What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-25 · 240 added, 400 removed, 519 unchanged (55% of the section changed)

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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 enable brands', retailers' and media owners’ growth by providing best-in-class marketing and monetization services and infrastructure on the open Internet, driving approximately $30 billion in ecommerce sales for our clients – 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.

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Based on this data and other assets, we delivered 1.8 trillion targeted ads in the year ended December 31, 2022.

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%.

As of December 31, 2022, we served approximately 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 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.

In 2022, 2021 and 2020, our largest client repre sented 7.7%, 7.0%, and 3.5% of our revenue, respectively, and in 2022, 2021 and 2020, our largest 10 clients represented 17.8%, 16.6% and 13.7% of our revenue in the aggregate, respectively.

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

We operate in 96 countries through a network of 29 offices located in Europe, Middle East, Africa (EMEA), the Americas and Asia-Pacific.

We operate in 94 countries through a network of 27 offices located in Europ e, Middle East, Africa (EMEA), the Americas and Asia-Pacific.

As a result of our significant international operations, our revenue from outside of France, our home country, accounted for 94.5% of our revenue for year ended December 31, 2022.

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• Revenue of $2,017.0 million, $2,254.2 million and $2,072.6 million for the years ended December 31, 2022, 2021 and 2020, respectively;

• 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;

• Gross profit of $795.2 million, $781.9 million and $688.0 million for the years ended December 31, 2022, 2021 and 2020, respectively;

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

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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.

GAAP," are presented in the Non-GAAP Financial Measures section of this filing.

We are focused on maximizing Contribution ex-TAC.

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We believe our results of operations reflect this focus.

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.

In August 2022, we closed the acquisition of IPONWEB, a market-leading AdTech company with world-class media trading capabilities, for $250 million comprised of a mix of cash and treasury shares of the Company, with an earn-out consideration of up to $100 million subject to certain financial and performance milestones.

This strategic acquisition is expected to accelerate our Commerce Media Platform strategy by adding scale, complementary products, and stronger first-party data capabilities, further reducing our reliance on third-party cookies and other identifiers.

Operating Results.

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Historically, the Criteo model has focused solely on converting our clients' website visitors into customers, enabling us to charge our clients only when users engage with an ad we deliver, usually by clicking on it.

More recently, we have expanded our solutions to address a broader range of marketing goals for our clients.

We offer two families of solutions to our commerce and brand clients:

As part of our Company transformation, we have expanded our solutions to address a broader range of marketing goals for our clients.

We offer three families of solutions to our commerce and brand clients:

• 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.

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.

• Criteo Retail Media allows 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.

• Iponweb specializes in building real-time advertising technology and trading infrastructure, delivering advanced media buying, selling, and packaging capabilities for media owners, agencies, performance advertisers, and 3rd-party ad tech platforms.

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.

We report revenues on a gross basis for our Marketing Solutions segment, and primarily on a net basis for our Retail Media and Iponweb segments.

Cost of Revenue

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Traffic Acquisition Costs.

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

Traffic acquisition costs consist primarily of purchases of impressions from publishers on a CPM basis, incurred to generate our revenues.

We purchase impressions directly from publishers or third-party intermediaries, such as advertisement exchanges.

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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 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).

Research and Development Expense .

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

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.

Sales and Operations Expense .

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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, including internal IT, and depreciation and amortization costs.

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.

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

General and Administrative Expense .

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

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 and Other Income (Expense)

Financial and Other Income (Expense) primarily consists of:

• Positive impact of foreign exchange derivatives entered-into to secure the cash consideration of the Iponweb acquisition

• 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 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.

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

At December 31, 2022, our exposure to foreign currency risk was centralized at parent company level and hedged.

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• 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.

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These tax liabilities are recognized when we believe that certain positions may not be fully sustained upon review by tax authorities, notwithstanding our belief that our tax return positions are supportable.

Our effective tax rates differ from the statutory rate applicable to us primarily due to valuation allowance on deferred tax assets, differences between domestic and foreign jurisdiction tax rates, Research Tax Credit offsets, which are non-taxable items, potential tax audit provision settlements, share-based compensation expenses that are non-deductible in some jurisdictions under certain circumstances, and transfer pricing adjustments.

