Opera Limited

Thank you for joining us. This morning, I am joined by our co-CEO, Song Lin, and our CFO, Freda Jacobson. Before I hand over the call to Song Lin, I would like to remind you that some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. please refer to the safe harbor statement in our earnings release and our form 20F, including the risk factors. We undertake no obligation to update any forward-looking statement. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website, located at investor.opera.com. Our comments will be on year-over-year comparisons unless we state otherwise. With that, let me turn the conference call over to our co-CEO, Song Lin, who will cover our second quarter operational highlights and strategy. And then Frodo Jacobson will discuss our financials and expectations going forward. Song?

Thank you, Matt, and thanks to everyone joining us today for a business update and more color on our second quarter. Our second quarter results were ahead of all expectations coming in above the high end of both our revenue and just EBITDA ranges. It is the continued momentum of our products and targeted user adoption that translates to growing and broadened revenue streams and strong financial results. In the second quarter, revenue was $110 million, growing at 17% year-over-year. Adjusted EBITDA was $27 million, translating to a margin of 24%. And particular strengths, this is our guidance of 22 to 25 million. In addition to the revenue over performance, our profitability benefited from even title focus on the most monetizable users as the portal progressed when it comes to our marketing spend. As a result, we grow up to 25% year over year, now an annualized $1.46 average across our products, and geographies. Advertising revenue was 65 million in the quarter, growing 20% year over year in a similar fashion as prior quarters. Our advertising revenue continues to benefit from the same underlying drivers of high output user growth and expanding monetization opportunities. In particular, as our Western and gaming users represent an increasingly attractive audience for monetization partners. Our ability to drive targeted and high purchase intent traffic from our users directly to an expanding partnership base has proven to be scalable. We are taking advantage of our first-party signals and our well-developed ad tech platform within Opera Ads while creating value to both partners and end users. We still consider ourselves to be in the early stages in taking advantage of these opportunities, especially as our AI offerings broaden and we increase the number of direct interactions between the browser itself and the end user. Search revenue was 45 million in the quarter, up 15% year over year, and also in line with our trajectory from prior quarters. We are proud to grow our most mature revenue stream at this pace, as it directly demonstrates our ability to attract and retain highly engaged and monetizable users. We remain enthusiastic about the future of our search-based revenue streams as well. There is certainly increased public focus on ensuring competition among search engines. Being an independent browser provider, we appreciate the broader recognition of the value and importance of the search position provided by a browser. And we are very excited to work with key players to capture and further expand the potential of the massive amount of traffic that we can drive from our user base. Last quarter, we also commented a bit on the positive initial impact of the Digital Markets Act, or DMA, which addresses many of the ways that the browser market is not always a level playing field. As separately disclosed, we take an active role in these processes, and this summer we pointed out where we believe the DMA's gatekeeper designation principles have been applied too narrowly. The BMA momentum carried over into the second quarter, where we saw significant strengths in new user adoption of both Opera for Android and Opera for iOS throughout the EU, as well as an increase in the number of smartphone users in the region who have made our mobile browsers the default. Beyond regulatory matters, technology and services evolved as well. Recently, there has been a lot of focus around search and content platforms being redefined. To a great extent, we see how AI underpins the ability of such services to give the end user a better experience, whether it's from answering questions directly or elevating the quality of promoted content. We are enthusiastic about this trend as we believe it puts a greater emphasis on content providers to deliver true value and less leakage of our user monetization to low-value publishers. The browser sits in a perfect spot as being a vehicle of how end users connect with those AI-elevated services, a powerful position to be in. We believe these changes are beneficial to our users as well as our high-quality monetization partners and ultimately to Opera. now turning a bit to the