Opera Limited

Thanks for joining us today. With me, 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 today's conference call, 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 we are inherently subject to economic, competitive, and other uncertainties and contingencies beyond the control of management. You should be careful. 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 earning release for those 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 based on IFRS. We believe the use of our non-IFRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. We have also posted unaudited supplemental information on our investor relations website that includes historical financial results of APRA, and our investee, NanoBank. With that, let me turn over the call to our co-CEO, Song Lin, who will cover our operational highlights and strategy. And then Frodo will finish up with financials and update on our investments and, most importantly, our expectations going forward. Song Lin?

Sure. Thank you, Derek. And, you know, thank you, everyone, for joining us today. So, as you know from our announcement earlier this month, Opera had a very strong beginning to the year. Obviously, I'm pleased with our financial performance, but what I'm most excited about is that it validates our strategic approach to growth, both our core business and our new initiatives, and that the Opera team continues to execute every day. So last fall, I highlighted that it was the strength of our core business that positioned us to not only outperform during a period of significant uncertainty, but it's also what gives us the ability and the confidence to invest in initiatives that have the potential to drive substantial growth for Opera in the years ahead. So what I'm about to say will sound familiar in a good way, and the plan is to repeat the pattern in the next few quarters to come. Our core business continues to deliver exceptional results thanks to strong execution. Trudeau will naturally give you more detail shortly, but here are some highlights. Revenue was strong with search and advertising growing 38% year-over-year and even grow sequentially. This is the seasonally strongest fourth quarter. This is a very strong indication of the strength of our core business. Adjusted EBITDA was better than expected as the revenue upside fell to the bottom line. We have also been growing users by 12% and 14% year-over-year respectively in Africa and Europe and CIS, our core regions of focus. Second, I would like to comment that our initiatives are showing excellent momentum. I'll start with our European payment default, DeFi. So in February, we have launched our in-browser smart shopping functionality in Spain, providing cashback and payment solutions for shoppers. This is an area of huge potential for us. It's no surprise that more and more consumers are looking to transact online, and the COVID-19 pandemic certainly served to accelerate this trend across multiple categories in multiple markets. We already have a good track record in this space through Ope and NanoBank as well, and we remain super excited about the European potential within Opera. So the early adoption rates are encouraging, with both new users' transaction volumes and GMV growing nicely. I would say it's still early stage, But the fact that we have a great user base constantly transacting in our browser already presents a massive opportunity for us to scale in a very relevant space. We will add new features and roll out in more countries in Europe as the year progresses such that DeFi is in a good position to contribute meaningfully to our revenue in the next year and beyond. I would also like to talk about gaming. Our efforts in gaming are just beginning, but the Opera GX gaming browser now has over 9 million monthly active users. One of the things that sets our ambitions in gaming apart is that we really have a holistic view of the gaming ecosystem and are innovating on multiple fronts. we will continue to add gaming features to Opera GX so that the browser complements the gaming experience, allowing us to continue to grow the gaming user base. At the same time, we are also building out our Game Maker Studio platform so that game development becomes accessible to an increasingly broad community and driving engagement. We believe that in the same way that easy-to-use applications and tools will allow anyone to design and launch a website or record music or video, the same accessible design tools will mean that more people will be able to design, play, and share their games with the world, which will, in turn, attract more gaming players into our ecosystem and form a full circle. These are obviously our first steps towards building our own gaming platform or even a potential gaming net of us. We are certainly ambitious. And with such a massive market, we will continue to innovate and expand in this space. And last, but of significant impact, Opera News. As we laid out last quarter, the continued success of Opera News led to the natural conclusion that we had the potential to expand its geographical footprint to developed regions, starting with several markets in Europe and the United States. All the results continue to be positive, and we have now achieved several million MAUs in those markets in just a few months' time, as also being visible from corresponding Google Play rankings in all those countries that you can see. While still evolving our product and go-to-market strategies, we believe we have developed a set of know-hows that has now proven to be able to driven rapid growth both for users but also for a strong revenue growth trajectory reflected by the fact that news revenue grows over 260% year-over-year and 30% sequentially in Q1. We do expect the strong revenue growth trend to continue in the callers to come, again powering our bullish view of our revenue growth potential. So as we look to the year ahead, we remain confident that the strengths we see in our core business will continue. The history of the browser and what it can be is still being written. I very strongly believe that Opera will continue to play an outsized role in writing this history. There is significant room for not just growth, but innovation. Browsers that have features that are optimized for the ways in which people will use them. Whether it's shopping, gaming, looking for news, or simply trying to manage your digital life with a sense of privacy and security, We cherish that people always expect more and better because therein lies our opportunity. So Opera Z Browser is preferred by well over 300 million users worldwide. And as we continue to push forward with our initiatives in payment, gaming, and news based on our core strengths, we will bring the same user-first approach and spirit of innovation. Succeeding with any one of these initiatives represents a massive value creation opportunity already. But of course, in our ambitious style and with confidence from these initial phases, we are naturally aiming for success across all three. As we think about the possibilities we have in front of us, we are excited about our core business and the potential for all our initiatives And as our guidance indicates, we see a very exciting period of accelerated growth ahead of us. So with this, I'll bring to Frida to come up with details.

