Criteo 10Q 2023 Q2 Quarterly report

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, 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 July 31, 2023, the registrant had 55,812,266 ordinary shares, nominal value €0.025 per share, outstanding.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	2
Item 1	Unaudited Financial Statements as of June 30 ,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)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4	Controls and Procedures	54
PART II	OTHER INFORMATION	55
Item 1	Legal Proceedings	55
Item 1A	Risk Factors	55
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 5	Other Information	58
Item 6	Exhibits	58
Signatures		59

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,” "objective," “plan,” “potential,” “predict,” "seek," “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, cash flow 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;

•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)


		June 30, 2023		December 31, 2022
		(in thousands)
Assets
Current assets:
Cash and cash equivalents	5	$	223,183	$	348,200
Trade receivables, net of allowances of $ 55.7 million and $ 47.8 million at June 30, 2023 and December 31, 2022, respectively	6	573,463		708,949
Income taxes	14	28,473		23,609
Other taxes		92,063		78,274
Other current assets	7	45,268		51,866
Restricted cash - current	5	75,000		25,000
Marketable securities - current portion	5	21,151		25,098
Total current assets		1,058,601		1,260,996
Property, plant and equipment, net		143,724		131,207
Intangible assets, net		179,185		175,983
Goodwill	2	522,536		515,140
Right of use assets - operating lease	9	100,971		102,176
Restricted cash - non-current	5	—		75,000
Marketable securities - non-current portion	5	16,299		—
Non-current financial assets		5,311		5,928
Other non-current assets		49,719		50,818
Deferred tax assets		52,021		31,646
Total non-current assets		1,069,766		1,087,898
Total assets		$	2,128,367	$	2,348,894

Liabilities and shareholders' equity
Current liabilities:
Trade payables		$	616,590	$	742,918
Contingencies - current portion	16	45,403		65,759
Income taxes	14	3,743		13,037
Financial liabilities - current portion	5	614		219
Lease liability - operating - current portion	9	32,180		31,003
Other taxes		60,574		58,031
Employee - related payables		100,465		85,569
Other current liabilities	8	89,447		83,457
Total current liabilities		949,016		1,079,993
Deferred tax liabilities		3,537		3,463
Defined benefit plans	10	4,358		3,708
Financial liabilities - non-current portion	5	75		74
Lease liability - operating - non-current portion	9	74,722		77,536
Contingencies - non-current portion	16	32,625		33,788
Other non-current liabilities	8	21,022		69,226
Total non-current liabilities		136,339		187,795
Total liabilities		1,085,355		1,267,788
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 63,337,453 and 63,248,728 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022, respectively.		2,081		2,079
Treasury stock,7,412,578 and 5,985,104 shares at cost as of June 30, 2023 and December 31, 2022, respectively.		(214,046)		(174,293)
Additional paid-in capital		787,674		734,492
Accumulated other comprehensive loss		(91,328)		(91,890)
Retained earnings		527,857		577,653
Equity-attributable to shareholders of Criteo S.A.		1,012,238		1,048,041
Non-controlling interests		30,774		33,065
Total equity		1,043,012		1,081,106
Total equity and liabilities		$	2,128,367	$	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				Six Months Ended
	Notes		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
		(in thousands, except share per data)

Revenue	11		$	468,934	$	495,090	$	913,950	$	1,005,657

Cost of revenue:
Traffic acquisition costs			(228,717)		(280,565)		(453,115)		(574,215)
Other cost of revenue			(40,435)		(29,550)		(79,544)		(62,443)

Gross profit			199,782		184,975		381,291		368,999

Operating expenses:
Research and development expenses			(67,775)		(41,496)		(131,365)		(75,523)
Sales and operations expenses			(112,511)		(99,313)		(213,753)		(188,312)
General and administrative expenses			(18,537)		(100,672)		(58,707)		(134,008)
Total operating expenses			(198,823)		(241,481)		(403,825)		(397,843)
Income (loss) from operations			959		(56,506)		(22,534)		(28,844)
Financial and Other income (expense)	13		(1,852)		16,412		4,975		20,442
Loss before taxes			(893)		(40,094)		(17,559)		(8,402)
Provision for income tax (expense) benefit	14		(1,078)		7,121		3,517		(3,293)
Net loss			$	(1,971)	$	(32,973)	$	(14,042)	$	(11,695)

Net loss available to shareholders of Criteo S.A.			$	(2,876)	$	(33,614)	$	(14,685)	$	(13,027)
Net income (loss) available to non-controlling interests			$	905	$	641	$	643	$	1,332

Weighted average shares outstanding used in computing per share amounts:
Basic	15		55,924,824		60,240,344		56,094,887		60,488,429
Diluted	15		55,924,824		60,240,344		56,094,887		60,488,429

Net loss allocated to shareholders per share:
Basic	15		$	(0.05)	$	(0.56)	$	(0.26)	$	(0.22)
Diluted	15		$	(0.05)	$	(0.56)	$	(0.26)	$	(0.22)

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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)

Net loss	$	(1,971)	$	(32,973)	$	(14,042)	$	(11,695)
Foreign currency translation differences, net of taxes	(8,450)		(51,510)		(2,135)		(70,728)
Actuarial gains (losses) on employee benefits, net of taxes	(7)		1,449		(143)		2,535
Other comprehensive loss	$	(8,457)	$	(50,061)	$	(2,278)	$	(68,193)
Total comprehensive loss	$	(10,428)	$	(83,034)	$	(16,320)	$	(79,888)
Attributable to shareholders of Criteo S.A.	$	(8,763)	$	(80,044)	$	(14,097)	$	(75,664)
Attributable to non-controlling interests	$	(1,665)	$	(2,990)	$	(2,223)	$	(4,224)

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
Net income (loss)	—	—	—	—	—	—	(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.