We license access to our technology to our subsidiaries and charge a royalty fee to these subsidiaries for such access.

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

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.

Critical Accounting Policies and Significant Judgments and Estimates

(See Note 17).

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S.

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

We believe estimates associated with (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 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.

We believe estimates associated with (1) gross vs net assessment in revenue recognition,, (2) allowances for credit losses, (3) 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, (4) assumptions used in valuing acquired assets and assumed liabilities in business combinations, (5) assumptions used in the valuation of goodwill, intangible assets and right of use assets - operating lease, (6) assumptions used in the valuation model to determine the fair value of share-based compensation plan and (7) assumptions surrounding the recognition and valuation of contingent liabilities and losses, are critical as they are made based on assumptions about matters which are uncertain..

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

Revenue Recognition

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 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.

Revenue Recognition - Gross vs Net Assessment

For revenue generated from arrangements that involve purchasing inventory from media owners, there is significant 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.

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Differences are defined as temporary when they are expected to reverse within a foreseeable future.

We may only recognize deferred tax assets if, based on the projected taxable incomes within the next three years, we determine that it is probable that future taxable profit will be available against which the unused tax losses and tax credits can be utilized.

We may only recognize deferred tax assets if we determine that it is probable that future taxable profit will be available against which the unused tax losses and tax credits can be utilized.

As a result, the measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized.

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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.

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.

Assumptions Used in the Valuation of Intangible Assets

In order to value our intangible assets, management prepares multi-year projections of revenue, TAC, gross profit, operating expenses, taxes and after tax margins relating to the operations associated with the intangible assets being valued.

These projections are based on the estimates of management at the time they are prepared and include subjective assumptions regarding industry growth and other matters.

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.

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.

In the course of 2022, the Company has reassessed its operating and reportable segments in accordance with ASC 280 and now reports its results of operations through three segments:

Marketing Solutions, Retail Media and Iponweb.

Goodwill has been allocated to these 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.

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

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.

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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

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

Acquired intangible assets are composed of software, technology and customer relationships amortized on a straight-line basis over their estimated useful lives comprised between one and three years for the software, and three and nine years, for the technology and customer relationships.

Intangible assets are reviewed for impairment whenever events or changes in circumstances such as, but not limited to, significant declines in revenue, earnings or cash flows or material adverse changes in the business climate indicate that the carrying amount of an asset may be impaired.

Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services.

We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.

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

Contingent Losses and Liabilities

With respect to litigation, claims and non-income tax risks, that may result in a provision to be recognized, we exercise significant judgment in measuring and recognizing provisions or determining exposure to contingent liabilities that are related to pending litigation, other outstanding claims and non income tax audits.

These judgment and estimates are subject to change as new information becomes available.

Equity Awards Compensation

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Expected life (in years)

- 6 years 6 years

Dividend yield

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For a discussion of recent accounting pronouncements applicable to us, see Note 1 to our audited consolidated financial statements beginning on page F-1.

Non-GAAP Financial Measures

As required by the rules of the Securities and Exchange Commission (“SEC”), we provide reconciliations of the non-GAAP financial measures contained in this document to the most directly comparable measures under GAAP, which are set forth in the financial tables below.

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.

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 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

2022 2021 2020

(in thousands)

Gross Profit 795,200 781,944 688,018

Other Cost of Revenue 133,024 138,851 137,028

Contribution ex-TAC $ 928,224 $ 920,795 $ 825,046

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, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter.

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, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter 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

2022 2021 2020

(in thousands)

Net income $ 10,875 $ 137,647 $ 74,689

Financial (Income) expense (17,053) 1,044 1,939

Provision for income taxes 31,186 16,169 32,197

Equity awards compensation expense 65,035 44,955 31,425

Pension service costs 1,756 1,324 2,232

Depreciation and amortization expense 89,018 88,402 88,238

Acquisition-related costs 12,584 11,256 286

Loss contingency on regulatory matter 63,221 — —

Restructuring, integration and transformation (gain) costs 10,677 21,698 19,989

Total net adjustments 256,424 184,848 176,306

Adjusted EBITDA $ 267,299 $ 322,495 $ 250,995

Twelve Months Ended

2022 2021 2020

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

Facilities related (gain) costs 1,452 16,020 12,975

Payroll related (gain) costs 7,373 4,480 5,911

Consulting costs related to transformation 1,852 1,625 3,758

Total restructuring, integration and transformation (gain) costs $ 10,677 $ 21,698 $ 19,989

