Annual Report • Apr 16, 2014
Annual Report
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REVENUE UP OVER 25 X
[NUMBERS IN MUSD] CASH FLOW
USERS BY DEVICE
350MILLION USERS
Net cash flow from operating activities in 2013 totaled MUSD 49.5 (2012: 37.6).
Opera's cloud-based consumer products and services enable more than 350 million internet users to discover and connect with the content and services that matter most to them, no matter the device, network or location.
We make choices every minute of every day – when to wake up, how long to brush our teeth, what to wear, what to invest in. Choice is as important to you as it is to the millions of users, and thousands of advertisers and publishers, that choose Opera.
The opportunities for the web are endless, and the potential for growth seems to extend with every person who gets access. Opera is fo cused on helping to get the next billion people online. Whether they're in fully developed or emerging markets, when given a choice to join the web community, millions choose Opera to help them.
Advertisers choose how to reach out and grab new audiences; publishers decide how to dis seminate their content and who they want to
-
see it; and, 23 out of the top 25 global media companies choose Opera to reach 500 million mobile consumers and counting.
Discerning users, operators, manufacturers, publishers, advertisers and investors choose Opera because of its unique technologies. Opera generates growth by succeeding in three very simple objectives:
186 // Corporate social responsibility
We enable advertisers and publishers to broaden their audiences and reach millions of potential customers.
The consolidated financial statements, which have been drawn up by the Board and management, must be read in conjunction with the Annual Report and the independent auditor's opinion.
Up until 2010, Opera only made browsers, and we were good at it. In fact, we were ahead of our time. But, in 2010, we realized we would have to do more in order to survive and thrive, and we started down a path of diversification. At the start of 2013, we pledged to focus on the following three areas to make our business even more sustainable over the long term: (i) consumer browser products, (ii) mobile operators and (iii) advertisers and publishers, under the Opera Mediaworks brand. At the beginning of 2014, I can proudly say that we have transformed these three focal areas into three thriving business units, all of which are firing on all cylinders. Let me now turn to how our three business units contributed to Opera's success in 2013.
Browsers are our history. They're in our DNA. For many years, our own browser engine, Presto, served us well and propelled us to the forefront of browser innovation. That is why it was extremely difficult to make the decision to move from Presto to the open-source Chromium browser engine in 2012. Our objective in switching engines was to be able to move more employees to product innovation and away from browser "hygiene" in the guts of the engine. In addition, we hoped to re-spark the innovation for which Opera has been known.
One year into the switch, I am happy to report that the move has served us very well. In 2013, we launched totally new, built-from-scratch mobile and desktop products. We also developed and launched brand-new products including the revolutionary new browser Opera Coast and Opera Max. The browser product teams are delivering like never before, we have more engineers working on products and features than ever before, and we have been able to accelerate product cycles and releases and decrease time to market for all our browser products. And, best of all, the new products have been very well received in the market. The great user growth we have seen over the past year is a testament that we are playing in the big leagues.
Here are some highlights about our user numbers and consumer browser business:
Our mobile operator business has been successful for many years with our flagship product, the co-branded Opera Mini browser, and the addition of Opera Web Pass to the portfolio in 2012. In 2013, we acquired Skyfire, Inc. Skyfire's unique video compression technology and cloud solutions have given us a further edge in the operator business by helping us expand our product portfolio with such products as Rocket Optimizer, Horizon Toolbar and Opera Max. Now, we have premium products that cover operators' complete portfolio from basic phones to the most advanced smartphones. We have never been as attractive to and relevant for mobile operators as we are today, which is evidenced by the fact that we continue to sign agreements for new products
with mobile operators around the world.
Here are some highlights about our mobile operator business:
Our Opera Mediaworks business has been the definition of a success. At the close of 2013, this business delivered nearly \$120m in revenue, up from zero revenue in 2009 and \$54m in 2012. We made significant investments in innovation to expand our service portfolio, delivering new capabilities for rich-media and video ad units, targeting and audience segmentation, and performance-oriented tools to serve advertisers around the world. Our brand-focused ad networks, Mobile Theory (USA) and 4th Screen Advertising (U.K.), had great results in 2013, attracting category leaders in every major advertising vertical in mobile. These offerings, together with our AdMarvel publisher platform, helped us extend our customer reach in 2013, giving us revenue growth that outpaced the rest of the industry.
The value proposition we offer to mobile publishers and advertisers is second to none. Reflecting our work to integrate all these components under a single platform under a single brand, we have built a new marketing message for 2014: "Opera Mediaworks — Powering the Global Ad Economy".
Here are some highlights about our Opera Mediaworks business:
• Serves 17 of the top 25 media companies (publishers) and 23 of the top 25 global brands (advertisers)
• Enabled over \$500m of revenue for our publisher customers in 2013
• Delivered advertising to more than 500m unique mobile consumers
• Managed over 65b ad impressions per
In 2013, we took further steps to leverage the Opera Mediaworks organization to drive monetization of our own and operated services beyond the browser:
• Saw the Opera Mobile Store become the largest independent app store in the world, with more than 100m visitors a month and driving more than 60m downloads a month • Launched new payment solutions, including Opera Web Pass and subscription app stores for operators, worldwide
• Saw OSP (Opera Stats Platform), our big data engine, give us deep, near-real-time insights gleaned from billions of page views and petabytes of mobile data consumption
In 2014, a key area of focus for Opera Mediaworks is to maximize the monetization of Opera's owned and operated products and properties including Opera Mini, Opera for smartphones, Opera Max and our connected-TV products.
In summary, I am very proud of what we have accomplished in 2013. Opera has never been as relevant in all our businesses in terms of customer-reach, technology and product innovation. The teams we have in place are solid across the board and are as operational and dedicated to achieving success as they come. We set ambitious goals, and we consistently get things done. I believe we have found the recipe for Opera's continued success, and I look forward to Opera's future.
300.1 MUSD
86.6 MUSD
49.5 MUSD
61.8 MUSD
REVENUE
ADJ. EBITDA*
OPERATING CASH FLOW
EBIT**
Opera experienced another excellent year in 2013. Our impressive results and user growth in 2013 were the result of our continued, flawless execution on the plan, further diversification of our product portfolio and re-sparked Opera innovation. We are no longer on our way to becoming a mobile consumer internet company — in 2013, we officially became one.
* NON-IFRS EBITDA EX-CLUDES STOCK OPTION COSTS AND ONE-TIME EXTRAORDINARY COSTS
**EXCLUDING ONE-TIME EXTRAORDINARY COSTS
KEY NUMBERS, 2013
In order to get a grip on what everyday choices are really about, we went to the Big Apple, where we met people from all over the world.
This is the story about ordinary people making ordinary choices in an ordinary world, coming together in the Big Apple. It gave us a lot to think about. Not only does it share the enthusiasm about their passion for Opera, this story also says a lot about our choice in life. Here's a sneak peak into the life of a few of those people we met who have made their choice.
Opera's cloud-based consumer products and services enable more than 350 million internet users to discover and connect with the content and services that matter most to them, no matter the device, network or location. In turn, these products and services help advertisers to reach the audiences that
build value for their businesses and publishers to monetize their content and services. Opera also delivers products and services to more than 130 operators around the world, enabling them to provide a faster, more economical and better network experience to their subscribers.
Opera is a global leader around the development and deployment of compression and data-savings technologies to consumers and operators around the world.
Opera Mini, which compresses web content by up to 90% and was first deployed in 2005, is among the most popular mobile browsers in the world due its web content download speed and its ability to save consumers significant amounts of money on data. This compression is delivered via Opera's mobile cloud infrastructure, which is among the largest in the world.
Opera has created an amazing legacy in data-savings cloud computing and is in the position to continue to be a global leader in the field of compression. The company's newest consumer product, Opera Max, capitalizes on Opera's rich data-compression history, offering users the ability to save data on all browsers and almost any app on their phones, including high-data, intensive video applications such as Vine and Instagram.
50% MORE OUT OF YOUR DATA PLAN VIDEO COSTS A LOT OF DATA, AND ULTIMATELY DATA IS MONEY. WE MAKE VIDEOS LIGHTER: A 10 MB VIDEO BECOMES 3 MB. IT LETS YOU GET 10MB 3MB
Opera leads the world in data-savings technology and has among the world's largest mobile cloud infrastructure.
LI ENJOYS OPERA WHILE HAVING A BREAK IT SHOULD BE FUN GRABBING YOUR PHONE MID-DAY
For an established global player with an international reach, users choose Opera to discover the content, services and apps they want. Opera's suite of browsers provides the best web experience on first-rate and last-rate networks, on nearly any device.
The next billion people coming online will choose the mobile web as a primary method of connecting to the content and services that matter most to them. Today, 270 million unique users worldwide browse the web with an Opera mobile browser. From low-end basic phones to Android smartphones to high-end tablets, Opera works on more than 3,000 phones and supports more platforms than any other browser.
WHAT USERS AND ADVERTISERS WANT With support from features like Speed Dial website shortcuts and the Discover content-discovery feature, Opera browsers
are attracting advertisers to help extend their reach and drive users and usage and, ultimately, revenue. Quick access to the Opera Mobile Store, co-branding options, Speed Dial placement, curated content and ad placement in the Discover feature, and search, make Opera's mobile browsers a proven channel to target and reach the audiences that premium and performance advertisers desire.
19
PRODUCT AND SERVICES
270MILLION PEOPLE GET ONLINE ON MOBILE DEVICES HAS HELPED
MOBILE WEB ACCESS MOBILE USERS
CAMILA & PILAR ARE READY TO GO PARTYING ENJOY A GREAT DAY, ALL DRESSED UP FOR FUN
Opera's newest compression solution for mo bile users, codenamed Turbo2, is being tested in the Opera for Android browser. This revo lutionary data-savings technology gives users access to video content, while avoiding buff ering and a poor user experience. In addition, with Turbo2, advertisers will be able to deliver highly engaging, fast-loading rich-media and video ads and content.
In December 2013, Opera's mobile cloud infra structure served more than 183 billion pages and compressed over 17 petabytes of data for Opera Mini users. In all, 39% of the total users of Opera mobile browsers are using smart phones to browse the web. Compared to December 2012, the total user base of Opera mobile browsers grew by more than 17%.
In line with Opera's focus on the growing Android market, 2013 also brought partnerships with important Android OEMs. Most prominently, in 2013, fourteen Indian mobile device manufacturers decided to preinstall Opera Mini on their future Android devices. Opera Mini is well suited for India, the world's third-largest smartphone market, thanks to its data-saving capabilities. Opera Mini will be the exclusive third-party browser prein stalled on all Android devices manufactured by Celkon, Karbonn, Lava, Intex, Micro max, Videocon, Spice, MoMagic Technol ogies, Wynncom, Lemon Mobile and iBall Android devices.
OF OPERA MOBILE BROWSER USERS ARE USING SMARTPHONES TO BROWSE THE WEB 39 %
In 2013, Opera launched Opera Coast, a radical redesign of browsing on Apple's iPad. The newest addition to the Opera browser family, Opera Coast opts for gesture-based controls and full-canvas browsing.
Opera Coast, with its unique look and feel, enables Opera to reach potentially higher-income consumers, bringing opportunities for premium advertisers to reach a more exclusive user base.
Opera Max, an Android app that utilizes the Rocket Optimizer™ mobile video/media optimization technology to help users save data across almost every app on their phones, including all browsers, launched in beta form in 2013. The U.S. beta showed Opera Max to be extremely effective, saving users up to 50% on all the data traffic traveling through their devices, including as much as 70% on video alone.
DILARA IS READY TO TAKE HER SUITCASE ANYWHERE SHE CHOSE TO COME TO NYC - ALL THE WAY FROM TURKEY
"The U.S. beta showed Opera Max to be extremely effective, saving users up to 50% on all the data traffic traveling through their devices, including as much as 70% on video alone."
Opera has the products and services that allow global operators to offer the most compelling, cloud-based mobile experiences to current and future customers, anywhere in the world. Opera helps more than 130 operators around the world to increase revenue, improve customer retention and decrease capital expenditures and operating expenses.
MAFIZ KNOWS THE IMPORTANCE OF BEING FAST HE SMILES AWAY WHILE SERVING TODAY'S CHOICES
FAHAD TAKES THE FAST LANE WITH OPERA NEW YORK IS DIFFERENT FROM KUWAIT, ISN'T IT?
Opera's 130+ carrier relationships, global sales team and delivery organization are accelerating the global commercialization of Skyfire's technology. In addition, integrating Opera's advertising solutions into Skyfire's HorizonTM solution will offer mobile operators the option of a complete turnkey solution, including ad optimization, ad sales and rich analytics.
Operators, via an Opera/operator co-branded solution, are able to offer their mass market subscribers content compression, fast internet download speeds and convenient access to operator portal services, which enable operators to drive incremental revenue and offer lower-priced data plans and data packages, all capitalizing on the up-to-90% data compression that Opera's cloud services enable.
Via Opera Web Pass, Opera makes purchasing data plans simpler and more compelling for operator subscribers. Operators can now move beyond confusing, megabyte-based data plans and offer use-case/content-based data plans, which are inherently easier for consumers to understand and value. Opera Web Pass provides operators with a scalable solution to provide cost-effective data bundles that match their users' needs. With minimal integration work, an operator can now deploy tailor-made, mobile-internet packages to their entire user base easily and quickly.
In March 2013, as part of the Company's mission to expand the number of products and services the Company can offer our burgeoning operator customer base, Opera acquired privately-held Skyfire, a global leader in mobile video optimization and cloud solutions for mobility. Skyfire, headquartered in Mountain View, California, is best known for its cloudbased Rocket Optimizer™ mobile-video optimization solution, which can detect when specific users are facing poor network connections and then intervene in milliseconds to improve network quality and performance for that user. The Rocket Optimizer™ solution can minimize long start times, rebuffering and stalling on video and audio streams, reducing frustration for mobile users around the world. The Rocket Optimizer™ solution provides operators with an instant 60% boost in bandwidth capacity across smartphones, tablets and laptops on 3G and 4G LTE networks. Its flexible cloud architecture and intelligent traffic steering dramatically reduce an operator's total cost of ownership, in comparison with the cost of legacy in-line hardware solutions.
With video expected to consume over twothirds of global mobile bandwidth by 2017, and as time spent on Android and iOS devices continues to explode, Skyfire is a strong extension of Opera's solution set for operators. 60% ROCKET OPTIMIZER™ IN BANDWITH CAPACITY ACROSS SMARTPHONES, TABLETS AND LAPTOPS ON 3G AND 4G LTE NETWORKS BOOST
DOMINIC HAS USED OPERA FOR A VERY LONG TIME HE REMEMBERS THE VERY FIRST BROWSERS – DO YOU?
Opera reaches over 500 million unique monthly users with 65 billion ad impressions a month.
BRANDS 23/25
TOP GLOBAL BRANDS ARE SERVED BY OPERA MEDIAWORKS
Via the Opera Mediaworks brand, Opera
powers the mobile ad economy through technology innovation, transparency and trust, to create vibrant marketplaces for publishers and advertisers across the globe. This enables advertisers to efficiently reach their target audience and publishers to improve their monetization. Opera Mediaworks operates one of the largest brand-focused mobile-ad networks in the world, serving 23 of the 25 top global brands. Opera also delivers world-leading, mobile-ad server and monetization tools to 17 of the top 25 media companies, worldwide.
MOBILE-AD SERVING AND MEDIATION Opera, with the AdMarvel SDK, the industry's leading third-party mediation hub, provides the ability for publishers to deliver mobile advertising from media they sell directly or via ad campaigns acquired through more than 140 mobile-focused ad networks and DSPs around the world. This includes Opera's own premium and performance ad networks. Opera reaches over 500 million unique mobile consumers a month via its third-party publisher network and manages over 65 billion ad impressions a month, across more than 14,000 mobile sites and applications.
Opera combines teams in the United States, Europe, Latin America, Asia and Africa, servicing 23 of the top 25 global brands. Via Opera's
28 29 PRODUCT AND SERVICES PRODUCT AND SERVICES
CREATE
MANAGE
SELL
SELVES THROUGH OPERA, WHILE PARTNER WEBSITES EARN MONEY
THE OUTREACH IS EXPANDING, AND, IN 2014, WE WILL GROW WITH HUNT IN LATIN AMERICA
MANY OF THE WORLD´S MOST FAMOUS BRANDS COME TO US USER GROWTH OF
48% DURING 2013
PREMIUM PUBLISHERS LIKE PANDORA MEDIA, SHAZAM, SKY, THE WALL STREET JOURNAL, AND UNIVISION HAVE ALL CHOSEN OPERA TO HELP PROMOTE, MAINTAIN, TRACK AND PROFIT FROM THEIR UNIQUE CONTENT.
AdMarvel, Mobile Theory, 4th Screen Advertising and Hunt
Lufthansa, McDonald's, Starbucks, Walmart, Home Depot, Mazda, Microsoft, Paramount, Unilever, Apple, BMW, eBay, Levi's, Shell, Sky, Samsung, AMEX, Lloyds, Amazon, Google; performance advertisers such as Candy Crush Saga, Netspend, Audible, Expedia and King.com.
OPERA DELIVERS WORLD-LEADING, MOBILE-AD SERVER AND MONETIZATION TO
/ 17 25 TOP MEDIA COMPANIES WORLDWIDE
HERNANDES LIKES TO GO ONLINE ON-THE-GO FROM MEXICO – TAKING A BITE OF THE BIG APPLE
network of publishers, premium advertisers can get access to an audience from among the world's top premium publishers. In addition, by partnering with Opera, advertisers are able to capitalize on the Company's creative teams, which specialize in the creation of rich-media ads and campaigns that inspire and engage.
Opera Response provides real-time targeting and optimization of performance campaigns. Opera Response helps advertisers generate quality leads, registrations, app downloads and sales.
The Opera Mediaworks Ad Exchange (OMAX 2.0) is a real-time-bidding (RTB) platform that brings advertisers, agency trading
130 MOBILE-FOCUSED AD NETWORKS AND DSPS AROUND THE WORLD
desks, DSPs, SSPs, publishers and app developers together into a public and private marketplace for mobile. This enables efficient and automated buying and selling of mobile advertising.
Building on a legacy as a trusted partner for the management of a publisher's private data, Opera now offers a cooperative DMP solution. Here, publishers can opt in, consistent with their privacy policies, to share non-personally identifiable information about their consumers to improve ad-targeting capabilities and drive better monetization. This helps publishers pool their data to provide better targeting and advertisers to identify and reach their target consumer more easily.
PUBLISHERS CAN DELIV-ER MOBILE ADVERTISING FROM MEDIA THEY SELL DIRECTLY OR VIA AD CAMPAIGNS ACQUIRED THROUGH MORE THAN
Opera engineers products and services that allow users to get online quickly and discover new content. Opera's browsers are speeding up connections all over the world.
In 2013, Opera released a completely revamped desktop browser, Opera for Windows and Mac. With a change in code-base from Opera's own Presto engine to developing on the Chromium/Blink rendering engine, Opera is now able to ensure that users get premium site compatibility and the fastest and smoothest web experience possible.
The new Opera for Windows and Mac introduced several innovative features to the Opera browser line, including Off-Road mode, an improvement to Opera Turbo that compresses websites and enables pages to load faster when on congested or sluggish networks. Opera for Windows and Mac also introduced users to the Stash feature, which allows users to save earmarked webpages for viewing and searching at a later time.
The Discover feature, which provides users with a graphically-based view of the latest news and information from a variety of content sources and categories, enables advertisers and publishers to provide a unique, non-intrusive method of reaching potential consumers.
Opera for Windows and Mac drives revenue from Google- and Yandex-sponsored search. Content providers can increase brand awareness and drive traffic to their web properties via multiple content-distribution paths. In 2013, the Opera for Windows and Mac start page, and its ubiquitous Speed Dial, supported partnerships for commercial giants including Facebook, Amazon and Booking.com. The Speed Dial feature promotes services with one-click access to websites. A customized thumbnail serves as a visual tease that pushes logos or content and increases click-throughs. Localized content also appears in default Speed Dial entries, providing partners prominent placement and access to a desktop user base of 50 million users.
SPEED DIAL ENTRIES
50MILLION USERS PROVIDING PARTNERS PROMINENT PLACEMENT TO OVER
1994
THE FIRST OPERA BROWSER WAS RELEASED
1995 1.0 3.0 3.6 6.0 5.1 7.0 7.1 7.2 7.55 8.0 8.5 9.2 10.0 10.1 11.5 11.6 15 17 19 1997 1999 2001 2003 2005 2007 2009 2011 JUN SEP JAN DIVE INTO THE HISTORY OF OPERA'S DESKTOP BROWSER The first version of Opera's browser had only a limited internal release—although it was demonstrated publicly at the Third International WWW Conference in April 1995. It was known for its multiple document interface (MDI) and "hotlist" (sidebar), which made browsing several pages at once much easier, as well as being the first browser to completely focus on adhering to the W3C standards. Opera 7 introduced the new "Presto" Object Model (DOM) support. 20 versions of Opera's web browser during last 20 years Version 9.2, codenamed Merlin, introduced Speed Dial, 3 × 3 small thumbnails which are shown instead of a blank page. Opera 19 lets you create your own theme. Upload images or use images from the web to customize the look of your browser. Opera 6 was released with new features including Unicode support and The first completely free download version (ad-free toolbar) that fit to window width and gave notification of blocked pop-ups was released.
DULCE & DIANA ARE READY TO HAVE SOME FUN ENTERTAINMENT COMES IN MANY FORMATS
fun and entertainment on every screen
Take pleasure in the best experiences on every screen, large and small.
Opera delivers the entire value chain to the connected-TV ecosystem, from a foundational software development kit (SDK) that combines HTML5-based TV apps and full internet browsing with emerging standards, to tools that allow for easy channel creation, to a robust Opera TV Store marketplace that allows consumers to select from hundreds of channels to watch on their living-room screens.
The Opera Devices SDK provides the ideal foundation for developing connected, interactive TV solutions by combining web apps and full internet browsing with emerging standards like HTML5, CSS, HbbTV and OIPF. For more than a decade, the Opera Devices SDK has unleashed the power of the web on millions of TVs, set-top boxes, portable media players and other devices, around the globe.
Opera launched the industry's first commercial-grade Chromium/Blink engine designed for reference design kit (RDK) set-top boxes in 2013. This RDK is a reference library of shared components used to build software for home entertainment set-top boxes. Opera's advances in providing Chromium/Blink rendering to these devices gives manufacturers and operators the ability to deliver cross-platform web services and HTML5-based TV apps.
Connected TVs, set-top boxes and Blu-ray Disc players from major brands are now shipping with the Opera TV Store as a key component for consumers. The Opera TV Store brings hundreds of HTML5-enabled, internet media and online video channels into the living room, offering users the opportunity to choose from an array of entertainment, breaking news, sports and lifestyle "channels" that behave like TV apps. Opera TV Store apps run from the cloud and suit any screen size or resolution. It provides consumers with a comfortable, "lean-back" experience, requiring only a standard TV remote control for users to navigate, select and launch apps easily.
Opera has license agreements with a wide range of consumer electronic device OEMs:
Opera takes you in the right direction.
In September 2012, Opera teamed up with DiGi, one of the largest mobile operators in Malaysia, to provide its customers with an easy and more affordable way to get online. The DiGiLive Web Pass, powered by Opera, leveraged the existing capabilities of the already popular Opera Mini platform to offer DiGi's customers easy-to-understand and relevant mobile web packages.
DiGi made its requirements clear: increase users' awareness of the mobile web, reduce entry barriers for first-time users and convert them into long-term customers of mobile web services.
The DiGiLive Web Pass succeeded in these areas within a very short period of time. And, with the ability to experiment with various packages, pricing and promotions, DiGi distributed over 4.6 million web passes to its user base.
The exceptional ease of signing up for a pass resulted in an overall checkout success rate of 85%+ among users with sufficient funds. And, shortly after the implementation of the Opera's web pass platform, up to 52% of users were repurchasing one or more passes each month.
The DiGiLive Web Pass proved that streamlined checkout, as opposed to antiquated and error-prone USSD or SMS purchasing, got people online faster and encouraged them to interact with their networks' web offerings more frequently.
By providing incentives for use through a free Facebook hourly web pass for the entire month of January 2013, DiGi managed to increase the uptake of paid web passes significantly after the promotional period was over. This resulted in a 65% increase of the average number of transactions per day and a 56% increase in average revenue per day.
Going forward, DiGi has the flexibility to optimize its web-pass campaigns easily, allowing it to segment and target its user base more efficiently with tailored web-pass offerings, thus improving overall user satisfaction and profitability.
4.6MILLION WEB PASSES
WEB PASS IN MALAYSIA
52% OF USERS REPURCHASED ONE OR MORE PASSES EACH MONTH
CHECKOUT SUCCESS RATE AMONG USERS WITH SUFFICIENT FUNDS
REVENUE PER DAY AFTER PROMOTIONAL PERIOD IN JANUARY WAS OVER
Opera Web Pass lets you access the web and use your favorite apps in four simple steps:
| Choose web pass. | Select access. | Confirm purchase. | Browse with access. |
|---|---|---|---|
DAVID IS LITERALLY IN THE MIDDLE OF THE ROAD BEFORE YOU RUN, MAKE SURE YOU ARE ON TRACK
DID YOU KNOW?
THERE ARE MORE OPERA WEB BROWSERS IN RUSSIA THAN ANYWHERE ELSE IN THE WORLD
WE HAVE MORE EMPLOYEES IN THE USA THAN ANYWHERE ELSE
WE WORK WITH THE 10 LARGEST WHITE-LABEL PRODUCERS IN INDIA
OPERA MEDIAWORKS SERVICES
17
TOP GLOBAL MEDIA COMPANIES
/25
TOP GLOBAL BRANDS &23/25
30
A global company 130OPERATORS AROUND THE WORLD WE DELIVER PRODUCTS AND SERVICES TO MORE THAN
ACTIVELY USED OUR CONSUMER PRODUCTS WORLDWIDE IN 2013
Opera Software is a truly global company, in all aspects, with a diverse staff from all over the world, presence in more than 15 local offices from San Francisco to Jakarta and users in practically every country on the planet.
Opera browsers and mobile apps are translated and localized into as many as 96 languages, giving users the experience they desire in their
native tongue. No other browser in the world provides this care and attention to their users.
THE TOTAL NUMBER ACTIVELY USING OUR DESKTOP BROWSER: 50MILLION
Opera has local advertising agencies and ad networks that span every part of the globe. Opera's unique technologies make sure that its ad services give advertisers and publishers the best placement and visibility. Local offices from Brazil to Russia guarantee that placement is culturally relevant and always potent.
OPERA BROWSERS AND MOBILE APPS ARE TRANSLATED INTO
96 LANGUAGES
350MILLION
USERS
USERS
Grab Opera to spice up your experience and taste the fun.
| Company | Analyst | Telephone |
|---|---|---|
| ABG Sundal Collier ASA | Aleksander Nilsen | +47 2201 6112 |
| Arctic Securities ASA | Markus Bjerke | +47 2101 3223 |
| Carnegie ASA | Espen Torgersen | +47 2200 9372 |
| Danske Securities ASA | Martin Stenshall | +47 8540 7073 |
| DnB NOR Markets | Christer Roth | +47 2294 8287 |
| Enskilda Securities ASA | Peder Strand | +47 2100 8576 |
| Goldman Sachs | Mohammed Moawalla | +44 (20) 7774 1726 |
| Handelsbanken Capital Markets | Fredrik Lithell | +46 (0)87015575 |
| Nordea Markets ASA | Daniel Djurberg | +46 8 534 919 56 |
| Fondsfinans | Henriette Trondsen | +47 23 11 30 45 |
| Event name | Date | Location |
|---|---|---|
| Goldman Sachs Inaugural Payments Conference | December 11, 2013 | London, England |
| Morgan Stanley Thirteenth Annual Technology, Media & Telecoms Conference |
November 20-22, 2013 | Barcelona, Spain |
| DNB Markets Nordic TMT Conference | August 28, 2013 | Oslo, Norway |
| Jefferies, 2013 Global TMT Conference | May 7-9, 2013 | New York, New York |
| Goldman Sachs, 6th Annual Small & Mid-Cap Symposium | May 7-10, 2013 | London, England |
| Goldman Sachs, Digital Seminar | March 22, 2013 | London, England |
| DNB Markets, SME Conference | March 19, 2013 | Oslo, Norway |
| Enskilda, "Best of Norway" | March 19, 2013 | Frankfurt, Germany |
| Morgan Stanley Technology, Media & Telecom Conference | February 25-28, 2013 | San Francisco, California |
| SEB Enskilda Nordic Seminar | January 8-9, 2013 | Copenhagen, Denmark |
| Date | Location |
|---|---|
| Oslo, Norway | |
| April 30, 2014 | Oslo, Norway |
| June 3, 2014 | Oslo, Norway |
| August 21, 2014 | Oslo, Norway |
| October 24, 2014 | Oslo, Norway |
| February 11, 2014 |
Opera offers both a live webcast and an archived version located at http://www.operasoftware.com/company/investors/webcasts/.
Communication with shareholders, investors and analysts, both in Norway and abroad, is a priority for Opera Software ASA. The Company's objective is to ensure that financial markets have sufficient information about the company to be certain that pricing reflects underlying values. Opera Software ASA arranges regular presentations in Europe and the USA, in addition to holding meetings with investors and analysts. Important events affecting the Company are reported immediately.
As part of this, Opera conducted over 150 investor meetings and attended the following conferences during 2013:
| KPI last five years | 2009 2010 2011 2012 2013 | ||||
|---|---|---|---|---|---|
| Revenue (MUSD) | 97.5 114.5 159.8 216.0 300.1 | ||||
| Adjusted EBITDA (MUSD) | 13.0 | 23.8 | 47.4 | 63.5 | 86.6 |
| Operating cash flow (MUSD) | 10.1 | 12.6 | 36.7 | 37.6 | 49.5 |
index of the Oslo Stock Exchange in Norway. The new OBX composition was effective from
December 20, 2013.
SHARE PRICE 2013
Chief Executive Officer
Lars Boilesen has extensive sales and business development experience from the global IT and telecommunications industries. He has held executive positions in various corporations including Alcatel-Lucent, where he was CEO for the Nordics and the Baltics. He has previously served at Opera Software as Executive Vice President of Sales and Marketing, from 2000 to 2005. Prior to that, Lars headed the Northern Europe and Asia Pacific markets for Tandberg Data. He started his career at Lego Group.
Executive Vice President, Consumer Mobile Mahi is responsible for commercial activities for Opera's consumer mobile products and services. Before joining Opera, Mahi was Co-Founder and CEO of AdMarvel, Inc., the global leader in mobile advertising platforms, acquired by Opera in 2010. Prior to AdMarvel, Mahi co-founded the Frengo Corporation, a mobile social-media platform. Mahi also spent 10 years at VeriSign, where he was part of the startup management team. From 2002 to 2006, he served as Senior Vice President and General Manager of Wireless and Digital Content Services at VeriSign, where he built the world's leading mobile messaging and mobile entertainment business, with revenues exceeding \$600M per year. Prior to VeriSign, he served in various technology leadership roles at Taligent, Apple and NCR Corporation.
Executive Vice President, Product Development Rikard Gillemyr began his affiliation with Opera Software in 1998, when he and the other co-founders of Hern Labs in Sweden ported Opera 3 to BeOS.
Since officially joining Opera Software in 2000, Gillemyr has been responsible for many of Opera's major deliveries, including Opera on BREW and the Opera Devices SDK. Gillemyr previously served as Country Manager of Opera's offices in Poland and Korea before his appointment to Vice President of Engineering.
He was educated at the Linköping Institute of Technology, where he studied Computer Science and Engineering until 1999.
Chief Financial Officer / Chief Strategy Officer As CFO/CSO, Harrell's primary responsibilities include Opera's global finance & accounting and financial planning operations, corporate strategy, corporate development/mergers & acquisitions, and investor relations.
Prior to joining Opera in 2005, Harrell was CFO of the European operations for Advent Software, a NASDAQ-listed software company based in San Francisco, California, USA. Harrell's professional experience includes six years at JP Morgan & Co. in New York, where he was Vice President of Mergers & Acquisitions, and the role of Founder and CEO of an early-stage Internet software company.
Harrell has an M.B.A. with Distinction from the Harvard Business School and holds an M.A. and B.A. (Phi Beta Kappa) from The Johns Hopkins University.
Executive Vice President, Human Resources Tove Selnes joined Opera in 2007 as VP of Human Resources and has more than ten years of experience in organizational management. Prior to working at Opera, Selnes served as Director of Human Resources at Eltel Networks, where she was responsible for the development and implementation of the organization's human resources strategy. Her professional experience also includes working at Avinor and Aetat.
Selnes holds a Law degree from the University of Oslo and is presently pursuing a Master's of Management degree at the Norwegian School of Management. In 1994, she was awarded an Erasmus scholarship with Bologna University in Italy, where she studied EU and international environmental rights. She is a noted and respected authority on human resources management.
Executive Vice President, Sales & Marketing Andreas Thome joined Opera Software in 2007, when he took on a role as Senior Vice President of Sales & Marketing for the EMEA region. Prior to his career with Opera, he was a Project Director at Telecom Management Partner, where he also served as Chief Officer for the Fixed Networks Division of Ghana Telecom in West Africa.
Thome previously served a variety of roles within Alcatel. In addition to several Commercial and Management roles at Alcatel, he was the Regional Vice President (North Europe) for Access Networks Division, the General Manager for Fixed Networks, and the Customer Account Director for Alcatel's Nordic and Baltic regions. Thome has also held positions at Tandberg Data in Oslo and RIM Invest in Singapore.
Thome obtained a Master's of Science degree in Project Analysis, Finance & Investment from University of York (U.K.) and Master's of Science and Bachelor's degree in Economics from the University of Oslo.
LARS BOILESEN
ERIK C. HARRELL
TOVE SELNES
MAHI DA SILVA
ANDREAS THOME
Arve Johansen has been a key figure in shaping Norway's telecom giant, Telenor, into the global company it is today. Johansen holds degrees from both the Norwegian Institute of Technology (NTNU) and the Harvard Business School. He has a background as a technical manager for EB Telecom, where he served as chief engineer on several large-scale projects. This career foundation lead him to Telenor, first as CEO of Telenor International and later as Deputy Group CEO responsible for all of Telenor's activities in Asia. Arve Johansen currently serves as an independent board member for multiple companies.
Marianne Heien Blystad has been an Attorney-at-Law with the law firm Ro and Sommernes since 2008. Apart from her professional experience in corporate banking, shipping and offshore, she holds directorships with Eksportfinans ASA, Edda Utvikling AS and Songa Shipping. Ms. Blystad holds a Business degree from the Norwegian School of Management (Handelshøyskolen BI) and a Law degree from the University of Oslo.
Audun Wickstrand Iversen is a private investor. Over the last ten years, he has focused primarily on the telecom, IT and alternative energy industries. Previously, Iversen worked as a financial analyst at DnB Markets and as a portfolio manager at DnB Asset Management, with responsibility for global telecoms and alternative energy. He holds a degree in Business Administration from the Norwegian School of Management (BI), as well as degrees from Norwegian School of Economics and Business Administration (NHH) and the University of Oslo.
Kari Stautland has a background in human resources. Most recently, she was Human Resources Manager at GE Healthcare AS — a leading global medical company. She has worked in HR for many years and has extensive knowledge within this area. Kari holds a Master's degree in Business and Marketing.
Coleman is President at Criteo, a global leader in performance display advertising, driving search-like performance for online display advertising and managing campaigns of all sizes that are measurable, scalable and powered by user intent. Criteo successfully went public on NASDAQ in 4Q 2013.
Coleman has extensive experience within sales and has lead sales departments in several influential media and technology companies, including serving as President and Chief Revenue Officer at The Huffington Post and EVP of Global Sales at Yahoo! Coleman is also an Adjunct Professor of Digital Marketing at New York University's Stern Business School.
Christian Uribe joined Opera Software in 2005, bringing with him a varied, international professional and educational background. Before taking up his role at Opera (where he serves currently as Product Director for Opera Mini), Uribe ran an IT consultancy in Mexico. He holds a Law degree from the Universidad de Valparaiso in Chile.
Erik Möller is an experienced software engineer and team leader who joined Opera Software in 2009 after having spent 14 years in the computer games industry. Erik is currently leading the team responsible for the Chromium development on Android.
Krystian Kolondra heads up the Consumer Browser Products business unit at Opera. He joined Opera Software in 2006. Before taking up his current position, he was Country Manager for Opera's offices in Poland, SVP for TV Product Development, and, most recently, he had overall responsibility for the Desktop product group.
Prior to joining Opera, Krystian worked in various managerial positions in Siemens and BenQ. Krystian holds a Master's degree in Computer Sciences from the University of Wroclaw and is a post-grad in Project Management at the Higher School of Banking in Wroclaw.
The Board of Directors (from left): Greg Coleman, Erik Möller, Christian Uribe, Arve Johansen, Kari Stautland, Audun Wickstrand Iversen, Marianne Blystad (Krystian Kolondra was not present.)
OPERATING REVENUE Revenue and profitability increased significantly compared to 2012, and Opera's total browser user base reached 350 million by year's end, up 50 million compared to the end of 2012.
Opera's position with major mobile operators, mobile consumers, mobile publishers and advertisers and connected-TV manufac turers grew substantially during the year.
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In 2013, Opera signed multiple new opera tor agreements and extended many existing ones, grew mobile users from 229 million to 270 million, increased our mobile publisher base from 12,000 sites and applications to 14,000, increased managed ad impressions to 687 billion, compared to 448 billion in 2012, signed multiple agreements with device OEM customers, and launched new products for desktop, mobile and tablets.
Overall, during 2013, Opera made substan tial strides in our transformation into a highly scalable and profitable company, driven by our high-growth mobile businesses — Mobile Consumers, Mobile Publishers and Advertisers, and Mobile Operators. By 4Q 2013, revenue related to our mobile businesses comprised close to 80% of total revenue, up from 57% in 4Q 2012.
Opera's operating revenues grew by 39% to MUSD 300.1 in 2013 (2012: 216.0). Operating expenses, excluding one-time extraordinary costs, increased by 44% to MUSD 238.3 (2012: MUSD 165.8), with non-headcount ex penses increasing primarily due to the higher cost of goods sold or publisher payout costs related to the Mobile Publisher and Advertiser
business, higher hosting costs related to Opera Mini's hosting infrastructure, and overall marketing and travel expenses. Opera delivered EBIT (excluding costs for restructuring the business) of MUSD 61.8 (2012: 50.2), an increase of 23%, and profit before income taxes (including costs for restructuring the business) ended at MUSD 67.5 (2012: 25.6). Income taxes were MUSD 7.2 (2012: 8.6), and the Company's profit for the period was MUSD 60.3 (2012: 17.0). Earnings per share were USD 0.490 (2012: 0.143), and diluted earnings per share were USD 0.479 (2012: 0.140). On a Non-IFRS basis, EBITDA before stock-based compensation expenses grew 36% to MUSD 86.6 in 2013 (2012: MUSD 63.6). Non-IFRS profit for 2013 ended at MUSD 67.8 (2012: 44.7) and non-IFRS earn ing per share was USD 0.55 (2012: 0.376), while diluted earnings per share was USD
0.539 (2012: 0.369).
