Earnings Release • Feb 11, 2015
Earnings Release
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Quarterly report Fourth quarter 2014
Opera enables more than 350 million internet consumers worldwide to connect with the content and services that matter most to them and more than 130 mobile operators to deliver the very best possible internet experience to their subscriber base. Opera also helps publishers monetize their content through advertising and advertisers reach the audiences that build value for their businesses, capitalizing on a global consumer audience reach that exceeds 800 million.
www.opera.com
| Financial metric | 4Q14 (\$m) | 4Q13 (\$m) | |
|---|---|---|---|
| Revenue | Total revenue | 154.4 | 89.6 |
| Profitability | Adj. EBITDA* | 34.4 | 24.0 |
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
Quarterly report Fourth quarter 2014
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 | 4Q14 (\$m) | 4Q13 (\$m) | |
|---|---|---|---|
| Revenue | Total revenue | 154.4 | 89.6 |
| Profitability | Adj. EBITDA* | 34.4 | 24.0 |
| Cash generation | Operating Cash Flow | 20.3 | 14.9 |
| Free Cash Flow** | 15.1 | 12.6 |
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
** Operating Cash Flow less capital expenditures
| 4Q14 Actuals(\$m) | 4Q14 Midpoint Guidance* (\$m) | |
|---|---|---|
| Total revenue | 154.4 | 164.0 |
| Adj. EBITDA** | 34.4 | 38.0 |
*Provided at 3Q14 Presentation (October 30th, 2014)
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| \$m | 4Q14 | 4Q13 | Q on Q |
|---|---|---|---|
| Revenue | 154.4 | 89.6 | 72% |
| Cost of Goods sold - | 54.4 | 20.7 | 163% |
| Payroll and related expenses - | 39.8 | 29.5 | 35% |
| Stock-based compensation expenses - | 3.7 | 1.0 | 275% |
| Depreciation and amortization - | 42.3 | 6.3 | 572% |
| Other operating expenses - | 25.8 | 15.3 | 69% |
| Total expenses = | 166.0 | 72.8 | 128% |
| Adjusted EBITDA* | 34.4 | 24.0 | 43% |
| EBIT | -11.6 | 16.8 | |
| Net Income | -58.3 | 49.3 | |
| EPS (USD) | -0.407 | 0.385 | |
| Non - IFRS Net Income |
25.7 | 21.1 | |
| Non – IFRS EPS (USD) |
0.180 | 0.165 |
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
* Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
| Customer Type | |
|---|---|
| --------------- | -- |
| Mobile Consumers – Opera Owned and Operated Properties |
In line with expectations |
|---|---|
| Operators | In line with expectations |
| Mobile Publishers & Advertisers – Opera Publisher Partner Members |
Below expectations |
| Desktop Consumers | Below expectations |
| Device OEMs | In line with expectations |
Mobile Consumers
Mobile Publishers & Advertisers
Desktop
Device OEMs
Revenue driven primarily by mobile advertising and licensing revenue
277 million users by end of 4Q14, up 3% compared to end of 4Q13
37.1 billion ad requests from owned & operated properties in 4Q14, up 34% versus 4Q13. Opera users of the Smartpage and Discover page increased to 74.4 million users by the end of 4Q14, up 41% versus 4Q13. Downloads from the Opera Mobile Store in 4Q14 reached 153.8 million, with 82.6 million from Android up 14% compared to 4Q13
Revenue growth: 55% versus 4Q13
Mobile Consumers – Opera Owned and Operated Properties* (\$m)
* Unaudited
Cloud based Operator Data/License down 16% versus 4Q13 at \$13m Key license revenue components: Opera Mini Operator co-brands and Rocket Optimizer
Overall revenue growth: Down 15 % versus 4Q13
21% Operator active user growth December 2014 vs. December 2013
User growth driven by Airtel, MTN, Telenor, Vimpelcom and Vodafone in particular
Operator Revenue Total* (\$m)
