Criteo S.A. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Form 10-K. This section generally discusses 2024 results compared to 2023 results. Discussion of 2023 results compared to 2022 results to the extent not included in this report can be found in Item 7 of our 2023 Annual Report on Form 10-K. To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"), we present Contribution ex-TAC, and Adjusted EBITDA, which are non-GAAP financial measures. We define Contribution ex-TAC as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other costs of revenue. Contribution ex-TAC is presented in the section entitled "Contribution excluding Traffic Acquisition Costs", which includes a reconciliation to its most directly comparable U.S. GAAP financial measure, Gross Profit. We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter. Adjusted EBITDA is presented in the section entitled "Adjusted EBITDA", which includes a reconciliation to its most directly comparable U.S. GAAP financial measure, Net Income. We also present revenues, traffic acquisition costs and Contribution ex-TAC on a constant currency basis; these measures exclude the impact of foreign currency fluctuations and are computed by applying the average exchange rates for the prior year to the current year figures. A reconciliation is provided in the section entitled "Constant Currency Reconciliation". We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business. As required by the rules of the SEC, we provide reconciliations of the non-GAAP financial measures contained in this document to the most directly comparable measures under GAAP. Overview We are a global technology company driving superior commerce outcomes for marketers and media owners through the world’s leading Commerce Media Platform. We operate in commerce media, the future of digital advertising, leveraging commerce data and artificial intelligence ("AI") to connect ecommerce, digital marketing and media monetization to reach consumers throughout their shopping journey. Our vision is to bring richer experiences to every consumer by supporting a fair and open internet that enables discovery, innovation, and choice – powered by trusted and impactful advertising. We have accelerated and deeply transformed the Company from a single-product to a multi-solution platform provider, fast diversifying our business into new solutions. Beginning in the first quarter of 2024 – following the completion of the integration of our Iponweb acquisition – our Chief Operating Decision Maker, who is our Chief Executive Officer (“CEO”), no longer received disaggregated information for Iponweb. As such, we updated our segment financial reporting structure in line with how the CEO assesses performance and allocates resources. Starting in 2024, we reported two segments: Retail Media and Performance Media. Performance Media combines our former Marketing Solutions and Iponweb segments. As such, prior period segment results and related disclosures have been conformed to reflect the Company’s current reportable segments. 51 Full Year 2024 financial highlights For the year ended December 31, 2024 , revenue was $1,933.3 million , down (1)% compared to the prior year, reflecting growth in Retail Media offset by lower revenue in Performance Media. At constant currency, revenue was flat . Gross profit for the year ended December 31, 2024 increased by 14% to $983.0 million , compared to the prior year, primarily due to lower traffic acquisition costs, lower hosting costs and a decrease in depreciation of data center servers. Contribution ex-TAC for the year ended December 31, 2024 increased by 10% to $1,121.5 million , compared to the prior year, driven by growth in Retail Media and Performance Media. At constant currency, Contribution ex-TAC increased by 11% . Net income for the year ended December 31, 2024 increased by 110% to $114.7 million , compared to the prior year, primarily due to lower traffic acquisition costs. Adjusted EBITDA for the year ended December 31, 2024 increased by 29% to $390.1 million , compared to the prior year, primarily due to higher Contribution ex-TAC. Cash flow from operating activities was $258.2 million for the year ended December 31, 2024 , compared to $224.2 million in the prior year. Trends, Opportunities and Challenges We believe our performance and future success depend on several factors that present significant opportunities but also pose risks and challenges, including those referred to in Part I, Item 1A. Develop and Scale our Commerce Media Platform Our future growth depends upon our ability to retain and scale our existing clients and increase the usage of our Commerce Media Platform as well as adding new customers. We believe that we are in a leading position in the Commerce Media space as we have unique commerce data at scale, deep integrations with retailers, a large client base, differentiated technology and a R&D powerhouse. By unifying the Commerce Media ecosystem with a multi-retailer, multi- channel, multi-format approach and providing full funnel closed loop measurement to our clients, we believe we are well positioned to capture more ad budgets and market share. Business and Macroeconomic Conditions Global economic and geopolitical conditions have been volatile due to factors such as the ongoing conflicts in Ukraine and the Middle East, persistent inflation, and high interest rates. These factors, among others, including the impact of persistent inflation, make it difficult for Criteo and our clients to accurately forecast and plan future business activities, and could cause the company's clients to reduce or delay their advertising spending or increase their cautiousness, which, in turn, could have an adverse impact on our business, financial condition and results of operations. Seasonality In the advertising industry, companies commonly experience seasonal fluctuations in revenue, as many marketers allocate the largest portion of their budgets to the third and fourth quarter of the calendar year in order to coincide with increased back-to-school and holiday purchasing. Historically, the fourth quarter has reflected our highest level of advertising activity for the year. We generally expect the subsequent first quarter to reflect lower activity levels, but this trend may be masked due to the growth of our business. In addition, historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and consumer activity due to the potential impacts of the evolving macroeconomic and geopolitical conditions discussed above. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole. 52 Privacy Trends and Government Regulations We are subject to U.S. and international laws and regulations regarding privacy, data protection, digital advertising and the collection of user data. In addition, large Internet and technology companies such as Google and Apple are making their own decisions as to how to protect consumer privacy with measures resulting in signal loss, which impact the entire digital ecosystem. While Google has announced in July 2024, that it will not pursue its original plan to fully phase out third-party cookies in Chrome, Google has proposed an updated approach that allows users to make an informed choice across web browsing that can be adjusted at any time. This proposal remains subject to consultation with the UK Competition and Market Authority, the Information Commissioner's Office and other global regulators. These developments could cause instability in the advertising technology industry. We have developed a multi-pronged addressability strategy to provide scalability and runtime interoperability of privacy-safe solutions for a more open, unified and efficient ecosystem. 