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Edited Transcript of OPERA.OL earnings conference call or presentation 27-Feb-20 7:00am GMT

Q4 2019 Otello Corporation ASA Earnings Presentation

Oslo Mar 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Otello Corporation ASA earnings conference call or presentation Thursday, February 27, 2020 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Lars Rabaek Boilesen

Otello Corporation ASA - CEO

* Petter Lade

Otello Corporation ASA - CFO

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Conference Call Participants

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* Christoffer Wang Bjørnsen

DNB Markets, Research Division - Analyst

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Presentation

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [1]

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Good morning. Welcome to Q4 2019 Otello Corporation's Presentation. Today's agenda, I will do an executive summary, follow up with operational review. Then our CFO, Petter Lade, will do a financial update. And at the end, we'll have time for some Q&A.

Executive summary. Revenue came in at $70 million, up from $63.1 million, equal to 11% compared to same quarter last year, up from $66.9 million equal to approximately 5% increase. Adjusted EBITDA, $8 million, up from $6 million equal to 33%. And compared to the same quarter in 2018, up from $5.5 million equal to 45%.

So for Bemobi, this was another record quarter on revenue and adjusted EBITDA. For AdColony, our revenue came in above our expectations and guidings. And we had the highest adjusted EBITDA for 3 years since Q4 2016.

And if we summarize the targets we set out, beginning of 2019, we hit them all, higher Bemobi revenue growth versus 2018, higher adjusted EBITDA for Bemobi growth versus 2018. And also, we managed to make AdColony adjusted EBITDA positive for the entire 2019.

Okay. Operational review. If you look at AdColony, revenue is finally back to year-on-year growth. This is the first time since Q3 2016. We continue to see very strong development on Brand and programmatic. This is where we have our focus. This is where we stand out in the market. This is where we take market shares, and that continues to be very strong. Our Performance business, which is less strategic compared to Brand, is still volatile.

And on the cost side, we continue to optimize cost. We have now reduced cost more than 50% over the last 2 years. And we strongly believe that we are reaching a level where we have a sustainable level, which is a level where we can start scaling revenue from.

So to sum up AdColony, finally, we're starting to feel comfortable to say that the turnaround is complete. We have reduced costs over a long time, but a real turnaround is only when you start growing again. And it's good to see that AdColony is back to growth.

2020, we're expecting an -- the revenue growth to continue, approximately 10% compared to 2019. It's very good to see that despite the low season we see in Q1, programmatic revenue is off to a strong start.

The revenue growth continues. And we do expect margins to stay stable, so we expect a significant adjusted EBITDA growth in 2020 compared to '19.

Brand is where we invest. We have established a very strong organization who is very good in going out and getting demand from our clients. So this is a trend that will continue.

We use the same platform, the same supply for both Brand and Performance. So we do see cannibalization from Brand over Performance. But this is a positive problem. It's good for our customers because -- and also our publisher, who get better monetization on our platform. And obviously, we take the highest dollar by prioritizing Brand. So good for everyone.

Let's dig into the Brand business, and then I'll do Performance at the end. If you look at the results for Brand advertising in the quarter, IO and PMP $21.7 million, up 9%, Brand Performance, up 28% to $9 million. And then finally, our programmatic open marketplace was up 42% year-on-year to $11.6 million, total $42.4 million, up 20%.

So 20% year-on-year revenue growth from Q4 to -- compared to the same quarter last year is very strong results. This is actually the first time Brand has posted year-over-year quarterly growth in 3.5 year. So we're very pleased with that. Very good to see that -- particularly that we continue to manage to grow our programmatic revenue.

We have definitely managed to move many of our -- to assisting many of our biggest clients from IO over to buying directly on our brand exchange despite many of them continue to buy IO as well, where we're also growing. It's now 40% of the overall Brand revenue, up to $17.5 million, 55% compared to the same quarter last year.

When we are successfully transitioning our clients over to pragmatic, this is also an opportunity to reduce further costs because, basically, our clients are just buying on the exchange.

So we have trimmed our infrastructure. And more important, we definitely have an infrastructure, which is ready to scale revenue even further on the programmatic side.

