Opera Ltd Q4 FY2025 Earnings Call

Welcome to the Opera Limited Fourth Quarter and Full Year 2025 Earnings Call. 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. Please begin.

Thank you for joining us. This morning, I am joined by our 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 as a result of various factors, including those set forth in today's earnings press release and our most recent annual report on Form 20-F, filed with the SEC. We undertake no obligations to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our Investor Relations website at investor.opera.com. Our comments will be on year-over-year comparisons, unless we state otherwise. With that, let me turn the call over to our CEO, Song Lin, who will cover our fourth quarter operational highlights and strategy, and then Frode Jacobsen, who will discuss the details of our financials and expectations for the first quarter and full year. Song?

Sure. Thank you, Matt, and good day, everyone. While we preannounced Q4 outperformance, we have been very much looking forward to today, and to tell you how great our actual results were, and even more importantly, how exciting our 2026 guidance is. Advertising revenue led by continued scaling of e-commerce came in with an unprecedented sequential increase of $19 million versus the third quarter, resulting in 25% year-over-year growth. Clearly, we are performing well for an increased number of advertiser partners, all running performance-based campaigns with us, and we have yet again shown our ability to leverage the seasonally strongest fourth quarter to cross a year of fast growth. In addition, our rapidly expanding monetization of user intent query revenue continued with 16% growth year-over-year. This was fueled by both healthy search revenue growth and a continuation of 200% plus year-over-year growth in non-search query revenue. The monetization of intent-based traffic beyond search is an exciting opportunity, contributing over $5 million of revenue in the quarter and will continue to be our fastest-growing revenue component in 2026. All in all, Q4 revenue growth was 22% against the toughest quarterly comparison of 2024, and 8% higher than the midpoint of guidance. Our resulting annual revenue growth was 28% in 2025, an acceleration from 21% growth in 2024. EBITDA also came in well above the high end of our guidance range and was 7% higher than the midpoint. We continue to invest in both product marketing and the growth of advertiser relationships, while maintaining a healthy EBITDA margin and solid cash flow, which Frode will cover in more detail later. We have talked a lot about our positioning in the AI era over the past years, and the topic continues to deserve attention. Our job is to make the best browsers for demanding users. We are amazed at the quality of emerging AI services, as I'm sure many of you are too, and we do not consider these companies as our competitors, but rather current and potential future partners. Our focus is to create the best orchestration layer possible for end users to benefit from this rapidly expanding ecosystem. The best example is Google, which has delivered the world's best search experience for decades and is showcasing its technical abilities through the advancing Gemini models. Google has its own browser but has been our partner for 25 years as we deliver an integrated experience for the end user to benefit from these services in a feature-rich and advanced browser. And with the broadening ecosystem of services, the appeal of an independent browser only increases. And at the same time, the attention to the browser space results in more people contemplating which browser represents a better alternative. That sentiment should be shared by the new AI companies, which would prefer to reach their users via an independent Opera browser as opposed to a direct competitor's browser. That is a healthy basis for constructive relationships. Our strength is browser sophistication and a dedication to augment the web experience in ways the users will find familiar and useful. Most people don't want to change their browsing habits. Rather, they are looking to enhance it with a richer experience enabled by AI and agentic capabilities of their choosing, but it all starts with browsing at its core. The browser itself is a gateway to your online journey, and it is a mistake to build a browser that is a little more than an AI terminal with browsing the web as an afterthought. This positioning is also what enables our financial profile. We do not need to put out massive capital into hardware nor enter a fierce competitive large language model arms race. Financially, this is a continuation of the profile we have consistently shown: a healthy combination of growth, profitability, and cash generation, and a relatively unique resulting ability to be both a growth company with no financial constraints to seize our potential while also returning significant cash to our shareholders. While our performance and outlook are not fully reflected by the public market today, there is always a silver lining. And in this case, it is our ability to take advantage of this opportunity to create significant value for our shareholders by launching a major share buyback program. Frode will go into the specifics shortly. Moving on to operational highlights. 