Criteo S.A. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission, or "SEC", on February 25, 2022. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from the information provided in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Annual Report filed on Form 10-K for the year ended December 31, 2021. Recently Issued Pronouncements See "Recently Issued Accounting Standards" under Note 1, "Summary of Significant Accounting Policies," of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued during 2022. Use of Non-GAAP Financial Measures This Form 10-Q includes the following financial measures defined as non-GAAP financial measures by the SEC: Contribution ex-TAC, Adjusted EBITDA and Adjusted Net Income. These measures are not calculated in accordance with U.S. GAAP. Contribution ex-TAC is a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs ("TAC") 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. GAAP. 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 be useful for period-to-period comparisons of our 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. Adjusted EBITDA is 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 and certain other non-recurring items impacting net income (loss). Adjusted EBITDA and Adjusted EBITDA margin are key measures 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- and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, pension service costs, restructuring related and transformation costs, and certain other non-recurring items impacting net income (loss). Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors. Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, certain other non-recurring items impacting net income (loss), and the tax impact of these adjustments. Adjusted Net Income and Adjusted diluted EPS are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs, certain other non-recurring items impacting net income (loss), and the tax impact of these adjustments, Adjusted Net Income and Adjusted diluted EPS can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted Net Income and Adjusted diluted EPS provide useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors. 30 Please refer to the supplemental financial tables provided for a reconciliation of Contribution ex-TAC to gross profit, Adjusted EBITDA to net income, and Adjusted Net Income to net income in each case, the most comparable U.S. GAAP measurement. Our use of non-GAAP financial measures 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. GAAP. Some of these limitations are: (1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and (2) other companies may report Contribution ex-TAC, Adjusted EBITDA, Adjusted Net Income, or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income. 31 Condensed Consolidated Statements of Income Data (Unaudited): Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands, except share and per share data) Revenue $ 495,090 $ 551,311 $ 1,005,657 $ 1,092,388 Cost of revenue (1) Traffic acquisition costs (280,565) (331,078) (574,215) (658,745) Other cost of revenue (29,550) (37,364) (62,443) (72,076) Gross profit 184,975 182,869 368,999 361,567 Operating expenses Research and development expenses (1) (41,496) (41,915) (75,523) (73,612) Sales and operations expenses (1) (99,313) (80,751) (188,312) (160,105) General and administrative expenses (1) (100,672) (40,474) (134,008) (73,902) Total operating expenses (241,481) (163,140) (397,843) (307,619) Income from operations (56,506) 19,729 (28,844) 53,948 Financial and Other income (expense) 16,412 (519) 20,442 (1,237) Income before taxes (40,094) 19,210 (8,402) 52,711 Provision for income taxes 7,121 (4,181) (3,293) (14,232) Net income $ (32,973) $ 15,029 $ (11,695) $ 38,479 Net income available to shareholders of Criteo S.A. $ (33,614) $ 14,804 $ (13,027) $ 37,210 Net income allocated to shareholders per share: Basic $ (0.56) $ 0.24 $ (0.22) $ 0.61 Diluted $ (0.54) $ 0.23 $ (0.21) $ 0.58 Weighted average shares outstanding used in computing per share amounts: Basic 60,240,344 60,663,301 60,488,429 60,702,780 Diluted 62,303,670 64,665,212 62,957,718 64,371,603 (1) Cost of revenue and operating expenses include equity awards compensation expense, pension service costs, depreciation and amortization expense, restructuring related and transformation costs, and acquisition-related costs : 32 Detailed Information on Selected Items (unaudited): Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands) Equity awards compensation expense Research and development expenses $ 5,578 $ 4,218 $ 9,545 $ 6,714 Sales and operations expenses 2,550 3,636 5,118 6,005 General and administrative expenses 3,892 3,815 6,847 6,832 Total equity awards compensation expense $ 12,020 $ 11,669 $ 21,510 $ 19,551 Pension service costs Research and development expenses 136 175 278 350 Sales and operations expenses 39 53 79 106 General and administrative expenses 89 109 182 219 Total pension service costs (a) $ 264 $ 337 $ 539 $ 675 Depreciation and amortization expense Cost of revenue (data center equipment) 12,625 15,744 27,257 30,988 Research and development expenses (b) 3,181 2,207 6,474 3,960 Sales and operations expenses (c) 3,729 3,702 7,338 7,656 General and administrative expenses 606 838 1,216 1,741 Total depreciation and amortization expense $ 20,141 $ 22,491 $ 42,285 $ 