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spk00: Please stand by, your program is about to begin. If you need assistance during the conference today, please press star zero. Welcome to the Opera Limited First Quarter 2024 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 keypad. If you would like to remove yourself from the queue, please press the pound key. Please be advised that today's call is being recorded. Lastly, if you should need operator assistance, please press star 0. I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations. Please go ahead.
spk04: Thank you for joining us. As usual, I have with me today our co-CEO, Song Lin, and CFO, Frodo Jacobson. Before I hand the call over to Song, I'd 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 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 an unaudited quarterly historic financial results of opera on our investor relations website. With that, let me turn the conference call over to our co-CEO, Song Lin, who will cover our first quarter operational highlights and strategy, and then Frodo Jacobson will discuss our financials and expectations going forward. Song?
spk05: Song, thanks, Matt. and thanks to everyone joining us this morning to review our first quarter results. 2024 is already off to a strong start with revenue of $102 million driven once again by organic growth paired with cost discipline resulting in $25 million of adjusted EBITDA representing a margin of 24%. Both revenue and EBITDA exceeded the first quarter guidance that we outlined on our last quarterly call. Our user growth strategy remains focused on quality over quantity. We continue to see growth of users in Western markets, GX users, and other high value users globally, offset by declines in low monetization mobile users in emerging markets. Annualized APU was $1.34 in the first quarter. It's an up of 24% year-over-year. This was primarily driven by the growth of users in high APU markets, as well as continued growth of Opera GX broadly, which consistently attracts highly monetizable users across markets. In the first quarter, search revenue was $43 million. up 14%. This category has consistently grown in the mid-teens and faster than the broader search market, enabled by continued focus on growing the highest value users. During the quarter, Google exercised its option only to extend our current search revenue partnership, a sign of the value of this relationship to both parties. In the first quarter, advertising revenue was 59 million, growing 21% year-over-year and representing 58% of total revenue. Advertising revenue continues to benefit from both our owned and operated, meaning our browsers, as well as our opera ads business. There is a clear trend that the digital advertising industry has put more focus on high user intent events, be it the shopping journey of a user or the payment activity in association with a travel booking. Being a browser, we are best positioned to capture these interactions, giving users help choices and suggestions at the right moments. This could be in the form of a product recommendation or a relevant page link with context, aided by AI to help put everything into perspective. As a result, advertising revenue within the browser experienced the fastest year-over-year growth since the second quarter of 2021, when advertising revenue was still rebounding post the onset of the COVID pandemic. That's a very direct example of our focus of high-value users translating into financial results. As an independent browser, we are known for our continuous innovation and bringing exciting new features to our browsers. Opera 1, which we launched last year, was a great success with the introduction of our browser AI, Agria. In addition, it came with built-for-UI design, whether it is a tap island innovation or stock page animations, benefiting from a robust engine, enabling complex graphical operations in the UI layout to be separated out from background processes, ensuring the most elegant browsing experience possible. Let's see how such features and our strong browser brand drive adoption. When users consider a new browser, they are more and more often considered and chosen. They remain encouraged by all the results of the recently implemented digital market apps in the EU. The DMA requires Apple to show a browser choice screen to iOS users in the region and will qualify for the choice screen in every EU country. Post-implementation, we saw a 63% increase in new iOS users in the EU from February to March, though still from a small base and with lots of work remaining ahead to flourish the opportunity. We are very excited about this development and will increase our iOS investments now that the playing field is more level. with other key regions potentially also opening up. We are starting from a modest base due to previous platform limitations, leading us to believe that the growth potential is substantial. Again, this reflects a general trend that people show an interest to move away from the boring system default browser to differentiated products that are tailored for particular audience and needs. We believe that this trend will continue and even accelerate. Turning to our gaming browser, Opera GX. We have spoken about it repeatedly, but I think it's a good example of bringing something truly differentiated to market and users loving it. In less than five years, Opera GX has reached 29.5 million euros, up 6.1% versus the first quarter alone. In addition to consistently growing our user base, monetization of the GX user base continues to grow, reaching $3.49 in the first quarter, up 10%. compared to a year ago, even as its geographic footprint expands in non-Western markets. GX remains our highest monetizing browser, both in developed and emerging markets, while the regional differences in monetization is less than our other browsers. One of the most welcomed new features is GX modes, which allows users to customize almost all aspects of the browser. These modes span a wide spectrum and are very creative. 