Q3 2023 Opera Ltd Earnings Call
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Welcome to the Opera limited third quarter 2023 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 to ask a question. During this period you will need to press the star one.
Your telephone keypad, if you would like to remove yourself from the queue. Please press the pound key please be advised that today's call is being recorded lastly, if you should require operator assistance. 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 as usual I have with me today are co CEO song Lin and our CFO prototypical Tim.
Before I hand, the call over to song Lin I would like to remind everyone that the conference call today, the company will be making statements about 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.
Do we 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 you may refer to the safe Harbor statement on 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 that are prepared and presented based on Ifr S. We believe that the use of our non I FRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and true.
These measures should not be measured in isolation or as a substitute for financial information prepared in accordance with Ifr at we have also posted unaudited quarterly historical financial results of opera on our Investor Relations website will be live posting highlights Nicol remark Twitter account at Investor Opera. So please follow.
Along there during the call and in the future with that let me turn the call over to our co CEO song Lin who will cover our third quarter operational highlights and strategy and then further we will discuss our financials and expectations going forward.
As long as the call. This morning, and it has voice gives out I will step in and finish his prepared remarks, if necessary. So.
Oh, Yeah sure. Thank you, Matt So I'm going to call I Hope my boyfriend would come into sexy, but anyway.
Thanks, everyone for joining us today.
We are very proud to announce falloff saltwater result led bulb.
Adjusted EBITDA exceeding the high end of our guidance ranges and our business and product lineup has been a struggle as more strategic than ever.
In the fourth quarter <unk> generated $102 6 million in revenue compared to the 98 two.
We had guided.
Box I'll relay those conservative on a whole, 20% plus top line growth.
Well as the milestone of exceeding 100 million.
In our quarterly revenue.
What's even more exciting.
Our performance was fueled by an accelerating business strengths.
During the quarter, adding to the trajectory and potential of <unk>.
You will see all of the trust the guidance ranges for the year in Q4 now even begin about the high end of ranges.
For both revenue and adjusted EBITDA.
So the household revenue components is visible in our adjusted EBITDA.
And $23 8 million.
23% margin compared to the.
$18 five to Centerpoint.
<unk>.
Profit performance was in other words, even stronger than the revenue over performance.
T O.
Product driven strength, leading to lower market.
Thank you.
So the old way continue to credit outside of Nashville, some fees to our ongoing focus on growing the highest value loss.
With careful cost management.
Sale of our user base that kind of lift are you going to continue to increase in the corner, which in turn contributed to an awesome Grosso, 11%.
Population of the planet portal or 24% year over year to a new high at $1.
Somebody wants it.
Advertising revenue grow 24% compared to last deal representing 39% of total revenue.
Growth was fueled by a healthy combination of Crazy, Colorado advertising revenue from a powerful.
Which represents the majority of our advertising revenue.
Combined with the underlying growth.
He has extensive business.
Such revenue growth, 15% in the salt score all of which relates to our browse.
Also benefiting from our continued user growth and the rest of the market.
So there are three business topics that I would like to focus on today.
Oh, hey that initiatives.
Otherwise, you're seeing platforms and the timing of the opera Gx browser.
So I'll start with Eylea, Colin Connolly develops to browse.
But you don't need to adult directly monetize it and either if it is holiday Inn.
Integrating the how can be the bras AI for all users.
Iraq is such a strategic.
Gross philosophy.
<unk> has the potential to greatly spend.
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That's very typical fatwa your loss.
So after all you mention of SUNFISH Brittany area to outerwear designed flashy Plaza Ultra one.
And two opera for Android.
<unk> continued to roll it out to a profile S and opera Gx.
Operator: Please stand by, your program is about to begin. Should you need audio and sustain today's program? Please press star zero.
Quarter.
The positive step this enables a lot of sentiment about you love to take advantage of IRS exciting new features.
Matthew Wolfson: Welcome to the Opera Ltd. 3rd quarter, 2023 earnings call. At this time, all participants are in your listen only mode. After the speakers presentation, there will be a question and intercession. To ask a question during this period, you will need to press the star one on your telephone keypad. If you would like to remove yourself from the queue, please press the pound key. Please be advised that today's call is being recorded.
Being an independent Nebraska, so offer that also is the flexibility.
Walk me, though the reality partners is a journey I space and does not lock us into any one specific not negligible, though all emmis specific source of information.
He's buildup across all of them compose our architecture, which allows it to tap into various language models.
Operator: Lastly, if you should require operator assistance, please press star zero.
Like Oh capacity between mobile and to gather all the information from the web.
Matthew Wolfson: I would now like to turn the call over to your speaker today, Matt Wolfson. Head of investor relations, please begin. Thank you for joining us. As usual, I have with me today our co-CEO Song Lim and our CFO, Frode Jacobsen. Before I hand the call over to Song Lim, I would like to remind everyone that the conference call today, the company will be making statements about future results and expectations which constitute forward looking statements within the meetings of the private security litigation reform act.
This makes its results both more up to date and accurate.
Well for one also let you do more.
With less time.
Matthew Wolfson: Such statements are based on current expectations and how we perceive the current economic environment and how we subject to economic competitive and other uncertainties and contingencies beyond the control of management. You should be caution that these statements are not guarantees of future performance. You may refer to the state harbor statement in the company's earnings release for details. Our comments are today will also include non-IFRS financial measures, including adjusted EBITDA, which are different from our consolidated financial statements that are prepared and presented based on IFRS.
Fiona technical skills and mechanical.
It comes with a set of tools that allow you to easily and refine your parish and great content, where the federal predefined probe you can't fall about Portland area with my style feature that lets you train your browser.
