Opera Ltd. Form 20-F Summary
Business context and reporting period
Opera Limited is a Cayman Islands holding company listed on Nasdaq under OPRA; each ADS represents two ordinary shares. The filing is the audited annual report for the fiscal year ended December 31, 2021, prepared under IFRS. Opera operates browser, news and content-recommendation, gaming, advertising, e-commerce and Web3 products. The filing includes selected fourth-quarter metrics but does not present a separate complete Q4 income statement.
- 2021 average monthly active users exceeded 358 million, including approximately 310 million browser users and 203 million Opera News users.
- Fourth-quarter total MAUs were 343.1 million, down approximately 10% year over year, while annualized search and advertising ARPU increased 63% to $0.83.
- Opera shifted marketing toward higher-monetization Western markets and reduced acquisition spending in lower-ARPU South Asia.
- Google contributed approximately 51.3% of 2021 revenue; search activity represented 48.6% of total revenue.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $251.0 million | $165.1 million | +52% |
| Search revenue | $122.0 million | $84.2 million | +45% |
| Advertising revenue | $123.9 million | $71.3 million | +74% |
| Operating loss | $6.2 million | $2.4 million | Higher loss |
| Net loss attributable to owners | $44.0 million | Net income of $179.2 million | Material deterioration |
| Adjusted EBITDA | $29.0 million | $25.0 million | +16% |
| Adjusted net loss | $22.1 million | Adjusted net income of $62.9 million | Material deterioration |
| Operating cash flow | $26.6 million | $93.3 million | Down $66.8 million |
| Cash and cash equivalents | $102.9 million | $134.2 million | Down $31.3 million |
| Cash, cash equivalents and marketable securities | $181.0 million | $134.2 million | Up $46.8 million |
Revenue growth was driven by higher monetization per user, increased Western-market users and stronger search and advertising demand. The Browser and News segment generated $248.0 million of revenue, while Other revenue declined 69% to $3.0 million as Opera reduced engineering and professional services provided to investees.
Operating expenses increased to $257.7 million, or 102.7% of revenue, from $179.0 million in 2020. Marketing and distribution expense rose 153% to $120.9 million, equal to 48.3% of revenue, reflecting accelerated user acquisition in Western markets. Personnel expense increased 20% to $74.5 million, including $10.5 million of share-based remuneration. The filing does not provide a conventional gross margin; operating margin was approximately negative 2.5% in 2021 versus negative 1.5% in 2020.
Net loss included a $118.2 million impairment of the Nanobank investment, a $26.7 million share of losses from equity-accounted investees and $5.6 million of impairment of goodwill and other intangible assets. These items were partly offset by a $116.6 million fair-value gain on investments, primarily involving OPay and Star X.
Liquidity, debt and cash flow
- Operating cash flow was $26.6 million, compared with $93.3 million in 2020.
- Investing cash flow was negative $49.7 million, including $84.8 million of net purchases of listed equity securities and $9.0 million for the YoYo Games acquisition, partly offset by $50.0 million of proceeds from selling OPay shares.
- Financing cash flow was negative $6.7 million, principally reflecting $5.1 million of lease-liability repayments, $0.5 million of loan repayments and $0.7 million of share repurchases.
- Total contractual commitments were $71.3 million, including $38.8 million of trade and other payables, $7.95 million of interest-bearing loans including interest, $5.4 million of lease liabilities and $19.1 million of other liabilities.
- Total lease liabilities and other loans were $13.5 million at year-end, including $7.5 million drawn under a broker credit facility used for listed-equity investments. Management stated that available liquidity was sufficient for ordinary working-capital and capital-expenditure needs for the next 12 months.
- Opera had no material off-balance-sheet arrangements. It provided a guarantee supporting lease liabilities with a principal limit of $11.4 million.
Material changes versus the prior comparable period
- Revenue rebounded strongly after declining in 2020, led by advertising growth of approximately 74% and search growth of 45%.
