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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 June 30, 2022
or
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 July 31, 2022, the registrant had 60,609,940 ordinary shares, nominal value €0.025 per share, outstanding.




TABLE OF CONTENTS
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General
    Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q ("Form 10-Q") to the "Company," "Criteo," "we," "us," "our" or similar words or phrases are to Criteo S.A. and its subsidiaries, taken together. In this Form 10-Q, references to "$" and "US$" are to United States dollars. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or "U.S. GAAP."
Trademarks
    “Criteo,” the Criteo logo and other trademarks or service marks of Criteo appearing in this Form 10-Q are the property of Criteo. Trade names, trademarks and service marks of other companies appearing in this Form 10-Q are the property of their respective holders.
Special Note Regarding Forward-Looking Statements
    This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. When used in this Form 10-Q, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
the ongoing effect of the COVID-19 pandemic and potential 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, 2021, and to Part II, Item 1A "Risk Factors" of 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)
Notes June 30, 2022 December 31, 2021
(in thousands)
Assets
Current assets:
    Cash and cash equivalents 3 $ 562,546  $ 515,527 
    Trade receivables, net of allowances of $50.5 million and $45.4 million at June 30, 2022 and December 31, 2021, respectively
4 490,643  581,988 
    Income taxes 19,888  8,784 
    Other taxes 68,608  73,388 
    Other current assets 5 39,240  34,182 
    Marketable securities - current portion 3 10,000  50,299 
    Total current assets 1,190,925  1,264,168 
Property, plant and equipment, net 124,133  139,961 
Intangible assets, net 78,018  82,627 
Goodwill 322,972  329,699 
Right of use assets - operating lease 7 108,563  120,257 
Marketable securities - non current portion 3 —  5,000 
Non-current financial assets 4,908  6,436 
Deferred tax assets 41,325  35,443 
    Total non-current assets 679,919  719,423 
Total assets $ 1,870,844  $ 1,983,591 
Liabilities and shareholders' equity
Current liabilities:
    Trade payables $ 400,058  $ 430,245 
    Contingencies 14 64,731  3,059 
    Income taxes 3,791  6,641 
    Financial liabilities - current portion 3 255  642 
    Lease liability - operating - current portion 7 32,110  34,066 
    Other taxes 50,589  60,236 
    Employee - related payables 70,435  98,136 
    Other current liabilities 6 44,390  39,523 
    Total current liabilities 666,359  672,548 
Deferred tax liabilities 2,907  3,053 
Defined benefit plans 8 3,213  5,531 
Financial liabilities - non current portion 3 334  360 
Lease liability - operating - non current portion 7 82,984  93,893 
Other non-current liabilities 4,859  9,886 
    Total non-current liabilities 94,297  112,723 
Total liabilities 760,656  785,271 
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 65,794,032 and 65,883,347 shares authorized, issued and outstanding at June 30, 2022, and December 31, 2021, respectively.
2,147  2,149 
Treasury stock, 5,265,393 and 5,207,873 shares at cost as of June 30, 2022 and December 31, 2021, respectively.
(148,509) (131,560)
Additional paid-in capital 750,774  731,248 
Accumulated other comprehensive income (loss) (102,931) (40,294)
Retained earnings 577,552  601,588 
Equity-attributable to shareholders of Criteo S.A. 1,079,033  1,163,131 
Non-controlling interests 31,155  35,189 
Total equity 1,110,188  1,198,320 
Total equity and liabilities $ 1,870,844  $ 1,983,591 

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
2


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
Notes June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands, except share per data)
Revenue 9 $ 495,090  $ 551,311  $ 1,005,657  $ 1,092,388 
Cost of revenue:
Traffic acquisition costs (280,565) (331,078) (574,215) (658,745)
Other cost of revenue (29,550) (37,364) (62,443) (72,076)
Gross profit 184,975  182,869  368,999  361,567 
Operating expenses:
Research and development expenses (41,496) (41,915) (75,523) (73,612)
Sales and operations expenses (99,313) (80,751) (188,312) (160,105)
General and administrative expenses (100,672) (40,474) (134,008) (73,902)
Total operating expenses (241,481) (163,140) (397,843) (307,619)
Income from operations (56,506) 19,729  (28,844) 53,948 
Financial and Other income (expense) 11 16,412  (519) 20,442  (1,237)
Income before taxes (40,094) 19,210  (8,402) 52,711 
Provision for income taxes 12 7,121  (4,181) (3,293) (14,232)
Net income (loss) $ (32,973) $ 15,029  $ (11,695) $ 38,479 
Net income (loss) available to shareholders of Criteo S.A. $ (33,614) $ 14,804  $ (13,027) $ 37,210 
Net income available to non-controlling interests $ 641  $ 225  $ 1,332  $ 1,269 
Weighted average shares outstanding used in computing per share amounts:
Basic 13 60,240,344 60,663,301 60,488,429 60,702,780
Diluted 13 62,303,670 64,665,212 62,957,718 64,371,603
Net income (loss) allocated to shareholders per share:
Basic 13 $ (0.56) $ 0.24  $ (0.22) $ 0.61 
Diluted 13 $ (0.54) $ 0.23  $ (0.21) $ 0.58 
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

