Slide 1: 3Q 2017 Opera Software ASA
3Q 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 3Q17 ($m) 2Q17 ($m) 3Q16 ($m) Total revenue 108.7 109.9 136.0 Adj. EBITDA* 7.9 3.1 11.9 • AdColony revenue below expectations - Weaker Brand IO revenue: as expected, uptick in Performance revenue: weaker than expected • AdColony, Bemobi, SurfEasy and Skyfire all
Slide 4: Quarterly highlights
Quarterly highlights Opera Software ASA Weak revenue due to Solid revenue growth from Solid revenue and profit Turn around complete, cost Performance business 2Q17 growth in the quarter reduced by 70% Slow ramp of new products Record profitability Sold for EV of $38.5m to Revenue gro
Slide 5: Further cost cuts in AdColony
Further cost cuts in AdColony Annualized Annualized OPEX run- Additional Annualized OPEX OPEX run- rate entering savings executed run-rate 2018 rate 3Q17 2017 $24m Headcount $2m Marketing ~$145m ~$120million $90-95million $1m Offices $3m Other • Focus on Brand and Performance Business • Significant
Slide 6: Financial Review
Financial Review 6
Slide 7: 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 8: Opera Group 3Q17 P&L
Opera Group 3Q17 P&L P&L 3Q 2017 3Q 2016 % Total operating revenue 108.7 136.0 -20% Publisher and revenue share cost (65.1) (80.0) -19% • Revenue and cost both down Payroll and related expenses1) (20.4) (25.8) -21% 20% YoY Stock-based compensation expenses (1.7) (3.0) -44% Depreciation and amortizat
Slide 9: Opera Group 3Q17
Opera Group 3Q17 • Revenue down in 3Q17 vs 3Q16 due to AdColony, growth in Bemobi, Skyfire and SurfEasy • Opex down significantly versus 3Q16 and 2Q17 • Solid sequential profit trend and all 4 companies Adj. EBITDA profitable in the quarter 9
Slide 10: AdColony – Slow product ramp and shift to programmatic, significant cost cuts
AdColony –Slow product ramp and shift to programmatic, significant cost cuts • Revenue impacted by weak $128 performance revenue, slow $121 product ramp and shift to $93 $96 $91 programmatic • Gross margin down due to shift to programmatic and aggressive moves to secure premium publisher inventory •
Slide 11: Bemobi – Record quarter
Bemobi – Record quarter • Record revenue up 13% from 2Q17 and up 2% from 3Q16 (3Q16 included $0.8m extraordinary revenue) • Solid international revenue growth • Paced opex growth linked to international rollout • Continued strong gross margin • Record profitability (Adj. EBITDA) 11
Slide 12: Skyfire & SurfEasy – Revenue up and cost down
Skyfire & SurfEasy – Revenue up and cost down • Revenue up 100%+ YoY with strong revenue growth from both SurfEasy and Skyfire • OPEX down 40% YoY, all due to cost measures in Skyfire • 90%+ Gross margin • First quarterly Adj. EBITDA profit 12
Slide 13: Cash flow – Positive free cash flow
Cash flow – Positive free cash flow • Operating CF: USD 3.4 million, negatively impacted by restructuring in AdColony and Skyfire • Capex & Capitalized R&D: USD 2.8 million, down 60% vs 3Q16 • Free cash flow * : USD 0.6m • Investing & Financing: Earnout payments of USD 8.8 million and USD 8.1 millio
Slide 14: Financial position – Strong net cash position
Financial position – Strong net cash position Financial Position Balance sheet $161.7 Other assets Cash Equity Accounts $61.6 receivables Other liabilities -$56.1 Goodwill -$100.1 Earn-out liabilities Loans Gross Cash Gross Debt Net Cash Earnout liabilities 14
Slide 15: Financial outlook – FY 2017
Financial outlook – FY 2017 • Stable revenue from AdColony with focus on core business offering around Mobile video, Performance and Programmatic • AdColony opex base to be further reduced from USD 120m annual run-rate to around USD 90m in 2018 to ensure positive free cash flow at today’s revenue le
Slide 16: Financial outlook – 4Q17 expectations (vs 3Q17)
Financial outlook – 4Q17 expectations (vs 3Q17) Company Revenue Adj. EBITDA AdColony Flat Flat Bemobi Up Up SurfEasy* Down Down Skyfire Down Down *Revenue only through 6th November 2017 16
Slide 17: Operational Review
Operational Review 17
Slide 18: AdColony – Revenue ~5% below expectations
AdColony – Revenue ~5% below expectations • AdColony Brand • Move from Managed IO to Programmatic is hurting revenue short term • New leader in US Brand (Şekip Can Gökalp) with proven track record and Programmatic expertise • AdColony Performance • Strong customer relationship thorugh SDK penetratio
Slide 19: AdColony – Opex down 50m+ last 12 months
AdColony – Opex down 50m+ last 12 months Opex annualized run-rate (USD million) $160 $140 • Reduced headcount from 700+ to 400 $120 $100 • Turned regional offices into sales $80 offices $60 • Focusing on strategic and $40 profitable businesses $20 • Committed to be cash flow $0 positive Enter 2017 E
Slide 20: AdColony – Reasons to be optimistic
AdColony – Reasons to be optimistic • Market continues to grow • Market wants independent partners with scale • We have unique footprint through our SDK • Just launching our business in China (world’s 2nd biggest market) • New leadership in Technology (Andrzej Dzius) • Focused on delivering on plan
Slide 21: Bemobi – Record revenue and profit
