Everyone, thanks for coming to this section. So this is company Opera. And then with me today, we have CFO of Opera, Mr. Frode Jacobsen, and then also IR, Matthew Wolfson.
Hello.
I'm Alicia Yap. I'm the analyst of Opera. I'm actually head of Pan-Asia Internet Research, based in Hong Kong. So I cover mostly some of the Chinese internet names and also Southeast Asia internet names as well. So thank you all. So without delay, let's maybe get started. I think many of us actually in the audience are actually not very familiar with the company. So maybe if you can, you know, help us, you know, to get started. You know, it's been you know, Opera has been around for quite some time, right? And you know, if you can give a little bit brief history and also your product portfolio and also what is the monetization model of the company?
Yeah, sure. Hey, by the way, nice to be here. I'm based in Norway, so where we have the group headquarters, but I can get back more to the geographies.
Mm.
It's many of you, or maybe your geeky friends will know Opera because we have been around as a company for 30 years, as a Norwegian company started to make web browsers. Then it's always about making browsers that stand out enough from, like, the Chrome and Safari, and Edges of the world, that people care enough that they, "Okay, I'll download that, and I'll use that instead of whatever came with the phone or computer." So that's what we do. We, we believe we make it a better web browsing experience for the people that, that download us and, and use our apps for it. So that's what the company is. We also have some content apps, and we have some balance sheet values, but that's the main part.
Headquartered in Norway, as I mentioned, we make our browsers in Europe, in Poland, Sweden, U.K. as key, key locations. We also have a Chinese office, R&D center, more around ad tech and content products.
Mm-hmm.
How we make money is to drive traffic to partners. So search is, 40% some of our total revenue, is mainly Google driving search queries and collecting a revenue share. But we also promote other partners that we call advertising revenue, whether it's, bookmarks, to promote partners and collect rev share or show ads, normal native ads in content to monetize that way.
Mm-hmm. Okay, and then, so maybe if you can drill down a little bit. I know that the two main ad revenue, one is the search, and then one is the advertising, right? So then, you know, within that, you know, what is the split of that? Mm-hmm.
I mean, search is predominantly driven by Google since they are the biggest sort of global. We, we have a very global footprint. We have close to 320 million monthly active users. I actually should have said that in the introduction because it's not that many European consumer internet companies that have that kind of user base, so bigger than maybe you would think. And on the advertising side, it's, let's say, three components, and they're all of equal order of magnitude.
Mm
... whether it's integrating bookmarks, showing ads, and also using our ad platform and the targeting benefits we have as a browser to let also other third-party apps monetize through what we call Opera Ads, that they connect other apps to.
Mm-hmm. And then I think, the search is mainly a lot of that is actually in Europe, right? But I think the news, which is the Opera app, I think this is in other regions. So if you can elaborate a little bit in terms of geographic footprint-
Yeah
... of your app portfolio.
Yeah. So of our 320 million MAUs, starting with that, about 15% of our user base is in, Western markets, in the most strict definition of it. So it's, let's say, the EU countries in Europe and that Western Europe region, and North America. So there we have 15% of our base, and then the other 85% is then, you know, emerging markets with Africa, Asia, LATAM, Eastern Europe, et cetera.
Mm-hmm.
We have, for the past years, made products that are very tailored for the Western user bases. We have had an explicit strategy to grow our footprint in the West, so it's still only 15% of our total user base, but four years ago, it was 8% of our total user base. So that, and that shift has been very key in the tripling of ARPU that we have had over the past few years. So it's been a rewarding strategy, I would say. Because on average, we say it's about six times higher ARPU in the average Western country compared to the average emerging country. So even if it's only 15% of the total user base, it represents about half of total revenue.
Okay.
Yeah.
... I see. And I guess, you know, the last few quarters, you guys have been delivering pretty good results, right? I think despite there are some macro headwinds, you know, ups and down, but seems like your ad revenue is actually pretty consistent. Okay, so how is that—what are the main reasons behind, and, you know, you're able to sustain some of the macro headwinds?