3


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Six Months Ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands)
Net income (loss) $ (32,973) $ 15,029  $ (11,695) $ 38,479 
Foreign currency translation differences, net of taxes (51,510) 10,443  (70,728) (26,540)
Actuarial (losses) gains on employee benefits, net of taxes 1,449  29  2,535  658 
Other comprehensive income (loss) $ (50,061) $ 10,472  $ (68,193) $ (25,882)
Total comprehensive income (loss) $ (83,034) $ 25,501  $ (79,888) $ 12,597 
Attributable to shareholders of Criteo S.A. $ (80,044) $ 25,191  $ (75,664) $ 13,745 
Attributable to non-controlling interests $ (2,990) $ 310  $ (4,224) $ (1,148)
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
4


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, 2020 66,272,106 $2,161 (5,632,536) $(85,570) $693,164 $16,027 $491,359 $1,117,142 $35,545 $1,152,687
Net income 22,406 22,406 1,044 23,450
Other comprehensive income (loss) (33,852) (33,852) (2,502) (36,354)
Issuance of ordinary shares 119,800 3 2,148 2,151 2,151
Change in treasury stocks 34,935 (1,693) (3,237) (4,930) (4,930)
Share-Based Compensation 6,710 6,710 50 6,760
Other changes in equity
Balance at March 31, 2021 66,391,906 $2,164 (5,597,601) $(87,263) $702,022 $(17,825) $510,528 $1,109,626 $34,137 $1,143,763
Net income 14,804 14,804 225 15,029
Other comprehensive income (loss) 10,387 10,387 85 10,472
Issuance of ordinary shares 305,454 9 7,568 7,577 7,577
Change in treasury stocks (482,407) (24,560) (5,439) (29,999) (29,999)
Share-Based Compensation 11,172 11,172 55 11,227
Other changes in equity
Balance at June 30, 2021 66,697,360 $2,173 (6,080,008) (111,823) $720,762 $(7,438) $519,893 $1,123,567 $34,502 $1,158,069

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 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
Net income (33,614) (33,614) 641 (32,973)
Other comprehensive income (loss) (46,430) (46,430) (3,631) (50,061)
Issuance of ordinary shares (111,362) 110 110 110
Change in treasury stocks(*)
(3) 62,251 (11,179) (1,342) (8,509) (21,033) (21,033)
Share-Based Compensation 11,452 11,452 97 11,549
Other changes in equity 39 34 73 73
Balance at June 30, 2022 65,794,032 $2,147 (5,265,393) $(148,509) $750,774 $(102,931) $577,552 $1,079,033 $31,155 $1,110,188
(*) 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 1,117,873 shares repurchased at an average price of $26.2 offset by 940,543 treasury shares used for RSUs vesting.
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
5


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
2022
June 30,
2021
(in thousands)
Net income (loss) $ (11,695) $ 38,479 
Non-cash and non-operating items 98,227  65,905 
    - Amortization and provisions 114,502  42,386 
 - Net gain or (loss) on disposal of non-current assets (696) 3,959 
    - Equity awards compensation expense (1)
21,510  18,885 
    - Change in deferred taxes (7,114) 2,305 
    - Change in income taxes (14,678) (1,655)
    - Other (2)
(15,297) 25 
Changes in working capital related to operating activities 2,370  (662)
    - (Increase) / Decrease in trade receivables 65,476  26,195 
    - Increase / (Decrease) in trade payables (16,977) (19,906)
    - (Increase) / Decrease in other current assets (14,595) (5,187)
    - Increase/ (Decrease) in other current liabilities (31,313) (1,069)
    - Change in operating lease liabilities and right of use assets (221) (695)
Cash from operating activities 88,902  103,722 
Acquisition of intangible assets, property, plant and equipment (32,794) (27,616)
Change in accounts payable related to intangible assets, property, plant and equipment 11,778  708 
Payment for a business, net of cash acquired —  (9,598)
Change in other non-current financial assets 44,311  (20,308)
Cash (used for) from investing activities 23,295  (56,814)
Proceeds from borrowings under line-of-credit agreement 78,513  — 
Repayment of borrowings (78,513) (1,272)
Proceeds from exercise of stock options 351  9,575 
Repurchase of treasury stocks (29,334) (34,929)
Change in other financial liabilities (860) (748)
Other (2)
15,334  — 
Cash used for financing activities (14,509) (27,374)
Effect of exchange rates changes on cash and cash equivalents (50,669) (18,024)
Net increase in cash and cash equivalents 47,019  1,510 
Net cash and cash equivalents at beginning of period 515,527  488,011 
Net cash and cash equivalents at end of period $ 562,546  $ 489,521 
Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds (25,085) (13,582)
Cash paid for interest (626) (736)
(1) Of which $20.6 million and $18.0 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the six months ended June 30, 2022 and 2021, respectively.
(2) Primarily consists of realized gains in FX hedges.

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
6


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".






























