Opera Reports Record Third Quarter 2022 Results

Revenue and adjusted EBITDA both exceeded prior guidance ranges, with gaming browser GX key driver of high ARPU users in the Americas and Europe

Q3 revenue grew 28% year-over-year, with adjusted EBITDA margin reaching 25% in the quarter

Company announced a major repurchase of 23.4 million ADS equivalents that closed in October, in addition to 0.9 million ADSs repurchased in the market during Q3

Company raises 2022 guidance, expecting 29% revenue growth at a 19% adjusted EBITDA margin at the midpoint

OSLO, Norway, Oct. 27, 2022 /PRNewswire/ -- Opera Limited (NASDAQ: OPRA), one of the world's major browser developers and a leading internet consumer brand, today announced its unaudited consolidated financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Financial Highlights

"Once again, Opera was able to deliver record revenue at a profitability level well ahead of our expectations, by remaining focused on operational excellence despite continuing macro headwinds," said Co-CEO Song Lin.

"While the macroeconomic outlook remains highly uncertain, we are pleased to yet again observe that our strategic choice to focus product innovation around high-ARPU users in the US and in Europe continues to drive strong underlying performance. The substantial revenue growth and profitability expansion we report today exceed our earlier increased guidance and demonstrate the growth potential of our core strategy even in turbulent times. Finally, I would like to add how excited I am to join the Board of Directors and continue to shape the direction of our company," continued Mr. Song.

Third Quarter and Recent Business Highlights

• Core search and advertising revenue grew 29% year-over-year, driven by the ongoing ARPU trend of our browser and news user base as well as our Opera Ads platform.
• Opera's average monthly active user base was 321 million MAUs in the quarter, with underlying growth continuing to be strongest in the Americas. As our focus on monetizable users in emerging markets mature, we are starting to see signs of user base stabilization in these regions at significantly higher ARPU levels.
• In the third quarter, each user on average generated a record $1.06 of revenue on an annualized basis, exceeding the one-dollar milestone following 41% growth versus the third quarter of 2021.
• The Opera GX gaming browser had over 18 million monthly active users across PC and mobile in the third quarter, with the underlying growth being partially offset by seasonality.
• Towards the end of the quarter, Opera announced that it had reached an agreement with its pre-IPO shareholder, 360, to acquire its 23.4 million ADS equivalents or 20.6% stake in Opera for $128.6 million, financed by our strong balance sheet. Subsequent to the end of the quarter the transaction closed, and 360 is no longer a shareholder in Opera.
• During the quarter, the company conducted open market repurchases of 0.9 million ADSs at an average price of $4.84, for a total spend of $4.4 million, leaving $35 million or nearly 70% of our existing buyback authorization remaining. Net of the transaction with 360 and repurchases to date in Q4, the total number of ADS equivalents outstanding is now 89,693,168.
• At the end of the third quarter our cash and marketable securities were $201 million. Combined with present value receivables of $168 million from the sale of Nanobank and Star X, this adds to a total of $369 million, or $241 million net of the subsequent payment for 360's stake. We also continue to hold our 6.44% equity stake in OPay as an asset held for sale.

Business Outlook

"Both our search and advertising revenues supported our continued strong growth trajectory driven by our focus on high value users and broadened monetization in all regions. Revenue outperformance combined with lower-than-expected marketing expenses resulted in higher-than-expected EBITDA," said CFO Frode Jacobsen. "On top of our strong operating performance, we remain committed to returning capital to shareholders. In total Opera has bought back more than 28% of total ADS equivalents outstanding after our 2018 IPO and 2019 follow-on offering and we remain focused on closing the gap between the current share price and the intrinsic value we see in our company."

For the full year of 2022, Opera expects revenue of $323 million to $326 million, representing 29% year-over-year growth at the midpoint and up from our prior guidance of $313 million to $319 million. We guide adjusted EBITDA to be between $62 million and $64 million, or a 19% margin at the midpoint, and up from our prior guidance of $53 million to $60 million.

For the fourth quarter of 2022, Opera expects revenue of $88 million to $91 million, representing 23% year-over-year growth at the midpoint. Adjusted EBITDA is expected to be between $17 million and $19 million, representing a 20% margin at the midpoint.

Third Quarter 2022 Consolidated Financial Results

All comparisons in this section are relative to the third quarter of 2021 unless otherwise stated.

Revenue increased 28% to $85.3 million.

• Search revenue increased by 15% to $35.4 million, driven in by the growth of our PC footprint in western markets, particularly in North America.
• Advertising revenue increased by 41% to $49.1 million, benefiting from the audience extension supported by our Opera Ads platform in addition to the growth in our western PC footprint.
• Technology licensing and other revenue was $0.8 million.

Operating expenses increased by 3% to $69.3 million.

• Combined technology and platform fees, content cost and cost of inventory sold was $15.7 million, or 18% of revenue.
• Personnel expenses, including share-based remuneration, were $18.0 million, a 15% decrease. This expense consists of cash-based compensation expense of $16.1 million, a 7% decrease year-over-year mainly due to strengthening of the US dollar, and share-based remuneration expense of $1.8 million.
• Marketing and distribution expenses were $26.0 million, a decrease of 20% year-over-year, or a 3% sequential increase versus the prior quarter.
• Depreciation and amortization expenses were $3.4 million, a 30% decrease year-over-year but stable versus the prior quarter.
• All other operating expenses were $6.1 million, a 10% increase year-over-year but a 14% decrease versus the prior quarter.