Yeah, I think benefit of being, I mean, we are still a relatively small company for close to $400 million of revenue this year, just over 20% EBITDA margin. But we have a good combination, I would say, of growth and profitability. And I think, being small is sometimes also a benefit because we have more maneuvering ability. So, yes, there are macroeconomic headwinds, both in terms of advertiser demand, but also currency, since we are such a global company, have such a global business, and then the dollar is strengthening. So, you know, expressed in dollars, that's also a headwind. But I think what has allowed us to still have a good trajectory is that—you know, U.S. is our fastest growing country, so we grow in these high-value regions.
We still, you know, our product portfolio, we like to think it's never been better, but it—I would encourage you to give it a try, so you get a feel of what, what we talk about. But they have been attracting users that spend more and more time in the browser and have more and more activity, so then we can monetize better.
Mm-hmm. Mm-hmm. And I think, you know, talking about U.S., which is one or two sideway to, I think is, Opera GX browser, your game browser.
Mm-hmm.
That is something that actually gets you a pretty fast growth driver, and then also a much higher ARPU, right?
Mm-hmm.
So can you elaborate a little bit, you know, the background, like how you get into the game browser, and then will that kind of, like, growth is actually will be sustainable? Yeah.
Yeah, because when we talk about growing high-value users, there's the geographic perspective, like Western Europe, North America, but then there's also segments. And it was quite new, a new thing we did some years back where we said, "Okay, we always develop browsers, and we talk about the functionality and features, and then for anyone who may be interested." But then we have a lot of gamers also amongst our, in our product teams, and they were saying that there's nobody really has made a web browser for PC gamers, which is a big part of the whole sort of daily routine. And then what we did then was to make a browser that had some specific features that are tailor-made for gamers, integrations, and also, but also the look and feel of it, like the color and the way it behaves on...
So it fits with the...
Mm.
If you imagine those, like, black and red setups with keyboards, with all the lights, and, like, the whole thing is, like, gamer setup, and then you don't want, like, some sharp-
Mm-hmm
... Chrome or Edge. You know, you want the browser to look like it fits. So that scaled from nothing to be about 24 million users in Q2. By far, our highest ARPU product we have.
Mm-hmm.
Best retention, best engagement metrics. Even though it's still quite early days in how we monetize it has, like, nearly 3x the ARPU of the group as a whole, on average. And I think you asked what we think about that going forward, and I think it's still kind of only 24 million users, and the TAM is in the hundreds of millions. So we keep building that, building awareness around that product, I would say.
So your 24 million is part of that 320 million, right?
Yeah.
That is completely a subset of that.
Yes.
Okay. And then, I think, you know, on the background of it, is that, how many years ago was that? There was also a small acquisition that you did also kind of like, you know, kind of strengthen your game, browser exposure as well, right?
Yeah, there, some rendering engine to make kind of simple gaming-
Mm
... effects. It was a small U.K. company that we acquired. They had almost no revenue. We made their product free.
Mm-hmm.
So it's more, I would say it was an acquisition not of revenue, but just of, let's say, a feature set-
Mm
... that we take advantage of within the whole gaming ecosystem.
Mm-hmm. And then since then, actually, then you do more aggressive on growing the user, right?
Yes.
The last two years actually is a very fast growth.
Yes
... of the game browser.
Yeah.
Okay. All right. Okay. And then, when you mention because of 24 million versus what you have on 320 million, and, you know, given this is like 3x higher on the ARPU, and if this is actually sustainable, so does that mean this will be one of the fastest growth driver, in the next—at least in the probably near term, like the next, you know, 12 months or so, 12, 24 months?
I think it's been a super successful segment for us.
Mm-hmm.
What's holding it back is not people not liking the product, because it does rate very highly.
Mm-hmm.
So it's more about building the awareness of it.
Mm.
So we do a lot of branding, ecosystem type of materials. You guys can have a look at YouTube and search for us, and you can see some of it, stuff that's out already. But yeah.
Would you characterize some of the sales and marketing spend over the past, like, you know, one and 1.5 years? Some of that is actually used to drive the user awareness and the branding-
Yes.
-campaign.
Yeah.
Okay, and that's actually seems like you also committed to continue, right, in terms of the sales and marketing spend?
Well, we find it a very effective way to-
Mm.
