Criteo S.A. (Nasdaq:CRTO), the performance advertising technology company, announced its financial results for the second quarter ended June 30, 2014.
- Revenue in the second quarter 2014 increased 66.3% (or 71.5% at constant currency) to €165.3 million, compared with €99.4 million in the second quarter 2013.
- Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, in the second quarter 2014 grew 67.4% (or 72.1% at constant currency) to €67.0 million, or 40.5% of revenue, compared with €40.0 million, or 40.3% of revenue, in the second quarter 2013.
- Net income in the second quarter 2014 increased by €8.0 million to €2.4 million, compared with a net loss of €5.6 million in the second quarter 2013.
- Adjusted EBITDA for the second quarter 2014 was €13.2 million, an increase of €12.6 million (or €12.6 million at constant currency), compared with €0.7 million in the second quarter 2013.
- Cash flow from operating activities in the second quarter 2014 increased 170.0% to €11.2 million, compared with €4.1 million in the second quarter 2013.
- Free Cash Flow for the second quarter 2014 was €0.7 million, an increase of €3.2 million compared with a negative €2.5 million free cash flow in the second quarter 2013.
Variations at constant currency exclude the impact of foreign currency fluctuations and are computed by restating 2014 figures with the 2013 average exchange rates.
“We delivered another record quarter exceeding our expectations, driven by focused execution across the business in all regions” said JB Rudelle, Criteo’s co-founder and CEO. “We are very pleased by the success of our significant technology enhancements and the broadening of our client base across geographies.”
- We rolled-out the new Criteo Engine to approximately 60% of our client base in the quarter, delivering a significant increase in post-click sales for those clients.
- With our complete mobile solution on all leading browsers, we showed personalized mobile ads to 69% of our client base inthe second quarter2014.
- Criteo’s year-over-year growth at constant currency in the Americas accelerated from 66% in the first quarter to 78% in the second quarter, driven by strong growth in the US.
- Total number of clients grew by 564 in the second quarter to 6,131, representing a 43% year-over-year growth, including strong acceleration in the mid-market segment.
- New client additions in the second quarter 2014 included:
o In the Americas: Orvis, PartyCity
o In EMEA: Abritel (Homeaway group), ING, PayPal, Samsung, VoyageSNCF.com
o In Asia-Pacific: AB Road, music.jp
Revenue ex-TAC grew 67.4% in the second quarter 2014, or 72.1% at constant currency, to €67.0 million, compared with €40.0 million in the second quarter 2013. This year-over-year performance was primarily driven by the broad-based growth of operations across our geographies, the expansion of our client base, particularly in the midmarket segment, and the continued roll-out of our product set to a greater share of clients across all markets.
- In the Americas, revenue ex-TAC in the second quarter 2014 grew by 67.2% over the comparable quarter in 2013, or 77.7% at constant currency, to €18.6 million. The Americas represented approximately 28% of our global revenue ex-TAC in the second quarter 2014.
- Revenue ex-TAC in EMEA in the second quarter 2014 increased by 61.0% over the same period last year, or 60.1% at constant currency, to €35.1 million. EMEA represented approximately 52% of our global revenue ex-TAC in the second quarter 2014.
- Revenue ex-TAC in Asia-Pacific in the second quarter 2014 increased by 87.6% over the comparable quarter in 2013, or 100.5% at constant currency, to €13.3 million. Asia-Pacific accounted for approximately 20% of our global revenue ex-TAC in the second quarter 2014.
Revenue ex-TAC margin as a percentage of revenue in the second quarter 2014 was at 40.5%, representing a 0.2 percentage point increase compared with 40.3% in the second quarter of 2013.
Adjusted EBITDA and Operating Expenses
Adjusted EBITDA for the second quarter 2014 was €13.2 million, an increase of €12.6 million, or €12.6 million at constant currency, compared with €0.7 million in the second quarter 2013. This year-over-year increase in Adjusted EBITDA is primarily the result of the strong revenue ex-TAC performance in the quarter, as well as the favorable impact of some exceptional items, primarily an increase in R&D tax credit to be recognized in 2014, which were partially offset by our continued strong investments in the quarter.