Net cash flow from operating activities in 2013 totaled MUSD 49.5 (2012: 37.6). Opera's cash balance in 2013 versus 2012 was im pacted positively primarily by pre-tax profits and proceeds from an equity share issue of MUSD 87.2 (2012: 0). Opera's cash balance in 2013 versus 2012 was reduced by MUSD 62.7 (2012: 44.2) related to acquisitions, MUSD 10.2 (2012: 10.4) related to capital expenditures and MUSD 4.4 (2012: 4.0) re lated to dividends. As of December 31, 2013, the Company had a cash balance of MUSD 163.4 (2012: 57.2) and MUSD 60 (2012: 0) in interest-bearing debt. It is the Board's opinion that the annual accounts provide a true and fair view of the Company's activities in 2013.
"At the end of 2013, Opera had active agreements with 52 operators worldwide (with a total of 130+ agreements when including all subsidiaries of global frame agreements signed), including 17 out of the top 30 operators worldwide, which combined have approximately 2.8 billion subscribers, or more than 40% of the total global subscriber base."
Opera's cloud-based consumer products and services enable more than 350 million internet users to discover and connect with the content and services that matter most to them, no matter the device, network or location. In turn, these products and services help advertisers to reach the audiences that build value for their businesses and publishers to monetize their content and services. Opera also delivers products and services to more than 130 operators around the world, enabling them to provide a faster, more economical and better network experience to their subscribers.
By the end of 2013, Opera had more than 350 million active monthly users of our consumer products worldwide, with Opera powering the internet on mobile phones, gaming consoles, internet-connected TVs, set-top boxes, tablets, netbooks, desktop computers and laptops. Moreover, Opera's mobile active monthly users with operators exceeded 100 million, meaning that the Company and our operator customers, key monetization and marketing partners, jointly delivered services to nearly 40% of the Company's 270 million mobile consumer base.
SOURCE OF REVENUE OPERATORS advertisers), iii) Mobile Publishers and Advertisers (Opera Publisher Partner Network, which includes partners such as Pandora Media, American Express and Home Depot), (iv) device OEMs (such as Sony and Samsung), and (vi) Desktop Consumers (primarily from search, advertising and e-commerce partnerships, including those with Google, Yandex and Amazon).
In addition, Opera, via our Mobile Publisher and Advertiser business, reached major milestones in 2013. By the end of 2013, the reach of Opera's mobile audience via our publisher partners exceeded 400 million and more than 14,000 mobile applications and websites were powered by Opera's advertising technology platform, with 60 billion ad impressions managed by the platform on a monthly basis by year-end.
Opera has one revenue line, but Opera also provides an overview of revenue by customer type: (i) Mobile Operators (such as MTN, Telkomsel and Vodafone), (ii) Mobile Consumers (via partnerships with search providers and
Opera's operating revenues grew by 39% to MUSD 300.1 in 2013 (2012: 216). Compared to 2012, 2013 saw strong revenue growth from Mobile Operators, Mobile Consumers, and Mobile Publishers and Advertisers (Opera Publisher Partner members), as well as a decrease in revenue from Desktop Consumers and Device OEMs. Mobile Publishers and Advertisers (Opera Publisher Partner members) was the largest source of revenue in 2013 (MUSD 119.1 in revenue and 40% of total revenue), followed by Operators (MUSD 62.1 in revenue and 21% of total revenue), Desktop Consumers (MUSD 60.9 in revenue and 20% of total revenue), Mobile Consumers (MUSD 37.9 in revenue and 13% of total revenue) and Device OEMs (MUSD 18.3 in revenue and 6% of total revenue).
Mobile Publisher and Advertiser (Opera Publisher Partner members) revenue grew 120%, compared to 2012. Revenue growth was driven primarily by increased revenue from premium and performance advertisers and "app-install"-driven spend primarily from the mobile gaming sector. Mobile Consumer (Opera's owned and operated properties) revenue was up 94% in 2013, compared to 2012, with revenue driven primarily by licensing revenue and mobile advertising related to Opera's owned and operated properties. Revenue from Mobile Operators increased by
49% in 2013, compared to 2012. Operator cloud-based license/data revenue increased by 53% to MUSD 58.2 in 2013, compared to MUSD 38.1 in 2012, fueled by both strong user growth and revenue from the Rocket Optimizer™ and Horizon™ cloud-based services.
Desktop revenue was lower in 2013, compared to 2012, due to lower search revenue, which was partly offset by higher content and advertising revenue. Device OEM revenue was down 35% in 2013, compared to 2012, driven by lower license revenue from our connected-TV customers in particular.
As mobile operators face increasing downward pressure on average voice revenue per subscriber, and as competition heightens, operators around the world are looking for new sources of revenue, differentiation via data services and network performance/quality, and solutions to manage the explosion of mobile video and multimedia data network traffic spurred by the rapid adoption of smartphones and tablets.
Opera is a trusted partner for operators globally. The Company currently offers four major cloud-based solutions and services to operators worldwide: (i) Operator co-branded versions of Opera Mini, whereby operators are able to offer their mass-market subscribers content compression, fast internet download speeds, convenient access to operator portal services in order to drive incremental revenue and lower-priced data plans and data packages, capitalizing on the up to 90% data compression that Opera's cloud services enables; (ii) the Rocket Optimizer™ solution, which allows mobile operators to leverage cloud computing to optimize and compress
video and other multimedia traffic on crowded mobile towers, including 3G and 4G LTE networks, enabling operators both to boost the capacity of their networks by up to 60% and offer better network performance and quality to their subscribers; (iii) the Horizon™ solution, a mobile browser extension and toolbar platform that allows users to personalize their smartphone browser and allows operators to gain new monetization opportunities, such as advertising; and (iv) Opera Web Pass, which allows users to buy time-based or content-based mobile data packages easily through a simple, one-click purchase, similar to how users buy apps today, enabling operators both to offer a broad array of personalized data package alternatives for their subscribers and increase the average revenue generated per subscriber.
At the end of 2013, Opera had active agreements with 52 operators worldwide (with a total of 130+ agreements when including all subsidiaries of global frame agreements signed), including 17 out of the top 30 operators worldwide, which combined have approximately 2.8 billion subscribers, or more than 40% of the total global subscriber base. These customer figures also include Skyfire's customer list. Skyfire itself counts three, large U.S. mobile operators as customers, including one customer for its Rocket Optimizer™ solution and two customers for its Horizon™ solution.
During 2013, Opera continued to see strong growth in the number of operator-related Opera Mini users from our existing agreements, notably from such customers as Airtel, MTN, Telenor, Vimpelcom and Vodafone; the active user figures also include Horizon active users from two major U.S. operators, where active users are just starting to ramp up. At the end of December 2013, the total number of Opera and Skyfire active users with operators grew
OPERATORS
BOOST NETWORK CAPACITY BY UP TO 60%
OPERA WORKS WITH 17 OF THE TOP 30 OPERATORS WORLDWIDE
OPERA AND SKYFIRE ACTIVE USERS WITH OPERATORS
THE YEAR'S INCREASE:
to 104.7 million, an increase of 95% versus the end of December 2012.
Opera-owned-and-operated properties: Helping consumers discover and reach the content and services that matter most to them
Opera continues to maintain our position as a global leading mobile consumer company. In December 2013, 270 million unique users worldwide browsed the web using Opera mobile consumer products. In addition, the number of Opera users on the Android smartphone platform at the end of 2013 was 85.2 million users, up 85%, compared to the end of 2012.
Opera's tremendous worldwide success with mobile consumers across all mobile platforms has occurred because of Opera Mini. First, Opera Mini is faster than the competition, due to the up to 90% compression, compared to a normal full web browser, which makes for a much more enjoyable and efficient browsing experience for consumers. Second, Opera Mini is much cheaper for consumers — i.e., consumers save up to 90% browsing with Opera Mini, compared to competitive products, due to Opera's unique proxy browsing technology. Third, Opera Mini works on the vast majority of mobile phones, including more than 3,000 different mobile-phone models. Fourth, Opera believes Opera Mini's user interface design and rendering quality are superior to the competition.
Opera.com continues to be a key channel for distributing the Opera-branded version of Opera Mini. Opera has also focused on distribution via direct agreements with mobile OEMs and chip-set manufacturers, with these channels accounting for over 50% of Opera's mobile user base. Opera Mini is also available on several handset vendor application stores, such as Apple's iPhone App Store, Google Play, BlackBerry App World and Nokia's Ovi Store.
From a platform standpoint, Opera has put significant focus on growing our user base on Android, both via Opera Mini and Opera for Android, Opera's browser for high-end smartphones. In December 2013, the number of Opera users on Android reached 85.2 million, up 85% versus December 2012. This makes Opera one of the leading third-party browser apps on the Android platform.
Overall, Opera's extensive and burgeoning mobile user base has put the Company in an enviable position both to develop and expand our owned and operated properties and to become a major global mobile publisher. These owned and operated properties include the Speed Dial feature, the Smart Page, the Opera Mobile Store and the Discover service. By expanding our mobile publisher properties, Opera has been able to increase usage of and user engagement with our mobile products, which, in turn, has led to higher ARPU (average revenue per user) via mobile advertising and mobile search, in particular.
Ultimately, Opera has created a large and growing mobile audience, and, as a result of our first-party user data, the Company has become an increasingly attractive channel for advertisers and app developers, as they seek to reach the Company's large and diverse audience base.
The global advertising industry continues to experience a macro shift in advertising spend from traditional offline channels, such as print,
95%
JORDAN & MOLLY ARE SOCIALLY ACTIVE ONLINE WILL THIS PHOTO BE LIKED BY OUR FRIENDS IN FLORIDA?
services, highly intuitive reporting and analytical tools and access to premium advertisers (via Opera's own advertiser relationships and third-party mobile ad networks), helping these publishers maximize revenue from their content and user bases. At the core of Opera's success with premium publishers and developers is AdMarvel and its technology platform and software development kit (SDK). AdMarvel's success with premium publishers stems from three major sources: (i) its ad-serving capabilities (powerful rich-media ad serving, targeting and analytics), (ii) its ad mediation (ad performance optimization and transparency and control over ad network traffic from over 120 ad sources from around the world) and (iii) its campaign management capabilities (management, uploading, scheduling and control of "house" ads and directly sourced advertising). These capabilities have helped AdMarvel's publisher customers to drive higher fill rates, CPMs and, ultimately, higher revenue. Premium publisher customers include Pandora Media, Shazam, Sky, The Wall Street Journal and Univision.
Overall, Opera's U.S.-based mobile advertising subsidiaries work, both directly and indirectly, with 70 out of the Top 100 Ad Age Advertisers in the United States. In addition, Opera globally powers advertising for 20 of the top 25 global media companies and manages 60 billion monthly ad requests for advertisers and publishers around the world.
Via the Opera Mediaworks Ad Exchange (OMAX), Opera offers a real-time bidding (RTB) platform that brings advertisers, ad networks and agencies together with mobile publishers and app developers for an efficient, automated media buying and selling experience. Through OMAX 2.0, publishers now have access to several new demand-side platforms (DSPs), facilitated by new audience segmentation and
expanded targeting capabilities, designed to improve monetization of publisher properties. Publisher customers can also choose the option of setting up private marketplaces for their inventories, with "programmatic direct" on OMAX. This brings in diverse demand sources while still maintaining publisher control.
Revenue in 2013, compared to 2012, was fueled by expanded business with existing advertiser and publisher customers, as well as new customers. Revenue growth from both our mobile advertiser and mobile publisher customers, who provide content via mobile web properties and mobile applications, continues to be strongest on smartphone and tablet devices, with iOS and Android constituting the leading platforms.
Traditionally, television has been referred to
Driving new services and revenue streams As device manufacturers and operators seek to enhance their relationships with and provide compelling applications and services to their consumers, they are increasingly developing and deploying internet-connected devices. as a "lean back" medium, where interaction is passive. Today, television manufacturers and operators are trying to encourage consumers to become more actively engaged with their TV sets, referred to as a "lean forward" model, by providing web apps, web browsing and other digital content on TVs. This has been spurred not only by the desire of the TV manufacturers and operators to differentiate, obtain premium pricing for their product and service offerings and generate new revenue streams, but also by the perceived opportunity to bring many of the same services that have been deployed successfully in the mobile phone eco-system, such as mobile web browsing and app stores, to their TV consumer customers.
television and radio, to online channels, with mobile taking an increasing share of the online/internet medium. This macro shift from offline to online has been fueled by several factors, namely, the increasing amount of time consumers spend online and on mobile devices, as well as the fact that digital advertising compared to traditional offline advertising enables much better targeting, provides opportunities for more user interaction and provides better measurement capabilities.
The rapid growth in mobile advertising in particular is being fueled by a number of factors: (i) the dramatic increase in smartphone users to around 1.5 billion by the end of 2013, with smartphone users spending significantly more time engaged with their mobile devices than basic phone users; (ii) reach and "anytime-anywhere" access to users — there are almost 5 billion mobile-phone users worldwide overall (compared to around 2 billion desktop users, for example); (iii) strong targeting characteristics — advertisers are able to glean meaningful amounts of aggregated information about mobile users, such as location, demographics and behavior; (iv) high performance and user response rates from Android and iOS smartphone devices in particular, which support highly interactive and entertaining ad formats due to advanced display technologies, strong graphics processors and fast processing speeds; (v) more widespread access to high-speed wireless data networks, which enables the consumption of high-quality and rich-media and video content on mobile devices; and (vi) a rapid increase in the consumer time spent in smartphone mobile apps in particular, as developers have been able to deliver highly intuitive, engaging and personalized content experiences "inapp", capitalizing on native operating system software development kits, which facilitate the
full harnessing of a mobile device's processing capabilities and functionality.
Opera's goal is to power the mobile advertising ecosystem through innovative and differentiated mobile advertising services and technology solutions, targeting premium brand and performance advertisers, ad agencies, publishers and application developers. Opera's ultimate mission is to help both publishers increase revenue from their mobile properties and content providers and advertisers reach and acquire potential customers.
Under the Opera Mediaworks brand and through Opera's mobile advertising subsidiaries, Mobile Theory (USA) and 4th Screen Advertising (U.K.), Opera is able to offer premium-brand mobile advertisers the ability to build their brands and engage with consumers by offering creative services, sophisticated audience targeting capabilities, significant audience and publisher reach, high levels of transparency and measurability on ad campaigns, and support for highly interactive and engaging advertising experiences on a full range of mobile devices, including banner display ads, interactive rich-media and video ads, and native advertising.
Under the Opera Mediaworks Response brand, Opera is able to provide performance advertisers with comprehensive tools to reach their target audience better and acquire new customers. Opera Mediaworks Response facilitates real-time targeting, real-time bidding (RTB) and real-time reporting on mobile ad campaigns. Overall, Opera Mediaworks Response helps performance advertisers and application developers with "cost per action" (CPA) campaigns, such as campaigns to secure customer sign-ups, leads and application downloads.
For premium mobile publishers and developers, Opera offers technology solutions and
"Revenue in 2013, compared to 2012, was fueled by expanded business with existing advertiser and publisher customers, as well as new customers."
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With the Opera Devices Software Developer Kit (SDK), device manufacturers and opera tors are able to offer not only web-browsing capabilities and full internet access to their consumer end customers, but also custom ized web apps that are accessible from the home screen of the device. Moreover, with the Opera Devices SDK, device manufacturers and operators are able to use their own (and third-party) developers to create user interfaces, widgets and menu systems using web technologies, such as HTML5 and CSS, HbbTV and OIPF, while accelerating time to market for new consumer electronic devices.
The Opera TV Store, an HTML5-based app store for connected TVs, set-top boxes and media players, offers a selection of high-qual ity, easily navigated web apps. Side-by-side applications allow viewers to use TV apps without losing focus on the program they are watching. The Opera TV Store has also been enhanced with the ability to display ads, thereby enabling publishers and content pro viders to inject pre-roll ads and to monetize their applications. The Opera TV Store, which contains hundreds of TV apps from popular content providers including Vimeo, Facebook and Fashion TV, has already shipped on tens of millions of devices, including Smart TVs and Blu-ray Disc players. In addition, with innovative toolkits such as Opera TV Snap, brands and content owners can quickly re purpose their online video inventory into HT-ML5-based TV apps, at zero cost.
Today, the desktop browser is a more powerful platform than ever. This is seen most saliently with the clear dominance of web applications OPERA IN RUSSIA/CIS within desktop-centric computing. This trend is no more pronounced than with social net working, where Facebook, for example, has more than 800 million desktop users. In addi tion, the rapid adoption and innovation around HTML5 is making web applications more powerful and always available. For example, playing video without the need for third-party applications or plug-ins and using geolocation to provide locally targeted information are some clear examples where HTML5 is making the browser and browser-based applications much more powerful than in the past.
Since its first public release in 1995, Opera has continuously delivered browser innova tion to desktop PCs. Opera's desktop browser provides its users with a safe, efficient, cus tomizable and enjoyable browsing experience. Today, the vast majority of Opera's desk top users are in the Russia/CIS region and in the emerging markets. Opera is particularly focused on gaining users in regions where we already have a strong base of users, such
as Russia.
Opera's monetization strategy for our desk top browser revolves predominantly around search, which comes pre-configured on all of the Company's desktop versions. Google and Yandex are Opera's key strategic search partners and provide the majority of the Com pany's desktop monetization. These partnerships are supplemented by local search partnerships in certain markets, such as Japan and China, where Opera works with Yahoo! Japan and Baidu, respectively. In addition, Opera has signed deals with e-commerce players including Amazon.com (USA, Germa ny, Japan), Booking.com (64 countries) and
Ozon (Russia) to further enhance ARPU. In December 2013, the number of desktop users was approximately 51 million, down 7% versus December 2012. Revenue was lower in
"Today, the vast majority of Opera's desktop users are in the Russia/CIS region and in the emerging markets. Opera is particularly focused on gaining users in regions where we already has a strong base of users, such as Russia."
IN RUSSIA/CIS, ALL PRODUCTS
Opera Software ASA is a company domiciled in Norway. The consolidated financial statements of the Company include the Company subsidiaries Hern Labs AB, Opera Distribution AS, Netview Technology AS and Opera Software International AS (which, in turn, includes the subsidiaries Opera Software Korea Ltd, Opera Software Technology (Beijing) Co., Ltd, Opera Software Poland Sp. z o.o, Opera Software Singapore PTE. LTD., AdMarvel, Inc., LLC Opera Software (Russia), LLC Opera Software Ukraine, Opera Software Iceland ehf, Opera Web Technologies Pvt. Ltd, Handster, Inc., Mobile Theory, Inc., 4th Screen Advertising Ltd, 4th Screen Advertising Holdings Ltd, Skyfire Labs, Inc., Opera Software International US, Inc., Opera Mediaworks, LLC., Opera Mediawork Performance, LLC, OM-WMSG, LLC, Opera Holdings Ireland Limited, Opera Mediaworks Ireland Limited, Opera Software Ireland Limited, Opera Mediaworks Ad Exchange, Inc., Opera Software Netherland BV, Opera Software Americas, LLC., Opera Commerce, LLC., and the limited company Beijing Yuege Software Technology Service Co., Ltd. (of which Opera had full control), together referred to as the "Group". As of December 31, 2013, Opera Software International AS had branches in Japan, Taiwan and Poland.
At the close of 2013, the Company had 1,039 full-time employees and equivalents, compared to 931 full-time employees and equivalents at the end of 2012.
2013, compared to 2012, due to lower search revenue, which was partly offset by higher content and advertising revenue. DESKTOP USERS Board of Directors composition man rights. Moreover, these rights are fundamental to facilitate the meaningful realization of other human rights, such as the right to access information.
At Opera, we strongly believe in these human rights and will strive to protect them for our users, employees, partners and other stakeholders. The open internet, including the web, has true potential as an open communication platform that enables users globally to exercise their freedom of speech. Conversely, new technologies can be used to invade citizens' privacy. Opera will take the required measures to protect our users' basic right to privacy.
Our employees are our most valuable resource. Opera Software will interact with our employees in the same way as we strive to interact with our customers: following the highest ethical standards and with respect for individuality.
To ensure a high ethical standard, Opera last year decided to revise our Ethical Code of Conduct. By doing so, Opera reaffirms its commitment to respecting and supporting internationally recognized human rights. The guidelines apply to all staff members, in all Opera Software Group offices and departments. The code has been put in place to help employees, clients and business partners understand Opera's values and standards.
Freedom of speech and "blowing the whistle" on malpractice, fraud, illegality, breaches of rules, regulations and procedures, or raising health and safety issues, is encouraged at Opera.
We strongly encourage and guide our employees regarding how to speak up and take action against abuse and malpractice.
Any Opera staff member making a whis-
At the Annual General Meeting on June 4, 2013, Arve Johansen was re-elected as the chairman of the Board of Directors and Kari Stautland, Audun Iversen, Greg Coleman and Marianne Blystad were re-elected to the Board of Directors. In addition, three employee-elected representatives have seats on the Board (Christian Mauricio Uribe Espinoza, Krystian Kolondra, and Erik Möller).
The Company's guidelines for corporate governance are in accordance with the Accounting Act §3-3b and section 3-3c and the Norwegian Code of Practice for Corporate Governance, dated October 23, 2012, as required by all listed companies on the Oslo Stock Exchange. Please see the section entitled "Principles of corporate governance" in the Annual Report for more information.
Two years after we first announced our commitment to the United Nations Global Compact (UNGC), the Opera Software Group is pleased to reaffirm our ongoing support to the initiative and its ten principles in the area of human rights, labor, environment and anti-corruption.
We are guided by the principles of the UN Global Compact, and we continually strive to make the principles a part of our strategy, culture and day-to-day operations. Please see the section entitled "Principles of corporate social responsibility" in the Annual Report for more information.
Opera helps millions of people across the globe to connect to the internet. Freedom of expression and privacy are fundamental hutleblowing report is protected from any repercussions, such as dismissal and other forms of reprisals, provided that such report is made in accordance with policies and regulations.
Opera respects and observes the fundamental employment rights set out in the international conventions on human rights, such as the conventions of the International Labor Organization (ILO) and the United Nations (UN). Opera believes that everyone has the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and join labor unions. Several Opera employees are organized into labor unions. Opera is an equal-opportunity employer. We insist on fair, non-discriminative treatment for all employees, in recruitment and in selection for promotion or training opportunities, irrespective of race, color, nationality, age, sex, sexual orientation, gender identity, ethnic origin, marital status, disability or religion. Individuals at every level share responsibility for maintaining a culture that is built on open, supportive and positive relationships, free from prejudice, stereotyping and unfair bias. Our employees shall not be subjected to harassment or other improper conduct that might
be perceived as threatening or demeaning.
Opera's employees regularly participate in anonymous surveys concerning the work environment. This gives Opera the opportunity to discover and deal with problems concerning harassment or discrimination at an early stage. In 2013, more than 81% of the employees participated in the Opera Organizational Survey. In this survey, employees are asked to give feedback on areas such as job satisfaction, participation and teamwork, policy and
2012 2013 55M 51M
guidelines, health and safety, management, competence and training. The results are benchmarked against companies in Norway to ensure that we uphold a high level of employee satisfaction and participation in each of these important areas for employee satisfaction.
The results have been very positive and on level with, or higher than, other companies in Norway. In the survey, more than 85% of the respondents strongly agreed that they were very proud to work for Opera, while only 4% were neutral to the statement, and 11% were in agreement with the statement.
There have been no reported harassment or discrimination incidents at Opera in 2013.
We are very happy to see these results and will continue to work on this to ensure that employee satisfaction remains high.
Through elected representatives to the board, we give our employees a voice. Our employees have the right and obligation to elect three representatives to the Board of Directors. The representatives are elected by all Opera employees, globally. Directors ensure the best interests of Opera Software ASA, and a special obligation falls on the employeeelected members to voice the concerns of Opera employees.
In 2011, Opera Software ASA was ranked as one of the companies with the lowest registered sick leave on the Oslo Stock Exchange. These good results have continued in 2012 and 2013, as the reported sick-leave numbers for the Opera Software Group were well below 1.75 percent for all countries in the Opera Software Group. The sick-leave number for the parent company was 0.82 percent. No work-related accidents involving personal injury were reported. No incidents involving material damage occurred.
With such a low sick-leave level, we are constantly evaluating our policies. For example, discrimination on the basis of any disability shall not occur at Opera. We strive to meet all our employees' needs, and we offer shorter working hours and other services to accommodate our employees with disabilities.
We are also cognizant of our Scandinavian heritage and promote a healthy work-life balance. In our headquarters in Oslo and our offices in Poland, we provide kids' rooms where employees can bring their children to work for shorter periods of time under their own supervision. We encourage a healthy lifestyle by serving healthy meals and snacks. At the headquarters in Oslo, employees can get their daily exercise in one of Oslo's most popular recreation areas just outside the office, running in Maridalen or swimming in Nydalsdammen. During the winter, employees can work out in our newly refurbished activity and weight room. Opera also sponsors a yearly sum for gym memberships or other training activities for its employees worldwide.
At the end of 2013, Opera had 1,039 full-time employees from countries all over the world, of which 21% were women and 79% were men. Opera has two female board members and one woman on the senior Executive Team. As part of our core values, Opera promotes cultural diversity and gender equality, and Opera is proud to have 55 nationalities represented in the organization.
Equal opportunity to all Opera employees and potential employees is an important factor throughout the organization. When recruiting, we use assessment methods such as programming tests and test cases to give equal opportunity to
NO. OF EMPLOYEES
| 1039 |
|---|
| 931 |
| 777 |
| 747 |
| 757 |
GENDER OF EMPLOYEES 79%
21%
"The reported sick-leave numbers for the Opera Software Group were well below 1.75 percent for all countries in the Opera Software Group."
all qualified applicants. Opera strives to continue improving the company's gender balance.
At Opera, we pride ourselves in aiming to give equal opportunity to employees in both work and personal life. One of the benefits for all male employees is the opportunity to have two weeks of paid father's leave upon the birth of their baby. By doing this, we are emphasizing the importance having a healthy work-life balance, regardless of the geographical location or local labor legislation.
For several years, Opera has made data-center efficiency, low-power CPUs in our servers and procuring power from renewable energy sources as key components of our hosting expansion strategy. Opera also has participated in programs to dispose of electronic equipment responsibly and encourages employees to use this service for any personal electronics they are retiring.
Reducing the amount of paper produced during normal business practices and recycling what paper waste we do create are also visible examples of Opera's environmental commitments, as well as keeping lights out after hours and in unused areas.
At Opera, we believe that an open, connected world — powered by great technology and services — is essential to breaking down the barriers that limit access to information, education and fun.
Today, only 2.7 billion people are connected to the internet. The cost of getting online is one of the biggest challenges for users worldwide. We want to help get the next five billion online. Opera Mini, which makes it possible to access the web from even the simplest phones, is our most important 2013, approximately 76% (2012: 71%) of revenues were in USD, 13% (2012: 22%) in EUR, 5% (2012: 4%) in GBP, 4% (2012: 1%) in CNY and 1% (2012: 2%) in other currencies. For the parent company, approximately 68% (2012: 67%) of revenues were in USD, 23% (2012: 29%) in EUR, 7% (2012: 2%) in CNY and 2% (2012: 2%) in other currencies. The Board and management carefully monitor the foreign exchange risks, although there are no hedging strategies that can be employed to eliminate the fluctuations in NOK-reported revenues, given that nearly 90% of Opera's revenues are denominated in USD and EUR.
The majority of the Group's purchases are made in the following denominations: NOK, USD, SEK, PLN, GBP, JPY, CNY, KRW, TWD, AUD, UAH, ISK, SGD, EUR and INR. Exchange rate fluctuations in these currencies do impact Opera's income statement. In FY 2013, approximately 54% (2012: 36%) were in USD, 20% (2012: 30%) in NOK, 6% (2012: 7%) in SEK, 6% (2012: 5%) in GBP, 5% (2012: 7%) in PLN, 2% (2012: 3%) in CNY and 6% (2012: 12%) in other currencies.
Opera is exposed to customer-related credit risk, which is primarily influenced by the financial strength and characteristics of each customer. There is always a risk of loss on accounts receivable from our customers and reduced sales to our customers if they face liquidity challenges.
Opera Software, in February 2013, signed a MUSD 100 secured revolving credit facility with DNB Bank ASA for general corporate purposes, including acquisitions. The facility is primarily secured through a share pledge in Opera Software International AS, as well as floating charges over accounts receivable in
FINANCIAL RISK contribution toward achieving this, and today we have more than 243 million users on Opera Mini, with a majority of them in developing countries.
In 2013, Opera also joined Internet.org, a partnership between Facebook, Opera and other technology companies. The goal of Internet.org is to make internet access available to the two thirds of the world who are not yet connected and to bring the same opportunities to everyone that the connected third of the world has today. Opera is proud to contribute to the project with our competence in internet technology.
The Opera Software Group is also engaged in measures to fight poverty and to give children an opportunity for education and a better life.
This year, Opera participated in two major programs in India and Indonesia to give children access to education.
In India, Opera partnered with the Smile Foundation to launch the "Smile with Opera Mini" campaign, to support the basic education of 1,000 underprivileged children of the Smile Foundation's Mission Education program for a year.
In Indonesia, Opera ran a similar campaign with the YCAB Foundation, the "Browse for Change" campaign with Opera Mini.
Each of the following risk factors can have a significant negative impact on Opera's business, financial results, operations, cash flow, and the trading price of our common stock:
Opera's sales and expenses are exposed to foreign currency exchange risk. Most of the Company's foreign exchange risk relates to sales and is the result of revenue contracts signed in EUR and other currencies. For FY
Opera Software ASA and certain of its U.K. and U.S. subsidiaries. The facility has a term of 3 years and bears an interest rate of LIBOR + 1.75% p.a. (plus a utilization fee varying with the amount drawn). On the undrawn portion of the facility, a commitment fee of 0.61% p.a.
will be paid.
As of December 31, 2013, Opera had MUSD 60 in interest-bearing debt, and the cash balance was MUSD 163.4 (parent company: MUSD 128.4). Operas interest-coverage was 17 (2012: 369), and the equity ratio was 59% (2012: 60%). Investments are only made in funds operated by institutions rated by S&P or Moody's, with a minimum rating of BBB or Baa2, respectively. Although Opera does invest our money conservatively, all our investments are subject to risk. For example, Opera's cash and other investments placed in Norwegian financial institutions are not guar-
anteed by the government above MNOK 2 per institution. If the financial institution were to go bankrupt, a portion of Opera's cash or investment could be lost. Tax risk From time to time, Opera faces tax audits and investigations by both domestic and foreign tax authorities, and the outcome of any audit could have a negative impact on our operating results and financial condition. Furthermore, the tax treatment of many transactions relies on the judgment of the Company and its auditors, since the tax laws and regulations are not always clear. Based on the uncertainty that exists, the ultimate tax outcome may differ from the amounts recorded in our financial statements and if Opera were required to re-file our taxes based on an adverse tax judgment, it could materially affect our financial results during the relevant period(s).
Other
GBP CNY EUR USD 5% 4% 13% 76%
1%
"At Opera, we believe that an open, connected world — powered by great technology and services is essential to breaking down the barriers that limit access to information, education and fun."
Opera's competitors include some of the largest technology, advertising, IT and telecommunication companies in the world, with significantly larger financial resources and headcount and broader distribution channels than Opera has. These large companies have a greater financial capacity to make strategic acquisitions, invest in new technology and research and development, market their products and compete for customers. Furthermore, due to the dynamic nature of the market, there is always a risk that our large competitors, and even smaller startup competitors, could take a large share of the markets in which we are operating within a very short period of time, by developing more attractive products and taking customers away from our own products and services.
Opera's revenue is dependent on expanding our user base and customer base by developing and marketing products that are more attractive than our competitors' products. If the attractiveness of our products does not continuously improve and evolve to keep pace with the industry, we will have challenges retaining our current user base and gaining new customers. Our competitors are constantly improving their products and associated services. In order to stay competitive, Opera has to invest significant resources in research and development. Investing significantly in R&D is, however, no guarantee that consumers and customers will, in fact, find our products to be attractive enough to begin or continue using them, as it is impossible to accurately predict the behavior of our consumer and business customers.
There is always a risk that existing customers will terminate or fail to renew their contracts with us if, for example, Opera's technology does not remain competitive enough to provide value to our customers or our customers' products, which incorporate Opera's technology, or does not generate revenue and users as the customer expected. There is also a risk that consumers will stop using Opera's technology and begin using a competitor's technology and that our brand and performance advertising customers work with our competitors instead of us for advertising campaigns. The negative impact of a loss of customer(s) and/or end users on Opera's revenues and business could be significant. For example, in 2013, Opera had sales to one customer that accounted for more than 10% of total revenues. Loss of this customer or a change in the commercial terms of that deal would negatively harm our revenues and business. Similarly, not being able to attract new customers, partners and consumers to our products would have a negative impact on revenues and business.
Data-center risk
Many of our products and services are dependent on the continuous operation of data centers and computer hosting and telecommunications equipment. If Opera's internal IT systems fail or are damaged, or if a third party gains unauthorized access to such systems and data is lost or compromised, it could have a material impact on Opera's operations. Downtime can, for example, hurt our reputation with our consumer customers, as well as increase the risk of damage claims and monetary penalties from our customers.
If our data centers malfunction or become damaged, service can be interrupted for long periods of time. Damage can result from any number of factors, including natural disasters, such as earthquakes, floods, lightning strikes, and fires, terrorist attacks, power loss or failure, telecommunication equipment failures, severed or damaged fiber optic cables, computer viruses, security breaches, sabotage, vandalism, negligence of our suppliers, or deliberate attempts to harm our equipment and/ or systems. Furthermore, actions or inactions of third-party hosting centers or telecommunications providers, including financial difficulties, can result in service disruption, which would have negative impact on our products and services.
If our centers or systems are subject to a security breach, customers' confidential or personal information could be obtained and used by third parties, which could have a negative impact on our brand and the market perception that we are a reliable company, as well as subjecting us to significant regulatory fines or claims or damages from our customers.
For certain business models, we depend on internal systems to collect and produce accurate statistics regarding the use of our products and services, especially for products that rely on an active user royalty model. Failures or malfunctioning of these systems can have a significant impact on our financial results. Failure to adequately back up our internal systems can also have a material impact on the running of our business.
Opera has a strong brand name in our markets. In order to expand our user and customer base, we must maintain and strengthen the "Opera" brand by producing excellent products and services and maintaining and improving end users'
and customers' perceptions of Opera. Issues such as data privacy and security issues, product and service outages, compatibility issues and product/service malfunctions can have a negative impact on our brand name, which can, in turn, impact our results and business.
Opera is exposed to reputational risk, as Opera is heavily reliant on browser products and other related products and services, while maintaining a relatively low marketing budget. In the past, Opera's reputation has been spread via word of mouth by satisfied users and customers. Failure to continue to release and develop high-quality, user-friendly and customer-attractive products and services would adversely impact our reputation, this marketing channel and Opera's business.
Our business has always experienced growth and dynamic change, which may require an increase in headcount and/or the need to restructure the work force's competence, leading to downsizing and the rehiring of people with different skill sets. If we fail to manage this growth and change effectively, the quality of our products, services and technology could be negatively affected, and our business and operating results could be impacted. Our presence and expansion in many international markets amplifies these risks due to multiple legal and regulatory systems, languages, cultures and customs. Failing to improve our operational, financial, management, reporting and compliance procedures continuously could negatively impact our growth and financial position.
Executing on our strategic objectives depends on our ability to retain and attract key executives and members of senior management, as
well as skilled personnel, including software engineers and developers. There is strong competition for employees in our business, and our competitors often try to lure away our personnel. If our competitors are able to offer more competitive compensation arrangements and/or more attractive workplaces, our ability to attract and retain key employees will be hampered. Losing members of the team can negatively affect our ability to execute on our strategic objectives and compete effectively.
Opera operates on a global scale and is therefore subject to regulatory regimes across the globe. Not only is it a challenge for a company the size of Opera to remain current on all the regulatory regimes that may apply to Opera at any one time, but also some regulators have a particular interest in the markets within which Opera is operating. As a result, Opera may become subject to increased regulatory scrutiny in the future. If lawmakers and regulators make new laws or interpret current laws in different ways or subject Opera to regulatory scrutiny, Opera may be required to, for example, invest significant amounts of money to participate in or defend ourselves in regulatory proceedings in multiple jurisdictions and to adapt our products and services to conform to the regulatory regimes in multiple jurisdictions. Such product adaptations may be very costly and might ultimately result in Opera's products and services becoming less attractive to our customers and end users and/or in Opera being forced to maintain different software builds for different countries.
Opera has many customers, partners and end users around the world, and, as a result, we can be exposed to lawsuits, government investigations and other claims or proceedings on a global basis. Such lawsuits, investigations and proceedings could be related to, for example, intellectual property (issues including trademark and patent suits), labor law issues, commercial lawsuits, data protection and privacy matters, consumer law, marketing law, tax issues and so forth. All such proceedings can have a significant impact on Opera, whether or not we are ultimately successful, due to the legal cost and the internal resources we would have to employ to defend ourselves. In the event of an adverse result against Opera in such a proceeding, Opera could be required to pay significant monetary damages or fines and/or re-design our products or services, causing a material impact on Opera's business, financial results, operations and cash flow. Intellectual property lawsuits are very
common in the market within which Opera operates. Regardless of the merits of such lawsuits, they are extremely expensive to defend and litigate, and the damages awarded in such suits can be high. In addition, Opera has contractually undertaken to indemnify certain of our customers and partners, so, in the event they are sued for alleged intellectual property infringement, Opera would be required to defend them and pay their damages. Furthermore, an adverse judgment could require Opera to cease using certain technologies in our products or names for our products, requiring Opera to re-engineer or re-name our products.
Compared to Opera, many of our competitors own large numbers of patents and other intellectual property rights. Although we do seek patent protection for certain innovations, we may not have sufficient protection for important innovations. Furthermore, because
many large companies are able to settle intellectual property lawsuits by cross-licensing each other's technology, the fact that our patent portfolio is not as extensive as our competitors' portfolios could have a negative impact in a cross-licensing situation.
Opera has made a number of acquisitions in the past and will likely make future acquisitions. Acquisitions and other strategic transactions can create operational and integration challenges, diversion of management attention, dilution, cultural challenges, assumption of liabilities or debt, and other challenges that can impact our business and results. In addition, making such acquisitions requires significant costs for legal and financial advice and can take management's focus away from achieving other strategic objectives.
Opera's operating results fluctuate from period to period, due to, for example, changing business models and factors that are outside our span of control. Furthermore, our business and the market are dynamic and evolving, and our spending has historically been cyclical in nature and user traffic tends to be seasonal.
