Welcome to the Opera Limited Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions]. I would now like to turn the call over to your speaker today, Derrick Nueman, Head of Investor Relations. Please go ahead.

Thank you and thanks everyone for joining us. With me today, I have our CFO, Frode Jacobsen; and Song Lin who today now holds the role of Co-CEO of Opera. Before I hand over the call to Frode, I would like to remind everyone that in the conference call today, the company will be making statements about its future results and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and the current economic environment, and are inherently subject to economic, competitive and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not a guarantee of future performance. You may refer to the Safe Harbor Statement in the company’s earnings release for details. Our commentary today will also include non-IFRS financial measures, including adjusted EBITDA which are different from our consolidated financial statements that are prepared and presented based on IFRS. We believe that the use of our non-IFRS financial measures provide an additional tool for investors to use in evaluating ongoing Operating results and trends. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. With that, let me now turn over the call to our CFO, Frode Jacobsen.

Thanks, Derrick and hello everyone. We have a lot of exciting stuff to cover today, two big announcements which I'll address first and later I'll cover our financial highlights and provide some color on how our business is recovering from COVID-19 and returning to growth. Let's cover the first piece of news, namely the elevation of Song Lin from his role as Chief Operating Officer to his new role as Co-CEO stepping in alongside Yahui Zhou, who remains both CEO and Chairman of Opera. This promotion formalize a strong role Song Lin has been executing on for the past years, basically overseeing everything at Opera outside of the microlending business and highlights the trust that Yahui places in him and in the global Opera leadership team. As context, Song Lin joined Opera in Norway 18 years ago and spent many years in key engineering roles. Later on, he was instrumental in our privatization and transition to new ownership and our strategy to accelerate our trajectory and leverage our user base to launch new businesses. As many of you have realized in live face to face discussions, Song Lin knows everything there is to know about Opera and the markets where we Operate. He is a fast talker and a quick thinker with good intuition. And just like Yahui he has a tremendous drive and urgency and together the two of them have shaped our company and our ambitions over the past years. On a personal level, he is also a fantastic guy to work with, and I know I speak for all of our staff when I congratulate him on his expanded role. Now to the second topic, the formation of Nanobank. As many of you know, we have been working towards massive fintech opportunities for several years. First, we…

Hey guys, thank you Frode. So, I'm glad to be named as Co-CEO and I view it as not myself but really a realization of what the overall Opera team has accomplished over the past few years, growing revenues, users, and to growing multiple new businesses so thank you guys. It's an exciting 18-year journey. I look forward to taking on this new role and continuing the strong momentum together with the proud Opera team. So at this time I will talk about some recent trends and developments. Our user trends for Q2 with historical high user base become our key role [ph]. Our user base in the Q2 was a record 363 million monthly active users an increase of 12 million users compared to Q1. This was driven by growth in Africa and Europe our key regions of focus. Our base has further growth in July and an all time high of 329 [ph] million monthly active users in this time of COVID [ph]. We are very pleased to doing that. And to further break it down Opera News has achieved an important milestone in May of 200 million monthly active users and averaged 205 million users in Q2, it is up 26% year-over-year. We are of the thought that Opera News has become a critical information hub during the COVID-19 outreach. On the other angle our [Technical Difficulty] 15% year-over-year to a record of 75 million in Q2. This was driven by both the strength, let's say, in Europe with our PC offering which is becoming ever more relevant when people spend more time from the home base. And also globally from Opera GX North South venues [ph] also which has reached 4 million monthly active users recently and more than doubled year-to-date. On the mobile we are…

