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.

Thank you. As a reminder, to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press the pound key. We do ask that you please pick up your handset to allow optimal sound quality.

one moment for your first question your first question comes from the line of lance vitanza with colin hi guys thanks for taking the uh the questions congratulations on the quarter and i guess why don't we start with um well thanks for posting the supplemental financial information i found it very helpful could you talk about the impact of covid in the year ago quarter in one Q 20 versus, versus, um, the expectation versus what you saw as we moved throughout last year. In other words, we know obviously there's a bigger impact in the second quarter of 2020, but was there much of an impact in the first quarter? It doesn't necessarily look like it given that one Q 20 revenues were actually up over one Q 19, but perhaps X COVID they would have been up more. I'm just trying to, how should we be thinking about that?

Hi, Lance. Thanks for the question. In terms of what's our continued operations with the browser news and the other products that we've been discussing today, we didn't really see much of a COVID impact in the first quarter last year. It affected NanoBank's business, for sure, in terms of the assessments on collectability, et cetera, at the end of the quarter. But it was really towards sort of the very end of March, not detecting the quarter as a whole much for search and advertising. Got it. Yeah.

Great. Thanks. So this growth is really on a – it's not just a recovery bounce. This is growth over a period where you were already pretty strong and growing. Okay. So the guidance seems to reflect, if I'm hearing you right, only the strength in the core business, but really not much contribution from the growth initiatives to Yet, you know, we know that you're plowing a lot of money into these growth initiatives. So could you talk about, and I heard the comments that you made, Frodo, just a minute ago about getting to, you know, a size that is, you know, a multiple of the size of the company today. But could you talk a little bit about how should we think about the medium to longer term potential of these growth initiatives per se, right? Because we know the core business is also growing. I'm just trying to figure out how we should be modeling what some of these other new initiatives could ultimately contribute. Sure.

So if I begin with the overall picture, I mean, for us, all of these three main areas that we are investing into represent substantial upside to value creation for us, both in terms of creating a much-used content business in Western markets in the broader gaming ecosystem that we are working on, as well as the European payments products and services around DeFi. So we think all of them we consider massive opportunities, but I think over the past quarterly calls we've had, we've been clear that we don't really take much of it into our guidance for 2021. We tend to be very conservative on that and look internally mostly at what run rate are we scaled to sort of exit the year with and the impact it can have on 2022. So I would point to 2022 as the first year of really seeing material impact of these new initiatives.

Okay, and then maybe just on the JVs. Go ahead. What I would say is if you start looking at Um, you know, the revenue growth of the core, which is, you know, historically been in our 20% plus, and then you start layering in some success here, you start coming up with very good revenue growth rates. The second comment I'd make on these assessments is, you know, today we're, we're investing money because they're very new, but as they scale and get bigger, the incremental margins on these businesses are really good. So the idea is longer term, you're going to end up throwing off more cashflow than what you would have done otherwise. assuming they're successful.

Thank you. If I could just squeeze in one more question about the JVs. And maybe this is a multi-part question, but on OPE, I'm wondering if there was perhaps a seasonal impact there. And I may be misinterpreting the release, but, and forgive me if I missed a comment on your prepared remarks, but it looks like growth at OPE perhaps slowed in the first quarter. Um, given that you didn't call out exactly what that growth was, but perhaps that's just due to the fourth quarter being seasonally strong for a payments related business. But I'm wondering if you could elaborate on that. And then with respect to star maker, where, you know, it's growing at a multiple. I'm just wondering if you could talk about what's driving the growth there. In other words, are you launching new markets? Is this, you know, a big new marketing campaign? Or are there other things that are sort of fueling that? I think it was 3.5x growth that you called out in the release.

Sure. I can begin. Oh, Derek, go ahead.

No, Lance, I was going to say on OK, you know, they did more total payment volume in March than December. So they're continuing to grow. I think we're being a little more cautious on what we say on OPEI and allowing the team over to OPEI to sort of give those details out because I know they're trying to drive a higher profile for themselves as they think about the future. Frodo, you want to take this one?

