UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended March 31, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from _________ to _________

Commission file number: 001-36153

Criteo S.A.

(Exact name of registrant as specified in its charter)


France			Not Applicable
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

32 Rue Blanche	Paris	France	75009
(Address of principal executive offices)			(Zip Code)

+33 1 40 40 22 90

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares, each representing one Ordinary Share,
nominal value €0.025 per share

CRTO

Nasdaq Global Select Market

Ordinary Shares, nominal value €0.025 per ~~share~~share

Nasdaq Global Select Market

* Not for trading, but only in connection with the registration of the American Depositary Shares.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ☐ No x

As of ~~April 29, 2020,~~May 5, 2021, the registrant had ~~61,724,141~~60,727,589 ordinary shares, nominal value €0.025 per share, outstanding.

TABLE OF CONTENTS

General

Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q ("Form 10-Q") to the "Company," "Criteo," "we," "us," "our" or similar words or phrases are to Criteo S.A. and its subsidiaries, taken together. In this Form 10-Q, references to "$" and "US$" are to United States dollars. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or "U.S. GAAP."

Trademarks

“Criteo,” the Criteo logo and other trademarks or service marks of Criteo appearing in this Form 10-Q are the property of Criteo. Trade names, trademarks and service marks of other companies appearing in this Form 10-Q are the property of their respective holders.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. When used in this Form 10-Q, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•the ongoing effect of the novel coronavirus pandemic ("COVID-19"), including its macroeconomic effects, on our business, operations, and financial results; and the effect of governmental lockdowns, restrictions and new regulations on our operations and processes;

•the ability of the Criteo Artificial Intelligence (AI) Engine to accurately predict engagement by a user;

•our ability to predict and adapt to changes in widely adopted industry platforms and other new ~~technologies;~~technologies, including without limitation the proposed changes to and enhancements of the Chrome browser announced by Google;

•our ability to continue to collect and utilize data about user behavior and interaction with ~~advertisers;~~advertisers and publishers;

•our ability to acquire an adequate supply of advertising inventory from publishers on terms that are favorable to us;

•our ability to meet the challenges of a growing and international company in a rapidly developing and changing industry, including our ability to forecast accurately;

•our ability to maintain an adequate rate of revenue growth and sustain profitability;

•our ability to manage our international operations and expansion and the integration of our acquisitions;

•the effects of increased competition in our market;

•the impact of COVID-19 on our workforce, operations and revenue, as well as on the workforce, operations and revenue of our customers, and the effectiveness of our actions taken in response to COVID-19;

•our ability to adapt to regulatory, legislative or self-regulatory developments regarding internet privacy matters;

•our ability to protect users’ information and adequately address privacy concerns;

•our ability to enhance our brand;

•our ability to enter new marketing channels and new geographies;

•our ability to effectively scale our technology platform;

•our ability to attract and retain qualified employees and key personnel;

•our ability to maintain, protect and enhance our brand and intellectual property; and

•failures in our systems or infrastructure.

You should also refer to Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, and to Part II, Item 1A "Risk Factors" of this Form 10-Q, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. The degree to which COVID-19 may affect our results and operations will depend on future developments that are highly uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary factors.

This Form 10-Q may contain market data and industry forecasts that were obtained from industry publications. These data and forecasts involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this Form 10-Q is generally reliable, such information is inherently imprecise.

PART I

Item 1. Financial ~~Statements.~~Statements

CRITEO S.A. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)


		Notes	December 31, 2019		March 31, 2020			Notes	March 31, 2021		December 31, 2020
			(in thousands)								(in thousands)
Assets	Assets						Assets
Current assets:	Current assets:						Current assets:
Cash and cash equivalents	Cash and cash equivalents	3	$	418,763	$	436,506	Cash and cash equivalents	3	$	520,060	$	488,011
Trade receivables, net of allowances of $16.1 million and $23.1 million at December 31, 2019 and March 31, 2020, respectively		4	481,732		364,440
Trade receivables, net of allowances of $38.7 million and $39.9 million at March 31, 2021 and December 31, 2020, respectively							Trade receivables, net of allowances of $38.7 million and $39.9 million at March 31, 2021 and December 31, 2020, respectively	4	416,910		474,055
Income taxes	Income taxes		21,817		23,101		Income taxes		12,750		11,092
Other taxes	Other taxes		60,924		65,293		Other taxes		69,692		69,987
Other current assets	Other current assets	5	17,225		19,832		Other current assets	5	22,494		21,405
Marketable securities - current portion							Marketable securities - current portion	3	17,586		0
Total current assets	Total current assets		1,000,461		909,172		Total current assets		1,059,492		1,064,550
Property, plant and equipment, net	Property, plant and equipment, net		194,161		181,848		Property, plant and equipment, net		168,036		189,505
Intangible assets, net	Intangible assets, net	6	86,886		79,818		Intangible assets, net		79,440		79,744
Goodwill	Goodwill	6	317,100		315,266		Goodwill		322,821		325,805
Right of use assets - operating lease	Right of use assets - operating lease	8	142,044		139,954		Right of use assets - operating lease	7	96,266		114,012
Marketable securities - non current portion							Marketable securities - non current portion	3	28,281		41,809
Non-current financial assets	Non-current financial assets		21,747		20,373		Non-current financial assets		14,788		18,109
Deferred tax assets	Deferred tax assets		27,985		29,458		Deferred tax assets		13,511		19,876
Total non-current assets	Total non-current assets		789,923		766,717		Total non-current assets		723,143		788,860
Total assets	Total assets		$	1,790,384	$	1,675,889	Total assets		$	1,782,635	$	1,853,410

Liabilities and shareholders' equity	Liabilities and shareholders' equity						Liabilities and shareholders' equity
Current liabilities:	Current liabilities:						Current liabilities:
Trade payables	Trade payables		$	390,277	$	300,315	Trade payables		$	347,209	$	367,025
Contingencies	Contingencies	14	6,385		6,020		Contingencies	14	1,773		2,250
Income taxes	Income taxes		3,422		3,013		Income taxes		1,201		2,626
Financial liabilities - current portion	Financial liabilities - current portion	3	3,636		2,303		Financial liabilities - current portion	3	2,114		2,889
Operating lease liabilities - current portion	Operating lease liabilities - current portion	8	45,853		47,288		Operating lease liabilities - current portion	7	44,501		48,388
Other taxes	Other taxes		50,099		49,159		Other taxes		56,192		58,491
Employee - related payables	Employee - related payables		74,781		73,251		Employee - related payables		71,450		85,272
Other current liabilities	Other current liabilities	7	35,886		35,709		Other current liabilities	6	32,693		33,390
Total current liabilities	Total current liabilities		610,339		517,058		Total current liabilities		557,133		600,331
Deferred tax liabilities	Deferred tax liabilities		9,272		7,922		Deferred tax liabilities		4,066		5,297
Retirement benefit obligation	Retirement benefit obligation		8,485		7,111		Retirement benefit obligation	8	5,621		6,167
Financial liabilities - non-current portion	Financial liabilities - non-current portion	3	769		555		Financial liabilities - non-current portion	3	371		386
Operating lease liabilities - non-current portion	Operating lease liabilities - non-current portion	8	117,988		113,920		Operating lease liabilities - non-current portion	7	61,874		83,007
Other non-current liabilities	Other non-current liabilities		5,543		2,715		Other non-current liabilities		9,807		5,535
Total non-current liabilities	Total non-current liabilities		142,057		132,223		Total non-current liabilities		81,739		100,392
Total liabilities	Total liabilities		752,396		649,281		Total liabilities		638,872		700,723
Commitments and contingencies	Commitments and contingencies						Commitments and contingencies		0		0
Shareholders' equity:	Shareholders' equity:						Shareholders' equity:
Common shares, €0.025 par value, 66,197,181 and 66,202,881 shares authorized, issued and outstanding at December 31, 2019 and March 31, 2020, respectively.			2,158		2,158
Treasury stock, 3,903,673 and 4,533,650 shares at cost as of December 31, 2019 and March 31, 2020, respectively.			(74,900)		(79,834)
Common shares, €0.025 par value, 66,391,906 and 66,272,106 shares authorized, issued and outstanding at March 31, 2021, and December 31, 2020, respectively.							Common shares, €0.025 par value, 66,391,906 and 66,272,106 shares authorized, issued and outstanding at March 31, 2021, and December 31, 2020, respectively.		2,164		2,161
Treasury stock, 5,597,601 and 5,632,536 shares at cost as of March 31, 2021 and December 31, 2020, respectively.							Treasury stock, 5,597,601 and 5,632,536 shares at cost as of March 31, 2021 and December 31, 2020, respectively.		(87,263)		(85,570)
Additional paid-in capital	Additional paid-in capital		668,389		676,510		Additional paid-in capital		702,022		693,164
Accumulated other comprehensive (loss)			(40,105)		(54,283)
Accumulated other comprehensive loss							Accumulated other comprehensive loss		(17,825)		16,028
Retained earnings	Retained earnings		451,725		450,480		Retained earnings		510,528		491,359
Equity-attributable to shareholders of Criteo S.A.	Equity-attributable to shareholders of Criteo S.A.		1,007,267		995,031		Equity-attributable to shareholders of Criteo S.A.		1,109,626		1,117,142
Non-controlling interests	Non-controlling interests		30,721		31,577		Non-controlling interests		34,137		35,545
Total equity	Total equity		1,037,988		1,026,608		Total equity		1,143,763		1,152,687
Total equity and liabilities	Total equity and liabilities		$	1,790,384	$	1,675,889	Total equity and liabilities		$	1,782,635	$	1,853,410

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


				Three Months Ended							Three Months Ended
		Notes		March 31, 2019		March 31, 2020			Notes		March 31, 2021		March 31, 2020
			(in thousands, except share per data)							(in thousands, except share per data)

Revenue	Revenue	9		$	558,123	$	503,376	Revenue	9		$	541,077	$	503,376

Cost of revenue:	Cost of revenue:							Cost of revenue:
Traffic acquisition costs	Traffic acquisition costs			(322,429)		(297,364)		Traffic acquisition costs			(327,667)		(297,364)
Other cost of revenue	Other cost of revenue			(26,045)		(33,806)		Other cost of revenue			(34,712)		(33,806)

Gross profit	Gross profit			209,649		172,206		Gross profit			178,698		172,206

Operating expenses:	Operating expenses:							Operating expenses:
Research and development expenses	Research and development expenses			(46,577)		(37,515)		Research and development expenses			(31,697)		(37,515)
Sales and operations expenses	Sales and operations expenses			(95,909)		(84,974)		Sales and operations expenses			(79,354)		(84,974)
General and administrative expenses	General and administrative expenses			(33,770)		(25,915)		General and administrative expenses			(33,428)		(25,915)
Total operating expenses	Total operating expenses			(176,256)		(148,404)		Total operating expenses			(144,479)		(148,404)
Income from operations	Income from operations			33,393		23,802		Income from operations			34,219		23,802
Financial income (expense)		11		(1,974)		(334)
Financial expense								Financial expense	11		(718)		(334)
Income before taxes	Income before taxes			31,419		23,468		Income before taxes			33,501		23,468
Provision for income taxes	Provision for income taxes	12		(10,018)		(7,040)		Provision for income taxes	12		(10,051)		(7,040)
Net income	Net income			$	21,401	$	16,428	Net income			$	23,450	$	16,428

Net income available to shareholders of Criteo S.A.	Net income available to shareholders of Criteo S.A.			$	19,120	$	15,459	Net income available to shareholders of Criteo S.A.			$	22,406	$	15,459
Net income available to non-controlling interests	Net income available to non-controlling interests			$	2,281	$	969	Net income available to non-controlling interests			$	1,044	$	969

Net income allocated to shareholders of Criteo S.A. per share:
Weighted average shares outstanding used in computing per share amounts:								Weighted average shares outstanding used in computing per share amounts:
Basic	Basic	13		$	0.30	$	0.25	Basic	13		$	60,741,674	$	61,691,001
Diluted	Diluted	13		$	0.29	$	0.25	Diluted	13		$	64,077,409	$	62,125,582

Weighted average shares outstanding used in computing per share amounts:
Net income allocated to shareholders per share:								Net income allocated to shareholders per share:
Basic	Basic	13		64,336,777		61,691,001		Basic	13		0.37		0.25
Diluted	Diluted	13		66,041,296		62,125,582		Diluted	13		0.35		0.25

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


		Three Months Ended					Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
		(in thousands)							(in thousands)

Net income	Net income	$	21,401	$	16,428	Net income	$	23,450	$	16,428
Foreign currency translation differences, net of taxes	Foreign currency translation differences, net of taxes	(10,492)		(15,932)		Foreign currency translation differences, net of taxes	(36,983)		(15,932)
Actuarial (losses) gains on employee benefits, net of taxes	Actuarial (losses) gains on employee benefits, net of taxes	(1,053)		1,734		Actuarial (losses) gains on employee benefits, net of taxes	629		1,734
Other comprehensive income (loss)	Other comprehensive income (loss)	$	(11,545)	$	(14,198)	Other comprehensive income (loss)	$	(36,354)	$	(14,198)
Total comprehensive income (loss)	Total comprehensive income (loss)	$	9,856	$	2,230	Total comprehensive income (loss)	$	(12,904)	$	2,230
Attributable to shareholders of Criteo S.A.	Attributable to shareholders of Criteo S.A.	$	7,773	$	1,281	Attributable to shareholders of Criteo S.A.	$	(11,446)	$	1,281
Attributable to non-controlling interests	Attributable to non-controlling interests	$	2,083	$	949	Attributable to non-controlling interests	$	(1,458)	$	949

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

CRITEO S.A.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)


		Share capital			Treasury Stock			Additional paid-in capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Equity - attributable to shareholders of Criteo S.A.	Non controlling interest		Total equity		Share capital		Treasury Stock		Additional paid-in capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Equity - attributable to shareholders of Criteo S.A.	Non controlling interest	Total equity
		Common shares		Shares															Common shares		Shares

		(in thousands, except share amounts )																					(in thousands, except share amounts )
Balance at December 31, 2018		67,708,203	$2,201	(3,459,119)	$(79,159)	$663,281	$(30,522)	$387,869	$943,670	$24,221	$967,891
Balance at December 31, 2019												Balance at December 31, 2019	66,197,181		$2,158	(3,903,673)	$(74,900)	$668,389	$(40,105)	$451,725	$1,007,267	$30,721	$1,037,988
Net income	Net income	—						19,120		2,281	21,401	Net income	—							15,459		969	16,428
Other comprehensive income (loss)	Other comprehensive income (loss)	—					(11,347)	—	(11,347)	(198)	(11,545)	Other comprehensive income (loss)	—						(14,178)	—	(14,178)	(20)	(14,198)
Issuance of ordinary shares	Issuance of ordinary shares	28,596	1	—		372	—		373	—	373	Issuance of ordinary shares	5,700		—			39	—		39	—	39
Change in treasury stocks	Change in treasury stocks	(1,594,288)	(45)	1,786,715	40,080	(36,091)	—	(3,944)	—			Change in treasury stocks	—			(629,977)	(4,934)	—		(13,305)	(18,239)	—	(18,239)
Share-Based Compensation	Share-Based Compensation	—				13,533	—		13,533	(11)	13,522	Share-Based Compensation	—					8,082	—		8,082	49	8,131
Other changes in equity	Other changes in equity	—		—		(1)	—	155	154	—	154	Other changes in equity	—							(3,399)		(142)	(3,541)
Balance at March 31, 2019		66,142,511	$2,157	(1,672,404)	$(39,079)	$641,094	$(41,869)	$403,200	$965,503	$26,293	$991,796
Balance at March 31, 2020												Balance at March 31, 2020	66,202,881		$2,158	(4,533,650)	$(79,834)	$676,510	$(54,283)	$450,480	$995,031	$31,577	$1,026,608


