Opera Ltd. Form 20-F Summary
Business context and reporting period
Opera Limited, a Cayman Islands company headquartered in Oslo, Norway, filed its annual report for the fiscal year ended December 31, 2022. The company reports under IFRS as issued by the IASB. Opera operates browser, news, gaming, advertising, Web3 and e-commerce products, with approximately 324 million average monthly active users in 2022.
The filing is an annual report rather than a standalone quarterly filing. Fourth-quarter operating metrics are provided, including 324.4 million total MAUs and annualized ARPU of US$1.18 for the three months ended December 31, 2022.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | US$331.0 million | US$251.0 million | +31.9% |
| Search revenue | US$140.2 million | US$122.0 million | +14.9% |
| Advertising revenue | US$187.4 million | US$123.9 million | +51.3% |
| Operating profit | US$41.8 million | US$6.2 million loss | Improved |
| Net income attributable to owners | US$15.0 million | US$44.0 million loss | Returned to profit |
| Adjusted EBITDA | US$68.1 million | US$29.0 million | +135% |
| Adjusted net income | US$27.9 million | US$22.1 million loss | Improved |
| Operating cash flow | US$56.7 million | US$26.6 million | +113% |
| Cash and cash equivalents | US$52.4 million | US$102.9 million | Down US$50.5 million |
| Cash, equivalents and marketable securities | US$118.7 million | US$181.0 million | Down US$62.3 million |
Revenue growth was driven by higher monetization per user, increased users in higher-ARPU Western markets and strong growth in Opera Ads, including audience-extension services. Advertising revenue exceeded search revenue for the second consecutive year and represented approximately 56.6% of total revenue, compared with 49.4% in 2021.
Operating profit margin was approximately 12.6%, compared with a negative operating margin in 2021. Net income margin was approximately 4.5%. Adjusted EBITDA margin was approximately 20.6%.
Cash flow, debt and liquidity
- Operating activities generated US$56.7 million; investing activities generated US$44.5 million, mainly from investment disposals and marketable securities; financing activities used US$150.6 million.
- Opera spent approximately US$146.1 million on share repurchases in 2022, including US$128.6 million to repurchase 46.75 million ordinary shares from Qifei International Development and US$17.3 million under the 2022 ADS repurchase program.
- Total contractual commitments were US$68.7 million, including US$8.3 million of lease liabilities and US$46.9 million of trade and other payables.
- Debt was limited. Lease liabilities and other loans totaled US$7.8 million at year-end, including only US$0.1 million of interest-bearing loans.
- Management stated that available liquidity was sufficient for working capital and capital expenditures in the ordinary course over the next 12 months. A US$71.3 million special dividend was paid in February 2023, reducing post-year-end liquidity.
Material changes versus the prior comparable period
- Total MAUs declined approximately 5% year over year in the fourth quarter, reflecting a 16% increase in Western-market users and an 11% decrease in emerging-market users. Annualized ARPU increased 42% to US$1.18.
- Marketing and distribution expense decreased 4.9% to US$115.0 million, while personnel expense was broadly stable at US$74.6 million.
- Cost of inventory sold increased 747% to US$46.7 million, primarily because Opera Ads used third-party advertising inventory. This was a material offset to advertising growth.
- Net finance expense increased to US$19.4 million from US$8.6 million, primarily due to a US$37.9 million fair-value loss on the Nanobank sale receivable, partly offset by a US$15.9 million gain on the listed-equity investment program.
- The 2021 US$115.5 million impairment of the Nanobank equity-accounted investment did not recur in 2022. Opera recognized US$3.2 million of impairment on non-core intangible assets in 2022.
- Opera sold its interests in Nanobank and Star X. The Star X transaction with related party Kunlun had total consideration of US$83.5 million, with US$56.4 million remaining receivable at year-end.
- Opera’s goodwill and intangible assets remained substantial at approximately US$429.4 million and US$100.0 million, respectively. No impairment was recorded against Browser and News goodwill in 2022.
Guidance, outlook, commentary and risks
Management expects marketing and distribution expense to remain consistent with or increase slightly from 2022 in absolute terms, while declining as a percentage of revenue as the business scales. Management also expects personnel expenses to increase over time as the company expands, and expects cost of inventory sold to grow as advertising activity expands.
Opera intends to prioritize user growth and monetization in higher-ARPU Western markets, expand Opera Ads, scale cashback and VPN offerings, and develop gaming, Web3 and AI-powered content products. The filing does not provide formal numerical revenue or earnings guidance.
- Revenue concentration is significant: Google accounted for approximately 44.9% of 2022 revenue, and search-related activity represented 42.3% of total revenue.
- Revenue from customers and monetization partners domiciled in Russia was US$20.3 million, or 6.1% of revenue, in 2022. Opera terminated advertising contracts with Russian customers following December 2022 EU sanctions. Management estimated that approximately 9.9% of 2022 revenue was generated from monetizing users in Russia.
- Macroeconomic conditions, advertising demand, inflation, interest rates, foreign exchange movements, COVID-19 effects and the war in Ukraine may adversely affect results.
- Opera disclosed a material weakness in internal control over financial reporting as of December 31, 2022. The deficiencies involved accounting for certain transactions and complex accounting matters, documentation, and IT dependencies. Management stated that the deficiencies did not result in a known material misstatement, but remediation may not be completed by the end of 2023.
- Opera is controlled by Kunlun and its controlling shareholder, Yahui Zhou, who together held approximately 82.1% of voting power. Opera relies on certain controlled-company and Cayman Islands corporate-governance exemptions.
- The Nanobank receivable was measured at US$76.3 million at year-end using significant unobservable assumptions. In February 2023, it was settled with OPay shares estimated at US$77.4 million, subject to potential return provisions tied to future performance targets.
- Opera had no material off-balance-sheet arrangements. It had a Dell lease guarantee capped at US$10.2 million plus related interest, costs and expenses.
Important facts for investors to verify
- Whether Opera Ads growth remains profitable after the sharp increase in third-party inventory costs.
- The renewal terms and economics of the Google and Yandex search distribution agreements, both stated to extend through December 2024.
- Fourth-quarter and 2023 trends in MAUs, Western-market mix and ARPU.
- Collections and valuation of the remaining Star X and Nanobank-related receivables and the potential impact of the OPay share-return provisions.
- Progress and independent assessment of remediation of the material weakness in internal control over financial reporting.
- Post-dividend cash, marketable securities and liquidity, including the effect of the February 2023 special dividend.
- Future impairment risk related to approximately US$429.4 million of goodwill and US$100.0 million of intangible assets.
- Exposure to Russia-related sanctions, advertising restrictions, partner concentration, privacy regulation, cybersecurity events and foreign-exchange volatility.