Thanks Song Lin. Given the extraordinary nature of the second quarter I'm going to keep our comments short as the results aren't reflective of our business and focus on key highlights and trends. Additionally, I would advise you to look at our press release for more detailed information. Revenue for the second quarter was 55.4 million. Of this search was 17.6 million, down 18% year-over-year. Trends improved each month of the quarter. PC has recovered quicker, whereas the mobile recovery is taking a little longer based on exposure to emerging markets. However, both platforms are on the way to recovery, and in July search revenue had regained half of the year-over-year decline observed in Q2. Advertising was 12.7 million, down 22% year-over-year. Advertising revenue also improved each month of the quarter and we benefited from strong e-commerce partners and sports leagues returning. In July advertising revenue had regained two thirds of the year-over-year decline observed in Q2 and was back to year-over-year growth when excluding the travel vertical. Fintech revenue was 11.8 million and as discussed, loan volumes began ramping in late June. Finally, combined retail and tech revenues were 13.3 million. As a reminder, we expect combined retail and tech revenues to be between 5 million and 6 million next quarter, though that reduction is not expected to affect profits. Our operating expenses were 59.4 million, down considerably from the first quarter due to two primary factors. One, discipline around variable costs and two, lower credit losses in microlending due to the smaller revenue base and stronger than expected collections on loans that were open at the end of Q1. As a result, adjusted EBITDA was positive at $2.9 million in the quarter. Net income was 17.1 million, benefiting from finance income from marketable securities, the performance of our…

Thank you. [Operator Instructions]. Our first question comes from the line of Lee Krowl of B. Riley FBR. Q – Lee Krowl: Great, thanks for taking my questions and congrats on the promotion to Co-CEO. I wanted to start out on the search and advertising business, you kind of consolidated the trends of those business into down 8% year-over-year. Could you maybe break out the trends specifically by search and advertising quarter-to-date? And then I guess the other breakout I was curious on is just by the subsectors which have returned to kind of normalized levels and which are lagging? Thanks.

Yes, sure. Thanks for the question. So yeah, as mentioned in Q2 search was down 18% year-over-year and advertising 21%. And in July we saw that search had regained half and was down 9% year-over-year. Advertising even more so was down 6% year-over-year and as I mentioned, excluding travel it was back to growth year-over-year in July.

And this is Derrick, the other comment that we made is that, month-to-date in August we're seeing better trends than July. Q – Lee Krowl: Got it, okay. And then on the Nanobank transaction, you guys provided a lot of detail that was helpful. I just kind of wanted to dig in on the question of why now, you know, the business has reached some decent scale, a lot of velocity, but obviously a brief pause with the pandemic, why does it make sense to do this transaction today versus waiting for it to build further scale within Opera? Thanks.

Sure, I mean this is something that we have considered for some time. We've seen fantastic operational performance in both Opera and Mobimagic. We think this is good timing to consolidate now and prepare for the reacceleration of the business and do everything we can so that that business is set up to be a true leader, as a global scale for emerging markets. We see operational benefits as mentioned. We also see structural flexibility over time. Q – Lee Krowl: Got it. Thank you for taking my questions.

Our next question comes from the line of Lance Vitanza of Cowen.

Hi guys, thanks for taking the questions and glad to hear things are improving. Let me actually ask you a couple of questions on Nanobank. I guess the first is how easy or difficult do you expect the integration with Mobimagic and the formation of JV to be, are there risks there that, you know, putting the two companies together causes you to miss some of the opportunities in the marketplace over the next, say, three to six months?

Sure, Frode here again, I'll answer that question. I would say at the starting point operationally the businesses have different core markets. Where it overlaps we already work together. So that would actually simplify things being apart, having it as part of one joint group. Think we've also seen that in Mexico, which we are really excited about. That market we have prepared together and we are about to really start scaling that now. I think in terms of building a corporate function, that is an area where Opera will remain quite involved, very similar to how we supported OPay in its early days until we have sort of the corporate consolidating function well in place.

Okay, and then sticking with this, so you obviously you talked about the disparate profitability, right. So Opera generating more than half of the revenue, but at a relatively low margin versus Mobimagic generating less than half of the revenue but at a pretty impressive margin. How do you explain that margin differential, is that sustainable, what are the structural elements that go into that, and I guess, I know you mentioned all of the factors but at the end of the day is that margin differential really why Opera winds up with only 42% of the equity in the JV despite contributing the majority of the revenue?