Right. Thank you.
It's never been Israel to life long pieces of cash from insightful reviews to elephant emails.
Complaints or unique style of lighting.
Being able to effectively interact with AI is quickly becoming an essential scale.
Now lets people easily place you might get to watch they're looking for ways that you've seen such sharp information okay.
Matthew Wolfson: We believe that the use of our non-IFRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be measured in isolation or as a substitute for financial information prepared in accordance with IFRS. We have also posted unordered quarterly historical financial results of Opera on our Investor Relations website.
A piece of content.
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Admittedly increase their social virus.
Page deals for fishing.
Still way off only getting started.
Walt is only get them to get used to take care of the voltage of the med Tech knowledge.
Matthew Wolfson: We will be live posting highlights from the call from our Twitter account at Investor Opera, so please follow along there during the call and in the future.
Well I look forward to keeping you posted on.
Matthew Wolfson: With that, let me turn the call over to our Co-CEO Song Lim. We will cover our third quarter, operational highlights and strategy, and then Frode will discuss our financials and expectations going forward. Song is a call this morning, and if his voice gives out, I will step in and finish this for every market necessary.
All of our milestones.
Let's all this grow the origination.
And the capabilities.
The daily Montana indirectly bulge in terms of attracting new ddos and increasing our engagement.
Song Lim: Song? Yes, Sean. Thank you, Matt.
In turn benefits our existing subs.
Song Lim: I'm going to call so I hope my voice is coming to 60, but anyway, thanks everyone for joining us today. So in the short corner, we generated 1.2.6 million revenue, compared to the 98, to call your million weight, half-guided. That marks our 11th percentage of the total of 70 percent class. For client growth, as well as the milestone for exceeding 100 million of corporate revenue. What, even more exciting, that the overall performance was filled by an accelerating business strength, we're using the corner, adding to the trajectory and potential of renounce the hands.
And advertising partnerships.
There is no need to lease structure those deals could benefit.
Looking ahead, we're all.
Excited about how our assay used car T cells.
Directly translate to monetize the bull enrollment in accommodations.
What about your drug or any context around this.
And then essentially talked about the monetization as well done to all advertising technology, which I highlight so it is a key enabler for vault revenue trajectory.
So often products are used every day by hundreds of millions of engaged to do those.
And in 2019, you would have non smoker ACH.
Perhaps you got online advertising platform.
That helps advertisers all maximize the performance of their campaigns and increase engagement rage target audiences.
So through real time bidding platform also come back to it possibly inventories.
Song Lim: As you will see, I'll refresh the guidance when it's 40 years and 24. Now, even begin about the trial, I end up ranges for both revenue and adjust even that. So, the house of our revenue overperformance is reasonable, you know, adjust the data which coming in 23.8 million, 23% margin, compared to the 18.5 to 20.5 million, we have died it. Both of the overall performance was in other words, even stronger than the revenue overperformance, fueled by product driven strength leading to lower maximum than expected.
Our advertising partners to rich Internet is also worldwide.
Including hundreds of millions of openness.
Ultra has been polished partners to achieve key performance indicators.
Such as extended rich.
August rotation.
Sprint brand recognition and a favorable return on ad spend.
So as a result of a F channels to the loss of the largest advertising dsp's agencies and equal months partners across the globe.
To give you a sense of its rich, we're not handle volume of $3 8 million accurate Chris consistent.
Song Lim: So, overall, we continue to create about the financial success to our ongoing focus of growing the highest value you know, combined with care for cost management. We'll share about the database data, whether you know, continue to increase in the corner, which, in turn, contributed to an average growth of 11% compared with the prior quarter, or 24% year-over-year, to a new high of $1.41. Out of the revenue growth, 24% compared to last year's revenue, 59% of total revenue.
Peak times.
You asked about what the biggest play off income of all this rich.
That being said and then in another company with a very large user base to start with.
We feel that we are still at early stage of monetization.
And look for a nice growth trajectory ahead.
And then finally, I would just coming together and the opera Gx browser.
So our <unk> user base.
Opinions to impress.
Another 10% sequentially to 26 million and then you delivered a solid quarter.
Song Lim: The growth wants to be about the housing condition of increased total annual advertising revenue from our growth, which represents the majority of advertising revenue combined with the online growth in our audience exchange business. Such revenue growth, 15% in the short corner, all of which relate to our growth also benefiting from our continued growth in Western markets.
You've got Apple was up 60%.
Sequentially or swapped at 3% year over year ill now annualized.
Tradeoffs into license.
Good.
Continuing to be our best monetizing product.
Thanks to our passionate team all the day loss engineers design more and more they haven't built in Nebraska that deliver that amazing and unique experience on all fronts.
Song Lim: So, there are three business topics that I would like to focus on today. All AI initiatives, all advertising platforms, and familiarly approach GX growth. So, I was happy with ARIA.
Not only about what projects Probot flagship features such as CPU and they rather use edge controllers.
They do this year alone.
Having introduced several military shows that could bring customization.
Song Lim: How are you going to develop the growth of AI? Even if we don't directly monetize it, and even if it is all it is creating the ultimate growth of AI for all you know. Because ARIA is such a strategic ARIA on focus for us that has the potential to greatly expand your services, that may take a thought to our users. So, after our initial success, bringing ARIA to our redesigned flagship growth offer one, and to offer for Android, we continue to roll it out to offer for iOS, and offer GX in the short corner.
Integration.
Relative to and parallel level.
These future game off and they'll activate influencers and streamers something to talk about as it builds the brand.
And as a brand strategy all of our projects in <unk>.
