Slide 1: 3Q 2018 Otello Corporation ASA
3Q 2018 OTELLO CORPORATION ASA
Slide 2: Agenda
Agenda • Executive Summary & Operational Review (CEO, Lars Boilesen) • Bemobi (CEO Bemobi, Pedro Ripper) • Financial Review (CFO, Petter Lade) 2
Slide 3: Executive Summary
Executive Summary 3
Slide 4: Quarterly highlights
Quarterly highlights Financial metric 3Q18 3Q17 2Q18 (USD million) Total revenue 64.9 106.5 72.2 Adj. EBITDA* 1.4 7.2 1.7 • Revenue slightly down in AdColony vs 2Q18 due to focus on margins, turning down unprofitable deals and down in Bemobi due to FX (weak BRL vs USD) • Adj. EBITDA virtually flat v
Slide 5: Operational Review
Operational Review 5
Slide 6: AdColony – Turnaround continues
AdColony – Turnaround continues • Revenue • Performance business still struggling, focus on gross margin impacted 3Q18 revenue • Brand business stable versus 2Q18 and profitable in the quarter • Cost • OPEX reduced by over 50%, now targeting $70m annual run-rate • Merged tech and product organizatio
Slide 7: AdColony – Status
AdColony – Status • Gross margins ramped significantly through 3Q in the performance business, an important step to secure profitability • Tech and product organization merged, already seeing positive impact on delivery speed • Current cost base enable Adj. EBITDA break-even @ $50m in quarterly reve
Slide 8: AdColony Global Performance
AdColony Global Performance 8
Slide 9: Results: Performance Advertising
Results: Performance Advertising Summary: Q3 2018 Performance Revenues = $21.2Mn (-16% vs. Q2’18) Performance Revenues & Gross margin dollars $31,9 $26,6 $25,2 $21,2 $M USD 16% $9,3 $7,6 $5,1 $4,4 14% 4Q17 1Q18 2Q18 3Q18 • Difficult quarter with both revenue and gross margin coming under pressure •
Slide 10: Turnaround in Gross Margins on Performance Business in Q3
Turnaround in Gross Margins on Performance Business in Q3 Focus on profitability Gross Margin (%) $2,3 Gross Margin dollars ($m) 29,8% 30% $1,9 $1,8 24,9% $1,6 $1,5 20,6% 18,4% $1,2 16,1% $1,0 12,6% April May June July Aug Sep Oct April May June July Aug Sep Oct 4Q18 gross margin dollars to be highe
Slide 11: Game Plan to turnaround the Performance Revenues
Game Plan to turnaround the Performance Revenues Early positive signs with growth in weekly revenue and steady margins 1. Fix the fundamentals Weekly Revenue I. Demand led publishing deals 1,82 II. Creative innovation and effective 1,669 1,589 1,603 1,552 attribution mgmt. 1,471 1,37 III. Simplifyin
Slide 12: In Sum, Performance Business Transformation in Progress
In Sum, Performance Business Transformation in Progress On track to be profitable • Significantly lower cost base, in line with current scale of Performance business • Central performance hub established in Turkey to support global performance and publishing • Gross margin turnaround achieved in 3Q1
Slide 13: AdColony Global Brand Business
AdColony Global Brand Business 13
Slide 14: Results: Brand Advertising
Results: Brand Advertising Revenue Source Q3 2018 Q3 2018 Mix % $15.7 50% Brand (incl. IO and PMP) (down from $19.2 in Q2) (down from 58% in Q2) $7.8 25% Brand Performance (up from $7 in Q2) (up from 21% in Q2) Programmatic $7.8 25% Open Marketplace (up from 21% in Q2) (up from $7 in Q2) TOTAL $31.3
Slide 15: Continued Focus On Quality Fueled Growth
Continued Focus On Quality Fueled Growth • Programmatic revenue will continue to be the Brand organization’s primary focus and catalyst for growth • Programmatic Open Exchange Marketplace grew another 11% globally quarter-over-quarter due to Tech and Engineering work and renewed “programmatic first”
Slide 16: What We're Working On
What We’re Working On • Continued improvements and maturation of our programmatic tools and offerings • Improved dashboards and reporting tools • Faster and more accurate auction dynamics • Renewed commitment to first-party, high-quality Display inventory • We rehired a former AdColony Vice Presiden
Slide 17: Opera TV (Vewd)
Opera TV (Vewd) • As previously communicated, this is a legal dispute with majority shareholder (MFC) • Favorable verdict granted, not appealed by MFC • MFC ordered by the Court to pay a substantial portion of Otello’s legal costs to date, all cash received • Next steps: ask the court to reopen the
