Earnings Release • Aug 21, 2014
Earnings Release
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SECOND QUARTER 2014
Opera Software crafts products and services that connect 350 million people to the internet. More than 130 operators around the world choose to work with us to give their customers the best web experience. Our mobile advertising platform enables publishers to monetize their content and allows brands to reach a global audience of more than 800 million consumers.
Learn more about Opera at www.opera.com
| Financial metric | 2Q14 (MUSD) | 2Q13 (MUSD) | |
|---|---|---|---|
| Revenue | Total revenue | 100.6 | 73.1 |
| Profitability | Adj. EBITDA* | 27.0 | 21.7 |
*Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
Erik Carson Harrell CFO / CSO, Opera Software
This presentation contains, and is i.a. based on, forward-looking statements regarding Opera Software ASA and its subsidiaries. These statements are based on various assumptions made by Opera Software ASA, which are beyond its control and which involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
Forward-looking statements may in some cases be identified by terminology such as "may", "will", "could", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. These forward looking statements are only predictions. Actual events or results may differ materially, and a number of factors may cause our actual results to differ materially from any such statement. Such factors include i.a. general market conditions, demand for our services, the continued attractiveness of our technology, unpredictable changes in regulations affecting our markets, market acceptance of new products and services and such other factors that may be relevant from time to time. Although we believe that the expectations and assumptions reflected in the statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievement.
Opera Software ASA makes no representation or warranty (express or implied) as to the correctness or completeness of the presentation, and neither Opera Software ASA nor any of its subsidiaries, directors or employees assumes any liability connected to the presentation and the statements made herein. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations. You are advised, however, to consult any further public disclosures made by us, such as filings made with the Oslo Stock Exchange or press releases.
This presentation is not an offer or invitation to sell or issue securities for sale in the United States, and does not constitute any solicitation for any offer to purchase or subscribe any securities. Securities may not be sold in the United States unless they are registered or are exempt from registration. Opera Software ASA does not intend to register any securities in the United States or to conduct a public offering in the United States. Any public offering of securities to be made in the United States would be made by means of a prospectus that will contain detailed information about Opera Software ASA and its management, as well as financial statements. Copies of this presentation should not be distributed in or sent into any jurisdiction where such distribution may be unlawful. The information in this presentation does not constitute an offer of securities for sale in Canada, Japan or Australia.
| Financial metric | 2Q14 (MUSD) | 2Q13 (MUSD) | |
|---|---|---|---|
| Revenue | Total revenue | 100.6 | 73.1 |
| Profitability | Adj. EBITDA* | 27.0 | 21.7 |
| Operating Cash Flow | 4.7 | 11.1 | |
| Cash generation | Free Cash Flow** | 0.1 | 10.1 |
*Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
** Operating Cash Flow less capital expenditures
| 2Q 2014 Actuals | 2Q 2014 Midpoint Guidance* | |
|---|---|---|
| Revenue | MUSD 100.6 | MUSD 97.0 |
| Adj EBITDA** | MUSD 27.0 | MUSD 25.5 |
*Provided at 1Q14 Presentation (April 30th, 2014)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| MUSD | 2Q14 | 2Q13 | Q on Q |
|---|---|---|---|
| Revenue | 100.6 | 73.1 | 38% |
| Cost of Goods sold- | 23.4 | 13.7 | 71% |
| Payroll and related expenses - | 33.0 | 25.3 | 30% |
| Stock-based compensation expenses- | 2.1 | 1.0 | 108% |
| Depreciation and amortization - | 6.9 | 5.5 | 25% |
| Other operating expenses - | 17.2 | 12.5 | 38% |
| Total expenses = | 82.6 | 58.0 | 42% |
| Adjusted EBITDA* | 27.0 | 21.7 | 24% |
| EBIT** | 18.0 | 15.2 | 18% |
| Net Income | 9.5 | 6.1 | |
| EPS (USD) | 0.071 | 0.051 | |
| Non- IFRS Net Income |
17.5 | 15.1 | |
| Non- IFRS EPS (USD)** |
0.132 | 0.125 |
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
** Excludes one-time extraordinary costs
Revenue (MUSD)
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| Customer Type | |
|---|---|
| Operators | In line with expectations |
| Mobile Consumers – Opera Owned and Operated Properties |
In line with expectations |
| Mobile Publishers & Advertisers – Opera Publisher Partner Members |
Above expectations |
| Desktop Consumers | In line with expectations |
| Device OEMs | In line with expectations |
Cloud based Operator Data/License revenue up 11% to MUSD 16.5 Key license revenue components: Opera Mini Operator co-brands, Rocket Optimizer and Opera Max
Overall revenue growth: Up 12% versus 2Q13, driven by Cloud based Operator Data/License revenue
46% Operator active user growth June 2014 vs. June 2013
User growth driven by Airtel, MTN, Telenor, Vimpelcom and Vodafone in particular
* Unaudited
** Operator Opera Mini users and Operator Horizon users
Revenue driven primarily by mobile advertising offset by less licensing revenue
270.8M users by end of 2Q14, up 8% compared to end of 2Q13
31.4b ad requests from owned & operated properties in 2Q14, up 52% versus 2Q13. Opera users of the Smartpage and Discover page increased to 64.8 million users by the end of 2Q14, up from 39.6 Million in 2Q13. Downloads from the Opera Mobile Store in 2Q14 reached 137 million, up 16% compared to 2Q13 (Android downloads up 115% in 2Q14 vs. 2Q13)
Revenue growth: -21% versus 2Q13
Revenue growth driven by both premium advertisers, including Google, Home Depot, Kellogg's, McDonald's, Microsoft, Samsung, Toyota, Walmart and Wells Fargo, as well as performance advertisers such as King.com and Spotify.
