Opera(OPRA) - 2023 Q1 - Quarterly Report

Executive Summary & Key Highlights Opera achieved record financial results in Q4 and FY2022, driven by strong revenue and user growth, expanded profitability, and strategic AI integration Financial Performance Overview (Q4 & FY2022) Opera reported record financial results for Q4 and Full Year 2022, exceeding guidance with strong revenue growth and significant adjusted EBITDA margin expansion Financial Performance Summary (US$ thousands) | Metric | Q4 2021 (US$ thousands) | Q4 2022 (US$ thousands) | YoY % Change | FY 2021 (US$ thousands) | FY 2022 (US$ thousands) | YoY % Change | | :-------------------------------- | :---------------------- | :---------------------- | :----------- | :---------------------- | :---------------------- | :----------- | | Revenue | 72,626 | 96,272 | 32.6% | 250,991 | 331,037 | 31.9% | | Net income (loss) | (112,390) | 20,922 | n.m. | (43,964) | 15,035 | n.m. | | Adjusted EBITDA | 17,254 | 22,784 | 32.1% | 29,012 | 68,084 | 134.7% | | Adjusted EBITDA Margin | 23.8% | 23.7% | - | 11.6% | 20.6% | +9.0 pp | | Diluted net income (loss) per ADS | (0.97) | 0.22 | n.m. | (0.38) | 0.14 | n.m. | | Diluted adjusted net income (loss) per ADS | (0.92) | 0.27 | n.m. | (0.19) | 0.25 | n.m. | - Co-CEO Song Lin highlighted that Opera outperformed expectations, delivering record revenue with strong profitability and cash generation despite geopolitical and macroeconomic uncertainty[3][4] Business & User Growth Highlights Opera's core search and advertising revenue and user base, particularly for Opera GX in western markets, experienced significant growth driven by increased ARPU and the Opera Ads platform - Core search and advertising revenue grew 34% year-over-year, fueled by ARPU growth and the Opera Ads platform[5] - Opera's average monthly active user base reached 324 million MAUs, with strongest growth in western markets, indicating a successful shift towards higher-value users[5] - The Opera GX gaming browser exceeded 20 million monthly active users across PC and mobile in Q4, an 11% increase from Q3 2022[1][5] - Average Revenue Per User (ARPU) on an annualized basis increased to $1.18 in Q4, up 12% QoQ and 42% YoY[5] Capital Allocation & Shareholder Returns Opera actively returned capital to shareholders through significant share repurchases in 2022 and a special dividend paid in early 2023, while maintaining an ongoing buyback program - Company repurchased 26.7 million ADS equivalents in 2022 at a total cost of $146 million ($5.46 per ADS)[1] - In February 2023, Opera paid a special dividend of $0.80 per ADS, totaling $71 million[1][5] - A $50 million open market buy-back program remains in place, with $32.7 million remaining as of year-end 2022[1][5] Strategic Initiatives & Product Development Opera is strategically expanding its product offerings by integrating AI-generated content (AIGC) services into its browsers and other products, leveraging both internal solutions and partnerships - Opera announced the upcoming integration of AI-generated content (AIGC) services into its PC and mobile browsers in February 2023[5] - The company is expanding its existing AI program into AIGC for its browser, news, and gaming products through its own solutions and new/existing partnerships[5] Business Outlook Opera provides cautious financial guidance for Q1 and Full Year 2023, projecting continued revenue growth and healthy adjusted EBITDA margins despite economic uncertainties Full Year 2023 Guidance Opera provided initial guidance for the full year 2023, projecting revenue growth and a healthy adjusted EBITDA margin, based on cautious expectations reflecting the current economic environment - The company sets cautious expectations, basing guidance on a 15% annual revenue growth at the midpoint, reflecting a prudent view of the 2023 economic environment[7] Full Year 2023 Guidance (Midpoint) | Metric | FY 2023 Guidance (Midpoint) | | :---------------- | :-------------------------- | | Revenue | $370 - $390 million ($380 million midpoint) | | Adjusted EBITDA | $71 - $81 million ($76 million midpoint) | | Adjusted EBITDA Margin | 20% | First Quarter 2023 Guidance For the first quarter of 2023, Opera anticipates continued revenue growth and a strong adjusted EBITDA margin, accounting