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Criteo Remains on Track in a "Challenging" Quarter

By Steve Symington - Updated Apr 2, 2020 at 1:35PM

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The ad-retargeting specialist's generous new stock-repurchase authorization certainly didn't hurt.

Criteo ( CRTO -0.54% ) announced slightly better-than-expected second-quarter 2019 results early Wednesday, delivering modest top-line growth at constant currencies and adding its highest number of net new clients since this time last year.

The ad-retargeting leader's first-half performance left management comfortable enough to not only reiterate its full-year outlook, but also to authorize a generous new share-repurchase plan.

With shares climbing as much as 10% in today's early trading before largely giving up those gains late in the afternoon, let's left-click our way a little deeper into Criteo's progress during what management has described as another challenging transition year.

Dark blue and black stock-market charts indicating gains.

IMAGE SOURCE: GETTY IMAGES.

Criteo results: The raw numbers

Metric

Q2 2019

Q2 2018

Year-Over-Year Growth

Revenue (ex-TAC)

$223.9 million

$230.2 million

(2.7%)

Net income available to shareholders

$10.8 million

$13.7 million

(21.1%)

Net income per diluted share

$0.16

$0.20

(20%)

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

What happened with Criteo this quarter?

  • Revenue ex-TAC climbed 0.3% at constant currency and arrived near the high end of guidance provided in late April for between $221 million and $224 million. 
  • Adjusted EBITDA fell 18% (down 16% at constant currency) to $56 million, above guidance for between $50 million and $53 million.
  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and restructuring costs, Criteo's earnings fell 13% to $30.7 million and declined 11% on a per-share basis to $0.47.
  • Criteo added 360 net new clients this quarter, bringing its total to 19,733, with client retention remaining close to 90% for all products.
  • Revenue ex-TAC from mobile apps grew 21% year over year.
  • Criteo's header-bidding technology now connects to more than 3,800 web publishers and 200 app developers.
  • Criteo generated $53 million in cash from operations, and free cash flow of $20 million.
  • Criteo's board of directors also authorized a new $80 million share repurchase program today, good through May 15, 2020, as a demonstration of the company's "confidence in its business and its ability to generate free cash flow."

What management had to say

"In a challenging landscape, we achieved important milestones in our transformation in Q2," stated Criteo CEO JB Rudelle. "I feel good about our strategic direction and our ability to deliver on our plans."

"We maintain our 2019 outlook for both top-line growth and profitability margin, and are strongly committed to delivering healthy profitability over time," elaborated Criteo CFO Benoit Fouilland.

Looking forward

For the third quarter of 2019, Criteo expects revenue ex-TAC of $219 million to $223 million, or a range of down 2% to flat from the same year-ago period at constant currency. That should translate to quarterly adjusted EBITDA of $57 million to $61 million.

So for the full fiscal-year 2019, Criteo reiterated its targets for revenue ex-TAC growth of between 0% and 2% at constant currency, and for adjusted EBITDA margin to be approximately 30% of revenue ex-TAC.

Given this encouraging reiteration, and with shares still down more than 20% so far in 2019, it's no surprise to see Criteo stock staging a modest rebound 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.

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