Revenues in the quarter came from a broad spectrum of brand advertisers, including 49 of the 50 AdAge Top 50 Global Advertisers. Large advertising campaigns include Samsung, Toyota, Honda, Ford, American Express, AstraZeneca, Capital One, Disney, Fox, Ikea, Johnson & Johnson, Kellogg's, Shell and Wells Fargo
AdMarvel platform managed 190.8b ad impressions (including O&O) in 4Q14, up 6% vs. 4Q13
18,500+ websites and applications enabled in 4Q14, up from 14,000+ in 4Q13 and total reach of 800m+ (excluding O&O) in 4Q14 up from 425m+ in 4Q13
\$m Mobile Publisher & Advertisers Opera Publisher Partner Members*
** Includes Opera´s O&O ad impressions
*** Contribution from AdColony of around \$48m in 4Q14
Desktop revenue below expectations
User growth and underlying solid ARPU offset by weak local currencies and the Russian ruble in particular and lower licensing revenue
Desktop users at 55 million, up 8% versus 4Q13
Overall revenue growth: Down 20% versus 4Q13
Monthly Desktop users* (last month of quarter)
*Unaudited
Device OEM revenue in line with expectations
Revenue driven by Connected TV customers
License revenue: ~70% of revenue
Overall revenue growth: 125% versus 4Q13
Device OEM revenue* (\$m)
*Unaudited
| Cost line | 4Q14 vs. 4Q13 |
Comments |
|---|---|---|
| Payroll | 35% | Higher headcount |
| Cost of Goods sold | 163% | Driven by 139% growth in Mobile Publisher and Advertiser revenue Cogs or Publisher Cost related to Mobile Publisher & Advertiser business |
| Other OPEX | 69% | Marketing and travel expenses key drivers |
| Depreciation & Amortization* |
80% | Higher investments in Opera Mini server infrastructure and depreciation on intangible assets related to acquisitions. |
| Stock-based compensation expenses |
275% | Stock-based compensation expenses increased in 4Q14 due to the issuance of RSUs based on a restricted stock unit (RSU) plan that was approved by Opera´s shareholders at the 2014 Annual General Meeting |
| Total Expenses* | 85% |
*Excludes \$31 million impairment expense related to Skyfire
| IFRS Profit for the period | (58.3) |
|---|---|
| Non-cash stock-based compensation | 3.7 |
| Impairment of intangible assets | 31.0 |
| Acquisition-related adjustment - depreciation of acquired intangible assets | 6.2 |
| Items excluded from operating expenses | 40.9 |
| Non-operations related costs | 0.0 |
| Items excluded from costs for restructuring the business | 0.0 |
| Acquisition-related adjustment - non-cash interest expense, net | 6.2 |
| Acquisition-related adjustment - non-cash FX gains/losses, net | 25.2 |
| Other FX gains/losses, net (negative amount = losses) | (14.7) |
| Gain/losses on non-controlling strategic equity interest | 2.1 |
| Acquisition-related adjustment - other non-cash items, net | 26.3 |
| Items excluded from finance costs | 45.0 |
| Acquisition-related adjustment - non-cash income taxes | (1.8) |
| Items excluded from provision for taxes* | (1.8) |
| Non-IFRS Profit for the period*** | 25.7 |
Based on the impairment test the Group recognized an impairment expense related to the Skyfire goodwill of \$31 million.
FX impact on balance sheet items due in particular to the strengthening of the USD vs. NOK
Revaluation of contingent consideration associated with acquisitions was \$26.3 million in the quarter due in particular to increased earn-out expectations for the AdColony acquisition.
| Financial metric | 2014 (\$m) | 2013 (\$m) | 2014 vs 2013 | |
|---|---|---|---|---|
| Revenue | Total revenue | 480.8 | 300.1 | 60% |
| Profitability | Adj. EBITDA* | 118.0 | 86.6 | 36% |
* Assumes FX rates as of February 10th 2015
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs.
