Opera Limited's Earnings Call: Annual Revenue Up 20% Reported

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Opera Limited's Earnings Call: Annual Revenue Up 20% Reported

Internet browser developer Opera Limited (NASDAQ: OPRA) reported strong financial performance in its third quarter earnings call on November 1, 2024. The company's co-CEO Song Lin and CFO Frode Jacobsen announced that revenue reached $123 million, representing a 20% year-over-year increase. The acceleration from 17% growth in the first half of the year was attributed to significant gains in advertising and search revenues, as well as a notable increase in annual average revenue per user (ARPU). Opera's adjusted EBITDA was $31 million, yielding a 25% margin, and the company remains optimistic for the fourth quarter, particularly due to e-commerce growth during the holiday season.

Key Highlights:

  • Third quarter revenue increased 20% year-over-year to $123 million.
  • Annual ARPU rose 27% to $1.66.
  • Adjusted EBITDA was $31 million, with a 25% margin.
  • Advertising revenue surged 26% to $77 million, driven by e-commerce and travel.
  • Search revenue increased 13% to $46 million.
  • New iOS users surged 33% post-launch of Opera One for iOS.
  • Opera GX gaming browser reached 31.9 million monthly active users.
  • Partnership with Riot Games for the League of Legends World Championship was a significant initiative.
  • Opera set records in revenue, adjusted EBITDA, and cash flow in Q3.
  • The company introduced a new non-IFRS metric for adjusted net income.
  • Full-year revenue guidance was updated to between $470 million and $473 million, with adjusted EBITDA projected at $112 million to $114 million.
  • Opera plans to divest an asset and is awaiting a suitable offer before or after the IPO.
  • The AI browser Opera One R2 and the AI assistant Aria have seen significant adoption.
  • User growth on iOS increased by 60% in Europe.

Company Outlook: Opera anticipates fourth quarter revenue to be between $135 million and $138 million, expecting 21% growth year-over-year. Adjusted EBITDA is projected to be between $30 million and $32 million. The company continues to focus on maintaining its rule of 40 status.

Negative Highlights:

  • Operating expenses (OpEx) totaled $92 million.
  • Marketing costs increased by $3.5 million to $32.5 million.
  • Wage costs were slightly higher due to rising premiums.

Positive Highlights:

  • Opera GX user base grew by a net 1.8 million users.
  • The company completed its 14th consecutive quarter of meeting or exceeding guidance.
  • Free cash flow was strong at $29.7 million.

Shortcomings: Certain shortcomings in the revenue report summary were not discussed.

Q&A Highlights: Management discussed growth opportunities in Western markets and increasing mobile penetration. User engagement with the Aria feature in Opera One increased nearly 50% from Q2 to Q3. Marketing budgets are expected to significantly increase in Q4 to support new product launches.

Opera Limited demonstrated a strong growth trajectory in Q3 2024, particularly in segments with high ARPU potential, driven by strategic initiatives including partnerships and product launches. The company's focus on scalable growth and user monetization, along with optimism for the upcoming holiday season, positions it positively for the remainder of the year. The market eagerly anticipates Opera's Q4 results and initial guidance for 2025, which will be reported at the end of February.

InvestingPro Forecasts: Opera Limited's robust Q3 performance is further supported by real-time data from InvestingPro. The company's market capitalization stands at $1.66 billion, reflecting investor confidence in its growth trajectory. As of Q3 2024, Opera's trailing twelve-month revenue reached $449.91 million, marking an impressive 18.37% revenue growth during the same period, aligning with the reported 20% year-over-year revenue increase for Q3.

The company's profitability is clearly visible with an adjusted operating income of $84.46 million for the trailing twelve months and an operating income margin of 18.4%. This strong financial performance translates to Opera's price-to-earnings (P/E) ratio of 10.42, suggesting that the stock may be undervalued relative to its earnings.

InvestingPro insights highlight Opera's financial strength and market performance. One insight notes that Opera has "more cash than debt on its balance sheet," indicating a strong financial position consistent with the reported free cash flow of $29.7 million in Q3. Another insight mentions that Opera "saw significant returns in the last week," with InvestingPro data showing a total return of 18.13% over the past week. This recent stock performance can be attributed to the positive Q3 results and optimistic Q4 outlook.

For investors seeking a deeper understanding of Opera's financial health and market position, InvestingPro offers 13 additional insights providing a comprehensive analysis of the company's strengths and potential risks.