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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-02-26 · 336 added, 288 removed, 583 unchanged (52% 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 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, 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 over $950 billion in online sales transactions 1 on our clients' digital properties in the year ended December 31, 2020.

We are a global technology company driving superior commerce outcomes for marketers and media owners through the world’s leading Commerce Media Platform.

We operate in commerce media, the future of digital advertising, leveraging commerce data and artificial intelligence ("AI") to connect ecommerce, digital marketing and media monetization to reach consumers throughout their shopping journey.

Our vision is to bring richer experiences to every consumer by supporting a fair and open internet that enables discovery, innovation, and choice – powered by trusted and impactful advertising.

We have accelerated and deeply transformed the Company from a single-product to a multi-solution platform provider, fast diversifying our business into new solutions.

We enable brands', retailers' and media owners’ growth by providing best-in-class marketing and monetization services and infrastructure on the open Internet, driving approximately $40 billion of commerce outcomes for our customers – in the form of product sales for retailers, brands and marketers and advertising revenues for media owners.

We differentiate ourselves by delivering high-performing commerce audiences at scale and we deliver this value by activating commerce data in a privacy-by-design way through proprietary AI technology to reach and engage consumers in real time with highly relevant digital advertisements ("ads") across all stages of the consumer journey.

Our data offers deep insights into consumer intent and purchasing habits.

Our focus is on commerce media.

Our clients include many of the largest and most sophisticated consumer brands, commerce companies and media owners in the world.

We partner with them to capture user activity on their websites and mobile applications ("apps"), which we define as digital properties, and leverage that data to deliver superior ad performance to help marketers, brands and agencies reach their campaign objectives.

This includes powering the retail media ecosystem as we enable brands to reach shoppers with relevant ads near the digital point of sale on retailer and marketplace websites while enabling retailers to add a new revenue stream.

Demonstrating the depth and scale of our data, we collected data on over $1 trillion in online sales transactions 1 on our clients' digital properties in the year ended December 31, 2021.

Based on this data and other assets, we delivered 1.8 trillion targeted ads in the year ended December 31, 2021.

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%.

As of December 31, 2021, we served close to 22,000 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 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.

In 2021, 2020 and 2019, our largest client represented 7.0, 3.5%, and 2.8% of our revenue, respectively, and in 2021, 2020 and 2019, our largest 10 clients represented 16.6%, 13.7% and 11.4% 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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• Revenue of $2,254.2 million, $2,072.6 million and $2,261.5 million for the years ended December 31, 2021, 2020 and 2019, respectively;

• Revenue ex-TAC, which is a non-U.S.

• Gross prof it of $781.9 million, $688.0 million and $829.0 million for the years ended December 31, 2021, 2020 and 2019, respectively;

• Contribution ex-TAC, which is a non-U.S.

GAAP financial measure, of $920.8 million, $825.0 million and $946.6 million for the years ended December 31, 2021, 2020 and 2019, respectively;

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GAAP financial measure, of $322.5 million, $251.0 million and $299.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Please see footnotes 3, 4 and 5 to the Other Financial and Operating Data table in “Item 6.

Selected Financial Data” in this Form 10-K for a reconciliation of Revenue to Revenue ex-TAC, Net Income to Adjusted EBITDA and Net Income to Adjusted Net Income respectively, in each case the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States or "U.S.

We are focused on maximizing Revenue ex-TAC.

Please note that reconciliations of Gross Profit to Contribution ex-TAC and Net Income to Adjusted EBITDA - in each case the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States or "U.S.

GAAP," are presented below.

We are focused on maximizing Contribution ex-TAC.

We believe this focus builds sustainable long-term value for our business and fortifies a number of our competitive strengths, including a highly liquid marketplace for digital advertising inventory.

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We believe our results of operations reflect this focus.

On October 29, 2018, we acquired Manage, a Silicon Valley-based company with an attractive app install advertising solution.

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.

On May 18, 2021, we completed the acquisition of all of the outstanding shares of Doobe In Site Ltd.

("Mabaya"), a leading retail media technology company that powers sponsored products and retail media monetization for major ecommerce marketplaces globally.

In December 2021, we executed a purchase agreement to acquire the business of IPONWEB Holding Limited ("IPONWEB"), a market-leading AdTech company with world-class media trading capabilities, for $380 million comprised of a mix of cash and treasury shares of the Company, subject to certain adjustments including for working capital, other current assets and current liabilities and net indebtedness, with the transaction expected to close in the first quarter of 2022.

The transaction is subject to customary closing conditions.

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.

We also have multiple pricing models which now include cost plus margin models in addition to cost-per-click, cost-per-install and cost-per-impression pricing models.

We recognize revenues when we transfer control of promised services directly to our clients or to advertising agencies, which we collectively refer to as our clients, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services.

For campaigns priced on a cost-per-click, cost-per-install basis and cost plus margin basis, we bill our clients when a user clicks on an advertisement we deliver or installs an application by clicking on an advertisement we delivered, respectively.

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

For campaigns priced on a cost-per-impression basis, we bill our clients based on the number of times an advertisement is displayed to a user.

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

For campaigns with a fixed pricing component, where fixed amounts are billed to the customer at various intervals, we recognize revenue on a ratable basis, based on our completion of our performance obligation to the customer.

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

(ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices.

Therefore, based on these factors, we report revenue earned and the related costs incurred on a gross basis.

We also have multiple pricing models which now include percentage of spend models in addition to cost-per-click, cost-per-install and cost-per-impression pricing models.

Cost of Revenue

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Costs owed to publishers but not yet paid are recorded in our Consolidated Statements of Financial Position as trade payables.

For some solutions within Criteo Retail Media, we pay for the inventory of our retailer partners on a revenue sharing basis, effectively paying the retailers a portion of the click-based revenue generated by user clicks on the sponsored products advertisements displaying the products of our consumer brand clients.

For a discussion of the trends we expect to see in traffic acquisition costs, see the section entitled " - Highlights and Trends - Revenue ex-TAC" in Item 7.D - Trend Information below.

For solutions within Criteo Retail Media, we pay for the inventory of our retailer partners on a revenue sharing basis, effectively paying the retailers a portion of the click-based revenue generated by user clicks on the sponsored products advertisements or impressions on the commerce display advertisements displaying the products of our consumer brand clients.

