Criteo S.A. (NASDAQ: CRTO), the global technology company powering the world's marketers with trusted and impactful advertising, today announced financial results for the fourth quarter and fiscal year ended December 31, 2019.

Q4 2019

- Revenue decreased 3% year-over-year, or 2% at constant currency, to USD$653m (£506m).

- Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, decreased 2% year-over-year, or 1% at constant currency, to USD$266m (£206m), representing 41% of revenue.

- Net income decreased 2% year-over-year to USD$41m (£32m), representing 6% of revenue.

- Adjusted EBITDA2 increased 5% to USD$109m (£84.4m), representing 41% of Revenue ex-TAC.

- Diluted EPS increased 14% to USD$0.65 (£0.50) and Adjusted diluted EPS2 increased 29% to USD$1.08 (£0.84).

- Cash flow from operating activities was USD$59m (£46m) and Free Cash Flow2 was USD$42m (£32m).

- Cash position was USD$419m (£324m) as of December 31, 2019, up USD$54m (£42m) year-over-year.

Fiscal year 2019

- Revenue declined 2% year-over-year, or increased 1% at constant currency, to USD$2.262bn (£1.752bn).

- Revenue ex-TAC2 decreased 2% year-over-year, or increased 0.3% at constant currency, to USD$947m (£733m), representing 42% of revenue.

- Net income was USD$96m (£74m), flat compared to the prior year, representing 4% of revenue.

- Adjusted EBITDA2 was USD$299m (£231m), or 32% of Revenue ex-TAC.

- Diluted EPS increased 5% to USD$1.38 (£1.07) and Adjusted diluted EPS2 increased 7% to USD$2.67 (£2.07).

- Cash flow from operating activities was USD$223m (£173m) and Free Cash Flow2 reached USD$125m (£96.9m).

"Megan has already demonstrated her impactful leadership," said JB Rudelle, Chairman. "She has the full support of the Board and we're all confident in her success in driving Criteo forward."

"I am thrilled to lead Criteo into its next chapter," said Megan Clarken, CEO. "We have unbelievable assets and compelling opportunities. I'm confident in our strategic priorities and determined to deliver on them."

"We've delivered on our margin and cash generation targets in a challenging year," said Benoit Fouilland, CFO. "We're committed to maintaining solid profitability and cash flows to support the business in the long run."

Q4 2019 operating highlights

- New solutions, which include all solutions outside of retargeting, grew 44% year-over-year to 16% of total Revenue ex-TAC.

- One quarter after beta launch, 800 clients were already live with our Consideration products priced on cost-per-impression (or CPM) basis.

- 23% of our live clients purchased more than one Criteo product, up from 13% in Q4 last year.

- Added 280 net new clients and maintained high client retention at 90% for all products.

- Same-client Revenue ex-TAC3 decreased 3% year-over-year at constant currency, up from -4% in Q3.

- Our direct header-bidding technology now connects to over 4,500 publishers across Web and App.

- Launched Criteo Certified Partner Program (CCP) in our go-to-market for small midmarket clients.

Revenue and Revenue ex-TAC

Q4 2019
Revenue declined 3% year-over-year, or 2% at constant currency, to USD$653m (Q4 2018: USD$670m). Revenue ex-TAC decreased 2% year-over-year, or 1% at constant currency, to USD$266m (Q4 2018: USD$272m). This better-than-expected performance was driven by the decline in our business with existing clients, despite continued adoption of our new solutions across our client base and a strong Holiday Season across regions, partially offset by our growing business with new clients, in particular in the midmarket. Revenue ex-TAC as a percentage of revenue, or Revenue ex-TAC margin, was 41% (Q4 2018: 41%).

- In the Americas, Revenue declined 3% year-over-year, or 3% at constant currency, to USD$306m and represented 47% of total Revenue. Revenue ex-TAC declined 3% year-over-year, or 3% at constant currency, to USD$117m and represented 44% of total Revenue ex-TAC.

- In EMEA, Revenue declined 2% year-over-year, and increased 1% at constant currency, to USD$217m and represented 33% of total Revenue. Revenue ex-TAC declined 1% year-over-year, and increased 1% at constant currency, to USD$92m and represented 34% of total Revenue ex-TAC.

- Revenue. Revenue ex-TAC declined 1% year-over-year, or 2% at constant currency, to USD$57m and represented 22% of total Revenue ex-TAC.

Fiscal Year 2019
Revenue decreased 2% year-over-year to USD$2.262bn (2018: USD$2.300bn), and increased 1% at constant currency. Revenue ex-TAC decreased 2% year-over-year to USD$947m (2018: USD$966m), and increased 0.3% at constant currency. The performance at constant currency was primarily driven by our business with new clients, in particular in the midmarket, offsetting a slight decline in our business with existing clients, in particular with large customers, despite continued adoption of our new solutions across our client base. The Revenue ex-TAC margin was 42% (2018: 42%).

- In the Americas, Revenue was USD$952m, flat year-over-year, or growing 0.3% at constant currency, and represented 42% of total Revenue. Revenue ex-TAC was USD$373m, declining 0.4% year-over-year, or growing 0.2% at constant currency, and represented 39% of total Revenue ex-TAC.

