Opera Limited (OPRA) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a positive sentiment overall. Record revenue and strong advertising growth are complemented by raised guidance, indicating confidence in future performance. The introduction of AI-driven products and strategic international expansion highlight growth potential. While some uncertainties exist, like tariff headwinds and unclear management responses, the overall financial health, shareholder returns, and strategic plans suggest a positive outlook, likely resulting in a 2% to 8% stock price increase over the next two weeks, especially given the small-cap nature of the company.

Key Financial Performance

Revenue Growth 30% year-over-year, compared to guidance of 22% to 26%, and well ahead of 17% growth in the second quarter of last year. This growth was fueled by organic revenue growth and healthy margins.

Advertising Revenue Grew 44% year-over-year to $93 million. E-commerce, the fastest-growing vertical within Advertising, grew over 100% year-over-year despite tariff uncertainty. E-commerce now represents nearly half of total Advertising revenue.

Search Revenue Returned to double-digit growth, up 11% year-over-year to $50 million in the quarter. Sequential growth of 6% was twice as high as Q2 last year, driven by a user base shift towards higher ARPU regions and AI-powered monetization opportunities.

Adjusted EBITDA $32 million, just above the high end of previously issued guidance, demonstrating the ability to outperform revenue expectations while hitting profit targets.

Operating Cash Flow $33 million in the quarter, representing 103% of adjusted EBITDA. Free cash flow from operations was $29 million or 91% of adjusted EBITDA.

Annualized ARPU for Opera GX $3.47, with a user base of 33 million MAUs, up 11% year-over-year.

Overall User Base ARPU 5% growth to an annualized level of $1.97 with 289 million MAUs in the quarter.

MiniPay Wallet Reached 9 million activated wallets and exceeded 250 million transactions. MiniPay supports over 40 currencies in 53 countries and allows seamless conversion between local cash and stablecoins.

Adjusted Diluted EPS $0.26 in the quarter, providing a consistent view on underlying business performance, excluding volatile accounting impacts.

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Operating Highlights

AI Browser - Opera Neon: Opera is set to release Opera Neon in the fall, combining major AI use cases into a single user interface. It is designed to be a gateway to AI, web applications, and automation, targeting productivity for knowledge workers.

Opera GX Updates: Opera GX introduced enhanced tab management and multitasking features. It is being soft-launched in South Korea and Japan, leveraging a partnership with League of Legends.

MiniPay Wallet: Opera launched MiniPay, a stablecoin-based wallet, now available as a standalone app on Android and iOS. It supports over 40 currencies in 53 countries and has reached 9 million activated wallets with 250 million transactions.

E-commerce Advertising Growth: E-commerce advertising revenue grew over 100% year-over-year, now representing nearly half of total advertising revenue. The company sees ample room for expansion.

Search Revenue Growth: Search revenue grew 11% year-over-year to $50 million, driven by a shift to higher ARPU regions and AI-powered monetization opportunities.

Revenue Growth: Year-over-year revenue grew 30%, exceeding guidance. Advertising revenue grew 44% to $93 million, and adjusted EBITDA reached $32 million.

Operational Efficiency: Cost of revenue scaled with revenue, maintaining a consistent percentage. Marketing and compensation costs grew at a controlled pace.

AI and Browser Integration: Opera is positioning its browser as the operating system for AI services, enabling local native operations for AI agents.

Stablecoin Adoption: Opera is focusing on stablecoin technology through MiniPay, aiming to drive financial inclusion and capitalize on regulatory developments like the GENIUS Act in the U.S.

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Risk or Challenges

E-commerce growth and tariff uncertainty: E-commerce remains the fastest-growing vertical within advertising, but its growth is impacted by ongoing volatility due to tariff uncertainty, which could affect revenue stability.

AI browser competition: The company is entering a competitive AI browser market with Opera Neon. The success of this product depends on its ability to differentiate itself and gain user adoption in a crowded space.

Stablecoin regulatory environment: While there are positive regulatory developments, the stablecoin market remains subject to regulatory risks that could impact the adoption and growth of MiniPay.

Currency fluctuations: The weakened U.S. dollar relative to other currencies has increased costs, particularly compensation costs, which could impact profit margins.

Advertising revenue volatility: Advertising revenue has shown resilience but remains exposed to macroeconomic volatility and tariff-related headwinds, particularly in U.S. e-commerce.

Operational cost management: The company faces challenges in managing operational costs, including marketing and compensation, which are expected to grow, potentially impacting margins.