Operating expenses in the second quarter of 2014 increased by 43.6% to €53.7 million, compared with the second quarter 2013. Excluding the impact of share-based compensation, pension costs, depreciation and amortization and acquisition-related deferred price consideration, which, taking all exclusions together, we reference as operating expenses on a “Non-IFRS basis”, our operating expenses in the second quarter 2014 were €49.1 million, an increase of 38.6% compared with the second quarter of 2013. This increase in operating expenses over the period was principally related to headcount growth across our three main functions – Research & Development, Sales & Operations and General & Administrative – as we continued to scale the whole Criteo organization to support anticipated future growth. In particular, our headcount in Sales & Operations increased by 60% year-over-year in an effort to capture market opportunity in our geographies, especially in our mid-market organization. We intend to continue to invest significantly through the remainder of the year, as well as accelerate our investments in Research & Development and Sales & Operations, as we progress toward our full potential.
Net Income and Adjusted Net Income
Net income for the second quarter 2014 was €2.4 million, representing a €8.0 million increase compared with a net loss of €5.6 million in the second quarter 2013. Net income available to shareholders of Criteo S.A. for the second quarter 2014 was €2.2 million, or €0.04 per diluted share, compared with a net loss of €5.6 million, or €0.11 per diluted share, in the second quarter 2013.
Adjusted Net Income for the second quarter 2014, or our net income adjusted to eliminate the impact of share-based compensation expense, amortization of acquisition-related intangible assets and acquisition-related deferred price consideration and the tax impact of these adjustments, was €5.5 million, representing a €10.0 million increase compared with an Adjusted Net Loss of €4.4 million in the second quarter 2013.
Cash Flow and Cash Position
- Our cash flow generated by operating activities in the second quarter 2014 increased by 170.0% to €11.2 million, compared with €4.1 million in the second quarter 2013.
- Our free cash flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment, net of proceeds from disposal, was €0.7 million in the second quarter 2014, an increase of €3.2 million, compared with a negative €2.5 million free cash flow in the second quarter 2013.
- Total cash, cash equivalents and short-term investments were at €242.9 million as of June 30, 2014. This represented an increase of €8.6 million compared with December 31, 2013, primarily the result of €8.4 million free cash flow generation over the period and proceeds from capital increases of €18.8 million, including the net proceeds of €16.4 million from the primary portion of the follow-on equity offering on the NASDAQ Global Market in March 2014, which were offset by the €18.8 million cash consideration for the acquisitions of Tedemis S.A. and AdQuantic SAS, in February 2014 and April 2014, respectively.
The following forward-looking statements reflect Criteo’s expectations as of August 5, 2014.
Third Quarter 2014 Guidance:
- Revenue ex-TAC for the third quarter ending September 30, 2014 is expected to be between €71 million and €73 million.
- Adjusted EBITDA for the third quarter ending September 30, 2014 is expected to be between €10.5 million and €12.5 million.
Fiscal Year 2014 Guidance:
- The Company is increasing its Revenue ex-TAC outlook for the fiscal year ending December 31, 2014, now expected to be between €280 million and €284 million.
- The Company is increasing its Adjusted EBITDA outlook for the fiscal year ending December 31, 2014, now expected to be between €55.5 million and €59.5 million.
The above guidance assumes no additional acquisitions are completed during the quarter ending September 30, 2014 or the fiscal year ending December 31, 2014.
Non-IFRS Financial Measures
This press release and its attachments include the following financial measures defined as non-IFRS financial measures by the U.S. Securities and Exchange Commission (SEC): Revenue ex-TAC, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Non-IFRS Operating Expenses and Revenue ex-TAC margin. These measures are not calculated in accordance with IFRS.
Revenue ex-TAC is our revenue excluding traffic acquisition costs (TAC) generated over the applicable measurement period. Revenue ex-TAC is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC provides useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted EBITDA is our income (loss) from operations before interest, taxes, depreciation and amortization, adjusted to eliminate the impact of share-based compensation expense, pension service costs and acquisition-related deferred price consideration. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the elimination of non-cash compensation expense, pension costs and acquisition-related deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.
