Q3 2024 Opera Ltd Earnings Call
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Welcome to the Opera limited third quarter 2024 earnings call at this time, all participants are in a listen only mode.
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Speaker Change: I would now like to turn the call over to your Speaker today, Matt Wilson head of Investor Relations. Please go ahead Sir.
Matt Wilson: Thank you for joining us this morning, I'm joined by our co CEO song Lin and our CFO <unk> Jacobsen before I hand over the call to song Lin I would like to remind you that some of the statements that we make today regarding our business operations and financial performance may be considered forward looking such statements are based on current expectations and assumptions.
Matt Wilson: They are subject to a number of risks and uncertainties actual results could differ materially. Please refer to the safe Harbor statements in our earnings press release, and our form 20-F, including the risk factors. We undertake no obligation to update any forward looking statements. During this call we will present, both <unk> and non <unk> financial.
Matt Wilson: Measures reconciliation of non <unk> measures is included in today's earnings press release.
Matt Wilson: Is distributed and available to the public through our Investor Relations website, located at Investor don't operate Dot com.
Speaker Change: Our comments will be on a year over year comparisons unless we state otherwise with that let me turn the conference call over to our co CEO song Lin who will cover our third quarter operational highlights and strategy and then further jacobson will discuss our financials and expectations going forward.
Matt Wilson: Sure.
Song Lin: Sure. Thank you, Matt and thanks to everyone joining us today for a business update and more color.
Matt Wilson: Fourth quarter.
Speaker Change: As you can see from all that and as a result, we find ourselves in a great position.
Matt Wilson: Our product lineup has never been better.
Matt Wilson: <unk> continues to gain traction.
Speaker Change: Hi, Thank you guys.
Speaker Change: No. It's all it's broader monetization is paying off.
Speaker Change: As a result.
Speaker Change: Total revenue was Hangzhou it into the 3 million growing 20% year over year.
Speaker Change: <unk> represents an acceleration from the 17% growth experienced in the bulk hop over to you.
Speaker Change: And what's more.
Speaker Change: You can tell from our updated guidance today, we think the growth rate may increase even Togo.
Speaker Change: The fourth column.
Annualized ARPA growth, 27% year over year Neil.
Speaker Change: New record of $1 <unk> and 6%.
Speaker Change: Adjusted EBITDA was 41 million, representing a margin of 25%.
Speaker Change: I'm very proud that both revenue and adjusted EBITDA exceeded the high end of our saltwater our guidance ranges.
Speaker Change: In terms of the year as a whole.
Speaker Change: We had a material uplift adjustment of guidance after Q2.
Speaker Change: And now with Q3, let me repeat that exercise.
Speaker Change: The new range for revenue above the high end of the previously provided guidance range.
Speaker Change: Adjusted EBITDA guidance range also moves tile.
Speaker Change: Advertising revenue was <unk>.
Speaker Change: 77 million in the Colo.
Speaker Change: For the 6% year over year.
Speaker Change: Ladies represents the highest rate of growth since then.
Speaker Change: <unk>.
Speaker Change: The outperformance was led in particular by the e-commerce and travel categories.
Speaker Change: Oh equal loss initiative benefited in particular from our PC browser monetization.
Speaker Change: Well as all success in expanding our reach to new batteries to altra ASP level.
Speaker Change: We've got some of our results of Q3 also gives us greater confidence.
Speaker Change: Continued step up all the monetization.
Speaker Change: There is not as strong fourth column.
Such revenue growth.
Speaker Change: $46 million Nikola 14% year over year.
This was a tad above our own expectations.
<unk> seen some of the impact in July and August deal to visibility.
Speaker Change: Also please so ctrip inbound with lead to 15% annual growth.
Speaker Change: We remain cautiously optimistic that other independent challenger in the <unk> space.
Speaker Change: Wait stand to benefit from increased competition.
Speaker Change: Market as we look ahead.
Speaker Change: I'd like to make a few comments.
Speaker Change: Awesome.
Speaker Change: You may not be directly visible as you look at all overall energy vehicles.
Speaker Change: We continue to focus R&D most.
Speaker Change: Most of the valuable adults globally.
Speaker Change: Rich outbound.
Speaker Change: The markets.
Speaker Change: Our overall western market, Ed you count has been quite stable.
Speaker Change: <unk>.
Speaker Change: Wait keep directing our product development and marketing efforts.
Speaker Change: What's the most accurate and valuable sub citizens.
Speaker Change: Leading to increased engagement with the user base.
Speaker Change: As a result of that is our op growth in the restaurant markets will significantly Pascal that overhaul.
Speaker Change: This is also the main driver of our growth in marketing spend.
Value with us.
Speaker Change: The higher average cost.
Speaker Change: As opposed to being a pure volume game.
Speaker Change: Within the broad strength of the Colo Colo.
Speaker Change: A couple of trends we are also spending a minute Tom.
Speaker Change: As previously mentioned.
Speaker Change: Great momentum in retail.
Speaker Change: The strengths, we have pulled out over the summer continuing into the back to school season.
Speaker Change: The combination of our owned and operated properties.
Speaker Change: And as the ultra ads audience extension platform.
Speaker Change: Lay off at all.
Speaker Change: Besides the partners.
Speaker Change: Level of performance that is increasingly appreciate it.
Speaker Change: We are ready to open up how visible bunzl is carrying over into the seasonally strongest fourth colo.
Speaker Change: Merchants' positioning themselves.
Speaker Change: Let's walk you through them.
Speaker Change: The other trend to go out with travel which were both strong in the saltwater.
Speaker Change: We benefited from the combination of more high value with us, whereas the higher propensity to spend on travel.
Speaker Change: Combined with the Costco locations continuing to increase.
Speaker Change: This higher volume and higher prices.
The plates into enhance revenues from this category.
Speaker Change: I would like to people with last spoke in late August.
Speaker Change: We have introduced our refreshed ultra one for our espresso.
Speaker Change: And at the time, we were excited about the new visuals and how favorably is compelled to the deepwater.
Speaker Change: We can now report that the inflow of new Iot Google's was up <unk>.
Speaker Change: 3% year over year, the only the South Dakota, despite the new Brussels, Oh, I'm going to be available for lesser over the quarter.
Speaker Change: The growth was even more impressive in the EU.
Speaker Change: Well the Ethernet Whatsapp.
Speaker Change: It was up 66% from August to September.
Speaker Change: There's a lot of opportunity on this platform to further innovate the product and the growth of user base.
Speaker Change: Lastly, the rate relief Oprah what Archie.
Speaker Change: As of June of last year, but also for girls.
Speaker Change: We have made it even more powerful and even more beautiful.
Speaker Change: Our AI assistant, Iran. Any default that you can take with it into the browser.
Speaker Change: Accessible directly from a browser shortcuts Hathaway leaked AI features also of a dedicated chat box and into the pool of the browser assurance.
Speaker Change: Our collective web browsing habits.
Speaker Change: Sean.
Speaker Change: And I believe that it is important to bring AI to the world.
Speaker Change: <unk>.
Speaker Change: And the browser right play to our strengths.
Speaker Change: Our native AI IRA can distill the context over page.
Speaker Change: In shopping.
Speaker Change: Scan images.
Speaker Change: You just have matured in our developed propulsion and are now live.
Speaker Change: Flagship portion.
Speaker Change: Not to mention the fact that auto dealers can now access IRA without logging in and what is the profile.
Speaker Change: Next up for <unk>.
Speaker Change: Visibility.
To manage open pets alike.
Mike close or perhaps claim they do.
