Criteo S.A. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Form 10-K. Overview We are a global technology company driving superior commerce outcomes for marketers and media owners through the world’s leading Commerce Media Platform. We operate in commerce media, the future of digital advertising, leveraging commerce data and artificial intelligence ("AI") to connect ecommerce, digital marketing and media monetization to reach consumers throughout their shopping journey. Our vision is to bring richer experiences to every consumer by supporting a fair and open internet that enables discovery, innovation, and choice – powered by trusted and impactful advertising. We have accelerated and deeply transformed the Company from a single-product to a multi-solution platform provider, fast diversifying our business into new solutions. We enable brands', retailers' and media owners’ growth by providing best-in-class marketing and monetization services and infrastructure on the open Internet, driving approximately $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. Our data offers deep insights into consumer intent and purchasing habits. Our focus is on commerce media. Our clients include many of the largest and most sophisticated consumer brands, commerce companies and media owners in the world. We partner with them to capture user activity on their websites and mobile applications ("apps"), which we define as digital properties, and leverage that data to deliver superior ad performance to help marketers, brands and agencies reach their campaign objectives. This includes powering the retail media ecosystem as we enable brands to reach shoppers with relevant ads near the digital point of sale on retailer and marketplace websites while enabling retailers to add a new revenue stream. Demonstrating the depth and scale of our data, we collected data on over $1 trillion in online sales transactions 1 on our clients' digital properties in the year ended December 31, 2022. 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, 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 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 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. The Company's foreign currency risk exposure to the British pound, the Japanese yen, the Brazilian real and the U.S. dollar against the euro (the euro still remains the Company's functional currency) is described in Item 7 note B. Liquidity and Capital Resources to our Management's Discussion and Analysis included elsewhere in this Form 10-K. ___________________________________________________ 1 Excluding Criteo Retail Media 61 Our financial results include: • 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 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. GAAP financial measure, of $928.2 million, $920.8 million and $825.0 million for the years ended December 31, 2022, 2021 and 2020, respectively; • Net Income of $10.9 million, $137.6 million and $74.7 million for the years ended December 31, 2022, 2021 and 2020, respectively; and • Adjusted EBITDA, which is a non-U.S. GAAP financial measure, of $267.3 million, $322.5 million and $251.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. 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 in the Non-GAAP Financial Measures section of this filing. We are focused on maximizing Contribution ex-TAC. We believe this focus builds sustainable long-term value for our business and fortifies a number of our competitive strengths, including a highly liquid marketplace for digital advertising inventory. As part of this focus, we seek to maximize our percentage of overall marketing spend in the digital advertising market over the long-term. In addition, this focus enriches liquidity for both advertisers and publishers resulting in more effective advertising for clients, better monetization for publishers and more relevant advertisements for consumers. We believe our results of operations reflect this focus. Acquisitions 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. 62 A. Operating Results. Basis of Presentation The key elements of our results of operations include: Revenue We sell personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. 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. 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 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 Our cost of revenue primarily includes traffic acquisition costs and other cost of revenue. Traffic Acquisition Costs. 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. We recognize cost of revenue on a publisher by publisher basis as incurred. Costs owed to publishers but not yet paid are recorded in our Consolidated Statements of Financial Position as trade payables. For solutions within Criteo Retail Media, we pay for the inventory of our retailer partners on a revenue sharing basis, effectively paying the retailers a portion of the click-based revenue generated by user clicks on the sponsored products advertisements or impressions on the commerce display advertisements displaying the products of our consumer brand clients. For a discussion of the trends we expect to see in traffic acquisition costs, see the section entitled " - Highlights and Trends - Contribution ex-TAC" in Item 7.D - Trend Information below. Other Cost of Revenue. Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment, the cost of data purchased from third parties and digital taxes. The Company does not build or operate its own data centers and none of its Research and Development employments are dedicated to revenue generating activities. As a result, we do not include the costs of such personnel in other cost of revenue. 