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Opera Software ASA Quarterly report
Second quarter 2015
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www.opera.com
About Opera SoftwareOpera enables more than 350 million internet consumers worldwide to connect with
and services that matter most to them. Opera also helps publishers monetize their
through advertising and advertisers reach the audiences that build value for their b
capitalizing on a global consumer audience reach that exceeds 1 billion.
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Financial Highlights 2Q15
Financial metric 2Q15 ($m) 2Q14 ($m)
Revenue Total revenue 146.2 100.6
Profitability Adj. EBITDA* 29.5 27.0
*Adj EBITDA, excluding stock-based compensation expenses and one-time costs
Revenue and Adjusted EBITDA at low end of guidance Strong revenue growth from Mobile Advertising (3rdparty publishers)
Solid revenue growth in Consumer (O&O) on constant currency basis
Record Operating Cashflow
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Financial review Quarterly report
Second quarter 2015
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A note from our lawyersDisclaimer
This presentation contains, and is i.a. based on, forward-looking statements regarding Opera Software ASA and its subsstatements are based on various assumptions made by Opera Software ASA, which are beyond its control and which invunknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be mfrom 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, eintend, anticipate, believe, estimate, predict, potentialor continue, the negative of such terms or other compaThese forward looking statements are only predictions. Actual events or results may differ materially, and a number of facactual results to differ materially from any such statement. Such factors include i.a. general market conditions, demand focontinued attractiveness of our technology, unpredictable changes in regulations affecting our markets, market acceptanand services and such other factors that may be relevant from time to time. Although we believe that the expectations anreflected in the statements are reasonable, we cannot guarantee future results, levels of activity, performance or achie
Opera Software ASA makes no representation or warranty (express or implied) as to the correctness or completeness ofand neither Opera Software ASA nor any of its subsidiaries, directors or employees assumes any liability connected to ththe statements made herein. Except as required by law, we undertake no obligation to update publicly any forward-lookinany reason after the date of this presentation to conform these statements to actual results or to changes in our expectat
advised, however, to consult any further public disclosures made by us, such as filings made with the Oslo Stock Exchanreleases.
This presentation is not an offer or invitation to sell or issue securities for sale in the United States, and does not constitufor any offer to purchase or subscribe any securities. Securities may not be sold in the United States unless they are regexempt from registration. Opera Software ASA does not intend to register any securities in the United States or to conducthe United States. Any public offering of securities to be made in the United States would be made by means of a prospedetailed information about Opera Software ASA and its management, as well as financial statements. Copies of this presbe distributed in or sent into any jurisdiction where such distribution may be unlawful. The information in this presentationan offer of securities for sale in Canada, Japan or Australia.
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Financial Highlights 2Q15
Financial metric 2Q15 ($m) 2Q14 ($m)
Revenue Total revenue 146.2 100.6
Profitability Adj. EBITDA* 29.5 27.0
Cash generationOperating Cash Flow
Free Cash Flow**
31.0
25.6
4.7
-3.1
*Adj EBITDA, excluding stock-based compensation expenses and one-time costs
** Operating Cash Flow less capital expenditures and capitalized R&D costs
Excluding the impact of year-over-year changes in foreign exchange rates, revenwould have increased by 55% (to approximately $156m)
