UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

for the quarterly period ended ~~June 30, 2018~~March 31, 2019



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

for the transition period from _________ to _________

Commission file number: 001-36153

Criteo S.A.

(Exact name of registrant as specified in its charter)



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

32, rue Blanche, Paris-France		75009
(Address of principal executive offices)		(Zip Code)

+33 1 40 40 22 90

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares, each representing one Ordinary Share, nominal value €0.025 per share	CRTO	Nasdaq Global Select Market
Ordinary Shares, nominal value €0.025 per share*		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 ~~day~~days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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	x	Accelerated Filer	¨
Non-accelerated Filer	¨~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨
		Emerging growth company	¨

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

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

As of ~~July 31, 2018,~~April 30, 2019, the registrant had ~~67,006,234~~64,590,773 ordinary shares, nominal value €0.025 per share, outstanding.

TABLE OF CONTENTS

General

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

Trademarks

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

Special Note Regarding Forward-Looking Statements

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

the ability of the Criteo 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;

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

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 refer to Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and to Part II, Item 1A "Risk Factors" of this Form 10-Q, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. 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 statements.

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

PART I

Item 1. Financial Statements.

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)


	Notes	December 31, 2017			June 30, 2018
								Notes	December 31, 2018			March 31, 2019
		(in thousands)							(in thousands)
Assets
Current assets:
Cash and cash equivalents	4	$	414,111		480,285			3	$	364,426		$	395,771
Trade receivables, net of allowance	5	484,101			372,906
Trade receivables, net of allowances of $25.9 million and $25.2 million at December 31, 2018 and March 31, 2019, respectively								4	473,901			386,792
Income taxes		8,882			11,921				19,370			8,182
Other taxes		58,346			42,076				53,338			56,828
Other current assets	6	26,327			26,114			5	22,816			24,737
Total current assets		991,767			933,302				933,851			872,310
Property, plant and equipment, net		161,738			146,904			2	184,013			180,377
Intangible assets, net	7	96,223			87,031			6	112,036			107,218
Goodwill	7	236,826			235,950			6	312,881			317,076
Right of use assets - operating lease								8	—			200,274
Non-current financial assets		19,525			20,226				20,460			20,331
Deferred tax assets		25,221			33,129				33,894			48,330
Total non-current assets		539,533			523,240				663,284			873,606
Total assets		$	1,531,300		$	1,456,542			$	1,597,135		$	1,745,916
Liabilities and shareholders' equity
Current liabilities:
Trade payables		$	417,032		$	321,295			$	425,376		$	345,923
Contingencies	14	1,798			1,811			14	2,640			3,215
Income taxes		9,997			9,346				7,725			5,794
Financial liabilities - current portion	9	1,499			1,055			3	1,018			1,599
Operating lease liabilities - current portion								8	—			49,459
Other taxes		58,783			46,947				55,592			58,192
Employee - related payables		66,219			65,832				65,878			63,459
Other current liabilities	8	65,677			30,803			7	47,115			37,256
Total current liabilities		621,005			477,089				605,344			564,897
Deferred tax liabilities		2,497			3,251				10,770			8,421
Retirement benefit obligation		5,149			5,472				5,537			6,893
Financial liabilities - non current portion	9	2,158			1,758			3	2,490			2,283
Operating lease liabilities - non current portion								8	—			166,920
Other non-current liabilities		2,793			4,104				5,103			4,706
Total non-current liabilities		12,597			14,585				23,900			189,223
Total liabilities		633,602			491,674				629,244			754,120
Commitments and contingencies
Shareholders' equity:
Common shares, €0.025 par value, 66,085,097 and 66,861,045 shares authorized, issued and outstanding at December 31, 2017 and June 30, 2018, respectively.		2,152			2,177
Common shares, €0.025 par value, 67,708,203 and 66,142,511 shares authorized, issued and outstanding at December 31, 2018 and March 31, 2019, respectively.								Common shares, €0.025 par value, 67,708,203 and 66,142,511 shares authorized, issued and outstanding at December 31, 2018 and March 31, 2019, respectively.	2,201			2,157
Treasury stock, 3,459,119 and 1,672,404 shares at cost as of December 31, 2018 and March 31, 2019, respectively.									(79,159		)	(39,079		)
Additional paid-in capital		591,404			630,772				663,281			641,094
Accumulated other comprehensive (loss)		(12,241		)	(20,722		)
Accumulated other comprehensive loss									(30,522		)	(41,869		)
Retained earnings		300,210			333,725				387,869			403,200
Equity-attributable to shareholders of Criteo S.A.		881,525			945,952				943,670			965,503
Non-controlling interests		16,173			18,916				24,221			26,293
Total equity		897,698			964,868				967,891			991,796
Total equity and liabilities		$	1,531,300		$	1,456,542			$	1,597,135		$	1,745,916

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


		Three Months Ended						Six Months Ended								Three Months Ended
	Notes	June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018			Notes		March 31, 2018			March 31, 2019
		(in thousands, except share per data)													(in thousands, except share per data)

Revenue	2	$	542,022		$	537,185		$	1,058,688		$	1,101,349		9		$	564,164		$	558,123

Cost of revenue:
Traffic acquisition costs		(322,200		)	(306,963		)	(628,893		)	(630,709		)			(323,746		)	(322,429		)
Other cost of revenue		(32,808		)	(29,957		)	(59,963		)	(60,016		)			(30,059		)	(26,045		)

Gross profit		187,014			200,265			369,832			410,624					210,359			209,649

Operating expenses:
Research and development expenses		(43,611		)	(47,544		)	(83,132		)	(92,862		)			(45,318		)	(46,577		)
Sales and operations expenses		(97,900		)	(92,726		)	(188,631		)	(188,375		)			(95,649		)	(95,909		)
General and administrative expenses		(32,239		)	(35,644		)	(63,754		)	(70,235		)			(34,591		)	(33,770		)
Total operating expenses		(173,750		)	(175,914		)	(335,517		)	(351,472		)			(175,558		)	(176,256		)
Income from operations		13,264			24,351			34,315			59,152					34,801			33,393
Financial income (expense), net	11	(2,094		)	(1,006		)	(4,427		)	(2,331		)
Financial income (expense)														11		(1,325		)	(1,974		)
Income before taxes		11,170			23,345			29,888			56,821					33,476			31,419
Provision for income taxes	12	(3,665		)	(8,638		)	(7,866		)	(21,024		)	12		(12,386		)	(10,018		)
Net income		$	7,505		$	14,707		$	22,022		$	35,797				$	21,090		$	21,401

Net income available to shareholders of Criteo S.A.		$	5,970		$	13,726		$	18,411		$	33,535				$	19,809		$	19,120
Net income available to non-controlling interests		$	1,535		$	981		$	3,611		$	2,262				$	1,281		$	2,281

Net income allocated to shareholders of Criteo S.A. per share:
Basic	13	$	0.09		$	0.21		$	0.28		$	0.51		13		$	0.30		$	0.30
Diluted	13	$	0.09		$	0.20		$	0.27		$	0.50		13		$	0.29		$	0.29

Weighted average shares outstanding used in computing per share amounts:
Basic	13	65,027,985			66,347,599			64,611,237			66,254,476			13		66,160,375			64,336,777
Diluted	13	68,131,274			67,488,311			67,709,789			67,479,513			13		67,469,738			66,041,296

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018			March 31, 2018		March 31, 2019
	(in thousands)												(in thousands)

Net income	$	7,505		$	14,707		$	22,022		$	35,797		$	21,090	$	21,401
Foreign currency translation differences, net of taxes	36,762			(34,555		)	45,854			(8,671		)	25,884		(10,492		)
Foreign currency translation differences	36,762			(34,555		)	45,854			(8,671		)
Income tax effect	—			—			—			—
Actuarial (losses) gains on employee benefits, net of taxes	337			413			590			413			—		(1,053		)
Actuarial gains on employee benefits	401			413			698			413
Income tax effect	(64		)	—			(108		)	—
Comprehensive income (loss)	$	44,604		$	(19,435	)	$	68,466		$	27,539
Other comprehensive income (loss)													$	25,884	$	(11,545	)
Total comprehensive income													$	46,974	$	9,856
Attributable to shareholders of Criteo S.A.	$	43,097		$	(19,705	)	$	64,390		$	25,051		$	44,756	$	7,773
Attributable to non-controlling interests	$	1,507		$	270		$	4,076		$	2,488		$	2,218	$	2,083

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)



	Share capital		Treasury Stock		Additional paid-in capital	Accumulated Other Comprehensive Income	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, 2017	66,085,097	$2,152	—	—	$591,404	$(12,241)	$300,210	$881,525	$16,173	$897,698
Net income	—	—	—	—	—	—	19,809	19,809	1,281	21,090
Other comprehensive income (loss)	—	—	—	—	—	24,947	—	24,947	937	25,884
Issuance of ordinary shares	163,254	1	—	—	597	—	—	598	—	598
Change in treasury stocks		—	—	—	—	—	—	—	—	—
Share-Based Compensation	—	—	—	—	18,284	—	—	18,284	112	18,396
Other changes in equity	—	4	—	—	(4)	4	1	5	—	5
Balance at March 31, 2018	66,248,351	$2,157	—	$—	$610,281	$12,710	$320,020	$945,168	$18,503	$963,671

Balance at December 31, 2018	67,708,203	$2,201	(3,459,119)	$(79,159)	$663,281	$(30,522)	$387,869	$943,670	$24,221	$967,891
Net income	—	—	—	—	—	—	19,120	19,120	2,281	21,401
Other comprehensive income (loss)	—	—	—	—	—	(11,347)	—	(11,347)	(198)	(11,545)
Issuance of ordinary shares	28,596	1	—	—	372	—	—	373	—	373
Change in treasury stocks	(1,594,288)	(45)	1,786,715	40,080	(36,091)	—	(3,944)	—	—	—
Share-Based Compensation	—	—	—	—	13,533	—	—	13,533	(11)	13,522
Other changes in equity	—	—	—	—	(1)	—	155	154	—	154
Balance at March 31, 2019	66,142,511	$2,157	(1,672,404)	$(39,079)	$641,094	$(41,869)	$403,200	$965,503	$26,293	$991,796

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

CRITEO S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018				March 31, 2018			March 31, 2019
	(in thousands)												(in thousands)
Net income	$	7,505		$	14,707		$	22,022		$	35,797			$	21,090		$	21,401
Non-cash and non-operating items	42,974			54,021			84,448			107,987				53,966			42,866
- Amortization, depreciation and provisions	24,376			25,099			46,692			51,149
- Amortization and provisions														26,050			19,644
- Equity awards compensation expense ⁽¹⁾	14,918			20,241			29,858			39,070				18,829			13,882
- Interest accrued and non-cash financial income and expenses	15			21			32			44
- Change in deferred taxes	(5,536		)	(4,389		)	(12,405		)	(7,535		)		(3,146		)	(5,916		)
- Income tax for the period	9,201			13,028			20,271			28,560				15,532			15,934
- Other ⁽²⁾	—			21			—			(3,301		)		(3,299		)	(678		)
Changes in working capital related to operating activities	25,860			(10,043		)	25,790			13,644				23,687			20,821
- (Increase) / Decrease in trade receivables	(23,358		)	10,154			36,211			101,446
- Increase / (Decrease) in trade payables	48,776			(26,745		)	(26,254		)	(89,690		)
- (Increase) / Decrease in other current assets	(3,493		)	5,821			2,580			13,779
- Increase/(Decrease) in other current liabilities ⁽²⁾	3,935			727			13,253			(11,891		)
- Decrease in trade receivables														91,292			86,018
- Decrease in trade payables														(62,945		)	(58,485		)
- Decrease/(Increase) in other current assets														7,958			(5,992		)
- (Decrease)/Increase in other current liabilities ⁽²⁾														(12,618		)	2,436
- Change in operating lease liabilities and right of use assets														—			(3,156		)
Income taxes paid	(15,848		)	(18,344		)	(27,531		)	(32,560		)		(14,216		)	(17,868		)
CASH FROM OPERATING ACTIVITIES	60,491			40,341			104,729			124,868				84,527			67,220
Acquisition of intangible assets, property, plant and equipment	(30,008		)	(18,880		)	(53,275		)	(26,293		)		(7,413		)	(13,292		)
Change in accounts payable related to intangible assets, property, plant and equipment	2,953			1,033			(1,986		)	(24,121		)		(25,154		)	(10,392		)
Payment for (Disposal of) business, net of cash acquired (disposed)	1,089			—			1,052			(10,811		)
Payment for (disposal of) a business, net of cash acquired (disposed)														(10,811		)	(5,325		)
Change in other non-current financial assets	1,668			154			1,274			42				(112		)	(32		)
CASH USED FOR INVESTING ACTIVITIES	(24,298		)	(17,693		)	(52,935		)	(61,183		)		(43,490		)	(29,041		)
Issuance of long-term borrowings	1,454			—			1,454			—
Repayment of borrowings	(77,168		)	(235		)	(79,221		)	(473		)		(238		)	(172		)
Proceeds from capital increase	11,517			396			24,454			562				166			11
Change in other financial liabilities ⁽²⁾	145			(35		)	264			16,810				16,845			(30		)
CASH (USED FOR) FROM FINANCING ACTIVITIES	(64,052		)	126			(53,049		)	16,899
CASH FROM (USED FOR) FINANCING ACTIVITIES														16,773			(191		)

CHANGE IN NET CASH AND CASH EQUIVALENTS	(27,859		)	22,774			(1,255		)	80,584				57,810			37,988
Net cash and cash equivalents at beginning of period	303,813			483,874			270,317			414,111				414,111			364,426
Effect of exchange rates changes on cash and cash equivalents ⁽²⁾	32,231			(26,363		)	39,123			(14,410		)		11,953			(6,643		)
Net cash and cash equivalents at end of period	$	308,185		$	480,285		$	308,185		$	480,285			$	483,874		$	395,771

⁽¹⁾ Of which ~~$14.7~~$18.4 million and ~~$19.8~~$13.5 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the three months ended ~~June 30, 2017~~March 31, 2018 and 2018, respectively, and $29.3 million and $38.2 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the six month period ended June 30, 2017 and 2018,2019, respectively.

