Why invest in Rovio
Strategy
Business and operating environment

 

Rovio is a global games-first entertainment company that creates, develops and publishes mobile games and acts as a brand licensor in various entertainment and consumer product categories. The Company is best known for creating the global Angry Birds brand, which started from a popular mobile game and has expanded into multiple other games, animated series, The Angry Birds Movie, activity parks and various consumer products produced by third parties under licenses from Rovio.

Rovio’s operations are divided into two business units, Games and Brand Licensing.

Games

Games business unit creates, develops and publishes mobile games. Rovio's games have a large user base. Rovio's games had been downloaded more than 3.7 billion times as at June 30, 2017 and had on average 80 million monthly active users and 11 million daily active users during the three months ended June 30, 2017.

Brand Licensing

The Brand Licensing business unit licenses Rovio’s Angry Birds brand and its characters, and potentially also Rovio’s other brands in the future.

Mission and Vision

Rovio’s mission is to set the world on fire through crafting the best games and entertainment in the world.

The Company’s vision is to conquer the top-grossing charts for years and to have an evergreen entertainment brand.

Rovio’s long-term financial targets are as follows:

  • The Games business unit revenue growth faster than market growth in Western markets.
  • Group operating profit margin of 30 percent.

 

Why invest in Rovio

Diversified Portfolio of High Quality Games with a Large Global User Base

  • A strong and diversified game portfolio with multiple popular games.
  • 82 percent of the Games business unit’s gross bookings is generated by the top five games in terms of gross bookings.[1]
  • In the three months ended June 30, 2017, the Company’s top five games in terms of gross bookings have enjoyed high top-grossing ranks during their lifetime [2].
  • Rovio’s games have a large user base with 3.7 billion downloads[3] as well as on average 80 million MAU and 11 million DAU[4].
  • The Company’s diverse game portfolio enables cross promotion to existing users.

Proven Talent and Process to Continuously Develop Successful Games Across Genres

  • Rovio employs experienced game developers and has a refined game development process to create new games.
  • The Company aims to develop games in accordance with its “fewer, bigger and better” portfolio logic (i.e., games that have potential for a long lifetime, to reach topgrossing lists and to become “digital hobbies” supporting long-term revenue generation).
  • The Company is pursuing genre mastery in certain genres of its choice, and it has award-winning games in various genres, including Slingshot, where the Company has a leading position, Puzzle, Role Playing Game (“RPG”) and Real-Time Player vs. Player (“RT PvP”).

Angry Birds is a Global Brand with Wide and High Global Awareness and Proven Longevity and Versatility

  • Angry Birds is a global brand with a large fan base, with the Company’s games having been downloaded more than 3.7 billion times as at June 30, 2017. Angry Birds is the most recognized brand to be born from a mobile game and the first mobile game to have reached a billion downloads.
  • The brand has a very high global awareness of 97 percent, as compared to, for instance, Star Wars with 96 percent, Hello Kitty with 93 percent, Frozen with 94 percent and Pokémon with 91 percent[5].
  • Having been around since 2009, the Angry Birds brand has proven its longevity and versatility.

Significant Expertise in User Acquisition, Engagement and Retention to Drive the Monetization of the Games

  • Rovio has an efficient user acquisition model premised on a significant number of organic downloads based on the popularity of the Angry Birds brand as well as a sophisticated, analytical approach to paid user acquisition.
  • Rovio has demonstrated its ability to engage users and monetize user activity within its games. User engagement is promoted through a so-called Game-as-a-Service (“GaaS”) model.
  • The Company has been able to increasingly convert users into paying users as well as to increase the spend per active user.

Revenue Growth Coupled with Profitable and Operations

  • Rovio’s revenue has grown at a CAGR of 10.0 percent between the financial years ended December 31, 2014 and December 31, 2016 due to the enhanced monetization by Rovio’s top five games in terms of gross bookings. Compared to the six months ended June 30, 2016, Rovio’s revenue grew 94.3 percent in the six months ended June 30, 2017.
  • Strong financial performance in the Games business unit has also supported the profitability of the Company. Rovio’s adjusted EBITDA margin in the financial year ended December 31, 2016 was 18.5 percent, as compared to 11.6 percent in the financial year ended December 31, 2014.
  • Rovio also expects the new licensing-based business model in movies and animated series to decrease the Brand Licensing business unit’s need for capital expenditure as, under this model, the Company’ investments in content production, marketing and distribution are minimal.

Experienced Leadership Team and Ability to Retain the Best Talent

  • Rovio’s management team has extensive experience from relevant sectors, including games, mobile technology, intellectual property rights, governance and brand management.
  • The Leadership Team’s track record includes significant operational changes and business transformations, including fully transitioning the games monetization model to free-to-play, growing the Games business, restructuring the Brand Licensing business to regain focus on core operations and products, and transforming the business model in movies and animated series to full licensing.
  • The employee retention rate has increased significantly since 2015, with regrettable employee attrition declining to 3.2 percent in the six months ended June 30, 2017. Rovio is one of the most attractive IT sector employers in Finland being consistently ranked in the top 10 employers list[6].

 

Strategy

Drive Growth in Existing Games

Rovio will focus on growing revenues from its current top performing games through targeting increasing the user base and increasing the efficiency of in-app monetization. The improved monetization has enabled Rovio to significantly increase its investments aimed at profitable and predictable user acquisition. The Company believes that continuous improvements based of the GaaS model, including more live events and leveraging of best practices supports further growth in monetization, and that increasing its investment in user acquisition enables it to drive growth in active users in the Company’s strong game portfolio, hence supporting growth and profitability of the Games business unit.

