Both revenue and adjusted EBITDA exceed expectations

Third quarter revenue grew 57% year-over-year driven by very strong browser and news performance

Advertising revenue exceeded search revenue for the first time

Company raises revenue and adjusted EBITDA expectations for the remainder of the year, guiding year-over-year revenue growth of 51% at the midpoint

OSLO, Norway, Oct. 28, 2021 /PRNewswire/ -- Opera Limited (NASDAQ: OPRA), one of the world's largest internet consumer brands with hundreds of millions of users worldwide, today announced its unaudited consolidated financial results for the quarter ended September 30, 2021.

Third quarter 2021 financial highlights

"Over time, advertising has been our fastest growing revenue category, fueled by new products and features driving increasing user engagement, a focus on growing our user base in high-value markets, and finally, an increasingly rich toolset for advertisers to target and connect with our audiences," said Co-CEO Song Lin.

"As the year nears its end, we are very pleased with the results of our ambitious investments in accelerated growth; taking Opera to a new level in terms of both financials and product offerings. In sum, we find ourselves in a strong position as we enter into the fourth quarter and look to 2022."

Third Quarter and Recent Business Highlights

• Core search and advertising revenue grew 63% year-over-year in the third quarter driven by strong browser and news performance
• Opera's average monthly active user base was 352 million MAUs in the quarter; with a continued directional shift towards higher ARPU users. In the Americas we saw an increase of 30% in user growth led by North America up 46%, and in the EU users were up 9% largely offsetting a continued and expected decline in Asia
• In the third quarter, each user on average generated a record 75 cents of revenue on an annualized basis, up 19% sequentially, and up 80% compared to the third quarter of 2020
• The Opera GX browser user base now has 13 million users across PC and mobile, an increase from 11 million last quarter
• Advertising revenue surpassed search revenue for the first time in Opera's history in the third quarter. News and content is now approaching half of our advertising revenue
• Continued scaling our other strategic growth initiatives; our recently launched cashback offering under the Dify brand in Spain already has over 100 thousand users, leading to a 105% increase in GMV compared to the second quarter, and we continued to build out the Opera gaming platform/community including announcing the winner of our first Game Jam

Business Outlook

"Our strategy of increasing the value of our user base by introducing new products and opening new markets is producing record results for Opera," said CFO Frode Jacobsen. "Our core business continues to perform and grow ahead of expectations, increasing our confidence in our outlook for the remainder of the year. We believe our browsers are very well positioned to continue to grow both our high margin search and advertising revenues, with a continued expectation that advertising will grow faster."

For the fourth quarter of 2021, Opera expects revenue of $70 million to $72 million, representing 41% year-over-year growth at the midpoint. This is being driven by further acceleration in our core businesses and the continued growth of Opera News. Adjusted EBITDA is expected between $11 million and $14 million, benefitting from the combination of the additional scale we've built during the year, and the continuation towards a normalization of marketing and distribution spend.

For the full year of 2021, Opera then expects revenue of $248 million to $250 million, representing a 51% year-over-year increase versus 2020 at the midpoint, and adjusted EBITDA between $23 million and $26 million.

Other updates

Opera holds valuable investments in OPay (6.44%), Starmaker (19.35%), and Nanobank (42.35%).

Nanobank has continued its geographic expansion and now provides microlending services across several emerging markets. The company has been particularly successful in scaling its business in Mexico. On the other hand, a combination of pandemic-related pressures and regulatory uncertainties have created unfavorable operating conditions in India. In the third quarter of 2021, the company effectively halted Indian operations since its payments to foreign suppliers and intercompany charges are subject to regulatory inspection by the Ministry of Finance of India. Management at Opera continues to monitor the situation. The third-quarter Nanobank revenue is thereby driven by the other active geographies.

Third quarter 2021 consolidated financial results

All comparisons in this section are relative to the third quarter of 2020 unless otherwise stated.

Revenue increased 57% to $66.6 million in the quarter.

• Search revenue increased by 45% to $30.7 million driven by both PC and mobile browser monetization growth.
• Advertising revenue increased by 83% to $34.9 million, predominantly fueled by monetization growth within Opera News and our mobile browsers.
• Technology licensing and other revenue was $1.0 million.

Operating expenses increased by 73% to $67.3 million.

• Combined technology and platform fees, content cost and cost of inventory sold was $3.3 million, a 45% increase following the scaling of associated revenues.
• Personnel expenses, including share-based remuneration, were $21.2 million. This expense consists of cash-based compensation expense of $17.3 million, a 24% increase as we are investing in new products and services, and $3.9 million of share-based remuneration expense.
• Marketing and distribution expenses were $32.3 million, an increase of $21.3 million or 193% versus the third quarter of 2020 as we are investing in accelerating the growth of our business, with Opera News in developed markets representing the biggest driver of such increase, and a $3.0 million or 8% sequential decline versus the second quarter of 2021, showing that our strong growth trajectory was achieved with less investment in marketing than initially expected.
• Depreciation and amortization expenses were $4.9 million, flat versus last year.
• Other operating expenses were $5.5 million, a 7% increase.