⁽²⁾During the three months ended ~~and six months ended June 30,~~March 31, 2018, the Company reported the cash impact of the settlement of hedging derivatives related to financing activities in cash from (used for) financing activities in the unaudited consolidated statements of cash flows.

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. is~~We are a global ~~commerce marketing~~ technology ~~company.~~company building the leading advertising platform for the open Internet. We ~~help~~strive to deliver impactful business results at scale to commerce companies and ~~brand manufacturers acquire, convert and re-engage~~consumer brands by meeting their ~~customers, using~~multiple marketing goals at their targeted return on investment. Using shopping data, predictive technology and large consumer ~~reach. We strive to deliver post-click sales at scale to~~reach, we help our clients ~~across different marketing objectives to meet~~drive Awareness, Consideration and Conversion for their ~~targeted return on investment.~~products and services¹, and help retailers generate advertising revenues from brands. Our data is pooled among our clients and offers deep insights into consumer intent and purchasing habits. To drive ~~sales~~measurable results for ~~our~~ clients, we activate our data assets through proprietary ~~machine-learning algorithms~~artificial intelligence ("AI") technology to engage consumers in real time through the pricing and delivery of highly relevant digital advertisements ("ads"), across devices and environments. By pricing our offering on a ~~cost-per-click~~range of pricing models and measuring our value based on ~~post-click sales,~~clear, well-defined performance metrics, we make the return on investment transparent and easy to measure for ~~our clients.~~ advertisers.

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

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements included herein (the "Unaudited Condensed Consolidated Financial Statements") have been prepared by Criteo S.A. pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC on March 1, ~~2018.~~2019. 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) ~~the~~revenue recognition ~~of revenue and particularly, the determination as to whether revenue should be reported on a gross or a net basis;~~criteria (2) ~~the evaluation of our trade receivables and the recognition of a valuation allowance~~allowances for doubtful ~~accounts;~~accounts, (3) ~~the~~research tax credits (4) income taxes, including i) recognition of ~~our~~ deferred tax assets ~~considering~~arising from the subsidiaries projected taxable profit for future years, ~~(4) the~~ii) evaluation of uncertain tax positions ~~considering~~associated with our transfer pricing ~~policies~~policy and ~~research tax credits in the United States and France; (5) the~~iii) recognition ~~and measurement~~ of income tax ~~positions considering~~position in respect of the ~~2017 Tax Cuts and Jobs Act enacted~~tax reform in France voted in December ~~2017~~2018, (5) assumptions used in valuing acquired assets and assumed liabilities in business combinations, (6) assumptions used in the ~~U.S., and particularly the measurement of the base erosion anti-avoidance tax ("BEAT"); (6) the recognition and measurement~~valuation of goodwill and intangible assets, and ~~particularly costs capitalized~~(7) assumptions used in ~~relation~~the valuation model to ~~our customized internal-use software; and (7)~~determine the ~~measurement~~fair value of share-based compensation ~~and related expenses.~~plan.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, except for the accounting pronouncements adopted below.

Accounting Pronouncements adopted in ~~2018~~2019

~~In May 2014,~~Effective January 1, 2019, we have adopted the ~~FASB issued~~Financial Accounting Standards Board, ("FASB") Accounting Standards Update ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605), and requires the Company to recognize revenue when control of promised services is transferred to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services. We adopted the new standard effective January 1, 2018 using the modified retrospective method. The new standard had no significant impact on our Unaudited Condensed Consolidated Financial Statements, except for related disclosures (see Note 2 for further details).

In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. We adopted ASU 2017-01 as of January 1, 2018 on a prospective basis and it did not have a material impact on our financial position, results of operations or cash flows.

~~In May 2017, the FASB issued ASU 2017-09~~ ~~Compensation - Stock Compensation (Topic 718)~~. ASU 2017-09 was issued to provide clarity and reduce diversity in practice and complexity when applying the guidance in Topic 718 to a change in terms or conditions of a share based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. We adopted ASU 2017-09 as of January 1, 2018 on a prospective basis and it did not have a material impact on our financial position, results of operations or cash flows.

~~In March 2017, FASB issued ASU 2017-07~~ ~~Compensation-Retirements Benefits (Topic 715).~~ ASU 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. We adopted ASU 2017-07 as of January 1, 2018 and it did not have a material impact on our financial position, results of operations or cash flows.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments~~ ~~(“ASU 2016-15”~~("ASU"). Among other clarifications, ASU 2016-15 clarifies certain items, including the classification of payments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment, excluding accrued interest, which will now be included in the Financing Activities section in the Consolidated Statement of Cash Flows. We adopted ASU 2016 - 15 as of January 1, 2018 and it did not have a material impact on our financial position, results of operations or cash flows, including classification as operating, financing, or investing activities.

~~In October 2016, the FASB issued Accounting Standards Update No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory~~ (ASU 2016-16), which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory. We adopted ASU 2016-16 as of January 1, 2018 on a modified retrospective basis. It did not have a material impact on our Consolidated Financial Statements.

~~Recently Issued Accounting Pronouncements not yet adopted~~

~~In February 2016, the FASB issued Accounting Standards Update~~ 842 No. 2016-02, Leases (Topic 842) (ASU 2016-02), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet for operating leases with terms of more than 12 months, in addition to those currently recorded. WeIn August 2018, the FASB issued ASU 2018-11, Target Improvements to ASC 842, which included an option not to restate comparative periods in transition and use the effective date of ASC 842, Leases, as the date of the initial application of transition, which we elected. Prior periods have ~~selected~~not been adjusted and continue to be accounted for in accordance with ASC 840. As a result of adopting ASU 842, we recognized total operating lease ~~accounting system~~liabilities of $223.5 million and ~~are currently implementing this system~~operating right-of-use assets of $204.3 million as ~~well as modifying~~of January 1, 2019. The adoption of ASC 842 had an immaterial impact on our ~~processes in conjunction with~~condensed consolidated statements of income and our ~~review~~condensed consolidated statement of ~~existing lease agreements. Our implementation of this system is on schedule. We will adopt Topic 842 effective~~cash flows for the three month period ended March 31, 2019. Refer to Note 8. Leases, for additional information and required disclosures.

Effective January 1, 2019, ~~and expect~~we have adopted ASU 2018 - 07, Improvements to ~~elect certain available transitional practical expedients. We anticipate~~Non-Employee Sharebased Payment Accounting. The amendments in this ~~standard will~~ASU expands Topic 718 to include share base payments for goods or services to non employees. The adoption of ASU 2018-07 did not have a material impact on our financial position ~~and~~or results of operations. ~~While we are continuing to assess all potential impacts of the new standard, we currently believe the most significant impact relates to the accounting for office and datacenter operating leases.~~

Recently Issued Accounting Pronouncements not yet adopted

In January 2017, the FASB issued ASU 2017-04 Goodwill and Other (Topic 350). ASU 2017-04 simplifies the subsequent measurement of goodwill and reduces the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit's fair value. This update will be effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of ASU 2017-04 is not expected to have a material impact on our financial position or results of operations.

In August 2017, the FASB issued ASU 2017-12 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12was issued with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements as well as to simplify the application of hedge accounting guidance in current GAAP. We intend to adopt the standard on the effective date of January 1, 2020. The adoption of ASU 2017-12 is not expected to have a material impact on our financial position or results of operations.

In August 2018, the FASB issued ASU 2018 - 13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement. This ASU modifies disclosure requirements for Fair Value including 1) removing existing disclosure requirements such as reasons for transfers from 1 to 2 level, policy of timing of transfers 2) modifying existing disclosure requirements, such as a rollforward of level 3 assets, investments in entities that calculate net asset value, and the measurement uncertainty disclosure 3) Adds additional disclosures such as changes in unrealized gains and losses in OCI, and the range and weight of significant unobservable inputs. We intend to adopt the standard on the effective date of January 1, 2020. The adoption of ASU 2018-13 is not expected to have a material impact on our financial position or results of operations.

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

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software - Customer’s Accounting for Implementation Costs incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU was issued to clarify the accounting for implementation costs incurred for SaaS agreements. Previously the guidance only referred to development of internal use software and the accounting for SaaS agreements was not clarified. This ASU states that the implementation costs should be capitalized. The ASU will be effective for periods after December 15, 2019. We are currently evaluating the impact on our financial position, results of operations, and statement of cash flows.

Note 2. ~~Revenue~~Significant Events and Transactions of the Period

~~Adoption~~Change in estimated useful life of ~~ASC Topic 606, “Revenue from contracts with customers”~~servers and other data center equipment

On January 1, ~~2018,~~2019 we ~~adopted Topic 606 using the modified retrospective method. The new standard had no significant impact on~~revised our Consolidated Financial Statements, except for related disclosures which are presented under Topic 606 for reporting periods beginning after January 1, 2018, while prior period disclosures are reported in accordance with previous Topic 605.

~~Nature of services~~

~~We generate revenues from our performance marketing service portfolio currently comprised~~estimate of the ~~following services:~~

~~Criteo Dynamic Retargeting~~ ~~drives post-click sales for~~useful life of all servers and other equipment used in our ~~commerce clients by engaging consumers with personalized advertisements offering products~~data centers from 3 to 5 years. This change in estimate was determined based on a revised commissioning plan which extends the period equipment is used to 5 years prior to disposal. This resulted in an increase in income from operations of $10.8 million, increase net income of $9.2 million, or ~~services for~~$0.14 per share, from that which ~~they~~would have ~~already expressed shopping intent.~~

~~Criteo Sponsored Products~~ drives post-click sales for our brand clients by pricing and delivering in real time sponsored product advertisements to consumers demonstrating intent, or actively searching for a specific product or product category, onbeen reported had the ~~websites~~previous expected useful life of ~~retailers selling such brand product.~~

~~Criteo Customer Acquisition~~ drives post-click sales for our commerce clients by helping them to acquire new prospective customers, using intent information across a large pool of retailers and engaging such prospective customers with personalized advertisements offering products or services that are predicted to be of interest to them.

~~Criteo Audience Match~~ drives more post-click sales for our commerce clients by accurately targeting and re-engaging their existing customers with personalized advertisements offering new products or services that they have not yet purchased.

~~Excluding our core product, Criteo Dynamic Retargeting, no other product accounted for more than 10% of total consolidated revenue for the periods presented.~~

~~Disaggregation of revenue~~

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

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

June 30, 2017 $ 229,392
$ 191,682
$ 120,948
$ 542,022
June 30, 2018 $ 212,781
$ 201,080
$ 123,324
$ 537,185

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

June 30, 2017 $ 437,405
$ 380,774
$ 240,509
$ 1,058,688
June 30, 2018 $ 425,476
$ 423,691
$ 252,182
$ 1,101,349
3 years been used.

Share repurchase program

~~Revenue recognition accounting policies~~

~~We recognize revenues when we transfer control~~On October 25, 2018 Criteo's Board of ~~promised services directly~~Directors authorized a share repurchase program of up to ~~our clients or to advertising agencies, which we collectively refer to as our clients, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services.~~

All our services consist mainly in serving relevant advertising and banner to clients’ users, using Criteo’s technology, when client’s users are surfing on the web. Our contracts typically include a single promise to stand ready, to display the advertising or banner until a client’s user clicks. This represents a series of distinct repetitive services (units of time) that are substantially the same, with the same pattern of transfer to the client. Accordingly, the promise to stand ready is accounted for as a single performance obligation.

~~Each performance obligation is satisfied over time as the client continuously receives and consumes the benefits~~$80.0 million of the services in continue. We generally price our advertising campaigns on a cost per click basis (CPC) model based on the number of clicks generated by users on each advertisement we deliver in our advertising campaigns (variable consideration). Which means that we have a right to invoice our clients when a user clicks on an advertisement displayed by us. Advertising campaigns are billed and paid on a monthly basis. This amount is representative of the value of the service delivered to the client and therefore, applying the right-to-bill practical expedient, we recognize revenue over time based on the users’ clicks.

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

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

~~Note 3. Restructuring~~

~~Restructuring of our China Operations~~

In May 2017, the Company announced it would no longer continue to serve the domestic market in China and would refocus its China operations entirely on the export business. For the three months ended June 30, 2017, we recognized $3.3 million in restructuring charges as detailed below:



	~~Three Months and Six Months Ended~~
	~~June 30, 2017~~
	~~(in thousands)~~
~~Severance costs~~	~~$802~~
~~Facility exit costs~~	~~2,265~~
~~Other~~	~~232~~
~~Total restructuring costs~~	~~$3,299~~

For the three months and six months ended June 30, 2017, $2.5 million was included in Other Cost of Revenue, $0.7 million in Sales and Operations expenses, and $0.1 million was included in General and Administrative expenses.

Company’s outstanding American Depositary Shares. As of December 31, ~~2017, we had a restructuring liability~~2018, 3.5 million shares were held as treasury shares.

On February 8, 2019, the Board of ~~$0.4 million included in other current liabilities on~~Directors authorized the ~~consolidated statement~~reduction of ~~financial position. No additional expenses were recorded related to this restructuring in the six months ended June 30, 2018 and the remaining $0.4 million was paid during the period~~capital resulting in the ~~extinguishment~~formal retirement of 1.6 million treasury shares. As of March 31, 2019, we have 1.7 million treasury shares remaining which may be used primarily to satisfy the ~~restructuring liability as~~company's obligations under its employee equity plans upon RSU vestings in lieu of ~~June 30, 2018.~~

~~Discontinuation of Criteo Predictive Search~~

On October 31, 2017, the Company announced that it had decided to discontinue the Criteo Predictive Search product. $4.1 million was recognized as restructuring charges in 2017. For the three months ended June 30, 2018, we recognized restructuring costs of $0.2 million due to variances in the terms of actual settlement and facility sublease agreements from those used to determine our original estimate.

issuing new shares.



