3Q 2020 OTELLO CORPORATION ASA
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, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
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Agenda
- Executive Summary (CEO, Lars Boilesen)
- Operational Review (CEO, Lars Boilesen)
- Financial Review (CFO, Petter Lade)
- Q&A (CEO, Lars Boilesen & CFO, Petter Lade)
Executive Summary
Quarterly highlights
Financial metric (USD
million) |
3Q20 |
3Q19 |
| Revenue |
63.2 |
63.1 |
| Adj. EBITDA* |
5.7 |
6.0 |
| Operating Cash Flow |
4.2 |
(0.9) |
- AdColony and Bemobi both in line with expectations for the quarter
- Revenue and Adj. EBITDA virtually flat vs last year and would have been up with like-for-like FX rates
- Strong Operating Cash Flow of USD 4.2 million
*For further information regarding Adjusted EBITDA and other alternative performance measures used by Otello, see Note 9 of the interim financial statements
Operational Review
AdColony
• Revenue
- Revenue growth YoY and QoQ, despite Covid 19 impact
- Performance revenue stable last 4 quarters
- Continued growth for our Brand business
- Programmatic (OMP + PMP) revenue growth of over 80% in 3Q20 vs 3Q19 • Now 57% of Brand revenue
• Cost
- Successful merging of demand side of Brand and Performance
- Expanding Istanbul service hub
- Cost savings of around USD 1 million per quarter
Global Brand Business
Results: Brand Advertising
- Fourth consecutive quarter of double digit YoY growth (+20% 4Q19, +36% 1Q 20, +14% 2Q20)
- Continued efforts to become a programmaticfirst platform driving PMP and Open Exchange Marketplace growth
- Brand Performance is experiencing a delayed recovery
Revenue
Source |
3Q 2020 |
YoY Growth |
Brand
(incl. IO and
PMP) |
\$19.9MM |
+ 19% |
Brand
Performance |
\$3.4MM |
-
54% |
Programmatic
Open
Marketplace |
\$15.1MM |
+ 91% |
| TOTAL |
\$38.4MM |
+ 20% |
North America Brand
- Finished 3Q20 up 10% YoY despite COVID still impacting brand business potential
- Primary source of growth was programmatic both PMP and Open Exchange as buyers leaning towards more efficient buying models
- 3Q20 dollars across the ecosystem continued to be impacted due to COVID but AdColony's unique position as one of the few sources of high-quality, gaming inventory at scale allowed us to maintain momentum we built throughout previous quarters
Revenue 2019 vs 2020 (Millions USD)
EMEA & LATAM Brand
- EMEA & LATAM markets continue to grow at rapid pace
- 47% YoY growth driven primarily by a 150% YoY increase on PMP sales of our core Instant Play video product
APAC Brand
• 17% YoY growth throughout Asia at a time when many countries in the region are still facing challenges due to COVID
- Programmatic represented 53% of APAC's overall revenue in 3Q20 a 20% increase compared to 3Q19
- Recent resource investments in Thailand, Malaysia and Japan continue to grow and build revenue
Revenue 2019 vs 2020 (Millions USD)
Programmatic Results
Results: Programmatic
- 5th consecutive quarter of strong YoY growth
- Private Marketplace business was one of the hardest hit with COVID pauses and cancellations in Q2 and began showing a resurgence in Q3 validated by 112% QoQ growth
- Open Exchange and PMP continue to show phenomenal growth through the early stages of Q4 and we expect the momentum to carry through the quarter and beyond
Revenue
Source |
3Q 2020 |
YoY Growth |
|
Programmatic
Open
Marketplace |
\$15.1MM |
+ 91% |
|
Programmatic
Private
Marketplace |
