Criteo S.A. (CRTO) Q3 2021 Earnings Report, Transcript and Summary

Good morning and welcome to Criteo's Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After the prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Edouard Lassalle, Senior Vice President Market Relations and Capital Markets. Please go ahead.

Thanks, Roko, and good morning, everyone. Welcome to Criteo's third quarter 2021 earnings call. We hope you're all doing well today. Joining us from our global Headquarters in Paris today are CEO, Megan Clarken; and CFO, Sarah Glickman. Todd Parsons, our Chief Product Officer, also in Paris, will join as well for Q&A. As usual, you’ll find our investor deck on our website now, as well as our script and transcript after the call. Before we get started, I’d like to remind you that our remarks today will include forward-looking statements, which reflect Criteo’s judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting Criteo’s business. We do not undertake any obligation to update any forward-looking statements discussed today, except as required by law. 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 call are against the same period in the prior year. With that, let me now hand it over to Megan.

Thanks Ed and good morning everyone and thank you all for joining us today. I'm particularly pleased to announce our Q3 results so close to my second anniversary with Criteo. We delivered yet another strong quarter of double-digit growth and high profitability, above the high end of our guidance. The sustained momentum in our business and company transformation reflects our steady progress and delivery on the strategy that we’ve laid out and on each of our strategic priorities. We continue to develop our Commerce Media Platform and strengthen our first party data capabilities, positioning us to drive sustainable growth and long-term shareholder value. On our call today, I’ll discuss our Commerce Media Platform progress, provide additional color on our expected business resilience with regards to Apple’s App Tracking Transparency, or ATT, and talk about our key highlights in the third quarter as we continue to deliver against our key priorities. Sarah will then cover our third quarter performance in more detail and discuss our financial outlook. Let me start with an overview of our commerce media vision and progress. As you know, Criteo focuses on commerce media, the future of digital advertising that leverages commerce data and machine learning to target consumers throughout their shopping journey. We differentiate ourselves by delivering the best performing commerce audiences at scale for the marketers and media owners that we serve on the open Internet. Our Commerce Media Platform offers a holistic suite of solutions that activate the world’s largest set of commerce data for first-party data-based marketing and monetization. Similar to the proven playbook exemplified by the walled gardens, we’re able to identify, reach and monetize highly relevant consumers to drive $40 billion of commerce outcomes for our 22,000 marketers, a number that continues to grow, and thousands of media owners we have direct access to, including product consideration and sales for marketers like New Balance and Macy’s, and rich ad revenue for media owners like Yahoo! Japan or Carrefour in retail media. Driving the best commerce audiences requires rare assets and capabilities in data, media and AI. It’s the combination of our unique data, media access, AI expertise and measurement capabilities that enables us to transform large crowds of generic consumers into highly-relevant, highly performing commerce audiences. With a global consumer reach of 650 million Daily Active Users, huge scale in commerce data with first-party data from 22,000 customers and unique access to over $900 billion of ecommerce sales, a differentiated Retail Media offering working with various top-25 retailers in the U.S. and in Europe, and 15 years of expertise in commerce-focused AI, we’re already a global powerhouse in commerce media with a strong first-mover advantage. Our Total Addressable Market is expected to reach $100 billion by 2024, growing 22% per annum compared to our serviceable market last year. We’re laser-focused on executing on this huge opportunity while continuing to gain share across all our existing markets. While our team has done great work already, we still have lots to do. We continue to focus on growing our customer base, broadening our direct supply and first-party media network, and strengthening our first-party dataset. I now want to take a moment to provide additional color on our expected business resilience with regards to Apple’s ATT given the recent focus on this. It’s important to note that our business is much more oriented towards web-based advertising than apps. While we do target in apps, this is a small part of our business. As a result, we believe we’re much more insulated from the overall impact of Apple’s ATT than large mobile app-first players. Our Retail Media onsite business does not rely on any third-party identifier and is therefore not impacted by Apple’s ATT. Importantly as well, our total exposure to Apple users in our Marketing Solutions business, across both web and app, is limited to less than 10% of Revenue ex-TAC as of October 2021, including about 4% on app. As part of our commitment to transparency with our shareholders, the expected impact from ATT and iOS15 changes is already reflected in the $55 million privacy and identity impact for 2021 that we had previously communicated to the market, and that Sarah will comment on shortly. While Apple’s changes make it harder for marketers to gain access to the data that enables tracking and affects media owners’ ability to best understand and serve a consumer, this serves as an opportunity for us as we serve the market to offer alternatives. We’ve been working on alternative solutions to iOS and Chrome for over two years and are confident in our position today. To say this another way, we started our transformation journey years ago, and believe we’re ahead in the race to drive superior performance in environments deprived of third-party identifiers. Our Commerce Media Platform, built on our First-Party Media Network, allows us to collect alternative, addressable identifiers, to build privacy-by-design audiences and drive commerce outcomes on inventory consumed by Apple users. In addition, with broad reach of 650 million daily active users globally, we engage consumers not just on their Apple device but in the multiple environments in which they interact. In the U.S. alone, our largest single market and the biggest advertising market in the world, we reach over 50% of the U.S. population on par with Facebook's app. This means