Welcome to the Opera Limited First Quarter 2025 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.

Thank you for joining us. This morning, I am joined by our Co-CEO, Song Lin; and our CFO, Frode Jacobsen. Before I hand over the call to Song Lin, I would like to remind you that some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to the safe-harbor statement in our earnings press release as well as our Annual Report Form 20-F, including the risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at investor.opera.com. Our comments will be on the year-over-year comparisons unless we state otherwise. With that, let me turn the call over to our Co-CEO, Song Lin, who will cover our first quarter operational highlights and strategy; and then Frode Jacobsen, who will discuss our financials and expectations going forward. Song?

Sure. Thanks, Matt, and thank you to everyone for joining us today. I'm excited to share our strong first quarter results with you and to provide an update on our recent business activity. The accelerating business momentum we experienced in the second half of 2024 continued into the first quarter of 2025. In fact, our year-over-year revenue growth increased from 29% in the fourth quarter to 40% in the first quarter, well above the 28% to 31% growth we had previously guided for the periods. This translates to revenue of $143 million, a record for the first quarter. Once again, our outperformance relative to our previously issued guidance was primarily driven by advertising and, in particular, the e-commerce opportunities we are focusing on. In fact, advertising revenue growth was 3% in the first quarter, reaching $96 million and now representing two-thirds of our total revenue. Within this, e-commerce was the fastest growing vertical with over 100% annualized growth, which in turn offset the underlying seasonality pattern we expect to see from Q4 to Q1. Search revenue was $47 million in the quarter, growing 8% year-over-year. The browser serves as the crucial access point for search and we are pleased to see continued growth in search revenue. By leveraging AI, we can effectively identify high user intent, enabling us to optimize the click stream. This optimization allows us to deliver the best possible experience for both end users and partners, fostering the simultaneous growth of search and advertising. Revenue outperformance leads to increased profitability as demonstrated by adjusted EBITDA of $32 million, also well above the high end of our previously issued range. The corresponding margin was 23%, meaning that we were able to accelerate our top line growth without sacrificing the expected profit margin percentage. Our user base continues to be relatively stable with 293 million MAUs, while remaining consistent with our ongoing strategy of focusing on those users with the highest value potential. As a result, our annualized ARPU grew by an outstanding 44% year-over-year. After significant updates to both Opera One and GX during the fourth quarter, the product launches in the first quarter included improvements such as the addition of Bluesky, Discord, and Slack support to the sidebar of Opera One. Even more relevant and in mobile, Opera became the first major browser to present AI-powered browsing through the browser operator. The browser operator marks the first step towards broadening the role of the browser to an application that can also perform tasks for its users. While working on completing a task, the browser operator lets users see what's going on at any point in the process as well as what steps were taken to complete it. During this process, the user remains in full control and can take over or cancel the task at any given moment. The best part is that browser operator works in the same environment as the user—the browser. In a recent event this month, we showcased the browser operator's ability to make travel bookings and even order flowers to a particular hotel room in Lisbon. Given a handful of parameters in English, the browser found a retailer with a website that imported gifts, filled in the order with specified flowers along with all relevant delivery and payment information, leaving only the final checkout to be clicked by the user. We are just starting to see what is possible with an agentic browsing experience. We also brought our browser AI, ARIA, to Opera Mini. This makes ARIA available across our full suite of browsers for both mobile and desktop users. Now close to 300 million people can enjoy the benefits of ARIA, allowing even our most data-conscious users to harness the power of AI in a data-efficient manner. Turning to Opera GX, the browser made for gamers. Our GX user base was steady at 34 million. This is a strong result and reflects growth from the fourth quarter. On an annual basis, we grew the GX user base by 14%, with the current annualized ARPU of $3.41, slightly down from the seasonal peak of Q4. Engagement on GX remains high with continued sequential growth in the number of GX games that are published, registered users, and the number of unique modes available to users. We also announced our first game, Roblox, Hell's Obby, which is a competition where up to 25 players must navigate a decimated and obstacle-filled wasteland in a high-stakes battle. During the first quarter, we also released the latest member of the Opera browser family, Opera Air. This browser, with mindfulness front and center, has already received a warm welcome from users with enthusiastic and in-depth coverage, and we are in the process of fine-tuning it ahead of increasing its marketing. Still in its first two months alone, Opera Air has already been downloaded over 500,000 times and we are seeing very encouraging usage. Consistent with our focus on the highest value users, Opera Air is targeting users in Western markets. It is still early days, but we like what we see. To summarize, 2025 is off to an impressive start, signaling our business is growing faster than we had thought possible just a few months ago. The fact that we achieved this in the face of a highly volatile macro backdrop speaks to the appeal of our broadening browser portfolio and our monetization capabilities, and we'll certainly do our very best to keep it up. Finally, since a lot of our conversation today might center on the volatility affecting the broader market, I wanted to mention that Opera is actually celebrating its service anniversary in 2025 and I've personally been part of the journey for nearly 23 of those years. We have found ourselves in the midst of some significant disruptions over that time, including the emergence of the web itself, our pioneering of making the Internet available on mobile phones, the rise and fall of various tech giants, the emergence of smartphones, and the globalization of Internet access. We've dealt with changing environments and competition from companies many times larger than ourselves. All that to say, we have a strong track record of navigating a rapidly evolving landscape and finding ways to benefit from it and contribute to innovation. So while today, it’s natural that we focus on our ability to grow even faster than what we told you to expect last time, this will always be made possible by our internal focus on how we develop our products and platforms to set ourselves up for success in the long run. With that, let me hand the call over to Frode for additional details.

