Criteo S.A. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Criteo carried out an evaluation as of December 31, 2022, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to reasonably assure that information required to be disclosed in our reports filed or furnished under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to reasonably assure that this information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management assessed, with the oversight of our board of directors, the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2022. The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Associés, our independent registered public accounting firm, as stated in its attestation report, which appears on page F-2 of this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended December 31, 2022, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Criteo have been detected. These inherent limitations include the realities that judgments in decisions making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 95 Item 9B. Other Information Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not applicable. 96 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item (other than the information set forth in the next paragraph in this Item 10) will be included in our definitive proxy statement with respect to our 2023 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. We have adopted a Code of Business Conduct and Ethics (the "Code of Conduct") that is applicable to all of our employees, officers (including our chief executive and senior financial officers), directors, temporary workers and interns. The Code of Conduct is available on our website at criteo.investorroom.com under "Governance." The Audit Committee of our board of directors is responsible for overseeing the Code of Conduct and our board of directors is required to approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements required to be disclosed under the rules of the SEC or Nasdaq will be disclosed on our website. Item 11. Executive Compensation The information called for by this item will be included in our definitive proxy statement with respect to our 2023 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information called for by this item will be included in our definitive proxy statement with respect to our 2023 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information called for by this item will be included in our definitive proxy statement with respect to our 2023 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information called for by this item will be included in our definitive proxy statement with respect to our 2023 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference. 97 PART IV Item 15. Exhibits and Financial Statement Schedules (a) Financial Statements The financial statements listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as part of this Form 10-K. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (b) Exhibits Incorporated by Reference Exhibit Description Schedule/ Form File Number Exhibit File Date 2.1 Merger Agreement, dated as of October 3, 2016, by and among Criteo Corp., TBL Holdings, Inc., Hooklogic, Inc. and Fortis Advisors LLC 8-K 001-36153 2.1 October 4, 2016 2.2 Amended and Restated Framework Purchase Agreement, dated as of August 1, 2022, by and among the Company, Sellers, Mr. Ljubisa Bogunovic in his capacity as trustee of the “IW General Management Trust” and Mr. Boris Mouzykantskii 10-Q 001-36153 2.1 August 5, 2022 3.1 Updated By-laws (as of February 23, 2023) (English translation) 8-K 001-36153 3.1 February 24, 2023 4.1 Amended and Restated Deposit Agreement, dated as of December 28, 2021, among the Company, the Bank of New York Mellon, as depositary, and all owners and holders from time to time of American Depositary Shares issued thereunder 8-K 001-36153 4.1 December 29, 2021 4.2# Agreement to Furnish Debt Instruments 4.3 Description of Registrant's Securities 10-K 001-36153 4.3 March 2, 2020 10.1† Non-Compete Agreement between the registrant and each of Messrs. Rudelle, Le Ouay and Niccoli F-1 333-191223 10.5 October 2, 2013 10.2† 2014 Stock Option Plan (including forms of Stock Option Grant Agreement and Exercise Notice) S-8 333-197373 99.1 July 11, 2014 10.3† Amended 2016 Stock Option Plan (including forms of Stock Option Grant Agreement and Exercise Notice) (English Translation) S-8 333-258256 99.1 July 29, 2021 10.4† Summary of BSA Terms and Conditions 10-K 001-36153 10.7 February 29, 2016 10.5† Form of BSA Grant Document (English translation) 10-K 001-36153 10.9 March 1, 2017 10.6† Summary of BSPCE Plan F-1 333-191223 10.8 September 18, 2013 10.7† Form of BSPCE Grant Document (English translation) F-1 333-191223 10.11 September 18, 2013 98 Incorporated by Reference Exhibit Description Schedule/ Form File Number Exhibit File Date 10.8† Amended and Restated 2015 Time-Based Restricted Stock Units Plan (including form of Grant Letter) (English Translation) S-8 333-258256 99.2 July 29, 2021 10.9† Amended and Restated 2015 Performance-Based Restricted Stock Units Plan (including form of Grant Letter) (English Translation) S-8 333-258256 99.3 July 29, 2021 10.10† Criteo Executive Bonus Plan 10-K 001-36153 10.15 February 29, 2016 10.11 † Offer Letter between the Registrant and Sarah Glickman, dated August 27, 2020 8-K 001-36153 10.1 September 3, 2020 10.12† Amendment to Offer Letter between Criteo Corp. and Sarah Glickman, dated August 27, 2020 10-Q 001-36153 10.1 May 5, 2021 10.13† Amendment to Offer Letter between Criteo Corp. and Sarah Glickman, dated as of March 16, 2022 10-Q 001-36153 10.1 May 5, 2022 10.14 Amendment and Restatement Agreement, dated as of March 29, 2017, by and among the registrant, as borrower, and BNP Paribas, Crédit Lyonnais (LCL), HSBC France, Natixis and Société Générale Corporate & Investment Banking 8-K 001-36153 4.1 March 30, 2017 10.15 Form of Offer to Directors, Officers or Specifically Designated Persons to Subscribe Liability Insurance and Provide Indemnification 10-K 001-36153 10.22 March 1, 2019 10.16† Management Agreement between the registrant and Megan Clarken, dated October 2, 2019 8-K 001-36153 10.1 October 30, 2019 10.17† Amendment to Management Agreement between the registrant and Megan Clarken, dated November 22, 2019 10-K 001-36153 10.18 March 2, 2020 10.18† Employment Agreement between the registrant and Ryan Damon, dated August 1, 2018 10-K 001-36153 10.19 March 2, 2020 10.19† Amendment to Executive Employment Agreement between Criteo Corp. and Ryan Damon, dated as of March 16, 2022 10-Q 001-36153 10.2 May 5, 2022 99 Incorporated by Reference Exhibit Description Schedule/ Form File Number Exhibit File Date 10.20 Multicurrency Revolving Facility Agreement, dated as of September 27, 2022, among the Company, certain of its subsidiaries, the lenders party thereto from time-to-time, BNP Paribas, Crédit Lyonnais (LCL), HSBC Continental Europe and Société Générale, as bookrunners and mandated lead arrangers, Bank of Montreal Europe PLC, Citibank N.A., London Branch and Crédit Industriel et Commercial (CIC), as mandated lead arrangers, BNP Paribas, as coordinator and documentation agent, Société Générale, as agent, and Société Générale and HSBC Continental Europe, as sustainability coordinators 8-K 001-36153 10.1 September 28, 2022 21.1# List of Subsidiaries 23.1# Consent of Deloitte & Associés 31.1# Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2# Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101# The following financial statements from Criteo S.A.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements 104 Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101) † Indicates management contract or compensatory plan. # Filed herewith. * Furnished herewith. 100 Item 16. Form 10-K Summary Not applicable. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CRITEO S.A. February 24, 2023 By: /s/ Megan Clarken Megan Clarken Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Megan Clarken her or his attorney-in-fact, each with the power of substitution, for her or him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue of hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated below. 101 Signature Title Date /s/ Megan Clarken Chief Executive Officer and Director (Principal Executive Officer) February 24, 2023 Megan Clarken /s/ Sarah Glickman Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 24, 2023 Sarah Glickman /s/ Nathalie Balla Director February 24, 2023 Nathalie Balla /s/ Marie Lalleman Director February 24, 2023 Marie Lalleman /s/ Edmond Mesrobian Director February 24, 2023 Edmond Mesrobian /s/ Hubert de Pesquidoux Director February 24, 2023 Hubert de Pesquidoux /s/ Rachel Picard Director February 24, 2023 Rachel Picard /s/ James Warner Director February 24, 2023 James Warner 102 Index to Consolidated Financial Statements Page Reports of Deloitte & Associés, Independent Registered Public Accounting Firm (PCAOB ID No. 1756 ) F-2 Consolidated Statements of Financial Position as of December 31, 2022 and 2021 F-4 Consolidated Statements of Income for the Years Ended December 31, 2022, 2021 and 2020 F-5 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020 F-6 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2022, 2021 and 2020 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 F-8 Notes to the Consolidated Financial Statements F-9 103 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Criteo S.A. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Criteo S.A. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue — Refer to Note 1 to the financial statements Critical Audit Matter Description The Company’s Marketing Solutions revenue consists of selling personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. This is primarily achieved by converting the Company’s clients’ website visitors into customers, enabling the Company to charge its clients when users engage with an ad the Company delivers, either by clicking on it (cost-per-click basis), or through installing an application by clicking on an ad that the Company delivers (cost-per-install). Because of the nature of the Company’s revenue, which is made up of a significant volume of low-dollar value transactions, sourced from multiple databases and other tools, the Company uses highly automated systems to process and record its revenue transactions. F-2 We identified Marketing Solution revenue as a critical audit matter because the Company’s systems to process and record its revenue transactions are highly automated and thus required significantly more involvement and effort from our information technology (IT) internal specialist team to identify, test, and evaluate the Company’s system, software applications, and automated controls. How the Critical Audit Matter Was Addressed in the Audit With the assistance of our IT specialists and Data specialists, our audit procedures related to the Company’s system to process and record its revenue transactions included the following: • Identified the significant applications and systems used to process revenue transactions and tested the general IT controls over each of these applications and systems, including testing of user access controls, change management controls, and IT operations controls. • Performed testing of system interface controls and automated controls within the relevant revenue solutions, as well as the controls designed to address the occurrence, accuracy and completeness of revenue. • Tested internal controls within the relevant revenue business process, including those in place to reconcile the various applications to the Company’s general ledger. • Tested the underlying data of the revenue transactions by agreeing the amounts recognized in the financial statements to the source transactional systems and tested the mathematical accuracy of the recorded revenue. Business combinations – Fair Value of Acquired Technologies — Refer to Notes 2 and 8 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Iponweb Holding Limited for $290.2 million on August 1, 2022. The Company accounted for the transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including technologies intangible assets of $90.2 million. Management estimated the fair value of the technologies intangible assets using the multi-period excess earnings method and the relief-from-royalty method, depending on the technology being valued. The determination of the fair value of the technologies intangibles assets required management to make significant estimates and assumptions related to forecasts of future revenue, EBITDA margin, and the selection of the discount rate and of the royalty rate. We identified the fair value of acquired technologies from Iponweb Holding Limited as a critical audit matter because of the significant estimates and assumptions management makes to fair value these assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenues, EBITDA margin, and the selection of the discount rate and of the royalty rate. F-3 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to forecasts of future revenues, EBITDA margin, and the selection of the discount rate and of the royalty rate for the acquired technologies included the following, among others: • We tested the effectiveness of controls over the valuation of the technologies intangible asset, including management’s controls over forecasts of future revenues, EBITDA margin, and the selection of the discount rate and of the royalty rate. • We assessed the reasonableness of management’s forecasts of future revenues and EBITDA margin by comparing the projections to historical results. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rate, including testing the source information underlying the determination of the discount rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management and (3) royalty rate, including evaluating the consistency of the royalty rate selected with external market and industry data. • We evaluated whether the estimated future revenues were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Associés Paris-La Défense, France February 24, 2023 We have served as the Company's auditor since 2011. F-4 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Criteo S.A. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Criteo S.A. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022 of the Company and our report dated February 24, 2023, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Associés Paris-La Défense, France February 24, 2023 F-5 Criteo S.A. and subsidiaries Consolidated Statements of Financial Position Year Ended December 31, Notes 2022 2021 Assets (in thousands) Current assets: Cash and cash equivalents 4 $ 348,200 $ 515,527 Trade receivables, net of allowances of $ 47.8 million and $ 45.4 million as of December 31, 2022 and December 31, 2021, respectively. 5 708,949 581,988 Income taxes 23,609 8,784 Other taxes 78,274 73,388 Other current assets 6 51,866 34,182 Restricted cash - current portion 4 25,000 — Marketable securities - current portion 25,098 50,299 Total current assets 1,260,996 1,264,168 Property, plant and equipment, net 7 131,207 139,961 Intangible assets, net 8 175,983 82,627 Goodwill 9 515,140 329,699 Right of use asset - operating lease 11 102,176 120,257 Restricted cash - non-current portion 4 75,000 — Marketable securities - non current portion — 5,000 Non-current financial assets 5,928 6,436 Other non - current assets 50,818 — Deferred tax assets 17 31,646 35,443 Total non current assets 1,087,898 719,423 Total assets $ 2,348,894 $ 1,983,591 Liabilities and shareholders' equity Current liabilities: Trade payables $ 742,918 $ 430,245 Contingencies - current portion 19 65,759 3,059 Income taxes 13,037 6,641 Financial liabilities - current portion 10 219 642 Lease liability - operating - current portion 11 31,003 34,066 Other taxes 58,031 60,236 Employee-related payables 85,569 98,136 Other current liabilities 12 83,457 39,523 Total current liabilities 1,079,993 672,548 Deferred tax liabilities 17 3,463 3,053 Retirement benefit obligation 3,708 5,531 Financial liabilities - non current portion 10 74 360 Lease liability - operating - non current portion 11 77,536 93,893 Contingencies - non-current portion 19 33,788 — Other non-current liabilities 12 69,226 9,886 Total non-current liabilities 187,795 112,723 Total liabilities 1,267,788 785,271 Commitments and contingencies Shareholders' equity: Common shares, € 0.025 per value, 63,248,728 and 65,883,347 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively. 2,079 2,149 Treasury stock, 5,985,104 and 5,207,873 shares at cost as of December 31, 2022 and December 31, 2021, respectively. ( 174,293 ) ( 131,560 ) Additional paid-in capital 734,492 731,248 Accumulated other comprehensive income (loss) ( 91,890 ) ( 40,294 ) Retained earnings 577,653 601,588 Equity - attributable to shareholders of Criteo S.A. 1,048,041 1,163,131 Non-controlling interests 33,065 35,189 Total equity 1,081,106 1,198,320 Total equity and liabilities $ 2,348,894 $ 1,983,591 The accompanying notes form an integral part of these consolidated financial statements. F-4 Criteo S.A. and subsidiaries Consolidated Statements of Income Year Ended December 31, Notes 2022 2021 2020 (in thousands, except share and per share data) Revenue $ 2,017,003 $ 2,254,235 $ 2,072,617 Cost of revenue Traffic acquisition costs ( 1,088,779 ) ( 1,333,440 ) ( 1,247,571 ) Other cost of revenue ( 133,024 ) ( 138,851 ) ( 137,028 ) Gross profit 795,200 781,944 688,018 Operating expenses: Research and development expenses ( 187,596 ) ( 151,817 ) ( 132,513 ) Sales and operations expenses ( 377,996 ) ( 325,616 ) ( 330,285 ) General and administrative expenses ( 205,330 ) ( 152,634 ) ( 116,395 ) Total operating expenses ( 770,922 ) ( 630,067 ) ( 579,193 ) Income from operations 24,278 151,877 108,825 Financial and Other Income (Expense) 16 17,783 1,939 ( 1,939 ) Income before taxes 42,061 153,816 106,886 Provision for income taxes 17 ( 31,186 ) ( 16,169 ) ( 32,197 ) Net income $ 10,875 $ 137,647 $ 74,689 Net income available to shareholders of Criteo S.A. $ 8,952 $ 134,456 $ 71,679 Net income available to non-controlling interests $ 1,923 $ 3,191 $ 3,010 Net income allocated to shareholders per share: Basic 18 $ 0.15 $ 2.21 $ 1.18 Diluted 18 $ 0.14 $ 2.09 $ 1.16 Weighted average shares outstanding used in computing per share amounts: Basic 18 60,004,707 60,717,446 60,876,480 Diluted 18 62,760,197 64,231,637 61,818,593 The accompanying notes form an integral part of these consolidated financial statements. F-5 Criteo S.A. and subsidiaries Consolidated Statements of Comprehensive Income Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 10,875 $ 137,647 $ 74,689 Other comprehensive income (loss): Foreign currency translation differences, net of taxes ( 59,001 ) ( 61,406 ) 53,213 Foreign currency translation differences ( 59,001 ) ( 61,406 ) 53,213 Income tax effect — — — Actuarial (losses) gains on employee benefits, net of taxes 2,969 1,205 4,692 Actuarial (losses) gains on employee benefits 3,311 1,374 5,214 Income tax effect ( 342 ) ( 169 ) ( 522 ) Comprehensive income (loss) ( 45,157 ) 77,446 132,594 Attributable to shareholders of Criteo S.A. ( 40,721 ) 81,302 130,821 Attributable to non-controlling interests $ ( 4,436 ) $ ( 3,856 ) $ 1,773 The accompanying notes form an integral part of these consolidated financial statements. F-6 Criteo S.A. and subsidiaries Consolidated Statements of Changes in Shareholders’ Equity Share capital Treasury stock Additional paid-in capital Accumulated other comprehensive (loss) income Retained earnings Equity - attributable to shareholders of Criteo S.A. Non controlling interests Total equity (in thousands, except share data) (Common shares) (Shares) Balance at January 1, 2020 66,197,181 $ 2,158 ( 3,903,673 ) $ ( 74,900 ) $ 668,389 $ ( 40,105 ) $ 451,725 $ 1,007,267 $ 30,721 $ 1,037,988 Net income — — — — — — 71,679 71,679 3,010 74,689 Other comprehensive income (loss) — — — — — 56,133 — 56,133 1,773 57,906 Issuance of ordinary shares 231,784 8 — — 1,928 — — 1,936 — 1,936 Change in treasury stock — — ( 1,728,863 ) ( 14,570 ) — — ( 29,017 ) ( 43,587 ) — ( 43,587 ) Shared-based compensation — — — — 26,913 — — 26,913 188 27,101 Other changes in equity (1) ( 156,859 ) ( 5 ) — — ( 4,066 ) — ( 3,028 ) ( 3,199 ) ( 147 ) ( 3,346 ) Balance at December 31, 2020 66,272,106 $ 2,161 ( 5,632,536 ) $ ( 85,570 ) $ 693,164 $ 16,028 $ 491,359 $ 1,117,142 $ 35,545 $ 1,152,687 Net income — — — — — — 134,456 134,456 3,191 137,647 Other comprehensive income (loss) — — — — — ( 56,345 ) — ( 56,345 ) ( 3,856 ) ( 60,201 ) Issuance of ordinary shares 1,109,950 32 — — 25,441 — — 25,473 — 25,473 Change in treasury stock (2) ( 1,498,709 ) ( 44 ) 424,663 ( 45,990 ) ( 29,782 ) — ( 24,227 ) ( 100,043 ) — ( 100,043 ) Shared-based compensation — — — — 42,425 — — 42,425 309 42,734 Other changes in equity — — — — — 23 — 23 — 23 Balance at December 31, 2021 65,883,347 $ 2,149 ( 5,207,873 ) $ ( 131,560 ) $ 731,248 $ ( 40,294 ) $ 601,588 $ 1,163,131 $ 35,189 $ 1,198,320 Net income — — — — — — 8,952 8,952 1,923 10,875 Other comprehensive income (loss) — — — — — ( 51,596 ) — ( 51,596 ) ( 4,436 ) ( 56,032 ) Issuance of ordinary shares 97,767 2 — — 429 — — 431 — 431 Change in treasury stock (3) ( 2,732,386 ) ( 72 ) ( 777,231 ) ( 42,733 ) ( 59,984 ) — ( 32,896 ) ( 135,685 ) — ( 135,685 ) Shared-based compensation — — — — 62,782 — — 62,782 389 63,171 Other changes in equity — — — — 17 — 9 26 — 26 Balance at December 31, 2022 63,248,728 $ 2,079 ( 5,985,104 ) $ ( 174,293 ) $ 734,492 $ ( 91,890 ) $ 577,653 $ 1,048,041 $ 33,065 $ 1,081,106 (1) Includes deferred consideration in the context of Storetail Marketing Services SAS acquisition in 2018 and 2020 and from January 1, 2020, the adoption of ASU 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 issued by the Financial Accounting Standards Board (FASB). (2) On February 5, 2021 Criteo's Board of Directors authorized a share repurchase program of up to $ 175.0 million of the Company's outstanding American Depositary Shares. The change in treasury stocks is comprised of 2,647,742 shares repurchased at an average price of $ 37.99 offset by 1,573,696 treasury shares used for RSUs vesting and 1,498,709 treasury shares cancelled. (3) On February 5, 2022 Criteo's Board of Directors extended a share repurchase program of up to $ 480.0 million of the Company's outstanding American Depositary Shares. The change in treasury stocks is comprised of 5,135,359 shares repurchased at an average price of $ 26.43 offset by 1,625,742 treasury shares used for RSUs vesting and 2,732,386 treasury shares cancelled. The accompanying notes form an integral part of these consolidated financial statements. F-7 Criteo S.A. and subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 10,875 $ 137,647 $ 74,689 Non-cash and non-operating items 185,029 124,879 154,629 Amortization and provisions 150,261 90,934 106,591 Equity awards compensation expense (1) 65,034 44,528 28,770 Net gain on disposal of non-current assets ( 194 ) 1,965 2,714 Interest accrued and non-cash financial income and expenses ( 259 ) — — Change in uncertain tax positions 412 — — Net change in fair value of Earn-out 771 — — Change in deferred taxes 3,602 ( 18,642 ) 3,720 Change in income taxes ( 10,952 ) 6,043 10,867 Other ( 23,646 ) 51 1,967 Change in working capital related to operating activities 60,081 ( 41,613 ) ( 43,962 ) (Increase) / Decrease in trade receivables ( 41,910 ) ( 134,950 ) ( 3,957 ) Increase / (Decrease) in trade payables 133,792 82,691 ( 33,314 ) (Increase) / Decrease in other current assets ( 14,687 ) ( 19,742 ) ( 7,188 ) Increase / (Decrease) in other current liabilities ( 17,862 ) 33,033 6,261 Change in operating lease liabilities and right of use assets 748 ( 2,645 ) ( 5,764 ) Cash from operating activities 255,985 220,913 185,356 Acquisition of intangibles assets, property, plant and equipment ( 84,796 ) ( 54,983 ) ( 67,287 ) Change in accounts payable related to intangible assets, property, plant and equipment 28,951 1,973 1,818 Payment for businesses, net of cash acquired ( 138,027 ) ( 10,419 ) ( 1,176 ) Change in other financial non-current assets 27,753 ( 12,938 ) ( 34,448 ) Cash used for investing activities ( 166,119 ) ( 76,367 ) ( 101,093 ) Proceeds from borrowings under line-of-credit agreement 78,513 — 153,188 Repayment of borrowings ( 78,513 ) ( 1,249 ) ( 167,344 ) Proceeds from capital increase 1,028 25,196 1,727 Change in treasury stocks ( 135,685 ) ( 100,027 ) ( 43,655 ) Change in other financial liabilities ( 265 ) ( 4,037 ) ( 1,663 ) Other 21,878 — — Cash used for financing activities ( 113,044 ) ( 80,117 ) ( 57,747 ) Effect of exchange rate changes on cash and cash equivalents ( 44,149 ) ( 36,913 ) 42,732 Net increase (decrease) in cash and cash equivalents ( 67,327 ) 27,516 69,248 Net cash and cash equivalents - beginning of period 515,527 488,011 418,763 Net cash and cash equivalents - end of period $ 448,200 $ 515,527 $ 488,011 Supplemental disclosures of Cash Flow information Cash paid for taxes, net of refunds $ ( 38,124 ) $ ( 28,767 ) $ ( 17,610 ) Cash paid for interest, net of amounts capitalized $ ( 1,298 ) $ ( 1,486 ) $ ( 2,155 ) ( 1) Of which $ 63.3 million and $ 42.7 million of equity awards compensation expense consisted of share-based compensation expense according to ASC 718 Compensation - stock compensation for the twelve month period ended December 31, 2022 and 2021, respectively. The accompanying notes form an integral part of these consolidated financial statements. F-8 Notes to the Consolidated Financial Statements Criteo S.A. was initially incorporated as a société par actions simplifiée, or S.A.S., under the laws of the French Republic on November 3, 2005, for a period of 99 years and subsequently converted to a société anonyme, or S.A. We are a global technology company powering the world's marketers with trusted and impactful advertising. We enable brands' and retailers' growth by activating commerce data through artificial intelligence ("AI") technology, reaching consumers on an extensive scale across all stages of the consumer journey, and generating advertising revenues from consumer brands for large retailers. Our vision is to build the world's leading Commerce Media Platform to deliver measurable business outcomes at scale for global brands, agencies and retailers across multiple marketing goals. Our data is pooled among our clients and offers deep insights into consumer intent and purchasing habits. To drive trusted and impactful advertising for marketers, we activate our data assets in a privacy-by-design way through proprietary AI technology to engage consumers in real time by designing, pricing and delivering highly relevant digital advertisements ("ads") across devices and environments. In these notes, Criteo S.A. is referred to as the Parent company and together with its subsidiaries, collectively, as "Criteo," the "Company," the "Group," or "we". F-9 Note 1. Principles and Accounting Methods Basis of Preparation We prepared the consolidated financial statements in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of Criteo S.A and its wholly owned subsidiaries. Consolidation Methods We have control over all our subsidiaries, and consequently they are all fully consolidated. Intercompany transactions and balances have been eliminated. The table below presents at each period’s end and for all entities included in the consolidation scope the following information: the country of incorporation and the percentage of voting rights and ownership interests. 