Risk factors not mentioned above and which are currently believed to be immaterial, or which are currently not known, could also materialize in a manner which could lead to a material adverse effect on the Opera Group's business, operations and financial position.
As of December 31, 2013, Opera Software had 132,288,232 outstanding shares. Total stock-based compensation expenses for employees in 2013 were MUSD 4.0 (parent company: 4.0), compared to MUSD 3.6 (parent company: 2.4) in 2012.
As of December 31, 2013, the Group had MUSD 203.6 in total paid in capital. Total equity was MUSD 314.0 (parent company: 306.6).
The total comprehensive income for the period for Opera Software ASA was MUSD 44.0 in 2013. The Board of Directors recommends a NOK 0.24 per share dividend payment for the 2013 accounting year. The proposed dividend payout is consistent with the Company's dividend policy. The dividend disbursement amounts to approximately MUSD 5.2. The Board proposes that the remainder of the total comprehensive income for the period is transferred to other equity. As the financial statements for the parent company are reported according to IFRS, the total comprehensive income is included in other equity. The Company's unrestricted capital as of December 31, 2013, after deducting allocations for the proposed dividend disbursement for the 2013 accounting year, amounted to approximately MUSD 106.9.
In accordance with Norwegian accounting regulations, the Board confirms the annual financial statements have been prepared on a going-concern basis.
No subsequent events have occurred after the reporting date that would require the consolidated financial statements to be adjusted. For announcements of new contracts, please see the announcements published
TOTAL STOCK-BASED COMPENSATION EXPENSES FOR EMPLOYEES
on the Oslo Stock Exchange website (www.oslobors.no).
The Annual General Meeting held on June 14, 2011, approved a new stock incentive program. The maximum number of options to be granted during 2011, 2012, 2013 and 2014 is 11,950,000. This represents slightly less than 10% of the registered share capital of the Company. However, options cannot be granted if the aggregate of all issued, un-exercised, and not-terminated options represents more than 10% of the then-registered share capital of the Company. No employee can be granted options annually which in value exceed 200% of that employee's base salary. The value is to be based on valuation principles for options as applied under IFRS and in accordance with Opera Software's financial statements. The options are to be granted in accordance with the Company's standard option agreement as approved by the Ordinary General Meeting in 2010, which means that the vesting structure is 50% after 3 years and 50% after 4 years, with a strike price equal to the market price at grant. After June 14, 2011, and up to December 31, 2013, 4,548,850 options have been granted under the program.
During 2013, Opera did not purchase any own shares.
As of December 31, 2013, there were 132,288,232 (119,574,782 as of December 31, 2012) shares outstanding. The Company had 3,638 (2012: 3,286) shareholders at year's end. At that time, 57.7% (2012: 74.2%) of the shares were held in Norway-based accounts, 16.4% (2012: 8.8%) in U.K.-based accounts, 7.7% (2012: 6.3%) in U.S.-based accounts and 18.2% (2012: 10.7%) in accounts based elsewhere.
A key concept in Opera's approach to corporate governance is the equal treatment of shareholders. Opera has one class of shares and all shares are freely transferable (with possible exceptions due to foreign law restrictions on sale and offering of securities). Opera is not aware of any agreements between shareholders that restrict the ability to transfer shares or cast votes. All shares in the Company carry equal voting rights. Any decision to waive the preemption rights of existing shareholders to subscribe for shares in the event of an increase in share capital will be explained. Where the Board of Directors resolves to carry out an increase in the share capital and waive the preemption rights of the existing shareholders on the basis of a mandate granted to the Board, an explanation will be publicly disclosed in a stock exchange announcement issued in connection with the increase of the capital. Please see the section entitled "Principles of corporate governance" in the Annual Report for more information.
Opera Software ASA understands the importance of protecting the environment.
Opera shall:
• Act according to environmental laws. • Commit to using environmentally safe products in the workplace.
• Evaluate the consumption of energy and other resources to determine means of control. • Ensure the development of environmentally protective procedures.
OUTLOOK
The 10 biggest shareholders of Opera Software ASA as of December 31, 2013, had 41% ownership of the total shares.
the Company's overall growth prospects, which is expected to be driven primarily by our mobile businesses going forward.
Within our mobile business, Opera continues to drive a compelling value proposition for operators, helping them increase data and services revenue streams and profitability. With the continued rollout of the cloud-based Rocket Optimizer™ solution and other smartphone-targeted products and services to the Company's existing and prospective customers, Opera expects to generate solid revenue growth from our operator business in 2014, compared to 2013.
Moreover, the Company continues to deliver a very compelling value proposition to our rapidly burgeoning mobile consumer base, providing a fast and data saving, and therefore cheaper, browsing experience. Opera's strategy is to capitalize on our over 270 million mobile browser user base by building and expanding Opera's owned and operated properties and monetizing these properties via mobile advertising, mobile search and mobile applications. Opera expects to generate solid revenue growth from our mobile-consumer user base in 2014, versus 2013, due to much
larger mobile advertising revenue streams in particular from our owned and operated mobile properties, including the Smart Page and the Opera Mobile Store.
Within Opera's Mobile Publisher & Advertiser business (Opera Publisher Partner members), Opera expects to generate meaningfully more revenue from this business in 2014, compared to 2013, as Opera continues to ramp up revenue from brand and performance advertisers and application developers.
Opera's key operational priorities in 2014 include continuing to (i) sign operator agreements for Opera's existing and new products and services, including the Rocket Optimizer™ solution; (ii) grow revenues and users of Opera's mobile consumer products, particularly on the Android and iOS smartphone platforms, and expand usage and monetization of Opera's owned and operated properties; (iii) increase revenue from Mobile Publishers and Advertisers (Opera Publisher Partner members), by expanding Opera's demand-side advertising reach and capabilities; (iv) grow Opera's desktop user base, particularly in Russia/CIS; and (v) increase Opera's overall profitability and margins.
Below, please find financial information and commentary on Opera Software ASA, the Opera Software parent company. Please note that the numbers and comments below are only applicable to the parent company and not for the Group. However, the information described above for the Group is also applicable for the parent company, except for the information below.
FINANCIAL SUMMARY
Opera's operating revenues grew by 6% to MUSD 169.8 in 2013 (2012: 160.8). Operating expenses increased by 9% to MUSD 131.0 (2012: 120.5), with non-headcount expenses increasing primarily due to higher intercompany costs related to purchases of marketing and technical services from the subsidiaries and an overall increase in marketing expenses. Opera delivered EBIT (excluding costs for restructuring the business) of MUSD 37.7 (2012: 40.4), a decrease of 4%, and profit before income taxes (including costs for restructuring the business) ended at MUSD 36.9 (2012: 33.1). Income taxes were MUSD
Arve Johansen Chairman
Oslo, April 10, 2014
Marianne Blystad
Christian Mauricio Uribe Espinoza Employee Representative
Krystian Kolondra Employee Representative
Lars Boilesen CEO
Audun Wickstrand Iversen
Gregory Gerard Coleman Erik Möller
Employee Representative
Kari Stautland
17.4 (2012: 9.3), and the Company's profit for the period was MUSD 57.6 (2012: 21.0). Earnings per share was USD 0.47 (USD 0.18), and diluted earnings per share was USD 0.46
(USD 0.17).
Net cash flow from operating activities in 2013 totaled MUSD 69.3 (2012: 38.3). Opera's cash balance in 2013, versus 2012, was impacted positively by pre-tax profits and proceeds from share issues of MUSD 87.2 (2012: 0). Opera's cash balance in 2013, versus 2012, was reduced by MUSD 143.7 (2012: 0.8) related to acquisitions, MUSD 2.1 (2012: 5.2) for capital expenditure and MUSD 4.4 (2012: 4.0) related to dividends. As of December 31, 2013, the Company had a cash balance of MUSD 128.4 (2012: 128.2) and MUSD 0 (2012: 0) in interest-bearing debt. The Company's interest-coverage was 55 (2012: 437), and the equity ratio was 77% (2012: 76%).
It is the Board's opinion that the annual accounts provide a true and fair view of the Company's activities in 2013.
Opera's key operational priorities in 2014 include continuing to
The Board of Directors and the Chief Executive Officer (CEO) have reviewed and approved the Board of Directors' report and the financial statements for Opera Software Group and Opera Software ASA as of December 31, 2013, (Annual Report for FY 2013).
The consolidated financial statements and the financial statements for the parent company have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the EU and the interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements have also been prepared according to applicable regulations and paragraphs in the Norwegian Accounting Act and the relevant paragraphs in the Security Trading Act.
To the best of our knowledge: • The consolidated financial statements and the financial statements for the parent company for 2013 have been prepared in accordance with applicable accounting standards.
• The consolidated financial statements and the financial statements for the parent company give a true and fair view of the assets, liabilities, financial position and profits as a whole as of December 31, 2013, for the Group and the parent company.
• The Board of Directors' report for the group and the parent company includes a true and fair review of:
◦ The development and performance of the business and the position of the Group and the parent company
◦ The principal risks and uncertainties the Group and the parent company face
Arve Johansen Chairman
Oslo, April 10, 2014
Marianne Blystad
Christian Mauricio Uribe Espinoza Employee Representative
Krystian Kolondra Employee Representative
Lars Boilesen CEO
Audun Wickstrand Iversen
Gregory Gerard Coleman Erik Möller
Employee Representative
Kari Stautland
| 1/1 - 12/31 | 1/1 - 12/31 | ||
|---|---|---|---|
| Numbers in MUSD | Note | 2013 | 2012 |
| Revenue | 1, 2, 5 | 300.1 | 216.0 |
| Total operating revenue | 300.1 | 216.0 | |
| Cost of goods sold | 1, 2, 5 | 58.2 | 24.9 |
| Payroll and related expenses | 3, 5 | 108.6 | 94.7 |
| Depreciation expenses | 5, 7 | 20.8 | 9.7 |
| Other operating expenses | 3, 4, 5, 7, 14 | 50.8 | 36.4 |
| Total operating expenses | 238.3 | 165.8 | |
| Results from operating activities ("EBIT"), excl. restructuring costs |
61.8 | 50.2 | |
| Costs for restructuring the business | 12 | 2.5 | 12.8 |
| Results from operating activities ("EBIT") | 59.3 | 37.4 | |
| Interest income | 5 | 2.2 | 1.3 |
| Other financial income | 5 | 15.9 | 1.8 |
| Interest expenses | 5 | -4.2 | -0.1 |
| Interest expense related to contingent consideration | 11 | -17.0 | -7.7 |
| FX gains/losses related to contingent consideration, net | 11 | -6.3 | 1.4 |
| Revaluation of contingent consideration | 11 | 28.8 | 0.2 |
| Other financial expenses | 5 | -7.8 | -5.1 |
| Share of the profit/loss of associates accounted for using the equity method |
8 | -3.3 | -3.7 |
| Profit before income tax | 67.5 | 25.6 | |
| Income tax on ordinary result | 6 | 7.2 | 8.6 |
| Profit for the period | 60.3 | 17.0 | |
| Other comprehensive income may be reclassified to profit and loss: |
|||
| Foreign currency translation differences for foreign operations |
-0.2 | 4.4 | |
| Total comprehensive income for the period | 60.1 | 21.4 | |
| Profit attributable to: | |||
| Owners of the Company | 60.3 | 17.0 | |
| Non-controlling interest | 0.0 | 0.0 | |
| Profit for the period | 60.3 | 17.0 | |
| Total comprehensive income attributable to: | |||
| Owners of the Company | 60.1 | 21.4 | |
| Non-controlling interest | 0.0 | 0.0 | |
| Total comprehensive income for the period | 60.1 | 21.4 | |
| Earnings per share: | |||
| Basic earnings per share (USD) | 15 | 0.490 | 0.143 |
| Diluted earnings per share (USD) | 15 | 0.479 | 0.140 |
The consolidated group annual accounts report for Opera Software ASA contains the following documents:
The consolidated financial statements, which have been drawn up by the Board and management, should be read in relation to the Annual Report and the independent auditor's opinion.
| Shareholders' equity and liabilities |
|---|
| Equity |
| Paid in capital |
| Retained earnings |
| Liabilities |
| Non-current liabilities |
| Current liabilities |
| Numbers in MUSD | Note | 12/31/2013 | 12/31/2012 |
|---|---|---|---|
| Shareholders' equity and liabilities | |||
| Equity | |||
| Paid in capital | |||
| Share capital | 9 | 0.4 | 0.4 |
| Share premium | 184.2 | 81.9 | |
| Other reserves | 18.9 | 17.0 | |
| Total paid in capital | 203.6 | 99.3 | |
| Retained earnings | |||
| Other equity | 110.4 | 44.4 | |
| Total retained earnings | 110.4 | 44.4 | |
| Total equity | 314.0 | 143.8 | |
| Liabilities | |||
| Non-current liabilities | |||
| Other long-term liabilities | 5, 10 | 60.1 | 0.0 |
| Provisions | 10, 11 | 14.8 | 26.1 |
| Total non-current liabilities | 74.9 | 26.1 | |
| Current liabilities | |||
| Accounts payable | 10 | 22.2 | 19.6 |
| Taxes payable | 6 | 20.2 | 7.7 |
| Social security, VAT and other taxation payable | 9.8 | 5.9 | |
| Deferred revenue | 5 | 17.9 | 11.2 |
| Option liability | 3 | 0.0 | 0.1 |
| Other short-term liabilities | 5, 10 | 29.1 | 22.4 |
| Provisions | 10, 11 | 44.9 | 2.7 |
| Total current liabilities | 144.1 | 69.7 | |
| Total liabilities | 219.0 | 95.8 | |
| Total equity and liabilities | 533.0 | 239.5 |
| Numbers in MUSD | Note | 12/31/2013 | 12/31/2012 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 7, 8 | 149.5 | 70.3 |
| Other intangible assets | 7, 8 | 46.6 | 12.5 |
| Total intangible assets | 196.2 | 82.8 | |
| Property, plant and equipment | |||
| Office machinery, equipment, etc. | 7 | 15.4 | 15.8 |
| Total property, plant and equipment | 15.4 | 15.8 | |
| Financial assets and deferred tax assets | |||
| Deferred tax assets | 6 | 23.6 | 3.8 |
| Investments in other shares | 8, 10 | 0.1 | 2.1 |
| Other investments and deposits | 4, 8, 10 | 4.9 | 3.6 |
| Total financial assets and deferred tax assets | 28.6 | 9.4 | |
| Total non-current assets | 240.1 | 108.0 | |
| Current assets | |||
| Trade and other receivables | |||
| Accounts receivable | 5, 10 | 61.5 | 35.2 |
| Unbilled revenue | 10 | 32.4 | 26.7 |
| Other receivables | 6 | 35.6 | 12.4 |
| Total trade and other receivables | 129.5 | 74.3 | |
| Cash and cash equivalents | 5 | 163.4 | 57.2 |
| Total current assets | 292.9 | 131.5 | |
| Total assets | 533.0 | 239.5 |
Arve Johansen
Chairman
Oslo, April 10, 2014
Marianne Blystad
Christian Mauricio Uribe Espinoza Employee Representative
Lars Boilesen CEO
Audun Wickstrand Iversen
Gregory Gerard Coleman Erik Möller
Employee Representative
Kari Stautland
| 1/1 - 12/31 | 1/1 - 12/31 | ||
|---|---|---|---|
| Numbers in MUSD | Note | 2013 | 2012 |
| Cash flow from operating activities | |||
| Profit/loss before taxes | 67.5 | 25.6 | |
| Taxes paid | 6 | -13.0 | -9.2 |
| Depreciation expenses | 7 | 20.8 | 9.7 |
| Profit/loss from sales of property, plant and equipment | -0.0 | 0.1 | |
| Impairment of intangible assets | 7, 12 | 0.0 | 3.0 |
| Changes in accounts receivable ** | -29.5 | -24.3 | |
| Changes in accounts payable | -1.1 | 5.4 | |
| Changes in other liabilities and receivables, net | 2.9 | 4.9 | |
| Equity method accounting for associate companies | 8 | 7.3 | 4.6 |
| Share-based remuneration | 3 | 3.4 | 3.6 |
| Interest and FX related to contingent payment /** | 8, 11 | -5.5 | 6.0 |
| Conversion discrepancy | -3.1 | 8.1 | |
| Net cash flow from operating activities | 49.5 | 37.6 | |
| Cash flow from investment activities | |||
| Capital expenditures | 7 | -10.2 | -10.4 |
| Investment in R&D **** | 4, 7 | -14.4 | -3.4 |
| Acquisitions *** | 8 | -62.7 | -44.2 |
| Other investments* | 8 | -7.9 | -4.9 |
| Net cash flow from investment activities | -95.2 | -62.9 | |
| Cash flow from financing activities | |||
| Proceeds from exercise of own shares (incentive program) | 9 | 1.5 | 3.4 |
| Proceeds of share issues, net (incentive program) | 9 | 8.4 | 0.0 |
| Proceeds of share issues, net (equity increase) | 9 | 87.2 | 0.0 |
| Proceeds from sale of shares | 8 | 0.7 | 0.0 |
| Proceeds from loans and borrowings | 5 | 60.0 | 0.0 |
| Payments of loans and borrowings | 5 | -1.6 | 0.0 |
| Dividends paid | 9 | -4.4 | -4.0 |
| Purchase of own shares | 9 | 0.0 | 0.0 |
| Net cash flow from financing activities | 151.9 | -0.6 | |
| Net change in cash and cash equivalents | 106.2 | -25.9 | |
| Cash and cash equivalents (beginning of period) | 57.2 | 83.1 | |
| Cash and cash equivalents ** | 163.4 | 57.2 |
*Interest income and interest expenses are included in the profit and loss. Interest paid and interest received are recognized in the same year that interest income and interest expenses are recognized in the profit and loss, with the exception of interest related to re-evaluation of the contingent payment related to acquisitions. Conversion differences and interest related to re-valuation of the contingent payment are booked on a separate line as net cash flow from operating activities.
**Changes in unbilled revenue are included in changes in accounts receivables in the statement of cash flows.
***On March 14, 2013, Opera Software ASA acquired 100% of the shares and voting interest of the privately-held company Skyfire Labs, Inc., following a payment equivalent to MUSD 49.1 comprising MUSD 35.9 in cash and MUSD 13.2 in shares (no cash-flow effect) of Opera Software ASA. At the same time, a second payment of MUSD 25.7 was set in escrow and is to be released if certain financial targets are achieved. Net cash of MUSD 8.2 in Skyfire Labs, Inc., existing on the day of acquisition, has been netted in acquisitions in the statement of cash flows.
In 2Q 2013, Opera paid the final part of the FY 2012 earnout payment of MUSD 0.5 related to the Mobile Theory acquisition deal. The payment has been included in acquisitions in the statement of cash flows. Please see note 11 for more information.
In 1Q 2013, Opera paid the FY 2012 earnout payment of MUSD 1.9 related to the 4th Screen Advertising acquisition deal. The payment has been included in acquisitions in the statement of cash flows. Please see note 11 for more information.
In 1Q 2013, Opera paid the FY 2012 earnout payment of MUSD 0.6 related to the Handster acquisition deal. The payment has been included in acquisitions in the statement of cash flows. Please see note 11 for more information.
In 1Q 2013, a cash payment of MUSD 4.4, for an immaterial transaction, has been included in acquisitions in the statement of cash flows. At the same time, a second payment of MUSD 3.0 was set in escrow and is to be released if certain financial targets are achieved. Net cash of MUSD 1.9, existing on the day of acquisition, has been netted in acquisitions in the statement of cash flows.
****In 2013, MUSD 14.4 (2012: 3.4) of Opera's investment in product development was capitalized in the consolidated statement of financial position.
*****In 3Q 2013, Opera invested MUSD 5.7 in nHorizon Innovation, of which MUSD 2.8 was payable in 4Q 2013. This investment comes in addition to a loan of MUSD 2.3 granted in 4Q 2013. Please see note 8 for more for more information.
******As of December 31, 2013, the conversion discrepancy profit booked on cash and cash equivalents was MUSD -1.0, and the comparative number as of December 31, 2012, was MUSD 1.3.
The face value of the shares is NOK 0.02.
Other reserves consist of option costs booked according to the equity settled method and issued shares registered in the period after the current financial year.
The reserve for the Group's own shares comprises the face value cost of the Company's shares held by the Company.
The translation reserve consists of all foreign currency differences arising from the translation of the financial statements of foreign operations.
Other equity consists of all other transactions, including but not limited to, total recognized income and expense for the current period and excess value of the Company's own shares.
| Numbers in MUSD | Number of shares |
Share capital |
Share premium |
Other reserves |
Reserve for own shares |
Trans lation reserve |
Other equity |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance as of 12/31/2011 | 117.9 | 0.4 | 77.4 | 12.8 | 0.0 | -2.4 | 29.4 | 117.5 |
| Comprehensive income for the period |
||||||||
| Profit for the period | 17.0 | 17.0 | ||||||
| Other comprehensive income |
||||||||
| Foreign currency translation differences |
4.4 | 4.4 | ||||||
| Total comprehensive income for the period |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 4.4 | 17.0 | 21.4 |
| Contributions by and distributions to owners |
||||||||
| Dividend to equity holders | -4.0 | -4.0 | ||||||
| Own shares acquired | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Own shares sold | 1.3 | 0.0 | 3.4 | 3.4 | ||||
| Tax deduction loss own shares |
0.7 | 0.7 | ||||||
| Issue expenses | 0.0 | 0.0 | ||||||
| Tax deduction on equity bookings |
0.0 | 0.0 | 0.0 | |||||
| Share-based payment transactions |
4.8 | 0.0 | 4.8 | |||||
| Total contributions by and distributions to owners |
1.3 | 0.0 | 0.0 | 4.8 | 0.0 | 0.0 | 0.1 | 4.9 |
| Other equity changes | ||||||||
| Other changes | 0.0 | 0.0 | 0.0 | |||||
| Total other equity changes |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Balance as of 12/31/2012 | 119.2 | 0.4 | 77.3 | 17.6 | -0.0 | 2.0 | 46.4 | 143.8 |
Opera Software ASA (the"Company") is a company domiciled in Norway. The consolidated financial statements of the Company for the year ended December 31, 2013, comprise the Company, its subsidiaries Hern Labs AB, Opera Distribution AS, Netview Technology AS, and Opera Software International AS (which, in turn, include the subsidiaries Opera Software Korea Ltd, Opera Software Technology (Beijing) Co., Ltd, Opera Software Poland Sp. z o.o, Opera Software Singapore PTE. LTD., AdMarvel, Inc., LLC Opera Software (Russia), LLC Opera Software Ukraine, Opera Software Iceland ehf, Opera Web Technologies Pvt. Ltd, Handster, Inc., Mobile Theory, Inc., 4th Screen Advertising Ltd, 4th Screen Advertising Holdings Ltd, Skyfire Labs, Inc., Opera Software International US, Inc., Opera Mediaworks, LLC., Opera Mediawork Performance, LLC, OMWMSG, LLC, Opera Holdings Ireland Limited, Opera Mediaworks Ireland Limited, Opera Software Ireland Limited, Opera Mediaworks Ad Exchange, Inc, Opera Software Netherland BV, Opera Software Americas, LLC., Opera Commerce, LLC.), and the limited company Beijing Yuege Software Technology Service Co., Ltd. (of which Opera had full control) together referred to as the "Group". In 2013, Opera Software International AS had branches in Japan, Poland and Taiwan.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the EU and the interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements have also been prepared according to applicable regulations and paragraphs in the Norwegian Accounting Act and the relevant paragraph in the Securities Trading Act.
The consolidated financial statements are presented in USD, rounded to the nearest million. They are prepared on a historical cost basis.
Except for liabilities for derivative financial instruments, cash-settled, share-based payment arrangements and contingent considerations obtained in business combinations, no other assets or liabilities are stated at their fair value. Assets and liabilities in the business combinations are valued at fair value at the acquisition date according to IFRS 13. No subsequent changes in fair value are recognized except for impairment losses. Receivables and debts are assumed to have a market value equal to book value.
The preparation of consolidated financial statements, in conformity with IFRS, requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgments about carrying values of assets and liabilities. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
Judgments made by management in the application of IFRS, which have a significant effect on the consolidated financial statements and estimates, with a significant risk of material adjustment in the next year, are discussed in note 13.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
The accounting policies have been applied consistently by Group entities.
The Group has not changed its accounting policies during FY 2013 except for implementing IFRS 13. IFRS 13 is applicable from 2013. The new standard did not have significant effect for the group. Opera's assets and liabilities to be valued according to fair value are primarily level 3 valuations. Note 5 includes disclosures according to IFRS 13.
Opera does not have defined benefit plans for pensions. Hence, the amended IAS 19 has had no effect for the company.
From January 1, 2010, the Group has applied IFRS 3 Business Combinations (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively and has had no material impact on earnings per share.
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.
For acquisitions on or after January 1, 2010, the Group measures goodwill at the acquisition date as:
in the acquiree, plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquire; less
• The net recognized amount (generally, fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognized immediately in the profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in the profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not premeasured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognized in the profit or loss.
When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree's employees (acquirer's awards) and relate to past services, then all or a portion of the amount of the acquiree's replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree's awards and the extent to which the replacement awards relate to past and/or future service.
For acquisitions between January 1, 2004, and January 1, 2010, goodwill represents the excess of the cost of the acquisition over the Group's interest in the recognized amount (generally, fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognized immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities that the Group incurred in connection with business combinations, were capitalized as part of the cost of the acquisition.
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests, and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in the profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.
As part of its transition to IFRS, the Group elected to restate only those business combinations that occurred on or after January 1, 2004. A portion of the goodwill relates to the purchase of Hern Labs AB. As the goodwill existed before January 1, 2004, the goodwill is based on the amount recognized according to NGAAP. Goodwill from the purchase of Hern Labs AB booked on December 31, 2010, has the same value as goodwill on January 1, 2004. Intra-group balances, any unrealized gains and losses, or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.
Investments in associates are accounted for using the equity method (equity-accounted investees) and are recognized initially at cost. The cost of the investment includes transaction costs.
The consolidated financial statements include the Group's share of the profit or loss and other comprehensive income, after adjustments, to align the accounting policies with those of the Group from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.
When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
Accounting for acquisitions of non-controlling interests Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners, and, therefore, no goodwill is recognized as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.
Transactions in foreign currencies are translated at the foreign exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to functional currency at the foreign exchange rate prevailing on that date. Foreign exchange differences arising on translation are recognized in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate prevailing on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to USD at foreign exchange rates prevailing on the date the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising from consolidation, are translated to USD at foreign exchange rates prevailing on the balance sheet date. Revenues and expenses of foreign operations are translated to USD using the approximate foreign exchange rates prevailing on the transaction date. Foreign exchange differences arising from re-translation are recognized directly in a separate component of equity.
Property, plant and equipment are stated at cost, less accumulated depreciation (see below) and impairment losses (see accounting policy regarding impairment).
Where parts of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Leases, where the Group assumes substantially all the risks and rewards of ownership, are classified as finance leases. The Group has only operational lease contracts as of December 31, 2013. Expenses concerning the upgrading of leased premises have been capitalized and are amortized over the remaining term of the contract.
The Group recognizes, in the carrying amount of an item
of property, plant and equipment, the cost of replacing part of such an item when that cost is incurred, if it is probable that the future economic benefits embodied with the item will flow to the Group, and the cost of the item can be measured reliably. All other costs are recognized in the statement of comprehensive income as an expense as incurred.
Depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
| • Leasehold improvements | Up to 6 years |
|---|---|
| • Machinery and equipment | Up to 10 years |
| • Fixtures and fittings | Up to 5 years |
The residual value, if not insignificant, is reassessed annually.
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see above.
Goodwill is stated at cost, less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortized but is tested annually for impairment (see accounting policy regarding impairment).
Negative goodwill arising on an acquisition is recognized directly in the profit or loss.
Expenses related to research activities, which are expected to lead to scientific or technological knowledge and understanding, are recognized as costs in the statement of comprehensive income in the period they are incurred.
The Company develops specifically designed browsers for use in its customers' products. A fee is paid to the Company for this service, and this fee should cover the costs related to the development of these custom-made browsers. As the customer's payment covers the development costs, these costs are not reported in the statement of financial position.
Cost of building new features, together with significant and pervasive improvements of the core platform, provided that the significant and pervasive improvements of parts or main components of the core platform will generate probable future economic benefits, are capitalized as development costs and amortized on a straight-line, 3-year basis.
A significant portion of the work that engineering performs (beyond specifically designed browsers) is related to the
implementation of the ongoing updates that are required to maintain the browser's functionality. Examples of updates include "bug fixes", updates made to comply with changes in laws and regulations, and updates made to keep pace with the latest web trends. These costs are expensed as maintenance costs.
Other intangible assets, excluding deferred tax assets (see accounting policy regarding income tax) that are acquired by the Group, are stated at cost less accumulated amortization (see below) and impairment losses (see accounting policy regarding impairment).
Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are expensed as incurred.
Amortization is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible assets, unless such lives are indefinite. Goodwill and intangible assets with indefinite useful lives are systematically tested for impairment at each balance sheet date.
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are initially measured at fair value plus transaction costs, except for those non-derivative financial instruments classified as at fair value through profit or loss, which are initially measured at fair value without transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
From time to time, the Group holds derivative financial instruments to hedge its foreign currency exposures. Derivatives are recognized initially at fair value; associated transaction costs are recognized in the profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes in fair value are recognized in the profit or loss. No hedge accounting has been applied.
Trade and other receivables are stated at their cost less impairment losses (see accounting policy regarding impairment).
Cash and cash equivalents comprise cash balances and call deposits. Deposits in money market funds are included in cash and cash equivalents, as the funds can be withdrawn from the money market fund at will.
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated (see below).
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The cash-generating unit is considered to be the acquired companies except for Hern Labs AB, Netview Technology AS and Opera Software Poland Sp. z o.o. Please see note 8. Impairment losses are recognized in the statement of comprehensive income.
Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
When a decline in the fair value of an available-for-sale financial asset has been recognized directly in equity, and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in equity is recognized in the profit or loss even though the financial asset has not been derecognized. The amount of the cumulative loss that is recognized in the profit or loss is the difference between the acquisition cost and current fair value less any impairment loss on that financial asset previously recognized in the profit or loss.
The recoverable amount of the Group's assets is the greater of their fair value less cost of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss in respect of goodwill is not reversed.
With respect to other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount do not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
Dividends on shares are recognized as a liability in the period in which they are declared.
The Group book a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value. The carrying amount of the dividend is re-measured at each reporting date and at the settlement date, with any changes recognized directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognizes the difference, if any, between the carrying amounts of the assets distributed and the carrying amount of the liability in the profit or loss.
The purchase and sale of treasury shares have been recognized directly in equity.
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in the profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.
A provision for restructuring costs is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Further, operating losses are not provided for.
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits or when the Group recognizes costs for a restructuring. If benefits are not expected to be settled within 12 months of the end of the reporting period, then they are discounted.
The share option program allows Group employees to acquire shares of the Company. The fair value of options granted is recognized as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black & Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognized as an expense is adjusted to reflect the actual number of share options that vest, except where forfeiture is only due to share prices not achieving the threshold for vesting. For options granted between March 2007 and June 15, 2010, 20% of the options vest after one year, another 20% after two years, 25% after three years and the last 35% after four years. For options granted from June 16, 2010, 50% of the options vest after three years and the last 50% after four years. Option costs related to the options granted in 2007-2013 are accrued according to the principle of graded vesting. Those employees, who were granted options in 2007-2013, are responsible for the social security taxes. Opera pays the social security taxes but is reimbursed by the employee. The employees can exercise the options until three years after they have vested. This condition is included in the calculation of the fair value of the options.
A provision is recognized in the statement of financial position when the Group has a current existing legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The fair value of a contingent consideration is calculated using the income approach based on the expected payment amounts and their associated probabilities (i.e., probability-weighted). Since a part of the contingent consideration is long-term in nature, it is discounted to present value.
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
Trade and other payables are stated at cost.
The Company has the following primary sources of revenue:
Opera's main revenue recognition principles are as follows: Opera only recognizes revenues when: (i) persuasive evidence of an arrangement exists (signed agreement), (ii) delivery of the product and/or service has occurred, (iii) revenue is fixed and determinable, and the amount of revenue can be measured reliably and (iv) collection is reasonably assured.
Customer device agreements typically involve multiple sources of revenue, including license/royalty income, development fees and maintenance and support. For customer contracts where development and customization have already been completed, or, if no development or customization is required, Opera typically recognizes license/royalty revenue in the same period as the customer ships the devices with Opera preinstalled. In cases where Opera is not preinstalled, Opera recognizes license/royalty income when the customer or customer's customer downloads the Opera browser to its device.
revenue. Where there is no customization, no significant customization of the browser is required, or, if there is no porting or no significant engineering is required to port the browser to the operating system, the prepaid minimum license/royalty fees are typically recognized when the master copy of the product is delivered to the customer. For certain agreements, a customer commits on contract signature to pay, on an installment basis, for a fixed or unlimited number of licenses over an extended time period. In these cases, provided that Opera has no substantive customization obligations attached to these committed licenses, Opera recognizes revenues on these licenses in the accounting period in which the installment payment is due from the customer, as these contracts include extended payment terms.
In some contracts, the customer prepays for a minimum number of copies of the customized browser. Opera receives this license/royalty fee irrespective of whether the customer actually uses or ships the number of minimum licenses. Where there is significant customization of the browser or significant engineering is required to port the browser to the operating system, the prepaid minimum license/royalty fees are recognized on a percentage-of-completion basis along with the development fee Development fees are recognized in the month the service is provided. Development fees, or non-recurring engineering, where the Company customizes the browser for its customers and/or ports the browser to an operating system, typically spans a number of accounting periods. Consequently, a portion of the revenue is taken each period using the percentage of completion method. This calculation is made by taking the total number of hours delivered during an accounting period divided by the total estimated hours to fulfill the terms of the contract. The total estimated hours to fulfill the contract are constantly monitored by the Company and updated periodically
Opera also enters into customer agreements for a customer-branded or joint customer/Opera "co-branded" version of our Opera Mini product offering (typically with operators), where license/royalty income is generated over a defined period predicated on the number of active users of the browser in that period (where an active user is generally defined as a user who uses the Opera Mini browser to access the internet at least once in that period). Opera also enters into agreements with operators where a portion of revenue generated by the operator from data services and content is shared with Opera. For these revenue-share agreements, Opera typically hosts the Opera Mini solution and recognizes the revenue according to revenue-share reports provided by the operator. For the active user agreements, Opera typically hosts the Opera Mini solution and recognizes the revenue based on the active user information the Company has available from its own computer servers. Opera also enters into customer agreements where the customer pays for delivery of an unlimited number of copies of active user licenses in a limited time frame with no future obligations for Opera. These revenues are recognized on an installment basis, as these contracts include extended payment terms. Some customers also pay a fee that covers the set-up of the co-branded Opera Mini product and the right to use the co-branded product technology, links, trademarks, etc., as specified in the agreements. These revenues are typically recognized ratably over the term of the agreements.
where appropriate. The portion of income not yet invoiced to the customer is presented as unbilled revenue. Percentage of completion calculations are made using the contract currency and converted to USD.
Maintenance, support and hosting revenues are recognized ratably over the term of the maintenance, support and hosting agreements with the customer.
Search revenue is generated when an Opera user conducts a qualified search using an Opera search partner (such as Google and Yandex) through the built-in combined address and search bar provided in Opera's desktop and mobile browsers.
Opera recognizes revenue based on the activity of mobile users viewing ads through Opera-owned properties, developer applications and mobile websites. Our revenue is recognized when our advertising services are delivered based on the specific terms of the advertising contract, which are commonly based on the number of ads delivered, or views, clicks or actions by users on mobile advertisements. At that time, our services have been provided, the fees charged are fixed or determinable, persuasive evidence of an arrangement exists, and collectability is reasonably assured.
Opera sells advertising on several bases: CPM (cost per thousand), where Opera charges advertisers and recognizes revenue based on when an ad is delivered to a consumer; CPC (cost per click), where Opera charges advertisers and recognizes revenue for each ad clicked on by a consumer; and CPA (cost per action), where Opera charges advertisers and recognizes revenue each time a consumer takes a specified action, such as downloading an application. The vast majority of our revenue today is earned on a CPM basis, although Opera expects advertising revenue delivered on a CPC and CPA basis to increase in the future.
For the revenue generated through Opera-owned properties, revenue is reported on a gross basis, as Opera is the principal in our transactions with advertisers. Opera is responsible for identifying and contracting with third-party advertisers, establishing the selling prices of the advertisements sold, and performing all billing and collection activities, including retaining credit risk, as well as bearing sole responsibility for fulfillment of the advertising. Accordingly, Opera acts as the principal in these arrangements and, therefore, reports revenue earned and costs incurred related to these transactions on a gross basis.
In the normal course of business, Opera acts as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether Opera is acting as the principal or an agent in our transactions with advertisers. The determination of whether Opera is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. While none of the factors individually are considered presumptive or determinative, in reaching our conclusions on gross versus net revenue recognition, Opera places the most weight on the analysis of whether Opera is the primary obligor in the arrangement. For agreements where Opera has a contractual relationship with both the publisher and the associated advertisement supplier, Opera is responsible for identifying and contracting with third-party advertisers, establishing the selling prices of the advertisements sold and performing all billing and collection activities, including retaining credit risk, as well as bearing sole responsibility for fulfillment of the advertising. Accordingly, Opera acts as the principal in these arrangements and, therefore, reports revenue earned and costs incurred related to these transactions on a gross basis. For agreements where the publisher has a direct contractual relationship with the advertiser, revenue is recognized on a net basis, as Opera is not the primary obligor and does not assume the fulfillment and credit risk.
Opera also offers additional services to assist in both forecasting and/or transmission of information between publishers and advertisers. Opera recognizes revenue once our services have been provided, the fees charged are fixed or determinable, persuasive evidence of an arrangement exists and collectability is reasonably assured.
Content revenue is generated when a user purchases a premium application from the Opera-branded Opera Mobile Store (OMS) or a white-label, operator-controlled version of the mobile store. When a transaction occurs in OMS, Opera collects the payment and shares a percentage of the revenue with the developer. When a transaction occurs in an operator-controlled version of the mobile store, two payment methods will exist. The user may pay using the Opera Payment Exchange, in which case Opera would collect and share a percentage of the revenue with both the operator and the developer, or the user may use a form of carrier billing, where the operator would collect the payment and share a portion of the revenue with Opera, who would in turn share a percentage of revenue with the developer. The revenue will occur on a transaction basis, and the sales are booked as income in the period in which the transaction occurs.
Payment revenue is generated through the Opera Payment Exchange (OPX), when a user completes a transaction using a payment service that was made available via OPX. Opera generally receives a percentage of the transaction value, and the income is booked in the period in which the transaction occurs.
