00:04 Welcome to the Opera Limited Third Quarter twenty twenty one Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] 00:32 I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations. Please, begin.

00:40 Thanks for joining us today. With me today, I have our co-CEO, Song Lin; and our CFO, Frode Jacobsen. Before I hand over the call to Song Lin, 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. 01:01 Such statements are based on current expectations and how we perceive 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 guarantees of future performance. You may refer to the Safe Harbor statement in the company's earnings release for details. 01:21 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 non-IFRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. 01:42 These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. We have also posted unaudited supplemental information on our Investor Relations website that includes historical financial results of Opera and of our investee Nanobank. We will be live tweeting highlights from the call at @InvestorOpera. So, please follow along there during the call and in the future. 02:06 With that, let me turn the conference call over to our co-CEO, Song Lin, who will cover our operational highlights and strategy and then Frode will finish up with financials and our expectations going forward. Song?

02:20 Sure. Thank you, Matt. This is Song Lin. Thank you everyone for joining us today. So, I'm pleased to report that Opera once again outperformed delivering financial results for the quarter that exceeded the high end of both our revenue and EBITDA guidance. So, revenue was up thirty seven percent year over year and represented a continuation of our strong growth trajectory with eleven percent sequential growth when comparing with the previous quarters. 02:57 The quarter also represents and earlier than expected that overall margin expansion with twelve percent adjusted EBITDA margin well ahead of our breakeven guidance. Looking ahead, we are confident that our strong performance will continue. We remain on track to have record year for the company as search and advertising revenues both set new high [indiscernible]. 03:27 Revenue growth continues to be driven by advertising and such, generating ninety eight percent of our total revenue on combined basis. And for the first time in Opera history, advertising has surpassed such revenues in terms of mix. So, in the third quarter such revenue grew approximately forty five percent year over year, while advertising was nearly double that rate and eighty four percent growth. 03:59 Our advertising revenue is accelerating, thanks to new products and features in credit user engagement, a focus on growing high value users and finally, a rich toolset for advertisers to target and connect with our audiences. 04:15 We continue to focus on products and services that highlight the browser and how it's advertisement services, which we call Browser+ haven't been able to enhance people's online service. 04:31 On mobile, we have continued to expand our offerings in Africa. So, even though we already have over one hundred million forty million monthly active users in Africa, and represent one of the most relevant…

11:41 Thanks, Song Lin. As Song Lin said, our strategy of increasing the value of our user base by introducing adjacent products and opening new markets is producing record results for Opera. 11:54 Our results this quarter are a strong validation of our Browser+ strategy, and we see the strength continuing through the fourth quarter. As a result, I'm pleased to announce that we yet again raise our guidance for the full year revenue and adjusted EBITDA. 12:13 Revenue for the third quarter was a record sixty six point six million, up fifty seven percent year over year and up eleven percent versus the prior quarter. After a few quarters of favorable comps due to COVID, the search and advertising revenues had returned to pre-COVID levels by the third quarter of twenty twenty, making us extra pleased with the year over year achievement. 12:42 For the first time, our revenue mix skews towards advertising revenue, which is now fifty two percent of the total, a trend we expect to continue. Specifically in the quarter, search was thirty point seven million, growing forty five percent year over year. This was driven by monetization gains for both PC and mobile browsers. 13:05 Advertising was thirty four point nine million, growing eighty three percent year over year. This was driven by strong monetization from Opera News and our mobile browsers. Our strategy to improve revenue and profitability by focusing on not just growth, but also improving the value of our user base is clearly demonstrated by Opera’s consistent and continuing trend of growing our ARPU. 13:35 One simple way to demonstrate this is to take our search and advertising revenue and divide it by our entire user base. In the third quarter, each user on average generated a record zero point seven five…

19:22 [Operator Instructions] We will take our first question from Lance Vitanza with Cowen.

19:40 Thanks guys. It's Lance at Cowen. A couple of questions for me. First you call out in the headline that the – in headline of the press release that ad revenue exceeded search for the first time, but could you just, stupid question, but could you explain why that is significant? Why do we care that advertising revenue is exceeding search revenue? What's the implication of that?

