Slide 1: 2Q 2017 Opera Software ASA
2Q 2017 Opera Software ASA Gg
Slide 2: Agenda
Agenda • Executive Summary • Financial Review • Operations Review • AdColony (Mobile Advertising) • Closing Comments 2
Slide 3: Quarterly highlights
Quarterly highlights Financial metric 2Q17 ($m) 1Q17 ($m) 2Q16 ($m) Total revenue 109.9 107.0 127.7 Adj. EBITDA 3.1 0.5 9.5 • AdColony revenue down vs 2Q16, but up vs 1Q17 - Weak 2017 UA Performance trend from January through May, but solid uptick in revenue after May and established at higher level
Slide 4: Quarterly highlights
Quarterly highlights Opera Software ASA Weak revenue due to 5% revenue growth, both Solid revenue growth from Very limited revenue in 2Q17, Performance business LATAM and international direct and partner business but lower loss on operations vs growing 2Q16 due to cost measures Slow ramp o
Slide 5: Financial Review
Financial Review 5
Slide 6: Disclaimer
Disclaimer This presentation contains, and is i.a. based on, forward-looking statements regarding Opera Software ASA and its subsidiaries. These statements are based on various assumptions made by Opera Software ASA, which are beyond its control and which involve known and unknown risks, uncertainti
Slide 7: Opera Group 2Q: weak, as expected
Opera Group 2Q: weak, as expected • Revenue down in 2Q17 vs 2Q16 due to AdColony, growth in Bemobi and SurfEasy • Opex flat YoY with cost focus in AdColony and Skyfire in particular • Adj. EBITDA down mainly due to AdColony 7
Slide 8: AdColony – Impacted by slow product ramp and shift to programmatic
AdColony – Impacted by slow product ramp and shift to programmatic • Revenue impacted by weak performance revenue, slow product ramp and shift to programmatic • Stable gross margin • Opex down YoY with strict cost control • Significant cost program initiated at the end of the quarter with $25 millio
Slide 9: Bemobi – Investing for growth
Bemobi – Investing for growth • LATAM mature, Brazil impacted by lower BRL VS USD rates • International revenue growth offset by lower legacy revenue • Opex growth due to international expansion • Continued strong gross margin 9
Slide 10: Skyfire & SurfEasy – Restructuring and Growth
Skyfire & SurfEasy – Restructuring and Growth • SurfEasy revenue growing, offset by Skyfire revenue declining • OPEX down significantly in Skyfire • 90% Gross margin • Adj. EBITDA still negative due to lack of scale • Substantial cost cuts initiated at the end of the quarter for Skyfire 10
Slide 11: Cost alignment in AdColony and Skyfire
Cost alignment in AdColony and Skyfire Annualized OPEX run- Annualized OPEX run- Savings rate entering 2017 rate 2H 2017 $15m Headcount ~$145m $4-5m Hosting ~$120million $2m Offices $2-3m Other $3m Headcount ~$7m $1m Offices ~$ 1.5 million $1m Other 11
Slide 12: Cash flow – Impacted by earnouts and share repurchase
Cash flow – Impacted by earnouts and share repurchase • Operating CF: USD (1.0) million • Capex & Capitalized R&D: USD 9.5 million • Investing & Financing: Earnout payments of USD 7.4 million and USD 5.7 million in share repurchases • Cash end of quarter: USD 174.7 million, down USD 20.1 million vs
Slide 13: Financial position – Strong net cash position
Financial position – Strong net cash position Financial Position Balance sheet $174.7 Other assets Cash Equity $74.8 Accounts receivables Other liabilities -$63.3 Goodwill -$100.0 Earn-out liabilities Loans Gross Cash Gross Debt Net Cash Earnout liabilities 13
Slide 14: Financial outlook – FY 2017
Financial outlook – FY 2017 -Ramp in AdColony revenue slower than earlier expected • Overall, we expect to be below the guidance we put out in the beginning of the year • Speed of transformation to more programmatic revenue streams for AdColony makes predictability lower on revenue and margin, thus
Slide 15: Financial outlook – 3Q17 expectations (vs 2Q17)