Subscription revenue was generated by our FastMail email service. FastMail was sold in 2013. FastMail provided both a paid premium subscription based email service and a free email service. For FastMail's paid premium, subscription-based email service, the company offers subscription based options to customers for a range of periods, generally one year, all of which require payment in advance. Revenue is recognized on a straight-line basis over the period in which the subscription relates. That portion of revenue recorded as received in advance is carried on the balance sheet as deferred income.
Some agreements are bundled agreements, where Opera receives a fee that covers development, licenses, maintenance, and other services. The total fee is allocated to the different elements, if measurable, and the allocated fee is recognized according to the principles described above.
Cost of goods sold comprises publisher costs and the cost of licenses purchased from third-party suppliers. Publisher costs consist of the agreed-upon payments Opera makes to publishers for their advertising space, in which we deliver mobile ads. These payments are typically determined in advance as either a fixed percentage of the advertising revenue we earn from mobile ads placed on the publisher's application or website or as a fixed fee for that ad space. Opera recognizes publisher cost at the same time we recognize the associated revenue. License costs are the costs of licenses purchased from third-party suppliers.
Material income and costs, which are not related to the normal course of business, are classified as other operating income (cost).
Payments made under operating leases are recognized in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognized in the statement of comprehensive income as an integral part of the total lease expense.
Interest income is recognized in the statement of comprehensive income as it accrues, using the effective interest method.
Dividend income is recognized in the statement of comprehensive income on the date upon which the entity's right to receive payments is established.
Income tax on the profit or loss for the year comprises current and deferred taxes. Income tax is recognized in the statement of comprehensive income, except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Other finance income and costs comprise foreign exchange gains and losses and contingent consideration, which are recognized in the statement of comprehensive income. Overview The Group has exposure to the following risks from its use of financial instruments:
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting or taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is only recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend.
Taxes paid abroad for the parent company will be deducted in Norwegian taxes if the Company has taxes payable in Norway. If Opera has no Norwegian taxes payable, the taxes paid abroad will be carried forward as a deductible in future taxes payable.
This note presents information about the Group's expo sure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk and the Group's management of capital. Further quantita tive disclosures are included throughout these consolidat ed financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk manage ment framework.
-
The Group's risk management policies have been estab lished to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.
Credit risk is the risk of financial loss that exists due to the potential failure of a customer or counterparty meeting their contractual obligations. Credit risk arises principally from the Group's customer receivables.
The Group's exposure to credit risk is primarily influenced by the characteristics of each customer. The majority of the Group's customers are large global companies. Each new customer is analyzed individually for creditworthi ness, and large customers are arranged by region and monitored by the account executive responsible for that region. The guidelines for extending credit to customers are determined by management and the credit risk expo sure is evaluated continuously.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individual exposures. The provision for bad debt is determined case by case upon evaluation of each customer in addition to a collective loss component. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient liquid ity to meet its liabilities when due, under both normal and abnormal circumstances, without incurring unacceptable losses or risking damage to the Group's reputation.
The Board has instructed management to invest surplus cash in instruments with low credit and liquidity risk. In vestments are only made in funds operated by institutions rated by S&P or Moody's, with a minimum rating of BBB or Baa2, respectively.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk man agement is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
The majority of the financial risk that the Group carries, as a result of its subsidiaries, relates to foreign exchange fluctuations. The Group is exposed to currency risk on both sales and purchases.
In order to achieve the Company's aggressive, long-term objectives, the policy has been to maintain a solid equi ty-to-asset ratio and to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.
The Company has issued options to its employees in accordance with its objective that employees shall hold company shares.
From time to time, the Group purchases its own shares on the market, as determined by the Board of Directors, if mandated by the General Assembly. These shares are primarily intended to be used for issuing shares under the Group's share option program.
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary share holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attribut able to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which include share options granted to employees.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and ex penses that relate to transactions with any of the Group's other components. Opera's chief operating decision mak ers are members of the Executive Team. The Executive Team meets regularly to review the period's assets, liabili ties, revenues and costs for the Group, as well as to make decisions about how resources are to be allocated based on this information.
A number of new standards, amendments to standards and interpretations are not yet effective for the year end - ing December 31, 2013, and have not been applied in preparing these consolidated financial statements.
None of these is expected to have a significant effect on the consolidated financial statements of the Group.
| Non-current assets [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Non-current assets located in Norway | 25.3 | 17.8 |
| Non-current assets located in foreign countries | 191.2 | 86.4 |
| Total | 216.5 | 104.3 |
The Group's business activities stem from browser-related sales (i.e., revenue generated from Opera's owned-and-operated properties, such as license, search, and advertising revenue) and advertising revenue generated from the Opera Advertising Network (i.e., non-Opera-owned-and-operated properties) primarily from Opera's AdMarvel, Mobile Theory, 4th Screen Advertising and Opera Mediaworks subsidiaries.
| Opera's chief operating decision makers are members of | ||||
|---|---|---|---|---|
| the Executive Team. The Executive Team meets regular |
| Revenue by region [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| EMEA | 104.0 | 78.1 |
| Americas | 166.3 | 107.0 |
| Asia Pacific | 29.9 | 31.0 |
| Total | 300.1 | 216.0 |
The geographical revenue breakdown reflects revenues from external customers attributed to the entity's country of domicile. Consequently, the revenue breakdown reflects the location of Opera's customers and partners. Because the products of Opera's customers and partners are distributed globally, the breakdown above does not accurately reflect where Opera's derivative products are actually used.
In 2013, Opera had sales to one customer that account-
The breakdown above reflects non-current assets (other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts) located in Norway and located in all foreign countries.
Assets located in the United States account for MUSD
ly to review the period's assets, liabilities, revenues and costs for the Group as a whole, as well as to make decisions about how resources are to be allocated based on this information.
Members of the Executive Team are specified in note 3.
Based on the above, Opera has determined that it has one segment. Please see note 1 for a definition of products andservices for each reportable segment.
ed for more than 10% of total Group revenues. The customer's FY 2013 revenue ranged between MUSD 35 and MUSD 40 in total. Revenue attributed to customers domiciled in the United States amounted to MUSD 161.7 (2012: 104.0).
Revenues attributed to Norway for 2013 were MUSD 0.1 (2012: 0.2), and revenue attributed to all foreign countries in total were MUSD 300.1 (2012: 215.9).
167.2 (2012: 70.6) of the total non-current assets.The vast majority of the value is related to the acquisitions described in more details in note 8.
A more detailed overview of the assets domiciled in Norway is provided in the "Statement of financial position" for the parent company.
| Revenue customer type [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Mobile Operators | 62.1 | 41.7 |
| Mobile Consumers | 37.9 | 19.5 |
| Mobile Publishers and Advertisers | 119.1 | 54.1 |
| Desktop Consumers | 60.9 | 67.5 |
| Device OEMs | 18.3 | 28.2 |
| Other | 1.7 | 4.9 |
| Total | 300.1 | 216.0 |
| Cost of goods sold [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Publisher cost | 58.1 | 24.9 |
| License cost | 0.0 | 0.0 |
| Total | 58.2 | 24.9 |
Publisher cost consists of the agreed-upon payments we make to publishers for their advertising space in which we deliver mobile ads. These payments are typically determined in advance as either a fixed percentage of the advertising revenue we earn from mobile ads placed on the publisher's application or website or as a fixed fee for that ad space. We recognize publisher cost at the same time we recognize the associated revenue. License cost is cost from the purchase of licenses from third-party suppliers.
| otal . |
|---|
| ther revenue |
| Subscription |
| Application and content |
| Advertising |
| search |
| Maintenance, support and hosting |
| evelopment fees |
| .icenses/royalties |
| Total | |
|---|---|
| Other | |
| Device OEMs | |
| Desktop Consumers | |
| Mobile Publishers and Advertisers | |
| Mobile Consumers | |
| Mobile Operators |
| Revenue type [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Licenses/royalties | 84.2 | 67.3 |
| Development fees | 7.6 | 10.8 |
| Maintenance, support and hosting | 7.7 | 6.7 |
| Search | 55.3 | 62.6 |
| Advertising | 142.7 | 63.1 |
| Application and content | 1.6 | 4.3 |
| Subscription | 1.1 | 1.2 |
| Other revenue | 0.0 | 0.1 |
| Total | 300.1 | 216.0 |
Mobile Operators: Opera is a trusted partner for operators globally. The Company currently offers four major cloud-based solutions and services to Operators worldwide: (i) Operator/co-branded versions of Opera Mini, whereby Operators are able to offer their mass-market subscribers content compression, fast internet download speeds, convenient access to operator portal services in order to drive incremental revenue and lower-priced data plans and data packages, capitalizing on the up to 90% data compression that Opera's cloud services enable; (ii) the Rocket Optimizer™ solution, which allows mobile operators to leverage cloud computing to optimize and compress video and other multimedia traffic on crowded mobile towers, including 3G and 4G LTE networks, enabling operators to both boost the capacity of their networks by up to 60% and offer better network performance and quality to their subscribers; (iii) the Horizon™ solution, a mobile browser extension and toolbar platform that allows users to personalize their smartphone browser and operators to gain new monetization opportunities, such as advertising; and (iv) Opera Web Pass, which allows users to easily buy time-based or content-based mobile data
packages through a simple, one-click purchase, similar to how users buy apps today, enabling operators to both offer a broad array of personalized data package alternatives for their subscribers and increase average revenue generated per subscriber.
Mobile Consumers (Opera-owned-and-operated properties): Opera has around 270 million mobile users of consumer products on a monthly basis. Opera is placing a significant emphasis on developing and expanding its owned-and-operated properties and capitalizing on its extensive mobile consumer user base. These owned-and-operated properties include the Speed Dial page, the Smart Page, the Opera Mobile Store and the Discover feature. These Opera-owned-and-operated properties are expected to be monetized primarily via mobile advertising, mobile search and mobile applications.
Mobile Publishers and Advertisers (Opera Network Members): Opera's goal is to power the mobile advertising ecosystem through innovative and differentiated mobile advertising services and technology solutions, targeting premium and performance advertisers, ad agencies, publishers and developers. Opera's ultimate mission is both to help publishers increase revenue from their mobile properties and content and advertisers reach and acquire potential customers.
Desktop Consumers: Since the first public release in 1995, Opera has continuously delivered browser innovation to desktop PCs. Opera's desktop browser provides its users with a safe, efficient and enjoyable browsing experience. Today, the vast majority of Opera's desktop users are in the Russia/CIS region and in the emerging markets. Opera is particularly focused on gaining users in regions where it already has a strong base of users, such as Russia.
Global Device Original Equipment Manufacturers (Device OEMs): With the Opera Devices Software Developer Kit (SDK), device manufacturers are able to offer not only web browsing capabilities and full internet access to their operator and consumer end customers, but also customized web applications that are accessible from the home screen of the device. Moreover, with the Opera Devices SDK, device manufacturers are able to use their own (and third-party) developers to enable full web browsing, create user interfaces, widgets and menu systems using web technologies, such as HTML5 and CSS, HbbTV and OIPF, while accelerating time to market for new consumer electronic devices.
| Wage costs [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Salaries/bonuses | 74.9 | 70.2 |
| Social security cost | 10.4 | 9.4 |
| Pension cost | 2.9 | 2.9 |
| Share-based remuneration including social security cost | 4.0 | 3.6 |
| Other payments | 9.5 | 6.0 |
| Consultancy fees for technical development | 7.0 | 2.5 |
| Total | 108.6 | 94.7 |
| Average number of employees | 985 | 854 |
In January 2010, Opera appointed Mr. Lars Boilesen as the new Chief Executive Officer. He has waived his rights under Section 15-16 of the Norwegian 2005 Act related to employees' protection, etc. As compensation, Mr. Boilesen is entitled to a termination amount of two years' base salary if the employment is terminated by the Company.
The company has incorporated the requirements with regards to Obligatorisk Tjeneste Pensjon (OTP). to the CEO, the Chairman of the Board or their related parties.
As of December 31, 2013, there was no existing severance agreement between Opera and the Chairman of the Board.
| Audit fees [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Statutory audit | 0.3 | 0.4 |
| Assurance services | 0.0 | 0.0 |
| Tax advisory fee | 0.0 | 0.0 |
| Other services | 0.1 | 0.1 |
| Total | 0.5 | 0.5 |
Other services include services from KPMG Law.
The Group has not given any loans or security deposits The total fees billed by independent auditors during 2013 was MUSD 0.5 (2012: 0.5). This is broken down as follows:
A bonus program exists for the senior Executive Team at Opera. For each individual executive, there is a limited amount of bonus that can be achieved. The size of the bonus payment is dependent on actual company performance compared to a set of predefined targets.
All 2013 bonuses for senior executives have been accrued for in the accounts. Bonuses will be paid in 2014.
| [In thousands of options] | Weighted av erage exercise price 2013 (NOK) |
Number of options 2013 |
Weighted av erage exercise price 2012 (NOK) |
Number of options 2012 |
|---|---|---|---|---|
| Outstanding at the beginning of the period |
26.68 | 9 577 | 23.24 | 9 391 |
| Terminated (employee terminations) | 34.64 | 314 | 25.10 | 156 |
| Forfeited during the period | 0 | 0 | 0 | 0 |
| Expired during the period | 26.00 | 3 | 0 | 0 |
| Exercised during the period | 24.79 | 3 035 | 18.05 | 1 552 |
| Granted during the period | 35.05 | 885 | 37.97 | 1 894 |
| Outstanding at the end of the period | 7 109 | 9 577 | ||
| Exercisable at the end of the period | 1 226 | 2 210 |
The Company has established a stock option program for eligible employees.
The strike price of non-vested options was adjusted for the dividend of NOK 0.22 that was paid out following the resolution of the Annual General Meeting.
On June 5, 2012, the Board of Directors granted 400,000 options each to executives Erik Harrell and Andreas Thome. Rikard Gillemyr was granted 250,000 options. In all, 200,000 of the options granted to Erik Harrell and Andreas Thome, and 50,000 of the options granted to Rikard Gillemyr, were subject to approval from the AGM. The vesting period started from June 6, 2012, and the options are originally booked as an option liability and are included in total current liabilities. These options were approved by the AGM in June 2013.
The Annual General Meeting held on June 14, 2011, passed the following resolutions:
a) The maximum number of options to be granted during 2011, 2012, 2013 and 2014 is 11,950,000. This represents slightly less than 10% of the registered share capital of the Company. However, options cannot be granted if the aggregate of all issued, un-exercised and not-terminated options represents more than 10% of the then-registered share capital of the Company.
The fair value of services received in return for stock options granted is measured by using the Black & Scholes option pricing model.
The expected volatility is based on historic volatility (calculated using the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information.
Share options are granted under service conditions, not market-based conditions. Such conditions are not taken intoaccount in the grant date fair-value measurement. There are no market conditions associated with the share option grants. For both 2013 and 2012, an annual average
Options that have not yet vested shall be adjusted for any dividend paid out during the vesting period.
| Fair value of share options and assumptions [Numbers in NOK] | 2013 | 2012 |
|---|---|---|
| Fair value at measurement date (average per option) | 12.72 | 13.66 |
| Expected volatility (weighted average) | 45.00 | 45.00 |
| Option life (adjusted for expectations of early exercise) | 5.00 | 4.62 |
| Expected dividends | 0.00 | 0.00 |
| Risk-free interest rate (based on national government bonds) | 1.90 | 1.40 |
b) No employee can be granted options annually that in value exceed 200% of that employee's base salary. The value is to be based on valuation principles for options as applied under IFRS and in accordance with Opera Software's financial statements.
c) The options are to be granted in accordance with the Company's standard option agreement as approved by the Ordinary General Meeting in 2010, which means that the vesting structure is 50% after 3 years and 50% after 4 years, with a strike price equal to the market price at grant.
d) No changes are made to the already approved standard option agreement. The proposal does not constitute any authority for the Board to change the terms in the standard agreement, including strike price and time of vesting, for the options that may be granted, and does not include the possibility to grant options to Board members.
After June 14, 2011, and up to December 31, 2013, 4,548,850 options have been granted under the program.
On June 4, 2013, the General Meeting decided to give the Board of Directors the authority to increase the share capital. Please see note 9 for more information.
On June 4, 2013, the General Meeting decided to authorize the Board of Directors to buy back Opera shares. Please see note 9 for more information.
The number and weighted average exercise price of share options are as follows:
attrition rate of 15% is used. This average attrition rate, and the employees responsibility for paying the Company's contributions related to the options, are taken into consideration when estimating the cost of the options in accordance with IFRS 2. Given that employees have the right to exercise their options one or three years after the vesting date (depending on when the options were granted), the estimate is based on an assumption that the employees, on average, are exercising their options 18 months after the vesting date.
The total number of options granted in 2013 was 1,335,000 (2012: 1,893,850).
The table below shows the number of options issued to employees at various strike prices and exercise dates.
| Total outstanding options | Vested options | ||||
|---|---|---|---|---|---|
| Exercise price [In thousands of options] |
Outstanding options per 12/31/2013 |
Weighted average remaining lifetime |
Weighted average exercise price (NOK) |
Vested options 12/31/2013 |
Weighted av erage exercise price (NOK) |
| 10.00 - 12.30 | 87.50 | 0.92 | 11.99 | 87.50 | 11.99 |
| 12.30 - 15.00 | - | - | - | - | - |
| 15.00 - 20.00 | 711.90 | 1.65 | 19.10 | 711.90 | 19.10 |
| 20.00 - 25.00 | 1 174.20 | 4.17 | 21.32 | 272.20 | 21.55 |
| 25.00 - 30.00 | 2 479.51 | 4.11 | 27.45 | 134.50 | 27.47 |
| 30.00 - 35.00 | 965.00 | 6.29 | 34.47 | 20.00 | 32.10 |
| 35.00 - 40.00 | 1 661.17 | 5.92 | 37.81 | - | - |
| 40.00 - 45.00 | 30.00 | 6.14 | 44.18 | - | - |
| Total | 7 109 | 4.56 | 28.86 | 1 226 | 20.27 |
Exercise price = strike price
The table below shows the date, number and achieved selling price of options exercised.
| Date of exercise [In thousands of options] | Number of exercised options |
Achieved selling price (NOK) |
|---|---|---|
| 1/11/2013 | 206 | 34.10 |
| 3/13/2013 | 224 | 38.37 |
| 6/17/2013 | 30 | 45.00 |
| 6/18/2013 | 511 | 45.18 |
| 9/10/2013 | 1 228 | 57.31 |
| 12/6/2013 | 836 | 78.05 |
| Compensation to executive management 2013 [Numbers in MUSD] |
Remu neration |
Salary | Bonus | Other compen sation |
Pension compen sation |
Benefit exercised options |
Total compen sation |
|---|---|---|---|---|---|---|---|
| Executives | |||||||
| Lars Boilesen, | |||||||
| Chief Executive Officer | 0.61 | 0.49 | 0.05 | 0.10 | 5.53 | 6.79 | |
| Erik C. Harrell, Chief Financial Officer/Chief Strategy Officer |
0.40 | 0.36 | 0.09 | 0.04 | 2.61 | 3.50 | |
| Rikard Gillemyr, EVP Product Development |
0.31 | 0.19 | 0.00 | 0.03 | 1.05 | 1.58 | |
| Tove Selnes, EVP Human Resources |
0.27 | 0.11 | 0.04 | 0.03 | 0.38 | 0.83 | |
| Andreas Thome, EVP Commercial and Operations |
0.31 | 0.29 | 0.00 | 0.03 | 1.22 | 1.86 | |
| Mahi de Silva, EVP Consumer Mobile |
0.27 | 0.31 | 0.00 | 0.04 | 0.62 | ||
| Jeffrey S. Glueck, EVP Operator Solutions, director from March 14, 2013 |
0.23 | 0.23 | |||||
| The Board of Directors | |||||||
| Arve Johansen, Chairman | 0.10 | 0.05 | 0.15 | ||||
| Gregory Gerard Coleman, Board Member |
0.09 | 0.09 | |||||
| Kari Stautland, Board Member | 0.05 | 0.13 | 0.18 | ||||
| Audun Wickstrand Iversen, Board Member |
0.05 | 0.03 | 0.08 | ||||
| Marianne Blystad, Board Member | 0.04 | 0.04 | |||||
| Christian Mauricio Uribe Espinoza, Employee Representative |
0.01 | 0.14 | 0.00 | 0.01 | 0.04 | 0.20 | |
| Krystian Kolondra, Employee Representative from February 1, 2013 |
0.02 | 0.12 | 0.00 | 0.00 | 0.08 | 0.21 | |
| Erik Möller, Employee Representa tive from February 1, 2013 |
0.02 | 0.09 | 0.01 | 0.12 | |||
| The Nomination Committee | |||||||
| Jakob Iqbal, Chairman | 0.01 | 0.01 | |||||
| Michael Tetzschner, Member | 0.01 | 0.01 | |||||
| Nils Foldal, Member | 0.01 | 0.01 | |||||
| Total | 0.39 | 2.75 | 1.76 | 0.19 | 0.25 | 11.18 | 16.52 |
| Presented above are the actual bonuses paid out in 2013, which are based on the 2012 results. Bonuses earned, but unpaid in 2013, have been excluded from the table. |
from the Company or any business owned by the Company, ex cept that mentioned above. |
||||||
| Other remuneration mentioned in the Norwegian Accounting Act § 7-31b has no relevance for the Company. |
normal function. | There has been no significant additional compensation given to directors with regard to special services performed outside of their |
The Executive Team is included in the Company's employee pension scheme, which is a defined contribution plan.
There has been no compensation or other economic benefit provided to any member of the Executive Team or Board of Directors Christian Mauricio Uribe Espinoza was re-elected as the Company's Employee Representative in 2012. Effective from February 1, 2013, Stig Halvorsen and Karl Anders Øygard have stepped down as Employee Representatives, while Erik Möller and Krystian Kolondra have joined the Board of Directors as Employee Representatives.
Presented above are the actual bonuses paid out in 2012, which are based on the 2011 results. Bonuses earned, but unpaid in 2012, have been excluded from the table.
| [Numbers in MUSD] | Remu neration |
Salary | Bonus | Other compen sation |
Pension compen sation |
Benefit exercised options |
Total compen sation |
|---|---|---|---|---|---|---|---|
| Executives | |||||||
| Lars Boilesen, | |||||||
| Chief Executive Officer | 0.57 | 0.46 | 0.05 | 0.01 | 0.70 | 1.79 | |
| Erik C. Harrell, Chief Financial Officer/Chief Strategy Officer |
0.29 | 0.28 | 0.00 | 0.01 | 0.90 | 1.48 | |
| Rikard Gillemyr, EVP Product Development |
0.27 | 0.12 | 0.00 | 0.01 | 0.24 | 0.64 | |
| Tove Selnes, EVP Human Resources |
0.24 | 0.07 | 0.04 | 0.01 | 0.02 | 0.38 | |
| Andreas Thome, EVP Sales & Marketing |
0.28 | 0.28 | 0.00 | 0.01 | 0.05 | 0.62 | |
| Mahi de Silva, EVP Consumer Mobile |
0.24 | 0.22 | 0.46 | ||||
| Tom Christian Gotschalksen, EVP Mobile Services from June 1, 2012 |
0.13 | 0.02 | 0.02 | 0.01 | 0.17 | ||
| The Board of Directors | |||||||
| Arve Johansen, Chairman | 0.10 | 0.00 | 0.10 | ||||
| Alberto Torres, Board Member until November 13, 2012 |
0.10 | 0.00 | 0.10 | ||||
| Gregory Gerard Coleman, Board Member from November 14, 2012 |
0.02 | 0.02 | |||||
| Kari Stautland, Board Member | 0.05 | 0.00 | 0.05 | ||||
| Audun Wickstrand Iversen, Board Member |
0.05 | 0.02 | 0.07 | ||||
| Marianne Blystad, Board Member | 0.04 | 0.02 | 0.06 | ||||
| Stig Halvorsen, Employee Representative |
0.01 | 0.14 | 0.00 | 0.01 | 0.01 | 0.16 | |
| Karl Anders Øygard, Employee Representative |
0.01 | 0.14 | 0.00 | 0.01 | 0.04 | 0.20 | |
| Christian Mauricio Uribe Espinoza, Employee Representative from |
|||||||
| June 6, 2012 | 0.00 | 0.13 | 0.00 | 0.01 | 0.01 | 0.15 | |
| Charles McCathieNevile, Employ ee Representative to June 5, 2012 |
0.00 | 0.08 | 0.00 | 0.00 | 0.01 | 0.09 | |
| The Nomination Committee | |||||||
| Jakob Iqbal, Chairman | 0.01 | 0.01 | |||||
| Michael Tetzschner, Member | 0.01 | 0.01 | |||||
| Nils Foldal, Member | 0.01 | 0.01 | |||||
| Total | 0.40 | 2.49 | 1.44 | 0.12 | 0.08 | 2.02 | 6.56 |
There are no existing agreements regarding the dispensation of loans or security deposits to key personnel, members of the board or their related parties.
The following table shows the number of options held by executive management.
| [In thousands of options] | Opening balance | Issued options | Terminated options | Executed options | Average exercise price — A (NOK) |
Closing balance | Weighted average exer cise price — B (NOK) |
Weighted average lifetime — C |
Value of outstanding options (MUSD) |
IFRS 2 cost for the period (MUSD) |
|---|---|---|---|---|---|---|---|---|---|---|
| Executives | ||||||||||
| Lars Boilesen, Chief Executive Officer |
1 500 | 800 | 18.2 | 700 19.14 | 1.63 | 6.4 | 0.4 | |||
| Erik C. Harrell, Chief Financial Officer/Chief Strategy Officer |
923 | 311 | 14.9 | 613 32.86 | 5.58 | 4.4 | 0.4 | |||
| Rikard Gillemyr, EVP Product Development |
785 | 123 | 11.7 | 663 27.05 | 4.54 | 5.1 | 0.4 | |||
| Mahi de Silva, EVP Consumer Mobile |
131 | 43 | 28.6 | 88 28.40 | 0.51 | 0.8 | 0.1 | |||
| Tove Selnes, EVP Human Resources |
179 | 50 | 72 | 22.2 | 158 27.75 | 5.51 | 1.3 | 0.1 | ||
| Jeffrey S. Glueck, EVP Operator Solutions |
||||||||||
| Tom Christian Gotschalksen, EVP Mobile Services |
150 | 150 37.58 | 5.93 | 1.0 | 0.1 | |||||
| Andreas Thome, EVP Com mercial and Operations |
972 | 220 | 24.0 | 753 31.88 | 5.33 | 5.5 | 0.5 | |||
| Total | 4 640 | 50 | - 1 567 | 3 123 | 24.6 | 1.8 |
A — average exercise price for options executed in the financial year
B — average exercise price for the number of options held by the end of the financial year
Other remuneration mentioned in the Norwegian Accounting Act § 7-31b has no relevance for the Company.
The Executive Team is included in the Company's employee pension scheme, which is a defined contribution plan. There has been no compensation or other economic benefit provided to any member of the Executive Team or Board of Directors from the Company or any business owned by the Company, except that mentioned above.
There has been no significant additional compensation given to directors with regard to special services performed outside of their normal function.
A — average exercise price for options executed in the financial year
B — average exercise price for the number of options held by the end of the financial year
| [In thousands of options] | Opening balance | Issued options | Terminated options | Executed options | Average exercise price — A (NOK) |
Closing balance | Weighted average exer cise price — B (NOK) |
Weighted average lifetime — C |
Value of outstanding options (MUSD) |
IFRS 2 cost for the period (MUSD) |
|---|---|---|---|---|---|---|---|---|---|---|
| Executives | ||||||||||
| Lars Boilesen, Chief Executive Officer |
1 750 | 250 | 17.0 1 500 19.34 | 2.50 | 3.0 | 0.4 | ||||
| Erik C. Harrell, Chief Financial Officer/Chief Strategy Officer |
773 | 400 | 250 | 11.7 | 923 27.20 | 5.17 | 1.2 | 0.2 | ||
| Rikard Gillemyr, EVP Product Development |
605 | 250 | 70 | 12.1 | 785 25.14 | 4.80 | 0.1 | 0.2 | ||
| Mahi de Silva, EVP Consumer Mobile |
175 | 44 | 28.6 | 131 28.62 | 1.01 | 0.1 | 0.1 | |||
| Tove Selnes, EVP Human Resources |
187 | 8 | 24.4 | 179 24.10 | 4.87 | 0.2 | 0.1 | |||
| Tom Christian Gotschalksen, EVP Mobile Services |
150 | 150 37.80 | 6.93 | 0.0 | 0.0 | |||||
| Andreas Thome, EVP Sales & Marketing |
591 | 400 | 19 | 15.4 | 972 30.56 | 5.65 | 0.6 | 0.3 | ||
| Total | 4 081 1 200 | - | 641 | 4 640 | 5.2 | 1.3 |
There are no existing agreements regarding the dispensation of loans or security deposits to key personnel, members of the board or their related parties.
The following table shows the number of options held by executive management. Name
| [In thousands of shares and options] | Commission | Shares | Options | Weighted average strike price (NOK) |
Total |
|---|---|---|---|---|---|
| Arve Johansen | Chairman | 70 | 80 | 30.58 | 150 |
| Kari Stautland * | Board Member | 9 512 | 30 | 32.10 | 9 542 |
| Alberto Torres | Board Member | 0 | 30 | 32.10 | 30 |
| Audun Wickstrand Iversen** | Board Member | 90 | 30 | 22.14 | 120 |
| Marianne Blystad*** | Board Member | 100 | 30 | 23.90 | 130 |
| Christian Mauricio Uribe Espinoza **** | Board Member | 0 | 5 | 21.20 | 5 |
| Krystian Kolondra **** | Board Member | 0 | 130 | 30.18 | 130 |
| Erik Möller **** | Board Member | 0 | 0 | ||
| Lars Boilesen | Chief Executive Officer |
10 | 700 | 19.14 | 710 |
| 9 782 | 1 035 | 10 817 |
* Kari Stautland owns 100% of Arepo AS, which owns 9,512,120 shares in Opera Software ASA. **Audun Wickstrand Iversen holds 90,000 shares in the company through Naben, 100% owned by Iversen. *** Marianne Blystad holds a total of 0 shares in Opera Software and, with family, owns 100% of the shares in the investment company Spencer Trading, which holds 100,000 shares in the company. **** Employee Representative
| Name | Weighted average strike price |
||||
|---|---|---|---|---|---|
| [In thousands of shares and options] | Title | Shares | Options | (NOK) | Total |
| Erik C. Harrell | Chief Financial Of ficer/Chief Strategy Officer |
77 | 613 | 32.86 | 690 |
| Rikard Gillemyr | EVP Product Development |
360 | 663 | 27.05 | 1 023 |
| Mahi De Silva | EVP Consumer Mobile |
0 | 88 | 28.40 | 88 |
| Tove Selnes | EVP Human Resources |
9 | 158 | 27.75 | 166 |
| Jeffrey S. Glueck | EVP Operator Solutions |
10 | 10 | ||
| Tom Christian Gotschalksen | EVP Mobile Services | 0 | 150 | 37.58 | 150 |
| Andreas Thome | EVP Commercial and Operations |
10 | 753 | 31.88 | 763 |
| 466 | 2 423 | 2 888 |
| Name [In thousands of shares and options] |
Commission | Shares | Options | Weighted average strike price (NOK) |
Total |
|---|---|---|---|---|---|
| Arve Johansen | Chairman | 70 | 100 | 30.50 | 170 |
| Kari Stautland * | Board Member | 11 012 | 50 | 32.32 | 11 062 |
| Alberto Torres | Board Member | 0 | 50 | 32.32 | 50 |
| Audun Wickstrand Iversen**** | Board Member | 90 | 40 | 22.90 | 130 |
| Marianne Blystad | Board Member | 10 | 30 | 24.66 | 40 |
| Stig Halvorsen *** | Board Member | 3 | 4 | 16.60 | 7 |
| Christian Mauricio Uribe Espinoza **** | Board Member | 0 | 15 | 20.01 | 15 |
| Karl Anders Øygard ** , *** | Board Member | 754 | 74 | 24.48 | 828 |
| Lars Boilesen | Chief Executive Officer |
10 | 1 500 | 19.34 | 1 510 |
| 11 949 | 1 862 | 13 811 |
Shares and options owned by members of the Board and the Chief Executive Officer as of December 31, 2012
* Kari Stautland owns 100% of Arepo AS, which owns 11,012,120 shares in Opera Software ASA.
** Karl Anders Øygard holds 753,931 shares in Opera Software through Villemhaugen Invest AS, which is 100% owned by Øygard. In addition, Karl Anders Øygard holds 200 shares in the Company.
*** Employee Representative
****Audun Wickstrand Iversen holds 90,000 shares in the company through Naben, 100% owned by Iversen.
| Other expenses [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Rent and other office expenses | 9.0 | 6.1 |
| Equipment | 3.5 | 2.4 |
| Audit, legal and other advisory services | 6.4 | 4.6 |
| Marketing expenses | 7.6 | 4.7 |
| Travel expenses | 7.1 | 5.9 |
| Hosting expenses, excl. depreciation cost | 10.5 | 8.4 |
| Other expenses | 6.7 | 4.2 |
| Total | 50.8 | 36.4 |
Engineering salaries are the primary expense incurred in terms of costs related to source code research, development, and maintenance. For FY 2013, engineering salaries, expensed in the financial statement, were MUSD 39.3 (2012: 45.9). Development costs capitalized in FY 2013 were MUSD 14.4 (2012: 3.4). For additional information, please see notes 7 and 13. Rental deposits in various countries comprise the majority of other non-current investments and deposits together with a loan to nHorizon Innovation of MUSD 2.3. Please see note 8 for more information.
The majority of the financial risk carried by the Group, as a result of its subsidiaries, relates to foreign exchange fluctuations. Both sales and expenses are exposed to currency risk.
Most of the Company's foreign exchange risk relates to sales and is the result of revenue contracts signed in EUR and other currencies.
For FY 2013, approximately 76% (2012: 71%) of revenues were in USD, 13% (2012: 22%) in EUR, 5% (2012: 4%) in GBP, 4% (2012: 1%) in CNY, and 2% (2012: 2%) in other currencies.
The majority of the Company's purchases are made in the following denominations: NOK, USD, SEK, PLN, GBP, JPY, CNY, KRW, TWD, AUD, UAH, ISK, SGD, EUR and INR. Exchange rate fluctuations in these currencies do impact
Opera's income statement. For FY 2013 approximately 54% (2012: 36%) was in USD, 20% (2012: 30%) in NOK, 6% (2012: 7%) in SEK, 6% (2012: 5%) in GBP, 5% (2012: 7%) in PLN, 2% (2012: 3%) in CNY, and 6% (2012: 12%) in other currencies.
For FY 2013, Opera had a foreign exchange gain of MUSD 1.8 that was comprised of MUSD 5.5 realized foreign exchange gain and MUSD 3.7 net unrealized foreign exchange loss. Opera has not entered into any foreign exchange contracts as of December 31, 2013.
For FY 2012, Opera had a foreign exchange loss of MUSD 1.9 that was comprised of MUSD 4.3 realized foreign exchange gain and MUSD 6.2 net unrealized foreign exchange loss. Opera has not entered into any foreign exchange contracts as of December 31, 2012.
| Name | Weighted average strike price |
||||
|---|---|---|---|---|---|
| [In thousands of shares and options] | Title | Shares | Options | (NOK) | Total |
| Erik C. Harrell | Chief Financial Of ficer/Chief Strategy Officer |
77 | 923 | 27.20 | 1 000 |
| Rikard Gillemyr | EVP Product Development |
360 | 785 | 25.14 | 1 145 |
| Mahi De Silva | EVP Consumer Mobile |
0 | 131 | 28.62 | 131 |
| Tove Selnes | EVP Human Resources |
9 | 179 | 24.10 | 188 |
| Tom Christian Gotschalksen | EVP Mobile Services | 0 | 150 | 37.80 | 150 |
| Andreas Thome | EVP Sales & Marketing |
10 | 972 | 30.56 | 982 |
| 456 | 3 140 | 3 596 |
Shares and options owned by other leading employees as of December 31, 2012
As the majority of the Groups's income is earned in USD and EUR, changes in exchange rates have an immediate effect on the Group's revenue.
| [Numbers in MUSD] | 2013 | 2012 | ||
|---|---|---|---|---|
| MUSD | % | MUSD | % | |
| NOK | 0.3 | 0.12 | 0.2 | 0.11 |
| USD | 229.6 | 76.50 | 152.4 | 70.54 |
| GBP | 15.8 | 5.26 | 9.6 | 4.45 |
| JPY | 0.5 | 0.16 | 0.8 | 0.39 |
| CAD | 0.0 | 0.00 | 0.0 | 0.01 |
| CHF | 0.2 | 0.05 | 0.0 | 0.00 |
| PLN | 0.0 | 0.01 | 0.0 | 0.02 |
| CNY | 12.7 | 4.22 | 2.6 | 1.20 |
| BYR | 1.4 | 0.47 | 1.8 | 0.83 |
| SEK | 0.0 | 0.00 | 0.0 | 0.00 |
| EUR | 38.6 | 12.87 | 47.3 | 21.88 |
| SGD | 0.0 | 0.01 | 0.1 | 0.04 |
| INR | 0.0 | 0.00 | 0.0 | 0.00 |
| AUD | 1.0 | 0.33 | 1.2 | 0.54 |
| Total | 300.1 | 100.00 | 216.0 | 100.00 |
Conversion of the Group's revenues from foreign currencies into USD yields the following average exchange rates:
| 2013 | 2012 | 2013 | 2012 | ||
|---|---|---|---|---|---|
| NOK | 0.1708 | 0.1733 | NOK | 0.0 | 0.0 |
| GBP | 1.5805 | 1.5918 | GBP | 1.6 | 1.0 |
| JPY | 0.0103 | 0.0124 | JPY | 0.0 | 0.1 |
| CAD | 0.9609 | 1.0015 | CAD | 0.0 | 0.0 |
| CHF | 1.0931 | CHF | 0.0 | 0.0 | |
| PLN | 0.3160 | 0.3053 | PLN | 0.0 | 0.0 |
| CNY | 0.1617 | 0.1585 | CNY | 1.3 | 0.3 |
| BYR | 0.0001 | 0.0001 | BYR | 0.1 | 0.2 |
| SEK | 0.1536 | SEK | 0.0 | 0.0 | |
| EUR | 1.3314 | 1.2933 | EUR | 3.9 | 4.7 |
| SGD | 0.8075 | 0.8008 | SGD | 0.0 | 0.0 |
| INR | 0.0172 | INR | 0.0 | 0.0 | |
| AUD | 0.9705 | 1.0338 | AUD | 0.1 | 0.1 |
A 10% increase in the average exchange rate would have the following positive effect on the Group's revenue (MUSD):
Conversely, a 10% decrease in the average exchange rate would have a similar negative effect on the Group's revenue as shown above (MUSD).