For a discussion of the trends we expect to see in traffic acquisition costs, see the section entitled " - Highlights and Trends - Contribution ex-TAC" in Item 7.D - Trend Information below.

Other Cost of Revenue.

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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.

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

The number of employees increased from 2,755 employees at January 1, 2020 to 2,781 employees at December 31, 2021.

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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Research and development expense consists primarily of personnel-related costs for our employees working in the engine, platform, site reliability engineering, scalability, infrastructure, engineering program management, product, analytics and other teams, including salaries, bonuses, equity awards compensation and other personnel related costs.

Our research and development function was supplemented in January 2013 to include a dedicated product organization following the appointment of a Chief Product Officer.

Also included are non-personnel costs such as subcontracting, consulting and professional fees to third-party development resources, allocated overhead and depreciation and amortization costs.

Also included are non-personnel costs such as subcontracting, consulting and professional fees to third-party development resources, allocated overhead, including internal IT and depreciation and amortization costs.

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 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 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.

The number of employees in research and development functions increased from 681 at January 1, 2020 to 682 at December 31, 2021.

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.

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Sales and operations expense consists primarily of personnel-related costs for our employees working in our sales, account strategy, sales operations, publisher business development, analytics, marketing, technical solutions, creative services and other teams, including salaries, bonuses, equity awards compensation, and other personnel-related costs.

Additional expenses in this category include travel and entertainment, marketing and promotional events, marketing activities, provisions for doubtful accounts, subcontracting, consulting and professional fees paid to third parties, allocated overhead and depreciation and amortization costs.

The number of employees in sales and operations functions declined from 1,595 at January 1, 2018 to 1,520 at December 31, 2020.

The number of employees in sales and operations functions increased from 1,578 at January 1, 2020 to 1,596 at December 31, 2021.

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

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General and administrative expense consists primarily of personnel costs, including salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs for our administrative, legal, information technology, human resources, facilities and finance teams.

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 decreased from 468 at January 1, 2018 to 450 at December 31, 2020.

The number of employees in general and administrative functions increased from 496 at January 1, 2020 to 503 at December 31, 2021.

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.

Financial Income (Expense)

Financial income (expense) primarily consists of:

Financial and Other Income (Expense)

Financial and Other Income (Expense) primarily consists of:

• exchange differences arising on the settlement or translation into local currency of monetary balance sheet items labeled in euros (the Company's functional currency).

We are exposed to changes in exchange rates primarily in the United States, the United Kingdom, Japan, Korea and Brazil.

We are exposed to changes in exchange rates primarily in the U.S., the United Kingdom, Japan, Korea and Brazil.

dollar, the British pound, the Korean won, the Japanese yen and the Brazilian real are our most significant foreign currency exchange risks.

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• interest received on our cash and cash equivalents and interest incurred on outstanding borrowings under our debt loan agreements and revolving credit facilities ("RCFs").

• Proceeds from sale of data center equipment to third-parties, made as part of Criteo's data center update program.

• Dividends received from an investment made in 2018.

We monitor foreign currency exposure and look to mitigate exposures through normal business operations and hedging strategies.

Provision for Income Taxes

We are subject to potential income taxes in France, the United States and numerous other jurisdictions.

We are subject to potential income taxes in France, the U.S.

and numerous other jurisdictions.

We recognize tax liabilities based on estimates of whether additional taxes will be due.

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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 (NOPA) from the Internal Revenue Service ("IRS") audit of Criteo Corp.

for the year ended December 31, 2014, confirmed by the definitive notice dated February 8, 2018.

We disagreed with the IRS's position and contested it.

On August 24, 2020, the IRS and the Company agreed to a settlement and closed the income tax audit for the year ended December 31, 2014.

The settlement provides for a disallowance of Criteo Corp's.

Net Operating Losses (NOLs) amounting to $9.2 million.

Although we believe that we have adequately reserved for our uncertain tax positions (including net interest and penalties), we can provide no assurance that the final tax outcome of these matters will not be materially different.

No uncertain tax positions were identified as of December 31, 2021.

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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.

The spread of COVID-19 and the various attempts to contain it have continued to create volatility, uncertainty and economic disruption to global society, economics, financial markets and business practices and increase the uncertainty associated with certain estimates, in particular those related to allowance for credit losses, assumptions used in the valuation of goodwill and estimates relating to income taxes.

Principles and Accounting Methods to our audited consolidated financial statements beginning on page F-1 for a description of our other significant accounting policies.

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

For campaigns priced on a cost-per-impression basis, we bill our clients based on the number of times an advertisement is displayed to a user.

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

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

(ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices.

Therefore, based on these factors, we report revenue earned and the related costs incurred on a gross basis..

For revenue generated from arrangements that involve third-party publishers, there is judgment in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis.

In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price.

The assessment of whether we are considered the principal or the agent in a transaction could impact our revenue and cost of revenue recognized on the consolidated statements of income.

Trade Receivables, Net of Allowances for Doubtful Accounts

We carry our accounts receivable at net realizable value.

On a periodic basis, our management evaluates our accounts receivable and determines whether to provide an allowance or if any accounts should be written down and charged to expense as a bad debt.

The evaluation is based on a past history of collections, current credit conditions, the length of time the trade receivable is past due and a past history of write downs.

A trade receivable is considered past due if we have not received payments based on agreed-upon terms.

A higher default rate than estimated or a deterioration in our 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.

We generally do not require any security or collateral to support our trade receivables.

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.

We apply Accounting Standards Update No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost that an entity does not expect to collect over the asset's contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions.

For accounts receivable measured at amortized cost, we use aging analysis, and probability of default methods to evaluating and estimating the expected credit losses.

Deferred Tax Assets

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These uncertain tax positions include our estimates for transfer pricing that have been developed based upon analyses of appropriate arms-length prices.

Similarly, our estimates related to uncertain tax positions concerning research tax credits are based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax credits will be sufficient.

We make adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.

To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have a material impact on our financial condition and operating results.

Although we believe that we have adequately assessed all potential uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different.

Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company has determined that it operates as a single reporting unit and has selected December 31 as the date to perform its annual impairment test.

