Otello Corporation ASA (OTEC) Earnings Call Transcript & Summary

Good morning. Welcome to Otello Corporation's Second Quarter 2020 presentation. Today's agenda, I will do an executive summary, follow up with an operational review; then our CFO, Petter Lade, will do a financial update; and finally, we have time for Q&A. Quarterly highlights: Revenue came in at $54 million, down from $56.2 million; adjusted EBITDA, $3.5 million, down from $3.9 million; operating cash flow, $3 million, an improvement from same quarter last year where cash flow was minus $2.8 million. So AdColony is slightly above the guiding we gave, and Bemobi slightly below. For AdColony, EBITDA improved and turned positive. And Bemobi faced some COVID-19 impact, negative impact, and also had some strong FX headwinds in the quarter. Strong cash flow -- operating cash flow of $3 million for the company. Operational review. If we start with AdColony, very strong quarter for AdColony, very pleased with the quarter. Also on revenue, we're very pleased. We had higher revenue in Q2 compared to Q1. We also had higher revenue in Q2 compared to Q2 last year. This is very strong in a quarter where the whole industry was completely paralyzed by COVID-19 when it broke out end of March into April. We managed to already in the end of April to get our advertisers back to our network. And in many ways, April was really the low point on revenue. Since then, we have increased and have many of our advertisers back, and we ended up actually doing better revenue in Q2 compared to Q1. Very few players in the industry did that. If we compare ourselves with the Tier 1, the biggest guy -- elephants in the industry, they were down in Q2 compared to Q1. They were flat versus Q2 last year. So we're very proud of our performance, and it shows that we have a very strong organization and partnership with our advertisers and supply partners. The main reason for this good results was that the programmatic revenue had more than 100% growth in the quarter, and now it's actually up to 40% of the total Brand revenue. So that's really encouraging. On the cost side, we took some action as well. We merged the demand side, the sales side of Brand and Performance in the quarter. We also -- part of this was to expand our Istanbul service hub. And this gave us in savings of around $4 million annualized, so $1 million per quarter going forward. Going forward, we expect the momentum to continue. So we're expecting plus 10% revenue growth this year compared to 2019. There are some risk due to COVID 19, but as I said, the low point was really already in April. And already from May, we have seen positive trends all the way into Q3. We see stable performance revenue and continued growth in the Brand business, particularly due to the -- we have managed to really get a lot of users to -- and a lot of partners to buy programmatic from us on the Brand side. We see that the trend is also continuing into Q3. July was stronger than June and also positive staff for August. So this is despite that we have some verticals where we basically have not really getting advertisers back. This is industries like travel, sports entertainment, restaurants, et cetera. There's still a very big upside there when we get out of the COVID-19 in these verticals. But despite that, we see the positive trend continue. And when it comes to costs, the cost savings we executed in Q2 have now brought the cash flow breakeven point down to $50 million in quarterly revenue. So clearly, going forward, we expect to be cash flow positive. Looking at the different parts of AdColony, we start with supply publishing. Clearly, with our SDK footprint, we are a leader for in-app inventory for mobile games. We did a study with our SDK partners and with a study on our users. And they say that 50% are using the phone relatively more. It's gone up significant during the last few months with COVID-19. 33% of them play multiple games per day and 23% are playing new games. And obviously, this all has a positive impact our SDK footprint, simply give us more available inventory for our Brand and Performance advertisers. And the reason is, of course, that 95% of our supply, which we also use for Brand advertising is based on gaming. Advertisers want a fraud-free, brand safe, transparent marketplace, and that's exactly what we deliver with our SDK, given the fact that gaming is basically always brand safe. Also a trend we have seen from our demand customers, our advertisers is that they are becoming much more sensitive now, where the ads ends up, what content is next to the ads. And that's where gaming is also a very safe harbor because you won't risk that you end up next to negative COVID-19 news content online. If we look at the global brand business, then we had our third consecutive quarter of double-digit growth. This was very much -- this positive trend is very much happening due to our programmatic business. We had 133% growth on our programmatic business. So basically, what we see is that many of our advertisers are now also buying programmatic on our programmatic exchange for Brand. This is very positive. Our IO business was down 13%. It's actually a really good results because April was very, very little, more or less all campaigns were canceled. But we saw that AdColony's mobile video ad networks was really one of the first networks that was turned on by the big advertisers. So we're also pleased with our IO performance in the quarter. May and June was very strong. And the same thing goes for brand performance. All