	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
Net income (loss)	—	—	—	—	—	—	(2,876)	(2,876)	905	(1,971)
Other comprehensive income (loss)	—	—	—	—	—	(5,887)	—	(5,887)	(2,570)	(8,457)
Issuance of ordinary shares	20,757	—	—	—	399	—	—	399	—	399
Change in treasury stocks(*)	—	—	(89,425)	(2,646)	—	—	(21,189)	(23,835)	—	(23,835)
Share-Based Compensation	—	—	—	—	26,878	—	—	26,878	(165)	26,713
Other changes in equity	—	—	—	—	—	(26)	—	(26)	—	(26)
Balance at June 30, 2023	63,337,453	$2,081	(7,412,578)	$(214,046)	$787,674	$(91,328)	$527,857	$1,012,238	$30,774	$1,043,012

(*) On December 7, 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 2,469,577 shares repurchased at an average price of $31.3 offset by 1,042,103 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)


		Six Months Ended
		June 30, 2023		June 30, 2022
	(in thousands)
Net Loss		$	(14,042)	$	(11,695)
Non-cash and non-operating items		48,886		98,227
- Amortization and provisions		37,422		114,502

- Net (gain) or loss on disposal of non-current assets		(8,797)		(696)
- Equity awards compensation expense (1)		52,341		21,510

- Change in deferred taxes		(20,536)		(7,114)
- Change in income taxes		(13,615)		(14,678)
- Other (2)		2,071		(15,297)
Changes in working capital related to operating activities		8,448		2,370
- (Increase) / Decrease in trade receivables		129,454		65,476
- Increase / (Decrease) in trade payables		(128,557)		(16,977)
- (Increase) / Decrease in other current assets		(6,652)		(14,595)
- Increase/ (Decrease) in other current liabilities		14,597		(31,313)
- Change in operating lease liabilities and right of use assets		(394)		(221)

Cash from operating activities		43,292		88,902
Acquisition of intangible assets, property, plant and equipment		(61,507)		(32,794)
Change in accounts payable related to intangible assets, property, plant and equipment		(17,231)		11,778
Payment for business, net of cash acquired		(6,957)		—
Proceeds from disposition of investments		9,625		—

Change in other non-current financial assets		(12,267)		44,311
Cash (used for) from investing activities		(88,337)		23,295
Proceeds from borrowings under line-of-credit agreement		—		78,513
Repayment of borrowings		—		(78,513)
Proceeds from exercise of stock options		1,697		351
Repurchase of treasury stocks		(74,866)		(29,334)

Cash payment for contingent consideration		(22,025)		—
Other (2)		(923)		14,474
Cash used for financing activities		(96,117)		(14,509)
Effect of exchange rates changes on cash and cash equivalents		(8,855)		(50,669)
Net increase (decrease) in cash and cash equivalents		(150,017)		47,019
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		$	298,183	$	562,546

Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds		(31,101)		(25,085)
Cash paid for interest		(676)		(626)

(1) Of which $51.4 million and $20.6 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, 2023 and 2022, respectively.
(2) Primarily consists of realized gains in FX hedges for the six months ended June 30, 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 "Acquisition Date"), 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 12 for further discussion.

Financing. The acquisition was financed by available cash resources, and in connection with the Iponweb 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 were 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 Iponweb Acquisition, the Sellers agreed to indemnify Criteo for losses related to certain liabilities, up to an amount of $50.0 million. As such, Criteo has 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 $12.6 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 June 30, 2023, we did not record any acquisition related costs.

Impact on profit and loss. The Company's consolidated statements of operations for the six months ended June 30, 2023 include Iponweb's revenues of $54.2 million and pretax income (loss) of $6.7 million.

On a pro-forma basis, assuming the Iponweb Acquisition occurred on January 1, 2022, Criteo's consolidated pro-forma revenue and net loss would have been as follows:



	Three Months Ended				Six Months Ended
	June 30 2023		June 30 2022		June 30 2023		June 30 2022

Revenue	$	468,934	$	522,039	$	913,950	$	1,058,034
Net loss	(1,971)		(38,406)		(14,042)		(21,684)

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 Iponweb Acquisition had taken place at the beginning of the Company's fiscal year 2022.

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 $0.7 million were fully expensed as incurred.

Note 3. Restructuring

As part of our ongoing transformation, the Company incurred restructuring costs of $14.7 million and $19.9 million for the three and six months ended June 30, 2023, respectively. The following table summarizes restructuring activities as of June 30, 2023 included in other current liabilities on the balance sheet:


	Salaries and other benefits

Restructuring liability as of January 1, 2023	$	—
Restructuring charge	19,914
Amounts paid	(7,600)
Restructuring liability as of June 30, 2023	$	12,314

For the three and six months ended June 30, 2023, $3.1 million, and $3.3 million, respectively, was included in Research and Development expenses, $2.2 million and $2.9 million, respectively, was included in General and Administrative expenses and $9.4 million and $13.7 million, respectively, was included in Sales and Operations expenses.

Note 4. Segment information

Reportable segments

Criteo is a global technology company driving superior commerce outcomes for marketers and media owners through the world’s leading Commerce Media Platform.

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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)
Marketing Solutions	$	395,274	440,423		$	777,181	904,311
Retail Media	44,590		54,667		82,611		101,346
Iponweb	29,070		—		54,158		—
Total Revenue	$	468,934	$	495,090	$	913,950	$	1,005,657

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, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)
Contribution ex-TAC
Marketing Solutions	$	167,629	$	177,969	$	325,807	$	364,057
Retail Media	43,518		36,556		80,870		67,385
Iponweb	29,070		—		54,158		—
	$	240,217	$	214,525	$	460,835	$	431,442

Other costs of sales	(40,435)		(29,550)		(79,544)		(62,443)
Gross profit	$	199,782	$	184,975	$	381,291	$	368,999
Operating expenses
Research and development expenses	(67,775)		(41,496)		(131,365)		(75,523)
Sales and operations expenses	(112,511)		(99,313)		(213,753)		(188,312)
General and administrative expenses	(18,537)		(100,672)		(58,707)		(134,008)
Total Operating expenses	(198,823)		(241,481)		(403,825)		(397,843)

Income (loss) from operations	$	959	$	(56,506)	$	(22,534)	$	(28,844)
Financial and Other Income (Expense)	(1,852)		16,412		4,975		20,442
Loss before tax	$	(893)	$	(40,094)	$	(17,559)	$	(8,402)

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 5. Cash, Cash Equivalents, Marketable Securities and Restricted Cash

Fair Value Measurements


	As of June 30, 2023
	Cash and Cash Equivalent		Marketable Securities
	(in thousands)
Cash	174,286		$	—
Level 2
Term deposits and notes	48,897		37,450
Total	$	223,183	$	37,450


	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:


	June 30, 2023		December 31, 2022

	(in thousands)


Securities Held-to-maturity
Term Deposits	$	37,450	$	25,098
Total	$	37,450	$	25,098

The gross unrealized gains on our marketable securities were not material as of June 30, 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
	June 30, 2023

	(in thousands)
Due in one year	$	21,151	$	—
Due in one to five years	$	16,299	$	—
Total	$	37,450	$	—

Restricted Cash

As part of the Iponweb Acquisition in August 2022, 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.


	June 30, 2023		December 31, 2022

	(in thousands)

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

Note 6. Trade Receivables

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


	June 30, 2023		December 31, 2022

	(in thousands)
Trade accounts receivables	$	629,185	$	756,741
(Less) Allowance for credit losses	(55,722)		(47,792)
Net book value at end of period	$	573,463	$	708,949

At June 30, 2023 our largest receivable balance from an individual customer was 10% of our gross accounts receivable. No other customers individually exceeded 10% of our gross accounts receivables.