Results of Operations for the Years Ended December 31, 2022, 2021 and 2020

Revenue breakdown by segment

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

We report our segments results as Marketing Solutions, Retail Media and Iponweb:

• 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,

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$ 207,292 $ 243,794 $ 265,061 (16) % (8) %

Iponweb revenue as reported $ 52,169 $ — $ — N/A N/A

Conversion impact U.S.

dollar/other currencies $ —

Iponweb revenue at constant currency $ 52,169 $ — $ — N/A N/A

(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.

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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.

(2) In all arrangements running on Criteo's Commerce Media platform, the Company recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions were accounted for on a gross basis.

Most clients using Criteo’s legacy Retail Media solutions transitioned to this platform by the end of 2022.

During the transition period, Revenue declined but Contribution ex-TAC margin increased.

Contribution ex-TAC was not impacted by this transition.

2022 Compared to 2021

Revenue in 2022 decreased $(237.2) million, or (11)% (or (4)% on a constant currency basis) to $2.0 billion compared to 2021.

Year-over-year decrease in revenue was driven by our existing clients, partly offset by net new clients accounted for approximately 6% of 2022 organic revenue and positive contribution from Iponweb.

Excluding Iponweb, our total number of clients was stable year-over-year across regions.

Marketing Solutions revenue decreased (12)% (or (5)% on a constant currency basis) to $1.8 billion for 2022, reflecting decreased spend from large clients, notably on our retargeting solutions, as they adjusted their advertising budgets to the current uncertain macro economic environment.

Retail Media revenue decreased(18)% (or (16)% on a constant currency basis) to 202.3 million for 2022, as the strong performance with large retailers across the U.S.

and EMEA was more than offset was more than offset by the technical and transitory impact related to the ongoing client migration to the Company's platform.

Criteo's platform accounted for the majority of Retail Media revenue, or close to 79% for the year ended December 31, 2022, and its revenue is accounted for on a net basis.

In 2021, around 50% of Retail Media 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 was temporarily impacted.

Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 29% (or 33% on a constant currency basis) in the year ended December 31, 2022, mainly driven by continued strength in Retail Media onsite, particularly in the U.S.

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.

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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.

Marketing Solutions revenue increased 11% (or 10% on a constant currency basis) to $2,007.2 million for 2021, reflecting increased spend from Retail 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.

and EMEA was more than offset by the technical and transitory impact related to the ongoing client migration to the Company's platform.

Criteo's platform accounted 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 platform business, the growth of Retail Media revenue was 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.

market, and growing network effects of the platform.

Revenue breakdown by region

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2022 Compared to 2021

Our revenue in the Americas region decreased $(25.6) million, or (3)% (or (3)% on a constant currency basis) to $891.3 million for 2022 compared to 2021.

This decrease was driven by negative retail trends, in particular with large customers across Marketing Solutions and by the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform, partially offset by the continued strong performance of Retail Media, as the platform continues to scale with consumer brands and large retailers and growing network effects of the platform.

Our revenue in the EMEA region decreased $(137.5) million, or (16)% (or (6)% on a constant currency basis) to $706.9 million for 2022 compared to 2021.

This decrease was driven by the suspension of our business in Russia effective as of March 2022, and by the continued decline in retail over the year in our main Marketing Solutions markets, in particular in France, UK and Germany, partially offset by the positive performance of Retail Media across the region.

Our revenue in the Asia-Pacific region decreased $(74.2) million, or (15)% (or (3)% on a constant currency basis) to $418.9 million for 2022 compared to 2021.

The decrease was driven by reduced spend from retail clients in the region, in particular in Japan and South-Asia, partly offset by our business in India.

Additionally, $2,017 million of revenue for 2022 was negatively impacted by $147.6 million of currency fluctuations, particularly as a result of the depreciation of the Euro, the Japanese Yen and the British pound sterling compared to the U.S.

2021 Compared to 2020

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.

