Opera Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

There are 9 speakers on the call.

Operator

Welcome to the Opera Limited 4th Quarter and Full Year 2023 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's call is being recorded. I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations.

Operator

Please begin.

Speaker 1

Thank you for joining us. As usual, I have with me today are Co CEO, Song Lin and our CFO, Frode Jacobsen. Before I hand over the call to Song Lin, I would like to remind everyone that in the conference call today, the company will be making statements about its future results and expectations, which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and how we perceive the current economic environment and are inherently subject to economic, competitive and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guarantees of future performance and you may refer to the Safe Harbor statement in the company's earnings release for details.

Speaker 1

Our commentary today will also include non IFRS financial measures, including adjusted EBITDA, which are different from our consolidated financial statements that are prepared and presented based on IFRS. We believe that the use of our non IFRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. We've also posted unaudited quarterly historic financial results of Opera on our Investor Relations website. With that, let me turn the conference call over to our Co CEO, Song Lin, who will cover our Q4 operational highlights and strategy and then Frode Jacobsen will discuss our financials and expectations going forward.

Speaker 2

So, I'll turn the call over to Paul? Sure. Thanks, Matt, and thank you to everyone joining us this morning to review our 4th quarter results. We are excited to report yet another great quarter. Revenue of $130,000,000 driven by strong organic growth payout with cost discipline, resulting in $28,000,000 of adjusted EBITDA, well above our expectations.

Speaker 2

For the full year, revenue was $397,000,000 and adjusted EBITDA was $94,000,000 dollars The Q4 of 2023 built upon the strength we saw throughout the year. This time last year, we guided revenue growth of 15% for 2023 as a whole with 20% EBITDA margin and the midpoint. Even after raising the midpoint of revenue and EBITDA guidance every quarter, we were able to consistently beat those expectations, ending the year with revenue up 20% and then adjusted EBITDA margin of 24%. We are very pleased that we have been able to consistently deliver revenue outperformance, while spending less than anticipated on marketing and accelerating our margin expansion. This also highlights our ability to consistently attract new users primarily through organic channels.

Speaker 2

We did not wave off from our strategy to focus on high up users. As expected, we are starting to see signs that high app user growth is offsetting lower app user churn, raised a slight increase in our total user base during Q4. Annualized ARPU grew to a record high 1.44% in the 4th quarter, up 22% year over year and 10% sequentially. This was primarily driven by high value users as well as Opera GX. 2024 will be more of the same with the goal of continuing to grow Zeeb users, both in Western markets as well as high value users in general.

Speaker 2

Combining this focus on high value users coupled with a stronger product portfolio and ongoing efforts to continually improve monetization puts us in a very exciting position. We are still a relatively small company with lots of potential remaining in the core browser business. During the quarter, advertising revenue was $68,000,000 growing 20% year over year. Advertising was strong for both our owned and operated inventory as well as Opera Ads. We saw particular strength in the retail vertical during the holiday period.

Speaker 2

Advertising now represents 60% of revenue. Search revenue was $45,000,000 in the quarter, up 15%, which we are also very proud of given the maturity of this revenue category. As we shift the mix of our user base towards higher monetization regions and user groups, we can generate search revenue growth well beyond the underlying market growth of search based monetization. Last quarter, I outlined 3 core growth drivers: generative AI and the work we are doing with ARIA advertising opportunities and finally, our gaming focus, Wave Opera GX. I want to give you a brief update on each and how they shape our focus for 2024.

Speaker 2

For several years, we have used AI to help power our new and content products to deliver relevant and customized content for our users. In 2023, we stepped up those efforts, specifically rolling out Aria, our browser AI. Aria has received great user feedback and provided another point of attention that supported our user growth in Western markets. Yet, we need to be mindful that the whole industry is still in the early stage of its potential. Users can benefit more from AI assistance than what they might consider themselves.

Speaker 2

The muscle memory of routine is strong and many integration points within the industry need to be rebuilt. As we embark on the New Year, we continue to iterate and are very excited for this next chapter in the ARIA story. We want to integrate ARIA further into the browsing experience, assisting users to unlock more efficiency gains, whether it relates to the browsing of the web itself, obtaining or processing information or content creation. As a browser and as an independent ecosystem player, we also have a unique opportunity to help users navigate the broader AI space and simplify their experience. On top, we see potential to help less tech savvy users take advantage of these technologies, while enjoying heightened levels of privacy and data protection.

