Criteo crossed $1 billion in revenue in 2015 - its CEO tells us the big reason why it's ad tech's star performer
The company's revenue crossed $1 billion for the first time - far outpacing the majority of the other publicly-traded ad tech companies.
Criteo is a "performance" advertising specialist that works with ecommerce companies to target ads at people who are likely to be in the market for buying their products - mainly through re-targeting (serving an ad at someone that has already viewed your product or website.)
Revenue for the fiscal year 2015 increased 60% year-over-year to €1.2 billion ($1.3 billion.) Revenue excluding traffic acquisition costs (revenue ex-TAC) grew 59% year-over-year to €482 million ($453 million,) or 40% of revenue, versus analysts' estimates of €474.4 million ($534.4 million).
And where Criteo also stands apart from many of its other ad tech competitors is that it is net profitable. Many of the other public ad tech companies - such as Rocket Fuel and Tremor Video - are carrying huge losses.
Criteo's net income for 2015 grew 60% year-over-year to €57 million ($64 million.) The company also increased its free cash flow by 8% to €57 million ($64 million).
CEO Eric Eichmann tells us the key reason behind Criteo's success
Speaking to Business Insider over the phone, shortly after the earnings release crossed the wires, Criteo CEO Eric Eichmann said the company's 2015 success ultimately boils down to the fact that the majority of its clients (of which 73% are marketers, rather than advertising agencies) treat Criteo as a sales cost rather than a marketing cost.
For that reason (a bit like search advertising) clients don't need to go through a process to get marketing budget sign-off: If Criteo can prove it increased sales, spend on the platform can go up as soon as the next day. It's uncapped spend, unlike marketing budgets, which are often fixed over the course of a year or quarter.
Eichmann said: "I think the reason why people want work with us is because we deliver better performance at scale, it's as easy as that. I can give you 20 reasons why that's the case, but that's why they keep spending with us day in and day out. Top on the list is that we have a technology that is superior and we have teams that are dedicated to improving it day in and day out, more than anybody else in the world in this particular sector."
And spend really did go up. In the fourth quarter of 2015, Eichmann said clients were spending 20% more than in the same quarter in 2014. He says this is largely due to improvements Criteo made to its technology, such as improving its mobile offering - 25% of the company's ex-TAC revenue in the fourth quarter came from users matched across at least two different devices, he added.
Criteo also added more than 900 clients in the last quarter, meaning its total number of customers crossed 10,000 last year. On the publisher side of its business, the company added 2,000 additional publishers in the fourth quarter.
Eichmann also said Criteo's client retention rate was 90% in the last quarter, adding: "Not many other companies can do this, except for companies like Google."
Criteo's three objectives for 2016
After a strong 2015, expectations will be high for this year.
Eichmann said one of his main objectives for 2016 will be to continue to improve Criteo's technology. A search product is currently in "proof of concept phase," it is about to deploy an email product, and the company is exploring use of beacons to see if it can help retailers use offline customer behavior to boost online sales.
Acquisitions could also be likely as the company is increasingly looking to cross-device targeting and measurement - two complicated areas that require sophisticated tech, machine learning, and mapping in order to pull off successfully.
In addition, two new areas of growth will be in the mid-market and Asia, he said.
A note on EPS
Criteo's stock was up 0.35% at the time of writing.
In terms of EPS, Criteo posted €0.88 ($0.99) for the full-year, a miss on the €0.97 ($1.09) estimated by analysts. However, for the quarter, Criteo posted a big beat. Analysts estimated the company would post EPS of €0.40 ($0.45) but it posted €0.55 ($0.62,) in the quarter to December 31.
Eichmann said while he understands the street looks to EPS as a guide, it is not a key measure for Criteo like it is for a more stable, large company - such as a utility company, for example. Adjusted EBITDA is a better indicator for Criteo's operating profitability, he said.
Adjusted EBITDA for the full year increased 64% to €130 million ($146.5 million,) or 10.9% of revenue. For the quarter, adjusted EBITDA increased 53% to €49 million ($55 million,) or 13.5% of revenue.