Criteo S.A. — Q1 2022 10-Q Summary
Reporting period: Three months ended March 31, 2022; unaudited U.S. GAAP results. Criteo operates a commerce media advertising platform through Marketing Solutions and Retail Media.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $510.6 million | $541.1 million | Down 6% reported; down 1% at constant currency |
| Gross profit / margin | $184.0 million / 36% | $178.7 million / 33% | Gross profit up 3% reported |
| Operating income / margin | $27.7 million / 5.4% | $34.2 million / 6.3% | Down 19% |
| Net income | $21.3 million | $23.5 million | Down 9% |
| Diluted EPS | $0.32 | $0.35 | Down 9% |
| Adjusted EBITDA (non-GAAP) | $62.8 million | $75.9 million | Down 17%; margin 12.3% vs. 14.0% |
| Contribution ex-TAC (non-GAAP) | $216.9 million | $213.4 million | Up 2% reported; up 6% constant currency |
| Cash from operating activities | $74.9 million | $77.4 million | Down 3% |
Segments: Marketing Solutions revenue was $463.9 million, down 4% reported but up 1% at constant currency; Contribution ex-TAC was $186.1 million, down 3%. Retail Media revenue was $46.7 million, down 19% reported and 18% constant currency, while Contribution ex-TAC rose 46% to $30.8 million. Management attributed much of Retail Media’s reported revenue decline to clients shifting to a platform where revenue is recognized net rather than gross; it said Contribution ex-TAC is not affected by this accounting transition.
Financial position and liquidity
- Cash and cash equivalents were $589.3 million at March 31, 2022, versus $515.5 million at year-end; marketable securities were $31.4 million.
- Total financial liabilities were $3.8 million. The company reported no borrowings under its $326.4 million revolving credit facility at quarter-end. Operating lease liabilities totaled about $116.1 million.
- Total assets were $1.92 billion, total liabilities $712.8 million, and total equity $1.20 billion.
- Investing cash flow was positive $16.9 million, primarily due to maturity of investments; financing cash flow used $1.4 million, including $8.3 million for share repurchases. The MD&A reports capital expenditures of $5.6 million for the quarter.
- Management stated that cash, marketable securities, the undrawn credit facility and other resources provided liquidity in excess of $1.0 billion, and that existing cash should cover anticipated needs for at least 12 months.
Material changes, outlook and risks
- Revenue was negatively affected by $25.6 million of currency translation. At constant currency, total revenue declined 1%; reported revenue fell 6%.
- Gross margin improved to 36% from 33%, helped by lower traffic acquisition costs. Operating expenses rose 8%, with higher research and development and sales and operations costs; sales and operations expense also reflected increased bad-debt expense and headcount costs.
- Management said 88% of quarterly revenue came from existing clients and reported 971 net new clients year over year. It expects capital expenditures to remain at or slightly above 4% of revenue in 2022, reflecting data-center capacity and infrastructure-redundancy investment. No specific revenue or earnings guidance is stated in the supplied filing text.
- The company suspended advertising activity in Russia. Russia and Ukraine represented less than 2% of 2021 Contribution ex-TAC. The filing cites potential macroeconomic, currency, cybersecurity, employee and execution impacts; a $2.7 million bad-debt reserve was recorded in Q1 associated with the adverse economic effects of the invasion.
- Privacy and identity changes remain business risks, including regulatory developments and changes to industry platforms. A CNIL investigation under GDPR was ongoing; Criteo had not accrued a loss contingency because the claim was unasserted and the potential loss could not be reasonably estimated.
- The board extended its share-repurchase authorization to a total of $280 million. Criteo repurchased 303,342 shares in March at an average price of $27.37; approximately $271.7 million remained authorized at quarter-end. The company said it does not anticipate cash dividends in the foreseeable future.
Important facts for investors to verify
- How much of the reported revenue decline reflects currency and the Retail Media gross-to-net transition versus underlying demand.
- Whether Retail Media’s Contribution ex-TAC growth and platform migration progress continue as expected, particularly as most legacy clients were expected to transition by the second half of 2022.
- The effects of privacy and identity changes, the Russia-related suspension and credit exposure, including any subsequent changes to bad-debt reserves.
- Whether operating cash flow remains resilient and planned 2022 capital spending stays near or above 4% of revenue.
- Developments in the CNIL investigation and any resulting costs, required actions or change in contingency assessment.