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Criteo Makes Progress With Its Multiproduct Transition

By Steve Symington – Oct 31, 2018 at 8:21PM

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The ad-retargeting leader delivered as promised in Q3 and reaffirmed its full-year outlook. Here's what investors need to know.

Criteo SA (ADR) (CRTO) announced solid third-quarter 2018 results on Wednesday morning, detailing an expected revenue decline, an intriguing acquisition, and a big new share-repurchase authorization.

With shares up 9.2% today in response, let's take a closer look at what drove Criteo to start the second half, and what we should be watching in the coming months.

Blurred man in suit in background pointing to a bar/line chart indicating gains.

IMAGE SOURCE: GETTY IMAGES.

Criteo results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Growth

Revenue (ex-TAC)

$528.9 million

$564 million

(6.2%)

Net income available to shareholders

$17.1 million

$19.8 million

(15.3%)

Net income per diluted share

$0.25

$0.29

(13.8%)

DATA SOURCE: CRITEO. EX-TAC = EXCLUDING TRAFFIC ACQUISITION COSTS. 

What happened with Criteo this quarter?

  • Revenue fell 4% at constant currency, in line with guidance provided in August for a 5% to 3% decline.
  • Revenue ex-TAC declined 5% (2% at constant currency) to $223 million.
  • Adjusted EBITDA declined 12% (11% at constant currency) to $70 million, well above guidance for between $61 million and $66 million. 
  • On an adjusted (non-GAAP) basis -- which means excluding items like stock-based compensation, acquisition costs, and restructuring expenses -- net income fell 18% to $36 million, or $0.53 per share. 
  • Criteo's client count increased 11% year over year to over 19,000, with client retention remaining near 90% for full-funnel products.
  • Revenue ex-TAC from non-retargeting products -- including Criteo Customer Acquisition, Audience Match, Sponsored Products, and Storetail -- increased 82% at constant currency, representing 7% of total sales (up from 6% last quarter).
  • Criteo Direct Bidder is now connected to over 2,600 large publishers, up from 2,300 last quarter.
  • Today Criteo also announced it has acquired mobile app install solution company Manage, expanding its client base to gaming and other app-first areas like food delivery and ride-sharing.
  • Criteo's board authorized an $80 million share repurchase program valid through 2019 -- a move it says demonstrates "confidence in its ability to achieve its vision over the medium-term and to return to growth while continuing to generate healthy free cash flow."

What management had to say

"Our clients continue to place great value in our performance, scale and neutrality," stated Criteo CEO JB Rudelle. "We are building on this trust to expand our client relationships with new products and solutions."

"We are on track with our transition to a multi-product company and the realignment of our sales organization," added CFO Benoit Fouilland. "This transformation will help bring even more value to our customers."

Looking forward

For the fourth quarter of 2018, Criteo sees revenue ex-TAC of between $256 million and $262 million, or a constant-currency decline of 6% to 4%. Criteo also called for adjusted EBITDA in Q4 of between $86 million and $92 million.

As such, Criteo reaffirmed its full-year outlook for revenue ex-TAC to be flat, plus or minus 1% at constant currency. It also reiterated its goal for adjusted EBITDA margin to be between 30% and 32% of total revenue ex-TAC.

In the end, there was little not to like about this quarterly report from Criteo. Given today's big pop from near its 52-week lows, it seems evident the market agrees.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Criteo. The Motley Fool has a disclosure policy.

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