Opera (OPRA) Risk Factors

We may be, and in some instances have been, subject to claims, lawsuits (including class actions and individual lawsuits), government investigations and other proceedings relating to intellectual property, consumer protection, privacy, labor and employment, import and export practices, competition, securities, tax, marketing and communications practices, commercial disputes and other matters. For example, we and certain of our directors and officers were named as defendants in a putative class action filed in the United States District Court for the Southern District of New York: Brown v. Opera Limited et al., Case No. 20 cv 674 (S.D.N.Y.), which was dismissed with prejudice in April 2021. The number and significance of our legal disputes and inquiries have increased as our products and services have grown in complexity and as our business has expanded in scope and geographic reach. For instance, we are currently attempting to enforce an U.K. court judgment against a non-paying customer in Kenya. This customer has also filed a lawsuit against us in Kenya, which we believe lacks substantial merit. While we have obtained the judgment for the full amount in the U.K., we have been advised to record a bad debt provision, as there are uncertainties regarding our ability to successfully enforce the judgment and collect the full amount in Kenya. As a public company, we have an elevated public profile, which may result in increased litigation and public awareness of such litigation. Further, there is substantial uncertainty regarding the scope and application of many of the laws and regulations to which we are subject, which increases the risk that we will be subject to claims alleging violations of those laws and regulations. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes to our business practices, increased cost of operations and declines in our user base, retention or engagement, any of which could seriously harm our business. In the future, we may also be accused of having, or be found to have, infringed or violated third party intellectual property rights. Regardless of the outcome, legal proceedings can have a material and adverse impact on us due to their costs, diversion of our resources and other factors. We may decide to settle legal disputes on terms that are unfavorable to us. Furthermore, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that we may not choose to appeal or that may not be reversed upon appeal. We may have to seek a license to continue practices found to be in violation of a third party's rights. If we are required, or choose to enter into, royalty or licensing arrangements, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternative non-infringing technology or discontinue the use of technology, and doing so could require significant effort and expense, or may not be feasible. In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits or proceedings may require us to cease some or all of our operations, or pay substantial amounts to the other party and could materially and adversely affect our business, financial condition and results of operations.

We collect, store and process certain personal and other sensitive data from our users during our daily business operations. The data that we have processed and stored makes us and our external service providers a target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. Unauthorized parties can and have attempted to gain access to our systems and facilities through various means, including, among others, hacking into the systems or facilities of us or our partners or customers, or attempting to fraudulently induce our employees, partners, customers or others into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access our information technology systems, and we expect such efforts will continue in the future. While we have taken measures to protect the confidential information that we have access to, our security measures could and in some cases have been breached. Moreover, the techniques used to obtain unauthorized, improper or illegal access to our and our external service providers' systems, our data or customers' data, disable or degrade service, or sabotage systems are constantly evolving and becoming more sophisticated, may be difficult to detect quickly, and often are not recognized until after they have been launched against a target. We cannot guarantee that our security measures or the security measures of external service providers will prevent all security breaches, intrusions or attacks, as computer circumvention tools and techniques become more advanced. Certain such malicious efforts may be state-sponsored and supported by significant financial and technological resources, making them even more difficult to detect and prevent. Cybersecurity threats may also be amplified by improper use of AI in addition to other related technologies, which may further increase our exposure to security breaches, intrusions or attacks and other cybersecurity risks, as attackers harness its capabilities to launch more complex, automated, and targeted attacks and may require us to spend additional resources to further strengthen our defenses against such threats. In addition, cybersecurity organizations in many countries have published warnings of increased cybersecurity threats to businesses, and external events, like the conflict between Russia and Ukraine, may increase the likelihood of cybersecurity attacks. We and our customers, suppliers and partners may be subject to retaliatory cyberattacks perpetrated by Russia or others at their direction in response to economic sanctions and other actions taken against Russia as a result of its invasion of Ukraine. Any failure or security breach of information systems or data could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation or a loss of confidence in our security measures, which could also adversely affect our business. Although to date we have not suffered any material costs or disruption to our business caused by any such incident, any future security breach could have a material adverse impact on our users' willingness to use our services, and our reputation and brands, business operations and financial performance. For more information, see "Item 16K. Cybersecurity – Material Incidents" of this annual report.

We are constantly upgrading our technology to provide improved performance, increased scale and better integration among our platforms. Adopting new technologies, upgrading our internet ecosystem infrastructure, as well as maintaining and improving our technology infrastructure require significant investments of time and resources, including adding new hardware, updating software and recruiting and training new engineering personnel. For example, in February 2024, we announced our deployment of a new AI data cluster in Iceland featuring our investment in a NVIDIA DGX SuperPOD. Adverse consequences from the failure to continue to make such investments may include unanticipated system disruptions, security breaches, computer virus attacks, slower response times, decreased user satisfaction and delays in reporting accurate operating and financial information. In addition, many of the software and interfaces we use are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of our software or platforms, or are unable to maintain and constantly improve our technology infrastructure to handle our business needs and ensure a consistent and acceptable level of service for our users, our business, financial condition, results of operation and prospects, as well as our reputation, could be materially and adversely affected.