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Guidance & Outlook

Revenue Growth: For 2025, Opera Limited guides revenue of $585 million to $597 million, representing 22% to 24% growth over 2024. This is an increase from previous guidance, reflecting confidence in the company's growth trajectory.

Adjusted EBITDA: Guidance for adjusted EBITDA is $136 million to $140 million for 2025, with a margin of 23.4% at the midpoint. This reflects expectations for margin expansion in the second half of the year.

Q3 2025 Revenue and EBITDA: Guidance for Q3 2025 revenue is $146 million to $149 million, representing 20% growth at the midpoint. Adjusted EBITDA for Q3 is guided at $34 million to $36 million, with a 24% margin at the midpoint.

Cost of Revenue: For 2025, cost of revenue items are expected to be 34% to 35% of revenue, driven by the growth of Opera Ads. Marketing costs are expected to grow at mid- to high single digits, and compensation costs are expected to increase by about 10%.

Product Launch - Opera Neon: The company plans to release Opera Neon, an AI-powered browser, in the fall of 2025. This browser will integrate major AI use cases into a single user interface, targeting productivity improvements for knowledge workers.

Stablecoin Wallet - MiniPay: Opera's MiniPay wallet, which supports stablecoin transactions, is expected to scale further. The wallet has already reached 9 million activated wallets and over 250 million transactions, with plans to expand its feature set and global reach.

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Shareholder Return Plan

Recurring Dividends: Opera Limited has been able to fund recurring dividends through its cash flows. Since January 2023, the company has distributed $2.80 of dividends per share.

Share Buyback Program: During the three years prior to January 2023, Opera Limited bought back 30% of its outstanding stock as a way to drive value for shareholders.

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Key Q&A

Q:What drove the strong sequential growth in the Western market user base compared to the lack of growth in GX users?

A:The strong growth in the Western market user base was attributed to seasonality factors, as GX users, who are primarily younger audiences and gamers, are more affected by summer holidays. Additionally, the company focuses on ROI and potential markets, with Europe showing good growth in Q2. The adoption of AI in Western markets has also made it easier to acquire users.

Q:How should we think about the pricing and cost structure of the Neon product?

A:The company is focusing on product-market fit for Neon. They believe AI has proven that web interfaces are the preferred platform for accessing information. Neon will likely follow a combination of advertisement-supported and subscription-based models for monetization. The company is leveraging large language models from major AI companies and focusing on integrating AI into the browser environment.

Q:What is the monetization strategy for MiniPay and its connection to user growth and retention?

A:MiniPay is already generating revenue through partnerships and strategic agreements. The product is closely tied to the fintech industry, which is inherently profitable. The company sees MiniPay as a natural monetization opportunity without relying on advertisements or search revenue. It is also expected to contribute to user growth and retention.

Q:What drove the rebound in Search revenue, and how durable is this trend?

A:The rebound in Search revenue was expected and is attributed to broader changes in the search landscape and the integration of new information processing services like Neon. The company is optimistic about the durability of this trend but did not provide detailed breakdowns or long-term projections.

Q:What are the tariff-related headwinds mentioned, and are they temporary?

A:The tariff-related headwinds were anticipated and have been offset by global growth. The company is starting to see some recovery, and these headwinds are viewed as temporary, with potential upside as activity levels return to pre-tariff conditions.

Q:What is the opportunity size for Opera GX in South Korea and Japan?

A:The opportunity is still in the early stages, but East Asia is a significant market for gaming. Localization efforts are underway, and the company sees strong growth potential in e-commerce and monetization in these regions.

Q:How should we think about the seasonality and vertical opportunities in the e-commerce business?

A:The e-commerce business experiences seasonality, with stronger performance in the second half of the year due to the shopping season. The company is cautious in its growth projections and sees opportunities to expand into verticals like travel and fintech.

Q:What is powering the Neon browser, and how is it positioned strategically?

A:Neon is powered by large language models from major AI companies, with the company focusing on integrating AI into the browser environment. The competitive market for language models has reduced costs, making it a good time for the company to invest in this area.

Q:What is the strategic value of the company's browser installed base?

A:The company has 300 million MAUs and is one of the largest independent browsers. This scale and independence position it well for strategic opportunities, although it may be underrecognized in discussions about the browser market.

Q:Review of Unclear Management Responses

A:Management avoided providing detailed breakdowns or projections for the rebound in Search revenue and the durability of this trend. They also did not provide specific estimates for the opportunity size of Opera GX in South Korea and Japan, citing early stages and localization efforts. Additionally, they avoided commenting on specific details related to the tariff-related headwinds and their long-term impact.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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