63 Operating Expenses Operating expenses consist of research and development, sales and operations, and general and administrative expenses. Salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs are the most significant components of each of these expense categories. Research and Development Expense . Research and development expense consists primarily of personnel-related costs for our employees working in the engine, platform, site reliability engineering, scalability, infrastructure, engineering program management, product, analytics and other teams, including salaries, bonuses, equity awards compensation and other personnel related costs. Also included are non-personnel costs such as subcontracting, consulting and professional fees to third-party development resources, allocated overhead, including internal IT and depreciation and amortization costs. These expenses are partially offset by the French research tax credit that is conditional upon the level of our expenditures in research and development. Sales and Operations Expense . Sales and operations expense consists primarily of personnel-related costs for our employees working in our sales, account strategy, sales operations, publisher business development, analytics, marketing, technical solutions, creative services and other teams, including salaries, bonuses, equity awards compensation, and other personnel-related costs. Additional expenses in this category include travel and entertainment, marketing and promotional events, marketing activities, provisions for doubtful accounts, subcontracting, consulting and professional fees paid to third parties, allocated overhead, including internal IT, and depreciation and amortization costs. General and Administrative Expense . General and administrative expense consists primarily of personnel costs, including salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs for our administrative, legal, information technology, human resources, facilities and finance teams. Additional expenses included in this category include travel-related expenses, subcontracting and professional fees, audit fees, tax services and legal fees, as well as insurance and other corporate expenses, along with allocated overhead, including internal IT and depreciation and amortization costs. 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. The U.S. 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. These exchange differences in euro are then translated into U.S. dollars (the Company's reporting currency) according to the average euro/U.S. dollar exchange rate. • Interest received on our cash and cash equivalents and interest incurred on outstanding borrowings under our debt loan agreements and revolving credit facilities ("RCFs"). • Proceeds from sale of data center equipment to third-parties, made as part of Criteo's data center update program. We monitor foreign currency exposure and look to mitigate exposures through normal business operations and hedging strategies. 64 Provision for Income Taxes We are subject to potential income taxes in France, the U.S. and numerous other jurisdictions. We recognize tax liabilities based on estimates of whether additional taxes will be due. 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, non-tax deductible provision from the loss contingency on regulatory matter, 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. (See Note 17). Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of revenue, assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. 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) 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.. See Note 1. 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 - 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. The assessment of whether we are considered the principal or the agent in a transaction could impact our revenue and cost of revenue recognized on the consolidated statements of income. Trade Receivables, Net of Allowances for Doubtful Accounts We apply Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost that an entity does not expect to collect over the asset's contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions. For accounts receivable measured at amortized cost, we use aging analysis, and probability of default methods to evaluating and estimating the expected credit losses. 65 Deferred Tax Assets Deferred taxes are recorded on all temporary differences between the financial reporting and tax bases of assets and liabilities, and on tax losses, using the liability method. Differences are defined as temporary when they are expected to reverse within a foreseeable future. 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. If future taxable profits are considerably different from those forecasted that support recording deferred tax assets, we will have to revise downwards or upwards the amount of the deferred tax assets, which could have a significant impact on our financial results. This determination requires many estimates and judgments by our management for which the ultimate tax determination may be uncertain. Uncertain Tax Positions We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. These uncertain tax positions include our estimates for transfer pricing that have been developed based upon analyses of appropriate arms-length prices. 