Accounts receivable as of December 31, 2013, are converted using the following exchange rates: EUR 1.3787, JPY 0.0095, NOK 0.1646, GBP 1.6521, PLN 0.3321, CNY 0.1637 and INR 0.0162.
| 2013 | 2012 | |
|---|---|---|
| USD | 45.1 | 22.2 |
| EUR | 9.4 | 9.1 |
| JPY | 0.8 | 3.5 |
| NOK | 0.7 | 0.1 |
| GBP | 3.9 | 2.2 |
| PLN | 0.1 | 0.0 |
| CAD | 0.0 | 0.0 |
| SEK | 0.0 | 0.0 |
| CNY | 7.0 | 2.9 |
| ISK | 2.1 | 0.0 |
| INR | 0.1 | 0.0 |
| CZK | 0.0 | 0.0 |
| TWD | 0.0 | 0.0 |
| AUD | 0.0 | 0.0 |
| SGD | 0.0 | 0.0 |
The numbers above are presented in local currencies.
Opera conducts most of its business with large global companies. Throughout last year, the Group conducted business with a number of its customers without suffering significant credit-related losses.
The customers have not committed any collateral or other means to secure their outstanding debt.
Credit risk regarding accounts receivable may be specified per region as follows (MUSD):
| Total | 66.9 | 38.3 |
|---|---|---|
| Asia Pacific | 7.9 | 10.0 |
| Americas | 40.1 | 19.5 |
| EMEA | 19.0 | 8.9 |
| 2013 | 2012 |
| 2013 | 2012 | |
|---|---|---|
| Provision as of January 1 | 3.1 | 1.8 |
| Change in the provision for bad debt recognized in the "Statement of comprehensive income" |
2.6 | 0.7 |
| Change in the provision for bad debt not recognized in the "Statement of comprehensive income"* |
0.1 | 0.5 |
| Change in the provision for bad debt not recognized in the "Statement of comprehensive income" ** |
0.0 | 0.1 |
| Currency adjustment | -0.4 | 0.0 |
| Provision as of December 31 | 5.4 | 3.1 |
| Realized losses, recognized directly in the "Statement of comprehensive income" |
1.3 | 0.2 |
| Received from previously written-down bad debts | 0.0 | 0.0 |
* Opening balance acquisitions 2013.
** Currency adjustment provision as of January 1
The majority of the 2013 receivables that are more than 90 days outstanding have been paid in 2014 or booked against deferred income in the "Statement of financial position".
| 2013 | 2012 | ||||
|---|---|---|---|---|---|
| Gross receivables | Provision for bad debt |
Gross receivables | Provision for bad debt |
||
| Not past due | 17.5 | 0.2 | 17.0 | 0.0 | |
| Past due 0-30 days | 9.7 | 0.0 | 10.0 | 0.2 | |
| Past due 31-60 days | 14.7 | 0.1 | 2.7 | 0.1 | |
| Past due 61-90 days | 14.0 | 1.2 | 2.9 | 0.1 | |
| More than 90 days | 11.0 | 3.9 | 5.8 | 2.6 | |
| Total | 66.9 | 5.4 | 38.3 | 3.1 |
The Group had the following liquidity reserve and credit facility as of December 31, 2013:
| Liquidity reserve [Numbers in MUSD] | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Cash and cash equivalents | ||
| Cash in hand and on deposit | 163.4 | 57.2 |
| —of which restricted funds * | 76.3 | 1.8 |
| Unrestricted cash | 87.1 | 55.4 |
| Unutilized credit facilities | 40.0 | 0.0 |
| Short-term overdraft facility | 0.0 | 0.0 |
| Liquidity reserve | 40.0 | 0.0 |
| Credit facility [Numbers in MUSD] | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Long-term cash credit | 100.0 | 0.0 |
| — of which utilized | 60.0 | 0.0 |
| Short-term overdraft facility | 0.0 | 0.0 |
| — of which utilized | 0.0 | 0.0 |
Opera Software has, in February 2013, signed a MUSD 100.0 secured revolving credit facility with DNB Bank ASA. The facility will primarily be secured through a share pledge in Opera Software International AS, as well as floating charges over accounts receivable in Opera Software ASA and certain of its U.K. and U.S. subsidiaries. The loan agreement has the following covenants: a) a Gearing Ratio to be below 1.50:1 and B) an Equity Ratio to hold the minimum level of 35%. The facility has a term of 3 years and bears an interest rate of LIBOR + 1.75% p.a. (plus a utilization fee varying with the amount drawn). On the undrawn portion of the facility, a commitment fee of 0.61% p.a. will be paid. Opera Software intends to use the financing for general corporate purposes and potential acquisitions. development fees and prepaid campaigns. Of the Group's total current liabilities, MUSD 17.9 (2012: 11.2) relates to deferred revenue, and MUSD 13.3 (2012: 10.8) relates to deferred revenue that has no future cash payments. Capital management In order to achieve the Group's ambitious, long-term objectives, the policy has been to maintain a high equity-to-asset ratio and to maintain a solid capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group still possesses a business model that anticipates considerable cash flow in the future.
During FY 2013 and FY 2012, the Group did not use forward exchange contracts to hedge its currency risk, and Opera had not entered into any foreign exchange contracts as of December 31, 2013.
*Cash and cash equivalents of MUSD 76.3 were restricted assets as of December 31, 2013, and cash and cash equivalents of MUSD 1.8 were restricted assets as of December 31, 2012. MUSD 68.7 of the restricted cash as of December 31, 2013, was released on January 20, 2014, as it was used as part of a share capital increase in Opera Software International AS.
Deferred revenue consists of prepaid license/royalty payments, prepaid maintenance and support, prepaid The Company has issued options to the Group's employees in accordance with its objective that employees shall hold company shares.
The Board of Directors has as of December 31, 2013, not used its authorization to buy the Company's own shares. Please see note 9 for more information.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
| v | a. | ||
|---|---|---|---|
| Tax expense [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Current tax | 23.5 | 9.7 |
| Deferred tax | -15.3 | -4.3 |
| Tax expense related to change in tax rate | 0.1 | 0.0 |
| Deferred tax assets from previously unrecognized tax losses | -5.0 | 0.0 |
| Taxes on capital raising costs | 0.0 | 0.0 |
| Tax payable abroad | 4.0 | 3.2 |
| Too much/little tax booked previous year | 0.0 | 0.0 |
| Total | 7.2 | 8.6 |
*Booked against equity
Deferred tax assets and liabilities are attributable to the following:
| Tax payable [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Current tax | 24.5 | 9.7 |
| Tax payable abroad | 3.9 | 2.9 |
| Too much/little tax booked previous year | 0.1 | 0.2 |
| Tax settlement previous year | 0.0 | 0.0 |
| Prepaid tax subsidiaries/branches | -3.5 | -1.4 |
| Taxes on capital raising costs | 0.0 | 0.0 |
| Withholding tax paid to a foreign country | -3.9 | -2.9 |
| Tax effect on losses from sales of own shares* | -0.9 | -0.7 |
| Withholding tax utilized | 0.0 | 0.0 |
| Total | 20.2 | 7.7 |
| Prepaid tax [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Prepaid tax subsidiaries/branches | 0.0 | 1.0 |
| Withholding tax paid to a foreign country | 0.0 | 0.0 |
| Sum other receivables | 0.0 | 1.0 |
| Movement in temporary differences during the year | Acquired in business |
|||||
|---|---|---|---|---|---|---|
| [Numbers in MUSD] | Balance 1/1/12 |
Posted to P/L |
Posted directly to the equity |
combina tions (note 8) |
Balance 12/31/12 |
|
| Inventory, office machinery, etc. | 2.1 | 0.3 | 1.4 | 0.0 | 3.8 | |
| Accounts receivables | -0.6 | -0.1 | 0.0 | 0.0 | -0.7 | |
| Liabilities | -1.1 | -1.1 | -0.2 | 0.0 | -2.4 | |
| Tax value of loss carry-forwards utilized | -1.2 | -3.4 | -0.1 | 0.2 | -4.5 | |
| Deferred taxes / (tax assets) | -0.8 | -4.3 | 1.1 | 0.2 | -3.8 |
| ASSETS | LIABILITIES | NET | ||||
|---|---|---|---|---|---|---|
| [Numbers in MUSD] | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Inventory, office machinery, etc. | -1.5 | -1.0 | 1.6 | 4.6 | 0.1 | 3.6 |
| Accounts receivables | -1.5 | -0.7 | 0.0 | 0.0 | -1.5 | -0.7 |
| Derivatives | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other liabilities | -13.2 | -3.1 | 0.9 | 0.9 | -12.4 | -2.2 |
| Tax value of loss carry-forwards utilized | -9.9 | -4.5 | 0.0 | 0.0 | -9.9 | -4.5 |
| Deferred taxes/ (tax assets) | -26.1 | -9.3 | 2.5 | 5.5 | -23.6 | -3.8 |
| Set-off of tax | 2.5 | 5.5 | -2.5 | -5.5 | 0.0 | 0.0 |
| Net deferred taxes / (tax assets) | -23.6 | -3.8 | 0.0 | 0.0 | -23.6 | -3.8 |
| [Numbers in MUSD] | Balance 1/1/13 |
Posted to P/L |
Posted directly to the equity |
Acquired in business combina tions (note 8) |
Balance 12/31/13 |
|---|---|---|---|---|---|
| Inventory, office machinery, etc. | 3.8 | -12.8 | -0.3 | 9.4 | 0.1 |
| Accounts receivables | -0.7 | -0.7 | 0.0 | 0.0 | -1.5 |
| Liabilities | -2.4 | -16.8 | -2.9 | 9.8 | -12.4 |
| Tax value of loss carry-forwards utilized | -4.5 | 10.0 | 3.7 | -19.1 | -9.9 |
| Deferred taxes / (tax assets) | -3.8 | -20.3 | 0.5 | 0.0 | -23.6 |
It is Opera's opinion that the deferred tax asset can be utilized in future periods. Its measure is based on the expected and estimated future income. Consequently, Opera has capitalized the deferred tax asset.
All the U.S. entities are included in a U.S. consolidated tax group.
Permanent differences include non-deductable costs and share-based remuneration.
| Change in deferred tax asset directly posted against the equity capital [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Changes due to foreign currency changes | 0.5 | 1.1 |
| Capital raising costs and losses from sales of own shares | 0.0 | 0.0 |
| Total deferred taxes posted directly against the equity | 0.5 | 1.1 |
| Reconciliation of effective tax rate [Numbers in MUSD] | 2013 | 2012 | ||
|---|---|---|---|---|
| Profit before tax | 67.5 | 25.6 | ||
| Income tax using the domestic corporate tax rate | 28.0 % | 18.9 | 28.0 % | 7.2 |
| Overbooked taxes, previous year | -0.1 % | -0.1 | 3.3 % | 0.8 |
| Tax paid to a foreign country | 1.4 % | 1.0 | -0.8 % | -0.2 |
| Effect of different tax rates between countries | 2.0 % | 1.4 | 1.2 % | 0.3 |
| Taxes on other permanent differences | -13.2 % | -8.9 | 2.1 % | 0.5 |
| Deferred tax assets from previously unrecognized tax losses | -7.5 % | -5.0 | 0.0 % | 0.0 |
| Total tax expense for the year | 10.7 % | 7.2 | 33.7 % | 8.6 |
| [Numbers in MUSD] | Cost rented premis es |
Machin ery and equip ment |
Fixtures and |
fittings Goodwill | Develop ment |
Other in tangible assets |
2013 Total |
2012 Total |
|---|---|---|---|---|---|---|---|---|
| Acquisition cost | ||||||||
| Acquisition cost as of 1/1/13 |
1.0 | 30.4 | 1.3 | 74.1 | 3.4 | 13.6 | 123.8 | 59.9 |
| Acquisitions through business combina |
||||||||
| tions | 0.0 | 0.6 | 0.0 | 80.3 | 4.2 | 26.8 | 111.9 | 53.3 |
| Other acquisitions | 0.5 | 7.4 | 0.3 | 0.0 | 14.4 | 2.0 | 24.6 | 13.8 |
| Disposal | 0.0 | -3.7 | -0.1 | -4.0 | -8.0 | 6.5 | -9.4 | -3.7 |
| Currency differences | -0.1 | 0.0 | 0.0 | 0.0 | -0.5 | -0.2 | -0.8 | 0.6 |
| Acquisition cost as of 12/31/13 |
1.4 | 34.7 | 1.4 | 150.3 | 13.5 | 48.8 | 250.1 | 123.8 |
| Depreciation and impairment losses |
||||||||
| Depreciation and impairment losses as of 1/1/13 |
0.2 | 16.4 | 0.3 | 3.8 | 0.0 | 4.6 | 25.2 | 15.1 |
| Acquisitions through business combina tions |
0.0 | 0.2 | 0.0 | 0.0 | 0.0 | 0.0 | 0.2 | 0.2 |
| Disposal | 0.0 | -3.5 | -0.1 | -4.0 | -1.4 | 0.8 | -8.2 | -3.2 |
| Currency differences | 0.0 | 0.1 | 0.0 | 0.9 | -0.1 | -0.1 | 0.7 | 0.3 |
| Accumulated depreciation and impairment losses as of 12/31/13 |
0.3 | 21.4 | 0.4 | 0.8 | 3.1 | 12.7 | 38.7 | 25.2 |
| Net book value as of 12/31/13 |
1.1 | 13.3 | 1.0 | 149.5 | 10.4 | 36.1 | 211.4 | 98.6 |
| Depreciation for the year |
0.2 | 8.2 | 0.2 | 0.1 | 4.6 | 7.4 | 20.8 | 9.7 |
| Impairment losses for the year (see note 12) |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 3.0 |
| Useful life | Up to 6 years |
Up to 10 years |
Up to 5 years |
Undeter mined |
Up to 4 years |
Up to 5 years |
||
| Depreciation plan | Linear | Linear | Linear | No de preciation |
Linear | Linear | ||
Goodwill relates to the acquisition of Hern Labs AB, Opera Software Poland Sp. z o.o., AdMarvel, Inc., Handster, Inc., Mobile Theory, Inc., 4th Screen Advertising, Ltd., Netview Tehnology AS, FastMail, Moolah Media, Inc., and Skyfire Labs, Inc. See note 8.
Development is internally developed intangeble assets.
Other intangible assets relate to the acquisition of Opera Distribution AS, AdMarvel, Inc., Handster, Inc., Mobile Theory, Inc., 4th Screen Advertising, Ltd., FastMail, Moolah Media, Incl, and Skyfire Labs, Inc. See note 8.
Please see note 8 for asset additions related to business combinations.
The most significant agreements relate to the rental of premises in United States, Norway, the United Kingdom, Sweden and Poland.
In 2012, the Company entered into a new lease for the rental of its Norwegian offices at Gjerdrums vei 19. The new lease will run through November 2019. The lease agreement, according to IAS 17, is considered an operating lease.
| [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Leasing costs expensed | 6.2 | 5.6 |
| Duration of the lease contract | 11/30/19 | 11/30/19 |
| Non-terminable operating leases due in: [Numbers in MUSD] | 2013 | 2012 |
| Less than one year | 4.6 | 4.9 |
| Between one to five years | 13.5 | 10.1 |
More than five years 1.4 2.5 Total 19.5 17.5
Opera Software ASA's financial statements are available at the Company's headquarters located at Gjerdrums vei 19 in Oslo, Norway.
In 1Q 2011, Opera and China's Telling Telecom announced that they planned to establish a company in greater China with the goal of becoming the most popular consumer mobile web browser and web services platform in China. Opera will provide our browser technology, and Telling Telecom will contribute a local operations team and strong distribution capabilities. Telling Telecom is a leading mobile phone distributor in China.
| [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Revenue | 10.1 | 2.0 |
| EBIT | -28.0 | -18.4 |
| Net profit | -28.5 | -18.5 |
| Assets | 10.4 | 0.9 |
| Short term liabilities | 15.6 | 6.2 |
| Equity | -5.2 | 0.7 |
| Subsidiaries [Numbers in MUSD] | Hern Labs AB |
Opera Software International AS |
Opera Distribution AS |
Netview Technology AS |
|---|---|---|---|---|
| Formal information | ||||
| Date of purchase | 12/13/2000 | 1/5/2005 | 12/16/2008 | 5/14/2012 |
| Registered office | Linköping, Sweden |
Oslo, Norway |
Oslo, Norway |
Oslo, Norway |
| Ownership interest | 100% | 100% | 100% | 100% |
| Proportion of votes | 100% | 100% | 100% | 100% |
| Information related to the date of purchase (in the year of purchase) |
||||
| Purchase cost | 1.3 | 0.2 | 0.3 | 0.8 |
| Goodwill at acquisition cost | 1.3 | 0.0 | 0.0 | 0.5 |
| Other intangible assets at acquisition cost | 0.0 | 0.0 | 0.3 | 0.5 |
nHorizon Innovation (Beijing) Software Ltd was co-founded by Opera Software ASA and Telling Telecom in August 2011. nHorizon is committed to developing and marketing the Oupeng mobile browser, providing users with a simple, fast, and smooth mobile internet experience and to helping people enjoy a comfortable mobile internet life. For more information, please visit www.oupeng.com.
The focus of the company will be on the massive consumer mobile internet market and revenue opportunity in China. Opera China will continue to target the operator, mobile OEM, device OEM, and desktop markets independent from the company.
Information regarding nHorizon Innovation
The investments in nHorizon Innovation are accounted for using the equity method. In 3Q 2013, Opera invested MUSD 5.7, of which MUSD 2.8 was payable in 4Q 2013 together with a loan of MUSD 2.3. This investment comes in addition to the MUSD 2.4 already invested in in both 3Q and 4Q 2012 and to the MUSD 2.4 already invested in 2011. In addition, Opera is guaranteed a minimum amount of revenue from the company corresponding to Opera's initial capital contribution over the three-year period starting from the establishment of the company.
As of December 31, 2013, Opera owned 29.09% of nHorizon Innovation, and Opera has booked the following fair value on the accounting line "Other investments and deposits":
| Booked value [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Investment (Booked value January 1) |
2.0 | 1.5 |
| Investment during the fiscal year | 5.7 | 4.8 |
| FX adjustment | -0.4 | 0.3 |
| Share of the profit/loss | -3.3 | -3.7 |
| Elimination portion of sale | -4.0 | -0.9 |
| Total | -0.0 | 2.0 |
Opera Software ASA owns 20% of the European Center for Information and Communication Technologies — EICT GmbH. The booked value of the share is USD 0.1. The market value of the company is unknown. The EICT is a public/private partnership of scientific institutions, institutes of applied research and leading industrial companies. The strategic innovation partnership pools and specifically links research and development activities in industry and science to information and communication technologies. For more information about EICT, please see the website at www.eict.de.
On March 14, 2013, Opera Software ASA acquired 100% of the shares and voting interest of the privately-held company Skyfire Labs, Inc., a leader in mobile video optimization and cloud solutions for mobility. Opera believes Skyfire adds capabilities to our portfolio around video, app optimization, smartphones, and tablets, and strength in North America, and we are excited to expand Opera's solutions for operators.
Skyfire is headquartered in Mountain View, California. The company's main product, the Rocket Optimizer™ solution, allows mobile operators to leverage cloud computing to optimize virtually any video and other multimedia on crowded mobile towers, including 3G and 4G LTE networks. The Rocket Optimizer™ solution provides mobile networks a significant boost in capacity by compressing video and other multimedia content to fit available bandwidth. The Rocket Optimizer™ solution detects, and intervenes in milliseconds, when specific users are facing poor quality experience or connections that need assistance. This can minimize the long start times, rebuffering and stalls on video and audio streams that frustrate mobile users around the world. The approach aligns with the trend toward SDN (software-defined networking) and NFV (network function virtualization) among telecommunications operators, based on its elastic and virtualization-friendly cloud architecture.
Skyfire also offers the Horizon™ solution, a mobile browser extension and toolbar platform that allows users to personalize their smartphone browsers and facilitates operators to gain new monetization opportunities.
The acquisition price includes a mix of cash and stock, with an upfront consideration of MUSD 49.1 (including MUSD 8.2 of cash on the Skyfire balance sheet) and performance-based earnout payments over three years, including MUSD 25.7 in cash held in escrow and funded upfront, that can bring the total deal size to MUSD 155.2.
Skyfire Labs, Inc., currently employs 66 full-time equivalents. In 2013, the Group incurred acquisition-related costs of MUSD 1.0 (2012: 0.0) related to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in the consolidated statement of comprehensive income.
| Other intangible assets | 4.2 |
|---|---|
| Property, plant and equipment | 0.4 |
| Deferred tax assets | 9.4 |
| Accounts receivable* | 0.5 |
| Other receivables | 0.1 |
| Cash and cash equivalents | 8.2 |
| Accounts payable | -0.1 |
| Social security, VAT and other taxation payable |
-0.3 |
| Deferred revenue | -5.1 |
| Other short-term liabilities | -2.7 |
| Other long-term liabilities | -1.6 |
| Non-current provisions | -3.3 |
| Total net identifiable assets | 9.7 |
| Cash consideration | -49.1 |
| Contingent consideration | -40.5 |
| Excess value | -79.9 |
| Related customer relationships | 3.6 |
| Proprietary technology | 19.4 |
| Non-compete | 0.4 |
| Deferred tax on excess values | -9.4 |
| Goodwill | 65.8 |
The assets and liabilities that were recognized by Skyfire Labs immediately before the business combination equaled the carrying amount recognized by the Group on the acquisition date. Subsequent to the business combination, the opening balance has been adjusted to reflect MUSD 9.4 in deferred tax assets. In addition, the Group booked the excess price of the fair value of the total identifiable assets as related customer relationships, proprietary technology, deferred tax on excess values and goodwill, since the excess price has been deemed to be related to these intangible assets. The substantial amount of goodwill in the acquisition of Skyfire Labs can be attributed to the synergies that exist between the two companies, as well as the qualified Skyfire Labs workforce.
Opera calculated the fair value on the acquisition date and booked a contingent consideration of MUSD 40.5 in the financial statements. The contingent consideration is revalued each quarter, and more information can be found in note 11.
The value of the related customer relationships and the proprietary technology is depreciated over a 6-year period.
Identifiable assets acquired and
| liabilities assumed [Numbers in MUSD] | |
|---|---|
| Other intangible assets | 0.0 |
| Other investments and deposits | 0.0 |
| Property, plant and equipment | 0.0 |
| Accounts receivable* | 2.3 |
| Unbilled revenue | 0.0 |
| Other receivables | 0.0 |
| Cash and cash equivalents | 1.3 |
| Accounts payable | -2.0 |
| Social security, VAT and other taxation payable |
0.0 |
| Other short-term liabilities | -0.6 |
| Total net identifiable assets | 1.1 |
| Cash consideration | -14.1 |
| Contingent consideration | -15.9 |
| Excess value | -28.9 |
| Non-compete | 0.3 |
| Related customer relationships | 2.6 |
| Related developer relationships | 0.8 |
| Proprietary technology | 4.2 |
| Deferred tax on excess values | -0.9 |
| Goodwill | 22.0 |
* No provision for bad debt.
The assets and liabilities that were recognized immediately before the business combinations equaled the carrying amount recognized by the Group on the acquisition dates. In addition, the Group booked the excess price of the fair value of the total identifiable assets as related customer relationships, proprietary technology, deferred tax on excess values and goodwill, since the excess prices have been deemed to be related to these intangible assets.
The fair value of the net identifiable assets has not been calculated by an external company. Opera has treated the entire contingent consideration as consideration for the purchase of the business and no part as remuneration. The evaluation is based on the indicators outlined in IFRS 3.
The total Skyfire Labs revenue, in the first 9.5 months after the purchase, was MUSD 12.1, and the estimate for the 12-month period beginning January 1, 2013, is MUSD 15.3.
The net profit for Skyfire Labs, in the first 9.5 months, after the purchase was MUSD 15.2, and the estimate for the 12-month period beginning January 1, 2013, is MUSD 17.5.
The Group has acquired 100% of the shares/membership interests of several companies that individually are not seen as material transactions. These business combinations are material collectively, and the numbers below are therefore disclosed in aggregate.
From April 1, 2013, Opera has the following aggregated future obligations related to these transactions: \$31.7 million in potential earnout consideration as a mix of cash and stock (to be paid to the Sellers in 2014, 2015 and 2016 based on aggressive revenue and EBIT targets), plus additional potential limited consideration based on over-performance on EBIT in 2013, 2014 and 2015.
Transactions closed prior to January 1, 2013, have enabled Opera to (i) strengthen its mobile store offerings and better monetize Opera's own properties and traffic that is generated by Opera's large mobile audience and (ii) bring in-house video expertise and technology assets. In 1Q 2013, Opera closed on an acquisition transaction that brings in-house a team and product platform that now significantly enhances Opera's ability to help advertisers with performance or "cost per action" campaigns, such as campaigns for driving app downloads and securing customer sign-ups and leads.
In 2013, the Group incurred acquisition-related costs of MUSD 0.7 (2012: 0.7) related to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in the consolidated statement of comprehensive income.
| Goodwill at acquisition cost for Hern Labs AB | 1.3 |
|---|---|
| Accumulated depreciation as of 12/31/04 | 1.1 |
| Net book value as of 12/31/04 | 0.3 |
| Reversed depreciation 2004 | 0.3 |
| Net book value as of 1/1/04 and 12/31/08 | 0.5 |
| Goodwill at acquisition cost for Opera Software Poland Sp. z o.o |
2.2 |
| Net book value as of 12/31/09 | 2.8 |
| Goodwill at acquisition cost for AdMarvel | 13.2 |
| Goodwill at acquisition cost for FastMail | 4.0 |
| Net book value as of 12/31/10 | 20.0 |
| Goodwill at acquisition cost for Handster | 7.2 |
| FX adjustment to the goodwill acquisition cost | 0.0 |
| Net book value as of 12/31/11 | 27.2 |
| Goodwill at acquisition cost for Mobile Theory | 34.4 |
| Goodwill at acquisition cost for 4th Screen Advertising |
11.3 |
| Goodwill at acquisition cost for Netview Technology |
0.3 |
| Impairment of FastMail goodwill | -3.0 |
| FX adjustment to the goodwill acquisition cost | 0.1 |
| Net book value as of 12/31/12 | 70.3 |
| Goodwill at acquisition cost for Skyfire Labs, Inc. |
65.8 |
| Sale of FastMail | -1.0 |
| Goodwill at acquisition cost for immaterial transactions |
14.4 |
| FX adjustment to the goodwill acquisition cost | -0.1 |
Net book value as of 12/31/13 149.5
In respect to business acquisitions that have occurred since January 1, 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. A portion of the goodwill relates to the purchase of Hern Labs AB. As the goodwill existed before January 1, 2004, the goodwill is based on the amount recognized according to NGAAP. Goodwill from the purchase of Hern Labs AB booked on December 31, 2011, has the same value as goodwill on January 1, 2004.
MUSD 3.1 of the recognized goodwill and MUSD 0.3 of the recognized other intangible assets is related to the acquisition of Hern Labs AB, Netview Technology AS and Opera Software Poland Sp. z o.o. Netview's operations have been sold to Opera Software ASA, and Hern Labs AB and Opera Software Poland Sp. z o.o are development companies that deliver development services to Opera Software ASA. Hern Labs AB and Opera Software Poland Sp. z o.o use a cost plus model. Hence, it is difficult to estimate the value of Hern Labs AB and Opera Software Poland Sp. z o.o on the basis of their cash flows. The Opera Software ASA Group is thus considered to be the smallest cash-generating unit for the three acquisitions.
The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill. This judgment has, among other things, been based on estimated cash flows to the companies the coming 3-year period and the fact that the market value of the Opera Group is considerably higher than the equity.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
MUSD 65.8 of the recognized goodwill, MUSD 19.8 of the recognized other intangible assets, and MUSD -7.2 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of Skyfire Labs, Inc. The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
MUSD 13.2 of the recognized goodwill, MUSD 0.5 of the recognized other intangible assets, and MUSD 1.5 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of AdMarvel, Inc. The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period. A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow. 4th Screen Advertising Ltd. MUSD 14.4 of the recognized goodwill, MUSD 2.8 of the recognized other intangible assets, and MUSD 2.3 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of Moolah, Inc.
MUSD 34.4 of the recognized goodwill, MUSD 2.5 of the recognized other intangible assets, and MUSD 5.1 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of Mobile Theory, Inc. The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
An after-tax discount rate where Opera used a 3.0% current market risk-free rate of interest and added a risk of 9.0% (equity risk premium of 5.0% x beta 1.1 and alpha risk 3.0%). This gives an implicit pre-tax discount rate of 19%. • Cash flows were projected using past experience, actual operating results, and the 3-year business plan extending from FY 2014 to FY 2016. The terminal value has been calculated using the average of the estimated cash flow in 2014 to 2016 and a 2% future growth rate.
Cash flows were projected using past experience, actual operating results and the 3-year business plan extending from FY 2014 to FY 2016. The terminal value has been calculated using the average of the estimated cash flow in 2014 to 2016 and a 2% future growth rate.
The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
• An after-tax discount rate where Opera used a 3.0% current market risk-free rate of interest and added a risk of 9.0% (equity risk premium of 5.0% x beta 1.1 and alpha risk 3.0%). This gives an implicit pre-tax discount rate of 20%.
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
MUSD 7.3 of the recognized goodwill, MUSD 1.0 of the recognized other intangible assets, and MUSD 0.0 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of Handster, Inc. The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
MUSD 14.4 of the recognized goodwill, MUSD 2.8 of the recognized other intangible assets and MUSD 2.3 of the net working capital excluding cash, as of December 31, 2013, are related to the acquisition of Opera Mediaworks Performance, LLC. The Group has performed a complete impairment test as of December 31, 2013, according to IAS 36. The Group considers it unnecessary to recognize an impairment loss concerning goodwill and other intangible assets. This judgment has, among other things, been based on estimated cash flows to the company the coming 3-year period.
Value in use was determined by discounting the future cash flows, and the calculation was based on the following key assumptions:
A change in the discount rate with a risk up to 2% would still not cause the booked goodwill to be impaired, nor would a 5% decrease of the cash flow.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the General Meeting.
All shares rank equally with regard to the Group's residual assets. The Company does not have any preferred shares.
For information regarding share options, please see the accompanying note 3.
The Annual General Meeting (AGM) held on June 4, 2013, passed the following resolution:
a) The Board of Directors is authorized to acquire shares in the Company. The shares are to be acquired at market terms, in or in connection with a regulated market where the shares are traded.
b) The shares may only be used to fulfill obligations under incentive schemes approved by the shareholders. No new authority is granted by this item for new incentive schemes. c) The maximum face value of the shares which the Company may acquire pursuant to this authorization is in total NOK 240,000. The minimum amount which may be paid for each share acquired pursuant to this power of attorney is NOK 10, and the maximum amount is NOK 100.
d) The authorization comprises the right to establish pledge over the Company's own shares.
e) This authorization is valid from the date it is registered with the Norwegian Register of Business Enterprises until June 30, 2014.
f) The authorization replaces the current authorization when registered in the Norwegian Register of Business Enterprises.
During 2013, Opera purchased 0 (2012: 0) shares and sold 339,500 (2012: 1,302,430) own shares for MUSD 1.5 (2012: 3.4). As of December 31, 2013, Opera owned 0 shares.
The Annual General Meeting held on June 4, 2013, passed the following resolutions:
a) The Board of Directors is authorized to increase the Company's share capital by a total amount of up to NOK 240,000, by one or several share issues of up to a total of 12,000,000 shares, each with a nominal value of NOK 0.02. The subscription price and other terms will be determined by the Board of Directors.
b) The authorization includes the right to increase the Company's share capital in return for non-cash contributions or the right to assume special obligations on behalf of the Company.
c) The preferential rights pursuant to Section 10-4 of the Public Limited Liability Companies Act may be deviated from by the Board of Directors.
d) The authorization may only be used for issuing new shares in relation to the Company's incentive schemes existing at any time in the Opera Group. The authorization cannot be used in connection with options that may be granted to directors on or after June 15, 2010.
e) The authorization shall be effective from the date it is registered in the Norwegian Register of Business Enterprises and shall be valid until June 30, 2014.
f) The authorization replaces the current authorization when registered in the Norwegian Register of Business Enterprises.
g) The authorization cannot be used if the Company, in the period of June 4, 2013, to June 30, 2014, pursuant to board authorizations, has issued new shares in the Company representing more than 10% of the Company's share capital.
a) The Board of Directors is authorized to increase the Company's share capital by a total amount of up to NOK 240,000, by one or several share issues of up to a total of 12,000,000 shares, each with a nominal value of NOK 0.02. The subscription price and other terms will be determined by the Board of Directors.
b) The authorization includes the right to increase the Company's share capital in return for non-cash contributions or the right to assume special obligations on behalf of the Company.
c) The preferential rights pursuant to Section 10-4 of the Public Limited Liability Companies Act may be deviated from by the Board of Directors.
d) The authorization may only be used in connection with acquisitions of businesses or companies, including mergers, within the business areas operated by the Opera Group, or which relates thereto.
e) The authorization shall be effective from the date it is registered in the Norwegian Register of Business Enterprises and shall be valid until June 30, 2014.
f) The authorization replaces the current authorization when registered in the Norwegian Register of Business Enterprises.
g) The authorization cannot be used if the Company, in the period of June 4, 2013, to June 30, 2014, pursuant to board authorizations, has issued new shares in the Company representing more than 10% of the Company's share capital.
During 2013, Opera issued 2,665,544 (2012: 0) ordinary shares related to the incentive program, 2,047,906 (2012: 0) of ordinary shares related to business combinations, and 8,000,000 (2012: 0) of ordinary shares related to an equity increase.
| [In thousands of shares] | Shares | Owner's share | Voting share |
|---|---|---|---|
| Ludvig Lorentzen AS | 10 637 | 8.04% | 8.04% |
| Arepo AS | 9 512 | 7.19% | 7.19% |
| Ferd AS Invest | 6 906 | 5.22% | 5.22% |
| Sundt AS | 6 655 | 5.03% | 5.03% |
| Folketrygdfondet | 6 086 | 4.60% | 4.60% |
| JPMorgan Chase Bank | 2 725 | 2.06% | 2.06% |
| Statoil Pensjon | 2 124 | 1.61% | 1.61% |
| Verdipapirfondet DNB Norge (IV) | 1 829 | 1.38% | 1.38% |
| SEB Enskilda Securitas AB | 1 795 | 1.36% | 1.36% |
| Skandinaviska Enskilda Banken AB | 1 742 | 1.32% | 1.32% |
| JPMorgan Chase Bank London | 1 680 | 1.27% | 1.27% |
| State Street Bank and Trust Co. | 1 496 | 1.13% | 1.13% |
| State Street Bank & Trust Company | 1 379 | 1.04% | 1.04% |
| Sum | 54 566 | 41.25% | 41.25% |
| Other shareholders | 77 722 | 58.75% | 58.75% |
| Total numbers of shares | 132 288 | 100.00% | 100.00% |
The Annual General Meeting held on June 4, 2013, passed the following resolution: NOK 0.22 per share is paid as dividend for 2012, constituting an aggregate dividend payment of MNOK 26.8 (approximately MUSD 4.6). The dividend will be paid to those who are shareholders at end of trading on June 4, 2013, and the shares will be trading exclusive of dividend rights as of June 5, 2013.
For further details about the meeting held on June 4, 2013, please see the protocol from the Annual General Meeting published on the Oslo Stock Exchange website (www.oslobors.no).
For information about the employee option program, please see note 3 in the FY 2013 Annual Report.
During the year, the Company completed the offering of
The Board of Directors proposes that the 2013 Annual General Meeting approves a dividend payment of NOK 0.24 per share.
8,000,000 new shares, equal to 6.48% of the existing share capital of the Company. The offering, which was led by ABG Sundal Collier and Morgan Stanley, was comprised of a private placement to institutional investors in Norway and internationally. The over-subscribed offering was completed at a subscription price of NOK 68.50 per share, which was determined through an accelerated book-building process. Gross proceeds from the offering amounted to MNOK 548 (approximately MUSD 90). The net proceeds, of approximately MUSD 87.2, will be used to increase the Company ́s capital base for current and future strategic acquisition activities and obligations.
For information about the employee option program, please see note 3.