for typical seasonality in advertising revenue First Quarter 2023 Guidance (Midpoint) | Metric | Q1 2023 Guidance (Midpoint) | | :---------------- | :-------------------------- | | Revenue | $83 - $85 million ($84 million midpoint) | | YoY Growth | 17% | | Adjusted EBITDA | $17 - $19 million ($18 million midpoint) | | Adjusted EBITDA Margin | 21% | - The Q1 guidance reflects greater seasonality as advertising revenue has scaled rapidly[9] Other Updates Opera completed the Nanobank receivable settlement by acquiring OPay shares and adjusted its 2023 guidance to reflect the impact of European sanctions Nanobank Receivable Settlement Opera settled its Nanobank receivable by accepting OPay shares instead of future cash installments, leading to an impairment charge but increasing its stake in the fast-growing OPay - Opera settled its Nanobank receivable by taking immediate full payment in OPay shares, triggered by Nanobank's sale of the majority of its business to OPay[5][10] - The settlement resulted in an impairment of the receivable by $35.9 million to a net fair value of $76.3 million as of year-end 2022[5][12] - Opera's stake in OPay increased from 6.4% to 9.5%, which is classified as 'held for sale', with OPay continuing its strong growth trajectory[5][13] European Sanctions Impact European sanctions related to the conflict in Ukraine have impacted Opera's business, leading to a projected revenue headwind and a cautious outlook for the affected region - The war in Ukraine and subsequent EU/Norway sanctions, particularly the 9th sanctions package in December 2022, have impacted Opera's business[14] - Impacts include shifting FX rates, decline in advertiser interest, and termination of several advertising contracts due to limitations on providing services to Russian entities[14] - Opera has reflected an approximate $10 million headwind related to existing sanctions in its 2023 guidance[14] Fourth Quarter 2022 Consolidated Financial Results Opera's Q4 2022 results show significant revenue growth driven by advertising and PC footprint expansion, improved profitability, and positive adjusted financial metrics despite increased operating expenses Revenue Analysis Opera's total revenue increased significantly in Q4 2022, primarily driven by strong growth in advertising revenue and continued expansion of its PC footprint in western markets - Total revenue increased by 33% year-over-year to $96.3 million in Q4 2022[15] Revenue by Category (US$ thousands) | Revenue Category | Q4 2021 (US$ thousands) | Q4 2022 (US$ thousands) | YoY % Change | | :-------------------------- | :---------------------- | :---------------------- | :----------- | | Search revenue | 34,751 | 39,034 | 12% | | Advertising revenue | 36,666 | 56,753 | 55% | | Technology licensing and other | 1,210 | 485 | -60% | - Search revenue growth was driven by the PC footprint in western markets, especially North America, while advertising revenue benefited from the Opera Ads platform and western PC footprint growth[17] Operating Expenses Operating expenses increased in Q4 2022, mainly due to higher cost of inventory sold and personnel expenses, while marketing and distribution expenses remained stable - Total operating expenses increased by 22% to $84.6 million in Q4 2022[16] Operating Expenses by Category (US$ thousands) | Expense Category | Q4 2021 (US$ thousands) | Q4 2022 (US$ thousands) | YoY % Change | | :-------------------------------------- | :---------------------- | :---------------------- | :----------- | | Combined tech & platform fees, content cost, cost of inventory sold | 5,540 | 19,000 | +243% | | Personnel expenses (incl. share-based) | 17,668 | 21,095 | 19% | | Marketing and distribution expenses | 29,969 | 29,558 | -1% | | Depreciation and amortization | 4,555 | 3,490 | -23% | | Impairment of non-financial assets | 5,624 | 3,194 | -43% | | All other operating expenses | 5,567 | 8,300 | +49% | - Personnel expenses increased due to higher headcount and salary adjustments, while other operating expenses rose due to increased activity levels and credit loss provisions[17] Profitability and Net Income Opera significantly improved its profitability in Q4 2022, moving from a net loss to a net income, driven by increased operating profit and a net finance