3A gaming franchises can provide GX modes like those we just announced in association with Cyberpunk 2077, a very popular game with a loyal fanbase. But also, our users actively create modes. For example, the background music can react in real time to the actions and moods of users while using the browser based on the keystrokes or mood of the mouse. The options are limitless. Users can also upload their modes to the GX store and share it with fellow gamers. Since the introduction of modes a year ago, over 6,000 modes have been created and shared by our users, and our modes have been installed over 150 million times. That is a great testimony of how this functionality is appreciated by the gamer audience and the potential related to differentiation in the browser space, which in reality is still largely untapped. I'm going to end on the continuation evolution of our embrace of AI. we continue to roll out new generative AI features within the Opera browser. In the first quarter, we announced our AI Features Broke project, which gives users of our Opera 1 developer build access to our latest AI explorations. We broke new features as often and every few weeks, making us one of the fastest movers in the space. One highlight is the experimental support of 150 different local large language model variants from approximately 50 families of models, which are now natively supported to be downloaded and can run locally on Europe's own computer within the browser. And in terms of speed, last week we added support for the latest LLAMA3 model just one day after its release. This step marks the first time local live language models can be easily accessed and managed from a major browser to a building feature. The local AI models are a complementary addition to Opera's own ARIA AI service, which utilize our new fully green energy powered AI cluster in Iceland that were announced in February and is now fully operational. It is indeed an interesting time for Browser with a massive user base and a brand for innovation. We are fascinated about all the changes happening around us and cannot wait to explore the path ahead. So now, let me turn it over to Frida to discuss the financials and guidance for the second quarter and 2024 in more detail. So, Frida.
spk08: Thank you, Sang. 2024 is off to a solid start with Q1 exceeding the guidance ranges we set just two months ago. revenue grew 17% year over year, nicely ahead of the 15% midpoint growth we had guided. Net of continued FX headwinds, we saw an even stronger underlying constant currency revenue growth of 23%, or six percentage points higher. Advertising remains our strongest growth driver, though search has also been performing ahead of the underlying market growth, clearly showing the benefit of our high ARPU user focus. In terms of cost, marketing cost came in slightly below expectations, as did the other OPEX category. Salary cost came in as expected, while an investment in scaling new advertising revenue streams in our browsers drove up cost of revenue for the quarter. In total, we managed costs to stay on budget, resulting in the revenue overperformance, translating to adjusted EBITDA overperformance as well. Tax cost of 4.6 million was 19% of adjusted EBITDA, which was somewhat elevated, mainly due to our tax assets, which reduced in USD value when local currencies weakened. Our cash generation was particularly strong in the quarter with operating cash flow reaching as much as 31 million or 125% of adjusted EBITDA. This quarter, we made an all-cash investment to establish our new AI data center representing an unusual amount of capex for us while we were still able to generate free cash flow from operations of 8 million or 33% of adjusted EBITDA. Cash generation fluctuates more than EBITDA from one quarter to the next, and as the year progresses, our year-to-date cash conversion rates will stabilize similar to what we saw last year. We paid our semi-annual dividend in January, 40 cents per ADS, or 35 million total. Of the total, 25 million was offset against our Star X receivable, and 10 million was paid in cash. The final 8 million of our Star X receivable will be cleared as part of our next recurring dividend payment, which we continue to expect for July, same as last year. We remain committed to our dividend program, viewing it as the best way to return cash to shareholders without impacting our free float or trading volumes. Having said that, as we've also demonstrated several times in the past, we continuously monitor for opportunities to generate ROI for our shareholders through buybacks when conditions favor that. Yesterday, we issued our 20F for 2023, and I just want to highlight the one estimate update as part of the annual report relating to the fair value of our 9.4% ownership stake in OPE. We ultimately set the year end 2023 valuation to 253 million, as opposed to 269 million initially estimated. which led to an updated Q4 valuation gain of 90 million, as opposed to a gain of 106 million. This is an estimate of an unrealized gain, and you'll see that the ownership stake is carried at the new value on our balance sheet, but it had no impact on our revenue, cash, or other operating metrics. In keeping with our well-established tradition to guide cautiously, We translate the overperformance of Q1 to a $4 million lift of the low end of our full year revenue guidance, while leaving the high end as is. Our new revenue guidance becomes $454 to $465 million, which results in the midpoint increasing from 15% to 16% full year growth. In terms of adjusted EBITDA, our guided range was already quite narrow at 106 to 110 million, and we retain it based on the same logic. This maintains a 24% adjusted EBITDA margin expectation for the year as a whole. Overall, as only two months have passed since we issued our original guidance for the year, we prefer to progress further into the year before we fully extrapolate our trajectory. For the second quarter, we guide revenue of $107 to $109 million or 14 to 16% year-over-year growth. we got adjusted EBITDA of 22 to 25 million, or a 22% margin at the midpoints. That translates to OPEX pre-adjusted EBITDA of 84.5 million at the midpoints, which includes a steady increase in marketing spend, annual salary adjustments effective in April, and adding just over a percentage point of cost of revenue items relative to revenue. Other OPEX items are expected at about the quarterly average of 2023. Our cost expectations for the year as a whole remain in line with our prior directional commentary, with marketing cost and cost of revenue ticking a bit up as percentage of revenue, while compensation cost and other OPEX items ticking down, overall offsetting one another. All in all, we are off to a solid start of 2024 and excited to continue executing on our strategy. We'll also participate at a number of upcoming investor conferences in May, which gives Matt and I a chance to meet up with many of you in person soon as well. With that, I'll turn the call back to the operator for questions.
