Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our ADSs have been listed on the Nasdaq Global Select Market under the symbol “CRTO” since October 30, 2013. Prior to that date, there was no public trading market for ADSs or our ordinary shares.
Holders
As of January 31, 2021, there were 36 holders of record of our ordinary shares and 129 participants in DTC that held our ADSs. The actual number of holders is greater, and includes beneficial owners whose ADSs are held in street name by brokers and other nominees. This number of holders of record and DTC participants also does not include holders whose shares may be held in trust by other entities.
ADS Performance Graph
The following graph matches our cumulative five-year total shareholder return on our ADSs with the cumulative total returns of the Russell 2000 Index and the Nasdaq Internet Index. The graph tracks the performance of a $100 investment in our ADSs and in each index (with the reinvestment of all dividends) from December 31, 2015 to December 31, 2020. The returns shown are based on historical results and are not intended to suggest future performance.
The foregoing performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
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Dividends
We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future and intend to retain all available funds and any future earnings to fund our growth.
Subject to the requirements of French law and our by-laws, dividends may only be distributed from our statutory retained earnings. Dividend distributions, if any, will be made in euros and converted into U.S. dollars with respect to the ADSs, as provided in the deposit agreement. In addition, under the General RCF, we may not declare, make or pay dividends if our net debt to Adjusted EBITDA leverage ratio exceeds 2.0x.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
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. We did not have any share repurchase activity for the three months ended December 31, 2020.
Recent Sales of Unregistered Securities and Use of Proceeds
There were no unregistered sales of equity securities during 2020.
Exchange Controls & Ownership by Non-French Residents
Under current French foreign exchange control regulations there are no limitations on the amount of cash payments that we may remit to residents of foreign countries. Laws and regulations concerning foreign exchange controls do, however, require that all payments or transfers of funds made by a French resident to a non-resident, such as dividend payments, be handled by an accredited intermediary. All registered banks and substantially all credit institutions in France are accredited intermediaries.
Neither the French Commercial Code nor our by-laws presently impose any restrictions on the right of non-French residents or non-French shareholders to own and vote shares. However, non-French residents must file a declaration for statistical purposes with the Bank of France ( Banque de France ) within 20 working days following the date of certain direct foreign investments in us, including any purchase of our ADSs. In particular, such filings are required in connection with investments exceeding €15,000,000 that lead to the acquisition of at least 10% of our outstanding ordinary shares or voting rights or the crossing of either such 10% threshold. Violation of this filing requirement may be sanctioned by five years of imprisonment and a fine of up to twice the amount of the relevant investment. This amount may be increased fivefold if the violation is made by a legal entity.
Further, any investment (i) by an individual or entity located in a country that is not a member State of the European Union or of a member State of the European Economic Area having entered into a convention on administrative assistance against tax evasion and fraud with France, or by a French citizen not residing in France, and (ii) that will result in the relevant investor acquiring the control of, all or part of a business of, or more than 33.33% of the share capital or voting rights of, a company registered in France and developing activities in certain strategic industries, such as telecommunications, cybersecurity or data collection, is subject to the prior authorization by the French Minister of Economy. In the absence of such authorization, the relevant investment shall be deemed null and void.
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Taxation
French Tax Consequences
The following describes the material French income tax consequences to U.S. Holders (as defined below) of purchasing, owning and disposing of the ADSs and ordinary shares, or the Securities as in force on the date of this Form 10-K.
This discussion does not purport to be a complete analysis or listing of all potential tax effects of the acquisition, ownership or disposition of our securities to any particular investor, and does not discuss tax considerations that arise from rules of general application or that are generally assumed to be known by investors. All of the following is subject to change. Such changes could apply retroactively and could affect the consequences described below.
For the purposes of this discussion, the term “U.S. Holder” means a beneficial owner of securities that is (1) an individual who is a U.S. citizen or resident for U.S. federal income tax purposes, (2) a U.S. domestic corporation or certain other entities created or organized in or under the laws of the United States or any state thereof, including the District of Columbia, or (3) otherwise subject to U.S. federal income taxation on a net income basis in respect of securities.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds securities, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a U.S. Holder is a partner in a partnership that holds securities, such holder is urged to consult its own tax adviser regarding the specific tax consequences of acquiring, owning and disposing of securities.