2025 was certainly another year of rapid innovation and built upon our modular technology and preference to tailor browsers to distinct audiences. We launched two new browsers, Opera Air and the subscription-based Opera Neon, which became widely available in early December. While user demand for agentic browsers is not yet mainstream, Neon is a terrific product that solves multiple goals. It provides one of the most advanced browsers for AI demanding power users, potentially unlocking a new subscription-based revenue stream. And more importantly, it is a testing ground for new AI features that we can then introduce across our full suite of browsers. Our revamped flagship browser, Opera One, entered 2025 in its second-generation R2, and most recently was refreshed to R3. In addition to greatly enhanced tab management and split screen views, R3 came with native integration of e-mail and calendar and our most advanced integrated AI assistant yet, Opera AI. Compared to earlier versions, Opera AI benefits from a 20% faster agentic-based engine and contextual responses that allow AI to understand the web page or an entire group of tabs. This enables it to give answers based on the browsing context while maintaining privacy and control in the hands of the user. As a result, the user benefits from more relevant, efficient persistency and direct task completion within the browsing experience, unlike a stand-alone chat. And on the back of expanding monetization opportunities, we are bringing Opera AI to all of our browsers. With business models evolving beyond subscription, Opera is exceptionally well-positioned to benefit from these trends and take advantage of our successful history of query monetization. Opera GX, the browser for gamers, reached over 34 million MAUs in the fourth quarter, a 5% sequential increase and remains our highest ARPU product. As the official browser sponsor of the League of Legends World Championships, we saw our best weekend of user activations in the history of GX during the tournament. Our mobile browsers also contributed to healthy user base dynamics, with Europe continuing to stand out after iOS became a more level playing field, following the EU Digital Markets Act. All in all, we ended the year with 284 million MAUs, inclusive of 60 million users in Western markets that contribute the most to our strong ARPU trajectory. ARPU grew by 26% to $2.49 in the fourth quarter. This growth demonstrates our ability to gain users in key target markets despite new entrants from well-capitalized competitors. We continue to take advantage of our browser position to scale opportunities that are natural extensions. Opera Ads, the platform that initially optimized the relevance of ads to each individual Opera user, has become a global player also on non-browser inventory as part of our audience extension. Learning from primary data signals, we more than doubled its pace of growth in 2025 versus 2024, with well-performing campaigns for our advertiser partners. Every second, we process 12 million ad queries, more than double the year-ago period. We worked with over 300 advertisers in 2025, including four of the five largest e-commerce platforms. Within the top 50 advertisers, the average spend per advertiser grew by 56% in 2025. In terms of our total advertising reach, when taking into account the millions of users that access our content platform through OEM white-label solutions, and the reach of Opera Ads, it exceeds 0.5 billion MAUs and continues to grow. This scale and growth position Opera uniquely among the largest online platforms. Another native extension of our footprint is MiniPay, a stablecoin wallet that emerged as a feature inside our mini browser tailored to emerging market users and is now available as a dedicated app. MiniPay continues to drive adoption in a stable core market with over 13 million activated wallets, an increase from 10 million in the third quarter. The accumulated number of transactions increased from 290 million last quarter to 390 million. MiniPay is the fastest-growing stablecoin wallet in Africa, appreciated for its technical ease and seamless integrations with a broad partner ecosystem, enabling simple and low to no-fee transactions. Most recently, we expanded support for USDT and Tether Gold and are rolling out the MiniPay card to increase functionality and serve as an important offering, offering best-in-class FX rates. Building upon our success in Africa, our 2026 focus will be to invest in making MiniPay a more global platform. With that, I would like to turn the call over to our CFO, Frode Jacobsen, to discuss our financial results, guidance and capital allocation in greater detail. Frode?