Yes, so I would say on profitability first of all there will always be country by country differences. So, how profitable each market will be and Mobimagic has set up a very attractive business in Indonesia both in terms of growth and profitability. Second reason why their profitability is good is that they have been able to leverage their technology developed for Indonesia as they have supported Opera which has made it -- made the company profitable as you referred to.

So I think --

And so to cover the second part of the question, so when we've looked at the relative valuations, we have looked at cash flows over a long time period, and we have looked at multiples both on revenue level to sort of determine the right split. On that one as I mentioned, we engaged an independent professional party to help us confirm the appropriateness of the...

And Lance this is Derrick. We're not expecting any structural changes in terms of Mobimagic's business, meaning their tech platform will be the same in Indonesia and we'll continue to do what it's doing. So there's nothing that's one time this year.

Thank you, that was really -- that was a big part of the question. And then I guess just, I think you went through this on the prepared remarks, but just to make sure I have it right, so there was roughly 31 million. If I take your June 30 cash and marketable securities of about 160 and then I back out the 31 million or so that you are shipping into the joint venture essentially. So on a pro forma basis you've got about 130 million of cash and marketable securities, is that accurate?

Correct.

Okay, and then just any -- will there be any debt at the JV, I would imagine, nothing on balance sheet but could you know anything about the debt structure there and then also and I apologize, I'm not familiar with the Mobimagic shareholder base, I know that there's a relationship there between your other Co-CEO and Chairman but could you remind me his percentage ownership in Mobimagic and how that whether that's direct or indirect through one of those other investment vehicles?

Sure, so to answer the first question, no, there won't be any external debt in the Nanobank balance sheet so that will be clear. On ownership that is correct, that our CEO is the majority shareholder in Mobimagic.

Okay, thank you very much, guys. Appreciate the help.

Sure. Thank you.

Our next question comes from line of John Godin of Lake Street.

Hey guys, thank you for taking my question, congrats. First on the Nanobank, can you talk in a little bit more detail about how you think this expands the TAM both from a geographic and scalability standpoint as well as from a new product standpoint? And then number two, can you walk me through kind of the strategy for customer acquisition, especially for some of these markets where Opera hasn’t had a significant presence through any other products previously? Thank you.

Sure, I can go first. So we believe that a consolidated company working across different geographies makes the operation solid, makes it easier to expand to new geographies. It also supports a broader product diversification to essentially have a company that has centralized tech, that it can apply in different geographies. So we believe that the combination of Opera and Mobimagic into Nanobank is very supportive for its continued growth.

Yes, this is Derrick, I would add you look at the existing markets, I guess the new markets of Indonesia and Mexico, they're two of the top unbanked markets. Obviously they're smaller than India, but bigger in size than Kenya. So there is bigger opportunity. I mean, I think Mexico has the opportunity to be very similar to Indonesia in terms of scale. There's some other markets that Nanobank is looking at and which again would fall into large unbanked populations. And, they want to a) make sure everything with this deal goes right, b) get Mexico continuing to scale and India scale back up. But in the next 6 to 12 months would not be shocked to see a couple of big more markets. The other thing that I think we spoke a little about last quarter or the quarter before was the expanded products. So they're working on that. There's multiple different products. Remember, when you look at Nanobank, there were 50 million registered users. And when you look at the loans the companies provided, they're not giving a lot of users. So they're really focused on how do they get the most out of that registered user base and go from there. I think your final question was around how do they acquire users in different countries?

Yeah, just the customer acquisition strategy in countries where Opera hasn't previously had a big presence?