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2Q15 Actuals($m)2Q15 MidpointGuidance* ($m)
Total revenue 146.2 150.0
Adj. EBITDA** 29.5 31.5
2Q15 Actuals versus Guidance
*Provided at 1Q15 Presentation (May 13th, 2015)
**Adj EBITDA, excluding stock-based compensation expenses and one-time costs
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2Q15 Financial Review
$m 2Q15 2Q14 Q on
Revenue 146.2 100.6 45%
Publisher and revenue share cost - 52.2 23.4 123%
Payroll and related expenses - 38.8 33.0 18%
Stock-based compensation expenses - 2.1 2.1 -1%
Depreciation and amortization - 12.2 6.9 77%
Other operating expenses - 25.7 17.2 50%
Total expenses** = 131.1 82.6 59%
Adjusted EBITDA* 29.5 27.0 9%EBIT** 15.2 18.0
Net Income -1.3 9.5
EPS (USD) -0.009 0.071
Non - IFRS Net Income 12.6 15.5
NonIFRS EPS (USD) 0.086 0.117
*Adj EBITDA, excluding stock-based compensation expenses and one-time costs** Excludes one-time costs
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Financial Highlights: 2Q142Q15
27
34 34
$ 0
$ 5
$ 10
$ 15
$ 20
$ 25
$ 30
$ 35
2Q14 3Q14 4Q14
Adjusted EBITDARevenue ($m)
*Adj EBITDA, excluding stock-based compensation expenses and one-time costs
18 16 22 18 22
32 36 30 2631
51
87103
83
93
$ 0
$ 20
$ 40
$ 60
$ 80
$ 100
$ 120
$ 140
$ 160
2Q14 3Q14 4Q14 1Q15 2Q15
Mobile Advertising - 3rd Party Publishers
Consumer (Owned and Operated Properties)
Tech Licensing
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Revenue: Customer Type 2Q15Revenue within guidance range, lower end overall
Customer Type 2Q15 ($m) Change vs2Q14 Commen
Mobile Advertising - 3rdParty Publishers*
92.9 +83%Low end ofexpectation
Consumer (Owned andOperated Properties)
31.4 -2%In line withexpectation
Tech Licensing 21.9 +24%In line withexpectation
*2Q15 vs. 2Q14 pro forma revenue growth of 6% (pro forma includes AdColony for 2Q14)
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Mobile Advertising - 3rd Party Publishers
CustomerType
2Q15 ($m) Vs 2Q14 ($m)* % Growth Comm
Instant PlayPerformance
38 +8 +27% Solid gr
Instant PlayBrand
15 +9 +136% Strong
Non-Instant Play
Performance
4 -7 -58% Weak
Non-Instant PlayBrand
36 -4 -11% Weak
Total MobileAdvertising - 3rdParty Publishers
93 +6 6% Lower t
*Pro forma includes AdColony for 2Q14
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Revenue: Mobile Advertising - 3rd Party PubMobile Advertising - 3rd Party Publishers revenue at low end of expectations
Revenue growth was driven primarily by increased Instant Play revenue from premium and performance advertisers and app -instafrom primarily the mobile gaming sector.
Ran campaigns for many of the top revenue grossing app developers in the world
Revenue came in below expectations mainly due in particular to softness in the non-Instant play video advertising market
$m Mobile Advertising - 3rd Party Publishers
51
87103
8393
$ 0
$ 20
$ 40
$ 60
$ 80
$ 100
$ 120
2Q14 3Q14 4Q14 1Q15 2Q15
Top 5 Brand Vertica
1. CPG / FMCG
2. Travel
3. Finance
4. Automotive
5. Technology/Consumer El
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Mobile Advertising - 3rd Party Publishers
Video vs non-Video ($m)
47 47 51
35 39
5
40
52
48
54
$ 0
$ 20
$ 40
$ 60
$ 80
$ 100
$ 120
2Q14 3Q14 4Q14 1Q15 2Q15
non-Video Video
79%
53% 55%
21%
47% 45%
0%
10%
20%
30%
40%50%
60%
70%
80%
90%
100%
2Q14 3Q14 4Q14
Brand Perform
Brand vs. Perfor
Video Accounted for 58% of total Mobile Advertising (3rdPP) in 2Q
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Revenue: Tech Licensing
1816
2218
$0
$5
$10
$15
$20
$25
2Q14 3Q14 4Q14 1Q15
Tech Licensing revenue in line with expectations
Revenue ($m)
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Outlook
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3Q15 Guidance Overview
Vs. 2Q15* Comments (Outlook)
RevenueMobile Advertising - 3rd PartyPublishers
UpSolid growth from both Brand and Pe
Consumer (Owned andOperated Properties)
Up Solid search and mobile advertising rIncludes approximately 7 weeks of B
Tech Licensing DownSolid TV revenue offset by lower othe
revenue
Expenses Payroll Flat/Up Limited headcount growth in Advertis
Publisher and revenue share
cost
Up Reflecting Mobile Advertising (3rdPP
Stock-based compensation Flat/UpStable trend with cost of RSU progra
dependent on shareprice
