Criteo Falls After Yet Another Great Quarter

The advertising retargeting company beat expectations, but followed with a light outlook. Here's what investors need to know.

Steve Symington
Steve Symington
Feb 22, 2017 at 4:21PM
Technology and Telecom

Criteo SA (ADR) (NASDAQ:CRTO) announced stronger-than-expected fourth-quarter 2016 results Wednesday morning, highlighted by record new-client additions. But shares of the advertising retargeting specialist declined modestly as the market digested what appeared to be underwhelming guidance.

Let's have a closer look, then, at how Criteo capped the year, as well as what investors should expect going forward.

Criteo logo.


Criteo results: The raw numbers


Q4 2016 Actuals

Q4 2015 Actuals

Year-Over-Year Growth

Revenue (ex-TAC*)

$224.9 million

$160.0 million


Net income available to shareholders

$39.4 million

$37.9 million


Net income per share (diluted)




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

What happened with Criteo this quarter?

  • Criteo's top line was driven by strong revenue ex-TAC across all regions.
  • On November 9, 2016, Criteo closed on its acquisition of HookLogic, which specializes in connecting e-commerce retailers with consumer brand manufacturers. Criteo now offers HookLogic's products under the "Criteo Sponsored Products" name.
  • Excluding Criteo Sponsored Products, quarterly net income decreased 2%, to $38 million.
  • On an adjusted basis, which excludes items like stock-based compensation and acquisition costs, net income increased 18% year over year, to $55 million, or $0.84 per diluted share.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 55% year over year, to $83 million. Excluding Criteo Sponsored Products, fourth-quarter adjusted EBITDA increased 46% -- 45% at constant currency -- to $78 million.
  • By comparison, Criteo's guidance called for lower revenue ex-TAC between $207 million and $210 million, and lower adjusted EBITDA between $72 million and $75 million.
  • Quarterly cash flow from operations grew 7%, to $72 million. Excluding Criteo Sponsored Products, operating cash flow grew 15%, to $77 million.
  • Free cash flow increased 2%, to $49 million. Excluding Criteo Sponsored Products, free cash flow grew 15%, to $55 million.
  • Ended the year with cash and equivalents of $270 million, down from $354 million at the end of 2015. The decrease stemmed from Criteo paying $175 million in cash for its HookLogic acquisition.
  • Added nearly 1,600 net clients during the quarter, setting a new company record and bringing Criteo's client base to more than 14,400.
  • Nearly 63% of total revenue ex-TAC came from mobile ads during the quarter (excluding Criteo Sponsored Products).
  • Users matched through Criteo's Universal Match technology generated 60% of revenue ex-TAC, up from 52% last quarter.
  • Criteo's partnership with Facebook has so far driven over 16% more sales for Criteo clients, on average.
  • Criteo's ad-blocking solution has been adopted by 400 publishers, driving revenue ex-TAC growth of 70% sequentially from last quarter.
  • On a geographic basis:
    • Americas revenue ex-TAC increased 52% year over year -- 50% at constant currency -- to $99 million, or 44% of total revenue ex-TAC.
    • Europe, Middle East, and Africa revenue ex-TAC grew 30% -- 36% at constant currency -- to $81 million, representing 36% of total revenue ex-TAC.
    • Asia-Pacific revenue ex-TAC grew 38% -- 29% at constant currency -- to $45 million, for 20% of total revenue ex-TAC.

What management had to say

Criteo CEO Eric Eichmann stated: "We made great progress in 2016. We bolstered our performance marketing platform for commerce and brands and opened exciting new avenues of growth."

"We continued to deliver rapid growth, expanding profitability and strong cash flow," added Criteo CFO Benoit Fouilland. "This attractive combination demonstrates the unique attributes of our model."

Looking forward

For the first quarter of 2017, Criteo anticipates revenue ex-TAC between $200 million and $205 million, which should translate to adjusted EBITDA between $47 million and $52 million. For perspective, note that, at the foreign exchange rates provided with Criteo's fourth-quarter 2016 guidance, its first-quarter 2017 guidance would equate to revenue ex-TAC between $208 million and $213 million, and adjusted EBITDA between $51 million and $56 million. Even so -- and though we don't typically pay much attention to Wall Street's quarterly demands -- analysts' models were more optimistic, with consensus estimates calling for first-quarter revenue ex-TAC of $213.2 million.

Finally, for the full fiscal year of 2017, Criteo expects revenue ex-TAC growth to be between 27% and 31% at constant currency. Full-year 2017 adjusted EBITDA margin is expected to be flat to up 50 basis points as a percentage of revenue ex-TAC relative to Criteo's 31% for the same metric in 2016. Here again, Wall Street was looking for even more robust year-over-year revenue ex-TAC growth of 34% in 2017.

Given Criteo's propensity for crushing expectations each quarter, we shouldn't rule out the possibility that its outlook will prove to be conservative when all is said and done. But with shares down around 2% -- and still up around 22% over the past year -- as of this writing, it's clear this report left the market in want.