Q2 2021 Opera Ltd Earnings Call
[music].
Welcome to the Opera limited second quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I have two question. During this period you will need to press. The Star then one on your telephone keypad.
I would like to remove yourself from the queue. Please press the pound key.
Please be advised that today's conference is being recorded and if you need operator. Please press star Zero I would now like to turn the call over to your speaker today, Matt Wilson head of Investor Relations. Please begin.
Thank you for joining us today with me today I have our co CEO song Lin and our CFO for Jacobs.
Before I hand, the call over to song Lin I'd like to remind everyone that the conference call today, The company moved making statements about its future results and expectations, which constitute forward looking statements within the meaning of the private Securities Litigation Reform Act.
Such statements are based on current expectations and how we perceive the current economic environment and are inherently subject to economic competitive and other uncertainties and contingencies beyond the control of management you should be cautioned that these statements are not guarantees of future performance.
The Safe Harbor statement in the company's earnings release for details. Our commentary today will also include non <unk> financial measures, including adjusted EBITDA, which are different from our consolidated financial statements are prepared and presented based on <unk>. We believe that the use of our nanhai FRS financial measures provide an additional tool for <unk>.
<unk> to use in evaluating ongoing operating trends and results.
These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with I FRS. We've also posted unaudited supplemental information on our Investor Relations website that includes historical results of opera and are investing nano bank on a personal note. This is my first earnings call since I joined opera I just wanted to say.
How excited I am to arrive in a thriving environment with a team I've already gone to know well now shooting for value creation opportunities in several key areas I'll do my best to keep everyone updated on where we are and the future direction of opera will be live tweeting highlights from a call at Investor Opera. So please follow along there during the call and in the fee.
Sure.
With that let me turn the conference call over to our co CEO song Lin, who will cover our operational highlights and strategy and then first of all finish up with financials and our expectations going forward.
Song.
Sure.
And so that's and I'm glad to have you on board and then thanks, everyone for joining us.
I will say that NASA has picked up a good Colo and then very exciting times two housekeeping first altra industrial coal will have to deliver strong results for the polo.
Exceeding the high end of revenue guidance waste.
Lease revenue up 87% year over year and up 17%. This is the already record high first quarter.
Further we will of course talk in detail about our numbers, Bobby and General office revenue is nicely balanced between search and advertising both of which continued to show strong growth.
So not only is our co browsing business performing better than expected, but each of the notable initiatives within Boston, He's taking route and showing great promise with all that's expanding al Richey mobile computers, all into entirely new categories like gaming.
And what's really satisfying to see the success, we are having as we introduce them.
And scale products and so this is into new markets.
On the mobile side for example.
Opera News, which continues to show great traction.
As you know we have launched the product in Africa markets and this year, we started to scale it.
U S and several European.
European countries.
The United States for instance opera news is constantly in the top 10, most downloaded news app on both Google play and also the iOS App store ahead of men at household household Legals EMEA name as such as <unk> and the New York Times.
Another. Good example is all profitable.
So a couple of LNG in America, it's a new comp polo, which just launched in June powered by the same AI as our newest product.
Even though it's a very short timeframe. It has already grown its audience too although 10 million people. So we expect even more growth, whereas the stock all the premium League later this month and hype.
We'll talk about it briefly last caller.
Our dedicated chat sell this building to the ultra many mobile web browser.
Lost in Kenya. This audio this year before expanding this to the rest of the continent and at the end of the call.
Up until now we have had more than 1 million sign ups already in this short period of time.
Four pieces, which are always a proud we're continuing to invest in innovative new features that makes it the ultra Russell even below through improved performance control and privacy by incorporating popular features such as Tmall supports and which is a nice feature with just the released and also Arlo smart.
Things such as the rest of the new solution with added Fort Bela managing browser based video conferences, where it should be something very handy when you use a Google conference placements.
Yeah.
For the often use also has spent billions of dollars each year, while E commerce and we are developing products that will provide value to our shoppers and incremental GMB for our partners.
Oh in Brel, So solti and financial functionality continues to expand in selected markets.
We work with regulators and partners to ensure compliance and also provided Youll also has an excellent experience.
For instance, through our depot products, we are providing our Spanish and do those ways.
And the fastest cashback unveil online shopping.
And we've already sold and approximate four times increase in <unk>.
Syndicated equal amongst transactions and spend from April to June.
We will expand both of our product offerings and market soft in this space in the second half of the year.
Another recent highlights, which I love to talk about is that not only we are providing very interesting fact reality, but we have also won three red Dot design award for design quality and creative performance.
Good product design is of course, an important ingredient in creating a good news I experience and we really appreciate it that's really condition.
We are also expanding our footprint in.
In geographies.
Such as the Europe and the U S.
Income, we are seeing growth in those markets, which translates into generally significantly higher <unk> opportunities for us and this is also why our revenue growing so fast Nicola in fast salt in mature markets monetize and rates 10 times greater than some of your larger markets.
