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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-03-02 · 268 added, 237 removed, 603 unchanged (46% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Form 10-K.

We are a global technology company powering marketers with trusted and impactful advertising.

We strive to deliver measurable business results at scale across multiple marketing goals for retailers and brands, through our self-service Criteo Platform.

Using shopping data, artificial intelligence ("AI") technology and extensive consumer reach, we help marketers drive Awareness, Consideration and Conversion for their products and services 1 , and help retailers generate advertising revenues from consumer brands.

We are a global technology company powering the world's marketers with trusted and impactful advertising.

We operate at the intersection of ecommerce, digital marketing and media monetization.

We enable brands' and retailers' growth by providing best-in-class marketing and monetization services on the open Internet.

We do this 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.

We price our offering on a range of pricing models and measure our value based on clear, well-defined performance metrics, making our impact on the business of our clients both transparent and easy to measure.

Our clients include some of the largest and most sophisticated commerce companies in the world, along with world-class consumer brands.

To drive trusted and impactful advertising, we activate our data assets in a privacy-by-design way through proprietary AI technology to engage consumers in real time with highly relevant digital advertisements ("ads") across devices and environments.

Our focus is on ecommerce.

Our clients include some of the largest and most sophisticated ecommerce companies in the world, along with world-class consumer brands.

We partner with them to capture user activity on their websites and mobile applications ("apps"), which we define as digital properties, and optimize the performance of their ads based on that activity and other data.

Demonstrating the depth and scale of our data, we collected data on $900 billion in online sales transactions 2 on our clients' digital properties in the year ended December 31, 2019.

Based on this data and other assets, we delivered targeted ads that generated over 11 billion clicks 2 in the year ended December 31, 2019.

Demonstrating the depth and scale of our data, we collected data on over $950 billion in online sales transactions 1 on our clients' digital properties in the year ended December 31, 2020.

Based on this data and other assets, we delivered 1.6 trillion targeted ads in the year ended December 31, 2020.

As of December 31, 2020, we served more than 21,000 clients and, in each of the last three years, our average client retention rate, as measured on a quarterly basis, was approximately 90%.

We serve a wide range of clients and our revenue is not concentrated within any single client or group of clients.

In 2017 , 2018 and 2019 , our largest client represented 1.9%, 2.0% and 2.8% of our revenue, respectively, and in 2017, 2018 and 2019 , our largest 10 clients represented 11.2%, 11.7% and 11.4% of our revenue in the aggregate, respectively.

In 2020, 2019 and 2018, our largest client represented 3.5%, 2.8%, 2.0% of our revenue, respectively, and in 2020, 2019 and 2018, our largest 10 clients represented 13.7%, 11.4% and 11.7% of our revenue in the aggregate, respectively.

There is no group of customers under common control or customers that are affiliates of each other constituting an aggregate amount equal to 10% or more of our consolidated revenues, the loss of which would have a material adverse effect on the Company.

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As a result of our significant international operations, our revenue from outside of France, our home country, accounted for 93.6% of our revenue for year ended December 31, 2020.

The Company's foreign currency risk exposure to the British pound, the Japanese yen, the Brazilian real and the U.S dollar against the euro (the euro still remains the Group's functional currency) is described in Item 7 note B.

The Company's foreign currency risk exposure to the British pound, the Japanese yen, the Brazilian real and the U.S.

dollar against the euro (the euro still remains the Company's functional currency) is described in Item 7 note B.

Liquidity and Capital Resources to our Management's Discussion and Analysis included elsewhere in this Form 10-K.

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1 Driving Awareness for a brand means exposing its brand name to consumers who have not been in touch with the brand before, thereby creating brand awareness from such consumers.

Driving Consideration for an advertiser's products or services means attracting prospective new consumers to consider engaging with and/or buying this advertiser's products or services.

Driving Conversion for an advertisers' products or services means triggering a purchase by consumers who have already engaged with this advertisers products or services in the past.

1 Excluding Criteo Retail Media

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On August 3, 2018, we acquired Storetail, a Paris-based pioneering retail media technology platform enabling retailers to monetize native placements on their ecommerce sites.

Transition to U.S.

GAAP and Change in Reporting Currency

As of June 30, 2015, we no longer met the requirements to qualify as a foreign private issuer under the Exchange Act.

As a result, we began reporting as a domestic registrant as of January 1, 2016 and we are required under current SEC rules to prepare our financial statements in accordance with U.S.

GAAP, rather than IFRS, and to present our financial information in U.S.

dollars instead of euros.

The transition from consolidated financial statements under IFRS to U.S.

GAAP only impacted the presentation of our consolidated statement of financial position (order of liquidity) and of our consolidated statement of cash flows (effect of exchange rate changes on cash and cash equivalents).

The functional currency of the Company remains the euro, while our reporting currency changed from the euro to the U.S.

Consequently, since we incur portions of our expenses and derive revenues in currencies other than the euro, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.

Foreign exchange risk exposure also arises from intra-company transactions and financing with subsidiaries that have a functional currency different than the euro.

Operating Results.

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

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

We 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 and cost-per-install basis, we bill our clients when a user clicks on an advertisement we deliver or installs an application by clicking on an advertisement we delivered, respectively.

For 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.

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For this pricing model, we recognize revenue when an advertisement is displayed.

We act as principal in our arrangements because (i) we control the advertising inventory (spaces on websites) before it is transferred to our clients;

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.

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Other Cost of Revenue.

Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment and the cost of data purchased from third parties.

Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment, the cost of 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.

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Salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs are the most significant components of each of these expense categories.

We grew from 2,503 employees at January 1, 2017 to 2,755 employees at December 31, 2019 .

The number of employees decreased from 2,764 employees at January 1, 2018 to 2,594 employees at December 31, 2020.

We include equity awards compensation expense in connection with grants of share options, warrants, and restricted share units ("RSUs") in the applicable operating expense category based on the respective equity award recipient’s function (Research and development, Sales and operations, General and administrative).

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These expenses are partially offset by the French research tax credit that is conditional upon the level of our expenditures in research and development.

Our research and development efforts are focused on enhancing the performance of our solution and improving the efficiency of the services we deliver to our clients and publisher partners.

All development costs, principally headcount-related costs, are expensed as management determines that technological feasibility is reached, shortly before the release of the developed products or features.

As a result, the development costs incurred after the establishment of technological feasibility and before the release of those products or features are not material and, accordingly, are expensed as incurred.

Our research and development efforts are focused on enhancing the performance of our solutions and improving the efficiency of the services we deliver to our clients and publisher partners.

All development costs, principally headcount-related costs, are expensed until management determines that technological feasibility is reached and the preliminary project phase is completed.

The Company capitalizes costs associated with software developed when the preliminary project stage is completed, management implicitly or explicitly authorizes and commits to funding the project and it is probable that the project will be completed and perform as intended .

Capitalized costs mainly relates to internally developed internal-use software and IT licenses.

The number of employees in research and development functions grew from 603 at January 1, 2017 to 681 at December 31, 2019 .

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, and we expect our headcount to be slightly reduced upon completion of this restructuring.

We expect research and development expenses to slightly decrease as a percentage of our revenue.

We believe our continued investment in research and development to be critical to maintaining and improving our technology within the Criteo Platform, our quality of service and our competitive position.

The number of employees in research and development functions decreased from 701 at January 1, 2018 to 624 at December 31, 2020.

On October 7, 2019, in connection with the new organization structure, we announced a plan to restructure its R&D activities with the closing of our R&D operations in Palo Alto, and our headcount was slightly reduced in connection with the completion of this restructuring.

Additionally, research and development expenses slightly decreased as a percentage of our revenue.

We believe our continued investment in research and development to be critical to maintaining and improving our technology within the Criteo Commerce Media Platform, our quality of service and our competitive position.

Sales and Operations Expense .

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In order to expand our business, we expect to make targeted investments in our resources in some areas of our sales and operations.

Yet, we expect sales and operations expenses to remain fairly flat as a percentage of revenue over time as weincrease the productivity of our sales and operations teams.

Yet, we expect sales and operations expenses to remain fairly flat as a percentage of revenue over time as we increase the productivity of our sales and operations teams.