53 A. Operating Results Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of revenue, assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates. An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe estimates associated with (1) r evenue recognition, including judgements made in the determination of whether we are acting as a principle or agent ( 2) income taxes, including i) recognition of deferred tax assets arising from the subsidiaries projected taxable profit for future years, ii) evaluation of uncertain tax positions and iii) recognition of income tax position in respect with tax reforms recently enacted in countries where we operate, (3) assumptions used in valuing long-lived assets including intangible assets, and goodwill, and (4) assumptions surrounding the recognition and valuation of contingent liabilities and losses, are critical as they are made based on assumptions about matters which are uncertain. See Note 1 . Principles and Accounting Methods to our audited consolidated financial statements beginning on page F-1 for a description of our other significant accounting policies. Revenue Recognitio n The determination as to whether revenue should be reported gross of amounts billed to customers or net of payments to publishers requires significant judgment, and is based on our assessment of whether we are acting as the principal or an agent in a transaction. For revenue generated from arrangements that involve purchasing inventory from media o wners, we consider whether we obtain control of the services before they are transferred to the customer, or if we are acting primarily as an agent or intermediary. The assessment of whether we are considered the principal or the agent in a transaction could impact our revenue and cost of revenue recognized in the consolidated statements of income. For additional information regarding revenue and the assumptions used for determining our revenue recognition refer to Note 1 . Principles and Accounting Methods of our financial statements. Income taxes We are subject to income taxes in France and numerous foreign jurisdictions. We record deferred taxes on all temporary differences between the financial reporting and tax bases of assets and liabilities, and on tax losses, using the liability method. The measurement of deferred income tax assets is reduced, when 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 revise the amount of the deferred tax assets downwards or upwards, which could have a significant impact on our financial results. We recognize the tax benefits arising 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 and development 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 to sustain the position. Valuation of Long-lived Assets including Goodwill and Intangible Assets We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill and allocated to reporting units based on the expected benefit from the business combination. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. 54 Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users, acquired technology, acquired patents, and trade names from a market participant perspective, useful lives, and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Goodwill is tested for impairment at the reporting unit level annually, or more frequently if events or changes in circumstances would indicate that the fair value of a reporting unit may be below its carrying value. Goodwill has been allocated to segments using a relative fair value allocation approach. As of December 31, 2024 , no impairment of goodwill has been identified. In 2024, the Company voluntarily changed its goodwill and indefinite-lived intangible asset annual impairment test date from December 31 to October 1. Refer to Note 10 Goodwill of our financial statements beginning on page F-1. Long-lived assets, including property and equipment and finite-lived intangible assets are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. Contingent Losses and Liabilities With respect to litigation, claims and other non-income tax risks that may result in a provision to be recognized, we exercise significant judgment in measuring and recognizing provisions or determining exposure to contingent liabilities that are related to pending litigation, other outstanding claims and non-income tax risks. Contingency provisions are recognized when they are determined to be both probable and estimable. These judgments and estimates are subject to change as new information becomes available. Change in Accounting Estimate In January 2025, we completed an assessment of the useful lives of our servers and network equipment, resulting in a change in the estimated useful life of certain servers and network equipment from five to six years, which we expect to result in a reduction of depreciation of approximately $7 million for the full fiscal year 2025 for assets in service as of December 31, 2024. For additional information regarding the change in useful lives refer to Note 1 . Principles and Accounting Methods of our financial statements. Components of Results of Operations The key elements of our results of operations include: Revenue For Performance Media, we primarily generate revenues by delivering personalized display advertisements featuring product-level recommendations either directly to clients or to advertising agencies. Such products are generally sold based on a click or impression based pricing model. Revenues are recognized when an ad is clicked on or displayed to the end user as that is 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. The amount we charge to the customers varies depending on the optimization strategy of the Criteo engine, the dynamics and performance of the market, amongst other factors. Performance Media revenue can be recognized on a gross or net basis as we act either as a principal or an agent in the transaction. 55 For Retail Media, we generate revenue by providing our platform to brands, agencies and retailers for the purchase and sale of digital advertising inventory. Generally, our revenue is based on a percentage of working media spend that runs through our platform. The working media spend running through the platform depends on various factors, such as but not limited to the number of customers using the platform and the budgets allocated by brands and agencies to the Criteo platform. In Retail Media, we also generate revenue through providing additional professional services to our customers. Retail Media revenue is primarily recognized on a net basis, as we act as an agent in the transaction. The determination of whether we act as a principal or an agent on a product or contract level is primarily based on the following factors: (i) whether we control the advertising inventory before it is transferred to our clients, (ii) whether we have inventory risks or purchase the inventory upfront and (iii) whether we have discretion in establishing prices. Refer to Note 1 . Principles and Accounting Methods of our financial statements for a description of our revenue recognition policies. Cost of Revenue Our cost of revenue includes traffic acquisition costs and other cost of revenue. Traffic acquisition costs consist primarily of purchases of impressions from publishers on a CPM basis, incurred to generate our revenues, for the Performance Media segment. We purchase impressions directly from publishers or third-party intermediaries, such as advertisement exchanges. We recognize cost of revenue on a publisher by publisher basis as incurred. Costs owed to publishers but not yet paid are recorded in our Consolidated Statements of Financial Position as trade payables. For a discussion of the trends we expect to see in traffic acquisition costs, see the section entitled " - Highlights and Trends - Contribution ex-TAC" in Item 7.E -Trend Information below. Other cost of revenue includes expenses related to depreciation of data center equipment, lease cost of data centers, cost of data purchased from third parties, digital taxes, and third-party hosting fees . 