		Share capital			Treasury Stock			Additional paid-in capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Equity - attributable to shareholders of Criteo S.A.	Non controlling interest		Total equity		Share capital		Treasury Stock		Additional paid-in capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Equity - attributable to shareholders of Criteo S.A.	Non controlling interest	Total equity
		Common shares		Shares															Common shares		Shares
		(in thousands, except share amounts )																					(in thousands, except share amounts )
Balance at December 31, 2019		66,197,181	$2,158	(3,903,673)	$(74,900)	$668,389	$(40,105)	$451,725	$1,007,267	$30,721	$1,037,988
Balance at December 31, 2020												Balance at December 31, 2020	66,272,106		$2,161	(5,632,536)	$(85,570)	$693,164	$16,027	$491,359	$1,117,142	$35,545	$1,152,687
Net income	Net income	—						15,459		969	16,428	Net income	—							22,406		1,044	23,450
Other comprehensive income (loss)	Other comprehensive income (loss)	—					(14,178)	—	(14,178)	(20)	(14,198)	Other comprehensive income (loss)	—						(33,852)	—	(33,852)	(2,502)	(36,354)
Issuance of ordinary shares	Issuance of ordinary shares	5,700	—			39	—		39	—	39	Issuance of ordinary shares	119,800		3	—		2,148	—		2,151	—	2,151
Change in treasury stocks		—		(629,977)	(4,934)	—		(13,305)	(18,239)	—	(18,239)
Change in treasury stocks(*)												Change in treasury stocks(*)	—			34,935	(1,693)	—		(3,237)	(4,930)	—	(4,930)
Share-Based Compensation	Share-Based Compensation	—				8,082	—		8,082	49	8,131	Share-Based Compensation	—					6,710	—		6,710	50	6,760
Other changes in equity (*)		—						(3,399)		(142)	(3,541)
Balance at March 31, 2020		66,202,881	$2,158	(4,533,650)	$(79,834)	$676,510	$(54,283)	$450,480	$995,031	$31,577	$1,026,608
Other changes in equity												Other changes in equity	—							0
Balance at March 31, 2021												Balance at March 31, 2021	66,391,906		$2,164	(5,597,601)	$(87,263)	$702,022	$(17,825)	$510,528	$1,109,626	$34,137	$1,143,763

^(*) ~~From January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement~~On February 5, 2021, Criteo's Board of ~~Credit Losses on Financial Instruments, which requires~~Directors authorized a share repurchase program of up to $100.0 million of the ~~measurement and recognition~~Company's outstanding American Depositary Shares. The change in treasury stocks is comprised of ~~expected credit losses~~149,960 shares repurchased at an average price of $32.9 offset by 184,895 treasury shares used for ~~financial assets held at amortized cost issued by the Financial Accounting Standards Board (FASB).~~RSUs vesting.

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


			Three Months Ended						Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020
		(in thousands)						(in thousands)
Net income	Net income		$	21,401	$	16,428	Net income		$	23,450	$	16,428
Non-cash and non-operating items	Non-cash and non-operating items		24,998		32,828		Non-cash and non-operating items		30,017		32,828
- Amortization and provisions	- Amortization and provisions		19,644		27,044		- Amortization and provisions		17,225		27,044
- Net gain (loss) on disposal of non-current assets			—		2,266

- Net gain or loss on disposal of non-current assets							- Net gain or loss on disposal of non-current assets		3,945		2,266
- Equity awards compensation expense ⁽¹⁾	- Equity awards compensation expense ⁽¹⁾		13,882		8,502		- Equity awards compensation expense (1)		7,215		8,502

- Change in deferred taxes	- Change in deferred taxes		(5,916)		(2,678)		- Change in deferred taxes		4,998		(2,678)
- Income tax for the period			(1,934)		(2,329)
- Change in income taxes							- Change in income taxes		(3,379)		(2,329)
- Other	- Other		(678)		23		- Other		13		23
Changes in working capital related to operating activities	Changes in working capital related to operating activities		20,821		7,487		Changes in working capital related to operating activities		23,895		7,487
- Decrease in trade receivables			86,018		99,388
- (Decrease) in trade payables			(58,485)		(81,679)
- (Increase) in other current assets			(5,992)		(10,398)
- (Decrease) / Increase in other current liabilities			2,436		(945)
- (Increase) / Decrease in trade receivables							- (Increase) / Decrease in trade receivables		47,226		99,388
- Increase / (Decrease) in trade payables							- Increase / (Decrease) in trade payables		(10,640)		(81,679)
- (Increase) / Decrease in other current assets							- (Increase) / Decrease in other current assets		(5,050)		(10,398)
- Increase/ (Decrease) in other current liabilities							- Increase/ (Decrease) in other current liabilities		(4,527)		(945)
- Change in operating lease liabilities and right of use assets	- Change in operating lease liabilities and right of use assets		(3,156)		1,121		- Change in operating lease liabilities and right of use assets		(3,114)		1,121

Cash from operating activities	Cash from operating activities		67,220		56,743		Cash from operating activities		77,362		56,743
Acquisition of intangible assets, property, plant and equipment	Acquisition of intangible assets, property, plant and equipment		(13,292)		(11,258)		Acquisition of intangible assets, property, plant and equipment		(11,953)		(11,258)
Change in accounts payable related to intangible assets, property, plant and equipment	Change in accounts payable related to intangible assets, property, plant and equipment		(10,392)		(479)		Change in accounts payable related to intangible assets, property, plant and equipment		(1,827)		(479)
(Payment for) Disposal of a business, net of cash acquired (disposed)			(5,325)		—

Change in other non-current financial assets	Change in other non-current financial assets		(32)		889		Change in other non-current financial assets		(3,252)		889
Cash used for investing activities	Cash used for investing activities		(29,041)		(10,848)		Cash used for investing activities		(17,032)		(10,848)

Repayment of borrowings	Repayment of borrowings		(172)		(170)		Repayment of borrowings		(182)		(170)
Proceeds from capital increase	Proceeds from capital increase		11		4		Proceeds from capital increase		2,074		4
Change in treasury stocks			—		(18,241)
Repurchase of treasury stocks							Repurchase of treasury stocks		(4,930)		(18,241)
Change in other financial liabilities	Change in other financial liabilities		(30)		(354)		Change in other financial liabilities		(378)		(354)
Cash used for financing activities	Cash used for financing activities		(191)		(18,761)		Cash used for financing activities		(3,416)		(18,761)
Effect of exchange rates changes on cash and cash equivalents	Effect of exchange rates changes on cash and cash equivalents		(6,643)		(9,391)		Effect of exchange rates changes on cash and cash equivalents		(24,865)		(9,391)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents		31,345		17,743		Net increase in cash and cash equivalents		32,049		17,743
Net cash and cash equivalents at beginning of period	Net cash and cash equivalents at beginning of period		364,426		418,763		Net cash and cash equivalents at beginning of period		488,011		418,763
Net cash and cash equivalents at end of period	Net cash and cash equivalents at end of period		$	395,771	$	436,506	Net cash and cash equivalents at end of period		$	520,060	$	436,506

Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information						Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds	Cash paid for taxes, net of refunds		(17,868)		(12,047)		Cash paid for taxes, net of refunds		(8,432)		(12,047)
Cash paid for interest, net of amounts capitalized			(407)		(349)
Cash paid for interest							Cash paid for interest		(367)		(349)

⁽¹⁾ Of which ~~$13.5~~$6.8 million and $8.1 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended March 31, ~~2019~~2021 and 2020, respectively.

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

CRITEO S.A.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Criteo S.A. was initially incorporated as a société par actions simplifiée, or S.A.S., under the laws of the French Republic on November 3, 2005, for a period of 99 years and subsequently converted to a société anonyme, or S.A.

We are a global technology company ~~building~~powering the ~~leading advertising platform for~~world's marketers with trusted and impactful advertising. We operate at the intersection of ecommerce, digital marketing and media monetization. We enable brands' and retailers' growth by providing best-in-class marketing and monetization services on the open Internet. We ~~strive to deliver impactful business results at~~do this by activating commerce data through artificial intelligence ("AI") technology, reaching consumers on an extensive scale ~~to commerce companies~~across all stages of the consumer journey, and consumer brands by meeting their marketing goals at their targeted return on investment. Using shopping data, predictive technology and large consumer reach, we help our clients drive Awareness, Consideration and Conversion for their products and services¹~~, and help retailers generate~~generating advertising revenues from ~~brands.~~consumer brands for large retailers. Our vision is to build the world's leading Commerce Media Platform to deliver measurable business outcomes at scale for global brands, agencies and retailers across multiple marketing goals. Our data is pooled among our clients and publishers and offers deep insights into consumer intent and purchasing habits. To drive ~~measurable results for clients,~~trusted and impactful advertising, we activate our data assets in a privacy-by-design way through proprietary ~~artificial intelligence ("AI")~~AI technology to engage consumers in real time ~~through the pricing and delivery of~~with highly relevant digital advertisements ("ads"), across devices and environments. By pricing our offering on a range of pricing models and measuring our value based on clear, well-defined performance metrics, we make the return on investment transparent and easy to measure for advertisers.

In these notes, Criteo S.A. is referred to as the "Parent" company and together with its subsidiaries, collectively, as "Criteo," the "Company," the "Group," or "we".

^{___________________________________________________}

¹ Driving Awareness for a brand means exposing its brand name to consumers who have not been in touch with the brand before, thereby creating brand awareness from such consumers. Driving Consideration for an advertiser's products or services means attracting prospective new consumers to consider engaging with and/or buying this advertiser's products or services. Driving Conversion for an advertisers' products or services means triggering a purchase by consumers who have already engaged with this advertisers products or services in the past.

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements included herein (the "Unaudited Condensed Consolidated Financial Statements") have been prepared by Criteo S.A. pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on ~~March 2, 2020.~~February 26, 2021. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses in the condensed consolidated financial statements and accompanying notes. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. Our actual results may differ from these estimates. U.S. GAAP requires us to make estimates and judgments in several areas, including, but not limited to: (1) revenue recognition criteria, (2) allowances for credit losses, (3) research tax credits, (4) income taxes, including i) recognition of deferred tax assets arising from the subsidiaries projected taxable profit for future years, ii) evaluation of uncertain tax positions associated with our transfer pricing policy and iii) recognition of income tax position in respect with tax reforms recently enacted in countries we operate, (5) assumptions used in valuing acquired assets and assumed liabilities in business combinations, (6) assumptions used in the valuation of goodwill, intangible assets and right of use assets - operating lease, and (7) assumptions used in the valuation model to determine the fair value of share-based compensation plan.

The ~~ongoing impact~~severity, magnitude, duration and after-effects of the COVID-19 ~~increases~~pandemic on general economic conditions increase uncertainty associated with these estimates, in particular those related to allowance for credit losses, assumptions used in the valuation of goodwill and estimates relating to income taxes.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, except for the update to our existing accounting ~~pronouncements adopted below.~~policy described below:

Revenue Recognition

Principal vs Agent:

For certain customer arrangements, related to transactions using our Retail Media Platform, a new self-service solution providing transparency, measurement and control to our brand and retailer customers, we act as agent, because we (i) do not control the advertising inventory before it is transferred to our clients, (ii) do not have inventory risks because we do not purchase the inventory upfront and (iii) have limited discretion in establishing prices as we charge a platform fee based on a percentage of the digital advertising inventory purchased through the use of the platform. Therefore, based on these and other factors, we report the revenue earned and related costs incurred by the Retail Media Platform solution on a net basis.

Accounting Pronouncements ~~adopted~~Adopted in ~~2020~~2021

Effective January 1, ~~2020,~~2021, we have adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. ~~2016-13,~~ ~~Financial Instruments-Credit Losses~~2019-12, Income Taxes (Topic ~~326)~~740): ~~Measurement of Credit Losses on Financial Instruments~~Simplifying the Accounting for Income Taxes (ASU 2019-12), which ~~requires~~simplifies the ~~measurement and recognition~~accounting for income taxes. The adoption of ~~expected credit losses for~~this new standard did not have a material impact on our consolidated financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. This results in earlier recognition of credit losses.

We measure loss allowances for all trade receivables using the lifetime expected credit loss approach, as described above. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

statements.

109

Effective January 1, ~~2020,~~2021, we have adopted ~~ASU 2017-04,~~the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2018-14, ~~Goodwill and Other (Topic 350)~~C. ASU 2017-04 simplifies the subsequent measurement of goodwill and reduces the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit's fair value. The adoption of the ASU did not have an impact in our financial position or results of operations as we did not recognize an impairment loss during the period.

~~Effective January 1, 2020, we have adopted ASU 2018-15,~~ ~~Intangibles - Goodwill and Other - Internal Use Software - Customer’s Accounting for Implementation Costs incurred in a Cloud Computing Arrangement That is a Service Contract~~. This ASU was issued to clarify the accounting for implementation costs incurred for SaaS agreements. Previously the guidance only referred to development of internal use software and the accounting for SaaS agreements was not clarified. This ASU states that the implementation costs of SaaS agreements should be capitalized. The adoption of the standard did not have an impact on our financial position or results of operations, however, it did have a minor impact on expense classification in current and future periods.

~~Recent Accounting Pronouncements~~

~~In August 2018, the FASB issued ASU 2018-14, Compensation~~ompensation - Retirement Benefits - Defined Benefit Plans - General. The purpose of this update is to modify disclosure requirements for Defined Benefit Plans. It removes requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year among others. It adds disclosure requirements for the items such as an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. ~~We intend to adopt the standard on the effective date of January 1, 2021.~~ The adoption of ~~ASU 2018-14 is~~this new standard did not ~~expected to~~ have a material impact on our consolidated financial ~~position or results of operations but may have an impact on our disclosures.~~statements.

~~In December 2019, the FASB issued~~

Recent Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. We intend to adopt the standard on the effective date of January 1, 2021. The adoption of ASU 2019-12 is not expected to have a material impact on our financial position or results of operations but may have an impact on our disclosures.Pronouncements

~~Other accounting~~Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon adoption.

1110

Note 2. Significant Events and Transactions of the Period

~~Share repurchase program~~

On October 25, 2018, Criteo's Board of Directors authorized a share repurchase program of up to $80.0 million of the Company’s outstanding American Depositary Shares. We completed this share repurchase program in 2018. As of December 31, 2018, 3.5 million shares were held as treasury shares.

~~On February 8, 2019, the Board of Directors authorized the reduction of capital resulting in the formal retirement of 1.6 million treasury shares.~~

On July 26, 2019, Criteo's Board of Directors authorized a share repurchase program of up to $80.0 million of the Company's outstanding American Depositary Shares. As of December 31, 2019, 3.2 million shares were held as treasury shares as part of the share repurchase program authorized on July 26, 2019.

As of March 31, 2020, we had 4.5 million treasury shares remaining which may be used to satisfy the Company's obligations under its employee equity plans upon RSU vestings in lieu of issuing new shares, and for M&A activity. We completed the 2019 share repurchase program in February 2020.

Number of Treasury Shares Amount
(in thousands of dollars)
Balance at January 1, 2020 3,903,673 $ 74,900
Treasury Shares Repurchased for RSU Vesting 1,258,068 18,239
Treasury Shares Issued for RSU Vesting (628,091) (13,305)
Balance at March 31, 2020 4,533,650 $ 79,834

Restructuring

~~Cease of our R&D operations in Palo Alto~~

On ~~October 7, 2019, in connection with the new organization structure,~~February 1, 2021, the Company announced a plan to restructure its ~~R&D activities~~workforce across functions and regions to better align with the ~~closing~~Company's evolution. We expect the plan will be completed by the end of ~~its R&D operations in Palo Alto.~~2021. The Company ~~incurred additional net~~recorded $5.2 million of restructuring ~~costs of $0.4 million~~charges for severance related to this plan in the ~~three month~~ period ended March 31, ~~2020 comprising of payroll~~2021. For the three months ended March 31, 2021, $4.0 million was included in Sales and Operations expenses, $1.1 million was included in General and Administrative expenses and $0.1 million was included in Research and Development expenses.

~~The following table summarizes restructuring activities as of March 31, 2020 included in other current liabilities on the balance sheet:~~


	~~Three Months Ended~~
	~~March 31, 2020~~
	~~(in thousands)~~
~~Restructuring liability - January 1, 2020~~	$	~~5,581~~
~~Restructuring costs~~	~~449~~
~~Amount paid~~	~~(3,788)~~
~~Restructuring liability - March 31, 2020~~	~~2,242~~

~~New organization structure~~

As part of a new organization structure designed to best support our multi-product platform strategy and accelerate execution, commenced in the twelve month period ended December 31, 2019, the Company incurred net restructuring costs of $0.8 million for the three month period ended March 31, 2020, comprising of payroll expenses.