The pricing has also been good on our exchange. This is very much due to the fact that we are managing to also have our clients to buy video on our exchange. If you look at the mix, it's now 70% video and 30% display, which is complete change to at it was 1 year ago. So this is strategic, very important for us. And you can see the impact on global eCPM, it's up 40% to $2.95 compared to $1.78 last year.

So what are the underlying reasons for the growth in Q4? We continue to improve our platform. If you look at the supply-demand alignment, then we have successfully launched data science model, which has optimized queries per second between Exchange and DSP. And we've also been better in making sure that most of our supply are being used by, let's say, DSPs, where we can scale faster. So the team has also done a really good job in reducing numbers of DSP we have on exchange, so we work more and more with the ones who really manage to scale our revenue.

We continue to be best-in-class on transparency and measurability, which we offer our clients, who is working on our exchange.

We have full support for -- into these tenders like Moats, IAS. And we launched Open Measurement in our SDK. If we look a little bit on the different regions, start with EMEA and LATAM, we saw good growth on all our 3 segments there, LinkedIn, Instant-Play and Spotify. They all grew kind of equally. We had 28% increase year-on-year in the quarter.

Also, we see a huge potential on programmatic in Europe basically to replicate what we have successfully done in '19 in America.

This is growing very fast in Europe, even though it's still small numbers, but it's a big focus for the coming year.

In addition, we also continue to move on with our partner model there. As you might recall, we closed down all our offices during the turnaround in EMEA and LATAM and only work via partners. And we do see potential, particularly with our new partners in Spain, Italy and Russia, to have strong growth in 2020.

In the Nordics, we have a special situation because we -- that's where we have the sensitivity for promoting LinkedIn. And we do have a setup, organization-wise, in the Nordics. So we're actually trying there now on Instant-Play to hire people to go direct because of the very attractive market we see in the Nordics.

Also, we have been successfully launching Spotify audio ads and we are moving audio into more segments. This is also a focus in EMEA, LATAM in the coming year.

Looking at APAC, we had 10% growth year-on-year. Gross margins are good, 51%. This is very much due to that we have a lot of our revenue already on programmatic in APAC, more than 50%.

This year, we are definitely going to see if we can expand better into, let's say, the more high-end advertised markets in Asia Pacific, New Zealand, Australia, Japan, Korea. And we are ready for this expansion. We have invested into new people, new organization in these markets already at the end of 2019.

Also, for example, in Japan, we have -- we're starting to get ready for Olympics in 2020 and have a major focus there with our partners for 2020. In the quarter, we won the Best Ad Network-Mobile award from Adweek. This is one of the most prestigious awards in the industry.

We were nominated together with Google and Unity and we won. There was more than 50,000 people who was voting online. And I think this shows that we are simply back when it comes to our Brand offering when -- I mean, obviously, when big agencies do integrate a campaign for big brands, they do all kind of different medias. But when it comes to mobile video, AdColony is top of mind. This is what this award is improving.

If you go on to Performance and publishing, we had a decrease in the quarter of 20%. We think this can be explained by cannibalization from Brand, where we clearly are having a better pricing and much more demand. And we are prioritizing Brand over Performance on our exchange. We also had a tech issue during an upgrade, which we believe resulted in a 5% impact. So the decrease can be explained by that. But in general, we do see the platform being quite healthy these days. If you look at Q4, we actually saw impression was up 5.5% and also a number of uniques is finally starting to increase again. So that's good to see.

We do have ambitions in 2020 for Performance. So we have invested into what we call a growth team in our Turkish subsidiary.

They are adding new supply every day. In Q4, they added more than 150 new apps. And actually, it was very good to see that these new apps actually was more than 10% of the revenue. So we have -- we think we're doing the right thing in order to get Performance back to growth again.

If we look a little bit the highlights on the platform, we have successfully launched our 4.X SDK. We have been much better in getting the publisher to upgrade to the new SDK. This is important because this is -- in order to support some of the new creators we have, they need to be on the latest version.

And also, we have -- we're now supporting display in our SDK. So this is in order to capture that revenue opportunity. Then we need to have our publisher on the latest around. So it's good to see it's already more than 50%.

Our efforts on the advanced bidding is also paying off. We continue to work really close with some selected platforms on header bidding, and it's now more than 16% revenue contribution.

