Criteo S.A. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Criteo operates a commerce media platform for marketers and media owners. Comparisons below are with the corresponding 2020 periods; dollar amounts are in U.S. dollars.
Financial performance
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $551.3m | $437.6m | $1,092.4m | $941.0m |
| Revenue ex-TAC (non-GAAP) | $220.2m | $179.9m | $433.6m | $385.9m |
| Gross profit / margin | $182.9m / 33% | $146.0m / 33% | $361.6m / 33% | $318.2m / 34% |
| Operating income | $19.7m | $9.8m | $53.9m | $33.6m |
| Net income | $15.0m | $6.2m | $38.5m | $22.6m |
| Diluted EPS | $0.23 | $0.09 | $0.58 | $0.34 |
| Adjusted EBITDA (non-GAAP) | $67.3m | $38.9m | $143.2m | $98.1m |
- Q2 revenue rose 26% as reported and 22% at constant currency; revenue ex-TAC grew 22% reported and 18% at constant currency. Revenue ex-TAC margin was 40%, versus 41% a year earlier.
- Marketing Solutions revenue was $487.5m in Q2, up 28% reported and 23% at constant currency. Retail Media revenue was $63.8m, up 13% and 10%, respectively. Retail Media revenue ex-TAC grew 53% reported.
- For the first half, revenue increased 16% reported and 12% at constant currency. Revenue ex-TAC increased 12% reported and 9% at constant currency. Retail Media revenue ex-TAC grew 78% reported.
- Q2 operating margin was approximately 3.6%, compared with 2.2% in Q2 2020; net margin was approximately 2.7% versus 1.4%. The first-half effective tax rate was 27%, down from 30%.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $489.5m, with marketable securities of $63.5m. Total assets were $1,842.4m, total liabilities $684.4m and equity $1,158.1m.
- Financial liabilities were $3.6m. Criteo had not drawn on its €350m revolving credit facility or its short-term credit and overdraft facilities. Operating lease liabilities totaled approximately $141.1m.
- First-half operating cash flow was $103.7m, compared with $90.1m. Investing activities used $56.8m and financing activities used $27.4m; cash increased $1.5m to $489.5m. Capital expenditures were $26.9m.
- Management said cash, marketable securities, treasury shares and undrawn credit availability represented total liquidity above $1.0bn, and expected existing cash to cover anticipated needs for at least 12 months.
Changes, outlook and notable items
- Growth reflected stronger digital advertising demand and Retail performance. Management attributed 72% of Q2 revenue growth to existing clients and 28% to new-client additions; the company reported 973 net new clients year over year. Travel remained weak amid the pandemic, particularly in EMEA and Asia-Pacific.
- Foreign currency translation supported reported Q2 revenue: revenue growth was 22% at constant currency versus 26% reported. First-half growth was 12% at constant currency versus 16% reported.
- Retail Media Platform arrangements are reported net rather than gross. As clients migrate from legacy offerings, reported Retail Media revenue may be lower while revenue ex-TAC margin increases; management said revenue ex-TAC is not affected by this accounting presentation transition.
- Management expected 2021 capital expenditures to remain at or slightly above 3% of revenue, including investment in data-center capacity and infrastructure redundancy. The filing provides no numerical revenue or earnings guidance.
- A workforce restructuring announced in February is expected to be completed by year-end 2021; $5.0m of severance charges were recorded in the first half. Broader restructuring and transformation costs were $21.6m in the first half, compared with $3.4m a year earlier.
- Criteo acquired Mabaya, a retail media technology company, in May for $9.9m, funded with cash. The purchase-price allocation remained preliminary; provisional goodwill was $8.5m. Acquisition-related costs of $0.4m were expensed.
- The CNIL’s formal GDPR investigation, opened in 2020, remained ongoing. Criteo said an adverse outcome was reasonably possible, but no loss was accrued because the potential amount could not be reasonably estimated. Management reported no material changes to previously disclosed risk factors.
Key investor verification points
- Track constant-currency revenue and revenue ex-TAC growth alongside GAAP revenue, including the effects of FX and the Retail Media shift to net revenue recognition.
- Assess whether higher operating earnings persist as restructuring, transformation, acquisition and share-based compensation costs affect reported results; review non-GAAP reconciliations and adjustments.
- Monitor receivables and credit-loss allowances, cash conversion, capital spending, and use of the $100m share-repurchase authorization. The company repurchased 793,532 shares in Q2 at an average $38.07 per share.
- Follow the CNIL investigation, privacy and data-use regulation, browser/platform changes, and continued COVID-19 effects on travel advertising.
- Review Mabaya’s finalized purchase-price allocation and integration, as well as restructuring completion and related cash costs.