Speaker Change: Organized open paths into logical tap islands.
Speaker Change: Productivity has always been a key feature of opera and Ottawa.
Speaker Change: Also comes with that innovative splitscreen view this enables grateful multitasking productivity, something which we think could be a game changing azoff mutual pad.
Speaker Change: Tabs.
Speaker Change: Ill turn it to the three introduction of tap islands weight repulse version of upper one.
Speaker Change: And the list goes on.
Have also launched a concept.
Speaker Change: Tap traces which highlights the most recent perhaps quickly re trades will online journey and of course still support the flight Adobe tap a emerges which turns out of Europe beverage.
Speaker Change: It really helps visualize what's what's otherwise then can be a little screen.
Speaker Change: <unk> also introduced that enhanced musical playoff decoupled from the sidebar, although rates detachable video, meaning that you can continue browsing.
Speaker Change: While doing videos all participating.
With your conference.
Speaker Change: Opera Gx, Connecticut.
Speaker Change: Connecticut gaming, but also remains our fastest growing but also lays over one 8 million net yield results in the quarter to slightly $1 9 million and they use a 22% increase compared to last year.
Speaker Change: We are also able to increase our annualized up to $3 six to eight cents.
Speaker Change: 12% increase year over year.
<unk> Gx, absolutely, let the markets growing.
Speaker Change: Neon it twice as fast.
Speaker Change: We recently announced a new multiyear sponsorship with riot or league of legends dwarf.
Speaker Change: The largest use both events in the walk that we rallied from late September to all in a bundle.
Speaker Change: The sense of its popularity.
Speaker Change: <unk> attracted over 50 million total deals last year.
Speaker Change: And legal diligence is the second most streamed game on Twitch during the tournament opera Gx Europe can download exclusive modes and the pumping drops as well as the physical items. In addition opera Gx is to be featured prominently in the two elements.
Speaker Change: He is a good example of how we seek to expand the <unk> partnerships with content that resonates way to gain loss.
Speaker Change: Last quarter, we commented.
Speaker Change: Partnership laser TV show with voice.
Speaker Change: Today, I would like all of the Jackson with us.
Speaker Change: The annualized your browser.
Speaker Change: The deadly hosted moat.
Speaker Change: Partnership with demo the Lockdowns that most of the region to implement in that franchise, which was released last weekend and.
Speaker Change: Beyond the Blue collar opera Gx Easter egg in the movie.
Speaker Change: But all of that is only the beginning.
Speaker Change: The number of gamers in the billions.
Speaker Change: And juice is unique but also and the ecosystem for this highly engaged segment.
Speaker Change: That's an opportunity that we will continue to cultivate and rosy. This current quarter you will see US launch also the next generation of opera Gx.
I will leave the details and the excitement to the upcoming launch, but I will say that we will not only continue to offer mortgages net gain or loss.
Speaker Change: But also takes the experience beyond just one device to that next level.
So stay tuned.
Speaker Change: All in all we are.
Speaker Change: We're moving ahead full speed.
Speaker Change: The excitement about the opportunities now it's all hands on deck for BP Q4, and I look forward to keeping you posted on our progress.
Speaker Change: With that I will tell you, though about it further to dive deeper into our software results.
Speaker Change: And our guidance for the remainder of the year.
Speaker Change: Thank you song.
Speaker Change: We are certainly keeping with tradition to pair healthy operational development with attractive financials coming in even ahead of our latest expectations.
Speaker Change: <unk> set new records across our key financial metrics revenue adjusted EBITDA and cash flows.
Speaker Change: Starting with revenue, we had guided for a modest sequential increase in our year over year revenue growth, though adding three percentage points to reach a 20% year over year growth rate was well beyond our expectations and guidance range on.
Speaker Change: On a constant currency basis, our growth would have been six percentage points higher or 26%.
Speaker Change: That's trajectory, including initial e-commerce opportunities continuing to materialize on top of our continued focus on high value users sets the stage for a very nice update to our outlook on the fourth quarter, which I will get back to shortly.
Speaker Change: We kept our overall cost base in line with expectations, resulting in adjusted EBITDA also over performing well above the high end of our guidance range.
Speaker Change: And coming in at a 25% margin.
Speaker Change: Is that Q3 marks our 14th consecutive quarter as a rule of company and yet another quarter of meeting or exceeding our guidance.
Speaker Change: I've spoken before about the health and predictable nature of our revenue streams, but also about our preference to be costs. When we guide amongst such rapid growth.
Speaker Change: Yes.
Speaker Change: We always try to strike a balance between reasonable expectations.
Speaker Change: Keeping in mind that we operate in a highly dynamic and competitive environment.
Speaker Change: Looking more closely at cost the quarter evolved to a slightly different mix than anticipated, though as mentioned within the expected total of $92 million Opex pre adjusted EBITDA.
Speaker Change: Relative to the second quarter, we increased marketing cost by $3 5 million to $32 5 million, though our guidance has allowed for an even greater increase.
This was partially offset by cost of revenue items scaling with the revenue over performance and relative to revenue increased by about half a percentage point beyond the expectations coming in at $33 1 million driven by the acceleration within opera ads.
Speaker Change: Compensation cost was also somewhat higher due to increased bonus provisions in light of our performance.
Speaker Change: It did decrease as a percentage of revenue as expected and came in at $19 1 million.
Speaker Change: All other opex items pre adjusted EBITA came in at $7 7 million declining in line with expectations.
Speaker Change: Our operating cash flow also came in at an all time high with $34 9 million in the quarter, representing 113% of adjusted EBITDA and lifting the year to date conversion to 101% let's.
Speaker Change: As mentioned earlier this metric is expected to normalize as the year progresses, and we expect that operating cash flow will ultimately represent about the same percentage of adjusted EBITDA in 2024, as we saw last year.
Speaker Change: Free cash flow from operations was $29 7 million or <unk>, 97% of adjusted EBITDA.
Speaker Change: That resulted in a net increase in cash even within the quarter that we paid our semi annual dividend that came with a 27 6 million cash expense net of the $78 million offset from the remainder of our receivable related to the sale of <unk> in 2022.
Speaker Change: Year to date, we have converted 63% of adjusted EBITDA to free cash flow from operations or 86%, if excluding the $19 1 million in Q1 investments and our AI cluster in Iceland.
Speaker Change: This quarter, we are also launching a new non <unk> metrics, namely adjusted net income and the resulting adjusted earnings per avs.
Speaker Change: This metric most importantly excludes P&L impacts of non operational investments equity based compensation and the amortization of acquired intangible assets net of tax effect.
Speaker Change: For clarity I'll note that the acquired intangible assets related to our product itself from the privatization of our company in 2016.
Speaker Change: We have observed various approaches to strip out such items to get to the underlying net profit per avs and hope the metric will be a useful supplements when reviewing our financial results.
Speaker Change: Historical values are included in the <unk> table that would be published together with our quarterly reports.
Speaker Change: Okay.
Speaker Change: Turning to our guidance for the fourth quarter and the resulting further increases in our full year view.
Speaker Change: Since it earlier, the fact that revenue growth accelerated in Q3 with a manifestation of expanded monetization opportunities increases our confidence in a year and well beyond what's been implied in our guidance to date.
Speaker Change: Mentioned last quarter, we have seen particular strength in the e-commerce vertical and we are increasingly confident that such benefits will become even more pronounced during the holiday season in the final months of the year.
Speaker Change: In parallel we are increasing our expectations of the Q4 ramp up in marketing activities. Following the release of a program or two as well as the upcoming gx release.