I mean, like John this is Song Lin. Yeah, sorry for jumping, I guess I'm a bit jealous that Frode gets all the questions, so I just want to try to chime in. Yeah, so like and maybe also to comment right. So like to be related, maybe a bit repetitive that we actually feel that now is a great time to do this, like first of all microlending business is doing great, but of course it does have impact with COVID. But now of course the region has been recovering. So we actually feel that now it's a great time, partly because the demand is more than ever. Also because you talk about customer acquisition, because now obviously for well Opera is big, like India, Indonesia or even Mexico, where we are reasonably big. But then now it is also a fantastic time to actually acquire [indiscernible] because of course it is very cheap, because people are still recovering from COVID. So, it's a fantastic time for you to get user probably the cheapest of all possible. So we really feel that now is our chance actually to scale. Without being too exciting we feel that in those emerging markets that we really have the golden chance to actually be I would say, maybe I'll be too bold to say number one, right, so this is a short time frame. But then we need to concentrate, we need to have one thing to focus on that, streamline all the risk control, the QRC and all the processes. So I think that's -- now it's golden timing, maybe partly to answer your question, that now is also a completely perfect time to acquire those because, all those markets we talk about, South Asia, Southeast Asia or even Latin America it's the best time to acquire -- as it is very cost effective now, also in combination with Opera traffic.

It's super helpful. Thank you. Thank you Song. And second one also for you. Can you just talk a little bit in more detail about the trends you're seeing with the Opera News [ph] reduced hub, kind of the progress you're making there with the expansion into, I believe you are in six markets now, as well as how all this is trending and whether that's kind of ahead or in line with your expectations maybe at the beginning of the year? Thank you.

Yeah, so it's a bit sporadic, so I'm not sure if I have it, but I'll try to answer what I feel. So, high level -- as we also commented a bit on the press release Opera News are going really well on in Q2. It's a milestone that we have to pass 200 million and now the average is also past 205 million in the second quarter. So it's a good indication that we believe our strategy really works. And yes, you are right that buyers actually uses -- often use -- are able to establish a very strong presence by what was all the local content producers in all those key countries, Nigeria, Kenya, [indiscernible] and a few others. And that of course, is really part of the growth that we are seeing. And I just have to say that, of course, we are quite pleased of the role we have been playing during COVID time, because apparently that actually become go to place for people to actually check all those relevant news. So, of our comment that, you probably see that in your financial report, where we actually have reduced our marketing spend just because the organic growth of users are so big that we almost don't need to spend that much but then we still have 26 year-over-year growth that's what we are very pleased about it. And also, I'm not sure if I hear you clearly, but if you are talking about monetization, I also commented that despite of the COVID news, monetization in Q2 has almost grown by 65% [ph] compared with last year. So, obviously it's still a low point last year, but still 65% during COVID. I think, it is a very strong signal that we're doing well. And I have also commented that, if you look at how many app impressions we are serving globally, News is actually almost for the five ones you can look at problematic matter on Google. So, we are very proud. Like again, I guess the only issue with that is that generally Africa although they are still very low compared with what you see in, say, U.S. or Europe, but we just have confidence that when the companies recover and when that whole region become to grow, we will be in a very good position to grow further. So, we are quite pleased with what we're seeing in Africa.

Thank you, guys.

Our next question comes from the line of Alicia Yap of Citigroup.

Hi, greetings from the management. This is Vicky Wei on behalf of Alicia Yap, so I've got two questions. The first one is about advertising. So as the COVID-19 situation becomes better and we expect traffic and ads project gradually to normalize in the second quarter. So can you elaborate a bit more on the changes in July and August I mean, overall advertiser participant and for rest of the year and have you seen any cautiousness on that budget spending in line with geographic political tension and also by categories, let's say online travel, e-commerce, would you please explain more about how advertisers perform? Thank you.