General and Administrative Expense .

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Additional expenses included in this category include travel-related expenses, subcontracting and professional fees, audit fees, tax services and legal fees, as well as insurance and other corporate expenses, along with allocated overhead and depreciation and amortization costs.

The number of employees in general and administrative functions grew from 411 at January 1, 2017 to 496 at December 31, 2019 .

The number of employees in general and administrative functions decreased from 468 at January 1, 2018 to 450 at December 31, 2020.

We expect our general and administrative expense to decrease as a percentage of revenue over time as we increase the productivity of our general and administrative teams.

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In France, we benefit from a reduced tax rate of 10% on a large portion of this technology royalty income.

On September 27, 2017, we received a draft notice of proposed adjustment from the Internal Revenue Service ("IRS") audit of Criteo Corp.

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.

If the IRS prevails in its position, it could result in an additional federal tax liability of an estimated maximum aggregate amount of $15.0 million, excluding relative fees, interest and penalties.

We strongly disagree with the IRS's position as asserted in the draft notice of proposed adjustment and intend to contest it.

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.

No uncertain tax positions were identified as of December 31, 2020.

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.

We believe estimates associated with revenue recognition, trade receivables, net of allowances for doubtful accounts, deferred tax assets, uncertain tax positions, impact of tax reforms in the U.S., goodwill and intangible assets, internal-use software and equity awards compensation have the greatest potential impact on our consolidated financial statements.

We believe estimates associated with (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.

Therefore, we consider these to be our critical accounting policies and estimates.

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For these pricing models, we recognize revenue when a user clicks on an advertisement or installs an application.

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For this pricing model, we recognize revenue when an advertisement is displayed.

We act as principal in our arrangements because (i) we control the advertising inventory (spaces on websites) before it is transferred to our clients;

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.

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A higher default rate than estimated or a deterioration in our major clients’ creditworthiness could have an adverse impact on our future results.

Given 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.

Allowances for doubtful accounts on trade receivables are recorded in “Sales and Operations” in our consolidated statements of income.

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The amount of allowance for doubtful accounts charged to our consolidated statements of income for the years ended December 31, 2020, 2019 and 2018 was $30.8 million, $11.1 million and $17.1 million, respectively and represented 6.5%, 2.3% and 3.7% of our trade receivables, net of allowances, as of December 31, 2020, 2019, and 2018, respectively.

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.

Deferred Tax Assets

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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.

Goodwill and Intangible Assets

Acquired intangible assets are accounted for at acquisition cost less accumulated 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.

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 a two-step impairment test, which involves assumptions regarding estimated future cash flows to be derived from the Company.

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.

The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill.

If the net book value exceeds its fair value, then the Company would perform the second step of the goodwill impairment test to determine the amount of the impairment loss.

The impairment loss to be recognized would be calculated by comparing the implied fair value of the Company to its net book value.

In calculating the implied fair value of the Company’s goodwill, the fair value of the Company would be allocated to all of the other assets and liabilities based on their fair values.

The excess of the fair value of the Company over the amount assigned to its other assets and liabilities is the implied fair value of goodwill.

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.

There has been no impairment of goodwill during the years ended December 31, 2020, 2019 and 2018, as the Company's reporting unit's fair value was substantially in excess of the carrying value based on the annual goodwill impairment test.

Internal-Use Software

Costs related to customized internal-use software that have reached the application development stage are capitalized.

Capitalization of such costs begins when the preliminary project stage is complete and stops when the project is substantially complete and is ready for its intended purpose.

In making this determination, several analyses for each phase are performed, including analysis of the feasibility, availability of resources, intention to use and future economic benefits.

Amortization of these costs begins when capitalization stops and is calculated on a straight-line basis over the assets’ useful lives estimated at three to five years.

Costs incurred during the preliminary development stage, as well as maintenance and training costs, 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.

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.

Equity Awards Compensation

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0.00% - 0.25% 0.00% - 0.10% 0.60% - 0.90%

0.00% - 0.10%

Expected life (in years)

6 years 6 years 6 years

Dividend yield

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Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis.

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands)

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Revenue at constant currency (*)

2,075,856 2,312,889 2,281,196 (8) % 1 %

Revenue as reported $ 894,854 $ 952,154 $ 954,073 (6) % (0.2) %

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Revenue at constant currency (*)

$ 907,624 $ 956,738 $ 961,766 (5) % 0.3 %

Revenue as reported $ 749,672 $ 806,197 $ 839,825 (7) % (4) %

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Revenue at constant currency (*)

$ 745,144 $ 850,675 $ 818,272 (8) % 1 %

Revenue as reported $ 428,091 $ 503,165 $ 506,416 (15) % (1) %

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Revenue at constant currency (*)

$ 423,088 $ 505,476 $ 501,158 (16) % (0.2) %

(*) Revenue at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the prior year to the following year figures.

2020 Compared to 2019

Revenue in 2020 decreased $(188.9) million, or (8)% (or (8)% on a constant currency basis) to $2,072.6 million compared to 2019.

The COVID-19 pandemic impacted our business during most of the year, with an estimated net negative impact on revenue of approximately $262 million for the twelve months ended December 31, 2020, or approximately 12 points of year-over-year growth, as some clients decided to temporarily pause or reduce their campaigns with us.

The COVID-19 headwind impacted our large customers in our Marketing Solutions business, in particular in the Travel, Classifieds verticals and some large brick-and-mortar Retail clients.

However, we believe that client spending from Retail clients in the midmarket and in our Retail Media solutions was supported by stronger ecommerce shopping trends emerging from the COVID-19 pandemic.

The year-over-year decrease in revenue was driven by the lower contribution from our existing clients and some churning clients, both of which we largely attribute to the COVID-19 outbreak, offsetting the positive contribution from new clients.

We added 1,213 net new clients year-over-year across regions.

Our revenue in the Americas region decreased $(57.3) million, or (6)% (or (5)% on a constant currency basis) to $894.9 million for 2020 compared to 2019.

This decline was driven by an estimated revenue impact from COVID-19 of approximately $90 million, in particular with large customers in the broader Classifieds vertical and some large brick-and-mortar Retail clients in the U.S.

Our revenue in the EMEA region decreased $(56.5) million, or (7)% (or (8)% on a constant currency basis) to $749.7 million for 2020 compared to 2019.

This decrease at constant currency includes an estimated $96 million revenue impact from the COVID-19 pandemic, in part due to the fact that the EMEA region had the highest exposure to the Travel vertical prior to the pandemic, which was most impacted by COVID-19.

Our revenue in the Asia-Pacific region decreased $(75.1) million, or (15)% (or (16)% on a constant currency basis) to $428.1 million for 2020 compared to 2019.

The decrease at constant currency included an estimated $76 million revenue impact from the COVID-19 pandemic, mostly in the Travel and Classifieds verticals, and was also driven by a weak economic climate in Japan, our largest market in the region.

Additionally, $2,073 million of revenue for 2020 was negatively impacted by $ $3.2 million of currency fluctuations, particularly as a result of the depreciation of the Turkish Lira, Russian Ruble, the Brazilian real, partially offset by the appreciation of the Japanese Yen and the Euro, compared to the U.S.

The year-over-year decrease in revenue on a constant currency basis is entirely attributable to the decrease in the average price charged to advertisers, partly driven by the evolution of our revenue mix over the period, and partially offset by the increased number of impressions delivered by us and the increased number of clicks delivered on the advertising banners displayed by us.

2019 Compared to 2018

Revenue for 2019 decreased $(38.8) million, or (2)% (or increased 1% on a constant currency basis) to $2,261.5 million, compared to 2018.

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The year-over-year growth in revenue on a constant currency basis was entirely attributable to an increased number of clicks delivered on the advertising banners displayed by us and the increased number of impressions delivered by us, offsetting the decrease in the average cost-per-click charged to advertisers.

2018 Compared to 2017

Revenue for 2018 increased $3.6 million , or 0.2% (or decreased (1)% on a constant currency basis) to $2,300.3 million , compared to 2017 .

Revenue was impacted by the discontinuation of certain products over the period.