Note 7. Other Current Assets

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


	June 30, 2023		December 31, 2022

	(in thousands)
Prepayments to suppliers	$	5,050	$	12,421
Other debtors	5,914		6,768
Prepaid expenses	32,687		24,549
Other current assets	1,617		8,128

Net book value at end of period	$	45,268	$	51,866

Prepaid expenses mainly consist of amounts related to SaaS arrangements.

Note 8. Other Current and Non-Current Liabilities

Other current liabilities are presented in the following table:


	June 30, 2023		December 31, 2022

	(in thousands)
Customer prepayments	$	13,841	$	16,334
Rebates	17,790		17,671
Accounts payable relating to capital expenditures	7,680		25,414
Other creditors	3,982		2,398

Earn out liability – current	46,154		21,640
Total current liabilities	$	89,447	$	83,457

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


	June 30, 2023		December 31, 2022

	(in thousands)
Earn out liability – non-current	$	—	$	44,696
Uncertain tax positions	17,760		17,980
Other	3,262		6,550
Total non-current liabilities	$	21,022	$	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 is expected to be paid in 2024. 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 $17.8 million related to uncertain tax positions as of June 30, 2023. These uncertain tax positions are related to the Iponweb Acquisition.

Note 9. Leases

The components of lease expense are as follows:


	Three Months Ended
	June 30, 2023						June 30, 2022
	Offices		Data Centers		Total		Offices		Data Centers		Total
	(in thousands)
Lease expense	$	3,425	$	5,624	$	9,049	$	4,343	$	5,029	$	9,372
Short term lease expense	147		20		167		204		2		206
Variable lease expense	115		57		172		25		86		111
Sublease income	(186)		—		(186)		(263)				(263)
Total operating lease expense	$	3,501	$	5,701	$	9,202	$	4,309	$	5,117	$	9,426


	Six Months Ended
	June 30, 2023						June 30, 2022
	Offices		Data Centers		Total		Offices		Data Centers		Total
	(in thousands)
Lease expense	$	7,129	$	11,200	$	18,329	$	8,752	$	10,236	$	18,988
Short term lease expense	289		29		318		355		5		360
Variable lease expense	204		61		265		75		91		166
Sublease income	(415)		—		(415)		(435)				(435)
Total operating lease expense	$	7,207	$	11,290	$	18,497	$	8,747	$	10,332	$	19,079

As of June 30, 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	$	2,547	$	25,878
Additional right of use assets	$	2,547	$	25,878

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

Note 10. 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	354
Interest cost	80
Actuarial losses (gains)	143
Currency translation adjustment	73
Projected benefit obligation present value at June 30, 2023	$	4,358

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, 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 relate to France, the United States (for 401k plans), and the United Kingdom.


	Three Months Ended			Six Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
		(in thousands)
Defined contributions plans included in personnel expenses		$	(5,536)	$	(6,278)	$	(9,614)	$	(10,136)

Note 11. Revenue

Disaggregation of revenue

The following table presents our disaggregated revenues by segment:


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

June 30, 2023	$	395,274	$	44,590	$	29,070	$	468,934
June 30, 2022	$	440,423	$	54,667	$	—	$	495,090


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

June 30, 2023	$	777,181	$	82,611	$	54,158	$	913,950
June 30, 2022	$	904,311	$	101,346	$	—	$	1,005,657

Note 12. Share-Based Compensation

Equity awards Compensation Expense

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


	Six Months Ended
	2023		2022
	(in thousands)
Research and Development	(32,504)		(9,545)
Sales and Operations	(9,092)		(5,118)
General and Administrative	(10,745)		(6,847)
Total equity awards compensation expense	(52,341)		(21,510)
Tax benefit from equity awards compensation expense	(3,669)		(4,200)
Total equity awards compensation expense, net of tax effect	$	(56,010)	$	(25,710)

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


	Six Months Ended
	2023		2022
	(in thousands)
Share options	(65)		20
Lock-up shares	(21,422)		—
Restricted stock units / Performance stock units	(29,931)		(20,610)
Non-employee warrants	(923)		(920)
Total equity awards compensation expense	(52,341)		(21,510)
Tax benefit from equity awards compensation expense	(3,669)		(4,200)
Total equity awards compensation expense, net of tax effect	$	(56,010)	$	(25,710)

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	(21,657)
Options forfeited	(3,468)
Options canceled	—
Options expired	(580)
Outstanding - June 30, 2023	346,624	€	20.58	4.36	€	11.68

Vested and exercisable - June 30, 2023	299,691

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 June 30, 2023. As of June 30, 2023, unrecognized stock-based compensation $0.02 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 1.00 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 June 30, 2023	2,960,243	$	23.94

At June 30, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $34.0 million, which is expected to be recognized over a period from June 2023 to August 1, 2025.

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	894,461	—
Vested	(899,654)	—
Forfeited	(288,994)	—
Outstanding as of June 30, 2023	5,055,768	€	25.52

At June 30, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $77.2 million, which is expected to be recognized over a weighted-average period of 3.07 years.


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


Outstanding as of December 31, 2022	522,467	—
Granted	356,402	—
Vested	(145,626)	—
Forfeited	—	—
Outstanding as of June 30, 2023	733,243	€	27.56

At June 30, 2023, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $14.1 million, which is expected to be recognized over a weighted-average period of 2.92 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	(58,318)
Canceled	—
Expired	—
Outstanding - June 30, 2023	244,457	€	17.65	4.99	€	15.37

Vested and exercisable - June 30, 2023	231,248

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 June 30, 2023. As of June 30, 2023, the instruments were fully vested.

Note 13. 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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)

Financial income from cash equivalents	$	1,072	$	240	$	2,135	$	373
Interest and fees	(577)		(422)		(1,063)		(969)


Foreign exchange gains (losses)	(1,003)		16,126		(2,952)		20,589
Discounting impact	(1,419)		—		(2,099)		—
Other financial income (expense)	75		468		8,954		449
Total Financial and Other income (expense)	$	(1,852)	$	16,412	$	4,975	$	20,442

The $5.0 million in financial and other income for the six months ended June 30, 2023, were driven by proceeds from disposal of non consolidated investments and financial income from cash equivalents, partially offset 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, and the accretion of earn-out liability related to Iponweb acquisition.

At June 30, 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 14. 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.

On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of a minimum rate of 15% for multinational companies with consolidated revenue above €750 million. Various foreign jurisdictions are in the process of enacting legislation to adopt a minimum effective tax rate. The OECD continues to release additional guidance on the two-pillar solution with an implementation anticipated by 2024. We are currently evaluating the potential impact on future periods of the Pillar Two, pending legislative adoption by individual countries.