Thanks, Anden. The continued acceleration of our product, both in terms of engagement and resulting monetization, resulted in a first quarter that exceeded our already high expectations. I'll recap the highlights and then provide our refresh on guidance. Revenue for the first quarter was $51.6 million. This compares to $40.2 million of revenue in the year-ago quarter and also grew sequentially compared to last quarter despite seasonal headwinds. Specifically in the quarter, search was $26.7 million, accelerating to 36% year-over-year growth compared to 13% last quarter. This was driven by our record PC users and monetization gain. Advertising was 23.4 million, accelerating to 40% year over year, compared to 16% last quarter. This was driven by strong monetization from upper news and our mobile browsers. Finally, tech and other revenue was 1.2 million. Year over year, this revenue category has been reduced by 2.4 million, although with almost no impact to profit, as the decline relates primarily to low-margin professional services to old pay. Our operating expenses pre-adjusted EBITDA were 47 million. As expected, we saw significant increases in marketing spend, as well as some growth in personnel expenses, due to our efforts to expand our produce into Western markets and around DeFi and gaming. Adjusted EBITDA was 4.6 million in the quarter. This was better than expected, with the overperformance largely following the upside from our core search advertising revenue stream, and as some marketing and personnel expenses shifted to the second quarter. Net of DNA share-based expenses and other items net income was 0.6 million for the quarter. Our operating cash flow was positive at 7.3 million, supporting an overall increase in our total cash and marketable securities of 9.1 million versus the prior quarter to a total of 143.3 million. Then moving to our investments that continued their positive trends in Q1 and represent significant upside potential for Opera shareholders. As a reminder, our investments are NanoBank with Opera holding 42%, as well as Opay at 13.1% and StarMaker at 19.35%. Beginning with NanoBank, for the quarter, NanoBank posted revenue of $50.3 million, up about 10% compared to the fourth quarter, and dispersed loans representing $235 million in total value. Adjusted EBITDA was $5.5 million, representing an 11% margin, and post-tax profits were $4.3 million. We continue to believe NanoBank will scale meaningfully in 2021 as it launches in new geographies and adds products both of which are in testing phases, and as India starts to recover from COVID-19 impacts. As noted in our prior call, we expect this to be more evident towards the middle to later part of the year. Our two other significant investments, OPE and StarMaker, continue to scale. OPE's total payment volume continues to grow and have increased from December 2020 levels of $2 billion driven by new initiatives. One of the most exciting innovations is the Opay card, a debit card that is tied to the Opay wallet balance, supporting offline use cases of the Opay wallet aimed at increasing frequency of use. StarMaker continues to scale rapidly with an annual revenue run rate of almost $180 million in the first quarter. up 3.5 times compared to the year-ago period. Now, moving to our forward-looking commentary. Our core business continues to perform and grow ahead of expectations, and this is increasing our confidence in our near-term and full-year outlook. Further, we continue to believe that taking most of our underlying adjusted EBITDA growth and reinvesting it into our new initiatives is the right thing to do. We believe the ROI on those investments will enable us to achieve growth rates well in excess of a 20% to 30% level and accelerate our path towards becoming multiples of our current size. Translating our momentum into a refreshed 2021 guidance, we continue to take a conservative approach not including anywhere near the full potential from new initiatives, while making sure potential investment is reflected. With that said, based on the performance of our core business, we are raising our revenue guidance while maintaining our adjusted EBITDA guidance to provide flexibility to drive further growth. We now expect 2021 revenue of $230 to $245 million, representing 44% year-over-year growth at the midpoint, up from our prior midpoint guidance of 39% growth. Our expectation for adjusted EBITDA remains at $10 to $30 million for the year. In Q2, we expect revenue of $55 to $57 million, representing 74% year-over-year growth at the midpoint. The second quarter revenue growth acceleration is fueled by strong continued results from Opera's core search and advertising business, but comparisons to Q2 2020 should of course also bear in mind the significant COVID-19 impact to search and advertising revenue in the year-ago quarter. However, tech licensing and other revenue become far more comparable on a year-over-year basis than in recent quarters. as revenue from professional services work was largely phased out by Q2 2020. Adjusted EBITDA is expected around break-even in the second quarter as we continue to invest aggressively in our new initiatives. Overall, and in sum, Q1 was another strong quarter and a very healthy start to 2021. It's great to see the momentum in the business and how the acceleration of our growth trajectory It's benefiting both our near and long-term trajectory, and we look forward to keeping you posted. Thanks. I think we can now take questions.