Key Highlights

  • Adjusted EPS fell 67% to USD 0.43, below the USD 0.58 estimate, while GAAP diluted EPS was USD 0.11.
  • Contribution ex-TAC declined 17% to USD 240 million, slightly above the USD 239.2 million estimate.
  • Reported Revenue fell 11% to USD 416 million, and adjusted EBITDA dropped 39% to USD 65 million.
  • Media spend rose 9% in constant currency to USD 1.2 billion, and full year guidance was maintained.

Criteo (NASDAQ:CRTO) reported third quarter adjusted diluted EPS of USD 0.43, down from USD 1.31 a year earlier and below the USD 0.58 estimate. Contribution ex-TAC, the company's core profit measure, was USD 240 million, edging past the USD 239.2 million estimate even though it fell 17% year over year. GAAP revenue was USD 416 million, down 11%, and GAAP Net Income was USD 6 million, or USD 0.11 per diluted share, compared with USD 40 million, or USD 0.70.

Retail Media and Performance Media

Retail Media revenue fell 23%, and its Contribution ex-TAC fell 23%, reflecting a USD 20 million headwind from previously communicated scope changes with two clients. Excluding that effect, Retail Media Contribution ex-TAC grew 10% across the underlying client base. Performance Media revenue declined 9%, and its Contribution ex-TAC fell 15%, mainly on soft performance in Commerce Growth.

Media spend, the Volume of Advertising activity flowing through the platform, was USD 1.2 billion in the quarter, up 9% in constant currency, and USD 4.6 billion over twelve months. CEO Michael Komasinski said the company is making progress in newer channels with a growing opportunity pipeline. Criteo is extending Performance Connected TV to Brazil and Mexico by year end, with Canada, the UK, France, Germany, Italy, Spain, Australia and other markets in 2027. Its ChatGPT advertising offering is now available in 89 countries.

Profitability, Cash and Capital

Gross profit fell 19% to USD 208 million, and gross Margin narrowed to 50% from 55%. Adjusted EBITDA was USD 65 million versus USD 105 million, a 27% margin on Contribution ex-TAC compared with 36%. Operating expenses declined 9% to USD 187 million, and non-GAAP operating expenses declined 3% to USD 153 million. Adjusted net income was USD 21 million versus USD 70 million.

Operating cash flow was USD 57 million versus USD 90 million, and free cash flow was USD 21 million versus USD 67 million, with trailing twelve month free cash flow at USD 134 million. Cash and marketable securities were USD 326 million, down USD 63 million from December 31 after USD 65 million of share repurchases over nine months, USD 4 million of it in the third quarter. Total Liquidity was about USD 788 million, including USD 462 million available on the revolving Credit facility. The planned move of the company's legal domicile from Luxembourg to the United States is scheduled for January 1, 2027, subject to Shareholder approval.

Guidance and Currency Assumptions

Criteo maintained full year 2026 guidance for Contribution ex-TAC to decline 10% to 12% in constant currency, with an adjusted EBITDA margin of about 30% of Contribution ex-TAC. For the fourth quarter, it guided to Contribution ex-TAC of USD 292 million to USD 298 million, down 9% to 11% in constant currency, and adjusted EBITDA of USD 105 million to USD 111 million.

The guide reflects the Retail Media scope changes. The company said currency would be a larger headwind in the fourth quarter than previously assumed and based its outlook on a dollar-euro rate of 0.87, a dollar-yen rate of 159 and a dollar-pound rate of 0.75.

Numbers in Context

Third quarter Contribution ex-TAC of USD 240 million compares with a fourth quarter guide of USD 292 million to USD 298 million and nine month Contribution ex-TAC of USD 746 million. Adjusted EBITDA of USD 65 million compares with the fourth quarter guide of USD 105 million to USD 111 million and nine month adjusted EBITDA of USD 203 million. Adjusted EPS of USD 0.43 compares with USD 1.96 for nine months. Nine month free cash flow was zero, against USD 76 million a year earlier.