Speaker Change: We wanted to take advantage of our strong underlying profitability to ensure that we are in a position to seize growth opportunities on the back of these releases and set ourselves up with good momentum into 2025, while still coming in ahead of expected profitability for 2024.
Speaker Change: For the fourth quarter, we got revenue of $135 million to $138 million or 21% year over year growth at the midpoint that represents an addition of $4 million versus the midpoint of our implicit prior Q4 guidance or adding three six percentage.
Speaker Change: <unk> of growth.
Speaker Change: We guide adjusted EBITDA of $30 million to $32 million or a 23% margin at the midpoint.
Speaker Change: Pre adjusted EBITDA, our total Opex is that implied at $105 5 million at the midpoint, we build in over $40 million of marketing spend. So this category represents about two thirds of the $13 million sequential increase in our total cost and.
Speaker Change: And we had just over a percentage point of cost of revenue items relative to revenue.
Speaker Change: We expect compensation costs to modestly reduce in dollar amount and the total of other opex items pre adjusted EBITDA is expected to remain quite stable versus the third quarter. Both then declining as a percentage of revenue.
Speaker Change: Our Q4 expectations translate to a full year revenue guidance of $4 70 to $4 $73 million or 19% growth at the midpoint with a range starting well above the high end of our prior guidance.
Speaker Change: Full year, adjusted EBITDA guidance increases to $112 million to $114 million or 24% margin at the midpoint.
Speaker Change: With this we continue to expect a 40 basis point increase in our EBITDA margin for the year 2024 relative to 2023 or.
Speaker Change: Our guidance implies marketing costs remaining relatively stable as a percentage of revenue between the years cost of revenue items combined are expected to tick up relative to revenue, though this has been more than offset by compensation and other opex items, reducing as a percentage of revenue.
Speaker Change: All in all we expect to exit 2024 with a momentum ahead of even quite recent expectations setting us up for an exciting continuation in the year and years to come.
Speaker Change: As a reminder, we report our fourth quarter results towards the end of February and we look forward to providing the first look at our 2025 guidance at that time for.
Speaker Change: For now ill wrap it up by pointing to our long streak as a rule of 40 company and the fact that we will certainly work hard to stay in that range.
Speaker Change: With that I'll turn the call back to the operator for questions.
Speaker Change: 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 when posing your questions. We do ask that you pick up your handset for optimal sound quality.
Speaker Change: Thank you. Our first question will come from <unk> Khan with B Riley Securities. Your line is now open.
Speaker Change: Great. Thank you very much.
Speaker Change: Just a couple of questions from me please.
Speaker Change: One maybe just on this on this top line momentum that Youre seeing driven by E. Commerce can you just kind of give us a sense of how fast that e-commerce advertisement.
Revenue stream is growing within <unk>.
Speaker Change: Advertising bucket.
Speaker Change: Dan.
Speaker Change: Give us a sense of that that could be great and also how big can it be over time in terms of overall revenue.
Speaker Change: The second question I had was about EBITDA.
Speaker Change: Q4 looks like.
Speaker Change: <unk>.
Speaker Change: Increasing marketing spend in the fourth quarter.
Speaker Change: And that you do have some.
Speaker Change: Some of them sort of.
Speaker Change: One time kind of activities like the new browser and upcoming.
Speaker Change: <unk> Dx launch.
Speaker Change: Also.
Speaker Change: Maybe the league of legends. So can you just kind of talk about how much of the increase is associated with these versus just regular marketing.
Speaker Change: <unk>.
Speaker Change: Sure I mean I can go first so I would say on e-commerce, it's growing faster than the advertising overall growth rate. So it's continuing to increases.
Speaker Change: The percentage of our advertising mix.
Speaker Change: I think it's hard to quantify that but it is certainly becoming material and yet we're still.
Speaker Change: In the early days of addressing the opportunity.
Speaker Change: In terms of the Q4, EBIT number marketing implied we have more or less shifted the.
Speaker Change: Let's say unused.
Speaker Change: Marketing budget of Q3 into Q4.
Speaker Change: It's a conscious decision since we just now came out with our two in October and our new version of Gx has also soon to come out and we want to be in a good position to take advantage of that while at the same time.
Speaker Change: Ending up with EBITDA for the year are higher than what we had guided last.
Speaker Change: Understood and maybe just on the on your response showed about the.
Speaker Change: E Commerce.
Speaker Change: How are the customers finding.
Speaker Change: The opportunity in the coming to our prep work and maybe just talk about it.
Speaker Change: If you look out two years, maybe two or three years five years out.
Speaker Change: Do you think e-commerce could be.
Speaker Change: A majority of the advertising revenue or how should we be thinking about this opportunity.
Speaker Change: Yes.
Speaker Change: Hill, I think I'll just try to try to answer that so so first of all I think I think our E. Commerce revenues very strong just because almost all of them outperformance space right. So so so unlike maybe some of it is some other advertising.
Speaker Change: Our revenue almost purely based on the performance that eventually weigh brain to the advertisers and the fact that is growing so fast.
Speaker Change: Is a good indication that.
Speaker Change: Very happy and then I think that as a result, we actually see some major growth even further in Q4, when we actually move into the new shopping seasons, so very comfortable with that.
Speaker Change: Percentage wise, it's actually like I guess, it's almost a bit when it.
Speaker Change: It comes to classification of what you combat e-commerce, whether it's not but in general I think what we see that is already a major revenue stream for our company as a whole which will result.
Speaker Change: So I think it can be meaningful and he's also havent give us strong.
Speaker Change: Our strong growth potential block in the future. So that's why we're quite excited.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you our next question.
Speaker Change: Will come from Lance Vitanza with PD Cowen.
Lance Vitanza: Hi, guys. Thanks, So just a couple of questions.
Lance Vitanza: The first on the on the balance sheet. It looks like cash at the end of the period came it actually quite a bit ahead of where we had modeled and I know obviously your EBITDA was was strong but I was wondering if there was anything kind of below the EBITDA line that may have favorably impacted your.
Lance Vitanza: Cash flow in the quarter I don't know if if taxes were lower than expected or capex was lower than expected or if there is anything on the working capital and then the other question I had is with respect to the <unk> stake and I apologize if I missed this in the prepared remarks, but.
Lance Vitanza: Im wondering if theres any change in the valuation there haven't had a chance to get through all of the materials that you've disclosed, but if there was any change to the valuation there or any update on your thoughts around the potential monetization of that stake I think you had it on the books at around $250 million recently so.
Lance Vitanza: Quite material.
Speaker Change: So I'll answer that.
Speaker Change: There wasn't anything particular, driving the strong cash other than the fact that we actually reduced our working capital by just over $4 million from from Q2 to Q3. So that's on top of adjusted EBITDA translates more or less to the operating cash flow.
Speaker Change:
Speaker Change: In terms of the <unk> evaluation, it's unchanged, we'll reassess it at year end, but we have maintained the same value as we had in the prior quarters.
Speaker Change: And any sort of update or any thoughts on potential monetization of that asset.
Speaker Change: Same is the same as before.
Speaker Change: It has performed well.
Speaker Change: We are not actively involved in its operation. So we essentially are a financial investor at this stage and we do plan to divest it.
Speaker Change: Either.
Speaker Change: If we get a.
Speaker Change: And offer while the company is still private or post a future IPO.
Speaker Change: Just to chime in and by the way.
Speaker Change: On the cash part or go back to the cash part of the question. You also asked about <unk>, we didnt really pay tax this quarter. So it's really <unk>.
