Games grew 5.2% year-on-year in Q3, profit margin lower due to increased user acquisition to drive growth of new games

Article Financial Update default 30.10.2019

Comments from CEO Kati Levoranta:

Rovio’s revenue in the third quarter of 2019 was EUR 74.8 (71.0) million and grew 5.4% year-on-year. Rovio’s Games unit revenue was EUR 66.4 million (63.1) and grew 5.2% year-on-year. Angry Birds Dream Blast, which was released in January this year, continued to grow and reached EUR 17.8 million gross bookings. The gross bookings of Angry Birds Dream Blast are thus trending close to EUR 60 million for the full year of 2019 and in September the yearly run-rate of gross bookings reached nearly EUR 80 million. This shows our ability to launch and scale up a game quickly when the opportunity arises, i.e. when the game KPIs are good and the user acquisition performance is according to our targets.

The gross bookings of Angry Birds 2, Rovio’s largest game, was EUR 25.0 million as the month of July was quite soft for the game although the Angry Birds Movie 2 release boosted the game during the August and September. We continue to work on improving the games retention and monetization to enable us to increase user acquisition investments and grow the game.

In September, we launched a new game, Sugar Blast, that is based on the Angry Birds Dream Blast core gameplay, but with a new IP. The game was launched late in the quarter and thus did not significantly contribute to the quarter’s financials. We are ramping up the game gradually through user acquisition as we gain more data.

The user acquisition investments in the reporting period grew to EUR 27.1 million (17.8). Most of the investments were directed to Angry Birds Dream Blast to drive its growth. During the quarter the largest user acquisition investments were made in August, around the release of the Angry Birds Movie 2, which gave us a good opportunity to boost our key games.

The adjusted operating profit of Rovio in the reporting period was EUR 5.4 (10.4) million and the adjusted operating profit margin 7.2% (14.6%). The lower operating margin in this quarter was mostly due to increased investments in user acquisition.

Our game portfolio continues its transition, with new games clearly playing an increasing role and replacing older games in the portfolio. We’ve launched two new games in 2019, as we had planned, and currently we have three games in soft launch out of which one is an Angry Birds game and two are with new IP. Our newest game which was soft launched in October is called Small Town Murders, a narrative puzzle game with a new IP. We’ve stated that our aim is to increase our top line growth rate, and thus we aim to keep user acquisition investments at a high level for the rest of 2019.

The Brand Licensing unit’s revenue in the third quarter was EUR 8.4 million which was a bit higher than last year (7.9). The growth was mainly due to higher consumer products revenues boosted by The Angry Birds Movie 2, which released in August. The sequel opened in a very competitive landscape and regardless of great critics’ reviews and high audience score, the theatrical box office traction has been much softer than what we had hoped for. As communicated earlier in connection with the 1H/2019 financial report we somewhat lowered our revenue expectations for the Brand Licensing unit due to the highly competitive landscape for consumer products. Consequently, we have started employee cooperation negotiations in the Brand Licensing unit and are planning to restructure the unit to seek efficiencies and improve profitability.

In the third quarter, Rovio continued exploring alternative financial structures and partnerships to accelerate the growth of Hatch Entertainment, Rovio’s 80% owned subsidiary, which is developing a cloud-based game streaming service for mobile and smart TVs.


Read the full Q3 report here