Criteo S.A. - Quarter Report: 2023 March (Form 10-Q)

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, 2023


☐			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 75 85 09 39

(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

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 Act). Yes ☐ No x

As of April 28, 2023, the registrant had 56,136,498 ordinary shares, nominal value €0.025 per share, outstanding.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	2
Item 1	Unaudited Financial Statements as of March 31,2023	2
	Condensed Consolidated Statements of Financial Position (Unaudited)	3
	Condensed Consolidated Statements of Income (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Shareholder's Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4	Controls and Procedures	46
PART II	OTHER INFORMATION	47
Item 1	Legal Proceedings	47
Item 1A	Risk Factors	47
Item 6	Exhibits	48
Signatures		49

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 inflation and rising interest rates in the U.S., including the macroeconomic effects, on our business, operations, and financial results;

•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, 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 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;

•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;

•the invasion of Ukraine by Russia and the effect of resulting sanctions on our business;

•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, 2022, and to our subsequent quarterly reports on 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. 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

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


		March 31, 2023		December 31, 2022
		(in thousands)
Assets
Current assets:
Cash and cash equivalents	4	$	305,662	$	348,200
Trade receivables, net of allowances of $50.5 million and $47.8 million at March 31, 2023 and December 31, 2022, respectively	5	545,840		708,949
Income taxes	13	28,008		23,609
Other taxes		91,354		78,274
Other current assets	6	58,116		51,866
Restricted cash - current	4	75,001		25,000
Marketable securities - current portion	4	21,168		25,098
Total current assets		1,125,149		1,260,996
Property, plant and equipment, net		146,211		131,207
Intangible assets, net		179,877		175,983
Goodwill	2	522,788		515,140
Right of use assets - operating lease	8	107,749		102,176
Restricted cash - non-current	4	—		75,000
Marketable securities - non-current portion	4	10,875		—
Non-current financial assets		4,542		5,928
Other non-current assets		50,000		50,818
Deferred tax assets		44,296		31,646
Total non-current assets		1,066,338		1,087,898
Total assets		$	2,191,487	$	2,348,894

Liabilities and shareholders' equity
Current liabilities:
Trade payables		$	602,180	$	742,918
Contingencies - current portion	15	67,149		65,759
Income taxes	13	16,815		13,037
Financial liabilities - current portion	4	4,208		219
Lease liability - operating - current portion	8	33,287		31,003
Other taxes		60,294		58,031
Employee - related payables		99,616		85,569
Other current liabilities	7	109,367		83,457
Total current liabilities		992,916		1,079,993
Deferred tax liabilities		3,877		3,463
Defined benefit plans	9	4,138		3,708
Financial liabilities - non-current portion	4	76		74
Lease liability - operating - non-current portion	8	80,762		77,536
Contingencies - non-current portion	15	33,244		33,788
Other non-current liabilities	7	26,285		69,226
Total non-current liabilities		148,382		187,795
Total liabilities		1,141,298		1,267,788
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 63,316,696 and 63,248,728 shares authorized, issued and outstanding at March 31, 2023, and December 31, 2022, respectively.		2,081		2,079
Treasury stock, 7,323,153 and 5,985,104 shares at cost as of March 31, 2023 and December 31, 2022, respectively.		(211,400)		(174,293)
Additional paid-in capital		760,397		734,492
Accumulated other comprehensive income (loss)		(85,415)		(91,890)
Retained earnings		551,922		577,653
Equity-attributable to shareholders of Criteo S.A.		1,017,585		1,048,041
Non-controlling interests		32,604		33,065
Total equity		1,050,189		1,081,106
Total equity and liabilities		$	2,191,487	$	2,348,894

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


			Three Months Ended
	Notes			March 31, 2023		March 31, 2022
		(in thousands, except share per data)

Revenue	10			$	445,016	$	510,567

Cost of revenue:
Traffic acquisition costs				(224,398)		(293,650)
Other cost of revenue				(39,109)		(32,893)

Gross profit				181,509		184,024

Operating expenses:
Research and development expenses				(63,590)		(34,027)
Sales and operations expenses				(101,242)		(88,999)
General and administrative expenses				(40,170)		(33,336)
Total operating expenses				(205,002)		(156,362)
Income (loss) from operations				(23,493)		27,662
Financial and Other income (expense)	12			6,827		4,030
Income (loss) before taxes				(16,666)		31,692
Provision for income taxes	13			4,595		(10,414)
Net income (loss)				$	(12,071)	$	21,278

Net income (loss) available to shareholders of Criteo S.A.				$	(11,809)	$	20,587
Net income (loss) available to non-controlling interests				$	(262)	$	691

Weighted average shares outstanding used in computing per share amounts:
Basic	14			56,256,082		60,738,299
Diluted	14			60,494,827		63,613,550

Net income (loss) allocated to shareholders per share:
Basic	14			$	(0.21)	$	0.34
Diluted	14			$	(0.20)	$	0.32

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (UNAUDITED)


	Three Months Ended
		March 31, 2023		March 31, 2022
		(in thousands)

Net income (loss)		$	(12,071)	$	21,278
Foreign currency translation differences, net of taxes		6,315		(19,218)
Actuarial gains (losses) on employee benefits, net of taxes		(136)		1,086
Other comprehensive income (loss)		$	6,179	$	(18,132)
Total comprehensive income (loss)		$	(5,892)	$	3,146
Attributable to shareholders of Criteo S.A.		$	(5,334)	$	4,380
Attributable to non-controlling interests		$	(558)	$	(1,234)

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

CRITEO S.A.

CONDENSED CONSOLIDATED 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
	Common shares		Shares
	(in thousands, except share amounts )
Balance at December 31, 2021	65,883,347	$2,149	(5,207,873)	$(131,560)	$731,248	$(40,294)	$601,588	$1,163,131	$35,189	$1,198,320
Net income (loss)	—	—	—	—	—	—	20,587	20,587	691	21,278
Other comprehensive income (loss)	—	—	—	—	—	(16,207)	—	(16,207)	(1,925)	(18,132)
Issuance of ordinary shares	22,047	1	—	—	319	—	—	320	—	320
Change in treasury stocks(*)	—	—	(119,771)	(5,770)	—	—	(2,534)	(8,304)	—	(8,304)
Share-Based Compensation	—	—	—	—	8,948	—	—	8,948	93	9,041
Other changes in equity	—	—	—	—	—	—	—	—	—	—
Balance at March 31, 2022	65,905,394	$2,150	(5,327,644)	$(137,330)	$740,515	$(56,501)	$619,641	$1,168,475	$34,048	$1,202,523

(*) On February 3, 2022, Criteo's board of directors authorized an extension of the share repurchase program to up to $280.0 million of the Company's outstanding American Depositary Shares. The change in treasury stocks is comprised of 303,342 shares repurchased at an average price of $27.4 offset by 183,571 treasury shares used for RSUs vesting.