Operating profit was $16.2 million compared to an operating loss of $0.6 million in the third quarter of 2021.

Net finance expense was $2.2 million, of which the present value impact of the extended payment period of our Nanobank sale was the most significant driver.

Income tax expense was $5.2 million in the quarter, elevated due to foreign currency impacts on net deferred tax liabilities.

Net income was $9.4 million. This compared to net income of $23.5 million in the third quarter of 2021. Net income in the third quarter of 2021 was positively impacted by the $28.0 million gain from recognizing our ordinary shares in OPay at fair value.

Net income per ADS was $0.08 in the quarter. Each ADS represents two shares in Opera Limited. In the quarter, the weighted average number of shares outstanding was 227.4 million, corresponding to 113.7 million ADSs.

Adjusted EBITDA was $21.4 million, representing a 25% margin, compared to adjusted EBITDA of $8.2 million in the third quarter of 2021.

Adjusted net income was $11.8 million in the quarter, compared to adjusted net income of $29.8 million in the third quarter of 2021.

Adjusted net income per ADS was $0.10 in the quarter.

We have posted Opera's unaudited financial results by quarter since 2019 at https://investor.opera.com.

Conference Call

Opera's management will host a conference call to discuss the third quarter 2022 financial results on Thursday, October 27th at 8:00 am Eastern Time (EDT). Listeners may access the call by dialing the following numbers:

United States: +1 877-830-2596
China: +10-800-714-1507 or +10-800-140-1382
Hong Kong: +80-090-1494
Norway: +47 80-01-3780
United Kingdom: +44 0-808-101-1183
International: +1 785-424-1744

Confirmation Code: OPRAQ322

A live webcast of the conference call will be posted at https://investor.opera.com.

We will be tweeting highlights from our prepared remarks. Please follow along on Twitter @InvestorOpera.

About Non-IFRS Financial Measures

To supplement our consolidated financial statements, which are prepared and presented based on IFRS, we use adjusted EBITDA and adjusted net income (loss), both non-IFRS financial measures, to understand and evaluate our core operating performance. These non-IFRS financial measures, which may differ from similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS.

We define adjusted EBITDA as net income (loss) excluding income tax expense (benefit), net finance expense (income), share of net loss (income) of equity-accounted investees, fair value loss (gain) from investments, depreciation and amortization, impairment of non-financial assets, impairment of equity-accounted investees, share-based remuneration, credit loss expense related to divested joint venture, non-recurring expenses, less other operating income and (profit) loss from discontinued operations.

We define adjusted net income (loss) as net income (loss) excluding share-based remuneration, amortization cost related to acquired intangible assets, amortization of Nanobank intangible assets, credit loss expense related to divested joint venture and other non-recurring expenses, and (profit) loss from discontinued operations, adjusted for the associated tax benefit related to such items.

We believe that adjusted EBITDA and adjusted net income (loss) provide useful information to investors and others in understanding and evaluating our operating results. These non-IFRS financial measures adjust for the impact of items that we do not consider indicative of the operational performance of our business. While we believe that these non-IFRS financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared and presented in accordance with IFRS. Please refer to our financial statements at the end of this announcement for a table reconciling our non-IFRS financial measures to net income (loss), the most directly comparable IFRS financial measure.

Safe Harbor Statement

This press release contains statements of a forward-looking nature. These statements, including statements relating to the Company's future financial and operating results, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "may," "expect," "believe," "anticipate," "intend," "aim," "estimate," "intend," "seek," "plan," "potential," "continue," "ongoing," "target," "guidance," "is/are likely to," "future" and similar statements. Among other things, management's quotations and the Business outlook section contain forward-looking statements. The Company may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry in which it operates. Potential risks and uncertainties include, but are not limited to, those relating to: the duration and development of the conflict in Ukraine and the COVID-19 pandemic, as well as resulting changes in consumer behaviors; the outcome of regulatory processes or litigation; the Company and its goals and strategies; expected development and launch, and market acceptance, of products and services; Company's expectations regarding demand for and market acceptance of its brands, platforms and services; Company's expectations regarding growth in its user base, user retention and level of engagement; Company's ability to attract, retain and monetize users; Company's ability to continue to develop new technologies, products and services and/or upgrade its existing technologies, products and services; quarterly variations in Company's operating results caused by factors beyond its control; and global macroeconomic conditions and their potential impact in the markets in which the Company has business. All information provided in this press release is as of the date hereof and is based on assumptions that the Company believes to be reasonable as of this date, and it undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by Opera is included in the Company's filings with the SEC, including its annual reports on Form 20-F.

About Opera

Opera is a global web innovator. Opera's browsers, gaming, Web3 and news products are the trusted choice of hundreds of millions of users worldwide. Opera is headquartered in Oslo, Norway and listed on the Nasdaq stock market (OPRA). Download the Opera browser from www.opera.com.

Learn more about Opera at https://investor.opera.com or on Twitter @InvestorOpera.

Unaudited Consolidated Statement of Operations

Unaudited Consolidated Statement of Comprehensive Income

Unaudited Consolidated Statement of Financial Position

Unaudited Consolidated Statement of Changes in Equity

For the nine months ended September 30, 2021:

For the nine months ended September 30, 2022:

Unaudited Consolidated Statement of Cash Flows

Financial Details by Business Area

The tables below specify the contribution by each business area.