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Opera Ltd (NASDAQ:OPRA)
Q1 2020 Earnings Call
May 20, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good day, everyone, and welcome to the Opera's First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference to Mr. Derrick Nueman, Opera's Head of Investor Relations, to open the call. Thank you. Please go ahead, sir.

Derrick Nueman -- Vice President, Investor Relations

Thanks for joining us. With me today, I have our CFO, Frode Jacobsen, and our COO, Song Lin.

Before I hand over the call to Frode, I would like to remind everyone that in the conference call today, 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 guarantees 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 adjusted EBITDA and adjusted net income, which are different from our consolidated financial statements that are prepared and presented based on IFRS. We believe that 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 is on our Investor Relations website.

Finally, we will be launching our business blog soon. Its focus will be to provide more color and updates related to our efforts and initiatives, current topics and to provide more access to our broader leadership team. Hopefully this is something you'll check out once it goes live, and we plan to publish content on a frequent basis.

With that, let me turn over the call to Frode. Frode?

Frode Jacobsen -- Chief Financial Officer

Thanks, Derrick, and hello, everyone. In times like these, it's a privilege to be part of the company whose products and services are in more demand than ever. We have never before seen more users of Opera News or of our PC and newer smartphone browsers. Our job is to manage for the near-term implications that the COVID-19 pandemic has in our business. Stay prudent, but at the same time take advantage of our strong product portfolio, our financial strength and our brand assets and aim to exit this period on an even stronger trajectory than what we entered it with.

In 2019, we grew our revenues by over 94%. And for 2020, we originally guided revenue growth of 63% at the midpoint, including $123 million to $133 million for the first quarter. As we shared with the market in April, we ended Q1 even ahead of this guidance as the COVID-19 impact came only late in the quarter. Song then will talk about our operations and how we continue to proceed full speed toward our ambitions. In parallel, we are balancing risk and reward and appreciate the uncertainties the pandemic brings with it.

In anticipation of near-term challenges in key countries like India and Kenya, we significantly reduced our micro loan volumes from mid-March. Further, as also shared with the market in April, we took an extraordinary additional loan loss provision at the end of the first quarter to capture a conservative view on repayment probabilities as our borrowers are affected by the various measures taken to help the pandemic.

For our browser and news business, as every other ad-based business model, there will be near-term monetization impacts more visible in Q2 than Q1. However, we believe that COVID-19 has accelerated the underlying transition from offline to online in our key markets. And we see early indications that the monetization trend is already improving versus a low point in April, which is encouraging.

Beyond revenue, cost discipline has always been very high at Opera. A certain end market businesses faced delays or self-imposed limitations, as in case of microlending, we have adjusted our cost structure accordingly and moved to more lightweight local operational structures. Our strength to scale up rapidly also makes it easier for us to contract when justified, and we are confident in our ability to rescale when conditions normalize.

So, to sum it up, right now, we are in unprecedented times. We are facing new challenges, but also significant new opportunities. We are fortunate to represent a company that is financially solid and well capitalized that has products in high demand and that consists of a talented and highly dedicated global workforce that is maintaining full momentum to execute against our growth strategy.

And finally, we are seeing early signs of a recovery in terms of increasing monetization beginning the initial steps toward ramping backup our fintech efforts and our key markets taking meaningful steps toward normalcy.

With that, let me hand the call over to Song Lin for some operational highlights. Then I'll review Q1 and speak in more detail around recent trends.

Lin Song -- Chief Operating Officer

Thanks, Frode, and hi, everyone. Just to echo Frode's comments, I'm very pleased with how our employees and the company overall have navigated those unprecedented times. Our R&D efforts have continued more or less unaffected and our products have never been more desirable. There is no better way to drive toward our long-term potential.

Our commercial teams are working with additional customers that want to promote their services on our inventory and continue to take advantage of the accelerating offline to online transition, while our products link users with digital information, facilitate e-commerce and provide app-based cashless fintech services. So, while COVID-19 impacted us toward the end of the first quarter and also into the second in both good and bad ways, our optimism around our long-term prospects is intact, and we believe that our focus on the facilitation of online content, commerce and transactions will serve us well.