The 10 biggest shareholders of Opera Software ASA shares as of December 31, 2013, were as follows:
| CARRYING AMOUNT | FAIR LEVEL | |||||||
|---|---|---|---|---|---|---|---|---|
| [Numbers in MUSD] | Desig nated at fair value |
Loans and receiv ables |
Other financial liabilities |
Total | Level 1 | Level 2 | Level 3 | Total |
| Financial assets not measured at fair value |
||||||||
| Investments in other shares |
0.1 | 0.1 | 0.1 | 0.1 | ||||
| Other investments and deposits |
4.9 | 4.9 | 4.9 | 4.9 | ||||
| Accounts receivable | 61.5 | 61.5 | 61.5 | 61.5 | ||||
| Unbilled revenue | 32.4 | 32.4 | 32.4 | 32.4 | ||||
| Cash and cash equiva lents |
163.4 | 163.4 | 163.4 | 163.4 | ||||
| Total financial assets not measured at fair value |
0.0 | 262.3 | 0.0 | 262.3 | 0.0 | 0.0 | 262.3 | 262.3 |
| Financial liabilities measured at fair value |
||||||||
| Provisions | 59.7 | 59.7 | 59.7 | 59.7 | ||||
| Total financial liabilities measured at fair value |
59.7 | 0.0 | 0.0 | 59.7 | 0.0 | 0.0 | 59.7 | 59.7 |
| Financial liabilities not measured at fair value |
||||||||
| Secured bank loans | 60.1 | 60.1 | 60.1 | 60.1 | ||||
| Accounts payable | 22.2 | 22.2 | 22.2 | 22.2 | ||||
| Other short-term liabilities |
29.1 | 29.1 | 29.1 | 29.1 | ||||
| Total financial liabili ties not measured at fair value |
0.0 | 0.0 | 111.5 | 111.5 | 0.0 | 0.0 | 111.5 | 111.5 |
Financial assets and liabilities mainly comprise short-term items (non-interest-bearing). Based on this assessment, management does not consider the Group to have financial assets or liabilities with potentially significant differences between net book value and fair value.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
For more information, please see note 11.
| Desig nated at fair value |
Loans and receiv ables |
Other financial liabilities |
Total | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|---|---|---|
| 2.1 | 2.1 | 2.1 | 2.1 | ||||
| 3.6 | 3.6 | 3.6 | 3.6 | ||||
| 35.2 | 35.2 | 35.2 | 35.2 | ||||
| 26.7 | 26.7 | 26.7 | 26.7 | ||||
| 57.2 | 57.2 | 57.2 | 57.2 | ||||
| 0.0 | 124.8 | 0.0 | 124.8 | 0.0 | 0.0 | 124.8 | 124.8 |
| 28.8 | 28.8 | 28.8 | 28.8 | ||||
| 28.8 | |||||||
| 0.0 | 0.0 | 0.0 | 0.0 | ||||
| 19.6 | 19.6 | 19.6 | 19.6 | ||||
| 22.4 | 22.4 | 22.4 | 22.4 | ||||
| 0.0 | 0.0 | 41.9 | 41.9 | 0.0 | 0.0 | 41.9 | 41.9 |
| 28.8 | 0.0 | CARRYING AMOUNT 0.0 |
28.8 | 0.0 | FAIR LEVEL 0.0 |
28.8 |
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| [Numbers in MUSD] | Note | Contingent consideration |
|---|---|---|
| Balance as of 1/1/2012 | 9.4 | |
| Assumed in a business combination | 11 | 39.3 |
| Paid | 11 | -25.4 |
| Finance cost | 11 | 6.0 |
| Conversion discrepancy | 11 | -0.4 |
| OCI | 11 | 0.0 |
| Balance as of 12/31/2012 | 28.8 | |
| Assumed in a business combination | 11 | 54.7 |
| Paid | -14.6 | |
| Finance cost | 11 | -5.5 |
| Conversion discrepancy | 11 | -3.7 |
| OCI | 11 | 0.0 |
| Balance as of 12/31/2013 | 59.7 |
The following tables show the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used.
| Type | Valuation technique | Significant unobservable inputs |
Inter-relationship between significant unobservable inputs and fair value measurement |
|---|---|---|---|
| Contingent consideration | Discounted cash flows The valuation model considers the present value of expected payment, |
Forecasted annual revenue Forecasted EBIT *Risk-adjusted discount rate |
The estimated fair value would increase (decrease) if: |
| discounted using a risk-adjusted discount rate. The expected payment is |
*The annual revenue growth rate were higher (lower), |
||
| determined by considering the possible scenarios where Opera has forecast EBITDA, the amount to be |
* The EBIT margin were higher (lower); or |
||
| paid under each scenario and the probability of each scenario. |
* The risk-adjusted discount rate were lower (higher) |
||
| Generally, a change in the annual revenue growth rate is accompanied by a directionally similar change in EBIT margin. |
The following table shows a reconciliation from the opening balance to the closing balances for Level 3 fair values.
| Imbers in MUSD] | ||
|---|---|---|
Skyfire Labs — Earnout agreement and senior management incentive plan
Valuation techniques and key model inputs used to measure the contingent consideration:
Opera has estimated the total earnout value before discounting to be MUSD 57.2, at the acquisition date. Opera used a WACC of 25% and foreign exchange rate of 5.7214, when calculating the earnout. Based on these assumptions and the earnout valuation performed at the acquisition date, Opera calculated the fair value and booked a contingent consideration of MUSD 40.5 in the financial statements. The FY 2013, 2014 and FY 2015 earnout targets are both based on revenue and EBIT targets. The maximum possible payment for both FY 2013, 2014 and FY 2015 is MUSD 94.7. At the acquisition date, Opera calculated the earnout value before discounting to be MUSD 26.7 in FY 2013, MUSD 30.5 in FY 2014, and MUSD 0.0 in FY 2015. The weighted probability rates are estimated to change +/-10%. +/-10%. Please also see note 8 for more details. In 3Q 2013, Opera paid portions of the 2013 earnout payment of MUSD 11.7. Further, it has been agreed that up to the first MUSD 10.0 of any 2015 total earnout payments that become payable pursuant to the merger agreement are to be part of an incentive payment to certain senior management employees. The valuation of the contingent consideration is based on the same principles as described above. The contingent consideration is revalued each quarter, and MUSD 2.8 has been booked as a non-current provision as of December 31, 2013. For 2013, Opera booked MUSD 1.1 (2012: 0) as an interest expense and MSUD -1.6 (2012: 0) as change in likelihood. The weighted probability rates
and MUSD 0.4 has been booked as a non-current provision and MUSD 0.0 as a current provision as of December 31, 2013. For 2013, Opera booked MUSD 6.1 (2012: 0) as an interest expense, MUSD 2.0 (2012: 0) as an FX expense and MUSD -34.1 (2012: 0) as change in likelihood. The weighted probability rates are estimated to change
The contingent consideration is revalued each quarter, are estimated to change +/-10%.
Opera has estimated the total earnout values before discounting to be MUSD 25.4, at the acquisition date. Opera used a WACC between 20% and 25%, when calculating the earnout. Based on these assumptions and the earnout valuation performed at the acquisition date, Opera calculated the fair value and booked a contingent consideration of MUSD 15.9 in the financial statements. At the acquisition date, Opera calculated the earnout value before cember 31, 2013. For 2013, Opera booked MUSD 3.8 (2012: 0.3) as an interest expense, MUSD 0.1 (2012: -0.1) as an FX income and MUSD 3.2 (2012: -0.7) as change in likelihood. The weighted probability rates are estimated to change +/-10%. Please also see note 9 for more details. In 1Q 2013, Opera paid the 2012 earnout payment of MUSD 0.6.
| Sensitivity analysis [Numbers in MUSD] | Increase | Decrease |
|---|---|---|
| Annual revenue growth rate (10% movement) | 2.9 | -4.8 |
| EBIT margin (5% movement) | 0.6 | -4.8 |
| Sensitivity analysis [Numbers in MUSD] | Increase | Decrease |
|---|---|---|
| Annual revenue growth rate (10% movement) | 2.2 | -2.8 |
| EBIT margin (5% movement) | 5.7 | -6.8 |
discounting to be MUSD 1.3 in FY 2012, MUSD 9.9 in FY 2013, MUSD 7.1 in FY 2014, and MUSD 7.1 in FY 2015.
The contingent consideration is revalued each quarter, and MUSD 10.4 has been booked as a non-current provision and MUSD 11.6 as a current provision as of De-
Opera has estimated the total earnout value before discounting to be MUSD 45.5, at the acquisition date. Opera used a WACC of 20% and foreign exchange rate of 5.7284, when calculating the earnout. Based on these assumptions and the earnout valuation performed at the acquisition date, Opera calculated the fair value and booked a contingent consideration of MUSD 32.7 in the financial statements. The FY 2012 and FY 2013 earnout targets are both based on revenue and EBIT targets. The maximum possible payment for both FY 2012 and FY 2013 is MUSD 45.0, plus additional potential limited consideration based on over performance of EBIT in 2012 and 2013. At the ac-
| Sensitivity analysis [Numbers in MUSD] | Increase | Decrease |
|---|---|---|
| Annual revenue growth rate (10% movement) | 0.0 | 0.0 |
| EBIT margin (5% movement) | 0.4 | -0.4 |
| Sensitivity analysis [Numbers in MUSD] | Increase | Decrease |
|---|---|---|
| Annual revenue growth rate (10% movement) | 0.0 | -0.3 |
| EBIT margin (5% movement) | 0.0 | 0.0 |
Opera has estimated the total earnout value before discounting to be MUSD 6.9, at the acquisition date. Opera used a WACC of 20% and foreign exchange rate of 5.7284, when calculating the earnout. Based on these assumptions and the earnout valuation performed at the acquisition date, Opera calculated the fair value and booked a contingent consideration of MUSD 4.9 in the financial statements. The FY 2012 and FY 2013 earnout targets are both based on revenue and EBIT targets. The maximum possible payment for both FY 2012 and FY 2013 is MUSD 6.5, plus additional potential limited consideration based on over performance of EBIT in 2012 and 2013. At the acquisition date, Opera calculated the earnout value before discounting to be MUSD 18.3 in FY 2012 and MUSD 27.3 in FY 2013. The weighted probability rates are estimated to change +/-10%.
The contingent consideration is revalued each quarter, and MUSD 0.0 has been booked as a non-current provision and MUSD 30.2 as a current provision as of December 31, 2013. For 2013, Opera booked MUSD 6.3 (2012: 6.6) as an interest expense, MUSD 3.6 (2012: -1.3) as an FX expense and MUSD 2.2 (2012: 0.6) as change in likelihood. The weighted probability rates are estimated to change +/-10%. Please also see note 8 for more details.
In 4Q 2012, Opera prepaid the 2012 earnout payment of MUSD 17.8. The final 2012 earnout payment of MUSD 0.5 was paid in 2Q 2013.
quisition date, Opera calculated the earnout value before discounting to be MUSD 2.2 in FY 2012 and MUSD 4.7 in FY 2013. The weighted probability rates are estimated to change +/-10%.
The contingent consideration is revalued each quarter, and MUSD 0.0 has been booked as a non-current provision and MUSD 4.3 as a current provision as of December 31, 2013. For 2013, Opera booked MUSD 0.8 (2012: 0.7) as an interest expense, MNOK 0.5 (2012: -0.2) as an FX expense and MUSD -0.1 (2012: -0.2) as change in likelihood. The weighted probability rates are estimated to change +/-10%. Please also see note 8 for more details.
In 1Q 2013, Opera paid the 2012 earnout payment of MUSD 1.9.
| Costs for restructuring the business [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Salary restructuring cost | 0.2 | 5.9 |
| Option restructuring cost | 0.0 | 0.0 |
| Office restructuring cost | -0.1 | 3.0 |
| Termination cost — hosting center | 0.0 | 0.0 |
| Impairment cost | 0.0 | 3.0 |
| Legal fees related to business combinations | 1.9 | 0.9 |
| Other restructuring cost | 0.5 | 0.0 |
| Total | 2.5 | 12.8 |
During 4Q 2013, the Opera Group recorded restructuring charges related to a strategic cost reduction that will better align costs with revenues and legal fees related to business combinations.
During 1Q 2013, the Opera Group recorded legal fees related to business combinations.
As of December 31, 2013, MUSD 0.6 was not paid and booked as other short-term liabilities in the statement of financial position. The comparative number as of December 31, 2012, was MUSD 4.9.
Management has evaluated the development, selection and disclosure of the Group's critical accounting policies and estimates and the application of these policies and estimates.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
Based on signed contracts with large, established mar-
Note 13. Accounting estimates and judgments
In FY 2013, except for the Group's transactions with Hern Labs AB, Opera Software International AS, Opera Distribution AS, Netview Technology AS, and Opera Software Poland Sp. z o.o, the Group did not engage in any related party transactions, including with any members of the Board of Directors or the Executive Team. Please refer to notes 3 and 8 for additional information.
Members of the Board of Directors and the Executive Team of the Group and their immediate relatives controlled 7.7% of the Group's voting share as per December 31, 2013. The Company has not provided any loans to directors or Executive Team members as of December 31, 2013.
Executive Team members also participate in the Group's stock option program (see note 3). Compensation for Executive Team members can be found in note 3.
ket participants, Opera develops and adjusts the Opera browser so that it is compatible with mobile phones, game consoles and many other devices. The adjustments and modifications are carried out continuously over time. Hence, income and costs are booked in accordance with the percentage of completion method. Estimation of the degree of completion is based on the best estimate. Management's choice of estimates for the degree of completion will have a effect on booked income.
The Group has, in note 5, given a detailed analysis of the currency risk and risk related to changes in the foreign exchange rates.
The Group has entered into earnout agreements as specified in notes 8 and note 11. Opera has in note 11 given a detailed analysis of how the contingent considerations have been calculated. Changes in the chosen assumptions can have a significant impact on the size of the earnout cost.
The Group has established an option program for its employees. The options are booked in accordance with IFRS 2. The option costs are estimated on the basis of various assumptions, such as volatility, interest level, dividend and an assumption of how many will exercise their options, as well as other factors. The chosen assumptions can have a significant impact on the size of the option costs. The assumptions are given in note 3.
The Group has considered its activities related to technological development in terms of the requirements in IAS 38. The Company develops specially designed browsers for use in its customers' products. The reason the Group has entered into contracts with customers, committing the Company to develop a custom-made browser for a settled fee, is that the fee received is meant to cover Opera's expenses related to this specific technological components of the core platform will generate probable future economic benefits, are capitalized as development costs and amortized on a straight-line 3-year basis. Please refer to notes 4 and 7 for additional information.
development. These projects are booked in accordance with the percentage of completion method, which states that related income and expenses should be booked in the same period. Cost of building new features, together with significant and pervasive improvements of the core platform, provided that the significant and pervasive improvements of parts or main In some contracts, Opera receives a fee that covers development and a guaranteed number of licenses, as well as maintenance in the subsequent period. The elements in the different contracts are assessed in accordance with the best estimate of true value and booked as the elements are delivered. If the elements can not be separated, all income is booked in aggregate, in accordance with the percentage of completion method.
A significant portion of the work that engineering performs (beyond specifically designed browsers) is related to the implementation of the ongoing updates that are required to maintain the browser's functionality. Examples of updates include "bug fixes", updates made to comply with changes in laws and regulations, and updates made to keep pace with the latest web trends. These costs are expensed as maintenance costs.
| Earning per share [Numbers in USD] | 2013 | 2012 |
|---|---|---|
| Earnings per share (basic) | 0.490 | 0.143 |
| Earnings per share, fully diluted | 0.479 | 0.140 |
| Shares used in earnings per share calculation | 123 156 089 | 118 782 269 |
| Shares used in earnings per share calculation, fully diluted | 125 783 923 | 121 173 334 |
Earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted ordinary shares in issue during the period.
The average stock exchange price for 2013 is used when calculating the options that are "in the money" and when calculating the fully diluted number of shares. The options have varying exercise prices and would, upon exercise, mean payment to the Company of MNOK 205.2. In relation
| 2013 | 2012 | |
|---|---|---|
| Average number of shares | 123 156 089 | 118 782 269 |
| The following equity instruments have a diluting effect: | ||
| Options | 7 109 283 | 7 758 356 |
| Total | 7 109 283 | 7 758 356 |
| Options | 7 109 283 | 7 758 356 |
| Number of shares purchased (MNOK 205.2/51.06) | 4 017 714 | 4 945 339 |
| Number of shares with diluting effect | 3 091 569 | 2 813 017 |
| Expected options to be exercised | 2 627 834 | 2 391 065 |
to the accounting standard regarding earnings per share, the effect of these funds being used by the Company to purchase shares in the market should be considered when calculating the fully diluted number of shares outstanding. Opera has included options with a strike price below NOK 51.06 when calculating the fully diluted number of shares outstanding. Total options used in the calculations are 7,109,283, of which 5,883,183 options are unvested and 1,226,100 are vested but not yet exercised.
No subsequent events have occurred after the reporting date that would require the consolidated financial statements to be adjusted.
For announcements of new contracts, please see announcements published on the Oslo Stock Exchange website (www.oslobors.no).
| 1/1 - 12/31 | 1/1 - 12/31 | ||
|---|---|---|---|
| Numbers in MUSD | Note | 2013 | 2012 |
| Revenue | 1, 2, 5 | 169.8 | 160.8 |
| Total operating revenue | 169.8 | 160.8 | |
| Cost of goods sold | 5 | 0.0 | 0.0 |
| Payroll and related expenses | 3, 5 | 31.0 | 44.3 |
| Depreciation expenses | 5, 7 | 4.4 | 2.2 |
| Impairment of shares | 8 | 12.3 | 0.0 |
| Other operating expenses | 3, 4, 5, 7, 14 | 83.3 | 73.9 |
| Total operating expenses | 131.0 | 120.5 | |
| Results from operating activities ("EBIT"), excl. restructuring costs |
38.7 | 40.4 | |
| Costs for restructuring the business | 13 | 1.8 | 7.3 |
| Results from operating activities ("EBIT") | 36.9 | 33.1 | |
| Interest income | 5, 9 | 2.2 | 3.3 |
| Other financial income | 5 | 15.9 | 1.8 |
| Interest expenses | 5, 9 | -1.4 | -0.1 |
| Interest expense related to contingent consideration | 8, 11 | -6.1 | 0.0 |
| FX gains/losses related to contingent consideration, net | 8, 11 | -2.0 | 0.0 |
| Revaluation of contingent consideration | 8, 11 | 34.1 | 0.0 |
| Other financial expenses | 5 | -4.6 | -7.7 |
| Profit before income tax | 74.9 | 30.3 | |
| Income tax on ordinary result | 6 | 17.4 | 9.3 |
| Profit for the period | 57.6 | 21.0 | |
| Other comprehensive income may be reclassified to profit and loss: |
|||
| Foreign currency translation differences for foreign operations |
-13.6 | 9.3 | |
| Total comprehensive income for the period | 44.0 | 30.3 | |
| Profit attributable to: | |||
| Owners of the Company | 57.6 | 21.0 | |
| Non-controlling interest | 0.0 | 0.0 | |
| Profit for the period | 57.6 | 21.0 | |
| Total comprehensive income attributable to: | |||
| Owners of the Company | 44.0 | 30.3 | |
| Non-controlling interest | 0.0 | 0.0 | |
| Total comprehensive income for the period | 44.0 | 30.3 | |
| Earnings per share: | |||
| Basic earnings per share (USD) | 16 | 0.467 | 0.177 |
| Diluted earnings per share (USD) | 16 | 0.458 | 0.173 |
The parent company annual accounts report for Opera Software ASA contains the following documents:
The financial statements, which have been drawn up by the Board and management, should be read in relation to the Annual Report and the independent auditor's opinion.
| Numbers in MUSD | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Shareholders' equity and liabilities | ||
| Equity | ||
| Paid in capital | ||
| Share capital 10 |
0.4 | 0.4 |
| Share premium | 184.2 | 81.9 |
| Other reserves | 19.1 | 16.8 |
| Total paid in capital | 203.7 | 99.1 |
| Retained earnings | ||
| Other equity | 102.9 | 53.1 |
| Total retained earnings | 102.9 | 53.1 |
| Total equity | 306.6 | 152.2 |
| Liabilities | ||
| Non-current liabilities | ||
| Provisions 12 |
0.4 | 0.0 |
| Total non-current liabilities | 0.4 | 0.0 |
| Current liabilities | ||
| Accounts payable 9, 11 |
14.5 | 14.3 |
| Taxes payable 6 |
12.8 | 7.0 |
| Social security, VAT and other taxation payable | 9.3 | 4.7 |
| Deferred revenue 5 |
14.3 | 9.4 |
| Option liability 3 |
0.1 | 0.1 |
| Other short-term liabilities 5, 9, 11 |
39.4 | 12.6 |
| Provisions 12 |
0.0 | 0.0 |
| Total current liabilities | 90.5 | 48.1 |
| Total liabilities | 90.9 | 48.1 |
| Total equity and liabilities | 397.5 | 200.4 |
| Shareholders' equity and liabilities |
|---|
| Equity |
| Paid in capital |
| Retained earnings |
| Liabilities |
| Non-current liabilities |
| Current liabilities |
| Oslo, April 10, 2014 |
Arve Johansen Chairman
Marianne Blystad
Christian Mauricio Uribe Espinoza Employee Representative
Krystian Kolondra
Employee Representative
Lars Boilesen CEO
Audun Wickstrand Iversen
Gregory Gerard Coleman Erik Möller
Employee Representative
Kari Stautland
| Numbers in MUSD | Note | 1/1 - 12/31 2013 |
1/1 - 12/31 2012 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit/loss before taxes | 74.9 | 30.3 | |
| Taxes paid | 6 | -10.8 | -6.0 |
| Depreciation expenses | 7 | 4.4 | 2.2 |
| Profit/loss from sales of property, plant and equipment | 0.0 | 0.0 | |
| Impairment of assets | 7 | 0.0 | 0.0 |
| Impairment of shares | 8 | 12.3 | 0.0 |
| Loss on sale of shares | 8 | 0.0 | 0.0 |
| Changes in accounts receivable * | -8.4 | -9.3 | |
| Changes in accounts payable | -2.8 | 1.7 | |
| Changes in other liabilities and receivables, net | 31.8 | 7.4 | |
| Share-based remuneration | 3 | 0.9 | 2.4 |
| Interest and FX related to contingent payment /** | 8, 12 | -26.0 | 0.0 |
| Conversion discrepancy | -7.0 | 9.5 | |
| Net cash flow from operating activities | 69.3 | 38.3 | |
| Cash flow from investment activities | |||
| Proceeds from sale of assets | 7 | 0.7 | 0.8 |
| Capital expenditures | 7 | -2.1 | -5.2 |
| Investment in R&D **** | 4, 7 | -8.7 | -1.7 |
| Acquisition of shares ** | 8 | -143.7 | -0.8 |
| Other investments *** | 8 | -7.9 | -4.9 |
| Net cash flow from investment activities | -161.7 | -11.8 | |
| Cash flow from financing activities | |||
| Proceeds from exercise of own shares (incentive program) | 10 | 1.5 | 3.4 |
| Proceeds of share issues, net (incentive program) | 10 | 8.4 | 0.0 |
| Proceeds of share issues, net (equity increase) | 10 | 87.2 | 0.0 |
| Dividends paid | 10 | -4.4 | -4.0 |
| Purchase of own shares | 10 | 0.0 | |
| Net cash flow from financing activities | 92.7 | -0.6 | |
| Net change in cash and cash equivalents | 0.3 | 25.9 | |
| Cash and cash equivalents (beginning of period) | 128.2 | 102.3 | |
| Cash and cash equivalents * | 128.4 | 128.2 |
*Interest income and interest expenses are included in the profit and loss. Interest paid and interest received are recognized in the same year that interest income and interest expenses are recognized in the profit and loss, with the exception of interest related to re-evaluation of the contingent payment related to acquisitions. Conversion differences and interest related to re-valuation of the contingent payment are booked on a separate line as net cash flow from operating activities.
**Changes in unbilled revenue are included in changes in accounts receivables in the statement of cash flows.
***On March 14, 2013, Opera Software ASA acquired 100% of the shares and voting interest of the privately-held company Skyfire Labs, Inc., following a payment equivalent to MUSD 49.0 comprising MUSD 35.9 in cash and MUSD 13.2 in shares (no cash-flow effect) of Opera Software ASA. At the same time, a second payment of MUSD 25.7 was set in escrow and is to be released if certain financial targets are achieved.
****In 2013, MUSD 8.7 (2012: 1.7) of Opera's investment in product development was capitalized in the consolidated statement of financial position.
*****As of December 31, 2013, the conversion discrepancy profit booked on cash and cash equivalents was MUSD -1.6, and the comparative number as of December 31, 2012, was MUSD 4.3.
| Numbers in MUSD | Number of shares |
Share capital |
Share premi um |
Other re serves |
Reserve for own shares |
Trans lation reserve |
Other equity |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance as of 12/31/2012 | 119.2 | 0.4 | 77.4 | 16.1 | 0.0 | 6.2 | 52.2 | 152.2 |
| Comprehensive income for the period |
||||||||
| Profit for the period | 57.6 | 57.6 | ||||||
| Other comprehensive income |
||||||||
| Foreign currency translation differences |
-13.6 | -13.6 | ||||||
| Total comprehensive income for the period |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -13.6 | 57.6 | 44.0 |
| Contributions by and distributions to owners |
||||||||
| Dividend to equity holders | -4.4 | -4.4 | ||||||
| Issue of ordinary shares related to business combi nations |
2.0 | 0.0 | 13.2 | 13.2 | ||||
| Issue of ordinary shares related to the incentive program |
2.7 | 0.0 | 8.4 | 8.4 | ||||
| Issue of ordinary shares related to equity increase |
8.0 | 0.0 | 87.2 | 87.2 | ||||
| Own shares acquired | 0.0 | |||||||
| Own shares sold | 0.3 | 0.0 | 1.5 | 1.5 | ||||
| Tax deduction on equity bookings |
0.9 | 0.0 | 0.9 | |||||
| Share-based payment transactions |
3.7 | 3.7 | ||||||
| Total contributions by and distributions to owners |
13.1 | 0.0 | 109.7 | 3.7 | 0.0 | 0.0 | -2.9 | 110.5 |
| Other equity changes | ||||||||
| Other changes | 0.0 | 0.0 | 0.0 | |||||
| Total other equity changes | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Balance as of 12/31/2013 | 132.3 | 0.4 | 187.0 | 19.8 | 0.0 | -7.4 | 106.9 | 306.6 |
The face value of the shares is NOK 0.02.
Other reserves consist of option costs booked according to the equity settled method and issued shares registered in the period after the current financial year.
The reserve for the Company's own shares comprises the face value cost of the Company's shares held by the Company.
| Numbers in MUSD | Number of shares |
Share capital |
Share premi um |
Other re serves |
Reserve for own shares |
Trans lation reserve |
Other equity |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance as of 12/31/2011 | 117.9 | 0.4 | 77.4 | 12.6 | -0.0 | -3.1 | 31.1 | 118.3 |
| Comprehensive income for the period |
||||||||
| Profit for the period | 21.0 | 21.0 | ||||||
| Other comprehensive income |
||||||||
| Foreign currency translation differences |
9.3 | 9.3 | ||||||
| Total comprehensive income for the period |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 9.3 | 21.0 | 30.3 |
| Contributions by and distributions to owners |
||||||||
| Dividend to equity holders | -4.0 | -4.0 | ||||||
| Own shares acquired | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Own shares sold | 1.3 | 0.0 | 3.4 | 3.4 | ||||
| Tax deduction loss own shares |
0.7 | 0.7 | ||||||
| Issue expenses | 0.0 | 0.0 | ||||||
| Tax deduction on equity bookings |
0.0 | 0.0 | 0.0 | |||||
| Share-based payment transactions |
3.5 | 0.0 | 3.5 | |||||
| Total contributions by and distributions to owners |
1.3 | 0.0 | 0.0 | 3.5 | 0.0 | 0.0 | 0.1 | 3.6 |
| Other equity changes | ||||||||
| Other changes | 0.0 | 0.0 | 0.0 | |||||
| Total other equity changes | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Balance as of 12/31/2012 | 119.2 | 0.4 | 77.4 | 16.1 | 0.0 | 6.2 | 52.2 | 152.2 |
The translation reserve consists of all foreign currency differences arising from the translation of the financial statements of foreign operations.
Other equity consists of all other transactions, including, but not limited to, total recognized income and expense for the current period and excess value of the Company's own shares.
| Revenue by region [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| EMEA | 87.1 | 67.9 |
| Americas | 48.6 | 61.0 |
| Asia Pacific | 34.0 | 31.9 |
| Total | 169.8 | 160.8 |
The Company's business activities stem from browser related sales (i.e., revenue generated from Opera's owned and operated properties, such as license, search and advertising revenue).
Opera's chief operating decision makers are members of the Executive Team. The Executive Team meets regularly to review the period's assets, liabilities, revenues and costs for the Group as a whole, as well as to make decisions about how resources are to be allocated based on this information.
Information about the accounting principles is given in the accomanying note 1 in the consolidated financial statement.
The geographical revenue breakdown reflects revenues from external customers attributed to the entity's country of domicile. Consequently, the revenue breakdown reflects the location of Opera's customers and partners. Because the products of Opera's customers and partners are distributed globally, the breakdown above does not accurately reflect where Opera's derivative products are actually used.
Members of the Executive Team are specified in note 3 in the consolidated financial statements.
Based on the above, Opera has determined that it has one segment. Please see note 1, in the consolidated financial statements, for a definition of products and services for each reportable segment.
In 2013, Opera had sales to two customers that accounted for more than 10% of total Group revenues. FY 2013 revenue from these two customers, on a combined basis, ranged between MUSD 60 and MUSD 70 in total. Revenue attributed to customers domiciled in the United States amounted to MUSD 43.1 (2012: 57.7).
Revenues attributed to Norway for 2013 were MUSD 0.0 (2012: 0.2), and revenues attributed to all foreign countries in total were MUSD 169.7 (2012: 160.7).
| Licenses/royalties | |
|---|---|
| Development fees | |
| Maintenance, support and hosting | |
| Search | |
| Advertising | |
| Application and content | |
| Other revenue | |
| Total |
| Total | |
|---|---|
| Other | |
| Device OEMs | |
| Desktop Consumers | |
| Mobile Consumers | |
| Mobile Operators | |
| Revenue type [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Licenses/royalties | 76.8 | 67.8 |
| Development fees | 8.5 | 11.2 |
| Maintenance, support and hosting | 6.1 | 6.7 |
| Search | 55.3 | 62.6 |
| Advertising | 22.6 | 9.1 |
| Application and content | 0.4 | 3.0 |
| Other revenue | 0.0 | 0.4 |
| Total | 169.8 | 160.8 |
| Revenue customer type [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Mobile Operators | 50.5 | 41.7 |
| Mobile Consumers | 39.4 | 19.4 |
| Desktop Consumers | 60.9 | 67.5 |
| Device OEMs | 18.2 | 28.2 |
| Other | 0.8 | 4.1 |
| Total | 169.8 | 160.8 |
Mobile Operators: Opera is a trusted partner for operators, globally. The Company currently offers four major cloud-based solutions and services to Operators worldwide: (i) Operator/Co-branded versions of Opera Mini, whereby Operators are able to offer their mass-market subscribers content compression, fast internet download speeds, convenient access to operator portal services in order to drive incremental revenue, and lower-priced data plans and data packages, capitalizing on the up to 90% data compression that Opera´s cloud services enables; (ii) the Rocket Optimizer™ solution, which allows mobile operators to leverage cloud computing to optimize and compress video and other multimedia traffic on crowded mobile towers, including 3G and 4G LTE networks, enabling operators to both boost the capacity of their networks by up to 60% and offer better network performance and quality to their subscribers; (iii) the Horizon™ solution, a mobile browser extension and toolbar platform that allows users to personalize their smartphone browser and operators to gain new monetization opportunities, such as advertising; and (iv) Opera Web Pass, which allows users to buy time-based or content-based mobile data packages easily via a simple, one-click purchase, similar to how users buy apps today, enabling operators to both offer a broad array of personalized data package alternatives for their subscribers and increase average revenue generated per subscriber.
Mobile Consumers (Opera-owned-and-operated properties): Opera has around 270 million mobile users of consumer products on a monthly basis. Opera is placing a significant emphasis on developing and expanding its owned and operated properties and capitalizing on our extensive mobile consumer user base. These owned and operated properties include the Speed Dial page, the Smart Page, the Opera Mobile Store and the Discover feature. These Opera-owned-and-operated properties are expected to be monetized primarily via mobile advertising, mobile search and mobile applications.
Desktop Consumers: Since the first public release in 1995, Opera has continuously delivered browser innovation to desktop PCs. Opera's desktop browser provides our users with a safe, efficient and enjoyable browsing experience. Today, the vast majority of Opera's desktop users are in the Russia/CIS region and in emerging markets. Opera is particularly focused on gaining users in regions where it already has a strong base of users, such as Russia.
Global Device Original Equipment Manufacturers (Device OEMs): With the Opera Devices Software Developer Kit (SDK), device manufacturers are able to offer not only web browsing capabilities and full internet access to their operator and consumer end customers, but also customized web apps that are accessible from the home screen of the device. Moreover, with the Opera Devices SDK, device manufacturers are able to use their own (and third-party) developers to enable full web browsing, create user interfaces, widgets and menu systems using web technologies, such as HTML5 and CSS, HbbTV and OIPF, while accelerating time to market for new consumer electronic devices.
| In thousands of options | Weighted av erage exercise price 2013 (NOK) |
Number of options 2013 |
Weighted av erage exercise price 2012 (NOK) |
Number of options 2012 |
|---|---|---|---|---|
| Outstanding at the beginning of the period |
25.70 | 7 184 | 21.19 | 6 684 |
| Transferred | -1 724 | 0 | ||
| Terminated (employee terminations) | 33.99 | 136 | 19.59 | 73 |
| Forfeited during the period | 0.00 | 0 | 0.00 | 0 |
| Expired during the period | 0.00 | 0 | 0.00 | 0 |
| Exercised during the period | 24.82 | 1 946 | 15.05 | 916 |
| Granted during the period | 35.09 | 490 | 28.09 | 1 489 |
| Outstanding at the end of the period | 3 868 | 7 184 | ||
| Exercisable at the end of the period | 861 | 2 033 |
| Wage costs [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Salaries/bonuses | 21.8 | 32.0 |
| Social security cost | 4.2 | 5.3 |
| Pension cost | 1.6 | 1.6 |
| Share-based remuneration including social security cost | 1.0 | 2.4 |
| Other payments | 1.9 | 2.7 |
| Consultancy fees for technical development | 0.4 | 0.3 |
| Total | 31.0 | 44.3 |
| Average number of employees | 245 | 299 |
The company has incorporated the requirements with regards to Obligatorisk Tjeneste Pensjon (OTP).
Information about remuneration to key management personnel is given in the accompanying note 3 in the consolidated financial statements.
The total fees billed by the independent auditors during 2013 were MUSD 0.3 (2012: 0.3). This is broken down as follows:
| Audit fees [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Statutory audit | 0.2 | 0.2 |
| Assurance services | 0.0 | 0.0 |
| Tax advisory fee | 0.0 | 0.0 |
| Other services | 0.1 | 0.1 |
| Total | 0.3 | 0.3 |
Other services include services from KPMG Law.
ments.
The number and weighted average exercise price of share options are as follows:
| 12,73 13,20 45,00 45,00 |
|---|
| 5,00 4,52 |
| 0,00 0,00 |
| 1,90 1,33 |
| Options that have not yet vested shall be adjusted for any dividend paid out during the vesting period. |
| TOTAL OUTSTANDING OPTIONS | VESTED OPTIONS | ||||
|---|---|---|---|---|---|
| Exercise price [In thousands of options] |
Outstanding options per 12/31/2013 |
Weighted aver age remaining lifetime |
Weighted av erage exercise price (NOK) |
Vested options 12/31/2013 |
Weighted av erage exercise price (NOK) |
| 10.00 - 12.30 | - | 0.00 | 0.00 | - | 0.00 |
| 12.30 - 15.00 | - | 0.00 | 0.00 | - | 0.00 |
| 15.00 - 20.00 | 700 | 1.63 | 19.14 | 700 | 19.14 |
| 20.00 - 25.00 | 525 | 4.15 | 21.41 | 85 | 21.93 |
| 25.00 - 30.00 | 1 351 | 5.07 | 27.26 | 56 | 27.92 |
| 30.00 - 35.00 | 585 | 6.06 | 34.28 | 20 | 32.10 |
| 35.00 - 40.00 | 708 | 5.94 | 37.49 | 0 | 0.00 |
| Total | 3 868 | 4.63 | 27.93 | 861 | 20.29 |
| Date of exercise [In thousands of options] Number of exercised options Achieved selling price (NOK) |
|
|---|---|
| 3/13/2013 100 |
38.37 |
| 6/17/2013 30 |
45.00 |
| 6/18/2013 409 |
45.18 |
| 9/10/2013 805 |
57.31 |
| 12/6/2013 602 |
78.05 |
Exercise price = strike price
| Other expenses [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Intercompany services | 62.6 | 57.5 |
| Rent and other office expenses | 2.5 | 1.9 |
| Equipment | 1.8 | 1.4 |
| Audit, legal and other advisory services | 2.6 | 2.6 |
| Marketing expenses | 5.3 | 3.7 |
| Travel expenses | 2.9 | 3.1 |
| Hosting expenses, excl. depreciation cost | 1.2 | 0.8 |
| Other expenses | 4.4 | 2.9 |
| Total | 83.3 | 73.9 |
The Company purchases marketing services and technical services from the subsidiaries Hern Labs AB, Opera Distribution AS, Netview Technology AS and Opera Software International AS (which has branches/subsidiaries in Japan, United States, the United Kingdom, Ukraine, Ireland, the Netherlands, Korea, China, Poland, Taiwan, Russia, Australia, Iceland, Singapore, and India). The cost is included in intercompany services above.
Engineering salaries are the primary expense incurred
Rental deposits comprise the majority of other non-current investments and deposits together with a loan to nHorizon Innovation of MUSD 2.3.
The majority of the financial risk carried by the Group, as a result of its subsidiaries, relates to foreign exchange fluctuations. Both sales and purchases are exposed to currency risk.
Most of the Company's foreign exchange risk relates to sales and is the result of revenue contracts signed in USD and EUR. For FY 2013, approximately 23% (2012: 29%) of revenues were in EUR and 68% (2012: 67%) in USD.
For FY 2013, Opera had a foreign exchange gain of MUSD 9.2. MUSD 10.7 of the foreign exchange gain was realized, and MUSD 1.5 was net unrealized foreign exchange loss. Opera has not entered into any foreign exchange contracts as of December 31, 2013.
| [Numbers in MUSD] | 2013 | 2012 | ||
|---|---|---|---|---|
| MUSD | % | MUSD | % | |
| NOK | 0.4 | 0.24 | 0.2 | 0.14 |
| USD | 115.8 | 68.21 | 107.6 | 66.88 |
| GBP | 0.1 | 0.08 | 0.1 | 0.08 |
| JPY | 0.5 | 0.28 | 0.8 | 0.52 |
| CAD | 0.0 | 0.01 | 0.0 | 0.01 |
| CHF | 0.2 | 0.09 | 0.0 | 0.00 |
| PLN | 0.0 | 0.02 | 0.1 | 0.05 |
| CNY | 12.7 | 7.47 | 2.6 | 1.61 |
| BYR | 1.4 | 0.83 | 1.8 | 1.12 |
| SEK | 0.0 | 0.00 | 0.0 | 0.02 |
| EUR | 38.5 | 22.70 | 47.3 | 29.39 |
| SGD | 0.0 | 0.02 | 0.1 | 0.05 |
| INR | 0.0 | 0.01 | 0.0 | 0.00 |
| AUD | 0.1 | 0.06 | 0.2 | 0.15 |
| Total | 169.8 | 100.00 | 160.8 | 100.00 |
Conversion of the Company's revenues from foreign currencies into USD yields the following average exchange rates:
A 10% increase in the average exchange rate would have the following positive effect on the Company's revenue (MUSD):
| 2013 | 2012 | 2013 | 2012 | ||
|---|---|---|---|---|---|
| NOK | 0.1708 | 0.1729 | NOK | 0.0 | 0.0 |
| GBP | 1.5791 | 1.5900 | GBP | 0.0 | 0.0 |
| JPY | 0.0103 | 0.0124 | JPY | 0.0 | 0.1 |
| CAD | 0.9609 | 1.0015 | CAD | 0.0 | 0.0 |
| CHF | 1.0931 | CHF | 0.0 | 0.0 | |
| PLN | 0.3160 | 0.3106 | PLN | 0.0 | 0.0 |
| CNY | 0.1617 | 0.1585 | CNY | 1.3 | 0.3 |
| BYR | 0.0001 | 0.0001 | BYR | 0.1 | 0.2 |
| SEK | 0.1536 | 0.1515 | SEK | 0.0 | 0.0 |
| EUR | 1.3314 | 1.2932 | EUR | 3.9 | 4.7 |
| SGD | 0.8075 | 0.8008 | SGD | 0.0 | 0.0 |
| INR | 0.0172 | INR | 0.0 | 0.0 | |
| AUD | 0.9342 | 1.0457 | AUD | 0.0 | 0.0 |
For FY 2012, Opera had a foreign exchange loss of MUSD 6.0. MUSD 5.2 of the foreign exchange loss was realized, and MUSD 0.8 was net unrealized foreign exchange loss. Opera has not entered into any foreign exchange contracts as of December 31, 2012.
As the majority of Opera Software's income is earned in USD and EUR, changes in exchange rates have an immediate effect on the Company's revenue.
Conversely, a 10% decrease in the average exchange rate would have a similar negative effect on the Company's revenue as shown above (MUSD).
