Opera Limited (OPRA) Earnings Call Transcript & Summary

Welcome to the Opera Limited Second Quarter 2026 Earnings Call. [Operator Instructions]. Please be advised that today's call is being recorded. [Operator Instructions]. I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations. Please go ahead.

Thank you, Erica, and thank you, everyone, for joining us this morning. I'm joined by our CEO, Song Lin; and our CFO, Frode 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 that are subject to a number of risks and uncertainties. Actual results could differ materially as a result of various factors, including those set forth in today's earnings press release and in our most recent annual report on Form 20-F filed with the SEC. We undertake no obligation to update any forward-looking statement. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our Investor Relations website at investor.opra.com. Our comments will be on the year-over-year comparisons unless we state otherwise. With that, let me turn the call over to our CEO, Song Lin, who will cover our second quarter operational highlights and strategy, and then to Frode Jacobsen, who will discuss the details of our financials and expectations for the third quarter and full year. Song?

Thank you, and good morning, everyone. We have been looking forward to sharing today's report with you. Our second quarter results reaffirm that being an independent, well-established and innovative browser provider with the user base of nearly 300 million people and a significant advertising reach is a very attractive position to hold rapidly evolving and expanding ecosystem. Instead of placing bets on which AS obviously saw infrastructure plays well be leading in the future, we cultivate our position as a tech enabler and platform that facilitates choice for the end user and access to a vast ideas for our partners. In this landscape, Zebra is becoming more valuable as AI changes or people such work and Acton and Opera is already translating that shift into greater engagement and monetization. -- by continuing to give the most demanding new readers to switch from the operating system Deforo and by expanding the functionality of our advertising platform -- we broadened our partner ecosystem and grow monetization opportunities every month, adding to the foundation of our long-term trajectory as well. Both revenue and adjusted EBITDA exceeded the top guidance range with growth fueled by acceleration of revenue growth from 23% year-over-year in Q1 to 25% year-over-year in Q2. The strength was broad-based. Advertising revenue grew 27% to $25 million while Opera revenue grew 21% to $62 million. With that, second quarter revenue exceeded CNY 178 million and surpassed the seasonal Q4 peak a quarter earlier than what we've seen in most prior years. Adjusted EBITDA was also a quarterly record and 42.4 million. representing a margin of 24% and growing and 2% year-over-year. And importantly, our confidence in this innovative trajectory allows us to raise full year guidance beyond the Q2 over performance, which further will get back to. Advertising growth was again led by e-commerce in particular. As we look ahead -- our road map includes additional high intent bonus, including AI-supported product comparisons designed to help shops evaluate the products, well-healechants, reusers flowed out to a purchase decision. Our in-house Homo platform already helps match our users with the best deals across 100 merchants with over 100 million products. Within travel, another high potential vertical for us, we work with both online travel agencies and have started initial campaigns beyond Opera's all user base. Our partners continue to expand their work with us because our performance-based campaigns delivered variable outcomes. As a combined platform for fast and third-party inventory, we are able to inform and allocate campaigns with a solid outstanding of the relevant audiences. IAP, our total addressable audience when taking into account the mines of users that access our content platform through OEM white label solutions and the broader STK ratio of Opera has now reached beyond $700 million, up from the $500 million were announced just 6 months ago. This scale and growth reinforces our position among the largest online platforms. Our Opera revenue representing the monetization of our users per active intent continue to grow ahead of underlying search market benchmarks. As we benefit from natively integrating key plasmas as part of the browser interface. This revenue category directly captures the traffic monetization potential or the increased engagement in our browsers, was native AI function entities benefiting both time spent and the browser's ability to connect the right partners with our resource and the right time. This is also true as it relates to the evolution of our search partnerships while the secular tailwind from a longer and more complex so journey continues to build. Such is body from short keywords to questions and incur conversations. We combine this with rapid product innovation, driving both user appreciation and increased usage of our browsers, all of which results in more engagement within the addressable and Omni box with more opportunities to connect high internet users with relevant results. Look at the ARPU-driven Western markets, as mentioned before, -- we see that the users will engage with AI with [ Zenobrocess ] spend significantly more time in the browser and even conduct many more searches, this