Slide 1: 1Q 2017 Opera Software ASA
1Q 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 1Q17 ($m) 1Q16 ($m) Total revenue 107.0 129.1 Adj. EBITDA 0.5 10.0 • AdColony revenue down - Mix shift within Brand to Brand Performance & Programmatic (lower CPM) - Delay in product launches - Few hit games launched in 1Q17 vs 1Q16 • Profit (Adj. EBITDA) down d
Slide 4: Quarterly highlights
Quarterly highlights Opera Software ASA Weak revenue due to 26% revenue growth, both Solid revenue growth from Very limited revenue in 1Q17 Performance business LATAM and international direct and partner business growing Lower loss on operations vs Apollo VII completed in 1Q17 Signed 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 1Q: weak, as expected
Opera Group 1Q: weak, as expected • Revenue drop in 1Q led by AdColony, growth in Bemobi and SurfEasy • Opex down YoY with cost focus in AdColony and Skyfire in particular • Adj. EBITDA down solely due to AdColony 7
Slide 8: AdColony – Impacted by delayed products and shift to programmatic
AdColony – Impacted by delayed products and shift to programattic • Revenue impacted by weak performance revenue, product delays and shift to programmatic • Opex down YoY with strict cost control • Adj. EBITDA impacted by lower gross margin and lower revenue * AdColony revenue excludes intercompany
Slide 9: Bemobi – Investing for growth
Bemobi – Investing for growth • Revenue up 26% YoY. LATAM mature and international growth offset by lower legacy revenue • Opex growth due to international expansion • Gross margin positively impacted by release of cost by international operator • Adj. EBITDA up with higher revenue and gross margin
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 • Gross margin 90%+ • Adj. EBITDA still negative due to lack of scale 10
Slide 11: Cash flow – Impacted by earnouts and share repurchase
Cash flow – Impacted by earnouts and share repurchase • Operating CF: USD 1.8 million • Capex & Capitalized R&D: USD 9.5 million • Investing & Financing: Earnout payments of USD 12.2 million and USD 9.7 million in share repurchases • Cash end of quarter: USD 195 million, down 25 million vs 4Q16 11
Slide 12: Financial position – Strong net cash position
Financial position – Strong net cash position Financial Position Balance sheet $194.8 Other assets $134.8 Cash $194.8 $500.8 Equity $94.8 Accounts receivables $120.8 $104.3 Other liabilities Goodwill -$100.0 -$70.6 $325.3 $70.6 Earn-out liabilities $100.0 Loans Gross Cash Gross Debt Net Cash Earnout
Slide 13: Financial outlook – Positive view on H2 maintained
Financial outlook – Positive view on H2 maintained Q1 2017 FY 2017 guidance • Initiatives in AdColony, in particular, to Revenue drive growth in 2H is on track USD 107.0 million USD 550-650 million Adj. EBITDA (margin) USD 0.5 million USD 50-70 million • FY 2017 guidance unchanged (0.5%) (~9-11%) 13
Slide 14: Operational Review
Operational Review 14
Slide 15: AdColony – Revenue down as expected in 1Q17
AdColony – Revenue down as expected in 1Q17 Revenue Source Q1 2016 ($m) Q1 2017 ($m) Comments Delay in product launches Performance $66.5 $46.7 Impact from soft 4Q16 «halo» effect and few hit games launched Brand $50.8 $46.6 Decline in managed service business was largely due to the delay in key pro
Slide 16: AdColony – Apollo on track, impact from 3Q
AdColony – Apollo on track, impact from 3Q Elevating mobile advertising across today’s hottest apps Apollo update Expected launch Progress VII: Improved bidding engine to increase revenue 2Q 2017 Product completed, beta testing underway, on track VIII: New SDK Inventory toolkit to increase revenue 3
Slide 17: AdColony
AdColony • Audience reach of 1.9b up from 1.4b in 1Q16 • Apollo launches on track to drive revenue growth in 2H 2017 • Measures to increase efficiency and reduce costs on track and underway. 17
Slide 18: Bemobi – Solid revenue growth
Bemobi – Solid revenue growth Making premium apps available to emerging markets Revenue Q1 2017 ($m) vs Q1 2016 Comments LATAM $10.7 +30% Strong growth, maturing market Strong growth of Apps Club and NDNC revenue, offset by lower legacy International $1.9 +19% revenue (featurephone app store) Total
Slide 19: Bemobi – Subscriber growth driving revenue and scale
Bemobi – Subscriber growth driving revenue and scale • LATAM operators up from 16 in 1Q16 to 20 in 1Q17 • International operators up from 10 in 1Q16 to 29 in 1Q17 • Live with No Data, No Credit portal with 3 international operators • Total addressable subscriber base now over 2 billion across the gl
Slide 20: Bemobi – Product launches driving growth
Bemobi – Product launches driving growth Initiatives Timing NDNC (No Data No Credit) Portal was improved to create better user experience. 1Q 2017 Introduced adaptive billing for better monetization 1Q 2017 Improvement in most operational metrics (subscriber acquisition and monetization) across regi
Slide 21: Skyfire – Turnaround continues
Skyfire – Turnaround continues Improved internet bandwidth experience • 4 Live operator contracts • Completed two successful trials during the quarter with large operators, one in Europe and one in Asia. Both are now in commercial negotiations • During the quarter, Skyfire enhanced heuristics that i