	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
	(in thousands, except share amounts )
Balance at December 31, 2022	63,248,728	$2,079	(5,985,104)	$(174,293)	$734,492	$(91,890)	$577,653	$1,048,041	$33,065	$1,081,106
Net income (loss)	—	—	—	—	—	—	(11,809)	(11,809)	(262)	(12,071)
Other comprehensive income (loss)	—	—	—	—	—	6,475	—	6,475	(296)	6,179
Issuance of ordinary shares	67,968	2	—	—	1,295	—	—	1,297	—	1,297
Change in treasury stocks(*)	—	—	(1,338,049)	(37,107)	—	—	(13,922)	(51,029)	—	(51,029)
Share-Based Compensation	—	—	—	—	24,610	—	—	24,610	97	24,707
Other changes in equity	—	—	—	—	—	—	—	—	—	—
Balance at March 31, 2023	63,316,696	$2,081	(7,323,153)	$(211,400)	$760,397	$(85,415)	$551,922	$1,017,585	$32,604	$1,050,189

(*) On February 5, 2022, Criteo's board of directors authorized an extension of the share repurchase program to up to $480.0 million of the Company's outstanding American Depositary Shares. The change in treasury stocks is comprised of 1,731,634 shares repurchased at an average price of $29.9 offset by 393,585 treasury shares used for 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
		March 31, 2023		March 31, 2022
	(in thousands)
Net income (loss)		$	(12,071)	$	21,278
Non-cash and non-operating items		31,947		34,726
- Amortization and provisions		27,311		26,611

- Net (gain) or loss on disposal of non-current assets		(8,790)		9
- Equity awards compensation expense (1)		25,168		9,489

- Change in deferred taxes		(12,297)		2,868
- Change in income taxes		(137)		(432)
- Other (2)		692		(3,819)
Changes in working capital related to operating activities		22,088		18,926
- (Increase) / Decrease in trade receivables		164,120		92,738
- Increase / (Decrease) in trade payables		(145,011)		(49,672)
- (Increase) / Decrease in other current assets		(13,594)		(18,947)
- Increase/ (Decrease) in other current liabilities		16,666		(3,182)
- Change in operating lease liabilities and right of use assets		(93)		(2,011)

Cash from operating activities		41,964		74,930
Acquisition of intangible assets, property, plant and equipment		(37,195)		(10,857)
Change in accounts payable related to intangible assets, property, plant and equipment		3,976		5,293
Payment for business, net of cash acquired		(6,500)		—
Proceeds from disposition of investments		9,625		—

Change in other non-current financial assets		(6,008)		22,489
Cash (used for) from investing activities		(36,102)		16,925
Proceeds from borrowings under line-of-credit agreement		—		78,513
Repayment of borrowings		—		(78,513)
Proceeds from exercise of stock options		1,266		271
Repurchase of treasury stocks		(51,030)		(8,304)
Change in other financial liabilities		—		6,666
Cash payment for contingent consideration		(22,025)		—
Other (2)		(428)		—
Cash used for financing activities		(72,217)		(1,367)
Effect of exchange rates changes on cash and cash equivalents		(1,182)		(16,673)
Net increase (decrease) in cash and cash equivalents		(67,537)		73,815
Net cash and cash equivalents at beginning of period		448,200		515,527
Net cash and cash equivalents and restricted cash at end of period		$	380,663	$	589,342

Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds		(7,900)		(7,978)
Cash paid for interest		(616)		(365)

(1) Of which $24.7 million and $9.0 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the three months ended March, 2023 and 2022, respectively.
(2) Primarily consists of realized gains in FX hedges for the three months ended March 2022.

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 that enables marketers and media owners to drive better commerce outcomes through the world’s leading Commerce Media Platform. We bring richer experiences to every consumer by supporting a fair and open internet that enables discovery, innovation, and choice — powered by trusted and impactful advertising from the world’s marketers and media owners.

We are leading the way of commerce media — a new approach to advertising that combines commerce data and machine learning to target consumers throughout their shopping journey and help marketers and media owners drive commerce outcomes (sales, leads, advertising revenue).

Our strategy is to help marketers and media owners activate 1st-party, privacy-safe data and drive better commerce outcomes through our Commerce Media Platform, a suite of products:

•that offer marketers (brands, retailers, and agencies) the ability to easily reach consumers anywhere throughout their shopping journey and measure their advertising campaigns

•that offer media owners (publishers and retailers) the ability to monetize their advertising and promotions inventory for commerce anywhere where consumers spend their time

•sitting on top of a dataset and technology that power our entire offering.

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".

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 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, 2022, filed with the SEC on February 24, 2023. 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) gross vs net assessment in revenue recognition (2) allowances for credit losses, (3) income taxes, (4) assumptions used in valuing acquired assets and assumed liabilities in business combinations, (5) assumptions used in the valuation of goodwill, intangible assets and leases, (6) assumptions used in the valuation model to determine the fair value of share-based compensation plan, and (7) assumptions surrounding the recognition and valuation of contingent liabilities and losses.

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, 2022.

Accounting Pronouncements Adopted in 2023

No standards were adopted in 2023 which had an impact on the Company's financial statements.

Recent Accounting Pronouncements

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.

Note 2. Business acquisitions

Iponweb

On August 1, 2022, the Company, Iponweb Holding Limited, Exezars Limited (a subsidiary of Iponweb Holding Limited and collectively with Iponweb Holding Limited, the “Sellers”), Mr. Ljubisa Bogunovic, in his capacity as trustee of the “IW General Management Trust” and Mr. Boris Mouzykantskii, founder and Chief Executive Officer of Iponweb Holding Limited (the “Founder”) entered into an amended and restated Framework Purchase Agreement (the “FPA”), amending and restating the previously disclosed framework purchase agreement, dated December 22, 2021, which provided for the acquisition of the business of Iponweb Holding Limited (the "Iponweb business"), a market-leading AdTech company with world-class media trading capabilities, by the Company (the “Iponweb Acquisition”).

This business combination is composed of an asset purchase of Iponweb intellectual property and other intangible rights and a share purchase of 100% of the share capital and voting rights of nine Iponweb operational legal entities.

Purchase price. The purchase price, as per ASC 805, was $290.2 million for the Iponweb business, out of which $61.2 million represents the fair value of the contingent consideration. This contingent consideration is payable in cash to the Sellers in an amount up to $100 million, conditioned upon the achievement of certain net revenue targets by the Iponweb business for the 2022 and 2023 fiscal years.

Separate compensation arrangement. The Company transferred Treasury shares with a fair value of $70.2 million to Iponweb's Sellers, subject to lock-up conditions. As these shares are subject to a lock-up period that expires in three installments on each of the first three anniversaries of the Iponweb Acquisition, unless the Founder's employment agreement is terminated under certain circumstances during the pendency of such lock-up period, the $70.2 million fair value was not included in the purchase price consideration above and will be accounted for separately from the business combination as a stock compensation expense. See Note 11 for further discussion.

Financing. The acquisition was financed by available cash resources, and in connection with the Acquisition, the Company drew down €50.0 million ($51.1 million) for a one-month period on its then-current revolving credit facility (repaid prior to quarter end) to provide additional liquidity.

Assets acquired and liabilities assumed. The transaction was accounted for as a business acquisition. The purchase price allocation has been completed.

