Opera Limited

Thank you for joining us. As usual, I have with me today 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 future results and expectations, which constitute forward-looking statements within the meetings 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 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 or presented based on IFRS. We believe that 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 unordered quarterly historical financial results of opera on our investor relations website. We will be live tweeting highlights from the call at investor opera. So 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, who will discuss our financials and expectations going forward. Song?

Yeah, sure. Thanks, Matt. And thank you, everyone, for joining us today. We are very pleased to announce a very strong first quarter, which exceeded our previously issued guidance for both revenue and profitability. We maintain a healthy momentum as we embark on the remainder of the year and feel great to also raise our 2023 guidance today. Our first quarter revenue reached $87.1 million, an increase of 22% over the previous year. Adjusted EBITDA was $21.7 million, a 25% margin. The first quarter was very much a continuation of our solid execution and the trends we have communicated in the past, specifically focusing on those users who offer the greatest value and simultaneously growing our Opera ads business to offer greater reach to our advertising partners beyond our owned and operated sites and apps. Over the past two years, we have been quite vocal in our strategy of focusing on those users with the greatest potential for monetization. The success of that strategy is apparent when looking at our APU, which has doubled over that two-year period. Analyzed APU was $1.08 in the first quarter. an increase of 30% compared to last year. With marketing spend coming in below plan, combined with normatismality, we saw our global user base dip slightly in the fourth column. We continue on our trajectory with a strong growth of high upper users in key products. With an attractive ROI, our marketing spend leading to solid financial results. We have also begun new integrations with OEMs and partners to preload the Opera browser as part of the OEMs device system updates, creating a tailwind for potential user growth in the second half of the year. Advertising revenue grew 26% compared to last year, representing 56% of total revenue, and continues to benefit from the underlying growth in our audience extension business on top of our unknown advertising. Such revenue grew 18% in the first quarter, driven by the growth of our PC footprint in Western markets, particularly North America. Year-to-date integration of AI services has become a top priority for many popular consumer apps, and we set out to be among the leaders within browsers and AI. After announcing our collaboration with OpenAI, Opera became among the first browsers to have support for popular services such as ChatGPT directly in our browser sidebar, as well as innovative AI prompts. And this allows users to access and take advantage of generative AI services for the web content they are browsing. I would encourage all of you to download either Opera or Opera GX and enable the AI tools in the easy setup and try it for yourself. Moving forward, we plan to introduce a new native AI services designed to augment web browsing for our users and further differentiate our products to drive engagement. Earlier this week, we opened up for all the access Opera 1, a completely redesigned browser, tailored for AIGC services, where AI tools are enabled by default. Opera GX continues to grow its user base, up another 80% sequentially to $22 million during the quarter, with an annualized output of $3.17, an increase of 18% compared to the first quarter of 2002. GX also enjoys the highest engagement metrics across our product portfolio, becoming a key part of the online lives of the gamers who have come to love GX. During the first quarter, the number of people with GX Me accounts doubled compared to the first quarter. These registered accounts are among our most loyal and engaged users. Our objective continues to be to raise awareness around Opera GX and grow our highly engaged user base. And next month, we are launching an influencer campaign with one of the world's most popular YouTubers as part of that. We recently announced that the live score features found directly in the browser for football and cricket fans has surpassed 50 million users, less than six months after its introduction, which speaks to the strengths of our distribution. These users are incredibly engaged, and with future updates allowing even more personalization of the app, we expect this trend to only continue. In fact, Opera Football is consistently among the most popular destinations for football-related content globally. Finally, we are also very excited to see the renewed attention currently being paid to the browser space by the broader tech ecosystem, including the press and the investors. as a key access point to the web, with the ability to integrate services and functionality across websites to improve the end user experience and productivity, browsers are much more than commodity products. Opera has been proving that for decades. We are excited about this next chapter of AI-based productivity innovations, and we plan to be just as proud of our impact on that front as we are on our broader history in this space. With that, let me turn the call over to Frida. Frida?

Thank you, Tom. On top of the operational color already provided, I'll dive a bit further into the numbers in this yet another very strong quarter for APRA. Q1 revenue came in 2 million above the high end of our guidance at 87.1 million, representing 22% year-over-year growth. As expected, we saw greater seasonality in our advertising revenue than in prior years due to our successful scaling of also third-party ad inventories. but we were positively surprised to see even stronger underlying growth than we had anticipated. Adjusted EBITDA came in almost 3 million above the top end of our guidance at 21.7 million, or a 25% margin. Profitability benefited from our revenue over performance combined with continued cost discipline with marketing expense in particular coming in below expectations. During the quarter, we repurchased 370,000 ADSs for 2.5 million under our buyback program, translating to an average price of 6.66 per ADS. That leaves another $30 million remaining under our current buyback authorization from 2022, and we plan to take advantage of that in an opportunistic manner. In Q1, we also paid our first dividend of 80 cents per ADS for a total consideration of $71 million. In terms of cash generation, we generated a strong operating cash flow of 25.7 million in the quarter, and our free cash flow from operations which is net of capex items and lease payments was 23.3 million and ahead of adjusted EBITDA given the benefit of reduced working capital after the seasonally strongest fourth quarter. Our balance sheet remains very healthy with 85 million of cash and no corporate debt. In addition, our receivable from the sale of Starex totals $57 million present value, and we value our 9.5% stake in OPE, which is classified as held for sale, at $163 million. In total, that adds up to $305 million, which is a significant amount relative to our market cap. Now turning to our updated guidance for the full year 2023 and the second quarter. For the full year, we are raising our revenue guidance to 373 to 390 million, up from 370 to 390 million, That is 15% revenue growth at the midpoint, but representing continued caution given the broader macroeconomic picture. For annual adjusted EBITDA, we lift our guidance range to be 77 to 83 million, up from 71 to 81 million, and representing a 21% margin at the midpoint. The underlying cost expectations remain largely as discussed on our prior earnings call. We continue to expect cost of revenue items to come in just over 20% of revenue for the year as a whole, and we continue to build in close to 120 million of marketing expenses, even if we spend less than expected in the first quarter. Cash compensation expense is expected to increase modestly relative to 2022, and all other OPEX items before adjusted EBITDA is expected to come in at a bit over $30 million for the year as a whole. For the second quarter, we guide revenue to 92 to 94 million, which is 19% growth at the midpoint. We got adjusted EBITDA to be 18 to 20 million, translating to a 20% margin at the midpoints. In summary, we are off to a very healthy and better than expected start of 2023. We're on a strong track and look forward to keeping you posted in what we expect to be a very active year for Opera with a continued high activity level in a very dynamic market. So stay tuned. With that, I would like to turn the call back over to the operator for your questions.