Ad hoc-Mitteilungen

Rovio Entertainment Corp.: Record quarterly revenue for Games and high profitability

Rovio Entertainment Corporation        Stock Exchange Release         August 14, 2020 at 9.00 a.m. EEST

Record quarterly revenue for Games and high profitability

April-June 2020 highlights

  • Rovio group revenue was EUR 69.2 million (71.8) and declined 3.6% year-on-year due to lower movie revenues
  • Group adjusted operating profit grew to EUR 13.8 million (5.3) and adjusted operating profit margin to 20.0% (7.4%) due to stable revenues of key games, increased player engagement due to Covid-19 and lower level of user acquisition
  • Games revenue grew 2.2% year-on-year to EUR 66.9 million (65.4). In comparable currencies, games revenue grew by approximately by 1%. The Games gross bookings were EUR 67.7 million (65.2) and grew 3.9% year-on-year. In comparable currencies, the gross bookings grew by approximately 2%
  • Angry Birds 2 gross bookings were EUR 28.8 million and increased by 15% from Q120
  • Rovio launched a new narrative puzzle game Small Town Murders on 10th June
  • Rovio acquired Darkfire Games studio in Copenhagen, Denmark
  • Rovio established a new game studio to explore future of gaming in Montreal, Canada
  • User acquisition investments were EUR 14.0 million (21.3), or 20.9% of the Games segment’s revenue (32.6%)
  • Brand Licensing revenue was EUR 2.3 million (6.4) and declined 63.7% year-on-year due to lower movie revenues
  • Group adjusted operating profit excluding Hatch Entertainment was EUR 15.6 million (8.1) and adjusted operating profit margin 22.5% (11.3%)
  • Operating cash flow was EUR 18.7 million (4.8)
  • Earnings per share was EUR 0.15 (0.04)
January-June 2020 highlights

  • Rovio group revenue was EUR 135.8 million (142.6) and declined 4.8% year-on-year due to lower movie revenues
  • Group adjusted operating profit grew to EUR 26.9 million (12.8) and adjusted operating profit margin to 19.8% (9.0%)
  • Games revenue declined by 1.6% year-on-year to EUR 129.6 million (131.7). In comparable currencies, games revenue declined by approximately by 2%. The Games gross bookings were EUR 129.8 million (131.0) and declined 0.9% year-on-year. In comparable currencies, the gross bookings declined by approximately 2%.
  • User acquisition investments were EUR 27.5 million (45.1), or 21.2% of the Games segment’s revenue (34.2%)
  • Brand Licensing revenue was EUR 6.2 million (11.0) and declined 43.7% year-on-year
  • Group adjusted operating profit excluding Hatch Entertainment was EUR 31.4 million (17.4) and adjusted operating profit margin 23.1% (12.2%)
  • Operating cash flow was EUR 30.2 million (8.0)
  • Earnings per share was EUR 0.26 (0.11)
Key figures

 4-6/4-6/Change,1-6/ 1-6/Change,
EUR million20202019%20202019%
Revenue69.271.8-3.6 %135.8142.6-4.8 %
EBITDA16.19.666.9 %31.920.158.8 %
EBITDA margin23.2 %13.4 %-23.5 %14.1 %-
Adjusted EBITDA15.99.664.6 %32.020.159.3 %
Adjusted EBITDA margin, %22.9 %13.4 %-23.6 %14.1 %-
Operating profit14.15.3164.3 %26.812.8109.6 %
Operating profit margin, %20.3 %7.4 %-19.7 %9.0 %-
Adjusted operating profit13.85.3160.1 %26.912.8110.3 %
Adjusted operating profit margin, %20.0 %7.4 %-19.8 %9.0 %-
Profit before tax14.84.8206.2 %26.312.4112.7 %
Capital expenditure1.11.010.6 %1.81.613.9 %
User acquisition14.021.3-34.4 %27.545.1-39.1 %
Return on equity (ROE), %19.7 %18.5 %-19.7 %18.5 %-
Net gearing ratio, %-68.1 %-66.8 %--68.1 %-66.8 %-
Equity ratio, %83.1 %79.6 %-83.1 %79.6 %-
Earnings per share, EUR0.150.04299.6 %0.260.11131.7 %
Earnings per share, diluted EUR0.150.04302.6 %0.260.11133.8 %
Net cash flows from operating activities18.74.8291.5 %30.28.0276.2 %
Employees (average for the period)4604482.7 %4634356.4 %
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.

Kati Levoranta, CEO:
We had an eventful Q2 and continued delivering on our strategy on multiple fronts. We reached record high Games revenue driven by the strong performance of our key games. Our profitability improved significantly year-on-year due to lower user acquisition investments and higher games gross bookings. The strong profitability led to the highest operating cash flow since Q418.

