Rovio Entertainment Corp.: Q3 interim report: Live games

Rovio Entertainment Corporation    Stock Exchange Release    October 28, 2022 at 9.00 a.m. EEST

Live games showing strength

July-September 2022 highlights

• Rovio group revenue increased 8.4% to EUR 77.4 million (71.4). On a comparable (*) basis the revenue declined by 4.6%.
• Group adjusted EBITDA declined to EUR 15.6 million (17.2) and adjusted EBITDA margin declined to 20.2% (24.1).
• Group adjusted operating profit declined to EUR 12.1 million (14.3) and adjusted operating profit margin declined to 15.6% (20.0).
• Games gross bookings increased by 6.2% to EUR 70.8 million (66.7). Comparable (*) gross bookings declined by 7.2%.
• Gross bookings of Angry Birds Dream Blast, Rovio’s second largest game increased year-on-year by 17.5% to EUR 17.6 million. The run-rate of Dream Blast increased steadily throughout the quarter and approached EUR 20 million per quarter, which is its best level since launch year of 2019.
• Gross bookings of Angry Birds 2, Rovio’s largest game, were EUR 28.7 million and grew 7.8% year-on-year.
• User acquisition investments were EUR 21.3 million (18.1) and 28.7% of games’ revenue (26.4%).
• Operating cash flow was EUR 8.6 million (16.7).
• Earnings per share was EUR 0.10 (0.16).
• 2022 outlook has been updated.

January–September 2022 highlights

• Rovio group revenue increased 16.1% to EUR 240.8 million (207.3). Comparable (*) revenue growth was 2.1%.
• Group adjusted EBITDA grew to EUR 44.3 million (38.2) and adjusted EBITDA margin was 18.4% (18.4).
• Group adjusted operating profit increased to EUR 33.3 million (30.5) and adjusted operating profit margin decreased to 13.8% (14.7).
• Games gross bookings increased by 13.5% to EUR 224.1 million (197.5). Comparable (*) gross bookings decreased by 1.0%.
• User acquisition investments increased to EUR 73.2 million (56.6) and 31.5% of games’ revenue (28.3).
• Operating cash flow was EUR 37.9 million (26.7).
• Earnings per share was EUR 0.30 (0.32).

*) Comparable growth is calculated at constant USD/EUR exchange rate and including Ruby Games only for the month of September.

Key figures

	7–9/	7–9/	Change,	1–9/	1–9/	Change,	1–12/
EUR million	2022	2021	%	2022	2021	%	2021
Revenue	77.4	71.4	8.4%	240.8	207.3	16.1%	286.2
EBITDA	12.2	16.9	-28.1%	37.6	37.4	0.5%	50.8
EBITDA margin	15.7%	23.7%		15.6%	18.0%		17.7%
Adjusted EBITDA	15.7	17.2	-9.0%	44.3	38.2	16.0%	54.8
Adjusted EBITDA margin, %	20.2%	24.1%		18.4%	18.4%		19.1%
Operating profit	8.6	14.0	-38.8%	26.6	29.7	-10.5%	37.7
Operating profit margin, %	11.1%	19.6%		11.0%	14.3%		13.2%
Adjusted operating profit	12.1	14.3	-15.6%	33.3	30.5	9.1%	43.7
Adjusted operating profit margin, %	15.6%	20.0%		13.8%	14.7%		15.3%
Profit before tax	10.2	14.6	-30.0%	30.4	31.1	-2.3%	40.3
Capital expenditure	1.3	0.9	41.6%	4.6	2.7	69.7%	4.0
User acquisition	21.3	18.1	17.7%	73.2	56.6	29.3%	77.2
Return on equity (ROE), %	19.0%	19.2%		19.0%	19.2%		22.2%
Net gearing ratio, %	-81.3%	-72.6%		-81.3%	-72.6%		-77.4%
Equity ratio, %	72.3%	73.5%		72.3%	73.5%		70.8%
Earnings per share, EUR	0.10	0.16	-35.3%	0.30	0.32	-6.0%	0.41
Earnings per share, diluted EUR	0.10	0.16	-35.8%	0.30	0.32	-6.6%	0.41
Net cash flows from operating activities	8.6	16.7	-48.6%	37.9	26.7	41.8%	44.0
Employees (average for the period)	522	490	6.6%	506	486	4.3%	490

Unless otherwise stated, the comparison figures in brackets refer to the corresponding period in the previous year. Calculations and definitions are presented in the Performance Measures section.

The changes in comparable currencies have been calculated by translating the reporting period figures with the average USD/EUR exchange rates of the comparison period for the US dollar dominated in-app-purchases in United States and global ad network sales.

Alex Pelletier-Normand, CEO
I am pleased to see that we have continued to perform well in a challenging market in the third quarter. Our reported revenue grew 8.4% and our comparable revenue declined 4.6%, during a period in which the US market declined over 15% year-on-year. The performance of our live games, especially Angry Birds Dream Blast, the consolidation of Ruby Games, and a favorable fx supported those results.

The same market headwinds continued as in the previous quarter. However, it is interesting to note that the quarter-over-quarter decline was only 1% in the US in Q3, showing a positive development after five consecutive quarters of decline. We continue to believe that long-term growth opportunities look attractive in the mobile gaming market.

We took advantage of the past months to launch meaningful initiatives aimed at strengthening our position for further growth as the market recovers.