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 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 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, 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. The estimated future cash flows are used to derive the fair value of the reporting unit, which is then compared to its net book value, including goodwill . If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets. If the net book value exceeds its fair value, then the Company would be required to recognize an impairment loss. The impairment loss to be recognized would be calculated by comparing the fair value of the Company to its net book value, including goodwill. 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. 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. 66 Equity Awards Compensation We account for share-based compensation in accordance with ASC 718 - Compensation - Stock Compensation . Under the fair value recognition provisions of this guidance, share-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense, over the requisite service period, which is generally the vesting period of the respective award. Determining the fair value of share-based awards at the grant date requires judgment. The determination of the grant date fair value of RSUs is based on the share price on the grant date. We use the Black-Scholes option-pricing model to determine the fair value of share options. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated ordinary share fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our ordinary shares, the exercise price of the option, the expected term of the options, our expected share price volatility, risk-free interest rates, and expected dividends, which are estimated as follows: • Fair value of our ordinary shares. Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on Nasdaq on the date of grant for purposes of determining the fair value of ordinary shares. • Exercise price of the option. Following our initial public offering, we established a policy of using the closing sales price per ADS as quoted on Nasdaq on the date of grant for purposes of determining the exercise price with a floor value of 95% of the average of the closing sales price per ADS for the 20 trading days preceding the grant. • Expected term. The expected term represents the period that our share-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the ordinary share option awards granted, we have based our expected term on the simplified method, which represents the average period from vesting to the expiration of the award. • Expected volatility. Prior to our initial public offering, as we did not have a trading history for our ordinary shares, the expected share price volatility for our ordinary shares was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the ordinary share option grants. From the initial public offering, the expected share price volatility takes into account the Criteo closing share price from the initial public offering date to the grant date and closing share price of industry peers for the remaining expected term of the ordinary share option grant. • Risk-free rate . The risk-free interest rate is based on the yields of France Treasury securities with maturities similar to the expected term of the options for each option group. • Dividend yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero. If any of the assumptions used in the Black-Scholes model changes significantly, share-based compensation for future awards may differ materially compared with the awards granted previously. The following table presents the range of assumptions used to estimate the fair value of options granted during the periods presented: Year Ended December 31, 2022 2021 2020 Volatility —% — % 39.2% - 39.9% Risk-free interest rate — % —% 0.00% - 0.25% Expected life (in years) - - 6 years Dividend yield —% —% — % There were no grants of share options during the year ended December 31, 2022. 67 Recent Accounting Pronouncements For a discussion of recent accounting pronouncements applicable to us, see Note 1 to our audited consolidated financial statements beginning on page F-1. 68 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. GAAP. We have included Contribution ex-TAC because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions. In particular, we believe that this measure can 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. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Contribution ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Contribution ex-TAC alongside our other U.S. GAAP financial result measures. The below table provides a reconciliation of Contribution ex-TAC to gross profit: Twelve Months Ended December 31, 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 69 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. GAAP. 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. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income. Twelve Months Ended December 31, 2022 2021 2020 (in thousands) Net income $ 10,875 $ 137,647 $ 74,689 Adjustments: 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 December 31, 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 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. • 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. Year Ended December 31, 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands) Revenue as reported $ 2,017,003 $ 2,254,235 $ 2,072,617 (11) % 9 % Conversion impact U.S. dollar/other currencies 147,636 (19,713) 3,239 Revenue at constant currency (1) $ 2,164,639 $ 2,234,522 $ 2,075,856 (4) % 8 % Marketing Solutions as reported $ 1,762,517 $ 2,007,239 $ 1,806,431 (12) % 11 % Conversion impact U.S. dollar/other currencies $ 142,661 $ (16,511) $ 4,364 Marketing Solutions at constant currency (1) $ 1,905,178 $ 1,990,728 $ 1,810,795 (5) % 10 % Retail Media as reported (2) $ 202,317 $ 246,996 $ 266,186 (18) % (7) % Conversion impact U.S. dollar/other currencies $ 4,975 $ (3,202) $ (1,125) Retail Media at constant currency (1) $ 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. We have included results on a constant currency basis because it is a key measure used by our management and board of directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. The table above reconciles the actual results presented in this section with the results presented on a constant currency basis. (2) 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. market. 