in all, up 14%, $30 million in total, very good momentum for Q3, very positive. North America, which is the most strategic market we have. That's where we have the biggest market. It's clearly the leading market in mobile advertising worldwide, very positive quarter, up more than 100% on programmatic, up 24% compared to same quarter last year. So this clearly shows that among agencies in U.S., we are top of mind when it comes to mobile video. In EMEA, we had also an increase despite COVID-19. We saw the same trends with cancellation of campaigns in April. Despite that, we had growth very positive, particularly because we have not really started our programmatic offering in EMEA. So very positive that we were growing compared to last year. In APAC, that was where we had the full impact of COVID-19 from day 1 in the quarter. We had -- we were down 7% on brands. We see now that Q3 will be significant stronger. So all in all, we are also pleased with the development in Asia, APAC. If you look at our programmatic results, which is really where we -- this is the strategic part, this is future, we had a very strong quarter. We see that our advertisers are coming to our exchange because it's for free, it's brand safe. Everything is transparent. We continue to add more supply or most demand to the exchange. So we simply increase the supply/demand alignment around that. The things that's happened in the market has been positive for AdColony in the sense that consumers, as you see on the diagram on the right, consumers are simply spending more time on gaming, video streaming, et cetera. And that's where we have our supply. So this is positive. And we had 133% growth on programmatic, and it's very encouraging to see that this trend is continuing into Q3. When we look at our Performance business, it was flat, relatively flat now for the third quarter in a row. This is, of course, after several years of strong decline. So it's positive, it's flat. We see growth in key categories like rewards, social casino, hyper-casual games. And we have a lot of focusing on attracting more new advertisers to our Performance platform, but also new publishers. So I think it's positive that, of the revenue, more than $1 million was coming from new advertisers and almost 3 million was from new games, new publishers. So that trend is positive. And also bear in mind that we use the same platform for performance and brands. So we are clearly prioritizing Brand because we get better pricing from Brand than we do on Performance. So if we wanted, we could, of course, have stronger growth in the quarter, but we have, of course, I think, Brand due to better pricing. And what are we doing to scale our performance better is, of course, to get better margin, get a pricing, make it competitive to our brand offering as well. And we have invested into a data science team in Poland to actually improve that. They are working on some new models, some new algorithms. And we are testing this in the lab. It looks very promising, and we will deploy that in next -- this month, next month. And this will, of course, drive better decision on the platform, better predictability on the platform. We also, as I said, are working very hard on our growth team in Turkey to attract new advertisers, new supply. And that is going well, and we'll continue to invest into that. So all in all, given the total growth of AdColony, we -- there's an explanation for why Performance was flat in the quarter. And we think with the new data science team and the new growth team, we can get back to growth in Performance as well. Let's go to Bemobi. Just to repeat the strategy for Bemobi, we have 2 pillars, which are basically the securing profitability growth in emerging markets and which makes us unique. One is our portfolio of services with basically, tailor-made and position for emerging markets. And then the other pillar we have is our distribution channels where we use operator channels, we use third-party channels, but we also have developed our own channels, which make us very unique in what we do. The combination of these 2 things is what give us the growth. Let's take a look at our subscription services, as I mentioned. The first is the Apps Club family, where we basically have bundles of top of games at a low price point in the subscription models. We have this with several categories. We started with games, but now we are active in many other areas like fitness, health, security, Kids Club, et cetera. We also have stand-alone subscription apps. We are exclusive distributor, for example, for TRUECALLER in many markets. So that's something we're also increasing. And then finally, in the last year, we have successfully launched voice and financial services. We are the leading voice messaging provider in Brazil, for example, now. So this is also becoming a very important subscription service for us, which we will take international as well. On the channel side, we use carriers. When a deal is signed, then the mobile carriers is committed to use their channels to launch our service. We use paid online campaigns. We've been working with different partners, different portals, web properties over the last 2 years, where we know we have quality traffic. Opera Software is one of the key partners there, for example. This is an important part of our distribution. And then finally, the most strategic where we have most control is our co-owned channels with mobile carriers. We have these portals for no credit, no data for voice, basically, when the user runs out of credit