Thanks, Song. As Song Lin also opened, we have been looking forward to sharing our complete fourth quarter and full year results with growth well ahead of even recent expectations and above the guidance ranges on both revenue and adjusted EBITDA. While we always apply caution to guidance, exceeding the high end of our revenue range by over $12 million is a recent record. Relative to midpoint, revenue was 8% above guidance and adjusted EBITDA was 7% above guidance. We are also very pleased with the composition of our overperformance with healthy trajectories across both advertising and query revenue. Our e-commerce success translated into a record contribution from the holiday shopping season, and as importantly, demonstrated our ability to scale our partnerships further ahead of embarking on a new year. Our most mature revenue stream, search, is evolving and broadening with our ability to monetize users' intent as part of query revenue, whether it relates to reactive suggestions or advancing our intent-based traffic partnerships. In addition, AI unlocks query volume that was previously too complex for the search bar and represents a major improvement in the user experience, including well-tailored advertiser recommendations. Quarterly revenue totaled $177 million, 22% up year-over-year and well ahead of guidance. Looking at our quarterly cost components, we incurred about $1 million more cash compensation expense than expected, predominantly as a result of increased bonus provisions and a weaker U.S. dollar. Cost of revenue items also scaled with the revenue overperformance, representing 37.4% of total revenue. Marketing costs and the sum of all other OpEx items pre-adjusted EBITDA came in according to expectations. In total, and largely as a function of revenue overperformance, costs were $11 million higher than implied in our midpoint guidance, though this was more than offset by the comparable $14 million increase in revenue, resulting in $3 million incremental adjusted EBITDA. Quarterly adjusted EBITDA came in at $42 million, a 23.6% margin and also outside the guidance range, as earlier stated. All in all, full year revenue came in at $615 million, growing 28%. Our initial guidance for 2025 was for growth of 17%, after which our steady cadence of overperformance added $52 million of revenue as the year progressed or 11 percentage points of growth. 2025 adjusted EBITDA came in at $143 million, a 23.2% margin. This too represented a solid increase of $7.5 million versus initial guidance, adding 7 percentage points to the expected growth rate for the year. With that, 2025 was our fifth consecutive year as a Rule of 40 company. A few words about gross margin. As we scale Opera Ads, which has a different gross margin profile compared to our overall revenue streams, we see a greater cost of revenue component in our results. But the platform comes with no marketing cost and a limited OpEx base. As a result, our EBITDA margin was relatively stable even as we delivered 28% overall revenue growth. It's worth noting that the Opera Ads gross margin actually expanded in parallel with its scaling from 2024 to 2025, thanks to enhancements in our optimization algorithms, showing how both we and our advertisers benefit from our strong targeting capabilities. Operating cash flow was $40 million in the quarter or 96% of adjusted EBITDA, resulting in a full-year operating cash flow of $118 million or a relatively normalized 83% as expected. Free cash flow from operations, which also deducts capitalized equipment and development as well as payment of lease liabilities, was $35 million in the quarter and $98 million for the year, corresponding to 84% and 69% of adjusted EBITDA, respectively. As percentages of adjusted EBITDA, we believe these annual levels represent fair expectations for 2026 cash conversion as well, while we will continue to see quarterly fluctuations with seasonality, tax and bonus payments and other cyclical effects. Then turning to guidance. While we are very pleased with our performance last year, we are still early in our trajectory. As we embark on a new year, we are excited by both the quality and potential of our products and our opportunities to continue growing our financial results. Starting with the current quarter, we guide Q1 revenue of $169 million to $172 million, representing 18% to 21% growth year-over-year. The guidance reflects the growth momentum experienced year-to-date, reducing the sequential effect following the seasonally strongest quarter. We are generating healthy margins and are guiding for adjusted EBITDA of $38 million to $40 million, a 22.9% margin at the midpoint, setting a solid foundation for the remainder of the year. For 2026 as a whole, we guide revenue of $720 million to $735 million, translating into growth of 17% to 20%. While we prefer to be prudent at such an early point in the year, we are humbled by how far we have come in these past few years and our opportunities ahead. We guide adjusted EBITDA of $167 million to $172 million, a 23.3% margin at the midpoint. We take pride in driving organic revenue growth at a healthy level of profitability. And while our guidance reflects an inclination to focus on building scale over expanding margins, it implies a slight tick up in profitability, with the 2025 margin level now representing the starting point of the range. In terms of costs, we then implicitly guide to a full year OpEx base pre-adjusted EBITDA of $558 million at the midpoint, of which $131.5 million in Q1. We expect cost of revenue items combined to represent about 38% of revenue for the year, starting somewhat below and ticking up as the year progresses. That represents a 2 percentage point gross margin headwind for the year, while Opera Ads in isolation is expected to continue its margin expansion. Economies of scale across the other OpEx items support the combination of rapid growth combined with a cautious adjusted EBITDA margin expansion. Cash-based compensation expense is expected to grow with a percentage in the low teens with quarterly costs starting just below our Q4 2025 level and ticking up with annual salary adjustments as of April. Full year marketing cost is expected to grow by about 10% from the 2025 level with a relatively even distribution of the annual spend between the quarters. And all other OpEx items pre-adjusted EBITDA are expected to grow by about 15% for the year as a whole, starting just below the Q4 level and increasing quite linearly through the year. Finally, we are excited to launch our new buyback program today, which is of an unprecedented scale. In fact, the $300 million authorization exceeds all prior buybacks combined and represents over 25% of our market cap as of this morning. Our ability to do this on top of an already meaningful recurring dividend only highlights the attractiveness of our operating model and commitment to shareholder returns. Given our belief that our stock is trading at levels that do not reflect our continued success, we are taking advantage of our strong balance sheet and expanding cash generation to capture a compelling ROI opportunity for our shareholders. We will pace and structure the buyback program based on market conditions, and we will buy back shares from our majority shareholder at the same pace as we buy back shares in the public market, ensuring that our free float percentage remains unchanged while massively stepping up our return of cash to shareholders. All in all, we are very pleased and also proud of the results we have achieved, thanks to our highly driven team and our ability to expand monetization while enhancing the user experience. We look forward to keeping you posted as yet another year with much promise progresses. With that, I'll turn the call back to the operator for questions.