\$6.9MM |
+ 70% |
|
| TOTAL |
\$22.0MM |
+ 84% |
|
Global Publishing & Performance Business
Results: Performance Advertising
Performance Revenues
- Performance revenue stabilizing after several quarters of consistent decline
- Increased focus in process realignment and tooling to bring us back to growth
1 6
Bemobi
Bemobi's two pillars for sustainable profitable growth in emerging markets makes us unique
APPSCLUB SERVICES
Compelling subscription services with best of breed apps & games priced for each emerging market. Once services are live with mobile carriers, it increases Bemobi's addressable market
DISTRIBUTION CHANNELS
A unique mix of distribution channels are needed to promote services to the addressable market at a sustainable low cost of acquisition given the APRU and LTV of this market segment
REACH OF DISTRIBUTION CHANNELS
Bemobi's key subscription service offerings
Bundles of top apps & games in a low price point subscription model
SUBSCRIPTION SERVICES
Bridging the gap in emerging countries for monetizing digital subscription services
Bemobi's distribution channels
MOBILE CARRIERS PROMOTIONS 1
When a deal is signed, the mobile carrier commits to doing marketing and promotion of the new service
- SMS/MMS/RCS/ messages campaigns
- App Push Notifications
- Billing insert campaigns
- Store promotions and bundles
DISTRIBUTION CHANNELS
PAID ONLINE CAMPAIGNS 2
Partnering with leading apps and web properties in emerging markets to promote Bemobi's service offering.
• Revenue share based (e.g. Opera Mini)
• Paid per acquisition - CPA
Control increases
CO-OWNED CHANNELS WITH MOBILE CARRIERS
Bemobi's turnkey platform for mobile carriers captures users browsing and voice sessions when they are out of credit/data to promote its services
• Magazine inserts and TV spots • NCND portals and interactive voice response
3
Revenue & Adj. EBITDA
- Negative impact from FX and Covid-19
- Outperformed our peers during Covid-19
|
|
|
∆ (%) |
| Bemobi |
3Q20 |
3Q19 |
Y-o-Y |
| Revenue (USD M) |
11,6 |
14,8 |
-21% |
| EBITDA (USD M) |
4,7 |
6,2 |
-24% |
|
|
|
∆ (%) |
| Bemobi - Ex-FX Rate |
3Q20 |
3Q19 |
Y-o-Y |
| Revenue (USD M) |
14,5 |
14,8 |
-2% |
| EBITDA (USD M) |
6,1 |
6,2 |
-1% |
FX Rate impact YoY (3Q20 vs. 3Q19)
• LATAM BRL: - 35.4%
• INTL basket: -4.2%
Bemobi – Subscriber growth driving revenue and scale
- Total # subscribers up 6.8 million vs 3Q19
- YoY LATAM up 5.6 million including Voice (IVR) and financial services subscribers
- YoY International up 1.1 million (11%) due to global rollout of new products
- Strong QoQ growth of 2.8 million (9%) from 2Q20 as COVID impacts are gradually easing off in most key geographies
- Overall service penetration on served addressable market at about 1.5%
- 70 operators live
- 21 operators in Latam
- 10 operators in South Asia
- 18 operators in South-East Asia
- 12 operators in CIS
- 9 operators in Africa 22
Bemobi - Overall channel mix improving
Co-owned Channels
NDNC
- 16 portals live in Bemobi outside of Latam:
- Idea India
- Vodafone India
- Vodafone Ukraine
- Telenor Pakistan
- Jazz Pakistan
- Tele2 Russia
- Vodacom Tanzania
-
Grameenphone Bangladesh
-
Banglalink Bangladesh
- Robi Bangladesh
- Ncell Nepal
- MTS Belarus
- Telenor Myanmar
- Smart Cambodia
- Indosat Indonesia • Rostelekom Russia
- 2-3 more planned for the next 2 quarters
New NC Voice Portal and Bemobi Loop
- New No-Credit Voice Portal now deployed and live in all main carriers in Brazil.
