Criteo S.A.

Good morning and welcome to Criteo's third quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please press the star key followed by zero. After the prepared remarks, there will be an opportunity to ask questions. To ask a question, please press star, then one. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Melanie Dombray, Director of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and welcome to Credeo's third quarter 2022 earnings call. Joining us on the call today, Chief Executive Officer Megan Clarkin and Chief Financial Officer Sarah Glickman are going to share some prepared remarks. You will find our prepared remarks and transcripts on our IR website after the call. Before we get started, I would like to remind you that our remarks will include forward-looking statements which reflect Credo's judgments, assumptions, and analysis only as of today. Our actual results may differ materially from current expectations based on the number of factors affecting Credo's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to the risk factors discussed in our earnings release, as well as our most recent forms 10-K and 10-Q filed with the SEC. We'll also discuss non-GAAP measures of our performance. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published today. Finally, unless otherwise stated, all growth comparisons made during this quarter are against the same period in a prior year. With that, Let me now hand it over to Megan.

Thanks, Melanie, and good morning, everyone. Thank you all for joining us today. We're intentionally keeping today's prepared remarks relatively brief as we look forward to sharing more with you at our upcoming Investor Day on Monday. We also look forward to meeting with many of you in person over the coming weeks. Our Investor Day will be the opportunity for us to discuss the substantial progress we've made on our transformation journey to reposition Criteo from a pure play retargeting business to a platform play focused on commerce media. A platform that is self-service and not reliant on third-party signals. We'll show you how our commerce media platform is coming to life, how we plan to unlock its growth potential with our integrated go-to-market strategies, and why we believe we'll win in retail media, and more broadly, in commerce media. We'll also discuss our mid-term financial outlook and our plans to drive profitable growth and long-term shareholder value. Turning to our third quarter highlights, we reached several important milestones this quarter, including the closing of our iPon Web acquisition and the soft launch of Commerce Max, our self-service and first-of-its-kind Demand Side Platform or DSP. Starting with iPon Web. It's only been three months since we closed the strategic acquisition and we're pleased with the progress of our integration and iPon Web's business performance. Our teams are coming together and we're very energized by the unique opportunities to shape the future of commerce media together. iPon Web enhances our scale, and brings our complimentary capabilities on both demand and the supply sides to accelerate the execution of our Commerce Media Platform strategy. The recent launch of Commerce Max demonstrates the progress of our integration. Commerce Max combines the power of our retail media tech and IPONweb's DSP capabilities. Commerce Max empowers brands and agencies to find valuable commerce audiences on retailer websites and activate onsite sponsored and display ads. It extends to commerce audiences that exist offsite across the open internet, leveraging multiple channels, including video and CTV. Our Commerce Max DSP also provides closed-loop measurement capabilities to help marketers understand what performs, why, and how, in near real-time. Our value proposition is unique, and our clients, including some of the largest brands, agencies, and retailers worldwide, have been enthusiastic about what we're bringing to market. We expect Commerce Max to be instrumental in the growth of off-site for retail media in future years. Moving to our third quarter performance, we delivered constant currency contribution ex-tax growth of 14% in line with our expectations. In retail media, our highly differentiated technology and superior offering continue to drive our momentum with existing and new clients. We have a solid pipeline. In head-to-head testing, retailers are shifting from competitors to Criteo. We recently announced a three-year exclusive partnership with media mark Saturn. Europe's leading consumer electronic retailer across 13 countries. We won after delivering the best performance in a competitive RFP. In the Americas, we signed new deals with large retailers, including Giant Eagle and Metro Canada. And we're seeing traction and upselling retail media offsite and display with existing clients. We also expanded our retail media footprint in APAC, with the addition of iStyle Ads, Ascle Japan, and Chemist Warehouse Australia. In addition, we onboarded close to 100 brands this quarter. In a tough macro environment, brands want to get as close to the point of sale as they possibly can, and there's nothing closer than advertising on a retailer's site. In marketing solutions, we experienced mixed trends with more moderate or more targeted spending from several clients across regions. In this environment, we benefit from a diversified client base. As we approach the holiday season, our clients are facing challenges related to high inflation and macroeconomic uncertainties. While we experienced an early start to the holiday season last year, we're seeing several marketers and brands slow down their spend. Despite this, they continue to prioritize performance and rely on our solutions to drive sales, and return on ad spend. A perfect example of this is that we've recently joined the Shopify Plus certified ad program, which simplifies and automates Shopify merchants' ability to leverage our acquisition and retention solutions. While still early days, we saw a 30% increase in the number of new Shopify merchants using Criteo this quarter. compared to the number of merchants we added in the second quarter. These merchants come to us for performance as they typically benefit from three times more traffic and five times more sales when using our solutions. Lastly, we're excited to explore new ways to extend our commerce value proposition to social platforms. We're now actually testing new use cases for brands, marketers, and retailers who would like to access Meta's ad inventory on Facebook and Instagram globally. We look forward to sharing more in the coming months. As we enter the fourth quarter and prepare for 2023, we remain laser-focused on execution to capitalize on the significant opportunities ahead of us, and we remain committed to cost discipline. We believe that we have laid the groundwork for long-term sustainable growth, and we're pleased to see that our vision resonates with the industry at large. I also want to express my sincere gratitude to all Critegos globally, including those who joined us from IPONweb, for their tremendous commitment and hard work to deliver exceptional service to our clients and realize our vision. With that, I'll now turn the call over to Sarah, who will provide more details on our financial results and our outlook. Sarah.