The following table presents provision for income taxes:


	Six Months Ended
	June 30, 2023		June 30, 2022
	(in thousands)
Provision for income tax (expense) benefit	$	3,517	$	(3,293)

For the six months ended June 30, 2023 and June 30, 2022, provision for income tax (expense) benefit was $3.5 million and $(3.3) million, respectively. The $3.5 million tax benefit was driven by the loss from operations. The six months ended June 30, 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 15. 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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net loss attributable to shareholders of Criteo S.A.	$	(2,876)	$	(33,614)	$	(14,685)	$	(13,027)
Weighted average number of shares outstanding	55,924,824		60,240,344		56,094,887		60,488,429
Basic earnings per share	$	(0.05)	$	(0.56)	$	(0.26)	$	(0.22)

Diluted Earnings Per Share

Since we were in a loss position for all periods presented, basic net loss is the same as diluted net loss per share for all periods as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net loss attributable to shareholders of Criteo S.A.	$	(2,876)	$	(33,614)	$	(14,685)	$	(13,027)
Basic shares :
Weighted average number of shares outstanding of Criteo S.A.	55,924,824		60,240,344		56,094,887		60,488,429




Diluted shares :
Weighted average number of shares outstanding used to determine diluted earnings per share	55,924,824		60,240,344		56,094,887		60,488,429
Diluted earnings per share	$	(0.05)	$	(0.56)	$	(0.26)	$	(0.22)

Note 16. 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 (the "CNIL"), against Criteo and a number of other 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, the CNIL opened a formal investigation. As previously disclosed, the assigned rapporteur issued a report that claimed various GDPR violations and included a proposed financial sanction against Criteo of €60.0 million ($65 million), and on March 16, 2023, the CNIL Sanction Committee conducted a formal hearing. On June 21, 2023, Criteo received notice that the CNIL issued their decision, in which the CNIL retained alleged GDPR violations but reduced the financial sanction against Criteo from the original proposed amount of €60 million ($65 million) to €40 million ($44 million). The decision relates to past matters and does not include any obligation for Criteo to change its current practices. Criteo intends to appeal this decision before the competent courts.

The €40 million ($44 million) penalty was applied against the previously accrued liability for loss contingency reflected in our financial statements for the period ended June 30, 2022, which amounted to €60 million ($65 million). Criteo anticipates making the required sanction payment in the third quarter of 2023.

Non income tax risks

We have recorded a $31.9 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 17. 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)

June 30, 2023	$	204,755	$	158,215	$	105,964	$	468,934
June 30, 2022	$	213,340	$	176,867	$	104,883	$	495,090


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

June 30, 2023	$	393,043	$	318,429	$	202,478	$	913,950
June 30, 2022	$	408,187	$	370,821	$	226,649	$	1,005,657

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


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)

Americas
United States	$	184,547	$	190,018	$	354,138	$	361,882
EMEA
Germany	$	43,190	$	48,639	$	88,972	$	104,094
France	$	24,409	$	29,309	$	47,707	$	60,090
Asia-Pacific
Japan	$	53,862	$	61,844	$	113,554	$	139,819

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)

June 30, 2023	$	97,631	$	204,584	$	20,694	$	322,909
December 31, 2022	$	92,952	$	193,007	$	21,231	$	307,190

Note 18. Subsequent Events

The Company evaluated all subsequent events that occurred after June 30, 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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022

	(in thousands, except client data)
Gross Profit	$	199,782	$	184,975	$	381,291	$	368,999
Other Cost of Revenue	$	40,435	$	29,550	79,544		62,443
Contribution ex-TAC	$	240,217	$	214,525	$	460,835	$	431,442

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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net loss	$	(1,971)	$	(32,973)	$	(14,042)	$	(11,695)
Adjustments:
Financial (Income) expense	1,956		(15,924)		(4,650)		(19,954)
Provision for income taxes (benefit)	1,078		(7,121)		(3,517)		3,293
Equity awards compensation expense	27,831		12,020		53,896		21,510



Pension service costs	177		264		353		539



Depreciation and amortization expense	26,606		20,141		51,926		42,285




Acquisition-related costs	362		1,977		1,194		4,521



Net Loss contingency on regulatory matters	(21,616)		65,684		(21,616)		65,684







Restructuring, integration and transformation costs	21,563		5,925		31,165		6,635




Total net adjustments	57,957		82,966		108,751		124,513
Adjusted EBITDA	$	55,986	$	49,993	$	94,709	$	112,818

Results of Operations for the Periods Ended June 30, 2023 and June 30, 2022 (Unaudited)

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

Revenue breakdown by segment

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

•Marketing Solutions 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 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
	June 30, 2023		June 30, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	468,934	$	495,090	(5)	%
Conversion impact U.S. dollar/other currencies	$	4,345	$	—
Revenue at constant currency (1)	$	473,279	$	495,090	(4)	%

Marketing Solutions revenue as reported	395,274		440,423		(10)	%
Conversion impact U.S. dollar/other currencies	4,032		—
Marketing Solutions revenue at constant currency (1)	399,306		440,423		(9)	%

Retail Media revenue as reported (2)	44,590		54,667		(18)	%
Conversion impact U.S. dollar/other currencies	313		—
Retail Media revenue at constant currency (1)	44,903		54,667		(18)	%

Iponweb revenue as reported	29,070		—		N/A
Conversion impact U.S. dollar/other currencies	—		—
Iponweb revenue at constant currency (1)	29,070		—		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 for the three months ended June 30, 2023 decreased (5)%, or (4)% on a constant currency basis, to $473.3 million compared to the three months ended June 30, 2022, reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform in Retail Media.

In the quarter, 91% of revenue came from existing clients while 9% came from new client additions. Our number of clients was down 2% year-over-year.

Marketing Solutions revenue decreased (10)%, or (9)% on a constant currency basis, to $399.3 million for the three months ended June 30, 2023, driven by anticipated signal loss impacts and soft retail trends, partially offset by continued strength in travel.

Retail Media revenue decreased (18)%, or (18)% on a constant currency basis, to $44.9 million for the three months ended June 30, 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 19%, or 20% on a constant currency basis, for the three months ended June 30, 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 June 30, 2023 was $29.1 million following the closing of the acquisition on August 1, 2022.

Additionally, our $468.9 million of revenue for the three months ended June 30, 2023 was negatively impacted by $4.3 million of currency fluctuations, particularly as a result of the depreciation of the Euro, Japanese Yen, British Pound, Turkish Lira, and the Brazilian Real compared to the U.S. dollar.