Slide 22: SurfEasy – Fast and trustworthy VPN
SurfEasy – Fast and trustworthy VPN • SurfEasy owned and Operated products added over 140k new paying subscribers in 1Q. This represented a 140% increase over previous quarter • One of our larger partners began making significant gains in new customer acquisitions during 1Q. Early indications that r
Slide 23: AdColony
(/ ADCOLONY —
Slide 24: Executive Summary
Executive Summary • Per guidance, we expect revenues to be down in the first half, as we ramp up our new products and return to growth in 2nd half of the year. • Revenues in Q1 were on plan at $93.3M and we had an EBITDA loss of ($2.2M) - Maintained diversity of revenues with 50% Brand / 50% Perform
Slide 25: Q1 Results
Q1 Results
Slide 26: Q1 2017 Revenue
Q1 2017 Revenue • Revenues down vs. Q1’16. Biggest decreases came from Performance and, within Brand, from old AdMarvel SSP Business. Highlights included strong growth in Brand Performance and Programmatic. Revenue Source Q1 2016 Q1 2017 Change Performance $66.5 $46.6 -29.9% Brand $50.8 $46.7 -8.0%
Slide 27: Q1 2017 Gross Margin
Q1 2017 Gross Margin • Gross Margins were on plan and down ~1 points vs 2016 full year average. Brand margin decline due to pivot off legacy “ad network” model + mix shift of revenues towards Brand Performance and Programmatic. Margin Source CMD: Full Year 2016 Q1 2017 Pt Change Performance 37% 38%
Slide 28: Detailed Results: Performance Advertising
Detailed Results: Performance Advertising Summary: Q1 2017 Performance revenues = $46.6M (-30% vs Q1’16) Summary of Q1 2017 Results • Increased competition for mobile video supply and pricing • Majority of revenue softness due to lower than expected performance metrics on existing business and some
Slide 29: Detailed Results: Brand Advertising
Detailed Results: Brand Advertising Summary: Q1 2017 Brand Revenues (excluding Programmatic/SSP) = $39.8 (-3% vs. Q1’16) Summary of Q1 2017 Results • Brand Performance business achieved 116% growth as we continue to see brand advertisers being more performance focused • Video was down in the US ($11
Slide 30: Detailed Results: Programmatic
Detailed Results: Programmatic Summary: Q1 2017 Programmatic/SSP Revenues = $6.9M (-30% vs Q1’16) Summary of Q1 2017 Results • Legacy AdMarvel SSP business winding down. Revenues dropped from $5.2M to $1.4M (-73% YoY decline) • RTB-based programmatic exchange grew from $4.7M to $5.5M (+17% YoY) • Pr
Slide 31: Q2 Focus & Trending
Q2 Focus & Trending
Slide 32: Q2 Focus & Trending
Q2 Focus & Trending Key areas of strategic focus for us include: • Publishing: Driving SDK growth & convert entire tech platform to our new 3.X series SDK • Selling in new products to Brand and Performance advertisers, while continuing to support existing products and older platforms, as new product
Slide 33: SDK 3.X Penetration has tripled since January
SDK 3.X Penetration has tripled since January Healthy adoption of next-generation SDK SDK 3.X Adoption • Current live publisher penetration 16% rate on 3.X is at 19% as of May 11 • Publishers excited about new SDK % Network Impressions as it enables Vertical, Explorable, 12% Interactive Video & Play
Slide 34: Vertical Video: Early KPIs are strong for Performance
Vertical Video: Early KPIs are strong for Performance Instant-Play ™ HD Vertical Video (Performance) Q1 Q2 • Vertical video inventory has been ramping up very quickly - 10x Vertical Video Impressions since February • We have launched nearly 700 new advertiser creatives across ~200 campaigns which ar
Slide 35: Vertical Video: Strong 10% Engagement Rate for Brand
Vertical Video: Strong 10% Engagement Rate for Brand Instant-Play ™ HD Vertical Video (Brand) Successful launch campaigns with UFC, FX, and Xbox with broad press coverage. Strong results to date: • 89% avg. video completion rates outperforming social channels that have single digit completion rates
Slide 36: Interactive Video: 1st to market campaigns in May/June!
Interactive Video: 1st to market campaigns in May/June! Aurora™ HD Video Launch • “First to market” launch program locked with major brand advertisers • Brand beta program drawing in 7- figure revenue in Q2 • First live flight dates start May 25 • Press planned in early June • Drawing interest from
Slide 37: Product Updates/Tracking
Product Updates/Tracking Focus on SDK, Apollo VII, Apollo IX & LTV Optimization Product Updates & Tracking SDK 3.X • v3.1 SDK was made publicly available on March 6, 2017 (Next gen AdColony SDK) • Since March, focused on minor bug fixes, optimizations, partner integrations Apollo VII • Passed QA in
Slide 38: Closing Statements
Closing Statements • While a challenging quarter financially, we are “on plan” and we continue to get strong market validation of our focus on driving OUTCOMES for brands and publishers • I couldn’t be more proud of our development studio in navigating a very challenging and ambitious SDK, which is
Slide 39: Closing Comments
Closing Comments 39
Slide 40: Segment outlook
Segment outlook – Opera Software ASA An open, connected world - powered by great technology and services - breaking down barriers that limit access to information, education and fun Apollo launches on track Continued international ramp Growth of direct product & sign Strict cost control up a