that we have plenty of opportunities to reach and engage consumers along their shopping journey. Shifting to our third quarter highlights. We continued to deliver against our three strategic priorities of growth, execution, and first-party data. First, Growth. We achieved double-digit growth for the second consecutive quarter, driving Revenue ex-TAC up 14% at constant currency. We delivered the highest growth in our New Solutions in four quarters at +66%. And we’re pleased that our new solutions now represent 28% of our total business, up three points compared to Q2. This fast growth in our new solutions is accelerating our revenue diversification, a key pillar of our transformation. Second, Execution. Our team continues to execute steadily, with grit, focus and conviction, across our entire solutions portfolio for marketers and media owners. As I’ve said every quarter, we’re committed to maintaining a high do/say ratio in everything that we do. Marketing Solutions performed strongly, largely driven by solid growth with Retail Strategic customers like Macy’s and BonPrix. We also experienced strength in our Core clients spend and a solid retargeting business. Retargeting remained healthy, growing 1% despite the expected impact from identity restrictions. Excluding incremental identity headwinds, retargeting actually grew 10%. Within Marketing Solutions, growth in our New Solutions accelerated to 68%, up 16 points since Q2, with growing contribution from our Agency partners. Audience-first Targeting is a growing area of focus for us, enjoying steady momentum with both our retailer and brand customers, and the agencies they partner with. Growth in our Audience-first Targeting solutions accelerated 18 points compared to Q2, to close to 50%, as marketers increasingly spend across the entire marketing funnel with us. Omnichannel, our product that helps marketers optimize their marketing investments across online and offline, now represents 20% of our New Solutions business within our Marketing Solutions Portfolio, growing about 140%. We see increased traction from customers willing to target consumers everywhere and bridge the online and offline worlds as ecommerce remains strong and economies increasingly reopen. Lastly, we’re launching very exciting tests of our new Shoppable video ads offering that Todd mentioned at our Investor Day. This opportunity is very compelling for our marketer clients and for us, and we are encouraged by the early results. In Retail Media, we see accelerating momentum as well. We delivered 65% growth in Revenue ex-TAC, accelerating by 16 points versus Q2. Year-to-date, Retail Media has grown an impressive 70%, accelerating both on a one-year and two-year basis. We see continued momentum in our Onsite business, largely driven by the growing network effects of our Retail Media Platform, which provides our unified Retail Media offering for brands and retailers on a single platform. Close to 80% of our Retail Media business in the U.S. already goes through RMP. We had stronger growth with our top U.S. retailer customers, adding 10 new retailers globally and launched 10 retailers on the Retail Media Platform, including Walmart Canada, BestBuy and Douglas. We’re also thrilled to have our Retail Media Platform power the recently announced retail media programs of large U.S. players including Ulta Beauty and Lowe's. In addition, our marketplace business delivered solid performance during the quarter, accelerated by our successful acquisition of Mabaya, performing in line with our expectations. And we continue to make good progress on our offsite business, which allows brands to extend their commerce audiences beyond retailer properties to the open Internet, with a strong retailer pipeline expected to drive acceleration in Q4. Our third strategic priority is first-party data. As we’ve said before, connecting first-party supply will become the only way for both marketers and media owners to effectively advertise and monetize our commerce audiences on the open internet, once the industry finally moves beyond third-party cookies. We continue to make progress in securing first-party data via Retail Media. Our Commerce Media Platform strategy is anchored in our Retail Media onsite business, which is entirely built on first-party data and does not rely on any type of third-party identifiers whether cookies or IDFAs, further strengthening our moat and our lead around first-party data. We also continue to make progress in securing first-party data via our first-party media network, working directly with media owners like ABC and The LA Times to power first-party data media buying on the open internet. Today, approximately 60% of our daily active users on the web are addressable through media owners we have direct access to. Building upon our legacy Direct Bidder product, we’re actively increasing our direct integrations with publishers, including as part of our evolution to a full supply-side platform. Our key focus remains the quality of our direct integrations with media owners, ensuring deep relationships with the most strategic players. That’s why, in every market, we typically ensure direct paths to the top 100 publishers giving marketers advantaged and transparent buying on the properties that matter most to their business success. And with our Commerce Media Platform, we also deepen our relationships with direct publishers by expanding their inventory reach to key consumers through new sources of marketer demand and greater publisher monetization and addressability. Last quarter, we discussed our initiative to bring third-party demand through the Criteo SSP and broaden our buying scale with our direct media partners. With over 550 global publishers already signed up, our SSP allows us to leverage our commerce data on a larger scale, bring our direct publishers larger buys of supply executed through Criteo or other third-party DSP, and secure our long-term direct access to quality media. In short, with Retail Media’s unique first-party data assets and our larger media purchasing scale, including through more direct media integrations, we’re uniquely positioned alongside the Walled Gardens to drive the best commerce audiences to the open internet based on first-party data. In closing, we’re very pleased with the sustained momentum in our business and company transformation. We’re making steady progress and delivering with focus on each of our key priorities of growth, execution and first-party data. We continue to expand our Commerce Media Platform to drive the best commerce audiences on the open internet, further positioning us for sustainable growth and long-term shareholder value. With that, I’ll turn over to Sarah to discuss our financial performance and guidance. Sarah?

