Image source: The Motley Fool.
Opera Ltd (OPRA -1.91%)
Q4Â 2019 Earnings Call
Feb 25, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Opera Limited Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Derrick Nueman, Head of Investor Relations. Thank you. And please go ahead, sir.
Derrick Nueman -- Vice President of Investor Relations
Great. Thank you.
Good morning, everyone. With me today I have Frode Jacobsen, our CFO, and our COO, Song Lin.
Before I hand over the call to Frode, I would like to remind everyone that in today's conference call, the Company will be making statements about its future results and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and the current economic environment and are inherently subject to economic, competitive and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guaranties of future performance. You may refer to the Safe Harbor statement in the Company's earnings release for details.
Our commentary today will also include non-IFRS financial measures, including EBITDA and adjusted net income, which are different from our consolidated financial statements that are prepared and presented based on IFRS. We believe the use of these non-IFRS financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. Reconciliations between IFRS and non-IFRS metrics for our reported results can be found in our press release that was issued earlier today, a copy of which can be found on our Investor Relations website.
With that, I will now turn it over to Frode.
Frode Jacobsen -- Chief Financial Officer
Thanks, Derrick, and hello, everyone.
Similar to the last several quarters, we are very pleased with our strong fourth quarter results. Our growth rate continued to accelerate, and we're continuing to execute on our strategy to leverage our strong brand and large user base of more than 350 million monthly active users to grow new opportunities well beyond the browser. These efforts, including the significant investments we have made in our business, led to year-over-year revenue growth of 158% in the fourth quarter. With $129.6 million of revenue in that quarter, we significantly exceeded the top end of our guidance range. We also beat the top end of our adjusted EBITDA guidance and achieved an increased adjusted EBITDA margin of 16%.
Before getting into specific details on our initiatives and financials, I want to take a step back and provide some highlights on the meaningful progress we made in 2019. First, our year-over-year revenue growth accelerated materially. 2019 revenues came in 94% higher than 2018 compared to a prior annual growth rate of 34%.
Second, our highly profitable browser business continued its steady growth trajectory and we demonstrated its potential to address even more segments like the GX browser for gamers which shows record engagement levels.
Third, Opera News has become the leading news service in Africa, and we are continuing to drive increases in user engagement with a deepening of our content strategy, like the Opera News Hub for local content creators.
Fourth highlight is how we scaled our fintech business from near nothing to an annualized run rate of $290 million in Q4, with a 30% contribution margin. Fifth highlight is how we launched several new initiatives, including our ad network, Opera Ads, and the OList classifieds platform. We also laid the groundwork for new opportunities within real estate and other high value verticals, and a European fintech business, all of which we believe have the potential to drive multiyear growth. And finally, we maintained solid profitability even while investing aggressively in future growth opportunities.
Before I hand the call over to Song Lin to cover our operational highlights and growth strategy, I would like to say a few words about Opera's corporate governance. At Opera, we are focused on building a business that delivers strong shareholder returns. The best way to accomplish this is to drive long-term profitable and sustainable growth through successful products that are appreciated by our users. We invest heavily in our products, both current ones and initiatives we are developing for launch. And we feel great about the opportunities ahead of us. As part of this, we also want to make sure that all our investors are represented in our governance structure and that we always adhere to our governance policies.
As many of you are aware, there has been published speculation around our business. As we stated on our IR website, these speculations were false and misleading. We have no desire to feed such discussions or legitimize such reports by entering into detailed public arguments. Instead, we remain focused on what we are building at Opera. We believe the most effective rebuttal is continued execution and growth which is also what we again achieved this past quarter and what we are guiding for 2020.
At this point, I would like to clarify a few specifics. Our lending apps have been reviewed and approved by Google and are live on Google Play. Both our smartphone and PC user bases have grown substantially over the past year. We have made sound investments that have been validated and year-end revalued by external third-parties. We have rational and mutually beneficial relationships with all our partners.
And finally, no one at Opera, including our Chairman, has received any payment or direct benefit from our acquisitions or investments. We are a Norwegian headquartered company, audited by KPMG Norway. There is also significant review of every major transaction from our Board, including our Audit Committee which consists solely of Independent Directors.
With that, let me turn it over to Song to speak about the operational progress we have made.
Lin Song -- Chief Operating Officer
Hi. Thanks, Frode, and hi, everyone.
