Opera Limited

Thank you for joining us today. With me today, I have our co-CEO, Song Lin, and our CFO, Frodo Jacobson. Before I hand the call over 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 and the company's earnings release for 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 that the use of our non-IFRS financial measures provide an additional tool for investors to use in evaluating ongoing operating trends and results. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. We've also posted unordered supplemental information on our investor relations website that includes historical results of Opera and our Investee Nano Bank. On a personal note, this is my first earnings call since I joined Opera, and I just want to say how excited I am to have arrived in a thriving environment with a team I've already gotten to know well and that's shooting for value creation opportunities in several key areas. I'll do my best to keep everyone updated on where we are in the future direction of Opera. We will be live-tweeting highlights from the call at Investor Opera to please follow along there during the call and in the future. With that, let me turn the conference call over to our co-CEO, Song Lin, who will cover our operational highlights and strategy, and then Frodo will finish up with financials and our expectations going forward. Song?

Song? Hi. Thanks, Matt. And, you know, great to have you on board. And then thanks, everyone, for joining us. I will say that Matt has picked up a good call and a very exciting time to host his first Opera investor call. We have delivered strong results for the call, exceeding the high end of our revenue guidance, with revenue up 87% year over year and up 17%. This is the already record high first call. So Frida will, of course, talk in detail about our numbers. But in general, offers revenue is nicely balanced between search and advertising, both of which continue to show strong growth. Further, not only is our core browsing business performing better than expected, but each of the multiple initiatives we've embarked on is taking root and showing great promise, whether that's expanding our reach in mobile and computers or into entirely new categories like gaming. And what's really satisfying is to see the success we are having as we introduce and scale products and services into new markets. On the mobile side, for example, we have open news, which continues to show great traction As you know, we have launched the product in African markets, and this year we started to scale it in U.S. and several European countries. In the United States, for instance, Open News is constantly in the top ten most downloaded news app on both Google Play and also the iOS App Store, ahead of many household legacy media names such as CNN and The New York Times. Another good example is Opera Football, or SOCA for those in America. It's a new content portal we just launched in June, powered by the same AI as our newest product. Even though it's a very short timeframe, it has already grown its audience to over 10 million people. So we expect even more growth with the stock of the premium league later this month. And, you know, hype. We talked about it briefly last call. It's our dedicated chat service built into the Opera Mini mobile web browser. We first launched it in Kenya earlier this year before expanding this to the rest of the continent and to the end of the corner. Up until now, we have had more than one million sign-ups already in this short period of time. For PCs, which we are always proud, we continue to invest in innovative new features that make the Opera Browser even better through improved performance, control, and privacy by incorporating popular features such as pinball support, which is a nice feature we just released, and also other smart things, such as the recent new solution we've added for better managing browser-based video conferences, which is becoming very handy when using, say, Google Conference, for instance. Further on, all the users have spent billions of dollars each year via e-commerce, and we are developing products that will provide value to our shoppers and incremental GMB for our partners. Our in-browser shopping and financial functionality continues to expand in select markets as we work with regulators and partners to ensure compliance and also provide users with an excellent experience. For instance, through our DeFi products, we are providing our Spanish users with the highest and the fastest cashback on their online shopping and we've already saw an approximate four times increase in facilitated e-commerce transactions in Spain from April to June. We will expand both our product offerings and markets sold in this space in the second half of the year. Another recent highlight, which I would like to talk about, is that not only are we providing very interesting functionality, but we have also won three Red Dot Design Awards for design quality and creative performance. Good product design is, of course, an important ingredient in creating a good user experience, and we really appreciated that recognition. We are also expanding our footprint in geographies, such as Europe and the U.S. In turn, we are seeing user growth in those markets, which translates into generally significantly higher opportunities for us. And this is also why our revenue are growing so fast in the quarter. In fact, certain material markets monetize end rates 10 times greater than some emerging markets. We think this trend will continue, creating another tailwind for Opera, as we benefit from the mixed shift in our user base, not only to the emerging market, but also a lot more now towards higher Apple consumers. Finally, in gaming, while we are expanding in both mobile and for computers, we could not be more pleased at the rollout of several key initiatives. Our gaming-specific browser, Opera GX, has now over 10 million active users since it was formally launched in June 2019. Even more interesting, Opera GX Mobile, which we just launched eight weeks ago, already has well over 1 million users. I should also say that we are seeing the bulk of the user growth in Europe and the U.S., which is, again, exciting for us just because users in those markets tend to generate significantly higher output. So to be driving user growth in the millions, well, we believe have a very positive impact on monetization and profit generating going forward. And plus, we continue to have big ambitions when it comes to our Game Maker Studio gaming platform. I've talked about it, not just the size of the gaming market, but also the direction we think it is evolving think about it, that if billions of consumers make and share pictures, movies, and music every day on thousands of platforms, there is no reason that online gaming with almost as many players and gaming role as a medium of connection, community, and entertainment will not also be adopted as a medium of expression and sharing. GameMaker Studio has already been downloaded millions of times And we believe the potential combination of the GX user base together with the GameMaker Studio gaming engine will build upon each other to provide a really strong, interesting gaming platform. I look forward to talk more about this as we continue to build on this portfolio in the second half of the year. So our core business is strong and growing. And each of our key initiatives is showing great traction, and we believe huge potential. Not just stepping back, we're asking people continue to shift more and more of their lives online, to shop, to walk, to connect and communicate, and especially to play. So being able to choose a browser that can be personalized to the way people lead their digital lives is an ever-strengthened value proposition in this context. So at Opera, we believe this is a long-term durable trend, one that was accelerated by the pandemic, and one we benefit from as the consumers want to be able to choose their browser, but also seeking functionality, privacy, content services, and also the ability to customize their online experiences. So, taken together, we believe there's a lot to be excited about at Opera, and we believe we can continue to expect sustained long-term growth. So, with this, I would like to turn to Frida, so that he can provide a more detailed discussion of both our performance during the call-out and also our outlook. So, hello to you, Frida.