Thanks, Song. Staying on the topic of rapid scaling, with revenue coming in nearly $10 million above the high end of our guidance range, we are certainly off to a solid start for the year with a 40% year-over-year growth rate in the quarter, which is 11 percentage points above both Q4 and the midpoint of guidance for Q1. This speaks to the underlying commercial success of Opera, as we enter a new period where an important geography like the U.S. is held back by greater uncertainty among many advertisers. Over our nearly seven years as a public company, we've scaled to become several times larger than where we started. We've been careful to guide with caution, even though the underlying trend has consistently been very positive. While in retrospect, we could have been less conservative in terms of reflecting how headwinds could affect the first quarter, it is certainly rewarding that we are now able to raise guidance further, even if we believe that these headwinds might be more pronounced in the quarters to come. The underlying success of Opera and our diverse geographic footprint both provide natural hedges. Beyond revenue, we are also pleased that our adjusted EBITDA came in at the highest margin percentage indicated in guidance, adding more than $2 million on top of the high end of our EBITDA guidance range. In terms of costs, we saw cost of revenue items scale in line with the overperformance of advertising revenue. Apart from that, our OpEx items, pre-adjusted EBITDA landed in accordance with our prior directional commentary. This included lowering our marketing spend to $34 million from $41 million in the fourth quarter, which was elevated due to multiple product launches. As in recent periods, we have focused our marketing spend on those users with the highest ARPU returns. Our cash compensation cost was $18 million, up about $1 million versus the Q4 level and more similar to the recent average quarterly cost level as expected. Other OpEx items combined were $8 million, up about $0.5 million versus the Q4 level and also as expected. Year-over-year, all of these cost categories increased in dollars, but as a percentage of revenue, they reduced as we benefited from economies of scale. Our operating cash flow was $16 million in the quarter, representing 49% of adjusted EBITDA. Free cash flow from operations came in at $12 million, or 37% of adjusted EBITDA. As in prior years, we continue to expect fluctuations in cash conversion on a quarterly basis, which will stabilize as the year progresses toward the full year value. For example, in this particular quarter, the fact that revenue remained unusually strong as we exited the peak shopping season of Q4 also meant that our accounts receivable did not contract as they did in Q1 last year. And the reduction in marketing costs drove a reduction in quarter-end payables. Such effects benefit cash flow in future quarters and, so for the year as a whole, it's neutral. To conclude, Q1 marks our 16th consecutive quarter as a Rule of 40 company and yet another quarter of meeting or exceeding our guidance. We are proud to combine solid growth with healthy profitability and have now entered our third year as a recurring dividend-paying company, which lets our shareholders directly benefit from our cash generation through a proper and meaningful yield. Since January 2023, we have distributed $2.40 of dividends per share with the next record date scheduled for July. Now turning to guidance. Given political tensions and unresolved trade disputes, we expect to remain in a volatile period for the foreseeable future. But as a lean and fast-moving company with the ability to navigate growth pockets, we will do our best to play to our strengths. Apart from having guided cautiously as the year commenced, there are a couple of other reasons why we have some natural cushions from the current volatility as it relates to e-commerce and the U.S. First, while e-commerce is our fastest growing vertical, we still