Criteo S.A. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited U.S. GAAP financial statements. Criteo operates a commerce media platform and reports Marketing Solutions, Retail Media and Iponweb segments.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Revenue | $445.0 million | $510.6 million | Down 13% reported; down 9% at constant currency |
| Gross profit / margin | $181.5 million / 41% | $184.0 million / 36% | Profit down 1%; margin increased, partly reflecting revenue-recognition mix |
| Contribution ex-TAC | $220.6 million | $216.9 million | Up 2% reported; up 6% at constant currency; non-GAAP measure |
| Operating expenses | $205.0 million | $156.4 million | Up 31%, including higher R&D, personnel and equity compensation |
| Operating income (loss) | $(23.5) million | $27.7 million | Moved to operating loss |
| Net income (loss) | $(12.1) million | $21.3 million | Diluted EPS $(0.20), versus $0.32 |
| Adjusted EBITDA | $38.7 million | $62.8 million | Down about 38%; non-GAAP measure |
| Operating cash flow | $42.0 million | $74.9 million | Down $33.0 million |
Marketing Solutions revenue fell 18% reported (14% constant currency) to $381.9 million; Retail Media fell 19% (18% constant currency) to $38.0 million; Iponweb contributed $25.1 million following its 2022 acquisition. Retail Media contribution ex-TAC rose 21% reported (22% constant currency) to $37.4 million. The company said revenue came from existing clients at 91% and new client additions at 9%; client count rose 2% year over year, or fell 1% excluding Iponweb.
Cash, liquidity and capital
- Cash and cash equivalents were $305.7 million at March 31, down from $348.2 million at year-end. Cash plus restricted cash totaled $380.7 million; marketable securities were $32.0 million.
- Cash used in investing activities was $36.1 million, including $33.2 million of capital expenditures and a $6.5 million Brandcrush acquisition payment, partly offset by $9.6 million of investment-sale proceeds. Cash used in financing was $72.2 million, mainly $51.0 million of share repurchases and a $22.0 million Iponweb earn-out payment.
- The company reported access to a €407 million revolving credit facility (about $442.6 million) and total liquidity above $813 million, including cash, marketable securities, the facility and treasury shares. It said existing cash should meet anticipated requirements for at least 12 months. Financial liabilities on the balance sheet were $4.3 million current and $0.1 million non-current; the filing reports no outstanding RCF borrowing at quarter-end.
- Capital expenditures were expected to remain at or slightly above 4% of revenue for 2023. The board-authorized share repurchase program totals $480 million; $51.0 million was repurchased during the quarter.
Material changes, outlook and risks
- Management attributed the revenue decline to Retail Media customers migrating to the Commerce Media platform, where revenue is recognized net rather than gross; anticipated signal-loss impacts, suspended Russia operations, soft retail trends and adverse currency movements also weighed on results. Currency reduced reported revenue by $18.5 million. Continued travel strength partly offset weakness.
- Management said the Retail Media platform transition temporarily reduced reported revenue while not affecting contribution ex-TAC; it cited strength in U.S. onsite retail media and growing platform network effects. No specific full-year revenue or earnings guidance was provided in the supplied filing text.
- Operating expenses rose materially, particularly R&D, which increased 87% to $63.6 million. The company cited higher headcount-related costs, Iponweb-related share compensation and acquired-intangible amortization. Equity awards compensation expense increased to $25.2 million from $9.5 million.
- A CNIL proceeding concerns alleged GDPR violations. The regulator’s rapporteur proposed a €60.0 million ($65.3 million) penalty; Criteo recorded that proposed penalty as a current loss-contingency provision. The final decision was expected after consultation, likely by mid-2023, and the final amount could differ.
- The Iponweb acquisition includes contingent consideration of up to $100 million tied to 2022 and 2023 revenue targets; $22.0 million for 2022 was paid in Q1. Brandcrush was acquired for $7.1 million in February 2023; its purchase-price allocation remained provisional.
- Other identified risks include privacy and regulatory developments, changes to platform technology and user-data availability, competition, macroeconomic conditions, foreign-exchange exposure, and the ability to sustain growth and profitability. Management reported disclosure controls effective as of March 31, 2023; no new risk factors were reported in this 10-Q.
Important facts for investors to verify
- Track organic performance separately from revenue-recognition changes in Retail Media, currency effects and Iponweb’s contribution.
- Monitor whether Retail Media contribution growth and platform adoption persist as reported revenue reflects net recognition.
- Check the final CNIL decision, any resulting penalty or appeal, and the treatment of the recorded $65.3 million provision.
- Assess the drivers of lower operating cash flow, higher operating expenses and capital spending, along with share repurchases and remaining liquidity.
- Review the final Brandcrush purchase-price allocation and any further Iponweb earn-out payments tied to 2023 targets.