This increase was driven by continued positive retail trends, in particular with large clients across Marketing Solutions, and continued strong performance of Retail Media, as the Company's platform 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 platform.

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.

This increase was driven by positive retail trends in our main markets, in particular in Germany and emerging markets, positive traction with large clients 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.

The increase was driven by the recovery of our large clients 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.

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

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

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

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

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

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

Cost of Revenue

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Retail Media (40,957) (122,353) (187,891) (67)% (35)%

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

Traffic Acquisition Costs $ (1,088,779) $ (1,333,440) $ (1,247,571) (18)% 7%

(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.

(1) There are no traffic acquisition costs associated with the Iponweb solutions as we are acting as agent in all the arrangements.

Refer to Note 1.

Principles and Accounting Methods for a detailed description of our accounting policies.

2022 Compared to 2021

Cost of revenue for 2022 decreased $(250.5) million, or (17)%, compared to 2021.

This decrease was primarily the result of a $(244.7) million, or (18)% decrease in traffic acquisition costs (or (14)% on a constant currency basis), and by a $(5.8) million, or (4)% decrease in other cost of revenue.

The 13% decrease in Marketing Solutions' traffic acquisition costs related primarily to the (25)% decrease (or (14)% increase on a constant currency basis) in the average CPM for inventory purchased, including lower CPMs for signal-limited environments where Criteo continues to perform, partially offset by a 15% 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 67% 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.

The decrease in other cost of revenue includes a $10.2 million decrease in allocated depreciation and amortization expense and a $0.2 million in data acquisition costs, partially offset by $(3.3) million increase in hosting costs, $(1.3) million increase in other cost of sales mainly due to the digital tax and proceeds from disposal of datacenter equipments.

2021 Compared to 2020

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

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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.

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

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

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

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

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

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

Contribution excluding Traffic Acquisition Costs

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Retail Media 202,317 246,996 266,186

Iponweb 52,169 — —

Total 2,017,003 2,254,235 2,072,617

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Total 928,224 920,795 825,046

(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.

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 results, including gross profit.

(1) R efer to the "Non-GAAP Financial Measures" section for a definition of this Non-GAAP metric.

(2) There are no traffic acquisition costs associated with the Iponweb solutions as we are acting as agent in all the arrangements.

Refer to Note 1.

Principles and Accounting Methods for a detailed description of our accounting policies.

Constant Currency Reconciliation

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Revenue at constant currency $ 2,164,639 $ 2,234,522 $ 2,075,856 (4)% 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 $ (1,088,779) $ (1,333,440) $ (1,247,571) (18)% 7%

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Other cost of revenue as reported $ (133,024) $ (138,851) $ (137,028) (4)% 1%

Conversion impact U.S.

dollar/other currencies (372) (1,167) (1,856)

Other cost of revenue at constant currency $ (139,223) $ (138,195) $ (119,389) 2% 18%

Gross profit as reported $ 795,200 $ 781,944 $ 688,018 2% 14%

Research and Development Expenses

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Research and development expenses for 2022 increased $35.8 million, or 24%, compared to 2021.

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

This increase mainly related to an increase in headcount-related expenses and the amortization of Iponweb acquisition-related intangible assets.

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.

Sales and Operations Expenses

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2022 Compared to 2021

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

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.

Sales and operations expenses for 2022 increased $52.4 million, or 16%, compared to 2021.

This increase was mainly driven by an increase in headcount-related costs and the amortization of Iponweb acquisition-related intangible assets.

2021 Compared to 2020

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.

General and Administrative Expenses

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General and administrative expenses for 2022 increased $52.7 million, or 35%, compared to 2021.

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.

This increase was mainly related to the loss contingency related to the CNIL matter as described in Note 19 and an increase in headcount-related costs.

2021 Compared to 2020

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.

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

Financial and Other Income (Expense)

5 unchanged sentences

2022 Compared to 2021

Financial and Other Income for 2022 increased by $15.8 million, or 817% compared to 2021.

The $17.8 million financial and other income for the period ended December 31, 2022 was mainly driven by the positive impact of foreign exchange derivatives entered-into to secure the cash consideration of the Iponweb acquisition.

This was partially offset by the $4.7 million accretion of earn-out liability related to Iponweb acquisition.

