Earnings Release • Apr 30, 2014
Earnings Release
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Opera is a world-leading internet company with more than 350 million users worldwide
We're shaping an open, connected world www.opera.com
Highlights from our business units:
| Consumer products | Strong smartphone growth Opera Max beta launched in USA, Europe and Russia Opera Coast launched for iPhone and iPad |
|---|---|
| Operators | Opera Web Pass launched and new deals signed Rocket Optimizer new deals signed and ongoing trails |
| Opera Mediaworks | Strong revenue growth |
| Financial metric | 1Q14 (MUSD) | 1Q13 (MUSD) | |
|---|---|---|---|
| Revenue | Total revenue | 87.0 | 62.0 |
| Profitability | Adj. EBITDA* | 22.7 | 18.4 |
*Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
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 | 1Q14 (MUSD) | 1Q13 (MUSD) | |
|---|---|---|---|
| Revenue | Total revenue | 87.0 | 62.0 |
| Profitability | Adj. EBITDA* | 22.7 | 18.4 |
| Operating Cash Flow | 15.4 | 3.4 | |
| Cash generation | Free Cash Flow** | 13.8 | 0.9 |
*Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
** Operating Cash Flow less capital expenditures
| 1Q 2014 Actuals | 1Q 2014 Midpoint Guidance* | |
|---|---|---|
| Revenue | MUSD 87.0 | MUSD 86.5 |
| Adj EBITDA** | MUSD 22.7 | MUSD 22.0 |
*Provided at 4Q13 Presentation (February 11th, 2014)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| MUSD | 1Q14 | 1Q13 | Q on Q |
|---|---|---|---|
| Revenue | 87.0 | 62.0 | 40% |
| Cost of Goods sold- | 16.1 | 8.9 | 81% |
| Payroll and related expenses - | 31.7 | 23.9 | 33% |
| Stock-based compensation expenses- | 1.1 | 0.9 | 19% |
| Depreciation and amortization - | 6.7 | 3.2 | 110% |
| Other operating expenses - | 16.6 | 10.9 | 52% |
| Total expenses = | 72.2 | 47.7 | 51% |
| Adjusted EBITDA* | 22.7 | 18.4 | 23% |
| EBIT** | 14.9 | 14.3 | 4% |
| Net Income | 2.5 | 3.6 | |
| EPS (USD) | 0.019 | 0.030 | |
| Non- IFRS Net Income |
14.3 | 14.6 | |
| Non- IFRS EPS (USD) |
0.108 | 0.122 |
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
** Excludes one-time extraordinary costs
Revenue (MUSD)
Adjusted EBITDA* (MUSD)
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
Opera Powers the Mobile Internet and App Economy
Operators
Users and Usage and explosion of video traffic
Mobile Consumers Users and Usage and smartphone growth
Mobile Publishers & Advertisers
Mobile Advertising Spend from Premium Brands and Performance Advertisers
Desktop Users and Usage
Overall revenue in line with expectations
| 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 |
In line with expectations |
| Desktop Consumers | In line with expectations |
| Device OEMs | In line with expectations |
Operators
Advertisers Desktop
Device OEMs
Mobile Consumers
Mobile Publishers &
Cloud based Operator Data/License revenue up 48% to MUSD 17.5, driven primarily by Opera Mini Operator license revenue from user growth and revenue from Rocket Optimizer and Horizon products
Overall revenue growth: Up 47% versus 1Q13, driven by Cloud based Operator Data/License revenue
68% Operator active user growth March 2014 vs. March 2013
MUSD Operator Revenue total*
User growth driven by Airtel, MTN, Telenor, Vimpelcom and Vodafone in particular
* Unaudited
** Operator Opera Mini users and Operator Horizon users
Revenue growth driven primarily by mobile advertising and license revenue, including the licensing of the Rocket Optimizer video/media optimization technology to a major Internet company
274M users by end of 1Q14, up 25M compared to end of 1Q13
29.5b ad requests from owned & operated properties in 1Q14, up 74% versus 1Q13. Application downloads from OMS of 140 million in 1Q14, up 61% compared to 1Q13. Opera users of the Smartpage and Discover page increased to 58.6 million users by the end of 1Q14, up from 33.5 Million in 1Q13.
