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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________ to _________
Commission file number: 001-36153
Criteo S.A.
(Exact name of registrant as specified in its charter)

France
Not Applicable
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
32 Rue BlancheParisFrance75009
(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 classTrading Symbol(s)Name of each exchange on which registered
American Depositary Shares, each representing one Ordinary Share,
nominal value €0.025 per share
CRTONasdaq Global Select Market
​Ordinary Shares, nominal value €0.025 per share​*Nasdaq Global Select Market*
* Not for trading, but only in connection with the registration of the American Depositary Shares.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has 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 Act).   Yes        No x
          As of October 29, 2020, the registrant had 60,241,537 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 impact of COVID-19 on our workforce, operations and revenue, as well as on the workforce, operations and revenue of our customers, and the effectiveness of our actions taken in response to COVID-19;
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 also refer to Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and to Part II, Item 1A "Risk Factors" of this Form 10-Q, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. The degree to which COVID-19 may affect our results and operations will depend on future developments that are highly uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
    You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary factors.
     This Form 10-Q may contain market data and industry forecasts that were obtained from industry publications. These data and forecasts involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this Form 10-Q is generally reliable, such information is inherently imprecise.




PART I
Item 1. Financial Statements.
CRITEO S.A. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
NotesDecember 31, 2019September 30, 2020
(in thousands)
Assets
Current assets:
    Cash and cash equivalents3$418,763 $626,744 
    Trade receivables, net of allowances of $16.1 million and $38.3 million at December 31, 2019 and September 30, 2020, respectively
4481,732 335,583 
    Income taxes21,817 11,422 
    Other taxes 60,924 58,123 
    Other current assets517,225 19,278 
    Total current assets1,000,461 1,051,150 
Property, plant and equipment, net194,161 195,679 
Intangible assets, net686,886 78,340 
Goodwill6317,100 319,595 
Right of use assets - operating lease 8142,044 120,283 
Marketable securities3 23,416 
Non-current financial assets21,747 20,174 
Deferred tax assets27,985 34,731 
    Total non-current assets789,923 792,218 
Total assets$1,790,384 $1,843,368 
Liabilities and shareholders' equity
Current liabilities:
    Trade payables$390,277 $293,480 
    Contingencies146,385 960 
    Income taxes3,422 276 
    Financial liabilities - current portion33,636 167,033 
    Operating lease liabilities - current portion 845,853 48,691 
    Other taxes50,099 45,998 
    Employee - related payables74,781 68,709 
    Other current liabilities735,886 43,299 
    Total current liabilities610,339 668,446 
Deferred tax liabilities9,272 8,439 
Retirement benefit obligation8,485 10,634 
Financial liabilities - non-current portion3769 44 
Operating lease liabilities - non-current portion 8117,988 90,560 
Other non-current liabilities5,543 3,333 
    Total non-current liabilities142,057 113,010 
Total liabilities752,396 781,456 
Commitments and contingencies
Shareholders' equity:
Common shares, 0.025 par value, 66,197,181 and 66,083,172 shares authorized, issued and outstanding at December 31, 2019 and September 30, 2020, respectively.
2,158 2,155 
Treasury stock, 3,903,673 and 5,989,258 shares at cost as of December 31, 2019 and September 30, 2020, respectively.
(74,900)(92,450)
Additional paid-in capital668,389 685,841 
Accumulated other comprehensive loss(40,105)(19,658)
Retained earnings451,725 452,932 
Equity-attributable to shareholders of Criteo S.A.1,007,267 1,028,820 
Non-controlling interests30,721 33,092 
Total equity1,037,988 1,061,912 
Total equity and liabilities$1,790,384 $1,843,368 
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
2


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months EndedNine Months Ended
NotesSeptember 30,
2019
September 30,
2020
September 30,
2019
September 30,
2020
(in thousands, except share per data)
Revenue9$522,606 $470,345 $1,608,876 $1,411,335 
Cost of revenue:
Traffic acquisition costs(301,901)(284,401)(928,559)(839,463)
Other cost of revenue(31,101)(34,608)(86,205)(102,328)
Gross profit189,604 151,336 594,112 469,544 
Operating expenses:
Research and development expenses(41,414)(30,954)(132,006)(99,716)
Sales and operations expenses(85,985)(83,659)(277,397)(244,414)
General and administrative expenses(32,835)(28,672)(102,372)(83,772)
Total operating expenses(160,234)(143,285)(511,775)(427,902)
Income from operations29,370 8,051 82,337 41,642 
Financial expense11(900)(491)(4,228)(1,828)
Income before taxes28,470 7,560 78,109 39,814 
Provision for income taxes12(7,913)(2,267)(23,614)(11,943)
Net income$20,557 $5,293 $54,495 $27,871 
Net income available to shareholders of Criteo S.A.$18,778 $5,227 $48,721 $26,402 
Net income available to non-controlling interests$1,779 $66 $5,774 $1,469 
Net income allocated to shareholders of Criteo S.A. per share:
Basic13$0.29 $0.09 $0.75 $0.43 
Diluted13$0.28 $0.09 $0.74 $0.43 
Weighted average shares outstanding used in computing per share amounts:
Basic1364,868,545 60,080,598 64,600,869 61,059,345 
Diluted1366,067,045 61,027,795 65,916,219 61,644,827 
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