Financial outlook – 3Q17 expectations (vs 2Q17) Company Revenue Adj. EBITDA AdColony Flat Up Bemobi Up Up SurfEasy Up Up Skyfire Up Up 15
Slide 16: Operational Review
Operational Review 16
Slide 17: AdColony – Revenue down as expected in 2Q17, up vs 1Q17
AdColony – Revenue down as expected in 2Q17, up vs 1Q17 Elevating mobile advertising across today’s hottest apps Revenue Source 2Q 2016 ($m) 2Q 2017 ($m) Comments Revenue declined in our Performance business, hitting a run rate Performance $57.6 $39.6 low in May but rebounding significantly in June
Slide 18: AdColony – cost initiatives and growth drivers
AdColony – cost initiatives and growth drivers • Cost plan implemented • Initiated cost cuts with an annualized impact of USD 25m with impact from 3Q17 ($120m annual run-rate) • Key revenue growth drivers going forward: • PERFORMANCE • New SDK enabled ad formats (Vertical, playables) • Fixed priced
Slide 19: Bemobi – Solid revenue growth
Bemobi – Solid revenue growth Making premium apps available to emerging markets Revenue 2Q 2017 ($m) 2Q 2016 ($m) Comments LATAM 10.1 9.6 Maturing market, negatively impacted by FX Strong growth of Apps Club and NDNC revenue, offset by lower legacy International 2.2 2.1 revenue (featurephone app sto
Slide 20: Bemobi – Subscriber growth driving revenue and scale
Bemobi – Subscriber growth driving revenue and scale • LatAm subscriber base slightly down from 14.3mm in Q2’16 to 13.9mm in Q2’17. • International subscriber base grew from 2.3mm in Q2’16 to 4.0mm in Q2’17. • Total addressable subscriber base now over 2 billion across the globe 20
Slide 21: Bemobi – Customer status and growth beyond LATAM
Bemobi – Customer status and growth beyond LATAM Apps Club Distribution 31 operators live outside LATAM: • Opera 55%, down from 75% • 12 operators in South Asia • NDNC channel has grown from 4% to 12%. • 10 operators in South-East Asia • Digital acquisitions (CPA/rev share) grew from 1% to 13%. • 7
Slide 22: Skyfire – Turnaround completed
Skyfire – Turnaround completed Deliver on commitment to be profitable • Asked for commitment from top 2 customers • Guaranteed revenue 5m+ over next 3 years • Sold source code license to OEM • Headcount reduced from 30 to 8 • Terminated office lease • Annualized OPEX <$1.5m • No direct sales, all sa
Slide 23: SurfEasy – Fast and trustworthy VPN
SurfEasy – Fast and trustworthy VPN • Revenue and profitability up significantly from 2Q16 and 1Q17, having first quarter of 20% + margins • Tracking ahead of plan for the year • Launched an expanded Partners program and increased related business development activities and have entered discussions
Slide 24: AdColony
(/ ADCOLONY —
Slide 25: Agenda
Agenda • State of Mobile Advertising & Implications for AdColony • Q2 Results: Performance & Brand • Cost Efficiencies • Product Updates • Key Takeaways 25
Slide 26: State of Mobile Advertising
State of Mobile Advertising • The mobile advertising category is large and has strong forecasted growth rates • Brand demand is increasingly moving to 1st party and direct supply sources only • Ad technology companies who don’t have a strong SDK footprint are getting pushed out of the market • Progr
Slide 27: Implications for AdColony
Implications for AdColony • Our SDK footprint continues to be our most valuable asset. At the end of Q2, we maintained our position of having the largest SDK footprint among all independents and were 2nd only to Google in the top 1000 apps • We added +48% growth of new apps actively using our SDK vs
Slide 28: Q2 Results
Q2 Results
Slide 29: Results: Performance Advertising
Results: Performance Advertising Summary: Q2 2017 Performance revenues = $39.6M (-31% vs Q2’16) Weekly Performance Revenues $3,93 $3,98 $3,67 $3,62 $3,66 $3,57 $3,40 $3,26 $3,26 $3,19 $3,24 $2,96 $3,05 $M USD $2,92 $2,84 $2,71 $2,68 4.3 4.10 4.17 4.24 5.1 5.8 5.15 5.22 5.29 6.5 6.12 6.19 6.26 7.3 7.