Speaker Change: <unk> started the taxpaying quarters.
Speaker Change: But I think as I indicated on the call.
Speaker Change: Affect Q4.
Speaker Change: And I would rather point is about the full year operating cash flow generation of last year.
Speaker Change: And set the expectation that the percentage conversion from EBITDA to operating cash flow in 2024 will be about the same.
Speaker Change: Great. Okay. Thanks, guys.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question will come from Mark Argento with Lake Street.
Mark Argento: Good morning, guys, just wanted to drill down a little bit.
Mark Argento: AI opportunity it looks like you guys relaunched.
Mark Argento: A new browser opera, one or two.
Mark Argento: Wanted to maybe dig in a little bit error in terms of our product roadmap, how you're thinking about.
Mark Argento: AI opportunity excuse me as things evolve here of the marketplace.
Speaker Change: Yeah. So yeah, so it's only hill so.
Speaker Change: Yes, I think I think.
Speaker Change: Also mentioned in the prepared notes.
So while the major things that we do launch that.
Speaker Change: Actually this is actually AI and <unk>.
Speaker Change: He is going to react.
And then we also see that.
Speaker Change: We've only launched it for about one week that we also already.
<unk> already done.
Speaker Change: Thanks, Beth and.
Speaker Change: And then also if you compare quarter to quarter.
Speaker Change: Like from where we are now already again someday Chris.
Speaker Change: So there's some of that so I think overall quite quite excited.
Speaker Change: Resolve.
Speaker Change: Dig too deeply into it I think essentially the way way basically I see as a long term differentiator and that it will detail it will be always ways <unk> and I think the delta is a very good medium that they can make use of it.
No not only like you also see that the Allison will be bolt on the UI and you just make any more multiyear in the browser, but also on media and well say last quarter, we announced a lot on the market. If you don't follow the images.
Speaker Change: And then we will have more things to walk down also from this are also quite excited and I think from that angle was also actually do more on both the local.
Speaker Change: But also how to make it after they get through the cloud. So essentially that I think <unk> been asked I think AI won't be the only deal will be super important it will be <unk>.
Speaker Change: <unk> for everyone.
Speaker Change: Then we also have a long term sustainable view because this is also something I don't think that you have to be respectful of all icloud Mitchell privacy are well protected even local scenario, how do you make sure that with the highest safety standards. So all those into consideration when we are building our products.
Speaker Change: So again very excited I think we are dependent a bit of all of.
Speaker Change: It will be a long time until deal with everybody that has already impacted because of the size it can be more <unk>.
Speaker Change: So the health of the long run.
Speaker Change: Is there any any yet.
Thoughts around I mean, you look at like the success that perplexity as having almost got to.
Speaker Change: And the whole kind of concept of browsing, most kind of putting AI first.
Speaker Change: Obviously being able to charge for a product like that I think they are charging $20 a month not too dissimilar chat GPT.
Speaker Change: Is there anything in the roadmap of potential.
Speaker Change: Scripted type product that you guys could watches given the future deep rich feature sets that you guys have built out.
Speaker Change: Yes, it's actually a very good question right. So I would almost say I think in general although we did see in the past our historical track record right. So I think in general.
Speaker Change: Or you can say about how to make sense.
Speaker Change: AI, that's more accessible to everyone all bill.
Speaker Change: Instead of prioritized on charging a subscription base I think that's all that's all.
Speaker Change: That's also part of why we're also being careful in not yet in the right time. That's also why for instance, we are doing.
Speaker Change: Now walking on potentially cloud hosting.
Rich you mentioned the cost is actually very.
Speaker Change: Manageable from Allianz would that still be able to.
Speaker Change: Maximize.
Speaker Change: Engagements.
Speaker Change: So yes, so I think all in all but <unk> been at I think well probably prioritize how to make this more accessible to the end of Q2, then the loss instead of purely subscription base.
Speaker Change: We're all contemplating all of the aspects of it.
Speaker Change: But you also have subscription based product like VPN. So it's not surprising, but I would say in this call and our strengths it would probably be hard to make sure. It which is the maximum audience I think partly also because.
Speaker Change: Yeah like relative itself, we managed to make it profitable products. So unlike some AI startups, but we don't really need to.
Speaker Change: For for revenue short term I think that's also perhaps all of the strengths.
Speaker Change: We would have against some of the other side, obviously, which that just about the money. So ourselves. So that's why I'm quite proud of.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from Eric Sheridan with Goldman Sachs. Your line is open.
Speaker Change: Hi, This is Alex on for Eric. Thanks, So much for taking the question just wanted to dig into the Iot opportunity in Europe now that you've had a few months under your belt more than a few months under your belt since the DMA went into effect.
Speaker Change: Any color you can give on user retention rate sort of browsing behavior.
Speaker Change: <unk>.
Speaker Change: The iqos users in Europe.
Speaker Change: And on the investment side.
Speaker Change: For Iowa.
Speaker Change: Is it really just on marketing spend at this point or is there any sort of product development or other investments that you need to make.
Speaker Change: In Europe to exactly how much opportunity. Thanks, so much.
Speaker Change: Yes, yes, it's only I think also briefly comment so yes, so I think as well as our adjusted EBITDA pick up nodes.
Speaker Change: We are quite happy with the program.
With that we had the highest it had been growing significantly if they see the hole that's on hold but I think we're also.
Speaker Change: Think about the inflow of new vessel being increased more than 60% by the way.
Speaker Change: In Europe sales, so I think he is asking it.
Speaker Change: Panamax above what our expectation is before this summer and we're also happy to see that this trend continues.
Speaker Change: So yes, so I think in Q4, we'll probably see stronger growth in I'll ask about very happy how that has been received.
Speaker Change: And also together with the new ultra launch of our Ultra <unk>, which we are proud of what we will also have a corresponding way based on the Io is a company thats because we also feel that there is also digital potentials.
Speaker Change: Combining mineral desktop units, which are already using opera.
Speaker Change: Hopefully.
Speaker Change: A big portion of them also have the outlet malls.
Speaker Change: So I think that when that material is also a good one because the philosophy bolsa multiple outlets, but also potentially for <unk> mobile. So that's what we're focused on Q4.
Speaker Change: Again very excited because if you look at all penetration from the rest of the market. They still have a lot of growth potential even if we adjust to make sure that all the operators in the aftermarket.
Speaker Change: <unk> also using that on mobile for instance, so.
Speaker Change: We're quite excited about the opportunities.
Thank you once again, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our next question will come from Alicia Yap with Citi. Your line is open.
Speaker Change: Yeah.
Speaker Change: Alicia Your line is open please make sure your phone is not on mute.
Speaker Change: Okay.
Speaker Change: Again, we are hearing no no sorry.
Speaker Change: We can hear you now please go ahead.
Alicia Yap: Thanks management for taking my question.
Speaker Change: I have one follow up question.
Speaker Change: Can you please share with us.
Speaker Change: Maybe just on payback on I'll call one.
Speaker Change: Also management sales are in MISO, we are on this on the.
Speaker Change: Top line growth expectations on EBITDA Chen.
Speaker Change: The investment area that we should be aware of thank you.
Speaker Change: Yes. It is.
Speaker Change: Tony I'm not sure if I hear you poorly because his loyalty to the bank, but I guess you have asked about our alpha <unk>. So more like I would say that we're in if you like compared with Q.
Speaker Change: Q2 sales were allowed us some major optics of Iris.
Speaker Change: Great fluke, its probably well almost up after 50%. So it's a major growth very excited but of course, we see that potentially will be even more growth in Q4, which is our fault answer because.