Adjusted Net Income is our net income adjusted to eliminate the impact of share-based compensation expense, amortization of acquisition-related intangible assets and acquisition-related deferred price consideration, and the tax impact of these adjustments. Adjusted Net Income is not a measure calculated in accordance with IFRS. In particular, we believe that the elimination of share-based compensation expense, amortization of acquisition-related intangible assets and acquisition-related deferred price consideration and the tax impact of these adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Please refer to supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to revenue, Adjusted EBITDA to net income and Adjusted Net Income to net income, the most comparable IFRS measurements. Our use of non-IFRS financial measures has limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.
With respect to our expectations under “Business Outlook” above, reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding IFRS measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-IFRS measures; in particular, the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future IFRS financial results.
These measures may be different than non-IFRS financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. Explanations of the Company’s non-IFRS financial measures, and reconciliations of these financial measures to the IFRS financial measures the Company considers most comparable, are included in the accompanying tables below.
ECB launches small climate-change unit to lead Lagarde’s green push
FRANKFURT (Reuters) – The European Central Bank is setting up a small team dedicated to climate change to spearhead its efforts to help the transition to a greener economy in the euro zone, ECB President Christine Lagarde said on Monday.
Lagarde has made the environment a priority since taking the helm at the ECB, taking a number of steps to include climate considerations in the central bank’s work as the euro zone’s banking watchdog and main financial institution.
She is now creating a team of around 10 ECB employees, reporting directly to her, to set the central bank’s agenda on climate-related topics.
“The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves,” Lagarde said in a speech.
She said that climate change belonged in the ECB’s remit as it could affect inflation and obstruct the flow of credit to the economy.
The ECB said earlier on Monday it would invest some of its own funds, which total 20.8 billion euros ($25.3 billion) and include capital paid in by euro zone countries, reserves and provisions, in a green bond fund run by the Bank for International Settlement.
More significantly, ECB policymakers are also debating what role climate considerations should play in the institution’s multi-trillion euro bond-buying programme.
So far the ECB has bought corporate bonds based on their outstanding amounts but Lagarde has said the bank might have to consider a more active approach to correct the market’s failure to price in climate risk.
“Our strategy review enables us to consider more deeply how we can continue to protect our mandate in the face of (climate) risks and, at the same time, strengthen the resilience of monetary policy and our balance sheet,” Lagarde said.
(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Emelia Sithole-Matarise)
What to expect in 2021: Top trends shaping the future of transportation
By Lee Jones, Director of Sales – Grocery, QSR and Selected Accounts for Northern Europe at Ingenico, a Worldline brand
The pandemic has reinforced the need for businesses to undergo digital transformation, which is pivotal in the digital economy. In 2020, we saw the shift to online and cashless payments accelerated as a result of increased social distancing and nationwide restrictions.
The biggest challenge on all businesses into 2021 will be how they continue to adapt and react to the ever changing new normal we are all experiencing. In this context, what should we expect this year and beyond, in terms of developments across key sectors, including transport, parking and electric vehicle (EV) charging?
Mobility as a service (MaaS) and the future of transportation
Social distancing and lockdown measures have brought about a real change in public habits when it comes to transportation. In the last three months alone, we have seen commuter journeys across the globe reduce by at least 70%, while longer-distance travel has fallen by up to 90%. With it, cash withdrawals for payment has drastically reduced by 60%.
Technological advancements, alongside open payments, have unlocked new possibilities across multiple industries and will continue to have a strong impact. Furthermore, travellers are expecting more as part of their basic service. Tap and pay is one of the biggest evolutions in consumer payments. Bringing ease and simplicity to everyday tasks, consumers have welcomed this development to the transport journey. In-app payments are also on the rise, offering customers the ability to plan ahead and remain assured that they have everything they need, in one place, for every leg of their journey. Many local transport networks now have their own apps with integrated timetables, payments, and ticket download capabilities. These capabilities are being enabled by smaller more portable terminals for transport staff, and self-scanning ticketing devices are streamlining the process even further.