So, with that, just let me now get into details. Our browser business continues to perform well and drive sustained growth. A large amount is due to our efforts to differentiate our products, which has become even more beneficial during these COVID-19 times.

Beginning with PC. We have exceeded 73 million users in March, up 11% year-over-year to our highest level ever. Just to provide some context. We had about 44 million PC users in March 2017, and we are very proud that our continued product innovation has led to Opera be selected by many as an alternative to their default PC browser. User engagement and use of the differentiated features like building chat has really spiked. Additionally, our gaming specific GX browser continues to perform well above expectations, growing users by more than 80% sequentially in the quarter to exceed 3 million in March. We believe that our success with Opera GX, and already a record strong monetization from the gaming segment highlights our ability to drive browser growth by focusing on a specific vertical or user needs.

On the mobile side, there is also a lot to be excited about. Our flagship mobile browser Opera for Android accelerated its trajectory to all-time high user levels in March with strong growth in Europe as a superior mobile browser with differentiating features like better support for Web 3.0, enhanced reading mode, better offline page access and several more.

Then, we would also focus a bit on Africa, where our Opera Mini browser has significant scale, brand relevance and remains one of the biggest Internet entry points for users in the region, along with Google and Facebook. So we spoke last quarter about our data management value proposition and efforts to expand this by long-term data plans starting with MTN and Airtel in Nigeria. So, recently we have expanded those efforts with operators also in Kenya, Zambia and Ghana, and now also have a strong pipeline of additional operators. This has now become even more relevant as users in those regions more than ever made efficient and affordable access to online content. So, already about 14 million users have taken advantage of those joint data plans with engagement levels up to 50%, above our average for the region. So, in general, we believe these efforts will provide an efficient way for us to grow users, strengthen our brand and increase user loyalty by addressing a key pain point of relatively expensive data in Africa.

I'll also spend some time on Opera News, our user base has grown 21% year-over-year to 180 million monthly active users in the fourth quarter. Further, in March, Opera News has reached a record number of users, well over 190 million. This strong result was really driven by several factors. So, first, Opera News has become a critical information source during the COVID-19 crisis, which we're very proud of. Second, Opera News Hub has now expanded well beyond Nigeria to also Kenya, Ghana, Cote d'Ivoire, South Africa and Egypt and has driven increased engagement.

And finally, we launched new ways to access Opera News, including Opera News Live, a less data-intensive app, and also the ability to access Opera News directly from the web. So, overall, Opera News has become a crucial component to ensure access to relevant news for local communities during the special times. We really see this trend continuing into Q2 with Opera News further manifesting its status as the top go-to place for content consumption in the region.

Our classified offering always continuing to rapidly grow its user base, with also nearly 50% growth in MAUs from December to March, averaging 4.5 million MAU in the quarter and also benefiting as COVID-19 pushes more activity online. So, we are not aggressively developing additional features and functionality for our offering that we'll be introducing as the year progresses, and looking to extend this to some additional geographies in Africa. As we have stated previously, we believe, as we ramp usage, it will open opportunities to get involved in transactions and also to leverage our efforts in advertising beyond Opera News and our browser offerings.

Another area of strong long-term potential is our Europe FinTech initiative around payments and open banking. So, similar to our other efforts, the accelerated transition from offline to online transactions and commerce will be a tailwind, together with the EU legislation that opens up European banking. Just as a reminder, this will, of course, build on our growing 50 million European gross user base and offer attractive new products.

Our first step was the acquisition of a fintech start-up, Pocosys, and our next step will be to launch our first payment and banking products. So, for the past few months, we have made a lot of progress developing our initial offering and are currently testing our digital wallet and cards. Our goal remains to launch in one market later this year, and then roll out to other party [Phonetic] countries in Europe.