consider the U.S. e-commerce opportunity to be mostly ahead of us. In other words, we have less exposure than many others and believe that there is plenty of opportunities to scale further in a more normalized environment. Second, almost all of our advertising revenue is performance-based as opposed to brand advertising. That means that the payment from the advertiser is tied to measurable results, which we believe makes the business more resilient. Taken together, we believe we are in a pretty good relative position for whatever comes next. For 2025 as a whole, we now raise revenue guidance to $567 million to $582 million, or 20% annual growth at the midpoint, up from $555 million to $570 million. This means we are already adding 3 incremental percentage points of full-year growth, with the former high end of guidance now representing the lower part of our revised range. Similar to before, we have based our guidance on sequential modeling, with the raised estimates capturing the Q1 overperformance, as well as a modest incremental uplift in what we had previously assumed for each remaining quarter of the year. As before, this results in a relatively stable trend of quarterly revenue growth measured on a two-year CAGR, which captures the scale we have built in recent quarters while also evening out our forward-looking growth profile. In terms of adjusted EBITDA, we now guide $135 million to $140 million for the year as a whole, continuing to represent a 24% margin at the midpoints, but raised to reflect the incremental revenue. Cost-wise, we then implicitly guide to a full-year OpEx space pre-adjusted EBITDA of $437 million at the midpoints, with a further amplification of the trends that we discussed last. Our baseline expectation remains that the margin headwind from growth in cost of revenue items will be offset by margin tailwinds from economies of scale in the remainder of our cost base, leading to a stable EBITDA margin on top of a rapidly scaling revenue base. We now expect cost of revenue items combined will reach 32% to 33% of revenue in 2025, scaling with our overperformance. We expect that marketing costs will grow at year-over-year percentage in the high single digits with a relatively stable level from Q1 to Q2 before increasing somewhat higher in the second half of the year. We expect both cash compensation and all other OpEx items pre-adjusted EBITDA combined to grow at year-over-year percentage rates in the mid to high single digits. In other words, marketing, compensation, and the sum of the other smaller OpEx items are all expected to continue to decline as a percentage of revenue in 2025. In line with all this, we guide Q2 revenue of $134 million to $138 million, representing 24% growth at the midpoint, and Q2 adjusted EBITDA of $30 million to $32 million or a 23% margin at the midpoints. This represents a lift versus previous Q2 estimates as part of our formal full-year guidance, while also including a buffer for volatility from e-commerce advertisers targeting U.S. consumers. Within the implied quarterly OpEx space of $105 million at the midpoints, we expect that cost of revenue items as a percentage of revenue will be in the low 30s in the quarter, just below our full-year expectations. We expect marketing costs in the mid to low $30 million range and thereby relatively stable versus the first quarter. We expect cash compensation costs to increase about $1 million to $2 million versus the Q1 level, inclusive of annual salary adjustments and potentially a weaker U.S. dollar relative to the main currencies of our salary expenses. All other OpEx items, pre-adjusted EBITDA, are expected to remain quite stable in totality. All in all, we are very pleased with the continued success of our business and how we are taking advantage of opportunities to scale faster even in the face of macro challenges that could delay some of our growth potential for now. With that, I'll turn the call back to the operator for questions.