44,345 Acquisition-related costs Sales and operations 178 — 178 — General and administrative expenses 1,799 3,047 4,343 3,047 Total acquisition-related costs $ 1,977 $ 3,047 $ 4,521 $ 3,047 Loss contingency on regulatory matter General and administrative 65,684 — 65,684 — Total loss contingency on regulatory matter $ 65,684 $ — $ 65,684 $ — Restructuring related and transformation (gain) costs Research and development expenses 1,029 4,831 1,038 6,267 Sales and operations expenses 4,076 1,551 4,532 8,918 General and administrative expenses 820 3,614 1,065 6,447 Total Restructuring related and transformation (gain) costs $ 5,925 $ 9,996 $ 6,635 $ 21,632 (a) Effective January 1, 2012, actuarial gains and losses are recognized in other comprehensive income. (b) Includes acquisition-related amortization of intangible assets of $1.5 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively and $2.9 million and $1.5 million for the six months ended June 2022 and, 2020, respectively. (c) Includes acquisition-related amortization of intangible assets of $2.2 million and $2.2 million for the three months ended June 30, 2022 and 2021, respectively and $4.3 million and $4.4 million for the six months ended June 30, 2022 and 2021, respectively. 33 Detailed Information on Restructuring related and Transformation costs (unaudited): Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands) (Gain) from forfeitures of share-based compensation awards — — — (666) Facilities related (gain) costs 753 9,721 1,286 16,337 Payroll related (gain) costs 4,992 (181) 4,992 4,971 Consulting costs related to transformation 180 456 357 990 Total restructuring related and transformation (gain) costs $ 5,925 $ 9,996 $ 6,635 $ 21,632 For the three months ended and the six months ended June 30, 2022 and June 30, 2021, respectively, the cash outflows related to restructuring related and transformation costs were $2.3 million, and $10.3 million and $3.1 million, and $16.5 million, respectively, and were mainly comprised of payroll costs, broker and termination penalties related to real-estate facilities and other consulting fees. Consolidated Statements of Financial Position Data (unaudited): June 30, 2022 December 31, 2021 (in thousands) Cash and cash equivalents $ 562,546 $ 515,527 Total assets 1,870,844 1,983,591 Trade receivables, net of credit losses 490,643 581,988 Total financial liabilities 589 1,002 Total liabilities 760,656 785,271 Total equity $ 1,110,188 $ 1,198,320 34 Other Financial and Operating Data (unaudited): Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands, except client data) Number of clients 21,711 21,332 21,711 21,332 Contribution ex-TAC (3) $ 214,525 $ 220,233 $ 431,442 $ 433,643 Adjusted Net Income (4) $ 23,027 $ 40,856 $ 56,801 $ 84,008 Adjusted EBITDA (5) $ 49,993 $ 67,269 $ 112,818 $ 143,198 35 (3) 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. GAAP. 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 be useful for measuring for period-to-period comparisons of our 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. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (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: Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands, except client data) Gross Profit $ 184,975 $ 182,869 $ 368,999 $ 361,567 Other Cost of Revenue $ 29,550 37,364 62,443 72,076 Contribution ex-TAC (1) $ 214,525 $ 220,233 $ 431,442 $ 433,643 36 (4) We define Adjusted Net Income as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs and, acquisition-related costs, certain other non-recurring items impacting net income (loss), and the tax impact of the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income in this Form 10-Q because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, amortization of acquisition-related intangible assets, restructuring related and transformation costs and, acquisition-related costs, certain other non-recurring items impacting net income (loss) and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our other U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted Net Income to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated: Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands) Net income (loss) $ (32,973) $ 15,029 $ (11,695) $ 38,479 Adjustments: Equity awards compensation expense 12,020 11,669 21,510 19,551 Amortization of acquisition-related intangible assets 3,614 2,936 7,322 5,871 Acquisition-related costs 1,977 3,047 4,521 3,047 Loss contingency on regulatory matter* 65,684 — 65,684 — Restructuring related and transformation (gain) costs 5,925 9,996 6,635 21,632 Tax impact of the above adjustments (33,220) (1,821) (37,176) (4,572) Adjusted Net Income $ 23,027 $ 40,856 $ 56,801 $ 84,008 * The Company recorded a provision for a loss contingency on a regulatory matter with France's Commission Nationale de l'Informatique et des Libertés ("CNIL"). Refer to Note 14 of our financial statement notes for more information. We consider that the loss contingency relating to one regulatory matter is non-recurring and is not reflective of the underlying past and future trends in our business. 37 (5) We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, restructuring related and transformation costs and, acquisition-related costs and certain other non-recurring items impacting net income (loss). Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA in this Form 10-Q 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 and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, restructuring related and transformation costs and, acquisition-related costs and certain other non-recurring items impacting net income (loss) in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our other U.S. GAAP financial results, including net income. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated: Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (in thousands) Net income (loss) $ (32,973) $ 15,029 $ (11,695) $ 38,479 Adjustments: Financial income (expense) (15,924) 519 (19,954) 1,237 Provision for income taxes (7,121) 4,181 3,293 14,232 Equity awards compensation expense 12,020 11,669 21,510 19,551 Pension service costs 264 337 539 675 Depreciation and amortization expense 20,141 22,491 42,285 44,345 Acquisition-related costs 1,977 3,047 4,521 3,047 Loss contingency on regulatory matter* 65,684 — 65,684 — Restructuring related and transformation (gain) costs 5,925 9,996 6,635 21,632 Total net adjustments 82,966 52,240 124,513 104,719 Adjusted EBITDA $ 49,993 $ 67,269 $ 112,818 $ 143,198 * The Company recorded a provision for a loss contingency on a regulatory matter with France's Commission Nationale de l'Informatique et des Libertés ("CNIL"). Refer to Note 14 of our financial statement notes for more information. We consider that the loss contingency relating to one regulatory matter is non-recurring and is not reflective of the underlying past and future trends in our business. 38 Results of Operations for the Periods Ended June 30, 2022 and June 30, 2021 (Unaudited) Revenue breakdown by segment Beginning in the first quarter of 2022 and 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. • 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. Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands) Revenue as reported $ 495,090 $ 551,311 (10) % Conversion impact U.S. dollar/other currencies $ 38,530 Revenue at constant currency (1) $ 533,620 $ 551,311 (3) % Marketing Solutions revenue as reported $ 440,423 $ 487,465 (10) % Conversion impact U.S. dollar/other currencies $ 37,286 Marketing Solutions revenue at constant currency (1) 477,709 487,465 (2) % Retail Media revenue as reported (2) 54,667 63,846 (14) % Conversion impact U.S. dollar/other currencies $ 1,244 Retail Media revenue at constant currency (1) 55,911 63,846 (12) % Revenue by segment Revenue for the three months ended June 30, 2022 decreased (10)%, or (3)% on a constant currency basis, to $495.1 million compared to the three months ended June 30, 2021. In the quarter, 88% of revenue came from existing clients while 12% came from new client additions. We added 379 net new clients year-over-year across regions. Marketing Solutions revenue decreased (10)%, or (2)% on a constant currency basis, to $440.4 million for the three months ended June 30, 2022, driven by anticipated identity and privacy changes and the suspension of the Company's operations in Russia, partially offset by a rebound in travel and traction in upselling and cross-selling of existing clients. (1) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. (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 is expected to increase. Contribution ex-TAC is not impacted by this transition. 39 Retail Media revenue decreased (14)%, or (12)% on a constant currency basis, to $54.7 million for the three months ended June 30, 2022, reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform. Criteo's platform accounts for a growing share of Retail Media onsite revenue, or about 82% in the second quarter of 2022, and its revenue is accounted for on a net basis. In the prior year period, approximately 33% of retail media onsite revenue was accounted for on a net basis, and as a result of this transition to a full platform business, the growth of Retail Media revenue has been temporarily impacted. Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 36% (or 42% on a constant currency basis) in the second quarter of 2022, driven by continued strength in Retail Media onsite, in particular in the U.S. market, and growing network effects of the platform. Additionally, our $495.1 million of revenue for the three months ended June 30, 2022 was negatively impacted by $38.5 million of currency fluctuations, particularly as a result of the depreciation of the Euro, Japanese Yen, British Pound, Turkish Lira, Russian Ruble and the Brazilian Real compared to the U.S. dollar. Revenue breakdown by region Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands) Revenue as reported $ 495,090 $ 551,311 (10) % Conversion impact U.S. dollar/other currencies $ 38,530 Revenue at constant currency (1) 533,620 551,311 (3) % Americas Revenue as reported 213,340 221,227 (4) % Conversion impact U.S. dollar/other currencies $ (355) Revenue at constant currency (1) 212,985 221,227 (4) % EMEA Revenue as reported 176,867 209,303 (15) % Conversion impact U.S. dollar/other currencies $ 21,826 Revenue at constant currency (1) 198,693 209,303 (5) % Asia-Pacific Revenue as reported 104,883 120,781 (13) % Conversion impact U.S. dollar/other currencies $ 17,059 Revenue at constant currency (1) $ 121,942 $ 120,781 1 % Revenue by region Our revenue in the Americas region decreased (4)% or (4)% on a constant currency basis to $213.3 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. This primarily reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by continued strong performance of Retail Media as the platform continues to scale with large retailers and consumer brands, as well as a rebound in travel. (1) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. 