on voice, data or -- then we redirect them to a portal, which we co-own with carriers. And the user can then buy Bemobi services and carriers, the core services on voice and data. If we go to revenue, revenue in the quarter was $10.7 million, down from $13.9 million. EBITDA was $4 million, down from $6 million. If we correct for FX, which was really against us in the quarter, then that on constant currency is $13.5 million, down from $13.9 million. So a decrease of 3%. And EBITDA was $5.3 million, down from $6 million. This decrease if we have -- if we compare ex FX is very much due to COVID 19. What happened in many emerging markets in -- particularly in April, but also into May and June, was that there was a complete lockdown in many countries like Brazil, but also other markets where basically, during the lockout, all shops were closed. You could not top up your accounts, et cetera, and we saw an immediate impact on our services. In fact, we already saw beginning of April that when we talk to our carriers partners that their account balance was down 30%, 40% already in April, we didn't see such a big impact there. But we saw it a little bit later, never at that rate. We saw maybe like 10%, a little bit less -- more than 10% in some markets. So we clearly think that we will hit less than other services. But clearly, it had an impact. The positive part is, of course, that we see July is significantly better than June. So we think after the lockdown has been -- I mean these countries are back to normal, their people -- shops are open again, people can top-up their accounts, then we see that revenue is rebounding. On the subscriber side, we saw the same trends, Okay, we were up $4.5 million compared to last year. This was mainly from voice subscription. Also, international had a growth over $2 million. But compared to Q1, we were down $3.5 million. And this is, again, the same explanation that during the lockdown, people had time -- it was difficult to top up your accounts. If you don't do that, we lose them as a user. But on that side as well, we see in July that now after log time has been -- is over, then we see subscription is going up again. If you look at the mix, the channel mix, then we are now live with 16 portals in Bemobi outside LATAM. We have 2, 3 more planned for the next 2 quarters. We are live with our voice portal with all the main Tier 1 operators in Brazil. So we have big plans to take this internationally. This has been a little bit delayed due to COVID-19 because it's hard to travel to these operators. Also, they are very, very sensitive to make -- to put new hardware and new software into the network. So we are making progress, but it's a little bit delayed due to the lockdown we have seen. If you look at the mix, then it's current to see that more than 1/3 of our distribution is coming from our own channels. Operators is down from 8% to 4%, and we are up 5% on the paid. So pretty normal months, good mix. We will continue to focus very much on the voice-based channels, the omni channels. We have managed to basically take the no data, no credit portal out of Brazil to operators internationally. We want to do the same with the voice portals we have. So there'll be a big focus on that now given that many of our markets are opening up again, so we can start focusing on that. Also in Brazil, it's going really well. We are launching some new microfinancing, data microfinancing products. In Q4, we've done some tests. It looks really promising. So we have a very strong road map for our voice portals. And also, when it comes to service diversification, this is in full swing. We are launching many new services, international, basically, just replicating the success we have from Brazil. Up until this year, we were just doing Apps Club international. Now we have launched services in many different categories also outside Brazil. When it comes to Bemobi IPO, we are constantly assessing the market condition, and it's still our target to carry out an IPO. We still think Brazil is the best location, best listing venue for Bemobi. And we basically plan to do this as soon as the market -- it is reopen. If you look at the market in Brazil, it's looking promising for that. So we're very focused on that. COVID-19 clearly had a big impact in the quarter. We were hit less than other services, hit less than when we compare how much carriers account balance was done with prepaid users. But we see that we are rebounding nicely now. Many of the big emerging market countries, despite a lot of issues we COVID-19, they have decided to get back to a more normal, let's say, society where shops are open again, people are going to work. So this is helping us to make people buy our service again. And we see July was clearly better than June. So we expect improvement on this due to the lockdown is over, and we're getting a little bit more back to normal. So July was better, and we expect the same trend in September -- August, September. Opera TV, as previously communicated, that's an ongoing legal dispute with majority shareholder, MFC. There's a favorable verdict granted on liability for Otello, not appealed by MFC. MFC was ordered by the court to pay a substantial portion of our legal costs. All that cash has been received. Otello has restored the proceedings in order to pursue alternative remedies. This was supposed to happen in spring. It was delayed, postponed due to COVID-19. Now it's scheduled for the first week of October 2020, so in 3 months. That ends my operational view. So Petter, please.

