10-Q 1 criteo10qq32017.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 2017

or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________ to _________
Commission file number: 001-36153
 
Criteo S.A.
(Exact name of registrant as specified in its charter)
 
France 
 
Not Applicable 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
32, rue Blanche, Paris-France
 
75009
(Address of principal executive offices)
 
(Zip Code)

+33 1 40 40 22 90
(Registrant’s telephone number, including area code)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day Yes x  No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
x
Accelerated Filer
¨
Non-accelerated Filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ¨    No x
          As of October 31, 2017, the registrant had 65,993,182 ordinary shares, nominal value €0.025 per share, outstanding.

 



TABLE OF CONTENTS





















General
Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q ("Form 10-Q") to the "Company," "Criteo," "we," "us," "our" or similar words or phrases are to Criteo S.A. and its subsidiaries, taken together. In this Form 10-Q, references to "$" and "US$" are to United States dollars. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or "U.S. GAAP."
Trademarks
“Criteo,” the Criteo logo and other trademarks or service marks of Criteo appearing in this Form 10-Q are the property of Criteo. Trade names, trademarks and service marks of other companies appearing in this Form 10-Q are the property of their respective holders.

Special Note Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. When used in this Form 10-Q, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
the ability of the Criteo Engine to accurately predict engagement by a user;
our ability to predict and adapt to changes in widely adopted industry platforms and other new technologies;
our ability to continue to collect and utilize data about user behavior and interaction with advertisers;
our ability to acquire an adequate supply of advertising inventory from publishers on terms that are favorable to us;
our ability to meet the challenges of a growing and international company in a rapidly developing and changing industry, including our ability to forecast accurately;
our ability to maintain an adequate rate of revenue growth and sustain profitability;
our ability to manage our international operations and expansion and the integration of our acquisitions;
the effects of increased competition in our market;
our ability to adapt to regulatory, legislative or self-regulatory developments regarding internet privacy matters;
our ability to protect users’ information and adequately address privacy concerns;
our ability to enhance our brand;
our ability to enter new marketing channels and to effectively scale our technology platform in new industry verticals;
our ability to attract and retain qualified employees and key personnel;
our ability to maintain, protect and enhance our brand and intellectual property; and
failures in our systems or infrastructure.




You should refer to Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016, and to Part II, Item 1A "Risk Factors" of this Form 10-Q, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
     This Form 10-Q may contain market data and industry forecasts that were obtained from industry publications. These data and forecasts involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this Form 10-Q is generally reliable, such information is inherently imprecise.




PART I
Item 1. Financial Statements.
CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
 
Notes
 
December 31, 2016

 
September 30, 2017

 
 
 
 
 
 
 
 
 
(in thousands)
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
    Cash and cash equivalents
3
 
$
270,317

 
357,983

    Trade receivables, net of allowances
4
 
397,244

 
373,922

    Income taxes
 
 
2,741

 
5,295

    Other taxes
 
 
52,942

 
46,095

    Other current assets
5
 
19,340

 
26,945

    Total current assets
 
 
742,584

 
810,240

Property, plant and equipment, net
 
 
108,581

 
134,885

Intangible assets, net
6
 
102,944

 
99,714

Goodwill
7
 
209,418

 
236,363

Non-current financial assets
3
 
17,029

 
19,350

Deferred tax assets
 
 
30,630

 
57,642

    Total non-current assets
 
 
468,602

 
547,954

Total assets
 
 
$
1,211,186

 
$
1,358,194

Liabilities and shareholders' equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
    Trade payables
 
 
$
365,788

 
$
350,690

    Contingencies
14
 
654

 
1,553

    Income taxes
 
 
14,454

 
16,341

    Financial liabilities - current portion
9
 
7,969

 
7,943

    Other taxes
 
 
44,831

 
42,713

    Employee - related payables
 
 
55,874

 
59,661

    Other current liabilities
8
 
30,221

 
26,802

    Total current liabilities
 
 
519,791

 
505,703

Deferred tax liabilities
 
 
686

 
28,719

Retirement benefit obligation
 
 
3,221

 
3,690

Financial liabilities - non current portion
9
 
77,611

 
2,525

Other non-current liabilities
 
 

 
4,290

    Total non-current liabilities
 
 
81,518

 
39,224

Total liabilities
 
 
601,309

 
544,927

Commitments and contingencies
 
 


 


Shareholders' equity:
 
 
 
 
 
Common shares, €0.025 par value, 63,978,204 and 65,551,174 shares authorized, issued and outstanding at December 31, 2016 and September 30, 2017, respectively.
 
2,093

 
2,137

Additional paid-in capital
 
 
488,277

 
568,171

Accumulated other comprehensive (loss)
 
 
(88,593
)
 
(21,386
)
Retained earnings
 
 
198,355

 
247,821

Equity-attributable to shareholders of Criteo S.A.
 