7


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, 2021, filed with the SEC on February 25, 2022. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

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

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, 2021.
8


Accounting Pronouncements Adopted in 2022

Effective January 1, 2022, we have adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (ASU 2021-10), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. The impacts on our annual consolidated financial statements will be limited as a result of adoption of this standard.

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.

9


Note 2. 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: Marketing Solutions and Retail Media.

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

Criteo's Retail Media 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.

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 Six Months Ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands)
Marketing Solutions $ 440,423  487,465  $ 904,311  970,655 
Retail Media 54,667  63,846  101,346  121,733 
Total Revenue $ 495,090  $ 551,311  $ 1,005,657  $ 1,092,388 
The following table shows Contribution ex-TAC by reportable segment and its reconciliation to the Company’s Consolidated Statements of Operation:
Three Months Ended Six Months Ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands)
Contribution ex-TAC
Marketing Solutions $ 177,969  $ 193,333  $ 364,057  $ 385,650 
Retail Media 36,556  26,900  67,385  47,993 
$ 214,525  $ 220,233  $ 431,442  $ 433,643 
Other costs of sales (29,550) (37,364) (62,443) (72,076)
Gross profit $ 184,975  $ 182,869  $ 368,999  $ 361,567 
Operating expenses
Research and development expenses (41,496) (41,915) (75,523) (73,612)
Sales and operations expenses (99,313) (80,751) (188,312) (160,105)
General and administrative expenses (100,672) (40,474) (134,008) (73,902)
Total Operating expenses (241,481) (163,140) (397,843) (307,619)
Income from operations $ (56,506) $ 19,729  $ (28,844) $ 53,948 
Financial and Other Income (Expense) 16,412  (519) 20,442  (1,237)
Income before tax $ (40,094) $ 19,210  $ (8,402) $ 52,711 
The Company's chief operating decision maker, or CODM, does not review any other financial information for our two segments, other than Contribution ex-TAC, at the reportable segment level.
10



Note 3. Financial Instruments
Financial assets
The maximum exposure to credit risk at the end of each reported period is represented by the carrying amount of financial assets and summarized in the following table:
June 30, 2022 December 31, 2021
(in thousands)
Trade receivables, net of allowances 490,643  581,988 
Other taxes 68,608  73,388 
Other current assets 39,240  34,182 
Non-current financial assets 4,908  6,436 
Marketable securities 10,000  55,299 
Total $ 613,399  $ 751,293 

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

Financial Liabilities
June 30, 2022 December 31, 2021
(in thousands)
Trade payables $ 400,058  $ 430,245 
Other taxes 50,589  60,236 
Employee-related payables 70,435  98,136 
Other current liabilities 44,390  39,523 
Financial liabilities 589  1,002 
Total $ 566,061  $ 629,142 

The fair value of financial liabilities approximates the carrying amount, given the nature of the financial liabilities and the maturity of the expected cash outflows.

Fair Value Measurements     
We measure the fair value of our cash equivalents and marketable securities, which include interest-bearing bank deposits, as level 2 measurements because they are valued using observable market data.
Financial assets or liabilities include derivative financial instruments used to manage our exposure to the risk of exchange rate fluctuations. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.


11



Derivative Financial Instruments
Derivatives consist of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts in financial income (expense), and their position on the balance sheet is based on their fair value at the end of each respective period. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.
June 30, 2022 December 31, 2021
(in thousands)
Derivative Assets:
Included in other current assets $ 2,658  $ 60 
Derivative Liabilities:
Included in financial liabilities - current portion $ —  $ — 

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

Cash and Cash Equivalents
The following table presents for each reporting period, the breakdown of cash and cash equivalents:
June 30, 2022 December 31, 2021
(in thousands)
Cash equivalents $ 48,312  $ 137,228 
Cash on hand 514,234  378,299 
Total cash and cash equivalents $ 562,546  $ 515,527 

Cash equivalents are investments in interest–bearing bank deposits which meet ASC 230—Statement of Cash flows criteria: short-term, highly liquid investments, for which the risks of changes in value are considered to be insignificant. Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.
For our cash and cash equivalents, the fair value approximates the carrying amount, given the nature of the cash and cash equivalents and the maturity of the expected cash flows.






12



Marketable Securities

The following table presents for each reporting period, the breakdown of the fair value of marketable securities:
June 30, 2022 December 31, 2021
(in thousands)
Securities Available-for-sale
Term Deposits $ —  $ 22,652 
Securities Held-to-maturity
Term Deposits $ 10,000  $ 32,647 
Total $ 10,000  $ 55,299 

The gross unrealized gains on our marketable securities were not material as of June 30, 2022.
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
June 30, 2022
(in thousands)
Due in one year $ 10,000  $ — 
Due in one to five years $ —  $ — 
Total $ 10,000  $ — 

13



Note 4. Trade Receivables
The following table shows the breakdown in trade receivables net book value for the presented periods:
June 30, 2022 December 31, 2021
(in thousands)
Trade accounts receivables $ 541,131  $ 627,379 
(Less) Allowance for credit losses (50,488) (45,391)
Net book value at end of period $ 490,643  $ 581,988 
Changes in allowance for credit accounts are summarized below:
 2022  2021
(in thousands)
Balance at January 1 $ (45,391) $ (39,899)
Allowance for credit losses (11,551) (6,617)
Reversal of provision 4,474  3,469 
Currency translation adjustment 1,980  454 
Balance at June 30 $ (50,488) $ (42,593)
We write off accounts receivable balances once the receivables are no longer deemed collectible.