Speaker 2

In short, these opportunities are huge. Our rewards for helping our users benefit from ARIA is observable not only as part of user growth, but also within engagement and indirect and direct monetization opportunities from monetizable links in chat environment to intelligent recommendations based on the browsing topics. As you may have seen, we have announced that we are pairing our product development with a significant investment in our AI infrastructure, raised the launch of a new data center in Iceland. This data center will be green energy powered and takes advantage of the Icelandic climate to reduce cooling costs. And in general, we pride ourselves on our efficient hosting setup, typically at oneten of the cost of third party providers.

Speaker 2

And we're excited to expand our in house hosting to the AI space. AI is processing intensive, with energy and quality being key OpEx factors, but less sensitive to latency variations in milliseconds. As such, Iceland is a great location for our fast AI footprint, whereas our other data centers are typically located closer to our end users. Shifting to advertising, which remains a top priority given the potential we see to continue strengthening our monetization. As a browser company, we can leverage the closed loop environment of the browser to capture interest and context.

Speaker 2

While remaining mindful of user privacy, we are able to create value and utility for the user throughout their online journey, unlike many advertising platforms, which rely on third party signals and cookies. For example, when shopping online, we do not need to rely on third party cookies to tell us which offers to display to a user, but rather can't do so organically and at the right moment in the user's shopping experience, such as discount codes when viewing the cart when intent is at its highest. With the growth of high value users, we are becoming an increasingly relevant party to even more potential advertisers, typically in the context of integrated functionality that both benefit our users and has the potential to drive sizable revenue for Opera, representing a significant opportunity as we look into 2024. Beyond our Opera inventory, Opera Ads has proven itself as a competitive player in the broader landscape, attracting advertisers based on our technical abilities to augment their targeting. We will continue investing in that platform in 2024, which we will see good opportunities from e commerce, gaming and other high intent user interactions in a programmatic way, coupled with advances in AI and algorithms, which we persist in pursuing.

Speaker 2

And then in terms of our focus on games, Opera GX continues its healthy growth trajectory. Our GX user base was 27,800,000 in the fall, adding 7% high value users versus Q3 alone. On top of the user growth, annualized ARPU increased to $0.0351 during the quarter, up 6% versus Q3. The compounding of user and app growth has brought Opera GX to become a product with almost $100,000,000 annualized revenue run rate, demonstrating our ability to be relevant to a young and highly engaged user segment. In terms of footprint, Brazil now follows the U.

Speaker 2

S. As the 2nd largest market of GX. We continue to observe that GX users in emerging markets monetize significantly better than users on other browsers, than users on other browsers, where the gap between Western and other users be narrow among PC gamers in particular. We feel great about the prospects of Opera GX in 2024 with continued user growth and further monetization opportunities within this attractive user base. Our ability to invest in the footprint of GX is also ever expanding alongside the growth of the product market.

Speaker 2

Beyond these three highlighted areas of opportunity, we also observed some exciting trends in the broader ecosystem. 1 is the opening up of iOS, for now in Europe, a result of continued evolution of the regulatory environment in the EU and other parts of the world. Such regulatory measures to promote healthy competition is naturally a positive impulse to Opera and their independent player. Also, we are well positioned for the rebound interest in fintech applications on Web3, while we continue to invest in technology and build use cases. Both of these carry strategic importance to Opera in the months and years to come.

Speaker 2

So now let me turn the call over to Frode to discuss the financials and 2024 guidance in more detail. Frode?

Speaker 3

Thank you, Song. Q4 was a great quarter for us with a continuation of the strength we've observed all year and a confirmation of our confidence as discussed when we raised Q4 guidance last quarter. Revenue in the quarter came in at the top of our guidance at 17% year over year growth. On a constant currency basis, our growth would have been about 4 percentage points higher or 21%. Our user base is growing in Western markets and PC browsers also grow high ARPU users in emerging markets due to the success of Opera GX.