Well I think this trend won't continue creating another tailwind for opera ads with benefits from the mix shift you know all user base not only through your multi market, but also a lot more now towards I'll offer to consumers.
Finally in gaming.
We are expanding in both mobile and <unk>.
We could not be more pleased after the roll out of several key initiatives.
Well again, you're specific browser opera Gx.
Have now over 10 million active users since it was formally launched in June 2019.
Even more interesting opera Gx to mobile, which was just launched eight weeks ago already have well over 1 million users.
I should also say that we are seeing the bulk of the unit growth in Europe, and the U S, which is again exciting philosophy, just because you don't see in those markets tend to generate significantly higher output so to be driving unit growth in the Midlands, well, we believe having a very positive impact on monetization.
<unk> and profit generating going forward.
And plus we continue to have big ambitions when it comes to our makeup studio gaming platform.
Talked about it.
The size of the gaming market, but also the direction, where I think it is evolving.
Think about it that billions of consumers make and shell give shows movies and music everyday value platforms.
There's no reason that online gaming, whereas almost as many players and gaming rollout as a medium of connection community and entertainment will not also be adopted as a medium of expression and sharing.
Didn't make us studio has already been downloaded millions of times.
And we believe.
Combination of the Gx user base to get always make us do the organic engine well build upon each other to provide a really strong interest in gaming platform.
I look forward to talk more about this as we continue to build on this portfolio in the second half of the year.
So our core business is strong and growing and each of our key initiatives is showing great traction and we believe huge potential.
No just stepping back I think people continue to ship more and more of their lives online.
To show up to work to connect and communicate and especially to play so being able to choose umbrella. So that can be pulse nice to the way people need today, our digital lives is that ever strengthened value proposition in this context.
So at opera, we believe this is a long term durable trend one.
That was accelerated by the pandemic and while the benefit the benefit from as the consumers want to be able to choose their browser.
But also seeking functionality privacy content. So this is and also the ability to customize their online services.
Taken together, we believe there's a lot to be excited about and ultra and we believe we can continue to expect sustained long term growth.
So with this I would like to turn to for that so that you can provide a more detailed discussion of both our performance given the polo and also our outlook so healthy.
Thanks Alan.
Our bras are plus strategy keeps delivering and our financials, followed by offering products that resonate with users who wants a more personalised browser experience.
<unk> with content and gaming initiatives, we continue to achieve strong results as evidenced by our revenue yet again exceeding the high end of our prior expectations and guidance.
Ill recap the highlights and then provide our updated thoughts on guidance for the back half of the year.
Revenue for the second quarter was $68.2 million and represents a new all time high by a good margin.
Our year over year growth rate was 87% and the sequential growth versus the prior quarter was 17%.
We expect to continue to see sequential growth for the remainder of the year, which results in a record revenue in each subsequent period.
Our current revenue mix is split almost evenly between search and advertising specifically in the quarter search was 29.8 million accelerating to 69% year over year growth.
This was driven by monetization gains for both PC and mobile browsers as well as favorable comps due to covid.
Advertising was $28.9 million accelerating to 128% year over year.
This was driven by strong monetization from opera news and our mobile browsers.
Keep in mind that Covid impacted advertising revenue in Q2 last year more than any other quarter.
While we naturally do not expect to continue as such annual growth rates. We do believe we have created a strong foundation for continued healthy growth for the remainder of this year and beyond.
Finally, taking on the revenue was $1.5 million year over year. This revenue category has been reduced by half a million, although with almost no impact to profit as the decline relates primarily to low margin professional services to obey.
As someone mentioned earlier user growth was particularly strong in North America, and Western Europe, where users monetize at a much higher rate than other regions.
We have been investing into this trend and believe it will serve as an additional tailwind to future growth as well.
As we execute on our growth ambitions, we took marketing and distribution spend to a new high this quarter $35.3 million.
This is about $20 million higher than the average spend over the previous eight quarters.
The increased marketing spend is primarily focused on growing news and western markets, which have higher user acquisition costs and corresponding strong revenue potential.
The investment is tracking well with positive ROI.
And we continue to believe that this is money well spent.
Our adjusted EBITDA came in at more or less breakeven as expected at negative $1 million.
Our net income for the quarter was $44.3 million with profit this quarter predominantly driven by the partial realization of our investments in <unk> as well as the step up in valuation for the old <unk> preference shares.
<unk>.
Our operating cash flow was positive at $6.3 million for the quarter.
And bind with a partial monetization of our open investment this increased our total cash and marketable securities by $58 million versus the prior quarter to a total of $201.3 million.
Now moving to our forward looking commentary.
That's our core business continues to perform and grow ahead of expectations, our confidence and our outlook for the rest of the year increases.
Further we continue to believe that taking most of our underlying adjusted EBITDA growth and reinvesting it into our new initiatives is the right thing to do.
When we initially set up guidance for the year, we commented that the more successful or growth initiatives. The more confident we would be and allowing our EBITDA to fall towards the lower end of our guidance.