During the six month period ended June 30, 2022, and June 30, 2021, the Company recovered $4.5 million, and $1.7 million, respectively, previously reserved for, and accounted for this as a reversal of provision.
As of June 30, 2022 and December 31, 2021 no customer accounted for 10% or more of trade receivables.

14



Note 5. Other Current Assets
The following table shows the breakdown in other current assets net book value for the presented periods:
June 30, 2022 December 31, 2021
(in thousands)
Prepayments to suppliers $ 8,231  $ 9,640 
Other debtors 2,224  9,259 
Prepaid expenses 26,127  15,283 
Derivative instruments 2,658  — 
Net book value at end of period $ 39,240  $ 34,182 
Prepaid expenses mainly consist of cash paid related to SaaS arrangements.

15


Note 6. Other Current Liabilities
Other current liabilities are presented in the following table:
June 30, 2022 December 31, 2021
(in thousands)
Current liabilities to clients $ 16,978  $ 16,423 
Rebates 15,091  17,423 
Accounts payable relating to capital expenditures 9,501  4,507 
Other creditors 2,136  1,088 
Deferred revenue 684  82 
Total $ 44,390  $ 39,523 

16


Note 7. Leases
The components of lease expense are as follows:
Three Months Ended
June 30, 2022 June 30, 2021
Offices Data Centers Total Offices Data Centers Total
(in thousands)
Lease expense $ 4,343  $ 5,029  $ 9,372  $ 6,874  $ 6,460  $ 13,334 
Short term lease expense 204  206  125  132 
Variable lease expense 25  86  111  100  129  229 
Sublease income (263) —  (263) (288) —  (288)
Total operating lease expense $ 4,309  $ 5,117  $ 9,426  $ 6,811  $ 6,596  $ 13,407 

Six Months Ended
June 30, 2022 June 30, 2021
Offices Data Centers Total Offices Data Centers Total
(in thousands)
Lease expense $ 8,752  $ 10,236  $ 18,988  $ 13,417  $ 12,858  $ 26,275 
Short term lease expense 355  360  201  14  215 
Variable lease expense 75  91  166  244  202  446 
Sublease income (435) (435) (476) —  (476)
Total operating lease expense $ 8,747  $ 10,332  $ 19,079  $ 13,386  $ 13,074  $ 26,460 

As of June 30, 2022, 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 $ —  $ 6,271 
Additional right of use assets $ —  $ 6,271 
These operating leases will commence during the fiscal year ending December 31, 2022 and December 31, 2023.

17


Note 8. Employee Benefits

Defined Benefit Plans
According to the French law and the Syntec Collective Agreement, French employees are entitled to compensation paid on retirement.
The following table summarizes the changes in the projected benefit obligation:
Projected benefit obligation
(in thousands)
Projected benefit obligation present value at January 1, 2021
$ 6,167 
Service cost
1,324 
 Interest cost
51 
Actuarial losses (gains)
(1,543)
Currency translation adjustment
(468)
Projected benefit obligation present value at December 31, 2021
$ 5,531 
Service cost
539 
 Interest cost
37 
Actuarial losses (gains)
(2,535)
Currency translation adjustment
(359)
Projected benefit obligation present value at June 30, 2022
$ 3,213 
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:
Six Months Ended Year ended
June 30, 2022 December 31, 2021
Discount rate (Corp AA)
3.75%
1.40%
Expected rate of salary increase
5%
5%
Expected rate of social charges
49% - 50%
49% - 50%
Expected staff turnover
—% - 17.8%
—% - 17.8%
Estimated retirement age
Progressive table Progressive table
Life table
TH-TF 2000-2002 shifted TH-TF 2000-2002 shifted


18


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 Six Months Ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands)
Defined contributions plans included in personnel expenses
$ (6,278) $ (3,447) $ (10,136) $ (9,000)



Note 9. Revenue

Disaggregation of revenue
The following table presents our disaggregated revenues:
Marketing Solutions Retail Media Total
For the three months ended (in thousands)
June 30, 2022 $ 440,423  $ 54,667  $ 495,090 
June 30, 2021 $ 487,465  $ 63,846  $ 551,311 