Thank you, Lars, and good morning. So let's dig into the financials. We are pretty happy with the results that we delivered in Q2. Revenue is down 4% year-on-year from $56.2 million down to $54 million. If you adjust for FX, revenue actually would have been up slightly year-on-year, which is pretty good in the midst of the pandemic that is ongoing. On the cost side, we were able to take down costs further in the quarter, which meant that we were able to protect the adjusted EBITDA, which came in at 3.5% versus 3.9% a year ago. Also here, if we adjust for FX, the negative 11% on adjusted EBITDA would have been positive over 20% year-on-year with the same FX rate as we had a year ago. So again, pretty happy with those results in the midst of a pandemic. If you look at the onetime cost, typically, we have a negative item on a onetime cost. This time is actually a reversal of a restructuring charge. So it's a positive onetime cost of $1.2 million. This is predominantly from an office lease that we were able to get out of, and we were able to get out of it at much more favorable terms than we expected. So it reversed a previous expense that we've taken. We had an operating profit of negative $2 million in the quarter. This is down -- or up rather from $4.2 million, which we had in the previous year. But we -- what's interesting here is that if you look at how our operating cash flow is doing, it's tracking well ahead of the EBIT. So that's a promising sign going forward. And it shows that we have a lot of noncash items that are pulling down the numbers still, but those will diminish over time. So you'll see reflected in the P&L, the solid patent track that we're on. Net financial items, as always, a big swing. This is FX. If you remember, in Q1, we had a positive swing of nearly $20 million. This is the relationship between the kroner and the U.S. dollar. This quarter, the dollar was weaker. So we have a loss on the net financial, all noncash, of course. If you look at the trend, we still feel that we're on a solid growth path. Clearly, this is a seasonal business where Q4 is stronger, particularly in the advertising business. What we delivered this quarter, although being slightly below a year ago, adjusted for FX, it would have been up. And you can see cost is down significantly. So in the midst of turbulent times like this, we also have an opportunity to look hard at the organization and streamline it further, making profitability higher when growth returns at a stronger pace. If we then look at AdColony. Lars been through in detail what we saw with the AdColony in the quarter, but really happy with the results that we delivered. We see year-on-year growth and Q-on-Q growth for AdColony, and that is a lot better than many of our peers. Really happy to see that our Performance business has stabilized. It's around $13 million per quarter. And we see that our Brand business just continue to grow. And particularly, we're happy to see the Brand programmatic business grow, which is now 40% of overall Brand revenue. And clearly, here, in many cases, we have an opportunity to favor Brand dollars or performance dollars because we'd rather take 40% gross margin as opposed to 25% gross margin. So that's the reason why you'll see Brand expanding, sometimes at the expense of our Performance business. The -- when we do that, there tend to be a mix shift. The fastest-growing part within Brand is programmatic. That comes to a slightly lower gross margin than the IO business. So you'll see that the overall gross margin is down about 1 to 2 percentage point. I think the level we're at now is very sustainable. And the small dip that we see in gross margin, we more than make up for in lower OpEx. So the result and bottom line is definitely positive by the move to programmatic. If you look at OpEx, OpEx was down significantly in the quarter. It was down a full $2 million year-on-year. I'd say about $1 million of those is ongoing. That's the rationalization that we've done, streamlining of our offices and services and merging the supply side -- the demand side rather of -- with Brand and Performance. So that's here to stay. The other $1 million is more onetime in nature. Well, of course, we have -- we do less travel, less marketing, less entertainment in a period of COVID-19. But it still means that the ongoing business is going to have an OpEx at or below $15 million per quarter, so $60 million or so run rate. Finally, on adjusted EBITDA, happy to see that we were able to swing from a negative $1 million to a positive $0.5 million in EBITDA in the quarter, with revenue being relatively similar to last