Thank you, Megan, and good morning everyone. I'm delighted to be presenting such a strong quarterly performance today. I will walk you through our financial highlights for Q3 as well as our guidance for the rest of 2021. Starting with our financial highlights. Revenue was $509 million, growing 8%, with 72% of year-over-year growth driven by existing customers and 28% driven by new clients. Our revenue growth was primarily driven by favorable pricing. The total media spend activated by our Commerce Media Platform was over $2.5 billion over the last 12 months and close to $615 million in Q3, growing 23% at constant currency. Revenue ex-TAC grew 14% to $211 million. As expected and previously communicated in our guidance, this included $17 million of incremental identity and privacy impacts compared to last year. On a two-year basis, Revenue ex-TAC grew an estimated 9% excluding incremental privacy impact, showing solid momentum. Our Revenue ex-TAC margin represented 41.5% of revenue, up 200 basis points year-over-year, largely driven by Retail Media and the acceleration of our client transition to the Retail Media Platform. Notably, we grew our customer base to close to 22,000 marketers and brands, adding 1,200 net new clients year-over-year, including more than 400 clients in Q3. Large customer wins include landmark names such as Lowe’s, Wayfair and New Balance. We grew our same-client Revenue ex-TAC 9%, demonstrating the depth and breadth of our platform as 40% of live customers now use our new solutions. Client retention remains close to 90%. Looking at verticals, our Retail business, up 16% on a two-year basis at constant currency across our solutions reflects sustained strong demand, as consumers continue to shop online while enjoying heading back to physical stores. Retailers, large and small, adopt more of our performance-focused products and are driving the solid momentum in our business. Our Q3 spend with Travel clients is slightly increasing and we are signing new business, particularly in the U.S. Our performance remained solid and balanced across all regions. We continue to see momentum in the Americas, with Revenue ex-TAC up 18% at constant currency, driven by acceleration in our Retail Media business with both large brands and top U.S. retailers, strong performance with Strategic and Core Retail customers, and new business in Travel. We are proud to serve a roster of top retail and ecommerce customers, and continue to strengthen our leading position in the fast-growing Retail Media market in the U.S. Asia-Pac also experienced solid momentum, growing Revenue ex-TAC 15% at constant currency, driven by higher Classifieds, the strong recovery of our Retail business in Japan and sustained performance with enterprise clients in South-East Asia and Korea. Our EMEA performance, with Revenue ex-TAC growing 8% at constant currency, reflects mixed performance by country and verticals. We continue to see strong traction from Retail customers, notably in Germany, and in Retail Media especially in France, partially offset by lower spend from one large Europe-wide travel customer. Now a quick note on Retail Media revenue dynamics. As we progressively transition all our Retail Media clients to our Retail Media Platform, an increasing share of our Retail Media revenue, or about 62% in Q3, is now accounted for on a net basis compared to less than 5% in Q3, 2020. As a result of this transition, Retail Media revenue is lower in Q3 2021 compared to the prior year. This is a transitory impact linked to our ongoing client migrations to the platform. Year-over-year, the media spend activated by Retail Media grew 74%, from $90 million to close to $160 million, accelerating from Q2, and Retail Media’s underlying performance reflected by Revenue ex-TAC 201 remains extremely strong, growing 65%. Once this transition is complete, which we expect by the second part of 2022, revenue and Revenue ex-TAC for our Retail Media onsite business will be recognized on a consistent basis. As a result, this will drive a higher Revenue ex-TAC margin for Retail Media compared to prior periods. Moving down our P&L, we continued to deliver strong profitability while investing in growth. Our adjusted EBITDA of $68 million was up 37% at constant currency, resulting in an adjusted EBITDA margin of 32%, up 6 points year-over-year and over 3 points on a two-year basis. We closed the quarter with a global headcount of 2,660 Criteos, the highest level since Q2 2020, reflecting our strong employer value proposition in a tight talent market. Our growth investments are largely funded through productivity, enabling top line leverage as we ramp up commercialization of new solutions. Key investment areas remain new hires in solution selling, go-to-market, R&D and product, in particular for Retail Media, Commerce Insights and Contextual advertising, as well as upgraded tools and processes to support our new solutions growth. Non-GAAP expenses were $143 million in Q3, up 5% at constant currency. Non-GAAP OpEx increased $7 million or 6%, including 13% for R&D, and grew 5% before the impact of our higher stock price on social charges. On that same basis, we increased employee costs by $3 million or 3% at constant currency. We incurred a $2 million gain of pre-tax restructuring and transformation costs in Q3, almost entirely related to lease accounting impact from lease exits and amendments executed as part of our global office right-sizing. As a result, we now anticipate pre-tax restructuring and transformation