Other impacts come from the foreign exchange reevaluations net of related hedging of our operations, income from cash and cash equivalent, and the financial expense relating to our €407 million available Revolving Credit Facility (RCF) up-front fees amortization and non-utilization costs.

At December 31, 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.

2021 Compared to 2020

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

3 unchanged sentences

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

2020 Compared to 2019

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

The $1.9 million financial expense for the period ended December 31, 2020 was mainly driven by the financial expense relating to the €140 million drawing from May 2020 to November 2020 as part of our available Revolving Credit Facility (RCF) financing, the up-front fees amortization, and the

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

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

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

Provision for Income Taxes

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(in thousands, except percent information)

Provision for income taxes $ (16,169) $ (32,197) $ (39,496) (50)% (18)%

Provision for income tax expense (benefit) $ 31,186 $ 16,169 $ 32,197 93% (50)%

% of revenue 2 % 1 % 2 %

1 unchanged sentence

2022 Compared to 2021

The provision for income taxes for 2021 decreased by $(16.0) million, or 50%, compared to 2020.

The provision for income taxes for 2022 increased by $15.0 million, or 93%, compared to 2021.

The annual effective tax rate for 2022 was 74.1%, compared to an annual effective tax rate of 10.5% for 2021.

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 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%.

The annual effective tax rate 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 2022, our income before taxes decreased by $111.8 million to $42.1 million, compared to 2021, generating a $10.9 million theoretical income tax expense at a nominal standard French tax rate of 25.82%.

This theoretical tax expense is impacted mainly by the following items contributing to a 31.2 million effective tax expense and a 74.1% 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.

$1.7 million of deferred tax assets on which we recognized a valuation allowance, $16.9 million resulting from the non-tax deductible provision following the loss contingency on regulatory matters (refer to Note 19) , $6.2 million of permanent differences (mainly employee costs and intercompany transactions), $1.6 million related to the French business tax, Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, and $2.9 million of net effect of share-based compensation offset by a $6.7 million tax deduction resulting from technology royalty income we received from our subsidiaries, $2.9 million Research and Development tax credit in France, and the recognition or reversal of valuation allowance on deferred tax assets of $1.3 million.

Please see Note 17 to our audited consolidated financial statements for more detailed information on the provision for income taxes.

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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).

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:

Please see Note 17 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).

Year Ended December 31, % change

2021 2020 2019 2021 vs 2020 2020 vs 2019

(in thousands, except percent of revenue)

Net income $ 137,647 $ 74,689 $ 95,969 84% (22)%

% of revenue 6 % 4 % 4 %

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.

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.

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.

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.

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:

(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.

($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).

Unaudited Quarterly Results of Operations

The following tables set forth our unaudited consolidated statement of income data for the last eight quarters, as well as the percentage of revenue for each line item shown.

The following tables set forth our unaudited consolidated statement of income data for the last eight quarters.

We derived this information from our unaudited interim consolidated financial information, which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the information for the quarters presented.

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Traffic acquisition costs (1)

Other cost of revenue (31,840) (34,935) (37,364) (34,712) (34,700) (34,608) (33,914) (33,806)

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

Operating expenses (1)

Research and development expenses (44,860) (33,345) (41,915) (31,697) (32,797) (30,954) (31,247) (37,515)

Sales and operations expenses (89,892) (75,619) (80,751) (79,354) (85,871) (83,659) (75,781) (84,974)

General and administrative expenses (43,855) (34,877) (40,474) (33,428) (32,623) (28,672) (29,185) (25,915)

Total operating expenses (178,607) (143,841) (163,140) (144,479) (151,291) (143,285) (136,213) (148,404)

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

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

Provision for income taxes 5,864 (7,801) (4,181) (10,051) (20,254) (2,267) (2,636) (7,040)

Net income $ 74,938 $ 24,230 $ 15,029 $ 23,450 $ 46,818 $ 5,293 $ 6,150 $ 16,428

Net income available to shareholders of Criteo S.A.

