Opera Limited (OPRA) Earnings Call Transcript & Summary

Thank you. You get going? Okay. Well, I think in the interest of time, maybe we should kick it off. I know everyone's still making their way across rooms, but it's great to welcome the team from Opera. Pro, thanks so much for being part of the conference.

Thanks for having us.

So let's just kick start by taking a step back. For those who don't know the company, well maybe you can walk through a little bit of the Opera story and bring us up to date on what some of the key initiatives and priorities are for the company.

Sure. So Opera is the biggest independent browser that people can choose. The way we get users to use our browser as opposed to whatever standard browser would come with the phone or computer is to make a product that's to the most demanding users. So it's more feature-rich, it has more functionality. AI opportunities is a big part of that, but that's something we've done for 30 years and by attracting those users. They are also the users with the highest output potential. And so we generate revenue by driving traffic to partners. Either it's query that the user is looking for something and we can send it to search or another partner that has what they are looking for, or it's advertising revenue, where we show ads natively in the browser or we buy third-party inventory and use our data advantage to show ads there. So over the past 10 years when Lin Song and [ Frode Jacobsen ] have been CEO and CFO, we're proud that we are our CAGR is 21%, so we had a long run from just over $100 million revenue to a bit over $700 million this year and then our priority is just continued growth. What we see is that the bigger we get, the more partnership opportunities open up because the traffic we can drive is more and more meaningful. So of course the next big milestone is to hit the $1 billion of revenue, which isn't necessarily so far out. We're approaching it and because of this fact that we scale, we grow faster and then you know the path from there to more of those billions. It's almost easier than going from $100 million to $700 million.

Okay. Well, maybe let's pause there. You've been at the forefront of a lot of AI getting put in front of consumers, especially around the browser experience. What have you learned so far about the way in which consumers want to interact with AI specifically around the browser? I think.

It's maybe the most exciting time for a company like Opera because of this, maybe revolution is a too big word, but it's such a productivity lifter, right? It's such useful tools. And it's happening in the context that, I mean the browser was already getting more and more time spent. Now people spend more time because you have tools that become essentially web-based, whether it's your presentations and spreadsheets or calendar or email or instant messaging. And then I think, AI, it started out a bit like search, like a web page or a dedicated app on your phone. And that's great. You know, and we all probably use it for stuff. But the big opportunity and what is still happening now is the integration of AI at the browser level, because then you lift it from existing on a website to existing at the same level as the user. So where you're logged into your stuff, you can have the AI both be context aware, and you also then have the agentic opportunity, which is still, I would say, I would say very early days and more enthusiast-driven than mainstream. But probably a year from now when we talk again, that has gotten increasingly able to do complex things on behalf of the user, even though we can already save you a bunch of time in terms of like populating your calendar and summarizing messages and and stuff like that. So I think our strategy in that context is to be the best orchestration layer for whatever AI tool the user wants to use. So we were very early in 2023 we built our own you know an AI assistant into the product and we allowed offline like local LLM and so on. Not as a competitor to the platforms because we don't compete in that space, but we see them more as just potential partners and services that we should make our browser the best place for the user to experience that. So we do that through like plugins or backend integration so that we allow the browser to be controlled by whatever AI tool that the user prefers. It's kind of like our R&D product.

Okay, so there's a couple of things I want to pull on there. But with with the launch of Neon, which was almost a year ago, what has been the feedback you've gotten from customers on Neon broadly as a product?

So what Opera Neon is, it's the full Opera browser, but with agentic capabilities built in. So you have to pay for a subscription, because the compute is to cover the computing cost. But then you have a native agentic experience where you can have the browser perform tasks for you. And through that, the main objective with that is not, it's not Neon in itself. It's how those users use the feedback button actively and playback and the team, we are learning from that. And this is our, this is where we test on the most intuitive and sophisticated users ahead of bringing functions into our free products like Opera One and Opera GX. We charge on Neon because it's our own compute cost to cover that, whereas in the free products, we will, for example, let the user plug in, as I mentioned before, like their existing subscription. I think offline models is something we have supported for a long time, but it surprisingly gets little attention, even though most people have computers that can run it. So we think that's a huge opportunity for the browser to essentially have local, both for privacy, but also for avoiding the need to pay for your compute costs. You just pay electricity, essentially. So. That's how we think about Neon, and then we use it, and you've seen over the last months, you know, the various updates and integrations that we support as we try to bring it into the free version and cost efficient sort of good monetization way.

Can you just talk, you talked a little bit about the theme of interoperability, openness, the ability for the user to bring product and connectivity into your platform. Talk a little bit about what that means in terms of enabling utility and usage around your products over time.

But we think it's definitely the it's the future of how people will use the web and how they will use all the services that they're connected to. Not all AI, not all agentic, but that it will become increasingly common to rely on AI for more than just tech. searching right or data processing as we do now so so we want to have that integrated so our logic this is so we we want to be we want to be thought of as oh that's the best browser for my AI tools if somebody offers a plug-in we want to support it if they want to do an MCP connection we want to support it so that people can access as much as possible natively. So we build the Opera browser so that they can be used by humans, and that's what they mainly are, but they can also be used by AI agents and controlled in collaboration with the user.