	~~Three Months Ended~~
	~~March 31, 2020~~
	~~(in thousands)~~
~~Payroll related costs~~	$	~~(772)~~
~~Total restructuring costs~~	~~(772)~~

~~For the three month period ended March 31, 2020, $0.2 million was included in Research and Development expenses and $0.6 millionwas included in Sales and Operations expenses.~~

The following table ~~summarizes~~presents the breakdown of restructuring ~~activities~~liability as of March 31, ~~2020 included in other current liabilities~~2021, presented as part of employees related payables on the balance sheet:


	~~Three Months Ended~~
	~~March 31, 2020~~
	(in thousands)
Restructuring liability - January 1, ~~2020~~2021	$	510
Restructuring costs	~~772~~5,152
Amount paid	~~(686)~~(84)
Restructuring liability - March 31, ~~2020~~2021	~~596~~5,578

Note 3. Financial Instruments

Financial assets

The maximum exposure to credit risk at the end of each reported period is represented by the carrying amount of financial assets and summarized in the following table:


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020
		(in thousands)							(in thousands)

Trade receivables, net of allowance		481,732		364,440
Trade receivables, net of allowances						Trade receivables, net of allowances	416,910		474,055
Other taxes	Other taxes	60,924		65,293		Other taxes	69,692		69,987
Other current assets	Other current assets	17,225		19,832		Other current assets	22,494		21,405
Non-current financial assets	Non-current financial assets	21,747		20,373		Non-current financial assets	14,788		18,109
Marketable Securities						Marketable Securities	45,867		41,809
Total	Total	$	581,628	$	469,938	Total	$	569,751	$	625,365

~~Credit Risk~~

We maintain an allowance for estimated credit losses. During the twelve-month period ended December 31, 2019 and the three-month period ended March 31, 2020, our net change in allowance for credit losses was $9.9 million and $(7.0) million, respectively (note 4). The primary cause of this change was the adoption of ~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326)~~ ~~effective January 1, 2020 resulting in an earlier recognition of credit losses, the cumulative effect of which, was recorded as an adjustment to retained earnings for $3.5 million (note 1).~~

For our financial assets, other than trade receivables, net of allowances, the fair value approximates the carrying amount, given the nature of the financial assets and the maturity of the expected cash flows.

~~Trade Receivables~~

Credit risk is defined as an unexpected loss in cash and earnings if the client is unable to pay its obligations in due time. We perform internal ongoing credit risk evaluations of our clients. When a possible risk exposure is identified, we require prepayments or pause the provision of services until payment of past due receivables is made.

~~As of December 31, 2019 and March 31, 2020,~~

~~no customer accounted for 10% or more of trade receivables.~~

Financial Liabilities


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Trade payables	Trade payables	$	390,277	$	300,315	Trade payables	$	347,209	$	367,025
Other taxes	Other taxes	50,099		49,159		Other taxes	56,192		58,491
Employee-related payables	Employee-related payables	74,781		73,251		Employee-related payables	71,450		85,272
Other current liabilities	Other current liabilities	35,886		35,709		Other current liabilities	32,693		33,390
Financial liabilities	Financial liabilities	4,405		2,858		Financial liabilities	2,485		3,275
Total	Total	$	555,448	$	461,292	Total	$	510,029	$	547,453

~~For our~~The fair value of financial liabilities ~~the fair value~~ approximates the carrying amount, given the nature of the financial liabilities and the maturity of the expected cash flows.

We are party to several loan agreements and a revolving credit facility, or RCF, with third-party financial institutions. There have been no significant changes from what was disclosed in Note 12 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Fair Value Measurements

We measure the fair value of our cash equivalents and marketable securities, which include interest-bearing bank deposits, as level 2 measurements because they are valued using observable market data.

Financial assets or liabilities include derivative financial instruments used to manage our exposure to the risk of exchange rate fluctuations. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

Derivative Financial Instruments

Derivatives consist of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts in financial income (expense), and their position on the balance sheet is based on their fair value at the end of each respective period. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

~~December 31, 2019~~

~~March 31, 2020~~

~~(in thousands)~~

~~Derivative Assets:~~

~~Included in other current assets~~

—

~~105~~

~~Derivative Liabilities:~~

~~Included in financial liabilities - current portion~~

~~1,284~~

—


	March 31, 2021		December 31, 2020

	(in thousands)



Derivative Liabilities:
Included in financial liabilities - current portion	$	394	$	925

~~For our~~The fair value of derivative financial instruments ~~the fair value~~ approximates the ~~carrying~~notional amount, given the nature of the derivative financial instruments and the maturity of the expected cash flows.

Cash and Cash Equivalents

The following table presents for each reporting period, the breakdown of cash and cash equivalents:


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Cash equivalents	Cash equivalents	$	189,119	$	169,569	Cash equivalents	$	154,885	$	162,457
Cash on hand	Cash on hand	229,644		266,937		Cash on hand	365,175		325,554
Total cash and cash equivalents	Total cash and cash equivalents	$	418,763	$	436,506	Total cash and cash equivalents	$	520,060	$	488,011

~~Investments~~Cash equivalents are investments in interest–bearing bank deposits which meet ASC 230—Statement of Cash flows criteria: short-term, highly liquid investments, for which the risks of changes in value are considered to be insignificant. Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

For our cash and cash equivalents, the fair value approximates the carrying amount, given the nature of the cash and cash equivalents and the maturity of the expected cash flows.

Marketable Securities

The following table presents for each reporting period, the breakdown of the fair value of marketable securities:


	March 31, 2021		December 31, 2020

	(in thousands)
Securities Available-for-sale
Term Deposits	$	23,281	$	24,538
Securities Held-to-maturity
Term Deposits	$	22,586	$	17,271
Total	$	45,867	$	41,809

The gross unrealized gains on our marketable securities were not material as of March 31, 2021.

Term deposits are considered a level 2 financial instrument as they are measured using valuation techniques based on observable market data.

The following table classifies our marketable securities by contractual maturities:


	Held-to-maturity		Available-for-sale
	March 31, 2021

	(in thousands)
Due in one year	$	17,586	$	0
Due in one to five years	$	5,000	$	23,281
Total	$	22,586	$	23,281

1613

Note 4. Trade Receivables

The following table shows the breakdown in trade receivables net book value for the presented periods:


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Trade accounts receivables	Trade accounts receivables	$	497,800	$	387,524	Trade accounts receivables	$	455,604	$	513,954
(Less) Allowance for credit losses	(Less) Allowance for credit losses	(16,068)		(23,084)		(Less) Allowance for credit losses	(38,694)		(39,899)
Net book value at end of period	Net book value at end of period	$	481,732	$	364,440	Net book value at end of period	$	416,910	$	474,055

Changes in allowance for credit accounts are summarized below:


		2019		2020			2021		2020

		(in thousands)							(in thousands)
Balance at January 1	Balance at January 1	$	(25,918)	$	(16,068)	Balance at January 1	$	(39,899)	$	(16,068)
Allowance for credit losses through retained earnings (*)	Allowance for credit losses through retained earnings (*)	—		(3,498)		Allowance for credit losses through retained earnings (*)	—		(3,498)
Allowance for credit losses	Allowance for credit losses	(5,282)		(6,997)		Allowance for credit losses	(2,759)		(6,997)
Reversal of provision	Reversal of provision	5,931		2,989		Reversal of provision	3,306		2,989
Currency translation adjustment	Currency translation adjustment	100		490		Currency translation adjustment	658		490
Balance at March 31	Balance at March 31	$	(25,169)	$	(23,084)	Balance at March 31	$	(38,694)	$	(23,084)

(*) ~~From~~On January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost issued by the Financial Accounting Standards Board (FASB). ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. This results in earlier recognition of credit losses. We adopted ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained ~~earnings (note 1).~~earnings.

~~The amount charged to allowance for credit losses for~~We write off accounts receivable balances once the ~~three months ended March 31, 2020~~ ~~increased~~ compared to the same period in the prior year due to the application of the expected credit loss model beginning on January 1, 2020 as well as an increase in the provision due to the expected impact of COVID-19 on the Company's future cash collections.

~~The reversal of provision decreased during~~receivables are no longer deemed collectible. During the three month period ended March 31, ~~2020, mainly due to lower payments received~~2021, and ~~write-offs of long outstanding receivables already reserved for which it is certain we will not collect the receivable. During the three months ended~~ March 31, 2020, the Company recovered $0.5 million, and $0.6 million, respectively, previously written off, and accounted for as a reversal of provision.

~~The Company mitigates its credit risk with respect to accounts receivables by performing credit evaluations~~As of March 31, 2021 and ~~monitoring agencies and advertisers' accounts receivables balances.~~December 31, 2020 no customer accounted for 10% or more of trade receivables.

1714

Note 5. Other Current Assets

The following table shows the breakdown in other current assets net book value for the presented periods:


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Prepayments to suppliers	Prepayments to suppliers	$	5,109	$	4,668	Prepayments to suppliers	$	4,362	$	5,613
Other debtors	Other debtors	4,225		3,822		Other debtors	3,725		5,991
Prepaid expenses	Prepaid expenses	7,891		11,237		Prepaid expenses	14,407		9,801
Derivative instruments		—		105
Gross book value at end of period		17,225		19,832

Net book value at end of period	Net book value at end of period	$	17,225	$	19,832	Net book value at end of period	$	22,494	$	21,405

Prepaid expenses mainly consist of costs related to SaaS arrangements and office rental advance payments.

Derivative financial instruments include foreign currency swaps or forward purchases or sales contracts used to manage our exposure to the risk of exchange rate fluctuations. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

~~Note 6. Intangible Assets and Goodwill~~

~~There have been no significant additions to intangible assets or goodwill since December 31, 2019.~~

Due to the changes in the current economic environment and the recent decline in global equity markets related to the COVID-19 pandemic, we believe that there has been a change in events and circumstances that may indicate that the carrying amount of goodwill might not be recoverable. We have therefore conducted an interim impairment test between our annual tests. This interim test was based on a stretched scenario reflecting the estimated impact of COVID-19, built on top of the business plan used for our 2019 annual test. The test concluded that the reporting unit’s fair value is above its carrying amount, including goodwill. Therefore, no impairment loss was recorded.

~~In addition, no triggering events have occurred that would indicate impairment of intangible assets.~~

~~The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows:~~

Software Technology and customer relationships Total
(in thousands)
From April 1 to December 31, 2020 $ 6,420 $ 8,537 $ 14,957
2021 7,414 11,382 18,796
2022 4,826 11,382 16,208
2023 2,652 10,897 13,549
2024 685 8,700 9,385
Thereafter 59 6,852 6,911
Total $ 22,056 $ 57,750 $ 79,806

Note 7.6. Other Current Liabilities

Other current liabilities are presented in the following table:


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Clients' prepayments	Clients' prepayments	$	13,618	$	11,249	Clients' prepayments	$	11,575	$	12,234
Credit notes	Credit notes	16,420		18,993		Credit notes	15,529		14,433
Accounts payable relating to capital expenditures	Accounts payable relating to capital expenditures	4,408		3,834		Accounts payable relating to capital expenditures	2,366		4,721
Other creditors	Other creditors	1,213		1,447		Other creditors	2,235		1,918
Deferred revenue	Deferred revenue	227		186		Deferred revenue	988		84
Total	Total	$	35,886	$	35,709	Total	$	32,693	$	33,390

2016

Note 8.7. Leases

We have adopted Topic 842 effective January 1, 2019 on a modified retrospective basis and elected not to restate comparative periods. We chose to use certain practical expedients offered by the standard including:

•~~We did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or the initial direct costs for any existing leases.~~

•~~We do not recognize a lease liability or right of use asset for leases with a term of 12 months or less.~~

•~~We used hindsight in determining the lease term.~~

We lease space under non-cancellable operating leases for our offices as well as our data centers. Our office leases typically include free rent periods or rent escalation periods, and may also include leasehold improvement incentives. Leases for data centers may also include free rent periods or rent escalation periods. These leases typically do not include residual value guarantees. Both office and data center leases may contain both lease components (rent) and non-lease components (maintenance, electrical costs, and other service charges). Non-lease components are accounted for separately.

Both office and data center leases typically contain options to renew, and/or early terminate. We have evaluated management's expectations for these options as of March 31, 2020. Options have been included in the lease term if management has determined it is reasonably certain it will be exercised.

Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate at lease commencement to determine the present value of future payments. We have a centralized treasury function, and the majority of our leases are negotiated and signed by representatives of Criteo SA. As such, the incremental borrowing rate of Criteo SA is used for all of our contracts. It is then adjusted in consideration of the currency of the lease and the lease term as of the lease commencement date.

Lease expense is recognized for minimum lease payments on a straight-line basis over the lease term. Variable costs are expensed in the period incurred. Variable expenses include changes in indexation. Leases for data centers may have variable costs based on electrical usage.

The components of lease expense are as follows:


		Three Months Ended										Three Months Ended											Three Months Ended
		March 31, 2019										March 31, 2020											March 31, 2021				March 31, 2020
		Offices		Data Centers		Total		Offices		Data Centers		Total			Offices		Data Centers		Total		Offices		Data Centers		Total
		(in thousands)																		(in thousands)
Lease expense	Lease expense	$	8,340	$	5,187	$	13,527	$	6,314	$	6,536	$	12,850	Lease expense	$	6,543	$	6,398	$	12,941	$	6,314	$	6,536	$	12,850
Short term lease expense	Short term lease expense	925		530		1,455		286		56		342		Short term lease expense	76		7		83		286		56		342
Variable lease expense	Variable lease expense	—		114		114		9		516		525		Variable lease expense	144		73		217		9		516		525
Sublease income	Sublease income	(1,076)		—		(1,076)		(202)		—		(202)		Sublease income	(188)		0		(188)		(202)		0		(202)
Total operating lease expense	Total operating lease expense	$	8,189	$	5,831	$	14,020	$	6,407	$	7,108	$	13,515	Total operating lease expense	$	6,575	$	6,478	$	13,053	$	6,407	$	7,108	$	13,515

As of March 31, ~~2020, we had future minimum lease payments as follows:~~

March 31, 2020
Offices Data Centers Total
(in thousands)
Remainder of 2020 $ 24,813 $ 14,251 $ 39,064
2021 30,386 14,586 44,972
2022 27,839 10,714 38,553
2023 18,455 4,383 22,838
2024 9,413 2,229 11,642
Thereafter 14,285 373 14,658
Total minimum lease payments 125,191 46,536 171,727
Impact of Discount Rate (9,748) (770) (10,518)
Total Lease Liability $ 115,443 $ 45,766 $ 161,209

~~The weighted average remaining lease term and discount rates as of March 31, 2020 are as follows:~~

March 31, 2019 March 31, 2020
Weighted average remaining lease term (years)
    Offices 5.4 4.5
    Data Centers 3.0 3.0
Weighted average discount rate
    Offices 2.6 % 2.5 %
    Data Centers 1.7 % 1.7 %

~~Supplemental cash flow information related to our operating leases is as follows for the period ended March 31, 2020:~~

Three Months Ended
March 31, 2019 March 31, 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Cash flow for operating activities $ (13,964) $ (14,048)
Right of use assets obtained in exchange for new operating lease liabilities $ 10,926 $ —

~~As of March 31, 2020,~~2021, we have additional operating leases, that have not yet commenced which will result in additional operating lease liabilities and right of use assets:

Offices Data Centers
(in thousands)
Additional operating lease liabilities $ 11,295 $ 7,807
Additional right of use assets $ 8,446 $ 7,807


	Offices		Data Centers
	(in thousands)
Additional operating lease liabilities	$	0	$	7,893
Additional right of use assets	$	0	$	7,893

These operating leases will commence during the ~~fiscal~~ year ending December 31, ~~2020.~~2021.