Marketing Solutions Retail Media Total
For the six months ended (in thousands)
June 30, 2022 $ 904,311  $ 101,346  $ 1,005,657 
June 30, 2021 $ 970,655  $ 121,733  $ 1,092,388 
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Note 10. Share-Based Compensation
Criteo's board of directors ("board of directors") has been authorized by the general meeting of the shareholders to grant employee warrants (Bons de Souscription de Parts de Créateur d’Entreprise or "BSPCEs"), share options (Options de Souscription d'Actions or "OSAs"), restricted share units ("RSUs") and non-employee warrants (Bons de Souscription d'Actions or "BSAs").
During the three months ended June 30, 2022, there was one grant of RSUs under the Employee Share Option Plan 14 as defined in Note 20 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
On February 24, 2022, 348,133 RSUs were granted to Criteo employees subject to continued employment and 384,277 PSUs were granted to members of the management subject to continued employment.
On April 28, 2022 1,626,911 RSUs were granted to Criteo employees subject to continued employment and 79,907 PSUs were granted to members of the management subject to continued employment.
There have been no changes in the vesting and method of valuation of the BSPCEs, OSAs, RSUs, or BSAs from what was disclosed in Note 19 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Change in number of outstanding BSPCE / OSA / RSU / BSA
OSA/BSPCE RSU/PSU BSA Total
Balance at January 1, 2022 570,801  5,299,356  343,775  6,213,932 
Granted —  2,439,227  —  2,439,227 
Exercised (OSA/BSPCE/BSA) (39,711) —  —  (39,711)
Vested (RSU) —  (932,135) —  (932,135)
Forfeited (100,860) (705,462) —  (806,322)
Expired —  —  —  — 
Balance at June 30, 2022 430,230  6,100,986  343,775  6,874,991 

Breakdown of the Closing Balance
OSA/BSPCE RSU BSA
Number outstanding 430,230  6,100,986  343,775 
Weighted-average exercise price 21.07  NA 15.12 
Number vested 281,242  —  291,645 
Weighted-average exercise price 23.84  NA 15.45 
Weighted-average remaining contractual life of options outstanding, in years 4.95 NA 5.29



20


Reconciliation with the Unaudited Consolidated Statements of Income
Three Months Ended
June 30, 2022 June 30, 2021
(in thousands)
R&D S&O G&A Total R&D S&O G&A Total
RSUs $ (5,577) $ (2,709) $ (3,341) $ (11,627) $ (4,218) $ (3,559) $ (3,183) $ (10,960)
Share options / BSPCE —  157  (79) 78  —  (77) (189) (266)
Total share-based compensation (5,577) (2,552) (3,420) (11,549) (4,218) (3,636) (3,372) (11,226)
BSAs —  —  (472) (472) —  —  (444) (444)
Total equity awards compensation expense $ (5,577) $ (2,552) $ (3,892) $ (12,021) $ (4,218) $ (3,636) $ (3,816) $ (11,670)
    

Six Months Ended
June 30, 2022 June 30, 2021
(in thousands)
R&D S&O G&A Total R&D S&O G&A Total
RSUs $ (9,545) $ (5,320) $ (5,745) $ (20,610) $ (6,714) $ (5,208) $ (5,471) $ (17,393)
Share options / BSPCE —  202  (182) 20  —  (182) (411) (593)
Total share-based compensation (9,545) (5,118) (5,927) (20,590) (6,714) (5,390) (5,882) (17,986)
BSAs —  —  (920) (920) —  —  (899) (899)
Total equity awards compensation expense $ (9,545) $ (5,118) $ (6,847) $ (21,510) $ (6,714) $ (5,390) $ (6,781) $ (18,885)

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Note 11. Financial and Other Income and Expenses
The condensed consolidated statements of income line item “Financial income (expense)” can be broken down as follows:
Three Months Ended Six Months Ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
(in thousands)
Financial income from cash equivalents $ 240  $ 198  $ 373  $ 326 
Interest and fees (422) (506) (969) (1,046)
Interest on debt (214) (464) (744) (881)
Fees (208) (42) (225) (165)
Foreign exchange gain (loss) 16,126  (521) 20,589  (1,319)
Other financial expense 468  310  449  802 
Total Financial and Other income (expense) $ 16,412  $ (519) $ 20,442  $ (1,237)

The $16.4 million financial and other income and the $20.4 million financial and other income for the three months and six months ended June 30, 2022 respectively, were driven by the recognition of a positive 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 ("RCF") financing.
At June 30, 2022, 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.



22


Note 12. Income Taxes
Breakdown of Income Taxes
The tax provision for interim periods is determined using an estimate of our annual effective tax rate (“AETR”), adjusted for discrete items arising in the period. To calculate our estimated AETR, we estimate our income before taxes and the related tax expense or benefit for the full fiscal year (total of expected current and deferred tax provisions), excluding the effect of significant unusual or infrequently occurring items or comprehensive income items not recognized in the statement of income. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated annual tax rate does change, we make a cumulative adjustment in that quarter. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, are subject to significant volatility due to several factors including our ability to accurately predict our income (loss) before provision for income taxes in multiple jurisdictions and the changes in foreign exchange rates. Our effective tax rate in the future will depend on the portion of our profits earned within and outside of France.
The condensed consolidated statements of income line item “Provision for income taxes” can be broken down as follows:

Six Months Ended
June 30, 2022 June 30, 2021
(in thousands)
Current income tax $ (10,407) $ (11,927)
Net change in deferred taxes 7,114  (2,305)
Provision for income taxes $ (3,293) $ (14,232)