	~~Three Months Ended~~
	~~June 30, 2018~~
	~~(in thousands)~~
~~Severance costs~~	~~$321~~
~~Facility exit costs~~	~~(122)~~
~~Total restructuring costs / (gain)~~	~~$199~~



	Number of Treasury Shares		Amount (in thousands of dollars)
Balance at January 1, 2018	—		$	—
Treasury Shares Repurchased to potentially use for M&A	1,751,147		40,000
Treasury Shares Repurchased for RSU Vesting	1,748,111		40,000
Treasury Shares Issued for RSU Vesting	(40,139	)	(841		)
Balance at December 31, 2018	3,459,119		$	79,159
Treasury Shares Retired	(1,594,288	)	$	(36,137	)
Treasury Shares Issued for RSU Vesting	(192,427	)	(3,943		)
Balance at March 31, 2019	1,672,404		$	39,079

~~For the three months ended June 30, 2018, $0.2 million was included in Sales and Operations expenses.~~



	~~Six Months Ended~~
	~~June 30, 2018~~
	~~(in thousands)~~
~~Severance costs~~	~~$127~~
~~Facility exit costs~~	~~297~~
~~Other~~	~~(477)~~
~~Total restructuring costs / (gain)~~	~~$(53)~~

~~For the six months ended June 30, 2018, we recognized a gain of $0.1 million. This gain~~

was due to employees being relocated within the company rather than being terminated and a reduction of share based compensation expenses which was partially offset by additional charges for facilities and employee severance agreements.

For the six months ended June 30, 2018, $0.2 million was included in Sales and Operations expenses and $(0.3) million in Research and Development expenses. Other costs relate to a reduction of share based compensation expenses of $(0.5) million due to forfeitures.

~~The following table summarizes restructuring activities as of June 30, 2018 included in other current liabilities on the balance sheet:~~



	~~Restructuring Liability~~
	~~(in thousands)~~
~~Restructuring liability - January 1, 2018~~	~~$2,351~~
~~Restructuring costs / (gain)~~	~~(53)~~
~~Amounts paid~~	~~(1,808)~~
~~Other~~	~~472~~
~~Restructuring liability - June 30, 2018~~	~~$962~~

Note 4.3. Financial Instruments

~~Credit Risk~~Financial assets

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


	December 31, 2017		June 30, 2018		December 31, 2018		March 31, 2019
	(in thousands)				(in thousands)
Cash and cash equivalents	$	414,111	$	480,285
Trade receivables, net of allowance	484,101		372,906		473,901		386,792
Other taxes	58,346		42,076		53,338		56,828
Other current assets	26,327		26,114		22,816		24,737
Non-current financial assets	19,525		20,226		20,460		20,331
Total	$	1,002,410	$	941,607	$	570,515	$	488,688

~~As of December 31, 2017 and June 30, 2018, no customer accounted for 10% or more of trade receivables.~~

~~We perform ongoing credit evaluations of our customers and do not require collateral.~~ Credit Risk

We maintain an allowance for estimated credit losses. During the period ended March 31, 2019 and the year ended December 31, ~~2017 and the six-month period ended June 30,~~ 2018, our net change in allowance for doubtful accounts ~~increased by $9.2~~was $0.7 million and ~~$2.5~~$5.1 million, respectively.

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

Trade Receivables

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

~~For each period presented, the aging~~As of December 31, 2018 and March 31, 2019, no customer accounted for 10% or more of trade ~~receivables and allowances for potential losses is as follows:~~

December 31, 2017 June 30, 2018
Gross value
% Allowance
% Gross value
% Allowance
%
(in thousands)
(in thousands)
(in thousands)
(in thousands)

Not yet due $ 304,233
60.3 % $ (168 ) 0.8 % $ 306,148
77.3 % $ (31 ) 0.1 %
0 - 30 days 121,957
24.2 % —
— % 10,629
2.7 % —
— %
31 - 60 days 29,325
5.8 % (21 ) 0.1 % 18,169
4.6 % (29 ) 0.1 %
61 - 90 days 7,498
1.5 % (35 ) 0.2 % 13,984
3.5 % (77 ) 0.3 %
> 90 days 41,906
8.3 % (20,594 ) 98.9 % 47,356
11.9 % (23,243 ) 99.5 %
Total $ 504,919
100 % $ (20,818 ) 100 % $ 396,286
100 % $ (23,380 ) 100 %

receivables.

Financial Liabilities


	December 31, 2017		June 30, 2018		December 31, 2018		March 31, 2019

	(in thousands)				(in thousands)
Trade payables	$	417,032	$	321,295	$	425,376	$	345,923
Other taxes	58,783		46,947		55,592		58,192
Employee-related payables	66,219		65,832		65,878		63,459
Other current liabilities	65,677		30,803		47,115		37,256
Financial liabilities	3,657		2,813		3,508		3,882
Total	$	611,368	$	467,690	$	597,469	$	508,712

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

We are party to several loan agreements and a revolving credit facility, or RCF, with third-party financial institutions. There have been no significant changes from what was disclosed in Note 13 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

Fair Value Measurements

We measure the fair value of our cash equivalents, which include ~~money market funds and interest bearing~~interest-bearing bank deposits, as ~~level 1 and~~ level 2 measurements because they are valued using ~~quoted market prices and~~ observable market ~~data, respectively.~~data.

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

Derivative Financial Instruments

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


	December 31, 2017		June 30, 2018		December 31, 2018		March 31, 2019

	(in thousands)				(in thousands)
Derivative Assets:
Included in other current assets	$	5,159	$	877	$	1,703	$	—

Derivative Liabilities:
Included in financial liabilities - current portion	$	—	$	—	$	—	$	603

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

Cash and Cash Equivalents

~~Cash and cash equivalents include investments~~Investments in ~~money market funds and~~ interest–bearing bank deposits which meet ASC 230—Statement of Cash flows criteria: short-term, highly liquid investments, for which the risks of changes in value are considered to be insignificant. ~~Money market funds are considered level 1 financial instruments as they are valued using quoted market prices.~~ Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

December 31, 2017
June 30, 2018

(in thousands)
Cash and cash equivalents $ 267,236
$ 308,070
Money market funds —
—
Interest-bearing bank deposits 146,875
172,215
Total cash and cash equivalents $ 414,111
$ 480,285



	December 31, 2018		March 31, 2019

	(in thousands)
Cash equivalents	$	125,442	$	141,260
Cash on hand	238,984		254,511
Total cash and cash equivalents	$	364,426	$	395,771

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

Note 5.4. Trade Receivables

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


							December 31, 2018			March 31, 2019
	December 31, 2017			June 30, 2018
	(in thousands)						(in thousands)
Trade accounts receivables	$	504,919		$	396,286		$	499,819		$	411,961
(Less) allowance for doubtful accounts	(20,818		)	(23,380		)
(Less) Allowance for doubtful accounts							(25,918		)	(25,169		)
Net book value at end of period	$	484,101		$	372,906		$	473,901		$	386,792

Changes in allowance for doubtful accounts are summarized below:


	2017			2018			2018			2019

	(in thousands)						(in thousands)
Balance at January 1	$	(11,598	)	$	(20,818	)	$	(20,818	)	$	(25,918	)
Allowance for doubtful accounts	(3,686		)	(6,315		)	(4,436		)	(5,282		)
Reversal of provision	2,142			3,303			1,460			5,931
Currency translation adjustment	(87		)	450			(166		)	100
Balance at June 30	$	(13,229	)	$	(23,380	)
Balance at March 31							$	(23,960	)	$	(25,169	)

The change in allowance for doubtful accounts during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019, related mainly to increased business with categories of clients associated with a higher credit risk. The Company mitigates its credit risk with respect to accounts receivables by performing credit evaluations and monitoring agencies and advertisers' accounts receivables balances.

Note 6.5. Other Current Assets

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

December 31, 2017 June 30, 2018

(in thousands)
Prepayments to suppliers $ 3,244
$ 4,367
Employee-related receivables —

154
Other debtors 5,694
4,151
Prepaid expenses 12,230
16,565
Derivative instruments 5,159
877
Gross book value at end of period 26,327
26,114
(Less) Allowance for doubtful accounts $ —
$ —
Net book value at end of period $ 26,327
$ 26,114

~~Prepaid expenses mainly consist of office rental advance payments.~~



	December 31, 2018		March 31, 2019

	(in thousands)
Prepayments to suppliers	$	4,056	$	9,126
Other debtors	4,762		4,562
Prepaid expenses	12,295		11,049
Derivative instruments	1,703		—
Gross book value at end of period	22,816		24,737
Net book value at end of period	$	22,816	$	24,737

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

Note 7.6. Intangible assets and Goodwill

There have been no significant changes in intangible assets or goodwill since December 31, ~~2017.~~2018. In addition, no triggering events have occurred that would indicate impairment in the balance of either intangible assets or goodwill.

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


	Software		Technology and customer relationships		Total		Software		Technology and customer relationships		Total
	(in thousands)						(in thousands)
From July 1 to December 31, 2018	$	5,964	$	7,561	$	13,525
2019	4,864		13,035		17,899
From April 1 to December 31, 2019							$	5,069	$	16,373	$	21,442
2020	3,368		8,700		12,068		6,405		16,828		23,233
2021	1,253		8,700		9,953		4,588		16,828		21,416
2022	166		8,700		8,866		2,810		11,450		14,260
2023							706		10,281		10,987
Thereafter	—		24,720		24,720		16		15,864		15,880
Total	$	15,615	$	71,416	$	87,031	$	19,594	$	87,624	$	107,218

Note 8.7. Other Current Liabilities

Other current liabilities are presented in the following table:


	December 31, 2017		June 30, 2018		December 31, 2018		March 31, 2019

	(in thousands)				(in thousands)
Clients' prepayments	$	33,495	$	22,268	$	10,328	$	11,177
Credit notes					13,183		13,868
Accounts payable relating to capital expenditures	30,736		6,738		21,454		10,156
Other creditors	740		1,490		1,527		1,342
Deferred revenue	706		307		623		713
Total	$	65,677	$	30,803	$	47,115	$	37,256

~~The changes in "Client's prepayments" mainly related to the customers' cash advances for the Criteo Sponsored Products travel business disposed in Q1 2018.~~ The changes in "accounts payable relating to capital expenditures" relate to significant data centers equipment and leasehold improvements acquisitions in ~~2017~~2018 paid during the ~~six-month~~three months ended March 31, 2019.

Note 8. Leases

On January 1, 2019, we adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) which requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet.

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

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

We do not recognize a lease liability or right of use asset for leases with a term of 12 months or less, and

We used hindsight in determining the lease term.

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

Both office and data center leases typically contain options to renew, and/or early terminate. We have evaluated management's expectations for these options as of March 31, 2019. Options have been included in the lease term if management has determined it is reasonably certain it will be exercised.

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

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

The components of lease expense are as follows:



	Three Months Ended
	March 31, 2019
	Offices			Data Centers		Total
	(in thousands)
Lease expense	$	8,340		$	5,187	$	13,527
Short term lease expense	925			530		1,455
Variable lease expense	—			114		114
Sublease income	(1,076		)	—		(1,076		)
Total operating lease expense	$	8,189		$	5,831	$	14,020

As of March 31, 2019, we had future minimum lease payments as follows:



	March 31, 2019
	Offices			Data Centers			Total
	(in thousands)

Remainder of 2019	$	22,220		$	17,103		$	39,323
2020	35,166			19,341			54,507
2021	33,118			12,521			45,639
2022	30,503			8,631			39,134
2023	21,467			2,198			23,665
Thereafter	29,550			—			29,550
Total minimum lease payments	172,024			59,794			231,818
Impact of Discount Rate	(13,608		)	(1,831		)	(15,439		)
Total Lease Liability	$	158,416		$	57,963		$	216,379

The weighted average remaining lease term and discount rates as of March 31, 2019 are as follows:



	Three Months Ended
	March 31, 2019

Weighted average remaining lease term (years)
Offices	5.4
Data Centers	3.0
Weighted average discount rate
Offices	2.6	%
Data Centers	1.73	%

Supplemental cash flow information related to our operating leases is as follows for the period ended ~~June 30, 2018.~~March 31, 2019:



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

As of March 31, 2019, we have additional operating leases, primarily for offices, that have not yet commenced which will result in additional operating lease liabilities and right of use assets of approximately $14.0 million. These operating leases will commence between 2019 and 2020.

For periods prior to January 1, 2019, we accounted for our lease commitments in accordance with ASC 840. We recognized rent expense for leases on a straight-line basis over the life of the lease. For the three months ended March 31, 2018, we recognized expense for office leases of $9.7 million and data centers costs of $12.3 million. The rent expense recognized in prior periods included amounts which are now considered non-lease components such as maintenance services and electricity charges.

Reduction of London office space

We evaluate our right of use assets for impairment. As of March 31, 2019, management has implemented a plan to reduce the occupied space of the London Office. In accordance with ASC 842, we have reviewed the right-of-use asset due to the London Office lease for impairment resulting in a $1.9 million impairment charge for the three months ended March 31, 2019. This charge was recognized in Sales and Operations expenses in our condensed consolidated statement of income.

Note 9. ~~Financial Liabilities~~

~~The changes in current and non-current financial liabilities during the period ended March 31, 2018 are illustrated in the following schedules:~~

As of January 1, 2018 New borrowings Repayments Change in scope
Other ⁽¹⁾
Currency translation adjustment As of June 30, 2018

(in thousands)
Borrowings $ 982
$ —
$ (473 ) $ —
$ 363
$ (23 ) $ 849
Other financial liabilities 517
—
(307 ) —
—
(4 ) 206
Derivative instruments —
—
—
—
—
—
—
Current portion 1,499
—
(780 ) —
363
(27 ) 1,055
Borrowings 1,798
—
—
—
(363 ) (37 ) 1,398
Other financial liabilities 360
—
—
—
—
—
360
Non current portion 2,158
—
—
—
(363 ) (37 ) 1,758
Borrowings 2,780
—
(473 ) —
—
(60 ) 2,247
Other financial liabilities 877
—
(307 ) —
—
(4 ) 566
Derivative instruments —
—
—
—
—
—
—
Total $ 3,657
$ —
$ (780 ) $ —
$ —
$ (64 ) $ 2,813

⁽¹⁾~~Includes reclassification from non-current to current portion based on maturity of the financial liabilities.~~

~~Borrowings are financial liabilities at amortized cost and are measured using level 2 fair value measurements.~~

We are party to several loan agreements and revolving credit facilities, or RCF, with third-party financial institutions. There have been no significant changes from what was disclosed in Note 13 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.Revenue

Revenue Recognition

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

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

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

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

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

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

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

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

Disaggregation of revenue

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

The following table presents our revenues disaggregated by geographical area:



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

March 31, 2018	$	212,695	$	222,611	$	128,858	$	564,164
March 31, 2019	$	217,993	$	209,643	$	130,487	$	558,123

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

Customer Credit Notes

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

Deferred Revenues

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

Practical Expedients

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

Note 10. Share-Based Compensation

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

During the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, there ~~were four grants~~was one grant of RSUs ~~and two grants of OSAs~~ under the Employee Share Option Plan 1011 as defined in Note 1819 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

On March 1, ~~2018, 122,448~~2019, 202,180 RSUs were granted to Criteo employees ~~subject to continued employment.~~

~~On March 16, 2018, 1,295,513 RSUs were granted to Criteo employees subject to continued employment.~~

~~On March 16, 2018, 794,733 OSAs were granted to senior management subject to continued employment.~~

~~On April 25, 2018, 101,377 RSUs were granted to Criteo employees subject to continued employment.~~

~~On June 26, 2018 142,390 RSUs were granted to Criteo employees and 152,833 OSAs were granted to senior management~~ subject to continued employment.