 
600,132

 
796,743

Non-controlling interests
 
 
9,745

 
16,524

Total equity
 
 
609,877

 
813,267

Total equity and liabilities
 
 
$
1,211,186

 
$
1,358,194

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

2


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
 
Three Months Ended
 
Nine Months Ended
 
Notes
 
September 30, 2016

 
September 30, 2017

 
September 30, 2016

 
September 30, 2017

 
 
(in thousands, except share per data)
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
$
423,867

 
$
563,973

 
$
1,232,321

 
$
1,622,661

 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
 
Traffic acquisition costs
 
 
(247,310
)
 
(329,576
)
 
(727,034
)
 
(958,469
)
Other cost of revenue
 
 
(22,332
)
 
(29,951
)
 
(60,950
)
 
(89,914
)
 
 
 
 
 
 
 
 
 
 
Gross profit
 
 
154,225

 
204,446

 
444,337

 
574,278

 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development expenses
 
 
(30,701
)
 
(43,860
)
 
(88,097
)
 
(126,992
)
Sales and operations expenses
 
 
(68,164
)
 
(95,184
)
 
(201,862
)
 
(283,815
)
General and administrative expenses
 
 
(32,492
)
 
(32,389
)
 
(85,839
)
 
(96,143
)
Total operating expenses
 
 
(131,357
)
 
(171,433
)
 
(375,798
)
 
(506,950
)
Income from operations
 
 
22,868

 
33,013

 
68,539

 
67,328

Financial (expense)
11
 
(570
)
 
(2,886
)
 
(1,982
)
 
(7,313
)
Income before taxes
 
 
22,298

 
30,127

 
66,557

 
60,015

Provision for income taxes
12
 
(7,574
)
 
(7,858
)
 
(19,968
)
 
(15,724
)
Net income
 
 
$
14,724

 
$
22,269

 
$
46,589

 
$
44,291

 
 
 
 
 
 
 
 
 
 
Net income available to shareholders of Criteo S.A.
 
 
$
13,539

 
$
19,774

 
$
42,869

 
$
38,185

Net income available to non-controlling interests
 
 
$
1,185

 
$
2,495

 
$
3,720

 
$
6,106

 
 
 
 
 
 
 
 
 
 
Net income allocated to shareholders of Criteo S.A. per share:
 
 
 
 
 
 
 
 
 
Basic
13
 
$
0.21

 
$
0.30

 
$
0.68

 
$
0.59

Diluted
13
 
$
0.21

 
$
0.29

 
$
0.66

 
$
0.56

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding used in computing per share amounts:
 
 
 
 
 
 
 
 
 
Basic
13
 
63,628,351

 
65,412,326

 
63,163,922

 
64,881,751

Diluted
13
 
65,816,422

 
68,200,343

 
65,429,757

 
67,876,791

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


3


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2016

 
September 30, 2017

 
September 30, 2016

 
September 30, 2017

 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Net income
 
$
14,724

 
$
22,269

 
$
46,589

 
$
44,291

Foreign currency translation differences, net of taxes
 
2,649

 
20,972

 
12,677

 
66,826

Foreign currency translation differences
 
2,649

 
20,972

 
12,677

 
66,826

Income tax effect
 

 

 

 

Actuarial (losses) gains on employee benefits, net of taxes
 
(73
)
 
155

 
(282
)
 
745

Actuarial losses on employee benefits
 
(90
)
 
184

 
(341
)
 
882

Income tax effect
 
17

 
(29
)
 
59

 
(137
)
Comprehensive income (loss)
 
$
17,300

 
$
43,396

 
$
58,984

 
$
111,862

Attributable to shareholders of Criteo S.A.
 
$
15,991

 
$
41,002

 
$
54,113

 
$
105,391

Attributable to non-controlling interests
 
$
1,309

 
$
2,394

 
$
4,871

 
$
6,471

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

4


CRITEO S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016

 
September 30, 2017

 
September 30, 2016

 
September 30, 2017

 
(in thousands)
Net income
$
14,724

 
$
22,269

 
$
46,589

 
$
44,291

Non-cash and non-operating items
36,609

 
61,995

 
96,235

 
146,443

    - Amortization and provisions
16,030

 
25,990

 
45,555

 
72,681

    - Equity awards compensation expense (1)
13,965

 
22,028

 
30,030

 
51,887

    - Interest accrued and non-cash financial income and
       expenses
(960
)
 
(25
)
 
638

 
7

    - Change in deferred taxes
(3,121
)
 
(8,164
)
 
(7,545
)
 
(20,569
)
    - Income tax for the period
10,695

 
16,022

 
27,557

 
36,293

    - Other

 
6,144

 

 
6,144

Changes in working capital related to operating activities
4,576

 
(12,372
)
 
(22,860
)
 
13,418

    - (Increase)/decrease in trade receivables
(2,160
)
 
(991
)
 
(4,528
)
 
35,220

    - Increase/(decrease) in trade payables
11,218

 
(5,031
)
 
(3,931
)
 
(31,284
)
    - (Increase)/decrease in other current assets
(2,856
)
 
4,001

 
(18,633
)
 
6,581

    - Increase/(decrease) in other current liabilities
(1,626
)
 
(10,351
)
 
4,232

 
2,901

Income taxes paid
(12,278
)
 
(10,165
)
 
(38,152
)
 
(37,696
)
CASH FROM OPERATING ACTIVITIES
43,631

 
61,727

 
81,812

 
166,456

Acquisition of intangible assets, property, plant and equipment
(15,792
)
 
(20,999
)
 
(54,970
)
 
(74,275
)
Change in accounts payable related to intangible assets, property, plant and equipment
(4,115
)
 
(6,774
)
 
570

 
(8,760
)
Payments for acquired business, net of cash acquired

 
73

 
(5,074
)
 
1,125

Change in other non-current financial assets
(377
)
 
(157
)
 
197

 
1,117

CASH USED FOR INVESTING ACTIVITIES
(20,284
)
 
(27,857
)
 
(59,277
)
 
(80,793
)
Issuance of long-term borrowings
739

 
2,220

 
3,798

 
3,674

Repayment of borrowings
32

 
(4,672
)
 
(5,416
)
 
(83,893
)
Proceeds from capital increase
1,600

 
5,164

 
17,182

 
29,619

Change in other financial liabilities
(25
)
 