We are very proud off.
Our goal is to create the marquee gaming brand and the central government.
E gaming ecosystem and become limited.
So that's why opera Gx maintains one of the largest diesel and some of the rock.
Collaborates with Saddam's altogether leaves us, including some of the biggest names in it.
Song Lim: And the focus step enables a last segment of all you know, to take advantage of ARIA's exciting new features. Being an independent browser, all for us, also a good flexibility to work with the variety of partners in the GMAI space, and does not knock us into any one specific last language model or any specific source of information. I will help you build up Opera's own composal architecture, which allow you to tap into various language models like OpenSGBT model and together live information from the web.
Space.
And provides again Michel Martin Midland downloaded App for indie game development.
On the ambition to giving came off of a platform by which they can play games.
So <unk> now has a very positive ruling 10 milligram patents, a bespoke trades and they function well it piece by itself, becoming a category leading brand platform.
An important channel for building awareness and getting an idea of our gross photo.
Is that a huge achievement for a browser company.
Finally, it is important to note that.
Song Lim: This makes its results both more up-to-date and accurate. Opera 1 also lets you do more with AI with less time. See all technical skills and next effort. Opera comes with a set of tools that allow you to easily refine your queries and create content with a set of predefined probes. You can follow post-med career with a mind-spire feature that lets you train your browse AI to write like you. It's never been easier to write non-pieces of text, from inside for reviews to add up in emails or spell complaints, or in your unique style of writing.
Yeah.
Majority of it all of opera Gx, she loves and J D.
And so have only just begun.
To develop and brand loyalty.
Legacy Gx, he's taking a strong position.
They are also the most tech savvy generation yet.
Ladies and DP stoves and activity.
Building resilient communities.
<unk> insurance.
Ross great distances.
So wildly muscle and fat and to remain a key focus.
Sentiment based offerings like.
We also see a broader opportunity from this strategy as well so wagering content that has paid.
Song Lim: Being able to effectively interact with AI is pretty easy to tell me and it's easier to scale in life. Opera lets people easily and pretty much get to what they are looking for, whether it's in such short information or creating a piece of content. So, Opera has proven to be a hit-win resource and they are clearly enjoying the experience as evidenced by a myth in increasing the social power and taking those professions.
Caleb AI based content, they're gonna nation platform too.
Dedicated apps for so-called patents granted patents or hyper local news.
On the browser side, just not even said Campbell.
Hospital waste chance they'll come to put chess walk into the browser.
So ladies custom built for both desktop and mobile products.
Yes.
Can now enjoy it on Saturday the game.
Song Lim: Still, we are only getting started and the world is only getting to get used to taking advantage of the mere technology. We look forward to getting you posted on our area milestones as we solve this global richness, awareness, and the capabilities. Today, we want to interact indirectly both in terms of tracking new results and increasing our new engagement, which in turn benefits our existing search and advertising partnerships. There is no need to restructure those deals to benefit. Looking ahead, we are excited about how our last useful features can directly translate to monetizeable informed recommendations through what about broadly context awareness.
Uh huh.
Plus desktop Russell Cieslak pulp I can now resides in the sidebar, although customize the washing of our Brussels.
You can't solve puzzles.
The battery or rivals while you browse cigarette.
Oh and you also got a chest she may football.
<unk> waste chancellor, they could articles videos and informational content.
So although we didn't do we have the best product and take advantage of lifelong learning.
History.
Fully offsetting a very strong position to continue to deliver great new products.
The strong financial results as well it looks to me at all.
So with that let me turn the call to Florida.
Song Lim: And then since we talk about monetization, I welcome to our advertising technology, which I highlight. So, it is a key label of our ready-made trajectory. So, Opera products are used every day by hundreds of millions of engage individuals.
Thank you song starting with our financial results, we are very content to see how our product strengths and growth strategy translate into yet another record quarter.
Year over year growth rates for both search and advertising remain at the level, we achieved in the prior quarter, which is well ahead of what we had guided.
Song Lim: And in 2019, we have announced Opera ads. Opera ads is an online advertising platform that shouts advertising, maximizing the performance of your campaigns, and increasing engagement with the attacking audiences. So, through real-time bidding, the platform also connects with path-million entries, allowing our advertising partners to reach Internet users worldwide, including our hundreds of millions of operators. Opera ads need power partners to achieve performance indicators, such as extended range. Prologue of the expectation, widespread grant recognition, and a terrible return of absent.
The effects that we saw a stronger than expected intra quarter accelerations from months to months bodes well for our outlook as you can see in our refresh guidance today.
All in all we are very pleased with the resilience of our growth model and the trajectory of our company even in a volatile macro environment.
We continue to benefit from our user shift towards higher RP populations, whether geographic or song Lin talked about with gamers.
The rotation of our user base has low monetized users churning out and higher monetize users coming in.
Song Lim: So as a result, offer app channels to the world's largest advertisers, BSP's agencies, and e-commerce partners across the globe. To give you a sense of its rich, we now handle a volume of 3.8 million app requests, consistent and peak times, making us among all the biggest players in terms of audience rich.
As a result, we came in above the high end of our guidance at $102 6 million in revenue or 20% year over year growth.
On a constant currency basis, our year over year growth would have been about five percentage points higher or 25%.
In terms of profitability, we benefited both by our revenue over performance and the fact that we did not fully utilize the buffer we had built into our marketing spend expectations.
Song Lim: That being said, and in the company, we are very much, super based, to start with, with you that we are still at a rather early stage of monetization, and look for mass growths to generate ahead.
Consequently, adjusted EBITDA also exceeded the top end of guidance at 23.8 million or a 23% margin.