I'll just comment that we had a very good 2019. Since this is year-end I would just like to say that we could not have reached this point without the help of many people at Opera. I am truly excited to work with our strong team across the globe, in Norway, Sweden, Poland, China, India, Nigeria, Kenya, South Africa, Cote d'Ivoire, Egypt, Ireland, UK, and you know last but not least Estonia to drive further execution.
Now getting to the business. We have shown success across multiple areas and the work we've done has built the foundation for strong and sustainable multiyear growth and margin expansion. Our browser business has continued to grow nicely in very stable market with over 300 million monthly active users, making us one of the biggest global Internet platforms. It's an attractive and growing business that generates significant cash flow.
And I would just like to comment that from a strategic point of view, it's a key component of our ability to launch and scale new business. This has been evident with the success we have seen in news and fintech, the early results from OList and hopefully will again be the cases as we start our European fintech efforts in 2020.
So now I'll just come into a bit more details. Our PC users were up 11% year-over-year in the fourth quarter, driven by product innovation and Opera being selected by many users as an alternative to default browsers. Additionally, our gaming specific GX browser continues to perform above expectations, with very strong engagement and reviews. We have recently also extended the product to macOS and also will be increasing our efforts to drive awareness so we can scale this product.
On the mobile browsers, we are increasing our emphasis on Africa. Our value proposition on data management has made us one of the most popular browsers on that continent and now we have expanded this offering by recently launching data plans in Nigeria. Our proprietary technology around data has allowed us to partner with leading telcos such as MTN and Airtel to provide Opera specific targeted data plans to consumers. Early results have been very promising with an increase in browsing activity and users purchasing more data plans from those carriers. So, following the strong results, we have now teamed up with more operators in the region and we will continue to innovate in browsing and content consumption in the region and build up our strong position there.
I'll also talk about Opera News. We saw 21% year-over-year growth to our user base that exceeds 160 million monthly active users and also 97% growth for the dedicated Opera News app over the same period.
As we spoke about last quarter, at this scaled level, our number one focus is to drive increased engagement while steadily increasing user monetization. So our engagement we are making significant progress with the average daily time spent and average daily article clicks which increased by 24% and 20% respectively year-over-year.
Further, our Opera News Hub launched in September in Nigeria which allows local creators to create exclusive content for our platform using our suite of tools. This has shown tangible engagement results with increases in article clicks by 60%, reading times by 40% and ad times [Phonetic] spent by 20% further. So we are very pleased about the results there and we will expand Opera News Hub to four additional African countries beyond Nigeria this year. And we believe that the combination of Opera News Hub and other efforts will be able to all us to drive further increases in engagement.
And moving to monetization. We have grown revenue on the Opera News app by more than 20% quarter-over-quarter, which is a big increase. So looking forward, we expect the combination of more engagement, improved targeting, new app format and increased ad load will continue to drive revenue growth from our news apps in 2020. Long-term, we will also benefit from the online advertising ecosystem growing and the broadening in Africa as well as our efforts around OList which will help small and medium enterprises grow their businesses.
With that being said, we are also moving ahead aggressively with our classified offerings OList. Instead of focusing only on advertising, for OList, we are focused on facilitating the underlying transactions which actually represents significant multiyear revenue opportunities and will provide meaningful benefits for our users in everyday life. I will use real estate as an example, which in Nigeria is really a rental market. We have created a marketplace where both landlords and renters will benefit from a safe, transparent place to transact. We have initially built our operations for Lagos, where 3 million targeted clients reside, making it one of the biggest potential [Phonetic] cities in Africa. So we are representing both property owners and helping customers finding rentals. We have concluded our first transactions in late 2019 and are now preparing to scale rapidly.
We estimate that in the segment where we initially focus, the annual renting market opportunity for Opera is approximately $1 billion in size, so this can become a substantial business for us. So, having said that, our near-term goal is to be the market leader by the year-end and we will prioritize scale into 2020. On top of it, we will also focus on other verticals that represent large opportunities such as used car resale.
On the other new effort which I am very excited about is our European fintech initiative around payments and open banking. We believe this represents an opportunity to build on our European base of roughly 50 million users to offer attractive new products. Interestingly, millennials comprise the biggest segment of our European base, which is really important as this segment is highly dissatisfied with current financial offerings. So we are optimistic that they will be receptive to the compelling products we have planned.
