Criteo S.A. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Criteo carried out an evaluation as of December 31, 2020, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to reasonably assure that information required to be disclosed in our reports filed or furnished under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to reasonably assure that this information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to provide reasonable assurance. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management assessed, with the oversight of our board of directors, the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2020. The effectiveness of the Company's internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Associés, our independent registered public accounting firm, as stated in its attestation report, which appears on page F-2 of this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended December 31, 2020, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. 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 decisions making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 89 Item 9B. Other Information On February 25, 2021, the board of directors amended and restated the By-laws ( statuts ) of the Company, effective immediately. Article 6 of the By-laws has been amended to provide that, as of the date of the amendment, the Company has a share capital of €1,656,802.65, divided into 66,272,106 shares with a par value of €0.025 each, increased from €1,651,008.05, divided into 66,040,322 shares with a par value of €0.025 each. The foregoing description is qualified in its entirety by the amended By-laws, the English translation of which is attached hereto as Exhibit 3.1 and incorporated herein by reference. 90 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item (other than the information set forth in the next paragraph in this Item 10) will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. We have adopted a Code of Business Conduct and Ethics (the "Code of Conduct") that is applicable to all of our employees, officers and directors, including our chief executive and senior financial officers. The Code of Conduct is available on our website at criteo.investorroom.com under "Governance." The Audit Committee of our board of directors is responsible for overseeing the Code of Conduct and our board of directors is required to approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements required to be disclosed under the rules of the SEC or Nasdaq will be disclosed on our website. Item 11. Executive Compensation The information called for by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information called for by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information called for by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information called for by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. 91 PART IV Item 15. Exhibits and Financial Statement Schedules (a) Financial Statements The financial statements listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as part of this Form 10-K. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (b) Exhibits Incorporated by Reference Exhibit Description Schedule/ Form File Number Exhibit File Date 2.1 Merger Agreement, dated as of October 3, 2016, by and among Criteo Corp., TBL Holdings, Inc., Hooklogic, Inc. and Fortis Advisors LLC 8-K 001-36153 2.1 October 4, 2016 3.1# By-laws ( statuts ) (English translation) 4.1 Form of Deposit Agreement, including the Form of American Depositary Receipt F-1 333-191223 4.1 October 2, 2013 4.2# Agreement to Furnish Debt Instruments 4.3 Description of Registrant's Securities 10-K 001-36153 4.3 March 2, 2020 10.1 Commercial Lease between Orosdi and the registrant dated January 20, 2012 (English translation) F-1 333-191223 10.1 October 2, 2013 10.2 Form of Registration Rights Agreement by and among the registrant and certain investors signatory thereto, dated as of August 30, 2013 F-1 333-191223 10.3 October 23, 2013 10.3† Non-Compete Agreement between the registrant and each of Messrs. Rudelle, Le Ouay and Niccoli F-1 333-191223 10.5 October 2, 2013 10.4† Stock Option Plans—2009, 2010, 2011, 2012, 2013 (including forms of Stock Option Grant Agreement and Exercise Notice) F-1 333-191223 10.6 October 2, 2013 10.5† 2014 Stock Option Plan (including forms of Stock Option Grant Agreement and Exercise Notice) S-8 333-197373 99.1 July 11, 2014 10.6† Amended 2016 Stock Option Plan (including form of Stock Option Grant Agreement and Exercise Notice) (English Translation) S-8 333-240043 99.1 July 23, 2020 10.7† Summary of BSA Terms and Conditions 10-K 001-36153 10.7 February 29, 2016 10.8† Form of BSA Grant Document (English translation) 10-K 001-36153 10.9 March 1, 2017 92 Incorporated by Reference Exhibit Description Schedule/ Form File Number Exhibit File Date 10.9† Summary of BSPCE Plan F-1 333-191223 10.8 September 18, 2013 10.10† Form of BSPCE Grant Document (English translation) F-1 333-191223 10.11 September 18, 2013 10.11† Amended and Restated 2015 Performance-Based Free Share Plan (including form of Allocation Letter) (English Translation) S-8 333-240043 99.2 July 23, 2020 10.12† Amended and Restated 2015 Time-Based Free Share Plan (including form of Allocation Letter) (English Translation) S-8 333-240043 99.3 July 23, 2020 10.13† Criteo Executive Bonus Plan 10-K 001-36153 10.15 February 29, 2016 10.14† Offer Letter between the Registrant and Sarah Glickman, dated August 27, 2020 8-K 001-36153 10.1 September 3, 2020 10.15 Amendment and Restatement Agreement, dated as of March 29, 2017, by and among the registrant, as borrower, and BNP Paribas, Crédit Lyonnais (LCL), HSBC France, Natixis and Société Générale Corporate & Investment Banking 8-K 001-36153 4.1 March 30, 2017 10.16 Form of Offer to Directors, Officers or Specifically Designated Persons to Subscribe Liability Insurance and Provide Indemnification 10-K 001-36153 10.22 March 1, 2019 10.17† Management Agreement between the registrant and Megan Clarken, dated October 2, 2019 8-K 001-36153 10.1 October 30, 2019 10.18† Amendment to Management Agreement between the registrant and Megan Clarken, dated November 22, 2019 10-K 001-36153 10.18 March 2, 2020 10.19† Employment Agreement between the registrant and Ryan Damon, dated August 1, 2018 10-K 001-36153 10.19 March 2, 2020 10.20 Consulting Agreement between the Company and Dave Anderson, dated May 14, 2020 10-Q 001-36153 10.1 July 31, 2020 10.21# Amendment to Consulting Agreement between the Company and Dave Anderson, dated November 29, 2020 21.1# List of Subsidiaries 23.1# Consent of Deloitte & Associés 93 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 31.2# Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 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 101# The following financial statements from Criteo S.A.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements 104 Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101) † Indicates management contract or compensatory plan. # Filed herewith. * Furnished herewith. Item 16. Form 10-K Summary Not applicable. 94 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. February 26, 2021 By: /s/ Megan Clarken Megan Clarken Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated below. 95 Signature Title Date /s/ Megan Clarken Chief Executive Officer (Principal Executive Officer) February 26, 2021 Megan Clarken /s/ Sarah Glickman Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 26, 2021 Sarah Glickman /s/ Nathalie Balla Director February 26, 2021 Nathalie Balla /s/ Marie Lalleman Director February 26, 2021 Marie Lalleman /s/ Edmond Mesrobian Director February 26, 2021 Edmond Mesrobian /s/ Hubert de Pesquidoux Director February 26, 2021 Hubert de Pesquidoux /s/ Rachel Picard Director February 26, 2021 Rachel Picard /s/ James Warner Director February 26, 2021 James Warner 96 Index to Consolidated Financial Statements Page Reports of Deloitte & Associés, Independent Registered Public Accounting Firm F-2 Consolidated Statements of Financial Position as of December 31, 2020 and 2019 F-4 Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018 F-5 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 F-6 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2018, 2019 and 2020 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 F-8 Notes to the Consolidated Financial Statements F-9 97 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Criteo S.A. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Criteo S.A. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of this critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Revenue — Refer to Notes 1 and 25 to the financial statements Critical Audit Matter Description The Company’s revenue consists primarily of selling personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. This is achieved by converting the Company’s clients’ website visitors into customers, enabling the Company to charge its clients when users engage with an ad the Company delivers, either by clicking on it (cost-per-click basis), or through installing an application by clicking on an ad that the Company delivers (cost-per-install). F-2 Because of the nature of the Company’s revenue, which is made up of a significant volume of low-dollar value transactions, sourced from multiple databases and other tools, the Company uses highly automated systems to process and record its revenue transactions. We identified revenue as a critical audit matter because the Company’s systems to process and record its revenue transactions are highly automated and thus required significantly more involvement and effort from our information technology (IT) internal specialist team to identify, test, and evaluate the Company’s system, software applications, and automated controls. How the Critical Audit Matter Was Addressed in the Audit With the assistance of our IT specialists, our audit procedures related to the Company’s system to process and record its revenue transactions included the following: • Identified the significant applications and systems used to process revenue transactions and tested the general IT controls over each of these applications and systems, including testing of user access controls, change management controls, and IT operations controls. • Performed testing of system interface controls and automated controls within the relevant revenue solutions, as well as the controls designed to address the occurrence, accuracy and completeness of revenue. • Tested internal controls within the relevant revenue business process, including those in place to reconcile the various applications to the Company’s general ledger. • Tested the underlying data of the revenue transactions by agreeing the amounts recognized in the financial statements to the source transactional systems and tested the mathematical accuracy of the recorded revenue. /s/ Deloitte & Associés Paris-La Défense, France February 26, 2021 We have served as the Company's auditor since 2011. F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Criteo S.A. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Criteo S.A. and subsidiaries (the “Company” ) as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020 of the Company and our report dated February 26, 2021, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Associés Paris-La Défense, France February 26, 2021 F-4 Criteo S.A. and subsidiaries Consolidated Statements of Financial Position Year Ended December 31, Notes 2020 2019 (in thousands) Assets Current assets: Cash and cash equivalents 4 $ 488,011 $ 418,763 Trade receivables, net of allowances of $ 39.9 million and $ 16.1 million as of December 2020 and 2019, respectively. 5 474,055 481,732 Income taxes 11,092 21,817 Other taxes 69,987 60,924 Other current assets 6 21,405 17,225 Total current assets 1,064,550 1,000,461 Property, plant and equipment, net 7 189,505 194,161 Intangible assets, net 8 79,744 86,886 Goodwill 9 325,805 317,100 Right of use asset - operating lease 13 114,012 142,044 Marketable securities 41,809 — Non-current financial assets 10 18,109 21,747 Deferred tax assets 21 19,876 27,985 Total non current assets 788,860 789,923 Total assets $ 1,853,410 $ 1,790,384 Liabilities and shareholders' equity Current liabilities: Trade payables $ 367,025 $ 390,277 Contingencies 11 2,250 6,385 Income taxes 2,626 3,422 Financial liabilities - current portion 12 2,889 3,636 Lease liability - operating - current portion 13 48,388 45,853 Other taxes 58,491 50,099 Employee-related payables 85,272 74,781 Other current liabilities 14 33,390 35,886 Total current liabilities 600,331 610,339 Deferred tax liabilities 21 5,297 9,272 Retirement benefit obligation 15 6,167 8,485 Financial liabilities - non current portion 12 386 769 Lease liability - operating - non current portion 13 83,007 117,988 Other non-current liabilities 5,535 5,543 Total non-current liabilities 100,392 142,057 Total liabilities 700,723 752,396 Commitments and contingencies Shareholders' equity: Common shares, € 0.025 per value, 66,272,106 and 66,197,181 shares authorized, issued and outstanding at December 31, 2020 and December 31, 2019, respectively. 