Slide 18: Bemobi
Bemobi • Bemobi continues strong underlying growth in revenue and profit • Otello and Bemobi have had informal discussions with several stakeholders • Given the positive performance and global opportunities Otello is considering strategic alternatives, including exploring a potential IPO or demerger
Slide 19: Bemobi
Bemobi Pedro Ripper, Bemobi CEO 19
Slide 20: Bemobi - strong results impacted by FX
Bemobi - strong results impacted by FX D (%) Bemobi 3Q18 3Q17 Y-o-Y Revenue (USD M) 12,4 13,9 -11% EBITDA (USD M) 5,2 6,8 -23% D (%) Bemobi - Ex-FX Rate 3Q18 3Q17 Y-o-Y Revenue (USD M) 14,8 13,9 7% EBITDA (USD M) 6,5 6,8 -4% FX Rate impact YoY (3Q18 vs. 3Q17) • INTL basket: -6,2% • BRL average FX Ra
Slide 21: Bemobi Subscribers (M)
Bemobi – solid subscriber growth while still at a low service penetration 25,0 4,0% • 26% YoY subscriber growth 23,9 20,0 3,6% • Service penetration on served 20,3 3,0% Bemobi Subscribers (M) 3,2% 19,0 addressable market grew from 0.9% to 17,0 15,0 1.1%. 2,0% 13,1 10,0 • 65 operators live with 4* ad
Slide 22: Bemobi - Overal channel mix improving
Bemobi - Overal channel mix improving Co-owned Channels International markets gross adds Q3 17 vs Q3 18 NDNC • 10 portals live in Bemobi outside of CHANNEL FROM TO Comments Latam: • Idea India (POC) (Q1) Opera Mini 59% 25% less dependency on one player • Vodafone India (Q1) • Telenor Pakistan (Q2) N
Slide 23: Bemobi – other updates
Bemobi – other updates • New integrated organization announced in September • Integrated financials and accounting principles • New key hires: products Director and BI leader • Evaluating and experimenting with new services areas and partnerships • Important win in a new channel with significant pot
Slide 24: Financial Review
Financial Review 24
Slide 25: 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 26: Otello Corporation 3Q18
Otello Corporation 3Q18 (USD million) 3Q 2018 3Q 2017 2Q 2018 Revenue 64.9 106.5 72.2 Revenue down due to AdColony, Publisher and revenue share cost (38.4) (65.1) (42.6) Bemobi negatively impacted by FX Payroll and related expenses (14.0) (19.8) (15.8) Stock-based compensation expenses (0.2) (1.6) (
Slide 27: Otello Corporation 3Q18
Otello Corporation 3Q18 Revenue (USD million) OPEX (USD million) 37,0 106,5 34,2 99,2 29,8 28,0 25,1 72,2 71,4 64,9 • Revenue down in 3Q18 vs 3Q17 due to AdColony, Bemobi impacted negatively by FX 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 • OPEX down YoY due to cost cuts in AdColony Adj. EBI
Slide 28: AdColony
AdColony Revenue USD million) OPEX USD million) 90 85 9 Brand - 6 11 Programmatic • Brand business stable and 29,9 5 28,7 57 58 profitable 34 53 Brand - 5 7 22,3 37 Performance 21,3 9 7 8 • 19,3 8 Brand - Managed Performance revenue impacted 17 19 16 IO by margin recovery in 3Q18 41 32 27 25 Perform
Slide 29: Bemobi – Consistent Gross Margins and EBITDA
Bemobi – Consistent Gross Margins and EBITDA Revenue (USD million) OPEX USD million) 14,8 • 3Q18 results were impacted 5,2 14,3 5,1 14,1 13,9 13,7 3,5 4,6 by FX (BRL vs USD) 12,4 3,1 2,9 • Solid and gross margins and EBITDA despite investments 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 in int
Slide 30: Cash flow
Cash flow Cash flow (USD million) (1) (13) • Operating CF: USD (1.1) million (1) (1) • Final Earn-out payment to BeMobi of USD 10.0 million 47 30 • CAPEX & Capitalized R&D: USD 3.2 million • CF from financing: USD 1.1 million in share repurchases • Cash end of quarter: USD 30 million Cash, Beginning
Slide 31: Financial position
Financial position – Net cash position with no debt and no earn-outs Financial Position (USD million) Balance sheet USD million 30 30 Other assets 140,2 Cash 30,2 Accounts Equity 453,2 receivables Goodwill 310,1 Other liabilities 0 0 90,3 Gross Cash Gross Debt Net Cash Net earn-out liabilities 31
Slide 32: Outlook for 4Q18
Outlook for 4Q18 AdColony* BeMobi Revenue: Flat/Up 2018 expected to show growth in revenue and Adj. EBITDA versus 2017 in local currency Gross Margins: Up FX volatility will impact 4Q18 vs 4Q17, however BRL is rebounding against the USD after Opex: Down presidential election 4Q18 expected to be a st
Slide 33: Q&A
Q&A 33