40 Our revenue in EMEA decreased (15)% (or (5)% on a constant currency basis), to $176.9 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting the suspension of the Company's operations in Russia and mixed retail trends with strength in Germany, emerging markets and a rebound in the U.K. offsetting softness in France. This also reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by solid traction in Retail Media. Our revenue in the Asia-Pacific region decreased (13)% (or increased 1% on a constant currency basis), to $104.9 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting mixed retail trends and a slow recovery of classifieds and travel in the region. Six months ended June 30, 2022 compared to the Six months ended June 30, 2021 Revenue breakdown by segment Six Months Ended June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands) Revenue as reported $ 1,005,657 $ 1,092,388 (8) % Conversion impact U.S. dollar/other currencies $ 63,719 Revenue at constant currency (1) $ 1,069,376 $ 1,092,388 (2) % Marketing Solutions revenue as reported $ 904,311 $ 970,655 (7) % Conversion impact U.S. dollar/other currencies $ 62,004 Marketing Solutions revenue at constant currency (1) 966,315 970,655 (0.4) % Retail Media revenue as reported (2) 101,346 121,733 (17) % Conversion impact U.S. dollar/other currencies $ 1,715 Retail Media revenue at constant currency (1) 103,061 121,733 (15) % Revenue by segment Revenue for the six months ended June 30, 2022 decreased (8)%, or (2)% on a constant currency basis, to $1.0 billion compared to the six months ended June 30, 2021. In the first half of 2022, 88% of revenue came from existing clients while 12% came from new client additions. We added 379 net new clients year-over-year across regions. Marketing Solutions revenue decreased (7)%, or (0.4)% on a constant currency basis, to $904.3 million for the six months ended June 30, 2022, driven by anticipated identity and privacy changes and the suspension of the Company's operations in Russia, partially offset by a rebound in travel and mixed retail trends. (1) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. (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 is expected to increase. Contribution ex-TAC is not impacted by this transition. 41 Retail Media revenue decreased (17)%, or (15)% on a constant currency basis, to $101.3 million for the six months ended June 30, 2022, reflecting the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform. Criteo's platform accounts for a fast-growing share of Retail Media onsite revenue, or about 79% in the first half of 2022, and its revenue is accounted for on a net basis. In the prior year period, approximately 27% of retail media onsite revenue was accounted for on a net basis, and as a result of this transition to a full platform business, the growth of Retail Media revenue has been temporarily impacted. Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 40% (or 45% on a constant currency basis) for the six months ended June 30, 2022, driven by continued strength in Retail Media onsite, in particular in the U.S. market, and growing network effects of the platform. Additionally, our $1,005.7 million of revenue for the six months ended June 30, 2022 was negatively impacted by $63.7 million of currency fluctuations, particularly as a result of the depreciation of the Euro, Japanese Yen, British Pound, Turkish Lira, Russian Ruble and the Brazilian Real compared to the U.S. dollar. Six months ended June 30, 2022 compared to the Six months ended June 30, 2021 Revenue breakdown by region Six Months Ended June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands) Revenue as reported $ 1,005,657 $ 1,092,388 (8) % Conversion impact U.S dollar / other currencies $ 63,719 Revenue at constant currency (1) 1,069,376 1,092,388 (2) % Americas Revenue as reported 408,187 425,127 (4) % Conversion impact U.S dollar / other currencies $ (995) Revenue at constant currency (1) 407,192 425,127 (4) % EMEA Revenue as reported 370,821 421,399 (12) % Conversion impact U.S dollar / other currencies $ 37,462 Revenue at constant currency (1) 408,283 421,399 (3) % Asia-Pacific Revenue as reported 226,649 245,862 (8) % Conversion impact U.S dollar / other currencies $ 27,252 Revenue at constant currency (1) $ 253,901 $ 245,862 3 % (1) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. Revenue by region Our revenue in the Americas region decreased (4)% (or (4)% on a constant currency basis) to $408.2 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. This primarily reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by continued strong performance of Retail Media as the platform continues to scale with large retailers and consumer brands and a rebound in travel. 42 Our revenue in EMEA decreased (12)% (or (3)% on a constant currency basis), to $370.