3


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months EndedNine Months Ended
September 30, 2019September 30, 2020September 30, 2019September 30, 2020
(in thousands)
Net income$20,557 $5,293 $54,495 $27,871 
Foreign currency translation differences, net of taxes(24,202)25,660 (25,096)21,312 
Actuarial (losses) gains on employee benefits, net of taxes(689)(377)(2,327) 
Other comprehensive income (loss)$(24,891)$25,283 $(27,423)$21,312 
Total comprehensive income (loss)$(4,334)$30,576 $27,072 $49,183 
Attributable to shareholders of Criteo S.A.$(6,015)$29,866 $20,827 $46,849 
Attributable to non-controlling interests$1,681 $710 $6,245 $2,334 
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
4


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
Share capitalTreasury
Stock
Additional paid-in capitalAccumulated Other Comprehensive Income (Loss)Retained EarningsEquity - attributable to shareholders of Criteo S.A.Non controlling interestTotal equity
Common sharesShares
(in thousands, except share amounts )
Balance at December 31, 201867,708,203$2,201(3,459,119)$(79,159)$663,281$(30,522)$387,869$943,670$24,221$967,891
Net income19,12019,1202,28121,401
Other comprehensive income (loss)(11,347)(11,347)(198)(11,545)
Issuance of ordinary shares28,5961372373373
Change in treasury stocks(1,594,288)(45)1,786,71540,080(36,091)(3,944)
Share-Based Compensation13,53313,533(11)13,522
Other changes in equity(1)155154154
Balance at March 31, 201966,142,511$2,157(1,672,404)$(39,079)$641,094$(41,869)$403,200$965,503$26,293$991,796
Net income10,82310,8231,71412,537
Other comprehensive income (loss)8,2468,2467679,013
Issuance of ordinary shares19,012252252252
Change in treasury stocks553,43512,515(12,515)
Share-Based Compensation11,25411,25410811,362
Other changes in equity(28)330(299)33
Balance at June 30, 201966,161,523$2,157(1,118,969)$(26,564)$652,572$(33,293)$401,209$996,081$28,882$1,024,963
Net income18,77818,7781,77920,557
Other comprehensive income (loss)(24,793)(24,793)(98)(24,891)
Issuance of ordinary shares12,460132132132
Change in treasury stocks(688,282)(12,210)(296)(5,393)(17,899)(17,899)
Share-Based Compensation10,73510,7358110,816
Effect of changes in consolidation scope727727
Other changes in equity
Balance at September, 201966,173,983$2,157(1,807,251)$(38,774)$663,439$(58,382)$414,594$983,034$31,371$1,014,405

5


Share capitalTreasury StockAdditional paid-in capitalAccumulated Other Comprehensive Income (Loss)Retained EarningsEquity - attributable to shareholders of Criteo S.A.Non controlling interestTotal equity
Common sharesShares
(in thousands, except share amounts )
Balance at December 31, 201966,197,181$2,158(3,903,673)$(74,900)$668,389$(40,105)$451,725$1,007,267$30,721$1,037,988
Net income15,45915,45996916,428
Other comprehensive income (loss)(14,178)(14,178)(20)(14,198)
Issuance of ordinary shares5,700393939
Change in treasury stocks(629,977)(4,934)(13,305)(18,239)(18,239)
Share-Based Compensation8,0828,082498,131
Other changes in equity (*)(3,399)(3,399)(142)(3,541)
Balance at March 31, 202066,202,881$2,158(4,533,650)$(79,834)$676,510$(54,283)$450,480$995,031$31,577$1,026,608
Net income5,7165,7164346,150
Other comprehensive income (loss)9,9869,98624110,227
Issuance of ordinary shares2,000131313
Change in treasury stocks(1,055,758)(10,880)(3,981)(14,861)(14,861)
Share-Based Compensation6,7656,765396,804
Other changes in equity32322456
Balance at June 30, 202066,204,881$2,158(5,589,408)$(90,714)$683,288$(44,297)$452,247$1,002,682$32,315$1,034,997
Net income5,2275,227665,293
Other comprehensive income (loss)24,63924,63964425,283
Issuance of ordinary shares35,150167167167
Change in treasury stocks(399,850)(5,636)(4,851)(10,487)(10,487)
Share-Based Compensation6,3916,391676,458
Other changes in equity (**)(156,859)(3)3,900(4,005)309201201
Balance at September 30, 202066,083,172$2,155(5,989,258)$(92,450)$685,841$(19,658)$452,932$1,028,820$33,092$1,061,912
(*) From January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost issued by the Financial Accounting Standards Board (FASB).
(**) Deferred consideration in the context of Storetail Marketing SAS acquisition in 2018.