In the impairment assessment of its goodwill, the Company performs an impairment test, which involves assumptions regarding estimated future cash flows to be derived from the Company The estimated future cash flows are used to derive the fair value of the reporting unit, which is then compared to its net book value, including goodwill .

In the course of 2021, the Company has reassessed its operating and reportable segments in accordance with ASC 280 and now reports its results of operations through two segments:

Marketing Solutions and Retail Media.

Goodwill has been allocated to these two segments using a relative fair value allocation approach.

The Company has selected December 31 as the date to perform its annual impairment test.

The test is performed at the reporting unit level, which we have determined to be Marketing Solutions and Retail Media.

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 reporting unit.

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.

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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.

There is also significant judgement in the allocation of the net book value of the Company to each of its segments, as many of the assets are not directly attributable to the Company's operating segments.

Intangible Assets

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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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• Fair value of our ordinary shares.

Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on the Nasdaq on the date of grant for purposes of determining the fair value of ordinary shares.

Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on Nasdaq on the date of grant for purposes of determining the fair value of ordinary shares.

• Exercise price of the option.

Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on the Nasdaq on the date of grant for purposes of determining the exercise price with a floor value of 95% of the average of the closing sales price per ADS for the 20 trading days preceding the grant.

Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on Nasdaq on the date of grant for purposes of determining the exercise price with a floor value of 95% of the average of the closing sales price per ADS for the 20 trading days preceding the grant.

• Expected term.

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Expected life (in years)

6 years 6 years 6 years

- 6 years 6 years

Dividend yield

There were no grants of share options during the year ended December 31, 2021.

Recent Accounting Pronouncements

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Results of Operations for the Years Ended December 31, 2021, 2020 and 2019

Revenue breakdown by segment

Beginning in the fourth quarter of 2021, we report our segments results as Marketing Solutions and Retail Media:

• Criteo Marketing Solutions allow commerce companies to address multiple marketing goals by engaging their consumers with personalized ads across the web, mobile and offline store environments.

Year Ended December 31,

2021 2020 2019 2021 vs 2020 2020 vs 2019

(in thousands)

Revenue as reported $ 2,254,235 $ 2,072,617 $ 2,261,516 9 % (8) %

Conversion impact U.S.

dollar/other currencies (19,713) 3,239 51,373

Revenue at constant currency (1)

$ 2,234,522 $ 2,075,856 $ 2,312,889 8 % (8) %

Marketing Solutions as reported $ 2,007,239 $ 1,806,431 $ 2,092,590 11 % (14) %

Conversion impact U.S.

dollar/other currencies $ (16,511) $ 4,364 $ 49,668

Marketing Solutions at constant currency (1)

$ 1,990,728 $ 1,810,795 $ 2,142,258 10 % (13) %

Retail Media as reported (2)

$ 246,996 $ 266,186 $ 168,926 (7) % 58 %

Conversion impact U.S.

dollar/other currencies $ (3,202) $ (1,125) $ 1,705

Retail Media at constant currency (1)

$ 243,794 $ 265,061 $ 170,631 (8) % 57 %

(1) Information herein with respect to results presented on a constant currency basis is computed by applying prior period average exchange rates to current period results.

We have included results on a constant currency basis because it is a key measure used by our management and board of directors to evaluate operating performance.

Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends.

The table above reconciles the actual results presented in this section with the results presented on a constant currency basis.

(2) Criteo operates as two reportable segments from December 31, 2021.

The table above presents the operating results of our Marketing Solutions and Retail Media segments.

A strategic building block of Criteo’s Commerce Media Platform, the Retail Media Platform, introduced in June 2020, and reported under the retail media segment, is a self-service solution providing transparency, measurement and control to brands and retailers.

In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis.

We expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform by the second half of 2022.

As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin will increase.

Contribution ex-TAC will not be impacted by this transition.

2021 Compared to 2020

Revenue in 2021 increased $181.6 million, or 9% (or 8% on a constant currency basis) to $2,254.2 million compared to 2020.

84% of the year-over-year increase in revenue was driven by the contribution from our existing clients, and 16% of the year-over-year increase was driven by the contribution from new clients.

We added 285 net new clients year-over-year across regions.

The year-over-year increase in revenue on a constant currency basis was largely attributable to the increase in the average price charged to advertisers, and partially offset by the decreased number of impressions delivered by us.

Marketing Solutions revenue increased 11% (or 10% on a constant currency basis) to $2,007.2 million for 2021, reflecting increased spend from Retai l clients, both on our retargeting, audience targeting and omnichannel solutions, partially offset by incremental identity and privacy changes, as expected.

Retail Media revenue decreased (7)% (or (8)% on a constant currency basis) to $246.9 million for 2021, as the strong performance with large retailers across the U.S.

and EMEA was more than offset by the technical and transitory impact related to the ongoing client migration to the RMP.

Criteo's RMP accounts for a fast-growing share of Retail Media revenue, or about 50% for the year ended December 31, 2021, and its revenue is accounted for on a net basis.

In 2020, less than 5% of Retail Media revenue was accounted for on a net basis, and as a result of this transition to a full RMP business, the growth of Retail Media revenue is temporarily impacted.

Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 59% (or 58% on a constant currency basis) in the year ended December 31, 2021, driven by continued strength in Retail Media onsite, in particular in the U.S.

market, and growing network effects of the RMP.

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 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.

The year-over-year decrease in revenue was also 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.

Marketing Solutions revenue decreased (14)% (or (13)% on a constant currency basis) to $1,806.4 million for 2020, reflecting decreased spend from large clients, primarily as a result of the COVID-19 pandemic impact, which we consider as retail bankruptcies and softness with our Travel and Classifieds clients Retail clients, as well as incremental identity and privacy changes, as expected.

Retail Media revenue increased 58% (or 57% on a constant currency basis) to $266.2 million for 2020, reflecting the strong adoption by large retailers across the U.S.

Revenue breakdown by region

Information in this Form 10-K with respect to results presented on a constant currency basis was calculated by applying prior period average exchange rates to current period results.

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2021 Compared to 2020

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 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.

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 increased $22.0 million, or 2% (or 3% on a constant currency basis) to $916.8 million for 2021 compared to 2020.

