Slide 1: 4Q 2017 Otello Corporation ASA
4Q 2017 OTELLO CORPORATION ASA
Slide 2: Agenda
Agenda • Executive Summary • Financial Review • Operations Review • AdColony (Mobile Advertising) • Closing Comments 2
Slide 3: Executive Summary
Executive Summary 3
Slide 4: Quarterly highlights
Quarterly highlights Financial metric 4Q17 ($m) 4Q16 ($m) Total revenue 99.2 142.5 Adj. EBITDA* 2.9 17.7 • Revenue down due to AdColony, partly offset by growth in Bemobi • Profit (Adj. EBITDA) down vs 4Q16 due to AdColony • Positive Adj. EBITDA despite lower revenue due to significant cost cuts in
Slide 5: Quarterly highlights
Quarterly highlights Otello Corporation ASA ▪ AdColony Performance business still ▪ 10% revenue growth ▪ 2H 2017 profitable impacted by delayed product launches ▪ FX had 4% negative impact on revenue ▪ Significantly lower cost base ▪ AdColony Brand revenue impacted by vs 3Q17 (LATAM) reorganizations
Slide 6: Financial Review
Financial Review 6
Slide 7: Disclaimer
Disclaimer This presentation contains, and is i.a. based on, forward-looking statements regarding Otello Corporation ASA and its subsidiaries. These statements are based on various assumptions made by Otello Corporation ASA, which are beyond its control and which involve known and unknown risks, unc
Slide 8: Otello Corporation 4Q17
Otello Corporation 4Q17 Continued operations Note 4Q 2017 4Q 2016 Revenue 99.2 142.5 Note Publisher and revenue share cost (59.3) (83.5) Payroll and related expenses (19.3) (25.2) 1. AdColony cost savings Stock-based compensation expenses (1.5) (2.3) program expected to save Depreciation and amortiz
Slide 9: Otello Corporation 4Q17
Otello Corporation 4Q17 Revenue OPEX 42,9 42,5 142,5 41,9 37,0 34,2 108,0 106,1 105,6 99,2 • Revenue down in 4Q17 vs 4Q16 due to AdColony, growth in Bemobi 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 • OPEX down YoY due to cost cuts in AdColony and Skyfire, Adj. EBITDA with continued investmen
Slide 10: AdColony
AdColony Revenue OPEX • Brand revenue negatively 13 Brand - impacted by shift to 10 36,5 Programmatic programmatic and ramp down 34,8 34,8 7 10 of non-core and non-profitable 29,9 9 Brand - 28,7 52 11 9 6 11 5 Performance products and markets 29 38 34 37 Brand - Managed IO • Performance revenue 53 4
Slide 11: Bemobi
Bemobi Revenue OPEX 14,1 5,2 13,9 • 3,9 LATAM revenue negatively 3,3 3,1 12,8 impacted by weaker BRL vs 12,6 12,3 USD in 4Q17 2,0 • Solid International revenue 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 growth Adj. EBITDA Gross Margin % • OPEX growth due to 76 74,4 international expansion (us
Slide 12: Skyfire
Skyfire Revenue OPEX 1,8 1,5 2,5 2,5 2,3 0,7 0,5 • Skyfire revenue 2x in 2H17 vs 0,3 1H17 0,6 0,4 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 • OPEX down significantly YoY as turnaround complete Adj. EBITDA Gross Margin % 100,0 100,0 100,0 100,0 100,0 • Adj. EBITDA positive in 2H17 102,5 1,4 1
Slide 13: Cost alignment in AdColony and Skyfire
Cost alignment in AdColony and Skyfire Annualized OPEX run- Annualized OPEX Annualized OPEX rate entering 2017 run-rate 2H 2017 run-rate 1H 2018 AdColony ~$145m ~$120million ~$90million Skyfire ~$7m ~$ 1.5 million ~$ 1.5 million 13
Slide 14: Cash position – Impacted by SurfEasy sale, loan repayment and buyback
Cash position – Impacted by SurfEasy sale, loan repayment and buyback Cash flow • Operating CF: USD 0.1 million • CAPEX & capitalized R&D: USD 3.5 million • CF from investment: USD 29.8 million, proceeds from sale of SurfEasy • CF from financing: Repayment of USD 100m loan & USD 4 million in share r
Slide 15: Financial position – Strong net cash position
Financial position – Strong net cash position Financial Position Balance sheet Other assets 116.4 86 86 86.0 Cash Equity 469.0 111.4 Accounts 0 receivables 322.6 Goodwill 113.6 Other liabilities -54 53.9 Earn-out liabilities 0,0 Gross Cash Gross Debt Net Cash Earnout Loans liabilities 15