Revenue from new clients contributed 63% to the year-over-year revenue growth of the period, while revenue from existing clients contributed 37%.

Business with our existing clients was generally resilient despite significant headwinds resulting in softer contribution to revenue growth.

We added 1,301 net new clients across regions and client sizes over the period, a lower volume than the prior year, primarily driven by delayed sales headcount hiring and increased employee attrition, particularly in the midmarket.

Offsetting this, clients increasingly used our Criteo Marketing Solutions to address new marketing goals, particularly Consideration, as well as Criteo Retail Media solutions, launched campaigns in new environments, such as apps, and benefited from our broader direct connections with publishers through Criteo Direct Bidder.

Our revenue in the Americas region decreased (4)% (or (3)% on a constant currency basis) to $954.1 million for 2018 compared to 2017.

While we saw continued strength with our largest existing clients in the United States, execution was more difficult in the midmarket across the region and we experienced prolonged difficult market conditions in Latin America.

We saw a positive impact from the continued ramp up of our expanded Criteo Marketing Solutions and Criteo Retail Media solutions, in particular in the United States.

Contribution from existing clients was negatively impacted by user coverage limitations across the region, and the discontinuation of certain products over the period.

Contribution from new clients was negatively impacted by hiring delays within our sales teams.

Our revenue in the EMEA region increased 4% (or 1% on a constant currency basis) to $839.8 million for 2018 compared to 2017.

This was largely driven by solid growth in Germany, Russia and Middle-East, as well as the traction from our broader solutions offering.

External negative factors, including the implementation of the GDPR, as well as some short-term disturbance related to the implementation of our new go-to-market model across the region had a temporary negative impact on revenue growth.

Our revenue in the Asia-Pacific region increased 2% (or 1% on a constant currency basis) to $506.4 million for 2018 compared to 2017.

Overall, revenue growth was driven by a stronger business in Korea (particularly in apps) and India and Japan (particularly with large clients).

Additionally, our $2,300.3 million of revenue for 2018 was positively impacted by $19.1 million of currency fluctuations, particularly as a result of the strengthening of the Japanese yen, the British pound and the euro partially offset by the depreciation of the Brazilian real and the Turkish lira, compared to the U.S.

The year-over-year decrease in revenue on a constant currency basis was attributable to a slight decrease in the average cost-per-click, not entirely offset by growth in the volume of clicks delivered on the advertisements displayed by us.

Cost of Revenue

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percentages)

Traffic acquisition costs

$ (1,247,571) $ (1,314,947) $ (1,334,334) (5)% (1)%

Other cost of revenue

(137,028) (117,533) (131,744) 17% (11)%

Total cost of revenue $ (1,384,599) $ (1,432,480) $ (1,466,078) (3)% (2)%

% of revenue (67) % (63) % (64) %

Gross profit % 33 % 37 % 36 %

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Cost of revenue for 2020 decreased $(47.9) million, or (3)%, compared to 2019.

This decrease was primarily the result of a $(67.4) million, or (5)% decrease in traffic acquisition costs (or (5)% on a constant currency basis), partially offset by a $19.5 million, or 17% (or 18% on a constant currency basis), increase in other cost of revenue.

The decrease in traffic acquisition costs on a constant currency basis related primarily to the (13)% decrease (and (13)% decrease on a constant currency basis) in the average CPM for inventory purchased.

This was partly driven by lower global demand for advertising inventory, despite the increase in online traffic globally caused by the lockdown imposed in COVID-19 affected areas, making the unit price of inventory relatively cheaper than in the pre-pandemic period.

This was also driven by the effectiveness of our Criteo Direct Bidder, which allows us to buy quality inventory directly from large publishers and remove intermediary fees in the process.

This decrease was not entirely offset by the 10% increase in the number of impressions we purchased, reflecting higher volumes of inventory available and our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns.

The increase in other cost of revenue includes $(11.1) million in the allocated depreciation and amortization expense,$(4.2) million in hosting costs, $(2.6) million in data acquisition and $(1.6) million increase in other cost of sales.

2019 Compared to 2018

Cost of revenue for 2019 decreased $(33.6) million, or (2)%, compared to 2018.

This decrease was primarily the result of a $(19.4) million, or (1)% decrease in traffic acquisition costs (or an increase of 1% on a constant currency basis), and a $(14.2) million, or (11)% (or (9)% on a constant currency basis), decrease in other cost of revenue.

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The decrease in other cost of revenue includes a $(22.5) million decrease in the allocated depreciation and amortization expense following the changes in our estimation of the useful life of the servers and other equipment used in our data centers from 3 to 5 years, partially offset by a $5.9 million increase in other cost of sales and a $2.4 million increase in hosting costs.

2018 Compared to 2017

Cost of revenue for 2018 decreased $(11.1) million , or (1)% , compared to 2017 .

This decrease was primarily the result of a $(21.2) million , or (2)% (or (2)% on a constant currency basis), decrease in traffic acquisition costs and a $10.1 million , or 8% (or 8% on a constant currency basis), increase in other cost of revenue.

The decrease in traffic acquisition costs related primarily to a (2.7)% decrease (or (3.2)% decrease on a constant currency basis) in the average CPM for inventory purchased, partly offset by an increase of 1.2% in the total number of impressions we purchased.

The increase in the volume of purchased impressions reflects our expanding relationships with existing and new publisher partners to support the growth in our client demand for advertising campaigns.

The year-over-year decrease in average CPM was driven by a combination of factors, including the effectiveness of our Criteo Direct Bidder, which allows to buy quality inventory directly from large publishers and remove intermediary fees in the process, as well as of the growing share of in-app inventory in our business, which inventory cost tends to be slightly lower than that in the web browser environment.

The increase in other cost of revenue includes a $13.1 million increase in allocated depreciation and amortization expense and a $0.1 million increase in other cost of sales partially offset by a $3.1 million decrease in hosting costs.

Revenue excluding Traffic Acquisition Costs

2 unchanged sentences

We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including access to advertising inventory, breadth and depth of data and continuous improvement of the Criteo AI Engine’s performance, allowing it to deliver more relevant advertisements at scale.

As part of this focus, we continue to invest in building relationships with direct publishers and pursue access to leading advertising exchanges.

As part of this focus, we continue to invest in building preferred relationships with direct publishers and pursue access to leading advertising exchanges.

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

Year Ended December 31,

Region 2020 2019 2018

(in thousands)

Traffic acquisition costs

Revenue Americas $ 894,854 $ 952,154 $ 954,073

EMEA 749,672 806,197 839,825

Asia-Pacific 428,091 503,165 506,416

Total $ 2,072,617 $ 2,261,516 $ 2,300,314

Traffic acquisition costs Americas $ (569,436) $ (579,175) $ (579,597)

EMEA (433,206) (453,530) (471,654)

Asia-Pacific (244,929) (282,242) (283,083)

Total $ (1,247,571) $ (1,314,947) $ (1,334,334)

Revenue ex-TAC (1)

Americas $ 325,418 $ 372,979 $ 374,476

EMEA 316,466 352,667 368,171

Asia-Pacific 183,162 220,923 223,333

Total $ 825,046 $ 946,569 $ 965,980

(1) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period.

17 unchanged sentences

Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis:

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands)

16 unchanged sentences

Research and Development Expenses

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent of revenue)

Research and development expenses

$ (132,513) $ (172,591) $ (179,263) (23)% (4)%

(6) % (8) % (8) %

2020 Compared to 2019

Research and development expenses for 2020 decreased $(40.1) million, or (23)%, compared to 2019.

This decrease mainly related to a decrease in headcount-related costs following the cessation of our R&D operations in Palo Alto in 2019 and lower amortization expense due to the Manage assets revised useful life in 2019.

2019 Compared to 2018

Research and development expenses for 2019 decreased $(6.7) million, or (4)%, compared to 2018.

This decrease mainly related to an increase in the French Research Tax Credit and a decrease of headcount-related costs due to a lower share-based compensation expense, partially offset by an increased amortization expense for Manage technology due to a revised useful life (see Note 8).

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.