For the six months ended June 30, 2022 and June 30, 2021, we used an annual estimated tax rate of 39% and 27%, respectively, to calculate the provision for income taxes. The increase in 2022 was mainly driven by the impact of the accrual booked for the loss contingency related to the CNIL matter as described in Note 14.
Current tax assets and liabilities
The total amount of current tax assets and liabilities consists mainly of prepayments of income taxes and credits of Criteo S.A., Criteo Corp., and Criteo GmbH.
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Note 13. Earnings Per Share
Basic Earnings Per Share
We calculate basic earnings per share by dividing the net income (loss) for the period attributable to shareholders of the Parent by the weighted average number of shares outstanding.
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Net income (loss) attributable to shareholders of Criteo S.A. $ (33,614) $ 14,804  $ (13,027) $ 37,210 
Weighted average number of shares outstanding 60,240,344  60,663,301  60,488,429  60,702,780 
Basic earnings (loss) per share $ (0.56) $ 0.24  $ (0.22) $ 0.61 
Diluted Earnings Per Share
We calculate diluted earnings per share by dividing the net income (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 (see Note 10). There were no other potentially dilutive instruments outstanding as of June 30, 2022 and June 30, 2021. Consequently, all potential dilutive effects from shares are considered.
For each period presented, a contract to issue a certain number of shares (i.e., share option, non-employee warrant, 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 Six Months Ended
June 30, 2022 June 30,
2021
June 30, 2022 June 30, 2021
Net income (loss) attributable to shareholders of Criteo S.A. $ (33,614) $ 14,804  $ (13,027) $ 37,210 
Weighted average number of shares outstanding of Criteo S.A. 60,240,344  60,663,301  60,488,429  60,702,780 
Dilutive effect of :
Restricted share awards ("RSUs") 1,899,561  3,384,757  2,245,545  3,178,570 
Share options and BSPCE 87,920  495,536  133,506  395,803 
Share warrants 75,845  121,618  90,238  94,450 
Weighted average number of shares outstanding used to determine diluted earnings per share 62,303,670  64,665,212  62,957,718  64,371,603 
Diluted earnings (loss) per share $ (0.54) $ 0.23  $ (0.21) $ 0.58 
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:
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Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Restricted share awards 384,938  858,511  221,889  595,406 
Share options and BSPCE —  —  —  — 
Weighted average number of anti-dilutive securities excluded from diluted earnings per share 384,938  858,511  221,889  595,406 
Note 14. Commitments and contingencies
Commitments
Revolving Credit Facilities, Credit Line Facilities and Bank Overdrafts     
We are party to an RCF with a syndicate of banks which allows us to draw up to €294.0 million ($305.4 million).
We are also party to short-term credit lines and overdraft facilities with HSBC plc, BNP Paribas and LCL with an authorization to draw up to a maximum of €21.5 million ($22.3 million) in the aggregate under the short-term credit lines and overdraft facilities. As of June 30, 2022, we had not drawn on any of these facilities. Any loans or overdrafts under these short-term facilities bear interest based on the one month EURIBOR rate or three month EURIBOR rate. As these facilities are exclusively short-term credit and overdraft facilities, our banks have the ability to terminate such facilities on short notice.
Contingencies
Changes in provisions during the presented periods are summarized below:
Provision for employee-related litigation Other provisions Total
(in thousands)
Balance at January 1, 2022 $ 1,117  $ 1,942  $ 3,059 
Increase 60  65,719  65,779 
Provision used (77) (311) (388)
Provision released not used* (63) (46) (109)
Currency translation adjustments (111) (3,499) (3,610)
Balance at June 30, 2022 $ 926  $ 63,805  $ 64,731 
 - of which current 926  63,805  64,731 
*Due to changes in management's latest estimates
The amount of the provisions represents management’s latest estimate of the expected impact.

Regulatory matters
As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, 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"). 

25


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 ($65.4 million). Under the CNIL sanction procedures, Criteo has the right to respond in writing to the report, both with respect to the GDPR findings and the value of the sanction, following which there will be a formal hearing before the CNIL Sanction Committee. The CNIL Sanction Committee will then 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. Any final decision on resolution and potential financial penalties would likely not occur until 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 ($65.4 million), we have accounted for the proposed penalty as a provision for a loss contingency, which is reflected in our financial statements for the period ended as of June 30, 2022 as general and administrative expenses. Such amount could be lower or higher based on the final resolution and merits of the claims made in the report.
26


Note 15. 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.