spk00: Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. To withdraw your question from the queue, you may press pound. When posing your question, we ask that you please pick up your handset for optimal sound quality. Thank you. Our first question will come from Lance Vitanza with TD Cowan. Your line is now open.
spk01: Hi. Thanks, everyone, and congratulations on the quarter, guys. A lot to go through here, but maybe we could start with the DMA in Europe. I find this very exciting. And you mentioned a 63% increase in new iOS users just from February to March. Now, I understand it's off of a very small base, but could you talk a little more about the opportunity there? Just, you know, how many iOS users are there in Europe and what's Opera's penetration like today? Where do we think that could realistically go over, you know, let's say three to five years or whatever you think the right timeframe is? And And then also, what are the odds that we see a similar kind of DMA framework? You did talk, I think, Song, you talked about you do see other markets potentially embracing this kind of a framework. What are your thoughts there in terms of the U.S. at some point? Thanks.
spk05: Yeah, so it's only how I think I just briefly comment. It's a big topic, right? So I think, number one, in general, we are very excited to see the trend here. Because I think Europe, of course, is a key market, and there's almost a leading role in many of those, I would say, military matters to make sure that there's a bit more fair playing ground. I think we're happy that you have been taking this approach, and we're even more happy that it proves to everyone that there is effect, right? Because, you know, many times we saw that there are some actions taken by government, nothing happens. And in this case, I think Apple did comply, which we are very happy about them as well. And the end result is also quite satisfactory, I would say, probably more than many people thought, right? So I think that's very encouraging. And, like, also just to comment that, like, we also see a general trend that those since also happening in other markets. I guess, I mean, I'm not expert on this, but I guess we all know that just last two weeks, I think the DOJ also had a case against Apple. Well, it's all the similar nature, right, in the U.S. So, and then some of the things are exactly the same. So we just saw that, you know, I think there is a good chance that more likely also from Apple point of view, I guess, if they already agreed to open this up in one market, My feeling is just that we have hope and it's more natural also for them to open up worldwide, which then, of course, can make a real difference because the only limit in the EU, of course, is still off the limit, even though it's already a very good start. And then I think in terms of opportunity, I think we all know that on the mobile space, I think Apple has pretty much, especially if they segment the section to be, let's say, performance smartphones, which I think is also a case where DOJ has been using. Then I think Apple almost has 70% of the total market, which means you need to do rather higher in the smartphones. And because of the previous limitations, that this is almost non-existent for any other browser players, simply because Apple don't almost allow it, and they don't allow a browser engine. So we feel that now this is almost opening a new ground. that, you know, presumably 70% of those performance smartphones in the U.S., and I would say maybe 50-60% elsewhere, will have a chance to be accessed by us and by other browser vendors, which can be a very interesting playground. And we have been able to show that on Android, where everything is relatively, you know, a level field, we are able to take strong market shares, and we have high hope that they can also be replicated in in iOS, right? So more like for now, we are, you know, the user base to start with iOS, we have millions of users. But then, of course, compared with, you know, our total user base, which we announced to be 300 million, there's still a bigger growth potential. So I think even though now, even though we see major growth, there are many things, like many other things ahead, which can have meaningful impact on our revenues, you know, year to come. So I think that's more like the general feelings and why we're excited. But then, of course, it's even interesting to see how this develops in the next few months to come.
spk01: And you did mention that there would be an increase, understandably, I would hope there would be, an increase in your iOS investment spend. And I just wanted to check with Froda, is that presumably that was already kind of anticipated? And so we think about the guidance that we sort of talked about for the budgeting. and the marketing spend over the balance of the year, I should say, there's no incremental upside to the guidance?