This discussion applies only to investors that hold our securities as capital assets that have the U.S. dollar as their functional currency, that are entitled to treaty benefits under the “Limitation on Benefits” provision contained in the treaty, and whose ownership of the securities is not effectively connected to a permanent establishment or a fixed base in France.
Certain U.S. Holders (including, but not limited to, U.S. expatriates, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, banks, insurance companies, regulated investment companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, persons who acquired the securities pursuant to the exercise of employee share options or otherwise as compensation, persons that own (directly, indirectly or by attribution) 5% or more of our voting stock or 5% or more of our outstanding share capital, dealers in securities or currencies, persons that elect to mark their securities to market for U.S. federal income tax purposes and persons holding securities as a position in a synthetic security, straddle or conversion transaction) may be subject to special rules not discussed below.
U.S. Holders are urged to consult their own tax advisers regarding the tax consequences of the purchase, ownership and disposition of securities in light of their particular circumstances, especially with regard to the “Limitations on Benefits” provision.
Furthermore, in 2011, France introduced a comprehensive set of new tax rules applicable to French assets that are held by or in foreign trusts. These rules, among other things, provide for the inclusion of trust assets in the settlor’s net assets for purpose of applying the French wealth tax, for the application of French gift and inheritance tax to French assets held in trust, for a specific tax on capital on the French assets of foreign trusts not already subject to the French wealth tax and for a number of French tax reporting and disclosure obligations. The following discussion does not address the French tax consequences applicable to securities held in trusts.
If securities are held in trust, the grantor, trustee and beneficiary are urged to consult their own tax adviser regarding the specific tax consequences of acquiring, owning and disposing of securities.
Purchasing Consequences
Financial Transactions Tax
Pursuant to Article 235 ter ZD of the French Tax Code ("FTC"), purchases of shares or ADSs (of a French company listed on a regulated market of the European Union or an exchange formally acknowledged by the French Financial Market Authority (AMF)) are subject to a 0.3% French tax on financial transactions provided that the issuer’s market capitalization exceeds €1 billion as of December 1 of the year preceding the taxation year.
A list of companies whose market capitalization exceeds €1 billion as of December 1 of the year preceding the taxation year within the meaning of Article 235 ter ZD of the French Tax Code is published annually by the French tax authorities. Pursuant to Regulations BOI‑ANNX‑000467‑20201223 issued on December 23, 2020, Criteo is currently not included in such list. Please note that such list may be updated from time to time, or may not be published anymore in the future. Nasdaq is not currently acknowledged by the French AMF but this may change in the future. Consequently, Criteo’s securities should not fall within the scope of the tax on financial transactions described above.
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Registration Duties
In the case where Article 235 ter ZD of the FTC is not applicable, transfers of shares which are not listed on a regulated market of the European Union or an exchange formally acknowledged by the French Financial Market Authority (AMF) are subject to uncapped registration duties at the rate of 0.1%. As ordinary shares of Criteo are not listed on an exchange formally acknowledged by the French Financial Market Authority (AMF) , their transfer should be subject to uncapped registration duties at the rate of 0.1%.
However, although the official guidelines published by the French tax authorities are silent on this point, ADSs should remain outside of the scope of the aforementioned 0.1% registration duties as they cannot be considered as French shares.
Ownership Consequences
Taxation of Dividends
Dividends paid by a French corporation to non-residents of France are generally subject to French withholding tax at a rate of 28% for corporate bodies or other legal entities (which is expected to be progressively decreased to 25% in 2022) or 12.8% for individuals. Dividends paid by a French corporation in a non-cooperative State or territory, as set out in the list referred to in Article 238-0 A of the FTC, will generally be subject to French withholding tax at a rate of 75%. However, eligible U.S. Holders entitled to Treaty benefits under the “Limitation on Benefits” provision contained in the Treaty who are U.S. tax residents, as defined pursuant to the provisions of the Treaty may be subject to the withholding tax at a reduced rate (as described below).