Ultimately, the end goal for many transport providers is MaaS – providing an easy and frictionless all-encompassing transport system that guides consumers through the whole journey, no matter what mode of travel they choose. Additionally, payment will remain the key orchestrator that will drive further developments in the transportation and MaaS ecosystems in 2021. What remains critical is balancing the need for a fast and convenient payment with safety and data privacy in order to deliver superior customer experiences.
The EV charging market and the accelerating pace of change
The EV charging market is moving quickly and represents a large opportunity for payments in the future. EVs are gradually becoming more popular, with registrations for EVs overtaking those of their diesel counterparts for the first time in European history this year. What’s more, forecasts indicate that by 2030, there will be almost 42 million public charging points deployed worldwide, as compared with 520,000 registered in 2019.
Our experience and expertise in this industry have enabled us to better understand but also address the challenges and complexities of fuel and EV payments. The current alternating current (AC) based chargers are set to be replaced by their direct charging (DC) counterparts, but merchants must still be able to guarantee payment for the charging provider. Power always needs to be converted from AC to DC when charging an electric vehicle, the technical difference between AC charging and DC charging is whether the power gets converted outside or inside the vehicle.
By offering innovative payment solutions to this market segment, we enable service operators to incorporate payments smoothly into their omnichannel customer experience that also allows businesses to easily develop acceptance and provide a unique omnichannel strategy for EV charging payments. From proximity to online payments, it will support businesses by offering a unique hardware solution optimized for PSD2 and SCA. It will manage both near field communication (NFC) cards and payments from cards/smartphones, as well as a single interface to manage all payments, after sales support and receipt with both ePortal and eReceipts.
Cashless options for parking payments
The ‘new normal’ is now partly defined by a shift in consumer preference for cashless, contactless and mobile or embedded payments. These are now the preferred payment choices when it comes to completing the check-in and check-out process. They are a time-saver and a more seamless way to pay.
Drivers are more self-reliant and empowered than ever before, having adopted technologies that work to make their life increasingly efficient. COVID-19 has given rise to both ePayment and omnichannel solutions gaining in popularity. This has been due to ticketless access control based on license plate recognition or the tap-in/tap-out experience, as well as embedded payments or mobile solutions for street parking.
These smart solutions help consider parking services more broadly as a part of overall mobility or shopping experience. Therefore, operators must rapidly adapt and scale new operational practices; accept electronic payment, update new contactless limits, introduce additional payments means, refund the user or even to reflect changing customer expectations to keep pace.
2021: the journey ahead
This year, we expect to see an even greater shift towards a cashless society across these key sectors, making the buying experience quicker and more convenient overall.
As a result, merchants and operators must make the consumer experience their top priority as trends shift towards simplicity and convenience, ensuring online and mobile payments processes are as secure as possible.
Opportunities and challenges facing financial services firms in 2021
By Paul McCreadie, Partner at ECI Partners, the leading growth-focused mid-market private equity firm
Despite 2020 being an enormously disruptive year for businesses, our latest Growth Index research reveals that almost three quarters (74%) of mid-market financial services companies remained resilient throughout the pandemic.
This is positive news, especially when taking into account the economic disruption that financial services firms have had to go through since the crisis began. No doubt 2021 will also hold its own challenges – as well as opportunities – for firms in this sector.
Unsurprisingly, the biggest short-term concern for financial firms for the year ahead involved changing pandemic guidance, with 42% citing this as a top concern. With the UK currently experiencing a third lockdown many financial services businesses will have already had to adapt to rapidly changing guidance, even since being surveyed.
Businesses will also be considering the need to invest in working from home operations, and there may be uncertainty over re-opening offices on a permanent basis. According to the research 30% of financial services firms are planning to adopt remote working on a permanent basis, so decisions need to be made now about whether they invest more in enabling staff to do this, or in their current office premises.
Due to Brexit, UK financial services firms are no longer able to passport their services into Europe, which may cause problems, particularly in the next 12 months as the Brexit deal is ironed out and the agreement is put into practice. Despite this, Brexit was only cited by 24% of financial firms as a short-term concern. While it’s comforting to see that UK financial firms aren’t hugely concerned about Brexit at this juncture, it is going to be vital for the ongoing success of the industry that the UK is able to get straightforward access to Europe and operate there without issue, otherwise we may see these concern levels rise.