2217

Note 8. Employee Benefits

Defined Benefit Plans

According to the French law and the Syntec Collective Agreement, French employees are entitled to compensation paid on retirement.

The following table summarizes the changes in the projected benefit obligation:


	Projected benefit obligation
	(in thousands)
Projected benefit obligation present value at January 1, 2020	$	8,485
Service cost	2,232
Interest cost	95
Actuarial losses (gains)	(5,214)

Currency translation adjustment	569
Projected benefit obligation present value at December 31, 2020	$	6,167
Service cost	337
Interest cost	13
Actuarial losses (gains)	(629)

Currency translation adjustment	(267)
Projected benefit obligation present value at March 31, 2021	$	5,621

The Company does not hold any plan assets for any of the periods presented.

The main assumptions used for the purposes of the actuarial valuations are listed below:


	Three months ended	Year ended
	March 31, 2021	December 31, 2020
Discount rate (Corp AA)	1.25%	0.85%
Expected rate of salary increase	5%	5%
Expected rate of social charges	49% - 50%	49% - 50%
Expected staff turnover	0% - 17.8%	0% - 17.8%
Estimated retirement age	Progressive table	Progressive table
Life table	TH-TF 2000-2002 shifted	TH-TF 2000-2002 shifted

Defined Contribution Plans

The total expense represents contributions payable to these plans by us at specified rates.

In some countries, the Group’s employees are eligible for pension payments and similar financial benefits. The Group provides these benefits via defined contribution plans. Under defined contribution plans, the Group has no obligation other than to pay the agreed contributions, with the corresponding expense charged to income for the year. The main contributions concern France, the United States, for 401k plans, and the United Kingdom.


	Three Months Ended
	March 31, 2021		March 31, 2020
	(in thousands)
Defined contributions plans included in personnel expenses	$	(5,553)	$	(3,429)

Note 9. Revenue

~~Revenue Recognition~~

We sell personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. Historically, the Criteo model has focused solely on converting our clients' website visitors into customers, enabling us to charge our clients only when users engage with an ad we deliver, usually by clicking on it. More recently, we have expanded our solutions to address a broader range of marketing goals for our clients.

~~We offer two families of solutions to our commerce and brand clients:~~

•~~Criteo Marketing Solutions~~ ~~allow commerce companies to address multiple marketing goals by engaging their consumers with personalized ads across the web, mobile and offline store environments.~~

•~~Criteo Retail Media~~ solutions allow retailers to generate advertising revenues from consumer brands, and/or to drive sales for themselves, by monetizing their data and audiences through personalized ads, either on their own digital property or on the open Internet, that address multiple marketing goals.

In conjunction with broadening our solutions, we have also started expanding our pricing models to now include a combination of cost-per-install and cost-per-impression for selected new solutions, in addition to cost-per-click.

We recognize revenues when we transfer control of promised services directly to our clients or to advertising agencies, which we collectively refer to as our clients, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services.

For campaigns priced on a cost-per-click and cost-per-install basis, we bill our clients when a user clicks on an advertisement we deliver or installs an application by clicking on an advertisement we delivered, respectively. For these pricing models, we recognize revenue when a user clicks on an advertisement or installs an application.

For campaigns priced on a cost-per-impression basis, we bill our clients based on the number of times an advertisement is displayed to a user. For this pricing model, we recognize revenue when an advertisement is displayed.

We act as principal in our arrangements because (i) we control the advertising inventory (spaces on websites) before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices. Therefore, based on these factors, we report revenue earned and the related costs incurred on a gross basis.

Disaggregation of revenue

~~The following tables disclose our consolidated revenue for each geographical area for each of the reported periods. Revenue by geographical area is based on the location of advertisers’ campaigns.~~

The following table presents our ~~revenues~~ disaggregated ~~by geographical area:~~revenues:


		Americas		EMEA		Asia-Pacific		Total			Marketing Solutions		Retail Media		Total
For the three months ended	For the three months ended	(in thousands)															For the three months ended	(in thousands)

March 31, 2019		$	217,993	$	209,643	$	130,487	$	558,123
March 31, 2021										March 31, 2021	$	483,190	$	57,887	$	541,077
March 31, 2020	March 31, 2020	$	191,745	$	190,114	$	121,517	$	503,376	March 31, 2020	$	469,773	$	33,603	$	503,376

Excluding our historical solution for driving Conversion through Criteo Marketing Solutions (formerly called Criteo Dynamic Retargeting), no individual solution accounted for more than 10% of total consolidated revenue for the periods presented.

2320

~~Customer Credit Notes~~

We offer credit notes to certain customers as a form of incentive, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and they are recognized as a reduction of revenue. We believe that there will not be significant changes to our estimates of variable consideration.

~~Deferred Revenues~~

We record deferred revenues when cash payments are received or due in advance of our performance. Our payment terms vary depending on the service or the type of customer. For certain customers, we require payment before the services are delivered.

~~Practical Expedients~~

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

~~We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and operating expenses.~~

Note 10. Share-Based Compensation

The board of directors has been authorized by the general meeting of the shareholders to grant employee warrants (Bons de Souscription de Parts de Créateur d’Entreprise or "BSPCEs"), share options (Options de Souscription d'Actions or "OSAs"), restricted share units ("RSUs") and non-employee warrants (Bons de Souscription d'Actions or "BSAs").

During the three months ended March 31, ~~2020,~~2021, there was one grant of RSUs under the Employee Share Option Plan 1213 as defined in Note 20 19 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

On ~~March 2, 2020, 40,240~~February 25, 2021, 96,450 RSUs were granted to Criteo employees subject to continued employment and ~~43,217~~235,850 RSUs and ~~43,217~~235,848 PSUs were granted to ~~a member~~members of the management subject to continued employment.

There have been no changes in the vesting and method of valuation of the BSPCEs, OSAs, RSUs, or BSAs from what was disclosed in Note 2019 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on ~~March 2, 2020.~~February 26, 2021.

Change in ~~Number~~number of ~~BSPCE/OSA/RSU/~~outstanding BSPCE / OSA / RSU / BSA


		OSA/BSPCE	RSU	BSA	Total		OSA/BSPCE	RSU/PSU	BSA	Total
Balance at January 1, 2020		2,559,534	4,978,987	363,767	7,902,288
Balance at January 1, 2021						Balance at January 1, 2021	2,102,158	4,954,091	343,775	7,400,024
Granted	Granted	—	126,674	—	126,674	Granted	0	568,148	0	568,148
Exercised (OSA/BSPCE/BSA)	Exercised (OSA/BSPCE/BSA)	(5,700)	—	—	(5,700)	Exercised (OSA/BSPCE/BSA)	(101,710)	0	0	(101,710)
Vested (RSU)	Vested (RSU)	—	(640,528)	—	(640,528)	Vested (RSU)	0	(181,505)	0	(181,505)
Forfeited	Forfeited	(107,929)	(275,710)	(12,742)	(396,381)	Forfeited	(9,564)	(215,956)	0	(225,520)
Expired	Expired	(3,600)	—	—	(3,600)	Expired	(700)	0	0	(700)
Balance at March 31, 2020		2,442,305	4,189,423	351,025	6,982,753
Balance at March 31, 2021						Balance at March 31, 2021	1,990,184	5,124,778	343,775	7,458,737

Breakdown of the Closing Balance


		OSA/BSPCE		RSU	BSA			OSA/BSPCE		RSU	BSA

Number outstanding	Number outstanding	2,442,305		4,189,423	351,025		Number outstanding	1,990,184		5,124,778	343,775
Weighted-average exercise price	Weighted-average exercise price	€	23.01	NA	€	14.82	Weighted-average exercise price	€	23.33	NA	€	15.12
Number vested	Number vested	1,815,222		NA	154,576		Number vested	1,527,511		0	221,562
Weighted-average exercise price	Weighted-average exercise price	€	24.40	NA	€	17.42	Weighted-average exercise price	€	26.23	NA	€	17.00
Weighted-average remaining contractual life of options outstanding, in years	Weighted-average remaining contractual life of options outstanding, in years	5.8		NA	7.4		Weighted-average remaining contractual life of options outstanding, in years	5.50		NA	6.54

Reconciliation with the Unaudited Consolidated Statements of Income


		Three Months Ended																															Three Months Ended
		March 31, 2019														March 31, 2020															March 31, 2021				March 31, 2020
		(in thousands)																															(in thousands)
		R&D		S&O		G&A		Total		R&D		S&O		G&A		Total			R&D		S&O		G&A		Total		R&D		S&O		G&A		Total
RSUs	RSUs	$	(3,846)	$	(5,955)	$	(2,516)	$	(12,317)	$	(2,369)	$	(3,619)	$	(1,988)	$	(7,976)	RSUs	$	(2,496)	$	(1,649)	$	(2,288)	$	(6,433)	$	(2,369)	$	(3,619)	$	(1,988)	$	(7,976)
Share options / BSPCE	Share options / BSPCE	(179)		(246)		(780)		(1,205)		—		(61)		(94)		(155)		Share options / BSPCE	0		(105)		(222)		(327)		0		(61)		(94)		(155)
Total share-based compensation	Total share-based compensation	(4,025)		(6,201)		(3,296)		(13,522)		(2,369)		(3,680)		(2,082)		(8,131)		Total share-based compensation	(2,496)		(1,754)		(2,510)		(6,760)		(2,369)		(3,680)		(2,082)		(8,131)
BSAs	BSAs	—		—		(360)		(360)		—		—		(372)		(372)		BSAs	0		0		(455)		(455)		0		0		(371)		(371)
Total equity awards compensation expense	Total equity awards compensation expense	$	(4,025)	$	(6,201)	$	(3,656)	$	(13,882)	$	(2,369)	$	(3,680)	$	(2,454)	$	(8,503)	Total equity awards compensation expense	$	(2,496)	$	(1,754)	$	(2,965)	$	(7,215)	$	(2,369)	$	(3,680)	$	(2,453)	$	(8,502)

2622

Note 11. Financial Income and Expenses

The condensed consolidated statements of income line item “Financial income (expense)” can be broken down as follows:


		Three Months Ended							Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
		(in thousands)							(in thousands)

Financial income from cash equivalents	Financial income from cash equivalents	$	177	$	382	Financial income from cash equivalents	$	128	$	382
Interest and fees	Interest and fees	(523)		(432)		Interest and fees	(540)		(432)
Interest on debt	Interest on debt	(430)		(380)		Interest on debt	(417)		(380)
Fees	Fees	(93)		(52)		Fees	(123)		(52)
Foreign exchange gain (loss)	Foreign exchange gain (loss)	(1,598)		(1,628)		Foreign exchange gain (loss)	(798)		(1,628)
Other financial expense	Other financial expense	(30)		1,344		Other financial expense	492		1,344
Total financial income (expense)		$	(1,974)	$	(334)
Total financial expense						Total financial expense	$	(718)	$	(334)

The $0.7 million and the $0.3 million ~~and the $2.0 million~~ financial expenses for the three ~~month periods~~months ended March 31, ~~2020~~2021 and March 31, ~~2019,~~2020, respectively, were driven by the up-front fees amortization, the non-utilization costs ~~incurred as part of~~and the financial expense relating to our available Revolving Credit Facility (RCF) financing ~~offset by income from cash and cash equivalents~~ and the recognition of a negative impact of foreign exchange reevaluations net of related ~~hedging costs.~~

~~We manage~~hedging. At March 31, 2021, our exposure to foreign currency risk was centralized at ~~the~~ Criteo S.A. ~~level~~ and ~~hedge~~hedged using foreign currency swaps or forward purchases or sales of foreign currencies.

Note 12. Income Taxes

Breakdown of Income Taxes

The tax provision for interim periods is determined using an estimate of our annual effective tax rate (“AETR”), adjusted for discrete items arising in the period. To calculate our estimated AETR, we estimate our income before taxes and the related tax expense or benefit for the full fiscal year (total of expected current and deferred tax provisions), excluding the effect of significant unusual or infrequently occurring items or comprehensive income items not recognized in the statement of income. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated annual tax rate does change, we make a cumulative adjustment in that quarter. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, are subject to significant volatility due to several factors including our ability to accurately predict our income (loss) before provision for income taxes in multiple jurisdictions and the changes in foreign exchange rates. Our effective tax rate in the future will depend on the portion of our profits earned within and outside of France.

The condensed consolidated statements of income line item “Provision for income taxes” can be broken down as follows:


		Three Months Ended							Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
		(in thousands)							(in thousands)
Current income tax	Current income tax	$	(15,934)	$	(9,718)	Current income tax	$	(5,053)	$	(9,718)
Net change in deferred taxes	Net change in deferred taxes	5,916		2,678		Net change in deferred taxes	(4,998)		2,678
Provision for income taxes	Provision for income taxes	$	(10,018)	$	(7,040)	Provision for income taxes	$	(10,051)	$	(7,040)

For the three months ended March 31, ~~2019~~2021 and March 31, 2020, we used an annual estimated tax rate of 30% to calculate the provision for income taxes. The effective tax rate was ~~32% and~~ 30% for the three months ended March 31, ~~2019~~2021 and 2020, respectively. The difference between the annual estimated tax rate and the effective tax rate is mainly due to the tax impact of discrete items such as share-based compensation in the United States. Discrete items were immaterial for the three months ended March 31, 2020 resulting in no material difference between the annual estimated tax rate and the effective tax rate.

Current tax assets and liabilities

The total amount of current tax assets consists mainly of prepayments of income taxes and credits of Criteo ~~SA,~~S.A, Criteo Corp., and Criteo ~~Gmbh. The current tax liabilities refers mainly to the corporate tax payables of~~GmbH and Criteo K.K.

~~Ongoing tax inspection in the United States~~

On September 27, 2017, we received a draft notice of proposed adjustment (NOPA) from the Internal Revenue Service ("IRS") audit of Criteo Corp. for the year ended December 31, 2014, confirmed by the definitive notice dated February 8, 2018. Although we disagree with the IRS's position and are currently contesting this issue, the ultimate resolution of this litigation is uncertain and, if resolved in a manner unfavorable to us, could result in an additional federal tax liability of an estimated maximum aggregate amount of approximately $15.0 million, excluding related fees, interest and penalties.

2824

Note 13. Earnings Per Share

Basic Earnings Per Share

We calculate basic earnings per share by dividing the net income for the period attributable to shareholders of the Parent by the weighted average number of shares outstanding.


		Three Months Ended					Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
Net income attributable to shareholders of Criteo S.A.	Net income attributable to shareholders of Criteo S.A.	$	19,120	$	15,459	Net income attributable to shareholders of Criteo S.A.	$	22,406	$	15,459
Weighted average number of shares outstanding	Weighted average number of shares outstanding	64,336,777		61,691,001		Weighted average number of shares outstanding	60,741,674		61,691,001
Basic earnings per share	Basic earnings per share	$	0.30	$	0.25	Basic earnings per share	$	0.37	$	0.25

Diluted Earnings Per Share

We calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued from share-based compensation plans (see Note 10). There were no other potentially dilutive instruments outstanding as of March 31, ~~2019~~2020 and March 31, ~~2020.~~2021. Consequently, all potential dilutive effects from shares are considered.

For each period presented, a contract to issue a certain number of shares (i.e. share option, non-employee warrant, ~~("BSA"), restricted share unit ("RSU") or~~ employee warrant ("BSPCE")) is assessed as potentially dilutive if it is “in the money” (i.e., the exercise or settlement price is lower than the average market price).