2021 compared to 2020 Revenue in 2021 increased $181.6 million, or 9% (or 8% on a constant currency basis) to $2,254.2 million compared to 2020. 84% of the year-over-year increase in revenue was driven by the contribution from our existing clients, and 16% of the year-over-year increase was driven by the contribution from new clients. We added 285 net new clients year-over-year across regions. The year-over-year increase in revenue on a constant currency basis was largely attributable to the increase in the average price charged to advertisers, and partially offset by the decreased number of impressions delivered by us. Marketing Solutions revenue increased 11% (or 10% on a constant currency basis) to $2,007.2 million for 2021, reflecting increased spend from 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 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 platform. 72 Revenue breakdown by region Information in this Form 10-K with respect to results presented on a constant currency basis was calculated by applying prior period average exchange rates to current period results. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis. Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands) Revenue as reported $ 2,017,003 $ 2,254,235 $ 2,072,617 (11) % 9 % Conversion impact U.S. dollar/other currencies 147,636 (19,713) 3,239 Revenue at constant currency (*) $ 2,164,639 $ 2,234,522 $ 2,075,856 (4) % 8 % Americas Revenue as reported $ 891,267 $ 916,825 $ 894,854 (3) % 2 % Conversion impact U.S. dollar/other currencies (596) 1,380 12,770 Revenue at constant currency (*) $ 890,671 $ 918,205 $ 907,624 (3) % 3 % EMEA Revenue as reported $ 706,861 $ 844,312 $ 749,672 (16) % 13 % Conversion impact U.S. dollar/other currencies 86,587 (24,324) (4,528) Revenue at constant currency (*) $ 793,448 $ 819,988 $ 745,144 (6) % 9 % Asia-Pacific Revenue as reported $ 418,875 $ 493,098 $ 428,091 (15) % 15 % Conversion impact U.S. dollar/other currencies 61,645 3,231 (5,003) Revenue at constant currency (*) $ 480,520 $ 496,329 $ 423,088 (3) % 16 % (*) Revenue at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the prior year to the following year figures. 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. dollar. 73 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 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 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 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. dollar. 74 Cost of Revenue Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percentages) Traffic acquisition costs $ (1,088,779) $ (1,333,440) $ (1,247,571) (18)% 7% Other cost of revenue (133,024) (138,851) (137,028) (4)% 1% Total cost of revenue $ (1,221,803) $ (1,472,291) $ (1,384,599) (17)% 6% % of revenue (61) % (65) % (67) % Gross profit % 39 % 35 % 33 % Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percentages) Marketing Solutions (1,047,822) (1,211,087) (1,059,680) (13)% 14% Retail Media (40,957) (122,353) (187,891) (67)% (35)% Iponweb (1) — — — — — Traffic Acquisition Costs $ (1,088,779) $ (1,333,440) $ (1,247,571) (18)% 7% (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. 75 2021 Compared to 2020 Cost of revenue for 2021 increased $87.7 million, or 6%, compared to 2020. This increase was primarily the result of a $85.9 million, or 7% increase in traffic acquisition costs (or 6% on a constant currency basis), and by a $1.8 million, or 1% (or 2% on a constant currency basis), increase in other cost of revenue. The 14% increase in Marketing Solutions' traffic acquisition costs related primarily to the 6% increase (and 5% increase on a constant currency basis) in the average CPM for inventory purchased, reflecting the year-over-year recovery in the digital advertising market following the trough of the pandemic-related recession in the second quarter of 2020 and our preferred relationships with media owners, as well as the 8% increase in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns. Traffic acquisition costs in Retail Media decreased by 35% reflecting the technical and transitory impact related to the ongoing client migration due to the transitioning of our RMP. Because we recognize revenue on a net basis in all arrangements running on the RMP, we expect our Traffic acquisition costs for Retail Media to decrease over time as all of our clients are transitioned to the RMP. The increase in other cost of revenue includes a $(5.2) million increase in allocated depreciation and amortization expense, $(3.0) million increase in other cost of sales mainly due to the digital tax, partially offset by $5.7 million in hosting costs and $0.8 million in data acquisition costs. Contribution excluding Traffic Acquisition Costs We consider Contribution ex-TAC as a key measure of our business activity. Our strategy focuses on maximizing our Contribution ex-TAC