(281,021) (233,543) (280,565) (293,650) (377,076) (297,619) (331,078) (327,667)

Other Financial Data:

Contribution ex-TAC (2)

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

Adjusted EBITDA (3)

$ 110,867 $ 68,430 $ 67,269 $ 79,929 $ 103,423 $ 49,471 $ 38,911 $ 59,190

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

Three Months Ended

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

(in thousands)

Equity awards compensation expense

Research and development expenses 4,762 4,858 4,218 2,496 2,482 3,333 2,068 2,370

Sales and operations expenses 3,143 3,875 3,636 2,369 3,662 3,190 1,572 3,618

General and administrative expenses 4,209 4,557 3,815 3,017 2,816 280 3,519 2,515

Total equity awards compensation expense (a)

12,114 13,290 11,669 7,882 8,960 6,803 7,159 8,503

Pension service costs

Research and development expenses 166 170 175 175 290 286 269 269

Sales and operations expenses 49 52 53 53 103 101 95 95

General and administrative expenses 104 108 109 110 190 185 175 174

Total pension service costs 319 330 337 338 583 572 539 538

Depreciation and amortization expense

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

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

General and administrative expenses 599 679 838 903 1,041 1,143 1,231 1,377

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

Acquisition-related costs

General and administrative expenses 6,118 2,091 3,047 — 174 112 — —

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

Restructuring related and transformation costs

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

Sales and operations expenses 568 (106) 1,551 7,367 2,605 5,357 415 1,021

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

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, 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)

Facilities and impairment related costs 1,328 4,158

Payroll related costs (157) 1,422

Consulting costs related to transformation 423 1,458

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

(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

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

(in thousands)

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

Other cost of revenue (36,810) (33,771) (29,550) (32,893) (31,840) (34,935) (37,364) (34,712)

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.

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

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

(in thousands)

Reconciliation of Adjusted EBITDA to Net Income:

Net Income $ 74,938 $ 24,230 $ 15,029 $ 23,450 $ 46,818 $ 5,293 $ 6,150 $ 16,428

Financial (income) expense (347) 154 519 718 111 491 1,003 334

Provision for income taxes (5,864) 7,801 4,181 10,051 20,254 2,267 2,636 7,040

Equity awards compensation expense (a)

12,114 13,290 11,669 7,882 8,960 6,803 7,159 8,503

Pension service costs 319 330 337 338 583 572 539 538

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 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

Adjusted EBITDA $ 110,867 $ 68,430 $ 67,269 $ 75,929 $ 103,423 $ 49,471 $ 38,911 $ 59,190

(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.

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

(as a percentage of revenue)

Statements of Operations Data:

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

Cost of revenue

Traffic acquisition costs (57.7) (58.5) (60.1) (60.6) (61.7) (60.5) (58.9) (59.1)

Other cost of revenue (4.9) (6.9) (6.8) (6.4) (5.2) (7.4) (7.7) (6.7)

Gross profit 246,594 179,607 184,975 184,024 244,351 176,026 182,869 178,698

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15,400 6,579 (33,614) 20,587 73,765 23,481 14,804 22,406

Other Financial Data:

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 %

(1) In all arrangements running on Criteo's Commerce Media Platform, the Company recognizes revenue on a net basis, whereas revenue from arrangements running on legacy Retail Media solutions and on Marketing Solution solutions are accounted for on a gross basis.

Refer to Note 1.

Principles and Accounting Methods for a detailed description of our accounting policies.

Liquidity and Capital Resources.

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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.

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 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.

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

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As of December 31, 2022, we show a positive net cash position.

Since 2012, we utilize a cash pooling arrangement, reinforcing cash management centralization.

We utilize cash pooling arrangements, reinforcing cash management centralization.

Investment and financing decisions are carried out by our internal central treasury function.

We only deal with counterparties with high credit ratings.

In addition, under our Investment and Risk Management Policy, our central treasury function ensures a balanced distribution between counterparties of the investments, no matter the rating of such counterparty.

In addition, under our Investment and Risk Management Policy, our central treasury function ensures a balanced distribution between counterparties.

Liquidity Risk

We are mainly exposed to changes of foreign currency exchange rate fluctuations.

Working Capital

The following table summarizes our cash flows from operations, trade receivables, net of allowances and working capital for the periods indicated:

Year Ended December 31,

Cash flows provided by operating activities $220,913 $185,356

Trade receivables, net of allowances $581,988 $474,055

Working capital (current assets less current liabilities)

$591,620 $464,219

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.