When it comes to monetization, it is not surprising that the COVID-19 pandemic affects both search and advertising revenue. We have seen important categories such as travel and sports being severely impacted. Conversely, we are also seeing strong performance from e-commerce and the online streaming partners, and we do expect those to grow in importance as the year progresses. For example, one of our key e-commerce partner has approximately doubled its revenue contribution in several European countries. So, overall, we are seeing that some other indicators that the peak COVID-19 impact to monetization may be behind us with improved metrics as of late April. Although it's still hard to predict the shape or the length of the recovery at this point. Further, we believe that long-term, our ability to facilitate commerce and transactions will position us well as the structural trend of offline spend moving online accelerates.

Finally, our fintech business in South Asia and Africa had a very strong January and February. Revenues were up significantly and the credit losses were slightly down from the prior quarter. We also continued our efforts to expand and evolve our offerings to provide marketplace offers, buy now pay later, and other payment products in cooperation with local banks and partners.

As Frode mentioned, once it was clear that COVID-19 would impact our key markets, we made the strategic decision to reduce near-term credit exposure even if it will affect our near-term growth. However, we are positioned to rapidly scale that business back up once conditions becoming favorable and have already begun testing in preparation for this.

So just to sum up, Opera is progressing at full speed [Phonetic] despite some near-term challenges. Our long-term potential is at least as attractive as it was prior to COVID-19, and we are seeing initial signs that recovery is under way. I look forward to updating you on our overall progress and execution again next quarter, and I'm hopeful that I'll be able to speak about structural benefits such as continued traffic gains and how we are benefiting from the accelerated offline to online transition.

So with that, let me hand it back to Frode.

Frode Jacobsen -- Chief Financial Officer

Thanks, Song. Let me get into details about the first quarter and provide an update on the recent trends before we open up the call for questions. Our product delivered record first quarter revenue of $138.2 million, up 177% year-over-year and above our guidance range. Search revenue represented 14% of total revenue, or $19.7 million, down 4% year-over-year. Obviously, search revenue was impacted significantly in the back half of March.

Advertising revenue represented 12% of total revenue, or $16.8 million, up 18% year-over-year, and similar to search, experienced significant headwinds in late March. Fintech revenue represented 69% of total revenue, or $94.7 million. In spite of late March limitations, this revenue category increased 32% sequentially from the fourth quarter. Retail revenue represented 3% of total, or $4.7 million. And the technology, licensing and other revenue category represented 2% of the total, or $2.4 million, in line with expectations as we are facing out non-recurring revenue related to services provided to [Indecipherable] OPay.

Total operating expenses were $116.9 million in the first quarter, and I'll go through the main components. Compensation expenses were $20.5 million, down about $2 million or 9% versus the fourth quarter. Decrease was mainly due to a reduction in share-based compensation expense as well as certain limitations on in-market activities toward the end of the quarter. Marketing and distribution expense was $18.1 million, a slight increase of 3% versus the fourth quarter.

Cost of revenue was $27.6 million. Within this, $20.3 million related to microlending, representing 21% of microlending revenue, $4.4 million related to retail, $1.3 million related to browser and news, and $1.1 million related to tech licensing and other revenue. Credit loss expense was $69.5 million and mainly related to microlending. This figure includes the extraordinary loan loss provision of approximately $27 million to address collection risks associated with COVID-19, in addition to ordinary loan loss provisions predicted based on late period collections and historical data.

Earlier in Q1, we observed a continued decline in credit losses for our existing brands. While ultimate losses may prove to be lower, we believe it is prudent to take a conservative view, given the unprecedented nature of the COVID-19 pandemic. Net of loss provisions, our loan book stood at $45 million as of March 31st, 2020, of which $43 million has been collected since then, with $2 million now remaining. So, in other words, we are on track to collect more than what we expected as we close the first quarter.

