Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Opera Ltd (OPRA, Financial) reported second-quarter revenue of $110 million, a 17% year-over-year increase, surpassing expectations.
- Adjusted EBITDA for the quarter was $27 million, translating to a 24% margin, also exceeding guidance.
- Advertising revenue grew by 20% year-over-year to $65 million, driven by high-ARPU user growth and expanding monetization opportunities.
- Opera GX, the gaming browser, saw a 27% year-over-year user growth, reaching over 30 million monthly active users.
- The company raised its full-year revenue guidance to $461 million to $467 million, reflecting strong performance and a solidified outlook for the second half of the year.
Negative Points
- Foreign exchange (FX) headwinds impacted year-over-year growth, which would have been 25% on a constant currency basis.
- Marketing costs are expected to increase in the second half of the year, potentially impacting margins.
- The Western market user base remained flat sequentially, indicating potential seasonality or insufficient marketing spend.
- The company faces ongoing regulatory challenges, particularly with the Digital Markets Act (DMA) and its implications for default browser settings.
- There is uncertainty regarding the long-term impact of the Google antitrust ruling on search revenue, which could affect future financial performance.
Q & A Highlights
Q: Song, you mentioned that the gatekeeper definition might be applied too narrowly. Can you elaborate on how you think regulators should approach this and what changes you would like to see?
A: Sure. The Digital Markets Act (DMA) has been beneficial for independent players like us, especially on iOS platforms. However, we believe it should also apply to other platforms like Windows, where default browsers like Microsoft Edge should be included. We are actively working with the EU to ensure broader application of these principles, which would help independent companies like Opera grow.
Q: Frode, you mentioned a trend in e-commerce. Can you elaborate on the underlying drivers contributing to this trend?
A: Certainly. We've built a sizable user base in high-value markets, allowing us to create new partnerships and drive meaningful traffic with high purchase intent. E-commerce has become our fastest-growing vertical, driven by our ability to target high-ARPU users effectively.
Q: The Western market user base was flat sequentially. Is there seasonality, or were marketing dollars pushed from Q2 to Q3?
A: Q2 includes the beginning of summer, which has some seasonality. More importantly, we've tightened our focus on acquiring high-ARPU users, even if it means fewer users overall. We plan to increase marketing spend in the second half to capitalize on our new product lineup tailored for high-value users.
Q: How do shifts in the competitive and regulatory landscapes affect your long-term product and marketing priorities?
A: Regulatory shifts are opening up platforms like iOS, making it easier for us to compete. Additionally, AI is changing the landscape by enabling high-intent user actions beyond traditional search. We are focusing on integrating AI to capture these opportunities, which aligns with regulatory trends favoring independent companies.
Q: What impact do your AI initiatives have on your cost structure, excluding the AI cluster in Iceland?
A: We've been careful to avoid the high costs associated with training basic AI models. Instead, we focus on fine-tuning and hosting open-source models, which is cost-effective. This approach has limited impact on our OpEx while already contributing to revenue growth.
Q: Is the $19 million investment in the AI cluster in Iceland generating returns?
A: Yes, the AI cluster has been operational since Q2 and is already generating revenue. We use it for fine-tuning and hosting open-source models, and we expect even greater returns in the second half of the year.
Q: Should investors expect a step function down in search revenue due to the Google antitrust ruling?
A: While the Google case may take time, we are more focused on the broader paradigm shift enabled by AI. This shift allows us to capture high-intent user actions beyond search, which is already contributing to our e-commerce revenue growth.
Q: Can you provide more details on the growth and potential of the Opera GX browser?
A: Opera GX has a balanced user base between Western and non-Western markets, with strong monetization in both. We see significant growth potential, possibly reaching 200-300 million users, especially as we continue to innovate and expand our offerings.
Q: How does the DMA impact user adoption and awareness for Opera?
A: The DMA has increased awareness and user adoption by promoting alternative browsers. While the regulatory process is ongoing, the increased awareness alone has been beneficial for our growth.
Q: What are the new features of the GX browser, and how will they impact future monetization?
A: The next generation of GX will include a completely redesigned UI and enhanced customization features. We are also expanding our GX Store and collaborating with major gaming studios, which will drive further user engagement and monetization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