We'll take our first question from Ron Josey with Citi.

I wanted to ask a little bit more about Western users, which grew about $2 million sequentially. And I think we had some positive commentary around greater competition in Europe. So just talk to us about the ability to continue to gain these users despite, call it, greater competition and everything else. So talk about Western users and the growth there as one. Then the next question is just on ads overall. With e-commerce growing 25% year-over-year, a lot of that from e-commerce specifically, you noted the top 50 advertisers grew 56%. Talk to us about the traction that you're seeing within e-commerce and how you position that going forward.

Yes, I can address this. I noticed that Frode was mentioned, and I'll provide an initial response, after which Frode can add his comments. Overall, we're pleased with user performance in Q4. The total number of monthly active users is strong, especially considering we continue to lose some feature phone users while growing our smartphone and desktop user base. A significant portion of this growth is in Western users, as reflected in the Q4 statistics. This trend highlights our commitment to delivering appealing desktop offerings and we've also seen encouraging growth in mobile browsers, particularly on iOS following the European Market Act. The rise of AI has sparked interest in AI-powered browser experiences, particularly on iOS, leading to increased interest in Opera for iOS. Overall, the trends appear positive, and we are cautiously optimistic about continued growth in the coming year. Regarding ads, especially in e-commerce, it remains our largest category and is experiencing impressive growth, exceeding 25%. E-commerce is one of our key contributors to year-over-year growth, and overall, it has enabled us to achieve a yearly growth rate of 28%. The e-commerce market is substantial, potentially around $100 billion, and even with our current market share, we have a growth potential of at least $5 billion to $10 billion. The advancements in AI are shifting user intent, enabling us to capture those revenues not only through acquired revenue but also through performance-based advertising. We see this as a significant opportunity to sustain our growth in the months and years ahead, and we're excited about it.