There have been no changes in the vesting and method of valuation of the BSPCEs, OSAs, RSUs, or BSAs from what was disclosed in Note 1819 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC on March 1, ~~2018, except for one grant of OSAs to a member of senior management which will vest as follows:~~

~~up to a half of OSAs at the expiration of a two (2) year period from the date hereof,~~

as from the expiration of the initial aforementioned two (2) year period, in increments of 1/16th at the end of each elapsed quarter (i.e., per successive three-month periods), for 2 years from that date.

2019.

Change in Number of BSPCE/OSA/RSU/BSA

OSA/BSPCE
RSU
BSA
Total
Balance at January 1, 2018 3,192,708
4,212,508
186,276
7,591,492
Granted 947,566
1,661,728
—
2,609,294
Exercised (OSA/BSPCE/BSA) (96,739 ) —
—
(96,739 )
Vested (RSU) —
(679,159 ) —
(679,159 )
Forfeited (548,792 ) (395,587 ) (3,040 ) (947,419 )
Expired —
—
—
—
Balance at June 30, 2018 3,494,743
4,799,490
183,236
8,477,469



	OSA/BSPCE		RSU		BSA	Total
Balance at January 1, 2019	3,187,465		4,780,137		291,670	8,259,272
Granted	—		202,180		—	202,180
Exercised (OSA/BSPCE/BSA)	(27,691	)	—		—	(27,691	)
Vested (RSU)	—		(203,720	)	—	(203,720	)
Forfeited	(22,023	)	(207,278	)	—	(229,301	)
Expired	—		—		—	—
Balance at March 31, 2019	3,137,751		4,571,319		291,670	8,000,740

Breakdown of the Closing Balance


	OSA/BSPCE		RSU	BSA		OSA/BSPCE		RSU	BSA
Number outstanding	3,494,743		4,799,490	183,236		3,137,751		4,571,319	291,670
Weighted-average exercise price	€	27.20	NA	€	23.93	€	27.05	NA	€	13.02
Number vested	2,156,137		—	88,833		2,393,803		NA	115,544
Weighted-average exercise price	€	24.79	NA	€	16.70	€	26.12	NA	€	19.63
Weighted-average remaining contractual life of options outstanding, in years	7.11		NA	7.10		6.32		NA	7.68

Reconciliation with the Unaudited Consolidated Statements of Income

Three Months Ended
June 30, 2017 June 30, 2018

(in thousands)
R&D
S&O
G&A
Total
R&D
S&O
G&A
Total
RSUs $ (4,040 ) $ (6,875 ) $ (2,667 ) $ (13,582 ) $ (6,446 ) $ (8,059 ) $ (4,101 ) $ (18,606 )
Share options / BSPCE (419 ) 469
(1,172 ) (1,122 ) (326 ) (602 ) (284 ) (1,212 )
Total share-based compensation (4,459 ) (6,406 ) (3,839 ) (14,704 ) (6,772 ) (8,661 ) (4,385 ) (19,818 )
BSAs —
—
(214 ) (214 ) —
—
(423 ) (423 )
Total equity awards compensation expense (4,459 ) (6,406 ) (4,053 ) (14,918 ) (6,772 ) (8,661 ) (4,808 ) (20,241 )


	Six Months Ended																								Three Months Ended
	June 30, 2017												June 30, 2018												March 31, 2018												March 31, 2019

	(in thousands)																								(in thousands)
	R&D			S&O			G&A			Total			R&D			S&O			G&A			Total			R&D			S&O			G&A			Total			R&D			S&O			G&A			Total
RSUs	$	(7,512	)	$	(13,135	)	$	(5,395	)	$	(26,042	)	$	(11,063	)	$	(14,930	)	$	(9,249	)	$	(35,242	)	$	(4,617	)	$	(6,872	)	$	(5,147	)	$	(16,636	)	$	(3,846	)	$	(5,955	)	$	(2,516	)	$	(12,317	)
Share options / BSPCE	(863		)	19			(2,401		)	(3,245		)	(391		)	(962		)	(1,619		)	(2,972		)	(65		)	(359		)	(1,336		)	(1,760		)	(179		)	(246		)	(780		)	(1,205		)
Total share-based compensation	(8,375		)	(13,116		)	(7,796		)	(29,287		)	(11,454		)	(15,892		)	(10,868		)	(38,214		)	(4,682		)	(7,231		)	(6,483		)	(18,396		)	(4,025		)	(6,201		)	(3,296		)	(13,522		)
BSAs	—			—			(571		)	(571		)	—			—			(856		)	(856		)	—			—			(433		)	(433		)	—			—			(360		)	(360		)
Total equity awards compensation expense	$	(8,375	)	$	(13,116	)	$	(8,367	)	$	(29,858	)	$	(11,454	)	$	(15,892	)	$	(11,724	)	$	(39,070	)	$	(4,682	)	$	(7,231	)	$	(6,916	)	$	(18,829	)	$	(4,025	)	$	(6,201	)	$	(3,656	)	$	(13,882	)

Note 11. Financial ~~income (expense), net~~Income and Expenses

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


							Three Months Ended
	Three Months Ended						March 31, 2018			March 31, 2019
	June 30, 2017			June 30, 2018			(in thousands)
	(in thousands)
Financial income from cash equivalents	$	202		$	279		$	225		$	177
Interest and fees	(656		)	(488		)	(556		)	(523		)
Interest on debt	(650		)	(546		)	(487		)	(430		)
Fees	(6		)	58			(69		)	(93		)
Foreign exchange gain (loss)	(1,625		)	(777		)	(972		)	(1,598		)
Other financial expense	(15		)	(20		)	(22		)	(30		)
Total financial income (expense), net	$	(2,094	)	$	(1,006	)
Total financial income (expense)							$	(1,325	)	$	(1,974	)

The ~~$1.0~~$2.0 million financial expense for the three months ended ~~June 30, 2018~~March 31, 2019 was ~~mainly~~ driven by the non-utilization costs ~~and up-front fees amortization~~ incurred as part of our available RCF ~~financing. The intra-group position between~~financing and the recognition of negative impact of foreign exchange reevaluations net of related hedging. At March 31, 2019, our exposure to foreign currency risk was centralized at Criteo S.A. and ~~its U.S subsidiary in the context~~hedged using foreign currency swaps or forward purchases or sales of ~~the funding of the HookLogic acquisition is qualified as a net investment in a~~ foreign ~~operation from February 2018 and no longer requires hedging, resulting in reduced costs compared to the three months ended June 30, 2017.~~

Six Months Ended
June 30,
2017
June 30,
2018
(in thousands)
Financial income from cash equivalents $ 449
$ 504
Interest and fees (1,412 ) (1,044 )
Interest on debt (1,218 ) (1,033 )
Fees (194 ) (11 )
Foreign exchange gain (loss) (3,433 ) (1,747 )
Other financial expense (31 ) (44 )
Total financial income (expense), net $ (4,427 ) $ (2,331 )
currencies.

The ~~$2.3~~$1.3 million financial expense for the ~~six~~three months ended ~~June 30,~~March 31, 2018 was ~~mainly~~ driven by the non-utilization costs ~~and up-front amortization~~ incurred as part of our available RCF financing and hedging costs related to an intra-group position between Criteo S.A. and its U.S. subsidiary in the context of the funding of the HookLogic acquisition. ~~As of February 2018, this position qualified as a net investment in a foreign operation and no longer requires hedging resulting in reduced costs compared to the six months ended June 30, 2017.~~

Note 12. Income Taxes

Breakdown of Income Taxes

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

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


	Six Months Ended						Three Months Ended
	June 30, 2017			June 30, 2018			March 31, 2018			March 31, 2019
	(in thousands)						(in thousands)
Current income tax	$	(20,271	)	$	(28,559	)	$	(15,532	)	$	(15,934	)
Net change in deferred taxes	12,405			7,535			3,146			5,916
Provision for income taxes	$	(7,866	)	$	(21,024	)	$	(12,386	)	$	(10,018	)

For the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, we used an annual estimated tax rate of ~~30%~~37% and ~~37%~~30%, respectively, to calculate the provision for income taxes. The ~~increase in the annual estimated tax rate is primarily due to our preliminary estimates of the impact of the U.S. Tax Act. The~~ effective tax rate was ~~26%~~37% and ~~37%~~32% for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, respectively. The difference between the annual estimated tax rate and the effective tax rate for ~~six~~three months ended ~~June 30, 2017~~March 31, 2019 was due to the tax impact of discrete items such as share-based compensation in the United States. Discrete items were immaterial for the ~~six~~three months ended ~~June 30,~~March 31, 2018 resulting in no difference between the annual estimated tax rate and the effective tax rate.

~~Our~~For the three months ended March 31, 2019, our estimated effective tax rate includes in particular our preliminary estimates for the tax reform in France voted in December 2018. For the three months ended March 31, 2018, our estimated annual effective tax rate ~~includes~~included our preliminary estimates for the impact of the U.S. Tax Cuts and Jobs Act (the "Tax Act") which was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. federal income tax rate from 35% to 21% and creates new taxes on certain related-party payments, referred to as a base erosion anti-avoidance tax, or “BEAT”. ~~The Tax Act also modifies the limitation on the amount of deductible interest expense and the limitation on the deductibility of certain executive compensation.~~ Our estimates are preliminary, and our effective tax rate may be impacted as more information becomes available regarding the tax reform.

Current tax assets and liabilities

The total amount of current tax assets consists mainly of prepayments of income taxes and credits of Criteo ~~S.A., Criteo Corp.,~~GMBH, Criteo do Brasil LTDA, and Criteo B.V.. The current tax liabilities refers mainly to the net corporate tax payables of Criteo K.K. ~~and Criteo Deutschland.~~

Ongoing tax inspection in the United States

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

Note 13. Earnings Per Share

Basic Earnings Per Share

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


	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018		Three Months Ended
	(in thousands, except share amount and per data)								March 31, 2018		March 31, 2019
Net income attributable to shareholders of Criteo S.A.	$	5,970	$	13,726	$	18,411	$	33,535	$	19,809	$	19,120
Weighted average number of shares outstanding	65,027,985		66,347,599		64,611,237		66,254,476		66,160,375		64,336,777
Basic earnings per share	$	0.09	$	0.21	$	0.28	$	0.51	$	0.30	$	0.30

Diluted Earnings Per Share

We calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued from share-based compensation plans (see Note 10). There were no other potentially dilutive instruments outstanding as of ~~June 30, 2017~~March 31, 2018 and ~~2018.~~2019. Consequently, all potential dilutive effects from shares are considered.

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


	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018		Three Months Ended
	(in thousands, except share amount and per data)								March 31, 2018		March 31, 2019
Net income attributable to shareholders of Criteo S.A.	$	5,970	$	13,726	$	18,411	$	33,535	$	19,809	$	19,120
Weighted average number of shares outstanding of Criteo S.A.	65,027,985		66,347,599		64,611,237		66,254,476		66,160,375		64,336,777
Dilutive effect of :
Restricted share awards ("RSUs")	1,598,093		721,154		1,438,010		793,096		865,039		1,317,350
Share options and BSPCE	1,427,448		382,066		1,574,728		394,936		407,806		336,647
Share warrants	77,748		37,492		85,814		37,005		36,518		50,522
Weighted average number of shares outstanding used to determine diluted earnings per share	68,131,274		67,488,311		67,709,789		67,479,513		67,469,738		66,041,296
Diluted earnings per share	$	0.09	$	0.20	$	0.27	$	0.50	$	0.29	$	0.29

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


	Three Months Ended		Six Months Ended		Three Months Ended
	June 30, 2017	June 30, 2018	June 30, 2017	June 30, 2018	March 31, 2018	March 31, 2019

Restricted share awards	11,834	2,651,262	120,782	2,276,195	1,901,128	482,152
Share options and BSPCE	129,005	—	285,958	—	—	65,500
Weighted average number of anti-dilutive securities excluded from diluted earnings per share	140,839	2,651,262	406,740	2,276,195	1,901,128	547,652

Note 14. Commitments and contingencies

Commitments

~~Leases~~

We are party to various contractual commitments mainly related to our offices as well as hosting services. There have been no significant changes in future payment obligations for these contractual commitments from what was disclosed in Note 22 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. Certain of these arrangements have free rent periods or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis.

Rent expenses relating to our offices totaled $8.6 million and $9.5 million for the three-month period ended June 30, 2017 and 2018, respectively and $17.4 million and $19.2 million for the six-month period ended June 30, 2017 and 2018, respectively.

Hosting costs totaled $17.1 million and $12.4 million for the three-month period ended June 30, 2017 and 2018, respectively and $31.0 million and $24.7 million for the six-month period ended June 30, 2017 and 2018, respectively.

Revolving Credit Facilities, Credit Line Facilities and Bank Overdrafts

As mentioned in Note 9,3, we are party to one RCF with a syndicate of banks which allow us to draw up to €350.0 million ($~~408.0~~393.2 million).

We are also party to short-term credit lines and overdraft facilities with HSBC plc, BNP Paribas and LCL. We are authorized to draw up to a maximum of €21.5 million ($24.2 million) in the aggregate under the short-term credit lines and overdraft facilities. As of ~~June 30, 2018, there was no amount~~March 31, 2019, we had not drawn on any of these facilities. Any loans or overdraft under these short-term facilities bear interest based on the ~~RCF.~~

~~This~~one month EURIBOR rate or three month EURIBOR rate. As these facilities are exclusively short-term credit ~~facility is unsecured~~ and ~~contains customary events of default and contains covenants, including compliance with a total net debt~~overdraft facilities, our banks have the ability to ~~adjusted EBITDA ratio and restrictions~~terminate such facilities on ~~incurring additional indebtedness. As of June 30, 2018, we were in compliance with the required leverage ratio.~~short notice.