Operating loss was $0.6 million compared to an operating gain of $3.0 million in the third quarter of 2020.

Other items in the quarter include a $28.0 million gain from recognizing our ordinary shares in OPay at fair value, recorded as other income from long-term investments.

Income tax expense was $0.4 million in the quarter.

Net income was $23.5 million. This compared to net income of $154.4 million in the third quarter of 2020, which was elevated primarily due to the gain generated from the creation of Nanobank.

Net income per ADS was $0.20 in the quarter. Each ADS represents two shares in Opera Limited. In the quarter, the average number of shares outstanding was 230.3 million, corresponding to 115.1 million ADSs.

Adjusted EBITDA was $8.2 million, better than our previous guidance for breakeven, representing a 12% adjusted EBITDA margin, compared to adjusted EBITDA of $10.7 million in the third quarter of 2020. Adjusted EBITDA excludes share-based remuneration and non-recurring expenses, as well as other income and discontinued operations.

Adjusted net income was $29.8 million in the quarter, compared to adjusted net income of $10.5 million in the third quarter of 2020. Adjusted net income excludes share-based remuneration, non-recurring expenses, discontinued operations and amortization of intangible assets related to acquisitions.

Adjusted net income per ADS was $0.26 in the quarter.

We have posted unaudited supplemental information at https://investor.opera.com, including: 1) Opera's financial historical results by quarter since 2019; and 2) Nanobank financial results by quarter since 2019 (pro forma prior to August 19, 2020).

Conference call

Opera's management will host a conference call to discuss the third quarter 2021 financial results on Thursday, October 28th at 8:00 am Eastern Time (EST) (2:00 PM Central European Time, 8:00 PM Beijing/Hong Kong time). Listeners may access the call by dialing the following numbers:

United States: +1 877-888-4294China: +10-800-714-1507 or +10-800-140-1382Hong Kong: +80-090-1494Norway: +47 80-01-3780United Kingdom: +44 (0) 808-101-1183International: +1 785-424-1881Confirmation Code: OPRAQ321

A live webcast of the conference call will be posted at https://investor.opera.com.

We will be tweeting highlights from our prepared remarks. Please follow along @InvestorOpera.

About non-IFRS financial measures

To supplement our consolidated financial statements, which are prepared and presented based on IFRS, we use adjusted EBITDA and adjusted net income, both non-IFRS financial measures, to understand and evaluate our core operating performance. These non-IFRS financial measures, which may differ from similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS.

We define adjusted EBITDA as net income (loss) excluding income tax expense (benefit), net finance expense (income), share of net loss (income) of associates and joint ventures, other loss (income) from long-term investments, depreciation and amortization, share-based remuneration, non-recurring expenses, and excluding other income and profit (loss) from discontinued operations.

We define adjusted net income as net income (loss) excluding share-based remuneration, amortization cost related to acquired intangible assets, amortization of Nanobank intangible assets, non-recurring expenses, and excluding profit (loss) from discontinued operations, adjusted for the associated tax benefit related to such items.

We believe that adjusted EBITDA and adjusted net income provide useful information to investors and others in understanding and evaluating our operating results. These non-IFRS financial measures adjust for the impact of items that we do not consider indicative of the operational performance of our business. While we believe that these non-IFRS financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared and presented in accordance with IFRS. Please refer to our financial statements at the end of this announcement for a table reconciling our non-IFRS financial measures to net income (loss), the most directly comparable IFRS financial measure.

Safe harbor statement

This press release contains statements of a forward-looking nature. These statements, including statements relating to the Company and its investees' future financial and operating results, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "may," "expect," "believe," "anticipate," "intend," "aim," "estimate," "intend," "seek, " "plan," "potential," "continue," "ongoing," "target," "guidance," "is/are likely to," "future" and similar statements. Among other things, management's quotations and the Business outlook section contain forward-looking statements. The Company may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company, its investees, and the industry in which they operate. Potential risks and uncertainties include, but are not limited to, those relating to: the duration and development of the COVID-19 pandemic as well as changes in consumer behaviors as a result of such pandemic; the Company and its goals and strategies; expected development and launch, and market acceptance, of products and services; Company and its investees' expectations regarding demand for and market acceptance of their brands, platforms and services; Company's expectations regarding growth in its user base, user retention and level of engagement; Company's ability to attract, retain and monetize users; Company's ability to continue to develop new technologies, products and services and/or upgrade its existing technologies, products and services; quarterly variations in Company's operating results caused by factors beyond its control; and global macroeconomic conditions and their potential impact in the markets in which Company or its investees have businesses. All information provided in this press release is as of the date hereof and is based on assumptions that the Company believes to be reasonable as of this date, and it undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by Opera is included in the Company's filings with the SEC, including its annual reports on Form 20-F.

About Opera

Opera is a global web innovator. Opera's browsers, news products and fintech solutions are the trusted choice of hundreds of millions of users worldwide. Opera is headquartered in Oslo, Norway and listed on the NASDAQ stock exchange (OPRA). Download the Opera browser from www.opera.com.

Learn more about Opera at www.investor.opera.com or on Twitter @InvestorOpera.