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting mixed retail trends with strength in Germany and emerging markets, offsetting softness in France and in the U.K. This also reflects the impact of recognizing revenue on a net basis for Retail Media clients transitioning to the Company's platform, partially offset by solid traction in Retail Media. Our revenue in the Asia-Pacific region decreased (8)% (or increased 3% on a constant currency basis), to $226.6 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting the recovery of our retail business in the region and soft Classifieds trends. Cost of Revenue Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Traffic acquisition costs $ (280,565) $ (331,078) (15) % Other cost of revenue $ (29,550) $ (37,364) (21) % Total cost of revenue $ (310,115) $ (368,442) (16) % % of revenue (63) % (67) % Gross profit % 37 % 33 % *Traffic acquisition costs breakdown by solution: Three Months Ended % change % change at Constant Currency (2) June 30, 2022 June 30, 2021 2022 vs 2021 2022 vs 2021 (in thousands, except percentages) Marketing Solutions $ (262,454) $ (294,132) (11) % (5) % Retail Media (1) $ (18,111) $ (36,946) (51) % (52) % Traffic Acquisition Costs $ (280,565) $ (331,078) (15) % (10) % Cost of revenue for the three months ended June 30, 2022 decreased $(58.3) million, or (16)%, compared to the three months ended June 30, 2021. This decrease was primarily the result of a decrease of $(50.5) million, or (15)% (or (10)% on a constant currency basis) in traffic acquisition costs driven by a lower average price partially offset by an increase in volume, and a decrease of $(7.8) million, or (21)% in other cost of revenue. (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. 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 (2) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. 43 Traffic acquisition costs in Marketing Solutions decreased by (11)% (or (5)% at constant currency). This was driven by a (22)% decrease (or 17% at constant currency) in the average cost per thousand impressions ("CPM") for inventory purchased, reflecting our preferred relationships with media owners, which allow us to buy quality inventory directly from large publishers and remove intermediary fees in the process, and a 14% 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 (1) decreased by (51)% (or (52)% at constant currency), reflecting the technical and transitory impact related to the ongoing client migration due to the transitioning of our platform. Because we recognize revenue on a net basis in all arrangements running on the platform, we expect our traffic acquisition costs for Retail Media to decrease over time as all of our clients are transitioned to the platform. The decrease in other cost of revenue included a decrease in hosting costs of $3.5 million following the closure of certain data centers and depreciation and amortization expense of $3.1 million, and a decrease in other costs of sales mainly due to the digital tax and data acquisition costs. Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Traffic acquisition costs $ (574,215) $ (658,745) (13) % Other cost of revenue $ (62,443) $ (72,076) (13) % Total cost of revenue $ (636,658) $ (730,821) (13) % % of revenue (63) % (67) % Gross profit % 37 % 33 % *Traffic acquisition costs breakdown by solution: Six Months Ended % change % change at Constant Currency (2) June 30, 2022 June 30, 2021 2022 vs 2021 2022 vs 2021 (in thousands, except percentages) Marketing Solutions $ (540,254) $ (585,005) (8) % (3) % Retail Media (1) $ (33,961) $ (73,740) (54) % (54) % Traffic Acquisition Costs $ (574,215) $ (658,745) (13) % (8) % Cost of revenue for the six months ended June 30, 2022 decreased $(94.2) million, or (13)%, compared to the six months ended June 30, 2021. This decrease was primarily the result of a decreased of $(84.5) million, or (13)% (or (8)% on a constant currency basis) in traffic acquisition costs driven by a lower average price partially offset by an increase in volume, and a decrease of $(9.6) million, or (13)% in other cost of revenue. (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. 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 (2) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. 44 Traffic acquisition costs in Marketing Solutions decreased by (8)% (or (3)% at constant currency). This was driven by a (19)% decrease (or 15% at constant currency) in the average cost per thousand impressions ("CPM") for inventory purchased, reflecting our preferred relationships with media owners, which allow us to buy quality inventory directly from large publishers and remove intermediary fees in the process, and a 7% 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 (1) decreased by (54)% (or (54)% at constant currency), reflecting the technical and transitory impact related to the ongoing client migration due to the transitioning of our platform. Because we recognize revenue on a net basis in all arrangements running on the platform, we expect our traffic acquisition costs for Retail Media to decrease over time as all of our clients are transitioned to the platform. The decrease in other cost of revenue included a decrease in hosting costs of $5.5 million and depreciation and amortization expense of $3.7 million, and a decrease in other costs of sales mainly due to the digital tax and data acquisition costs . 