Accounts receivable as of December 31, 2013, are converted using the following exchange rates: EUR 1.3787, JPY 0.0095, NOK 0.1646, GBP 1.6521, PLN 0.3321, CNY 0.1637 and INR 0.0162.
| 2013 | 2012 | |
|---|---|---|
| USD | 10.4 | 7.0 |
| EUR | 9.4 | 8.9 |
| JPY | 0.8 | 3.5 |
| NOK | 0.7 | 0.1 |
| GBP | 0.0 | 0.0 |
| PLN | 0.1 | 0.1 |
| CAD | 0.0 | 0.0 |
| SEK | 0.0 | 0.2 |
| CNY | 7.0 | 2.9 |
| ISK | 2.1 | 0.0 |
| INR | 0.1 | 1.3 |
The numbers above are presented in local currencies.
Opera conducts most of its business with large global companies. Throughout last year, the Company conducted business with a number of its customers without suffering significant credit-related losses.
The customers have not committed any collateral or other means to secure their outstanding debt.
Credit risk regarding accounts receivable may be specified per region as follows (MUSD):
| 2013 | 2012 | |
|---|---|---|
| EMEA | 13.2 | 4.3 |
| Americas | 3.7 | 5.1 |
| Asia Pacific | 7.9 | 10.0 |
| Total | 24.7 | 19.4 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Gross receivables | Provision for bad debt |
Gross receivables | Provision for bad debt |
|
| Not past due | 8.9 | 0.0 | 7.3 | 0.0 |
| Past due 0-30 days | 4.9 | 0.0 | 6.9 | 0.2 |
| Past due 31-60 days | 3.1 | 0.0 | 1.0 | 0.1 |
| Past due 61-90 days | 4.2 | 1.1 | 2.0 | 0.1 |
| More than 90 days | 3.6 | 1.4 | 2.2 | 1.8 |
| Total | 24.7 | 2.5 | 19.4 | 2.3 |
The majority of the 2013 receivables that are more than 90 days outstanding have been paid in 2014 or booked against deferred income in the "Statement of financial position".
Changes in the provision for bad debt may be specified as follows (MUSD):
| 2013 | 2012 | |
|---|---|---|
| Provision as of January 1 | 2.3 | 1.6 |
| Change in the provision for bad debt recognized in the "Statement of comprehensive income" |
0.4 | 0.6 |
| Change in the provision for bad debt not recognized in the "Statement of comprehensive income"* |
0.0 | 0.0 |
| Change in the provision for bad debt not recognized in the "Statement of comprehensive income" ** |
0.0 | 0.1 |
| Currency adjustment | -0.2 | 0.0 |
| Provision as of December 31 | 2.5 | 2.3 |
| Realized losses, recognized directly in the "Statement of comprehensive income" |
1.3 | 0.2 |
| Received from previously written-down bad debts | 0.0 | 0.0 |
* Booked against deferred income in the "Statement of financial position"
** Previously written-down bad debts taken out of accounts receivable
| Liquidity reserve [Numbers in MUSD] | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Cash and cash equivalents | ||
| Cash in hand and on deposit | 128.4 | 128.2 |
| —of which restricted funds* | 7.6 | 1.8 |
| Unrestricted cash | 120.8 | 126.4 |
| Unutilized credit facilities | 0.0 | 0.0 |
| Short-term overdraft facility | 0.0 | 0.0 |
| Liquidity reserve | 0.0 | 0.0 |
The Group had the following liquidity reserve and credit facility as of December 31, 2013:
*Cash and cash equivalents of MUSD 7.6 were restricted assets as of December 31, 2013, and cash and cash equivalents of MUSD 1.8 were restricted assets as of December 31, 2012.
| Credit facility [Numbers in MUSD] | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Long-term cash credit | 0.0 | 0.0 |
| — of which utilized | 0.0 | 0.0 |
| Short-term overdraft facility | 0.0 | 0.0 |
| — of which utilized | 0.0 | 0.0 |
Opera Software International US, Inc., has, in February 2013, signed a MUSD 100 secured revolving credit facility with DNB Bank ASA. The facility will primarily be secured through a share pledge in Opera Software International AS, as well as floating charges over accounts receivable in Opera Software ASA and certain of its U.K. and U.S. subsidiaries. More credit facility information is given in the accompanying note 5 to the consolidated financial statements.
During FY 2013 and FY 2012, the Company did not use forward exchange contracts to hedge its currency risk, and Opera had not entered into any foreign exchange contracts as of December 31, 2013.
Deferred revenue consists of prepaid license/royalty payments, prepaid maintenance and support, and prepaid development fees. Of the Company's total current liabilities, MUSD 14.3 (2012: 9.4) relates to deferred revenue, and MUSD 11.6 (2012: 8.9) relates to deferred revenue that has no future cash payments.
In order to achieve the Company's ambitious, long-term objectives, the policy has been to maintain a high equity-to-asset ratio and to maintain a solid capital base so as to maintain investor, creditor, and market confidence and to sustain future development of the business. The Company still possesses a business model that anticipates considerable cash flow in the future.
The Company has issued options to our employees in accordance with our objective that employees shall hold company shares.
The Board of Directors has as of December 31, 2013, not used its authorization to buy the Company's own shares. Please see note 9 to the consolidated financial statements for more information.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
| Current tax [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Profit before income tax | 74.9 | 30.3 |
| Permanent differences in profit and loss | -16.1 | 0.3 |
| Tax deductible issue cost booked against equity | 0.0 | 0.0 |
| Taxes paid abroad | 0.0 | 0.0 |
| Changes in temporary differences | 1.2 | 3.5 |
| Use of taxable loss carried forward | 0.0 | 0.0 |
| Basis for current tax | 60.1 | 34.0 |
| Tax 28% | 16.8 | 9.5 |
| Tax losses paid abroad carried forward | -3.9 | -2.8 |
| Current tax | 12.9 | 6.7 |
| Tax expense [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Current tax | 13.7 | 7.6 |
| Deferred tax — gross changes | -0.3 | -1.0 |
| Tax expense related to change in tax rate | 0.1 | 0.0 |
| Taxes on capital raising costs | 0.0 | 0.0 |
| Tax effect on losses from sales of own shares | 0.0 | 0.0 |
| Tax payable abroad | 3.9 | 2.9 |
| Too much/little tax booked previous year | 0.0 | -0.1 |
| Total | 17.4 | 9.3 |
| Tax payable [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Current tax | 13.7 | 7.6 |
| Tax payable abroad | 3.9 | 2.9 |
| Too much/little tax booked previous year | 0.0 | 0.2 |
| Taxes on capital raising costs | 0.0 | 0.0 |
| Withholding tax paid to a foreign country | -3.9 | -2.9 |
| Tax effect on losses from sales of own shares* | -0.9 | -0.7 |
| Withholding tax utilized | 0.0 | 0.0 |
| Total | 12.8 | 7.0 |
*Booked against equity
*Including tax effect from equity bookings of MUSD 0.9
| 2013 | 2012 |
|---|---|
| 0.0 | 0.0 |
| 0.0 | 0.0 |
| 0.0 | 0.0 |
Deferred tax assets and liabilities are attributable to the following:
| ASSETS | LIABILITIES | NET | ||||
|---|---|---|---|---|---|---|
| [Numbers in MUSD] | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Inventory, office machinery, etc. | -1.3 | -0.9 | 0.0 | 0.0 | -1.3 | -0.9 |
| Accounts receivables | -0.5 | -0.6 | 0.0 | 0.0 | -0.5 | -0.6 |
| Derivatives | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other liabilities | -1.1 | -1.4 | 0.0 | 0.0 | -1.1 | -1.4 |
| Tax value of loss carry-forwards utilized | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Withholding tax paid to a foreign country carried forward |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Deferred taxes/ (tax assets) | -2.9 | -3.0 | 0.0 | 0.0 | -2.9 | -3.0 |
| Set-off of tax | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net deferred taxes / (tax assets) | -2.9 | -3.0 | 0.0 | 0.0 | -2.9 | -3.0 |
Movement in temporary differences during the year
| Posted directly | ||||||||
|---|---|---|---|---|---|---|---|---|
| [Numbers in MUSD] | Balance 1/1/12 |
Posted to P/L |
to the equity capital |
Balance 12/31/12 |
||||
| Inventory, office machinery, etc. | -0.1 | -0.8 | 0.0 | -0.9 | ||||
| Accounts receivables | -0.4 | -0.2 | 0.0 | -0.6 | ||||
| Liabilities | -0.6 | -0.8 | 0.0 | -1.4 | ||||
| Tax value of loss carry-forwards utilized | 0.0 | -0.0 | 0.0 | 0.0 | ||||
| Deferred taxes / (tax assets) | -1.2 | -1.8 | 0.0 | -3.0 |
| [Numbers in MUSD] | Balance 1/1/13 |
Posted to P/L |
Posted directly to the equity capital |
Balance 12/31/13 |
|---|---|---|---|---|
| Inventory, office machinery, etc. | -0.9 | -0.4 | 0.0 | -1.3 |
| Accounts receivables | -0.6 | 0.1 | 0.0 | -0.6 |
| Liabilities | -1.4 | 0.6 | -0.3 | -1.1 |
| Tax value of loss carry-forwards utilized | 0.0 | 0.0 | 0.0 | 0.0 |
| Deferred taxes / (tax assets) | -3.0 | 0.3 | -0.3 | -2.9 |
It is the Company's opinion that deferred tax assets can be substantiated in the future. The Company's opinion is based on expected and estimated future income.
| Change in deferred tax asset directly posted against the equity capital [Numbers in MUSD] | 2013 | 2012 | ||
|---|---|---|---|---|
| Capital raising costs and losses from sales of own shares | 0.0 | 0.0 | ||
| Total deferred taxes posted directly against the equity | 0.0 | 0.0 | ||
| Reconciliation of effective tax rate [Numbers in MUSD] | 2013 | 2012 | ||
| Profit before tax | 74.9 | 30.3 | ||
| Income tax using the domestic corporate tax rate | 28.0 % | 21.0 | 28.0 % | 8.5 |
| Overbooked taxes, previous year | 0.0 % | 0.0 | 2.3 % | 0.7 |
| Tax paid to a foreign country | 0.0 % | 0.0 | 0.0 % | 0.0 |
| Taxes on other permanent differences | -4.8 % | -3.6 | 0.4 % | 0.1 |
| Total tax expense for the year | 23.2 % | 17.4 | 30.7 % | 9.3 |
Permanent differences include non-deductable costs and share-based remuneration.
| [Numbers in MUSD] | Cost rented premises |
Machinery and equip ment |
Fixtures and fittings |
Develop ment |
Other intangible assets |
2013 Total |
2012 Total |
|---|---|---|---|---|---|---|---|
| Acquisition cost | |||||||
| Acquisition cost | |||||||
| as of 1/1/13 | 0.5 | 8.7 | 0.8 | 1.7 | 1.8 | 13.5 | 10.4 |
| Acquisitions | 0.5 | 1.5 | 0.2 | 8.7 | 0.0 | 10.8 | 6.9 |
| Disposal | 0.0 | -0.7 | 0.0 | 0.0 | 0.0 | -0.7 | -4.2 |
| Currency differences | -0.0 | -0.6 | -0.0 | -0.3 | -0.2 | -1.1 | 0.4 |
| Acquisition cost as of 12/31/13 |
0.9 | 8.9 | 0.9 | 10.2 | 1.7 | 22.5 | 13.5 |
| Depreciation | |||||||
| Depreciation as of 1/1/13 |
0.0 | 6.4 | 0.1 | 0.0 | 0.4 | 6.8 | 7.2 |
| Disposal | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -3.0 |
| Currency differences | 0.0 | -0.4 | 0.0 | -0.1 | 0.0 | -0.6 | 0.3 |
| Accumulated depre | |||||||
| ciation as of 12/31/13 |
0.1 | 7.1 | 0.2 | 2.4 | 0.8 | 10.6 | 6.8 |
| Net book value as of 12/31/13 |
0.9 | 1.7 | 0.7 | 7.7 | 0.9 | 11.9 | 6.7 |
| Depreciation for the year |
0.1 | 1.1 | 0.1 | 2.6 | 0.4 | 4.4 | 2.2 |
| Impairment losses for the year (see note 12) |
0.0 | 0.0 | |||||
| Useful life | Up to 6 years |
Up to 10 years |
Up to 5 years |
Up to 4 years |
Up to 5 years |
||
| Depreciation plan | Linear | Linear | Linear | Linear | Linear |
| [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Leasing costs expensed | 1.5 | 1.9 |
| Duration of the lease contract | 11/30/19 | 11/30/19 |
| Non-terminable operating leases due in: [Numbers in MUSD] | 2013 | 2012 |
| Less than one year | 1.5 | 1.3 |
| Between one to five years | 6.0 | 5.1 |
| More than five years | 1.4 | 2.5 |
| Total | 8.9 | 8.9 |
Development is internally developed intangeble assets.
Other intangeble assets are assets purchased seperately.
In 2012, the Company entered into a new lease for the rental of its Norwegian offices at Gjerdrums vei 19. The new lease will run through November 2019. The lease agreement, according to IAS 17, is considered an operating lease.
| Subsidiaries [Numbers in MUSD] | Hern Labs AB |
Opera Software International AS |
Opera Distribution AS |
Netview Technology AS |
|---|---|---|---|---|
| Formal information | ||||
| Date of purchase | 12/13/2000 | 1/5/2005 | 12/16/2008 | 5/14/2012 |
| Registered office | Linköping, Sweden |
Oslo, Norway |
Oslo, Norway |
Oslo, Norway |
| Ownership interest | 100% | 100% | 100% | 100% |
| Proportion of votes | 100% | 100% | 100% | 100% |
| Information related to the date of purchase (in the year of purchase) |
||||
| Purchase cost | 1.3 | 0.2 | 0.3 | 0.8 |
| Group contribution | 0.4 | |||
| Opera Software ASA's financial statements are available at the Company's headquarters located at Gjerdrums vei 19 in Oslo, Norway. Booked value [Numbers in MUSD] |
2013 | 2012 | ||
| Purchase price Impairment |
2.6 -0.5 |
2.6 -0.3 |
||
| Group contribution | 13.1 | 0.5 | ||
| Options issued* | 6.8 | 4.3 | ||
| Capital increase | 154.0 | |||
| FX adjustment | 0.1 | 0.1 |
The shares in the subsidiaries are booked at the cost of acquisition.
*Options issued by the Company on behalf of employees in the subsidiaries.
On March 14, 2013, Opera Software ASA acquired 100% of the shares and voting interest of the privately-held company Skyfire Labs, Inc., a leader in mobile video optimization and cloud solutions for mobility. Opera believes Skyfire adds capabilities to our portfolio around video, app optimization, smartphones, and tablets, as well as strength in North America, and we are excited to expand Opera's solutions for operators. in note 12. Opera Software International AS The Annual General Meeting held on June 4, 2013, passed the resolutions to pay a group contribution of MUSD 12.6 to Opera Software International. On September 12, 2013, Opera Software ASA increased
revalued each quarter, and more information can be found
The acquisition price included a mix of cash and stock, with an upfront consideration of MUSD 49.1 (including MUSD 8.2 of cash on the Skyfire balance sheet) and performance-based earnout payments over three years, including MUSD 25.7 in cash held in escrow and funded upfront, that can bring the total deal size to MUSD 155.2. Opera calculated the fair value on the acquisition date and booked a contingent consideration of MUSD 40.5 in the financial statements. The contingent consideration is MUSD 85.3 through a contribution in kind, where Opera Software ASA contributed the shares in Skyfire Labs, Inc. The contingent consideration was not transferred to Opera Software International AS, and more information can be found in note 12. On December 20, 2013, Opera Software ASA increased the share capital in Opera Software International AS, following a payment of MUSD 68.6 paid in January 2014.
the share capital in Opera Software International AS, with
In 1Q 2011, Opera and China's Telling Telecom announced that they planned to establish a company in greater China with the goal of becoming the most popular consumer mobile web browser and web services platform in China. Opera will provide our browser technology, and Telling Telecom will contribute a local operations team and strong distribution capabilities. Telling Telecom is a leading mobile phone distributor in China.
| [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Revenue | 10.1 | 2.0 |
| EBIT | -28.0 | -18.4 |
| Net profit | -28.5 | -18.5 |
| Assets | 10.4 | 0.9 |
| Short-term liabilities | 15.6 | 6.2 |
| Equity | -5.2 | 0.7 |
The investments in nHorizon Innovation are accounted for, using the cost method. In 3Q 2013, Opera invested MUSD 5.7, of which MUSD 2.8 was payable in 4Q 2013 together with a loan of MUSD 2.3. This investment comes in addition to the MUSD 2.4 already invested in in both 3Q and 4Q 2012 and to the MUSD 2.4 already invested in 2011. In addition, Opera is guaranteed a minimum amount
| Booked value [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Investment (Booked value January 1) | 7.3 | 2.4 |
| Investment during the fiscal year | 5.7 | 4.8 |
| FX adjustment | -0.6 | 0.2 |
| Impairment | -12.3 | 0.0 |
| Total | 0.0 | 7.3 |
nHorizon Innovation (Beijing) Software Ltd was co-founded by Opera Software ASA and Telling Telecom in August Information regarding nHorizon Innovation had the following numbers as of December 31, 2013:
Opera Software ASA owns 20% of the European Center for Information and Communication Technologies — EICT GmbH. The booked value of the share is USD 0.1. The market value of the company is unknown. The EICT is a public/private partnership of scientific institutions, 2011. nHorizon is committed to developing and marketing the Oupeng mobile browser, providing users with a simple, fast and smooth mobile internet experience and to helping people enjoy a comfortable mobile internet life. For more information, please visit www.oupeng.com.
The focus of the company will be on the massive consumer mobile internet market and revenue opportunity in China. Opera China will continue to target the operator, mobile OEM, device OEM and desktop markets independent from the company.
of revenue from the company corresponding to Opera's initial capital contribution over the three-year period starting from the establishment of the company.
As of December 31, 2013, Opera owned 29.09% of nHorizon Innovation, and Opera has booked the following fair value on the accounting line "Other investments and deposits":
institutes of applied research and leading industrial companies. The strategic innovation partnership pools and specifically links research and development activities in industry and science to information and communication technologies. For more information about EICT, please see the website at www.eict.de.
| Balance outstanding [Numbers in MUSD] | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Opera Software Poland Sp. z o.o | 2.8 | 3.4 |
| Opera Software Australia PTY LTD | 0.0 | 1.9 |
| Opera Software Iceland ehf | -0.4 | 1.7 |
| Opera Software Technology (Beijing) Co., Ltd. | 0.0 | 0.2 |
| Opera Software International AS Oddzial w Polsce | 0.0 | 0.0 |
| Opera Software Americas, LLC | -1.7 | 0.0 |
| Mobile Theory, Inc. | 0.0 | 0.0 |
| 4th Screen Advertising Limited | 0.0 | 0.0 |
| Beijing Yuege Software Technology Service Co.,Ltd. | 0.0 | 0.0 |
| Opera Software Singapore PTE. LTD | -0.2 | -0.1 |
| Opera Software Korea Ltd | -0.1 | -0.1 |
| Opera Software India Private Limited | -0.1 | -0.1 |
| Opera Software International US, Inc. | -29.9 | 0.0 |
| Opera Mediaworks, LLC | 0.2 | 0.0 |
| Opera Software Netherlands BV | 4.7 | 0.0 |
| LLC Opera Software Ukraine | -0.4 | -0.1 |
| Opera Software, LLC | -0.2 | -0.1 |
| AdMarvel, Inc | 0.3 | -0.4 |
| Netview Technology AS | 0.0 | -0.9 |
| Opera Software International AS | 0.1 | -2.9 |
| Hern Labs AB | -2.8 | -4.7 |
| [Numbers in MUSD] | 2013 | 2012 |
| Interest income from related parties | 2.3 | 2.1 |
| Interest expense from related parties | 0.2 | 0.0 |
| OTHER RECEIVABLES (NON-CURRENT) |
ACCOUNTS RECEIVABLES | OTHER RECEIVABLES (CURRENT) |
||||
|---|---|---|---|---|---|---|
| [Numbers in MUSD] | 12/31/2013 | 12/31/2012 | 12/31/2013 | 12/31/2012 | 12/31/2013 | 12/31/2012 |
| Entity within group | 9.7 | 8.7 | 1.8 | 0.1 | 2.8 | 0.0 |
| Sum | 9.7 | 8.7 | 1.8 | 0.1 | 2.8 | 0.0 |
| ACCOUNTS PAYABLE | OTHER SHORT-TERM LIABILITIES | |||
|---|---|---|---|---|
| [Numbers in MUSD] | 12/31/2013 12/31/2012 |
12/31/2013 | 12/31/2012 | |
| Entity within group | 12.2 | 10.9 | 29.9 | 0.0 |
| Sum | 12.2 | 10.9 | 29.9 | 0.0 |
All outstanding balances with the related parties are priced on an arm's-length basis and are to be settled in cash within five years of the reporting date. None of the balances are secured. The balances outstanding are specified as follows:
Shareholder information is given in the accompanying note 9 to the consolidated financial statements.
| CARRYING AMOUNT | FAIR LEVEL | |||||||
|---|---|---|---|---|---|---|---|---|
| [Numbers in MUSD] | Desig nated at fair value |
Loans and receiv ables |
Other financial liabilities |
Total | Level 1 | Level 2 | Level 3 | Total |
| Financial assets not measured at fair value |
||||||||
| Other receivables | 9.7 | 9.7 | 9.7 | 9.7 | ||||
| Investments in other shares |
0.1 | 0.1 | 0.1 | 0.1 | ||||
| Accounts receivable | 22.3 | 22.3 | 22.3 | 22.3 | ||||
| Unbilled revenue | 21.5 | 21.5 | 21.5 | 21.5 | ||||
| Cash and cash equiva lents |
128.4 | 128.4 | 128.4 | 128.4 | ||||
| Total financial assets not measured at fair value |
0.0 | 182.0 | 0.0 | 182.0 | 0.0 | 0.0 | 182.0 | 182.0 |
| Financial liabilities measured at fair value |
||||||||
| Provisions | 0.4 | 0.4 | 0.4 | 0.4 | ||||
| Total financial liabilities measured |
||||||||
| at fair value | 0.4 | 0.0 | 0.0 | 0.4 | 0.0 | 0.0 | 0.4 | 0.4 |
| Financial liabilities not measured at fair value |
||||||||
| Accounts payable | 14.5 | 14.5 | 14.5 | 14.5 | ||||
| Other short-term liabilities |
39.4 | 39.4 | 39.4 | 39.4 | ||||
| Total financial liabili ties not measured at fair value |
0.0 | 0.0 | 54.0 | 54.0 | 0.0 | 0.0 | 54.0 | 54.0 |
Financial assets and liabilities mainly comprise short-term items (non-interest-bearing). Based on this assessment, management does not consider the Group to have financial assets or liabilities with potentially significant differences between net book value and fair value.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
For more information, please see note 12.
| [Numbers in MUSD] | Desig nated at fair value |
Loans and receiv ables |
Other financial liabilities |
Total | Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Financial assets not measured at fair value |
|||||||||
| Other receivables | 8.7 | 8.7 | 8.7 | 8.7 | |||||
| Investments in other shares |
7.3 | 7.3 | 7.3 | 7.3 | |||||
| Accounts receivable | 17.1 | 17.1 | 17.1 | 17.1 | |||||
| Unbilled revenue | 16.8 | 16.8 | 16.8 | 16.8 | |||||
| Cash and cash equiva lents |
128.2 | 128.2 | 128.2 | 128.2 | |||||
| Total financial assets not measured at fair value |
0.0 | 178.1 | 0.0 | 178.1 | 0.0 | 0.0 | 178.1 | 178.1 | |
| Financial liabilities measured at fair value |
|||||||||
| Provisions | 0.0 | 0.0 | 0.0 | 0.0 | |||||
| Total financial liabilities measured at fair value |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Financial liabilities not measured at fair value |
|||||||||
| Accounts payable | 14.3 | 14.3 | 14.3 | 14.3 | |||||
| Other short-term liabilities |
12.6 | 12.6 | 12.6 | 12.6 | |||||
| Total financial liabili ties not measured at fair value |
0.0 | 0.0 | 26.9 | 26.9 | 0.0 | 0.0 | 26.9 | 26.9 |
Fair values of financial assets and financial liabilities as of December 31, 2012 The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| [Numbers in MUSD] | Note | Contingent consideration |
|---|---|---|
| Balance as of 1/1/2012 | 0.0 | |
| Assumed in a business combination |
12 | 0.0 |
| Paid | 12 | 0.0 |
| Finance cost | 12 | 0.0 |
| Conversion discrepancy | 12 | 0.0 |
| OCI | 12 | 0.0 |
| Balance as of 12/31/2012 | 0.0 | |
| Assumed in a business combination |
12 | 40.5 |
| Paid | 12 | -11.7 |
| Finance cost | 12 | -26.0 |
| Conversion discrepancy | 12 | -2.5 |
| OCI | 12 | 0.0 |
| Balance as of 12/31/2013 | 0.4 |
The following tables show the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used.
| Type | Valuation technique | Significant unobservable inputs |
Inter-relationship between significant unobservable inputs and fair value measurement |
|---|---|---|---|
| Contingent consideration | Discounted cash flows The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate. The expected payment is determined by considering the possible scenarios where Opera has forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario. |
Forecasted annual revenue Forecasted EBIT *Risk-adjusted discount rate |
The estimated fair value would increase (decrease) if: The annual revenue growth rate were higher (lower), The EBIT margin were higher (lower); or * The risk-adjusted discount rate were lower (higher) Generally, a change in the annual revenue growth rate is accompanied by a |
directionally similar change
in EBIT margin.
The following table shows a reconciliation from the opening balance to the closing balances for Level 3 fair values:
Skyfire Labs — Earnout agreement and senior management incentive plan
Valuation techniques and key model inputs used to measure the contingent consideration:
| Sensitivity analysis [Numbers in MUSD] | Increase | Decrease |
|---|---|---|
| Annual revenue growth rate (10% movement) | 2.9 | -4.8 |
| EBIT margin (5% movement) | 0.6 | -4.8 |
Opera has estimated the total earnout value before discounting to be MUSD 57.2, at the acquisition date. Opera used a WACC of 25% and foreign exchange rate of 5.7214, when calculating the earnout. Based on these assumptions and the earnout valuation performed at the acquisition date, Opera calculated the fair value and booked a contingent consideration of MUSD 40.5 in the financial statements. The FY 2013, 2014 and FY 2015 earnout targets are both based on revenue and EBIT targets. The maximum possible payment for both FY 2013, 2014 and FY 2015 is MUSD 94.7. At the acquisition date, sion and MUSD 0.0 as a current provision as of December 31, 2013. For 2013, Opera booked MUSD 6.1 (2012: 0) as an interest expense, MUSD 2.0 (2012: 0) as an FX expense and MUSD -34.1 (2012: 0) as change in likelihood. The weighted probability rates are estimated to change +/-10%. Please also see note 8 for more details. In 3Q 2013, Opera paid portions of the 2013 earnout payment of MUSD 11.7.
Opera calculated the earnout value before discounting to be MUSD 26.7 in FY 2013, MUSD 30.5 in FY 2014, and MUSD 0.0 in FY 2015. The weighted probability rates are estimated to change +/-10%.
The contingent consideration is revalued each quarter, and MUSD 0.4 has been booked as a non-current provi-
During 4Q 2013, Opera Software ASA recorded restructuring charges related to a strategic cost reduction that will better align costs with revenues and legal fees related to business combinations.
During 1Q 2013, Opera Software ASA recorded legal fees related to business combinations.
| Salary restructuring cost |
|---|
| Option restructuring cost |
| Office restructuring cost |
| ermination cost - hosting center |
| mpairment cost |
| egal fees related to business combinations |
| )ther restructuring cost |
| Costs for restructuring the business [Numbers in MUSD] | 2013 | 2012 |
|---|---|---|
| Salary restructuring cost | 0.0 | 3.9 |
| Option restructuring cost | 0.0 | 0.0 |
| Office restructuring cost | -0.1 | 2.3 |
| Termination cost — hosting center | 0.0 | 0.0 |
| Impairment cost | 0.0 | 0.0 |
| Legal fees related to business combinations | 1.9 | 1.0 |
| Other restructuring cost | 0.0 | 0.0 |
| Total | 1.8 | 7.3 |
As of December 31, 2013, MUSD 0.6 was not paid and booked as other short-term liabilities in the statement of financial position. The comparative number as of December 31, 2012, was MUSD 4.9.
Management has evaluated the development, selection and disclosure of the Company's critical accounting policies and estimates and the application of these policies and estimates.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Based on signed contracts with large, established market participants, Opera develops and adjusts the Opera browser so that it is compatible with mobile phones, game consoles and many other devices. The adjustments and modifications are carried out continuously over time. Hence, income and costs are booked in accordance with the percentage of completion method. Estimation of the degree of completion is based on the best estimate. Management's choice of estimates for the degree of completion will have an effect on booked income.
The Company has, in note 5, given a detailed analysis of the currency risk and risk related to changes in the foreign exchange rates.
The Company has entered into earnout agreements as specified in notes 8 and note 12. Opera has in note 12 given a detailed analysis of how the contingent considerations have been calculated. Changes in the chosen assumptions can have a significant impact on the size of the earnout cost.
The Company has established an option program for its employees. The options are booked in accordance with IFRS 2. The option costs are estimated on the basis of various assumptions, such as volatility, interest level, dividend and an assumption of how many will exercise their options, as well as other factors. The chosen assumptions can have a significant impact on the size of the option costs. The assumptions are given in accompanying note 3 to the consolidated financial statements.
Members of the Board of Directors and the Executive Team of the Company and their immediate relatives con-
The Company has considered our activities related to technological development in terms of the requirements in IAS 38. The Company develops specially designed browsers for use in our customers' products. The reason the Company has entered into contracts with customers, committing the Company to develop a custom-made browser for a settled fee, is that the fee received is meant to cover Opera's expenses related to this specific technological development. These projects are booked in accordance with the percentage of completion method, which states that related income and expenses should be booked in the same period.
In FY 2013, except for Opera Software ASA's transactions with Hern Labs AB, Opera Software International AS, Opera Distribution AS, Netview Technology AS and Opera Software Poland Sp. z o.o, Opera Software ASA did not engage in any related-party transactions, including with any members of the Board of Directors or the Executive Team. Please refer to notes 3, 4, 8 and 9 for additional information. The transactions with the subsidiaries are based on a model where the parent company covers the cost plus a margin. The margins are based on the arm'slength principle. trolled 7.7% of the Company's voting share as of December 31, 2013. Executive Team members also participate in the Company's stock option program (see note 3 in the consolidated financial statements). Compensation for Executive Team members can be found in note 3 to the consolidated financial statements.
Cost of building new features, together with significant and pervasive improvements of the core platform, provided that the significant and pervasive improvements of parts or main components of the core platform will generate probable future economic benefits, are capitalized as development costs and amortized on a straight-line 3-year basis. Please refer to notes 4 and 7 for additional information.
A significant portion of the work that engineering performs (beyond specifically designed browsers) is related to the implementation of the ongoing updates that are required to maintain the browser's functionality. Examples of updates include "bug fixes", updates made to comply with changes in laws and regulations, and updates made to keep pace with the latest web trends. These costs are expensed as maintenance costs.
In some contracts, Opera receives a fee that covers development and a guaranteed number of licenses, as well as maintenance in the subsequent period. The elements in the different contracts are assessed in accordance with the best estimate of true value and booked as the elements are delivered. If the elements can not be separated, all income is booked in aggregate, in accordance with the percentage of completion method.
| Earning per share [Numbers in USD] | 2013 | 2012 |
|---|---|---|
| Earnings per share (basic) | 0.467 | 0.177 |
| Earnings per share, fully diluted | 0.458 | 0.173 |
| Shares used in earnings per share calculation | 123 156 089 | 118 782 269 |
| Shares used in earnings per share calculation, fully diluted | 125 783 923 | 121 173 334 |
Earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted ordinary shares in issue during the period.
The average stock exchange price for 2013 is used when calculating the options that are "in the money" and when calculating the fully diluted number of shares. The options have varying exercise prices and would, upon exercise, mean payment to the Company of MNOK 205.2. In relation to the accounting standard regarding earnings per share, the effect of these funds being used by the Company to purchase shares in the market should be considered when calculating the fully diluted number of shares outstanding. Opera has included options with a strike price below NOK 51.06 when calculating the fully diluted number of shares outstanding. Total options used in the calculations are 7,109,283, of which 5,883,183 options are unvested and 1,226,100 are vested but not yet exercised.
| 2013 | 2012 | |
|---|---|---|
| Average number of shares | 123 156 089 | 118 782 269 |
| The following equity instruments have a diluting effect: | ||
| Options | 7 109 283 | 7 758 356 |
| Total | 7 109 283 | 7 758 356 |
| Options | 7 109 283 | 7 758 356 |
| Number of shares purchased (MNOK 177.6/35.92) | 4 017 714 | 4 945 339 |
| Number of shares with diluting effect | 3 091 569 | 2 813 017 |
| Expected options to be exercised | 2 627 834 | 2 391 065 |
No subsequent events have occurred after the reporting date that would require the consolidated financial statements to be adjusted.
For announcements of new contracts, please see announcements published on the Oslo Stock Exchange website (www.oslobors.no).
| Oslo | Haugesund | |
|---|---|---|
| Alta | Knarvik | |
| Arendal | Kristiansand | |
| Bergen | Larvik | |
| KPMG AS, a Norwegian member firm of the KPMG network of independent | Bodø | Mo i Rana |
| member firms affiliated with KPMG International Cooperative ("KPMG | Elverum | Molde |
| International"), a Swiss entity. | Finnsnes | Narvik |
| Grimstad | Reros | |
| Stategutoricarto rovienzar - modiammor gy Don noreko Roviendoroning | Homor | Condotiond |
The Board of Directors has, in accordance with the Public Limited Liability Companies Act § 6-16a, developed policies regarding compensation for the Executive Team.
The objectives of the Executive Team compensation program are, in particular, to (i) attract, motivate, retain and reward the individuals on the Executive Team and (ii) ensure alignment of the Executive Team with the long-term interests of the shareholders. The Company's executive compensation program is intended to be performance driven and is designed to reward the Executive Team for reaching key financial goals, strategic business objectives and enhancing shareholder value.
The most important components of Executive Team compensation are as follows: (i) base salary, (ii) cash incentive bonus, (iii) long-term, equity-based incentives.
Base salary is typically the primary component of Executive Team compensation and reflects the overall contribution of the executive to the Company. The determination of base salaries for the executives considers a range of factors, including: (i) job scope and responsibilities, (ii) competitive pay practices, (iii) background, training, and experience of the executive, and (iv) past performance of the executive at the Company. Adjustments to base salary are ordinarily reviewed every 12 months or more by the Board.
The Company uses a cash incentive bonus to focus the Executive Team members on, and reward the Executive Team members for, achieving key corporate objectives, which typically involve a fiscal-year performance period. Key drivers of cash incentive bonuses for the Executive Team are typically corporate financial and operational performance. Cash incentive bonuses tied to strategic business objectives, which may be individual to or shared among the Executive Team members, may also be considered as part of the cash incentive bonus. The determination of the total bonus that can be potentially earned by an executive in a given year is based on, among other factors, the executive's current and expected contributions to the Company's performance, his or her position within the Opera Executive Team and competitive compensation practices. Any cash incentive bonus is capped, so no member of the Executive Team can be awarded more than 200% of his or her cash incentive bonus.
In February 2013, the Board approved the Executive Compensation Plan for FY 2013, applicable to all Executive Team members, except for the EVP of Consumer Mobile, as noted below. The cash incentive bonus is divided into two components: Corporate Results (as defined above) and Strategic Business Objectives. For the Corporate Results component, 50% is tied to meeting the FY 2013 Revenue Target for the Company and 50% to meeting the FY 2013 Reported Adjusted EBITDA (including extraordinary one-time costs) Target for the Company. Based on the FY 2013 Executive Compensation Plan, there were no interim, intra-year payments, no bonus based on Corporate Results is paid or earned for attainment below 80% achievement, and the Company must meet at least 80% of the FY 2013 Reported Adjusted EBITDA (including extraordinary one-time costs) Target component to award any bonus associated with the FY 2013 Revenue Target. Provided attainment is above 80% for both the Revenues and Reported Adjusted EBITDA (including extraordinary one-time costs) components, the bonus is calculated as follows: from 80%-100%, bonus percentage achievement is interpolated based on a 30% bonus at 80% achievement and a 100% bonus at 100% achievement, and from 100%+ achievement, the bonus percentage achievement is interpolated based on a 100% bonus at 100% achievement and a 200% bonus at 110% achievement on both Revenue and Reported Adjusted EBITDA (including extraordinary one-time costs). Total bonuses paid for the fiscal year for Corporate Results under the plan shall not exceed 200% of the bonus opportunity for each Corporate Result component for any one individual.
| Other com | Pension compensa |
Benefit exercised |
Total com | |||
|---|---|---|---|---|---|---|
| [Numbers in MUSD] | Salary | Bonus | pensation | tion | options | pensation |
| Executives | ||||||
| Lars Boilesen, Chief Executive Officer | 0.61 | 0.63 | 0.05 | 0.10 | 5.53 | 6.93 |
| Erik C. Harrell, Chief Financial Officer/ Chief Strategy Officer |
0.40 | 0.38 | 0.09 | 0.04 | 2.61 | 3.53 |
| Rikard Gillemyr, EVP Product Development |
0.31 | 0.25 | 0.00 | 0.03 | 1.05 | 1.64 |
| Tove Selnes, EVP Human Resources | 0.27 | 0.16 | 0.04 | 0.03 | 0.38 | 0.88 |
| Andreas Thome, EVP Sales & Marketing |
0.31 | 0.48 | 0.00 | 0.03 | 1.22 | 2.05 |
| Mahi de Silva, EVP Consumer Mobile | 0.27 | 0.79 | 0.00 | 0.04 | 1.10 | |
| Jeffrey S. Glueck, EVP Operator Solu tions, director from March 14, 2013 |
0.23 | 0.23 | ||||
| Total | 2.40 | 2.69 | 0.19 | 0.24 | 10.84 | 16.36 |
During 2013, no deviations from the stock option program were made with respect to the Executive Team.
in 2010, which, i.e., means that the vesting structure is 50% after 3 years and 50% after 4 years with a strike price equal to the market price at grant. After June 14, 2011, and up to December 31, 2013, 4,548,850 options have been granted under the program, of which 4,171,171 options were still outstanding as at December 31, 2013.
Pursuant to Section 15-16 second subsection of the Norwegian 2005 Act relating to Employees' Protection, CEO Lars Boilesen has waived his rights under Chapter 15 of the Act. As compensation, he is entitled to a severance payment of two years' base salary if his employment is terminated by the Company. If the CEO has committed a gross breach of his duty or other serious breach of the contract of employment, the employment can be terminated with immediate effect without any right for the CEO to the mentioned severance payment.