expenses of about $21 million in 2021. Depreciation and Amortization increased 3% and the appreciation in our stock price year-on-year drove share-based compensation expense up 95%. Our solid business performance and disciplined cost management drove a quadrupling of our income from operations with close to 360% growth in net income. Our Q3 effective tax rate was 24%. Our weighted average diluted share count grew 5% to above 64 million as a result of our growing stock price. Diluted EPS was $0.37, up 310% and adjusted diluted EPS was $0.64, up 60%. We cancelled just short of 900,000 shares in Q3 and plan to cancel over 630,000 additional shares before the end of 2021, putting our total share count at about 65.7 million by year end, including 5.2 million treasury shares. Our strong cash generation and cash position continue to provide ample financial flexibility to execute on our commerce media strategy. Free cash flow was $35 million in Q3, or 51% of adjusted EBITDA, reaching $112 million for the first nine months. We closed the quarter with a strong balance sheet and $554 million in cash and marketable securities. With financial liquidity in excess of $1 billion, we maintain a robust capital allocation process with the primary goal of investing in continued organic growth and leveraging M&A to accelerate our Commerce Media Platform. We repurchased 1 million shares in Q3 at an average cost of $38.6 per share. Since starting our $100 million share buyback program in March, we have re-purchased $73 million worth of Criteo shares as of end-September, including $38 million in Q3. In October, we extended our current share buyback program from $100 million to $175 million. I’ll now provide our guidance and business outlook for the remainder of 2021, which reflect our expectations as of today, November 3. As we head into Q4, we continue to see strong business momentum, as evidenced by our revenue ex-TAC growing over 15% in October. While shops reopen, ecommerce remains strong, trending significantly above pre-COVID levels, as consumers increasingly value online shopping convenience and ecommerce continues to benefit from store closures. And as shops continue to reopen, retailers accelerate their investments in multi-channel fulfillment capabilities, making omni-channel increasingly prevalent in their marketing mix. Overall, we continue to be well-positioned to capitalize on these long-lasting positive trends. We’re experiencing an earlier start to the holiday season this year, carrying momentum into our fourth quarter to date. In parallel, current inflationary pressures have amplified many marketers’ need to advertise for more expensive products. We anticipate the holiday season to span over an extended Cyber-30 curve similar to last year for our U.S. and European ecommerce customers, and we expect the tail off in December to be earlier this year. While global supply chain challenges have had pockets of impacts in parts of the consumer electronic vertical and auto, which represent small parts of our business, we have not seen any material impact on our business to date. Our robust growth is supported by our diversified customer base of 22,000 marketers who, in the current environment, remain focused on reaching the right audience at the right time. Our guidance therefore anticipates a strong holiday season and continued strength in retail, with growth in travel and consumer electronics. As you know, we also have tough comps from last year in Q4. Lastly, our $55 million assumption for incremental identity and privacy impacts in 2021, including ATT and iOS15, remains unchanged and include a $25 million impact in Q4 specifically, including approximately $15 million for ATT and about $5 million for the new iOS15 changes. We will not be providing formal 2022 guidance on this call. That being said, looking ahead, we are optimistic about our growth trajectory, and we are confident that the robust growth that we expect in new solutions and retargeting in 2022 will continue to more than offset the incremental identity and privacy impacts that we anticipate for next year. As of today, we assume that these identity and privacy impacts, incremental to 2021, will amount to less than $60 million in 2022. Taking all of these factors into consideration, we are raising our full year 2021 Revenue ex-TAC growth guidance to approximately 10% at constant currency. We expect our fast-growing new solutions to grow above 50% in 2021, including 60% for Retail Media, as we continue to strengthen our Commerce Media Platform. We are also increasing our adjusted EBITDA margin guidance to about 35% of revenue ex-TAC, demonstrating top line strength and operating leverage. In 2021, we expect our Adjusted EBITDA conversion to free cash flow to be about 45%. Due to stronger revenue performance and regional mix, our projected tax rate is expected to be 26% for 2021. For Q4, we expect revenue ex-TAC between $271 million and $274 million, driving constant currency growth of 8% to 9%. We expect our new solutions to grow about 45% in Q4 as we lap strong growth and tougher comps from last year. And we expect Q4 adjusted EBITDA between $107 million and $110 million, or a margin of 39% to 40%, as we continue to invest in our growth areas and plan for higher bonus payout and sales commissions for the year. In closing, we are excited about the momentum in our transformation. Criteo continues to be uniquely positioned to win in commerce media. And with that, I’ll now open up the floor to your questions.