2022 2021 Country Voting rights Ownership Interest Voting rights Ownership Interest Consolidation Method Parent company Criteo S.A France 100 % 100 % 100 % 100 % Parent company French subsidiaries Criteo France SAS France 100 % 100 % 100 % 100 % Fully consolidated Criteo Finance SAS (1) France — % — % 100 % 100 % Fully consolidated Criteo Technology France 100 % 100 % 100 % 100 % Fully consolidated Condigolabs SAS France 40 % 40 % 40 % 40 % Fully consolidated Foreign subsidiaries Criteo Ltd United Kingdom 100 % 100 % 100 % 100 % Fully consolidated Criteo Corp. United States 100 % 100 % 100 % 100 % Fully consolidated Madyourself Technologies, Inc. United States 100 % 100 % 100 % 100 % Fully consolidated Doobe In Site Ltd. Israel 100 % 100 % 100 % 100 % Fully consolidated Criteo GmbH Germany 100 % 100 % 100 % 100 % Fully consolidated Criteo Nordics AB Sweden 100 % 100 % 100 % 100 % Fully consolidated Criteo Korea Ltd. Korea 100 % 100 % 100 % 100 % Fully consolidated Criteo KK Japan 66 % 66 % 66 % 66 % Fully consolidated Criteo do Brasil Desenvolvimento De Serviços De Internet Ltda. Brazil 100 % 100 % 100 % 100 % Fully consolidated Criteo BV The Netherlands 100 % 100 % 100 % 100 % Fully consolidated Criteo Australia Pty Ltd Australia 100 % 100 % 100 % 100 % Fully consolidated Criteo Srl Italy 100 % 100 % 100 % 100 % Fully consolidated Criteo Advertising (Beijing) Co. Ltd China 100 % 100 % 100 % 100 % Fully consolidated Criteo Singapore Pte. Ltd. Singapore 100 % 100 % 100 % 100 % Fully consolidated Criteo LLC Russia 100 % 100 % 100 % 100 % Fully consolidated Criteo Europa MM S.L. Spain 100 % 100 % 100 % 100 % Fully consolidated Criteo España S.L. Spain 100 % 100 % 100 % 100 % Fully consolidated Criteo Canada Corp. Canada 100 % 100 % 100 % 100 % Fully consolidated Criteo Reklamcılık Hizmetleri ve Ticaret Anonim Şirketi Turkey 100 % 100 % 100 % 100 % Fully consolidated Criteo MEA FZ-LLC United Arab Emirates 100 % 100 % 100 % 100 % Fully consolidated Criteo India Private Limited India 100 % 100 % 100 % 100 % Fully consolidated Gemini HoldCo, LLC United States 100 % 100 % 100 % 100 % Fully consolidated Bidswitch GmbH Switzerland 100 % 100 % — % — % Fully consolidated Bidswitch Inc. United States 100 % 100 % — % — % Fully consolidated Iponweb GmbH Switzerland 100 % 100 % — % — % Fully consolidated Iponweb GmbH Deutschland 100 % 100 % — % — % Fully consolidated Iponweb Limited United Kingdom 100 % 100 % — % — % Fully consolidated Iponweb Labs Limited Cyprus 100 % 100 % — % — % Fully consolidated Iponweb Inc. United States 100 % 100 % — % — % Fully consolidated The MediaGrid Inc. United States 100 % 100 % — % — % Fully consolidated Iponweb Labs LLC Armenia 100 % 100 % — % — % Fully consolidated (1) Merged with Criteo Technology F-10 Functional Currency and Translation of Financial Statements in Foreign Currency The Consolidated Financial Statements are presented in U.S. dollars, which differs from the functional currency of the Parent, being 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 statements of income, statements of comprehensive income and statements 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 (loss)” in the Consolidated Statements of Changes in Shareholders' Equity. Conversion of Foreign Currency Transactions Foreign currency transactions are converted to U.S. dollars at the rate of exchange applicable on the transaction date. At period-end, foreign currency monetary assets and liabilities are converted at the rate of exchange prevailing on that date. The resulting exchange gains or losses are recorded in the Consolidated Statements of Income in “Other financial income (expense)” with the exception of exchange differences arising from monetary items that form part of the reporting entity’s net investment in a foreign operation which are recognized in other comprehensive income (loss); they will be recognized in profit or loss on disposal of the net investment. Use of Estimates The preparation of our Consolidated Financial Statements requires the use of estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenue and expenses during the period. 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. On an on-going basis, management evaluates its estimates, primarily those related to: (1) gross vs net assessment in revenue recognition (2) allowances for credit losses, (3) income taxes, (4) assumptions used in valuing acquired assets and assumed liabilities in business combinations, (5) assumptions used in the valuation of goodwill, intangible assets and leases, (6) assumptions used in the valuation model to determine the fair value of share-based compensation plan, (7) assumptions surrounding the recognition and valuation of contingent liabilities and losses. Business combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of our acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Intangible Assets Acquired intangible assets are accounted for at acquisition cost, less accumulated amortization. Acquired intangible assets are composed of technology and customer relationships amortized on a straight-line basis over their estimated useful lives comprised between three and nine years . Intangible assets are reviewed for impairment whenever events or changes in circumstances such as, but not limited to, significant declines in revenue, earnings or cash flows or material adverse changes in the business climate indicate that the carrying amount of an asset may be impaired. Intangible assets also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Amortization of these costs begins when assets are placed in service and is calculated on a straight-line basis over the assets’ useful lives, generally estimated at three years . F-11 Cloud computing arrangements (“CCAs”), such as software as a service and other hosting arrangements, are evaluated for capitalized implementation costs in a similar manner as capitalized software development costs. If a CCA includes a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses. If a CCA does not include a software license, the service element of the arrangement is accounted for as a service contract. The Company capitalizes certain implementation costs for its CCAs that are service contracts, which are included in other current assets. The Company amortizes capitalized implementation costs in a CCA over the life of the service contract. Property, Plant and Equipment Property, plant and equipment are accounted for at acquisition cost less cumulative depreciation and any impairment loss. Depreciation is calculated on a straight-line basis over the assets’ estimated useful lives as follows: Servers........................................................................................................... 5 years over the life of the warranty Furniture and IT equipments............................................................................................................... 3 to 5 years Leasehold improvements are depreciated over their useful life or over the lease term, whichever is shorter. Impairment of Assets Goodwill and Intangible Assets Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net tangible and intangible assets acquired. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives. The Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates as three single reporting units and has selected December 31 as the date to perform its annual impairment test. Goodwill has been allocated to these three segments using a relative fair value allocation approach. In the impairment assessment of its goodwill, the Company performs an impairment test, which involves assumptions regarding estimated future cash flows to be derived from the Company. The estimated future cash flows are used to derive the fair value of the reporting unit, which is then compared to its net book value, including goodwill . If these estimates or their related assumptions change in the future, the Company may be required to record impairment on these assets. If the net book value exceeds its implied fair value, then the Company would be required to recognize an impairment loss in the Consolidated Statement of Income. Acquired intangible assets are accounted for at acquisition cost less cumulative amortization and any impairment loss. Acquired intangible assets are amortized over their estimated useful lives of three to nine years on a straight-line method. Intangible assets are reviewed for impairment whenever events or changes in circumstances such as, but not limited to, significant declines in revenue, earnings or cash flows or material adverse changes in the financial and economic environment indicate that the carrying amount of an asset may be impaired. Property, Plant and Equipment and Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset is impaired or the estimated useful life is no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with an asset are less than the carrying amount of the asset, an impairment loss is recorded to write the asset down to its estimated fair value. Fair value is estimated based on discounted future cash flows. F-12 Leases We lease space under non-cancellable operating leases for our offices and data centers. Our office leases typically include rent free periods and rent escalation periods, and may also include leasehold improvement incentives. Leases for data centers may also include rent free periods and rent escalation periods. Both office and data center leases may contain both lease components (rent) and non-lease components (maintenance, electrical costs, and other service charges). Non-lease components are accounted for separately. Our leases typically contain options to renew, and/or early terminate the lease. Options have been included in the lease term if management has determined it is reasonably certain that they will be exercised, at lease commencement. Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate at lease commencement to determine the present value of future payments. We have a centralized treasury function, and the majority of our leases are negotiated and signed by representatives of Criteo SA. As such, the incremental borrowing rate of Criteo SA is used for all of our contracts. It is then adjusted in consideration of the currency of the lease and the lease term as of the lease commencement date. Lease expense is recognized for minimum lease payments on a straight-line basis over the lease term. Variable costs include changes in indexation and are expensed in the period incurred. We chose to use certain practical expedients upon adaption of ASC 842 including: • We did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or the initial direct costs for any existing leases, • We do not recognize a lease liability or right of use asset for leases with a term of 12 months or less, and • We used hindsight in determining the lease term. Financial Assets and Liabilities, Excluding Derivative Financial Instruments Financial assets, excluding cash and cash equivalents, consist exclusively of loans and receivables. Loans and receivables are non-derivative financial assets with a payment, which is fixed or can be determined, not listed on an active market. They are included in current assets, except those that mature more than twelve months after the reporting date. Loans are measured at amortized cost using the effective interest method. The recoverable amount of loans and advances is estimated whenever there is an indication that the asset may be impaired and at least on each reporting date. If the recoverable amount is lower than the carrying amount, an impairment loss is recognized in the Consolidated Statements of Income. Financial liabilities are initially recorded at their fair value at the transaction date. Subsequently they are measured at amortized cost using the effective interest method. F-13 The Company carries the accounts receivable at original invoiced amount less an allowance for any potential uncollectible amounts. Receivables are presented on a gross basis and are not netted against the payments we are required to make to advertising inventory publishers. Management makes estimates of expected credit trends for the allowance for credit losses based on, among other factors, a past history of collections, current credit conditions, the aging of the receivables, past history of write downs, credit quality of our customers, current economic conditions, and reasonable and supportable forecasts of future economic conditions. A receivable is considered past due if we have not received payments based on agreed-upon terms. A higher default rate than estimated or a deterioration in our clients’ creditworthiness could have an adverse impact on our future results. Allowances for credit losses on trade receivables are recorded in “sales and operations expenses” in our Consolidated Statements of Income. We generally do not require any security or collateral to support our receivables. Derivative financial instruments We buy and sell derivative financial instruments in order to manage and reduce our exposure to the risk of exchange rate fluctuations. We deal only with major financial institutions. Financial instruments may only be classified as hedges when we can demonstrate and document the effectiveness of the hedging relationship at inception and throughout the life of the hedge. Generally, our derivatives are not designated as hedging instruments and mainly consist of forward buying contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts, as well as the related costs in the financial income (expense), net, along with the foreign currency gains and losses on monetary assets and liabilities. We report the cash impact of the settlement of hedging derivatives in cash from (used for) financing activities in the consolidated statements of cash flows. This results in the cash flows from derivative instruments to be classified in the same category as the underlying cash flows. Derivatives are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data. Fair value measurements Financial instruments are presented in three categories based on a hierarchical method used to determine their fair value : (i) level 1: fair value calculated using quoted prices in an active market for identical assets and liabilities; (ii) level 2: fair value calculated using valuation techniques based on observable market data such as prices of similar assets and liabilities or parameters quoted in an active market; (iii) level 3: fair value calculated using valuation techniques based wholly or partially on unobservable inputs such as prices in an active market or a valuation based on multiples for unlisted companies. Cash, Cash Equivalents and Marketable Securities Cash includes cash on deposit with banks and highly liquid investments such as demand deposits with banks. Cash equivalents include short-term, highly liquid investments, with a remaining maturity at the date of purchase of three months or less for which the risk of changes in value is considered to be insignificant. Highly liquid term deposits therefore meet the definition of cash equivalents. We hold investments in marketable securities, consisting mainly of term deposits with banks, not meeting the cash equivalents definition. We classify marketable securities as either available-for-sale or held-to-maturity investments, depending on whether we have the positive intent and ability to hold the term deposits to maturity. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive income (loss) in stockholders' equity. Our held-to-maturity investments are carried at amortized cost, and are subject to impairment assessments. Interest income generated from held-to-maturity investments is recorded as financial income. F-14 Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are held and foreign exchange contracts are transacted with major financial institutions that the Company's management has assessed to be of high credit quality. The Company has not experienced any losses in such accounts. The Company mitigates its credit risk with respect to accounts receivable by performing credit evaluations and monitoring agencies' and advertisers' accounts receivable balances. As of December 31, 2022 and 2021 no customer accounted for 10% or more of accounts receivable. During the years ended December 31, 2022, 2021 and 2020, no single customer represented 10% or more of revenue. Employee Benefits Depending on the laws and practices of the countries in which we operate, employees may be entitled to compensation when they retire or to a pension following their retirement. For state-managed plans and other defined contribution plans, we recognize them as expenses when they become payable, our commitment being limited to our contributions. The liability with respect to defined benefit plans is estimated using the following main assumptions: • discount rate; • future salary increases; • employee turnover; and • mortality tables. Service costs are recognized in profit or loss and are allocated by function. Actuarial gains and losses are recognized in other comprehensive income and subsequently amortized into the income statement over a specified period, which is generally the expected average remaining service period of the employees participating in the plan. Actuarial gains and losses arise as a result of changes in actuarial assumptions or experience adjustments (differences between the previous actuarial assumptions and what has actually occurred). Contingencies An estimated loss from a loss contingency is recognized if the following two conditions are met: • information available before the financial statements are issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements; • the amount of loss can be reasonably estimated. 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 tax audits. These judgment and estimates are subject to change as new information becomes available. F-15 Revenue Recognition We sell personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. We have multiple pricing models which include percentage of spend models in addition to cost-per-click, cost-per-install and cost-per-impression pricing models. Cost-per-click, cost-per-install and cost-per-impression pricing models We recognize revenues when we transfer control of promised services directly to our clients in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services. For campaigns priced on a cost-per-click, cost-per-install basis, we bill our clients when a user clicks on an advertisement we deliver or installs an application by clicking on an advertisement we delivered, respectively. For these pricing models, we recognize revenue when a user clicks on an advertisement or installs an application, as we consider the delivery of clicks or installs our performance obligation. For campaigns priced on a cost-per-impression basis, we bill our clients based on the number of times an advertisement is displayed to a user. For this pricing model, we recognize revenue when an advertisement is displayed as we consider the display of advertisements our performance obligation. Percentage of spend models Criteo's Platform enables the buying and selling of retail media with an end-to-end, self-service platform geared toward our brand, agency and retailer customers and is priced using a percentage of spend model. We generate revenues when we provide a platform for the purchase and sale of retail media digital advertising inventory. The platform connects sellers and buyers of retail media inventory, in an online marketplace. Retailers provide advertising inventory to the platform and brands and agencies bid on the retailers digital advertising inventory. Winning bids can create advertising, or paid impressions, which retailers display to their website visitors. The total volume of spending between buyers and sellers on the Company's platform is referred to as working media spend. We charge both the brands and agencies and retailers a contractual fee, based on a percentage of working media spend, for the use of our platform. We recognize revenue when an ad is displayed or clicked on. Criteo's Iponweb solutions offer an online trading platform through which supply partners can submit bid requests for media that they wish to sell, and demand partners can submit bids for media that they wish to buy through the operations of a dynamic, real-time exchange whereby media is sold to demand partners whose bids are selected by supply partners. We generate revenues by charging demand or supply a percentage of total media spend traded through our solutions. We recognize revenue when an ad is displayed or clicked on. Agent vs Principal When a third-party is involved in the delivery of our services to the client, through the supply of digital advertising inventory, we assess whether we act as principal or agent in the arrangement. The assessment is based on the degree we control the specified services at any time before they are transferred to the customer. The determination of whether we are acting as principal or agent requires judgment. F-16 We act as principal in our Criteo Marketing Solutions arrangements because (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility in fulfillment of the advertising promise and bear inventory risks and (iii) we have full discretion in establishing prices. Therefore, based on these and other factors, we have determined that we act as principal for our Criteo Marketing Solutions engagements and accordingly report the revenue earned and related costs incurred on a gross basis. We act either as principal or as agent in our Criteo Retail Media segment. For the arrangements related to transactions using our legacy Retail Media solutions, we consider that we act as principal, as we exercise significant control over the client’s advertising campaign. For arrangements related to transactions using our Platform, a self-service solution providing transparency, measurement and control to our brand, agency and retailer customers, we act as agent, because we (i) do not control the advertising inventory before it is transferred to our clients, (ii) do not have inventory risks because we do not purchase the inventory upfront and (iii) have limited discretion in establishing prices as we charge a platform fee based on a percentage of the digital advertising inventory purchased through the use of the platform. Therefore, we report the revenue earned and related costs incurred by the Platform solution on a net basis. We act as agent in Iponweb provided solutions as we (i) do not control the advertising inventory before it is transferred to our clients, (ii) do not have inventory risks because we do not purchase the inventory upfront and (iii) have limited discretion in establishing prices as we charge a fee based on a percentage of the digital advertising inventory traded through our solutions. Therefore, we report the revenue earned and related costs incurred by the Iponweb solutions on a net basis. Customer Credit Notes We offer credit notes to certain customers as a form of incentive, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and they are recognized as a reduction of revenue. We believe that there will not be significant changes to our estimates of variable consideration. Deferred Revenues We record deferred revenues when cash payments are received or due in advance of our performance. Our payment terms vary depending on the service or the type of customer. For certain customers, we require payment before the services are delivered. Practical Expedients We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and operating expenses. 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. 