On the Acquisition Date, assets acquired and liabilities assumed by major asset class before purchase price allocation are as follow:


	Estimated fair values
	(in millions)
Cash and cash equivalents	$	93.3
Trade receivables	100.7
Other current assets	1.1
Technology	90.2
Customer relationships	7.2
Other non-current assets	59.0
Trade Payables	(191.5)
Other current liabilities	(3.1)
Other non-current liabilities	(54.3)
Net assets acquired	$	102.6

Developed technology represents the estimated fair value of the features underlying the Iponweb products as well as the platform providing services to Iponweb customers. Customer relationships represent the estimated fair value of the underlying relationships with Iponweb customers, including the fair value of unbilled and unrecognized contracts yet to be fulfilled. The estimated useful lives of technologies acquired and customer relationships are four and nine years, respectively.

In the Iponweb business's opening balance sheet, Criteo recognized a $17.6 million liability related to the Iponweb business's uncertain tax positions in accordance with ASC 740. The Company also recognized a $33.7 million provision in connection with the Iponweb business, accounted for under ASC 450 Contingencies. As part of the Acquisition, the Sellers agreed to indemnify Criteo for losses related to certain liabilities, up to an amount of $50.0 million. As such, we have recognized an indemnification asset of $50.0 million which is recorded as part of "Other non-current assets" on the consolidated statement of financial position.

Goodwill. The Company has completed the valuation of assets acquired and liabilities assumed as part of the Iponweb Acquisition, based on facts and circumstances that existed as of the Acquisition Date. The excess of the purchase price over the fair value of net assets acquired has been allocated to goodwill. The goodwill of $187.6 million is primarily attributable to synergies expected to be realized from leveraging our technological capabilities and from the existence of an assembled workforce.

Acquisition costs. Acquisition related costs of $12.58 million were recorded within general and administrative expenses on the consolidated statements of comprehensive income for the twelve months ended December 31, 2022. In the period ending March 31, 2023, we did not record any acquisition related costs.

Impact on profit and loss. The Company's consolidated statements of operations for the three months ended March 31, 2023 include Iponweb's revenues of $25.1 million and pretax income (loss) of $2.4 million.

On a pro-forma basis, assuming the Acquisition occurred on January 1, 2021, Criteo's consolidated pro-forma revenue and net income or loss would have been as follows:


		Pro Forma Consolidated Statement of Operations Data
	Three Months Ended
			March 31, 2023		March 31, 2022
		(in thousands)
Revenue			$	445,016	$	563,397
Net Income (loss)			(12,071)		16,722

The historical consolidated financial information has been adjusted in the pro forma combined financial statements to give the effect to pro forma events that are directly attributable to the business combination and are reasonably estimable. The pro forma information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the Acquisition had taken place at the beginning the Company's fiscal year 2021.

Brandcrush

On February 28, 2023 we completed the acquisition of all of the outstanding shares of Brandcrush Inc. ("Brandcrush"). The purchase price for the acquisition of shares was $7.1 million. The acquisition was financed by available cash resources. The transaction has been accounted for as a business combination under the acquisition method of accounting. A preliminary valuation of the fair value of Brandcrush’s assets acquired was performed as of February 28, 2023, resulting in the identification of technology of $3.5 million. Provisional goodwill amounted to $5.0 million, subject to post-closing purchase price adjustments. Once this valuation analysis is finalized, the estimate of the fair value of the assets acquired and liabilities assumed may be adjusted. The Company will finalize these amounts no later than one year from the acquisition date. In addition, acquisition costs amounting to $0.4 million were fully expensed as incurred.

Note 3. Segment information

Reportable segments

The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments. The Company reports its results of operations through the following three segments: Marketing Solutions, Retail Media and Iponweb.

–Marketing Solutions: This segment allows commerce companies to address multiple marketing goals by engaging their consumers with personalized ads across the web, mobile and offline store environments.

–Retail Media: This segment allows 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.

–Iponweb: This segment specializes in building real-time advertising technology and trading infrastructure, delivering advanced media buying, selling, and packaging capabilities for media owners, agencies, performance advertisers, and 3rd-party ad tech platforms.

Segment operating results, Contribution ex-TAC, is Criteo's segment profitability measure and reflects our gross profit plus other costs of revenue.

The following table shows revenue by reportable segment:


	Three Months Ended
		March 31, 2023		March 31, 2022
		(in thousands)
Marketing Solutions		$	381,907	463,888
Retail Media		38,021		46,679
Iponweb		25,088		—
Total Revenue		$	445,016	$	510,567

The following table shows Contribution ex-TAC by reportable segment and its reconciliation to the Company’s Consolidated Statements of Operation:


	Three Months Ended
		March 31, 2023		March 31, 2022
		(in thousands)
Contribution ex-TAC
Marketing Solutions		$	158,178	$	186,088
Retail Media		37,352		30,829
Iponweb		25,088		—
		$	220,618	$	216,917

Other costs of sales		(39,109)		(32,893)
Gross profit		$	181,509	$	184,024
Operating expenses
Research and development expenses		(63,590)		(34,027)
Sales and operations expenses		(101,242)		(88,999)
General and administrative expenses		(40,170)		(33,336)
Total Operating expenses		(205,002)		(156,362)

Income (loss) from operations		$	(23,493)	$	27,662
Financial and Other Income		6,827		4,030
Income (loss) before tax		$	(16,666)	$	31,692

The Company's chief operating decision maker, or CODM, does not review any other financial information for our three segments, other than Contribution ex-TAC, at the reportable segment level.

Note 4. Cash, Cash Equivalents, Marketable Securities and Restricted Cash

Fair Value Measurements


	As of March 31, 2023
	Cash and Cash Equivalent		Marketable Securities
	(in thousands)
Cash	228,055		$	—
Level 2
Term deposits and notes	77,607		32,043
Total	$	305,662	$	32,043


	As of December 31, 2022
	Cash and Cash Equivalent		Marketable Securities
	(in thousands)
Cash	282,293		$	—
Level 2
Term deposits and notes	65,907		25,098
Total	$	348,200	$	25,098

Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

The fair value of term deposits approximates their carrying amount given the nature of the investments, its maturities and expected future cash flows.

Marketable Securities

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


	March 31, 2023		December 31, 2022

	(in thousands)


Securities Held-to-maturity
Term Deposits	$	32,043	$	25,098
Total	$	32,043	$	25,098

The gross unrealized gains on our marketable securities were not material as of March 31, 2023.

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, 2023

	(in thousands)
Due in one year	$	21,168	$	—
Due in one to five years	$	10,875	$	—
Total	$	32,043	$	—

Restricted Cash

As part of the Iponweb Acquisition, we had deposited $100.0 million of cash into an escrow account containing withdrawal conditions. The cash secures the Company's potential payment of Iponweb Acquisition contingent consideration to the Sellers, which is conditioned upon the achievement of certain revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. We have paid the contingent consideration of $22.0 million for the 2022 fiscal year in the quarter ended March 31, 2023.