Under the tax treaty between the Government of the United States and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital dated August 31, 1994, as amended by additional protocols of December 8, 2004 and January 13, 2009, the rate of French withholding tax on dividends paid to an eligible U.S. Holder who is a U.S. tax resident as defined pursuant to the provisions of the Treaty and whose ownership of the ordinary shares or ADSs is not effectively connected with a permanent establishment or fixed base that such U.S. Holder has in France, is generally reduced to 15%, or to 5% if such U.S. Holder is a corporation and owns directly or indirectly at least 10% of the share capital of the issuer; such U.S. Holder may claim a refund from the French tax authorities of the amount withheld in excess of the Treaty rates of 15% or 5%, if any.
For U.S. Holders that are not individuals but are U.S. residents, as defined pursuant to the provisions of the Treaty, the requirements for eligibility for Treaty benefits, including the reduced 5% or 15% withholding tax rates contained in the “Limitation on Benefits” provision of the Treaty, are complicated, and certain technical changes were made to these requirements by the protocol of January 13, 2009. U.S. Holders are advised to consult their own tax advisers regarding their eligibility for Treaty benefits in light of their own particular circumstances.
Dividends paid to an eligible U.S. Holder may immediately be subject to the reduced rates of 5% or 15% provided that such holder establishes before the date of payment that it is a U.S. resident under the Treaty by completing and providing the depositary with a treaty form (Form 5000).
Dividends paid to a U.S. Holder that has not filed the Form 5000 before the dividend payment date will be subject to French withholding tax at the rate of 12.8%, 28% in 2020, or 75% if paid in a non-cooperative State or territory (as defined in Article 238-0 A of the FTC), and then reduced at a later date to 5% or 15%, provided that such holder duly completes and provides the French tax authorities with the treaty forms Form 5000 and Form 5001 before December 31 of the second calendar year following the year during which the dividend is paid. Certain qualifying pension funds and certain other tax-exempt entities are subject to the same general filing requirements as other U.S. Holders except that they may have to supply additional documentation evidencing their entitlement to these benefits.
Form 5000 and Form 5001, together with instructions, will be provided by the depositary to all U.S. Holders registered with the depositary. The depositary will arrange for the filing with the French Tax authorities of all such forms properly completed and executed by U.S. Holders of ordinary shares or ADSs and returned to the depositary in sufficient time so that they may be filed with the French tax authorities before the distribution in order to obtain immediately a reduced withholding tax rate.
The withholding tax refund, if any, ordinarily occurs within 12 months from filing the applicable French Treasury Form, but not before January 15 of the year following the calendar year in which the related dividend was paid.
At last, please note that subject to certain conditions, corporations can obtain a full refund of the withholding tax if they are in loss-making position. In such case, the taxation is deferred and will occur if and when profits will be made.
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Wealth Tax
As from January 1, 2018, French wealth tax has been replaced by a new real estate wealth tax which applies only to individuals owning French real estate assets or rights, directly or indirectly through one or more legal entities and whose net taxable assets amount to at least 1,300,000 euros. Real estate assets allocated to an operational activity are excluded from the scope of the real estate wealth tax. Shares of an operating company holding French real estate assets in which the relevant individual holds, directly and indirectly, less than 10% of the share capital or voting rights, are also exempt from real estate wealth tax.
The tax treaty between the Government of the United States and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital dated August 31, 1994, as amended by additional protocols of December 8, 2004 and January 13, 2009, does not prevent the application of real estate wealth tax to a US Holder who would be a US tax resident. However, based on the above domestic provisions and considering that Criteo SA is an operating company, the owning of ADSs or ordinary shares should not be subject to real estate wealth tax.
