Opera(OPRA) - 2023 Q2 - Quarterly Report

Q1 2023 Performance Overview Opera reported strong Q1 2023 results, exceeding guidance with significant revenue and Adjusted EBITDA growth, alongside strategic advancements in AI and user engagement Financial Highlights Opera reported strong Q1 2023 financial results, exceeding guidance with revenue growth of 21.6% to $87.1 million, a shift to $15.5 million net income, and a 195.8% surge in Adjusted EBITDA to $21.7 million | Financial Metric | Q1 2022 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $71,583K | $87,051K | +21.6% | | Net Income (Loss) | ($9,436K) | $15,478K | n.m. | | Adjusted EBITDA | $7,349K | $21,738K | +195.8% | | Adjusted EBITDA Margin | 10.3% | 25.0% | +14.7 p.p. | | Diluted Net Income per ADS | ($0.08) | $0.17 | n.m. | | Free Cash Flow | $11,510K | $23,318K | +102.6% | - This marks the ninth consecutive quarter of over 20% revenue growth for the company[1] - The strong profitability was attributed to revenue outperformance combined with lower-than-anticipated marketing spend[3] Business & Strategic Highlights Opera's Q1 2023 business highlights include significant advertising revenue growth, integration of generative AI, expansion of the Opera GX gaming browser user base, and execution of capital return initiatives - Opera introduced its first generative AI features, including an AI assistant, directly into its browsers to enhance user retention and engagement[1][4][10] - Monthly active users (MAUs) were 319 million, down from Q4 due to reduced marketing in lower monetizing markets, however, annualized average revenue per user (ARPU) increased by 30% YoY to $1.08[10] - The Opera GX gaming browser's user base grew by 7% QoQ to over 21.7 million monthly active users[10] - The company distributed a special dividend of $0.80 per ADS ($71 million total) and repurchased $2.5 million worth of ADSs during the quarter[10] Business Outlook Opera has raised its full-year 2023 guidance for revenue and Adjusted EBITDA, reflecting confidence in continued performance Full Year 2023 and Q2 2023 Guidance Opera raised its full-year 2023 guidance, projecting revenue between $373 million and $390 million and Adjusted EBITDA between $77 million and $83 million, with Q2 2023 revenue expected at $92 million to $94 million | Guidance | Full Year 2023 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $373M - $390M | $92M - $94M | | Adjusted EBITDA | $77M - $83M | $18M - $20M | | Adj. EBITDA Margin (Midpoint) | 21% | 20% | - The company raised the low end of its revenue guidance and both ends of its adjusted EBITDA guidance for the full year 2023[7][8] Detailed Financial Results (Q1 2023) A detailed review of Q1 2023 financial performance reveals significant revenue growth, controlled operating expenses, and substantial improvements in profitability and cash flow Revenue Analysis Total revenue for Q1 2023 increased by 22% YoY to $87.1 million, driven by 26% growth in advertising revenue and 18% growth in search revenue | Revenue Stream | Q1 2023 Amount | YoY Growth | Key Driver | | :--- | :--- | :--- | :--- | | Advertising | $48.5M | +26% | Opera Ads platform and PC footprint growth | | Search | $37.8M | +18% | PC footprint growth in Western markets | | Total Revenue | $87.1M | +22% | | Operating Expenses Analysis Total operating expenses increased modestly by 4% YoY to $73.2 million, with a notable 29% decrease in marketing and distribution expenses to $24.4 million - Total operating expenses increased by 4% year-over-year to $73.2 million[13] - Marketing and distribution expenses decreased significantly by 29% to $24.4 million[20] - Personnel expenses were $20.1 million, with cash-based compensation up 7% YoY to $15.5 million and share-based remuneration at $4.5 million[20] Profitability and Cash Flow Opera's Q1 2023 profitability dramatically improved, with operating profit surging to $14.0 