2,161 2,158 Treasury stock, 5,632,536 and 3,903,673 shares at cost as of December 31, 2020 and December 31, 2019, respectively. ( 85,570 ) ( 74,900 ) Additional paid-in capital 693,164 668,389 Accumulated other comprehensive income (loss) 16,028 ( 40,105 ) Retained earnings 491,359 451,725 Equity - attributable to shareholders of Criteo S.A. 1,117,142 1,007,267 Non-controlling interests 35,545 30,721 Total equity 1,152,687 1,037,988 Total equity and liabilities $ 1,853,410 $ 1,790,384 The accompanying notes form an integral part of these consolidated financial statements. F-4 Criteo S.A. and subsidiaries Consolidated Statements of Income Year Ended December 31, Notes 2020 2019 2018 (in thousands, except share and per share data) Revenue $ 2,072,617 $ 2,261,516 $ 2,300,314 Cost of revenue Traffic acquisition costs 17 ( 1,247,571 ) ( 1,314,947 ) ( 1,334,334 ) Other cost of revenue 17 ( 137,028 ) ( 117,533 ) ( 131,744 ) Gross profit 688,018 829,036 834,236 Operating expenses: Research and development expenses 17,18 ( 132,513 ) ( 172,591 ) ( 179,263 ) Sales and operations expenses 17,18 ( 330,285 ) ( 375,477 ) ( 372,707 ) General and administrative expenses 17,18 ( 116,395 ) ( 139,754 ) ( 135,159 ) Total operating expenses ( 579,193 ) ( 687,822 ) ( 687,129 ) Income from operations 108,825 141,214 147,107 Financial expense 20 ( 1,939 ) ( 5,749 ) ( 5,084 ) Income before taxes 106,886 135,465 142,023 Provision for income taxes 21 ( 32,197 ) ( 39,496 ) ( 46,144 ) Net income $ 74,689 $ 95,969 $ 95,879 Net income available to shareholders of Criteo S.A. $ 71,679 $ 90,745 $ 88,644 Net income available to non-controlling interests $ 3,010 $ 5,224 $ 7,235 Net income allocated to shareholders per share: Basic 22 $ 1.18 $ 1.41 $ 1.33 Diluted 22 $ 1.16 $ 1.38 $ 1.31 Weighted average shares outstanding used in computing per share amounts: Basic 22 60,876,480 64,305,965 66,456,890 Diluted 22 61,818,593 65,598,588 67,662,904 The accompanying notes form an integral part of these consolidated financial statements. F-5 Criteo S.A. and subsidiaries Consolidated Statements of Comprehensive Income Year Ended December 31, 2020 2019 2018 (in thousands) Net income $ 74,689 $ 95,969 $ 95,879 Foreign currency translation differences, net of taxes 53,213 ( 8,070 ) ( 18,781 ) Foreign currency translation differences 53,213 ( 8,070 ) ( 18,781 ) Income tax effect — — — Actuarial (losses) gains on employee benefits, net of taxes 4,692 ( 1,211 ) 916 Actuarial (losses) gains on employee benefits 5,214 ( 1,373 ) 1,235 Income tax effect ( 522 ) 162 ( 319 ) Comprehensive income 132,594 86,688 78,014 Attributable to shareholders of Criteo S.A. 130,821 86,353 77,594 Attributable to non-controlling interests $ 1,773 $ 335 $ 420 The accompanying notes form an integral part of these consolidated financial statements. F-6 Criteo S.A. and subsidiaries Consolidated Statements of Changes in Shareholders’ Equity Share capital Treasury stock Additional paid-in capital Accumulated other comprehensive (loss) income Retained earnings Equity - attributable to shareholders of Criteo S.A. Non controlling interests Total equity (in thousands, except share data) (Common shares) (Shares) Balance at January 1, 2018 66,085,097 2,152 — — 591,404 ( 12,241 ) 300,210 881,525 16,173 897,698 Net income — — — — — — 88,644 88,644 7,235 95,879 Other comprehensive income (loss) — — — — — ( 18,285 ) — ( 18,285 ) 420 ( 17,865 ) Issuance of ordinary shares 1,623,106 4 — — 2,951 — — 2,955 — 2,955 Change in treasury stock (1) — — ( 3,459,119 ) ( 79,159 ) — — — ( 79,159 ) — ( 79,159 ) Shared-based compensation — — — — 64,725 — — 64,725 393 65,118 Other changes in equity (2) — 45 — — 4,201 4 ( 985 ) 3,265 — 3,265 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 — — — — — — 90,745 90,745 5,224 95,969 Other comprehensive income (loss) — — — — — ( 9,617 ) — ( 9,617 ) 335 ( 9,282 ) Issuance of ordinary shares 83,266 2 — — 1,829 — — 1,831 — 1,831 Change in treasury stock (1) ( 1,594,288 ) ( 45 ) ( 444,554 ) 4,259 ( 36,091 ) ( 296 ) ( 26,710 ) ( 58,883 ) — ( 58,883 ) Shared-based compensation — — — — 39,399 — — 39,399 214 39,613 Other changes in equity — — — — ( 29 ) 330 ( 179 ) 122 727 849 Balance at December 31, 2019 66,197,181 $ 2,158 ( 3,903,673 ) $ ( 74,900 ) $ 668,389 $ ( 40,105 ) $ 451,725 $ 1,007,267 $ 30,721 $ 1,037,988 Net income — — — — — — 71,679 71,679 3,010 74,689 Other comprehensive income (loss) — — — — — 56,133 — 56,133 1,773 57,906 Issuance of ordinary shares 231,784 8 — — 1,928 — — 1,936 — 1,936 Change in treasury stock (1) — — ( 1,728,863 ) ( 14,570 ) — — ( 29,017 ) ( 43,587 ) — ( 43,587 ) Shared-based compensation — — — — 26,913 — — 26,913 188 27,101 Other changes in equity (2) ( 156,859 ) ( 5 ) — 3,900 ( 4,066 ) — ( 3,028 ) ( 3,199 ) ( 147 ) ( 3,346 ) Balance at December 31, 2020 66,272,106 $ 2,161 ( 5,632,536 ) $ ( 85,570 ) $ 693,164 $ 16,028 $ 491,359 $ 1,117,142 $ 35,545 $ 1,152,687 (1) Share repurchase program (see note 2) (2) Includes deferred consideration in the context of Storetail Marketing Services SAS acquisition in 2018 and 2020 and from January 1, 2020, the adoption of 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). The accompanying notes form an integral part of these consolidated financial statements. F-7 Criteo S.A. and subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, 2020 2019 2018 (in thousands) Net income $ 74,689 $ 95,969 $ 95,879 Non-cash and non-operating items 154,629 126,281 154,436 Amortization and provisions 106,591 97,110 111,825 Equity awards compensation expense (1) 28,770 40,999 66,600 Net gain on disposal of non-current assets 2,714 — — Change in deferred taxes 3,720 15,418 ( 8,157 ) Change in income taxes 10,867 ( 28,015 ) ( 12,744 ) Other 1,967 769 ( 3,088 ) Change in working capital related to operating activities ( 43,962 ) 582 10,411 (Increase) / Decrease in trade receivables ( 3,957 ) 876 1,358 Increase / (Decrease) in trade payables ( 33,314 ) ( 14,145 ) 9,047 (Increase) / Decrease in other current assets ( 7,188 ) 7,631 3,974 Increase / (Decrease) in other current liabilities 6,261 11,390 ( 3,968 ) Change in operating lease liabilities and right of use assets ( 5,764 ) ( 5,170 ) — Cash from operating activities 185,356 222,832 260,726 Acquisition of intangibles assets, property, plant and equipment ( 67,287 ) ( 82,716 ) ( 116,984 ) Change in accounts payable related to intangible assets, property, plant and equipment 1,818 ( 15,224 ) ( 8,494 ) Payment for businesses, net of cash acquired ( 1,176 ) ( 4,582 ) ( 101,180 ) Change in other financial non-current assets ( 34,448 ) ( 1,366 ) ( 59 ) Cash used for investing activities ( 101,093 ) ( 103,888 ) ( 226,717 ) Proceeds from borrowings under line-of-credit agreement 153,188 — — Repayment of borrowings ( 167,344 ) ( 1,022 ) ( 964 ) Proceeds from capital increase 1,727 1,691 1,473 Change in treasury stocks ( 43,655 ) ( 58,588 ) ( 80,000 ) Change in other financial liabilities ( 1,663 ) ( 1,192 ) 16,815 Cash used for financing activities ( 57,747 ) ( 59,111 ) ( 62,676 ) Effect of exchange rate changes on cash and cash equivalents 42,732 ( 5,496 ) ( 21,018 ) Net increase (decrease) in cash and cash equivalents 69,248 54,337 ( 49,685 ) Net cash and cash equivalents - beginning of period 418,763 364,426 414,111 Net cash and cash equivalents - end of period $ 488,011 $ 418,763 $ 364,426 Supplemental disclosures of Cash Flow information Cash paid for taxes, net of refunds $ ( 17,610 ) $ ( 52,093 ) $ ( 67,045 ) Cash paid for interest, net of amounts capitalized $ ( 2,155 ) $ ( 1,403 ) $ ( 1,695 ) (1) Of which $ 27.1 million and $ 39.6 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the twelve month period ended December 31, 2020 and 2019, respectively. The accompanying notes form an integral part of these consolidated financial statements. F-8 Notes to the Consolidated Financial Statements 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 enable brands' and retailers' growth by activating commerce data through artificial intelligence ("AI") technology, reaching consumers on an extensive scale across all stages of the consumer journey, and generating advertising revenues from consumer brands for large retailers. Our vision is to build the world's leading Commerce Media Platform to deliver measurable business outcomes at scale for global brands, agencies and retailers across multiple marketing goals. 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. 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". F-9 Note 1. Principles and Accounting Methods Basis of Preparation We prepared the consolidated financial statements in accordance with the U.S generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of Criteo S.A and its wholly owned subsidiaries. Consolidation Methods We have control over all our subsidiaries, and consequently they are all fully consolidated. Intercompany transactions and balances have been eliminated. The table below presents at each period’s end and for all entities included in the consolidation scope the following information: the country of incorporation and the percentage of voting rights and ownership interests. 2020 2019 Country Voting rights Ownership Interest Voting rights Ownership Interest Consolidation Method Parent company Criteo S.A France 100 % 100 % 100 % 100 % Parent company French subsidiaries Criteo France SAS France 100 % 100 % 100 % 100 % Fully consolidated Criteo Finance SAS France 100 % 100 % 100 % 100 % Fully consolidated Storetail Marketing Services SAS (1) France — % — % 100 % 100 % N/A Condigolabs SAS France 100 % 40 % 100 % 40 % Fully consolidated Foreign subsidiaries Criteo Ltd United Kingdom 100 % 100 % 100 % 100 % Fully consolidated Storetail Marketing Services Ltd United Kingdom — % — % 100 % 100 % N/A Criteo Corp. United States 100 % 100 % 100 % 100 % Fully consolidated Manage, Inc. (2) United States — % — % 100 % 100 % N/A Criteo Gmbh Germany 100 % 100 % 100 % 100 % Fully consolidated Criteo Nordics AB Sweden 100 % 100 % 100 % 100 % Fully consolidated Criteo Korea Ltd. Korea 100 % 100 % 100 % 100 % Fully consolidated Criteo KK Japan 66 % 66 % 66 % 66 % Fully consolidated Criteo Do Brasil LTDA Brazil 100 % 100 % 100 % 100 % Fully consolidated Criteo BV The Netherlands 100 % 100 % 100 % 100 % Fully consolidated Criteo Pty Australia 100 % 100 % 100 % 100 % Fully consolidated Criteo Srl Italy 100 % 100 % 100 % 100 % Fully consolidated Criteo Advertising (Beijing) Co. Ltd China 100 % 100 % 100 % 100 % Fully consolidated Criteo Singapore Pte. Ltd. Singapore 100 % 100 % 100 % 100 % Fully consolidated Criteo LLC Russia 100 % 100 % 100 % 100 % Fully consolidated Criteo Europa S.L. Spain 100 % 100 % 100 % 100 % Fully consolidated Criteo Espana S.L. Spain 100 % 100 % 100 % 100 % Fully consolidated Storetail Marketing Services S.L.U (3) Spain — % — % 100 % 100 % N/A Criteo Canada Corp. Canada 100 % 100 % 100 % 100 % Fully consolidated Criteo Reklamcılık Hizmetleri ve Ticaret Anonim Şirketi Turkey 100 % 100 % 100 % 100 % Fully consolidated Criteo MEA FZ-LLC United Arab Emirates 100 % 100 % 100 % 100 % Fully consolidated Criteo India Private Ltd. India 100 % 100 % 100 % 100 % Fully consolidated (1) merged with Criteo S.A (2) merged with Criteo Corp. (3) merged with Criteo Espana S.L. Functional Currency and Translation of Financial Statements in Foreign Currency The Consolidated Financial Statements are presented in U.S. dollars, which differs from the functional currency of the Parent, being the Euro. The statements of financial position of consolidated entities having a functional currency different from the U.S. dollar are translated into U.S. dollars at the closing exchange rate (spot exchange rate at the statement of financial position date) and the statements of income, statements of comprehensive income and statements of cash flow of such consolidated entities are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption “Accumulated other comprehensive income (loss)” in the Consolidated Statements of Changes in Shareholders' Equity. F-10 Conversion of Foreign Currency Transactions Foreign currency transactions are converted to U.S. dollars at the rate of exchange applicable on the transaction date. At period-end, foreign currency monetary assets and liabilities are converted at the rate of exchange prevailing on that date. The resulting exchange gains or losses are recorded in the Consolidated Statements of Income in “Other financial income (expense)” with the exception of exchange differences arising from monetary items that form part of the reporting entity’s net investment in a foreign operation which are recognized in other comprehensive income (loss); they will be recognized in profit or loss on disposal of the net investment. Use of Estimates The preparation of our Consolidated Financial Statements requires the use of estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenue and expenses during the period. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. On an on-going basis, management evaluates its estimates, primarily those related 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 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. Business combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of our acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Intangible Assets Acquired intangible assets are accounted for at acquisition cost, less accumulated amortization. Acquired intangible assets are composed of software, technology and customer relationships amortized on a straight-line basis over their estimated useful lives comprised between one and three years for the software, and three and nine years , for the technology and customer relationships. Intangible assets are reviewed for impairment whenever events or changes in circumstances such as, but not limited to, significant declines in revenue, earnings or cash flows or material adverse changes in the business climate indicate that the carrying amount of an asset may be impaired. F-11 Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Amortization of these costs begins when assets are placed in service and is calculated on a straight-line basis over the assets’ useful lives estimated at three to five years . Cloud computing arrangements (“CCAs”), such as software as a service and other hosting arrangements, are evaluated for capitalized implementation costs in a similar manner as capitalized software development costs. If a CCA includes a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses. If a CCA does not include a software license, the service element of the arrangement is accounted for as a service contract. The Company capitalized certain implementation costs for its CCAs that are service contracts, which are included in other current assets. The Company amortizes capitalized implementation costs in a CCA over the life of the service contract. Property, Plant and Equipment Property, plant and equipment are accounted for at acquisition cost less cumulative depreciation and any impairment loss. Depreciation is calculated on a straight-line basis over the assets’ estimated useful lives as follows: Servers........................................................................................................... 5 years over the life of the warranty Furniture and IT equipments............................................................................................................... 3 to 5 years Leasehold improvements are depreciated over their useful life or over the lease term, whichever is shorter. Impairment of Assets Goodwill and Intangible Assets Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net tangible and intangible assets acquired. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives. The Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates as a single reporting unit and has selected December 31 as the date to perform its annual impairment test. In the impairment assessment of its goodwill, the Company performs an impairment test, which involves assumptions regarding estimated future cash flows to be derived from the Company The estimated future cash flows are used to derive the fair value of the reporting unit, which is then compared to its net book value, including goodwill . If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets. If the net book value exceeds its fair value, then the Company would be required to recognize an impairment loss. The impairment loss to be recognized would be calculated by comparing the fair value of the Company to its net book value, including goodwill. An impairment loss would be recognized in the Consolidated Statement of Income when the carrying amount of goodwill exceeds its implied fair value. With respect to intangible assets, acquired intangible assets are accounted for at acquisition cost less cumulative amortization and any impairment loss. Acquired intangible assets are amortized over their estimated useful lives of three to nine years on a straight-line method. Intangible assets are reviewed for impairment whenever events or changes in circumstances such as, but not limited to, significant declines in revenue, earnings or cash flows or material adverse changes in the financial and economic environment indicate that the carrying amount of an asset may be impaired. F-12 Property, Plant and Equipment and Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset is impaired or the estimated useful life is no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with an asset are less than the carrying amount of the asset, an impairment loss is recorded to write the asset down to its estimated fair value. Fair value is estimated based on discounted future cash flows. Leases We lease space under non-cancellable operating leases for our offices and data centers. Our office leases typically include rent free periods or rent escalation periods, and may also include leasehold improvement incentives. Leases for data centers may also include rent free 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 the lease. Options have been included in the lease term if management has determined it is reasonably certain that they 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. 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. Financial Assets and Liabilities, Excluding Derivative Financial Instruments Financial assets, excluding cash and cash equivalents, consist exclusively of loans and receivables. Loans and receivables are non-derivative financial assets with a payment, which is fixed or can be determined, not listed on an active market. They are included in current assets, except those that mature more than twelve months after the reporting date. Loans are measured at amortized cost using the effective interest method. The recoverable amount of loans and advances is estimated whenever there is an indication that the asset may be impaired and at least on each reporting date. If the recoverable amount is lower than the carrying amount, an impairment loss is recognized in the Consolidated Statements of Income. Financial liabilities are initially recorded at their fair value at the transaction date. Subsequently they are measured at amortized cost using the effective interest method. F-13 We carry our accounts receivable at original invoiced amount less an allowance for any potential uncollectible amounts . Management makes estimates of expected credit trends for the allowance for credit losses based on, among other factors, a past history of collections, current credit conditions, the aging of the receivables, past history of write downs, credit quality of our customers, current economic conditions, and reasonable and supportable forecasts of future economic conditions. A receivable is considered past due if we have not received payments based on agreed-upon terms. A higher default rate than estimated or a deterioration in our clients’ creditworthiness could have an adverse impact on our future results. Allowances for credit losses on trade receivables are recorded in “sales and operations expenses” in our Consolidated Statements of Income. We generally do not require any security or collateral to support our receivables. Derivative financial instruments We buy and sell derivative financial instruments (mainly put, forward buying and selling) in order to manage and reduce our exposure to the risk of exchange rate fluctuations. We deal only with major financial institutions. Financial instruments may only be classified as hedges when we can demonstrate and document the effectiveness of the hedging relationship at inception and throughout the life of the hedge. Derivatives not designated as hedging instruments mainly consist of put, forward buying and selling 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, as well as the related costs in the financial income (expense), net, along with the foreign currency gains and losses on monetary assets and liabilities. The Company reported the cash impact of the settlement of hedging derivatives in cash from (used for) financing activities in the consolidated statements of cash flows. This accounting policy choice results in the cash flows from the derivative instrument to be classified in the same category as the underlying cash flows. Fair value measurements Financial instruments are presented in three categories based on a hierarchical method used to determine their fair value : (i) level 1: fair value calculated using quoted prices in an active market for identical assets and liabilities; (ii) level 2: fair value calculated using valuation techniques based on observable market data such as prices of similar assets and liabilities or parameters quoted in an active market; (iii) level 3: fair value calculated using valuation techniques based wholly or partially on unobservable inputs such as prices in an active market or a valuation based on multiples for unlisted companies. The Company's valuation techniques used to measure the fair value of money market funds and certain short term investments were derived from quoted prices in active markets. The valuation techniques used to measure the fair value of the Company's financial liabilities and all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model-driven valuations using inputs derived from or corroborated by observable market data. Cash, Cash Equivalents and Marketable Securities Cash includes cash on deposit with banks and highly liquid investments such as demand deposits with banks. Cash equivalents include short-term, highly liquid investments, with a remaining maturity at the date of purchase of three months or less for which the risk of changes in value is considered to be insignificant. Highly liquid demand deposits therefore meet the definition of cash equivalents. We hold investments in marketable securities, consisting mainly of term deposits with banks, not meeting the cash equivalents definition. We classify marketable securities as either available-for-sale or held-to-maturity investments, depending on whether we have the positive intent and ability to hold the term deposits to maturity. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive income (loss) in stockholders' equity. Our held-to-maturity investments are carried at amortized cost, and are subject to impairment assessments. Interest income generated from held-to-maturity investments is recorded as financial income. F-14 Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are held and foreign exchange contracts are transacted with major financial institutions that the Company's management has assessed to be of high credit quality. The Company has not experienced any losses in such accounts. The Company mitigates its credit risk with respect to accounts receivable by performing credit evaluations and monitoring agencies' and advertisers' accounts receivable balances. As of December 31, 2020 and 2019 no customer accounted for 10% or more of accounts receivable. During the years ended December 31, 2020, 2019 and 2018, no single customer represented 10% or more of revenue. Employee Benefits Depending on the laws and practices of the countries in which we operate, employees may be entitled to compensation when they retire or to a pension following their retirement. For state-managed plans and other defined contribution plans, we recognize them as expenses when they become payable, our commitment being limited to our contributions. The liability with respect to defined benefit plans is estimated using the following main assumptions: • discount rate; • future salary increases; • employee turnover; and • mortality tables. Service costs are recognized in profit or loss and are allocated by function. Actuarial gains and losses are recognized in other comprehensive income and subsequently amortized into the income statement over a specified period, which is generally the expected average remaining service period of the employees participating in the plan. Actuarial gains and losses arise as a result of changes in actuarial assumptions or experience adjustments (differences between the previous actuarial assumptions and what has actually occurred). Contingencies An estimated loss from a loss contingency is recognized if the following two conditions are met: • information available before the financial statements are issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements; • the amount of loss can be reasonably estimated. With respect to litigation and claims that may result in a provision to be recognized, we exercise significant judgment in measuring and recognizing provisions or determining exposure to contingent liabilities that are related to pending litigation or other outstanding claims. These judgment and estimates are subject to change as new information becomes available. F-15 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. We also have multiple pricing models which now include cost plus margin models in addition to cost-per-click, cost-per-install and cost-per-impression pricing models. 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, cost-per-install basis and cost plus margin 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. For campaigns with a fixed pricing component, where fixed amounts are billed to the customer at various intervals, we recognize revenue on a ratable basis, based on our completion of our performance obligation to the customer. We mainly act as principal in our arrangements because (i) we control the advertising inventory 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 related costs incurred on a gross basis. 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. F-16 Practical Expedients 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. 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. Cost of Revenue Our cost of revenue primarily includes traffic acquisition costs and other cost of revenue. Traffic Acquisition Costs . Traffic acquisition costs consist primarily of purchases of impressions from publishers on a CPM basis. We purchase impressions directly from publishers or third-party intermediaries, such as advertisement exchanges. We recognize cost of revenue on a publisher by publisher basis as incurred. Costs owed to publishers but not yet paid are recorded in our Consolidated Statements of Financial Position as trade payables and other current liabilities. For some solutions within Criteo Retail Media, we pay for the inventory of our ecommerce retailer partners on a revenue sharing basis, effectively paying the retailers a portion of the click-based revenue generated by user clicks on the sponsored products advertisements displaying the products of our brand manufacturer clients. Other Cost of Revenue . Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment, data purchased from third parties and digital taxes. The Company does not build or operate its own data centers and none of its Research and Development employments are dedicated to revenue generating activities. As a result, we do not include the costs of such personnel in other cost of revenue. Share-Based Compensation Shares, employee share options and employee and non-employee warrants are primarily awarded to our employees or directors. These awards are measured at their fair value on the date of grant. The fair value is calculated with the most relevant formula regarding the settlement and the conditions of each plan. The fair value is recorded in personnel expenses (allocated by function in the Consolidated Statements of Income) on a straight-line basis over each milestone composing the vesting period with a corresponding increase in shareholders’ equity. At each closing date, we re-examine the number of options likely to become exercisable. If applicable, the impact of the review of the estimate is recognized in the Consolidated Statements of Income with a corresponding adjustment in equity. Income Taxes Income taxes are accounted for under the asset and liability method of accounting. Deferred taxes are recorded on all temporary differences between the financial reporting and tax bases of assets and liabilities, and on tax losses, using the liability method. Differences are defined as temporary when they are expected to reverse within a foreseeable future. We may only recognize deferred tax assets on net operating losses if, based on the projected taxable incomes within the next three years, we determine that it is probable that future taxable profit will be available against which the unused tax losses and tax credits can be utilized. As a result, the measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. If future taxable profits are considerably different from those forecasted that support recording deferred tax assets, we will have to revise downwards or upwards the amount of deferred tax assets, which would have a significant impact on our financial results. Tax assets and liabilities are not discounted. Amounts recognized in the Consolidated Financial Statements are calculated at the level of each tax entity included in the consolidation scope. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. F-17 The French Research Tax Credit, Crédit d’Impôt Recherche (“CIR”), is a French tax incentive to stimulate research and development (“R&D”). Generally, the CIR offsets the income tax to be paid and the remaining portion (if any) can be refunded at the end of a three-fiscal year period. The CIR is calculated based on the claimed volume of eligible R&D expenditures by us. As a result, the CIR is presented as a deduction to “research and development expenses” in the Consolidated Statements of Income, as the CIR is not within the scope of ASC 740. We have exclusively claimed R&D performed in France for purposes of the CIR. The U.S. Research Tax Credit is a U.S. tax credit to incentivize research and development activities in the U.S. Qualifying R&D expenses generating a tax credit which may be used to offset future taxable income once all net operating losses and foreign tax credits have been used. It is not refundable and as such, considered in the scope of ASC 740 as a component of income tax expense. We have exclusively claimed R&D performed in the U.S. for purposes of the U.S. Research Tax Credit. Uncertain Tax Positions We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. These uncertain tax positions include our estimates for transfer pricing that have been developed based upon analyses of appropriate arms-length prices. Similarly, our estimates related to uncertain tax positions concerning research tax credits are based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax credits will be sufficient. Although we believe that we have adequately reserved for our uncertain tax positions (including net interest and penalties), we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have a material impact on our financial condition and operating results. Operating Segments Segment information reported is built on the basis of internal management data used for performance analysis of businesses and for the allocation of resources (management approach). An operating segment is a component of the Company for which separate financial information is available that is evaluated regularly by our Chief Decision Maker in deciding how to allocate resources and assessing performance. Our chief operating decision-maker is our CEO. The CEO reviews consolidated data for revenue, revenue excluding traffic acquisition costs (revenue ex-TAC) and Adjusted EBITDA (earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration) for the purposes of allocating resources and evaluating financial performance. We have concluded that our operations constitute one operating and reportable segment. Earnings Per Share Basic earnings per share (“EPS”) are calculated by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding. The weighted average number of shares outstanding is calculated according to movements in share capital. In addition, we calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent company, Criteo S.A. by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued. F-18 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. 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 ASU. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, 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, results of operations or 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. F-19 Note 2. Significant Events and Transactions of the Period Share repurchase programs 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. As of December 31, 2018, 3.5 million shares were held as treasury shares. We completed this share repurchase program in 2018. 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. As of December 31, 2019, we have 3.9 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 M&A activity. 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 December 31, 2020 we had 5.6 million treasury shares remaining which may be used to satisfy the Company's obligations under its employee equity plan upon RSU vesting in place of issuing new shares, and for any potential M&A activity. Number of Treasury Shares Amount (in thousands) Balance at January 1 , 2019 3,459,119 $ 79,159 Treasury Shares Retired ( 1,594,288 ) ( 36,137 ) Treasury Shares Repurchased to use for M&A or RSU Vesting 1,498,709 28,452 Treasury Shares Repurchased to use for RSU Vesting 1,743,223 30,136 Treasury Shares Issued for RSU Vesting ( 1,203,090 ) ( 26,710 ) Balance at December 31, 2019 3,903,673 $ 74,900 Treasury Shares Repurchased to use for RSU Vesting 3,358,068 $ 43,655 Treasury Shares Issued for RSU Vesting ( 1,472,346 ) $ ( 29,085 ) Treasury Shares Issued for M&A ( 156,859 ) ( 3,900 ) Balance at December 31, 2020 5,632,536 $ 85,570 F-20 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 $ 0.1 million and $ 0.6 million for the three and twelve months ended December 31, 2020, respectively, comprising of payroll expenses included in Research and Development expenses. The following table summarizes restructuring activities as of December 31, 2020 included in other current liabilities on the balance sheet : Restructuring Liability (in thousands) Restructuring liability - January 1, 2020 $ 5,581 Restructuring costs 633 Amounts paid ( 5,932 ) Restructuring liability - December 31, 2020 $ 282 Termination of the Palo Alto Lease During the year ended December 31, 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 twelve months ended December 31, 2020, $ 0 million and $ 1.5 million, respectively, was included in Research and Development expenses, $ 0 million and $ 0.8 million was included in General and Administrative expenses and $ 0 million and $ 2.3 million was included in Sales and Operations expenses. F-21 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 year ended December 31, 2019, the Company incurred net restructuring costs of $ 1.4 million and $ 5.3 million for the three and twelve month periods ended December 31, 2020, respectively, comprising of payroll expenses. For the three and twelve month periods ended December 31, 2020, respectively, $ 0.3 million and $ 0.5 million was included in Research and Development expenses, $( 0.3 ) million and $ 0.9 million was included in General and Administrative expenses and $ 1.4 million and $ 3.9 million was included in Sales and Operations expenses. The following table summarizes restructuring activities as of December 31, 2020 included in other current liabilities on the balance sheet: Twelve Months Ended December 31, 2020 (in thousands) Restructuring liability - January 1, 2020 $ 510 Restructuring costs 5,278 Amount paid ( 3,812 ) Restructuring liability - December 31, 2020 $ 1,976 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. In March 2017, the maximum amount available under this RCF was increased to € 350 million ($ 429.5 million). On May 4, 2020, Criteo decided to draw € 140 million ($ 153.2 million) under its RCF credit facility for general purposes. This six month drawdown of € 140 million ($ 159.9 million) was fully reimbursed on November 4, 2020. 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 ($ 429 million) commitment through March 2022, and a € 294 million ($ 360.8 million) commitment from the end of March 2022 through March 2023. Changes in Group financial investments In December 2020, $ 5.0 million was invested in a 24 month term deposit with an annual yield of 0.60 % and € 10.0 million ($ 12.3 million) was invested in a 15 month term deposit with an annual yield of 0.50 %. These investments have been classified as Marketable Securities, a non-current asset, as they do not meet the cash and cash equivalent criteria. In September 2020, $ 20.0 million was invested in a 12 month term deposit with an annual yield of 0.75 %. This new investment is classified as Cash and Cash Equivalents. In June 2020, € 20.0 million ($ 24.5 million) was invested in a 24 month 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. F-22 Note 3. Categories of Financial Assets and Financial Liabilities Financial assets Year Ended December 31, 2020 2019 (in thousands) Trade receivables, net of allowances $ 474,055 $ 481,732 Other taxes 69,987 60,924 Other current assets 21,405 17,225 Marketable securities $ 41,809 $ — Non-current financial assets 18,109 21,747 Total $ 625,365 $ 581,628 Credit Risk We maintain an allowance for estimated credit losses. During the years ended December 31, 2020 and 2019, our net change in the allowance for credit losses was $( 23.8 ) million and $( 9.9 ) million, respectively. 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. As of December 31, 2020 and 2019, no customer accounted for 10% or more of trade receivables. Financial liabilities Year Ended December 31, 2020 2019 (in thousands) Trade payables $ 367,025 $ 390,277 Other taxes 58,491 50,099 Employee - related payables 85,272 74,781 Other current liabilities 33,390 35,886 Financial liabilities 3,275 4,405 Total $ 547,453 $ 555,448 F-23 The fair value of financial liabilities approximates the carrying amount, given the nature of the financial liabilities and the maturity of the expected cash flows. Fair Value Measurements We measure the fair value of our cash equivalents, which include interest bearing 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. Year Ended December 31, 2020 2019 (in thousands) Derivative Assets: Included in other current assets $ — $ — Derivative Liabilities: Included in financial liabilities - current portion $ 925 $ 1,284 The fair value of derivative financial instruments approximates the carrying amount, given the nature of the derivative financial instruments and the maturity of the expected cash flows. F-24 Marketable Securities The following table presents for each reporting period, the breakdown of marketable securities: December 31, 2020 December 31, 2019 (in thousands) Securities Available-for-sale Term Deposits $ 24,538 $ — Securities Held-to-maturity Term Deposits $ 17,271 $ — Total $ 41,809 $ — The gross unrealized gains or (loss) on our marketable securities were not material as of December 31, 2020. For our marketable securities, the fair value approximates the carrying amount, given the nature of the term deposit and the maturity of the expected cash flows. The term deposit is considered a level 2 financial instruments as it is measured using valuation techniques based on observable market data. The following table classifies our marketable securities by contractual maturities: Held-to-maturity Available-for-sale December 31, 2020 (in thousands) Due in one year $ — $ — Due in one to five years $ 17,271 $ 24,538 Total $ 17,271 $ 24,538 F-25 Note 4. Cash and Cash Equivalents The following table presents for each reported period, the breakdown of cash and cash equivalents: Year Ended December 31, 2020 2019 (in thousands) Cash equivalent $ 162,457 $ 189,119 Cash on hand 325,554 229,644 Total Cash and cash equivalents $ 488,011 $ 418,763 Investments in interest–bearing bank deposits which met ASC 230 - Statement of Cash flows criteria: short-term, highly liquid investments, for which the risks of changes in value are considered to be insignificant. Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data. For our cash and cash equivalents, the fair value approximates the carrying amount, given the nature of the cash and cash equivalents and the maturity of the expected cash flows. F-26 Note 5. Trade Receivables The following table shows the breakdown in trade receivables net book value for the presented periods: Year Ended December 31, 2020 2019 (in thousands) Trade accounts receivables $ 513,954 $ 497,800 (Less) Allowance for doubtful accounts ( 39,899 ) ( 16,068 ) Net book value at end of period $ 474,055 $ 481,732 Changes in allowance for doubtful accounts are summarized below: Year Ended December 31, 2020 2019 2018 (in thousands) Balance at beginning of period $ ( 16,068 ) $ ( 25,918 ) $ ( 20,818 ) Allowance for credit losses through retained earnings (*) ( 3,522 ) — — Provision for doubtful accounts ( 30,818 ) ( 11,072 ) ( 17,656 ) Reversal of provision 11,555 20,811 11,956 Change in consolidation scope — — ( 150 ) Currency translation adjustment ( 1,046 ) 111 750 Balance at end of period $ ( 39,899 ) $ ( 16,068 ) $ ( 25,918 ) (*) 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). 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 adopted ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained earnings (note 1). The amount charged to allowance for credit losses for the twelve months ended December 31, 2020 increased compared to the same period in the prior year due to the application of the expected credit loss model beginning on January 1, 2020 as well as an increase to the provision due to the expected impact of COVID-19 on the Company's future cash collections caused by the downturn in the economy which has led to financial difficulties for some of our customers, particularly those operating in the retail sector. In times of the global economic turmoil brought about by COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. The reversal of provision decreased during the twelve month period ended December 31, 2020, mainly due to lower payments received and lower write-offs of long outstanding receivables already reserved for which it is certain we will not collect the receivable. During the twelve month period ended December 31, 2020, the Company recovered $ 3.6 million previously written off, accounted for as a reversal of provision. The Company mitigates its credit risk with respect to accounts receivables by performing credit evaluations and monitoring agencies and advertisers' accounts receivables balances. We write off accounts receivable balances once the receivables are no longer deemed collectible. F-27 Note 6. Other Current Assets The following table shows the breakdown in other current assets net book value for the presented periods: Year Ended December 31, 2020 2019 (in thousands) Prepayments to suppliers $ 5,613 $ 5,109 Other debtors 5,991 4,225 Prepaid expenses 9,801 7,891 Gross book value at end of period 21,405 17,225 Net book value at end of period $ 21,405 $ 17,225 Prepaid expenses mainly consist of office rental advance payments. F-28 Note 7. Property, Plant and Equipment Changes in net book value during the presented periods are summarized below: Fixtures and fittings Furniture and equipment Construction in Progress Total (in thousands) Net book value at January 1, 2019 $ 18,884 $ 144,801 $ 20,328 $ 184,013 Additions to property, plant and equipment 466 23,117 46,959 70,542 Disposal of property, plant and equipment net of accumulated depreciation ( 999 ) ( 904 ) ( 12 ) ( 1,915 ) Depreciation expense ( 6,377 ) ( 50,222 ) — ( 56,599 ) Change in consolidation scope — 3 — 3 Currency translation adjustment ( 43 ) ( 1,660 ) ( 180 ) ( 1,883 ) Transfer into service 892 61,895 ( 62,787 ) — Net book value at December 31, 2019 12,823 177,030 4,308 194,161 Gross book value at end of period 35,456 412,915 4,308 452,679 Accumulated depreciation at end of period ( 22,633 ) ( 235,885 ) — ( 258,518 ) Net book value at January 1, 2020 12,823 177,030 4,308 194,161 Additions to property, plant and