This increase was driven by continued positive retail trends, in particular with large customers across Marketing Solutions, and continued strong performance of Retail Media, as the RMP continues to scale with consumer brands and large retailers, partially offset by the impact of recognizing revenue on a net basis for clients transitioning to the RMP.

Our revenue in the EMEA region increased $94.6 million, or 13% (or 9% on a constant currency basis) to $844.3 million for 2021 compared to 2020.

This increase was driven by positive retail trends in our main markets, in particular in Germany and emerging markets, positive traction with large customers across our retargeting and new solutions, and continued strong performance of Retail Media across the region.

Our revenue in the Asia-Pacific region increased $65.0 million, or 15% (or 16% on a constant currency basis) to $493.1 million for 2021 compared to 2020.

The increase was driven by the recovery of our large customers in the region, in particular in Japan, as well as positive contributions from Retail clients in South-East Asia.

Additionally, $2,254 million of revenue for 2021 was positively impacted by $(19.7) million of currency fluctuations, particularly as a result of the depreciation of the Turkish Lira, Russian Ruble, Japanese Yen and the Brazilian real, partially offset by the appreciation of the Euro and the British pound sterling, compared to the U.S.

2020 Compared to 2019

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.

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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.

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.

The year-over-year increase in revenue at constant currency was entirely driven by new clients, offsetting the decrease in our business with existing clients.

We added 828 net new clients across regions and client sizes over the period, a lower volume than the prior year.

This was primarily driven by focused execution and productivity improvements in the midmarket category leading to higher additions of higher-value midmarket clients.

Contribution from existing clients was impacted by lower retargeting spend from large clients, as well as by a general softness in the web environment, where users tend to progressively spend less time than in apps, where our solutions do not yet contribute significantly to our revenue growth, despite continued adoption of our new products.

Our revenue in the Americas region decreased (0.2)% (or increased 0.3% on a constant currency basis) to $952.2 million for 2019 compared to 2018.

Growth was driven by the acceleration of our midmarket business driven by larger midmarket clients, as well as continued traction in our Criteo Retail Media business in the U.S., partly offset by lower retargeting spend by large clients.

Our revenue in the EMEA region decreased (4)% (or increased 1% on a constant currency basis) to $806.2 million for 2019 compared to 2018.

This increase at constant currency was largely driven by accelerated growth in our midmarket business and by the positive traction of our new solutions, including Retail Media, partly offset by softer business with large customers.

Our revenue in the Asia-Pacific region decreased (1)% (or (0.2)% on a constant currency basis) to $503.2 million for 2019 compared to 2018.

This slight decrease at constant currency was driven by a slow-down in our large customer business in Japan, South-East Asia and Australia, despite strong growth across client categories in Korea and our growing midmarket business across the region.

Additionally, our $2,261.5 million of revenue for 2019 was negatively impacted by $(51.4) million of currency fluctuations, particularly as a result of the depreciation of the Japanese yen, the British pound, the Korean won, the Brazilian real and the Euro, compared to the U.S.

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.

Cost of Revenue

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Gross profit % 35 % 33 % 37 %

Year Ended December 31, % change

2021 2020 2019 2021 vs 2020 2020 vs 2019

(in thousands, except percentages)

Marketing Solutions $ (1,211,087) $ (1,059,680) $ (1,197,483) 14% (12)%

Retail Media (1)

$ (122,353) $ (187,891) $ (117,464) (35)% 60%

Traffic Acquisition Costs $ (1,333,440) $ (1,247,571) $ (1,314,947) 7% (5)%

(1) Criteo operates as two reportable segments from December 31, 2021.

The table above presents the operating results of our Marketing Solutions and Retail Media segments.

In all arrangements running on this platform, Criteo recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions are accounted for on a gross basis.

We expect most clients using Criteo’s legacy Retail Media solutions to transition to this platform by the second half of 2022.

As new clients onboard and existing clients transition to the Retail Media Platform, Revenue may decline but Contribution ex-TAC margin will increase.

Contribution ex-TAC will not be impacted by this transition.

2021 Compared to 2020

Cost of revenue for 2021 increased $87.7 million, or 6%, compared to 2020.

This increase was primarily the result of a $85.9 million, or 7% increase in traffic acquisition costs (or 6% on a constant currency basis), and by a $1.8 million, or 1% (or 2% on a constant currency basis), increase in other cost of revenue.

The 14% increase in Marketing Solutions' traffic acquisition costs related primarily to the 6% increase (and 5% increase on a constant currency basis) in the average CPM for inventory purchased, reflecting the year-over-year recovery in the digital advertising market following the trough of the pandemic-related recession in the second quarter of 2020 and our preferred relationships with media owners, as well as the 8% increase in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns.

Traffic acquisition costs in Retail Media decreased by 35% reflecting the technical and transitory impact related to the ongoing client migration due to the transitioning of our RMP.

Because we recognize revenue on a net basis in all arrangements running on the RMP, we expect our Traffic acquisition costs for Retail Media to decrease over time as all of our clients are transitioned to the RMP.

The increase in other cost of revenue includes a $(5.2) million increase in allocated depreciation and amortization expense, $(3.0) million increase in other cost of sales mainly due to the digital tax, partially offset by $5.7 million in hosting costs and $0.8 million in data acquisition costs.

2020 Compared to 2019

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

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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.

The increase in traffic acquisition costs on a constant currency basis related primarily to an increase of 9.2% in the total number of impressions we purchased, partly offset by a (10)% decrease (or (8)% decrease on a constant currency basis) in the average CPM for inventory 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 us 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 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.

Revenue excluding Traffic Acquisition Costs

We consider Revenue ex-TAC as a key measure of our business activity.

Our strategy focuses on maximizing our Revenue ex-TAC on an absolute basis over maximizing our near-term gross margin.

Contribution excluding Traffic Acquisition Costs

We consider Contribution ex-TAC as a key measure of our business activity.

Our strategy focuses on maximizing our Contribution ex-TAC on an absolute basis over maximizing our near-term gross margin.