year. So over to Bemobi. Clearly, the BRL, the Brazilian currency, where we have the majority of revenue still has been hit really hard over the last year. It's actually -- the FX rate is down 37% versus the U.S. dollar. So that makes a big impact to the P&L as long as we report in U.S. dollars. So we reported $10.7 million versus $13.9 million. This would have been 13.5%, down 3%, but still a tad below where we had hoped to be in Q2. And it was really the impact of COVID-19 hit Brazil, in particular in the emerging market, harder, but also a little bit later than for AdColony. So while we saw AdColony turning around during April, we saw the same thing happen with Bemobi in June and then we see nice growth into July, which has continued also into August. Gross margins, there's no big swings there. It's linked basically to what kind of products we sell, which channels we use and in which markets we do sell our products. OpEx is increasing. We are expanding our global presence. We are ready to when the world kind of normalizes. But as Lars noted, the COVID-19 impact has delayed some of the rollouts that we are -- we had expected to do already that will happen a couple of quarters later than we had planned for. Adjusted EBITDA, again, impacted by the fact that revenue is down. Turning over to cash flow. This is really a top priority for me. The operating cash flow in the quarter, we're really happy with. We had $3 million of positive operating cash flow. This is a swing from last year where we had negative $2.8 million. So that's something we're very happy with. Typically, Q2 is a relatively soft cash flow quarter because in Q2, you typically collect the revenue that you recognized in Q1. So we're happy with the contribution on cash we got in the quarter. Cash flow from investment, negative $2.9 million. That's also a number that we've been trying to get down. We try to use less on CapEx. We don't capitalize more on R&D than we absolutely have to. And then, of course, on financing, this is linked to IFRS 16 in terms of leases that we have to pay and also the interest that we pay on our RCF. Overall, we ended the quarter with pretty much the same cash that we entered with. Very happy with the financial position that we're in. We have $33.5 million in cash. We have used -- tapped into the RCF with $30 million. We have another $20 million available there, if we should need it. But overall, we're still in a net cash position. And as Lars said, we now enter Q3 in a position where we expect AdColony to be free cash flow positive in addition to Bemobi being free cash flow positive. So now we're looking forward to start generating cash again. Balance sheet is nice and clean with 75% equity ratio. Last 2 slides is the outlook for the rest of the year. So finally, for AdColony, no big changes here. We set this guidance before COVID-19 happened. And for AdColony, basically, we're keeping the same guidance as we did then. We see a year where 2020 is going to be 10% above 2019. We have done about 7% year-to-date in Q1 and Q2. We're going to be in the same range for Q3, and then we expect an acceleration into Q4, both because we get easier comps, particularly on the Performance business, but also because we know there's a lot of pent-up demand that's ready to go as soon as things normalize. We did some tweaks on the gross margin and OpEx. The mix means that, with more programmatic revenue, we have slightly lower gross margin. But then again, we also have lower OpEx. If you go to the bottom line, that's a neutral to slightly positive impact. For Q3, as I said, it's just more to say more growth and up -- clearly up from what we did in Q2. We see now July is already over 10% up from where we -- the average that we had in Q2. So it's a promising start. Finally, for Bemobi, we set out a goal of 10% growth year-on-year for 2020. This, again, we said before, COVID-19 hit us. And the hit on Bemobi has been slightly harder and its duration, I mean, slightly longer than for AdColony. So we are tweaking the guidance, taking it down from 10% to a range of kind of 0% to 5% growth. So still expecting growth year-on-year. The impact, of course, is that we made slightly less revenue in Q2 than we expected, but it's even more the fact that some of the rollouts that we wanted to do has been delayed. So it's more a delay of revenue than anything else. We are back to growth again now, but we are starting from a slightly lower point. In Q3, we expect revenue and adjusted EBITDA to be flat compared to last year. So that points to a nice upswing from where we ended Q2. That concludes the presentation. So let's go to Q&A.