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. F-17 For legacy 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 Retail Media Platform solutions, revenue is recognized on a net basis, and there are no associated Traffic Acquisition Costs. For solutions within Iponweb, revenue is recognized on a net basis, and there are no associated Traffic Acquisition Costs. Other Cost of Revenue . Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment, 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. Share-Based Compensation Shares, employee share options and employee and non-employee warrants are primarily awarded to our employees or directors. These awards are measured at their fair value on the date of grant. The fair value is calculated with the most relevant formula regarding the settlement and the conditions of each plan. The fair value is recorded in personnel expenses (allocated by function in the Consolidated Statements of Income) on a straight-line basis over each milestone composing the vesting period with a corresponding increase in shareholders’ equity. At each closing date, we re-examine the number of options likely to become exercisable. If applicable, the impact of the review of the estimate is recognized in the Consolidated Statements of Income with a corresponding adjustment in equity. Income Taxes Income taxes are accounted for under the asset and liability method of accounting. 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 on net operating losses if, based on the projected taxable incomes within the next three years, we determine that it is probable that future taxable profit will be available against which the unused tax losses and tax credits can be utilized. 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 deferred tax assets, which would have a significant impact on our financial results. Tax assets and liabilities are not discounted. Amounts recognized in the Consolidated Financial Statements are calculated at the level of each tax entity included in the consolidation scope. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The French Research Tax Credit, Crédit d’Impôt Recherche (“CIR”), is a French tax incentive to stimulate research and development (“R&D”). Generally, the CIR offsets the income tax to be paid and the remaining portion (if any) can be refunded at the end of a three-fiscal year period. The CIR is calculated based on the claimed volume of eligible R&D expenditures by us. As a result, the CIR is presented as a deduction to “research and development expenses” in the Consolidated Statements of Income, as the CIR is not within the scope of ASC 740. We have exclusively claimed R&D performed in France for purposes of the CIR. As of December 31, 2022, we have offset $ 14.7 million of CIR tax credits against “research and development expenses” in our Consolidated Statements of Income. The U.S. Research Tax Credit is a U.S. tax credit to incentivize research and development activities in the U.S. Qualifying R&D expenses generating a tax credit which may be used to offset future taxable income once all net operating losses and foreign tax credits have been used. It is not refundable and as such, considered in the scope of ASC 740 as a component of income tax expense. We have exclusively claimed R&D performed in the U.S. for purposes of the U.S. Research Tax Credit. F-18 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. Similarly, our estimates related to uncertain tax positions concerning research tax credits are based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax credits will be sufficient. Although we believe that we have adequately reserved for our uncertain tax positions (including net interest and penalties), we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have a material impact on our financial condition and operating results. Operating Segments Segment information reported is built on the basis of internal management data used for performance analysis of businesses and for the allocation of resources (management approach). An operating segment is a component of the Company for which separate financial information is available that is evaluated regularly by our Chief Operating Decision Maker in deciding how to allocate resources and assessing performance. Our chief operating decision-maker is our CEO. The CEO reviews Contribution ex-TAC, primarily at a family of solutions level, for the purposes of allocating resources and evaluating financial performance. Contribution ex-TAC is Criteo's profitability measure and reflects the Company's gross profit plus other costs of revenue. As of December 31, 2022, we have concluded that our operations constitute three operating and reportable segments: Marketing Solutions, Retail Media and Iponweb. Earnings Per Share Basic earnings per share (“EPS”) are calculated by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding. The weighted average number of shares outstanding is calculated according to movements in share capital. In addition, we calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent company, Criteo S.A. by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued. F-19 Accounting Pronouncements adopted in 2022 Effective January 1, 2022, we have adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (ASU 2021-10), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. The impacts on our annual consolidated financial statements are limited as a result of adoption of this standard. Recent Accounting Pronouncements Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon adoption. F-20 Note 2. Business Combinations On August 1, 2022, the Company, Iponweb Holding Limited, Exezars Limited (a subsidiary of Iponweb Holding Limited and collectively with Iponweb Holding Limited, the “Sellers”), Mr. Ljubisa Bogunovic, in his capacity as trustee of the “IW General Management Trust” and Mr. Boris Mouzykantskii, founder and Chief Executive Officer of Iponweb Holding Limited (the “Founder”) entered into an amended and restated Framework Purchase Agreement (the “FPA”), amending and restating the previously disclosed framework purchase agreement, dated December 22, 2021, which provided for the acquisition of the business of Iponweb Holding Limited (the "Iponweb business"), a market-leading AdTech company with world-class media trading capabilities, by the Company (the “Iponweb Acquisition”). This business combination is composed of an asset purchase of Iponweb intellectual property and other intangible rights and a share purchase of 100 % of the share capital and voting rights of nine Iponweb operational legal entities. Purchase price. The purchase price, as per ASC 805, was $ 290.2 million (subject to approval and finalization of post-close purchase price adjustments) for the Iponweb business, out of which $ 61.2 million represents the fair value of the contingent consideration. This contingent consideration is payable in cash to the Sellers in an amount up to $ 100 million, conditioned upon the achievement of certain net revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. Separate compensation arrangement. The Company transferred Treasury shares with a fair value of $ 70.2 million to Iponweb's Sellers, subject to lock-up conditions. As these shares are subject to a lock-up period that expires in three installments on each of the first three anniversaries of the Iponweb Acquisition, unless the Founder's employment agreement is terminated under certain circumstances during the pendency of such lock-up period, the $ 70.2 million fair value was not included in the purchase price consideration above and will be accounted for separately from the business combination as a stock compensation expense. See Note 15 for further discussion. Financing. The acquisition was financed by available cash resources, and in connection with the Acquisition, the Company drew down € 50.0 million ($ 51.1 million) for a one-month period on its then-current revolving credit facility (repaid prior to the quarter-immediately proceeding the acquisition) to provide additional liquidity. Assets acquired and liabilities assumed. The transaction was accounted for as a business acquisition. We have completed the preliminary purchase price allocation and we expect to finalize this analysis within one year from the Acquisition Date. On the Acquisition Date, assets acquired and liabilities assumed by major asset class before purchase price allocation are as follow: Estimated fair values (in millions) Cash and cash equivalents $ 93.3 Trade receivables 100.7 Other current assets 1.1 Technology 90.2 Customer relationships 7.2 Other non-current assets 59.0 Trade Payables ( 191.5 ) Other current liabilities ( 3.1 ) Other non-current liabilities ( 54.3 ) Net assets acquired $ 102.6 F-21 Developed technology represents the estimated fair value of the features underlying the Iponweb products as well as the platform providing services to Iponweb customers. Customer relationships represent the estimated fair value of the underlying relationships with Iponweb customers, including the fair value of unbilled and unrecognized contracts yet to be fulfilled. The estimated useful lives of technologies acquired and customer relationships are four and nine years , respectively. In the Iponweb business's opening balance sheet, Criteo recognized a $ 17.6 million liability related to the Iponweb business's uncertain tax positions in accordance with ASC 740. The Company also recognized a $ 33.7 million provision in connection with the Iponweb business, accounted for under ASC 450 Contingencies. As part of the Acquisition, the Sellers agreed to indemnify Criteo for losses related to certain liabilities, up to an amount of $ 50.0 million. As such, we have recognized an indemnification asset of $ 50.0 million which is recorded as part of "Other non-current assets" on the consolidated statement of financial position. Preliminary goodwill. The Company is assessing the fair value estimate of assets acquired and liabilities assumed as part of the Iponweb Acquisition, based on facts and circumstances that existed as of the Acquisition Date. This measurement period will not exceed one year from the Acquisition Date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The preliminary goodwill of $ 187.6 million is primarily attributable to synergies expected to be realized from leveraging our technological capabilities and from the existence of an assembled workforce. Our fair value estimate of assets acquired and liabilities assumed is pending the completion of certain items including the final determination of the purchase price. Accordingly, there could be adjustments to our consolidated financial statements, including changes in our amortization expense related to the valuation of intangible assets and their respective useful lives, among other adjustments. Acquisition costs. Acquisition related costs of $ 1.1 million and $ 12.58 million were recorded within general and administrative expenses on the consolidated statements of comprehensive income for the three and twelve months ended December 31, 2022, respectively. Impact on profit and loss. The Company's consolidated statements of operations for the twelve months ended December 31, 2022 includes Iponweb's revenues of $ 52.2 million and pretax income (loss) of $ 2.9 million for the period from the Acquisition Date to December 31, 2022. On a pro-forma basis, assuming the Acquisition occurred on January 1, 2021, Criteo's consolidated pro-forma revenue and net income or loss would have been as follows: Pro Forma Consolidated Statement of Operations Data Three Months Ended Twelve months ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands) Revenue $ 565,565 $ 685,396 $ 2,078,109 $ 2,356,377 Net Income (loss) 15,400 69,820 ( 2,502 ) $ 117,012 The historical consolidated financial information has been adjusted in the pro forma combined financial statements to give the effect to pro forma events that are directly attributable to the business combination and are reasonably estimable. The pro forma information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the Acquisition had taken place at the beginning the Company's fiscal year 2021. F-22 Note 3. Segment information Reportable segments The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments. As a result of the Iponweb Acquisition, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective August 1, 2022, the Company reports its results of operations through the following three segments: Marketing Solutions, Retail Media and Iponweb. – Marketing Solutions: This segment allows commerce companies to address multiple marketing goals by engaging their consumers with personalized ads across the web, mobile and offline store environments. – Retail Media: This segment 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: This segment 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. Segment operating results, Contribution ex-TAC, is Criteo's segment profitability measure and reflects our gross profit plus other costs of revenue. The