The sum of all other operating expenses, including depreciation and amortization and non-recurring expenses was $18.4 million, corresponding to a sequential reduction of 1% on the recurring expenses. As a result, we saw an operating loss of $15.9 million and a net loss of $20.9 million. Adjusted EBITDA loss was $8.6 million. Excluding the extraordinary additional credit loss provision, adjusted EBITDA would have been within our guided range for the quarter.

On the balance sheet, we ended the quarter with $215 million in cash and marketable securities, an increase of $33 million versus $182 million at year end 2019. As of this quarter, we are providing the full breakdown of our cash flow components. In the quarter, we benefited from positive underlying operating cash flow as well as our actions to significantly reduce our outstanding loan book. This was partially offset by certain investing and financing activities. Most importantly, our share repurchases and our Pocosys acquisition.

With that, let me look a bit ahead. As many of you know, we withdrew our 2020 guidance in April due to the COVID-19 pandemic. While we are not yet ready to provide new guidance due to the challenge of predicting the timing and slope of the return toward normal, we do want to provide some data on recent trends.

Beginning with our browser products and Opera News, our traffic trends were strong in both March and April, carrying the promise of incremental revenue potential once monetization returns toward normal. On monetization, both search and advertising saw year-over-year revenue declines starting in late March. In April, we started to see a recovery in search monetization. We also started to see encouraging signs in advertising, though the recovery is not yet as pronounced as search, primarily due to the travel and sports categories, and as Africa is behind Europe and North America. While there are advertising categories like travel that may take a long time to recover, others like e-commerce and online gaming are growing. Also, categories like sports should return to the historical norms in the intermediate term as sports leagues such as Bundesliga and the EPL return. To sum up, while it is difficult to predict the shape of the recovery, we have no doubt that we remain structurally well positioned for long-term sustained revenue growth.

Now, moving to microlending. As we've discussed, the business was continuing to perform at a very high level for most of the first quarter before we elected to proactively and meaningfully reduce the issuance of new micro loans as of mid-March to reduce our credit exposure as our key markets experienced government-mandated lockdowns. This has meant that there has been very little loan activity quarter-to-date. And this will lead to materially lower revenue in the second quarter versus the first quarter.

With that said, there are some encouraging signs. The lockdown in India, our largest market, is shifting to be state-by-state determined to enable economic recovery where the spread of the virus is most limited. Further, we have recently been testing on a small scale, which will enable us to make sure nothing has changed and adjust our loan offers and AI credit scoring as needed. We expect this business to ramp rapidly once we are comfortable with the risk profile of new loans. And compared to prior periods of rapid growth, this time, we have an additional benefit of a large known user base of repeat borrowers that always repaid their past loans. Further, we believe nothing has structurally changed and we currently expect microlending as well as our plans to widen our fintech offerings to be rapidly rescaling in the second half of the year.

Looking beyond this year, we believe the most lasting effects we will see from COVID-19 is the growth and adoption of our products, and thereby a positive that combines with the underlying growth of online monetization opportunities in our key markets. With that said, in the near-term, we are taking a more conservative approach toward our cost structure. Specifically, we've reduced the number of hires we plan to make this year. We've lowered our spend on external labor and consultants, and we expect lower marketing and distribution spend, primarily following reduced unit economic costs. While subject to ongoing evaluations, at a minimum, we expect to realize $20 million of cost savings versus what was expected back in February.

Most importantly, we are executing this in a way that should have minimal impact on our long-term growth. Additionally, we always look for opportunities to opportunistically accelerate our trajectory and drive value. This could be as simple as specific marketing or product initiatives, making additional tuck-in acquisitions to build out on our current product portfolio or other steps to unlock the value potential of our businesses.

To wrap up, in light of COVID-19, we are pleased with our first quarter results and how we are navigating and adjusting our business. We are encouraged by initial signs of recovery and remain optimistic about our future prospects. We look forward to keeping you updated on our progress.

So with that, we can now open up the call for questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Our first question comes from Lee Krowl from B. Riley FBR. Please go ahead.