Our first step on this end was the acquisition of fintech start-up Pocosys last month, which we also made a public press release. So Pocosys specializes in providing more than banking technologies and [Indecipherable] technology. This also provides us with a strong team. We will launch related payments and banking products in one market later this year and then roll out to other target countries in Europe. We will actually look forward to provide updates as we execute these initiatives.
Finally, I also want to talk about briefly about our fintech business in South Asia and Africa. This business has been highly successful for us. It has scaled into an annualized revenue run rate of almost $290 million in revenue by the end of 2019. Just as important, our products are well received by consumers as evidenced by our Google Play app store ratings and a large number of returning users. As our apps gain popularity with millions of active users who log in into the [Indecipherable] wallets, we are also evolving this offering to provide marketplace offers [Indecipherable] and other payment products also in cooperation with local banks and partners. As you have been seeing, we have been moving very fast in this area and have high confidence in our ability to continue to evolve and provide the most popular local fintech and payment products in all the emerging markets.
So now, just to sum up, it is a very exciting time at Opera. In this past year, we almost doubled revenue, launched several new businesses and invested heavily in several more, while still achieving good profitability. We think 2020 will bring more excitement, and I look forward to updating you on the Opera business.
So with that, let me hand it back to Frode.
Frode Jacobsen -- Chief Financial Officer
Thanks, Song.
Let me go into details about the fourth quarter and provide updated guidance before we open up the call for questions. To repeat the overall, Opera delivered record fourth quarter revenue of $129.6 million, up 158% year-over-year. This significantly exceeded our expectations primarily due to strength in microlending. Search revenue represented 17% of total or $22.6 million. This was up 7% year-over-year and represents a quite normalized growth level.
Advertising revenue represented 16% of total or $20.2 million, up 27% year-over-year. The growth was driven by direct ad sales, including Opera ads, and Opera News, where we continue to see strong potential, but was also partially offset by using our inventory to promote our other products.
Fintech revenue represented 55% of total or $71.9 million. This increased 80% from the third quarter and has continued to exceed our internal expectations driven by both strong loan growth and increased value per loan. India and Kenya remain our two most important live markets.
Retail revenue represented 7% of total or $9.3 million. This was slightly higher than typical [Indecipherable] us supporting OPay in their launch of a phone retail business. We expect to see similar levels in Q1 before returning to being quite stable at historical levels. The technology licensing and other revenue category represented 4% of the total or $5.5 million, largely driven by temporary support to our investee, OPay, which will phase out during this current first quarter of 2020.
Total operating expenses were $116.9 million in the fourth quarter, and I will go through the main components. Compensation expenses were $22.6 million, up versus the prior quarter. The increase was driven mainly by the growth in our fintech business, but also from OList and Opera Ads and in Nigeria as well as Opera News across Africa. Marketing and distribution expense was $17.5 million, down slightly compared to the third quarter as we focused browser and news customer acquisition efforts on our most proven ROI areas. Specifically, we focused on Africa and Europe and less on South Asia.
Cost of revenue was $32.7 million; $9.4 million of this related to retail revenue, $18.9 million related to microlending, which includes transaction and communication platform expenses, as well as third-party credit scoring, data and risk control costs, in total amounting to 26% of microlending revenue; finally, $1 million related to browser and news and $3.3 million related to tech licensing and other revenue.
Credit loss expense was $27.6 million, of which $27.4 million related to provisions in microlending. It is worth highlighting that, as expected, we saw a material decrease in nonperforming loans with losses representing 5.5% of amounts lent, down over 200 basis points from the prior quarter. This was supported by a higher percentage of loans to returning users which tend to have materially lower default rates.
The sum of all other operating expenses, including depreciation and amortization, was $16.5 million, mainly driven by increased costs as a result of the growing fintech operations and establishing our new revenue streams in Africa. As a result, we saw an operating profit of $12.7million.
Our net income was $22 million. This included noncash gains from OPay and Starmaker following year-end fair value assessments conducted by a professional third party. Adjusted EBITDA was $20.2 million, representing a 16% margin. Margins increased from last quarter, as we continued to see benefits from our revenue scaling, despite continued aggressive investments in our long-term growth.
On the balance sheet, we ended the quarter with $181.6 million in cash and marketable securities as well as $52.9 million deposited in an escrow account, which we exclude from reported cash. This adds up to a total of $234.5 million, and that figure is comparable to the $216 million we reported after Q3. In other words, we had an effective increase of $18.5 million compared to the third quarter.
