Criteo's (NASDAQ:CRTO) third quarter may have technically been mixed relative to the market's expectations, but the ad-retargeting specialist continued to rightly tout progress in its ongoing transformation to a multiproduct model. Even so, it certainly didn't help that Criteo followed by naming a new CEO today and also effectively lowering its full-year outlook, citing market uncertainty and softening trends with some larger customers.

With shares down around 16% as the market absorbed the news, let's take a closer look at how it fared over the past few months:

Metric

Q3 2019

Q3 2018

Growth

Revenue (ex-TAC)

$220.7 million

$223.5 million

(1.3%)

Net income available to shareholders

$18.8 million

$17.1 million

9.9%

Net income per diluted share

$0.28

$0.25

12%

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

A "solid" quarter for new solutions

For perspective, Criteo's revenue ex-TAC would have been roughly flat from the same year-ago period had it not been for the elevated impact of foreign-currency exchange. Viewed through that lens, revenue ex-TAC technically arrived near the high end of guidance provided three months ago for revenue ex-TAC to be down 2% to flat at constant currency.

3D Criteo text logo.

IMAGE SOURCE: CRITEO.

Trending toward the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) arrived at $64 million, also above guidance for a range of $57 million to $61 million. And as for earnings, note the above results include the impact of unusual items like stock-based compensation, acquisition expenses, and restructuring costs. Excluding those items, Criteo's (adjusted) net income declined 2% year over year, to $35 million, or $0.54 per share -- well above the $0.49 per share most analysts were modeling.

Criteo also added 238 net new clients during the quarter, with client retention continuing to hover around 90% for all products. And revenue ex-TAC from so-called "new solutions" outside of retargeting grew an impressive 57% year over year, to represent around 11% of Criteo's total. Meanwhile, Criteo's header-bidding technology now connects to more than 4,000 web publishers (up from 3,800 last quarter) and over 200 app developers.

"Our solid Q3 results show continued progress on our transformation," stated Criteo CFO Benoit Fouilland. "We are committed to making our revenue more resilient and sustainable, and to drive efficiency across the company."

Uncertainty ahead

Company founder and CEO JB Rudelle lauded reaching "key milestones" in Criteo's transformation, adding, "With a clear direction and augmented leadership, I am confident Criteo will succeed as the leading tech platform for the open Internet." To that end, Criteo took the opportunity to announce that Rudelle will be replaced as CEO by former Nielsen executive Megan Clarken, effective November 25, 2019. However, Rudelle will remain chairman of Criteo's board of directors.

Criteo elaborated in today's press release that Clarken's "deep know-how in product and partnerships, combined with a proven track record of driving complex company transformations, will be very valuable to the company."

But if Criteo's forward guidance is any indication, Clarken's leadership will be put to the test right away: For the fourth quarter, Criteo anticipates revenue ex-TAC to decline in the range of 5% to 3% year over year at constant currency, or to between $255 million and $261 million, which should translate to adjusted EBITDA of between $99 million and $105 million. To blame, Criteo says, is a combination of "the softer trend in our business with large customers, in particular in the mobile app arena," as well as uncertainty surrounding how that trend may affect Criteo's momentum in the crucial holiday season.

As such, Criteo believes revenue ex-TAC for the full fiscal year will be roughly flat at constant currency, near the low end of its previous guidance for the metric to be flat to up 2%. Criteo also reiterated its outlook for adjusted 2019 EBITDA margin to be roughly 30% of revenue ex-TAC.

In the end, our growth-hungry market is understandably lamenting the uncertainty causing Criteo's impending underperformance, and Criteo's stock price is responding in kind.