Revenue breakdown by region


	Three Months Ended
	June 30, 2023		June 30, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	468,934	$	495,090	(5)	%
Conversion impact U.S. dollar / other currencies	$	4,345	$	—
Revenue at constant currency (1)	$	473,279	$	495,090	(4)	%
Americas
Revenue as reported	204,755		213,340		(4)	%
Conversion impact U.S. dollar / other currencies	(1,520)		—
Revenue at constant currency (1)	203,235		213,340		(5)	%
EMEA
Revenue as reported	158,215		176,867		(11)	%
Conversion impact U.S. dollar / other currencies	691		—
Revenue at constant currency (1)	158,906		176,867		(10)	%
Asia-Pacific
Revenue as reported	105,964		104,883		1	%
Conversion impact U.S. dollar / other currencies	5,174		—
Revenue at constant currency (1)	111,138		104,883		6	%

(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 current year figures.

Our revenue in the Americas region decreased (4.0)%, or decreased (4.7)% on a constant currency basis, to 203.2 million for the three months ended June 30, 2023 compared to the three months ended June 30, 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 (11)%, or (10)% on a constant currency basis, to 158.9 million for the three months ended June 30, 2023 compared to the three months ended June 30, 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 continued traction in Retail Media.

Our revenue in the Asia-Pacific region increased 1.0%, or increased 6.0% on a constant currency basis, to 111.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, reflecting strength in travel and improving retail trends in the region.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022

Revenue breakdown by segment


	Six Months Ended
	June 30, 2023		June 30, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	913,950	$	1,005,657	(9)	%
Conversion impact U.S. dollar/other currencies	$	22,802	$	—
Revenue at constant currency (1)	$	936,752	$	1,005,657	(7)	%

Marketing Solutions revenue as reported	777,181		904,311		(14)	%
Conversion impact U.S. dollar/other currencies	22,115		—
Marketing Solutions revenue at constant currency (1)	799,296		904,311		(12)	%

Retail Media revenue as reported (2)	82,611		101,346		(18)	%
Conversion impact U.S. dollar/other currencies	687		—
Retail Media revenue at constant currency (1)	83,298		101,346		(18)	%

Iponweb revenue as reported	54,158		—		N/A
Conversion impact U.S. dollar/other currencies	—		—
Iponweb revenue at constant currency (1)	54,158		—		N/A

Revenue for the six months ended June 30, 2023 decreased (9)%, or (7)% on a constant currency basis, to $936.8 million compared to the six months ended June 30, 2022 reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform in Retail Media.

In the six months ended June 30, 2023, 91% of revenue came from existing clients while 9% came from new client additions. Our number of clients was down 2% year-over-year.

Marketing Solutions revenue decreased (14)%, or (12)% on a constant currency basis, to $799.3 million for the six months ended June 30, 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 (18)%, or (18)% on a constant currency basis, to $83.3 million for the six months ended June 30, 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 performance, Retail Media's Contribution ex-TAC increased 20%, or 21% on a constant currency basis, for the six months ended June 30, 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 six months ended June 30, 2023 was $54.2 million following the closing of the acquisition on August 1, 2022.

Additionally, our $914.0 million of revenue for the six months ended June 30, 2023 was negatively impacted by $22.8 million of currency fluctuations, particularly as a result of the depreciation of the Euro, Japanese Yen, British Pound, Turkish Lira, and the Brazilian Real compared to the U.S. dollar.

Revenue breakdown by region


	Six Months Ended
	June 30, 2023		June 30, 2022		2023 vs 2022
	(in thousands)
Revenue as reported	$	913,950	$	1,005,657	(9)	%
Conversion impact U.S. dollar / other currencies	$	22,802	$	—
Revenue at constant currency (1)	$	936,752	$	1,005,657	(7)	%
Americas
Revenue as reported	393,043		408,187		(4)	%
Conversion impact U.S. dollar / other currencies	(1,557)		—
Revenue at constant currency (1)	391,486		408,187		(4)	%
EMEA
Revenue as reported	318,429		370,821		(14)	%
Conversion impact U.S. dollar / other currencies	9,201		—
Revenue at constant currency (1)	327,630		370,821		(12)	%
Asia-Pacific
Revenue as reported	202,478		226,649		(11)	%
Conversion impact U.S. dollar / other currencies	15,158		—
Revenue at constant currency (1)	217,636		226,649		(4)	%

(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 current year figures.

Our revenue in the Americas region decreased (4)%, or (4)% on a constant currency basis, to $391.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 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 (14)%, or (12)% on a constant currency basis, to $327.6 for the six months ended June 30, 2023 compared to the six months ended June 30, 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 continued traction in Retail Media.

Our revenue in the Asia-Pacific region decreased (11)%, or (4)% on a constant currency basis, to $217.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, reflecting soft retail and Classified trends in the region.

Cost of Revenue

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Traffic acquisition costs	$	(228,717)		$	(280,565)		(18)	%
Other cost of revenue	$	(40,435)		$	(29,550)		37	%
Total cost of revenue	$	(269,152)		$	(310,115)		(13)	%
% of revenue	(57)		%	(63)		%
Gross profit %	43		%	37		%


	Three Months Ended				% change		% change at Constant Currency (2)
	June 30, 2023		June 30, 2022		2023 vs 2022		2023 vs 2022

	(in thousands, except percentages)
Marketing Solutions	$	(227,645)	$	(262,454)	(13)	%	(12)	%
Retail Media	$	(1,072)	$	(18,111)	(94)	%	(94)	%
Iponweb (1)	$	—	$	—	—	%	NM
Traffic Acquisition Costs	$	(228,717)	$	(280,565)	(18)	%	(18)	%

(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 June 30, 2023 decreased $(41.0) million, or (13)%, compared to the three months ended June 30, 2022. This decrease was primarily the result of a decrease of $(51.8) million, or (18)% (or (18)% 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 10.9 million, or 37% in other cost of revenue.

Traffic acquisition costs in Marketing Solutions decreased by (13)% (or (12)% at constant currency). This was driven by a (10)% decrease (or (9)% 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 (3)% decrease in the number of impressions we purchased.

Traffic acquisition costs in Retail Media(1) decreased by (94)% (or (94)% 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 $9.9 million and other costs of sales of $0.8 million.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022


	Six Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Traffic acquisition costs	$	(453,115)		$	(574,215)		(21)	%
Other cost of revenue	$	(79,544)		$	(62,443)		27	%
Total cost of revenue	$	(532,659)		$	(636,658)		(16)	%
% of revenue	(58)		%	(63)		%
Gross profit %	42		%	37		%


	Six Months Ended				% change		% change at Constant Currency (2)
	June 30, 2023		June 30, 2022		2023 vs 2022		2023 vs 2022

	(in thousands, except percentages)
Marketing Solutions	$	(451,374)	$	(540,254)	(16)	%	(14)	%
Retail Media	$	(1,741)	$	(33,961)	(95)	%	(95)	%
Iponweb (1)	$	—	$	—	—	%	NM
Traffic Acquisition Costs	$	(453,115)	$	(574,215)	(21)	%	(19)	%

Cost of revenue for the six months ended June 30, 2023 decreased $(104.0) million, or (16)%, compared to the six months ended June 30, 2022. This decrease was primarily the result of a decrease of $(121.1) million, or (21)% (or (19)% 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 $17.1 million, or 27% in other cost of revenue.