We face intense competition in all of the products and services we offer. In the browser space, we generally compete with other global browser developers, including companies such as Google (Chrome), Apple (Safari), Microsoft (Edge) and Samsung, which have distributional or other advantages on their respective hardware or software platforms. We also compete with other regional internet companies that have strong positions in particular countries. From time to time, we have to compete with smaller, independent browser companies such as Mozilla Firefox, Brave, Avast, Yandex, DuckDuckGo and UC Web as well for those users who want to choose an alternative browser for their devices in addition to their respective default browsers. In the advertising space, we compete with other global internet companies which operate advertising platforms and audience extension products, such as those offered by Meta, ByteDance and Alphabet for both inventory and advertisers. In the content space, we have faced significant competition from other internet companies promoting their own content products and services globally, including Alphabet, Apple and Meta, and traditional media such as local and global newspapers and magazines. Unlike some other large competitors in the content space, we have historically focused on emerging markets, and have integrated unique content to users via our evolving AI-powered content discovery and recommendation platform. However, as we increasingly focus on more developed markets, we also compete with digital media properties and other AI based news offerings platforms. In addition, we compete with all major internet companies for user attention and advertising spend. Moreover, in emerging markets, where certain mobile devices lack large storage capabilities, we may compete with other applications for the limited space available on users' mobile devices. As we introduce new products, as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition. For example, we launched an initial set of generative AI tools in our PC flagship browser in March 2023, gradually expanding to other mobile and PC browsers, and deploying additional tools, such as our Aria browser AI, during 2023. We also launched MiniPay, a new non-custodial stablecoin wallet built on the Celo blockchain, in September 2023. While we view our new products as extensions of Opera's existing product portfolio, adding new products and services subjects us to new competitors and enhanced competition from our current competitors. Many of our current and potential competitors have significantly greater resources and broader global recognition, and occupy better competitive positions in certain markets or on certain platforms than we do. These factors may allow our competitors to respond to new or emerging technologies and changes in market requirements better than we can. Our competitors may also develop products, features or services that are similar to ours or that achieve greater market acceptance. These products, features and services may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. In addition, our partners may use information that we share with them to develop or work with competitors to develop products or features that compete with us. Certain competitors, including Apple, Meta, Microsoft, Samsung and Alphabet, could use strong or dominant positions on their respective platforms or in one or more markets to gain competitive advantages against us in areas where we operate, including by: - integrating competing features into products they control such as web browsers or mobile device operating systems;- making acquisitions for similar or complementary products or services; or - impeding Opera's accessibility and usability by modifying or imposing use restrictions on existing hardware and software on which the Opera applications operate or upon which they depend. As a result, our competitors may acquire and engage users at the expense of our user base or engagement, which may seriously harm our business. We believe that our ability to compete effectively depends on a number of factors, many of which are beyond our control, including: - the usefulness, novelty, performance and reliability of our products compared to our competitors;- the number and demographics of our monthly active users, or MAUs;- the timing and market acceptance of our products, including developments and enhancements of our competitors' products;- our ability to monetize our products;- the effectiveness of our marketing activities and our marketing and distribution teams;- our ability to establish and maintain partners' interest in using Opera;- the frequency, relative prominence and type of advertisements displayed on our applications or by our competitors;- the effectiveness of our customer service and support efforts;- our ability to innovate and remain at the forefront of emerging technologies and related market trends;- changes as a result of legislation, regulatory authorities or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;- acquisitions or consolidation within the industries in which we operate;- our ability to attract, retain and motivate talented employees, particularly engineers and sales personnel;- our ability to cost-effectively manage and scale our rapidly growing operations; and - our reputation and brand strength relative to our competitors. If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers and partners and seriously harm our business.

A small number of business partners contribute a significant portion of our revenues. For example, our largest business partner, Google, contributed approximately 42.4% of our revenues in 2023, compared to 44.9% in 2022 and 51.3% in 2021. Although we continue efforts to diversify our partner base, we cannot assure you that a limited number of partners will not continue to contribute a significant portion of our revenues for the near future. Consequently, any of the following events may materially and adversely impact our business, results of operations and growth prospects: - reduction, delay or cancellation of services by our large business partners;- a significant decrease in the business results or prospects of one of our large business partners;- failure by one or more of our large business partners to pay for our services; or - loss of one or more of our significant customers and any failure to identify and acquire additional or replacement partners. Revenue generated from customers and monetization partners domiciled in Ireland accounted for 50.5%, 44.1% and 41.1% in 2021, 2022 and 2023, respectively. In addition, revenue generated from customers and monetization partners domiciled in Singapore accounted for 9.7%, 15.6% and 15.4% in 2021, 2022 and 2023, respectively. Geographic concentration is not necessarily an indication of where user activity occurs as our end users are located across the world but is affected by the geographic concentration of domicile among certain of our primary monetization partners. We are especially exposed to risks related to the economic conditions, regional specific legislation and tax law of the identified countries.

