Earnings Release • Feb 28, 2018
Earnings Release
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| Financial metric | 4Q17 (\$m) | 4Q16 (\$m) |
|---|---|---|
| Total revenue | 99.2 | 142.5 |
| Adj. EBITDA* | 2.9 | 17.7 |
Investment in user acquisition reduces short term profitability
2H 2017 profitable
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.
Forward-looking statements may in some cases be identified by terminology such as "may", "will", "could", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. These forward looking statements are only predictions. Actual events or results may differ materially, and a number of factors may cause our actual results to differ materially from any such statement. Such factors include i.a. general market conditions, demand for our services, the continued attractiveness of our technology, unpredictable changes in regulations affecting our markets, market acceptance of new products and services and such other factors that may be relevant from time to time. Although we believe that the expectations and assumptions reflected in the statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievement.
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| Continued operations |
|||
|---|---|---|---|
| Note | 4Q 2017 | 4Q 2016 | |
| Revenue | 99.2 | 142.5 | |
| Publisher and revenue share cost | (59.3) | (83.5) | |
| Payroll and related expenses |
(19.3) | (25.2) | |
| Stock-based compensation expenses |
(1.5) | (2.3) | |
| Depreciation and amortization | (9.3) | (12.6) | |
| Other operating expenses | (17.7) | (16.0) | |
| Total operating expenses | (107.1) | (139.8) | |
| Adj. EBITDA | 2.9 | 17.7 | |
| Restructuring and impairment cost | 1 | (4.9) | (19.8) |
| Net financial items (loss) | 2 | 13.8 | (10.0) |
| Profit (loss) before income tax | 1.0 | (27.1) | |
| Provision for taxes | 3 | (16.4) | (3.1) |
| Profit (loss) | (15.4) | (30.3) | |
| Discontinued operations | |||
| Profit (loss) from discontinuing operations | 4 | 30.9 | 517.6 |
Revenue
OPEX
Brand -
Brand -
IO
Programmatic
Performance
Performance
Brand - Managed
| 8 | 5 | 8 | 7 | 9 |
|---|---|---|---|---|
| 4, | 6, | 4, | 8, | 9, |
| 3 | 3 | 3 | 2 | 2 |
| 4Q16 | 1Q17 | 2Q17 | 3Q17 |
Revenue
Adj. EBITDA
| Annualized OPEX run rate entering 2017 |
Annualized OPEX run-rate 2H 2017 |
Annualized OPEX run-rate 1H 2018 |
|
|---|---|---|---|
| AdColony | ~\$145m | ~\$120million | ~\$90million |
| Skyfire | ~\$7m | ~\$ 1.5 million | ~\$ 1.5 million |
Cash flow
15
| Company | Goal 2018 |
|---|---|
| AdColony | Profitable* |
| Bemobi | Higher Revenue and Profit* vs 2017 |
| Skyfire | Profitable* |
*Adj. EBITDA
=> Continue to look at ways to optimize Revenue & Costs
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 |
Number of subscribers (million)
• LATAM subscribers up 12% YoY
• International subscribers base up 50% YoY
34 operators live outside LATAM:
6 NDNC portals live in ROW:
User growth driver => Continuous improvements and optimizations of conversion through different channels, launch of NDNC portals and investments into Digital acquisitions (CPA/rev share).
Revenue growth driver => optimizations of conversions, billing rates, pricing adjustments, data bundles launches and churn optimization especially introduction of additional billing cycles at almost all ROW operators.
| Trend | Implications | |||
|---|---|---|---|---|
| Advertisers will get what they want – programmatic gives them what they want. |
• Advertisers wanted to have control, transparency and efficiency at scale. Programmatic buying in one way or the other gives advertisers all they need. • 80% of mobile ad spend is activated programmatically in 2017. The non-programmatic segment in the market is shrinking too quickly. • AdColony's future is 100% programmatic. Today, we are 36% programmatic in the Brand and Exchange segment of our business. |
|||
| Adtech is a game of scale – Facebook, Google and now Amazon capture all growth |
• Facebook and Google represent >65% of US digital ad spend and continue to capture almost all of the growth. Amazon as a "new" entrant is going for the 3rd spot. • Advertisers are looking for alternatives, but they are still mostly looking to consolidate. Size and differentiation matters. • Clean, programmatic video at scale is rare. We have to be the best at it and clear leader of the vertical. |
|||
| Digital platforms now a "swamp of fake news, racism, sexism and extremism." according to Unilever. |
• Brand safety, ad blocking, privacy, fraud, viewability – digital advertising industry had to grow up really fast. Advertisers are asking all players to take responsibility and work on solutions. • Yet, it's early days of the clean-up - there is still risk in the space and most advertisers ultimately resort to fewer, bigger players to limit exposure • AdColony has to align itself with the market needs, provide transparency into its supply and environments. |
| Positioning | The #1 |
Video Marketplace for |
the "Organic" Media |
Movement. |
|---|---|---|---|---|
| Benefit Pillars |
Video Ads People Like |
Transparent & Measurable |
Viewable & Fraud Free |
Always Brand Safe |
| Key Benefits |
• User-initiated video reaches users on their own terms • Drives high attention rates and positive mood • Fullscreen but non-invasive |
• Completely transparent inventory • Highly measurable via Integrations with key ad quality measurement vendors • Enriched with advertising IDs to empower targeting and advanced campaign controls |
• Industry-leading viewability rates • Extremely low IVT activity |
• High propensity of gaming inventory delivers a brand safe environment every time. • No UGC or extremist content • LDA & COPPA compliant inventory available |
| Proof Points |
• 90%+ VCR • KPCB - Rewarded Video has the highest positive user attitude (68%) • AdColony user survey - 75% of users are in a good mood during AdColony ads. |
• 100% measurable PMPs available • Viewability & IVT measurement across Moat, IAS and DV • 100% IDFA & GAID enrichment |
• 96.7% MOAT Human and Viewable Rate • 1.14% MOAT Invalid Traffic Rate • Proprietary fraud defense system |
• 11.6M daily LDA-compliant global impressions • 102M daily COPPA-compliant global impressions |
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.
