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Criteo S.A. Delivers a Much-Needed Quarterly Beat

By Steve Symington - Feb 14, 2018 at 8:33PM

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You can exhale now, Criteo investors. The ad re-targeting leader's quarter wasn't nearly as bad as feared.

Criteo SA (ADR) (CRTO -1.03%) released stronger-than-expected fourth-quarter 2017 results on Wednesday morning. The advertising retargeting specialist highlighted solid growth led by momentum in the U.S., muting concerns over the negative impact of new intelligent tracking prevention (ITP) technology from Apple on its longer-term growth.

With shares of Criteo up nearly 30% on Wednesday in response, let's take a closer look at what it accomplished over the past few months.

Businessman drawing a line indicating stock volatility and gains


Criteo results: The raw numbers


Q4 2017

Q4 2016

Year-Over-Year Growth

Revenue (ex-TAC*)

$276.9 million

$224.9 million


Net income available to shareholders

$53.0 million

$39.4 million


Net income per share (diluted)





What happened with Criteo this quarter?

  • Revenue ex-TAC grew 20% at constant currency, driven by continued innovation, improved access to publisher inventory, and new clients.
  • Criteo added 820 net clients during the quarter, ending with over 18,000 and maintaining a client retention rate of nearly 90%.
  • On an adjusted (non-GAAP) basis -- which excludes items like stock-based compensation, acquisition costs, and restructuring expenses -- net income increased 47% to $82 million, or $1.21 per share.
  • Adjusted EBITDA increased 45% (36% at constant currency) to $120 million.
  • By comparison, when Criteo tempered its guidance in December because Apple's latest ITP functionality prevented it from reaching Safari browser users, it told investors to expect lower revenue ex-TAC of between $260 million and $263 million, and lower adjusted EBITDA of between $106 million and $109 million.
  • Quarterly cash flow from operations and free cash flow each grew 10% year over year, to $79 million and $54 million, respectively.
  • On a geographic basis:
    • Americas revenue ex-TAC grew 22% to $121.3 million.
    • Europe, Middle East, and Africa (EMEA) revenue ex-TAC grew 24% (16% at constant currency) to $100.4 million.
    • Asia-Pacific (APAC) revenue ex-TAC increased 23% (25% at constant currency) to $55.3 million.
  • Criteo Direct Bidder is now connected to 1,500 large publishers worldwide, up from 950 last quarter and 450 in Q2.
  • After launching beta versions of Criteo Audience Match and Criteo Customer Acquisition in October, the two products generated revenue ex-TAC of $3 million this quarter.

What management had to say

"Our business is seeing strong momentum, in particular in the U.S.," stated Criteo CEO Eric Eichmann. "This good traction, combined with the growing adoption of our new products, positions us well for 2018 and beyond."

CFO Benoit Fouilland added, "We delivered another year of strong growth, increasing profitability and cash flow. Our powerful financial model and effective investment approach make me confident for the future."

Looking forward

Better yet, for the first quarter of 2018, Criteo expects revenue ex-TAC to be between $230 million and $235 million -- well ahead of investors' expectations for $207.5 million -- with adjusted EBITDA between $60 million and $65 million. And for the full year, Criteo sees revenue ex-TAC climbing between 3% and 8% at constant currency, compared with consensus estimates for a reported year-over-year decline of 2.1%.

During the subsequent conference call, Eichmann added that when Criteo reduced its guidance in December, the company was providing "the worst-case scenario of the full potential impact of the limitations of the Safari environment." As it turns out, that worst-case scenario didn't materialize, partly because Criteo's IOS user coverage includes apps and environments where Apple's ITP isn't an issue, such as Google's Chrome browser, Google search, and Facebook.

Even then, as Criteo management also pointed out in December, we can be sure that Criteo continues to develop alternative longer-term solutions to serve the best interests of Safari users, publishers, and advertisers.

In the end, this strong quarter serves as a breath of fresh air for worried Criteo investors. Coupled with its better-than-expected outlook for 2018, it's hard to blame the market for so aggressively bidding up Criteo stock today.

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Criteo S.A. Stock Quote
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