You've obviously seen a lot of growth in the mobile part of Western markets over the last nine, 12 plus months. Talk to a little bit about what the catalyst was to see that types of growth you've seen, especially in Western markets.

It ties into our broader strategy of we focus on the highest potential user bases. So that can be geographic like Western markets, it can be gamers, we make a version of our browser that's tailored for them and within mobile iOS is kind of been a missing piece. So what's happened over the last couple of years is that iPhones have opened up that you can have another browser default. It doesn't have to be Safari. Prior to that, you couldn't compete. Any link, anybody would click in an email or anything would always open Safari. So even if they wanted to use Opera, it would be a constant uphill battle even for the user. So I think that the fact that the user is now free to set another browser as default means we can compete on that platform. It's still, I mean, we went from essentially like 100% Android smartphone base to, you know, iOS has become maybe 10% of the total now. But that's high ARPU mobile users with a very nice growth curve. And then broadly speaking, we have been growing our Western market. I mean, Western market is not the goal in itself, but it's a good indicator of, okay, we managed to grow high ARPU users. We grow in the right regions. We grow the right profile, et cetera.

Yes. Okay. Understood. Okay. When you think about your revenue base, maybe start with query revenues and how you think about them evolving from more traditional Google search and how you think about where search as a product from an evolutionary standpoint is going and what that means for monetization longer term.

Yes, I mean, the the the revenue is driven by the user looking for something. And so historically, whenever they started to type in, I mean, Opera came up with the whole idea of what if a person can just type in the URL bar, and then we send them to you, Google. What do you think about that, right? But that is definitely broadening, both because, I mean, Google is a key partner for us, and they have expanded their monetization of their AI modes, Gemini, et cetera, which benefits us through our our partnership, but also because our own AI backend can sort of, oh, the user is looking for this. And then if we work with an e-commerce player, for example, in that space, we can show the product directly and send it intent directly to the user.

the retailer. Okay, understood. Other verticals have become a key component to growth. Talk a little bit about.

the opportunities that sit in areas like commerce, travel, things that can rise as a percentage of the mix of the business in the years ahead. Commerce has been a great success. Though we're probably still under indexing, but over the last few years we always knew that we were kind of under indexing on it because e-commerce, it's done in the browser for the most part, right? And it was less than 20% of our advertising revenue. So the unlock was it's this whole thing about scale enables growth. So we got big enough in in Europe in the U.S. that major e-commerce players thought okay. Now we can start bring meaningful traffic, right? So we saw a 1 example where let's say our market share on the browser side is about 5%, but an e-commerce partner got 10% of their traffic from us. So they and they say, okay, this is meaningful. So then we can integrate the APIs, we can pull the products, the price, the description, the picture, et cetera. Can show that. So over the past 2 and a half years e-commerce has grown from like $40 million a year to in Q2 it was close it was over well over $200 million run rate. 6x over 2 and a half years. And I mean, still $240 million if we have 5% market share. There's billions of headroom, we think, in terms of opportunity. We do this in the browser, but we also we also use the relationships in our targeting to reach people also outside the browser. Because the browser can't really be an advertising, it has to be more native and elegant, and we do those things. But then you can reach users on websites or in other apps when you think that they are looking for something and drive high conversion traffic to.

partners. Okay. And then maybe in terms of like other verticals like travel and others, are there other areas where you're pointing investors to that could be potentially big growth opportunities similar to what commerce turned out to be?

It's exactly the same. I think travel is maybe 2%, 3% for advertising mix, where to, it's the browser that people do research and book their tickets and book their hotels, et cetera. So, uh, so we think that's another big opportunity, and it's just about allocating the people and the time to sort of build it up. Okay.

talk to us a little bit about Minipay and some of the success you've had there and how it fits into the broader strategy of the company, especially when it ties back to monetization potential.

over the longer term. Yeah. So Minipay is a blockchain stablecoin wallet. So we made it for emerging markets. It's a technology platform but it's made so that it's super easy for everyone to to create an account there and essentially move money into stable currencies like the USD, which is in itself quite compelling if you live in an emerging market with a volatile currency, et cetera, that you have that. Um, and it it's it's grown quickly. Uh, we uh So we partner up with relevant companies that focus on these regions and bringing them into sort of that ecosystem, like Tether is a key partner for us. And the way we monetize it now is via those partners. Essentially, uh integration and promotion of players in the ecosystem. It's still, I mean, it's about $20 million a year that we generate on it, but we've always had it profitable. Or in terms of commercial opportunities, as you said, I think over time, it can move into essentially generating revenue on transactions, but we're not doing that now because for now it's just about building scale and expanding the pool of services like and so forth. More adoption of what we have remittance is a big opportunity. People have family members in other countries. There are some angles also for even people outside emerging markets like if you travel you can use Minipay to pay the bus fare and in a foreign country you know like all the mobile based payments we can integrate them so that you can pay like a local.