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 and money market funds that are currently providing only a minimal return.

Sources of Liquidity

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We do not anticipate paying cash dividends on our equity securities in the foreseeable future.

Since our inception, we raised a total of $51.1 million aggregate net proceeds from the sale of preferred shares through four private placements.

In November 2013, we received aggregate net proceeds before expenses of $269.0 million from our initial public offering.

In March 2014, we received aggregate net proceeds before expenses of $22.6 million from our secondary equity offering.

We also benefited to a much lesser extent from the proceeds of the exercise of share options and warrants and expect to continue to do so in the future, as such securities are exercised by holders.

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

We completed two ADS repurchase programs in 2020:

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

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.

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

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€ 407,000 € — € — Floating rate:

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 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.

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.

EURIBOR / SOFR + margin depending on leverage ratio September 2027

For additional information regarding our RCF agreement, please refer to Note 10 - Financial Liabilities and Note 19 - Commitments.

This RCF 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, 2022, we were in compliance with the leverage ratio.

We are also party to short-term credit lines and overdraft facilities with HSBC Holdings plc, LCL and BNP Paribas.

We are authorized to draw up to a maximum of €21.5 million ($24.4 million) in the aggregate under the short-term credit lines and overdraft facilities.

We are authorized to draw up to a maximum of €21.5 million ($22.9 million) in the aggregate under those short-term credit lines and overdraft facilities.

As of December 31, 2022, we had not drawn on either of these facilities.

Any loans or overdrafts under these short-term facilities bear interest based on the one month EURIBOR rate or three month EURIBOR rate.

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

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

Our banks have the ability to terminate such facilities on short notice.

Our cash and cash equivalents are invested primarily in demand deposit accounts and term deposits that primarily aim at preserving capital.

Our cash, and cash equivalents at December 31, 2022 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $348.2 million as of December 31, 2022.

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 $36.9 million negative impact due to changes in foreign exchange rates on our cash position over the period.

The $(67.3) million decrease in cash and cash equivalents compared with December 31, 2021 primarily resulted from an increase of $256.0 million in cash from operating activities partially offset by a decrease of $(166.1) million in cash used for investing activities and a decrease of $(113.0) million in cash used for financing activities.

In addition, the cash flows were also negatively impacted by $(44.1) million due to foreign exchange rates impact on our consolidated cash position in USD over the period.

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

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

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

Furthermore, Criteo had financial liquidity of approximately $1.068 million, including its cash position, marketable securities and its Revolving Credit Facility as of December 31, 2021.

Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2022, enables financial flexibility.

Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts and term deposit accounts

Furthermore, Criteo had financial liquidity of approximately $835.0 million, including its cash position, short term investments and its Revolving Credit Facility as of December 31, 2022.

Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2023, enables financial flexibility and the meeting of all material contractual obligations.

We have also reserved $100m in cash (classified as Restricted cash on our Consolidated Statements of Financial Position) to fund the earn-out liability obligations, resulting from the Iponweb acquisition.

Share buy-back programs

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

In 2022, we completed an additional $136 million share repurchase.

All above programs have been implemented under our multi-year authorization granted by Board of Directors.

On December 7, 2022, this authorization was extended to a total amount of $480 million.

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

Operating and Capital Expenditure Requirements

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We expect our capital expenditures to remain at, or slightly below, 4% of revenue for 2023, 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.

On August 1st, 2022 we entered into a definitive purchase agreement which resulted in the Iponweb acquisition for $(135.5) million of cash consideration paid.

In 2021 we acquired all of the outstanding shares of Doobe In Site Ltd.

("Mabaya"), 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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Our cash and cash equivalents at December 31, 2022 were held for working capital and general corporate purposes, which could include acquisitions.

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

The decrease in cash and cash equivalents compared with December 31, 2021, primarily resulted from an increase of $256.0 million in cash flows from operating activities fully offset by a decrease of $(166.1) million in cash flows used for investing activities and a decrease of $(113.0) million in cash flows used for financing activities.