15,082

2 

(196
)
 
15,346

CASH FROM (USED FOR) FINANCING ACTIVITIES
2,346

 
17,794

 
15,368

 
(35,254
)
 
 
 
 
 
 
 
 
CHANGE IN NET CASH AND CASH EQUIVALENTS
25,693

 
51,664

 
37,903

 
50,409

Net cash and cash equivalents at beginning of period
377,407

 
308,185

 
353,537

 
270,317

Effect of exchange rates changes on cash and cash equivalents
4,058

 
(1,866
)
2 

15,718

 
37,257

Net cash and cash equivalents at end of period
$
407,158

 
$
357,983

 
$
407,158

 
$
357,983

(1) Of which $13.1 million and $21.4 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the quarter ended September 30, 2016 and 2017, respectively, and $28.6 million and $50.7 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the nine month period ended September 30, 2016 and 2017, respectively.
(2) During the three months ended September 30, 2017, the Company reported the cash impact of the settlement of hedging derivatives in cash from (used for) financing activities in the unaudited consolidated statements of cash flows. This resulted in a $9.0 million reclassification from the line "Effect of exchange rates changes on cash and cash equivalents" to "Change in other financial liabilities" and a $6.0 million movement on the line "Change in other financial liabilities" for the quarter ended September 30, 2017.
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

5


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

Criteo S.A. is a global technology company specialized in digital performance marketing. We strive to deliver post-click sales to our advertiser clients at scale and according to the client's targeted return on investment. 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". The Company uses its proprietary predictive software algorithms coupled with its deep insights into expressed consumer intent and purchasing habits to price and deliver highly relevant and personalized performance advertisements to consumers in real time.


Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by Criteo S.A. pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 1, 2017. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses in the condensed consolidated financial statements and accompanying notes. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. Our actual results may differ from these estimates. U.S. GAAP requires us to make estimates and judgments in several areas, including, but not limited to: (1) the recognition of revenue and particularly the determination as to whether revenue should be reported on a gross or a net basis; (2) the evaluation of our trade receivables and the recognition of a valuation allowance for doubtful accounts; (3) the recognition and measurement of goodwill and intangible assets and particularly costs capitalized in relation to our customized internal-use software; (4) the measurement of share-based compensation and (5) the tax provision determination and particularly the estimate of our annual effective tax rate based on applicable tax rates.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 that have had a material impact on our unaudited condensed consolidated financial statements and related notes.

Accounting Pronouncements adopted in 2017

From January 1, 2017, we adopted ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting issued by the Financial Accounting Standards Board (FASB), which among other items, simplifies certain aspects of the accounting for share-based payment transactions to employees. The new standard particularly requires excess tax benefits and tax deficiencies to be recorded in the statements of income as a component of the provision for income taxes when stock awards vest or are settled. The effective date is January 1, 2017. Upon adoption, a cumulative effect of $10.0 million of this change has been recognized through retained earnings. The adoption of the standard also resulted in a current year tax expense of $1.4 million which previously would have been recognized in the current period in additional paid-in capital.





6


Accounting Pronouncements not yet adopted
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) ("ASU 2017-01") the purpose of which is to change the definition of a business to assist entities in evaluating when a set of transferred assets and activities is a business. This update will be effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The adoption of ASU 2017-01 is not expected to have a material impact on our financial position or results of operations.

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

In March 2017, FASB issued ASU 2017-07 Compensation-Retirements Benefits (Topic 715). ASU 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The amendments in ASU 2017-07 improve the consistency, transparency, and usefulness of financial information to users that have communicated that the service cost component generally is analyzed differently from the other components of net benefit cost. This update will be effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in ASU 2017-07 should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets. We intend to adopt the standard on the effective date of January 1, 2018. The adoption of ASU 2017-07 is not expected to have a material impact on our financial position or results of operations.

In May 2017, the FASB issued ASU 2017-09 Compensation - Stock Compensation (Topic 718). ASU 2017-09 was issued to provide clarity and reduce diversity in practice and complexity when applying the guidance in Topic 718 to a change in terms or conditions of a share based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. The amendments are effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted and should be applied prospectively to an award modified on or after the adoption date. To date, Criteo has not yet had any modifications of its share-based awards. We intend to adopt the standard on the effective date of January 1, 2018. The adoption of ASU 2017-09 is not expected to have a material impact on our financial position or results of operations.
In August 2017, the FASB issued ASU 2017-12 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 was issued with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in it’s financial statements as well as to simply the application of hedge accounting guidance in current GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2017-12 on its consolidated financial statements.


7


Note 2. Significant Events and Transactions of the Period

Restructuring of our China Operations
    
In May 2017, the Company announced it would no longer continue to serve the domestic market in China and would refocus its China operations entirely on the export business. As such, we have recorded $3.3 million in restructuring charges for the nine months ended September 30, 2017, as follows:


    

 
Nine Months Ended
 
September 30, 2017

 
(in thousands)
Severance costs
$
802

Facility Exit Costs
2,265

Other
232

Total restructuring costs
$
3,299


For the three months ended September 30, 2017, no additional restructuring costs have been recorded in the period.

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

The following table summarizes restructuring activities as of September 30, 2017 included in other current liabilities on the balance sheet:

 
Nine Months Ended
 
September 30, 2017
 
(in thousands)
Restructuring liability - January 1, 2017
$

Restructuring charges
3,299

Amounts paid
$
(1,200
)
Other
(231
)
Restructuring liability - September 30, 2017
$
1,868


Repayment of the amount drawn on the Group Revolving Credit Facility agreement
As of December 31, 2016, $75.0 million was drawn on the Multicurrency Revolving Facility Agreement relating to the acquisition of HookLogic. This amount was re-paid in full during the second quarter of 2017 resulting in a nil balance as of September 30, 2017.