Disposal Consequences
Taxation on sale or assimilated
As a matter of principle, under French tax law, a foreign. shareholder should be subject to French tax on any capital gain from the sale, exchange, repurchase or redemption by us of ordinary shares or ADSs, provided that the foreign shareholder is not a French tax resident for French tax purposes; and either has not held more than 25% of our dividend rights, at any time during the preceding five years, either directly or indirectly, and, as relates to individuals, alone or with relatives (as an exception, a foreign shareholder established, domiciled or incorporated in a non-cooperative State or territory as defined in Article 238-0 A of the FTC should be subject to a 75% withholding tax in France on any such capital gain, regardless of the fraction of the dividend rights it holds) or holds French real estate assets or shares, units or rights in a company at least 50% of the assets of which consist of real estate located in France, or derives at least 50% of its value, directly or indirectly, from real estate located in France.
However, based on the tax treaty between the Government of the United States and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital dated August 31, 1994, as amended by additional protocols of December 8, 2004 and January 13, 2009, a U.S. Holder who is a U.S. tax resident for purposes of the treaty, has no permanent establishment or fixed base in France and is entitled to treaty benefit will only be subject to French tax on capital gain resulting from the sale of shares, units or rights in a company at least 50% of the assets of which consist of real estate located in France, or derives at least 50% of its value, directly or indirectly, from real estate located in France. Based on these provisions, capital gain resulting from the sale or assimilated of ADSs and ordinary shares should not be subject to taxation in France. U.S. Holders who own ordinary shares or ADSs through U.S. partnerships that are not residents for Treaty purposes are advised to consult their own tax advisors regarding their French tax treatment and their eligibility for Treaty benefits in light of their own particular circumstances.
Gift and inheritance Tax
Under French tax law, the following assets are subject to gift and inheritance tax :
- all movable or immovable property located in France or outside France when the donor or the deceased had his tax residence in France within the meaning of Article 4 B of the FTC;
- movable or immovable property located in France (Included French real estate assets held indirectly), when the donor or the deceased is not domiciled for tax purposes in France;
- movable and immovable property located in France or outside France received from a donor or deceased domiciled outside France by the heir, donee or legatee who is domiciled for tax purposes in France within the meaning of Article 4 B of the CGI and has been so domiciled for at least six years during the last ten years preceding the year in which he receives the property
However, based on the article 5 of the tax treaty between the Government of the United States and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Inheritances and Gifts, dated November 24, 1978 (as amended by the protocol of December 8, 2004), if the US Holder is domiciled in US and has no permanent establishment or fixed base in France , only the French real estate assets and shares, units or other interests in a company or legal entity whose assets consist, directly or through one or more other companies or legal entities, of at least 50% of real property located in France or of rights relating to such property, can be subject to gift and inheritance tax. Based on these provisions, ADSs or ordinary shares should not be subject to gift and inheritance tax.
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Item 6. Selected Financial Data
Our audited consolidated financial statements have been prepared in accordance with U.S. GAAP. We derived the selected consolidated statements of income data for the years ended December 31, 2018, 2019 and 2020 and selected consolidated statements of financial position data as of December 31, 2019 and 2020 from our audited consolidated financial statements included in Part IV, Item 15 “Exhibits and Financial Statements” of this Form 10-K. The selected consolidated statements of income data for the years ended December 31, 2016 and 2017 and the selected consolidated financial position data as of December 31, 2016, 2017 and 2018 have been derived from our audited consolidated financial statements and notes thereto which are not included in this Form 10-K. This data should be read together with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as our audited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results to be expected in the future.