	March 31, 2023		December 31, 2022

	(in thousands)

Restricted cash – current	$	75,001	$	25,000
Restricted cash – non-current	$	—	$	75,000
Total	$	75,001	$	100,000

Note 5. Trade Receivables

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


	March 31, 2023		December 31, 2022

	(in thousands)
Trade accounts receivables	$	596,368	$	756,741
(Less) Allowance for credit losses	(50,528)		(47,792)
Net book value at end of period	$	545,840	$	708,949

Note 6. Other Current Assets

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


	March 31, 2023		December 31, 2022

	(in thousands)
Prepayments to suppliers	$	11,910	$	12,421
Other debtors	10,806		6,768
Prepaid expenses	32,417		24,549
Other current assets	2,983		8,128

Net book value at end of period	$	58,116	$	51,866

Prepaid expenses mainly consist of amounts related to SaaS arrangements.

Note 7. Other Current and Non-Current Liabilities

Other current liabilities are presented in the following table:


	March 31, 2023		December 31, 2022

	(in thousands)
Customer prepayments	$	13,196	$	16,334
Rebates	16,871		17,671
Accounts payable relating to capital expenditures	28,978		25,414
Other creditors	4,846		2,388
Deferred revenue	27		$	10
Earn out liability – current	45,449		$	21,640
Total	$	109,367	$	83,457

Other non-current liabilities are presented in the following table:


	March 31, 2023		December 31, 2022

	(in thousands)
Earn out liability – non-current	$	—	$	44,696
Uncertain tax positions	18,055		17,980
Other	8,230		6,550
Total	$	26,285	$	69,226

Earn out liability

As part of the Iponweb Acquisition , the Sellers are entitled to contingent consideration of a maximum of $100.0 million, which is conditioned upon the achievement of certain revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. The related earn out liability is valued and discounted using management's best estimate of the consideration that will be paid in 2024 (current portion). The contingent consideration for fiscal year 2022 of $22.0 million has been paid in the period ended March 31, 2023.

Uncertain tax positions

Other non-current liabilities also include approximately $18 million related to uncertain tax positions as of March 31, 2023. These uncertain tax positions are related to the Iponweb Acquisition.

Note 8. Leases

The components of lease expense are as follows:


	Three Months Ended
	March 31, 2023						March 31, 2022
	Offices		Data Centers		Total		Offices		Data Centers		Total
	(in thousands)
Lease expense	$	3,704	$	5,576	$	9,280	$	4,409	$	5,207	$	9,616
Short term lease expense	142		9		151		151		3		154
Variable lease expense	89		4		93		50		5		55
Sublease income	(229)		—		(229)		(172)				(172)
Total operating lease expense	$	3,706	$	5,589	$	9,295	$	4,438	$	5,215	$	9,653

As of March 31, 2023, 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	$	1,081	$	26,954
Additional right of use assets	$	1,081	$	26,954

These operating leases will commence during the fiscal years ending December 31, 2023, 2024 and 2025, respectively.

Note 9. 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, 2022	$	5,531
Service cost	1,756
Interest cost	73
Actuarial losses (gains)	(3,311)
Currency translation adjustment	(341)
Projected benefit obligation present value at December 31, 2022	$	3,708
Service cost	176
Interest cost	41
Actuarial losses (gains)	136
Currency translation adjustment	77
Projected benefit obligation present value at March 31, 2023	$	4,138

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, 2023	December 31, 2022
Discount rate (Corp AA)	4.10%	4.25%
Expected rate of salary increase	5%	5%
Expected rate of social charges	48%	48%
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, 2023		March 31, 2022
		(in thousands)
Defined contributions plans included in personnel expenses		$	(4,078)	$	(3,858)

Note 10. Revenue

Disaggregation of revenue

The following table presents our disaggregated revenues:


	Marketing Solutions		Retail Media		Iponweb		Total
For the three months ended	(in thousands)

March 31, 2023	$	381,907	$	38,021	$	25,088	$	445,016
March 31, 2022	$	463,888	$	46,679	$	—	$	510,567

Note 11. Share-Based Compensation

Equity awards Compensation Expense

Equity awards compensation expense recorded in the consolidated statements of operations was as follows:


	Three Months Ended
	2023		2022
	(in thousands)
Research and Development	(16,172)		(3,968)
Sales and Operations	(4,045)		(2,566)
General and Administrative	(4,951)		(2,955)
Total equity awards compensation expense	(25,168)		(9,489)
Tax benefit from equity awards compensation expense	1,700		1,215
Total equity awards compensation expense, net of tax effect	$	(23,468)	$	(8,274)

The breakdown of the equity award compensation expense by instrument type was as follows:


	Three Months Ended
	2023		2022
	(in thousands)
Share options	(38)		(58)
Lock-up shares	(10,591)		—
Restricted stock units / Performance stock units	(14,079)		(8,983)
Non-employee warrants	(460)		(448)
Total equity awards compensation expense	(25,168)		(9,489)
Tax benefit from equity awards compensation expense	1,700		1,215
Total equity awards compensation expense, net of tax effect	$	(23,468)	$	(8,274)

A detailed description of each instrument type is provided below.

Share Options

Stock options granted under the Company’s stock incentive plans generally vest over four years, subject to the holder’s continued service through the vesting date and expire no later than 10 years from the date of grant.

In the following tables, exercise prices, grant date share fair values and fair value per equity instruments are provided in euros, as the Company is incorporated in France and the euro is the currency used for the grants.


	Options Outstanding
	Number of Shares Underlying Outstanding Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding - December 31, 2022	372,329
Options granted	—
Options exercised	(12,363)
Options forfeited	(400)
Options canceled	—
Options expired	(300)
Outstanding - March 31, 2023	359,266	€	20.65	4.49	€	16.25

Vested and exercisable - March 31, 2023	288,866

The aggregate intrinsic value represents the difference between the exercise price of the options and the fair market value of common stock on the date of exercise. No new stock options were granted in the period ending March 31, 2023. As of March 31, 2023, unrecognized stock-based compensation $0.1 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 1 year.

Lock up shares

On August 1, 2022, 2,960,243 Treasury shares were transferred to the Founder (referred to as Lock Up Shares or "LUS", see Note 2), as partial consideration for the Iponweb Acquisition. As these shares are subject to a lock-up period that expires in three installments on each of the first three anniversaries of the Iponweb Acquisition, unless the Founder's employment agreement is terminated under certain circumstances during the pendency of such lock-up period, they are considered as equity settled share-based payments under ASC 718 and are accounted over the three-year vesting period. The share based compensation expense is included in Research and Development expenses on the Consolidated Statement of Income. The shares were valued based on the volume weighted average price of one ADS traded on Nasdaq during the twenty (20) trading days immediately preceding July 28, 2022.


	Shares	Weighted-Average Grant date Fair Value Per Share


Outstanding as of December 31, 2022	2,960,243	—
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding as of March 31, 2023	2,960,243	$	23.94

At March 31, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $45.3 million, which is expected to be recognized over a period of 3 years starting from the grant date of August 1, 2022.

Restricted Stock Units / Performance Stock Units

Restricted stock awards generally vest over four years, subject to the holder’s continued service and/or certain performance conditions through the vesting date.


	Shares (RSU)	Weighted-Average Grant date Fair Value Per Share


Outstanding as of December 31, 2022	5,349,955	—
Granted	497,821	—
Vested	(273,456)	—
Forfeited	(196,070)	—
Outstanding as of March 31, 2023	5,378,250	€	25.69

At March 31, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $81.1 million, which is expected to be recognized over a weighted-average period of 3.15 years.