Bemobi – Record revenue and profit 3Q 2017 3Q 2017 3Q 2016 Revenue Comments ($m) ($m) ($m) LATAM 11.1 10.1 11.8 Mature market, $0.8m in extraordinary revenue in 3Q16 International 2.8 2.2 1.9 Strong growth of Apps Club and NDNC revenue Total 13.9 12.3 13.7 21
Slide 22: Bemobi – Subscriber growth driving revenue and scale
Bemobi – Subscriber growth driving revenue and scale • LatAm subscriber base back to growth • International subscriber base growing, but still very early phase • Encouraging ARPU trend in new markets • Total addressable subscriber base now over 2 billion across the globe 22
Slide 23: Bemobi – The International growth case
Bemobi – The International growth case Apps Club Distribution (vs 2Q17) 34 operators live outside LATAM: • Opera Browser acquisitions slightly decreased from 55% to 52% • 13 operators in South Asia • NDNC channel has grown from 12% to 15%. • 11 operators in South-East Asia • Digital acquisitions (CP
Slide 24: Skyfire – Turnaround complete
Skyfire – Turnaround complete Delivered on commitment to be profitable • Profitable in 3Q17 • Guaranteed multi million USD revenue over next 3 years • Headcount reduced from 30 to 8 • Terminated office lease • Annualized OPEX <$1.5m • No direct sales, all sales through Huawei • Any future cost incre
Slide 25: SurfEasy – Sold to Symantec
SurfEasy – Sold to Symantec • The Transaction values SurfEasy at an enterprise value of USD 38.5m (over 2x what we paid for it 3 years ago) • The Transaction has customary net working capital and net debt adjustment mechanisms • Purchase price consists of an all cash consideration, of which 85% is p
Slide 26: AdColony
(/ ADCOLONY —
Slide 27: Executive Summary
Executive Summary Q3 2017 • For the first 9 months of the year, we delivered $280M in Revenues (-20% vs. first 9 months 2016) • Q3 results were $90.6M in Revenues (-25% vs. Q3’16) and $0.6 in EBITDA. Relative to results in Q2’17, Revenue was down 6% and EBTIDA was flat. • Given these results, we hav
Slide 28: Q3 Results
Q3 Results
Slide 29: Results: Performance Advertising
Results: Performance Advertising Summary: Q3 2017 Weekly Performance Revenues $4.00 $4.10 $3.70 $3.62 $3.64 $3.58 $3.22 $3.23 $3.34 $2.99 $3.15 $3.11 $3.13 $3.19 $3.09 $3.00 $2.90 $M USD $2.67 $2.70 $2.81 $2.84 $2.77 $2.76 $2.82 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21 8/28
Slide 30: Results: Performance Advertising – New ad formats
Results: Performance Advertising Summary: New ad formats continue to outperform and scale up Weekly Playable Impressions Impressions 10/9 10/16 10/23 10/30 Vertical Video Playable Ads • Grew 100% • Continue to ramp up with adoption of 3.0 SDK • Now >10% of all inventory • Now 2% of performance impre
Slide 31: Results: Performance Advertising
Results: Performance Advertising Appsflyer Index (1H 2017): AdColony ranks only behind Apple, Facebook and Google in ROI 31
Slide 32: Results: Brand Advertising
Results: Brand Advertising Summary: Q3 2017 Brand Revenues = $49.6M (-21.9% vs. Q3’16) Q3 Q3 2016 YoY Revenue Source Q3 2016 Q3 2017 2017 Mix % Change Mix % Brand: Managed IO $41.4 65.1% $29.7 59.9% -28.2% Brand Performance $8.6 13.5% $6.5 13.0% -24.9% Programmatic – Open Market $8.4 13.1% $7.7 15.6
Slide 33: Q3 Recap & Future plans
Q3 Recap & Future plans Performance: • Run rate is stable, but we need to get our Install Rates higher and drive more absolute installs • New data science models to improve IR • Supply – continued expansion of high quality supply/1st waterfall position • SDK – increase penetration of 3.2 SDK Brand:
Slide 34: Product Update
Product Update
Slide 35: Product Updates/Tracking
Product Updates/Tracking Focus on SDK, tools for Supply/Demand & Cost Efficiencies Product Updates & Tracking SDK 3.X • 3.2.1 SDK launched on Sep. 11th, focuses on compatibility with iOS 11 and Android Oreo. (Next gen AdColony SDK) • Stable launch with ~10% penetration across AdColony publishers thu
Slide 36: New CTO & 7 Missions
New CTO & 7 Missions Missions = Key to returning to growth • New CTO, Andrzej Dzius, in mid September • Identified 7 most critical problems we need to address. If we solve these, we will return to growth The Key Missions: 1) Ad Readiness - Ensure we are ready to serve an ad whenever we get an ad cal
Slide 37: What are We Doing Differently & How To Win?
What are We Doing Differently & How To Win? Focus & Changes • New strategic focus: AdColony Platform + Exchange, providing the largest in app marketplace of video outside of social. Maintaining legacy businesses no longer made sense. • New executional priorities: Direct Supply, Exchange, Customer Or
Slide 38: Closing
Closing • Q3 was a challenging quarter. While we had small growth in Performance vs. Q2 and were EBITDA positive, we’ve seen our Brand business continue to shift to Programmatic buying and we saw an even more accellerated decline in legacy platforms. • Legacy businesses and platforms decayed faster
Slide 39: Closing Comments
Closing Comments 39
Slide 40: 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 continued ramp in expectations f