Expand Games Portfolio and Geographic Presence

Rovio’s plan is to continue to develop new successful games titles and to expand its game portfolio. The Company’s recent launches, Battle Bay launched in May 2017 and Angry Birds Evolution launched in June 2017, have been successful. Furthermore, Angry Birds Match, a Puzzle game launched in August 2017, had the best soft-launch key operational metrics the Company has experienced to date. In addition to Angry Birds Match, Rovio has more than 10 ongoing projects in various phases of the game development process. In addition to new games, Rovio is evaluating opportunities for geographic expansion to new markets. Rovio believes that China, in particular, could provide significant opportunities

Grow Angry Birds Long-term Brand Value

The Angry Birds brand has a consistent story that has developed over time and continues to develop. Rovio offers high quality games and licensing and entertainment offerings with the Angry Birds brand and builds on the long-term value of the brand. The Angry Birds brand interacts with consumers in a variety of ways, including games, movie, animation, consumer products and activity parks, and the brand’s story can be utilized in all of these areas. Recent and upcoming Angry Birds game launches are at the forefront of Rovio’s brand building. The Company also expects the Angry Birds movie sequel to reinforce the brand and support games and product licensing businesses.

Leverage Strong Business Platform for Gaming Consolidation

The global mobile gaming market is highly fragmented in terms of the number of gaming companies, which is why the Company believes there will be consolidation in the industry. From Rovio’s perspective, consolidation could be realized in various forms, such as acquisitions, partnership models or revenue sharing models. Rovio has multiple levers to add value to acquisition targets or business partners, such as in-house analytics and a proven user acquisition process, expertise in game development and monetization, as well as substantial cross-promotion capability.

Explore the Future of Technologies and Services to Pursue Long-term Opportunities

Rovio continuously monitors new trends and technologies emerging in mobile gaming. In practice, Rovio investigates and evaluates the feasibility of new opportunities and, if an opportunity meets Rovio’s initial financial criteria, Rovio aims to invest in development and partnerships. Rovio has identified the following long-term opportunities that it is currently investigating or investing in: virtual, augmented and mixed reality, E-Sports and Skill Games, Facebook’s Instant Games platform, and streaming platforms.

 

Business and operating environment

Rovio is a global games-first entertainment company that creates, develops and publishes mobile games and acts as a brand licensor in various entertainment and consumer product categories.

Rovio's Games business unit operates in mobile gaming, which is a large and fast growing global industry. Free-to-play games, where users play the game for free but can choose to make in-app purchases in order to progress more quickly, enable new content or unlock special features and are subject to in-app advertising, have become the dominant revenue model in the market, significantly increasing the revenue potential of mobile games as games have evolved into services. Rovio has responded to the shift in revenue model by fully transforming its games to the free-to-play model.

At the same time, the barriers to achieve long-term success in the mobile gaming market are becoming increasingly high as only a small portion of published mobile games reach significant scale, and user acquisition costs are increasing. The management of the Company believes that the industry success factors for overcoming discoverability and user acquisition challenges favor large gaming companies with strong brand awareness such as Rovio.

Rovio’s operations are divided into two business units, Games and Brand Licensing.

Games

Games business unit creates, develops and publishes mobile games. The Angry Birds games have a large user base. Rovio's games had been downloaded more than 3.7 billion times as at June 30, 2017 and had on average 80 million monthly active users and 11 million daily active users during the three months ended June 30, 2017.

Brand Licensing

The Brand Licensing business unit licenses Rovio’s Angry Birds brand and its characters, and potentially also Rovio’s other brands in the future.

Operating environment

Mobile Gaming Market

As consumers are spending an increasing amount of time and money on mobile platforms and applications, mobile gaming has become the fastest-growing segment within entertainment and gaming.The mobile gaming market has its own characteristics and trends that differ from the traditional gaming platforms.

  • Number of smartphone users growing rapidly and entertainment increasingly consumed through mobile
  • Growing share of population are playing mobile games and average revenue per user is on the rise
  • Free-to-play is an attractive revenue model within the entertainment industry
  • Mobile advertising is expected to grow
  • Mobile gaming market has increasingly high barriers to achieve long-term success favoring large gaming companies
  • The leading games have potential to generate high revenues over long lifetimes
  • New gaming platforms and services emerging

Entertainment Licensing and Movie Market

The brand licensing market is dominated by global brands with high brand awareness, and building new brands is expensive and time-consuming. Especially content, such as movies, is driving growth in the brand licensing market. Digitalization is driving sales and marketing to digital channels and companies are trying to find ways to link physical products to digital channels, for example using augmented reality (AR). In tight competitive landscape, working with top-tier partners in the industry has become increasingly important.

 


 

[1] On the 12-month period ended at June 30, 2017.
[2] Best historical games rank in the United States on iPhone as at June 30, 2017: Angry Birds 2 top 20 reached in February 2017, Angry Birds Blast top 40 March 2017, Angry Birds Friends top 49 reached in October 2013, Angry Birds POP! top 57 reached in October 2016, Battle Bay top 104 reached in May 2017. Source: App Annie
[3] By June 30, 2017.
[4] In the three-month period ended June 30, 2017.
[5] Based on a study commissioned by the Company including a 15-minute online survey (including screener), with a total sample of 7,500 questionnaires collected from five countries including the United States, the United Kingdom, China, Russia, and Mexico during the period June 27, 2017–July 14, 2017. Source: Lieberman Research Worldwide.
[6] 10 most attractive employers within IT in Finland in 2017. Survey conducted between October 16 and February 17. Sample size includes 13,495 students across 40 universities in Finland. Source: Universum.