Opera Limited

Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Thank you. Thank you. Welcome to Opera Limited 4th Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this period, you will need to press star 1 on your telephone. If you want to remove yourself from queue, please press the pound key. Please be advised that today's conference is being recorded. If you need operator assistance, please press star zero. I would now like to turn the call over to your speaker today, Derek Newman, Head of Investor Relations. Please begin.

Thanks, everyone, for joining us today. With me today on the call, I have our co-CEO, Song Lin, and our CFO, Frodo Jacobson. Before I hand over the call to Song Lin, I would like to remind everyone that in the conference call today, the company will be making statements about its future results and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and how we perceive the current economic environment and are inherently subject to economic, competitive, and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guarantees of future performance. You may refer to the safe harbor statement in the company's earnings release for more details. Our commentary today will also include non-IFRS financial measures, including adjusted EBITDA, which are different from our consolidated financial statements that are prepared and presented on IFRS. We believe that the use of our non-IFRS financial measures provides an additional tool for investors to evaluate ongoing operating results and trends. These measures should not be considered in isolation or as a substitute for the financial information prepared in accordance with IR4S. We have also posted unauded supplemental information on our investor relations website that includes historical financial results for APRA, which reflects microlending and retail as discontinued operations. We've also included pro forma results for Nano Bank, which we own 42% of. With that, let me turn over the call to our co-CEO, Song Lin. He'll cover our operational highlights and strategy. And then our CFO, Frodo Jacobson, will finish up with financials and update on our investments and our expectations going forward. With that, let me turn it over to Song.

Sure. Thank you, Derek. So, like, you know, first I just want to say that thank you, everyone, for joining us today. This is Song Lin here. 2020 has presented expected challenges for many people and business alike. Despite of that, I'm pleased to report that despite those challenges, the fourth quarter substantially exceeded our expectations for Opera with accelerating year-over-year revenue growth rates and strong margins in our core business. We are really excited as a company about the road ahead And here is why. So number one, our core business, both the Opera Browser and Opera News, have demonstrated not just resilience, but strength. This means we are now operating with more users and at greater scale in our key markets, seeing greater user engagement and an increasing ability to monetize. So this, along with the recovery from COVID-19 impacts led to accelerating revenue growth and an even stronger trajectory than we expected as Opera enters 2021. And second, the strength of our core business puts Opera in a position to not only benefit from our ability to create value through these core products, but to leverage that strength by investing where we see clear opportunities for growth. We have multiple growth initiatives rapidly expanding categories with high potential including gaming payments and news in developed markets and each of which benefits from our existing market position and each of which represents significant upside so in combination the scale and performance of our core business combined with our new initiatives make this an exciting time for opera we believe that that we can and we will grow to be a much larger business as these growth strategies play out over the next few years. But before I talk about our future, I also want to offer some highlights of our performance. So for the last year, we have added 29 million monthly active users into our base in 2020. We have also reached 79 million average monthly PC users in the fourth quarter It's up 17% year-over-year, which compared to about 10% growth in the third quarter. This was driven by our Opera GX Browser, which exceeded 7 million users in December. It's up 350% year-over-year, and we continue to see elevated growth rates thus far this year. Opera News monetization has also raised an inflection point It has grown more than 150% year over year and 60% compared with the third quarter. Our mobile users have also achieved record revenue while at the same time continuing the expansion of the user base, especially for our most advanced browsers, Opera for Android and Opera Touch. It is up 18% and 51% respectively. We also recently launched Hype. It's an in-browser messaging feature in Opera Mini, and this is an example of features we are launching to further increase engagement in key African markets. And finally, thanks to our increasing scale and engagement, advertisers not only returned to Opera, but have increased their spend with us. So the combined search and advertising revenue growth accelerated to be 14% year-over-year from about 1% last quarter. So looking ahead, we expect that our new initiatives, which both complement and benefit from our core browsing business, will contribute significantly to user engagement, search, and advertising growth, and SaaS revenue. So let's talk about those initiatives and also where we are. I will start with our European payment efforts We just announced the launch of DeFi. It's a new digital wallet that will fully integrate into our browser. So every day, millions of people shop online and make payments using Opera Browsers. And the first use case for DeFi will focus on online shopping, providing cashback benefits from more than 300 merchants that are already part of our program. This has significant potential for Opera. First, it will attract the many users we know are looking for better shopping experience with integrated payments and the ability to earn discounts through getting cash back. Second, and more broadly, this will further deepen our penetration of e-commerce, which we have done throughout 2020. Opera can accelerate partnerships with an increasing number of merchants by offering an even more seamless transaction layer into the browsing experience, and use DeFi as a payment of choice. So DeFi is now live in spend, and next steps will be to quickly expand to additional European markets, and as the year progresses, launch additional payment solutions and services, such as Binary Pay Layer, further building out the ecosystem around our browser and DeFi wallet. So it's very exciting. And gaming, we also talk about, is another area we are very excited about. The online gaming market itself is huge and growing. So the recent market research suggests that in year 2020, the global games market generated revenues almost 10 times global box office revenues. Our Opera GX browser is the world's first browser built specifically for gamers and we are encouraged by our early success there. So the Opera GX user base has grown tremendously to be over 7 million MAUs in December and is meaningfully contributing to our core business growth demonstrated by the fact that every million MAU on Opera GX now delivers more than 2.5 million annual revenue already. And we continue to invest in gaming So in January, we acquired Yoyo Games. It's a longstanding gaming engine well liked by the gaming communities and independent game developers. So we believe the combination of fast-growing GX towards gamers and the well-recognized GMS gaming engine with developer focus will allow us to build out a comprehensive gaming ecosystem and community, accelerating our monetization potential. We would like to call it a game changer. This is still fresh, but expect more details in the next few months. Finally, and perhaps most important in terms of revenue growth potential for this year, it's Open News. As you all know, Open News has been a huge success in emerging markets, especially Africa. We have over 200 million users in Africa and other emerging markets, and revenue is becoming substantial with healthy growth margin as a direct result of all our investment in users and market share. So at the end of last year, we began efforts to replicate the success we've had in more developed markets. The audit results have been promising with just over a million MOUs on the standalone app, and it's already the top downloaded news app in several markets with very good user engagement and monetization that position us to scale further. So we are glad that our prior and substantial experience around the AI, around algorithm and data, allow us to create a competitive edge in developed markets as well. We believe we are now well positioned to scale. While there will be meaningful upfront marketing costs aimed at our user acquisition, we will broaden our ecosystem in developed markets with a large and profitable content business and with a major potential impact on our revenue growth this year. So allow me to wrap up. Our core business is getting stronger with accelerating revenue growth and increasing profitability. We are using these strengths to build a bigger ecosystem, position our browser user base through e-commerce and payment, building a gaming universe around our projects, and bringing news to developed markets. So we are growing business in markets that are themselves growing, leveraging the scale and success of our core business with investments that will draw new users to Opera while increasing engagement with customers we already have, creates meaningful upside for our company and hopefully our shareholders. So before I hand the call over to Frida, I want to say that how excited we are about the year and even more about the years ahead. We see the potential to materially accelerate our growth rates this year with clear implications for our value. So with that, I'll turn over to Frida to continue. Hi, Frida.