On October 7, 2019, in connection with the new organization structure, the Company announced a plan to restructure its R&D activities with the cessation of its R&D operations in Palo Alto.

The Company incurred net restructuring costs of $0.7 million (see Note 2).

2018 Compared to 2017

Research and development expenses for 2018 increased $5.3 million , or 3% , compared to 2017 .

This increase mainly related to an increase of headcount-related costs and other expenses, partially offset by an increase in the French Research Tax Credit.

Sales and Operations Expenses

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent of revenue)

Sales and operations expenses $ (330,285) $ (375,477) $ (372,707) (12)% 1%

% of revenue (16) % (17) % (16) %

2020 Compared to 2019

Sales and operations expenses for 2020 decreased $(45.2) million, or (12)%, compared to 2019.

This decrease mainly related to a reduction in headcount-related costs, a lower share-based compensation expense, the absence of Manage customer relationships amortization (as asset was fully impaired in 2019), discretionary spend measures on marketing and events, partially offset by an increase in the provision for credit losses.

2019 Compared to 2018

Sales and operations expenses for 2019 increased $2.8 million, or 1%, compared to 2018.

This increase mainly related to impairment of facilities following our offices right sizing policy implementation (see Note 2), the $4.8 million impairment loss recognized on Manage customers relationships (see Note 8) and a $5.0 million increase following an exceptional charge related to an invoicing dispute partially offset by a positive change in provisions for doubtful receivables.

2018 Compared to 2017

Sales and operations expenses for 2018 decreased $(7.9) million , or (2)% , compared to 2017 .

This decrease mainly related to a decrease in headcount-related costs, internal and marketing events costs and operating taxes in Brazil and Singapore partially offset by an increase of bad debt expense.

General and Administrative Expenses

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent of revenue)

General and administrative expenses $ (116,395) $ (139,754) $ (135,159) (17)% 3%

% of revenue (6) % (6) % (6) %

2020 Compared to 2019

General and administrative expenses for 2019 increased $4.6 million , or 3% , compared to 2018 .

This increase was mostly driven by an increase in consulting fees for process optimization projects and the proceeds from the disposal of the HookLogic travel business in March 31, 2018

General and administrative expenses for 2020 decreased $(23.4) million, or (17)%, compared to 2019.

This decrease was mostly driven by a decrease in headcount-related costs, a lower share-based compensation expense and a decrease in rent and facilities costs, following the right-sizing of our real estate footprint, partially offset by transformation fees.

2019 Compared to 2018

General and administrative expenses for 2019 increased $4.6 million, or 3%, compared to 2018.

This increase mainly related to an increase of headcount-related costs and consulting fees relating to the Storetail and Manage acquisitions.

This increase was mostly driven by an increase in consulting fees for process optimization projects and the proceeds from the disposal of the HookLogic travel business in March 31, 2018.

Financial Expense

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent of revenue)

Financial expense $ (1,939) $ (5,749) $ (5,084) (66)% 13%

% of revenue (0.1) % (0.3) % (0.2) %

2020 Compared to 2019

Financial expense for 2019 increased by $0.7 million , or 13% compared to 2018 .

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.

Financial expense for 2020 decreased by $(3.8) million, or (66)% compared to 2019.

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, and the non-utilization costs, partially offset by income from invested cash & cash equivalents.

At December 31, 2020, our exposure to foreign currency risk was centralized at Criteo S.A.

1 unchanged sentence

2019 Compared to 2018

Financial expense for 2018 decreased by $(4.5) million , or (47)% compared to 2017 .

The $5.1 million financial expense for the period ended December 31, 2018 was mainly driven by the non-utilization costs and upfront fees amortization incurred as part of our available revolving credit facility RCF financing.

The hedging costs related to the intra-group position between Criteo S.A.

and its U.S subsidiary in the context of the funding of the HookLogic acquisition was lower in the year ended December 31, 2018 compared to the same period ended in 2017 as this intra-group position no longer requires hedging following the qualification as a net investment in a foreign operation in February 2018.

Financial expense for 2019 increased by $0.7 million, or 13% compared to 2018.

The $5.7 million financial expense for the period ended December 31, 2019 was mainly driven by the non-utilization costs and up-front 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.

1 unchanged sentence

Provision for Income Taxes

Year Ended December 31,

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent information)

Provision for income taxes $ (32,197) $ (39,496) $ (46,144) (18)% (14)%

% of revenue (2) % (2) % (2) %

Effective tax rate 30.1 % 29.2 % 32.5 %

2 unchanged sentences

The annual effective tax rate for 2020 was 30.1%, compared to an annual effective tax rate of 29.2% for 2019.

Generally, the annual effective tax rates differ from statutory rates primarily due to the impact of the domestic tax deduction applicable to technology royalty income we received from our subsidiaries, differences in tax rates in foreign jurisdictions, tax loss carryforwards in certain of our foreign subsidiaries, non-recognition of deferred tax assets related to tax losses and temporary differences, recognition of previously unrecognized tax losses and equity awards compensation expense.

The annual effective tax rates differs from the statutory rates primarily due to the impact of the domestic tax deduction applicable to technology royalty income we received from our subsidiaries, differences in tax rates in foreign jurisdictions, tax loss carryforwards in certain foreign subsidiaries, non-recognition of deferred tax assets related to tax losses and temporary differences, recognition of previously unrecognized tax losses and equity awards compensation expense.

In 2020, our income before taxes decreased by $28.6 million to $106.9 million, compared to 2019, generating a $34.2 million theoretical income tax expense at a nominal standard French tax rate of 32.02%.

This theoretical tax expense is impacted primarily by the following items contributing to a $32.2 million effective tax expense and a 30.1% effective tax rate:

$13.4 million of net effect of share-based compensation, $2.7 million of deferred tax assets on which we recognized a valuation allowance, $16.0 million resulting from the BEAT waiver election issued by the United States Treasury and IRS in December 2019, $7.7 million of permanent differences (mainly based on employee costs, depreciation expenses and intercompany transactions), $3.6 million related to the French business tax Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, offset by a $15.9 million tax deduction resulting from technology royalty income we received from our subsidiaries, $10.9 million Research and Development tax credit and the recognition or reversal of valuation allowance on deferred tax assets for $20.6 million (mainly for Criteo Corp).

$11.6 million of net effect of share-based compensation, $6.0 million of deferred tax assets on which we recognized a valuation allowance, $13.4 million resulting from the BEAT waiver election, $3.5 million related to the French business tax, Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, offset by a $13.4 million tax deduction resulting from technology royalty income we received from our subsidiaries, $5.3 million Research and Development tax credit, the recognition or reversal of valuation allowance on deferred tax assets of $2.5 million and $9.0 million of permanent differences (mainly based on employee costs, depreciation expenses and intercompany transactions).

Please see Note 21 to our audited consolidated financial statements for more detailed information on the provision for income taxes.

Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements.

As at December 31, 2019, the valuation allowance against deferred tax assets amounted to $25.3 million.

It mainly related to Criteo Corp.

($12.8 million), Criteo Ltd ($7.5 million), Criteo China ($3.3 million), Criteo Brazil ($3.2 million), and Criteo France ($7.7 million).

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 do Brasil ($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, $3.6 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).

2019 Compared to 2018

The provision for income taxes for 2018 increased by $14.5 million , or 46% , compared to 2017 .

The provision for income taxes for 2019 decreased by $(6.6) million, or 14%, compared to 2018.

The annual effective tax rate for 2019 was 29.2%, compared to an annual effective tax rate of 32.5% for 2018.

In 2018 , our income before taxes increased by $13.7 million to $142.0 million , compared to 2017 , generating a $48.9 million theoretical income tax expense at a nominal standard French tax rate of 34.43%.

The annual effective tax rates differ from statutory rates primarily due to the impact of the domestic tax deduction applicable to technology royalty income we received from our subsidiaries, differences in tax rates in foreign jurisdictions, tax loss carryforwards in certain of our foreign subsidiaries, non-recognition of deferred tax assets related to tax losses and temporary differences, recognition of previously unrecognized tax losses and equity awards compensation expense.