Speaker Change: <unk> also decided now that is the right time to you.
Speaker Change: Making <unk>, even more E mail to discover IRA and also to be able to use it without having to readjust the accountability and meeting initially so all of those who are proven to have some major impact that regulation, which are very excited about them closing monitoring upon.
Yes, so so I think thats part of why I have not heard the second part of your question.
Speaker Change: I can address that it was about the investments as I understood. It then in the fourth quarter and I think the key point, we want to make there is that it will be in our core product portfolio. This will as we always do.
Speaker Change: With ongoing development of course, but now with new releases on both.
Speaker Change: Two of our very key products with a prolonged and gx.
Speaker Change: Our marketing budget will follow so we guide for a substantial increase.
Speaker Change: From Q3 to Q4 in marketing still within sort of the original guidance of marketing spend for the year, but we have reserved budget for the fourth quarter and and that opportunity.
Speaker Change: Thank you.
Speaker Change: Thank you. It appears we have no further questions at this time I will now turn the program back over to song Lin for any additional or closing remarks.
Song Lin: Sure. So like again, thank you all for joining us today.
Song Lin: Some of the highlights.
Song Lin: The results we have been looking forward to share the results with you and Jonathan you on our trajectory for the rest of the year.
Song Lin: The South Dakota really demonstrates how we have navigated ultra interim position with continued strong underlying growth and how we stand to gain from Apple.
Song Lin: Are you guys with the highest potential and monetization areas that they're scalable.
Song Lin: Wish you a good rest of the day and look forward to reconnecting our Q4 results.
Speaker Change: Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
Speaker Change: [music].
Right.
Speaker Change: Alright.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Welcome to the Opera limited third quarter 2024 earnings call at this time, all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during this period, you'll need to press star one on your telephone keypad, if you want to remove yourself from the queue. Please press the pound key.
Speaker Change: Please be advised that today's call is being recorded.
Speaker Change: Lastly, if you should need 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 go ahead Sir.
Thank you for joining us this morning, I'm joined by our co CEO song Lin and our CFO photo Jacobson before I hand over the call to song Lin I would like to remind you that some of the statements that we make today regarding our business operations and financial performance may be considered forward looking such statements are based on current expectations.
Speaker Change: They are subject to a number of risks and uncertainties.
Speaker Change: <unk> results could differ materially please refer to the safe Harbor statements in our earnings press release, and our form 20-F, including the risk factors. We undertake no obligation to update any forward looking statements. During this call. We will present, both <unk> and non <unk> financial measures a reconciliation of non FRS. So ifr.
Speaker Change: <unk> measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website.
Speaker Change: <unk>.
Speaker Change: Investor Dot opera Dot com.
Speaker Change: Comments will be on a year over year comparisons unless we state otherwise with that let me turn the conference call over to our co CEO song Lin, who will cover our third quarter operational highlights and strategy and then further Jacobs, who will discuss our financials and expectations going forward.
Song Lin: Sure. Thank you, Matt and thanks to everyone joining us today for a business update and more color.
Song Lin: Our third quarter.
Song Lin: As you can see from that and as a result when final gels.
Song Lin: <unk> position.
Song Lin: Our product lineup has never been better.
Song Lin: And continues to gain traction among this high up with your dose.
Song Lin: Airports.
The monetization is paying off.
Song Lin: As a result.
Song Lin: Third quarter revenue was 73 million.
Song Lin: 20% year over year.
Song Lin: <unk> represents an acceleration from the 17% growth experienced in the first half of the year.
Song Lin: And what's more you.
Song Lin: Can tell from our updated guidance today, we think the growth rate may increase even though the fourth column.
Our annualized ARPA growth, 27% year over year.
Song Lin: New record of $1 and $6 <unk>.
Song Lin: Adjusted EBITDA was $31 million, representing a margin of 25%.
Song Lin: I'm very proud that both revenue and adjusted EBITDA exceeded the high end of our third quarter guidance ranges.
In terms of the year as a whole.
Song Lin: We had a material uplift adjustment of guidance after Q2.
Song Lin: Now with Q3, let me repeat that exercise.
Song Lin: The new range for revenue above the high end of the previously provided guidance range and adjusted EBITDA guidance range also moved higher.
Advertising revenue was <unk>.
Song Lin: 7 million in the Colo growing from the 6% in automobile, which represents the highest rate of growth since 2022.
Song Lin: The earnings outperformance was led in particular by the E Commerce and travel categories.
Song Lin: Oh equal loss initiative benefited in particular from our PC browser monetization as well as our success in expanding our reach to new inventories through our altra ASP level.
Song Lin: We will improve our results of Q3 also gives us greater confidence.
Speaker Change: Can you step off of monetization billions, there is not as strong fourth column.
Speaker Change: Such revenue was.
Speaker Change: $46 million Nikola up 14% year over year.
Speaker Change: This was a tad above our own expectations.
Speaker Change: <unk> seen some of impact in July and August and deals with visibility.
Speaker Change: We're also pleased with Ctrip inbound with a link to 15% annual growth.
Speaker Change: We remain cautiously optimistic.
Speaker Change: As an independent challenger in the <unk> space.
Wait stand to benefit from increased sales competition.
Speaker Change: The market as we look ahead.
Speaker Change: I'd like to make a few comments.
Speaker Change: The base also.
Speaker Change: <unk> may not be directly visible as you look at our overall Mou vehicles.
Speaker Change: We'll continue to focus on the most valuable Ddos globally.
Speaker Change: Many of which are found in western markets.
Our overall western market, you count has been quite stable through the summer quarters.
Speaker Change: Wait keep directing our product development and marketing efforts towards the most active and valuable sub segments.
Leading to increased engagement with the user base.
Speaker Change: As a result of that is our ARPA growth in the rest of the markets growing significantly faster than overhauls.
Speaker Change: This is also the main driver of our growth in marketing spend.
Speaker Change: Ill value with us and the higher average cost.
Speaker Change: As opposed to being a pure volume again.
Speaker Change: Within the broad strength of the Golar.
Speaker Change: A couple of trends we are also spending a minute Tom.
Speaker Change: As previously mentioned.
Speaker Change: Great momentum in <unk>.
Speaker Change: Retail.
Speaker Change: The strengths, we pulled out over the summer continuing into the back to school season.
Speaker Change: The combination of our owned and operated properties.
And as the ultra ads audience extension platform Lane.
Speaker Change: <unk>.
Speaker Change: Our advertising partners.
Speaker Change: <unk> performance that is increasingly appreciate it.
Speaker Change: We are ready to open up how this momentum is carrying over into the seasonally strongest fourth column.
Speaker Change: Merchants' positioning themselves for the spring season.
Speaker Change: The other trend to go out with travel which were both strong in the saltwater.
Speaker Change: <unk> benefited from the combination of more high value with us with a higher propensity to spend on travel.
Speaker Change: <unk> raised the Costco locations.
Speaker Change: To increase.
Speaker Change: This higher volume and higher prices.
Speaker Change: Flipped into enhance the revenues from this category.
Speaker Change: I would like to people late last spoke in late August.
Speaker Change: When we have introduced our refreshed offer one for our espresso.
Speaker Change: And at the time, we were excited about the new T cells and.
Speaker Change: How favorably is compelled to the deepwater.
Speaker Change: We can now report that the inflow of new <unk> was up 43% year over year, the only the South Dakota, despite the new browsers or might be available for lesser over the quarter.