Slide 16: Outlook – 2018
Outlook – 2018 Company Goal 2018 AdColony Profitable* Bemobi Higher Revenue and Profit* vs 2017 Skyfire Profitable* *Adj. EBITDA 16
Slide 17: Operational Review
Operational Review 17
Slide 18: AdColony – Turnaround continues
AdColony – Turnaround continues • Revenue • Performance business stabilizing • Brand business impacted by shift to programmatic and ramp down of non- core and non-profitable businesses • Gross margins stabilizing • Cost • OPEX reduced by 40% • Headcount reduced from 700+ to 400 • Ramp down of non-co
Slide 19: AdColony – Turnaround continues
AdColony – Turnaround continues • Organization • Old management team replaced • Internal talent promoted • Strategy starting to pay of • Tech team is now delivering customer focused products • Key KPI’s are improving, eCPM, Install rates and Gross margins • China growth very strong (already #3 bigge
Slide 20: Bemobi – Solid revenue growth
Bemobi – Solid revenue growth Making premium apps available to emerging markets Revenue 4Q 2017 ($m) 4Q 2016 ($m) Comments LATAM 10.8 11.1 Mature market, negatively impacted by FX (BRL vs USD) International 3.3 1.7 Strong growth of Apps Club and NDNC revenue Total 14.1 12.8 20
Slide 21: Bemobi – Subscriber growth driving revenue and scale
Bemobi – Subscriber growth driving revenue and scale Number of subscribers (million) 4,7 • LATAM subscribers up 12% YoY 3,1 • International subscribers base up 15,6 13,1 13,9 50% YoY 8,3 2014 2015 2016 2017 Latin America (including Brazil) International 21
Slide 22: Bemobi – Customer status and growth beyond LATAM
Bemobi – Customer status and growth beyond LATAM Distribution (user base during 2017 from Jan to Dec) Apps Club • Opera Mini 42%, down from 70% 34 operators live outside LATAM: • NDNC channel has grown from 1% to 11%. • 13 operators in South Asia • Digital acquisitions (CPA/rev share) grew from 4% t
Slide 23: Skyfire – Turnaround completed
Skyfire – Turnaround completed Delivered on commitment to be profitable • Asked for commitment from top 2 customers • Guaranteed revenue secures profitability next 2 years • Sold source code license to OEM • Headcount reduced from 30 to 8 • Terminated office lease • Annualized OPEX <$2.0m • No direc
Slide 24: SurfEasy – Sold to Symantec in 4Q17
SurfEasy –Sold to Symantec in 4Q17 • The transaction values SurfEasy at an enterprise value of USD 38.5m (over 2x what we paid for it 3 years ago) • The transaction price is approximately 5-6x revenue and 40x Adj. EBITDA Last Twelve Months • Sale of SurfEasy marks 3rd transaction post our strategic
Slide 25: AdColony Sales & Tech
AdColony Sales & Tech -Sekip Gokalp – EVP Exchange/Brand -Andrzej Dzius - CTO 25
Slide 26: The Perfect Storm is here – AdColony has to be on right side of history
The Perfect Storm is here – AdColony has to be on right side of history Trend Implications • Advertisers wanted to have control, transparency and efficiency at scale. Programmatic Advertisers will get what buying in one way or the other gives advertisers all they need. • 80% of mobile ad spend is ac
Slide 27: Our response: Embodying the "organic" media movement
Our response: Embodying the “organic” media movement 27
Slide 28: AdColony: The Ad Quality Video Marketplace
AdColony: The Ad Quality Video Marketplace Positioning The #1 Video Marketplace for the “Organic” Media Movement. Benefit Transparent & Pillars Video Ads People Like Viewable & Fraud Free Always Brand Safe Measurable • Completely transparent inventory • High propensity of gaming • User-initiated vid
Slide 29: Great opportunity ahead if we can stay focused and execute well
Great opportunity ahead if we can stay focused and execute well Opportunity: Tremendous shift to in-app video - we are the biggest source of measurable and clean in-app video and are uniquely positioned to address needs and shape habits across the biggest buyer segment in mobile Brands and Agencies.