Thanks, Heng-Lin. Our browser-plus strategy keeps delivering, And our financials follow. By offering products that resonate with users who want a more personalized browser experience, paired with content and gaming initiatives, we continue to achieve strong results as evidenced by revenue yet again exceeding the high end of our prior expectations and guidance. I'll recap the highlights and then provide our updated thoughts on guidance for the back half of the year. Revenue for the second quarter was 60.2 million and represents a new all-time high by a good margin. Our year-over-year growth rate was 87% and the sequential growth versus the prior quarter was 17%. We expect to continue to see sequential growth for the remainder of the year, which results in record revenue in each subsequent period. Our current revenue mix is split almost evenly between search and advertising. Specifically in the quarter, search was 29.8 million, accelerating to 69% year-over-year growth. This was driven by monetization gains for both PC and mobile browsers, as well as favorable comps due to COVID. Advertising was 28.9 million, accelerating to 128% year over year. This was driven by strong monetization from upper news and our mobile browsers. Keep in mind that COVID impacted advertising revenue in Q2 last year more than any other quarter. So while we naturally do not expect to continue at such annual growth rates, We do believe we have created a strong foundation for continued healthy growth for the remainder of this year and beyond. Finally, tech and other revenue was 1.5 million. Year-over-year, this revenue category has been reduced by half a million, although with almost no impact to profits, as the decline relates primarily to low-margin professional services to OPEI. As Songlin mentioned earlier, user growth was particularly strong in North America and Western Europe where users monetize at a much higher rate than other regions. We have been investing into this trend and believe it will serve as an additional tailwind to future growth as well. As we execute on our growth ambitions, we took marketing and distribution spend to a new high this quarter, 35.3 million. This is about 20 million higher than the average spend over the previous eight quarters. The increased marketing spend is primarily focused on growing news in Western markets, which have higher user acquisition costs and corresponding strong revenue potential. The investment is tracking well with positive ROI, and we continue to believe that this is money well spent. Our adjusted EBITDA came in at more or less break-even, as expected, at negative 1 million. Our net income for the quarter was 44.3 million, with profits this quarter predominantly driven by the partial realization of our investment in OPEI, as well as the step-up in valuation for the OPEI preference shares we retained. Our operating cash flow was positive at $6.3 million for the quarter. Combined with a partial monetization of our OPE investment, this increased our total cash and marketable securities by $58 million versus the prior quarter to a total of $201.3 million. Now, moving to our forward-looking commentary. As our core business continues to perform and grow ahead of expectations, our confidence in our outlook for the rest of the year increases. 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. When we initially set up guidance for the year, we commented that the more successful our growth initiatives, the more confident we would be in allowing our EBITDA to fall towards the lower end of our guidance. We are now raising both the lower and upper end of our 2021 revenue guidance for the second time, and expect 2021 revenue of 242 to 247 million, or 48% year-over-year growth at the midpoints. This represents record revenue for the second half of the year and the highest year-over-year growth for this period since going public. Correspondingly, for the full year, we narrow our adjusted EBITDA range to become 10 to 20 million, incorporating an increase of about 12 million to our expected marketing spend for the year. Such spend is success-based, and the positive results we see gives us confidence to lean further into it. In Q3, we expect revenue of 63 to 65 million, representing 51% year-over-year growth at the midpoints.