Yeah, so maybe I'll just comment a bit here. This is only for OPEI. So I guess actually what Derek is saying is more true that OPEI is actually growing tremendously. you know, TPP are growing, but even more importantly, there are some of the other aspects of their business, like, you know, the app users and a few others are actually growing a lot, many times, which is their focus for now, which food also talk about their, you know, issuing cards and other, right? So I think actually reality is because they, we are just, you know, we're just 11% of them and they are now, you know, they are always an independent company. We just prefer to, for themselves to actually announce the excellent results themselves instead of way, talk too much about it in our own remarks. I think that's actually the reason. But they are actually doing very well in Sri Lanka.

Thank you for clarifying that, Ash. I appreciate that.

Your next question comes from the line of Mark Magento with Lake Street Capital.

Hey, Songlin and Prota. I just wanted to drill down a little bit on the success you're having with Opera News. Maybe talk about kind of where you've been making the investments and been seeing the uptick in conversion in terms of monetization.

Yeah, so, okay, so this is Songlin. I'll try to give the first hit and then Frida can come up with numbers, I guess. So, you know, high level, I guess the comment is just that, you know, we are already being very successful in Africa. So as also commented in the quarterly release that, you know, for this year, especially Q1, for instance, we have been focusing on expanding into Western markets, you know, which has been doing really good. I think the comment would just be that we have grown very nicely in terms of users. We are just super happy to see that we are able to, you know, based on our past know-how. So, of course, we have to localize per market because each of those markets are very different. Like, you know, German is very different than U.S., but we are able to actually localize it and then be able to provide a very good, you know, solid numbers and conversion retention. So, all the performance remarks are actually very good. But maybe what's mentioned is that we're also, on top, very happy about the monetization because typically we saw a bit of a drag between first-world users and their monetization. But perhaps because of our past experience, we are able to actually almost grow the users in line with the growth of monetization. So that, I would say, is the extra point that I would call, which is more positive, which actually also is the reason why we, I think, are doing better, a bit better than even our audio guidance, and also partly why we also rise our guidance for that.

Right, and is it kind of the key precursor to revenue? Is it downloads of the app, or how do you guys actually stimulate uptake? Are you spending money to drive people to download the app in various regions, or what are you kind of doing specifically to get that business to grow from a user perspective?

Yeah, so I think from an end-use-upon-the-view perspective, I think it is aggressive performance marketing, but I think the key is just that, you know, based on the know-how that we have accumulated in the past year, we are able to do the performance marketing, growth marketing in a very efficient way. And I think that's number one. Number two is that the retention is really good because it's very tightly connected that if you, say, have a very poor R1 or R15 or R40 day retention, then, of course, there's no way you can grow. It doesn't matter how much money you spend. So I would say it's a combination of very effective performance marketing, but then tightly hand-to-hand with the ability for us to have a very high retention of those users. And they all might say R1 or R15 or R40.

Great. Maybe I could supplement. It's, of course, a product launching in a new geography. It goes through a few stages. We are now in the initial stages of launch where we of course we use marketing and we used performance marketing if I'm in talked about to build a presence and then over time as we've seen on our other initiatives and products then then you move over to the organic part of it playing a bigger and bigger role and and I can assure you that the investments that we are making are carefully assessed on on a daily basis monitoring the impacts and and and sort of return that we are generating on that investment.

Great. And then just a quick follow-up on the bounce back and add revenues. Can you talk about some of the end markets that you're seeing come back? I know you had some decent exposure to travel. Is that an area that you've seen come back in the various markets you operate in?

I think high level on the advertising drivers, we see a couple of things. Of course, we benefit from more user growth on products, but it is the per user monetization that is driving the revenue growth the most. Within that, there are a few components. We are experiencing strong demand for our inventory and the traffic that we can drive. There are certain partners that are scaling faster than others, typically online-related businesses. And we're also seeing the impact of geographic mix changes when Europe is growing very well, for example, that drives the average monetization per user up.

