Criteo SA

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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.

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction

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To supplement our condensed 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".

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To supplement our consolidated financial statements, which are prepared and presented in accordance with generally

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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.

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We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial

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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.

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We are a global technology company driving superior commerce outcomes for marketers and media owners through the

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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 receives disaggregated information for Iponweb. As such, we will update our segment financial reporting structure in line with how our CEO assesses performance and allocates resources. We will have two segments: Retail Media and Performance Media. Performance Media combines our former Marketing Solutions and Iponweb segments.

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Beginning in the first quarter of 2024 – following the completion of the integration of our Iponweb acquisition – our Chief

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For the year ended December 31, 2023, revenue was $1,949.4 million, down 3% compared to the prior year, reflecting growth in Retail Media and Iponweb offset by lower revenue in Marketing Solutions. At constant currency, revenue was down 3%.

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growth in Retail Media offset by lower revenue in Performance Media. At constant currency, revenue was flat.

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Gross profit for the year ended December 31, 2023 increased by 9% to $863.0 million, compared to the prior year, primarily due to lower traffic acquisition costs.

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Gross profit for the year ended December 31, 2024 increased by 14% to$983.0 million, compared to the prior year,

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Contribution ex-TAC for the year ended December 31, 2023 increased by 10% to $1,022.6 million, compared to the prior year, driven by growth in Retail Media and Iponweb. At constant currency, Contribution ex-TAC increased by 11%. In Q4 2023, new solutions represented approximately 56% of Contribution excluding Traffic Acquisition Costs, or Contribution ex-TAC, which is a non-U.S. GAAP financial measure, compared to 47% in Q4 2022.

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Contribution ex-TAC for the year ended December 31, 2024 increased by 10% to$1,121.5 million, compared to the prior

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Net income for the year ended December 31, 2023 increased by 402% to $54.6 million, compared to the prior year, primarily due to lower traffic acquisition costs and lower operating expenses.

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Net income for the year ended December 31, 2024 increased by 110% to$114.7 million, compared to the prior year,

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Adjusted EBITDA for the year ended December 31, 2023 increased by 13% to $301.8 million, compared to the prior year, primarily due to higher Contribution ex-TAC and planned cost reduction actions.

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Adjusted EBITDA for the year ended December 31, 2024 increased by 29% to$390.1 million, compared to the prior year,

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Cash flow from operating activities was $224.2 million for the year ended December 31, 2023, compared to $256.0 million in the prior year.

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Cash flow from operating activities was$258.2 million for the year ended December 31, 2024, compared to$224.2 million

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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.

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We believe our performance and future success depend on several factors that present significant opportunities but also

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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.

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Our future growth depends upon our ability to retain and scale our existing clients and increase the usage of our

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Global economic and geopolitical conditions have been increasingly volatile due to factors such as the conflicts in Ukraine and the Middle East, inflation, and high interest rates. The economic uncertainty resulting from these factors has negatively impacted advertising demand, consumer behavior, and to some extent our performance.

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Global economic and geopolitical conditions have been volatile due to factors such as the ongoing conflicts in Ukraine and

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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. We are monitoring these macroeconomic conditions closely and may continue to take actions in response to such conditions to the extent they adversely affect our business.

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These factors, among others, including the impact of persistent inflation, make it difficult for Criteo and our clients to

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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financial condition and results of operations.

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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.

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In the advertising industry, companies commonly experience seasonal fluctuations in revenue, as many marketers

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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. Google’s web browser, Chrome, announced plans to deprecate support for third-party cookies in the second half of 2024, which will follow a one-percent deprecation of third-party cookies for Chrome users globally in the first quarter of 2024. These developments could cause instability in the advertising technology industry. We have developed a multi-pronged addressability strategy to enhance our resilience post third-party identifiers.

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We are subject to U.S. and international laws and regulations regarding privacy, data protection, digital advertising and the

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Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of revenue, assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

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Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe estimates associated with (1) gross vs net assessment in revenue recognition, (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 associated with our transfer pricing policy and iii) recognition of income tax position in respect with tax reforms recently enacted in countries 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.

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about

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For revenue generated from arrangements that involve purchasing inventory from media owners, there is significant judgment in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the determination of the party primarily responsible for fulfillment of the promised service, inventory risk, and discretion in establishing price. The assessment of whether we are considered the principal or the agent in a transaction could impact our revenue and cost of revenue recognized in the consolidated statements of income.

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agent in a transaction. For revenue generated from arrangements that involve purchasing inventory from media owners,

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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.

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For additional information regarding revenue and the assumptions used for determining our revenue recognition refer to

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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, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. If future taxable profits are considerably different from those forecasted that support recording deferred tax assets, we will have to revise downwards or upwards the amount of the deferred tax assets, which could have a significant impact on our financial results.

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We are subject to income taxes in France and numerous foreign jurisdictions. We record deferred taxes on all temporary

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We also 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 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.

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We recognize the tax benefits arising from uncertain tax positions only if we believe that it is more likely than not that the

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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 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.

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We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible

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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.

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Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and

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Goodwill is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value. Goodwill has been allocated to segments using a relative fair value allocation approach. As of December 31, 2023, no impairment of goodwill has been identified.

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Goodwill is tested for impairment at the reporting unit level annually, or more frequently if events or changes in

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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.

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Long-lived assets, including property and equipment and finite-lived intangible assets are reviewed for possible impairment

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

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With respect to litigation, claims and other non-income tax risks that may result in a provision to be recognized, we exercise

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For Marketing Solutions, we 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 cost-per-click or cost-per-impression pricing models. 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 cost-per-click or cost-per-impression 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. Marketing solutions revenue is primarily recognized on a gross basis as we act as a principal in the transaction.

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For Performance Media, we primarily generate revenues by delivering personalized display advertisements featuring

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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. We earn revenue by applying a margin to the amount of working media spend that runs through the 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. The margin applied by Criteo to the working media spend is dependent on the market dynamics, sector and industry of the customers. Retail Media revenue is primarily recognized on a net basis, as we act as an agent in the transaction.

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For Retail Media, we generate revenue by providing our platform to brands, agencies and retailers for the purchase and

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We act as agent in Iponweb 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.

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following factors: (i) whether we control the advertising inventory before it is transferred to our clients, (ii) whether we have

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Refer to Note 1. Principles and Accounting Methods of our financial statements for a description of our revenue recognition policies.

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Refer to Note 1. Principles and Accounting Methods of our financial statements for a description of our revenue recognition

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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 Marketing Solutions 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.

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Our cost of revenue includes traffic acquisition costs and other cost of revenue. Traffic acquisition costs consist primarily of

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Other Cost of Revenue. Other cost of revenue includes expenses related to third-party hosting fees, depreciation of data center equipment, the cost of data purchased from third parties and digital taxes. The Company does not build or operate its own data centers and none of its Research and Development employments are dedicated to revenue generating activities. As a result, we do not include the costs of such personnel in other cost of revenue.

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of data purchased from third parties, digital taxes, and third-party hosting fees . The Company does not build or operate its

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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.

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Operating expenses consist of research and development, sales and operations, and general and administrative expenses.

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Research and Development Expense. Research and development expense consists primarily of personnel-related costs for our employees working in the engine, platform, site reliability engineering, scalability, infrastructure, engineering program management, product, analytics and other teams, including salaries, bonuses, equity awards compensation and other personnel related costs. Also included are non-personnel costs such as subcontracting, consulting and professional fees to third-party development resources, allocated overhead, including internal IT and depreciation and amortization costs. These expenses are partially offset by the French research tax credit that is conditional upon the level of our expenditures in research and development.

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Research and development expenses consist primarily of headcount-related expenses for our employees working in the

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Sales and Operations Expense. Sales and operations expense consists primarily of personnel-related costs for our employees working in our sales, account strategy, sales operations, publisher business development, analytics, marketing, technical solutions, creative services and other teams, including salaries, bonuses, equity awards compensation, and other personnel-related costs. Additional expenses in this category include travel and entertainment, marketing and promotional events, marketing activities, provisions for doubtful accounts, subcontracting, consulting and professional fees paid to third parties, allocated overhead, including internal IT, and depreciation and amortization costs.

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Sales and operations expenses consist primarily of headcount-related expenses for our employees working in our sales,

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General and Administrative Expense. General and administrative expense consists primarily of personnel costs, including salaries, bonuses, equity awards compensation, pension benefits and other personnel-related costs for our administrative, legal, information technology, human resources, facilities and finance teams. Additional expenses included in this category include travel-related expenses, subcontracting and professional fees, audit fees, tax services and legal fees, as well as insurance and other corporate expenses, along with allocated overhead, including internal IT and depreciation and amortization costs.

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based compensation, pension benefits and other personnel-related costs for our administrative, legal, information

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•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, 2023, 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.

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•Exchange differences arising on the settlement or translation into local currency of monetary balance sheet items