8


Note 3. Financial Instruments
Credit Risk
The maximum exposure to credit risk at the end of each reported period is represented by the carrying amount of financial assets, and summarized in the following table:
 
December 31, 2016

 
September 30, 2017

 
 
 
 
Cash and cash equivalents
$
270,317

 
$
357,983

Trade receivables, net of allowance
397,244

 
373,922

Other taxes
52,942

 
46,095

Other current assets
19,340

 
26,945

Non-current financial assets
17,029

 
19,350

Total
$
756,872

 
$
824,295

As of December 31, 2016 and September 30, 2017, no customer accounted for 10% or more of trade receivables.
We perform ongoing credit evaluations of our customers and do not require collateral. We maintain an allowance for estimated credit losses. During the twelve-month period ended December 31, 2016 and the nine-month period ended September 30, 2017, our allowance for doubtful accounts increased by $5.4 million and $5.1 million, respectively.
For our financial assets, the fair value approximates the carrying amount, given the nature of the financial assets and the maturity of the expected cash flows.
Fair Value Measurements     
We measure the fair value of our cash equivalents, which include money market funds and interest bearing deposits, as level 1 and level 2 measurements because they are valued using quoted market prices and observable market data, respectively.
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.
Trade Receivables
Credit risk is defined as an unexpected loss in cash and earnings if the client is unable to pay its obligations in due time. We perform internal ongoing credit risk evaluations of our clients. When a possible risk exposure is identified, we require prepayments.
For each period presented, the aging of trade receivables and allowances for potential losses is as follows:
 
December 31, 2016
 
September 30, 2017
 
Gross value
 
%
 
Allowance
 
%
 
Gross value
 
%
 
Allowance
 
%
 
(in thousands)
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not yet due
$
265,600

 
65.0
%
 
$

 
%
 
$
318,476

 
81.6
%
 
$
(8
)
 
%
0 - 30 days
92,163

 
22.5
%
 
(49
)
 
0.4
%
 
11,370

 
2.9
%
 

 
%
31 - 60 days
19,747

 
4.8
%
 
(182
)
 
1.6
%
 
20,100

 
5.1
%
 
(534
)
 
3.2
%
61 - 90 days
6,055

 
1.5
%
 
(191
)
 
1.6
%
 
8,136

 
2.1
%
 
(100
)
 
0.6
%
> 90 days
25,277

 
6.2
%
 
(11,176
)
 
96.4
%
 
32,560

 
8.3
%
 
(16,078
)
 
96.2
%
Total
$
408,842

 
100.0
%
 
$
(11,598
)
 
100.0
%
 
$
390,642

 
100.0
%
 
$
(16,720
)
 
100.0
%


9


Financial Liabilities
 
December 31, 2016
 
Carrying Value
 
Fair value
 
 
 
 
 
(in thousands)
Trade payables
$
365,788

 
$
365,788

Other taxes
44,831

 
44,831

Employee-related payables
55,874

 
55,874

Other current liabilities
30,221

 
30,221

Financial liabilities
85,580

 
85,580

Total
$
582,294

 
$
582,294

 
September 30, 2017
 
Carrying Value

 
Fair value

 
 
 
 
 
(in thousands)
Trade payables
$
350,690

 
$
350,690

Other taxes
42,713

 
42,713

Employee-related payables
59,661

 
59,661

Other current liabilities
26,802

 
26,802

Financial liabilities
10,468

 
10,468

Total
$
490,334

 
$
490,334






















10


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

 
December 31, 2016
 
Carrying Value

 
Fair value

 
 
 
 
 
(in thousands)
Derivative Assets:
 
 
 
Included in other current assets
$

 
$

 
 
 
 
Derivative Liabilities:
 
 
 
Included in financial liabilities - current portion
$
1,968

 
$
1,968

 
September 30, 2017
 
Carrying Value

 
Fair value

 
 
 
 
 
(in thousands)
Derivative Assets:
 
 
 
Included in other current assets
$

 
$

 
 
 
 
Derivative Liabilities:
 
 
 
Included in financial liabilities - current portion
$
2,106

 
$
2,106












11


Cash and Cash Equivalents
Cash and cash equivalents include investments in money market funds and interest–bearing bank deposits which meet ASC 230—Statement of Cash flows criteria: short-term, highly liquid investments, for which the risks of changes in value are considered to be insignificant. Money market funds are considered level 1 financial instruments as they are valued using quoted market prices. Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data.
 
December 31, 2016
 
Carrying Value

 
Fair value

 
 
 
 
 
(in thousands)
Cash
$
31,688

 
$
31,688

Money market funds
88,091

 
88,091

Interest-bearing bank deposits
150,538

 
150,538

Total cash and cash equivalents
$
270,317

 
$
270,317

 
September 30, 2017
 
Carrying Value

 
Fair value

 
 
 
 
 
(in thousands)
Cash
$
243,895

 
$
243,895

Money market funds

 

Interest-bearing bank deposits
114,088

 
114,088

Total cash and cash equivalents
$
357,983

 
$
357,983



12


Note 4. Trade Receivables
The following table shows the breakdown in trade receivables net book value for the presented periods:
 
December 31, 2016

 
September 30, 2017

 
 
 
 
 
(in thousands)
Trade accounts receivables
$
408,842

 
$
390,642

(Less) Allowance for doubtful accounts
(11,598
)
 
(16,720
)
Net book value at end of period
$
397,244

 
$
373,922

Changes in allowance for doubtful accounts are summarized below:
 
2016

 
2017

 
 
 
 
 
(in thousands)
Balance at January 1
$
(6,264
)
 
$
(11,598
)
Allowance for doubtful accounts
(7,733
)
 
(7,849
)
Reversal of provision
2,760

 
3,378

Currency translation adjustment
(10
)
 
(651
)
Balance at September 30
$
(11,247
)
 
$
(16,720
)
The change in allowance for doubtful accounts during the first nine months of 2017 related mainly to increased business with categories of clients associated with a higher credit risk.