spk08: In terms of marketing spend, I would say we already reflect the Western markets, Europe, North America, that is where we spend the majority of our marketing spend. It correlates with the revenue and where our revenue growth is really coming from as well. So even though it still represents only 17% of our total user base, that is where we continue to investing in as part of this strategy that we've been following for the past years.
spk01: Okay. And then just on the GX browser, you called out some dilution in the monetization as GX expands in non-Western markets. I imagine that's actually a good thing despite that, but I'm wondering if you were to control for the geography, do you have a sense for what the year-on-year growth in monetization might have otherwise been? I think it was 10%, you know, overall, but, you know, kind of market by market, so to speak, or, you know, emerging market versus, yeah.
spk08: We typically don't go into that level of detail, but overall, I think for the company as a whole, I think we'd see an ARPA growth at about twice that. So I think that's a good indication.
spk01: Again, just directionally, is the growth kind of comparable in each market, or are you seeing monetization growth now greater or lesser in one market or the other?
spk08: I think we see across the regions that we are doing well on monetization growth, and for GX in particular, I think we continue to advance on growth on greater ad revenue drivers, as it has historically been very search-driven in isolation. It's still not, let's say, caught up to our other products in terms of mix between advertising and search, but we are progressing on that.
spk01: Okay, last question for me. Iceland, we talked about the economics quite a bit back in February, I think it was, and it seems like the pace of incremental CapEx investments is is pretty well contained. Then we saw Meta announce another big increase in its CapEx budget. And so I'm just wondering, you know, what are the chances that we start to see these big data center investments, you know, pop up more frequently, you know, quarter to quarter, year to year, etc.? ?
spk08: I don't think I would expect any cash flow surprises there because, you know, even if we did want to expand it over time, there is significant lead time on that. Okay, thanks.
spk01: I'll get back to you.
spk00: Thank you. Our next question will come from Mark Argento with Lake Street. Your line is now open.
spk02: Hey, good morning, guys. Congrats on a nice quarter. Just a couple quick ones here. Anything to read into the kind of more accelerated timetable on the Google renewal? I know you guys had mentioned that, um, uh, that they had, uh, triggered that. And then, uh, just wanted to touch on, you know, what's outstanding right now on the buyback.
spk08: Uh, Frodo here. I can begin, uh, In terms of the buyback, we have fully consumed our most recent 50 million buyback plan, so I think now it's a bit watch and see, as we have historically always done, and sticking with the tradition that when we announce something, then we execute pretty quickly thereafter. In terms of the Google renewal, it was, of course, a nice gesture of them to renew it this early in the year, as they had the whole year, and From my point of view, I think this is a nice recognition of the joint potentials that we also have with Google.
spk02: That's helpful. And then just quickly back on the browser, it sounds like GX continues to perform well in North America. In terms of any uptake on the mobile side or on the desktop side, especially with more AI product or more AI technology rolling out, How do you see the non-GX browser as potentially a growth driver for you?
spk05: Yeah, it's only how I just commented, right? So, yeah, I think as we also commented a bit that, I mean, first of all, of course, Opera 1 is primarily... AI-focused browser now, and also when they are launching their latest AI official jobs, it's always on Opera One and Opera One Developmental Build. So I think now it's almost becoming one of the leading major browsers, which have the fastest and the oldest access to all the AI technologies, which we are very proud of. So yes, I think it's basically among the key opinion leaders and many others. that has already been established and definitely helpful to our growth in non-GX browsers. And then even more, I would comment with that, for instance, with iOS. And now, one of the major features we have been broadcasting is actually the ability to support AI, which we all know that Safari is still going. So I think all those provide, yeah, we feel that is a good opportunity for us to grow. And especially if we can also capture the IOS opportunity because, as you know, IOS are really by definition becoming really a high segment. And those users are also typically quite conscious about the features that we can provide that is data-run AI. So I think it's a very good playing ground. And even for GX, I just want to mention that GX also has mobile versions, and it's also doing very well on iOS. And I think we're also super happy that now there's more opening apps, which means they can do more. So yeah, quite positive about this trend there in general.
spk02: Great. That's helpful. Thanks, guys. Good luck the rest of the way.
spk00: Thank you. Our next question will come from Eric Sheridan with Goldman Sachs. Your line is now open.