Slide 30: Key metrics to track progress
Key metrics to track progress January January YoY Revenue Source Notes 2017 2018 Change PMP Revenue PMP revenue growth rate is the key indicator of 138% progress for the shift in our brand segment. # of active PMP buyers Indicator of PMP retention rates. Increase in 36 47 31% number and diversity he
Slide 31: SDK 3.X Penetration Continues to Grow
SDK 3.X Penetration Continues to Grow 3.X penetration reached half the network and is driving better results for our advertisers and publishers SDK 3.X Adoption 69% % Network Impressions • Live publisher penetration rate on 3.X 64%67% was at 64% through Q4 and jumped a 55%59% 50% further 5% in Janua
Slide 32: Why is this important?
Why is this important? • The types of creative that are supported by 3.X including vertical video and playables drive higher pricing which results in better eCPMs for our publishers. eCPM $11,75 $11,00 +20% $10,25 eCPM $9,50 $8,75 $8,00 2.X 3.X • Higher eCPMs result in our ads being played higher up
Slide 33: China investment is beginning paying off
China investment is beginning paying off KPI Mid Q1’18 vs End of Q4’17 Our investment in China has already Impressions 1.8x begun to pay off in 1Q’18 as we see strong growth Uniques 2.0x in impressions, unique users, ad Ad Spend 2.5x spend, publisher eCPM and app installs Publisher eCPM 1.6x Install
Slide 34: Re-aligned engineering around key efforts, broke silos
Re-aligned engineering around key efforts, broke silos In the past, engineering worked in silos with limited exposure to customer and business problems. We’ve taken huge steps to re-align the teams, bring new talent and increase understanding of our customers, our business, and the challenges we nee
Slide 35: Foundational changes to increase scale and minimize costs
Foundational changes to increase scale and minimize costs In Q4, we identified improvements in our foundational technology that will enable improved ad readiness, and thus increase scale in 2018, while drastically reducing daily processing costs. Cache request Real-time ad High costs serving minimiz
Slide 36: In Q4, kicked off key efforts based on customers & market
In Q4, kicked off key efforts based on customers & market Opposed to an internal-centric approach, Q4 was all about responding directly to customer feedback and opportunities, in addition to strong market dynamics Effort Engineering Efforts KPIs • SDK footprint in top apps • Evolving SDK to improve
Slide 37: Efforts will begin to have significant impact in H1 2018
Efforts will begin to have significant impact in H1 2018 Effort Expected Impact & Timing • Significant decrease in bugs – Q2 2018 PUBLISHING • 15% increase in Publisher eCPMs – by end of Q1 2018 • Increase in SDK penetration across top 1,000 apps – by end of Q3 2018 • Increase in spend across key Ti
Slide 38: Closing Comments
Closing Comments 38
Slide 39: Summary
Summary Otello Corporation ASA ▪ OPEX reduced from ▪ International growth to ▪ Cost base reduced by 70% $150m down to $90m accelerate in 2018 ▪ Contracts signed secures (40% savings) ▪ Gross margins to remain future profitabilty ▪ Gross margins have very strong stabilized ▪ Completely changed manage