Speaker 3

The decline of low monetized mobile users in emerging markets is offset by strong underlying ARPU growth, leading to revenue growth in both Western and non Western regions for all products. Adjusted EBITDA came in well above our guidance, adding $3,800,000 to the top of our prior range. The over performance was driven in particular by lower marketing spend than anticipated in our guidance and cost of revenue coming in about 1 percentage points lower than anticipated relative to revenue. On the other hand, we saw an increase in cost related to advisory services supporting our internal teams on SOX readiness as well as the bad debt provision. Cash flows came in at the high end of expectations relative to adjusted EBITDA with an 88% conversion to operating cash flow for the year as a whole and 77% conversion to free cash flow from operations for the year as a whole and both slightly stronger in the 4th quarter in isolation.

Speaker 3

Tax cost for the year was relatively modest at 7% of adjusted EBITDA. In 2023, we benefited from both the recognition of tax assets in relation to our share based compensation in prior years as well as FX movements between USD and local currencies in which our taxes are calculated and paid. Our year end balance sheet includes an updated fair value assessment of our investments in OPEI. We value our stake at an estimated EUR 269,000,000 up from EUR 163,000,000 before. This results in a significant noncash accounting gain of €106,000,000 in the 4th quarter.

Speaker 3

As noted in our press release, we've observed that the company more than quadrupled its user base during 2023 and saw an even higher uplift in daily usage, in turn driving strong revenue growth. The updated valuation also ties with the limited investment by a new OPay investor in late 2023, which subscribed at a $3,000,000,000 OPay valuation. We remain interested in selling our stake in OPay at the right time. We are also open to a later stage exit in connection with OPEY eventually going public according to its longer term plans. Our OPay stake stood at 9.44% as of year end.

Speaker 3

We completed our most recent buyback program in the quarter, repurchasing 1,150,000 ADSs at an average price of $11.27 totaling $13,000,000 We thereby fulfilled the $50,000,000 buyback that was launched in early 2022 with a total of 6,100,000 ADSs repurchased at an average cost of $8.17 We will continue to consider buybacks in a tactical manner to maximize value for our shareholders in the long run. Since 2020, we have repurchased 35,500,000 ADSs equal to 30% of the shares outstanding at that time at a cost of 2 $28,000,000 or $6.44 on average per ADS. When adjusting for dividends avoided, the average cost is even more attractive. However, as we look ahead, it is our recurring dividend program launched in 2023 and currently at $0.80 per ADS per year that is expected to be our main avenue of returning funds to our shareholders. Now turning to our first guidance for the full year 2024 and the Q1.

Speaker 3

For 2024 as a whole, we are guiding revenue to $450,000,000 to 465,000,000 representing 15% growth at the midpoint. The guidance assumes continued convergence between the growth rates of advertising and search, though further upside would more likely be fueled by advertising. We expect to continue our browsers growth trajectory with high ARPU users, and we expect continued expansion of Opera Ads. We guide adjusted EBITDA to $106,000,000 to $110,000,000 representing a 24% margin at the midpoint. The EBITDA guidance is highly exposed to what marketing cost we assume, and this cost is also highly discretionary.

Speaker 3

In 2023, marketing cost came in at 28% of revenue versus about 32% in our original guidance for the year. As a reminder, marketing cost was 35% of revenue in 2022 and even 48% of revenue in 2021. From a relatively low spend level at the start of 2023, we scaled our marketing activities quarter to quarter. We are encouraged by our ability to scale at attractive ROI. And as we look to 2024, we expect to continue the sequential trend as an investment in our growth trajectory also beyond the current year, though starting the year with a Q1 spend more similar to Q4.

Speaker 3

In sum, this translates to a marketing spend expectation of just above 130,000,000 or about 29% relative to revenue. Cost of revenue items combined represented 23% of revenue in 2023, scaling with the successful expansion of Opera Ads. Our guidance implies a modest continuation of the trend, adding about 1 percentage point relative to revenue for 2024 as a whole. Similar to 2023, the percentage will start below the annual average and increase in subsequent quarters. For remaining cost expectations, both cash based compensation costs and the sum of our other cost items prior to adjusted EBITDA are expected to grow year over year in the mid single digits and as a result are expected to drop about 2 percentage points relative to revenue combined.