In 2019, our income before taxes decreased by $(6.6) million to $135.5 million, compared to 2018, generating a $46.6 million theoretical income tax expense at a nominal standard French tax rate of 34.43%.

This theoretical tax expense is impacted primarily by the following items contributing to a $39.5 million effective tax expense and a 29.2% effective tax rate:

$17.7 million of net effect of share-based compensation, $11.7 million of deferred tax assets on which we recognized a valuation allowance (mainly related to Criteo Ltd, Criteo Corp., Criteo Pty and Criteo do Brasil LTDA), $12.0 million of permanent differences (mainly based on employee costs, depreciation expenses and intercompany transactions), $3.8 million related to the French business tax Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, offset by a $38.6 million tax deduction resulting from technology royalty income we received from our subsidiaries, $10.2 million Research and Development tax credit and the recognition or reversal of valuation allowance on deferred tax assets for $4.5 million (mainly for Criteo Advertising (Beijing) Co.

Ltd) and $1.8 million relating to other tax adjustments.

Please see Note 21 to our audited consolidated financial statements for more detailed information on the provision for income taxes.

1 unchanged sentence

As at December 31, 2019, the valuation allowance against deferred tax assets amounted to $25.3 million.

It mainly related to Criteo Corp ($18.6 million), Criteo Ltd ($7.2 million), Criteo China ($3.5 million), Criteo Brazil ($3.6 million), Criteo Singapore ($2.9 million) and Criteo France ($3.9 million).

Year Ended December 31,

It mainly related to Criteo Corp.

($12.8 million), Criteo Ltd ($7.5 million), Criteo China ($3.3 million), Criteo Brazil ($3.2 million), and Criteo France ($7.7 million).

Year Ended December 31, % change

2020 2019 2018 2020 vs 2019 2019 vs 2018

(in thousands, except percent of revenue)

2019 Compared to 2018

Net income for 2019 increased $0.1 million , or 0.1% compared to 2018 .

This increase was the result of the factors discussed above, in particular a $(5.9) million decrease in income from operations and a $(0.7) million increase in financial expense offset by a $6.7 million decrease in provision for income taxes compared to 2018 .

Net income $ 74,689 $ 95,969 $ 95,879 (22)% 0.1%

% of revenue 4 % 4 % 4 %

2020 Compared to 2019

Net income for 2020 decreased $(21.3) million, or (22)% compared to 2019.

This decrease was the result of the factors discussed above, in particular a $9.3 million increase in income from operations and a $(4.5) million decrease in financial expense offset by a $14.5 million increase in provision for income taxes compared to 2017 .

This decrease was the result of the factors discussed above, in particular a $(32.4) million decrease in income from operations, a $3.8 million decrease in financial expense and a $7.3 million decrease in the provision for income taxes compared to 2019.

2019 Compared to 2018

Net income for 2019 increased $0.1 million, or 0.1% compared to 2018.

This increase was the result of the factors discussed above, in particular a $(5.9) million decrease in income from operations, a $(0.7) million increase in financial expense offset by a $6.7 million decrease in provision for income taxes compared to 2018.

Unaudited Quarterly Results of Operations

4 unchanged sentences

Three Months Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

(in thousands)

Consolidated Statements of Income Data:

Revenue $ 661,282 $ 470,345 $ 437,614 $ 503,376 $ 652,640 $ 522,606 $ 528,147 $ 558,123

Cost of revenue (1)

1 unchanged sentence

Other cost of revenue (34,700) (34,608) (33,914) (33,806) (31,328) (31,101) (29,059) (26,045)

Gross profit 218,474 151,336 146,002 172,206 234,924 189,604 194,859 209,649

Operating expenses (1)

7 unchanged sentences

Provision for income taxes (20,254) (2,267) (2,636) (7,040) (15,882) (7,913) (5,683) (10,018)

Net income $ 46,818 $ 5,293 $ 6,150 $ 16,428 $ 41,474 $ 20,557 $ 12,537 $ 21,401

Net income available to shareholders of Criteo S.A.

45,277 5,227 5,716 15,459 42,024 18,778 10,823 19,120

Other Financial Data:

Revenue ex-TAC (2)

$ 253,174 $ 185,944 $ 179,916 $ 206,012 $ 266,252 $ 220,705 $ 223,918 $ 235,694

Adjusted EBITDA (3)

$ 103,423 $ 49,471 $ 38,911 $ 59,190 $ 109,499 $ 64,219 $ 56,399 $ 68,855

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

Three Months Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

(in thousands)

4 unchanged sentences

Total equity awards compensation expense (a)

8,960 6,803 7,159 8,503 9,089 11,770 14,391 13,882

Pension service costs

6 unchanged sentences

Research and development expenses (b)

1,712 1,721 1,658 5,650 5,248 4,249 3,534 3,477

Sales and operations expenses (b)

4,033 4,176 4,221 4,340 10,763 4,178 5,109 4,864

General and administrative expenses 1,041 1,143 1,231 1,377 1,787 1,768 1,825 1,820

2 unchanged sentences

General and administrative expenses 174 112 — — — — — —

Total depreciation and amortization expense

Restructuring

Total acquisition-related costs 174 112 — — — — — —

Restructuring related and transformation costs

Cost of revenue — — — — — — — —

2 unchanged sentences

General and administrative expenses 1,031 4,839 288 193 2,343 — 429 —

Total restructuring (c)

Total restructuring related and transformation costs (c)

$ 4,383 $ 12,181 $ 1,216 $ 2,209 $ 10,661 $ 303 $ 728 $ 1,890

(a) Excludes $(2.7) million, $(4.8) million and $(0.5) million disclosed as restructuring costs as of December 31, 2020, 2019 and 2018 , respectively.

(b) For the Three Months Ended December 31, 2019 the Company recognized accelerated amortization for Manage technology due to a revised useful life ($4.0 million in Research and development) and an impairment loss for Manage customers relationships ($6.9 million in Sales and operations).

(c) For the Three Months Ended December 31, 2019 the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy as detailed below:

Year Ended December 31, 2019

(Gain) from forfeitures of share-based compensation expense

(c) For the Three Months Ended December 31, 2020 and 2019 the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy detailed below:

Three Months Ended

(Gain) from forfeitures of share-based compensation awards (2,655) (4,849)

Depreciation and amortization expense — (67)

Facilities and impairment related costs 4,158 9,432

Payroll and Facilities related costs

Total restructuring costs

Payroll related costs 1,422 6,145

Consulting costs related to transformation 1,458 —

Total restructuring related and transformation costs $ 4,383 $ 10,661

(2) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period.

4 unchanged sentences

Three Months Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

(in thousands)

Reconciliation of Revenue ex-TAC to Revenue:

Revenue $ 661,282 $ 470,345 $ 437,614 $ 503,376 $ 652,640 $ 522,606 $ 528,147 $ 558,123

Traffic acquisition costs (408,108) (284,401) (257,698) (297,364) (386,388) (301,901) (304,229) (322,429)

Revenue ex-TAC $ 253,174 $ 185,944 $ 179,916 $ 206,012 $ 266,252 $ 220,705 $ 223,918 $ 235,694

We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs, acquisition-related costs and deferred price consideration.

(3) We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration.

Adjusted EBITDA is not a measure calculated in accordance with U.S.

3 unchanged sentences

Three Months Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

(in thousands)

Reconciliation of Adjusted EBITDA to Net Income:

Net Income $ 46,818 $ 5,293 $ 6,150 $ 16,428 $ 41,474 $ 20,557 $ 12,537 $ 21,401

Financial (income) expense 111 491 1,003 334 1,521 900 1,354 1,974

1 unchanged sentence

Equity awards compensation expense (a)

8,960 6,803 7,159 8,503 9,089 11,770 14,391 13,882

Pension service costs 583 572 539 538 383 388 391 394

Depreciation and amortization expense (b)

22,140 21,752 20,208 24,138 30,489 22,388 21,315 19,296

Acquisition-related costs 174 112 — — — — — —

Acquisition-related deferred price consideration

Restructuring costs (c)

4,383 12,181 1,216 2,209 10,661 303 728 1,890

Total net adjustments 56,605 44,178 32,761 42,762 68,025 43,662 43,862 47,454

1 unchanged sentence

(a) Excludes $(2.7) million, $(4 .8) million and $(0.5) million disclosed as restructuring costs as of December 31, 2020, 2019 and 2018, respectively.