Let me chime in briefly that the e-commerce is a very successful part of the business. It continues growth rates and a 100% year-over-year rate, including in the key fourth quarter and scaled massively over the past couple of years. Then the Opera Ads platform, which also allows third-party publishers to take advantage of our targeting, saw an increase in the growth rate in 2025. The metric you mentioned about the biggest customers growing, I think that's a very good picture of the deepening of the relationship we have with them, as all our campaigns are performance-based. And when we do well, we get a bigger share of their marketing budgets.

Our next question will come from Jim Callahan with Piper Sandler.

Just a question on Neon. It's been a few months since being rolled out. Anything you can talk to on engagement or monetization there, so far?

Yes. So again, it's Song Lin here. So I'll also try to comment a bit, right? So like again, as also mentioned in the scripts, very exciting about the launch of Neon. We just have it widely available in mid-December, so it's still quite early. But as also mentioned, I think what's been relevant is both the opening up of Neon as a potential community hub for AI power users. But also, I think the technology behind it, which allows us to use the most advanced orchestrations in ways and forms which are not possible in the past. And then all of those features have also been able to allow us to move those into Opera AI, which are also launched across all the Opera products, which are very well received, which we believe is also part of the reason why we see the strong growth in the Western market, because this is where this is mostly appealed to. But we also think that there is a good potential to have it further grow in 2026. Then in terms of monetization, as I also mentioned a bit that it's, of course, partly already revealed by the nice growth in both query revenue, but also related advertisement revenue based on it. But even though it's not really showing up in Q4, because we only launched it in mid-December, there are potential, of course, of potential subscription revenue streams, which can help us move up further.

Just follow-up on gross margin. So you're obviously scaling the off-platform part of the business, but your incremental gross margin stepped up the past two quarters. Can you just talk about the sustainability of that trend, and like what steady-state gross margins look like if we keep scaling off-platform?

I think the nice thing as we look into 2026, it's a good growth potential across the business. We are still guiding to Opera Ads platform, growing slightly faster than the totality and building in a bit of a couple of extra points on cost of revenue. But at the same time, given the P&L profile of running a platform, it's generating very healthy EBITDA contribution, which allows us to slightly tick up the EBITDA margin expectations for 2026.

Our next question comes from Eric Sheridan with Goldman Sachs.

Maybe the first one, just following up on Jim's question about Neon. I want to understand how you view the landscape to potentially grow wider adoption? And what might be some of the key investments you need to make from either a branding perspective or a download perspective to sort of get more usage around Neon broadly as you look out over the next sort of 6 to 12 months? That would be the first one. Then in the slide deck or the investor presentation, you talked a little bit about the payments opportunity that sits in front of you. What do you see as some of the strategic investments that have to be made to capitalize on that payment opportunity? And how does it fit more broadly into your strategic imperatives?

It's Song Lin. I'll start by addressing the question about Neon, which is an interesting topic. We find ourselves in a unique position compared to other AI companies that mainly rely on subscriptions. We are fortunate to be profitable with our free ad-supported product. The challenge for us lies in deciding which features to include in Neon as a subscription-based product versus those we can offer widely to everyone. Making features available to everyone could potentially lead to faster user growth and healthier advertising revenue, which is often a challenge for newer AI startups. In Q4, we prioritized moving many functionalities into Opera AI because it makes sense given our resources. However, our focus with Neon is on providing powerful tools for advanced users. Neon will facilitate the orchestration of various AI models, allowing users to select from options like Grok, OpenAI, and other models, including open-source variants. Additionally, it will enable comprehensive task management by grouping multiple tabs to create context. Neon will also feature powerful tools capable of producing utilities or mini-apps, tailored for a niche user group. We have many ideas and functionalities planned; some will go towards Opera AI for a broader audience, while others, such as efficiency tools, will target Neon users as potential subscription customers. This approach allows us to offer various browser-related utilities more freely to the general market. It's an exciting time for us, and we appreciate having multiple choices available. Regarding payments, we have previous successful investments based on fiat currencies, giving us experience in building payment infrastructure in emerging markets. MiniPay serves as a strong example of how we can leverage technology like Web3 and Stablecoin to establish a decentralized payment system. This infrastructure enables us to connect partners and end consumers effectively. Currently, we've had success in Africa, and this year we plan to expand globally and connect developed and developing markets. We're collaborating closely with partners, including Tether, to extend our reach beyond Africa and make additional announcements that will enhance our global platform and technical infrastructure. It's an exciting time for our growth.

