OK. Here goes. Again, this isn’t my strong suit compared to many here, but it helps me and hope it helps others.
First, management’s non-financial remarks were nearly identical as the last conference call. Same opening statement, same Big Three Trends driving business, same three areas of focus for technology and product innovation and same four priorities for 2016.
Here are some highlights making me believe the company is executing well now and has a good chance of executing on their strategies for growth going forward. This is the 11th consecutive quarter they’ve exceeded their guidance for the main two metrics - Rev Ex-TAC and Adj EBITDA. And for the 20th consecutive quarter, they’ve maintained 90% client retention. They set another record for net new clients added in the quarter at 900.
Important Numbers all reported in constant currency:
Revenue Ex-TAC grew 35% to $166M
Adjusted EBITDA grew 61% to $39M
For reference, the growth rates for these two metrics last quarter were 41% and 56%, respectively.
Other Important Items:
Mobile makes up over 50% of business. Mobile App business has been accelerating tremendously up six fold from last year with accelerated sequential growth.
Their “Universal Match” tool is now adopted by 66% of advertisers (60% last Q) and generates 47% of the revenue (40% Last Q).
Added 1,200 publishers totaling over 17,000 now.
There are now 6,000 (5,000 Last Q) advertisers using dynamic ads and that partnership appears to be bearing fruit. They are recently live on Instagram too.
Revenue Ex-TAC growth from Large companies was 10% and mid-market was 13%.
They believe mid-market remains a significant opportunity and are gearing up tools to accommodate that space better.
Expenses (linked Q noted in parentheses):
Other Cost of Revenue (hosting & data): $20M ($18M)
Operating Expenses: $116M grew 27% ($104M)
Headcount is 75% of Non-GAAP Opex
By Function (linked Q):
R&D Grew 60% to $27M (50% to $23M)
Sales & Ops grew 16% to $65M (23% to $59M)
G&A grew 32% to $25M (37% to $22M)
Adjusted EBITDA grew 61% and was 23.6% of Rev Ex-TAC a 170 bp improvement. Driven by 270 bp from leverage in Sales & Ops after investing 100 bp back into R&D.
Net income grew 240% to $13M.
EPS grew 106% to 33 cents per share.
CapEx was up 85% sequentially but this was guided.
Guidance:
Revenue Ex-TAC at mid-point $172M
Adj EBITDA - $44M
I have not listened to/read the Q&A. Will save that for another night.
Some quasi-final thoughts:
CRTO plays in a space that is still somewhat foreign to me, but they’ve been quite steady over the past two quarters. Management has proven adept at guiding and beating guidance, and its clients are happy (see client retention). I know I’ve heard that advertisers can’t really track their spend to understand the return generated. CRTO at its base wants to change that. Whether or not they will be successful in the long run remains to be seen. They are successful right now.
Take for example the following: Their Universal Match product seems interesting. For an advertiser using Google, they can track a user on any device (PC, phone, tablet) so long as they are using Google. For an advertiser using CRTO, they can track that user as they jump between devices and different sites from Google to Facebook to Bed Bath & Beyond to Retail Me Not, etc…
My point is, they seem to be innovating in the space and I get the sense their customers are highly satisfied. I hope they are truly changing the paradigm and are enabling advertisers to see their ROI because that would mean they have a truly sticky platform. Again, we will see.
It is late. Hope this helped some of you. If not, at least I’ll have some notes to refer to when the next quarter rolls around.
Happy Hunting!
A.J.