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


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months EndedNine Months Ended
September 30, 2019September 30, 2020September 30, 2019September 30, 2020
(in thousands)
Net income$20,557 $5,293 $54,495 $27,871 
Non-cash and non-operating items18,776 39,831 72,735 105,742 
    - Amortization and provisions19,455 24,680 57,381 79,631 
 - Net gain or loss on disposal of non-current assets 591  2,734 
    - Equity awards compensation expense (1)
11,165 6,803 36,760 22,465 
    - Change in deferred taxes(2,710)(80)(1,374)(7,697)
    - Change in income taxes(9,309)6,684 (19,939)7,411 
    - Other175 1,153 (93)1,198 
Changes in working capital related to operating activities3,956 6,032 36,243 7,663 
    - (Increase) / Decrease in trade receivables14,821 (4,177)120,164 122,529 
    - Increase / (Decrease) in trade payables(4,415)8,494 (77,895)(95,303)
    - (Increase) / Decrease in other current assets638 (2,762)2,150 2,288 
    - Increase/ (Decrease) in other current liabilities(10,177)6,303 (4,726)(20,145)
    - Change in operating lease liabilities and right of use assets3,089 (1,826)(3,450)(1,706)
Cash from operating activities43,289 51,156 163,473 141,276 
Acquisition of intangible assets, property, plant and equipment(27,239)(16,308)(69,343)(57,037)
Change in accounts payable related to intangible assets, property, plant and equipment3,295 3,410 (11,077)13,870 
(Payment for) Disposal of a business, net of cash acquired (disposed)106 (3)(4,582)(3)
Change in other non-current financial assets(165)(280)(1,349)(20,629)
Cash used for investing activities(24,003)(13,181)(86,351)(63,799)
Proceeds from borrowings under line-of-credit agreement 3,193  157,503 
Repayment of borrowings(167)(12)(506)(181)
Proceeds from capital increase725 117 638 101 
Repurchase of treasury stocks(17,603)(10,554)(17,603)(43,655)
Change in other financial liabilities(928)(1,083)(1,167)(2,010)
Cash (used for) from financing activities(17,973)(8,339)(18,638)111,758 
Effect of exchange rates changes on cash and cash equivalents(14,188)18,927 (13,732)18,746 
Net increase (decrease) in cash and cash equivalents(12,875)48,563 44,752 207,981 
Net cash and cash equivalents at beginning of period422,053 578,181 364,426 418,763 
Net cash and cash equivalents at end of period$409,178 $626,744 $409,178 $626,744 
Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds(19,932)4,337 (44,927)(12,229)
Cash paid for interest(337)(153)(1,095)(819)
(1) Of which $10.8 million and $6.5 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended September 30, 2019 and 2020, respectively, and $35.7 million and $21.4 million for the nine months ended September 30, 2019 and 2020, respectively.

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
7


CRITEO S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Criteo S.A. was initially incorporated as a société par actions simplifiée, or S.A.S., under the laws of the French Republic on November 3, 2005, for a period of 99 years and subsequently converted to a société anonyme, or S.A.
We are a global technology company powering the world's marketers with trusted and impactful advertising. We strive to deliver measurable business results at scale across multiple marketing goals for retailers and brands, through our Commerce Media Platform. Using shopping data, artificial intelligence ("AI") technology and extensive consumer reach, we help marketers drive awareness, consideration and conversion for their products and services, and help retailers generate advertising revenues from consumer brands. Our data is pooled among our clients and offers deep insights into consumer intent and purchasing habits. To drive trusted and impactful advertising for marketers, we activate our data assets in a privacy-by-design way through proprietary AI technology to engage consumers in real time by designing, pricing and delivering highly relevant digital advertisements ("ads") across devices and environments. We price our offering on a range of pricing models and measure our value based on clear, well-defined performance metrics, making our impact on the business of our clients both transparent and easy to measure.
In these notes, Criteo S.A. is referred to as the "Parent" company and together with its subsidiaries, collectively, as "Criteo," the "Company," the "Group," or "we".






