on an absolute basis over maximizing our near-term gross margin. We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including access to advertising inventory, breadth and depth of data and continuous improvement of the Criteo AI Engine’s performance, allowing it to deliver more relevant advertisements at scale. As part of this focus, we continue to invest in building preferred relationships with direct publishers and pursue access to leading advertising exchanges. The following table sets forth our revenue and Contribution ex-TAC by segment: Year Ended December 31, Segment 2022 2021 2020 (in thousands) Revenue Marketing Solutions $ 1,762,517 $ 2,007,239 $ 1,806,431 Retail Media 202,317 246,996 266,186 Iponweb 52,169 — — Total 2,017,003 2,254,235 2,072,617 Contribution ex-TAC (1) Marketing Solutions 714,695 796,152 746,751 Retail Media 161,360 124,643 78,295 Iponweb (2) 52,169 — — Total 928,224 920,795 825,046 (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. 76 Constant Currency Reconciliation Information in this Form 10-K with respect to results presented on a constant currency basis was calculated by applying prior period average exchange rates to current period results. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. Below is a table which reconciles the actual results presented in this section with the results presented on a constant currency basis: Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands) Revenue as reported $ 2,017,003 $ 2,254,235 $ 2,072,617 (11)% 9% Conversion impact U.S. dollar/other currencies 147,636 (19,713) 3,239 Revenue at constant currency $ 2,164,639 $ 2,234,522 $ 2,075,856 (4)% 8% Traffic acquisition costs as reported $ (1,088,779) $ (1,333,440) $ (1,247,571) (18)% 7% Conversion impact U.S. dollar/other currencies (63,434) 12,263 (1,605) Traffic acquisition cost at constant currency $ (1,152,213) $ (1,321,177) $ (1,249,176) (14)% 6% Contribution ex-TAC as reported $ 928,224 $ 920,795 $ 825,046 1% 12% Conversion impact U.S. dollar/other currencies 84,202 (7,450) 1,634 Contribution ex-TAC at constant currency $ 1,012,426 $ 913,345 $ 826,680 10% 11% Other cost of revenue as reported $ (133,024) $ (138,851) $ (137,028) (4)% 1% Gross profit as reported $ 795,200 $ 781,944 $ 688,018 2% 14% 77 Research and Development Expenses Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percent of revenue) Research and development expenses $ (187,596) $ (151,817) $ (132,513) 24% 15% % of revenue (9) % (7) % (6) % 2022 Compared to 2021 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 and the amortization of Iponweb acquisition-related intangible assets. 2021 Compared to 2020 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 Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percent of revenue) Sales and operations expenses $ (377,996) $ (325,616) $ (330,285) 16% (1)% % of revenue (19) % (14) % (16) % 2022 Compared to 2021 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 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. 78 General and Administrative Expenses Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percent of revenue) General and administrative expenses $ (205,330) $ (152,634) $ (116,395) 35% 31% % of revenue (10) % (7) % (6) % 2022 Compared to 2021 General and administrative expenses for 2022 increased $52.7 million, or 35%, compared to 2021. 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 2021 increased $36.2 million, or 31%, compared to 2020. This increase was mainly related to an increase in third-party services as part of our on-going transformation program and an increase in headcount related costs including the negative impact of our increasing stock price on compensation expense. Financial and Other Income (Expense) Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percent of revenue) Financial and Other Income (Expense) $ 17,783 $ 1,939 $ (1,939) 817% (200)% % of revenue 0.9 % 0.1 % (0.1) % 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. The $(1.9) million financial and other income for the period ended December 31, 2021 was mainly driven by the financial expense relating to our $350 million available Revolving Credit Facility (RCF), including up-front fees amortization and non-utilization costs, partially offset by income from cash and cash equivalent. Financial and Other income for the period ended December 31, 2021 was supported by $3.0 million in proceeds from disposal of servers and equipments and $2.4 million in dividends received from a minority interest. At December 31, 2021, our exposure to foreign currency risk was centralized at Criteo S.A. and hedged using foreign currency swaps, forward purchases or sales of foreign currencies. 79 Provision for Income Taxes Year Ended December 31, % change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands, except percent information) Provision for income tax expense (benefit) $ 31,186 $ 16,169 $ 32,197 93% (50)% % of revenue 2 % 1 % 2 % Effective tax rate 74.1 % 10.5 % 30.1 % 2022 Compared to 2021 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 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, $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. Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. As at December 31, 2022, 2021 and 2020, the valuation allowance against net deferred income taxes amounted to $31.1 million, $35.0 million and $37.3 million, which related mainly to Criteo Corp. ($5.7 million, $5.7 million and $13.3 million, respectively), Criteo Brazil ($3.3 million, $2.7 million and $2.8 million, respectively), Criteo Ltd ($8.1 million, $7.6 million and $7.4 million, respectively), Criteo China ($1.1 million, $3.3 million and $3.3 million, respectively), Criteo Singapore ($1.5 million, $4.2 million and $3.3 million), Criteo Pty ($2.6 million, $2.7 million and $2.8 million) and Criteo France ($6.5 million, $6.2 million and $1.0 million, respectively). 