Song Lim: And then finally, I will just come into getting, and offer GX Pro also. So, our GX Pro base continues to impress, up another 10% sequentially, to 26 million NAU, during the short quarter. The app was up 60% sequentially, or 23% year-over-year, now, and then annualized $3.00 to the license for MAU, continuing to be our best monetizing product. Thanks to our passionate team of gamers, engineers, developers, and more, we have built a browser that delivers an amazing and unique experience, our offerings.
We generated operating cash flows of $16 2 million in the quarter and our free cash flow from operations was $13 4 million.
The revenue strength within the quarter increased our accounts receivables, but that cash flow impact as a consequence, we are happy to live with.
During the quarter.
We returned $53 million to our shareholders.
Our first regular dividend was $36 million of which $11 million was cash to a D. S holders and $25 million was offset against our star ex receivable.
As a reminder, our remaining 32 million receivable from the sale of Star X, which is presented separately on our balance sheet will continue to reduce the cash component of upcoming dividends until it hasn't been fully offsets.
Song Lim: Not only that offer GX, but flagship features, such as CPU and RAM usage controllers, but that offer you this year alone, we are having to build several features that can bring customization and the duration of the abilities to and our parallel level. These features give gamers and their favorite infrastructure and streamers something to talk about, and they build the brand. And the brand, the brand, or both of GX, is something we are very proud of.
In addition, we repurchased $1 24 million ABS is for a total spend of $17 million that translates to a recurring annual dividend yield of 6% on the repurchased eight yes is benefiting all of our shareholders overtime.
Song Lim: Our goal is to create the multi-gaming brand and the potential of a driving gaming ecosystem and community. So, that's why offered GX maintains one of the largest and least-consumers around, collaborates with problems of gaming with results, including some of the biggest names in the space, and provides a game metal, a multi-million-dollar adapt for indie game development, or in addition to giving gamers a platform on which they can play games. So, offered GX now has a very fast-reliability of fans of Discord, Twitter, and TikTok.
Finally, we are very pleased about the nearly 40% increase in the free float of our stock following the secondary offering conducted at the end of the quarter.
As a result of our actions over the past 12 months. The free float has increased from 14% to 28% and our stock is also far more liquid.
Now turning to our updated guidance for the full year 2023, and the fourth quarter.
Throughout 2023, we have been able to grow faster and more cost effectively than planned at the start of the year translating to both higher revenue and higher profitability.
Song Lim: Well, it is by itself becoming a category-medium brand platform, and an important channel for building progress and stimulating our growth further, that is a huge achievement for a browser company. Finally, it is important to note that the vast majority of offered GX heroes are GZ, and so have only just begun to develop brand molecules in which GX is taking a strong position. They are also the most tech-savvy generation yet, leading beauty scholars and estinitiate for building resilient power line communities around their users across great distances. So while gamers are and tend to remain our key focus on segment-based offerings, we also see a broader opportunity from this strategy as well.
We approach the second half of the year with caution but are pleased to observe a very strong trajectory even in a volatile macro picture.
As a result, we are on track to exit 2023, and a great position as we look to the future.
For the fourth quarter, we guided revenue to $110 million to $113 million or up 16% year over year at the midpoint and.
And adjusted EBITDA of $22 million to $24 million or 21% margin at the midpoint.
Both represent substantial lifts versus our previous implicit Q4 guidance, increasing our guidance year over year growth rate for Q4 by six percentage points and our adjusted EBITA margin by one four percentage points at the midpoint.
Consequently, our full year revenue guidance is now $394 million to $397 million in its entirety above our prior range of 380 to $3 $90 million and representing 19% growth at the midpoint are.
Song Lim: So waiting content, we have a panel of AI-based content-based innovation platforms, two dedicated apps for sugar fans, credit fans, or hydro-local news.
Song Lim: On the browser side, just now you mentioned more, we have partnered with Chefs.com to put chefs right into the browser. So with custom builds for both desktop and mobile products, chefs in Suggest can now enjoy their favorite game, whatever they are. We offer special browser a Chefs.com icon now resides in the side of our customizing motion of our browser. So you can solve panels and battery arrivals while you browse the web. Opera for Android also got a Chefs scene made for all, complete with Chefs related articles, videos, and informational content.
Our full year adjusted EBITDA guidance is now 88 to 90 million also in its entirety above our prior range of 80 to 84 million and representing a 23% margin at the midpoint.
Our cost expectations have remained consistent all year, but with less marketing spend then built into our guidance.
We still expect Q4 to represent the year high in terms of marketing expenses and to exceed $30 million of quarterly spend though our full year marketing cost is now likely to come in below full year 2022, a great achievement in the context of our revenue grow.
Song Lim: So overall, we have the best product and technology line-up in corporate history. Putting up in a very strong position to continue to deliver great new products and strong financial results as we look to implement all the ideas.
Yes.
Our expectations for the sum of cost of revenue items remain in the mid Twenty's in terms of percentage of revenue for the year, but will likely be up a couple of points versus Q3 in the seasonally strong fourth quarter.
Cash compensation expense would likely return to around Q2 levels in Q4, and we maintain our expectation of a very modest annual increase for the year as a whole.
Matthew Wolfson: So with that, let me tell you all about two things.
Frode Jacobsen: Thank you, Song. Starting with our financial results, we are very content to see how our product strengths and growth strategy translate into yet another record quarter. Year over year growth rates for both search and advertising remain at the level we achieved in the prior quarter, which is well ahead of what we had guided. The fact that we saw a stronger than expected infer quarter acceleration from months to months, both well for our outlook as you can see in our refreshed guidance today.