Looking ahead to longer-term concerns for financial services businesses, the top concern was global economic downturn, of which 40% of firms cited this as a worry when looking beyond 2021.
Investing and adopting tech
Traditionally, the financial services sector has been slow to adopt digital transformation. Issues with legacy systems, coupled with often large amounts of data and a reluctance to undertake potentially risky change processes, have meant many firms are behind the curve when it comes to technology adoption. It’s therefore promising to see that so much has changed over the last year, with 45% of financial services firms having invested in AI and machine learning technology – making it the top sector to have invested in this space over the last 12 months.
One business that exemplifies the benefits of investing in machine learning is Avantia, the technology-enabled insurance provider behind HomeProtect. The business has undergone a large tech transformation in the last few years, investing in an underlying machine learning platform and an in-house data science team, which provides them with capabilities to return a quote to over 98% of applicants in under one second. This tech investment has allowed them to become more scalable, provide a more stable platform, improve customer service and consequently, grow significantly.
This demonstrates how this kind of tech can help businesses to leverage tech in order to offer a better customer experience, and retain and grow market share through winning new customers. This resilience should combat some of the concerns that firms will face in the next year.
Additionally, half (51%) of financial services firms have invested in cybersecurity tech over the last year, which allows them to protect the platforms on which they operate and ensure ongoing provision of solutions to their customers.
Clearly, there is a benefit of international revenues and profits on business resilience. In practice, this meant that businesses that weren’t internationally diversified in 2020 struggled more during the pandemic. In fact, the businesses considered to be the least resilient through the 2020 crisis were three times more likely to only operate domestically.
Perhaps an attribute towards financial services firms’ resilience in 2020, therefore, was the fact that 53% already had a presence in Europe throughout 2020 and 38% had a presence in North America. This internationalisation gave them an advantage that allowed them to weather the many storms of 2020.
Looking at how to capitalise on this throughout the rest of 2021, half (51%) of are planning overseas growth in Europe over the next 12 months, and 43% in North America. Further plans to expand internationally is not only a good sign for growth, but should further increase resilience within the sector.
While there are many concerns, the fact that financial services businesses are investing in technology like AI and machine learning, as well as still planning to grow internationally, means that they are providing themselves with the best chances of dealing with any upcoming challenges effectively.
In order to maintain their growth and resilience throughout the next 12 months, it’s imperative that they continue to put their customers first, invest in technology and remain on the front foot of digital change.
Staying connected: keeping the numbers moving in the finance industry
By Robert Gibson-Bolton, Enterprise Manager, NetMotion 2020 will certainly be hard to forget. Amongst the many changes we have come to...
How to lead a high-performing team
By Matthew Emerson, Founder and Managing Director, Blackmore Four When we think about a great team, the image we conjure...
A practical guide to the UCITS KIIDs annual update
By Ulf Herbig at Kneip We take a practical look at the UCITS KIID What is a UCITS KIID and what...
Oil prices steady as lockdowns curb U.S. stimulus optimism
By Noah Browning LONDON (Reuters) – Oil prices were steady on Monday as support from U.S. stimulus plans and jitters...
Dollar steadies; euro hurt by vaccine delays and German business morale slump
By Elizabeth Howcroft LONDON (Reuters) – The dollar steadied, the euro slipped and riskier currencies remained strong on Monday, as...
Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn
(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash...
Stocks rise on recovery hopes
By Ritvik Carvalho LONDON (Reuters) – Global shares rose to just shy of record highs, as optimism over a $1.9...
Fragile recovery seen in global labour market after huge 2020 losses – ILO
By Stephanie Nebehay GENEVA (Reuters) – Some 8.8% of global working hours were lost last year due to the pandemic,...
“Lockdown fatigue” cited as UK shopper numbers rose 9% last week
LONDON (Reuters) – The number of shoppers heading out to retail destinations across Britain rose by 9% last week from...
Alphabet’s Verily bets on long-term payoff from virus-testing deals
By Paresh Dave OAKLAND, Calif. (Reuters) – For Alphabet Inc’s Verily, a healthcare venture that is one the tech giant’s...