Note 5. Other Current Assets
The following table shows the breakdown in other current assets net book value for the presented periods:
 
December 31, 2016

 
September 30, 2017

 
 
 
 
 
(in thousands)
Prepayments to suppliers
$
2,439

 
$
6,056

Other debtors
3,263

 
4,491

Prepaid expenses
13,638

 
16,398

Gross book value at end of period
19,340

 
26,945

Net book value at end of period
$
19,340

 
$
26,945

Prepaid expenses mainly consist of office rentals.

13


Note 6. Intangible assets
The changes in intangible assets since December 31, 2016 mainly relate to purchase accounting adjustments to technology and customer relationships following the finalization of the Monsieur Drive (acquired on May 31, 2016) purchase price allocation as well as the preliminary purchase price allocation for HookLogic (acquired on November 9, 2016) in which technology and customer relationships were identified as intangible assets. A change in this preliminary valuation may also impact the income tax related accounts. The amounts shown below may change in the near term as management continues to assess the fair value of acquired assets and liabilities within the twelve-month purchase price allocation period.
 
December 31, 2016
 
September 30, 2017
 
 
 
 
 
 
 
 
 
Useful Lives
(Years)
 
Amounts recognized as of Acquisition Date
(in millions)
 
Useful Lives
(Years)
 
Amounts recognized as of Acquisition Date
(in millions)
    Technology
3-5 years
 
$
34.1

 
3-5 years
 
$
30.3

    Customer relationships
5-9 years
 
65.5

 
5-9 years
 
84.5

Total identifiable intangible assets acquired
 
 
$
99.6

 
 
 
$
114.8

In addition, no triggering events have occurred during the period which would indicate impairment in the balance of intangible assets.
The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows:
 
Software

 
Technology and customer relationships

 
Total

From October 1 to December 31, 2017
$
1,883

 
$
3,961

 
$
5,844

2018
6,546

 
15,678

 
22,224

2019
3,960

 
13,972

 
17,932

2020
1,577

 
8,628

 
10,205

2021
430

 
8,628

 
9,058

Thereafter
715

 
33,736

 
34,451

Total
$
15,111

 
$
84,603

 
$
99,714


Note 7. Goodwill
 
Goodwill
 
(in thousands)
Balance at January 1, 2017
$
209,418

Additions to goodwill
23,738

Currency translation adjustment
3,207

Balance at September 30, 2017
$
236,363

Changes in goodwill since December 31, 2016 relate to purchase accounting adjustments to intangible assets regarding HookLogic, further to the preliminary purchase price allocation as well as the finalization of the Monsieur Drive purchase price allocation (note 6).
In addition, no triggering events have occurred during the period which would indicate impairment in the balance of goodwill.

14


Note 8. Other Current Liabilities
Other current liabilities are presented in the following table:
 
December 31,
2016

 
September 30,
2017

 
 
 
 
 
(in thousands)
Clients' prepayments
$
9,176

 
$
17,407

Accounts payable relating to capital expenditures
15,484

 
7,198

Other creditors
2,440

 
1,749

Deferred revenue
3,121

 
448

Total
$
30,221

 
$
26,802


Note 9. Financial Liabilities
The changes in current and non-current financial liabilities during the period ended September 30, 2017 are illustrated in the following schedules:
 
As of January 1, 2017

 
New borrowings

 
Repayments

 
Change in scope

 
Other (1)

 
Currency translation adjustment

 
As of September 30, 2017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Borrowings
$
5,524

 
$
3,867

 
$
(84,086
)
 
$

 
$
79,880

 
$
310

 
$
5,495

Other financial liabilities
477

 
3

 
(241
)
 

 
69

 
34

 
342

Derivative instruments
1,968

 

 

 

 
(92
)
 
230

 
2,106

Current portion
7,969

 
3,870

 
(84,327
)
 

 
79,857

 
574

 
7,943

Borrowings
77,397

 

 

 

 
(79,880
)
 
4,482

 
1,999

Other financial liabilities
214

 
360

 

 

 
(69
)
 
21

 
526

Non current portion
77,611

 
360

 

 

 
(79,949
)
 
4,503

 
2,525

Borrowings
82,921

 
3,867

 
(84,086
)
 

 

 
4,792

 
7,494

Other financial liabilities
691

 
363

 
(241
)
 

 

 
55

 
868

Derivative instruments
1,968

 

 

 

 
(92
)
 
230

 
2,106

Total
$
85,580

 
$
4,230

 
$
(84,327
)
 
$

 
$
(92
)
 
$
5,077

 
$
10,468

 (1) Includes reclassification from non-current to current portion based on maturity of the financial liabilities.
Borrowings are financial liabilities at amortized cost and are measured using level 2 fair value measurements.
We are party to several loan agreements and revolving credit facilities, or RCF, with third-party financial institutions. The only changes from what was disclosed in Note 14 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 are the amendment to the revolving credit facility entered into in September 2015, which, among other things, increased the facility amount from €250.0 million to €350.0 million and the amendment of the HSBC Chinese RCF which increased the facility amount from RMB 40.0 million to RMB 50.0 million.