Except for the CEO as described above, the employment agreements for the members of the Executive Team have no provisions with respect to severance payments if a member of the Executive Team should leave his or her position, whether voluntarily or involuntarily. Severance payment arrangements, if any, will thus be based on negotiations between the Company and the relevant member of the Executive Team on a case-by-case basis.
Members of Executive Team participate in
There were no interim, intra-year payments, and no bonus is paid before a release form is signed by the executive.
To ensure a special focus on the growth plan for Opera's advertising operations, the Board has, for 2013, approved a separate executive cash incentive bonus structure for Opera's EVP of Consumer Mobile. This bonus structure is divided into two components, with 80% weight tied to revenue from Opera's Mobile Publisher and Advertiser (Opera Publisher Partner Members) business ("MP&A Bonus") and 20% weight tied to advertising revenue generated from Opera's owned and operated mobile properties ("O&O Bonus"). The achievement is based on actual FY2013 financial results. For the MP&A Bonus, 60% of the on target bonus is paid when certain minimum revenue, EBIT and EBIT margin targets have been reached. From 60%-100% achievement, the bonus percentage is linearly interpolated with 100% bonus achieved when 100% of the target is reached, as long as a certain EBIT margin is maintained; the EVP of Consumer Mobile is eligible for a nominal percentage of revenue above the revenue target provided a certain target EBIT margin is maintained. For the O&O Bonus, 60% of the bonus is paid when a certain minimum revenue target is reached; from 60-100% achievement, the bonus percentage is linearly interpolated with 100% bonus achieved when 100% of the target is reached. The EVP of Consumer Mobile is eligible for a nominal percentage of revenue above the revenue target. There were no interim, intra-year payments, and no bonus is paid before a release form is signed by the EVP of Consumer Mobile.
In March 2014, the Board approved the Executive Compensation Plan for FY 2014. The cash incentive bonus is divided into two components: Corporate Results (as defined above) and Strategic Business Objectives. For the Corporate Results component, 50% is tied to meeting the FY 2014 revenue target for the Company and 50% to meeting the FY 2014 Reported Adjusted EBITDA (including extraordinary one-time costs) target for the Company. Based on the FY 2014 Executive Compensation Plan, there are no interim, intra-year payments, no bonus based on Corporate Results is paid or earned for attainment below 90% achievement, and the Company must meet at least 80% of the FY 2014 Reported Adjusted EBITDA (including extraordinary one-time costs) target component to award any bonus associated with the FY 2014 revenue target. Provided the aforementioned conditions are met for revenues and Reported Adjusted EBITDA (including extraordinary one-time costs), the bonus is calculated as follows: from 90%-100%, bonus percentage achievement is interpolated based on a 30% bonus at 90% achievement and a 100% bonus at 100% achievement, and from 100%+ achievement, bonus percentage achievement is interpolated based on a 100% bonus at 100% achievement and a 200% bonus at 110% achievement. Total bonuses paid for the fiscal year for Corporate Results under the plan shall not exceed 200% of the bonus opportunity for each Corporate Result component for any one individual.
For 2014, the Board will also approve a separate plan for Opera's EVP of Consumer Mobile, which is expected to be structured in a similar way as the aforementioned executive's 2013 plan.
Subject to the Board of Directors' assessment and decision at its discretion, initial stock option grants are typically granted to Executive Team members when they start and annually thereafter. The number of options granted to each executive is based on, among other factors, the executive's contributions to the Company's performance, the current and expected contributions of the executive to Opera's longterm performance, his or her position within the Opera Executive Team and competitive compensation practices.
The Annual General Meeting held on June 14, 2011, approved a new stock option program. The maximum number of options to be granted during 2011, 2012, 2013 and 2014 is 11,950,000. This represents slightly less than 10% of the registered share capital of the Company as at the adoption of the program. However, options cannot be granted if the aggregate of all issued, un-exercised and not-terminated options represents more than 10% of the then-registered share capital of the Company. No employee can be granted options annually that in value exceed 200% of that employee's base salary. The value is to be based on valuation principles for options as applied under IFRS and in accordance with Opera Software's financial statements. The options are to be granted in accordance with the Company's standard option agreement as approved by the Ordinary General Meeting regular pension programs available for all employees of Company. For members of the Executive Team based in Norway, an additional pension agreement is in place. This agreement is based on a defined contribution scheme and contributes 20% of salary over 12K.
In 2013, the Executive Team received base salaries and potential cash incentive bonuses in line with the Executive Compensation Policy as presented to the 2013 Annual General Meeting. Increases in base salaries and cash incentive bonuses for FY 2013 have been given based on individual merit and to ensure closer alignment with competitive pay practices.
The EVP of Consumer Mobile received a bonus for 2013 that was in line with the bonus policies as described above.
In FY 2013, Opera achieved 107% of its FY 2013 revenue target and achieved 111% of its FY 2013 Reported Adjusted EBITDA (including extraordinary one-time costs) target (note that the relevant Executive Team members earned a bonus based on 110% achievement on the Adjusted EBITDA Target). For the EVP of Consumer Mobile, 110% of the revenue target for the MP&A bonus was achieved, and 100% of the O&O Bonus target was achieved.
Total compensation earned for the Executive Team in FY 2013 is summarized below (numbers showing earned bonuses for
FY 2013):
Opera Software ASA ("Opera" or the "Company") strongly believes that strong corporate governance creates higher shareholder value. As a result, Opera is committed to maintaining high standards of corporate governance. Opera's principles of corporate governance have been developed in light of the Norwegian Code of Practice for corporate governance (the "Code"), dated October 23, 2012, as required for all listed companies on the Oslo Stock Exchange. The Code is available on www.nues.no. The principles are further developed and are in accordance with section 3-3b and section 3-3c of the Norwegian Accounting Act, which can be found at www. lovdata.no/all/nl-19980717-056.html/. Opera views the development of high standards of corporate governance as a continuous process and will continue to focus on improving the level of corporate governance.
The Board of Directors has the overall responsibility for corporate governance at Opera and ensures that the Company implements sound corporate governance. The Board of Directors has defined Opera's basic corporate values, and the Company's ethical guidelines and guidelines on corporate social responsibility are in accordance with these values.
Opera's vision is that we are shaping an open, connected world. This is reflected in Article 3 of the Articles of Association, which reads "The Company's business shall be to develop, produce and sell software and associated services and all activities related thereto, including participation in other companies and other activities with similar purposes." However, reaching this goal is about much more than leading the innovation of web technologies. Our business is based on close relationships with customers, partners, investors, employees, friends, and communities all over the world — relationships we are committed to developing by conducting our business openly and responsibly. Our corporate policies are developed in order to be true to this commitment.
The Board of Directors has adopted corporate social responsibility ("CSR") guidelines. The CSR guidelines cover a range of topics such as human rights, employee relations, health, environment & safety, anti-discrimination and anti-corruption. Opera is a member of the UN Global Compact. Opera respects and supports the Global Compact's ten principles in the areas of Human Rights, Labour, Environment and Anti-Corruption. Please see the Company's webpage for the "Communication on Progress" related to the UN Global Compact (www.unglobalcompact.org/COPs/ detail/19864/). Please also see the Company's webpage for the CSR report at http://www.operasoftware.com/company/investors/corpgov/.
The Company's equity is considered to be adequate relative to Opera's financial objectives, overall strategy and risk profile.
To achieve our ambitious long-term growth objectives, it is Opera's policy to maintain a solid equity ratio. Opera believes our need for growth can be met while also allowing for a dividend distribution, as long as the Company is reaching our target growth and cash-generation levels. For this reason, the Company will consider continuing to pay dividends over the
next years. Dividend payments will be subject to approval by the shareholders at the Company's Annual General Meetings. Authorizations granted to the Board of Directors to increase the Company's share capital will be restricted to defined purposes and will, in general, be limited in time to no later than the date of the next Annual General Meeting. To the extent that an authorization to increase the share capital shall cover issuance of shares under employee share option schemes and other purposes, the Company will consider presenting the authorizations to the shareholders as separate items.
The Board of Directors may also be granted the authority to acquire own shares. Authorizations granted to the Board of Directors to
Quote: Opera strongly believes that strong corporate governance creates higher company value.
acquire own shares will also be restricted to defined purposes. To the extent that an authorization to acquire own shares shall cover several purposes, the Company will consider presenting the authorization to the shareholders as separate items. Such authority, by statute, may apply for a maximum period of 18 months and will state the maximum and minimum amount payable for the shares. Opera will, however, in general limit the duration of such authorizations to one year. In addition, an authorization to acquire own shares will state the highest nominal value of the shares which Opera may acquire, as well as the mode of acquiring and disposing of own shares. Opera may not at any time hold more than 10% of the total issued shares as own shares.
Current authorizations for the Board of Directors are set out in note 9 to the Annual Report.
A key concept in Opera's approach to corporate governance is the equal treatment of shareholders. Opera has one class of shares, and all shares are freely transferable (with possible exceptions due to foreign law restrictions on sale and offering of securities). All shares in the Company carry equal voting rights. The shareholders exercise the highest authority in the Company through the General Meeting. All shareholders are entitled to submit items to the agenda and to meet, speak and vote at the General Meeting.
Any decision to waive the preemption rights of existing shareholders to subscribe for shares in the event of an increase in share capital will be explained. Where the Board of Directors resolves to carry out an increase in the share capital and waive the preemption rights of the existing shareholders on the basis of a mandate granted to the Board, an explanation will be publicly disclosed in a stock exchange announcement issued in connection with the increase of the capital.
In 2013, there have been no significant transactions with closely related parties.
If the Company should enter into a not immaterial transaction with associated parties within Opera or with companies in which a director or leading employee of Opera or close associates of these have a material direct or indirect vested interest, those concerned shall immediately notify the Board of Directors.
Any such transaction must be approved by the Board of Directors, and, where required, be publicly disclosed to the market as soon as possible.
In the event of not immaterial transactions between the Company and a shareholder, a shareholder's parent company, members of the Board of Directors, executive personnel or close associates of any such parties, the Board of Directors will arrange for a valuation to be obtained from an independent third party, unless the transaction requires the approval of the General Meeting.
The Company has an established and closely monitored insider-trading policy.
Any transaction the Company carries out in its own shares will be carried out either through the stock exchange or at prevailing market prices if carried out in any other way.
Opera has no limitations on the transferability of shares and has one class of shares. Each share entitles the holder to one vote.
Through the General Meeting, the shareholders exercise the highest authority in the Company. General Meetings are held in accordance with the Code. All shareholders are entitled to submit items to the agenda and to meet, speak and vote at General Meetings. The Annual General Meeting is held each year before the end of June. Extraordinary General Meetings may be called by the Board of Directors at any time. The Company's auditor or shareholders representing at least five percent of the total share capital may demand that an Extraordinary General Meeting be called.
General Meetings are convened by written notice to all shareholders with known addresses no later than 21 days prior to the date of the meeting. Proposed resolutions and supporting information, including information on how to be represented at the meeting, voting by proxy and the right to propose items for the General Meeting, are generally made available to the shareholders no later than the date of the notice. According to the Company's Articles of Association, attachments to the calling notice may be posted on the Company's website and not sent to shareholders by ordinary mail. Shareholders who wish to receive the attachments may request the Company to mail
such attachments free of charge. Resolutions and the supporting information are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered in the meeting.
Shareholders who are unable to be present in the meeting are encouraged to participate by proxy, and a person who will be available to vote on behalf of shareholders as their proxy will be nominated. Proxy forms will allow the proxy holder to cast votes for each item separately. A final deadline for shareholders to give notice of their intention to attend the meeting or vote by proxy will be set in the notice for the meeting. Said deadline will be set as close as possible to the date of the General Meeting and under any circumstance, in accordance with the principles of section 5-3 of the Public Limited Companies Act.
The Chairman, Vice-Chairman, Chairman of the Nomination Committee, CEO, CFO and the auditor will, under normal circumstances, be present at the meeting in person. The Chairman for the meeting is generally independent. Notice, enclosures and protocol of meetings are available on Opera's corporate website at http://www.operasoftware.com/ company/investors/.
The General Meeting elects the members of the Board of Directors (excluding employee representatives), determines the remuneration of the members of the Board of Directors, approves the annual accounts, and decides such other matters, which by law, by separate proposal, or according to the Company's Articles of Association are to be decided by the General Meeting. The General Meeting will normally vote separately on each candidate for election for the Board of Directors, the Nomination Committee and any other corporate bodies to which members are elected by the General Meeting.
The Board of Directors may decide to allow electronic participation in General Meetings and will consider this before each
General Meeting.
The minutes from General Meetings will be posted on the Company's website within 15 days after the General Meeting has been held. Information that a General Meeting has been
held will be made public as soon as possible after the end of the meeting.
The Nomination Committee is a body established pursuant to the Articles of Association and shall consist of three to five members. The members and the chairperson are elected by the General Meeting. Members of the Nomination Committee serve for a two-year period, but may be re-elected. The current members of the Nomination Committee are Jakob Iqbal (Chairman), Michael Tetzschner and Nils Foldal. The members of the Nomination Committee are independent of the Board of Directors and the executive personnel. Currently, no member of the Nomination Committee is a member of the Board of Directors. Any member who is also a member of the Board of Directors will normally not offer himself or herself for re-election to the Board.
The tasks of the Nomination Committee are to propose candidates for election as shareholder-elected members of the Board of Directors and members of the Nomination Committee. The Committee cannot propose its own Committee members as candidates for the Company's Board of Directors. Further, the Committee shall make recommendations regarding the remuneration of the members of the Board of Directors. Its recommendations will normally be explained, and information about proposed candidates will normally be given, no later than 21 days before the General Meeting. The tasks of the Nomination Committee are further described in the Company's Nomination Committee guidelines, as adopted by the Annual General Meeting held on June 14, 2011. Remuneration of the members of the Nomination Committee will be determined by the General Meeting. Information regarding deadlines for proposals for members to the Board of Directors and the Nomination Committee will be posted on Opera's corporate website. Please see http://www.operasoftware.com/company/ investors/nominations/ for further information regarding the Nomination Committee.
Opera does not have a corporate assembly, as the employees have voted, and the General Meeting in 2010 approved, that the Company should not have one.
Composition and independence of the Board of Directors
The Board of Directors has overall respon-
sibility for the management of the Company. This includes a responsibility to supervise and exercise control of the Company's activities. The Board of Directors shall consist of 5-10 members, including the Employee Representatives. The proceedings and responsibilities of the Board of Directors are governed by a set of rules of procedure. It is the Company's intention that the members of the Board of Directors will be selected in the light of an evaluation of the Company's needs for expertise, capacity and balanced decision making, with the aim of ensuring that the Board of Directors can operate independently of any special interests and that the Board of Directors can function effectively as a collegial body.
The Chairman of the Board of Directors will normally be elected by the General Meeting, unless statutory law prescribes that the Chairman must be elected by the Board of Directors. The Board members are encouraged to own shares in the Company. Please see www. operasoftware.com/company/investors/board/ for a detailed description of the Board members, including share ownership. Pursuant to the Code, at least half the shareholder-elected members of the Board of Directors shall be independent of the Company's management and its main business connections. At least two of the shareholder-elected members of the Board of Directors shall be independent of the Company's main shareholders. In the Company's view, all directors, except for Kari Stautland, are considered independent of the Company's main shareholders, and all shareholder-elected directors are independent of the Company's management and main business connections. Executive personnel should normally not be included in the Board of Directors. Currently, no executive employee is a director. The term of office for members of the Board of Directors is two years unless the General Meeting decides otherwise, but a director may be re-elected.
The conduct of the Board of Directors follows the adopted rules of procedure for the Board of Directors. A specific meeting and activity plan is adopted towards the end of each year for the following period, normally revisited twice a year. The Board of Directors will meet a number of times within a year, including for strategy meetings, and it will hold additional meetings under special circumstances. Its working methods are openly discussed. Between meetings, the Chairman and Chief Executive Officer update the Board members on current matters. There is frequent contact regarding the progress and affairs of the Com pany. Each Board meeting includes a briefing by one of the functional or department man agers of the Company, followed by Q&A. The Board meetings are a continuous center of attention for the Board of Directors, ensuring executive personnel maintain systems, proce dures and a corporate culture that promote high ethical conduct and compliance with legal and regulatory requirements.
The Board of Directors has further established a Remuneration Committee and an Audit Committee. Currently, the Remuneration Com mittee and the Audit Committee each consists of three members. According to the Code, a majority of the members of each Committee should be independent from the Company. If the requirements for independence are not met, Opera will explain the reasons in our Annual Report. Currently, Audun W. Iversen (Chairperson), Kari Stautland and Erik Möller are members of the Audit Committee, and Marianne Blystad (Chairperson), Christian Uribe and Arve Johansen are members of the Remuneration Committee. The requirements for independence are thus met.
The Audit Committee's main responsibilities include following up on the financial report ing process, monitoring the systems for in ternal control and risk management, having continuous contact with the appointed auditor, and reviewing and monitoring the indepen dence of the auditor. The Board of Directors maintains responsibility and decision making in all such matters. Please see below under the section "Remuneration of the Executive Personnel" and the "Board Rules of Procedure" for the tasks to be performed by the Remuneration Committee.
The Board will consider evaluating its work, performance and expertise annually, and any report from such evaluation will upon request be made available to the Nomination Committee. The Board plans to carry out a self-evaluation process in 2014. In order to ensure a more independent consideration of matters of a material character in which the Chairman of the Board of Directors is, or has been, personally involved, such matters will be chaired by some other member of the Board of Directors. Please see www.opera software.com/company/investors/board/pro cedures/ for further information regarding the Rules of Procedure for the Board of Directors
and the instructions for its Chief Executive Officer http://www.operasoftware.com/com pany/investors/corpgov/. The Company has also established Rules of Procedure for our executive personnel.
The Board of Directors has overall responsibil ity for the management of the Company. This includes a responsibility to supervise and ex ercise control of the Company's activities. The Board has drawn up the rules of procedure for the Board of Directors of Opera Software ASA. The purpose of these rules of procedure is to set out rules on the work and administrative procedures of the Board of Directors of Opera Software ASA. The Board of Directors shall, among other things, ensure that the Compa ny's business activities are soundly organized, supervise the Company's day-to-day man agement, draw up plans and budgets for the Company's activities, keep itself informed on the financial position of the Company, and be responsible for ensuring that the Company's activities, accounts, and asset management are subject to adequate control. In its supervision of the business activities of Opera, the Board of Directors will ensure that:
The Board's duties can be found on our corporate site in the document "Rules of Procedure for the Board of Directors of Opera Software ASA" at http://www.operasoftware. com/company/investors/board/ procedures/.
Opera Software ASA's Board has drawn up instructions for the Executive Team of Opera Software ASA. The purpose of these instruc tions is to clarify the powers and responsibil ities of the members of the Executive Team and their duty of confidentiality.
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The Executive Team conducts an annual strat egy meeting with the Board of Directors. The strategy meeting focuses on product, sales, marketing, financial, organizational and the corporate development strategy for the Group.
The Board of Directors has ensured that the Company has sound internal control and systems for risk management that are appro priate in relation to the extent and nature of the Company's activities. The Company has performed a scoping of the financial risks in the Company and has established written control descriptions and process descriptions. The controls are executed on a monthly, quarterly or yearly basis, depending on the specific control. The internal controls and systems also encompass the Company's corporate values, ethical guidelines and guidelines for corporate social responsibility. The Board of Directors carries out an annual review of the Company's most important areas of exposure to risk and its internal control arrangements. In December 2013, all the Board members confirmed that they had read and complied with the Code of Conduct during the term of their directorship.
The Group's CFO is responsible for the Group's control functions for risk management and internal control. Opera publishes four interim financial statements in addition to the Annual Report. The financials are published on the Oslo Stock Exchange. Given the importance of providing accurate financial information, a centralized corporate control function and risk management function has been established ultimately consisting of the group business controllers. The business controllers' tasks are, among other things, to perform manage ment's risk assessment and risk monitoring across the group's activities, to administer the Company's value-based management system and to coordinate planning and budgeting pro cesses and internal controls reporting to the Board of Directors and Executive Team. The business controllers report to the CFO.
The Finance department prepares financial reporting for the Group and ensures that reporting is in accordance with applicable laws, accounting standards, established accounting principles and the Board's guide lines. The Finance department provides a set of procedures and processes detailing the requirements with which local reporting units must comply. The Group has established processes and a variety of control measures that will ensure quality assurance of financial reporting. A series of risk assessment and control measures has been established in connection with the preparation of financial statements. Reporting instructions are com municated to the reporting units each month, following internal meetings when the reporting units have submitted their group reports, and the business controllers have reviewed the reporting package with the purpose of iden tifying any significant misstatements in the financial statements. Based on the reported numbers from the reporting units, the Finance department consolidates the Group numbers. Several controls are established to ensure the correctness of the consolidation, e.g., control types such as reconciliation, segregation of duties, management review and authorization.
The leaders of the reporting units are responsi ble for the ongoing financial reporting and for implementing sufficient procedures to prevent errors in the financial reporting. In collaboration with the business controllers, the leaders iden tify, assess and monitor the risk of significant errors in the Group's financial reporting. All reporting units have their own management and the financial functions are adapted to the organization and activities. The leaders are responsible for implementing appropriate and effective internal controls in accordance with specified group requirements and are also re sponsible for compliance with local laws and requirements. All monthly and quarterly oper-
ations reports are analyzed and assessed relative to budgets, forecasts and historical trends. The Executive Team analyzes and comments on the financial reporting and business results of the Group on a quarterly basis. Critical issues and events that affect the future devel opment of the business and optimal utilization of resources are identified, and action plans are put in place, if necessary.
The Audit Committee oversees the process of financial reporting and ensures that the Group's internal controls and the risk man agement systems are operating effectively. The Audit Committee performs a review of the quarterly and annual financial state -
ments, which ultimately are approved by the Board of Directors.
As an extension of the general principles and guidelines, Opera has drawn up other guidelines.
The Board of Directors has adopted ethical and corporate social responsibility guidelines that contain the basic principles that Opera will follow with respect to our ethical guidelines and our corporate social responsibilities ("CSR"). The guidelines contain the basic principles describing rules governing business practice, personal conduct, and roles and responsibilities, ultimately describing topics including human rights, employee relations, health, environment & safety, anti-corruption and anti-discrimination. These general principles and guidelines apply to all employees and officers of the Group.
Opera has guidelines and information policies covering information security roles, responsibilities, training, contingency plans, etc.
Opera has established comprehensive internal procedures and systems to mitigate risks and to ensure reliable financial reporting.
Opera is committed to report financial results and other relevant information based on openness and taking into account the requirement for equal treatment of all participants in the securities market. In order to secure correct information be made public and to ensure equal treatment and flow of information, the Company's Board of Directors has approved an IR policy. A primary goal of Opera's investor relations activities is to provide investors, capital market players and shareholders with reliable, timely and balanced information for investors, lenders and other interested parties in the securities market, in order to enhance understanding of our operations.
External audit Opera is subject to a yearly external statutory audit.
The Financial Supervisory Authority of Norway In addition to its own supervisory bodies and external auditor, the Group is subject to statutory supervision by The Norwegian Financial Supervisory Authority.
Remuneration for Board members is a fixed annual sum proposed by the Nomination Committee and approved at the Annual General Meeting. The remuneration reflects the responsibility, qualifications, time commitment and the complexity of their tasks in general. No Board members (or any company associated with such member) elected by the shareholders have assumed special tasks for the Company beyond what is described in this document, and no such member (or any company associated with such member) has received any compensation from Opera other than ordinary Board of Directors remuneration. All remuneration to the Board of Directors is disclosed in note 3 to the Annual Report.
A large number of the Company's shareholders are international investors with a different view on some of the recommendations in the Code. Hence, some of Opera's directors carry stock options in the Company, as disclosed in note 3 to the Annual Report. This practice will be further limited in the future, but it will not be excluded as a tool to enhance the interest of any
particular international expert or senior executive to join the Board of Directors. Any grant of stock options to Board members will, however, be subject to specific approval by the General Meeting. Any Board member who takes on assignments for the Company in addition to his or her appointment as a Board member will disclose such assignments to the Board of Directors, which will determine the appropriate remuneration for the assignment in question.
A Remuneration Committee has been established by the Board of Directors. The Committee shall act as a preparatory body for the Board of Directors with respect to (i) the compensation of the CEO and other members of the Executive Team and (ii) Opera's corporate governance policies and procedures, which, in each case, are matters for which the Board of Directors maintains responsibility and deci-
sion making.
Details concerning remuneration of the executive personnel, including all details regarding the CEO's remuneration, are given in note 3 to the Annual Report. The performance-related remuneration to executive personnel is subject to an absolute limit. The Board of Directors as-
sesses the CEO and his terms and conditions once a year. The General Meeting is informed about incentive programs for employees, and, pursuant to section 6-16 a) of the Public Lim ited Companies Act, a statement regarding remuneration policies for the Executive Team will be presented to the General Meeting. The Board of Directors' declaration on the compen sation policies of the Executive Team is includ ed in a separate section to the Annual Report.
Communication with shareholders, investors and analysts is a high priority for Opera. The Company believes that objective and timely information to the market is a prerequisite for a fair valuation of the Company's shares and, in turn, the generation of shareholder value. The Company continually seeks ways to enhance its communication with the investment community.
The Opera corporate website (http://www. operasoftware.com/company/investors/) provides the investment community with information about the Company, including a comprehensive investor relations section. This section includes the Company's investor rela tions policy, annual and quarterly reports, press releases and stock exchange announcements, share price and shareholding information, a financial calendar, an overview of upcoming investor events, and other relevant information.
During the announcement of quarterly and annual financial results, there is a forum for shareholders and the investment community to ask questions of the Company's manage ment team. Opera also arranges regular pre sentations in Europe and the United States, in addition to holding meetings with investors and analysts. Important events affecting the Company are reported immediately to the Oslo Stock Exchange in accordance with ap plicable legislation, and posted on http://www. operasoftware.com/company/investors/. All material information is disclosed to recipients equally in terms of content and timing.
The Board has further established an IR policy for contact with shareholders and others be yond the scope of the General Meeting. The IR policy can be found at http://www.opera software.com/company/investors/corpgov/ir/.
The Board of Directors endorses the rec ommendation of the Code. The Articles of Association of Opera do not contain any re strictions, limitations or defense mechanisms on acquiring the Company's shares.
In accordance with the Securities Trading Act and the Code, the Board has adopted guide lines for possible takeovers. In the event of an offer, the Board of Directors will not seek to hinder or obstruct takeover bids for Opera's activities or shares. Any agreement with the bidder that acts to limit the Company's abil ity to arrange other bids for the Company's shares will only be entered into where the Board believes it is in the common interest of the Company and its shareholders.
Information about agreements entered into between the Company and the bidder that are material to the market's evaluation of the bid will be publicly disclosed no later than at the same time as the announcement that the bid will be made is published.
If an offer is made for the shares of Opera, the Board of Directors will make a recom mendation on whether the shareholders should or should not accept the offer and will normally arrange for a valuation from an independent expert.
The auditor participates in meetings of the Board of Directors that deal with the annual accounts, as well as upon special request. Every year, the auditor presents to the Audit Committee a report outlining the audit activi ties in the previous fiscal year and highlighting the areas that caused the most attention or discussions with management, as well as a plan for the work related to the Company's audit. The auditor also reviews the Company's internal control procedures, including identi fied weaknesses and proposals for improve ment. The auditor will make himself available upon request for meetings with the Board of Directors during which no member of the executive management is present, as will the Board of Directors upon the auditor's request. The General Meeting is informed about the Company's engagement and remuneration of the auditor and for fees paid to the auditor for services other than the annual audit, and de tails are given in note 3 to the Annual Report.
The Board of Directors has established guide lines with respect to the use of the auditor by the Company's executive personnel for services other than the audit.
Two years after we first announced our commitment to the United Nations Global Compact (UNGC), the Opera Software Group is pleased to reaffirm our ongoing support to the initiative and its ten principles in the areas of human rights, labour, environment and anti-corruption.
We are guided by the principles of the UN Global Compact, and we continually strive to make the principles a part of our strategy, culture and day-to-day operations.
This report from the Board of Directors of Opera Software ASA examines Opera's principles, efforts, measures and results related to corporate social responsibility ("CSR"). This CSR report is based on the principles set out in the CSR guidelines. The Board of Directors has adopted CSR guidelines, and Opera is a member of the UN Global Compact. The CSR guidelines cover a range of topics such as human rights, employee relations, Health, Environment & Safety, and anti-discrimination. The CSR guidelines apply equally to both national and international operations.
The reporting period for this report is 2013. The report comprises our international operations performed by the Opera Software Group.
Opera Software ASA respects and observes internationally proclaimed human rights, such as the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. Opera ensures that we are not complicit in any human rights abuses.
All employees must adhere to the existing laws and regulations, contractual obligations, internationally acclaimed human rights and the demands that good business conduct and commonly approved personal conduct require.
Respect for human rights is a core value for our company. Opera believes that people should be treated with respect at all times.
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses.
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Principle 10: Businesses should work against corruption in all its forms, including extortion and bribes.
We strongly condemn discrimination and focus on promoting tolerance and encouraging
freedom of expression.
Opera helps millions of people across the globe to connect to the internet. Freedom of expression and privacy are fundamental human rights. Moreover, these rights are fundamental to facilitate the meaningful realization of other human rights, such as the right to access information.
At Opera, we strongly believe in these human rights and will strive to protect them for our users, employees, partners and other stakeholders. The open internet, including the web, has true potential as an open communication platform that enables users globally to exercise their freedom of speech. Conversely, new technologies can be used to invade citizens' privacy. Opera will take the required measures to protect our users' basic right to privacy.
Opera Software ASA strives to be an ethically responsible company. Ensuring employee and human rights and assuming social responsibility have always been integral elements of our corporate policy. To ensure a high ethical standard, Opera has developed a company Ethical Code of Conduct. Our ethical guidelines highlight our commitment to respecting and supporting internationally recognized
human rights.
The reputation of our company is created by the conduct of each individual staff member. Therefore, all our employees are obliged to study the guidelines and to ensure that they perform their duties in accordance with them.
Our employees are our most valuable resource. Opera Software will interact with our employees in the same way as we strive to interact with our customers: following the highest ethical standards and respect for individuality.
To ensure a high ethical standard, Opera this year decided to revise our Ethical Code of
Conduct. By doing so, Opera reaffirms our commitment to respecting and supporting internationally recognized human rights. The guidelines apply to all staff members, in all Opera Software Group offices and depart ments. The code has been put in place to help employees, clients and business partners un derstand Opera's values and standards.
The Ethical Code of Conduct covers the fol lowing main areas: human rights, personal conduct and a safe and healthy work environ ment, anti-corruption, and the environment.
The Ethical Code of Conduct is approved by the Board of Opera Software, as well as the Opera Work Environment Committee. The Human Resources department and man agers at Opera Software are responsible for making employees aware of the Ethical Code of Conduct, as well as ensuring that em ployees adhere to the rules, regulations and principles therein.
Freedom of speech and "blowing the whistle" on malpractice, fraud, illegality, breaches of rules, regulations and procedures, or rais ing health and safety issues is encouraged at Opera.
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We strongly encourage and guide our em ployees regarding how to speak up and take action against abuse and malpractice.
Any Opera staff member making a whis tleblowing report is protected from any repercussions, such as dismissal and other forms of reprisals.
To improve communication and ensure that issues do not escalate to the point where they become a whistleblowing case, Opera focus
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Every Opera employee, upon being hired, is handed or given access to the Company's Ethical Code of Conduct.
Opera respects and observes the fundamen tal employment rights set out in the interna tional conventions on human rights, such as the conventions of the International Labor Organization (ILO) and the United Nations (UN).
Opera believes that everyone has the right to freedom of peaceful assembly and to the free dom of association with others, including the right to form and join labor unions. Several Op era employees are organized into labor unions.
Opera is an equal-opportunity employer. We insist on fair, non-discriminative treatment for all employees, in recruitment and in selection for promotion or training opportunities, irre spective of race, color, nationality, age, sex, sexual orientation, gender identity, ethnic origin, marital status, disability or religion. Individuals at every level share responsibility for maintaining a culture that is built on open, supportive and positive relationships, free from prejudice, stereotyping and unfair bias.
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Our employees shall not be subjected to ha rassment or other improper conduct that might be perceived as threatening or demeaning.
Opera's employees regularly participate in anonymous surveys concerning the work en vironment. This gives Opera the opportunity to discover and deal with problems concerning harassment or discrimination at an early stage.
In 2013, more than 81% of the employees participated in the Opera Organizational Survey. In this survey, employees are asked to give feed back on areas such as job satisfaction, participation and teamwork, policy and guidelines, health and safety, management, competence and training. The results are benchmarked against companies in Norway to ensure that we uphold a high level of employee satisfac tion and participation in each of these import ant areas for employee satisfaction.
The results have been very positive and on
level with, or higher than, other companies in Norway. In the survey, more than 85% of the respondents strongly agreed that they were very proud to work for Opera, while only 4% were neutral to the statement, and 11% were in agreement with the statement.
There have been no reported harassment or discrimination incidents at Opera in 2013.
Opera has established a Work Environment Committee. The committee works to ensure a satisfactory working environment for our employees. The organization's manager is also responsible for surveying and document ing all working environment issues related to risks, health hazards and welfare on an on-going basis, as well as implementing necessary measures.
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Through elected representatives to the Board, we give our employees a voice. Our employ ees have the right and obligation to elect three representatives to the Board of Directors. The representatives are elected by all Opera employees, globally. Directors ensure the best interests of Opera Software ASA, and a special obligation falls on the employeeelected members to voice the concerns of Opera employees.
In 2011, Opera Software ASA was ranked as one of the companies with the lowest regis tered sick leave on the Oslo Stock Exchange. These good results have continued in 2012 and 2013, as the reported sick-leave numbers for the Opera Software Group were well be low 1.75 percent for all countries in the Opera Software Group.
With such a low sick-leave level, we are con stantly evaluating our policies. For example, discrimination on the basis of any disability shall not occur at Opera. We strive to meet all our employees' needs, and we offer shorter working hours and other services to accom modate our employees with disabilities.
At the end of 2013, Opera had 1039 full-time employees from countries all over the world, of which 21% were women and 79% were men. Opera has two female Board members and one woman on the senior Executive Team. As part of its core values, Opera promotes cul tural diversity and gender equality, and Opera
is proud to have 55 nationalities represented within the organization.
Equal opportunity to all Opera employees and potential employees is an important factor throughout the organization. When recruiting, we use assessment methods such as pro gramming tests and test cases to give equal opportunity to all qualified applicants. Opera strives to continue improving the company's gender balance.
At Opera, we pride ourselves on aiming to give equal opportunity to employees in both work and personal life. One of the benefits for all male employees is the opportunity to have two weeks of paid father's leave upon the birth of their child. By doing this, we are emphasizing the importance having a healthy work-life balance, regardless of the geograph ical location or local labor legislation.
External environment Opera has adopted an environmental policy to support the Company's mission of preventing any environmental impact of its activities. The environmental policy is incorporated as a part of our Ethical Code of Conduct.
For several years, Opera has made data-cen ter efficiency, low-power CPUs in our servers and procuring power from renewable energy sources as key components of our hosting expansion strategy. This has both reduced the cost per transaction and reduced our environ mental impact. Opera also has participated in programs to dispose of electronic equipment responsibly and encourages employees to use this service for any personal electronics
they are retiring.
Reducing the amount of paper produced during normal business practices and recy cling the paper waste we do create are also visible examples of Opera's environmental commitments, as well as keeping lights out after hours and in unused areas.
At Opera, we believe that an open, connected world — powered by great technology and services — is essential to breaking down the barriers that limit access to information, edu cation and fun.
Today, only 2.7 billion people are connected to the internet. The cost of getting online is one of the biggest challenges for users world - wide. We want to help get the next five billion online. The Opera Mini browser, which makes it possible to access the web from even the simplest phones, is our most important contribution toward achieving this, and today we have millions of Opera Mini users, with a majority of them in developing countries.
In 2013, Opera also joined Internet.org, a partnership between Facebook, Opera and other technology companies. The goal of Internet.org is to make internet access available to the two thirds of the world who are not yet connected and to bring the same opportunities to everyone that the connected third of the world has today. Opera is proud to contribute to the project with its competence in internet technology.
The Opera Software group is also engaged in measures to fight poverty and to give children an opportunity for education and a better life.
This year, Opera participated in two major programs in India and Indonesia to give children access to education.
In India, Opera partnered with the Smile Foundation to launch the "Smile with Opera Mini" campaign, to support the basic education of 1,000 underprivileged children of the Smile Foundation's Mission Education program for a year.
In Indonesia, Opera ran a similar campaign with the YCAB Foundation, the "Browse for Change" campaign with Opera Mini. However, this time, Opera's employees got even more involved, and they were all invited to apply for two volunteer positions with YCAB. Two volunteers were selected to represent Opera and teach the kids at the YCAB learning centers about technology for a week.
As YCAB volunteers and Opera employees, Albert Sutojo and Greg di Stefano together inspired nearly 400 kids from four different schools to stay in school and get a better life. ""It was such an honor to talk to the kids and to represent Opera," says Sutojo, "And, it is very motivating to think that whatever I do while working at Opera is so important for so many users in Indonesia — out of 240 million, more than 30 million use Opera Mini on a daily basis!"
Opera's Ethical Code of Conduct strongly condemns corruption. All employees are obliged to follow these guidelines. As a part of our Ethical Code of Conduct, Opera has implemented the following:
No person acting on behalf of Opera Software is allowed to accept any gift, service or advantage of more than insignificant value, nor receive any amount of cash, regardless of sum. Correspondingly, no gifts, services or advantages may be offered by persons acting on behalf of Opera Software, apart from gifts of insignificant value, such as the marketing merchandise provided by Opera. Cash may never be offered, regardless of sum.
No person acting on behalf of Opera shall attempt to influence persons in the conduct of their post, office, or commission by offering an improper advantage. Nor shall improper advantage be offered to anyone for the purpose of influencing third parties in the conduct of their post, office or commission.
Correspondingly, no persons acting on behalf of Opera shall request, accept or receive improper advantage in connection with their position or assignment, or for the purpose of influencing a third party.
Improper advantage can take different forms, including but not limited to money, objects, credit, discounts, travel, accommodation and other services.
Employees can report any issues to a member of the Work Environment Committee at Opera. This can be done in writing via email, in person and/or via telephone.
Breaches to the Ethical Code of Conduct
A violation of the Ethical Code of Conduct will result in disciplinary action up to and including termination of employment. Several of the guidelines concern actions that are also punishable offenses, such as the harassment of co-workers and corruption. In the event of such a breach, the relevant authorities may also be notified. The Human Resources department is responsible for following up any possible breaches.
OPERA SOFTWARE ASA GJERDRUMS VEI 19 P.O. BOX 4214 NYDALEN, 0401 OSLO, NORWAY TEL: +47 2369 2400 | FAX: +47 2369 2401 WWW.OPERA.COM
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