Okay. Well, I think in the interest of time, maybe we should kick it off. I know everyone's still making their way across rooms, but it's great to welcome the team from Opera. Frode, thanks so much for being part of the conference.
Thanks for having us.
Let's just kick start by taking a step back. For those who don't know the company as well, maybe you can walk through a little bit of the Opera story and bring us up to date on what some of the key initiatives and priorities are for the company.
Sure. Opera is the biggest independent browser that people can choose. The way we get users to use our browser, as opposed to whatever standard browser would come with a phone or a computer, is to make a product that's tailored to the most demanding users. So it's more feature-rich, it has more functionality. AI opportunities is a big part of that, but that's something we've done for 30 years. And by attracting those users, they are also the users with the highest ARPU potential.
We generate revenue by driving traffic to partners. Either it is query, that the user is looking for something and we can send it to search or another partner that has what they are looking for, or it is advertising revenue.
Yeah.
Where we show ads natively in the browser, or we buy third-party inventory and use our data advantage to show ads there. Over the past 10 years, when Song and I have been CEO and CFO, we are proud that our CAGR is 21%. We had a long run from just over $100 million revenue to a bit over $700 million this year, and then our priority is just continued growth. What we see is that the bigger we get, the more partnership opportunities open up because the traffic we can drive is more and more meaningful.
Yep.
The next big milestone is to hit the $1 billion of revenue, which is not necessarily so far out. We are approaching it and because of the fact that, as we scale, we grow faster and then the path from there to more of those billions is almost easier than going from $100 million- $700 million.
Yeah. Okay. Well, maybe let us pause there. You have been at the forefront of a lot of AI getting put in front of consumers, especially around the browser experience. What have you learned so far about the way in which consumers want to interact with AI, specifically around the browser?
I think it's maybe the most exciting time for a company like Opera because of this, maybe revolution is too big word, but it's such a productivity lifter, right? And it's such useful tools. It's happening in the context that the browser was already getting more and more time spent. People spend more time because you have tools that become essentially web-based, whether it's your presentations and spreadsheets or calendar or email or instant messaging. Then I think AI, it started out a bit like search, like a web page or a dedicated app on your phone. That's great, and we all probably use it for stuff. But the big opportunity, and what is still happening now, is the integration of AI at the browser level. Because then you lift it from existing on a website to existing at the same level as the user.
So where you're logged into your stuff, you can have the AI both be context-aware, and you also then have the agentic opportunity, which is still, I would say, very early days and more enthusiast-driven than mainstream. But probably a year from now when we talk again, that has gotten increasingly able to do complex things on behalf of the user, even though it can already save you a bunch of time in terms of populating your calendar and summarizing messaging and stuff like that. So I think our strategy in that context is to be the best orchestration layer for whatever AI tool the user wants to use.
Okay.
We were very early in 2023. We built our own, an AI assistant into the product, and we allowed offline, like local LLM and so on. Not as a competitor to the platforms because we don't compete in that space, but we see them more as just potential partners and services that we should make our browser the best place for the user to experience that. So we do that through plugins or-
Yeah
backend integration so that we allow the browser to be controlled by whatever AI tool that the user prefers.
Okay. There's a couple of things I want to pull on there. With the launch of Neon, which was almost a year ago, what has been the feedback you've gotten from customers on Neon broadly as a product?
It's kind of like our R&D product.
Right.
What Opera Neon is, it's the full Opera browser, but with agentic capabilities built in. You have to pay for a subscription
Yep
because to cover the computing cost. Then you have a native agentic experience where you can have the browser perform tasks for you. Through that, the main objective with that, it's not Neon in itself. It's how those users use the feedback button actively and playback, and the team, we are learning from that. This is where we test on the most enthusiastic and sophisticated users ahead of bringing functions into our free products like Opera One and Opera GX. We charge on Neon because it's our own compute cost, to cover that, whereas in the free product, we will, for example, let the user plug in, as I mentioned before, their existing subscription.
Yeah.