Slide 30: Results: Brand Advertising
Results: Brand Advertising Summary: Q2 2017 Brand Revenues = $56.5M (-1 vs. Q2’16) Revenue Source Q2 2016 Q2 2016 Q2 2017 Q2 2017 YoY Change Mix % Mix % Brand Managed IO $39.0 68.2% $34.7 61.4% -11.0% Brand Performance $7.6 13.3% $8.5 15.0% +11.5% Programmatic – Open Market $5.2 9.1% $7.6 13.5% +46.
Slide 31: AdColony Programmatic (Open + PMP) = +85% Growth
AdColony Programmatic (Open + PMP) = +85% Growth Programmatic hit new milestone and now represents 20% of our Brand Revenue Open PMP $11.1M 3,5 $6M 0,8 7,6 5,2 2016 2017 31
Slide 32: Brand & Programmatic Focus Going Forward
Brand & Programmatic Focus Going Forward Transform consumer-initiated, mobile attention into creative brand experiences that drive real outcomes • Investing further in programmatic activation and products as business shifts away from Managed Service - Vertical Video opening up to Programmatic buying
Slide 33: Q2 Results: Cost Efficiencies
Q2 Results: Cost Efficiencies
Slide 34: Restructuring / Cost Controls
Restructuring / Cost Controls Restructuring in Q2 will drive $25M reduction OPEX vs 2016 (~20% in annualized savings). Cost Initiative Updates & Tracking Organization / Staffing • Restructuring in NA and EMEA completed in Q2, will yield $15M in annualized compensation cost savings beginning mid Q3 H
Slide 35: Product Update
Product Update
Slide 36: SDK 3.X Penetration Continues to Grow
SDK 3.X Penetration Continues to Grow Over 2X Penetration in last 3 months; Preparing now for new upgrade cycle w/iOS11 and Oreo SDK 3.X Adoption • Current live publisher penetration rate 38% on 3.X is at 38.1% through July % Network Impressions • 9 of the top 10 publishers on our 27% network from Q
Slide 37: Vertical Video
Vertical Video Significant increase in impressions during Q2 Weekly Vertical Video Impressions 33,4 Millions Impressions 31,8 28,3 26,6 24,0 18,1 12,9 14,0 12,2 10,2 5.22 5.29 6.5 6.12 6.19 6.26 7.3 7.10 7.17 7.24 • Vertical video has grown 400% from just 1M videos/day in April to ~5M/day in July or
Slide 38: Aurora™ HD Video
Aurora™ HD Video Industry-leading new Interactive Video format, resulting in 3X lift in deal size in Q3 Launch showcased innovation, 3x Deal Size Growth Driving Outsized Outcomes highlighted work w/ top brands 45,00% $554,00 $185,00 6,40% Instant-Play™ HD Video Aurora™ HD Video Instant-Play™ HD Vide
Slide 39: Product Updates/Tracking
Product Updates/Tracking Focus on SDK, Biggest Scale Revenue & Cost Efficiency Opportunities Product Updates & Tracking SDK 3.X • 3.2 SDK will be made publicly available in late August, focuses on compatibility with (Next gen AdColony SDK) iOS 11 and Android Oreo • 3.3 SDK scheduled for late Septemb
Slide 40: Closing Statements/Key Takeaways
Closing Statements/Key Takeaways • In Q2, we got off to a slow start but finished with good momentum. We saw growth vs. Q1 2017, we launched new products and are focused on scaling to drive revenue growth. • The company restructuring will not only lead to substantial cost savings, but will also set
Slide 41: Closing Comments
Closing Comments 41
Slide 42: All our companies must be profitable and generate cash
All our companies must be profitable and generate cash Opera Software ASA Delayed launch and ramp of Continued international ramp Clearly profitable and ahead of Cost program executed ($5m products reduces revenue plan for the year annualized impact) Expect ramp in revenue and expectations