Americas EMEA Asia-Pacific Total
For the three months ended: (in thousands)
June 30, 2022 $ 213,340  $ 176,867  $ 104,883  $ 495,090 
June 30, 2021 $ 221,227  $ 209,303  $ 120,781  $ 551,311 
Revenue generated in France, the country of incorporation of the Parent, amounted to $29.3 million and $39.1 million for the three months ended June 30, 2022 and 2021, respectively.
Americas EMEA Asia-Pacific Total
For the six months ended: (in thousands)
June 30, 2022 $ 408,187  $ 370,821  $ 226,649  $ 1,005,657 
June 30, 2021 $ 425,127  $ 421,399  $ 245,862  $ 1,092,388 
Revenue generated in France amounted to $60.1 million and $76.9 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
Revenue generated in other significant countries where we operate is presented in the following table:
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands)
Americas
United States $ 190,018  $ 196,579  $ 361,882  $ 380,663 
EMEA
Germany $ 48,639  $ 53,051  $ 104,094  $ 106,647 
United Kingdom $ 18,006  $ 22,112  $ 36,653  $ 45,404 
Asia-Pacific
Japan $ 61,844  $ 74,791  $ 139,819  $ 159,003 


27


Other Information
For each reported period, non-current assets (corresponding to the net book value of tangible and intangible assets, excluding right of use assets related to lease agreements) are presented in the table below. The geographical information includes results from the locations of legal entities.
Of which Of which
Holding Americas United States EMEA Asia-Pacific Japan Singapore Total
(in thousands)
June 30, 2022 $ 90,037  $ 79,952  $ 78,515  $ 4,868  $ 27,294  $ 10,234  $ 13,231  $ 202,151 
December 31, 2021 $ 97,627  $ 84,954  $ 83,843  $ 6,036  $ 33,971  $ 14,159  $ 15,650  $ 222,588 

Note 16. Related Parties
There were no significant related-party transactions pursuant to ASC 850 during the period nor any change in the nature of the transactions as described in Note 25 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
28


Note 17. Subsequent Events
CNIL Investigation
In connection with the previously disclosed investigation by CNIL, on August 3, 2022, the assigned rapporteur issued a report that claimed certain GDPR violations. The report includes a proposed financial sanction against the Company of €60.0 million ($65.4 million). A final decision on resolution and potential financial penalties would likely not occur until 2023. Refer to Note 14. Commitments and contingencies for more information.
Completion of the Acquisition of IPONWEB
On August 1, 2022, the Company, IPONWEB Holding Limited (“IPONWEB”), Exezars Limited (a subsidiary of IPONWEB and collectively with IPONWEB, the “Sellers”), Mr. Ljubisa Bogunovic, in his capacity as trustee of the “IW General Management Trust” (the “Trustee”) and Mr. Boris Mouzykantskii, founder and Chief Executive Officer of IPONWEB (the “Founder”) entered into an amended and restated Framework Purchase Agreement (the “A&R Purchase Agreement”), amending and restating the previously disclosed framework purchase agreement, dated December 22, 2021, which provided for the acquisition of the business of IPONWEB by the Company (the “Acquisition”).
The Acquisition was consummated on August 1, 2022 and the Company funded the purchase price of the Acquisition with (i) approximately $180 million of cash on hand, which is subject to certain adjustments including for working capital, other current assets and current liabilities and net indebtedness and (ii) treasury shares of the Company corresponding to a total value at closing of approximately $70 million. The A&R Purchase Agreement, also provides for contingent consideration payable in cash to the Founder in an amount up to $100 million, conditioned upon the achievement of certain revenue targets by the Company for the 2022 and 2023 fiscal year. The acquisition will accelerate Criteo's plans to shape the future of Commerce Media on the open internet. We will complete the initial accounting for the acquisition of IPONWEB, including the allocation of purchase consideration, during the third quarter of 2022.
On July 29, 2022, the Company drew down €50 million ($51.1 million) under the RCF for a one month period to provide additional liquidity in connection with the closing of the IPONWEB Acquisition.
29


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, 2021, filed with the Securities and Exchange Commission, or "SEC", on February 25, 2022.

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, 2021.

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 2022.

Use of Non-GAAP Financial Measures

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

Contribution ex-TAC is a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs ("TAC") from revenue and reconciled to gross profit through the exclusion of other cost 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 be useful 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.
Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs and certain other non-recurring items impacting net income (loss). Adjusted EBITDA and Adjusted EBITDA margin are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring related and transformation costs, and certain other non-recurring items impacting net income (loss). Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, certain other non-recurring items impacting net income (loss), and the tax impact of these adjustments. Adjusted Net Income and Adjusted diluted EPS are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, certain other non-recurring items impacting net income (loss), and the tax impact of these adjustments, Adjusted Net Income and Adjusted diluted EPS can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted diluted EPS provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