20:09 So, hi, Lance. I would say two quick comments for that. Number one, I think it’s a demonstration of the combined success of Opera News on top of the browser because the only revenue category we drive from Opera News is advertising. Number two, of course, the advertising revenues are far more, what's the word? Much less concentrated. There’s a much longer list of partners in that. So, it means that the sum of very many is starting to add up to now be our biggest revenue stream.

20:47 Okay, great. And then so if I look back through the beginning of COVID to twenty nineteen, I calculate a two-year revenue CAGR of about nineteen percent, which is outstanding, but my question is, how does that compare to other internet media players. I mean, on a two year basis and looking through COVID, is Opera growing in line with its peers or is it growing faster or slower than peers?

21:18 I mean, I can only speak for us. But in many ways, twenty twenty from a revenue perspective was a bit of last year given the decline in particular in Q2, Q3 was essentially back to year over year flat, and then we had a good Q4 again. And so, if you look at the growth rate from, if you look at Q3 twenty nineteen and Q3 twenty twenty the revenue was about the same when you look at search and advertising. 21:50 So, I think, of course, we came out of it broader and we come out of it with good products, and good uptake. But the monetization gains we're seeing now is relative to the same level that we had before COVID, but we only got back there by Q3 twenty.

22:11 Okay. I guess where I'm trying to go with this question is, I know it's a little early. I'm not going to ask for guidance, but as we think about our models in twenty twenty two revenue growth, I can't imagine that it continues in the fifty percent to sixty percent range. So, I'm thinking about moderating from the nineteen percent CAGR to something like, kind of a mid-teens growth rate. Is that a decent place to be modeling twenty twenty two from a revenue per perspective?

22:45 As you say, it's also a little bit early for me to go out publicly with guidance now. We do feel great about the trajectory of the business. I would agree with you that fifty-ish percent year over year growth is a fantastic performance that we've had and I would be – so that the direction of the growth rate will be lower than what it was in twenty twenty one. At these I think that's reasonable, but it's hard to give something very specific. 23:22 We are doing, we are investing in our business. We continue to invest at very high levels in growing our business. And we work on our initiatives that we have talked about before to sustain very attractive growth also looking ahead of course.

23:46 Okay. Just one last question for me and then I'll turn it over, but on OPay, you mentioned in your prepared remarks, the stepped up valuation now that you're using a fair value approach, but didn't fair value of the asset itself also increase given that they had raised some money at a higher valuation? I think from my notes, and I'm hoping you can confirm this for me that OPay had raised four hundred million at a one point five billion dollars valuation last May and then maybe raised another four hundred million at a two billion dollars valuation late August, is that right? And then presumably, you've been diluted by these raises. So, and I know there was a monetization as well. So, could you just confirm what percentage of OPay the company owns today? Thanks.

24:36 Sure. So, number one, it's just the timing of different types of releases. There been one funding around for OPay this year, and that's the one with about two billion dollars post money valuation, which is also the evaluation that Opera, we divested a bit less than a third of our ownership at that valuation. 24:58 So, there's been one when it comes to the share. So, the fair value, so the assumed value of OPay that formed the basis for our recognition of ownership, we updated that at the end of the second quarter to reflected that funding around and that we have not changed since. 25:20 The reason we have a gain now is that we have two types of shares, ordinary and preference shares. And from the past, ordinary shares were recorded under the equity method and not fair value. So, this is just an accounting topic. Our ownership of OPay is, now sense at six point four percent, used to be thirteen point one and we sold twenty nine percent of our stake, so that took us to nine point three. Then there was some equity set aside for employee grants held in the separate company. 25:51 So, we take all that dilution upfront taking it to eight point two and then there was the funding round that took it down to the six point forty four.

26:03 Perfect. Thanks so much for clarifying. Appreciate it. Congratulations on the quarter guys.

26:08 Thanks Lance.

26:11 We'll go next to Mark Argento with Lake Street.

26:16 Good morning, guys. A few quick questions. One is, looks like you're getting some pretty good traction with the news product in North America. Maybe talk about, kind of what penetration rate you are at, where do you think you can go with that and ultimately what kind of monetization rates that you could see there just in terms of trying to size up that opportunity?

