Criteo's Q4 2019 Earnings: A Mixed Digital Landscape

By your favorite finance analyst, Matt Levine Enthusiast

February 11, 2020

Overview of Earnings

On February 11, 2020, Criteo S.A. (NASDAQ: CRTO) released its financial results for the fourth quarter and fiscal year ended December 31, 2019. Spoiler alert: It wasn?t a blockbuster performance, but it wasn?t a total flop either. With a revenue of $653 million, Criteo saw a 3% decline year-over-year, or a 2% drop when adjusted for constant currency. This is what some might call an ?earnings surprise,? though it?s more of a gentle nudging than a shocking revelation.

Key Financial Metrics

Diving into the details, the earnings per share (EPS) landed at $0.65, reflecting a 14% increase compared to the previous year. Adjusted diluted EPS, a key metric that some analysts keep an eye on, surged by 29% to $1.08. This might give investors a slight chuckle, as it suggests that while revenue forecasts may not be hitting the high notes, the company is managing its costs and margins quite well.

Net income also took a hit, declining 2% to $41 million?representing 6% of revenue. But fear not; the adjusted EBITDA increased 5% to $109 million. This indicates that while the top line isn't exactly setting the world on fire, Criteo is still finding ways to maintain profitability.

Traffic Acquisition Costs and Revenue Ex-TAC

One of the more telling stats was the revenue excluding Traffic Acquisition Costs (Revenue ex-TAC), which fell 2% year-over-year to $266 million?or about 41% of total revenue. For context, Revenue ex-TAC is like the fancy cocktail at a party: it?s what you really want to focus on when assessing the health of a digital advertising business. If the core revenue stream feels a bit stunted, it raises questions about the overall effectiveness of their advertising model in a competitive landscape.

Cash Flow and Position

Criteo's cash flow from operating activities was $59 million, and free cash flow stood at $42 million. That?s a solid cushion to have while navigating the choppy waters of digital advertising. As of December 31, the company boasted a cash position of $419 million?up $54 million year-over-year. It appears Criteo isn?t just sitting on its hands while the revenue forecast looks cloudy; they?re actively managing their finances.

Outlook and Implications for the Sector

Looking forward, Criteo?s mixed Q4 results highlight the challenges faced by digital advertising companies in a rapidly evolving market. As businesses increasingly focus on performance metrics and ROI, Criteo will need to adapt its strategies to maintain and grow its market share. Furthermore, as competitors leverage advanced technologies for targeted advertising, will Criteo keep pace? This is a question that investors should ponder.

In summary, while Criteo's results may not have thrilled the market, they reflect a company that is, at least, managing to stay in the game. With a keen focus on profitability and cash flow, Criteo could very well navigate these turbulent times, though it will require a deft touch?and perhaps a little bit of luck?to thrive in the long run.