All other opex items before adjusted EBITDA are also expected to somewhat declined sequentially in the fourth quarter and to come in at about $32 million for the year as a whole in line with prior expectations.
In conclusion, the third quarter false nicely in line with our track record of achieving and exceeding our targets.
As discussed in prior calls our broader opportunity remains very attractive and very exciting and we will continue to pursue it.
Frode Jacobsen: All in all, we are very pleased with the resilience of our growth model and the trajectory of our company, even in a volatile macro environment. We continue to benefit from our usership towards higher RP populations, whether geographic or as Song then talked about with gamers. The rotation of our user base has low monetized users turning out and higher monetized users coming in. As a result, we came in above the high end of our guidance at 102.6 million revenue or 20% year over year growth.
We look forward to keeping you posted so with that I'll turn the call back to the operator for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone keypad to withdraw your question. Please press the pound key.
I think your question, we ask that you. Please pick up your handset to allow optimal sound quality well take our first question from Mark Argento with Lake Street. Your line is open.
Yeah. Good morning, guys nice quarter, just a couple of quick questions.
You saw some really nice growth and strength in the AD business this quarter.
Frode Jacobsen: On a constant currency basis, our year over year growth would have been about five percentage points higher or 25%. In terms of profitability, we benefited both by our revenue overperformance and the fact that we did not fully utilize the buffer we had built into our marketing spend expectations. Consequently, adjusted EBITDA also exceeded the top end of guidance at 23.8 million or 23% margin. We generated operating cash flows of 16.2 million in the quarter and our free cash flow from operations was 13.4 million. The revenue strength within the quarter increased our accounts receivables but that cash flow impact is a consequence we are happy to live with.
You know as you think about the opportunity and the AD market, especially with <unk> growing.
Nicely, what do you see that kind of mix going forward of kind of add versus search revenue I think in the.
Quarter AD revenue is almost 60%.
Should we think about that mix going.
Going forward.
Yeah.
Okay I can start.
And I think we continue to so we're very pleased with the core strength of both revenue streams.
Advertising revenue at some point past, 50% now it's close to 60% of revenue.
And a scaled even faster than search and I think as a bigger picture that is probably.
The trend that we would expect for sort of the near to mid term.
Frode Jacobsen: During the quarter we returned 53 million dollars to our shareholders. Our first regular dividend was 36 million of which 11 million was cash to ADS holders and 25 million was offset against our Star X receivable. As a reminder our remaining 32 million receivable from the sale of Star X which is presented separately on our balance sheet will continue to reduce the cash component of upcoming dividends until it has been fully offset.
And then just a quick follow up there in terms of the Gx browser and.
Excuse me the ARPA growth, but have you seen on that product in particular is that mostly domestic in western markets or what's kind of the mix there and in the end.
Are you how are you seeing that our prudent move up as aggressively as it has.
I think.
The Gx user base is is the splits between western and in developed markets, perhaps somewhat more tilted to western than the user base as a whole, but it taps into high value segments also in emerging markets, which is participating in and it's strong ARPA.
Frode Jacobsen: In addition we repurchased 1.24 million ADS for a total spend of 17 million dollars. That translates to a recurring annual dividend yield of 6% on the repurchased ADS benefiting all our shareholders over time. Finally we are very pleased about the nearly 40% increase in the free flow of our stock following the secondary offering conducted at the end of the quarter. As a result of our actions over the past 12 months the free flow has increased from 14% to 28% and our stock is also far more liquid.
I think we've been we've been pleased with the Rfps performance within both western and non western markets on.
On the product.
It still remains a bit under.
Under indexing in terms of AD monetization. So back to your first question. That's also an example of the lever for driving faster growth on the advertising side looking at.
Great and just one last one for me in terms of the marketing spend in the quarter came in a little below what you guys had anticipated.
Frode Jacobsen: Now turning to our updated guidance for the full year 2023 and the fourth quarter. Throughout 2023 we have been able to grow faster and more cost effectively than planned at the start of the year translating to both higher revenue and higher profitability. We approached the second half of the year with caution but are pleased to observe a very strong trajectory even in a volatile macro picture.
You know, what's the kind of the key Kpis you guys are keeping your eyes on there in terms of conversion rates or monetization rates.
Have you either either leaning in or are leaning out that spend and any kind of any quarter.
It's all ROI ROI based and to some extent also just our own capacity of capacities to drive sort of the brand efforts that we do so as Tom talked about for example for G X.
Frode Jacobsen: As a result we are on track to exit 2023 in a great position as we look to the future. For the fourth quarter we guide revenue to 110 to 113 million or up 16% year over year at the midpoints and adjusted EBITDA of 22 to 24 million or 21% margin at the midpoints. Both represent substantial lists versus our previous implicit Q4 guidance increasing our guided year over year growth rates for Q4 by 6 percentage points and our adjusted EBITDA margin by 1.4 percentage points at the midpoints.
We have built a very sizable presence also in social media around the products and I think the combination of the branding activities and the more tactical sort of distribution campaigns and distribution activities. It is very important for the best possible ROI on their spend.
For Q3 is a quarter are we more or less came in.
S.
As expected, which was a bit below what we had guided in terms of spend just because we like to always maintain a buffer that I think we've also historically talked about.
Great. Thank you.
Thank you we will take our next question from Lance Vitanza with Cowen Your line is open.
Frode Jacobsen: Consequently our full year revenue guidance is now 394 to 397 million in its entirety above our prior range of 380 to 390 million and representing 19% growth at the midpoints. Our full-year adjusted EBITDA guidance is now 88 to 90 million, also in its entirety above our prior range of 80 to 84 million and representing a 23% margin at the midpoints. Our cost expectations have remained consistent all year but with less marketing spend than built into our guidance.