Contingencies

Changes in provisions during the presented periods are summarized below:


	Provision for employee-related litigation			Other provisions			Total			Provision for employee-related litigation			Other provisions			Total
	(in thousands)									(in thousands)
Balance at January 1, 2018	$	545		$	1,253		$	1,798
Balance at January 1, 2019										$	244		$	2,396		$	2,640
Increase	149			960			1,109			—			1,000			1,000
Provision used	(352		)	(221		)	(573		)	(32		)	—			(32		)
Provision released not used	—			(456		)	(456		)	—			(365		)	(365		)
Currency translation adjustments	(21		)	(46		)	(67		)	(4		)	(24		)	(28		)
Balance at June 30, 2018	$	321		$	1,490		$	1,811
Balance at March 31, 2019										$	208		$	3,007		$	3,215
- of which current	321			1,490			1,811			208			3,007			3,215

The amount of the provisions ~~represent~~represents management’s best estimate of the future outflow. ~~As of June 30, 2018, provisions are mainly in relation to employee-related litigations and other operating provisions.~~

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

The Company operates in the following three geographical markets:

Americas (North and South America);

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

Asia-Pacific.

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

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

June 30, 2017 $ 229,392
$ 191,682
$ 120,948
$ 542,022
June 30, 2018 $ 212,781
$ 201,080
$ 123,324
$ 537,185



	Americas		EMEA		Asia-Pacific		Total
For the three months ended:	(in thousands)
March 31, 2018	$	212,695	$	222,611	$	128,858	$	564,164
March 31, 2019	$	217,993	$	209,643	$	130,487	$	558,123

Revenue generated in France, the country of incorporation of the Parent, ~~company,~~ amounted to ~~$36.1~~$41.5 million and ~~$37.0~~$37.4 million for the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, respectively.

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

June 30, 2017 $ 437,405
$ 380,774
$ 240,509
$ 1,058,688
June 30, 2018 $ 425,476
$ 423,691
$ 252,182
$ 1,101,349

~~Revenue generated in France amounted to $73.6 million and $78.4 million for the six months ended June 30, 2017 and 2018, respectively.~~

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


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018		March 31, 2018		March 31, 2019
	(in thousands)								(in thousands)
Americas
United States	$	200,801	$	187,368	$	380,464	$	373,420	$	186,052	$	195,791
EMEA
Germany	$	41,882	$	48,632	$	84,496	$	103,147	$	54,515	$	53,595
United Kingdom	$	26,422	$	22,544	$	54,619	$	48,778	$	26,234	$	21,768
Asia-Pacific
Japan	$	87,400	$	84,060	$	172,710	$	176,324	$	92,263	$	93,168

As of ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, our largest client represented ~~2.1%~~2.2% and ~~2.4%~~1.4%, respectively, of our consolidated revenue.

Other Information

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

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

December 31, 2017 $ 100,819
$ 113,272
$ 112,685
$ 18,850
$ 25,020
$ 10,141
$ 10,085
$ 257,961
June 30, 2018 $ 92,926
$ 105,119
$ 104,736
$ 16,785
$ 19,105
$ 7,900
$ 6,680
$ 233,935



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

December 31, 2018	$	123,388	$	125,654	$	125,312	$	27,898	$	19,109	$	11,630	$	2,992	$	296,049
March 31, 2019	$	124,679	$	118,896	$	118,557	$	26,174	$	17,846	$	10,822	$	2,545	$	287,595

Note 16. Related Parties

There were no significant related-party transactions during the period nor any change in the nature of the transactions as described in Note 2324 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017 except as follows:~~

~~On April 25, 2018, the Board appointed Jean-Baptiste Rudelle, the Executive Chairman of Criteo S.A., as the Company's Chairman and Chief Executive Officer.~~

On June 19, 2018 Criteo S.A. entered into a transition and separation agreement with Mr. Eric Eichmann, the Company's former Chief Executive Officer, pursuant to which Mr. Eichmann's Management Agreement with the Company has been terminated, effective as of April 25, 2018 and Mr. Eichmann will continue employment with the Company in a non-executive capacity as advisor to the Chief Executive Officer to assist with transition duties from April 25, 2018 to August 31, 2018.

Note 17. Subsequent Events

Criteo has entered into a definitive agreement to acquire Storetail, a pioneering retail media technology platform that enables retailers to monetize native placements on their ecommerce sites on a CPM basis. Criteo expects the deal to close in the third quarter of this year, subject to certain conditions precedent.

The Company evaluated all ~~other~~ subsequent events that occurred after ~~June 30, 2018~~March 31, 2019 through the date of issuance of the unaudited condensed consolidated financial statements and determined there are no ~~other~~ 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, ~~2017,~~2018, filed with the Securities and Exchange Commission, or "SEC", on March 1, ~~2018.~~2019.

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, ~~2017,~~2018, except for the adoption of ASC ~~606~~842 as of January 1, ~~2018.~~2019. Please refer to Note 1,"Summary of Significant Accounting Policies," of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of the changes in accounting policies due to the adoption of this standard.

On January 1, 2019 we have revised our estimate of the useful life of all servers and other equipment used in our data centers from 3 to 5 years. This change in estimate was determined based on a revised commissioning plan which extends the period equipment is used to 5 years prior to disposal. This resulted in an increase in income from operations of $10.8 million, increase net income of $9.2 million, or $0.14 per share, from that which would have been reported had the previous expected useful life of 3 years been used.

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 ~~2018.~~2019.

Use of Non-GAAP Financial Measures

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

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

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

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

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

Condensed Consolidated Statements of Income Data (Unaudited):


		Three Months Ended						Six Months Ended							Three Months Ended
		June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018				March 31, 2018			March 31, 2019
	(in thousands, except share and per share data)													(in thousands, except share and per share data)

Revenue		$	542,022		$	537,185		$	1,058,688		$	1,101,349			$	564,164		$	558,123

Cost of revenue ⁽²⁾:
Traffic acquisition costs		(322,200		)	(306,963		)	(628,893		)	(630,709		)		(323,746		)	(322,429		)
Other cost of revenue		(32,808		)	(29,957		)	(59,963		)	(60,016		)		(30,059		)	(26,045		)
Gross profit		187,014			200,265			369,832			410,624				210,359			209,649

Operating expenses
Research and development expenses ⁽²⁾		(43,611		)	(47,544		)	(83,132		)	(92,862		)		(45,318		)	(46,577		)
Sales and operations expenses ⁽²⁾		(97,900		)	(92,726		)	(188,631		)	(188,375		)		(95,649		)	(95,909		)
General and administrative expenses ⁽²⁾		(32,239		)	(35,644		)	(63,754		)	(70,235		)		(34,591		)	(33,770		)
Total operating expenses		(173,750		)	(175,914		)	(335,517		)	(351,472		)		(175,558		)	(176,256		)
Income from operations		13,264			24,351			34,315			59,152				34,801			33,393
Financial income (expense), net		(2,094		)	(1,006		)	(4,427		)	(2,331		)
Financial income (expense)															(1,325		)	(1,974		)
Income before taxes		11,170			23,345			29,888			56,821				33,476			31,419
Provision for income taxes		(3,665		)	(8,638		)	(7,866		)	(21,024		)		(12,386		)	(10,018		)
Net income		$	7,505		$	14,707		$	22,022		$	35,797			$	21,090		$	21,401
Net income available to shareholders of Criteo S.A. ⁽¹⁾		$	5,970		$	13,726		$	18,411		$	33,535			$	19,809		$	19,120
Net income available to shareholders of Criteo S.A. per share:
Basic		$	0.09		$	0.21		$	0.28		$	0.51			$	0.30		$	0.30
Diluted		$	0.09		$	0.20		$	0.27		$	0.50			$	0.29		$	0.29

Weighted average shares outstanding used in computing per share amounts:
Basic		65,027,985			66,347,599			64,611,237			66,254,476				66,160,375			64,336,777
Diluted		68,131,274			67,488,311			67,709,789			67,479,513				67,469,738			66,041,296

⁽¹⁾For the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, this excludes $1.5 million and $1.0 million, respectively, of net income attributable to non-controlling interests held by Yahoo! Japan in our Japanese subsidiary Criteo KK. For the six months ended June 30, 2017 and 2018, this excludes $3.6$1.3 million and $2.3 million, respectively, of net income attributable to non-controlling interests held by Yahoo! Japan in our Japanese subsidiary Criteo KK.

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

Detailed Information on Selected Items (unaudited):


		Three Months Ended				Six Months Ended						Three Months Ended
		June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018				March 31, 2018			March 31, 2019
	(in thousands)										(in thousands)
Equity awards compensation expense
Research and development expenses		$	4,461	$	6,771	$	8,377	$	11,326			$	4,555		$	4,025
Sales and operations expenses		6,401		8,668		13,111		16,499				7,832			6,201
General and administrative expenses		4,056		4,806		8,370		11,723				6,916			3,656
Total equity awards compensation expense		$	14,918	$	20,245	$	29,858	$	39,548			$	19,303		$	13,882

Pension service costs
Research and development expenses		151		212		297		432				220			193
Sales and operations expenses		60		75		119		154				79			72
General and administrative expenses		88		132		173		267				135			129
Total pension service costs ^(a)		$	299	$	419	$	589	$	853			$	434		$	394

Depreciation and amortization expense
Cost of revenue		13,003		15,050		24,094		30,299				15,249			9,135
Research and development expenses ^(b)		3,092		2,245		6,036		4,466				2,221			3,477
Sales and operations expenses ^(c)		4,925		4,518		9,886		8,972				4,454			4,864
General and administrative expenses		1,286		1,747		2,457		3,469				1,722			1,820
Total depreciation and amortization expense		$	22,306	$	23,560	$	42,473	$	47,206			$	23,646		$	19,296

Acquisition-related costs
General and administrative expenses		—		—		6		—
Total acquisition-related costs		$	—	$	—	$	6	$	—

Restructuring
Cost of revenue		2,497		—		2,497		—
Research and development expenses		—		16		—		(332		)		(348		)	—
Sales and operations expenses		690		183		690		290				107			1,890
General and administrative expenses		112		—		112		(11		)		(11		)	—
Total Restructuring		$	3,299	$	199	$	3,299	$	(53	)		$	(252	)	$	1,890

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

(b) Includes acquisition-related amortization of intangible assets of ~~$2.3~~$1.3 million and ~~$1.3~~$2.7 million for the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018, respectively, and $4.5 million and $2.5 million for the six months ended June 30, 2017 and 2018,~~2019, respectively.

(c) Includes acquisition-related amortization of intangible assets of ~~$2.5~~$2.2 million and ~~$2.2~~$2.7 million for the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018, respectively, and $5.0 million and $4.4 million for the six months ended June 30, 2017 and 2018,~~2019, respectively. .

Consolidated Statements of Financial Position Data ~~(Unaudited)~~(unaudited):


	December 31, 2017		June 30, 2018		December 31, 2018		March 31, 2019

	(in thousands)				(in thousands)
Cash and cash equivalents	$	414,111	$	480,285	$	364,426	$	395,771
Total assets	1,531,300		1,456,542		1,597,135		1,745,916
Trade receivables, net of allowance for doubtful accounts	484,101		372,906
Trade receivables, net of allowances for doubtful accounts					473,901		386,792
Total financial liabilities	3,657		2,813		3,508		3,882
Total liabilities	633,602		491,674		629,244		754,120
Total equity	$	897,698	$	964,868	$	967,891	$	991,796

Other Financial and Operating Data ~~(Unaudited)~~(unaudited):


	Three Months Ended				Six Months Ended					Three Months Ended
	June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018			March 31, 2018		March 31, 2019
	(in thousands, except client data)								(in thousands, except client data)
Number of clients	16,370		18,936		16,370		18,936			18,528		19,373
Revenue ex-TAC ⁽³⁾	$	219,822	$	230,222	$	429,795	$	470,640		$	240,418	$	235,694
Adjusted Net Income ⁽⁴⁾	$	26,244	$	35,482	$	57,065	$	76,001		$	40,519	$	39,705
Adjusted EBITDA⁽⁵⁾	$	54,086	$	68,774	$	110,540	$	146,706		$	77,932	$	68,855

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


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018				March 31, 2018			March 31, 2019

	(in thousands)												(in thousands)
Revenue	$	542,022		$	537,185		$	1,058,688		$	1,101,349			$	564,164		$	558,123
Adjustment:
Traffic acquisition costs	(322,200		)	(306,963		)	(628,893		)	(630,709		)		(323,746		)	(322,429		)
Revenue ex-TAC	$	219,822		$	230,222		$	429,795		$	470,640			$	240,418		$	235,694

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


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30, 2017			June 30, 2018			June 30, 2017			June 30, 2018				March 31, 2018			March 31, 2019

	(in thousands)												(in thousands)
Net income	$	7,505		$	14,707		$	22,022		$	35,797			$	21,090		$	21,401
Adjustments:
Equity awards compensation expense	14,918			20,245			29,858			39,548				19,303			13,882
Amortization of acquisition-related intangible assets	4,777			3,448			9,451			6,905				3,457			5,472
Acquisition-related costs	—			—			6			—				—			—
Restructuring	3,299			199			3,299			(53		)		(252		)	1,890
Tax impact of the above adjustments	(4,255		)	(3,117		)	(7,571		)	(6,196		)		(3,079		)	(2,940		)
Total net adjustments	18,739			20,775			35,043			40,204
Adjusted Net Income	$	26,244		$	35,482		$	57,065		$	76,001			$	40,519		$	39,705