		Three Months Ended					Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
Net income attributable to shareholders of Criteo S.A.	Net income attributable to shareholders of Criteo S.A.	$	19,120	$	15,459	Net income attributable to shareholders of Criteo S.A.	$	22,406	$	15,459
Weighted average number of shares outstanding of Criteo S.A.	Weighted average number of shares outstanding of Criteo S.A.	64,336,777		61,691,001		Weighted average number of shares outstanding of Criteo S.A.	60,741,674		61,691,001
Dilutive effect of :	Dilutive effect of :					Dilutive effect of :
Restricted share awards ("RSUs")	Restricted share awards ("RSUs")	1,317,350		264,309		Restricted share awards ("RSUs")	2,972,382		264,309
Share options and BSPCE	Share options and BSPCE	336,647		153,786		Share options and BSPCE	296,071		153,786
Share warrants	Share warrants	50,522		16,486		Share warrants	67,282		16,486
Weighted average number of shares outstanding used to determine diluted earnings per share	Weighted average number of shares outstanding used to determine diluted earnings per share	66,041,296		62,125,582		Weighted average number of shares outstanding used to determine diluted earnings per share	64,077,409		62,125,582
Diluted earnings per share	Diluted earnings per share	$	0.29	$	0.25	Diluted earnings per share	$	0.35	$	0.25

The weighted average number of securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute EPS in the future are as follows:


		Three Months Ended			Three Months Ended
		March 31, 2019	March 31, 2020		March 31, 2021	March 31, 2020

Restricted share awards	Restricted share awards	482,152	2,241,223	Restricted share awards	332,300	2,241,223
Share options and BSPCE	Share options and BSPCE	65,500	—	Share options and BSPCE	0	0

Weighted average number of anti-dilutive securities excluded from diluted earnings per share	Weighted average number of anti-dilutive securities excluded from diluted earnings per share	547,652	2,241,223	Weighted average number of anti-dilutive securities excluded from diluted earnings per share	332,300	2,241,223

2925

Note 14. Commitments and contingencies

Commitments

Revolving Credit Facilities "RCF", Credit Line Facilities and Bank Overdrafts

~~As mentioned in Note 3, we~~We are party to an RCF with a syndicate of banks which ~~allow~~allows us to draw up to €350.0 million ($~~383.5~~410.4 million) ~~until March 2022.~~.

We are also party to short-term credit lines and overdraft facilities with HSBC plc, BNP Paribas and LCL with an authorization to draw up to a maximum of €21.5 million ($~~23.6~~25.2 million) in the aggregate under the short-term credit lines and overdraft facilities. As of March 31, ~~2020,~~2021, we had not drawn on any of these facilities. Any loans or ~~overdraft~~overdrafts under these short-term facilities bear interest based on the one month EURIBOR rate or three month EURIBOR rate. As these facilities are exclusively short-term credit and overdraft facilities, our banks have the ability to terminate such facilities on short notice.

Contingencies

Changes in provisions during the presented periods are summarized below:


		Provision for employee-related litigation		Other provisions		Total			Provision for employee-related litigation		Other provisions		Total
		(in thousands)											(in thousands)
Balance at January 1, 2020		$	620	$	5,765	$	6,385
Balance at January 1, 2021								Balance at January 1, 2021	$	1,179	$	1,071	$	2,250
Increase	Increase	92		13		105		Increase	265		0		265
Provision used	Provision used	(4)		(211)		(215)		Provision used	(247)		0		(247)
Provision released not used		—		(42)		(42)
Provision released not used*								Provision released not used*	(400)		0		(400)
Currency translation adjustments	Currency translation adjustments	(12)		(201)		(213)		Currency translation adjustments	(47)		(48)		(95)
Balance at March 31, 2020		$	696	$	5,324	$	6,020

Balance at March 31, 2021								Balance at March 31, 2021	$	750	$	1,023	$	1,773
- of which current	- of which current	696		5,324		6,020		- of which current	750		1,023		1,773

*Due to changes in management's best estimates of the future outflow

The amount of the provisions represents management’s best estimate of the future outflow.

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Note 15. Breakdown of Revenue and Non-Current Assets by Geographical Areas

The Company operates in the following 3 geographical markets:

• Americas (North and South America);

• EMEA (Europe, Middle-East and Africa); and

• Asia-Pacific.

The following tables disclose our consolidated revenue for each geographical area for each of the reported periods. Revenue by geographical area is based on the location of advertisers’ campaigns.

Americas EMEA Asia-Pacific Total
For the three months ended: (in thousands)
March 31, 2019 $ 217,993 $ 209,643 $ 130,487 $ 558,123
March 31, 2020 $ 191,745 $ 190,114 $ 121,517 $ 503,376


	Americas		EMEA		Asia-Pacific		Total
For the three months ended:	(in thousands)

March 31, 2021	$	203,900	$	212,096	$	125,081	$	541,077
March 31, 2020	$	191,745	$	190,114	$	121,517	$	503,376

Revenue generated in France ~~the country of incorporation of the Parent, amounted~~amounted to ~~$37.4~~$37.7 million and $32.0 million for the three ~~months~~month ended March 31, ~~2019~~2021 and March 31, 2020, respectively.

Revenue generated in other significant countries where we operate is presented in the following table:


		Three Months Ended					Three Months Ended
		March 31, 2019		March 31, 2020			March 31, 2021		March 31, 2020
		(in thousands)							(in thousands)

Americas	Americas					Americas
United States	United States	$	195,791	$	173,027	United States	$	184,084	$	173,027
EMEA	EMEA					EMEA
Germany	Germany	$	53,595	$	50,618	Germany	$	53,596	$	50,618
United Kingdom	United Kingdom	$	21,768	$	20,820	United Kingdom	$	23,292	$	20,820
Asia-Pacific	Asia-Pacific					Asia-Pacific
Japan	Japan	$	93,168	$	84,637	Japan	$	84,212	$	84,637

~~As of March 31, 2019 and 2020, our largest client represented 2.1% and 3.3%, respectively, of our consolidated revenue.~~

Other Information

For each reported period, non-current assets (corresponding to the net book value of tangible and intangible assets, excluding right of use assets related to lease agreements) are presented in the table below. The geographical information includes results from the locations of legal entities.

Of which Of which
Holding Americas United States EMEA Asia-Pacific Japan Singapore Total
(in thousands)
December 31, 2019 $ 136,621 $ 104,389 $ 100,107 $ 20,336 $ 19,701 $ 9,617 $ 5,970 $ 281,047
March 31, 2020 $ 127,707 $ 94,642 $ 94,412 $ 18,158 $ 21,159 $ 11,844 $ 5,374 $ 261,666


					Of which						Of which
	Holding		Americas		United States		EMEA		Asia-Pacific		Japan		Total
(in thousands)

March 31, 2021	$	123,930	$	85,900	$	85,408	$	8,040	$	29,606	$	19,580	$	247,476
December 31, 2020	$	135,516	$	93,389	$	93,030	$	8,746	$	31,598	$	20,532	$	269,249

Note 16. Related Parties

There were no significant related-party transactions during the period nor any change in the nature of the transactions as ~~described~~described in Note ~~25 to~~24 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 except as follows:

On March 2, 2020, the Group announced that Chief Financial Officer Benoit Fouilland plans to depart from Criteo at the end of the second quarter 2020. Mr. Fouilland has indicated that he will remain fully committed to his role as Chief Financial Officer and member of the senior executive team, and will play an active role in identifying and hiring his successor to ensure an orderly and smooth transition until his anticipated departure date of June 30, 2020.

The Executive Officers as of March 31, ~~2020~~2021 were:

~~• Jean-Baptiste Rudelle - Chairman~~

•Megan Clarken - Chief Executive Officer

• ~~Benoit Fouilland~~Sarah Glickman - Chief Financial Officer and Principal Accounting Officer

•Ryan Damon - General Counsel and Corporate Secretary

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Note 17. Subsequent Events

Given the ongoing impact that the COVID-19 pandemic is having on the Company's clients' business, it will remain a factor in our analysis of estimates residing in the financial statements, including, but not limited to, estimates related to receivable reserves calculated under the CECL model, the impairment analysis, and the income tax calculation. These estimates involve projections and assumptions regarding the future economic environment and as such it is possible that events may occur rapidly or unexpectedly that could lead to their changes. We will continue to closely monitor the COVID-19 pandemic, and continuously evaluate its impact on our key estimates.

~~On April 29, 2020, the Company announced that the Board of Directors has authorized a share repurchase program of up to $30 million of the Company’s outstanding American Depositary Shares.~~

~~On April 29, 2020, the Company decided to preventively draw under its Multicurrency Revolving Facility Agreement for general purposes for a total amount of €140 million ($150 million).~~

The Company evaluated all ~~other~~ subsequent events that occurred after March 31, ~~2020~~2021 through the date of issuance of the unaudited condensed consolidated financial statements and determined there are no ~~other~~ significant events that require ~~adjustments.~~

adjustments or disclosure.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission, or "SEC", on ~~March 2, 2020.~~February 26, 2021.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Annual Report filed on Form 10-K for the year ended December 31, 2019. Please refer to Note 1,"Summary of Significant Accounting Policies," of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of the changes in accounting policies due to the adoption of this standard.2020.

Recently Issued Pronouncements

See "Recently Issued Accounting Standards" under Note 1, "Summary of Significant Accounting Policies," of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued during ~~2020.~~2021.

Use of Non-GAAP Financial Measures

This Form 10-Q includes the following financial measures defined as non-GAAP financial measures by the SEC: Revenue ex-TAC, Adjusted EBITDA and Adjusted Net Income. These measures are not calculated in accordance with U.S. GAAP.

Revenue ex-TAC is our revenue excluding traffic acquisition costs ("TAC") generated over the applicable measurement period and Revenue ex-TAC by Region reflects our Revenue ex-TAC by our core geographies. Revenue ex-TAC, Revenue ex-TAC by Region and Revenue ex-TAC margin are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our core business and across our core geographies. Accordingly, we believe that Revenue ex-TAC, Revenue ex-TAC by Region, and Revenue ex-TAC margin provide useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration, Adjusted EBITDA can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

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Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration, and the tax impact of these adjustments. Adjusted Net Income and Adjusted Net Income per diluted share are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration and the tax impact of these adjustments, Adjusted Net Income and Adjusted Net Income per diluted share can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted Net Income per diluted share provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Please refer to the supplemental financial tables provided for a reconciliation of Revenue ex-TAC to revenue, Adjusted EBITDA to net income, and Adjusted Net Income to net income in each case, the most comparable U.S. GAAP measurement. Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and (2) other companies may report Revenue ex-TAC, Adjusted EBITDA, Adjusted Net Income, or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income.

3531

Condensed Consolidated Statements of Income Data (Unaudited):


			Three Months Ended						Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020
		(in thousands, except share and per share data)						(in thousands, except share and per share data)

Revenue	Revenue		$	558,123	$	503,376	Revenue		$	541,077	$	503,376

Cost of revenue ⁽²⁾	Cost of revenue ⁽²⁾						Cost of revenue (2)
Traffic acquisition costs	Traffic acquisition costs		(322,429)		(297,364)		Traffic acquisition costs		(327,667)		(297,364)
Other cost of revenue	Other cost of revenue		(26,045)		(33,806)		Other cost of revenue		(34,712)		(33,806)
Gross profit	Gross profit		209,649		172,206		Gross profit		178,698		172,206

Operating expenses	Operating expenses						Operating expenses
Research and development expenses ⁽²⁾⁽¹⁾	Research and development expenses ⁽²⁾⁽¹⁾		(46,577)		(37,515)		Research and development expenses ⁽²⁾⁽¹⁾		(31,697)		(37,515)
Sales and operations expenses ⁽²⁾⁽¹⁾	Sales and operations expenses ⁽²⁾⁽¹⁾		(95,909)		(84,974)		Sales and operations expenses ⁽²⁾⁽¹⁾		(79,354)		(84,974)
General and administrative expenses ⁽²⁾⁽¹⁾	General and administrative expenses ⁽²⁾⁽¹⁾		(33,770)		(25,915)		General and administrative expenses ⁽²⁾⁽¹⁾		(33,428)		(25,915)
Total operating expenses	Total operating expenses		(176,256)		(148,404)		Total operating expenses		(144,479)		(148,404)
Income from operations	Income from operations		33,393		23,802		Income from operations		34,219		23,802
Financial income (expense)			(1,974)		(334)
Financial expense							Financial expense		(718)		(334)
Income before taxes	Income before taxes		31,419		23,468		Income before taxes		33,501		23,468
Provision for income taxes	Provision for income taxes		(10,018)		(7,040)		Provision for income taxes		(10,051)		(7,040)
Net income	Net income		$	21,401	$	16,428	Net income		$	23,450	$	16,428
Net income available to shareholders of Criteo S.A. ⁽¹⁾	Net income available to shareholders of Criteo S.A. ⁽¹⁾		$	19,120	$	15,459	Net income available to shareholders of Criteo S.A. ⁽¹⁾		$	22,406	$	15,459
Net income available to shareholders of Criteo S.A. per share:
Net income available to non-controlling interests							Net income available to non-controlling interests		1,044		969

Net income allocated to shareholders per share:							Net income allocated to shareholders per share:
Basic	Basic		$	0.30	$	0.25	Basic		$	0.37	$	0.25
Diluted	Diluted		$	0.29	$	0.25	Diluted		$	0.35	$	0.25

Weighted average shares outstanding used in computing per share amounts:	Weighted average shares outstanding used in computing per share amounts:						Weighted average shares outstanding used in computing per share amounts:
Basic	Basic		64,336,777		61,691,001		Basic		60,741,674		61,691,001
Diluted	Diluted		66,041,296		62,125,582		Diluted		64,077,409		62,125,582

⁽¹⁾~~For the three month periods ended March 31, 2019 and March 31, 2020, this excludes $2.3 million and~~ ~~$1.0 million, respectively, of net income attributable to non-controlling interests held by Yahoo! Japan in our Japanese subsidiary Criteo KK.~~

⁽²⁾ Cost of revenue and operating expenses include equity awards compensation expense, pension service costs, depreciation and amortization expense, restructuring related and transformation costs, acquisition-related costs and deferred price consideration as follows:

3632

Detailed Information on Selected Items (unaudited):


			Three Months Ended						Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020
		(in thousands)						(in thousands)
Equity awards compensation expense	Equity awards compensation expense						Equity awards compensation expense
Research and development expenses	Research and development expenses		$	4,025	$	2,370	Research and development expenses		$	2,496	$	2,370
Sales and operations expenses	Sales and operations expenses		6,201		3,618		Sales and operations expenses		2,369		3,618
General and administrative expenses	General and administrative expenses		3,656		2,515		General and administrative expenses		3,017		2,515
Total equity awards compensation expense	Total equity awards compensation expense		$	13,882	$	8,503	Total equity awards compensation expense		$	7,882	$	8,503

Pension service costs	Pension service costs						Pension service costs
Research and development expenses	Research and development expenses		193		269		Research and development expenses		175		269
Sales and operations expenses	Sales and operations expenses		72		95		Sales and operations expenses		53		95
General and administrative expenses	General and administrative expenses		129		174		General and administrative expenses		110		174
Total pension service costs ^(a)	Total pension service costs ^(a)		$	394	$	538	Total pension service costs (a)		$	338	$	538

Depreciation and amortization expense	Depreciation and amortization expense						Depreciation and amortization expense
Cost of revenue	Cost of revenue		9,135		12,771		Cost of revenue		15,244		12,771
Research and development expenses ^(b)	Research and development expenses ^(b)		3,477		5,650		Research and development expenses (b)		1,753		5,650
Sales and operations expenses ^(c)	Sales and operations expenses ^(c)		4,864		4,340		Sales and operations expenses (c)		3,954		4,340
General and administrative expenses	General and administrative expenses		1,820		1,377		General and administrative expenses		903		1,377
Total depreciation and amortization expense	Total depreciation and amortization expense		$	19,296	$	24,138	Total depreciation and amortization expense		$	21,854	$	24,138

Restructuring costs ⁽¹⁾

Restructuring related and transformation costs							Restructuring related and transformation costs
Research and development expenses	Research and development expenses		—		995		Research and development expenses		1,436		995
Sales and operations expenses	Sales and operations expenses		1,890		1,021		Sales and operations expenses		7,367		1,021
General and administrative expenses	General and administrative expenses		—		193		General and administrative expenses		2,833		193
Total Restructuring costs ⁽¹⁾			$	1,890	$	2,209
Total Restructuring related and transformation costs (1)							Total Restructuring related and transformation costs (1)		$	11,636	$	2,209

^{(a) Effective January 1, 2012, actuarial gains and losses are recognized in other comprehensive income.}

(b) Includes acquisition-related amortization of intangible assets of $0.7 million and $4.7 million for the three months ended March 31, 2021 and 2020, respectively.