Consolidated Statements of Income Data:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands, except share and per share data)
Revenue $ 2,072,617 $ 2,261,516 $ 2,300,314 $ 2,296,692 $ 1,799,146
Cost of revenue (1) :
Traffic acquisition costs (1,247,571) (1,314,947) (1,334,334) (1,355,556) (1,068,911)
Other cost of revenue (137,028) (117,533) (131,744) (121,641) (85,260)
Gross profit 688,018 829,036 834,236 819,495 644,975
Operating expenses
Research and development expenses (1)
(132,513) (172,591) (179,263) (173,925) (123,649)
Sales and operations expenses (1)
(330,285) (375,477) (372,707) (380,649) (282,853)
General and administrative expenses (1)
(116,395) (139,754) (135,159) (127,077) (117,469)
Total operating expenses (579,193) (687,822) (687,129) (681,651) (523,971)
Income from operations 108,825 141,214 147,107 137,844 121,004
Financial expense (1,939) (5,749) (5,084) (9,534) (546)
Income before taxes 106,886 135,465 142,023 128,310 120,458
Provision for income taxes (32,197) (39,496) (46,144) (31,651) (33,129)
Net income $ 74,689 $ 95,969 $ 95,879 $ 96,659 $ 87,329
Net income available to shareholders of Criteo S.A. (2)
$ 71,679 $ 90,745 $ 88,644 $ 91,214 $ 82,272
Net income available to shareholders per share:
Basic $ 1.18 $ 1.41 $ 1.33 $ 1.40 $ 1.30
Diluted $ 1.16 $ 1.38 $ 1.31 $ 1.34 $ 1.25
Weighted average shares outstanding used in computing per share amounts:
Basic 60,876,480 64,305,965 66,456,890 65,143,036 63,337,792
Diluted 61,818,593 65,598,588 67,662,904 67,851,971 65,633,470
(1) Cost of revenue and operating expenses include equity awards compensation expense, pension service costs, depreciation and amortization expense, acquisition-related costs, restructuring and transformation related costs and deferred price consideration as follows:
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Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Equity awards compensation expense
Research and development expenses $ 10,253 $ 15,036 $ 21,232 $ 21,093 $ 12,108
Sales and operations expenses 12,042 19,301 29,244 31,386 16,838
General and administrative expenses 9,130 14,795 16,600 19,872 14,313
Total equity awards compensation expense (a)
31,425 49,132 67,076 72,351 43,259
Pension service costs
Research and development expenses 1,114 760 844 621 211
Sales and operations expenses 394 283 325 247 144
General and administrative expenses 724 513 522 363 169
Total pension service costs
2,232 1,556 1,691 1,231 524
Depreciation and amortization expense
Cost of revenue 55,935 44,866 67,347 53,988 38,469
Research and development expenses (b)
10,741 16,508 10,602 11,226 7,211
Sales and operations expenses (c)
16,770 24,914 18,245 19,844 7,757
General and administrative expenses 4,792 7,200 7,306 5,738 3,342
Total depreciation and amortization expense
88,238 93,488 103,500 90,796 56,779
Acquisition-related costs
General and administrative expenses 286 — 1,738 6 2,921
Total acquisition-related costs
286 — 1,738 6 2,921
Acquisition-related deferred price consideration
Research and development expense — — — — 85
Sales and operations expenses — — — — —
General and administrative expenses — — — — —
Total acquisition-related deferred price considerations
— — — — 85
Restructuring related and transformation costs
Cost of revenue — — 2,497 —
Research and development expenses 4,240 2,000 (332) 2,911 —
Sales and operations expenses 9,398 8,810 290 1,825 —
General and administrative expenses 6,351 2,772 (11) 123 —
Total Restructuring related and transformation costs (d)
$ 19,989 $ 13,582 $ (53) $ 7,356 $ —
(a) Excludes $(2.7) million, $(8.1) million, and $(0.5) million, disclosed as restructuring and transformation related costs as of December 31, 2020, 2019 and 2018 respectively.
(b) Includes acquisition-related amortization of intangible assets of $ 6.8 million, $12.3 million, $15.8 million, $ 17.7 million and $4.1 million, (including the accelerated amortization for Manage technology due to a revised useful life for $4.0 million) as of December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
(c) Includes acquisition-related amortization of intangible assets of $8.7 million, $15.6 million, $9.1 million, $10.0 million and $0.8 million, (including an impairment loss on Manage customers relationships for $6.9 million) as of December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
(d) The Company recognized restructuring related and transformation charges following its new organizational structure implemented to support its multi-product platform strategy and office right sizing policy as detailed below as of December 31, 2020 and 2019:
Year Ended December 31, 2020 Year Ended December 31, 2019
(Gain) from forfeitures of share-based compensation awards (2,655) (8,133)
Depreciation and amortization expense — 1,161
Facilities and impairment related costs 12,975 11,080
Payroll related costs 5,911 9,474
Consulting costs related to transformation 3,758 —
Total restructuring related and transformation costs $ 19,989 $ 13,582
(2) For the years ended December 31, 2020, 2019, 2018, 2017 and 2016, this excludes $3.0 million, $5.2 million, $7.2 million, $5.4 million and $5.1 million, respectively, of net income available to non-controlling interests in our Japanese subsidiary held by Yahoo! Japan.