Margins are stable, and we do see that our tech team are working on some new core models, which are helping us to maintain strong margins. And one of the efforts there is that we are building a new core in Poland. So we have opened a tech department in Poland as well.

Priorities for the coming year. We're definitely going to continue doing what we're doing, focus on getting more demand, more supply going, do more of what's working, which has been -- so all in all, the organization is very stable. We're very pleased with the whole team, how they're executing, and we just want to help them to do more of that going in the coming year. We're going to capitalize on the display opportunity. We used to be very big on display. Now we have a very strong position, particularly on Brand on mobile video, but we see an opportunity also to sell display to our clients, who's buying video.

We are reorganizing Brand business development. We did that for 3 months ago. So now, supply and demand is one team. We think that, that is already giving results. We will focus more on that in the coming year. Also, we see a need to make sure we hit the targets we agree with our partners, particularly our publishing partners. So we have a new growth team who's only focused on delivering what we're delivering more than our clients expects on the KPIs we agree with them.

And as I mentioned, we have a lot of focus on our platform. We established a new tech team in Poland, who is a group of only data scientists who's going to help us to improve the platform on install rates, on ROAS, as it's Called, return on ad spend. And we believe this can help us to grow with the same pace we've seen in 2019.

So just to sum up, we think we are on a good path with AdColony. Finally, we are back to growth again. One thing is to take cost down, but really to see that we are back to growth. We start hiring again. This is good to see. The turnaround has been completed.

We move on to Bemobi. Just to sum a little bit up what is the unique thing about Bemobi. There's basically 2 areas. One pillar is our Apps Club services. We have a wide range of compelling subscription services in different verticals, everything from games to education, health, fitness. And in addition, we also have very strong mix of distribution platform, which is creating a strong -- and if you -- if you combine our services and our own distribution channels, then you get a very strong platform, which we have.

If you look at our service offering, then we have, of course, our flagship, which is our Apps Club for games, but we also have a wide range of other apps there.

In addition, we also are working with partners like TRUECALLERs, for example, where we're launching their app through our channels to users. And then, finally, we have added voice messaging solutions, particularly for LATAM, which we're all going to take international in 2020.

If you look at our distribution channels, then one important channel for us is mobile carriers. When we sign up deals with operators, we agree that they'll also -- we'll also get access to their channels. We have different paid online channels where we work with different channels, online channels from everything, from portals, et cetera.

Also, we work with other application vendor like Opera Software and others. This is channels where we maybe have more control when we work with operators. But finally, the most important and most strategic channel for us is the co-owned channels with mobile carriers, where we basically work with channels with carriers on portals for both data and for voice in Brazil. And there, we are basically capturing user browsing and also voice sessions when users are out of data or out of credit. That's where we step in and give them a good offering. And this is a very efficient channels. We're now live with 14, no credit, no data web portals in internationally, and we have all the big ones in our home market in Brazil. We expect to increase that during 2020.

The new things is that we have successfully developed a voice portal, where we're basically doing the same thing when people are doing a voice sessions and they will get a signal if they're running out of credit and they get an opportunity to basically finish the call by getting credit from us, and then we'll give them an offer afterwards. The same way as we do no credit, no data. We have managed to sign up all the major operators in this new portal, and we think this will help us to grow a number of voice customers going forward.

This is a very big effort this year to move not only the voice offering to internationally, but also to the channels. So again, our application goes together with our own channels.

If you look at the revenue, revenue came in at $14.9 million, up 9% from $13.6 million, and adjusted EBITDA was record high with $6.7 million in the quarter, up from $5.9 million, 13% increase.

FX continues to work against us in Brazil. So if we adjust for FX, then the revenue was $15.7 million, up 15% from $13.6 million. And adjusted EBITDA was $7.1 million, up 21% from $5.9 million. If you look at the number of subscribers, total subscribers, up 8 million versus last year same quarter. And the growth is coming from our new voice messaging services in Brazil, 4.4 million. And also, international had a growth compared to same quarter last year of 3.5 million. Still, we are only addressing a very small portion of the networks we have access to, 1.5% only. So there's a huge addressable market, we can focus on going forward. We are now live with 67 operators. Almost 50 of those are international. So there, the upside is even bigger.