is comparable users who are not yet engaged in AI. All of which directly contributes to ARPU growth. As an overall result, we see the acquired revenue is growing at 1.4x the pace in Western markets. This is a global average. Up to the 9% year-over-year as opposed to 21% globally. It's a point worth making that Opera already monetizing AI-driven care activity today, not simply describing a future opportunity. In the second quarter, Google announced a new commercialization of its AI Mod, widen the base is for our acquired revenue stream. We also expanded our AI strategy by announcing Browser Connector for leading AI services, including a broad cloud and open as ChatGPT. Browser Connector enables resorts to securely connect these offices to their open browser elevating those services to become agentic. -- by understanding the live browsing context and interacting, where is the browser on the user's behalf. This represents a shift from closed single vendor AI expertises, 1 alternate system, well, users can choose the AI services that best meet their needs while retaining the browser as a central interface. We are fully committed to start into our operability as the best basis for growth of new air platforms and services allowing the users to have a deeply independent experience without juggling multiple browsers and enabling new platforms to exit their users being a naked way without having to drive both adoption of the platform and the dedicated and perhaps narrow browser experience on top. This open approach aligns with Opera's position as an independent browser vendor and that deals to our most technologically sophisticated user base, many of whom value flexibility and avoid in dependency on a single AI provider. As AI assistance become increasingly capable, the browser is well positioned to solve as the trusted context and execution level as next users with multiple AS offices, and we expect adoption of such integrations to eventually be on in place for all users. Opera also introduced Opera Browser AI and Opera source common-line interface that enables developers and AIS to integrate the brows of directly into AI-driven workflows by allowing AI tolling agents and automation tools to interact with a live browser of process extends the browser's role beyond traditional browsing and reinforces offer strategy of making the brother grab infrastructure for the next generation of AI applications. Turning to our user base, Opera had 108 million monetizes in the quarter. Our Western Una base grew 4% year-over-year to $61 million with both desktop and mobile platforms contributing. Mobile was particularly strong and growing 8% year-over-year across the Western markets, while the low applicational home base continues to phase out. This continued mix shift towards higher value users helped in presales by 25% to $2.46. Opera GX reached 37 million mark in active users adding almost 2 million users during the quarter. Both desktop and mobile grew with a larger absolute contribution coming from the top. Partnerships waste games like 4-second rewards players with in-game items like frisk games and gaming boots, which resonates with our target audience. Our momentum is especially visible in some of the world's most competitive mobile markets. Over the past year, combined Android and ILS MAUs grew 66% in the United Kingdom and 40% in the United States. Across Europe, Opera 1 for IOS grew 42% and demonstrating our potential to broaden our smartphone base, which is still about 90% Android. Users continue to choose Opera for differentiated features, including our 3 non-loan intuitive cat management and building browser AI. Our ILS Unibased growth shows how even a highly restrictive ecosystem has materialized and the opportunity for us to grow those users and overall ARPU. Our browser reach and brand trust also enables us to scale new services, mini-pay our self-custody wallet solve the problem of access to international currency buses in emerging markets, removing publicities or the end user and making B2B TransForce and webe access very easy. Given our ability to rapidly scale, we are also able to work closely with key partners, such as [ Sloan Pete ] to drive adoption of these services. Milli base growth continued in the second quarter with 3 million new wallet activations and $88 million in transactions since our last update, bringing the total to 18 million wallets and 518 million transactions. Mini pay now reaches more than 66 countries and includes more than 57 like mini apps and is rapidly expanding its capabilities. In June, we launched a car in collaboration with Visa, that bridges the gap between state-of-[indiscernible] and data spending. The count is now available across the EU and is being gradually introduced in supporting markets in Africa, North America and Asia. Labor access has different use cases in different economies. But as a global yet local indicate network, we remove brain from international margin trans force when one of those parties are unbanked and our users can travel globally like true locals in markets where mobile payment options are expanding. All of this strengthens our conviction that mini pay can make stable is useful for everyday savings transport and spending. It is still only, but the product scale utility and ecosystem participation continue to progress rapidly. With that, I would like to turn the call over to Frode Jacobsen, our CFO, to discuss our financial results, guidance and capital allocation in greater detail. Frode?