Great. Very helpful. Thanks, guys.

Your next question comes from the line from Alyssa Yap with Citigroup.

Hi. Thank you. Good evening and good morning. Thanks for taking my questions. Congratulations on the strong set of results. I have two questions. First, I think in your guidance, you mentioned the second quarter, the strong guidance seems to be more alluded to the search recovering. But I assume the ad revenue is also going very well. But on the sequential basis, if you can give us some color in terms of whether search are bouncing better on the sequential basis versus the ads. And then understand you mentioned your full-year guidance despite raising to the new guidance range, but you also mentioned very, very little revenue that baked in from the new initiative. But just if you can give us some colors in terms of the timing, if we were to assume between the gaming and the European fintech, With gaming, you know, revenue will be coming more near-term and more medium-term versus FinTech is a little bit more longer-term than the gaming. So any color you can help a frame in terms of the timing of the revenue that come in. And on the more, let's say, by the time they reach a certain, you know, the feedback is actually a bigger proportions or the gaming will contribute a bigger proportion. Thank you.

Thanks, Lisa. So first talking about the second quarter guidance, the starting point and the Q1 revenue achieved in both search and advertising, we are very pleased with both. Both did, you know, from 36 to 40% year-over-year growth into a very solid result in the quarter and of our expectations. When we look into the next quarter and on a sequential basis comparing to Q1, I would definitely point to advertising being the expected biggest driver of the increase we are guiding from Q1 to Q2 this year. In terms of the full year and the new initiative, so as stated, we have been very cautious in baking in too high expectations of our new initiatives this year. So to the question of what will impact our results first and what we are cautiously considering as we set our guidance for the year, I would point to the advertising revenue effect in particular around the Western markets scaling of upper news. as that is sort of an immediate impact of building a user base in the US and European markets that probably will be the first one to materially benefit our financial statements and something that we should be seeing also in 2021.

And any, just follow up in terms of gaming versus impact, which one will come more near term and then which one will be a bigger contribution longer term?

So, I think I'll try not to go into sort of the specific of exactly estimates that we have for the year. I think for now, I would say that with both, we have been very cautious as we set our guidance for the year. Gaming revenues, of course, already have been present in our financials from the success of the Upper GX Browser, and that continues to scale very well. And we're broadening that with an ecosystem, the game studio, etc., that we have discussed before. And on the FinTech side of things, we are already being the browser of a very, very big number of transactions carried out from our user base. And that is something that we have already launched and started to step into. But with the initial focus being on building that service and preparing that service for scale, rather than focusing on, let's say, the revenue contribution or the near-term margin that we can drive from that.

Alicia, this is Derek. If you consider gaming to include the GX browser, that's driving a ton of value for us today. I think we said last quarter that every million MAUs are worth about $2.7 million. So you can see our trajectory of adding... a million plus I may use a quarter and you can see that contribution. And, um, you know, on the FinTech stuff, you know, we're in Spain with our, our smart, uh, shopping product is on Wednesday. And, you know, our hope is to be in a couple more markets over the course of the year. And depending on when those hit and how quickly Spain scales will, will really dictate what contribution we see this year.

I see. Okay. Helpful. And then just, uh, one last, uh, quick follow-up. I think you mentioned your sales and marketing. Some of the spending that you previously planned in first quarter has slipped into the second quarter. So just wondering if you can share what was the reason that it slipped. Yeah, thank you.

Maybe the word slipped is not super accurate. It's It's more a question of we look at the year as a whole and we look at the investments and the scaling that we want to achieve. At any point in time, we give guidance based on our best expectations for what will happen over the coming three-month period and the year as a whole. you know, we ended up spending slightly less on marketing and distribution in Q1 than we had originally thought.

I see. Okay. All right, then. Thank you so much.

