After the close last night, recent IPO Opera Ltd (OPRA 13.41, +0.85, +6.73%)
reported its Q2 results and provided a strong outlook for the remainder of
FY18. This was the company's first quarterly report since going public on July
27, so there are not yet any available analyst estimates against which to evaluate
the results . But on an absolute basis, OPRA's results were impressive by
metrics of both growth and profitability.
Before diving into the quarterly report and outlook, we wanted to provide some more background on this lesser-known company.
Based in Oslo, Norway, OPRA is a provider of an internet browsing platform for computers and smartphones. The company, whose Opera browser was initially released in 1995, is incorporated in the Cayman Islands. Recent years have seen the company expand its service in noteworthy ways, such as the addition of the Opera News service to its browser in January 2017 followed by a January 2018 release of a standalone news app. An average of 90.2 mln monthly active users accessed Opera news during 1Q18, up from 9.1 mln average monthly active users during the same period in the previous year, showcasing significant uptake.
The company says that its mobile browser, which noted 182.0 mln monthly active users as of the first quarter, is among market share leaders in high growth locales like South Asia, Southeast Asia, and Africa. It has also seen growth in its PC browser users, as its browser for Windows and Mac systems reported a user base of 57.4 mln average active monthly users in the first quarter, up 34.7% from 42.6 mln users one year ago.
Opera mainly generates revenue through agreements with its search partners and partners that deliver services and advertisements to users. Finally, the company believes that it finds its primary market opportunities in underpenetrated regions like Southeast Asia, South Asia, and Africa, where new internet and mobile broadband connections are being established at a rapid rate.
Q2 Results & Outlook
As noted above, given the recency of the company's IPO, analyst estimates for the stock are not yet available, so there's no consensus to compare Opera’s results to. That said, there are some clear highlights from its report. First, revenue jumped by an impressive 50% year/year to $39.8 mln. Search revenue, its largest component of total revenue (50%), climbed by 26% to $19.8 mln. The growth here was primarily driven by an increase in its average revenue per qualified search due to improved monetization by its search partners.
What really drove its growth, though, was a 63% spike in advertising revenue to $13.7 mln. This brings us to one of OPRA's most significant catalysts: Opera News. Opera News, alluded to above, is based on the company’s AI-powered content discovery and recommendation platform and was integrated into its mobile browsers in January 2017. This past January, the company launched the news service as a stand-alone app, and since then, the growth has been robust.
Specifically, for this quarter, average monthly active users for Opera News hit 101.0 mln, soaring 307% year/year and climbing sequentially from the aforementioned 90.2 mln average MAUs recorded for the three months ended March 31, 2018. Looking at the stand-alone app in particular, active users increased to 11.2 mln in June, with an average of 7.9 mln MAUs in the quarter.
The growth in Opera News drove the 63% increase in advertising revenue as it opened up new advertising inventory, resulting in strong revenue growth on standard mobile ad units.
In addition to the healthy revenue growth, what also stands out is the improvement in profitability. Namely, operating profit came in at $10.5 mln compared to a ($2.5) mln loss in 2Q17. While OPRA's top line surged, its operating expenses were also about flat year/year at $29.4 mln. This is particularly encouraging because many high-growth tech IPOs are characterized by high Sales & Marketing expenses that oftentimes rise nearly as quickly as the top-line growth.
In the earnings press release, OPRA also provided an outlook for the remainder of FY18, expecting total revenue of $170-$175 mln, equating to growth of 32-36%.
To conclude, OPRA delivered a solid first quarterly report as a public company, which may put the name on more traders' (and analysts') radars.
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