always high activity level within Opera. Our success has always been driven by innovation and speed, providing our users with unique products and improved experiences, and stayed ahead of competition. Last year, we launched Opera 1, our fully redesigned flagship browser, and in early Q2, we were proud to announce that Opera 1 received the prestigious IF Design Award 2024. We thought they'd lead with visuals and functionality, but to win users' hearts, our browsers must also look beautiful and provide elegant flows. The next major upgrade of Opera 1, referred to as R2, is now available for public testing and will roll out later this year. If you give it a try, you will see how we have improved, how people listen to music from popular services while browsing, as well as continue to advance our browser AI area. With the R2 release, we continue to build on the modular design introduced in Opera 1 and have a new split-screen mode that allows users to multitask more easily between two open tabs. Finally, R2 introduces a new type of scene support where users can customize their browser with a set of high-quality dynamic themes that provide immersive experiences, further differentiating the visual appearance of our browsers. Last week, we also launched Opera 1 for iOS, prioritized as a direct consequence of the increased opportunity to compete on the platform. Compared with Safari, Opera users can engage directly with the ARIA browser AI. They can experience browsing in proper full screen and benefit from all our other integrated services, like building free VPN and ad blocking. With that, our product lineup for users with the greatest monetization potential is more complete, and you will see us putting increased marketing dollars behind this lineup in the months ahead to continue raising awareness of Opera as an alternative to the iOS default browser. Now shifting focus to Opera GX, our highly successful gaming browser. In April, Opera GX debated the official Cyberpunk 2077 browser mode created in collaboration with game developer CD Projekt Red. The mode allowed deep customization of the Opera GX browser with branded elements from the popular game. In total, there are over 7,500 different modes available for Opera GX. In June, we launched the browser from Vault An official collaboration browser experience with the hit TV series, The Boys, alongside the premiere of season four. While seasonality works against our product in the summertime, Opera GX added another 500K users in the quarter to pass 30 million MAUs, achieving a year-over-year user growth of 27%, combined with a year-over-year output growth of 14%, now at $3.55 on an annualized basis. As the AI capabilities improve, the online journey of a consumer can be made both more productive and more informed. Having these tools built directly into the browser instead of a website or browser extension makes the experience all the more seamless. The current landscape reminds me of how search has evolved since the 1990s and before Opera pioneered the integration between search and browser over 20 years ago, from having to use the web page of search engine to search natively in the browser URL bar. So now the ability to gather information, making informed decisions, and both process and create content with the help of AI allows users to be even more productive. In the case of our AI-assisted ARIA, this is a fully integrated experience that exists naturally alongside the user's existing habits. Our role in this ecosystem is not to really make the individual tools available, but rather integrating both the back and the front end to give our users choice and elevated use cases, whether through ARIA or other services. ARIA itself evolves at a rapid pace. And this call along with multiple AI features from beta stage in our feature drop program and into our flagship browsers, including command line prompts, page context awareness, as well as voice and image generation capabilities. We are also offering an integrated and simplified way for users to download and use large language models locally on their computers, currently available in R2. It's a fantastic feeling to have always access to the power of AI assistance, regardless of internet connection, and with the certainty that your data does not leave your computer. As you can see, we are keeping busy. We might be a small company compared to our competition, but I think we are also the perfect size to innovate and seize opportunities. While we have more than tripled our revenue since our 2018 IPO, we have maintained an ever-present startup mindset free of the bureaucracy of large organizations, combined with a scaled business while solid financials allow us to invest in exciting products and healthy continued growth. With strength building throughout the year, we are excited to embark on the second half of 2024 and what comes next. With that, I will turn it over to Frodo to dive deeper into the QP numbers and our guidance.