30


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

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Condensed Consolidated Statements of Income Data (Unaudited):
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands, except share and per share data)
Revenue $ 495,090  $ 551,311  $ 1,005,657  $ 1,092,388 
Cost of revenue (1)
Traffic acquisition costs (280,565) (331,078) (574,215) (658,745)
Other cost of revenue (29,550) (37,364) (62,443) (72,076)
Gross profit 184,975  182,869  368,999  361,567 
Operating expenses
Research and development expenses (1)
(41,496) (41,915) (75,523) (73,612)
Sales and operations expenses (1)
(99,313) (80,751) (188,312) (160,105)
General and administrative expenses (1)
(100,672) (40,474) (134,008) (73,902)
Total operating expenses (241,481) (163,140) (397,843) (307,619)
Income from operations (56,506) 19,729  (28,844) 53,948 
Financial and Other income (expense) 16,412  (519) 20,442  (1,237)
Income before taxes (40,094) 19,210  (8,402) 52,711 
Provision for income taxes 7,121  (4,181) (3,293) (14,232)
Net income $ (32,973) $ 15,029  $ (11,695) $ 38,479 
Net income available to shareholders of Criteo S.A. $ (33,614) $ 14,804  $ (13,027) $ 37,210 
Net income allocated to shareholders per share:
Basic $ (0.56) $ 0.24  $ (0.22) $ 0.61 
Diluted $ (0.54) $ 0.23  $ (0.21) $ 0.58 
Weighted average shares outstanding used in computing per share amounts:
Basic 60,240,344  60,663,301  60,488,429  60,702,780 
Diluted 62,303,670  64,665,212  62,957,718  64,371,603 
(1)Cost of revenue and operating expenses include equity awards compensation expense, pension service costs, depreciation and amortization expense, restructuring related and transformation costs, and acquisition-related costs:
32



Detailed Information on Selected Items (unaudited):
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands)
Equity awards compensation expense
Research and development expenses $ 5,578  $ 4,218  $ 9,545  $ 6,714 
Sales and operations expenses 2,550  3,636  5,118  6,005 
General and administrative expenses 3,892  3,815  6,847  6,832 
Total equity awards compensation expense $ 12,020  $ 11,669  $ 21,510  $ 19,551 
Pension service costs
Research and development expenses 136  175  278  350 
Sales and operations expenses 39  53  79  106 
General and administrative expenses 89  109  182  219 
Total pension service costs (a)
$ 264  $ 337  $ 539  $ 675 
Depreciation and amortization expense
Cost of revenue (data center equipment) 12,625  15,744  27,257  30,988 
Research and development expenses (b)
3,181  2,207  6,474  3,960 
Sales and operations expenses (c)
3,729  3,702  7,338  7,656 
General and administrative expenses 606  838  1,216  1,741 
Total depreciation and amortization expense $ 20,141  $ 22,491  $ 42,285  $ 44,345 
Acquisition-related costs
Sales and operations 178  —  178  — 
General and administrative expenses 1,799  3,047  4,343  3,047 
Total acquisition-related costs $ 1,977  $ 3,047  $ 4,521  $ 3,047 
Loss contingency on regulatory matter
General and administrative 65,684  —  65,684  — 
Total loss contingency on regulatory matter $ 65,684  $   $ 65,684  $  
Restructuring related and transformation (gain) costs
Research and development expenses 1,029  4,831  1,038  6,267 
Sales and operations expenses 4,076  1,551  4,532  8,918 
General and administrative expenses 820  3,614  1,065  6,447 
Total Restructuring related and transformation (gain) costs $ 5,925  $ 9,996  $ 6,635  $ 21,632 
(a) Effective January 1, 2012, actuarial gains and losses are recognized in other comprehensive income.
(b) Includes acquisition-related amortization of intangible assets of $1.5 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively and $2.9 million and $1.5 million for the six months ended June 2022 and, 2020, respectively.
(c) Includes acquisition-related amortization of intangible assets of $2.2 million and $2.2 million for the three months ended June 30, 2022 and 2021, respectively and $4.3 million and $4.4 million for the six months ended June 30, 2022 and 2021, respectively.



33





Detailed Information on Restructuring related and Transformation costs (unaudited):

Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands)
(Gain) from forfeitures of share-based compensation awards —  —  —  (666)
Facilities related (gain) costs 753  9,721  1,286  16,337 
Payroll related (gain) costs 4,992  (181) 4,992  4,971 
Consulting costs related to transformation 180  456  357  990 
Total restructuring related and transformation (gain) costs $ 5,925  $ 9,996  $ 6,635  $ 21,632 
For the three months ended and the six months ended June 30, 2022 and June 30, 2021, respectively, the cash outflows related to restructuring related and transformation costs were $2.3 million, and $10.3 million and $3.1 million, and $16.5 million, respectively, and were mainly comprised of payroll costs, broker and termination penalties related to real-estate facilities and other consulting fees.

Consolidated Statements of Financial Position Data (unaudited):

June 30, 2022 December 31,
2021
(in thousands)
Cash and cash equivalents $ 562,546  $ 515,527 
Total assets 1,870,844  1,983,591 
Trade receivables, net of credit losses
490,643  581,988 
Total financial liabilities 589  1,002 
Total liabilities 760,656  785,271 
Total equity $ 1,110,188  $ 1,198,320 
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Other Financial and Operating Data (unaudited):
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands, except client data)
Number of clients 21,711  21,332  21,711  21,332 
Contribution ex-TAC (3)
$ 214,525  $ 220,233  $ 431,442  $ 433,643 
Adjusted Net Income (4)
$ 23,027  $ 40,856  $ 56,801  $ 84,008 
Adjusted EBITDA (5)
$ 49,993  $ 67,269  $ 112,818  $