Our next question will come from Naved Khan with B. Riley Securities.

Two questions from me. One on the Opera GX user growth. What regions are you seeing this growth come from? And then also, I recall you launched Japan and Korea sometime early last year. How are those markets performing in terms of contributing to the user growth? So that's question one. Then secondly, can you just talk about maybe OPay and maybe potential IPO timing, if there is going to be one this year, what are your expectations there or your thoughts there?

Yes, so like again, I think I'll try to talk about a bit on Opera GX, and then Frode can also talk a bit more on some other investments we have. Yes, so high level, I think Opera GX, so overall, I would almost say that at this stage, what we have already proven is that gaming users themselves are quite high-value users across the regions, right? So I think the nature of the fact that they are gaming users, typically on PC, actually, and this is very nicely reflected in the different revenue and ARPU profiles as fairly high ARPU users regardless of the regions they are. So yes, consequentially, for us, its priority is to make sure that we serve all those users, both in one of the biggest markets, for instance, the U.S., is still the biggest market, but also in other markets like LatAm and a few other places, which we also see some very good interest. Then maybe also super quick comment that, yes, indeed, we have also actually quite interesting developments in, I would say, the East Asian market, which we previously have not spent time on. Like, for instance, the League of Legends World Championship last year is actually in China, but also is also very influential in Korea and Japan. So the fact that our close relationships with Riot allows us actually to be able to do more in those markets. So we have some very exciting happenings, and also continuations in those markets in 2026 to come.

I can comment on the OPay question. We're very excited about the performance of our OPay. In terms of an IPO, they have hired experienced public executives with the new CFO and CEO recently announced. All signs suggest that becoming a public company is a natural next step for them, but nothing has been confirmed regarding timing and specific expectations.

Our next question will come from Jonnathan Navarrete with TD Cowen.

My questions are really on MiniPay. The first one is, could you walk us through the monetization path for MiniPay? And lastly, are there any read-throughs in terms of Stripe's potential acquisition of PayPal as it relates to MiniPay? Or are they just really two different platform assets?

I can comment on the monetization first. Our priority with MiniPay is to build a scale and build a user base and create a product that has such low barriers to entry that stablecoins become sort of a viable accessible tool for people with the starting focus on emerging markets. Then as we've talked about, we're expanding sort of the functionality of it to include more payment opportunities, both domestically and internationally. And the way we monetize it for now is, broadly speaking, from the partner ecosystem, integrating partners into the product and promoting that, and growing together with partners.

Our next question will come from Mark Argento with Lake Street.

Congrats on the strong finish to the year. Just one quick one for me. Could you just remind us non-search query revenue was up almost 200%, small dollars, but what is that exactly? And how can you leverage that going forward?

Yes, sure. I’ll do that. It's a very new revenue stream that is becoming significant. It exceeded $5 million in the quarter, up from $3 million in Q3, and is growing rapidly. Essentially, it involves addressing user intent by sending search queries to a search partner, while also providing direct references to partners as part of the URL experience or in an AI test with Opera AI, tailored to what the user is seeking. We are excited about this revenue stream because as these types of potential dialogues expand quickly, more users are taking advantage of Opera AI in the browsers. Being a native part of the browser and above websites has many advantages, including monetization potential, which we will capture in query revenue.

At this time, there are no further questions in the queue. So I'd like to turn the call back over to Song, for any additional or closing remarks.

Sure. So yes, like again, thank you to everyone for joining us today. 2025 was an amazing year. We were able to ship new browsers and bring exciting features to our existing suite of browsers, and at the same time, deliver impressive financial results that exceeded our rising expectations throughout the year. So while we, of course, still have a lot of work ahead of us, I'm confident we can make 2026 even more successful. Have a good day, everyone.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.