- In EMEA, Revenue declined 4% year-over-year to USD$806m, or increased 1% at constant currency, and represented 36% of total Revenue. Revenue ex-TAC declined 4% year-over-year to USD$353m, or grew 1% at constant currency, and represented 37% of total Revenue ex-TAC.

- In Asia-Pacific, Revenue decreased 1% year-over-year, or 0.2% at constant currency, to USD$503m and represented 22% of total Revenue. Revenue ex-TAC declined 1% year-over-year, or 1% at constant currency, to USD$221m and represented 24% of total Revenue ex-TAC.

Net Income and Adjusted Net Income

Q4 2019
Net income decreased 2% year-over-year to USD$41m (Q4 2018: USD$42m). Net income margin as a percentage of revenue was 6% (Q4 2018: 6%). Net income available to shareholders of Criteo S.A. increased 11% year-over-year to USD$42m, or USD$0.65 per share on a diluted basis (Q4 2018: USD$38m, or USD$0.57 per share on a diluted basis).

Adjusted Net Income, or net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, restructuring costs and the tax impact of these adjustments, increased 23% year-over-year to USD$70m, or USD$1.08 per share on a diluted basis (Q4 2018: USD$56m, or USD$0.84 per share on a diluted basis).

Fiscal Year 2019

Net income was flat year-over-year at USD$96m (2018: USD$96m). Net income margin as a percentage of revenue was 4% (2018: 4%). Net income available to shareholders of Criteo S.A. increased 2% year-over-year to USD$91m, or USD$1.38 per share on a diluted basis (2018: USD$89m, or USD$1.31 per share on a diluted basis).

Adjusted Net Income increased 4% year-over-year to USD$175m, or USD$2.67 per share on a diluted basis (2018: USD$169m, or USD$2.49 per share on a diluted basis).

Adjusted EBITDA and Operating Expenses

Q4 2019

Adjusted EBITDA increased 5% year-over-year, or 6% at constant currency, to USD$109m (Q4 2018: USD$105m), largely driven by the positive impact of our disciplined expense management, offsetting the slight Revenue ex-TAC decline over the period. Adjusted EBITDA as a percentage of Revenue ex-TAC, which is referred to as Adjusted EBITDA margin, was 41% (Q4 2018: 39%), an approximately 300-basis point increase year-over-year at constant currency.

Operating expenses increased 3% to USD$176m (Q4 2018: USD$171m). Operating expenses, excluding the impact of equity awards compensation expense, pension costs, restructuring costs, depreciation and amortization and acquisition-related costs and deferred price consideration, which is referred to as Non-GAAP Operating Expenses, decreased 7% to USD$138m (Q4 2018: USD$149m), demonstrating the positive impact of our disciplined expense management.

Fiscal Year 2019

Adjusted EBITDA declined 7% year-over-year, or 3% at constant currency, to USD$299m (2018: USD$321m), primarily driven by the Revenue ex-TAC performance over the period and despite a stronger focus on a more disciplined expense management. Adjusted EBITDA as a percentage of Revenue ex-TAC was 32% (2018: 33%), an approximately 120-basis point decrease year-over-year at constant currency.

Operating expenses were flat year-over-year at USD$688m (2018: USD$687m). Non-GAAP Operating Expenses declined 1% to 575m (2018: USD$581m), demonstrating our disciplined approach to expense management throughout the year.

Cash Flow and Cash Position

Q4 2019

Cash flow from operating activities decreased 31% year-over-year to USD$59m (Q4 2018: USD$86m).

Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and change in accounts payable related to intangible assets, property, plant and equipment, increased 4% year-over-year to USD$42m (Q4 2018: USD$40m), representing 38% of Adjusted EBITDA (Q4 2018: 38%).

Cash and cash equivalents increased USD$54m year-over-year to USD$419m.

Fiscal Year 2019

Cash flow from operating activities decreased 15% year-over-year to USD$223m (2018: USD$261m).

Free Cash Flow decreased 8% year-over-year to USD$125m (2018: USD$135m), representing 42% of Adjusted EBITDA (2018: 42%).

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of February 11, 2020.

First quarter 2020 guidance:

- Revenue ex-TAC expected to be between USD$209m and USD$212m, implying constant-currency growth of approximately -10% to -9%.

- Adjusted EBITDA expected to be between USD$58m and USD$62m.

Fiscal year 2020 guidance:

- Revenue ex-TAC expected to decline by approximately 10% at constant currency.

- Adjusted EBITDA margin expected to be approximately 30% of Revenue ex-TAC.

The above guidance for the first quarter and the fiscal year ending December 31, 2020, assumes the following exchange rates for the main currencies impacting our business: a US dollar-euro rate of 0.901, a US dollar-Japanese Yen rate of 110.0, a US dollar-British pound rate of 0.775 and a US dollar-Brazilian real rate of 4.050.

The above guidance assumes no acquisitions are completed during the first quarter and the fiscal year ending December 31, 2020.

Reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding U.S. GAAP 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-GAAP measures; in particular, the measures and effects of equity awards compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our share price. The variability of the above charges could potentially have a significant impact on future U.S. GAAP financial results.

For full financial disclosure and measures, please read the release and attachments available here.