We are now raising both the lower and upper end of our 2021 revenue guidance for the second time, and expect 2021 revenue of $2.42 to $2.47 million or 48% year over year growth at the midpoint.
This represents record revenue for the second half of the year and the highest year over year growth for this period since going public.
Correspondingly for the full year, we narrow our adjusted EBITDA range to become 10% to $20 million, incorporating an increase of about $12 million to our expected marketing spend for the year.
Such spend is success based and the positive results, we see gives us confidence to lean further into it.
In Q3, we expect revenue of $63 million to $65 million, representing 51% year over year growth at the midpoint.
The third quarter revenue growth.
It's fueled by continued strong results from revenue streams.
Adjusted EBITDA is expected to be around breakeven in the third quarter as we continue to invest aggressively in our initiatives.
Overall Q2 was another strong quarter and we are very pleased with the first half of 2021.
It's great to see the momentum across our businesses investments in an even stronger growth trajectory.
We are also pleased with our first realization of gains from our investments in adjacent companies and believe it also highlights the unrealized value of these holdings.
We look forward to keeping you posted.
So with that we can now turn it over to the operator for questions.
Yes.
Thank you and as a reminder to ask a question. Please press star one on your telephone keypad, Okay with all your question. Please.
Please pickup your handset optimal foreign quality, we will take our first question from Lance Vitanza.
I'm sorry, Rob.
<unk> with Cowen. Please go ahead.
Thank you thanks, operator, and thanks, everyone guys congratulations on an excellent quarter.
We were in the midst of the pandemic. We saw this explosion in engagement, but unfortunately, the advertisers has left the marketplace. So I think there was some concern it I'll just speak for myself.
As we exited the pandemic advertisers would return but their engagement, but also go back to its old level and the opera would ultimately be no better off the performance in the second quarter. It would seem to argue against that and the advertisers are back in a big way opera is hung onto increased user base. So is that a fair characterization what is.
Your outlook over the back half for MAA use and engagement levels and do you think they will hold into 2022.
Yeah.
Okay.
I'll answer this in front of her thanks. Thanks for the question I'll, Let song comment of course on sort of the product.
<unk>.
And the trajectory that we're on I would say as you as you pointed out when when the pandemic hit we we were of course affected in the near term, but we have been talking about sort of this shift from offline to online and how that benefits the company like opera and our with our.
To drive traffic.
And its very pleasing to sort of see the fruition of sort of advertising returning more towards normal paired with with the strengthened us user base and from a financial person.
Point of view.
The geographic split.
The impact of our good trajectory in both North America, and Western Europe has obviously benefited us.
In terms of revenue growth.
So we are now well beyond the levels that we were at prior to Covid I looked at the average.
Search and advertising revenue into three quarters immediately prior to Covid as a relatively representative baseline and our revenue since search and advertising are now 48% higher than that level.
Thank you and so let me go on to the EBITDA side for exact so.
Slower than we had modeled but as you pointed out.
Earlier in line with guidance you tightened the range for the full year.
I think you have said in the past would be something you would do if the marketplace opportunity was there and I know you talked about the increase in the marketing spend.
Do you expect positive ROI there.
I'm also just wondering are you are you seeing perhaps as some of the EBITDA.
Some of that reflecting inflationary cost pressures is there any sort of are you seeing higher unit costs or is it really just now this is really your decision to cloud revenue back into the business to further build the revenue base.
And then I guess just related to that I might as well get this and they're not doing it.
In the past you've discussed sort of.
After the hyper growth phase and that you sort of you expect margins could be back in the 30% area.
Area EBITDA margins as the business matures and I'm, just wondering if theres been any change to that sort of longer term. Thank you.
Sure.
So putting marketing distributions high to say discretionary spend.
And something that we tweak and fine tune on a weekly basis. The the remainder of Opex is very much in line with the expectations from the beginning of the year and as you can see it.
Relatively stable in the overall.
So if that answers. Your question. So this is to US. This has been about we had at the beginning of the year.
And after the first quarter are pretty good.
Good idea about the number of people, we would need sort of the.
The operating costs in terms of salary hosting and other parts of our business and in the underlying profit.
<unk> development and the development and the and the new services that we are developing that.
Moving ahead.
As planned and then it's the more.
Tactical nature of when and how to drive awareness marketing and downloads.
That are affecting the opex space and how we ultimately view the EBITDA for the year.
Great and then if I could just squeeze in one last question on the cash flow statement.
It looks like cash flow from operations was actually positive $6 million. Despite the small despite breakeven EBITDA.
I was just wondering if there was some sort of working capital.
Stuff in there that we should expect to reverse in the back half of the year should we be modeling.
More neutral or even perhaps a negative.
So in the back half of the year.
So that's the starting point I would say.
Tend to expect operating cash flow to be relatively similar to adjusted EBITDA.
I think the positive cash flow, we see is more.
Reflection of.
Good collections that we had in a bit more of a catch up.
More than it's being too forward leaning.
Having said that.
Of course, when we scale up our marketing and distribution spend we do carry some payables into the next quarter.
Thanks, guys. That's really helpful. I appreciate it.
And once again as a reminder, that Istar and one for your question.
And well take our next question from Mark Argento with Lake Street. Please go ahead.
Good morning, guys and nice quarter as well just a couple of quick follow ups on the <unk>.
Thinking about ROI on the incremental spend.
What kind of payback period do you guys typically calculated or how do you calculate that return.
<unk> marketing spend.
High protein and protein hair again, so for each campaign, we run close byproduct geography, and the type of campaign, we're always looking at the ROI of the campaign.
We are seeing an overall positive ROI on the initiatives that we're driving there are of course product variances in there also geographic variances and there are maturity.
Our emphasis in terms of learning as we go but when we look at the big.
The big spend drivers and marketing.
Biggest increase both relative to last year and relative to the last quarter was opera news.
Followed by our by the browser side of course.
We are seeing.
We are seeing positive rois and all the key markets for all the bulk of the spend is happening.
We're seeing it.
In terms of opera news have payback time of within four quarters.
<unk> now in western markets.
And.
And for the browser side.
It's less than that.
The difference is of course that on the browser side, we are growing from.
Sort of.
More established product in more established user base, whereas on the new side and in Western markets. We are essentially establishing a new for <unk> and it does require investment to sort of get that flywheel off the ground.
So we're actually.
Very pleased with the returns that we have we have seen even in that quite early stage.
Launching those products.
Great.
Thats helpful additional color.
When you had mentioned in your prepared remarks, I believe that you guys launched opera football.
Bob.
So unlike you already have some close million users on that which is pretty impressive you anticipate more of these kind of thematic.
Okay.
Products that leverage.
Core AI.
The news out or are you going to do more of those.
How you use that to monetize and sell that ad inventory.
Yes, yes, so that's a very good question right. So I would say it's the same experience that we have also seen a browse so rapidly instead of a generic <unk> and then we launched the Gx four gave me which is fantastic.
It's more I would say, reflecting a trend that we see that people like the people are becoming more segmented that because it would actually instead of appreciating a generic product, which is fine that we actually see a great opportunity in those different segments right. So we're proud that the browser to great success and the same is what we applied for news right.
Offer political easy essentially a new service Friday, just one category of neutral we find out that way.
Be more talented team if we're taking out two dedicated account and skoal and audience is that the total <unk>. So yes. So high level I would say I think you are right now we think it's a great churn.
The world is moving to more segmented and more targeted more personalized product and <unk> is definitely one of them.
This confidence is on that is basically at any level.
Very short timeframe.
And I think yes, I think I'm looking for a lot of the things we have that great base technology that is powered by news.
We shouldn't be able to also provide the even more I'll take them at their conference.
Coming to work.
Okay song Lin and just.
Just one last one you guys got it over 200 million Bucks of any quote to cash now.
It seemed like you are going to be.
Burning any cash in the near term any promote thoughts on <unk>.
For for that amount of cash.
Yes, we do have a very strong cash position.
With that she said over $200 million in cash and marketable securities and as we have demonstrated so far we have been funding our growth initiatives by the underlying cash generation of a very profitable core business. So when we think about our priorities for cash of course they incur.
<unk> the flexibility to seize growth opportunities in line with our strategy and the strengths that we have that we want to build on both in terms of organic opportunities, but also to be in a good position to make select acquisitions, such as yoyo games form that we did at the bigger.
<unk> this year.
And then in addition to that as we've shown in the past week.
We have been happy to buyback our own stock and there is always a trade off there obviously in terms of preserving liquidity, but those are the two priorities.
Right. Thanks, guys appreciate it.
Yeah.
Okay.
And well take our next question finally say yes.
Please go ahead.
Good morning management. Thanks for taking my question. This is Vicky Wei on behalf of understand yet. So I had just one small follow up question. So we see the top line revenue guidance.
Net income also comment about let's say the yields that have been shifting.
We wonder how is the sales hub northern case does impact the business recorded momentum by region.
Because as you see from the third quarter revenue it does not change the risk and the impact on revenue spend by your appetite.
Would you please provide more color on that Vijay. Thank you.
I would say overall when when Covid hit.
And as the recovery began its affected emerging markets more than it did western markets.
The recovery was also faster in Europe, North America for example than than in Africa.
Bye now.
BRCA.
Key emerging market strategic region for us represents about the same share of total revenue as it did prior to the pandemic.
So we have moved into a more normal state again with.
In terms of debt and the rest of the mixes as we have discussed more driven by Western Europe and North America.
Growing the user base, there at very attractive monetization levels.
Yeah.
Thank you.
Okay.
And once again as a reminder to ask a question that is star and one on your Touchtone phone.
And final question. Thank you.
Yeah.
<unk> no further questions at this time I will turn the call back over to Paul for any closing remarks.
Sure. So yes, I guess, thank you guys again.
Joining us today.
We think it's a great quarter that we are able to deliver and but I think even bigger potential ways you blush shell Patricia.
Appreciate your time and looking forward to speaking with you again.
Okay.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.
Yeah.
[music].
[music].
[music].
Thank you for joining us today with me today I have our co CEO song Lin and our CFO <unk> Jacobsen before I hand, the call over to song Lin I'd like to remind everyone that the conference call today, the company will be making statements about its future results and expectations, which constitute forward looking statements within them.
The private Securities Litigation Reform Act.
Such statements are based on current expectations and how we perceive the current economic environment and are inherently subject to economic competitive and other uncertainties and contingencies beyond the control of management you should be cautioned that these statements are not guarantees of future performance EMEA.
The Safe Harbor statement in the company's earnings release for details. Our commentary today will also include non <unk> financial measures, including adjusted EBITDA, which are different from our consolidated financial statements are prepared and presented based on Ifr US we believe that the use of our non <unk> financial measures provides an additional tool for them.
<unk> to use in evaluating ongoing operating trends at <unk>.
<unk>.
These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with I FRS. We've also posted unaudited supplemental information on our Investor Relations website that includes historical results of opera and are investing now debate on a personal note. This is my first earnings call since I joined opera I just wanted to say.
How excited I am to arrive in a thriving environment with a team have already gone to know well now shooting for value creation opportunities in several key areas I'll do my best to keep everyone updated on where we are and the future direction of opera will.
We will be live tweeting highlights from a call at Investor Opera. So please follow along there during the call and in the future with that let me turn the conference call over to our co CEO song Lin who will cover our operational highlights and strategy and then further well finish up with financials and our expectations going forward.
So.
Sure.
Thanks, Matt and good to have you on board and then thanks, everyone for joining us.
We'll say that not to have picked up a good color and then very exciting time to housekeeping first altra industrial coal will have to deliver strong results for the polo.
Exceeding the high end of our revenue guidance.
Revenue up 87% year over year.
And up 17%. This is the already record high first quarter.
Further we will of course talk in detail about our numbers, Bobby and General office revenue is nicely balanced between the search and advertising both of which continued to show strong growth.
So not only is our co browsing business performing better than expected that each of the multiple initiatives. We have embarked on is taking root and showing great promise with all that's expanding our reach and mobile computers all into entirely new categories like gaming.
And what's really satisfying to see the success, we are having azure introduced and scale products and so this is into new markets.
On the mobile side for example, we have.
Opera News, which continues to show great traction.
As you know we have launched the product in African markets and this year, we started to scale it in U S and several European our European countries.
The United States for instance opera news is constantly in the top 10, most downloaded news app on both Google play and also the iOS App store ahead of many of household household negus EMEA names, such as <unk> and the New York Times.
Another. Good example is all profitable.
So a couple of those in America.
It's a new comp in the polo, which just launched in June.
By the same AI as our newest product.
Even though it's a very short timeframe and has already grown its audience too, although 10 million people. So expect even more growth, whereas the stock of the premium League later this month and hype.
<unk> talked about it briefly last caller, it's all dedicated chat service built into the ultra many mobile web browser false.
First the launch it in Kenya. This although this yield before expanding this to the rest of the continent and at the end of the call.
Up until now we have had more than 1 million sign ups already in this short period of time.
Four pieces, which are always a proud we're continuing to invest in innovative new features that mentioned the ultra <unk>, even below through improved performance control and privacy by incorporating popular features such as <unk>, which is a nice feature with just the release and also Alex.
As such.
Such as the rest of the new solution with added Fort Bela managing relative base video conferences, we're actually becoming very handy when you use a Google conference placements.
Okay.
For the often use also has spent billions of dollars each deal while equal most and we are developing products that will provide value to our shoppers and incremental dnb for our partners.
Our in browser Solti and financial functionality continues to expand in some metro markets as we work with regulators and partners to ensure compliance and also provide you would also weigh the excellent experience points.
For instance, through our depot products, we are providing our Spanish in Europe, less the highest and the fastest cashback unveil online shopping and we already saw an approximate four times increase in facilitated equal amongst transactions and spend from April to June.
We will expand both our product offerings and market scope in this space in the second half of the year.
Another recent highlights which.
Let me talk about it is that not only we're providing very interesting functionality, but we have also won three red Dot design award for design quality and creative performance.
<unk> product design is of course, an important ingredient in creating a good news I assurance and we really appreciated that.
Recognition.
We're also expanding our footprint.
In geographies.
Such as in Europe, and the U S.
Income, we are seeing growth in those markets, which translates into generally significantly higher up who all the contiguous blocks and videos.
Our revenue and growing so fast Nicola in fast salted Latino markets monetize and rates 10 times well than some of the emerging markets, where I think this trend will continue.
Another tailwind for opera ads with benefits from a mix shift in all Europe.
Base, not only through emerging market, but also a lot more now towards pile up to consumers.
Finally in gaming.
We are expanding in both mobile and portal pillows.
Could not be more pleased after the roll out of several key initiatives.
Our gaming specifically browser opera Gx.
Half now.
<unk> asking the results since it was formally launched in June 2019.
Even more interesting opera Gx mobile, which we've just launched eight weeks ago.
We have well over 1 million users.
I should also say that we are seeing the bulk of that unit growth in Europe, and the U S, which is again exciting philosophy, just because users in those markets tend to generate significantly higher output so to be driving user growth in the Midlands well, we believe have a very positive impact on monitors.
<unk> and profit generating going forward.
And plus we continue to have big ambitions when it comes to our getting makeup studio and gaming platform.
I've talked about it not just the size of the gaming market, but also in the direction, where I think it is evolving.
Think about it that millions of consumers make and sell T shirts movies and music everyday.
Loan platforms. There is no reason that online gaming, whereas almost as many players and gaming rollout as a medium of connection community and entertainment will not also be adopted as a medium of expression and sharing.
<unk> has already been downloaded the mineral times.
We believe the potential combination.
The gx and user base to get always make us video gaming engine well build upon each other to provide a really strong interest in gaming platform.
I look forward to talk more about this as we continue to build on this portfolio in the second half of the year.
So our core business is strong and growing.
And each of our key initiatives is showing great traction and we believe huge potential.
No just stepping back we are seeing people continue to ship more and more of their lives online.
To show up to work to connect and communicate and especially to play so being able to choose umbrella. So that can be pulsed nice to the way people need today, our digital lives is that ever strengthened value proposition in this context.
So at opera lay belief. This is a long term durable trend one that was accelerated by the pandemic and while we benefit we benefit from as the consumers want to be able to choose their browser.
I'll also seeking functionality privacy content services and also the ability to customize their online services so taken together.
I believe there is a lot to be excited about in ultra and we believe we can continue to expect sustained long term growth.
So with this I would like to turn to fill that so that you can provide a more detailed discussion of both our performance given the colo.
Our outlook so healthy.
Thanks Alan.
Our <unk> surplus strategy keeps delivering and our financials, followed by offering products that resonated with users who want a more personalized browser experience.
<unk> with content and gaming initiatives, we continue to achieve strong results as evidenced by our revenue yet again exceeding the high end of our prior expectations and guidance.
I will recap the highlights and then provide our updated thoughts on guidance for the back half of the year.
Revenue for the second quarter was $60.2 million and represents a new all time high by a good margin.
Our year over year growth rate was 87% and the sequential growth versus the prior quarter was 17%.
We expect to continue to see sequential growth for the remainder of the year, which results in a record revenue in each subsequent period.
Our current revenue mix is split almost evenly between search and advertising specifically in the quarter search was 29.8 million accelerating to 69% year over year growth.
This was driven by monetization gains for both PC and mobile browsers as well as favorable comps due to covid.
Advertising was $28.9 million accelerating to 128% year over year.
This was driven by strong monetization from opera news and our mobile browsers Keith.
Keep in mind that Covid impacted advertising revenue in Q2 last year more than any other quarter.
So while we naturally do not expect to continue as such annual growth rates. We do believe we have created a strong foundation for a continued healthy growth for the remainder of this year and beyond.
Finally, taking on the revenue was $1.5 million year over year. This revenue category has been reduced by half a million, although with almost no impact to profit as the decline relates primarily to low margin professional services to obey.
And some of them had mentioned earlier user growth was particularly strong in North America, and Western Europe, where users monetize at a much higher rate than other regions. We have been investing into this trend and believe it will serve as an additional tailwind to future growth as well.
As we execute on our growth ambitions, we took marketing and distribution spend to a new high this quarter $35.3 million.
This is about $20 million higher than the average spend over the previous eight quarters.
The increased marketing spend is primarily focused on growing news and western markets, which have higher user acquisition costs and corresponding strong revenue potential.
The investment is tracking well with positive ROI.
And we continue to believe that this is money well spent.
Our adjusted EBITDA came in at more or less breakeven as expected at negative $1 million.
Our net income for the quarter was $44.3 million with profit this quarter predominantly driven by the partial realization of our investment in <unk> as well as the step up and validation for the old pay preference shares.
<unk>.
Our operating cash flow was positive at $6.3 million for the quarter combined with a partial monetization of our open investment. This increased our total cash and marketable securities by $58 million versus the prior quarter to a total of $201 three.
<unk>.
Now moving to our forward looking commentary.
That's our core business continues to perform and grow ahead of expectations our confidence in our outlook for the rest of the year increases.
Further we continue to believe that taking most of our underlying adjusted EBITDA growth and reinvesting it in to our new initiatives is the right thing to do.
When we initially set up guidance for the year, we commented that the more successful or growth initiatives. The more confident we would be and allowing our EBITDA to fall towards the lower end of our guidance.
We are now raising both the lower and upper end of our 2021 revenue guidance for the second time, and expect 2021 revenue of $2.42 to $2.47 million or 48% year over year growth at the midpoint.
This represents record revenue for the second half of the year and the highest year over year growth for this period since going public.
Responding late for the full year, we narrow our adjusted EBITDA range to become 10% to $20 million, incorporating an increase of about $12 million to our expected marketing spend for the year.
Such spend is success based and the positive results, we see gives us confidence to lean further into it.
In Q3, we expect revenue of $63 million to $65 million, representing 51% year over year growth at the midpoint.
Third quarter revenue growth.
Okay.
It's fueled by continued strong results from <unk> revenue streams.
Adjusted EBITDA is expected to be around breakeven in the third quarter as we continue to invest aggressively in our initiatives.
Overall Q2 was another strong quarter and we are very pleased with the first half of 2021.
It's great to see the momentum across our businesses investments in an even stronger growth trajectory.
We're also pleased with our first realization of gains from our investments in adjacent companies I believe it also highlights the unrealized value of these holdings.
We look forward to keeping you posted.
So with that we can now turn it over to the operator for questions.
Thank you and as a reminder to ask a question. Please press star one on your telephone keypad to withdraw your question. Please press the pound key.
Please pickup your handset optimal foreign quality.
I'll take our first question from Lance Vitanza.
I'm, sorry lab at Tinder with Cowen. Please go ahead.
Thank you thanks, operator, and thanks, everyone guys congratulations on an excellent quarter.
We were in the midst of the pandemic. We saw this explosion in engagement, but unfortunately, the advertisers have left the marketplace. So I think there was some concern and I'll just speak for myself that as we exited the pandemic advertisers would return but that engagement, but also go back to its old level and the opera.
Would ultimately be no better off the performance in the second quarter would seem to argue against that and the advertisers are back in a big way opera is hung on to increase user base. So is that a fair characterization what is your outlook.
Over the back half for Emma use and engagement level and do you think they will hold into 2022.
Yeah.
Okay.
So this is probably a hair. Thanks. Thanks for the question I'll, let song comment of course on sort of the product.
And the trajectory that we're on I would say as you as you pointed out when when the pandemic hit we were of course affected in the near term, but we had been talking about sort of this shift from offline to online and how that benefits the company like altra and with our ability to.
Drive traffic and and its very pleasing to see.
The fruition of sort of advertising, we're returning it theres more towards normal paired with with the strengthened us user base.
Our financial.
Point of view.
The geographics.
The impact of our good trajectory in both North America, and Western Europe has obviously benefited us.
Terms of revenue growth. So we are now.
Beyond the levels that we were at prior to Covid I looked at the average.
Search and advertising revenue into three quarters immediately prior to Covid as a relatively representative baseline and our revenues in search and advertising are now 48% higher than that level.
Thank you and so let me go onto the EBITDA side for exact so slower than we had modeled but as you pointed out.
Earlier in line with guidance you tightened the range for the full year.
I think you have said in the past would be something you would do it if the marketplace opportunity was there and I know you've talked about the increase in the marketing spend.
We expect a positive ROI there, but I'm also just wondering are you are you seeing perhaps as some of the EBITDA move some of that reflecting inflationary cost pressures is there any sort of are you seeing higher unit costs or is it really just know this is really your decision to cloud revenue.
Back into the business to further build the revenue base.
And then I guess just related to that I might as well get something theyre not there in the packs you've discussed sort of.
After the hyper growth phase and that you sort of you expect margins could be back in the 30%.
Area EBITDA margins as the business matures and I'm, just wondering if theres been any change to that sort of longer term. Thank you.
Sure.
So putting marketing and distribution is high that's a discretionary spend.
And something that we tweak and fine tune on a weekly basis. The remainder of Opex is very much in line with the expectations from the beginning of the year and as you can see it.
Relatively stable in the overall.
So if that answers. The question. So this is to US. This has been about we had at the beginning of the year.
And after the first quarter are pretty good.
Good idea about the number of people, we would need sort of.
And sort of the operating costs in terms of salary hosting and other parts of our business and in the underlying.
<unk> development and the development and the and the new services that we are developing that.
Moving ahead.
As planned.
Then it's the more technical nature of when and how to drive awareness marketing and downloads.
That are affecting the opex space and how we ultimately view the EBITDA for the year.
Great and then if I could just squeeze in one last question on the cash flow statement.
It looks like cash flow from operations was actually positive 6 million. Despite the small despite breakeven EBITDA.
So I'm just wondering if there was some sort of working capital.
Stuff in there that we should expect to reverse in the back half of the year should we be modeling.
More neutral or even perhaps a negative.
So in the back half of the year.
So that's the starting point I would say.
Hey.
Tend to expect operating cash flow to be relatively similar to adjusted EBITDA.
I think the positive cash flow, we see is more.
A reflection of.
Good collections that we had in a bit more of a catch up.
More than it's being too forward leaning.
Having said that.
Of course, when we scale up our marketing and distribution spend we do carry some payables into the next quarter.
Thanks, guys. That's really helpful. I appreciate it.
And once again as a reminder, that is star and one for your question.
And well take our next question from Mark Argento with Lake Street. Please go ahead.
Good morning, guys and nice quarter as well.
Follow ups on the <unk>.
Thinking about ROI on the incremental spend.
What kind of payback period do you guys typically calculate or how do you calculate that return.
Elevated marketing spend.
High protein and protein hair again, so for each campaign, we run so it's a byproduct geography type of campaign, we're always looking at the ROI of the campaign.
We are seeing an overall positive ROI on the initiatives that we're driving there are of course products variances in there also geographic variances and there are maturity.
Our emphasis in terms of learning as we go but when we look at the big.
The big spend drivers and marketing.
The biggest increase both relative to last year and relative to the last quarter was opera news.
Followed by our by the browser side of course.
We are seeing.
We are seeing positive rois and all the key markets for all the bulk of the spend is happening.
We're seeing it.
In terms of our news a payback time of within four quarters now in the western markets.
And.
And for the browser side.
It's less than that.
The difference is of course that on the browser side, we are growing from.
Sort of.
More established products in more established user base, whereas on the new side and in Western markets. We are essentially establishing a new for <unk> and <unk>.
And it does require investment and sort of get that flywheel off the ground. So so we're actually.
Very pleased with the returns that we have we have seen even in that quite early stage of launch.
Launching those products.
Great.
Thats helpful additional color.
When you had mentioned in your prepared remarks, I believe that you guys launched opera football.
Okay.
Sounded like you already have some close million users on that which is pretty impressive you anticipate more of these kind of thematic.
Okay.
Products that leverage.
Core AI and good news the news out but are you going to do more of those.
How you use that to monetize and sell that ad inventory.
Yes, yes, so that's a very good question. So I would say it's the same experience that we have also seen in the browser Roslin Institute will have a generic browser and now we've launched the Gx will gave me which is fantastic.
It's more I would say, reflecting a trend that we see that people like us.
Becoming more segmented now because it would actually instead of I appreciate the generic product, which is fine that we actually see a great opportunity in those different segments right. So we're proud that the browser to great success and the same is what we applied for Nielsen.
<unk> essentially a new survey slightly just one category of old news, but we will find out that.
<unk> be mortality, particularly the out to dedicated account and skoal and audience is that a couple of them really well. So yes. So high level I would say I think you are right now we think it's a great trend there.
That is the world is moving to more segmented and more populated more personalized product and <unk> is definitely one of them.
This confidence is on that is.
Yes, very short timeframe.
And I think yes, I think I'm looking for a lot of things we have that great base technology that is powered by news I think we should have been able to also provide the even more segmented content.
Coming to work.
Okay song Lin and just one last one you guys got it over 200 million Bucks I think worth of cash now and then.
Seem like Youre going to be.
Burning any cash over the near term.
To promote thoughts.
Uses for for that amount of cash.
Yes, we do have a very strong cash position.
With that she said over $200 million in cash and marketable securities.
We have demonstrated so far we have been funding our growth initiatives by the underlying cash generation of a very profitable core business. So when we think about our priorities for cash of course. They include the flexibility to seize growth opportunities in line with <unk>.
Our strategy and the strength that we have that we want to build on both in terms of organic opportunities, but also to be in a good position to make select acquisitions, such as Yo Yo games form that we did at the beginning of this year.
And then in addition to that as we've shown in the past week.
We have been happy to buyback our own stock and there is always a tradeoff there obviously in terms of preserving liquidity, but those are the two sort of priorities.
Great. Thanks, guys appreciate it.
Okay.
And well take our next question from Alicia Yap with Citi. Please go ahead.
Good morning management. Thanks for taking my question. This is Vicky Wei on behalf of Vishay, yet. So I had just one small follow up question. So we see them.
Top line revenue guidance and let me.
I'll also comment about let's say the yields that have been shifting.
We wonder how is the Delta of Bourbon case does impact the business recovery momentum by region.
Because FCC from the first quarter revenue. It does not seem there was and the impact on revenue spend by your appetite.
Would you please provide more color next or by region. Thank you.
I would say overall.
When covid hit.
And as the recovery began.
<unk> emerging markets more than it did western markets.
The recovery is also faster in Europe, North America for example than than in Africa bind.
Bye now.
BRCA.
Key emerging market strategic region for us represents about the same share of total revenue as it did prior to the pandemic. So we have moved into a more normal state again with.
In terms of debt and the rest of the mixes as we have discussed more driven by Western Europe and North America.
Growing the user base there.
Very attractive monetization levels.
Thank you.
And once again as a reminder to ask a question that is star and <unk>.
One on your Touchtone phone.
We'll pause to allow any further questions. Thank you.
And Nathan <unk> no further questions at this time I will turn the call back over to Paul for any closing remarks.
Sure. So yes, I guess, thank you guys again.
Joining us today.
We think it's a great quarter that they were able to deliver and but I think even bigger potential when you block. So I appreciate your time and looking forward to speaking with you again.