Thank you, Megan, and good morning, everyone. Starting with our financial highlights for Q3 2022. Revenue was $447 million and contribution ex-tax was $213 million. Reported contribution ex-tax reflects significant financial exchange headwinds. The weakening of currencies against the U.S. dollar resulted in a year-over-year $28 million drop unfavorable Forex impact. At constant currency, Q3 contribution index grew 14% on top of a tough comp with 14% growth in Q3 2021. This includes organic growth of 5% and growth from iPhone Web of 9%. Our organic growth was driven by retail media up 32% and commerce audiences. which we previously referred to as audience targeting, up 29% as part of marketing solutions, up 1%. The growth of retail media and commerce audiences, combined with the addition of iPhone Web, accelerated the shift of our top line mix, with number of retargeting solutions representing 41% of contribution XTAC in our third quarter, up from 33% in Q2 and up from 28% a year ago. Client retention remained high at close to 90%. Turning to our business segments in retail media, revenue was $41 million and contribution ex-tax was 32% at constant currency to $37 million. As a reminder, we had 65% growth in Q3 last year, including our buyer acquisition for online marketplaces. Our growth this quarter was primarily driven by our U.S. client base and CPG, our largest and fastest growing vertical. This was partially offset by lower online traffic on certain retailer sites and softness in France. Growth from existing clients remained strong, with same retailer Contribution XTAC retention at 133%. We are excited about our new retailer wins, which we expect to fuel our growth in 2023 and beyond. In marketing solutions, revenue was $387 million, and Contribution XTAC was up 1% at constant currency, to $158 million with growth in commerce audiences partially offset by lower retargeting. Retargeting was down 5% year-over-year or up 4% when excluding the impact of the suspension of our Russia operations earlier this year and the impact from the loss of signals. This quarter, we saw a $14 million signal loss impact, including iOS, as expected, and a faster-than-expected rollout of explicit consent in Europe. Our underlying growth and retargeting was primarily driven by continued momentum in travel, including client win-backs, knowledge performance in Asia-Pac, and most markets in the MEA, partially offset by softer trends in France, and for certain large clients in the US. Overall, our full funnel value proposition allows us to capture incremental budgets with an increasing number of clients, transitioning to always-on audience strategies to acquire and retain customers. 33% of our live clients use more than one Criteo product a day, compared to 29% a year ago. We expect to continue to benefit from more upselling and cross-selling activities with our integrated go-to-market strategies. Lastly, Ipong Web delivered mid-teens growth for its two months of contribution this quarter in line with our Q3 guidance. We delivered an adjusted EBITDA of $50 million in Q3 2022. As expected, non-GAAP operating expenses increased 15%, including investments in sales, R&D, and product talent. Moving down the P&L, depreciation and amortization decreased 14% in Q3 2022, and share-based compensation expense increased 59%. Our income from operations was $4 million, and our net income was $7 million in Q3 2022. As you recall, last quarter, we accrued €60 million as a provision for loss contingency related to the Caneel regulatory matter. We are now in the process of submitting our response. This is an accrual and will be reviewed each quarter as we move through the administrative process. We anticipate resolution of this matter in 2023. A weighted average diluted share count was 63.2 million. This resulted in diluted earnings per share of 10 cents and adjusted diluted EPS of 53 cents in Q3 2022. In a difficult macro environment, we benefit from a strong financial position with solid cash generation and no long-term debt, including about $744 million in total liquidity as at the end of September, and financial flexibility to execute on our growth and capital allocation strategy following the acquisition of iPhoneWeb. We