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

8


Note 1. Summary of Significant Accounting Policies

Basis of Presentation

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

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

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

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


Accounting Pronouncements Adopted in 2020


Effective January 1, 2020, we have adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. This results in earlier recognition of credit losses.

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



9



Effective January 1, 2020, we have adopted 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. The adoption of the ASU did not have an impact on our financial position or results of operations as we did not recognize an impairment loss during the period.
Effective January 1, 2020, we have adopted ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software - Customer’s Accounting for Implementation Costs incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU was issued to clarify the accounting for implementation costs incurred for SaaS agreements. Previously the guidance only referred to development of internal use software and the accounting for SaaS agreements was not clarified. This ASU states that any capitalized implementation costs would be included in prepaid expenses, amortized over the term of the hosting arrangement on a straight-line basis and presented in the same line items in the Consolidated Statement of Income as the expense for fees of the associated hosting arrangements. The adoption of the standard did not have an impact on our financial position or results of operations, however, it did have a minor impact on expense classification in current and future periods.

Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018 - 14, Compensation - 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 December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. We intend to adopt the standard on the effective date of January 1, 2021. The adoption of ASU 2019-12 is not expected to have a material impact on our financial position or results of operations but may have an impact on our disclosures.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon adoption.

10


Note 2. Significant Events and Transactions of the Period
Share repurchase program
On October 25, 2018, Criteo's Board of Directors authorized a share repurchase program of up to $80.0 million of the Company’s outstanding American Depositary Shares. We completed this share repurchase program in 2018. As of December 31, 2018, 3.5 million shares were held as treasury shares.
On February 8, 2019, the Board of Directors authorized the reduction of capital resulting in the formal retirement of 1.6 million treasury shares.
On July 26, 2019, Criteo's Board of Directors authorized a share repurchase program of up to $80.0 million of the Company's outstanding American Depositary Shares. As of December 31, 2019, 3.2 million shares were held as treasury shares as part of the share repurchase program authorized on July 26, 2019. We completed this share repurchase program in February 2020.
On April 23, 2020, Criteo's Board of Directors authorized a share repurchase program of up to $30.0 million of the Company's outstanding American Depositary Shares. We completed this share repurchase program in July 2020.
As of September 30, 2020, we had 6.0 million treasury shares remaining which may be used to satisfy the Company's obligations under its employee equity plans upon RSU vesting in lieu of issuing new shares, and for any potential M&A activity.
Number of Treasury SharesAmount
(in thousands of dollars)
Balance at January 1, 20203,903,673 $74,900 
Treasury Shares Repurchased for RSU Vesting3,358,068 43,655 
Treasury Shares Issued for RSU Vesting(1,272,483)(26,105)
Balance at September 30, 20205,989,258 $92,450 

Restructuring

Cessation of our R&D operations in Palo Alto
On October 7, 2019, in connection with the new organization structure, the Company announced a plan to restructure its R&D activities with the closing of its R&D operations in Palo Alto. The Company incurred additional net restructuring costs of $0.06 million and $0.6 million for the three and nine months ended September 30, 2020, respectively, comprising of payroll expenses included in Research and Development expenses.
The following table summarizes restructuring activities as of September 30, 2020 included in other current liabilities on the balance sheet:


Nine Months Ended
September 30, 2020
(in thousands)
Restructuring liability - January 1, 2020$5,581 
Restructuring costs560 
Restructuring costs - non cash items 
Amount paid(5,108)
Restructuring liability - September 30, 20201,033 

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Termination of the Palo Alto Lease

On September 30, 2020, we early terminated the Palo Alto lease, originally expiring in 2027. We incurred broker fees and termination penalties of $4.6 million in connection with this transaction. The net impact of write-offs of the right of use assets, lease liabilities, and fixed assets associated with the lease was nil.

For the three and nine months ended September 30, 2020, $1.5 million was included in Research and Development expenses, $0.8 million was included in General and Administrative expenses and $2.3 million was included in Sales and Operations expenses.
New organization structure
As part of a new organization structure designed to best support our multi-product platform strategy and accelerate execution, commenced in the twelve month period ended December 31, 2019, the Company incurred net restructuring costs of $2.8 million and $3.9 million for the three and nine month periods ended September 30, 2020, respectively, comprising of payroll expenses.
For the three and nine month periods ended September 30, 2020, respectively, nil and $0.2 million was included in Research and Development expenses, $1.3 million and $1.3 million was included in General and Administrative expenses and $1.5 million and $2.4 million was included in Sales and Operations expenses.