(b) For the Three Months Ended December 31, 2019, the Company recognized accelerated amortization for Manage technology due to a revised useful life ($2.2 million in Research and development) and an impairment loss for Manage customers relationships ($4.6 million in Sales and operations).

Year Ended December 31, 2019

(Gain) from forfeitures of share-based compensation expense

(b) For the Three Months Ended December 31, 2019, respectively the Company recognized accelerated amortization for Manage technology due to a revised useful life ($2.2 million in Research and development) and an impairment loss for Manage customers relationships ($4.6 million in Sales and operations).

(c) For the Three Months Ended December 31, 2020 and 2019, respectively the Company recognized restructuring charges for its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy as detailed below:

Three Months Ended

(Gain) from forfeitures of share-based compensation awards (2,655) (4,849)

Depreciation and amortization expense — (67)

Facilities and impairment related costs 4,158 9,432

Payroll and Facilities related costs

Total restructuring costs

Payroll related costs 1,422 6,145

Consulting costs related to transformation 1,458 —

Total restructuring related and transformation costs $ 4,383 $ 10,661

Three Months Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

(as a percentage of revenue)

Statements of Operations Data:

Revenue 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of revenue

1 unchanged sentence

Other cost of revenue (5.2) (7.4) (7.7) (6.7) (4.8) (6.0) (5.5) (4.7)

Gross profit 33.0 32.2 33.4 34.2 36.0 36.3 36.9 37.6

Operating expenses:

7 unchanged sentences

Provision for income taxes (3.1) (0.5) (0.6) (1.4) (2.4) (1.5) (1.1) (1.8)

Net income 7.1 % 1.1 % 1.4 % 3.3 % 6.4 % 3.9 % 2.4 % 3.8 %

Net income available to shareholders of Criteo S.A.

6.8 % 1.1 % 1.3 % 3.1 % 6.4 % 3.6 % 2.0 % 3.4 %

Other Financial Data:

4 unchanged sentences

The functional currency of the Company is the euro, while our reporting currency is the U.S.

Consequently, as a first step, since we incur portions of our expenses and derive revenues in currencies other than the euro, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.

Because we incur some of our expenses and derive revenues in currencies other than the euro, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.

Foreign exchange risk exposure also arises from intra-company transactions and financing with subsidiaries that have a functional currency different than the euro.

3 unchanged sentences

The resulting translation adjustments are included in equity under the caption “Accumulated Other Comprehensive Income” in the Consolidated Statement of Changes in Equity.

The $9.5 million financial expense for the period ended December 31, 2017 resulted from the interest incurred as a result of the $75.0 million drawn on the RCF entered into in September 2015 (as amended in March 2017) and the hedging cost related to an intra-group position between Criteo S.A.

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 $1.9 million financial expense for the period ended December 31, 2020 was mainly driven by the financial expense relating to the €140 million drawdown from May 2020 to November 2020 as part of our available Revolving Credit Facility (RCF) financing, the up-front fees amortization, and the non-utilization costs, partially offset by income from invested cash & cash equivalents.

The $5.1 million financial expense for the period ended December 31, 2018 was mainly driven by the non-utilization costs and upfront fees amortization incurred as part of our available RCF financing.

The intra-group position between Criteo S.A.

and its U.S subsidiary in the context of the funding of the HookLogic acquisition is qualified as a net investment in a foreign operation from February 2018 and no longer requires hedging, resulting in reduced costs compared to the same period ended December 31, 2017.

subsidiary in the context of the funding of the HookLogic acquisition is qualified as a net investment in a foreign operation from February 2018 and no longer requires hedging, resulting in reduced costs compared to the same period ended December 31, 2017.

Since 2013, the Company has had a foreign currency risk management policy in place.

5 unchanged sentences

Year Ended December 31,

2020 2019 2018

(in thousands)

+10% -10% +10% -10% +10% -10%

Net income impact

$ 116 $ (116) $ (386) $ 386 $ (785) $ 785

Year Ended December 31,

2020 2019 2018

(in thousands)

+10% -10% +10% -10% +10% -10%

Net income impact

$ (41) $ 41 $ (71) $ 71 $ (645) $ 645

Year Ended December 31,

2020 2019 2018

(in thousands)

JPY/USD +10% -10% +10% -10% +10% -10%

Net income impact $ 614 $ (614) $ 1,019 $ (1,019) $ 1,404 $ (1,404)

Year Ended December 31,

2020 2019 2018

(in thousands)

EUR/USD +10% -10% +10% -10% +10% -10%

Net income impact $ 9,360 $ (9,360) $ 10,755 $ (10,755) $ 11,552 $ (11,552)

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Working capital (current assets less current liabilities)

In addition, the cash flows were also negatively impacted by a $5.5 million change in foreign exchange rates on our cash position over the period.

$464,219 $390,122

In addition, the cash flows were also positively impacted by a $42.7 million change in foreign exchange rates on our cash position over the period.

We do not enter into investments for trading or speculative purposes.

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In 2018, we completed an $80 million share repurchase program.

In July 2019, the Board of Directors authorized a new share repurchase program of up to $80 million of the Company's outstanding American Depositary Shares.

Other than these repurchase programs, we intend to retail all available funds any future earnings to fund our growth.

We completed two ADS repurchase programs in 2020:

our July 2019 program of up to $80 million, which was completed in February 2020, and our April 2020 program of up to $30 million, which was completed in July 2020.

Other than these repurchase programs, we intend to retain all available funds and any future earnings to fund our growth.

We are party to a loan agreement and several RCFs with third-party financial institutions.

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Nominal/ Authorized amounts

Amount drawn as of December 31, 2019 (RCF only)

Amount Outstanding as of December 31, 2019

(in thousands)

Interest rate

Settlement date

BPI Loan - February 2014

Other BPI Loans

2023 and after

(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 0% 2023 and after

Other Loans NA NA $ 224.8 0% 2024

Bank Syndicate RCF - September 2015 (1)

€ 350,000 € — € — Floating rate:

EURIBOR / LIBOR + margin depending on leverage ratio

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

For additional information regarding our loan and RCF agreements, please refer to Note 12 - Financial Liabilities and Note 23 - Commitments.

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As these facilities are exclusively short-term credit and overdraft facilities, our banks have the ability to terminate such facilities on short notice.

Our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return.

Our cash and cash equivalents at December 31, 2020 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $488.0 million as of December 31, 2020.

The $69.2 million increase in cash and cash equivalents compared with December 31, 2019 primarily resulted from an increase of $185.4 million in cash from operating activities partially offset by a decrease of $(101.1) million in cash used for investing activities and a decrease of $(57.7) million in cash used for financing activities.

In addition, the increase in cash includes a $42.7 million positive impact due to changes in foreign exchange rates on our cash position over the period.

We do not enter into investments for trading or speculative purposes.

Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity.

Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return.

Furthermore, Criteo had financial liquidity of approximately $960 million, including its cash position, marketable securities and its Revolving Credit Facility as of December 31, 2020.

Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2020, enables financial flexibility.

Operating and Capital Expenditure Requirements

In 2020, 2019 and 2018, our actual capital expenditures were $65.5 million, $97.9 million and $125.5 million respectively, primarily related to the acquisition of data center and server equipment, and internal IT systems.

We expect our capital expenditures to remain at, or slightly below, 3% of revenue for 2020 , as we plan to continue to build and maintain additional data center equipment capacity in all regions and increase our redundancy capacity to strengthen our infrastructure.

As part of our strategy to build upon our market and technology leadership, in 2016 we acquired all of the outstanding shares of HookLogic for a final purchase price of $249.0 million financed by (i) a $75.0 million amount drawn on the General RCF and (ii) a $175.1 million amount financed by the available cash resources and in 2018 we acquired all of the outstanding shares of Storetail and Manage for $43.7 million and $60.0 million respectively, financed by the available cash resources.