Like others in our industry, our business is exposed to the risk of various forms of online advertising fraud perpetrated by bad actors to generate traffic that does not represent genuine user interest or intent. We seek to detect and prevent such invalid traffic and expect our marketing and advertising partners to do the same. We and our partners, however, have been unable and may continue to be unable to detect and prevent all such abuses. If we and our partners fail to detect significant online advertising fraud associated with our marketing campaigns or advertising campaigns in our or third-party inventory on our platforms, which reduces the competitiveness of Opera Ads and advertisers' willingness to advertise on our platforms, our revenues may be negatively affected. For example, affected advertisers may experience a reduced return on their investment in advertising on our platforms and advertisers or publishers may lose confidence in the integrity of our systems. If this happens, our revenues from such monetization partners may decline.

The Russian Federation initiated a full-scale military invasion of Ukraine on February 24, 2022, precipitating a humanitarian crisis. This ongoing military conflict has provoked strong reactions from the United States, the United Kingdom, the European Union and various other countries around the world, including the imposition of export control, control on distribution of online content and other broad financial and economic sanctions against Russia, which may have far-reaching effects on the global economy. While the precise effects of the ongoing military conflict and the retaliatory measures that have been taken, or could be taken in the future, remain uncertain, they have already resulted in significant volatility in financial markets and rises in energy and commodity prices globally, and created worldwide security concerns that could have a lasting impact on regional and global economies. The macroeconomic impacts on our business continue to evolve and be unpredictable and may continue to adversely affect our business, operations and financial performance. Examples of potential impacts of the war in Ukraine on our business include changes in our user base as a result of our inability to operate our products in affected countries, reduced demand affecting our advertising and search revenues, increased compliance costs and business limitations from export controls or economic sanctions, as well as broader fluctuations in exchange rates that may directly and indirectly affect our global revenue and costs as presented in U.S. Dollars. For example, on December 16, 2022, the European Union adopted new economic sanctions, or the December 2022 EU Sanctions, prohibiting the provision of "advertising services" to legal persons, entities or bodies established in Russia, and therefore we have subsequently terminated all advertising contracts with customers in Russia among other actions. For additional details, see "Item 4. Information on the Company - B. Business Overview – Regulations – European Economic Sanctions." Revenue generated from customers and monetization partners domiciled in Russia accounted for 6.1%, or $20.3 million, of our revenue in 2022 and 5.2%, or $20.7 million, of our revenue in 2023. A substantial portion of these amounts in both 2022 and 2023 were search revenues from our business partner, Yandex LLC, or Yandex. With respect to these search revenues, Yandex generates advertising revenues primarily in Russian Rubles, and pays us a revenue share converted at prevailing exchange rates to U.S. Dollars. Although our transactions with Yandex relating to search distribution are not at present subject to any export control or economic sanction against Russia, and we have terminated all advertising contracts with customers in Russia in response to the December 2022 EU Sanctions, there is no assurance that broader sanctions will not be in place in the future, which may adversely affect our relationship with our business partners as well as our revenue related to Russia. Moreover, on February 5, 2024, Yandex's US listed parent company, namely Yandex N.V., announced that it had reached a binding agreement to sell certain of its core businesses, including its search business, to a consortium of buyers. Yandex N.V. reported that the sale will be in full compliance with international sanctions and that no member of the consortium of buyers is the target of blocking sanctions in the U.S., European Union, U.K. or Switzerland. However, we cannot assure you that our cooperation with Yandex will not ultimately be impacted by such a restructuring. We estimate that approximately 9.9% of our revenue in 2022, and 5.7% of our revenue in 2023, was generated based on monetizing the portion of our user base in Russia. As a result of the scale of the ongoing crisis and the speed at which the global community has been impacted, our revenue growth rate and expense as a percentage of our revenues, and our operating results, may fall below expectations in future periods.