The following table summarizes restructuring activities as of September 30, 2020 included in other current liabilities on the balance sheet:

Nine Months Ended
September 30, 2020
(in thousands)
Restructuring liability - January 1, 2020$510 
Restructuring costs3,932 
Amount paid(2,159)
Restructuring liability - September 30, 20202,283 

We expect the majority of the cash outlays related to the charges incurred in 2020 will be complete within the next three months.

Changes in Group funding

In September 2015, Criteo S.A. entered into a Multicurrency Revolving Facility Agreement for general purposes of the Group including the funding of business combinations. On May 4, 2020, Criteo decided to draw €140 million ($164 million) under its RCF credit facility for general purposes. The drawdown is for an initial period of six months. In addition, the parties to the RCF agreement have agreed to extend the term of the agreement for one additional year, from March 2022 to March 2023, composed of a €350 million ($410 million) commitment through March 2022, and a €294 million ($344 million) commitment from the end of March 2022 through March 2023. The cost of the one-year extension is 0.025% of the extended amount.


Changes in Group financial investments

In September 2020, a $20.0 million amount has been invested in a 12 months term deposit with an annual yield of 0.75%. This new investment is classified as Cash and Cash Equivalents.

In June 2020, a €20.0 million ($23.4 million) amount was invested in a 24 months term deposit with an annual yield of 0.25%. This investment has been classified as Marketable Securities, a non-current asset, as it does not meet the cash and cash equivalent criteria.



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Note 3. Financial Instruments
Financial assets
The maximum exposure to credit risk at the end of each reported period is represented by the carrying amount of financial assets and summarized in the following table:
December 31, 2019September 30, 2020
(in thousands)
Trade receivables, net of allowance481,732 335,583 
Other taxes60,924 58,123 
Other current assets17,225 19,278 
Non-current financial assets21,747 20,174 
Marketable Securities 23,416 
Total$581,628 $456,574 

Credit Risk
We maintain an allowance for estimated credit losses. During the period ended December 31, 2019 and the nine month period ended September 30, 2020, our net change in allowance for credit losses was $9.9 million and $22.2 million, respectively (note 4). The primary cause of this change was the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) from January 1, 2020 resulting in an earlier recognition of credit losses, the cumulative effect of which, was recorded as an adjustment to retained earnings for $3.5 million (note 1), as well as an increase to the provision due to the expected impact of COVID-19 on the Company's future cash collection.
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 or pause the provision of services until payment of past due receivables is made.
As of December 31, 2019 and September 30, 2020, no customer accounted for 10% or more of trade receivables.

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Financial Liabilities
December 31, 2019September 30, 2020
(in thousands)
Trade payables $390,277 $293,480 
Other taxes50,099 45,998 
Employee-related payables 74,781 68,709 
Other current liabilities35,886 43,299 
Financial liabilities4,405 167,077 
Total$555,448 $618,563 

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 12 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 except as presented in note 2 relating to a drawing for a total amount of €140 million ($164 million) under the RCF credit facility for general purposes. The drawdown is for an initial period of six months. In addition, the parties to the RCF agreement have agreed to extend the term of the agreement for one additional year, from March 2022 to March 2023, composed of a €350 million ($410 million) commitment through March 2022, and a €294 million ($344 million) commitment from the end of March 2022 through March 2023. The cost of the one-year extension is 0.025% of the extended amount.
Fair Value Measurements     
We measure the fair value of our cash equivalents and marketable securities, which include interest-bearing bank deposits, as level 2 measurements because they are valued using observable market data.
Financial assets or liabilities include derivative financial instruments used to manage our exposure to the risk of exchange rate fluctuations. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.
Derivative Financial Instruments
Derivatives consist of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts in financial income (expense), and their position on the balance sheet is based on their fair value at the end of each respective period. These instruments are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.

December 31, 2019September 30, 2020
Derivative Liabilities:
Included in financial liabilities - current portion$1,284 $59 

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.

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Cash and Cash Equivalents
The following table presents for each reporting period, the breakdown of cash and cash equivalents:
December 31, 2019September 30, 2020
(in thousands)
Cash equivalents$189,119 $201,240 
Cash on hand229,644 425,504 
Total cash and cash equivalents$418,763