Speaker Change: The growth was even more impressive when you well the <unk> was up 66% from August to September.
Speaker Change: Well, there's a lot of opportunity on this platform to further innovate the product and the growth of the base.
Speaker Change: Lastly, late relief <unk>.
Speaker Change: The newest of our June of last year, but also for <unk>.
Speaker Change: We have made it even more powerful and even more beautiful.
Speaker Change: Our Atlas system area.
Speaker Change: <unk> integrated into the browser.
Speaker Change: Being accessible directly from a browser shortcuts.
As a way to meet AI features also have a dedicated chat box.
Speaker Change: Into the core of the browser experience.
Speaker Change: Tapping emerges, which turns out of Europe beverage.
Speaker Change: It really helps visualize what slots and otherwise then something on a screen.
Speaker Change: <unk> also introduced that enhanced musical playoff decoupled from the side of the box along with detachable video, meaning that you can continue browsing.
Speaker Change: While doing videos all participating.
Speaker Change: At the conference.
Speaker Change: <unk> all in Connecticut gaming, but also remains our fastest growing Belgium weighs over 1.8 million messages with us being a portal to circa $1 9 million and they use.
Speaker Change: 22% increase compared to last year.
Speaker Change: We are also able to increase our annualized up to $3 six to eight cents.
<unk> increased year over year.
Speaker Change: <unk> Gx, absolutely investment markets growing nearly twice as fast.
Speaker Change: We recently announced a new multiyear sponsorship was a riot or big of legend swath.
Speaker Change: Largest esports events in the walk that we run it from late September to all in November.
Speaker Change: To give you a sense of its popularity that <unk> attracted over 50 million total deals last year, though and league of legends is the second most streamed game on Twitch during the tournament opera Gx you'd also can download exclusive modes and content drops.
Speaker Change: As a physical items.
Speaker Change: In addition opera Gx is to be featured prominently two elements.
Speaker Change: And he is a good example of how we seek to expand the <unk> partnerships with content that resonates way to gain loss.
Speaker Change: Last quarter, we commented.
Speaker Change: Partnership laser television show the voice.
Speaker Change: Today, I really like all of the Jackson with us to minimize your browser.
Speaker Change: But definitely a host a moat in partnership with Venmo, the Lockdowns that most of the ranch and the instruments and that franchise, which was released lots of ligands and B Underdo College flat opera Gx Easter egg in the movie.
Speaker Change: But all of that is only the beginning.
Speaker Change: The number of gamers in the billions.
Speaker Change: And yes, it is unique to blossom and ecosystem for this highly engaged segments.
Speaker Change: That's an opportunity that we will continue to cultivate and rosy. This current quarter you will see US launch also the next generation of opera Gx.
Speaker Change: I will leave the details and the excitement to the upcoming launch, but I will say that we're not only continued to offer multi just that dental is lost.
But also takes a experience beyond just one device to that next level.
Speaker Change: So stay tuned.
Speaker Change: All in all we are.
Speaker Change: I am moving ahead and full speed and with the excitement about our opportunities now it's all hands on deck for our beat in Q4, and I look forward to keeping you posted on our progress.
Speaker Change: With that I'll turn it all voted for them to dive deeper into our software our results and our guidance for the remainder of the year.
Speaker Change: Thank you so long.
Speaker Change: We are certainly keeping with tradition to pair healthy operational developments with attractive financials.
Speaker Change: We did that was mentioned within the expected total of $92 million Opex pre adjusted EBITA.
Speaker Change: Relative to the second quarter, we increased marketing cost by $3 5 million to $32 5 million, though our guidance had allowed for an even greater increase.
Speaker Change: This was partially offset by cost of revenue items scaling with the revenue over performance and relative to revenue increased by about half a percentage point beyond the expectations coming in at $33 1 million driven by the acceleration within opera ads.
Speaker Change: Compensation cost was also somewhat higher due to increased bonus provisions in light of our performance, though it did decrease as a percentage of revenue as expected and came in at $19 1 million.
All other opex items pre adjusted EBITA came in at $7 7 million declining in line with expectations.
Our operating cash flow also came in at an all time high with $34 9 million in the quarter, representing 113% of adjusted EBITA and lifting the year to date conversion to 101%.
Speaker Change: As mentioned earlier this metric is expected to normalize as the year progresses, and we expect that operating cash flow will ultimately represent about the same percentage of adjusted EBITDA in 2024, as we saw last year.
Speaker Change: Free cash flow from operations was $29 7 million or <unk>, 97% of adjusted EBITDA that.
Speaker Change: That resulted in a net increase in cash even within the quarter that we paid our semi annual dividend that came with a 27 6 million cash expense net of the $7 million to $8 million offset from the remainder of our receivable related to the sale of <unk> in 2022.
Speaker Change: Year to date, we have converted 63% of adjusted EBITDA to free cash flow from operations or 86%, if excluding the $19 1 million in Q1 investment and our AI cluster in Iceland.
Speaker Change: This quarter, we are also launching a new non <unk> metrics, namely adjusted net income and the resulting adjusted earnings per avs.
Speaker Change: This metric most importantly excludes P&L impact of non operational investments equity based compensation and the amortization of acquired intangible assets net of tax effect.
Speaker Change: For clarity I'll note that the acquired intangible assets related to <unk> itself from the privatization of our company in 2016.
Speaker Change: We have observed various approaches to strip out such items to get to the underlying net profit per ads and hope the metric will be a useful supplement when reviewing our financial results.
Speaker Change: Historical values are included in the <unk> table that will be published together with our quarterly reports.
Speaker Change: Then turning to our guidance for the fourth quarter and the resulting further increases in our full year view.
Speaker Change: Since it earlier, the fact that revenue growth accelerated in Q3 with a manifestation of expanded monetization opportunities increases our confidence in a year and well beyond what's been implied in our guidance to date.
Speaker Change: Mentioned last quarter, we have seen particular strength in the e-commerce vertical and we are increasingly confident that such benefits will become even more pronounced during the holiday season in the final months of the year.
Speaker Change: In parallel we are increasing our expectations after Q4 ramp up in marketing activities. Following the release of a program or two as well as the upcoming gx for Luis.
Speaker Change: We want to take advantage of our strong underlying profitability to ensure that we are in a decision to seize growth opportunities on the back of these for leases and set ourselves up with good momentum into 2025, while still coming in ahead of expected profitability for 2024.
For the fourth quarter, we got revenue of $135 million to $138 million or 21% year over year growth at the midpoint.
That represents an addition of $4 million versus the midpoint of our implicit prior Q4 guidance or adding three six percentage points of growth.
Speaker Change: We guide adjusted EBITDA of $30 million to $32 million or a 23% margin at the midpoint.
Speaker Change: Pre adjusted EBITDA, our total Opex is that implied at $105 $5 million at the midpoint, we build in over $40 million of marketing spend. So this category represents about two thirds of the $13 million sequential increase in our total cost and we had just over a percent.
Speaker Change: Point of cost of revenue items relative to revenue.
Speaker Change: We expect compensation costs to modestly reduce in dollar amount and the total of other opex items pre adjusted EBITDA is expected to remain quite stable versus the third quarter.
Speaker Change: Then declining as a percentage of revenue.
Speaker Change: Our Q4 expectations translate to a full year revenue guidance of $4 70 to $4 $73 million or 19% growth at the midpoint with a range starting well above the high end of our prior guidance.
Speaker Change: Full year, adjusted EBITDA guidance increases to $112 million to $114 million or 24% margin at the midpoint.