	Shares (PSU)	Weighted-Average Grant date Fair Value Per Share


Outstanding as of December 31, 2022	522,467	—
Granted	356,402	—
Vested	(118,161)	—
Forfeited	—	—
Outstanding as of March 31, 2023	760,708	€	27.20

At March 31, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $16.2 million, which is expected to be recognized over a weighted-average period of 3.56 years.

Non-employee warrants

Non-employee warrants generally vest over four years, subject to the holder’s continued service through the vesting date.


	Shares	Weighted-Average Grant date Fair Value Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value


Outstanding - December 31, 2022	302,775
Granted	—
Exercised	(52,223)
Canceled	—
Expired	—
Outstanding - March 31, 2023	250,552	€	17.65	5.27	€	19.25

Vested and exercisable - March 31, 2023	230,737

The aggregate intrinsic value represents the difference between the exercise price of the non-employee warrants and the fair market value of common stock on the date of exercise. No new stock non-employee warrants were granted in the period ending March 31, 2023. As of March 31, 2023, the instruments were fully vested.

Note 12. Financial and Other Income and Expenses

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


	Three Months Ended
			March 31, 2023		March 31, 2022
		(in thousands)

Financial income from cash equivalents			$	1,063	$	133
Interest and fees			(486)		(547)


Foreign exchange gains (losses)			(1,949)		4,463
Other financial income (expense)			8,199		(19)
Total Financial and Other income (expense)			$	6,827	$	4,030

The $6.8 million financial and other income for the three months ended March 31, 2023, were driven by the recognition of a negative impact of foreign exchange reevaluations net of related hedging and the up-front fees amortization, the non-utilization costs, and the financial expense relating to our available Revolving Credit Facility financing, fully offset by the proceeds from disposal of non consolidated investments.

At March 31, 2023, 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.

Note 13. 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 following table presents provision for income taxes:


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Provision for income tax expense (benefit)	$	(4,595)	$	10,414

For the three months ended March 31, 2023 and March 31, 2022, provision for incomes taxes is $(4.6) million and $10.4 million, respectively. The $(4.6) million tax benefit was driven by the loss from operations. The three months ended March 31, 2023 provision for income taxes mainly differs from the nominal standard French rate of 25.0% due to the application of a reduced income tax rate on the majority of the technology royalties income in France.

Note 14. Earnings Per Share

Basic Earnings Per Share

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


	Three Months Ended
		March 31, 2023		March 31, 2022
Net income (loss) attributable to shareholders of Criteo S.A.		$	(11,809)	$	20,587
Weighted average number of shares outstanding		56,256,082		60,738,299
Basic earnings per share		$	(0.21)	$	0.34

Diluted Earnings Per Share

We calculate diluted earnings per share by dividing the net income or loss 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 (refer to Note 11). There were no other potentially dilutive instruments outstanding as of March 31, 2023 and March 31, 2022. 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, 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
		March 31, 2023		March 31, 2022
Net income (loss) attributable to shareholders of Criteo S.A.		$	(11,809)	$	20,587
Weighted average number of shares outstanding of Criteo S.A.		56,256,082		60,738,299
Dilutive effect of :
Restricted share awards ("RSUs")		4,062,752		2,591,530
Share options and BSPCE		118,146		179,089
Share warrants		57,847		104,632
Weighted average number of shares outstanding used to determine diluted earnings per share		60,494,827		63,613,550
Diluted earnings per share		$	(0.20)	$	0.32

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
		March 31, 2023	March 31, 2022

Restricted share awards		497,821	58,840
Share options and BSPCE		—	—

Weighted average number of anti-dilutive securities excluded from diluted earnings per share		497,821	58,840

Note 15. Commitments and contingencies

Contingencies

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, results of operations, financial condition 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.

The amount of the provisions represents management’s latest estimate of the expected impact.

Regulatory matters

In November 2018, Privacy International filed a complaint with certain data protection authorities, including France's Commission Nationale de l'Informatique et des Libertés ("CNIL"), against Criteo and a number of other similarly situated advertising technology companies, arguing that certain of these companies' practices were not in compliance with the European Union's General Data Protection Regulation ("GDPR"). In January 2020, CNIL opened a formal investigation into Criteo in response to this complaint, and on June 23, 2021, CNIL notified the Company of the appointment of an investigator(rapporteur) for the ongoing investigation. The investigation also covers another complaint against Criteo received in November 2018 by CNIL from the European Center for Digital Rights ("NOYB").

On August 3, 2022, the assigned rapporteur issued a report that claimed certain GDPR violations, in particular relating to the Company’s contractual relationships with its advertisers and publishers with respect to consent collection oversight. The report includes a proposed financial sanction against the Company of €60.0 million ($65.3 million).Under the CNIL sanction procedures, Criteo had the right to respond in writing to the report, both with respect to the GDPR findings and the value of the sanction, and did so, following which a formal hearing before the CNIL Sanction Committee occured on March 16, 2023, with both Criteo and the rapporteur presenting their respective positions. The CNIL Sanction Committee is expected to issue a draft decision that will be submitted for consultation to other European data protection authorities as part of the cooperation mechanism mandated by GDPR. A final decision, including regarding potential financial penalties, will likely occur by mid-2023.

Pursuant to U.S. GAAP, we establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated, and these accruals are reviewed and adjusted each quarter based on the information available at that time.

Given the receipt of this report, which included a proposed sanction penalty of €60.0 million ($65.3 million), we have accounted for the proposed penalty as a provision for a loss contingency, which is reflected in our financial statements, as a current liability, for the period ended as of March 31, 2023. Such amount could be lower or higher based on the final resolution and merits of the claims made in the report.

Non income tax risks

We have recorded a $33.2 million provision related to certain non income tax items accounted for under "ASC 450 Contingencies". These risks were identified and recognized as part of the Iponweb Acquisition. We have recorded an indemnification asset in the full amount of the provision as the Company is indemnified against certain tax liabilities under the FPA. The indemnification asset is recorded as part of "Other non current assets" on the consolidated statement of financial position.

Note 16. Breakdown of Revenue and Non-Current Assets by Geographical Areas

The Company operates in the following three 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 or of the retailers.


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

March 31, 2023	$	188,288	$	160,214	$	96,514	$	445,016
March 31, 2022	$	194,847	$	193,954	$	121,766	$	510,567

Revenue generated in France amounted to $23.3 million and $30.8 million for the three months ended March 31, 2023 and March 31, 2022 respectively.

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


	Three Months Ended
			March 31, 2023		March 31, 2022
		(in thousands)

Americas
United States			$	169,591	$	171,864
EMEA
Germany			$	45,782	$	55,455
France			$	23,298	$	30,781
Asia-Pacific
Japan			$	59,692	$	77,975

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.



	Americas		EMEA		Asia-Pacific		Total
(in thousands)

March 31, 2023	$	91,766	$	209,760	$	24,562	$	326,088
December 31, 2022	$	92,952	$	193,007	$	21,231	$	307,190

Note 17. Subsequent Events

The Company evaluated all subsequent events that occurred after March 31, 2023 through the date of issuance of the unaudited condensed consolidated financial statements and determined there are no significant events that require adjustments or disclosure.