Some items worth highlighting there. First, on the restricted cash and escrow. We have placed cash in escrow to guarantee for loan funding within India. As of year-end 2019, $52.9 million of cash was on such accounts, and as of this balance sheet date, we have recognized it as another receivable and not cash. Our Q4 operating cash flow is thereby also affected by the same amount.
Second, we received $10.8 million in October from our underwriter's exercise of their overallotment option related to our September share additions. Third, we benefited from a reduction in working capital, primarily from marketing expenses we had prepaid. And last, I'd like to point out that this quarter, our microlending growth was actually self-funded with net payments from customers exceeding the loan book growth.
Finally, we also announced a $50 million buyback program in January, as we believe that our stock started trading at levels that did not factor in much past or continued success and as such represented a compelling ROI opportunity for our shareholders. We plan to purchase stock in an opportunistic and ROI oriented manner to the extent our results aren't being rewarded to the benefit of our investors.
With that, let me turn to our full year 2020 outlook and Q1 guidance. Beginning with revenue, we are expecting $530 million to $560 million in revenue in 2020. This represents 63% revenue growth over 2019 at the midpoint. A couple of factors worth highlighting. Our fintech business continues to perform well, and we expect continued strong growth in revenue with a substantial uplift over 2019. Sequential growth rates will naturally moderate versus our past trajectory, given our already large scale. Our estimates have also largely discounted the impact of new markets and expanded product offerings as difficult to forecast this potential.
Search revenue is expected to grow at mid single digits in 2020, depending on our search partners' underlying monetization trajectory, with some upside tied to our initiatives to grow this revenue stream faster. Advertising growth is expected above the levels achieved in 2019, benefiting from increased monetization on Opera News and building out Opera Ads. Retail and technology revenue are expected to combined decrease by approximately $20 million versus 2019. As a reminder, neither of these revenue lines contributes meaningfully to our adjusted EBITDA.
And finally, for new initiatives such as OList and European fintech, we are building in about $10 million of revenue to our 2020 expectations, predominantly in the second half of the year. Further, we believe these businesses will exit 2020 with potential to contribute meaningfully to 2021 growth.
With that said, for the first quarter, we expect revenue in the range of $123 million to $133 million, representing a year-over-year growth rates between 147% to 167%. Our strong revenue guidance reflects continued fintech growth as well as continued positive momentum around our advertising efforts, offset by a $4 million sequential decrease in tech and other revenues, and the typical Q1 seasonality in search and advertising with a similar sequential impact.
Now moving to adjusted EBITDA. We expect full year 2020 adjusted EBITDA to be $70 million to $80 million, an increase of 54% to 76% versus 2019. This view incorporates several items: increased cost of revenue, mostly driven by growth and microlending and our content strategy around [Indecipherable]; increased credit losses and compensation costs in existing businesses, largely a consequence of our growth in microlending; slightly higher absolute marketing and distribution costs, but lower as a percentage of revenue versus 2019; general growth in other costs categories following the continued scaling and expansion of our business; and finally, approximately $30 million in spend toward new initiatives such as OList and European fintech detracting from near-term profits but additive as we look beyond 2020. We expect first quarter adjusted EBITDA to be in the range of $11 million to $14 million, which represents slight growth versus last year.
To summarize, we are very pleased with our strong results, our continued execution and our ability to yet again exceed expectations. Our outlook for 2020 has us exceeding well over $500 million in revenue and growing adjusted EBITDA rapidly while investing heavily in future growth.
We've come a long way in the last 18 months since our IPO when our revenue run rate was $160 million or about a third of what it will be in 2020. We plan to continue moving as fast as we have done since then, and look forward to this $500 million milestone that is now well within reach, and more importantly, what comes after.
With that, I will turn it back to the operator for questions.
Questions and Answers:
Operator
[Operator Instructions] And our first question comes from the line of Lee Krowl with B.Riley FBR. Your line is now open.
Lee Krowl -- B.Riley FBR -- Analyst
Great. Thanks for taking my questions, guys, and congrats on a really solid quarter and outlook. Just wanted to start initially on the incremental $30 million in investments. Could you maybe just talk about the cadence of that $30 million as you go through 2020? Is it first half weighted or is it evenly distributed throughout the year?
Frode Jacobsen -- Chief Financial Officer
I would say it's relatively evenly distributed throughout the year, but will ramp slightly quarter to quarter.