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


	Three Months Ended				Six Months Ended					Three Months Ended
	June 30, 2017		June 30, 2018		June 30, 2017		June 30, 2018			March 31, 2018			March 31, 2019
	(in thousands)									(in thousands)
Net income	$	7,505	$	14,707	$	22,022	$	35,797		$	21,090		$	21,401
Adjustments:
Financial expense (income), net	2,094		1,006		4,427		2,331
Financial expense (income)										1,325			1,974
Provision for income taxes	3,665		8,638		7,866		21,024			12,386			10,018
Equity awards compensation expense	14,918		20,245		29,858		39,548			19,303			13,882
Pension service costs	299		419		589		853			434			394
Depreciation and amortization expense	22,306		23,560		42,473		47,206			23,646			19,296
Acquisition-related costs	—		—		6		—			—			—
Restructuring	3,299		199		3,299		(53		)	(252		)	1,890
Total net adjustments	46,581		54,067		88,518		110,909			56,842			47,454
Adjusted EBITDA	$	54,086	$	68,774	$	110,540	$	146,706		$	77,932		$	68,855

Results of Operations for the Periods Ended ~~June 30, 2017~~March 31, 2018 and ~~2018~~2019 (Unaudited)

Revenue

Three months ended ~~June 30, 2018~~March 31, 2019 compared to the three months ended ~~June 30, 2017~~March 31, 2018


	Three Months Ended							Three Months Ended
	June 30, 2017		June 30, 2018			2017 vs 2018		March 31, 2018		March 31, 2019		2018 vs 2019

	(in thousands)							(in thousands)
Revenue as reported	$	542,022	$	537,185		(1	)%	$	564,164	$	558,123	(1	)%
Conversion impact U.S dollar/other currencies			(11,393		)					24,041
Revenue at constant currency ⁽¹⁾	542,022		525,792			(3	)%	564,164		582,164		3	%
Americas
Revenue as reported	229,392		212,781			(7	)%	212,695		217,993		2	%
Conversion impact U.S dollar/other currencies			1,416							2,207
Revenue at constant currency ⁽¹⁾	229,392		214,197			(7	)%	212,695		220,200		4	%
EMEA
Revenue as reported	191,682		201,080			5	%	222,611		209,643		(6	)%
Conversion impact U.S dollar/other currencies			(10,702		)					18,542
Revenue at constant currency ⁽¹⁾	191,682		190,378			(1	)%	222,611		228,185		3	%
Asia-Pacific
Revenue as reported	120,948		123,324			2	%	128,858		130,487		1	%
Conversion impact U.S dollar/other currencies			(2,107		)					3,292
Revenue at constant currency⁽¹⁾	$	120,948	$	121,217		0.2	%	$	128,858	$	133,779	4	%

⁽¹⁾Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the ~~2017~~2018 average exchange rates for the relevant period to ~~2018~~2019 figures. We have included revenue at constant currency in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends.

Revenue for the three months ended ~~June 30, 2018 were $537.2~~March 31, 2019 decreased to $558.1 million, ~~declining~~decreasing by (1)% (or ~~(3)%~~increasing by 3% on a constant currency ~~basis)~~basis, as defined in footnote 1 directly above), compared to the three months ended ~~June 30, 2017. The~~March 31, 2018. Revenue from new clients contributed 59.8% to the year-over-year ~~decline in~~ revenue ~~was entirely driven by our business with~~growth at constant currency, while revenue from existing clients negatively impacted by significant user coverage limitations, namely Apple’s Intelligent Tracking Prevention (“ITP”) feature, compared to the prior year, while new clients' contribution to revenue growth was not strong enough to offset the negative contribution of existing clients. Over the period, wecontributed 40.2%. We added ~~2,566~~845 net new clients across regions and client sizes ~~and expanded~~over the period, a lower volume than the prior period, primarily driven by our ~~business with~~increased focus on higher-value midmarket clients until we roll out our self-service onboarding module to address smaller midmarket prospects. Revenue from existing clients ~~through~~grew over 2% at constant currency over the ~~increasing~~period, largely driven by the broader adoption of our new solutions addressing new marketing goals as well as Criteo Retail Media.

The year-over-year increase at constant currency was the Criteo Customer Acquisition and Criteo Audience Match products, a growing presence in mobile applications, and more direct connections with publishers through Criteo Direct Bidder. However, the strong headwind we experienced from user coverage limitations more than offset the various factors drivingresult of our ~~business with existing clients.~~

growth across all regions. Revenue in the Americas region increased 2% (or 4% on a constant currency basis, including 5% in the U.S.) to $218.0 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. Growth was driven by increased spend from existing clients using our Criteo Marketing Solutions to address new marketing goals, particularly Consideration, the acceleration of our midmarket business driven by larger midmarket clients, continued good traction in our Criteo Retail Media business in the U.S., as well as improving performance in Brazil.

Revenue in EMEA decreased ~~(7)~~(6)% (or ~~(7)%~~increased 3% on a constant currency basis) to ~~$212.8~~$209.6 million for the three months ended ~~June 30, 2018~~March 31, 2019 compared to the three months ended ~~June 30, 2017, and~~March 31, 2018. This increase at constant currency was largely driven by accelerated growth in our midmarket business, as well as the ~~region was the largest contributor to our global revenue. We saw strength with both large and midmarket clients and the continued ramp up~~positive traction of our ~~newest products, in particular in~~Criteo Marketing Solutions, particularly to address the ~~US. This was~~Consideration marketing goal, partly offset by ~~the negative impact of user coverage limitations~~a continued short-term headwind related to GDPR implementation across the region, as well as continued difficult market conditions in Latin America. Revenue in EMEA increased 5% (or decreased (1)% on a constant currency basis) to $201.1 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. We acquired new clients across the region, in particular in the midmarket, but our business with existing clients was negatively impacted by external factors, including user coverage limitations, as well as short-term friction related to the implementation of our new go-to-market model across the region.

Revenue in the Asia-Pacific region increased 2%1% (or ~~0.2%~~4% on a constant currency basis) to ~~$123.3~~$130.5 million for the three months ended ~~June 30, 2018~~March 31, 2019 compared to the three months ended ~~June 30, 2017.~~

~~Our~~March 31, 2018. This increase was the result of strong growth in Korea, driven by both existing large customers and midmarket customers, increased spend from large existing clients in Japan, offset by a slow-down in new client acquisition in Japan and slower business in ~~Korea was strong, in particular in mobile applications, while the Japan market faced some headwinds primarily due to industry one-off changes on the supply side~~India and ~~softer demand from the classified vertical.~~South-East Asia.

Additionally, our ~~$537.2~~$558.1 million of revenue for the three months ended ~~June 30, 2018~~March 31, 2019 was ~~positively~~negatively impacted by ~~$11.4~~$24.0 million as a result of changes in foreign currency against the U.S. dollar compared to the three months ended ~~June 30, 2017.~~

~~The year-over-year decline in revenue on a constant currency basis is primarily attributable to a decrease in the average cost-per-click charged to advertisers.~~

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands)
Revenue as reported $ 1,058,688
$ 1,101,349
4 %
Conversion impact U.S dollar/other currencies
(42,480 )
Revenue at constant currency ⁽¹⁾
1,058,688
1,058,869
— %
Americas
Revenue as reported 437,405
425,476
(3 )%
Conversion impact U.S dollar/other currencies
1,619

Revenue at constant currency ⁽¹⁾
437,405
427,095
(2 )%
EMEA
Revenue as reported 380,774
423,691
11 %
Conversion impact U.S dollar/other currencies
(36,388 )
Revenue at constant currency ⁽¹⁾
380,774
387,303
2 %
Asia-Pacific
Revenue as reported 240,509
252,182
5 %
Conversion impact U.S dollar/other currencies
(7,711 )
Revenue at constant currency⁽¹⁾
$ 240,509
$ 244,471
2 %

⁽¹⁾Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2017 average exchange rates for the relevant period to 2018 figures. We have included revenue at constant currency in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends.

Revenue for the six months ended June 30, 2018 increased to $1,101.3 million, growing 4% (or 0.0% on a constant currency basis), compared to the six months ended June 30, 2017. Revenue from new clients contributed 92.8% to the year-over-year revenue growth, while revenue from existing clients contributed 7.2% to the year-over-year revenue growth, impacted by user coverage limitations. Over the period, the company added 2,566 net new clients across regions and client sizes, and expanded its business with existing clients through the increasing adoption of the Criteo Customer Acquisition and Criteo Audience Match products, a growing presence in mobile applications, and more direct connections with publishers through Criteo Direct Bidder.

Revenue in the Americas region decreased (3)% (or (2)% on a constant currency basis) to $425.5 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. We saw strength with both large and midmarket clients and continued ramp-up of our newest products, in particular in the US, offset by the negative impact of user coverage limitations across the region, as well as continued difficult market conditions in Latin America. Revenue in EMEA increased 11% (or 2% on a constant currency basis) to $423.7 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017.

This was largely driven by solid growth in Germany and Middle-East and Africa, as well as the higher adoption of our newest products, Criteo Customer Acquisition and Criteo Audience Match, offset by the negative impact of external factors, including user coverage limitations, as well as some short-term friction related to the implementation of our new go-to-market model across the region. Revenue in the Asia-Pacific region increased 5% (or 2% on a constant currency basis) to $252.2 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. Our business in Korea was strong, in particular in mobile applications and we introduced Criteo Customer Acquisition in some markets across the region, while Japan faced some industry-related challenges.

Additionally, our $1,101.3 million of revenue for the six months ended June 30, 2018 was positively impacted by $42.5 million as a result of changes in foreign currency against the U.S. dollar compared to the six months ended June 30, 2017.March 31, 2018.

The year-over-year growth in revenue on a constant currency basis is ~~primarily~~entirely attributable to an increased number of clicks delivered on the advertising banners displayed by us as well as the increased number of impressions delivered by us.

Cost of Revenue

Three months ended ~~June 30, 2018~~March 31, 2019 compared to the three months ended ~~June 30, 2017~~March 31, 2018


	Three Months Ended						% change		Three Months Ended						% change
	June 30, 2017			June 30, 2018			2017 vs 2018		March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)								(in thousands, except percentages)
Traffic acquisition costs	$	(322,200	)	$	(306,963	)	(5	)%	$	(323,746	)	$	(322,429	)	(0.4)%
Other cost of revenue	$	(32,808	)	$	(29,957	)	(9	)%	$	(30,059	)	$	(26,045	)	(13)%
Total Cost of Revenue	$	(355,008	)	$	(336,920	)	(5	)%	$	(353,805	)	$	(348,474	)	(2)%
% of revenue	(65		)%	(63		)%			(63		)%	(62		)%
Gross profit %	35		%	37		%			37		%	38		%

Cost of revenue for the three months ended ~~June 30, 2018~~March 31, 2019 decreased ~~$(18.1)~~$(5.3) million, or ~~(5)~~(2)%, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. This decrease was primarily the result of a decrease of ~~$(15.2)~~$(1.3) million, or ~~(5)~~(0.4)% (or ~~(7)%~~an increase of 4% on a constant currency basis), in traffic acquisition costs and a ~~decrease of $(2.9)~~$(4.0) million, or ~~(9)~~(13)% (or ~~(8)~~(11)% on a constant currency basis), decrease in other cost of revenue.

The ~~decrease~~increase in traffic acquisition costs related primarily to ~~a (3.2)% decrease~~an increase of 7% in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners to support the growth in our client demand for advertising campaigns. Over the period, the average cost per thousand impressions (or "CPM"), decreased by (6.6)% (or ~~(5.3)~~(2.6)% on a constant currency basis), ~~in large part due to~~driven by a combination of factors, including the ~~broader deployment~~effectiveness of our Criteo Direct Bidder, which allows us to buy quality inventory directly from large publishers in the web and in apps, and remove intermediary fees and the growing share, in our overall business, of inventory purchased in mobile applications, which tend to come at lower price per unit or CPM, relative to web-based inventory. In addition, the number of impressions we purchased over the period decreased by (2)%, driven by changes in the ~~way we are charged for purchased impressions in mobile applications from certain publisher partners,~~process, as well as ~~user coverage limitations.~~

Traffic acquisition costs in the Americas region decreased (14)% (or (13)% on a constant currency basis) to $(125.5) million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, in part due to the broader deployment of Criteo Direct Bidder in the region, and the growing share of in-app inventory ~~purchased~~ in ~~mobile applications.~~

~~Traffic acquisition~~our business, which has inventory costs ~~in EMEA increased 6% (or (0.1)%~~that tend to be slightly lower on ~~a constant currency basis) to $(112.6) million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, as we further deployed Criteo Direct Bidder~~average than that in the region and increased our share of inventory purchased in mobile applications. Traffic acquisition costs in the Asia-Pacific region decreased (2)% (or (4)% on a constant currency basis) to $(68.9) million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, as we increased our share of inventory purchased in mobile applications, and maintained strong relationships with large premium publishers in the region, in particular in Japan.web browser environment.

The decrease in other cost of revenue includes a ~~$4.7~~$6.1 million decrease ~~in hosting costs partially offset by a $1.8 million increase~~ in allocated depreciation and amortization ~~expense.~~expense following the changes in our estimation of the useful life of the servers and other equipment used in our datacenters from 3 to 5 years, partially offset by a $1.3 million increase in hosting costs, and a net $0.8 million increase in other costs including the provision for the expected Digital Tax in France and Italy ($1.4 million).

We consider Revenue ex-TAC as a key measure of our business activity. Our strategy focuses on maximizing the growth of our Revenue ex-TAC on an absolute basis over maximizing our near-term gross margin. We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including access to advertising inventory, breadth and depth of data and continuous improvement of the Criteo Engine’s performance, allowing it to deliver more relevant advertisements at scale. As a part of this focus, we continue to invest in building relationships with direct publishers and pursuing access to leading advertising exchanges. Our performance-based business model provides us with significant control over our level of Revenue ex-TAC margin, which we seek to optimize in order to maximize Revenue ex-TAC growth on an absolute basis in accordance with our strategic focus.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands, except percentages)
Traffic acquisition costs $ (628,893 ) $ (630,709 ) 0.3 %
Other cost of revenue $ (59,963 ) $ (60,016 ) 0.1 %
Total Cost of Revenue $ (688,856 ) $ (690,725 ) 0.3 %
% of revenue (65 )% (63 )%
Gross profit % 35 % 37 %

Cost of revenue for the six months ended June 30, 2018 increased $1.9 million, or 0.3%, compared to the six months ended June 30, 2017. This increase was primarily the result of an increase of $1.8 million, or 0.3% (or (3)% on a constant currency basis), in traffic acquisition costs and a $0.1 million, or 0.1% (or (1)% on a constant currency basis), increase in other cost of revenue.