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Reconciliation from Non-GAAP Operating Expenses to Operating Expenses under GAAP:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Research and development expenses $ (132,513) $ (172,591) $ (179,263) $ (173,925) $ (123,649)
Equity awards compensation expense 10,253 15,036 21,232 21,093 12,108
Depreciation and amortization expense 10,741 16,508 10,602 11,226 7,211
Pension service costs 1,114 760 844 621 211
Acquisition-related deferred price consideration
— — — — 85
Restructuring related and transformation costs 4,240 2,000 (332) 2,911 —
Non-GAAP - Research and development expenses $ (106,165) $ (138,287) $ (146,917) $ (138,074) $ (104,034)
Sales and operations expenses (330,285) (375,477) (372,707) (380,649) (282,853)
Equity awards compensation expense 12,042 19,301 29,244 31,386 16,838
Depreciation and amortization expense 16,770 24,914 18,245 19,844 7,757
Pension service costs 394 283 325 247 144
Restructuring related and transformation costs 9,398 8,810 290 1,825 —
Non-GAAP - Sales and operations expenses (291,681) (322,169) (324,603) (327,347) (258,114)
General and administrative expenses (116,395) (139,754) (135,159) (127,077) (117,469)
Equity awards compensation expense 9,130 14,795 16,600 19,872 14,313
Depreciation and amortization expense 4,792 7,200 7,306 5,738 3,342
Pension service costs 724 513 522 363 169
Acquisition-related costs
286 — 1,738 6 2,921
Restructuring related and transformation costs 6,351 2,772 (11) 123 —
Non-GAAP - General and administrative expenses (95,112) (114,474) (109,004) (100,975) (96,724)
Total Operating expenses (579,193) (687,822) (687,129) (681,651) (523,971)
Equity awards compensation expense 31,425 49,132 67,076 72,351 43,259
Depreciation and Amortization expense 32,303 48,622 36,153 36,808 18,310
Pension service costs 2,232 1,556 1,691 1,231 524
Acquisition-related costs 286 — 1,738 6 2,921
Acquisition-related deferred price consideration — — — — 85
Restructuring related and transformation costs 19,989 13,582 (53) 4,859 —
Total Non-GAAP Operating expenses $ (492,958) $ (574,930) $ (580,524) $ (566,396) $ (458,872)
Non-GAAP Operating Expenses are our consolidated operating expenses adjusted to eliminate the impact of depreciation and amortization, equity awards compensation expense, pension service costs, restructuring related and transformation costs, acquisition-related costs and deferred price consideration. The Company uses Non-GAAP Operating Expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short-term and long-term operational plans, and to assess and measure our financial performance and the ability of our operations to generate cash. We believe Non-GAAP Operating Expenses reflects our ongoing operating expenses in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. As a result, we believe that Non-GAAP Operating Expenses provides useful information to investors in understanding and evaluating our core operating performance and trends in the same manner as our management and in comparing financial results across periods. In addition, Non-GAAP Operating Expenses is a key component in calculating Adjusted EBITDA, which is one of the key measures we use to provide our quarterly and annual business outlook to the investment community.