- Focus now to integrate these multiple channels in a single platform (i.e. Loop) and to accelerate international expansion of the new voice channels
- New No-Credit Voice Portal's in active discussions with International Carriers (although roll-out progress is impacted by COVID-19 and global lockdown as no traveling is possible)
International markets continue subscriber growth 3Q19 vs. 3Q20 (from 9.6M to 10.7M)
| CHANNEL |
FROM |
TO |
Comments |
Bemobi1
(co
owned) |
34% |
34% |
Stable % contribution despite the
significant growth in gross adds from the
same period a year before.
Strategic: scalable, predictable and with
low incremental cost |
| Operator2 |
7% |
3% |
No incremental cost but less scalable and
less predictable. Operator bundles and
promotions have decreased due to focus
from carriers in core data services during
the COVID-19 lockdown period. |
| Paid3 |
58% |
62% |
CPA -
Increase of acquisitions in South Asia
and South Eastern Asia.
Opera Mini -
New improved contract was
signed in November 2019 and this channel
is expected to grow |
1 – Bemobi = NCND Portals
2 – Operator = Operator Promo
3 – Paid = Digital Acquisition (CPA) or based on Revenue Share agreements (e.g. Opera Mini )
Bemobi
- New voice-based channels and omnichannel platform with good traction in Brazil and about to begin international rollout, however delayed by about two quarters
- New voice and financial services offers growing in Brazil and show potential for an international rollout in the future. Two new contracts with carriers in Brazil around voice and data microfinancing as well as one in International markets expected to be live by 4Q20 further validates the new offer
- Service diversification into new verticals beyond the Apps club also consistent with plan
Other topics: Bemobi IPO and COVID-19
- Bemobi has made a preliminary filing for a listing in Brazil.
- The preliminary filing consists of draft documentation which will be subject to review by the Brazilian Securities Commission (the "CVM"). The filing does not mean that a listing of Bemobi will definitely take place.
- As indicated during Q2, COVID 19 had a short-term negative impacts in Bemobi due to mobile pre-paid lower balance as a direct results of more depressed economies, specifically in Brazil where COVID had one of the largest impacts
- Rebound: As COVID lockdown measures are gradually easing off there is similar gradual trend of improvement month after month indicating a much faster recovery than most industries as countries go back to work
Opera TV (Vewd)
- As previously communicated, there is an ongoing legal dispute with majority shareholder (MFC)
- Favorable verdict granted on liability, not appealed by MFC
- MFC ordered by the Court to pay a substantial portion of Otello's legal costs to date, all cash received
- Otello has now restored the proceedings in order to pursue alternative remedies, including (1) have the Court require MFC to buy Otello's shares (and loan note) at the higher of the current valuation of those shares and the price that the buyer was prepared to pay, and (2) if MFC is unable to purchase the shares at such price, require that all shares in the company be sold and Otello be paid the sum found to be due to it out of the proceeds of such sale
- Court case was held first week of October 2020 and we are now waiting for the verdict
Financial Review
Otello Corporation 3Q20
| (USD million) |
3Q 2020 |
3Q 2019 |
% Change |
| Revenue |
|
|
|
|
63.2 |
63.1 |
0% |
| Publisher and revenue share cost |
(38.9) |