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, 2022, filed with the Securities and Exchange Commission, or "SEC", on February 24, 2023.

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, 2022.

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 2023.

Non-GAAP Financial Measures

As required by the rules of the Securities and Exchange Commission (“SEC”), we provide reconciliations of the non-GAAP financial measures contained in this document to the most directly comparable measures under GAAP, which are set forth in the financial tables below.

Reconciliation of Contribution ex-TAC to Gross Profit

We define Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other costs of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC 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. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business.Accordingly, we believe that Contribution 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 Contribution ex-TAC 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 Contribution 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 Contribution ex-TAC alongside our other U.S. GAAP financial measures. The below table provides a reconciliation of Contribution ex-TAC to gross profit:


	Three Months Ended
	March 31, 2023		March 31, 2022

	(in thousands, except client data)
Gross Profit	$	181,509	$	184,024

Other Cost of Revenue	$	39,109	$	32,893

Contribution ex-TAC	$	220,618	$	216,917

Reconciliation of Adjusted EBITDA to Net Income (Loss)

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, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA 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-term and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our 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 U.S. GAAP financial results, including net income.


	Three Months Ended
	March 31,
		2023		2022
Net income (loss)		$	(12,071)	$	21,278
Adjustments:
Financial (Income) expense		(6,606)		(4,030)
Provision for income taxes		(4,595)		10,414
Equity awards compensation expense		26,065		9,490



Pension service costs		176		275



Depreciation and amortization expense		25,320		22,144




Acquisition-related costs		832		2,544











Restructuring, integration and transformation costs		9,602		710




Total net adjustments		50,794		41,547
Adjusted EBITDA		$	38,723	$	62,825


	Three Months Ended
				March 31, 2023			March 31, 2022
		(in thousands)
(Gain) from forfeitures of share-based compensation awards		(897)			—

Facilities related (gain) costs				618			533
Payroll related (gain) costs				9,631			—
Consulting costs related to transformation				250			177
Restructuring, integration and transformation (gain) costs		$	9,602		$	710

Results of Operations for the Periods Ended March 31, 2023 and March 31, 2022 (Unaudited)

Revenue breakdown by segment

We report our segments results as Marketing Solutions, Retail Media and Iponweb:

•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 allows 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.

•Iponweb specializes in building real-time advertising technology and trading infrastructure, delivering advanced media buying, selling, and packaging capabilities for media owners, agencies, performance advertisers, and 3rd-party ad tech platforms.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Revenue breakdown by segment


	Three Months Ended
	March 31, 2023		March 31, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	445,016	$	510,567	(13)	%
Conversion impact U.S. dollar/other currencies	$	18,457
Revenue at constant currency (1)	$	463,473	$	510,567	(9)	%

Marketing Solutions revenue as reported	$	381,907	$	463,888	(18)	%
Conversion impact U.S. dollar/other currencies	$	18,083
Marketing Solutions revenue at constant currency (1)	399,990		463,888		(14)	%

Retail Media revenue as reported (2)	38,021		46,679		(19)	%
Conversion impact U.S. dollar/other currencies	$	374
Retail Media revenue at constant currency (1)	38,395		46,679		(18)	%

Iponweb revenue as reported	25,088		—		N/A
Conversion impact U.S. dollar/other currencies	$	—
Iponweb revenue at constant currency (1)	25,088		—		N/A

(1) Information herein with respect to results presented on a constant currency basis is computed by applying prior period average exchange rates to current period results. We have included results 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. The table above reconciles the actual results presented in this section with the results presented on a constant currency basis.

(2) In all arrangements running on Criteo's Commerce Media platform, the Company recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions were accounted for on a gross basis. Most clients using Criteo’s legacy Retail Media solutions transitioned to this platform by the end of 2022. During the transition period, Revenue declined but Contribution ex-TAC margin percentage increased. Contribution ex-TAC was not impacted by this transition.

Revenue by segment

Revenue for the three months ended March 31, 2023 decreased (13)%, or (9)% on a constant currency basis, to $445.0 million compared to the three months ended March 31, 2022, reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform in Retail Media.

In the three months of 2023, 91% of revenue came from existing clients while 9% came from new client additions. Our number of clients was up 2% year-over-year, or down -1% excluding Iponweb.

Marketing Solutions revenue decreased (18)%, or (14)% on a constant currency basis, to $381.9 million for the three months ended March 31, 2023, driven by anticipated signal loss impacts, the suspension of the Company's operations in Russia and soft retail trends, partially offset by continued strength in travel.

Retail Media revenue decreased (19)%, or (18)% on a constant currency basis, to $38.0 million for the three months ended March 31, 2023, reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform. As a result of this transition to a full platform business, the growth of Retail Media revenue has been temporarily impacted. Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 21%, or 22% on a constant currency basis, for the three months ended March 31, 2023, driven by continued strength in Retail Media onsite, in particular in the U.S. market, and growing network effects of onboarding brands and retailers to the platform.

Iponweb revenue for the three months ended March 31, 2023 was $25.1 million following the closing of the acquisition on August 1, 2022.

Additionally, our $445.0 million of revenue for the three months ended March 31, 2023 was negatively impacted by $18.5 million of currency fluctuations, particularly as a result of the depreciation of the Euro, Japanese Yen, British Pound, Turkish Lira, Russian Ruble and the Brazilian Real compared to the U.S. dollar.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Revenue breakdown by region

Information in this Form 10-Q with respect to results presented on a constant currency basis was calculated by applying prior period average exchange rates to current period results. 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
	March 31, 2023		March 31, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	445,016	$	510,567	(13)	%
Conversion impact U.S. dollar / other currencies	$	18,457
Revenue at constant currency (1)	463,473		510,567		(9)	%
Americas
Revenue as reported	188,288		194,847		(3)	%
Conversion impact U.S. dollar / other currencies	$	(65)
Revenue at constant currency (1)	188,223		194,847		(3)	%
EMEA
Revenue as reported	160,214		193,954		(17)	%
Conversion impact U.S. dollar / other currencies	$	8,539
Revenue at constant currency (1)	168,753		193,954		(13)	%
Asia-Pacific
Revenue as reported	96,514		121,766		(21)	%
Conversion impact U.S. dollar / other currencies	$	9,983
Revenue at constant currency (1)	$	106,497	$	121,766	(13)	%

(1) Revenue at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the prior year to the following year figures.

Revenue by region

Our revenue in the Americas region decreased (3)%, or (3)% on a constant currency basis, to $188.3 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. This primarily reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by continued strong performance of Retail Media as the platform continues to scale with large retailers and consumer brands and a rebound in travel.

Our revenue in EMEA decreased (17)%, or (13)% on a constant currency basis, to $160.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, reflecting soft retail trends across our markets. This also reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by solid traction in Retail Media.

Our revenue in the Asia-Pacific region decreased (21)%, or decreased (13)% on a constant currency basis, to $96.5 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, reflecting soft retail and Classified trends in the region.