Because the net result of investing in the brand and awareness is that when we look at our inflow of new users, new installs, three-quarters are organic. So that because that brand has been in the market for 30 years, and then we build a lot of awareness around the newest products that we have-
Mm-hmm
... to keep adopting that. But I would say our product lineup as a whole is very made for driving more ARPU headroom. The newer products we have out, we see we get better and better at increasing time spent, and engagement, and activity-
Mm.
within the apps. So they are performing quite well.
Mm-hmm. Okay. Any more details about the user profile on the GX browser that you can share?
Um, younger.
Mm.
Still more male than female.
Okay. Uh-
Use desktop.
Desktop, yes.
So that 24 million users on GX, roughly 20 million-
Is-
-are desktop-
Okay.
-with 4 million mobile, versus our entire, of the 300 million users, it's roughly 75 million that are desktop, with the balance being mobile. So it's kind of like the inverse on GX-
Mm.
-versus our total portfolio.
Mm-hmm. I see.
Yeah.
Okay, that's very helpful. I think, you know, before we drill more on the ads, I think the other thing that you guys recently announced is the cooperation with Google and also your own Aria, right?
Mm-hmm.
Which is on the AI browser. So can you also talk a little bit more about that? Because it seems like you are one of the earlier, you know, browser to really announce that you have a partnership, and then doing something on the generative AI front.
Yeah. I think, for us, browser geeks, 2023 has been an exciting year because there is so much stuff-
Mm
... happening, and with these AI tools or content generation tools. So we very early entered a partnership with OpenAI for ChatGPT. We work with Google and their relevant teams. Essentially what we want to do, because we believe that these tools will become more and more useful, let's say, companions for people as they browse the web. Then the opportunity we have is that we are not locked within any of those major ecosystems.
Mm.
So, for example, when you're on Microsoft, you kind of have to work with OpenAI only-ish, and Google really can't do that. They have their own, et cetera. So our benefit is that we can integrate with all of them, and then our pitch almost to the users that want to try us is, you download Opera, you can sort of use these integrations across the most popular services to create hopefully an experience that's better not doing it via Opera. And the reason why that is even possible to think-
Mm
... is if you go to, like, ChatGPT and ask them, like, "What's going on this weekend," right? That's a website, so it doesn't really know who you are, where you are. ChatGPT, today, many of these language models don't have current information. They're trained on historic text, right? So it lacks the context. But when you are the browser, first of all, you can have these chats in a window next to your browsing, so you can integrate at the same time. And then on the back end, when a user puts in a query, we could say, "Well, you know, this is most likely a female, seems to live in Hong Kong, when she's asking about what's happening this week. And here's some..." We check through Google integrations what is going on in Hong Kong this weekend.
Mm.
And then, so the language model gets, "Answer the question," which is all you typed in, "taking into account that this, this, this, and this.
Mm.
And then, in theory, then you get a better answer.
Mm, I see. So it's more like a combination of the original search, plus-
Yes
... GPT-like answer.
Yes. Mm, yeah.
Okay.
That answer can actually have both the GPT answer with relevant web links from the search results into that answer.
Okay.
It's not just the answer that ChatGPT wants to give, but with the additional context of Google Search results.
Mm-hmm. Would you say some of that links is the original sponsor link from the search, it, that will appear on the answer?
Yeah, when it fits.
Mm.
That's the plan. We don't really so if we... Because it's probably then moving to monetization at some-
Yeah
... stage, right? And I think these types of services, we are very excited about it, not just because of the technical things it enables, but also because it means more normal people will have some interest in their browser. Like, if these tools become talked about, that's pretty good, then, so it helps us get new users. So I would say, for us, in terms of revenue impact, the step one is just when we have more users come in that spend more time in the product, then the existing monetization-... works very well-
Mm-hmm.
with existing advertising and search, and then I think it's almost like a new layer that, where we are still very early in the game, in where you can integrate partners and drive traffic to partners as part of the AI dialogue.
Mm-hmm. And I think you, after, not long after you released the product, you also announced, is it 1 million user that is on, the Aria? Right.
Yeah.
Okay.
Because, I mean, what we do is we turn it on, and then we let the existing user base update, and we don't push it very hard. But then, of course, that number quickly goes up-
Yeah
... as more and more people-
Mm-hmm
Update to the latest.
Do we have the latest number, like beyond the one-
We haven't disclosed it, so then I'll be careful to not say it.
Sure.
But no, we feel very encouraged by-
Mm
... that whole trend and what it means to us, essentially.
Mm. I see. I see. And you did mention it is still very early in terms of actual monetization, right? So is it something that you guys are thinking that potentially it could further enhance some of the ad dollars that you can generate, or is that like additional monetization model that you are thinking behind your mind?
I think as a step one, it just plays right into the existing monetization setup that we already have.
Mm.
So the more users we get, and the more time they spend in our apps, the more likely they are to do activities that generate revenue for us. So that one is there from the beginning.
Mm.
That one is always there. But then in terms of seizing new opportunities, like other ways to work with partners and drive traffic to partners and so on, that is not where our focus is yet.
Mm.
But yeah, I think that could be, let's say, a new revenue category over time.
Mm-hmm. I see. Maybe, before I go on, I wanted to pause a little bit to see if the audience, any audience wanted to ask a question, like follow up on some of, you know, the features that they're doing on the AI with the browser. Yeah, okay. So maybe we can continue, okay-
Okay
... a little bit. I guess, you know, maybe to help the audience also understand a little bit better, your industry vertical exposure in terms of the advertiser-
Mm.
industry vertical, what are some of the common, you know, kind of advertiser,
Right
... and then also, the ads formats, right? Because I think, not, not on the search, I mean, on the Opera side-
Mm.
Right, the news app. What type of... For example, is it like the pop-up, you know, screen ads, or is it more the banner ads? Like, what type of format that is actually generate most of the revenue on the news app side?
I think it's nothing too special on these things in terms of the verticals. I'm sure it's the same verticals that every other sort of inventory owner would see-
Mm
... but from, you know, e-commerce, travel, retail, sports, media, like, media platforms, subscription platforms, advertising. In terms of the formats, I think in the content it's, it's just, you know, you scroll, and every so often you see an ad in there, just like,
So the feeds-
Yeah, in the feed
The feed space more, right?
The feed, yeah.
The feed space.
Okay.
And then in the browser itself, we also have advertising, native advertising from what we call our Speed Dials, which are pre-installed bookmarks that come preloaded. So when you were to install that app on your mobile or desktop device, when you'd open up that launch page, there might be six, depending on the size of the real estate and where you are, six to eight kind of links to websites that we think are... And we've partnered with companies that we think are very useful to the user, so they don't even view them as ads. It might be a Netflix, an Amazon, a Booking.com, where to the user, they're like, "Oh, that's Netflix there. That's, that's really helpful." But from our perspective, that's an ad, so it's a pre-installed bookmark. We call those Speed Dials, and that's part of the advertising piece of the browser.
Mm. How big is that pre-installed bookmark thing?
Uh, uh-
In terms of contribution, it's a smaller part, right? The feed base is the largest.
They're all in the same order of magnitude, I would say.
Okay.
Yeah.
All right. All right. And I think you mentioned earlier in terms of your EBITDA margins is about 20%, and it actually seems to be quite consistent. So just wondering, is there any room for the upside on the EBITDA margin, especially over time, when we have, you know, additional revenue or efficiency coming out from the generative AI?
Yeah. Oh, I think our P&L is pretty simple and straightforward. It's very economies of scale type-
Mm
... of business, but we, our biggest cost items are marketing. We spend about 30% of our revenue on marketing, and then, and then it's down to less than half of that, which is the next one, which would maybe be salary cost, et cetera.
Mm.
But that doesn't scale so much with our size. So I think this year we've guided to 21% EBITDA margin, something like that, and we also have good cash flow conversion from EBITDA to free cash flow. We could always, it's an ongoing choice between how much do we wanna invest in marketing our products and accelerating, like awareness and adoption versus near-term profitability dollars, right? So we've been navigating it. We're trying to grow revenue just over 20%, trying to margin just over 20%. But of course, it's very discretionary.
Mm.
when 30% of, or when marketing costs represent 30% of our revenue, and you can just turn it on and off on very short notice, right?
Mm.
So-
I see. So that means, like, if in some quarters that you don't spend some of that marketing dollars, then it is that leverage that you can grow?
Yeah, it translates. Because but of course, we like to spend, like we, we've been spending relatively, a relatively stable amount over the past years in various marketing activities. We do that. We try to spend more second half this year than we did first-
Mm.
- because it just puts us on a good trajectory, you know, for—you know, it doesn't maybe impact the revenue in the quarter that you spend so much-
Mm.
- but it stages you, you know, when we're still small, and then we still have potential to accelerate the growth through awareness.
Can you remind us in terms of the ad dollar spend, is it more to drive the traffic, right? Which is, could be related to, let's say, some of the app store, you know, installations and also, potentially some branding ad campaign as well.
Yeah. The single biggest cost item is just normal online ads, "Click here to download," because that is so expensive on a per new user basis. But it only represents about 10% of our new users who come in that way, so that we use quite opportunistically. Then we work with OEMs for another 15% of new installs, so it's-
Mm
... quite predictable, predictable, stable, cost-effective method of distribution. And then 75% of our new installs are organic, so that comes from the work with influencers and productions and raising awareness around Opera. So I think that it's a quite healthy mix of inflow, given that organic is such a big part of it, but we do invest in the awareness of the brand-
Mm
to be in that position.
I see. I see. So, in that case, because your GX browser is a lot of it is from the PC, right? So then that doesn't apply in terms of some of the ad dollars. So then when you wanted to promote your GX browser, is it mostly you do more the campaign, like the brand awareness?
It's been a lot of campaign, a lot of gaming influencers, YouTubers to talk about it. We connect with them. It's good because they are quite connected in that space.
Mm-hmm.
So, so they say, "Yeah, I already use your browser." Okay, so then we can, you know, pay them a little bit to talk about it, or create something together, some content or-
Mm
... something that gives them something to talk about to their audiences.
Mm-hmm.
So, I think that's been a big part in building the credibility of that product.
Mm-hmm. I see. I see. And then, I think in the very beginning when you introduced your team, it seems like you, you have, you know, the European, Oslo, Poland teams, and then also the China team. So maybe a little bit more background in terms of the China R&D team, and then, like, how management actually manage, like, the two separate teams, and then is there any collaborations between those? And then what's the... You know, I, I know one is, like, specifically more on the, the news, right, on in China, and then, the search is mostly in Europe, but then, any of the crossover, right? And then what about kind of the, the newest one, which is the Aria?
Mm.
Which is, where does it come from in terms of the R&D development effort?
Yeah, I understand. We've been working together like a global team, super close, for... I've been in the company 10 years, and I'm the least tenured executive-
Mm.
You know, or the... So we don't really have a turnover problem, I guess. But we've operated in the key countries, Norway, Sweden, Poland, and China, for over 10 years in all these places. I think we have those hubs because they are good talent hubs.
Mm.
The products we make are a bit historical and a bit like the type of engineering talent-
Mm
that we find.
Mm.
But it's, I mean, you could say the Opera News, the content team that, as the example, based in China.
Mm
- reports to, head of mobile, who is based in Norway, for example.
Mm. I see.
Yeah.
Okay. All right. But then the Poland team doesn't report to the China team, right? So it's, there's like a leadership in Poland that's in charge of that.
Yeah, it's a local leadership in Poland. We all, I mean, we are a group of, you know, business unit leaders-
Mm-hmm
... executive responsibilities. We gather as a group, quite frequently.
Mm.
Um, yeah.
Okay.
So it is operating as one company, I would say.
Mm
... just across these locations.
Okay. Even though it looks like quite diverse and broad, right?
Yeah.
Spread across.
Yeah.
Okay. All right, all right. So maybe I pause here a little bit to see if any ones from the audience wanted to ask more on the business side as well.
For the webcast,
Oh, it's working. Sure. Thanks. Maybe just, I guess I haven't—I mean, I haven't followed the company too well over the last few years, but there were other verticals like OPay, OKash. I don't know if those are still in the business, and if they're still, you know, what the plans are there for those?
Yeah.
Yeah.
You're right. Along the way, we have had ownerships, minority stakes in three private companies that have been... Two of the three have been in, like, the fintech space, I would say. So one was this Nanobank, which there was a fintech emerging markets. OKash was one of the brands that we divested. Then we had a social platform around music that we have also divested. And then we have our stake in a company called OPay, which is the biggest one of the three, that Opera was a founding member of this company, but doesn't play an active role in the management. That's the one we have left, which we classified as held for sale, since we don't have any operational involvement anymore. But we're
Mm
... we're also not super rushed to sell it. The company is doing well, and if we get a good offer, I think we would seriously consider, yeah.
Mm-hmm. Okay. Any other questions? Okay. So maybe that's the sideway to the dividend questions or the cash, you know, return. So, I think you did a special dividend in the beginning of the year, right? And then, in the middle of the year, in June, I think you also announced there will be... Going forward, it is a semi-annual dividend pay. So I know because, you know, the business turned out a lot of cash, and there's also a way that you wanted to kind of return to the shareholder. So maybe a little bit more background on, you know, this. I think there's maybe some audience may be a little bit confused with the actual cash outflow versus the actual cash dividend with the receivable.
Mm-hmm.
Yeah. Mm-hmm.
Well, I can begin with taking a bigger step back to say, we try to run the company in the most, like, healthy, basic way possible. Like, you should grow a company, but it should ultimately create profit.
Mm.
So we, I talked before a bit how we think about balancing that, but then we, you have a company to drive profit, and then we give back to the shareholders. So since 2020, we have given back over $300 million in dividends and buybacks as a starting point, which, relative to our market cap, is, you know, quite sizable amount. And we started off buying back shares, and we did a major exit of a pre-IPO investor in late 2022, as a 20% holder of Opera. That, combined with market buyback, leads there now to be fewer outstanding shares than what we had pre our 2018 IPO.
Mm-hmm.
We actually declined the number of shares outstanding. Been good, a good ROI for our investors. And then, in the connection with simplifying and monetizing some of these positions that we've had, they've all been good investments, but too distracting, I think, for people. Too much to study. So as we have simplified, we paid our first dividend ever of $0.80 in the beginning of the year, and then, as you mentioned, we launched a recurring dividend program of $0.80 annualized this summer, $0.40 twice a year. So that's the context-
Mm
... at least for what we have done, and it just follows this whole very basic... You know, you run a company and generate some profit, and then good ways to give it back.
Mm-hmm. And then, because Kunlun is the largest shareholder-
Mm
... then I think some of the dividend payable is actually will be offset, right, by, the receivable that you're supposed to receive.
Yeah, because one of those three assets that we sold, we sold to our biggest shareholder. So, now instead of them paying us for the asset and we paying them dividend-
Mm
... we've just agreed that until, the dividends you would have otherwise gotten-
Mm-hmm
... equal the remaining value that they owed us, then there's no cash transaction.
Okay. Okay.
So it's been good for us, because otherwise we would have had to pay also them the dividend first, and then they would pay us back after.
Sure, sure. And then lastly, just, I know it's, you know, not too much to ask, but I guess that currently you probably will plan to keep the dividend paid out steady, but over time, we'll see how the profit and the cash flow coming, and then you can decide in terms of the, you know, the dividend payment amount, if there's any chance to further increase, right?
I know, we know the textbook, yeah, behavior that we should have with dividends. So we are very aware of that, but, yeah, we scale the company, we scale our revenue, we took up a bit on our profitability, and so, of course, we hope to be in a position to-
Mm
... to raise the dividend then, also following that trend.
I see. Okay, and then I think we almost run out of time. Any last question from the audience?
All right.
Okay. Any conclusions you wanted to make?
Well, uh-
Yeah
... thanks for joining us today. We're Matt is based here in New York, so he's quite accessible for people and, yeah, we're happy to connect to more people. I think we're even though we've been public now for five years, we're still in the mode of raising awareness, I think, and it's helped quite a bit in the last year or two that our products are more and more picked up by Americans, for example. So more people we speak to is like: "Oh, yeah, my kids are using that or my this and that.
Yeah.
So that helps, but, yeah, we-
I think the shareholder returns is also important, right? To bring the awareness as well.
Yeah, we want to-
Yeah
... want to be a good, good company to own stock in.
Okay. All right, with that, we're going to leave it. Thank you so much for everyone attending, and then, have a good afternoon. Thank you.
Thank you.
Thank you.