Thank you, Sang. Now, four months further into the year versus our last earnings call, it's fair to say that 2024 is shaping up to be another really nice year for Opera. We are growing ahead of expectations with internal excitement across the board on the topics Sang Lin covered and more to come. Our financial results once again exceeded expectations, even the top of our ranges. In fact, over our six-year history as a public company, we've never missed our revenue guidance and only missed our EBITDA guidance once when the COVID pandemic hit in the first quarter of 2020. That does say something about our healthy and organic growth, and its relatively predictable nature, even if we like to bake in some caution for potential headwinds here and there. We've also been a rule of 40 company for 13 sequential quarters now, that is every quarter after the first year of COVID. And as you see from our guidance, we aim to remain in that category going forward as well. Our overall revenue growth was 17% and our adjusted EBITDA margin was 24%, both in line with recent quarters. As Song commented, I would highlight the e-commerce opportunities already seized and their further potential as a key building block in our continued ARPU building, naturally on top of healthy user-based dynamics. As in recent quarters, FX continues to represent a headwind, in particular as it relates to emerging markets. And our year-over-year growth would have been 8 percentage points higher, or 25% on a constant currency basis. In terms of cost, we had guided for a sequential increase in marketing costs, yet in the end maintained the spend level from Q1. That led adjusted EBITDA to overperform even beyond the incremental revenue. Other than that, costs largely came in according to expectations. Compensation costs increased sequentially as expected, predominantly due to annual salary adjustments, but also with hires and increased bonus provisions. Cost of revenue items came in at 25.2% of revenue, which was within the expected range. And all other OPEX pre-adjusted EBITDA came in at 8.6 million, also in line with expectations. Tax cost of 2.8 million was 11% of adjusted EBITDA. In the prior quarter, our tax cost was elevated due to FX impacts on our tax assets. Year-to-date, tax cost as percentage of adjusted EBITDA is 14%, and in line with a more normalized level. Our operating cash flow was 17.4 million in the quarter, representing 65% of adjusted EBITDA. Free cash flow from operations was 13.5 million, or 51% of adjusted EBITDA. This year, annual bonuses were paid in Q2, as opposed to in the first quarter of 2023, representing a quarter-specific headwind. Looking at the first half of 2024 as a whole, our conversion from adjusted EBITDA to operating cash flow stands at 94%. The year-to-date conversion from adjusted EBITDA to free cash flow from operations stands at 42%. However, it would be 79% if netting out the special 19 million investment we made in establishing a proprietary AI cluster in Iceland. As commented earlier, we expect these ratios to stabilize as the year progresses. Towards the end of the quarter, we announced our regular semi-annual dividend of 40 cents per ADS, or 35.4 million in total value. Payment was made in early July consisting of 27.6 million in cash and 7.8 million offset against the remainder of our receivable related to the sale of Starex in 2022, meaning that this receivable is now fully settled. Going forward, dividend payments will be entirely cash-based and fully funded by our growing cash generation. Then, turning to guidance. Following a strong first half of the year that demonstrated the resilience in our growth model, we have added to our comfort on our full-year trajectory and are pleased to raise our guidance today. We now guide full-year revenue of 461 to 467 million, up from our prior guidance of 454 to 465 million, and translating to 17% year-over-year growth at the midpoint. Our trajectory allows us to raise guidance beyond the Q2 overperformance and also narrow the range to reflect a solidified outlook for the second half. We are seeing particular strength in the e-commerce vertical, and we are cautiously optimistic that such benefits may be even more pronounced during the holiday season in the final months of the year. We raised suggested EBITDA guidance to $110 to $113 million for the year, up from our prior guidance of $106 to $110 million, and representing a 24% margin at the midpoint. While Q2 in isolation could indicate an even stronger range for the year, we guide for a more back-loaded marketing spend profile than earlier assumed to ensure we are in position to seize growth opportunities on the back of our new iOS offering and the upcoming releases of Opera 1 and Opera GX. In sum, our updated revenue guidance range now begins above the former midpoint and our updated adjusted EBITDA guidance range now begins at the former high end. While we do guide for the trend to be modest, we are also very pleased to indicate increases in the year-over-year growth rate from quarter to quarter in the second half of the year. For the third quarter, we guide revenue of 119 to 121 million, or 17% year-over-year growth at the midpoint. We got adjusted EBITDA of 27 to 28.5 million, or a 23% margin at the midpoints. That equates to OPEX pre-adjusted EBITDA of 92 million at the midpoints, in which the sequential increase of 9 million is predominantly driven by incremental provisions for marketing spent. We also had just over a percentage point of cost of revenue in items relative to revenue, and expect compensation costs to modestly tick upwards in dollar amounts, though decrease as a percentage of revenue. The total of other OPEX items pre-adjusted EBITDA is expected to trend down versus the second quarter, both in dollars and naturally then relative to revenue. 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 up a bit as percentage of revenue relative to 2023, while compensation costs and other OPEX items tick down, largely offsetting one another, but implying 40 basis points of continued margin expansion at the midpoints, combined with stronger than expected revenue growth. So all in all, we are entering the second half with great momentum and look forward to keeping you posted. With that, I'll turn the call back to the operator for 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. When posing your question, we ask that you pick up your handset for optimal sound quality. Again, to ask a question, please press star one at this time. We'll take our first question from Naveed Khan with the B. Reilly Securities. Please go ahead.