Thanks, Han. We remain very pleased with how our strategy and business performance converts to healthy financials, having exceeded our guidance ranges in both quarters of 2026 to date. As Song Lin pointed out, being an independent partner-oriented and tech-first browser in the evolving AI landscape is a great position that we will continue to cultivate. And yet again, we are able to lift our full year guidance, reflecting both the Q2 overperformance and our trajectory as we enter the second half of the year. Opera's growth is all organic and comes with healthy profitability. We invest in our growth through rapid and continuous product development, creative and engaging marketing and by acquiring the third-party inventories as we scale our ads business. Those who have followed us over time, know that we balance this carefully to ensure a strong growth trajectory while also driving profits and cash generation that we return to our shareholders through our recurring dividend and share buybacks. Last quarter, I talked about how our 10-year average annual revenue growth stands at 21%. And in fact, if you zoom into the post-COVID period and look at the CAGR across the last 4 full years, the average annual revenue growth has been 23%, and profit metrics have grown even faster. At EPS level, our share buybacks have amplified that trend with average annual adjusted EPS growth of 33%, which excludes valuation gains from our stake in OP that we eliminate from our adjusted metrics. Zooming back into our Q2 results, revenue grew 25% to $178.1 million. Overall expenses came in according to expectations, resulting in adjusted EBITDA growth of 32% to $42.4 million or a margin of 24%. In terms of cost categories, cost of revenue items combined came in at 38% of revenue, exactly as previously indicated. Marketing spend came in at $36.2 million, representing a sequential decline of 6% relative to Q1 with continued discipline. Cash-based compensation was $23.1 million, which included accelerated annual bonus accruals following the strong underlying performance in the quarter. The sum of all the smaller OpEx items, pre-adjusted EBITDA came in at $8.9 million and was overall flat versus Q1. Below the EBITDA line, we achieved adjusted net income of $30 million or 27% growth year-over-year and adjusted diluted EPS was $0.33, representing 25% growth. Operating cash flow was $22 million in the quarter, with free cash flow from operations of $17 million. Year-to-date, we have converted 76% of adjusted EBITDA to operating cash flow and 62% of adjusted EBITDA to free cash flow from operations. Both ratios nearly the same as in the first half of 2025. While we continue to expect fluctuations in cash conversion between quarters, the year-to-date ratios will stabilize and likely tick up in the second half of the year as they also did in 2025. In terms of capital allocation, our low CapEx business model allows us to return significant value to our shareholders through our recurring dividend and share buyback program. In fact, since 2020 and including our recent July dividend, we have returned $577 million to our shareholders, of which $320 million through dividends and $256 million spent to buy back a total of 37.2 million shares of Opera with an average cost per share of $6.88 and representing 31% of shares outstanding at the start of 2020. Our July semiannual dividend of $0.40 per share or $35.6 million total represented an annualized yield of 3.9% on the record date. During Q2, we repurchased 636,000 shares for a total spend of $11.1 million pro rate are distributed between public buybacks and repurchases from our majority shareholder at the same price per share, which was $17.44. This corresponded to 0.7% of shares outstanding at the start of the quarter and reduced the total number of shares outstanding as of 30th of June to $88.9 million. You'll see $14.2 million of buyback spend in our Q2 cash flow, which includes $4.1 million of Q1 repurchases that settled in Q2 and excludes $1 million of Q2 purchases that will settle in Q3. Now turning to guidance. as we revised our full year ranges, we combined the Q2 beat on both revenue and adjusted EBITDA, with additional upside in the second half of the year, in line with how we also raised guidance at this time last year. So while we build in a more normalized Q4 spike than the extraordinary year-end growth spikes we saw in 2024 and ultimately also in 2025. we also reflect our most recent momentum. For the full year, we guide revenue of $734 million to $742 million or 20% growth at the midpoint adding $2 million to $5 million in addition to the Q2 overperformance. We guided adjusted EBITDA of $172 million to $175 million, representing a 24% margin on the elevated revenue midpoint. For the third quarter, we guide revenue of $181 million to $183 million or 19% to 20% growth. We guided adjusted EBITDA of $41 million to $43 million, representing a 23% margin at the midpoint. In terms of costs, we then implicitly guide to a full year OpEx base pre-adjusted EBITDA of $565 million at the midpoint, of which $140 million in Q3. At the new midpoint, we expect cost of revenue items combined to represent about 39% of revenue for the year and the quarterly percentages ticking up with seasonality and advertising. Marketing cost is expected to remain relatively stable around the Q2 level, resulting in mid-single-digit annual growth and representing about 20% of full year revenue. Cash-based compensation expense is expected to modestly reduce relative to Q2 with annual growth in the low double digits and representing about 12% of full year revenue. The sum of all other OpEx items, pre adjusted EBITDA is expected to remain stable at about 5% of revenue. In sum, cash-based compensation and marketing will then decline from representing 36% of revenue last year to representing about 32% of revenue this year, supported by economies of scale, and the inflow of revenue from Opera Ads that carries cost of revenue, but limited incremental OpEx. This enables us to guide to an increase in adjusted EBITDA margin relative to 2025 and of 25 to 40 basis points. Taken together, we are very pleased with the second quarter and our momentum and opportunity as we enter the second half of the year. We have continued returning capital to our shareholders while investing in the product and commercial opportunities that can fuel Opes growth well into the future. With that, I'll turn the call back over to the operator for your questions.