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. Operating Expenses Operating expenses consist of research and development, sales and operations, and general and administrative expenses. Salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs are the most significant components of each of these expense categories. Research and development expenses consist primarily of headcount-related expenses for our employees working in the engine, platform, site reliability engineering, scalability, infrastructure, engineering program management, product, analytics and other teams, including salaries, bonuses, share-based compensation and other personnel related costs. Also included are non-personnel costs such as subcontracting, consulting and professional fees to third-party development resources, allocated overhead, including internal IT and depreciation and amortization costs. These expenses are partially offset by the French research tax credit that is conditional upon the level of our expenditures in research and development. Sales and operations expenses consist primarily of headcount-related expenses for our employees working in our sales, account strategy, sales operations, publisher business development, analytics, marketing, technical solutions, creative services and other teams, including salaries, bonuses, share-based compensation, and other personnel-related costs. Additional expenses in this category include travel and entertainment, marketing and promotional events, marketing activities, provisions for doubtful accounts, subcontracting, consulting and professional fees paid to third parties, allocated overhead, including internal IT costs. General and administrative expenses consist primarily of headcount-related expenses, including salaries, bonuses, share- based compensation, pension benefits and other personnel-related costs for our administrative, legal, information technology, human resources, facilities and finance teams. Additional expenses included in this category include travel- related expenses, subcontracting and professional fees, audit fees, tax services and legal fees, as well as insurance and other corporate expenses, along with allocated overhead, including internal IT costs. 56 Financial and Other Income (Expense) Financial and Other Income (Expense) primarily consists of: • Exchange differences arising on the settlement or translation into local currency of monetary balance sheet items labeled in euros (the Company's functional currency). At December 31, 2024 , our exposure to foreign currency risk was centralized at parent company level and hedged. These exchange differences in euro are then translated into U.S. dollars (the Company's reporting currency) according to the average euro/U.S. dollar exchange rate. • Interest received on our cash and cash equivalents and interest incurred on outstanding borrowings under our debt loan agreements and revolving credit facilities ("RCFs"). • Other income (expense) mainly arising from gains and losses on investments. Provision for Income Taxes We are subject to income taxes in France, the U.S. and numerous other jurisdictions. We recognize tax liabilities based on estimates of whether additional taxes will be due. These tax liabilities are recognized when we believe that certain positions may not be fully sustained upon review by tax authorities, notwithstanding our belief that our tax return positions are supportable. Our effective tax rates differ from the statutory rate applicable to us primarily due to valuation allowance on deferred tax assets, differences between domestic and foreign jurisdiction tax rates, Research Tax Credit offsets, which are non-taxable items, potential tax audit provision settlements, share-based compensation expenses that are non-deductible in some jurisdictions under certain circumstances, non-tax deductible provision from the loss contingency on regulatory matter, and transfer pricing adjustments. We license access to our technology to our subsidiaries and charge a royalty fee to these subsidiaries for such access. In France, we benefit from a reduced tax rate of 10% on a large portion of this technology royalty income. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements applicable to us, see Note 1 to our audited consolidated financial statements beginning on page F-1. 57 Results of Operations for the Years Ended December 31, 2024 , 2023 and 2022 Revenue breakdown by segment Year Ended December 31, 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands) Revenue as reported $ 1,933,289 $ 1,949,445 $ 2,017,003 (1) % (3) % Conversion impact U.S. dollar/other currencies 24,509 8,927 147,636 Revenue at constant currency $ 1,957,798 $ 1,958,372 $ 2,164,639 — % (3) % Retail Media as reported $ 258,303 $ 209,007 $ 202,317 24 % 3 % Conversion impact U.S. dollar/other currencies 572 (1,143) 4,975 Retail Media at constant currency $ 258,875 $ 207,864 $ 207,292 24 % 3 % Performance Media revenue as reported $ 1,674,986 $ 1,740,438 $ 1,814,686 (4) % (4) % Conversion impact U.S. dollar/other currencies 23,937 10,070 142,661 Performance Media revenue at constant currency $ 1,698,923 $ 1,750,508 $ 1,957,347 (2) % (4) % 2024 Compared to 2023 Revenue in 2024 decreased $(16.2) million , or (1)% (or flat on a constant currency basis) to $1,933.3 million compared to 2023 . The year-over-year decrease in revenue was driven by lower Performance Media revenue, partially offset by the increase in Retail Media revenue. Performance Media revenue decreased (4)% (or (2)% on a constant currency basis) to $1,675.0 million for 2024 , driven by lower spend in our media trading marketplace, soft retail trends, partially offset by continued strength in travel and classifieds. Retail Media revenue increased 24% (or 24% on a constant currency basis) to $258.3 million for 2024 , driven by continued strength in Retail Media onsite, in particular in the U.S. market, and growing network effects of onboarding brands and retailers to the platform. 2023 compared to 2022 Revenue in 2023 decreased $(67.6) million , or (3)% (or (3)% on a constant currency basis) to $1,949.4 million compared to 2022 . The year-over-year decrease in rev enue was driven by lower Performance Media partially offset by the increase in Retail Media revenue. Performance Media revenue decreased (4)% (or (4)% on a constant currency basis) to $1,740.4 million for 2023 , reflecting decreased spend from large clients, notably on our retargeting solutions, as they adjusted their advertising budgets to the uncertain macro economic environment. This was partially offset by the contribution from the acquisition of Iponweb that was completed in August 2022. Retail Media re venue increased 3% (or 3% on a constant currency basis) to $209.0 million for 2023 , reflecting the strong performance with large retailers across the U.S. and EMEA, partially offset by the technical and transitory impact related to the client migration to the Company's platform. Criteo's platform accounted for most of Retail Media revenue for the year ended December 31, 2023 , and its revenue is accounted for on a net basis. In 2022 , close to 79% of Retail Media revenue was accounted for on a net basis, and as a result of this transition to a full platform business, the growth of Retail Media revenue was temporarily impacted. Reflecting the underlying economic performance, Retail Media's Contribution ex-TAC increased 26% (or 26% on a constant currency basis) in the year ended December 31, 2023 , mainly driven by strength in the U.S. market. 58 Revenue breakdown by region Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands) Revenue as reported $ 1,933,289 $ 1,949,445 $ 2,017,003 (1) % (3) % Conversion impact U.S. dollar/other currencies 24,509 8,927 147,636 Revenue at constant currency $ 1,957,798 $ 1,958,372 $ 2,164,639 — % (3) % Americas Revenue as reported $ 892,175 $ 887,247 $ 891,267 1 % — % Conversion impact U.S. dollar/other currencies 3,816 (2,638) (596) Revenue at constant currency $ 895,991 $ 884,609 $ 890,671 1 % (1) % EMEA Revenue as reported $ 676,455 $ 672,610 $ 706,861 1 % (5) % Conversion impact U.S. dollar/other currencies 1,283 (28,430) 86,587 Revenue at constant currency $ 677,738 $ 644,180 $ 793,448 1 % (9) % Asia-Pacific Revenue as reported $ 364,659 $ 389,588 $ 418,875 (6) % (7) % Conversion impact U.S. dollar/other currencies 19,410 39,995 61,645 Revenue at constant currency $ 384,069 $ 429,583 $ 480,520 (1) % 3 % 2024 Compared to 2023 Our revenue in the Americas region increased $4.9 million or 1% (or 1% on a constant currency basis) to $892.2 million for 2024 compared to 2023 . This reflects continued strong performance of Retail Media as the platform continues to scale with large retailers and consumer brands, and strength in travel and classifieds in Performance Media, partially offset by soft retail trends and lower spend in our media trading marketplace and supply. Our revenue in the EMEA region increased $3.8 million , or 1% (or 1% ) on a constant currency basis) to $676.5 million for 2024 compared to 2023 . This increase was driven by continued traction in Retail Media and continued strength in travel and classifieds, partially offset by soft retail trends. Our revenue in the Asia-Pacific region decreased $(24.9) million , or (6)% (or (1)% on a constant currency basis) to $364.7 million for 2024 compared to 2023 . The decrease was driven by soft classified trends, partially offset by solid retail and travel trends in the region. Additionally, $1,933.3 million of revenue for 2024 was negatively impacted by $24.5 million of currency fluctuations, particularly as a result of the depreciation of the euro compared to the U.S. dollar. 