following table shows revenue by reportable segment: Year Ended December 31, 2022 2021 2020 (in thousands) Marketing Solutions $ 1,762,517 $ 2,007,239 $ 1,806,431 Retail Media 202,317 246,996 266,186 Iponweb 52,169 — — Total Revenue $ 2,017,003 $ 2,254,235 $ 2,072,617 F-23 The following table shows Contribution ex-TAC by reportable segment and its reconciliation to the Company’s Consolidated Statements of Operation: Year Ended December 31, 2022 2021 2020 (in thousands) Contribution ex-TAC Marketing Solutions $ 714,695 796,152 746,751 Retail Media 161,360 124,643 78,295 Iponweb 52,169 — — $ 928,224 $ 920,795 $ 825,046 Other costs of sales ( 133,024 ) ( 138,851 ) ( 137,028 ) Gross profit $ 795,200 $ 781,944 $ 688,018 Operating expenses Research and development expenses ( 187,596 ) ( 151,817 ) ( 132,513 ) Sales and operations expenses ( 377,996 ) ( 325,616 ) ( 330,285 ) General and administrative expenses ( 205,330 ) ( 152,634 ) ( 116,395 ) Total Operating expenses ( 770,922 ) ( 630,067 ) ( 579,193 ) Income from operations $ 24,278 $ 151,877 $ 108,825 Financial and Other Income (Expense) 17,783 1,939 ( 1,939 ) Income before tax $ 42,061 $ 153,816 $ 106,886 The Company's CODM does not review any other financial information for our three segments, other than Contribution ex-TAC, at the reportable segment level. F-24 Note 4. Cash, Cash Equivalents, Marketable Securities and Restricted Cash Fair value measurements As of December 31, 2022 Cash and Cash Equivalent Marketable Securities (in thousands) Cash 282,293 $ — Level 2 Term deposits and notes 65,907 25,098 Total $ 348,200 $ 25,098 As of December 31, 2021 Cash and Cash Equivalent Marketable Securities (in thousands) Cash 378,299 $ — Level 2 Term deposits and notes 137,228 55,299 Total $ 515,527 $ 55,299 Interest-bearing bank deposits are considered level 2 financial instruments as they are measured using valuation techniques based on observable market data. The fair value of term deposits approximates their carrying amount given the nature of the investments, its maturities and expected future cash flows. F-25 Marketable Securities The following table presents for each reporting period, the breakdown of marketable securities: December 31, 2022 December 31, 2021 (in thousands) Securities Available-for-sale Term Deposits $ — $ 22,652 Securities Held-to-maturity Term Deposits $ 25,098 $ 32,647 Total $ 25,098 $ 55,299 The gross unrealized gains or (loss) on our marketable securities were not material as of December 31, 2022. For our marketable securities, the fair value approximates the carrying amount, given the nature of the term deposit and the maturity of the expected cash flows. The term deposit is considered a level 2 financial instruments as it is measured using valuation techniques based on observable market data. The following table classifies our marketable securities by contractual maturities: Held-to-maturity Available-for-sale December 31, 2022 (in thousands) Due in one year $ 25,098 $ — Due in one to five years $ — $ — Total $ 25,098 $ — Restricted Cash As part of the Iponweb Acquisition (refer to Note 2), we have deposited $ 100.0 million of cash into an escrow account containing withdrawal conditions. The cash secures the Company's potential payment of Iponweb Acquisition contingent consideration to the Sellers, which is conditioned upon the achievement of certain revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. December 31, 2022 December 31, 2021 (in thousands) Restricted cash – current $ 25,000 $ — Restricted cash – non-current $ 75,000 $ — Total $ 100,000 $ — F-26 Note 5. Trade Receivables The following table shows the breakdown in trade receivables net book value for the presented periods: Year Ended December 31, 2022 2021 (in thousands) Trade accounts receivables $ 756,741 $ 627,379 (Less) Allowance for doubtful accounts ( 47,792 ) ( 45,391 ) Net book value at end of period $ 708,949 $ 581,988 Changes in allowance for doubtful accounts are summarized below: Year Ended December 31, 2022 2021 2020 (in thousands) Balance at beginning of period $ ( 45,391 ) $ ( 39,899 ) $ ( 16,068 ) Allowance for credit losses through retained earnings (*) — — ( 3,522 ) Provision for doubtful accounts ( 18,641 ) ( 14,433 ) ( 30,818 ) Write-off, net of recoveries 19,370 7,485 11,555 Increase due to acquisition ( 4,733 ) — — Currency translation adjustment 1,603 1,456 ( 1,046 ) Balance at end of period $ ( 47,792 ) $ ( 45,391 ) $ ( 39,899 ) (*) From January 1, 2020, we adopted ASU 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 issued by the Financial Accounting Standards Board (FASB). ASU 2016- 13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. This results in earlier recognition of credit losses. We adopted ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained earnings (note 1). We write off accounts receivable balances once the receivables are no longer deemed collectible. During the twelve month period ended December 31, 2022, the Company recovered $ 3.2 million, previously reserved for, and accounted for this as a reversal of provision. Increase due to acquisition includes $( 4.7 ) million related to the Iponweb acquisition. Credit risk is defined as an unexpected loss in cash and earnings if the client is unable to pay its obligations in due time. We perform internal ongoing credit risk evaluations of our clients. When a possible risk exposure is identified, we require prepayments or impair Customer credit. As of December 31, 2022 and 2021, no customer accounted for 10% or more of trade receivables. F-27 Note 6. Other Current Assets The following table shows the breakdown in other current assets net book value for the presented periods: Year Ended December 31, 2022 2021 (in thousands) Prepayments to suppliers $ 12,421 $ 9,640 Other debtors 6,768 9,259 Prepaid expenses 24,549 15,283 Other current assets 8,128 — Total 51,866 34,182 Prepaid expenses mainly consist of costs related to SaaS arrangements. F-28 Note 7. Property and Equipment, Net Major classes of property and equipment were as follows (in thousands) As of December 31, 2022 2021 Computer equipment 292,246 340,404 Furniture and fixtures 8,629 7,408 Construction in progress (1) 47,534 13,397 Leasehold improvements 12,968 13,432 Gross book value at end of period 361,377 374,641 Less: Accumulated depreciation ( 230,170 ) ( 234,680 ) Net book value at end of period $ 131,207 $ 139,961 (1) includes leasehold improvements projects which are not yet ready for the intended use. Depreciation expense for 2022 and 2021 was 55.6 million and 65.8 million, respectively. For the years ended December 31, 2022 and 2021 there were no impairment charges to property and equipment. F-29 Note 8. Intangible assets Changes in net book value during the presented periods are summarized below: December 31, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Software $ 63,218 $ ( 53,228 ) $ 9,990 $ 73,924 $ ( 55,362 ) $ 18,562 Acquired technology 153,410 ( 62,492 ) 90,918 60,904 ( 49,434 ) 11,470 Acquired customer relationship 97,419 ( 66,003 ) 31,416 91,365 ( 58,077 ) 33,288 Internally developed software in progress 43,659 — 43,659 19,307 — 19,307 Total intangible assets, net 357,706 ( 181,723 ) 175,983 245,500 ( 162,873 ) 82,627 Amortization expense was 33.4 million, 22.6 million, and 24.9 million for the year ended December 31, 2022, 2021 and 2020, respectively. Software mainly consists of internally developed software. As of December 31, 2022, expected amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands): Software Technology and customer relationships Total 2023 13,500 34,581 48,081 2024 18,110 33,978 52,088 2025 14,762 32,303 47,065 2026 7,277 15,257 22,534 2027 — 2,057 2,057 Thereafter — 4,158 4,158 Total $ 53,649 $ 122,334 $ 175,983 F-30 Note 9. Goodwill Changes in the carrying amount of goodwill for the years ended December  31, 2022 and 2021 were as follows: Marketing Solutions Retail Media Iponweb Total (in thousands) Balance at January 1, 2021 $ 186,383 $ 139,422 $ — $ 325,805 Acquisitions — 8,712 — 8,712 Currency translation adjustment ( 2,684 ) ( 2,134 ) — ( 4,818 ) Balance at December 31, 2021 $ 183,699 $ 146,000 $ — $ 329,699 Acquisitions — — 187,600 187,600 Currency translation adjustment ( 2,919 ) ( 2,320 ) 3,079 ( 2,159 ) Balance at December 31, 2022 $ 180,780 $ 143,680 $ 190,679 $ 515,140 In addition, on the basis of our impairment assessment as of December 31, 2022, no impairment has been detected. F-31 Note 10. Financial Liabilities 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 € 407,000 € — € — Floating rate: EURIBOR / SOFR + margin depending on leverage ratio September 2027 On September 27, 2022, we entered into a new Revolving Credit Facility ("RCF") with a five year tenor with a syndicate of banks which allows us to draw up to € 407.0 million ($ 434.0 million). We are also party to short-term credit lines and overdraft facilities with HSBC plc, BNP Paribas and LCL with an authorization to draw up to a maximum of € 21.5 million ($ 22.9 million) in the aggregate under the short-term credit lines and overdraft facilities. As of December 31, 2022, we had not drawn on any of these facilities. Any loans or overdrafts under these short-term facilities bear interest based on the one month EURIBOR rate or three month EURIBOR rate. As these facilities are exclusively short-term credit and overdraft facilities, our banks have the ability to terminate such facilities on short notice. At December 31, 2022, no amount is drawn under the RCF. This revolving credit facilities is unsecured and contain customary events of default and covenants, including compliance with a total net debt to adjusted EBITDA ratio and restrictions on the incurrence of additional indebtedness. At December 31, 2022, we were in compliance with the required leverage ratio. The following table shows the maturity of our financial liabilities: Maturity Carrying value 2023 2024 2025 2026 2027 2028 (in thousands) Other financial liabilities 293 218 — 75 — — — Financial liabilities $ 293 $ 218 $ — $ 75 $ — $ — $ — F-32 Note 11. Leases The components of lease expense are as follows: Three Months Ended Twelve Months Ended December 31, 2022 Offices Data Centers Total Offices Data Centers Total Lease expense $ 2,157 $ 4,971 $ 7,128 $ 13,271 $ 20,013 $ 33,284 Short term lease expense 169 3 172 673 8 681 Variable lease expense 3 91 94 185 273 458 Sublease income ( 401 ) — ( 401 ) ( 883 ) — ( 883 ) Total operating lease expense $ 1,928 $ 5,065 $ 6,993 $ 13,246 $ 20,294 $ 33,540 Three Months Ended Twelve Months Ended December 31, 2021 Offices Data Centers Total Offices Data Centers Total Lease expense $ 4,149 $ 5,143 $ 9,292 $ 19,949 $ 23,704 $ 43,653 Short term lease expense 182 21 203 524 61 585 Variable lease expense 46 23 69 353 291 644 Sublease income ( 129 ) — ( 129 ) ( 838 ) — ( 838 ) Total operating lease expense $ 4,248 $ 5,187 $ 9,435 $ 19,988 $ 24,056 $ 44,044 F-33 As of December 31, 2022, we had future minimum lease payments as follows: December 31, 2022 Offices Data Centers Total (in thousands) 2023 $ 17,228 $ 16,692 $ 33,920 2024 13,535 6,434 19,969 2025 11,802 4,887 16,689 2026 9,360 3,401 12,761 2027 7,776 1,264 9,040 Thereafter 19,665 — 19,665 Total minimum lease payments 79,366 32,678 112,044 Impact of Discount Rate ( 2,735 ) ( 769 ) ( 3,504 ) Total Lease Liability $ 76,631 $ 31,909 $ 108,540 The weighted average remaining lease term and discount rates as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 Weighted average remaining lease term (years) Offices 6.27 6.51 Data Centers 2.93 2.47 Weighted average discount rate Offices 0.96 % 1.02 % Data Centers 1.54 % 1.69 % Supplemental cash flow information related to our operating leases is as follows for the period December 31, 2022 and 2021: Twelve Months Ended December 31, 2022 2021 (in thousands) Cash paid for amounts included in the measurement of lease liabilities : Cash flow for operating activities $ ( 34,964 ) $ ( 52,107 ) Right of use assets obtained in exchange for new operating lease liabilities $ 22,728 $ 102,162 As of December 31, 2022, we have additional operating leases, that have not yet commenced which will result in additional operating lease liabilities and right of use assets: Offices Data Centers (in thousands) Additional operating lease liabilities $ — $ 26,720 Additional right of use assets $ — $ 26,720 These operating leases will commence during the fiscal year ending December 31, 2023. F-34 Note 12. Other Current Liabilities and Non Current Liabilities Other current liabilities are presented in the following table: Year Ended December 31, 2022 2021 (in thousands) Customer prepayments $ 16,334 $ 16,423 Rebates 17,671 17,423 Accounts payable relating to capital expenditures 25,414 4,507 Other creditors 2,388 1,088 Deferred revenue 10 82 Earn out liability - current $ 21,640 $ — Total $ 83,457 $ 39,523 Other non-current