Note 4 - Segment and Revenue Information

12 Months Ended

Dec. 31, 2019

Statement Line Items [Line Items]

Disclosure of revenue from contracts with customers [text block]

NOTE 4. SEGMENT AND REVENUE INFORMATION

For management reporting purposes, the Group is organized into business units based on its products and services and has

four

reportable segments, as follows:

● Browser and News

● Fintech

● Retail

● Other

In prior periods, the Group had

one

operating segment. The change in

2019

follows the Group’s expansion and growth into new businesses including microlending, and related changes to how financial information is reviewed by the Group’s chief operating decision maker (the “CODM”).

An operating segment captures relatively distinct business activities from which the Group earns revenue and incurs expenses. Furthermore, the segments’ operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the various business activities and to assess performance. Management has determined that the CEO, who is also the Chairman of the Board, is the Group’s CODM.

The operating and reportable segments are based on the Group’s main categories of products and services. The segment profit or loss is the Contribution by segment, which is calculated as revenue, less (i) cost of revenue, (ii) marketing and distribution expense, and (iii) credit loss expense.

The Browser and News segment includes the Group’s PC and mobile browser business as well as the Opera News platform, both as leveraged within the Group’s browsers and as made available through standalone apps. These products, which have similar characteristics and are often closely bundled, generate search and advertising revenue for the Group. The Fintech segment relates to app-based microfinance services that offer instant credit to approved borrowers. The retail segment includes sale of handsets, prepaid airtime, and data to consumers and wholesalers. The segment Other includes licensing of the Group’s proprietary technology to

third

parties, including related maintenance, support and hosting services, providing professional services, and providing customized browser configurations to mobile operators.

[US$ thousands]	Year ended December 31, 2017
Segments	Browser and News			Fintech		Retail		Other			Total
Revenue
Revenue from contracts with customers		109,239			-		-		19,653			128,892
Total revenue		109,239			-		-		19,653			128,892
Cost of revenue		(1,303	)		-		-		(2,666	)		(3,969	)
Marketing and distribution expenses		(30,971	)		-		-		-			(30,971	)
Credit loss expense (1)		(1,837	)		-		-		-			(1,837	)
Direct expenses		(34,111	)		-		-		(2,666	)		(36,777	)
												-
Contribution by segment		75,128			-		-		16,987			92,115

[US$ thousands]	Year ended December 31, 2018
Segments	Browser and News			Fintech			Retail			Other			Total
Revenue
Revenue from contracts with customers		138,444			-			9,287			22,890			170,621
Other revenue		-			1,655			-			-			1,655
Total revenue		138,444			1,655			9,287			22,890			172,276
Cost of revenue		(3,637	)		(428	)		(9,096	)		(6,848	)		(20,009	)
Marketing and distribution expenses		(31,336	)		(45	)		-			-			(31,381	)
Credit loss expense (1)		678			(528	)		-			-			150
Direct expenses		(34,295	)		(1,001	)		(9,096	)		(6,848	)		(51,240	)
Contribution by segment		104,149			654			191			16,042			121,036

[US$ thousands]	Year ended December 31, 2019
Segments	Browser and News			Fintech			Retail			Other			Total
Revenue
Revenue from contracts with customers		154,968			-			29,802			21,712			206,482
Other revenue		-			128,373			-			-			128,373
Total revenue		154,968			128,373			29,802			21,712			334,855
Cost of revenue		(2,642	)		(29,759	)		(29,836	)		(11,754	)		(73,991	)
Marketing and distribution expenses		(64,685	)		(8,464	)		-			-			(73,150	)
Credit loss expense (1)		(577	)		(54,302	)		-			-			(54,879	)
Direct expenses		(67,904	)		(92,525	)		(29,836	)		(11,754	)		(202,019	)
														-
Contribution by segment		87,064			35,848			(34	)		9,958			132,835

(

1

)

For the Browser and News segment, Credit loss expense in the segment reporting is consistent with Credit loss expense in the Statement of Operations, while for the Fintech segment, Credit loss expense is consistent with Other changes in fair value of loans to customers in the Statement of Operations. 

Other income, personnel expenses, depreciation and amortization, share of net income (loss) of associates and joint ventures, change in fair value of preferred shares in associates, finance income and expense, net foreign exchange gain (loss), income tax expense and other expenses are

not

allocated to those segments as they are managed and monitored on a group basis.