2023 Compared to 2022 Our revenue in the Americas region decreased $(4.0) million or (0.5)% (or (1)% on a constant currency basis) to $887.2 million for 2023 compared to 2022 . This reflects negative retail trends in Performance Media and the impact of recognizing revenue on a net basis for clients transitioning to the Company's platform, partially offset by the continued strong performance of Retail Media, as the platform continues to scale with consumer brands and large retailers and growing network effects of the platform. Our revenue in the EMEA region decreased $(34.3) million , or (5)% (or (9)% on a constant currency basis) to $672.6 million for 2023 compared to 2022 . This decrease was driven by negative retail trends in Performance Media, in 59 particular in the UK and France, and the suspension of our business in Russia effective as of March 2022, partially offset by the positive performance of Retail Media across the region. Our revenue in the Asia-Pacific region decreased $(29.3) million , or (7)% (or increased 3% on a constant currency basis) to $389.6 million for 2023 compared to 2022 . The increase was driven by higher spend from retail clients in the region , in particular in Thailand and South Korea. Additionally, $1,949.4 million of revenue for 2023 was negatively impacted by $8.9 million of currency fluctuations, particularly as a result of the appreciation of the euro compared to the U.S. dollar. Cost of Revenue Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percentages) Traffic acquisition costs $ 811,806 $ 926,839 $ 1,088,779 (12)% (15)% Other cost of revenue 138,512 159,562 133,024 (13)% 20% Total cost of revenue $ 950,318 $ 1,086,401 $ 1,221,803 (13)% (11)% % of revenue 49 % 56 % 61 % % of Gross profit 51 % 44 % 39 % Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percentages) Retail Media $ 4,457 $ 5,547 $ 40,957 (20)% (86)% Performance Media 807,349 921,292 1,047,822 (12)% (12)% Traffic Acquisition Costs $ 811,806 $ 926,839 $ 1,088,779 (12)% (15)% 2024 Compared to 2023 Cost of revenue for 2024 decreased $(136.1) million , or (13)% , compared to 2023 . This decrease was primarily the result of a $(115.0) million , or (12)% decrease in traffic acquisition costs (or (11)% on a constant currency basis), and $(21.1) million , or (13)% decrease in other cost of revenue. The decrease in Performance Media's traffic acquisition costs of (12)% (or (11)% decrease on a constant currency basis) related primarily to the (19)% decrease in the average CPM for inventory purchased, including lower CPMs for signal- limited environments where Criteo continues to perform, partially offset by an 8% increase in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns. Traffic acquisition costs in Retail Media decreased by (20)% . The decrease in other cost of revenue includes a decrease in depreciation of data center servers of $(11.2) million, other cost of sales of $(7.5) million and hosting costs of $(2.4) million. 2023 Compared to 2022 Cost of revenue for 2023 decreased $(135.4) million , or (11)% , compared to 2022 . This decrease was primarily the result of a $(161.9) million , or (15)% decrease in traffic acquisition costs (or (14)% on a constant currency basis), partially offset by a $26.5 million , or 20% increase in other cost of revenue. 60 The decrease in Performance Media's traffic acquisition costs of (12)% (or (11)% decrease on a constant currency basis) related primarily to the (13)% decrease in the average CPM for inventory purchased, including lower CPMs for signal- limited environments where Criteo continues to perform, partially offset by a 1% increase in the number of impressions we purchased, reflecting our expanding relationships with existing and new publisher partners, in particular through direct connections, to support client demand for advertising campaigns. Traffic acquisition costs in Retail Media decreased by (86)% reflecting the technical and transitory impact related to the client migration of our platform, as we recognize revenue on a net basis. The increase in other cost of revenue includes an increase in hosting costs of $27.9 million and other cost of sales of $3.7 million, offset by a decrease of $(5.1) million in depreciation of data center servers. Contribution excluding Traffic Acquisition Costs We define Contribution excluding Traffic Acquisition Costs, "Contribution ex-TAC", as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other costs of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. We have included Contribution ex-TAC because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Contribution ex-TAC has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Contribution ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Contribution ex-TAC alongside our other U.S. GAAP financial measures. The below table provides a reconciliation of Contribution ex-TAC to gross profit: Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percentages) Gross Profit $ 982,971 $ 863,044 $ 795,200 14 % 9 % Other Cost of Revenue 138,512 159,562 133,024 (13) % 20 % Contribution ex-TAC $ 1,121,483 $ 1,022,606 $ 928,224 10 % 10 % 61 The following table sets forth our revenue and Contribution ex-TAC by segment: Year Ended December 31, % change Segment 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands) Revenue Retail Media $ 258,303 $ 209,007 $ 202,317 24 % 3 % Performance Media 1,674,986 1,740,438 1,814,686 (4) % (4) % Total $ 1,933,289 $ 1,949,445 $ 2,017,003 (1) % (3) % Contribution ex-TAC Retail Media $ 253,846 $ 203,460 $ 161,360 25 % 26 % Performance Media 867,637 819,146 766,864 6 % 7 % Total $ 1,121,483 $ 1,022,606 $ 928,224 10 % 10 % Gross Profit increased $119.9 million , or 14% for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023, and Contribution ex-TAC increased $98.9 million , or 10% for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 . The increase in Gross Profit and Contribution ex-TAC was driven by continuous growth in Retail Media, in particular in the U.S. market, and lower traffic acquisition costs in Performance Media, related primarily to the decrease of the average CPM for inventory purchased. Gross Profit increased $67.8 million , or 9% for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022, and Contribution ex-TAC increased $94.4 million , or 10% for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022. The increase in Gross Profit and Contribution ex-TAC was driven the strong performance with large retailers across the U.S. and EMEA in Retail Media, and by the contribution from the acquisition of Iponweb in Performance Media . Constant Currency Reconciliation Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands) Revenue as reported $ 1,933,289 $ 1,949,445 $ 2,017,003 (1) % (3) % Conversion impact U.S. dollar/other currencies 24,509 8,927 147,636 Revenue at constant currency $ 1,957,798 $ 1,958,372 $ 2,164,639 — % (3) % Traffic acquisition costs as reported $ 811,806 $ 926,839 $ 1,088,779 (12) % (15) % Conversion impact U.S. dollar/other currencies 9,529 5,815 63,434 Traffic acquisition cost at constant currency $ 821,335 $ 932,654 $ 1,152,213 (11) % (14) % Contribution ex-TAC as reported $ 1,121,483 $ 1,022,606 $ 928,224 10 % 10 % Conversion impact U.S. dollar/other currencies 14,980 3,112 84,202 Contribution ex-TAC at constant currency $ 1,136,463 $ 1,025,718 $ 1,012,426 11 % 11 % Other cost of revenue as reported $ 138,512 $ 159,562 $ 133,024 (13) % 20 % Gross profit as reported $ 982,971 $ 863,044 $ 795,200 14 % 9 % 62 Research and Development Expenses Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent of revenue) Research and development expenses $ 279,341 $ 242,289 $ 187,596 15% 29% % of revenue 14 % 12 % 9 % 2024 Compared to 2023 Research and development expenses for 2024 increased $37.1 million , or 15% , compared to 2023 . This increase mainly related to an increase in amortization of intangibles and headcount-related expenses. 