2021 Compared to 2020 The provision for income taxes for 2021 decreased by $(16.0) million, or (50)%, compared to 2020. The annual effective tax rate for 2021 was 10.5%, compared to an annual effective tax rate of 30.1% for 2020. 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%. This theoretical tax expense is impacted mainly by the following items contributing to a $16.2 million effective tax expense and a 10.5% effective tax rate: $1.7 million of deferred tax assets on which we recognized a valuation allowance, $6.6 million resulting from the BEAT expense, $6.5 million of permanent differences (mainly based on employee costs, depreciation expenses and intercompany transactions), $2.2 million related to the French business tax, Cotisation sur la Valeur Ajoutée des Entreprises, or “CVAE”, offset by a $25.7 million tax deduction resulting from technology royalty income we received from our subsidiaries, $4.8 million Research and Development tax credit, the recognition or reversal of valuation allowance on deferred tax assets of $10.4 million and $1.4 million of net effect of share-based compensation. 80 Please see Note 17 to our audited consolidated financial statements for more detailed information on the provision for income taxes. Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. As at December 31, 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. ($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). 81 Unaudited Quarterly Results of Operations 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. The quarterly results of operations have been prepared by, and are the responsibility of, our management and have not been audited or reviewed by our independent registered public accounting firm. You should read this information together with our audited consolidated financial statements and related notes beginning on page F-1. Three Months Ended December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 (in thousands) Consolidated Statements of Income Data: Revenue $ 564,425 $ 446,921 $ 495,090 $ 510,567 $ 653,267 $ 508,580 $ 551,311 $ 541,077 Cost of revenue Traffic acquisition costs (1) (281,021) (233,543) (280,565) (293,650) (377,076) (297,619) (331,078) (327,667) Other cost of revenue (36,810) (33,771) (29,550) (32,893) (31,840) (34,935) (37,364) (34,712) Gross profit 246,594 179,607 184,975 184,024 244,351 176,026 182,869 178,698 Operating expenses Research and development expenses (69,348) (42,725) (41,496) (34,027) (44,860) (33,345) (41,915) (31,697) Sales and operations expenses (99,633) (90,051) (99,313) (88,999) (89,892) (75,619) (80,751) (79,354) General and administrative expenses (28,969) (42,353) (100,672) (33,336) (43,855) (34,877) (40,474) (33,428) Total operating expenses (197,950) (175,129) (241,481) (156,362) (178,607) (143,841) (163,140) (144,479) Income from operations 48,644 4,478 (56,506) 27,662 65,744 32,185 19,729 34,219 Financial and Other income (expense) (6,144) 3,485 16,412 4,030 3,330 (154) (519) (718) Income before taxes 42,500 7,963 (40,094) 31,692 69,074 32,031 19,210 33,501 Provision for income taxes (26,451) (1,442) 7,121 (10,414) 5,864 (7,801) (4,181) (10,051) Net income $ 16,049 $ 6,521 $ (32,973) $ 21,278 $ 74,938 $ 24,230 $ 15,029 $ 23,450 Net income available to shareholders of Criteo S.A. 15,400 6,579 (33,614) 20,587 73,765 23,481 14,804 22,406 (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. 82 B. Liquidity and Capital Resources. Market Risk We are mainly exposed to changes of foreign currency exchange rate fluctuations. The functional currency of the Company is the euro, while our reporting currency is the U.S. dollar. Because we incur some of our expenses and derive revenues in currencies other than the euro, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. Foreign exchange risk exposure also arises from intra-company transactions and financing with subsidiaries that have a functional currency different than the euro. The statements of financial position of consolidated entities having a functional currency different from the U.S. dollar are translated into U.S. dollars at the closing exchange rate (spot exchange rate at the statement of financial position date) and the statement of income, statement of comprehensive income and statement of cash flow of such consolidated entities are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption “Accumulated Other Comprehensive Income” in the Consolidated Statement of Changes in Equity. Since 2013, the Company has had a foreign currency risk management policy in place. 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. 83 Foreign Currency Risk A 10% increase or decrease of the British pound, the euro, the Japanese yen or the Brazilian real against the U.S. dollar would have impacted the Consolidated Statements of Income including non-controlling interests as follows: Year Ended December 31, 2022 2021 2020 (in thousands) GBP/USD +10% -10% +10% -10% +10% -10% Net income impact $ (444) $ 444 $ (351) $ 351 $ 116 $ (116) Year Ended December 31, 2022 2021 2020 (in thousands) BRL/USD +10% -10% +10% -10% +10% -10% Net income impact $ (235) $ 235 $ (38) $ 38 $ (41) $ 41 Year Ended December 31, 2022 2021 2020 (in thousands) JPY/USD +10% -10% +10% -10% +10% -10% Net income impact $ 2,489 $ (2,489) $ 619 $ (619) $ 614 $ (614) Year Ended December 31, 2022 2021 2020 (in thousands) EUR/USD +10% -10% +10% -10% +10% -10% Net income impact $ (2,169) $ 2,169 $ 11,162 $ (11,162) $ 9,360 $ (9,360) Counterparty Risk As of December 31, 2022, we show a positive net cash position. 