(c) Includes acquisition-related amortization of intangible assets of $2.2 million and $2.2 million for the three months ended March 31, 2021 and 2020, respectively.

(1) For the three ~~month periods~~months ended March 31, ~~2019,~~2021, and March 31, 2020, respectively, the Company recognized ~~restructuring~~restructuring-related and transformation charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing ~~policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:~~policy:


			Three Months Ended		Three Months Ended		Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020
			(in thousands)								(in thousands)
(Gain) from forfeitures of share-based compensation awards					(Gain) from forfeitures of share-based compensation awards			(666)		—

Depreciation and amortization expense			1,143		—
Facilities and impairment related costs	Facilities and impairment related costs		747		987	Facilities and impairment related costs			6,616		987
Payroll related costs	Payroll related costs	—		1,222	Payroll related costs			5,152		1,222
Total restructuring costs			1,890		2,209
Consulting costs related to transformation					Consulting costs related to transformation			534		—
Total restructuring related and transformation costs					Total restructuring related and transformation costs			11,636		2,209

~~(a) Effective January 1, 2012, actuarial gains and losses are recognized in other comprehensive income.~~

~~(b) Includes acquisition-related amortization of intangible assets of $2.7 million and $4.7 million for~~

For the three months ended March 31, ~~2019~~2021 and March 31, 2020, ~~respectively.~~

~~(c) Includes acquisition-related amortization of intangible assets of $2.7~~respectively, the cash outflows related to restructuring related and transformation costs were $6.1 million, and ~~$2.2~~$4.5 million ~~for the three months ended March 31, 2019~~respectively, and ~~2020, respectively.~~

were mainly comprised of payroll costs and broker and termination penalties related to facilities and other consulting fees.

Consolidated Statements of Financial Position Data (unaudited):


		December 31, 2019		March 31, 2020			March 31, 2021		December 31, 2020

		(in thousands)							(in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	418,763	$	436,506	Cash and cash equivalents	$	520,060	$	488,011
Total assets	Total assets	1,790,384		1,675,889		Total assets	1,782,635		1,853,410
Trade receivables, net of credit losses	Trade receivables, net of credit losses	481,732		364,440		Trade receivables, net of credit losses	416,910		474,055
Total financial liabilities	Total financial liabilities	4,405		2,858		Total financial liabilities	2,485		3,275
Total liabilities	Total liabilities	752,396		649,281		Total liabilities	638,872		700,723
Total equity	Total equity	$	1,037,988	$	1,026,608	Total equity	$	1,143,763	$	1,152,687

Other Financial and Operating Data (unaudited):


			Three Months Ended						Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020
		(in thousands, except client data)						(in thousands, except client data)
Number of clients	Number of clients		19,373		20,360		Number of clients		20,626		20,360
Revenue ex-TAC ⁽³⁾	Revenue ex-TAC ⁽³⁾		$	235,694	$	206,012	Revenue ex-TAC (3)		$	213,410	$	206,012
Adjusted Net Income ⁽⁴⁾	Adjusted Net Income ⁽⁴⁾		$	39,705	$	32,028	Adjusted Net Income (4)		$	43,152	$	32,028
Adjusted EBITDA⁽⁵⁾	Adjusted EBITDA⁽⁵⁾		$	68,855	$	59,190	Adjusted EBITDA (5)		$	75,929	$	59,190

⁽³⁾We define Revenue ex-TAC (Traffic Acquisition Costs) as our revenue excluding traffic acquisition costs, or TAC, generated over the applicable measurement period. Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Revenue ex-TAC has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC alongside our other U.S. GAAP financial results, including revenue. The following table presents a reconciliation of Revenue ex-TAC to revenue, the most directly comparable U.S. GAAP measure, for each of the periods indicated:


			Three Months Ended						Three Months Ended
			March 31, 2019		March 31, 2020				March 31, 2021		March 31, 2020

		(in thousands)						(in thousands)
Revenue	Revenue		$	558,123	$	503,376	Revenue		$	541,077	$	503,376
Adjustment:	Adjustment:						Adjustment:
Traffic acquisition costs	Traffic acquisition costs		(322,429)		(297,364)		Traffic acquisition costs		(327,667)		(297,364)
Revenue ex-TAC	Revenue ex-TAC		$	235,694	$	206,012	Revenue ex-TAC		$	213,410	$	206,012

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⁽⁴⁾We define Adjusted Net Income as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration, and the tax impact of the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration, and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our other U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted Net Income to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated:

Three Months Ended
March 31, 2019 March 31, 2020
(in thousands)
Net income $ 21,401 $ 16,428
Adjustments:
Equity awards compensation expense 13,882 8,503
Amortization of acquisition-related intangible assets 5,472 6,848
Restructuring costs ⁽¹⁾
1,890 2,209
Tax impact of the above adjustments (2,940) (1,960)
Adjusted Net Income $ 39,705 $ 32,028

⁽¹⁾For the three month periods ended March 31, 2019, and March 31, 2020, respectively, the Company recognized restructuring charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy, respectively, initiated at the end of the fiscal year ended December 31, 2019 as detailed below:

Three Months Ended Three Months Ended
March 31, 2019 March 31, 2020
(in thousands)
Depreciation and amortization expense 1,143 —
Facilities and impairment related costs 747 987
Payroll related costs — 1,222
Total restructuring costs 1,890 2,209


	Three Months Ended
		March 31, 2021		March 31, 2020
		(in thousands)
Net income		$	23,450	$	16,428
Adjustments:
Equity awards compensation expense		7,882		8,503
Amortization of acquisition-related intangible assets		2,935		6,848


Restructuring related and transformation costs		11,636		2,209
Tax impact of the above adjustments		(2,751)		(1,960)
Adjusted Net Income		$	43,152	$	32,028

3936

⁽⁵⁾ We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA in this Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends to prepare and approve our annual budget and to develop short and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, restructuring related and transformation costs,, acquisition-related costs and deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our other U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated:

Three Months Ended
March 31,
2019 March 31,
2020
(in thousands)
Net income $ 21,401 $ 16,428
Adjustments:
Financial expense (income) 1,974 334
Provision for income taxes 10,018 7,040
Equity awards compensation expense 13,882 8,503
Pension service costs 394 538
Depreciation and amortization expense 19,296 24,138
Restructuring costs ⁽¹⁾
1,890 2,209
Total net adjustments 47,454 42,762
Adjusted EBITDA $ 68,855 $ 59,190


	Three Months Ended
		March 31, 2021		March 31, 2020
		(in thousands)
Net income		$	23,450	$	16,428
Adjustments:
Financial expense		718		334
Provision for income taxes		10,051		7,040
Equity awards compensation expense		7,882		8,503
Pension service costs		338		538
Depreciation and amortization expense		21,854		24,138


Restructuring related and transformation costs		11,636		2,209
Total net adjustments		52,479		42,762
Adjusted EBITDA		$	75,929	$	59,190

4037

Results of Operations for the Periods Ended March 31, ~~2019~~ 2021and March 31, 2020(Unaudited)

Revenue breakdown by region

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~2020


		Three Months Ended
		March 31, 2019		March 31, 2020		2019 vs 2020			Three Months Ended
									March 31, 2021		March 31, 2020		2021 vs 2020
		(in thousands)									(in thousands)
Revenue as reported	Revenue as reported	$	558,123	$	503,376	(10)	%	Revenue as reported	$	541,077	$	503,376	7	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies			8,118				Conversion impact U.S. dollar/other currencies	$	(16,747)
Revenue at constant currency ⁽¹⁾	Revenue at constant currency ⁽¹⁾	558,123		511,494		(8)	%	Revenue at constant currency (1)	524,330		503,376		4	%
Americas	Americas							Americas
Revenue as reported	Revenue as reported	217,993		191,745		(12)	%	Revenue as reported	203,900		191,745		6	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies			1,758				Conversion impact U.S. dollar/other currencies	$	2,306
Revenue at constant currency ⁽¹⁾	Revenue at constant currency ⁽¹⁾	217,993		193,503		(11)	%	Revenue at constant currency (1)	206,206		191,745		8	%
EMEA	EMEA							EMEA
Revenue as reported	Revenue as reported	209,643		190,114		(9)	%	Revenue as reported	212,096		190,114		12	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies			5,624				Conversion impact U.S. dollar/other currencies	$	(14,220)
Revenue at constant currency ⁽¹⁾	Revenue at constant currency ⁽¹⁾	209,643		195,738		(7)	%	Revenue at constant currency (1)	197,876		190,114		4	%
Asia-Pacific	Asia-Pacific							Asia-Pacific
Revenue as reported	Revenue as reported	130,487		121,517		(7)	%	Revenue as reported	125,081		121,517		3	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies			736				Conversion impact U.S. dollar/other currencies	$	(4,833)
Revenue at constant currency⁽¹⁾	Revenue at constant currency⁽¹⁾	$	130,487	$	122,253	(6)	%	Revenue at constant currency(1)	$	120,248	$	121,517	(1)	%

Revenue breakdown by solution

Three months ended March 31, 2021 compared to the three months ended March 31, 2020


	Three Months Ended
	March 31, 2021		March 31, 2020		2021 vs 2020
	(in thousands)
Revenue as reported	$	541,077	$	503,376	7	%
Conversion impact U.S. dollar/other currencies	$	(16,747)
Revenue at constant currency (1)	$	524,330	$	503,376	4	%

Marketing Solutions as reported	$	483,190	$	469,773	3	%
Conversion impact U.S. dollar/other currencies	$	(15,653)
Marketing Solutions at constant currency (1)	467,537		469,773		(0.5)	%

Retail Media as reported (2)	57,887		33,603		72	%
Conversion impact U.S. dollar/other currencies	$	(1,094)
Retail Media at constant currency (1)	56,793		33,603		69	%

(1)Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the ~~2019~~2020 average exchange rates for the relevant period to ~~2020~~2021 figures. We have included revenue at constant currency in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends.

(2) Criteo operates as one operating segment. From January 1,2021 we have disaggregated revenues between Marketing Solutions and Retail Media. A strategic building block of Criteo’s Commerce Media Platform, the Retail Media Platform, introduced in June 2020, is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis. Over time, we expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform. As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Revenue ex-TAC margin will increase. Revenue ex-TAC will not be impacted by this transition.

Revenue for the three months ended March 31, ~~2020 decreased (10)% (or decreased by (8)%~~2021 increased 7% or 4% on a constant currency basis, (as defined in footnote 1 directly above), to $541.1 million, compared to the three months ended March 31, ~~2019.~~2020.

The COVID-19 ~~outbreak started having~~pandemic impacted our business during most of the quarter, with an estimated net negative impact on ~~our~~ revenue ~~beginning in mid-February. Overall,~~of approximately $46 million for the ~~COVID-19 impact on our revenue was~~three months ended March 31, 2021, or approximately ~~$24 million, or more than 4~~9 points of year-over-year growth, as some clients decided to temporarily pause or reduce their campaigns with us. The COVID-19 impact differed significantly by client vertical. Traditionally, the mix of our revenue is approximately 70% in the Retail vertical, 10% in the Travel vertical, 10% in the Classifieds vertical and the remaining 10% a collection of other verticals including consumer finance, auto, gaming and ride sharing. In the first quarter 2020, our revenue in the Travel vertical was impacted by up to 95% compared to pre-COVID-19 levels, while revenue in Classifieds decreased by around 40%, mostly in the marketplace space. Our revenue in the Retail vertical remained relatively healthier, with reductions limited to about 10%. The Travel vertical, which was deeply affected by COVID-19, contributed to 40% of the revenue impact and the remaining 60% were evenly spread between Retail, Classifieds and other verticals. About 80% of the COVID impact on revenue was with large clients, as spending in the midmarket remained resilient.

~~Due to~~In the ~~material impact from the COVID-19 outbreak,~~quarter, 81% of the year-over-year ~~decrease~~increase in revenue was ~~entirely~~ driven by the ~~lower~~higher contribution from our existing clients ~~which exceeded revenues derived~~while 19% came from new ~~clients.~~client additions. We added ~~987~~266 net new clients year-over-year across regions, ~~a higher volume than during the prior year period. Revenue~~while revenue from existing clients ~~decreased~~increased by 9%8% at constant currency over the period ~~including 5 points attributable to the impact of COVID-19, despite the continued adoption of our new products across our client base.~~.

~~Revenue~~The year-over-year increase in revenue on a constant currency basis was 88% attributable to volume-based drivers of our business (increasing number of impressions delivered and clicks delivered on the ~~Americas region~~advertising banners displayed), and 12% attributable to price-based drivers (increasing average price charged to advertisers).

Marketing Solutions revenue increased 3% (or decreased ~~(12)% (or (11)~~(0.5)% on a constant currency ~~basis, including 12% in the U.S.)~~basis) to ~~$191.7~~$483.2 million for the three months ended March 31, ~~2020~~2021, as increased spend from Retail clients, in particular in our retargeting solution, was partially offset by the negative impact from continued lower spend from Travel clients.

Retail Media revenue increased 72% (or 69% on a constant currency basis) to $57.9 million for the three months ended March 31, 2021, driven by strong performance with large retailers across the U.S. and EMEA, supported by continued solid trends in ecommerce shopping sustained through the COVID-19 pandemic.

Our revenue in the Americas region increased 6% (or 8% on a constant currency basis), including 6% in the U.S., to $203.9 million for the three months ended March 31, 2021 compared to the three months ended March 31, ~~2019. This decline was~~2020, driven by ~~an impact from COVID-19 of $8 million,~~positive Retail trends, in particular with large customers across our retargeting and new solutions, continued strong performance of Retail Media, in ~~the broader~~particular with CPG brands and existing retailers, partially offset by continued negative impact from COVID-19 on Travel and Classifieds ~~vertical. This came in addition to a soft start in January, due to client budget slowdowns after very high spend levels during the Q4 2019 peak season in the Americas.~~clients.

~~Revenue~~Our revenue in EMEA ~~decreased (9)%~~increased 12% (or ~~decreased (7)%~~4% on a constant currency basis) to ~~$190.1~~$212.1 million for the three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019. This decrease at constant currency includes approximately $12 million revenue~~2020, driven by positive Retail trends, in particular with large customers across our retargeting and new solutions, continued strong performance of Retail Media, partially offset by continued negative impact from ~~the~~ COVID-19 ~~in the region, in part due to the fact that EMEA is the region with the highest exposure to the~~on Travel ~~vertical, which was most hit by COVID-19. In this difficult context, our performance in the midmarket across the region, as well as in our German~~ and ~~Eastern European businesses remained solid and resilient.~~Classifieds clients.

~~Revenue~~Our revenue in the Asia-Pacific region ~~decreased (7)~~increased 3% (or (1)% ~~(or decreased (6)%~~decrease on a constant currency basis) to ~~$121.5~~$125.1 million for the three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019. The decrease at constant currency, included an approximately $5 million revenue~~2020, as the continued negative impact from the COVID-19 ~~mostly~~pandemic on Travel and Classifieds more than offset the recovery of Retail accounts in the Travel and Retail verticals, with our South-East Asian markets most hit. Our Japanese business was less impacted than other markets, and Korea continued to grow double digits despite the early COVID-19 outbreak in the country.region.

Additionally, our ~~$503.4~~$541.1 million of revenue for the three months ended March 31, ~~2020~~2021 was ~~negatively~~positively impacted by ~~$8.1~~$16.7 million of currency fluctuations, particularly as a result of ~~changes in foreign currency against~~the depreciation of the Turkish Lira, Russian Ruble, the Brazilian real, partially offset by the appreciation of the Euro and the Japanese Yen, compared to the U.S. ~~dollar~~dollar.