2023 Compared to 2022 Research and development expenses for 2023 increased $54.7 million , or 29% , compared to 2022 . This increase mainly related to an increase in share-based compensation related to the Iponweb acquisition, amortization of Iponweb acquisition-related intangible assets and the headcount-related expenses. Sales and Operations Expenses Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent of revenue) Sales and operations expenses $ 376,090 $ 406,012 $ 377,996 (7)% 7% % of revenue 19 % 21 % 19 % 2024 Compared to 2023 Sales and operations expenses for 2024 decreased $(29.9) million , or (7)% , compared to 2023 . This decrease was mainly driven by a decrease in headcount-related expenses, bad debt expense and rent and facilities cost partially offset by marketing costs. 2023 Compared to 2022 Sales and operations expenses for 2023 increased $28.0 million , or 7% , compared to 2022 . This increase was mainly driven by an increase in headcount-related expenses and share-based compensation offset by a decrease in marketing expenses. 63 General and Administrative Expenses Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent of revenue) General and administrative expenses $ 176,138 $ 137,525 $ 205,330 28% (33)% % of revenue 9 % 7 % 10 % 2024 Compared to 2023 General and administrative expenses for 2024 increased $38.6 million , or 28% , compared to 2023 . This increase was mainly related to the partial reversal of the loss contingency in 2023 related to the CNIL matter as described in Note 20 , as well as third party services costs partially offset by a decrease of headcount-related expenses. 2023 Compared to 2022 General and administrative expenses for 2023 decreased $(67.8) million , or (33)% , compared to 2022 . This decrease was mainly related to the partial reversal of the loss contingency related to the CNIL matter as described in Note 20 . Financial and Other Income (Expense) Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent of revenue) Financial and Other Income (Expense) $ 3,095 $ (2,490) $ 17,783 (224)% (114)% % of revenue 0.2 % (0.1) % 0.9 % 2024 Compared to 2023 Financial and Other Income for 2024 increased by $5.6 million , or (224)% compared to 2023 . The $3.1 million financial and other income for the period ended December 31, 2024 was mainly driven by interests income offset by the recognition of a negative impact of foreign exchange, including end of year noncash marked to market, the accretion of earn-out liability related to the Iponweb acquisition and financial expense relating to our €407 million available Revolving Credit Facility (RCF). 2023 Compared to 2022 Financial and Other Expense for 2023 decreased by $(20.3) million , or (114)% compared to 2022 . The $(2.5) million financial and other expense for the period ended December 31, 2023 was mainly driven by proceeds from disposal of non consolidated investments fully offset by the recognition of a negative impact of foreign exchange, the accretion of earn-out liability related to the Iponweb acquisition and financial expense relating to our €407 million available Revolving Credit Facility (RCF). 64 Provision for Income Taxes Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent information) Provision for income taxes $ 39,784 $ 20,084 $ 31,186 98% (36)% % of revenue 2 % 1 % 2 % Effective tax rate 25.8 % 26.9 % 74.1 % 2024 Compared to 2023 The provision for income taxes for 2024 increased by $19.7 million , or 98% , compared to 2023 , due to the increase in profit before income taxes due to higher Contribution ex-TAC, and cost reduction actions. The annual effective tax rate for 2024 was 25.8% , compared to an annual effective tax rate of 26.9% for 2023 . The annual effective tax rate differs from the statutory rates primarily due to the impact of the domestic tax deduction applicable to technology royalty income we received from our subsidiaries, non deductible payroll expenses, differences in tax rates in foreign jurisdictions, tax loss carryforwards in certain foreign subsidiaries, non-recognition of deferred tax assets related to tax losses and temporary differences, recognition of previously unrecognized tax losses and equity awards compensation expense. In 2024 , our income before taxes increased by $79.8 million to $154.5 million , compared to 2023 , generating a $39.9 million theoretical income tax expense at a nominal standard French tax rate of 25.8% . This theoretical tax expense is impacted mainly by the following items contributing to a $39.8 million effective tax expense and a 25.8% effective tax rate: $5.7 million of net effect of share-based compensation, $7.7 million of permanent differences mainly employee costs, offset by $(5.8) million tax deduction resulting from technology royalty income we received from our subsidiaries, and the recognition or reversal of valuation allowance on deferred tax assets of $(5.8) million . Please see Note 18 to our audited consolidated financial statements for more detailed information on the provision for income taxes. As of December 31, 2024 , the adoption of Pillar Two resulted in an impact of $3.0 million recognized in Provision for income taxes within the Consolidated Statement of Operations. The global regulatory environment, including the introduction of Pillar Two, adds uncertainty on the future business environment. We will continue to assess the ongoing impact of Pillar Two as additional guidance becomes available. Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. As at December 31, 2024 , 2023 and 2022 , the valuation allowance against net deferred income taxes amounted to $27.6 million , $29.8 million and $31.1 million , which related mainly to Criteo Corp. ( $5.9 million , $5.7 million and $5.7 million , respectively), Criteo Brazil ( $— million , $2.7 million and $3.3 million , respectively), Criteo Ltd ( $9.3 million , $10.7 million and $8.1 million , respectively), Criteo Singapore ( $— million , $1.2 million and $1.5 million ), Criteo Australia Pty ( $2.9 million , $2.9 million and $2.6 million ) and Criteo France ( $8.7 million , $5.0 million and $6.5 million , respectively). 2023 Compared to 2022 The provision for income taxes for 2023 decreased by $(11.1) million , or (36)% , compared to 2022 , due to the non deductible loss contingency related to the CNIL matter as described in Note 20 . The annual effective tax rate for 2023 was 26.9% , compared to an annual effective tax rate of 74.1% for 2022 . The annual effective tax rate differs from the statutory rates primarily due to the impact of the domestic tax deduction applicable to technology royalty income we received from our subsidiaries, differences in tax rates in foreign jurisdictions, tax loss carryforwards in certain foreign subsidiaries, non-recognition of deferred tax assets related to tax losses and temporary differences, recognition of previously unrecognized tax losses and equity awards compensation expense. 65 In 2023 , our income before taxes increased by $32.7 million to $74.7 million , compared to 2022 , generating a $19.3 million theoretical income tax expense at a nominal standard French tax rate of 25.8% . This theoretical tax expense is impacted mainly by the following items contributing to a $20.1 million effective tax expense and a 26.9% effective tax rate: $8.8 million of net effect of share-based compensation, $2.8 million of permanent differences mainly employee costs, $0.9 million of deferred tax assets on which we recognized a valuation allowance, offset by $(4.3) million tax deduction resulting from technology royalty income we received from our subsidiaries, $(5.5) million resulting from the non-tax deductible provision following the loss contingency on regulatory matters (refer to Note 20 ), and the recognition or reversal of valuation allowance on deferred tax assets of $(1.8) million . Please see Note 18 to our audited consolidated financial statements for more detailed information on the provision for income taxes. Amounts recognized in our Consolidated Financial Statements are calculated at the level of each subsidiary within our Consolidated Financial Statements. Adjusted EBITDA We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income. 66 Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent information) Net Income (loss) $ 114,713 $ 54,644 $ 10,875 110% 402% Adjustments: Financial (Income) expense (3,095) 2,805 (17,053) (210)% 116% Provision for income taxes 39,784 20,084 31,186 98% (36)% Equity awards compensation expense 105,742 99,222 65,035 7% 53% Pension service costs 495 401 1,756 23% (77)% Depreciation and amortization expense 101,193 99,653 89,018 2% 12% Acquisition-related costs 1,439 1,894 12,584 (24)% (85)% Net loss contingency on regulatory matters — (21,632) 63,221 100% (134)% Restructuring, integration and transformation costs 29,847 44,727 10,677 (33)% 319% Total net adjustments 275,405 247,154 256,424 11% (4)% Adjusted EBITDA $ 390,118 $ 301,798 $ 267,299 29% 13% The following table presents our Adjusted EBITDA on a comparative basis: Year Ended December 31, % change 2024 2023 2022 2024 vs 2023 2023 vs 2022 (in thousands, except percent information) Net Income $ 114,713 $ 54,644 $ 10,875 110% 402% Adjusted EBITDA $ 390,118 $ 301,798 $ 267,299 29% 13% Net income increased $60.1 million , or 110% for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 , and Adjusted EBITDA increased $88.3 million , or 29% for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 . The increase in Net Income and Adjusted EBITDA was primarily due to higher Contribution ex-TAC and cost reduction actions Net income increased $43.8 million , or 402% for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 , and Adjusted EBITDA increased $34.5 million , or 13% for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 . The increase in Net Income was primarily due to higher Contribution ex-TAC, cost reduction actions and the partial reversal of the loss contingency related to the CNIL matter described in Note 20 . The increase in Adjusted EBITDA was primarily due to higher Contribution ex-TAC and cost reduction actions. 67 Unaudited Quarterly Results of Operations The following tables set forth our unaudited consolidated statement of income data for the last eight quarters. We derived this information from our unaudited interim consolidated financial information, which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the information for the quarters presented. The quarterly results of operations have been prepared by, and are the responsibility of, our management and have not been audited or reviewed by our independent registered public accounting firm. You should read this information together with our audited consolidated financial statements and related notes beginning on page F-1. Three Months Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 (in thousands) Consolidated Statements of Income Data: Revenue $ 553,035 $ 458,892 $ 471,307 $ 450,055 $ 566,302 $ 469,193 $ 468,934 $ 445,016 Cost of revenue Traffic acquisition costs 218,636 192,789 204,214 196,167 249,926 223,798 228,717 224,398 Other cost of revenue 33,428 34,171 34,248 36,665 39,750 40,268 40,435 39,109 Gross profit 300,971 231,932 232,845 217,223 276,626 205,127 199,782 181,509 Operating expenses Research and development expenses 67,559 85,285 59,639 66,858 48,402 62,522 67,775 63,590 Sales and operations expenses 97,356 90,823 95,069 92,842 97,687 94,572 112,511 101,242 General and administrative expenses 41,548 46,222 41,199 47,169 42,219 36,599 18,537 40,170 Total operating expenses 206,463 222,330 195,907 206,869 188,308 193,693 198,823 205,002 Income (loss) from operations 94,508 9,602 36,938 10,354 88,318 11,434 959 (23,493) Financial and Other income (expense) 2,206 (8) (284) 1,181 (4,498) (2,967) (1,852) 6,827 Income (loss) before taxes 96,714 9,594 36,654 11,535 83,820 8,467 (893) (16,666) Provision for income taxes 24,770 3,450 8,595 2,969 21,769 1,832 1,078 (4,595) Net income (loss) $ 71,944 $ 6,144 $ 28,059 $ 8,566 $ 62,051 $ 6,635 $ (1,971) $ (12,071) Net income (loss) available to shareholders of Criteo S.A. 71,095 6,245 26,987 7,244 61,017 6,927 (2,874) (11,809) 68 B. Liquidity and Capital Resources. Market Risk We are mainly exposed to changes of foreign currency exchange rate fluctuations. The functional currency of the Company is the euro, while our reporting currency is the U.S. dollar. Because we incur some of our expenses and derive revenues in currencies other than the euro, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. Foreign exchange risk exposure also arises from intra-company transactions and financing with subsidiaries that have a functional currency different than the euro. The statements of financial position of consolidated entities having a functional currency different from the U.S. dollar are translated into U.S. dollars at the closing exchange rate (spot exchange rate at the statement of financial position date) and the statement of income, statement of comprehensive income and statement of cash flow of such consolidated entities are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption “Accumulated Other Comprehensive Income” in the Consolidated Statement of Changes in Equity. At December 31, 2024 , 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. 69 Foreign Currency Risk A hypothetical 10% increase or decrease of the Pound Sterling, the euro, the Japanese yen or the Brazilian real against the U.S. dollar would have impacted the Consolidated Statements of Income as follows: Year Ended December 31, 2024 2023 2022 (in thousands) GBP/USD +10% -10% +10% -10% +10% -10% Net income (loss) impact $ 245 $ (245) $ (86) $ 86 $ (444) $ 444 Year Ended December 31, 2024 2023 2022 (in thousands) BRL/USD +10% -10% +10% -10% +10% -10% Net income (loss) impact $ 275 $ (275) $ 220 $ (220) $ (235) $ 235 Year Ended December 31, 2024 2023 2022 (in thousands) JPY/USD +10% -10% +10% -10% +10% -10% Net income (loss) impact $ 4,065 $ (4,065) $ 408 $ (408) $ 2,489 $ (2,489) Year Ended December 31, 2024 2023 2022 (in thousands) EUR/USD +10% -10% +10% -10% +10% -10% Net income (loss) impact $ 4,003 $ (4,003) $ 156 $ (156) $ (2,169) $ 2,169 Counterparty Risk As of December 31, 2024 , we show a positive net cash position. We utilize cash pooling arrangements, reinforcing cash management centralization. Investment and financing decisions are governed by our Investment and Risk Management Policy and carried out by our internal central treasury function, ensuring investments are entered into with high credit ratings, balanced counterparties. 70 Liquidity Risk Sources of Liquidity Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations. We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future. We are party to several revolving credit facilities with several third-party financial institutions. Our revolving credit facilities as of December 31, 2024 are presented in the table below: Nominal/ Authorized amounts Amount drawn as of December 31, 2024 Amount Outstanding as of December 31, 2024 Nature (in thousands) Interest rate Settlement date Bank Syndicate Revolving Credit Facility - September 2022 € 407,000 € — € 407,000 Floating rate: EURIBOR / SOFR + margin depending on leverage ratio September 2027 Other short-term lines of credit € 21,500 € — € 21,500 EURIBOR For additional information regarding our resolving credit facilities , please refer to Note 11 - Financial Liabilities. The Bank Syndicate Revolving Line of Credit is unsecured and contains 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. As of year-end December 31, 2024 , we were in compliance with the required covenants. On November 17, 2023, we updated certain terms of our syndicated credit facility to a €407 million ( $423 million ) sustainability-linked credit facility. Certain terms and conditions of the amended credit facility are now linked to our sustainability goals to increase the representation of women in tech roles and reduce our GHG emissions, while the rest of the credit facility agreement remains unchanged. We are also party to short-term credit lines in the form of overdraft facilities with HSBC Holdings plc, LCL and BNP Paribas. We are authorized to draw up to a maximum of €21.5 million ( $22.3 million ) in the aggregate under those short-term credit lines and overdraft facilities. As of December 31, 2024 , we had not drawn on either of these facilities. Our banks have the ability to terminate such facilities on short notice. Our cash and cash equivalents and restricted cash at December 31, 2024 were held for working capital and general corporate purposes, which could include acquisitions, and amounted to $290.9 million as of December 31, 2024 . The $(120.4) million decrease in cash and cash equivalents and restricted cash compared with December 31, 2023 primarily resulted from an increase of $258.2 million in cash from operating activities, offset by a $(97.9) million decrease in cash for investing activities, and by a decrease of $(270.5) million in cash for financing activities. In addition, the cash flows were also negatively impacted by $(10.2) million due to foreign exchange rates impact on our consolidated cash position in USD over the period. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts and term deposit accounts. Furthermore, Criteo had financial liquidity of approximately $782.3 million , including its cash position, short term investments, its Revolving Credit Facility and treasury shares available for acquisitions as of December 31, 2024 . Overall, we believe that our current financial liquidity, combined with our expected cash-flow generation in 2025 , enables financial flexibility and the meeting of all material contractual obligations. 71 Share Buy-back Programs In December 2022 , we completed a $136.0 million share repurchase program. In 2023 , we completed an additional $125.0 million share repurchase, and in 2024 , we completed an additional $224.6 million share repurchase. All above programs have been implemented under our multi-year authorization granted by Board of Directors. In January 2025, this authorization was extended to a total amount of up to $805.0 million. Other than these repurchase programs, we intend to retain all available funds and any future earnings to fund our growth. Operating and Capital Expenditure Requirements In 2024 , 2023 and 2022 , our net capital expenditures were $(76.6) million , $(114.3) million and $(55.8) million , respectively, primarily related to the acquisition of data center and server equipment, and internal IT systems. We expect our capital expenditures to remain at, or slightly below, 5% of revenue for 2025 , as we plan to continue to build, reshape and maintain additional data center equipment capacity in all regions and we keep investing in our Commerce Media Platform. We believe our existing cash balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, the amount and timing of our investments in personnel and capital equipment, and the timing and extent of our introduction of new products and product enhancements. If our cash and cash equivalents balances and cash flows from operating activities are insufficient to satisfy our liquidity requirements, we may need to raise additional funds through equity, equity-linked or debt financings to support our operations, and such financings may not be available to us on acceptable terms, or at all. We may also need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies, assets or products. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing will be dilutive to our shareholders. Historical Cash Flows The following table sets forth our cash flows for 2024 , 2023 and 2022 : Year Ended December 31, 2024 2023 2022 (in thousands) Cash flows provided by operating activities $ 258,161 $ 224,246 $ 255,985 Cash used in investing activities (97,901) (108,712) (166,119) Cash used for financing activities $ (270,499) $ (147,254) $ (113,044) Our cash and cash equivalents at December 31, 2024 were held for working capital and general corporate purposes, which could include acquisitions. The decrease in cash and cash equivalents compared with December 31, 2023 , primarily resulted from an increase of $258.2 million in cash flows from operating activities fully offset by a decrease of $(97.9) million in cash flows used for investing activities and a decrease of $(270.5) million in cash flows used for financing activities. 72 Operating Activities Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating expense items such as depreciation, amortization, equity awards compensation, deferred tax assets and income taxes. In 2024 , net cash flows provided by operating activities were $258.2 million and consisted of net income of $114.7 million , $192.1 million in adjustments for noncash and nonoperating items and $(48.7) million of cash flows from working capital and other assets and liabilities. Adjustments for noncash and nonoperating items mainly consisted of depreciation and amortization expense of $87.8 million and equity awards compensation expense of $106.6 million . The $(48.7) million decrease in cash resulting from changes in working capital primarily consisted of a $(28.5) million increase in accounts receivable and a $(17.2) million decrease in accounts payable, partly driven by the mix of our segments, largely related to the acceleration of Retail Media. The $33.9 million increase of cash flow from operating activities during 2024 compared to 2023, was mostly due to the 2023 payment of $(43.3) million of a contingent liability for regulatory matters. Investing Activities In 2024 , net cash flows used in investing activities were $97.9 million and consisted of $76.6 million for net purchases of servers and other data center equipment and capitalized software development costs , and $20.7 million change in other noncurrent financial assets resulting from investments in Marketable Securities (see Note 5 ). The $10.8 million decrease in cash used in investing activities during 2024 compared to 2023, was mostly due to decreases of the purchases of servers and other data center equipment and capitalized software development costs. Financing Activities In 2024 , net cash used in financing activities was $270.5 million mainly resulting from the $224.6 million impact from our share repurchase program, a $52.0 million payout of the earn-out liability resulting from the Iponweb Acquisition, partially offset by $4.6 million in proceeds from stock-options exercises. The $123.2 million increase in cash used in financing activities during 2024 compared to 2023, was mostly due to the increase of our share repurchase program and the final payment of the earn-out liability resulting from the Iponweb Acquisition. C. Off-balance Sheet Arrangements. We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. D. Tabular Disclosure of Contractual Obligations. Our principal commitments consist of non-cancelable operating leases for our various office facilities and data centers, and other contractual commitments consisting of obligations to our hosting services providers, and providers of software as a service. The following table discloses aggregate information about material contractual obligations and periods in which payments were due as of December 31, 2024 . Future events could cause actual payments to differ from these estimates. 73 Less than 1 year 1 to 5 years More than 5 years Total (in thousands of U.S. Dollars) Operating Leases $ 30,080 $ 68,627 $ 15,408 $ 114,115 Other purchase obligations 58,027 18,728 — 76,755 Total $ 88,107 $ 87,355 $ 15,408 $ 190,870 Material Cash Requirements We currently anticipate that our available funds and cash flow from operations and financing activities will be sufficient to meet our operational cash needs and fund our share repurchase program for at least the next 12 months and thereafter for the foreseeable future. We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance our future capital requirements. Leases and Contractual Commitments Our operating lease obligations mostly include offices and data centers. Our finance lease obligations mostly include certain network infrastructure. Our restructuring efforts to sublease, early terminate or abandon several office buildings under operating leases did not materially change our operating lease obligations. Contingent Consideration As part of the Iponweb Acquisition, the Sellers were entitled to contingent consideration of a maximum of $100.0 million , which was subject to the achievement of certain revenue targets by the Iponweb business for the 2022 and 2023 fiscal years. The earn out liability was fully settled during the year 2024. See Note 13 - Other Current Liabilities. Contingencies We are involved in legal proceedings, claims, and regulatory, tax or government inquiries and investigations. We record a liability when we believe that it is both probable that a liability has been incurred, and that the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may incur a loss and the loss or range of loss can be estimated, we disclose the possible loss in the accompanying notes to the consolidated financial statements to the extent material. Significant judgment is required to determine both probability and the estimated amount of loss. Such matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows. See Note 12 Leases, Note 13 Other Current and Noncurrent Liabilities, Note 18 Income Taxes and Note 20 Commitments and contingencies in the notes to the consolidated financial statements included in Part II, Item 8, and "Legal Proceedings" contained in Part I, Item 3 of this Form 10-K for additional information regarding leases and contractual commitments, long- term debt, taxes, and contingencies. 