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. 84 Liquidity Risk We are mainly exposed to changes of foreign currency exchange rate fluctuations. Sources of Liquidity Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations. We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future. We are party to a loan agreement and several RCFs with third-party financial institutions. Our loan and RCF agreements as of December 31, 2022 are presented in the table below: Nominal/ Authorized amounts (RCF Only) Amount drawn as of December 31, 2022 (RCF only) Amount Outstanding as of December 31, 2022 Nature (in thousands) Interest rate Settlement date Bank Syndicate RCF - September 2022 (1) € 407,000 € — € — Floating rate: 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 ($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. 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 $(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 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. (see Note 2) 85 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 In 2022, 2021 and 2020, our actual capital expenditures were $55.8 million, $53.0 million and $65.5 million respectively, primarily related to the acquisition of data center and server equipment, and internal IT systems. We expect our capital expenditures to remain at, or slightly below, 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. 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. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, the amount and timing of our investments in personnel and capital equipment, and the timing and extent of our introduction of new products and product enhancements. If our cash and cash equivalents balances and cash flows from operating activities are insufficient to satisfy our liquidity requirements, we may need to raise additional funds through equity, equity-linked or debt financings to support our operations, and such financings may not be available to us on acceptable terms, or at all. We may also need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies, assets or products. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing will be dilutive to our shareholders. Historical Cash Flows The following table sets forth our cash flows for 2022, 2021 and 2020 : Year Ended December 31, 2022 2021 2020 (in thousands) Cash flows provided by operating activities $ 255,985 $ 220,913 $ 185,356 Cash used in investing activities (166,119) (76,367) (101,093) Cash used for financing activities $ (113,044) $ (80,117) $ (57,747) Our cash and cash equivalents at December 31, 2022 were held for working capital and general corporate purposes, which could include acquisitions. 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. 86 Operating Activities Cash provided by operating activities is primarily impacted by the increase in the number of clients using our solution and by the amount of cash we invest in personnel to support the anticipated growth of our business. Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating expense items such as depreciation, amortization, equity awards compensation, deferred tax assets and income taxes. 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. The $(41.6) million decrease in cash resulting from changes in working capital primarily consisted of a $(2.6) million decrease due to changes in operating lease liabilities and right of use assets, a $(19.7) million increase in other current assets (including prepaid expenses and VAT receivables) and a $(135.0) million increase in accounts receivable partially offset by a $33.6 million increase in accrued expenses such as payroll and payroll related expenses and VAT payables and $82.7 million increase in accounts payable. In 2020, net cash flows provided by operating activities were $185.4 million and consisted of net income of $74.7 million, $154.6 million in adjustments for non-cash and non-operating items and $(44.0) million of cash flows from working capital. Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $106.6 million, equity awards compensation expense of $28.8 million, changes in deferred tax assets of $3.7 million, $2.7 million generated on disposal of non-current assets, $1.9 million from other non-operating items, and by $10.9 million of accrued income taxes net of income tax paid. 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. 87 Investing Activities Our investing activities to date have consisted primarily of purchases of servers and other data-center equipment and business acquisitions. 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). 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. 88 C. 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. 89 D. 