CRTO results

Investment Analysis Clubs Saul’s Investing Discussions
1

CRTO reported earnings.

Key metrics that I follow:

Net customers added: 730 for a total of 8564, up 9.3% sequentially. Looks great here. Here is the historical increase in customers with sequential percentage increases:


3811	
4274	12.1%
4631	8.4%
5072	9.5%
5567	9.8%
6131	10.1%
6581	7.3%
7190	9.3%
7832	8.9%
8564	9.3%

Average spend (Ex-TAC Revenue) per customer: $12.9K. Down sequentially from $13.4K last quarter. The last two Q2s also had a sequential decline. Could it be seasonality? We’ll need to watch this going forward. Here are the historical numbers for average spend per customer:


9.8
9.4
10.1
10.8
11.3
10.9
11.8
13.4
13.4
12.9

Retention rate: Still above 90% which is very good.

Based on the above and the raised guidance, I think it was a great quarter. CRTO’s business seems to be doing well. I’m not worried about the EPS number as CRTO has said that 2015 would be an investment year where earnings would be lower.

Chris

19 Likes
2

The market is punishing CRTO…off 12% at this point. The miss seems to be the focus

3

The market is punishing CRTO…off 12% at this point. The miss seems to be the focus

Apparently, but the “miss” is completely irrelevant, IMO. The business results look excellent. The revenue increase and the upped revenue guidance is what’s so much more important.

Chris

3 Likes
4

Agreed. It’s always interesting to see market reaction in these situations.

Gary

5

Hi Chris,

Thanks for the post!

On the earnings release, I pulled this:

Net Income and Adjusted Net Income

Net income in the second quarter 2015 was €4 million compared with €2 million in the second quarter 2014. Net income available to shareholders of Criteo S.A. in the second quarter 2015 was €3 million, or €0.05 per diluted share, compared with €2 million, or €0.04 per diluted share, in the second quarter 2014.

Adjusted Net Income, or net income adjusted to eliminate the impact of share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related deferred price consideration, and the tax impact of these adjustments, in the second quarter 2015 was €10 million, or €0.15 per diluted share, representing a 78% increase compared with €6 million, or €0.09 per diluted share, in the second quarter 2014.

GAP EPS looks relatively weak (up about 25%) when compared to ADJ EPS (up 78%).

On a previous post of yours, you created a couple of nice tables:


Full Yr Growth Rate

Period	CRTO
3/14	N/A
6/14	N/A
9/14	695%
12/14	316%
3/15	262%
6/15	159%

1YRPEG	CRTO
3/15	0.15
6/15	0.22

Then you included a list of important elements, which I’m trying to update from the earnings release:

CRTO
*Great PEG TBD I don’t have a spreadsheet with historical data yet.
*Rapidly decelerating EPS growth SG&A & R&D are growing higher for 3 months QoQ than 6 months QoQ, which means that EPS would decelerate from such a high rate. Increased investment you mention below
*Increasing customers 730 net new clients
*Increasing revenue per customer possible seasonality for small decrease
*Spending more in 2015 (EPS lower as result) invest in the business EPS deceleration you mention above
*Business requires low CapEx there is no line item for it :wink:
*Technology can change quickly (watch for customer acquisition growth decline and spend per customer decline to predict decay to competition…so far so good) the iOS threat!
***Assessment: PEG is low due to very high 1 year EPS growth rate so too much deceleration in the EPS growth rate makes this company susceptible to being less of a great bargain. TBD

They said that they would do Adjusted EBITDA for the second quarter ending June 30, 2015 is expected to be between €18 million and €21 million and they beat it by doing €21.8 million.

They called for Revenue ex-TAC for the second quarter ending June 30, 2015 is expected to be between €105 million and €107 million and they beat it by doing €110.5.

So it looks like they’re doing pretty well.

I would really like to get a better handle on the potential iOS impact.

DJ

3 Likes
6

DJ,

I think that’s an accurate update. I would add the following thoughts:

  1. Based on guidance, it is possible that we may see a q/q adj EPS next quarter. They guided 22M Euros in adj EBITDA which I try to translate into adj EPS. I get about 15c (in Euros) for Q3 which would be a 43% y/y decline.

  2. Also based on guidance, they are predicting 51.6M Euros in adj EDITDA for Q4. Again, I tried to translate this into adj EPS and get 60c in Euros which would be a 64% increase over the prior Q4.

  3. Because they are spending on technology improvements this year their EPS numbers this year will be depressed versus their normal years (we’d hope that such extra spending is a one-time thing). This means that next years comparisons should be really good because their revenue should continue to grow nicely while their spending will be much lower as a percentage of revenue than this year.

  4. I’m not concerned about the iOS thing. Online advertising is huge and people are increasingly buying that way (so people as a whole don’t seem to mind or even like it). Even if Apple allows disabling, I don’t think most people would elect to block ads.

Based on the price drop today and today’s results, I added to my position.

Chris

1 Like
7

Chart Chat…

http://stockcharts.com/freecharts/gallery.html?crto

we dropped down and touched the 200dma on huge volume, but we bounced off this “key support” trend line. A lot of “trades” and institutions like to see support here and when they do, they feel better, stop selling and maybe stop buying. It can act as a secondary indicator to inform our buy decisions. All this volume might mean the sellers are done. Maybe. We had a huge down volume day in mid-June and survived that.

On the other hand, look at Cognex…
http://stockcharts.com/freecharts/gallery.html?cgnx
Bigger ouch if you ask me.

2 Likes
8

Chris,
I did the same thing, doubled the size.
Did the same with SWKS on the sell off
Erik