entered into a new and expanded five-year revolving credit facility of €407 million in September, which replaces our former €294 million facility. This underscores the confidence of our global banking partners in our balance sheet and our business outlook. The primary goal of our capital allocation is to invest in high ROI organic investments and value-enhancing acquisitions, and to return capital to shareholders via our Share Buy Back program. Since the beginning of 2022, we have repurchased 2.2 million shares at an average cost of $26.70 per share. We have accelerated our share repurchases since the completion of our iPhone Web acquisitions and have $121 million left on our share buyback authorization. Turning to our financial outlook, which reflects our expectations as of today, October 28th. We remain prudent, given the persistent uncertainties in the macro environment. For 2022, we now expect contribution XTAC to range between 10% to 11% at constant currency. This comprises organic growth of approximately 5% and inorganic growth of MyPondWeb contributing approximately 5% to 6%. Organically, we now expect contribution XTAC growth of approximately 35% for retail media, given softer online traffic. lower brand spend, and a slower integration of some of our newly signed retailers. And contribution XTAC grows of approximately 20% to 25% for commerce audiences. We now expect our 2022 adjusted EBITDA margin to be approximately 28% to 29%, reflecting the lower contribution XTAC in Q4, which is our largest quarter, and the lower EBITDA profile of iPodWeb. As we communicated at the start of 2022, with our focus on sustainable growth and our continued transformation to a commerce media platform, we have invested in high ROI projects, including new skill sets. Clearly, we also have initiatives to enable productivity and efficiency. Given the tougher macro and the iPhone web integration, this is a heavy focus area. Given the further weakening of the euro and yen against the US dollar, we now estimate the impact of Forex to lower contribution x-packs by $90 million for 2022, or approximately 10 percentage points, compared to our previous forecast of $60 million. This includes $10 million in Q1, $21 million in Q2, $28 million in Q3, and an estimated $31 million impact in Q4. As a reminder, close to 30% of our contribution tax is exposed to the euro, and approximately 10% of our contribution tax is exposed to the Japanese yen. There was no change to our capital expenditures and we continue to expect free cash flow conversion of about 45% of adjusted EBITDA. For Q4 2022, we are cautious given the impact of a slower macro environment on consumers, our clients, and the expectation of lower budgets, especially in retail. We expect Q4 contribution tax of $275 million to $280 million growing by 11% to 13% at constant currency. This assumes flat organic growth and iPod Web inorganic growth. Importantly, we expect retail media to continue to show strong growth despite the challenging macro environment. We assume a signal loss impact of approximately $9 million. We expect adjusted EBITDA of $90 million to $95 million reflecting the lower top line. Looking ahead to 2023, while there is macroeconomic uncertainty, we expect to continue to deliver growth, healthy profitability, and solid cash generation. We expect our broad and diversified client base and our performance-driven offering to contribute to the relative resilience of our business. We are disciplined in managing our headcount and our expenses, and we have a clear plan for the integration of IconWeb. We expect our adjusted EBITDA margin to remain in line with 2022 levels, given the full year impact of the IconWeb business. Over time, we have a plan to drive operating leverage from scaling and transitioning to more self-service solutions, as well as synergies. As I've said before, and as with any transformation, our path won't be linear, but we remain focused on the execution of our strategy to create the world's leading commerce media platform to drive long-term sustainable growth and shareholder value. We look forward to sharing more at our Investor Day on Monday. And with that, I'll turn over to the operator to begin the Q&A sessions.