26:40 Yes, Okay. So, it's Song Lin. I’d that just try to answer a bit broader, right. So, I mean, I would say when it comes to the Europe and North America, the other states is considering that. It is a huge market itself, right. So, I mean, I think it's a run to say penetration. I would say, we are just getting started, but it is good to see we have a very good [indiscernible], very good retention, very good valuation engagement. 27:06 So, all the numbers are really good, but yes – but then well of course, I guess well it is a rational way, you know where once you of course just being – you know the same time what they're doing now, right? They want to be always be [indiscernible] and be very target focused on the high ARPU value. 27:23 So, not just going for the broader user base, but we want to make show the target [indiscernible] we're going to need it, very high engagement [indiscernible]. So, more like it. I guess to sum up, I would say, number one, we are feeling better on the stage. I think we, at least probably many times growth potentials. But especially if you reference to our position in Africa, right. 27:41 If you look at Africa we have the final number one. We’re almost dominate in the region and U.S., of course, we also feature in some of their traditional media outlet on others. So, I would just say, I've got probably many, many times opportunity waiting for us, but on the other end, I think yes, on the other end, I think we just also be very systematic about it. We want to be cautious. And we will make sure we're talking the right audience. 28:05 The other comment I think we will be also saying that we're also trying to focus different verticals both in Africa, but also in other regions that we’re experiencing many particular vertical by vertical and just make sure that on that particular vertical may that be [indiscernible] the AI, intelligent news will be able to differentiate it from the more normal source, right? So, I think that's our general approach. 28:31 So, I feel that there’s still going to be a great growth opportunity ahead of that, but on the other end, we also want to be very cautious and we move steady ahead.

28:42 I know one of, previously the idea was to spending aggressively on customer acquisition. Maybe talk a little bit about the strategy shift there in particular, was the ROI not where you wanted it? And so, you kind of retrenched a little bit and focused on like you said some of the higher value verticals or what happens with the strategy shift? What did you see out there?

29:09 Yeah. Maybe just a high level comment and Frode could add on top of that. So, no, I don't think it's more like – I don't think it's a strategy shift. We are still spending on very elevated levels compared with before and more likely yes. So, I don't think that is a strategy shifting, I think the major difference is more like we are being continue to be smarter. 29:30 You know, previously, we spent, I guess little bit less in the developed regions and now sending [indiscernible] to find out there are also many interesting ways that we can buy those that make us a little more smarter, you know without being too long. I would just say, the traditional user acquisition is [indiscernible] price that you buy it you may have be retention. But now, actually programmatic ways, we are able to buy particularly to that particular user's potential value, instead of generic buy and the result of that is that allow us to almost to be extremely targeted and the user what we want. 30:09 But then of course with the potential that we find out maybe many of those we don't want. And so, we don't have to spend money on it. And I think that’s more actually thinking you know why you we see, we’re able to spend less, but achieve almost the higher revenue compared with what we predicted we will. And we will continue to that trend.

30:28 That’s helpful. And just last one for me. In terms of your search partnerships, remind us, you know who you're partnered with on the search side and are those contracts that need to be renewed on a regular basis, if you could refresh us on that it would be helpful? Thank you.

30:48 Sure. Frode, do you want to comment or do you want me to comment?

30:53 Yeah, I mean, most important search partners are Google and Yandex. We typically enter three, four year contracts with them. I believe we actually attached them to our annual reports, but with all this juicy stuff grayed out because that we cannot disclose, they've been long partnerships for fifteen plus years probably.

31:22 And the next time, those are set to renew, just like you said, is that kind of an auto renew situation or do you guys actually sit out and renegotiate those every year, every three years?

31:35 No. We try to negotiate them every time they renew. So, they typically don't auto renew. There are some instances where the partner has the right to extend the contract. So, let's say for another year, post initial term on the same terms, and then beyond that we meet to negotiate. But they tend to be quite stable in terms of, in terms of important terms. Quite stable and of course yes [Multiple Speakers]

32:08 Maybe I'll just comment that. Yes, more likely the most relevant ones, where I'm moving ahead, we don't expect surprises and if anything will hopefully this to be [off-site] [ph].

32:20 And when is the next renewal, are we on a renewal cycle this year or next year?

