Rovio Entertainment Corporation Stock Exchange Release April 28, 2020 at 9 a.m. EEST
Improved profitability, cash flow and Angry Birds 2 performance
January-March 2020 highlights
- Rovio group revenue was EUR 66.6 million (70.9) and declined 6.0% year-on-year
- Group adjusted operating profit grew to EUR 13.0 million (7.5) and adjusted operating profit margin to 19.6% (10.5%) on the back of quite stable games revenues despite much lower level of user acquisition
- Games revenue declined by 5.3% year-on-year to EUR 62.7 million (66.3). In comparable currencies, games revenue declined approximately by 7%. The Games gross bookings were EUR 62.1 million (65.8) and declined 5.7% year-on-year. In comparable currencies, the gross bookings declined by approximately 8%.
- Angry Birds 2, gross bookings were EUR 25.0 million and increased slightly from Q4-19. The game has had stable revenues with continued low amount of user acquisition. Game performance improved during the quarter.
- Angry Birds Dream Blast, launched on 24th January 2019, gross bookings were EUR 16.1 million and the user acquisition investments were significantly decreased from last year’s level
- User acquisition investments were EUR 13.5 million (23.7), or 21.5% of the Games segment’s revenue (35.8%)
- Brand Licensing revenue was EUR 3.9 million (4.6) and declined 15.9% year-on-year
- Group adjusted operating profit excluding Hatch Entertainment was EUR 15.8 million (9.3) and adjusted operating profit margin 23.7% (13.1%)
- Operating cash flow was EUR 11.5 million (3.3)
- Earnings per share was EUR 0.11 (0.08)
Key figures
| 1-3/ | 1-3/ | Change, | 1-12/ | |
| EUR million | 2020 | 2019 | % | 2019 |
| Revenue | 66.6 | 70.9 | -6.0% | 289.1 |
| EBITDA | 15.9 | 10.5 | 51.4% | 32.3 |
| EBITDA margin | 23.8% | 14.8% | - | 11.2% |
| Adjusted EBITDA | 16.2 | 10.5 | 54.4% | 32.6 |
| Adjusted EBITDA margin, % | 24.3% | 14.8% | - | 11.3% |
| Operating profit | 12.7 | 7.5 | 70.6% | 18.1 |
| Operating profit margin, % | 19.1% | 10.5% | - | 6.3% |
| Adjusted operating profit | 13.0 | 7.5 | 74.8% | 18.3 |
| Adjusted operating profit margin, % | 19.6% | 10.5% | - | 6.3% |
| Profit before tax | 11.5 | 7.5 | 52.8% | 17.7 |
| Capital expenditure | 0.8 | 0.7 | 18.7% | 3.1 |
| User acquisition | 13.5 | 23.7 | -43.3% | 99.7 |
| Return on equity (ROE), % | 13.3% | 19.5% | - | 10.8% |
| Net gearing ratio, % | -69.5% | -67.4% | - | -65.7% |
| Equity ratio, % | 80.8% | 78.4% | - | 80.5% |
| Earnings per share, EUR | 0.11 | 0.08 | 50.4% | 0.17 |
| Earnings per share, diluted EUR | 0.11 | 0.07 | 51.9% | 0.17 |
| Net cash flows from operating activities | 11.5 | 3.3 | 253.8% | 10.5 |
| Employees (average for the period) | 466 | 422 | 10.4% | 450 |
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:
Rovio’s first quarter of 2020 was characterized by an improvement in profitability and operating cash flow. Group adjusted operating profit increased to EUR 13.0 million (7.5) or 19.6% margin (10.5) year-on-year. Operating cash flow increased to EUR 11.5 (3.3) million and was driven by the improved profitability. The group revenue was EUR 66.6 (70.9) million, which declined by 6.0% year-on-year.
The high operating profit of the quarter was driven by the low level of user acquisition and the stability of our key games, especially Angry Birds 2. We introduced a series of updates for Angry Birds 2, Angry Birds Dream Blast and Sugar Blast that were well received by the players. As a result, the performance of these games improved gradually during the quarter.
In the beginning of the first quarter we scaled down user acquisition to meet our payback targets and the daily user acquisition investments were quite stable throughout the quarter. Now as we have entered the second quarter, the user acquisition has continued at a similar level. We are ready to invest more in user acquisition when we see an opportunity in the market, improvement in live games performance and when we launch new games.
Brand Licensing performed in line with our expectations: revenue was lower year-on-year while being profitable. The highlight for the Brand Licensing in the quarter was the announcement of a new long-form Angry Birds animation series with Netflix, scheduled to be released in 2021.
During the first quarter, several new game concepts were added to the early phase of our roadmap. Additionally, we had new games entering the marketability test. These are part of our continuous effort to build and maintain a healthy game pipeline - a key enabler for long-term growth. We are also happy to announce the launch of our next game, Small Town Murders, which is scheduled for launch in June 2020. The game is a new IP puzzle game embedded in a narrative of mysteries.
Rovio has taken the Covid-19 and the impact it has had on individuals and society very seriously. It has been our top priority to minimize the risk of the pandemic to our employees and to our business. On March 12th, we instructed everyone at Rovio to work from home until further notice to safeguard the health of our employees and business continuity. Nevertheless, we have continued during this time to hire new talent to strengthen our competence
In our games, we have seen an increase in the number of downloads as well as user engagement and also some uptick in revenues in March and April. However, it is too early to quantify and distinguish the impact of the corona pandemic and game improvements.
We are grateful for all Rovians for the fast transformation to “working from home -mode” and the continued positive spirit during these challenging times.
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 other games (Angry Birds Match, Angry Birds Friends and Angry Birds Pop) is expected to continue decline at a steady slow pace. We have lowered or stopped user acquisition investments into these three games.
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. Currently we have three games in soft launch and several games in other 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 quarter 2020 financial results, including a Q&A session for analysts, media and institutional investors at
14:00-15:00 EEST on April 28, 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: 76415854#
Finland Toll: +358 981 710 310
Sweden Toll: +46 856 642 651
United Kingdom Toll: +44 333 300 0804
United States +1 855 857 0686
More information:
Kati Levoranta, CEO, tel. +358 40 485 8985
René Lindell, CFO, tel. +358 40 485 8985
Distribution:
Nasdaq Helsinki, key media, www.rovio.com
Rovio in brief:
Rovio Entertainment Corporation is a global, games-first entertainment company that creates, develops and publishes mobile games, which have been downloaded 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 has produced The Angry Birds Movie, which opened number one in theatres in 50 countries. Its sequel, The Angry Birds Movie 2, released worldwide in August 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)
Attachment