With this we continue to expect a 40 basis point increase in our EBITDA margin for the year 2024 relative to 2023.
Speaker Change: Our guidance implies marketing costs remaining relatively stable as a percentage of revenue between the years cost of revenue items combined are expected to tick up relative to revenue, though this has been more than offset by compensation and other opex items, reducing as a percentage of revenue.
Speaker Change: All in all we expect to exit 2024 with a momentum ahead of even quite recent expectations setting us up for an exciting continuation in the year and years to come.
Speaker Change: As a reminder, we report our fourth quarter results towards the end of February and we look forward to providing the first look at our 2025 guidance at that time for.
Speaker Change: For now ill wrap it up by pointing to our long streak as a rule of 40 company and the fact that we will certainly work hard to stay in that range.
Speaker Change: With that I'll turn the call back to the operator for questions.
Speaker Change: 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.
Speaker Change: When posing your questions. We do ask that you pick up your handset for optimal sound quality.
Speaker Change: Thank you. Our first question will come from Nat <unk> with B Riley Securities. Your line is now open.
Speaker Change: Yeah.
Speaker Change: Great. Thank you very much.
Speaker Change: A couple of questions from me please.
Speaker Change:
Speaker Change: One maybe just on this on this top line momentum that Youre seeing driven by ecommerce can you just kind of give us a sense of how fast that e-commerce advertisement.
Revenue stream is growing within the advertising bucket.
Speaker Change: Dan.
Speaker Change: Give us a sense of that that would be great and also how big can it be over time in terms of overall revenue.
The second question I had was about EBITDA.
Speaker Change: Q4, and it looks like.
Speaker Change: You are increasing marketing spend in the fourth quarter.
Speaker Change: And that you do have some.
Speaker Change: Some of them sort of.
Speaker Change: One time kind of activity like the new browser and upcoming Dx launch.
Speaker Change: Also.
Speaker Change: Maybe they're in a league of legends sponsorship can you just kind of talk about how much of the increase is associated with these versus just regular marketing.
Speaker Change: <unk>.
Speaker Change: Sure I mean I can go first so I would say on e-commerce, it's growing faster than the advertising overall growth rates. So it's continuing to increases.
Speaker Change: The percentage of our advertising mix.
Speaker Change: Hard to quantify but it is certainly becoming material and yet we're still.
Speaker Change: In the early days of addressing the opportunity.
Speaker Change: In terms of the Q4, EBITDA number marketing implied we have more or less.
Speaker Change: <unk> the.
Let's say unused.
Speaker Change: The marketing budget of Q3 into Q4.
Speaker Change: This decision since we just now came out with our two in October and our new version of <unk> is also soon to come out and we want to be in a good position to.
Speaker Change: Take advantage of that while at the same time.
Speaker Change: Ending up with EBITDA for the year higher than what we had guided last.
Speaker Change: Understood and maybe just on the on your response showed about equal.
Speaker Change: E Commerce.
Speaker Change: How are the customers finding.
Speaker Change: The opportunity in the coming to our properties.
Speaker Change: Maybe just talk about.
Speaker Change: If you look out two years three years five years out.
Speaker Change: Do you think e-commerce could be.
Speaker Change: A majority of the advertising revenue or how should we be thinking about this opportunity.
Speaker Change: Yes, So Tony Hill, I think I'll, just try to try to answer that so so possible I think I think our E. Commerce revenues very strong just because almost all of them are performance based right. So so so unlike maybe some not all.
Speaker Change: Is it some other advertising.
Our revenue almost purely based on the performance that eventually weigh brain to the advertised launch and the fact that it's growing so fast.
Speaker Change: <unk> is a good indication that they are very happy and then I think that those are resolved, we actually see some major growth even further in Q4.
Speaker Change: We actually will be into the new shopping seasons. So so very comfortable with that and I I think percentage wise, it's actually like I guess, it's almost a bit.
Speaker Change: It comes to classification of what you count as you come up whether its not but in general I think what we see that is already a major revenue stream for our company as a whole which will result.
Speaker Change: So I think it can be meaningful and he's also havent give us strong.
Speaker Change: Strong growth potential block in the future. So that's why we're quite excited.
Speaker Change: Okay.
Thank you.
Speaker Change: Thank you our next question.
Speaker Change: Will come from Lance Vitanza with PD Cowen.
Lance Vitanza: Hi, guys. Thanks, just a couple of questions.
Lance Vitanza: The first on the on the balance sheet. It looks like cash at the end of the period came in actually quite a bit ahead of where we had modeled and I know obviously your EBITDA was was strong but I was wondering if there was anything kind of below the EBITDA line that may have favorably impacted your.
Lance Vitanza: Cash flow in the quarter I don't know if I'm, if taxes were lower than expected or capex was lower than expected or if theres anything on the working capital and then the other question I had is with respect to the <unk> stake and I apologize if I missed this in the prepared remarks, but.
Lance Vitanza: I'm wondering if there's any change in the valuation there I haven't had a chance to get through all of the materials that you've disclosed, but if there was any change to the valuation there or any update on your thoughts around the potential monetization of that stake I think you had it on the books at around $250 million recently so.
Quite material.
Speaker Change: So I'll answer that.
Speaker Change: There wasn't anything particular, driving the strong cash other than the fact that we actually reduced our working capital by just over $4 million from from Q2 to Q3. So that's on top of adjusted EBITDA translates more or less to the operating cash flow.
Speaker Change:
In terms of the old pay evaluation, it's unchanged, we'll reassess it at year end, but we've maintained the same value.
It had in the prior quarters.
Speaker Change: And any sort of update or any thoughts on potential monetization of that asset.
Speaker Change: Same is the same as before.
Speaker Change: It has performed well.
Speaker Change: We are not actively involved in its operation. So we essentially are a financial investor at this stage.
Speaker Change: And we do plan to divest it.
Speaker Change: Or.
Speaker Change: If we get a and offer while the company is still private or post a future IPO.
Speaker Change: Just to chime in and by the way on the cash part or go back to the cash part of the question. You also asked about <unk>, we didnt really pay tax this quarter, so it's really <unk> and <unk>.
Speaker Change: <unk> started the taxpaying quarters.
Speaker Change: But I think as I indicated on the call that will affect Q4.
Speaker Change: And I would rather point to sort out the full year operating cash flow generation of last year.
And set the expectation that the percentage conversion from EBITDA to operating cash flow in 2024 will be about the same.
Speaker Change: Great. Okay. Thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question will come from Mark Argento with Lake Street.
Mark Argento: Good morning, guys, just wanted to drill down a little bit.
Speaker Change: Uh huh.
AI opportunity it looks like you guys relaunched.
Speaker Change: A new browser opera, one or two just wanted to maybe dig in a little bit error in terms of our product roadmap, how you're thinking about.
Speaker Change: The AI opportunity excuse me as things evolve here of the marketplace.
Speaker Change: Yeah. So yeah, so it's only hill so.
Speaker Change: Yes, I think I think as I've also mentioned in the prepared notes.
Speaker Change: One of the major things that we do launch now.
Speaker Change: Actually this is actually AI and <unk>.
Speaker Change: All right and then we also see that.
Speaker Change: We've only launched it for about one week that we also already see some big.
Speaker Change: I think that also you feel compel Colo Colo.
Speaker Change: Like somewhere around knowledge already again Sunday brunch.
Speaker Change: So there's some of that so I think overall quite quite excited.
Speaker Change:
Speaker Change: I would actually dig too deep into it I think essentially a way where they can see as a long term differentiator and that it will detail. It will be always weighs Lady with us and I think it also has a very good medium that they can make use of it.