equipment 771 38,932 13,164 52,867 Disposal of property, plant and equipment net of accumulated depreciation ( 2,786 ) ( 1,527 ) — ( 4,313 ) Depreciation expense ( 3,815 ) ( 59,482 ) — ( 63,297 ) Change in consolidation scope — ( 11 ) 17 6 Currency translation adjustment 78 9,485 518 10,081 Transfer into service 247 3,596 ( 3,843 ) — Net book value at December 31, 2020 $ 7,318 $ 168,023 $ 14,164 $ 189,505 Gross book value at end of period 29,606 439,089 14,164 482,859 Accumulated depreciation at end of period ( 22,288 ) ( 271,066 ) — ( 293,354 ) The increase in property plant and equipment (gross book value and accumulated depreciation) mainly includes purchases of server equipment in the French, American and Japanese subsidiaries where the Company’s data center equipment are located. F-29 Note 8. Intangible assets Changes in net book value during the presented periods are summarized below: Software Technology and customer relationships Construction in Progress Total (in thousands) Net book value at January 1, 2019 $ 13,266 $ 93,317 $ 5,453 $ 112,036 Additions to intangible assets 2,627 — 9,548 12,175 Disposal of intangible assets — — — — Amortization and impairment expense ( 8,982 ) ( 27,906 ) — ( 36,888 ) Change in consolidation scope 111 — — 111 Currency translation adjustment ( 232 ) ( 207 ) ( 109 ) ( 548 ) Transfer into service 12,325 — ( 12,325 ) — Net book value at December 31, 2019 19,115 65,204 2,567 86,886 Gross book value at end of period 56,501 144,226 2,567 203,294 Accumulated amortization and impairment at end of period ( 37,386 ) ( 79,022 ) — ( 116,408 ) Net book value at January 1, 2020 19,115 65,204 2,567 86,886 Additions to intangible assets 3,169 — 11,246 14,415 Disposal of intangible assets — — — — Amortization and impairment expense ( 9,420 ) ( 15,520 ) — ( 24,940 ) Change in consolidation scope 64 — — 64 Currency translation adjustment 1,460 1,142 717 3,319 Transfer into service 2,211 — ( 2,211 ) — Net book value at December 31, 2020 $ 16,599 $ 50,826 $ 12,319 $ 79,744 Gross book value at end of period 66,851 148,063 12,319 227,233 Accumulated amortization and impairment at end of period ( 50,252 ) ( 97,237 ) — ( 147,489 ) Additions to software mainly consist of capitalization of internally developed internal-use software and IT licenses. In 2019 we accounted for in "Amortization and depreciation expense" to a change in useful life of Manage technology based on the early decommissioning of the Manage platform ($ 2.2 million) and an impairment loss of Manage customers relationships ($ 4.6 million) driven by lower business performance compared to expectations at the time of the acquisition, largely due to high client concentration and a volatile business environment. The Manage customer relationships were written down to their estimated fair value, calculated under the discounted cash flows model. The average life of software is 3 years. The average life of technology and customer relationships, consisting of identified intangible assets arising from HookLogic and Storetail business combinations, is between 3 and 9 years. F-30 As of December 31, 2020, expected amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands): Software Technology and customer relationships Total 2021 $ 12,336 $ 11,704 $ 24,040 2022 9,377 11,704 21,081 2023 6,372 11,158 17,530 2024 767 8,700 9,467 2025 66 7,560 7,626 Thereafter — — — Total $ 28,918 $ 50,826 $ 79,744 Note 9. Goodwill Goodwill (in thousands) Balance at January 1, 2019 $ 312,881 Additions to goodwill 5,277 Currency translation adjustment ( 1,058 ) Balance at December 31, 2019 317,100 Additions to goodwill 2,807 Currency translation adjustment 5,898 Balance at December 31, 2020 $ 325,805 Additions to goodwill in 2020 and 2019, were due to one business combination, and two business combination, respectively considered as not material to our consolidated financial statements. In addition, on the basis of our impairment assessment as of December 31, 2020, no impairment has been detected. F-31 Note 10. Non-Current Financial Assets Non-current financial assets are mainly composed of (i) an interest-bearing bank deposit amounting to $ 6.9 million, which is pledged to the benefit of a bank in order to secure the first-demand bank guarantee in connection with our headquarters premises, and (ii) guarantee deposits for office rentals in France, Spain, the United Kingdom, the United States, Japan and Singapore. Note 11. Contingencies Changes in provisions during the presented periods are summarized below: Provision for employee- related litigation Other provisions Total (in thousands) Balance at January 1, 2019 $ 244 $ 2,396 $ 2,640 Charges 461 3,797 4,258 Provision used ( 82 ) — ( 82 ) Provision released not used — ( 402 ) ( 402 ) Currency translation adjustments ( 3 ) ( 26 ) ( 29 ) Balance at January 1, 2020 $ 620 $ 5,765 $ 6,385 Charges 507 994 1,501 Provision used — ( 831 ) ( 831 ) Provision released not used (*) ( 33 ) ( 2,207 ) ( 2,240 ) Currency translation adjustments 85 26 111 Other (**) — ( 2,676 ) ( 2,676 ) Balance at December 31, 2020 $ 1,179 $ 1,071 $ 2,250 - of which current $ 1,179 $ 1,071 $ 2,250 - of which non-current $ — $ — $ — * Due to changes in management's best estimates of the future outflow ** Transfer to Other liabilities due to tax notification received confirming the amount owed The amount of the provisions represents management’s best estimate of the future outflow. F-32 Note 12. Financial Liabilities We are party to several loan agreements and a revolving credit facility, or RCF, with third-party financial institutions. Our loans and RCF agreements are presented in the table below: Nominal/ Authorized amounts (RCF Only) Amount drawn as of December 31, 2020 (RCF only) Amount Outstanding as of December 31, 2020 Nature (in thousands) Interest rate Settlement date BPI Loan - February 2014 NA NA $ 368.1 Fixed: 2.09 % May 2021 Other BPI Loans NA NA $ 912.0 — % 2023 and after Other Loans NA NA $ 224.8 — % 2024 Bank Syndicate RCF - September 2015 (1) € 350,000 $ — $ — Floating rate: EURIBOR / LIBOR + margin depending on leverage ratio March 2022 (1) Subsequent to the settlement date of March 2022, the authorized amount of € 350 million is reduced to € 294 million through to a new settlement date of March 2023 In September 2015, Criteo entered into a 5 year revolving credit facility for general corporate purposes, including acquisitions, for a maximum amount of € 250 million ($ 306.8 million), with a bank syndicate composed of Natixis (coordinator and documentation agent), Le Credit Lyonnais (LCL) (facility agent), HSBC France, Société Générale Corporate & Investment Banking and BNP Paribas (each acting individually as bookrunners and mandated lead arrangers). In 2017, this agreement was amended by, among other things, increasing the amount of facility to € 350.0 million ($ 429.4 million) and extending the term of the contract from 2020 to 2022. In 2020, 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 ($ 429.4 million) commitment through March 2022, and a € 294 million ($ 360.8 million) commitment from the end of March 2022 through March 2023. This multi-currency revolving credit facility bears interest rate at Euribor or the relevant Libor plus a margin to be adjusted on the basis of the leverage ratio. Besides this RCF agreement, Criteo is part of many credit lines it entered into or maintained following acquisitions. Criteo specifically has agreements with Bpifrance Financement (French Public Investment Bank) for a total amount outstanding as of December 31, 2020 of € 1.0 million ($ 1.3 million). All of these loans and revolving credit facilities are unsecured and contain customary events of default but do not contain any affirmative, financial or negative covenants, with the exception of the September 2015 revolving credit facility which contains covenants, including compliance with a total net debt to adjusted EBITDA ratio and restrictions on the incurrence of additional indebtedness. At December 31, 2020, we were in compliance with the required leverage ratio. Criteo intends to repay the BPI bank loans in 2021, prior to their settlement date. The following table shows the maturity of our financial liabilities: Maturity Carrying value 2021 2022 2023 2024 2025 2026 (in thousands) Borrowings $ 1,505 $ 1,505 Other financial liabilities 845 459 45 — — 341 — Financial derivatives 925 925 — — — — — Financial liabilities 3,275 2,889 45 — — 341 — F-33 Note 13. Leases The components of lease expense are as follows: Three Months Ended Twelve Months Ended December 31, 2020 Offices Data Centers Total Offices Data Centers Total Lease expense $ 8,413 $ 5,331 $ 13,744 $ 29,183 $ 25,850 $ 55,033 Short term lease expense 487 335 822 819 335 1,154 Variable lease expense 124 ( 110 ) 14 444 — 444 Sublease income ( 242 ) — ( 242 ) ( 756 ) — ( 756 ) Total operating lease expense $ 8,782 $ 5,556 $ 14,338 $ 29,690 $ 26,185 $ 55,875 Three Months Ended Twelve Months Ended December 31, 2019 Offices Data Centers Total Offices Data Centers Total Lease expense $ 11,833 $ 7,169 $ 19,002 $ 38,910 $ 24,596 $ 63,506 Short term lease expense 352 253 605 2,296 1,826 4,122 Variable lease expense 141 ( 958 ) ( 817 ) 599 — 599 Sublease income ( 378 ) — ( 378 ) ( 2,916 ) — ( 2,916 ) Total operating lease expense $ 11,948 $ 6,464 $ 18,412 $ 38,889 $ 26,422 $ 65,311 F-34 As of December 31, 2020, we had future minimum lease payments as follows: December 31, 2020 Offices Data Centers Total (in thousands) 2021 $ 29,463 $ 24,102 $ 53,565 2022 27,737 11,656 39,393 2023 17,818 4,427 22,245 2024 8,424 2,274 10,698 2025 7,211 380 7,591 Thereafter 2,424 — 2,424 Total minimum lease payments 93,077 42,839 135,916 Impact of Discount Rate ( 3,103 ) ( 1,418 ) ( 4,521 ) Total Lease Liability $ 89,974 $ 41,421 $ 131,395 The weighted average remaining lease term and discount rates as of December 31, 2020 and 2019 are as follows: December 31, 2020 December 31, 2019 Weighted average remaining lease term (years) Offices 3.59 4.52 Data Centers 2.18 2.52 Weighted average discount rate Offices 1.97 % 2.47 % Data Centers 1.51 % 1.85 % Supplemental cash flow information related to our operating leases is as follows for the period December 31, 2020 and 2019: Twelve Months Ended December 31, 2020 2019 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Cash flow for operating activities $ ( 61,343 ) $ ( 54,259 ) Right of use assets obtained in exchange for new operating lease liabilities $ 57,550 $ 15,714 F-35 As of December 31, 2020, we have additional operating leases, that have not yet commenced which will result in additional operating lease liabilities and right of use assets: Offices Data Centers (in thousands) Additional operating lease liabilities $ — $ 7,900 Additional right of use assets $ — $ 7,900 These operating leases will commence during the fiscal year ending December 31, 2021. During the three months period ended December 31, 2020 and December 31, 2019, we incurred an impairment loss of $ 0.0 million and $ 8.9 million, respectively, on certain right of use assets due to the implementation of management's facilities right sizing program. We used market quotes in determining the fair value of the right of use assets. The impairment loss was classified between Research and Development expenses of $ 0.0 million, and $ 0.7 million, Sales and Operations expenses of $ 0.0 million and $ 6.4 million, and General and Administrative expenses of $ 0.0 million and $ 1.8 million. During the year ended December 31, 2020 and December 31, 2019, we incurred an impairment loss of $ 1.6 million, and $ 8.9 million, respectively, on certain right of use assets due to the implementation of management's facilities right sizing program. We used market quotes in determining the fair value of the right of use assets. The impairment loss was classified between Research and Development expenses of $ 0.2 million and $ 0.7 million, Sales and Operations expenses of $ 1.1 million and $ 6.4 million, and General and Administrative expenses of $ 0.3 million and $ 1.8 million. Note 14. Other Current Liabilities Other current liabilities are presented in the following table: Year Ended December 31, 2020 2019 (in thousands) Clients' prepayments $ 12,234 $ 13,618 Credit notes 14,433 16,420 Accounts payable relating to capital expenditures 4,721 4,408 Other creditors 1,918 1,213 Deferred revenue 84 227 Total $ 33,390 $ 35,886 F-36 Note 15. Employee Benefits Defined Benefit Plans According to the French law and the Syntec Collective Agreement, French employees are entitled to compensation paid on retirement. The following table summarizes the changes in the projected benefit obligation: Year Ended December 31, 2020 2019 2018 (in thousands) Projected benefit obligation present value - beginning of period $ 8,485 $ 5,537 $ 5,149 Service cost 2,232 1,556 1,690 Interest cost 95 113 86 Actuarial losses (gains) ( 5,214 ) 1,374 ( 1,235 ) Change in consolidation scope — — 98 Currency translation adjustment 569 ( 95 ) ( 251 ) Projected benefit obligation present value - end of period $ 6,167 $ 8,485 $ 5,537 The Company does not hold any plan assets for any of the periods presented. The main assumptions used for the purposes of the actuarial valuations are listed below: Year Ended December 31, 2020 2019 2018 Discount rate (Corp AA) 0.85 % 1.1 % 2.1 % Expected rate of salary increase 5.0 % 5.0 % 5.0 % Expected rate of social charges 49.0 % - 50.0 % 49.0 % - 50.0 % 49.0 % - 50.0 % Expected staff turnover — % - 17.8 % — % - 10.5 % — % - 10.5 % Estimated retirement age Progressive table Progressive table Progressive table Life table TH-TF 2000-2002 shifted TH-TF 2000-2002 shifted TH-TF 2000-2002 shifted Defined Contribution Plans The total expense represents contributions payable to these plans by us at specified rates. In some countries, the Group’s employees are eligible for pension payments and similar financial benefits. The Group provides these benefits via defined contribution plans. Under defined contribution plans, the Group has no obligation other than to pay the agreed contributions, with the corresponding expense charged to income for the year. The main contributions concern France, the United States, for 401k plans, and the United Kingdom. Year Ended December 31, 2020 2019 2018 (in thousands) Defined contributions plans included in personnel expenses $ ( 16,211 ) $ ( 15,686 ) $ ( 16,912 ) F-37 Note 16. Common shares and Treasury stock Change in Number of Shares Number of ordinary shares Balance at January 1, 2019 64,249,084 of which Common shares 67,708,203 of which Treasury stock ( 3,459,119 ) Issuance of shares under share option and free share plans (1) 83,266 Treasury shares retired (2) ( 1,594,288 ) Share repurchase program (see Note 2) ( 444,554 ) Balance at December 31, 2019 62,293,508 of which Common shares 66,197,181 of which Treasury stock ( 3,903,673 ) Issuance of shares under share option and free share plans (3) 231,784 Storetail deferred consideration ( 156,859 ) Share repurchase program (see Note 2) ( 1,728,863 ) Balance at December 31, 2020 60,639,570 of which Common shares 66,272,106 of which Treasury stock ( 5,632,536 ) (1) Adopted by the Board of Directors on March 1, 2019, April 25, 2019, June 25, 2019, July 25, 2019, October 24, 2019 and December 11, 2019. (2) On February 8th, 2019, the Board acknowledged the share capital decrease resulting from the cancellation of 1,594,288 shares and approved the related amendment of Article 6 of the Company’s by-laws reflecting such decrease. (3) Adopted by the Board of Directors on March 3, 2020, April 23, 2020, June 22, 2020, July 23, 2020, October 23, 2020 and December 9, 2020 F-38 Note 17. Nature of Expenses Allocated by Function Nature of Expenses Allocated to Cost of Revenue Year Ended December 31, 2020 2019 2018 (in thousands) Traffic acquisition costs $ ( 1,247,571 ) $ ( 1,314,947 ) $ ( 1,334,334 ) Other cost of revenue ( 137,028 ) ( 117,533 ) ( 131,744 ) Hosting costs ( 61,458 ) ( 57,139 ) ( 54,764 ) Depreciation and amortization ( 55,935 ) ( 44,866 ) ( 67,346 ) Data acquisition ( 4,961 ) ( 2,410 ) ( 282 ) Other cost of sales ( 14,674 ) ( 13,118 ) ( 9,352 ) Total cost of revenue $ ( 1,384,599 ) $ ( 1,432,480 ) $ ( 1,466,078 ) Nature of Expenses Allocated to Research and Development Year Ended December 31, 2020 2019 2018 (in thousands) Personnel expenses $ ( 90,525 ) $ ( 116,803 ) $ ( 130,696 ) Personnel expense excluding equity awards compensation expense and research tax credit ( 97,396 ) ( 123,696 ) ( 120,024 ) Equity awards compensation expense ( 9,771 ) ( 9,320 ) ( 21,359 ) Research tax credit 16,642 16,213 10,687 Other cash operating expenses ( 30,115 ) ( 37,820 ) ( 37,119 ) Subcontracting and other headcount related costs ( 10,706 ) ( 16,343 ) ( 15,129 ) Rent and facilities costs ( 12,196 ) ( 14,009 ) ( 14,201 ) Consulting and professional fees ( 4,782 ) ( 4,416 ) ( 3,320 ) Marketing costs ( 2,135 ) ( 3,818 ) ( 4,976 ) Other ( 296 ) 766 507 Other non-cash operating expenses ( 11,873 ) ( 17,968 ) ( 11,448 ) Depreciation and amortization ( 10,759 ) ( 17,208 ) ( 10,602 ) Net change in other provisions ( 1,114 ) ( 760 ) ( 846 ) Total research and development expenses $ ( 132,513 ) $ ( 172,591 ) $ ( 179,263 ) F-39 Nature of Expenses Allocated to Sales and Operations Year Ended December 31, 2020 2019 2018 (in thousands) Personnel expenses $ ( 222,370 ) $ ( 243,733 ) $ ( 244,256 ) Personnel expense excluding equity awards compensation expense ( 212,081 ) ( 226,849 ) ( 215,615 ) Equity awards compensation expense ( 10,289 ) ( 16,884 ) ( 28,641 ) Other cash operating expenses ( 70,680 ) ( 109,268 ) ( 104,960 ) Subcontracting and other headcount related costs ( 13,338 ) ( 24,655 ) ( 25,706 ) Rent and facilities costs ( 29,713 ) ( 32,353 ) ( 32,398 ) Marketing costs ( 2,882 ) ( 20,804 ) ( 17,864 ) Consulting and professional fees ( 9,660 ) ( 6,988 ) ( 5,330 ) Operating taxes ( 4,268 ) ( 6,197 ) ( 11,788 ) Other including bad debt expense ( 10,819 ) ( 18,271 ) ( 11,874 ) Other non-cash operating expenses ( 37,235 ) ( 22,476 ) ( 23,491 ) Depreciation and amortization ( 18,495 ) ( 30,620 ) ( 18,245 ) Net change in provisions for doubtful receivables ( 19,264 ) 9,740 ( 5,453 ) Net change in other provisions 524 ( 1,596 ) 207 Total sales and operations expenses $ ( 330,285 ) $ ( 375,477 ) $ ( 372,707 ) Nature of Expenses Allocated to General and Administrative Year Ended December 31, 2020 2019 2018 (in thousands) Personnel expenses $ ( 66,062 ) $ ( 75,815 ) $ ( 76,476 ) Personnel expense excluding equity awards compensation expense ( 57,351 ) ( 61,020 ) ( 59,876 ) Equity awards compensation expense ( 8,711 ) ( 14,795 ) ( 16,600 ) Other cash operating expenses ( 47,950 ) ( 52,057 ) ( 48,687 ) Subcontracting and other headcount related costs ( 9,576 ) ( 14,781 ) ( 16,638 ) Rent and facilities costs ( 11,228 ) ( 11,951 ) ( 11,081 ) Marketing costs ( 1,645 ) ( 3,130 ) ( 1,061 ) Consulting and professional fees ( 20,081 ) ( 19,329 ) ( 18,163 ) Other ( 5,420 ) ( 2,866 ) ( 1,744 ) Other non-cash operating expenses ( 2,383 ) ( 11,882 ) ( 9,996 ) Depreciation and amortization ( 4,153 ) ( 8,825 ) ( 7,306 ) Net change in other provisions 1,770 ( 3,057 ) ( 2,690 ) Total general and administrative expenses $ ( 116,395 ) $ ( 139,754 ) $ ( 135,159 ) F-40 Note 18. Allocation of Personnel Expenses Allocation of Personnel Expenses By Function Year Ended December 31, 2020 2019 2018 (in thousands) Research and development expenses $ ( 90,525 ) $ ( 116,803 ) $ ( 130,696 ) Sales and operations expenses ( 222,370 ) ( 243,733 ) ( 244,256 ) General and administrative expenses ( 66,062 ) ( 75,815 ) ( 76,476 ) Total personnel expenses $ ( 378,957 ) $ ( 436,351 ) $ ( 451,428 ) Allocation of Personnel Expenses by Nature Year Ended December 31, 2020 2019 2018 (in thousands) Wages and salaries $ ( 278,934 ) $ ( 306,862 ) $ ( 296,336 ) Severance pay ( 5,251 ) ( 12,504 ) ( 6,922 ) Social charges ( 75,552 ) ( 76,594 ) ( 77,284 ) Other social expenses ( 7,091 ) ( 15,513 ) ( 14,375 ) Equity awards compensation expense ( 28,771 ) ( 40,999 ) ( 66,600 ) Profit sharing — ( 92 ) ( 598 ) Research tax credit (classified as a reduction of R&D expenses) 16,642 16,213 10,687 Total personnel expenses $ ( 378,957 ) $ ( 436,351 ) $ ( 451,428 ) F-41 Note 19. Share-Based Compensation Share Options Plans and Employee Warrants Grants (BSPCE) 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 “BSPCE”) and to implement share options, free shares plans as follows: • Issuance of 2,112,000 BSPCE, authorized at the General Meeting of Shareholders on October 24, 2008, making available up to 2,112,000 BSPCE until April 24, 2010 (“Plan 1”); • Issuance of 1,472,800 BSPCE, authorized at the General Meeting of Shareholders on April 16, 2009, making available up to 1,472,800 BSPCE until October 16, 2010 (“Plan 2”); • 1,584,000 Share Options, authorized at the General Meeting of Shareholders on September 9, 2009, making available up to 1,584,000 share options until November 8, 2012. This Plan has been amended at the General Meeting of Shareholders on November 16, 2010, making available up to 2,700,000 share options or BSPCE (“Plan 3”); • Issuance of 361,118 BSPCE, granted to Criteo co-founders at the General Meeting of Shareholders on April 23, 2010 (“Plan 4”); • 2,800,000 BSPCE or Share Options (Options de Souscription d'Actions or “OSA”) , authorized at the General Meeting of Shareholders on November 18, 2011, making available up to 2,800,000 share options or BSPCE (“Plan 5”); • 1,654,290 BSPCE or Share Options, authorized at the General Meeting of Shareholders on September 14, 2012, making available up to 1,654,290 share options or BSPCE (“Plan 6”). • 6,627,237 BSPCE or Share Options, authorized at the General Meeting of Shareholders on August 2, 2013, making available up to 6,627,237 share options or BSPCE (“Plan 7”). • 9,935,710 Share Options, authorized at the General Meeting of Shareholders on June 18, 2014, making available up to 9,935,710 share options (“Plan 8”). The Board of Directors has also authorized free shares/restricted stock units ("RSUs") to Criteo employees under presence condition and to certain senior managers, employees and members of the Management, subject to the achievement of internal performance objectives and presence condition. • 4,600,000 Share Options or RSUs, authorized at the General Meeting of Shareholders on June 29, 2016 and 100,000 BSAs (any BSA granted will also be deducted from the 4,600,000 limit), such authorizations collectively referred to as “Plan 9”. The Board of Directors has authorized RSUs to Criteo employees subject to a presence condition and to certain senior managers, employees and members of management, subject to the achievement of internal performance objectives and a presence condition. • 4,600,000 Share Options or RSUs, authorized at the General Meeting of Shareholders on June 28, 2017 and 120,000 BSAs (any BSA granted will also be deducted from the 4,600,000 limit), such authorizations collectively referred to as “Plan 10”. The Board of Directors has authorized RSUs to Criteo employees subject to a presence condition and to certain senior managers, employees and members of management, subject to the achievement of internal performance objectives and a presence condition. • 4,200,000 Share Options or RSUs, authorized at the General Meeting of Shareholders on June 27, 2018 and 150,000 BSAs (any BSA granted will also be deducted from the limit), such authorizations collectively referred to as “Plan 11”. The Board of Directors has authorized RSUs to Criteo employees subject to a presence condition and to certain senior managers, employees and members of management, subject to the achievement of internal performance objectives and a presence condition. • 6,200,000 Share Options or RSUs, authorized at the General Meeting of Shareholders on May 16, 2019 and 175,000 BSAs (any BSA granted will also be deducted from the limit), such authorizations collectively referred to as “Plan 12”. The Board of Directors has authorized RSUs to Criteo employees subject to a presence condition and to members of management, subject to the achievement of internal performance objectives and a presence condition. F-42 • 6,463,000 Share Options or RSUs, authorized at the General Meeting of Shareholders on June 25, 2020, such authorizations collectively referred to as “Plan 13”. The Board of Directors has authorized RSUs to Criteo employees subject to a presence condition and to members of management, subject to the achievement of internal performance objectives and a presence condition. Upon the exercise of the BSPCEs or Share Options, we grant beneficiaries newly issued ordinary shares of the Parent. We also grant beneficiaries ordinary shares of the Parent upon the vesting of RSUs. Prior to the beginning of our share repurchase programs described elsewhere in this Form 10-K, these grants relating to vested RSUs were completed using newly issued ordinary shares. Since the initiation of our share repurchase programs, the grants relating to vested RSUs are completed using existing ordinary shares that were repurchased as part of our share repurchase programs. The vesting schedule for the BSPCEs and OSAs is the following for the Plans 1, 2 and 3: • up to one third (1/3) of the BSPCEs on the first anniversary of the date of grant; • up to one twelfth (1/12) at the expiration of each quarter following the first anniversary of the date of grant, and this during twenty-four ( 24 ) months thereafter. • The BSPCEs and OSAs may be exercised at the latest within ten ( 10 ) years from the date of grant. For the Plan 3 amended to Plan 13, the vesting schedule is as follows: • up to one fourth (1/4) of the BSPCEs/share options on the first anniversary of the date of grant; • up to one-sixteenth (1/16) at the expiration of each quarter following the first anniversary of the date of grant, and this during thirty-six ( 36 ) months thereafter. • The BSPCEs and OSAs may be exercised at the latest within ten ( 10 ) years from the date of grant. The vesting schedule for the RSUs is as follows: • 50 % at the expiration of a two year period • 6.25 % at the expiration of each quarter following the first two years-period during twenty four ( 24 ) months. When the Company was not listed, exercise prices were determined by reference to the latest capital increase as of the date of grant, unless the Board of Directors decided otherwise. Since our initial public offering, exercise prices are determined by reference to the closing share price the day before the date of the grant if higher than a floor value of 95 % of the average of the closing share price for the last 20 trading days. In the following tables, exercise prices, grant date share fair values and fair value per equity instruments are provided in euros, as the Company is incorporated in France and the euro is the currency used for the grants. F-43 Details of BSPCE / OSA / RSU plans Plans 1 & 2 Plan 3 Plan 5 Plan 6 Plan 7 Plan 8 Plan 9 Plan 10 Plan 11 Plan 12 Plan 13 Dates of grant (Boards of Directors) Oct 24, 2008 - Sept 14, 2010 Sept 9, 2009 - Sept 21, 2011 Nov 18, 2011 - May 22, 2012 Oct 25, 2012 Oct 25, 2012 - April 18, 2013 Sept 3, 2013 - April 23, 2014 July 30, 2014 - June 28, 2016 July 28, 2016 - June 27, 2017 July 27, 2017 - June 26, 2018 July 26, 2018 - June 25, 2019 July 25, 2019 - June 24, 2020 June 25, 2020 - December 15, 2020 Vesting period 3.0 years 3.0 - 4.0 years 4.0 years 1.0 year 4.0 - 5.