gain that offset the Nanobank receivable impairment Profitability Metrics (US$ thousands) | Metric | Q4 2021 (US$ thousands) | Q4 2022 (US$ thousands) | YoY % Change | | :---------------- | :---------------------- | :---------------------- | :----------- | | Operating profit | 3,780 | 11,842 | +213% | | Net finance gain | (4,064) | 6,898 | n.m. | | Income tax gain | (2,435) | 681 | n.m. | | Net income (loss) | (112,390) | 20,922 | n.m. | | Net income per ADS | (0.97) | 0.22 | n.m. | - Net finance gain of $6.9 million was primarily due to the appreciation of marketable securities, which more than offset the impairment of the Nanobank receivable[18] - The significant improvement in net income from a loss of $112.4 million in Q4 2021 was largely due to the absence of the $115.5 million Nanobank impairment recorded in the prior year[19] Adjusted Financial Metrics Opera's adjusted financial metrics also showed strong performance in Q4 2022, with adjusted EBITDA increasing and adjusted net income turning positive, reflecting core operational strength Adjusted Financial Metrics (US$ thousands) | Metric | Q4 2021 (US$ thousands) | Q4 2022 (US$ thousands) | YoY % Change | | :---------------------- | :---------------------- | :---------------------- | :----------- | | Adjusted EBITDA | 17,254 | 22,784 | 32.1% | | Adjusted EBITDA Margin | 23.8% | 23.7% | -0.1 pp | | Adjusted net income (loss) | (105,673) | 25,890 | n.m. | | Adjusted net income per ADS | (0.92) | 0.28 | n.m. | About Non-IFRS Financial Measures This section defines and reconciles Opera's non-IFRS financial measures, Adjusted EBITDA and Adjusted Net Income, to provide a clearer view of core operating performance Definitions of Non-IFRS Measures Opera utilizes Adjusted EBITDA and Adjusted Net Income (Loss) as non-IFRS financial measures to provide a clearer view of its core operating performance, excluding certain non-recurring or non-cash items - Adjusted EBITDA is defined as net income (loss) excluding income tax, net finance expense, share of net loss of equity-accounted investees, fair value loss/gain from investments, depreciation and amortization, impairment of assets, share-based remuneration, credit loss expense, non-recurring expenses, less other operating income and profit/loss from discontinued operations[26] - Adjusted net income (loss) is defined as net income (loss) excluding share-based remuneration, amortization of acquired intangible assets, amortization of Nanobank intangible assets, credit loss expense, other non-recurring expenses, and profit/loss from discontinued operations, adjusted for associated tax benefits[27] - These non-IFRS measures are used to understand and evaluate core operating performance and are not intended as substitutes for IFRS financial information[25][28] Reconciliation of Non-IFRS Measures The report provides detailed reconciliations of net income (loss) to Adjusted EBITDA and Adjusted Net Income (Loss) for both the fourth quarter and full year periods, illustrating the adjustments made from IFRS to non-IFRS metrics Reconciliation of Net Income (Loss) to Adjusted EBITDA (US$ thousands) | Item | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net income (loss) | (112,390) | 20,922 | (43,964) | 15,035 | | Add (deduct) adjustments | 129,644 | 1,862 | 72,976 | 53,049 | | Adjusted EBITDA | 17,254 | 22,784 | 29,012 | 68,084 | Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (US$ thousands) | Item | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net Income (loss) | (112,390) | 20,922 | (43,964) | 15,035 | | Add (deduct) adjustments | 6,717 | 4,968 | 21,858 | 12,888 | | Adjusted net income (loss) | (105,673) | 25,890 | (22,106) | 27,923 | Unaudited Consolidated Financial Statements This section presents Opera's unaudited consolidated financial statements, including statements of operations, comprehensive income, financial position, changes in equity, and cash flows for the reported periods Consolidated Statement of Operations The Consolidated Statement of Operations presents Opera's revenues, operating expenses, and net income (loss) for the three and twelve months ended December 31, 2021 and 2022, highlighting the significant shift from a net loss to a net income in 2022 Consolidated Statement of Operations (US$ thousands) | [US$ thousands] | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Revenue | 72,626 | 96,272 | 250,991 | 331,037 | | Total operating expenses | (69,094) | (84,577) | (257,668) | (290,906) | | Operating profit (loss) | 3,780 | 11,842 | (6,211) | 40,600 | | Net income (loss) attributable to owners of the parent | (112,390) | 20,922 | (43,964) | 15,035 | | Diluted earnings per ADS, US$ | (0.98) | 0.22 | (0.38) | 0.14 | Consolidated Statement of Comprehensive Income The Consolidated Statement of Comprehensive Income details the net income (loss) and other comprehensive income (loss) components, such as exchange differences on foreign operations, for the reported periods Consolidated Statement of Comprehensive Income (US$ thousands) | [US$ thousands] | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net income (loss) | (112,390) | 20,922 | (43,964) | 15,035 | | Other comprehensive income (loss) | (211) | 1,679 | (928) | (2,865) | | Total comprehensive income (loss) attributable to owners of the parent | (112,601) | 22,601 | (44,891) | 12,170 | Consolidated Statement of Financial Position The Consolidated Statement of Financial Position provides a snapshot of Opera's assets, liabilities, and equity as of December 31, 2021 and 2022, showing a decrease in total assets and an increase in non-current receivables from sale of investments Consolidated Statement of Financial Position (US$ thousands) | [US$ thousands] | As of Dec 31, 2021 | As of Dec 31, 2022 | | :------------------------------------------ | :----------------- | :----------------- | | Total non-current assets | 551,475 | 624,473 | | Total current assets | 540,986 | 340,213 | | Total assets | 1,092,460 | 964,686 | | Total equity attributable to owners of the parent | 1,013,039 | 888,213 | | Total liabilities | 79,421 | 76,472 | | Total equity and liabilities | 1,092,460 | 964,686 | - Non-current receivables from sale of investments increased from $0 to $76.3 million, reflecting the Nanobank settlement[35] - Cash and cash equivalents decreased from $102.9 million to $52.4 million[35] Consolidated Statement of Changes in Equity The Consolidated Statement of Changes in Equity outlines the movements in Opera's equity components, including net profit, other comprehensive loss, share-based remuneration, and significant treasury share acquisitions Consolidated Statement of Changes in Equity (US$ thousands) | [US$ thousands] | As of Dec 31, 2021 | As of Dec 31, 2022 | | :------------------------------------------ | :----------------- | :----------------- | | Total equity attributable to owners of the parent | 1,013,039 | 888,213 | | Net profit (loss) | (43,964) | 15,035 | | Acquisition of treasury shares | (749) | (146,068) | | Treasury shares (balance) | (60,453) | (206,514) | | Retained earnings (balance) | 249,155 | 273,262 | - The company acquired a substantial amount of treasury shares in 2022, totaling $146.1 million[36] Consolidated Statement of Cash Flows The Consolidated Statement of Cash Flows details the cash generated from operating, investing, and financing activities, showing a significant increase in cash flow from operating activities and a large outflow from financing activities due to treasury share acquisitions Consolidated Statement of Cash Flows (US$ thousands) | [US$ thousands] | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net cash flow from operating activities | 16,473 | 23,542 | 26,564 | 56,662 | | Net cash flow from (used in) investing activities | (1,537) | (4,795) | (49,703) | 44,450 | | Net cash flow used in financing activities | (1,495) | (132,993) | (6,683) | (150,578) | | Net change in cash and cash equivalents | 13,441 | (114,245) | (29,822) | (49,465) | | Cash and cash equivalents at end of period | 102,876 | 52,414 | 102,876 | 52,414 | - Cash flow from operating activities more than doubled year-over-year for the full year 2022, reaching $56.7 million[37] - The substantial net cash outflow from financing activities in Q4 and FY 2022 was primarily driven by the acquisition of treasury shares[37] Supplemental Financial Details This section provides supplemental financial details, including revenue and expenses by business area, and a breakdown of personnel and other operating expenses Financial Details by Business Area Opera provides a breakdown of revenue and direct expenses by its 'Browser and News' and 'Other' business areas, demonstrating that the 'Browser and News' segment is the primary driver of revenue and contribution Q4 2022 Revenue by Business Area (US$ thousands) | Revenue Category | Browser and News | Other | Total | | :-------------------------- | :--------------- | :---- | :---- | | Search | 39,034 | - | 39,034 | | Advertising | 56,746 | 7 | 56,753 | | Technology licensing and other | 15 | 470 | 485 | | Total revenue | 95,795 | 477 | 96,272 | FY 2022 Revenue by Business Area (US$ thousands) | Revenue Category | Browser and News | Other | Total | | :-------------------------- | :--------------- | :---- | :---- | | Search | 140,162 | - | 140,162 | | Advertising | 187,405 | 29 | 187,434 | | Technology licensing and other | 789 | 2,652 | 3,441 | | Total revenue | 328,356 | 2,681 | 331,037 | - The 'Browser and News' segment generated $46.4 million in contribution in Q4 2022, compared to $0.36 million from 'Other'[39] Personnel Expenses Including Share-based Remuneration This section details Opera's personnel expenses, including both cash-based compensation and share-based remuneration, showing an increase in total personnel costs in Q4 2022 Personnel Expenses (US$ thousands) | [US$ thousands] | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Personnel expenses, excluding share-based remuneration | 14,125 | 16,999 | 63,984 | 65,284 | | Share-based remuneration, including related social security costs | 3,543 | 4,096 | 10,466 | 9,304 | | Total personnel expenses including share-based remuneration | 17,668 | 21,095 | 74,450 | 74,588 | - Cash-based compensation increased by 20% year-over-year in Q4 2022, mainly due to increased headcount and salary adjustments[17] Other Operating Expenses The breakdown of other operating expenses reveals increases across several categories in Q4 and FY 2022, particularly in hosting and audit/legal services Other Operating Expenses (US$ thousands) | [US$ thousands] | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Hosting | 1,933 | 2,398 | 7,647 | 9,267 | | Audit, legal and other advisory services | 1,351 | 1,468 | 6,579 | 6,857 | | Software license fees | 451 | 608 | 1,782 | 2,149 | | Rent and other office expense | 786 | 1,078 | 3,152 | 3,743 | | Travel | 223 | 446 | 542 | 1,496 | | Other | 822 | 1,004 | 3,101 | 3,193 | | Total other operating expenses | 5,567 | 7,002 | 22,802 | 26,705 | - Total other operating expenses increased by 44% year-over-year in Q4 2022, driven by increased activity levels and cautious credit loss provisions[17] Corporate Information This section provides essential corporate information about Opera, including its profile, a safe harbor statement for forward-looking information, and investor relations contacts About Opera Opera is a global web innovator known for its browsers, gaming, Web3, and news products, serving hundreds of millions of users worldwide and listed on Nasdaq - Opera is a global web innovator, headquartered in Oslo, Norway, and listed on the Nasdaq stock market (OPRA)[30] - Its product portfolio includes browsers, gaming, Web3, and news products, trusted by hundreds of millions of users globally[30] Safe Harbor Statement This section serves as a disclaimer for forward-looking statements made in the press release, highlighting inherent risks and uncertainties that could cause actual results to differ materially from projections - The press release contains forward-looking statements under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[29] - These statements involve known and unknown risks and uncertainties, including those related to the conflict in Ukraine, regulatory processes, product development, user growth, and global macroeconomic conditions[29] - Investors are cautioned that actual results may differ materially from anticipated results, and the company undertakes no obligation to update forward-looking statements except as required by law[29] Investor Relations Contact Contact information for investor relations and media inquiries is provided for stakeholders seeking further information about Opera - Investor Relations Contact: Matthew Wolfson, investor-relations@opera.com[32] - Media inquiries can be directed to press-team@opera.com[32]