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 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:

The following table sets forth our revenue and Contribution ex-TAC by segment:

Year Ended December 31,

Region 2020 2019 2018

Segment 2021 2020 2019

(in thousands)

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)

Revenue Marketing Solutions $ 2,007,239 $ 1,806,431 $ 2,092,590

Retail Media 246,996 266,186 168,926

Total $ 2,254,235 $ 2,072,617 $ 2,261,516

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

Contribution ex-TAC (1)

Marketing Solutions $ 796,152 $ 746,751 $ 895,107

Retail Media 124,643 78,295 51,462

Total $ 920,795 $ 825,046 $ 946,569

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

Revenue ex-TAC and Revenue ex-TAC by Region are not measures calculated in accordance with U.S.

We have included Revenue ex-TAC and Revenue ex-TAC by Region in this Form 10-K because they are key measures used by our management and board of directors to evaluate operating performance and generate future operating plans.

In particular, we believe that the elimination of TAC from revenue and review of these measures by region can provide useful measures for period-to-period comparisons of our core business.

Accordingly, we believe that Revenue ex-TAC and Revenue ex-TAC by Region provide 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 Revenue ex-TAC and Revenue ex-TAC by Region has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S.

(1) We define Contribution ex-TAC as a profitability measure akin to gross profit.

It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue.

We have included Contribution ex-TAC in this Form 10-K because it is a key measures used by our management and board of directors to evaluate operating performance and generate future operating plans.

In particular, we believe that this can provide useful measures for period-to-period comparisons of our core business.

Accordingly, we believe that Contribution 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.

Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S.

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;

(b) other companies may report Revenue ex-TAC and Revenue ex-TAC by Region or similarly titled measures but define the regions differently, which reduces their effectiveness as a comparative measure;

and (c) 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 and Revenue ex-TAC by Region alongside our other U.S.

GAAP financial results, including revenue.

The above table provides a reconciliation of Revenue ex-TAC by region to revenue by region.

Please also refer to footnote 3 to the "Other Financial and Operating Data" table in “Item 6.

Selected Financial Data” in this Form 10-K for a reconciliation of Revenue ex-TAC to revenue, the most directly comparable financial measure calculated and presented in accordance with U.S.

(b) other companies may report Contribution 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 Contribution ex-TAC alongside our other U.S.

GAAP financial results, including gross profit.

Constant Currency Reconciliation

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Revenue at constant currency $ 2,234,522 $ 2,075,856 $ 2,312,889 8% (8)%

Gross profit as reported $ 781,944 $ 688,018 $ 829,036 14% (17)%

Conversion impact U.S.

dollar/other currencies (7,822) 467 20,686

Gross profit at constant currency $ 774,122 $ 688,485 $ 849,722 13% (17)%

Traffic acquisition costs as reported $ (1,333,440) $ (1,247,571) $ (1,314,947) 7% (5)%

2 unchanged sentences

Traffic acquisition cost at constant currency $ (1,321,177) $ (1,249,176) $ (1,343,778) 6% (5)%

Revenue ex-TAC as reported $ 825,046 $ 946,569 $ 965,980 (13)% (2)%

Contribution ex-TAC as reported $ 920,795 $ 825,046 $ 946,569 12% (13)%

Conversion impact U.S.

dollar/other currencies (7,450) 1,634 22,542

Revenue ex-TAC at constant currency $ 826,680 $ 969,111 $ 957,294 (13)% 0.3%

Contribution ex-TAC at constant currency $ 913,345 $ 826,680 $ 969,111 11% (13)%

Other cost of revenue as reported $ (138,851) $ (137,028) $ (117,533) 1% 17%

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2021 Compared to 2020

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.

Research and development expenses for 2021 increased $19.3 million, or 15%, compared to 2020.

This increase mainly related to an increase in headcount-related expenses driven by the negative impact of our increasing stock price.

2020 Compared to 2019

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

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 cessation of its R&D operations in Palo Alto.

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

Sales and Operations Expenses

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Sales and operations expenses for 2021 decreased $(4.7) million, or (1)%, compared to 2020.

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.

This decrease was mainly driven by lower net bad debt expense, lower depreciation and amortization costs and lower rent and facilities costs due to the right-sizing of our real estate footprint, partially offset by the reversal of a provision that was settled in 2020 and the negative impact of our increasing stock price on headcount-related expenses.

2020 Compared to 2019

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.

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

General and Administrative Expenses

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2021 Compared to 2020

General and administrative expenses for 2021 increased $36.2 million, or 31%, compared to 2020 .

This increase was mainly related to an increase in third-party services as part of our on-going transformation program and an increase in headcount related costs including the negative impact of our increasing stock price on compensation expense.

2020 Compared to 2019

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 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

Financial and Other Income (Expense)

Year Ended December 31, % change

1 unchanged sentence

(in thousands, except percent of revenue)

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

Financial and Other Income (Expense) $ 1,939 $ (1,939) $ (5,749) (200)% (66)%

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

2021 Compared to 2020

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.

Financial and Other Income for 2021 decreased by $(3.9) million, or (200)% compared to 2020.

The $(1.9) million financial and other income for the period ended December 31, 2021 was mainly driven by the financial expense relating to our $350 million available Revolving Credit Facility (RCF), including up-front fees amortization and non-utilization costs, partially offset by income from cash and cash equivalent.

Financial and Other income for the period ended December 31, 2021 was supported by $3.0 million in proceeds from disposal of servers and equipments and $2.4 million in dividends received from a minority interest.

At December 31, 2021, our exposure to foreign currency risk was centralized at Criteo S.A.

and hedged using foreign currency swaps or forward purchases or sales of foreign currencies.

and hedged using foreign currency swaps, forward purchases or sales of foreign currencies.

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 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.

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

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.

11 unchanged sentences

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:

$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).

In 2021, our income before taxes increased by $46.9 million to $153.8 million, compared to 2020, generating a $43.7 million theoretical income tax expense at a nominal standard French tax rate of 28.40%.

This theoretical tax expense is impacted mainly by the following items contributing to a $16.2 million effective tax expense and a 10.5% effective tax rate:

$1.7 million of deferred tax assets on which we recognized a valuation allowance, $6.6 million resulting from the BEAT expense, $6.5 million of permanent differences (mainly based on employee costs, depreciation expenses and intercompany transactions), $2.2 million related to the French business tax, Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, offset by a $25.7 million tax deduction resulting from technology royalty income we received from our subsidiaries, $4.8 million Research and Development tax credit, the recognition or reversal of valuation allowance on deferred tax assets of $10.4 million and $1.4 million of net effect of share-based compensation.