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years 4.0 years Contractual life 10.0 years 10.0 years 10.0 years 10.0 years 10.0 years 10.0 years 10.0 years 0.0 years 10.0 years 0.0 years 10.0 years 0.0 years 10.0 years 0.0 years 10.0 years 0.0 years 0.0 years Expected option life 8.0 years 8.0 years 8.0 years 8.0 years 8.0 years 6.0 - 8.0 years 6.0 years 0.0 years 6.0 years 0.0 years 6.0 years 0.0 years 6.0 years 0.0 years 6.0 years 0.0 years 0.0 years Number of instruments granted 1,819,120 4,289,940 1,184,747 257,688 1,065,520 2,317,374 4,318,551 2,534,262 502,410 2,556,315 947,565 2,150,498 128,380 2,712,014 515,980 3,733,588 858,467 Type : Share Option (S.O.) / BSPCE / RSU BSPCE BSPCE & OSA BSPCE & OSA BSPCE BSPCE & OSA BSPCE & OSA OSA RSU OSA RSU OSA RSU OSA RSU OSA RSU RSU Share entitlement per option 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Exercise price € 0.45 - € 2.1 € 0.2 - € 5.95 € 5.95 € 8.28 € 8.28 - € 10.43 € 12.08 - € 38.81 € 22.95 - € 47.47 — € 38.2 - € 43.45 — € 24.63 - € 28.69 — € 15.86 - € 17.98 — € 8.66 - € 15.67 — — Valuation method Black & Scholes Grant date share fair value € 0.2 - € 0.7 € 0.20 - € 4.98 € 4.98 € 6.43 € 5.45 - € 6.43 € 12.08 - € 38.81 € 22.50 - € 47.47 € 35.18 - € 35.58 € 38.20 - € 43.45 € 33.98 - € 49.08 € 24.63 - € 28.69 € 22.92 - € 44.37 € 15.86 - € 17.98 € 24.92 - € 44.37 € 8.66 - € 15.67 € 3.29 - € 17.44 € 10.79 - € 15.57 Expected volatility (1) 53.0 % - 55.7 % 55.2 % - 57.8 % 52.1 % - 52.9 % 50.2 % 49.6 % - 50.2 % 44.2 % - 50.1 % 39.4 % - 44.5 % — 40.6 % - 41.3 % — 41.0 % - 41.5 % — 40.7 % - 41.2 % — 39.2 % - 39.9 % — — Discount rate (2) 2.74 % - 4.10 % 2.62 % - 3.76 % 2.79 % - 3.53 % 2.20 % 1.80 % - 2.27 % 1.20 % - 2.40 % — % - 0.71 % N/A N/A N/A 0.60 % - 0.70 % N/A 0.10 % - 0.90 % N/A — % - 0.25 % N/A N/A Performance conditions No Yes (A) No Yes (B) No No No Yes (C) No Yes (D) (E) No No No Yes (F) No Yes (G) (H) Yes (H) Fair value per option / RSU € 0.08 - € 0.45 € 0.08 - € 2.88 € 2.75 - € 2.85 € 3.28 € 3.28 - € 5.83 € 6.85 - € 16.90 € 9.47 - € 17.97 € 26.16 - € 37.10 € 14.49 - € 16.82 € 33.98 - € 49.08 € 9.85 - € 11.40 € 22.92 - € 44.37 € 6.15 - € 6.94 € 15.86 - € 30.80 € 3.29 -€ 5.78 € 8.66 -€ 17.44 € 10.79 - € 15.57 (1) Based on similar listed entities. (2) Based on Obligation Assimilables du Trésor, i.e. French government bonds with a ten-year maturity (“TEC 10 OAT floating-rate bonds”). (A) Options subject to performance condition: Among the 960,000 share options granted in April 7, 2011, 180,000 are subjected to performance conditions based on revenue excluding traffic acquisition costs targets that were met in 2012. (B) On October 25, 2012, the Board of Directors of the Parent also granted a total of 257,688 BSPCE to our co-founders. The conditions of exercise of these BSPCE are linked to a future liquidity event or a transfer of control of the Company, and the number of BSPCE that can be exercised are determined by the event’s date which cannot occur after March 31, 2014. Based on the assumptions known as at December 31, 2012, we determined that the share-based compensation expense would be recognized over a one -year period. This assumption was confirmed in 2013. (C) On October 29, 2015, the Board of Directors of the Parent also granted a total of 337,960 RSU to Criteo employees under condition of presence and to certain senior managers, employees and members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2015, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. This assumption was confirmed in 2016. On January 29, 2016, the Board of Directors of the Parent granted a total of 33,010 RSUs to members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2016, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. This assumption was confirmed in 2016. (D) On July 28, 2016, the Board of Directors of the Parent granted a total of 195,250 RSUs to certain senior managers and members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2016, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. This assumption was confirmed in 2017. (E) On June 27, 2017, the Board of Directors of the Parent granted a total of 135,500 RSUs to certain senior managers and members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2017, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. This assumption was confirmed in 2018. (F) On July 26, 2018, the Board of Directors of the Parent granted a total of 203,332 RSUs to certain senior managers and members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2018, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. (G) On April 25, 2019, the Board of Directors of the Parent granted a total of 257,291 RSUs to members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2019, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. (H) On March 3, 2020, October 23, 2020 and December 9, 2020 the Board of Directors of the Parent granted a total of 272,600 RSUs to members of the management, subject to the achievement of internal performance objectives and condition of presence. Based on the assumptions known at December 31, 2020, we determined the share-based compensation expense by applying a probability ratio on performance objectives completion. F-44 Change in Number of outstanding BSPCE / OSA / RSU OSAs RSUs Total Balance at January 1, 2018 3,192,708 4,212,508 7,405,216 Granted 1,013,065 3,133,644 4,146,709 Exercised (BSPCE and OSA) ( 137,348 ) — ( 137,348 ) Vested (RSU) — ( 1,362,873 ) ( 1,362,873 ) Forfeited ( 880,960 ) ( 1,203,142 ) ( 2,084,102 ) Expired — — — Balance at December 31, 2018 3,187,465 4,780,137 7,967,602 Granted 438,347 3,147,751 3,586,098 Exercised (BSPCE and OSA) ( 83,266 ) — ( 83,266 ) Vested (RSU) — ( 1,219,112 ) ( 1,219,112 ) Forfeited ( 983,012 ) ( 1,729,789 ) ( 2,712,801 ) Expired — — — Balance at December 31, 2019 2,559,534 4,978,987 7,538,521 Granted 140,513 2,684,402 2,824,915 Exercised (BSPCE and OSA) ( 223,934 ) — ( 223,934 ) Vested (RSU) — ( 1,478,894 ) ( 1,478,894 ) Forfeited ( 370,355 ) ( 1,230,404 ) ( 1,600,759 ) Expired ( 3,600 ) — ( 3,600 ) Balance at December 31, 2020 2,102,158 4,954,091 7,056,249 F-45 Breakdown of the Closing Balance Plans 1 & 2 Plan 3 Plan 5 Plan 6 Plan 7 Plan 8 Plan 9 Plan 10 Plan 11 Plan 12 RSUs Total Balance at December 31, 2018 Number outstanding $ 3,600 $ 67,751 $ 242,613 $ 41,338 $ 306,172 $ 1,599,033 $ 328,726 $ 532,732 $ 65,500 $ — $ 4,780,137 $ 7,967,602 Weighted-average exercise price € 0.70 € 4.43 € 5.95 € 9.26 € 17.95 € 30.99 € 41.75 € 25.79 € 18.72 € — € — € 26.94 Number exercisable 3,600 67,751 242,613 41,338 306,172 1,417,904 161,658 — — — — 2,241,036 Weighted-average exercise price € 0.70 € 4.43 € 5.95 € 9.26 € 17.95 € 30.04 € 41.37 € — € — € — € — € 25.39 Weighted-average remaining contractual life 1.2 years 2.4 years 3.3 years 4.0 years 4.9 years 6.2 years 8.2 years 9.3 years 9.8 years — — 6.7 years Balance at December 31, 2019 Number outstanding 3,600 63,544 230,673 26,350 216,157 1,080,017 116,580 318,766 128,380 375,467 4,978,987 7,538,521 Weighted-average exercise price € 0.70 € 4.37 € 5.95 € 9.28 € 17.70 € 29.69 € 41.50 € 26.58 € 17.32 € 15.67 € — € 23.09 Number exercisable 3,600 63,544 230,673 26,350 216,157 1,066,670 80,966 129,908 16,375 — — 1,834,243 Weighted-average exercise price € 0.70 € 4.37 € 5.95 € 9.28 € 17.70 € 29.58 € 41.17 € 26.42 € — € — € — € 24.12 Weighted-average remaining contractual life 0.2 years 1.4 years 2.3 years 3.0 years 3.9 years 5.1 years 7.1 years 8.3 years 9.1 years 9.9 years — 6.2 years Balance at December 31, 2020 Number outstanding — 42,644 101,852 20,870 104,131 921,534 97,013 169,754 128,380 515,980 4,954,091 7,056,249 Weighted-average exercise price € — € 5.31 € 5.95 € 9.36 € 20.05 € 29.82 € 41.18 € 26.46 € 17.32 € 13.76 € — € 26.81 Number exercisable — 42,644 101,852 20,870 104,131 921,534 97,013 169,754 56,330 93,867 — 1,607,995 Weighted-average exercise price € — € 5.31 € 5.95 € 9.36 € 20.05 € 29.82 € 41.18 € 26.46 € 17.52 € — € — € 24.87 Weighted-average remaining contractual life — 0.5 years 1.3 years 2.1 years 2.9 years 4.2 years 6.1 years 7.3 years 8.1 years 9.0 years — 5.8 years F-46 Non-Employee Warrants (Bons de Souscription d’Actions or BSA) In addition to the RSUs, share options and BSPCE grants, the shareholders of the Parent also authorized the grant of non-employee warrants or Bons de Souscription d’Actions (“BSA”), as indicated below: • Plan A : up to one-eighth (1/8) at the expiration of each quarter following the date of grant, and this during twenty-four ( 24 ) months; and at the latest within ten ( 10 ) years as from the date of grant. • Plan B : up to one third (1/3) of the non-employee warrants on the first anniversary of the date of grant; then up to one twelfth (1/12) at the expiration of each quarter following the first anniversary of the beginning of the vesting period, and this during twenty-four ( 24 ) months thereafter; and at the latest within ten ( 10 ) years as from the date of grant. • Plan C : up to one-twenty fourth (1/24) at the expiration of each month following the date of grant, and this during twenty-four ( 24 ) months, and at the latest within ten ( 10 ) years as from the date of grant. • Plan D (member of the advisory board) : up to one-twenty fourth (1/24) at the expiration of each month following the date of grant, and this during twenty-four ( 24 ) months; and at the latest within ten ( 10 ) years as from the date of grant. • Plan D (not member of the advisory board): one-third (1/3) at the date of grant; one third (1/3) at the first anniversary of the date of grant; one third (1/3) at the second anniversary of the date of grant; and at the latest within ten ( 10 ) years as from the date of grant. • Plans E, F, G, H and I : up to one fourth (1/4) of the non-employee warrants on the first anniversary of the date of grant; up to one-sixteenth (1/16) at the expiration of each quarter following the first anniversary of the date of grant, and this during thirty-six ( 36 ) months thereafter; and at the latest within ten ( 10 ) years from the date of grant. Upon exercise of the non-employee warrants, we offer settlement of the warrants in newly issued ordinary shares of the Parent. F-47 Details of Non-Employee Warrants Plan A Plan B Plan C Plan D Plan E Plan F Plan G Plan H Plan I Dates of grant (Boards of Directors) November 17, 2009 March 11, 2010 November 16, 2010 - September 21, 2011 October 25, 2012 - March 6, 2013 March 19, 2015 - October 29, 2015 April 20, 2016 - March 1, 2017 July 27, 2017 - October 26, 2017 October 25, 2018 October 24, 2019 Vesting period 2 years 3 years 2 years 2 years 1 - 4 years 1 - 4 years 1 - 4 years 1 - 4 years 1 - 4 years Contractual life 10 years 10 years 10 years 10 years 10 years 10 years 10 years 10 years 10 years Number of warrants granted 231,792 277,200 192,000 125,784 38,070 59,480 46,465 125,000 105,680 Share entitlement per warrant 1 1 1 1 1 1 1 1 1 Share warrant price € 0.02 € 0.07 - € 0.11 € 0.04 - € 0.30 € 0.43 - € 0.48 € 9.98 - € 16.82 € 13.89 - € 17.44 € 13.88 - € 17.55 € 6.91 € 6.81 Exercise price € 0.70 € 0.70 € 0.70 - € 5.95 € 8.28 - € 9.65 € 35.18 - € 41.02 € 33.98 - € 43.42 € 35.80 - € 44.37 € 19.71 € 17.44 Valuation method Binomial method Grant date share fair value € 0.2 € 0.7 € 0.7 - € 4.98 € 6.43 - € 9.65 € 35.18 - € 41.02 € 33.98 - € 44.33 € 35.8 - € 44.37 € 19.71 € 17.44 Expected volatility (1) 55.7 % 55.2 % 53.5 %- 55 % 50 %- 50.2 % 39.9 % 40.6 % - 40.9 % 41 %- 41.3 % 40.7 % 37.2 % Discount rate (2) 3.58 % 3.44 % 2.62 % - 3.38 % 2.13 % - 2.27 % — %- 0.52 % 0.1 % - 0.66 % 0.54 % - 0.6 % 0.6 % ( 0.2 )% Performance conditions No Yes (A) No No No No No No No Fair value per warrant € 0.05 € 0.33 - € 0.38 € 0.40 - € 2.58 € 2.85 - € 4.98 € 9.98 - € 16.82 € 13.89 - € 14.55 € 13.88 - € 17.55 € 6.91 € 6.81 (1) Based on similar listed entities. (2) Based on Obligations Assimilables du Trésor, i.e. French government bonds with a ten-year maturity (“TEC 10 OAT floating-rate bonds”). (A) All the performance conditions were achieved during the period ended December 31, 2010. F-48 Changes in Number of Non-Employee Warrants Balance at January 1, 2018 186,276 Granted 125,000 Exercised — Forfeited ( 19,606 ) Balance at December 31, 2018 291,670 Granted 105,680 Exercised — Forfeited ( 33,583 ) Balance at December 31, 2019 363,767 Granted — Exercised ( 7,250 ) Forfeited ( 12,742 ) Expired — Balance at December 31, 2020 343,775 Breakdown of the Closing Balance Non-employee warrants Balance at December 31, 2018 Number outstanding 291,670 Weighted-average exercise price € 13.02 Number exercisable 108,780 Weighted-average exercise price € 18.95 Weighted-average remaining contractual life 7.9 years Balance at December 31, 2019 Number outstanding 363,767 Weighted-average exercise price € 14.83 Number exercisable 156,604 Weighted-average exercise price € 17.52 Weighted-average remaining contractual life 7.6 years Balance at December 31, 2020 Number outstanding 343,775 Weighted-average exercise price $ 15.12 Number exercisable 205,890 Weighted-average exercise price $ 17.33 Weighted-average remaining contractual life 6.8 years F-49 Reconciliation with the Consolidated Statements of Income Balance for the year ended December 31, 2020 Balance for the year ended December 31, 2019 Balance for the year ended December 31, 2018 (in thousands) R&D S&O G&A Total R&D S&O G&A Total R&D S&O G&A Total RSUs ( 9,771 ) ( 9,891 ) ( 6,619 ) ( 26,281 ) ( 9,742 ) ( 17,282 ) ( 11,109 ) ( 38,133 ) ( 20,499 ) ( 27,025 ) ( 12,179 ) ( 59,703 ) Share options / BSPCE — ( 398 ) ( 422 ) ( 820 ) 422 398 ( 2,300 ) ( 1,480 ) ( 860 ) ( 1,616 ) ( 2,938 ) ( 5,414 ) Plan 7 — — — — — — — — ( 2 ) ( 1 ) ( 1 ) ( 4 ) Plan 8 — — ( 20 ) ( 20 ) 131 90 ( 187 ) 34 169 ( 553 ) ( 493 ) ( 877 ) Plan 9 — — 231 231 202 258 ( 314 ) 146 ( 495 ) ( 461 ) ( 902 ) ( 1,858 ) Plan 10 — — 874 874 89 178 ( 1,454 ) ( 1,187 ) ( 532 ) ( 601 ) ( 1,485 ) ( 2,618 ) Plan 11 — ( 190 ) ( 118 ) ( 308 ) — ( 128 ) ( 269 ) ( 397 ) — — ( 57 ) ( 57 ) Plan 12 — ( 208 ) ( 1,389 ) ( 1,597 ) — — ( 76 ) ( 76 ) — — — — Total share-based compensation ( 9,771 ) ( 10,289 ) ( 7,041 ) ( 27,101 ) ( 9,320 ) ( 16,884 ) ( 13,409 ) ( 39,613 ) ( 21,359 ) ( 28,641 ) ( 15,117 ) ( 65,117 ) BSAs — — ( 1,670 ) ( 1,670 ) — — ( 1,386 ) ( 1,386 ) — — ( 1,483 ) ( 1,483 ) Total equity awards compensation expense $ ( 9,771 ) $ ( 10,289 ) $ ( 8,711 ) $ ( 28,771 ) $ ( 9,320 ) $ ( 16,884 ) $ ( 14,795 ) $ ( 40,999 ) $ ( 21,359 ) $ ( 28,641 ) $ ( 16,600 ) $ ( 66,600 ) F-50 Note 20. Financial expense The Consolidated Statements of Income line item “Financial income (expense)” can be broken down as follows: Year Ended December 31, 2020 2019 2018 (in thousands) Financial income from cash equivalents $ 1,117 $ 1,528 $ 1,055 Interest and fees ( 2,811 ) ( 2,383 ) ( 2,107 ) Interest on debt ( 2,381 ) ( 1,756 ) ( 1,796 ) Fees ( 430 ) ( 627 ) ( 311 ) Foreign exchange loss ( 150 ) ( 4,425 ) ( 3,945 ) Other financial expense ( 95 ) ( 469 ) ( 87 ) Total financial expense $ ( 1,939 ) $ ( 5,749 ) $ ( 5,084 ) The $ 1.9 million financial expense for the period ended December 31, 2020 was mainly driven by the financial expense relating to the € 140 million drawing from May 2020 to November 2020 as part of our available Revolving Credit Facility (RCF) financing, the up-front fees amortization, the non-utilization costs, partially offset by income from cash & cash equivalent. At December 31, 2020, 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 $ 5.7 million financial expense for the period ended December 31, 2019 was mainly driven by the non-utilization costs and upfront fees amortization incurred as part of our available RCF financing and the recognition of a negative impact of foreign exchange reevaluations net of related hedging. At December 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. F-51 Note 21. Income Taxes Breakdown of Income Taxes The Consolidated Statements of Income line item “Provision for income taxes” can be broken down as follows: Year Ended December 31, 2020 2019 2018 (in thousands) Current income tax $ ( 28,477 ) $ ( 24,078 ) $ ( 54,301 ) France ( 16,379 ) ( 8,410 ) ( 37,223 ) International ( 12,098 ) ( 15,668 ) ( 17,078 ) Net change in deferred taxes ( 3,720 ) ( 15,418 ) 8,157 France 4,548 ( 14,109 ) 11,155 International ( 8,268 ) ( 1,309 ) ( 2,998 ) Provision for income tax $ ( 32,197 ) $ ( 39,496 ) $ ( 46,144 ) As mentioned in Note 1 (Principles and Accounting Methods), the French Research Tax Credit is not included in the line item “Provision for income taxes” but is deducted from “Research and development expenses” (see Note 18 - Allocation of Personnel Expenses) unlike the U.S. Research Tax Credit for an amount of nil , $ 5.3 million and $ 6.4 million and for the year ended December 31, 2020, 2019 and 2018, respectively. French business tax, CVAE, is included in the current tax balance for an amount of $ 5.1 million, $ 5.5 million and $ 5.9 million, for the years ended December 31, 2020 , 2019 and 2018, respectively. Income before taxes included income from France of $ 114.4 million, $ 122.7 million and $ 130.7 million for the periods ended 2020, 2019 and 2018 respectively. Income (loss) before taxes from countries outside of France totaled $( 7.5 ) million, $ 12.8 million and $ 11.3 million for the periods ended December 31, 2020, 2019 and 2018, respectively. F-52 Reconciliation between the Effective and Nominal Tax Expense The following table shows the reconciliation between the effective and nominal tax expense at the nominal standard French rate of 32.02 % (excluding additional contributions): Year Ended December 31, 2020 2019 2018 (in thousands) Income before taxes $ 106,886 $ 135,465 $ 142,023 Theoretical group tax-rates 32.02 % 34.43 % 34.43 % Nominal tax expense ( 34,225 ) ( 46,641 ) ( 48,899 ) Increase / decrease in tax expense arising from: Research tax credit (1) 5,298 10,851 10,211 Net effect of shared-based compensation (2) ( 11,604 ) ( 13,432 ) ( 17,674 ) BEAT waiver election (3) ( 18,640 ) ( 15,962 ) — Other permanent differences (4) 8,979 ( 7,667 ) ( 11,982 ) Non recognition of deferred tax assets related to tax losses and temporary differences (5) ( 6,026 ) ( 2,713 ) ( 11,664 ) Utilization or recognition of previously unrecognized tax losses (6) 2,511 20,636 4,461 French CVAE included in income taxes ( 3,464 ) ( 3,632 ) ( 3,849 ) Special tax deductions (7) 13,402 15,946 38,577 Effect of different tax rates 3,963 5,441 ( 377 ) Other differences 7,609 ( 2,323 ) ( 4,948 ) Effective tax expense $ ( 32,197 ) $ ( 39,496 ) $ ( 46,144 ) Effective tax rate 30.1 % 29.2 % 32.5 % Increases and decreases in tax expense are presented applying the theoretical Group tax rate to the concerned tax bases. The impact resulting from the differences between local tax rates and the Group theoretical rate is shown in the “effect of different tax rates.” (1) Included income tax effect of the French RTC deducted from the "Research and development expenses" and US Tax credits included in the line "Provision for income taxes". (2) While in most countries share-based compensation does not give rise to any tax effect either when granted or when exercised, the United States and the United Kingdom generally permit tax deductions in respect of share-based compensation. The tax deduction generated in the United States and United Kingdom in connection with the number of options exercised during the period was offset by the share-based compensation accounting expense exclusion. (3) Final and new proposed regulations on the Base Erosion Anti-abuse Tax (BEAT) have been issued by the United States Treasury and IRS, allowing a waiver election to permanently forgo deductions for all U.S. federal tax purposes, with the result that the foregone deductions will not be treated as a base erosion tax benefit. (4) Mainly related to employee costs, depreciation expenses and intercompany transactions. (5) Deferred tax assets on which a valuation allowance has been recognized over the periods mainly relate to Criteo Ltd, Criteo Corp, Criteo France, Criteo Singapore Pte. Ltd, Criteo do Brasil LTDA and Criteo Pty. (6) In 2019 recognition of previously unrecognized tax losses related to Criteo Corp., mainly generated by the BEAT waiver election implementation . (7) Special tax deductions refer to the application of a reduced income tax rate on the majority of the technology royalties income invoiced by the Parent to its subsidiaries. F-53 Deferred Tax Assets and Liabilities The following table shows the changes in the major sources of deferred tax assets and liabilities: (in thousands) Year ended December 31, 2018 Change recognized in profit or loss Change recognized in OCI Change in consolidation scope Other Currency translation adjustments Year ended December 31, 2019 Net deferred tax assets : Net operating loss carryforwards $ 55,358 $ ( 27,680 ) $ — $ ( 330 ) $ — $ ( 371 ) $ 26,977 Intangibles ( 25,345 ) 7,214 — — — 91 ( 18,040 ) Stock compensation 14,400 ( 3,515 ) — — — — 10,885 Bad debt allowance 3,879 ( 1,871 ) — — — ( 19 ) 1,989 Personnel-related accruals 7,317 219 — — — ( 24 ) 7,512 Other accruals 3,901 290 — — — ( 74 ) 4,117 Projected benefit obligation 1,907 575 473 — — ( 32 ) 2,923 Financial instruments ( 586 ) 1,014 — — — 15 443 Other 5,479 ( 9,472 ) — — 11,105 84 7,196 Valuation allowance ( 43,186 ) 17,808 ( 310 ) 330 — 69 ( 25,289 ) Net Deferred Income Taxes 23,124 ( 15,418 ) 163 — 11,105 ( 261 ) 18,713 F-54 (in thousands) Year ended December 31, 2019 Change recognized in profit or loss Change recognized in OCI Change in consolidation scope Other Currency translation adjustments Year ended December 31, 2020 Net deferred tax assets : Net operating loss carryforwards $ 26,977 $ ( 3,991 ) $ — $ 1,150 $ — $ 443 $ 24,579 Intangibles ( 18,040 ) 4,646 — ( 34 ) — ( 527 ) ( 13,955 ) Stock compensation 10,885 ( 4,173 ) — — — — 6,712 Bad debt allowance 1,989 3,256 — ( 21 ) — ( 6 ) 5,218 Personnel-related accruals 7,512 ( 679 ) — — — 20 6,853 Other accruals 4,117 888 — — — ( 86 ) 4,919 Projected benefit obligation 2,923 205 ( 1,508 ) — — 164 1,784 Financial instruments 443 ( 199 ) — — — 25 269 Other 7,196 8,856 — 63 — ( 182 ) 15,933 Valuation allowance ( 25,289 ) ( 12,529 ) 986 ( 1,206 ) — 305 ( 37,733 ) Net Deferred Income Taxes 18,713 ( 3,720 ) ( 522 ) ( 48 ) — 156 14,579 Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. As at December 31, 2020, 2019 and 2018, the valuation allowance against net deferred income taxes amounted to $ 37.3 million, $ 25.3 million and $ 43.2 million, which related mainly to Criteo Corp. ($ 13.3 million, $ 12.8 million and $ 18.6 million, respectively), Criteo Brazil ($ 2.8 million, $ 3.2 million and $ 3.6 million, respectively), Criteo Ltd ($ 7.4 million, $ 7.5 million and $ 7.2 million, respectively), Criteo China ($ 3.3 million, $ 3.3 million and $ 3.5 million, respectively), Criteo Singapore ($ 3.3 million, $ 2.8 million and $ 2.9 million), Criteo Pty ($ 2.8 million, $ 2.6 million and $ 2.5 million) and Criteo France ($ 1.0 million, $( 7.7 ) million and $ 3.9 million, respectively). In accordance with ASC 740 - Income taxes , no uncertain tax positions were identified as of December 31, 2020. The Company has various net operating loss carryforwards in the U.S. and China for $ 4.2 million and $ 3.3 million, respectively, which begin to expire in 2030 and in 2021, respectively. The Company has net operating loss carryforwards in the United Kingdom of $ 7.7 million which have no expiration date. Current tax assets and liabilities The total amount of current tax assets mainly consists of prepayments of incomes taxes and credits of Criteo SA, Criteo Corp., and Criteo Gmbh. The current tax liabilities mainly refer to the corporate tax payables of Criteo K.K. Ongoing tax audits F-55 As a multinational corporation, we are subject to regular review and audit by U.S. federal and state, and foreign tax authorities. Significant uncertainties exist with respect to the amount of our tax liabilities, including those arising from potential challenges with certain positions we have taken. Any unfavorable outcome of such a review or audit could have an adverse impact on our tax rate. 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. We disagreed with the IRS's position and contested it. On August 24, 2020, the IRS and the Company agreed to a settlement and closed the income tax audit for the year ended December 31, 2014. The settlement provides for a disallowance of Criteo Corp's. Net Operating Losses (NOLs) amounting to $ 9.2 million. F-56 Note 22. 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. Year Ended December 31, 2020 2019 2018 (in thousands, except share data) Net income attributable to shareholders of Criteo S.A. $ 71,679 $ 90,745 $ 88,644 Weighted average number of shares outstanding (note 16) 60,876,480 64,305,965 66,456,890 Basic earnings per share $ 1.18 $ 1.41 $ 1.33 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 19). There were no other potentially dilutive instruments outstanding as of December 31, 2020, 2019 and 2018. 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, share warrant, restricted share award or BSPCE contracts) is assessed as potentially dilutive, if it is “in the money” (i.e., the exercise or settlement price is inferior to the average market price). Year Ended December 31, 2020 2019 2018 (in thousands, except share data) Net income attributable to shareholders of Criteo S.A. $ 71,679 $ 90,745 $ 88,644 Weighted average number of shares outstanding of Criteo S.A. 60,876,480 64,305,965 66,456,890 Dilutive effect of : Restricted share awards 796,609 978,521 786,932 Share options and BSPCE 133,177 279,270 382,512 Share warrants 12,327 34,832 36,570 Weighted average number of shares outstanding used to determine diluted earnings per share 61,818,593 65,598,588 67,662,904 Diluted earnings per share $ 1.16 $ 1.38 $ 1.31 F-57 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: Year Ended December 31, 2020 2019 2018 Restricted share awards 1,726,506 1,120,439 1,464,145 Share options and BSPCE 70,257 142,380 40,573 Share warrants — — — Weighted average number of anti-dilutive securities excluded from diluted earnings per share 1,796,763 1,262,819 1,504,718 Note 23. Commitments and contingencies Purchase Obligations As of December 31, 2020, we had $ 6.2 million of other non-cancellable contractual obligations, primarily related to software licenses, maintenance and $ 0.5 million bandwidth for our servers. Revolving Credit Facilities, Credit Lines Facilities and Bank Overdrafts As mentioned in Note 12, we are party to one RCF with a syndicate of banks which allow us to draw up to € 350.0 million ($ 429.4 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 ($ 26.4 million) in the aggregate under the short-term credit lines and overdraft facilities. As of December 31, 2020, we had not drawn on any of these facilities. Any loans or overdraft under these short-term facilities bear interest based on the one month EURIBOR rate or three month EURIBOR rate. As these facilities are exclusively short-term credit and overdraft facilities, our banks have the ability to terminate such facilities on short notice. Contingencies From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. F-58 Note 24. Related Parties On March 2, 2020, the Group announced that Chief Financial Officer Benoit Fouilland planned to depart from Criteo at the end of the second quarter 2020. On May 15, 2020, the Group announced the appointment of Dave Anderson as the Company’s Interim Chief Financial Officer for a six-month term in replacement of Benoit Fouilland, effective May 18, 2020. During his engagement, Mr. Anderson was also the Company’s Principal Financial Officer and Principal Accounting Officer. Mr. Fouilland departed Criteo on June 30, 2020. On August 31, 2020, the Group announced that Jean-Baptiste Rudelle, Criteo's co-founder and former CEO, had stepped down from Criteo's Board of Directors effective August 27, 2020. Mr. Rudelle had previously stepped down from the day to day activities as CEO in November 2019, and as Chairman of the Board in July 2020. Also effective August 27, 2020, CEO Megan Clarken was appointed to the Board of Directors. On September 3, 2020, the Group announced the appointment of Sarah Glickman as the Company's Chief Financial Officer and Principal Accounting Officer, effective September 8, 2020, replacing Dave Anderson who served as interim Chief Financial Officer for four months. The Executive Officers as of December 31, 2020 were: • Megan Clarken - Chief Executive Officer • Sarah Glickman - Chief Financial Officer and Principal Accounting Officer • Ryan Damon - General Counsel and Corporate Secretary Total compensation for the Executive Officers, including social contributions, is summarized in the following table: Year Ended December 31, 2020 2019 2018 (in thousands) Short-term benefits (1) $ ( 3,380 ) $ ( 3,830 ) $ ( 3,150 ) Long-term benefits (2) ( 23 ) ( 44 ) ( 47 ) Shared-based compensation ( 2,103 ) ( 4,605 ) ( 8,016 ) Total $ ( 5,506 ) $ ( 8,479 ) $ ( 11,213 ) (1) wages, bonuses and other compensations (2) pension defined benefit plan For the year ended December 31, 2020, 2019 and 2018, there were no material related party transactions. Note 25. 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. F-59 Americas EMEA Asia-Pacific Total (in thousands) December 31, 2018 $ 954,073 $ 839,825 $ 506,416 $ 2,300,314 December 31, 2019 952,154 806,197 503,165 2,261,516 December 31, 2020 $ 894,854 $ 749,672 $ 428,091 $ 2,072,617 Revenue generated in France amounted to $ 132.7 million, $ 144.3 million and $ 153.3 million for the periods ended December 31, 2020, 2019 and 2018, respectively. Revenue generated in other significant countries where we operate is presented in the following table: Year Ended December 31, 2020 2019 2018 (in thousands) Americas United States $ 815,476 $ 861,099 $ 848,378 EMEA Germany 184,183 200,025 203,020 United Kingdom 93,319 88,928 97,849 Asia-Pacific Japan $ 301,183 $ 342,298 $ 351,441 Other Information For each reported period, non-current assets (corresponding to the net book value of tangible and intangible assets) are presented in the table below. The geographical information results from the locations of legal entities. Of which Of which Holding Americas United States EMEA Asia-Pacific Japan Singapore Total (in thousands) December 31, 2019 $ 136,621 $ 104,389 $ 100,107 $ 20,336 $ 19,701 $ 9,617 $ 5,970 $ 281,047 December 31, 2020 $ 135,516 $ 93,389 $ 93,030 $ 8,746 $ 31,598 $ 20,532 $ 7,003 $ 269,249 F-60 Note 26. Subsequent Events On February 5, 2021 Criteo announced that its Board of Directors has authorized a share repurchase program of up to $ 100 million of the Company’s outstanding American Depositary Shares. The Company intends to use any repurchased shares under this new authorization to satisfy employee equity obligations in lieu of issuing new shares, which would limit future dilution for its shareholders. F-61