Revenue growth: 84% versus 1Q13
Mobile Publisher & Advertiser revenue in line with expectations
Revenue growth driven by both premium advertisers, including Audi, Coca Cola, eBay, Dominos-Pizza, Kellogg's, McDonalds, Old Navy, Samsung, Snickers, Sony and Wells Fargo, as well as performance advertisers such as King.com and Netspend.
AdMarvel platform managed 187B ad impressions in 1Q14, up 23.5% vs. 1Q13
14,000+ websites and applications enabled in 1Q14, up from 12,000+ in 1Q13 and total reach of 500m+ (including O&O) in 1Q14 up from 300m+ in 1Q13
Revenue growth: 72% versus 1Q13
** Includes Opera´s O&O ad impressions
Solid ARPU with lower search revenue offset by higher licensing revenue, including the licensing of the Rocket Optimizer video/media optimization technology to a major Internet company
Desktop users at 51 million, down 7% versus 1Q13
Overall revenue growth: 6% versus 1Q13
| Device OEM revenue in line with expectations |
|
|---|---|
| Revenue driven by Connected TV customers | |
| License revenue: ~65% of revenue | |
| Overall revenue growth: Down 20% versus 1Q13 |
* Unaudited
| Cost line | 1Q14 vs. 1Q13 | Comments |
|---|---|---|
| Payroll | 33% | Higher headcount |
| Cost of Goods Sold | 81% | Driven by 72% growth in Mobile Publisher and Advertiser revenue |
| COGS or Publisher Cost related to Mobile Publisher & Advertiser business |
||
| Other OPEX |
52% | Hosting costs, marketing and travel expenses key drivers |
| Depreciation & Amortization |
110% | Higher investments in Opera Mini server infrastructure and depreciation on intangible assets related to acquisitions |
| Stock-based compensation expenses |
19% | Higher strike price for granted options |
| One-time extraordinary cost |
NA | Opera recorded restructuring charges of MUSD 1.3 related to a strategic cost reduction that will better align costs with revenues and legal fees related to business combinations. |
| Total Expenses* | 51% |
*Excludes one-time extraordiary cost
| Metric | 2Q14 Guidance |
|---|---|
| Revenue* | MUSD 95.5-98.5 |
| Adj EBITDA*** | MUSD 24.5-26.5 |
* Assumes currency remainder of 2Q14 (NOK 6.0 /USD, USD 1.35 /EUR)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| Vs. 1Q14* | Comments | ||
|---|---|---|---|
| Revenue | Operators | Flat | Solid cloud based license/data revenue |
| Mobile Consumers | Down | Solid user growth and solid ARPU offset by lower license revenues |
|
| Mobile Publishers & Advertisers |
Up | Strong growth in a seasonally strong quarter |
|
| Desktop | Down | Stable user trend and solid ARPU offset by lower license revenues |
|
| Device OEMs | Flat | Driven by Connected TV customers |
|
| Expenses | Payroll | Up | Growing headcount in MP&A business |
| Cost of goods sold | Up | Reflecting Mobile Publisher & Advertiser revenue trend |
|
| Stock-based compensation |
Up | General trend | |
| Depreciation | Up | Continued investments in cloud based server hosting infrastructure |
|
| Other Opex | Flat | General trend |
| Metric | 2014 Guidance (prior***) | 2014 Guidance (new) |
|---|---|---|
| Revenue* | MUSD 390-410 | MUSD 390-410 |
| Adj EBITDA** | MUSD 108-116 | MUSD 108-116 |
* Assumes currency remainder of 2014 (NOK 6.0 /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 4Q13 presentation
Highlights from our business units:
| Consumer products | Strong smartphone growth Opera Max beta launched in USA, Europe and Russia Opera Coast launched for iPhone and iPad |
|---|---|
| Operators | Opera Web Pass launched and new deals signed Rocket Optimizer new deals signed and ongoing trails |
| Opera Mediaworks | Strong revenue growth |
Strengthening our iOS presence Opera Coast launched for iPhone and iPad
Powerful data-savings app that compresses almost all data on your Android smartphone
Available for users in the US, Europe, Russia, Ukraine and Belarus
New devices and more countries coming soon!
