Criteo SA (ADR) (NASDAQ: CRTO) stock fell 9.11% on September 7th, 2018 and continued its negative momentum on 10 Sep,(as of 11:41 AM GMT-4; Source: Google finance) after the Goldman Sachs analyst confirmed that the advertising retargeting specialist has been decertified as a preferred Facebook Marketing Partner. In a note, Goldman’s Heath Terry says that Criteo has confirmed recent reports that it lost its Facebook Marketing Partner status at the beginning of July. But at the same time and keeping in mind that revenue excluding traffic acquisition costs (TAC) derived from Facebook was only 4% of Criteo’s total revenue last quarter, Terry has reduced his revenue ex-TAC estimates for Criteo by a modest 2%. And he reiterated his neutral rating on the stock. Meanwhile, CRTO has issued a comment on its Facebook relationship. Criteo continues to work with Facebook through integration with the Facebook platform. The change in Criteo’s partner status with Facebook does not impact its ability to buy inventory for clients on the Facebook platform. In the second quarter of 2018, Revenue ex-TAC generated from inventory purchased on the Facebook platform was 4% of Criteo’s Revenue ex-TAC.
For the third quarter 2018, CRTO expects Revenue ex-TAC to be between $218 million and $223 million. This implies a constant-currency growth of -5% to -3%. The company expect Adjusted EBITDA to be between $61 million and $66 million.
For FY 18, CRTO expect Revenue ex-TAC to grow between -1% to +1% at constant currency. The company has raised the adjusted EBITDA margin outlook for FY 18, and expect it to be between 30% to 32% of Revenue ex-TAC.
Meanwhile, CRTO has entered into a definitive agreement to acquire Storetail, which is a pioneering retail media technology platform that enables retailers to monetize native placements on their ecommerce sites on a CPM basis. The 2016 Hooklogic acquisition, and the subsequent Criteo Sponsored Products solution, have allowed Criteo to partner more deeply with retailers from an on-site monetization perspective to reach and engage shoppers throughout every stage of the funnel. While having no material revenue contribution at closing, the addition of Storetail’s highly complementary technology is an important building block to enable Criteo to offer a full monetization platform to retailers. The company expect the deal to close in the third quarter of this year, subject to certain conditions precedent.
Additionally, the company has ended the second quarter with 19,000 commerce and brand clients, a 16% increase year-over-year, while maintaining client retention at close to 90% for all products. Revenue ex-TAC in Q2 2018 grew 5%, or 2% at constant currency, to $230 million (Q2 2017: $220 million). This increase was primarily driven by the addition of new clients across regions, sizes and products, and the improving Revenue ex-TAC margin over the period