Speaker 3

For the Q1, we guide revenue to $99,000,000 to $101,000,000 or up 15% year over year at the midpoint and adjusted EBITDA of $22,500,000 to 24,500,000 or a 24% margin at the midpoint. In conclusion, we've put behind us a year that's progressed ahead of our expectations, both in terms of revenue and profitability, and we are excited to embark on 2024. We're only 2 months out from releasing Q1 by now, and we look forward to giving you more color on how 2024 is shaping up then. With that, I'll turn the call back to the operator for questions.

Operator

Thank We'll take our first question from Lance Vitanza with TD Cowen. Your line is open.

Speaker 4

Hi, thanks for taking the questions and congratulations on the quarter. A couple for me if I could. The first is with respect to the headroom that you think you have to further expand the user base in the high value markets like the U. S. And Western Europe?

Speaker 4

And I know you touched on this a little bit during the call, but could you provide any more color on how penetrated you believe you are in those markets today versus where do you think you can ultimately take that? And then I was not quite sure I followed the commentary

Speaker 2

around Brazil and how that comes into play.

Speaker 4

I mean, that's not necessarily Brazil and how that comes into play. I mean, that's not necessarily a high value market, but it sounds like you're seeing some progress there. So if perhaps you could revisit that and elaborate on that, that would be helpful.

Speaker 3

Hello? Zong Min, are you muted?

Speaker 2

No, I'm good to hear. Okay.

Speaker 4

Did you guys get the question or should I repeat that?

Speaker 2

No, I think it's good. Okay. So okay. No, no, I think it's good. Yes, there's a bit of a new path out in the beginning, but I think now it works.

Speaker 2

Maybe I'll comment okay, so maybe I'll comment a bit for the GX penetration and also a bit Brazil and then Frodo can always add Carlos for the user numbers. So yes, so more like yes, maybe starting with Brazil, because it's actually quite interesting. I think we just commented that for GX, U. S, of course, is always our number one market, but it's a good example that we also show very strong growth for Brazil as more like as an emerging market, but also it's a function that it's also one of the places where we see traditionally, it's counted as the emerging market and we see up are not so high on margins. But for GX, what we're very interesting is that we see that if it's gaming users, if it's from PC, game modes, very active, then actually we see that it's actually relatively high ARPU compared with other browsers.

Speaker 2

So, I think it's so we highlight this to call out that in some instance, especially I would say in PC and in GX case, we actually see maybe less difference of users from different regions. But rather as far as their high ARPU users, for instance, they are gamers, they play with 3A games, then you actually see quite high ARPU across the regions. So I think we're excited to see that we have very good growth of JF Rewards in Brazil. And also, it's a proof, I would say, rather, that in the long run perhaps more relevant is high ARPU users with high intent. We also see it as a trend in the industry and can even be less limited to a particular region.

Speaker 2

So I think maybe that's the commentary that we have here. And then maybe also to comment that, but still like all in general, both, I would say, in, let's say, high ARPU user market or let's say, in Western market, we are still single digit market share, right? We still have plenty of rooms to grow. And overall, we're just very excited about the potentials. It's more like, I would say, for certain products, which are already very high up to start with, we also announced the GX up, right?

Speaker 2

I would say we probably have less focus on particular region and where we'll pump order user growth, both organically also by market spend. So potentials are huge. While we, of course, in certain other verticals, we'll, of course, focus more high value more like high yield of value markets like Western markets.

Speaker 4

Okay. That's super helpful. And if I could just squeeze in one more question about capital allocation before I pass the baton here. And I heard the commentary about the dividend being the primary mechanism for returning cash to shareholders. And I think I know the answer to this, but there's a yield on the stock, a 7% dividend yield that would seem to suggest that maybe the market sees potentially some downside risk to the dividend.

Speaker 4

And just to be clear, is there any reason to think that the dividend could actually be cut or lowered? I mean, it seems to me like the risk around the dividend is to the upside given you have no debt, you have strong margins and even if growth were to begin to plateau, which it hasn't, it seems as though you're generating, I think I have you at around $150,000,000 of cash at the end of this year even after you pay the public portion of that $0.80 dividend, right, because you still have some of the StarMaker receivable that you're working off, I believe?

Speaker 3

Yes, that's correct. Yes, I can try to broadly comment. I mean, yes, we seem to trade at a good yield, so good for our investors. The business is scaling. We are converting cash sorry, profitability to cash, I think, in a healthy manner.