15


Note 10. Share-Based Compensation
The board of directors has been authorized by the general meeting of the shareholders to grant employee warrants (Bons de Souscription de Parts de Créateur d’Entreprise or "BSPCEs"), share options (Options de Souscription d'Actions or "OSAs"), restricted share units ("RSUs") and non-employee warrants (Bons de Souscription d'Actions or "BSAs").
During the nine months ended September 30, 2017, there were three grants of RSUs and one grant of OSAs under the Employee Share Option Plan 9 and one grant of BSAs under the Plan F, as defined in Note 19 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
On March 1, 2017, 231,460 RSUs were granted to Criteo employees subject to continued employment and 10,825 BSAs were granted to a board member subject to continued engagement on the board of directors.
On April 27, 2017, 139,386 RSUs were granted to Criteo employees subject to continued employment.
On June 27, 2017, 135,500 RSUs were granted to senior management subject to achievement of internal performance objectives and continued employment. Based on the assumptions known as of June 30, 2016, we determined share-based compensation expense by applying the probability of performance objectives completion. In addition, on June 27, 2017, 896,586 RSUs and 355,010 OSAs were granted to Criteo employees subject to continued employment.
On June 28, 2016, the general meeting of the shareholders authorized the board of directors (i) to grant up to 4,600,000 OSAs and/or RSUs, each representing the right to receive one ordinary share and (ii) to grant up to 120,000 BSAs, each representing the right to receive one ordinary share (any BSAs granted will also be deducted from the 4,600,000 limit), such authorizations collectively referred to as "Plan 10". On July 27, 2017, the board of directors granted 227,680 RSUs to Criteo employees subject to continued employment and 9,790 BSAs to board members subject to continued engagement on the board of directors under the Plan 10.
There have been no changes in the vesting and method of valuation of the BSPCEs, OSAs, RSUs, or BSAs from what was disclosed in Note 19 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 1, 2017.

Change in Number of BSPCE/OSA/RSU/BSA
 
OSA/BSPCE

 
RSU

 
BSA

 
Total

Balance at January 1, 2017
4,960,092

 
3,243,279

 
188,125

 
8,391,496

Granted
355,010

 
1,630,612

 
20,615

 
2,006,237

Exercised
(1,515,081
)
 

 
(57,889
)
 
(1,572,970
)
Forfeited
(288,854
)
 
(347,411
)
 

 
(636,265
)
Expired

 

 

 

Balance at September 30, 2017
3,511,167

 
4,526,480

 
150,851

 
8,188,498

Breakdown of the Closing Balance
 
OSA/BSPCE

 
RSU

 
BSA

Number outstanding
3,511,167

 
4,526,480

 
150,851

Weighted-average exercise price
27.66

 
NA

 
25.87

Number vested
2,111,897

 
NA

 
75,247

Weighted-average exercise price
22.06

 
NA

 
14.04

Weighted-average remaining contractual life of options outstanding, in years
7.13

 
NA

 
7.26




16


Reconciliation with the Consolidated Statements of Income
 
Three Months Ended
 
September 30, 2016
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
R&D

 
S&O

 
G&A

 
Total

 
R&D

 
S&O

 
G&A

 
Total

RSUs
$
(3,295
)
 
$
(4,154
)
 
$
(2,471
)
 
$
(9,920
)
 
$
(5,929
)
 
$
(9,896
)
 
$
(3,956
)
 
$
(19,781
)
Share options / BSPCE
(986
)
 
(720
)
 
(1,505
)
 
(3,211
)
 
(432
)
 
(1
)
 
(1,169
)
 
(1,602
)
Total share-based compensation
(4,281
)
 
(4,874
)
 
(3,976
)
 
(13,131
)
 
(6,361
)
 
(9,897
)
 
(5,125
)
 
(21,383
)
BSAs

 

 
(834
)
 
(834
)
 

 

 
(645
)
 
(645
)
Total equity awards compensation expense
$
(4,281
)
 
$
(4,874
)
 
$
(4,810
)
 
$
(13,965
)
 
$
(6,361
)
 
$
(9,897
)

$
(5,770
)
 
$
(22,028
)
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
R&D

 
S&O

 
G&A

 
Total

 
R&D

 
S&O

 
G&A

 
Total

RSUs
$
(6,010
)
 
$
(7,638
)
 
$
(4,755
)
 
$
(18,403
)
 
$
(13,443
)
 
$
(23,028
)
 
$
(9,354
)
 
$
(45,825
)
Share options / BSPCE
(2,852
)
 
(3,114
)
 
(4,276
)
 
(10,242
)
 
(1,295
)
 
19

 
(3,570
)
 
(4,846
)
Total share-based compensation
(8,862
)
 
(10,752
)
 
(9,031
)
 
(28,645
)
 
(14,738
)
 
(23,009
)
 
(12,924
)
 
(50,671
)
BSA

 

 
(1,385
)
 
(1,385
)
 

 

 
(1,216
)
 
(1,216
)
Total equity awards compensation expense
$
(8,862
)
 
$
(10,752
)
 
$
(10,416
)
 
$
(30,030
)
 
$
(14,738
)
 
$
(23,009
)
 
$
(14,140
)
 
$
(51,887
)

17



Note 11. Financial Income and Expenses
The condensed consolidated statements of income line item “Financial income (expense)” can be broken down as follows:
 