Thank you. [Operator Instructions] Today’s first question comes from Doug Anmuth with JPMorgan. Please go ahead.

Great. Thanks for taking the questions. First, just on new solutions, you highlighted the acceleration partly driven by agency partners. So if you could just talk more about your efforts there? How you brought the company closer to agencies over the last two years? Perhaps what work remains to do there? And then secondly, just to go back to supply chain, I know that you mentioned consumer electronics and then also auto not seeing much impact thus far. I guess, just curious kind of what gives you the confidence that that’ll stay kind of stable and the things kind of don’t potentially get any worse as you go through the course of 4Q? Thanks.

Thanks, Doug. Good to hear from you. Let me kick things off here with agencies and then I’ll spill over to supply chain and if I don’t cover it all, which I’m sure won’t until I’ll throw it across to Sarah to help out. On the agency front, we’ve gained a lot of traction over the last couple of years. About a third of about business runs through agencies today. It’s been an effort which doesn’t stop. In fact, we’ve got a lot more work to do. But it’s showing promise, sufficiently the performance agencies that we deal with really great partners of us when it comes to marketing solutions. And as I said, a couple of years ago, we wouldn’t have acknowledged that today we do, and we’ve worked hard to get in. But they are now important clients to us and see us as important partners for them to service both their market clients and help them get access to media that they might not be able to get access to without a partner like us that has direct access to media properties. On the agency hold code front this is really the domain of Retail Media, Retail Media has had a really strong push through agency hold codes to get to some of the biggest blows that that we enjoy the company with, enjoy having us our partners and clients. What I’m mostly excited about is that’s just the beginning. So I think if you start us off from not scratch two years ago, but maybe at a 20% two years ago, and we’ve pushed our way through to be trusted partners to maybe a 60% today, there’s a lot of wiggle room there for us to go deeper with agencies. And that comes through just over time showing them that we can help them get performance and continue to attract and retain clients. But also that we have internally the ability to bring our commercial teams closer and closer together, and be able to tell a more holistic story of the Commerce Media Platform and how that can be of benefit to agencies too. So long and the short of it is there’s a lot of wiggle room there. But we’re pretty happy with the traction that we’ve made to date. On the supply chain topic, I think it’s important to always note that we’re in the advertising business and therefore, it’s really about whether – if the question is whether or not the supply chain drives up advertising, and we’ve not seen anything like that. In fact, to the contrary, if you look at ad spend across the globe for 2021, that’s predicted to grow by about 14%. And so that’s far from – that’s total. And if you just look at digital, it looks like it’ll grow by 20%. And the clients that I’ve spoken to around directly around the subject of their supply chain, a couple of things to note. One is that they have seen this coming and have beefed up stock where they can get stock and have promoted goods that they have on the shelf or have access to, or have access to deliver. They still have to advertise, they still need to make money. They still need to shift product. And so we’ve – what we’ve done is, we’ve just seen them change what they advertise. They haven’t backed away from advertising, because of the supply chain problem. That’s what we’ve seen. And then the other thing to notice that our business is both goods and services and so we see both of them tracking along extremely strongly and services clearly less to not effective by any kind of supply chain issues. Anything to add, or…

I mean, I think the only thing to add is we have 22,000 customers. So the diverse price really helps us here. And then just when we look at the I guess the businesses that are more impact by supply chain, yes, auto maybe slightly smaller than it was a quarter of go, but it’s – we’ve off more than offset that with growth elsewhere. So, each client is different, but we see growth in one client offsetting, I guess, less growth in another, and that’s been our business model and helps us through kind of all trends. And we don’t see any significant impact of supply chain for Q4.