Derrick Nueman -- Vice President of Investor Relations
Yes, Lee. This is Derrick. It's really a function of headcount. So a lot of the headcount we brought on board already, but there'll be additional hires.
Lee Krowl -- B.Riley FBR -- Analyst
Got it. And then on the lending business, two questions. Obviously, the loss ratio improved significantly. Is that a reset to a sustainable level or would you anticipate that it kind of moderates going forward? And then, tied to that, could you maybe just talk about the timing of the launch of new markets for that business?
Frode Jacobsen -- Chief Financial Officer
Yeah, sure. So as we said on our Q3 call, we did see that Q4 was showing a material improvement there. And it was expected because our businesses had matured more. We had a bigger base of existing customers and we saw an increase in returning users. As we look ahead, all else equal, launching new markets will tilt the percentage a bit -- or losses a bit up again, although, I think given our scale at this moment, we won't see very big swings.
Lee Krowl -- B.Riley FBR -- Analyst
Got it. And then just lastly, obviously with shares pulling back significantly, definitely not getting credit for a lot of the initiatives you guys have put in place. Would you guys anticipate to use that entire share repurchase program in short order or is this sort of a measured approach throughout the year?
Frode Jacobsen -- Chief Financial Officer
I think at this point, I will just say that we are looking at this as a very strong ROI opportunity and we will act so long as that remains the case.
Lee Krowl -- B.Riley FBR -- Analyst
Got it. Thank you for taking my questions, guys.
Frode Jacobsen -- Chief Financial Officer
Sure.
Operator
[Operator Instructions] And our next question comes from the line of John Godin with Lake Street. Your line is now open.
John Godin -- Lake Street -- Analyst
Hey, guys, thanks for taking my question, and congrats again on a nice quarter. First question is around Opera News. I guess can you give us some more color as to how you kind of balance growth of users with overall monetization there? And where you're really seeing success with kind of ramping up that monetization? Thank you.
Lin Song -- Chief Operating Officer
So, yeah, this Song Lin. I think I'll just try to answer that. I think for Opera News, as we also a bit mentioned earlier, I think for us, there are some key principles. So number one is that definitely going to continue to grow in Africa. I think we have already shown that we are really, really strong there. And then, as I mentioned, we have also tried -- we have also actually launched Opera News Hub which is really big success for us in Nigeria, and we're just going to expand to other markets.
So I think I would just say that we are relatively confident about our position in Africa. But then that also gives us a great opportunity to monetize. I would just say, at least in Africa, I think we are really well positioned, and we can [Indecipherable] monetize both in terms of new ad formats, new loads, but as well as because of the increased user time spent on those things, this will definitely help our monetization. So I think that part we are really good.
On the other hand, I think we will remain probably to be tactical on areas outside of Africa. I think we are just being consistent in saying that, in other regions like South Asia, Southeast Asia, very well. We are still growing the OList and Ads. But I think our tactic there will just be that we will -- we treat this as ROI opportunity. If we can find good ROI we will definitely do it. But then, if we see that, for whatever reason, on a particular market, if somebody else is spending a lot money, throwing money away, that we will not follow.
So exciting [Indecipherable] in summary, I would just say that for Opera News, we'll continue to be super strong in Africa. That's our number one market. We are in a very good position, both user growth wise and monetization wise, while some other market like South Asia or Southeast Asia we'll just be tactical.
Derrick Nueman -- Vice President of Investor Relations
Yeah. This is Derrick. I would add to John's question. In Africa, I think we're positioned very well for monetization given our scale and given our market share in those markets. And so, as we push up the ad loads and add a bunch of new ad formats, I think we feel pretty good about where we're going.
John Godin -- Lake Street -- Analyst
Awesome. All right. And then second, on OList. Can you talk just a little bit about what you guys have learned as you're kind of entering that market? What the technology looks like, and the monetization? And then outside of real estate, down the road, you mentioned scale. I guess where else do you guys think you could be effective in monetizing through OList? Thank you.
Lin Song -- Chief Operating Officer
Yeah. Sure. I think I'll just quickly also comment on that. This is Song Lin here. So I think the big learning experience probably is actually [Indecipherable] almost same as some other parts of Africa that we find out -- basically, we have two ways of doing things, right. One is, you can basically get revenue by actually doing advertisement. But then what we find out is that typically, in countries like Nigeria, other guys are not even very good. Like -- you can sell that even to others, that they are actually not even very good in that anyway.