Speaker 3

I would also end up with the calculation of increasing cash, also taking into account our new Iceland data center for the year though. So we obviously, we have a we'd like to be more textbook. And I hope we just launched this recurring dividend. But over time, of course, we would like to be in a position where we can increase it and certainly not decrease it.

Speaker 4

Thank you very much guys. I'll get back in the queue.

Speaker 3

Thanks, guys.

Operator

Thank you. And we'll take our next question from Eric Sheridan with Goldman Sachs. Your line is open.

Speaker 5

Thanks so much for taking the questions. 2 if I could. First, coming back to the comments about Apple and opening up broader competition, how should we think about what that means for growth in the business, not only in 2024, but against a longer term time horizon and how you're thinking about incorporating that into forward forecasts? That would be number 1. And then number 2, obviously nice leverage displayed both in the quarter and the way you're framing margins for 2024.

Speaker 5

Can you talk a little bit about balancing what your key investments are for 2024 against delivering against that type of operating leverage? Thanks so much.

Speaker 2

Yes, sure. So I guess I thought this is Olin. I thought I'll just take the Apple one because I like it. So now I think so in general, I think it's still around the early stage, right, because it's more like it's a function of regulatory changes. I guess everybody sees the motions well due to some of the pressures from EU DMA apps that we see Apple now starting to opening up, right, trying to say that they now potential third party browser engines, in our case, to be available on Apple, even though there are still lots of conditions that we need to iron out, right?

Speaker 2

So I would almost say, as we all know that in Western market or high upmarket, Apple has a significant market share and that has been rather than teens, so partly browsers because they simply do not allow the browser engine at all, right? So I don't know if many people realize that from the beginning. They never allow it, which is rather strange. So I would almost say that I think now we have this force to rise move that at least that's opening up. That's a potential that can allow us to compete in the same level as, say, Android, which is now by far the majority of the mobile smartphone base, simply because we can then have our own engine.

Speaker 2

So I think that's definitely the right direction. There's still work to do because I think given yes, we also have good talk with Apple and the many others. They are still ironing out the whole process and with all because now it's also limited to the EU, which is a bit strange. Like why would you have something which is only okay in Europe, not out of place? So we need to iron out a lot of details also in very good experience and partnership with Apple and the likes.

Speaker 2

But we like the movement and the directions, and we are very actively working on it. I do think that we will have a higher growth in iOS in any case. But of course, again, it depends on a few of our other stuffs that we're actively working on. So yes, I think that's my short answer. But then maybe Frode can comment a bit on capital allocation models.

Speaker 3

Yes. Sure, Eric. So I mean, we our underlying trend is margin expansion as we scale. And then when we look at the 2024, we set our guidance based on sort of that normalized trend of that scale. So I think we guide about a point or so percentage points ahead of consensus given that we have scaled very strongly in the Q4.

Speaker 3

The Q4 alone lifted the EBITDA margin of 2023 by an entire percentage point relative to what we guided for the quarter ahead of time. So we certainly came in ahead of expectations throughout the year, including in the final months of the year. Because if you look back, remember, our original margin expectation for 2023 was 20% EBITDA. So we continue to scale it, but we also invest in growth in our marketing when we see healthy ROI, and we have been stepping that up in dollar terms quarter by quarter, and we do want to continue that trend.

Speaker 5

Thank you.

Operator

Thank you. And we'll take our next question from Naved Khan with B. Riley. Your line is open.

Speaker 6

Yes, hi, great. Thanks a lot. On the iOS topic, I'm curious if you plan to do any advertising to drive up awareness for Opera as this change goes into effect on March 7, so that you can get more downloads? Any color on that? And then I have a follow-up on the ad extension.

Speaker 6

Are you seeing any increased interest because of the upcoming cookie deprecation and Chrome browser and how you kind of offer a closed loop system for the advertisers?

Speaker 2

Yes. So okay. Yes, this is Soliho. I think I'll comment a bit in the start and then Frode can always chime in for more details. So, yes, I think you probably referred to the potential valid screen and others allowing you to choose a list of consoles from yes, when you're talking to the phone when you're seeing new models.