Three Months Ended
 
September 30,
2016

 
September 30,
2017

 
(in thousands)
 
 
 
 
Financial income from cash equivalents
$
295

 
$
189

Interest and fees
(555
)
 
(830
)
Interest on debt
(372
)
 
(635
)
Fees
(183
)
 
(195
)
Foreign exchange gain (loss)
(301
)
 
(2,227
)
Other financial expense
(9
)
 
(18
)
Total financial income (expense)
$
(570
)
 
$
(2,886
)

The $2.9 million financial expense for the three months ended September 30, 2017 was driven by the hedging cost related to an intra-group position between Criteo S.A. and its U.S. subsidiary in the context of the funding of the HookLogic acquisition in November 2016 and the non-utilization fees incurred as part of our available RCF financing. The $0.6 million financial expense for the three months ended September 30, 2016 was mainly the result of a limited impact of foreign exchange reevaluations and related hedging together with the recognition of the fees related to the revolving credit facility entered into in September 2015.

 
Nine Months Ended
 
September 30,
2016

 
September 30,
2017

 
(in thousands)
 
 
 
 
Financial income from cash equivalents
$
1,165

 
$
639

Interest and fees
(1,643
)
 
(2,242
)
Interest on debt
(1,155
)
 
(1,853
)
Fees
(488
)
 
(389
)
Foreign exchange gain (loss)
(1,476
)
 
(5,660
)
Other financial expense
(28
)
 
(50
)
Total financial income (expense)
$
(1,982
)
 
$
(7,313
)

The $7.3 million financial expense for the nine months ended September 30, 2017 was driven by the interest accrued as a result of the $75 million drawn on the revolving credit facility entered into in September 2015 (as amended in March 2017) and the hedging cost related to an intra-group position between Criteo S.A. and its U.S. subsidiary, both in the context of the funding of the HookLogic acquisition in November 2016, as well as the non-utilization fees incurred as part of our available RCF financing. The $2.0 million financial expense for the nine months ended September 30, 2016 was mainly a result of the recognition of negative impact of foreign exchange reevaluations and related hedging recorded during the first quarter, together with the fees related to the revolving credit facility entered into in September 2015.

18




Note 12. Income Taxes
Breakdown of Income Taxes
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate (“AETR”), adjusted for discrete items arising in that quarter. To calculate our estimated AETR, we estimate our income before taxes and the related tax expense or benefit for the full fiscal year (total of expected current and deferred tax provisions), excluding the effect of significant unusual or infrequently occurring items or comprehensive income items not recognized in the statement of income. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated annual tax rate changes, we make a cumulative adjustment in that quarter. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, are subject to significant volatility due to several factors including our ability to accurately predict our income (loss) before provision for income taxes in multiple jurisdictions and the changes in foreign exchange rates. Our effective tax rate in the future will depend on the portion of our profits earned within and outside of France.
The condensed consolidated statements of income line item “Provision for income taxes” can be broken down as follows:
 
Nine Months Ended
 
September 30,
2016

 
September 30,
2017

 
(in thousands)
Current income tax
$
(27,513
)
 
$
(36,293
)
France
(12,511
)
 
(14,164
)
International
(15,002
)
 
(22,129
)
Net change in deferred taxes
7,545

 
20,569

France
7,087

 
271

International
458

 
20,298

Provision for income taxes
$
(19,968
)
 
$
(15,724
)
For the nine months ended September 30, 2016 and 2017, we used an annual estimated tax rate of 30% and 30%, respectively, to calculate the provision for income taxes. The effective tax rate was 30.0% and 26.2% for the nine months ended September 30, 2016 and 2017, respectively. The difference between the annual estimated tax rate and the effective tax rate for nine months ended September 30, 2017 is due to the tax impact of discrete items such as share-based compensation in the United States.
Current tax assets and liabilities
The total amount of current tax assets consists mainly of prepayments of income taxes by Criteo S.A., Criteo Corp. and Criteo Brazil. The current tax liabilities refers mainly to the net corporate tax payables of Criteo Italy, Criteo K.K. and Criteo Deutschland.
Ongoing tax inspection in the United States
On September 27, 2017, we received a draft notice of proposed adjustment from the Internal Revenue Service ("IRS") audit of Criteo Corp. for the year ended December 31, 2014. The amount of adjustments that may be asserted by the IRS in the final notice of proposed adjustment cannot be quantified at this time; however, based on the draft notice received, the amount to be assessed may be material. We strongly disagree with the IRS's position as asserted in the draft notice of proposed adjustment and intend to contest it.



19


Note 13. Earnings Per Share
Basic Earnings Per Share
We calculate basic earnings per share by dividing the net income for the period attributable to shareholders of the Parent by the weighted average number of shares outstanding.
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
2016

 
September 30,
2017

 
September 30,
2016

 
September 30,
2017

 
 
(in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
Net income attributable to shareholders of Criteo S.A.
 
$
13,539

 
$
19,774

 
$
42,869

 
$
38,185

Weighted average number of shares outstanding
 
63,628,351

 
65,412,326

 
63,163,922

 
64,881,751

Basic earnings per share
 
$
0.21

 
$
0.30

 
$
0.68

 
$
0.59

Diluted Earnings Per Share
We calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued from share-based compensation plans (see Note 10). There were no other potentially dilutive instruments outstanding as of September 30, 2016 and 2017. Consequently, all potential dilutive effects from shares are considered.
For each period presented, a contract to issue a certain number of shares (i.e. share option, non-employee warrant ("BSA"), restricted share unit ("RSU") or non-employee warrant ("BSPCE") is assessed as potentially dilutive if it is “in the money” (i.e., the exercise or settlement price is lower than the average market price).
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
2016

 
September 30,
2017

 
September 30,
2016

 
September 30,
2017

 
 
(in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
Net income attributable to shareholders of Criteo S.A.
 