Depreciation (excludingimpairment expenses)
UpInvestments in cloud based server ho
and acquisition related depreciation
Other Opex Flat Relatively comparable to 2Q in aggre
* Assumes FX rates as of August 11th
2015
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4Q15 Revenue Overview
Vs. 3Q15* Comments (Outlook)
RevenueMobile Advertising - 3rd PartyPublishers
Up
Strong growth from both Brand and Pe
business in a seasonally strong quarte
Consumer (Owned andOperated Properties)
Up
Solid desktop search revenue growth
advertising and search revenue from s
growth and new mobile browser produ
Tech Licensing Flat/Up Solid TV revenue and uptick in other L
* Assumes FX rates as of August 11
th
2015
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2015 Guidance
* Assumes FX rates as of August 11 th2015
**Adj EBITDA, excluding stock-based compensation expenses and one-time costs
***Guidance given at 1Q15 presentation May 13 th 2015
Metric Old***2015 Guidance
Updated Guidanc
Revenue $630-650m $600-61
Adj.
EBITDA**$130-140m $108-11
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Gam
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Our Consumer Product Portfolio
Browsers Privacy &
GamConten
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Continue to sca
Cross promote o
Protect & improve
Retention
Cost effective mo
2H grow
145M Monthly Active Android users
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Strong growth in O&O monetization
9.4 M USD
6.5 M USD
+45%
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300 million mobile u
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Strong pipeline for Opera Mini product devel
Full browsing, full fidelity mode in Septem
Brand new compression technology in Q4
In-product notifications for social (Faceboo
More personalization of content and brows
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Opera Mini product features improving mone
Better search experience
More speed dials and adapted to small & large phone types
More valuable ad formats, including video being added
In-product notifications to promote other Opera Apps
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Performance & Privacy
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Opera Max launche
New Max Popular with Users
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New Max Popular with Users
Google Play Rating up from 4.1 to 4.3
Max User Retention up by 2X
2H Max Roadmap Highlights
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Opera Maxs Data Savings tech will support:
HTTPS Video Savings
Music streaming Savings
Background data blocking
2H Max Roadmap Highlights
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Apps & Games
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Bemobi`s Apps Club
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Android focused app subscription service
Native Client
Top premium paid apps
Curated regionally aware catalog
Proprietary app wrapping technology enables app usage for active subscribers
Effective monetization of premium apps in emerging markets
Strong customers and operations in Latin America
Bemobi s Apps Club
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The Opera Eco-system
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Advertising(Mediaworks)
PartnersUser fees /
subscriptions3rdparty
distribution
Monetization channels
Browser and Content Apps
Performance and Privacy Apps
Browser App Store
News /
Discover
Bemobi
Apps Club Project 1 Project 2
Opera Max Web Pass App PassSurfEasy /
PrivacyProject 1
The Opera Eco system
Project 2
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Tech Licensing
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Strong Opera TV SDK shipment in quart
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g p p q
Existing customers ramp up shipments to millions of
Summary
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Strong User growth
Strengthening O&O monetization
Good User feedback for Max, ready for global roll out
Acquisition of Bemobi to strengthen our apps and games business
Ready to leverage large Opera Mini user base to cross promotion Max
Games
y
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Making Mobile Ads Matter.