Traffic acquisition costs in Marketing Solutions decreased by (16)% (or (14)% at constant currency). This was driven by a (20)% decrease (or (18)% 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 5% 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 decreased by (95)% (or (95)% 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 $18.9 million, partially offset by other cost of sales of $(1.7) million.

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

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								Six Months Ended
Segment	June 30, 2023		June 30, 2022		YoY Change		YoY Change at Constant Currency (2)		June 30, 2023		June 30, 2022		YoY Change		YoY Change at Constant Currency (2)
	(amounts in thousands, except percentages)
Revenue
Marketing Solutions	$	395,274	$	440,423	(10)	%	(9)	%	$	777,181	$	904,311	(14)	%	(12)	%
Retail Media	44,590		54,667		(18)	%	(18)	%	82,611		101,346		(18)	%	(18)	%
Iponweb	29,070		—		N/A		NM		54,158		—		N/A		NM
Total	468,934		495,090		(5)	%	(4)	%	913,950		1,005,657		(9)	%	(7)	%

Contribution ex-TAC (1)
Marketing Solutions	167,629		177,969		(6)	%	(5)	%	325,807		364,057		(11)	%	(7)	%
Retail Media	43,518		36,556		19	%	20	%	80,870		67,385		20	%	21	%
Iponweb(2)	29,070		—		N/A		NM		54,158		—		N/A		NM
Total	240,217		214,525		12	%	13	%	460,835		431,442		7	%	10	%

(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

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								Six Months Ended
	June 30, 2023			June 30, 2022			YoY Change		June 30, 2023			June 30, 2022			YoY Change
	(amounts in thousands, except percentages)

Gross Profit as reported	$	199,782		$	184,975		8	%	$	381,291		$	368,999		3	%

Other cost of revenue as reported	$	(40,435)		$	(29,550)		37	%	$	(79,544)		$	(62,443)		27	%

Contribution ex-TAC as reported	$	240,217		$	214,525		12	%	$	460,835		$	431,442		7	%
Conversion impact U.S. dollar/other currencies	$	2,205		$	—				$	12,144		$	—
Contribution ex-TAC at constant currency	$	242,422		$	214,525		13	%	$	472,979		$	431,442		10	%
Contribution ex-TAC/Revenue as reported	51		%	43		%			50		%	43		%

Traffic acquisition costs as reported	$	(228,717)		$	(280,565)		(18)	%	$	(453,115)		$	(574,215)		(21)	%
Conversion impact U.S. dollar/other currencies	$	(2,140)		$	—				$	(10,658)		$	—
Traffic Acquisition Costs at constant currency	$	(230,857)		$	(280,565)		(18)	%	$	(463,773)		$	(574,215)		(19)	%

Revenue as reported	$	468,934		$	495,090		(5)	%	$	913,950		$	1,005,657		(9)	%
Conversion impact U.S. dollar/other currencies	$	4,345		$	—				$	22,802		$	—
Revenue at constant currency	$	473,279		$	495,090		(4)	%	$	936,752		$	1,005,657		(7)	%

Research and Development Expenses

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Research and development expenses	$	(67,775)		$	(41,496)		63%
% of revenue	(14)		%	(8)		%

Research and development expenses for the three months ended June 30, 2023, increased 26.3 million or 63.3% compared to the three months ended June 30, 2022. This increase mainly related to an increase in headcount-related expenses, including consideration paid to the Iponweb sellers and accounted for as share-based compensation, and the amortization of Iponweb acquisition-related intangible assets.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022


	Six Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Research and development expenses	$	(131,365)		$	(75,523)		74%
% of revenue	(14)		%	(8)		%

Research and development expenses for the six months ended June 30, 2023, increased $55.8 million or 74% compared to the six months ended June 30, 2022. This increase mainly related to higher headcount-related costs, increase in share-based compensation expense and depreciation and amortization costs.

Sales and Operations Expenses

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Sales and operations expenses	$	(112,511)		$	(99,313)		13%
% of revenue	(24)		%	(20)		%

Sales and operations expenses for the three months ended June 30, 2023 increased 13.2 million or 13.3% compared to the three months ended June 30, 2022. This increase mainly related to an increase in headcount-related costs and share-based compensation expense partially offset by a decrease in marketing expense.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022


	Six Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Sales and operations expenses	$	(213,753)		$	(188,312)		14%
% of revenue	(23)		%	(19)		%

Sales and operations expenses for the six months ended June 30, 2023 increased $25.4 million or 14% compared to the six months ended June 30, 2022. This increase mainly related to an increase in headcount-related costs and share based compensation expense partially offset by a decrease in marketing expenses and depreciation and amortization expense.

General and Administrative Expenses

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
General and administrative expenses	$	(18,537)		$	(100,672)		(82)%
% of revenue	(4)		%	(20)		%

General and administrative expenses for the three months ended June 30, 2023, decreased (82.1) million or (81.6)%, compared to the three months ended June 30, 2022. The decrease mainly relates to the partial reversal of the loss contingency on regulatory matters accounted for during the three months ended June 30, 2022 (see Note 16), partially offset by people-related costs.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022


	Six Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
General and administrative expenses	$	(58,707)		$	(134,008)		(56)%
% of revenue	(6)		%	(13)		%

General and administrative expenses for the six months ended June 30, 2023, decreased $(75.3) million or (56)%, compared to the six months ended June 30, 2022. The decrease mainly relates to the partial reversal of the loss contingency on regulatory matters accounted for during the three months ended June 30, 2022 (see Note 16), partially offset by people-related costs.

Financial and Other Income / (Expense)

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Financial and Other Income / (Expense)	$	(1,852)		$	16,412		(111)%
% of revenue	(0.4)		%	3		%

Financial and Other income for the three months ended June 30, 2023, decreased by $(18.3) million or (111)% compared to 2022. The $(1.9) million in financial and other expense for the three months ended June 30, 2023, was driven by the recognition of a negative impact of foreign exchange reevaluations net of related hedging, and by the accretion of earn-out liability related to Iponweb acquisition.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022


	Six Months Ended						% change
	June 30, 2023			June 30, 2022			2023 vs 2022

	(in thousands, except percentages)
Financial and Other Income / (Expense)	$	4,975		$	20,442		(76)%
% of revenue	1		%	2		%

Financial and Other income for the three months ended June 30, 2023, decreased by $(15.5) million or (76)% compared to 2022. The $5.0 million in financial and other income for the three months ended June 30, 2023, was driven by proceeds from disposal of non consolidated investments and financial income from cash equivalents, partially offset 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, and the accretion of earn-out liability related to Iponweb acquisition.