If you look at the channel mix, as I said, we are live with 17 (sic) [13] No Data No Credit portals worldwide. We hope to expand that in 2020. We already have 2, 4 signed up and just take a little bit time to integrate them and launch them. When it comes to the new voice portal, we're now live with 4 in Brazil. This has been a big effort in the last 3 -- in the quarter. And we are also doing a lot of development under these portals. It's a very unique thing for how to launch our service going forward.

So we're building one platform. We'll combine data and voice portal into a new platform called -- which we call Bemobi Loop.

We are pleased to see that we continue to grow distribution, relative distribution for our portals. It was up to 28%, but more important, number of subscribers in absolute numbers grew from 1.6 million to 2.7 million.

When it comes to Operator, it's still a very important channel for us, even though that it's relatively part of the total distribution was down to 6%, which is okay. We have less control in that channel, but it remains important for us. When it comes to paid, this is a mix of working together with partners like Opera but also working with other online channels. The reason why it's increasing is that we simply are just becoming better at it. We have a longer history to work with different partners. And when we see that some channels are giving us high-quality traffic, we basically move more spend into these channels.

So we have managed to get channel up on paid, where we avoid low-quality traffic, which is just taking us some time to work on our filters and also to avoid working with partners with less quality traffic.

So just to sum up, our voice channels are getting big traction in Brazil. Big focus this year is to take this internationally. We are pleased to see how we are growing on our data portals internationally. It's bringing 34% of new users.

This is absolutely strategic for us going forward. We are pleased to see that we are launching -- on track to launch new apps internationally. We have basically only launched our flagship product. This was basically -- the idea was to get traction with operators on one, our best flagship product, but now we also see that our clients internationally are asking for more products from us. So the first step there is to take the most successful apps we have in Brazil and replicate that internationally.

So service diversification is going to be a big factor in our international growth in 2020.

We expect continued revenue and adjusted EBITDA growth in 2020, and we're also pleased that we have signed a new multiyear agreement with our CEO, Pedro Ripper.

When it comes to the strategic direction of Bemobi, we are still aiming to carry out a separate listing of Bemobi.

We are not considering London as realistic anymore due to Brexit. So we are considering other exchanges. And in that context, we have -- we have had many investor meetings in these specific potential markets in the last 4 weeks.

We have extended the agreement with the earnout participants. The earnout ended 2019. So we extended that with 1 year. The reason is that we jointly want to see if we can make an IPO happen this year. In case nothing happens, the earnout has been capped at $18.6 million.

When it comes to Opera TV, we have previously communicated there's an ongoing legal dispute with the majority shareholder, MFC. We have a favorable verdict granted on liability that was not appealed by MFC. MFC has been ordered by the court to pay a substantial portion of our legal costs. That cash has been received. And we have now restored the proceedings. There is a new trial coming up in March, April, where the court is supposed to determine the value of our shares, which then MFC has to then pay to Otello.

This ends my presentation. We will now take a deeper financial look. So Petter?

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Petter Lade, Otello Corporation ASA - CFO [2]

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Thank you, Lars, and good morning.

So let me walk you through the financials of the quarter. Obviously, as Lars said, really happy with what we did in Q4, $70 million in revenue, above what we guided and above what we expected for the quarter. Back to year-on-year revenue growth, which is very gratifying. And this is growth from both AdColony and Bemobi.

If you look at the cost side, the cost is overall relatively flat. What's interesting here is that we continue to invest in our people. So you'll see headcount is going up quite a bit. Salary cost is going up a little bit, but we're able to offset that by more efficient delivery of hosting for AdColony. And also, we've been able to move people from a high cost location to a lower cost location. So we're definitely gearing up for growth now in 2020.

Combination of growing revenue and solid margins and flat costs, obviously, led to an expanding adjusted EBITDA, which grew 45% compared to the same period last year.

The trend over the last few quarter's been really good. We sat at the low point. We believe the low point was Q1 in '19. I think we've proven that now. We've had 3 quarters in a row with very solid growth from Bemobi and from AdColony. And at the same time, we've been able to keep costs flat. So we are starting to show some of the leverage that we have in the business. And the $8 million that we have in adjusted EBITDA in Q4, that's the highest we've seen since -- back actually in 2016.