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Consolidated Statements of Financial Position Data:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Cash and cash equivalents $ 488,011 $ 418,763 $ 364,426 $ 414,111 $ 270,317
Total assets $ 1,853,410 $ 1,790,384 $ 1,597,135 $ 1,531,300 $ 1,211,186
Trade receivables, net of allowances for doubtful accounts
$ 474,055 $ 481,732 $ 473,901 $ 484,101 $ 397,244
Total financial liabilities $ 3,275 $ 4,405 $ 3,508 $ 3,657 $ 85,580
Total liabilities $ 700,723 $ 752,396 $ 629,244 $ 633,602 $ 601,309
Total equity $ 1,152,687 $ 1,037,988 $ 967,891 $ 897,698 $ 609,877
Other Financial and Operating Data:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands, except number of clients)
Number of clients 21,460 20,247 19,419 18,118 14,468
Revenue ex-TAC (3)
$ 825,046 $ 946,569 $ 965,980 $ 941,136 $ 730,235
Adjusted net income (4)
$ 134,171 $ 175,399 $ 168,738 $ 183,311 $ 136,777
Adjusted EBITDA (5)
$ 250,995 $ 298,972 $ 321,059 $ 309,584 $ 224,572
(3) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs, or TAC, generated over the applicable measurement period. Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC in this Form 10-K because it is a key measure used by our management and board of directors 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 TAC from revenue can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC 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. Revenue ex-TAC has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and (b) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC alongside our U.S. GAAP financial results, including revenue . The following table presents a reconciliation of Revenue ex-TAC to revenue, the most directly comparable U.S. GAAP measure, for each of the periods indicated:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Revenue $ 2,072,617 $ 2,261,516 $ 2,300,314 $ 2,296,692 $ 1,799,146
Adjustment:
Traffic acquisition costs (1,247,571) (1,314,947) (1,334,334) (1,355,556) (1,068,911)
Revenue ex-TAC $ 825,046 $ 946,569 $ 965,980 $ 941,136 $ 730,235
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(4) We define Adjusted Net Income as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration and the tax impact of the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income in this Form 10-K because it is a key measure used by our management and board of directors 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, amortization of acquisition-related intangible assets, restructuring related and transformation costs, acquisition-related costs and deferred price consideration and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income 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. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted Net Income to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Net income $ 74,689 $ 95,969 $ 95,879 $ 96,659 $ 87,329
Adjustments:
Equity awards compensation expense (a)
31,425 49,132 67,076 72,351 43,259
Amortization of acquisition-related intangible assets
15,520 27,906 15,821 17,731 4,131
Acquisition-related costs
286 — 1,738 6 2,921
Acquisition-related deferred price consideration
— — — — 85
Restructuring and transformation related costs 19,989 13,582 (53) 7,356 —
Tax impact of the above adjustments
(7,738) (11,190) (11,723) (10,792) (948)
Adjusted net income $ 134,171 $ 175,399 $ 168,738 $ 183,311 $ 136,777
(a) Excludes $(2.7) million, $(8.1) million, and $(0.5) million disclosed as restructuring costs as of December 31, 2020, 2019 and 2018, respectively.
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(5) 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. GAAP. We have included Adjusted EBITDA in this Form 10-K because it is a key measure used by our management and board of directors 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 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 core 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. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated:
Year Ended December 31,
2020 2019 2018 2017 2016
(in thousands)
Net income $ 74,689 $ 95,969 $ 95,879 $ 96,659 $ 87,329
Adjustments:
Financial expense 1,939 5,749 5,084 9,534 546
Provision for income taxes 32,197 39,496 46,144 31,651 33,129
Equity awards compensation expense (a)
31,425 49,132 67,076 72,351 43,259
Pension service costs 2,232 1,556 1,691 1,231 524
Depreciation and amortization expense 88,238 93,488 103,500 90,796 56,779
Acquisition-related costs 286 — 1,738 6 2,921
Acquisition-related deferred price consideration — — — — 85
Restructuring related and transformation costs 19,989 13,582 (53) 7,356 —
Total net adjustments 176,306 203,003 225,180 212,925 137,243
Adjusted EBITDA $ 250,995 $ 298,972 $ 321,059 $ 309,584 $ 224,572
(a) Excludes $(2.7) million, $(8.1) million, and $(0.5) million disclosed as restructuring costs as of December 31, 2020, 2019 and 2018, respectively.
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