Lee Krowl -- B. Riley FBR -- Analyst

Great. Thanks for taking my questions, and hope everyone is well wherever you might be. Wanted to first start off on the lending business, seems like some pretty solid growth and very well managed on the risk side of things. First question is just on revenue contribution from the newer product features. Was it material in the quarter and, I guess, is that a product you offer to existing customers? Are you targeting a different cohort with the buy-now-pay-it-later type functionality?

Frode Jacobsen -- Chief Financial Officer

Hi, Lee. Thanks. This is Frode speaking. As I would say, broadening of the portfolio, we start to see transaction on it, but it wasn't really a material part of the Q1 results.

Lee Krowl -- B. Riley FBR -- Analyst

Okay. And then, you guys -- you talked about saving roughly $20 million on the cost front. Is that imply that you still intend to invest about $10 million, because I think the incremental expense previously was $30 million, or is this $20 million in cost savings net of those gross investments?

Lin Song -- Chief Operating Officer

Yeah. So, of the potential savings, a very big component is actually that the unit economics of marketing and distribution is getting cheaper. So, all else equal, we can maintain good volume. But when it comes to the newer initiatives, I think, as we've spoken about now, the ambitions for those are unchanged. There are some in market limitations that can cause certain delays, and with that there will also be some cost benefits. But for the most part, I would say, it's not the one-to-one with the overall savings and what we do on new initiatives. I think the bigger bulk is actually centralized costs, marketing and distribution.

Derrick Nueman -- Vice President, Investor Relations

And Lee, this is Derrick. The one point I would add to what Frode said is, we're trying to be more efficient with cost savings. And again, marketing was one, but on an overall basis, our focus is continuing to try to grow this business and continue to fund our initiatives so that we have a better chance of a good outcome.

Lee Krowl -- B. Riley FBR -- Analyst

Got it. And then, just last question for me. I know obviously the world has changed since you provided guidance in February. But it seems like all else equal, the growth initiatives and new products remain on track for their scheduled launches. Would that imply that that $10 million targeted revenue for the full year is still a target that's achievable or is that unlikely just given the macro backdrop?

Frode Jacobsen -- Chief Financial Officer

We haven't. So, we've been cautious, we didn't want to provide a guidance yet for the remainder of 2020. So, I would be a little bit careful to comment on sort of specific components either. We -- it's a bit premature to conclude on that. We -- the most important thing for us is how we managed to scale those operations that we get them live, and that we have a good run rate as we exit 2020 and into 2021. Whether that will be a sort of accumulated revenue impact of $10 million or if it will be a little bit less, too early to say right now, but the ambition is the same.

Lee Krowl -- B. Riley FBR -- Analyst

Got it. Thanks for taking my questions, guys.

Frode Jacobsen -- Chief Financial Officer

Sure. Thanks, Lee.

Operator

Thank you. Our next question comes from John God in from Lake Street Capital. Please go ahead.

John Godin -- Lake Street Capital -- Analyst

Hi, guys. thanks for taking my questions. I hope everyone is doing well. First, just thinking about India, as the government starts to loosen restrictions and open things back up a little bit, what are some of the key milestones or trigger points that you're looking for that would give you confidence to start more rapidly going back into that market? And then, second, just thinking about the competitive landscape, obviously the fintech space in both Africa and India is quite competitive. Have you seen anything change there just due to the economic slowdown and maybe anything changing with some less capitalized competitors? Thank you.

Frode Jacobsen -- Chief Financial Officer

Hi, John. I'll go first. So, India, it's interesting They're lockdown 4.0, I guess, they call it, which is scheduled to end at the end of this month. It's really moved -- and it has already moved to a quite state-by-state, as I mentioned, more local -- local policies. So, sort of what was initially very strict is now becoming a bit more and more loosened up, I would say. So, for example, we have our offices there are now starting to reopen again. Initially you can have 33% capacity, and and then you -- we expect that to scale up. So -- and I think that as an indicator of sort of the broader economic activity, which then in the end helps our users to get back to work and to get back to having an income, I think those are positive signs.

