(15)%

Total pension service costs


275


338


(19)%








Depreciation and amortization expense







Cost of revenue (data center equipment)


14,632


15,244


(4)%

Research and development


3,293


1,753


88%

Sales and operations


3,609


3,954


(9)%

General and administrative


610


903


(32)%

Total depreciation and amortization expense


22,144


21,854


1%








Acquisition-related costs







General and administrative


2,544



NM

Total acquisition-related costs


2,544



NM








Restructuring related and transformation (gain) costs







Research and development


9


1,436


(99)%

Sales and operations


456


7,367


(94)%

General and administrative


245


2,833


(91)%

Total restructuring related and transformation (gain) costs


$        710


$   11,636


(94)%

CRITEO S.A.

Reconciliation of Adjusted Net Income to Net Income

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




Three Months Ended





March 31,





2022


2021


YoY
Change








Net income


$        21,278


$        23,450


(9)%

Adjustments:







Equity awards compensation expense


9,490


7,882


20%

Amortization of acquisition-related intangible assets


3,708


2,935


26%

Acquisition-related costs


2,544



NM

Restructuring related and transformation (gain) costs


710


11,636


(94)%

Tax impact of the above adjustments (1)


(3,956)


(2,751)


44%

Total net adjustments


12,496


19,702


(37)%

Adjusted net income (2)


$        33,774


$        43,152


(22)%








Weighted average shares outstanding







 – Basic


60,738,299


60,741,674



 – Diluted


63,613,550


64,077,409










Adjusted net income per share







 – Basic


$            0.56


$            0.71


(21)%

 – Diluted


$            0.53


$            0.67


(21)%

(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) We define Adjusted Net Income as our 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 the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income 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 regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income 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. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition-related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our other U.S. GAAP-based financial results, including net income.

CRITEO S.A.

Constant Currency Reconciliation

(U.S. dollars in thousands, unaudited)




Three Months Ended





March 31,





2022


2021


YoY

Change








Revenue as reported


$   510,567


$   541,077


(6)%

Conversion impact U.S. dollar/other currencies


25,595





Revenue at constant currency(1)


536,162


541,077


(1)%








Traffic acquisition costs as reported


(293,650)


(327,667)


(10)%

Conversion impact U.S. dollar/other currencies


(15,308)





Traffic Acquisition Costs at constant currency(1)


(308,958)


(327,667)


(6)%








Contribution ex-TAC as reported(2)


216,917


213,410


2%

Conversion impact U.S. dollar/other currencies


10,287





Contribution ex-TAC at constant currency(2)


227,204


213,410


6%

Contribution ex-TAC(2)/Revenue as reported


42%


39%










Other cost of revenue as reported


(32,893)


(34,712)


(5)%

Conversion impact U.S. dollar/other currencies


(1,554)





Other cost of revenue at constant currency(1)


(34,447)


(34,712)


(1)%








Gross Profit as reported


184,024


178,698


3%

Conversion impact U.S. dollar/other currencies


8,733





Gross Profit at constant currency(1)


192,757


178,698


8%








Adjusted EBITDA(3)


62,825


75,929


(17)%

Conversion impact U.S. dollar/other currencies


3,647





Adjusted EBITDA(3) at constant currency(1)


$     66,472


$     75,929


(12)%

Adjusted EBITDA(3)/Contribution ex-TAC(2)


29%


36%



(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) Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. See the table entitled “Reconciliation of Contribution ex-TAC to Gross Profit” for a reconciliation of Contribution ex-TAC to gross profit.


(3) Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. See the table entitled “Reconciliation of Adjusted EBITDA to Net Income” for a reconciliation of Adjusted EBITDA to net income.

CRITEO S.A.

Information on Share Count

(unaudited)




Three Months Ended



2022


2021

Shares outstanding as at January 1,


60,675,474


60,639,570

Weighted average number of shares issued during the period


62,825


102,104

Basic number of shares – Basic EPS basis


60,738,299


60,741,674

Dilutive effect of share options, warrants, employee warrants – Treasury method


2,875,251


3,335,736

Diluted number of shares – Diluted EPS basis


63,613,550


64,077,410






Shares issued as March 31, before Treasury stocks


65,905,394


66,391,906

Treasury stock as of March 31,


(5,327,644)


(5,597,601)

Shares outstanding as of March 31, after Treasury stocks


60,577,750


60,794,305

Total dilutive effect of share options, warrants, employee warrants


6,361,622


7,458,737

Fully diluted shares as at March 31,


66,939,372


68,253,042

CRITEO S.A.

Supplemental Financial Information and Operating Metrics

(U.S. dollars in thousands except where stated, unaudited)



YoY

Change

QoQ

Change

Q1

2022

Q4

2021

Q3

2021

Q2

2021

Q1

2021

Q4

2020

Q3

2020

Q2

2020

Q1

2020













Clients

5%

(0.7)%

21,597

21,745

21,747

21,332

20,626

21,460

20,565

20,359

20,360













Revenue 

(6)%

(22)%

510,567

653,267

508,580

551,311

541,077

661,282

470,345

437,614

503,376

Americas

(4)%

(32)%

194,847

287,270

204,428

221,227

203,900

312,817

204,618

185,674

191,745

EMEA

(9)%

(17)%

193,954

234,559

188,354

209,303

212,096

232,137

167,800

159,621

190,114

APAC

(3)%

(7)%

121,766

131,438

115,798

120,781

125,081

116,328

97,927

92,319

121,517













Revenue

(6)%

(22)%

510,567

653,267

508,580

551,311

541,077

661,282

470,345

437,614

503,376

Marketing Solutions

(4)%

(20)%

463,888

577,962

458,622

487,465

483,190

543,262

412,126

381,270

469,773

Retail Media (2)

(19)%

(38)%

46,679

75,305

49,958

63,846

57,887

118,020

58,219

56,344

33,603













TAC

(10)%

(22)%

(293,650)

(377,076)

(297,619)

(331,078)

(327,667)

(408,108)

(284,401)

(257,698)

(297,364)

Marketing Solutions

(4)%

(21)%

(277,800)

(349,584)

(276,498)

(294,132)

(290,873)

(324,017)

(243,616)

(218,990)

(273,057)

Retail Media (2)

(57)%

(42)%

(15,850)

(27,492)

(21,121)

(36,946)

(36,794)

(84,091)

(40,785)

(38,708)

(24,307)













Contribution ex-TAC (1)

2%

(21)%

216,917

276,191

210,961

220,233

213,410

253,174

185,944

179,916

206,012

Marketing Solutions

(3)%

(19)%

186,088

228,378

182,124

193,333

192,317

219,245

168,510

162,280

196,716

Retail Media (2)

46%

(36)%

30,829

47,813

28,837

26,900

21,093

33,929

17,434

17,636

9,296













Cash flow from
operating activities 

(3)%

14%

74,930

66,012

51,179

26,360

77,362

44,080

51,156

33,377

56,743













Capital expenditures

(60)%

(45)%

5,564

10,145

15,957

13,128

13,780

22,302

12,898

18,532

11,737













Capital
expenditures/Revenue

(1)ppt

(1)ppt

1%

2%

3%

2%

3%

3%

3%

4%

2%













Net cash position

13%

14%

589,343

515,527

497,458

489,521

520,060

488,011

626,744

578,181

436,506













Headcount

16%

6%

2,939

2,781

2,658

2,572

2,532

2,594

2,636

2,685

2,701













Days Sales Outstanding
(days – end of month)

10 days

(9) days

74

65

70

66

64

56

62

61

62


(1) We define Contribution ex-TAC as 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 cost 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. Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Contribution ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Contribution ex-TAC alongside our other U.S. GAAP financial result measures. 


(2) Criteo operates as two reportable segments as of December 31, 2021. The table above presents the operating results of our Marketing Solutions and Retail Media segments.  A strategic building block of Criteo’s Commerce Media Platform, the Retail Media Platform, introduced in June 2020, and reported under the retail media segment, 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 are accounted for on a gross basis. We expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform by the second half of 2022. As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin is expected to increase. Contribution ex-TAC is not impacted by this transition. 

SOURCE Criteo S.A.

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