Sure. Your next question comes from the line of Sarah Simon with Barenburg.

Yeah, hi. I have a couple of questions. First one, Can you give us an idea with something like, well, whichever product you'd like, what the delta is in terms of monetization of a user in, let's say, Europe versus Asia or India or Africa, for example? Because I'm guessing that's quite significant. And therefore, as you expand news into Europe and the U.S., It might lag, but it's clearly going to be much more significant in terms of the pickup in revenue than the pickup in MAUs. So that was the first question. Second one, can you just remind us, how do you sell your advertising? Is this done, is this programmatic or is it direct? That was the second. And then the third was, You know that you obviously restated your numbers because you discontinued stuff in Q3 last year. Can you remind us what the growth was on the new reporting format in Q1 2020 and Q2 2020? Thanks.

Yeah, so it's only, I guess, maybe I'll just answer the first two, and then you can comment on the last number one.

Sure.

Yeah, so, yeah, more like just a quick comment that I hear the question of the monetization. I would almost say, I guess it's up to between a European, U.S. user, versus the African user, or like Asian user. High-level comment is that if we compare, say, a user in Africa with a user in U.S., it's roughly, I would say, 10 times. And European user is actually slightly less than U.S. It depends on which country you are. It's actually quite different. Some are up to 60%. of U.S. to be 80% or even equal, depending on different countries, that's quite a loss. But yeah, so in general, if we use U.S. as a benchmark, then I would say 10 times compared with, say, Africa would be a good comparison about family ratio. And when it comes to ad selling, so we have to use all of the ways that you're talking about in different regions. So I think we do have direct sales teams, typically in countries like Africa, where we do rely more on direct sales teams. While in some other countries like in the U.S. and Europe, we do have more programmatic. I would say it's actually very good you called that. And we see that actually grow very fast compared with some other regions. And on top of course, we also have an ad SDK approach. We'll simply just embed ad SDK and just monetize from Facebook SDK or Google SDK. So we have both of those three available.

Okay.

Yeah. So, and then through that, just handing over to you for the, uh, yeah, the number cracking.

Yeah. Yeah, sure. Sure. So in Q1, uh, 2019 we had 38 million revenue and in Q1, we had 40.2 million revenue, which was about 6% up would have been a couple of percent more, uh, if COVID hadn't affected the end of the quarter, but, but that the most comparable period. Q2 2020 had a year-over-year decline as that was the quarter most affected by COVID for us.

Sorry, Q2 was down?

Q2 2020 was down 24% versus Q2 2019, naturally driven by the COVID impact that we saw. in that quarter.

Perfect. Okay, thanks very much.

Sure. Your next question comes from the line of Lenny Brecken with Brecken Capital Advisors.

Hey, thanks guys for the call. I have two questions. One, can you talk about the deployment of the cash hoard that you have on your balance sheet and what the board is thinking about maybe doing with it? And the second is, The new initiatives, I assume, are acting as a drag on earnings in 2021, and I assume that's going to lessen in 2022, which is probably the core of the story and why all the analysts are trying to ask these various questions in understanding that. So can you help us quantify the drag on the new initiatives on earnings this year versus next year?

Yeah, hi. Frodo here. I can start. So starting with the cash in our balance sheet, I think we are not planning to use it for dividends, as we have stated in the past. We keep it to maximize our strategic flexibility, both in terms of having the having that support for any operational opportunities that we come across of course now even with these heavy investments that we are running in 2021 we are essentially also generating the cash that we are using for that but it gives us that opportunity in the past we've also in a couple of instances launched share buyback programs where we have felt when we have felt that that has been in the best interest of our shareholders and and we always look at M&A opportunities, though historically they have been of relatively limited size and then focused more on the organic growth thereafter. In terms of the new initiatives and the drag on the profitability in the year, that is correct. We started the year by saying that essentially we would take all the additional EBITDA generation, including from the scaling of our business and invest that in an additional in the driving these growth initiatives. But I think you only have to look back to like Q4 2020, we had a 28% EBITDA margin still having investments in teams, et cetera, at that stage, but giving at least an indication of sort of the margin picture of that business when when we are not as aggressively as now scaling these initiatives and then I think it's sort of the more successfully these businesses scale and confidence that we have in the ROI being positive of course that will continue to support our thesis for this year it's a little bit early for me now to say exactly how the details towards the end of the year and the beginning of the following will look in terms of margin picture. But we are seeing this as an opportunity to establish those businesses and create a strong foothold in them. And then as we talked about earlier in the Q&A session, then it's moving over to more existing in-market products and sort of the more, let's say, stable P&L profile and margin accretion also from those.