[US$ thousands]	Year ended December 31,
Reconciliation	2017			2018			2019
Contribution by segment		92,115			121,036			132,835
Other income		5,460			-			-
Personnel expenses including share-based remuneration		(42,134	)		(34,683	)		(61,029	)
Depreciation and amortization		(16,604	)		(12,694	)		(18,933	)
Other expenses		(25,359	)		(28,359	)		(32,210	)
Restructuring costs		(3,240	)		-			-
Share of net income (loss) of associates and joint ventures		(1,670	)		(3,248	)		(3,818	)
Change in fair value of preferred shares in associates		-			-			37,900
Finance income		1,054			1,637			10,530
Finance expense		(238	)		(1,695	)		(1,505	)
Net foreign exchange gains (losses)		(1,881	)		(354	)		(269	)
Net income (loss) before income taxes		7,504			41,641			63,500

Revenue

Set out below is the disaggregation of the Group’s revenue from contracts with customers. Origination fees and late interest from loans to customers are also presented as revenue in the Statement of Operations.

[US$ thousands]	Year ended December 31, 2017
Segments	Browser and News		Fintech		Retail		Other		Total
Type of goods or service
Search		68,192		-		-		-		68,192
Advertising		41,047		-		-		-		41,047
Airtime and handsets		-		-		-		-		-
Technology licensing and other revenue (1)		-		-		-		19,653		19,653
Total revenue from contracts with customers		109,239		-		-		19,653		128,892
Origination fees and late interest		-		-		-		-		-
Total revenue		109,239		-		-		19,653		128,892

[US$ thousands]	Year ended December 31, 2018
Segments	Browser and News		Fintech		Retail		Other		Total
Type of goods or service
Search		80,204		-		-		-		80,204
Advertising		58,240		-		-		-		58,240
Airtime and handsets		-		-		9,287		-		9,287
Technology licensing and other revenue (1)		-		-		-		22,890		22,890
Total revenue from contracts with customers		138,444		-		9,287		22,890		170,621
Origination fees and late interest		-		1,655		-				1,655
Total revenue		138,444		1,655		9,287		22,890		172,276

[US$ thousands]	Year ended December 31, 2019
Segments	Browser and News		Fintech		Retail		Other		Total
Type of goods or service
Search		86,155		-		-		-		86,155
Advertising		68,813		-		-		-		68,813
Airtime and handsets		-		-		29,802		-		29,802
Technology licensing and other revenue (1)		-		-		-		21,712		21,712
Total revenue from contracts with customers		154,968		-		29,802		21,712		206,482
Origination fees and late interest		-		128,373		-		-		128,373
Total revenue		154,968		128,373		29,802		21,712		334,855

(

1

)

 Technology licensing and other revenue in

2019

include

US$18,632

 thousand related to professional services provided to associates and other related parties of the Group (

2018:

US$18,319

 thousand and

2017:

US$3,216

 thousand).

The table below presents the revenue by customer location.

[US$ thousands]	Year ended December 31,
Revenue by customer location	2017		2018		2019
Ireland		63,152		76,791		81,637
Russia		18,251		17,356		17,265
India		-		1,549		98,504
Kenya		-		3,426		35,086
Other (1)		47,490		73,154		102,363
Total		128,893		172,276		334,855

(

1

)

No

other individual country exceeded

10%

of total revenue.

Revenue by country is based upon the customers' countries of domicile, which is

not

necessarily an indication of where activities occur because the end-users of the Group's products are located worldwide.

The Group has

two

customer groups that each has exceeded

10%

of the Group's revenue in the periods below.

[US$ thousands]	Year ended December 31,
Customer groups	2017		2018		2019
Customer group 1		55,685		67,882		74,572
Customer group 2		16,604		17,017		17,758

Revenue from Customer group

1

includes both search and advertising services, while revenue from Customer group

2

includes only search services.

Other income

During

2017,

the Group entered into a set of agreements with

one

customer that included a sale of intellectual property, which had embedded technology licensed from Otello Corporation ASA, and certain time-restricted hosting services. The sale of intellectual property (IP), net of associated costs and the book value of the divested IP, and the costs of external technology required to enable the intellectual property to be transferred, is presented net as Other Income. Revenue related to the licensing of the Group's own IP and the revenues from hosting services are included in the Technology Licensing and other category

[US$ thousands]	Year ended December 31,
Other income	2017			2018		2019
Proceeds allocated to divestment of IP		7,800			-		-
Cost of technology license obtained from Otello Corporation ASA		(2,000	)		-		-
Book value of associated capitalized development costs		(256	)		-		-
Legal fees related to the divestment process		(84	)		-		-
Total		5,460			-		-