We expect our capital expenditures to remain at, or slightly below, 3% of revenue for 2021, as we plan to continue to build and maintain additional data center equipment capacity in all regions and increase our investments supporting our new work from home policy as part of our office right sizing program.

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

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Year Ended December 31,

2020 2019 2018

(in thousands)

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Our cash and cash equivalents at December 31, 2020 were held for working capital and general corporate purposes, which could include acquisitions.

The increase in cash and cash equivalents compared with December 31, 2018 , primarily resulted from $222.8 million in cash flows from operating activities partially offset by $(103.9) million in cash flows used for investing activities and $(59.1) million used for financing activities.

The increase in cash and cash equivalents compared with December 31, 2019, primarily resulted from an increase of $185.4 million in cash flows from operating activities partially offset by a decrease of $(101.1) million in cash flows used for investing activities and a decrease of $(57.7) million in cash flows used for financing activities.

Operating Activities

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In 2020, net cash flows provided by operating activities were $185.4 million and consisted of net income of $74.7 million, $154.6 million in adjustments for non-cash and non-operating items and $(44.0) million of cash flows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $106.6 million, equity awards compensation expense of $28.8 million, changes in deferred tax assets of $3.7 million , $2.7 million generated on disposal of non-current assets, $1.9 million from other non-operating items, and by $10.9 million of accrued income taxes net of income tax paid.

The $(44.0) million decrease in cash resulting from changes in working capital primarily consisted of a $(33.3) million decrease in accounts payable, a $(5.8) million decrease due to changes in operating lease liabilities and right of use assets, a $(7.2) million increase in other current assets (including prepaid expenses and VAT receivables) and a $(4.0) million increase in accounts receivable partially offset by a $6.3 million increase in accrued expenses such as payroll and payroll related expenses and VAT payables.

In 2019, net cash flows provided by operating activities were $222.8 million and consisted of net income of $96.0 million, $126.3 million in adjustments for non-cash and non-operating items and $0.6 million of cash flows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $97.1 million, equity awards compensation expense of $41.0 million, $15.4 million of changes in deferred tax assets and $0.8 million of changes in other items, partially offset by $28.0 million of accrued income taxes net of income tax paid.

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The $10.4 million increase in cash resulting from changes in working capital primarily consisted of $1.4 million decrease in accounts receivable, a $4.0 million decrease in other current assets (including prepaid expenses and VAT receivables) and a $9.0 million increase in accounts payable partially offset by a $4.0 million decrease in accrued expenses such as payroll and payroll related expenses and VAT payables.

In 2017 net cash flows provided by operating activities were $245.5 million and consisted of net income of $96.7 million and $155.9 million in adjustments for non-cash and non-operating items partially offset by $7.1 million of cash flows used for working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $104.0 million, equity awards compensation expense of $71.6 million and other items for a total amount of $4.9 million including the reclassification of the cash impact of the settlement of hedging derivatives to financing activities of $4.1 million, partially offset by $13.3 million of changes in deferred tax assets and $11.5 million of accrued income taxes net of income tax paid.

The $7.1 million decrease in cash resulting from changes in working capital primarily consisted of $76.9 million increase in accounts receivable and $3.4 million increase in other current assets (including prepaid expenses and VAT receivables) driven by increased revenue during the year and, to a lesser extent, an increase in office rental advance payments.

This was partially offset by an $32.9 million increase in accounts payable and $40.3 million increase in accrued expenses such as payroll and payroll related expenses and VAT payables, explained primarily by an increase in traffic acquisition costs, and an increase in accrued payroll and payroll-related expenses resulting from an increase in the number of our employees.

Investing Activities

Our investing activities to date have consisted primarily of purchases of servers and other data-center equipment and business acquisitions.

In 2019 , net cash flows used in investing activities were $103.9 million and consisted of $97.9 million for purchases of servers and other data-center equipment, $4.6 million for business acquisitions and $1.2 million in other financial liabilities.

In 2020, net cash flows used in investing activities were $101.1 million and consisted of $65.5 million for purchases of servers and other data-center equipment, $1.2 million for business acquisitions and $34.4 million change in other non-current financial assets resulting from investments in Marketable Securities (see Note 2 and 3).

In 2019, net cash flows used in investing activities were $103.9 million and consisted of $97.9 million for purchas es of servers and other data-center equipment, $4.6 million for business acquisitions and $1.2 million in other financial liabilities.

In 2018, net cash flows used in investing activities were $226.7 million and consisted of $125.5 million for purchases of property and equipment, and by $101.2 million related to the Storetail and Manage acquisitions and disposal of a business.

In 2017 , net cash flows used in investing activities were $106.3 million and consisted of $108.5 million for purchases of property and equipment, partially offset by $1.1 million related to change in acquisition price of HookLogic due to the working capital adjustment and $1.1 million of lease deposits refunds.

Financing Activities

In 2020, net cash used in financing activities was $57.7 million mainly resulting from the $10.9 million impact of the €140 million drawing from May 2020 to November 2020 as part of our available Revolving Credit Facility (RCF) and the $43.7 million impact from our share repurchase program.

In 2019, net cash used in financing activities was $59.1 million resulting from $58.6 million relating to the share repurchase program, $1.2 million of changes in other financial liabilities and $1.0 million for the repayment of borrowings, partially offset by $1.7 million related to proceeds from capital increase.

In 2018, net cash used in financing activities was $62.7 million resulting from $1.5 million from proceeds of share option exercises and $16.8 million of changes in other financial liabilities relating to the cash impact of the settlement of hedging derivatives, offset by $80.0 million relating to the share repurchase program and by $1.0 million for the repayment of borrowings.

In 2017 , net cash provided by financing activities was $29.5 million resulting from $3.7 million of the drawing on the China RCF, $32.0 million from proceeds of share option exercises and $24.6 million of changes in the other financial liabilities relating to the cash impact of the settlement of hedging derivatives, offset by $89.7 million for the repayment of drawings on the General RCF used in the context of the acquisition of HookLogic in 2016 and on the China RCF.

Research and Development, Patents and Licenses, etc.

We invest substantial resources in research and development to enhance our solution and technology infrastructure, develop new features, conduct quality assurance testing and improve our core technology.

Our engineering group is primarily located in research and development centers in Paris, France and Ann Arbor, Michigan.

Our engineering group is primarily located in research and development center s in Paris, Grenoble, France and Ann Arbor, Michigan.

We expect to continue to expand the capabilities of our technology in the future and to invest significantly in continued research and development efforts.

We had 624 employees primarily engaged in research and development at December 31, 2020.

Research and development expense totaled $173.9 million , $179.3 million and $172.6 million for 2017 , 2018 and 2019 , respectively.

Research and development e xpense totaled $132.5 million, $172.6 million and $179.3 million for 2020, 2019 and 2018, respectively.

Trend Information.

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Year Ended December 31,

2020 2019 2018

(in thousands, except number of clients)

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Number of Clients

We define a client to be a unique party from whom we have received an insertion order and delivered an advertisement during the previous 12 months.

We believe this criteria best identifies clients who are actively using our solution.

We define a client to be a unique party from whom we have received a signed contract or an insertion order and for whom we have delivered an advertisement or monetized an advertising inventory during the previous 12 months.

We believe this criteria best identifies clients who actively use our set of solutions.

We count specific brands or divisions within the same business as distinct clients so long as those entities have separately signed insertion orders with us.

In the case of some solutions within Criteo Retail Media, we count the parent company of the brands as an individual client, even if several distinct brands pertaining to the same parent company have signed separate insertion orders with us.

On the other hand, we count a client who runs campaigns in multiple geographies as a single client, even though multiple insertion orders may be involved.

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In addition, over time we have added an increasing number of midmarket clients that generate a lower revenue per client than large clients on average, and may continue to add a significant number of midmarket clients in the future.

Therefore, there is not necessarily a direct correlation between a change in clients in a particular period and an increase or decrease in our revenue.

Therefore, there is not necessarily a direct correlation between a change in clients in a particular period and an increase or decrease in our revenue over that same period.

Revenue ex-TAC

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Adjusted EBITDA

Adjusted EBITDA represents our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring costs and acquisition-related costs and deferred price consideration .