At June 30, 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 June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended				% change
	June 30, 2023		June 30, 2022		2023 vs 2022

	(in thousands, except percentages)
Provision for income tax (expense) benefit	$	(1,078)	$	7,121	(115)%

For the three months ended June 30, 2023, benefit for income taxes was $(1.1) million. For the three months ended June 30, 2022, income tax expense was $7.1 million. The $(1.1) million benefit was driven by the loss from operations. The three months ended June 30, 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 and loss from operations.

Six months ended June 30, 2023 compared to the Six months ended June 30, 2022


	Six Months Ended				% change
	June 30, 2023		June 30, 2022		2023 vs 2022

	(in thousands, except percentages)
Provision for income tax (expense) benefit	$	3,517	$	(3,293)	(207)%

For the six months ended June 30, 2023 benefit for income taxes was $3.5 million. For the six months ended June 30, 2022, income tax expense was $(3.3) million. The $3.5 million benefit was driven by the loss from operations. The six months ended June 30, 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 and loss from operations.

Net Loss

Three months ended June 30, 2023 compared to the three months ended June 30, 2022


	Three Months Ended					% change
	June 30, 2023			June 30, 2022		2023 vs 2022

	(in thousands, except percentages)
Net loss	$	(1,971)		(32,973)		94%
% of revenue	(0.4)		%	(7)	%

Net loss for the three months ended June 30, 2023 decreased 31.0 million, or 94.0%, compared to the three months ended June 30, 2022. This decrease was the result of the business dynamics discussed above, in particular, a $57.5 million increase in income from operations and by an $8.2 million decrease in provision for income taxes offset by a $(18.3) million decrease in financial and other income compared to the three months ended June 30, 2022.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022


	Six Months Ended					% change
	June 30, 2023			June 30, 2022		2023 vs 2022

	(in thousands, except percentages)
Net loss	$	(14,042)		(11,695)		(20)%
% of revenue	(2)		%	(1)	%

Net loss for the six months ended June 30, 2023, increased $(2.3) million, or (20)%, compared to the six months ended June 30, 2022. This increase was the result of the business dynamics discussed above, in particular, a $6.3 million increase in income from operations, offset by a $(15.5) million decrease in financial and other income and by a $(6.8) million decrease in provision for income taxes compared to the six months ended June 30, 2022.

Liquidity and Capital Resources

Our cash and cash equivalents and restricted cash at June 30, 2023 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $298.2 million as of June 30, 2023. The $(150.1) million decrease in cash and cash equivalents, and restricted cash compared with December 31, 2022 primarily resulted from a decrease of $(88.3) million in cash used for investing activities and by $(96.1) million in cash used for financing activities over the period, partially offset by an increase of $43.3 million in cash from operating activities. The cash used for financing activities mainly related to $(74.9) million in cash used for the share repurchase program, and to $22.0 million payout of the current portion earn-out liability resulting from the Iponweb Acquisition, partially offset by $1.7 million of proceeds from capital increase following the exercises of stock options. In addition, the decrease in cash includes an $(8.9) million negative impact of changes in foreign exchange rates on our cash position over the period. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return.

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 ($442.2 million) of liquidity, which, combined with our cash position, marketable securities and treasury shares as of June 30, 2023, provides total liquidity above $747 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 six months ended June 30, 2023, we had acquired $74.9 million of shares through 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 six months ended June 30, 2023 and 2022, our capital expenditures were $78.7 million and $21.0 million, respectively. During the six months ended June 30, 2023, these capital expenditures were mainly comprised of acquisition of data center and server equipment, and software development costs. We expect our capital expenditures to remain at around 5% of revenue for 2023, as we plan to continue to build, reshape and maintain additional data center equipment capacity in all regions and we increase our investments to further develop our Commerce Media Platform.

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 June 30, 2023 and June 30, 2022:


	Six Months Ended
	June 30, 2023		June 30, 2022

	(in thousands)
Cash (used for) from operating activities	$	43,292	$	88,902
Cash (used for) from investing activities	$	(88,337)	$	23,295
Cash (used for) from financing activities	$	(96,117)	$	(14,509)

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 six months ended June 30, 2023, net cash provided by operating activities was $43.3 million and consisted of net loss of $(14.0) million, and $48.9 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 $37.4 million, equity awards compensation expense of $52.3 million and a $2.1 million change in other non-cash items partially offset by $(20.5) million of changes in deferred tax assets, by a $(13.6) million change in income taxes and by other non-operating items of $(8.8) million. The $8.4 million increase in cash from changes in working capital primarily consisted of a $129.5 million decrease in trade receivables, and a $14.5 million increase in other current liabilities such as payroll and payroll related expenses and VAT payables and change in fair value of derivatives, offset by a $(128.6) million decrease in trade payables, a $(0.4) million change in lease liabilities and right of use assets, and a $(6.7) 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 six months ended June 30, 2023, net cash used for investing activities was $(88.3) million and primarily consisted of a $(78.7) million change in capital expenditures mainly comprised of purchases of servers and other data-center equipment and capitalized software development costs, a $(12.3) million change from the maturity of investments in Marketable Securities and a $(6.9) million payment for business acquisition, partially offset by $9.6 million proceeds from the sale of a non consolidated investment.

Financing Activities

For the six months ended June 30, 2023, net cash used for financing activities was $(96.1) million, resulting mainly from a $(74.9) 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 $1.7 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 six months ended June 30, 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:


	Six Months Ended
	June 30, 2023				June 30, 2022

	(in thousands)
GBP/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	(244)	$	244	$	(293)	$	293


	Six Months Ended
	June 30, 2023				June 30, 2022

	(in thousands)
BRL/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	126	$	(126)	$	86	$	(86)


	Six Months Ended
	June 30, 2023				June 30, 2022

	(in thousands)
JPY/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	832	$	(832)	$	1,723	$	(1,723)


	Six Months Ended
	June 30, 2023				June 30, 2022

	(in thousands)
EUR/USD	+10%		-10%		+10%		-10%
Net income (loss) impact	$	(3,636)	$	3,636	$	3,457	$	(3,457)

Credit Risk and Trade receivables

For a description of our trade receivables, please see "Note 6. 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 June 30, 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 16. Commitments and contingencies.

Item 1A. Risk Factors.

The following risk factor is provided to update the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023. Except as presented below, there have been no material changes to the Risk Factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Regulatory, legislative or self-regulatory developments regarding internet or online matters could adversely affect our ability to conduct our business.

Governmental authorities around the world have enacted, considered or are considering legislation or regulations that could significantly restrict our ability to collect, process, use, transfer and pool data collected from and about consumers and devices. Trade associations and industry self-regulatory groups have also promulgated best practices and other industry standards relating to targeted advertising.