[Operator Instructions]. We'll take our first question from Naved Khan with B. Riley Securities.

Great. I have a couple of questions. So maybe just on this audience number you gave, you said you have more than a reach of more than 700 million, which is up from 500 million plus that you had 6 months ago. Did you sign any new partners to drive this kind of reach?Can you maybe talk about that a little bit? And then on a related sort of note, the 100 or so advertisers that you have with 100 million or so listings item listings. How does that compare with the last quarter and the year ago period? And then maybe finally on Opera -- sorry, Opay. Any -- can you give us any sense of timing on when that might happen in terms of going public? Is it this year or next year? Just give us some thoughts there?

Well, yes, so it's only. I think I'll try to answer the first 2 questions, and then Frode can also address a bit payola comment about it. So Yes. So for the reach, yes, yes. We have actually expanded quite a lot of new partners in the field. on the back of actually our strengths of Opera and also with the fact that with the help of AI and algorithms, we were able to bring a lot of demand and also make it much easier for our partners will to work with us because we can also help them monetize. So I would almost say, like the broader new partnerships that we see from in, actually, many of them are very encouraging because they are -- like many of them are very new AI services that they see a benefit of combined with our strength with those -- it could be in the field of AI generated videos. It could be in the field of AI social and many others. And it's actually has on both sides that they are very happy, but it also allow us also to reach advertisers, which are very keen on those audiences. So I think that we're actually very pleased and it's almost ahead of what we project. So reasonably happy about it. But again, it's still in all stage, right? Because I think our goal is just to reach big in hopefully on SAP, and then we should be the top tier players in the field. and that's our goal. And then -- and also maybe also to briefly comment a bit about your question about how the merchant and 100 million products. So just to be specific, that's actually particular design to power our AI services, right? So almost bet if you imagine that as a way to show that with the help of AI for whatever previously may be only available if you do it from a such. Now those are also available that we can directly pop up under the context. And it's also very relevant because it's directly combining like a relevant context with a particular product with the right price and with the right information, so which is actually the only possible way with the help of AI. And it's right not new. So I would say it's almost -- it's not really a comparison in the past because in the past way, I'm not really doing this because of many limitations, but now with AI we can. That way that is actually possible for us to outer the context of what users bring solving to try to give him as accurate information as possible. So view this as the future approach where we try to give you the relevant information and hopefully, also be able to commercialize it in the right approach and in connection with many of our partners. So it's actually -- it's still holidays but is a very important initiative from our side. So yes, as a summary, I think both of the 2 questions are actually relevant with our faster growth on AI. So the first 1 is actually we're able to work actually added many interest in [indiscernible], which has a very good positive look on both sides. And the second one actually allow us to provide AI relevant promotional contents, ecomet contents in the right context and pay the potential monetization base in the future. So quite excited. And with that, I think Frode also help address the last question.

Yes. In terms of OPay and question around an IPO. We continue to expect that OPay will ultimately go public. We are very impressed with what OP has achieved. And at upper, we're also proud to have been part of its founding. As a shareholder, we will welcome an IPO, it will lead to an immediate transparency as to the value of our funding stake in the company, but I can't really comment on timing that will be more up to the OPay team to judge.

And we'll take our next question from the line of Eric Sheridan with Goldman Sachs.

This is Alex on for Eric. I appreciate it. I wanted to dig into the strength you saw in the quarter of mobile MAUs in U.S. and Europe. Can you talk about some of the key catalysts that have driven this growth recently? Is it just broader adoption of Chrome and Safari alternatives post the regulatory environment? Are there any active investments you're making in the regions to drive this growth? And any differences in AI adoption and consumer behavior within AI that you're seeing across the 2 regions would be helpful.

Yes. So yes, I think I'll comment a bit on -- so yes. So in general, I think it's a bit of both, right? So Europe is actually because of the actions of opening up. we always see from even last year and we see in trends that become well, especially our IOS that there are alternative browsers, and we keep a nice growing trajectory. And this actually hasn't been further helped by the advance of AI as again, right, AI becoming it much more visible to everybody that these alternatives on the open system like that you can choose as the browser play out, right? So that we definitely see a very, very nice growth trajectory as reported, both in Europe but also see the same trend happening in U.S. So very, very exciting about it. And we -- yes, so like we have this whole banks, how that will continue to grow further. And then on top we think that it's -- I would also say that it's also the trends that we see that -- it's a self-reinforcing loop. That way, we also feel very encouraging that user come to the platform come to Operated of system, deferred systems on mobile typical because of AI. But then what we also see is that the moment they use AI, they actually spend much longer time and even in traditional such and also they have much more engagement compound ratios which do not come from but from some other regular cases. So this actually overall created almost a positive feedback loop that they come to propoliand more they use it, the more they actually engage with it, which actually makes this very encouraging. So I think that's also why we will probably likely continue to double down this by providing better products for the edge and hopefully also will nicely see a growth trajectory on those platforms.