Great. Thank you, Megan and Sarah

And our next question today comes from Sarah Simon at Berenberg. Please go ahead.

Hi, I’ve got a few questions. First one is to Sarah. You are obviously referred to higher bonus provisions given how strong the number to be. As we kind of head into 2022, do you think relative to what you achieved this year, you are kind of fully paid up or is there going to be a catch up in terms of bonuses next year? Second one for Megan, just on agency relationships and so on, obviously we’ve seen publishers by CitrusAd, has that resulted in a holdcos [ph] coming to you, as opposed to maybe going to CitrusAd because they’ve lost their independence. I’d be interested in them, anything you can say on that. And then just another one on travel. You’ve talked about it recovering. Is it doing better than where you thought it was going to be at this point, if you compare that to say what you said to us at Q2? Thanks.

Hi, Sarah. Great to hear from you. I’ll cover the bonus and travel. So on bonus though, we – I mean, we effectively, we pay for performance and we have a very structured bonus program that really does drive from, for the most of the population the RexT and then for kind of executives is RexTand and EBITDA and on sales commission, obviously that’s, straight from how, what the sales process is and how from a new sales perspective, as well as new solutions. We don’t see any true up for 2022. We do see that we want to pay for the performance that we are delivering this year and that everyone’s working incredibly hard. And that’s what we’re paying for. So no true up for 2022, but we start with, I guess, an even playing field. And obviously we hope to be, any numbers that we plan for next year. So, we want to incentivize for that. In terms of travel you are the one I know who referred to this as the sleeping dragon, which we kind of love that term. It’s waking up, it’s waking up slowly. Our growth is double what it was a year ago. But that’s still probably about half of what it was in 2019. We – in Q4, we have seen some new bookings. So, we have seen some new iOS coming in, and we’ve seen – we see traction, but we expect it to be quarter-after-quarter as we continue to kind of move forward. So those are really the key takeaways that, that we have, we’re planning for right now.

Let me jump in on the, on the publicist or Citrus comment, Sarah and good to hear you. We predicted it last quarter. I think, we were asked the question about what we thought of that acquisition, and we actually see it as an opportunity given that holdcos are great partners and clients to ours for retail media and are less likely then to go to the likes of the Citrus or one or capability that’s owned by another holdco. So, what we have seen is exactly that play out. So thanks for the question, they are – what we do find is that we have a stronger connection to the other holdcos that are looking to partner for this kind of capability and have counted out provider in the market who is acquired or leans very heavily on one of their competitors. So exactly as we predicted.

Great. Thanks.

Then the next question today comes from Dan Salmon with BMO Capital Markets. Please go ahead.

All right. Good morning, everyone. I have two questions. First for Sarah or Megan, or maybe a combination of both. I just want to follow up on the comment about the expectation for less than $60 million of privacy impact for 2022. And I just want to make sure I understand what’s built in there. It sounds like ATT and iOS 16 make up the majority of that still as it does in the fourth quarter, but can you remind us what else is baked into that figure for next year and how timing of that impact may ever flow? And then second for Todd, I hope Todd’s on. I would love to hear his take about the continued drumbeat that we’re hearing around clean rooms as the next technology, next generation of technology, rather that marketers are using to leverage their first party data. How’s that trend relevant to Criteo and do you see it as a risk or an opportunity or a mix of both for the organization? Thanks.

Yes. So I'll just start on privacy and as you know, we haven't given any guidance out for 2022, but given this is such a hot topic we wanted to at least not leave you with a cliff hanger. What we anticipate is that iOS kind of 15 plus will, that's really starting early November and so there will be an impact of that next year. So I would assume about half the impact relates to the iOS 15 kind of hide my IP type features versus this year, just given that it just began, so we've got three quarters and a half if you all left of that. And then for ATT the rollouts there in Q2 2021, so we're anticipating probably around another half of that $60 million relating to the ATT. There's a small amount we're expecting for explicit consent, but as you know, that's kind of already hit us for the most part. And our customers continue to focus on strategies to ensure that they continue to protect consumers as well. So for the most part, that's iOS ATT plus iOS 15 and that's our expectation and that relates primarily to the retargeting business. And of course, retail media has no third-party identified. So that's all first party. So that's the way we're thinking about it as of now.