AdMarvel platform managed 187b ad impressions in 2Q14, up 9% vs. 2Q13
17,000+ websites and applications enabled in 2Q14, up from 13,000+ in 2Q13 and total reach of 800m+ (excluding O&O) in 2Q14 up from 350m+ in 2Q13
Revenue growth: 83% versus 2Q13
** Includes Opera´s O&O ad impressions
Solid ARPU with lower search revenue offset by higher advertising and licensing revenue
Desktop users at 51 million, down 2% versus 2Q13
Monthly Desktop users* (last month of quarter)
Overall revenue growth: 23% versus 2Q13
* Unaudited.
| Device OEM revenue in line with expectations |
|
|---|---|
| Revenue driven by Connected TV customers | |
| License revenue: ~65% of revenue | |
| Overall revenue growth: 74% versus 2Q13 |
* Unaudited
| Cost line | 2Q14 vs. 2Q13 | Comments |
|---|---|---|
| Payroll | 30% | Higher headcount |
| Cost of Goods Sold | 71% | Driven by 83% growth in Mobile Publisher and Advertiser revenue COGS or Publisher Cost related to Mobile Publisher & Advertiser business |
| Other OPEX |
38% | Hosting costs, marketing and travel expenses key drivers |
| Depreciation & Amortization |
25% | Higher investments in Opera Mini server infrastructure and depreciation on intangible assets related to acquisitions |
| Stock-based compensation expenses |
108% | Stock based compensation costs include approximately four weeks of costs related to Opera´s new restricted stock unit (RSU) plan |
| One-time extraordinary cost |
NA | In 2Q14, Opera recorded restructuring charges of MUSD 1.9 related to a strategic cost reduction that will better align costs with revenues and legal fees related to business combinations. |
| Metric | 3Q14 Guidance |
|---|---|
| Revenue* | MUSD 135-142 |
| Adj EBITDA*** | MUSD 31-34 |
* Assumes currency remainder of 3Q14 (NOK 6.2 /USD, USD 1.35 /EUR)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| Vs. 2Q14* | Comments | ||
|---|---|---|---|
| Revenue | Operators | Down | Solid cloud based license/data revenue |
| Mobile Consumers | Up | Solid smartphone user growth and solid ARPU |
|
| Mobile Publishers & Advertisers |
Up | Strong growth with addition of AdColony as of July 25th |
|
| Desktop | Down | Stable user trend and solid ARPU offset by lower license revenues |
|
| Device OEMs | Up | Driven by Connected TV customers |
|
| Expenses | Payroll | Up | Growing headcount in MP&A business, with inclusion of AdColony |
| Cost of goods sold | Up | Reflecting Mobile Publisher & Advertiser revenue trend |
|
| Stock-based compensation |
Up | Full quarter of new RSU program | |
| Depreciation | Up | Continued investments in cloud based server hosting infrastructure and acquistion related depreciation |
|
| Other Opex | Up | Attributed primarily to acquisition of AdColony |
| Metric | 2014 Guidance (prior***) | 2014 Guidance (new) |
|---|---|---|
| Revenue* | MUSD 435-460 | MUSD 480-500 |
| Adj EBITDA** | MUSD 110-120 | MUSD 117-124 |
* Assumes currency remainder of 2014 (NOK 6.2 /USD, USD 1.35 /EUR)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
*** Prior guidance refers to update done 24th June in connection with announcement of AdColony acquisition
Lars Boilesen CEO, Opera Software
Highlights from our three business units:
| Consumer products | Signed new strategic deal with Microsoft Launched new Opera Mini for iOS |
|
|---|---|---|
| Operators | Extended partnership agreement with Telenor Continued strong growth of more than 110 million users |
|
| Opera Mediaworks | Aquisition of AdColony Strong revenue quarter |
Smartphones and Tablets with Opera for Android pre-installed has been shipped to Russia and is now available in the market. These smartphone models are:
Ascend G6, G730, Y600, Y530, and Y330
Completed migration to the Blink rendering engine Now available on all platforms: Mac, Windows and Linux Retention rate is higher than previous Opera products We had a strong revenue growth in the quarter
Strong revenue in this quarter New deals signed with Swisscom and The Washington Post
Rocket Optimizer
SECOND QUARTER 2014
"Growth rates for mobile video ad spending will be far greater than for any other related channel—television, online or total digital"
eMarketer, August 2013
A Leading Player in the Mobile Video Space Audience reach of more than 340 million consumers
Full-screen HD TV-like experience Video ads shown "anywhere" – not only as part of video content
Dynamic End Cards that drive post-viewing interaction with consumers Deliver immersive brand experiences, location, social media sharing, app installs Strong traction with both brand advertisers and performance advertisers
Industry Leader in Mobile Video Advertising
Establishes Opera as the leader in mobile video advertising Highly differentiated combined platform – leading the innovation curve Addresses huge demand for mobile video inventory from our brand advertisers Very attractive market with strong underlying growth
Expands Publisher Base
Highly complementary addition of a broad range of top-tier mobile publishers Attractive new inventory for rich media and banner ads
Strong Brand & Performance Offering
Strengthens Opera's portfolio in high growth mobile ad market
Global Opportunity
Opera can take AdColony beyond U.S. footprint and expand to international markets (starting with a solid foothold in the U.K., Germany, Brazil and Mexico)
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