So digging a little bit deeper into AdColony. So AdColony had a very strong quarter, and particularly on the Brand side. Brand Programmatic grew really well into Q4 and has continued into Q1.

But what's encouraging here is not just Brand Programmatic, it's also Brand performance. It's Brand, the managed IO service. It's across APAC, it's in EMEA, and it's in the U.S. They're growing year-on-year and they're growing sequentially. So it's really the breadth of the Brand strength that's encouraging. It's not -- this is not the one-trick pony. It's really across the board.

Of course, at the same time, and as Lars alluded to, our Brands are paying us a higher and higher price, a higher and higher eCPM. So in many cases, they're outbidding our performance demand. And if we wanted performance isolated to be higher, we could do that. But overall, we go for the highest dollar amount. So if Brand pay a higher price, we're happy to give them the supply that we have available.

So as you can see, Performance revenue is down, both sequentially and year-on-year, but it's really important to see Brand and Performance combined here. Still, we believe there's a ton of potential in our Performance business, and we have a lot of initiatives to improve that in 2020.

OpEx has been relatively flat. It's been coming down significantly over 2 years. We're now at the base where we believe we can scale. As Lars said, a lot of the revenue growth will come from programmatic delivery. And we still have opportunity to take out costs. We still have opportunity to do hosting more efficient. So we believe those 2 will offset. We'll continue to invest in our people and product, but we'll take out costs elsewhere, which would give us nice scale and upside.

Gross margins, very stable in the kind of 34% range, also a level where we expect it to stay.

EBITDA, over $3 million in the quarter, highest, again, that we've seen in 3-plus years.

Bemobi, another very good quarter for Bemobi. Another record quarter for Bemobi on top line and on adjusted EBITDA. They just continue to deliver. I think we're very excited as we go into 2020 because we have a lot of growth levers now, both the international rollout and a ton of new services that we see is working really well. So very excited about the growth prospects for Bemobi in 2020.

On the OpEx side, obviously, it's coming up as we launch new products. It's coming up as we do our international rollout but we also believe that we can do a ton more revenue with the existing OpEx base that we have.

One of the more positive surprises, under many in Bemobi is the gross margin. So gross margin's actually been exceeding our internal expectations, and it's basically twofold. When we do a better channel mix, being that we have using our own or co-branded channel with the operators, gross margins are better. When we are selling somewhere in new products with invoice and financial, gross margins are close to 100%. So this is actually bringing total gross margin higher than we initially expected.

Again, I already talked about the EBITDA as another record quarter. It was up 15% year-on-year. It would have been over 20% if you adjust for FX.

Cash flow. This is going to be a key priority going into 2020. We started the year or the quarter, rather, with $31.5 million in cash. We had a positive operating cash flow with $2.7 million. This compares to an adjusted EBITDA of $8 million. So obviously, we'd like to generate even more cash on operating cash flow. But keep in mind that a lot of growth that we saw, particularly for AdColony, happened late in the quarter. So it happened in December, so this basically builds up the accounts receivable and working capital, if you will, in Q4.

If you look at the investment activities, $4.7 million close to half of this, so I'd say about $2 million, is more of one-offs. It's CapEx linked to Bemobi and the rollout of new services there. So this is a number that will be smaller going forward. $1.2 million is on financing. This is the IFRS 16 or the lease costs that we have in offices and some share buybacks.

So as I said, cash flow is going to be a priority going into 2020, and generating a healthy, positive free cash flow is a top priority.

Our financial position, $28.3 million in cash. We have utilized a small portion of our RCF of $20 million in the quarter, which gives us a net cash position of $8.3 million, which is healthy, is positive, and we expect to grow it.

Then to the more exciting part, looking forward. So let me give you some flavor on what we believe about the next quarter and the next year. So for AdColony, this is the 4 business lines or the revenue types that we have in AdColony.

So if you look at Brand Programmatic had a phenomenal 2019 and a very strong Q4, and that we expect to continue into 2020. We're off to a very strong start in Q1. Actually, we see revenue in Q1 compared to last year up over 100% on Brand Programmatic. So that's extremely strong.

If we look at Brand IO, also, we see solid growth here in EMEA, in APAC and in the U.S. That's going to continue this year.