And we'll take our next question from Ron Josey with Citi.

Song, you mentioned earlier just about greater engagement from users who engaged with AI versus those who don't. I want to hear a little bit more from you on just the adoption, what tools those users are using with within the browser, the insights of users who have adopted those tools, meaning who are they versus those that have not? And and specifically are the Western users? And just more insights on the plan to drive greater adoption of the AI tools given the impact of the shift, I think, toward an open AI ecosystem, which you talked about in the letter. And then just as a follow-up on Agentecommerce and 10-plus merchants, $100 million, I think, products. Just talk just a little bit more how Opera's positioning here as Agentic Commerce just evolves into a bigger part of everyone's shopping experience.

Yes, sure. I think I'll try to give some answers there. I think possible way like -- and this internally, we have also done some states, and we have some -- as a browser, I think we are lucky that we are in a position to be able to to have false information of what you behave in those environments, right? So I think once we can definitely form that the use of AI is definitely moving forward fast pace, right? So like both, I would say, in terms of using the pockets, like the big players that we usually see, both from Google Jimmi, but also from therapy and also for CBD. Most of them actually use it by visiting the web as is common, and we can definitely see that as of the use has grows largely in the last quarter, and both year-over-year, but also very visible quarter-over-quarter. So that's definitely something which we can confirm, right? But then maybe I'll also point it in a broader label, right? So there are also some very interesting other trends that we see during the Q2. So number 1 is that we also clearly see a pattern that on top of those bigger online service players, we also see an interesting trend that we saw an increased use of many open source services, right, that is out there. So that is very visible. And we believe that -- and this -- for the combination of user behavior, we believe that there seems to be a sense that it will now be coming to very -- like, let's say, if previously, they want to use 1 chart or whatever as a whole of the user. Now it seems that the behavior becoming they use set for something, they use give a different chance for different ins. Imagine 1 maybe for a company walks the other maybe for probably long. But then we also see that they're not also started to use many other, let's say, alternative offices models. -- as a potential tool in whatever context, right, that -- so that is actually, I think, quite interesting that we see in Q2. We believe that's partly just because of the illustration of diversification that's probably a function of more and more many of the agent functionality we are better solved by some open source was because of cost because these have to be pretty much cheaper and token pride becoming much more conscious around us. But potentially, I think also because of some of the agent framework, what are better supported by open source we believe maybe also by intention that we think many of those guys do not want all their workout assets to be available on 1 big single big AR player, maybe to fail that the guys will take their take the share of what they right? So that's 1 thing which we see quite interesting mix. I would also say that the other thing which we see on the brain is also that there seems to be also now one more opening of both online, not but also local models, which is also becoming very interesting. So like we'll use the big fronted models for the ratoon stuff. But we also see that many of them actually probably use local models in many other ways, like voice input and a few others. And again, primarily probably both for the concept of privacy, but also for potentially taken price considerations because local model cost doesn't cost just cause electricity on your laptop. And this is even more of when it comes to the latest math machines and a few others, which are all well supported outlots. So by and large, we think this are actually quite relevant and interesting and that's actually pay, we define our strategy because we think both of them are very positive to or -- number 1 being an independent player, we are a very natural place to serve all of those big brown models, allow people to access it, which we see people already happening. -- but we are also very not biased towards any other open-source models among others. And we also -- while the assets are artists browser, which do support the local models, which are hosted on local machines in combination with other technologies. So we think all of those are very interesting directions and prod us to move forward in this area of being the broader infrastructure to support all those function additives. So both the obese and the big frontier models, but also both the cloud one, but also local ones. So we think we very uniquely position on those space. and very excited also about the trend of this move in the future.

And we'll take our next question from Jim Callahan with Piper Sandler.

I guess, starting with GX users with a strong uptick. I think you added as many users Q-over-Q as you did in all of 2025. Any further commentary on kind of what drove the strength this quarter and maybe like the sustainability of that going forward?