Thank you. We will now begin the question and answer session.

To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

At this time, we will pause momentarily to assemble our roster. Our first question comes from Matt Thornton with Truist Securities.

Please go ahead.

And Sarah and everyone, maybe two if I could. First, maybe you could just help us understand what you're seeing out there just from a linearity standpoint as we exit 3Q and kind of through October. I'm just kind of curious what informs your 4Q outlook. Any color there would be helpful. And then just secondly around retail media, out of all the different revenue buckets, a little bit more of a de-sell there. I'm just curious if that's just pure year-over-year comp or if there's anything you're seeing changing there from a competitive and or other standpoint. Any color on those two would be great. Thank you.

Yes, so thank you for the question. In terms of Q4, I mean, what we're seeing, and we saw this in Q3, and I would say we're seeing this from all retailers, is there's more targeted and more moderate spend. And what we do see is, of course, that there's an orientation towards performance marketing, but with the pullback in consumer spending, there's less grand dollars, and I would say there's just more cautious focus on budgets. So we expected a pullback and we saw a pullback from Q3 spend and a more focused spend in Q4 for holiday season. Last year we saw a early spend for holiday spending and that we haven't seen this year. And consistent with external measurements that expect the holiday season to be muted versus last year, we're seeing the same trends. So that's the reason for our caution. It's less spend from our customers overall, and that's largely due to less spend by consumers and less online traffic.

Yeah, I'll add a little bit of color to it. Just to sort of reiterate what Sarah said, one of the sort of signals that we saw was from Prime Day, And usually what we see and what we saw last year was when different shopping days come up, there's a halo effect. And so retailers more broadly than Amazon use that opportunity to do their own discounting on that day. And they see sales based on, good sales based on the fact that Amazon had a prime day. We didn't see that this year, which was really interesting. It was telling in terms of consumer spend. It's not that retailers didn't try, but what we're looking forward to is seeing Cyber Monday and Black Friday coming up to see whether or not there's a shift there, to see whether or not there's a lift there compared to the halo effect that we didn't see from Amazon Prime Day. So we're just being cautious because we have a lot of data at our fingertips. We see trends, we see signs, and we want to make sure that we're taking those into account when we look at our potential performance going forward. On the retail media front, look, there's really solid growth there. It's a very, very solid story, and commerce media is the big place to be right now if you're a retailer. If you're an advertiser, you want to swing towards somewhere where you're going to see those results. And so again, while we remain cautious because we see a slower ramp up in terms of the time it takes retailers to come on board, just the caution that they're applying to their strategies, there is no doubt in our mind that commerce media is the winner as you compare it to the other advertising platforms in terms of search and social. So we're extremely optimistic still in our strategy around comments media. We're just making sure that we're prudent and cautious given what we see in the marketplace around consumer spend and retailers' reaction to that.

Yeah, sorry, just to add one piece of color on the consumer spend, more of it is on more essential goods, so less on apparel, toys and hobbies, and those are obviously the huge areas for us, but also for Q4 spend overall. And then retail as a sector year on year has decreased as a sector. We've seen that. We'll clearly see that with other earning coming out and so we've applied that within our assumptions in terms of the spend that we expect to see for Q4.

The next question comes from Sarah Simon with Barenburg. Please go ahead.

Morning. I've got two questions. First one is on Q4 Outlook again. I mean, you're talking about being cautious and so on. So are you assuming in your guidance that things deteriorate from the current level of trading that you see now? That was the first question. And the second one is the expanded debt facility. Should we read anything into that? I mean, clearly it's a tough environment. Probably more companies are going to fall over. Are you feeling like you might want to step up the pace in terms of M&A or is it just they offered you more money so you've taken it and we shouldn't read anything more into it than that? Thanks.

I'll take the second question first. We started to renegotiate our credit facility earlier this year. Actually, I would say before the financial markets became more shaky. We had a high level of interest from global partners including new partners in the Americas that wanted to be part of the facility. And so we increased the facility largely as a way to ensure that we had the right level of flexibility going forward. We are incredibly robust on our balance sheet, our cash flow generation, needs for day-to-day operations. We do have an M&A pipeline. that we continue to focus on. Most of those would be tuck-ins, as we've always said, for key capabilities that will help us to accelerate. But no issues at all in terms of our balance sheet, our cash generation, and our operational leverage from our own operations. For Q4, yes, we have seen that the level of spend is more cautious. So we have, in Q4, moved the numbers down, I would say, week over week. That does not mean that we don't have fantastic high-five moments within that. But when we look overall, we're seeing softness in key categories, so retail, apparel, huge areas for us that we don't see as much spend. And we're seeing country-by-country growth America's large retail, Asia-Pac, France being, I would say, lower lights, with some big highlights in terms of return back to growth for some of our other markets, including the UK. The UK is more resilient than we've seen over the last few months, so we'll see what happens there. So that's our caution. I would say it's in line with everyone else's caution. So I don't see anything that's different when I read the transcripts of others in terms of what we're seeing ourselves. The benefit we have is we're closest to the point of sale in terms of performance advertising. And so we do see and expect to see that there will be continued performance advertising for Q4 going into a holiday season that may be shorter and less exciting than the last two years, given that we're out of COVID and people are less on their desktops and phones than they were a year or two years ago.