For our Performance, our Brand Performance business, we believe this will be relatively flat in 2020 compared to 2019. Also keep in mind that the Performance business here is seeing some of the cannibalization. The more successful we are on Brand, to some extent, they're eating the lunch of the Performance business.

Also putting the gross margin here, just to give you a feel for where we are and what's contributing to the blended gross margin that we have of around 34%. The fastest growing part, which is growing at 30%, and the second fastest-growing part is 45%. So overall, we believe that the range that we're in now of around 34% we can achieve again in 2020. So I think it's interesting to see that we've been growing revenue without giving away basically a cent in gross margin.

So this gives us an outlook for 2020 of about 10% revenue growth for AdColony, both in Q1 and for the full year. Of course, for the full year, this is coming off a year with 17% negative growth.

So it's really been a turnaround that we look forward to, to prove to you in 2020. At the same time, we're going to do this while keeping costs the same and keeping gross margin as strong as it is today. So overall, of course, this will lead to a very nice expansion in adjusted EBITDA.

Finally, over to Bemobi. Again, just to give a little bit of flavor in terms of what are the moving pieces here. If we look at revenue, the moving pieces are really the number of subscribers that we have. The more subscribers we're able to get in, the more revenue we can make. In addition to that, the more services that we can provide to our subscribers, the more revenue we make. And I think we made a big leap in the end of 2019 with IVR and voice services and financial services that we look forward to expand also into the international markets towards -- more towards the end of 2020.

Gross margin, as already alluded to the fact that we're seeing a better and better channel mix, we're seeing a -- we're seeing new services with higher gross margin. Both those 2 components drive up gross margin.

If we spend more on CPA kind of paid campaigns, that will have -- that will lead to a lower gross margin. But on the balance, it looks very favorable going into 2020.

Then finally, on OpEx, we continue to expand with our product portfolio and headcount.

So basically, we have people. We're expanding with people selling our products, and we expand with people building our products.

The combination of all of this is we continue to see growth for Bemobi. So we're estimating another growth year on top and bottom line. So revenue growth of around 10% in Q1 and the same for the full year and adjusted EBITDA growth of around 10% in Q1 and for the full year.

So overall, pretty -- feel pretty enthusiastic about the next year, both for AdColony and Bemobi.

That was my last slide. So with that, let's take some questions.

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Questions and Answers

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [1]

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So Christopher here from DNB markets. Actually, one place where I think we could start with that's interesting is on viewed. I just noticed that during Q4, there wasn't a significant acceleration in the growth, the top line of viewed. I think the year-over-year growth was almost 30% after a quite flattish first 9 months of the year. Do you have any insight into if that is an acceleration or if there's been delays in deliveries? Or..

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [2]

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We do not have a particular insight on that.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [3]

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Sure. Okay. And then moving on to the -- to AdColony. So it seems like that was an important driver of the working capital outflow during the quarter with the seasonal downtick in Q1. Should we expect to see a quite significant inflow of cash from working capital changes then?

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Petter Lade, Otello Corporation ASA - CFO [4]

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Yes, you'll see some. You'll see definitely see it reverses somewhat in Q1. But also keep in mind that, unfortunately, the average payment terms for a lot of the advertisers in -- are closer to 90 days. So this is something that we will collect in March if they pay on time. So we'll see -- yes, it will reverse in Q1 or really towards the end of Q1.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [5]

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Okay. And then on the OpEx, you say flat OpEx into next year. Should we expect the cash OpEx to stay flat for AdColony as well? Or should that be somewhat down? Or...

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [6]

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I'm not sure I understand the question.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [7]

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Cash, so including the capitalized costs related to AdColony, what should -- in 2020.

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Petter Lade, Otello Corporation ASA - CFO [8]

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Well, it will certainly not go. If you look at overall costs, I mean, the kind of $60 million to $65 million range, I think, is good. It gives us a little bit of leeway. Overall, our capitalized R&D is going down. We are investing, as Lars said, in an office in Poland, but I don't expect the capitalization to go up. We continue to do our tech more efficiently as we move the -- some of the people from Seattle over to Poland.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [9]

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Yes. And so in general, you can say that we're very pleased with our support, global center in Turkey. We're very pleased with the new tech team we have on -- in Poland. We're very much focused on adding more salespeople in markets like the U.S. So for example, in Q4, we actually increased headcount in a colony, but costs went down.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [10]

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Great. And then on -- it's super to see AdColony back to growth. And then 10% growth next year is looking good, but I would actually expect that it could also be more upside to that number if you just look at the market growth numbers for Mobile Advertising and video -- in-app video in particular. So is that kind of the mix where you're trying to be a bit cautious? Or...