So we find out that the most effective is probably to do the transaction ourselves. For instance, that's why we find out that it's actually much, much more making a lot of sense for us to actually do wanting to do the real estate transaction. Because, just to give you an example, right, so, if I renting a house in Nigeria, the agency fee can be as high as 10% or even more. So that is actually a highly lucrative, if you know how to do it.
So I think our biggest takeaway is just that, instead of just selling ads inventory on to others, which they don't really know how to do it, the best way is for us to -- went straight in and to went into that real estate market, which, as we also commented, very big potential. We comment that it could easily be a $1 billion market, and it could make even more sense. So, I guess that's the biggest takeaway.
And then, on top of it, we also commented that there are some other similar opportunities like second hand cars which are also very, very lucrative, which we think can make a lot of sense. So, yeah, I mean, hopefully -- I think still, with that being said, we are still at very early stage. We just announced this in Q3 anyway. So our goal is just to make sure that we remain well -- we get opportunity to be the number one player in Nigeria this year and we also have plans to expand to other markets maybe second half of this year.
Derrick Nueman -- Vice President of Investor Relations
And John, this is Derrick. The transaction revenue we expect to get will obviously grow as the year goes on. And I think, as you think about your model multiple years out, the ideas [Indecipherable] these transactions can be a many times bigger multiple than the ad market, because you are participating in a much higher value transactions than if you were just taking [Indecipherable].
John Godin -- Lake Street -- Analyst
Awesome. And last one from me, just on the fintech business. Could you guys just kind of comment on the competitive landscape there and really how you guys are able to leverage your brand with your other offerings and how that's been able to help you guys achieve scale? Thank you.
Frode Jacobsen -- Chief Financial Officer
Sure. This is Frode here. So I would say these are definitely competitive markets, and essentially the products are priced based on the cost of capital and sort of collection probability in the markets. I think the benefit that Opera has is of a three-fold. One, we have, as you mentioned, we have the brand and we also have the distribution power, allowing us to quickly ramp new products in the markets.
Second, we have a very strong AI team that allows us to make quite good predictions on probability of repayment. And third, we have decades of experience in these markets. So we're quite good at getting feet on the ground and creating truly local businesses present in those markets. So I think those are our advantages in that space.
John Godin -- Lake Street -- Analyst
Awesome. Thanks a lot, everybody.
Frode Jacobsen -- Chief Financial Officer
Sure. Thanks, John.
Lin Song -- Chief Operating Officer
Thank you.
Operator
Thank you. And our next question comes from the line of Hillman Chan with Citi. Your line is now open.
Hillman Chan -- Citigroup -- Analyst
Hi Song Lin, Frode and Derrick. Congrats on another strong quarter of results. First question is on the OList business. Could you share more on the go to strategy, I would say? Given that online classified is businesses that relies on a lot of the online traffic, user traffic, big merchant base, and then the related network effect can make it more effective. And how should we think about our go to strategy in terms of building up the user mindshare -- the merchant mindshare as a new player in the field?
And then my second question would be on the European [Indecipherable] development related to the Pocosys investment. Given their model is for a banking as a surface operation model, could you share more again on the monetization strategy and the go to strategy for the first market that you also announced in the press release? What are we trying to achieve with this European fintech acquisition in the medium and longer term? And how should we think about the synergy with the existing businesses if any? Thank you very much.
Lin Song -- Chief Operating Officer
Sure, Hillman. So, this is Song Lin. I think, yeah -- maybe I'll just first commenting on the OList part. So, I would say it's very good question. So I think what we have been learning in OList is that you are absolutely right in saying that for classified business really needs a lot of traffic because you need a large amount of user base to drive those almost, use cases. So I would say, I think we are very unique in that -- so number one, we do have a very big online traffic.
You probably know that in Nigeria I would say we are probably one of the very, very few player which has a massive traffic reach. And even better that, for OList as a service, it isn't limited to apps or anything. So any webpage or even a feature phone, they can actually use our product. So what we have been seeing is that we are able to really use Opera traffic to the extreme [Indecipherable] feature phone, smartphone, they can both access our traffic. This actually has make very significant impact in the last quarter of how we're actually building up our traffic there. So online, that maybe I've also been commenting that. I think what's being a bit unique about us is that many other companies are trying to do the same. They can do it online, but they don't know how to do it offline.