Speaker Change: No not only like you also see that the Allison will be bolt on the UI and you just make any more multi in the browser, but also on media and well say last quarter, we announced a vote on the matter. If you don't follow the images.
Speaker Change: And then we will have more things to walk down also foundries are also quite excited and then I think from the other angle was also actually do more.
Speaker Change: So the holdco.
Speaker Change: Yes.
Speaker Change: But also how to make it after they get through the cloud.
Speaker Change: Essentially I think that's something that I think AI will be the only super important.
Speaker Change: It is painful for everyone. But then we also took a long term sustainable deal because it also so many other things you have to be respectful I called Mitchell.
Speaker Change: Well protected even local scenario, how do you make sure that way.
Speaker Change: The highest safety standards. So all those into consideration when we are building our products.
Speaker Change: So again very excited I think will.
Speaker Change: The bulk of it will be there a long time.
Speaker Change: Everybody that has already impacted by it.
Speaker Change: Can be more <unk>.
Go down for the long run.
Speaker Change: Is there any any yet.
Speaker Change: Thoughts around I mean, you look at like the success that perplexities have almost kind of.
Speaker Change: Tweak in the whole kind of concept of browsing, most kind of putting AI for it.
Speaker Change: Obviously being able to charge for a product like that I think they are charging $20 a month not too dissimilar chat GPT.
Is there anything in the roadmap of potential.
Speaker Change: Subscription type product that you guys could watches given the future deep rich feature sets that you guys have built out.
Speaker Change: Yes, it's actually a very good question right. So I would almost say I think in general although we did see in the Python historical track record right. So I think in general.
Speaker Change: More you can say about how to make those AI.
Speaker Change: So that's the more accessible to everyone all down.
Speaker Change: Instead of prioritized on charging a subscription base I think that's all that's all that's also partly why we're also being careful in not yet in the right time and that's also why for instance, we are doing.
Speaker Change: Now walking on potentially cloud hosting.
Speaker Change: I'm glad you mentioned the cost is actually a very.
Speaker Change: Manageable from Allianz would that still be able to.
Speaker Change: Maximize.
Speaker Change: Engagements.
Speaker Change: So yes, so I think all in all that they didn't do that I think well probably prioritize how to make this more accessible to the end of <unk>. So that leaves us instead of purely subscription base.
Speaker Change: We're all contemplating all of the aspects of it.
Speaker Change: But you also have subsequently based product like VPN. So it's not surprising, but I will say and as pointed our strengths. It would probably be on how to make sure I had which is the massive audiences I think.
Speaker Change: Partly also because.
Speaker Change: Yeah like relative itself, we manage to make it profitable products. So unlike some AI start ups, we don't really need to maximize.
Speaker Change: But revenue short term I think that's also perhaps one of the strengths.
Speaker Change: We would have against some of the other side, obviously, which that just about the money. So ourselves. So that's why I'm quite proud of.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from Eric Sheridan with Goldman Sachs. Your line is open.
Speaker Change: Hey, this is Alex on for Eric. Thanks, So much for taking the question just wanted to dig into the <unk> opportunity in Europe now that you've had a few months under your belt more than a few months under your belt since the DMA went into effect.
Speaker Change: Any color you can give on user retention rates sort of browsing behavior <unk>.
Speaker Change: For the Iqos users in Europe, and on the investment side.
Speaker Change: <unk> for iOS.
Speaker Change: Is it really just on marketing spend at this point or is there any sort of product development or other investments that you need to make.
Speaker Change: Europe to exactly how much opportunity. Thanks, so much.
Yeah Yeah.
It's only I think alto data comment so, yes, so I think as well as our adjusted EBITDA pick up notes.
Speaker Change: Quite happy with the progress that we have the highlights it had been growing significantly if they see the hour that's on hold but I think we're also particularly I think about the inflow of the users increased more than 60% led the way in Europe. So I think is that the plan.
Speaker Change: How much above what our expectation is before this summer and we're also happy to see that this trend continues.
Speaker Change: So yes, so I think in Q4, we'll probably see stronger growth.
Speaker Change: So we're very happy with how that has been received.
Speaker Change: And also together with the new Alpha launch of our Ultra line, which we are proud of.
Speaker Change: Also have a corresponding way based on the Io is a company. That's because we also feel that there is also good for potentials.
Speaker Change: Combining minerals desktop neulasta, which are already using opera by that hopefully.
Speaker Change: A big portion of them also have the <unk>. So I think that when that material. It doesn't get all the kind of the philosophy bolsa multiple outlets, but also for those vertical gx mobile. So that's what we're focused on Q4.
Again very excited because if you look at all penetration from the rest of the market. They still have a lot of growth potential even if we're just to make sure that all the operators and the rest of the market.
Speaker Change: PCR also using that on mobile for instance, so so I'm quite excited about the opportunities.
Speaker Change: Thank you once again, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our next question will come from Alicia Yap with Citi. Your line is open.
Speaker Change: Alicia Your line is open please make sure your phone is not on mute.
Alicia Yap: Again, we are hearing Hello, sorry.
Alicia Yap: We can hear you now please go ahead.
Alicia Yap: Thanks management for taking my questions.
Alicia Yap: Just one follow up question.
Can you please share with us.
Alicia Yap: Nature's own feedback on our Ria on October one.
Alicia Yap: Also management shares are in MISO ROE on this on the.
Alicia Yap: Top line growth expectations on EBITDA Chen.
Alicia Yap: And the investment area.
So be aware of thank you.
Speaker Change: Yeah. So it's only now I'm not sure if I hear you poorly.
Speaker Change: They've been going through for the bank, but I guess you have asked about all happened last time around so I more like I would say that we're in if you like compelled HQ2.
Speaker Change: Q2 sales were allowed us some major upticks of Iran's can I take a great look it's probably well almost up after 50%. So it's a major growth very excited but of course, we see that potentially will be even more growth in Q4, which is our fault answer because we have also decided now that is the right time to may.
Speaker Change: Making <unk>, even more easier to discover IRA and also to be able to use it without having to reduce don't contemplate and leasing initially so all of those who are proven to have some major impacts that regulation, which are very excited about them closing monitoring upon.
Speaker Change: Yeah. So so I think that's part of why I have not heard the second part of your question.
Speaker Change #100: I can address that it was about the investments as I understood. It in the fourth quarter and I think the key point, we want to make there is that it will be in our core product portfolio that is supposed to be always too.
Speaker Change #100: With ongoing development of course, but now with new releases on both.
Speaker Change #100: Two of our very key products with a prolonged and gx.
Speaker Change #100: Our marketing budget will follow so we guided for a substantial increase.
Speaker Change #100: From Q3 to Q4 in marketing still within sort of the original guidance of marketing spend for the year, but we have reserved budget for the fourth quarter and and that opportunity.
Speaker Change #100: Thank you.
Speaker Change #101: Thank you. It appears we have no further questions at this time I will now turn the program back over to song Lin for any additional or closing remarks.
Song Lin: Sure. So like again, thank you all for joining us today to cover some of the highlights from <unk>.
This article, though we have been looking at bolt onto shelves as you announced with you and drop it to you on our trajectory for the rest of the year.
Song Lin: Linking the South Dakota really demonstrates how we have navigated entre into a position, where it's continued and strong underlying growth and how it stands again, so I'm not sure because I don't think those with the highest potential and monetization areas that I'm sure. They are scalable.
I wish you a good rest of the day and look forward to reconnecting our Q4 results.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect.