Image source: Criteo SA.

Shares of Criteo SA (ADR) (NASDAQ:CRTO) dropped more on Wednesday after the advertising-retargeting specialist announced second-quarter 2015 results. But similar to last quarter's post-earnings plunge, the market's pessimism seems strange considering Criteo's results were reasonably solid relative to expectations.

Criteo results: The raw numbers


Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Revenue (ex-TAC*)

$166.2 million

$122.1 million


Net income available to shareholders

$12.2 million

$3.5 million


Net income per share (diluted)




ex-TAC = excluding traffic-acquisition costs; YOY = year over year. Data source: Criteo S.A. 

What happened with Criteo this quarter?

  • Revenue ex-TAC grew 35% year over year on a constant currency basis.
  • Adjusted net income increased 106% year over year, to $21.9 million, or $0.33 per diluted share.
  • Adjusted EBITDA rose 65.6% (61% at constant currency), to $39.2 million.
  • Once again, these results were above expectations, as Criteo's guidance called for lower revenue ex-TAC between $158 million and $162 million, with adjusted EBITDA between $32 million and $36 million.
  • Cash flow from operations increased 61% year over year, to $19 million, and free cash flow was negative $3 million, narrowed from negative $6 million in last year's second quarter.
  • Ended the quarter with cash and equivalents of $377 million, up from $354 million at the end of 2015.
  • Criteo added more than 900 net clients during the quarter -- a new company record -- leaving Criteo's total client base approaching 12,000.
  • Mobile ads continued to generate more than 50% of revenue ex-TAC during the quarter.
  • Went live on Instagram in June, providing advertisers a new source of social inventory.
  • Users matched through Criteo's Universal Match solution generated 47% of revenue ex-TAC during the quarter.
  • Existing clients from last year's second quarter generated 14% more revenue ex-TAC at constant currency in the second quarter of 2016, again demonstrating Criteo's ability to expand revenue from within its client base.
  • On a geographic basis:
    • Americas region revenue ex-TAC rose 36% year over year (38% at constant currency) to $60 million, or 36% of Criteo's total.
    • Europe, Middle East, and Africa revenue ex-TAC increased 25% (with no impact from currencies) to $67 million, or 40% of the total.
    • Asia-Pacific revenue ex-TAC increased 61% (50% at constant currency) to $39 million, or 24% of Criteo's total.

What management had to say 

Criteo CEO Eric Eichmann stated, "Our performance marketing platform best positions us to offer advertisers the relevant, accountable and seamless marketing across all environments they are demanding."

CFO Benoit Foulland added, "We deliver fast growth and expanding profitability. Our ability to deliver operating leverage while investing in innovation demonstrates the scalability of our model."

Looking forward 

For the current quarter, Criteo anticipates revenue ex-TAC between $170 million and $174 million, with adjusted EBITDA between $42 million and $46 million. And finally, for the full year 2016, Criteo reiterated its prior guidance for revenue ex-TAC growth between 30% and 34% at constant currency, with adjusted EBITDA margin as a percentage of revenue improving by between 60 basis points and 100 basis points.

As usual, this was another strong showing from Criteo as it accelerates growth of its client base and strives to make its industry ever more efficient. To be fair, perhaps some investors are disappointed the company yet again reiterated guidance for the second straight quarter despite its relative outperformance -- even if the gravity of that outperformance was modest. But as long as Criteo continues to sustain its momentum in this way going forward, and with shares up just 6% year to date as of this writing, I think investors should be happy with the company's position today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.