So I think for us, what's been very unique is that we have also being shown that we can do very good in Nigeria, even in offline, that we're able to build like a strong offline execution, both [Indecipherable] in many areas, both for Opera News and also for this case, that actually allow us to be able to actually facilitating the agency transaction part which allow us to actually be part of that transaction fee. So I think for those we are very of optimistic about it. And so just a summary that, for our go to marketing strategy, we are able to use both online, but also give the offline opportunities.
And then maybe I'll just very quickly commenting also on the European fintech part. I think it's still a bit too early, so I don't know how much detail we can share at this point. We also want to be prudent. But I would just say that we find Europe is a very interesting market just because like [Indecipherable] the market is very different than some other place. Typically, we find all that in Europe, you typically [Indecipherable] have this user base, which we also have. This [Indecipherable] They need a lot -- like they are very unhappy with the current like fintech landscape with traditional banking. So that's why I think our major focus will be around payments and also to some extent also around open banking, which is a new European initiative and around how to help them get access to more different payment options.
So I would almost encourage you maybe -- I think it would be too early for us, but I think it's still maybe for you to look at all those other good European fintech initiatives which might give you good guidance about what we are up to, like, again, I think, yeah, we can hopefully disclose a bit more around latter part of the year of the exact plans.
Hillman Chan -- Citigroup -- Analyst
Thank you, Song Lin. And just to follow up on the OList part, could you also share a bit more? Given than you talk about the traffic, share about the proportion of user traffic that we generate from the organic sources from our own online properties as well as those paid user traffic acquisitions?
And then on the other hand, I think you touched on a good point about the offline transaction. That's something we could be doing much better than our competitors who are leveraging more on the ad monetization. But just to learn a bit more how labor or capital intensive did the offline transaction business become? And related to that, how much of that is factored in our EBITDA guidance for 2020 just for the OList offline transaction development? Thank you.
Lin Song -- Chief Operating Officer
Yeah. So, I understand. I think Frode might also add a bit more comment. But I would just say that, it's possible regarding your question of organic versus paid traffic, I would just say that, for now, almost by far majority, I would say, probably more than 90% are organic in a way that they are coming from Opera traffic just because we have such a big user base in Nigeria, that we don't really have to spend a lot of effort to trying to buy traffic. So, yeah, I would say, more than 90% is actually organic in that way. That's number one.
So, number two, I think, yes, it's a very good question that -- to be honest, I think we have been able to demonstrate even in some other part of our business that we are able to leverage huge offline team in very cost efficient way. So maybe I'll just put it like this. So we have now in Nigeria already hundreds of people working for us offline, if not more. And then -- but the cost of them is probably only about, let's say, a few people as what you would see in Europe.
So I think that's actually a major differentiating part of us toward maybe some other companies that who are able to use a big, big offline team -- very timely fashion, but then also very cost efficient. So I would say that part actually would not to be a major part of our EBITDA cost, but it will actually help boost our business as a major differentiator.
Derrick Nueman -- Vice President of Investor Relations
Yeah. And, Hillman, we tried to give our guidance with fully weight expenses and be a little more conservative on revenue contribution. And so the idea is that, hopefully, we can do what we've done in past years and overachieve.
Operator
Thank you. And our next question comes from the line of [Indecipherable] Zhao [Phonetic] with CICC. Your line is now open.
Zhao -- CICC -- Analyst
Hi, congratulations on the strong results and thank you for taking my questions. So I'm actually especially impressed by how we managed to lower the default rate and create a lot of fintech revenues. But how should we expect the [Indecipherable] to be when the business is trying to mature? Do we have an internal model for that?
Frode Jacobsen -- Chief Financial Officer
I would say, on the countries where we are live today, I think this is relatively decent level in terms of mapping out expectations, but slight variations. Launching new businesses, all else equal, will drive losses up slightly, but given the scale of our existing businesses today, we don't expect major swings. I would expect it to go up slightly in the first half of 2020, but not as high as the levels that we have had in the past.
Zhao -- CICC -- Analyst
Okay. But in the mature areas -- like assuming that we didn't start to expand into new areas. In the mature areas, how low can it be, I mean, the credit loss at the present is to fintech revenue?
Frode Jacobsen -- Chief Financial Officer
That's a little bit hard to say. But I would say, overall, whether in the mature countries, they will continue to go down from where we were, I don't want to promise that. I think it's better that you more expect it to remain stable. Also keep in mind, we are broadening our fintech offering with additional services, etc., that are not just lending, which by the costs would have one-time debt repayment risk [Phonetic].