Cost of Revenue


	Three Months Ended						% change
	March 31, 2023			March 31, 2022			2023 vs 2022

	(in thousands, except percentages)
Traffic acquisition costs	$	(224,398)		$	(293,650)		(24)	%
Other cost of revenue	$	(39,109)		$	(32,893)		19	%
Total cost of revenue	$	(263,507)		$	(326,543)		(19)	%
% of revenue	(59)		%	(64)		%
Gross profit %	41		%	36		%


	Three Months Ended				% change		% change at Constant Currency (2)
	March 31, 2023		March 31, 2022		2023 vs 2022		2023 vs 2022

	(in thousands, except percentages)
Marketing Solutions	$	(223,729)	$	(277,800)	(19)	%	(16)	%
Retail Media	$	(669)	$	(15,850)	(96)	%	(96)	%
Iponweb (1)	$	—	$	—	—	%	—	%
Traffic Acquisition Costs	$	(224,398)	$	(293,650)	(24)	%	(21)	%

(1) There are no traffic acquisition costs associated with the Iponweb solutions as we are acting as agent in all the arrangements.

Cost of revenue for the three months ended March 31, 2023 decreased $(63.0) million, or (19)%, compared to the three months ended March 31, 2022. This decrease was primarily the result of a decrease of $(69.3) million, or (24)% (or (21)% on a constant currency basis) in traffic acquisition costs driven by a lower average price partially offset by an increase in volume, and an increase of $6.2 million, or 19% in other cost of revenue.

Traffic acquisition costs in Marketing Solutions decreased by (19)% (or (16)% at constant currency). This was driven by a (29)% decrease (or 26% at constant currency) in the average cost per thousand impressions ("CPM") for inventory purchased, including lower CPMs for signal-limited environments where Criteo continues to perform, and a 13% increase in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns.

Traffic acquisition costs in Retail Media(1) decreased by (96)% (or (96)% at constant currency), reflecting the technical and transitory impact related to the client migration to our platform because we recognize revenue on a net basis in all arrangements running on the platform.

As Iponweb reports revenues on a net basis, it has no traffic acquisition costs.

The increase in other cost of revenue included an increase in hosting costs of $9.0 million partially offset by depreciation and amortization expense of $3.0 million

Contribution excluding Traffic Acquisition Costs

We consider Contribution ex-TAC as a key measure of our business activity. Our strategy focuses on maximizing our Contribution 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 our Criteo AI Engine’s performance, allowing it to deliver more relevant advertisements at scale. As part of this focus, we continue to invest in building preferred relationships with direct publishers and pursue access to leading advertising exchanges.

The following table sets forth our revenue and Contribution ex-TAC by segment:


	Three Months Ended
Segment			March 31, 2023		March 31, 2022		YoY Change		YoY Change at Constant Currency (2)
		(amounts in thousands, except percentages)
Revenue
Marketing Solutions			$	381,907	$	463,888	(18)	%	(14)	%
Retail Media			38,021		46,679		(19)	%	(18)	%
Iponweb			25,088		—		N/A		N/A
Total			445,016		510,567		(13)	%	(9)	%

Contribution ex-TAC (1)
Marketing Solutions			158,178		186,088		(15)	%	(10)	%
Retail Media			37,352		30,829		21	%	22	%
Iponweb(2)			25,088		—		N/A		N/A
Total			220,618		216,917		2	%	6	%

(1) Refer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.

(2) There are no traffic acquisition costs associated with the Iponweb solutions as we are acting as agent in all the arrangements.

Constant Currency Reconciliation


	Three Months Ended
			March 31, 2023			March 31, 2022			YoY Change
		(amounts in thousands, except percentages)

Revenue as reported			$445,016			$510,567			(13)	%
Conversion impact U.S. dollar/other currencies			18,457			—
Revenue at constant currency			$463,473			$510,567			(9)	%

Traffic acquisition costs as reported			$	(224,398)		$	(293,650)		(24)	%
Conversion impact U.S. dollar/other currencies			(8,518)			—
Traffic Acquisition Costs at constant currency			$	(232,916)		$	(293,650)		(21)	%

Contribution ex-TAC as reported			$	220,618		$	216,917		2	%
Conversion impact U.S. dollar/other currencies			9,939			—
Contribution ex-TAC at constant currency			$	230,557		$	216,917		6	%
Contribution ex-TAC/Revenue as reported			50		%	42		%

Other cost of revenue as reported			$	(39,109)		$	(32,893)		19	%



Gross Profit as reported			$	181,509		$	184,024		(1)	%

Research and Development Expenses

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended						% change
	March 31, 2023			March 31, 2022			2023 vs 2022

	(in thousands, except percentages)
Research and development expenses	$	(63,590)		$	(34,027)		87%
% of revenue	(14)		%	(7)		%

Research and development expenses for the three months ended March 31, 2023, increased $29.6 million or 87% compared to the three months ended March 31, 2022. This increase mainly related to an increase in headcount-related expenses, including consideration paid to the Iponweb seller and accounted for as share-based compensation, and the amortization of Iponweb acquisition-related intangible assets.

Sales and Operations Expenses

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended						% change
	March 31, 2023			March 31, 2022			2023 vs 2022

	(in thousands, except percentages)
Sales and operations expenses	$	(101,242)		$	(88,999)		14%
% of revenue	(23)		%	(17)		%

Sales and operations expenses for the three months ended March 31, 2023 increased $12.2 million or 14% compared to the three months ended March 31, 2022. This increase mainly related to an increase in headcount-related costs partially offset by a decrease in marketing expenses and bad debt expense.

General and Administrative Expenses

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended						% change
	March 31, 2023			March 31, 2022			2023 vs 2022

	(in thousands, except percentages)
General and administrative expenses	$	(40,170)		$	(33,336)		21%
% of revenue	(9)		%	(7)		%

General and administrative expenses for the three months ended March 31, 2023, increased $6.8 million or 21%, compared to the three months ended March 31, 2022. The increase mainly relates to headcount-related costs.

Financial and Other Income / (Expense)

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended						% change
	March 31, 2023			March 31, 2022			2023 vs 2022

	(in thousands, except percentages)
Financial and Other Income / (Expense)	$	6,827		$	4,030		69%
% of revenue	2		%	1		%

Financial and Other income for the three months ended March 31, 2023, increased by $2.8 million or 69% compared to 2022. The $6.8 million financial and other income for the three months ended March 31, 2023, were driven by the recognition of a negative impact of foreign exchange reevaluations net of related hedging and the up-front fees amortization, the non-utilization costs, and the financial expense relating to our available Revolving Credit Facility financing, fully offset by the proceeds from disposal of non-consolidated investments. At March 31, 2023, 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.