45 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 and Contribution ex-TAC by segment: Three Months Ended Six Months Ended Segment June 30, 2022 June 30, 2021 YoY Change YoY Change at Constant Currency (2) June 30, 2022 June 30, 2021 YoY Change YoY Change at Constant Currency (2) Revenue (amounts in thousands, except percentages) Marketing Solutions $ 440,423 $ 487,465 (10) % (2) % $ 904,311 $ 970,655 (7) % (0.4) % Retail Media 54,667 63,846 (14) % (12) % 101,346 121,733 (17) % (15) % Total 495,090 551,311 (10) % (3) % 1,005,657 1,092,388 (8) % (2) % Contribution ex-TAC (1) Marketing Solutions 177,969 193,333 (8) % 2 % 364,057 385,650 (6) % 3 % Retail Media 36,556 26,900 36 % 42 % 67,385 47,993 40 % 45 % Total 214,525 220,233 (3) % 7 % 431,442 433,643 (1) % 8 % (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-Q 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. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (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. (2) Constant currency measures exclude the impact of foreign currency fluctuations and is computed by applying the prior year monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. 46 Constant Currency Reconciliation Information in this Form 10-Q with respect to results presented on a constant currency basis was calculated by applying the 2021 monthly exchange rates to transactions denominated in settlement or billing currencies other than the US dollar. Beginning in the second quarter of 2022, the Company updated its methodology for calculating revenue and traffic acquisition costs on a constant currency basis, which are non-GAAP measures. The Company will use the prior year’s monthly exchange rates where the settlement or billing currencies are in currencies other than US dollars. The Q1 2022 revenue and traffic acquisition costs have been revised consistent with this updated methodology. Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis: Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 YoY Change June 30, 2022 June 30, 2021 YoY Change (amounts in thousands, except percentages) Revenue as reported $ 495,090 $ 551,311 (10) % $1,005,657 $1,092,388 (8) % Conversion impact U.S. dollar/other currencies 38,530 — 63,719 — Revenue at constant currency $ 533,620 $ 551,311 (3) % $1,069,376 $1,092,388 (2) % Traffic acquisition costs as reported $ (280,565) $ (331,078) (15) % $ (574,215) $ (658,745) (13) % Conversion impact U.S. dollar/other currencies (17,401) — (28,811) — Traffic Acquisition Costs at constant currency $ (297,966) $ (331,078) (10) % $ (603,026) $ (658,745) (8) % Contribution ex-TAC as reported $ 214,525 $ 220,233 (3) % $ 431,442 $ 433,643 (1) % Conversion impact U.S. dollar/other currencies 21,129 — 34,908 — Contribution ex-TAC at constant currency $ 235,654 $ 220,233 7 % $ 466,350 $ 433,643 8 % Contribution ex-TAC/Revenue as reported 43 % 40 % 43 % 40 % Other cost of revenue as reported $ (29,550) $ (37,364) (21) % $ (62,443) $ (72,076) (13) % Gross Profit as reported $ 184,975 $ 182,869 1 % $ 368,999 $ 361,567 2 % 47 Research and Development Expenses Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Research and development expenses $ (41,496) $ (41,915) (1)% % of revenue (8) % (8) % Research and development expenses for the three months ended June 30, 2022, decreased $(0.4) million or (1)%, compared to the three months ended June 30, 2021. This decrease mainly related to higher headcount-related costs offset by lower facilities and supplies costs. Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Research and development expenses $ (75,523) $ (73,612) 3% % of revenue (8) % (7) % Research and development expenses for the six months ended June 30, 2022, increased $1.9 million or 3% compared to the six months ended June 30, 2021. This increase mainly related to higher headcount-related costs, depreciation and amortization slightly offset by a decrease in facilities costs. 48 Sales and Operations Expenses Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Sales and operations expenses $ (99,313) $ (80,751) 23% % of revenue (20) % (15) % Sales and operations expenses for the three months ended June 30, 2022 increased $18.6 million or 23% compared to the three months ended June 30, 2021. This increase mainly related to an increase in headcount-related costs, marketing costs, net bad debt expense, partially offset by a decrease in rent & facilities. Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Sales and operations expenses $ (188,312) $ (160,105) 18% % of revenue (19) % (15) % Sales and operations expenses fo r the six months ended June 30, 2022 increased $28.2 million or 18% compared to the six months ended June 30, 2021. This increase mainly related to an increase in headcount-related costs, marketing costs, net bad debt expense, partially offset by a decrease in rent & facilities. 49 General and Administrative Expenses Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) General and administrative expenses $ (100,672) $ (40,474) 149% % of revenue (20) % (7) % General and administrative expenses for the three months en ded June 30, 2022, increased $60.2 million or 149%, compared to the three months ended June 30, 2021. This increase mainly relates to a loss contingency on a regulatory matter. Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) General and administrative expenses $ (134,008) $ (73,902) 81% % of revenue (13) % (7) % General and administrative expenses for the six months ended June 30, 2022, increased $60.1 million or 81%, compared to the six months ended June 30, 2021 . This increase mainly relates to a loss contingency on a regulatory matter. 50 Financial and Other Income / (Expense) Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Financial and Other Income / (Expense) $ 16,412 $ (519) 3,262% % of revenue 3.3 % (0.1) % Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Financial and Other Income / (Expense) $ 20,442 $ (1,237) 1,753% % of revenue 2.0 % (0.1) % Financial and Other income for the three months ended and the six months ended June 30, 2022, increased by $16.9 million and by $21.7 million, respectively, compared to the three months ended and six months ended June 30, 2021. The $16.4 million financial and other income for the three months ended and six months ended June 30, 2022 were driven by the recognition of a positive impact of foreign exchange reevaluations net of related hedging and the up-front fees amortization, the non-utilization costs, and the financial expense relating to our available Revolving Credit Facility ("RCF") financing. At June 30, 2022, 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. 51 Provision for Income Taxes Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Provision for income taxes $ 7,121 $ (4,181) (270)% % of revenue — % (1) % Effective tax rate 18 % 22 % Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Provision for income taxes $ (3,293) $ (14,232) (77)% % of revenue (0.3) % (1) % Effective tax rate 39 % 27 % For the six months ended June 30, 2022 and June 30, 2021, we used an annual estimated tax rate o f 39% and 27%, respectively, to calculate the provision for income taxes. 52 Net Income Three months ended June 30, 2022 compared to the three months ended June 30, 2021 Three Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Net income $ (32,973) 15,029 (319)% % of revenue (7) % 3 % Net income for the three months ended June 30, 2022, decreased $(48.0) million, or (319)%, compared to the three months ended June 30, 2021. This decrease was the result of the business dynamics discussed above, in particular, a $(76.2) million decrease in income from operations, offset by a $16.9 million increase in financial and other income and by a $11.9 million decrease in provision for income taxes compared to the three months ended June 30, 2021. Six months ended June 30, 2022 compared to the six months ended June 30, 2021 Six Months Ended % change June 30, 2022 June 30, 2021 2022 vs 2021 (in thousands, except percentages) Net income $ (11,695) 38,479 (130)% % of revenue (1) % 4 % Net income for the six months ended June 30, 2022, decreased $(50.2) million, or (130)%, compared to the six months ended June 30, 2021. This increase was the result of the business dynamics discussed above, in particular, a $(82.8) million decrease in income from operations, offset by $21.7 million increase in financial and other income and by a $10.9 million decrease in provision for income taxes compared to the six months ended June 30, 2021. 53 Liquidity and Capital Resources Our principal sources of liquidity are our cash and cash equivalents and cash generated from operating activities. We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future. In 2018, we completed an $80 million share repurchase program. In July 2019, the board of directors authorized a new share repurchase program of up to $80 million of the Company’s outstanding American Depositary Shares, which we completed in February 2020. In April 2020, the board of directors authorized a new share repurchase program of up to $30 million of the Company's outstanding American Depositary Shares, which we completed in July 2020. In February 2021, the board of directors approved a new, long-term share repurchase program of up to $100 million of the Company's outstanding American Depositary Shares, which we completed in December, 2021. In February 2022, the board of directors approved an extension of the long-term share repurchase program of up to $175 million of the Company's outstanding American Depositary Shares, to a total of $275 million. Other than these repurchase programs, we intend to retain all available funds from any future earnings to fund our growth. As discussed in Note 14 to the unaudited condensed consolidated financial statements in Item 1 to this Form 10-Q, we are party to several loan agreements and revolving credit facilities with third-party financial institutions. Our cash and cash equivalents at June 30, 2022 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $562.5 million as of June 30, 2022. The $47.0 million increase in cash and cash equivalents compared with December 31, 2021 primarily resulted from $88.9 million in cash from operating activities, $23.3 million in cash from investing activities, partially offset by $(14.5) million in cash used for financing activities over the period. The cash used for financing activities was mainly related to $(29.3) million in cash used for the share repurchase programs partially offset by the recognition of $14.5 million positive impact of foreign exchange reevaluations net of related hedging, and $0.4 million of proceeds from a capital increase following the exercises of stock options. In addition, the increase in cash includes an $(50.7) million negative impact of changes in foreign exchange rates on our cash position over the period. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts that are currently providing only a minimal return. Furthermore, the Company has immediate access to an additional € 294.0 million ($305.4 million) from the RCF, which, combined with our cash position, marketable securities and treasury shares as of June 30, 2022, provides total liquidity approximating $1.0 billion. On July 29, 2022, we drew down €50 million ($51.1 million) under the RCF for a one month period to provide additional liquidity in connection with the closing of the IPONWEB Acquisition. Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2022, enables financial flexibility. Operating and Capital Expenditure Requirements For the six months ended June 30, 2022 and 2021, our capital expenditures were $21.0 million and $26.9 million, respectively. During the six months ended June 30, 2022, these capital expenditures were mainly comprised of purchases of servers and other data-center equipment and capitalized software development costs. We expect our capital expenditures to remain at, or slightly above, 3% of revenue for 2022, as we plan to continue to build and maintain additional data center equipment capacity in all regions and significantly increase our redundancy capacity to strengthen our infrastructure. We believe our existing cash balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, the amount and timing of our investments in personnel and capital equipment, and the timing and extent of our introduction of new products and product enhancements. If our cash and cash equivalents balances and cash flows from operating activities are insufficient to satisfy our liquidity requirements, we may need to raise additional funds through equity, equity-linked or debt financings to support our operations, and such financings may not be available to us on acceptable terms, or at all. 54 We may also need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies, assets or products. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing will be dilutive to our shareholders. 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. 55 Historical Cash Flows The following table sets forth our cash flows for the six month period ended June 30, 2022 and June 30, 2021: Six Months Ended June 30, 2022 June 30, 2021 (in thousands) Cash (used for) from operating activities $ 88,902 $ 103,722 Cash (used for) from investing activities $ 23,295 $ (56,814) Cash (used for) from financing activities $ (14,509) $ (27,374) Operating Activities Cash from operating activities is primarily impacted by the increase in the number of clients using our solutions and by the amount of cash we invest in personnel to support the anticipated growth of our business. Cash from operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable, accounts payable and accrued expenses, adjusted for certain non-cash and non-operating items such as depreciation, amortization and share-based compensation, deferred tax assets and income taxes. For the six months ended June 30, 2022, net cash provided by operating activities was $88.9 million and consisted of net income of $(11.7) million, and $98.2 million in adjustments for certain non-cash and non-operating items. Adjustments for certain non-operating items primarily consisted of amortization and provision expense of $114.5 million, equity awards compensation expense of $21.5 million, and $(7.1) million of changes in deferred tax assets, partially offset by a $(14.7) million change in income taxes and other non-operating items of $(15.3) million. The $2.4 million increase in cash from changes in working capital primarily consisted of a $65.5 million increase in trade receivables, partially offset by a $(14.6) million change in other current assets including prepaid expenses and value-added tax ("VAT") receivables, a $(0.2) million change in lease liabilities and right of use assets, a $(17.0) million change in trade payables, and a $(31.3) million change in other current liabilities such as payroll and payroll related expenses and VAT payables and change in fair value of derivatives. Investing Activities Our investing activities to date have consisted primarily of purchases of servers and other data-center equipment. For the six months ended June 30, 2022, net cash from investing activities was $23.3 million and primarily consisted of a $44.3 million positive change from the maturity of investments in Marketable Securities, partially offset by a $(21.0) million change in capital expenditures, mainly comprised of purchases of servers and other data-center equipment and capitalized software development costs. Financing Activities For the six months ended June 30, 2022, net cash used for financing activities was $(14.5) million, resulting mainly from a $(29.3) million payment for our share repurchase program, a $(0.9) million change in other financial liabilities, a $15.3 million change relating to the recognition of a positive impact of foreign exchange reevaluations net of related hedging, partially offset by $0.4 million of proceeds from capital increase following the exercises of stock options. 56