First, I want to really start with a follow-up question on your comment on the pent-up demand in AdColony for the coming quarters. Could you just elaborate a bit on the nature of this pent-up demand and which segments, what kind of customers, brands? And why is it pent up? And why are you so confident that this will kind of give a catch-up effect going forward?

Yes. Okay. I'll talk. So okay, what we saw when we're -- I mean the reason why we've been hit relatively hard in both AdColony and Bemobi right away is because we have a business that is very transactional. So when lockdown happened in U.S., we got the first cancellation within hours. And those are kind of spends that went away. When restaurants closed, they see no need to advertise. When Best Buy closed, there's no need to advertise. When movie theaters closed, they don't advertise. When Disney is not producing or screening any new movies, they don't advertise. So a lot of these demands are still gone. What we've been fortunate is that we've had a Performance business that come in and taken some of that demand. We had other like pizza deliveries that come out and taken some of the demand, but still a very sizable chunk of ad spend is still on the sideline and doing -- some are doing 80%, some are doing 50%, some are doing 20% of what they did in the past. So if they just get back to the normal spend that they had, and that's a really sizable chunk of revenue -- I can't really quantify how much it is. We just know that some of our big accounts are basically still running at 2 cylinders, if you do not.

All right. That's helpful. And then on the Performance business, still at kind of a stable revenue run rate, which is encouraging. But in terms of bringing that back to growth, which you commented on, Lars, kind of what do you think is needed and what kind of catalyst do you see for that happening? Are you seeing any indications in the development work, thus far, that they're making progress? And what kind of time line should we look for there?

I mean it's very clear that, I mean, it's been a turnaround in AdColony, and we have done a lot of things, and we've been very focusing for the first year of that turnaround on cost. And then, of course, we had invested a lot on our platform into -- basically, attract brands to invest on our platform to make our Brand customers to go programmatic, et cetera. So we feel we have succeeded there. So during all this, we had lower margins on performance and we had tough competition, particularly tough competition from pure platform companies with really good data science. And that's basically we are trying to go head-on now. So in order to do that, we had to basically out of AdColony to make a complete new data science team. And that's what we have built up now over the last, I would say, 8 to 12 months in Poland. So they have already -- they're already involved in the platform that help the Performance platform to get where we are now, but we haven't really launched any of their new, let's say, models, right, their new algorithms. We're still running on, let's say, old agreement, which are okay. That's what you get. But we are testing some of the new models, and it looks very promising. We just need to launch it live. So just so you understand, right, you're not -- we are running maybe 5% of the traffic on their models, real traffic, and we see good results. So we're very excited about basically when we launch these new models, the new algorithms.

Also just to add to that, and in Lars' part, the fact that we're now going out and getting a lot of new both supply and demand. So one of the faults in the past is that you were too dependent on your existing publishers, your existing advertisers. But this is a market where it changes, and we now have a much better grasp in terms of how to attract new advertisers and new publishers. So you kind of get back to growth.

Yes. So basically, what we're saying is we didn't have a lot of focus on Performance. Performance was important as a supply for our Brand business. Now we want Performance to get back to growth. We're investing into a data science team, that's necessary. We're investing in to attract more supply and more advertisers to our Performance platform. And we hope all these 2 things we're doing there will help margins still grow up. So we will also -- it will also be competitive to our brand advertising. So that's the focus. We're very clear about that. So we hope results will come.

Sure. That's helpful. And then last one on AdColony. We're getting closer to the changes to the Apple IDFA now likely in September, and then that will probably start to affect your business. Could you just elaborate a bit on that kind of headwind for AdColony and then how you kind of compare it to your peers and competitors from that point of view since you have your SDK directly integrated and stuff like that?