Hey, Dan this is Todd. Nice to join the call and to hear from you. On the clean room point, just kind of going back to what we signaled on our Investor Day, and I think an earlier question you may have asked. We continue to lean forward in this space with all the major players that are promoting clean room offerings. There are a couple of newer ones that that are out there that you know, and then obviously live ramp has had its safe haven product, which is somewhat being extended by data fleets and so forth, but we're talking snowflake info some live ramp and a couple of others that we're definitely looking at as integration opportunities. These tend to be customer driven integration opportunities where there are two use cases. One is safely mixing first party data of the marketer with our publishers or our data collective in a way that that makes for a better commerce media audience to be targeted. And then the second use case, which is something where we really add value to clean rooms, is activating those audiences across our first party media network. So we look at the emergence of clean rooms as being very important to us in a fairly neutral sense. And as I mentioned, we've made a lot of progress partnering with all the major players since we last talked.

Great. Thank you. And Sarah, can I just clarify the $60 million impact for next year is an absolute amount, correct, not incremental to this year?

No, that would be incremental. And it's really more kind of second half versus first half this year and this year we obviously have more impact with other – with explicit consent Safari, Firefox, et cetera, at the beginning of the year. So it's kind of more a year-on-year impact just due to the timing.

Okay. Thank you very much both of you. Appreciate it.

You're welcome.

And the next question today comes from Tim Nollen with Macquarie. Please go ahead.

Hi. Great. Thanks for taking the question. Follow on to the last on the impacts on next year, the $60 million I'm guessing. I mean, you didn't call out anything to do with Google cookie elimination. I assume that's not baked in yet. I know that's kind of pushed out to like 23-ish, I guess, is this something yet to worry about then the following year? Or are you getting to a point where you've got so much first party data driving everything you do that that really doesn't affect you as much by the time it finally comes about? And then I guess relatedly you're retargeting number was positive for the second quarter in a row, I think it was 1% constant currency, or even 10% if you exclude some of those privacy effects. Any color you could give us on what that looks like in a Q4 and beyond, is this actually a sustainably growing business again already? Thanks.

Let me take the first part of the Chrome question. So Google has pushed that that impact down the road and what that means to us is it just gives us more time to ready the market. It gives us more time to develop the product and create more and more and more first party data. So the further it goes down the road I guess the longer we have absorb any kind of impact there. To date we've been lean into the tests – the tests that Google have done across their alternatives both flock and fledge with Linton very, very quickly. And they're so far away from actually being ready for market adoption that it's left the marketplace with a big question mark around when, and even if Google will go ahead with turning off the ability to use third-party cookies. So we don't see any certainly the heats gone off any kind of impact from Chrome. And what we'll do is we'll just continue to do what we are doing, continue to build the moat, continue to bring in the first party data to make us more and more resilient by the day to anything that happens across the Chrome browser to automate our ability to use any identifiers.

I can quickly comment on retargeting and on Q4. So we are – yes, retargeting is doing well. We do see that we have a robust past business. They're very resilient as we expected. Most of the Q – the 2021 privacy impact about $24 million is in Q4. So that obviously pretty much offset the pretty phenomenal growth that we're already seeing in retail. We expect to continue into Q4. And in 2022 and again, I don't want to – I'm not giving guidance in for 2022, but we do anticipate that we will continue to see resiliency in our retargeting space. And we are looking to offset the incremental impacts in privacy. So it's a great business when it plays and we're seeing that our customers really, really like to do retargeting. So all good.

Excellent, thanks.

I just wanted to add, Tim to add one thing to it that we didn't talk about obviously spot on Chrome going back to Chrome. But we didn't mention that we're actively helping our marketers find and advertiser engage audiences, high value audiences that are now available at lower CPMs in iOS. So the impacts that we've talked are obviously related to mostly to from web to app retargeting and a little bit of app to app retargeting, but what we didn't talk about is that our product efforts remain full steam ahead on helping target into those environments without it being a retargeting effect.

Okay. Thanks, Todd.

You bet.

Our next question today comes from Matthew Thornton with Truist Securities. Please go ahead.

Hey, good morning, everybody. Congrats on the results. Maybe a quick housekeeping question for Sarah, and then I've got a follow up for either Megan and or Todd. Sarah on travel for the back half of the year, I think previously you talked about down 70% versus 2019. I think earlier you might have mentioned something closer to maybe down 50%. I just want to make sure if I heard that correct, if that's how we should be thinking about travel is in the back half of the year? And then for Megan or Todd, when we think about contextual versus retargeting –obviously retargeting Criteo as a dominant player and the market leader, from where we stand now, how do you think about your capabilities in contextual and your ability to be best in class, any market leader in contextual, where perhaps there were already some incumbent players in other competitors kind of in that market, any update there would be helpful? Thanks, everyone.

Let's start with your second question first. So just before I hand it across to Mr. contextual here and Todd, I sort of want to remind you of the things that go into the mix for us. As I said before, we have 650 million daily active that's a lot of consumers, that's a lot of people that we see. We have 22,000 commerce clients. So that's a lot of marketers with a lot of marketing data that we can get our hands on in terms of their shopping behavior, their e-commerce data. We see over $900 billion in e-commerce sales. We see it so we know what people are buying. And we also from our background have a good reputation in creating outcomes. So we're responsible for about $40 billion worth of commerce outcomes from the client base that we have today. So if you take that capability, that data and layer on AI capability on top of that, then you have this melting pot, if you like of stuff that is being pulled into our contextual product offering. So I'll close there. You jump in Todd.

No, that's great. Megan, I appreciate that. And just to add a little bit to it, everything that makes us different from a contextual standpoint, of course, we do all the regular content and meaning extraction that others do some natural language processing that would not be enough. What does make us different is that there will always be a certain amount of first-party users recognized across both app and web that have buying behaviors that are uniquely seen by Criteo. So in order to match those and then to take that match into the contextual meaning that I described before is what makes us different. And it will always make us different.

And I'll just quickly take the travel question. So going into – if I kind of look at the quarter-on-quarter versus 2019. Q1, we were down about 80% of, and obviously when we planned, we expected, we slightly better than that. Q2, we exited about 70%, same as Q3. And we are anticipating Q4. We hoped to exit around 50%. So we are seeing some new orders kind of coming in Q4. So that's the way that we're thinking about it.

That's very helpful. Maybe I could just slip one other quick one in only because you guys talked a little bit about your shoppable video ads, and obviously we're doing more and more about performance marketing trying to find its way into CTV. And so my question there is, I guess, is in each hands, we could see some, whether it's a CTV platform or a CTV publisher, any type of, partnerships that could come our way in the coming months and quarters?

I mean, we're really focused. First of all, we're really excited about shoppable mainly be, we have always brokered on the promise of bringing commerce to where consumers are most, looking to discover a brand or to engage a brand. For us, the first and most meaningful scale opportunity is an online video. And the testing that we're doing now, not surprisingly lean to, into online video, doesn't mean that we won't be talking about CTV as well, but you're going to hear a lot of noise from us on online video, because there's so much untapped opportunity for shoppable across the open internet right now. And it really signals quite an evolution for us beyond what has already been effective in display. So we're laser focused on that, but weren’t certainly not closed to any of those other opportunities.

Great. Thanks.

And our next question today comes from Mark Zgutowicz with Rosenblatt Securities. Please go ahead.

Thanks much. Maybe just a quick on UID 2.0, Todd I don’t know if you could comment on, so how that's progressing and your participation there and sort of what contribution you're anticipating from your participation. Thanks.

Yes. We're still moving along and obviously that is a very ambitious initiative that is there to benefit the entire ecosystem. We're still very supportive of it. And of course, we have work in parallel with pre-bid single sign on that is advancing. These are big initiatives. I think we signal, in earlier calls that we expected, it would take the better part of a year to get to any scale. But we do see progression and we're happy with it, could always go faster, but do bear in mind, these are for the whole ecosystem, not just for the trade desk or for Criteo.

Yes, I I'll our sort of focus on this has been one of interoperability and the ability for all of these things to work together. And to Todd's point that's a hugely ambitious task, but one that we're laser focused on and we are behind not behind, behind we're pushing this as fast as we possibly can because we need to make sure that entire market is ready to go at a time when Chrome decides to enact third party cookies.

Okay, great. Thanks. And just a quick – travel. I might have missed this but can you just quantify what the travel contribution was to your revenues in 2019?

I think for the year it was around about a $100 million if I recall.

The total COVID impact last year was $100 million travel probably in 2019 and 2017.

As a segment was…

Yes, it was about 17 million in 2019.

17 million. Thank you. Thanks so much. Appreciate it.

Well, thanks Mark. I think we're going to end up the call here, so we'd like to thank Megan, Sarah and Todd and thanks everyone for joining today. These will not computer call. The IR team is always available for any follows-ups you guys may have, so please do not hesitate. And thanks, we wish you a good end of year. Thanks.

Thank you everybody. Bye everyone.

Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Have a wonderful day.