We rely upon a number of third parties for distribution of our products and services to end users. For example, we rely on mobile software application storefronts, including Google Play and Apple's App Store, as well as various mobile manufacturer app stores, to enable users to download our mobile software applications, and on key mobile device manufacturers to pre-install our mobile software applications on mobile phones prior to sale. The promotion, distribution and operation of our software applications are subject to the standard terms and conditions of these distribution channel providers, which may be broad, poorly tailored to local conditions, and subject to frequent unilateral changes and interpretation by the channel providers. If one or more channel providers halt the distribution of certain of our products and services on their platforms, as they have temporarily done in the past, our business may suffer. There is no guarantee that these distribution channel providers will distribute or continue to support or feature our product offerings. Furthermore, these channel providers may not enforce their standard terms and conditions for application developers consistently or uniformly across all applications and with all application developers, in part because such terms and conditions may not be practical or otherwise appropriate in certain markets. We will continue to be dependent on distribution channel providers, and any changes, bugs, technical or regulatory issues relating to such channel providers, our relationships with these channel providers, or the requirements or interpretation of their terms and conditions or pricing that is to our detriment could adversely impact our business. These may include any changes that degrade the functionality of our offerings, reduce or eliminate our ability to distribute our offerings, give preferential treatment to competitive products, limit our ability to deliver high quality offerings, or impose fees or other charges related to delivering our offerings. Further, if a channel provider believes that we have violated the terms and conditions of its platform, regardless of whether such terms and conditions have a legitimate basis or are practical in a given market, this could result in the channel provider restricting our ability to use their services and adversely affect our product usage and monetization. Furthermore, if any of these distribution channel providers delivers unsatisfactory services, engages in fraudulent action, or is unable or refuses to continue to provide its services to us and our users for any reason, it may materially and adversely affect our business, financial condition and results of operations.

We will be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if, applying applicable look-through rules, either (i) at least 75% of our gross income for such year is passive income or (ii) at least 50% of the value of our assets (generally determined based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we are a PFIC for that year and involves extensive factual investigation, including ascertaining the fair market value of all of our assets on a quarterly basis and the character of each item of income that we earn, and is subject to uncertainty in several respects. Based on the market price of our ADSs, the value of our assets and the nature and composition of our income and assets, we do not believe that we were a PFIC for United States federal income tax purposes for our taxable year ended December 31, 2023, and we do not expect to become a PFIC for our current taxable year, although there can be no assurances in this regard. Moreover, we cannot assure you that the United States Internal Revenue Service, or the IRS, will agree with any position that we take. Accordingly, there can be no assurance that we will not be treated as a PFIC for any taxable year or that the IRS will not take a position contrary to any position that we take. Changes in the nature or composition of our income or assets, including as a result of our investment in new businesses, products, services and technologies, may cause us to be or become a PFIC. In addition, the determination of whether we will be a PFIC for any taxable year may also depend in part upon the value of our goodwill and other unrecorded intangibles not reflected on our balance sheet (which may depend upon the market price of our ADSs or ordinary shares from time to time, which may fluctuate significantly) and also may be affected by if, how, and how quickly, we spend our liquid assets and the cash we generate from our operations and raise in any offering. In estimating the value of our goodwill and other unrecorded intangibles, we have taken into account our market capitalization. Among other matters, if our market capitalization declines, we may be or become a PFIC for the current or future taxable years because our liquid assets and cash (which are for this purpose considered assets that produce passive income) may then represent a greater percentage of the value of our overall assets. Further, while we believe our classification methodology and valuation approach are reasonable, it is possible that the IRS may challenge our classification or valuation of our goodwill and other unrecorded intangibles, which may result in our being or becoming a PFIC for our taxable year ended December 31, 2023, the current taxable year or one or more future taxable years. If we are a PFIC for any taxable year during which a United States Holder (as defined in "Item 10. Additional Information-E. Taxation-United States Federal Income Tax Considerations") holds our ADSs or ordinary shares, certain adverse United States federal income tax consequences would generally apply to such United States Holder. See "Item 10. Additional Information-E. Taxation-United States Federal Income Tax Considerations-Passive Foreign Investment Company."

We are subject to a variety of laws and regulations that involve matters central to our business, including user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online-payment services. These laws can be particularly restrictive in certain countries, particularly in the European Economic Area, where courts and regulators applying the General Data Protection Regulation, or GDPR, have generally favored a strict application of the law, especially where international data transfers, AI, or internet advertising are at issue. For example, in recent years European regulators and courts issued several decisions that are broadly adverse to the internet advertising industry, and showed particular concern about the use of personal data in AI services, including OpenAI's ChatGPT product. Further, such laws and regulations constantly evolve and many jurisdictions that are significant to our businesses, including Singapore, Nigeria, Kenya, and Brazil have enacted or updated privacy laws, while similar developments are under consideration in India and several states of the U.S. The application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes to our business practices, increased cost of operations and declines in user growth, retention or engagement, any of which could seriously harm our business. See "Item 4. Information on the Company-B. Business Overview-Regulations-Regulations on Data Protection and Information Security and Regulations on Data Projection and Information Security" of this annual report.