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [11]

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I think this is our best estimate. In general, I think, given our history, we don't take anything for granted in AdColony. So we're just coming out with our best estimate for how we see it. It's always very difficult to see how the trending will be, but we just focused on making sure Q1 will be strong. And we are trying to invest into all areas where we see growth, particularly on the Brand side, and we are enjoying our position and our team and working with our clients. So I don't think we should spend too much time on trying to estimate 2020. We're just focusing on continuing executing like we've been doing. Actually, throughout 2019, we had 2-digit growth from Q1 to Q2, 2-digit growth from Q2 to Q3, 2-digit from Q3 to Q4. Now it's absolutely key for us to have a strong Q1, and that's the focus of the organization.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [12]

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Sure, sure. And last one on AdColony, if you could just help us understand a bit more about this platform issue and what really is going on.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [13]

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This is just basically an upgrade on iPhone, where suddenly, we, of course, had -- we were fully supported, but then we need also our publisher to upgrade. And that was a technical issue in that upgrade, which we fixed quite quickly. But you -- giving our level we have on Performance in 2 days of not normal revenue has an impact of 5%.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [14]

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And then moving on to Bemobi. On the CapEx side there, I understood there were some nonrecurring items or they were nonrecurring in nature during the quarter. So could you just explain why you think those outlays were nonrecurring? And then how we should look at that CapEx number going into 2020? What should the level be at?

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Petter Lade, Otello Corporation ASA - CFO [15]

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I mean, if you look back in the mid of our -- in second quarter of '19, we bought some assets from a company. And we've been expanding that asset because our goal is to get into voice and financial services with all the LATAM or Brazilian operators. So we've been able to do that now by the end of 2019, but that means that we need to get our hardware into the network. So it really -- it was a one-time investment to get that hardware into the network. So a couple of million dollars that hit Q4. Of course, if we do this rollout internationally, we will see some of the similar ones. But just to say if you get this hardware into the network so close to their core, you're just in a unique and pretty amazing position with the operators. So I'd be happy to make that investment into 2020, but I don't foresee -- we do that at least in the first half of this year.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [16]

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We are technically working on a cloud solution also in this noise, but it's all kind of new for us. So in order to execute particularly in the home market, we were just focusing on, let's say, the old infrastructure where we have to get hardware in. But we are having a project where we hope to be able to do the international expansion without similar costs as we had now with the 2 wins we had in Q4 in Brazil. So -- but it will take some time. So we should -- we hope to get wins international as well, and we don't expect our cloud solutions to be ready to support that at that time. So that will be CapEx costs on these potential wins.

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Christoffer Wang Bjørnsen, DNB Markets, Research Division - Analyst [17]

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Sure, sure. You haven't talked about this for a while, so it will also be helpful if you could just give an update on Skyfire and how that is developing as part of corporate. Where are you seeing that headed? Is it being just sunset? Or is there -- it seemed like there's been some activity around marketing there and -- yes, strategic alternatives.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [18]

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It's -- our focus in 2019 on Skyfire was not to lose any money on that operation. So that has been reduced to absolute minimum. They are only focusing on the few clients they have. So we don't expect a lot of activity there. The main goal is we're not going to make any investments that will potentially lead into losses. So that's the main tact.

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Petter Lade, Otello Corporation ASA - CFO [19]

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And also, the number for Skyfire is now built into the corporate functions. So whatever extra revenue or cost or cash collection we get there is -- you'll see in the corporate part.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [20]

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Remember, when it comes to Skyfire, we sold the unique part of Skyfire to -- in connection with -- when we sold the browser part of this. So we only kept a very few small part of it. So that's the main reason for the low activity in that company.

Do we have anyone maybe online?

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Petter Lade, Otello Corporation ASA - CFO [21]

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Anyone else? Any questions? Okay. Thank you so much.

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Lars Rabaek Boilesen, Otello Corporation ASA - CEO [22]

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Thank you.