Zhao -- CICC -- Analyst
Okay. Thanks. And next question is on cash flow. Noticing we have a negative cash flow for operating in 2020 and understanding that most of the reason is because of fintech business, how do we expect the cash flow in 2020? Any chance to turn positive?
Frode Jacobsen -- Chief Financial Officer
We don't really give cash flow guidance. But I think one important comment I made was that what we saw in Q4 was that, at its core, the growth in microlending was self-funded. So if you just look at the growth in the loan book and compare it to revenue less loss provisions, it actually funded itself the growth of the loan book. Then there is naturally opex, etc., that needs to be covered, but we are definitely moving toward a level where the cash flow is turning positive, even with the high growth rates that we have seen.
Zhao -- CICC -- Analyst
Sure. Another question is on users. I mean, our active users are increasing really quick, but for the fourth [Phonetic] quarter, Q-on-Q, we see the numbers are kind of light. Just trying to have more color on that. What are the reasons that we are losing users and what are the reasons they are still growing really strong?
Lin Song -- Chief Operating Officer
Yeah. So like -- this is Song Lin. So maybe I'll just comment that. As we also commented, I think in Africa, we are definitely growing very well. Also in Europe, we are also growing very well. That's very important for us. As we said that in some other markets, I think in particular South Asia, Southeast Asia, we are just very tactical. We will get users when we see good opportunity, but if we see that for whatever reason in a certain market the ROI becomes not good enough, we will not invest just to grow that.
And maybe just to further comment is that, Europe [Indecipherable] are talking about of course mostly the browser and news results. We do also have a huge amount of users in Southeast Asia for say, fintech, by the way. Yeah -- to say that those markets are still very important for us, but we choose to be tactical that we are waiting, making most sense, we'll do that. But then, we will like -- yeah, if it doesn't make sense ROI-wise, we won't do it there.
Derrick Nueman -- Vice President of Investor Relations
Yeah. I think in South Asia, we're focusing on gaining users we know we can monetize and putting less focus on users where the monetization isn't there, and I think that's really the point Song was making.
Lin Song -- Chief Operating Officer
Yeah. I think the same strategy, to be honest, we're going to execute also in 2020. That -- I think we need to be very tactical in key markets like Europe, very good growth. Africa, we are very happy about it. In other regions, I think we will just be tactical.
Operator
Thank you. And our last question comes from the line of Lance Vitanza with Cowen & Company. Your line is now open.
Lance Vitanza -- Cowen & Company -- Analyst
Thanks for taking the question. Regarding the short seller, I appreciate the rebuttal you included in the press release. I've never heard of this particular short seller, but I've seen these drive by hit pieces before and they are typically successful in driving down the share price just long enough for the author of the report to cover their position at the expense of the readers of the report. So my question is, has this short seller made any attempt to engage with you? And if so, have these efforts been fruitful?
Derrick Nueman -- Vice President of Investor Relations
Yeah. I mean -- this is Derrick. I would say, we did not speak with the short seller prior to them publishing their report. Obviously, as Frode said, our focus is just keep printing good results, keep growing the business. Frode, anything to add?
Frode Jacobsen -- Chief Financial Officer
There was the journalist that contacted us one or two days prior to that report with similar questions. We answered all of those questions, but none of that was reflected I think in the short report. But we haven't, as Derrick said, we haven't had any direct contact.
Lance Vitanza -- Cowen & Company -- Analyst
Interesting. Okay. Thanks, guys. Not surprising.
Operator
Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back to management for closing remarks.
Frode Jacobsen -- Chief Financial Officer
All right. Thank you. So, yeah, from our end, we would like to say thank you to everyone who has joined our earnings call today. We feel great about these results. We feel great about the year we're in and we're looking forward to keeping you posted. Thanks, all. Have a good day.
Lin Song -- Chief Operating Officer
Yeah, same here. Cheers.
Operator
[Operator Closing Remarks]
Duration: 53 minutes
Call participants:
Derrick Nueman -- Vice President of Investor Relations
Frode Jacobsen -- Chief Financial Officer
Lin Song -- Chief Operating Officer
Lee Krowl -- B.Riley FBR -- Analyst
John Godin -- Lake Street -- Analyst
Hillman Chan -- Citigroup -- Analyst
Zhao -- CICC -- Analyst
Lance Vitanza -- Cowen & Company -- Analyst