Please see Note 22 to our audited consolidated financial statements for more detailed information on the provision for income taxes.

1 unchanged sentence

As at December 31, 2021, 2020 and 2019, the valuation allowance against net deferred income taxes amounted to $36.4 million, $37.3 million and $25.3 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).

($5.7 million, $13.3 million and $12.8 million, respectively), Criteo Brazil ($2.7 million, $2.8 million and $3.2 million, respectively), Criteo Ltd ($7.6 million, $7.4 million and $7.5 million, respectively), Criteo China ($3.3 million, $3.3 million and $3.3 million, respectively), Criteo Singapore ($4.2 million, $3.3 million and $2.8 million), Criteo Pty ($2.7 million, $2.8 million and $2.6 million) and Criteo France ($6.2 million, $1.0 million and $(7.7) million, respectively).

2020 Compared to 2019

1 unchanged sentence

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

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.

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).

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.

Year Ended December 31, % change

4 unchanged sentences

2021 Compared to 2020

Net income for 2021 increased $63.0 million, or 84% compared to 2020.

This increase was the result of the business dynamics discussed above, in particular a $43.1 million increase in income from operations, a $3.9 million increase in financial and other income and a $16.0 million decrease in the provision for income taxes compared to 2020.

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 $(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.

Non-GAAP Financial Measure Reconciliation

Reconciliation of Contribution ex-TAC to Gross Profit

We define Contribution ex-TAC as a profitability measure akin to gross profit.

It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue.

Contribution ex-TAC is not a measure calculated in accordance with U.S.

We have included Contribution ex-TAC 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.

In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business.

Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S.

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;

(b) other companies may report Contribution 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 Contribution ex-TAC alongside our other U.S.

GAAP financial result measures.

The below table provides a reconciliation of Contribution ex-TAC to gross profit:

Twelve Months Ended

2021 2020 2019

(in thousands)

Gross Profit 781,944 688,018 829,036

Other Cost of Revenue 138,851 137,028 117,533

Contribution ex-TAC $ 920,795 $ 825,046 $ 946,569

Reconciliation of Adjusted EBITDA to Net Income

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, acquisition-related costs and restructuring related and transformation costs.

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

We have included Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operational plans.

In particular, we believe that the elimination of equity awards compensation expense, pension service costs, and restructuring related and transformation costs 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.

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.

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;

(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.

Twelve Months Ended

2021 2020 2019

(in thousands)

Net income $ 137,647 $ 74,689 $ 95,969

Financial (Income) expense 1,044 1,939 5,749

Provision for income taxes 16,169 32,197 39,496

Equity awards compensation expense 44,955 31,425 49,132

Research and development 16,334 10,253 15,036

Sales and operations 13,023 12,042 19,301

General and administrative 15,598 9,130 14,795

Pension service costs 1,324 2,232 1,556

Research and development 686 1,114 760

Sales and operations 207 394 283

General and administrative 431 724 513

Depreciation and amortization expense 88,402 88,238 93,488

Cost of revenue (data center equipment) 61,119 55,935 44,866

Research and development 9,484 10,741 16,508

Sales and operations 14,780 16,770 24,914

General and administrative 3,019 4,792 7,200

Acquisition-related costs 11,256 286 —

General and administrative 11,256 286 —

Restructuring related and transformation (gain) costs (1)

21,698 19,989 13,582

Research and development 5,751 4,240 2,000

Sales and operations 9,380 9,398 8,810

General and administrative 6,567 6,351 2,772

Total net adjustments 184,848 176,306 203,003

Adjusted EBITDA $ 322,495 $ 250,995 $ 298,972

(1) For the Twelve Months Ended December 2021, 2020 and 2019, respectively, the Company recognized restructuring related and transformation costs following its new organizational structure implemented to support its Commerce Media Platform strategy:

Twelve Months Ended

2021 2020 2019

(Gain) from forfeitures of share-based compensation awards (427) (2,655) (8,133)

Depreciation and amortization expense — — 1,161

Facilities related (gain) costs 16,020 12,975 11,080

Payroll related (gain) costs 4,480 5,911 9,474

Consulting costs related to transformation 1,625 3,758 —

Total restructuring related and transformation (gain) costs $ 21,698 $ 19,989 $ 13,582

For the twelve months ended December 31, 2021 and December 31, 2020, respectively, the cash outflows related to restructuring related and transformation costs were $3.9 million and $16.9 million respectively, and were mainly comprised of payroll costs, broker and termination penalties related to real-estate facilities and other consulting fees.

Unaudited Quarterly Results of Operations

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Income from operations 65,744 32,185 19,729 34,219 67,183 8,051 9,789 23,802

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

Financial and Other income (expense) 3,330 (154) (519) (718) (111) (491) (1,003) (334)

Income before taxes 69,074 32,031 19,210 33,501 67,072 7,560 8,786 23,468

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Other Financial Data:

Revenue ex-TAC (2)

Contribution ex-TAC (2)

$ 276,191 $ 210,961 $ 220,233 $ 213,410 $ 253,174 $ 185,944 $ 179,916 $ 206,012

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Cost of revenue 14,611 15,520 15,744 15,244 15,354 14,712 13,098 12,771

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)

Research and development expenses 2,967 2,557 2,207 1,753 1,712 1,721 1,658 5,650

Sales and operations expenses

3,579 3,545 3,702 3,954 4,033 4,176 4,221 4,340

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Restructuring related and transformation costs

Cost of revenue — — — — — — — —

Research and development expenses 513 (1,029) 4,831 1,436 747 1,985 513 995

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General and administrative expenses 752 (632) 3,614 2,833 1,031 4,839 288 193

Total restructuring related and transformation costs (c)

Total restructuring related and transformation costs (b)

$ 1,833 $ (1,767) $ 9,996 $ 11,636 $ 4,383 $ 12,181 $ 1,216 $ 2,209

(a) Excludes $0.2 million, $(2.7) million and $(4.8) million disclosed as restructuring costs as of December 31, 2021, 2020 and 2019, 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, 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:

(b) For the three months ended December 31, 2021 and 2020 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 239 (2,655)

Depreciation and amortization expense — (67)

Facilities and impairment related costs 1,328 4,158

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Total restructuring related and transformation costs $ 1,833 $ 4,383

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

Revenue ex-TAC is not a measure calculated in accordance with U.S.