million, net income reaching $15.5 million, Adjusted EBITDA at $21.7 million, and strong free cash flow of $23.3 million | Profitability Metric | Q1 2022 | Q1 2023 | | :--- | :--- | :--- | | Operating Profit | $1.3M | $14.0M | | Net Income (Loss) | ($9.4M) | $15.5M | | Adjusted EBITDA | $7.3M | $21.7M | | Free Cash Flow | $11.5M | $23.3M | - Net income per ADS was $0.17 for the quarter[17] Unaudited Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including the statement of operations, financial position, and cash flows for Q1 2023 Consolidated Statement of Operations The consolidated statement of operations highlights Q1 2023 revenue of $87.1 million, a surge in operating profit to $14.0 million, and a net income of $15.5 million, reversing a prior-year net loss | Line Item (US$ thousands) | Q1 2022 | Q1 2023 | | :--- | :--- | :--- | | Revenue | 71,583 | 87,051 | | Total operating expenses | (70,413) | (73,230) | | Operating profit | 1,342 | 13,950 | | Profit (loss) before income taxes | (8,828) | 18,747 | | Net income (loss) | (9,436) | 15,478 | | Diluted earnings per ADS, US$ | (0.08) | 0.17 | Consolidated Statement of Financial Position As of March 31, 2023, Opera's balance sheet shows total assets of $911.6 million, total liabilities of $78.1 million, and total equity of $833.5 million, with notable changes in assets held for sale and cash | Balance Sheet Item (US$ thousands) | Dec 31, 2022 | Mar 31, 2023 | | :--- | :--- | :--- | | Total Assets | 964,686 | 911,550 | | Cash and cash equivalents | 52,414 | 84,843 | | Assets held for sale | 86,100 | 163,462 | | Total Liabilities | 76,472 | 78,095 | | Total Equity | 888,213 | 833,455 | Consolidated Statement of Cash Flows For Q1 2023, net cash flow from operating activities was $25.7 million, investing activities provided $22.6 million, and financing activities used $15.9 million, leading to a net increase in cash of $32.4 million | Cash Flow Activity (US$ thousands) | Q1 2022 | Q1 2023 | | :--- | :--- | :--- | | Net cash flow from operating activities | 13,464 | 25,727 | | Net cash flow from investing activities | 5,841 | 22,583 | | Net cash flow used in financing activities | (4,199) | (15,905) | | Net change in cash and cash equivalents | 15,108 | 32,405 | | Cash and cash equivalents at end of period | 117,786 | 84,843 | Supplemental Information This section provides supplemental information, including reconciliations of non-IFRS financial measures and other corporate details Non-IFRS Financial Measures and Reconciliations Opera utilizes non-IFRS measures like Adjusted EBITDA and Free Cash Flow, with Q1 2023 Adjusted EBITDA at $21.7 million and free cash flow at $23.3 million, reconciled from IFRS results - Adjusted EBITDA is defined as net income excluding items like taxes, net finance expense, depreciation & amortization, and share-based remuneration[25] - Free cash flow from operations is defined as net cash flows from operating activities less purchases of fixed/intangible assets, development expenditure, and lease liability payments[26] | Reconciliation to Adjusted EBITDA (US$ thousands) | Q1 2023 | | :--- | :--- | | Net income | 15,478 | | Add: Income tax expense | 3,269 | | Deduct: Net finance income | (4,797) | | Add: Depreciation and amortization | 3,380 | | Add: Share-based remuneration | 4,537 | | Adjusted EBITDA | 21,738 | Other Information This section includes details for the Q1 2023 results conference call, a Safe Harbor statement for forward-looking information, and a brief corporate profile of Opera - A conference call to discuss the financial results was scheduled for April 27th at 8:00 am Eastern Time[21] - The press release includes a Safe Harbor statement, cautioning that forward-looking statements are subject to risks and uncertainties[27] - Opera is a global web innovator headquartered in Oslo, Norway, and is listed on the Nasdaq under the ticker symbol "OPRA"[28]