Cost of Revenue

Three months ended March 31, 2021 compared to the three months ended March 31, ~~2019.~~2020

~~The year-over-year decrease~~


	Three Months Ended						% change
	March 31, 2021			March 31, 2020			2021 vs 2020

	(in thousands, except percentages)
Traffic acquisition costs*	$	(327,667)		$	(297,364)		10%
Other cost of revenue	$	(34,712)		$	(33,806)		3%
Total Cost of Revenue	$	(362,379)		$	(331,170)		9%
% of revenue	(67)		%	(66)		%
Gross profit %	33		%	34		%

*Traffic acquisition costs breakdown by solution:


	Three Months Ended				% change
	March 31, 2021		March 31, 2020		2021 vs 2020

	(in thousands, except percentages)
Marketing Solutions	$	(290,873)	$	(273,057)	7%
Retail Media (1)	$	(36,794)	$	(24,307)	51%
Traffic Acquisition Costs	$	(327,667)	$	(297,364)	10%

(1) Criteo operates as one operating segment. From January 1,2021 we have disaggregated revenues between Marketing Solutions and Retail Media. A strategic building block of Criteo’s Commerce Media Platform, the Retail Media Platform, introduced in June 2020, is a self-service solution providing transparency, measurement and control to brands and retailers. In all arrangements running on this platform, Criteo recognizes revenue on a ~~constant currency~~net basis, ~~is entirely attributable~~whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis. Over time, we expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform. As new clients onboard and existing clients transition to the ~~decrease in the average cost-per-click charged to advertisers, partially offset~~Retail Media Platform, Revenue may decline but Revenue ex-TAC margin will increase. Revenue ex-TAC will not be impacted by ~~the increased number of clicks delivered on the advertising banners displayed by us and the increased number of impressions delivered by us.~~this transition.

~~Cost of Revenue~~

~~Three months ended March 31, 2020 compared to the three months ended March 31, 2019~~

Three Months Ended % change
March 31,
2019 March 31,
2020 2019 vs 2020
(in thousands,
except percentages)
Traffic acquisition costs $ (322,429) $ (297,364) (8)%
Other cost of revenue $ (26,045) $ (33,806) 30%
Total Cost of Revenue $ (348,474) $ (331,170) (5)%
% of revenue (62) % (66) %
Gross profit % 38 % 34 %

Cost of revenue for the three months ended March 31, ~~2020 decreased $(17.3)~~2021 increased $31.2 million, or ~~(5)%~~9%, compared to the three months ended March 31, ~~2019.~~2020. This ~~decrease~~increase was primarily the result of ~~a decrease~~an increase of ~~$(25.1)~~$30.3 million, or ~~(8)%~~10% (or ~~a decrease of (6)%~~7% on a constant currency basis) in traffic acquisition costs, and aan increase of ~~$7.8~~$0.9 million, or ~~30%~~3% (or ~~31%~~2% on a constant currency basis) in other cost of revenue.

The ~~decrease~~increase in traffic acquisition costs on a constant currency basis related primarily to the lower average cost per thousand impressions (or "CPM"), which decreased by (15)% (or (13)% on a constant currency basis). This was mainly driven by lower global demand for advertising inventory, despite the increase in online traffic globally caused by the lockdown imposed in COVID-19 affected areas, making the unit price of inventory cheaper. This was also driven by the effectiveness of our Criteo Direct Bidder, which allows us to buy quality inventory directly from large publishers in the web and in apps and remove intermediary fees in the process. This was not entirely compensated by the 8%13% increase in the number of impressions we purchased, reflecting ~~higher volumes of inventory available and~~ our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns. This increase was partially offset by the (3)% decrease (and (3)% decrease on a constant currency basis) in the average CPM for inventory purchased. This was partly driven by the effectiveness of our Criteo Direct Bidder and direct publisher integrations, which allows us to buy quality inventory directly from large publishers and remove intermediary fees in the process.

Traffic acquisition costs in Marketing Solutions increased by 7%, driven by a 12% increase in the number of impressions we purchased, partially offset by a 5% decrease in the average CPM for inventory purchased.

Traffic acquisition costs in Retail Media increased by 51%, driven by a 53% increase in the number of impressions we purchased, partially offset by a 1% decrease in the average CPM for inventory purchased. As we recognize revenue on a net basis in all arrangements running on the Retail Media platform, we expect our Traffic acquisition costs for Retail Media to decrease over time as our clients are transitioned to the Criteo Retail Media Platform.

The increase in other cost of revenue includes a ~~$3.6~~$1.3 million increase in allocated depreciation and amortization expense following the acquisitions of servers and other equipment used in our data centers offset by a ~~$2.1~~$0.4 million ~~increase in hosting costs and a $2.0 million increase~~decrease in other ~~costs including $1.6 million of provision for Digital Taxes.~~costs.

We consider Revenue ex-TAC as a key measure of our business activity. Our strategy focuses on maximizing the growth of our Revenue ex-TAC on an absolute basis over maximizing our near-term gross margin. We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including

access to advertising inventory, breadth and depth of data and continuous improvement of the Criteo Engine’s performance, allowing it to deliver more relevant advertisements at scale. As a part of this focus, we continue to invest in building relationships with direct publishers and pursuing access to leading advertising exchanges.

Our performance-based business model provides us with significant control over our level of Revenue ex-TAC margin, which we seek to optimize in order to maximize Revenue ex-TAC growth on an absolute basis in accordance with our strategic focus.

Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region

The following table sets forth our revenue, traffic acquisition costs and Revenue ex-TAC by geographic region, including the Americas (North and South America), Europe, Middle East and Africa, or EMEA, and Asia-Pacific.

Three Months Ended
Region March 31, 2019 March 31, 2020 Year over Year Change
Revenue: (amounts in thousands, except percentages)
Americas $ 217,993 $ 191,745 (12) %
EMEA 209,643 190,114 (9) %
Asia-Pacific 130,487 121,517 (7) %
Total 558,123 503,376 (10) %
Traffic acquisition costs:
Americas (131,545) (120,022) (9) %
EMEA (117,291) (108,397) (8) %
Asia-Pacific (73,593) (68,945) (6) %
Total (322,429) (297,364) (8) %
Revenue ex-TAC⁽¹⁾:
Americas 86,448 71,723 (17) %
EMEA 92,352 81,717 (12) %
Asia-Pacific 56,894 52,572 (8) %
Total $ 235,694 $ 206,012 (13) %


	Three Months Ended
Region		March 31, 2021		March 31, 2020		Year over Year Change

Revenue		(amounts in thousands, except percentages)
Americas		$	203,900	$	191,745	6	%
EMEA		212,096		190,114		12	%
Asia-Pacific		125,081		121,517		3	%
Total		541,077		503,376		7	%

Traffic Acquisition Costs
Americas		(127,628)		(120,022)		6	%
EMEA		(126,648)		(108,397)		17	%
Asia-Pacific		(73,391)		(68,945)		6	%
Total		(327,667)		(297,364)		10	%

Revenue ex-TAC (1)
Americas		76,272		71,723		6	%
EMEA		85,448		81,717		5	%
Asia-Pacific		51,690		52,572		(2)	%
Total		$	213,410	$	206,012	4	%

⁽¹⁾We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period. Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region are not measures calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region in this Form 10-Q because they are key measures used by our management and board of directors to evaluate operating performance and generate future operating plans. In particular, we believe that the elimination of TAC from revenue and review of these measures by region can provide useful measures for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region or similarly titled measures but define the regions differently, which reduces their effectiveness as a comparative measure; and (c) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region alongside our other U.S. GAAP financial results, including revenue. The above table provides a reconciliation of revenue ex-TAC by region to revenue by region. Please also refer to footnote 3 to the Other Financial and Operating Data table in "Item 2—Management's Discussion and Analysis" of this Form 10-Q for a reconciliation of revenue ex-TAC to revenue, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

4342

Constant Currency Reconciliation

Information in this Form 10-Q with respect to results presented on a constant currency basis was calculated by applying the ~~2019~~2020 average exchange rates for the relevant period to ~~2020~~2021 figures. We have included information with respect to our results presented on a constant currency basis because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis:


		Three Months Ended									Three Months Ended
		March 31, 2019			March 31, 2020			YoY Change			March 31, 2021			March 31, 2020			YoY Change
		(amounts in thousands, except percentages)															(amounts in thousands, except percentages)
																			(amounts in thousands, except percentages)
Revenue as reported	Revenue as reported	$	558,123		$	503,376		(10)	%	Revenue as reported	$	541,077		$	503,376		7	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies				8,118					Conversion impact U.S. dollar/other currencies	(16,747)
Revenue at constant currency	Revenue at constant currency	$	558,123		$	511,494		(8)	%	Revenue at constant currency	$	524,330		$	503,376		4	%

Traffic acquisition costs as reported	Traffic acquisition costs as reported	$	(322,429)		$	(297,364)		(8)	%	Traffic acquisition costs as reported	$	(327,667)		$	(297,364)		10	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies				(4,525)					Conversion impact U.S. dollar/other currencies	$	10,317
Traffic Acquisition Costs at constant currency	Traffic Acquisition Costs at constant currency	$	(322,429)		$	(301,889)		(6)	%	Traffic Acquisition Costs at constant currency	$	(317,350)		$	(297,364)		7	%

Revenue ex-TAC as reported	Revenue ex-TAC as reported	$	235,694		$	206,012		(13)	%	Revenue ex-TAC as reported	$	213,410		$	206,012		4	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies				3,593					Conversion impact U.S. dollar/other currencies	$	(6,430)
Revenue ex-TAC at constant currency	Revenue ex-TAC at constant currency	$	235,694		$	209,605		(11)	%	Revenue ex-TAC at constant currency	$	206,980		$	206,012		0.5	%
Revenue ex-TAC/Revenue as reported	Revenue ex-TAC/Revenue as reported	42		%	41		%			Revenue ex-TAC/Revenue as reported	39		%	41		%

Other cost of revenue as reported	Other cost of revenue as reported	$	(26,045)		$	(33,806)		30	%	Other cost of revenue as reported	$	(34,712)		$	(33,806)		3	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies				(424)					Conversion impact U.S. dollar/other currencies	322
Other cost of revenue at constant currency	Other cost of revenue at constant currency	$	(26,045)		$	(34,230)		31	%	Other cost of revenue at constant currency	$	(34,390)		$	(33,806)		2	%

Adjusted EBITDA as reported	Adjusted EBITDA as reported	$	68,855		$	59,190		(14)	%	Adjusted EBITDA as reported	$	75,929		$	59,190		28	%
Conversion impact U.S. dollar/other currencies	Conversion impact U.S. dollar/other currencies				1,617					Conversion impact U.S. dollar/other currencies	(4,591)
Adjusted EBITDA at constant currency	Adjusted EBITDA at constant currency	$	68,855		$	60,807		(12)	%	Adjusted EBITDA at constant currency	$	71,338		$	59,190		21	%

4443

Research and Development Expenses

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~

Three Months Ended % change
March 31,
2019 March 31,
2020 2019 vs 2020
(in thousands,
except percentages)
Research and development expenses $ (46,577) $ (37,515) (19)%
% of revenue (8) % (7) %
2020


	Three Months Ended						% change
	March 31, 2021			March 31, 2020			2021 vs 2020

	(in thousands, except percentages)
Research and development expenses	$	(31,697)		$	(37,515)		(16)%
% of revenue	(6)		%	(7)		%

Research and development expenses for the three months ended March 31, ~~2020,~~2021, decreased ~~$(9.1)~~$(5.8) million or ~~(19)~~(16)%, compared to three months ended March 31, 2019. This decrease for the three month period mainly related to a decrease in headcount-related costs following the cease of our R&D operations in Palo Alto in 2019, and a lower share-based compensation expense partially offset by an increased amortization expense for Manage technology due to a revised useful life and an increase in the French Research Tax Credit.

~~Sales and Operations Expenses~~

~~Three months ended March 31, 2020~~ compared to the three months ended March 31, ~~2019~~2020. This decrease mainly relates to a decrease in headcount-related costs, and a decrease in depreciation and amortization following the full depreciation of Manage technology in 2020.

Three Months Ended % change
March 31,
2019 March 31,
2020 2019 vs 2020
(in thousands,
except percentages)
Sales and operations expenses $ (95,909) $ (84,974) (11)%
% of revenue (17) % (17) %

Sales andOperations Expenses

Three months ended March 31, 2021 compared to the three months ended March 31, 2020


	Three Months Ended						% change
	March 31, 2021			March 31, 2020			2021 vs 2020

	(in thousands, except percentages)
Sales and operations expenses	$	(79,354)		$	(84,974)		(7)%
% of revenue	(15)		%	(17)		%

Sales and operations expenses for the three months ended March 31, ~~2020,~~2021, decreased ~~$(10.9)~~$(5.6) million or ~~(11)~~(7)%, compared to the three months ended March 31, ~~2019.~~2020. This decrease ~~for the three month period~~ is mainly ~~related to~~driven by lower bad debt expense, a ~~decrease~~reduction in headcount-related costs and a lower share-based compensation expense, partially offset by an increase in facilities costs due to early termination of a ~~negative change in provisions for doubtful receivables including~~lease agreement as part of the ~~adoption~~right-sizing of ~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326)~~our real estate footprint.

4544

General andAdministrative Expenses

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~2020


		Three Months Ended									% change		Three Months Ended				% change
		March 31, 2019			March 31, 2020			2019 vs 2020		March 31, 2021			March 31, 2020			2021 vs 2020

		(in thousands, except percentages)											(in thousands, except percentages)
General and administrative expenses	General and administrative expenses	$	(33,770)		$	(25,915)		(23)%	General and administrative expenses	$	(33,428)		$	(25,915)		29%
% of revenue	% of revenue	(6)		%	(5)		%		% of revenue	(6)		%	(5)		%

General and administrative expenses for the three months ended March 31, ~~2020 decreased $(7.9)~~2021 increased $7.5 million or ~~(23)%~~29%, compared to the three months ended March 31, ~~2019.~~2020. This ~~decrease~~increase is mainly related to an increase in third-party services as part of our on-going transformation program, a ~~decrease~~favorable one-time accounting impact in ~~headcount-related~~Q1 2020 which lowered the comparable basis, as well as the negative impact of our growing stock price on social charges related to people costs ~~and in facilities costs following the right-sizing policy aiming to optimize the office spaces.~~.

Financial ~~Income (Expense)~~Expense

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~

Three Months Ended % change
March 31,
2019 March 31,
2020 2019 vs 2020
(in thousands,
except percentages)
Financial income (expense) $ (1,974) $ (334) (83)%
% of revenue (0.4) % (0.1) %

2020


	Three Months Ended						% change
	March 31, 2021			March 31, 2020			2021 vs 2020

	(in thousands, except percentages)
Financial expense	$	(718)		$	(334)		NM
% of revenue	(0.1)		%	(0.1)		%

Financial expense for the three ~~month period~~months ended March 31, ~~2020, decreased~~2021, respectively, increased by ~~$(1.6)~~$(0.4) million, ~~or (83)%,~~ compared to the three months ended March 31, ~~2019.~~2020. The ~~$0.3~~$0.7 million financial expense for the three months ended March 31, ~~2020~~2021 was driven by the up-front fees amortization, the non-utilization costs ~~incurred as part of~~and the financial expense relating to our available Revolving Credit Facility (RCF) financing ~~offset by income from cash and cash equivalents~~ and the recognition of a negative impact of foreign exchange reevaluations net of related ~~hedging costs. Our~~hedging. At March 31, 2021, our exposure to foreign currency risk was centralized at Criteo S.A. and hedged using foreign currency swaps or forward purchases or sales of foreign currencies.

4645

Provision for Income Taxes

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~2020

Three Months Ended % change
March 31,
2019 March 31,
2020 2019 vs 2020
(in thousands,
except percentages)
Provision for income taxes $ (10,018) $ (7,040) (30)%
% of revenue (1.8) % (1) %
Effective tax rate 32 % 30 %


	Three Months Ended						% change
	March 31, 2021			March 31, 2020			2021 vs 2020

	(in thousands, except percentages)
Provision for income taxes	$	(10,051)		$	(7,040)		43%
% of revenue	(2)		%	(1)		%
Effective tax rate	30		%	30		%

For the three ended months ~~ended~~ March 31, ~~2019~~2021 and March 31, 2020, respectively, we used an annual estimated tax rate of 30% to calculate the provision for income taxes. The effective tax rate was ~~32% and~~ 30% for both the three months ended March 31, ~~2019~~2021 and 2020, respectively. The difference between the annual estimated tax rate and the effective tax rate is mainly due due to the tax impact of discrete items such as share-based compensation in the United States.March 31, 2020.