Please see footnote 3 to the "Other Financial and Operating Data" table in “Item 6.

Selected Financial Data” in this Form 10-K for more information.

Below is a reconciliation of Revenue ex-TAC to revenue, the most directly comparable financial measure calculated and presented in accordance with U.S.

(2 We define Contribution ex-TAC as a profitability measure akin to gross profit.

It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue.

Contribution ex-TAC is not a measure calculated in accordance with U.S.

Below is a reconciliation of Contribution ex-TAC to gross profit, the most directly comparable financial measure calculated and presented in accordance with U.S.

Three Months Ended

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(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

(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.

Gross Profit 244,351 176,026 182,869 178,698 218,474 151,336 146,002 172,206

Other Cost of Revenue 31,840 34,935 37,364 34,712 34,700 34,608 33,914 33,806

Contribution ex-TAC $ 276,191 $ 210,961 $ 220,233 $ 213,410 $ 253,174 $ 185,944 $ 179,916 $ 206,012

(3) We define Adjusted EBITDA as our consolidated earnings before financial income (expense), including dividends, 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.

Please see footnote 5 to the "Other Financial and Operating Data" table in “Item 6.

Selected Financial Data” in this Form 10-K for more information.

Below is a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with U.S.

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Pension service costs 319 330 337 338 583 572 539 538

Depreciation and amortization expense (b)

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

Depreciation and amortization expense 21,756 22,301 22,491 21,854 22,140 21,752 20,208 24,138

Acquisition-related costs 6,118 2,091 3,047 — 174 112 — —

Restructuring costs (c)

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

Restructuring costs 1,833 (1,767) 9,996 11,636 4,383 12,181 1,216 2,209

Total net adjustments 35,929 44,200 52,240 52,479 56,605 44,178 32,761 42,762

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(a) Excludes $0.2 million, $(2.7) million and $(4.8) million disclosed as restructuring costs as of December 31, 2021, 2020 and 2019, respectively.

(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 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

December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020

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Income from operations 10.1 6.3 3.6 6.3 10.2 1.7 2.2 4.7

Financial income (expense) — (0.1) (0.2) (0.1) (0.2) (0.2) (0.3) (0.4)

Financial and Other income (expense) 0.5 — (0.1) (0.1) — (0.1) (0.2) (0.1)

Income before taxes 10.6 6.3 3.5 6.2 10.1 1.6 2.0 4.7

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Other Financial Data:

Revenue ex-TAC 38.3 % 39.5 % 41.1 % 40.9 % 40.8 % 42.2 % 42.4 % 42.2 %

Contribution ex-TAC 42.3 % 41.5 % 39.9 % 39.4 % 38.3 % 39.5 % 41.1 % 40.9 %

Adjusted EBITDA 17.0 % 13.5 % 12.2 % 14.8 % 15.6 % 10.5 % 8.9 % 11.8 %

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

Financial and Other income for the period ended December 31, 2021 was supported by other incomes being $3.0 million proceeds from disposal of servers equipments and $2.4 million dividends received from a minority interest.

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 $5.7 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.

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.

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.

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$591,620 $464,219

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.

In addition, the cash flows were also negatively impacted by a $(36.9) 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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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.

In December 2021, we completed a $100 million share repurchase program.

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

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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)

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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

(1) Subsequent to the settlement date of March 2022, the authorized amount of €350 million is expected to be 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 13 - Financial Liabilities and Note 24 - Commitments.

All of these loans and RCFs are unsecured and contain customary events of default but do not contain any affirmative, financial or negative covenants, with the exception of the September 2015 RCF which contains covenants, including compliance with a total net debt to Adjusted EBITDA ratio and restrictions on the incurrence of additional indebtedness.

This revolving credit facilities is unsecured and contain customary events of default and covenants, including compliance with a total net debt to adjusted EBITDA ratio and restrictions on the incurrence of additional indebtedness.

At December 31, 2021, we were in compliance with the required leverage ratio.

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The $27.5 million increase in cash and cash equivalents compared with December 31, 2020 primarily resulted from an increase of $220.9 million in cash from operating activities partially offset by a decrease of $(76.4) million in cash used for investing activities and a decrease of $(80.1) 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.

In addition, the increase in cash includes a $36.9 million negative 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.

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In 2021, 2020 and 2019, our actual capital expenditures were $53.0 million, $65.5 million and $97.9 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 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.

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 available cash resources.

We expect our capital expenditures to remain at, or slightly below, 4% of revenue for 2022, as we plan to continue to build, reshape 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.

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, in 2018 we acquired all of the outstanding shares of Storetail and Manage for $43.7 million and $60.0 million respectively, and in 2021 we acquired all of the outstanding shares of Doobe In Site Ltd.

("Mabaya"), all financed by available cash resources.

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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In 2021, net cash flows provided by operating activities were $220.9 million and consisted of net income of $137.6 million, $124.9 million in adjustments for non-cash and non-operating items and $(41.6) million of cash flows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $90.9 million, equity awards compensation expense of $44.5 million, changes in deferred tax assets of $(18.6) million, $2.0 million generated on disposal of non-current assets, and by $6.0 million of accrued income taxes net of income tax paid.

The $(41.6) million decrease in cash resulting from changes in working capital primarily consisted of a $(2.6) million decrease due to changes in operating lease liabilities and right of use assets, a $(19.7) million increase in other current assets (including prepaid expenses and VAT receivables) and a $(135.0) million increase in accounts receivable partially offset by a $33.6 million increase in accrued expenses such as payroll and payroll related expenses and VAT payables and $82.7 million increase in accounts payable.

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.

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The $0.6 million increase in cash resulting from changes in working capital primarily consisted of a $11.4 million increase in accrued expenses such as payroll and payroll related expenses and VAT payables, a $7.6 million decrease in other current assets (including prepaid expenses and VAT receivables) and a $0.9 million decrease in accounts receivable partially offset by a $14.1 million decrease in accounts payable and a $5.2 million decrease due to changes in operating lease liabilities and right of use assets.

