Criteo (CRTO) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01If we fail to innovate, enhance our brand, and adapt and respond effectively to rapidly changing technology, our offerings may become less competitive or obsolete. Our investments in new solutions and technologies to address new marketing goals for our clients are inherently risky and may not be successful
2. 02Our investments in our Commerce Media Platform and new technologies are inherently risky and may not be successful
3. 03The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors
4. 04In addition to competing for advertising spend, we compete with many companies for advertising inventory, some of whom also operate their own advertising networks or exchanges from which we buy advertising inventory
5. 05Our success depends on our ability to implement our business transformation and achieve our global business strategies
6. 06The failure by Criteo AI Engine to accurately predict user engagement and the failure to maintain the quality of our client and publisher content could result in significant costs to us, lost revenue and diminished business opportunities
7. 07Therefore, we need to continuously deliver satisfactory results for our clients and publishers to maintain and increase revenue, which depends partly on the optimal functioning of Criteo AI Engine
8. 08Third parties may implement technical restrictions that impede our access to data and revenue opportunities upon which we rely, which could materially impact our business and results of operations
9. 09We have substantial client concentration in certain markets and solutions, with a limited number of clients accounting for a substantial portion of our revenues in those areas
10. 10We may not be able to effectively integrate or realize the expected benefits of acquisitions or strategic transactions, which may adversely affect our ability to achieve our growth and business objectives
11. 11Our international operations and expansion expose us to several risks
12. 12Additionally, operating in international markets also requires significant management attention and financial and legal resources. We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability
13. 13Regulatory, legislative or self-regulatory developments regarding internet or online matters could adversely affect our ability to conduct our business
14. 14Under GDPR, data protection authorities have the power to impose administrative fines of up to a maximum of €20 million or 4% of the data controller’s or data processor’s total worldwide turnover from the preceding financial year. Similar sanctions would be applicable under the E-Privacy Regulation to cookie consent
15. 15We cannot predict the full effect of these laws and regulations on our business, but adapting our business to comply with them could involve substantial resources and expense, and may cause us to divert resources from other aspects of our business, all of which may adversely affect our business
16. 16Some of these consumer and privacy laws differ slightly from the CCPA and CPRA leading to a varied and complex regulatory landscape, which could result in material costs
17. 17Additionally, legislative and regulatory action is emerging in the areas of artificial intelligence (“AI”), which, given our long history developing using and innovating through AI with the Criteo AI Engine, could increase costs or restrict opportunity
18. 18Our ability to generate revenue depends on our collection of significant amounts of data from various sources, which may be restricted by consumer choice, clients, publishers and retailer partners, browsers or other software, changes in technology, and new developments in laws, regulations and industry standards
19. 19In addition, web browsers that explicitly do not allow the tracking of data may be growing in popularity. If a significant number of web browser users switch to advertising-free services or platforms, our business could be materially impacted
20. 20User privacy features of other channels of programmatic advertising, such as Connected TV or over-the-top video, are still developing. Technical or policy changes, including regulation or industry self-regulation, could harm our growth in those channels
21. 21We operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. Our historical growth rates may not be indicative of our future growth, and we may have difficulty sustaining profitability
22. 22We derive a significant portion of our revenue from companies in the retail, travel and classified industries, and any downturn in these industries or any changes in regulations affecting these industries could harm our business
23. 23We face intense competition for employee talent, and if we do not retain and continue to attract highly skilled talent or retain our senior management team and other key employees, we may not be able to achieve our business objectives
24. 24For example, if we have an unsuccessful engagement with an advertising agency on a particular advertising campaign, we risk losing the ability to work not only for the client for whom the campaign was run, but also for other clients represented by that agency
25. 25Our future success will depend in part on our ability to expand into new industry verticals
26. 26Our future success will depend in part on our ability to expand into new advertising channels
27. 27Our success in expanding into any additional advertising channels will depend on various factors, including our ability to identify, adapt, innovate, market and integrate our solutions to the new advertising channels
28. 28We experience fluctuations in our results of operations due to a number of factors, which make our future results difficult to predict and could cause our operating results to fall below expectations or our guidance