Mobile video stalling and exceeding data plans are continuing to frustrate consumers
We have solutions to help both consumers and operators: Opera Max and Rocket Optimizer
Opera Max are designed to help give users a buffer-free video experience and up to 50% more out of their limited data plans
Reintroduction of the bookmarks bar
Adding customization options such as themes, advanced settings and Speed Dial configuration
Developing network installer and infrastructure for distribution
Revenue up 6% YoY
Custom layout selection, where the user can choose between phone, tablet or class look
Redesigned Discover, optimized for swiping between the different articles
Improved and optimized search functionality
The most well-known Opera product gets a long-awaited update with a completely new UI and new features
Important for us to support Java & BlackBerry phones as well as users are transitioning to smartphones
New Opera Mini version coming for iPhone
New Opera Mini version coming for iPad
Video compression technology deployed on all consumer products
Nokia announced the debut of its Nokia X operating system during Mobile World Congress
Opera will be pre-installed on Nokia X, Nokia X+ and Nokia XL devices
Nokia is aiming big with this new venture in the smartphone market – and we're excited to be part of that!
There were 307 million TV's connected to the internet in 2013
By 2018, it's estimated that 759 million TV's will be connected to the internet
We're establishing ourselves as the leading distribution medium to deliver premium video content, including Opera Mediaworks' technology to monetize content owners
New deals signed this quarter
TV's Silicon vendors Operators
Rocket Optimizer
Cloud based video optimization engine, available today, built for the future Improved video quality of experience over any network
Congestion based, on-demand video optimization in high-speed 3G and 4G networks – to avoid buffering and stalling
Video right-sizing in low-speed Edge and basic 3G networks – to make videos play
The desire to watch video is universal - when it works, people watch more!
Signed Tier 1 internet company
Multiple trials and RFP's ongoing among major operators
New customer signed up in South Asia: Wi-Tribe
Two customers already gone live in the market
We're now building a strong pipeline with partners and customers in our key markets
Vodafone India, one of India's leading telecommunications service providers, is all set to bring web pass services to its customers in India
Telkomsel, Indonesia's biggest telecommunication provider, today announced the launch of Opera Web Pass for the first time in Indonesia
In 2014, mobile advertisement will account for nearly onequarter of total digital ad spending worldwide
The US will continue to be the largest market followed by Europe and APAC
Strong growth expected in emerging markets, particularly in large markets like Russia, Mexico and Brazil, where smartphone adoption is reaching critical mass
Targeting: National Hispanic Campaign promoting the new 2014 Honda Civic
Compelling features: The ad unit allows the users to take a picture of themselves, while then posting that picture on Facebook.
More Details: The unit always the user to rotate, zoom in and out and the ability to retake the photo if needed.
Targeting: National campaign promoting Lego City with the ability to download the App
Compelling features: The ad unit allows the users to swipe left and right version up or down. The unit is put together with several sections of artwork to present one long fluid view.
More Details: Users have the ability to engage with each section and either swiping left or right replaying the animation, watching the video or downloading the app.
Jascha Samadi Founder & CEO of Apprupt
New acquisition, based in Hamburg, Germany
Will cover Europe and German-speaking countries such as Austria and Switzerland
Is now part of Opera Mediaworks, and our European sales organization, we're excited about what Apprupt will bring to Opera
Both our core businesses nominated this year
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