Angry Birds Dream Blast leading the way
One of these initiatives is an enhanced focus on our portfolio of live games. We increased the resourcing of our live games and the depth of our live operations, and we can already see the benefits of such actions. For instance, our second biggest title, Angry Birds Dream Blast, grew double digits both year-on-year and quarter-on-quarter. This is an amazing achievement from the team, who have worked relentlessly to improve the game’s quality and marketability since its launch. The run-rate of the game grew to around EUR 20 million per quarter at the end of September.

Angry Birds 2 continued to perform well, growing both quarter-on-quarter and year-on-year driven by good live operations and solid UA performance. We have exciting new content coming to the game later this year. For instance, for the first time since the release of the second Angry Birds Movie in 2019, we plan on introducing a new bird in the game.

Angry Birds Friends declined slightly from the previous quarter. The game was impacted by an issue with our partner Meta, causing some players to temporarily lose access to their progress. This resulted in a short-lived gap in revenues. After remedying the issue, we saw the game’s daily active users and revenue run-rate recovering.

Two new studios supporting the growth
To support the growth of our top live games, we are opening a new studio in Barcelona, Spain. This initiative will widen our talent pool particularly in live operations and level design – an activity that is today widely outsourced. Recruitment is ongoing and we aim to hire 15 developers in the next 12 months, who will support our Puzzle studio in Espoo.

In other exciting news, in Montreal, a team of industry veterans decided to jointly leave their former employer to join Rovio. They are specialized in very fast prototyping and market tests and aim at producing hybrid-casual games. They are internally called “Studio 6” and we are delighted to have them on board.

Healthy pipeline of new titles
We’ve also made good progress in our new games development. Moomin: Puzzle & Design is developing as planned and enters the next soft launch test at the beginning of the year. Our Puzzle Studio is also working on a new Match-3 game that builds upon the learnings of Small Town Murders. The game looks promising and will have its first marketability and early retention test in December. In Montreal Studio, we refocused our team on expanding Angry Birds beyond mobile with a multiplayer cross-platform game targeted for Gen Z. As of November 7th, the studio will be led by console gaming veteran Andréane Meunier who has over a decade experience at Ubisoft. Ruby Games, Toronto and Copenhagen are also advancing well in their new games. Overall, our pipeline is healthy with 10 new titles in development across our studios.

In brand news, as part of our Angry Birds content strategy beyond games, the third season of Angry Birds Summer Madness was released on Netflix in August. The success of Angry Birds animation was highlighted in a recent Rovio commissioned consumer study where, among teenagers aged 12-16 in the USA, Angry Birds was the third most watched series on Netflix.

We are excited to enter the last quarter of the year, which is typically the most eventful season in games. We start the quarter with good momentum in our top games and a stream of seasonal events to drive fan engagement across the portfolio.

With our two new studios, a strong focus on live games already showing results, and new games progressing well, we see Rovio well positioned to capture growth opportunities in 2023 and beyond. I am excited to continue leading these efforts and I am proud of Rovians’ resourcefulness in continuously finding growth opportunities.

2022 updated outlook
We are expecting the reported revenue to be significantly higher and the revenue at comparable fx to be somewhat higher year-on-year. Depending on the speed of growth and the investments in user acquisition to fuel that growth, especially in the case of new games, and our larger investments in new games development, the adjusted operating profit is expected to be lower year-on-year.

Additional information on user acquisition investments in Q4 2022
The user acquisition investments for Q4 2022 are expected to be 28–33% of games revenues.

2022 previous outlook
Building on the positive momentum in our top live games, the launch of Angry Birds Journey in January and having the full benefit of the Ruby Games acquisition from the start of the year, we are expecting strong topline growth for the year. Depending on the speed of growth and the investments in user acquisition to fuel that growth, especially in the case of new games, and our larger investments in new games development, the adjusted operating profit is expected to be lower year-on-year.

Audiocast and conference call
Rovio will host an English language audiocast and phone conference on the Q3 2022 financial results, including a Q&A session, for analysts, media and institutional investors at 14:00–15:00 EEST on October 28, 2022. The audiocast can be viewed live at: https://investors.rovio.com/en and as a recording later the same day.

Details for the phone conference:
https://call.vsy.io/access-8620

More information:
Alex Pelletier-Normand, CEO, tel. +358 40 485 8985 (media phone)
René Lindell, CFO, tel. +358 40 485 8985 (media phone)

Distribution: Nasdaq Helsinki, key media, https://investors.rovio.com/en

Rovio in brief
Rovio Entertainment Corporation is a global mobile-first games company that creates, develops and publishes mobile games, which have been downloaded over 5 billion times. Rovio is best known for the global Angry Birds brand, which started as a popular mobile game in 2009, and has since evolved from games to various entertainment, animations and consumer products in brand licensing. Rovio has produced The Angry Birds Movie (2016), and its sequel, The Angry Birds Movie 2 was released in 2019. The company offers multiple mobile games and has nine game studios – two in Espoo (Finland), one in Stockholm (Sweden), one in Copenhagen (Denmark), one in Barcelona (Spain), two in Montreal and one in Toronto (Canada). The studios also include a subsidiary in Izmir (Turkey) called Ruby Games, which was acquired in 2021. Most of the employees are based in Finland where Rovio is headquartered. The company’s shares are listed on the main list of NASDAQ Helsinki stock exchange with the trading code ROVIO.

 

• Rovio Q3-2022_interim report