Risks Related to Data Privacy, Intellectual Property and Cybersecurity

1. 29Our business involves the use, transmission and storage of personal data and confidential information, and the failure to properly safeguard such information could result in significant reputational harm and monetary damages
2. 30Our efforts to address undesirable activity on our platform may also increase the risk of retaliatory cyber-attacks. As a result, we may suffer significant legal, reputational, or financial exposure, which could adversely affect our business and results of operations
3. 31We have invested in and expended significant resources to protect against such threats and to alleviate problems caused by breaches in security and may have to expend additional resources for such purposes in the future
4. 32For example, effective IP protection may be resource intensive or may not be available in every country in which we operate or intend to operate. Some IP-mechanisms, such as patents, may require us to disclose otherwise confidential information to the public
5. 33Furthermore, despite our efforts, the protection obtained may be insufficient or an issued patent may be deemed invalid or unenforceable
6. 34Our business relies on the continued and uninterrupted performance of our software and hardware infrastructures, including Criteo AI Engine. We currently place close to five billion advertisements per day and each of those advertisements can be placed in under 100 milliseconds
7. 35Our failure to continuously upgrade or increase the reliability and redundancy of our infrastructure to meet the demands of a growing base of global clients and publisher and retailer partners could adversely affect the functioning and performance of our technology and could in turn affect our results of operations
8. 36Our business may suffer if it is alleged or determined that our technology or another aspect of our business infringes the intellectual property rights of others
9. 37Such infringement claims could subject us to significant liabilities for monetary damages, interfere with or delay our development, commercialization or provision of our offerings on acceptable terms, harm our reputation or require technology or branding changes
10. 38Our inability to use software licensed from third parties, or our use of open source software under license terms that interfere with our proprietary rights, could disrupt our business

Risks Related to Ownership of Our Shares and the ADSs and the Trading of the ADSs

1. 39The market price for the ADSs has been and may continue to be volatile or may decline regardless of our operating performance
2. 40Actions of activist shareholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition, or share price
3. 41We currently have a senior unsecured revolving credit facility under which we may borrow up to €407 million (or its equivalent in U.S. dollars) for general corporate purposes, including the funding of business combinations (the "General RCF")
4. 42Furthermore, if we raise additional funds through the issuance of additional equity securities, shareholders will experience dilution, and the new equity securities could have rights senior to those of our ordinary shares
5. 43Our business could be negatively impacted by the activities of hedge funds or short sellers
6. 44We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth, both organic and inorganic
7. 45The determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our statutory financial statements prepared and presented in accordance with accounting principles generally accepted in France
8. 46Finally, exchange rate fluctuations may affect the amount of euros that we are able to distribute, and the amount in U.S
9. 47Our by-laws and French corporate law contain provisions that may delay or discourage a sale of the Company
10. 48You may not be able to exercise your right to vote the ordinary shares underlying your ADSs
11. 49Your right as a holder of ADSs to participate in any future preferential subscription rights or to elect to receive dividends in shares may be limited, which may cause dilution to your holdings
12. 50However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties
13. 51U.S. investors may have difficulty enforcing civil liabilities against our Company, directors and senior management
14. 52The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations incorporated in the U.S

General Risk Factors

1. 53In periods of macroeconomic and geopolitical uncertainty, businesses may delay or reduce their spending on advertising, which may expose us to the credit risk of some of our clients and adversely affect our business, financial condition, results of operations and/or cash flows
2. 54Our failure to maintain certain tax regimes applicable to French technology companies may adversely affect our results of operations
3. 55We are a multinational organization facing increasingly complex tax issues in many jurisdictions, and new taxes or laws, or revised interpretations thereof, that may negatively affect our results of operations
4. 56If we fail to maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of ADSs may be adversely impacted
5. 57U.S. Holders of our ADSs may suffer adverse tax consequences if we are treated as a “passive foreign investment company” for U.S. federal income tax purposes
6. 58As the value of our assets for purposes of the above-mentioned PFIC asset test will generally be determined by reference to the market value of our ADSs, the determination of whether we will be or become a PFIC will depend in large part upon the market value of our ADSs, which we cannot control
7. 59Based on the value and composition of our assets, although not free from doubt, we do not believe we were a PFIC for the taxable year ended December 31, 2024, and we do not anticipate becoming a PFIC in the current taxable year or the foreseeable future
8. 60If we are classified as both a CFC and a PFIC (as defined above), we generally will not be treated as a PFIC with respect to those U.S. Holders that are U.S. Shareholders during the period in which we are a CFC