Well, just one follow-up. So, I mean, I guess as an investor, I'm sort of wondering how a 40% growth company can trade at three to four times roughly forward sales when many companies growing less than that are trading at twice that valuation. From the management's perspective, how do you see the value of the company being unlocked? Is it the new initiatives when you finally gain leverage, or is there something else that you think is going to be the driver?

I think what we can focus on is, of course, driving the business in the best way we can. and being clear about our strategy for sort of how we are moving towards the scale and how we see sort of the potential and initiatives that can drive us to become multiple size, what we are today, which is what we are very focused on. We also try to shed light and relevant information on the investments that we hold, as we think they represent significant value upside to our shareholders and, of course, in being able to document that value over time and being able to actually see a transaction or sort of that market validation of those, I think, can be very helpful. Thank you.

Your last question comes from the line of Lance Betanza with Cowen.

Hi, guys. Thanks for jumping back to me. I just was hoping to follow up. I'd asked you before we kind of got cut off about StarMaker. And the question is, you know, the growth that you called out in the release is obviously fabulous. I think it was 3.5x. And I'm just wondering what's going on there. Is that – new markets? Is that, you know, a big new marketing campaign, you know, or something else? What is it? How do you explain that kind of growth?

Thanks. Yeah. Hi, Lance. Sorry we missed that part of your question before. Unfortunately, the answer is a little bit the same as Ope, that it is its own company. It is sort of communicating its own results a bit on its own, and we try to stay within that. But as you mentioned, it's a tremendous growth year over year. It's nearly 50% sequential growth versus the fourth quarter. It remains a profitable company in all of the net income lines, and it's doing very well. But I'll be a little bit careful to try to give additional KPIs that the company hasn't itself prepared to communicate. But Song, is there anything? other color that you think we could share on StarMaker?

Yeah, so I think I would just say that StarMaker is a very typical case where it has been growing very fast from last year to this year, right? So then, of course, naturally, if you compare with the Q1 last year to Q1 this year, it is, of course, going to be huge. The reason is just because it keeps growing from Q1, Q2, Q3, Q4, all through 2020 and continue that trending in Q1 2021, right? So yeah, so it's actually a true reflective of how fast it grows all across the whole last year. And that's a cumulative result that you are seeing. I mean, it's almost, I would say, the equivalent of what you see in opera news, right? Like news, we also said it's 360%, you know, year over year, and we're probably, hopefully we'll see more even in Q2, right? So it's actually a very similar trajectory that if you have something new and are fast growing pace, Call the over-caller. That's what you see.

Fair enough. Thanks, guys.

That concludes our Q&A session. I will now turn the call over to Sun Lin for any additional or closing remarks.

Okay, sure. So, you know, I think, guys, I think we have a great caller. Our call business are doing well. Well, you know, our new initiatives are scaling, really allowing us to predict a bullish future. And I think I just want to say that all of these, of course, are, of course, indispensable from the shareholders out there that trust us and support us. So I just want to say that I appreciate your support as always. We will do our best. And, you know, and hopefully we can continue and we'll continue to execute heat and bit. And hopefully we'll all have, you know, a great result to come. So, like again, thanks for attending, and have a nice day.