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. Dollars) 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 90 E. Trend Information. Key Metrics We review three key metrics to help us monitor the performance of our business and to identify trends affecting our business. These key metrics include number of clients, Contribution ex-TAC, and Adjusted EBITDA. We believe these metrics are useful to understanding the underlying trends in our business. The following table summarizes our key metrics for 2022, 2021 and 2020. Year Ended December 31, 2022 2021 2020 (in thousands, except number of clients) Number of clients 21,600 21,745 21,460 Contribution ex-TAC $ 928,224 $ 920,795 $ 825,046 Adjusted EBITDA $ 267,299 $ 322,495 $ 250,995 Number of Clients We define a client to be a unique party from whom we have received a signed contract or an insertion order and for whom we have delivered an advertisement or monetized an advertising inventory during the previous 12 months. We believe this criteria best identifies clients who actively use our set of solutions. We count specific brands or divisions within the same business as distinct clients so long as those entities have separately signed insertion orders with us. In the case of some solutions within Criteo Retail Media, we count the parent company of the brands as an individual client, even if several distinct brands pertaining to the same parent company have signed separate contracts or insertion orders with us. On the other hand, we count a client who runs campaigns in multiple geographies as a single client, even though multiple insertion orders may be involved. When the insertion order is with an advertising agency, we generally consider the client on whose behalf the advertising campaign is conducted as the “client” for purposes of this calculation. In the event a client has its advertising spend with us managed by multiple agencies, that client is counted as a single client. We believe that our ability to increase the number of clients is an important indicator of our ability to grow revenue over time. While our client count has increased over time, this metric can also fluctuate from quarter to quarter due to the seasonal trends in advertising spend of clients and the timing and amount of revenue contribution from new clients. Therefore, there is not necessarily a direct correlation between a change in clients in a particular period and an increase or decrease in our revenue over that same period. Contribution ex-TAC Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. 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. 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. In particular, we believe this can provide a useful measure 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. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. Please see above for a discussion of the limitations of Contribution ex-TAC and a reconciliation of Contribution ex-TAC to gross profit, the most comparable U.S. GAAP measure, for 2021 and 2022. 91 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, 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. GAAP. 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. 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. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. 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 in the Non-GAAP Financial Measures section of this filing. Highlights and Trends 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. 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. 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. GAAP. 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. Number of Clients Since our inception, we have significantly grown the number of clients with which we do business. 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. We expect to continue to focus our attention and investment on further growing our client base across all regions, client categories and verticals, with continued strong focus on ecommerce. Client Retention We believe our ability to retain and grow revenue from our existing clients is a useful indicator of the stability of our revenue base and the long-term value of our client relationships. Our offering, the Criteo Commerce Media Platform, is powered by AI technology and aims to cover the entire marketing funnel (Awareness, Audience Targeting, Conversion). Our technology is optimized to drive impactful business outcomes from marketing and monetization for retailers and brands. We measure our client satisfaction through our ability to retain them and the revenue they generate quarter after quarter. 92 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 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. In each of 2022, 2021 and 2020, our client retention rate was approximately 90%. Seasonality Our client base consists primarily of businesses in the digital Retail, Travel and Classifieds industries, which we define as commerce clients. In the digital Retail industry and the consumer brand verticals in particular, many businesses devote the largest portion of their advertising spend to the fourth quarter of the calendar year, to coincide with increased holiday spending by consumers. With respect to Criteo Retail Media, the concentration of advertising spend in the fourth quarter of the calendar year is particularly pronounced. Our Retail clients typically conduct fewer advertising campaigns in the first and second quarters than they do in other quarters, while our Travel clients typically increase their travel campaigns in the first and third quarters and conduct fewer advertising campaigns in the second quarter. As a result, our revenue tends to be seasonal in nature, but the impact of this seasonality has, to date, been partly offset by our significant growth and geographic expansion. If the seasonal fluctuations become more pronounced, our operating cash flows could fluctuate materially from period to period. ___________________________________________________ 1 Excluding Criteo Retail Media. 93 F. Safe Harbor. This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See "Special Note Regarding Forward-Looking Statements."