The decrease in traffic acquisition costs at constant currency related primarily to a (3.7)% decrease in the average cost per thousand impressions (or "CPM") (or (5.3)% on a constant currency basis), in large part due to the broader deployment of Criteo Direct Bidder, which allows us to remove intermediary fees, and the growing share, in our overall business, of inventory purchased in mobile applications, which tend to come at lower price per unit or CPM, relative to web-based inventory. In addition, the number of impressions we purchased over the period increased by 4%, driven by both publishers with whom we have direct relationships, including Criteo Direct Bidder, and the main real-time bidding exchanges, on both the web and mobile applications.

Traffic acquisition costs in the Americas region decreased (6)% (or (6)% on a constant currency basis) to $(257.0) million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, in part due to the broader deployment of Criteo Direct Bidder in the region, and the growing share of inventory purchased in mobile applications. Traffic acquisition costs in EMEA increased 9% (or decreased by (1)% on a constant currency basis) to $(232.5) million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, as we further deployed Criteo Direct Bidder in the region and increased our share of inventory purchased in mobile applications. Traffic acquisition costs in the Asia-Pacific region increased 0.5% (or decreased by (3)% on a constant currency basis) to $(141.2) million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, as we increased our share of inventory purchased in mobile applications, and maintained strong relationships with large premium publishers in the region, in particular in Japan.

The increase in other cost of revenue includes a $6.0 million increase in allocated depreciation and amortization expense and a $0.4 million increase in other cost of sales, including additional purchases of third-party data partially offset by a $6.3 million decrease in hosting costs.

~~Research and Development Expenses~~

~~Three months ended June 30, 2018 compared to the three months ended June 30, 2017~~

Three Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
Research and development expenses $ (43,611 )
$ (47,544 ) 9%
% of revenue (8 )%
(9 )%

Research and development expenses for the three months ended June 30, 2018 increased $3.9 million, or 9%, compared to the three months ended June 30, 2017. This increase was the result of a growth in headcount to 682 employees resulting in $5.4 million of additional headcount related costs, a $0.6 million increase in rent and facilities costs, and a $1.1m increase in other costs, partially offset by a $1.4m decrease in costs for internal events, a $0.8 million decrease in amortization and depreciation of assets and an increase in the French Research Tax Credit of $1.0 million.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
Research and development expenses $ (83,132 )
$ (92,862 )
12%
% of revenue (8 )%
(8 )%

Research and development expenses for the six months ended June 30, 2018 increased $9.7 million, or 12%, compared to the six months ended June 30, 2017. This increase was the result of a growth in headcount to 682 employees resulting in $11.3 million of additional headcount related costs and a $1.5 million increase in rent and facilities costs, and a $1.2m increase in other costs, partially offset by a $1.4m decrease in costs for internal events, a $1.6 million decrease in amortization and depreciation of assets and an increase in the French Research Tax Credit of $1.3 million.

~~Sales and Operations Expenses~~

~~Three months ended June 30, 2018 compared to the three months ended June 30, 2017~~

Three Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
Sales and operations expenses $ (97,900 )
$ (92,726 ) (5)%
% of revenue (18 )% (17 )%

Sales and operations expenses for the three months ended June 30, 2018 decreased $(5.2) million, or (5)%, compared to the three months ended June 30, 2017. This decrease was the result of a $5.4 million decrease in costs for internal events, a $1.0 million decrease in costs for marketing events, a $0.4 million decrease in allocated depreciation and amortization expense, a $0.2 million decrease in allocated rent and facilities costs, and a $0.5 million decrease in other costs. This decrease was only partially offset by a slight increase in headcount-related costs of $1.0 million due to a delay of hiring resulting in 1,527 employees as of June 30, 2018 and a $1.3 million increase in allowance for potential losses.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
Sales and operations expenses $ (188,631 )
$ (188,375 )
(0.1)%
% of revenue (18 )%
(17 )%

Sales and operations expenses for the six months ended June 30, 2018 decreased $(0.3) million, or (0.1)%, compared to the six months ended June 30, 2017. This decrease was the result of a $5.8 million decrease in costs for internal events, a $1.0 million decrease in costs for marketing events, a $0.9 million decrease in allocated depreciation and amortization expense, a $0.2 million decrease in allocated rent and facilities costs, and a $1.4 million decrease in other costs. This decrease was only partially offset by an increase in headcount-related costs of $5.8 due to a delay of hiring resulting in 1,527 employees as of June 30, 2018 and a $3.2 million increase in allowance for potential losses.

~~General and Administrative Expenses~~

~~Three months ended June 30, 2018 compared to the three months ended June 30, 2017~~

Three Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
General and administrative expenses $ (32,239 )
$ (35,644 )
11%
% of revenue (6 )%
(7 )%

General and administrative expenses for the six months ended June 30, 2018 increased $3.4 million, or 11%, compared to the three months ended June 30, 2017. This increase was the result of a growth in headcount to 469 employees resulting in $2.6 million of additional headcount related costs, a $0.2 million increase in allocated rent and facilities costs, a $0.5 million increase in allocated depreciation and amortization expense, a $0.5 million increase in other consulting and professional fees and a $0.7 million increase in other costs offset by a $1.1m decrease in costs for internal events.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
General and administrative expenses $ (63,754 ) $ (70,235 ) 10%
% of revenue (6 )% (6 )%

General and administrative expenses for the six months ended June 30, 2018 increased $6.5 million, or 10%, compared to the six months ended June 30, 2017. This increase was the result of a growth in headcount to 469 employees resulting in $6.7 million of additional headcount related costs, a $0.6 million increase in allocated rent and facilities costs, a $1.0 million increase in allocated depreciation and amortization expense, a $0.2m increase in other costs, partially offset by a $1.2m decrease in costs for internal events and a $0.8m decrease in other consulting and professional fees.

~~Financial income (expense), net~~

~~Three months ended June 30, 2018 compared to the three months ended June 30, 2017~~

Three Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)

Financial income (expense), net (2,094 )
(1,006 ) (52)%
% of revenue (0.4 )%
(0.2 )%

Financial expense for the three months ended June 30, 2018 decreased by $(1.1) million, or (52.0)%, compared to the three months ended June 30, 2017. The $1.0 million financial expense for the three months ended June 30, 2018 was mainly driven by the non-utilization costs and up-front fees amortization incurred as part of our available RCF financing. The intra-group position between Criteo S.A. and its U.S subsidiary in the context of the funding of HookLogic acquisition is qualified as a net investment in a foreign operation from February 2018 and no longer requires hedging, resulting in reduced costs compared to the three months ended June 30, 2017.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)

Financial income (expense), net $ (4,427 )
$ (2,331 )
(47)%
% of revenue (0.4 )%
(0.2 )%

Financial expense for the six months ended June 30, 2018 decreased by $(2.1) million, or (47)%, compared to the six months ended June 30, 2017. The $2.3 million financial expense for the three months ended June 30, 2018 was driven by the non-utilization costs and up-front fees amortization incurred as part of our available RCF financing and hedging costs related to an intra-group position between Criteo S.A. and its U.S. subsidiary in the context of the funding of the HookLogic acquisition. As of February 2018, this position qualified as a net investment in a foreign operation and no longer requires hedging resulting in reduced costs compared to the three months ended June 30, 2017.

~~Provision for Income Taxes~~

Our estimated annual effective tax rate includes our preliminary estimates for the impact of the U.S. Tax Cuts and Jobs Act (the "Tax Act") which was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. federal income tax rate from 35% to 21% and creates new taxes on certain related-party payments, referred to as a base erosion anti-avoidance tax, or “BEAT”. The Tax Act also modifies the limitation on the amount of deductible interest expense and the limitation on the deductibility of certain executive compensation. Our estimates are preliminary, and our effective tax rate may be impacted as more information becomes available regarding the tax reform.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)
Provision for income taxes $ (7,866 ) $ (21,024 ) 167%
% of revenue (1 )% (2 )%
Effective tax rate 26 % 37 %

For the six months ended June 30, 2017 and June 30, 2018, we used an annual estimated tax rate of 30% and 37%, respectively, to calculate the provision for income taxes. The increase in the annual estimated tax rate is primarily due to our preliminary estimates of the impact of the U.S. Tax Act. The effective tax rate was 26% and 37% for the six months ended June 30, 2017 and 2018, respectively. The difference between the annual estimated tax rate and the effective tax rate for six months ended June 30, 2017 was due to the tax impact of discrete items such as share-based compensation in the United States. Discrete items were immaterial for the six months ended June 30, 2018 resulting in no difference between the annual estimated tax rate and the effective tax rate.

~~Net Income~~

~~Three months ended June 30, 2018 compared to the three months ended June 30, 2017~~

Three Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)

Net income $ 7,505

14,707

96%
% of revenue 1 %
3 %

Net income for the three months ended June 30, 2018 increased $7.2 million, or 96%, compared to the three months ended June 30, 2017. This increase was the result of the factors discussed above, in particular, a $11.1 million increase in income from operations and a $1.1 million decrease in financial expense partially offset by a $5.0 million increase in provision for income taxes compared to the three months ended June 30, 2017.

~~Six months ended June 30, 2018 compared to the six months ended June 30, 2017~~

Six Months Ended % change
June 30, 2017
June 30, 2018
2017 vs 2018

(in thousands,
except percentages)

Net income $ 22,022

35,797

63%
% of revenue 2 %
3 %

Net income for the six months ended June 30, 2018 increased $13.8 million, or 63%, compared to the six months ended June 30, 2017. This increase was the result of the factors discussed above, in particular, a $24.8 million increase in income from operations and a $2.1 million decrease in financial expense partially offset by a $13.1 million increase in provision for income taxes compared to the six months ended June 30, 2017.

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

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


		Three Months Ended								Six Months Ended									Three Months Ended
	Region	June 30, 2017			June 30, 2018			Year over Year Change		June 30, 2017			June 30, 2018			Year over Year Change		Region	March 31, 2018			March 31, 2019			Year over Year Change

Revenue:	Revenue:	(amounts in thousands, except percentages)																Revenue:	(amounts in thousands, except percentages)
	Americas	$	229,392		$	212,781		(7	)%	$	437,405		$	425,476		(3	)%	Americas	$	212,695		$	217,993		2	%
	EMEA	191,682			201,080			5	%	380,774			423,691			11	%	EMEA	222,611			209,643			(6	)%
	Asia-Pacific	120,948			123,324			2	%	240,509			252,182			5	%	Asia-Pacific	128,858			130,487			1	%
	Total	542,022			537,185			(1	)%	1,058,688			1,101,349			4	%	Total	564,164			558,123			(1	)%

Traffic acquisition costs:	Traffic acquisition costs:																	Traffic acquisition costs:
	Americas	(145,289		)	(125,502		)	(14	)%	(274,156		)	(257,023		)	(6	)%	Americas	(131,521		)	(131,545		)	—	%
	EMEA	(106,605		)	(112,577		)	6	%	(214,189		)	(232,470		)	9	%	EMEA	(119,893		)	(117,291		)	(2	)%
	Asia-Pacific	(70,306		)	(68,884		)	(2	)%	(140,548		)	(141,216		)	0.5	%	Asia-Pacific	(72,332		)	(73,593		)	2	%
	Total	(322,200		)	(306,963		)	(5	)%	(628,893		)	(630,709		)	0.3	%	Total	(323,746		)	(322,429		)	(0.4	)%

Revenue ex-TAC⁽¹⁾:	Revenue ex-TAC⁽¹⁾:																	Revenue ex-TAC⁽¹⁾:
	Americas	84,103			87,279			4	%	163,249			168,453			3	%	Americas	81,174			86,448			6	%
	EMEA	85,077			88,503			4	%	166,585			191,221			15	%	EMEA	102,718			92,352			(10	)%
	Asia-Pacific	50,642			54,440			7	%	99,961			110,966			11	%	Asia-Pacific	56,526			56,894			1	%
	Total	$	219,822		$	230,222		5	%	$	429,795		$	470,640		10	%	Total	$	240,418		$	235,694		(2	)%

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

Constant Currency Reconciliation

Information in this Form 10-Q with respect to results presented on a constant currency basis was calculated by applying the ~~2017~~2018 average exchange rates for the relevant period to ~~2018~~2019 figures. We have included information with respect to our results presented on a constant currency basis because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis:


	Three Months Ended								Six Months Ended								Three Months Ended
	June 30, 2017			June 30, 2018			YoY Change		June 30, 2017			June 30, 2018			YoY Change		March 31, 2018			March 31, 2019			YoY Change
	(amounts in thousands, except percentages)																(amounts in thousands, except percentages)
	(amounts in thousands, except percentages)																(amounts in thousands, except percentages)
Revenue as reported	$	542,022		$	537,185		(1	)%	$	1,058,688		$	1,101,349		4	%	$	564,164		$	558,123		(1	)%
Conversion impact U.S. dollar/other currencies				(11,393		)						(42,480		)						24,041
Revenue at constant currency	$	542,022		$	525,792		(3	)%	$	1,058,688		$	1,058,869		—	%	$	564,164		$	582,164		3	%

Traffic acquisition costs as reported	$	(322,200	)	$	(306,963	)	(5	)%	$	(628,893	)	$	(630,709	)	0.3	%	$	(323,746	)	$	(322,429	)	(0.4	)%
Conversion impact U.S. dollar/other currencies				6,487								23,356								(13,470		)
Traffic Acquisition Costs at constant currency	$	(322,200	)	$	(300,476	)	(7	)%	$	(628,893	)	$	(607,353	)	(3	)%	$	(323,746	)	$	(335,899	)	4	%

Revenue ex-TAC as reported	$	219,822		$	230,222		5	%	$	429,795		$	470,640		10	%	$	240,418		$	235,694		(2	)%
Conversion impact U.S. dollar/other currencies				(4,906		)						(19,124		)						10,571
Revenue ex-TAC at constant currency	$	219,822		$	225,316		2	%	$	429,795		$	451,516		5	%	$	240,418		$	246,265		2	%
Revenue ex-TAC/Revenue as reported	41		%	43		%			41		%	43		%			43		%	42		%

Other cost of revenue as reported	$	(32,808	)	$	(29,957	)	(9	)%	$	(59,963	)	$	(60,016	)	0.1	%	$	(30,059	)	$	(26,045	)	(13	)%
Conversion impact U.S. dollar/other currencies				(73		)						603								(750		)
Other cost of revenue at constant currency	$	(32,808	)	$	(30,030	)	(8	)%	$	(59,963	)	$	(59,413	)	(1	)%	$	(30,059	)	$	(26,795	)	(11	)%

Adjusted EBITDA as reported	$	54,086		$	68,774		27	%	$	110,540		$	146,706		33	%	$	77,932		$	68,855		(12	)%
Conversion impact U.S. dollar/other currencies				(3,786		)						(13,099		)						4,335
Adjusted EBITDA at constant currency	$	54,086		$	64,988		20	%	$	110,540		$	133,607		21	%	$	77,932		$	73,190		(6	)%

Research and Development Expenses

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended						% change
	March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)
Research and development expenses	$	(45,318	)	$	(46,577	)	3%
% of revenue	(8		)%	(8		)%

Research and development expenses for the three months ended March 31, 2019 increased $1.3 million, or 3%, compared to the three months ended March 31, 2018. This increase mainly related to an increase in amortization of acquisition-related intangible assets and consulting fees, partially offset by an increase in the French Research Tax Credit.