I think offline models, it's something we have supported for a long time, but it surprisingly gets little attention even though most people have computers that can run it. We think that's a huge opportunity for the browser to essentially have local, both for privacy, but also for avoiding the need to pay for your compute costs. You just pay electricity, essentially.
Yeah.
That's how we think about Neon, and then we use it, and you've seen over the last months, the various updates and integrations that we support as we try to bring it into the free version in a cost-efficient sort of good monetization way.
Yeah. You talked a little bit about the theme of interoperability, openness, the ability for the user to bring product and connectivity into your platform. Talk a little bit about what that means in terms of enabling utility and usage around your products over time.
We think it's definitely the future of how people will use the web and how they will use all the services that they're connected to. Not all AI, not all agentic-
Right
but that it will become increasingly common to rely on AI for more than just fact searching, right? Or data processing as we do now. So we want to have that integrated. So our logic to this is we want to be thought of as, "Oh, that's the best browser for my AI tools.
Right.
If somebody offers a plugin, we want to support it. If they want to do an MCP connection, we want to support it so that people can access as much as possible natively. So we build the Opera browser so that, they can be used by humans, and that's what they mainly are, but they can also be used by AI agents
Yeah
and controlled in collaboration with the user.
Okay. You've obviously seen a lot of growth in the mobile part of Western markets over the last 9, +12 months. Talk to a little bit about what the catalyst was to see the types of growth you've seen, especially in Western markets.
It ties into our broader strategy of we focus on the highest potential user bases. That can be geographic, like Western markets, it can be gamers. We make a version of our browser that's tailored for them. And within mobile, iOS has been a missing piece. What's happened over the last couple of years is that iPhones have opened up, that you can have another browser default. It doesn't have to be Safari. Prior to that, you couldn't compete. Any link, anybody would click in an email or anything would always open Safari. Even if they wanted to use Opera, it would be a constant uphill battle even for the user. I think the fact that the user is now free to set another browser as default means we can compete on that platform. We went from essentially like 100% Android smartphone base
Yeah
iOS has become maybe 10% of the total now.
Yeah.
But that's high ARPU mobile users with a very nice growth curve. Broadly speaking, we have been growing our Western market. Western market is not a goal in itself, but it's a good indicator of, okay, we managed to grow high ARPU users. We grow in the right regions, we grow the right profile, et cetera.
Yeah. Okay. Understood. When you think about your revenue base, maybe start with query revenues and how you think about them evolving from more traditional Google search and how you think about where search as a product from an evolutionary standpoint is going and what that means for monetization longer term.
Yeah, the revenue is driven by the user looking for something.
Yeah.
Historically, whenever they started to type in, Opera came up with the whole idea of what if a person can just type in the URL bar and then we send them to you, Google. What do you think about that, right? That is definitely broadening both because Google is a key partner for us, and they have expanded their monetization of their AI modes and Gemini, et cetera, which benefits us through our partnership. But also because our own AI backend can sort of, "Oh, the user is looking for this." Then if we work with an e-commerce player, for example, in that space, we can show the product directly and send that intent directly to the retailer.
Yep.
Yeah.
Okay. Understood. Other verticals have become a key component to growth. Talk a little bit about the opportunities that sit in areas like commerce, travel, things that can rise as a percentage of the mix of the business in the years ahead.
Commerce has been a great success, even though we're probably still under-indexing, but over the last few years. We always knew that we were kind of under-indexing on it because e-commerce, it's done in the browser for the most part, right? It was less than 20% of our advertising revenue. The unlock was, it's this whole thing about scale enables growth. So we got big enough in Europe and the U.S. That major e-commerce player thought, "Okay, now we can start bringing meaningful traffic." So we saw one example where, let's say our market share on the browser side is about 5%, but an e-commerce partner got 10% of their traffic from us. So they say, "Okay, this is meaningful." Then we can integrate the APIs, we can pull the products, the price, the description, the picture, et cetera, and we can show that.
Over the past 2.5 Years, e-commerce has grown from $40 million a year to, in Q2, it was well over $200 million run rate, 6x over 2.5 years. Still, $240 million, if we have 5% market share
Yeah
there is billions of headroom, we think, in terms of opportunity. We do this in the browser, but we also use the relationships and our targeting to reach people also outside the browser.
Yeah.
The browser cannot really be in advertising. It has to be more native and elegant, and we do those things. Then you can reach users on websites or in other apps when you think that they are looking for something and drive high conversion traffic to partners.
Okay. Then maybe in terms of other verticals like travel and others, are there other areas where you are pointing investors to that could be potentially big growth opportunities similar to what commerce turned out to be?
It's exactly the same. I think travel is maybe 2%-3% for advertising mix.
Yeah.
It's the browser that people do research and book their tickets and book their hotels, et cetera. So we think that's another big opportunity, and it's just about allocating the people and the time to build it up.
Okay. Talk to us a little bit about MiniPay and some of the success you've had there and how it fits into the broader strategy of the company, especially when it ties back to monetization potential over the longer term.
Yeah. MiniPay is a blockchain stablecoin wallet.
Yeah.
We made it for emerging markets. It is a technology platform, but it is made so that it is super easy for everyone to create an account there and essentially move money into stable currencies like the USD, which is in itself quite compelling if you live in an emerging market with a volatile currency, et cetera, that you have that. It has grown quickly. We partner up with relevant companies that focus on these regions and bringing them into that ecosystem, like Tether is a key partner for us.
Yeah.
The way we monetize it now is via those partners. Essentially, integration and promotion of players in the ecosystem. It is about $20 million a year that we generate on it, but we have always had it profitable. In terms of the commercial opportunity, as you said, I think over time, it can move into essentially generating revenue on transactions, but we are not doing that now because for now it is just about building scale and expanding the pool of services, like more adoption of what we have. Remittance is a big opportunity. People have family members in other countries. There are some angles also for even people outside emerging markets. If you travel, you can use MiniPay to pay the bus fare in a foreign country. All the mobile-based payments, we can integrate them so that you can pay like a local.
Okay.
Yeah.
Okay. I wanted to come back to gaming. You mentioned the gaming browser, Opera GX, earlier. Talk to us a little bit about the opportunities and the challenges of scaling in a vertical and aligning a product with a particular end-use case of a vertical for consumers, and where some of the potential still lies for growth in gaming broadly.
Yeah. It was a new thing for us. It has been six years or so now since we really launched it, but the idea was, okay, there is this. Opera One, the main flagship browser, is sort of going for anyone who has the interest to change their browser into something richer than a standard browser. Then we thought, okay, it is the same core technology, so it is a relatively easy job on top to create a version of the browser that is tailored for a specific segment, such as for gamers. We chose that because it is a very engaged audience, you would think, and it proved to be correct, that they spend more money online than the average non-gamer would do, spend more time. Even if you look at it globally, maybe particularly if you look in non-Western markets, the gamer is relatively more affluent than the non-gamer, for example.
Yeah.
We made that product. We hit 37 million MAUs in the most recent quarter, so it's continued to grow, but in a pool of many hundred million gamers. Then we have a product that's tailored to them, and feature-rich, and our focus there is just to continue to raise awareness that this product exists.
Yeah.
Because it's our highest ARPU product and great retention, great engagement, all of that.
Okay. Do you see any other verticals that could have browser-specific products that might be tailored to an industry vertical or an end-user experience that might mirror the success you've had with gaming?
I think gaming probably will stand out for the foreseeable future.
Yeah
as the major segment. Opera Neon is another example, right?
Yeah.
A product for an AI enthusiast.
Yeah.
We have a browser for sort of mindfulness and calm, pure distractions. These are small products.
Yep.
We had a crypto browser five, six years ago. Again, just natively integrating data feeds and all of that. They are relatively lightweight engineering tasks to create. I wouldn't expect anything. Our focus right now is on the commonality in terms of the AI tools. That is what we see as the big opportunity. We'd rather focus our effort on that as opposed to spreading out on verticals.
Okay, understood. You guys pretty consistently continue to improve margins, still invest in growth initiatives, and grow the top line. Talk to us a little bit about the overall philosophy of balancing growth investments with margin trajectory in the business. Then maybe I've got a couple of specific cost-related questions, but just the broader philosophy you guys try to execute against.
Priority one is building scale as fast as we can because that is good for our opportunity. But we want to do that with healthy profitability.
We've had relatively stable EBITDA margin over the years, like 23%, 24%, and then we converted last year 69% of that to free cash flow. We can pay it out as dividend and buybacks because we're a very asset-light company.
We've essentially kind of thought, "Okay, let's operate at about this profitability-
Yep
and then grow as fast as we can while doing that. Every year and every quarter, we say, "Okay, with this, how much money can we spend on marketing our products faster, and where's the best ROI on that? Or investing growing new verticals on the advertising side," right? Because once you start off with something new and want to scale it, typically at lower margins in the beginning, and then you're training, essentially, you're targeting, and then they expand
Yeah
over time. So within the overall picture, that's how we optimize. And I would say, sometimes I get asked about gross margin too, but it becomes quite meaningless because we have one part of the business that's monetization within the browser that has marketing costs and higher team costs and OpEx, but no cost of revenue almost.
Right.
Then you have another part of the business which is very OpEx light, but has cost of revenue, which is when we buy inventory from other
Yeah
places. So the profitability of these two meet at the EBITDA level, is where they are comparable, and that's what we guide.
Okay.
Or how we guide our decisions.
Okay.
Yeah.
One of the topics so far across day one of the conference has been the rising cost of compute and inference in areas where companies want to be more AI front-focused, but there's a shift from maximizing expense to optimizing expense. How do you think about the input costs tied to wanting to build and scale AI initiatives inside the company against the supply-demand imbalance for compute today?
Since we are not an LLM platform,
Yeah
we sort of have the luxury to avoid that. So, when we bring the AI functionality into the browser, if you have an existing account with Claude or ChatGPT,
Yep
you can log into that. We're happy to let that control the browser. So long as we have a lot of people using the Opera browser as their preferred-
Right
interface, then we are happy. Of course, the compute happens within the user's existing subscription. We want to make it super easy to use local LLMs, as I mentioned before.
Yep.
Also, zero compute cost. Of course, there is some, but I think in the last quarter, our hosting cost, which covers all of this and more, increased by 1.5 million year-over-year.
Yep.
The revenue was up $35 million. So it's at a very low level, and it's probably equally affected by just general cost of equipment because of the AI demand.
Yeah.
Yeah.
Okay. When you go to other cost items like customer acquisition and marketing, how do we think about the payback period you are getting on marketing dollars? Probably one of the more consistent questions I get from investors, which is you are just a little bit spoiled for your own successes, why not invest more money in marketing and growth because they consistently seem to produce better growth numbers than people think. Why not invest more as opposed to the level you are doing today? Just walk us through a little bit of the thought process on the return you are getting from marketing and why that is the right amount of spend or the right level.
Yeah. In terms of how we manage it is very data-driven. We measure the ROI on every campaign, and within a few days, we have a very good prediction of what will be the ROI of any campaign, any channel, any product combination in any country. Just because you see the profile of the inflow, and you can quickly sort of project the activity level and the revenue generation when you have billions of clicks or big numbers. There are several reasons why we focus on the most demanding and high ARPU users, but that is also where we see the highest ROI on marketing spend.
Yeah.
With the same dollar amount, in marketing, you get fewer eyeballs and new users in countries like the U.S. or Germany or U.K., et cetera, than if we went to emerging markets. But still, even though the number of users is less, the revenue generation is higher and the ROI is better.
Yeah.
In terms of the should we spend more or less, that is just a choice. I think we have been relatively stable over the years, and this is our compromise. We also want to grow as fast as possible, but we want to show healthy profitability along the way, and this is about the profit level that we will allow ourselves-
Okay
and then grow as fast as possible within that.
Okay. With that as a backdrop of how you invest in the business, talk to us a little bit about capital allocation. You guys have paid dividends, you have bought back stock, you have obviously invested in growth initiatives inside the business, especially around user growth. Talk a little bit about the balance of capital allocation, how you think through as a management team allocating capital, and where relative returns are at any given moment in time.
Sure. When we talked about the cost, the one thing I didn't talk about was the investment in product. That one we don't tailor based on. Whatever ideas we have, then we invest what we need in the product.
Okay.
The residual is more a growth, marketing, vertical kind of decision. We are quite proud, actually, to be a company that's both growing fast and returning cash to shareholders. We highlight in our investor materials, but it's worth mentioning that since 2020, we have returned over $500 million.
Yeah.
Which for a company of $1.6 billion market cap is a substantial amount. Half of it on buybacks, and for about $250 million, we bought back 30% of our company over the year.
Yeah.
It's been attractive ROI, I think.
Yeah.
The other half is dividends. Right now, we have both a recurring dividend that we pay out twice per year, and then we have a $300 million buyback authorization. I think in 2026, if you assume similar cash conversion as we had last year, essentially what we've paid out to date and the run rate of where we are on the buyback and all of that, even the run rate means that we are paying back the entire free cash flow generation to our shareholders. Then, of course, on top of that, we have a strong balance sheet, so we can always step up.
Yeah.
We do that because it's an asset-light, capital-light, working capital-light business.
Yeah. How do you think about M&A within that broader construct, whether it's decisions to build or buy to either scale or tactical capabilities? How do you think about that as a potential lever for the business longer term?
We have done a few transactions, but they've typically been to acquire specific team-
Yeah
or a specific platform, et cetera.
Yeah.
We never really acquired revenue. The one time we got a small company that had $2 million-$3 million of revenue, we made the product free. But it can be nice addition. We're always open to it. But to date, the entire growth that we have generated have been organic.
Got it. So in the last few minutes we have left, if we talk about the company over the next 12- 24 months, try to bring it all together for us, what are the key strategic priorities that you and Kåre are the most focused on executing against, because that's where you see the scope for either the most growth or the most return profile?
Commercially, it's the billion-dollar milestone.
Yeah.
It used to be the $200 million, $500 million.
Yeah.
Now it is a billion. It's not just for the milestone itself, it's because we see how getting to scale supports the partnership opportunities of the company. The company's 30 years old, so it took like +30 years to get to a billion. Then hopefully you can count on one hand the number of years it takes to go from one to two based on our trajectory and what that comes with. So I think that's financially speaking, commercial-related opportunity that, not in the next year, but when we speak again in one year, it will be even more tangible, right?
Yeah.
Because we'll be closer. I think on the product side, it's just to grow the awareness around Opera. We want Opera to be known as the best orchestration layer for AI services. That is, we're already, I think, the best browser for people who actually care about the browser. We've seen how you have two narrow browsers that work great maybe with an AI integration, but it's mediocre on everything else. That doesn't work. So it has to be a great browser. We use our advantage that we are independent, that we are not the direct competitor to any platform, as an advantage for us to make the user experience as good as possible, and be known for that.
Because we see that the users we bring in that care about this and use these tools are the most engaged and the highest revenue-generating users that we can bring in. We also think it just will keep elevating sort of the strategic asset that is the Opera browser, being known for that.
Okay. Last one before I lose you. When you meet with investors, what do you think the theme around the company's operations that's the least understood by investors, whether it's a growth opportunity or return opportunity in your collection of businesses, what do you think is the least understood?
At least in terms of the broader market, we have realized that we better spend a decent amount of time on our earnings calls to just explain our positioning.
Yeah.
If somebody thinks, like, "Who will win? Will it be ChatGPT or Gemini or Opera? Maybe not that European company." No, no, no. It's not that. We want to work with all of them. We're not competing with these platforms. I think, making sure that people understand exactly what we are working on and why it is working, and why we are internally so excited-
Yeah
is the number one job. Everybody's thinking, who will win the AI race?
Right.
It doesn't matter so much to us, right? I'm confident that there will be many tools and so long as we can make them work great in our browser, then that's good for the user and that becomes good for us. I would say that's probably number one.
Okay. Why don't we leave it there? Please join me in thanking Opera for being part of the conference.