32:29 I think Google renewal would be for next year. Yandex is in, I think it's twenty twenty two or twenty twenty three.

32:44 Great. Thanks, guys. And congrats on a really strong quarter.

32:49 Thanks, Mark.

32:50 Thank you.

32:53 We'll go next to Alicia Yap with Citigroup.

32:58 Hi. Good evening, morning management. Thanks for taking my questions. Congrats on the strong quarter and guidance. I have a couple questions here. Number one, can you elaborate the geographic distribution of your ad revenue? So, how big is the ad revenue contribution from the America and the Europe and the Asia, if it could share a little bit rough percentage? And then also just curious, if you could also share the growth rate of the ad revenue coming from America? I guess given eighty three percent growth, so I would assume the America growth is like the very good high triple-digit growth. So, any specific MAU target that you wanted to reach in the U.S?

33:59 So Alicia, maybe I can begin at least answering your question. We don't disclose revenues at the detailed level by country and geography, but roughly speaking, advertising is quite balanced between Europe and the Americas versus the emerging markets. 34:25 In terms of Opera News, of course, we are spending big marketing dollars, but that is also generating good revenue growth for us and that has been driven by actually both, but of course, the most step up is due to sort of the growth from virtually nothing to actually starting to have a presence in western market. So, that benefits our advertising revenue stream. And sort of explaining why it is growing faster than search.

35:07 Any color that the user that you wanted to further penetrate in terms of the user base in the U.S.?

35:14 Yes. Song, I think you touched on that before, maybe you just comment.

35:26 Sure, yes. So, yeah, I would say, I think to be honest, I guess it's probably less about and more like I think overall, our overall strategy just that we do want to achieve the best. In U.S. we are more like high engagement where people are which – feel that people [natural] [ph] with our product. 35:47 So, yes, more like, I would say, yes I mean like, I think at least for the results that we have been it is especially when comes to more or like, just to say there are few types, right. So, when it comes to Opera News, I would say, don’t have typical, I would say, high value users which do have a news reading habit. That's what we see. It tends to be outside maybe slightly towards middle age, because those ones which have a lot of – need already news while for instance, we're also growing very big in gaming. 36:21 U.S. is one of the biggest market in [Jersey] [ph] also and they always develop teams, young kids, which probably not readying a whole lot of news, but they do a lot of gaming. So, yes, so I think we are now [indiscernible] starting the way that we buy of course difference users, cloud difference user doing so well marketing by different means, and we just see that it is a very natural mix among others.

36:47 I see. And for your 4Q EBITDA guidance, checking from that, is that right to assume that your sales and marketing spend on the absolute dollar terms, as well as the percentage of revenue is actually coming down sequentially from 2Q?

37:11 So, what you'll see implicit in our guidance since the rest of the OpEx, sort of moves with more limited steps is that we essentially expect marketing spend to be at about the same level as the third quarter. I guess on the margin, more likely a bit down, but not a big change relative to the third quarter.

37:39 I see. Okay. And then lastly, could you might split of the android versus the iOS users for your news app? Just wondering if there have been any impact to your news app from the iOS changes in the recent quarter?

38:03 Yeah, understood. So yes, I would say, by far majority of our user base are android. That's not by intention it is just because we launched the iOS a lot later. So, yes, our majority would be still on android and that’s why. Well, so let’s say positively not effected or even elevated by the trend. 38:24 And of course we do think it is making sense to continue to invest in iOS, but I guess now, you could see that since the [monetization] [ph] has to be challenging it is also flat [indiscernible] iOS. So, that math is up and hopefully would just benefit on.

38:41 All right. Sounds good. Thank you. Congrats again.

38:47 Sure. Thank you.

38:48 Thanks Alicia.

38:53 There are no further questions at this time. I'll turn the call over to Song Lin for any additional or closing remarks.

39:01 Sure, guys. Okay. Then as I said, thank you all of you for joining us today. As you also have hoped, that we believe Opera is well positioned to continue to grow, and we are very excited about our new initiatives. We appreciate your time and we look forward to speaking with you again.

39:24 This does conclude today's program. Thank you for your participation. You may disconnect at any time.