Thank you. We'll take our first question from Naved Khan with B. Riley Securities. Please go ahead.

Great. Thank you so much and congrats on the quarter and the raised guidance. I just have a couple of questions. Maybe one just on the search growth during the quarter. The 8% is a slowdown from the sort of teens growth that we had been seeing. Is that because you're able to funnel some of this into e-commerce advertising and this is a net result of that? What's the right way to think about search for the full year? And the second question I have is on GX. ARPU declined sequentially. I get it, there is seasonality, but it also seems like it is below the levels in the quarter before that. How much of a factor is the macro environment on the ex-ARPU? Thank you.

Yes. So it's Song Lin. I think I'll just try to answer both of the questions. So I think for search, you are right that what we see is that overall, the whole industry is actually shifting towards a more intent-based targeting and advertisement, and we just want to grasp that opportunity. So, even though search is always a very important part of the browser revenue, the moment we can identify user intents, we have the possibility of bringing users other forms of advertisements with the clickstream. So I would say this partly explains why there's some slowdown. Well, the advertisement overall has grown quite quickly. And then, even though search is below the double-digit mark, there's still a notable growth that we're happy with. In the coming quarters, I think we will see a very strong growth of search moving forward. It just makes more sense from any standpoint to expose users to even more ads in different forms and shapes, and we will be very happy to do it. And as for the overall macro environment, it benefits us more than anything else. So they've done that. And then I think for GX, it's a bit similar that, firstly, I think GX is a business analogy because Q1 is also a bit of a slow season for adults. There is that. And then I guess that it’s also a matter of now we actually, with the help of AI and the user intent, have many more options for what we show that can potentially be in GX, but there might also be other places to show that with the same effect. And then, of course, as far as those who are not showing in GX, we don't count them as GX revenue. So that's the other factor. But I would say overall, it's actually benefiting Opera as a company as a whole.

And on GX, I forgot to ask about currency. If the currency played a role, could the dollar is pretty strong in Q1? So how should we think about that?

The U.S. dollar continues to provide a headwind in terms of constant currency. Our growth would have been, we estimate, 5 percentage points to 6 percentage points higher on a constant currency basis. We see on a sequential basis that the impact is quite muted. In future quarters, that might turn into a positive tailwind. But for now, it's still been a headwind.

Thanks so much.

We'll take our next question from Lance Vitanza from TD Cowen. Please go ahead.

Thanks, guys. Congratulations on the strong quarter. A few questions here. The first, on the e-commerce growth, you mentioned that it offset the typical seasonality. I assume that's just because it's growing so quickly, right? I mean, what I'm getting at is that once the e-commerce business reaches maturity, I assume that it too would be seasonal or do you think we should expect a return to the typical seasonality that we've seen at Opera in the first quarter of next year?

Hey, Lance. Yes, you're correct. The underlying growth of the e-commerce opportunity has been so strong that we didn't see a seasonality factor that we would normally expect. Song, I'll hand it over to you.

No. I think what Frode described is right. While revenue always has a seasonality aspect, it is also true that whenever we have something growing very fast, it tends to overcome that seasonality. However, I would emphasize that the total e-commerce market is huge. I'm talking about a $100 billion market. Even if we grow to be $1 billion in revenue, we're only 1% of it. So yes, you should always assume seasonality, but the growth potential remains significant for a company like us, particularly in e-commerce. We will continue to focus on it and hopefully maintain aggressive growth in the quarters to come.

Got it. Thanks. And then, the overall user base seems to be drifting a little lower. It feels like it's getting harder to round up to 300 million MAUs. I’m just wondering, is there any cause for concern there? If not now, perhaps in the future, is there a level of total MAUs at which you don't want to be below?

Lance, I can begin. There’s not a single person in the company that is measured on the MAU count itself because what's important is the engagement metrics that actually drive the revenue. What we are observing is typical churn among emerging market, mobile users, and we've strategically focused our marketing spend and growth initiatives on the user base that has the highest ARPU potential. While this results in fewer total users, it drives much higher revenue, which is reflected in our ARPU that’s up so much over the past year.

Okay. And then just one last one for me. Switching gears a little bit, there has been a lot of news flow recently around U.S. antitrust actions affecting Alphabet and the rest of Big Tech. Could you talk about how you see the broader ecosystem evolving and what that could mean for Opera's businesses both on the browser side and in ad tech?

