Opera Limited Q1 2023 Earnings Call
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Welcome to the Opera limited first quarter 2023 earnings call.
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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.
I have with me today are co CEO song Lin and our CFO for the Jacobsen before I hand over the call to song Lin I would 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 the meanings in the private Securities Litigation Reform Act such statements are based on current.
Patients 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 may refer to 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 prepared and presented based on higher FRS. We believe that the use of our non <unk> financial measures provides an additional tool for investors to use in evaluating ongoing operating <unk>.
And trends 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 an unaudited quarterly historical financial results of opera on our Investor Relations website.
We will be live tweeting highlights from our call Investor Apis. 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 Fred who will discuss our financials and expectations going forward.
Tom.
Yeah sure Thanks, Matt and thank you everyone for joining us today.
We are very pleased to announce a very strong fourth quarter, which exceeded our previously issued guidance for both revenue and profitability.
We maintain a healthy momentum in.
And Buck on the remainder of the year and feel great to also raise our 2023 guidance today.
Our first quarter revenue reached $87 1 million.
And English all the 2% well above the previous year.
Adjusted EBITDA was 71 7 million.
The 5% margin.
The Buffalo was very much a continuation of our solid execution.
The churn rate has kind of indicated in the past.
Specifically focusing on those of us.
Who offer the greatest value and simultaneously growing our ultra <unk> business to offer greater reach to our advertising partners.
Beyond all owned and operated sites and apps.
Although the past two years have.
I have been quite vocal in our strategy of focusing on those waves.
Why isn't the greatest potential for monetization.
The success of that strategy is apparent when looking at our IPO, which has doubled.
The two year period.
Annualized a pool was $1.08.
Hello.
Chris.
40%.
Compared to last deal.
But as the marketing spend coming in below plan combined with the normal seasonality, we saw our global user base deep slightly in the fourth column.
We continue on our trajectory raises a strong well so high up in <unk>.
<unk> products.
A copy of ally.
Our marketing spend leading to solid financial results.
I've also began nearly integrations with Oems and the possible.
<unk> payload real propel also ask Todd all the Oems that you might still see some topics.
<unk> tailwind for potential use in gross in the second half of the year.
Advertising revenue grow 26% compared to last deal representing.
6% of total revenue and continues to benefit from the underlying growth in our audience extension business on top of all of our no advertising.
Such revenue growth, 18% in the first column driven by the growth of our pizza food Crunchy Wesco market, particularly in North America.
Year to date, you congressional but yeah. So this is has it become a top priority for many popular consumer apps and ways that ought to be among the leaders within Brazil.
Yes.
After announcing our collaboration with <unk> ultra became among the fossil brazos to have support.
Popular services, such as <unk> directly, but also sidebar as well as native AD trumps and.
This allows the users to access and take advantage of generative I saw this is for the web content.
I would encourage all of you to download the other alcohol opera Gx and enabled the AI tools.
Easy setup and try it for yourself.
Moving vault, we plan to introduce a new native AI services designed to all women led Rossi for our users and to further differentiate our products to drive engagement.
Although this way Kuwait opened up for all the axis Ultra one.
Completely redesigned the Basel pay lawful aig's these offices.
Well to us.
By people.
Ultra continues to grow its user base.
All eight of us and sequentially to 10, it would be that there was a colo raise and annualized op, who all the trade dollars 17 says.
That increase of 18% compared to two in the first call with you on that too.
<unk> also enjoys the highest engagement metrics across all products with a female becoming a key part of the online lives over the gamers, who have come to love GFS.
During the first call mean about people raise the Gx me accounts doubled compared to the first Colo.
Just on the comps are above our most loyal and engaged to use us.
Our objective continues to be to raise awareness around the opera Gx and grow a highly engaged user base and <unk>. They are launching and Influencer campaign with one of the worlds most important all Youtube also as part of that.
<unk> recently announced that the lives lost Vishal Shah founder directly in the browser.
Suitable and cricket stance has surpassed the sensitivity that you lost less than six months after its introduction, where it just speaks to the strength of our distribution.
<unk> also are incredibly engaged afterwards future updates, allowing even more personalization of the App. We expect this trend to only continue in fast ultra football is consistently among the most popular destinations for football related to content globally.
Finally, we are also very excited to see the renewed attention.
They are being paid to the Gulf of space by the broader tech ecosystem, including the press and the vessels.
The key actions point to the web raising the ability to integrate all of this is and the functionality across websites.
Through the end user experience and the productivity, but also.
Much more than commodity products.
Oh I'm sorry has been told me that she just for decades.
Second about it takes an extra chastel of AI based productivity innovations.
And we plan it could be just as proud of our impact on that strong adds weight on our broader history is the shelf space.
When does that let me turn the call over to you through the.
<unk>.
Thank you song.
On top of the operational color already provided I'll dive a bit further into the numbers and it's yet another very strong quarter for Rockwell.
Q1 revenue came in 2 million above the high end of our guidance at $87 1 million, representing 22% year over year growth.
As expected, we saw greater seasonality in our advertising revenues than in prior years due to our successful scaling of also third party ad inventories.
We were positively surprised to see even stronger underlying growth than we had anticipated.
Adjusted EBITDA came in almost 3 million above the top end of our guidance at $21 7 million or a 25% margin.
Profitability benefited from our revenue over performance combined with continued cost discipline with marketing expense in particular coming in below expectations.
During the quarter be repurchased 370000, maybe $4 million to $5 million under our buyback program translating to an average price of 666 per ads.
That leaves another $30 million remaining under our current buyback authorization from 2022, and we plan to take advantage of that.
And opportunistic manner.
In Q1, we also paid our first dividend of 80 cents per aes for a total consideration of $71 million.
In terms of cash generation, we generated a strong operating cash flow of $25 7 million in the quarter.
And our free cash flow from operations, which is net of Capex items and lease payments was $23 3 million and the head of adjusted EBITDA given the benefits of reduced working capital after the seasonally strongest fourth.
Quarter.
Our balance sheet remains very healthy with $85 million of cash and no corporate debt.
In addition, our receivable from the sale of storage totaled 57 million preference value.
We value our nine 5% stake in <unk>, which is classified as held for sale, it's $163 million.
In total debt.
Up to $305 million, which is a significant amount relative to our market cap.
Now turning to our updated guidance for the full year 2023, and the second quarter.
For the full year, we are raising our revenue guidance to $373 million to $390 million up from $370 million to $390 million.
That is 15% revenue growth at the midpoint, but representing continued caution given the broader macroeconomic picture.
For annual adjusted EBITDA, we've missed our guidance range to be $77 million to $83 million.
$71 million to $81 million and representing a 21% margin at the mid points.
The underlying cost expectations remain largely as discussed on our prior earnings call. We continue to expect cost of revenue items to come in just over 20% of revenue for the year as a whole and we continue to build and close to $120 million.
Of marketing expenses, even as we spent less than expected in the first quarter.
Cash compensation expense is expected to increase modestly relative to 2022.
All other opex items before adjusted EBITDA is expected to come in at a bit over $30 million for the year that's helpful.
For the second quarter, the guide revenue to $92 million to $94 million, which is 19% growth at the midpoint.
Have you guys adjusted EBITDA to be 18 to 20 million translating to a.
20% margin at the midpoint.
In summary, we are off to a very healthy and better than expected start of 2023.
We're on a strong track and look forward to keeping you posted and what do you expect it to be a very active year for opera with their continued high activity level in a very dynamic market. So stay tuned.
With that I would like to turn the call back over to the operator for your questions.
Thank you.
As a reminder to ask a question. Please press star one on your telephone keypad.
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We'll take our first question from Lance Disanto with TD Cohen.
Yeah.
Good morning, everyone. This is Jonathan on for Dan.
What are.
My first question is so it's great to hear that operators working with Oems to preload the opera browser.
For the <unk> for acute events.
How much of our revenue.
Hum.
Let's see.
This isn't baked into guidance and therefore as a source of upside to your guidance.
Okay.
Yes, maybe.
Hey, Tony Hawk I can at least give.
Sure.
Some issues about how are you Budd I guess, you're asking the question of the OEM a potential pre installation amount of those so so so I would say yes.
Just to be descriptive way, we see a trend well.
Oh, yes that they see the value of Ashley will ask every day pre installation the browser, especially a very good one like us.
And so.
Just take the opportunity to stop the deeper installation, which which yes, it's oh.
It will definitely be contributing to our revenues.
Revenue profits and all those.
He was also of course, so when you see it more as a very interesting trend where people see the value all of Gaza and see a company like us professional playoffs to actually be in this space as a reorganization.
We I don't think we have actually.
Books. So many revenue there was a lot of R&D in.
Particularly for installations, because I'll call CMS can be.
It takes time for them to actually be able to do that some of it all of our controls. So we don't want to assume on that.
By the way you can give out there the one that actually happens.
Got it and none of that opportunity revenue opportunity is it's an embedded in guidance just yet right.
No I would not say so.
Okay, Okay, great. Thanks.
My next question is regarding that.
That starts to become a very a trending topic and just would like to hear a little bit more detail about the economics, what do you see.
The revenue opportunity, what's the investment Lake.
Yeah. So yeah, it's only hill again.
Well I tried to I suppose through them pretty shabby. So yes, I guess, that's a bit abnormal question roundabout everybody's asking John .
I would say it's been like this its definitely beneficial to us in terms of your thoughts around that and you talked about getting it right. So that's very helpful.
He is asking about.
It was a bit of our marketing spend because you are.
I'll, just see called golf they.
We called him and so on and so now it's a it's definitely positive.
And the way we do also see that user engagement on Argos well increase.
How are.
You know, what's the best the business model around it I would say, it's still to be explored.
It definitely improves the hollow browser type spend and you know us all how black Dave in SaaS, we have more revenue for sure.
However.
I understand your question that it is in general have a cost.
Hello, Matt and then people are trying to take all the what's the best led to get the revenue I mean, the way I see any of that.
General bias calculation.
You will probably have to spend more I can't get them done twice right.
So you would have to pay for it for now actually reached.
Wish you all decided by actually use a painful and it doesn't no extra cost for us, which is the which is against but we may in the future I'll choose who actually and has.
Directly natively integrated well with OBL cost goddamn way, well predict to get that back by advertisements and welcome ladies talking I'll say exactly how we're trying to do.
It shows a walk in the process.
But the way I think we are ramping up a little optimistic about it's going to be positive to the whole.
Too often.
Understood. Thank you and my last question here is you know I can't appreciate the.
The narrowing of our full year guidance, but with a strong performance in the first quarter, just wondering why why not raise it as well or is it maybe because.
It's probably best to be somewhat cautious still or just any thought behind that would be great.
In front of me here I can open.
To be cautious in setting expectations with our guidance.
Came in ahead of Q1, but.
But we also observed that it is a quite volatile macro environment and sort of the.
The companies that relate to.
Moving parts. These days. So this will be preferred to keep the high and stable there's always already good headroom between the midpoint and.
Top of our range.
And for now we listed.
Full range on EBITDA and stuff.
Mhm.
Okay got it yeah, and plasma and just guided two months ago.
Yeah.
Makes sense, okay. Thank you guys.
Yeah.
And we'll take our next question from Mark Argento with Lake Street.
If I <unk>.
<unk>. So so I would say definitely only about this evening too long and way <unk> <unk> you know like is it two days ago, and why I wasn't onto something today, how to make a notice and all of the ziad related right. So I think the past 100 deal and people well the <unk>.
Use of it but I definitely think if you're gonna stay and we're definitely think that also is going to be a key component and the carry all over the all of this all based on a bunch of attitude or anything <unk>.
But as well so you <unk> very very heavy mountains would probably most useful activities cross <unk> and hopefully we can show more in the next that it pulled up there it is.
That's that's helpful. Helpful for just a couple of quick ones on the numbers I saw that there was.
2.4 million dollar credit loss that ran through the income statement, maybe just touch on that quick.
Yeah sure <unk> is predominantly from one customer is very unusual for US you can Virginia.
Very low but issues.
But we took a permission for one customer.
Well of course, we need the intent to.
<unk> all approaches to to get disconnected, but we just didn't want the exposure.
And then you also mentioned in a marketing spread you guys haven't had to spend as much what would you anticipate to kinda generate.
The the utilization or the the revenue maybe talk to the dynamic there is it you know.
Just a more favorable environment for bars of.
Of you know ads or what what's going on that's allowing you guys to kind of consistently not have to get his aggressive with the market and spent.
Alright, I can go first so so I would say yeah pricing is one factor.
If you you're over here.
Approximately around a third there's also been a lot of bus around the browser space around upfront and essentially a lot of indirect promotional plus which which just allowed us to to to spend less than we had expected and decor you still maintain.
<unk> are full year marketing budgets that'd be that's a song mentioned and we do have a lot of <unk>.
<unk> coming up Intermarket, an immediate we want to take advantage.
Off of all marketing opportunities to race very so we're going to surround dose.
[noise] I appreciate it thanks, guys nice corner of good luck the rest of the what is your.
Thanks.
Thank you once again, if you would like to ask a question. Please press star and one on your Touchtone phone.
We'll take our next question from Alicia Yeah with Citigroup.
Hi, Thank you have a good evening on song on Friday, Thanks for taking that question his contract.
Two questions first on the <unk> is that say I can say it is mainly coming from the strong the outperformance after advertising rather than you're more than to search for Avenue.
And then second question is the I didn't follow up on the AI. The checks you can keep I know, that's probably more unlimited data at this point that if you can elaborate any netflix that you have seen is that more <unk>.
You have already seen some improvement and then also April to get.
Get more use H it comes on your Internet as well and then.
You.
You also mentioned on the total at my high for but I just wanted to to to think about how we translate into a bad.
Types of all that time on.
On top of it for your new state your recommendation checking alrighty.
Quite a lot of like you know kind of the AI algorithms.
By applying check G D T.
Will that actually but into your new recommendation pocketing.
So if you can elaborate a little bit on that will be helpful. Thank you.
Alright, Lisa I I can assist the opened it was the first part of your question on you guys are so yes, we did see in particular advertisement come in.
Dictations in the first quarter, we expected seasonality, which would be song.
It performed better than what we expected. So overall I think they're they're coins at the same time, we do like to keep the is still a bit of a wide range seeing that.
Seeing that there's <unk> at a scale very quickly and cause we want to we wanted to make sure that that will be delivered.
We have guided.
And then I think I'll hand, it over to song fully.
Netflix and I.
The noose versus a.
Yeah, <unk> <unk>, yeah. So I'll just say that <unk> has received just normal easily interest both of <unk>, which is which is trying to stick to the policy iPhone flush. So that is what we can see a I think I'm in <unk>.
Behaviour also yes, we'll see the ads you about <unk>.
<unk>.
Well you actually use it yeah, and it's a it's a very helpful tool and you know <unk>.
<unk> tell me about your engagement that also potential Amy attention <unk>. The only thing is that for now the central sizes. The rest of the small because way COVID-19 into auto accident <unk>. So we feel appropriate dental staged home a diet will might actually goes out to a big old, yes, but without the <unk>.
<unk>.
And like I guess at the same when it comes to a month is a shame that.
Maybe I'll have some ideas overhaul potentially can be <unk>.
But like again to spell out to Coleman died while they actually have an option the thrift shop, and maybe just a quick lines. All neils. So I would say that first of all I'll call says the prediction now what are the about the meals that <unk> Dizzy decision, making the I instead of January so.
So it's a bit different than what's tragedy has been about so does it <unk> two two different branches them down and.
He tried to relevant to that you'll have already used <unk> as well quite extensively emails can items because they they will definitely be helpful to you know help or the January thing all <unk>.
<unk> <unk> <unk> and the death, well addressed night, the the industrial they'll as well and would love to be loved it out and move on it. So so again very optimistic about the potentials of <unk> also nails and contact the general even though the appeal yeah <unk>.
<unk> click parties actually more decision making that.
Mmm, Okay, alright, that's great. Thank you.
It appears that we have no further questions at this time I will now turn the program back over to <unk> for additional or closing remarks.
Sure. So yeah like again, thank you again every local you'll continue to support and interest ultra.
We believe we will once again set the records for all revenue and profitability put into the tree.
<unk> the benefit of the local mall employees also around the world and and I would like to possibly also sent them for their contributions.
Looking ahead I'm most excited.
<unk> and also <unk> initiatives.
And look forward to <unk> would you is it <unk>.
We appreciate your time and look forward to speaking with you again in the future.
This does conclude today's program. Thank.
Thank you for your participation you may disconnect at anytime.
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