In 2018, net cash flows provided by operating activities were $260.7 million and consisted of net income of $95.9 million, $154.4 million in adjustments for non-cash and non-operating items and by $10.4 million of cash flows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $111.8 million, equity awards compensation expense of $66.6 million, partially offset by $12.7 million of accrued income taxes net of income tax paid, $8.2 million of changes in deferred tax assets and other items for $3.1 million including $2.3 million reclassification of the cash impact of the settlement of hedging derivatives to financing activities.

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.

Investing Activities

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

In 2021, net cash flows used in investing activities were $76.4 million and consisted of $53.0 million for purchases of servers and other data-center equipment and capitalized software development costs, $10.4 million for business acquisitions and $12.9 million change in other non-current financial assets resulting from investments in Marketable Securities (see Note 4 ).

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 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.

Financing Activities

In 2021, net cash used in financing activities was $80.1 million mainly resulting from the $25.2 million proceeds from stock-options exercises and the $100.0 million impact from our share repurchase program.

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.

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 center s in Paris, Grenoble, France and Ann Arbor, Michigan.

Our engineering group is primarily located in research and development centers 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 682 employees primarily engaged in research and development at December 31, 2021.

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

Research and development expense totaled $151.8 million, $132.5 million and $172.6 million for 2021, 2020 and 2019, respectively.

Trend Information.

We review three key metrics to help us monitor the performance of our business and to identify trends affecting our business.

These key metrics include number of clients, Revenue ex-TAC, and Adjusted EBITDA.

These key metrics include number of clients, Contribution ex-TAC, and Adjusted EBITDA.

We believe these metrics are useful to understanding the underlying trends in our business.

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Number of clients 21,745 21,460 20,247

Revenue ex-TAC $ 825,046 $ 946,569 $ 965,980

Contribution ex-TAC $ 920,795 $ 825,046 $ 946,569

Adjusted EBITDA $ 322,495 $ 250,995 $ 298,972

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While our client count has increased over time, this metric can also fluctuate from quarter to quarter due to the seasonal trends in advertising spend of clients and the timing and amount of revenue contribution from new clients.

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 over that same period.

Revenue ex-TAC

We consider Revenue ex-TAC as a key measure of our business activity.

Contribution ex-TAC

We consider Contribution ex-TAC as a key measure of our business activity.

Our traffic acquisition costs primarily consist of purchases of impressions from publishers on a CPM basis.

Our management views our Revenue ex-TAC as a key measure to evaluate, plan and make decisions on our business activities and sales performance.

In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our 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 is not a measure calculated in accordance with U.S.

Please see footnote 3 to the "Other Financial and Operating Data" table in "Item 6.

Selected Financial Data" in this Form 10-K for a discussion of the limitations of Revenue ex-TAC and a reconciliation of Revenue ex-TAC to revenue, the most comparable U.S.

Our management views our Contribution ex-TAC as a key measure to evaluate, plan and make decisions on our business activities and sales performance.

In particular, we believe this can provide a useful measure for period-to-period comparisons of our business.

Contribution ex-TAC is not a measure calculated in accordance with U.S.

Please see above for a discussion of the limitations of Contribution ex-TAC and a reconciliation of Contribution ex-TAC to gross profit, the most comparable U.S.

GAAP measure, for 2017, 2018, 2019, 2020 and 2021.

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

Please see footnote 5 to the "Other Financial and Operating Data" table in "Item 6.

Selected Financial Data" in this Form 10-K for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S.

Please see above for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S.

GAAP measure, for 2017, 2018, 2019, 2020 and 2021.

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

Revenue ex-TAC

We are focused on maximizing our Revenue ex-TAC on an absolute basis.

Contribution ex-TAC

We are focused on maximizing our Contribution ex-TAC on an absolute basis.

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 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 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.

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 Contribution ex-TAC.

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

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

Adjusted EBITDA

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

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.

Our Adjusted EBITDA for 2021 was $ 322.5 million, a 28% increase over 2020.

Our increase in Adjusted EBITDA for 2021 compared to 2020 was primarily the result of the 12% increase in Contribution ex-TAC over the period, partly offset by a 16% increase in our Non-GAAP operating expenses.

This drove a 35% adjusted EBITDA margin in 2021.

While this margin improvement was largely driven by operating leverage from revenue growth and productivity improvement, it also reflects several structural cost measures initiated in 2020, including in our hosting and facilities costs, as well as COVID-19-related savings related to the lack of marketing events and travel and entertainment during the pandemic.

For 2022, we expect to invest 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 to accelerate growth in 2023, driving a lower Adjusted EBITDA margin as a percentage of Contribution ex-TAC compared to 2021.

Over time, we expect to continue to invest in the growth areas of our business and to maintain a healthy profitability as we continue to deliver sustainable revenue 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.

Please see footnote 5 to the "Other Financial and Operating Data" table in "Item 6.

Selected Financial Data" in this Form 10-K for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S.

Please see above for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S.

GAAP measure.

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Since our inception, we have significantly grown the number of clients with which we do business.

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

Our base of clients increased to close to 22,000 at December 31, 2021, a 1% increase over December 31, 2020.

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.

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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.

Client Retention

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This metric is calculated on a quarterly basis, and for annual periods, we use an average of the quarterly metrics.

We define a live client as a client whose advertising campaign has or had been generating Revenue ex-TAC for us on any day over the relevant measurement period.

We define a live client as a client whose advertising campaign has or had been generating revenue for us on any day over the relevant measurement period.

In each of 2021, 2020 and 2019, our client retention rate was approximately 90%.

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 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.

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1 Excluding Criteo Retail Media.

Off-balance Sheet Arrangements.

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

In addition, we do not engage in trading activities involving non-exchange traded contracts.

We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Tabular Disclosure of Contractual Obligations.

The following table discloses aggregate information about material contractual obligations and periods in which payments were due as of December 31, 2020.

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

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

Financial derivatives 925 — — 925

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

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.

Long-term debt includes interest of $0.1 million.

Pension contributions and cash outflows have not been included in the above table as they have been deemed immaterial.

This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995.

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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