$
13,539

 
$
19,774

 
$
42,869

 
$
38,185

Weighted average number of shares outstanding of Criteo S.A.
 
63,628,351

 
65,412,326

 
63,163,922

 
64,881,751

Dilutive effect of :
 
 
 
 
 
 
 
 
Restricted share awards ("RSUs")
 
266,970

 
1,615,344

 
152,317

 
1,497,121

Share options and BSPCE
 
1,841,080

 
1,116,117

 
2,030,088

 
1,421,857

Share warrants
 
80,021

 
56,556

 
83,430

 
76,062

Weighted average number of shares outstanding used to determine diluted earnings per share
 
65,816,422

 
68,200,343

 
65,429,757

 
67,876,791

Diluted earnings per share
 
$
0.21

 
$
0.29

 
$
0.66

 
$
0.56


20


The weighted average number of securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute EPS in the future are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
2016

 
September 30,
2017

 
September 30,
2016

 
September 30,
2017

 
 
 
 
 
 
 
 
 
Restricted share awards
 
32,176

 
1,168,812

 
345,732

 
470,125

Share options and BSPCE
 
455,474

 
516,668

 
426,777

 
362,861

Share warrants
 

 

 

 

Weighted average number of anti-dilutive securities excluded from diluted earnings per share
 
487,650

 
1,685,480

 
772,509

 
832,986


21


Note 14. Commitments and contingencies
Commitments
Leases
We are party to various contractual commitments mainly related to our offices as well as hosting services. There have been no significant changes in future payment obligations for these contractual commitments from what was disclosed in Note 23 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. Certain of these arrangements have free rent periods or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis.
Rent expenses relating to our offices totaled $8.3 million and $8.9 million for the three-month period ended September 30, 2016 and 2017, respectively and $23.3 million and $26.3 million for the nine-month period ended September 30, 2016 and 2017, respectively.
Hosting costs totaled $10.6 million and $13.1 million for the three-month period ended September 30, 2016 and 2017, respectively and $30.4 million and $44.2 million for the nine-month period ended September 30, 2016 and 2017, respectively.

Revolving Credit Facilities, Credit Line Facilities and Bank Overdrafts     
As mentioned in Note 9, we are party to two RCFs including one with HSBC for which we can draw up to RMB 50.0 million ($7.5 million) and one with a syndicate of banks which allow us to draw up to €350.0 million ($413.2 million), further to the amendment signed in March 2017 increasing the facility amount from €250.0 million to €350.0 million and extending the term of the contract from 2020 to 2022. As of September 30, 2017, RMB 30.0 million ($4.5 million), and €0.0 million ($0.0 million), respectively, were drawn on the RCFs.
Both of these 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 €350.0 million ($413.2 million) RCF which contains covenants, including compliance with a total net debt to adjusted EBITDA ratio and restrictions on incurring additional indebtedness. As of September 30, 2017, we were in compliance with the required leverage ratio.

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, 2017
$
485

 
$
169

 
$
654

Increase
275

 
964

 
1,239

Provision used
(250
)
 

 
(250
)
Provision released not used
(100
)
 
(58
)
 
(158
)
Currency translation adjustments
36

 
32

 
68

Balance at September 30, 2017
$
446

 
$
1,107

 
$
1,553

 - of which current
446

 
1,107

 
1,553

The amount of the provisions represent management’s best estimate of the future outflow. As of September 30, 2017, provisions are mainly in relation to employee-related litigations and business and operating risks.

22


Note 15. Breakdown of Revenue and Non-Current Assets by Geographical Areas
The Company operates in the following three geographical markets:
Americas (North and South America);
EMEA (Europe, Middle-East and Africa); and
Asia-Pacific.
The following tables disclose our consolidated revenue for each geographical area for each of the reported periods. Revenue by geographical area is based on the location of advertisers’ campaigns.
 
Americas

 
EMEA

 
Asia-Pacific

 
Total

For the three months ended:
(in thousands)
 
 
 
 
 
 
 
 
September 30, 2016
$
160,739

 
$
157,921

 
$
105,207

 
$
423,867

September 30, 2017
$
228,326

 
$
207,168

 
$
128,479

 
$
563,973

Revenue generated in France, the country of incorporation of the Parent, amounted to $31.8 million and $38.2 million for the three months ended September 30, 2016 and 2017, respectively.
 
 
Americas

 
EMEA

 
Asia-Pacific

 
Total

For the nine months ended:
(in thousands)
 
 
 
 
 
 
 
 
September 30, 2016
$
464,435

 
$
471,226

 
$
296,660

 
$
1,232,321

September 30, 2017
$
665,731

 
$
587,942

 
$
368,988

 
$
1,622,661

Revenue generated in France, the country of incorporation of the Parent, amounted to $95.2 million and $111.8 million for the nine months ended September 30, 2016 and 2017, respectively.
Revenue generated in other significant countries where we operate is presented in the following table:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
2016

 
September 30,
2017

 
September 30,
2016

 
September 30,
2017

 
(in thousands)
 
 
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
United States
$
134,504

 
$
200,801

 
$
395,769

 
$
578,806

EMEA
 
 
 
 
 
 
 
Germany
$
33,692

 
$
41,882

 
$