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Criteo Hones Its Focus With a Strong Start to 2018

By Steve Symington – May 3, 2018 at 3:00AM

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The ad-retargeting leader kicked off the year with a solid first-quarter report. Here's what investors need to know.

Criteo SA (ADR) (CRTO 3.13%) released another better-than-expected quarter on Wednesday, detailing healthy strategic customer growth and the continued adoption of the advertising retargeting specialist's newest products.

The stock moved modestly higher on the news -- though its climb couldn't rival the nearly 30% single-day pop Criteo shareholders enjoyed after last quarter's stellar report in February. Still, let's dig deeper into what Criteo had to say, as well as what investors should look for in the coming months.

3D Criteo logo in orange.

Image source: Criteo.

Criteo results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Growth

Revenue (ex-TAC*)

$240.4 million

$210.0 million


Net income available to shareholders

$19.8 million

$12.4 million


Net income per share (diluted)




Data source: Criteo *ex-TAC = Excluding traffic acquisition costs. 

What happened with Criteo this quarter?

  • Revenue ex-TAC climbed 8% at constant currency, driven by product innovation, a larger product portfolio, improved access to publisher inventory, and new clients.
  • Adjusted EBITDA increased 38% to $77.9 million.
  • These results compared favorably to Criteo's latest guidance, which called for revenue ex-TAC of between $230 million and $235 million, and adjusted EBITDA between $60 million and $65 million.
  • On an adjusted (non-GAAP) basis -- which excludes items like stock-based compensation and restructuring expenses -- net income grew more than 30% to $40.5 million, or $0.60 per diluted share.
  • Criteo added 410 net clients during the quarter -- a lower increase than we're used to seeing from Criteo (in Q1 it added 820 clients) -- to end the quarter with over 18,500 clients.
    • During the subsequent conference call, management explained that the deceleration in client growth was the result of a conscious decision to focus more on large mid-market clients, while simultaneously developing a fully scalable self-service platform to manage smaller mid-market clients more efficiently.
  • Client retention remained near 90% across all products.
  • Criteo Direct Bidder is now connected to 2,000 large publishers, up from 1,500 last quarter.
  • Criteo now boasts roughly 1.4 billion individual users in its worldwide Identity Graph, making it one of the largest ID graphs (more on that below) in the world.

What management had to say

"I am pleased with our execution and results in the first quarter," stated Criteo CEO JB Rudelle, "which track quite well with our upcoming priorities for the year."

"We delivered another quarter of healthy growth, increased profitability and cash flow," elaborated Criteo CFO, Benoit Fouilland. "These results once again highlight the strengths and scalability of our business model."

During the call, management also noted that Criteo was able to achieve these results despite "some user coverage limitations." Take Apple's new intelligent tracking prevention (ITP) functionality, for example, which limits Criteo's ability to use technologies like browser cookies to more effectively reach users with appropriate ads.

That's where Criteo's enormous Identity Graph comes in with its 1.4 billion individual users. Rudelle explained:

This graph creates a unique and anonymized identifier across devices, browsers, apps, and the offline world. [...] This massive scale allows us to offer our clients a comprehensive coverage of consumers globally. We are also making promising progress in developing technologies to improve our user coverage in all other environments.

Looking forward

For the second quarter of 2018 -- and noting that Q2 is generally Criteo's slowest quarter due to regular seasonality -- Criteo anticipates revenue ex-TAC of between $226 million and $230 million, up from $219.8 million in the same year-ago period, with adjusted EBITDA between $53 million and $57 million. 

As such, Criteo reiterated its previous guidance for full fiscal-year revenue growth of between 3% and 8% at constant currency. During the call, Fouilland added that this guidance assumes "some level of cautiousness given the various changes happening in the industry."

With that in mind, Criteo understandably opted not to boost its guidance even after its strong start to the year. But make no mistake, this was as solid a quarter as investors could have hoped for from Criteo as it navigates those industry changes. And it's no surprise to see the stock climbing in response.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Criteo. The Motley Fool has a disclosure policy.

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