When it comes to our scaling up again of that business, I think a key advantage that we have this year, which we didn't have in 2019, when you could say we scaled that business for the first time is that now we have a proven user base. So now we have millions of people that have taken loans and paid them back, and we have seen -- have used the service a bit like we would use a credit card. And sort of having that as a basis is very important for us as we scale it up. So we will definitely begin with, I guess, what we could call trusted users or proven users. And then, as always, as we did also in 2019, start off with smaller amounts and then scale it -- scale it up from there.

And I think, these are considerations that we will do taking the local market and policy conditions into accounts where we think it's where we think it's most sustainable to start scaling again. So that is a bit of the testing that we're doing now, and what we expect to be rolling out. But when it comes to the broader landscape -- yeah, sorry, Derrick.

Derrick Nueman -- Vice President, Investor Relations

Go on, Frode.

Frode Jacobsen -- Chief Financial Officer

Broader landscape, I I'm not aware of any material -- yes, we are a well funded company and we are a very solid company and we will be there as the market picks up. I'm not aware of any major problems for our competition there as of now.

Derrick Nueman -- Vice President, Investor Relations

John, this is Derrick. I would add one point. I think our view of where this business and the potential hasn't changed. We expect to continue to scale our lending, and we expect to offer different products. And Frode said, we're testing and once we feel comfortable that, as you said, with the smaller people that things have returned to normal, we can scale very quickly.

Operator

Thank you. I show, our next question comes from Mark Argent from Lake Street Capital. Please go ahead.

Mark Argento -- Lake Street Capital -- Analyst

Hey, guys. I think John got most of our questions. So I'll hop back in the queue. Thanks.

Operator

Thank you. I show our next question comes from Lance Vitanza from Cowen. Please go ahead.

Lance Vitanza -- Cowen -- Analyst

Hi, guys. Thanks for taking my questions. I wanted to talk to you guys about two areas, if I could, the search and advertising, and then just your liquidity picture. But on the advertising side, and you talked about this a little bit, Frode, but could you review again a little bit -- maybe a little bit more detail, how your categories -- how you index to categories that are poorly performing, like travel on the one hand, and categories like gaming that are, if anything, that are actually continuing to grow. Just try to get a sense for how you stack up relative to the overall contribution of these sectors to total advertising.

Frode Jacobsen -- Chief Financial Officer

I understand. So, I would say, important categories for us include e-commerce, it includes gaming, as you know we even have a gaming browser. It includes travel, and not so much flights, but more hotels and sort of local reservations. And it involves sports. And then, I would say, let's say, general mobile advertising overall as a representative of a large user base that we can market products to. So, these verticals, they are affected differently. We see that the e-commerce and even like content streaming and gaming verticals are on track to do quite well. And then, we have others like travel that we expect will take longer to recover and sports that have, of course, slowed down given the cancellation of events and so on. But it's encouraging to see that some of the major European football events, for example, are starting to come back.

So there, there could also be a question of whether we will see delays in revenue more than actual losses when we look at the year as a whole. But we haven't given any public sort of splits between these verticals. And so, I'd rather just focus on talking qualitatively about it.

Lance Vitanza -- Cowen -- Analyst

That's helpful. Actually I appreciate it. So, the search revenue you mentioned was down 4% for the quarter, but it was doing much better obviously through January and February. Could you sort of give us an idea of what that growth rate in search had been kind of as you started to kind of fall off into the crisis in March? And then...

Frode Jacobsen -- Chief Financial Officer

Sure. I mean...

Lance Vitanza -- Cowen -- Analyst

Bridged out [Indecipherable] or was it less pronounced?

Frode Jacobsen -- Chief Financial Officer

Yeah. So, I would say, we had our Q4 call in late February, and that's when we gave our original guidance for 2020. So, on that -- what we guided for 2020 was, of course, colored by what we were seeing at the time. And we guided search in sort of the mid-single digits and we guided advertising to be higher than the 18% year-over-year growth we had seen in 2019.