Yeah, it's Song Lin. I could comment on that. We can't really comment on particular litigation, but I would say that, overall, even without the mitigation, we have seen significant shifts in how advertisers conduct business, focusing on high intent click streams, which were previously primarily available for certain products. Now, with the help of AI, these insights are much more widely accessible. This is beneficial for Opera as a company—our browser is becoming more prominent, reflecting a very positive trend. We have undergone significant innovation in both the browser and monetization based on user intent, which is very encouraging for our growth potential.

Thank you, gentlemen.

Thank you. And our next question will be from Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the question. I wanted to go a little bit deeper into the e-commerce opportunity. Could you give us a little bit of color on either the vertical exposure or the geographic exposure of your e-commerce advertisers today, and how to think about the diversification of that mix looking out over the next 12 to 18 months? When you talk to these advertisers, what are the key factors you're trying to solve for in order to increase their overall budget exposure?

Hi, Eric. I can begin by describing the e-commerce opportunity. As Song mentioned on the call, it's growing very quickly—over 100% year-over-year rates—which means it is becoming a sizable part of our advertising revenue and approaching search in terms of financial importance. It is a globally distributed opportunity still. We think that the U.S. opportunity is still primarily ahead of us, and we like the growth dynamics of both our partner base and the diversification in revenues. These are all positive directions for our revenue mix as we look ahead.

Thank you. And we'll go next to Mark Argento from Lake Street.

Yeah. Thanks. Good morning. Maybe we take another stab at that e-commerce question in terms of better understanding the levers there. You said in particular that the U.S. opportunity is still fairly nascent. To start to develop that opportunity more, do you have to attract specific platforms, particularly certain retailers or e-commerce retailers? What are the levers you need to see that growth start to happen in the U.S.?

Yeah, it's Song Lin. Regarding your question, our strength lies in performance advertising. This means we are very effective partners for advertisers focused on performance and incrementality. If they aim to achieve similar high user intent, we excel in those areas. The total e-commerce market is immense, providing significant growth potential despite some volatility. We strategically work with larger partners who have scale and can make an impact while also planning to engage with more long-tail retailers in the future. We are based in Norway, a nation of only 5 million people, which means we have always been seeking global opportunities. We are growing quickly in the U.S. but are seeing growth in Asia and other regions as well.

So is it safe to say that the current tepid or slowing environment is perhaps more favorable for you guys? Is that because of the opportunity to drive more wallet share and focus more on performance in the U.S. market, or is it something that people are adopting a wait-and-see approach in the near term?

Yes, typically in those volatile environments, brand advertisers tend to pull back because they can be quick to cut budgets. However, we see that in such environments, advertisers prefer to collaborate with us because our model is performance-based—they pay only when there are results. This, in fact, drove our high growth in Q1, and we hope to maintain this momentum in the coming quarters.

Thank you. We'll take our next question from Jim Callahan with Piper Sandler. Please go ahead.

Hi. Thanks for taking the question. In search, I think in the past, you've called out a benefit from Choice Screens in Europe. Are there any trends to note there?

Sure. Yes, I would say that where we actually implement Choice, we see much bigger growth than the average. I will mention that, of course, there's also an effect of transforming some of the search revenue into advertisement revenue, which may not show up properly in the States. But yes, you're absolutely right. The Choice Screen has significantly helped our search revenue, and we hope that continues.

Got it. Okay. That's helpful. And then, similar to the marketing expense, are there any channel allocation changes this year worth mentioning or anything that's working especially well?

As we look from the change from Q4 into Q1, we had a spike in Q4 with the larger releases of both Opera One and Opera GX. The sequential change primarily focuses on online campaigns promoting the apps through click-based campaigns, while broader brand-building initiatives with content creators remain stable. As I guided, we expect Q2 will be similar before picking up towards the second half of the year.

Okay, great. Thank you.

At this time, we have no further questions. I'd like to turn it back over to Mr. Song Lin for any additional or closing remarks.

Sure. Thank you all for joining us today. Q1 really showed the potential of our continued growth acceleration, and we will focus our attention on the best opportunities for the times ahead. Have a good rest of the day, and we look forward to reconnecting on our Q2 results.

We’d like to thank everybody for joining us on today's call. Please feel free to disconnect your line at any time.