Hi, Thanks, guys.
Great quarter, a couple of questions here, the first with respect to the focus on growing the highest value users did.
Did you mentioned what proportion of your M may use are in those markets today and and if yes could you repeat that and then where do you think that that sort of split could ultimately go as we think out.
Three 510 years.
Airlines, Yeah, so at least in our investor presentation.
I'm not sure if it's updated online yet, but it you'll see it up that it's that so for now western users represent 16% of the user base up from 15% in the prior quarter.
Frode Jacobsen: We still expect Q4 to represent the year high in terms of marketing expenses and to exceed 30 million of quarterly spend, though our full-year marketing cost is now likely to come in the low full-year 2022, a great achievement in the context of our revenue growth. Our expectations for the sum of cost of revenue items remain in the mid-20s in terms of percentage of revenue for the year but will likely be up a couple of points versus Q3 in the seasonally strong fourth quarter.
It's a.
It's not such an excellent stat, just because you know it typically moves with Destiny and then every couple of quarters, maybe that we've been adding a point.
But it is up relative to the Q2 average and I think you'll also see in the timeline. So I think we are.
We are the number of users over time in this year.
Unlike the past many years.
We had a growth also from Q3 to Q4.
We're normally because of seasonality Q3 relative to Q2 is quite flat.
Frode Jacobsen: Cash compensation expense will likely return to around Q2 levels in Q4 and we maintain our expectation of a very modest annual increase for the year as a whole. All other off-ex items before adjusted EBITDA are also expected to somewhat decline sequentially in the fourth quarter and to come in at about 32 million for the year as a whole in line with prior expectations.
I mean is the way to think about that though I mean 15, 16% regardless of those don't sound like Big numbers does that suggest that there is a lot of headroom. There for continued growth I mean do you see.
Is the target to get to I don't know 30%.
70% of that kind of a splitter or where should we be thinking this could kind of go over time.
We don't really have a very defined ceiling, just because we still have the Ah <unk>.
Frode Jacobsen: In conclusion, the third quarter falls nicely in line with our track record of achieving and exceeding our targets. As discussed in prior calls, our broader opportunity remains very attractive and very exciting and we will continue to pursue it.
Perception that we remain still quite small company you talk a bit about the sizing.
Opera Gx as well so but looking ahead and also looking past for the past couple of years. Our strategy is to keep growing in western markets. We continue to have very good momentum on that and to grow high value users broadly such as gamers for example.
Matthew Wolfson: We look forward to keeping you posted, so with that I'll turn the call back to the operator for questions. Thank you.
Operator: As a reminder to ask a question, please press the star one on your telephone key pass. To withdraw your question, please press the pound key. When closing your question, we ask that you please pick up your headset to allow optimal sound quality.
Okay on the marketing spend my question on marketing spend.
Mark Argento: We'll take our first question from Mark Argenta with Lake Street. Your line is open. Yeah, good morning guys. Nice quarter. Just a couple quick questions. Obviously, you saw some really nice growth and strength in the ad business this quarter. As you think about the opportunity in the ad market, especially with GX growing as nicely, what do you see that kind of mix going forward of kind of adverse surge revenue? I think in the quarter ad revenue is almost 60%. How should we think about that mix going forward?
Due to lower than expected a little bit lower than our estimate and just to what extent was that perhaps driven by timing and maybe a decision to just sort of push some of the marketing spend from <unk> into <unk> is there any of that that we should be thinking about I mean, I know you mentioned that youre going to be a little bit over $30 million in them.
In the fourth quarter I'm, just wondering if that's a result of maybe some investments that got pushed.
No, it's not really a timing item when you look at the implicit.
The marketing guidance for for the next quarter. It. It's the same to a bit down relative to what we had in our prior implicit Q4 guidance.
Frode Jacobsen: Again, I can start. I think we continue to, so we're very pleased with the core strength of both revenue streams. Advertising revenue at some point past 50%, now it's close to 60% of revenue and is scaled even faster than search, and I think is a big picture that is probably the trend that we would expect for us to look the near to midterm. And then just a quick follow up there in terms of the GX browser and the, you know, the, excuse me, the RPU growth that you've seen on that product in particular, is that mostly domestic and western markets or what's kind of the mix there and, you know, are you, how are you seeing that RPU move up as aggressively as it has?
Okay, Great and then last for me you talked about the stronger than expected.
Acceleration within the quarter as you go month to month, and this past quarter and I'm, just wondering clear clearly it sounds like products and technology at opera had a lot to do with that but was there. Perhaps also some improvement in the overall advertising backdrop that helped you or that was <unk>.
Proving throughout the quarter as well or maybe the way to phrase. It is is the macro backdrop, helping or hurting you these days, and which which which direction do you see that going.
I mean, the starting with the FX headwind. That's a that's worked against US for some time just due to the strength of the U S. Dollar I think we saw that headwind declined a little bit now, let's say only five percentage points in the quarter.
Frode Jacobsen: I think the GX user base is space between western and developed the markets, perhaps somewhat more tilted to western than the user base as a whole, but it taps into high value segments also in emerging markets, which is participating in a strong RPU. I think we've been, we've been pleased with the RPU performance within both western and non western markets on, on the product still remains a bit under, under indexing in terms of ad monetization so back to your first question, that's also an example of the lever for driving faster growth on the advertising side looking at.
But it remains a headwind and given our very global exposure for the AD market in particular song I don't I don't know if you want to comment on that.