Adjusted EBITDA represents our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration.

Adjusted EBITDA is a key measure used by management to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.

In particular, we believe that the elimination of equity awards compensation expense, pension service costs, restructuring costs and acquisition-related costs and deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business.

In particular, we believe that the elimination of equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business.

Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors.

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We believe significant opportunities exist for us to continue to expand our business going forward.

Specifically, we believe that we can strengthen our core business, expand our product portfolio, explore strategic game changes and drive further technology excellence and innovation to further expand our business over time.

Specifically, as part of our Commerce Media Platform strategy, we believe that we can further strengthen our core business, continue to expand our product portfolio, explore strategic game changers for our business and drive further technology innovation and operational excellence to further expand our business over time.

However, due to external challenges and other factors, we may not be able to maintain our historical growth rates in the future.

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We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including access to digital advertising inventory, breadth and depth of data and continuous improvement of the Criteo AI Engine’s performance, allowing us to deliver more relevant advertisements at scale.

As part of this focus we are continuing to invest in building relationships with direct publishers, including with ecommerce retailers, and increasing access to leading advertising exchanges, which includes purchasing advertising inventory that may have lower margins on an individual impression basis, but generates incremental Revenue ex-TAC.

As part of this focus we are continuing to invest in building preferred relationships with direct publishers, including with ecommerce retailers, and increasing access to leading advertising exchanges, which includes purchasing advertising inventory that may have lower margins on an individual impression basis, but generates incremental Revenue ex-TAC.

We believe this strategy maximizes the growth of our Revenue ex-TAC on an absolute basis and strengthens our market position.

As a result, we expect our traffic acquisition costs to continue to increase on an absolute basis as we continue to grow our revenue.

However, our traffic acquisition costs might also increase as a percentage of revenue as we continue to invest in building liquidity and long-term value for clients and publishers over optimizing near-term gross margins, and as we grow our new solutions, some of which might involve a higher level of traffic acquisition costs as a percentage of revenue relative to our historical trends.

However, our traffic acquisition costs might also increase as a percentage of revenue as we continue to invest in building liquidity and long-term value for clients and publishers over optimizing near-term gross margins, and as our product mix continues to evolve towards a growing share of new solutions, some of which might involve a higher level of traffic acquisition costs as a percentage of revenue relative to our historical trends.

Adjusted EBITDA

Our Adjusted EBITDA for 2020 was $ 251.0 million, a (16)% decrease over 2019.

Our decrease in Adjusted EBITDA for 2019 compared to 2018 was primarily the result of the (2)% decrease in Revenue ex-TAC over the period, slightly offset by the decrease in our Non-GAAP operating expenses.

In the short-term, we expect to continue to have a disciplined management of our expense base cross the company and to drive efficiency through more automation and operational excellence across all functions, in order to be in a position to reinvest a portion of savings driven by such efficiency gains into strategic areas of our business.

We anticipate a slight decrease in our Adjusted EBITDA margin as a percentage of Revenue ex-TAC in 2020.

Over time, we expect Adjusted EBITDA to increase slightly as a percentage of our Revenue ex-TAC, as we benefit from disciplined expenses management and operating leverage.

Our decrease in Adjusted EBITDA for 2020 compared to 2019 was primarily the result of the (13)% decrease in Revenue ex-TAC over the period, partly offset by the decrease in our Non-GAAP operating expenses.

In the short-term, we expect to continue to have a disciplined management of our expense base cross the company and to drive efficiency through more automation and operational excellence across the organization, in order to self-fund investments in the strategic growth areas of our business, such as Retail Media, our first-party media network, Contextual advertising, video, Connected TV and Commerce Insights.

For 2021, we anticipate an approximately flat Adjusted EBITDA margin as a percentage of Revenue ex-TAC compared to 2020.

Over time, we expect to continue to invest in the growth areas of our business and to maintain a healthy profitability as our revenue returns to sustainable growth and as we benefit from operating leverage and continued discipline in our expense management.

Adjusted EBITDA is not a measure calculated in accordance with U.S.

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Our base of clients increased to more than 21,000 at December 31, 2020, a 4% increase over December 31, 2019.

This growth in our number of clients has been driven by a number of factors, including our global footprint and our commercial expansion in existing markets, our continued development of large clients in the retail, travel and classifieds industry verticals, our expansion of midmarket clients and our penetration into the consumer brand vertical through some of our Criteo Retail Media offerings.

This growth in our number of clients has been driven by a number of factors, including our global footprint and our commercial expansion in existing markets, our continued development of large clients in the Retail vertical, especially in ecommerce, our expansion of midmarket clients and our penetration into the consumer brand vertical through some of our Criteo Retail Media offerings.

We believe that our ability to increase our number of clients is a leading indicator of our ability to grow revenue over time.

We expect to continue to focus our attention and investment on further growing our client base across all regions, client categories and verticals.

We expect to continue to focus our attention and investment on further growing our client base across all regions, client categories and verticals, with continued strong focus on ecommerce.

While we intend to grow our client base across all categories, we expect midmarket customers to continue to increase their contribution in the mix of our total revenue.

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We believe our ability to retain and grow revenue from our existing clients is a useful indicator of the stability of our revenue base and the long-term value of our client relationships.

Our offering, the Criteo Platform, is powered by AI technology and aims to cover the entire marketing funnel (Awareness, Consideration, Conversion).

Our technology is optimized to drive impactful business results for advertisers across multiple marketing goals.

Our offering, the Criteo Commerce Media Platform, is powered by AI technology and aims to cover the entire marketing funnel (Awareness, Audience Targeting, Conversion).

Our technology is optimized to drive impactful business outcomes from marketing and monetization for retailers and brands.

We measure our client satisfaction through our ability to retain them and the revenue they generate quarter after quarter.

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We define our revenue retention rate with respect to a given 12-month period as (1) revenue recognized during such period from clients that contributed to revenue recognized in the prior 12-month period divided by (2) total revenue recognized in such prior 12-month period.

Our revenue retention rate was 115%, 101% and 94% for the years ended December 31, 2017 , 2018 and 2019 , respectively 1 .

Our revenue retention rate wa s 92%, 94% 1 and 101% 1 for the years ended December 31, 2020, 2019 and 2018, respectively.

Our client base consists primarily of businesses in the digital Retail, Travel and Classifieds industries, which we define as commerce clients.

In the digital retail industry in particular, many businesses devote the largest portion of their advertising spend to the fourth quarter of the calendar year, to coincide with increased holiday spending by consumers.

In the digital Retail industry and the consumer brand verticals in particular, many businesses devote the largest portion of their advertising spend to the fourth quarter of the calendar year, to coincide with increased holiday spending by consumers.

With respect to Criteo Retail Media, the concentration of advertising spend in the fourth quarter of the calendar year is particularly pronounced.

Our retail commerce clients typically conduct fewer advertising campaigns in the first and second quarters than they do in other quarters, while our travel clients typically increase their travel campaigns in the first and third quarters and conduct fewer advertising campaigns in the second quarter.

Our Retail clients typically conduct fewer advertising campaigns in the first and second quarters than they do in other quarters, while our Travel clients typically increase their travel campaigns in the first and third quarters and conduct fewer advertising campaigns in the second quarter.

As a result, our revenue tends to be seasonal in nature, but the impact of this seasonality has, to date, been partly offset by our significant growth and geographic expansion.

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Future events could cause actual payments to differ from these estimates.

Less than 1 year

More than 5 years

Less than 1 year 1 to 5 years More than 5 years Total

(in thousands of U.S.

Long-term debt $ 1,583 $ 341 $ — $ 1,924

Operating Leases 53,565 82,351 — 135,916

Other financial liabilities 398 45 — 443

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Other purchase obligations 4,780 1,894 — 6,674

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including interest on long-term debt, fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

Total $ 61,251 $ 84,631 $ — $ 145,882

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including interest on long-term debt, fixed or minimum services to be used, fixed, minimum or variable price provisions, the approximate timing of the actions under the contracts and operating leases for offices and data centers.

The table does not include obligations under agreements that we can cancel without a significant penalty.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis