Welcome to the Opera Limited Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions] 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 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 on 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 year-over-year comparisons unless we state otherwise. And with that, let me turn the call over to our co-CEO, Song Lin, who will cover our second quarter operational highlights and strategy; and then Frode Jacobsen, who will discuss our financials and expectations going forward. Song?

Thank you, Matt, and everyone else for joining us today. We have been looking forward to sharing our second quarter results with you and also update you on our latest thinking and priorities in this very exciting business landscape. I am going to start with the financials. The second quarter experienced year-over-year revenue growth of 30% compared to guidance of 22% to 26% and well ahead of 17% growth in the second quarter of last year. This marks our 17th straight quarter as a Rule of 40 company, entirely fueled by organic revenue growth and healthy margins, leading to cash flows that fund both innovation and our recurring dividends. Advertising revenue grew 44% year-over-year to $93 million. E-commerce remains the fastest-growing vertical within Advertising, continuing to grow over 100% year-over-year despite the ongoing volatility due to tariff uncertainty. While the growth support from e- commerce in our revenue mix has resulted in the vertical now representing nearly half of total Advertising revenue, we still believe we are under-indexing with ample headroom for continued expansion as we move into the retail heavy back half of the year. We are also very pleased to see Search revenue returning to double-digit growth, up 11% year-over-year to $50 million in the quarter. The sequential growth of 6% was also twice as high as it was in Q2 last year, benefiting from the continued mix shift of our user base towards higher ARPU regions. We also see a broader trend with a new focus on high user intent traffic powered by AI leading to monetization opportunities arising not only during actual search, but also around pre and post search, providing ample opportunities for those in a position to detect and create value. This allows us to deepen cooperation in the space with a wider range…

Thanks, Tom. First of all, we are very pleased to yet again deliver on high expectations and exceed both our own guidance as well as Street expectations. Revenue growth was 30% year-over-year, well ahead of our already strong guidance of 22% to 26% growth. Looking at the first half as a whole, we grew revenue 35% year-over-year, which is more than double the year-over-year growth in the first half of 2024. Over the past year, our Advertising revenue has scaled to new levels. Preparing for and then seizing e-commerce opportunities, we saw major growth acceleration in the second half of last year, followed by an unprecedented sequential growth from the seasonal peak of Q4 into Q1 2025. And with Q2, we saw the expansion of global opportunities, largely offsetting the impact of tariff-related headwinds in U.S. e-commerce. We have been positively assured by the resilience of our newly scaled Advertising revenue streams, in an otherwise volatile macro picture. We also saw Search revenue return to double-digit growth as expected, which adds to our ability today to significantly raise our growth expectations for the year. On the cost side, Q2 OpEx came in according to our prior directional commentary across marketing, compensation and the other smaller items combined, while cost of revenue scaled with the revenue overperformance and came in at the same percentage of revenue as in Q1. This means that we were able to grow faster than expected and strengthen our overall business trajectory going into the second half of the year while still exceeding the high end of our adjusted EBITDA guidance. Our operating cash flow was $33 million in the quarter, representing 103% of adjusted EBITDA with the cash flow headwinds of Q1 representing tailwinds in Q2. Free cash flow from operations came in at $29 million…

[Operator Instructions] We'll take our first question from Naved Khan with B. Riley Securities.

Two questions from me, please. One on the Western market user base, the sequential growth was quite strong, I think the strongest we've seen in some time. And on the flip side, GX users didn't really grow. So is this a reflection of how you spend your marketing spend? Just trying to understand the dynamics there in terms of what drove the strength in Western market users versus GX? And the second question I have is just around Neon. Can you just maybe share some thoughts on how should we think about the pricing of the product and also the cost side of things as you would probably have to pay for the compute for it?

Yes. So it's Song Lin. I think I'll just quickly cover that, right? So maybe super high level, I would just say that I think there is a bit seasonality around it, just to call out, right, because, of course, naturally, GX users are mostly younger audiences and also gamers, young gamers and Gen Zs or whatever. So they are, of course, affected more always like we saw this all the time that they are affected more by the summer holidays. So there is a bit of seasonality factors involved. And yes, hopefully, it will be more changed during the Q3 and Q4. So I think that will be more visible. And then just to also say that, of course, internally, we don't really operate on a basis of more like -- I would almost say that the growth of the [indiscernible], of course, is more like a summary of indicative trends, right? But internally, of course, we're always organized by ROIs and where we see the biggest potential and where we see the product has been received a lot. And maybe I'll just call out that, yes, so like we see that we have very good growth in Europe, for instance, for Q2, which is very excited, which is actually also good proof that by having more of those AIs, actually it would also be helpful to us just because then -- especially the Western markets are more exposed to be aware that there is actually a choice of browser, right? So not only default, but there will be multiple choices. And that in turn can actually help driven adoptions. So we actually see that where AI is hottest is actually where it's almost become easier for us to acquire users. Yes, as a simple way to put it.

We'll take our next question from Eric Sheridan with Goldman Sachs.

Maybe a 2-parter on Neon. With the announcement in the release and getting closer to a public launch there. I wanted to go a little bit deeper first, big picture on how you think the browser environment is going to change more broadly. This clearly is a first step towards a direction of sort of AI generation in browsers and how you think about the multiyear pathway for the browser landscape generally changing and how you align the platform for those changes? And then the second piece would just be in terms of launching something like this in the public, how should we think about the investments needed either on the marketing side or on the infrastructure side? I know Naved asked about sort of the cost of compute tied to it, but just trying to understand a little bit of sort of fixed versus variable investments behind this over a longer duration period of time.

Sure. So like I guess I also take the chance to also come on the question which I have not answered in the first one, so about Neon and also in general landscape, right? So I guess, first of all, just to call out that it's, of course, the early stage. And I would say, at this point, our focus primarily is actually on like product market fit side of things, right? Because more like -- but maybe I'll just first talk about how we think of product and also the growth of browser or whatever, right? So a few points, high level, I think that with AI, it's already been proven that web interface via traditional apps, I guess, has now been also been recognized as almost the preferred platform where people want to access information. And this is especially obvious with AI, right? Because I guess at least it shows that the web, traditional web instead of locking apps are still the best way for AI to be able to operate and to access information freely. So that is very good news for browser in general. So that is of course very strong alternatives. If we compare with some earlier narratives a few years back where somebody is still talking about, it's only app or whatever. So I think with AI, that's actually a big help that everybody now see very clearly that web and browser is probably the future. And then I guess I'll also comment that as also you probably also see the trend lately, both -- also by those AI players, right? All of them are also talking about how important browser could be. So I think our view is about the same, right, that like when web becomes so important, there will always be,…

We'll go next to Lance Vitanza with TD Cowen.

Congrats on the quarter. I have 2 questions, if I could. The first is on the stablecoin, the MiniPay, the 9 million activated wallets, that's great. How do you monetize the engagement? Is this just about encouraging user growth and retention? Or is there another angle here? Is there any way to connect the dots between MiniPay user growth and, I don't know, sustained ad revenue growth, for example?

Yes. So it's Song Lin. I think I also try to cover this, and then Frode can also supplement with also other information, right? So like again, like we are trying to be conservative in calling out those new initiatives. We have launched for the record, we have been actually incubating MiniPay for few years and very happy that we are now seeing that expanding and also now it's the right moment, right? So like, again, internally, we are very excited, quietly excited, I would say, to see the growth of it, to see the very good for the market in many places. And we also see that the wide adoption of stablecoin across the industry, which, of course, is very necessary for anything to succeed in the fintech world, right? So now I think we're starting to see that many of the stars are starting to align, and that's why we are also getting very excited. And then maybe just super quickly on monetization, right? So I actually feel that, again, MiniPay is one of the few products that -- it's a good combination of both very good product market, but actually, it also comes with monetization. I think the nature is just that it's very close to -- it is a product which are very close to money, I would say, for the nature of fintech. So for now, like it's already actually generating sales for money from us, even though, of course, for now, that's not the short-term purpose. Our purpose, of course -- but like -- yes -- but the stand-alone is actually already approval, I would say, for monetization. So for now, I would say the pure monetization model will be to -- for us to work with ecosystem partners to integrate that, all those…

That's great. And actually, that sort of ties into my next question, which was on Search revenue and the rebound there. And Frode, I think you mentioned that it was expected and maybe I lost track of why you were expecting it to rebound. But I'm just wondering what drove that? What I tend to think of Search revenue as a function of number of searches. So did Search volume rise on a per user basis? Or is this simply a change in revenue per search that's perhaps driven by the shift in users to higher-value markets?

Yes. When we last reported, we already saw the trends were picking up. We were in the single digits year-over-year growth last quarter, and then we saw we are getting back towards the double digits. And I think we expect Search to continue to do well for the remainder of the year, and that's reflected in our guidance. But I don't think I should go into sort of the detailed breakdown of how we model or predict it.

Okay. Well, how about -- at least, can you discuss whether you think it's a new trend line? Or was it more of sort of -- how durable do you see this resurgence potentially being?

I think that the broader search landscape is changing rapidly, right, with the theme of a lot of this call as well with various kinds of new information processing and gathering services. I think that is very, very interesting as a browser, right, being able to send traffic to partners, but also being able to natively integrate those types of solutions in the product that we talked about with Neon. So as a broader concept, I think we are very enthusiastic about this. It might be a bit narrow almost to call it search, right? Because it's almost like information discovery and how the browser becomes increasingly relevant in that space.

We'll go next to Jim Callahan with Piper Sandler.

Can you talk more about the tariff-related headwinds you kind of called out in the quarter? Are these temporary? Or is this something we can see kind of like persisting through the rest of this year?

Yes, I can comment on that. I think it played out a bit as expected. So when we last reported, it was late April, and we were past the initial launch of tariffs. And I think, of course, since then, maybe there's been somewhat more stabilization in the broader picture. But it did translate into a real headwind, and we are very proud to have been able to offset that with global growth essentially. So I think as we look ahead, I think we are starting to see some recovery now, but it definitely represents an upside potential for us to see a return to even higher activity levels as in pre-tariff terrain.

Got it. That's helpful. And then Opera GX launching in South Korea and Japan. I guess, how should we think about sort of like the size of that opportunity would be helpful?

Yes, it's Song Lin. I can briefly comment, right? So I would almost say that it's still early stage, but I guess we have announced that we are [indiscernible] the preferred browser. And of course, as you know, that naturally, East Asia is actually one of the bigger, almost important places for those games. And as a result, we actually see that there are some very interesting attractions that the GX are becoming to be liked by the users in those countries. So I think it's very natural for us to deepen that. And I think the only thing is that, of course, those regions also require more localization because they are all [indiscernible], and we have not really prioritized this in the past, but now we see opportunities. So we are diving in. I think it's a bit too early to estimate the scale in market returns, but it's a very exciting market. And interestingly, just to comment that partly though is also that we do already see quite strong growth on the e-commerce potential in those regions based on our still regular base or limited user coverage on the generic browsers. So essentially, I think the other important factor is that we are very excited about monetization potentials. And I think that's also why we feel that it's the right move to further spread the coverage of those key, I would say, developed countries.

[Operator Instructions] We'll go next to Mark Argento with Lake Street.

Just a few quick ones here. On the e-commerce business, as that business will start to comp, the comps get a little bit more difficult. But how should we think about the seasonality in terms of kind of the revenue there? Obviously, probably a little bit more weighted over time to the higher spend quarters. But just wanted to get your thoughts on how you see that playing out in the different verticals?

Yes, sure, Mark, I can comment a bit. So as a recap, I think what we saw last year was that we went from a 17% year-over-year growth rate in the first half of the year into 20% and then 29% growth in the second half. So the comparables are definitely quite challenging in the second half of the year. Of course, the underlying -- it is the shopping season. So that is a tailwind for the second half of the year. At the same time, we try to not bake in the same kind of home run in our second half expectations at this point in time, but rather take a more cautious view, and that's why we look at the 2-year growth rate by quarter to guide something that's a bit more of an even growth profile all in all.

Okay. That's helpful. And then in terms of the various verticals, obviously is still mostly focused on more kind of product -- or goods versus services at this point. Is there opportunity to expand into travel and some other areas above and beyond just more of the kind of the traditional goods area?

I can try to comment on this. So yes, more like super high level just to comment that -- for now, of course, we see the fastest growing is retail. So that's great. And it's also proven that like the -- let's say, the intent-based advertisement actually works because -- I think I also mentioned earlier that all our advertisers, almost all are performance based is a very solid proof that it actually works. So -- and then I would also say that we see very close follow-up. Traveling is definitely key sectors. We are traditionally already fairly big, like browser is historically always a fairly big distribution partners for travelers like Booking.com, for instance. So yes, 100% that we see that it's a good combination of both browser, but also AI. So that is definitely very interesting. And then I guess we also commented maybe a bit earlier that there are also some other verticals like fintech, for instance, that could also be quite relevant because, again, it's also a good combination of you see a lot of those executives on a browser environment, very natural. And also they are also the ones probably affected most by AI that there could also be maybe a better combination of things. So I would say all those areas are good potentials for us to develop further, and we are looking into those.

Okay, that's helpful. And then just pivoting quickly, it wasn't overly clear to me at least on the Neon product launch, is that going to -- is that built on your guys' tech stack? Are you guys using other LLMs? Maybe just refresh me and better understand kind of what is powering that new browser?

Sure. So yes, it's Song Lin. I'll quickly cover that, right? So yes, I think essentially, we are using similar approaches as most others that we do rely on the big base models from those bigger AI companies. I don't think we have plan to spend billions of dollars to train the large language model because I think that's repetitive. And I guess the beauty of that is that because the market of big language models are so competitive, that it's almost a bit commoditized in some ways that actually allow us to be able to have a good relationship with almost all of them to actually be able to use the best language model at any given time in any given scenario. So I would almost say that's an advantage of that. And also because of all the investment and the competitions, we actually see that the costs have actually been lowered down quite dramatically. As there is still competition, we believe that will still be the case. And I think that's actually a good time for a player like us. And then on top of it, I think our contribution would mostly be on, number one, how to give the relevant context and how to allow AI to operate in a browser like environment. I think that will be the best advantage that we would have. And I think that will be a huge win for us to nail it, and that's what we are focusing on.

Great. And last one for me. You touched on it a little bit earlier, but Perplexity was out with their unsolicited offer to buy Chrome browser. A little surprised you guys didn't get any play on that in terms of just kind of being in the mix. It sounds like for Perplexity went and talked to all of the other browser players out there. Is there a strategic opportunity for you guys to work with other large branded guys above and beyond what you're doing right now? And how do you think about -- and if you could size it for us as well, how big is actually your browser installed base right now? Because I don't think the market is valuing the strategic value of that installed base?

Yes. Okay. So I guess I will comment a bit first, and then I think it's the moment to go through that and Matt can also comment a bit, right? So -- okay, so I guess it's very interesting. I mean we, of course, follow this closely as you know that well. So we are more or less involved in all those discussions, right? So we are very familiar with the player there. Okay -- so first of all, I would just say that, yes, it's actually quite interesting to see, right, because, of course, we saw some of the players claiming that they are in a better position. They are one of the few positions to be able to accommodate Chrome, should there be some jurisdictions? And I guess we, of course, are always a very good partner with Google for more than 20 years. But then I would just say that, of course, I guess like we are probably -- we are one of the biggest independent browser out there. We have been independent for the past 30 years, which we are celebrating this year for 30 years. And we are the innovator of browsers, and we have a deep understanding of technology. And more importantly, we have, of course, 300 million MAUs and still growing. So I think everything is very strong, pointing that we are in a very good position for all those discussions. So it's more like just interesting point out, right? So like if we're actually talking about whoever is the biggest independent browsers, I think our name should actually pop up very high there. I guess the only thing is just because being a European company has some pros and cons, I guess, that we are probably less frequently being discussed in those context. But again, I think it's just our job to be visiting U.S. more, and we should also -- and of course, U.S. has been our biggest market for the past many years, and it's becoming more and more relevant, and we should just work more on it. So I would almost say that's -- that's our feelings for now. And otherwise, I think it's hard for us to comment anything in particular related to this case, [Technical Difficulty] we have good cooperation with all the partners involved there.

It appears we have no further questions at this time. I will now turn the program back over to Song Lin for any additional or closing remarks.

Sure. So like again, thank you to everyone for joining us today. We look forward to sharing the results and outlook with you. And now we come to an extremely exciting second half of the year. We have many launches to come. We will work hard to seize the opportunities that come with it and look forward to keeping you posted. Have a good day, all of you.

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