Oh, Yeah, Yeah, Yeah, that's fine, but then I decided this myself it is not going anywhere else so box.
I think in general we see a good recovery of the travel agents is a very old Belgium, Q3 trend is very strong and to go like Okay. I tried to make the travel sort of benefited from that.
Especially also during the summertime right, which is we're trying to do country.
I think well see E.
You can almost towards the end of Q3 last time out and go back to sleep.
All right.
Good.
Yeah.
You know covenants or asking for it's also going to be are going to be okay.
Frode Jacobsen: Just one last one for me in terms of the marketing spend in the quarter came in a little below what you guys had anticipated. You know, what's the kind of the key KPI you guys are keeping your eyes on there in terms of conversion rates or monetization rates, you know, that kind of have you either, you know, you're leading in or leading out that spend in any kind of any quarter. It's ROI, ROI based and to some some extent also just our own capacity to drive sort of the brand efforts that we do.
So I think.
It's a noticeable largely see.
The rest are more like the second.
Great. Thanks, guys I appreciate the help.
Yeah.
Once again that is star one if you would like to ask the question well take our next question from Alex <unk> with Citi.
Your line is open.
Hi, and thank you. So good morning, Anglogold thing congratulations to the strong quarter and guidance.
So I just wonder I know I react is not directly monetize by now but just wondering.
Frode Jacobsen: So a song talked about, for example, for GX, we have built a very sizable presence also in social media around the products and I think the combination of branding activities and the more technical sort of distribution campaign. And distribution activities is, is very important for the best possible ROI on the spend. They for Q3 as a quarter, we more or less came in as expected, which was a bit below what we had guided in terms of spend just because we like to always maintain a buffer that I think we've also historically talked about.
How much of the strong performance in the third quarter are benefiting from the availability of army out there how big is that engagement that also lead to better monetization you talked about the increased time span. All also increased their inventory or even to Hyatt CPM. So any color that you can either quantify at all.
Frode Jacobsen: Thank you.
Kind of qualitatively comment the outwear.
Contributing to some of that strong.
Performance at <unk> and even some that are month over month are accelerating trends. So any color you can share would be great and then second I was also wondering.
Lance Vitanza: We will take our next question from Lance and Sensa with TV. How are your eyes open? Hi, thanks guys. Great quarter. A couple of questions here. The first with respect to the focus on growing the highest value users. Did you mention what proportion of your MAUs are in those markets today and if could you repeat that and then and where do you think that that sort of split could ultimately go as we think out, you know, three, five, 10 years?
Given eastern since our country on Baidu App CAC improvement.
Any preliminary color that you can share how would you expect revenue growth to be for next year. Thank you.
Tom do you want to comment on ARIA or.
Yeah, yeah, Okay. So I can call them to do so.
Lance Vitanza: Hey, Lance. Yeah, so I at least in our investor presentation, I'm not sure if it's updated online yet, but you'll see the updated stat. So for now, Western users represent 16% of the user base from 15% in the prior quarter. It's not such an excellent stat just because, you know, it typically moves with decimals and then every couple of quarters, maybe we've been adding a point, but it is up relative to the Q2 average, and I think you also see in the timeline.
So.
Yeah.
Super High level, I think Uh huh.
Also discussed this Greg so I would say the other effect of Iran can mostly.
But remarkably well of course.
Later in Hawaii.
Spend less.
Once again, the you know most of us that we want to so its very positive is of course to be called power has increased because of wellness.
You know that this is very attractive, but I'll just see it.
So it's quite similar as what we see on T X well the color. We gave me it's a very differentiating.
Lance Vitanza: So I think we, we, the number of users over time and this year is unlike the past many years, we had a growth also from Q3 to Q4. We're normally because of these analogy, Q3 relative to Q2 is quite true. I mean, is the way to think about that, though, I mean, 15-16% regardless, those don't sound like big numbers. Does that suggest that there's a lot ahead room there for continued growth?
And same applies around when it comes to let you know that as well. So those are that's number one so that has been very helpful. That's probably has already have some very positive I'm.
Very positive consequence of how we can be more profitable and this call is also that's good.
In the long run as discussed I think.
We do see it a chatbot increase engagement those ourselves boardrooms and others.
That's what they do but also has the magnetizable impact that I think Glenn let me do this but the more time also.
Lance Vitanza: I mean, do you see, you know, is the target to get to, I don't know, 30%, you know, 70% that kind of a split or where, where should we be thinking this could kind of go over time? We don't really have a very defined ceiling just because we still have the perception that we remain still a quite small company. We talk a bit about the size thing for our PRGX as well, so, but looking ahead and also looking past for the past couple of years, our strategy is to keep growing in Western markets. We continue to have very good momentum on that. And to grow high value users broadly, such as gamers, for example.
And those are in a listen potentials wakes Rob Walker as possible.
And then Alicia to answer or maybe the second part of your question I think it's it's still a bit too early to start giving guidance for 'twenty to 'twenty four mm. So we'll hold that back until our next call but.
We believe that sort of the.
The growth rate that we expect to be able to achieve in the fourth quarter is at least a nice.
Indication of the underlying speed speed up the business as it stands now.
Mhm I should thank you maybe just one last follow up.
Our Q, our EBITDAR guidance Corey.
Frode Jacobsen: Okay. On the marketing expense, and my question on marketing spend, do, you know, lower than expected, a little bit lower than our estimate, and just to what extent was that perhaps driven by timing and maybe a decision to just sort of push some of the marketing spend from 3Q and to 4Q? Was there any of that that we should be thinking about? I mean, I know you mentioned that you're going to be a little bit over 30 million in the fourth quarter.