Trends are Evolving But the Future is BrightWhile we are providing lower guidance we are well positioned for long term success
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Sales Execution: In Q2, organization amid transformation towards Vid Weaker than expected performance in banner and simple rich-media
Trend: growing shift of dollars to programmaticlower pricing & mar Growth slower than expected in banner and simple rich-media
Trend: Counter balanced by shift to videohigher pricing & margins Market shift towards richer, high engagement ad units Brands are becoming more attribution focused
Opera Mediaworks is well positioned for the future Delivering strongly differentiated value to publishers and advertisers Strategic investments and organization transformation towards Video and In Strong SDK footprint and direct publisher relationships Strong relationships with agencies and advertisers Global footprint with presence in all major media markets
While we are providing lower guidance, we are well positioned for long term success
Largest Independent Mobile Ad PlatformWith more reach revenues and profits than any platform competitor
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Global Unique Consumers
Reached Every Month
of the Ad Age Top 100
Working with OMW
installs
1.1BMobile Sites and Applications
(e.g. Pandora, CBS, CNET)
19,000 90%
With more reach, revenues and profits than any platform competitor
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Highest Quality Publisher GrowthNew publisher relationships solidified in Q2 gives Opera Mediaworks more access an
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New publisher relationships solidified in Q2 gives Opera Mediaworks more access anin the most popular apps worldwide
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Spotlight on APACOpera Mediaworks APAC investment is yielding impressive results in only one quarter, havin
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p y g p y qrevenues by 72%over the previous quarter, adding 39 new accounts (122 campaigns), inclumillion dollar accounts. Opened 2 new markets - Malaysia & Australia. Strengthened team inSingapore, India and Indonesia
Q2 revenue growth over Q1
72%
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VIDEO
Revenue Shift Towards Video ContinuesAd format mix shift favors video and video is the key driver of revenue growth.
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91%
42%
9%
58%
Q2 2014 Q2 2015
Q2 2014 vs. Q2 2015 YOY Share of OMW Revenue, Video vs. Non-Video
Non-Video Video
Revenue Shift Towards Video Continues (Pro Forma)Even when including AdColony business during Q2 2014 (pre-acquisition), the data shoadvertising mix shift favoring video
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advertising mix shift favoring video.
54%
42%
46%
58%
Q2 2014 Q2 2015
Q2 2014 vs. Q2 2015 YOY Share of OMW Revenue, Video vs. Non-Video
Non-Video Video
Brands Increase Spending Towards VideoRevenue for Instant-PlayTMHD videonearly doubled from Q1 to Q2. Growth is drivenbrands in CPG Financial Services Tech and Entertainment
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brands in CPG, Financial Services, Tech and Entertainment.
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NATIVE
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Opera Software SynergiesAd monetization of owned & operated properties and services expands
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Strong demand for Operabrowserinventory in Asia and Africa
Opera Mini 10 has native rich-media and
video ads in launch screen and DiscoverFeed
GameInsidr BETA launch with ad SDK todeliver ad monetization to publishers
OG C
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PROGRAMMATIC
Leading with Programmatic: Quality + ScaleSeveral significant initiatives established Opera Mediaworks position in the programmaspace with a focus on quality, scale and differentiation
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space with afocus on quality, scale and differentiation
55% of all OMW ad requests areexposed to programmatic bidders
10% of all ads dollars came form aprogrammatic demand source
Strong demand for OMW managedinventory
Revenue from ppartners in Q2 ifrom May to Jun
Instant-Play Vidin Private Alpha
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Announcing Today: A Complete Marketing Automation PlatforApp DevelopersYvolver platform & team will become a part of Opera Mediaworks and the technology sbe integrated into the Opera Mediaworks SDK
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Delivering real-time player management &
live services including: Advanced loyalty marketing Monetization and marketing analytics A/B Testing Advanced segmentation In-app-purchase validation Digital and physical rewards
Dynamic UIs with seamless nativeintegration
be integrated into the Opera Mediaworks SDK
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