Criteo S.A. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021, with quarterly results including the three months ended December 31, 2021. Criteo is a global commerce-media and digital advertising technology company; it reports under U.S. GAAP and began presenting two segments in Q4: Marketing Solutions and Retail Media.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $2,254.2 million | $2,072.6 million | +9% reported; +8% constant currency |
| Gross profit / gross margin | $781.9 million / 34.7% | $688.0 million / 33.2% | +14% gross profit |
| Operating income / margin | $151.9 million / 6.7% | $108.8 million / 5.2% | +40% |
| Net income | $137.6 million | $74.7 million | +84% |
| Diluted EPS | $2.09 | $1.16 | Higher year over year |
| Contribution ex-TAC* | $920.8 million | $825.0 million | +12% reported; +11% constant currency |
| Adjusted EBITDA* | $322.5 million | $251.0 million | +28%; 35% of Contribution ex-TAC |
| Operating cash flow | $220.9 million | $185.4 million | Increased |
| Free cash flow* | $167.9 million | Not stated here | FY2021 figure reported by the company |
Q4 2021: Revenue was $653.3 million versus $661.3 million in Q4 2020 (about 1% lower). Net income rose to $74.9 million from $46.8 million; Contribution ex-TAC* was $276.2 million versus $253.2 million, and Adjusted EBITDA* was $110.9 million versus $103.4 million.
Liquidity and debt: Cash and cash equivalents were $515.5 million at year-end, and marketable securities totaled $55.3 million. Working capital was $591.6 million. The €350 million revolving credit facility was undrawn, and reported financial liabilities were approximately $1.0 million. Operating lease liabilities were $128.0 million. The company reported a $100 million share repurchase program completed in December 2021.
*Non-GAAP measures; the filing provides reconciliations to U.S. GAAP measures. Free cash flow is reported as $167.9 million; the filing’s cash-flow discussion shows $220.9 million of operating cash flow and $53.0 million of capital expenditures.
Material changes and operating trends
- Marketing Solutions revenue increased 11% to $2,007.2 million, driven mainly by higher spending from retail clients, partly offset by privacy and identity changes and fewer impressions delivered.
- Retail Media revenue fell 7% to $247.0 million, but segment Contribution ex-TAC rose 59% to $124.6 million. Management attributed the revenue decline largely to clients migrating to the Retail Media Platform (RMP), where Criteo recognizes revenue net rather than gross. The company said this presentation change does not affect Contribution ex-TAC.
- Revenue recovered from the pandemic-affected 2020 period but remained below 2019’s $2,261.5 million. Criteo cited stronger retail activity and recovery in some markets, while Travel and Classifieds remained exposed to COVID-19 effects.
- Accounts receivable increased to $582.0 million from $474.1 million; working-capital movements used $41.6 million of cash in 2021, including a $135.0 million increase in receivables.
- R&D expense rose 15% to $151.8 million; general and administrative expense rose 31% to $152.6 million, including transformation-related third-party services and higher compensation costs. Sales and operations expense declined 1% to $325.6 million.
Outlook, risks and contingencies
- For 2022, management expected to invest in Retail Media, first-party media, contextual advertising, video, Connected TV and commerce insights; it expected Adjusted EBITDA as a percentage of Contribution ex-TAC to be lower than 2021, with investment intended to support growth in 2023.
- Management expected capital expenditures to be at or slightly below 4% of revenue in 2022. It also expected non-retargeting solutions to approach 40% of the business measured by Contribution ex-TAC in 2022, including the pending IPONWEB acquisition.
- The $380 million IPONWEB acquisition agreement, payable in cash and treasury shares subject to adjustments, was pending at year-end and expected to close in Q1 2022, subject to customary conditions. Criteo had acquired Mabaya in May 2021 for $9.9 million.
- Key risks include privacy regulation and consent requirements, browser and operating-system changes that limit identifiers or tracking, intense competition and access to advertising inventory, AI performance and system reliability, cybersecurity, economic and advertising-spend volatility, client credit risk, foreign exchange and seasonality.
- CNIL’s investigation following privacy complaints remained ongoing. Criteo had not accrued a loss because it considered the matter an unasserted claim, with an unfavorable outcome reasonably possible but the potential loss not reasonably estimable. The filing states there were no other legal proceedings expected to have a material adverse effect.
- The filing gives inconsistent liquidity totals: one section states approximately $967 million of liquidity from cash, marketable securities and the revolver, while another says approximately “$1.068 million.” The latter is unclear and does not reconcile with the listed components; verify the intended amount.
Important facts for investors to verify
- Confirm the liquidity figure and the availability, terms and post-March 2022 size of the revolving credit facility.
- Track RMP client migration and distinguish reported Retail Media revenue growth from Contribution ex-TAC growth under net revenue presentation.
- Assess IPONWEB closing, final purchase consideration, financing mix, integration costs and expected contribution.
- Monitor the CNIL investigation and evolving privacy rules, including CPRA effectiveness and browser or platform changes affecting addressable advertising.
- Review receivables growth, collections and credit-loss allowances, along with the sustainability of cash generation and margins as strategic investment increases.
- Consider non-GAAP definitions and adjustments when comparing Contribution ex-TAC, Adjusted EBITDA and free cash flow with other companies.