Yeah, great. Thank you. A couple of questions from me. Maybe one for Song. So, Song, you said that maybe, you know, you think that maybe the gatekeeper definition has been applied too narrowly. Maybe can you just give us your thoughts on how you think, you know, regulators should kind of think about applying it and where do you expect to or where do you want to see it go in terms of implementation? And maybe the second question is for Chef Rode. So just on your commentary on this trend you're seeing in e-commerce, maybe just talk about what are the underlying drivers that are kind of contributing to this trend? Thank you.

Sure. I'll comment a bit about that. So, yeah, I think that, you know, more like, I think that's in relation to the DMA, right? So, more like, I think DMA has been helpful, demonstrated to independent players like us, right, where we've got a lot of exploits on particular iOS platforms. But I think, you know, of course, there are some other platforms which is also relevant. And, you know, for instance, I think in this particular case, including Windows, among others, which also does sort of more like a gatekeeper definitions. And then for now, it applies to Windows, but it doesn't really apply to some other default browser there, like Microsoft Edge, which we think is also, you know, by the definition, it actually should apply among others. So yeah, so I think in general, our comment is just more like we are actually working very closely with the EU on this as a European company. And we also have given opinions and ideas of how, you know, how moving forward this is, especially seeing that the audio legislation has actually been very helpful to independent players like us to be able to grow. So we feel that there's definitely opportunity for more actions there. So I think that's what we're trying to refer to. And, yeah, so more like I think there are some separate press releases which we have issued around the matter. And we'll just continue to work closely with EU and with all the related parties to see how we can build on stress and how we can have better opportunity, not only in iOS, which I think is great, but also in broader platforms. Yeah, so I think the general trend is in general quite positive. And we think there are similar things which are happening around the world, not only in EU, which definitely are going to be positive to an independent player like us.

Navid, I'll chime in on the second part of the question on the trend within e-commerce. I would say we have built a sizable user base in high-value markets, and that allows us to create new partnerships where we can drive meaningful traffic. And using our insights, we then have the ability to drive traffic with high purchase intent. So e-commerce has become our biggest vertical and our vertical that is growing the fastest.

Okay, that's helpful. Maybe a quick follow-up, if I may. If I just look at the Western market user base, kind of flattest sequentially, wondering if there is seasonality there or if there's more marketing dollars you could have spent. something getting pushed from Q2 into Q3. Maybe help us understand that. Thank you.

Yeah, I can understand that. Q2 includes the beginning of summer, but I think more importantly, I would say we have continued our strategy. We have even applied it tighter than before. So when we look at our marketing spend, year-over-year and relative to Q1 we have actually reduced the number of users that have come in through our marketing activities but at an increased cost and that is what is driving the year-over-year 8% growth in marketing and sort of the flat trend from Q1 so we are focusing on the very most valuable and RP driving users that we can and And I think that is also a factor in looking at the total user base. As mentioned, we are building in more marketing cost in the second half. We have a product lineup that is essentially tailored for Western and high-value users, and that is what we focus on in the second half of the year. Super helpful.