Lance Vitanza -- Cowen -- Analyst

Perfect. Okay. Maybe just moving to liquidity quickly. The liquidity and the cash plus marketable securities rose $35 million. I know that you have the cash flow statement. I haven't been able to sort of sift through that in much detail, but it looks like the big driver there was just the shrinking of the loan book, which I suppose is now pretty much at it's kind of -- at a sort of a trough level. So, as we think about cash flows in the second quarter, probably won't see a big increase from additional shrinking of the loan book. What other factors should we think about as we kind of contemplate your ability to continue generating cash over the balance of the year?

Frode Jacobsen -- Chief Financial Officer

So, maybe first to speak to Q1, we had an operating cash flow of $51 million, as you mentioned. Off that, $48 million came from conversion of short-term loans to cash as we were scaling down that business and limiting our credit exposure when -- and then you asked, when we look ahead. So, I mean, as a starting point, for Q2 on the microlending side, as we mentioned, we had severe -- so far in Q2, we've continued our restrictions on our microlending business. As I mentioned earlier, we ended Q1 with a loan book of $45 million. So far in Q2, we have collected $43 million, indicating that we may have been a bit too restrictive as we closed the loss provisions for Q1. But we've had continued strong conversion of outstanding loans to cash in the second quarter, which will also benefit our Q2 cash flow.

I'll be sort of careful to guide cash flow for sort of the remainder of the year, but at least I wanted to point out those.

Lance Vitanza -- Cowen -- Analyst

Yeah. No, thank you for clarifying that. So, basically -- so another big cash inflow from continued monetization of those loans in this quarter. And then, maybe just lastly for me, and I know nobody has a crystal ball here, but if you just think qualitatively about sort of the outer years, '22, 2023, etc, have you -- and you think about the impact from COVID over the longer-term. I'm just trying to understand whether we think COVID is -- is it a one-time hit? What the "new normal" looks like for both -- or for all of Opera's businesses? And how long it takes to get to that new normal? Should we be thinking about the business having been impaired or augmented in any way or is it just it was a blip and we go back to where we were?

Frode Jacobsen -- Chief Financial Officer

So, we tried to get to some of that on this call. It's an area that while it's given us some short-term challenges, we've had to modify a bit our approach with our fintech business in particular. The other things happening is something that is quite exciting. The fact that our user base is growing really well and that we're seeing that more and more people are both trying our browsers, that Opera News has really become a true hub for content and information and entertainment in the markets where we focus is, is something that to us -- that's why we said in there that we believe our long-term potential is at least as good as it was before the COVID-19 situation came around.

So, that actually carries with it some promise and some additional upside that we hadn't expected. When it comes to sort of like the track from here toward normalcy, as Derrick also mentioned, we're ready to scale up very quickly on the microlending and the broader fintech side. That's a bit different than the other ones because it's actually -- demand is super high. It's just us limiting it because we're not -- we haven't been comfortable so far in Q2 with the risk profile.

And I think, on the advertising and search and the verticals that I just went through, of course, we'll follow the market. We expect monetization will come back. There could be -- but we'll be careful not to be too enthusiastic, but the fact -- this can also represent an additional accelerator on the shift from offline to online that can be positive for us as we look ahead.

Lance Vitanza -- Cowen -- Analyst

Okay. Thanks so much for answering the questions. Take care.

Frode Jacobsen -- Chief Financial Officer

Sure.

Lin Song -- Chief Operating Officer

Thanks.

Operator

Thank you. [Operator Instructions] I show our next question comes from Alicia Yap from Citi. Please go ahead.

Alicia Yap -- Citigroup -- Analyst

Hi. Good evening, morning and afternoon, management, wherever you are. Thanks for taking my question. So, given the strength in the user traffic that we are seeing in the Opera News and the search, how will that translate in the advertising dollars in coming months, right, after we come out from the COVID impact? And I guess, gaming, e-commerce and some of the digital content might actually be benefiting. So, have you seen some of that actually come along with our traffic strength?