- User growth and profitability were deliberately traded off: Q4 total MAUs declined approximately 10% year over year, but ARPU rose 63% as the mix shifted toward higher-value markets.
- Marketing expense increased $73.1 million, or 153%, substantially exceeding revenue growth and reducing operating leverage.
- Net income of $179.2 million in 2020 changed to a $44.0 million net loss in 2021. The 2020 result included $141.7 million of profit from discontinued operations, while 2021 included only a $0.8 million loss from discontinued operations.
- Nanobank, OPay and Star X were classified as held for sale at year-end. Nanobank was written down to $120.3 million, producing a $118.2 million impairment.
- Opera acquired YoYo Games for $9.5 million in cash and launched the Opera Gaming division and GXC gaming portal.
- Opera became a consolidated subsidiary of Kunlun after Kunlun’s ownership exceeded 50%. Kunlun beneficially owned 55.6% of Opera’s ordinary shares at the filing date, while CEO Yahui Zhou could effectively control approximately 64.1% of voting power.
- Management reported a material weakness in internal control over financial reporting, related to insufficiently performed controls over certain accounting transactions and complex accounting documentation. Disclosure controls were consequently deemed ineffective.
Guidance, outlook, risks and unusual items
Management did not provide formal numerical revenue or earnings guidance in the filing. It expects marketing and distribution expense to remain consistent with or increase slightly from 2021 in absolute terms, but to decline as a percentage of revenue as Western-market growth initiatives mature. Management expects personnel and other operating expenses to increase in absolute terms as the business expands.
- War in Ukraine: Russia-related customers and monetization partners generated 6.44% of 2021 revenue, primarily through Yandex-related search revenue. Management stated that the financial effect of the war could not yet be reliably estimated and cited risks from sanctions, reduced advertiser demand, service restrictions, compliance costs and currency volatility.
- Partner concentration: Google represented approximately 51.3% of revenue, making changes to search distribution terms or partner demand material risks.
- Investment volatility: The investment program permits up to $70 million of capital in listed equities and derivatives. The portfolio generated a $4.9 million net loss in 2021, compared with gains in prior periods.
- Impairment and valuation risk: Goodwill and other intangible assets totaled $534.0 million at year-end, and unlisted investments were valued using significant unobservable assumptions. Future impairment or fair-value losses could materially affect earnings.
- Internal controls: Management’s remediation plan includes additional finance resources and training, stronger policies, automated controls and centralized documentation. The filing states remediation might not be completed by the end of 2022.
- Subsequent transactions: Opera sold Nanobank for $127.1 million payable over eight quarterly installments and sold Star X to Kunlun for $83.5 million, partly deferred through 2024. The filing states these transactions did not create incremental 2022 gains or losses because the year-end fair values were based on the transaction prices.
- Capital allocation: A new $50 million ADS repurchase program was authorized in January 2022; 569,352 ADSs had been repurchased for $3.0 million by March 31, 2022. Opera does not expect to pay dividends in the foreseeable future.
Most important facts for investors to verify
- Whether advertising and search growth can continue despite declining total MAUs and dependence on Google and other major partners.
- The sustainability of the higher ARPU achieved through Western-market expansion and whether marketing expense normalizes as a percentage of revenue.
- The collectability and timing of the Nanobank and Star X sale proceeds, including the deferred installments and related-party nature of the Star X transaction.
- The assumptions supporting OPay, Star X and other private-investment valuations and the potential for future impairment or fair-value losses.
- Progress and independent validation of remediation of the disclosed material weakness in internal control over financial reporting.
- Exposure to Russia, sanctions, currency movements, privacy and content regulation, cybersecurity incidents and intense browser and digital-content competition.
- The effect of Kunlun and CEO Yahui Zhou’s voting control, related-party transactions and reliance on Nasdaq controlled-company and foreign-private-issuer exemptions.