Provision for Income Taxes

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Three Months Ended

% change

March 31,
2023

March 31,
2022

2023 vs 2022

(in thousands, except percentages)

Provision for income tax expense (benefit)

(4,595)

10,414

For the three months ended March 31, 2023 benefit for incomes taxes is $(4.6) million. For the three months ended March 31, 2022 income tax expense was $10.4 million. The $(4.6) million was driven by the loss from operations. The three months ended March 31, 2023 provision for income taxes mainly differs from the nominal standard French rate of 25.0% due to the application of a reduced income tax rate on the majority of the technology royalties income in France

Net Income / (Loss)

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended					% change
	March 31, 2023			March 31, 2022		2023 vs 2022

	(in thousands, except percentages)
Net income (loss)	$	(12,071)		21,278		(157)%
% of revenue	(3)		%	4	%

Net income for the three months ended March 31, 2023, decreased $(33.3) million, or (157)%, compared to the three months ended March 31, 2022. This decrease was the result of the business dynamics discussed above, in particular, a $(51.2) million decrease in income from operations, offset by $2.8 million increase in financial and other income and by a $(15.0) million decrease in provision for income taxes compared to the three months ended March 31, 2022.

Liquidity and Capital Resources

Our cash and cash equivalents and restricted cash at March 31, 2023 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $380.7 million as of March 31, 2023. The $(67.5) million decrease in cash and cash equivalents, and restricted cash compared with December 31, 2022 primarily resulted from a decrease $(36.1) million in cash used for investing activities and by $(72.2) million in cash used for financing activities over the period, partially offset by an increase of $42.0 million in cash from operating activities. The cash used for financing activities mainly related to $(51.0) million in cash used for the share repurchase program, and to $22.2 million payout of the current portion earn-out liability resulting from the Iponweb acquisition, partially offset by $1.3 million of proceeds from capital increase following the exercises of stock options. In addition, the decrease in cash includes an $(1.2) 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.

As disclosed in our Form 10-K for the fiscal year 2022, on September 27, 2022, the Company entered into a new five year Revolving Credit Facility (the "RCF") that allows immediate access to an additional €407.0 million ($442.6 million) of liquidity, which, combined with our cash position, marketable securities and treasury shares as of March 31, 2023, provides total liquidity above $813 million. Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2023, enables financial flexibility.

Share buy-back programs

In December 2021, we completed a $100 million share repurchase program. In 2022, we completed an additional $136 million share repurchase. For the three months ended March 31, 2023, we had acquired $51.0 million of our on-going share repurchase program.

All above programs have been implemented under our multi-year authorization granted by Board of Directors. On December 7, 2022, this authorization was extended to a total amount of $480 million. Other than these repurchase programs, we intend to retain all available funds and any future earnings to fund our growth.

Operating and Capital Expenditure Requirements

For the three months ended March 31, 2023 and 2022, our capital expenditures were $33.2 million and $5.6 million, respectively. During the three months ended March 31, 2023, these capital expenditures were mainly comprised of acquisition of data center and server equipment, and internal IT systems. We expect our capital expenditures to remain at, or slightly above, 4% of revenue for 2023, as we plan to continue to build, reshape and maintain additional data center equipment capacity in all regions and increase our investments supporting our new work from home policy as part of our office right sizing program.

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.

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, 2023 and March 31, 2022:


	Three Months Ended
	March 31, 2023		March 31, 2022

	(in thousands)
Cash (used for) from operating activities	$	41,964	$	74,930
Cash (used for) from investing activities	$	(36,102)	$	16,925
Cash (used for) from financing activities	$	(72,217)	$	(1,367)

Operating Activities

Cash from operating activities is primarily impacted by the increase in the number of clients using our solutions and by the amount of cash we invest in personnel to support the anticipated growth of our business. Cash from operating activities has typically been generated from changes in our operating assets and liabilities, particularly in the areas of accounts receivable, 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, 2023, net cash provided by operating activities was $42.0 million and consisted of net loss of $(12.1) million, and $31.9 million in adjustments for certain non-cash and non-operating items. Adjustments for certain non-operating items primarily consisted of amortization and provision expense of $27.3 million, equity awards compensation expense of $25.2 million, $0.6m change in other non-operating and non-cash items partially offset by $(12.3) million of changes in deferred tax assets, by a $(0.1) million change in income taxes and by other non-operating items of $(8.8) million. The $22.1 million increase in cash from changes in working capital primarily consisted of a $164.1 million decrease in trade receivables, and a $16.7 million increase in other current liabilities such as payroll and payroll related expenses and VAT payables and change in fair value of derivatives, partially offset by a $(145.0) million decrease in trade payables, a $(0.1) million change in lease liabilities and right of use assets, and a $(13.6) million change in other current assets including prepaid expenses and value-added tax ("VAT") receivables.

Investing Activities

Our investing activities to date have consisted primarily of the consideration paid to acquire the Iponweb business and purchases of servers and other data-center equipment. For the three months ended March 31, 2023, net cash used for investing activities was $(36.1) million and primarily consisted of $(33.2) million change in capital expenditures mainly comprised of purchases of servers and other data-center equipment and capitalized software development costs, a $(6.0) million change from the maturity of investments in Marketable Securities, a $(6.5) million payment for business acquisition, partially offset by $9.6 million proceed on sale of a non consolidated investment.

Financing Activities

For the three months ended March 31, 2023, net cash used for financing activities was $(72.2) million, resulting mainly from a $(51.0) million payment for our share repurchase program, a $(22.0) million payout of the current portion earn-out liability resulting from the Iponweb acquisition, partially offset by $1.3 million of proceeds from capital increase following the exercises of stock options.

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 months ended March 31, 2023.

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, 2022.

A hypothetical 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
	March 31, 2023				March 31, 2022

	(in thousands)
GBP/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	(114)	$	114	$	(138)	$	138


	Three Months Ended
	March 31, 2023				March 31, 2022

	(in thousands)
BRL/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	236	$	(236)	$	—	$	—


	Three Months Ended
	March 31, 2023				March 31, 2022

	(in thousands)
JPY/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	(339)	$	339	$	134	$	(134)


	Three Months Ended
	March 31, 2023				March 31, 2022

	(in thousands)
EUR/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	(1,680)	$	1,680	$	2,273	$	(2,273)

Credit Risk and Trade receivables

For a description of our trade receivables, please see "Note 5. Trade Receivables" in the Notes to the Consolidated Financial Statements.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on their evaluation as of March 31, 2023, 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.

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 or fraud may occur and may not be detected.

PART II

Item 1. Legal Proceedings.

For a discussion of our legal proceedings, refer to Note 15. Commitments and contingencies.

Item 1A. Risk Factors.

None.

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 2023:


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, 2023	1,133,552	$	28.21	1,133,552	$	212,324,227
February 1 to 28, 2023	362,565	$	32.74	362,565	200,437,260
March 1 to 31, 2023	235,517	$	30.51	235,517	193,258,955
Total	1,731,634			1,731,634	—

(1) In October 2021, the board of directors approved an extension of the long-term share repurchase program of up to $175 million of the Company's outstanding American Depositary Shares, and in December 2022, the board of directors further extended this long-term share repurchase program to a total of $480 million.

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

Item 6. Exhibits.

Exhibit Index

Incorporated by Reference

Exhibit

Description

Schedule/ Form

File
Number

Exhibit

File
Date

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

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

# Filed herewith.

* Furnished herewith.

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/ Sarah Glickman
Date: May 3, 2023	Name:	Sarah Glickman
	Title:	Chief Financial Officer
		(Principal financial officer and duly authorized signatory)