We bring together the benefits of a scaled technology platform that aggregates 1st party supply that is scarce in the marketplace and a customer and service oriented organization that Brands need in order to navigate the nuanced world of programmatic in-app video.
As we work through the consequences of internal changes, market is moving. Competition with inherent advantages will start to move into the space and it will be a winner takes all game.
We need to seize the opportunity now; invest and stay focused on growth of programmatic revenue to become the true and accepted leader of this segment while it's still relevant to do so.
| Revenue Source | January 2017 |
January 2018 |
YoY Change |
Notes | |
|---|---|---|---|---|---|
| PMP Revenue | 138% | PMP revenue growth rate is the key indicator of progress for the shift in our brand segment. |
|||
| # of active PMP buyers |
36 | 47 | 31% | Indicator of PMP retention rates. Increase in number and diversity here is a sign of sustainability of revenue. |
|
| # of active PMP's |
105 | 159 | 51% | Same as above. Unlike the IO business, PMP's often – not always- tend to be of an "always on" nature and expand across quarters and campaigns. |
|
| IPX Revenue | 145% | The total revenue that is generated solely on our in-app video supply through all programmatic means. |
|||
| Share of programmatic within all Brand and Exchange |
19% | 36% | 90% | KPI of how much progress we make in the shift from declining total addressable market IO segment to growing TAM programmatic segment |
69%.
through 3.X
3.X penetration reached half the network and is driving better results for our advertisers and publishers
• Live publisher penetration rate on 3.X was at 64% through Q4 and jumped a further 5% in January and February to • 39 of the top 40 publishers on our network currently run impressions 27% % Network Impressions
• 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
• Higher eCPMs result in our ads being played higher up the publisher waterfall. That results in more volume with higher quality.
Our investment in China has already begun to pay off in 1Q'18 as we see strong growth in impressions, unique users, ad spend, publisher eCPM and app installs
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 need to solve.
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.
35
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 |
|---|---|---|
| PUBLISHING | • Evolving SDK to improve publisher ease and performance. • Adjusting ad-server & demand-side dynamics to increase eCPM and earnings. |
• SDK footprint in top apps • Publisher eCPM & earnings • SDK crashes/bugs reported |
| PERFORMANCE | • Launching PIE tools for manual optimizations based on user quality. • Heavy re-configuring of Core and testing to drive spend increases and manual matching of demand to desired supply. • Iterating on buying tools like Granular Pricing and LTV User Score. |
• App Install spend • User quality/ROAS |
| CHINA | • Launched infrastructure and CDN in mainland China behind "great firewall" • Supporting local testing and business development for ramp up. |
• AdColony revenue from China devices |
| BRAND & PROGRAMMATIC |
• Launched SDK integrations with the leading measurement ad quality vendors – IAS, DoubleVerify, and Moat • Developed programmatic methodology to drive measurement across widely-used VAST video standard. |
• Brand revenue • PMP revenue |
| Effort | Expected Impact & Timing |
|---|---|
| PUBLISHING | • Significant decrease in bugs – Q2 2018 • 15% increase in Publisher eCPMs – by end of Q1 2018 • Increase in SDK penetration across top 1,000 apps – by end of Q3 2018 |
| PERFORMANCE | • Increase in spend across key Tier 1 advertisers – Q2 2018 • Increase in advertiser's User quality/ROAS KPIs – Q2 2018 • Minimize costs via Adaptive Caching and RTAS – Q2 2018 |
| CHINA | • In Q4, ad readiness improved 300% when CDN was launched, revenue expected to ramp up throughout H1 2018 |
| BRAND & PROGRAMMATIC |
• Viewability tech to empower Brand to hit their Q2 goals across IOs and PMPs |
Gross margins to remain very strong
Cost base reduced by 70%
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