(35.9) |
8% |
Payroll
and related
expenses |
(10.7) |
(12.8) |
-16% |
Stock-based
compensation
expenses |
(0.6) |
(1.0) |
-37% |
| Depreciation and amortization expenses |
(5.2) |
(7.3) |
-29% |
| Other operating expenses |
(7.9) |
(8.4) |
-6% |
|
|
|
|
| Total operating expenses |
(63.3) |
(65.4) |
-3% |
Adjusted
EBITDA* |
5.7 |
6.0 |
-5% |
Operating profit (loss), (EBIT), excluding restructuring and impairment
expenses |
(0.1) |
(2.3) |
|
| Restructuring and impairment expenses |
(0.4) |
(0.6) |
|
Operating profit
(loss), (EBIT) |
(0.5) |
(2.9) |
|
| Net financial items |
(5.2) |
10.0 |
|
| Provision for taxes |
(1.0) |
(0.1) |
|
| Profit (loss) |
(6.7) |
7.0 |
|
Revenue growth in AdColony offset by revenue decline in Bemobi
Total operating expenses down 3%
- Higher publisher cost due to revenue growth for AdColony
- Positive FX impact for Bemobi
- Headcount reduction and lower cost per head in AdColony
- Lower T&E due to Covid-19
Adj. EBITDA down 5% vs 3Q19
Negative Net financial items due to weaker USD vs NOK
Otello Corporation 3Q20
Revenue (USD million)
OPEX (USD million)
Adj. EBITDA (USD million)
Revenue growth in AdColony offset by revenue decline in Bemobi
OPEX down 12% due to lower payroll expenses
- Positive FX impact for Bemobi
- Headcount reduction and lower cost per head in AdColony
- Lower T&E due to Covid-19
Adj. EBITDA down 5% vs 3Q19
AdColony
16 13 14 13 13 17 22 14 14 20 7 9 5 5 3 8 12 10 12 15 Revenue USD million) 43 48 55 52 43
3Q19 4Q19 1Q20 2Q20 3Q20
OPEX (USD million)
| 8 |
9 |
8 |
7 |
4 |
| 5, |
5, |
5, |
3, |
4, |
| 1 |
1 |
1 |
1 |
1 |
| 3Q19 |
4Q19 |
1Q20 |
2Q20 |
|
- Revenue in line with expectations in 3Q20, very strong Programmatic revenue
- Performance business stable last 4 quarters
- Cost down significantly in 3Q20
- Ongoing savings from lower headcount (USD 1 million)
- Lower expenses on T&E
- Annualized OPEX now below USD 60 million
- Gross margins down due to greater mix of programmatic revenue
- Adj. EBITDA up significantly vs last year and last quarter
Bemobi
Gross Margin % 14,8 14,9 13,0 10,7 11,6 3Q19 4Q19 1Q20 2Q20 3Q20 Revenue (USD million) 14,5
3Q20 vs 3Q19 FX Rate impact YoY (3Q20 vs. 3Q19)
- LATAM BRL: - 35.4%
- INTL basket: -4.2%
OPEX (USD million)
• Reported revenue and Adj EBIDTA would have been respectively down 2% and 1% YoY with neutral FX rates
• As COVID19 lockdown measurements gradually reduces, Revenues and Adj. EBITDA are starting to rebound and are up 9% and 24% QoQ with neutral FX rates
Cash flow
33.5 4.2 (3.5) (0.8) (0.1) Cash flow (USD million) 33.1
Cash, Beginning of Quarter Cash Flow from Operating Activities Cash Flow from Investment Activities Cash Flow from Financing Activities Effects of FX changes on cash and cash equivalents Cash, End of Quarter
• Operating cash flow: USD 4.2 million
- Positively impacted by positive Adj. EBITDA and good cash collection
- Cash flow from Investment: USD (3.5) million
- Capitalized R&D: USD (2.6) million
- CAPEX: USD (0.8) million
- Cash flow from Financing: USD (0.8) million
- Payment on RCF: USD (0.2) million
- Lease liabilities: USD (0.6) million (IFRS 16)
- FX impact on cash position: USD (0.1) million
- Cash end of quarter: USD 33.1 million
Financial position
Financial Position (USD million)
Gross Cash Gross Debt Net Cash
Balance sheet (USD million)
Outlook AdColony
4Q20*
Revenue: Up 10-15% Gross margin: Down OPEX: Down Adj. EBITDA: Up
2020**
Revenue: Up ~10% Gross margin: Down OPEX: Down Adj. EBITDA: Up
Outlook Bemobi
• Not able to provide forward-looking statements due to IPO filing