Sales and Operations Expenses

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended						% change
	March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)
Sales and operations expenses	$	(95,649	)	$	(95,909	)	0.3%
% of revenue	(17		)%	(17		)%

Sales and operations expenses for the three months ended March 31, 2019 increased $0.3 million, or 0.3%, compared to the three months ended March 31, 2018. This increase mainly related to an impairment charge for our London office lease, an increase in headcount-related costs, partially offset by a decrease in bad debt expense and operating taxes.

General and Administrative Expenses

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended						% change
	March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)
General and administrative expenses	$	(34,591	)	$	(33,770	)	(2)%
% of revenue	(6		)%	(6		)%

General and administrative expenses for the three months ended March 31, 2019 decreased $(0.8) million, or (2)%, compared to the three months ended March 31, 2018. This decrease was the result of a lower equity compensation expense, partially offset by the proceeds from disposal of the HookLogic travel business in March 31, 2018, and an increase in consulting fees for process optimization projects.

Financial Income (Expense)

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended						% change
	March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)
Financial income (expense)	$	(1,325	)	$	(1,974	)	49%
% of revenue	(0.2		)%	(0.4		)%

The Financial expense for the three months ended March 31, 2019 increased by $0.6 million, or 49%, compared to the three months ended March 31, 2018. The $2.0 million financial expense for the three months ended March 31, 2019 was driven by the non-utilization costs incurred as part of our available Revolving Credit Facility (RCF) financing and the recognition of a negative impact of foreign exchange reevaluations net of related hedging. At March 31, 2019, 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.

The $1.3 million financial expense for the three months ended March 31, 2018 was driven by the non-utilization costs incurred as part of our available RCF financing and hedging costs related to an intra-group position between Criteo S.A. and its U.S. subsidiary in the context of the funding of the HookLogic acquisition.

Provision for Income Taxes

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended						% change
	March 31, 2018			March 31, 2019			2018 vs 2019

	(in thousands, except percentages)
Provision for income taxes	$	(12,386	)	$	(10,018	)	(19)%
% of revenue	(2		)%	(2		)%
Effective tax rate	37		%	32		%

For the three months ended March 31, 2018 and March 31, 2019, we used an annual estimated tax rate of 37% and 30% respectively to calculate the provision for income taxes. The effective tax rate was 37% and 32% for the three months ended March 31, 2018 and 2019, respectively. The difference between the annual estimated tax rate and the effective tax rate for three months ended March 31, 2019 was due to the tax impact of discrete items such as share-based compensation in the United States. Discrete items were immaterial for the three months ended March 31, 2018 resulting in no difference between the annual estimated tax rate and the effective tax rate.

Net Income

Three months ended March 31, 2019 compared to the three months ended March 31, 2018



	Three Months Ended					% change
	March 31, 2018			March 31, 2019		2018 vs 2019

	(in thousands, except percentages)
Net income	$	21,090		21,401		1%
% of revenue	4		%	4	%

Net income for the three months ended March 31, 2019 increased $0.3 million, or 1%, compared to the three months ended March 31, 2018. This increase was the result of the factors discussed above, in particular, a $1.4 million decrease in income from operations and a $0.6 million increase in financial expense offset by a $2.3 million decrease in provision for income taxes compared to the three months ended March 31, 2018.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operating activities. ~~We also benefited to a much lesser extent from the proceeds of the exercise of share options and warrants and expect to continue to do so in the future, as such securities are exercised by holders.~~ We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future and intend to retain all available funds and any future earnings to fund our growth. As discussed in Note 93 to the unaudited condensed consolidated financial statements in Item 1 to this Form 10-Q, we are party to several loan agreements and revolving credit facilities with third-party financial institutions.

Our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return. Our cash and cash equivalents at ~~June 30, 2018~~March 31, 2019 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to ~~$480.3~~$395.8 million as of ~~June 30, 2018.~~March 31, 2019. The ~~$66.2~~$31.3 million increase in cash and cash equivalents compared with December 31, ~~2017~~2018 primarily resulted from ~~$124.9~~$67.2 million in cash from operating activities, ~~and $16.9~~partially offset by a $29.0 million in cash ~~from financing activities. This was partially offset by $61.2~~used for investing activities and $0.2 million used for ~~investing~~financing activities over the period. The cash used for investing activities is mainly related to ~~$50.4~~$23.7 million in capital expenditures and ~~$10.8~~a $5.4 million ~~upon disposal of an activity.~~following a business acquisition that was not material to our consolidated financial statements. The cash used for financing activities is primarily related to ~~$17.1~~$0.2 million ~~cash impact~~ of ~~the settlement~~repayment of ~~hedging derivatives related to financing activities.~~borrowings. In addition, the increase in cash includes a ~~$14.4~~$6.6 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.

Operating and Capital Expenditure Requirements

For the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018,~~2019, our capital expenditures were ~~$55.3~~$32.6 million and ~~$50.4~~$23.7 million, respectively. In ~~2018,~~2019, these capital expenditures were primarily related to the acquisition of data center and server equipment, and IT systems. We expect our capital expenditures to remain at the level of approximately 5% of revenue for 2019, as we plan to continue to build and maintain additional data center equipment capacity in all regions and significantly increase our ~~data centers as well as furnishing and leasehold improvements of new offices and office expansions.~~ redundancy capacity to strengthen our infrastructure.

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

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

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

If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing ~~could~~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 ~~six~~three month period ended ~~June 30, 2017~~March 31, 2018 and ~~2018:~~2019 :


	Six Months Ended						Three Months Ended
	June 30, 2017			June 30, 2018			March 31, 2018			March 31, 2019

	(in thousands)						(in thousands)
Cash from operating activities	$	104,729		$	124,868		$	84,527		$	67,220
Cash used in investing activities	$	(52,935	)	$	(61,183	)	$	(43,490	)	$	(29,041	)
Cash (used for) from financing activities	$	(53,049	)	$	16,899
Cash from (used for) financing activities							$	16,773		$	(191	)

Operating Activities

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

For the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, net cash provided by operating activities was ~~$124.9~~$67.2 million and consisted of net income of ~~$35.8~~$21.4 million, ~~$108.0~~$42.9 million in adjustments for certain non-cash and non-operating items and changes in working capital of ~~$13.6~~$20.8 million partially offset by ~~$32.6~~$17.9 million of income taxes paid during the first ~~six~~three months of ~~2018.~~2019. Adjustments for certain operating items primarily consisted of depreciation and amortization expense of ~~$51.1~~$19.6 million, equity awards compensation expense of ~~$39.1~~$13.9 million, ~~$28.6~~$15.9 million of accrued income taxes partially offset by ~~$3.3~~$0.7 million for other items and by ~~$7.5~~$5.9 million of changes in deferred tax assets. The ~~$13.6~~$20.8 million increase in cash from changes in working capital primarily consisted of a ~~$101.4~~$86.0 million decrease in trade receivables, a ~~$13.8~~$2.4 million ~~decrease in other current assets including prepaid expenses and VAT receivables partially offset by a $89.7 million decrease in trade payables and a $11.9 million decrease~~increase in other current liabilities such as payroll and payroll related expenses and value-added tax ("VAT") ~~payables.~~payables, partially offset by a $58.5 million decrease in trade payables, a $6.0 million increase in other current assets including prepaid expenses and VAT receivables, and a $3.2 million decrease in change of lease liabilities and right of use assets.

Investing Activities

Our investing activities to date have consisted primarily of purchases of property and equipment and business acquisitions.

For the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, net cash used in investing activities was ~~$61.2~~$29.0 million and consisted of ~~$50.4~~$23.7 million for purchases of property and equipment and ~~$10.8~~a $5.4 million ~~for the disposal of an activity.~~payment following a business acquisition that was not material to our consolidated financial statements.

Financing Activities

For the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, net cash ~~from~~used for financing activities was ~~$16.9~~$0.2 million resulting from ~~the $17.1 million cash impact~~repayment of the settlement of hedging derivatives related to financing activities and $0.6 million of share option exercises, partially offset by $0.5 million in repayments of borrowings and a $0.3 million change in other financial liabilities.borrowings.

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 first ~~six~~three months ~~of 2018.~~ended period March 31, 2019.

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, ~~2017.~~2018.

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


	Six Months Ended										Three Months Ended
	June 30, 2017					June 30, 2018					March 31, 2018					March 31, 2019

	(in thousands)										(in thousands)
GBP/USD	+10%		-10%			+10%			-10%		+10%			-10%		+10%			-10%
Net income impact	$	115	$	(115	)	$	(550	)	$	550	$	(212	)	$	212	$	(496	)	$	496


	Six Months Ended										Three Months Ended
	June 30, 2017					June 30, 2018					March 31, 2018					March 31, 2019

	(in thousands)										(in thousands)
BRL/USD	+10%			-10%		+10%			-10%		+10%		-10%			+10%			-10%
Net income impact	$	(17	)	$	17	$	(200	)	$	200	$	15	$	(15	)	$	(97	)	$	97


	Six Months Ended										Three Months Ended
	June 30, 2017					June 30, 2018					March 31, 2018					March 31, 2019

	(in thousands)										(in thousands)
JPY/USD	+10%		-10%			+10%		-10%			+10%		-10%			+10%		-10%
Net income impact	$	701	$	(701	)	$	439	$	(439	)	$	249	$	(249	)	$	443	$	(443	)


	Six Months Ended										Three Months Ended
	June 30, 2017					June 30, 2018					March 31, 2018					March 31, 2019

	(in thousands)										(in thousands)
EUR/USD	+10%		-10%			+10%		-10%			+10%		-10%			+10%		-10%
Net income impact	$	4,192	$	(4,192	)	$	5,428	$	(5,428	)	$	2,864	$	(2,864	)	$	2,736	$	(2,736	)

Credit Risk and Trade receivables

For a description of our credit risk and trade receivables, please see "Note 4.3. Financial instruments" 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, 2018,~~March 31, 2019, 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 of fraud may occur and not be detected.

PART II

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

You should carefully consider the risks described below and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December ~~31, 2017 and in our Quarterly Report on Form 10-Q for the quarterly period ended March~~ 31, 2018. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any such risks materialize, our business, financial condition and results of operations could be materially harmed and the trading price of our ADSs could decline. These risks are not exclusive and additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. There have been no material changes to the Risk Factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31,~~ 2018.

Item 6. Exhibits.

Exhibit Index



		Incorporated by Reference
Exhibit	Description	Schedule/ Form	File Number	Exhibit	File Date
31.1#	Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
31.2#	Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
32.1*	Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended
101.INS	XBRL Instance Document
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

# 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/ Benoit Fouilland
Date: ~~August 2, 2018~~May 9, 2019	Name:	Benoit Fouilland
	Title:	Chief Financial Officer
		(Principal financial officer and duly authorized signatory)

5448



PART I	FINANCIAL INFORMATION	2
Item 1	Financial Statements	2
	Condensed Consolidated Statements of Financial Position (Unaudited)	2
	Condensed Consolidated Statements of Income (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	4
	Condensed Consolidated Statements of ~~Comprehensive Income~~Shareholder's Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2928
Item 3	Quantitative and Qualitative Disclosures About Market Risk	5044
Item 4	Controls and Procedures	5145
PART II	OTHER INFORMATION	5246
Item 1	Legal Proceedings	5246
Item 1A	Risk Factors	5246
Item 6	Exhibits	5347
Signatures		5448



	December 31, 2017									June 30, 2018
	Gross value		%		Allowance			%		Gross value		%		Allowance			%
	(in thousands)				(in thousands)					(in thousands)				(in thousands)

Not yet due	$	304,233	60.3	%	$	(168	)	0.8	%	$	306,148	77.3	%	$	(31	)	0.1	%
0 - 30 days	121,957		24.2	%	—			—	%	10,629		2.7	%	—			—	%
31 - 60 days	29,325		5.8	%	(21		)	0.1	%	18,169		4.6	%	(29		)	0.1	%
61 - 90 days	7,498		1.5	%	(35		)	0.2	%	13,984		3.5	%	(77		)	0.3	%
> 90 days	41,906		8.3	%	(20,594		)	98.9	%	47,356		11.9	%	(23,243		)	99.5	%
Total	$	504,919	100	%	$	(20,818	)	100	%	$	396,286	100	%	$	(23,380	)	100	%



	As of January 1, 2018		New borrowings		Repayments			Change in scope		Other ⁽¹⁾			Currency translation adjustment			As of June 30, 2018

	(in thousands)
Borrowings	$	982	$	—	$	(473	)	$	—	$	363		$	(23	)	$	849
Other financial liabilities	517		—		(307		)	—		—			(4		)	206
Derivative instruments	—		—		—			—		—			—			—
Current portion	1,499		—		(780		)	—		363			(27		)	1,055
Borrowings	1,798		—		—			—		(363		)	(37		)	1,398
Other financial liabilities	360		—		—			—		—			—			360
Non current portion	2,158		—		—			—		(363		)	(37		)	1,758
Borrowings	2,780		—		(473		)	—		—			(60		)	2,247
Other financial liabilities	877		—		(307		)	—		—			(4		)	566
Derivative instruments	—		—		—			—		—			—			—
Total	$	3,657	$	—	$	(780	)	$	—	$	—		$	(64	)	$	2,813