Operating Activities

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In 2022, net cash flows provided by operating activities were $256.0 million and consisted of net income of $10.9 million, $185.0 million in adjustments for non-cash and non-operating items and $60.1 million of cash flows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $150.3 million, equity awards compensation expense of $65.0 million, changes in deferred tax assets of $3.6 million, partially offset by $(11.0) million of accrued income taxes net of income tax paid and $(22.9) million of other non-cash and non-operating items.

In 2022, our cash generated by operating activities benefited from strong working capital leverage, largely due to the impact from strong collections, in particular Iponweb, which has favorable seasonality in the fourth quarter.

The $60.1 million increase in cash resulting from changes in working capital primarily consisted of a $0.7 million decrease due to changes in operating lease liabilities and right of use assets, a $(14.7) million increase in other current assets (including prepaid expenses and VAT receivables) and a $(41.9) million increase in accounts receivable partially offset by a $(17.9) million decrease in accrued expenses such as payroll and payroll related expenses and VAT payables and a $133.8 million increase in accounts payable mainly due to seasonality.

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.

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

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

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

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.

Investing Activities

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In 2022, net cash flows used in investing activities were $166.1 million and consisted of $55.8 million for purchases of servers and other data-center equipment and capitalized software development costs, $138.0 million for business acquisitions and $27.8 million change in other non-current financial assets resulting from investments in Marketable Securities (see Note 4).

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 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 2022, net cash used in financing activities was $113.0 million mainly resulting from the $135.7 million impact from our share repurchase program, partially offset by $21.9 million change relating to the recognition of a positive impact of foreign exchange reevaluations net of related hedging and $1.0 million proceeds from stock-options exercises.

In 2 021, 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.

Research and Development, Patents and Licenses, etc.

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

Our engineering group is primarily located in research and development centers in Paris, 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 expense totaled $151.8 million, $132.5 million and $172.6 million for 2021, 2020 and 2019, respectively.

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.

Our principal commitments consist of non-cancelable operating leases for our various office facilities and data centers, and other contractual commitments consisting of obligations to our hosting services providers, and providers of software as a service.

The following table discloses aggregate information about material contractual obligations and periods in which payments were due as of December 31, 2022.

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.

Operating Leases 33,920 58,459 19,665 112,044

Other purchase obligations 55,770 8,506 — 64,276

Total $ 89,690 $ 66,965 $ 19,665 $ 176,320

Trend Information.

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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.

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.

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.

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 in the Non-GAAP Financial Measures section of this filing.

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

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Adjusted EBITDA

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

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

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

Adjusted EBITDA represents our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter.

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

Adjusted EBITDA 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.

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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.

GAAP measure in the Non-GAAP Financial Measures section of this filing.

Highlights and Trends

We believe the expansion of our business with existing clients as well as the addition of new clients have both been significant drivers of our historical growth.

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

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

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

Contribution ex-TAC

Our Contribution ex-TAC for 2022 was $928 million, a 10% increase over 2021, at constant currency.

This performance was driven by growth in Retail Media and Commerce Audiences, offsetting lower Retargeting.

It also reflects significant headwinds from foreign exchange rates and the wind down of operations in Russia.

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 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 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.

Our Adjusted EBITDA for 2022 was $267.3 million, a (17)% decrease over 2021.

Our decrease in Adjusted EBITDA for 2022 compared to 2021 was primarily the result of the 1% increase in Contribution ex-TAC over the period, partly offset by a 11% increase in our Non-GAAP operating expenses.

This drove a 29% adjusted EBITDA margin in 2022.

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.

Our 2022 investments in the strategic growth areas of our business, such as Retail Media, our first-party media network, acquisition solutions, video, Connected TV and Commerce Insights to accelerate growth drove 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, rightsizing our cost base and continued discipline in our expense management.

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

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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 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.

We had close to 22,000 clients as of December 31, 2022, flat compared to our client base as of December 31, 2021.

In recent years, the expansion of our clients has been driven our global footprint and our commercial expansion in existing markets, our continued development of large clients in the Retail vertical, especially in ecommerce, our expansion of midmarket clients and our penetration into the consumer brand vertical through some of our Criteo Retail Media offerings.

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

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We define client retention rate as the percentage of live clients during the previous quarter that continued to be live clients during the current quarter.

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

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

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.

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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