I mean this is -- this, of course, is a hot topic for the entire industry. Apple's plans will change a big portion of this industry. And when we look at it, of course, we don't really know yet how and what they will launch. They have in the past done changes up until the last minute. But there are some clear companies that are going to struggle with this. The attribution partners out there, the companies that do retargeting, they're all going to struggle because they can't find a unique identifier on the phone. That's IDFA, that's what it's doing. We feel that we are in a relative advantaged position because we have our SDK, so we know a lot about the users already. So we think that the power of balance will shift. And basically, of course, what Apple is doing is that they're making themselves a more important player in terms of deciding who gets the install in terms of what the attribution players did in the past. So we actually think this can play in our favor because we have a great relationship with Apple. We're not really doing anything that goes against their guidelines and terms. So if they take over control as opposed to what the attribution players are doing now, I think we'll fare really, really well. The only thing I'd say is that when this is all happening and if it happens now in mid-September, I wouldn't be surprised if advertisers are a little bit kind of wait and see. But this is a $100 billion industry. So I don't think it will go away, it'll just find other ways to transact. And again, having kind of a first-hand inventory with our own SDK, that's kind of the best position you could choose.

I mean just to sum up, right, it's -- when you have changes like this, it's all about having your own user base. So there's a lot of fragmentation in this industry based on third parties, right? One of the reasons why we have succeeded in Brand is that we have a brand-safe platform, and you can only have that if you have your own first-party users. So there's a lot of uncertainty around that. We don't expect a big impact on spend for the industry, but we definitely do expect that this will favor companies with their own user base going forward. And via our SDK, we are in a strong position there.

Great. Moving on to Bemobi. You mentioned that you believe that you outperformed your peers during Q2 and the tough period that's been in the Latin American region. Could you just elaborate a little bit on what is the benchmark you're using to -- as a proxy for peers? Is it prepaid revenues for the operators? Or are there actually competitors that you have insight to? Or...

It's very -- we can be very transparent on that. We have co-owned channels with carriers. So we can basically see what are the account balance because we have access to that. So of course, we got very worried when COVID-19 happens in many markets where we have these co-channels because we can see what is the account balance, right? And we have, of course, dialogue with carriers. So clearly, the emerging market was really impacted by this due to the lockdown. So we were actually surprised that we didn't have the same impact immediately, but the impact came a little bit delayed, which, of course, is a good sign that you have a good service, et cetera. But when people cannot top-up or other reasons for why, they don't have money, et cetera, then we were impacted. So it was a clear warning when we saw that their confidence with operators was so much down. So we know just by pure calculation that we were significantly less down. So that's basically the assumption from this.

And then with all this insight, could you just elaborate a bit on your thinking behind the guidance for Bemobi, Q3 in local currencies? What is kind of the leading account balance indicator telling you at the moment in July, August and then also kind of traffic on the platform for July and August, the trend?

Yes. So again, the good thing here, and again, similar to AdColony, we follow basically revenue hour by hour. So it's very easy to track what's going on. We saw at the beginning of -- kind of late June, beginning of July, the frequency of top-ups, the amount that are being topped up by the consumer were both increasing. So the available balance were increasing. That's a leading indicator into spend because when they top-up their balance, we get a ping, we asked them to renew or increase their subscription. So that's -- as soon as -- basically, that's the easiest way to look at it, the number -- the frequency of top-ups and the sum that they were topping up. So if we look at the guidance that we've given, it's basically just continuing on that, that Brazil is going back to normal, the shops are open again, consumers are slowly getting back to work and they're getting money into their hands, which are then spend on entertainment, such as Bemobi. Again, it's a subscription service. So predictability is relatively high.

Great. And then moving on to the -- to Vewd, basically. I was just wondering, I know you have limited insight there, but if you can comment a bit on the development there. I just saw that revenues in EBIT, identical to last year, but net profit was down to 0. Is there any changes in the financing structure?

I can take that. I mean, clearly, we're in dispute with Vewd. We can't really say much. But I think it's fair to say that we don't want to put any profit into our P&L that we can't vouch for 100%.

Yes, we have limited insight. So on the case, that's really not happening anything. It won't happen before October.

Okay. Thank you.

Thank you very much.