I guess I can take it. This is Song Lin for high level and Frode can probably comment on the action almost like a game because Frode I will take a minute. Lot of questions that I'm helping out there. So, yeah. So, I would say, like what already been saying that I would say in July or August, we have already seen a great recovery which we are optimistic about. If we tried to say we're going to do this, I would say on the mobile I think the ads revenue are growing nicely, almost back to where it is before. So, like we are very hopeful that this trend will continue. Of course, we have to be cautious because [indiscernible] but high level we see that and this is where I think it's recovering and it's very positive. On the desktop side, I would say and as Frode said has almost recovery into the only single digit drop compared with last year. And now hopefully that trend will continue so -- which is great. In terms of advertisement I would say, if you look at categories without traveling, which primarily remains is e-commerce and a few others, I would say those are already back to the last year level, maybe slightly higher. So, in terms of traveling, of course it's still being impacted. But we also see strong recoveries, a few times recoveries say from June to July. And then that trend also continues in August. So, it remains to be seen. We believe, of course, it will still be down compared with last year. But, the growth trend is very encouraging. So, I think that more could be a high level, but now Frode can also comment a bit on the details on numbers.

Yeah, I think we'll be quite careful in sort of laying out the trajectory of sort of the normalization and back to growth. Maybe the only thing I can add as a reminder is at the beginning of the year, we guided advertising to grow faster in 2020 than in 2019. Last year, it grew 18 and the start of the year, we were also well over 20% in year-over-year growth. Since then, of course, we have COVID, which has impacted monetization these days, but we also have more users than what we expected to have at this point in time. So, I believe the outlook is actually quite positive when it comes to advertising and search monetization.

Thank you. I have one follow up questions about the European Fintech business. So, we know that the company is taking a lot of initiatives. I want to ask management's opinion in the longer-term with, let's say in two to three years how do you see your market position and would you please share with us any long term and short-term plan? Thank you.

Yeah, this is Derrick, I mean, in terms of our market position, I think the idea is to continue doing what we've been doing, which is growing our users COVID aside, growing our monetization. And then using our platform to launch new products. So obviously we've been successful over the last couple of years with Opera New as well as the microlending. And I think, when you look at OList, when you look at the European Fintech and some other initiatives that are too early to talk about, our hope is that, we grow our search and advertising at historical -- better rate, and then we find new businesses to turbo charge growth. So that's sort of how we look at it.

Thank you.

Our next question comes from the Liping Zhao of CICC.

Hi management, thanks for taking my questions. I'm wondering whether you could provide updates on OList business such as in EU and our monetization method on the business and also growth strategy? Thank you.

Yeah, so yeah, this is Song Lin, I can just give a quick remark. So, yes, so obviously this is what we launched in Nigeria, it is a very good example of how we're trying to enable the local merchants to transit from the offline business to the online business. User wise we are having Q2 reach average about 6 million monthly active users compared with 4 million at the start of the year, which we are quite proud because that's the user base. That's a big user base compared to Nigeria. You know, monetization wise, I think it's also a very good example that the way we have just announced the initiative of offer for business to get over to Google. I think that's a very -- that should action our strategy that we will try to partner with all the bigger guys like Google and -- other players in the region to help those merchants and potentially end users to better monetize and also do better transitions. So, like, I guess you are welcome to actually go through our website or Opera for business and there will be more interesting updates. And we feel that we are optimistic about how that can power the transitioning into a digital space, which is ever more relevant in the current COVID situations because it's happened before you go ask to do it from -- online. So, I think what [indiscernible] we are there. Moving forward, I think our strategy would be the same, that we will try to build similar propositions in Africa and even potentially in other parts of the world, which is encouraging, because we think all of these are relevant to helping transition from offline to online.

Okay, thank you.

And that was our final question, I'd like to turn the floor back over to Song Lin for any additional or closing remarks.

So yes, as there are no further questions, I think I have to say that, guys, I'm very proud of how Opera has continued to [integrate] it among the uncertain times. The good news is that our user app monetization is bouncing back and we have very exciting new initiatives that could really turbo charge our growth and we are positioned to take advantage of the structural change from transition of offline to online. So like looking forward to take the great opportunity, together with all of you and thanks, everyone, for joining us today and have a good day.

Thank you, ladies and gentlemen, this does conclude today's conference call, you may now disconnect.