Speaker 2

So I would say yes, I think we will definitely we'll probably allocate more marketing budget, I agree, because of the timing. But then maybe just to point out that, of course, for us, we're more looking also forward into the capability of be able to having independent browser engine because that actually will make more differentiations and that will take more time simply because Apple will yes, there's still a lot of limitations technically that Apple Apple is still not very clear yet. That pans out, so we need to work on that. But yes, high level, I think, does make sense to have higher marketing spend, and we're looking forward to it to actually further increase our iOS market share. So it's that.

Speaker 2

And then also maybe comment a bit on the ads that yes, yes, we do see that web traffic is quite relevant to us as the ad platform, just because we as a browser are quite natural into this. We have all the false positive data and we're not really impacted by putting Google Earth's or no traffic amount. So yes, we already see a good trend that we see picking up of web traffic perhaps more than anything else in Q4 and we think that trend will continue in Q1 and we'll focus on that as well. So it's probably going to be a bit tailwind or good advantage for us moving forward.

Speaker 6

Excellent. Thank you.

Operator

Thank you. And we'll take our next question from Alicia Yap with Citigroup. Your line is open.

Speaker 7

Hi, thank you. Good evening, good morning, management. Thanks for taking my questions. Also congrats on the solid quarter. I have a few questions.

Speaker 7

First is following up on the Brazil GX browser, with the lesson learned from Brazil, would that lead you to think about also launching in other markets? If so, where could that be? And then second question is just wondering if there's any initial target that on the revenue contribution or incremental revenue contribution that can be coming out from the ARIA integration later this year? And then our last question is, given you will continue to grow the high value, high ARPU user on your platform, What kind of potential new advertiser industry vertical or category that you believe you could attract that have not been already on your platform? Thank you.

Speaker 2

Yes. Yes. Okay. So yes. Okay.

Speaker 2

Like again, so we'll hear. I'll turn on the call center further. Please chime in and I'll try to be brief. So yes, I think GX I mean GX essentially is available worldwide. We don't really have too much limitations on regions.

Speaker 2

But then you are right that the content, of course, of GX can be different across regions because of languages, news, user interest among others. So yes, there are a bit localization needed and a bit localized focus, which as you are rightly saying that we have like we've also followed the U. S. And other European countries, but now we're also expanding into LatAm, in particular, Brazil, which works really well. So I think naturally, we will yes, into relevant regions.

Speaker 2

And then there are also other similar regions, which we can look at. So I think the focus is naturally that we want to target other regions and countries where there is a big penetration of game off, especially PC game off because that's very relevant product for GX. So I think that's high level how we look at it. And I think you will continue to see the nice expansion of the GX user base, which again is a very nice revenue driver and it's profitable from day 1. So very excited about it because that actually will means more profit margins hopefully.

Speaker 2

And then I think you also commented about ARIA and its contribution to revenue, I guess. So like again, it's still for totality, it's still a bit early stage. But I would say that first of all, of course, it does bring awareness and say we have grown very nice people over 1 of flagship products because of AI, because people put a lot of focus on it. They see that it can be differentiated. But then on top, if looking at purely revenue point of view in many regions, you probably can already see that now the AI or the ARIA chatting has now already included say monetizable links.

Speaker 2

If you click on it, it will take you to a web page and where would you get monetizable shares. So, I think that's a very good example of how that can be monetized, even though we are still working, of course, with our partners, because it's very important that they're also on the board jointly how we should design the model for work. So it's that. And then again, not limited to links, there are many other recommendations of hotel and many others, which we are very excited about with our partners experimenting. So like OYVO, very nice way of monetize, very easily conceivable.

Speaker 2

And the only thing is just we have to see almost a bigger change in the industry and we want to work very closely with our partners to do this in the right way. So it's that. And then I think what's the last question again?

Speaker 7

As you continue to grow the high value, high ARPU user, any like new advertiser industry vertical that you haven't been on board we can able to attract?

Speaker 2

Yes. Sorry, I don't have a note. So yes, I forgot this one. Okay, sure. So yes, I mean, I think it's actually quite interesting, right?