Thank you, guys.

Thank you. Our next question will come from Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Maybe first building on Naveen's question on the EU but widening out a little bit. You know, when you see this level of shift in the competitive and the regulatory landscapes, how should we be thinking about this informing a almost reprioritization of product or marketing over a longer period of time and how your priorities might be shifting or changing, given what you're seeing in the external landscape and some opportunities opening up. And second, in terms of the ARIA assistant, curious, any feedback on behavior, adoption, things you've learned from the way users have embraced AI in the early days? Thanks so much.

Sure. I'll comment a bit on it. So I think I agree that I think maybe I'll just comment that I think there's perhaps a bigger shifting. So there's definitely regulatory shiftings, which actually in general tends to be forcing more opening up over the platforms. May it be iOS or may it be Windows or may it be iOS, which is definitely beneficial. So that's, of course, indirect is what we are doing now to invest more heavily in those platforms. It's just simply because some of those platforms like iOS are It's too difficult, right? But now it's actually opening up. But I think maybe perhaps a bit more beyond that is that, you know, also you have an issue of AI. There's a whole paradigm shifting that, you know, like previously, you know, because just remember that previously most of those high intent user action dollars are concentrated on, you know, half of it are perhaps on search, half is on something else. It's very isolated. But now because of AI, I think more and more players are Starting to see that those high-intensity user events can be more broad-spread in many other positions, if we're positioned in the right way. If you design the product in the right way, for instance, it can be pre-search, it can be post-search, two-dimensional e-commerce, all of the areas where actually you utilize AI actively. to be able to give you the very valid recommendations using AI. It's very natural. And then we are very happy that advertisers and the whole industry are actually also looking at it and saying that, oh, that's actually very valuable. We are willing to work with Opera on this among others. So I think, to some extent, that potentially is opening up even more than regulatory methods So to us, I think for Opera, our priority has just been, you know, positioning our product to be able to take those advantages. Because at the end of the day, more like we are a relatively small player yet. But the potential is huge, right? Like compared with our market share, you know, for instance, we have a few percent of market share with the browser, but then if you look at some bigger player like Google, like it's $2 trillion company, even 1% of it is $20 billion, right? We're only like $1 billion. So we feel that there's at least 10 times, 20 times potentials we can do if we capture these shifting paradigms, which is actually our focus. But we're very happy that that's actually in line with some regulatory matters as well. There seems to be want to move to the same direction that you know, perhaps they want this thing to be more diversified into more independent companies like us, and I think that's what we feel a bit appreciative. Yeah, so around those. And then I think to your second question, which is a bit related, right? So I think in general, AI, you know, it seems on the public out there, you know, like it seems to be quiet down a little bit because there's no GPT-5 yet, you know, whatever. But then the way we see it is that actually the application of AI have that's been moving almost into day-to-day stuff. more commonly than people perhaps thought. Like, again, as an example, many of those monetization features, we are actually already using AI to be able to help assist, to be able to identify, to give you the right recommendations. And even though some people may not even be aware, that's actually based on Gen AI. So I think, like we saw this, I think, a bit across the industry, that even though maybe there are some pile downs or whatever in the consumer field, the application of this is actually more penetrating and have more impact and all the way up to the revenue. So I think that's what we see, and that's what we're quite excited about.

Thank you.

Thank you. Our next question will come from Lance Vitenza with TD Cowen. Please go ahead.

Hi. Thanks, guys, and congratulations on another strong quarter. Just to start to stick with the AI theme, I'm wondering about, and thank you for all of the detail on what you're doing, where you're focused, and how that's creating value for your publishing partners and your advertising customers as well as your user base, but I'm wondering about the impact these initiatives and the work that you're doing, the impact that might have on your cost structure. Are you finding it more expensive to operate either in absolute dollar terms or as a percent of revenue. And to be clear, I'm really trying to focus here on OPEX, if we can leave the AI cluster in Iceland out of it for now.

Hey, Lance. Yeah, sure.

I'll go ahead, Sam.

Okay, sure. Yeah, I think I'll chime in. Both of them can also add a bit, right? So, like, I think... I actually want to say that I think that's also what we have been very careful about because, of course, you saw so many other companies like, you know, the Magnificent Seven or whatever, they spent trillions of dollars, right, to try to invest in architecture or whatever. So I think for us, we have been quite clear in the start, right? Like, I think we don't want to re-make tools. It's also very hard for us to compete in those, you know, basic fundamental model, language model level, you know, because we, like, there's no point for us as a small company to try and reinvent the wheel. So I think we have been very smart in choosing a possible, you know, like, because the majority of the course is actually training the basic models, making sure it works, right? So while the extra deducting part of it is not that costly, if you have the right infrastructure. So I think our focus is that we don't really do the most heavy lifting in terms of, you know, training the basic models, which is just cost way too much. But then we focus on how to work with partners and even, you know, open source models, which doesn't cost anything, and host it in a very closely effective way, and that's how authentic infrastructure has come into play. by, you know, just by allowing debunking, which is cost a lot less than you want to train it, and then provide that as a very valuable, you know, very valuable service to the users. And then also, when we are asked to provide it to the users, we are optimizing how we can make, you know, monetizable contributions, right? For instance, recommendation of, hey, this perhaps is a product that you want to try. This perhaps is a context of what you might be interested in, click the search links upon. Well, of course, in the end, we actually get paid. So I think so far we have been quite disciplined on those, and the result has been good. There's a very limited impact on the OPEX, and the revenue upside is already demonstrated in our numbers. I think we're part of the same trend. There will probably be more usage in the second half, and then, you know, when the usage is picking up even more, especially when it will not come up more or whatever, but I think net-net, it will definitely be a positive for us.

Great. Thanks. That's really helpful. And then actually turning to Iceland, and I remembered that it was a $19 million investment, but I kind of lost track of exactly when that went live. And I'm just wondering if you could talk about to the extent that that's up and running and been up and running, have you seen that specific investment sort of generating returns for you, so to speak? Is that helping facilitate the work that you have called out that you're doing in AI?

Yeah, so as mentioned earlier, we're quite proud of that setup. It's still a small company, but it's ranked, I think by June, it's ranked as the 88th most powerful supercomputer, which, you know, top 100 in the world, which we are not top 100 company in the world. So quite proud that we actually have that computing power built up. So, yes, it's been operational since Q2, roughly. And then, yeah, so we have been using it, as mentioned earlier, on various fine-tuning tasks, not training the basic models. We don't do that, but we use it very efficiently in the fine-tuning, and we're actually using it also hosting various open-source models where we actually call it the cloud-hosting solutions for those open-source language models and provide it to the end users. So we're actually working on that. I think it's still a bit out of stage just because we haven't operated on it for a few months. But I think by second half of this year, we will see probably even bigger impact of it. And yes, I think it has already been able to generate revenues by all calculations, probably positive. So I think that seems a very good investment. But then, yeah, I think we have actually big hold on this to generate even for the growth in the second half and also into next year.

Great. And then if I could just get one more question in. Regarding any expected impact on search revenue from the Google antitrust ruling, I mean, I'm guessing the earliest that you could see any impact would be 2026 or maybe even 2027. But should investors be girding for some kind of eventual step function down in search revenue? Is that sort of out on the horizon someday?