In June, we launched a new narrative puzzle game called Small Town Murders. Our aim is to scale up the user acquisition of the game gradually. Rovio’s largest game, Angry Birds 2, grew quarter-on-quarter thanks to game updates, seasonal events and increased player engagement that can be attributed to Covid-19, especially in April. The overall impact of Covid-19, which was visible in a higher level of downloads, daily active users and player engagement, peaked late April. From May onwards these KPIs started to normalize. At the same time, successful game improvements have led to somewhat higher monetization compared to the beginning of the year and stable revenues in our key games.

During Q2, we released news regarding two new Rovio game studios. First, we set up a new studio in Montreal, Canada headed by Ben Mattes, a gaming industry veteran with broad experience from both console and mobile games. In 2020, we are building up the studio’s core team, who will be initiating forward-looking projects around the future of gaming. In June, we announced the acquisition of a Copenhagen based RPG studio Darkfire Games, now named Rovio Copenhagen. The studio has already one game in soft launch and the team strengthens our RPG genre mastery. M&A continues to be an integral part of our strategy and during Q2 we strengthened our leadership team by appointing a new Head of Corporate Development, Jakob Longer, to drive Rovio’s M&A strategy.

During the first half of this year we have seen heightened viewership and engagement for Angry Birds content across all major digital platforms. As an example, The Angry Birds Movie 2 was amongst the most watched movies on Netflix during the spring. In June, we signed a contract with IMG Licensing Worldwide for exclusive global representation of Angry Birds consumer products and location-based entertainment licensing. With their extensive global operations, supported by front and back office resources across geographies and product categories, we believe IMG can help us build an exciting offering over the coming years to reach our fans with high quality consumer products across the globe.

During these exceptional times we have successfully managed the transition to working from home. Going forward we will carefully follow how the pandemic situation develops and adjust our ways of working accordingly. I would like to express my gratitude to all Rovians and our partners for their tremendous efforts and adaptability.

Outlook for 2020 (unchanged)
During 2020 we aim to launch 1-3 new games. The timing of new game launches depends on how the games progress in soft launch. Therefore, we do not give a full year 2020 revenue guidance. We start the year at a lower user acquisition level than we ended last year. Due to lower user acquisition investments and the planned cost savings in Hatch Entertainment Ltd., our adjusted operating profit improves.

Basis for outlook
Our strategy is to seek growth in the Games business through improving the performance of our key games and developing new games.

Brand Licensing segment is optimized for profit at a lower revenue which is expected to decline approximately 50% year-on-year in 2020.

Hatch Entertainment annualized expenses are expected to be approximately EUR 5 million (2019: EUR 10.9 million) on an adjusted basis after restructuring and aligning with its new strategy.

More detailed outlook per games category is given below:

Grow: We believe Angry Birds Dream Blast will grow on an annual basis but starts the year at a lower quarterly run-rate compared to the end of 2019. The game has a strong feature roadmap focusing on improvements to long term retention and monetization. We are continuing to develop Sugar Blast through live operations for its core audience and improve retention and monetization in order to scale the game up.

Earn: The revenues of Angry Birds 2 stabilized despite much lower user acquisition investments y-on-y. We further focus on improving the performance of the game through introducing new updates that increase engagement with our core users. The revenue of the other “earn”-category games for which we have stopped, or lowered UA significantly is expected to continue decline at a steady slow pace, except for Angry Birds Friends which is showing good stability.

Catalogue: We expect these games to continue declining over time. They still receive substantial organic downloads, but the active user base and revenues are expected to decline over time as we do not develop these games further.

New games: We aim to launch 1-3 new games in 2020. We have launched one new game, Small Town Murders in June, and we have currently two games in soft launch and several games in different phases of production.

Games in soft launch are available in a selected number of countries and operated with a limited number of gamers. Soft launch games have advanced far in the game development process. They are being tested and developed in order to verify their commercial potential and scalability. There is no guarantee that games in soft launch will be published. 

Audiocast and conference call:
Rovio will host an English language audiocast and conference call on the first half 2020 financial results, including a Q&A session for analysts, media and institutional investors at
14:00-15:00 EEST on August 14, 2020. The audiocast can be viewed live at: https://investors.rovio.com/en , and later on the same day as a recording.

Conference call details:
PIN: 15390508#

Finland Toll: +358 981 710 310
Sweden Toll: +46 856 642 651
United Kingdom Toll: +44 333 300 0804
United States Toll: +1 631 913 1422

More information:
Kati Levoranta, CEO, tel. +358 40 485 8985
René Lindell, CFO, tel. +358 40 485 8985

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

Rovio in brief:
Rovio Entertainment Corporation is a global, games-first entertainment company that creates, develops and publishes mobile games, which have been downloaded over 4.5 billion times so far. 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 and consumer products in brand licensing. Today, Rovio offers multiple mobile games, animations and produced The Angry Birds Movie in 2016. Its sequel, The Angry Birds Movie 2, was released in 2019. Rovio is headquartered in Finland and the company's shares are listed on the main list of NASDAQ Helsinki stock exchange with the trading code ROVIO. (www.rovio.com)

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