| 2015 Aspirations*** | FX/Macro/Skyfire impact Implied FX/Macro/Skyfire on aspirations**** adjusted 2015 aspirations |
Actual 2015 guidance | |||||
|---|---|---|---|---|---|---|---|
| Metric | 2015 Aspirations*** |
Metric | 2015 Aspirations |
Metric | 2015 Aspirations |
Metric | 2015 Guidance |
| Revenue* | \$670m | Revenue* | -\$60m | Revenue* | \$610m | Revenue* | \$630-650m |
| Adj. EBITDA** |
\$180m | Adj. EBITDA** |
-\$45m | Adj. EBITDA** |
\$135m | Adj. EBITDA** |
\$130-140m |
* Assumes FX rates as of February 10th 2015
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
*** Updated June 2014 in connection AdColony acquisition
**** Revenue impacted by FX is estimated to be \$30 million, compared to FX rates in June 2014, of which the clear majority is Russian ruble. "Macro" refers to the much more difficult macro-economic situation in the Russia/CIS region. "Skyfire" refers to lower expectations on operator Rocket Optimizer contracts compared to expectations last year
| 2014 Actual | 2015 Outlook* | |
|---|---|---|
| Operators | \$67.3m | Down, due to declining Co-branded operator revenue |
| Mobile Consumers | \$52.9m | Up, driven by growth in mobile advertising revenue on O&O properties |
| Mobile Publishers & Advertisers |
\$272.8m | Up, driven by growth from brand and performance advertisers and mobile video advertising in particular |
| Desktop | \$62.2m | Down, solid user trend, offset by macro situation in Russia/CIS, FX and lower license revenue |
| Device OEMs | \$24.7m | Flat, driven by Connected TV customers |
| Metric | 1Q15 Guidance |
|---|---|
| Revenue* | \$124m – 128m |
| Adj. EBITDA*** | \$16m – 20m |
* Assumes FX rates as of February 10th 2015
** Non-IFRS EBITDA excludes stock-based compensation expenses, extraordinary/one-time costs and acquisition related costs
| Vs. 4Q14* | Comments | ||
|---|---|---|---|
| Revenue | Operators | Down | Lower Co-branded and Rocket Optimizer revenue |
| Mobile Consumers | Flat | Solid advertising and license revenue | |
| Mobile Publishers & Advertisers | Down | Strong underlying trend in seasonally weak quarter | |
| Desktop | Down | Stable user trend and ARPU impacted by FX | |
| Device OEMs | Down | Solid revenue from Connected TV customers | |
| Expenses | Payroll | Flat | Relatively flat overall headcount |
| Cost of goods sold | Down | Reflecting Mobile Publisher & Advertiser revenue trend | |
| Stock-based compensation | Flat | Stable trend with cost of RSU program leveling out | |
| Depreciation (excluding impairment expenses) |
Flat | Investments in cloud based server hosting infrastructure and acquisition related depreciation leveling out |
|
| Other Opex | Flat | Relatively flat overall headcount |
We empower the mobile internet economy
Advertisers
Media optimization capabilities
Lars Boilesen
CEO, Opera Software ASA
Highlights from our business units
Consumer products Continued strong Android growth
Launched first operator-branded app store Tier-1 mobile operator, Huawei, signed for video optimization
Mobile publishers and advertisers Strong revenue growth Announced the acquisition of AdVine, South Africa's leading premier mobile-advertising network
Quarterly report Fourth quarter 2014
Up 53% over the past 12 months
The biggest OEM in South- Asia A distribution power in our core markets Opportunities for monetization Opportunities for growth
About BLU
Founded in 2009 - based in Miami, USA
Opera browser embedded on the entire BLU product portfolio
Over 10 million BLU mobile devices have been sold in over 40 countries
Now live in 108 countries
Available in 46 languages
Signed agreement with Microsoft to extend Opera Mobile Store to more Nokia phones
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15
New markets
Two operators signed with many millions of subscribers
More than 500,000 video titles now available in the store
Broad range of content, from live broadcasts to video-on-demand and short clip
Quarterly report Fourth quarter 2014
Opera's Skyfire unit to deliver video optimization for cloud platform
Quarterly report Fourth quarter 2014
Focused on driving monetization for the largest & most successful publishers
Delivering the best brand experiences for advertisers, when it matters the most
Working with 90%+ of the AdAge Top 100 with Q4 highlights including:
Launched APAC team in Q4 to meet growing needs of brands, agencies & publishers in the region
% of impressions
Key assets and priorities
Continued strong growth from our leading ad platform position with clearly differentiated products
Strong and growing user base on smartphones in leading Opera markets
Several initiatives and good traction on monetization of own mobile users base
Leverage on our strong partnerships with big players in the mobile industry
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