Yeah, so it's a very good question, right? So, like, I think maybe I'll just say that, like, again, I think Google probably can build up a very simple answer to some of those things, but it's a bit like this, right? So, first of all, my opinion has just been that I think, like, in general, high-level, or, like, maybe from a high-level sense, right? So, at the end of the day, I don't think we care if it's social revenue or whatever revenue. We care that we get paid. And high-level principle, I think that... As far as that everybody seems to be more and more consider that this is a browser traffic, a default position in a browser is very relevant, very important. More important, actually, than most people thought, then I believe we should have a chance to be paid more, right? I don't care what they're called, but we should be paid more. I think that's a general principle. And as I mentioned also a bit earlier, that I think actually the bigger picture, I agree with you, the particular case with Google probably drags on for some time. But I think what we as a company focus on is actually the bigger paradigm shifting, which is, I mean, this is like the whole thing is changing beyond search, right? Because now all the advertisers are talking about pre-search, post-search, high-intensity events, retail medias. Well, everything of those are actually based on browser. So I think we're actually more motivated to, you know, keep tuning our product, keep innovating, keep designing our product to capture, not only search, but also even beyond search and post-search as for totality with the help of AI. That's actually what we see a major increase of e-commerce revenue, as Frida has commented. We actually already see a major increase in Q2, and we're definitely seeing more increase in Q3, and even forward in Q4, which is the hottest season in the year. So that's very fascinating to see. Essentially, you can consider this almost as previously, many of those things go to search by natural, everybody do it. But now, search is fine, but actually they even want to directly go to us and then try to engage directly, which were of course positive. We work with all the partners on those things. I think those are the things really exciting. In the next half a year, one year to come, you'll probably see more activities around this field. on top of salt anyway. And this actually might have bigger impact for totality. So that's what we think of it at this point.

Great. Thanks, guys. Appreciate the answers.

Thank you. Our next question will come from Mark Argento with Lake Street. Please go ahead.

Hey, good morning guys. Uh, just a couple of quick ones. Um, one in terms of the, uh, opera GX browser. I mean, it's just amazing how that continues to grow. I think it was up over, it was a 27% in a quarter. Talk a little bit about that 30, 30 million monthly active users. How many are kind of, you know, Western versus, um, non-Western markets and kind of how do you see that, uh, you know, the longterm opportunity there play out because it just continues to grow kind of beyond our expectations.

Do you want to comment about it?

Yeah, I can do that. In terms of the user base mix, GX is actually quite evenly split between Western and non-Western, but with a substantially better monetization, well, in both categories, and also a narrower gap between non-Western and Western monetization. Still Western is far better monetized than non-Western, but the non-Western user base are relatively more affluent or at least monetizable than what we see in general in the markets. So that is an exposure to Western markets that is somewhat ahead of our Opera 1 flagship and well ahead, naturally, of our user base as a whole, where 17% of our users are Western.

That's helpful. Have you guys sat back and done any work in terms of trying to size that market? I mean, is it multiples the size of what it is today for you guys, or how should we be thinking about the longer term opportunity there?

I mean, for now, we remain very enthusiastic about that product. It still has a lot of headroom, we believe. We have a slide in our corporate presentation that tries to indicate a little bit how we see the market, but we don't have any very defined ultimate end-state ambition. Right now, we just want to continue to cultivate the growth model.

Maybe I'll just add a bit there. So if you look at the combination of a bit younger audience and then with gamers, that overlap is probably talking about the total addressable market is probably like billion people. And then even if we just have a percent of it, size of a percent of it, now React is the only browser there which addresses the market. We feel that the total market addressable is probably 200, 300 million, 200 million. So I think there's at least 10 times potential that we can reach for this audience, and especially when they are growing and they speak with us and then there's more younger audience just coming in, right? So I think, yeah, so in short, I think there's definitely 10 times growth potential that we can address. So like, again, we're very enthusiastic in a lot of actions around it just to, you know, bigger campaigns, ambitions, That's another one of those things.

That's helpful. And then just one quick follow-up on the DMA discussion. Can you just walk us through the actual mechanics? Some, obviously, you guys continue to benefit from that too. But does the user get prompted once a quarter, once a year, or just on the initial, you know, firing up of the device? I'm just trying to better understand how long or the benefit, you know, could persist for you guys. in terms of seeing some incremental uses come from that new law, that new rule?

Yeah, so, yeah, so, you know, I think, okay, so the actual process on iOS, for instance, is an ongoing process. I don't think that's finished. That's still between EU and Apple, for instance. They're still trying to walk around the room with their models, right, like what the best approach is for Apple to actually allow some of the browsers to be, you know, to be actually, you know, functioning well and how should Apple open up, right? So it's not settled yet. It's still in discussions. We're very active in that process. But I think the major contribution is actually out of the people's awareness that, you know, like people feel that, oh, now actually everybody's saying and even officially people are saying that, you should definitely try alternative browsers. They're actually out there. It's actually possible. And it's a bit unlike what Apple said as well, that it's actually completely solid, and even the EU are actually advocating. So I think those impacts in general have largely opened up awareness. And also on top, of course, there will be continued actions. to actually have an actual real impact on top of choice screen, there will be some other requirement to say that, hey, Apple, you should be able to allow browsers to submit their own engine, which is still not allowed at this point, unless you submit some very strange contract, which nobody does. So all of this is going to happen. So Apple poses around it. But as I mentioned, I think the sole user awareness of it, and then also the sponsoring, of, you know, of relevant governments are actually helpful to, you know, have people feel that, okay, now I actually have a choice and I should definitely try it out. And that has been very helpful to our growth still.

Great. Thanks, guys. Good luck checking out.

Thank you. Our next question will come from Alicia Yap with Citi. Please go ahead.

Hi. Good evening, management. Thanks for taking my questions. Congrats on the solid result. Two questions. One is that I saw that Obra News already emerged as the number two app in Brazilian news ecosystem and just wonder how management think about the future business opportunity in LATAM and then with user metrics and advertising monetization opportunity. So do you think LATAM could actually attract relatively higher output per user for your app business compared to other emerging markets. The second question is that can you elaborate a little bit some of the new features of the GX Browser and how do you think that will help and translate to future monetization upside? Thank you.

Sure. Yeah, I think actually LATAM is one of the fastest growing markets for us. I think GX is always very big in LATAM just because the Brazilian users love to play games, so they really embrace GX. But also, like our regular browser, our news app or whatever, are also playing big in LATAM, especially Brazil, but we also see similar in Mexico and a few other countries in the region. So yes, we actually have high hope on the region. We actually have entity there established. We are building up teams, and it will grow faster. So I'm relatively optimistic. I think it will be as influential as some of the other fast-growing emerging markets that we see elsewhere. So quite excited. When it comes to GX, I think we have been, we will actually have some major launches in the second half, like we will have the next generation of GX launching. It's actually already available in the already bought versions, so you can try it. We've completely redesigned the whole UI, the whole user experience, all the modding and customization function, right? So it's actually a major update. in the second half, which we remain very excited. And on top, I think we have also been able to move forward on many services within GX, like GX Store, which provided most download has been super successful. So we are now actually working with some, you know, even hardware vendors and others to be able to run the store and provide you all those services. you know, gaming gadgets and items, which can be quite relevant and exciting. We have also, you know, have GX Gaming for those, which has also been now more and more popular and helpful, which that actually prompts us to work with all those big gaming studios like CD Projekt Red, for the more than potentially will now also have some other potential corporations. So I actually more like where I also have, you know, working with some corporate tier titles, games to come. And I think you'll actually see a lot more announcement in the second half of this year, which will be very exciting for GX.

Thank you.

Thank you. This does conclude our question and answer session. I would like to turn the call back to Song Lin for any additional or closing remarks.

Sure. I think, you know, on behalf of all the management team, thank you all for joining us today. You know, the volatile times, we have been looking forward to coming out and confirming and continue the tracking and continue the excitement for the way ahead. We'll reconnect in just over two months with our Q3 release, and we'll work hard to bring you more good news there. Again, thank you all for your time, and have a good rest of your day.