liabilities are presented in the following table: Year Ended December 31, 2022 2021 (in thousands) Earn out liability – non-current $ 44,696 $ — Uncertain tax positions 17,980 — Other 6,550 9,886 Total $ 69,226 $ 9,886 Earn out liability As part of the Iponweb Acquisition (refer to Note 2), the Sellers are entitled to contingent consideration of a maximum of $ 100.0 million, which is conditioned upon the achievement of certain revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. The related earn out liability is valued and discounted using management's best estimate of the consideration that will be paid in 2023 (current portion) and 2024 (non-current portion). F-35 Note 13. Employee Benefits Defined Benefit Plans According to French law and the Syntec Collective Agreement, French employees are entitled to compensation paid on retirement. The following table summarizes the changes in the projected benefit obligation: Year Ended December 31, 2022 2021 2020 (in thousands) Projected benefit obligation present value - beginning of period $ 5,531 $ 6,167 $ 8,485 Service cost 1,756 1,324 2,232 Interest cost 73 51 95 Actuarial losses (gains) ( 3,311 ) ( 1,543 ) ( 5,214 ) Currency translation adjustment ( 341 ) ( 468 ) 569 Projected benefit obligation present value - end of period $ 3,708 $ 5,531 $ 6,167 The Company does not hold any plan assets for any of the periods presented. The main assumptions used for the purposes of the actuarial valuations are listed below: Year Ended December 31, 2022 2021 2020 Discount rate (Corp AA) 4.25 % 1.4 % 0.9 % Expected rate of salary increase 5.0 % 5.0 % 5.0 % Expected rate of social charges 48.0 % 49.0 % - 50.0 % 49.0 % - 50.0 % Expected staff turnover — % - 17.8 % — % - 17.8 % — % - 17.8 % Estimated retirement age Progressive table Progressive table Progressive table Life table TH-TF 2000-2002 shifted TH-TF 2000-2002 shifted TH-TF 2000-2002 shifted Defined Contribution Plans The total expense represents contributions payable to these plans by us at specified rates. In some countries, the Group’s employees are eligible for pension payments and similar financial benefits. The Group provides these benefits via defined contribution plans. Under defined contribution plans, the Group has no obligation other than to pay the agreed contributions, with the corresponding expense charged to income for the year. The main contributions concern France, the U.S., for 401k plans, and the United Kingdom. Year Ended December 31, 2022 2021 2020 (in thousands) Defined contributions plans included in personnel expenses $ ( 17,111 ) $ ( 16,165 ) $ ( 16,211 ) F-36 Note 14. Common shares and Treasury stock Change in Number of Shares Number of ordinary shares Balance at January 1, 2021 60,639,570 of which Common shares 66,272,106 of which Treasury stock ( 5,632,536 ) Issuance of shares under share option and free share plans (1) ( 388,759 ) Treasury Shares Issued for RSU Vesting 1,573,696 Treasury Shares Retired 1,498,709 Share repurchase program (2) ( 2,647,742 ) Balance at December 31, 2021 60,675,474 of which Common shares 65,883,347 of which Treasury stock ( 5,207,873 ) Issuance of shares under share option and free share plans (3) ( 2,634,619 ) Treasury Shares Issued for RSU Vesting 1,625,742 Treasury Shares Retired (4) 2,732,386 Share repurchase program ( 5,135,359 ) Balance at December 31, 2022 57,263,624 of which Common shares 63,248,728 of which Treasury stock ( 5,985,104 ) (1) Adopted by the Board of Directors on February 5, 2021, February 25, 2021, April 29, 2021, June 14, 2021, July 29, 2021, October 28, 2021 and December 15, 2021 (2) Adopted by the Board of Directors on October 28, 2021 (3) (4) Adopted by The Board of Directors on July 28, 2022 and December 7, 2022 F-37 Note 15. Share-Based Compensation Equity awards Compensation Expense Equity awards compensation expense recorded in the consolidated statements of operations was as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Research and Development ( 36,514 ) ( 16,334 ) ( 9,771 ) Sales and Operations ( 14,200 ) ( 12,623 ) ( 10,289 ) General and Administrative ( 14,320 ) ( 15,571 ) ( 8,710 ) Total equity awards compensation expense ( 65,034 ) ( 44,528 ) ( 28,770 ) Tax benefit from equity awards compensation expense 5,423 4,858 2,720 Total equity awards compensation expense, net of tax effect $ ( 59,611 ) $ ( 39,670 ) $ ( 26,050 ) The breakdown of the equity award compensation expense by instrument type was as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Share options ( 97 ) ( 986 ) ( 820 ) Lock-up shares ( 18,049 ) — — Restricted stock units / Performance stock units ( 45,025 ) ( 41,747 ) ( 26,280 ) Non-employee warrants ( 1,863 ) ( 1,795 ) ( 1,670 ) Total equity awards compensation expense ( 65,034 ) ( 44,528 ) ( 28,770 ) Tax benefit from equity awards compensation expense 5,423 4,858 2,720 Total equity awards compensation expense, net of tax effect $ ( 59,611 ) $ ( 39,670 ) $ ( 26,050 ) A detailed description of each instrument type is provided below. Share Options Stock options granted under the Company’s stock incentive plans generally vest over four years , subject to the holder’s continued service through the vesting date and expire no later than 10 years from the date of grant. In the following tables, exercise prices, grant date share fair values and fair value per equity instruments are provided in euros, as the Company is incorporated in France and the euro is the currency used for the grants. Options Outstanding Number of Shares Underlying Outstanding Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding - December 31, 2021 561,584 Options granted — Options exercised ( 56,767 ) Options canceled ( 133,648 ) Options expired 1,160 Outstanding - December 31, 2022 372,329 € 20.7 4.62 € 5.83 Vested and exercisable - December 31, 2022 278,462 F-38 The aggregate intrinsic value represents the difference between the exercise price of the options and the fair market value of common stock on the date of exercise. No new stock options were granted in the year ending December 31, 2022 and December 31, 2021. As of December 31, 2022, unrecognized stock-based compensation $ 0.1 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 1 year. Lock up shares On August 1, 2022, 2,960,243 Treasury shares were transferred to the Founder (referred to as Lock Up Shares or "LUS", see Note 2), as partial consideration for the Iponweb Acquisition. As these shares are subject to a lock-up period that expires in three installments on each of the first three anniversaries of the Iponweb Acquisition, unless the Founder's employment agreement is terminated under certain circumstances during the pendency of such lock-up period, they are considered as equity settled share-based payments under ASC 718 and are accounted over the three-year vesting period. The share based compensation expense is included in Research and Development expenses on the Consolidated Statement of Income. The shares were valued based on the volume weighted average price of one ADS traded on Nasdaq during the twenty ( 20 ) trading days immediately preceding July 28, 2022. Shares Weighted-Average Grant date Fair Value Per Share Outstanding as of December 2021 — Granted 2,960,243 Vested — Forfeited — Outstanding as of December 31, 2022 2,960,243 $ 23.94 At December 31, 2022, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $ 55.7 million, which is expected to be recognized over a period of 3 years. Restricted Stock Units / Performance Stock Units Restricted stock awards generally vest over four years , subject to the holder’s continued service and/or certain performance conditions through the vesting date. In the following tables, exercise prices, grant date share fair values and fair value per equity instruments are provided in euros, as the Company is incorporated in France and the euro is the currency used for the grants. Shares (RSU) Weighted-Average Grant date Fair Value Per Share Outstanding as of December 2021 4,765,558 Granted 3,004,700 Vested ( 1,488,533 ) Forfeited ( 931,770 ) Outstanding as of December 31, 2022 5,349,955 € 24.84 At December 31, 2022, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $ 80.2 million, which is expected to be recognized over a weighted-average period of 3.17 years. F-39 Shares (PSU) Weighted-Average Grant date Fair Value Per Share Outstanding as of December 2021 533,798 Granted 464,182 Vested ( 144,403 ) Forfeited ( 331,110 ) Outstanding as of December 31, 2022 522,467 € 23.55 At December 31, 2022, the Company had unrecognized stock-based compensation relating to restricted stock of approximately $ 5.5 million, which is expected to be recognized over a weighted-average period of 2.8 years . Non-employee warrants Non-employee warrants generally vest over four years , subject to the holder’s continued service through the vesting date. Shares Weighted-Average Grant date Fair Value Per Share Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding - December 31, 2021 343,755 Granted — Exercised ( 41,000 ) Canceled — Expired — Outstanding - December 31, 2022 302,755 € 15.91 5.43 € 11.8 Vested and exercisable - December 31, 2022 276,355 The aggregate intrinsic value represents the difference between the exercise price of the non-employee warrants and the fair market value of common stock on the date of exercise. No new stock non-employee warrants were granted in the year ending December 31, 2022 and December 31, 2021. As of December 31, 2022, the instruments were fully vested. F-40 Note 16. Financial and Other Income (Expense) The Consolidated Statements of Income line item “Financial and Other income (expense)” can be broken down as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Financial income from cash equivalents $ 1,932 $ 634 $ 1,117 Interest and fees ( 2,025 ) ( 2,271 ) ( 2,811 ) Interest on debt ( 1,520 ) ( 1,988 ) ( 2,381 ) Fees ( 505 ) ( 283 ) ( 430 ) Foreign exchange income (loss) 19,659 ( 1,776 ) ( 150 ) Discounting impact ( 4,700 ) — — Interest income (expense) on provision for R&C 2,258 — — Other financial income (expense) 730 2,369 ( 95 ) Other income $ ( 71 ) $ 2,983 $ — Total financial and other income (expense) $ 17,783 $ 1,939 $ ( 1,939 ) 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. 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) 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 included other income of $ 3.0 million, generated by the disposal of servers equipments and other financial income of $ 2.4 million consisting of dividends received from an investment. At December 31, 2021, our exposure to foreign currency risk was centralized at Criteo S.A. and hedged using foreign currency swaps or forward purchases or sales of foreign currencies. F-41 Note 17. Income Taxes Breakdown of Income Taxes The Consolidated Statements of Income line item “Provision for income taxes” can be broken down as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Current income tax expense (benefit) $ 27,584 $ 34,811 $ 28,477 France 5,665 16,549 16,379 International 21,919 18,262 12,098 Deferred tax expense (benefit) 3,602 ( 18,642 ) 3,720 France 5,868 ( 9,574 ) ( 4,548 ) International ( 2,266 ) ( 9,068 ) 8,268 Provision for income tax expense (benefit) $ 31,186 $ 16,169 $ 32,197 Income before taxes included income (loss) from France of $( 4.2 ) million,$ 109.9 million and $ 114.4 million for the periods ended 2022, 2021 and 2020 respectively. Income (loss) before taxes from countries outside of France totaled $ 46.2 million, $ 46.9 million and $( 7.5 ) million for the periods ended December 31, 2022, 2021 and 2020, respectively. F-42 Reconciliation between the Effective and Nominal Tax Expense The following table shows the reconciliation between the effective and nominal tax expense at the nominal standard French rate of 25.8 % (excluding additional contributions): Year Ended December 31, 2022 2021 2020 (in thousands) Income before taxes $ 42,061 $ 153,816 $ 106,886 Theoretical group tax-rates 25.8 % 28.4 % 32.0 % Nominal tax expense (benefit) 10,860 43,684 34,225 Increase / decrease in tax expense arising from: French Research Tax Credit, Crédit d’Impôt Recherche (“CIR”) ( 2,901 ) ( 4,830 ) ( 5,298 ) Shared-based Compensation 2,895 ( 1,429 ) 11,604 BEAT tax — 6,560 18,640 Non-tax deductible provision from loss contingency on regulatory matters (see Note 19) 16,971 — — Nondeductible Expenses 6,178 6,476 ( 8,979 ) Non recognition of deferred tax assets 3,190 1,666 6,026 Utilization or recognition of previously unrecognized tax losses ( 1,338 ) ( 10,357 ) ( 2,511 ) French CVAE (1) 1,635 2,170 3,464 Income eligible to reduced taxation rate (2) ( 6,766 ) ( 25,655 ) ( 13,402 ) Change in Uncertain Tax Positions 412 — — Effect of different tax rates 201 395 ( 3,963 ) Other differences ( 151 ) ( 2,511 ) ( 7,609 ) Effective tax expense (benefit) $ 31,186 $ 16,169 $ 32,197 Effective tax rate 74.1 % 10.5 % 30.1 % Increases and decreases in tax expense are presented applying the theoretical Group tax rate to the concerned tax bases. The impact resulting from the differences between local tax rates and the Group theoretical rate is shown in the “effect of different tax rates.” (1) French CVAE " cotisation sur la valeur ajoutée des entreprises " - is the business value add contribution tax in France (2) Income eligible to reduced taxation rate refers to the application of a reduced income tax rate on the majority of the technology royalties income F-43 Deferred Tax Assets and Liabilities The following table shows the changes in the major sources of deferred tax assets and liabilities: (in thousands) Year ended December 31, 2020 Change recognized in profit or loss Change recognized in OCI Purchase Price Accounting Other Currency translation adjustments Year ended December 31, 2021 Net deferred tax assets : Net operating loss carryforwards $ 24,576 $ 7,082 $ — $ 2,542 $ — $( 672 ) $ 33,528 Shared-based Compensation 6,712 4,727 — — ( 5,177 ) 23 6,285 Bad debt allowance 5,216 425 — — — ( 96 ) 5,545 Personnel-related accruals 6,850 2,093 — 21 — ( 183 ) 8,781 Other accruals 4,918 1,385 — — — ( 583 ) 5,720 Projected benefit obligation 1,784 164 ( 398 ) — — ( 121 ) 1,429 Financial instruments 268 ( 275 ) — — — ( 8 ) ( 15 ) Tax Credits 16,214 817 — — — — 17,031 Other ( 1,026 ) ( 212 ) — — 5,177 5 3,944 Net deferred tax liabilities: Intangibles ( 14,689 ) 1,471 — ( 1,817 ) — 63 ( 14,972 ) Gross Deferred Income Taxes 50,823 17,677 ( 398 ) 746 — ( 1,572 ) 67,276 Valuation allowance ( 36,341 ) 965 229 ( 746 ) — 899 ( 34,994 ) Net Deferred Income Taxes 14,482 18,642 ( 169 ) — — ( 673 ) 32,282 F-44 (in thousands) Year ended December 31, 2021 Change recognized in profit or loss Change recognized in OCI Purchase Price Accounting Other Currency translation adjustments Year ended December 31, 2022 Net deferred tax assets : Net operating loss carryforwards $ 33,528 $( 10,285 ) $ — $ — $ — $( 1,793 ) $ 21,450 Shared-based Compensation 6,285 ( 469 ) — — — ( 11 ) 5,805 Bad debt allowance 5,545 ( 291 ) — — — ( 62 ) 5,192 Personnel-related accruals 8,781 ( 225 ) — 7 — ( 144 ) 8,419 Other accruals 5,720 ( 1,455 ) — — — ( 287 ) 3,978 Projected benefit obligation 1,429 472 ( 855 ) — — ( 88 ) 958 Intangibles ( 14,972 ) 17,996 — 1,550 653 117 5,344 Tax Credits 17,031 ( 11,242 ) — — — — 5,789 Other 3,944 ( 607 ) — 7 85 ( 293 ) 3,136 Net deferred tax liabilities: Financial instruments ( 15 ) ( 726 ) — — — ( 8 ) ( 749 ) Gross Deferred Income Taxes 67,276 ( 6,832 ) ( 855 ) 1,564 738 ( 2,569 ) 59,322 Valuation allowance ( 34,994 ) 3,230 513 ( 955 ) ( 653 ) 1,720 ( 31,139 ) Net Deferred Income Taxes 32,282 ( 3,602 ) ( 342 ) 609 85 ( 849 ) 28,183 Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. As of 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). The Company mainly has net operating loss carryforwards in the U.S. for $ 51.0 million in various states, which begin to expire in 2034 and net operating loss carryforwards in the United Kingdom for $ 40.1 million which have no expiration date. The company has $ 5.8 million of state R&D tax credits which can be carry-forward indefinitely. Utilization of our net operating loss and tax credit carryforwards in the US may be subject to annual limitations due to the ownership change limitations provided by the IRS Code 382 and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization. As of December 31, 2022, we have not provided deferred taxes on unremitted earnings related to foreign subsidiaries. We intend to continue to reinvest these foreign earnings indefinitely and do not expect to incur any significant taxes related to such amounts. Ongoing tax audits As a multinational corporation, we are subject to regular review and audit by U.S. federal and state, and foreign tax authorities. Significant uncertainties exist with respect to the amount of our tax liabilities, including those arising from potential challenges with certain positions we have taken. Any unfavorable outcome of such a review or audit could have an adverse impact on our tax rate. Tax years ending on or after December 31, 2020 are subject to examination in France, and tax years ending on or after December 31, 2020 are subject to examination in the US. F-45 Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits during the years ended December 31, 2022 2021 and 2020: Year Ended December 31, 2022 2021 2020 (in thousands) Beginning balance of unrecognized tax benefits $ — $ — $ — Increases related to current year tax positions $ 13,315 — — Ending balance of unrecognized tax benefits (excluding interest and penalties) $ 13,315 — — Interest and penalties associated with unrecognized tax benefits $ 4,665 — — Ending balance of unrecognized tax benefits (including interest and penalties) $ 17,980 — — The total amount of gross unrecognized tax benefits, including related interest and penalties, was $ 18.0 million as of December 31, 2022. All of the unrecognized tax benefits are considered non-current. Our policy is to recognize interest and penalties associated with tax matters as part of the income tax provision and include accrued interest and penalties with the related income tax liability on our consolidated balance sheet. During the year ended December 31, 2022, interest expense recorded related to uncertain tax positions was $ 0.4 million Our Uncertain Tax Positions relate to the acquisition of Iponweb. For more information regarding the acquisitions and UTP items please refer to Note 2 Business Combinations. The income taxes we pay are subject to review by taxing jurisdictions globally. Our estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We believe that our estimate has adequately provided for these matters. However, our future results may include adjustments to estimates in the period the audits are resolved, which may impact our effective tax rate. F-46 Note 18. Earnings Per Share Basic Earnings Per Share We calculate basic earnings per share by dividing the net income for the period attributable to shareholders of the Parent by the weighted average number of shares outstanding. Year Ended December 31, 2022 2021 2020 (in thousands, except share data) Net income attributable to shareholders of Criteo S.A. $ 8,952 $ 134,456 $ 71,679 Weighted average number of shares outstanding (note 14) 60,004,707 60,717,446 60,876,480 Basic earnings per share $ 0.15 $ 2.21 $ 1.18 Diluted Earnings Per Share We calculate diluted earnings per share by dividing the net income attributable to shareholders of the Parent by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued from share-based compensation plans (see note 20). There were no other potentially dilutive instruments outstanding as of December 31, 2022, 2021 and 2020. Consequently all potential dilutive effects from shares are considered. For each period presented, a contract to issue a certain number of shares (i.e., share option, share warrant, restricted share award or BSPCE contracts) is assessed as potentially dilutive, if it is “in the money” (i.e., the exercise or settlement price is inferior to the average market price). Year Ended December 31, 2022 2021 2020 (in thousands, except share data) Net income attributable to shareholders of Criteo S.A. $ 8,952 $ 134,456 $ 71,679 Weighted average number of shares outstanding of Criteo S.A. 60,004,707 60,717,446 60,876,480 Dilutive effect of : Restricted share awards 2,554,516 3,061,807 796,609 Share options and BSPCE 117,934 341,971 133,177 Share warrants 83,040 110,413 12,327 Weighted average number of shares outstanding used to determine diluted earnings per share 62,760,197 64,231,637 61,818,593 Diluted earnings per share $ 0.14 $ 2.09 $ 1.16 F-47 The weighted average number of securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute EPS in the future are as follows: Year Ended December 31, 2022 2021 2020 Restricted share awards 172,758 312,413 1,726,506 Share options and BSPCE — — 70,257 Share warrants — — — Weighted average number of anti-dilutive securities excluded from diluted earnings per share 172,758 312,413 1,796,763 Note 19. Commitments and contingencies Purchase Obligations As of December 31, 2022, we had $ 64.3 million of other non-cancellable contractual obligations, primarily related to software licenses, maintenance and $ 0.7 million bandwidth for our servers. Contingencies From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. The amount of the provisions represents management’s latest estimate of the expected impact. Regulatory Matters As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, in November 2018, Privacy International filed a complaint with certain data protection authorities, including France's Commission Nationale de l'Informatique et des Libertés ("CNIL"), against Criteo and a number of other similarly situated advertising technology companies, arguing that certain of these companies' practices were not in compliance with the European Union's General Data Protection Regulation ("GDPR"). In January 2020, CNIL opened a formal investigation into Criteo in response to this complaint, and on June 23, 2021, CNIL notified the Company of the appointment of an investigator (rapporteur) for the ongoing investigation. The investigation also covers another complaint against Criteo received in November 2018 by CNIL from the European Center for Digital Rights ("NOYB"). On August 3, 2022, the assigned rapporteur issued a report that claimed certain GDPR violations, in particular relating to the Company’s contractual relationships with its advertisers and publishers with respect to consent collection oversight. The report includes a proposed financial sanction against the Company of € 60.0 million ($ 63.9 million).Under the CNIL sanction procedures, Criteo has the right to respond in writing to the report, both with respect to the GDPR findings and the value of the sanction, following which there will be a formal hearing before the CNIL Sanction Committee. The CNIL Sanction Committee will then issue a draft decision that will be submitted for consultation to other European data protection authorities as part of the cooperation mechanism mandated by GDPR. Any final decision, including regarding potential financial penalties, will likely not occur until 2023. Pursuant to U.S. GAAP, we establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated, and these accruals are reviewed and adjusted each quarter based on the information available at that time. F-48 Given the receipt of this report, which included a proposed sanction penalty of € 60.0 million ($ 63.9 million), we have accounted for the proposed penalty as a provision for a loss contingency, which is reflected in our financial statements for the period ended as of December 31, 2022 as general and administrative expenses. Such amount could be lower or higher based on the final resolution and merits of the claims made in the report. Non income tax risks We have recorded a $ 33.8 million provision related to certain non income tax items accounted for under "ASC 450 Contingencies". These risks were identified and recognized as part of the Iponweb Acquisition. We have recorded an indemnification asset in the full amount of the provision as the Company is indemnified against certain tax liabilities under the the FPA. The indemnification asset is recorded as part of "Other non current assets" on the consolidated statement of financial position. Note 20. Breakdown of Revenue and Non-Current Assets by Geographical Areas The Company operates in the following three geographical markets: • Americas: North and South America; • Europe, Middle-East and Africa; and • Asia-Pacific. The following tables disclose our consolidated revenue for each geographical area for each of the reported periods. Revenue by geographical area is based mainly on the location of advertisers’ campaigns. Revenue generated in other significant countries where we operate is presented in the following table: Year Ended December 31, 2022 2021 2020 (in thousands) Americas $ 891,267 $ 916,825 $ 894,854 of which United States 798,391 815,797 815,476 EMEA 706,861 844,312 749,672 of which France 111,368 151,611 132,741 of which Germany 196,373 217,965 184,183 Asia-Pacific 418,875 493,098 428,091 of which Japan 253,996 309,378 301,183 Other Information For each reported period, non-current assets (corresponding to the net book value of tangible and intangible assets) are presented in the table below. The geographical information results from the locations of legal entities. Americas EMEA Asia-Pacific Total (in thousands) December 31, 2021 $ 84,954 $ 103,663 $ 33,971 $ 222,588 December 31, 2022 $ 92,952 $ 193,007 $ 21,231 $ 307,190 F-49 Note 21. Subsequent Events There are no significant events that require adjustments or disclosure in the Consolidated Financial Statements. F-50