In the European Union (the “EU”), the two main pillars of the data protection legal framework are the Directive on Privacy and Electronic Communications ("E-Privacy Directive") and the General Data Protection Regulation ("GDPR"). The E-Privacy Directive directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access and given his or her consent. A recent ruling by the Court of Justice of the EU clarified that such consent must be reflected by an affirmative act of the user in line with the requirements applicable to consent under the GDPR. These developments result in ending reliance on implied consent mechanisms that have been used to meet requirements of the E-Privacy Directive in some markets. A replacement by an E-Privacy Regulation for the E-Privacy Directive is still under discussion by EU member states to align the E-Privacy Directive with the GDPR and force a harmonized approach across EU member states. It is possible that the proposed E-Privacy Regulation could further impede the use of cookies. However, the advancement of the legislative process for the adoption of the E-Privacy Regulation remains quite uncertain.

Under the GDPR, data protection authorities have the power to impose administrative fines of up to a maximum of €20 million, or 4%, of the data controller’s or data processor’s total worldwide turnover from the preceding financial year. Similar sanctions would be applicable under the E-Privacy Regulation to cookie consent.

Further, on October 1, 2020, the French data protection authority (the Commission Nationale de l'Informatique et des Libertés, or the "CNIL") issued the final version of its guidelines on the use of cookies and other trackers and its final recommendations on modalities for obtaining users’ consent to store or read non-essential cookies and similar technologies on their devices. The recommendations provide that, when required, consent must be indicated by a clear and positive action of the data subject, such as by clicking on an “accept all” button on the first layer of the consent management platform. The CNIL also noted that it should be as easy to refuse consent to the use of cookies as it is to accept consent, and an equivalent “refuse all” button should be present on the first layer of the consent management platform. Further, the ability to withdraw consent must be readily available at all times. Companies had until March 2021 to ensure compliance with these guidelines. The CNIL has launched investigations and sanctioned companies for lack of compliance with its guidelines on cookies. The European Center for Digital Rights ("NOYB") has also filed several complaints with data protection authorities for failure to comply with GDPR requirements.

In January 2020, the CNIL opened a formal investigation into Criteo. In June 2023, the CNIL issued their decision, in which the CNIL retained alleged GDPR violations but reduced the financial sanction against Criteo from the original proposed amount of €60 million ($65 million) to €40 million ($44 million). Criteo anticipates making the required sanction payment in the third quarter of 2023. The decision relates to past matters and does not include any obligation for Criteo to change its current practices. Criteo intends to appeal this decision before the competent courts. Refer to Note 16. Commitments and Contingencies for more information.

In 2018, the State of California adopted the California Consumer Privacy Act of 2018 (“CCPA”). The CCPA has been characterized as the first “GDPR-like” privacy statute to be enacted in the U.S. because its scope, and a number of the key provisions, resemble the GDPR. The CCPA establishes a new privacy framework for covered businesses by, among other requirements, creating an expanded definition of personal information, establishing new data privacy rights for consumers in California, imposing special rules on the collection of personal data from minors, creating new notice obligations and new limits on the sale of personal information, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. As currently enacted, we and partners in our industry have been required to comply with these requirements since January 1, 2020, when the CCPA became effective. As with the GDPR, the advertising technology marketplace may have to adapt to operating under the CCPA where it applies. Our advertising or publishing partners may impose new CCPA restrictions with which we must adapt and comply. In November 2020, voters in California voted to pass the California Privacy Rights Act (“CPRA”), which both amends and expands the scope of the CCPA. The CPRA became effective on January 1, 2023, with a look back period to January 1, 2022. The CPRA creates new criteria by which businesses can be regulated, expands the definition of “personal information” to more closely match European regulations, creates a new audit requirement, and creates a new agency to oversee enforcement of the CPRA. The CPRA also explicitly provides an opt-out right for cross-contextual behavioral advertising. We cannot predict the timing or outcome of this adaptation or the effect on our business. Adapting our business to the CCPA and the new requirements and regulations under the CPRA could involve substantial resources and expense, and may cause us to divert resources from other aspects of our business, all of which may adversely affect our business.

In addition, other states in the U.S. are quickly adopting state enacted privacy laws. Virginia, Colorado and, more recently, Connecticut and Utah have passed consumer and privacy laws that differ slightly from the CCPA and CPRA. If other states follow suit, it could lead to a varied and complex regulatory landscape, which could result in material costs.

Clarifications of and changes to these existing and proposed laws, regulations, judicial interpretations and industry standards can be costly to comply with, and we may be unable to pass along those costs to our clients in the form of increased fees, which may negatively affect our operating results. Such changes can also delay or impede the development of new solutions, result in negative publicity and reputational harm, require significant management time and attention, increase our risk of non-compliance and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices, such as our ability to charge per click or the scope of clicks for which we charge. Additionally, any perception of our practices or solutions as an invasion of privacy, whether or not such practices or solutions are consistent with current or future regulations and industry practices, may subject us to public criticism, private class actions, reputational harm or claims by regulators, which could disrupt our business and expose us to increased liability. Finally, our legal and financial exposure often depends in part on our clients’ or other third parties' adherence to and compliance with privacy laws and regulations and their use of our services in ways consistent with visitors’ expectations. If our clients fail to adhere to our contracts in this regard, or a court or governmental agency determines that we have not adequately, accurately or completely described our own solutions, services and data collection, and use and sharing practices in our own disclosures to consumers, then we and our clients and publisher partners may be subject to potentially adverse publicity, damages and investigation or other regulatory activity in connection with our privacy practices or those of our clients.

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 second 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)
April 1 to 30, 2023	224,889	$	31.25	224,889	$	186,229,711
May 1 to 31, 2023	262,188	$	31.92	262,188	177,858,895
June 1 to 30, 2023	250,866	$	33.62	250,866	169,422,550
Total	737,943			737,943	—

(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 5. Other Information

Trading Plans

On June 15, 2023, Megan Clarken, the Company's Chief Executive Officer, adopted a trading plan to sell up to 73,959 shares of Company stock between September 15, 2023 and February 28, 2024. Ms. Clarken's trading plan is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and the Company's policies regarding insider transactions.

During the three months ended June 30, 2023, no other directors or Section 16 officers of the Company adopted or terminated any Rule 10b5-1 trading arrangement or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits.

Exhibit Index

Incorporated by Reference

Exhibit

Description

Schedule/ Form

File
Number

Exhibit

File
Date

3.1

Update to By-laws (statuts) of Criteo S.A. (English Translation)

8-K

001-36153

3.1

June 13, 2023

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: August 2, 2023	Name:	Sarah Glickman
	Title:	Chief Financial Officer
		(Principal financial officer and duly authorized signatory)

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Uncertain
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Litigous
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Criteo (CRTO) 10-Q2023 Q2 Quarterly report

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