Imply which obviously is lower than the first two quarters.
Ashish So I wonder if this is just more consolidated.
As a normal practice or is there some step up spending because you mentioned the sales and marketing will be in that study medium quantity run rate. So right. So it doesn't seem that there's any chaos aspect that stops spending about your out of pocket they eat.
Frode Jacobsen: I'm just wondering if that's a result of maybe some investments that got pushed. No, it's not really a timing item. When you look at the implicit marketing guidance for the next quarter, it's the same to a bit down relative to what we had in our prior implicit Q4 guidance. Okay, great. And then last for me, you talked about the stronger than expected acceleration within the quarter as you go month to month in this past quarter.
Yeah.
Yeah, correct, we've always had a lot of the marketing spend to increase at the year progresses, and as we build out and build more scale in the total, let's say machinery around our marketing activities.
So we've guided to exceed 30 million you'll come in.
The three four.
<unk> million above that wants to add up add up what we have in the guidance and comparing that to an average spend per quarter year to date, though below $27 million.
Frode Jacobsen: And I'm just wondering clearly, it sounds like products and technology at Opera had a lot to do with that, but was there perhaps also some improvement in the overall advertising backdrop that helped you or that was improving throughout the quarter as well? Or maybe the way to phrase it is, is the macro backdrop helping or hurting you these days and which direction do you see that going? I mean, starting with the FX headwind, that's worked against this for some time due to the strength of the US dollar.
Of course, it with we have maintained the average spend expectation for Q4, then the margin would would be far far higher.
Okay alright, thank you.
Thank you we have no further questions in the queue. At this time I will turn the program over to song Lin for any additional or closing remarks.
So Sean Thanks for that I think I'll just wrap it up.
Frode Jacobsen: I think we saw the headwind decline a little bit now, let's say only 5 percentage points in the quarter, but it remains the headwind given our very global exposure. For the ad marketing particular song, I don't I don't know if you you want to comment on that. Yeah, yeah, I would try, but then I like to say this myself is not going anywhere. So, but I would say I think in general, we see a good the recovery of the traveling, which is very well built in Q3. I think the rest are more accurate. Thank you. Great. Thanks, guys. I appreciate the help.
Thank you for all of your continued support and interest in Marlborough.
So much potential from Oprah and Randgold important right.
I appreciate your time today and look forward to reporting our progress and the next injunction.
And this does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.
Okay.
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Operator: And once again, let us start and one if you would like to ask a question.
Alicia Yap: We'll take our next question from Alicia Yap with city group. Your mind is open. Hi, thank you. So good morning and good evening. Congratulations to the strong quarter and guidance. So I just wonder, you know, I know area is not directly monetized for now, but just wondering how much of the strong performance in the third quarter of benefiting from the availability of area that help the user engagement that also lead to better monetization because of the increased time span or increase the inventory or even the higher UCPM.
Uh huh.
Alicia Yap: So any color that you can either quantify or kind of qualitatively comment where our area is contributing to some of that strong performance that you even see that month over month accelerating trends. So if any color you can share would be great. And then second, I was also wondering, even if this is also driven by the Act Act improvement, any preliminary color that you can share with us, how would you expect the revenue growth to be for next year.
Alicia Yap: Thank you. Do you want to comment on our area or? Yeah, yeah. Okay. So I can call them. So yeah, I'm more like super high level. I think. I also discussed it this quick. So I would say the only effect of our rent mostly available magically. Well, of course, you know, partner in a wide way. And you know, you know, you know, you must never want to. So it's very positive. Of course, because our area has increased people's awareness that, you know, that we do very attractive.
Alicia Yap: So it's quite a bit of a novelty. I mean, it's a very different setting. And then the clouds are around. We have a student that we can also those for this level one. So that has been very helpful. That's known probably has already have some very positive. Very positive consequence of how we can, you know, be more profitable in this corner. So that's good. You know, well, as discussed, I think. Wait, we'll do see it.
Alicia Yap: Travel increase on engagement. Those are so small. And others that we need to also have a marketable impact. But that I think when we produced the more time also knows about the potential. So it's where we're working with partners. And then Alicia to answer maybe the second part of your question. I think it's still a bit too early to start giving guidance for 2024. So we'll hold that back until our next call.
Alicia Yap: But we believe that the growth rate that we expect to be able to achieve in the fourth quarter is at least the nice indication of the underlying speed. Speed up the business as it stands now. Thank you. Maybe because one last follow up, the four QE data guidance and the midpoint imply which obviously is lower than the first three quarters that you already achieved. So I wonder if this is just more conservative as a normal practice or is it some step-up spending?
Alicia Yap: Because you mentioned the sales and marketing will be in the 30 million quarterly run rate, so right? So it doesn't seem there is any kind of unexpected step-up spending that you offer to eat for this quarter. Yeah, correct. We've always had sort of the marketing spend to increase at the year progresses and if we build and build more scale in the total at a machinery around our marketing activities. So we've guided to exceed 30 million.
Alicia Yap: You'll come in three, four, five million above that once you add up, add up what we have in the guidance and comparing that to an average spend per quarter year today, so below 27 million. So of course, as we've maintained an average spend expectation for Q4, then the margin would be far higher. Okay, all right. Thank you.
Operator: We have no further questions to the queue at this time.
Song Lim: I'll turn the program over to Someland for any additional or closing remarks. So, sure. Thank you guys.
Song Lim: I think I'll just wrap it up. Well, we'd like to thank you for all of your continued support and interest in our program. So there is so much potential for our program and we are going for it. We appreciate your time today and look forward to reporting our progress and the next junction.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.