74 E. Trend Information Key Metrics We review three key metrics to help us monitor the performance of our business and to identify trends affecting our business. These key metrics include number of clients, Contribution ex-TAC, and Adjusted EBITDA. We believe these metrics are useful to understanding the underlying trends in our business. The following table summarizes our key metrics for 2024 , 2023 and 2022 . Year Ended December 31, 2024 2023 2022 (in thousands, except number of clients) Number of clients (1) 17,269 18,197 18,990 Contribution ex-TAC $ 1,121,483 $ 1,022,606 $ 928,224 Adjusted EBITDA $ 390,118 $ 301,798 $ 267,299 (1) In the first quarter of 2023, we streamlined our client count methodology which is now based on unique billing accounts while the previous methodology included clients from whom Criteo has received a signed contract or an insertion order during the previous 12 months. The new methodology led to the consolidation of some clients accounts but does not change the underlying activity or the overall trends. Number of Clients We define a client to be a unique party with a signed contract and for whom we have delivered an advertisement or monetized inventory during the previous 12 months. We count distinct brands or divisions within the same business as separate clients if they have insertion orders with us. For certain Retail Media solutions, we count the parent company as a single client, even if multiple brands under that company have signed separate contracts. When working with advertising agencies, we generally attribute the client count to the advertiser rather than the agency. If a client's advertising spend is managed by multiple agencies, they are counted as a single client. We believe that our ability to grow the number of clients is an important indicator of our revenue growth over time. Our client count may fluctuate quarterly due to the seasonal advertising trends and the timing of new client contributions. Therefore, changes in client count does not necessarily correspond to changes in revenue for a given period. 75 Contribution ex-TAC We define Contribution excluding Traffic Acquisition Costs, "Contribution ex-TAC", as a profitability measure akin to gross profit. It is calculated by deducting traffic acquisition costs from revenue and reconciled to gross profit through the exclusion of other cost of revenue. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. Contribution ex- TAC because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions. In particular, we believe that this measure can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Please see above for a discussion of the limitations of Contribution ex-TAC and a reconciliation of Contribution ex-TAC to gross profit, the most comparable U.S. GAAP measure in the Non-GAAP Financial Measures section of this filing. Our management views our Contribution ex-TAC as a key measure to evaluate, plan and make decisions on our business activities and sales performance. In particular, we believe this can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Contribution ex-TAC provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Contribution ex-TAC is not a measure calculated in accordance with U.S. GAAP. Please see above for a discussion of the limitations of Contribution ex-TAC and a reconciliation of Contribution ex-TAC to gross profit, the most comparable U.S. GAAP measure, for 2024 and 2023 . Adjusted EBITDA Adjusted EBITDA represents our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operational plans. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, certain restructuring, integration and transformation costs, certain acquisition costs and a loss contingency related to a regulatory matter in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business, Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see above for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S. GAAP measure in the Non- GAAP Financial Measures section of this filing. Highlights and Trends Number of Clients We had approximately 17,300 clients as of December 31, 2024 , down slightly compared to our client base as of December 31, 2023 . Our client base reflects our global footprint and our commercial expansion in existing markets, our continued development of large clients in the Retail vertical, especially in ecommerce, our ex pansion of midmarket clients and our penetration into the consumer brand vertical through some of our Retail Media offerings. We expect to continue to focus our attention and investment on further growing our client base across all regions, client categories and verticals, with continued strong focus on ecommerce. 76 Client Retention We believe our ability to retain and grow revenue from our existing clients is a useful indicator of the stability of our revenue base and the long-term value of our client relationships. Our offering, the Criteo Commerce Media Platform, is powered by AI technology and aims to cover the entire marketing funnel (Awareness, Audience Targeting, Conversion). Our technology is optimized to drive impactful business outcomes from marketing and monetization for retailers and brands. We measure our client satisfaction through our ability to retain them and the revenue they generate quarter after quarter. We define client r etention rate as the percentage of live clients during the previous quarter that continued to be live clients during the current quarter. This metric is calculated on a quarterly basis, and for annual periods, we use an average of the quarterly metrics. We define a live client as a client whose advertising campaign has or had been generating revenue for us on any day over the relevant measurement period. In each of 2024 , 2023 and 2022 , our client retention rate was approximately 90%. Seasonality Our client base consists primarily of businesses in the digital Retail, Travel and Classifieds industries, which we define as commerce clients. In the digital Retail industry and the consumer brand verticals in particular, many businesses devote the largest portion of their advertising spend to the fourth quarter of the calendar year, to coincide with increased holiday spending by consum ers. With respect to Retail Media, the concentration of advertising spend in the fourth quarter of the calendar year is particularly pronounced. Our Retail clients typically conduct fewer advertising campaigns in the first and second quarters than they do in other quarters, wh ile our Travel clients typically increase their travel campaigns in the first and third quarters and conduct fewer advertising campaigns in the second quarter. As a result, our revenue tends to be seasonal in nature, but the impact of this seasonality has, to date, been partly offset by our significant growth and geographic expansion. If the seasonal fluctuations become more pronounced, our operating cash flows could fluctuate materially from period to period. Contribution ex-TAC Our Contribution ex-TAC for 2024 was $1,121.5 million , an 11% increase over 2023 , at constant currency. This performance was mainly driven by growth in Retail Media . We are focused on maximizing our Contribution ex-TAC on an absolute basis. We believe this focus builds sustainable long-term value for our business by fortifying a number of our competitive strengths, including access to digital advertising inventory, breadth and depth of data and continuous improvement of the Criteo AI Engine’s performance, allowing us to deliver more relevant advertisements at scale . Adjusted EBITDA Our Adjusted EBITDA for 2024 was $390.1 million , a 29% increase over 2023 . Our increase in Adjusted EBITDA for 2024 compared to 2023 was primarily the result of the 10% increase in Contribution ex-TAC over the period, partly offset by a 3% increase in our Non-GAAP operating expenses. This drove a 35% adjusted EBITDA margin in 2024 . Going forward, we intend to continue to optimize our operating model while continuing investments in AI innovation and scaling Retail Media capabilities. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. Please see above for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable U.S. GAAP measure. F. Safe Harbor. This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See "Special Note Regarding Forward-Looking Statements."