Speaker 2

Because in Q4 alone, we already see that e commerce is really standing out. But I would almost say that it's really it's a bit different than what we've seen in the past that now we see that ecommerce vertical with a very specific high user intent is very relevant. Like instead of generic banners showing, hey, you can buy this, use of that, We see that now we can do more, I would say, focus on high intent user events, like at the point where you don't want to check out, we say, hey, do you have a coupon code? Hey, maybe you want to check this cash back. And those actually works really well.

Speaker 2

We're experimenting with some of our U. S. Partners. So very excited about it. I think that's definitely a new trend that we see that we focus on high intent user events and then we make and then we try to commercialize it, but also give very good user values because you are very appreciative because that gives them value right out of the sport.

Speaker 2

So I think similar styles that maybe potentially lower frequency, but very high value event with good user intent, e commerce, but it can also potentially be Fintech Finance, credit card application or whatever can be quite relevant. So those are what we are very excited about as potentially new verticals.

Speaker 7

Okay, great. Thank you.

Speaker 3

Maybe I should just comment on your second question in terms of guidance. So I would say we do reflect the fact that ARIA helps us raise awareness, and so it helps us attract high value users. And we see that it's also very engaged users that we monetize well in our existing monetization directly. So that's how we consider it for now. And then incrementality, we are more cautious to build in, since it's still so new.

Speaker 7

I see. Okay. Got you. Thank

Speaker 2

you.

Operator

We'll take our next question from Mark Argento with Lake Street. Your line is open.

Speaker 8

Hi, good morning guys. Just a couple of quick ones here. So Song Lin, I know in your prepared remarks, you talked a little bit about search continue to see decent strength there. I think it grew 15%. You did mention that you thought you could grow in excess of the search market.

Speaker 8

Just wanted to drill down there a little bit and on is AI the core contributor there? And then just one for Frode on the Opay, big reval up on the stake with the recent investment. Did you guys get a look at the opportunity to sell secondary shares in that transaction? Or what's the probability we could see a monetization there? And then if you do monetize any kind of thoughts on use of proceeds?

Speaker 8

Thanks guys.

Speaker 2

Yes. Okay. So, yes, I'll brief your comment and then yes, Frode can also comment a bit on the OpEx. So, yes, I guess, when we refer to such, I think it's really a function of, number 1, we do have like, say, for instance, we work closely with our search partners, the likes of Google and the likes. And then in fact, of course, just being that we do have a bit higher search growth because we're benefiting from not only the revenue growth, in this case, similar to Google, but we do also have more user growth perhaps.

Speaker 2

It's just because we are starting from a much smaller point, right, like especially in high up market. So I think that's really just explained why we do have higher user higher search revenue growth than, say, the bigger markets, right? So if you compare us with Google Adebikes. So that's one. And then, of course, we're also quite excited about the future because I think mainly because we are very positive about our potential user growth.

Speaker 2

And then I also agree with you that with the incorporation of AI, it can actually make user more efficient, more search discoverable and then they can lead perhaps to the search page, the search results page more likely, which we really hope that can also bring more revenue stream from that and if we can also be innovative on that. But again, we are working very closely with no partners on that because I think it's very important that this is a coordinated effort.

Speaker 3

Mark, I can comment on the offay part of the question. So I think based on the results of 2023, we can say we are happy. We haven't sold out yet. We didn't monetize the stake a couple of years ago, but still a significant position. At the same time, it's not part of our business.

Speaker 3

We don't have any operational synergies really as an investor. So as a long term view, we do want to exit the position, but there's no real necessity of a set time line. So I think we'll consider it and treat it in an opportunistic manner. And then as I mentioned on the call, whether that ultimately becomes a sale or a exit via an IPO, that's how we see it long term. But we don't have a set time line that we, for some reason must adhere to.

Speaker 8

Great. Thank you.

Operator

And it appears that 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.

Speaker 2

Sure. Okay. So like again, really appreciate that you could join the call in conclusion. We think that 2023 was a terrific year for Opera. The top line growth and adjusted EBITDA margin expansion we experienced, combined with the best product portfolio in our history, sets us up for continued success in 2024.

Speaker 2

So really looking forward to it. And I would also like to thank all of you, our employees, for your hard work and our investors for your confidence in us. Thank you, Cory.

Operator

And this does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.

Powered by Quartr
Earnings Conference Call
Opera Q4 2023
00:00 / 00:00