Yeah, okay. But would you say that in your guidance, you are assuming that things get worse from here, or are you basing it on kind of what you've seen in October and assuming that that trend is consistent?

Yeah, I would say we're not seeing the early pickup of holiday spend that we saw in the last two years. So last year, we went from a cyber 20. We went from cyber six in the traditional pre-COVID model to cyber 20 in 21, sorry, 20 to cyber 30 last year. And we're not seeing that right now. Of course, we're not in 2021. the peak holiday season, but we haven't seen the early spend that we benefited from last year. And we are seeing year-on-year budgets are down, whereas last year they were massively up. So that's the trend that we're seeing. Yeah. Okay.

I wouldn't say it's cautious.

I think it's reality.

Yeah. Okay. That's helpful. Thanks. The next question comes from Richard Kramer with Eric Research.

Please go ahead.

Thanks very much. Megan, since you mentioned Prime Day, can you talk a little bit about Amazon both as a competitor to Criteo, but also as sort of the poster child or example of how some of your large retail clients might be looking to build material advertising businesses of their own and how you might be helping them with that? And I guess one other question, you know, given Your comments, Sarah and Megan, about the timing of spend resuming being so uncertain and cautiousness. Can you talk about what you're doing to bring new logos on board this year? Sort of position yourself now for the growth that you might like to see in 2023. Thanks.

Yeah, great. Thanks. Thanks, Richard. Good to hear you. It was very encouraging, I think, from our standpoint to hear Amazon advertising still performing well. really solid results that they posted yesterday. They are the poster child for retail media. They attract a lot of brands. They're part of sort of a brand strategy spend on their site. And they do it very, very well. They've been doing it for a long time, reasonably. So we've always said, I think, that we see ourselves as the Amazon advertising of the open Internet. and that's the way we think about our business. And the reason why this is important is that brands cannot just confine themselves, confine might be a strong word, but to Amazon because Amazon is a competing retailer and they need to be able to advertise, sell their own advertising on their own site and also extend off across the open internet. So they need a platform that enables them to do that, which means that it's not necessarily that we're going to disrupt their advertising on Amazon, but to be more complimentary so that they can light up their own advertising business and expand that to their brands out and across the open internet. they wouldn't necessarily rely on Amazon to do that. Amazon's reach is not the same as Criteo's reach, particularly when it comes to how many consumers we can reach across the open internet and how well we know those consumers and know whether those consumers are on their buyer journey. They're shoppers and therefore they're a very valuable consumer to reach. So we have, I would guess, a complementary but extremely strong offering as compared to Amazon advertising. But to your point, they're opposed to Charles and we're there as the complementary alternative backup or supplementary supplier to Amazon. Our retailers are leaning into the space incredibly heavily right now because it is a new opportunity for them. They see the results that Amazon have enjoyed. They see the growth of Walmart and Walmart Connect. And they see the serviceable, addressable market that is available to them if they just line up their own capability. And that's where they turn to Criteo to help them to do that. We're seeing just solid quarter after quarter performance here of our retail media business. The logos that we've brought on board in terms of not just retailers but brands and the strength of our relationship with agencies is just continuing to prove to us that we're exactly where we need to be and we'll continue down this route. More to come on Monday, Richard. I'm looking forward to seeing you there. On the second piece, I'll get Sarah to speak too.

Yeah, I mean, just in terms of we've had some win-backs. We can't announce the names, but I would say massive retailers in the U.S. that have come back to Criteo due to our performance. So we've seen not only new logo wins. A media mark pattern was one of those. That was a new logo. We have some other new logos that we have just one that we will be announcing soon. in Europe as well as in the U.S. And we have win-backs. Brands have also, we've increased the number of brands and more to come on Monday when we share some of those metrics. But in terms of same Retailer Contribution Act tech, I mean, our retention is 133% in Q3. There's an average of 137% over the last four quarters. And what we see for 2023 is It's not only the contribution from existing retailers, which is for the most part what we've benefited from this year in terms of our growth, but also new contributions from those signed retailers coming on board. Most retailers have a Q4 code freeze, so typically we tend to see more of that uplift going into the new year, and that's what we expect early 2023 as well.

Thanks. The next question comes from Mark Kelly with CISO.

Please go ahead.

Great. Thanks very much. Good morning, everyone. You just talked about MediaMarkt for just one second. Can you just remind us when that kicks in? Is that the 23 timeline that you outlined? And I guess when can we expect someone of that size to be material? And then you talked about Synergy's and your ability to gain some operating leverage, you know, perhaps beyond 2023. Can you give us a sense where those synergies might be at? I think IPON Web, I think the employee base was relatively small already. So any thoughts there would be great. Thank you.

Yeah, in terms of timing, that's a partnership between us and MediaMarkt. So we do expect those revenues to start coming in in 2023. However, We haven't given guidance for 2023, so I don't want to be too precise of when we expect to see that revenue coming in. In terms of the synergies, we have a clear plan with the integration of IPOMweb that we're already working through with ourselves and the IPOMweb team. We do see two things. One is the revenue synergies that we expected from integration of their platforms with ours and a lot more to come on that on Monday in terms of our new offerings, which is the commerce media platform and our joint capabilities driving that. In terms of our own cost base, we have, as you know, for a long time enjoyed a high margin retargeting managed service business. And as we transition more to self-service, clearly there are efficiency plays that come with that. Also, we have already invested in those solution-setting skill sets in 2022, and so we anticipate enjoying the benefit of that on our top-line growth, and also as they look at their organizations to ensure that they're fit for purpose, focused on growth, and focused on high ROI clients. We have segmented our clients. to enterprise clients and growth clients, and we have made some changes in our organization to ensure that we're fully aligned to our customers, to their needs at a CMO level so that we ensure we drive the commerce media platform story at the right level to ensure that we're selling a platform as opposed to in the past individual product plays. Overall, we anticipate that for 2023 we'll continue to invest, not only in the high ROI growth investments, particularly in Asia-Pac and in retail media, but also that we'll start to see where the infrastructure that we need to drive that change will be invested in. So data centers is an area of focus for us. We have taken out a lot of spend over the last couple of years, about $20 million on our data centers. There's a renewal that we're doing next year, some of which will be CAPEX, some will be OPEX. And there's infrastructure around how we ensure that we can bill and collect and account for all our new platforms along with iPhone Web. So some integration of new capabilities to upgrade our I would say, internal infrastructure on systems.

We're looking to be world-class, so it's an exciting place to be. That's great. Thanks, Sarah. Our next question comes from Doug Anmuth with JP Morgan.

Please go ahead.

Hi, this is Katie on for Doug. Thanks for taking the question. So first, I just wanted to dig into privacy. It looks like it's going to be, you know, a $5 or $10 million headwind worse than anticipated this year. So can you just walk through what's driving that fire and how you're thinking about, you know, some of those incremental headwinds into 2023? I think you previously mentioned not expecting a big year-over-year impact, so just curious if that's still the case. And then secondly, just looking at Google's privacy sandbox, Some recent reports have suggested that the FLEDGE product has received some mixed reviews. So just curious if there's anything you can share in terms of your feedback from testing the FLEDGE product. Thanks.

Well, on the second question on the FLEDGE, that's a topic we'll address on Monday. So I'll move that question to Monday when we'll have Tom presenting. In terms of the privacy impact, we have seen a higher increase related to explicit consent so that was very small for us at the beginning of q1 q2 and we were anticipated that was about four million dollars of the incremental headwind in q3 and we're anticipating that to be about three million in q4 um in terms of the 2023 Privacy incremental impact, we are not seeing any large incremental impact, so we don't anticipate anything that's incremental to our 2022 expectations. Overall, we went from $55 million to about $60 million, and most of that will be in Q3.

Okay, thanks. The next question comes from Tim Nolan with Macquarie.

Please go ahead.

Hi, thanks. I've got a question which I'm guessing you'll probably also be addressing on Monday. So just answer as you see fit, please. But it's about your off-site retail business, which you mentioned at the top of the call and you've spoken about before. And I'm just curious if you could enlighten us a bit more as to what you're doing in off-site, how you differ from others, and I guess where you see the competition in that field.

Yeah, thanks for the question, Tim. It will be addressed on Monday, but let me give you a couple of some top-line notes on it. Off-site for us is, well, for our clients, is their ability to partner with their brands or offer their brands advertising off the retailer's sites. Because the retailers realize that if they just stick to the traffic that comes to their sites, they'll never get enough reach for those brands. And so they extend that advertising out across the open internet. And so Commerce Max for us has been our ability to light up the DSP that the retailers can use to manage this for their brands. Our ability to reach, and we reach today about 725 million daily active users of which we have unique insights into whether they're commerce audiences, meaning are they audiences that are on their buyer journey? Are there audiences that are shopping as opposed to audiences that might just be communicating with each other on social platforms or researching something that has nothing to do with a purchase intent. So we're really very focused on commerce audiences and we have capabilities through the data sets that we have access to to be able to really narrow in on these very valuable audiences. They come to life for the retailer and the brand through the DSP, through Commerce Max. So it's... Very unique proposition that we offer. There is nobody really doing solid off-site capability right now for retailers. So this is very new for retailers. And there is certainly a big differentiator for us in our ability to do closed-loop reporting. In other words, being able to report for them the effectiveness of their on-site sponsored ads with the display ads with their search, plus their off-site, their expansion to off-site ads for the retailer in near real-time measurement capability. And that you don't see anywhere. So I don't want to be a spoiler here because there's more to come on this on Monday, but there's a lot of reasons why you would point or you would come to Criteo for retail media offsite versus anybody else.

Okay, thanks. We'll look forward to Monday. Thanks. Yeah, great. Again, if you have a question, please press start and want to be joined into the queue.

Our next question comes from Mark Sketovic with the Benchmark Company. Please go ahead.

Thank you. Good morning. So we've heard a few prominent DSPs talk more about their relationships with retail media networks. And I'm curious if you can discuss what may remain sort of your relative advantage here and perhaps how Commerce Max may enable you to corner this market a bit more. I know you just talked about you know, closed loop as certainly a relative advantage, but also curious about what your go-to-market now is with CommerceMax in place. Thanks.

Yeah, look, retail media, being a retail media provider is more than what a lot of people think that it is. And we've been doing this for a long time. We acquired a company called HookLogic, And we've been focused on this for six years now, which is probably longer than anybody else. Plus, from a global perspective, we have people on the ground in those markets who know, that have local relationships in those markets. And so we have this, you know, a footprint of people who know retail media backwards. That's the starting point. The second is, to do retail media is to integrate with the retailers. It's not just about lighting up a DSP that the retailers can use. You have to have deep integration into the retailer's data sets from their catalog data through to the SKU data, to their loyalty card data, to their CRM data. It just goes on and on because you have to do a job for the retailer, which is You know, light up the right promotion at the right time. Is the product actually available? Is it in stock? Is it in stock in that geolocation? How can we continue to stay engaged with the consumer by giving them a recommendation for something else that they might like? All of these things and disciplines that come with being able to do retail media. And there's only a couple of players out there that can actually do that. So, you know, that's sort of the... That's the ground roots for us is that don't underestimate what it means to be a player in this space. And the first mover advantage for us is the deep integrations that we already have with over 160 retailers around the world and the biggest names on the planet. From there, it's extending out the services. Like I just talked about is that retailers now need to be able to extend beyond their own walls to offer advertising to the brands. to take them off site, to get them in front of more consumers who are actually on their buyer journey. And that's what Commerce Max is all about. So, again, I don't want to be a spoiler for Monday. I'm looking forward to the team taking you through what that looks like. It's really very cool and exciting, and I look forward to seeing you there, Mark.

Yeah, likewise. Thanks, Megan. I look forward to seeing you all as well on Monday.

Take care. Great. This concludes our question and answer session.

I would now like to turn the conference back over to Melanie Dombre for any closing comments.

Thank you, Megan and Sarah. This now concludes our call for today. We look forward to seeing many of you at our investor day in New York on Monday, and we will also webcast the event live.

Have a great day, everyone. Thank you for attending today's presentation. You may now disconnect.