Net Income

Three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019~~2020


		Three Months Ended								% change		Three Months Ended			% change
		March 31, 2019			March 31, 2020		2019 vs 2020		March 31, 2021			March 31, 2020		2021 vs 2020

		(in thousands, except percentages)										(in thousands, except percentages)
Net income	Net income	$	21,401		16,428		(23)%	Net income	$	23,450		16,428		43%
% of revenue	% of revenue	4		%	3	%		% of revenue	4		%	3	%

Net income for the three months ended March 31, ~~2020, decreased $(5.0)~~2021, increased $7.0 million, or ~~(23)%~~43%, compared to the three months ended March 31, ~~2019.~~2020. This ~~decrease~~increase was the result of the factors discussed above, in particular, a ~~$(9.6)~~$10.4 million ~~decrease~~increase in income from operations partially offset by a ~~$1.6~~$(0.4) million ~~decrease~~increase in financial expense and a ~~$3.0~~$(3.0) million ~~decrease~~increase in provision for income taxes compared to the three months ended March 31, ~~2019.~~

2020.

4746

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operating activities. We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future. In 2018, we completed an $80 million share repurchase program. In July 2019, the Board of Directors authorized a new share repurchase program of up to $80 million of the Company’s outstanding American Depositary Shares, which we completed in February 2020. In April 2020, the Board of Directors authorized a new share repurchase program of up to $30 million of the Company's outstanding American Depositary Shares, which we completed in July 2020. In February 2021, the Board of Directors approved a new, long-term share repurchase program of up $100 million of the Company's outstanding American Depositary Shares, for which the duration is estimated to be until February, 2023. Other than these repurchase programs, we intend to retain all available funds from any future earnings to fund our growth. As discussed in Note 314 to the unaudited condensed consolidated financial statements in Item 1 to this Form 10-Q, we are party to several loan agreements and revolving credit facilities with third-party financial institutions.

Our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a ~~minimal~~minimal return. Our cash and cash equivalents at March 31, ~~2020~~2021 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to ~~$436.5~~$520.1 million as of March 31, ~~2020.~~2021. The ~~$40.7~~$32.0 million increase in cash and cash equivalents compared with December 31, ~~2019~~2020 primarily resulted from ~~$56.7~~$77.4 million in cash from operating activities, partially offset by ~~a $(10.8)~~$(17.0) million in cash used for investing activities and ~~a $(18.8)~~$(3.4) million in cash used for financing activities over the period. The cash used for financing activities is ~~primarily~~mainly related to ~~$(18.2)~~$(4.9) million cash used for the share repurchase programs. In addition, the increase in cash includes a ~~$(9.4)~~$(24.9) million negative impact of changes in foreign exchange rates on our cash position over the period. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return.

Furthermore, the Company has immediate access to aan additional €350 million from the Revolving Credit Facility, which, combined with its cash position, marketable securities and treasury shares as of March 31, ~~2020,~~2021, provides total liquidity in excess of ~~$820 million. On April 29, 2020, we decided to preventively draw under our Multicurrency Revolving Facility Agreement for general purposes for a total amount of €140 million ($150 million).~~$1.0 billion. Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in ~~2020, puts us in a strong position to weather the COVID-19 crisis under multiple scenarios.~~

2021, enables financial flexibility.

Operating and Capital Expenditure Requirements

For the three months ended March 31, ~~2019~~2021 and 2020, our capital expenditures were ~~$23.7~~$13.8 million and $11.7 million, respectively. During the three months ended March 31, ~~2020,~~2021, these capital expenditures were primarily related to the acquisition of data center and server equipment, and IT ~~systems.~~systems. We expect our capital expenditures to remain at, or slightly above, 3% of revenue for ~~2020,~~2021, as we plan to continue to build and maintain additional data center equipment capacity in all regions and significantly increase our redundancy capacity to strengthen our infrastructure.

We believe our existing cash balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months.

Our future working capital requirements will depend on many factors, including the rate of our revenue growth, the amount and timing of our investments in personnel and capital equipment, and the timing and extent of our introduction of new products and product enhancements.

If our cash and cash equivalents balances and cash flows from operating activities are insufficient to satisfy our liquidity requirements, we may need to raise additional funds through equity, equity-linked or debt financings to support our operations, and such financings may not be available to us on acceptable terms, or at all. We may also need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies, assets or products.

If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing will be dilutive to our shareholders.

4847

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Historical Cash Flows

The following table sets forth our cash flows for the three month period ended March 31, ~~2019~~2021 and 2020:

Three Months Ended
March 31,
2019 March 31,
2020
(in thousands)
Cash from operating activities $ 67,220 $ 56,743
Cash used in investing activities $ (29,041) $ (10,848)
Cash from (used for) financing activities $ (191) $ (18,761)


	Three Months Ended
	March 31, 2021		March 31, 2020

	(in thousands)
Cash from operating activities	$	77,362	$	56,743
Cash used for investing activities	$	(17,032)	$	(10,848)
Cash used for financing activities	$	(3,416)	$	(18,761)

Operating Activities

Cash provided by operating activities is primarily impacted by the increase in the number of clients using our solution and by the amount of cash we invest in personnel to support the anticipated growth of our business. Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating items such as depreciation, amortization and share-based compensation, deferred tax assets and income taxes.

For the three months ended March 31, ~~2020,~~2021, net cash provided by operating activities was ~~$56.7~~$77.4 million and consisted of net income of ~~$16.4~~$23.5 million, ~~$32.8~~$30.0 million in adjustments for certain non-cash and non-operating items and changes in working capital of ~~$7.5~~$23.9 million. Adjustments for certain non-operating items primarily consisted of depreciation and amortization expense of ~~$27.0~~$17.2 million, equity awards compensation expense of ~~$8.5~~$7.2 million, $3.9 million on disposal of non-current assets and ~~$2.3~~$5.0 million ~~for other items,~~changes in deferred tax assets, partially offset by a ~~$2.3~~$3.4 million ~~of changes~~change in income ~~taxes and a $2.7 million of changes in deferred tax assets.~~taxes. The ~~$7.5~~$23.9 million increase in cash from changes in working capital primarily consisted of a ~~$99.4~~$47.2 million decrease in trade receivables, ~~and a $1.1 million increase in lease liabilities and right of use assets,~~ partially offset by a ~~$81.7 million decrease in trade payables, a $10.4~~$5.1 million increase in other current assets including prepaid expenses and VAT receivables, a $3.1 million change in lease liabilities and right of use assets, a $10.6 million decrease in trade payables, and a ~~$0.9~~$4.5 million decrease in other current liabilities such as payroll and payroll related expenses and value-added tax ("VAT") payables.

Investing Activities

Our investing activities to date have consisted primarily of purchases of servers and other data-center ~~equipment and business acquisitions.~~equipment. For the three months ended March 31, ~~2020,~~2021, net cash used for investing activities was ~~$10.8~~$17.0 million and primarily consisted of ~~$23.7~~$13.8 million in capital expenditures, mainly comprised of purchases of servers and other data-center equipment ~~offset by~~and capitalized costs, and a ~~$0.9~~$3.3 million change in other non-current financial assets.

Financing Activities

For the three months ended March 31, ~~2020,~~2021, net cash used for financing activities was ~~$18.8~~$3.4 million, resulting ~~mostly~~mainly from a ~~$18.2~~$4.9 million payment for our share repurchase program, $0.4 million change in other financial liabilities and a $0.2 million repayment of borrowings ~~and a $0.4~~partially offset by $2.1 million ~~change in other financial liabilities.~~of proceeds from capital increase.

4948

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

We are mainly exposed to foreign currency exchange rate fluctuations. There have been no material changes to our exposure to market risk during the three ~~month period~~months ended March 31, ~~2020.~~2021.

For a description of our foreign exchange risk, please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - B. Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

A 10% increase or decrease of the Pound Sterling, the Euro, the Japanese yen or the Brazilian real against the U.S. dollar would have impacted the Condensed Consolidated Statements of Income as follows:


		Three Months Ended															Three Months Ended
		March 31, 2019						March 31, 2020							March 31, 2021				March 31, 2020

		(in thousands)															(in thousands)
GBP/USD	GBP/USD	+10%		-10%		+10%		-10%		GBP/USD	+10%		-10%		+10%		-10%
Net income impact	Net income impact	$	(496)	$	496	$	(34)	$	34	Net income impact	$	(14)	$	14	$	(34)	$	34


		Three Months Ended															Three Months Ended
		March 31, 2019						March 31, 2020							March 31, 2021				March 31, 2020

		(in thousands)															(in thousands)
BRL/USD	BRL/USD	+10%		-10%		+10%		-10%		BRL/USD	+10%		-10%		+10%		-10%
Net income impact	Net income impact	$	(97)	$	97	$	(4)	$	4	Net income impact	$	44	$	(44)	$	(4)	$	4


		Three Months Ended															Three Months Ended
		March 31, 2019						March 31, 2020							March 31, 2021				March 31, 2020

		(in thousands)															(in thousands)
JPY/USD	JPY/USD	+10%		-10%		+10%		-10%		JPY/USD	+10%		-10%		+10%		-10%
Net income impact	Net income impact	$	443	$	(443)	$	194	$	(194)	Net income impact	$	203	$	(203)	$	194	$	(194)


		Three Months Ended															Three Months Ended
		March 31, 2019						March 31, 2020							March 31, 2021				March 31, 2020

		(in thousands)															(in thousands)
EUR/USD	EUR/USD	+10%		-10%		+10%		-10%		EUR/USD	+10%		-10%		+10%		-10%
Net income impact	Net income impact	$	2,736	$	(2,736)	$	3,195	$	(3,195)	Net income impact	$	3,033	$	(3,033)	$	3,195	$	(3,195)

Credit Risk and Trade receivables

For a description of our credit risk and trade receivables, please see "Note 3. Financial instruments" and "Note 4. Trade Receivables" in the Notes to the Consolidated Financial Statements.

The Company has observed a decrease in payments from customers in geographic regions that are most affected by COVID-19, in the last part of the three month period ended March 31, 2020. The expected credit losses model, adapted by the Company on January 1, 2020, requires us to look at how current and future economic conditions impact the amount of expected credit losses, As such, we have increased the provision for credit losses, using our best available current estimates on the impact of COVID-19.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on their evaluation as of March 31, ~~2020,~~2021, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to provide reasonable assurance that (i) the information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Limitation on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Criteo have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error of fraud may occur and not be detected.

PART II

Item 1. Legal Proceedings.

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, financial condition, results of operations or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

~~The following risk factor is provided to update~~You should carefully consider the ~~risk factors previously disclosed~~risks described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 2, 2020. Except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K.

~~Our business has been and likely will continue to be negatively impacted by the recent COVID-19 pandemic and the global attempt to contain it.~~

We face various risks related to health epidemics, pandemics and similar outbreaks, including the recent COVID-19 pandemic. The spread of COVID-19 and the various attempts to contain it have created significant volatility, uncertainty and economic disruption. Certain of our customers, especially those in the Travel and Classified verticals, have seen their businesses and revenues negatively impacted by the COVID-19 pandemic. As a result, we saw a decline in revenue during March 2020. We expect that the negative impact of the COVID-19 pandemic on our revenues will continue until economic conditions improve and stabilize.

The extent to which COVID-19 will continue to impact our business, operations and financial results depends on numerous future developments which are highly uncertain and may be difficult to predict, including, among others, the duration and scope of the pandemic, new information which may emerge concerning the severity of the COVID-19 pandemic, governmental, business and individual actions taken to control the spread of COVID-19 or treat its impact, the effect on our customers and customer demand, and ability to pay, for our services, and changes in worldwide economic conditions. We will continue to actively monitor the situation and assess possible implications to our business and the business of our customers, and will strive to take appropriate actions in an effort to mitigate any adverse consequences. These actions may alter our business operations, may be required by governmental authorities, and/or may be actions we determine to be in the best interests of our employees, customers, partners and shareholders. We cannot assure you that we will be successful in any mitigation efforts.

We cannot at this time predict the extent of the impact of the COVID-19 pandemic and its resulting economic impact, but it has had, and likely will continue to have, a material adverse effect on our business, financial position and results of operations. To the extent the COVID-19 pandemic adversely impacts our business, operations and financial results, it may also result in the heightening the other risks described in “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, ~~2019 filed with~~2020. These risks and uncertainties are not the ~~SEC~~only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any such risks materialize, our business, financial condition and results of operations could be materially harmed and the trading price of our American Depositary Shares could decline. These risks are not exclusive and additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. There have been no material changes to the Risk Factors described in our Annual Report on ~~March 2,~~Form 10-K for the fiscal year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Purchases of Equity Securities by the issuer and Affiliated Purchasers

The following table provides certain information with respect to our purchases of our ADSs during the first fiscal quarter of ~~2020:~~2021:

Period
Total Number of Shares Purchased⁽¹⁾
Average Price Paid per Share⁽²⁾
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs⁽¹⁾
January 1 to 31, 2020 400,548 $ 15.14 400,548 $ 18,228,007.37
February 1 to 29, 2020 857,520 $ 14.19 857,520 $ 12,163,930.60
March 1 to 31, 2020 — — $ —
Total 1,258,068 $ 14.49 1,258,068


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
January 1 to 31, 2021	—	$	—	—	$	—
February 1 to 28, 2021	—	—		—	$	—
March 1 to 31, 2021	149,960	$	32.87	149,960	$	95,069,508
Total	149,960	$	32.87	149,960	—

⁽¹⁾ ~~In July 2019,~~On February 5, 2021, Criteo's Board of Directors authorized a share repurchase program of up to ~~$80.0~~$100.0 million ~~(€70.5 million)~~ of the Company's outstanding American Depositary Shares. The Company ~~intended~~intends to use repurchased shares to satisfy employee equity plan vesting in lieu of issuing new shares, and potentially in connection with M&A transactions. The repurchase program commenced in ~~July 2019~~March 2021 and ~~completed~~will be concluded in ~~February 2020.~~March 2023.

⁽²⁾ Average price paid per share excludes any broker commissions paid.

5352

Item 6. Exhibits.

Exhibit Index

Incorporated by Reference

Exhibit

Description

Schedule/ Form

File
Number

Exhibit

File
Date

10.1#

Amendment to Offer Letter between Criteo Corp. and Sarah Glickman dated August 27, 2020

31.1#

Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

31.2#

Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

32.1*

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

~~104.~~104

Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101.

# Filed herewith.

* Furnished herewith.

5453

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CRITEO S.A.
		(Registrant)

	By:	/s/ ~~Benoit Fouilland~~Sarah Glickman
Date: ~~April 30, 2020~~May 5, 2021	Name:	~~Benoit Fouilland~~Sarah Glickman
	Title:	Chief Financial Officer
		(Principal financial officer and duly authorized signatory)

5554


	Number of Treasury Shares	Amount (in thousands of dollars)
Balance at January 1, 2020	3,903,673	$	74,900


Treasury Shares Repurchased for RSU Vesting	1,258,068	18,239
Treasury Shares Issued for RSU Vesting	(628,091)	(13,305)
Balance at March 31, 2020	4,533,650	$	79,834


	Software		Technology and customer relationships		Total
	(in thousands)
From April 1 to December 31, 2020	$	6,420	$	8,537	$	14,957
2021	7,414		11,382		18,796
2022	4,826		11,382		16,208
2023	2,652		10,897		13,549
2024	685		8,700		9,385
Thereafter	59		6,852		6,911
Total	$	22,056	$	57,750	$	79,806



	March 31, 2019		March 31, 2020
Weighted average remaining lease term (years)
Offices	5.4		4.5
Data Centers	3.0		3.0
Weighted average discount rate
Offices	2.6	%	2.5	%
Data Centers	1.7	%	1.7	%


Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs⁽¹⁾
January 1 to 31, 2020	400,548	$	15.14	400,548	$	18,228,007.37
February 1 to 29, 2020	857,520	$	14.19	857,520	$	12,163,930.60
March 1 to 31, 2020	—			—	$	—

Total	1,258,068	$	14.49	1,258,068