And related to the guidance, I understood you withdrawing that. But could you give us a little bit color in terms of the second quarter, in terms of the magnitude, right, of the sequential growth rate? How should we think about on the search business, on the Opera News business? I know, on the fintech side, it's probably a material decline. But then, on the ad side, given we are benefiting from some vertical like gamings and e-commerce, so any colors on just the magnitude of the sequential trend would be helpful. Thank you.

Lin Song -- Chief Operating Officer

Yeah. Hi, there. So it's Song Lin here. I think I'll just try to chime in a bit just on some of the categories that you mentioned. So, I mean, I think high level, what you're saying is true that I think basically we share the view that the growth that way we see that's impacting on desktop, which is really good growth and also the growth with the News, we believe that it's definitely sustainable even after the COVID hotspot [Phonetic]. And also, like -- maybe also just to be capture on what Frode saying before that we feel that, yes, we definitely see some behavior changes, a bit long-term behavioral change or structural change on those deals, and largely, I think because we are mostly online, we are almost like a typical example of online company, we don't have any offline that this is exactly beneficial to us.

So, I give you a bit more detail that, for instance, we see that e-commerce, as we said, are actually growing for some of our partners even in Q2, right, which is a worse time. And we think that will stay because once people are getting used to buy it in all place, I think we'll see that trend will continue. And a bit same as gaming, maybe even more with gaming that when they are getting used to actually play games inside the browser, then we think that there's a good chance it will stay. So that grows very nicely.

And maybe also add a bit color into News, right? I think, despite of a general Q2, of course, it's going to be tough for the whole ad business, not only us, but for the whole industry, News -- app monetization on News is actually relatively stable. Why? Just because such a major growth of users and usage will actually need to -- a stable news ads revenue as far as we can see. And actually it's still a big percent growth compared with last year. So it's a big year-to-year growth on News, for instance.

So, I think, all this probably leads to the belief that orders are going to stay and going to have a positive impact even after the COVID times. So, I think, this -- maybe just add a bit more color on what you're asking. In terms of actually Q2 exact guidance, to be honest, I think we still need to be very prudent. It's very hard for us to tell. Maybe what I can say is that on the search end, we definitely see the users are up. But then, of course, we have been limited by the likes of Google, and to some extent, Yandex, which is the other ones actually providing the actual search and the actual ads on top of it. So it's almost easier for you to reference their guidance to have a feeling on what can actually impact on us. I think we'll probably be a bit better just because we have more usage than that.

But I think it -- we all have to be prudent because we can't really also predict for them. I mean that's basically my take on this. And I think, to be same on at that, of course, part of our sales are also related to the likes of Facebook and Google. So, it's a bit dependent on whether how -- whether they can continue to perform in the next few months. I think we can say that we definitely -- it bottoms -- it's becoming flat by April, and we see some recovery trends. But I think the better we don't predict those things, but then just see how the trend goes.

Alicia Yap -- Citigroup -- Analyst

Okay. Thank you.

Operator

Thank you. This concludes our Q&A session. At this time, I'd like to turn the call over to Mr. Frode Jacobsen, CFO, for closing remarks. Please go ahead.

Frode Jacobsen -- Chief Financial Officer

All right. Yeah, I guess that wraps up our call for today. Special times, but as we've talked about, we are quite pleased with how we have navigated that so far and quite excited about the long-term opportunities that we are working toward these days. So, thank you all for joining us on this call, and have a great rest of the day.

Duration: 51 minutes

Call participants:

Derrick Nueman -- Vice President, Investor Relations

Frode Jacobsen -- Chief Financial Officer

Lin Song -- Chief Operating Officer

Lee Krowl -- B. Riley FBR -- Analyst

John Godin -- Lake Street Capital -- Analyst

Mark Argento -- Lake Street Capital -- Analyst

Lance Vitanza -- Cowen -- Analyst

Alicia Yap -- Citigroup -- Analyst

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