spk03: Hi, this is Alex on for Eric. Thanks for taking the question. Just a quick one on marketing spend. There's been a lot of discussion broadly around the industry on elevated ad prices and developed markets and sort of competitive ad auctions. Obviously, that's where you're focused on adding users. Can you talk a little bit about what you're seeing in the market and the ad auctions? Which digital ad channels are working well for you? How has ROASH trended in recent months? That'd be really helpful. Thank you.
spk05: Yeah, so I'll comment a bit, but maybe comment also from a few grounds as well. So I would say high level, I feel that we are rather competitive in marketing. I think it's also part of why we actually have a bit higher . I think the reason is just because if you look at, if you are more like a traditional ad buyer where you typically buy just search ads or you typically buy, say, native ads, then of course you are pretty limited and you are always facing all of the competitions, right, that there's not so much you can do. I think for us, it's a bit different that as a browser, especially a desktop browser, we, from the starting point, don't really rely heavily on those. It's just because we'll never be able to compete in that way. So we, for instance, focus a lot more on the influencers, that we work with all the influencers, and then the practitioners. And then when people are sick, So I think, you know, those things actually enable us to be able to acquire those in a rather effective way and pretty much maybe not so much affected or impacted as much by those, I guess, movements in the pure ad or marketing spend space. So I think maybe that's the biggest of the negotiations. However, it's almost from a monetization point of view, I just want to comment that we actually see an interesting trend that indeed just purely buying from social media is almost not as exciting because we saw that people, advertisers, are actually exploring this so-called high user intent event, which means... precise and the time you go take actions. So when you go out on the web page, when you try to buy something, you want something to show up. So that's actually an interesting trend, which doesn't impact so much on marketing, but it actually has a benefit for also advertisements. which we're going to talk about, that now, starting from this year, we saw a lot of other guys approaching us for potential cooperation. And we are working with some of those giants on how to make sure we can pop up at the right moment with high user intent, which is a very good context for browser, because as a browser, of course, They have good knowledge of what you are doing and what time, and so what kind of recommendations can be given them. So I think that's actually one of the interesting trends that have been discovered on the digital advertising space, which is definitely something that's changing, and we're very excited about it. So, yeah, so two things. I'll try to do both of them at the same time.
spk03: That's helpful. Thank you.
spk00: Thank you. Once again, if you would like to ask a question, that is star 1. Again, that is star one if you would like to join the queue. Our next question comes from Navid Khan with B Reilly Securities. Your line is now open.
spk07: Hi. Thank you a lot. So maybe just on the DMA implementation and the trends you saw, maybe you can provide some color on the existing base if you were able to retain that, and then What are you seeing in terms of usage after people who kind of set Opera as a default, which is previously maybe not being a default? Let's talk about that a little bit.
spk05: Yeah, I think I just briefly commented that. Yeah, so I don't think we have to disclose the separation of our iOS users. It's not irrelevant. It's in media and user range, so it's still big. But as we also commented on that, for total, of course, as I said, it's still small. But even that, if you saw a section of the new users, then there are also major uplifting on the existing active user base, which we are very happy about. And then I think what we see is that, yeah, so, and they are right in the sense that allow you to set the default browser. Also, first of all, we do see a significant increase of the default browser results, which is actually very common. Like most other platforms, we saw a big portion of our users set the browser as default. You know, the most possible, you know, we saw the ratio is a lot higher, which we're also very happy because, yes, that has direct impact on per user office. because they simply search more and they have a chance to expose the end users more. So all of those are very positive. And I think the only thing is just that we feel, of course, it's only at the beginning because now it's only EU and it's also been fragmented because EU contains many countries. So we feel that we would rather feel this is probably the pioneer of what this is heading to in some even bigger markets, like the U.S., which is how they're anticipating. So let's see how this develops. And in any case, we'll just continue the growth because it's definitely the right trend for us to move forward to.
spk07: Okay. And then maybe a quick follow-up for today. Maybe just talk about the – opportunity you're seeing for marketing spend. You came in a little bit lighter, I think, in the first quarter. How should we kind of think about that going out? And do you see some new channels you can deploy, add dollars into?
spk08: So, we had expected Q1 marketing spend to be very similar to Q4. It came in 2% below, so I think it was quite on expectation. And for the rest of the year, we continue to expect like $1 to $2 million of incremental spend quarter by quarter. So, keep ticking up as the year progresses. I think in terms of the channel mix, we expect to continue what we do today, which is to work with influencers and to keep turning more of the spend into Western markets and other high-value populations, and then in particular for Opera GX and its global growth.
spk07: Understood. And then for Opera GX specifically, maybe... is, is, uh, the, the growth you're seeing in some of these new emerging markets, um, is that primarily word of mouth or how much of that advertising and how does the, the monetization there kind of, uh, change over time? Do you think that it's early days and it might actually improve as you, as you become a bigger presence in a certain geo or is that, uh, let's give us some thoughts there.
spk08: Sure. I mean, in terms of word of mouth and distribution mix, we do benefit from a strong brand once we have started to build presence. So that we also show a chart in our investor presentation to sort of illustrate the size of the organic inflow of users. But it does require investment to start building a presence. And in the example of GX, raise awareness of that product. So we definitely do that. I think the second part of the question was around monetization opportunities. We are in process of expanding the monetization of Upper GX. I think the Q4 to Q1 ARPU was almost flat, down a couple of percentage points, something like that, which is very strong given the seasonally strong fourth quarter. The product does benefit that the users it attracts outside Western markets are relatively more affluent than the average user in those regions. But let's say if ARPU was constant and it continues to grow internationally, that, of course, would be a headwind. But fortunately, we've been able to grow the underlying ARPU faster than, let's say, the geomix impact.
spk07: Understood. Thanks a lot, guys. Sure.
spk00: Thank you. Our next question will come from Vicky Wei with Citi. Your line is now open.
spk06: thanks for taking my questions and congrats on the solid quarter I've got one question since the announcement of adding experimental support for 150 local LM variants from 50 families to offer one browser in developer stream any comment you could share which are the top five favorite models from the user you see on your opera one and the Indication how some of these usage of models could help on future financial growth or will this be more enhancement tools with limited? Monetization.
spk05: Thank you Yeah, yeah, it's it's only hell so yeah, I'll briefly comment right so so both of what I would say is I think it's more like, number one, I would say this feature is rather a reflection of way, but also many ones like us, many key opinion leaders in the industry feel where the AI is heading to, that it is always about the combination of you have this very powerful large language models, which are hosted by the guys of OpenAI and the likes, but then also in combination of, I would say, local models, more like, well, I think the typical example is Lama and a few others, I think the reason just because, you know, there's always the case that you want to get some help very fast, and then for privacy and other considerations, you do not want this to be uploaded to a cloud, and also there are some cost considerations among those. So I think there are always the leaks. that for some very, you know, for some actions they'll be taken very remotely, and there are some, you know, actions which will have to be done locally. So I think that's where we are heading to, and we feel that we're quite happy and proud almost to be the four major ones to go to that path. I think really just because we are rather independent, We don't have any more like, for some other players, I understand, some other considerations, right? They want to know the cloud service or whatever. But for us, we just care what is user need, right? So I think that's what's important for us. And then, you know, in terms of models, I think the typical ones, Lama, of course, will always be very popular. It's one of the most powerful ones from Facebook, from Meta. And then you also have even Google has Gamma, right, which has gone down that. And even Microsoft has announced some local models lately. So we're just happy that it's proven to be the right trend. And also, if you want, you can also try Lama 3, which is the latest model we just had. So we're quite proud because it's only coming out last week. And now you can actually try that out on Apple Pro. and use it very easily, just a few steps. You don't have to go develop or whatever. So I think that's the role we're playing, and we're quite proud of it. So more like those are things that we're happy to do. It doesn't look unlike Meta and a few others. We're trying to do this in a very smart way, so this will not bring up heavy costs, and it's almost mostly upside just because essentially this makes our product more differentiated and hopefully the retention will be high, and if we solve the user loyalty, we hope that they will speak to us longer. So I think it's a win-win situation, because at the end of the day, what is being consumed is the user's CPU and electricity, his own laptop, which I'm sure he's happy to take, and it also doesn't bring additional costs to us. So I think all those are good things, good product features, and we hope to remain the leading roles in the AI field. I can mainly chime in.
spk08: I can maybe chime in from the monetization point. I think being able to take these types of AI features mainstream, can attract to us exactly the type of user profile that we monetize the best, right? And we expect that these offline models will exist in combination with the online models like ARIA because of the needs that require essentially updated information, access to products, access to other live things that won't be captured in an offline version. So slightly different use cases.
spk06: Thank you.
spk05: Okay, so if there's no other questions, I would just say that, you know, thank you all for joining us today. We have been looking forward to share this quarterly update with you. It is certainly exciting times, and as you see, we innovate and evolve quickly to seize the opportunities ahead. There will be lots to talk about as the year progresses, so stay tuned, and thank you for your time.
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