What happened
Shares of advertising platform Criteo (CRTO 3.21%) were up on Wednesday, after the French company released financial results for the second quarter of 2022. The company also informed investors that it completed a previously announced acquisition, but on dramatically different terms. As of 3 p.m. ET, Criteo stock was up 10%.
So what
It's been a bad year for adtech stocks. This industry can be loosely tracked with an exchange-traded fund (ETF) like SmartETFs Advertising & Marketing Technology ETF. This ETF is down 45% year to date and Criteo stock has trended downward on a nearly identical path. In short, with Apple and Alphabet's Google making things harder for digital ad companies, investors expected Criteo to perform poorly.
NASDAQ: CRTO
Key Data Points
Criteo's Q2 revenue according to general accepted accounting principles (GAAP) was down 10% year over year. However, excluding traffic acquisition costs (a normal thing for adtech companies to exclude) it was only down 3%. And revenue was actual up 7% in constant currency, compensating for the strength of the U.S. dollar. Moreover, the company's net income increased to $18 million from $15 million last year -- resilient results despite the challenging operating environment.
Now what
On Aug. 1, Criteo acquired fellow ad company IPONWEB. The company was originally going to acquire it for $380 million. However, with valuations down, it bought it for just $250 million, or about 2.5 times IPONWEB's sales in 2021. This acquisition is expected to be accretive to Criteo's revenue, and it's part of why management is guiding for full-year adjusted revenue growth of 11% to 14% in constant currency.
One thing for Criteo shareholders to be excited about is ongoing cross-selling opportunities. According to management, just 28% of customers used more than one Criteo product last year. Now, that's up to 33%. If this trend can continue, I expect Criteo's business results to continue to impress.
